Prepared remarks
Thank you for standing by. This is Jordan, and I will be your conference operator today. At this time, I would like to welcome everyone to the Telesat Second Quarter 2026 Financial Results Call. All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question-and-answer session. If you would like to ask questions during this time, simply press star followed by 1 on your telephone keypad. If you would like to withdraw your question, press the pound key again. Thank you. I would now like to turn the call over to James Maxwell Ratcliffe, Vice President, Investor Relations. Please go ahead.
Thank you, Jordan. Good morning, everyone, and thank you for joining us today. Earlier this morning, we filed our quarterly report for the period ending 06/30/2026 on Form 6-K with the SEC and on SEDAR+. Our remarks today may contain forward-looking statements. There are risks that Telesat's actual results may differ materially from the results contemplated by the forward-looking statements as a result of known and unknown risks and uncertainties. For a discussion of known risks, please see Telesat's annual report and updates filed with the SEC. Telesat assumes no responsibility to update or revise these forward-looking statements. I would now like to turn the call over to Daniel S. Goldberg, Telesat's President and Chief Executive Officer.
Okay. Thanks, James, and good morning, everyone. Thanks for joining us. I will start with a few words about the business, and then I will hand the call over to Donald to speak to the numbers in more detail, and we will then open the call up to questions. Just last week, we announced we signed the first contract in the ESCAPE program. We are very pleased to have secured that key strategic opportunity to provide such a critical capability to the Canadian Armed Forces to support the range of important missions and interests that they have and that Canada has in the Arctic. With that contract announced, and an expanded Lightspeed constellation fully funded for an accelerated rollout, we are very well positioned to execute on the wide range of additional opportunities for Lightspeed that we are now engaged on, including in the defense and government segments. This allows us to build on our already substantial $5.6 billion Telesat Lightspeed contractual backlog. Our strong confidence in our future prospects caused us to raise our publicly available revenue and EBITDA forecast for Lightspeed, which I hope you all saw last week. In addition to the strong commercial traction we are getting, we have also been making excellent progress on the technical and operations fronts for Lightspeed. On the constellation development side of things, we signed a firm contract with MDA for 69 additional satellites, bringing the fully funded and committed constellation size to 225 satellites. We have secured almost all the launch capacity we need and expect to sign an agreement for the final Falcon 9 rocket required to complete the deployment of the 225-satellite constellation in the near future. And we continue to expect global commercial availability in the first quarter of 2028. In light of the expansion of the constellation, you may have noticed in today's earnings release that we updated our 2026 Lightspeed total investment guidance for 2026, which includes both OpEx and CapEx associated with delivering the global network. Our prior guidance was CAD 1.0 billion to CAD 1.2 billion of investment this year, which we have now brought up to CAD 1.3 billion to CAD 1.5 billion — a $300 million increase to the bottom and top end of the range. In our GEO segment, second quarter results came in largely as we had expected, with most of the year-over-year decline coming from non-renewals and lower revenue renewals in our broadcast activities and, to a lesser extent, reductions in services for fixed broadband customers. That was partially offset by new contracts for broadband services or commercial airline broadband connectivity. As you may have noticed, our GEO backlog increased during the quarter due primarily to a meaningful term extension of one of our broadcast video contracts. This is evidence of our continued efforts to maximize the value of our existing GEO satellites, lock in long-term commitments where we can to improve cash flow visibility in the legacy business, all while retaining careful cost controls to mitigate the impact of ongoing revenue pressures in the GEO segment. During the quarter, two of our GEO satellites, Anik F4 and Telstar 14R, reached the end of their useful lives and were retired from service. While we have been able to transfer nearly half the traffic from these satellites on to certain of our remaining GEO satellites, the decommissioning of these satellites will still be a headwind for the balance of this year and into the future. We had anticipated this impact when we provided our GEO segment guidance for 2026, and we are reiterating that revenue and EBITDA guidance today. Staying with our GEO segment, we were pleased to see late last month the FCC's report and order to repurpose 160 megahertz of C-band satellite spectrum for terrestrial wireless use. Under the terms of the report and order, Telesat is due to receive US$189 million in incentive payments for our role in freeing up that valuable spectrum. We are actively working to develop a plan to ensure that spectrum is cleared prior to the transition deadlines in 2030 and 2031. We successfully cleared C-band spectrum in the prior FCC C-band reallocation proceeding and we are confident we will be successful this time as well. Lastly, for Telesat GEO, we have entered into a new term loan agreement with a third-party lender for US$120 million to be used for general corporate purposes. These new funds will provide Telesat with greater financial resources to support our legacy business. We remain heavily focused on the upcoming Telesat GEO debt maturities and achieving a fair and balanced consensual outcome for all of our stakeholders. So with that, I will hand over to Donald, who will speak to the numbers in more detail. And then we will open the call up to questions.
Thank you, Dan, and good morning, everyone. My prepared remarks today will focus on highlights from this morning's press release and filing. In the second quarter of 2026, we reported consolidated revenue of $79 million, adjusted EBITDA of $22 million, and net loss of $559 million. Consolidated net loss for the quarter was impacted by an increase of $475 million in the fair value of Telesat Lightspeed warrants, and the weakening of the Canadian dollar during the quarter impacting the value of our U.S. dollar-denominated debt. The warrants are now valued at more than $1.3 billion reflecting the expansion of the constellation to 225 satellites and our ability to accelerate the execution of our plan. Interest expense for the quarter totaled $50 million, down from $54 million in the second quarter of 2025, due to a lower interest rate on our term loan. Interest relating to the Telesat Lightspeed project totaled $18 million during the second quarter of 2026 and was capitalized to the project compared to $8 million for the same period last year, as the amount outstanding on the Telesat Lightspeed financing has increased to $974 million at the end of the quarter, including capitalized interest of $54 million. Our GEO segment results were in line with our expectations during Q2. We generated $78 million in revenue, down 26% or $28 million compared to the same period last year. For the year, revenue of our GEO business segment was $184 million, also down 26% from last year. The majority of the revenue decline during the quarter and for the year was in our broadcast segment, driven by the expiration of a contract for service on our Anik F4 satellite in 2025, and lower capacity and rate as part of the renewal of a contract on Anik F5. In our enterprise segment, the decline was primarily driven by lower revenue from our Xplore contract renewed in October 2025. These declines were partially offset by new contracts added in 2025 in our aviation vertical by our global commercial team. The utilization of our satellites was 60% at the end of Q2. I will note that this utilization figure benefited from the retirement of our Telstar 14R and Anik F4 satellites during the quarter. If we adjust for these retirements, utilization declined about 2 percentage points from the end of Q1. The backlog of our GEO segment rose to $900 million at the end of June, due in large part to the extension of one of our broadcast service contracts for five years during the quarter. Adjusted EBITDA for our GEO segment was $43 million for the second quarter, down $37 million compared to last year, driven by lower revenue and higher expense related to our debt refinancing process. Our second quarter 2026 results include approximately $14 million in costs related to our debt refinancing, up approximately $7 million compared to the same period last year. Adjusting for these expenses, our GEO adjusted EBITDA would have been $57 million during the period, down 30% from last year. For the year, adjusted EBITDA totaled $119 million after excluding expenses relating to our refinancing process. As a result of this performance, for the first half of 2026, we are reiterating our GEO business segment guidance for the year of revenue of $300 million to $320 million and adjusted EBITDA of $210 million to $230 million, excluding debt refinancing and related litigation expenditure. Turning to the cash and liquidity position of our GEO business segment, cash at the end of Q2 was approximately $160 million and we announced today we borrowed US$120 million under a new term loan, providing meaningful additional cash for Telesat GEO. We invested $165 million in the Telesat Lightspeed program during the second quarter of 2026, including $145 million in capital expenditure and $20 million in non-capitalized labor and other operating costs, for a total investment of $336 million this year. Given the accelerated expansion of the constellation deployment from 156 to 225 satellites we announced last week, we now expect full-year investment in the program to be between $1.3 billion to $1.5 billion, up from $1.0 billion to $1.2 billion guidance we provided earlier this year, with the incremental investment funded by pre-service payment to be received from the Government of Canada. In the LEO segment, we ended the quarter with over $200 million in cash on hand. This cash, combined with $1.6 billion in availability under our Telesat Lightspeed financing, US$325 million from our vendor financing, and US$1.5 billion in milestone payments related to the ESCAPE contract is expected to fully fund the Telesat Lightspeed project, including US$500 million of contingencies, until it achieves global commercial service around the end of Q1 2028. Our backlog for Lightspeed increased significantly to approximately $5.6 billion, with the increase coming largely from the 15-year ESCAPE contract we announced last week. We also signed a 5-year contract with Northwestel in early Q2 for rural broadband connectivity in Canada. Before I conclude my prepared remarks, I would like to confirm that we are in compliance with all government covenants in our credit agreements and indenture. I will now turn the call back to the operator for the Q&A.
Questions and answers
Thank you. As a reminder, if you would like to ask a question in today's call, simply press star and 1. We will take a brief moment to compile the Q&A roster. Your first question comes from the line of Caleb Henry from Quilty Space. Your line is now live.
Hi, guys. Okay. First question is actually on the future expansion of the Lightspeed Constellation. On the previous call, it was mentioned that there is going to be a UHF band component, which you are partnered with MDA on. Can you talk about the role that Telesat is playing as a partner there? Is that capacity that you also anticipate being able to sell? Or is Telesat mainly managing the constellation on behalf of the Canadian government?
Hey, Caleb. Good morning, and thanks for the question. So maybe just a quick step back on ESCAPE; we have talked a little bit about this before. It is all about Arctic satellite communications capability. There is a military Ka-band component of that, and as we have announced before, that is going to be provided using Lightspeed, and we have expanded the constellation to meet those requirements. So that is number one. Number two is there will also be a UHF and X-band capability that is expected to be in MEO. That is a constellation that will be primed by MDA and Telesat will be a subcontractor to MDA. And so there is still more work that needs to be done on that — more work with the Government of Canada, DND, the Canadian Air Force — to define exactly what that capability is going to look like, and contracts need to be in place. We have a teaming agreement with MDA on that. Telesat and MDA have already been named as strategic partners for that capability. It is not my expectation that we are going to end up owning that MEO constellation. Would we have some ability to resell excess capacity on it? I do not know. That is not something that we have explored at this point in time. It is going to take a little while from here. We have got to do definition work and whatnot. I think at a minimum what Telesat will be doing in connection with the MEO constellation, again as a subcontractor to MDA, is providing network integration expertise, ground segment expertise, and overall ESCAPE integration. You have the Mil-Ka. You have the UHF. You have the X-band. All of that has got to operate as an integrated network. In any event, I do think it is a meaningful opportunity for Telesat. When we talked about the ESCAPE contract that we announced just last week, we were pretty clear that is an initial contract. We expect follow-on contracts probably next year even for the military Ka-band that will be more about network integration, user terminals, and other ground segment work, and we expect that to be a meaningful set of contracts for us. On the MEO side, that work is going to take probably a couple of years to get in place. But again, our expectation is we will have a long-term role in supporting that constellation, and that represents a very material revenue opportunity for the company. So I hope that is helpful.
That is. And then my one follow-up, also harking back to last week's call. The presentation had a couple of mentions of relay as an emerging service area. I was wondering if you could talk a little bit about the forecast for relay revenue and sort of when you see that turning on and what the drivers are?
Yeah. So when we talk about space relay, that is really about leveraging the Lightspeed constellation to communicate with other satellites. Those could be satellites like Earth observation, for instance, and we have the ability to connect those satellites into our global backbone. Many of those satellites today are taking images and collecting data, but the end user has to wait for the satellite to pass over a gateway, that data gets downloaded, and only then is it available to the end user. We can get that data back to the users in real time. If that satellite is connected to the Lightspeed constellation, it can collect the data, instantly relay that data to Lightspeed, and we can terminate that traffic anywhere on the face of the earth in milliseconds. We think that is very powerful. We are already doing work with NASA to demonstrate this capability, and we have disclosed that NASA contract before, and we have been engaged with quite a few potential customers for this — Earth observation companies and other governments. Governments have a lot of those satellites in orbit collecting valuable data and they want access to that information as fast as possible. I should also say that our optical intersatellite links meet the U.S. government's SDA standard, and so that opens up a big opportunity because other operators will have their optical links also meeting those standards, which means we can pass traffic to one another. When you have seen our forecast that revenue ramps, it ramps gradually, but we are bullish on that opportunity for defense applications and civil applications. We think there is great promise there. Certainly when you hear others talk about data centers in space, that is another opportunity; if there are data centers in space, they need to be connected back to the Earth. When we think about space relay, it covers a pretty wide range of applications that we are quite bullish on.
Your next question comes from the line of Edison Yu from Deutsche Bank. Your line is now live.
Hey, good morning. Thanks for taking our questions. First, I want to ask you about your latest thoughts regarding D2D. You probably saw MDA addressed the space radar proposal. Is that something that you would take part in? Have you had discussions around a potential role in operating such a constellation? Also, can you talk about the underlying assumptions that went into the Lightspeed forecast that you put out, outside of the mix shift to government and military? Were there significant changes in pricing assumptions or price per bit since earlier plans? And lastly, any update on the refinancing and near-term maturities and how we should think about the negotiations?
So on D2D, maybe the first thing I would say is we are very, very focused right now on executing on Lightspeed. It is the biggest project in Telesat's history, it is the biggest space project in Canada's history, and we see a huge opportunity there, but we need to stay focused on executing that. That said, we are pretty well acquainted with what various operators around the world and here in Canada are doing around D2D. We have had conversations with a number of parties about what role Telesat could potentially play in a D2D constellation. I won't offer more specifics than that other than to say it is not our principal area of focus, but opportunistically, if we can play a role in a D2D network where we can add value that is accretive to Telesat and does not distract us from our top priorities, that is something we would think about. Regarding Lightspeed assumptions: fundamentally there has certainly been a meaningful change in mix. When we first started Lightspeed, the world was a different place; geopolitical shifts and ongoing conflicts have opened a significant opportunity for defense and sovereign requirements. In response to the government's ESCAPE program, we changed our frequency plan to add military Ka-band, which in itself has a big impact on expectations around revenue mix because Mil-Ka will be used for government, defense, and sovereignty applications. Beyond that, we updated all the assumptions underpinning the plan with respect to pricing, take-up, geographic distribution, and so on. There were not wholesale changes in terms of expectations around the pricing environment. We always expected satellite-delivered broadband connectivity to be a competitive market and modeled downward price pressure over time. That remains embedded in our current plan. We sharpened pricing assumptions in some instances down and in some up based on current information. On the refinancing and maturities, we are limited in what we can say publicly given the nature of these processes, but I can say it remains a key priority. Our focus, working with our advisers, is to reach a consensual outcome with the legacy lenders prior to the maturities coming due. We are focused on doing that in a way that is fair and balanced for all stakeholders, including the lenders. As soon as we have a material update we can share, we will.
Your next question comes from the line of David McFadgen from ATB. Your line is live.
Hi, guys. A couple of questions, if I may. I see that you increased the warrant valuation quite a bit. Can you tell us what you are actually valuing Lightspeed at to get to that warrant evaluation? And secondly, when do you think you would be able to announce some more defense customers, like some other NATO countries buying some capacity on Lightspeed? Thank you.
Thanks for the questions, David. On trying to extrapolate the value of Lightspeed from the warrant value, we are not going to do that for folks. But you are absolutely right that the value of the warrants has gone up by more than 50%, and that is totally a function of the fact that we got the ESCAPE contract done, we have a very significant backlog now on Lightspeed, and we have been able to accelerate our expectations around revenue and EBITDA and take-up commensurate with accelerating the expansion of the constellation. That is obviously positive for the business. It is good news if you are a Canadian taxpayer because the Government of Canada and the Government of Quebec have warrants in the Lightspeed project. On further defense opportunities and when we would be in a position to announce them, it is always tricky. ESCAPE itself took a long time from the original bid to being finalized. I do not expect the other opportunities in the pipeline for Lightspeed to take that long given today's environment; customers want capability as soon as possible. We have real meaningful concrete opportunities with sovereign customers about using Lightspeed. It is always hard to handicap timing, but my expectation is by the end of next year our backlog will be meaningfully higher because we are confident about converting opportunities in the pipeline into firm, take-or-pay contracts like ESCAPE. Is it possible to get something more done by the end of this year? Maybe, but I would not telegraph high conviction for that. We are very pleased to have gotten ESCAPE, signed the Northwestel contract, and have positive, significant opportunities in the pipeline above and beyond ESCAPE. We are very bullish about our ability to meaningfully grow backlog from here even before we enter commercial service.
Would it be possible to squeeze one more in? I saw you got that additional loan in the GEO subsidiary. What is the collateral for that additional loan?
So I would say we are not going to get into the weeds on this call, but at a high level under our covenant package in the legacy borrowing — the term loan and the notes — we obviously had scope to raise this incremental funding. We were pleased to get it done; it gives us more financial resources to support the legacy business, which is a good thing. We have provided some disclosure about this loan in the release and in the financial statements, and in the fullness of time we will file the loan agreement as well. That will be out there.
Your next question comes from the line of Mayor Yaghi from Scotiabank. Your line is live.
Great. Thank you for taking my question. I have a few. Maybe I will start with the ESCAPE contract that you signed. It was great to see the contract finalized. I wanted to ask you specifically: the new satellites that you are going to deploy following that contract being signed — are they in any way different technologically speaking in terms of frequencies that they operate under versus the initial 156?
Thanks for the question. No. They are identical to the first 156. What is good about that is they will follow immediately down the assembly line from the 156, which means nothing about adding those 69 additional satellites is going to slow down the delivery of those first 156, which is why we are standing behind our target entry date for global service. Those next 69 just follow right on from the initial 156. So yes, all 225 will be identical.
Okay. Given this, I was trying to figure out the revenue run rate of the program beyond the initial spike in cash payments upfront. I was wondering why you need the new satellites now. I was trying to figure out the capacity that the new contract is going to consume out of your existing 156 satellites. On the Mil-Ka band, which is 25% of your spectrum allocation, it does not seem like it is going to use up much of that 25% anyway. So why move to putting up more satellites right away instead of waiting after commercial launch and then adding more satellites?
Great question. There are a couple of reasons. First, when we converted the frequency plan for the first 156, it was the right thing to do given all the opportunities we see with defense users and expected demand for military Ka-band capability. At the same time, we took 25% of the frequencies that were going to be available for our commercial customers off the market. We see huge opportunities for commercial verticals — airline broadband, maritime, rural broadband, enterprise — and we did not want to reduce our capacity that could support those markets. Accelerating the expansion allowed us to restore the 25% of commercial capacity that we had diverted for defense, and accelerate satellites we always planned to add. Previously, we had planned to fund expansion satellites with cash flow from the first 156, but we did not have enough upfront funding to grow the constellation as much as we wanted. With ESCAPE, we are able to restore that commercial capacity, accelerate the satellites we always needed, and provide more resiliency, redundancy, and better network performance. So it was a win.
Your next question comes from the line of Walter Piecyk from LightShed. Your line is live.
Thanks. Hey, Daniel. Just want to go to the expansion and specifically Falcon 9. Are these contracted? I know SpaceX has talked about stopping third-party bookings beyond 2028, and I assume that extension will go beyond 2028, so I am curious if these launches are contracted and whether they have to be on Falcon 9 or if you are going to look for other launch opportunities.
To launch the 225 satellites, we need 15 rockets. We already have 14 under contract with SpaceX. We had a few surplus rockets that we did not need for the 156, but when we added the 69 we needed those and one more. We like using Falcon 9: it is super reliable, SpaceX launches at a rapid cadence, and we are very focused on getting the constellation deployed as quickly as possible, so that is the right launch vehicle for Lightspeed. We needed one more Falcon 9, we've been in touch with SpaceX, they have agreed to make that rocket available to us, and we are getting the launch services agreement in place to do that. We expect all of our launches for all 225 satellites will be done by the end of 2028.
I know you've been asked this many times but I will ask again: any requests from potential customers for you to layer in additional spectrum to the satellites you've developed before you actually get these launches going? These first 225— are they fixed? Could you modify them for other bands if asked?
These first 225 are effectively locked in. The design's done, hardware is ordered, and satellites are already at MDA's factory. We are going hard down the path; we will not make modifications to these 225 without taking a massive delay, which we will not do. Our expectation is Lightspeed will grow over time in response to demand. For future satellites we are already doing work on next-generation designs that could accommodate other frequency bands or hosted payloads, but not these first 225.
Your next question comes from the line of James Ratzer from New Street Research. Your line is now live.
Yes. Daniel, thanks very much for taking the questions. I have a couple, please. First, coming back to the refinancing coming up, I think you mentioned you wanted to be kind of fair, balanced, and consensual. I was reading a court document from July 27 that seemed to suggest you might also be considering a Chapter 11 process as an option. Is that something you are seriously thinking about at this stage as one outcome? Secondly, on the $120 million of new financing you just received, can you let us know where in the stack that ranks? Is it pari passu with the senior debt or unsecured? Just interested to know where that sits in the stack. Many thanks.
Thanks, James. The filing you reference — I am not sure what conclusion you drew about entertaining a bankruptcy filing, but that is not the case at all. Our focus is strongly on refinancing the debt prior to the maturities and achieving a consensual outcome. That is the focus; we are spending a lot of time and energy to achieve that outcome. On the $120 million and where it fits in, again, we are not going to go into the weeds on this call. The borrowings were made within a non-guarantor subsidiary of Telesat GEO, so they sit within the legacy debt silo. The loan agreement will get filed and made available, and we will leave it at that for now.
Got it. Can you say whether it was linked to the new C-band proceeds that you are going to be receiving, or is that separate from the new debt you just raised?
I will not say specifically, but I will note that having the FCC order come out and Telesat being eligible for those proceeds, subject to meeting our obligations to clear that spectrum on time, is obviously a very accretive development for the business.
Your next question comes from the line of Christopher Quilty from Quilty Space. Your line is live.
Thanks. Just a follow-up on the ESCAPE program. Is that going to require an incremental ground segment? Or is that something that the existing Lightspeed ground segment can sort of lease back to the customer? And more broadly, where do you sit in terms of the ground segment build-out? I think you had past deliberations around bringing in outside financing or not for the ground segment. Where do you stand on that?
Christopher, thanks. We are making really good progress on rolling out the ground segment — landing stations and gateways. We have at least three or four landing stations under development in Canada at various stages, and we have been installing the big gateway antennas and doing tests, which is going well. We have announced ground stations being built for us in Australia, and we did the deal with Orange in France at their teleport; that is currently being commissioned. We gave Intellian a contract to build the landing station antennas, and commissioning and testing is underway. As to working with third parties to support landing stations, absolutely that is something we are receptive to and have always done. Even for GEO, some ground stations we own, but many are provided by third-party teleports. With Lightspeed, that approach is common across the industry — Amazon, Starlink, OneWeb use third-party teleports as well. We might own equipment at those teleports and they host it for us. We are already working with some third parties in Australia and Europe, and having conversations in Asia. We are receptive to broader, more comprehensive arrangements with third parties if it accelerates rollout and is financially accretive, always provided they can deliver mission-critical services in a secure environment given the nature of traffic on Lightspeed.
Is that something that would likely happen this year or is it slipping into next year?
We are rolling out landing stations now and have to support upcoming launches. We have at least eight-plus teleports and landing stations under development at various stages right now — some are already done and some are in flight. We will be doing more over the course of this year, and we expect to be able to share more information about our plans for that.
Thank you. That concludes our question-and-answer session. I would like to turn the call over to Daniel S. Goldberg for closing remarks.
Okay. Well, operator, thank you very much. Maybe I would just say in summary: we are about two-thirds of the way through the year and we feel very good about how the business is performing and how we are executing. We reiterated our guidance for GEO. Last week we announced the largest contract in Telesat's history with the ESCAPE contract. The pipeline for Lightspeed is very significant; we have about $5.6 billion of backlog at this point in time with Lightspeed. Between further opportunities related to ESCAPE, other sovereign opportunities, and commercial opportunities in the pipeline, we are more bullish than ever about our prospects. The constellation has expanded, it is accelerated, and it is fully funded. We have US$500 million in contingency to support Lightspeed, which we are focused on not needing to dip into. The GEO business is performing pretty well year to date; we actually grew our backlog in GEO this past quarter, which we have not done for a while. I think that shows some resiliency and improved cash flow visibility when we can grow it. Certainly, the FCC announcement on the C-band process and Telesat being eligible for US$189 million of proceeds, on the back of the $344 million in proceeds we received from the earlier proceeding, gives us confidence that we will secure this $189 million. We end Q2 and head into the rest of the year optimistic and bullish about where the business is going and our prospects. In any event, thank you all for joining us this morning, and we look forward to chatting with you when we issue our third quarter numbers. So thank you, operator.
This concludes today's meeting. You may now disconnect.