Maxar Technologies Inc.

Good afternoon and thank you for standing by. Welcome to the Maxar Technologies first quarter 2022 earnings call. All lines have been placed on mute to prevent any background noise. Should you require any assistance, please press star zero on your telephone keypad and an operator will assist you. During today's call, there will be a question and answer session and instructions will be provided at that time. I will now turn the conference over to Mr. Jason Gursky, Vice President of Investor Relations and Corporate Treasurer. Please go ahead.

Good afternoon, and thanks, Operator. Welcome to Maxar's first quarter 2022 earnings conference call. I'm joined today by the company's Chief Executive Officer, Dan Jablonski, and its Chief Financial Officer, Biggs Porter. Both will make some opening remarks, after which we're going to open up the line for your questions. We're shooting to wrap up the call in about an hour. Before we get started, I'd like to refer listeners to the accompanying slides for today's presentation, which can be found on the company's website at maxart.com. Once there, please turn to slide two, where I'd like to remind you that part of today's discussion, including responses to various questions, may contain forward-looking statements, which represent the company's estimates, future plans, objectives, and expected performance at today's date. These statements are based on current assumptions that the company believes are reasonable, but are subject to a wide range range of uncertainties and risks that could lead actual results to differ materially from the forward-looking information. You are referred to the advisory regarding forward-looking statements contained in our quarterly earnings releases, earnings call slide decks, and the company's most recent MD&A section found in our Form 10-Q on the company's website at maxar.com. And with that, I'll hand the discussion over to Dan. Dan, go ahead.

Thanks, Jason, and good afternoon, everyone. Today I'm going to review the key highlights of our performance of the quarter and provide an update on the legion build. I'll then review our key priorities for the year and wrap up with a discussion of our growth strategy. FIGS will then take over with a more detailed review of results and an update on guidance. Please turn to slide three for the key highlights of the quarter. We posted both revenue growth and adjusted EBITDA margin expansion driven by the space infrastructure segment. Financial results at Earth Intelligence came in a bit below our expectations as we experienced some pushouts in Q1 that we expect to close and execute in the second quarter and the rest of the year. And as Biggs will go into momentarily, stock-based compensation was higher than expected given the performance of our shares during the quarter. Additionally, we shifted resources to support the war in Ukraine, and you've certainly seen the prevalence of Maxar imagery over the past couple of months on media broadcasts and in publications. This shift has been the right thing to do, and it aligns closely with our values. We believe the world not only better understands what is going on in that region because of our efforts, but it also better appreciates the value of the geospatial data we provide to our customers each and every day. My thanks to our teams who have been working 24-7. This not only puts us on the right side of history, but it also positions our industry and Maxar specifically for an increased role in better serving customer missions in the future. On cash flows, we continue to see improvement, with trailing 12-month free cash flow of $67 million, which compares favorably to the $15 million we consumed on the same basis a year ago. As you know, we're focused on driving cash flow growth as we look to reduce debt and leverage. Book-to-bill metrics were roughly in line with expectations this quarter. On a trailing 12-month basis, the earth intelligence business is running at roughly one times And we announced that we received 27 awards during the quarter across nine U.S. government customers, eight of which are Department of Defense or intelligence community organizations, for up to $202 million of work on artificial intelligence and machine learning applications, advanced data analytics, software development, data conditioning, geospatial production and dissemination, maritime domain awareness, and training and development. As a reminder, we've seen a move toward book-to-ship revenue in this segment over the past couple of years, driven in part by customer adoption of our products, including 3D. We believe this trend, combined with the pipeline we see, supports the 6% to 13% growth we are projecting for the year. Importantly, demand pulses have picked up significantly across both enterprise and government customers. This has been reflected in part in light of the demonstrated value we're providing related to the Ukraine conflict but also with regard to adoption of our 3D technologies and solutions. Both aspects further bolster our confidence in our 2022 outlook. In space infrastructure, book-to-bill continues to be impacted by the large number of geocompsat awards received in 2020 related to the C-band transition. This is creating difficult comps. As a reminder, orders tend to be a bit variable, and it's hard to predict the precise timing of when awards will be made. We expect to end the year with a book to build greater than one in this segment, as we have a solid set of opportunities in front of us with a diverse customer base. For example, we're seeing solid demand signals from commercial customers for GeoComsats and LEO spacecraft, and from government customers for spacecraft utilizing our 1300 class bus and modular architectures for both Geo and LEO solutions. Also on the government side, we're pursuing opportunities where we can act as a subcontractor and also see opportunities where we can prime. Both avenues are creating some interesting partnership opportunities for us. Moving on to Black Shark. I am pleased to announce that we made a data for equity investment in this company and that we will receive a meaningful royalty for any sales Black Shark makes on products derived from our data. This is exactly in line with the types of deals that I've mentioned we're pursuing. and it follows the Q1 Aurora Insight investment announced earlier in the year. Blackshark's platform provides another alternative technology for processing satellite imagery data and pairs particularly well with our PlusVivid basemaps, detecting and segmenting objects, roads, vegetation, and other infrastructure. This information is used to rapidly create a visually appealing 3D digital model that is geotypical and complementary to Maxar's three precision 3D products. Partnering with Blackshark will allow us to move faster in areas such as gaming and flight simulation where customers may not need the global accuracy of Maxar's full precision 3D suite while opening up new revenue streams from Blackshark. I'm excited about this new relationship and the ability for Maxar to use its data as a currency in placing strategic investments. Moving on to guidance. FIGS will provide more details on the full year in a few minutes, but the quick take is that we are not making any substantive changes to our outlook. Please turn to slide four to cover a key milestone that was achieved during the quarter by NASA JPL on the Psyche mission. As a reminder, Psyche is expected to launch later this year to explore an asteroid orbiting between Mars and Jupiter, which is likely made largely of metal and may be core material from an early planet. The spacecraft will travel more than one billion miles and arrive at the asteroid in 2026, where it will spend 21 months orbiting the 140 mile wide asteroid, mapping it and studying its properties. The SEP chassis built from Psyche is Maxar's lightest and smallest graphite 1300-class spacecraft platform, roughly the size of a small car. It is combined with a medium-sized solar array and a high-gain antenna in Maxar's latest solar electric propulsion system. The spacecraft has been specifically designed to function in a low-power environment because of the Psyche asteroid's distance from the sun. In addition to Psyche, Maxar is also leveraging both its 1300-class platform and SEP technology for the NASA Gateway Power and Propulsion Element under the Artemis program, where we recently completed the first phase of end-to-end testing of its unique 12-kilowatt propulsion system. And the 1300-class platform has also been selected for NASA's Goddard Space Flight Center OSAM-1 mission and will host NASA's tropospheric emissions monitoring pollution or TEMPO instrument. It was good to see the Psyche spacecraft on its way down to the launch site in Florida. putting it one step closer to achieving its mission goals. I'd like to congratulate NASA and JPL on this key milestone and the Maxar team members that helped make it a reality. Please turn to slide five for a discussion of the Legion program. The headline is that we are delaying the first launch to September as we work through a test configuration anomaly that occurred during an environmental testing procedure on the second fully integrated satellite in our Palo Alto facility. Remediation is underway. We also continue our work on the remaining satellites in the program, and in particular, the third satellite. We expect both the second and third satellites to align with the updated timing of the first launch. That should give us some flexibility as we're now likely to have three spacecraft ready to support the first launch of two satellites. I'm disappointed that we've had another delay. As you know, we've been hit with supply chain and COVID-related issues over the past couple of years, which negatively impacted our timeline. And the war in Ukraine has limited the use of Antonov aircraft that typically fly spacecraft to launch sites. This has put further pressure on the overall schedule as we're more likely than not going to need to use ground transportation to get the satellites down to the Cape from Palo Alto. This is a first of a kind program and issues can arise as we go through our exhaustive testing protocols to assure mission success for a set of satellites designed to last at least a decade. We remain confident in the long term success of the program. As Beggs will address later, we do not expect the delay to impact 2022 guidance. We know how important this program is to Maxar, our customers, and to our investors. Once on orbit and in use with our existing Constellation assets, the Legion satellites will increase our capacity and revisit rates, positioning us well to take advantage of the robust demand we see in front of us. I look forward to that, and we will provide further updates on our second quarter earnings call this summer. Let's now turn to slide six for a quick review of our 2022 priorities. At the top of the list is getting Legion launched, which I just discussed. In addition to being focused on the launch of the first six satellites, we also announced on our last earnings call that we've begun long lead work on Legion 7 and 8. We're doing this to shorten the cycle time of the builds to either more quickly react to the strong demand signals we're seeing or be in a position to efficiently replace Worldview 3 when the time comes. Second up is the EOCL program, which we expect will replace the Enhanced View follow-on program. As a reminder, we've been a trusted partner of the US government for over 20 years, delivering commercial capabilities with superior quality, cost, security, and reliability. And as you've heard me discuss on prior earnings calls, we continue to hear from our government customers that there is solid demand for geospatial data, analytics, insights, and solutions to support both intelligence and tactical missions. In fact, The environment is as robust as I have seen it during my time in the industry, particularly in the context of the Ukraine war. Our customers at the NRO, NGA, and military services seek to leverage the capabilities of the industrial base to better understand what's going on in every corner of the planet. Importantly, they are increasingly looking for answers to tough questions in technology solutions, not just data. We believe the investments we've been making in our Constellation assets, secure ground infrastructure, data platforms, 3D capabilities, AI and ML analytical tools, and technology to support relevant sensor to decision timelines position us well to deliver significant value to our customers. We're very proud to support the U.S. government mission and look forward to continuing to work with the NRO as they increasingly adopt commercial geospatial data sources through the EOCL program. Now, as far as timing of the award is concerned, the best I can say right now is that it could be any day. We submitted our proposal late last year and expected an award in Q1 2022. Clearly, that is yet to happen, and I suspect that the war in Ukraine may have had something to do with that, as the government has been focused on supporting operations in the region. In the meantime, we remain under contract with the Enhanced View Follow-On Program, with a period of performance that stretches out into the third quarter of 2023, should the government continue to exercise the options available to it. As far as other key priorities are concerned, The space infrastructure segment executed well this quarter, generating solid margin performance, and the pipeline remains robust as we focus on capturing awards going forward. As far as financial flexibility is concerned, the big focus this year is to continue to grow cash flow and to manage through some upcoming maturities. Let's now turn to slide seven. We last held an Investor Day in March 2020 just before the world shut down because of the pandemic, and we typically host such events every other year, which means we are due. We continue to evaluate the status of the pandemic and COVID protocols, and we're looking forward to hosting another event when appropriate. I certainly look forward to seeing all of you in person as soon as practically possible. That said, in the time since our last Investor Day, we've tried to keep investors up to date on the key drivers of the business and on the strategy going forward. Slide seven is one you've certainly seen before, but I thought it would be a good reminder. The key takeaway here is that we operate in large and growing verticals, where we have established positions and where we're making investments across both segments to drive future growth. And slide eight provides hyperlinks to the presentations we've made over the past five quarters to double-click on our positioning and strategy, including in the areas of joint all-domain command and control, sensor to decision technologies, AI and ML, geospatial products, and solar electric propulsion. And of course, last quarter, we did a deep dive on some ESG-related topics. I'd encourage you to take a read through these decks and the accompanying transcripts to better understand our business and the industry in which we operate. It's an exciting time to be at Maxar, and I look forward to diving deeper into all of these topics on future earnings calls, and importantly, in person at another investor date in the quarters ahead. I'd like to conclude my remarks today by reiterating that I am very optimistic about Maxar's future. We are well-established and well-positioned in large and growing verticals, We're making solid investments that we expect to further our leadership positioning. We're focused on execution, including cash generation and debt reduction. And we're making an impact on the world through the products and services we offer. All of this positions us well for the future. And then in the near term, we're seeing solid demand pulses across both the Earth intelligence and space infrastructure segments. And we're focused on executing on both the EOCL award and the launches of the Legion satellites. I'm confident that all this together will result in revenue, profit, and cash flow growth in the quarters and years ahead, and with it, attractive shareholder returns. With that, I'm going to stop and hand the call over to Biggs for a discussion of our first quarter results and an update to our guidance for the year.