Q4 2020 Maxar Technologies Inc Earnings Call
Yeah.
Ladies and gentlemen, thank you for standing by and welcome to the Max Our technologies Q4, 2020 conference call and webcast.
At this time all participants are in a listen only mode. After the speaker's presentation there'll be a question and answer session to ask a question. During the session you will need to press star one on your telephone if you require any further assistance. Please press star zero and I would now like to hand, the conference over to your speaker today, Jason Gursky present.
Net of Investor Relations and corporate Treasurer. Thank you. Please go ahead Sir.
Great. Good afternoon, and thanks, operator, welcome to our fourth quarter earnings call I'm joined today by the company's Chief Executive Officer, Dan Jablonsky, 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 on about an hour before we get started I'll refer listeners to the accompanying <unk>.
Slides for today's presentation, which can be found on the company's web site, <unk> dot com and the investor Investor events and presentations section of the site. 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 of uncertainties and risks that could lead actual results to differ materially from the forward looking information.
And you referred to the advisory regarding forward looking statements contained in our quarterly earnings releases earnings call slide deck and the company's most recent MD&A section founded on our form 10-K, which is available online under the company's SEDAR profile at SEDAR Dot com under the company's Edgar profile at SEC Gov or on the company's website at <unk> Dot com as we get.
Started I'd like you to now turn to slide three and the deck and with that I'll turn the discussion over to Dan and go ahead.
Thanks, Jason and good afternoon, everyone.
I appreciate you joining us for a review of our fourth quarter and full year results.
Before we get started I'd like to congratulate NASA and J P. L and successful landing of the perseverance Rover on Mars.
As you know Maxim has provided robotic arms on six missions for the Red Planet and we are extremely proud to be part of this one as well.
For a long and storied history of working with NASA and we're very excited about the work we're doing today with Artemis perseverance oshea on one and psyche and look forward to many decades of future missions with NASA.
Please turn to slide for the accompanying presentation for a discussion of the key highlights from 2020.
A big story of the year of course was the global pandemic.
I've spoken about its impact on the company and our stakeholders quite a bit and the past and we've got a fair amount of disclosure on our filings.
I'd say at this point is and I'm really proud of the way our teams powered through.
We remain focused on protecting our workforce, while producing the products and solutions our partners need to complete their critical missions.
I am pleased to report consistent with every report we have made so far that all <unk> locations continue to remain operational through a combination of work from home and certain key personnel working on site.
I remain encouraged by the tremendous efforts of Max our team members to driving mission success.
These efforts helped drive 6% topline growth and 16% adjusted EBITDA growth and 2020, excluding the effects of the burn down from the enhanced for your deferred revenue.
A solid outcome, given where we all were back in March of 2020.
One of my top priority since taking the helm and the company has been in a position both Earth intelligence and space infrastructure for sustained growth over the medium to longer term.
And this year's performance is a positive proof point that we're making progress.
And space infrastructure, we continued our reengineering efforts and reorganization to align authority and accountability across my leadership team.
As part of this effort, we developed and new business capture process under our global field operations organization that Leverages robust mission architecture support provided by our technology teams.
We also placed new talent and leadership roles and particular software and software development.
And architecture and business development through a combination of new hires and internal moves from Earth intelligence.
Finally, we also continue to develop financial systems and processes to support Kaz and far compliance a key enabler and our pursuit of further diversifying the business and our military and intelligence programs with the U S government.
And Earth intelligence are operational teams ended the year successfully meeting or exceeding the performance requirements of our service level agreement for the enhanced for you follow on contract for a 20 <unk> consecutive month.
Over the course of the enhanced for your contract we've met the demand and customer requirements and impressive 119 out of 124 months.
This speaks volumes about our reliability quality and our resilience even during the global pandemic.
As we prepare for the next phases of the enhanced fee program, our ongoing performance as a compelling demonstration of our track record and the consistent value and continuity we deliver.
Importantly, we also saw continued growth and usage on our platforms.
Global Easy day, now has more than 400000 total users.
Noam has grown to over 3500 users and secure watch us past 200 customers.
These statistics demonstrate the growing value add that our data and insights bring to our government and commercial customers around the globe.
Overall I am pleased with the financial performance of the company and this year.
Fourth quarter adjusted EBITDA came in a little bit lower than I would've liked to some of our Earth intelligence orders slipped into early 2021, and we had higher than anticipated stock compensation given the strong performance of our shares through December.
Biggs will go into more details on a moment, but hopefully this latter point is something that listeners will appreciate.
We also had a very solid year of bookings with backlog growing 17% year over year, despite absorbing $80 million of enhanced you deferred burned down.
And Earth intelligence, we had key wins and deepened our relationship with the most discriminating and innovative customers and the world.
Including the National Reconnaissance office National Geospatial Intelligence Agency U S Army U S Air Force U S Space Force Department of Homeland Security every tier Toyota and key U S allies.
Of note, we recently expanded our relationship with a large technology company by adding a multi year contract, including for Max and <unk> elevation data.
In addition to our renewal for our on demand imagery subscription services.
Finally, and Earth intelligence, Brian <unk> was awarded Phase II of the U S. Army's one world terrain prototype contract were $39 $3 million, which puts our three D products on firm footing for growth as we move into 2021 with $50 million of recent awards that we expect to convert into revenue this year for three D capabilities.
And space infrastructure, we booked six new Geo Comsat awards, and several civil programs, including development work for NASA human landing system, where we're partnered with dianetics.
Also in 2020, we acquired the 50% of <unk> software and data provider for icon that we didn't already own.
As a reminder, we believe ryka and is the global leader and satellite derived <unk> data for defense and intelligence markets, which to date has focused on three day mapping Earth observation accelerating <unk> infrastructure planning precision guided munitions military simulation and training and increasingly the emerging needs for GPS denied navigation.
We initially invested in and then later purchased the company outright because of its strength and the defense and Intel markets.
However, I'm also pleased to report today that we have recently acquired licensing rights to the underlying intellectual property and for icon for the consumer and commercial markets as well.
It's early days, but the addition of these addressable markets further enhances our confidence and our long term growth outlook for <unk> capabilities.
And finally, we closed on the MDA divestiture back in April.
That transaction for our balance sheet on firmer footing as proceeds were used to reduce indebtedness.
And as you say the least it was a busy year and we made solid progress toward achieving our longer term goals.
I'd like to thank all Max our team members for their diligence and resilience and 2020.
And I look forward to better things to come in 2021 and beyond.
If you please turn to slide five.
As we shift into the new year, our priorities will look pretty familiar to most of you.
Our top priority is to win and Earth intelligence and position the segment for sustained growth moving forward.
This means we will be focused on launching the legion constellation success.
Successfully competing for the next iteration of the enhanced program and continuing to make investments and <unk> artificial intelligence and machine learning our.
Our platforms products and capabilities that accelerate sensor to decision timelines.
On Legion, we remain on track for a September launch window for our first launch.
And as I mentioned above we already have $50 million of awards for <unk> and <unk> products.
Our second priority. This year is to continue to establish a firm foundation for growth at space infrastructure.
This means we'll be focused on driving diversified bookings so that we achieve our target goal for revenue mix of a third commercial.
Third civil and a third military and intelligence.
We've made some nice progress over the past two years, especially with NASA science and exploration missions, but theres still more work to be done.
We will also be focused on solid execution.
Producing space craft is a challenging task on a good day.
But it's been made more difficult with Covid protocols.
It's going to take another year, a focused effort to drive us toward our 10% plus adjusted EBITDA and margin targets.
But we're on the right path.
And lastly, we plan to continue to make investments in technologies and and systems that will allow us to effectively compete for and win the most demand and commercial and government programs.
Our third big priority. This year is to maintain the financial flexibility that will need to grow the business over time.
We'll be focused on driving cash flow and deploying capital and a disciplined fashion.
And of course, we'll make we'll remain focused on reducing our goal.
We remain focused on our goal of reducing debt and leverage.
I'd like to now ask you to turn to slide six.
We have a robust pipeline of diversified opportunities and space infrastructure demand for space systems, and architectures is growing across both commercial and government markets and there are several opportunities and the civil market for for exploration and our science missions.
And Earth intelligence, we see growing demand for data and analytics, particularly with our government customers and the Legion constellation will be a key enabler and meeting our customers' needs.
All told we see in excess of 25 billion and pipeline opportunities over the next five years, which compares.
Quite favorably with the $1 9 billion of orders we booked this year.
And we're confident about the growth trajectory of the company and the years ahead, and Biggs is going to provide and update on our long term targets on a minute.
And please turn to slide seven.
As I've mentioned several times now <unk> is well aligned with the national defense strategy across multiple disciplines, including space and cyber.
<unk> missile defense joint Lasalle and <unk> for workforce resilience and autonomous systems.
What I'd like to do today is double click a bit more on all of this.
We're excited about the difficult technology problems, we're helping to solve and that will help our nation maintained its competitive advantage over near peer threats and the future.
Please turn to slide eight which demonstrates the multiple domains in which the U S. Military operates and where <unk> is helping to address the complexity of the battlefield.
From space assets to ground infrastructure to analytics solutions, we are well positioned.
And we're currently supporting multiple customers and programs that are developing new technologies and capabilities for tomorrow's conflicts.
Including the Army has tightened program and project convergence.
Usda's project Nathan.
Air Force has advanced Battle management system, and the Navy's Overmatched program.
All of these programs are at or near the center of the government's efforts to develop systems and capabilities to support joint all domain operations and joint all domain command and control across varied branches on the military.
Please turn to slide nine.
One other key goals of these investments by the government is to achieve and advantage on the battlefield by shortening the sensor to shoot or timeline from space, which is all about seeing identify and targeting and prosecuting dynamic targets at scale and at distance.
Ultimately D O D is driving to goodbye and broad area of surveillance and automatic target recognition to support long range precision fires at speeds required on future battlefields.
Today, most current sensor to sugar timelines are measured in hours.
We believe the breadth of our coverage and the quality and accuracy of our imagery and our software processing capabilities are key enablers for dramatically, reducing these timelines, particularly given that our data is AI and machine learning ready.
For example, and our recent exercise we were able to collect download and process data at high velocity and theater and then in a matter of seconds Boccio registered that data using <unk> technology and in for instance, using our machine learning algorithms all in one seamless workflow.
We're really excited about being able to provide these valuable capabilities and are driving hard in this area.
The recent one world terrain Award I mentioned earlier.
And the remote ground Terminal award I mentioned on our third quarter call. Both with the army are solid proof points of our traction with customers.
Please turn to slide 10.
Importantly, <unk>.
<unk> is uniquely positioned to assist in these and broader Iot efforts with capabilities across ISR systems processing architectures, three D modeling and simulation advanced algorithm algorithms systems engineering and intelligence product generation.
And our view, we're at the right place at the right time to help our customers solve many of the tough problems at the center of the National Defense strategy and we are confident that this will in turn drive long term growth for the company.
And returns for our investors.
We're also confident that our growth and capabilities aren't limited to defense and Intel and we're expanding our market opportunities like with the expanded break on intellectual property rights for autonomous navigation gaming and other commercial applications.
I'm tremendously excited about our future here.
With that I'd like to turn the call over to begs for a review of the financials, including our outlook for 2021 and beyond.
Thanks, Dan Please turn to slide 11, where we present year over year comparisons for the fourth quarter.
Our net loss from continuing operations for Q4 was $52 million and.
And for the year of $46 million, driven primarily by the $33 million write off of our remaining prepaid asset from a prior contract.
For the commercial provider of ground station services as we executed a new multiyear contracts with more favorable terms.
Revenue increased 14% for the quarter and 3% for the full year.
Without the effects of the enhanced view contract deferred revenue burn off total company revenues increased 23% quarter over quarter, driven by recent wins and space infrastructure.
Without the effects of the deferred revenue adjusted EBITDA grew 36% quarter over quarter came and a little below the middle of our range.
Due to higher than expected stock comp expense given the performance of our shares during the quarter and the slip other contract and Earth intelligence that was signed in early 2021.
You may recall, though it raised our guidance after the second quarter.
On a full year basis.
The effects of the EV deferred total company revenues increased 6% and adjusted EBIDTA grew 16%.
Please turn to slide 12.
And I would like to provide a little more background on stock comp and other expenses incurred during the year.
For the full year 2020 stock comp increased $43 million from $20 million for 2019 much.
Much of this increase was expected given the cadence of prior awards that caused a full loading of our three year vesting schedule to hit expense this year versus only two years and 2019.
However share performance to drive roughly $7 million of additional expense versus your expectations given the strong finish to the year.
Moving forward, we expect our annual stock based compensation will be roughly 36 million subject to share performance.
Additionally, we incurred $27 million and COVID-19 related EAC growth due to our operating posture space from subtract share for the full year, including supplier delays and increased labor hours.
While the Covid posture continues to impact cost and schedules versus a normalized operating environment. It is it is to a lesser degree at this point and can we do not expect to experience incremental cost growth like this again in 2021.
Please turn to slide 13.
Earth intelligence revenues decreased 10% for the quarter and was roughly flat for the year Earth intelligence revenue increased 1% year over year without the effects that you would be deferred and the fourth quarter, while adjusted EBITDA margins declined driven largely by the timing of joint venture income and the fourth quarter of 2019.
Which made for a tough comp.
Recall, we recorded for icon net income and our adjusted EBITDA without recognizing any revenue until their results for consolidated into our financials after acquisition and the third quarter of 2020.
On a full year basis without the effect of <unk> deferred revenue increased 4% year over year, driven by growth and services international customers and Brian and the ROIC on acquisition, while margins declined modestly driven largely by the JV income dynamic and I just described.
Please turn to slide 14.
The turnaround at space infrastructure continued into the fourth quarter driven by our recent commercial and U S Government awards, reflecting progress on our diversification strategy.
Revenue increased 46% year over year on margins expanded to 1800 basis points given the several charges recorded in the year ago period, and higher levels of profitability on regional awards of note. This marks the third consecutive quarter with adjusted EBIDTA margins, and then and 6% range driven by the execution.
On a recent wins, partially offset by higher SG&A expenses, including stock based compensation.
And it is worth noting that despite the $27 million and Covid related charges. We took on the first three quarters of 2020.
Space infrastructure finished the year right around breakeven with revenue above guidance, while adjusted EBITDA was roughly in line.
Please turn to slide 15.
The company generated six 2 million and operating cash flow for continuing operations and the fourth quarter and invested $84 million and Capex and developed intangibles.
Full year free cash consumption of $65 million exceeded the midpoint of the upwardly revised guidance, we issued on our third quarter call given favorable timing of cash collections and Capex that came in at the lower end of our guidance.
The outperformance in 2020 is going to come and part of the expense of 2021, the details of which I'll cover in a moment during the discussion on guidance.
Please turn to slide 16.
We had roughly 496 million and liquidity at the end of the fiscal year and our bank defined leverage ratio ended the year at approximately four three times compared to our covenant of seven five times as a reminder, we have no significant maturities due until 2023.
And now please turn to slide 17 for a discussion of 2021 guidance.
We expect Earth intelligence revenue to be and a range of 105 to one point on <unk> 5 billion, which translation of 5% to 9% growth without the effect of BV deferred driven primarily by product growth and the inclusion of for icon.
We expect revenue and space infrastructure to be and a range of $800 million to $835 million or.
A growth of 11% to 16% driven by the solid bookings growth we experienced in 2020.
Intersegment eliminations and expect to be roughly $45 million.
We expect Earth intelligence, adjusted EBITDA to be and a range of $440 million for $70 million, which translates to growth of 5% at the midpoint without the effects of BV differed.
Driven by the revenue growth I mentioned earlier.
Set by cost growth related to the Legion constellation as we continue investments on our ground and secure operations architectures.
We expect adjusted EBITDA space infrastructure to be and a range of $75 million to $95 million.
Up from roughly breakeven in 2020, as we execute on our backlog.
Please note the space infrastructure adjusted EBITDA guidance excludes any potential impact from recent events related to Sirius XM and Sirius XM seven and satellite.
Intersegment eliminations are expected to decrease to roughly $16 million in 'twenty and 'twenty one is.
As a legion constellation work completes.
Corporate and other expenses are expected to increase to $80 million, reflecting increased investment and corporate level system engineering and marketing expense. Additionally.
Additionally, we have reallocated approximately $4 million and marketing spend from Earth intelligence, corporate and will incur additional expenses related to investments and our mission architecture and capabilities.
We expect our adjusted EBITDA results to grow and the second half over the first half and 2021.
The first quarter being the lowest.
The midpoint of our operating cash flow.
Reflects growth year over year, while Capex is expected to decline in 2020.
As I mentioned earlier.
Outperformed on our expectations for free cash flow and 2020. So some of that has come at the expense of this year is the beat was driven largely by timing.
But even after considering that the midpoint of our guidance has us free cash flow positive and 2021.
Equally important as I'll discuss on a couple of slides we're on.
And more positive on our long term cash flow outlook.
Please turn to slide 18 for a refresh of our 2023 targets.
We see a path toward five on up to $580 million and adjusted EBITDA by 2023 and increase of 40 million from what we previously described and our 2022 2023 target.
Without the inclusion of the <unk> deferred revenue, we ended 2020 with roughly $340 million and adjusted EBITDA.
Space infrastructure, adjusted EBITDA is expected to grow by $95 million.
So Tony.
And intersegment eliminations of space and infrastructure at places intercompany work are obvious Legion with third party billings.
We expect this growth to be driven by solid execution on new awards and the roll off and nonrecurring COVID-19 related <unk> share growth.
AAC growth.
And losses on the large developed build that we've spoken of in the past. Additionally.
Additionally, we also expect the business to grow organically as we continue our diversification strategy across commercial national and civil customers.
And Earth intelligence, we expect growth to be driven by allegiant capacity, and our product and service offerings, particularly in the area of three D.
Corporate expenses are expected to increase.
$20 million from 2020 levels, but at roughly $80 million and total in line with what I just gave as guidance for 2021.
Made significant progress in 'twenty, and 'twenty and we're well positioned for the features and we continue to drive our business towards significant adjusted EBITDA growth.
Please turn to slide 19.
For our 2023 free cash flow targets, we expect to see total free cash flow growth.
Of up to $390 million.
The majority of this will come from earnings growth and a reduction in Capex spend as we complete the Legion constellation and move towards a normalized capex spend of roughly $100 million by 2023.
We also expect interest savings of $70 million as we reduced our leverage.
And with that I'd like to hand, the call back over to Dan before we go to Q&A.
Thanks Briggs.
Please turn to slide 20.
You've heard me present this slide over the past two years, so I won't belabor it but I do think it's an important reminder, that we've been on a journey here at <unk>.
And 2019 and 2020, we were focused on cleaning up the balance sheet reengineering space infrastructure and recovering from the on orbit failure of the Worldview four satellite.
As 2021 begins and we remain focused on our revenue profit and cash flow growth.
We'll also be looking to accelerate financial performance and further optimize our capital structure.
And my view this narrative and playbook remains as intact today as the day, we introduced introduced it to our investors a couple of years ago.
With that I'd like to hand, the call over to the operator for your questions. Operator, Please open the lines.
Thank you as a reminder to ask a question you will need to press star one on your telephone to withdraw your question press the pound or Husky. Please standby, we compile the Q&A roster.
Your first question comes from the line of Kenneth Herbert from Canaccord. Your line is open.
Yeah, Hi, Thanks, good afternoon.
Hey, Kevin good afternoon.
Hey, Thanks, Dan and I just wanted to first ask if you could.
Can you talk about the sort of your bid pipeline and what we should expect on the infrastructure side and in 'twenty one in terms of order activity.
Off of obviously, the really strong backlog growth you saw on 'twenty.
Yeah.
I think the first thing I'd say is we.
We are continuing to diversify so it's not just looking at the Geo comsat market anymore, but we're looking at a range of different programs across both civil and defense and intelligence as well and.
And we do currently expect the Geo comsat market to be about flattish, but we'll be looking to get our fair share of those awards. There are some real opportunities out there and we're watching those and engage closely and advanced with engineering studies and that sort of thing and we continue to work with civil agencies like NASA that would I guess I would point you to the HOS as a good example of a down select when that occurs.
Where we're partnered with Dianetics and other work like Artemis that we're doing with NASA out there.
So you know on timelines and budgets are always.
Something to be watched with a larger program. So we're pretty confident about the way things are looking with.
And with defense and Intel we're still we're still kind of early innings there and.
And it's multiyear journey that we're on.
We do expect to gain programs over time, and we've been upgrading our talent to be able to tackle. This so overall pretty good.
<unk>.
In terms of backlog numbers. This year, we've got already 90% of backlog for our space infrastructure programs. That's a pretty good number to be heading into the year as we as we get awards and get wins.
And that'll help cash flow throughout the year there too.
Okay, great and if I just could on enhanced view and the Recompete what.
And what does the guidance assume or imply in terms of contribution.
And this year, obviously I know most of it's baked in but how do we think about that and the recompete and how are you viewing and viewing that debt probability now on that contract.
Why don't I talk about the contract first and then I'll hand, it over to Biggs to talk about the.
And how it matches into our guidance, particularly the longer term.
Range plans and stuff, but.
But.
And as you know and we've discussed before NRO gave us a one year study contract in June of 2019 that we completed in 2020.
On the government renewed as I have done on schedule and every other year the enhanced for your contract in September.
At this point, we do expect as they've told us that prior to September 21, and we'll be entering into a new government, but that's part of a larger process for expanding the use of geospatial data.
And so we'll be watching that really closely.
And if that doesn't happen on the default is that.
This year, we would we would as we've done every other year would expect to renew the contract in September at the current terms and conditions.
We believe we're really well positioned particularly given our performance over the past two decades, and the investment, we're making and allegiant and that architecture coming on line and the way we've been partnering with the U S. Government. So we're really excited about where the trend lines are there on what the customer needs are and what we're able to provide.
And in terms of what that means in terms of guidance I think that.
We've always said weeks.
We expect.
The customers commitment to commercial and energy to grow not to decline and for our to position and that overall growing pie to be very strong.
And I got more definitive debt and I don't think it makes sense to start to put discrete numbers around that for 'twenty, one or all the way out to 'twenty three except to say that at least still very good and still feel very good about our position.
Great. Thank you very much I'll pass it back there.
Thanks, Ken.
Your next question comes from the line of Carter Copeland from Melius Research. Your line is open.
Alright, Thanks, a lot for the time just a couple of quick question on on.
And one on the right on.
And I must admit I didn't realize on that yet.
Consumer reports from up from Nike purchase.
There and I'm wondering if you could just give us some color on what you see from an opportunity standpoint, as a part of that and if there's anything else who require there and now you've got all of the.
Non interest at this point.
Yeah.
First off.
And really excited about it we built the business case up on the the defense and Intel products and <unk>.
Our recently obtained the license rights.
To both the consumer and commercial markets as well so that we're really excited about debt.
We think it does open up just a whole another set of market opportunities for us I'm not going to be too specific yet we're still a little a little newer and working through all of our go to market strategy for products and those areas, but things like gaming virtual reality and.
Autonomous vehicles are on the table now and we're really and.
And we think Theres some nice conflicts between the work we've been doing with the department of defense and the USDA on those areas and where we might take commercial and consumer applications as well.
So we're yes, we're really excited about it we're really excited about the traction we're seeing and initial discussions we're having with people.
Okay great.
And just with respect biggs to the the the longer term cash flow guidance it looks like that.
Lower capex assumption in there and.
And can you comment was around.
Promising leads on and getting to a normal run rate.
Is there something and that it moves that we should be aware of.
No the I think debt.
The story is pretty consistent and nobody's told it previously.
And we did present things on all the different fashion and make it clear on where interest savings were and where our capex savings were and try.
Try to make it clearer between capitalized interest versus just pure cash interest. So I don't know if that's creating any.
And try and work for the slides for this one but.
The $180 million is very much made up of Legion and Legion and related Capex and my Saint Legion and related it's because.
In 2020, we were spending on ground infrastructure also spending on interoperability with the customer.
And so there was more spin and just the 600 roughly million.
Legion Capex program.
But the expectations here are still very much as they have been and will be.
Driving down over the next few years.
Okay and with respect to debt.
And that that built in and existing constellation should you expand and obviously, we would revisit that number.
Yes, and it doesn't assume are building any additional agents and this time period.
Okay.
Pete.
For the customer.
Wanted debt then we obviously have to consider that but.
This assumes just the constellation.
Alright, that's a high class problem. Thanks, very much for the time guys.
Thanks Carter.
Your next question comes from the line of Robert Springer from Credit Suisse. Your line is open.
Hi, good afternoon.
Hey, Rob.
Biggs just on that 2023 cash flow number I don't want to make sure I follow on.
Because I guess it's.
And it's you know.
$135 million above the old guide and you said debt.
Some of that is capex some of that interest expense is the rest how do we think about the rest of it some of it's for icon I imagine what else is and there.
Well.
Hi.
I think some other always just conservatism and we had before.
Okay.
Probably did better than what we put out there.
And when we first gave the guidance out.
For what was three years out for future before.
Sure.
But for icon as a part of this having you know a little bit better visibility into each on much of the business.
And.
Saying you know what is a reasonable cash flow expectation off of that.
Uh huh.
So I don't think I wouldn't say, we're being aggressive and this I think maybe were low.
It helps on back before rather than.
Two for lean and because it is the first time or go on par with it sure.
Okay Dan.
And on that just timing on Legion.
Tranche, two and I just want to get a good idea of where we are on tranche, one and then tranche two and then Biggs how much Legion and sell through was in your 2023, EBITDA and cash flow numbers is that selling all six satellites fully or how do we think about that.
You want to take that one first Biggs and then I'll get on.
Free cash flow for sure.
I know you've asked the question before and implicitly you know how much excess capacity is there out there and leave.
We have declined.
And sorry as fully as you would like and I just wanted to probably answer that question is I mean, not all capacity is created equal and so shortly you can always have some some capacity and areas that arent and and higher demand.
Irrespective of what's happening elsewhere, but we are going to have a significant cash.
Alicia you always have to.
Think of it too in terms of it's not just about the imagery is everything else that date and imagery drives and so our capacity to generate revenue from Legion isn't solely determined just by the amount of imagery, we can sell off of it but also what it enables and everything else in terms of.
And the products more traditionally we deliver and also all of the free D products and all of the analysis associated.
With with imagery. So it's it's more open ended and you might think based upon just the number of passes and <unk>.
Visit for ground around the world from the six.
Satellite constellation. So that's originally we're not being specific but we don't expect to stop growing and.
23.
On any kind of assumption that we're tapped out in terms of our ability to continue to grow revenue.
And the assets that we would have in place.
Okay.
Right. So Rob yes speaking of those assets I was.
You'll remember we toured that towards that metal lab area.
Last year about this time at the Investor Day, I was just out there with our team two weeks ago.
And they are beautiful.
Looking good.
Too bad we can't get you out there right now with Covid protocols and everything to take a look but.
Satellites are really coming along and we're still on track for the first two and.
And the September launch window. So we're excited about that and the company is all geared up and moving towards that timeframe.
On the next for which will be the second launch those will be the ones that go on to mid inclination orbit.
We're just now starting to work with Spacex on what the launch Windows look like and I think on the last call I said that we'd be expecting to launch those on the order of three to six months. After the first to go up.
And so we're probably looking very early part of 2022 right now would be my guess, but you know with complex program will continue to work with Spacex on a launch windows and everything else to get those lined up for that.
Okay, and then just as a last question and this has to do with EI and I just wanted to revisit.
And that business and get the latest on the breakdown between the imagery business and the analytics business.
Those are both trending.
And then a follow up question to that is that there are some other players.
Smaller competitors, perhaps that are starting to accelerate their growth trajectory and trying to compete I think with Max are and maybe some others on on imagery and analytics.
Through lower cost offerings, and maybe higher revisit rates or they may claim higher revisit rates do you see how do you see this competition and that's starting to show up out there.
Yes, I guess, what I'd say is we've got great trend lines, we've got great traction with our customers and I think the wins, we had and the performance. We did this year even during a.
Covid environment, when we were capacity constrained and limited waiting for Legion constellation.
Is it pretty good testament to that.
And we've made great gains on on each of the analytics as well as the imagery fronts.
And they're coming they're becoming more seamlessly intertwined as we keep moving forward and the reason I say part of that is because of the data that's coming off the birds is now and we.
We've got some blogs out today on this topic as well, but but it's analyst ready its AI, it's machine learning ready and so that kind of seamlessly transitions into the type of software you run on this the type of <unk>.
Algorithm is if youre doing a and artificial intelligence environment, whether that goes right into a convolutional neural network or something else.
It's pretty exciting for us.
And I think the breakout and capabilities only.
Really supercharge that for us.
In terms of Yeah go ahead.
Are the two areas growing and parallel or would you say analytics is outgrowing imagery or the other way around right now analytics and software are outgrowing imagery and most of that's due to the fact that we lost well before and we're capacity constrained I think that probably changes when lesion becomes operable towards the end of the year here.
And that kind of flips into.
A lot of capacity that we can then because it can for doubling our nearest 500 and near $5 five capacity there.
So kind.
And of the back and forth there.
On the others.
Kind of.
And I don't like to make specific comments about.
Anybody in particular, I guess, maybe a couple of points I'd make for that.
Yes.
Exactly new entrants and they've been around for.
Almost a decade now some of them so.
And we're aware of them were aware of their capabilities. We've had good traction with our customer sets and we.
And we look we think it's all for the positive debt.
And that there are other companies out there that are continuing to other groups and growing market I think Thats Testament to this <unk> has been the leading commercial provider of geospatial data and analytics. We competed successfully with the advanced technologies, we have and we think it's good for the industry that there is competition, our strong competitive environment drives technology gains and.
On innovation and lower cost for consumers so.
Were all the more for that and welcome welcome those who are who are here.
Those who might get in and otherwise.
Okay. Thank you very much.
You bet.
Thanks, Rob.
Your next question comes from the line of panels much worse from BMO capital markets. Your line is open hi, good.
Afternoon.
Can you talk about the pipeline for leaching and how are.
You're seeing that evolve.
And I realize that most of the selling happens once they are and space, but just in terms of the pipeline or for some of the pre selling activity.
Some of that and then repeated speaker for the pandemic or on the flip side is it being held by the current geopolitical dynamics and environment. What are you seeing on that front.
Hey, Thanks for the question Yeah, So I think.
It's kind of a mixed bag on whether we've been helped or hurt by the pandemic.
As I was doing a signing ceremony with the new Zealanders on some cooperation agreements this week and.
That would have taken me multiple days of travel both ways to try and do something like that so on the one hand, it's a little bit easier to do some stuff like that on the other hand. It is it is more difficult to get and especially with the classified customers overseas into their defense and intelligence establishment and have the same level of conversation we might have.
Without the ability to travel some of those locations.
I think.
As you said there will be some countries and there will be some customers that will purchase once the assets once they can see the data and once it's on orbit, but we're having good early traction with the conversations we're having.
People are really excited and watching the timelines and the progress on the pictures, we send them on the constellation and build out really closely and we're seeing really really good demand signals and and customer uptake on some of those because they are they are you know allied nations and they've got pretty discrete programs, we won't be able to announce them we'll just.
Be able to.
And I kind of talk about what kind of awards, we're getting and.
And we're seeing really strong uptake on the commercial side as well.
With a large technology customers, they're very excited about the type and quantity and accuracy and revisit rates were going to provided with constellation.
Great and in terms of the.
Margins for Earth intelligence and now they are all throughout the year so for.
Help us understand I mean once once the launch happens is near and maybe temporary margin and debt because of some incremental opex that the combined or.
On the margins of all throughout the year for that segment.
And I'll take that one bags.
I'll take it unless.
The assets.
Things, we can't hear you if you're talking.
My apologies for the line of VIX has disconnected.
Okay I'll take it and then basically it comes back and or Jason do you want it takes on one.
Yes.
What I would say.
And I was on the margin just correct you got to keep in mind that the satellites, we're having those.
Aiming to have those launched in September.
Talked about.
And one or roughly a quarter.
Yeah.
And the satellites and operation and producing revenue generating kind up data, so theres not much baked into 2021.
With regard to margins and.
From a linear perspective.
<unk> did mentioned during his prepared remarks.
<unk>, we do have some incremental costs this year associated with the buildout of the infrastructure on the ground for the Legion constellation.
So we do have some extra costs this year and as well.
The Legion capacity comes online and we begin generating revenue and that's what you ought to see.
Incremental margins kind of accelerate as we move into that 'twenty two 'twenty three time frame.
As you can imagine.
The margin we do expect.
And expansion and the 'twenty two 'twenty three time frame as the Legion constellation comes online and helps offset those increased costs and we've.
Absorbing this year.
Okay, great and.
And finally, <unk> mentioned that the space infrastructure guidance doesn't contemplate.
And I forget the exact wording, but potential costs or potential implications of Acs ex im certain failure. So just help us understand that I mean are there any potential costs.
And I presume you're still on a course of identifying the root cause that it might be thanks for your part at this point, but what would the potential exposure would be if any.
Yeah, we don't and we don't have anything.
To report on the continued troubleshooting work we're doing.
With the satellite and with the customer.
We did and I.
I know you guys, probably haven't had a chance to go through and we've got some pretty extensive disclosure on our 10-K on this.
As of December.
31, 2020, we had $50 million and Unbilled receivables.
And $14 million and and <unk>.
Collectible in orbit.
Payments for receivables that are over the life of 15 years, so that debt.
$29 million there and then we've also got we're exposed to some liquidated damages damages that haven't previously been accrued.
Up to $9 million.
So I think what I'd like to remind everyone is.
Satellites are it's a hard business.
We're continuing to work on this one and were going to do our best to.
Get it to.
Perform at or back to specifications as we can we.
We do have 90 Macs are built satellites on orbit and they're operating to their expected lives and we really pride.
Pride ourselves on the quality of our products. So it will be.
Looking for any learnings, we can get from this and focus on producing the next 90 spacecraft with the same type of reliability were known and our customers now know us for.
Sure.
Great Thanks and topline.
Thanks.
Dan. This is ex my line was dropped but I am back.
<unk> and Texas, we're not sure how other storms are still go on but I think.
It's pretty warm here now and I think.
And what causes one.
Your next question comes from the line of Chris Quilty from quality analytics. Your line is open.
Got it thanks.
And I'll follow up on that.
Seven seven satellite since number eight is a twin of that satellite and still on the production line is there a possibility that we could get some other EAC charges. If you determine that there was some kind of a.
<unk> colt with seven and that's going to need to be corrected with a.
And we're working with the customer to get aid up as quickly as possible and that's part of the resiliency of their their network and we will.
We do expect to launch that as.
As soon as we're able to hear.
In terms of additional charges Biggs do you want to handle that piece of it.
Yeah at this point and time, we don't expect anything.
And we're obviously focused on.
On seven and all the analysis, there and doing all we can.
And making it.
Optimized and and operational.
So.
I think that.
Thanks, and I'll always unfold, but don't expect anything significant to have on their respective.
Cost standpoint, okay.
And a follow up on the question about for icon and the commercial consumer rights was that something that Bob has done anything with do they have any preexisting business where was that debt.
Rice and those activities simply sitting on the shelf for them and us.
I'm going to go into too much detail on it just because there's a large body for some third party work here, but some.
Some of those rights were with a large technology company and.
And we've been able to work with that large technology company too.
To acquire full access to the intellectual property rights there.
And so was there something that will find and the 10-K in terms of the acquisition cost for those assets.
Thank you on it takes that I'm sorry.
I'm sorry. The question is this or is there a cost associated with the commercial rights.
Are there any disclosures and the 10-K, which haven't gotten too about the acquisition cost for the commercial rights. There really is not a discrete acquisition and cost associated with those we're not capitalizing on additional and tangibles.
As a result on acquiring those as a part of a broader arrangement.
Discrete costs associated with the <unk>.
IP.
Understand.
So excluding the Broadcom revenue pick up I guess, the Earth intelligence business was down a couple percentage this year.
What were the primary factors and the revenue decrease in 2020.
I'm not sure I get to the same numbers on decrease.
On.
I'm, sorry, and we see and exclude the <unk>.
Are you looking just for the last quarter.
I'm, sorry on what I'm, saying on a full year basis, if you exclude the.
And the $8 million contribution for Brightcove.
And we can circle back on for sure I get.
Yeah, we come back and I'm not sure I get to the same date on why don't you.
Maybe you can do a follow up with Jason on that using and what will it be disclosed but.
And that's where I talked about on Dan has talked about it the business is otherwise growing.
There is.
Good.
Good strengths and what we're doing from an analytics standpoint, we are low constrained on.
Capacity side for imagery.
But.
We don't we don't see any real weakness there and theres some timing at the end of the end of the year.
Things slipping into 'twenty one.
But other than that.
<unk> is performing well, particularly in Talbot environment.
And I think this was the last quarter, Chris we had the burn off of that do you view deferred revenue so on a year over year basis from last year $40 million of noncash deferred revenue.
100% margin and.
And the business is finally gone on and off the books.
Yes, Chris on full year basis, if you look at the bottom of page 13, you'll see that.
Revenue streams without the effective <unk>.
And differed and.
I think that'll help you get to.
And to help answer your question.
Okay.
And I apologize I was thinking you were asking the items that you'd be deferred so if I could.
And the answer.
On target and I'm, sorry for that but you know the data is there.
Yes, no problem.
So a question and I know you guys don't report revenues and this way, but can you talk about.
What you used to call. Your DAP business is both in terms of revenues and number of customers and pipeline as we prepare for Legion.
So I think.
And the last time, we did make disclosure we I don't know we said it does and the 2014 countries that had those types of facilities.
We continue to see strong traction in the marketplace with both the.
And the direct access facilities themselves the hardware and the software component tree as well as the virtual.
The rapid access program. So there are some countries now that have virtual solutions for direct access and increasingly we're seeing those countries plus other countries coming on on the secure watch contracts or we're seeing sort of a blend of the software and the platform and the virtual and the hardware componentry there.
That's a great business for us.
And it continues to be a great business. It provides us an entre to the top organizations in those countries too.
To demonstrate and not just our capacity for the satellites on the on orbit capabilities and the direct tasking features but also increasingly our software and our three day type solutions. So it's.
It's good.
It's been very very solid which is I think has helped to underpin our performance sometimes it runs a little up and down a ran a little down and Covid and when a lot of people had to leave their buildings and couldn't tasking on it.
And depending on world situations and the threat environment. It runs back up and some areas of the world again faster than others, but we're on every one of those customers is really looking forward to the Legion constellation and we're making upgrades to our software and ground infrastructure to make sure that as the Legion constellation comes on line, we can start the money flowing on that right.
Okay.
Great and final question and this is I guess specific to the Earth intelligence business.
One of your competitors Black Sky filed this back and and Theres, obviously, a presentation deck out there they have between now and 2023.
I think 200 million incremental revenue growth over that timeframe.
Two years, and I guess as banks are being capacity constrained and we havent seen <unk>.
And $30 million of growth.
Do you see the marketplace and the next.
Two years growing at I guess in excess of 201 billion, assuming that there is growth and there for Max our and other competitors also.
Yes, I think what I'd say is look I.
We keep very good tabs on everything that's happening on our industry.
And we're seeing the decks and read them on.
And won't comment on them other than to say as we think about the marketplace as we think about.
Our track record, our competitive positioning or the work, we do day and a day out with customers.
We think the market is growing.
And we think that our piece of it is factored in.
Very very well into the numbers that Biggs gave you for our 2021 and longer term 'twenty and 'twenty three type guidance. So.
No.
Think about it that way for wheat.
We've kind of factored and some things, including our capacity.
And to those numbers, but were.
And we're very confident and.
What we're proposing for for our numbers I'm not going to speak to anybody else's.
Alright, thank you.
Thanks, Chris.
Okay, operator were.
And out of time here I'm going to.
On.
Thank you everybody for joining us today.
We've got a.
Busy calendar.
And with some sell side conferences and the coming weeks and we look forward to seeing many other listeners on the call.
And at those conferences and certainly look forward to.
To returning this time next quarter for a discussion of our first quarter.
First quarter earnings and we look forward to speaking with you all and then thanks and have a great day.
Ladies and gentlemen, this concludes today's conference call. Thank you for participating you may now disconnect.
Okay.
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