Mr. Dan Goldberg reports

TELESAT REPORTS RESULTS FOR THE QUARTER AND TWELVE MONTHS ENDED DECEMBER 31, 2023

Telesat Corp. has released its financial results for the three-month and one-year periods ended Dec. 31, 2023. All amounts are in Canadian dollars and reported under international financial reporting standards (IFRS) unless otherwise noted.

"Telesat achieved a great deal in 2023 and I am pleased with our financial performance and, more importantly in terms of our future, the breakthrough we had in moving Telesat Lightspeed, our advanced low-Earth orbit (LEO) satellite program, forward," commented Dan Goldberg, Telesat's president and chief executive officer. "Our financial results reflect our continued disciplined execution, delivering adjusted EBITDA [earnings before interest, taxes, depreciation and amortization] above our 2023 guidance as well as industry-leading adjusted EBITDA margins, high-capacity utilization, a substantial contractual backlog of $1.3-billion and significant cash flow, ending the year with a cash balance of $1.7-billion."

Mr. Goldberg added: "Certainly the big development for Telesat last year was our announcement in August that we selected MDA Space to be the prime satellite contractor for Telesat Lightspeed, that the program is fully funded through global service delivery (subject to certain conditions), and that, by leveraging a number of key technology advances, Telesat Lightspeed will have improved network performance and efficiency and still achieve an expected capital cost savings of approximately $2-billion (U.S.) relative to the approach we previously had been taking. I am also pleased that we have had extensive engagement with the government of Canada regarding financing for Telesat Lightspeed and expect to share funding terms shortly. We estimate that, in addition to the roughly $2-billion (U.S.) of capital cost savings, our total cost of borrowings is expected to be roughly $750-million (U.S.) lower relative to our prior Telesat Lightspeed plan. The government of Canada has been a strong supporter of the Lightspeed program and we are grateful for that support."

Mr. Goldberg concluded: "For 2024, and as reflected in our financial guidance for the year, we expect continued reduction in revenues from our North American direct-to-home (DTH) satellite video customers as well as reduced revenues from customers for enterprise services owing to significant competition in the satellite services market. We also expect meaningful increases in operating and capital expenditures as we accelerate the development of Telesat Lightspeed. The reduction in revenue and increase in operating expenditures is expected to result in a substantial decrease in adjusted EBITDA relative to 2023, down 34 per cent at the midpoint of our 2024 guidance range. Our focus this year will be, on the one hand, maximizing our adjusted EBITDA and cash flow by seeking to mitigate the anticipated revenue declines and rigorously managing our legacy cost structure while, on the other hand, ramping up all activities associated with building and commercializing Telesat Lightspeed, which we strongly believe will revolutionize broadband connectivity for enterprise and government users and represents a highly compelling growth and value creation opportunity for Telesat and its stakeholders."

For the year ended Dec. 31, 2023, Telesat reported consolidated revenue of $704-million, a decrease of 7 per cent ($55-million) compared with the same period in 2022. When adjusted for changes in foreign exchange rates, revenue declined 9 per cent ($70-million) compared with 2022. The decrease was due to a rate reduction on the renewal of a long-term agreement with a North American DTH customer combined with a reduction of capacity and rate by another one of the company's North American DTH customers. The completion of an equipment sale in 2022 to the U.S. Defense Advanced Research Projects Agency (DARPA) which was not repeated in 2023 as well as lower revenue from certain Latin American customers also contributed to the revenue reduction relative to 2022.

Operating expenses for the full year 2023 were $205-million, a decrease of 21 per cent ($54-million) from 2022. When adjusted for changes in foreign exchange rates, operating expenses decreased by 22 per cent ($57-million) compared with 2022. The decrease was primarily due to lower non-cash share-based compensation, higher costs for equipment sales in 2022 relating to the DARPA program and lower insurance costs.

Adjusted EBITDA for the full year 2023 was $534-million, a decrease of 6 per cent ($34-million) or, when adjusted for foreign exchange rates, a decrease of 8 per cent ($46-million). The adjusted EBITDA margin was 75.8 per cent, compared with 74.8 per cent in the same period in 2022.

For the year ended Dec. 31, 2023, Telesat's net income was $583-million compared with a net loss of $82-million for the prior year. The positive variation of $665-million was principally due to C-band clearing proceeds recognized in the second quarter of 2023 combined with a positive variation in foreign exchange gain (loss) on the conversion of U.S.-dollar debt into Canadian dollars and a higher gain on the repurchase of debt.

For the quarter ended Dec. 31, 2023, Telesat reported consolidated revenue of $166-million, a decrease of 20 per cent ($41-million) compared with the same period in 2022. The decrease was primarily due to the completion of an equipment sale in 2022 to DARPA which was not repeated in 2023 and a rate reduction on the renewal of a long-term agreement with a North American DTH customer.

Operating expenses for the quarter were $50-million, a decrease of 38 per cent ($30-million) from 2022.

The decrease was primarily due to lower non-cash share-based compensation and higher equipment sales in 2022 relating to the DARPA program.

Adjusted EBITDA for the quarter was $123-million, a decrease of 11 per cent ($16-million). The adjusted EBITDA margin was 74.3 per cent, compared with 67.2 per cent in the same period in 2022.

Telesat net income for the quarter was $39-million compared with net income of $91-million for the same period in the prior year.

Business highlights:

• MDA Space satellite agreement and Telesat Lightspeed financing:
  • Telesat announced on Aug. 11, 2023, that space technology company MDA Space Ltd. has been contracted to build the advanced satellites for the Telesat Lightspeed program and that, subject to certain conditions, Telesat Lightspeed was fully financed through global service delivery.
• SpaceX launch agreement:
  • In September, 2023, Telesat announced that it had entered into a launch agreement with SpaceX for 14 launches on SpaceX's Falcon 9. These launches will carry up to 18 of its Telesat Lightspeed satellites per launch from SpaceX's launch facilities in California and Florida and is the largest commercial satellite launch agreement in SpaceX's history.
• Launch of LEO 3 demonstration satellite:
  • In July, 2023, Telesat launched its LEO 3 demonstration satellite, which has successfully completed in-orbit testing;
  • The LEO 3 satellite features Ka- and V-band payloads and will provide continuity for customer and ecosystem vendor testing campaigns following the decommissioning of Telesat's phase 1 LEO satellite.
• C-band spectrum cleared:
  • On June 30, 2023, the Wireless Telecommunications Bureau of the U.S. Federal Communications Commission (FCC) completed its validation of Telesat's phase II certification of accelerated C-band clearing activities in the 3.7-gigahertz band, making Telesat eligible to receive $259.6-million (U.S.), its second accelerated relocation payment;
  • An amount of $344.9-million ($259.6-million (U.S.)) was recognized during the three months ended June 30, 2023, and was recorded under other operating gains (losses), net, and the payment was received in the three months ended Sept. 30, 2023.
• Debt repurchase:
  • For the year ended Dec. 31, 2023, Telesat repurchased debt with a cumulative principal amount of $427-million (U.S.) in exchange for an aggregate cost of $255.6-million (U.S.);
    • Combined with the debt repurchases completed in 2022, Telesat has repurchased a cumulative principal amount of $587-million (U.S.) for an aggregate cost of $332.7-million (U.S.).
• At Dec. 31, 2023:
  • Telesat had contracted backlog for future services of approximately $1.3-billion (excluding approximately $740-million revenue commitments associated with Telesat Lightspeed);
  • Fleet utilization was 85 per cent.

2024 financial outlook (assumes a foreign exchange rate of $1 (U.S.) per $1.35)

For 2024, Telesat expects full year:

• Revenues to be between $545-million and $565-million;
• Adjusted EBITDA to be between $340-million and $360-million, which reflects Telesat Lightspeed operating expenses of between $80-million and $90-million;
• Cash flows used in investing activities to be in the range of $1,000-million to $1,400-million, which is nearly all related to expected Telesat Lightspeed capital expenditures.

Telesat's annual report on Form 20-F for the year ended Dec. 31, 2023, has been filed with the United States Securities and Exchange Commission (SEC) and the Canadian securities regulatory authorities, and may be accessed on the SEC's website and on the System for Electronic Document Analysis and Retrieval+ (SEDAR) website.

Conference call

Telesat has scheduled a conference call on Thursday, March 28, 2024, at 10:30 a.m. ET to discuss its financial results for the three-month and one-year periods ended Dec. 31, 2023. The call will be hosted by Mr. Goldberg, president and chief executive officer, and Andrew Browne, chief financial officer, of Telesat.

Dial-in instructions

The toll-free dial-in number for the teleconference is 1-800-806-5484. Callers outside of North America should dial 1-416-340-2217. The access code is 6484355 followed by the number sign. Please allow at least 15 minutes prior to the scheduled start time to connect to the teleconference. In the event of technical issues, please dial star zero and advise the conference call operator of the company name (Telesat) and the name of the moderator (Michael Bolitho).

Webcast

The conference call can also be accessed, as a listen-in only, on-line. A replay of the webcast will be archived on Telesat's website under the investors tab.

Dial-in audio replay

A replay of the teleconference will be available one hour after the end of the call on March 28, 2024, until 11:59 p.m. ET on April 11, 2024. To access the replay, please call 1-800-408-3053. Callers from outside North America should dial 1-905-694-9451. The access code is 7879436 followed by the number sign.

About Telesat Corp.

Backed by a legacy of engineering excellence, reliability and industry-leading customer service, Telesat is one of the largest and most successful global satellite operators. Telesat works collaboratively with its customers to deliver critical connectivity solutions that tackle the world's most complex communications challenges, providing powerful advantages that improve their operations and drive profitable growth.

Continuously innovating to meet the connectivity demands of the future, Telesat Lightspeed, the company's LEO satellite network, will be the first and only LEO network optimized to meet the rigorous requirements of telecom, government, maritime and aeronautical customers. Telesat Lightspeed will redefine global satellite connectivity with ubiquitous, affordable, high-capacity links with fibre-like speeds.

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