Maxar Technologies Inc.

 

As of January 2, 2019, Maxar is a U.S. company; the Company was previously known as MacDonald Dettwiler and Associates (MDA) until its acquisition of DigitalGlobe in late 2017.  The company has a full range of space technology solutions for commercial and government customers including satellite construction, Earth imagery, geospatial data and analytics.  Previously MDA did not have access to U.S. government classified business however they have taken steps to enter that market.  Maxar’s stock has been crushed after it came under fire from a shortseller - discussed in various comments however a key thesis is that the company’s internal development of its new satellite constellation would consume the company’s cash flow and thus the company was virtually worthless due to its high debt and minimal cash flow in addition to overstating its earnings.  While Maxar’s debt is indeed elevated, it’s well below their covenants and it’s manageable and they continue to fundamentally generate positive operating cash flow (excluding investments into working capital and timing differences between expenditures and receipts from customers).  While margins and EBITDA declined markedly in 2018 and into 2019, this was mainly due to rising losses at their GEO Satcom business due to large projects winding down (and revised costs to complete certain projects) while new project awards have been low.  The internal development of its new satellite constellation is indeed consuming cash however this is not in perpetuity and once completed, the company can use its operating cash flow to reduce debt.  This is very different than having no operating cash flow at all.  Lastly, in early 2019, the company announced the failure of one of their satellites which hammered the stock even more as investors speculated the lost cash flow would push the company into default of their covenants.  The company’s financials have undergone significant change, previously reporting in Canadian dollars under IFRS, then converted to U.S. dollars under IFRS and then conversion to U.S. GAAP for the end of FY18 – this is enough change to make your head spin and create significant confusion.  The conversion to U.S. GAAP reduced EBITDA and management does not offer a presentation of adjusted earnings so U.S. GAAP makes their earnings look horrendous (very negative) as they do not exclude intangible amortization however they give you all the data to do it yourself.  Its U.S. GAAP earnings are lower than their IFRS earnings however the stock still looks attractively priced if those earnings stabilize and improve.  The stock is definitely a high-risk investment given its high debt levels and tenuous situation in its Geo Comsat business as well as its significant volatility. 

 

As of 4Q18, Maxar reports in $U.S. in U.S. GAAP, from 4Q17 to 3Q18, Maxar reported in $U.S. IFRS., prior to 4Q17, Maxar reported in $C IFRS.

While Maxar has converted to a U.S. company, I will keep it in my Canadian portfolio for continuity of performance reporting.

Ests:     2Q22     3Q22   FY22    FY23

Revs    455m     506      1.8b     1.96  Rev ests from Koyfin

EPS      ..29        .51      .36       1.87   EPS ests from Koyfin

 

P=U.S. $20.54, C=$28.24, U.S. Div=$0.04, yield=0.1%, gross debt 2.1bn D/C=59%, EV/EBITDA=8.7X, TTM adj EPS $3.39 ex intangible amort and 1-time costs, P/E=86, Forward estimates include purchased intangibles which are declining.  Leverage Ratio 4.6X vs covenants 5.5X, debt upgraded by S&P in Oct 2 to B+

 

3Q22   .81 vs .90, incl intangibles .22 vs .21 (0 tax), est .29 up from .19

  • Nov 3, 2022, P= U.S. $20.54, C=$28.24, TTM adj EPS 3.39 ex intangible amort and 1-time costs, P/E=6X

  • EPS ex .17/sh from 12m liability reserve re conducting business in a foreign country and tax accrual.

  • Revs -0.2% to 436m (est 455m), adj EBITDA 110m vs 113m (incl 5m fx loss, est 122m), OCF 124 vs 136, FCF 49 vs 85, B/B =1.08, Backlog 2.96bn

  • SI +3.3% to 186m, EBITDA 33 vs 14, B/B=1.4X

  • EI +1.5% to 275m, EBITDA 115 vs 124, B/B=0.76

  • EI soft due to services business awards weak cadence and staffing issues, recent hiring and improved books position them to return to growth, expecting 2 large imagery deals to sign in 4Q (1 slipped from 3Q)

  • FY22 Outlook: a touch lower, 1.755-1.805b, adj EBITDA 450-495, OCF 325-355 (narrowed)

  • Maintaining FY23 targets but adjusted for recent refinancing

  • Legion “nearing completion” of software validation, expect to ship 1st 2 sats in December for January launch, “essentially completed” most of the software validation work, the teams have received their software drops and they’re progressing through the other phases of testing.

2Q22  1.05 vs 1.19, incl intangibles .39 vs .51, est .12 down from .18         

  • Aug 9, 2022, P=U.S. $28.51, TTM adj EPS $3.49 ex intangible amort and 1-time costs, P/E=8X

  • Revs -7.4% to 438m (est 452), Adj EBITDA 119m vs 132m (est 118), Backlog 2.95bn

  • SI -9.7% to 186m, EBITDA 19 vs 27, B/B=0.87

  • EI +0.4% to 284m, EBITDA 129 vs 131, B/B=5.8X, 0.47X ex EOCL contract

  • Awarded contract for 14 spacecraft platforms for L3H Tranche 1 Tracking Layer contract with Space Development Agency (Missile Warning/Tracking); modular LEO satellite platform – delivery in 2024, launches begin April 2025.

  • Refinanced remaining 2023 Notes and 2024 Term Loan to 2027 and 2029., FY22 Cash Interest 140m vs 103m

  • FY22 Outlook: Revs 1.8-1.89bn, adj EBITDA 455-505m, Cash interest now 140m, OCF 300-380m due to higher interest exp, implies EPS ex intangibles 3.06-3.72

  • Legion 1st launch further delayed, now expected in 4Q. Environmental testing is complete, encountered delay during software validation and testing (made “significant” progress), 2nd launch ~2 months after, looking at air-transport to launch (reduces ~2 weeks)

 

Mid Quarter Update – May 25, 2022

  • NRO announced EOCL contract

  • Maxar wins 5-year fixed commitment for 1.5bn (300m/y) plus options up to 10 years for total potential 3.24bn, can be serviced with existing constellation for remaining life so once Legion launches, can focus on growth capacity.

  • Mgmt thinks there are growth opportunities with NRO before yr5 as Legion capacity kicks in.

  • Should provide solid support for refinancing the debt.

  • Blacksky was awarded 5-year contract for 85.5m, options up to total 1.021bn

1Q22 .57 vs .54 or (.10) vs (.25) incl intangibles, est (.05) down from .10

  • May 9, 2022, P=U.S. $28.84, C=$37.62, TTM EPS=3.67

  • Revs -3.6% to 405m, Bookings 156 vs 343, B/B=0.39

  • Adj EBITDA 84m vs 95m, OCF 48m vs 27m, FCF (16m) vs (23m)

  • Earth Intelligence +0.4% to 251m, EBITDA 99 vs 107m, B/B=0.39

  • Space Infrastructure -3.3% to 177m, EBITDA 19m vs 16m, B/B=0.32, Expect FYB/B>1

  • Precision 3D was light in 1Q but expect +50% in FY22.

  • Backlog 2.38bn vs 2.7bn, expect better bookings this year in Space Infrastructure with interesting GEO and LEO opportunities. Had some pushouts in Earth Intelligence (largely Precision 3d) expected to close in 2Q and remainder of year, orders were booked but POs didn’t come through.

  • Legion 1st launch now expected in September, 2nd and 3rd launches within 3 and 6 months after 1st, “experienced a test configuration anomaly on the 2nd satellite (the test itself, not the satellite) that is in process of being re-executed” in addition to needing ground transport to launch site which was expected although a schedule push and the test anomaly were not, pushing the line as Notes mature in 4Q23.

  • Still waiting for 4th telescope from Raytheon this month.

  • EPS miss largely due to higher stock comp driven by share performance in 1Q but still modestly disappointing.

4Q21  .90 vs .49, est .06 down from 32, FY21 EPS 3.38 

  • EPS ex orbital gain, incl intangible amort, EPS .27 vs (.34), FY21 .77 vs (2.32) 

  • Feb 22, 2022, P= U.S. $27.06, C=$34.49, TTM EPS=3.38, P/E=8X

  • Revs flat at 468m (est 461m), Bookings 327m vs 156m, B/B=0.7, FY21 B/B=1.05

  • Adj EBITDA 112m vs 95m, OCF 108m vs 62m, FCF 30m vs (22m)

  • Earth Intelligence +12% to 289m, EBITDA 130m vs 106m, B/B=1.04

  • Space Infrastructure -11.2% to 199m, EBITDA 17m vs 13m, B/B=0.13

  • Backlog 1.89bn vs 1.9bn, 

  • WV Legion 1st launch expected June-July, 2nd and 3rd launches within 3-6 months, added 3rd launch to further de-risk and get 4 up this year.  1st 2 satellites completed hardware integration and initial performance testing, now doing environmental testing and software validation. So far no issues but omicron impacted testing staff. 

  • FY22 Outlook: Revs 1.79-1.87bn (vs 1.77bn, est 1.88, SI -5%, EI +6-13%), adj EBITDA 440-520m (vs 452, est 478, SI 45-60 vs 74, EI 505-570 vs 492), OCF 340-420m vs 294m, CapEx 300-320m incl 40m cap interest. Implies EPS (.07)-1.00 vs .77 or ex purch intangibles 2.39-3.46 vs 3.38

  • Mgmt thinks SI range reflects EOCL award probably having more upside than downside. 

  • FY23 Target EBITDA 570m, previously 580m, FCF 340m, previously 325m

3Q21 .85 vs .23, est .20 down from .23

  • Nov 3, 2021, P=U.S. $27.05, C=$33.52, TTM adj EPS 2.97, P/E=9X

  • Revs flat at 437m (+7.6% ex EV deferred last year)

  • Adj EBITDA 113m vs 95m ex EV deferred, CFO 136m vs 115m, FCF 85 vs 19

  • Earth Intelligence -1% to 271m (+6.7% ex EV deferred), EBITDA 124 vs 128, 124 vs 108 ex EV, B/B=1.97

  • Space Infrastructure flat at 180m, EBITDA 14 vs 12, B/B=2.34

  • Backlog 2.1bn vs 1.9bn with EV option renewal and 2 SXM awards announced earlier.

  • Reiterated 1st Legion Launch between March-June, 2nd 3-6 months later. 

  • For Legions, received Honeywell components, 2nd Raytheon Telescope expected soon, delayed from Sept but do not expect impact on schedule. 

  • Raised FY21 Outlook on EBITDA 405-435m (from 390-440), OCF to 260-290m (from 240-270), FCF 40-50m (from 5-10m)

2Q21  1.14 vs .46 ex tax benefit and purchased intangibles, .51 incl intangibles vs est .11 up from .04

  • Aug 4, 20201, P=U.S. $34.00, C=$42.78, TTM EPS=2.35, P/E=14X, FY22 P/E=25X

  • Revs +7.7% to 473m (+15.6% ex EV deferred last year), EBITDA 132 vs 114 ex EV deferred LY

  • Earth Intelligence +1.8% to 283m (+14% ex EV deferred), EBITDA 131 vs 116 ex EV deferred, B/B=0.59

  • Space Infrastructure +12% to 206m, EBITDA 27 vs 11, B/B=0.28

  • Backlog 1.5bn down from 1.8bn at 1Q, but unfunded contracts 918m vs 865m at 1Q, during 3Q awarded contract for SXM9 for 2024 launch and extended EV contract option for another year. 

  • FY21 Outlook: Affirming outlook, expect positive FCF in 2H and FY21.

  • Legion launch delayed again between March and June 2022 received Honeywell components, 1 Raytheon component en route, expecting delivery today, 2nd expected in Sept (expected first 2 in July), remaining 4 in the fall.  Also COVID return to work impacting integration, testing, and software teams. 

  • Delay impacts Legion CapEx next year ~30m, still expect growth in Revs and earnings and FCF. 

  • It’s possible Legion delay impacts FY23 targets but it’s too early to say because it could ramp faster. 

1Q21  .49 vs (.15) ex items and purchased intangibles, est (.12)

  • May 3, 2021, P=U.S. $39.23, C=$48.18, TTM adj EPS 1.67, P/E=23X 

  • Revs +20% to 420m ex 28m SXM7 charge and EV deferred last year (est 437) adj EBITDA ex 28m charge 95m vs 79, B/B=0.82

  • Ex SXM7 charge and EV deferred last year, Revs +20%, adj EBITDA +20%

  • Earth Intel -8% to 250m (+3.7% ex EV deferred), adj EBITDA 107 vs 133 (vs 103 ex 30m EV) B/B=0.96

  • Space Infrastructure +17% to 155m (+39% ex SXM7), adj EBITDA (12) vs (39), ex SXM7 16 vs (39), B/B=0.57

  • CFO 27m vs (15)

  • After equity offering, leverage ratio 3.8X well below covenant 7.5X. Backlog 1.8bn 

  • SXM8 complete and en-route for launch soon. 

  • Some issues with Honeywell components but on priority list, Raytheon also remediating some high-precision optical instruments so Legion slipping into 4Q, CEO not ready to call it early or late 4Q, I wouldn’t be surprised to see 1Q22

  • FY21 Outlook: ex SXM charge Revs 1.76-1.84 (lowered by 45m), adj EBITDA unchanged, CFO raised low end, 260-290m, Capex unchanged

  • Stock -10% or so AH as SXM and debt-retirement costs “shocking” but shouldn’t be surprising to anyone paying attention and how the stock has traded over the past few months, likely still more turbulence but the quarter was fundamentally fine other than the slight push to Legion.  

March 18, 2021

  • Priced equity issue at $40, 10m new shares is 16% dilution, stock trading down below $40, stock price down >16% since the announcement.

March 15, 2021

  • Offering 400m in stock to repay portion of debt

  • Smart move, some investors (including me) have been anticipating something like this or should have been, advances debt reduction schedule which has been anticipated post Legion launch and more than FY23 expected FCF.

4Q20 .49 vs (.20) ex impairment and purchased intangibles, est (05) 

  • Feb 24, 20201, P=U.S. $45.60, C=$57.10, TTM EPS ex intangibles and EV=1.03, P/E=44X

  • Revs +13.9% to 467m, EBITDA 95m vs 70m and 95m in 3Q ex EV def Revs, impacted by higher stock comp (no adjustment made but it’s due to stock price)

  • Space Infrastructure +46% to 224m, EBITDA 13m vs (19), B/B .05 after 3 strong quarters

  • Earth Intelligence -9.8% to 258m, EBITDA 106m vs 124m ex EV last year, B/B=0.56

  • Backlog 1.9bn vs 1.6bn, -15% q/q 

  • Legion On track for first launch in Sept, 2nd launch early 2022

  • Management sees $25bn in pipeline opportunities over next 5 years. 

  • FY21 Outlook: Revs ~1.805-1.885bn, adj EBITDA 420-470m (+10-23% ex 1time costs and EV deferred), CFO 240-290m, CapEx 205-230m ex 30m capitalized interest, implies no debt reduction in FY21 guidance implies adj EPS ex purchased intangibles 2.94-3.76, 

  • FY23 Targets: Raised Adj EBITDA 580m vs 340m FY20 EBITDA ex EV Deferred, FCF 325m, EPS power ~4.50

  • Solid results, weak orders following 3 strong quarters, mgmt announced a nice order for Vricon in conjunction with these results, future results obviously are highly dependent on success of Legion launch and commissioning then executing on winning business.

3Q20  .55 vs .41 ex .80 vs .98 purchased intangibles, est (19) up from (.27)

  • Nov 5, 2020, P=U.S. $28.57, TTM EPS ex purchased intangibles=2.14, P/E=13X

  • Revs +5.6% to 436m, adj EBITDA 115 vs 109 ex 3m COVID adjs, CFO 115 vs 58, FCF 19m vs (62)

  • Space Infrastructure +11.7% to 181m, B/B=1.23X, EBITDA 12 vs (3) incl 3m negative adjs

  • Earth Intelligence -2.8% to 274m (+1% ex EV rolloff), B/B=1.88X but 0.79X ex $300m EV option exercise, EBITDA 128 vs 145 due to EV rolloff

  • Space Infrastructure increased y/y from 27m growth from US govt partly offset by 6m lower commercial programs and 3m adjustments from COVID19 

  • Bookings 739m, slight improvement q/q, B/B=1.69X, Backlog 2.2bn, Earth Intelligence increased with exercise of $300m EV option

  • Legion Launch pushing to Summer/Fall due to COVID delays

  • FY20 Guidance Revs roughly flat, adj EBITDA still 415-445m, CFO 200-250m (previously 150-250)

  • FY21 thoughts: Should see solid SI growth, margin expansion esp as negative program ends

  • EI headwind from EV def revs but they see a path to offset the headwind (EV EBITDA at 100% margin), Due to Legion pushout, won’t hit 22/23 runrate until late 22

  • After C-Band satellites are completed, mgmt. sees steady GEO environment plus NASA work and Defense/Intelligence business

  • Quarter is fine but stock selling off as EV rolloff reality sets in, delay of Legion, and tone of management for FY21 is more “stable” rather than growth.  Still lots of opportunity in the stock but the next leg could require more patience, I definitely have to start thinking of diversifying my position as there are other names I’d like to buy and MAXR is my source of cash.  

Mid Quarter Update Sept 17, 2020

  • Awarded build of Galaxy 37 by Intelsat, the 5th c-band award for MAXR out of the total 7

2Q20 .96 vs .36 ex purchased intangibles, est (.56)

  • Aug 5, 2020, P= U.S. $20.73, C=$27.45, TTM EPS ex purchased intangibles 1.97, P/E=11X

  • GAAP EPS 0.0 significantly better than expected.

  • Revs +6.6% to 439m (est 408.6), adj EBITDA 138m incl 6m additional COVID19 costs,

  • Space Infrastructure +1.7% to 184m, EBITDA margin 6% vs 3.9%, Earth Intelligence +5.7% to 278m, EBITDA margin 52.5% vs 47.1%

  • Space infrastructure growth driven by government programs, commercial down.

  • Incremental COVID-19 accrual reduced Space Infrastructure Revs by 6m due to estimated program costs

  • Bookings 730m vs 450m in 1Q20, including Intelsat order announced 3 months ago, B/B=1.6X, Earth Intelligence bookings 259m, B/B=0.93X, Space Infrastructure 471m, B/B=2.56X

  • Space Infrastructure EBITDA impacted by 10m retention bonuses and 7m recovery, 17m losses on developmental builds, and 6m negative revenue impact from COVID19, 

  • Corp Expenses had 6m lower retention bonuses

  • Backlog 1.9bn vs 1.6bn, unfunded contract options 1.3bn

  • Leverage ratio 4.4X, well below covenants of 7.5X

  • Legion on budget and on time, expect 1st launches in 1H21, “in active conversations with both government and commercial customers”, updates closer to launch.  

  • EnhancedView renewal window is Sept 1st, mgmt. expects next year’s renewal will likely include competition.

  • Mgmt pointed out Space Infrastructure margins have been depressed due to some negative programs (2018 news) but should see EBITDA margins >10% after they are delivered if FY21.  

  • Outlook: Raised FY20 Revs flat to mid-single-digit growth, adj EBITDA 415-445m (215m YTD so implies 2H 200-230, reflects some caution on commercial Earth Intelligence due to elongated sales cycle (COVID19 related). Also factors 40m decline vs 1H due to EnhancedView burning off in August, renewal is factored into guidance.

  • Telesat LEO program not factored into their outlook, looks like a very low probability for them.  

  • Mgmt excited about opportunities in US Defense Intelligence, just not a significant aspect to the business yet 

Mid-Quarter Update – June 23, 2020

  • Exercising option to purchase remainder of Vricon (MAXR owns 50%) for $115m net of cash, 10X TTM adj EBITDA, see significant growth, Sold $150m notes at 7.54% due 2027

  • Also repurchasing $150m of 9.75% notes at 112.45% with proceeds from MDA sale

  • Vricon, formed as a JV between MAXR and Saab in 2015, combined “Saab IP with Maxar commercial satellite imagery to build highly accurate Immersive 3D products at scale.  Vricon is a global leader in satellite-derived 3D data for defense and intelligence markets, with software and products that enhance 3D mapping, Earth intelligence data, military simulation and training and precision-guided munitions”.  Combined Saab IP and Maxar technology to serve markets not traditionally served by Maxar, opens up significant opportunities.  

  • 2019 Revs +90% to 40m, EBITDA 20m

  • Will be accretive to previously provided FY20 guidance

  • My guess is option exercise now is cheaper than next year and integration into Maxar offerings could open up further opportunities. 

Mid Quarter Update – June 15th

  • Awarded contract to manufacture 4/7 satellites for Intelsat for c-band clearing, 2/7 were awarded to NOC, Intelsat still in negotiations for the 7th.  

1Q2020 (.19) vs .23 incl .56 unexpected costs, ex 14m orbital impairment              

  • May 11, 2020, P= U.S. $11.60, C=$16.23, TTM adj EPS=0.84, P/E=14X, 8X trailing earnings power 

  • Revs -11.6% to 381m, adj EBITDA 77m vs 99 incl 18m COVID19 actual and EXPECTED costs and 14m related to design anomaly in final satellite testing, ex costs EBITDA 109 vs 99, CFO from cont ops (13) vs (88)

  • adj results exclude $14m impairment on orbital receivables due to increase in credit risk, 48m remaining on books from that customer out of 363m

  • 32m in costs I’d normally exclude them because they’re mostly for future periods however given they’re reserved, we wouldn’t otherwise see those costs in trailing results.

  • Earth Intelligence +6.7% to 271m, adj EBITDA 133m vs 125m

  • Space Infrastructure -37% to 132m, adj EBITDA (39) vs (-2) incl 32m unexpected costs

  • Space Infrastructure 1Q bookings 335m, B/B=2.5X

  • Announced contract today for multiple for 1300-Class GEO satellites (several hundred million dollars, structured to be CFO positive for the life of contract), brings YTD bookings in Space Infrastructure >700m so puts today’s award ~400m.

  • Backlog +6% to .7bn (Earth Intelligence 770m vs 926m, Space Infrastructure 908m vs 705), unfunded contract options $1.4bn (at Dec 31st, not including today’s award)

  • Sales cycle for Legion is tracking their expectations, expect first launches in 1H21

  • FY20 Guidance: ~90% of expected FY20 revs booked, Revs still expected to be flat despite 1Q lower than expected, Lowered adj EBITDA guidance by 20-30m to 370-410m to absorb unexpected 1Q costs of 32m (slight raise ex 1Q costs, encouraging they think unexpected costs are fully reserved), CFO forecast unchanged at 150m to 250m.

  • EV contract burns to 0 in 3Q. expect 300m options exercise in 3Q.

  • CFO cagey on providing FCF guidance for FY21 due to number of variables

  • 27m in cash, 467m available on revolver

Mid Quarter Update – April 8, 2020

  • Closed sale of MDA, expects net proceeds US$729m

MAXR Investor Briefing March 4, 2020

  • 2019 Revenue Mix: 40% Space Infrastructure, 60% Earth Intelligence (29% Data Analytics, 31% Data Generation)

  • Highlighted significant fuel efficiency of electric propulsion which can increase useful payload (cameras, communication transponders, etc) by 3X 

  • 7 GEO satcoms in backlog, 13 LEO satellites 

  • From 2014-2018, Maxar won largest share of GEO commercial satellite awards, 36% of total, Boeing was next at 24%, Airbus at 17%, then Thales at 7%

  • Underperforming programs % of SI revs: FY18 >30%, FY19 ~25%, FY20 <15%, FY21 <5%, SI to have slightly positive adj EBITDA in FY20, improving to 10% or more by 2022

4Q19 .29 vs (.16) cont ops, est .42 up from .26, FY19 adj EPS 1.26 vs .43

  • March 2, 2020, P=U.S. $14.76, C=$19.84, TTM adj EPS $1.26, P/E=12X, FY20 P/E 8X on mgmt. guidance

  • MDA now reported as Discontinued Ops, results reflect from Cont Ops unless specified.  

  • Revs -1.9% to 410m, adj EBITDA 100m vs 70m, CFO 175m, FCF 60m, Net Debt -220m q/q to 2.89bn, FY19 adj EBITDA 416m vs 383, Guidance at 3Q ex MDA was $425m, lower 4Q EBITDA due to stock comp from rising stock price. 

  • Earth Intelligence +8% to 286m, adj EBITDA 53.8% 45.3%, EBITDA +28%

  • Space Infrastructure -13% to 153m, EBITDA (19m) vs (44m), FY EBITDA (17m) vs (75m)

  • Backlog 1.6bn vs 2.1bn, Space Infrastructure +8% to 705m, Earth Intelligence -35% to 926m due to recognition of EnhancedView (EV) deferred revenue, unfunded contract options 1.4bn vs 1.2bn, 4Q B/B>1 Ex EV burnoff?

  • EV deferred Revs in FY19 were 120m, will be 80m in FY20 

  • FY20 Guidance: Flattish revs despite 40m lower EV revs, ADJ EBITDA 400-440m, Interest 175m (ex 40m capitalized), D&A 335m, Purchased Intangible Amortization 203m, implies adj EPS 1.85, CFO 150-250m, CapEx 315-340m

  • Once MDA is sold and debt is repaid, D/EBITDA on FY20 Guidance is ~7X, still very attractive.

  • Provided walkthrough for 2023 adj EBITDA target ~540m, FCF ~190m (vs -240m in FY19) although not clear how much from WV Legion

  • Lots happened since 3Q19 report, in addition to mid-quarter updates below, also announced $142m award from build a robotic arm called SPIDER (Space Infrastructure Dexterous Robot) to be integrated with spacecraft bus MAXR is building for NASA’s Restore-L project for LEO refueling.  Also announced small $5m contract for another robotic arm (SAMPLR) for NASA gathering samples on the moon, highly suggests that MAXR has retained critical robotic technology after MDA is sold.  Maxar also retains RADARSAT-2 relationship with US govt. 

  • Hosting Investor Briefing on March 4th.  

 

Mid Quarter Updates:

Feb 3, 2020

  • Confirmed GEO award from Intelsat to manufacture Intelsat 40e to launch in 2022 

Jan 31, 2020

  • Awarded $142m contract for lightweight robotic arm – SPIDER (Space Infrastructure Dextrous Robot) – to be integrated on the spacecraft bus Maxar is building for NASA’s Restore-L project which plans to refuel LEO satellites. SPIDER to be built by Maxar’s team in California which has previously delivered 6 robotic arms for NASA’s Mars rovers and landers. 

Dec 30, 2019

  • Selling MDA for C$1bn or US$765m (9X EBITDA), proceeds to reduce leverage and improve capital structure and prioritize investments in Earth Intelligence and Space Infrastructure

  • Includes all MDA’s Canadian and UK businesses – ground stations, radar satellite products, robotics, defense, and satellite components, ~1900 employees, expected FY19 Revs US$370m, adj EBITDA US$85m which includes $78m in sales to other Maxar entities. 

  • Loss of cash flow from MDA to be “significantly offset” by lower interest expense, reduces their guidance for adj EBITDA and FCF in 2022-2023 by ~50m

Nov 15, 2019

  • Priced $1bn notes with 9.75% interest rate, notes issued at 98% of face value

  • Closing expected around Dec 2nd. Proceeds to be held in escrow until closing Palo Alto real estate announced in 3Q report. 

3Q19   .68 vs .09, est .55

  • Nov 4, 2019, P=U.S. $9.94, C $13.04, TTM adj EPS=1.83 EPS ex intangible amort, P/E=5X

  • Revs -6% to 479m, Adj EBITDA 128m vs 105m, 26.7% vs 20.6%

  • Space -16% to 220m, Imagery +5% to 220m, Services +17% to 73m

  • EBITDA: Space 11 vs (7), Imagery 140 vs 129, Services 9 vs 9

  • SSL had a small EBITDA loss vs 31.5m loss, expect FY19 ~breakeven ex retention payments

  • Backlog 2.2bn, flat q/q, Unfunded contract options 1.4bn

  • Announced sale and leaseback on 2 facilities in Palo Alto for $291m, annual operating lease $20m, to retire 2020 maturities.

  • Imagery Revs and EBITDA benefited from signing of delayed customer discussed in 2Q and new contract awards partly offset by loss of WV4.

  • Debt decreased a little q/q, FCF was 4m

  • Mgmt expects solid CFO in 4Q given expected milestone payments

  • Geocomsat market starting to improve, announced 1 award earlier and recently won another but are still working through contract details. MDA wins some work even if MAXR doesn’t get the award.

  • Mgmt commented on recent announcement to dissolve the partnership bidding on Telesat LEO, allows Maxar to “bid on areas where we feel we have competitive advantages across our capability set and manufacturing geographies”.

  • Announced $1.25bn offering of debt to reduce credit line to $500m and extend maturity to 2023 from 2021 (conditional on successful bond offering), retire Term Loan A, and expands covernants to 7.25X this year, 7.5X at 1Q20, 7.75X for 1.5 years, 7.5X for 1 year, 6.5X for 6 months, 5.75X thereafter.  

2Q19   .84 vs .71, est (.57)

  • Aug 6, 2019, P=U.S. $7.17, C$ 9.52, TTM adj EPS $1.64 ex intangible amort, P/E=4X

  • Ex Insurance proceeds, adj EPS (.32) but ex intangibles, 0.84 vs .71

  • Revs -15% to 490m, adj EBITDA 129m vs 133m, 26.3% vs 23%, EBITDA incl 7m in recovery

  • Space Systems -22% to 257m EBITDA 28m vs 13m, Imagery -5% to 201m, EBITDA 61.2% vs 62.7%, Services +12% to 74m, EBITDA 8.1% vs 9.1%

  • Space EBITDA improved y/y on lower R&D and cost cuts and 7m recovery, mgmt. thinks R&D was a little heavy in the past, focusing R&D efforts on appropriate areas.

  • Backlog 2.2bn, unfunded contract options of 1.2bn

  • Debt decreased a little q/q as insurance proceeds offset capex

  • Announced a few important wins in the quarter, making progress on cost reduction efforts

  • Comforting that EBITDA (especially Space Systems) still improved q/q despite completion of RCM

  • 1 imagery contract is being delayed for signing, not much detail but it’s a long-standing customer, delay related to changes in customer’s procurement process, while important to hit FY19 guidance, mgmt. thinks it’s just timing.  

  • MDA should return to growth next year after full impact of RCM completion due to wins

  • Mgmt feels they are getting better visibility into Space Solutions

  • Mgmt maintains Legion is on budget and on time, made it past Critical Design Review, moving into build phase, 1 or 2 vendors have long lead times (not sure how they are managing that).

  • Mgmt declined to comment on media reports of sale of MDA

    FY19 Guidance: More detailed.  EBITDA for Imagery, Services, and MDA >$550m, total adj EBITDA >$510m (previously was flat vs 470m), Space Systems “breakeven” with the drag from 20m retention payments and 20m from intersegment-eliminations, CFO ex Space Solutions 350-450m, Space to consume 80-100m, CapEx <375m.  Not surprising, implies 2H EBITDA > 1H, 2H CFO 191-291m, CapEx <$248m (vs 127m in 1H), so 2H FCF could be (57m) to 43m, not horrible, 2H should also experience cash inflow from new projects.  

    Mgmt reiterated FY19 is peak spending year for Legion, “definitely comes down in 2020”

1Q19 .64 vs 1.07 ex intangibles amort, est .14

  • May 9, 2019, P= U.S. $6.71, C$ 9.01, TTM EPS 1.55 ex intangible amort, P/E=4X, EV/EBITDA=7.7X, Debt/EBITDA 4.5X vs covenant of 6X (next maturity Oct 2020)

  • Revs -9.6% to 504m, Adj EBITDA 117m vs 151m and 84m at 4Q18 (+23m q/q), EBITDA included 6m in fx losses due to discontinued hedge accounting, would have been 123m

  • Space Revs -6.5% to 274m, EBITDA 10m vs 28m, Imagery -5.2% to 200m, EBITDA 121m vs 134m (122m in 4Q), Services -2.9% to 68m, EBITDA 7m vs 4m

  • In imagery, Revs -11m y/y, EBITDA -13m y/y, loss of WV4 partly offset by growth in in US govt and commercial subscriptions (WV4 had FY18 Revs of 85m with “high margins”, 85/4=21.25)

  • Space revs down due to GEO and RCM, WV Legion activity was higher.  Space Systems EBITDA improved 39m q/q while consolidated EBITDA improved only 33m due to increase in corp exp, Imagery cost reductions began late in 1Q so should see improvement in 2Q, debt up a bit q/q due to timing of payments/receipts, D/EBITDA ~4.5X, well below covenants.

  • Backlog 1.9bn vs 2.4bn at 4Q, unfunded contract options 1.3bn

  • SSL consumed 45m of FCF vs 95m in FY18, expect FY19 to be a headwind but remainder of year depends on a number of variables, looking to win new programs that bring in cash

  • Announced acceptance of insurance proceeds form loss of WV4 prior to 1Q report, stock went on a tear likely as some investors were skeptical they’d receive the funds which are now mostly received and remainder expected before end of 2Q.

  • FY19 Outlook: flat revs and adj EBITDA (vs EBITDA of 470m which implies 1Q19 run rate for rest of the year), CFO ex SSL 350-450m incl restructuring, CapEx <375m with FY19 being peak year, Ex SSL, EBITDA >550m with SSL improving EBITDA but consuming cash due to milestones and restructuring. Imagery flat revs and adj EBITDA, Services low single digit rev growth and 11% EBITDA margin, Space Systems mid single-digit rev decline, “several hundred basis point” compression in margins. 

  • GAAP EPS (0.99)  looks horrendous as conversion to U.S. GAAP reduced EBITDA and mgmt. does not present non-GAAP EPS excluding intangibles (but they give you all the data to calculate it yourself).

  • Employing technology advances to increase capacity of WorldView Legion from original plans. 

  • While capacity constrained until WorldView Legion launches, subscriptions and product sales will be the growth drivers (moderate). Also seeing increased US government spending in FY19 and FY20, good pipeline from Canadian government.

  • No new awards at SSL but see a healthy pipeline of potential wins following disruption during Geo Satcom review, expect some wins in the “near future”.

  • RCM is finished and preparing for launch.  

  • Nice to see q/q improvement.  EV/EBITDA=7.7X which could be low if EBITDA stabilizes and continues to improve which guidance suggests improvement in adj EBITDA in FY19 which if that was the case would give confidence of continued recovery in FY20 and beyond. Note 1Q19 EPS annualized=$2.56 compared to TTM $1.55. If EBITDA improves and confidence improves, a 10X EV/EBITDA ratio would put the stock back to $25 (again lots of risk that this doesn’t happen).

  • Stock opened down -14% on a weak day sparked by tariff fears, ended up 2%.

4Q18 (.13) vs 1.19, est 0.60 down from 1.06 incl ~0.63 in 1-time costs

  • Feb 28, 2019, P= U.S. $7.30, C$ 9.60, TTM EPS 2.92, P/E=2.5X, FY19 EPS estimates are high 

  • IFRS adj loss per share (.13) with 0% tax rate (vs recovery reported) incl ~0.63 1-time cost adjustments.  FY18 EPS 2.92 w 20% TR, 

  • Cut dividend to .04, not surprising given WV4 failure and focus on cash flows and debt covenants.  

  • Pro-forma revs -10% to 496m, GEO and RCM -34%, ex GEO and RCM revs +1%, EBITDA 17% vs 21%,

  • Imagery +3% to 213m, adj EBITDA 57.3% vs 63.5% due to mix and 1-time legal costs, Space -17% to 243m, EBITDA (11.9%) vs 6.5%, Services +10% to 68m, EBITDA 8.8% vs 15.9% due to mix and pension adjustment 

  • FY18 pro forma revs -7%, GEO and RCM -26%, ex GEO and RCM revs +4%, Space ex GEO and RCM was +8%

  • Former adj IFRS presentation:  4Q18 EBITDA 91m vs 181, still much weaker than expected, 4Q CFO looks like was ~108m with some delayed payments from US govt shutdown, FY EBITDA 596 vs 739, FY18 FCF (10m),

  • New US GAAP presentation 4Q EBITDA  84m vs 116m, FY EBITDA 472, no FY17 pro forma given (includes 170m impairment and 20m stock comp)

  • EBITDA impacted by 27m increased cost estimates (again) to complete programs, 18m accrual for liquidated damages for anticipated schedule changes which are not expected to repeat and would be excluded from covenant calc which also excludes some R&D and ITCs which add 22m giving a 4Q run rate of $158m, annualized to 632m, loss of WV4 offset by cost savings, puts leverage around 4.7X vs still well below covenant of 6X. 

  • GEO Comsat review completed, going to keep it and restructure it to a much smaller scale, felt it was worth more than offers from potential buyers, can reduce leased space. Could do sale/leaseback for another $80-120m but only if enables them to stay long term.  See strategic value in keeping the teams together, a more robust pipeline in smaller satellites than they thought.  Orbital securitization is possible but difficult as customers must consent.

  • Implementing restructuring to reduce costs by ~60m in FY19, annualized savings ~70m, in addition to post-merger expected savings run rate of 60-120m by end of 4Q19

  • FY19 Outlook: Imagery flat, lost revenue and EBITDA from WV4 offset by growth in U.S. govt and cost reductions.  Services low-mid single digit rev growth. MDA single-digit decline in Revs and several hundred bps lower margins as RCM winds down (expected launch 1H19, little margin in FY19). SSL still in transition. FY19 EBITDA ex SSL >550m, expect SSL to improve from (80m) in FY18 with continued headwind on cash due to timing of milestone pmts and restructuring charges.  CapEx up as they hit peak spending on Legion.  Expect insurance proceeds from WV4, SSL to consume more cash on peak spending, timing of costs vs pmts, possibly negative FCF but mgmt. not providing guidance.

  • Growth options: numerous potential customers and programs, not entirely dependent on capacity due to analytics, information products, and subscriptions.  Robust pipeline in Services including several classified programs relating to AI and analytics 

  • Backlog: Imagery 1.2bn funded backlog, 900m unfunded from EnhancedView follow-on contract with NRO. Services 246m in funded backlog, 100m unfunded. Space systems 935m, 525m of which is GEO Comsats in prodn.  Including unfunded, backlog roughly flat y/y as growth in imagery and services offset by burn in Space Systems

  • Debt 3bn, bank defined leverage 4.2X, well within covenants which are on IFRS, have roughly 672m in available liquidity (cash and revolver), no maturities until October 2020 ($250m), another $250m + Revolver in Oct 2021, $1.9bn in Oct 2024

  • 10-K flags a material weakness in internal controls but mgmt. says it’s due to transition to US GAAP, HQ relocation rather than lack of real controls/systems, expect significant improvement to rectify this year.

  • Lots of things going on, base earnings power still looks to be at least $2 per share with room for growth and more cost savings in FY20 and beyond.  Leverage of course still elevated however looks to be comfortably below covenants. 1Q19 to be weak due to loss of WV4 not being offset by cost savings (EPS maybe 0.30) which will have a larger impact in 2Q.  4Q normalized EPS run rate, or EBITDA walk through, implies FY19~$1.90-2.13 (0% Tax) and FY20 $2.30-3.00 with additional 60-120m cost savings and 20% Tax on adj US GAAP (4-4.80 on former adj IFRS basis).

Mid Quarter Updates 

  • Jan 7th, 2019 - Negative

  • WorldView-4 Satellite experienced a failure.  Its FY18 revs were approx. $85m, BV of $155m, insured for $183m although it’s unclear how much would go to customers for inability to fulfil contracts.

  • Mgmt undertaking actions to offset ~10-15m of revs and minimize potential impacts in future years.  

  • Stock very weak in response, bears might think this is insurance fraud although I’d doubt it.  Rev impact of $85m is 4% of expected FY18 revenue, could be $55m in lost EBITDA (65%?),

  • If 4Q EBITDA before WV4 failure is 133m, TTM EBITDA would be 639m, Debt/EBITDA 4.9X but ex $55m est from WV4, TTM EBITDA could be 584m and Debt/EBITDA would be 5.3X.  Ex Geosatcom and WV4, FY18 EBITDA could be 617m, just a bit lower than TTM EBITDA at end of 3Q18 ex estimate for WV4 and debt/EBITDA would be 5X. This does not reduce debt by expected insurance proceeds which would lower the leverage ratio a little bit.

  • If Geosatcom losses continue for a while or cut into the bone, annualizing 4Q est EBITDA ex $55m would be $479m with debt/EBITDA (on 4Q estimated run rate) would be 6.5X.  Definitely bad but would they enforce covenants on a temporarily low 4Q run rate? Most likely would be on TTM basis but important considerations definitely 4Q cash flow and plan for geosatcom.

  • Worst case: Supplier quality issues persist, they are unable to shut down or exit geosatcom in a timely manner and significant losses continue or get worse, 4Q cash flow falls short, pushing the company to default due to declining EBITDA. This is a very real possibility as they likely can’t just turn the lights off before the end of 1Q19 due to continued contracts. If 1Q19 and 2Q19 EBITDA come in at the same rate as 4Q18 without WV4, the company will likely hit the covenant at the end of 2Q on a TTM basis. If the losses from geosatcom accelerate, this timeframe moves up and if the losses moderate, this timeframe would extend. 

  • Best Case: They are able to shut down or exit or carve out geosatcom and stop the losses in the very near term, while WV4 was a driver for growth, remaining margins are solid and durable, company would still be within covenants, could alter capex cadence to stretch cash flow by a few more quarters. Dividend cut or elimination is very possible. Key issues are 4Q cash flow, timing of exiting geosatcom and losses endured by the division until exit. It’s possible someone offers to buy the company given its extensive technology position however that should not be counted on. The company has said exiting geosatcom would likely yield proceeds that exceed costs however the timing of that would be critical (they already sold a building for $70m which I did not factor into lower debt).

  • Dec 21, 2018 – Positive? 

  • Announced more flexible covenants:

  • 4Q18 5.5X

  • 1Q19-3Q20 6X (was 4.75X to 1Q20)

  • 4Q20 and beyond 5.5X (was 4X from 2Q20-3Q20 and 3.5X 4Q20 and beyond).

  • Dec 6, 2018 - Positive

  •  Sold Building 1 in Palo Alto for $70m, employees will be relocated to another building, reducing SSL footprint and frees up some capital to pay down debt.

  • Nov 16, 2018

  • Shareholders approve U.S. domestication which is expected on or around January 1, 2019. Any shareholders of MAXR should consult the Information Circular and their tax/legal advisors. There will be a deemed disposition of MAXAR Canada shares (and associated capital gain/loss) with a subsequent acquisition of MAXAR U.S. shares with a new cost basis.  

3Q18   adj EPS .75 vs 1.00, -25%, ex impairment, est 1.06

  • October 31, 2018, P=U.S.$27.07, C$35.49, TTM EPS=4.71, P/E=6X 

  • Revs 508.2m, Pro forma -10%, adj EBITDA 146.3m vs 68.7m or 189.1 pro forma, 28.8% vs 20.4%

  • Imagery +4% pro forma to 209m, EBITDA 63.5% vs 63.6%, Space Systems -12% to 263m, EBITDA 19m vs 61.2m, 7.2% vs 20.5%, Services -14% to 62m, EBITDA 15% vs 12.9%

  • Adj CFO 91.9m, FCF 29.2m, Debt/EBITDA 4.3X vs covenants 5.5X

  • In Space Systems, Geo Comsat -31%, rest of segment was +13%, this year Geo is about 50% of Space Systems revs and 30% of total revs, low margin YTD, very negative in 3Q

  • Should complete evaluating strategic alternatives for GEO Comsat business by year end, no matter the outcome should generate cash

  • Space Systems impacted by higher than expected costs to complete certain programs due to supplier quality issues, required to book expected losses and in some cases negative revs immediately 

  • Backlog 2.59bn due to winding down of large GEO satcom projects

  • FY18 Outlook Revs -6.5%, EBITDA 32%, lowered adj EPS to 4.05-4.10, adj CFO 300-400m, CapEx 300-315m, YTD adj CFO 160.7, CapEx 222.8, implies 4Q CFO 139-239m, CapEx 77.2-92.2m

  • Implies 4Q EPS .56-.66 which is bad but due to growing losses at GEO and they should be back to normal once they exit GEO

  • EPS guidance lowered vs a raise 3 months ago due to losses at GEO, rev guidance lowered slightly, CFO guidance unchanged, CapEx guidance lower

  • Stock getting hammered due to revenue/EPS miss, lowered rev and EPS guidance, likely resulting in lowering future expectations of earnings power, improved outlook for FY18 FCF encouraging.  Mgmt thinks FY19 Rev growth ex Geo +4-5%

  • Basically negative revisions in GEO Satcom resulted in booking some negative revenues and profitability coupled with supplier and component issues resulted in lower than expected revenues and earnings and a reduction in revenue and earnings guidance. Mgmt in process of selling or winding down GEO which would generate cash by selling assets however it’s unknown how long that would take, evaluation should be completed by end of 4Q (which is a big cash flow quarter for GEO satcom). Once the cut is done, earnings should reflect the remaining core business.

Mid Quarter Update

  • August 7, 2018 

  • A short seller put out a report targeting MAXR saying the company could be worth nothing due to minimal to no free cash flow this year and that aggressive depreciation strategies inflate EBITDA and earnings.   

2Q18 adj EPS 1.22 vs .97

  • July 31, 2018, P=U.S.$51.75, C$67.32, TTM EPS=4.96, P/E=10X

  • Revs 578.9m, Pro forma -4.1%, adj EBITDA 171.2m vs 66.0 or 187.3m pro forma, 29.6% vs 31% pro forma do to timing of ITCs, ex ITCs, margins expanded 60bps

  • Geo comm and RCM -18% y/y, rest of business +5%

  • Pro Forma: Space Systems -2.9%to 329.9m, EBITDA 42.2m vs 61.6m, Imagery +5.1% to 212m, EBITDA 136.2m vs 128.8m, Services -3.5% to 66.3m, EBITDA 6.9m vs 7.5m

  • Backlog 3.05bn

  • Reaffirmed guidance, EPS near top of the range 4.65-4.85

  • Still see deferrals in new satellite awards, continues to see strong opportunities in U.S. government, LEO (Low Earth Orbit) communications and Earth observation business, Space Systems ex Geo comm and RCM +34%

  • Won a prime contract where previously they have been subcontractors, demonstrating their moving up the food chain, expect 25m in cost savings this year, confident of hitting their run rate of 60m by end of FY19

  • Results continue to be decent during this bottoming phase, valuation is attractive for when they return to growth and dividend is reasonable while investors wait.

1Q18   1.47 vs .92, est 1.05

  • Revs 557.7m, Pro forma Revs -5.1%, adj EBITDA 187.4 vs 63.1 or 178m pro forma, 33.6% vs 16.9% or 30.3% pro forma

  • Geo comm and RCM -30%, rest of business +15%, MDA ex RCM +7%, mgmt. thinks geostationary is bottoming

  • Pro Forma: Space Systems -14% to 294.4m, EBITDA 54.6m vs 62.5m, Imagery +9% to 211.4m, EBITDA 138.1m vs 120.1m, Services +21% to 70m, EBITDA 7.1m vs 6m

  • Backlog flat q/q @ 3.3bn

  • FY Outlook EPS raised to 4.65-4.85, the rest affirmed

  • Stock was strong following results, and while EPS was ahead of estimates and guidance was raised, it’s fundamentally the same story as last quarter and the stock hasn’t fully recovered, still looks cheap cheap.

4Q17   $US1.19 vs 1.06, $C 1.52 vs 1.42, est $C 1.52, FY17 EPS $US4.16 vs 4.37

  • Now reporting in $U.S.

  • Revs 545.1m incl 221.6m from DigitalGlobe, adj EBITDA 180.9m vs 66.3, 33.2% vs 17.6%

  • Pro Forma revs -7.2% to 552.1m, EBITDA 184.9m vs 185.4m, 33.5% vs 31.2%, EPS 1.18 vs 1.56

  • Backlog 3.3bn, added1.7bn from DigitalGlobe but previous contract with DigitalGlobe removed as it’s now an intracompany contract.

  • On progress to deliver $55-110m in cost savings by end of 2019, $25m included in FY18 outlook. Several program awards and facility clearance for Palo Alto factory (Feb 2018).

  • Net Debt to EBITDA = 4.0X, well below their covenants and their previous forecast.

  • FY18 Outlook: pro-forma revs decline 2-4%, EBITDA 32.5%, CFO 300-400m (Operating cash flows minus interest and financing expenses), EPS 4.50-4.70 (+8-13%), Space Systems to decline in 2018 but rebound in 2019 and beyond.

  • Stock reacted negatively, FY18 Capex investments will result in minimal FCF but should drive revenue and earnings growth over the longer term

Converting to $U.S. reporting

3Q17   1.23 vs 1.49 ex .23 provision last year, est 1.29

  • Revs -15% to 421.3, EBITDA incl corp. exp 85 vs 90.4 ex 10m provision in 3Q16

  • Communications -27.8% to 256m on lower satellite construction activity, EBITDA 43m vs 58.2m

  • Surveillance and Intelligence +17.1% to 165.3m, EBITDA 46.9m vs 36.1m ex 10m provision in 3Q16

  • Backlog 2.3bn

  • Pro Forma incl DigitalGlobe (closed Oct 5th): 3Q17 Revs -4.6% to 712.1, adj EBITDA 237.2m vs 232.8m, Digital Globe would have been +16% to $C 290.8m, EBITDA 156.4 vs 156.8

Mid-Q Update

  • Closed acquisition of DigitalGlobe and changing name to Maxar Technologies. Assumed $U.S. 1.2bn in net debt, adding $U.S. 1bn in new debt, and 19.5m new shares on top of 36.5m existing shares. This will be dilutive to MDA’s earnings on an EPS basis but DigitalGlobe’s EBITDA margins are significantly higher than MDA’s.

2Q171.29 vs 1.57, 19.5% TR vs 13.5%, est 1.25 down from 1.35

  • Revs flat at 503.7m, EBITDA incl corp exp 88.3m vs 92.2m

  • Communications -8% to 332.4m, lower number of satellite awards, EBITDA 41.1m vs 56.2m

  • Surveillance and Intelligence +21% to 171.3m, EBITDA 53.2m vs 40.3m

  • Backlog 2bn, DigitalGlobe acquisition should close in 3Q or shortly after

  • Mgmt sees a higher backlog at the end of the year to drive higher utilization and renewed growth, expects to sign a 500m satellite award soon, their largest ever, and the satellite servicing contract is not yet in backlog.

1Q17   1.23 vs 1.53, ex items, est 1.35

  • Revs -12% to 494.3m, EBITDA incl corp exp 83.9m vs 93m

  • Communications -17.7% to 332m, EBITDA -15% to 50.5m, S&I +2% to 162.4m, EBITDA +2.4% to 38.6m, Communications weak due to lower satellite industry awards over the past 2 years (expect FY17 awards similar to FY16 but weighed to 2H)

  • Backlog 2bn

  • Softer than expected and backlog declined q/q, major contributors to lower revs are EU and South America. DigitalGlobe acquisition continues to enhance long-term valu as does working towards U.S. security clearance.

4Q16   1.42 vs 1.51

  • Revs -7.6% to 502.9m, EBITDA incl corp exp 88.8m vs 92.1m

  • Backlog 2.4bn vs 2.6bn at 3Q

  • Proposals and win rates at record levels

  • Security clearance granted for SSL MDA holdings, next step for Palo Alto clearance

  • To acquire DigitalGlobe expected 2H17, accretive in 2018, 75-150m in annual cost savings be end of FY19, Pro Forma revs 3.0bn, EBITDA 881m vs 354m for MDA alone, EBITDA margin 29% vs 17% for MDA alone