Q4 2021 MDA Ltd Earnings Call
Good morning, ladies and gentlemen, and welcome to M. D. As conference call and webcast note that this call is being recorded on March 17, 2022 at 830, a M eastern time.
Following the presentation, we will conduct a question and answer session instructions will be provided at that time for you to queue up for questions. If anyone has difficulties hearing the conference. Please press star followed by zero for operator assistance at any time and I'd like to turn the conference over to Sabrina Zahawi Senior director of Investor Relations.
At M D.
Thank you operator, good morning, and welcome to M. D. As Q4 2021 earnings call My Greeley, our CEO and Vito Carmony, our CFO will lead todays call and share some prepared remarks before taking your questions before.
Before we begin I would like to remind you that today's call will include estimates and other forward looking information, which may differ from actual results. Please review the cautionary language in today's press release and public filings regarding various factors assumptions and risks that could cause actual results to differ.
In addition, during this call we will refer to certain non <unk> financial measures. Although we believe these measures provide useful supplemental information about our financial performance. These measures do not have any standardized meaning under ifr us and our approach in calculating these measures may differ from that of other issuers and therefore may not be.
Comparable please see the company's quarterly reports and other public filings for more information about these measures, including reconciliations to the nearest ifr S measures and with that it's my pleasure to turn the call over to Mike.
Good morning, Thank you Sherry.
Good morning, and thank you to everyone for joining us today to discuss our fourth quarter results and our full year 2021 financial results.
We're very pleased with the results and the progress we have made over the last year, including visible execution of our strategy.
Across all of our businesses.
And satellite systems, we are investing in new technologies and capabilities to accelerate our transition from analog to digital payloads and building up our high volume satellite manufacturing capacity to strengthen our position.
More of lower orbit or Leo constellation opportunities come to the market.
And robotics in space operations, we're leveraging our global leadership in space Robotics innovation and long history of success with Canada to win follow on space Agency work and engage with a full slate of new and exciting commercial opportunities as they emerge to provide both proven technology solutions and on orbit operational services.
And then our Geo intelligence business, we continue to see strong demand for our Earth observation data and analytics and are advancing work on Mda's next generation Earth observation constellation chorus, which will provide even greater imaging capabilities and actionable insights for our customers.
Turning to recent developments, let me begin by highlighting two awards post quarter that demonstrate the strength of our pipeline.
One was phase b of the Canadarm III program and the other a new contract with Globalstar, and which MDA will serve as prime contractor for the design manufacture Assembly and test of 17 satellites with an option for nine more to enhance global stars Leo constellation.
These awards build on our robust backlog and order bookings in 2021 with both metrics up over 50% versus 2020 levels, providing us with good revenue visibility and a strong business Foundation for 2022.
To support the anticipated growth MTA successfully hired 670 people last year and deployed $95 million in capital expenditures, which included research and development spending on technologies related to chorus and other growth initiatives.
And just last week, we announced our new global headquarters and space Robotics Centre of Excellence, which will include a new mission control center capability for government and commercial customers with.
With the market for robotics rapidly maturing our timing could not be better to bring a new suite of commercial robotic products to market combined with new control centers to provide on orbit operational services.
For this morning's call I'll quickly step through the financial highlights for the year in the quarter and then give you a view on the industry and update on MDA as three business areas and then pass the Davita for a deep dive on the financials for the quarter and the year.
Starting with our full year results backlog at year end stood at $864 million.
Representing an impressive 54% increase versus 2020 levels.
<unk> delivered revenues of $477 million up 16% year over year.
Our adjusted EBITDA increased to $137 million and we generated an adjusted EBITDA margin of 29%.
For the fourth quarter revenues were up 15% to $116 million adjusted EBITDA was $27 million and adjusted EBITDA margin was 23%.
Peter will provide more context for mdas underlying performance in his remarks.
We also ended the year with a healthy financial position and a strong balance sheet, which offers us ample financial flexibility to run the business and invest in our growth initiatives.
In short 2021 was a year of strong growth for MDA and I am proud of how the team executed against a challenging macro backdrop.
We continue to fulfill our commitments to customers, while taking care of our employees MBA is most critical resource.
Next I'd like to update you on developments within the broader space market and the opportunity we see for MDA as we look ahead.
2021 marked a record year for investment in the space industry government spending on space reached $92 billion up 8% year over year with an increased share of budget allocated to civilians space programs.
Gration of space based capability as a routine component of defense and military budgets also continued to increase driven by geopolitical tensions and demand for space based surveillance and detection systems.
The unique and valuable role space based technologies and capabilities provide for military surveillance and detection is clearly evident in Ukraine, where mdas Earth observation and synthetic aperture radar assets are providing important intelligence I will speak to that in greater detail in a moment.
We also saw a $14 $5 billion invested in space infrastructure companies last year, a 50% increase compared to 2020 and another clear indicator that we are in the early days of a strong and growing commercial space sector. This is the fourth year in a row that investment in commercial space has doubled.
Our positive and encouraging developments that bode well for MTA and our future opportunity set.
Looking at the Big picture market research firm Euro consult estimates the size of the global space economy today at approximately $370 billion U S. This.
This is projected to grow to over one trillion by 2020, according to the U S chamber of Commerce.
We also saw a record number of global launches last year with the full figure of 146 setting an all time new annual record.
And the number of satellites launched into space up an impressive 45% year over year.
Additionally, as the global space market matures, we've seen an increasing number of new national government programs designed to gain a strong foothold in this space economy with countries such as Canada. The U S. France, U K, Australia, New Zealand and others across the European Union investing in space startups and creating.
Early stage contracting opportunities.
We also saw the recent launch of space, Canada last year, a new industry Association created a way raise awareness of space as a strategic market opportunity and meaningful economic driver. We view this as a positive sign the candidates space industry is banding together to ensure that we are ready to seize the opportunity that the growing space sector.
Resents MDA is proud to be a founding member of space, Canada. This New Association.
Taking a tour around the rest of the world, we see public and commercial activity is picking up momentum Israel has signed on to the Rd, Mr courts, which aligns nations on a common set of principles for space exploration.
The U K, where MDA as a small but rapidly growing presence as published both the national space strategy and a defense based strategy within the past six months and announced new funding initiatives for space, India, and Australia, prioritize human spaceflight and their space development strategies and.
And we saw the EU initiated 1 billion fund to support startups in the space sector and attract private investors into this key sector.
All of this activity is indicative of near and long term opportunity for MTA and our ability to create value for our stakeholders.
I'll take a few minutes now and turn to our three business areas.
And satellite systems, we are seeing good activity with our teams responding to multiple requests for communications satellite solutions and for a growing number of commercial constellation projects, particularly in the lowest orbit or Leo segment of the market.
As I mentioned off the top in February we announced an award from Globalstar, which selected MDA is the prime contractor to enhance its Leo constellation. This.
This is an important award for MDA, reflecting our strategy to expand our offerings and move up the value chain.
It is also a testament to our team's ability to compete and win against established satellite prime contractors to innovate and provide advanced payload capabilities and systems engineering.
And to provide high volume manufacturing to meet increasingly sophisticated customer needs.
Regarding the Telesat Lightspeed program, we are in active discussions with tell us that its management team and our 2022 outlook assumes a contract award in the first half of the year as we said previously.
MBA is in a position.
We received the green light from the customer.
And our intelligence business, we are seeing good demand for Earth observation offerings as customers are looking for value add solutions from data providers recall that in addition to providing data from our own commercial satellite radar side too as well as third party satellites, we offer a rich suite of data analytics that provide actionable insights for our customers.
During the quarter, we made progress on our next generation first observation mission chorus.
Of course, we will include C band and X men synthetic aperture radar or SAR satellites. This approach will provide the most extensive radar imaging capacity available on the market.
<unk> enhances existing services and enables new applications not feasible with existing SAR satellites.
We have entered into an agreement with eisai to provide an X band SAR spacecraft or of course, we are encouraged by the volume of inbound inquiries from customers interested in acquiring chorus data and analytics.
The Geo intelligence business also houses, our surveillance and detection systems, including those on the Canadian surface combatant program for CSC.
CSC program is progressing in line with our expectations and a number of awards were added to backlog in 2021.
Work on the requirements analysis phase of the program is advancing and MDA continues to finalize a number of additional electronic warfare suite sensor contracts.
And our robotics in space operations business as previously indicated we continue to stream songs, we continue to see strong signs of maturity in the commercial market.
We recently shared two exciting announcements related to our robotics in space operations business as.
As mentioned the first is the canadarm three phase b contract, which carried a value of approximately $270 million.
The new contract will see MDA, completing the preliminary design of canadarm threes robotic system.
It will be used to board the NASA led lunar gateway a major multi year international collaboration to establish a sustainable space station in lunar orbit to support human and robotic missions to the surface of the moon.
This builds on MDA has completed phase <unk> and subsequent phase I of the program with work on this space expected to start immediately.
Approximately a year and a half.
Our work on the <unk> III program is also instrumental to allowing us to leverage innovative technologies for new commercial markets.
The second announcement relates to our new facility in Brampton that will have advanced robotics manufacturing capabilities and emission control center.
The facility is another important foundational marker.
Supports the company's ongoing growth and lays the groundwork for long term success and the evolving space robotics market.
Modern 200000 square foot facility currently under construction will be home to our growing team and further unlock the potential of our world class engineering and space mission expertise, while allowing us to bring to market a full suite of innovative space robotics products that leverage canadarm three technology.
We are also engaged with multiple parties to provide advanced sensors to their spacecraft and lunar landing systems as well as to provide robotics to space stations and space tourism and on orbit servicing space craft.
In Q4, we saw a new activity for our Rover teams with the award of a contract by the Canadian Space Agency to undertake the initial design study for our Canadian Lunar Rover mission to the Moon.
Turning to operations.
We continue to take strategic steps to scale the business we.
We successfully hired and onboard is 670 people last year and expect to add a few hundred more this year as programs ramp up the.
The new Brampton HQ is also another compelling recruiting tool for us as we compete for the best and the brightest.
With respect to COVID-19, we started our return to the office in September using a hybrid workplace model and in Q4, we introduced a mandatory vaccination policy, which was well received by employees and has been helpful. In keeping COVID-19 rates low at MDA.
We're also keeping a close eye on our supply chain for potential business disruptions.
We have taken several proactive measures such as designing around known shortages or finding alternatives that are more readily available ordering materials as early as possible and building up inventory for some components where necessary.
For new programs, we are ensuring that our supply chain organization has full visibility early in the process to ensure to ensure that orders are placed promptly and monitor constantly to mitigate delay risks.
I want to spend a few minutes to come back to the tragic situation that we all see in Ukraine.
As a global provider of satellite imagery MDA has secured a special authorization from the Canadian government to collect radar satellite imagery over restricted areas of Ukraine.
And we just kept it by captured by NDA SAR technology, which is unique for its ability to see through all weather and cloud conditions are being merged and analyze with other sources of imagery from commercial Earth observation companies to develop comprehensive near real time intelligent reports for Ukrainian government officials.
We're honored that we've been able to use our radar satellite capabilities to contribute to these international efforts and appreciate the fact that the opportunities for space based technologies to contribute to geopolitical conflict resolution will increase in importance in the future as a result.
The outpouring of support from MDA employees customers and our global community has been very encouraging.
Our thoughts are with the people of Ukraine. During this very difficult time.
To recap I am very proud of what the team has accomplished in 2021 and the opportunities that lie ahead, this year and beyond to build tremendous value.
We're executing well on our strategy.
<unk> growing our backlog and expanding our leadership in core markets. We're doing all of this while maintaining strong profitability and a healthy financial position to help us fund our growth initiatives.
With that I'll hand, it over to Vito to walk us through the detailed financials.
Thank you, Mike and good morning, everyone I'm delighted to be with you. This morning to talk about our Q4 and our full year 2021 financial results.
Just a quick reminder, the company commenced operations through the sale of the northern private capital on April eight 2020 and.
And as such on a full year basis, the consolidated financial statements other than the balance sheet continue to include comparative information for the period from April eight 2020 to December 31 2020.
We've continued to provide constructive 2020 carve out results in all of our commentary is for the full comparative period.
Let's now dig into our Q4 results and our full year results overall were pleased with our Q4 financial results first off the backlog as of December 31, 2021 was $864 3 million.
Solid 54% increase compared to the year end 2000, 22020 levels, reflecting incremental awards across our business.
Our 2022 revenue outlook that I'll talk about in a few minutes reflects continued robust build of this backlog throughout 2022.
Total revenues for the fourth quarter of 2021 were $115 5 million. This represents a 15% increase over prior year levels and on a full year basis total revenues are $476 9 million an increase of 16% over the full year 2020.
Revenues in our <unk> intelligence business increased $5 2 million or 11% to $52 8 million in Q4 compared to $47 6 million in the fourth quarter of 2020.
For the full year jail intelligence increased revenues from $184 5 million in 2020 to $190 7 million, representing a $6 2 million or 3% increase.
While in Q4, we continued to see growth in sales of satellite imagery and analytics services and growth from increased volume on CSC on a full year basis was partially offset by the completion of various programs.
In robotics in space operations revenue continued to show positive growth in Q4.
Revenues were $29 9 million in Q4 of 2021, representing $4 2 million or 16, 3% increase versus Q4 of 2020.
On a full year basis robotics in space operations revenue or $132 9 million showing growth of 15% when compared to the full year 2020.
A large proportion of this growth is driven by increased activity on the Canada arm three program.
Satellite systems continued once again to deliver strong revenue growth on both a quarter and a full year basis in Q4 satellite systems generated revenue of $32 8 million, which is $5 9 million or 22% increase over Q4 of 2020.
On a full year basis satellite systems delivered growth of $41 6 million or 37% over full year 2020 with revenues of $153 3 million.
This growth is attributable to higher volume stemming from New program awards, the restart of the Onewest program in the first half of 2021.
And improved program performance over the same period in 2020.
Let's move over to gross profit results and as a reminder, gross profit represents our revenue less cost of revenue, which includes materials labor overhead.
Fred credits and depreciation.
For Q4, our gross profit was 45 4 million versus $28 6 million in Q4 of 2020.
For the quarter. This translated into a gross margin of 39% compared to 29% of Q4 2020.
The full year results for gross profit of $167 $8 million with a 35% gross margin versus a $117 3 million in Q4 of 2020 and a 29% gross margin.
Both the quarter and the full year improvements over prior year are due to increased volume improved.
Improved program performance over 2020 and increased investment tax credits are in both in the quarter and full year.
While we're pleased with this margin performance on both the quarter and the full year, we do anticipate the mix of programs in 2022 to cause a slight drop in gross margins as we make our way throughout the year.
Operating expenses Q4, operating expenses were $43 3 million compared to $41 million in Q4 of 2020.
On a full year basis, our operating expenses were $149 2 million compared to $122 1 million for the 12 month comparative period.
This increase was primarily driven to an additional quarter of amortization of intangible assets, resulting from the April 20th acquisition of MBA by Northern private capital and increased share based compensation expenses. Following the introduction of the new stock option plan, which commenced with commencement of grants awarded in Q.
For 2020.
Another contributor to the growth in Q4, and the full year results and operating expenses as an increase in R&D expense due to the heightened activity on cores and other proprietary technology programs.
Adjusted EBITDA in the quarter.
In Q4, excuse me was $26 8 million. This is a drop of $3 3 million from Q4 2020 levels. This reduction is reflective of an increase in R&D spend due to course and lower Canada wage subsidy program income on a year over year basis, offset substantially by stronger gross profit and <unk>.
Q4 of 2021, we recorded $800000 in sous income as compared to $9 2 million in the same quarter of 2020.
On a full year basis, adjusted EBITDA was $137 1 million up from 2020 levels of $126 8 million.
Adjusted EBITDA as a percentage of revenue for the full year was 28, 7%, which.
Which is down slightly when compared to full year 2020 performance of 38, 38%.
However, and importantly, excluding the impact of <unk>.
We continue to see a meaningful increase in our EBITDA margin with full year 2021, EBITDA margin of 23, 5% an increase from the 27% level. We achieved in 2020 again driven by strong improvement in our operating results through 2021.
In terms of capital spend Q4 capital spend continues to show a steady ramp of investment from the previous quarter aggregating to $37 million on a full year basis, our capital spend was $94 6 million.
And this continue this reflects the continued planned ramp up of our Capex expenditure investments supporting our key strategic growth initiatives, including our <unk> program, which is our next generation commercial <unk> constellation and tell us at light speed the Telesat Leo constellation program.
We expect this level of spend to continue as we advance these and other important growth initiatives.
We ended the year with a strong balance sheet and minimal net debt of $61 1 million $418 million of available liquidity and our net debt net debt to adjusted EBITDA ratio of 0.4 times.
In closing we're pleased with our.
Financial performance, we continue to see strong results across our key metrics steady improvement quarter over quarter and are continuing to be focused on successful execution of both our base and our growth programs.
Let me turn out to our financial outlook and our growth strategies.
We're executing on specific growth strategies, and leveraging our competitive strengths to capitalize on the fastest growing areas of the space economy to maximize our growth opportunities, we're investing in R&D manufacturing product development and in scaling the business. Our strategic initiatives include investing in developing our next generation <unk>.
Earth observation missions course that will provide the broadest synthetic aperture radar area of coverage on the market with cloud enabled ground infrastructure to provide best in class download times.
Expanding our high volume production capacity by investing in new satellite manufacturing facilities and modernizing existing facilities with state of the art digital capability.
Further developing our digital satellite technologies to support the transition from analog to digital payloads for both Leo and Geo satellites by providing customized digital payload solutions for specific applications, including Iot <unk> backhaul in rural broadband this will enable us to offer critical solutions.
The satellite manufacturers that lack digital payload capabilities.
Investing to maintain our global leadership in space Robotics, and exploration mission solutions, and leveraging our technologies and capabilities for emerging commercial on orbit servicing applications.
Evaluating acquisition opportunities that can complement our organic growth strategy and enhance our offering and lastly, but certainly not least continuing to invest to attract and recruit top talent to drive our future growth, including hiring more than 670, new employees in 2021.
Full year 2021 was definitely a pivotal and exciting year for MDA.
In addition to the Q4 successes that Mike has covered we successfully completed our IPO in April and saw strong growth across all three of our business areas.
NGL intelligence some of the awards to highlight include a three year contract under the dark vessel detection program. The initial $60 million CSC contract, which was followed by a series of additional orders and a contract by the Canadian Space Agency to provide satellite flight operations and data management services for the Csa's Earth observation in space.
Situational awareness satellite missions valued at more than $35 million over a three year period with an option to renew for two additional years and.
In robotics in space operations, we continue to receive awards for sensors to support flight to the lunar surface with MTA sensor solutions down selected for multiple learners emissions, we were awarded a $35 million contract in Canada and three from the Canadian Space Agency for the design of the robotic interfaces and post quarter.
We announced MTA has been awarded phase B of Catherine <unk>, III, which is valued at $269 million.
And satellite systems, we were selected by tell us that to provide a direct radiating array technology on the Telesat Lightspeed program and subsequent to year end in February of 2022, we were selected as the prime contract for Global stars, New Leo satellites and award valued at more than $400 million.
Our satellites built by MDA will integrate with globalstar as existing constellation insurance service continuity for globalstar customers.
Turning to our 2022 financial outlook consistent with the outlook that we provided in Q3, we expect our full year revenues to be in the $750 million to $800 million range, representing robust year over year growth of approximately 55% to 65%.
And we expect full year adjusted EBITDA to be $140 million to $160 million. Our forecasts are predicated on continued backlog growth in the first half of 2022.
Followed by a ramp up in revenues in the second half.
We expect 2022 Q1 revenues to be in line with first quarter 2021 levels with revenue starting to inflect positively in quarter, two and accelerating over the balance of the year.
We expect our capital expenditures in 2022 to be $180 million to $220 million.
Driven primarily of growth investments to support of course, and the previously outlined growth initiatives across the three business areas.
We believe our backlog and recent awards announced in the first quarter of 2022, including global search Leo.
Satellite constellation Canadarm, three phase B provide us with good revenue visibility and solid business Foundation for 2022 and beyond.
We continually monitor backlog and contract award timing and assess their impact on financial projections.
It continues to be incredibly exciting time for all of us at MDA as we embark on this transformational year that is building backlog that is building block to increase long term value creation, Mike with that I'll turn it back to you. Okay. Thank you.
With that we'll open it up to questions. Thank you, Sir ladies and gentlemen, if you would like to ask a question. Please press star followed by one on your Touchtone phone you will then hear a threefold prompt acknowledging your request and if you would like to withdraw from the question queue. Please press star followed by two and if you're using a speaker phone, we do ask that.
Please lift the handset before pressing any Keith. Please go ahead and press Star one now if you have a question.
And your first question will be from Paul steep Scotia capital.
Okay, great. Good morning, Vito could you maybe just.
Walk us through how you're thinking about the capex build through 'twenty, two and then maybe beyond four major growth initiatives. Thanks.
Yeah, Paul Thank you for the question and as I've alluded to in my prepared remarks, obviously, it's an exciting time when our growth Capex is really in support of <unk>.
Our capex expenditures as largely in support of growth initiatives, obviously, a privilege to be in that situation with a focus on value creation and.
An appropriate hurdle rate from a return on investment perspective, those are very very important initiatives for us first off I'll say in regards to the three to four year envelope back to the IPO in the prospectus that we issued we still expect our growth capex to be in that 6% to $700 million area. So no changes there Paul from a problem that <unk>.
<unk> that we provided we expect that all to be substantially funded through.
Cash from operations. So again, we're unique situation, where we've got strong cash generations, particularly with the growing revenue profile that allows us to essentially fund the growth capex from cash from operations.
In terms of.
Closer in here 2022, obviously, it's the first time, we're providing annual guidance and that was $180 million to $220 million.
You see the last couple of quarters in 2021, just under the $40 million Mark and we'll continue to see that ramp up I was given first half second half sort of projections on 2022, and maybe put it at 40% first half 60%.
Second half as we make our way through 2022 on a quarterly basis.
Great. Thanks, and then just on any supply chain impacts Mike you commented briefly about light speed that you were still working with them in the MDA any updates overall I think for the business in terms of how we should be thinking about supply chain impacting the business and then I got one last quick follow up.
Thanks.
Yeah sure I think on supply chain issues. They continue to be managed to have a well across the business. Obviously, there are supply chain issues globally.
And that affects everybody for us.
We are managing that while I believe at the team level as I mentioned in my remarks.
We look at the technical design of projects in terms of design alternatives to make sure that we have multiple options for critical technologies. In addition, the programs are making sure that they get out ahead of any potential <unk>.
<unk> and supply chain activity.
So you'll be able to increase the volume of long lead items that are ordered early in programs to make sure that they are.
Accommodated for in the in the execution phase I.
I think we're also fortunate that across our portfolio we have.
Opportunities to make sure that we're quoting on stuff in the sort of two or three year chunks and so we're able to.
Accommodate.
Fluctuations as they occur.
<unk> constantly updated quote in bidding processes. So all of those tools are being used to manage those fluctuations.
Great last one for me is just on hiring timing Vito can you can you just remind US you added 670 over 2400 staff at the end of Q4.
Is the Q4 number indicative of the run rate for all of those staff and then you talked about a few hundred more this year should we think that those are front end loaded or is there any other timing thoughts around that thanks.
So I think that the this is Mike sorry, the I think that the from a head count perspective, we certainly did have.
A higher pace of hiring in 2021.
In response to the flow of the actual programs themselves.
As you indicated the hiring will continue and as we indicated through 2022, it'll be it'll be pretty steady.
There has been a really good performance very much in line with our plan and expectations in terms of the hiring pace. So far in the first part of the year.
It'll be front end loaded, but it certainly will continue through the year.
Thank you.
Thank you next question will be from Ken Herbert at RBC capital markets.
Good morning, Mike Good morning, listen Thank you, Steve <unk> on for Ken Herbert do you mind bookings through your expectations for contract wins in the first half of 2022.
Contract wins in the first half of 'twenty. Two we'll certainly we were very excited about the contracts that we have won and announced so far it's been a very.
Very robust start to the year.
With the with the award of the Globalstar Leo constellation that.
It's been the.
Critical to us in terms of execution on our strategy and our satellite systems business area and our move to a prime contractor for for full satellite design and manufacturing. So thats occurred and then of course, Canada arm three.
Which is the large order in the robotics in space operations business to ensure that we have the next large phase of funding for the next year and a half for the Canadarm three program that allows us to continue to advance the design of those projects further engage the supply chain while at the same time conducting the detailed planning that's necessary for the follow on Phase to act.
<unk> developed and launched those technologies.
Over the next several years.
So those are those are ongoing there are.
Several others that will occur in each of those two business areas that I would expect in the first half of the year. We want of course named him or anything but there are we would expect some additional capability and then as previously mentioned, we expect our intelligence lightspeed in the first half of the year.
That program to kick into a higher gear and we're certainly ready to perform on that.
The minute that the green flag is lifted.
Perfect.
One question if I may can you kind of discuss the margin profile of those contract wins, a global store in Canada arm three how much of the 2022 EBITDA is going to be.
Did you come from both of those.
Yes, I wouldn't have a number in terms of the percentage, but in terms of their actual EBITDA margins. It's all in line with the expectations that we set in terms of us continuing to operate through the next several years and that sort of 18% to 20% EBITDA range.
All fit into the portfolio and ensure that we maintain that expectation.
Perfect. Thank you.
Thank you.
Once again as a reminder, ladies and gentlemen, if you would like to ask a question. Please slowly press star followed by one of your Touchtone phone.
And your next question will be from Shadow special pools at RBC capital markets. Please go ahead.
That's actually BMO capital markets.
The spending.
Hey, just wondering on the supply chain discussion.
<unk> related to the Ukraine conflict.
And your perspective of obviously, Russia as a supplier of rocket engines and lots of capacity in one way we are slated to launch obviously, Russia. So.
And in particular to that perspective.
Yeah on our projects no.
Nothing yet obviously, the things youre talking about from.
From a global market perspective, there is all kinds of rumblings you are correct that some people had planned launches on on Russian launch vehicles. Some of those have changed such as the one Web example that youre using.
Some of the Russian vehicles coming out of French Guiana like that's been shut down. So there has been there's been some of those shifts in activity.
I think that so as a result people will be rescheduling and looking for alternative plans you would expect that the north American launch community would pick up some additional orders and request and the likes so there'll be there'll be some shifting around in the market to keep everything humming for.
Individually, though on our projects, we have not seen any specific impacts of those changes.
Okay great.
And then in terms of the CTO intelligence segments, I mean, I imagine the concept is driving increased demand for imagery. So how do we think about the potential implications against both short term and long term.
At the moment that you are running at full capacity on radar SaaS, you or is there room for incremental revenue.
And then from a longer term perspective, how much of complex maybe accelerate some opportunities.
<unk>.
Yeah. So we are seeing obviously increased interest in imagery as I mentioned from the Ukraine conflict.
Radar side too has lots of capacity. So we're not we're not out of any kind of limits or anything like that.
So that does represent.
Any evolving.
Opportunity as we go through the year, it's very new obviously, it's only a couple of weeks old. So it's all emerging as our existing <unk>.
Oh channels, both government and commercial.
Our requesting sort of an increased pace of our requested in that region.
Long term a couple of things are starting to emerge in the conversation that we see in the media certainly the value of space based Earth observation as being really appreciated.
The value of radar based Earth observation is certainly picking up opinion conversation that you will see in the media and the like.
Radar based satellites in terms of their ability to.
See-through clouds, <unk> hundred IC throw all weather conditions, because it's an active sensor it's not taking a picture it's actually pinging the earth and receiving a response you can see through that whether in day and night. So the importance of that I think as.
As a contribution to information products is just kind of generally increasing as a result of this situation. So we would expect increased dialogues hopefully in the future as people are realizing those benefits.
Great and then finally I thought the globalstar win was interesting given that you were selected as the prime rather than as a sub could.
Could you maybe speak to.
What drove your selection.
Is that your stream yes.
Tennis side.
Was it just overall prior experience and Leo just yet.
What kind of drove that one.
It is exciting we agree.
It's a it's a great success for the team in the company to be to be recognized by our proven satellite operator like Globalstar RMB selected is prime for the next generation of satellites for their constellation.
For us it's a it's a reflection of our strategy continuing to work and execute.
In the marketplace.
In terms of our capability and us.
Really doing well and global competition to be able to receive this award is based on a number of things one is our engineering and design capability.
As has always been expanding and growing but it's very proven and and then as very collaborative customers regularly comment on.
Being able to work well with our teams to be able to design next generation technology solutions, our ability to then deliver on those designs has also been continually expanding over time so.
We've been involved in for Leo constellation, So far as sub system manufacturers and continued to increase with support of local governments, our advanced manufacturing capabilities.
And so we're set up well to be able to convert.
Our design engineers that we were able to demonstrate in this particular project.
Into advanced manufacturing capabilities. The other exciting thing for me about this is the opportunity for us to work as a very proven space company over decades with some of the new entrants in the space market over the next several years each of our business areas, we're seeing the opportunities and mix our proven expertise with.
Our new emerging provider in the market to create novel and exciting capabilities in the market. So in this case with Globalstar our collaboration with rocket lab is a is an excellent opportunity for us to be able to demonstrate our ability to.
To be that bridge between to bring customers that.
Want the latest and greatest and our ability to engage the new space economy mixed with our experience to deliver novel solutions in a timely fashion to the market.
Great. Thanks, Mike I'll pass the line.
Thanks Thanos.
Next question will be from Christine Legwork at Morgan Stanley .
Hey, good morning, Mike and Vito.
<unk> following up okay.
Peter following up on your $600 million to $700 million in Capex for the business, we expect to fund our growth and you're expecting on all of this in operating cash.
Yes.
Two you're expecting capex to keep adjusted EBITDA and you know you've got net debt of about $61 million like when do you expect EBIT start exceeding capex.
How much buffer do you have built into your expectations to find all this growth.
Operating cash and then a follow up to that sorry for this multi part question, but if you do.
Do we need to raise capital how do you think about debt versus equity.
[laughter] well Theres a lot there.
Definitely at this point, there's no there's no there's no need for us at all to issue.
Any.
<unk> equity definitely in the short term.
I go back to our starting <unk>.
Balance sheet position here at the end of the year, just obviously essentially minimal net debt and Youre absolutely right as we move through 2022.
I think back to the quarterly sort of cadence that you are looking at as we move through into the back half of 2022, you'll start to see.
EBITDA to net debt metrics again fall into a first class sort of.
Range.
So we see no stress at all on the balance sheet as we make our way through 'twenty.
<unk> 2022.
As the as the EBITDA performance and as the revenue profile and the operating cash flow picks up in the back half of the year and into 2023, and Youll see ample operating cash flow being able to fund the capital expenditures.
In terms of in terms of capital structure, perhaps and whatnot, obviously, I mean, I think that will evolve as we move forward.
Start to see US here in Q2 look at the term.
Debt that we have it and we'll get into a position where we can optimize some of our interest annual interest cost by taking advantage of our strong balance sheet and operating cash flow position.
Thanks, Vito and then Mike if I could follow up the globalstar contracts, a pretty big deal for you guys, especially as your prime.
There are some discussions in whole globalstar has ultimate customer is but for presumably the large tech company. If you start thinking about other companies like globalstar the ultimate customer.
Looking about building their own constellations as well.
<unk>.
How quickly could that turnaround for you and do you see yourself.
Brian position for additional contracts like that.
Yes, we've always said over the last sort of year and a half that we've got this strong pipeline and satellite systems around Leo constellations.
And that Leo constellation pipeline.
Just a different types of different types of activities.
Some of them are folks that have a great business model and they are raising capital and theyre going to develop a constellation and deliver service and they are talking to us and other cases.
They come from our existing operators of constellations that want to replace or expand and in other cases. There is large corporations that are starting to see that space based networks are.
We're going to be a useful tool for them for communications or internet of things.
Or other purposes in the market and so that's that that is the characterization of that pipeline. It remains solid it continues to advance and progress and those opportunities are there within that pipeline, there's a solid mix of opportunities certainly.
The work share for us is inside each of those opportunities is larger than it has been in the past.
Full payload opportunities, which would include payloads and antennas for constellations are there opportunities to be prime are there as well and so there are a number of those so our future is strong in this regard.
We're able to continue to work a solid pipeline of Leo constellations with very meaty workshop for us.
Within each of those.
Great. Thanks, Mike and if I could follow up one more question I mean, you talked about supply chain a lot, but can you provide more specific details on exactly what kind of issues you're experiencing is it more on the raw material side is it sub component is it more just cross border activity like where are you seeing.
Some of those issues and any specifics would be helpful. As well in terms of how you're mitigating the risk.
Yes, we don't have like.
A particular technology or problem area in terms of like a specific type of part like in general like the rest of the economy electronic components are a little bit more challenging in the market.
Which you will see and hear I'm sure on all your earnings calls most of the impacts to us tend to be around schedule, making sure that the.
The quotes that were getting have accurate schedules, making sure that we are paying attention to suppliers capability to deliver on schedule <unk>.
During early if we need to ordering upfront if we need to.
And ensuring that our quotes and expectations, we're giving our customers are accommodating those schedule shifts.
That tends to be the most important thing that we're dealing with.
Great. Thank you guys.
Thanks, Christine Thanks Christine.
Thank you.
And at this time, Mr. Green Lee we have no further questions. Please proceed.
Okay, well I think with that I just want to thank everybody for having a great call. This morning, we look forward to updating everyone on our progress at our next earnings call talking about Q1, 2022, which will which we'll do in may. So thank you very much and we'll keep talking to you.
Have a great day goodbye. Thank you, Sir ladies and gentlemen, this does indeed conclude your conference call for today. Once again, thank you for attending and at this time, we do ask that you. Please disconnect your lines.
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