Telesat reaffirms 2025 revenue and EBITDA guidance while navigating capital expenditures and ramping up LightSpeed in defense markets.

OPERATOR - (00:00:00)

Further 135 million at the end of October, thus having a total cumulative draw of 540 million. Guidance as you will also have noted in our earnings release this morning, we have reiterated our guidance for 2025 for revenues, adjusted EBITDA and capital expenditure. The guidance assumes a Canadian dollar to US dollar exchange rate of 1.42 for 2025. We continue to expect full year revenues to be between 405 and 400425 million. In terms of operating expenses excluding share based compensation, we expect spending to be approximately between 75 and 85 million on Telesat LightSpeed this year. This guidance reflects higher capitalized engineering and the timing of hiring. As we continue to ramp up the Telesat Lightspeed team, we continue to expect total adjusted EBITDA to be between 170 million to 190 million. And also reflects provisions we've made for advisory, legal, professional fees with related to the work in respect to geosat. In respect to capital expenditures, we continue to expect for 2025 expenditures to be in the range of 900 million to 1.1 billion which is nearly all related to Telesat LightSpeed. To meet our expected cash requirements for the next 12 months including interest payments and capital expenditures, we have approximately 480 billion of cash in short term investments at the end of September as well as 2 billion available under our funding agreements with the government Canada and Quebec at the end of the third quarter. The total leverage ratio is calculated under the terms of the amended senior secured credit facilities was 8.676 times. Kenny Sales compliance with all the covenants in our credit agreement and indentures. A reconciliation between our financial statements and financial covenant calculations is provided in the report we filed this morning. Our 6K provides you notice that in term condemns consolidated financial information on the mda. The non guarantor subsidiaries shown are essentially the unrestricted subsidiaries of minor differences. This concludes our prepared remarks for the call and very happy to turn back to the operator and address any questions you may have. Thank you very much. Thank you again. If you have a question, please press Star one on your telephone keypad to join the queue. If you wish to remove yourself from the queue, simply press Star one again. One moment for your first question. Your first question comes from the line of David McFady of Cormark Securities. Your line is open.

David McFady - (00:02:34)

Hi. Great. Yeah. So first of all just want to say congratulations to Andrew on his retirement. Hope you have a nice retirement there. So, a couple of questions. Yeah, I'll just start. First of all on the debt negotiations. I was wondering, could you just maybe give us an idea of. Do you think you're far apart in terms of what the debt holders want or you think you might be pretty close? Just kind of wondering where things stand with respect to that.

Dan - (00:03:09)

Hey David, it's Dan. So, you know, it's too early to say we've started engagement and we'll just have to take it from there, so. Yeah, too early to say.

David McFady - (00:03:23)

Okay, so then a question on the guidance. So you left your EBITDA guidance unchanged, but yet you dropped your spend on the LEO. So that would imply a higher or, sorry, a lower EBITDA being generated from GEO. But you didn't change your revenue outlook on GEO. So just kind of, just kind of wondering how you square those off. Because if the revenue hasn't changed on GEO, it shouldn't really change the EBITDA.

Dan - (00:03:54)

Maybe I'll take the first crack at this. So relative to guidance, we've underspent some, mostly related to LEO headcount. And that's been two things. One, we've capitalized more kind of engineering expense than we originally assumed. So that's number one. And number two, our hiring feels like at the end of the day it's going to be sort of more backloaded than what the budget assumed. And so in any event, so that explains the kind of underspend on the LEO OPEX. But it's been offset by greater spending than anticipated around professional fees and that's pretty much entirely around the refinancing exercise and the transaction where we spun out the equity stake in Telesat LEO. So in any event, I mean, that's kind of how it's played out. So yes, at the end of the day, OPEX down on LEO headcount because of capitalized engineering and just a slower ramp, but offset by increased professional fees, mostly around the transaction that we announced spinning out LEO.

David McFady - (00:05:27)

Okay, I think most people would have viewed those as one time and when, you know, hit EBITDA by that. But anyways, at least we know what's going on.

Dan - (00:05:36)

Yeah, yeah, I mean, fair point. I mean, just to be transparent about it, that that's what it was.

David McFady - (00:05:43)

Right. Okay. So you know, you called out the two sectors where you're seeing, I guess, stronger interest than others, Arrow and government. Are you seeing a really increased demand, say from the defense sector? That defense could be kind of viewed as its own?

Dan - (00:06:08)

Yeah, you know what, that's a great question because when we work with government, you know, a lot of that is around rural Broadband programs. But what, you know, I was referring to in my opening comments is much more on the defence side. So, you know, we know that the current government of Canada has committed to meet Canada's NATO spending obligations. And, you know, other allies have made similar commitments. The government of Canada's announcing a budget today and I don't know, based on everything we're reading and based on everything we're seeing, we expect there'll be a meaningful uptick in defense spending. LightSpeed. We've talked about this before. Sort of a dual use infrastructure. It's, you know, designed for rural broadband connectivity for commercial arrow, for maritime services, for cellular backhaul and the like. But it also has great utility for defense use cases as well. And given what Canada is saying about the importance of Arctic sovereignty, given the amount of spending that Canada will be doing with its allies to meet its defense obligations, and I think an expectation from the government that when it's spending a lot of money with its allies, there's some expectation that the allies will in turn reciprocally be contracting with Canadian providers. All of those things gives us a great deal of optimism about us to grow our business and leverage lightspeed for those defense requirements, both with the government of Canada and Canada's allies.

David McFady - (00:08:23)

So just following up on that comment, you know, the Korean government has committed to a minimum revenue commitment of 60 million a year for 10 years. I would have thought that most of that 60 million was not defense. Can you confirm that?

Dan - (00:08:39)

Yeah, correct. That's going to be used for rural broadband connectivity. And you'll recall the way that agreement works is we basically create a pool of capacity that we've then agreed to sell to rural Canadian Internet Service Providers (ISPs) at sort of below market rates. So, you know, that 60 million a year for 10 years should.

David McFady - (00:09:06)

The pool.

Dan - (00:09:07)

Of capacity that underpins that, we expect incremental revenue when that capacity is made available to those rural ISPs. And then, yes, any commitments from the Government of Canada for defence purposes would be above and beyond that.

David McFady - (00:09:31)

Okay, okay. So there's a potential for that to be significantly greater. So you also said that the first launch for satellites is planned late next year. I thought that the satellites were going to start to be launched in Q3 26.

Dan - (00:09:49)

No, no, I think for many, many quarters now we've been talking about late, late next year.

David McFady - (00:09:59)

Okay, all right, I guess I was incorrect on that one. Okay. Like, I mean, you have it booked a SpaceX, right? So can you give us an idea what month you expect the satellites to. Start to go up.

Dan - (00:10:12)

It'll be late as our expect. I mean we're probably, you know, looking at a December launch with a couple of Pathfinder satellites that will use to do testing and validation and start to do that for our own purposes and make it available to meaningful customers as well to do their own testing and the like. And then 2027 should be a very busy launch cadence for us as we launch really, you know, all the rest of the satellites in the constellation. Thanks David.

OPERATOR - (00:10:51)

I can move on to the next question, please. David, you have one more.

David McFady - (00:10:56)

I did have one more. Sorry, I don't like the call. You're still expecting to start to generate revenue on lightspeed in Q4 2027, correct?

Dan - (00:11:07)

Yeah, that's exactly right. We expect to enter global service by the end of 2027. So that's right.

David McFady - (00:11:15)

Okay. All right, thanks guys.

Dan - (00:11:17)

Okay, thank you.

OPERATOR - (00:11:19)

Your next question comes from line of Edison, you of Deutsche Bank. Your line is open.

Edison - (00:11:25)

Hey, thank you for taking our question. So firstly just want to come back to the carve out of the LEO equity. Could you walk us through like the main rationale behind this move and like would you contemplate raising more equity for Lightspeed or like potentially use it as sort of currencies part of other transactions?

Dan - (00:11:51)

So I mean the rationale is really around just trying to optimize the capital structure and to enhance our ability. To. Do kind of more raise more funds in the future. I mean the notion is by getting that controlling interest into an entity that's separate from where the debt sits for our geo activities it just gives us more scope, more flexibility, more optionality around using that stake to if we need to secure incremental funding. So that's the primary purpose of, of doing that transaction as far as issuing more equity at this time. And that's not a current plan. Lightspeed for the first 156 satellites, which is what we need to launch a compelling fully global network is fully funded with the commitments that we have from the government of Canada in Quebec to loan this money with our own equity contribution with the, you know, 300 million US of vendor financing that we have. So we're in good shape there. So yeah, that's how we think about it.

Edison - (00:13:22)

Okay, gotcha. And also about we have seen some spectrum transaction in the industry recently. Just curious about your thoughts on that. Like the spectrum supply demand landscape, like how you see playing out for longer term and also would Telesight potentially like have a role to play in this D2D market?

Dan - (00:13:50)

So the Spectrum I Mean, the big spectrum transaction was obviously SpaceX acquiring the S band rights of Echo Star. And to your point, that was all about, you know, having spectrum for D to D. We certainly see rumors that, you know, there could be more of those transactions contemplated. We've got no insight on that. Our focus, as we've said before, is really on deploying lightspeed, which is not a direct to device constellation, but, but instead a. An advanced global broadband constellation. So that's, that's where our focus is right now. You know, we certainly have the wherewithal and the expertise to launch a direct device network. We don't have the spectrum for it other than the C band spectrum that we still have. Following the decision by the US and the Canadian regulators to repurpose about 3/5 of that spectrum for 5G. But we still have the other two fits. But it's not our focus at this point to pursue a direct to device network. I would note that the FCC recently issued a notice of proposed rulemaking or a notice of inquiry about potentially using the rest of the C band that the satellite industry continues to make use of using the rest of that spectrum for 5G. So that's certainly something that Telesat will be paying close attention to. We have satellites that have CBAM coverage and capacity over the US and of course over Canada as well. So we participated in the last proceeding when the FCC reallocated that C band spectrum. And if that's something they do again, we'll follow that and participate in that actively again.

Edison - (00:16:18)

Okay, gotcha. Appreciate the color.

Dan - (00:16:22)

Thank you.

OPERATOR - (00:16:24)

Your next question comes from the line of Caleb Henry of Quilty Space. Your line is open.

Caleb Henry - (00:16:31)

Hi guys. Thanks for taking the questions. Follow up on the launch side of things. You mentioned first launching some Pathfinders and then serial launches. Are you planning a gap between those two? And if so, can you quantify how much time would be in between the first launch and the second? And if you're anticipating any design changes or upgrades or tweaks that might come from that learning period.

Dan - (00:16:59)

Thanks, Caleb, for the question. So it's always been our plan to launch the Pathfinder satellites. We can do an enormous amount of testing on the ground, which we will do, but there's nothing quite like gaining the confidence of testing the satellites in orbit in space, real conditions. So we'll do that. It's probably going to be, I don't know, two, three, four months when we launch those satellites. We need to do some orbit raising. We're going to want to put them sort of fully through their paces, test out, you know, just everything, the onboard processors, the, you know, inter satellite links, the handoff of traffic from satellite to satellite on the ground. So anyway, we'll do all that and again, we'll be doing some of that, you know, ourselves alongside of NDA and then with kind of customers as well. And we know that the customer community is keen to engage in a variety of tests with us as well. So that's the plan. But, you know, so we have a comprehensive testing plan. You know, our expectation, particularly after all the testing we'll have done on the ground, is that it should be. It's more confirmatory in nature, I would say. So we're not expecting. Yeah, we're expecting to confirm the findings of the testing that we've done on the ground once the birds are up in space.

Caleb Henry - (00:18:48)

Okay. I also thought this morning Telus had announced the partnership, an investment in Farcast. Can you share how that into the plan to use a terminal portfolio for lightspeed?

Dan - (00:19:01)

Yeah, we've made a couple of announcements already. We will have a suite of different user terminals for each of the different verticals that we're focused on. I think to date we announced a collaboration with cast around aeronautical FPAs. We've announced collaboration with Inteleon on both flat panel antennas and a dual parabolic antenna, which for certain applications, you know, can still make sense. And then. And then the one today with Farcast. Farcast is a very innovative company with a very innovative technology where they interleave the transmit and receive elements of one of these flat panel antennas. And there are real advantages that you get from that. I mean, basically you get a smaller user terminal that's still, you know, highly capable. And we've been working with Farcast for some years now and feel, yeah, very optimistic about the progress that they've made and the advantages that leveraging their technology can give us and our customers across a whole range of different verticals. And I'd say we're not the only satellite operator out there that's enthusiastic about the technology that they're developing. So that's our approach. It's very much, I'd say, an open ecosystem in many ways in terms of the user terminals that can be used. We'll have a modem that can be integrated into these various flat panel and dual parabolic antennas. Our constellation can also operate in a transparent mode. So in some circumstances, customers can bring their own waveforms and their own modems. There's some segment of customers where that might be attractive. We've always said that the trajectory of the technology development around these flat panel antennas is moving in a very favorable way. And this announcement with Farcast I'd say is just a manifestation of that. We're excited about it.

Caleb Henry - (00:21:33)

If not, have you announced a modem supplier? I assume it's one single company.

Dan - (00:21:41)

Michel, do you want to say something about the modems?

Michel - (00:21:43)

Yeah. So for the modem, the user terminal, this is a development that we took on us. We are partnering with some vendors to do the detailed design that Telesat will own. And. And we're also partnering with candidate contract manufacturer for the volume production here in Canada to be announced at a later time.

Caleb Henry - (00:22:12)

Okay, thanks. And then just last question. We've seen a decent amount in the news about LEO constellations or tech companies that are excited about the idea of space based data centers for AI. Seen Musk and Bezos and Star Cloud and Nvidia. Is this something that Telesat would be interested in doing as well? And can it be done with the baseline lightspeed constellation or would that require some sort of upgrade?

Dan - (00:22:40)

Hey Caleb, you broke up a little bit there. Would you just mind repeating the question?

Caleb Henry - (00:22:46)

Sure. Sorry. I was asking if Telesat has interest in space based data centers for AI to. Because of the amount of enthusiasm we're seeing between kind of other players like Musk and Bezos and if that can be done with the existing lightspeed architecture or if that requires any changes.

Dan - (00:23:09)

You know, so maybe a couple of thoughts on that. You know, one, we're bullish about leveraging AI to improve the efficiency of the network in terms of managing traffic and the like. So that's number one. Number two, you know, AI is going to just drive a lot of broadband usage. And so that, you know, is accretive to what we're doing too. Three, every single one of our satellites is basically a flying computer processor. And so, you know, we see it absolutely playing a role in the kind of larger global digital infrastructure, including in connection with AI. But I don't think that we'll be leveraging lightspeed so much for kind of space based data centers. I see lots of advantages and benefits from the development of AI in terms of how our constellation will be operated and used. But we're not contemplating lightspeed per se to be used as kind of in space data centers. I think that's a little bit different.

Caleb Henry - (00:24:29)

Okay, thank you very much.

Dan - (00:24:31)

Thank you.

OPERATOR - (00:24:33)

Your next question is from Chris Quilty of Quilty Space. Your line is open.

Chris Quilty - (00:24:39)

Thanks. Dan. I think you said you're still targeting end of 27 for service, I just wanted to clarify is that do you need all 198 for launching initial service, or can you launch with a subset of that.

Dan - (00:24:54)

We expect to have? So we're starting with 156 satellites. We expect those will be in orbit by the end of 2027. We can start global service. With 96 satellites? Yeah, with 96 satellites, and we'll do that. But the balance, the other 60, I guess, will follow on very quickly from that. But, yeah, that remains the plan.

Chris Quilty - (00:25:23)

So 96 would give you geographic coverage, but not the capacity?

Dan - (00:25:29)

Well, I mean, I think we can actually. We'll start customers up on 96 and we've got a lot of folks that are very keen to have lightspeed and service and to start leveraging it. But we'll go from 96 to 156 in a matter of a couple of months. Gotcha.

Chris Quilty - (00:25:50)

And in order to launch service, you need gateway ground network. Where are we at in that process?

Dan - (00:25:57)

Yeah, we're making good progress there, I think. We've already announced a deal with Orange for European teleport. We've made some announcements, I think, with vocus for teleports in Australia. We ourselves are building out three or four teleports, four teleports here in Canada. And we've procured the land and the like to be building those out. And we're, you know, in the midst of an RFP right now, you know, lining up landing station locations, us, latam, Asia, and I'd say we're well advanced in site selection and the like. Inteleon is under contract to build all the gateway antennas and they're making good progress there. So anyway, you know, we're absolutely where we need to be in terms of the rollout of our landing station infrastructure.

Chris Quilty - (00:26:58)

Gotcha. And obviously higher altitude helps with siting. But do you anticipate any areas or regions where, you know, it's more difficult and, you know, you might have to actually have fiber laid more than just, you know, setting up at an existing teleport facility.

Dan - (00:27:16)

I don't think so. We've got good candidate locations in all the geographies where we need it now, of course, I mean, all these gateways are going to be fibered up and they'll be connected to pops at kind of strategic locations around the world. But no, I mean, that's proceeding in a good way. And remember, also the Constellation as intersatellite links will be rolling out initially about 25 landing stations around the world and then adding to those and then our Customers can have their own landing stations as well. But having the intersatellite links gives us greater flexibility in terms of, and minimizes in some ways the number of landing stations we need in order to have a fully connected global network. Gotcha.

Chris Quilty - (00:28:19)

Follow up on just the Constellation build. I know it's a fixed price contract, but so more of MDA's issue. But are you seeing any challenges related to the tariff situation, which seems to change on a weekly basis?

Dan - (00:28:36)

Not yet. And we're in contact, as you can imagine, with MDA all the time, you know, to date. And, you know, so what's happening is MDA is building the satellites at their factory outside of Montreal. They're sourcing some of the components from here in Canada. They're sourcing components from Europe, they're sourcing components from the us.

Chris Quilty - (00:29:04)

Sure.

Dan - (00:29:04)

There are components coming from other parts of the world as well. And so it's really, you know, where MDA could potentially be at risk is if they're importing components, say from the US and Canada implements retaliatory tariffs, which they haven't done to date. That's where there would be more risk. But so far Canada hasn't implemented retaliatory tariffs and as far as we can tell from mda, they're not being adversely impacted by the tariffs that are out there.

Chris Quilty - (00:29:42)

Great. Looks like SpaceX and OneWeb may actually get into India sometime next year. Not this year as I had thought, but with that market opening up, do you have a specific plan for that market? I think you had an announcement with Nalco some years ago. Is that still the partner and have you evolved the strategy?

Dan - (00:30:05)

We're engaged with a number of parties that will be good partners for us in India. We'll need to get, you know, market access from a satellite perspective and then our customers will need their own authorizations to be service providers and provide service to their customers in India. So in any event, we've been following closely the developments in that market from a geo perspective. It's a market that I've certainly been active in that market for decades. So it's a market that we know well. We think that LightSpeed can offer a lot to users in India and help the government achieve some of their public policy objectives around broadband connectivity and the like. So, yeah, we've got a plan there.

Chris Quilty - (00:31:07)

Gotcha. SpaceX got its first customer for its plug and playser capability, which is really acting as a transport layer for other satellite operators. Is that a consideration for Lightspeed and how would that be implemented? In the future.

Dan - (00:31:33)

So, you know, it's interesting, this question of making the constellations interoperable at the optical level. Our optical terminals are coming from tsat. We were deliberate in selecting an optical terminal that was compatible with the US Government's standard. That came from the Space Development Agency, I believe. So we will be interoperable with other constellations that are also meeting the SDA's standards. So that's one. And then with respect to SpaceX, we've given some thought to how we could make light speed interoperable with SpaceX at the optical level. Technically, you know, there's a relatively straightforward path to get that done. So, you know, it's the old, you know, you can do it, and then the next question is, should you do it? Are there, you know, benefits to Telesat, SpaceX, and importantly the user community for us to be interoperable? And I'd say that's still something that, you know, think we all need to reflect on a little bit more, but there's certainly a path there to get that done.

Chris Quilty - (00:33:03)

Gotcha. Final question. You're like the only space company that hasn't mentioned Golden Dome on their conference call for the obvious reason. But, you know, as you mentioned, you are SDA compliant on the terminal side. Is there a path forward and any discussions that you expect around potentially working on that program or contributing.

Dan - (00:33:26)

Well, I'd say in all honesty, I haven't mentioned Golden Dome on this call, but I'm guilty of mentioning it in prior calls. I mean, and what we've said on those prior calls is, yes, light speed, I think, could make excellent contributions to a Golden Dome network. I mean, you know, from what I know of Golden Dome, and there's still a lot there that needs to be fleshed out in terms of what Golden Dome is exactly. But it's basically a collection of different networks that are going to be interoperable with one another. Some of those network layers will be space based, others will be ground based, and they're all going to need to talk to each other. We certainly believe that there's a role that lightspeed could play because of our optical intersatellite links, because of the orbits that we're flying in, which are additive, I think, and would add resiliency to what where some of the other constellations are, I think, you know, Canada has expressed an openness to participating with the US in Golden Dome. Certainly Canada and the US through norad, have a long history of cooperating to protect sovereignty and the defense of North America. So. And certainly it's the case that Space Force and the Pentagon and DOD sort of more broadly are well aware of the capabilities of lightspeed and I think very interested in the capabilities that we could offer. So, yes, we think of Golden Dome as another one of those defense opportunities that could be very accretive to the broader lightspeed business case.

Chris Quilty - (00:35:40)

Great. Thanks a bunch, gentlemen.

Dan - (00:35:43)

Okay, thank you.

OPERATOR - (00:35:45)

This concludes the Q and A session. I will now turn the call over to CEO Dan Goldberg for closing remarks.

Dan - (00:35:51)

Okay, well, thank you all for joining us this morning. I do want to take just a moment. It is Andrew's last earnings call with us, and Andrew and I have worked together for think it's 27 years now. And before signing off here, I just wanted to acknowledge what a brilliant career Andrew has had, certainly in the satellite industry. He served as CFO for, I think, at least four or five publicly traded satellite companies and had a great career in the tech world even before joining the satellite sector. So in any event, just to say to Andrew, thank you for being such a great colleague and being such a great cfo, thank you for all of your contributions to Telesat over the last six years. We deeply appreciate it and we wish you well. And so with that, I'll sign off. Maybe Andrew has a word, but I'll sign off and just say to everyone, thank you for joining the call and we look forward to speaking with you again when we issue our full year numbers. But over to Andrew.

Andrew - CFO - (00:37:05)

Look, Dan, thank you so much for your kind words and indeed a friendship partnership over many years and six years here at telesat. I'd welcome Donald coming. He'll do a great job. And just to say, personally, I feel very proud of what we've collectively achieved to date and with a great future ahead. And also sincerely would like to thank all my colleagues around this table and people that will work very closely together over the years and thank the board. And so that's it. I will miss our quarterly calls. And with that, thank you very much and thank you, Dan, again.

Dan - (00:37:41)

Okay, thank you all.

OPERATOR - (00:37:44)

This concludes today's conference call. You may now disconnect.