Q4 2022 MDA Ltd Earnings Call
Speaker 2: the presentation, we will conduct a question and answer session. Instructions will be provided at that time for you to queue up for questions.
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Speaker 2: I'd now like to turn the conference over to Shereen Sahawi, Senior Director of Investor Relations at MDA. Please go ahead. Thank you, Michelle. Good morning and welcome to MDA's Q4 2022 earnings call. Mike Greenlee, our CEO , and Vida Kolmonyi, our CFO , will lead today's call and share some
Speaker 2: factors, assumptions, and risks that could cause actual results to differ.
Speaker 2: In addition, during this call, we will refer to certain non-IFRS financial measures.
Speaker 2: Although we believe these measures provide useful supplemental information about our financial performance, these measures do not have any standardized meetings under IFRS, and our approach in calculating these measures may differ from that of other issuers and therefore may not be directly comparable. Please be seated.
Speaker 2: the company's quarterly report and other public filings for more information about these measures, including reconciliations to the nearest IFRS measures.
Speaker 2: And with that, it's my pleasure to turn the call over to Mike.
Speaker 3: Thank you, Shereen.
Speaker 3: Good morning and thank you to those joining us today to discuss our fourth quarter and full year 2022 financial results.
Speaker 3: As we wrap up another strong year for MDA, I would like to thank our employees for their dedication and commitment to delivering for our customers.
Speaker 3: Our secret sauce and key to our success are our talented employees, and we are fortunate to work in an exciting field that really energizes and attracts talent and pushes the boundaries of innovation every day.
Speaker 3: As we rounded out the year, our team remained laser focused on executing our growth strategies across our end markets, and we are pleased with the progress made in the fourth quarter, including a contract award to support RSAT, Argentina's national telecommunications company, by providing Ka-band antennas.
Speaker 3: and the completion of the preliminary design review on GlobalStar's LEO Constellation program. We are also pleased with the development progress made on CORSUS, our next generation Earth observation constellation. In Q4, the team conducted the mission Critical Design Review, or CDR. A major milestone in development of the program.
Speaker 3: that will now allow us to advance to unit level build activities.
Speaker 3: Overall, we are seeing strong business momentum and we have made tangible progress in executing against the plan we laid out just under two years ago at the time of our IPO.
Speaker 3: Our backlog at year end stood at $1.4 billion, up 59% year over year, at a very healthy level for the company. And we continue to see a significant growth pipeline across our business.
Speaker 3: In 2022, we secured $1.2 billion in awards, which included two sizeable wins, Phase B of Canadarm3 and Global Stars Leo Constellation.
Speaker 3: complemented by numerous other strategic awards across our three business areas. We grew our revenue to $641 million dollars, an increase of 34% year-over-year, and expanded our adjusted EBITDA to $141 million dollars, up 26% versus last year levels.
Speaker 3: This translates to a robust 22% margin for the full year.
Speaker 3: To support current and future growth, we continue to focus on talent recruitment. In 2022, we added 880 new staff. This is in addition to the 670 new hires we added in 2021.
Speaker 3: We also deployed $180 million in capital expenditures, which included research and development spending on technologies related to CORS and other growth initiatives.
Speaker 3: Persistent innovation and technology advancement is a critical market differentiator for MDA. Our company was recently ranked by market research firm Research InfoSource as one of the top 45 companies in Canada for R&D and technology investment based on 2021 data.
Speaker 3: From a strategy perspective, we remain focused on executing on the priorities we've outlined for our three business areas to capitalize on the growth opportunities we see in our end markets.
Speaker 3: In 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 as more low-earth orbit or LEO constellation opportunities come to market.
Speaker 3: Our GlobalStar award, where MDA was selected as a prime contractor for 17 LEO satellites with an option for nine additional systems.
Speaker 3: support direct-to-handset functionality and work to support the U.S. Space Development Agency's LEO constellations each showcase our strategy in action.
Speaker 3: In robotics and space operations, we are leveraging our global leadership in space robotics innovation and long history of success with Canadarm 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 andLI
Speaker 3: and on-orbit operational services. Our initial awards from Axiom Space, which is one of a number of commercial players constructing commercial space stations.
Speaker 3: an important win, an indicator of the market opportunities as we start to commercialize derivatives of the Canadarm3 robotic technology. And in our geo-intelligence business we continue to see robust demand for our Earth observation data and analytics and our advancing work on MDA's next generation Earth observation constellation, KORUS.
Speaker 3: which will provide even greater imaging capabilities and actionable insights for our customers.
Speaker 3: We are in the early innings of a multi-decade growth cycle playing out in our end markets, and MDA is uniquely qualified to take advantage of this growth.
Speaker 3: With that growth market as our backdrop,
Speaker 3: Today we are also introducing our full year 2023 financial outlook.
Speaker 3: MDA is well positioned to capitalize on strong customer demand and robust market activity given our diverse improvement technology offerings.
Speaker 3: We see activities ramping up in line with our expectations on the majority of our programs, and are encouraged by the team's solid execution. In 2023, we expect revenues to be in the $750 to $800 million range, representing robust year-over-year growth of approximately $7.5 million.
Speaker 3: 20% at the midpoint of guidance. We expect full year adjusted EBITDA to be $145 to $155 million, representing approximately 19 to 20% adjusted EBITDA margin. We expect capital expenditures to be $220 to $240 million as we continue to invest in our growth initiatives.
Speaker 3: In short, 2022 was a year of strong growth for MDA and I'm proud of how the team executed. As we look to 23, the team is energized by the strong momentum and positive trends we are seeing in our end markets, and MDA has the right technology portfolio to capitalize on the opportunities ahead of us.
Speaker 3: I'll now give you a view of the industry, an update on MDA's three business areas, and then pass it to Vito for a deep dive on the financials.
Speaker 3: Starting with the global space market, 2022 was another strong year for space, with research firm Euroconsult estimating the space market grew by 8% to reach $424 billion last year, while the space economy, which also includes non-contracted government activity, reached $464 billion.
Speaker 3: Governments around the globe continue to invest in space, with 86 nations spending a total of $103 billion in 2022, up 9% year over year.
Speaker 3: Governments are allocating a higher share of their space budgets to defence programs as the gap between civil and defence spending continues to decrease and is projected to reach parity by 2031.
Speaker 3: We are seeing increased integration of space-based capability as a routine component of defense and military budgets driven by geopolitical tensions and demand for space-based surveillance and detection systems.
Speaker 3: Looking at the big picture, Euroconsult estimates the size of the global space market will grow to over 737 billion dollars within a decade, representing a compounded annual growth rate of 6% over the forecast period. The U.S. Chamber of Commerce projects that the space economy will exceed $1.5 trillion by 2040.
Speaker 3: In terms of space infrastructure, spacecraft launch activity continued to unfold at a record pace in 2022.
Speaker 3: with a total of 2,500 spacecraft launched globally, an increase of 36% versus last year, with 89% of those spacecraft operated by commercial players and the majority of launches comprised of communications satellites. The higher activity levels are driven primarily by growth in commercial low Earth orbit.
Speaker 3: or Leo constellations.
Speaker 3: Notable industry developments last year included the increased adoption of satellite constellations in mobile communications. We saw a number of mobile network operators and cell phone manufacturers announce partnerships with satellite operators in a push to enable messaging and emergency SOS functionality.
Speaker 3: geographic areas not typically reachable by traditional cell signals. In September GlobalStar disclosed that it will be utilizing its network including the recently announced enhancement via the 17 additional LEO satellites and MDA delivering to support new satellite enabled services.
Speaker 3: for certain of Apple's products.
Speaker 3: We saw similar announcements from T-Mobile and Starlink, which are working to add text coverage for T-Mobile customers across the US.
Speaker 3: In October , AT&T announced it is working with AST SpaceMobile to utilize the latter satellite network to provide coverage in hard-to-reach areas of the U.S. In January of this year, Qualcomm announced a partnership with Iridium to enable satellite messaging for Android phones.
Speaker 3: The increased interest in satellite-to-cell offerings is an exciting development for the industry and has the potential to enhance connectivity and bridge the divide for customers in remote areas around the globe.
Speaker 3: On the space exploration front, we saw the successful launch of Artemis I.
Speaker 3: a key milestone in NASA's human spaceflight program to enable humans return to the lunar surface and the long-term exploration on and around the Moon.
Speaker 3: The Artemis program is comprised of multiple missions.
Speaker 3: Artemis 2, which will be a crewed mission, is expected to launch in late 2024 and carry a Canadian astronaut.
Speaker 3: MDA and the entire industry is excited and eagerly awaiting an announcement from NASA of who will be on that Artemis crew in a little over a week on April 3rd.
Speaker 3: In addition, we are seeing growing global interest in space exploration.
Speaker 3: In 2022, NASA added nine new signatories to its Artemis Accords.
Speaker 3: Signaling these countries' commitment to safe, long-term and ethical space exploration, the latest entries bring the group size to 23 nations. The Accord, which was unveiled in October of 2020 to align nations on a common set of principles for space exploration, has tripled in size over the last two years.
Speaker 3: with interest from many non-traditional spacefaring nations which are now building their own national space programs.
Speaker 3: All of this activity bodes well for MDA and our Future Opportunity final, which we would characterize as very healthy.
Speaker 3: Now I'll turn to our three business areas.
Speaker 3: In satellite systems, our opportunity funnel remains strong, and we continue to see good activity levels. Our teams are advancing multiple requests for communication satellite solutions and for a growing number of constellation projects, particularly in low-orbit segment of the market.
Speaker 3: This quarter we announced a new contract with RSAT, Argentina's national telecommunications company.
Speaker 3: which is aligned with our strategy of expanding our geographic footprint internationally.
Speaker 3: The contract will see MDA design and build Ka-band multi-beam antennas for RSAT's geosynchronous satellite, which will provide high-speed internet as well as digital video and voice services across Argentina and to neighbouring countries. The RSAT antennas will be built in MDA's state-of-the-art high-volume production facility in Montreal.
Speaker 3: The team also continues to make good progress ramping up on the GlobalStar program and advancing in design work.
Speaker 3: We successfully completed the mission preliminary design review for the LEO constellation and the program has now advanced to the satellite detailed design phase.
Speaker 3: We announced the award from Globalstar in early 2022, where MDA was selected as the prime contractor to enhance Globalstar's real constellation.
Speaker 3: We view this as an important market validation of MDA reflecting our strategy to expand our offerings, move up the value chain and to position our company as a prime integrator for LEO constellations, providing advanced payload capabilities and systems engineering as well as high volume manufacturing.
Speaker 3: Moving to the geointelligence business, we continue to see robust customer demand for our Earth observation offerings, coupled with increased recognition of the role that commercial Earth observation satellites can play to provide near real-time data and analytics to governments and private enterprise.
Speaker 3: During the year, we made significant progress on the KORUS constellation program, which includes a fourth-generation MDA-built C-band SAR satellite in addition to the X-band satellite which will be supplied by ICIDE.
Speaker 3: In Q4, the team conducted the mission Critical Design Review, or CDR, and started unit level build activities. In Q23, the team is focused on continuing flight unit development and deliveries, building the ground segment subsystems, and detailing constellation operation plans and processes.
Speaker 3: Work on the Canadian Surface Combatant Program, or CSC, one of our long-term government programs, continues to progress in line with the cadence we saw in the previous quarters.
Speaker 3: The preliminary design review for the vessels was completed late last year, and our teams are now working on maturing the system level design.
Speaker 3: MDA is responsible for the design and integration of the electronic warfare system for the ships, which comprises a suite of sensors, including laser warning and electronic system technologies used to detect aerial threats to help protect the men and women of the Royal Canadian Navy.
Speaker 3: Moving to our robotics and space operations business.
Speaker 3: We are seeing good traction and activity levels on both the government and commercial fronts.
Speaker 3: On the government side, we continue to ramp up work on Phase B of the Canadarm3 contract, which MDA was awarded in early 2022, and that will see us completing the preliminary design of Canadarm3's robotic system to be used aboard the NASA-led Lunar Gateway. Program activity is ramping up in line with our expectations, and the team is making good progress.
Speaker 3: closing out the preliminary design and safety review for the robotic interfaces and multiple additional subsystem reviews in the lead up to a system design review milestone expected in the first half of 2023.
Speaker 3: In 2022, we also announced two commercial sales of space robotic products derived from Canadarm3 to Axiom Space. MDA is delivering 32 external robotic interfaces and 62 payload interface pairs for Axiom Space Station.
Speaker 3: The interfaces will allow connectivity to Canadarm2 and once operational, Canadarm3 technologies as well as provide mechanical, electrical and data connections for payloads that are externally mounted on the Axiom station.
Speaker 3: The Axiom station which is now under construction will initially be attached to the International Space Station.
Speaker 3: subsequently separate from the ISS when the ISS partners decommission it at the end of the decade.
Speaker 3: While still in its early days we are seeing an emergent shift in the commercial landscape for space robotics, as more non-government entities look to establish a foothold and hub in the low-Earth orbit for a variety of activities, including space manufacturing, human spaceflight missions to LEO, and deep space exploration missions to the Moon and beyond.
Speaker 3: Shifting to operations, to support the current and anticipated revenue ramp up, we added 880 new hires in 2022. This is in addition to the 670 people hired in 2021.
Speaker 3: We continue to keep a close eye on our supply chain for potential business disruptions and so far those have all been manageable. Over the last two years, we rolled out a number of proactive measures that have served us well. These include designing around known shortages, finding alternatives that are more readily available, and finding solutions that will help reduce the risk of
Speaker 3: ordering materials as early as possible, and building up inventory for some components. For new programs, we are ensuring that our supply chain organization has full visibility early in the process to ensure orders are placed promptly and monitored constantly to mitigate delays.
Speaker 3: To recap, I'm very proud of what the team accomplished in 2022 and the opportunities to lie ahead. Our team is energized. We remain laser focused on our priorities.
Speaker 3: a strong focus on execution, converting opportunities in our funnel, and expanding our leadership in core markets while maintaining strong profitability and a healthy balance sheet to help us fund our growth initiatives. With that, I'll hand it over to Vito to walk us through the detailed financials.
Speaker 4: Thank you, Mike, and good morning everyone. For my update here this morning, I'll walk you through our Q4, our full year 2022 financial results, and also provide a little color on our 2023 outlook.
Speaker 4: Overall Q4 was a strong quarter for MDA and we're pleased with how the team is executing. In the quarter we saw strong revenue growth, solid profitability, and healthy backlog at Q1 which will bode well for our performance in 2023.
Speaker 4: Total revenues for the fourth quarter were $186.1 million. This represents a $71 million or 61% increase over the same period last year.
Speaker 4: The year-over-year increase is driven by higher revenues from our satellite systems and robotics and space operations businesses. On a full year basis, total revenues were $641.2 million, an increase of 34% over 2021.
Speaker 4: The increase in revenues was primarily driven by execution on our opening backlog, as well as orders added to backlog in 2022, primarily in our SAT systems and robotics and space operations businesses.
Speaker 4: By business areas, revenues in satellite systems of $84.3 million in the fourth quarter 2022 were 51.5 million or 157% higher compared to the same quarter in 2021.
Speaker 4: The strong showing was driven by higher work volume as new programs ramp up, including the Global Star program, which was ordered in early 2022.
Speaker 4: On a full year basis, revenues for SAT systems increased to $252.2 million for the latest year, representing a $98.9 million or 65% growth over full year 2021.
Speaker 4: This growth is also attributable to higher volumes on new programs, including the Global Star Program.
Speaker 4: In robotics and space operations, we saw healthy year-over-year growth with revenues of $47.9 million in the latest quarter, representing $18 million or 60% increase versus Q4 of last year. The growth is largely attributable to a higher volume of work performed on the Canada Arm3 program.
Speaker 4: For the full year 2022, robotics and space operations revenue were $193.7 million, translating to a $60.8 million, or 46% year-over-year growth, largely driven by increased activity on the Canada Arm3 program.
Speaker 4: Revenues in our geointelligence business of 53.9 million in the latest quarter represent an increase of 1.1 million or 2% year-over-year, reflecting steady work volume.
Speaker 4: For the full year 2022, revenues for geointelligence were $195.3 million, representing a $4.6 million, or 2% increase, compared to 2021 levels.
Speaker 4: Let's move on to gross profit and as a reminder, gross profit represents our revenue less cost of revenue which includes material labor, allocated overhead, S&ED credits and depreciation.
Speaker 4: For Q4 2022, gross profit was $58.9 million, representing a 13.5 million or 30% increase over the same period last year.
Speaker 4: Gross margin in the latest quarter was 31.6%, which is in line with our expectations as our program mix evolves.
Speaker 4: This compares to 39.3% for the same period in 2021, which as a reminder included a higher percentage of investment tax credits recognized against
Speaker 4: to 39.3% for the same period in 2021, which as a reminder included a higher percentage of investment tax credits recognized against cost of revenues.
Speaker 4: For the full year 2022 gross profit was 228.4 million, representing a $60 million increase or 36% increase over 2021. The year-over-year increase was driven by higher work volume coupled with higher ITC income recognized this year.
Speaker 4: with the latter contributing $29 million of the $60.6 million increase.
Speaker 4: Gross margin for full year 2022 was 35.6%, which compares to gross margin of 35.2% in 2021.
Speaker 4: When excluding the impact of the $16.8 million resolution of historical ITC claims recognized in 2022, full year margin, full year gross margin was 33%. And this is in line with our expectations and reflective of strong operating performance throughout 2022.
Speaker 4: Turning to operating expenses, Q4 operating expenses of $40 million were slightly below last year's metric of $43.3 million, reflecting good cost control and lower intangibles amortization in share-based compensation.
Speaker 4: On a full year basis, our operating expenses were $153.8 million in 2022 compared to $149.2 million for the 12 month comparative period.
Speaker 4: The year-over-year increase is primarily due to higher R&D costs as we ramp up development activity on course and other proprietary technology programs.
Speaker 4: The increase in R&D was somewhat offset by lower amortization of intangibles and share-based compensation expenses in 2022. Adjusted EBITDA in the latest quarter was $39.9 million compared to $26.8 million in Q4 2021 reflecting higher work volumes across the business.
Speaker 4: Adjusted EBITDA margin was 21.4% in Q4 2022 compared to 23.2% in the same period last year. The slight year over year decline is consistent with our expectations and largely driven by lower gross margin in the latest quarter somewhat offset by stronger SG&A cost control.
Speaker 4: On a full year basis, adjusted EBITDA was $157.9 million, up from 2021 levels of $137.1 million, representing a $20.8 million or 15% year-over-year increase. Full year 2022 adjusted EBITDA included $16.8 million of ITC income from the resolution of historical ITC claims.
Speaker 4: already mentioned, while full year adjusted EBITDA in 2021 included $24.8 million of SEWS income. Excluding these items, adjusted EBITDA was $141.1 million in 2022 compared to $112.3 million in 2021.
Speaker 4: Adjusted EBITDA margin for the full year 2022 was 24.6% compared to 28.7% for 2021. When excluding the aforementioned historical ITC settlement and sues income, our EBITDA margin was 22% in 2022 compared to 23.5% in 2021.
Speaker 4: Throughout 2022, we've demonstrated strong operating performance, focusing on program execution and cost control while simultaneously investing in the growth initiatives which contributed to higher levels of R&D expense.
Speaker 4: Moving on to backlog, we ended the quarter with $1.4 billion in backlog, representing an increase of 59% year-over-year. The growth in backlog was driven by the addition of a number of sizeable awards in the first half of this year, including Canada Arm 3 and GlobalStar, as well as numerous other smaller awards across our three business areas.
Speaker 4: Capital expenditures. We remain focused on making the right investments in the business to support our strategic growth initiatives. In Q4 2022, we spent $47.1 million on gross capital expenditures, up from $37 million last year as we ramp up our development on course and other growth initiatives.
Speaker 4: Growth CapEx was 38.5 million in the latest quarter, up from 30.9 million in Q4 of 2021.
Speaker 4: And on a full year basis, our capital spend was $180 million.1 million in 2022, compared to approximately $95 million in 2021.
Speaker 4: We expect this level of spend to continue in 2023 as we advance course and invest in initiatives to support our growing business, including expanding and modernizing our physical infrastructure.
Speaker 4: Cash from operations during the quarter generated $40.3 million compared to cash generation of $34.5 million in Q4 of 2021.
Speaker 4: The year-over-year increase was driven by higher net income in Q4 2022 versus the prior quarter.
Speaker 4: Free cash flow was negative $6.8 million in the latest quarter, and free cash flow after adjusting out growth CapEx investments was positive $31.7 million in Q4 of 2022. For the full year 2022, the cash from operations generated $57 million, compared to cash generation of $72.1 million in 2020.
Speaker 4: Free cash flow was negative 123 million in 2022 compared to negative 22 and a half million in the prior year. And the year over year decrease in free cash flow was driven by the elevated growth capex investments.
Speaker 4: Free cash flow after adjusting out our growth capex was $38.5 million in 2022 compared to $57 million in 2021. Moving on to our balance sheet quickly, we ended the quarter with a strong financial position and net debt of $204.3 million.
Speaker 4: available liquidity of $331 million, and net debt to trailing 12 months adjusted EBITDA rate of 1.3 times.
Speaker 4: In summary, this was a strong quarter to wrap up fiscal 2022, and we're encouraged by the positive momentum we're seeing across our business.
Speaker 4: Turning to Outlook, as Mike noted, we are introduced in our 2023 Financial Outlook and are well positioned to capitalize on strong customer demand and robust market activity, given our diverse improvement technology and product offerings.
Speaker 4: For fiscal 2023, we expect full year revenues to be between 750 and 800 million, representing robust year-over-year growth of approximately 20% at the midpoint of guidance.
Speaker 4: We expect full year adjusted EBITDA to be $145 to $155 million, representing approximately 19 to 20% adjusted EBITDA margin. We expect capital expenditures to be $220 to $240 million in 2023, primarily comprising of growth investments to support course and growth.
Speaker 4: and the previously outlined growth initiatives across our three business areas.
Speaker 4: Turning to Q1 2023, we expect revenues to grow by approximately 50% compared to Q1 2022 levels.
Speaker 4: With a number of large programs now in our backlog, our book of business is strong. We remain focused on discipline execution, on our customer commitments, and leveraging our capabilities and technology to grow profitably in core and emerging markets in line with our long-term plan.
Speaker 4: With a number of large programs now in our backlog, our book of business is strong. We remain focused on discipline execution, on our customer commitments, and leveraging our capabilities and technology to grow profitably in core and emerging markets in line with our long-term plan. Mike, with that, I'll turn it back to you. Thank you, Vito.
Speaker 3: I think with that we will open it up for questions. Operator? Thank you.
Speaker 2: I think with that we will open it up for questions. Operator? Thank you. Ladies and gentlemen, we will now begin the question and answer session.
Speaker 2: answer session. Should you have a question, please press star followed by the one on your touch tone phone. You will hear a three tone prompt acknowledging your request. Should you wish to decline from the polling process, please press star followed by the two. If you are using a speakerphone, please lift the handset before pressing any keys. One moment please for your first question.
Speaker 5: Your first question comes from Thanos Moskapulis of BMO Capital Markets. Please go ahead. Hi, good morning. Mike, just given geopolitical things that are going on, can you maybe spend a moment on this pipeline?
Speaker 5: Obviously I guess I should put well for long-term course demands has this prompted in the acceleration the timeframe for DESP Canada obviously looking to upgrade its north infrastructure which may works opportunities in the US you're obviously building some antennas for US defense crime so
Speaker 5: Can you speak to maybe some of the opportunities that you see over the next year or two stemming from defense? Thanks.
Speaker 3: Yeah sure I can talk about it a bit. I think you just provided a good summary. But yeah look there definitely is things that are occurring there. You mentioned the activity that we're seeing in SDA in the US for LEO constellations. Those constellations that follow like the different tranches of those continues to expand as the military community is using LEO constellations.
Speaker 3: to have a more robust communications network around the world. So that is solid and continues to feed into the pipeline as we continue to supply satellite technologies to most if not all of the prime contractors in the US on that US defense legal constellation activity.
Speaker 3: And so that that would continue. On the sticking with communications, you know, military communications continues to be important globally both in terms of military looking to acquire communication networks such as the you know the US SDA that we just talked about. Within the NORAD modernization program in Canada that you mentioned there's a
Speaker 3: program for Northern Communications that's in that, that we would continue to track as well. The Earth observation you mentioned, and so we saw some uptick in the global market as a result of the Ukraine activity that caused
Speaker 3: the need for you know earth observation products to go into Ukraine but it also caused you know various countries to realize what they could obtain from commercial sources and so that causes an increased dialogue globally with you know various nations in terms of you know what types of earth observation information can they have access to so good good dialogue there globally in terms of like you know new new systems
Speaker 3: and services commercially. So Corus for example you know would have a strong opportunity to deliver into increasing defense and intelligence community demand as well as commercial customers. So there's a number of things there that are keeping us busy as the as the defense need increases.
Speaker 5: Great thanks for that caller. And just a couple of financial questions for Vito. How should we think about working capital over the next year? Obviously investment this year. Just given the program ramps, would you expect negative working capital or negative working capital?
Speaker 4: should that be contributed to cash over the next year? Yeah, thanks Thanos. So now we've been really, really pleased with our working capital.
Speaker 4: progress throughout 2022. When you look back with the significant growth and I think our working capital draw in 2022 was close to 16 million dollars. So as we work our way into 2023, don't see a significant cash requirement for working capital. We do a really focused job in ensuring that our milestone payments are matched up against the road.
Speaker 5: linearity throughout the year. You obviously gave us full year guidance, but should we see kind of a steady ramp given the various programs that is ramping up or anything to call out as far as the teens of the quarters.
Speaker 4: Yeah, no, I think it is a real nice steady year. You know, we gave guidance to Q1, we give our full year guidance. If you sort of map Q1 to our full year guidance divided by 4, you're sort of in that range. So, you know, we'll obviously see what the back half of the year brings in relation to additional programs perhaps and whatnot.
Speaker 4: As the plan stands and the guidance stands, it's a real nice study quarter over quarter type here.
Speaker 4: and the guidance stands, it's a real nice steady quarter over quarter type year. Great. I passed the line. Thanks.
Speaker 4: You're welcome. Thank you. The next question comes from Ken Herbert of RBC cattle markets. Please go ahead. Hi. Good morning. Mike Vito answering. This is actually Steve's track house on for Ken Herbert. Congrats on the next quarter this morning. I was hoping you could just kind of dive a little bit further into the free cash flow expectations for this year.
Speaker 4: growth CAPEX plans, of course, is a continued development of of course, in addition to obviously supporting our infrastructure and strategic programs and satellite and robotics. So that's very, very consistent. We expect our total CAPEX to be in the range that I provided 220 to 240, with the majority of that essentially being what we
Speaker 4: term as growth capex. So when you map that against you know our EBITDA guidance and other aspects of our cash flow it will be a negative cash flow year as expected and consistent with our plan, our longer term plan. Balance sheets in great shape 1.3 times here at the end of the year so no concern at all as we lean into these very.
Speaker 4: long-term focused and important strategic growth capex on our end. Great and then just a follow-up there on Chorus. Can you provide us any update on Chorus? I know you noted the CDR but I wanted to ask how the unit level builds are going. If there's anything in the supply chain that you're seeing as far as delays or if there's anything, you know, if you're learning anything significant in that problem.
Speaker 3: start unit level builds. It's definitely exciting to be able to drop into the satellite production facilities in Montreal and see chorus pieces coming together. That's exciting to see for
Speaker 3: you know there's always in any satellite program you've got you know puts and takes in your schedule on supply chains but to answer your question like there's nothing new or market that uh that that changes our our views on the program or our expectations um the teams continue to work very hard on it and we continue to get it done so
Speaker 3: Engaging with customers, we definitely see enthusiasm there. We have a strong customer base globally on radar sat2. Folks are looking forward to Corus coming and having a C-band and an X-band satellite working together in the same constellation. So with the pipeline type of opportunities now.
Speaker 3: you know, start to heat up once we get into unit level production and we everyone can see we're moving ahead well with this. We're definitely getting increased energy in the in the pipeline conversations moving forward.
Speaker 2: Great, thanks so much. I'll hold back. Thank you. Thanks, Steve. Thank you. Once again, ladies and gentlemen, if you do have a question, please press star one at this time.
Speaker 2: The next question comes from Christine LeWig of Morgan Stanley . Please go ahead. The next question comes from
Speaker 6: Hey, good morning guys. Hey.
Speaker 6: So following up on Globalstar, can you guys talk about an updated financing? It looks like they've secured help from Apple. And then can you remind us regarding the revenue and cash contribution for the program in 2023 and when you expect peak cash or peak revenue is for the program?
Speaker 4: Hi, Christine, it's Vito. Maybe I'll take the revenue one first. You know, the revenue is essentially pretty straight line over the three years. So I would expect 2023 revenues to be largely in line with where 2022 levels were, give or take, you know, a few million dollars. So that was pretty straight line.
Speaker 4: we're in very close contact with them. We're encouraged by where they stand in their last couple of little steps that they got to take to arrange for their financing and we'll just sit by patiently as they move to execution through that process. Great. Thanks, Vito. And following up on the growth...
Speaker 4: there are key customers of ours. So when we talk program specifics, we do get in situations where we discuss cash related to the programs. But our plan at this point in time doesn't rely at all on any government, meaningful government assistance with what I described. The balance sheet's in great shape. Again, we could continue to talk to government and ensure that the...
Speaker 4: you know, they pay and are represented appropriately in these arrangements. But I think it's important to note that our balance sheet stands on its own as we currently sit here. And if I could sneak a third one in. So on Telesat, is it possible to get Telesat revenue in 2023?
Speaker 3: can you give us an update in terms of what you're hearing from your customer and also if you're able to secure financing is this still an 800 million dollar contract by the time you get to 2024? Yeah so on the on the Lightspeed community as you know and we we talked about we
Speaker 3: at this time. They definitely, from the signals we see in the market, continue to work to try to progress their project and get their financing arranged. We continue to ensure that our bids and contribution to that program, like any other program in the pipeline, we have a number of them.
Speaker 3: remain current and valid so that they can act upon them should they get their financing put in place. So we stand by at the ready. Our scope has not decreased in any of our conversations to answer your scope of work question. So should they get the go, it would continue to be that size of a program for us.
Speaker 3: at least moving forward into the future. It's an actively worked pipeline opportunity like many others and we continue to wish them well in getting the project organized and moving forward. Thanks Mark, thank you Bill. Thanks Christine. Thank you.