MDA Space Ltd.

Good morning ladies and gentlemen. Welcome to MDA Space conference call and webcast. This call is being recorded on March 7, 2025 at 8.30 a.m. Eastern Time. Following the presentation, we will conduct a question and answer session. Instructions will be provided at that time for you to queue up for questions. For those viewers listening via webcast, please note that the company will be using a presentation. Webcast viewers can advance the slides by using the arrows seen in the presentation window. If anyone has difficulties hearing the conference, please press star followed by zero for operator assistance at any time. I'd now like to turn the call over to Shireen Sahawi, head of investor relations at MDA Space.

Thank you, operator. Good morning and welcome to MDA Space fourth quarter and full year 2024 earnings call. Mike Greenlee, our CEO, and Guillaume Lavoie, our CFO, will lead today's call and share some prepared remarks before taking your questions. A couple of housekeeping items before we begin. Today's call is accessible via webcast on our Investor Relations website. All our disclosures, including the press release, MD&A, and financial statements, are available from our Investor Relations website and from CDAR+. I would also 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 full year 2024 financial results. There's a lot to share today as we finish one year and guide to another. So bear with us and we will get through a lot of information. Before we get into our Q4 update, I want to start by acknowledging and thanking the MDA Space team for delivering another strong year of performance. Our team delivered for our customers, our shareholders, and our company with strong growth and execution, further solidifying our position as a trusted mission partner and leader in the expanding space industry. In 2024, we secured $2.4 billion in new awards, which included the next phases of Canadarm3, in addition to other strategic awards across the three business areas. We grew our revenues to $1.1 billion, an increase of 34% year over year, and expanded our adjusted EBITDA to 217 million, up 25% versus last year's levels, exceeding our guidance for the year for these two metrics. Our full-year adjusted EBITDA margin of 20% was robust and in line with our expectations. We generated operating cash flow of $816 million and free cash flow of $615 million, consistent with our expectations to turn free cash flow positive one year ahead of our prior plan. Throughout the year, our teams continue to execute well in our programs, with notable developments, including the successful completion of the preliminary design review for the Telesat Lightspeed LEO constellation program, a critical milestone for that program. We also continue to advance the manufacturing of MDA-CORUS, our next-generation Earth observation constellation. Additionally, the MDA space team also successfully conducted the preliminary design review for the Canadarm3 program, another important engineering milestone. Operationally, to support current and future growth, we continued to focus on talent and recruitment, and in 2024, we added approximately 950 new staff. We also deployed $200 million in capital expenditures which included research and development spending on technologies related to MDA Chorus and other growth initiatives. Our research and development efforts are a critical differentiator for MDA Space. Market research firm Research InfoSource, which is focused on the Canadian R&D ecosystem, recently ranked MDA Space as 33rd in its ranking of Canada's top 100 corporate R&D spenders based on 2023 data. Q4 and the subsequent period was also a busy one for MDA Space. In Q4, the MDA Space team delivered another strong quarter driven by solid execution. Our Q4 revenues totaled $347 million, up 69% year over year. Adjusted EBITDA was $71 million, up 68% versus last year. And adjusted EBITDA margin was a solid 20.5%. Operating cash flow was strong at $383 million, and we ended the quarter in a net cash positive position as we continue to deliver our balance sheet. Our backlog of $4.4 billion at quarter end provides us with good revenue visibility for 2025 and beyond. Recent awards bring our backlog closer to the $5 billion level today. We continue to make progress on our major programs, including Telesatellite Speed, Canadarm3, MDA Chorus, and Global Star. Post-quarter end, we announced that MDA Space has been awarded a $1.1 billion follow-on contract from Global Star to manufacture its next generation low Earth orbit constellation, which will include over 50 MDA Aurora digital satellites. This is our third LEO constellation contract in three years, and the second constellation with Global Star further highlighting the continued momentum we are seeing in our satellite systems business, driven by strong customer demand for our differentiated technology. In summary, 2024 was another year of strong growth for MDA Space, and I am extremely proud of how the team executed. With the growing space market as our backdrop, today we are introducing our 2025 financial outlook. We expect 2025 to be another year of strong growth for the company, For the full year, we expect revenues to be $1.5 billion to $1.65 billion, representing year-over-year growth of approximately 45% at the midpoint of that guidance. We expect full-year adjusted EBITDA to be $290 to $320 million, representing year-over-year growth of approximately 40% at the midpoint of guidance and approximately 19% to 20% adjusted EBITDA margin. We expect capital expenditures to be $210 to $240 million as we continue to invest in our growth initiatives. We also expect free cash flow to be neutral to positive for the full year. As we look to 2025, the team is energized. By the strong momentum and positive trends we are seeing in our end markets, an MDA space has the right technology portfolio to capitalize on the opportunities ahead of us. I'll now give you a view of the industry. an update on our three business areas, and then I'll pass it to Guillaume for a deep dive on the financials. Starting with the global space market, 2024 was another strong year for space, with research firm NovaSpace estimating the space economy grew to $596 billion last year, up from $509 billion in the prior year. Governments around the globe continue to invest in space, with government space investments reaching approximately $135 billion in 2024, up 10% year over year. Governments continue to allocate a higher share of their space budgets to defense programs, which today comprise the majority of budgets at $73 billion, or 54%, underscoring space's growing importance as a contested and strategic domain. 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. Looking at the big picture, NovaSpace estimates the size of the global space economy will grow to $944 billion a year by 2033. while other recent forecasts, including those from the World Economic Forum, project that the space economy will almost triple by 2035, driven by lower costs and wider access to space-enabled technologies. In addition, we continue to see growing global interest in space exploration. In 2024, NASA added 19 new signatories to its Artemis Accords, signaling these countries' commitment to safe, long-term, and ethical space exploration. As of March 2025, 53 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 four years with interest from many non-traditional space-faring nations which are now building their own national space programs. In terms of space infrastructure, spacecraft launch activity continued to unfold at a robust pace. In 2024, there were a total of 259 orbital launches, up 18% versus 2023. A total of 2,863 spacecraft launched globally, consistent with the levels seen in 2023. Communication satellites continued to dominate in terms of service type, comprising close to 77% of all spacecraft launched last year, driven primarily by growth in commercial low-Earth orbit constellations. All of this activity bodes well for MDA Space and our future opportunity set, which we estimate today to be in excess of $20 billion of opportunity in cumulative pipeline over the next five years. Now I'll turn to our three business areas. In satellite systems, we continue to see 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 also seeing good activity levels from customers and our opportunity funnel remains strong. In Q4, our teams were busy advancing work on a number of programs. On the Telesat Lightspeed program, as I mentioned earlier, we completed the Preliminary Design Review, or PDR, which is a critical checkpoint in the program. The successful PDR completion demonstrates maturity in the design that meets the program's functional and performance requirements. As part of the process, the PDRs for multiple key subsystems have also been successfully completed. The teams are now transitioning to the program's detailed engineering and manufacturing phase, including the critical design review, which is taking place later this year. With all critical subsystems suppliers now under contract, this sets the stage for work volumes to accelerate in 2025, consistent with our program plans. We also announced post-quarter end that MDA Space has been selected by GlobalStar to be the prime contractor for the satellite operator's next-generation LEO constellation, where MDA Space will manufacture more than 50 MDA Aurora software-defined digital satellites. The contract, valued at approximately $1.1 billion, is a follow-on to an initial authorization-to-proceed contract we had previously announced on November 17, 2023, with an undisclosed customer. Approximately $350 million of the $1.1 billion contract value was added to backlog in 2023 and 2024 as part of the ATP. The team is making good progress on the engineering, development, and program procurement activities for the program and has successfully completed the preliminary design review with work now transitioning towards the critical design review taking place in the second half of this year. We also... continued to advance work on the initial Global Star program, where MDA Space is the prime contractor to enhance Global Star's LEO constellation through the addition of 17 satellites, which support SOS features and direct-to-device communication on certain Apple products. In Q4, the team progressed flight hardware production and flat-sat testing of the bus and payload systems. The team continues to advance satellite integration work following a successful spacecraft integration readiness review. We are also making good progress on our facility expansion in Quebec, which will add 185,000 square feet to our existing satellite production facility. The building shell has now been completed, and construction has commenced on the interior elements of the facility. Once complete, it will be the world's largest high-volume manufacturer facility in its satellite class, with capacity to deliver two MDA Aurora digital satellites per day. The production line is expected to be operational in the second half of 2025. Moving to our robotics and space operations business, we continue to see good traction and activity levels on both the government and commercial fronts. In Q4, we continue to ramp up work volumes on Phase C, which we were awarded along with Phase D in June 2024 for the Canadarm3 program. Phase C will see us completing the final design, whereas Phase D covers the construction, system assembly, integration and test of the full robotics system, as well as a ground segment for command and control. MDA Space will support commissioning of the Canadarm3 robotic system once in orbit from our new mission control facility at our Global Headquarters and Space Robotics Centre of Excellence in Brampton, Ontario. The contract also includes planning and personnel training in preparation for on-orbit mission operations. On the commercial side, we continue to explore opportunities to incorporate our robotic technology on applications to support space exploration and lunar mobility. During the quarter, we progressed the design and development of the MDA SkyMaker robotics for the Lunar Outpost Lunar Terrain Vehicle Services contract with NASA. We also supported the successful Starlab Commercial LEO Space Station PDR with NASA and successfully conducted lunar mobility field trials at the Canadian Space Agency. Moving to our geo-intelligence business, Customer demand for our Earth observation offering remains robust, and we are seeing increased recognition of the role that commercial Earth observation satellites can play to provide near real-time data and analytics to governments and private enterprise. In Q4, we continued to enjoy strong demand for Radarsat-2 data and analytics, with more than 20 contract awards from a broad range of commercial, space agency, and other government customers globally, with contracts ranging in value from low to high single-digit millions. We also received our first task order under NASA's Commercial SmallSat Data Acquisition Program, created to help acquire Earth observation data and provide related services for the agency. We also continued to work on MDA Chorus. The MDA space team fit harnesses in the main spacecraft body and progressed the integration of the first of four synthetic aperture radar antenna panels. Our solar array assemblies are complete and have started their acceptance tests. We are now well into a busy first quarter where we plan to test and characterize the first SAR antenna panel and expect to authorize shipment of the solar arrays to our facility. Overall, we are pleased with the progress to date on MDA Chorus. and continue to see strong interest from existing customers and new prospective customers, and business development discussions continue to accelerate. We are excited to deliver MDA Chorus enhanced functionality to all of our current and future customers. Shifting to operations, in 2024, the team completed the move to our new global headquarters and space robotics center of excellence in Brampton, Ontario. The purpose-built facility features state-of-the-art labs, manufacturing, R&D, and assembly, integration and test facilities. The Centre of Excellence also houses a unique space robotics mission control centre, enabling MDA to provide critical on-orbit operation capabilities to commercial and government customers worldwide. I also wanted to take this opportunity to offer some thoughts on the recently imposed US tariffs and counter tariffs announced by the Canadian government. While the situation remains fluid, we have been actively engaging government and regulatory bodies in both the US and Canada regarding tariff mechanics and have conducted a thorough review of our active contracts and ongoing proposals. We believe our potential tariff exposure is manageable. At the end of Q4, approximately 90% of our backlog of $4.4 billion derived from geographies outside of the US And when we look at our supply chain, particularly for our satellite manufacturing business, it's well diversified globally with a little over a quarter, 25% of suppliers based in the U.S., clearly demonstrating the benefits of being a global space business. In addition, we are encouraged by our customers' collaborative approach to finding solutions. In most cases, the technologies and products we are offering are differentiated and cost competitive, and as a result, not easily replaced. To date, we have not seen any dampening in the desire of customers and potential customers to engage with us as a result of the tariff developments, and our opportunity pipeline remains very strong. And similar to other companies, we are exploring strategies to mitigate the potential impact of any tariffs that might emerge. We'll be monitoring this situation closely and update you as necessary. Moving to a lighter topic, last year we were also pleased to see increased recognition for MDA Space and the progress we are making from industry and peers. To name a few of the accolades we received in 2024, MDA Space was named as one of the Greater Toronto's Top Employers for 2025. The Globe and Mail's report on business magazine named MDA Space as one of Canada's top-growing companies in its annual ranking. Luigi Pozzobon, our Vice President of Satellite Systems at MDA Space, was named an Executive of the Year by the Globe and Mail, and I was humbled and honored to accept the 2023 Satellite Executive of the Year Award from Via Satellite Magazine and the CEO of the Year for Innovation Award from the Globe and Mail's report on business magazine. In addition, Our efforts to increase gender diversity earned us a spot on the Globe and Mail's report on Business Magazine's Women Lead Here First list. We were also selected as Employer of the Year by the University of Toronto's Personal Exchange Year Co-op Program, a wonderful acknowledgement of the real and meaningful work and mentorship that our teams provide for our next generation of space leaders. And in early 2024, MDA Space was added to the TSX Competence Composite Index, an important milestone in our life as a public company. To recap, I'm very proud of what the team has accomplished in 2024 and optimistic about the opportunities that lie ahead. Our team is energized and highly motivated, 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 Guillaume to walk us through the detailed financials.

Thank you, Mike. Good morning, everyone. For my update, I will walk you through our Q4 and full year 2024 financial results. and our 2025 financial outlook. Overall, both Q4 and full year 2024 results were strong with solid growth in revenue and profitability, strong free cash flow generation, and solid backlog to end the year, positioning us well for 2025 and beyond. Total revenues for the fourth quarter were $347 million. This represents a $142 million or 69% increase over the same period last year. The year-over-year increase is driven by higher revenues from our satellite systems business. On a full-year basis, total revenues were $1.8 billion, an increase of 34% over 2023 and exceeding our full-year revenue guidance of $1.45 billion to $1.65 billion. The year-over-year increase in revenues was primarily driven by execution on backlog with strong contributions from our satellite systems and robotics and space operations businesses. By business area, revenues in satellite systems of $235 million in the fourth quarter of 2024 were $144 million or 160% increase compared to the same quarter in 2023. The strong showing was driven by the ramp of the Telesat Lightspeed Program and contributions from the Global Star Authorization to Proceed Contract, or ATP, which was awarded in Q4 2023 and recently converted into a full contract as announced on February 10, 2025. On a full year basis, revenues for satellite systems increased to $598 million, representing 237 million or 65% growth over 2023. This growth is also attributable to the ramp up of the TALISAT Lightspeed program and contributions from the new Global Star contract. In robotics and space operations, revenues of 65 million in the latest quarter were in line with the levels seen in Q4 2023, driven by the gradual ramp of phase C of the Canadarm3 program which was awarded in Q2 of 2024. For full year 2024, robotics and space operations revenue were $280 million, translating into a $31 million or 13% year-over-year increase, reflecting higher volume of work performed on the Canadarm3 program. Revenues in our geointelligence Business of $47 million in the latest quarter represents a slight decrease of $2.5 million or 5% year-on-year, mainly due to the timing of programs renewal. For the full year 2024, revenues for geointelligence were $202 million, aligned with our expectations and representing a $4.6 million or 2% increase compared to 2023 levels. Moving to gross profits. For Q4 2024, gross profit was $82 million, representing a $24 million or 42% increase over the same period last year. Gross margin in the latest quarter was 23.6%, which is in line with our expectations as our program mix evolves. This compares to 28.2% for the same period in 2023. For the year, gross profit was $282 million, representing a $38 million or 15% increase over 2023. The year-over-year increase was driven by higher volume of work performed. Gross margin for the year was 26.1%, which compares to gross margin of 30.2% in 2023, again in line with our expectations and reflective of an evolving program mix and higher depreciation expense. as assets were placed into service throughout 2024. Adjusted EBITDA in the quarter was 71 million compared to 42 million in Q4 of 2023, reflecting, again, higher volume of work as we continue to execute on our backlog. Adjusted EBITDA margin was 20.5% in Q4, in line with the margin reported in Q4 2023 and consistent with our margin guidance of 19 to 20%. On a full year basis, adjusted EBITDA was 217 million, up from 2023 levels of 174 million, representing a 43 million or 25% increase year over year. The improvement was driven by higher volume of work performed and effective scaling of operating expenses. Adjusted EBITDA margin of 20.1% for the full year, 2024 is consistent with our full year margin guidance of 19 to 20% and compares to 21.6% for 2023. Adjusted net income for the quarter was 35 million compared to 28 million in Q4, 2023. The year over year increase of 7 million or 26% is largely due to higher operating income. Full year adjusted net income of $111 million was 13% higher year over year, driven by higher operating income. Adjusted diluted earnings per share of $0.28 in Q4 and $0.88 for the year were up 22% and 9% respectively versus the same periods last year. Moving to backlog, we ended the quarter with $4.4 billion in backlog, representing an increase of 42% year-over-year. The growth in backlog was driven by the addition of a number of sizable awards, including Phases C and D of the Canadarm3 program, the contract extension from the CSA to support robotics operation on the ISS, as well as numerous other awards across our business area. Now, moving to CAPEX, we remain focused on making the right investments in the business to support our strategic growth initiatives. In Q4 2024, we spent $68 million on capital expenditures, up from $58 million last year, as we continue to progress our development on CORUS and other growth initiatives, such as the expansion of our Montreal facility. On a full year basis, our capital expenditure was 201 million compared to 193 million in 2023. We expect this level of spend to continue in 2025 as we invest in initiatives to support our growing business, including expanding and modernizing our physical infrastructure. Cash flow from operations during the quarter generated 383 million compared to a cash usage of $41 million in Q4 of 2023. The year-over-year increase was driven by favorable working capital, primarily from the Telesat Lightspeed program and the new Global Star contract. Free cash flow was $315 million in the quarter versus a negative free cash flow of $99 million in the prior year. For the full year 2024, cash from operations generated $816 million, compared to a cash generation of only $14 million in 2023. Operating cash flow was driven, again, by favorable working capital, primarily from the Telesat Lightspeed program. Free cash flow was $615 million in 2024, in line with our guidance for free cash flow to be positive for the full year, which we achieved one year ahead of our plan. This compares to a usage of $180 million in the prior year. The year-over-year improvement in free cash flow, again, is largely due to the previously noted positive working capital contributions. Now moving to our balance sheet, we ended the quarter with a strong financial position with net cash of 167 million, available liquidity of close to 700 million under our credit facility and a total available liquidity of 860 million. In Q4, we continue to use our cash generation to deliver the balance sheet and we're debt free at the end of the year. As a reminder, At the end of 2023, our leverage ratio was at 2.4 times on a net debt to trailing 12-month adjusted EBITDA basis. Our strong balance sheet positions us well to evaluate deploying capital on the right strategic opportunities to complement our strong organic growth profile. In summary, this was a strong quarter to wrap up fiscal 24. and we are very encouraged by the positive momentum we are seeing across our businesses. Now let me turn to our 2025 outlook. As Mike noted, we are introducing our 2025 financial outlook and we are well positioned to capitalize on strong customer demand and robust market activity given our diverse and proven technology and product offerings. For fiscal 25, we expect full-year revenues to be between 1.5 and 1.65 billion, representing a year-over-year growth of approximately 45% at the midpoint of the guidance. We expect full-year adjusted EBITDA to be between 290 and 320 million, representing year-over-year growth of approximately 40%, at the midpoint of the guidance and 19 to 20% adjusted EBITDA margin. We expect capital expenditures to be between 210 and 240 million in 2025, comprising of growth investments to support the previously outlined growth initiatives across our business areas. We expect full year free cash flow to be neutral to positive in 2025. Finally, for the first quarter of 2025, we expect revenues to be between $350 and $335 million as we continue to execute on our backlog. Please note that the financial outlook provided does not factor any potential impact from the recently announced tariffs. As Mike noted in his remarks, our current assessment is that at this point in time, our potential tariff exposure is manageable, and the MDA space team continues to work with our customers to identify solutions and explore potential mitigation strategies. We will continue to monitor the situation very closely, and as it unfolds, we may elect to update our financial outlook if deemed necessary. With a number of large programs now in backlog, Our book of business is strong. We remain focused on discipline execution and on our customer commitments and leveraging our capabilities and technology to grow profitably in core and emerging markets in line with our long-term plan. Mike, with that, I'll turn it over back to you.

All right. Well, that was a lot. So that was a lot of information to share. Thank you for letting us get through that. With that, operator, we will open it up to questions.

Thank you. Ladies and gentlemen, we will now begin the question and answer session. Should you have a question, please press star, followed by the one on your touchtone phone. You will hear a prompt that your hand has been raised. Should you wish to decline from the polling process, please press star, followed by the two. If you are using a speakerphone, please lift the handset before pressing any keys. One moment, please, for your first question. Your first question comes from Konark Gupta with Scotiabank. Your line is now open.

Thanks, operator. Good morning, everyone. Congrats on a great quarter. You know, Mike, like I understand, obviously, for 2025, you guys are not, you know, like factoring in tariffs and nobody knows, obviously, you know, what would happen with that, clearly. In terms of like, you know, I think you said you have done some preliminary work, identifying mitigation strategies and the impact, etc. I mean, can you help us understand what is the sensitivity in the business based on whatever the tariffs could be potentially? I mean, what are the range of the outcomes you're looking at? And, you know, any examples of the mitigation strategies you can share with us? Thanks.

Yeah, so right now, I wouldn't call it preliminary work. It's a lot of detailed work, actually. So our teams are really deeply connected into governments on both sides of the border, in addition to the agencies responsible for managing imports and exports and managing any forms of tariff activity. And so a very deep understanding of all of that has come to bear as we've gone through this process. Our teams are engaged with the governments that are seeking input. from industry, and we are actively engaged in dialogues all around that. As a result of all of that, based on, you know, as we know, tariffs come and tariffs go in terms of the oscillations of what's happening here. But at any time when people have talked about the tariffs and described them and the like, we, of course, have updated our assessments. And repeatedly, we have found the situation for us to be a manageable situation. We're not going to get into the detailed mechanics of tariff management, just like we don't get into the details of many things in project mechanics. But when we look at our contracts and when we look at how tariffs work, we don't see a concern for us at this time. In addition, that's further embolstered by what we expressed whereby as we finish the year, 90% of our backlog was from outside the United States. And approximately 25% of our supply only comes from the United States. So it's a small portion of our business that we're dealing with. In addition to our understanding of the mechanics has put us in a situation whereby we feel that it's a very manageable situation. We have concurrence of that position working with our customers. Our customers are also doing all the same investigations as us. And we all agree on our conclusions about how we will manage and execute tariffs as they have been described to date. So that's comforting for everyone that we can see our way ahead. And as we mentioned in our discussions, nothing's slowing down. All the pipeline contains very active, lots of bid and contract negotiations activity happening across the business. And there is no slowdown in our enthusiasms.

That's great to hear, Mike. Thanks so much. And if I can shift gears to the competitive landscape. I mean, you guys just obviously won the full ATP from GlobalStar, so that's great news, clearly. But I think preceding that contract award, there was sort of a news, which I don't think was actually news, but SpaceX or Starlink and one of the U.S. telecom operators, I think they were exploring some sort of activity there. So, I mean, have you seen any major change in customer discussion or tone with respect to Starlink or any other satellite company out there? You know, they are not probably, your customers are probably not looking to be as aggressive in deploying new satellites through you guys. You know, like, have you seen any changes in discussions?

No, we have not seen any changes in our discussions in our pipeline. And we have had new folks come into our pipeline that would like to talk to us about MDA Aurora satellites, either for broadband or more narrowband directed device type applications. And so our new business activity remains very robust. There are other people out there in the world that are also, in addition to our potential customers, busy looking at space-based networks. It's a tremendous area of growth right now globally, which would include the SpaceX example that you mentioned, in addition to others. It was definitely an unfortunate situation, in my view, earlier when Apple did announce that it was going to talk to SpaceX and make arrangements to make sure that iPhones can work on their network. Folks seem to interpret that as a negative in our life, but it's not a negative in our life, as we've subsequently demonstrated by signing the contract with GlobalStar. Certainly, any phone manufacturer is going to want their phones to work on all available networks, just like you do here on terrestrially on Earth. You want to have them on all of the different mobile phone networks. And so... you would expect, logically, that there would be a number of different relationships that would occur around the world for people to make sure that their products work on all available networks, whether they're terrestrial or space-based. That doesn't change GlobalStar's strong business model to be able to have an excellent network, and it doesn't change the business model of other customers of ours that want to have strong space-based networks. So we continue to move forward to full steam ahead.

Thanks so much for taking my question. Thank you.

Your next question comes from Doug Taylor with Canaccord Genuity. Your line is now open.

Hi. Good morning. The guidance update here obviously reflects a quicker acceleration than most of us were modeling, which is great to see. In helping us understand the components that build up to that and, you know, what gets you to the low end versus the high end. Maybe could you help us by talking about expected contributions or give us a frame of reference for some of the key programs, you know, Lightspeed, Global Star, Canadarm3.

Yes. Hi, Doug. Basically, when we look at the bridge between 2024 and 2025, The story is as followed. Essentially, we've said that, you know, TELUSAT is the biggest driver here in our SAT system business. So definitely the work is ramping up there as we have completed the PDR. We're now, you know, really focused on the critical design review, and that's going to generate a lot more work year on year. Then you have the continued ramp on the newly awarded Global Star contract. So the work there continues to ramp up and is going to be higher year on year. We also have more revenues coming out of the C3 program. The activity is ramping up there as well. And then the only program that's going to come down year on year from a revenue perspective is the legacy Global Star contract with the 17 satellites that we're building right now. So that contract is coming to an end. So that's really the build-up to get to our guidance. It's really driven by those programs. And then the range is really around execution. So we're trying to maintain a range that we feel comfortable with in terms of how we will execute the work because obviously those are complex and complicated programs. There's a lot of activity going on both internally and with our supply chain, but we're very confident that based on all the status that we have on each of those programs that we can definitely be between 1.5 and 1.65 billion of revenue for 2025.

I appreciate that color. And then so when we're talking about execution, I just wanted to speak a little bit more about the Montreal facility. It sounds like from the comments we heard earlier that that is on track, which is also great to hear as we've had a snowy winter season. Perhaps you can confirm the timetable that it hasn't changed and also update us now you know, with your current backlog, including Global Star, as to whether the guidance you provided is contingent at all on the degree of work flowing through that facility towards the end of this year.

The project continues on track exactly as planned. Actually, it's always good to see when that occurs, especially on an infrastructure development project. So the plan was to have the exterior of the building closed in in March of 2025. It is now closed in. There's a few more windows to put on, but it's basically closed in, which then causes you to move to the, now the activity moves into the interior of the building. And through the rest of the year, that would get and then fit it out with the production equipment in the end of the year. So the goal was to have that all existing and operational by the end of the year so that as we headed into 2026, it could be used for production. There is no production required in that facility in 2025 related to any of our revenue or guidance at all. That facility is needed for activities that we would like to conduct in 2026.

Thanks for confirming that. I'll pass the line. Okay, thank you. Thank you.

Your next question comes from Benoit Poirier with Desjardins. Your line is now open.

Yep, thank you very much, and good morning, Mike and Guillaume, and congrats for the very strong finish. Just in terms of working capital assumption, obviously when we look at the 2025 guidance that implies neutral to positive, what would be kind of the working capital assumption implied? in your free cash flow target and just curious in terms of booking activity, what do you assume and if any new contract would be incremental to free cash flow for 2025?

Hi, good morning Benoit. So on the working capital, essentially the model remains intact. always targeting to convert between 75% and 85% of our EBITDA into operating cash flow. And then we'll have working capital fluctuations from one quarter to the other. And when we did our planning for the year, we essentially got to a guidance of positive, neutral to positive free cash flow because we think that, you know, the combination of the variation we'll see on the working capital and the amount we need to spend, again, this year, which is on capex of $210 to $240 million, will result in an outcome that we're comfortable with, which is neutral to positive cash you know, free cash flow for the year. All of our contracts are modeled in the same way. We always have, you know, always a coverage of our, you know, liability going forward. And we always make sure to have a cash curve that is always, you know, positive on a cumulative basis. But we'll see some variation on the working capital from time to time. but this year we're very confident that we'll be neutral to positive free cash flow.

And in terms of new business, if we picked up new awards, that would be incremental to answer your second question.

Okay, that's great, Collar. And when we look south of the border, the U.S. administration considers the BID program overall from fiber to satellites I was wondering if you see any opportunity for MDA here as a merchant supplier, maybe?

Any programs that are doing satellite space-based communications would be opportunities for us to be a merchant supplier.

Okay, okay. And when we look in Europe, Airbus and TALIS space businesses are in a restructuring mode. Any opportunities you see emerging in Europe, given the those businesses in the restructuring mode?

Yep, there would be opportunities there. In addition to the, you know, large surgence that's going on with European governments working together to put up, you know, large constellation programs such as the 11, 12 billion euro IRA squared program that engages industries all across Europe. Those programs are obviously to provide space-based network capacity for Europe, driven by Europe, by European companies. But there are all sorts of creative ways where companies like ours could find various strategic partnerships and relationships to be able to get involved in those things. So they're certainly worth looking at, and we do, and get involved in discussions to see how could we show up. Just like we are always looking to see how we could show up you know, more or differently in the United States to leverage more out of that market. We would also look at the European market to see how we could show up more or differently to make more out of that market. So those would be two pipeline expansion opportunities for us looking at these other markets.

Okay. And maybe just to finish off, could you provide an update on the M&A strategy? And given your stronger balance sheet right now, does it allow MDA to look at the, let's say, larger size deals?

Certainly, the strength of our balance sheet and the level of our growth, yes. It certainly allows us to look at M&A and would allow us to look at larger deals than we would have been able to previously. I'd say that's true. In terms of us, we maintain what we've been saying for the last 18 months or so, that M&A is a topic of interest to us. We tend to focus on two areas when we think about it. One is in securing our supply chain. to make sure that we can continue to take our technology roadmaps and our business roadmaps in the directions that we're currently moving. And if we have great relationships with suppliers and everything works on those roadmaps, then that's fine. If it makes more sense for us to look at M&A to be able to pick up elements, become a little bit more vertically integrated, to ensure the trajectory that we're on into the future, then we will consider M&A to secure our supply chain. The second area would be for additional capability and or geographic position so that we could have additional capability in other geographic areas. That would open up, in addition, access to additional talent in different geographic areas. and then open up new markets in different geographic areas. I think the two logical ones to think about would be the United States to open up more access to the United States government market, which is growing strong, and or Europe, which we just discussed, to open up the European government market. So you need to look at those regions, those talent pools, and the ability to show up more domestically in those areas so that you can participate in government procurement, both of which would open up larger pipelines for MDA.

That's great talk, Mike. Thank you very much and congrats again.

Thank you.

Your next question comes from David McFadden with Cormac Securities. Your line is now open.

Okay, great. Thank you. A couple questions. So when you talk about tariffs, you said you think they're manageable. What does that mean? Does that mean that you think you can maintain your guidance, you can maintain margins? Maybe you could define that for us. That would be helpful.

Yeah, for me, manageable just means we don't have any additional news to give you on that, which really means negative news. So no new negative news at this time. In terms of us looking at the situation, looking at the composition of our business, looking at our contracts, in terms of who's responsible for what, looking at our negotiations with customers on new opportunities, when you put all that, looking at the mechanics of how tariffs work, as discussed so far, when you put all that together, then it appears to be manageable within the frameworks that we're given. When we said here's our guidance and it doesn't include any particular impact of tariffs, it means that All of our investigations of this has it as a manageable activity at the moment, and we do not have any bad news to give on that topic. Obviously, this tariff situation is highly variable and is fluctuating all the time. But as we've lived it and engaged in it and studied it for the last several months, it is a manageable activity for us at the moment.

Okay. And... So when you look at your backlog, could the U.S. government, based on what's proposed right now, could the U.S. government put a tariff on something that you've already agreed to that's in your backlog?

Anything is possible, I guess, in terms of how you word these things. So right now, like I say, in our backlog, it's about at the end of 24, our backlog was 90% outside the United States. So there's a small element of activity that is, you know, potentially subject, depends on how you word a tariff, but it's, you know, it's potentially subject to something. But we, again, in our analysis of the situation, we don't see any concerns. We see it as a manageable activity.

Okay. I mean, I'm kind of surprised that you would say 90% of your backlog is not or originates from outside the U.S. because wouldn't just the Canadarm contract alone make it something much more than 10%?

Canadarm 3, our customer, is the Canadian Space Agency.

So that's a Canadian contract.

Canadarm 3 is Canada. TELUSAT is Canada. So, you know, very large things. The 90% number I am quoting is the end of 24. Obviously, we signed the Global Star contract. In Q1, which would take the 90 number down to an 80 something number. So there's still 10 to 20 percent of our business in the United States and the other very large majority outside of the United States.

OK. That's what the CSA. OK. And then on the supply chain, you said 25 percent is from the U.S. wouldn't the bus from Rocket Lab be most of that?

There's all kinds of components all over the place. So certainly the bus from Rocket Lab on that one contract, that would be a meaty component that's being imported from the United States. But across our business, there's a wide range of different products that come in. But as you can tell by that number, we have a very global supply chain. And so we've been doing a lot of work to ensure that We're getting good quality elements into our systems at good quality and decent prices, in addition to building relationships with folks that can scale with us globally. It's a very new thing in the last couple of years. Historically, you would buy something for any given project based on quality and price. We still need to do that. But now, because of our pace of growth, we really have to pay attention with people that can scale with us. And so that's another new conversation. So we really work globally on this and have a really nice, strong supply chain right now.

If I may add, David, for sure 25% of our supply chain is coming from the U.S. at the moment, but just based on what we know regarding the potential retaliatory import tariffs coming from Canada, um you know when we looked at the initial 30 billion worth of u.s products like that that initial basket like there's you know uh no impact to to to mda there's nothing on that list that would affect us uh again things may may change but at the moment we don't see um you know really any impact at this uh this time okay and then there's just two marks i want to pick up too much time but um

How easy is it to replace these U.S. suppliers from, say, Europe or so on if tariffs are going to apply to them? And then secondly, just on the backlog, I think the last conference call you indicated that, you know, backlog was going to be about $5 billion. So it's over $5 billion now, obviously. And do you expect to exit 2025 with a backlog of over $5 billion?

The... On the backlog ones, because that's on the mind, like, yeah, I would expect backlog to grow through the year. Like, I do think there's a chance of that. Let me think. A burn? It'd be, yeah, it could grow a titch in the year. It depends on some new potential opportunities, obviously, and how the customer would like to package those should that order come through. You know, there's There's ways you can tilt your head and see backlog growth and then use other ways of tilting your head and maybe seeing backlog being sustained as we come out of the year.

What was the first question?

On the ability to source parts from Europe or other countries.

It all depends on the nature of the components. There are certainly space elements that you could get from the United States that you could also get from Europe or other places. And, you know, so there would be those opportunities. There's not a large drive for that at the moment, like we say, because we feel it's a manageable situation. So we are absolutely comfortable maintaining our relationships with our current supply base. are not in a mode to go and change or deviate from our current suppliers. I'm saying that out loud and on purpose so that the suppliers listening are hearing me because they're all asking us that question. Right now we are comfortable with our mix of suppliers and we are maintaining our relationships moving forward.

Okay.

All right. Thanks.

Yep. Your next question comes from Ken Herbert with RBC Capital Markets. Your line is now open.

Good morning, Mike and Guillaume.

I wanted to first start, can you confirm, Mike, when you still expect to be at basically the full production or two a day on the Aurora satellite system?

We will have the capability to produce two a day as we enter 2026. That would be the plan. We do not need to do that in 2026 based on our current orders. So in 2026, we would need to produce a few satellites for Global Star and a few satellites for Telesat satellite speed. And that will allow us to get exercising all of this new capability and work the kinks out of it. And then in 2027, then you start to see some production rates where you're going to be using that full capability and really pumping out a lot of satellites. So we do have a bit of grace built into these schedules, and we are fortunate to have the facility ready in time that we can work the king side of it. But we will have that capacity built and ready to go as we enter 26, and we would really be showing it off a little bit in 2027.

Okay, and with the two contracts, obviously, now that you're producing two, do you have capacity in 2026 you could be selling, or... is really, as we think about incremental orders, 2027, when you're really going to have capacity now that you're out trying to fill.

Yeah, I think it's more like that. It's more of a, you know, if we got a new order now, then you're probably talking about you know, 27 and 28 production. If you've looked at, you know, if you've watched us with these projects, you know, you're seeing this sort of first year going through this preliminary design review and critical design review phases as we, you know, get all the detailed designs. We have explained clearly that MBA Auroras tend to have around 70% commonality across customers in terms of the core product, but then each customer has their own unique situation for their space-based networks. They did a little tweaks here, a little tweaks there. And so you still have to go through that process of confirming your design through the preliminary design and critical design review processes. So if somebody came in throughout 2025, for most of 25, well, for all of 25 and most of 26, you're just getting to the place where you're finishing your designs, ordering all your long lead items, building up your inventory of components and things, but you're probably not building a lot until you get into 27 on a new order that would start now.

Okay, great. And just again, remind us for 27, or I'm sorry, for Lightspeed, a couple of the major either technical or sort of operational or performance milestones you've got upcoming in the next few quarters.

Yeah, the big thing in this year is really the critical design reviews on a lot of systems. And so we would expect the CDR for Lightspeed to happen later this year. So that causes us, you know, while we are ordering some of the key components and long lead items, we are also confirming all the exact final design configurations of that system. satellite as part of the overall system of which we are a part. So all those teams are working together, you know, to confirm that design. Same thing's happening on Canadarm 3 for that system. And then the same thing's happening on the new Global Star Order because we completed preliminary design review under the authorization to proceed work. And now we're working towards critical design review on that one as well. So all three of those this year, the big phrase of the year will be listening and watching to us in the second half of the year. I'm crossing critical design reviews on all these programs.

Great. Thanks, Mike. A really nice quarter. No problem. Thanks again. Thank you.

Your next question comes from Thanos Moschopoulos with BMO Capital Markets. Your line is now open.

Hi. Good morning. Mike, on the tariffs, if you could clarify a very specific point. So let's say Telesat's binder satellites and then bringing them into the U.S. to launch on SpaceX. for ultimate re-export of the space. Just to be clear, is it your understanding that tariffs would apply or would not apply?

Yeah, so we're not going to make comments on specific projects and project mechanics or on specific strategies for tariffs management. We are giving our honest assessment of our portfolio of our business and the implications of tariffs both coming in and going out. And we feel that we have a very manageable situation. But we are not going to dive into the specifics of any individual project or the specifics of any individual's tariff mechanic.

Okay. And then maybe a different question. Just given all the geopolitical events and the U.S. government's recent actions, Has the pipeline been benefiting from a desire from international customers to, you know, as a result, make investments in their own space infrastructure? I mean, you mentioned Europe, but just any other kind of things along those lines you're seeing with ramped up investments from international?

Yeah, I think when we talk about our pipeline, we always talk about our pipeline as being pretty conservative, whereby these are specific opportunities that we are talking to customers about that have a known scope and dollar value, and therefore they're in our pipeline. Right now, I wouldn't say anything new is coming into the pipeline that's kind of a bit mature like that. However, there are a number of conversations that are occurring today in various countries around the world as countries are absolutely increasing their pace of activity and their enthusiasm to increase sovereignty, to increase their defense spend, to increase their own space programs and their ability to take care of themselves or work with others. There is definitely, in the last quarter here, as surge in enthusiasm around people that would like to do that. As a result, we are definitely getting involved in a lot more discussions about how MDA space could show up to be able to participate in a broader range of global space programs. So those are early conversations, conceptual conversations, what if we did this, what if we did that type conversations that will most likely turn into new elements in the pipeline. But this is almost like a pre-pipeline phase right now where There's a lot of exploration going on about what countries could do because the enthusiasm is high.

Great. Last one for me. As far as the cash flow, any comments as far as the linearity from a quarterly perspective, be it more back-end weighted, more front-end weighted this year?

Yeah, good morning, Thanos. Look, you know, we're not going to provide like a quarterly guidance on free cash flows, so we'll be neutral to positive this year. Again, you know, like we'll see some working capital fluctuations from one quarter to the other. Now, with that said, we're not expecting to have like huge swings in between the different quarters. I can add that color.

Great, I passed the line. Thank you.

Thank you.

Ladies and gentlemen, as a reminder, should you have a question, please press star 1. Your next question comes from Jason Gursky with Citibank. Your line is now open.

Hey, good morning, everybody. You mentioned some award activity in the geointelligence business on Radarsat. Can you just talk a little bit about that? Talk a little bit about the market dynamics that are going on there. What's driving that demand, and is that a strong signal for Chorus when it comes online?

I think it is a strong signal for Chorus. We've seen increases in RadarSat-2 ordering pace. That is, we believe, certainly is driven partially by Chorus. because folks are very comfortable they can build and expand their relationship with us as a radar-based Earth observation supplier to them and be able to have that continue well into the future through CORUS once it launches. And so we've noticed that over the last couple of years as we've progressed with CORUS, RadarSat-2 order book remains strong. In addition, the previous comments I made about nations wanting to do more to look at border security, do more to look at sovereignty, do more to look at increasing their defense and intelligence posture, that is causing a bit of an uptick in what people are asking for. And so we are seeing some of that happening as well.

Okay, great. And then let's see here in the space side of things, Talk a little bit of an end market that we don't talk about much anymore because I suspect it's a pretty demented amount of revenue, but I wanted to confirm that. Geocommunications. Can you just talk a little bit about the market there, the size of it these days, how many satellites are getting ordered, what your level of work activity is in supporting geo satellites being built?

Yeah, sure. For those that don't know, you're talking about geosynchronous orbit satellites, the large ones in the world. Yeah, that level remains a single-digit number of orders every year around the world. So, you know, it's less than 10 annually that would get ordered in the last couple of years. It seems to be that's the sustainable level. We continue to get content. I think our number is around 80% of geo-orders around the world will pick up some form of MDA space content. So our merchant supplier business remains strong. It continues to grow for us. And for both delivering satellite subsystems to geosynchronous satellite manufacturers, in addition to low Earth orbit constellation manufacturers. It gets dwarfed a bit in all of our conversations because of the size of our LEO full satellite deliveries. But our merchant supplier business continues to be strong. I mean, with us working with these other satellite manufacturers. And so we tend to get some work on about 80% of the geosynchronous satellites that do occur.

And do you think the geo-exposure, just how big it is, either a dollar percentage of the revenue streams these days?

Oh my gosh, it'd be a very small percent. Yeah, yeah. It'd be a very, very small percent of satellite systems, like low single-digit percent. Like it's not going to be a big percent.

Okay, great. And then last question for me. You know, we've historically had quite a bit of cooperation between the United States and Canada on the defense side of things. I'm just kind of curious whether you view the priorities of the new administration here on this side of the border, on the U.S. side in particular, Iron Dome, Golden Dome, whatever you want to call it, Missile Defense Dome. Is there any opportunity for you guys to play in that with any of your either space-based capabilities, ground-based? I'm just kind of curious whether this represents a potential green shooter growth factor for you all as well.

There can always be potential. We continue to see the militaries of you know, NATO being collaborative and certainly the militaries of Canada and the United States, you know, through NORAD and the like are highly integrated for North American defense. So that obviously continues, you know, a bit below, of course, the geopolitical noise at the moment. In terms of what nations are doing to procure their systems or capabilities, there is a bit more of a trend towards procuring domestically at the moment. So if Canada was going to contribute something that, you know, they would want to maybe buy it more a canadian-based uh defense for this example space performer um so that that increases and then the us of course you know has a bit of a bent towards buying from the united states-based manufacturers um and uh that's normal but increasing i think around the world right now we talked about europe earlier in this conversation um but the collaboration is still there so um and then in that relationship canada's responsibility, Canada's defense strategy that's published is very northern focused, focused on the north and the Arctic. You know, so we should expect, you know, that Canada will continue to increase the pace of that, both in general for the Arctic and then as part of NORAD modernization for defense of North America. So I think those collaboration intersections, you know, can come in the future. And certainly the pace of looking at What people can do to do more in defense and how to leverage the industrial base more in that expansion of defense is increasing, as I mentioned earlier, at the conversation level, and we'll see what that turns into in terms of pipeline.

Right. Okay. Thank you. Appreciate it. Good. Thanks, Jason.

I don't know for the questions at this time. I will now turn the call over to Mike for closing remarks.

Okay, thanks everyone. That went a bit long, but we exchanged a lot of information. Hopefully that's helpful to everyone. Certainly an exciting time as we finish a very strong 2024 and as commented during our discussion, start a bit of a steeper climb into 2025 with a 45% increase in top line while maintaining a really good strong structure to the business. So we're very pleased with where we are. We're excited about what this year is going to bring and look forward to continuing to talk with you about it as we go through the earnings calls through the rest of the year. Thanks very much. We'll talk to you in May. Have a great day.

Ladies and gentlemen, this concludes your conference call for today. We thank you for participating and ask that you please disconnect your lines.