Q1 2021 Maxar Technologies Inc Earnings Call
Greetings, Thank you for standing by and welcome to the Nexstar technologies first quarter and 2021 investor call. At this time, all participants are in a listen only mode.
Chris' presentation, there will be a question and answer session to ask a question. During the session you will need to press star one on your telephone please.
Be advised that today's conference is being recorded if you require any further assistance. Please press star zero and.
I would now like turn here on the hit and the conference over to your Speaker today, Jason Gursky, Vice President of Investor Relations. Please go ahead and.
Yeah. Good afternoon, Thanks, operator, welcome to Max or.
First quarter, 2020, One earnings conference call I'm joined today by the company's Chief Executive Officer, Dan Jablonsky, and Chief Financial Officer, Biggs Porter, both will make some opening remarks, after which we're going to open up the line for your questions. We're shooting to wrap up the call in about an hour before we get started Alex refers listeners to the accompanying slides for today.
His presentation, which can be found on the company's website at <unk> dot com in the investor events and presentations section of the sites. 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.
<unk> 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.
You are referred to the advisory regarding forward looking statements contained in our quarterly earnings releases earnings call slide decks and the company's most recent MD&A section found on our form 10-Q, which is available online on the company's SEDAR profile at SEDAR Dot com and other companies Edgard profile and FCC dot Gov or on the company's website at <unk>.
Dot com.
As we get started I'll ask you to turn to slide three and with that I'll turn the call over to Dan Dan go ahead.
Thanks, Jason and good afternoon, everyone.
We had another busy quarter and Max are good progress with the business and can see continued traction on our customer relationships and winning new programs.
We're really encouraged with the pace and the vaccines are rolling out and we started returning people back to work sites to join the approximately quarter to a third of our people at all along has continued powering through on site to serve critical customer emissions over the past year.
Today I'd like to run through key highlights from the quarter.
What date you on the progress we're making on our 2021 priorities provide a view on the demand environment pipeline and then do a double click on some of the technologies, we're working on with our space technologies, and we believe will help us drive growth and the future.
So with that please turn to slide three of the accompanying presentation.
We generated 12% revenue and 40% plus adjusted EBITDA growth year over year without the effects of the enhanced view deferred revenue despite charges related to the Sirius XM satellite program.
Because they go into the details later, but without these charges growth for both metrics would have been even higher.
And importantly work on Sirius XM eight has completed and Mr.
Satellites and route to launch facility.
We're looking forward to launch and a few weeks.
Well I'm definitely not pleased with these revenue looking charges and putting it in context, I'm really encouraged with the underlying growth we generated across both the intelligence and space segments. This quarter.
And they are both a strong proof point that all the work our teams have been doing to drive sustained growth and Max are now and into the future. We're on the right path to continue creating shareholder value.
One of our most important metrics free cash flow trends have continued to improve as well on.
Trailing 12 month consumption near breakeven this quarter, we continue to expect capital expenditures expenditures to trend significantly lower beyond 2021 driver.
Driving strong cash generation.
And that will give us even more flexibility on both debt reduction and those investments that will drive growth and the business.
Bookings trends also remained positive with.
Trailing 12 month book to Bill at roughly one one times.
And as we go into more details later, but on guidance, excluding the <unk> charge, we've increased the outlook for cash flow maintained it for adjusted EBITDA and modestly decreased it for revenue.
Overall, a pretty good quarter and start to the ear Bud flow charges on the Sirius XM satellite program.
Please turn to slide four for a review of the progress, we're making to our 2021 priorities.
We remain focused on winning and Earth intelligence, which means driving bookings growth, including for capacity on Worldview Legion growing our three D capabilities and extending the enhanced free program.
Key wins in the quarter included several renewals with international Allies, and large technology companies.
Some of the large customers have started adding three D data and point cloud capabilities to their renewals, including a key U S ally last week for over $10 million, highlighting and validating the decision we made to acquire <unk> last year.
Additionally, we signed contracts with the U S Army and the National Geospatial Intelligence agency this quarter to support training mapping intelligence and operational missions.
We also signed our first deal with a drone delivery service.
On Worldview Legion and I'm pleased to announce that we signed contracts with four international allies to upgrade their direct access facilities, two or three point on architecture. So total.
We're ready for lease and when the constellation comes on line.
This is an important step and the deployment of these assets and the eventual ramp and revenue, we will expect and Earth intelligence over the next several years.
On the enhanced your follow on program.
Our customer continues its work on extending the program beyond 2023.
It's always tough to predict exact dates but.
But it now appears possible with this award is likely to occur later in 2021, if that's the case, we'll expect a renewal of our existing contract and Q3 like we've seen every year for the past decade.
So from an execution perspective, it was a good quarter with the team generating solid adjusted EBITDA margin is tracking in line with our full year guidance range.
On the Worldview Legion program.
We continue to progress and I'm really excited about the capabilities. These satellites this entire constellation will soon be providing to our customers.
All that said, it's a complex program is anything this exquisite is expected to be and work continues.
Software and engineering teams are getting back into Workspaces. This week to again be and proximity to the teams that have been conducting the build work and thats really good to see.
And it's really impressive to see the morale and energy on these teams.
At this point, we're tracking a few critical items that could impact timelines to watch.
The first of these is completion and validation of flight software, which is complex and continued simulation and testing of the spacecraft.
And its components and subsystems.
And next there is an industry wide issue with some aspects of Honeywell electronic components that have been identified and need to be corrected.
We're using these honeywell electronic components on the first of our Legion satellites.
As I noted the entire satellite industry is being impacted.
Notably <unk> Legion program, though has been designated as a high priority defense missions and has formally received a dx rating under the defense production Act.
And we're basically front on the line alongside other Dx rated programs or close to it and preferential treatment and resolving this issue and at this point, we're optimistic that this is not a pacing item.
Finally, we put our satellites and systems through a rigorous set of environmental testing to validate the engineering the design and the quality and construction and work that goes into the builds.
We and our suppliers do that as additional validation measures.
During April one of our suppliers Raytheon had been conducting those same sorts of tests on the high precision optical instruments.
And unexpectedly encountered an issue during testing not relating to design, but due to some workmanship on on assembly of the supporting component.
And extensive plan for remediation is being completed thus compressing some of the margin we had on our schedule and is leading to other integration and testing delays.
This instrument has had some previous scheduled delays, but we're pretty sure we've got our arms around at this point.
With exquisite imaging instruments like this.
We can't accept anything less and perfection.
There's clearly a risk that this will prove to be the critical path for schedule.
Okay and more testing ahead of this can also on this can always change that's our best view today and what's driving completion.
So we're still driving hard and schedule is incredibly important.
So his quality.
We haven't heard earned our hard won reputation by cutting corners, we're going to keep going through our extensive mission assurance procedures.
So at this point, we expect a fourth quarter watch.
Turning now to space infrastructure, where we're committed to delivering the best possible systems for our customers and from a business standpoint have been focused on establishing a foundation for future growth.
Key wins in the quarter included a contract modification with NASA for work on the power propulsion element, which allows <unk> to proceed with Nasa's updated requirements for the now combined PPE Halo spacecraft.
We also signed several study contracts for National Security work as we continue to look to shape new programs and further diversify the business.
From an investment standpoint, our recently upgraded mission architecture team is hard at work on new satellite and constellation designs, including modular approaches as we look to serve commercial civil and classified programs with highly engineered and affordable solutions.
We also remain focused on our payload strategy and are proactively working with partners on comprehensive packages that will solve our customers' most demanding mission needs.
On execution, excluding the charge related to Sirius XM adjusted EBITDA margins continued their improvement, reflecting better performance and healthier program mix.
I'm also delighted to note that we recently hired Chris Johnson, the liter space programs organization.
Chris comes to us from Boeing where he has been for over two decades and most recently served as the president of Boeing satellite systems, and led successful business transformation that reduced balance sheet risk and <unk>.
<unk> profitability refined product strategy and modernized manufacturing approaches.
I look forward to working with Chris on the new role to drive sustained revenue profit and cash flow growth and our space segment and.
And I'm glad to be welcoming Chris to the Max our team.
And finally on financial flexibility, we issued 10 million shares this quarter and use the proceeds to claw back $350 million of expensive debt that was due in 2023.
This transaction strengthens our financial position and sets us up sets us up for continued growth.
We believed at the time and continue to know that the trade on dilution was advantageous to our shareholders and will drive higher equity performance going forward.
Please turn to slide five.
Speaking of growth on the demand and demand environment, we continue to see over $25 billion and pipeline opportunities over the next five years.
Compares quite favorably to the $1 9 billion of bookings in 2020.
And space infrastructure demand for space systems, and architectures is growing along.
With our other technologies that are across both commercial and government markets for missions and Leo Geo deep space.
I know youre, a consultant side, 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.
We're closely watching and at this point are encouraged by the by the administration's assessment of the geopolitical environment and.
Its priorities and making with regard to spending both on the national security front and with several programs that agencies like NASA.
We remain confident about the growth trajectory of the company and the years ahead and look forward to updating you over time on the progress, we make and growing our backlog.
Please turn to slide six.
Yeah.
And as you'll recall last quarter I did a deeper dive on some of the technology, we've been developing and deploying and Earth intelligence to support the U S government and reducing sensor to shoot or timelines on the battlefield and the subsequent growth potential we see for Max are as a result.
But I thought I'd do today is provide some more detail on what we've been up to recently and our space technologies, the strength of our portfolio and the potential we have to drive growth.
As you know Max or has a long heritage and space that dates back to the Apollo missions, and we have been designing and manufacturing communications and Earth observation satellites space exploration spacecraft and space robotics for decades.
Slide seven demonstrates some of the use cases of our technology <unk>.
Including satellites for direct broadcasting two way broadband digital audio radio digital media and weather.
We've been a market leader and the industry for these types of applications and have relied on price performance and quality to win market share over time.
Going forward, we see our unique capabilities and power and propulsion as key discriminator and as we look to serve both commercial and government customers and and building a well balanced portfolio of programs.
Please turn to slide eight.
Today <unk> has built over 35 satellites with solar electric propulsion, using and active hall effect thruster, including a commercial geo consummation that exclusively uses the technology.
This approach reduces fuel masked by 80% relative to traditional chemical fuel propulsion propulsion systems, allowing more allocation for revenue generating payload mass. This is a good thing.
Especially for our commercial customers, who are constantly looking for ways to increase the capital efficiency of their operations.
On slide nine we showcase the psyche mission as an example of how this technology can be used and deep space.
As a reminder, psyche as a NASA mission to explore a metallic asteroid.
The mission will require the space craft to be on orbit for years, and a travel 1 billion miles.
To get this done we're using a more powerful hall effect thruster than those used and the typical mission orbiting earth.
In fact, this will be the first time that a hall thruster is been used beyond lunar orbit and.
And as such is a groundbreaking mission that could lead to a different approach and how spacecraft or powered and deep space going forward.
Please turn to slide 10.
Things start to get even more interesting when this propulsion technique is combined with rollout solar arrays.
As you know satellites your solar panels to help power their operations.
However, traditional arrays have been limited by the mass and carrying capacity of the launch vehicles to get them into space.
Rollout solar arrays allow for Capex storage are highly scalable and both way and cost less and traditional arrays.
All of this allows for a more flexible powerful and cost effective spacecraft.
The best demonstration, we have to date of the power of these two technologies working together is the power propulsion element for PPE that we're developing for Nasa's lunar gateway.
Please turn to slide 11.
The PPE the power propulsion element will utilize unprecedentedly large rollout solar arrays, providing 60 kilowatts of electrical power.
More than any other space craft apart from the international space station.
And we'll also deploy the highest power solar electric propulsion system to ever fly on a spacecraft by using several large and larger hall effect frustration.
And at the time of their launch both roster types will be higher power than any other hall thruster launch to date.
The spacecraft will set the standard for solar electric propulsion, and we believe that we'll be able to use the technology and integration techniques developed for the program on future missions for both our commercial and government customers.
This is a nice foundation for growth and we remain excited about the demand backdrop across both across both our commercial and government customers.
We will continue providing updates like closer to look forward to future discussions on our space robotics capabilities.
Artificial intelligence and machine learning advances and augmented and virtual reality applications going forward.
And with that I'd like to hand, the call over to begs for a discussion of this quarters financials and an outlook for the year.
Over to you.
Thanks, Dan.
Please turn to slide 12, where we present year over year comparisons for the first quarter.
Our net loss from continuing operations for Q1 was $84 million, driven primarily by $41 million and debt extinguishment costs as we retired $350 million into 2020 three notes in connection with our recent equity raise as well as a $28 million charge related to the serious action southern and satellite.
Revenue increased 3% for the quarter on a year over year basis without the effects and few contract deferred revenue burn off total company revenues increased 12% year over year, driven by recent wins and space infrastructure and the expansion of programs or its intelligence.
Without the 28 million net charges related to serious action total company revenues and adjusted EBITDA would have been $420 million and $95 million respectively. This quarter.
Please turn to slide 13.
Earth intelligence revenue without the effects of Hebei deferred revenue increased 4% year over year and the first quarter, while adjusted EBITDA margins improved modestly with a slightly more favorable program mix.
Growth was driven by increases and our commercial programs as well as growth from international defense and intelligence customers.
Please turn to slide 14.
As noted in our earnings release space infrastructure revenue and adjusted EBITDA were negatively impacted by the performance issues with the Siriusxm southern and satellite.
This included a $25 million cumulative adjustment to revenue.
Due to the loss of the final milestone and orbital payments net of other adjustments.
This compares favorably to the $38 million, we expressed as risks from the receivables on Ltvs.
Additionally, we incurred 3 million on cost during the quarter as we attempted to repair and fully recover the satellite.
On a reported basis revenue increased 70%, 17% year over year, while margins expanded 2001, or an 80 basis points driven by the profitability of recent awards as well as a reduction and negative EAC impacts, including those related to COVID-19 taken last year.
As we first adjusted our operating posture due to the pandemic.
Without the $28 million impact of the Sirius XM adjustments to revenue and adjusted EBITDA margins would've been eight 7%, which we feel is more on line with their expectations as we continue to drive margin growth.
The space infrastructure segment has a trailing 12 month book to Bill greater than one times.
And without the Sirius XM charge, our trailing 12 months margins would have been roughly 7%.
These are important milestones as we continue to diversify our bookings and this business and drive growth with more profitable margins.
Please turn to slide 15.
The company generated 27 million and operating cash flow trading and operation of the first quarter and invested $50 million and Capex and developed intangibles.
Importantly, trailing 12 month cash consumption was $15 million and compares favorably to the 65 million consumed and 2020.
We remain confident and the outlook for cash generation as Allegiant construction program winds down.
Please turn to slide 16.
We had roughly 400 and sort of a $2 million liquidity at the end of the quarter and our bank defined leverage ratio ended the year and approximately three eight times leverage metric benefited from the recent 350 million pay down of our claim and 23 notes.
Please turn to slide 17 for a summary of our guidance changes.
The following guidance just on include any impact related to the Sirius XM charges taken during the first quarter, which impacted both revenue and adjusted EBITDA by $28 million and it will impact full year cash flow by approximately $20 million.
Total company revenue guidance is down modestly given the announcement of the human landing system down select.
Our adjusted EBITDA guidance remains unchanged and we have raised the bottom end of our operating cash flow guidance by $20 million.
Now please to slide 18 for a more detailed view of those guidance figures.
Revenue guidance for Earth intelligence remains unchanged from what we issued it here and the targeted range of 1.15 to one point on nine 5 billion.
We've modified our revenue guidance and space infrastructure downward by $35 million to account for our team's loss. So the human landing system program and now expect to be and a range of 165 million to $800 million.
Intersegment eliminations of increased modestly and we now expect to be and a range of $50 million to $55 million per year.
Turning to adjusted EBITDA, no change to the outlook range for its intelligence.
Recall that we could expect some incremental costs in future quarters.
Related to the Legion constellation as we continue investments and our ground and secure operations architecture.
As such.
At the midpoint of guidance, we don't expect margins to expand from Q1 levels. Despite the forecast for sequential revenue growth.
And.
The reduction related to the human landing system down slick does not materially impact our adjusted EBITDA expectations at space infrastructure and we've left the same guidance range is for us and it last quarter and.
On a consolidated level our guidance for adjusted EBITDA also is unchanged.
We previously stated that revenue and earnings will progress sequentially each quarter as we proceed through the year.
This is still the case.
This progression and is driven by general growth, but more specifically the continued transition of revenues at space infrastructure and it's worked transitions to more recent contracts and there's product revenues, notably three D continue to ramp up at our intelligence.
We've increased the bottom end of our operating cash flow guidance by $20 million for total range of $260 million to $290 million.
This is driven in large part by the interest savings we will realize this year as a result of the debt pay down.
And we've left the top end of our operating cash flow range unchanged as they are still early in the year, especially given the typical and uncertainty around working capital changes.
We will look to tighten this range throughout the year.
The ranges for Capex remained the same.
Moving on to other noteworthy items, we've updated on interest expense and share count guidance for the recent equity issuance and subsequent pay down of debt.
Interest expense expectations have increased by 5 million and to a total of a 165 man and third is inclusive of the 41 million and nonrecurring charges taken in Q1 stemming from the early retirement of debt on.
On an annualized basis interest expense will decrease by roughly $35 million.
Which flows into future years, and will have a positive impact on our longer term financial targets.
And as I just stated all the guidance I gave us and exclusive of the effects of the serious action charge.
To make it easier going forward. We've also added a slide which shows how that guidance would look just to Sirius XM effects are added in after rounding numbers off.
Before I hand, the call back over to the operator for Q&A I wanted to also briefly address at corporate housekeeping matters that would require public filings and the next several days.
Back in 2019, we implemented a tax benefit preservation plan to preserve our Nols, which included the authorization of a potential issuance of series a preferred stock as a part of the plan.
However, because we don't utilize those shares and the plan has since expired we will be issuing an 8-K outlining certain steps required to formally eliminate those unused preferred shares.
There is no change to our Nols are impact current shareholders, but I wanted to take a minute to walk through those and explain the rationale before the 8-K is filed next week.
Operator, we'd like to now begin Q&A.
And as a reminder to ask a question on a star.
Telephone keypad.
And your name and your first question comes on line.
And with Hana.
Please go ahead.
Yeah, Hi, good afternoon.
Dan and Biggs.
Good afternoon, Hey, good afternoon.
Dan I, just wanted to start off and follow up on your comments on.
On the Legion and and the delays there do you have any more specifics around the timing and the fourth quarter. You are looking at for the launch and then I guess, specifically how are you viewing.
It sounds like the gating item on the components from Raytheon and you went through some of the detail there, but but confident and surround the steps over the next few months to further mitigate that risk and any more color around.
And what you can say and I hope with confidence on on a launch at the end of this year on that.
Yeah sure. Thanks.
So I mean, the Legion program is a complex program.
It's been one we've been working on for several years everything is starting to come together now we're getting into the final testing and integration phases and when you do that.
Unfortunately, sometimes you uncover things that you'd rather not have to go on but you're glad to get them.
On covered on the ground here before before we did launch it into space.
The Raytheon issue was a workmanship issue and I think we've got it fully resolved and taken care of and spin.
Spent some time in person with the Raytheon team this past week.
Looking at the improved test procedures are doing as well as the modifications and they've made a two to a small component and everything looks like it's on track and we're back on pace, but that said it did introduce it took out some margin and introduced some delays to us, particularly as we roll that into the rest of our testing phase programs, our integration and our.
The last amount of software and testing we do.
On the fully integrated satellite so.
At this point I think we've accounted for everything we're planning on a Q4 launch and we're driving for that I'm not prepared to say at this point, whether that's early or late Q4.
But we're continuing to drive as hard as we can on schedule, but keeping quality on.
Top of mind.
I think we've done and dealt with the Honeywell issue pretty well, but.
We've got to keep keep on that one as well and and keep working that and look forward to watch and quality instruments later this year.
Great. Thanks, and then just a quick follow up on that so just on the flight software and on the Honeywell issue. It sounds like those are maybe not as significant of issues, but I'm guessing you're you feel pretty good about our risk mitigation on those as well.
We do at this point, you know, but we track everything.
And the software itself is.
It was about just under 300000 lines of code or so so not incredibly complex, but its something we want to put through the paces and test over and over and in both the AR on the spacecraft when it's fully integrated as well as and they are in.
And the normal operating procedure will go through during thermal vac and and other testing procedures. So we want to keep keep running that are finalized and get everything to the point, where we want it but.
But those are those on the three big issues were tracking right now, obviously theres always something that could unanticipated would come into it but that's kind of where we are today as we look at the plan ahead and the the schedule on the work to be required to be done throughout the rest of the year.
Great, Thanks, Dan and I'll pass it back there yes. Thank you.
And your next question comes from the line of Tim.
James with TD Securities.
Thanks.
Good afternoon.
Hey, Tim.
Alright.
If you could maybe talk specifically about.
And the Lille market in particular and kind of.
I know, it's not a huge part of the ESI segment for you now, but just curious kind of how you view that and the opportunities there today.
And maybe kind of where that opportunity ranks relative to other buckets of growth for you within a space infrastructure.
Yeah, and just to kind of clarify Tim you may be asking just about the communication side, but we think about the Leo market more expansively so for.
For example, the Legion constellation other Earth observation, sometimes other government programs, we do and some that were chasing and we'll continue to chase or in the lower tour, but.
Part of space, there are certainly opportunities, we're chasing and the Leo side on the comm side as well are there and.
And then some that have been announced there are others out there that are.
We're in active pursuit on and there are others that are People's planning boards, right now for which RFID and Rfps haven't quite been issued but but that we're aware of.
Yeah.
One thing that we've done is we've made some really significant investments and our capture group as well as our mission architecture teams.
And people like Jim Mcclellan coming on board for the.
And systems architecture work are doing a great job I think it and helping us refine the types of products, we can deliver for Leo constellations and.
And I think over time, we're going to have some good success there.
Okay. That's helpful. And then just one follow up if I might just on the.
And 4% growth and.
Interest intelligence.
And both commercial and IDI.
Ibi customers accounting for that I'm just wondering.
Within that was one customer type or the other sort of more responsible for that growth or are they both kind of growing currently at that low single digit rate and kind of how do you see that trajectory through the balance of the year.
Yes, and I'll, let biggs chime in here a second line.
Seeing growth across commercial and international defense and and national programs as well on the Earth intelligence side. So we're really encouraged by that.
We're also going to see some strong ramp up throughout the year. So Q1 seasonally adjusted as you know a little lighter than the rest of the year is expected to be.
And Biggs talked about pipelines on the backlog statistics that I didn't go into more detail on that but we're.
We're seeing great uptake on the products, particularly the three D products across both the commercial and the government sets as well.
I agree, it's a pretty even mix between Eni and commercial in terms of the customer mix and.
Clearly the product and <unk>.
And I had an influence as well.
Okay. Thank you very much.
It's Tim.
And your next question comes on line.
Awesome.
With BMO capital markets.
Hi, good afternoon.
And maybe expanding on Hey, Dan.
And maybe expanding on the three D aspect and break on.
How much runway is there as far as Upselling back to your existing base of defense and on power customers. So roughly every day and that rents are and what kind of color you can play there.
Yeah, I think it's actually it's really strong.
The and my remarks, I made reference to a new $10 million Award, we got from an existing U S ally and.
And that's that's growth beyond what we would have otherwise expected and our data business and our services business for a customer like that very strong growth potential there and.
And first quarter, we and our earlier I guess the annual conference call a couple on a month and a half ago, we announced the.
The Army Oneworld terrain program enhancements and what we're doing there so that's.
And we expect to be used more extensively across our U S military applications and so we think there's just a great set of use cases across.
U S government and National Defense and intelligence customers.
And then commercial applications, we haven't talked about commercial applications a lot, but we've gotten some good early traction with our commercial customers and including the the contract I referenced in my from my remarks about a drone company that'll be using this type of technology to autonomous low navigate drones and <unk>.
And areas. So we're pretty excited about that see a lot of potential for it.
Internally and our forecast are looking very good for the three D product set this year and we expect that to be a strong growth driver for the business going forward.
And so let me just on the services business I know on the past you were maybe a bit headcount constrained as far as being able to meet demands but.
What are you seeing on that part of the business.
And is there opportunity materializing and internationally or is that.
It's still predominantly being driven by U S GAAP.
Right now, it's still being right and as of today, it's being predominantly driven by U S growth and if we could hire faster we'd be growing faster still even though we're growing healthy.
And one some really good programs, including the recently announced Janice Award.
With NGA that where staff and out of our St. Louis Office and some other great.
Great things, we've got going on.
On the international front, we're in deep discussions with a number of customers to be able to bring those types of and technologies and services and integration and things. We can do for the U S government to there.
And.
Intelligence defense needs.
Still early days, there and COVID-19 is probably hampered us a little more because we can't travel and do the same kind of demos and integration work, but we see over time that that can be a strong driver growth force as well.
Great just one last one for me the Honeywell assume like that effect on the other programs and the factory or would that be limited to a region.
It's an industry wide issue.
And it has the potential we're still assessing all the schedule impacts on any other programs.
At this point, we don't believe there are any material financial impacts to the business.
For that but it's a it's one of these things that goes across a broad set of programs across more companies and it just makes our.
Okay.
So bottom line.
Makes sense.
Okay.
Thank you and your.
Next question comes from the line and statements.
And J P Morgan.
Oh, great. Thanks.
Thanks, very much and good afternoon.
And.
I was wondering just on the on the 2023.
<unk> are those still operative.
And in general were not going to make it a habit to update every quarter, but I went to a new long range plan every quarter as you might guess.
At this point and time, we wouldn't.
Line out anything on that.
And I believe and learn that changes those I have made.
Made the point in time people, though with respect to the.
Refinancing that we did from the equity issuance at those into.
Interest savings are incremental to the guidance. We've previously given so there are as you know it will all other things equal upward pressure from that on the cash flow part of that guidance.
And on everything else.
Hmm.
I'm not forecasting any change it but we're not literally going to update every quarter.
Great. Thank you that's helpful and then.
Maybe one follow up on with regard to the guidance and Earth observation and.
And it seems maybe with the potential for the.
Legion launched it to slip out again.
It seems like that was.
The the EBIT I guess.
First part the EBITDA guidance for the year is kind of it seems like maybe independent of the timing of that launch and then and second with regard to the contracts that you have on that capacity is there a time by which you need to have those first satellites and the constellation launched.
Yeah. So just on the guidance piece we.
Right.
Please and impacts are not at all affecting our 2021 guidance or numbers.
We.
I think the one big thing to say about wage and disease. These are being assets designed for a 10 plus year life. So you know a couple of weeks here a couple of weeks there are not impacting our long term view of their importance to.
And the marketplace and to our customer base and so we're going to we're going to be very focused on quality and making sure. We get the right assets up there on the right time horizon, and where we're still well within our expectations for how our customers are going to need those and what we're gonna do and with the assets and all that said I get.
And to the 2023 numbers with the laser capacity, maybe a little steeper ramp up and.
The start date to how we want to and and out 2022 going into 2023.
So we'll be continuing to work on everything we can on this side, including any place we can.
And do things on the ground or the second set of the constellation or how fast we bring assets online for customers and any pre work we can do on the ground to.
To make that the revenue flow.
Hit faster things like our three point on architecture as well feed into that for the for the direct access facilities.
Great. Thanks, Thanks very much.
Sure.
And your next question comes on the line of Robert Springer with Credit Suisse.
Yeah.
Hi, everybody.
Rob Dan.
Hey, there when I go back to your slide number five and you talked about this $25 billion.
Five year pipeline, how does that split between the two businesses and and within space infrastructure, how much of that is G O satellite.
And demand.
Yeah.
And Oh.
Love Your question drop is great and I'm not going to break it out specifically like on a biggs if you want to talk a little bit more about how that balances out I think what youre seeing generally across the businesses.
<unk> been growing again on the space infrastructure side, which is really good and our margins have been increasing and we've been winning new programs. So we got to keep winning and keep doing that but where we're on the right path on the Earth intelligence side.
Probably you know if you've looked at it would be growing even faster with the the types of things we see in front of US here, particularly as you know Brian <unk> moving its way forward.
The Legion constellation coming on line and continued growth on our services side of the business.
And I'm just trying to Atlanta.
Sure.
Yeah, I don't have and anything more specific rod on my fingertips on the split, but I think there's a healthy pipeline on both segments and keeping in mind that the.
Earth Intelligence segment is very high margin.
And the space infrastructure and nominally.
And in person or more.
So.
From a bottom line standpoint to compete a little more heavily heavily weighted to.
Two the Earth intelligence side, but I can't remember literally the split on the.
The pipeline from a revenue standpoint.
Okay, and then just Dan given which for icon and the additional capabilities that you have and and your ability to move into Leo here, How do you think about the market.
As it evolves here with all these new competitors.
And the imagery and elsewhere and your positioning.
Given your.
Incumbent status, if you will and and how you think about Max on a relative to the competition going forward.
Well you know we've been very privileged and pleased to be the leader and and the Earth observation as well as now the technologies the tie all that together and make sense of the data and propagate the data and.
Pull it into usable format, so that our customers can make decisions, we continue to run as hard and fast as we possibly can to solve customer missions and that that's our big focus.
And if we're taking care of our customers and thinking ahead on what their needs are and building, our constellations and our assets and our infrastructure and our.
But both secured and unsecured infrastructure to be able to meet their needs going forward.
That's our biggest focus on doing that and a cost effective and profitable way for shareholders.
And we watch very closely everything that everybody else is doing.
I think Jeff Bezos always talks about what day, one felt like we hope we act that way around Max are here, but the biggest thing and we're focused on is driving as fast and hard as we can to solve customer problems. We think that's the best way to create value for shareholders. We're aware of what everybody else is doing but where.
Not resting for a second in terms of how we're taking care of people and thinking about the future.
Okay, and just last one and this kind of ties to the first question on the 25 billion, but what's your latest progress on getting defense work at space infrastructure. As you tried to diversify sales there either directly or maybe through the primes.
Yeah, I think we're about where we expect to be we always said it was a three to five year journey, we're probably about through the first year of that.
Were winning are doing well on study phase contracts, helping I think shape are the right things going forward.
But who's got it and those have to materialize that into what we would like to see for expectations and larger and more substantial programs. We are very open to and and you know and in.
Certain instances bidding and teaming with.
The large price, where we offer a value capability for them, that's either better than something they have or something they don't have and their portfolio.
So we might win some of those primary might when some of those sub to one of the larger companies.
And the industry, we're very focused on what our key technologies and capabilities are I think.
For my presentation, and the hall effect thrusters or one of those types of things that we do really well robotics space robotics is another and we will be doing some demonstrations on orbit next.
Next year, and a half or so with what some of those capabilities look like and getting the Legion and the lesion capabilities as well as some of our modular architecture up and space and having that all space qualified I think will go a long way towards helping us win some of these programs over the next.
123, and four years.
Okay. Okay. Thank you very much yeah. Thank you Sir.
Your next question comes from the line of Michael <unk>.
With securities.
Hey, good evening guys. Thanks for taking the questions.
Maybe just on the you pulled out the <unk>.
Human lander.
System revenues, what's the latest there it looks like masses.
Think issued a stop work order I mean, it sounds like youre being conservative, but any views and in light of how that that protest or programs progressing.
Not a lot [laughter], we were not awarded the initial phase contracts as you know we were teamed with dianetics as a subset of them on that for the some of the sub systems and thermal and communications work look it's very interesting we're watching the developments closely and if there's a way to get back and obviously.
And we'll certainly take it but we're not forecasting and planning on at this point.
And but we are focused on is trying to figure out how to US is ably and are definitely as we can to replace those types of opportunities with other NASA or commercial or other government programs. We've got some really great teams that are not going to be working on that right now and have the ability to work on other things and we're driving efforts and those directions.
Got it got it it makes sense and then just back to the to the Worldview Legion.
And I know you said there were no real financial implications and anything we should be aware of to capex or cash.
And if these are.
You know bottlenecks and continue to and.
And Georgia.
As far as 2021.
And likely to have okay.
Impact and we just updated the guidance basically are confirming what we already had out there for capex. So.
No real change expected this year.
To live.
You know really.
It is.
At this point and time not for their forecasted so I think that what we've got the right numbers to expect first from this year.
As Dan mentioned and I think the harder thing to call is 'twenty two and.
The exact timing of revenue buildup and how that gets affected.
Leading up to hitting the run rate, leaving 22 going into 'twenty three.
Got it got it and then just last one for me do you have the actual bookings number in the quarter.
I refer you to the 10-Q I don't know have it at my fingertips here sorry.
Got it.
Thank you.
And your next question comes on the line of Elizabeth.
Okay.
And with Bank of America. Please go ahead.
Hi, good afternoon and.
Thanks.
Thinking about once you have the Legion launch and then constellation and the plans for the existing constellation and thoughts around extending life of those satellites are ending their service line.
What that might look like.
Yeah, well first off I mean, we've got a great constellation we have the world leading constellation right now will.
And we'll be augmenting and then advancing it with the Legion constellation so not to take anything away from our current assets, but they they they've been doing great business for us and as long as customers have a need for them, which we expect to exist far into the future because theres still going to be some of the very best assets available in the world and a world class, but as long as we can keep operating and using them for customer.
Service needs.
It needs, we'll continue doing so.
We're excited about leads and there was always some replacement capacity designed into that for Worldview, one and two and as they get later in life, but and as we sit here today. They they continuing to do great mission service for U S International Allies, and commercial customers and we continue to expect to be provided and that even as we bring on that day.
The new lease and capacity for them.
So they could go beyond 'twenty 'twenty to 2020 three I mean.
It could go ahead and that's possible, yes, we've got we've got assets.
And our.
Our public reports based on.
Analyses that are done and assessments of the.
The expected or potential life of those satellites.
But those are just engineering simulations.
And and what we've learned is assets and space are the longer they are there and continuing to operate the longer day.
Specced it to continue operating so we'll adjust and update those as we can but.
But for now the best numbers on that would be and the tables and our 10-K for what we got.
Alright, Thank you you.
You bet.
And your next question comes on line.
Chris quality.
With quality.
Quality analytics. Please go ahead.
Hey, Chris.
Thanks, guys.
I wanted to follow up and just clarify something that you had and the script around the timing of enhanced view follow on contracts and I understand that you expect another one year extension contract and end of August So during third quarter, and then the successor contract vehicle, which.
<unk> is now being called the commercial Youll layer gets awarded later in the year.
And at some point you get folded in.
I guess after that one year extension is that correct yes.
Yeah, I think what we were trying to.
Press and and maybe we weren't as artful as we wanted to be but.
The initial or earlier in the year and earlier last year. When we said that there you know with all the study work that had been done that the the new phases of this the the.
Earth or electro optical.
Commercial layer, we thought that might happen this summer.
And then that would.
Takeover and replace the existing enhanced food program.
We're not so sure that's going to be the case anymore, and I think with the administration change and a few other things going on and it's just moving maybe a little bit slower than what we thought it might have six months ago.
And if that if that.
And next version of what happens into the future is not done by September one and we would expect to be.
Renewed under the existing program the option pick up as we have been every year.
So 2010 timeframe and then.
At some point you know it could be September 2nd half day anytime in the fall it could be who knows how long it exactly takes the federal government and get that done.
But.
And then once that gets hammered out then we would transition the enhanced free program on to the new Contra.
Contract vehicles and contract terms of the <unk>.
Gotcha.
Okay. You also made mentioned and somewhere in the transcript.
A cryptic statement about working with partners to do payloads for customers can you unpack that for us.
Well yeah.
We've we've got really good capabilities across our business and some swim lanes.
And a just as an example, we're really running fast with the Legion architecture on one hand, and and as well as some modular architecture and the others.
We traditionally haven't done a lot of payload development ourselves, so where someone else has a better payload capability on the commercial side. We believe digital payloads will be more of a partner strategy for us going forward.
Or other types of phenomenology that could be available for either commercial or classified.
<unk> that we'll be working with the wider defense industrial base ecosystem.
To put those on orbit and have them serve customers.
I understand.
And on the human later I was a little bit surprised that that you guys put that in your forecast even before the award.
Was made and obviously it was a competitive work with three strong teams.
Is that.
Sort of traditionally how you would handle a large potential awards like this or was there something special about this that gave you unfounded and confidence.
Well I think we always have a certain level of realistic confidence and when we build up a forecast there's puts and takes and.
Probability of wins and probability of programs going forward and all those kind of things that we take that basket and mix of things and as we put the forecast together and and then.
And I give the guidance on the numbers, we do on this one.
In the earlier phases, I think we'd been great and very well by NASA in terms of.
Things, we've been doing we're a little surprised by some of the commentary and results and the final award letters and.
And as I think one of the other folks on the call mentioned there is some challenge is taking place on.
On that front, but it was it was one that we had a reasonable degree of confidence and and so included in our forecast for those reasons.
Now that we've been knocked out we're adjusting and modifying for it.
And just on the upside yes, yes, Yeah go ahead.
And just add in that the original plan was for a down select to two of the three competitors.
So.
That of course increases our confidence level, while we were confident that we'd be one of the two down select.
Obviously, that's not the way and NASA has gone on at this point, but that was a part of our analysis only on Delta plan.
I understand.
<unk> on getting Sirius XM eight out the door, how is Jupiter three moving towards the door and are there any of those supply chain issues that you've previously identified that would impact that program.
Yeah, we continue to work very very hard on the Jupiter three program and no how critical that is for our customer and their business plans moving forward.
We don't believe there are any development risks associated with the program anymore.
And there is one particular vendor that's the bottleneck on one particular set of parts cross border and we are working with them and they've been a little bit hampered by COVID-19 in terms of how many people they could put into two new stations and do other things to keep the pipeline moving forward, but.
The products are delivering a they're not delivering at the pace we had.
And we originally expected, but things are on track now.
And we.
We did.
Didn't get any additional delays are related to the Jupiter three program. This quarter, we still gotta make it all the way through testing and everything to.
And to deliver the customer and the satellite they expect.
We're we're driving forward, it's really about execution at this point and we are.
And highly focused on on getting this customer the satellites so that they can complete their business operations.
Got it and final question the first Airbus Neo satellite launched and I should've written it down, but I think somewhere in the press release they are.
Advertise the fact that they had.
Free booked some certain amount of commercial revenues associated with that new satellite and its capability.
Which brings up the question are you getting any further along and customer traction and signing contracts and pre commitments.
We've made some great progress on our on our and the four daff architectures to the three point O architecture, specifically designed to incorporate the Legion.
Work, so customers are spending money too.
Get that capability online I think the the Dx rating on the program and as a as another good indicator for the importance of those missions and we're having lots of good traction at this point so.
We are.
Get it up.
As timely as we can to start getting the revenue and serving the customer needs that are expected on the constellation.
Great. Thank you.
Thanks, Chris.
And your next question and as a follow up from Tim James with TD Securities.
And thanks, I just wanted to follow up quickly on the <unk>.
And.
Dan you were commenting about if theres a bit of slippage here it implies a steeper ramp to kind of get the revenue.
And that's included in your 2023 targets.
Do you mean that it could be more challenging to get there or just that it will be a quicker ramp and and if you know if we think about what is required.
To get to 23 is it more of kind of getting customers signed up or is it more of a kind of operational challenge on on your part.
Good question, Tim I think the way I would characterize it as we fully still expect to be in that position a year and a half from now where we want to be but with the delays and where we are and the program.
With a couple of these issues that I highlighted and in the remarks, Honeywell and Raytheon.
The ramp is going to be a little bit steeper.
Now anytime you've got a little bit of a steeper ramp that's a little bit more of a challenge I don't know it's hard to guess at this point exactly.
How much more of a challenge that presents us, but it does mean, we will be focused on getting as much done as we can possibly now on the ground and then how fast we commission and the satellites and start delivering revenue and those kinds of things. So that the customers can get their expected service from the service levels from them.
There are a few customers a handful of them that are whose procurement agencies won't allow them to contract until they can see the data from the assets and so.
And it pushes the signing of those customers.
And it further.
If you've got a delay and the satellite program.
Okay. That's helpful. Thanks, Tim.
Sure.
Okay, operator, I think we.
<unk>.
And the queue I'd like to thank you as well as.
And those that dialed in for the call.
Today.
<unk>.
And Biggs.
I think we're all set for net one morbid everybody goodbye until until next quarter, certainly look forward to seeing many of you.
And the weeks and between.
On zoom and.
Thanks again operator.
This concludes today's conference call and thank you for your participation you may now disconnect.
And then.
[music].
Hum.
Yes.
[music].
Yeah.
And then.
[music].