Telesat Q2 FY26 earnings call TSAT

Telesat announced a firm contract with MDA for 69 additional satellites, bringing the fully funded and committed constellation size to 225 satellites. This expansion allows for the restoration of commercial capacity previously diverted for defense markets and enhances network resiliency, with global commercial availability still expected in Q1 2028. The new satellites are identical to the initial 156, ensuring no delays in deployment.

The company signed its first contract in the ESCP-P program with the Canadian Armed Forces, significantly expanding its Lightspeed contractual backlog to $5.6 billion. This initial 15-year contract is expected to be followed by additional contracts for network integration and ground segment support, representing a material revenue opportunity. Management expressed confidence in converting pipeline opportunities into firm contracts, expecting backlog to be meaningfully higher by the end of next year.

The GEO segment's Q2 results were in line with expectations, with revenue declining 26% YoY to $78 million due to non-renewals and lower rates in broadcast (Nimiq 4, Nimiq 5) and enterprise (Xplore contract). The retirement of two GEO satellites, Anik F4 and Telstar 14R, will create a headwind, though nearly half their traffic was transferred to other satellites. Despite these challenges, the GEO backlog increased to $900 million due to a 5-year broadcast contract extension.

The FCC's Report and Order to repurpose 160 MHz of C-band satellite spectrum will result in Telesat receiving $189 million in incentive payments. The company is actively developing a plan to clear the spectrum by the 2030 and 2031 deadlines, building on prior successful reallocations where $344 million in proceeds were received. This development is considered a very accretive development for the business.

Telesat secured a new $120 million term loan for general corporate purposes within its GEO segment, providing additional financial resources. Management reiterated its focus on addressing upcoming GEO debt maturities and achieving a consensual, fair, and balanced outcome with legacy lenders. The company remains in compliance with all covenants in its credit agreements and indenture.

Telesat is leveraging the Lightspeed constellation for space relay services, enabling real-time data transfer from other satellites (e.g., earth observation) to end-users globally. This capability, which meets U.S. government SDA standards, is being demonstrated with NASA and is seen as a significant opportunity for defense and civil applications. While D2D is not a primary focus, the company is open to opportunistic roles that are accretive and do not distract from Lightspeed execution.