MDA Space Ltd.

Good morning, my name is Sylvie and I will be your conference operator today. At this time, I would like to welcome everyone to the MDA Q4 2023 Earnings Conference Call. Note that all lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question and answer session. If you would like to ask a question during this time, simply press star then number one on your telephone keypad. And if you would like to withdraw from the question queue, please press star then number two. Thank you. I would now like to turn the call over to Shirin Zahawi. Please go ahead.

Thank you, operator. Good morning and welcome to MDA's fourth quarter 2023 earnings call. Mike Greenlee, our CEO, and Vida Colmoni, our CFO, will lead today's call and share some prepared remarks before taking your questions. Before we begin, I would like to remind you that today's call will include estimates and other forward-looking information which may differ from actual results. Please review the cautionary language in today's press release and public filings regarding various factors, assumptions, and risks that could cause actual results to differ. In addition, during this call, we will refer to certain non-IFRS financial measures. Although we believe these measures provide useful supplemental information about our financial performance, these measures do not have any standardized meaning under IFRS, and our approach in calculating these measures may differ from that of other issuers and therefore may not be directly comparable. Please see the company's quarterly report and other public filings for more information about these measures, including reconciliations to the nearest IFRS measures. And with that, it's my pleasure to turn the call over to Mike.

Thank you, Shireen. Good morning, everyone. And thank you to those joining us today to discuss our fourth quarter and our full year 2023 financial results. We delivered a strong quarter in Q4 with double-digit revenue growth, solid profitability, and record backlog. Our Q4 revenues totaled $205 million, up 10% year-over-year, as we continued to execute on our backlog, which stood at $3.1 billion at year-end. Our adjusted EBITDA in the quarter was $42 million, and adjusted EBITDA margin was a solid 20.5%. This was a busy quarter for MDA, with a number of milestones worth highlighting. In October, we announced the selection of SpaceX as our launch partner for Chorus. our next generation Earth observation constellation, and confirmed our launched window for Q4 2025. We also completed the acquisition of the Digital Payload Division of Satix 5 Communications in late October, as we continue to invest in our digital satellite technology and our talent. And in November, we announced that we've secured a $180 million authorization to proceed contract to initiate work on a new non-geostationary orbit satellite constellation, with the full contract expected to be awarded this year. We have now secured three constellation contracts in the past two years, highlighting the strong momentum we are seeing in our satellite systems business driven by customer demand for communications satellite constellations. Late last year, we also announced plans to double our workforce and operational footprint in the United Kingdom as we continue to grow and scale our business globally. The fourth quarter's financial results and operational progress showcase the team's continued strong execution and the momentum we are seeing in our business and in our end markets. As we wrap up the year, I would like to thank our employees for their dedication and commitment to delivering for our customers. Our 3,000 talented people are key to our success, and we are fortunate to work in a field that energizes and attracts talent and pushes the boundaries of innovation every day. In 2023, the MDA team delivered another year of strong growth and execution with double-digit growth in revenue and adjusted EBITDA, further solidifying our position as a trusted mission partner and leader in the expanding space industry. We secured a number of strategic contracts, including the Telesat Lightspeed Low Earth Orbit Constellation Award, valued at $2.1 billion, and the previously noted $180 million Authorization to Proceed contract, to initiate work on a new non-geostationary orbit satellite constellation. We also continue to advance work on the Canadarm3 program, with the first elements of the external robotic interfaces going into production in 2023, a major milestone for the program. On Corus, the team made significant development progress and has started subsystem unit assembly as we prepare for the mission launch in late 2025. These accomplishments reflect tangible progress against our strategic growth plan and position us well for the coming years. Our backlog at year end stood at $3.1 billion, a record level for the company, and we continue to see a significant growth pipeline across our businesses. In 2023, we secured $2.5 billion in awards, which included the Telesat Lightspeed Constellation Award, in addition to other strategic awards across our three business areas. We grew our revenue to $808 million for the year, an increase of 26% year-over-year, and expanded our adjusted EBITDA to $174 million, up 24% versus last year's levels when excluding non-recurring items. This translates to a robust 21.6% adjusted EBITDA margin for the full year. To support current and future growth, we continue to focus on talent and recruitment. In 2023, we added 890 new staff. We also deployed $193 million in capital expenditures, which included research and development spending on technologies related to chorus, commercial robotics products, digital satellite technologies, and other growth initiatives. Our research and development efforts are a critical differentiator for MDA. Market research firm Research InfoSource, which is focused on the Canadian R&D ecosystem, ranked MDA as 33rd in its ranking of Canada's top 100 corporate R&D spenders based on 2022 data. In line with our long-term strategic plan, we continue to invest in the business to meet current and future growth across our business areas. We are in the early innings of a multi-decade growth cycle playing out in our end markets, and MDA is uniquely qualified to take advantage of the growth. With that growth market as our backdrop, today we are introducing our 2024 financial outlook. We expect 2024 to be another year of strong growth for the company. For the full year, we expect revenues to be in the $950 million to $1.05 billion, representing robust year-over-year growth of approximately 25% at the midpoint of guidance. We expect full-year adjusted EBITDA to be $190 to $210 million, representing approximately 19% to 20% adjusted EBITDA margin. We expect capital expenditures to be in the $210 to $230 million range as we continue to invest in our growth initiatives. In summary, 2023 was a year of strong growth for MDA, and I'm extremely proud of how the team executed. As we look to 2024, the team is energized by the strong momentum and positive trends we are seeing in our end markets, and MDA has the right technology portfolio to capitalize on the opportunities ahead of us. I'll spend a few minutes now to give you a view of the industry, an update on MDA's three business areas, and then I'll pass it over to Vito for a deep dive on the financials. Starting with the global space market, 2023 was another strong year for space, with research firm Euroconsult estimating the space market grew to US $462 billion last year, up approximately 9% from 2022 levels, while the space economy, which also includes non-contracted government activity, reached $509 billion U.S. Governments around the globe continue to invest in space, with 90 nations spending a total of $117 billion in 2023, up 15% year over year, and marking a historic high for government space spending. governments are allocating a higher share of their space budgets to defense programs as the gap between civil and defense spending continues to narrow. 2023 marked the first year where defense spending at US $59 billion exceeded civil space investments. We are seeing increased integration of space-based capability as a routine component of defense and military budgets driven by geopolitical tensions and demand for space-based surveillance and detection systems as well as space-based communications for defense purposes. Looking at the big picture, Euroconsult estimates the size of the global space economy will grow to over $822 billion within a decade, representing a compound annual growth rate of 6% over the forecast period. The U.S. Chamber of Commerce projects that the space economy will exceed $1.5 trillion by 2040. Closer to home, Notable developments last year included approximately $3 billion of incremental funding for space programs announced by the government of Canada, including $1 billion of funding over 15 years for the Radarsat Plus portfolio, an initiative aimed at ensuring continuous, efficient, and sustainable access to critical and high-quality Earth observation data for Canada. That October funding announcement builds on the momentum we saw earlier in 2023 would Canada announce $2.3 billion of investments for two space initiatives, continuing Canada's participation in the International Space Station, and developing and contributing a Lunar Utility Vehicle, or rover, to assist astronauts on the Moon. These commitments signal not only the speed of the market opportunity before us, but the growing importance of the space economy on a national level. In the U.S., both NASA and the U.S. Department of Defense Space Development Agency, or SDA, continue to advance civil and defense space programs, including Artemis, NASA's lunar exploration program to send humans back to the moon, and SDA's multiple LEO constellations, which will create a new ecosystem of satellites designed to enhance space infrastructure and help protect national interest, which is resulting in repeat orders for core technology suppliers like MDA. On the space exploration front, India became the first country to land a spacecraft near the moon's south pole, an uncharted territory that scientists believe could hold vital reserves of frozen water. With this landing, India also becomes the fourth country to ever achieve a soft landing on the moon after the United States, Russia, and China. Earlier this month, MDA joined space enthusiasts around the world in congratulating intuitive machines on completing the first U.S. moon landing in 50 years. These are just two of a number of countries with lunar and space exploration ambitions. The number of space exploration missions are projected to exceed 750 in the next decade, more than tripling the 236 missions we saw in the previous 10 years, as governments around the world support ambitious space exploration plans. In addition, we are seeing growing global interest in space explorations. In 2023, NASA added nine new signatories to its Artemis Accords, signaling these countries' commitments to safe, long-term, and ethical space exploration. As of February, 36 nations have signed up to the Artemis Accords. The Accords, which was unveiled in October 2020 to align nations on a common set of principles for space exploration, has steadily grown in size over the last three years, with interest from many non-traditional spacefaring nations, which are now building and their own national space programs. In terms of space infrastructure, the spacecraft launch activity continued to unfold at a record pace. In 2023, there were a total of 223 orbital launch attempts, up 20% versus 2022. A total of 2,911 payloads launched globally, representing an increase of 17% versus 2022 levels. The higher activity levels are driven primarily by growth in commercial low Earth orbit, or LEO, constellations. All of this activity bodes well for MDA and our future opportunity set, which we estimate today at approximately $17 billion in cumulative pipeline over the next five years, a level that we would characterize as very robust for the company. Now I'll turn to our three business areas. In satellite systems, We are seeing good momentum in this market with our teams working to advance multiple requests for communication satellite solutions and a growing number of constellation projects. We are seeing good activity levels from customers and our opportunity funnel remains strong. On the operational front, the team commenced engineering and program procurement activities on a new non-geostationary orbit satellite constellation in Q4 under the $190 million authorization to proceed contract which we mentioned. The full constellation, valued at a minimum of $750 million, is expected to include a minimum of 36 MDA software-defined digital satellites. The definitive contract for the full constellation, for which MDA would be the prime contractor, is expected this year. This latest award includes the selection of our newly introduced software-defined satellite product line, which offers significant benefits to satellite operators looking to improve performance while at the same time driving time, cost, and complexity out of their LEO constellations. This is also our second customer for the fully integrated portfolio of modular digital satellite products and components we are rolling out following the Telesat Lightspeed Constellation Award last August, where MDA was selected as the prime satellite contractor for the 198th satellite constellation. On the Lightspeed program, we made good progress on ramp-up activities in Q4. Our teams have been busy engaging with our supplier base and progressing early design work, systems requirements analysis, and subcontractor tender planning and preparation. We are currently focused on finalizing supplier selection for the program. We also continue to advance work on a number of programs, including the GlobalSTAR program. In Q4, the team initiated flight hardware production and began flat-set testing of the bus and payload systems. Additionally, following the completion of the satellite critical design review in Q3 of 2023, The team is currently progressing towards a spacecraft integration readiness review to take place this quarter. For the Global Star program, MDA was selected as the satellite prime contractor to enhance Global Star's LEO constellation through the addition of 17 satellites, which support SOS feature and direct-to-device communication on certain Apple products. And in late October, we completed the acquisition of Satellite Spy Space Systems in the United Kingdom, the digital payload division of Satellite Spy Communications. The UK-based team has been integrated into MDA UK and brings with it strong capabilities and expertise in digital payload technology. This team, which is collaborating closely with our satellite systems business in Montreal, helps expand our footprint in the UK market and add strategic in-country capability to produce satellite payloads. Moving to our geo-intelligence business unit, customer demand for our Earth observation offerings remains robust and we are seeing increased recognition of the role the commercial EO satellites can play to provide near real-time data and analytics to government and private enterprise. During the year, we made significant progress on the chorus constellation program, which includes a fourth generation MDA-built C-band synthetic aperture radar satellite, in addition to an X-band satellite, which will be supplied by ISAI. Our team completed the payload critical design review and is currently advancing unit and subsystem level work for the platform, payload, and bus avionics, as well as building the ground segment subsystems and detailing constellation operations plans and processes. In the fourth quarter, we also announced the selection of SpaceX as our launch partner for Chorus, with a launch window for Q4 2025. We continue to engage in active discussions with both new and existing customers on how Chorus can help address their Earth observation data and analytics needs and are pleased with the response from customers thus far. In terms of other notable programs, work on the Canadian Surface Combatant Program, or CSE, one of our long-term government programs, is progressing in line with our expectations as the team continues to meet our technical milestones and complete capability testing as required. MDA is responsible for the design and integration of the electronic warfare system for the ship, which comprises a suite of sensors including laser warning and electronic system technologies used to detect aerial threats to help protect the men and women of the Royal Canadian Navy. Moving to our robotics and space operations business, we continue to see good traction and activity levels on both the government and commercial fronts. On the government side, we continue to progress the design work on Phase B of the Canadarm3 contract, which MDA was awarded in early 2022. and that will see us completing the preliminary design of Canadarm3's robotic systems to be used aboard the NASA-led Lunar Gateway. In 2023, we successfully closed out the systems definition review and made good progress towards the preliminary design review milestone expected to take place in 2024. We also secured follow-on contracts for the Canadarm3 external robotics interfaces, including the final construction and delivery of the interfaces. With these awards, the external robotics interfaces become the first Canadarm3 hardware components to go into production, a major milestone for the Canadarm3 program. In Q4, the team continued to engage with the Canadian Space Agency regarding contract awards for the next phases of work on Canadarm3, including advancing detailed design and assembly manufacturing integration and test phases. We are also working with the Canadian Space Agency on follow-on services contracts to provide engineering support to the International Space Station robotics, including Canadarm2, as part of Canada's continued commitment to support the International Space Station until its retirement in the 2030 timeframe. On the commercial side, we are exploring a number of opportunities to incorporate our robotic technology on applications to support space exploration and mobility and are encouraged by the level of customer activity in this area of the market. Shifting to operations, We continued our hiring efforts to support the anticipated revenue ramp up. In 2023, we added 890 new hires. With more than 3,000 highly skilled MDA staff today, we have the people and the talent to help propel our growth and give us the scale to execute on the market opportunities we see emerging. In Q4, the team was busy planning and preparing for the move to our new global headquarters and Space Robotics Center of Excellence here in Brampton, Ontario. which is currently underway. The purpose-built facility features state-of-the-art labs, manufacturing, R&D, and assembly integration and test facilities. The center of excellence will also house a unique space robotics mission control center, enabling MDA to provide critical on-orbit operations capabilities to commercial and government customers worldwide. With a number of sizable programs currently under contract, we remain vigilant when it comes to our supply chain and continue to deploy a number of proactive measures that have served us well. These include designing around known shortages, finding alternatives that are more readily available, ordering materials as early as possible, and building up inventory for some components. For new programs, we are ensuring that our supply chain organization has full visibility early in the process to ensure orders are placed promptly and monitored constantly to mitigate delay risks. To recap, I'm very proud of what the team has accomplished in 2023 and optimistic about the opportunities that lie ahead. Our team is energized, and we remain laser-focused on our priorities, a strong focus on execution, converting opportunities in our funnel, and expanding our leadership in core markets while maintaining strong profitability and a healthy balance sheet to help us fund our growth initiatives. With that, I'll hand it over to Vito to walk us through the growth initiatives.