Q1 2022 Maxar Technologies Inc Earnings Call
Partially of metal and maybe core material from an early planet.
The spacecraft will travel more than 1 billion miles and arrive at the asteroid in 2026, where it will spend 21 months orbiting the 140 mile wide asteroid mapping it and studying its properties.
The S&P chassis built psyche as Max our lightest and smallest graph by 300 class space craft platform.
Roughly the size of a small car.
It is combined with a medium sized solar array and hygiene antenna and Max our latest solar electric propulsion system.
The space craft has been specifically designed to function in a low power environment because of the psyche asteroids business from the Sun.
In addition to <unk> is also leveraging both <unk> 300 class platform and S&P technology for the NASA Gateway power and propulsion element under the Artemis program, where.
Where we recently completed the first phase of end to end testing of its unique 12 kilowatt propulsion system.
And the 300 class platform has also been selected for Nasa's Goddard Space Flight Center, <unk> mission and will host Nasa's tropospheric emissions monitoring solution or tempo of instruments.
It was good to see the psyche spacecraft on its way down to the launch site in Florida, putting in one step closer to achieving its mission goals.
I'd like to congratulate NASA and JPL on this key milestone and the Max are team members that helped make it a reality.
Please turn to slide five for a discussion of the Legion program.
The headline is that we are delaying the first launched in September as we worked through a test configuration anomaly that occurred during an environmental testing procedure on the second fully integrated satellite in our Palo Alto facility.
Remediation is underway.
We also continue our work on the remaining satellites in the program and in particular, the third satellite we.
We expect both the second and third satellites to align with the updated timing of the first launch.
That should give us some flexibility as we are now likely to have three spacecraft ready to support the first launch of two satellites.
I'm disappointed that we've had another delay.
As you know we've been hit with supply chain and Covid related issues over the past couple of years, which negatively impacted our timeline.
And the war in Ukraine has limited the use of Antonov aircrafts that typically fly spacecraft to launch sites.
This has put further pressure on the overall schedule as we're more likely than not going to need to use ground transportation to get the satellites down to the Cape from Palo Alto.
This is a first of a kind program and issues can arise as we go through our exhaustive testing protocols to assure mission success for a set of satellite designed to last at least a decade.
We remain confident in our long term successful program.
As Biggs will address later, we do not expect the delay to impact 2022 guidance.
We know how important this program is to Max our customers and to our investors.
Once on orbit and in use with our existing constellation assets. The Legion satellites will increase our capacity and revisit rates positioning us well to take advantage of the robust demand we see in front of us.
I look forward to that and we will provide further updates on our second quarter earnings call. This summer.
Let's now turn to slide six for a quick review of our 2022 priorities.
At the top of the list is getting Legion launched which I just discussed.
In addition to being focused on the launch of the first six satellites. We also announced on our last earnings call that we'd begun long lead work on Legion seven and eight.
We're doing this to shorten the cycle time of the builds to either more quickly react to the strong demand signals we're seeing.
Or be in a position to efficiently replace worldview three when the time comes.
Second up is the <unk> program, which we expect will replace the enhanced the follow on program.
As a reminder, we've been a trusted partner of the U S government for over 20 years, delivering commercial capabilities with superior quality cost security and reliability.
And as you've heard me discuss on prior earnings calls we continue to hear from our government customers that there is solid demand for geospatial data analytics insights and solutions to support both intelligence and tactical missions.
In fact, the environment. It is as robust as I've seen it during my time in the industry, particularly in the context of the Ukraine more.
Our customers at the NRO NGA and military services seek to leverage the capabilities of the industrial base to better understand what's going on in every corner of the planet.
Importantly, they are increasingly looking for answers to tough questions and technology solutions not just data.
We believe the investments we've been making in our constellation assets secure ground infrastructure data platforms <unk> capabilities.
AI and ml analytical tools and technology to support relevant sensor to decision timelines position us well to deliver significant value to our customers.
We're very proud to support the U S government mission and look forward to continuing to work with the NRO as they increasingly adopt commercial geospatial data sources through the <unk> program.
Now as far as timing of the award is concern the.
The best I can say right now is that it could be any day.
We submitted our proposal late last year and expected an award in Q1 2022.
Clearly that has yet to happen and I suspect that the war in Ukraine may have had something to do with that as the government has been focused on supporting operations in the region.
In the meantime, we remain under contract with the enhanced <unk> follow on program with a period of performance that stretches out into the third quarter of 2023 should the government continued to exercise the options available to it.
As far as other key priorities are concerned the space infrastructure segment executed well this quarter generating solid margin performance and the pipeline remains robust as we focus on capturing awards going forward.
As far as financial flexibility is concerned the big focus this year is to continue to grow cash flow and to manage through some upcoming maturities.
Let's now turn to slide seven.
We last held an Investor day in March 2020, just before the world shut down because of the pandemic and we typically host such events every other year, which means we are due.
We continue to evaluate the status of the pandemic and Covid protocols and we're looking forward to hosting another event when appropriate.
I certainly look forward to seeing all of you in person as soon as practically possible.
That said and the timing of our last Investor Day, we tried to keep investors up to date on the key drivers of the business and on the strategy going forward.
Slide seven is one you've certainly seen before but I thought it would be a good reminder, the.
The key takeaway here is that we operate in large and growing verticals, where we have established positions and where we're making investments across both segments to drive future growth.
On slide eight provides hyperlinks to the presentations we've made over the past five quarters, the double click on our positioning and strategy, including in the areas of joint all domain command and control.
Sensor to decision technologies.
AI and ml GSP.
<unk> special products and solar electric propulsion.
And of course last quarter, we did a deep dive on some ESG related topics.
I'd encourage you to take a read through these decks in the accompanying transcripts to better understand our business and the industry in which we operate.
It's an exciting time to be at Max and I look forward to diving deeper into all of these topics on future earnings calls and importantly in person at another investor day in the quarters ahead.
I'd like to conclude my remarks today by reiterating that I am very optimistic about <unk> future.
We are well established and well positioned in large and growing verticals, we're making solid investments that we expect to further our leadership positioning.
We're focused on execution, including cash generation and debt reduction and we're making an impact on the world through the products and services we offer.
All of this positions us well for the future.
And then in the in the near term, we're seeing solid demand pulses across both the Earth intelligence and space infrastructure segments, and we're focused on executing on both iOS CLO Award and the launches of the Legion satellites.
I am confident that all of this together will result in revenue profit and cash flow growth in the quarters and years ahead and with it attractive shareholder returns.
With that I'm going to stop and hand, the call over to Biggs for a discussion of our first quarter results and an update to our guidance for the year.
Thanks, Dan Please turn to slide nine where we present year over year comparisons for the first quarter net.
Net loss for Q1 was $7 million and net loss per share was <unk> 10.
Revenue was up 3% year over year for the quarter and adjusted EBITDA margins expanded 360 basis points topline.
Topline revenue growth was driven by exploration space infrastructure.
On an easy year over year comparison, given the nonrecurring charge related to the Sirius XM satellite.
That we recorded in this segment last year.
Adjusted EBITDA margins expanded as a result of the same dynamic.
Consolidated adjusted EBITDA was negatively impacted by 4 million year over year, given the appreciation of our stock during the quarter, which pushed stock based compensation higher relative to our expectations.
Higher stock compensation has been driven off of non over the last three years as a result of mark to market treatment.
Of our 2019 stock plan awards, which are now fully invested so volatility should reduce from here.
The quarter was also negatively impacted by push outs in the Earth intelligence segment, we expect to close out and execute on in the second quarter and the remainder of the year.
And by some mix shift between product and services relative to our expectations.
Were it not for these we would have exceeded our effective guidance for the quarter.
Although within our guidance from a year over year standpoint expenses increased in the quarter compared to last year as a result of investments, we're making to satisfy the space infrastructure business Diversifies space infrastructure business.
And advance our product development on the Earth intelligence side, including R&D systems and product capabilities.
We feel more positive than ever about the growth opportunity in both segments.
Please turn to slide 10.
First intelligence revenue was flat year over year in the quarter on a tough comparison as year ago period benefited from sales of slipped from the fourth quarter of 2020.
Conversely, the first quarter of this year was negatively impacted by some push outs for work that we expect to largely complete in the second quarter.
Adjusted EBITDA was also negatively impacted by mix and the higher stock based compensation I mentioned earlier with both impacting our expectations for the quarter at the time, we issued guidance back in February .
But again, we continue to expect sequential growth throughout the year.
Please turn to slide 11.
Space infrastructure revenue increased 14% year over year in the first quarter and adjusted EBITDA margins expanded significantly to 10, 7%.
Recall, the first quarter of 2021 included $28 million negative impact on revenue and adjusted EBITDA from the charge related to Sirius XM soon.
Normalizing for this revenue was down slightly as U S government and commercial programs have backlog continued to mature, including the labor revenue created by the C band Awards.
Adjusted EBITDA margins were positively impacted by an $11 million decrease indirect program costs in part offset by increases in SG&A costs, including labor stock based compensation and received research and development costs.
The increase was seen in R&D is part art part of the $10 million increase we included for guidance. This year and this spend will continue to create some pressure on margins in this segment over the rest of the year.
Please turn to slide 12.
The company generated $48 million in operating cash flow from continuing operations in the first quarter and invested $64 million in capex.
Cash flows were negatively impacted by $36 million in unfavorable working capital changes driven by timing of receipts and seasonal payments.
Please turn to slide 13.
We had roughly $494 million liquidity at the end of the quarter.
Now please turn to slide 14 for an update on our 2022 guidance.
There are some headwinds on our guidance, including on revenue the delay and any upside on iOS CL and the slightly June July and on cash from those items, an increase allegiant cost associated with the delay.
However, those are within the range as we previously gave it and there remain other opportunities, including some new ones to fully offset those pressures.
So we're not adjusting guidance in any subsequent in Hawaii at this point.
Revenue guidance for Earth intelligence remains unchanged from what we issued year end.
We continue to maintain a wider range for its intelligence as we await the outcome of the iOS Yellow award.
We've modified our guidance for space infrastructure, and intersegment eliminations upwards by $35 million to account for the Worldview Legion EAC growth.
$20 million of this EAC growth is driven by the delay Dan spoke to earlier.
But roughly $15 million.
Comes from work on Worldview Legion 708.
We have pulled forward into the current year.
No signs of space infrastructure for execution.
As a result space infrastructure revenues are expected to be roughly $735 million.
With $100 million and intersegment eliminations.
Since this is intercompany work there is no change to the total revenue guidance presented last quarter.
Turning to adjusted EBITDA, No change to the outlook range for Earth intelligence.
As a result of the Worldview Legion EAC growth, we've increased the expectations for space infrastructure, adjusted EBITDA by $10 million.
Including work for the Worldview Legion seven and eight.
But again this is offset by an increase in intercompany eliminations.
<unk> intelligence, we continue to expect revenues and adjusted EBITDA to grow sequentially throughout the year.
The growth will come from a variety of sources precision three D, which was light in the first quarter, but expected to be up 50% on a full year over year basis.
Increased government revenues, including from Ukraine.
<unk> customer upgrades services growth from the first quarter and to a lesser extent Legion revenues.
At space infrastructure there'll be some skewing towards the first half of the year, but this is not likely to affect the consolidated results materially.
We've not changed our guidance expectations for operating cash flows for capital expenditures as we stated during the prior call. The precise timing of cash flows and capital expenditures can vary throughout the year.
With that I'd like to hand, the call back over to the operator to begin Q&A.
Yes.
Thank you.
I would like to ask a question. Please press star followed by one on your telephone keypad.
If you wish to remove yourself from the queue. Please press star one once again one moment please.
Your first question comes from the line of Seth Theismann of J P. Morgan. Please go ahead.
Okay.
Thanks, very much good afternoon.
Afternoon.
Okay. So I guess you guys probably expect at this one but I guess, if you could go into.
A little bit more detail about the <unk>.
Anomaly in the environmental testing.
Kind of.
What leads you to that kind of one month.
Delay as a result of that.
Normally and then can you talk again about the launch plan.
For the did you say at 1.3 spacecraft or.
The first.
Or I guess, what's the kind of the launch plan at this point in terms of which satellites go in which launch.
Sure. Thanks Seth.
So first off on the.
The anomaly that we had we had an anomaly on the configuration of one of our test. So it wasn't a design or a hardware issue was how the test was setup.
And we've had to go back and figure out how to do that test differently.
We substantively done that's taken a little bit of time for that but we're on a path to get it remediated and the timeline that supports a September launch and then again as I mentioned, we're also figuring in some potential reserve.
Possibly having to do ground transportation with the unavailability right now of Anson ops, but we're exploring some options to get our sales down there, but we're factoring in the fact that we'd have to.
The path to a ground based transportation.
And in terms of our confidence level, we continue to retire risk everyday and that gives us each time, we make it through one of these gating items gets us closer to that but we still have more testing ahead of us. So it's not a riskless exercise from here on out.
And as I've stated in the past we do.
Pride ourselves on our quality and the building of 10 year type assets that are going to support critical mission needs over the next decade plus so.
<unk>.
Unfortunate, but it happened and where we are.
Largely dealing with it and keeping keeping moving forward.
On the launch plan.
We will have three launches of two satellites each.
That's something that we changed our guidance on last quarter, and it's a little different than the first two and four launches that we had planned but so just kind of to reiterate three launches to satellite ctrip right.
Yes, John No change from our launch plan and.
To give us a little more confident in the September launch date, we expect to have three satellites ready. So if we had any.
Anomalous show around testing range that we'd have.
Other satellite ready to go.
We do expect us to continue to be on three months center lines. So the first one.
Call It September than three months after that in three months after that is still the pace. We're on and the program is marching along towards that.
Path right now.
Okay. Okay. Okay, and then maybe just one follow up in terms of.
Earth intelligence and kind of.
Whats implied by the midpoint of the guidance is kind of a fairly significant step up in EBITDA and so.
Just thinking about the.
The trajectory of that through the year and kind of where how should we should think about maybe where the exit rate is.
And Earth intelligence this year end.
What drives that up to what seems like it should be a fairly.
A very high level.
Yes, maybe I'll take a couple of parts of this and then I'll turn it over to Biggs to talk a little bit about some of the modeling details you Scott.
A couple of things we did see some push out of Q1 deals into Q2.
Not something that can happen, but we've been maintaining very strong prognosis for those deals we do expect them to complete during Q2 and then throughout the rest of the year.
We also see pretty healthy demand.
Cros are <unk> opportunities and thats across.
United in the United States government.
International Defense and intelligence customers as well as our commercial customers. So we're expecting 50% year over year growth in the <unk> set of products.
<unk>.
Probably just a little more color on that we had some deals that we probably could have gotten done in Q1, but for the fact that we really wanted to hold pricing on those products and that product suite and so we're patiently wanting to make sure that we get full value for what we think that technology offers.
So we're taking the long view.
Instead of just trying to jam some deals.
But.
Look as strong pipeline throughout the rest of the year a number of things we're doing with adapts and just doing the upgrades that are already in our bookings area and a number of other <unk>.
Growth opportunities, we see in front of the company. Thanks him talk anymore about the model.
Put some numbers behind that.
I'll talk about a little bit on a total company basis, but clearly the.
The improvement between.
First quarter.
Our run rate and what we expect for the full year is driven by Earth intelligence.
If you look at the total lift that we have to get from just taking the first quarter times four to what the middle of our ranges for the year.
That requires about $140 million of incremental.
EBITDA for the next three quarters relative to the first quarter run rate.
So first thing is obviously the stock comp was already said.
The <unk>.
Mark to market.
Phenomenon should go away as a result of.
Those shares.
<unk> settled at this point in time, and so that would contribute 16 million is not the biggest number on the page, but it's easy one to point out first.
But then on product in general or intelligence.
We would expect $80 million to $110 million.
Contribution.
Through increases over the next three quarters.
I think I mentioned in my comments, there is almost no <unk>.
Product revenue in the first quarter.
And this as book ship business significantly.
But we do expect that to grow significantly so.
And overall product grew by $100 million in 'twenty one so.
Getting $80 million to $110 million over the next three quarters in our mind is not only achievable, but fairly reasonable at this point in time.
Then das upgrades Legion and services growth.
We expect to contribute about $30 million and then after that.
The other sources and expense variations pretty much net out so I would term notes to be the big drivers for the company and for Earth intelligence.
There is.
Upside on <unk>, which once again.
<unk> contributes to the overall range.
At this point in time, hopefully, we'll narrow that out with an award or sooner as opposed to a lender.
Okay, great. Thank you very much.
Your next question comes from the line of Ken Herbert of RBC Capital markets. Please go ahead.
Yes, hi, good afternoon, Dan and Biggs.
Okay.
Dan I just wanted to first follow up there maybe on your comments on on iOS.
I appreciate it's hard to speculate that you called out maybe some delays with <unk>.
Obviously, the distraction and what's happening in eastern Europe right now.
Is there anything else you've heard from your customer you could potentially point to around.
Sort of <unk> and the potential timing of that award.
Well, we had expected by this point as I mentioned in my remarks.
We're not aware of anything holding it up at this point.
Budget has been passed.
The fight.
For the next cycle is in and all point strongly to adoption of.
Commercial.
Electro optical technologies.
No.
We think things are in line, we submitted our.
Proposal late last year and the customer originally said they expected to get awards by March 29th Theyre, not seeing that anymore, but we're not aware of anything holding them up at this point.
<unk>.
So I think we can.
Continue to believe we are well positioned on that our current constellation is best in class, we've been making the investments in Legion, We've got a secure operations architecture, which is unique to us in a pretty strong track record of success.
We have had some incremental.
Plus up funding related to the Ukraine.
Operations.
So that's kind of offset a little bit of the delays we were seeing for some upside on <unk>.
But.
If they continue to delay the ECL awards.
And under the existing contract.
Out into the fall of next year, even if necessary. So we're pretty good shape pretty in pretty good shape on that on that front.
Your next question comes from the line of.
My apologies comes from the line of Colin Canfield of Barclays. Please go ahead.
Okay.
Hey, Thanks for the question can.
Can you just talk a little bit more on kind of the aperture for growth beyond <unk>.
Youre talking about kind of the best environment, you've seen in a while and Doj commentary suggests that.
<unk>.
We could see further contract growth in consumption beyond NRO. So maybe you can update us on kind of what you sized the pipeline of opportunities in.
For the defense and Intel Space and then also talk about some of the trends that you're seeing within the commercial space.
How that's trending.
Yeah. Thanks.
I did say in my prepared remarks that this is I have been in the industry. Just over 10 years. Now. This is the strongest environment I've seen for for our Earth intelligence type of capabilities.
Ever and I think a lot of that has been highlighted by the prominence of.
Satellite imagery and data and solutions.
Related to Ukraine, and in particular <unk> type of solutions.
Seeing really really strong.
Growth in adoption rates for <unk> technology.
And that's a lot of that's based on the satellite data we've collected and then processed through to create those models.
But.
When we when we and our customers start to talk about physics based meta versus that are really accurate in worldwide solutions Theres only one place that you can go to get that right now and that's <unk>.
So on the defense and intelligence side, we're continuing to see more and more adoption and more and more solutions, particularly tactical edge type stuff uplink and downlink and satellite data, creating the <unk> models and then running the analytics.
Solutions based technology off of that.
We're seeing really strong adoption of our AI and ml capabilities.
Other analytics.
And that's across all of our defense customers both at the U S government and.
International Defense and intelligence around and in the commercial set of customers.
So we're trying to make sure we strike the right deals at the right licensing terms at the right price points for those but I.
I'd say really strong adoption rates really strong pipeline ahead of us there.
That's not even taken into account yet the pent up demand, we see for the Legion class assets that will be.
We are getting on orbit very soon here as well.
And then the strong pipeline, we see for that.
Got it and then if you think about kind of the cash.
Cash flow step up opportunity business. He has talk a little bit about the trends that you are expecting around some of the trends that you're expecting split between.
Worldview Legion Chili's.
Sure Leo investments and then kind of longer term, how you think about cost out of the.
Earth intelligence business.
As <unk> comes to completion.
Yes.
<unk>.
Probably give me give some more color commentary after I finish up here, but.
The first big one is we will complete the Legion constellation and will move from a cash expenditure capital expenditure type model to a.
Revenue opportunity and growth model on those assets. So thats, the first and easiest, but we are continuing to grow and have been growing our <unk> suite of products.
Have made some good progress on the investments, we've been making and I think pipeline support on the space side of the business as well.
And so I think that we've got some wise investments there and as we continue to invest on both sides of the business. We're trying to pick those higher growth higher return areas, where we'll deliver hope.
Hopefully attractive returns for our investors there, but to date, we've been making some smart ones are seeing strong customer adoption, particularly as.
Just the Ukraine situation brings delight really quickly I think for a lot of our customers there.
Thanks.
I think that's right.
That's your question.
As we look at the future weeks, obviously, making investments today in broadband lesion as Dan points out we're also making investments in.
Product.
Investments in the space infrastructure business as well.
As we go forward into the future.
Whether youre looking at it from an expense standpoint, or a capital standpoint, we would expect all of those to be self funding.
If we based upon the current plans that we have for the constellation including.
The replacement of.
Yes.
Worldview three with Liza southern eight.
When we start to have to spend on that more meaningfully at the end of 'twenty four 'twenty five.
From a incremental cost of operating standpoint.
It's pretty modest.
As we expand the constellation because.
Largely the.
The cost is fixed cost associated with the satellites operating costs arent that variable based upon the number of satellites are operating so.
We should expect to see.
Some growth in margins not to put a particular target out there over time.
As we execute our strategy with a very high high margin inventory and product business and success on the space infrastructure side.
Thank you.
Next question comes from the line of Peter Arment of Baird. Please go ahead.
Okay.
Okay.
Mr. <unk>. Your line is now open.
Sorry about that can you hear me now.
Yes go ahead.
Okay. Thank you sorry about that I was on mute.
Good afternoon, Dan Biggs and <unk>.
On the space infrastructure structure side, it's just more about just kind of the cadence you are off to a good start on adjusted EBITDA to start the year, how we should be kind of thinking about that because you are tracking pretty well towards the upper end of your guidance already and just wondering some of the moving parts on that thanks.
Yes.
I apologize.
Youre asking about the margins of that trend from aerospace infrastructure.
We are running a little bit.
Higher in the first quarter than what we have guided to for the full year.
We would expect to continue to have.
The R&D kind of investments over the remainder of the year.
But.
We do expect revenue in the mix to change as we go a little bit through the year I think we said as you know.
More front end weighted.
And the reason for the mix change is largely just because we have some.
So very profitable programs the revenue has been higher on.
Sort of over the last few quarters, including the first quarter that will drop off some in the second half.
Having said that.
We really like the opportunities that we have in front of us.
To get some new awards in that are going to add potentially.
Significant base to the business.
Put it in a good position going forward.
As we exit this year.
Okay, and just related to that Dan maybe you did talk about sort of some of the better environment that <unk> been in the last decade, or so just related to kind of bookings around the space infrastructure side.
How should we think about that just because there's so many moving parts with the legal market.
Some of the smaller opportunities that maybe isn't there. Thanks.
Yes, I think.
And we got to go win those awards still and we got to close out the year strong.
Do what Biggs just.
Shout out there.
But I really think we pick the right strategy with regard to the space infrastructure business, we've been diversifying both in terms of our.
Our product sets as well as our customer.
Marketing type opportunities so.
We're very pleased.
Pleased and very proud to continue to support Geo.
Type infrastructure on the commercial side Thats been the base of the business and we've.
We've had long strong relationships, there and have continued to do well.
And so customers like Sirius XM, Echostar, Intelsat and others we.
Like that business, we continue to do well at and I think we've got good product offerings, but.
But we have been making a very good strong push into the civil side NASA type business and Thats been a very strong performer for us and we're getting good marks from the customers there.
And on the defense and Intel side, we always said that was a.
A longer term cycle of opportunities, but we're seeing really good traction and.
Sometimes that will be as a sub to one of the large major sometimes it'll be priming those but it's but on a continual trend of winning types of study awards in providing technologies and <unk>.
Efficient price points for the customers on a commercial basis that they're excited about so we do expect to see wins starting to flow through on that side of the business and then our product diversification.
We've moved a long way from.
And the third 300 bus was never just a straight 1300 for us.
<unk> everything from something like the psyche mission, which I discussed on the call to something of the size of the Jupiter three satellite which is.
9300, plus kilograms wet so.
Very very large infrastructure, which is also being used for the Artemis missions.
For the PPE, but then on the on the other side of the investments we've made in the lesion in the lesion type chassis.
Leo.
Type of infrastructure that we have been designing I think are really starting to show signs of bearing some fruit. So I do look forward hopefully in the very near future discussing what some of those awards and wins look like with you all.
I appreciate it thanks Dan.
Your next question comes from the line of Noah <unk> of Goldman Sachs. Please go ahead.
Hello, everyone.
Hey, Noah.
Thanks.
Is there any change to the 2023 targets that you have out there.
So yes, we're going to continue our practice of not.
Literally updating on a quarterly basis.
But I will give a few comments.
The two months slide on Legion, although of course is not helpful.
It is limited in its impact.
We'd already lowered legions contribution.
Sure.
And are the expectations for the contribution from Legion and 23, when we updated guidance last quarter.
There are a lot of moving parts and other drivers that we'll assess as we update our long term plans later in the year.
Having said that.
Yes, we are firming quarterly, but I, certainly don't see or know enough to change it today.
Okay.
Sounds like some moving pieces under the surface, but the.
Aggregate EBITDA and cash flow not not changing sort of similar to what you're what's happening in 'twenty two.
Yes.
Say.
Don't know enough to change it today is that as far as I can go but obviously.
I'm trying to help you understand.
The comments I made.
Okay.
These higher eliminations numbers.
Yes stay at this new level kind of on a run rate going forward.
No.
When you get to 'twenty three.
There should be a drop off to very little.
Okay, because Legion program will be complete.
Okay. Okay sure Okay, great and then.
Dan.
Planet.
Press release, some of the specifics on the.
Pelican specs.
Some of which were maybe a little surprising in terms of.
Resolution revisit wait and see.
I Wonder if you could if you could comment on that and what you thought of what they had to say hey.
What it means for the competitive landscape.
Hey, Thanks Noah.
I guess, probably just at the outset I'd focus in on what <unk> is doing which I think has been.
Best in class widely adopted by customers generating a very large sustainable.
A sustainable and growing business and so the architectural decisions we've made or.
The ones I'm very excited about very proud of and very in tune with Legion is going to be a big part of that going forward.
There are lots of companies out there with lots of announced constellation plans planet is one of them with the Pelican of course.
<unk> been shifting theirs as well set of logic.
<unk>.
Airbus is probably a very long list of entities and companies. We can point to that have announced very constellation plans, we're cognizant of them.
And we take them into how we forecast and how we how we plan our business here at <unk>.
So I don't want don't want to discount.
Discount any of that but I'd say look I think what it points to is that it's a growing and dynamic market and a growing and dynamic market should attract new entrants.
The U S government.
As indicated in has been budgeting and we'll be spending more on commercial adoption continues the pace, particularly for the types of <unk> solutions in physics space meta versus that.
Max I was able to contribute to and Thats dual use technology. That's the same type of technology that will be used in the army's one world terrain.
<unk> and training programs.
And so we're really excited about the industry, we see it as a <unk>.
Fast growing one it should attract entrance and they'll.
They'll do some things.
And our wake and they'll try and do something different from us to to gain competitive advantage, but.
We're feeling pretty good about where we are in that ecosystem right now.
Okay.
Thanks, guys I appreciate it.
Thanks, Paul.
Your next question comes from the line of Robert Spingarn of Melius Research. Please go ahead.
Hi, everybody.
Hey, Robert.
Dan in terms of Legion I think you said that number.
Number three is just about assembled but do you have all the hardware for three and then where does the what's the hardware status for four five and six.
Yes. So actually three is three is fully assembled and it started it's environmental as well. So we've got we've got three satellites fully integrated assembled being tested and going through environmental.
Initial performance reference testing has been looking good on all three.
So.
We're on a path to have right now three satellites ready for that September launch timeframe.
And so that's looking pretty good.
On the remaining satellites. They are all in production they are all marching their way through.
The system.
We're waiting for.
For the fourth instrument to deliver so that will be the key component of hardware that we need to support the second launch, but we do expect that this month.
On last quarters call, we expected in April that didn't quite happen we had some initial additional.
Testing and performance reviews, we wanted to do before we signed off on taking that we do expect it to deliver from Raytheon This month.
And then the <unk>.
Hardware for the of the remaining two satellites as is on track and should.
Be well within bounds to support the the third launch.
Okay.
Are you comfortable.
Which would be about four months for environmental.
Yes, it doesn't actually take quite that long for environmental the first the first ones that go through you do a bit more rigorous testing I think.
Because you want to make sure for example on a thermal vac jayme want to make sure. We prove the thermal design of the satellite not just the componentry of what's going through.
On our hardware basis.
And the first time through you've got a little bit of the growing pains of setting up different majors and testing protocols and connections for a first of its kind space program.
By the time, we get to the fifth and sixth our teams.
Should be very in tune with the assembly testing and protocol environment. So.
Got that things can't come up during the testing phases, but we would expect less and less of the hey, we didn't know what's going to go quite that way first time type events.
Even with all the rigorous engineering, we do about stuff when you come into the actual world environment, and actually start running stuff up and down.
You do notice a little bit more than you do in the OLED, even the best of digital designs and criteria that you put on them.
Yes, I guess kind of just a recap though.
We've got three to six space craft humming, along there and environmental.
We've got and they're being tested we've got the.
Fourth instrument due in in May and then the hardware should support the the remaining launches on the three months central lines that I talked about.
Okay. That's super helpful. And then just on seven and eight are these.
<unk> are these have you committed to these because of the pull forward or that decision is still not made and then yes.
Going back to what Biggs and know what we are discussing I imagine if you are working on those that could change the capex profile.
For either this year certainly next year, so might there be higher capex in your guide Biggs.
Yes.
Kind of clarify there what we said was we procured we're in the process of getting the long lead time parts on 708, So Rob as you know any satellite program there are certain things that take longer than others and become critical path.
We made commitments to get those long lead time parts into the system. So that we could shorten the timeline from.
It will hit the go signal to the vendor base to time, that's an satellites might be on orbit and be able to shrink that down.
We had already factored that into the guidance. We gave both for 'twenty two 'twenty three so that's not really changed and what we're looking at there.
I'll, let <unk> comment a little more on a second there, but we do have some.
We can manage the workforce to some extent the vendor base to some extent depending on how many leads as we eventually decide to build and when we do it but.
But the demand signals, we're getting right now are very strong, which support us potentially moving fast was 708 and then just from an efficiency standpoint, eventually worldview three will.
William stays up there very very long time and exceeds its lifetime like many of our satellites have done, but we will want to contemplate doing that and we want to do it in the most efficient and.
Thoughtful way possible right. So.
Based upon.
As we see it today, we're doing the long lead which of course gives us the option of moving faster for some reason we wanted to.
Alright.
That long lead spending would be done this year.
There would be no impact in 'twenty three on late June seven and eight relative to what we've put out there as guidance and expectations, we wouldn't need to start spending to replace royalties free until the latter part of 2024, So thats why the capex.
Might uptick.
And then you'd have spending over the next few years.
But we've also said that free cash flow, we didnt expect to go down even if we're spending on 708 out in that time period, because we expect growth otherwise in earnings and operating cash flow or that time period.
So.
The one thing is just separately a little different in the guidance. This time around versus what we gave the fourth quarter.
In the fourth quarter call, we said liver.
Spend on the.
The long lead on seven and eight and it was included in our Capex expectations for the year.
We've made that historically.
And most of this is instrument related.
Historically.
The instrument.
Activity was not a part of space infrastructure. It was managed let's.
Let's say out of corporate or out of Earth intelligence, but as a part of US consolidating all the program management activity under space infrastructure and this quarter, we assigned that activities space infrastructure. Once again, it's all eliminated so it doesn't have an impact on the bottom line.
Why it doesn't change our guidance for Capex It doesn't change our guidance for consolidated revenue or earnings.
It's just a true up to how they want to account for the program over the long term.
I see I see thank you both for all the help.
Thanks, Rob sure.
Your next question comes from the line of Thanos Moscow, Paul <unk> of BMO capital markets. Please go ahead.
Okay.
Okay.
Mr and Ms. Coppola Your line is now open.
Sorry about that.
Hey, Dan just as a follow up on.
<unk> seven and eight would be the earliest that those could be launched if you get the right financial close that would justify that.
Well no they will still be complicated programs.
So there is the big pieces of these.
Other than the long lead time parts are the instruments and.
We'd have to go under contract on those quickly. The rest there is a lot of the rest of the stuff that can be done in the supply chain that we might have more control over.
But you probably.
Talking about 30% to 33 months from.
The.
The previous go signal so we've been working on the long lead time parts, we brought down some of that risk already but the satellite programs are generally around that 30 to 33 months point, all things being nominal.
Okay, and then just going back to the.
Great deals and push outs in the deal.
By segment this quarter just to clarify was that predominantly.
Precision Treaty business as you alluded to or were there other factors to call out in terms of Barclays.
That's the big one and a lot of those orders have already been booked and we just didn't.
The shipment or the <unk>.
Didn't come through on the larger deals. So that's part of it but there also is a very strong pipeline of deals. There. There are some other data type deals to as you know we've got.
Beyond the precision <unk> products, we've got a range of different.
Base maps like plus <unk> and other things that are that are pretty strong and pipeline as well.
We've also got staff upgrades that we've been doing and.
Some of those.
Kind of sliding around exactly when you can get out to the facility internationally.
Those upgrades done that would have contributed some revenue in this corner, but we know it will be contributing revenue next quarter as well.
Okay, great. Thanks, guys and congrats on the great work you're doing for you.
Thanks, Dennis Thank you.
Your next question comes from the line of Chris Chris Quilty of Quilty analytics LLC. Please go ahead.
Thanks, guys I'll try to go quick since I know, we're pushing the time here.
Biggs I think you mentioned in the script, a trailing 12 month book to Bill of about one point of view can you tell us what it was in the quarter, maybe a breakdown by segment and how do you expect the book to Bill to shape up.
Through the course of the year is Q2 going to be.
As of quarter, and then it sort of levels out to the balance of the year any sense on on the orders.
So.
<unk>.
Yes, we do think it's important to look at it on a 12 month basis, because among other things.
There is the big <unk> CL award that comes in the third quarter of the year and then it burns off in the other quarters on Earth intelligence.
If you look at it on a trailing 12 month basis.
<unk> intelligence was a one point out book to bills based infrastructure of <unk>, seven and overall on <unk> nine.
For the quarter alone, it's quite a bit lower.
Actually I don't think it's all that meaningful to point for first intelligence appoint two for space infrastructure.
And.
Keeping in mind that on Earth intelligence once again theres the bleed off of the third quarter Big Award on the <unk> contract and also a fair amount of that business is now.
Book to Bill in our space infrastructure of the business is just lumpy in terms of awards coming in and so one quarter really doesn't.
Add that much meaning.
As we look at it in terms of the pipeline.
And I know, both Dan and I said I think.
It looks very strong for both businesses.
As good as it has so.
We would expect in the remainder of the year that on space infrastructure They end up.
One point I'll work better.
Net Earth intelligence, likewise that it'll be very strong.
The one thing I will point out that maybe you have to dig further in numbers on is in Earth intelligence that even though.
The if you will.
Bookings.
Produced that point for a number for the quarter.
Our.
Unexercised options grew by $113 million in the quarter and that is work that is not <unk> work that is work that we expect to be executed over the near term.
<unk> once again.
Yes.
<unk> given the backlog we see we think we look at this at a 12 month basis always done it that way that's been most meaningful.
Great.
And I mean, one of the areas at least on this space infrastructure that you had shown very good strength I think back in 19 civil was like 40% of the revenue mix.
You've executed on those programs, but as we saw with the picture psyche is rolling off into a plane to go away.
What does the pipeline look like on the civil program.
And do you still expect.
Our longer term mix to be about a third between commercial civil and government and it was that two years out or five years out.
Well I think yes.
Yeah.
It's close it's closer to that two to five I would say depending on what comes in and when it comes in but I think the.
While nominally we'd like to be just call. It a third a third and a third there will be quite a bit of variability in that and when they roll in for example, the C band awards pretty dramatically skewed things toward the commercial side of our business, having something like a very large Artemis award dropping one quarter skews pretty hard to.
Something like the civil side of the business and then.
Nascent, but we do want to get up and running we do see very strong.
Market signals from.
The department of Defense and the intelligence community on National infrastructure asset so.
Quarter to quarter, sometimes even 12 months or 12 months it'll it'll be a hard comparison, but over time I think the strength of the business will be in the resiliency of it will be in the growth in all three of those areas as we see it modeling forward in terms of the civil programs.
That's one of the hardest to predict Chris as you know the.
NASA.
We're already bidding on stuff with.
Putting the paperwork in on stuff that might be 2028, or 2029 type programs.
Probably a little more variability in how their budgets run back and forth compared to the commercial and the defense and Intel sites.
Yes.
Got you. Thanks does that mean, you can give us a 2028 forecast.
Yeah.
Now we.
We do run all kinds of modeling here, because we make long term decisions but.
<unk>.
Finally kicked me pretty hard on the table, if we went that far out.
That's right, we will stick with 23 to.
So you mentioned DAP in international work.
One thing I was maybe I don't know surprised by in the current quarter you would have picked up some kind of impact from Ukraine and incremental demand and can you talk about.
Could we or should we expect to see.
Incremental revenues associated with Ukraine or does most of it.
With your U S government contracts covered by current fixed price contracts.
I think what I'd say is there some of these are fixed price and some of the longer term. We did have some small uplift.
And you've probably heard some of the U S government customers talk about the fact that they were spending more in that region.
And some of that went to us, but we're fairly capacity constrained at all as well. So we had to do some shifting.
To support the U S government mission, which is <unk>.
Long term the right thing to do and also for the current situation in the world, but it has impacts on other things that we do.
I think the two uplifts youll see going forward because of the capacity is constrained environment. We've been in is that the legions should snap into a higher demand signal quicker probably than even we were forecasting a year or two ago with the predominance of that type of information as we go through IOC on them and then the second is.
The non capacity constrained type products that we're building, but we're seeing really strong demand signals for for example, uplink and downlink and tasking and theater, which.
We haven't seen we haven't seen from the U S government before so we think thats another growth vector for us a sensor to decision, making work and <unk> modeling is training and simulation and possibly even.
How that factors into hardware and software systems for defense and intelligence going forward can be really really strong growth vectors for us. So.
Ukraine, not a real big impact of the year right now, but the types of products that are getting a lot of show very strong demand growth some through in the year and then throw up a longer term cycle as well representing I'd just say so that there is some uplift from it we haven't quantified it.
And as it is in the mix of things that I said there pluses.
Pluses or minuses that.
Sort of net out what I'll walk through the big drivers Earth intelligence for the full year.
So it's there but the other elements I've talked about are just bigger.
Got you and final question, Dan You had mentioned subcontracted awards per chance anything you can announce with regard to FDA to Antoine.
If I had something to announce I would've already done.
Okay.
Very good and you are presumably still continuing to team on different opportunities there.
For the ongoing spirals.
Both on the both on the defense and Intel side as well as on the commercial side, we do see.
A decent and a strong pipeline of helio type opportunities.
And.
The teaming arrangements are.
Our positive right now.
Very good thank you.
Thanks, Chris and operator, operator, we've gone past the hour, but I assume you've got a couple more questioners.
We push on and get through everybody here.
You wouldn't mind going into the next question I appreciate it.
Of course. Your next question comes from the line of Sam <unk> of <unk> Securities. Please go ahead.
Hey, guys. Thanks for sneaking me in here.
On behalf of Mike Troy.
So I was just curious do you guys think is there any thought about the possibility that perhaps the delay in the iOS CL announcement may be related to the government kind of considering delays in the <unk>.
On your guidance Legion launch timeline or I guess, how are you guys kind of thinking about how that might be interacting with each other.
We really haven't even thought of them as tied together.
We think they've got.
Sort of what they need to continue moving forward.
Obviously, we.
Had planned than would otherwise all things considered rather have leasing up right now being able to serve that more quickly.
But it's on the it's on the timeline it's on.
We don't have anything to.
It caused us to make that assessment.
Okay, Great and then.
Building off the the.
Question right before me.
In terms of just the heightened demand around the whole Ukraine situation do you guys have you guys seen any kind of shift in I guess demand from kind of a broader international audience kind of also relating to how NATO seems to be ramping up their defense spending overall do you guys kind of see an increase in your international market as a result of this.
Yes, I think there is a long term positive upward trend therefore us.
We've disclosed in the past that we've got over a dozen direct access facility customers that are international governments.
Use us and we've got.
Very strong adoption of our.
Rapid access program as well, which is a.
Somewhat in a different version of what a direct access facility as it is kind of the same thing without the hardware, we handle a lot of that through software and tasking and availability.
Things like secure watch.
And our base maps had been very strong as well as the <unk> adoption.
Look at <unk>.
Budgets go up in a lot of countries are now committing to at least the 2% number both in NATO as well as southeast Asia and some other locations like that we see that as a very strong positive trend for the.
The defense and intelligence work that we've historically.
<unk> done a very good job of capturing across the world.
U S allies and relationships across.
Great. Thank you very much.
Thanks Sam.
And your next question comes from the line of Austin Moeller of Canaccord Genuity community. My apologies. Please go ahead.
Good afternoon, Dan and Biggs.
Just my first question here, if we think about the timeline for Legion.
So.
<unk> you've laid out with the three months center lines, we should have the first launch in September then the second launch in December and then probably the third one and in March of next year correct.
Calendar three months center lines, it won't be to the date, but.
That's.
Generally about a reasonable timeframe there.
Okay, and then as far as the on orbit testing goes is it still appropriate to assume on average about 60 days upon an orbit testing per satellite before they can take.
Take on customer capacity.
That's generally what we're planning I think we've said 60 to 90 days.
With some of the.
The delays on the hardware side and through the testing environment.
It sounded like our teams that are planning to do the commissioning had sitting around so they are looking at ways to.
Enhance the availability and the revenue generating capacity that those bring on but.
Until we go through the shakeout crews as it were in the an orbit testing.
Kind of not really backing off those dates yet.
But where we are.
Positive.
We'll go through that type of environment configuration, and it's more than just kind of testing out the satellite we run very.
Lot of data through the systems at a lot of.
Availability and how they operate in our environment, how the operating direct access to slowed environment, how the data moves through and gets calibrated.
Because our customers expect a very very high standard.
When when we commission that satellite as they've come to expect from our constellation. So it's not just a couple of happy snaps, but it's.
Real space space Defense and intelligence asset.
Okay. That's helpful. And then just a question about the planet Pelican constellation. So I thought it was interesting they had the 30 centimeter resolution in there how do you think they are achieving that do you think that they really have.
Large primary mirror with a wide aperture to get that kind of resolution or do you think that the satellites are may be able to transit in and out of very lower orbit to get a closer vantage point.
Okay.
No comment on that.
There's a lot of different ways that these.
These types of things can be done.
We've got some of the.
Brightest engineers and scientists on the planet working inside <unk>, and we certainly looked at lots of different things that.
We can do and others can do with regard to that and.
I think the thing I'd say is at this point nobody has really changed the curve on physics yet.
So orbital agee the amount of photons you'd get from near surface.
Resolution.
Aperture size the types of stability you need to do different different things like this are still.
Well within the realm of known science.
But I think we we've been doing a pretty good job of creating the value there for our customers along the way.
Okay, great. Thank you for all the details Tim.
Yeah sure. Thanks Austin.
Great.
Operator, I think we've exhausted our questioner so I appreciate everybody dialing into the call today and we.
Certainly look forward to chatting with you all again.
When we report out in late July or early.
Our early August our second quarter earnings call and for those that will be seeing along the way here and I'll look forward to seeing some people face to face operator, I think we'll hand, it back to you to wrap up.
Thank you. This concludes today's conference call you may now disconnect your lines.
Okay.