UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 __________________________ FORM 20-F __________________________ (Mark One) ☐ REGISTRATION STATEMENT PURSUANT TO SECTION 12(b) OR (g) OF THE SECURITIES EXCHANGE ACT OF 1934 OR ☒ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended December 31, 2023 OR ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 ☐ SHELL COMPANY REPORT PURSUANT TO SECTI ...

Financial Data and Key Metrics Changes - In Q3 2023, Telesat reported revenues of $175 million, a decrease of $5 million compared to the same period in 2022. Adjusted EBITDA was $133 million, down by $4 million, resulting in an adjusted EBITDA margin of 75.9% compared to 76% in 2022 [89][90] - For the nine months ended September 30, 2023, net income was $545 million, primarily due to U.S. C-band clearing proceeds and gains from debt repurchase [8] - The net loss for Q3 2023 was $3.3 million, a significant improvement from a net loss of $228.7 million in the prior year, attributed to favorable currency conversion and debt repurchase gains [72] Business Line Data and Key Metrics Changes - Operating expenses decreased by $6 million to $50 million in Q3 2023, while cash inflow from operating activities was $156 million [89][8] - The revenue decrease was mainly due to lower revenue from certain South American customers, with a noted loss from foreign exchange of $77 million [71][90] Market Data and Key Metrics Changes - The company experienced competitive pressure in the enterprise segment, particularly from Starlink, which has gained traction in maritime and aeronautical services [120] - In Latin America, a specific contract in Peru was lost to a competitor, contributing to revenue softness in the region [32] Company Strategy and Development Direction - Telesat is focused on executing the Telesat Lightspeed program, an advanced broadband LEO network, and is optimistic about concluding funding arrangements with Canadian federal and provincial partners [5][4] - The company has secured a significant contract with SpaceX for the launch of 14 Falcon 9 rockets, which is expected to support the timely deployment of the Lightspeed network [69] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the execution of the Lightspeed program and the expected customer commitments leading up to the first satellite launch in mid-2026 [12] - There are anticipated revenue headwinds due to a renewal with Bell Canada at a lower rate, which may impact operating margins [19][106] Other Important Information - Telesat has repurchased a total of $587 million in debt at an aggregate cost of $332.7 million, resulting in annual interest savings of approximately $40 million [9] - The company maintains a cash balance of approximately $1.8 billion, with $1.3 billion held in unrestricted subsidiaries, providing a strong liquidity position [73] Q&A Session Summary Question: Can you provide insights on OpEx and CapEx ramp-up? - Management indicated that OpEx will begin to ramp up in Q4 as the Lightspeed program commences, with detailed guidance expected in future calls [94][96] Question: Any updates on the constellation planning and capacity commitments? - Management confirmed ongoing engagement with customers and expects to announce additional capacity commitments throughout the next year [12][99] Question: What are the expectations regarding gross margins? - Management noted that while they have historically maintained high operating margins, there may be downward pressure due to revenue headwinds from contract renewals [19][106] Question: Can you clarify the funding arrangements with Canadian partners? - Management stated that they are making good progress with federal and provincial partners and expect to reach financial close either late this year or early next year [109] Question: How is the competitive landscape evolving with Starlink's entry? - Management acknowledged increased competitive intensity in the enterprise segment, particularly in maritime services, but remains confident in the value proposition of the Lightspeed constellation [120]

Exhibit 99.1 TELESAT CORPORATION Quarterly Report For the Three and Nine Month Periods Ended September 30, 2023 PART I. FINANCIAL INFORMATION | Item 1. | Financial Statements | 1 | | --- | --- | --- | | Item 2. | Management's Discussion and Analysis of Financial Condition and Results of Operations | 26 | | Item 3. | Quantitative and Qualitative Disclosures About Market Risk | 55 | PART II. OTHER INFORMATION | Item 1. | Legal Proceedings | 56 | | --- | --- | --- | | Item 1A. Risk Factors | | 56 | | Item 2. | ...

Telesat Corporation (NASDAQ:TSAT) Q2 2023 Earnings Call Transcript August 11, 2023 9:30 AM ET Company Participants Michael Bolitho - Director of Treasury and Risk Management Daniel Goldberg - President and Chief Executive Officer Andrew Browne - Chief Financial Officer Conference Call Participants Michael Pace - JP Morgan Walter Piecyk - LightShed Partners Arun Seshadri - BNP Paribas Raghav Garg - DoubleLine Group Marcello Chermisqui - Ares Operator Good morning, ladies and gentlemen. Welcome to the confere ...

PART I. FINANCIAL INFORMATION This section presents the unaudited interim financial statements and management's analysis of Telesat Corporation's financial performance and condition [Financial Statements](index=3&type=section&id=Item%201.%20Financial%20Statements) This section presents Telesat Corporation's unaudited interim consolidated financial statements, including income, balance sheets, cash flows, and detailed notes [Unaudited Interim Condensed Consolidated Statements of Income (Loss)](index=3&type=section&id=Unaudited%20Interim%20Condensed%20Consolidated%20Statements%20of%20Income%20(Loss)) Telesat reported a net income of **$519.9 million** for Q2 2023, driven by C-band clearing gains and debt repurchase gains Consolidated Statements of Income (Loss) Highlights (in thousands of CAD) | Metric | Three Months Ended June 30, 2023 | Three Months Ended June 30, 2022 | Six Months Ended June 30, 2023 | Six Months Ended June 30, 2022 | | :--- | :--- | :--- | :--- | :--- | | **Revenue** | $179,752 | $186,614 | $363,174 | $372,383 | | **Operating Income** | $422,973 | $77,432 | $503,209 | $145,799 | | **Other operating gains (losses), net** | $344,890 | $(23) | $344,913 | $(53) | | **Gain on repurchase of debt** | $153,390 | $85,886 | $153,390 | $106,916 | | **Gain (loss) on foreign exchange** | $66,931 | $(98,834) | $77,067 | $(62,687) | | **Net Income (Loss)** | $519,940 | $(4,375) | $548,573 | $56,255 | | **Diluted Net Income (Loss) per Share** | $10.06 | $(0.16) | $10.82 | $0.96 | [Unaudited Interim Condensed Consolidated Balance Sheets](index=6&type=section&id=Unaudited%20Interim%20Condensed%20Consolidated%20Balance%20Sheets) As of June 30, 2023, total assets increased to **$6.55 billion**, liabilities decreased to **$4.20 billion**, and shareholders' equity rose to **$2.35 billion** Consolidated Balance Sheet Highlights (in thousands of CAD) | Metric | June 30, 2023 | December 31, 2022 | | :--- | :--- | :--- | | **Total Current Assets** | $1,964,045 | $1,788,288 | | **Total Assets** | $6,548,507 | $6,479,593 | | **Long-term Indebtedness** | $3,454,003 | $3,850,081 | | **Total Liabilities** | $4,197,225 | $4,643,891 | | **Total Shareholders' Equity** | $2,351,282 | $1,835,702 | | **Total Liabilities and Shareholders' Equity** | $6,548,507 | $6,479,593 | [Unaudited Interim Condensed Consolidated Statements of Cash Flows](index=7&type=section&id=Unaudited%20Interim%20Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) Net cash from operating activities increased to **$102.3 million** for H1 2023, while investing and financing activities resulted in net cash outflows Consolidated Statements of Cash Flows Highlights (in thousands of CAD) | Cash Flow Activity (Six months ended June 30) | 2023 | 2022 | | :--- | :--- | :--- | | **Net cash from operating activities** | $102,349 | $69,179 | | **Net cash (used in) generated from investing activities** | $(66,744) | $31,374 | | **Net cash (used in) generated from financing activities** | $(163,213) | $(93,733) | | **Changes in cash and cash equivalents** | $(160,793) | $32,657 | | **Cash and cash equivalents, end of period** | $1,516,999 | $1,482,250 | [Notes to the Unaudited Interim Condensed Consolidated Financial Statements](index=8&type=section&id=Notes%20to%20the%20Unaudited%20Interim%20Condensed%20Consolidated%20Financial%20Statements) These notes detail accounting policies, segment revenue, C-band clearing income, debt, share capital, and subsequent events including the Lightspeed constellation agreement - The company operates as a single segment providing satellite-based services, categorized into Broadcast, Enterprise, and Consulting[25](index=25&type=chunk) - In June 2023, the company accrued **$344.9 million** (US**$259.6 million**) for Phase II accelerated C-band spectrum clearing, with proceeds expected later in 2023[37](index=37&type=chunk) - During Q2 2023, Telesat repurchased **$312.2 million** in principal of various notes for **$159.1 million**, resulting in a gain of **$153.4 million**[50](index=50&type=chunk)[51](index=51&type=chunk) - Subsequent to the reporting period, on August 10, 2023, the company entered into a LEO Satellite Design and Supply Agreement with MDA Ltd. for approximately **$2.1 billion** to manufacture the Telesat Lightspeed constellation[115](index=115&type=chunk) [Management's Discussion and Analysis of Financial Condition and Results of Operations](index=29&type=section&id=Item%202.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management discusses financial results, highlighting increased net income from C-band clearing and debt repurchase gains, alongside liquidity, debt, and Lightspeed program progress [Operating Highlights](index=30&type=section&id=OPERATING%20HIGHLIGHTS) Key operational achievements include significant debt repurchases, C-band clearing, LEO 3 satellite launch, and securing full funding for the Lightspeed program - From April 1, 2023, to August 10, 2023, the company repurchased US**$296.0 million** in principal of various notes for US**$156.9 million**[131](index=131&type=chunk)[132](index=132&type=chunk) - Completed Phase II C-band clearing, making Telesat eligible for an accelerated relocation payment of US**$259.6 million**[133](index=133&type=chunk)[134](index=134&type=chunk) - Successfully launched the LEO 3 demonstration satellite in July 2023 to continue customer and vendor testing[135](index=135&type=chunk) - Contracted MDA Ltd. to build the Telesat Lightspeed LEO satellites and announced the program is fully funded through global service delivery, with launches to commence in mid-2026[115](index=115&type=chunk)[136](index=136&type=chunk) [Results of Operations](index=33&type=section&id=RESULTS%20OF%20OPERATIONS) Q2 2023 revenue decreased by **3.7%** to **$179.8 million**, while net income surged to **$519.9 million** due to C-band clearing and debt repurchase gains Revenue by Service (in millions of CAD) | Service | Q2 2023 | Q2 2022 | % Change | YTD 2023 | YTD 2022 | % Change | | :--- | :--- | :--- | :--- | :--- | :--- | :--- | | Broadcast | $86.3 | $89.6 | (3.7)% | $171.9 | $186.6 | (7.9)% | | Enterprise | $90.4 | $94.3 | (4.1)% | $185.5 | $179.7 | 3.2% | | Consulting and other | $3.1 | $2.8 | 11.8% | $5.8 | $6.1 | (4.9)% | | **Total Revenue** | **$179.8** | **$186.6** | **(3.7)%** | **$363.2** | **$372.4** | **(2.5)%** | - Q2 operating expenses decreased to **$51.6 million** from **$58.9 million** year-over-year, primarily due to an **$8.5 million** reduction in non-cash share-based compensation[166](index=166&type=chunk)[167](index=167&type=chunk) - Q2 interest expense rose to **$68.6 million** from **$49.7 million** year-over-year, driven by higher interest rates on the floating-rate Term Loan B facility[170](index=170&type=chunk)[171](index=171&type=chunk) - Contracted revenue backlog was approximately **$1.6 billion** as of June 30, 2023[188](index=188&type=chunk) [Liquidity and Capital Resources](index=37&type=section&id=LIQUIDITY%20AND%20CAPITAL%20RESOURCES) As of June 30, 2023, Telesat had **$1.52 billion** in cash and short-term investments, with sufficient liquidity for operations and Lightspeed constellation funding - As of June 30, 2023, the company had **$1,517.0 million** of cash and short-term investments and US**$200.0 million** of borrowing availability[191](index=191&type=chunk) - Cash from operating activities for the first six months of 2023 was **$102.3 million**, a **$33.2 million** increase from the prior year, mainly due to lower income taxes paid[192](index=192&type=chunk) - The company may continue to repay, repurchase, or refinance its existing debt depending on market conditions and liquidity[201](index=201&type=chunk) - As of June 30, 2023, the company was in compliance with all financial covenants of its debt agreements[221](index=221&type=chunk) [Non-IFRS Measures](index=44&type=section&id=NON-IFRS%20MEASURES) This section reconciles non-IFRS measures, reporting Q2 2023 Adjusted EBITDA at **$138.7 million** and a compliant Consolidated Total Secured Debt to Consolidated EBITDA ratio of **5.03:1.00** Adjusted EBITDA Reconciliation (in millions of CAD) | Metric | Q2 2023 | Q2 2022 | YTD 2023 | YTD 2022 | | :--- | :--- | :--- | :--- | :--- | | **Net income (loss)** | $519.9 | $(4.4) | $548.6 | $56.3 | | **Adjustments (Taxes, Interest, FX, etc.)** | $(381.2) | $150.8 | $(271.0) | $235.7 | | **Adjusted EBITDA** | **$138.7** | **$146.4** | **$277.6** | **$292.0** | | **Adjusted EBITDA Margin** | 77.1% | 78.4% | 76.4% | 78.4% | - Consolidated EBITDA for Covenant Purposes for the twelve months ended June 30, 2023, was **$590.2 million**[256](index=256&type=chunk) - As of June 30, 2023, the Consolidated Total Secured Debt to Consolidated EBITDA ratio was **5.03:1.00**, compliant with the covenant requirement of being less than **5.75:1.00**[258](index=258&type=chunk) [Quantitative and Qualitative Disclosures About Market Risk](index=61&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) This section discusses market risks, including credit, foreign exchange, and interest rate risks, particularly concerning U.S. dollar-denominated debt - The company is exposed to foreign exchange risk, with a **5%** change in the USD/CAD exchange rate estimated to impact net income by **$172.9 million** due to its U.S. dollar-denominated indebtedness[233](index=233&type=chunk) - The company is exposed to interest rate risk on its variable-rate debt; a **0.25%** change in interest rates would impact net income by **$1.3 million** for the quarter[240](index=240&type=chunk) PART II. OTHER INFORMATION This section provides updates on legal proceedings, risk factors, and other corporate information [Legal Proceedings](index=62&type=section&id=Item%201.%20Legal%20Proceedings) No material developments in legal proceedings have occurred since the last annual report, including a Brazilian tax dispute - There have been no material developments in legal proceedings since the filing of the Annual Report on Form 20-F for the fiscal year ended December 31, 2022[290](index=290&type=chunk) [Risk Factors](index=62&type=section&id=Item%201A.%20Risk%20Factors) No material changes to risk factors since the last annual report, but specific risks for the Lightspeed constellation are highlighted - Key risks for the Telesat Lightspeed constellation include inflation, funding conditions, technological challenges, supply chain disruptions, and competition from other LEO systems[292](index=292&type=chunk) [Other Information](index=62&type=section&id=Item%205.%20Other%20Information) Janet Yeung was appointed to the Board of Directors on August 2, 2023, replacing Jason Caloras - Janet Yeung was appointed to the Board of Directors on August 2, 2023, replacing the resigning Jason Caloras[297](index=297&type=chunk)

Financial Data and Key Metrics Changes - Telesat reported revenues of $183 million for Q1 2023, a decrease of $2 million compared to the same period in 2022 [6] - Adjusted EBITDA for Q1 2023 was $139 million, down $7 million from the previous year, resulting in an adjusted EBITDA margin of 75.7%, compared to 78.4% in 2022 [7] - Net income for Q1 2023 was $29 million, a decrease of $32 million from $61 million in the prior year [9] - Cash flow from operating activities was $63 million, with $7 billion in cash on the balance sheet [6][10] Business Line Data and Key Metrics Changes - Revenue decline was primarily attributed to reduced revenues from North American DTH customers, partially offset by higher equipment sales to Canadian government customers and increased services to air and maritime customers [7] - Utilization at the end of Q1 was 88%, slightly down from 89% at the end of Q4 [4] Market Data and Key Metrics Changes - Interest expense increased by $20 million compared to the same period in 2022, driven by rising interest rates and foreign exchange impacts [8] - A gain on foreign exchange of $10 million was recorded, down from $36 million in the same quarter of 2022 [8] Company Strategy and Development Direction - The company is optimistic about the Lightspeed constellation project, continuing to engage with various parties despite not having significant updates [5] - Telesat has repurchased approximately $103 million in face value of debt, which is expected to strengthen its financial position [5][11] Management's Comments on Operating Environment and Future Outlook - Management reaffirmed the full-year guidance provided in late March, indicating that the revenue and adjusted EBITDA declines are primarily due to the renewals with Bell and DISH [3][4] - The company expects to maintain its 2023 revenue guidance between $990 million and $710 million, with adjusted EBITDA expected to be between $500 million and $550 million [10] Other Important Information - Telesat has approximately $1.7 billion in cash and short-term investments, along with $200 million available under its revolving credit facility [10] - The leverage ratio at the end of Q1 was 6.24 times, with compliance to all covenants in the credit agreement [11] Q&A Session Summary Question: Update on LEO discussions - Management confirmed ongoing discussions with existing parties and noted progress, but no significant updates were available [12] Question: Participation in the IRIS 2 European project - Management stated that Telesat is not a bidder for the project but is monitoring developments and evaluating potential participation [13] Question: Cost to build Lightspeed and launch timeline - Management indicated no significant inflationary pressures affecting the estimated cost of $5.5 billion and projected the first launches could begin in 2026 [18] Question: Supplier conversations and cost reduction opportunities - Management confirmed ongoing collaboration with Thales as the prime contractor while evaluating alternative suppliers to reduce costs [19] Question: Impact of Erwin Hudson's retirement on Lightspeed - Management expressed confidence in the technical team's capabilities and indicated that Hudson would continue to consult on the project [20] Question: Royalty payments between GEO and LEO businesses - Management clarified that payments are for shared resources rather than royalties, with revenues primarily coming from U.S. government services [21] Question: Impact of Shaw Rogers transaction on relationships - Management stated that the relationship with Shaw is not expected to be adversely impacted by the Rogers acquisition [23] Question: Renewal timelines for Shaw contracts - Management indicated that renewals are tied to the end-of-life of satellites, with timelines extending into 2024 and beyond [24]

PART I. FINANCIAL INFORMATION [Item 1. Financial Statements](index=3&type=section&id=Item%201.%20Financial%20Statements) Telesat Corporation's Q1 2023 unaudited interim condensed consolidated financial statements, including income, equity, balance sheets, cash flows, and detailed notes [Unaudited Interim Condensed Consolidated Statements of Income (Loss)](index=3&type=section&id=Unaudited%20Interim%20Condensed%20Consolidated%20Statements%20of%20Income%20(Loss)) | (in thousands of Canadian dollars, except per share amounts) | 2023 | 2022 | | :------------------------------------------------ | :----- | :----- | | Revenue | $183,422 | $185,769 | | Operating income | $80,236 | $68,367 | | Interest expense | $(68,873) | $(48,503) | | Gain on extinguishment of debt | — | $21,030 | | Interest and other income | $15,467 | $660 | | Gain (loss) on foreign exchange | $10,136 | $36,147 | | Net income (loss) | $28,633 | $60,630 | | Net income (loss) per common share (Basic) | $0.62 | $1.16 | | Net income (loss) per common share (Diluted) | $0.60 | $1.13 | [Unaudited Interim Condensed Consolidated Statements of Comprehensive Income (Loss)](index=4&type=section&id=Unaudited%20Interim%20Condensed%20Consolidated%20Statements%20of%20Comprehensive%20Income%20(Loss)) | (in thousands of Canadian dollars) | 2023 | 2022 | | :--------------------------------- | :----- | :----- | | Net income (loss) | $28,633 | $60,630 | | Foreign currency translation adjustments | $(5,457) | $(17,543) | | Total comprehensive income (loss) | $23,176 | $43,087 | [Unaudited Interim Condensed Consolidated Statements of Changes in Shareholders' Equity](index=5&type=section&id=Unaudited%20Interim%20Condensed%20Consolidated%20Statements%20of%20Changes%20in%20Shareholders'%20Equity) | (in thousands of Canadian dollars) | March 31, 2023 | March 31, 2022 | | :--------------------------------- | :------------- | :------------- | | Total Telesat Corporation shareholders' equity | $510,505 | $431,479 | | Non-controlling interest | $1,356,795 | $1,331,654 | | Total shareholders' equity | $1,867,300 | $1,763,133 | [Unaudited Interim Condensed Consolidated Balance Sheets](index=6&type=section&id=Unaudited%20Interim%20Condensed%20Consolidated%20Balance%20Sheets) | (in thousands of Canadian dollars) | March 31, 2023 | December 31, 2022 | | :--------------------------------- | :------------- | :---------------- | | Total current assets | $1,845,834 | $1,788,288 | | Total assets | $6,504,963 | $6,479,593 | | Total current liabilities | $192,022 | $171,396 | | Long-term indebtedness | $3,839,510 | $3,850,081 | | Total liabilities | $4,637,663 | $4,643,891 | | Total shareholders' equity | $1,867,300 | $1,835,702 | [Unaudited Interim Condensed Consolidated Statements of Cash Flows](index=7&type=section&id=Unaudited%20Interim%20Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) | (in thousands of Canadian dollars) | 2023 | 2022 | | :--------------------------------- | :----- | :----- | | Net cash from operating activities | $62,649 | $43,443 | | Net cash (used in) generated from investing activities | $(24,959) | $46,598 | | Net cash (used in) generated from financing activities | $(2,052) | $(12,071) | | Changes in cash and cash equivalents | $31,785 | $62,997 | | Cash and cash equivalents, end of period | $1,709,577 | $1,512,590 | [Notes to the Unaudited Interim Condensed Consolidated Financial Statements](index=8&type=section&id=Notes%20to%20the%20Unaudited%20Interim%20Condensed%20Consolidated%20Financial%20Statements) These notes provide detailed explanations for the interim condensed consolidated financial statements, covering company background, accounting policies, segment performance, operating expenses, debt, equity, and other financial disclosures [1. BACKGROUND OF THE COMPANY](index=8&type=section&id=1.%20BACKGROUND%20OF%20THE%20COMPANY) - Telesat Corporation, incorporated in October 2020 and headquartered in Ottawa, Canada, is a global satellite operator providing mission-critical communications solutions, operating a fleet of **15 geostationary satellites** and the Canadian payload on Viasat-1[13](index=13&type=chunk)[14](index=14&type=chunk) - The company is developing a low earth orbit (LEO) satellite constellation called 'Telesat Lightspeed,' with the first LEO satellite successfully launched in **January 2018** to demonstrate low latency broadband capabilities[15](index=15&type=chunk) - Telesat Corporation began trading on Nasdaq and TSX on **November 19, 2021**, following a transaction where Loral Space & Communications Inc. and Public Sector Pension Investment Board exchanged interests for equity in the new public holding company[16](index=16&type=chunk)[17](index=17&type=chunk) [2. BASIS OF PRESENTATION](index=8&type=section&id=2.%20BASIS%20OF%20PRESENTATION) - The financial statements are prepared in accordance with International Accounting Standard 34, Interim Financial Reporting (IAS 34), and should be read in conjunction with the **December 31, 2022** consolidated financial statements[20](index=20&type=chunk)[21](index=21&type=chunk) [3. MATERIAL ACCOUNTING POLICY INFORMATION](index=9&type=section&id=3.%20MATERIAL%20ACCOUNTING%20POLICY%20INFORMATION) - The IASB amended IAS 1, Presentation of Financial Statements, in **October 2022** to improve information on long-term debt covenants, specifying that only covenants to be complied with on or before the reporting date affect debt classification[24](index=24&type=chunk)[25](index=25&type=chunk] - The amendments are effective for annual reporting periods beginning on or after **January 1, 2024**, with early adoption permitted[26](index=26&type=chunk) [4. SEGMENT INFORMATION](index=9&type=section&id=4.%20SEGMENT%20INFORMATION) - Telesat operates in a single segment, providing satellite-based services globally, categorized into Broadcast, Enterprise, and Consulting and other services[27](index=27&type=chunk)[28](index=28&type=chunk) Revenue by Service Type (in thousands of Canadian dollars) | Three months ended March 31, | 2023 ($) | 2022 ($) | | :--------------------------- | :------- | :------- | | Broadcast | 85,578 | 96,983 | | Enterprise | 95,091 | 85,408 | | Consulting and other | 2,753 | 3,378 | | **Total Revenue** | **183,422** | **185,769** | Enterprise Equipment Sales (in thousands of Canadian dollars) | Three months ended March 31, | 2023 ($) | 2022 ($) | | :--------------------------- | :------- | :------- | | Enterprise equipment sales | 7,305 | 3,356 | Revenue by Geographic Region (in thousands of Canadian dollars) | Three months ended March 31, | 2023 ($) | 2022 ($) | | :--------------------------- | :------- | :------- | | Canada | 88,723 | 81,620 | | United States | 59,037 | 74,963 | | Latin America & Caribbean | 14,462 | 12,276 | | Asia & Australia | 12,147 | 9,014 | | Europe, Middle East & Africa | 9,053 | 7,896 | | **Total Revenue** | **183,422** | **185,769** | - For both Q1 2023 and Q1 2022, **two significant customers** each accounted for over **10% of consolidated revenue**[32](index=32&type=chunk) [5. OPERATING EXPENSES](index=12&type=section&id=5.%20OPERATING%20EXPENSES) Operating Expenses Breakdown (in thousands of Canadian dollars) | Three months ended March 31, | 2023 ($) | 2022 ($) | | :--------------------------- | :------- | :------- | | Compensation and employee benefits | 29,974 | 43,066 | | Other operating expenses | 12,586 | 13,458 | | Cost of sales | 10,912 | 7,842 | | **Operating expenses** | **53,472** | **64,366** | - Compensation and employee benefits include salaries, bonuses, commissions, post-employment benefits, and share-based compensation[35](index=35&type=chunk) - Other operating expenses cover general and administrative, marketing, in-orbit insurance, professional fees, and facility costs[36](index=36&type=chunk) - Cost of sales includes third-party satellite capacity, equipment sales, and other direct costs[36](index=36&type=chunk) [6. INTEREST EXPENSE](index=12&type=section&id=6.%20INTEREST%20EXPENSE) Interest Expense Breakdown (in thousands of Canadian dollars) | Three months ended March 31, | 2023 ($) | 2022 ($) | | :--------------------------- | :------- | :------- | | Interest on indebtedness | 64,181 | 41,194 | | Interest on derivative instruments | — | 1,839 | | Interest on satellite performance incentive payments | 396 | 477 | | Interest on significant financing component | 4,110 | 4,411 | | Interest on employee benefit plans | (193) | 117 | | Interest on leases | 379 | 465 | | **Interest expense** | **68,873** | **48,503** | [7. INCOME TAXES](index=12&type=section&id=7.%20INCOME%20TAXES) Tax Expense (Recovery) (in thousands of Canadian dollars) | Three months ended March 31, | 2023 ($) | 2022 ($) | | :--------------------------- | :------- | :------- | | Current tax expense | 13,749 | 21,625 | | Deferred tax recovery | (5,416) | (2,196) | | **Tax expense (recovery)** | **8,333** | **19,429** | Income Before Taxes and Effective Tax Rate | Three months ended March 31, | 2023 | 2022 | | :--------------------------- | :----- | :----- | | Income (loss) before income taxes | $36,966 | $80,059 | | Statutory income tax rates | 26.44% | 26.46% | | Effective income tax rate | 22.54% | 24.27% | [8. SATELLITES, PROPERTY AND OTHER EQUIPMENT](index=13&type=section&id=8.%20SATELLITES,%20PROPERTY%20AND%20OTHER%20EQUIPMENT) - Additions to satellites, property, and other equipment for Q1 2023 totaled **$21.8 million**, primarily due to geostationary satellite and LEO program acquisitions, an increase from **$7.5 million** in the prior year[39](index=39&type=chunk) [9. GOODWILL AND INTANGIBLE ASSETS](index=13&type=section&id=9.%20GOODWILL%20AND%20INTANGIBLE%20ASSETS) - Goodwill and indefinite life intangible assets (excluding trade name) are tested for impairment annually or more frequently if circumstances indicate[40](index=40&type=chunk) - No impairment was recognized on goodwill, orbital slots, or trade name in Q1 2023, as assumptions from the end of 2022 valuation remained unchanged[41](index=41&type=chunk)[42](index=42&type=chunk) [10. LEASE LIABILITIES](index=13&type=section&id=10.%20LEASE%20LIABILITIES) Expected Undiscounted Contractual Cash Flows for Lease Liabilities (in thousands of Canadian dollars) | (in thousands of Canadian dollars) | Remaining 2023 | 2024 | 2025 | 2026 | 2027 | Thereafter | Total | | :--------------------------------- | :------------- | :--- | :--- | :--- | :--- | :--------- | :---- | | Expected undiscounted contractual cash flows | $2,696 | $3,473 | $3,192 | $2,957 | $2,883 | $33,695 | $48,896 | - The total undiscounted contractual cash flows for lease liabilities as of March 31, 2023, were **$48.9 million**, including **$14.4 million** in interest payments[43](index=43&type=chunk) [11. INDEBTEDNESS](index=13&type=section&id=11.%20INDEBTEDNESS) - Telesat Canada's Senior Secured Credit Facilities include a **$200.0 million US dollar revolving credit facility** maturing in **December 2024** and a Term Loan B – U.S. Facility of **US$1,908.5 million** maturing in **December 2026**[44](index=44&type=chunk) - Outstanding notes include **US$550 million of 6.5% Senior Unsecured Notes** due **October 2027**, **US$400 million of 4.875% Senior Secured Notes** due **June 2027**, and **US$500 million of 5.625% Senior Secured Notes** due **December 2026**[45](index=45&type=chunk)[48](index=48&type=chunk)[49](index=49&type=chunk) - In 2022, Telesat repurchased Senior Unsecured Notes with a principal amount of **$202.1 million (US$160.0 million)** for **$97.2 million (US$77.0 million)**, resulting in a **$106.9 million (US$84.5 million) gain on extinguishment of debt**[47](index=47&type=chunk) Long-term Indebtedness (in thousands of Canadian dollars) | (in thousands of Canadian dollars) | March 31, 2023 | December 31, 2022 | | :--------------------------------- | :------------- | :---------------- | | Term Loan B – U.S. Facility | $2,098,785 | $2,104,685 | | Senior Unsecured Notes | $527,124 | $528,606 | | 2026 Senior Secured Notes | $675,800 | $677,700 | | Senior Secured Notes | $540,640 | $542,160 | | **Long-term indebtedness** | **$3,839,510** | **$3,850,081** | [12. SHARE CAPITAL](index=14&type=section&id=12.%20SHARE%20CAPITAL) Share Capital (in thousands of Canadian dollars) | | March 31, 2023 | December 31, 2022 | | :--------------------------- | :------------- | :---------------- | | **Telesat Public Shares** | | | | Number of shares | 13,279,039 | 12,692,450 | | Stated value ($) | 42,298 | 40,214 | | **Class C Shares** | | | | Number of shares | 112,841 | 112,841 | | Stated value ($) | 6,340 | 6,340 | | **Total Share Capital** | | | | Number of shares | 13,391,880 | 12,805,291 | | Stated value ($) | 48,638 | 46,554 | - During Q1 2023, **103,071 Restricted Share Units (RSUs)** were settled for **54,166 Telesat Public Shares**, and **532,423 Telesat Public Shares** were issued in exchange for an equal number of Class B Limited Partnership units (LP Units)[53](index=53&type=chunk) LP Units (in thousands of Canadian dollars) | | March 31, 2023 | December 31, 2022 | | :--------------------------- | :------------- | :---------------- | | **Class A and Class B LP Units** | | | | Number of units | 18,321,842 | 18,854,265 | | Stated value ($) | 50,141 | 51,598 | | **Class C LP Units** | | | | Number of units | 18,098,362 | 18,098,362 | | Stated value ($) | 38,893 | 38,893 | | **Total LP Units** | | | | Number of units | 36,420,204 | 36,952,627 | | Stated value ($) | 89,034 | 90,491 | [13. NON-CONTROLLING INTEREST](index=15&type=section&id=13.%20NON-CONTROLLING%20INTEREST) - As of March 31, 2023, Telesat Corporation held approximately **27% economic interest** in the Partnership, with the remaining **73%** held by limited partnership unit holders, compared to **26% and 74%** respectively at December 31, 2022[55](index=55&type=chunk) [14. SHARE-BASED COMPENSATION PLANS](index=15&type=section&id=14.%20SHARE-BASED%20COMPENSATION%20PLANS) - Telesat Corporation adopted an Omnibus Long-Term Incentive Plan in **November 2021**, allowing for various equity-based awards including stock options, RSUs, PSUs, and DSUs, which can be settled for Public Shares or cash[57](index=57&type=chunk) Stock Options Outstanding | | Historic Plan (Number of options) | Omnibus Plan (Number of options) | | :-------------------------- | :-------------------------------- | :------------------------------- | | Outstanding, January 1, 2023 | 793,667 | 285,149 | | Forfeited | (5,568) | (10,080) | | Outstanding March 31, 2023 | 788,099 | 275,069 | Restricted Share Units (RSUs) Outstanding | Historic Plan (RSUs) | RSUs with time criteria | RSUs with time and performance criteria | | :-------------------------- | :---------------------- | :-------------------------------------- | | Outstanding, January 1, 2023 | 973,338 | 124,080 | | Forfeited | (33,088) | — | | Outstanding, March 31, 2023 | 940,250 | 124,080 | Omnibus Plan Awards Outstanding | Omnibus Plan | RSUs with time criteria | PSUs with time and performance criteria | DSUs | | :-------------------------- | :---------------------- | :-------------------------------------- | :--- | | Outstanding, January 1, 2023 | 351,071 | 140,583 | 46,576 | | Granted | — | — | 19,666 | | Settled | (103,071) | — | — | | Forfeited | (8,132) | (7,455) | — | | Outstanding, March 31, 2023 | 239,868 | 133,128 | 66,242 | [15. EARNINGS PER SHARE](index=16&type=section&id=15.%20EARNINGS%20PER%20SHARE) Net Income (Loss) Attributable to Telesat Common Shares (in thousands of Canadian dollars) | Three months ended March 31 | 2023 ($) | 2022 ($) | | :-------------------------- | :------- | :------- | | Net income (loss) attributable to Telesat Common Shares | 8,065 | 13,983 | | Diluted net income (loss) attributable to Telesat Common Shares | 8,783 | 15,325 | Weighted Average Number of Telesat Common Shares Outstanding | Three months ended March 31 | 2023 | 2022 | | :-------------------------- | :--- | :--- | | Basic total weighted average number of Telesat Common Shares outstanding | 13,022,905 | 12,023,077 | | Diluted total weighted average number of Telesat Common Shares outstanding | 14,638,067 | 13,562,260 | [16. GOVERNMENT GRANT](index=18&type=section&id=16.%20GOVERNMENT%20GRANT) - Telesat has an agreement for a non-refundable government contribution of up to **$85 million** for the Telesat Lightspeed constellation until **July 31, 2023**[63](index=63&type=chunk)[64](index=64&type=chunk) - For Q1 2023, **$1.7 million** was recorded, with **$0.7 million** reducing satellites, property, and other equipment, and **$1.0 million** reducing operating expenses[65](index=65&type=chunk) [17. CAPITAL DISCLOSURES](index=18&type=section&id=17.%20CAPITAL%20DISCLOSURES) - The Senior Secured Credit Facilities, Senior Secured Notes, and 2026 Senior Secured Notes are secured by substantially all of the Company's assets, excluding unrestricted subsidiaries[66](index=66&type=chunk) - As of March 31, 2023, the first lien net leverage ratio was **5.36:1.00**, below the maximum test ratio of **5.75:1.00**[66](index=66&type=chunk) [18. FINANCIAL INSTRUMENTS](index=18&type=section&id=18.%20FINANCIAL%20INSTRUMENTS) - As of March 31, 2023, the maximum exposure to credit risk was **$1,771.3 million**, primarily from cash and cash equivalents, and trade and other receivables[69](index=69&type=chunk) - The company mitigates credit risk by investing with high-quality financial institutions and through credit evaluation processes for receivables[70](index=70&type=chunk) - The company is exposed to foreign exchange risk, mainly from its U.S. dollar denominated indebtedness, cash, and short-term investments[73](index=73&type=chunk) - A **5% increase (decrease)** in the U.S. dollar against the Canadian dollar would have decreased (increased) net income (loss) by **$169.6 million** and increased (decreased) other comprehensive income (loss) by **$57.7 million** as of March 31, 2023[74](index=74&type=chunk) - Interest rate risk arises from variable interest rate indebtedness[75](index=75&type=chunk) - A **0.25% change** in interest rates on variable rate indebtedness would result in a **$1.3 million increase or decrease** to net income (loss) for Q1 2023[76](index=76&type=chunk) Contractual Cash Flows for Financial Liabilities (in thousands of Canadian dollars) | (in thousands of Canadian dollars) | Carrying amount | Contractual cash flows (undiscounted) | | :--------------------------------- | :-------------- | :------------------------------------ | | Trade and other payables | $43,462 | $43,462 | | Satellite performance incentive payments | $23,664 | $28,908 | | Indebtedness | $3,905,677 | $4,907,441 | | **Total** | **$3,976,498** | **$4,983,506** | Fair Value of Financial Instruments (in thousands of Canadian dollars) | As at March 31, 2023 | Amortized cost ($) | Fair Value ($) | Fair value hierarchy | | :------------------------------- | :----------------- | :------------- | :------------------- | | Cash and cash equivalents | 1,709,577 | 1,709,577 | Level 1 | | Other current financial assets | 474 | 474 | Level 1 | | Other long-term financial assets | 9,418 | 9,418 | Level 1 | | Other current financial liabilities | (72,107) | (72,719) | Level 2 | | Other long-term financial liabilities | (18,580) | (17,939) | Level 2 | | Indebtedness | (3,842,349) | (1,910,438) | Level 2 | - The fair value of indebtedness is based on market transactions and quotations, excluding deferred financing costs[91](index=91&type=chunk) - As of March 31, 2023, the fair value of the Term Loan B – U.S. Facility was **53.00% of face value**, Senior Unsecured Notes **30.88%**, Senior Secured Notes **51.71%**, and 2026 Senior Secured Notes **52.64%**[91](index=91&type=chunk) [19. EMPLOYEE BENEFIT PLANS](index=22&type=section&id=19.%20EMPLOYEE%20BENEFIT%20PLANS) Employee Benefit Plan Expenses (in thousands of Canadian dollars) | Three months ended March 31, 2023 | Pension Plans (Canadian $) | Pension Plans (US $) | Total Pension Plans ($) | Other Post-employment Benefit Plans (Canadian $) | Other Post-employment Benefit Plans (US $) | Total Other Post-employment Benefit Plans ($) | | :-------------------------------- | :----------------------- | :------------------- | :---------------------- | :----------------------------------------------- | :----------------------------------------- | :-------------------------------------------- | | Operating expenses | 1,131 | 171 | 1,302 | 117 | — | 117 | | Interest (income) expense | (573) | 142 | (431) | 232 | 6 | 238 | Employee Benefit Plan Liabilities and Assets (in thousands of Canadian dollars) | As at March 31, 2023 | Pension Plans (Canadian $) | Pension Plans (US $) | Total Pension Plans ($) | Other Post-employment Benefit Plans (Canadian $) | Other Post-employment Benefit Plans (US $) | Total Other Post-employment Benefit Plans ($) | | :------------------- | :----------------------- | :------------------- | :---------------------- | :----------------------------------------------- | :----------------------------------------- | :-------------------------------------------- | | Included in other long-term liabilities | — | 11,399 | 11,399 | 18,077 | 3,751 | 21,828 | | Included in other long-term assets | 46,855 | — | 46,855 | — | — | — | [20. SUPPLEMENTAL CASH FLOW INFORMATION](index=22&type=section&id=20.%20SUPPLEMENTAL%20CASH%20FLOW%20INFORMATION) Cash and Cash Equivalents (in thousands of Canadian dollars) | As at March 31, | 2023 ($) | 2022 ($) | | :-------------- | :------- | :------- | | Cash | 1,630,473 | 1,508,720 | | Short-term investments | 79,104 | 3,870 | | **Cash and cash equivalents** | **1,709,577** | **1,512,590** | Income Taxes and Interest Paid (in thousands of Canadian dollars) | Three months ended March 31, | 2023 ($) | 2022 ($) | | :--------------------------- | :------- | :------- | | Income taxes paid, net of income taxes received | (17,510) | (29,471) | | Interest paid, net of interest received | (24,153) | (22,109) | Reconciliation of Liabilities from Financing Activities (in thousands of Canadian dollars) | Reconciliation of liabilities from financing activities | Indebtedness ($) | Satellite performance incentive payments ($) | Lease liabilities ($) | | :-------------------------------------- | :--------------- | :------------------------------------------- | :-------------------- | | Balance as at January 1, 2023 | 3,850,081 | 25,124 | 34,106 | | Cash outflows | — | (1,529) | (523) | | Impact of foreign exchange | (10,802) | (71) | (10) | | Balance as at March 31, 2023 | 3,839,510 | 23,524 | 33,563 | Non-Cash Activities (in thousands of Canadian dollars) | Three months ended March 31, | 2023 ($) | 2022 ($) | | :--------------------------- | :------- | :------- | | Net change in operating assets and liabilities | (21,061) | (35,194) | | Non-cash investing activities (Satellites, property and other equipment) | 977 | (2,617) | [21. COMMITMENTS AND CONTINGENT LIABILITIES](index=24&type=section&id=21.%20COMMITMENTS%20AND%20CONTINGENT%20LIABILITIES) Off-Balance Sheet Contractual Obligations (in thousands of Canadian dollars) | Off-balance sheet contractual obligations as at March 31, 2023 ($) | Remaining 2023 | 2024 | 2025 | 2026 | 2027 | Thereafter | Total | | :------------------------------------------------- | :------------- | :--- | :--- | :--- | :--- | :--------- | :---- | | Property leases | 748 | 1,114 | 1,033 | 1,032 | 986 | 11,192 | 16,105 | | Capital commitments | 49,334 | 42,981 | 54,199 | — | — | — | 146,514 | | Other operating commitments | 32,561 | 25,657 | 15,856 | 6,543 | 4,144 | 12,096 | 96,857 | | **Total** | **82,643** | **69,752** | **71,088** | **7,575** | **5,130** | **23,288** | **259,476** | - Total outstanding capital commitments for the Telesat Lightspeed constellation and other capital expenditures were **$146.5 million** as of March 31, 2023[99](index=99&type=chunk)[100](index=100&type=chunk) - Customer prepayments for service agreements, a portion of which is refundable, totaled **$313.5 million** as of March 31, 2023[101](index=101&type=chunk) - Telesat is involved in legal proceedings, including a dispute with Brazilian tax authorities for **$95.2 million** (including interest and penalties) related to revenue characterization[108](index=108&type=chunk) - The company believes a favorable outcome is more likely than not and has not established a reserve[108](index=108&type=chunk) [22. RELATED PARTY TRANSACTIONS](index=26&type=section&id=22.%20RELATED%20PARTY%20TRANSACTIONS) - Inter-group transactions with subsidiaries, including satellite services, equipment sales, and management services, are eliminated on consolidation[110](index=110&type=chunk) - Compensation for executives and Board directors includes short-term benefits, post-employment benefits, and share-based compensation[111](index=111&type=chunk) - Contributions to defined benefit pension plans for Q1 2023 were **$0.3 million**, down from **$1.3 million** in Q1 2022[113](index=113&type=chunk) [23. SUBSEQUENT EVENTS](index=27&type=section&id=23.%20SUBSEQUENT%20EVENTS) - In April 2023 and up to May 10, 2023, Telesat repurchased Senior Secured Notes, 2026 Senior Secured Notes, and Senior Unsecured Notes with a principal amount of **US$48.2 million, US$37.2 million, and US$17.7 million**, respectively, at an aggregate cost of **US$56.0 million**[114](index=114&type=chunk) - On **May 9, 2023**, Telesat Canada amended its Credit Agreement to replace LIBOR-based benchmark rates with SOFR-based benchmark rates, adjusting interest margins for Revolving Facility and Term Loan B Facility loans[115](index=115&type=chunk) [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=28&type=section&id=Item%202.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management's discussion and analysis of Telesat Corporation's Q1 2023 financial condition and operational results, detailing business, outlook, and key financial metrics [OVERVIEW OF THE BUSINESS](index=30&type=section&id=OVERVIEW%20OF%20THE%20BUSINESS) - Telesat is a global satellite services operator, providing mission-critical communications through its fleet of **15 geostationary satellites** and the Canadian payload on ViaSat-1[132](index=132&type=chunk)[133](index=133&type=chunk) - The business is capital-intensive, with long-term contracts providing predictable revenue[134](index=134&type=chunk) - The company is developing 'Telesat Lightspeed,' a LEO satellite constellation designed for global broadband connectivity, with initial testing demonstrating low latency broadband capabilities[135](index=135&type=chunk) - Revenue is primarily derived from video and data services using satellite transponder capacity, ground-based services, equipment sales, network management, and consulting[137](index=137&type=chunk) - Operating expenses include labor, in-orbit insurance, and third-party contractor services[140](index=140&type=chunk) [FUTURE OUTLOOK](index=31&type=section&id=FUTURE%20OUTLOOK) - Telesat aims to profitably grow its business by increasing utilization of in-orbit satellites and deploying expansion capacity, leveraging its spectrum rights, customer service, and technical expertise[143](index=143&type=chunk) - A key focus is the development of the Telesat Lightspeed LEO constellation to revolutionize global broadband connectivity[144](index=144&type=chunk) - The company prioritizes developing new satellites in conjunction with customers committed to long-term service agreements and maintains operating discipline while pursuing expansion opportunities[145](index=145&type=chunk)[146](index=146&type=chunk) [RESULTS OF OPERATIONS](index=31&type=section&id=RESULTS%20OF%20OPERATIONS) - Net income decreased by **$32.0 million** to **$28.6 million** for Q1 2023 compared to **$60.6 million** in Q1 2022, primarily due to the prior year's gain on extinguishment of debt, higher interest expense, and lower foreign exchange gain, partially offset by increased interest income[147](index=147&type=chunk) [Revenue](index=32&type=section&id=Revenue) Revenue by Service Type (in millions of Canadian dollars) | ($ millions) | March 31, 2023 | March 31, 2022 | % Increase (Decrease) | | :----------- | :------------- | :------------- | :-------------------- | | Broadcast | $85.6 | $97.0 | (11.8)% | | Enterprise | $95.1 | $85.4 | 11.3% | | Consulting and other | $2.8 | $3.4 | (18.5)% | | **Total Revenue** | **$183.4** | **$185.8** | **(1.3)%** | - Broadcast revenue decreased by **$11.4 million** due to reduced revenue from a North American DTH customer, partially offset by favorable U.S. dollar conversion[150](index=150&type=chunk) - Enterprise revenue increased by **$9.7 million**, driven by higher equipment sales to Canadian Government and increased services in the aero and maritime markets[151](index=151&type=chunk) - Consulting and other revenue decreased by **$0.6 million** due to reduced activity[152](index=152&type=chunk) [Expenses](index=32&type=section&id=Expenses) Expenses Breakdown (in millions of Canadian dollars) | ($ millions) | March 31, 2023 | March 31, 2022 | % Increase (Decrease) | | :----------- | :------------- | :------------- | :-------------------- | | Depreciation | $46.4 | $49.3 | (5.9)% | | Amortization | $3.4 | $3.7 | (9.1)% | | Operating expenses | $53.5 | $64.4 | (16.9)% | | **Total expenses** | **$103.2** | **$117.4** | **(12.1)%** | - Depreciation decreased by **$2.9 million** due to the Anik F3 satellite reaching the end of its useful life, partially offset by depreciation on the newly acquired Anik F4[154](index=154&type=chunk) - Amortization decreased by **$0.3 million** due to reduced amortization on revenue backlog[155](index=155&type=chunk) - Total operating expenses decreased by **$10.9 million**, primarily from a **$13.1 million decrease** in compensation and employee benefits due to lower non-cash share-based compensation, and a **$0.9 million decrease** in other operating expenses due to lower insurance costs[157](index=157&type=chunk)[158](index=158&type=chunk) - Cost of sales increased by **$3.1 million** due to higher equipment sales to the Canadian Government[159](index=159&type=chunk) [Interest Expense](index=34&type=section&id=Interest%20Expense) Interest Expense (in millions of Canadian dollars) | ($ millions) | March 31, 2023 | March 31, 2022 | % Increase (Decrease) | | :----------- | :------------- | :------------- | :-------------------- | | Debt service costs | $64.2 | $43.0 | 49.1% | | **Total Interest expense** | **$68.9** | **$48.5** | **42.0%** | - Debt service costs increased by **$21.1 million**, mainly due to higher interest rates on the U.S. TLB Facility and unfavorable foreign exchange impact, partially offset by debt repurchases in 2022 and the maturity of an interest rate swap[161](index=161&type=chunk) [Gain on Extinguishment of Debt](index=35&type=section&id=Gain%20on%20Extinguishment%20of%20Debt) Gain on Extinguishment of Debt (in millions of Canadian dollars) | ($ millions) | March 31, 2023 | March 31, 2022 | | :----------- | :------------- | :------------- | | Gain on extinguishment of debt | $— | $21.0 | - No gain on extinguishment of debt was recorded in Q1 2023, compared to a **$21.0 million gain** in Q1 2022 from the repurchase of Senior Unsecured Notes[166](index=166&type=chunk) [Interest and Other Income](index=35&type=section&id=Interest%20and%20Other%20Income) Interest and Other Income (in millions of Canadian dollars) | ($ millions) | March 31, 2023 | March 31, 2022 | | :----------- | :------------- | :------------- | | Interest and other income | $15.5 | $0.7 | - Interest and other income increased by **$14.8 million**, driven by higher interest rates earned on increased cash and cash equivalent balances[167](index=167&type=chunk) [Foreign Exchange and Derivatives](index=35&type=section&id=Foreign%20Exchange%20and%20Derivatives) Foreign Exchange and Derivatives (in millions of Canadian dollars) | ($ millions) | March 31, 2023 | March 31, 2022 | | :----------- | :------------- | :------------- | | Gain (loss) on changes in fair value of financial instruments | $— | $2.4 | | Gain (loss) on foreign exchange | $10.1 | $36.1 | - Foreign exchange gain decreased by **$26.0 million**, from **$36.1 million** in Q1 2022 to **$10.1 million** in Q1 2023[169](index=169&type=chunk) - This decrease was primarily due to a weaker U.S. dollar to Canadian dollar spot rate impacting U.S. dollar denominated indebtedness[170](index=170&type=chunk)[171](index=171&type=chunk) [Income Taxes](index=35&type=section&id=Income%20Taxes) Income Taxes (in millions of Canadian dollars) | ($ millions) | March 31, 2023 | March 31, 2022 | | :----------- | :------------- | :------------- | | Current tax expense | $13.7 | $21.6 | | Deferred tax recovery | $(5.4) | $(2.2) | | **Tax expense (recovery)** | **$8.3** | **$19.4** | - Tax expense decreased by **$11.1 million**, mainly due to higher interest expense, lower foreign exchange gains, and the absence of prior year's gain on extinguishment of debt[172](index=172&type=chunk) [Backlog](index=36&type=section&id=Backlog) - As of March 31, 2023, contracted revenue backlog was approximately **$1.7 billion**, excluding any backlog from the Telesat Lightspeed program[173](index=173&type=chunk) - The majority of the backlog is from long-term service contracts for satellite capacity[173](index=173&type=chunk) - Customers may terminate agreements for in-orbit satellite failure, potentially requiring repayment of prepayments, which would be funded by insurance, cash, or credit facilities[174](index=174&type=chunk) Contracted Revenue Backlog (in millions of Canadian dollars) | ($ millions) | Remaining 2023 | 2024 | 2025 | 2026 | 2027 | Thereafter | | :----------- | :------------- | :--- | :--- | :--- | :--- | :--------- | | Backlog | $438.6 | $388.2 | $261.5 | $196.5 | $128.8 | $282.4 | [LIQUIDITY AND CAPITAL RESOURCES](index=36&type=section&id=LIQUIDITY%20AND%20CAPITAL%20RESOURCES) [Cash and Available Credit](index=36&type=section&id=Cash%20and%20Available%20Credit) - As of March 31, 2023, Telesat had **$1,709.6 million** in cash and short-term investments, including **$1,015.8 million** held in unrestricted subsidiaries, and approximately **US$200.0 million** available under its Revolving Credit Facility[176](index=176&type=chunk) [Cash Flows generated from Operating Activities](index=36&type=section&id=Cash%20Flows%20generated%20from%20Operating%20Activities) - Cash generated from operating activities increased by **$19.2 million** to **$62.6 million** for Q1 2023, driven by higher cash flows from operating assets and liabilities and lower income taxes paid, partially offset by lower operating income[177](index=177&type=chunk) [Cash Flows (used in) generated from Investing Activities](index=36&type=section&id=Cash%20Flows%20(used%20in)%20generated%20from%20Investing%20Activities) - Cash used in investing activities was **$25.0 million** in Q1 2023, mainly for the Telesat Lightspeed constellation and the Anik F4 satellite[178](index=178&type=chunk) - This contrasts with Q1 2022, which saw **$46.6 million** generated from C-band clearing proceeds, partially offset by Lightspeed investments[179](index=179&type=chunk) [Cash Flows (used in) generated from Financing Activities](index=36&type=section&id=Cash%20Flows%20(used%20in)%20generated%20from%20Financing%20Activities) - Cash used in financing activities was **$2.1 million** in Q1 2023, primarily for satellite performance incentive payments[180](index=180&type=chunk) - This is a decrease from **$12.1 million** used in Q1 2022, which included debt repurchases and incentive payments, partially offset by government grants[181](index=181&type=chunk) [Government Grant](index=37&type=section&id=Government%20Grant) - Telesat has an agreement with the Government of Canada for up to **$85.0 million** to support the Telesat Lightspeed constellation, committing to over **$200.0 million** in R&D activities and Canadian workforce expansion[182](index=182&type=chunk) - Total research and development costs for Telesat Lightspeed increased by **$5.6 million** to **$20.9 million** in Q1 2023, driven by increased development activities[183](index=183&type=chunk)[184](index=184&type=chunk) [Liquidity](index=37&type=section&id=Liquidity) - Telesat expects current cash, operating cash flows, and Revolving Credit Facility drawings to meet cash requirements for at least the next **twelve months**, excluding capital for Lightspeed constellation construction[185](index=185&type=chunk) - The company may continue to repurchase or refinance existing debt and may incur additional debt or issue equity to fund such transactions[186](index=186&type=chunk) - Future satellite programs, especially Lightspeed, will require significant capital, potentially funded by various sources including cash, operating cash flows, customer prepayments, and government grants[187](index=187&type=chunk) [Debt](index=38&type=section&id=Debt) - The Senior Secured Credit Facilities and guarantees are secured by substantially all of Telesat's assets (excluding unrestricted subsidiaries) and contain covenants restricting actions like incurring debt, paying dividends, and engaging in mergers[190](index=190&type=chunk) - The Revolving Credit Facility is a **$200.0 million loan** maturing in **December 2024**, with floating interest rates and an unused commitment fee[191](index=191&type=chunk) - As of March 31, 2023, there were no significant borrowings[191](index=191&type=chunk) - The Term Loan B – U.S. Facility is a **US$1,908.5 million facility** maturing in **December 2026**, with **US$1,552.8 million** outstanding as of March 31, 2023, bearing floating interest rates (LIBOR or ABR plus margins)[192](index=192&type=chunk)[193](index=193&type=chunk) - On **May 9, 2023**, the Credit Agreement was amended to replace LIBOR with SOFR-based benchmark rates for both the Revolving Facility and Term Loan B Facility, including credit spread adjustments for SOFR loans[195](index=195&type=chunk) - Senior Secured Notes (**US$400.0 million, 4.875%**, due **June 2027**), 2026 Senior Secured Notes (**US$500.0 million, 5.625%**, due **December 2026**), and Senior Unsecured Notes (**US$390.0 million** outstanding, **6.5%**, due **October 2027**) all have indentures with covenants restricting various corporate actions[196](index=196&type=chunk)[197](index=197&type=chunk)[198](index=198&type=chunk)[199](index=199&type=chunk) - As of March 31, 2023, Telesat was in compliance with all financial covenants for its Senior Secured Credit Facilities and notes[200](index=200&type=chunk) [Debt Service Cost](index=40&type=section&id=Debt%20Service%20Cost) - Estimated interest expense for the year ending **December 31, 2023**, is approximately **$260.2 million**, excluding amortization of deferred financing costs, prepayment options, and loss on repayment[201](index=201&type=chunk) [Derivatives](index=40&type=section&id=Derivatives) - Telesat uses interest rate and currency derivatives to manage exposure to interest rate and foreign exchange rate changes, but not for speculative purposes[202](index=202&type=chunk) - Embedded derivatives related to prepayment options on Senior Unsecured, Senior Secured, and 2026 Senior Secured Notes are accounted for at fair value, with changes recorded as non-cash gains or losses[203](index=203&type=chunk)[204](index=204&type=chunk) [MARKET RISK](index=40&type=section&id=MARKET%20RISK) [Credit Risk Related to Financial Instruments](index=40&type=section&id=Credit%20Risk%20Related%20to%20Financial%20Instruments) - Telesat is exposed to credit risk from cash and short-term investments, accounts receivable, and derivative assets[207](index=207&type=chunk) - This risk is mitigated by investing with high-quality financial institutions and performing credit checks on customers, with counterparty credit risk for derivatives also monitored[207](index=207&type=chunk) [Foreign Exchange Risk](index=41&type=section&id=Foreign%20Exchange%20Risk) - Operating results are subject to foreign exchange fluctuations, primarily due to U.S. dollar denominated indebtedness, cash, short-term investments, and a portion of revenue, expenses, and capital expenditures[208](index=208&type=chunk) - A mainly non-cash foreign exchange gain of **$10.1 million** was recorded in Q1 2023 due to a weaker U.S. to Canadian dollar spot rate, compared to a **$36.1 million gain** in Q1 2022[209](index=209&type=chunk) U.S. Dollar Denominated Financial Items | Three months ended March 31, | 2023 | 2022 | | :--------------------------- | :--- | :--- | | Revenue (U.S. dollar denominated) | 49.1% | 53.5% | | Operating expenses (U.S. dollar denominated) | 41.4% | 27.8% | | Interest on our indebtedness (U.S. dollar denominated) | 100.0% | 100.0% | - A **5% increase (decrease)** in the U.S. dollar's value against the Canadian dollar would increase (decrease) indebtedness by **$192.1 million**, cash and cash equivalents by **$79.8 million**, net income (loss) by **$24.3 million**, and other comprehensive income (loss) by **$55.5 million** for Q1 2023[211](index=211&type=chunk)[212](index=212&type=chunk) [Interest Rate Risk](index=42&type=section&id=Interest%20Rate%20Risk) - Telesat is exposed to interest rate risk on its cash, short-term investments, and variable-rate indebtedness[216](index=216&type=chunk) - A **0.25% increase (decrease)** in variable interest rates would decrease (increase) net income (loss) by **$1.3 million** for Q1 2023[218](index=218&type=chunk) - The company uses interest rate swaps to hedge this risk but had no outstanding swaps as of March 31, 2023, as all previous swaps matured[216](index=216&type=chunk)[217](index=217&type=chunk) [NON-IFRS MEASURES](index=42&type=section&id=NON-IFRS%20MEASURES) [Adjusted EBITDA](index=43&type=section&id=Adjusted%20EBITDA) - Adjusted EBITDA is a non-IFRS measure used to evaluate operating performance by excluding depreciation, amortization, interest, taxes, and certain other non-recurring expenses, enhancing comparability with competitors[220](index=220&type=chunk)[221](index=221&type=chunk) Adjusted EBITDA and Margin (in millions of Canadian dollars) | ($ millions) | March 31, 2023 | March 31, 2022 | | :----------- | :------------- | :------------- | | Net income (loss) | $28.6 | $60.6 | | Interest expense | $68.9 | $48.5 | | Depreciation | $46.4 | $49.3 | | Amortization | $3.4 | $3.7 | | Non-cash expense related to share-based compensation | $9.0 | $24.2 | | **Adjusted EBITDA** | **$138.9** | **$145.6** | | Revenue | $183.4 | $185.8 | | **Adjusted EBITDA Margin** | **75.7%** | **78.4%** | - Adjusted EBITDA decreased by **$6.7 million** for Q1 2023, primarily due to lower revenues and higher operating expenses[224](index=224&type=chunk) [Consolidated EBITDA for Covenant Purposes](index=45&type=section&id=Consolidated%20EBITDA%20for%20Covenant%20Purposes) - Consolidated EBITDA for Covenant Purposes is a non-IFRS measure used to assess compliance with financial ratio covenants in the Senior Secured Credit Facilities[225](index=225&type=chunk) - This includes a first lien net leverage ratio of **5.75:1.00** if the Revolving Credit Facility is drawn by more than **35%**[226](index=226&type=chunk) - This measure adjusts net income (loss) for Telesat and Restricted Subsidiaries by adding back interest expense, depreciation, amortization, non-cash charges, and other specific items, and deducting non-cash gains and certain other items[228](index=228&type=chunk) Consolidated EBITDA for Covenant Purposes (in millions of Canadian dollars) | (in $ millions) | Twelve months ended March 31, 2023 | | :-------------- | :--------------------------------- | | Net income (loss) | $(112.1) | | Consolidated income for Covenant Purposes | $(91.0) | | Plus: Income taxes | $33.3 | | Plus: Interest expense | $209.5 | | Plus: Depreciation and amortization expense | $198.9 | | Plus: Non-cash share-based compensation and pension expense | $56.7 | | Decreased by: Gains on extinguishment of debt | $(85.9) | | Decreased by: Non-cash gains resulting from changes in foreign exchange rates | $262.8 | | **Consolidated EBITDA for Covenant Purposes** | **$599.5** | [Consolidated Total Secured Debt and Consolidated Debt for Covenant Purposes](index=45&type=section&id=Consolidated%20Total%20Secured%20Debt%20and%20Consolidated%20Debt%20for%20Covenant%20Purposes) - These non-IFRS measures provide additional information for understanding compliance with financial covenants under the Senior Secured Credit Facilities[233](index=233&type=chunk) Consolidated Debt for Covenant Purposes (in millions of Canadian dollars) | (in $ millions) | As at March 31, 2023 | | :-------------- | :------------------- | | Indebtedness | $3,839.5 | | Add: lease liabilities | $33.6 | | Consolidated Total Debt | $3,875.9 | | Less: Cash and cash equivalents (max. US$100 million) | $(135.2) | | **Consolidated Total Debt for Covenant Purposes** | **$3,740.8** | | Less: Unsecured debt (Senior Unsecured Notes) | $(527.1) | | **Consolidated Total Secured Debt for Covenant Purposes** | **$3,213.6** | - As of March 31, 2023, the Consolidated Total Debt for Covenant Purposes to Consolidated EBITDA ratio was **6.24:1.00**, and the Consolidated Total Secured Debt to Consolidated EBITDA for Covenant Purposes ratio was **5.36:1.00**[234](index=234&type=chunk) - The company was in compliance with its debt covenants[236](index=236&type=chunk) [Unaudited Interim Condensed Consolidating Financial Information](index=45&type=section&id=Unaudited%20Interim%20Condensed%20Consolidating%20Financial%20Information) This section presents unaudited interim condensed consolidating financial information, reflecting investments using the equity method for Telesat in Issuers, Issuers in Guarantor and Non-Guarantor subsidiaries, and Guarantors in Non-Guarantor subsidiaries [Unaudited Interim Condensed Consolidating Statements of Income (Loss)](index=46&type=section&id=Unaudited%20Interim%20Condensed%20Consolidating%20Statements%20of%20Income%20(Loss)) | (in thousands of Canadian dollars) | Telesat Corporation | Telesat Partnership | Telesat LLC | Telesat Canada | Guarantor subsidiaries | Non guarantor subsidiaries | Adjustments | Consolidated | | :--------------------------------- | :------------------ | :------------------ | :---------- | :------------- | :--------------------- | :------------------------- | :---------- | :----------- | | Revenue | — | — | — | 162,700 | 101,227 | 2,548 | (83,053) | 183,422 | | Operating income (loss) | 476 | (272) | — | 49,335 | 43,530 | (7,855) | (4,978) | 80,236 | | Net income (loss) | 36,730 | 36,252 | — | 36,658 | 40,290 | 815 | (122,112) | 28,633 | [Unaudited Interim Condensed Consolidating Statements of Comprehensive Income (Loss)](index=46&type=section&id=Unaudited%20Interim%20Condensed%20Consolidating%20Statements%20of%20Comprehensive%20Income%20(Loss)) | (in thousands of Canadian dollars) | Telesat Corporation | Telesat Partnership | Telesat LLC | Telesat Canada | Guarantor subsidiaries | Non guarantor subsidiaries | Adjustments | Consolidated | | :--------------------------------- | :------------------ | :------------------ | :---------- | :------------- | :--------------------- | :------------------------- | :---------- | :----------- | | Net income (loss) | 36,730 | 36,252 | — | 36,658 | 40,290 | 815 | (122,112) | 28,633 | | Total comprehensive income (loss) | 56,001 | 55,492 | — | 55,868 | 63,536 | 23,122 | (230,843) | 23,176 | [Unaudited Interim Condensed Consolidating Statements of Income (Loss) (2022)](index=47&type=section&id=Unaudited%20Interim%20Condensed%20Consolidating%20Statements%20of%20Income%20(Loss)%20(2022)) | (in thousands of Canadian dollars) | Telesat Corporation | Telesat Partnership | Telesat LLC | Telesat Canada | Guarantor subsidiaries | Non guarantor subsidiaries | Adjustments | Consolidated | | :--------------------------------- | :------------------ | :------------------ | :---------- | :------------- | :--------------------- | :------------------------- | :---------- | :----------- | | Revenue | — | — | — | 166,271 | 102,194 | 3,200 | (85,896) | 185,769 | | Operating income (loss) | (1,010) | (274) | — | 39,596 | 40,546 | (5,243) | (5,248) | 68,367 | | Net income (loss) | 65,900 | 66,858 | — | 67,311 | 36,943 | (5,204) | (171,178) | 60,630 | [Unaudited Interim Condensed Consolidating Statements of Comprehensive Income (Loss) (2022)](index=47&type=section&id=Unaudited%20Interim%20Condensed%20Consolidating%20Statements%20of%20Comprehensive%20Income%20(Loss)%20(2022)) | (in thousands of Canadian dollars) | Telesat Corporation | Telesat Partnership | Telesat LLC | Telesat Canada | Guarantor subsidiaries | Non guarantor subsidiaries | Adjustments | Consolidated | | :--------------------------------- | :------------------ | :------------------ | :---------- | :------------- | :--------------------- | :------------------------- | :---------- | :----------- | | Net income (loss) | 65,900 | 66,858 | — | 67,311 | 36,943 | (5,204) | (171,178) | 60,630 | | Total comprehensive income (loss) | 24,724 | 25,575 | — | 25,856 | 24,691 | (40,601) | (17,158) | 43,087 | [CURRENT SHARE INFORMATION](index=52&type=section&id=CURRENT%20SHARE%20INFORMATION) Share Capital (in thousands of Canadian dollars) | | Number of shares | Stated value ($) | | :--------------------------- | :--------------- | :--------------- | | Telesat Public shares | 13,279,039 | 42,298 | | Class C shares | 112,841 | 6,340 | | **Total** | **13,391,880** | **48,638** | Telesat Public Shares Breakdown | Telesat Public shares | Number of shares | | :-------------------- | :--------------- | | Class A Common shares | 1,012,172 | | Class B Variable Voting shares | 12,266,867 | | **Total Telesat Public shares** | **13,279,039** | Outstanding Share-Based Awards as at March 31, 2023 | Outstanding Share-Based Awards as at March 31, 2023 | Historic Plan | Omnibus Plan | | :------------------------------------------------ | :------------ | :----------- | | Stock Options | 788,099 | 275,069 | | RSUs with time criteria | 940,250 | 239,868 | | RSUs with time and performance criteria | 124,080 | — | | PSUs with time and performance criteria | — | 133,128 | | DSUs | — | 66,240 | | **Total** | **1,852,429** | **714,305** | - During Q1 2023, **103,071 RSUs** were settled for **54,166 Telesat Public Shares**, and **532,423 Telesat Public Shares** were issued in exchange for an equal number of Class B Limited Partnership units (LP Units)[250](index=250&type=chunk) [CRITICAL ACCOUNTING JUDGMENTS AND ESTIMATES](index=53&type=section&id=CRITICAL%20ACCOUNTING%20JUDGMENTS%20AND%20ESTIMATES) - The preparation of financial statements requires management to make estimates and assumptions that affect reported amounts[251](index=251&type=chunk) - These critical accounting judgments and estimates are consistent with those outlined in the consolidated financial statements for the year ended **December 31, 2022**[252](index=252&type=chunk) [ACCOUNTING STANDARDS](index=53&type=section&id=ACCOUNTING%20STANDARDS) - The IASB amended IAS 1, Presentation of Financial Statements, in **October 2022** to improve disclosures about long-term debt covenants[253](index=253&type=chunk) - These amendments, effective **January 1, 2024** (with early adoption permitted), clarify that only covenants to be complied with on or before the reporting date affect debt classification[254](index=254&type=chunk)[255](index=255&type=chunk) [Item 3. Quantitative and Qualitative Disclosures About Market Risk](index=53&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) This section refers to the detailed discussion on market risk, including credit risk, foreign exchange risk, and interest rate risk, provided within Item 2 - Quantitative and qualitative disclosures about market risk are discussed in Item 2, Management's Discussion and Analysis of Financial Condition and Results of Operations, under the 'Market Risk' section[256](index=256&type=chunk) PART II. OTHER INFORMATION [Item 1. Legal Proceedings](index=54&type=section&id=Item%201.%20Legal%20Proceedings) This section states that there have been no material developments in legal proceedings since the filing of Telesat Corporation's Annual Report on Form 20-F for the fiscal year ended December 31, 2022 - No material developments in legal proceedings have occurred since the filing of the Annual Report on Form 20-F for the fiscal year ended **December 31, 2022**[258](index=258&type=chunk) [Item 1A. Risk Factors](index=54&type=section&id=Item%201A.%20Risk%20Factors) This section indicates that there have been no material changes to the risk factors previously disclosed in Telesat Corporation's Annual Report on Form 20-F for the fiscal year ended December 31, 2022 - No material changes to the risk factors have occurred since the filing of the Annual Report on Form 20-F for the fiscal year ended **December 31, 2022**[259](index=259&type=chunk) - Additional unknown or currently immaterial risks and uncertainties may adversely affect the business, financial condition, or operating results[260](index=260&type=chunk) [Item 2. Unregistered Sales of Equity Securities and Use of Proceeds](index=54&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) This section reports that there were no unregistered sales of equity securities or use of proceeds during the period - There were no unregistered sales of equity securities and no use of proceeds to report[261](index=261&type=chunk) [Item 3. Defaults Upon Senior Securities](index=54&type=section&id=Item%203.%20Defaults%20Upon%20Senior%20Securities) This section confirms that there were no defaults upon senior securities during the reporting period - There were no defaults upon senior securities[262](index=262&type=chunk) [Item 4. Reserved](index=54&type=section&id=Item%204.%20Reserved) This item is reserved, with no specific information provided [Item 5. Other Information](index=54&type=section&id=Item%205.%20Other%20Information) This section discloses that Erwin Hudson, Vice President of Telesat Lightspeed System Development, intends to retire on June 30, 2023 - Erwin Hudson, Vice President of Telesat Lightspeed System Development, is scheduled to retire on **June 30, 2023**[263](index=263&type=chunk) [Item 6. Exhibits](index=54&type=section&id=Item%206.%20Exhibits) This section indicates that there are no exhibits to be filed with this report - No exhibits are included with this report[264](index=264&type=chunk)

Financial Data and Key Metrics Changes - Telesat reported revenues of $759 million for the year 2022, with adjusted EBITDA of $568 million and cash from operations of $229 million, ending the year with $1.7 billion in cash on the balance sheet [7][10] - In Q4 2022, revenues increased by $19 million to $207 million compared to Q4 2021, while adjusted EBITDA decreased by $6 million to $139 million, resulting in an adjusted EBITDA margin of 67.2% compared to 77.1% in the same period last year [7][8] - The company experienced a foreign exchange gain of $72 million in Q4 2022, compared to a gain of $20 million in Q4 2021, primarily due to the stronger US dollar against the Canadian dollar [9][10] Business Line Data and Key Metrics Changes - Revenue growth in Q4 was driven by the completion of an equipment sale to DARPA and higher revenues from aero and maritime customers, partially offset by reduced revenues from a long-term agreement renewal with a North American DTH customer [8] - Operating expenses increased by $8 million to $80 million in Q4 2022, primarily due to higher equipment sales related to the DARPA program [8] Market Data and Key Metrics Changes - The company anticipates revenue and adjusted EBITDA declines in 2023, primarily due to residual headwinds from the DISH renewal on Anik F3 and an expected renewal with Bell for Nimiq 4 at a lower rate [5][10] - Telesat expects full-year revenues for 2023 to be between $690 million and $710 million, with adjusted EBITDA projected between $500 million and $550 million [10] Company Strategy and Development Direction - Telesat is focused on advancing the Lightspeed program, which is seen as a significant commercial opportunity despite delays in securing financing [5][16] - The company has authorized up to $200 million for debt repurchases if deemed beneficial, indicating a proactive approach to managing its capital structure [5][11] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the demand for a well-engineered LEO constellation, citing ongoing discussions with commercial and government customers as reinforcing the strategic importance of Lightspeed [16][17] - The company remains optimistic about securing the necessary financing for Lightspeed, with over $4 billion in financing commitments already lined up [17][30] Other Important Information - Telesat has complied with all covenants in its credit agreement and has a leverage ratio of 6.17 times [11] - The company has received approximately $85 million in US C-band clearing proceeds to date, with expected future proceeds of approximately $260 million [10] Q&A Session Summary Question: Should expectations for SG&A be frozen until financing for Lightspeed is secured? - Management indicated that they are currently spending on OpEx for Lightspeed and are confident in moving forward with the program, with guidance reflecting ongoing investments [12][13] Question: What is the percentage mix of SG&A related to Lightspeed? - Management stated that they are confident in the business case for Lightspeed and that the incremental costs related to LEO are not significant [15] Question: What kind of equity partner is Telesat looking for regarding Lightspeed? - Management clarified that they are in discussions with potential equity investors, but no new updates were provided beyond previous statements [19] Question: What are the key dates for maintaining US spectrum authorizations? - Management expressed confidence in having the necessary regulatory rights when ready to move forward with Lightspeed, with ongoing regulatory activities at the FCC [20] Question: How does Telesat plan to address capital structure and debt maturities? - Management highlighted that they have a significant amount of cash on hand and are generating cash from operations, with plans to evaluate opportunities as they arise [41][42]

[Executive Summary & Highlights](index=1&type=section&id=Executive%20Summary%20%26%20Highlights) [Full Year 2022 Performance Overview](index=1&type=section&id=Full%20Year%202022%20Performance%20Overview) Telesat's 2022 performance saw stable revenue, though it declined on a currency-adjusted basis, leading to lower Adjusted EBITDA and a net loss Full Year 2022 Key Financial Metrics | Metric | 2022 (CAD millions) | 2021 (CAD millions) | Change (CAD millions) | Change (%) | Change (FX Adj. %) | | :-------------------- | :------------------ | :------------------ | :-------------------- | :--------- | :----------------- | | Consolidated Revenue | $759 | $758 | $1 | Stable | -2% ($15) | | Operating Expenses | $259 | $237 | $22 | +9.3% | +$20 (FX Adj.) | | Adjusted EBITDA | $568 | $600 | -$32 | -5% | -8% ($46) (FX Adj.)| | Adjusted EBITDA Margin| 74.8% | 79.2% | -4.4 pp | | | | Net Income (Loss) | -$80 | $155 | -$235 | -151.6% | | - The slight reduction in revenue (FX adjusted) was primarily due to a **reduction on the renewal of a long-term agreement** with a North American DTH customer and non-recurring short-term services in 2021[2](index=2&type=chunk) - The increase in operating expenses was mainly due to **higher equipment sales** related to the DARPA program and increased costs associated with becoming a public company[3](index=3&type=chunk) - The net loss was principally due to a **negative non-cash foreign exchange impact** on U.S. dollar denominated debt and the recognition of Phase I accelerated clearing payments for C-band spectrum in 2021[5](index=5&type=chunk) [Fourth Quarter 2022 Performance Overview](index=2&type=section&id=Fourth%20Quarter%202022%20Performance%20Overview) In Q4 2022, Telesat's revenue increased due to an equipment sale, though operating expenses also rose, resulting in lower Adjusted EBITDA and net income Fourth Quarter 2022 Key Financial Metrics | Metric | Q4 2022 (CAD millions) | Q4 2021 (CAD millions) | Change (CAD millions) | Change (%) | Change (FX Adj. %) | | :-------------------- | :--------------------- | :--------------------- | :-------------------- | :--------- | :----------------- | | Consolidated Revenue | $207 | $187 | $19 | +10% | +6% ($11) (FX Adj.)| | Operating Expenses | $80 | $72 | $8 | +12% | +10% ($7) (FX Adj.)| | Adjusted EBITDA | $139 | $145 | -$6 | -4% | -9% ($12) (FX Adj.)| | Adjusted EBITDA Margin| 67.2% | 77.1% | -9.9 pp | | | | Net Income | $92 | $113 | -$21 | -18.6% | | - The Q4 revenue increase was primarily due to an **equipment sale to DARPA** and higher revenue from aero and maritime customers[7](index=7&type=chunk) - Q4 operating expenses increased mainly due to **higher equipment sales** related to the DARPA program, partially offset by lower non-cash share-based compensation and bonus expense[8](index=8&type=chunk) - The negative variation in Q4 net income was principally due to the recognition of **Phase I accelerated clearing payments for C-band spectrum** in 2021[10](index=10&type=chunk) [Strategic Developments and 2023 Outlook](index=1&type=section&id=Strategic%20Developments%20and%202023%20Outlook) Telesat is advancing its Lightspeed LEO constellation project, supported by a strong cash position and a substantial contractual backlog - Telesat is progressing discussions with suppliers and financing sources for Telesat Lightspeed, its planned Low Earth Orbit satellite constellation, and expects **greater clarity on financing arrangements in the near term**[2](index=2&type=chunk) Key Business Metrics | Metric | Value (CAD) | | :-------------------------- | :------------ | | Cash (as of Dec 31, 2022) | $1.7 billion | | Contracted Backlog (excl. Lightspeed) | $1.8 billion | - Telesat Lightspeed represents a **transformative growth opportunity** for the company and a highly compelling value proposition for enterprise and government customers[2](index=2&type=chunk) [Consolidated Financial Statements](index=5&type=section&id=Consolidated%20Financial%20Statements) [Consolidated Statements of Income (Loss)](index=5&type=section&id=Consolidated%20Statements%20of%20Income%20(Loss)) The income statement details revenue, expenses, and other financial items, resulting in a net loss for FY 2022 and net income for Q4 2022 Summary of Income (Loss) | Metric (CAD thousands) | Q4 2022 | Q4 2021 | FY 2022 | FY 2021 | | :--------------------- | :------ | :------ | :------ | :------ | | Revenue | 206,684 | 187,497 | 759,169 | 758,212 | | Operating expenses | (79,961)| (71,526)| (258,989)| (236,949)| | Operating income | 76,264 | 170,061 | 296,453 | 409,123 | | Interest expense | (67,304)| (48,841)| (221,756)| (187,994)| | Gain on extinguishment of debt | — | — | 106,916 | — | | Gain (loss) on foreign exchange | 72,251 | 20,196 | (239,591)| 27,539 | | Net income (loss) | 92,340 | 112,935 | (80,117)| 155,025 | | Basic EPS | $1.83 | $1.35 | $(1.90) | $1.89 | | Diluted EPS | $1.76 | $1.28 | $(1.90) | $1.83 | [Consolidated Balance Sheets](index=6&type=section&id=Consolidated%20Balance%20Sheets) The balance sheet shows an increase in total assets and shareholders' equity as of year-end 2022, with relatively stable total liabilities Summary of Financial Position | Metric (CAD thousands) | Dec 31, 2022 | Dec 31, 2021 | | :--------------------- | :----------- | :----------- | | Cash and cash equivalents | 1,677,792 | 1,449,593 | | Total current assets | 1,788,288 | 1,617,435 | | Satellites, property and other equipment | 1,364,084 | 1,429,688 | | Total assets | 6,479,593 | 6,362,451 | | Total current liabilities | 171,396 | 181,955 | | Long-term indebtedness | 3,850,081 | 3,792,597 | | Total liabilities | 4,643,891 | 4,666,158 | | Total shareholders' equity | 1,835,702 | 1,696,293 | [Consolidated Statements of Cash Flows](index=7&type=section&id=Consolidated%20Statements%20of%20Cash%20Flows) The cash flow statement indicates decreased cash from operations, a shift to net cash from investing, and an overall increase in cash for 2022 Summary of Cash Flows | Metric (CAD thousands) | FY 2022 | FY 2021 | | :--------------------- | :------ | :------ | | Net cash from operating activities | 228,848 | 293,497 | | Net cash (used in) generated from investing activities | 74 | (269,968)| | Net cash (used in) generated from financing activities | (104,865)| 605,240 | | Effect of changes in exchange rates on cash and cash equivalents | 104,142 | 2,446 | | Cash and cash equivalents, end of year | 1,677,792 | 1,449,593 | - Cash flows from operating activities **decreased in 2022**, primarily due to the net loss and changes in working capital, despite adjustments for non-cash items[28](index=28&type=chunk) - Investing activities shifted from a **net outflow in 2021 to a net inflow in 2022**, largely due to C-band clearing proceeds offsetting satellite program expenditures[28](index=28&type=chunk) - Financing activities saw a **significant reduction in cash used**, mainly due to lower debt repayments compared to proceeds from indebtedness in the prior year[28](index=28&type=chunk) [Non-IFRS Financial Measures](index=8&type=section&id=Non-IFRS%20Financial%20Measures) [Adjusted EBITDA Reconciliation](index=8&type=section&id=Adjusted%20EBITDA%20Reconciliation) This section reconciles net income (loss) to the non-IFRS measure of Adjusted EBITDA for Q4 and the full year of 2022 and 2021 Reconciliation of Net Income (Loss) to Adjusted EBITDA | Metric (CAD thousands) | Q4 2022 | Q4 2021 | FY 2022 | FY 2021 | | :--------------------- | :------ | :------ | :------ | :------ | | Net income (loss) | 92,340 | 112,935 | (80,117)| 155,025 | | Tax expense (recovery) | 1,786 | 30,786 | 49,929 | 78,377 | | (Gain) loss on foreign exchange | (72,251)| (20,196)| 239,591 | (27,539)| | Interest expense | 67,304 | 48,841 | 221,756 | 187,994 | | Depreciation | 46,691 | 50,370 | 188,755 | 203,772 | | Amortization | 3,775 | 3,932 | 14,979 | 15,983 | | Non-cash expense related to share-based compensation | 11,968 | 23,546 | 67,428 | 73,723 | | Adjusted EBITDA | 138,994 | 144,566 | 567,913 | 600,409 | | Revenue | 206,684 | 187,497 | 759,169 | 758,212 | | Adjusted EBITDA Margin | 67.2% | 77.1% | 74.8% | 79.2% | [Definition of Adjusted EBITDA and Backlog](index=9&type=section&id=Definition%20of%20Adjusted%20EBITDA%20and%20Backlog) This section defines key non-IFRS metrics, Adjusted EBITDA and contracted revenue backlog, used to measure performance and future revenue - **Adjusted EBITDA** is defined as 'Earnings Before Interest, Taxes, Depreciation and Amortization,' with adjustments for certain operating expenses to measure operating performance[30](index=30&type=chunk) - The use of Adjusted EBITDA helps Telesat and investors **compare operating results with competitors** by excluding variations from non-operational items[31](index=31&type=chunk) - **Contracted revenue backlog** represents Telesat's expected future revenue from existing service contracts, including deferred revenue, without discounting for present value[33](index=33&type=chunk) [Business Operations & Future Plans](index=2&type=section&id=Business%20Operations%20%26%20Future%20Plans) [2023 Preliminary Financial Outlook](index=2&type=section&id=2023%20Preliminary%20Financial%20Outlook) Telesat provides its 2023 financial outlook, projecting revenue, Adjusted EBITDA, and cash flows used in investing activities 2023 Full Year Outlook | Metric | 2023 Outlook (CAD millions) | | :-------------------------------- | :-------------------------- | | Full Year Revenues | $690 - $710 | | Adjusted EBITDA | $500 - $515 | | Cash flows used in investing activities | $40 - $70 | - The 2023 financial outlook assumes a **foreign exchange rate of US$1 = C$1.35**[13](index=13&type=chunk) - Telesat will provide a further update on anticipated capital expenditures for 2023 once arrangements for the **Telesat Lightspeed program are finalized**[13](index=13&type=chunk) [Business Highlights and Fleet Metrics](index=2&type=section&id=Business%20Highlights%20and%20Fleet%20Metrics) The company reports a substantial contracted backlog of $1.8 billion and a high fleet utilization rate of 89% at year-end 2022 Key Performance Indicators (as of Dec 31, 2022) | Metric | Value | | :-------------------------------- | :------ | | Contracted backlog (as of Dec 31, 2022) | ~$1.8 billion | | Fleet utilization (as of Dec 31, 2022) | 89% | [About Telesat and Lightspeed LEO Network](index=3&type=section&id=About%20Telesat%20and%20Lightspeed%20LEO%20Network) Telesat is a leading global satellite operator developing the innovative Lightspeed LEO network to provide high-capacity connectivity - Telesat is one of the **largest and most successful global satellite operators**, providing critical connectivity solutions to customers[19](index=19&type=chunk) - Telesat Lightspeed, the company's Low Earth Orbit (LEO) satellite network, is designed to be the **first and only LEO network optimized** for telecom, government, maritime, and aeronautical customers[20](index=20&type=chunk) - Telesat Lightspeed aims to redefine global satellite connectivity by offering **ubiquitous, affordable, high-capacity links with fiber-like speeds**[20](index=20&type=chunk) [Additional Information](index=3&type=section&id=Additional%20Information) [SEC Filings and Conference Call Details](index=3&type=section&id=SEC%20Filings%20and%20Conference%20Call%20Details) This section provides details on the company's regulatory filings and the upcoming conference call to discuss financial results - Telesat's annual report on **Form 20-F** for the year ended December 31, 2022, has been filed with the SEC and Canadian securities regulatory authorities[14](index=14&type=chunk) - A conference call to discuss financial results is scheduled for **Wednesday, March 29, 2023, at 10:30 a.m. ET**[15](index=15&type=chunk) - Dial-in instructions: Toll-free +1 800 806 5484 (North America), +1 416 340 2217 (outside North America), Access Code: 8861182[16](index=16&type=chunk) - Webcast access: https://edge.media-server.com/mmc/p/o4qyzpii, with a replay archived on Telesat's website[17](index=17&type=chunk) [Forward-Looking Statements and Risk Factors](index=4&type=section&id=Forward-Looking%20Statements%20and%20Risk%20Factors) The report contains forward-looking statements subject to risks and uncertainties that could cause actual results to differ materially - The news release contains **forward-looking statements**, including the 2023 financial outlook and timing for Telesat Lightspeed financing, which are not historical facts[23](index=23&type=chunk) - Actual results may differ materially from expectations due to known and unknown risks and uncertainties, including **inflation, satellite operating risks, and LEO constellation deployment challenges**[24](index=24&type=chunk) - Investors should review additional risk factors discussed in Telesat Corporation's **annual report on Form 20-F** for the year ended December 31, 2022[24](index=24&type=chunk)

UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 __________________________ FORM 20-F __________________________ (Mark One) ☐ REGISTRATION STATEMENT PURSUANT TO SECTION 12(b) OR (g) OF THE SECURITIES EXCHANGE ACT OF 1934 OR ☒ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 OR ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 OR ☐ SHELL COMPANY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ...