Telesat Q2 2025 Earnings Report

Telesat EPS Results

• Actual EPS: $1.00
• Consensus EPS: -$0.69
• Beat/Miss: Beat by +$1.69
• One Year Ago EPS: N/A

Telesat Revenue Results

• Actual Revenue: $77.94 million
• Expected Revenue: $109.64 million
• Beat/Miss: Missed by -$31.70 million
• YoY Revenue Growth: N/A

Telesat Announcement Details

• Quarter: Q2 2025
• Date: 8/6/2025
• Time: Before Market Opens
• Conference Call Date: Wednesday, August 6, 2025
• Conference Call Time: 10:00AM ET

Telesat (NASDAQ:TSAT), a satellite operator, provides mission-critical communications solutions to broadcast, enterprise, and consulting customers worldwide. The company's satellite-based services allow direct-to-home (DTH) service providers to deliver television programming, audio, and information channels directly to customers' homes; and enables broadcasters, cable networks, and DTH service providers to transmit television programming services. It offers value-added services that include satellite capacity, digital encoding of video channels, authorization, and uplinking and downlinking services; and occasional use services for the broadcast of video news, sports, and live event coverages. The company also provides satellite capacity and end-to-end services comprising space segment services and terrestrial facilities for enterprise connectivity, and internet and cellular backhaul; rural telephony to telecommunications carriers and network services integrators; and other satellite services. In addition, it offers direct-to-consumer broadband services; communications services for the oil and gas and mining industries; and broadband communication services to maritime and aeronautical markets comprising commercial airplanes and vessels. Further, the company operates satellite and hybrid satellite/terrestrial networks. Additionally, it provides satellite operator services; and consulting services related to space and earth segments, government studies, research and development, and satellite control services. The company offers its services primarily through a direct sales force. As of December 31, 2020, it operated a fleet of 15 in-orbit geostationary satellites and a Canadian payload on the ViaSat-1 satellite. The company was founded in 1969 and is headquartered in Ottawa, Canada. Telesat Corporation is a subsidiary of Loral Space & Communications Inc.

Telesat Q2 2025 Earnings Call Transcript

Key Takeaways

• Positive Sentiment: Telesat Lightspeed LEO program backlog exceeded CAD 1 billion at quarter-end, with a robust pipeline and strong customer interest in aero and government segments.
• Negative Sentiment: Second-quarter revenues fell by CAD 46 million year-over-year to CAD 106 million and adjusted EBITDA slipped by CAD 45 million to CAD 59 million.
• Positive Sentiment: Telesat repurchased US$857 million of debt at an average price of US$0.53, cutting overall debt by 36% and saving about US$53 million annually in interest.
• Negative Sentiment: 2025 capital expenditures are forecast at CAD 900–1,100 million (mostly for Lightspeed) and operating expenses of CAD 110–120 million, indicating a steep cash-outflow trajectory.
• Neutral Sentiment: The company plans to engage lenders soon to refinance restricted-group debt maturing in December 2026 and is progressing its search for a new CFO.

Presentation

[Operator]

Thank you for standing by. At this time, I would like to welcome everyone to Telesat Second Quarter twenty twenty five Financial Results Call. All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question and answer session. Thank you.

[Operator]

I would now like to turn the conference over to James Ratcliffe, Vice President, Investor Relations. Please go ahead.

[James Ratcliffe, VP - IR at Telesat]

Thank you, Demi. Good morning, everyone, and thank you for joining us today. Earlier this morning, we filed our quarterly report for the period ending 06/30/2025 on Form six ks with the SEC and on SEDAR plus Our remarks today may contain forward looking statements. There are risks that Telesat's actual results may differ materially from the results contemplated by the forward looking statements as a result of known and unknown risks and uncertainties. For a discussion of known risks, please see Telesat's annual report and updates filed with the SEC.

[James Ratcliffe, VP - IR at Telesat]

Telesat assumes no responsibility to update or revise these forward looking statements. I'd now like to turn the call over to Dan Goldberg, Telesat's President and Chief Executive Officer.

[Daniel Goldberg, Director, President & CEO at Telesat]

Okay. Thanks, James, and thank you all for joining us this morning. Q2 is in line with our expectations, and I'm pleased with Telesat's performance in the first half of this year in both our GEO and LEO segments. In GEO, our team continues to execute in a highly disciplined, focused manner with the Nimiq five renewal with DISH in Q4 last year providing the biggest top line headwind as far as year over year comparisons are concerned. In LEO, we're moving forward rapidly on both the technical LEO, and commercial aspects of Telesat Lightspeed.

[Daniel Goldberg, Director, President & CEO at Telesat]

We're making steady progress on the development of the satellites, ground infrastructure and the software for the network. I'm very pleased with the work that's taking place. On the commercial side, we're seeing strong interest in Telesat Lightspeed from customers across our target segments, particularly with respect to aero and government users at this time. We have a robust pipeline of opportunities at various stages of development, and we're working hard to turn them into completed deals and committed backlog, which for Telesat Lightspeed was above CAD 1,000,000,000 at the end of the second quarter and up slightly from the last time we spoke adjusting for movements in FX. We'll update you on our progress as the year unfolds.

[Daniel Goldberg, Director, President & CEO at Telesat]

Lastly, and as we've noted before, we remain focused on refinancing the restricted group debt that begins to come due in December next year and expect to engage with our lenders in the near term. We've also been progressing with our search for a new CFO given Andrew's planned retirement, and we expect to have some clarity there in the near future as well. And speaking of Andrew, I'll hand over to him now so that he can speak to the numbers in more detail before opening the call up to questions.

[Andrew Browne, CFO at Telesat]

Thank you, Dan. Good morning, everyone. I would now like to focus on highlights from this morning's press release and filings. In the 2025, Telesat reported consolidated revenues of $106,000,000 adjusted EBITDA of CAD59 million and year to date generated cash from operations of CAD108 million, thus ending the quarter with CAD547 million in cash million. For the 2025, revenues decreased by CAD 46,000,000 to CAD 106,000,000 from the 2024.

[Andrew Browne, CFO at Telesat]

Operating expenses decreased by CAD 6,000,000 to CAD 51,000,000 and adjusted EBITDA decreased by CAD 45,000,000 to CAD 59,000,000. The adjusted EBITDA margin was 55%. I would also note that the margin in our GEO segment was approximately 70%. The revenue decrease for the quarter was primarily due to a lower rate on the renewal of a long term agreement with a North American direct to home customer. Other factors included reductions in services for certain enterprise customers, particularly in Indonesian rural broadband program, lower consulting revenues and the reduction in services to another North American direct to home customer.

[Andrew Browne, CFO at Telesat]

The decrease in operating expenses was primarily due to higher capitalized engineering costs, lower consulting costs, lower share based and offset by higher Telesat Lightspeed headcount along with higher legal and professional fees. As usual, we'll break out the performance of our LEO and GEO segment separately in all four of our financial statements filed on Form six ks. Interest expense decreased by $8,000,000 during the second quarter when compared to the same period in 2025. The decrease in interest expense was primarily due to the impact of our debt repurchases. Speaking of which, to note, our cumulative amount of debt repurchased is USD $857,000,000 at a cost of USD $462,000,000, an average price of just under $0.53 This also results in interest savings of approximately USD 53,000,000 annually, including previous repayments of approximately US356 million dollars of our Term Loan B, our overall debt has reduced by approximately 36%.

[Andrew Browne, CFO at Telesat]

In the second quarter, we recorded a gain on foreign exchange of $115,000,000 as compared to a loss of $34,000,000 in the 2024. Our net income for the second quarter was $76,000,000 compared to net income of $129,000,000 for the same period in the prior year. The variance was due to lower revenues, loss related the change in the fair value of financial instruments, smaller gain on debt repurchases, partially offset by the foreign exchange gain I've mentioned a little bit earlier. For the 2025, the cash inflows from operating activities were 108,000,000 and cash flows used by investing activities were $413,000,000 In terms of capital expenditures incurred, almost all were related to Telesat Lightspeed. During the 2025, we completed the first two draws in our financing facilities with the Government of Canada and Government of Quebec, thus receiving CAD340 million guidance.

[Andrew Browne, CFO at Telesat]

As you will also have noted in our earnings release this morning, we have reiterated our guidance for 2025.

[Andrew Browne, CFO at Telesat]

This guidance assumes a Canadian dollar to U. S. Dollar exchange rate of CAD1.42.

[Andrew Browne, CFO at Telesat]

For 2025, we continue to expect full year revenues to be between $4.00 5,000,000 and $425,000,000 In terms of operating expenses, excluding share based compensation, we expect to spend approximately $110,000,000 to $120,000,000 on telesatellite speed this year compared to $74,000,000 in 2024. In terms of adjusted EBITDA, we expect to be between $170,000,000 to $190,000,000 In respect to capital expenditures and as previously disclosed, we continue to expect our 2025 capital expenditures to be in the range of CAD 900,000,000 to CAD 1,100,000,000.0, which is nearly all related to telesatellite fleet. To meet our expected cash requirements for the next twelve months including interest payments and capital expenditures, we have approximately $550,000,000 of cash and short term investments at the June as well as $2,200,000,000 available under our funding agreements with the governments of Canada and Quebec. At the end of the second quarter, the total leverage ratio is calculated under the terms of the amended senior secured credit facilities of 7.51x. Telesat is in compliance with all the covenants in our credit agreements and indentures.

[Andrew Browne, CFO at Telesat]

A reconciliation between our financial statements and financial covenant calculations is provided in the report we filed this morning. Our six ks provides the unaudited interim condensed consolidated financial information in the NDA. The non guarantor subsidiaries are essentially the unrestricted subsidiaries with some minor differences. So with this, I conclude our prepared remarks for the call. Very happy now to turn back to the operator and address any questions you may have. And thank you very much.

[Operator]

First question comes from the line of David McFadgen with Cormark Securities. Your line is open.

[David McFadgen, Director & Analyst - Communications & Media at Cormark Securities]

Great. Hi, guys. A couple of questions. So just first of all on the Eleo backlog, when you reported Q1, you said the backlog was about $1,100,000,000 but this time, you say it's over $1,000,000,000 So but then, Dan, you said that it's up slightly from when you reported Q1. So it is like slightly above 1,100,000,000.0 then, I guess?

[Daniel Goldberg, Director, President & CEO at Telesat]

It is no. Well, so the deal is we report our and David, by the way, thanks for the questions. We report the backlog in Canadian dollars. But for both GEO and LEO, it's a mix of different currencies. For LEO, it's a mix of U.

[Daniel Goldberg, Director, President & CEO at Telesat]

S. And Canadian. And fundamentally, over the quarter, the and relative to where kind of the U. S. Dollar and the Canadian dollar sat at the end of Q1, the Canadian dollar has gotten a little bit stronger.

[Daniel Goldberg, Director, President & CEO at Telesat]

So when we take the U. S. Dollar backlog and convert it into Canadian dollars, it wasn't showing up with as many Canadian dollars at the end of Q2 as it did in the end of Q1. So that's really what it was. Now we added a little bit of a small incremental LEO contract, which on an apples to apples basis would have made Lightspeed backlog a little bit higher at the end of Q2 than it was at the end of Q1. So anyway, that's what was going on there.

[David McFadgen, Director & Analyst - Communications & Media at Cormark Securities]

Yes, because you guys announced Arabsat and VOCUS after you reported your Q1.

[Daniel Goldberg, Director, President & CEO at Telesat]

Well, to be clear, so VOCUS I think VOCUS might have been a little something, wasn't massively material. ErebSat, I think we just signed a term sheet or a letter of intent with them. So that has no backlog contribution at this Okay. Point, at

[David McFadgen, Director & Analyst - Communications & Media at Cormark Securities]

And because I think Space Norway as well is the term sheet. Have you concluded Yeah, anything same thing. With them

[Daniel Goldberg, Director, President & CEO at Telesat]

No, not yet. It's the same thing. We don't count term sheets until we have a final definitive agreement. It doesn't go in the backlog.

[David McFadgen, Director & Analyst - Communications & Media at Cormark Securities]

Okay. All right. So then on the debt negotiations, restructuring the debt, I mean, I believe that you're talking to your debt holders. I was just wondering if you can give us any update there and whether you still think it's possible to conclude this in 2025?

[Daniel Goldberg, Director, President & CEO at Telesat]

I think so I would say that we really haven't started to engage with the restricted group debt holders at this point. We will soon is what our expectation is, but we haven't yet. As far as how long it will take to reach an agreement on refinancing, I think it's conceivable that it could get done by the end of this year. But until we engage and get a better sense of it, I'd say hard to tell.

[David McFadgen, Director & Analyst - Communications & Media at Cormark Securities]

Okay. I mean, I'm just wondering why it's taking so long to start engaging with them. You provide any information on why it's taking so long?

[Daniel Goldberg, Director, President & CEO at Telesat]

Yeah, there's no great mystery. I'd say that it's a process that we need to go through on our side, working with our advisors, working with our board. It is absolutely a priority for us. But obviously, we've got a lot of other things going on at the company as well. So anyway, it's a combination of all of that.

[Daniel Goldberg, Director, President & CEO at Telesat]

But I think that, as I said, I think we'll be in a position to engage in the near term.

[David McFadgen, Director & Analyst - Communications & Media at Cormark Securities]

And then just on the GEO business, you referenced a couple of big contracts that's you renegotiated those, and that's why the business is declining the way it is. And then when do you lap that or those two deals? And then do you think the decline would ease up?

[Daniel Goldberg, Director, President & CEO at Telesat]

Yes. So look, the declines I mean, I was looking at the numbers earlier, obviously. And we highlight in the earnings release basically two North American DTH customers. So one was DISH on the Nimiq V renewal. The other one would be Shaw, now Rogers, which is no longer using Anake F2.

[Daniel Goldberg, Director, President & CEO at Telesat]

And then the other two that we highlighted were a rural broadband program in Indonesia, where some Indonesian domestic satellites have come online and are taking some more of that business. And I also think just that whole broadband program was sort of getting refinanced or there are some questions around its funding. And then lastly, on the LEO Consulting side, we had been doing some work with NASA, but that is sort of a lumpy contract. Those four things, Dish, Indonesia Broadband and NASA account for roughly three quarters of the decrease in revenue. So as far as when things kind of flush out, I think we did the DISH renewal.

[Daniel Goldberg, Director, President & CEO at Telesat]

That's been the biggest headwind this year. We did that in October. So it'll have come Q4, we'll start to kind of get even with that, not entirely. And then I'd say the other thing that and again, not giving guidance for 2026, but I'd say the other North America DTH contract that will provide a headwind, it would be Nimiq four. Nimiq four is with Bell.

[Daniel Goldberg, Director, President & CEO at Telesat]

That satellite has about another year plus of life on it, but it's not our expectation that they will renew when that contract comes up in October. They'll consolidate their activities on the MiX-six. So that'll be kind of the next contract that's coming up that I think will provide a headwind. But in any event, so we'll give guidance for 2026. I'd say that, yes, some of the big headwinds on the North America DTH side, with the exception of that Nimiq IV contract, will have flushed their way through and then we'll go from there.

[David McFadgen, Director & Analyst - Communications & Media at Cormark Securities]

Okay. And then just lastly, on the Q1 call, you seem pretty optimistic on the interest or demand for Lightspeed, just given what's happening geopolitically or just what's happening in the market? Do you still have the same level of optimism?

[Daniel Goldberg, Director, President & CEO at Telesat]

Yeah, 100%. I noted in my remarks that the pipeline for Lightspeed is robust. I noted that that's particularly the case for Aero and for government. Obviously, we did the ViaSat deal. It was technically in Q2, although we announced it when we did our Q1 numbers, and we see more opportunities there.

[Daniel Goldberg, Director, President & CEO at Telesat]

And ViaSat is, I'd say, principally about commercial aero connectivity, although I believe they'll leverage Lightspeed for some of their other verticals as well. And we see more opportunities out there on the commercial aero broadband front. And then government, I've said before, it's always a little bit harder to handicap exactly when these government opportunities will land. But we see very meaningful opportunities out there for government, including here in Canada. Canada, like the rest of The U.

[Daniel Goldberg, Director, President & CEO at Telesat]

S. Allies is looking to spend more money on defense in part to meet NATO contribution commitments. I think Telusat Lightspeed is very well positioned to meet the government's requirements in terms of Northern sovereignty, NORAD modernization, making capabilities available to their allies. And so yes, I think Telesat has a really meaningful opportunity there. But we've got work to do and nothing's done until it's done.

[Daniel Goldberg, Director, President & CEO at Telesat]

But yes, we remain very bullish on our commercial prospects.

[David McFadgen, Director & Analyst - Communications & Media at Cormark Securities]

Okay. All right. Thank you.

[Operator]

Next question comes from the line of Caleb Henry with Kilti Space. Your line is open.

[Caleb Henry, Director of Research at Quilty Space]

Hi. Good morning, everyone. A couple of questions. First is just on OpEx for Lightspeed. Can you provide some visibility into how that's expected to trend throughout 2026 as the constellation moves closer to service entry?

[Daniel Goldberg, Director, President & CEO at Telesat]

In the 2026. Caleb, thanks for the question. So I mean Lightspeed expenses are ramping, particularly driven by headcount. I'd say we are a little bit slower off the mark for the first half of the year. We expect we've hired a lot of people, but we're expecting to hire even more people.

[Daniel Goldberg, Director, President & CEO at Telesat]

We believe we'll catch up from a headcount perspective toward the back end of the year. And yes, that will continue to ramp into 2026. Again, we're not giving guidance on 2026 numbers, but our technical staff will continue to grow. We'll be starting to scale our commercial team in a more meaningful way starting in 2026. I mean, so much of the headcount growth that we've had has been mostly around technical staff to support the build out of satellites, gateways, writing software, modems, user terminals and the like.

[Daniel Goldberg, Director, President & CEO at Telesat]

But as we get closer to in service, we've got to scale the commercial organization as well. And we've been doing that, but that will accelerate in the next year. So anyway but again, we'll provide guidance on that as we get closer to it.

[Caleb Henry, Director of Research at Quilty Space]

Alright. Thanks. And then I know we talked last call a little about the state of user terminals and gateways and things, but can you provide a little more clarity on when you think user terminals will be available? I think we talked about Thincom and Quest and some others. Are you expecting those to be ready the day Lightspeed turns on?

[Caleb Henry, Director of Research at Quilty Space]

Or are they ready now? How is that pacing alongside the Constellation's development?

[Daniel Goldberg, Director, President & CEO at Telesat]

Yes. So to talk about user terminals, you kinda need to go vertical by vertical. And then you have to, there are flat panel antennas, there are dual parabolic for certain applications. For aero, there are the more mechanically steered antennas that exist today. And so the mechanically steered antennas, they're obviously here now and LightSpeed is sort of backwards compatible with those provided that they're operating in Ka band and recognizing also that they'll require a LightSpeed modem.

[Daniel Goldberg, Director, President & CEO at Telesat]

And so those are available today. On the flat panel side for aero, there are flat panel aero antennas today and we're I'm trying to remember what we've announced and what we haven't announced.

So the development with KEST.

[Daniel Goldberg, Director, President & CEO at Telesat]

Yes. Thank you, Michel.

[Daniel Goldberg, Director, President & CEO at Telesat]

So we've announced on flat panel antennas for the Aero segment, development effort with KEST, which has a promising antenna. But there are others as well who are developing flat panel antennas. So and yes, we expect those will be frankly, all of our user terminals, whether they're flat panel antennas or in some cases for kind of community aggregator applications, that all of our user terminals, including the antennas, obviously, will be available in advance of our entry into commercial service. So we've announced some of that already. We announced development with Intelion.

[Daniel Goldberg, Director, President & CEO at Telesat]

We've just now referenced the development with Kest. And I'd say stay tuned. We'll make some other announcements too on that front. But it feels good. I mean, we always expected there would be good developments on the user terminal front, particularly with respect to flat panel antennas, that is very much materializing.

[Caleb Henry, Director of Research at Quilty Space]

Okay, thanks. And then last question, just sort of an obligatory Golden Dome question. I know there's been some discussion about Canada being involved. Is there any opportunity for Telesat Lightspeed to be involved in that? Or is that kind of too far out or too speculative?

[Daniel Goldberg, Director, President & CEO at Telesat]

It's probably all of that. Too far out and too speculative. I mean, I think it's fair to say that Golden Dome is something that's still being defined. It looks like it will be a network of networks and that space based architectures at various orbits will form an important part of Golden Dome. Whether Canada participates or not, I think is still an open question.

[Daniel Goldberg, Director, President & CEO at Telesat]

I think from what I just read, The US is receptive to Canada participating. So anyway, so I'd say that's still an open question. But I believe that Lightspeed, given its capabilities, given the orbit that we're flying at, up at around 1,300 kilometers, yes, I think that Lightspeed could make valuable contributions to Golden Dome. And so that's something that we're watching. We're certainly making sure that decision makers are aware of the capabilities of Lightspeed.

[Daniel Goldberg, Director, President & CEO at Telesat]

And so, yeah, look, I think there's a reason we're investing billions of dollars in LEO. We're absolutely convinced that the world and our industry is moving to LEO in all of these different verticals that we're talking about, broadband connectivity, broadband to planes, to ships, to rural communities, to moving vehicles, for government users. It's just for us, overall trends are pointing to LEO. And LEO's hard and there aren't that many of them. And particularly when you talk about architectures like Golden Dome, they need to be multiple networks to ensure resiliency.

[Daniel Goldberg, Director, President & CEO at Telesat]

And so, we're very bullish about the positioning that Lightspeed will have. So thanks for the question.

[Caleb Henry, Director of Research at Quilty Space]

Thank you.

[Operator]

Next question comes from the line of Edison Yu with Deutsche Bank. Your line is open.

[Edison Yu, Director at Deutsche Bank]

Hey, good morning, everyone. Thanks for taking our questions. One start off on Lightspeed, you highlighted aero and government. Could you shed some light on the discussions around pricing and usage dynamics going on? Obviously, you had put out some forecasts in the past about kind of revenue you're going to generate.

[Edison Yu, Director at Deutsche Bank]

And I assume there was some pricing embedded in that. Are those kind of discussions implying pricing is where you think it is? Is it better or worse? And also in terms of the usage patterns, is it fixed versus variable? Just curious if you could shed more light on those elements.

[Daniel Goldberg, Director, President & CEO at Telesat]

Yes. I mean, I'll tell you what we see right now. So for sure, we've got a model for light speed. It goes vertical by vertical. We've got pricing assumed on a basically per megabit basis in every vertical.

[Daniel Goldberg, Director, President & CEO at Telesat]

It depends on what user Terminal one uses as well. Obviously, the bigger the antenna, the more efficiency you get on the link. And so someone's using a big antenna, tend to give them a lower rate per megabit. If they have a little antenna, it means there are more inefficiencies in the link and you try. So anyway, just to give you a sense of what how that model is built up.

[Daniel Goldberg, Director, President & CEO at Telesat]

And then for the deals that we've closed to date, I'd say probably on balance, the pricing that we're seeing in the market and deals that we've closed is consistent with or higher than our price. And I'd say we've been pessimistic on our pricing, but we built a model that we think that we can execute on. So we envisioned a world where pricing would be lower than where it is today and would come down over time. I'd love to be proven wrong on that, but that's what we've assumed. And the pricing that has been in the contracts that we've closed on has been either consistent with or north of what's in our model.

[Daniel Goldberg, Director, President & CEO at Telesat]

I'd say that's true of the conversations that we're having in terms of opportunities in the pipeline. And as I said before, where we're seeing the most opportunities at this stage of Lightspeed. And by that, I mean, we're not going to be in service until the 2027. Where we're seeing the most opportunities right now, the most concrete opportunities are in aero, because there you need a longer horizon for our partners to equip those airlines to be ready for light speed. So the planning cycles in aero tend to be among the longest, shorter in maritime, shorter in, I'd say, terrestrial backhaul.

[Daniel Goldberg, Director, President & CEO at Telesat]

And then there's government, and the governments tend to plan well in advance. And so those are the two verticals right now, I'd say, we're getting the most traction. So yeah. And then as far as volumes, yeah, I've been pleasantly surprised. I'm glad to see that we're getting as much real traction as we're getting, even with Lightspeed still not coming online until basically another, what is it, year and a half or something

[Andrew Browne, CFO at Telesat]

like that? Or more?

[Daniel Goldberg, Director, President & CEO at Telesat]

Two point five.

[Edison Yu, Director at Deutsche Bank]

Understood. I appreciate the detailed color. Wanted to ask about maritime. I know you said, you just said that it's kind of shorter cycle time. Is that a market you think you will pursue, I guess, fairly aggressively?

[Edison Yu, Director at Deutsche Bank]

I would assume the pricing dynamics there are probably less favorable than aero government. But perhaps to your point, is it just cycle time? Or do you think it's more of a pricing competitive there?

[Daniel Goldberg, Director, President & CEO at Telesat]

No, so we will absolutely be pursuing maritime. Today, Maritime probably represents, I don't know, a little bit more than 5% of our total revenues, and that's down. That's down a lot. It's been cannibalized by Starlink because the Maritime users like, from what the market is telling us, they like the LEO value proposition. They like the low latency.

[Daniel Goldberg, Director, President & CEO at Telesat]

They like the high throughput. They like the smaller antennas. And so maritime is a great market for LEO and we'll be absolutely adjusting that market with light speed, cruise, maritime transport, high end yachts, the energy kind of offshore market, all of that we think is very promising.

[Edison Yu, Director at Deutsche Bank]

Understood. Understood. And last one, I actually wanted to shift to the geo side. I realize you're not providing kind of exact numbers going forward, but can we assume that GEO should at least be from a kind of standalone basis cash flow accretive or cash flow positive in the next few years? If so, when do you think that kind of becomes neutral or a drag?

[Edison Yu, Director at Deutsche Bank]

Understand it could be quite a few years away, but how do you think about, I guess, the cash generation ability of GEO as it sort of trickles down?

[Daniel Goldberg, Director, President & CEO at Telesat]

Well, I'm no finance guy, but it's pretty straightforward, I think, on GEO. I mean, the reality is it's generating a lot of cash right now. And because we haven't been building new GEO satellites, it means there's not a lot of CapEx going out. There's very little maintenance CapEx in terms of GEO. I think we do a really good job managing the operating expenses around GEO.

[Daniel Goldberg, Director, President & CEO at Telesat]

We report our segments separately, and you can see that GEO still has a very favorable EBITDA margin. So we run that business very efficiently. And we still have almost $1,000,000,000 of backlog left on GEO. And every quarter, we've got new stuff that comes up for renewal. So net net, we've been running backlog down, but we've replenished some of it along the way with some renewals.

[Daniel Goldberg, Director, President & CEO at Telesat]

And so in terms of so yes, for the foreseeable future, it's free cash flow positive. It's accretive to our cash position. And that would, I think, only change in the next couple of years if we had a new opportunity to invest in GEO. And so then we're building a new GEO satellite, so there's cash flows out that would offset the cash flows in. So anyway, that's what it looks like right now.

[Daniel Goldberg, Director, President & CEO at Telesat]

And we'd love to build a new GEO satellite provided that we feel good about the business case for the last like ten years, we haven't been able to close a business case on either a new GEO satellite or even a replacement GEO satellite, just given everything that's been going on in the market. But we still see some opportunities out there potentially. And so, yes. And we continue to work hard to develop a sound geo business case. So that I think is what the outlook looks like.

[Andrew Browne, CFO at Telesat]

Yes, absolutely, Daniel. Great.

[Caleb Henry, Director of Research at Quilty Space]

Great. Thank you very much.

[Operator]

And our next question comes from the line of Walter Piecyk with LightShed Partners.

[Walter Piecyk, Partner & TMT Analyst at LightShed Partners]

Dan, with Piper kind of getting a little momentum at least in launches, just curious if can you update us on and they seemingly are going after a similar market, just kind of your competitive analysis there and whether they're under consideration for any of the business that you've been attempting to win ahead of your LEO launch.

[Daniel Goldberg, Director, President & CEO at Telesat]

Hey, Walter. Yeah, so look, we always knew Kuiper was coming. Every once in a while, somebody would question how committed Amazon was to Kuiper. I was always convinced that this was something that they're very, very serious about. I continue to believe that.

[Daniel Goldberg, Director, President & CEO at Telesat]

And I think it will be like Starlink, a very capable constellation. And you're right, they're like Starlink, focused on the same verticals that we're focused on, plus consumer broadband. So again, like Starlink, we're not, as you know, focused on the B2C direct to consumer market. And yes, we see Kuiper out there in the market, themselves in all these different verticals that we're focused on. Which is all to say, as far as I'm concerned, nothing's changed.

[Daniel Goldberg, Director, President & CEO at Telesat]

We knew they were coming. Maybe on balance, they're coming a little bit later than we had anticipated, but they're starting to launch now.

[Walter Piecyk, Partner & TMT Analyst at LightShed Partners]

Do you see them in RFP processes though or no?

[Daniel Goldberg, Director, President & CEO at Telesat]

Yeah, that's a good question. I mean, the folks that kind of do more formal RFPs, it seems like the airlines certainly do that. We tend to support our channel partners in those RFPs. So I have a little less visibility there, but I would say, I assume they're pitching in the Arrow segment. To date, that segment is being successfully won by the incumbent operators, so the ViaSat of the world, Gogos, Panasonic, Hughes has made some inroads there. And then of course, Starlink. I assume that Amazon, I'm sorry,

[Daniel Goldberg, Director, President & CEO at Telesat]

But Typer's out there as well. And then we see them, there are different government opportunities all around the world. So yeah, it is as we expected. And I think that they'll have a great offering. I think that they'll get a lot of traction in the market.

[Daniel Goldberg, Director, President & CEO at Telesat]

And I continue to believe that we will too. It's a big market. We've got certain capabilities that are differentiated. So yeah.

[Walter Piecyk, Partner & TMT Analyst at LightShed Partners]

Is their value proposition enhanced because of their ability to tie it into AWS?

[Daniel Goldberg, Director, President & CEO at Telesat]

I think, I mean, look, they leverage a large ecosystem and they will benefit from that. They leverage a large ecosystem in terms of AWS. They have deep capabilities in terms of obviously software development, development of devices. Amazon's obviously one of the largest companies in the world. They've got Amazon Prime.

[Daniel Goldberg, Director, President & CEO at Telesat]

So we'll leverage all of those things, I think, in a pretty effective way.

[Walter Piecyk, Partner & TMT Analyst at LightShed Partners]

Okay. And then on tactical side, you have this company AST that has is in the process of sourcing some spectrum from Legato, something I've asked you about historically past calls as you know. I think there's some other S band that they identified today. But also Starlink, I think has been attempting to acquire additional spectrum from what's now EchoStar through an FCC process. We'll see how that goes, but it seems like there's some momentum there.

[Walter Piecyk, Partner & TMT Analyst at LightShed Partners]

I'm just curious, and again, I know this is a question I've asked you many times over the years, but I just wanna refresh, not just because if your peers doing it doesn't necessarily mean you have to do it, but is there any interest or discussion or kind of where are you in the development process of your birds that you could integrate additional spectrum and why or why is that not important for the future of connectivity when you're seeing some of your peers? Let's put AST aside for a second, but even Starlink, right, looking to add additional spectrum to their constellation.

[Daniel Goldberg, Director, President & CEO at Telesat]

So we're still sticking to our knitting in terms of enterprise broadband connectivity. We're well aware of what others are doing in the direct to device market and we wish them well, but we don't really have the spectrum for that. And our satellites that we're building today are absolutely optimized Every amp, every kilo of mass is absolutely devoted to our core mission. We do not have the capability to modify them in a way to add antennas or payloads to do direct to device. The satellites would look massively different than they do.

[Daniel Goldberg, Director, President & CEO at Telesat]

We'd lose schedules. So that's not something that we're being distracted by. And so, I mean, to come back to it, Lightspeed is significant undertaking from an engineering perspective, a commercial perspective, a regulatory perspective, a CapEx perspective. And so we've got to stay focused on that, and we are 1000% focused on that. And I think making really good progress.

[Daniel Goldberg, Director, President & CEO at Telesat]

I think the value creation opportunity for execute well on our Lightspeed plan is massive. And so we have to stay focused to capture that. On the spectrum front, the FCC, it sounds like is going to take another look at the portion of the C band that they did not claw back and auction for five gs services. We continue to operate on C band in North America. So maybe there's an opportunity there, but I don't think that's Teleset building a direct to device constellation. That's not on our radar.

[Walter Piecyk, Partner & TMT Analyst at LightShed Partners]

Got it. Thank you.

[Daniel Goldberg, Director, President & CEO at Telesat]

Thank you.

[Operator]

Seeing no further questions, that concludes our Q and A session. I'd like to turn the call back over to Dan Goldberg for closing remarks.

[Daniel Goldberg, Director, President & CEO at Telesat]

Okay. Well, thank you and thank you all for joining us this morning. And we look forward to chatting with you again when we release our third quarter numbers. So thank you. Thank you very much.

[Operator]

Ladies and gentlemen, that concludes today's call. Thank you all for joining and you may now disconnect.

Participants

Executives

• James Ratcliffe, VP - IR
• Daniel Goldberg, Director, President & CEO
• Andrew Browne, CFO

Analysts

• David McFadgen, Director & Analyst - Communications & Media at Cormark Securities
• Caleb Henry, Director of Research at Quilty Space
• Edison Yu, Director at Deutsche Bank
• Walter Piecyk, Partner & TMT Analyst at LightShed Partners