Maxar Technologies (NYSE:MAXR) (TSX:MAXR) (“Maxar” or the
“Company”), a trusted partner and innovator in Earth Intelligence
and Space Infrastructure, today announced financial results for the
quarter ended March 31, 2020 and a multi-hundred million dollar
contract award to build multiple 1300-Class communications
satellites for an undisclosed customer. All dollar amounts in this
press release are expressed in U.S. dollars, unless otherwise
noted.
Key points from the quarter include:
- Consolidated revenues from continuing operations of $381
million
- Net loss of $48 million
- Diluted loss per share from continuing operations of $1.30
- Adjusted EBITDA1 from continuing operations of $77 million and
Adjusted EBITDA1 margin of 20.2 percent
- Net loss and Adjusted EBITDA included charges of $18 million
related to COVID-19 and $14 million related to a recent design
anomaly detected in a final satellite test procedure
- Excluding the $32 million in charges described above, net loss
would have been $16 million and Adjusted EBITDA would have been
$109 million
1 This is a non-GAAP financial measure. Refer to section
“Non-GAAP Financial Measures” in this earnings release.
“Our results this quarter reflect progress on our multi-year
strategy to strengthen our company and position it for revenue,
profit and cash flow growth. Importantly, we closed the MDA
divestiture, which helped improve our balance sheet. We generated
solid revenue growth in Earth Intelligence, and
quarter-over-quarter consolidated backlog growth, demonstrating
solid demand from customers and continued success of our
diversification strategy,” said Dan Jablonsky, CEO. “And the
bookings momentum has continued into the second quarter with
today’s signing of a contract to build multiple 1300-Class
communications satellites. This brings our bookings total in Space
Infrastructure to over $700 million year-to-date and puts us on a
path for another year of backlog growth for this segment.”
Jablonsky continued, “As we respond to the global Coronavirus
pandemic, we are focused on protecting the health and safety of our
team members, families, customers and communities while continuing
to deliver the products and services needed by our partners to
complete their critical missions.”
“We ended the quarter with roughly $500 million in liquidity and
no significant debt maturities until the end of 2023,” stated Biggs
Porter, CFO. “This quarter’s results were negatively impacted by an
increase in estimated costs to complete programs and scheduling
penalties in our Space Infrastructure segment because of the social
distancing restrictions put in place across the world to help
combat COVID-19. Separately we discovered a design anomaly on a
commercial satellite program in late April prior to shipment. This
was during the final stage of our thorough test process and
resulted in schedule revisions and cost growth. Our results
included negative impacts of $32 million in the quarter related to
these items. Excluding these items, our results are in line with
expectations.”
On April 8, 2020, we completed the previously announced sale of
the MDA Business to Neptune Acquisition Inc., a corporation
existing under the laws of the Province of British Columbia and an
affiliate of Northern Private Capital Ltd., for $729 million (C$1
billion) subject to customary purchase price adjustments, including
for working capital, cash and debt. This divestiture represents a
strategic shift in our business and, in accordance with U.S. GAAP,
qualifies as a discontinued operation. As a result, the operating
results and cash flows related to the MDA Business have been
reflected as discontinued operations in the Unaudited Condensed
Consolidated Statements of Operations.
Total revenues from continuing operations decreased to $381
million from $431 million, or by $50 million, for the three months
ended March 31, 2020, compared to the same period of 2019. The
decrease was primarily driven by a $78 million decrease in the
Space Infrastructure segment which was partially offset by a $17
million increase in the Earth Intelligence segment.
For the three months ended March 31, 2020, net loss from
continuing operations of $78 million compared to a net loss of $68
million in the same period of 2019. The increase in net loss is
primarily driven by a decrease in revenue of $50 million for the
three months ended March 31, 2020 compared to the same period in
2019. The increase is also driven by a $14 million recognition of
impairment on orbital receivables, primarily due to an increase in
credit risk associated with our largest orbital customer, for the
three months ended March 31, 2020. We did not recognize any orbital
impairments for the three months ended March 31, 2019. The overall
increased loss was partially offset by a decrease in product and
service costs of $25 million and a decrease in selling, general and
administrative expenses of $17 million. The increased loss was also
partially offset by a $2 million foreign exchange gain for the
three months ended March 31, 2020 compared to a foreign exchange
loss of $5 million for the three months ended March 31, 2019.
For the first quarter of 2020, Adjusted EBITDA was $77 million
and Adjusted EBITDA as a percentage of consolidated revenues
(“Adjusted EBITDA margin percentage”) was 20.2%. This is compared
to Adjusted EBITDA of $99 million and Adjusted EBITDA margin
percentage of 22.9% for the first quarter of 2019. The decrease was
driven largely by lower Adjusted EBITDA from the Space
Infrastructure segment, partially offset by higher Adjusted EBITDA
from the Earth Intelligence segment.
Our results of operations for the three months ended March 31,
2020 include the current estimated impact of COVID-19. We had
COVID-19 related EAC growth of $18 million within the Space
Infrastructure segment which negatively impacted our earnings
during the three months ended March 31, 2020. The changes in the
EACs are due to increases in estimated program costs associated
with the COVID-19 operating posture and the estimated impact of
certain items such as supplier delays and increased labor hours
along with actuals realized during the three months ended March 31,
2020. These costs are considered incremental and separable from
normal operations.
We had total order backlog of $1.7 billion as of March 31, 2020
compared to $1.6 billion as of December 31, 2019. Backlog increased
primarily due to an increase in our Space Infrastructure segment
backlog as a result of new awards during the year, partially offset
by declines in our Earth Intelligence segment. The decrease in
backlog within the Earth Intelligence segment is primarily driven
by the timing of the exercise of the EnhancedView Contract option
year. The decrease was partially offset by increases in geospatial
services. Our unfunded contract options totaled $1.4 billion as of
March 31, 2020 and December 31, 2019, respectively.
Financial Highlights
In addition to results reported in accordance with U.S. GAAP,
the Company uses certain non-GAAP financial measures as
supplemental indicators of its financial and operating performance.
These non-GAAP financial measures include EBITDA and Adjusted
EBITDA. The Company believes these supplementary financial measures
reflect the Company’s ongoing business in a manner that allows for
meaningful period-to-period comparisons and analysis of trends in
its business.
Three months ended
March 31,
2020
2019
($ millions, except per share amounts)
Revenues
$
381
$
431
Loss from continuing operations
(78
)
(68
)
Income from discontinued operations, net
of tax
30
11
Net loss
$
(48
)
$
(57
)
EBITDA1
92
88
Adjusted EBITDA1
77
99
Diluted income (loss) per common
share:
Loss from continuing operations
$
(1.30
)
$
(1.14
)
Income from discontinued operations, net
of tax
0.50
0.18
Diluted loss per common share
$
(0.80
)
$
(0.96
)
Weighted average number of common shares
outstanding (millions):
Basic
60.1
59.0
Diluted
60.1
59.0
1 This is a non-GAAP financial measure. Refer to section
“Non-GAAP Financial Measures” in this earnings release.
Revenues by segment were as follows:
Three months ended
March 31,
2020
2019
($ millions)
Revenues
Earth Intelligence
$
271
$
254
Space Infrastructure
132
210
Intersegment eliminations
(22
)
(33
)
Total revenues
$
381
$
431
The Company analyzes financial performance by segment, which
combine related activities within the Company.
Three months ended
March 31,
2020
2019
Adjusted EBITDA:
Earth Intelligence
$
133
$
125
Space Infrastructure
(39
)
(2
)
Intersegment eliminations
(7
)
(4
)
Corporate and other expenses
(10
)
(20
)
Adjusted EBITDA1
$
77
$
99
1 This is a non-GAAP financial measure. Refer to section
“Non-GAAP Financial Measures” in this earnings release.
Earth Intelligence
Three months ended
March 31,
2020
2019
($ millions)
Revenues
$
271
$
254
Adjusted EBITDA
$
133
$
125
Adjusted EBITDA Margin
49.1
%
49.2
%
Revenues from the Earth Intelligence segment increased to $271
million from $254 million, or by $17 million, for the three months
ended March 31, 2020, compared to the same period of 2019. The
increase was primarily driven by $11 million in revenue growth from
new contract awards and expansion of existing programs with the
U.S. government. There was also a $6 million increase in revenues
in 2020 from an international customer due to a delay in contract
signing in 2019.
Adjusted EBITDA increased to $133 million from $125 million, or
by $8 million, for the three months ended March 31, 2020, compared
to the same period of 2019. The increase was primarily driven by an
increase in revenues and a decrease in selling, general and
administrative expenses due to headcount reductions taken in the
first half of 2019.
Space Infrastructure
Three months ended
March 31,
2020
2019
($ millions)
Revenues
$
132
$
210
Adjusted EBITDA
$
(39
)
$
(2
)
Adjusted EBITDA Margin
(29.5
)%
(1.0
)%
Changes in revenues from year to year are influenced by the
size, timing and number of satellite contracts awarded in the
current and preceding years and the length of the construction
period for satellite contracts awarded. Revenues on satellite
contracts are recognized using the cost-to-cost method to determine
the percentage of completion over the construction period, which
typically ranges between 20 to 36 months and up to 48 months in
special situations. Adjusted EBITDA margins can vary from quarter
to quarter due to the mix of our revenues and changes in our
estimated costs to complete as our risks are retired and as our
estimated costs to complete are increased or decreased based on
contract performance.
Revenues from the Space Infrastructure segment decreased to $132
million from $210 million, or by $78 million, for the three months
ended March 31, 2020 compared to the same period of 2019. Revenues
decreased primarily as a result of the impact of reduced volumes on
commercial programs of $114 million which were partially offset by
an increase in volume related to U.S. government contracts of $46
million during the three months ended March 31, 2020 compared to
the same period in 2019. There was COVID-19 related EAC growth of
$18 million which negatively impacted revenue for the three months
ended March 31, 2020. The changes in the EACs are due to increases
in estimated program costs associated with the COVID-19 operating
posture and the estimated impact of certain items such as supplier
delays and increased labor hours. These costs are considered
incremental and separable from normal operations. Additionally,
revenues were negatively impacted by $14 million due to increases
in estimated costs and an associated change in the EAC profit
margin of a commercial satellite program due to the identification
of a design anomaly in the final stage of a testing process.
Estimated costs to complete directly impacts revenues, as revenues
are recognized over time under the cost-to-cost method.
Adjusted EBITDA decreased to a loss of $39 million from a loss
of $2 million, or by $37 million, for the three months ended March
31, 2020, compared to the same period of 2019. The decrease in the
Space Infrastructure segment is primarily related to an $18 million
negative impact related to our COVID-19 operating posture and a $14
million negative impact on the above-mentioned commercial satellite
program.
Corporate and other expenses
Corporate and other expenses include items such as corporate
office costs, regulatory costs, executive and director
compensation, foreign exchange gains and losses, retention costs,
and fees for legal and consulting services.
Corporate and other expenses decreased to $10 million from $20
million, or by $10 million, for the three months ended March 31,
2020 compared to the same period in 2019. The decrease was
primarily driven by a $2 million foreign exchange gain for the
three months ended March 31, 2020 compared to a foreign exchange
loss of $5 million for the three months ended March 31, 2019. The
decrease in corporate and other expenses was also driven by a $2
million decrease in selling, general and administrative expenses
and a $1 million decrease in retention costs related to a 2019
program within the Space Infrastructure segment.
Intersegment eliminations
Intersegment eliminations are related to projects between our
segments, including WorldView Legion. Intersegment eliminations
have increased to $7 million from $4 million, or by $3 million, for
the three months ended March 31, 2020 compared to the same period
in 2019 primarily related to an increase in intersegment satellite
construction activity.
MAXAR TECHNOLOGIES INC.
Unaudited Condensed Consolidated
Statements of Operations
(In millions, except per share
amounts)
Three Months Ended
March 31,
2020
2019
Revenues:
Product
$
107
$
166
Service
274
265
Total revenues
$
381
$
431
Costs and expenses:
Product costs, excluding depreciation and
amortization
$
145
$
171
Service costs, excluding depreciation and
amortization
93
92
Selling, general and administrative
68
85
Depreciation and amortization
90
95
Impairment loss
14
—
Operating loss
(29
)
(12
)
Interest expense, net
49
49
Other (income) expense, net
(3
)
5
Loss before taxes
(75
)
(66
)
Income tax expense
2
1
Equity in loss from joint ventures, net of
tax
1
1
Loss from continuing operations
(78
)
(68
)
Income from discontinued operations, net
of tax
30
11
Net loss
$
(48
)
$
(57
)
Basic income (loss) per common share:
Loss from continuing operations
$
(1.30
)
$
(1.14
)
Income from discontinued operations, net
of tax
0.50
0.18
Basic loss per common share
$
(0.80
)
$
(0.96
)
Diluted income (loss) per common
share:
Loss from continuing operations
$
(1.30
)
$
(1.14
)
Income from discontinued operations, net
of tax
0.50
0.18
Diluted loss per common share
$
(0.80
)
$
(0.96
)
MAXAR TECHNOLOGIES INC.
Unaudited Condensed Consolidated Balance
Sheets
(In millions, except per share
amounts)
March 31,
December 31,
2020
2019
Assets
Current assets:
Cash and cash equivalents
$
12
$
59
Trade and other receivables, net
305
357
Inventory
25
20
Advances to suppliers
34
42
Prepaid and other current assets
40
32
Current assets held for sale
627
751
Total current assets
1,043
1,261
Non-current assets:
Orbital receivables, net
363
382
Property, plant and equipment, net
782
758
Intangible assets, net
943
991
Non-current operating lease assets
176
176
Goodwill
1,455
1,455
Other non-current assets
127
134
Total assets
$
4,889
$
5,157
Liabilities and stockholders’ equity
Current liabilities:
Accounts payable
$
128
$
153
Accrued liabilities
91
130
Accrued compensation and benefits
74
93
Contract liabilities
220
271
Current portion of long-term debt
29
30
Current operating lease liabilities
41
40
Other current liabilities
70
49
Current liabilities held for sale
175
230
Total current liabilities
828
996
Non-current liabilities:
Pension and other postretirement
benefits
193
197
Contract liabilities
3
4
Operating lease liabilities
172
173
Long-term debt
2,926
2,915
Other non-current liabilities
110
110
Total liabilities
4,232
4,395
Commitments and contingencies
Stockholders’ equity:
Common stock ($0.0001 par value, 240
million common shares authorized and 60.1 million outstanding at
March 31, 2020; $0.0001 par value, 240 million common shares
authorized and 59.9 million outstanding at December 31, 2019)
—
—
Additional paid-in capital
1,790
1,784
Accumulated deficit
(1,130
)
(1,082
)
Accumulated other comprehensive (loss)
income
(4
)
59
Total Maxar stockholders' equity
656
761
Noncontrolling interest
1
1
Total stockholders' equity
657
762
Total liabilities and stockholders'
equity
$
4,889
$
5,157
MAXAR TECHNOLOGIES INC.
Unaudited Condensed Consolidated
Statements of Cash Flows
(In millions)
Three Months Ended
March 31,
2020
2019
Cash flows (used in) provided by:
Operating activities:
Net loss
$
(48
)
$
(57
)
Net income from discontinued
operations
30
11
Net loss from continuing operations
(78
)
(68
)
Adjustments to reconcile net (loss) income
to net cash (used in) provided by operating activities:
Impairment losses including inventory
14
3
Depreciation and amortization
90
95
Amortization of debt issuance costs and
other noncash interest expense
4
2
Stock-based compensation expense
3
1
Other
(1
)
8
Changes in operating assets and
liabilities:
Trade and other receivables
42
17
Accounts payables and accrued
liabilities
(47
)
(85
)
Contract liabilities
(52
)
(77
)
Other
12
16
Cash used in operating activities -
continuing operations
(13
)
(88
)
Cash (used in) provided by operating
activities - discontinued operations
(2
)
30
Cash used in operating activities
(15
)
(58
)
Investing activities:
Purchase of property, plant and equipment
and development or purchase of software
(60
)
(70
)
Return of capital from discontinued
operations
11
—
Cash used in investing activities -
continuing operations
(49
)
(70
)
Cash used in investing activities -
discontinued operations
(3
)
(3
)
Cash used in investing activities
(52
)
(73
)
Financing activities:
Net proceeds of revolving credit
facility
15
139
Repayments of long-term debt
(5
)
(4
)
Settlement of securitization liability
(4
)
(4
)
Payment of dividends
(1
)
(1
)
Payment of finance leases
(2
)
(2
)
Other
1
—
Cash provided by financing activities -
continuing operations
4
128
Cash (used in) provided by financing
activities - discontinued operations
(15
)
11
Cash (used in) provided by financing
activities
(11
)
139
(Decrease) increase in cash, cash
equivalents, and restricted cash
(78
)
8
Effect of foreign exchange on cash, cash
equivalents, and restricted cash
—
1
Cash, cash equivalents, and restricted
cash, beginning of year
109
43
Cash, cash equivalents, and restricted
cash, end of period
$
31
$
52
Reconciliation of cash flow
information:
Cash and cash equivalents
$
27
$
45
Restricted cash included in prepaid and
other current assets
1
6
Restricted cash included in other
non-current assets
3
1
Total cash, cash equivalents, and
restricted cash
$
31
$
52
NON-GAAP FINANCIAL MEASURES
In addition to results reported in accordance with U.S. GAAP, we
use certain non-GAAP financial measures as supplemental indicators
of our financial and operating performance. These non-GAAP
financial measures include EBITDA and Adjusted EBITDA.
We define EBITDA as earnings before interest, taxes,
depreciation and amortization, and Adjusted EBITDA as EBITDA
adjusted for certain items affecting comparability as specified in
the calculation. Certain items affecting comparability include
restructuring, impairments, satellite insurance recovery, CEO
severance and transaction and integration related expense.
Transaction and integration related expense includes costs
associated with de-leveraging activities, acquisitions and
dispositions and the integration of acquisitions. Management
believes that exclusion of these items assists in providing a more
complete understanding of our underlying results and trends, and
management uses these measures along with the corresponding U.S.
GAAP financial measures to manage our business, evaluate our
performance compared to prior periods and the marketplace, and to
establish operational goals. Adjusted EBITDA is a measure being
used as a key element of our incentive compensation plan. The
Syndicated Credit Facility also uses Adjusted EBITDA in the
determination of our debt leverage covenant ratio. The definition
of Adjusted EBITDA in the Syndicated Credit Facility includes a
more comprehensive set of adjustments.
We believe that these non-GAAP measures, when read in
conjunction with our U.S. GAAP results, provide useful information
to investors by facilitating the comparability of our ongoing
operating results over the periods presented, the ability to
identify trends in our underlying business, and the comparison of
our operating results against analyst financial models and
operating results of other public companies.
EBITDA and Adjusted EBITDA are not recognized terms under U.S.
GAAP and may not be defined similarly by other companies. EBITDA
and Adjusted EBITDA should not be considered alternatives to net
(loss) income as indications of financial performance or as
alternate to cash flows from operations as measures of liquidity.
EBITDA and Adjusted EBITDA have limitations as an analytical tool
and should not be considered in isolation or as a substitute for
our results reported under U.S. GAAP. The table below reconciles
our net (loss) income to EBITDA and Adjusted EBITDA for the three
months ended March 31, 2020 and 2019.
Three Months Ended March
31,
2020
2019
($ millions)
Net loss
$
(48
)
$
(57
)
Income tax expense
2
1
Interest expense, net
49
49
Interest income
(1
)
—
Depreciation and amortization
90
95
EBITDA
$
92
$
88
Income from discontinued operations, net
of tax
(30
)
(11
)
Restructuring
—
11
Transaction and integration related
expense
1
5
Impairment loss, including inventory
14
3
CEO severance
—
3
Adjusted EBITDA
$
77
$
99
Adjusted EBITDA:
Earth Intelligence
133
125
Space Infrastructure
(39
)
(2
)
Intersegment eliminations
(7
)
(4
)
Corporate and other expenses
(10
)
(20
)
Adjusted EBITDA
$
77
$
99
Cautionary Note Regarding Forward-Looking Statements
Certain statements and other information included in this
release constitute "forward-looking information" or
"forward-looking statements" (collectively, "forward-looking
statements") under applicable securities laws. Statements including
words such as "may", "will", "could", "should", "would", "plan",
"potential", "intend", "anticipate", "believe", "estimate" or
"expect" and other words, terms and phrases of similar meaning are
often intended to identify forward-looking statements, although not
all forward-looking statements contain these identifying words.
Forward-looking statements involve estimates, expectations,
projections, goals, forecasts, assumptions, risks and
uncertainties, as well as other statements referring to or
including forward-looking information included in this
presentation.
Forward-looking statements are subject to various risks and
uncertainties which could cause actual results to differ materially
from the anticipated results or expectations expressed in this
presentation. As a result, although management of the Company
believes that the expectations and assumptions on which such
forward-looking statements are based are reasonable, undue reliance
should not be placed on the forward-looking statements because the
Company can give no assurance that they will prove to be correct.
The risks that could cause actual results to differ materially from
current expectations include, but are not limited to, the risk
factors and other disclosures about the Company and its business
included in the Company's continuous disclosure materials filed
from time to time with U.S. securities and Canadian regulatory
authorities, which are available online under the Company's EDGAR
profile at www.sec.gov, under the Company's SEDAR profile at
www.sedar.com or on the Company's website at www.maxar.com.
The forward-looking statements contained in this release are
expressly qualified in their entirety by the foregoing cautionary
statements. All such forward-looking statements are based upon data
available as of the date of this presentation or other specified
date and speak only as of such date. The Company disclaims any
intention or obligation to update or revise any forward-looking
statements in this presentation as a result of new information or
future events, except as may be required under applicable
securities legislation.
Unless stated otherwise or the context otherwise requires,
references to the terms “Company,” “Maxar,” “we,” “us,” and “our”
to refer collectively to Maxar Technologies Inc. and its
consolidated subsidiaries.
Investor/Analyst Conference Call
Maxar President and Chief Executive Officer, Dan Jablonsky, and
Executive Vice President and Chief Financial Officer, Biggs Porter,
will host an earnings conference call Monday, May 11, 2020,
reviewing the first quarter results, followed by a question and
answer session. The call is scheduled to begin promptly at 3:00
p.m. MT (5:00 p.m. ET). To participate, dial:
Participant Toll Free Dial-In: 1-866-211-3067 Participant
International Dial-In: 1-647-689-6610
The Conference Call will also be Webcast live and then archived
at:
http://investor.maxar.com/events-and-presentations/default.aspx
Telephone replay will be available from Monday, May 11, 2020 at
6:00 p.m. MT (8:00 p.m. ET) to Monday, May 25, 2020 at 9:59 p.m. MT
(11:59 p.m. ET) at the following numbers: Toll free North America:
1-800-585-8367 International Dial-In: 1-416-621-4642 Passcode:
1767056#
About Maxar
Maxar is a leading provider of solutions in Earth Intelligence
and Space Infrastructure. We help government and commercial
customers to monitor, understand and navigate the changing planet;
deliver global broadband communications infrastructure; and explore
and advance the use of space. Our approach combines decades of deep
mission understanding and a proven commercial and defense
foundation to deliver our services with speed, scale and cost
effectiveness. Maxar’s 4,000 team members in more than 20 global
locations work to help our customers harness the potential of
space. Maxar’s stock trades on the New York Stock Exchange and
Toronto Stock Exchange under the symbol “MAXR”. For more
information, visit www.maxar.com.
View source
version on businesswire.com: https://www.businesswire.com/news/home/20200511005896/en/
Jason Gursky | VP Investor Relations | 1-303-684-2207 |
jason.gursky@maxar.com
Turner Brinton | Media Relations | 1-303-684-4545 |
turner.brinton@maxar.com
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