Telesat (TSAT) 6-K Current Report

Exhibit 99.1

TELESAT CORPORATION

Quarterly Report

For the Three Month Period Ended March 31, 2024

PART I. FINANCIAL INFORMATION

Item 1.	Financial Statements	1
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	24
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	48

PART II. OTHER INFORMATION

Item 1.	Legal Proceedings	49
Item 1A.	Risk Factors	49
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	50
Item 3.	Defaults Upon Senior Securities	50
Item 4.	Reserved	50
Item 5.	Other Information	50
Item 6.	Exhibits	50

i

PART I. FINANCIAL INFORMATION

Item 1.Financial Statements

Telesat Corporation
Unaudited Interim Condensed Consolidated Statements of Income (Loss)
For the three months ended March 31

(in thousands of Canadian dollars, except per share amounts)	Notes	2024			2023
Revenue	4	$	152,175		$	183,422
Operating expenses	5		(47,112	)		(53,472	)
Depreciation			(36,395	)		(46,377	)
Amortization			(2,823	)		(3,360	)
Other operating gains (losses), net			15			23
Operating income			65,860			80,236
Interest expense	6		(64,430	)		(68,873	)
Interest and other income			21,128			15,467
Gain (loss) on foreign exchange			(68,413	)		10,136
Income (loss) before income taxes			(45,855	)		36,966
Tax (expense) recovery	7		(6,482	)		(8,549	)
Net income (loss)		$	(52,337	)	$	28,417
Net income (loss) attributable to:
Telesat Corporation shareholders		$	(14,762	)	$	8,009
Non-controlling interest			(37,575	)		20,408
		$	(52,337	)	$	28,417
Net income (loss) per common share attributable to Telesat Corporation shareholders
Basic		$	(1.08	)	$	0.61
Diluted		$	(1.08	)	$	0.60
Total Weighted Average Common Shares Outstanding
Basic	15		13,706,546			13,022,905
Diluted	15		13,706,546			14,638,067

See accompanying notes to the unaudited interim condensed consolidated financial statements

1

Telesat Corporation
Unaudited Interim Condensed Consolidated Statements of Comprehensive Income (Loss)
For the three months ended March 31

(in thousands of Canadian dollars)	2024			2023
Net income (loss)	$	(52,337	)	$	28,417
Other comprehensive income (loss)
Items that may be reclassified into profit or loss
Foreign currency translation adjustments		95,755			(5,457	)
Total other comprehensive income (loss)		95,755			(5,457	)
Total comprehensive income (loss)	$	43,418		$	22,960
Total comprehensive income (loss) attributable to:
Telesat Corporation shareholders	$	11,254		$	6,456
Non-controlling interest		32,164			16,504
	$	43,418		$	22,960

See accompanying notes to the unaudited interim condensed consolidated financial statements

2

Telesat Corporation
Unaudited Interim Condensed Consolidated Statements of Changes in Shareholders’ Equity

(in thousands of Canadian dollars)	Common shares/Public shares		Accumulated earnings			Equity-settled employee benefits reserve			Foreign currency translation reserve			Total reserves			Total Telesat Corporation shareholders’ equity			Non-controlling Interest			Total shareholders’ equity
Balance as at January 1, 2023	$	46,554	$	356,273		$	57,756		$	20,853		$	78,609		$	481,436		$	1,358,716		$	1,840,152
Net income (loss)		—		8,009			—			—			—			8,009			20,408			28,417
Issuance of share capital on settlement of restricted share units		627		—			(31	)		—			(31	)		596			(1,169	)		(573	)
Exchange of Limited Partnership units for Public Shares		1,457		16,282			2,375			1,084			3,459			21,198			(21,198	)		—
Other comprehensive income (loss), net of tax (expense) recovery of $Nil		—		—			—			(1,553	)		(1,553	)		(1,553	)		(3,904	)		(5,457	)
Share-based compensation		—		—			1,834			—			1,834			1,834			7,161			8,995
Balance as at March 31, 2023	$	48,638	$	380,564		$	61,934		$	20,384		$	82,318		$	511,520		$	1,360,014		$	1,871,534
Balance as at April 1, 2023	$	48,638	$	380,564		$	61,934		$	20,384		$	82,318		$	511,520		$	1,360,014		$	1,871,534
Net income (loss)		—		149,109			—			—			—			149,109			405,744			554,853
Issuance of share capital on settlement of restricted share units		2,585		11			(630	)		—			(630	)		1,966			(4,524	)		(2,558	)
Issuance of share capital on exercise of stock options		29		—			—			—			—			29			(13	)		16
Exchange of Limited Partnership units for Public Shares		—		5,295			—			274			274			5,569			(5,569	)		—
Other comprehensive income (loss), net of tax (expense) recovery of $1,665		—		(921	)		—			(11,857	)		(11,857	)		(12,778	)		(36,135	)		(48,913	)
Share-based compensation		—		—			6,503			—			6,503			6,503			17,548			24,051
Balance as at December 31, 2023	$	51,252	$	534,058		$	67,807		$	8,801		$	76,608		$	661,918		$	1,737,065		$	2,398,983
Balance as at January 1, 2024	$	51,252	$	534,058		$	67,807		$	8,801		$	76,608		$	661,918		$	1,737,065		$	2,398,983
Net income (loss)		—		(14,762	)		—			—			—			(14,762	)		(37,575	)		(52,337	)
Issuance of share capital on settlement of restricted share units and deferred share units		1,986		3,943			(502	)		191			(311	)		5,618			(7,776	)		(2,158	)
Other comprehensive income (loss), net of tax (expense) recovery of $Nil		—		—			—			26,016			26,016			26,016			69,739			95,755
Share-based compensation		—		—			1,487			—			1,487			1,487			3,949			5,436
Balance as at March 31, 2024	$	53,238	$	523,239		$	68,792		$	35,008		$	103,800		$	680,277		$	1,765,402		$	2,445,679

See accompanying notes to the unaudited interim condensed consolidated financial statements

3

Telesat Corporation
Unaudited Interim Condensed Consolidated Balance Sheets

(in thousands of Canadian dollars)	Notes	March 31, 2024		December 31, 2023
Assets
Cash and cash equivalents		$	1,756,299	$	1,669,089
Trade and other receivables			65,254		78,289
Other current financial assets			667		631
Current income tax recoverable			20,349		16,510
Prepaid expenses and other current assets			55,563		52,169
Total current assets			1,898,132		1,816,688
Satellites, property and other equipment	4,8		1,271,646		1,260,298
Deferred tax assets			2,824		2,954
Other long-term financial assets			6,683		6,633
Long-term income tax recoverable			7,497		7,497
Other long-term assets	4		40,890		40,926
Intangible assets	4,9		692,299		692,756
Goodwill	9		2,489,883		2,446,603
Total assets		$	6,409,854	$	6,274,355
LIABILITIES
Trade and other payables		$	51,590	$	43,626
Other current financial liabilities			49,892		29,061
Income taxes payable			2,762		1,921
Other current liabilities			58,178		63,119
Total current liabilities			162,422		137,727
Long-term indebtedness	11		3,269,014		3,197,019
Deferred tax liabilities			233,329		235,247
Other long-term financial liabilities			14,585		14,938
Other long-term liabilities			284,825		290,441
Total liabilities			3,964,175		3,875,372
SHAREHOLDERS’ EQUITY
Share capital	12		53,238		51,252
Accumulated earnings			523,239		534,058
Reserves			103,800		76,608
Total Telesat Corporation shareholders’ equity			680,277		661,918
Non-controlling interest	13		1,765,402		1,737,065
Total shareholders’ equity			2,445,679		2,398,983
Total liabilities and shareholders’ equity		$	6,409,854	$	6,274,355

See accompanying notes to the unaudited interim condensed consolidated financial statements

4

Telesat Corporation
Unaudited Interim Condensed Consolidated Statements of Cash Flows
For the three months ended March 31

(in thousands of Canadian dollars)	Notes	2024			2023
Cash flows from operating activities
Net income (loss)		$	(52,337	)	$	28,417
Adjustments to reconcile net income (loss) to cash flows from operating activities:
Depreciation			36,395			46,377
Amortization			2,823			3,360
Tax expense (recovery)			6,482			8,549
Interest expense			64,430			68,873
Interest income			(21,296	)		(15,518	)
(Gain) loss on foreign exchange			68,413			(10,136	)
Share-based compensation			5,434			8,958
(Gain) loss on disposal of assets			(15	)		(23	)
Deferred revenue amortization			(13,659	)		(15,474	)
Pension expense			1,409			1,419
Other			197			571
Income taxes paid, net of income tax received	20		(11,496	)		(17,510	)
Interest paid, net of interest received	20		(18,147	)		(24,153	)
Operating assets and liabilities	20		6,953			(21,061	)
Net cash from operating activities			75,586			62,649
Cash flows (used in) generated from investing activities
Cash payments related to satellite programs			(757	)		(12,523	)
Cash payments related to property and other equipment			(19,278	)		(12,436	)
Net cash (used in) generated from investing activities			(20,035	)		(24,959	)
Cash flows (used in) generated from financing activities
Payments of principal on lease liabilities	20		(647	)		(523	)
Satellite performance incentive payments	20		(711	)		(1,529	)
Tax withholdings on settlement of restricted share units			(2,116	)		—
Government grant received			1,194			—
Net cash (used in) generated from financing activities			(2,280	)		(2,052	)
Effect of changes in exchange rates on cash and cash equivalents			33,939			(3,853	)
Changes in cash and cash equivalents			87,210			31,785
Cash and cash equivalents, beginning of period			1,669,089			1,677,792
Cash and cash equivalents, end of period		$	1,756,299		$	1,709,577

See accompanying notes to the unaudited interim condensed consolidated financial statements

5

Telesat Corporation
Notes to the Unaudited Interim Condensed Consolidated Financial Statements
March 31, 2024
(all amounts in thousands of Canadian dollars, except where otherwise noted)

1. BACKGROUND OF THE COMPANY

Telesat Corporation (the “Corporation” or “Company”) was incorporated under the Business Corporations Act (British Columbia) in October 2020 and is headquartered in Ottawa, Canada.

The Corporation is a global satellite operator, providing mission-critical communications solutions to support the requirements of sophisticated satellite users throughout the world. The Company’s state-of-the-art fleet consists of 15 geostationary satellites and the Canadian payload on Viasat-1.

The Corporation is developing a constellation of low earth orbit (“LEO”) satellites and integrated terrestrial infrastructure, called “Telesat Lightspeed”. In January 2018, the first LEO satellite, LEO1, was successfully launched into orbit. The LEO 1 satellite has demonstrated certain key features of the Telesat Lightspeed system design, specifically the capability of the satellite and customer terminals to deliver a low latency broadband experience. In July 2023, the Corporation successfully launched its LEO 3 satellite into orbit and it has since replaced LEO 1.

The Corporation began trading on the Nasdaq Global Select Market and the Toronto Stock Exchange on November 19, 2021 under the ticker symbol “TSAT”. Quarterly and annual financial statements, material change statements and other publicly available documents of the Company can be obtained from the U.S. Securities Exchange Commission (“SEC”) at https://www.sec.gov and the System for Electronic Document Analysis and Retrieval (“SEDAR+”) at https://www.sedarplus.ca.

References herein to “Telesat” or “Company” refer to Telesat Corporation and its subsidiaries.

Unless the context states or requires otherwise, references herein to the “financial statements” or similar terms refer to the unaudited interim condensed consolidated financial statements of Telesat.

On May 9, 2024, these financial statements were approved by the Audit Committee of the Board of Directors and authorized for issue.

2. BASIS OF PRESENTATION

Statement of Compliance

The financial statements represent the interim financial statements of the Company and its subsidiaries, on a consolidated basis, prepared in accordance with International Accounting Standard34, Interim Financial Reporting (“IAS 34”).

The financial statements should be read in conjunction with the December 31, 2023 consolidated financial statements of the Corporation. The financial statements use the same basis of presentation and accounting policies and critical accounting judgments and estimates as outlined in Notes 4 and 5 of the consolidated financial statements for the year ended December 31, 2023, with the exception of the changes outlined in Note 3, below.

The results of operations for the three months ended March 31, 2024 are not necessarily indicative of the results that may be expected for the full fiscal year.

3. MATERIAL ACCOUNTING POLICY INFORMATION

Segment Reporting

As of January 1, 2024, the Company modified from reporting with one operating segment to two operating segments. The two operating segments are geostationary (“GEO”) and LEO. Transactions that do not belong to a particular operating segment such as certain corporate entities are reported within “others”. As a result, the comparative period operating segment information has been restated. For additional details on the change in operating segments, refer to Note 4.

Operating segments are reported in a manner consistent with the internal reporting provided to the Company’s Chief Operating Decision Maker (“CODM”), who is the Company’s Chief Executive Officer.

6

Telesat Corporation
Notes to the Unaudited Interim Condensed Consolidated Financial Statements
March 31, 2024
(all amounts in thousands of Canadian dollars, except where otherwise noted)

3. MATERIAL ACCOUNTING POLICY INFORMATION (cont.)

Impairment of Goodwill and Indefinite Life Intangible Assets

An assessment for impairment of goodwill and indefinite life intangible assets is performed annually, or more frequently whenever events or changes in circumstances indicate that the carrying amounts of these assets are likely to exceed their recoverable amount.

Up to the year ended December31, 2023, goodwill was tested for impairment at the entity-level which represented the lowest level within the Company at which the goodwill was monitored for internal management purposes. Due to the changes made to the operating segments explained in Note4, as of January1, 2024, the Company reallocated its goodwill to GEO and LEO segments on a relative fair value basis which are now considered to be lowest level at which the goodwill is monitored for the purpose of impairment.

Future Changes in Accounting Policies

The IASB periodically issues new and amended accounting standards. There were no new and amended standards determined to be applicable to the Company.

4. SEGMENT INFORMATION

Beginning in the first quarter of 2024, Telesat modified its operating segments to align with changes to the internal reporting being provided to the CODM. The CODM is provided with information to review the operating results, assess performance of the operations and make capital allocation decisions at the operating segment level comprising GEO and LEO. The accounting policies of the reportable segments are the same as those described in Note 2 and Note 3 above.

The segment information regularly reviewed by the CODM and the reconciliation thereof to the net income (loss) as well as the capital expenditures by operating segment are included in the following tables:

Three months ended March 31, 2024	GEO			LEO			Other(3)			Consolidated
Revenue	$	148,121		$	4,054		$	—		$	152,175
Operating expenses		(25,183	)		(15,311	)		(940	)		(41,434	)
Adjusted EBITDA(1)	$	122,938		$	(11,257	)	$	(940	)		110,741
Stock-based compensation and non-recurring items(2)											(5,678	)
Depreciation											(36,395	)
Amortization											(2,823	)
Other operating gains (losses), net											15
Operating income											65,860
Interest expense											(64,430	)
Interest and other income											21,128
Gain (loss) on foreign exchange											(68,413	)
Income (loss) before income taxes											(45,855	)
Tax (expense) recovery											(6,482	)
Net income (loss)										$	(52,337	)
Capital expenditures	$	1,124		$	24,266		$	—		$	25,390

7

Telesat Corporation
Notes to the Unaudited Interim Condensed Consolidated Financial Statements
March 31, 2024
(all amounts in thousands of Canadian dollars, except where otherwise noted)

4. SEGMENT INFORMATION (cont.)

Three months ended March 31, 2023	GEO			LEO			Other(3)			Consolidated
Revenue	$	182,268		$	1,154		$	—		$	183,422
Operating expenses		(31,528	)		(12,498	)		(488	)		(44,514	)
Adjusted EBITDA(1)	$	150,740		$	(11,344	)	$	(488	)		138,908
Stock-based compensation and non-recurring items(2)											(8,958	)
Depreciation											(46,377	)
Amortization											(3,360	)
Other operating gains (losses), net											23
Operating income											80,236
Interest expense											(68,873	)
Interest and other income											15,467
Gain (loss) on foreign exchange											10,136
Income (loss) before income taxes											36,966
Tax (expense) recovery											(8,549	)
Net income (loss)										$	28,417
Capital expenditures	$	11,352		$	10,496		$	—		$	21,848

____________

(1)The performance of each segment is evaluated by the CODM based on Adjusted EBITDA. Adjusted EBITDA is defined as operating income (excluding certain operating expenses such as share-based compensation expenses and unusual and non-recurring items, including restructuring related expenses) before interest expense, taxes, depreciation and amortization. Adjusted EBITDA margin is used to measure Telesat’s operating performance. Adjusted EBITDA does not have any standardized meaning prescribed by IFRS and are therefore unlikely to be comparable to similar measures presented by other issuers.

(2)Non-recurring payments includes severance payments and special compensation and benefits for executives and employees

(3)Transactions that do not belong to a particular operating segment such as certain corporate entities are reported within “others”.

Service Revenues

The Company derives revenue from the following services:

Broadcast — Direct-to-home television, video distribution and contribution, and occasional use services.

Enterprise — Telecommunication carrier and integrator, government, consumer broadband, resource, maritime and aeronautical, retail and satellite operator services.

Consulting and other — Consulting services related to space and earth segments, government studies, satellite control services, and research and development.

Revenue derived from the above services were as follows:

Three months ended March 31, 2024	GEO		LEO		Consolidated
Broadcast	$	72,512	$	—	$	72,512
Enterprise		72,843		—		72,843
Consulting and other		2,766		4,054		6,820
Total revenue	$	148,121	$	4,054	$	152,175

8

Telesat Corporation
Notes to the Unaudited Interim Condensed Consolidated Financial Statements
March 31, 2024
(all amounts in thousands of Canadian dollars, except where otherwise noted)

4. SEGMENT INFORMATION (cont.)

Three months ended March 31, 2023	GEO		LEO		Consolidated
Broadcast	$	85,578	$	—	$	85,578
Enterprise(1)		93,937		—		93,937
Consulting and other(1)		2,753		1,154		3,907
Total revenue	$	182,268	$	1,154	$	183,422

____________

(1)Revenues between Enterprise and Consulting and other were reclassified to correspond to the presentation in the current year.

(2)There is no revenue recognized in Other in any of the periods presented

Equipment sales included within the various services were as follows:

Three months ended March 31,	2024		2023
Enterprise	$	5,127	$	7,305
Equipment sales	$	5,127	$	7,305

All revenue from equipment sales relate to the GEO.

Geographic Information

Revenue by geographic regions was based on the point of origin of the revenue, which was the destination of the billing invoice, and was allocated as follows:

Three months ended March 31,	2024		2023
Canada	$	70,906	$	88,723
United States		55,623		59,037
Latin America & Caribbean		9,073		14,462
Asia & Australia		8,491		12,147
Europe, Middle East & Africa		8,082		9,053
Revenue	$	152,175	$	183,422

For the three months ended March31, 2024 and 2023, the revenue from the LEO was from the United States geographic region.

The satellites and the intangible assets have been classified based on ownership. Satellites, property and other equipment and intangible assets by geographic regions were allocated as follows:

As at,	March 31, 2024		December 31, 2023
Canada	$	803,006	$	782,639
United Kingdom		442,486		446,194
United States		13,836		18,035
Europe, Middle East & Africa (excluding United Kingdom)		10,408		11,395
All others		1,910		2,035
Satellites, property and other equipment	$	1,271,646	$	1,260,298

As at,	March 31, 2024		December 31, 2023
Canada	$	650,247	$	650,528
United States		26,545		25,999
Latin America & Caribbean		11,423		11,963
All others		4,084		4,266
Intangible assets	$	692,299	$	692,756

9

Telesat Corporation
Notes to the Unaudited Interim Condensed Consolidated Financial Statements
March 31, 2024
(all amounts in thousands of Canadian dollars, except where otherwise noted)

4. SEGMENT INFORMATION (cont.)

Other long-term assets by geographic regions were allocated as follows:

As at,	March 31, 2024		December 31, 2023
Canada	$	40,890	$	40,926
Other long-term assets	$	40,890	$	40,926

Goodwill was not allocated to geographic regions.

Major Customers

For the three months ended March 31, 2024 and 2023, there were two significant customers each representing more than 10% of consolidated revenue.

5. OPERATING EXPENSES

Three months ended March 31,	2024		2023
Compensation and employee benefits(a)	$	25,294	$	29,974
Other operating expenses(b)		11,121		12,586
Cost of sales(c)		10,697		10,912
Operating expenses	$	47,112	$	53,472

____________

(a)Compensation and employee benefits included salaries, bonuses, commissions, post-employment benefits and charges arising from share-based compensation.

(b)Other operating expenses included general and administrative expenses, marketing expenses, in-orbit insurance expenses, professional fees and facility costs. The balance for the three months ended March 31, 2024 included $0.5 million of leases not capitalized due to exemptions and variable lease payments not included in the measurement of the lease liabilities (three months ended March 31, 2023 — $0.5 million).

(c)Cost of sales included the cost of third-party satellite capacity, the cost of equipment sales and other costs directly attributable to fulfilling the Company’s obligations under customer contracts.

6. INTEREST EXPENSE

Three months ended March 31,	2024			2023
Interest on indebtedness	$	60,168		$	64,181
Interest on satellite performance incentive payments		309			396
Interest on significant financing component		3,623			4,110
Interest on employee benefit plans		(40	)		(193	)
Interest on leases		370			379
Interest expense	$	64,430		$	68,873

7. INCOME TAXES

Three months ended March 31,	2024			2023
Current tax expense (recovery)	$	7,941		$	13,749
Deferred tax expense (recovery)		(1,459	)		(5,200	)
Tax expense (recovery)	$	6,482		$	8,549

10

Telesat Corporation
Notes to the Unaudited Interim Condensed Consolidated Financial Statements
March 31, 2024
(all amounts in thousands of Canadian dollars, except where otherwise noted)

7. INCOME TAXES (cont.)

A reconciliation of the statutory income tax rate, which is a composite of Canadian federal and provincial rates, to the effective income tax rate was as follows:

Three months ended March 31,	2024			2023(1)
Income (loss) before income taxes	$	(45,855	)	$	36,966
Multiplied by the statutory income tax rates		26.40	%		26.44	%
		(12,106	)		9,774
Income tax recorded at rates different from the Canadian tax rate		(1,587	)		(1,637	)
Permanent differences		12,233			1,431
Effect of temporary differences not recognized as deferred tax assets		10,016			(1,755	)
Taxes related to prior periods		(144	)		—
Foreign exchange		(1,930	)		736
Tax expense (recovery)	$	6,482		$	8,549
Effective income tax rate		(14.14	)%		23.13	%

____________

(1)The amounts for the three months ended March 31, 2023 reflect the adjustments made as a result of the adoption of the amendments to IAS 12, Income Taxes (“IAS 12”) effective for annual period beginning January 1, 2023.

8. SATELLITES, PROPERTY AND OTHER EQUIPMENT

For the three months ended March 31, 2024, the Company had additions of $25.4 million (March 31, 2023 — $21.8 million) primarily related to acquisitions associated with the LEO program and the acquisition of a geostationary satellite in 2023.

9. GOODWILL AND INTANGIBLE ASSETS

Indefinite life intangible assets are tested for impairment at the CGU level. An assessment is performed annually, or more frequently whenever events or changes in circumstances indicate that the carrying amounts of these assets are likely to exceed their recoverable amount.

As stated in Note4, commencing on January1, 2024, Telesat reports on two operating segments — GEO and LEO which are considered to be the lowest-level within the Company at which the Goodwill is monitored for impairment. As such, the goodwill was allocated as of January1, 2024 to and is tested for impairment at the GEO and LEO operating segment level rather than the previous entity levels.

During the first quarter of 2024, we reviewed the most sensitive assumptions to determine whether or not there were any changes in the assumptions from the valuation that was performed at the end of 2023. Based upon this review, there were no changes to the assumptions from the valuation that was performed at the end of 2023, and as such there was no impairment on goodwill, orbital slots or trade name.

10. LEASE LIABILITIES

The expected undiscounted contractual cash flows of the lease liabilities as at March 31, 2024 were as follows:

Remainder 2024		2025		2026		2027		2028		Thereafter		Total
$	2,788	$	3,726	$	3,178	$	2,910	$	2,932	$	30,998	$	46,532

The undiscounted contractual cash flows included $13.1 million of interest payments.

11

Telesat Corporation
Notes to the Unaudited Interim Condensed Consolidated Financial Statements
March 31, 2024
(all amounts in thousands of Canadian dollars, except where otherwise noted)

11. INDEBTEDNESS

On December 6, 2019, Telesat Canada entered into a new amended and restated Credit Agreement with a syndicate of banks which provides for the extension of credit under the Senior Secured Credit Facilities (“Senior Secured Credit Facilities”). The Senior Secured Credit Facilities are comprised of two tranches — a revolving credit facility (“Revolving facility”) of up to $200.0 million US dollars (or Canadian equivalent) maturing in December 2024 and Term Loan B — U.S. Facility of US$1,908.5 million maturing in December 2026.

On October 11, 2019, Telesat Canada issued, through a private placement, US$550 million of 6.5% Senior Unsecured Notes, which mature in October 2027 (“Senior Unsecured Notes”).

On December 6, 2019, Telesat Canada issued, through a private placement, US$400 million 4.875% Senior Secured Notes, which mature in June 2027 (“Senior Secured Notes”).

On April 27, 2021, Telesat Canada issued, through a private placement, US$500 million in aggregate principal amount of 5.625% Senior Secured Notes maturing on December 6, 2026 (“2026 Senior Secured Notes”).

As at,	March 31, 2024			December 31, 2023
Senior Secured Credit Facilities
Revolving Credit Facility	$	—		$	—
Term Loan B – U.S. Facility (US$1,421,767)		1,925,073			1,882,846
Senior Unsecured Notes (US$295,000)		399,430			390,669
2026 Senior Secured Notes (US$399,040)		540,300			528,449
Senior Secured Notes (US$299,995)		406,193			397,283
		3,270,996			3,199,247
Deferred financing costs, prepayment options and loss on repayment		(1,982	)		(2,228	)
		3,269,014			3,197,019
Less: current indebtedness		—			—
Long-term indebtedness	$	3,269,014		$	3,197,019

12. SHARE CAPITAL

The Class A Common shares together with the Class B Variable Voting shares represent the Corporation’s Public Shares (“Telesat Public Shares”). The Class C Fully Voting shares and Class C Limited Voting shares shall be referred to as (“Class C Shares”). The Telesat Public Shares and Class C Shares together represent Telesat Corporation Shares (“Telesat Corporation Shares”).

The number of shares and stated value of the outstanding shares were as follows:

	March 31, 2024			December 31, 2023
	Number of shares	Stated value		Number of shares	Stated value
Telesat Public Shares	13,641,019	$	46,898	13,497,501	$	44,912
Class C Shares	112,841		6,340	112,841		6,340
	13,753,860	$	53,238	13,610,342	$	51,252

The breakdown of the number of shares of Telesat Public Shares, as at March 31, 2024, was as follows:

Telesat Public shares
Class A Common shares	1,481,615
Class B Variable Voting shares	12,159,404
Total Telesat Public shares	13,641,019

12

Telesat Corporation
Notes to the Unaudited Interim Condensed Consolidated Financial Statements
March 31, 2024
(all amounts in thousands of Canadian dollars, except where otherwise noted)

12. SHARE CAPITAL (cont.)

The number of Class A Common shares and Class B Variable Voting shares in the table above is based on information available to the Company as at March 31, 2024.

In addition, the Company has one Class A Special Voting Share, one Class B Special Voting Share, one Class C Special Voting Share and one Golden Share outstanding, each with a nominal stated value as at March 31, 2024 and December 31, 2023. The voting rights of the Special Voting Shares and the Golden Share are more fully described in the Company’s Annual Report filed on Form 20-F for the year ended December 31, 2023 that can be obtained on the SEC’s website at https://www.sec.gov and on the SEDAR+ at https://www.sedarplus.ca.

During the three months ended March 31, 2024, 285,985 Restricted Share Units (“RSUs”) were settled for 131,084 Telesat Public Shares, on a net settlement basis (Three months ended March 31, 2023 — 103,071 RSUs were settled for 54,166 Telesat Public Shares, on a net settlement basis).

During the three months ended March 31, 2024, 12,434 Deferred Share Units (“DSUs”) were settled for an equal number of Telesat Public Shares (Three months ended March 31, 2023 — Nil).

During the three months ended March 31, 2023, 532,423 Telesat Public Shares were issued in exchange for an equal number of Class B Limited Partnership units (“LP Units”). There were no exchanges of LP Units in the three months ended March31, 2024.

The number and stated value of the outstanding LP Units of Telesat Partnership LP (the “Partnership”) as at March 31, 2024 and December 31, 2023 were as follows:

	Number of units	Stated value
Class A and Class B LP Units	18,321,792	$	50,141
Class C LP Units	18,098,362		38,893
	36,420,154	$	89,034

On consolidation into the Corporation, the stated value of the LP Units is included under non-controlling interest.

13. NON-CONTROLLING INTEREST

Non-controlling interests represent equity interests in the Partnership that are not attributable to the Company. As at March 31, 2024, the Corporation held a general partnership interest representing approximately 27% economic interest in the Partnership (December 31, 2023 — approximately 27%). The remaining 73% economic interest represents exchangeable units held by the limited partnership unit holders (December 31, 2023 — 73%).

Net income (loss) attributable to non-controlling interests represents the non-controlling interests’ portion of the Partnership’s net income (loss).

14. SHARE-BASED COMPENSATION PLANS

On November 19, 2021, Telesat Corporation adopted an omnibus long-term incentive plan (“Omnibus Plan”). The Omnibus Plan allows for a variety of equity-based awards including stock options, RSUs, DSUs and performance share units (“PSUs”). The stock options, RSUs, DSUs and PSUs are collectively referred to as “Award”. Each Award will represent the right to receive Public Shares or, in the case of PSUs, RSUs or DSUs, Public Shares or cash, in accordance with the terms of the Omnibus Plan.

Telesat Holdings Inc. (the predecessor entity to Telesat Canada and Telesat Corporation) adopted a management stock incentive plan in September 2008, as amended (the “2008 Telesat Plan”) and a second management stock incentive plan in April 2013, as amended (the “2013 Telesat Plan”). In the first half of 2021, Telesat Canada also adopted a restricted share unit plan (the “RSU Plan” together with the 2008 Telesat Plan and 2013 Telesat Plan, the “Historic Plan”).

13

Telesat Corporation
Notes to the Unaudited Interim Condensed Consolidated Financial Statements
March 31, 2024
(all amounts in thousands of Canadian dollars, except where otherwise noted)

14. SHARE-BASED COMPENSATION PLANS (cont.)

The changes in number of time vesting stock options outstanding and their weighted average exercise price under the Omnibus Plan and Historic Plan have been summarized below:

	Historic plan				Omnibus Plan
	Number of options		Weighted average exercise price		Number of options	Weighted average exercise price
Outstanding, January 1, 2024	199,634		$	38.76	803,265	$	13.38
Forfeited	(413	)			—
Expired	(75,552	)			—
Outstanding March 31, 2024	123,669		$	46.00	803,265	$	13.38

The movement under the Historic Plan was as follows:

	RSUs with time criteria	RSUs with time and performance criteria
Outstanding, January 1, 2024	517,688	124,080
Forfeited	—	—
Outstanding, March 31, 2024	517,688	124,080

The movement under the Omnibus Plan was as follows:

	RSUs with time criteria		PSUs with time and performance criteria	DSUs
Outstanding, January 1, 2024	784,725		375,137	124,616
Granted	—		—	19,420
Settled	(285,985	)	—	(12,434	)
Forfeited	(5,024	)	—	—
Outstanding, March 31, 2024	493,716		375,137	131,602

15. EARNINGS PER SHARE

Basic earnings per share is calculated by dividing the net income (loss) for the period attributable to shareholders of each class of shares by the weighted average number of shares outstanding during the period.

Diluted earnings per share is calculated to give effect to equity Awards.

The following table presents reconciliations of the numerators of the basic and diluted per share computations:

Three months ended March 31	2024			2023
Net income (loss) attributable to Telesat Common Shares	$	(14,762	)	$	8,009
Effect of diluted securities		—			774
Diluted net income (loss) attributable to Telesat Common Shares	$	(14,762	)	$	8,783

14

Telesat Corporation
Notes to the Unaudited Interim Condensed Consolidated Financial Statements
March 31, 2024
(all amounts in thousands of Canadian dollars, except where otherwise noted)

15. EARNINGS PER SHARE (cont.)

The following table presents reconciliations of the denominators of the basic and diluted per share computations:

Three months ended March 31	2024	2023
Basic total weighted average number of Telesat Common Shares outstanding	13,706,546	13,022,905
Effect of diluted securities
Stock options	—	—
RSUs, DSUs and PSUs	—	1,615,162
Diluted total weighted average number of Telesat Common Shares outstanding	13,706,546	14,638,067

Effect of diluted securities represents Telesat Public Shares and Class C Shares assumed to be issued for no consideration. The difference between the number of Telesat Public Shares and Class C Shares assumed issued on exercise and the number of Telesat Public Shares and Class C Shares assumed repurchased are treated as an issue of common shares for no consideration.

The earnings per share for the three months ended March 31, 2023 reflects the adjustment as a result of adoption of amendments to IAS12, effective for annual period beginning January 1, 2023.

For the purpose of earnings per share, all of the Telesat Public Shares and Class C Shares have equivalent economic rights.

16. GOVERNMENT GRANT

In May 2019, Telesat entered into an agreement for a non-refundable government contribution of a value up to $85 million for a period until December 31, 2024 relating to the Telesat Lightspeed constellation.

For the three months ended March 31, 2024, the Company recorded $2.6 million relating to the agreement (Three months ended March 31, 2023 — $1.7 million).

Of the amount recorded in the three months ended March 31, 2024, $0.3 million was recorded as a reduction to satellites, property and other equipment and $2.3 million was recorded as a reduction to operating expenses (Three months ended March 31, 2023 — $0.7 million was recorded as a reduction to satellites, property and other equipment and $1.0 million was recorded as a reduction to operating expenses).

17. CAPITAL DISCLOSURES

The Senior Secured Credit Facilities, Senior Secured Notes and 2026 Senior Secured Notes are secured by substantially all of the Company’s assets, excluding the assets of unrestricted subsidiaries. If the Revolving Facility is drawn, the Senior Secured Credit Facilities require the Company to comply with a first lien net leverage ratio test. As at March 31, 2024, the first lien net leverage ratio was 4.98:1.00, which was less than the maximum test ratio of 5.75:1.00.

The Company’s operating results are tracked against budget on a monthly basis, and this analysis is reviewed by senior management.

18. FINANCIAL INSTRUMENTS

Measurement of Risks

The Company, through its financial assets and liabilities, is exposed to various risks. The following analysis provides a measurement of risks as at March 31, 2024.

15

Telesat Corporation
Notes to the Unaudited Interim Condensed Consolidated Financial Statements
March 31, 2024
(all amounts in thousands of Canadian dollars, except where otherwise noted)

18. FINANCIAL INSTRUMENTS (cont.)

Credit risk

Credit risk is the risk that a counterparty to a financial asset will default, resulting in the Company incurring a financial loss. As at March 31, 2024, the maximum exposure to credit risk is equal to the carrying value of the financial assets which totaled $1,828.9 million (December 31, 2023 — $1,754.6 million).

The following table provides breakdown by maturity of financial assets as at March 31, 2024:

	Carrying amount		Contractual cash flows
			Remaining 2024		2025		2026		2027		2028		Thereafter
Cash and cash equivalents	$	1,756,299	$	1,756,299	$	—	$	—	$	—	$	—	$	—
Trade and other receivables, excluding deferred receivables		62,495		62,495		—		—		—		—		—
Deferred receivables		8,419		2,384		1,456		1,432		722		604		1,821
Other financial assets		1,690		667		—		—		—		—		1,023
	$	1,828,903	$	1,821,845	$	1,456	$	1,432	$	722	$	604	$	2,844

Cash and cash equivalents are invested with high quality investment grade financial institutions and are governed by the Company’s corporate investment policy, which aims to reduce credit risk by restricting investments to high-grade, mainly U.S. dollar and Canadian dollar denominated investments.

The Company has credit evaluation, approval and monitoring processes intended to mitigate potential credit risks related to trade accounts receivable. The Company’s standard payment terms are 30 days with interest typically charged on balances remaining unpaid at the end of standard payment terms. The Company’s historical experience with customer defaults has been minimal. As at March 31, 2024, North American and International customers made up 37% and 63% of the outstanding trade receivable balance, respectively (December 31, 2023 — 49% and 51%, respectively). Anticipated bad debt losses have been provided for in the allowance for doubtful accounts. The allowance for doubtful accounts as at March 31, 2024 was $6.5 million (December 31, 2023 — $6.5 million).

The Company mitigates the credit risk associated with derivative instruments by entering into them with only high quality financial institutions.

Foreign exchange risk

The Company’s operating results are subject to fluctuations as a result of exchange rate variations to the extent that transactions are made in currencies other than Canadian dollars. The Company’s main currency exposures lie in its U.S. dollar denominated cash and cash equivalents, trade and other receivables, trade and other payables and indebtedness with the most significant impact being on the U.S. dollar denominated indebtedness, cash and short-term investments. As at March 31, 2024 and December 31, 2023, the entire indebtedness was denominated in U.S. dollars, with the Canadian dollar equivalent of the U.S. dollar denominated indebtedness equaling $3,271.0 million and $3,199.2 million, respectively, before netting of deferred financing costs, prepayment options and loss on repayment.

As at March 31, 2024, the impact of a 5 percent increase (decrease) in the value of the U.S. dollar against the Canadian dollar on financial assets and liabilities would have decreased (increased) net income (loss) by $150.3 million (December 31, 2023 — $146.4 million) and increased (decreased) other comprehensive income (loss) by $70.0 million (December 31, 2023 — $68.6 million). This analysis assumes that all other variables, in particular interest rates, remain constant.

16

Telesat Corporation
Notes to the Unaudited Interim Condensed Consolidated Financial Statements
March 31, 2024
(all amounts in thousands of Canadian dollars, except where otherwise noted)

18. FINANCIAL INSTRUMENTS (cont.)

Interest rate risk

The Company is exposed to interest rate risk on its cash and cash equivalents and its indebtedness. The interest rate risk on the indebtedness is from a portion of the indebtedness having a variable interest rate. Changes in the interest rates could impact the amount of interest that the Company is required to pay or receive.

If the interest rates on the variable rate indebtedness change by 0.25%, the result would be an increase or decrease to net income (loss) of $1.2 million for three months ended March 31, 2024 (three months ended March 31, 2023— $1.3 million).

Liquidity risk

The Company maintains credit facilities to ensure it has sufficient funds available to meet current and foreseeable financial requirements.

The contractual maturities of financial liabilities as at March 31, 2024 were as follows:

	Carrying amount		Contractual cash flows (undiscounted)		Remaining 2024		2025		2026		2027		2028		Thereafter
Trade and other payables	$	51,590	$	51,590	$	51,590	$	—	$	—	$	—	$	—	$	—
Customer and other deposits		1,552		1,552		637		544		51		—		167		153
Satellite performance incentive payments		18,293		22,165		4,877		3,328		3,390		2,590		2,476		5,504
Other financial liabilities		2,431		2,431		2,431		—		—		—		—		—
Indebtedness(1)		3,313,197		3,974,275		199,710		239,226		2,693,852		841,487		—		—
	$	3,387,063	$	4,052,013	$	259,245	$	243,098	$	2,697,293	$	844,077	$	2,643	$	5,657

____________

(1)Indebtedness excludes deferred financing costs, prepayment options and loss on repayment.

The interest payable and interest payments included in the carrying value and contractual cash flows, respectively, in the above table, were as follows:

	Interest payable		Interest payments
Satellite performance incentive payments	$	330	$	4,202
Indebtedness	$	42,201	$	703,279

Financial assets and liabilities recorded on the balance sheets and the fair value hierarchy levels used to calculate those values were as follows:

As at March 31, 2024	Amortized cost			Fair Value			Fair value hierarchy
Cash and cash equivalents	$	1,756,299		$	1,756,299		Level 1
Trade and other receivables		65,254			65,254		(1)
Other current financial assets		667			667		Level 1
Other long-term financial assets		6,683			6,683		Level 1
Trade and other payables		(51,590	)		(51,590	)	(1)
Other current financial liabilities		(49,892	)		(50,093	)	Level 2
Other long-term financial liabilities		(14,585	)		(14,083	)	Level 2
Indebtedness(2)		(3,270,996	)		(1,691,835	)	Level 2
	$	(1,558,160	)	$	21,302

17

Telesat Corporation
Notes to the Unaudited Interim Condensed Consolidated Financial Statements
March 31, 2024
(all amounts in thousands of Canadian dollars, except where otherwise noted)

18. FINANCIAL INSTRUMENTS (cont.)

As at December 31, 2023	Amortized cost			Fair value			Fair value hierarchy
Cash and cash equivalents	$	1,669,089		$	1,669,089		Level 1
Trade and other receivables		78,289			78,289		(1)
Other current financial assets		631			631		Level 1
Other long-term financial assets		6,633			6,633		Level 1
Trade and other payables		(43,626	)		(43,626	)	(1)
Other current financial liabilities		(29,061	)		(29,300	)	Level 2
Other long-term financial liabilities		(14,938	)		(14,388	)	Level 2
Indebtedness(2)		(3,199,247	)		(1,950,811	)	Level 2
	$	(1,532,230	)	$	(283,483	)

____________

(1)Trade and other receivables and trade and other payables approximate fair value due to the short-term maturity of these instruments.

(2)Indebtedness excludes deferred financing costs, prepayment options and loss on prepayment.

Assets pledged as security

The Senior Secured Credit Facilities, Senior Secured Notes and 2026 Senior Secured Notes are secured by substantially all of Telesat’s assets excluding the assets of unrestricted subsidiaries.

Fair Value

Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants in the principal market under current market conditions at the measurement date. Where possible, fair values are based on the quoted market values in an active market. In the absence of an active market, the Company determines fair values based on prevailing market rates (bid and ask prices, as appropriate) for instruments with similar characteristics and risk profiles or internal or external valuation models, such as option pricing models and discounted cash flow analysis, using observable market-based inputs.

The fair value hierarchy is as follows:

Level 1 is based on quoted prices (unadjusted) in active markets for identical assets or liabilities that the Company can access at the measurement date.

Level 2 is based on observable inputs other than Level 1 prices, such as quoted prices for similar assets or liabilities, quoted prices in markets that are not active, or other inputs that are observable or can be corroborated by observable market data for substantially all of the full term of the assets or liabilities.

Level 3 is based on unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities. Level 3 assets and liabilities include financial instruments whose values are determined using pricing models, discounted cash flow methodologies, or similar techniques, as well as instruments for which the determination of fair value requires significant management judgment or estimation.

Estimates of fair values are affected significantly by the assumptions for the amount and timing of estimated future cash flows and discount rates, which all reflect varying degrees of risk. Potential income taxes and other expenses that would be incurred on disposition of these financial instruments are not reflected in the fair values. As a result, the fair values are not necessarily the net amounts that would be realized if these instruments were actually settled.

The carrying amounts of cash and cash equivalents, trade and other receivables, and trade and other payables approximate fair value due to the short-term maturity of these instruments. As at March 31, 2024, cash and cash equivalents included $73.0 million (December 31, 2023 — $245.2 million) of short-term investments.

18

Telesat Corporation
Notes to the Unaudited Interim Condensed Consolidated Financial Statements
March 31, 2024
(all amounts in thousands of Canadian dollars, except where otherwise noted)

18. FINANCIAL INSTRUMENTS (cont.)

The fair value of the satellite performance incentive payments, included in other current and long-term financial liabilities, was determined using a discounted cash flow methodology. The calculation is performed on a recurring basis. As at March 31, 2024 and December 31, 2023, the discount rate used was 7.4%.

The fair value of the indebtedness was based on transactions and quotations from third parties considering market interest rates and excluding deferred financing costs, prepayment options and loss on repayment. The calculation of the fair value of the indebtedness is performed on a recurring basis. The rates used, which are a percentage of face value of the indebtedness, were as follows:

	March 31, 2024		December 31, 2023
Term Loan B – U.S. Facility – Senior Secured Credit Facilities	50.00	%	63.75	%
Senior Unsecured Notes	43.69	%	47.31	%
Senior Secured Notes	56.97	%	59.42	%
2026 Senior Secured Notes	59.86	%	62.38	%

Fair value of derivative financial instruments

Derivatives were valued using a discounted cash flow methodology. The calculations of the fair value of the derivatives are performed on a recurring basis.

Prepayment option cash flows were calculated with a third party option valuation model which is based on the current price of the debt instrument and discounted based on a discount curve.

The discount rates used to discount cash flows as at March 31, 2024 ranged from 4.63% to 5.58% (December 31, 2023 — 4.06% to 5.59%).

19. EMPLOYEE BENEFIT PLANS

The expenses included on the condensed consolidated statements of income (loss) were as follows:

	Pension Plans								Other Post-employment Benefit Plans
Three months ended March 31, 2024	Canadian			US		Total			Canadian		US		Total
Consolidated statements of income (loss)
Operating expenses	$	1,087		$	175	$	1,262		$	147	$	—	$	147
Interest (income) expense	$	(421	)	$	100	$	(321	)	$	235	$	46	$	281

	Pension Plans								Other Post-employment Benefit Plans
Three months ended March 31, 2023	Canadian			US		Total			Canadian		US		Total
Consolidated statements of income (loss)
Operating expenses	$	1,131		$	171	$	1,302		$	117	$	—	$	117
Interest (income) expense	$	(573	)	$	142	$	(431	)	$	232	$	6	$	238

No amounts were recorded on the statements of comprehensive income (loss) for the three months ended March 31, 2024 or 2023.

19

Telesat Corporation
Notes to the Unaudited Interim Condensed Consolidated Financial Statements
March 31, 2024
(all amounts in thousands of Canadian dollars, except where otherwise noted)

19. EMPLOYEE BENEFIT PLANS (cont.)

The balance sheet obligations, distributed between pension and other post-employment benefits were as follows:

	Pension Plans						Other Post-employment Benefit Plans
As at March 31, 2024	Canadian		US		Total		Canadian		US		Total
Included in other long-term liabilities	$	—	$	8,937	$	8,937	$	20,208	$	3,750	$	23,958
Included in other long-term assets	$	40,187	$	—	$	40,187	$	—	$	—	$	—

	Pension Plans						Other Post-employment Benefit Plans
As at December 31, 2023	Canadian		US		Total		Canadian		US		Total
Included in other long-term liabilities	$	—	$	8,633	$	8,633	$	19,999	$	3,720	$	23,719
Included in other long-term assets	$	40,624	$	—	$	40,624	$	—	$	—	$	—

20. SUPPLEMENTAL CASH FLOW INFORMATION

Cash and cash equivalents were comprised of the following:

As at March 31,	2024		2023
Cash	$	1,683,347	$	1,630,473
Short-term investments(1)		72,952		79,104
Cash and cash equivalents	$	1,756,299	$	1,709,577

____________

(1)Consisted of short-term investments with an original maturity of three months or less or which are available on demand with no penalty for early redemption.

Income taxes paid, net of income taxes received was comprised of the following:

Three months ended March 31,	2024			2023
Income taxes paid	$	(18,384	)	$	(17,513	)
Income taxes received		6,888			3
	$	(11,496	)	$	(17,510	)

Interest paid, net of interest received was comprised of the following:

Three months ended March 31,	2024			2023
Interest paid	$	(40,344	)	$	(39,079	)
Interest received		22,197			14,926
	$	(18,147	)	$	(24,153	)

20

Telesat Corporation
Notes to the Unaudited Interim Condensed Consolidated Financial Statements
March 31, 2024
(all amounts in thousands of Canadian dollars, except where otherwise noted)

20. SUPPLEMENTAL CASH FLOW INFORMATION (cont.)

The reconciliation of the liabilities arising from financing activities were as follows:

	Indebtedness		Satellite performance incentive payments			Lease liabilities
Balance as at January 1, 2024	$	3,197,019	$	18,271		$	33,339
Cash outflows		—		(711	)		(647	)
Amortization of deferred financing costs, prepayment options and loss on repayment		246		—			—
Interest paid		—		—			(370	)
Interest accrued		—		—			370
Non-cash addition		—		—			297
Impact of foreign exchange		71,749		403			121
Balance as at March 31, 2024	$	3,269,014	$	17,963		$	33,110

	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	)
Amortization of deferred financing costs, prepayment options and loss on repayment		231			—			—
Interest paid		—			—			(379	)
Interest accrued		—			—			379
Non-cash disposal		—			—			(10	)
Impact of foreign exchange		(10,802	)		(71	)		(10	)
Balance as at March 31, 2023	$	3,839,510		$	23,524		$	33,563

The net change in operating assets and liabilities was comprised of the following:

Three months ended March 31,	2024			2023
Trade and other receivables	$	12,392		$	(9,890	)
Financial assets		25			1,071
Other assets		(968	)		(11,656	)
Trade and other payables		5			1,967
Financial liabilities		123			(47	)
Other liabilities		(4,624	)		(2,506	)
	$	6,953		$	(21,061	)

Non-cash investing activities were comprised of:

Three months ended March 31,	2024		2023
Satellites, property and other equipment	$	13,028	$	977

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Telesat Corporation
Notes to the Unaudited Interim Condensed Consolidated Financial Statements
March 31, 2024
(all amounts in thousands of Canadian dollars, except where otherwise noted)

21. COMMITMENTS AND CONTINGENT LIABILITIES

The following were the Company’s off-balance sheet contractual obligations as at March31, 2024:

	Remaining 2024		2025		2026		2027		2028		Thereafter		Total
Property leases	$	887	$	1,217	$	1,219	$	1,021	$	1,007	$	10,576	$	15,927
Capital commitments		68,277		58,306		5,416		6,092		—		—		138,091
Other operating commitments		27,970		16,407		10,783		8,796		18,733		69,983		152,672
	$	97,134	$	75,930	$	17,418	$	15,909	$	19,740	$	80,559	$	306,690

Property leases consisted of off-balance sheet contractual obligations for land or building usage, while capital commitments included commitments for capital projects. Other operating commitments consisted of third party satellite capacity arrangements as well as other commitments that are not categorized as property leases or capital commitments. The Company’s off-balance sheet obligations included the future minimum payments for the non-cancellable period of each respective obligation, which have various terms and expire between 2024 to 2039.

Certain variable costs associated with the capitalized leases have been included in property leases commitments with a termination date co-terminus with the lease liability.

The Company has entered into contracts for the development of the Telesat Lightspeed constellation and other capital expenditures. The outstanding commitments as at March31, 2024 were included in capital commitments. Subsequent to March31, 2024, the Company’s capital commitments through May9, 2024 increased by US$71.5million.

The Company has agreements with various customers for prepaid revenue on several service agreements which take effect when the satellite is placed in service. The Company is responsible for operating and controlling these satellites. As at March 31, 2024, customer prepayments of $269.9 million (December 31, 2023 — $279.4 million), a portion of which is refundable under certain circumstances, were reflected in other current and long-term liabilities.

In the normal course of business, the Company has executed agreements that provide for indemnification and guarantees to counterparties in various transactions. These indemnification undertakings and guarantees may require the Company to compensate the counterparties for costs and losses incurred as a result of certain events including, without limitation, loss or damage to property, change in the interpretation of laws and regulations (including tax legislation), claims that may arise while providing services, or as a result of litigation that may be suffered by the counterparties. The nature of substantially all of the indemnification undertakings prevents the Company from making a reasonable estimate of the maximum potential amount the Company could be required to pay counterparties as the agreements do not specify a maximum amount and the amounts are dependent upon the outcome of future contingent events, the nature and likelihood of which cannot be determined at this time. Historically, the Company has not made any significant payments under such indemnifications.

Telesat Corporation and Telesat CanHold Corporation have entered into an indemnification agreement with Public Sector Pension Investment Board (“PSP Investments”) where they will indemnify PSP Investments on a grossed-up basis for PSP Investment’s pro rata share of the costs relating to: (a) certain losses and litigation proceedings related to the transaction to become a public company in 2021, (b) certain losses with regard to Loral Space & Communications Inc. (“Loral”) and out-of-pocket expenses of Loral and (c) certain tax matters.

In the case of indemnification for certain tax matters only, there will be a cap of US$50 million (other than with respect to defense costs and grossed-up payments) and all other indemnification obligations will be uncapped.

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Telesat Corporation
Notes to the Unaudited Interim Condensed Consolidated Financial Statements
March 31, 2024
(all amounts in thousands of Canadian dollars, except where otherwise noted)

21. COMMITMENTS AND CONTINGENT LIABILITIES (cont.)

Legal Proceedings

The Company participates from time to time in legal proceedings arising in the normal course of its business.

Telesat previously received assessments from Brazilian tax authorities alleging that additional taxes are owed on revenue earned for the period 2003 to 2018. The total disputed amount for the period 2003 to 2018, including interest and penalties, is now $112.1 million. The disputes relate to the Brazilian tax authorities’ characterization of revenue. The Company has challenged the assessments. The Company believes the likelihood of a favorable outcome in these disputes is more likely than not and, as such, no reserve has been established.

Other than the legal proceedings disclosed above and in Note 34 of the Company’s December 31, 2023 consolidated financial statements, the Company is not aware of any proceedings outstanding or threatened as at the date hereof by or against it or relating to its business which may have, or have had in the recent past, significant effects on the Company’s financial position or profitability.

22. RELATED PARTY TRANSACTIONS

Transactions with subsidiaries

The Company and its subsidiaries regularly engage in inter-group transactions. These transactions include the purchase and sale of satellite services and communications equipment, providing and receiving network and call centre services, access to orbital slots and management services. The transactions have been entered into over the normal course of operations. Balances and transactions between the Company and its subsidiaries have been eliminated on consolidation and therefore have not been disclosed.

Compensation of executives and Board level directors

Compensation of the Company’s executives consists of short-term benefits (including salaries), post-employment benefits and share-based compensation. Compensation of the Company’s Board level directors consists of cash and share-based compensation. The transactions have been entered into with the Company in the normal course of operations.

Transactions with related parties

The Company and certain of its subsidiaries regularly engage in transactions with related parties. The Company’s related parties included Red Isle Private Investments Inc. (“Red Isle”) and MHR. There were no transactions or balances with Red Isle or MHR during any of the periods presented.

Other related party transactions

The Company funds certain defined benefit pension plans. Contributions made to the plans for the three months ended March 31, 2024 were $0.6 million (Three months ended March 31, 2023 — $0.3 million).

23. SUBSEQUENT EVENTS

Debt repurchases

In April 2024 and up to May9, 2024, Telesat repurchased Senior Secured Notes, 2026 Senior Secured Notes, Senior Unsecured Notes and the Term Loan B with a principal amount of US$75.0million, US$12.0million, US$73.8million and US$58.7million, respectively at an aggregate cost of US$98.9million, inclusive of accrued interest of US$5.0million.

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Item 2.       Management’s Discussion and Analysis of Financial Condition and Results of Operations

The following management’s discussion and analysis (the “MD&A”) should be read in conjunction with Telesat Corporation’s unaudited interim condensed consolidated financial statements and the related notes for the three-month period ended March 31, 2024.

As used in this MD&A, unless the context states or requires otherwise, references to “Telesat,” “Company,” “we,” “our” and “us” refer to Telesat Corporation and its subsidiaries. Unless the context states or requires otherwise, reference herein to “the consolidated financial statements” or “the financial statements” or similar terms refer to Telesat Corporation’s unaudited interim condensed consolidated financial statements included herein.

All figures reported in this MD&A are in Canadian dollars, except where we indicate otherwise, and are referenced as “$” and “dollars”.

This MD&A contains a translation of some Canadian dollar amounts into United States dollars at specified exchange rates solely for your convenience. All references to “US$” and “U.S. dollar” refer to United States dollars.

The financial statements presented herein have been prepared in accordance with International Accounting Standards34, Interim Financial Reporting.

Certain totals, subtotals and percentages may not reconcile due to rounding.

The information contained in this MD&A takes into account information available up to May 9, 2024, unless otherwise noted.

This MD&A makes reference to certain non-IFRS measures, namely, Adjusted EBITDA, Adjusted EBITDA margin and Consolidated EBITDA. These measures are not recognized measures under International Financial Reporting Standards (“IFRS”) and do not have a standardized meaning prescribed by IFRS and are therefore unlikely to be comparable to similar measures presented by other companies. Accordingly, these measures should not be considered in isolation nor as a substitute for analysis of our financial information reported under IFRS. Rather, these non-IFRS measures are used to provide investors with supplemental measures of our operating performance and thus highlight trends in our core business that may not otherwise be apparent when relying solely on IFRS measures. We also believe that securities analysts, investors and other interested parties frequently use non-IFRS measures in the evaluation of issuers. Our management also uses non-IFRS measures in order to facilitate operating performance comparisons from period to period, to prepare annual operating budgets and forecasts and to determine components of management compensation. For a reconciliation of the non-IFRS measure to the most closely comparable IFRS measure, see below under the heading “Non-IFRS Measures”.

FORWARD LOOKING STATEMENTS

This MD&A contains forward-looking statements within the meaning of the U.S. Private Securities Litigation Reform Act of 1995. When used in this MD&A, the words “believes,” “expects,” “plans,” “may,” “will,” “would,” “could,” “should,” “anticipates,” “estimates,” “project,” “intend” or “outlook” or other variations of these words or other similar expressions are intended to identify forward-looking statements and information. In addition, Telesat or its representatives have made or may make forward-looking statements, orally or in writing, which may be included in, but are not limited to, various filings made from time to time with the U.S. Securities and Exchange Commission (“SEC”) and Canadian securities regulatory authorities, and press releases or oral statements made with the approval of an authorized executive officer of Telesat. Statements containing forward-looking information are not historical facts nor assurances of future performance but instead represent management’s expectations, estimates and projections regarding future events or circumstances.

These forward-looking statements and other forward-looking information are based on our opinions, estimates and assumptions in light of our experience and perception of historical trends, current conditions and expected future developments, as well as other factors that we currently believe are appropriate and reasonable in the circumstances. Actual results may differ materially from anticipated results as a result of certain risks and uncertainties. The results are not limited to the risks listed below and, in the section, entitled “Risk Factors” included in Telesat Corporation’s Annual Report on Form 20-F for the year ended December 31, 2023 (the “Annual Report”) which were filed with the SEC and the Canadian securities regulatory authorities on March 28, 2024. The Annual Report can be obtained on the SEC’s website at https://www.sec.gov and the System for Electronic Document Analysis and Retrieval (“SEDAR+”)

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at https://www.sedarplus.ca. There may be additional risks of which we are not presently aware or that we currently believe are immaterial which could have an adverse impact on our business. We make no commitment to revise or update any forward-looking statements in order to reflect events or circumstances that may change, except where we are expressly required to do so by law.

Factors that could cause actual results to differ from those projected include, but are not limited to (1) risks associated with financial factors, including swings in the global financial markets, fluctuations in interest rates, fluctuations in foreign exchange rates, and access to capital; (2) risks associated with satellite services, including dependence on large customers, launch delays and failures, in-orbit failures and competition; (3) risks and uncertainties associated with Telesat Lightspeed, including overcoming technological challenges, access to spectrum and markets, governmental restrictions or regulations, the impact of inflation on development costs and financing, raising sufficient capital to design and implement the system and competition from other low earth orbit systems; (4) regulatory risks, such as the effect of industry and government regulations that affect Telesat; and (5) other risks. The foregoing list of important factors is not exclusive. Furthermore, Telesat operates in an industry sector where securities values may be volatile and may be influenced by economic and other factors beyond Telesat’s control.

These factors should not be construed as exhaustive and should be read with the other cautionary statements in this MD&A. These forward-looking statements are based on our current expectations, estimates, forecasts and projections about our business and the industry in which we operate and management’s beliefs and assumptions, and are not guarantees of future performance or development and involve known and unknown risks, uncertainties and other factors that are in some cases beyond our control. As a result, any or all of our forward-looking statements in this MD&A may turn out to be inaccurate.

Comparisons of results for current and any prior periods are not intended to express any future trends or indications of future performance, unless specifically expressed as such, and should only be viewed as historical data. These forward-looking statements speak only as at the date of this MD&A. Except as required by law, we assume no obligation to update or revise these forward-looking statements for any reason, even if new information becomes available in the future. You should, however, review the factors and risks we describe in the reports we will file from time to time with the SEC and the Canadian securities regulatory authorities, after the date of this MD&A.

This MD&A contains estimates, projections, market research and other information concerning our industry, our business, and the markets for our services. Information that is based on estimates, forecasts, projections, market research or similar methodologies is inherently subject to uncertainties, and actual events or circumstances may differ materially from events and circumstances that are assumed in this information.

Unless otherwise expressly stated, we obtained this industry, business, market and other data from our own internal estimates and research as well as from reports, research surveys, studies and similar data prepared by market research firms and other third parties, industry and general publications, government data and similar sources.

In addition, assumptions and estimates of our and our industry’s future performance are necessarily subject to a high degree of uncertainty and risk due to a variety of factors, including those described in the section of our Annual Report entitled “Risk Factors” and our report on Form 6-K filed on March28, 2024. These and other factors could cause our future performance to differ materially from our assumptions and estimates.

Any references to forward-looking statements in this MD&A include forward-looking information within the meaning of applicable Canadian securities laws.

Additional information regarding the Company can be obtained on the SEC’s website at https://www.sec.gov and on SEDAR+ at https://www.sedarplus.ca.

OPERATING HIGHLIGHTS

Telesat and Government of Canada Agree to Terms on C$2.14 Billion Loan in Support of Telesat Lightspeed

On March28, 2024, Telesat received a letter from Canada’s Minister of Innovation, Science and Industry regarding an investment in Telesat Lightspeed. The letter states that, following several months of negotiations between Telesat and federal officials, the Government of Canada (“GoC”) is prepared to invest C$2.14billion in Telesat Lightspeed by way of a loan to Telesat LEO Inc., a wholly owned subsidiary of Telesat, that is developing and will own and operate the highly advanced Telesat Lightspeed Low Earth Orbit (“LEO”) global broadband satellite constellation.

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The loan will carry a floating interest rate that is 4.75% above the Canadian Overnight Repo Rate Average (CORRA) with a 15-year maturity. Interest is payable in-kind during the Telesat Lightspeed construction period, followed by a 10-year sculpted amortization. Furthermore, Telesat LEO Inc. will provide the GoC with warrants for 10% of the common shares of Telesat LEO based upon an equity valuation for Telesat LEO of US$3billion.

The GoC investment is subject to certain conditions, including the entry of definitive documentation with the GoC and Telesat’s other financing sources.

SUBSEQUENT EVENTS

Repurchase of Debt

In April 2024 and up to May9, 2024, we repurchased Senior Secured Notes, 2026 Senior Secured Notes, Senior Unsecured Notes and the Term Loan B with a principal amount of US$75.0million, US$12.0million, US$73.8million and US$58.7million, respectively at an aggregate cost, of US$98.9million, inclusive of accrued interest of US$5.0million.

OVERVIEW OF THE BUSINESS

We are a leading global satellite services operator, providing our customers with mission-critical communications services since the start of the satellite communications industry in the 1960s. Through a combination of advanced satellites and ground facilities and a highly expert and dedicated staff, our communications solutions support the requirements of sophisticated satellite users throughout the world. We are organized into two operating segments; GEO and LEO. We provide our services through three business categories: Broadcast, Enterprise and Consulting and other.

The satellite services business is capital intensive and the build-out of a satellite fleet requires substantial time and investment. Once the investment in a satellite is made, the incremental costs to maintain and operate the satellite are relatively low over the life of the satellite, with the exception of in-orbit insurance.

As at March 31, 2024, we provided satellite services to customers from our fleet of 15 in-orbit geostationary satellites, as well as our Canadian payload on the ViaSat-1 satellite. We also managed the operations of additional satellites for third parties.

We are developing what we believe will be one of the world’s most advanced constellations of low earth orbit satellites and integrated terrestrial infrastructure, called “Telesat Lightspeed” — a platform designed to revolutionize the provision of global broadband connectivity. In January 2018, our first LEO satellite, LEO 1, was successfully launched into orbit. The LEO 1 satellite demonstrated certain key features of the Telesat Lightspeed system design, specifically the capability of the satellite and customer terminals to deliver a low latency broadband experience. In July 2023, we successfully launched our LEO 3 satellite into orbit and it has since replaced LEO 1. We also installed ground infrastructure at our teleport in Allan Park, Ontario, to support testing with a variety of existing and prospective customers and potential suppliers of the Telesat Lightspeed system hardware who have been participating in trials since the second half of 2018.

Telesat and its affiliates operate satellites pursuant to authorizations granted by governments, including those of Canada, the United States, Brazil, the Kingdom of Tonga and the United Kingdom, to access and use certain geostationary orbital locations and associated spectrum resources. The use of these orbital locations, as well as our other operations, is subject to a variety of Canadian and international regulations.

Revenue

We earn most of our revenue by providing video and data services using satellite transponder capacity. We also earn revenue by providing ground-based transmit and receive services, selling equipment, managing satellite networks, and providing consulting services in the field of satellite communications.

We recognize revenue from satellite services on a monthly basis as services are performed in an amount that reflects the consideration we expect to receive in exchange for those services. We account for a contract when it has approval and commitment from both parties, the rights of the parties are identified, payment terms are identified, the contract has commercial substance and collectability is considered probable.

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Consulting revenue for cost plus contracts is recognized as the approved time and labor is completed by Telesat. We recognize consulting revenue for fixed price contracts using the input method to determine the progress towards complete satisfaction of the performance obligation. Equipment sale revenue is recognized when the customer obtains control of the equipment, being at the time the equipment is delivered to and accepted by the customer.

Expenses

Our operating expenses consist of labor, the cost of which has historically been relatively stable, and variable operating expenses which include in-orbit insurance and direct-billed expenses, such as third-party contractor services. As we further our Lightspeed development, we anticipate that our labor costs will increase.

Interest expense is significant and arises principally from our: Senior Secured Credit Facilities comprised of two outstanding secured credit facilities, which include a revolving facility maturing in 2024 and Term Loan B (“U.S. TLB Facility”) maturing in 2026 (together, the “Senior Secured Credit Facilities”); 6.5% senior unsecured notes due in 2027 issued by Telesat Canada and Telesat LLC, as the co-issuer (the “Senior Unsecured Notes”); 4.875% senior secured notes due in 2027 issued by Telesat Canada and Telesat LLC, as the co-issuer (the “Senior Secured Notes”); and 5.625% senior secured notes due in December 2026 issued by Telesat Canada and Telesat LLC, as the co-issuer (the “2026 Senior Secured Notes”).

Other significant operating expenses include the straight-line depreciation of the cost of each of our satellites over their useful lives and amortization expense related to various finite-life intangible assets.

FUTURE OUTLOOK

Our desirable spectrum rights, commitment to providing the highest level of customer service, deep technical expertise and culture of innovation have enabled us to successfully develop our business to date. Leveraging these strengths and building on our existing contractual revenue backlog, our focus is on profitably growing our business by increasing the utilization of our in-orbit satellites and, in a disciplined manner, deploying expansion satellite capacity where we anticipate there will be strong market demand.

After decades of developing and successfully operating our geosynchronous orbit-based satellite services business, we are now poised to revolutionize the provision of global broadband connectivity by developing what we believe will be one of the world’s most advanced constellations of LEO satellites and integrated terrestrial infrastructure, Telesat Lightspeed.

We believe we are well-positioned to serve our customers and the markets in which we participate. Although we pursue opportunities to develop new satellites, we do not procure additional or replacement satellites until we believe there is a demonstrated need and a sound business plan for such satellite capacity.

As we move through 2024, we remain focused on increasing the utilization of our existing satellites, the development of our global Telesat Lightspeed constellation, and identifying and pursuing opportunities to invest in expansion satellite capacity all while maintaining our operating discipline.

RESULTS OF OPERATIONS

Review of financial performance

Telesat Corporation’s net loss for the three months ended March 31, 2024, was $52.3 million compared to net income of $28.4 million for the same period in the prior year. The $80.8 million decrease was primarily due to a negative variation in the gain (loss) on foreign exchange combined with a decrease in revenues.

Below are the foreign exchange rates used for our interim condensed consolidated financial statements and this MD&A:

	Q1 2024	March 31, 2024	December 31, 2023
US$ to $ spot rate	—	1.3540	1.3243
US$ to $ average rate	1.3483	—	—

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	Q1 2023	March 31, 2023	December 31, 2022
US$ to $ spot rate	—	1.3516	1.3554
US$ to $ average rate	1.3519	—	—

Revenue

	Three months ended March 31,				% Increase (Decrease)
($ millions except percentages)	2024		2023
Broadcast	$	72.5	$	85.6	(15.3	)%
Enterprise		72.8		93.9	(22.5	)%
Consulting and other		6.8		3.9	74.6	%
Revenue	$	152.2	$	183.4	(17.0	)%

Total revenue for the three months ended March 31, 2024, decreased by $31.2 million to $152.2 million, when compared to the same period in the prior year.

Revenue from Broadcast services decreased by $13.1 million for the three months ended March 31, 2024, when compared to the same period in the prior year. The change was attributable to a decrease in GEO revenues, mainly due to a reduction of services and lower rate on the renewal of a long-term agreement with a North American DTH customer.

Revenue from Enterprise services decreased by $21.1 million for the three months ended March 31, 2024, when compared to the same period in the prior year. The change was attributable to a decrease in GEO revenues, primarily due to terminations and reductions of services by mobility and Latin American customers combined with lower equipment sales to Canadian Government customers.

Consulting and other revenue increased by $2.9million for the three months ended March 31, 2024, when compared to the same period in the prior year. The increase in revenue was due to an increase in LEO revenues related to services provided to NASA Goddard Space Flight Center, while GEO consulting revenues were unchanged.

Expenses

	Three months ended March 31,				% Increase (Decrease)
($ millions except percentages)	2024		2023
Depreciation	$	36.4	$	46.4	(21.5	)%
Amortization		2.8		3.4	(16.0	)%
Operating expenses		47.1		53.5	(11.9	)%
Total expenses	$	86.3	$	103.2	(16.4	)%

Depreciation

Depreciation of satellites, property and other equipment decreased by $10.0 million for the three-month period ended March 31, 2024, when compared to the same period in the prior year. The decrease in depreciation was primarily due to the end of useful lives, for accounting purposes, of our Nimiq 4 satellite in September 2023 and our Telstar 14R at the beginning of 2024.

Amortization

Amortization of intangible assets decreased by $0.5 million for the three-month period ended March 31, 2024, when compared to the same period in the prior year. The decrease was primarily related to the end of useful life, for accounting purposes, of certain revenue backlog and transponder rights.

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Operating Expenses

	Three months ended March 31,				% Increase (Decrease)
($ millions except percentages)	2024		2023
Compensation and employee benefits	$	25.3	$	30.0	(15.6	)%
Other operating expenses		11.1		12.6	(11.6	)%
Cost of sales		10.7		10.9	(2.0	)%
Operating expenses	$	47.1	$	53.5	(11.9	)%

Total operating expenses decreased by $6.4 million for the three-month period ended March 31, 2024, when compared to the same period in the prior year.

Compensation and employee benefits decreased by $4.7 million for the three-month period ended March 31, 2024, in comparison to the same period in the prior year. The decrease was primarily due to lower non-cash share-based compensation in GEO combined with higher capitalized engineering relating to LEO. This was partially offset by higher non-cash share-based compensation and higher wages and benefits in LEO.

Other operating expenses decreased by $1.5 million for the three-month period ended March 31, 2024, in comparison to the same period in the prior year. The decrease was primarily due to lower bad debt expense in GEO.

Cost of sales decreased by $0.2 million for the three-month period ended March 31, 2024, when compared to the same period in the prior year. The decrease was primarily due to lower GEO equipment sales to Canadian Government customers. This was partially offset by higher consulting costs associated with the LEO services provided to the NASA Goddard Space Flight Center.

Interest Expense

	Three months ended March 31,					% Increase (Decrease)
($ millions except percentages)	2024		2023
Debt service costs	$	60.2	$	64.2		(6.3	)%
Interest expense on significant financing component		3.6		4.1		(11.8	)%
Interest expense on satellite performance incentive payments		0.3		0.4		(22.0	)%
Interest expense on employee benefit plans		—		(0.2	)	(79.3	)%
Interest expense on leases		0.4		0.4		(2.4	)%
Interest expense	$	64.4	$	68.9		(6.5	)%

Interest expense included interest related to our debt, as well as interest related to our derivative instruments, significant financing components on certain revenue agreements, satellite performance incentive payments, employee benefit plans and leases.

Debt service costs, which included interest expense on indebtedness and derivative instruments, decreased by $4.0 million for the three months ended March 31, 2024, when compared to the same period in the prior year. The decrease in interest expense was primarily due to the impact of the repurchases of a portion of the U.S. TLB Facility, Senior Unsecured Notes, Senior Secured Notes and 2026 Senior Secured Notes. This was partially offset by an increase in interest rates on the U.S. TLB Facility.

Interest expense on significant financing component decreased by $0.5 million for the three months ended March 31, 2024, when compared to the same period in the prior year. The decrease in interest expense was primarily due to lower average prepayment balances for revenue agreements with a significant financing component.

Interest on satellite performance incentive payments decreased by $0.1 million for the three months ended March 31, 2024, when compared to the same period in the prior year, primarily due to declining balances of satellite performance incentive liabilities.

Interest expense on employee benefit plans increased by $0.2 million for the three months ended March 31, 2024, when compared to the same period in the prior year. The increase was primarily due to a higher estimate of interest expense according to actuarial reports.

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Interest expense on leases remained constant for the three months ended March 31, 2024, when compared to the same period in the prior year.

Interest and Other Income

	Three months ended March 31,
($ millions)	2024		2023
Interest and other income	$	21.1	$	15.5

Interest and other income increased by $5.7 million for the three-month period ended March 31, 2024, when compared to the same period in the prior year. The increase was primarily due to higher interest rates earned on our outstanding cash and cash equivalent balances, combined with higher investment balances.

Foreign Exchange

	Three months ended March 31,
($ millions)	2024			2023
Gain (loss) on foreign exchange	$	(68.4	)	$	10.1

The foreign exchange loss for the three months ended March 31, 2024, was $68.4 million compared to a foreign exchange gain of $10.1 million for the same period in the prior year, resulting in a negative change of $78.5 million.

The loss for the three months ended March 31, 2024, was mainly the result of a stronger U.S. dollar to Canadian dollar spot rate as at March 31, 2024 ($1.3540), compared to the spot rate as at December 31, 2023 ($1.3243), and the resulting unfavorable impact on the translation of our U.S. dollar denominated indebtedness.

The gain for the three months ended March 31, 2023, was mainly the result of a weaker U.S. dollar to Canadian dollar spot rate as at March 31, 2023 ($1.3516), compared to the spot rate as at December 31, 2022 ($1.3554), and the resulting favorable impact on the translation of our U.S. dollar denominated indebtedness.

Income Taxes

	Three months ended March 31,
($ millions)	2024			2023
Current tax expense (recovery)	$	7.9		$	13.7
Deferred tax expense (recovery)		(1.5	)		(5.2	)
Tax expense (recovery)	$	6.5		$	8.5

The tax expense (recovery) for the three months ended March 31, 2024, was $2.1 million lower than the same period in the prior year. The decrease was primarily due to a decrease in operating income.

Backlog

Remaining performance obligations, which we refer to as contracted revenue backlog (“backlog”), represents our expected future revenue from existing service contracts (without discounting for present value) including any deferred revenue that we will recognize in the future in respect of cash already received. The majority of our contracted revenue backlog is generated from contractual agreements for satellite capacity. We do not include revenue beyond the stated expiration date of a contract regardless of the potential for a renewal. As at March 31, 2024, our contracted backlog was approximately $1.2 billion, which does not include any backlog associated with the Telesat Lightspeed program.

Generally, following the successful launch of a satellite, if the satellite is operating nominally, our customers may only terminate their service agreements for satellite capacity by paying us all, or substantially all, of the payments that would have otherwise become due over the term of the service agreement. However, if certain of our existing satellites were to experience an in-orbit failure, or otherwise fail to operate as anticipated, our customers may be entitled to terminate their agreement and we may be obligated to return all or a portion of the customer prepayments made

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under service agreements for that satellite and reduce the associated contractual revenue from revenue backlog. Any repayments under such conditions would be funded by insurance proceeds we may receive, cash on hand, short-term investments, and funds available under our Revolving Credit Facility (as defined below).

We expect our backlog as at March 31, 2024 to be recognized as follows:

($ millions)	Remaining 2024		2025		2026		2027		2028		Thereafter
Backlog	$	333.6	$	280.0	$	204.0	$	132.9	$	68.9	$	219.5

LIQUIDITY AND CAPITAL RESOURCES

Cash and Available Credit

As at March 31, 2024, we had $1,756.3 million of cash and short-term investments, including $1,256.7 million held in unrestricted subsidiaries, as well as approximately US$200.0 million (or Canadian dollar equivalent) borrowing availability under our Revolving Credit Facility.

Cash Flows from Operating Activities

Cash flows from operating activities for the three months ended March 31, 2024, was $75.6 million, a $12.9 million increase compared to the same period in the prior year. The increase was primarily due to higher income taxes received and lower interest paid.

Cash Flows (used in) generated from Investing Activities

Cash used in investing activities for the three months ended March 31, 2024 was $20.0 million. This consisted mainly of payments associated with the Telesat Lightspeed constellation.

Cash used in investing activities for the three months ended March 31, 2023 was $25.0 million. This consisted mainly of payments associated with the Telesat Lightspeed constellation and the then newly acquired Anik F4 satellite.

Cash Flows (used in) generated from Financing Activities

Cash used in financing activities for the three months ended March 31, 2024 was $2.3 million. This was primarily due to tax withholdings on the settlement of restricted share units.

Cash used in financing activities for the three months ended March 31, 2023 was $2.1 million. This was primarily due to payments on the satellite performance incentive payments.

Government Grant

In 2019, we entered into an agreement with the GoC pursuant to which the GoC would contribute up to $85.0 million to support the development of the Telesat Lightspeed constellation through the GoC Strategic Innovation Fund. In return for the grant, Telesat has made a number of commitments to the GoC, including commitments to conduct over $200.0 million of research and development activities in Canada as well as to expand its Canadian workforce.

The costs that were incurred in connection with this program are summarized below:

($ millions)	Three months ended  March 31, 2024		Year ended December 31, 2023
Satellites, property and other equipment	$	24.3	$	106.9
Intangible assets		—		16.4
Operating expenses		17.5		48.3
Total costs incurred	$	41.8	$	171.6

Total research and development costs for Telesat Lightspeed for the three months ended March 31, 2024 increased by $20.9million from $20.9million to $41.8million, when compared to the same period in the prior year.

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The variation was primarily driven by a ramp in the Telesat Lightspeed program.

The following claims against the government grant have been made against the costs incurred associated with the program:

($ millions)	Three months ended  March 31, 2024		Year ended December 31, 2023
Satellites, property and other equipment	$	0.3	$	15.0
Operating expenses		2.3		4.5
Total claims	$	2.6	$	19.5

Liquidity

A large portion of our annual cash receipts are reasonably predictable because they are primarily derived from an existing backlog of long-term customer contracts. We believe cash and short-term investments as at March 31, 2024, cash flows from operating activities, and drawings on the Revolving Credit Facility under our Senior Secured Credit Facilities will be adequate to meet our expected cash requirements for at least the next twelve months for activities in the normal course of business, including required interest and principal payments on our indebtedness and our capital requirements. This includes the commitments we have made to date for our Telesat Lightspeed program, but it does not include the capital that would be required to commence construction of the constellation.

We have from time to time used available cash to repurchase some of our existing debt. We may from time to time continue to seek to repay, repurchase, exchange, refinance or otherwise retire our existing debt in open market transactions, privately negotiated transactions, tender offers, exchange offers, pursuant to the term of debt or otherwise. We may also incur additional debt to fund such transactions or exchange existing debt for newly issued debt obligations or equity or equity-like securities. Such transactions, if any, will depend on prevailing market conditions, trading prices of debt from time to time, our liquidity requirements and cash position, contractual restrictions and other factors. The amount involved in any such transactions, individually or in the aggregate, may be material. We cannot provide any assurance as to if or when we will consummate any such transactions or the terms of any such transactions.

The construction of any satellite replacement or expansion program will require significant capital expenditures, in particular the planned Telesat Lightspeed constellation. Cash required for any future satellite programs may be funded from a range of sources including: cash and short-term investments, cash flows generated from operating activities, cash flows from customer prepayments or through borrowings on the Revolving Credit Facility under the Senior Secured Credit Facilities; vendor financing; equity investments, including through the issuance of public equity; export credit agency financing; additional secured or unsecured debt financing; and from government sources. We may raise additional funding for the Telesat Lightspeed constellation through the issuance of additional equity of, or debt at, our unrestricted subsidiaries which will own, operate and commercialize the Telesat Lightspeed constellation.

In addition, we may sell certain satellite assets and, in accordance with the terms and conditions of the Senior Secured Credit Facilities, reinvest the proceeds in replacement satellites or pay down indebtedness under the Senior Secured Credit Facilities. However, our ability to access these sources of funding is not guaranteed, and therefore, we may not be able to fully fund additional replacement or new satellite programs.

We are developing our planned Telesat Lightspeed constellation in Unrestricted Subsidiaries (as defined in the credit agreement governing our Senior Secured Credit Facilities (the “Credit Agreement”) and indentures governing the Senior Unsecured Notes, Senior Secured Notes and 2026 Senior Secured Notes (together, the “Indentures”)), and we expect to complete the development of, fund, and operate our Telesat Lightspeed constellation through current or future Unrestricted Subsidiaries.

Debt

Senior Secured Credit Facilities

The obligations under the Credit Agreement and the guarantees of those obligations are secured, subject to certain exceptions, by a first priority security interest in the assets of Telesat Canada and certain of our subsidiaries (“Guarantors”). The Credit Agreement contains covenants that restrict the ability of Telesat Canada and the Guarantors

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to take specified actions, including, among other things and subject to certain significant exceptions: creating liens, incurring indebtedness, making investments, engaging in mergers, selling property, paying dividends, entering into sale-leaseback transactions, creating subsidiaries, repaying subordinated debt or amending organizational documents. The Credit Agreement also requires Telesat Canada and the Guarantors to comply with a maximum first lien leverage ratio and contains customary events of default and affirmative covenants, including an excess cash sweep, that may require us to repay a portion of the outstanding principal under our Senior Secured Credit Facilities prior to the stated maturity.

Our Senior Secured Credit Facilities are comprised of the following facilities:

i — Revolving Credit Facility

Our Revolving Credit Facility (“Revolving Facility”) is a $200.0 million loan facility available in either U.S. dollar or Canadian dollar equivalent, maturing in December 2024. Loans under the Revolving Facility bore interest at a floating interest rate. For Canadian Prime Rate and Alternative Base Rate (“ABR”) loans, an applicable margin ranging from 0.75% to 1.25% is applied to the Prime Rate and ABR as these interest rates are defined in the Senior Secured Credit Facilities. For Bankers Acceptance (“BA”) Loans and Eurodollar Loans, an applicable margin ranging from 1.75% to 2.25% is applied to either the BA interest rate or London Interbank Offered Rate (“LIBOR”). The rates on the Revolving Facility vary depending upon the results of the first lien leverage ratio. Our Revolving Facility currently has an unused commitment fee that ranges from 25 to 37.5 basis points per annum, depending upon the result of the total leverage ratio.

On May 9, 2023, Telesat Canada entered into a seventh amendment (the “Amendment”) to the Credit Agreement. The Amendment amended the Credit Agreement to replace LIBOR-based benchmark rates with Secured Overnight Financing Rate (“SOFR”)-based benchmark rates and to make certain other conforming changes. Following the Amendment, loans under the Revolving Facility will bear interest, at Telesat Canada’s option, at either (x) in the case of loans denominated in Canadian Dollars, (i) a floating rate based on the Canadian prime rate, plus an applicable margin ranging from 0.75% to 1.25% or (ii) a floating rate based on the Canadian BA rate, plus an applicable margin ranging from 1.75% to 2.25%, or (y) in the case of loans denominated in US dollars, (i) a floating rate based on the base rate, plus an applicable margin ranging from 0.75% to 1.25% or (ii) a floating rate based on SOFR, plus an applicable margin ranging from 1.75% to 2.25%.

As at March 31, 2024, other than approximately $0.2 million in drawings related to letters of credit, there were no borrowings under this facility.

ii — Term Loan B — U.S. Facility

Our Term Loan B — U.S. Facility is a US$1,908.5 million facility maturing in December 2026. As at March 31, 2024, the outstanding balance was US$1,421.8 million.

The borrowings under our U.S. TLB Facility bore interest at a floating rate of either: (i) LIBOR as periodically determined for interest rate periods selected by Telesat Canada in accordance with the terms of the Senior Secured Credit Facilities plus an applicable margin of 2.75%; or (ii) Alternative Base Rate as determined in accordance with the terms of the Senior Secured Credit Facilities plus an applicable margin of 1.75%.

On May 9, 2023, Telesat Canada entered into the Amendment to the Credit Agreement. The Amendment amends the Credit Agreement to replace LIBOR-based benchmark rates with SOFR-based benchmark rates and to make certain other conforming changes. Following the Amendment, loans under the Term Loan B Facility will bear interest, at Telesat Canada’s option, at either (i) a floating rate based on the base rate, plus an applicable margin of 1.75% or (ii) a floating rate based on SOFR, plus an applicable margin of 2.75%. In addition, loans benchmarked against SOFR will be subject to a credit spread adjustment of 0.11448% for a one-month interest period, 0.26161% for a three-month interest period and 0.42826% for a six-month interest period.

The mandatory principal repayments on our U.S. TLB Facility are one quarter of 1.00% of the value of the loan, which must be paid on the last day of each quarter. There are currently no mandatory quarterly principal repayments required.

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Senior Secured Notes

Our Senior Secured Notes, in the amount of US$400.0 million, bear interest at an annual rate of 4.875% and are due in June 2027. As at March 31, 2024, the balance outstanding was US$300.0 million. The indenture governing the Senior Secured Notes includes covenants or terms that restrict our ability to, among other things, incur additional indebtedness, incur liens, pay dividends or make certain other restricted payments, investments or acquisitions, enter into certain transactions with affiliates, modify or cancel our satellite insurance, effect mergers with another entity, and redeem our Senior Secured Notes, without penalty, before December 1, 2024, in each case subject to exceptions provided in the Senior Secured Notes indenture.

2026 Senior Secured Notes

On April 27, 2021, we issued US$500.0 million in aggregate principal amount of 2026 Senior Secured Notes which bear interest at an annual rate of 5.625% and are due in December 2026. As at March 31, 2024, the balance outstanding was US$399.0 million. The indenture governing the 2026 Senior Secured Notes includes covenants and terms that restrict our ability to, among other things, incur additional indebtedness, incur liens, pay dividends or make certain other restricted payments, investments or acquisitions, enter into certain transactions with affiliates, modify or cancel its satellite insurance, and effect mergers with another entity, in each case subject to exceptions provided in such indenture.

Senior Unsecured Notes

Our Senior Unsecured Notes, in the original principal amount of US$550.0 million, bear interest at an annual rate of 6.5% and are due in October 2027.

As at March 31, 2024, the balance outstanding was US$295.0 million. The indenture governing the Senior Unsecured Notes includes covenants or terms that restrict our ability to, among other things, incur additional indebtedness, incur liens, pay dividends or make certain other restricted payments, investments or acquisitions, enter into certain transactions with affiliates, modify or cancel our satellite insurance, effect mergers with another entity, and redeem our Senior Unsecured Notes, without penalty, before October 15, 2024, in each case subject to exceptions provided in the Senior Unsecured Notes indenture.

As at March 31, 2024, we were in compliance with the financial covenants of our Senior Secured Credit Facilities, the indenture governing our Senior Unsecured Notes, the indenture governing our Senior Secured Notes and the indenture governing our 2026 Senior Secured Notes.

Debt Service Cost

An estimate of the interest expense is based upon assumptions of foreign exchange rates, SOFR, BA rates and the applicable margins of our Senior Secured Credit Facilities. Our interest expense for the year ending December 31, 2024, is expected to be approximately $240.3 million. The interest expense excludes the amortization of our deferred financing costs, prepayment options and loss on repayment.

Derivatives

We use, from time to time, interest rate and currency derivatives to manage our exposure to changes in interest rates and foreign exchange rates. As at March 31, 2024, there were no interest rate or currency derivatives that were outstanding.

We also have embedded derivatives that are accounted for separately at fair value. These embedded derivatives are related to the prepayment option on our Senior Unsecured Notes, the prepayment option on our Senior Secured Notes and the prepayment option on our 2026 Senior Secured Notes. As at March 31, 2024, the fair value of the embedded derivative related to the prepayment option on our Senior Unsecured Notes, Senior Secured Notes and 2026 Senior Secured Notes was $Nil.

The changes in the fair value of these embedded derivatives are recorded on our consolidated statements of income as a gain or loss on changes in fair value of financial instruments and are non-cash.

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All derivative instruments are measured at fair value. Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants in the principal market under current market conditions at the measurement date. Where possible, fair values are based on the quoted market values in an active market. In the absence of an active market, we determine fair values based on prevailing market rates (bid and ask prices, as appropriate) for instruments with similar characteristics and risk profiles or internal or external valuation models, such as option pricing models and discounted cash flow analysis, using observable market-based inputs.

These estimates are affected significantly by the assumptions for the amount and timing of estimated future cash flows and discount rates, which all reflect varying degrees of risk. Potential income taxes and other expenses that would be incurred on disposition of our derivative instruments are not reflected in the fair values. The fair values also include an adjustment related to the counterparty credit risk. As a result, the fair values are not necessarily the net amounts that would be realized if these instruments were actually settled.

MARKET RISK

Credit Risk Related to Financial Instruments

Financial instruments that potentially subject us to a concentration of credit risk consist of cash and short-term investments, accounts receivable, derivative assets and other assets. Cash and short-term investments are invested with high quality financial institutions and are governed by our corporate investment policy, which aims to reduce credit risk by restricting investments to high-grade, mainly U.S. dollar and Canadian dollar denominated investments. Credit checks are performed to minimize exposure to any one customer. We are exposed to credit risk if counterparties to our derivative instruments are unable to meet their obligations. It is expected that these counterparties will be able to meet their obligations as they are institutions with strong credit ratings, but we continue to periodically monitor their credit risk and credit exposure.

Foreign Exchange Risk

Our operating results are subject to fluctuations as a result of exchange rate variations to the extent that transactions are made in currencies other than Canadian dollars. The most significant impact of variations in the exchange rate is on our U.S. dollar denominated indebtedness and cash and short-term investments. In addition, a portion of our revenue and expenses, as well as the majority of our capital expenditures are denominated in U.S. dollars. As a result, the volatility of the U.S. currency exposes us to foreign exchange risks.

For the three-month period ended March 31, 2024, we recorded a mainly non-cash foreign exchange loss of approximately $68.4 million due to a stronger U.S. to Canadian dollar spot rate ($1.3540) compared to December 31, 2023 ($1.3243).

For the three-month period ended March 31, 2023, we recorded a mainly non-cash foreign exchange gain of approximately $10.1 million due to a weaker U.S. to Canadian dollar spot rate ($1.3516) compared to December 31, 2022 ($1.3554).

The approximate amount of our revenue and certain expenses denominated in U.S. dollars, as a percentage of their overall balance, is summarized in the table below:

Three months ended March 31,	2023		2023
Revenue	51.5	%	49.1	%
Operating expenses	46.1	%	41.4	%
Interest on our indebtedness	100.0	%	100.0	%

We use, from time to time, the following instruments to manage our exposure to foreign exchange risk:

•forward currency contracts to hedge foreign exchange risk on anticipated cash flows, mainly related to the construction of satellites and interest payments; and

•currency derivative instruments to hedge the foreign exchange risk on our U.S. dollar denominated indebtedness.

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Our policy is that we do not use derivative instruments for speculative purposes. As at March 31, 2024, we have no forward currency contracts nor any currency derivative instruments.

A five percent increase (decrease) in the value of the U.S. dollar against the Canadian dollar would have increased (decreased) our indebtedness and (decreased) increased our net income (loss) as at March 31, 2024 by $163.5 million.

A five percent increase (decrease) in the value of the U.S. dollar against the Canadian dollar would have increased (decreased) our cash and cash equivalents by $79.7 million, increased (decreased) our net income (loss) by $12.6 million and increased (decreased) our other comprehensive income (loss) by $67.0 million as at and for the three months ended March 31, 2024.

A five percent increase (decrease) in the value of the U.S. dollar against the Canadian dollar would have increased (decreased) our revenue and certain expenses for the three months ended March 31, 2024, as summarized in the table below:

($ millions)
Revenue	$	3.9
Operating expenses	$	1.1
Interest on our indebtedness	$	3.0

The sensitivity analyses above assume that all other variables remain constant.

Through our U.S. dollar denominated indebtedness, we are exposed to foreign exchange fluctuations. The following table contains our existing U.S. dollar denominated indebtedness balances at the beginning of each respective period, which are net of our scheduled debt repayments, and based on the foreign exchange rate as at March 31, 2024.

($ millions, beginning of period)	Q2 2024		2025		2026		2027
U.S. TLB Facility	$	1,925.1	$	1,925.1	$	1,925.1	$	—
Senior Unsecured Notes		399.4		399.4		399.4		399.4
Senior Secured Notes		406.2		406.2		406.2		406.2
2026 Senior Secured Notes		540.3		540.3		540.3		—
U.S. dollar denominated debt balances	$	3,271.0	$	3,271.0	$	3,271.0	$	805.6

Interest Rate Risk

We are exposed to interest rate risk on our cash and short-term investments and on our indebtedness, a portion of the indebtedness which includes a variable interest rate. Changes in the interest rates could impact the amount of interest that we receive or are required to pay.

We use, from time to time, interest rate swaps to hedge the interest rate risk related to our indebtedness.

Our policy is that we do not use derivative instruments for speculative purposes.

If the interest rates on our variable rate debt increased (decreased) by 0.25%, the result would be a decrease (increase) of $1.2 million to our net income (loss) for three months ended March 31, 2024.

As at March 31, 2024, through our U.S. TLB Facility we are exposed to interest rate fluctuations. The following table contains the balance of the U.S. TLB facility at the beginning of each respective period, net of our scheduled repayments, and based on the foreign exchange rate as at March 31, 2024.

($ millions)	Q2 2024		2025		2026
U.S. TLB Facility	$	1,925.1	$	1,925.1	$	1,925.1

NON-IFRS MEASURES

Adjusted EBITDA

Adjusted EBITDA and Adjusted EBITDA margin are non-IFRS measures. EBITDA is defined as “Earnings Before Interest, Taxes, Depreciation and Amortization.” Adjusted EBITDA is used to measure our financial performance. Adjusted EBITDA is defined as operating income (excluding certain operating expenses such as

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share-based compensation expenses and unusual and non-recurring items, including restructuring related expenses) before interest expense, taxes, depreciation and amortization. Adjusted EBITDA margin is used to measure our operating performance. Adjusted EBITDA margin is defined as the ratio of Adjusted EBITDA to revenue.

Adjusted EBITDA and Adjusted EBITDA margin are not standardized financial measures under IFRS and might not be comparable to similar financial measures disclosed by other issuers. Adjusted EBITDA allows investors and us to compare our operating results with that of competitors exclusive of depreciation and amortization, interest and investment income, interest expense, taxes and certain other expenses. Financial results of competitors in the satellite services industry have significant variations that can result from timing of capital expenditures, the amount of intangible assets recorded, the differences in assets’ lives, the timing and amount of investments, the effects of other income (expense), and unusual and non-recurring items. The use of Adjusted EBITDA assists investors and us to compare operating results exclusive of these items. Competitors in the satellite services industry have significantly different capital structures. We believe that the use of Adjusted EBITDA improves comparability of performance by excluding interest expense.

We believe that the use of Adjusted EBITDA and the Adjusted EBITDA margin along with IFRS financial measures enhances the understanding of our operating results and is useful to investors and us in comparing performance with competitors, estimating enterprise value and making investment decisions. Adjusted EBITDA and Adjusted EBITDA margin as used here may not be the same as similarly titled measures reported by competitors. Adjusted EBITDA and Adjusted EBITDA margin should be used in conjunction with IFRS financial measures and are not presented as a substitute for cash flows from operations as a measure of our liquidity or as a substitute for net income (loss) as an indicator of our operating performance.

The following table provides a quantitative reconciliation of net income to Adjusted EBITDA and Adjusted EBITDA margin, each of which are non-IFRS measures.

	Three months ended March 31,
($ millions)	2024			2023
Net income (loss)	$	(52.3	)	$	28.4
Tax expense (recovery)		6.5			8.5
(Gain) loss on foreign exchange		68.4			(10.1	)
Interest and other income		(21.1	)		(15.5	)
Interest expense		64.4			68.9
Depreciation		36.4			46.4
Amortization		2.8			3.4
Non-recurring compensation expenses(1)		0.2			—
Non-cash expense related to share-based compensation		5.4			9.0
Adjusted EBITDA	$	110.7			138.9
Revenue	$	152.2		$	183.4
Adjusted EBITDA Margin		72.8	%		75.7	%

____________

(1)Includes severance payments, special compensation and benefits for executives and employees.

Adjusted EBITDA for Telesat Corporation decreased by $28.2 million for the three-month period ended March 31, 2024, when compared to the same period in the prior year. The decrease was primarily due to a decrease in revenues, as discussed above.

Consolidated EBITDA for Covenant Purposes

Under the terms of the Credit Agreement for our Senior Secured Credit Facilities, we are required to comply with a senior secured leverage ratio maintenance covenant as well as with other financial ratio covenants that impact, among other items, our ability to incur debt and make dividend payments.

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If our Revolving Credit Facility is drawn by more than 35% of the Credit Facility amount, our Credit Agreement requires us to comply with a first lien net leverage ratio of 5.75:1.00, tested quarterly, and failure to comply will result in an event of default. We refer to this first lien net leverage ratio as the Consolidated Total Secured Debt to Consolidated EBITDA for Covenant Purposes ratio.

Our Credit Agreement limits, among other items, our ability to incur debt and make dividend payments if the total leverage ratio is above 4.50:1.00, with certain exceptions. We refer to this total leverage ratio as the Consolidated Total Debt for Covenant Purposes to Consolidated EBITDA for the purposes of our Senior Secured Credit Facilities.

Our Consolidated Earnings Before Interest, Taxes, Depreciation and Amortization for Covenant Purposes is defined as net income (loss) for Telesat and Restricted Subsidiaries plus interest expense, net of cash interest income earned on cash and cash equivalents, depreciation expense, amortization expense, extraordinary losses and unusual and non-recurring charges, non-cash charges, any expenses or charges incurred in connection with any issuance of debt, any impairment charges or asset write off, foreign withholding taxes paid or accrued, non-cash charges related to share-based compensation expense and consulting fees payable to Loral. Additional sums which may be added include projected cost savings from an acquisition and lost revenue which may have been earned by satellites that have been subject to an insured loss. Deductions which are made in calculating Consolidated EBITDA for Covenant Purposes include extraordinary, non-recurring gains and losses and non-cash gains and losses.

Further adjustments are made to account for income from Unrestricted Subsidiaries, and currency gains and losses (including non-cash gains or losses on derivative contracts). Unrestricted Subsidiaries are (a) any Subsidiary of Telesat that is formed or acquired after the closing date of the Credit Agreement, provided that such Subsidiary is designated as an Unrestricted Subsidiary, and (b) any Restricted Subsidiary subsequently re-designated as an Unrestricted Subsidiary.

Consolidated EBITDA for Covenant Purposes is not a presentation made in accordance with IFRS, is not a measure of financial condition or profitability, and should not be considered as an alternative to (1) net income (loss) determined in accordance with IFRS or (2) cash flows from operating activities determined in accordance with IFRS. Additionally, Consolidated EBITDA for Covenant Purposes is not intended to be a measure of free cash flow for management’s discretionary use as it does not include certain cash requirements for such items as interest payments, tax payments and debt service requirements. We believe that the inclusion of Consolidated EBITDA for Covenant Purposes herein is appropriate to provide additional information concerning the calculation of the financial ratio maintenance covenant and other covenants on our Senior Secured Credit Facilities. Consolidated EBITDA for Covenant Purposes is a material component of these covenants. Non-compliance with the financial ratio maintenance covenant contained in our Senior Secured Credit Facilities could result in the requirement to immediately repay all amounts outstanding. This presentation of Consolidated EBITDA for Covenant Purposes is not comparable to other similarly titled measures of other companies because not all companies use identical calculations of EBITDA. We believe the disclosure of the calculation of Consolidated EBITDA for Covenant Purposes provides information that is useful to an investor’s understanding of our liquidity and financial flexibility.

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The following is a reconciliation of net income, which is an IFRS measure of our operating results, to Consolidated EBITDA for Covenant Purposes, as defined in the Credit Agreement and the calculation of the ratio of Consolidated Total Secured Debt to Consolidated EBITDA for Covenant Purposes as defined in the Credit Agreement. The terms and related calculations are defined in the Credit Agreement, a copy of which is publicly available at https://www.sec.gov.

(in $ millions)	Twelve months ended March 31, 2024
Net income (loss)	$	502.5
Impact of unrestricted subsidiaries		(1.0	)
Consolidated income for Covenant Purposes		501.5
Plus:
Income taxes (Note 1)		83.8
Interest expense (Note 1)		233.6
Depreciation and amortization expense (Note 1)		183.0
Non-cash share-based compensation and pension expense (Note 1)		32.4
C-band clearing income		(344.9	)
Impairment		79.7
Other		16.6
Decreased by:
Gain on repurchase of debt		(230.1	)
Non-cash (gains) losses resulting from changes in foreign exchange rates (Note 1)		0.6
Consolidated EBITDA for Covenant Purposes	$	556.2

____________

Note 1:Adjustments for covenant purposes exclude certain specific expenses as defined in the Credit Agreement. As a result, these items in the covenant calculation do not reconcile to the financial statement line items.

Consolidated Total Secured Debt and Consolidated Debt for Covenant Purposes

Consolidated Total Debt for Covenant Purposes and Consolidated Total Secured Debt for Covenant Purposes are non-IFRS measures. We believe that the inclusion of Consolidated Total Debt for Covenant Purposes and Consolidated Total Secured Debt for Covenant Purposes herein are appropriate to provide additional information concerning the calculation of the financial ratio maintenance and other covenants under our Senior Secured Credit Facilities and provides information that is useful to an investor’s understanding of our compliance with these financial covenants.

The following is a reconciliation of our Consolidated Total Debt for Covenant Purposes and Consolidated Total Secured Debt for Covenant Purposes to Indebtedness:

(in $ millions)	As at March 31, 2024
U.S. dollar denominated debt
Term Loan B U.S. Facility (US$)	$	1,421.8
Senior Unsecured Notes (US$)		295.0
Senior Secured Notes (US$)		300.0
2026 Senior Secured Notes (US$)		399.0
		2,415.8
Foreign exchange adjustment		855.1
Subtotal		3,270.9
Deferred financing costs and prepayment options		(2.0	)
Indebtedness	$	3,269.0

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(in $ millions)
Indebtedness	$	3,269.0
Adjustments for covenant purposes:
Deferred financing costs and prepayment options		2.0
Add: lease liabilities		33.0
Consolidated Total Debt		3,304.0
Less: Cash and cash equivalents (max. US$100 million)		(135.4	)
Consolidated Total Debt for Covenant Purposes	$	3,168.6
Consolidated Total Debt	$	3,304.0
Less: Unsecured debt (Senior Unsecured Notes)		(399.4	)
Consolidated Total Secured Debt		2,904.5
Less: Cash and cash equivalents (max. US$100 million)		(135.4	)
Consolidated Total Secured Debt for Covenant Purposes	$	2,769.1

As at March 31, 2024, the Consolidated Total Debt for Covenant Purposes to Consolidated EBITDA ratio, for the purposes of our Senior Secured Credit Facilities was 5.70:1.00. The Consolidated Total Secured Debt to Consolidated EBITDA for Covenant Purposes ratio, for the purposes of our Senior Secured Credit Facilities, was 4.98:1.00.

The consolidated EBITDA for covenant purposes for the Senior Secured Credit Facilities for the twelve months ended March 31, 2023 was $599.5 million. Detailed information of the calculation is included in Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations in the Telesat Corporation Quarterly Report for the three-month period ended March 31, 2023 on Form 6-K furnished with the SEC on May 11, 2023, which can be obtained on the SEC website at https://www.sec.gov.

As at the date hereof, we are in compliance with our debt covenants.

40

Unaudited Interim Condensed Consolidating Financial Information

The unaudited interim condensed consolidating financial information reflects the investments, using the equity method of accounting, of Telesat in the Issuers, of the Issuers in their respective Guarantor and Non-Guarantor subsidiaries, and of the Guarantors in their Non-Guarantor subsidiaries.

Balances of Telesat Partnership are inclusive of balances associated with Telesat Partnership LP, Telesat CanHold Corporation, Telesat Can ULC, Loral Space & Communications Inc. and Loral Skynet Corporation.

The unaudited interim condensed consolidating financial information for the three months ended March 31, 2023 incorporated the changes from the amendments to IAS12, Income Taxes.

Unaudited Interim Condensed Consolidating Statements of Income (Loss)
For the three months ended March 31, 2024

(in thousands of Canadian dollars)	Telesat Corporation			Telesat Partnership			Telesat LLC		Telesat Canada			Guarantor subsidiaries			Non- guarantor subsidiaries			Adjustments			Consolidated
Revenue	$	—		$	—		$	—	$	131,864		$	84,655		$	4,755		$	(69,099	)	$	152,175
Operating expenses		(650	)		(289	)		—		(83,992	)		(15,778	)		(15,502	)		69,099			(47,112	)
Depreciation		—			—			—		(3,363	)		(31,725	)		(840	)		(467	)		(36,395	)
Amortization		—			—			—		(60	)		(660	)		(81	)		(2,022	)		(2,823	)
Other operating gains (losses), net		—			—			—		15			—			—			—			15
Operating income (loss)		(650	)		(289	)		—		44,464			36,492			(11,668	)		(2,489	)		65,860
Income (loss) from equity investments		(49,254	)		(47,639	)		—		35,153			347			—			61,393			—
Interest expense		(27	)		(104	)		—		(61,716	)		(3,269	)		(1	)		687			(64,430	)
Interest and other income (expense)		8			42			—		3,275			1,937			16,472			(606	)		21,128
Gain (loss) on foreign exchange		(6	)		27			—		(66,938	)		(60	)		(1,436	)		—			(68,413	)
Income (loss) before income taxes		(49,929	)		(47,963	)		—		(45,762	)		35,447			3,367			58,985			(45,855	)
Tax (expense) recovery		—			(1,291	)		—		(1,877	)		(1,408	)		(1,906	)		—			(6,482	)
Net income (loss)	$	(49,929	)	$	(49,254	)	$	—	$	(47,639	)	$	34,039		$	1,461		$	58,985		$	(52,337	)

Unaudited Interim Condensed Consolidating Statements of Comprehensive Income (Loss)
For the three months ended March 31, 2024

(in thousands of Canadian dollars)	Telesat Corporation			Telesat Partnership			Telesat LLC		Telesat Canada			Guarantor subsidiaries			Non- guarantor subsidiaries		Adjustments			Consolidated
Net income (loss)	$	(49,929	)	$	(49,254	)	$	—	$	(47,639	)	$	34,039		$	1,461	$	58,985		$	(52,337	)
Other comprehensive income (loss)
Items that may be reclassified into profit or loss
Foreign currency translation adjustments		(148	)		157			—		3,608			3,955			64,271		23,912			95,755
Other comprehensive income (loss) from equity investments		71,991			71,834			—		68,226			(32,658	)		—		(179,393	)		—
Other comprehensive income (loss)		71,843			71,991			—		71,834			(28,703	)		64,271		(155,481	)		95,755
Total comprehensive income (loss)	$	21,914		$	22,737		$	—	$	24,195		$	5,336		$	65,732	$	(96,496	)	$	43,418

41

Unaudited Interim Condensed Consolidating Statements of Income (Loss)
For the three months ended March 31, 2023

(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 expenses		476		(272	)		—		(103,941	)		(22,823	)		(9,965	)		83,053			(53,472	)
Depreciation		—		—			—		(9,092	)		(34,235	)		(358	)		(2,692	)		(46,377	)
Amortization		—		—			—		(330	)		(643	)		(80	)		(2,307	)		(3,360	)
Other operating gains (losses), net		—		—			—		(2	)		4			—			21			23
Operating income (loss)		476		(272	)		—		49,335			43,530			(7,855	)		(4,978	)		80,236
Income (loss) from equity investments		36,036		36,442			—		40,356			749			—			(113,583	)		—
Interest expense		—		(148	)		—		(65,198	)		(3,523	)		(4	)		—			(68,873	)
Interest and other income (expense)		—		22			—		8,421			436			9,707			(3,119	)		15,467
Gain (loss) on foreign exchange		2		(15	)		—		10,005			67			77			—			10,136
Income (loss) before income taxes		36,514		36,029			—		42,919			41,259			1,925			(121,680	)		36,966
Tax (expense) recovery		—		7			—		(6,477	)		(969	)		(1,110	)		—			(8,549	)
Net income (loss)	$	36,514	$	36,036		$	—	$	36,442		$	40,290		$	815		$	(121,680	)	$	28,417

Unaudited Interim Condensed Consolidating Statements of Comprehensive Income (Loss)
For the three months ended March 31, 2023

(in thousands of Canadian dollars)	Telesat Corporation		Telesat Partnership		Telesat LLC		Telesat Canada			Guarantor subsidiaries			Non- guarantor subsidiaries		Adjustments			Consolidated
Net income (loss)	$	36,514	$	36,036	$	—	$	36,442		$	40,290		$	815	$	(121,680	)	$	28,417
Other comprehensive income (loss)
Items that may be reclassified into profit or loss
Foreign currency translation adjustments		31		30		—		(490	)		(2,607	)		22,307		(24,728	)		(5,457	)
Other comprehensive income (loss) from equity investments		19,240		19,210		—		19,700			25,853			—		(84,003	)		—
Other comprehensive income (loss)		19,271		19,240		—		19,210			23,246			22,307		(108,731	)		(5,457	)
Total comprehensive income (loss)	$	55,785	$	55,276	$	—	$	55,652		$	63,536		$	23,122	$	(230,411	)	$	22,960

42

Unaudited Interim Condensed Consolidating Balance Sheets
As at March 31, 2024

(in thousands of Canadian dollars)	Telesat Corporation		Telesat Partnership		Telesat LLC		Telesat Canada		Guarantor subsidiaries		Non- guarantor subsidiaries			Adjustments			Consolidated
Assets
Cash and cash equivalent	$	730	$	7,687	$	—	$	334,028	$	165,193	$	1,248,661		$	—		$	1,756,299
Trade and other receivables		—		—		—		18,359		21,690		25,205			—			65,254
Other current financial assets		—		91		—		—		933		413			(770	)		667
Intercompany receivables		4,038		1		—		239,915		72,620		512			(317,086	)		—
Current income tax recoverable		—		1,711		—		16,526		1,663		499			(50	)		20,349
Prepaid expenses and other current assets		4,021		—		—		7,128		10,806		41,628			(8,020	)		55,563
Total current assets		8,789		9,490		—		615,956		272,905		1,316,918			(325,926	)		1,898,132
Satellites, property and other equipment		—		—		—		89,391		565,538		574,650			42,067			1,271,646
Deferred tax assets		—		—		—		—		11,943		—			(9,119	)		2,824
Other long-term financial assets		—		8,509		—		1,878		4,728		77			(8,509	)		6,683
Long-term income tax recoverable		—		—		—		7,497		—		—			—			7,497
Other long-term assets		—		—		—		40,599		291		—			—			40,890
Intangible assets		—		—		—		544		556,745		177,943			(42,933	)		692,299
Investment in affiliates		429,904		512,185		—		2,972,799		139,968		—			(4,054,856	)		—
Goodwill		—		—		—		549,162		—		—			1,940,721			2,489,883
Total assets	$	438,693	$	530,184	$	—	$	4,277,826	$	1,552,118	$	2,069,588		$	(2,458,555	)	$	6,409,854
Liabilities
Trade and other payables	$	57	$	19	$	—	$	22,679	$	9,216	$	19,619		$	—		$	51,590
Other current financial liabilities		91		—		—		47,278		3,288		—			(765	)		49,892
Intercompany payables		3,280		338		—		75,010		227,882		10,576			(317,086	)		—
Income taxes payable		—		1,225		—		—		192		1,345			—			2,762
Other current liabilities		—		—		—		44,309		23,079		(1,185	)		(8,025	)		58,178
Total current liabilities		3,428		1,582		—		189,276		263,657		30,355			(325,876	)		162,422
Long-term indebtedness		—		—		—		3,269,014		—		—			—			3,269,014
Deferred tax liabilities		—		—		—		214,512		—		26,116			(7,299	)		233,329
Other long-term financial liabilities		8,508		196		—		84		14,305		—			(8,508	)		14,585
Other long-term liabilities		—		9,468		—		92,755		182,602		—			—			284,825
Total liabilities		11,936		11,246		—		3,765,641		460,564		56,471			(341,683	)		3,964,175
Shareholders’ equity		426,757		518,938		—		512,185		1,091,554		2,013,117			(2,116,872	)		2,445,679
Total liabilities and shareholders’ equity	$	438,693	$	530,184	$	—	$	4,277,826	$	1,552,118	$	2,069,588		$	(2,458,555	)	$	6,409,854

43

Condensed Consolidating Balance Sheets
As at December 31, 2023

	Telesat Corporation		Telesat Partnership		Telesat LLC		Telesat Canada		Guarantor subsidiaries		Non- guarantor subsidiaries		Adjustments			Consolidated
Assets
Cash and cash equivalents	$	708	$	7,800	$	—	$	280,859	$	140,561	$	1,239,161	$	—		$	1,669,089
Trade and other receivables		—		—		—		32,517		20,702		25,070		—			78,289
Other current financial assets		—		64		—		—		306		402		(141	)		631
Intercompany receivables		381		1		—		233,258		74,307		714		(308,661	)		—
Current income tax recoverable		—		1,687		—		12,495		2,081		314		(67	)		16,510
Prepaid expenses and other current assets		3,281		—		—		7,606		10,977		38,958		(8,653	)		52,169
Total current assets		4,370		9,552		—		566,735		248,934		1,304,619		(317,522	)		1,816,688
Satellites, property and other equipment		—		—		—		91,410		587,731		539,418		41,739			1,260,298
Deferred tax assets		—		—		—		—		11,895		—		(8,941	)		2,954
Other long-term financial assets		—		8,322		—		2,080		4,553		—		(8,322	)		6,633
Long-term income tax recoverable		—		—		—		7,497		—		—		—			7,497
Other long-term assets		—		—		—		40,635		291		—		—			40,926
Intangible assets		—		—		—		604		557,269		174,119		(39,236	)		692,756
Investment in affiliates		424,652		505,476		—		2,928,832		126,687		—		(3,985,647	)		—
Goodwill		—		—		—		549,162		—		—		1,897,441			2,446,603
Total assets	$	429,022	$	523,350	$	—	$	4,186,955	$	1,537,360	$	2,018,156	$	(2,420,488	)	$	6,274,355
Liabilities
Trade and other payables	$	106	$	43	$	—	$	22,735	$	7,950	$	12,792	$	—		$	43,626
Other current financial liabilities		64		—		—		26,526		2,573		—		(102	)		29,061
Intercompany payables		186		282		—		74,494		223,566		10,133		(308,661	)		—
Income taxes payable		—		—		—		—		142		1,795		(16	)		1,921
Other current liabilities		—		—		—		47,989		23,474		300		(8,644	)		63,119
Total current liabilities		356		325		—		171,744		257,705		25,020		(317,423	)		137,727
Long-term indebtedness		—		—		—		3,197,019		—		—		—			3,197,019
Deferred tax liabilities		—		—		—		216,527		—		25,541		(6,821	)		235,247
Other long-term financial liabilities		8,322		192		—		79		14,646		—		(8,301	)		14,938
Other long-term liabilities		—		9,147		—		96,112		185,182		—		—			290,441
Total liabilities		8,678		9,664		—		3,681,481		457,533		50,561		(332,545	)		3,875,372
Total shareholders’ equity		420,344		513,686		—		505,474		1,079,827		1,967,595		(2,087,943	)		2,398,983
Total liabilities and shareholders’ equity	$	429,022	$	523,350	$	—	$	4,186,955	$	1,537,360	$	2,018,156	$	(2,420,488	)	$	6,274,355

44

Unaudited Interim Condensed Consolidating Statements of Cash Flows
For the three months ended March 31, 2024

(in thousands of Canadian dollars)	Telesat Corporation			Telesat Partnership			Telesat LLC		Telesat Canada			Guarantor subsidiaries			Non- guarantor subsidiaries			Adjustments			Consolidated
Cash flows from (used in) operating activities
Net income (loss)	$	(49,929	)	$	(49,254	)	$	—	$	(47,639	)	$	34,039		$	1,461		$	58,985		$	(52,337	)
Adjustment to reconcile net income (loss) to cash flows from operating activities
Depreciation		—			—			—		3,363			31,725			840			467			36,395
Amortization		—			—			—		60			660			81			2,022			2,823
Tax expense (recovery)		—			1,291			—		1,877			1,408			1,906			—			6,482
Interest expense		27			104			—		61,716			3,269			1			(687	)		64,430
Interest income		(8	)		(42	)		—		(3,392	)		(2,011	)		(16,472	)		629			(21,296	)
(Gain) loss on foreign exchange		6			(27	)		—		66,938			60			1,436			—			68,413
Share-based compensation		—			—			—		4,817			657			(40	)		—			5,434
(Income) loss from equity investments		49,254			47,639			—		(35,153	)		(347	)		—			(61,393	)		—
(Gain) loss on disposal of assets		—			—			—		(15	)		—			—			—			(15	)
Deferred revenue amortization		—			—			—		(5,879	)		(7,780	)		—			—			(13,659	)
Pension expense		—			175			—		1,234			—			—			—			1,409
Other		—			—			—		197			—			—			—			197
Income taxes paid, net of income taxes received		—			(50	)		—		(7,925	)		(765	)		(2,756	)		—			(11,496	)
Interest paid, net of interest received		(19	)		42			—		(36,625	)		1,222			17,233			—			(18,147	)
Operating assets and liabilities		676			(164	)		—		8,265			1,404			(3,205	)		(23	)		6,953
Net cash from (used in) operating activities		7			(286	)		—		11,839			63,541			485			—			75,586
Cash flows (used in) generated from investing activities
Satellite programs		—			—			—		—			—			(757	)		—			(757	)
Purchase of other property and equipment		—			—			—		(1,220	)		(174	)		(17,884	)		—			(19,278	)
Return of capital to shareholder		—			—			—		40,641			—			—			(40,641	)		—
Net cash (used in) generated investing activities		—			—			—		39,421			(174	)		(18,641	)		(40,641	)		(20,035	)
Cash flows (used in) generated from financing activities
Payment of principal on lease liabilities		—			—			—		(392	)		(186	)		(69	)		—			(647	)
Satellite performance incentive payments		—			—			—		(559	)		(152	)		—			—			(711	)
Government grant received		—			—			—		—			—			1,194			—			1,194
Tax withholdings on settlement on restricted share units		—			—			—		(1,963	)		(130	)		(23	)		—			(2,116	)
Return of capital to shareholder		—			—			—		—			(40,641	)		—			40,641			—
Net cash (used in) generated from financing activities		—			—			—		(2,914	)		(41,109	)		1,102			40,641			(2,280	)
Effect of changes in exchange rate on cash and cash equivalent		15			173			—		4,823			2,374			26,554			—			33,939
Changes in cash and cash equivalents		22			(113	)		—		53,169			24,632			9,500			—			87,210
Cash and cash equivalents, beginning of period		708			7,800			—		280,859			140,561			1,239,161			—			1,669,089
Cash and cash equivalents, end of period	$	730		$	7,687		$	—	$	334,028		$	165,193		$	1,248,661		$	—		$	1,756,299

45

Unaudited Interim Condensed Consolidating Statements of Cash Flows
For the three months ended March 31, 2023

(in thousands of Canadian dollars)	Telesat Corporation			Telesat Partnership			Telesat LLC		Telesat Canada			Guarantor subsidiaries			Non-guarantor subsidiaries			Adjustments			Consolidated
Cash flows from (used in) operating activities
Net income (loss)	$	36,514		$	36,036		$	—	$	36,442		$	40,290		$	815		$	(121,680	)	$	28,417
Adjustment to reconcile net income (loss) to cash flows from operating activities
Depreciation		—			—			—		9,092			34,235			358			2,692			46,377
Amortization		—			—			—		330			643			80			2,307			3,360
Tax expense (recovery)		—			(7	)		—		6,477			969			1,110			—			8,549
Interest expense		—			148			—		65,198			3,523			4			—			68,873
Interest income		—			(22	)		—		(5,244	)		(544	)		(9,708	)		—			(15,518	)
(Gain) loss on foreign exchange		(2	)		15			—		(10,005	)		(67	)		(77	)		—			(10,136	)
Share-based compensation		(692	)		—			—		11,901			422			(2,673	)		—			8,958
(Income) loss from equity investments		(36,036	)		(36,442	)		—		(40,356	)		(749	)		—			113,583			—
(Gain) loss on disposal of assets		—			—			—		2			(4	)		—			(21	)		(23	)
Deferred revenue amortization		—			—			—		(7,351	)		(7,419	)		(704	)		—			(15,474	)
Pension expense		—			172			—		1,247			—			—			—			1,419
Other		—			—			—		(61	)		632			—			—			571
Income taxes paid, net of income taxes received		—			—			—		(16,345	)		(386	)		(779	)		—			(17,510	)
Interest paid, net of interest received		—			22			—		(34,039	)		165			9,699			—			(24,153	)
Operating assets and liabilities		243			52			—		(9,817	)		(321	)		(11,337	)		119			(21,061	)
Net cash from (used in) operating activities		27			(26	)		—		7,471			71,389			(13,212	)		(3,000	)		62,649
Cash flows (used in) generated from investing activities
Satellite programs		—			—			—		(8,909	)		—			(3,614	)		—			(12,523	)
Purchase of other property and equipment		—			—			—		(3,150	)		(271	)		(9,015	)		—			(12,436	)
Return of capital to shareholder		—			—			—		44,692			—			—			(44,692	)		—
Net cash (used in) generated investing activities		—			—			—		32,633			(271	)		(12,629	)		(44,692	)		(24,959	)
Cash flows (used in) generated from financing activities
Payment of principal on lease liabilities		—			—			—		(296	)		(126	)		(101	)		—			(523	)
Satellite performance incentive payments		—			—			—		(1,089	)		(440	)		—			—			(1,529	)
Return of capital to shareholder		—			—			—		—			(44,692	)		—			44,692			—
Dividends paid		—			—			—		—			(3,000	)		—			3,000			—
Net cash (used in) generated from financing activities		—			—			—		(1,385	)		(48,258	)		(101	)		47,692			(2,052	)
Effect of changes in exchange rate on cash and cash equivalent		—			(14	)		—		(1,253	)		377			(2,963	)		—			(3,853	)
Changes in cash and cash equivalents		27			(40	)		—		37,466			23,237			(28,905	)		—			31,785
Cash and cash equivalents, beginning of period		18			4,742			—		496,106			136,713			1,040,213			—			1,677,792
Cash and cash equivalents, end of period	$	45		$	4,702		$	—	$	533,572		$	159,950		$	1,011,308		$	—		$	1,709,577

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CURRENT SHARE INFORMATION

The number of shares and stated value of the outstanding Class A common shares and Class B variable voting shares (“Telesat Public shares”), and Class C fully voting shares and Class C limited voting shares (together, the “Class C shares”) as at March 31, 2024, were as follows:

	Number of shares	Stated value
Telesat Public shares	13,641,019	$	46,898
Class C shares	112,841		6,340
	13,753,860	$	53,238

The breakdown of the number of shares of Telesat Public Shares, as at March 31, 2024, was as follows:

Telesat Public shares
Class A Common shares	1,481,615
Class B Variable Voting shares	12,159,404
Total Telesat Public shares	13,641,019

The split between the Class A Common shares and Class B Variable Voting shares in the table above is based on information available to the Company as at March 31, 2024.

In addition, we have one Class A Special Voting Share, one Class B Special Voting Share, one Class C Special Voting Share and one Golden Share outstanding, each with a nominal stated value as at March 31, 2024.

The number of outstanding stock options, restricted share units (“RSUs”), performance share units (“PSUs”) and deferred share units (“DSUs”) issued under our Omnibus Plan and Historic Plan as at March 31, 2024 were as follows:

	Historic Plan	Omnibus Plan
Stock Options	123,669	803,265
RSUs with time criteria	517,688	493,716
RSUs with time and performance criteria	124,080	—
PSUs with time and performance criteria	—	375,137
DSUs	—	131,602
	765,437	1,803,720

Each of the foregoing securities can be settled or exercised, as applicable, for Telesat Public Shares.

During the three months ended March 31, 2024, 285,985 RSUs were settled for 131,084 Telesat Public Shares, on a net settlement basis.

During the three months ended March 31, 2024, 12,434 DSUs were settled for an equal number of Telesat Public Shares.

The number and stated value of the outstanding LP Units issued by Telesat Partnership LP as at March 31, 2024, were as follows:

	Number of units	Stated value
Class A and Class B LP Units	18,321,792	$	50,141
Class C LP Units	18,098,362		38,893
	36,420,154	$	89,034

On consolidation into Telesat Corporation, the stated value of the LP Units is included in non-controlling interest.

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CRITICAL ACCOUNTING JUDGMENTS AND ESTIMATES

The preparation of financial statements in accordance with International Financial Reporting Standards as issued by the International Accounting Standards Board (“IASB”) requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities as at the date of the financial statements, and the amounts of revenue and expenses reported for the year. Actual results could differ from these estimates under different assumptions and conditions. For more details on these estimates, refer to Note 5 of our audited consolidated financial statements for the year ended December 31, 2023.

The critical accounting judgements and estimates used in the application of our accounting policies are consistent with those outlined in Note 5 of the consolidated financial statements for the year ended December 31, 2023.

ACCOUNTING STANDARDS

Segment Reporting

As of January 1, 2024, we changed from operating with one operating segment to two operating segments. The two operating segments are geostationary (“GEO”) and LEO. Also included in the GEO segment are the transactions in entities that do not belong to a particular operating segment such as certain corporate entities.

Operating segments are reported in a manner consistent with the internal reporting provided to the Company’s Chief Operating Decision Maker, who is the Company’s Chief Executive Officer.

Future Changes in Accounting Policies

The IASB periodically issues new and amended accounting standards. There were no new and amended standards determined to be applicable to us.

Item 3.Quantitative and Qualitative Disclosures About Market Risk

See Item. 2 Management’s Discussion and Analysis of Financial Condition and Results of Operations, and the section “Market Risk”.

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PART II. OTHER INFORMATION

Item 1.Legal Proceedings

We discuss certain legal proceedings in Telesat Corporation’s Annual Report on Form 20-F for the fiscal year ended December 31, 2023, filed with the SEC, in the section titled “Legal Proceedings”. We refer the reader to that discussion for information concerning those proceedings. There have been no material developments in those proceedings since the filing of that report.

Item 1A.Risk Factors

Our business and operations are subject to a significant number of known and unknown risks and uncertainties. The most significant of the known risks are summarized in, and the reader’s attention is directed to, the section titled “Risk Factors” of Telesat Corporation’s Annual Report on Form 20-F for the fiscal year ended December 31, 2023, filed with the SEC and our report on Form 6-K filed on March28, 2024. There have been no material changes to those risk factors since the filing of these reports.

In our Annual Report we identify certain “Risks Relating to Telesat’s Lightspeed Constellation” and, in our report on Form 6-K filed on March28, 2024, we identify the risk that “Telesat and the GoC may be unable to agree on definitive documentation related to the Investment, and even if definitive documentation is executed, there is no guarantee that conditions precedent will be satisfied or that the Investment will be advantageous for Telesat, its subsidiaries or its shareholders.”

The risk factor set forth below updates, and should be read together with, the aforementioned and other risk factors described in our Annual Report and 6-K.

Telesat intends to substantially increase its capital expenditures on Telesat Lightspeed prior to completion of the definitive documentation with the Government of Canada (GoC) and its other financing sources (the GoC and other financing sources, the “Financing Sources”), and it is possible that Telesat and the Financing Sources may be unable to agree on definitive documentation related to the funding (the “Funding”). Even if definitive documentation is executed, there is no guarantee that any conditions precedent for advancement of the Funding will be satisfied. In either case, the Telesat Lightspeed program and Telesat’s future prospects, could be at risk.

Having reached an understanding with the GoC on the GoC’s funding for Telesat LightSpeed, Telesat intends to substantially increase its capital expenditures, which could exceed US$1billion by the end of 2024, prior to executing definitive documentation with the Financing Sources with respect to the Funding. Binding obligations with respect to the Funding will only be created upon completion of definitive documentation that will contain additional terms and conditions, as may reasonably be required by the Financing Sources, which are usual and customary for transactions of this nature and the Funding will be, in all respects, subject to, among other things, required governmental approvals and the meeting of certain conditions to closing before Telesat is able to draw down the Funding. Although Telesat believes it will successfully enter into definitive documentation with the Financing Sources and timely meet any Funding conditions, there is no guarantee it will be successful in doing so, or if successful, the amount of time it will take to do so.

It is possible that Telesat may exhaust all or substantially all of the cash reserves it is investing in the Telesat Lightspeed program prior to successfully obtaining the Funding. If there is delay between the time Telesat cash reserves are depleted and Funding, it is likely that such a delay would increase the costs of the Telesat Lightspeed program and delay the Telesat Lightspeed schedule and service commencement date. In the event Telesat is unsuccessful in obtaining the Funding, the investments Telesat would have made in Telesat LightSpeed, and any termination liabilities it may owe to its suppliers, could substantially reduce or exhaust all of the cash reserved for Telesat Lightspeed, materially prejudice the company’s ability to complete the Telesat Lightspeed program and, as a result, significantly adversely impact Telesat’s financial resources, ability to repay its debt and its future prospects.

Additional risks and uncertainties not currently known to us or that we currently deem to be immaterial may also materially adversely affect our business, financial condition or operating results.

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Item 2.Unregistered Sales of Equity Securities and Use of Proceeds

None.

Item 3.Defaults Upon Senior Securities

None.

Item 4.Reserved

Item 5.Other Information

None.

Item 6.Exhibits

None.

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