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)

[Introduction](index=4&type=section&id=INTRODUCTION) This section provides an overview of Telesat Corporation's structure, its subsidiaries, and financial reporting standards [Overview](index=4&type=section&id=INTRODUCTION_Overview) Telesat Corporation, incorporated in 2020, is the general partner of Telesat Partnership LP, reporting in IFRS and Canadian dollars - Telesat Corporation was incorporated on October 21, 2020, and is the general partner of Telesat Partnership LP, owning 100% of its operating subsidiaries[16](index=16&type=chunk) - References to 'Telesat,' 'Company,' 'we,' 'us,' or 'our' refer to Telesat Canada and its subsidiaries before the Transaction, and Telesat Corporation and its subsidiaries (including Telesat Canada) after the Transaction[18](index=18&type=chunk)[21](index=21&type=chunk) - Financial information is prepared in accordance with International Financial Reporting Standards (IFRS) and presented in Canadian dollars[23](index=23&type=chunk)[24](index=24&type=chunk) [Cautionary Note Regarding Forward-Looking Statements](index=4&type=section&id=CAUTIONARY%20NOTE%20REGARDING%20FORWARD-LOOKING%20STATEMENTS) Forward-looking statements are not guarantees, with actual results subject to financial, operational, and regulatory risks [Overview](index=4&type=section&id=CAUTIONARY%20NOTE%20REGARDING%20FORWARD-LOOKING%20STATEMENTS_Overview) Forward-looking statements are not guarantees, with actual results subject to financial, operational, and regulatory risks - The report contains forward-looking statements identified by words like 'believes,' 'expects,' 'plans,' 'may,' 'will,' 'would,' 'could,' 'should,' 'anticipates,' 'estimates,' 'project,' 'intend' or 'outlook'[25](index=25&type=chunk) - Actual results may differ materially from anticipated results due to risks and uncertainties, including financial factors (inflation, interest rates, capital access), satellite services (customer dependence, launch/in-orbit failures, competition), Lightspeed constellation (technological challenges, spectrum, regulations, supply chain, capital, competition), regulatory risks, and COVID-19 impacts[25](index=25&type=chunk)[26](index=26&type=chunk) - Forward-looking statements are based on current expectations, estimates, forecasts, and projections, and are not guarantees of future performance[27](index=27&type=chunk) [Glossary of Terms](index=6&type=section&id=GLOSSARY%20OF%20TERMS) This section defines key financial, corporate governance, share class, and operational terms used in the report [Overview](index=6&type=section&id=GLOSSARY%20OF%20TERMS_Overview) This section defines key financial, corporate governance, share class, and operational terms used in the report - Defines financial instruments such as '2026 Senior Secured Notes', 'Senior Notes', and 'Senior Secured Credit Facilities'[35](index=35&type=chunk)[46](index=46&type=chunk)[47](index=47&type=chunk) - Clarifies corporate governance terms like 'Change of Control', 'Independent Audit Committee Director', and 'Investor Rights Agreements'[37](index=37&type=chunk)[42](index=42&type=chunk)[43](index=43&type=chunk) - Explains various share and unit classes, including 'Class A Shares', 'Class B Variable Voting Shares', 'Class C Shares', 'Golden Share', and 'Telesat Partnership Units'[38](index=38&type=chunk)[39](index=39&type=chunk)[40](index=40&type=chunk)[41](index=41&type=chunk)[55](index=55&type=chunk) [Part I](index=10&type=section&id=PART%20I) This part covers the company's identity, risk factors, business overview, and financial performance [ITEM 1. Identity of Directors, Senior Management and Advisers](index=10&type=section&id=ITEM%201.%20Identity%20of%20Directors%2C%20Senior%20Management%20and%20Advisers) Information on directors, senior management, and advisers is not applicable in this section - Information regarding the identity of directors, senior management, and advisers is marked as 'Not applicable' for this item[63](index=63&type=chunk) [ITEM 2. Offer Statistics and Expected Timetable](index=10&type=section&id=ITEM%202.%20Offer%20Statistics%20and%20Expected%20Timetable) Offer statistics and expected timetable details are not applicable in this report section - Offer statistics and expected timetable information is marked as 'Not applicable' for this item[64](index=64&type=chunk) [ITEM 3. Key Information](index=10&type=section&id=ITEM%203.%20Key%20Information) This section details various risk factors impacting Telesat's business, including satellite, Lightspeed, regulatory, and financial aspects - Investing in Telesat Public Shares involves a high degree of risk, which could materially affect business, financial condition, liquidity, and stock price[67](index=67&type=chunk) [D. Risk Factors](index=10&type=section&id=D.%20Risk%20Factors) This sub-section details significant operational, Lightspeed, financial, ownership, and tax risks impacting Telesat - Risks related to Telesat's business include in-orbit satellite failures, declining demand for DTH services, intense competition, and technological changes[70](index=70&type=chunk)[75](index=75&type=chunk)[109](index=109&type=chunk)[118](index=118&type=chunk)[122](index=122&type=chunk) - The Lightspeed constellation faces numerous risks, including technological challenges, securing spectrum rights, governmental regulations, supply chain disruptions, and the ability to raise sufficient capital[69](index=69&type=chunk)[71](index=71&type=chunk)[152](index=152&type=chunk)[154](index=154&type=chunk)[157](index=157&type=chunk) - Financial risks include increased indebtedness, capital-intensive business operations, and significant exposure to foreign exchange rate fluctuations, particularly with U.S. dollar-denominated debt[74](index=74&type=chunk)[95](index=95&type=chunk)[139](index=139&type=chunk)[142](index=142&type=chunk)[234](index=234&type=chunk) - Major shareholders (MHR and PSP Investments) have substantial governance rights, and their interests may conflict with other shareholders[74](index=74&type=chunk)[99](index=99&type=chunk)[158](index=158&type=chunk)[160](index=160&type=chunk)[257](index=257&type=chunk)[258](index=258&type=chunk)[260](index=260&type=chunk) - Regulatory risks involve maintaining authorizations, coordinating with other satellite operators, and potential limitations from ITU rules[71](index=71&type=chunk)[74](index=74&type=chunk)[199](index=199&type=chunk)[214](index=214&type=chunk)[220](index=220&type=chunk)[228](index=228&type=chunk)[283](index=283&type=chunk)[287](index=287&type=chunk)[293](index=293&type=chunk)[297](index=297&type=chunk)[298](index=298&type=chunk)[299](index=299&type=chunk)[300](index=300&type=chunk)[302](index=302&type=chunk)[305](index=305&type=chunk)[306](index=306&type=chunk)[308](index=308&type=chunk) - Global supply chain issues and inflation have delayed Lightspeed financing and construction, increasing costs and potentially impacting regulatory milestones[146](index=146&type=chunk)[147](index=147&type=chunk)[148](index=148&type=chunk)[149](index=149&type=chunk) - The company's goodwill and intangible asset values, particularly those supported by the Lightspeed constellation, could be adversely affected by impairment if the program does not proceed as planned[135](index=135&type=chunk)[137](index=137&type=chunk) [ITEM 4. Information on the Company](index=55&type=section&id=ITEM%204.%20Information%20on%20the%20Company) This section details Telesat's history, business operations, strengths, strategy, and infrastructure, including Lightspeed [A. History and Development of the Company](index=55&type=section&id=A.%20History%20and%20Development%20of%20the%20Company) This sub-section details Telesat Corporation's incorporation in 2020, the 2021 Transaction, and the company's historical development - Telesat Corporation was incorporated on October 21, 2020, and became the publicly traded general partner of Telesat Partnership LP following the Transaction in November 2021[311](index=311&type=chunk)[312](index=312&type=chunk)[314](index=314&type=chunk) - The Transaction involved Loral stockholders and Telesat Canada equity holders exchanging interests for equity in Telesat Corporation and/or Telesat Partnership, with Loral becoming a wholly-owned subsidiary of Telesat Partnership[312](index=312&type=chunk)[314](index=314&type=chunk) - Telesat's history dates back to 1969 with the Telesat Canada Act, pioneering commercial geostationary satellites and various innovations in satellite communications[324](index=324&type=chunk) - Telesat Government Solutions (TGS), a wholly-owned subsidiary, was established in March 2022 and approved by the U.S. Government Defense Counterintelligence and Security Agency as a Foreign Ownership, Control, or Influence—mitigated entity[334](index=334&type=chunk) [B. Business Overview](index=56&type=section&id=B.%20Business%20Overview) Telesat, a global satellite operator, leverages its GEO fleet and Lightspeed development, strengths, and government support - Telesat is a leading global satellite operator with over 50 years of experience, operating 14 GEO satellites and developing the LEO Lightspeed constellation[322](index=322&type=chunk)[323](index=323&type=chunk)[339](index=339&type=chunk)[358](index=358&type=chunk) - Competitive strengths include industry-leading engineering expertise, strategic orbital locations, and a contracted revenue backlog of **$1.8 billion** as of December 31, 2022, representing **2.3 times** the year's revenue[341](index=341&type=chunk)[343](index=343&type=chunk)[347](index=347&type=chunk)[560](index=560&type=chunk) - The growth strategy involves increasing GEO satellite utilization and deploying Telesat Lightspeed to address the growing demand for global broadband connectivity, with significant government support including **$1.44 billion** from the GoC and **$400 million** from the GoQ[350](index=350&type=chunk)[351](index=351&type=chunk)[352](index=352&type=chunk)[346](index=346&type=chunk)[419](index=419&type=chunk)[418](index=418&type=chunk) - Telesat's services are divided into Broadcast (**47% of 2022 revenue**), Enterprise (**51% of 2022 revenue**), and Consulting and other (**2% of 2022 revenue**), serving over 400 customers globally[362](index=362&type=chunk)[363](index=363&type=chunk) Geographical Breakdown of Revenues (Year Ended December 31, 2022) | Region | Revenues ($ millions) | | :-------------------------- | :-------------------- | | North America | 620.5 | | Latin America and Caribbean | 57.8 | | Asia and Australia | 45.1 | | Europe, Middle East and Africa | 35.8 | - The Lightspeed constellation is designed to provide high-capacity, low-latency, global broadband connectivity, optimized for enterprise and government users, with a total addressable market estimated at **US$425 billion by 2025**[377](index=377&type=chunk)[384](index=384&type=chunk)[385](index=385&type=chunk)[386](index=386&type=chunk) - Telesat holds **49 issued patents** (5 in the U.S.) expiring between 2025 and 2039, and has several pending patent applications, relying on intellectual property to protect its technology and services[436](index=436&type=chunk) - The company's risk management includes on-board satellite redundancies, quality assurance during manufacturing and launch, and comprehensive insurance policies (Pre-Launch, Launch, In-Orbit), though not all satellites are fully insured[479](index=479&type=chunk)[482](index=482&type=chunk)[483](index=483&type=chunk)[484](index=484&type=chunk)[485](index=485&type=chunk)[487](index=487&type=chunk)[488](index=488&type=chunk)[489](index=489&type=chunk)[491](index=491&type=chunk) [C. Organizational Structure](index=86&type=section&id=C.%20Organizational%20Structure) This sub-section refers to a chart detailing Telesat Corporation's organizational structure and subsidiaries - The organizational structure, including the jurisdiction of formation or incorporation of material subsidiaries, is presented in a chart[500](index=500&type=chunk) [D. Property, Plants and Equipment](index=86&type=section&id=D.%20Property%2C%20Plants%20and%20Equipment) Information on property, plants, and equipment is referenced to the 'Business Overview' section (Item 4B) - Information on property, plants, and equipment is referenced to Item 4B, 'Business Overview'[500](index=500&type=chunk) [ITEM 4A. Unresolved Staff Comments](index=87&type=section&id=ITEM%204A.%20Unresolved%20Staff%20Comments) There are no unresolved staff comments from the SEC regarding the company's filings - There are no unresolved staff comments[501](index=501&type=chunk) [ITEM 5. Operating and Financial Review and Prospects](index=87&type=section&id=ITEM%205.%20Operating%20and%20Financial%20Review%20and%20Prospects) Management discusses Telesat's 2022 financial condition, operating results, liquidity, and capital resources [A. Operating results](index=87&type=section&id=A.%20Operating%20results) Telesat reported a **$80.1 million net loss** in 2022, driven by foreign exchange, despite stable revenue and **$1.8 billion backlog** - Telesat Corporation's net loss for the year ended December 31, 2022, was **$80.1 million**, a negative variation of **$235.1 million** from the prior year's net income of **$155.0 million**[533](index=533&type=chunk) - The negative variation was primarily due to a negative non-cash foreign exchange impact on U.S. dollar denominated debt and the recognition of Phase I accelerated clearing payments for C-band spectrum, partially offset by a gain on extinguishment of debt[533](index=533&type=chunk) Revenue by Service Category (Years Ended December 31) | ($ millions) | 2022 | 2021 | | :-------------------- | :----- | :----- | | Broadcast | 358.7 | 390.8 | | Enterprise | 389.0 | 354.1 | | Consulting and other | 11.5 | 13.3 | | Total Revenue | 759.2 | 758.2 | - Broadcast services revenue decreased by **$32.2 million (8.2%)** in 2022, mainly due to a reduction in a long-term agreement with a North American DTH customer[536](index=536&type=chunk) - Enterprise services revenue increased by **$34.9 million (9.8%)** in 2022, driven by equipment sales to DARPA and higher consulting revenue[537](index=537&type=chunk) Key Financial Metrics (Years Ended December 31) | Metric | 2022 ($ millions) | 2021 ($ millions) | Change (%) | | :--------------------------------- | :---------------- | :---------------- | :--------- | | Depreciation | 188.8 | 203.8 | (7.4)% | | Amortization | 15.0 | 16.0 | (6.3)% | | Operating expenses | 259.0 | 236.9 | 9.3% | | Other operating gains (losses), net | — | (107.6) | (100.0)% | | Interest expense | 221.8 | 188.0 | 18.0% | | Gain on extinguishment of debt | 106.9 | — | N/A | | Interest and other income | 23.5 | 3.4 | 589.7% | | Gain (loss) on changes in fair value of financial instruments | 4.3 | (18.7) | N/A | | Gain (loss) on foreign exchange | (239.6) | 27.5 | N/A | - Contracted revenue backlog was approximately **$1.8 billion** as of December 31, 2022, with **82.4%** of each year's total revenue historically under contract at the beginning of the year[560](index=560&type=chunk) Contracted Revenue Backlog Recognition Schedule ($ millions) | Year | Amount | | :--------- | :----- | | 2023 | 568.9 | | 2024 | 349.6 | | 2025 | 233.6 | | 2026 | 195.7 | | 2027 | 128.6 | | Thereafter | 282.2 | - Cash and short-term investments totaled **$1.68 billion** as of December 31, 2022, including **$1.05 billion** held in unrestricted subsidiaries, with **$200.0 million** U.S. dollars available under the Revolving Credit Facility[563](index=563&type=chunk) - Total debt as of December 31, 2022, was **$3.85 billion**, with variable rate indebtedness exposing the company to interest rate risk[234](index=234&type=chunk)[526](index=526&type=chunk)[580](index=580&type=chunk)[583](index=583&type=chunk)[584](index=584&type=chunk)[585](index=585&type=chunk)[587](index=587&type=chunk) Adjusted EBITDA (Years Ended December 31) | Metric | 2022 ($ millions) | 2021 ($ millions) | | :-------------------- | :---------------- | :---------------- | | Adjusted EBITDA | 567.9 | 600.4 | | Revenue | 759.2 | 758.2 | | Adjusted EBITDA Margin | 74.8% | 79.2% | - Adjusted EBITDA decreased by **$32.5 million** in 2022, primarily due to increased operating expenses, partially offset by a favorable foreign exchange impact[617](index=617&type=chunk) Consolidated Total Secured Debt and Consolidated Total Debt for Covenant Purposes (As at December 31, 2022) | Metric | Amount ($ millions) | | :------------------------------------ | :------------------ | | Consolidated Total Debt for Covenant Purposes | 3,751.7 | | Consolidated Total Secured Debt for Covenant Purposes | 3,223.1 | | Consolidated Total Debt for Covenant Purposes to Consolidated EBITDA ratio | 6.17:1.00 | | Consolidated Total Secured Debt to Consolidated EBITDA for Covenant Purposes ratio | 5.30:1.00 | [ITEM 6. Directors, Senior Management and Employees](index=115&type=section&id=ITEM%206.%20Directors%2C%20Senior%20Management%20and%20Employees) This section details Telesat's Board, senior management, compensation, corporate governance, and employee information [A. Directors and Senior Management](index=121&type=section&id=A.%20Directors%20and%20Senior%20Management) This sub-section lists the names, positions, and biographies of Telesat's directors and senior management - The Board of Directors includes Michael Boychuk, Jason A. Caloras, Jane Craighead, Richard Fadden, Daniel Goldberg, Henry Intven, David Morin, Dr. Mark H. Rachesky, Guthrie Stewart, and Michael B. Targoff[688](index=688&type=chunk)[691](index=691&type=chunk)[692](index=692&type=chunk)[693](index=693&type=chunk)[695](index=695&type=chunk)[696](index=696&type=chunk)[697](index=697&type=chunk)[698](index=698&type=chunk)[699](index=699&type=chunk)[700](index=700&type=chunk)[701](index=701&type=chunk) - Senior Management includes Daniel Goldberg (President and CEO), Michèle Beck (SVP, Canadian Sales), Andrew Browne (CFO), Christopher S. DiFrancesco (VP, General Counsel and Secretary), John Flaherty (VP, Business Planning & Marketing), Philip Harlow (President, Telesat Government Solutions), Erwin Hudson (VP, Telesat Lightspeed System Development), Glenn Katz (Chief Commercial Officer), Michael C. Schwartz (SVP, Corporate & Business Development), and France Teasdale (VP, People), David N. Wendling (Chief Technical Officer)[688](index=688&type=chunk)[702](index=702&type=chunk)[703](index=703&type=chunk)[704](index=704&type=chunk)[705](index=705&type=chunk)[706](index=706&type=chunk)[707](index=707&type=chunk)[708](index=708&type=chunk)[709](index=709&type=chunk)[710](index=710&type=chunk)[711](index=711&type=chunk)[712](index=712&type=chunk) [B. Compensation](index=126&type=section&id=B.%20Compensation) Telesat's executive and director compensation includes salary, bonuses, equity awards, and pension plans - Executive compensation aims to attract, retain, and motivate talent, align interests with shareholders, and encourage appropriate risk-taking[713](index=713&type=chunk)[716](index=716&type=chunk) - Compensation includes base salary, annual bonuses (tied to Adjusted EBITDA performance), and equity-based awards (Telesat Corporation Options, PSUs, RSUs, DSUs) under the Omnibus Plan and Historic Plans[714](index=714&type=chunk)[717](index=717&type=chunk)[742](index=742&type=chunk) NEO Compensation (Fiscal Year 2022) | Name | Salary ($) | Share-based Awards ($) | Option-Based Awards ($) | Annual incentive plan ($) | Pension Value ($) | All Other Compensation ($) | Total Compensation ($) | | :------------------------------------ | :--------- | :----------------------- | :---------------------- | :------------------------ | :---------------- | :------------------------- | :----------------------- | | Daniel S. Goldberg | 1,372,938 | 2,452,952 | 1,887,192 | 2,581,673 | 1,078,000 | 886,256 | 10,259,011 | | Andrew Browne | 723,155 | 584,031 | 449,330 | 1,359,821 | 6,000 | 123,840 | 3,246,177 | | Michael Schwartz | 675,120 | 467,218 | 359,457 | 1,269,143 | 442,000 | 82,338 | 3,295,276 | | David Wendling | 414,000 | 467,218 | 359,457 | 467,091 | 227,000 | 29,400 | 1,964,166 | | Glenn Katz | 667,696 | 467,218 | 359,457 | 753,321 | 158,000 | 1,081,767 | 3,487,459 | - The Omnibus Plan reserves **2,972,816 Telesat Public Shares** for issuance, representing **6%** of estimated fully diluted shares, with insider participation limits of **10%**[720](index=720&type=chunk)[721](index=721&type=chunk) Director Compensation Fee Schedule | Type of Fee | Position | Amount | | :---------------- | :-------------------- | :------------------------------------ | | Board Retainer | Board Member | $75,000 cash + $100,000 Telesat Corporation DSU Award | | Committee Retainer | Audit Committee Chair | $25,000 | | | Audit Committee Member | $10,000 | | | HRCC Chair | $15,000 | | | HRCC Member | $7,500 | | | NCGC Chair | $15,000 | | | NCGC Member | $7,500 | | Meeting Fees | Board and Committee Meetings | Nil | [C. Board Practices](index=134&type=section&id=C.%20Board%20Practices) Telesat's Board adheres to independence, majority voting, and diversity policies, supported by key committees - The Telesat Corporation Board consists of ten directors: the CEO, three designees from PSP Investments, three from MHR, and three independent directors nominated by the NCGC[757](index=757&type=chunk)[758](index=758&type=chunk) - A majority of the board (**8 out of 10 directors**) are independent, excluding the CEO (Dan Goldberg) and Michael Targoff[772](index=772&type=chunk) - The company has established an Audit Committee, a Nominating & Corporate Governance Committee (NCGC), and a Human Resources & Compensation Committee (HRCC)[765](index=765&type=chunk) - The board has a 'Majority Voting Policy' requiring directors who do not receive more 'for' than 'withheld' votes to tender their resignation[781](index=781&type=chunk) - Telesat is committed to increasing diversity on the board, with a goal of **30% female representation**, and considers diversity in candidate identification[783](index=783&type=chunk)[784](index=784&type=chunk) Board Diversity Matrix (As of December 31, 2022) | Part I: Gender Identity | Female | Male | Non-Binary | Did Not Disclose Gender | | :---------------------- | :----- | :--- | :--------- | :---------------------- | | Directors | 2 | 8 | — | — | [D. Employees](index=143&type=section&id=D.%20Employees) As of December 31, 2022, Telesat employed approximately **455 staff**, with **2.8%** under collective bargaining agreements - As of December 31, 2022, Telesat and its subsidiaries had approximately **455** permanent full and part-time employees[811](index=811&type=chunk) - Approximately **2.8%** of employees are subject to collective bargaining agreements[811](index=811&type=chunk) - The employee body is primarily comprised of professional engineering, sales and marketing staff, administrative staff, and skilled technical workers[811](index=811&type=chunk) [E. Share Ownership](index=144&type=section&id=E.%20Share%20Ownership) This sub-section details share and unit ownership by directors and senior management, including outstanding equity awards Share Ownership by Directors and Senior Management (As of February 28, 2023) | Name | Class A Shares | Class B Variable Voting Shares | Class A Units | Class B Units | Fully exchanged and converted basis | | :-------------------- | :------------- | :----------------------------- | :------------ | :------------ | :-------------------------------- | | Daniel Goldberg | 242,147 | — | — | — | 242,147 (0.49%) | | Mark H. Rachesky, M.D. | — | 46,136 | — | 18,050,092 | 18,096,228 (36.36%) | | Michael B. Targoff | — | 101,872 | — | — | 101,872 (0.20%) | | Andrew Browne | — | 22,595 | — | — | 22,595 (0.05%) | | Michael C. Schwartz | — | 38,369 | — | — | 38,369 (0.08%) | | David N. Wendling | 2,700 | — | — | — | 2,700 (0.01%) | | Michèle Beck | 1,890 | — | — | — | 1,890 (—%) | | Christopher S. DiFrancesco | 2,160 | — | — | — | 2,160 (—%) | | John Flaherty | 1,890 | — | — | — | 1,890 (—%) | | Erwin Hudson | — | 13,512 | — | — | 13,512 (0.03%) | | Glenn Katz | — | 2,700 | — | — | 2,700 (0.01%) | | Michael Boychuk | — | — | — | — | — | | Jason A. Caloras | — | — | — | — | — | | Jane Craighead | — | — | — | — | — | | Richard Fadden | — | — | — | — | — | | Henry Intven | — | — | — | — | — | | David Morin | — | — | — | — | — | | Guthrie Stewart | — | — | — | — | — | | France Teasdale | — | — | — | — | — | | Phillip Harlow | — | — | — | — | — | Outstanding Stock Options, RSUs, PSUs, and DSUs (As of December 31, 2022) | | Historic Plan | Omnibus Plan | | :----------------------------- | :------------ | :----------- | | Stock Options | 793,667 | 285,149 | | RSUs with time criteria | 973,338 | 351,071 | | RSUs with time and performance criteria | 124,080 | — | | PSUs with time and performance criteria | — | 140,583 | | DSUs | — | 46,576 | | Total | 1,891,085 | 823,379 | - During 2022, **574,226 Telesat Public Shares** were issued in exchange for an equal number of Class B LP Units in the Partnership[657](index=657&type=chunk) [F. Disclosure of a Registrant's Action to Recover Erroneously Awarded Compensation](index=144&type=section&id=F.%20Disclosure%20of%20a%20Registrant%27s%20Action%20to%20Recover%20Erroneously%20Awarded%20Compensation) There is no applicable disclosure regarding actions to recover erroneously awarded compensation - This item is marked as 'Not applicable'[815](index=815&type=chunk) [ITEM 7. Major Shareholders and Related Party Transactions](index=145&type=section&id=ITEM%207.%20Major%20Shareholders%20and%20Related%20Party%20Transactions) This section identifies major shareholders and details related party transactions, including agreements with PSP and MHR [A. Major Shareholders.](index=145&type=section&id=A.%20Major%20Shareholders.) This sub-section identifies major shareholders (PSP, MHR) and explains the 'Golden Share' for Canadian control Major Shareholders (5% or more beneficial ownership) as of February 28, 2023 | Name | Fully exchanged and converted basis | | :-------------------------- | :-------------------------------- | | PSP Investments | 18,211,203 (36.59%) | | Mark H. Rachesky, M.D. | 18,096,228 (36.36%) | | MHR | 18,035,092 (36.23%) | | GAMCO Investors, Inc | 2,763,775 (5.55%) | - The 'Golden Share' mechanism ensures that the aggregate votes cast by Canadians equal a simple majority, diluting the voting power of non-Canadian shareholders[818](index=818&type=chunk)[822](index=822&type=chunk) - The voting power of different share classes is summarized, noting that Class C Limited Voting Shares have no votes for director elections[823](index=823&type=chunk) [B. Related Party Transactions](index=147&type=section&id=B.%20Related%20Party%20Transactions) This sub-section details related party transactions, including the 2021 Transaction, Investor Rights, and legal services - The Transaction in November 2021 restructured ownership, making Loral a fully consolidated subsidiary of Telesat Partnership[826](index=826&type=chunk)[1436](index=1436&type=chunk) - Investor Rights Agreements grant PSP Investments and MHR the right to designate three directors each to the Telesat Corporation board[828](index=828&type=chunk) - Telesat incurred **US$793,159** in expenses in 2022 for legal services from Goldberg, Godles, Wiener & Wright, where the CEO's father is a partner[830](index=830&type=chunk) - Telesat has indemnification agreements with its directors and executive officers, and with PSP Investments for certain Transaction-related losses and tax matters, with some obligations uncapped[832](index=832&type=chunk)[1421](index=1421&type=chunk)[1422](index=1422&type=chunk) [C. Interests of Experts and Counsel](index=148&type=section&id=C.%20Interests%20of%20Experts%20and%20Counsel) There are no applicable disclosures regarding the interests of experts and counsel in the company - This item is marked as 'Not applicable'[833](index=833&type=chunk) [ITEM 8. Financial Information](index=148&type=section&id=ITEM%208.%20Financial%20Information) This section refers to consolidated financial statements, discusses legal proceedings, and outlines the company's dividend policy [A. Consolidated Financial Statements and Other Financial Information](index=148&type=section&id=A.%20Consolidated%20Financial%20Statements%20and%20Other%20Financial%20Information) This sub-section refers to consolidated financial statements, details legal proceedings, and dividend policy - Consolidated Financial Statements are included at the end of the Annual Report[834](index=834&type=chunk) - Telesat is involved in legal proceedings, including tax disputes with Brazilian authorities totaling **$89.6 million** (2003-2018) and Canadian tax authorities for **$13.1 million** (transfer pricing 2009-2014) and **$11.6 million** (R&D claims 2016-2017)[835](index=835&type=chunk)[836](index=836&type=chunk)[1424](index=1424&type=chunk)[1425](index=1425&type=chunk)[1426](index=1426&type=chunk) - The company believes the likelihood of a favorable outcome in these tax disputes is more likely than not, and no reserves have been established[1424](index=1424&type=chunk)[1425](index=1425&type=chunk)[1426](index=1426&type=chunk) - Telesat intends to retain all available funds and future earnings to support operations and finance business growth, and does not plan to declare or pay cash dividends in the foreseeable future[837](index=837&type=chunk) [B. Significant Changes](index=149&type=section&id=B.%20Significant%20Changes) No significant changes in Telesat Corporation's financial position have occurred since the Annual Financial Statements date - No significant changes in financial position have occurred since the date of the Annual Financial Statements[838](index=838&type=chunk) [ITEM 9. The Offer and Listing](index=149&type=section&id=ITEM%209.%20The%20Offer%20and%20Listing) Telesat Corporation's Class A and B Variable Voting Shares are listed on Nasdaq and TSX under 'TSAT' since 2021 - Telesat Corporation's Class A Shares and Class B Variable Voting Shares are listed on Nasdaq Global Select Market and TSX under 'TSAT' since November 19, 2021[839](index=839&type=chunk) - Telesat Partnership Units are not listed on any exchange[839](index=839&type=chunk) [ITEM 10. Additional Information](index=149&type=section&id=ITEM%2010.%20Additional%20Information) This section provides additional information on share capital, constating documents, ownership, and U.S./Canadian tax [A. Share Capital](index=149&type=section&id=A.%20Share%20Capital) Information regarding share capital is not applicable in this specific section - This item is marked as 'Not applicable'[840](index=840&type=chunk) [B. Constating Documents and Articles of Telesat Corporation](index=149&type=section&id=B.%20Constating%20Documents%20and%20Articles%20of%20Telesat%20Corporation) This sub-section details constating documents, transfer agents, Canadian ownership, and Telesat Partnership Unit rights - The transfer agent and registrar for Telesat Corporation Shares and Telesat Partnership Units are Computershare Trust Company, N.A. (U.S.) and Computershare Investor Services Inc. (Canada)[842](index=842&type=chunk) - Canadian law, including the Competition Act and Investment Canada Act, may impose limitations on non-resident acquisitions of Telesat Corporation Shares, particularly regarding control or significant interests[843](index=843&type=chunk)[844](index=844&type=chunk)[847](index=847&type=chunk) - Telesat Partnership Units provide economic and voting rights substantially equivalent to corresponding Telesat Corporation Shares, with voting facilitated through Special Voting Shares[853](index=853&type=chunk)[854](index=854&type=chunk)[857](index=857&type=chunk)[858](index=858&type=chunk) - Holders of Telesat Partnership Units have an 'Exchange Right' to convert their units into Telesat Corporation Shares, and mandatory exchanges can occur under specific conditions (e.g., Sunset Exchange, Control Transaction Exchange, Voting Event Exchange)[861](index=861&type=chunk)[865](index=865&type=chunk) - Telesat Partnership's dissolution can occur upon removal of the general partner, sale of substantially all property, or when no Partnership Units remain outstanding[885](index=885&type=chunk) - Telesat Corporation, as general partner, owes duties to Telesat Partnership and unit holders similar to a board's duties to a company and its shareholders, and is indemnified for certain losses[889](index=889&type=chunk)[890](index=890&type=chunk) [C. Material Contracts](index=161&type=section&id=C.%20Material%20Contracts) This sub-section lists Telesat's material contracts, including Transaction, Investor Rights, and debt indentures - Material contracts include the Transaction Agreement, Voting Agreement, Investor Rights Agreements with MHR and PSP Investments, and Registration Rights Agreement[907](index=907&type=chunk) - Also listed are amendments to the Credit Agreement and indentures for the **6.500% Senior Notes due 2027**, **4.875% Senior Secured Notes due 2027**, and **5.625% Senior Secured Notes due 2026**[907](index=907&type=chunk) [D. Exchange Controls](index=161&type=section&id=D.%20Exchange%20Controls) No Canadian laws restrict capital export/import or remittance of payments to non-resident security holders - No Canadian laws restrict capital export/import or remittance of payments to non-resident security holders[906](index=906&type=chunk) [E. Taxation](index=161&type=section&id=E.%20Taxation) This sub-section summarizes U.S. and Canadian income tax consequences for shareholders, including PFIC and SIFT rules - Section 7874 of the Code could treat Telesat Corporation or Telesat Partnership as a U.S. corporation or a surrogate foreign corporation, potentially subjecting them to U.S. tax on worldwide income or limiting tax attributes for Loral[283](index=283&type=chunk)[287](index=287&type=chunk)[914](index=914&type=chunk)[915](index=915&type=chunk)[921](index=921&type=chunk) - Telesat Corporation may have been a Passive Foreign Investment Company (PFIC) for 2021 and 2022, and could be in subsequent years, leading to adverse U.S. tax consequences for U.S. shareholders, including ordinary income rates on gains and interest charges[293](index=293&type=chunk)[294](index=294&type=chunk)[295](index=295&type=chunk)[934](index=934&type=chunk)[935](index=935&type=chunk)[937](index=937&type=chunk)[938](index=938&type=chunk) - U.S. Holders of Telesat Partnership Units may receive income allocations without sufficient cash distributions to cover tax liabilities, and exchanges of units for shares are generally taxable events[297](index=297&type=chunk)[953](index=953&type=chunk)[961](index=961&type=chunk) - Telesat Partnership is a 'SIFT partnership' for Canadian tax purposes, potentially subject to SIFT tax on 'taxable non-portfolio earnings,' which could reduce after-tax returns[298](index=298&type=chunk)[998](index=998&type=chunk) - Dividends paid by Telesat CanHoldco to Telesat Partnership are subject to Canadian federal withholding tax (**25%**), though administrative practice may allow for reduced rates based on partner residency[302](index=302&type=chunk)[303](index=303&type=chunk)[1011](index=1011&type=chunk) - Non-Canadian Holders of Telesat Partnership Units are generally subject to Canadian income tax only on their share of income from business carried on in Canada, and the company aims to manage affairs to avoid this[300](index=300&type=chunk)[1009](index=1009&type=chunk) [F. Dividends and Payment Agents](index=178&type=section&id=F.%20Dividends%20and%20Payment%20Agents) Information regarding dividends and payment agents is not applicable in this section - This item is marked as 'Not applicable'[1013](index=1013&type=chunk) [G. Statement by Experts](index=178&type=section&id=G.%20Statement%20by%20Experts) There is no applicable disclosure regarding statements by experts - This item is marked as 'Not applicable'[1014](index=1014&type=chunk) [H. Documents on Display](index=178&type=section&id=H.%20Documents%20on%20Display) The Annual Report and exhibits are available on SEDAR and SEC, with Telesat filing as a foreign private issuer - The Annual Report and exhibits are available at Telesat's offices and on SEDAR (http://sedar.com)[1015](index=1015&type=chunk) - As a foreign private issuer, Telesat is exempt from certain U.S. proxy rules and frequent reporting requirements, filing an annual report on Form 20-F with the SEC (http://sec.gov)[1016](index=1016&type=chunk)[1017](index=1017&type=chunk) [I. Subsidiary Information](index=179&type=section&id=I.%20Subsidiary%20Information) Information regarding subsidiary information is not applicable in this section - This item is marked as 'Not applicable'[1019](index=1019&type=chunk) [ITEM 11. Quantitative and Qualitative Disclosures About Market Risk](index=179&type=section&id=ITEM%2011.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) Disclosures about market risk are referenced to 'Item 5. Operating and Financial Review and Prospects' - Quantitative and qualitative disclosures about market risk are found in 'Item 5. Operating and Financial Review and Prospects'[1020](index=1020&type=chunk) [ITEM 12. Description of Securities Other Than Equity Securities](index=179&type=section&id=ITEM%2012.%20Description%20of%20Securities%20Other%20Than%20Equity%20Securities) There is no applicable disclosure regarding the description of securities other than equity securities - This item is marked as 'Not applicable'[1021](index=1021&type=chunk) [Part II](index=180&type=section&id=PART%20II) This part covers defaults, controls and procedures, audit committee, code of ethics, principal accountant fees, and corporate governance [ITEM 13. Defaults, Dividend Arrearages and Delinquencies](index=180&type=section&id=ITEM%2013.%20Defaults%2C%20Dividend%20Arrearages%20and%20Delinquencies) There are no defaults, dividend arrearages, or delinquencies to report - There are no defaults, dividend arrearages, or delinquencies[1023](index=1023&type=chunk) [ITEM 14. Material Modifications to the Rights of Security Holders and Use of Proceeds](index=180&type=section&id=ITEM%2014.%20Material%20Modifications%20to%20the%20Rights%20of%20Security%20Holders%20and%20Use%20of%20Proceeds) No material modifications to security holder rights or use of proceeds are reported - This item is marked as 'Not applicable'[1024](index=1024&type=chunk) [ITEM 15. Controls and Procedures](index=180&type=section&id=ITEM%2015.%20Controls%20and%20Procedures) Management concluded disclosure controls and internal control over financial reporting were effective as of December 31, 2022 - Telesat's disclosure controls and procedures were evaluated as effective as of December 31, 2022, providing reasonable assurance for timely and accurate financial reporting[1025](index=1025&type=chunk) - Management concluded that internal control over financial reporting was effective as of December 31, 2022, based on the COSO framework[1027](index=1027&type=chunk) - No material changes in internal control over financial reporting occurred during the period covered by the annual report[1029](index=1029&type=chunk) [ITEM 16A. Audit Committee Financial Expert](index=181&type=section&id=ITEM%2016A.%20Audit%20Committee%20Financial%20Expert) Telesat's Audit Committee members are independent, financially literate, and qualify as 'audit committee financial experts' - The Audit Committee is composed of Michael Boychuk (Chair), Jane Craighead, and Henry Intven[1030](index=1030&type=chunk) - All Audit Committee members are independent, financially literate, and qualify as 'audit committee financial experts' under applicable SEC rules and NASDAQ/NI 52-110[1030](index=1030&type=chunk) [ITEM 16B. Code of Ethics](index=181&type=section&id=ITEM%2016B.%20Code%20of%20Ethics) Telesat's Board adopted a global Code of Ethics covering compliance, conflicts of interest, and asset protection - Telesat Corporation has a written Code of Ethics applicable to all officers, directors, employees, consultants, contractors, and agents worldwide[1031](index=1031&type=chunk) - The Code addresses compliance with laws, conflicts of interest, confidentiality, financial information, internal controls, and protection of assets[1031](index=1031&type=chunk) - Violations are to be reported to senior executives, and the Board has ultimate responsibility for monitoring compliance[1031](index=1031&type=chunk) [ITEM 16C. Principal Accountant Fees and Services](index=181&type=section&id=ITEM%2016C.%20Principal%20Accountant%20Fees%20and%20Services) This section details fees paid to Deloitte LLP for audit and other services, with audit fees increasing in 2022 Fees Charged by Deloitte LLP (in thousands of Canadian dollars) | Category | Fiscal 2022 | Fiscal 2021 | | :-------------------- | :---------- | :---------- | | Audit fees | 3,934 | 1,920 | | Audit related fees | 240 | 165 | | Tax fees | 112 | 105 | | All other fee | 3 | 3 | | Total fees charged | 4,289 | 2,194 | - Audit fees for 2022 increased significantly due to services for annual financial statements and proxy statements related to the Transaction[1034](index=1034&type=chunk) - The Audit Committee pre-approves all audit and non-audit services to be provided by the independent external auditor to maintain independence[1035](index=1035&type=chunk) [ITEM 16D. Exemptions from the Listing Standards for Audit Committees](index=182&type=section&id=ITEM%2016D.%20Exemptions%20from%20the%20Listing%20Standards%20for%20Audit%20Committees) There are no applicable exemptions from the listing standards for audit committees - This item is marked as 'Not applicable'[1036](index=1036&type=chunk) [ITEM 16E. Purchases of Equity Securities by the Issuer and Affiliated Purchasers](index=182&type=section&id=ITEM%2016E.%20Purchases%20of%20Equity%20Securities%20by%20the%20Issuer%20and%20Affiliated%20Purchasers) There is no applicable disclosure regarding purchases of equity securities by the issuer and affiliated purchasers - This item is marked as 'Not applicable'[1037](index=1037&type=chunk) [ITEM 16F. Change in Registrant's Certifying Accountant](index=182&type=section&id=ITEM%2016F.%20Change%20in%20Registrant%27s%20Certifying%20Accountant) There is no applicable disclosure regarding a change in the registrant's certifying accountant - This item is marked as 'Not applicable'[1038](index=1038&type=chunk) [ITEM 16G. Corporate Governance](index=182&type=section&id=ITEM%2016G.%20Corporate%20Governance) Telesat's corporate governance adheres to BCBCA, Articles, Investor Rights, and Canadian/NASDAQ guidelines - Telesat's corporate governance is subject to the BCBCA, Telesat Corporation Articles, and Investor Rights Agreements with MHR and PSP Investments[1039](index=1039&type=chunk) - The company follows Canadian Corporate Governance Guidelines and intends to comply with NASDAQ Marketplace Rules, but as a Foreign Private Issuer, it may use exemptions to follow home country practices[1041](index=1041&type=chunk)[1042](index=1042&type=chunk) [ITEM 16H. Mine Safety Disclosure](index=182&type=section&id=ITEM%2016H.%20Mine%20Safety%20Disclosure) There is no applicable disclosure regarding mine safety - This item is marked as 'Not applicable'[1043](index=1043&type=chunk) [ITEM 16I. Disclosure Regarding Foreign Jurisdictions That Prevent Inspections.](index=182&type=section&id=ITEM%2016I.%20Disclosure%20Regarding%20Foreign%20Jurisdictions%20That%20Prevent%20Inspections.) There is no applicable disclosure regarding foreign jurisdictions that prevent inspections - This item is marked as 'Not applicable'[1043](index=1043&type=chunk) [Part III](index=183&type=section&id=PART%20III) This part includes the company's financial statements and a comprehensive list of all exhibits filed [ITEM 17. Financial Statements.](index=183&type=section&id=ITEM%2017.%20Financial%20Statements.) Telesat provides its financial statements pursuant to Item 18 of Form 20-F - Telesat has elected to provide financial statements pursuant to Item 18[1045](index=1045&type=chunk) [ITEM 18. Financial Statements.](index=183&type=section&id=ITEM%2018.%20Financial%20Statements.) The Annual Financial Statements of Telesat Corporation are included at the end of this Annual Report - The Annual Financial Statements of Telesat Corporation are included at the end of this Annual Report[1046](index=1046&type=chunk) [ITEM 19. Exhibits](index=184&type=section&id=ITEM%2019.%20Exhibits) This section lists all exhibits filed as part of the Annual Report on Form 20-F, providing supporting documentation - The section lists various exhibits, including Articles of Telesat Corporation, Amended and Restated Limited Partnership Agreement, Trust Agreement, Voting Agreement, and several Indentures for Senior Notes[1047](index=1047&type=chunk) - Also included are Investor Rights Agreements, Registration Rights Agreement, Credit Agreement amendments, and certifications (Section 302, Section 906)[1047](index=1047&type=chunk)[1049](index=1049&type=chunk) [Signatures](index=187&type=section&id=SIGNATURES) This section contains the official certification by Telesat Corporation, signed by the President and CEO [Overview](index=187&type=section&id=SIGNATURES_Overview) This section contains the official certification by Telesat Corporation, signed by the President and CEO on March 29, 2023 - Telesat Corporation certifies that it meets all requirements for filing on Form 20-F[1053](index=1053&type=chunk) - The report is signed by Daniel S. Goldberg, President and Chief Executive Officer, on March 29, 2023[1055](index=1055&type=chunk) [Index to Consolidated Financial Statements](index=188&type=section&id=Index%20to%20Consolidated%20Financial%20Statements) This index provides an overview of the consolidated financial statements, including auditor reports [Reports of Independent Registered Public Accounting Firm](index=189&type=section&id=Reports%20of%20Independent%20Registered%20Public%20Accounting%20Firm) Deloitte LLP issued unqualified opinions on internal controls and financial statements, highlighting goodwill impairment - Deloitte LLP issued an unqualified opinion on the effectiveness of Telesat Corporation's internal control over financial reporting as of December 31, 2022[1059](index=1059&type=chunk) - Deloitte LLP also expressed an unqualified opinion on the consolidated financial statements for the year ended December 31, 2022[1060](index=1060&type=chunk)[1065](index=1065&type=chunk) - A critical audit matter was the impairment assessment of goodwill and indefinite life intangible assets (orbital slots), involving significant estimates for future revenue forecasts, discount rates, and market multiples, particularly for the Telesat Lightspeed constellation[1070](index=1070&type=chunk)[1071](index=1071&type=chunk)[1072](index=1072&type=chunk) [Consolidated Statements of Income (Loss)](index=192&type=section&id=Consolidated%20Statements%20of%20Income) Telesat reported a **$80.1 million net loss** in 2022, primarily due to foreign exchange losses, despite stable revenue Consolidated Statements of Income (Loss) (in thousands of Canadian dollars) | Metric | 2022 | 2021 | | :------------------------------------------------- | :----- | :----- | | Revenue | 759,169 | 758,212 | | Operating expenses | (258,989) | (236,949) | | Depreciation | (188,755) | (203,772) | | Amortization | (14,979) | (15,983) | | Other operating gains (losses), net | 7 | 107,615 | | Operating income | 296,453 | 409,123 | | Interest expense | (221,756) | (187,994) | | Gain on extinguishment of debt | 106,916 | — | | Interest and other income | 23,476 | 3,418 | | Gain (loss) on changes in fair value of financial instruments | 4,314 | (18,684) | | Gain (loss) on foreign exchange | (239,591) | 27,539 | | Income (loss) before income taxes | (30,188) | 233,402 | | Tax (expense) recovery | (49,929) | (78,377) | | Net income (loss) | (80,117) | 155,025 | | Net income (loss) attributable to Telesat Corporation shareholders | (23,396) | 85,190 | | Net income (loss) attributable to Non-controlling interest | (56,721) | 69,835 | | Basic EPS | (1.90) | 1.89 | | Diluted EPS | (1.90) | 1.83 | - Net income (loss) attributable to Telesat Corporation shareholders was (**$23,396 thousand**) in 2022, down from **$85,190 thousand** in 2021[1076](index=1076&type=chunk) - Basic and diluted earnings per share were (**$1.90**) in 2022, compared to **$1.89** and **$1.83** respectively in 2021[1076](index=1076&type=chunk) [Consolidated Statements of Comprehensive Income (Loss)](index=193&type=section&id=Consolidated%20Statements%20of%20Comprehensive%20Income) Telesat reported **$94.9 million total comprehensive income** in 2022, driven by foreign currency translation adjustments Consolidated Statements of Comprehensive Income (Loss) (in thousands of Canadian dollars) | Metric | 2022 | 2021 | | :------------------------------------------------- | :----- | :----- | | Net income (loss) | (80,117) | 155,025 | | Foreign currency translation adjustments | 148,456 | (17,555) | | Actuarial gain (loss) on defined benefit plans | 33,282 | 55,422 | | Income tax on items that will not be reclassified to profit or loss | (6,768) | (14,424) | | Total other comprehensive income (loss) | 174,970 | 23,443 | | Total comprehensive income (loss) | 94,853 | 178,468 | | Total comprehensive income (loss) attributable to Telesat Corporation shareholders | 20,257 | 83,063 | | Total comprehensive income (loss) attributable to Non-controlling interest | 74,596 | 95,405 | - Total comprehensive income (loss) attributable to Telesat Corporation shareholders was **$20,257 thousand** in 2022, down from **$83,063 thousand** in 2021[1077](index=1077&type=chunk) [Consolidated Statements of Changes in Shareholders' Equity](index=194&type=section&id=Consolidated%20Statements%20of%20Changes%20in%20Shareholders%27%20Equity) Telesat's total shareholders' equity increased to **$1.84 billion** in 2022, influenced by net loss and share changes Consolidated Statements of Changes in Shareholders' Equity (in thousands of Canadian dollars) | Metric | Balance as at January 1, 2022 | Net income (loss) | Issuance of share capital on settlement of restricted share units | Exchange of Limited Partnership units for Public Shares | Other comprehensive income (loss), net of tax | Final Transaction adjustment | Share-based compensation | Balance as at December 31, 2022 | | :------------------------------------ | :---------------------------- | :---------------- | :------------------------------------------------- | :---------------------------------------------------- | :-------------------------------------------- | :--------------------------- | :----------------------- | :---------------------------- | | Share capital | 42,841 | — | 2,142 | 1,571 | — | — | — | 46,554 | | Accumulated earnings | 350,029 | (23,396) | — | 21,812 | 6,757 | — | — | 355,202 | | Equity settled employee benefits reserve | 38,664 | — | (1,224) | (14) | — | — | 20,330 | 57,756 | | Foreign currency translation reserve | (15,860) | — | — | (183) | 36,896 | — | — | 20,853 | | Total reserves | 22,804 | — | (1,224) | (197) | 36,896 | — | 20,330 | 78,609 | | Total Telesat Corporation shareholders' equity | 415,674 | (23,396) | 918 | 23,186 | 43,653 | — | 20,330 | 480,365 | | Non-controlling interest | 1,280,619 | (56,721) | (2,991) | (23,186) | 131,317 | (20,790) | 47,089 | 1,355,337 | | Total shareholders' equity | 1,696,293 | (80,117) | (2,073) | — | 174,970 | (20,790) | 67,419 | 1,835,702 | - Share capital increased by **$3,713 thousand** in 2022 due to RSU settlements and LP unit exchanges[1078](index=1078&type=chunk) - Non-controlling interest increased by **$74,718 thousand** in 2022, reaching **$1,355,337 thousand**[1078](index=1078&type=chunk) [Consolidated Balance Sheets](index=195&type=section&id=Consolidated%20Balance%20Sheets) Telesat's total assets increased to **$6.48 billion** in 2022, with cash rising, and liabilities decreased to **$4.64 billion** Consolidated Balance Sheets (in thousands of Canadian dollars) | Asset/Liability | December 31, 2022 | December 31, 2021 | | :------------------------------------ | :------------------ | :------------------ | | **Assets** | | | | Cash and cash equivalents | 1,677,792 | 1,449,593 | | Trade and other receivables | 41,248 | 122,698 | | Total current assets | 1,788,288 | 1,617,435 | | Satellites, property and other equipment | 1,364,084 | 1,429,688 | | Intangible assets | 756,878 | 762,659 | | Goodwill | 2,446,603 | 2,446,603 | | Total assets | 6,479,593 | 6,362,451 | | **Liabilities** | | | | Trade and other payables | 43,555 | 54,628 | | Other current financial liabilities | 48,397 | 36,647 | | Total current liabilities | 171,396 | 181,955 | | Long-term indebtedness | 3,850,081 | 3,792,597 | | Deferred tax liabilities | 275,696 | 296,318 | | Other long-term liabilities | 327,055 | 371,453 | | Total liabilities | 4,643,891 | 4,666,158 | | **Shareholders' Equity** | | | | Total Telesat Corporation shareholders' equity | 480,365 | 415,674 | | Non-controlling interest | 1,355,337 | 1,280,619 | | Total shareholders' equity | 1,835,702 | 1,696,293 | - Cash and cash equivalents increased by **$228,199 thousand**, while trade and other receivables decreased by **$81,450 thousand**[1080](index=1080&type=chunk) - Long-term indebtedness increased by **$57,484 thousand**, reaching **$3,850,081 thousand**[1080](index=1080&type=chunk) [Consolidated Statements of Cash Flows](index=196&type=section&id=Consolidated%20Statements%20of%20Cash%20Flows) Net cash from operating activities decreased to **$228.8 million** in 2022, with investing activities shifting to net generation Consolidated Statements of Cash Flows (in thousands of Canadian dollars) | Cash Flow Category | 2022 | 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 | | Changes in cash and cash equivalents | 228,199 | 631,215 | | Cash and cash equivalents, end of year | 1,677,792 | 1,449,593 | - Cash from operating activities decreased by **$64,649 thousand** in 2022[1082](index=1082&type=chunk) - Investing activities shifted from a net use of **$269,968 thousand** in 2021 to a net generation of **$74 thousand** in 2022, largely due to C-band clearing proceeds of **$64,651 thousand**[1082](index=1082&type=chunk) - Financing activities resulted in a net use of **$104,865 thousand** in 2022, primarily due to repayment of indebtedness (**$97,234 thousand**) and final transaction adjustment payment (**$20,790 thousand**)[1082](index=1082&type=chunk) [Notes to the 2022 Consolidated Financial Statements](index=198&type=section&id=Notes%20to%20the%202022%20Consolidated%20Financial%20Statements) These notes detail Telesat's financial statements, covering accounting policies, critical estimates, and specific line items [1. Background of the Company](index=198&type=section&id=1.%20Background%20of%20the%20Company) Telesat Corporation, incorporated in 2020, is a global satellite operator developing Lightspeed, trading on Nasdaq and TSX since 2021 - Telesat Corporation, incorporated in October 2020, is a global satellite operator with **14 GEO satellites** and the Canadian payload on Viasat-1[1084](index=1084&type=chunk)[1085](index=1085&type=chunk) - The company is developing the Telesat Lightspeed LEO constellation, with its first LEO satellite (LEO 1) launched in January 2018[1086](index=1086&type=chunk) - Telesat Corporation began trading on Nasdaq and TSX on November 19, 2021, after a transaction that made it the public holding company and Loral a wholly-owned subsidiary[1087](index=1087&type=chunk)[1088](index=1088&type=chunk) [2. Basis of Presentation](index=198&type=section&id=2.%20Basis%20of%20Presentation) Consolidated financial statements are prepared in accordance with IFRS, including subsidiaries and joint operations - Consolidated financial statements are prepared in accordance with IFRS as issued by the IASB[1091](index=1091&type=chunk) - The statements include results of Telesat and its controlled subsidiaries, with non-controlling interests separately identified[1093](index=1093&type=chunk)[1094](index=1094&type=chunk)[1095](index=1095&type=chunk) - Joint operations are accounted for by including Telesat's share of assets, liabilities, revenue, and expenses[1096](index=1096&type=chunk) - Financial statements are generally prepared on a historical cost basis, except for certain financial instruments measured at fair value[1097](index=1097&type=chunk) [3. Changes in Accounting Policies](index=199&type=section&id=3.%20Changes%20in%20Accounting%20Policies) Telesat retroactively adopted IFRIC's SaaS accounting decision, impacting the 2021 balance sheet and net income - Telesat retroactively adopted the IFRIC agenda decision on Software as a Service (SaaS) arrangements[1098](index=1098&type=chunk)[1099](index=1099&type=chunk) Impact of SaaS Accounting Policy Change on Balance Sheet (as at December 31, 2021) | Account | Impact ($ thousands) | | :-------------------------------- | :------------------- | | Satellites, property and other equipment | (2,087) | | Intangible assets | (1,419) | | Accumulated earnings | 3,495 | | Reserves | 11 | Impact of SaaS Accounting Policy Change on Income Statement (Years Ended December 31) | Metric | 2021 ($ thousands) | 2020 ($ thousands) | | :------------------------------------------------- | :----------------- | :----------------- | | Operating expenses | 2,895 | 758 | | Amortization | (158) | — | | Foreign currency translation adjustments | 11 | — | | Net income (loss) per common share attributable to Telesat Corporation shareholders – basic | (0.05) | (0.01) | | Net income (loss) per common share attributable to Telesat Corporation shareholders – diluted | (0.05) | (0.01) | [4. Significant Accounting Policies](index=200&type=section&id=4.%20Significant%20Accounting%20Policies) This section outlines Telesat's significant accounting policies, covering revenue, asset impairment, financial instruments, and benefits - Telesat operates in a single operating segment, providing satellite-based services to broadcast, enterprise, and consulting customers[1101](index=1101&type=chunk) - Revenue from satellite services is recognized monthly, consulting revenue based on completion or input method, and equipment sales upon customer acceptance[1106](index=1106&type=chunk)[1107](index=1107&type=chunk) - Deferred revenue represents liability for future services, recognized straight-line over contract term, with significant financing components adjusted using a discount rate[1109](index=1109&type=chunk)[1110](index=1110&type=chunk) - Satellites, property, and other equipment are carried at cost less depreciation, with useful lives of **12 to 15 years** for satellites[1127](index=1127&type=chunk)[1128](index=1128&type=chunk)[1129](index=1129&type=chunk) - Goodwill and indefinite life intangible assets (trade name, intellectual property, orbital slots) are tested for impairment annually, or more frequently if indicators exist, by comparing carrying value to recoverable amount (higher of fair value less costs of disposal and value in use)[1140](index=1140&type=chunk)[1141](index=1141&type=chunk)[1144](index=1144&type=chunk)[1145](index=1145&type=chunk)[1146](index=1146&type=chunk) - Financial instruments are measured at FVTPL, FVTOCI, or amortized cost[1156](index=1156&type=chunk)[1157](index=1157&type=chunk)[1158](index=1158&type=chunk)[1159](index=1159&type=chunk) - Employee benefit plans (defined benefit and contribution pensions, post-employment benefits) are accounted for using actuarial valuations, with remeasurements recognized in other comprehensive income[1164](index=1164&type=chunk)[1165](index=1165&type=chunk)[1166](index=1166&type=chunk)[1167](index=1167&type=chunk)[1168](index=1168&type=chunk)[1169](index=1169&type=chunk)[1170](index=1170&type=chunk)[1172](index=1172&type=chunk) - Income tax expense includes current and deferred income tax, with deferred tax assets recognized when probable of utilization[1176](index=1176&type=chunk)[1177](index=1177&type=chunk)[1178](index=1178&type=chunk) [5. Critical Accounting Judgments and Estimates](index=212&type=section&id=5.%20Critical%20Accounting%20Judgments%20and%20Estimates) This section highlights critical accounting judgments and estimates, including discount rates, impairment, and actuarial valuations - Critical judgments include determining the discount rate for deferred revenue's significant financing component, assessing lease renewal likelihood and incremental borrowing rates, and estimating provisions for uncertain income tax positions[1199](index=1199&type=chunk)[1200](index=1200&type=chunk)[1201](index=1201&type=chunk) - Critical estimates involve fair value measurement of derivative financial instruments, impairment assessments for goodwill and intangible assets (relying on future cash flow projections, discount rates, and growth rates), and actuarial valuations for employee benefits[1205](index=1205&type=chunk)[1206](index=1206&type=chunk)[1207](index=1207&type=chunk)[1208](index=1208&type=chunk)[1209](index=1209&type=chunk) - The determination of useful lives for satellites and finite-life intangible assets, and the recoverability of deferred tax assets, also involve significant estimates[1211](index=1211&type=chunk)[1212](index=1212&type=chunk) [6. Segment Information](index=214&type=section&id=6.%20Segment%20Information) Telesat operates as a single segment, with 2022 revenue primarily from Broadcast and Enterprise services in North America - Telesat operates in a single operating segment, providing satellite-based services through Broadcast, Enterprise, and Consulting and other categories[1213](index=1213&type=chunk)[1214](index=1214&type=chunk) Revenue by Service Category (in thousands of Canadian dollars) | Service Category | 2022 | 2021 | 2020 | | :-------------------- | :----- | :----- | :----- | | Broadcast | 358,661 | 390,815 | 411,407 | | Enterprise | 388,985 | 354,126 | 389,696 | | Consulting and other | 11,523 | 13,271 | 19,365 | | Total Revenue | 759,169 | 758,212 | 820,468 | Revenue by Geographic Region (in thousands of Canadian dollars) | Region | 2022 | 2021 | 2020 | | :-------------------------- | :----- | :----- | :----- | | Canada | 330,533 | 330,832 | 362,939 | | United States | 289,946 | 292,474 | 307,433 | | Latin America & Caribbean | 57,842 | 55,818 | 64,024 | | Asia & Australia | 45,082 | 38,266 | 41,362 | | Europe, Middle East & Africa | 35,766 | 40,822 | 44,710 | | Total Revenue | 759,169 | 758,212 | 820,468 | - Two significant customers each represented more than **10%** of consolidated revenue for the years ended December 31, 2022, 2021, and 2020[1217](index=1217&type=chunk) [7. Operating Expenses](index=216&type=section&id=7.%20Operating%20Expenses) Total operating expenses increased to **$259.0 million** in 2022, primarily due to higher cost of sales for equipment and services Operating Expenses (in thousands of Canadian dollars) | Expense Category | 2022 | 2021 | 2020 | | :----------------------------- | :----- | :----- | :----- | | Compensation and employee benefits | 152,154 | 156,112 | 89,882 | | Other operating expenses | 52,831 | 50,622 | 58,380 | | Cost of sales | 54,004 | 30,215 | 33,370 | | Total Operating expenses | 258,989 | 236,949 | 181,632 | - Cost of sales increased by **$23,789 thousand** in 2022, primarily due to higher equipment sales for the DARPA program and increased third-party services for DARPA and NASA programs[546](index=546&type=chunk)[1220](index=1220&type=chunk) - Compensation and employee benefits decreased by **$3,958 thousand** in 2022, mainly due to lower non-cash share-based compensation and bonus expense[544](index=544&type=chunk)[1218](index=1218&type=chunk) - Other operating expenses increased by **$2,209 thousand** in 2022, driven by high

Telesat Corporation (NASDAQ:TSAT) Q3 2022 Earnings Conference Call November 8, 2022 10:30 AM ET Company Participants Michael Bolitho - Director of Treasury and Risk Management Daniel Goldberg - President, CEO and Director Conference Call Participants Brandon Karsch - Kennedy Lewis Andrew Browne - CFO Operator Good morning, ladies and gentlemen. Welcome to the conference call to report the third quarter 2022 financial results for Telesat. Our speakers today will be Dan Goldberg, President and Chief Executive ...

Exhibit 99.1 TELESAT CORPORATION Quarterly Report PART I. FINANCIAL INFORMATION | Item 1. | Financial Statements | 1 | | --- | --- | --- | | Item 2. | Management's Discussion and Analysis of Financial Condition and Results of Operations | 29 | | Item 3. | Quantitative and Qualitative Disclosures About Market Risk | 59 | PART II. OTHER INFORMATION | Item 1. | Legal Proceedings | 60 | | --- | --- | --- | | Item 1A. Risk Factors | | 60 | | Item 2. | Unregistered Sales of Equity Securities and Use of Proceeds | ...

Telesat Corporation (NASDAQ:TSAT) Q2 2022 Earnings Conference Call August 5, 2022 10:30 AM ET Company Participants Michael Bolitho - Director of Treasury and Risk Management Dan Goldberg - President, CEO and Director Andrew Browne - CFO Conference Call Participants Walter Piecyk - LightShed Mike Pace - JPMorgan Arun Seshadri - Credit Suisse Jason Kim - Goldman Sachs Operator Good morning, ladies and gentlemen. Welcome to the conference call to report the Second Quarter 2022 Financial Results for Telesat. Ou ...

Exhibit 99.1 TELESAT CORPORATION Quarterly Report For the Three and Six Month Periods Ended June 30, 2022 PART I. FINANCIAL INFORMATION | Item 1. | Financial Statements | 1 | | --- | --- | --- | | Item 2. | Management's Discussion and Analysis of Financial Condition and Results of Operations | 28 | | Item 3. | Quantitative and Qualitative Disclosures About Market Risk | 57 | PART II. OTHER INFORMATION | Item 1. | Legal Proceedings | 58 | | --- | --- | --- | | Item 1A. | Risk Factors | 58 | | Item 2. | Unreg ...

Financial Data and Key Metrics Changes - Telesat reported revenues of $186 million for Q1 2022, a decrease of $5 million compared to the same period in 2021 [14] - Adjusted EBITDA for the quarter was $146 million, down $6 million from the previous year, with an adjusted EBITDA margin of 78.4% compared to 79.8% in 2021 [14][15] - Operating expenses increased by $24 million to $64 million, primarily due to higher noncash share-based compensation and increased public company expenses [15][16] - Cash from operations was $43 million, with over $1.5 billion in cash on the balance sheet at the end of the quarter [14][22] Business Line Data and Key Metrics Changes - A key contract with DISH network for the Anik F3 satellite was partially renewed, with DISH renewing a little more than half the capacity at a lower rate [6][7] - A new contract was secured for the remaining capacity, aimed at broadband connectivity for the cruise market [7] - The mobility market showed increased service demand as it recovers from COVID-19 impacts [15] Market Data and Key Metrics Changes - The overall market for satellite services is experiencing stronger activity and demand compared to the previous year, with a stable pricing environment [8] - Capacity utilization rate improved to 84% at the end of the last quarter, although challenges remain in finding available capacity to meet demand [9][56] Company Strategy and Development Direction - Telesat is focused on advancing the Telesat Lightspeed program, with plans for 188 satellites and 10 in-orbit spares, while managing cost increases due to supply chain issues [11][12] - The company is actively working with export credit agencies to secure financing for the Lightspeed program, aiming for clarity by the end of June [12][28] - Telesat is optimistic about the potential for growth in the enterprise and government markets, particularly with the Lightspeed initiative [45][88] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in meeting the 2022 guidance of $720 million to $740 million in revenues and $525 million to $545 million in adjusted EBITDA [20][62] - The company noted that delays in new satellite constellations could create opportunities for GEO assets to remain fully utilized, potentially improving pricing dynamics [66] - Management highlighted an uptick in demand in the aero and maritime markets as COVID-19 restrictions ease, with bandwidth requirements exceeding pre-pandemic levels [80][81] Other Important Information - Telesat repurchased $60 million in unsecured notes, which is expected to be accretive to the company [10][17] - The company has approximately $1 billion in cash held in unrestricted subsidiaries and $200 million available under a revolving credit facility [22] Q&A Session Summary Question: What are the additional steps needed for Lightspeed funding? - Management indicated that discussions with export credit agencies are the missing piece for closing financing, with a focus on finalizing these discussions by the end of June [26][28] Question: How much is Anik F3 generating in revenue and EBITDA now? - Management refrained from providing specific run rate figures for Anik F3 but expressed confidence in meeting guidance based on recent contract renewals [31][32] Question: What is the outlook for the GEO business given delays in LEO constellations? - Management noted that delays in new constellations could benefit GEO operators by maintaining higher asset utilization and potentially improving pricing dynamics [66] Question: Can you elaborate on the increase in utilization from 80% to 84%? - The increase was attributed to the removal of the Anik F1R satellite from utilization calculations as it was put into inclined operations, which had a lower utilization rate [56][55] Question: What is the expected ramp-up for the $750 million LEO backlog? - Management indicated that once financing is secured and full-scale production begins, they expect to sign more contracts, increasing the backlog significantly [58] Question: How does the pricing compare between broadcast and enterprise use cases? - Management stated that pricing dynamics vary significantly between different contracts and markets, making it difficult to generalize [75] Question: What is the current state of demand in the aero and maritime markets? - Management noted that demand in both sectors has rebounded significantly, with bandwidth requirements exceeding pre-pandemic levels [80][81]