Q3 2023 MDA Ltd Earnings Call

Speaker 1: Good morning ladies and gentlemen, welcome to the MDAs Conference call and webcast. This call is being recorded on November 8, 2023 at 8.30 a.m. Eastern time. Following the presentation, we will conduct a question and answer session.

Good morning, ladies and gentlemen, welcome to the <unk> Conference call and webcast. This call is being recorded on November eight 2023 at 830, a M. Eastern time. Following the presentation. We will conduct a question and answer session instructions will be provided at that time, we'll Youtube.

Speaker 1: Instructions will be provided at that time for you to queue up for questions. If anyone has difficulties hearing the conference, please press the star followed by zero for operator resistance at any time. I'd now like to turn the conference over to Shireen Sahabi, Senior Director of Investor Relations at NDA.

Two questions. If anyone has difficulty hearing the conference. Please press star followed by zero for operator assistance at any time now.

Now I'd like to turn the conference over to <unk> Senior director of Investor Relations at MDA.

Thank you operator.

Speaker 2: Thank you operator. Good morning and welcome to MDA's third quarter 2023 earnings call. My greenly RCO and Vito Comoni RCO will lead today's call and share some prepared remarks before taking your questions.

And welcome to Mdas third quarter 2023 earnings call, Mike Greeley, our CEO and Vito kimono, our CFO will lead todays call and share some prepared remarks before taking your questions.

Speaker 2: Before we begin, I'd like to remind you that today's call will include estimates and other forward looking information which may differ from actual results.

Before we begin I'd like to remind you that today's call will include estimates and other forward looking information, which may differ from actual results. Please review the cautionary language in today's press release and public filings regarding various factors assumptions and risks that could cause actual results to differ. In addition, during this call we will refer to <unk>.

Speaker 2: Please review the cautionary language in today's press release and public filings regarding various factors, assumptions, and risks that could cause actual results to differ. In addition, during this call, we will refer to certain non-IFRS financial measures.

Non <unk> financial measures.

Speaker 2: Although we believe these measures provide useful supplemental information about our financial performance, these measures do not have any standardized meaning under IFRS and our approach in calculating these measures may differ from that of other issuers and therefore may not be directly comparable. Please see the company's quarterly report and other public filings for more information about these measures, including reconcilations to the nearest IFRS measures. And with that, it's my pleasure to turn the call over to Mike.

We believe these measures provide useful supplemental information about our financial performance. These measures do not have any standardized meaning under ifr us and our approach in calculating these measures may differ from that of other issuers and therefore may not be directly comparable.

Please see the Companys quarterly report and other public filings for more information about these measures, including reconciliations to the nearest ifr S measures.

And with that it's my pleasure to turn the call over to Mike.

Thank you Sharon good morning folks and thank you to those joining us today to discuss our third quarter 2023 financial results.

Speaker 3: Thank you, Shireen. Good morning folks, and thank you to those joining us today to discuss our third quarter, 2023 financial results.

We delivered another solid quarter in Q3 with double digit revenue and adjusted EBITDA growth solid profitability and record backlog results, which showcased the team's continued strong execution and the momentum we are seeing in our business and our end markets.

Speaker 3: We delivered another solid quarter in Q3 with double digit revenue and adjusted EBIT growth. Solid profitability and record back.

Speaker 3: results with showcase the team's continued strong execution and the momentum we are seeing in our business and our end mark.

Speaker 3: Q3 was a busy quarter for MDA. In August , we announced we'd been awarded a $2.1 billion contract from Telosat to act as the prime satellite contractor on the Telosat Lightspeed Leo constellation. Our second prime satellite contract in 18 months, and a testament to MDA's innovative technology and advanced manufacturer in capabilities in this market.

Q3 was a busy quarter for MDA.

In August we announced we've been awarded a $2 $1 billion contract from <unk> to act as the Prime satellite contractor on the Telesat Lightspeed Leo constellation.

Our second Prime satellite contract in 18 months, and a testament to Mdas innovative technology and advanced manufacturers and capabilities in this market.

Speaker 3: Shortly after, we announced the acquisition of the Digital Payload Division of SADXY Communications as we continue to invest in our digital satellite technology and talent. That acquisition was completed last week, and I look forward to spending time with that team coming up soon.

Shortly after we announced the acquisition of the digital payload division of satisfied communications as we continued to invest in our digital satellite technology and talent.

That acquisition was completed last week and I look forward to spending time with that team coming up soon.

Speaker 3: We also unveiled our new software to find digital satellite product line at the World Satellite Business Week Conference in September , as the market continues to transform analog to digital satellites, with Telosat being an anchor customer for this new product line.

We also unveiled our new software defined digital satellite product line at the World Satellite business Week Conference in September as the market continues to transform from analog to digital satellites with telesat being an anchor customer for this new product line.

Speaker 3: and subsequent to quarter end, we announced a selection of SpaceX as our launch partner from Corus, our next generation Earth observation constellation, and confirmed our launch window for Q4 2025.

And subsequent to quarter end, we announced the selection of Spacex as our launch partner from chorus, our next generation Earth observation constellation and confirmed our launch window for Q4 2025.

Speaker 3: Of course, none of this would have been possible without the hard work and dedication of the entire MD-18, who I'd like to thank and acknowledge.

Of course, none of this would've been possible without the hard work and dedication of the entire MDA team, who I would like to thank and acknowledge.

Speaker 3: As a result of the strong execution year today, we are updating our guidance for the full year. We now expect 2023 revenues to be in the $790 million to $810 million range, an increase of approximately 25% year over year at the midpoint of guidance.

As a result of the strong execution year to date, we are updating our guidance for the full year. We now expect 2023 revenues to be in the $790 million to $810 million range, an increase of approximately 25% year over year at the midpoint of guidance. We're also increasing our adjusted EBITDA guidance to $1 65 to one.

Speaker 3: We're also increasing our adjusted EBITDA guidance to $165 to $175 million, representing approximately 20 to 21 percent adjusted EBITDA March.

$75 million, representing approximately 20% to 21% adjusted EBITDA margin.

Speaker 3: For the full year, we expect capital expenditures to be in the $200 to $210 million range, primarily reflecting growth investments across our business areas.

For the full year, we expect capital expenditures to be in the $200 million to $210 million range, primarily reflecting growth investments across our business areas.

Speaker 3: In line with our long-term strategic plan, we continue to invest in the business to meet current and future growth across our business areas.

In line with our long term strategic plan, we continued to invest in the business to meet current and future growth across our business areas.

Speaker 3: in satellite systems, we are continuing to make investments in new technologies and capabilities to accelerate our transition from analog to digital payloads. And build up our high volume satellite manufacturing capability as more low-earth orbit or Leo constellation opportunities come to market.

And satellite systems, we are continuing to make investments in new technologies and capabilities to accelerate our transition from analog to digital payloads and buildup, our high volume satellite manufacturing capacity as more lower orbit or Leo constellation opportunities come to market.

Speaker 3: The Tell us how Lightspeed Award is a great example of how we are strengthening and securing MBAs position at the heart of the rapidly growing leocontolation and satellite systems market.

Tell us our Lightspeed Award is a great example of how we are strengthening and securing mda's position at the heart of the rapidly growing Leo constellation and satellite systems market.

Speaker 3: MDA's contract includes the design, manufacturer assembly and test of 108 satellites with options for tele-SAT to purchase up to 100 additional satellites.

MTA contract includes the design manufacturer Assembly and test of a 198 satellites with options for telesat to purchase up to 100 additional satellites.

Speaker 3: The recently completed acquisition of SADX-FY Space Systems UK helps advanced MDA's new digital satellite product offering adding complimentary digital payload expertise and capacity to meet growing customer demand.

The recently completed acquisition of satisfy space systems, UK helps advanced Mta's, new digital satellite product offering, adding complementary digital payload expertise and capacity to meet growing customer demand.

And robotics in 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, most notably securing the award to develop the canadarm three robotic arm, which is destined for Nash as gateway Ah lunar orbit International space station.

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, most notably securing the award to develop the Canadarm III robotic arm, which is destined for NASA's Gateway, a lunar orbiting international space day.

Speaker 3: We are also engaging with a full slate of new and exciting commercial opportunities as they emerge in the market to provide both proven technology solutions and on-orbit operational services.

We are also engaging with a full slate of new and exciting commercial opportunities as they emerge in the market to provide both proven technology solutions and on orbit operational services.

And in our Geo intelligence business, we continue to see robust demand for our Earth observation data and analytics and are advancing and work on the chorus Earth observation constellations, which will provide even greater imaging capabilities and actionable insights for our customers.

Speaker 3: At energy intelligence business, we continue to see robust demand for our Earth observation data and analytics and our advancing work on the chorus Earth observation constellation, which will provide even greater imaging capabilities and actionable insights for our customers. On our quick...

I will now quickly step through the financial highlights for the quarter.

Speaker 3: spend a few minutes giving you a view on the industry, provide an update on MDA's three business areas, and then pass it over to Vito for a deep dive into the financial.

Spend a few minutes, giving you a view on the industry provide an update on Mda's three business areas and then pass it over to Vito for a deep dive into the financials.

Speaker 3: For the third quarter, MDA delivered revenues of $205 million, up 19% year-over-year, adjusted EBITDA was $43 million, up 10% year-over-year, and adjusted EBITDA margin was 20.9%.

For the third quarter MBA delivered revenues of $205 million up 19% year over year, adjusted EBITDA was $43 million up 10% year over year and adjusted EBITDA margin was 29%.

Speaker 3: Our backlog at quarter end stood at $3.1 billion, a record level for the company, driven by the sizable Telesat Lightspeed Award.

Our backlog at quarter end stood at $3 1 billion.

A record level for the company driven by the sizable Telesat Lightspeed Award.

We ended the quarter with a healthy balance sheet, which gives us the financial flexibility to run the business and invest in our strategic initiatives.

Speaker 3: We ended the quarter with a healthy balance sheet, which gives us the financial flexibility to run the business and invest in our strategic initiatives.

Speaker 3: Next, I'd like to update you on developments within the broader space market, which is continuing to expand, mature, and gain momentum.

Next I'd like to update you on developments within the broader space market, which is continuing to expand mature and gain momentum.

A few items worth highlighting.

Speaker 3: Starting closer to home, the Government of Canada announced in October $1 billion of funding over 15 years for the Radarsat Plus portfolio.

Starting closer to home the government of Canada announced in October of $1 billion of funding over 15 years for the radar plus portfolio at.

Speaker 3: an initiative aimed at ensuring continuous, efficient, and sustainable access to critical and high-quality Earth observation data for Canada.

An initiative aimed at ensuring continuous efficient and sustainable access to critical and high quality Earth observation data for Canada.

Speaker 3: The latest funding announcement builds on the momentum we saw earlier in the year when Canada announced $2.3 billion of investments for two space initiatives, continuing Canada's participation in the International Space Station, and developing and contributing a lunar utility vehicle to assist astronauts on the Moon.

The latest funding announcement builds on the momentum we saw earlier in the year, when Canada announced $2 3 billion of investments for two space initiatives, continuing Canada's participation in the international space station and developing and contributing Ah lunar utility vehicles to assist astronauts on the moon.

Speaker 3: These commitments signal not only the speed of the market opportunity before us, but the growing importance of the space economy on a national level.

These commitments signal not only the speed of the market opportunity before us, but the growing importance of the space economy on a national level.

In September.

Speaker 3: In September , the world watched as a historical seven-year mission of OSIRIS-REx successfully returned to Earth, touching down in the Utah desert with physical samples of the asteroid Bennu, thanks in part to an MDA-built laser altimeter.

Number the world watched as a historical seven year mission Osiris Rex successfully returned to Earth.

<unk> down in the Utah desert with physical samples of the asteroid Benno. Thanks in part to an MDA built laser ultimately.

Speaker 3: Over the course of six months, the OSIRIS-REx laser altimeter mapped and measured the surface of the asteroid, producing a highly accurate 3D map.

Over the course of six months, the Osiris Rex laser altimeter mapped and measured the surface of the asteroid producing a highly accurate <unk> map.

Speaker 3: That 3D map provided scientists critical insight into Bennu's surface, enabling them to pinpoint an ideal spot on the asteroid's rocky terrain from which to collect a sample.

<unk> provided scientists critical insight into new surface, enabling them to pinpoint an ideal spot on the asteroids rocky terrain from which to collect a sample the.

Speaker 3: The successful completion of this mission is a serious point of pride for all of us at MDA.

The successful completion of this mission is a serious point of pride for all of us at MDA.

Speaker 3: And on August 23rd, India became the first country to land a spacecraft near the moon's south pole, an unchartered territory that scientists believe could hold vital reserves of frozen water.

And on August 23, India became the first country to land a spacecraft near the Moon, South pool, and Unchartered territory. The scientists believe could hold vital reserves of frozen water.

With this lending India also becomes the fourth country to ever achieve a soft landing on the moon after United States, Russia and China.

Speaker 3: With this landing, India also becomes the fourth country to ever achieve a soft landing on the moon after the United States, Russia, and China.

Speaker 3: One of the major goals of India's mission is to hunt for water-based ice, which could support human habitation on the moon in the future.

What are the major goals of India's mission is to hunt for water based ice, which could support human habitation on the moon and the future.

Speaker 3: India is just one of a number of countries with lunar and space exploration ambitions. According to a recent report from space market analytics firm Euroconsult, the number of space exploration missions are projected to exceed 750 in the next decade, more than tripling from the 236 missions we saw in the previous decade.

India is just one of a number of countries with lunar in space exploration ambitions. According to a recent report from space market analytics firm Euro consult the number of space exploration missions are projected to exceed 750 in the next decade more than tripling from the 236 missions, we saw in the <unk>.

Previous 10 years.

Speaker 3: Global government spending for space exploration is expected to grow from $26 billion in 2023 to approximately $33 billion by just 2032 as governments around the world support ambitious space exploration plan.

Global government spending for space exploration is expected to grow from $26 billion in 2023 to approximately $33 billion by just 2032 as governments around the world support ambitious space exploration plans.

Speaker 3: South of the border, both NASA and the U.S. Department of Defense Space Development Agency, or SDA, continue to advance civil and defense space programs, including Artemis, NASA's lunar exploration program to send humans back to the moon.

So the border both NASA and the U S Department of Defense Space Development Agency or SDA continued to advanced civil and defense space programs, including Artemis, Nasa's Lunar exploration program to send humans back to the Moon and.

An SDA is multiple Leo constellations, which will create a new ecosystem of satellites designed to enhance the space infrastructure and help protect national interests, and which is resulting in repeat orders for core technology suppliers like MDA.

Speaker 3: and SDA's multiple LEO constellations, which will create a new ecosystem of satellites designed to enhance space infrastructure and help protect national interests, and which is resulting in repeat orders for core technology suppliers like MDA.

Speaker 3: Globally, we continue to see increased interest in space exploration, with Germany being the latest country to sign on to NASA's Artemis Accords, signaling its commitment to safe, long-term, and ethical space exploration.

Globally, we continue to see increased interest in space exploration with Germany being the latest country to sign on to Nasa's Artemis Accords signaling and its commitment to safe long term and ethical space exploration.

The latest entry brings the group size to 29 nations with interest from many non traditional space very nations, which are now building their own national space programs.

Speaker 3: The latest entry brings the group size to 29 nations, with interest from many non-traditional spacefaring nations, which are now building their own national space program.

Speaker 3: In terms of space infrastructure, spacecraft launch activity continued to unfold at a record pace. In the first half of 2023, a total of 1,666 spacecraft launched globally, an increase of approximately 40% versus the same period last year, with 93% of those spacecraft operated by commercial players and the majority comprised of communications satellite launches.

In terms of space infrastructure spacecraft launch activity continued to unfold at a record pace in the first half of 2023, a total of $1 666 spacecraft launched globally, an increase of approximately 40% versus the same period last year with 93% of those spacecraft operated by <unk>.

Commercial players and the majority comprised of communications satellite launches.

Speaker 3: The higher activity levels are driven primarily by growth in commercial Leo constellations.

The higher activity levels are driven primarily by growth in commercial Leo constellations.

Speaker 3: All of this activity bodes well for MDA and our future pipeline opportunity set, which we estimate today at approximately $17 billion in cumulative pipeline over the next five years, a level that we would characterize as very robust for the company.

All of this activity bodes well for MDA.

And our future pipeline opportunity set which we estimate today at approximately $17 billion cumulative.

<unk> cumulative pipeline over the next five years or less.

<unk> that we would characterize as very robust for the company.

Now I'll turn to our three business areas.

And satellite systems, we're seeing good momentum in this market with our teams working to advance multiple requests for communication satellite solutions and a growing number of Leo constellation projects.

We are seeing good activity levels from customers in our opportunity funnel remains strong.

Speaker 3: We are seeing good activity levels from customers and our opportunity funnel remains strong.

Speaker 3: As I noted earlier, in August , we announced an expanded role in the Telesatellite Speed Program where MDA is acting as the prime satellite contractor for the 198th Satellite Constellation responsible for the design, manufacture, assembly and test of the satellite.

As I noted earlier in August we announced an expanded role on the Telesat Lightspeed program, where MDA is acting as the prime satellite contractor for the 190 <unk> satellite constellation responsible for the design manufacturer Assembly and test of the satellites.

Speaker 3: Over the last few months, our teams have been busy engaging with our supplier base and progressing early design work, system requirements analysis, and subcontractor tendering, planning, and preparation.

Over the last few months, our teams have been busy engaging with our supplier base and progressing early design work system requirements analysis, and subcontractor tendering planning and preparation.

Additionally, with this contract telesat becomes the anchor customer for Mta's, new an industry, leading digital satellite product line.

Speaker 3: Additionally with this contract, Telesat becomes the anchor customer for MDA's new and industry-leading digital satellite product line. The fully integrated portfolio includes a complete range of modular digital products and components for space-based communication solutions coupled with advanced high-volume manufacturing capability capable of delivering two satellites a day, helping dramatically to reduce production costs and schedule for customers.

The fully integrated portfolio includes a complete range of modular digital products and components for space based communication solutions, coupled with advanced high volume manufacturing capability capable of delivering two satellites a day.

Helping dramatically reduced production cost and schedule for customers.

Speaker 3: As an example, Telesat has indicated that MDA's new software-defined satellite product was a significant factor in their ability to bring down the cost of light-speed constellation by approximately $2 billion when compared to the original constellation design.

As an example, telesat as indicated the Mta's new software defined satellite product was a significant factor in their ability to bring down the cost of lightspeed constellation by approximately $2 billion.

When compared to the original constellation design.

Speaker 3: We also recently completed the acquisition of the Digital Payload Division of Satexfly Communications, and I'd like to extend a warm welcome to our new team members. The team, which is based in the UK, has been integrated into MDA UK and brings with it strong capabilities and expertise in digital payload technology.

We also recently completed the acquisition of the digital payload division of satisfy communications and I'd like to extend a warm welcome to our new team members. The team, which is based in the UK has been integrated into MBA UK and brings with its strong capabilities and expertise in digital payload technology.

The team will be collaborating closely with our satellite systems business in Montreal, and will help us expand our footprint in the UK market and add strategic in country capability to produce satellite payloads.

Speaker 3: Moving to other notable programs, we continue to make good progress on the GlobalSTAR program. The team recently completed the Satellite Critical Design Review and is currently progressing towards a Spacecraft Integration Readiness Review in Q1 of 2024.

Moving to other notable programs, we continue to make good progress on the Globalstar program. The team recently completed the satellite critical design review and is currently progressing towards these spacecraft integration readiness review and Q1 of 2024.

Speaker 3: For the GlobalSTAR program, MDA was selected as the satellite prime contractor to enhance GlobalSTAR's LEO Constellation through the addition of 17 satellites, which support SOS features and direct-to-device communication for GlobalSTAR's customer applications.

For the Globalstar program MBA was selected as the satellite prime contractor to enhanced globalstar as Leo constellation through the addition of 17 satellites, which support Sos features and directed device communication for Globalstar customer Apple.

Moving to our Geo intelligence business customer demand for our Earth observation offerings remained robust and we are seeing 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: Moving to our geointelligence business, customer demand for our Earth observation offerings remain robust and we are seeing increased recognition of the role that commercial Earth observation satellites can play to provide near real-time data and analytics to governments and private enterprises.

Speaker 3: We continue to advance work on our Quorus constellation, which will include a fourth-generation MDA-built C-band Synthetic Aperture Radar Satellite, in addition to the X-band satellite which we're purchasing.

We continue to advance work on our corn chorus constellation, which will include a fourth generation MDA built C band synthetic aperture radar satellite in addition to the X band satellite, which we're purchasing.

Speaker 3: The team continues to advance unit and subsystem level work for the platform, payload and bus avionics as well as building the ground segment subsystems and detailing constellation operations plans and processes.

The team continues to advance unit and subsystem level work for the platform payload and bus avionics as well as building the ground segment subsystems and detailing constellation operations plans and processes.

Speaker 3: Subsequent to quarter end, we announced at our Earth Insights customer event in October , the selection of SpaceX as our large partner for chorus, with a launch window set for Q4 2025.

Subsequent to quarter end, we announced at our Earth insights customer event in October the selection of Spacex as our large partner for us with the launch window set for Q4 2025.

The event, which brings together our global customer community for our Earth observation business was a great opportunity to feature the enhanced capabilities of course and help existing and new customers gained a better appreciation of the technology that's coming.

Speaker 3: The event which brings together our global customer community for our Earth observation business was a great opportunity to feature the enhanced capabilities of course, and help existing and new customers gain a better appreciation of the technology that's coming.

We are pleased with the response from customers and continue to engage in active discussions with both new and existing customers on how <unk> can help address the earth observation data and analytics needs.

Speaker 3: We are pleased with the response from customers and continue to engage in active discussions with both new and existing customers on how KORUS can help address their earth observation data and analytics needs.

In terms of other notable programs work on the Canadian surface combatant, where CSC program one of our long term government program is progressing in line with our expectations. The team continues to meet our technical milestones and complete capability testing as required.

Speaker 3: In terms of other notable programs, work on the Canadian Surface Combatant, or CSC, program, one of our long-term government programs, is progressing in line with our expectations. The team continues to meet our technical milestones and complete capability testing as required.

Speaker 3: Recall that 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 threats to help protect the men and women of the Royal Canadian Navy.

Recall that 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 threats to help protect the men and women of the Royal Canadian Navy.

Moving to our robotics in space operations business, we continue to see good traction and activity levels on both government and commercial fronts.

Speaker 3: We continue to see good traction and activity levels on both government and commercial front.

Speaker 3: On the government side, we continue to progress the design work on Phase B of the Canadarm3 contract, which MDA was awarded in early 2022. And now we'll see us completing the preliminary design of Canadarm3's robotic system to be used aboard the NASA-led Lunar Gateway.

On the government side, we continue to progress the design work on phase B of the Canadarm three contract, which MDA was awarded in early 2022 now.

Now we will see is completing the preliminary design of canadarm threes robotic system to be used aboard the NASA led lunar gateway.

Speaker 3: The team is making good progress towards the preliminary design review milestones, and during the quarter, we submitted an updated bid for the next phases of work on Canadarm3, including advanced detailed design, detailed design and manufacture, integration and tests.

The team is making good progress towards the preliminary design review milestones and during the quarter. We submitted an updated bid for the next phases of work on Kinder arm three including advanced detailed design detailed design and manufacturer integration and test.

In Q3, we also received follow on contracts for the Canadarm, three external robotics interfaces, including the final construction and delivery of the interfaces. This latest award builds on the design work completed by MD NDA during the earlier phases of the program with these new contract awards the external robotic interfaces.

Speaker 3: In Q3, we also received follow-on contracts for the Canadarm3 external robotics interfaces, including the final construction and delivery of the interface.

Speaker 3: This latest award builds on the design work completed by MDA during the earlier phases of the program.

Speaker 3: With these new contract awards, the external robotic interfaces become the first Canadarm3 hardware components to go into production, a major milestone for the Canadarm3 program and Canada's space program.

Become the first canadarm III hardware components to go into production.

A major milestone for the <unk> III program and Canada space program.

Speaker 3: The team is also working with the Canadian Space Agency on Bids for follow-on services contracts to provide engineering support for the International Space Station Robotics, including Canadarm 2 as part of Canada's commitment to support the ISS until its retirement in 2030.

The team is also working with the Canadian Space Agency on bids for follow on services contracts to provide engineering support the international space station robotics, including Canadarm to as part of Canada's commitment to support the ISS until his retirement in 2030.

On the commercial side, we are exploring a number of opportunities to incorporate our robotic technology and applications to support space exploration and mobility and are encouraged by the level of customer activity in this market area.

Speaker 3: On the commercial side, we're exploring a number of opportunities to incorporate our robotic technology on applications to support space exploration and mobility and are encouraged by the level of customer activity in this market area.

Shifting to operations.

Speaker 3: We continue our hiring efforts to support the anticipated revenue ramp-up. Over the last year, we have added more than 840 new hires. With more than 2,900 highly skilled MDA staff, we have the people and the talent to help propel our growth and give us the scale to execute on the market opportunities we see emerging.

We continue our hiring efforts to support the anticipated revenue ramp up over the last year, we've added more than 840, new hires with more than 2900 highly skilled MDA start we have the people and the talent to help propel our growth and give us the scale to execute on the market opportunities we see emerging.

The team is busy planning and preparing for the move to our new global headquarters in space Robotics Center of excellence in Brampton, Ontario expected to begin in the first quarter of 2024.

Speaker 3: The team is busy planning and preparing for the move to our new global headquarters and space robotics center of excellence in Brampton, Ontario, expected to begin in the first quarter of 2024. This purpose-built facility will feature a state of the air labs, manufacturing, R&D, and assembly integration and test facilities.

This purpose built facility will feature state of the our labs manufacturing R&D and assembly integration and test facilities.

Speaker 3: The Center of Excellence will also house multiple space robotics mission control centers, enabling MDA to provide critical on-orbit operations capabilities to commercial and government customers worldwide.

The center of Excellence will also house multiple space Robotics mission control centers, enabling MDA to provide critical on orbit operations capabilities to commercial and government customers worldwide.

Speaker 3: We also remain vigilant when it comes to our supply chain, keeping a close eye for potential business disruptions, and so far these have all been manageable.

We also remain vigilant when it comes to our supply chain, keeping a close eye for potential business disruptions and so far these have all been manageable.

We continue to deploy a number of proactive measures that have served us well these.

Speaker 3: We continue to deploy a number of proactive measures that have served us well. These include designing around known shortages, finding alternatives that are more readily available, ordering materials as early as possible, and building up inventory for some components.

These include designing around known shortages finding alternatives that are more readily available ordering materials as early as possible and building up inventory for some components for.

Speaker 3: For new programs, we are ensuring that our supply chain organization has full visibility early in the process to ensure our orders are placed promptly and monitored constantly to mitigate any delay risks. To recap,

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 monitoring constantly to mitigate any delay risks.

To recap we are pleased with our performance this quarter.

Speaker 3: with momentum building across our operations. Our team is energized and we remain laser focused on our priority.

With momentum building across our operations our team is energized and we remain laser focused on our priorities our 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.

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 initiative.

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With that I'll hand, it over to Vito to walk us through the detailed financials.

Speaker 4: With that, I'll hand it over to Beto to walk us through the detailed financials. And thank you, Mike, and good morning, everyone. For my update today, I'll walk you through our K3 2023 financial results and also provide additional color on our outlook up.

Thank you, Mike and good morning, everyone.

For my update today I'll walk you through our Q3 2023 financial results and also provide additional color on our outlook update.

As Mike has noted overall Q3 was a strong quarter for MDA and we're pleased with how the team is executing.

Speaker 4: Mike just noted overall Q3 was a strong quarter for him, Dan, we're pleased with how the team is X.

Speaker 4: In the quarter, we saw strong revenue growth with revenues up 19% year-over-year, slightly ahead of our guidance for the quarter.

In the quarter, we saw strong revenue growth with revenues up 19% year over year.

Slightly ahead of our guidance for the quarter.

In terms of adjusted EBITDA, adjusted EBITDA margin of 29% exceeded our 19% to 20% guidance range.

Speaker 4: in terms of adjusted EBITDA, adjusted EBITDA margin of 20.9% exceeded our 19 to 20% guidance range, and backlog at the end of the quarter stood at a record $3.1 billion.

Backlog at the end of the quarter stood at a record $3 1 billion.

Speaker 4: Total revenues for the quarter were $204.7 million, and this represents a $32.7 million, or 19% increase over the same period last year.

Total revenues for the quarter were $204 $7 million and this represents a $32 $7 million or 19% increase over the same period last year.

Speaker 4: And the year of a year increases, we're driven by higher revenues across our businesses with strong contributions from our satellite systems, and our robotics and space operations business.

And the year over year increases were driven by higher revenues across our businesses with strong contributions from our satellite systems and our robotics in space operations businesses in particular.

By business area revenues and our deal intelligence business of $48 4 million represents an increase of $2 9 million or six 4%.

Speaker 4: By business area revenues in our geo intelligence business of 48.4 million represents an increase of 2.9 million or 6.4 percent compared to Q3 2022 and this was driven by slightly higher volumes of work.

Compared to Q3 2022, and this was driven by slightly higher volumes of work.

And robotics in space operations, we saw healthy year over year growth with revenues of $61 9 million in the latest quarter and that represented a $7 million.

Speaker 4: robotics and space operations. We saw healthy year over year growth with revenues of 61.9 million in the latest quarter and that represented a 7 million point three million dollar increase or 13.4 percent versus Q3 of last year.

$3 million increase or 13, 4% versus Q3 of last year.

And the growth is largely attributable to higher volume of work performed on the Canada arm three program.

Speaker 4: And the growth is largely attributable to higher volume of work performed on the Canada Armed 3 program.

Speaker 4: Revenue is in fact systems of 94.4 million in the third quarter where 22.5 million or 31.3 percent higher compared to the same quarter in 2022.

Revenues in <unk> systems of $94 4 million in the third quarter were $22 5 million or 31, 3% higher compared to the same quarter in 2022.

Speaker 4: Strong showing was driven by higher work volume as new programs rank up, ramp up, including the Global Star Program, which was awarded to us in Q1 of 2022.

Strong showing was driven by higher work volume as new programs ramp up ramp up including the Globalstar program, which was awarded to US in Q1 of 2022.

Moving to gross profit and as a reminder, gross profit represents our revenues less cost of revenues, which includes materials labors allocated overhead shredded credits and depreciation.

Speaker 4: Moving to gross profit and as a reminder gross profit represents our revenues less cost of revenues which include materials, laborers, allocated overhead, shred credits and depreciation.

For Q3 gross profit was $57 7 million, representing a $1 3 million or two 3% increase over the same period last year.

Speaker 4: 4Q3 gross profit was 57.7 million representing a 1.3 million or 2.3% increase over the same period last year. Gross margins in Q3 2023 was 28.2%. And this compares to 32.8% for the same period in 2022.

Gross margins in Q3, 2023 was 28, 2% and this compares to 32, 8% for the same period in 2022.

Speaker 4: as a result of MDA's evolving program mix and in line with our expectations.

As a result of Fda's evolving program mix and in line with our expectations.

Speaker 4: As discussed in previous quarters, we do anticipate the mix of programs in 2023 to cause a slight drop in gross margins as we make our way throughout the year. And we're seeing.

As discussed in previous quarters, we do anticipate the mix of programs in 2023 to cause a slight drop in gross margins as we make our way throughout the year and we're seeing that here.

Speaker 4: 23 operating expenses of $42 million were 3.4 million or 8.8% higher than last year's metric of 38.6.

Q3, operating expenses of $42 million were $3 4 million or eight 8% higher than last year's metric of $38 6 million.

Speaker 4: And this reflects an expansion of our S-GNA functions as our work volume grows, and a steady pace of R and D invests.

And this reflects an expansion of our SG&A functions as our work volume grows and the steady pace of R&D investment as.

Speaker 4: as we advance our development work on course, our next generation Earth Observation Consolation, and other proprietary technology initiatives.

As we advance our development work on of course, our next generation Earth observation constellation and other proprietary technology initiatives.

Adjusted EBITDA.

Speaker 4: The adjusted EBITDA on the latest quarter was 42.8 million compared to 38.8 million in Q3 of 2022 driven by higher gross profit as we continue to execute on our back.

Adjusted EBITDA in the latest quarter was $42 8 million compared to $38 8 million in Q3 of 2022.

Driven by higher gross profit as we continue to execute on our backlog.

Adjusted EBITDA margin was 29% in Q3 2020 in Q3 2023 excuse me compares to 22, 6% in the same period last year.

Speaker 4: adjusted EBITDA margin was 20.9% in Q3 2023 compares to 22.6% in the same period last year.

And the year over year change in adjusted EBITDA margin was largely in line with the variance in gross margin over the same period.

Speaker 4: And the year over year change in adjusted EBITDA margin was largely in line with the variance in gross margin over the same period.

Speaker 4: As noted, we ended the quarter with 3.1 billion in backlog. This represents an increase of 123% on a year-to-date basis and 118% versus the same period last year.

As noted we ended the quarter with $3 1 billion in backlog and this represents an increase of 123% on a year to date basis and 118%.

Versus the same period last year.

Speaker 4: The increase in backlog was driven by new order bookings, including the recently announced Towsat Lightspeak Constellation Contract Award, partially upset by continued conversion of our backlog inter-review.

The increase in backlog was driven by new order bookings, including the recently announce announced Telesat Lightspeed constellation contract award, partially offset by continued conversion of our backlog into revenue.

Speaker 4: In terms of CAPEX, we remain focused on making the right investments in the business to support our strategic growth initiatives. And in Q3 2023, we spent 49.4 million on gross capital expenditures. This was up slightly from 40.9.

In terms of Capex, we remain focused on making the right investments in the business to support our strategic growth initiatives and in Q3 2023, we spent $49 4 million on gross capital expenditures. This was up slightly from $49 million last year.

Speaker 4: Growth Capix was 44 million in the latest quarter compared to 35 million in Q3 of 2022.

Growth Capex was $44 million in the latest quarter compared to $35 million in Q3 of 2022 and.

And consistent with our plan, we expect to see year over year growth in Capex spend as we advance course and invest in initiatives to support our growing business, including expanding and modernizing our physical infrastructure.

Speaker 4: In system with our plan, we expect to see you over your growth and cap expand as we advance course and invest in initiatives to support our growing business, including expanding and modernizing our physical and...

Speaker 4: Cash from operations during the quarter was a usage of $30 million, compared to a cash generation of $7 million in Q3 of 2022.

Cash from operations during the quarter was a usage of $30 million.

Compared to a cash generation of $7 million in Q3 of 2022.

Speaker 4: The year over your decrease was driven by higher working capital requirements in Q3, 2023. As a result of the timing of certain milestone payments versus the same period of time.

The year over year decrease was driven by higher working capital requirements. In Q3 2023, as a result of the timing of certain milestone payments versus the same period last year.

On a trailing 12 months basis, it's important to note that our operating cash flow totaled 95 million, helping fund our growth investments.

Speaker 4: On a trailing 12 month basis, it's important to note that our operating cash flow total is 95 million helping fund our growth.

Free cash flow in the quarter was a use of $79 4 million in the latest quarter cash from financing activities was an inflow of $53 5 million, which primarily reflects the borrowings made on our revolving credit facility during the quarter compared to $23 5 million into Q3 of 2022.

Speaker 4: Free cash flow in the quarter was a use of 79.4 million in the latest quarter. Cash from finance and activities was an inflow of 53.5 million, which primarily reflects the borrowings made on our revolving credit facility during the quarter, compared to 23.5 million in the Q3 of 2022.

In terms of balance sheet, we ended the quarter with a healthy financial position as Mike has noted net debt at the end of the quarter stood at $294 million available liquidity was 275 remains elevated at $275 million and net debt to trailing 12 months adjusted EBITDA ratio was one seven X.

Speaker 4: In terms of balance sheet, we ended the quarter with a healthy financial position. As Mike has noted, net debt at the end of the quarter stood at $290.4 million. Available liquidity was $275, remains elevated at $275 million. And net debt to trail in 12 months adjusted, but a ratio was 1.7.

In summary, this was another strong quarter of execution from the team and in line with our guidance, we're seeing positive inflection in our revenue and profitability as we convert our backlog.

Speaker 4: In summary, this was another strong quarter of execution from the team and in line with our guidance, we're seeing positive inflection and our revenue and profitability as we convert our backlog.

Turning briefly to outlook for fiscal 2023, we're raising our financial outlook to reflect strong execution to date.

Speaker 4: Turning briefly to Outlook for fiscal 2023, we're raising our financial outlook to reflect strong execution to date. We're narrowing our full-year revenue guidance to $790 to $810 million. And this was from $785 to $810 million previously. And this represents robust year-over-year growth that will approximate 25% at the midpoint of guidance.

We're narrowing our full year revenue guidance to $7 $90 million to $810 million and this was from $785 to $8 million to $10 million previously.

And this represents a robust year over year growth of approximately 25% at the midpoint of guidance.

We are raising our 2023, adjusted EBITDA guidance to $165 million to $170 million from.

Speaker 4: We are raising our 2023 adjusted EBITDA guidance to $165 to $170 million.

Speaker 4: from 155 to 165 million previously. And this represents approximately 20 to 21%. Adjust the EBITDA margin.

From $1 $55 million to $165 million previously and this represents approximately 20% to 21% adjusted EBITDA margin.

We're also narrowing our 2023 capital expenditures range to $200 million to $210 million.

Speaker 4: We're also narrowing our 2023 capital expenditures range to 200 to 210 million from 200 to 220 million previous

From $200 million to $220 million previously comprising primarily of growth investments to support of course, and the previously outlined growth initiatives across our three business areas.

Speaker 4: comprising primarily of growth investments to support course and the previously outlined growth initiatives across our

With strong execution year to date, we look forward to wrapping up another successful year here for MDA, our backlog sets us up well for 2024 is our teams ramp up in advance.

Speaker 4: With strong execution year to date, we look forward to wrapping up another successful year here for MDA. Our backlogs set for sub...

Speaker 4: Well, for 2024 as our teams ramp up in advance.

Speaker 4: our work on a number of technologically exciting and strategic programs across our entire business.

Our work on a number of technologically exciting and strategic programs across our entire business.

Speaker 3: Mike, with that, I'll turn it over to you. All right. Thank you, Vito. I think with that, we'll open it up to questions, operator.

With that I'll turn it over to you.

Alright, Thank you Brito.

I think with that we'll open it up to questions operator.

Thank you ladies and gentlemen, we will now begin the question and answer session should you have a question. Please press the star followed by the one on your touch points.

Speaker 1: Thank you. Ladies and gentlemen, we will now begin the question and answer session. Should you have a question, please press the star followed by the one on your touchtone sign.

Speaker 1: Our first question comes from Dark Taylor from Canacot Genuity. Please go ahead, your line is open.

Our first question comes from Doug Taylor from Canaccord Genuity. Please go ahead. Your line is open.

Yes, Thank you and good morning, everyone. Congratulations on another strong quarter of execution.

Thanks, Doug.

Speaker 5: Tell us that earlier this week spoke to the strong progress in moving the light speed program forward with ramping and working with supply chain and such you've echoed that today. So my question is, I wonder if you know, with the benefit of a couple more months of planning now behind us. Are you willing to share anything incremental about the model implications we can anticipate for 2024 or any other timeline that you could potentially help us with.

Telesat earlier this week spoke to the strong progress in moving the Lightspeed program forward with ramping and working with supply chain and such you back out that today.

So my question is I wonder if.

The benefit of a couple more months of planning now behind US are you willing to share anything incremental about the model implications, we can anticipate for 2024 or any other timeline that.

You could potentially help us with.

Speaker 3: Yeah, I think probably not a lot right now. It's very similar to how we've talked about it before. Like, I agree.

Yes, I think probably not a lot right now is very similar to how we've talked about it before like.

I agree with our remarks of course, and I agree with <unk> remarks, like we're very much in sync we are executing on the plan on.

Speaker 3: with our remarks of course and I agree with Tell Us As remarks like we're very much in sync, we're executing on the plan.

Speaker 3: The teams are working really well together, so it's a very positive story. But there's a lot of work to do to ramp up. So it is a it is a long-ridesaw ramp up. You know, we've tried to characterize that through 24 or that

The teams are working really well together so it's a very positive story.

But theres a lot of work to do to ramp up. So it is a it is a long gradual ramp up we've tried to characterize that through 'twenty for that.

Speaker 3: You know, it's a steady ramp up through 24 as we, you know, solve everything and start to incrementally activate the supply chain.

The steady ramp up through 'twenty, four as we solve everything and start to incrementally activate the supply chain with.

Speaker 3: With the follow on years being a bit bigger of a burst as we then get into really receipt of a lot of materials and get into production towards those first 2026 launches. So the 24 is a ramping year for the year and then very heavy, busy 25 and 20.

The follow on years being a bit bigger of a burst as we then get into really receipt of a lot of materials and get into production.

Towards those <unk> 2026 launches so the the 24 is a ramping year for the year and then.

Very heavy busy.

25% and 26.

Speaker 5: Okay, maybe sticking with the satellite systems business seems like the global star program continues to move along nicely. Can you, could you remind us as to when we should expect to reach peak revenue throughput related to that program?

Okay, and then maybe sticking with the satellite systems business. It seems like the Globalstar program continues to move along nicely can you could you remind us as well as to when we should expect to reach peak revenue throughput related to that program.

In the years ahead.

Speaker 3: you know in the years ahead. I'll let Vito talk if he's got anything there, but I remember when we first talked about this program and it hasn't changed. It's very much a steady program. It's sort of a three year burst with like steady years throughout the three years on.

I will let Vito talk if he's got anything there, but I don't know I remember when we first talked about this program and it hasnt changed its very much a steady program is sort of.

A three year burst with like steady years throughout the three years on that one.

Speaker 3: And so there's not really a peak it's just like three solid steady years and that are you know similar in

And so theres not really a peak, it's just like three solid steady years that are.

Similar in nature.

Yes, I'd just add.

Speaker 4: I just echo those comments, Mike. Doug, Globalstar's progressing extremely, extremely well. We expect steady revenue through 2024 in relation to 2023, if you will. There's always some revenue recognition timing-related matters from a subcontractor perspective, but pretty well in line, I'd say. And just to echo back to

With those comments, Mike, Doug Globalstar progressing extremely extremely well.

We expect steady revenue through 2024 in relation to 2023. If you will there is always some revenue recognition timing related matters.

From a subcontractor perspective, but pretty well in line I would say and just to echo back to your question around Telesat in what Mike articulated clearly we will be looking forward to it.

Speaker 4: question around, tell us that and what Mike articulated. Clearly we'll be looking forward to, you know, with our year end results in providing more robust 2024 guidance, if you will, formal guidance. That project and the initiatives there that Mike described are going exceedingly well and, you know, the developments over the next couple of months.

With our year end results and providing more robust 2024 guidance, if you will formal guidance.

That project and the initiatives there that Mike described going exceedingly well and and.

The developments over the next couple of months as the teams.

Speaker 4: As the teams continue to dialogue, we'll provide a little bit more insight into maybe 2024

Yes.

As the teams continue to dialogue.

We'll provide a little bit more insight into maybe 2020 for revenue as specifics, but nothing.

Speaker 4: but nothing, no advance of it, no activity has transpired over the last couple of months that take us away from, you know, some of that.

No events.

No activity has transpired over the last couple of months that.

And that takes us away from some of that.

Commentary that we provided when we announced the program that's all progressing in line with our expectations to more slightly positive.

Speaker 4: So progressing in line with our expectations to more slides.

We will look forward to more detail next quarter last question for me given you know book to ride for chorus.

Speaker 5: We'll look forward to more detail next quarter. Last question for me, giving you now book to ride for chorus on SpaceX, can we infer increased confidence in the remaining technical and production milestones required there as you look to de-risk the build of that constellation?

Spacex can we infer.

<unk> confidence in the remaining technical and production milestones required there as you as you look to derisk the build of that constellation.

Speaker 3: Yep, absolutely, that is the case. That's why we would make those announcements at this time as they were past all of our critical design reviews. We're in unit production, next year we'll transition from unit production and satellite production. And then, you know, we can see all that. And, you know, based on our schedules, we've made all these calls with SpaceX in our launch windows. So that's what we're confident in for sure. I'll pass away.

Absolutely that is the case, that's why we would make those announcements at this time is that we are past all of our critical design reviews, where in unit production next year will transition from unit production and satellite production and.

We can see all that in.

Based on our schedules we've made all these calls with Spacex and our launch window. So.

That's what we're confident in for sure.

I'll pass the line. Thank you.

Okay. Thanks, Doug.

Thank you. Our next question comes from Ken Herbert from RBC Capital. Please go ahead. Your line is now open.

Speaker 1: Thank you. Our next question comes from Ken Herbert from RBC Capital. Please go ahead, your line is open.

Yes, hi, good morning.

Speaker 5: Yes, good morning, Mike, Vito and Serene.

Vito and <unk>.

Nice quarter again, maybe just to start Mike if we look at the potential the telesat exercise is more of the options on the light speed program can you just talk about where you stand with capacity on the digital satellite side and would you need to incrementally add capacity or how should we think about that over the next couple of year.

Speaker 5: Nice quarter again, maybe just to start Mike, if we look at the potential, the Tevilsat exercises, more of the options on the Lightspeed program, can you just talk about where you stand with capacity on the digital satellite side, and would you need to incrementally add capacity, or how should we think about that over the next couple of years?

Yes, it's a big big topic, everyone wants to talk about this topic is a good topic.

Speaker 3: Yeah, it's a big, big topic. Everyone wants to talk about this topic. It's a good topic because we do have a very active pipeline and people, you know, people need to have the right frame of mind in talking with us about our capacity.

Because we do have a very active pipeline and people people need to have the right frame of mind.

Talking with us about our capacity.

Speaker 3: You've heard us talk about the transition that we're making, and we're making a transition to the new digital satellite product, which has strong overlap across multiple opportunities and a growing pipeline. And that we're then modifying both of our engineering processes around more of a product-based framework as a result, and we're modifying our operations and production facilities around a product line.

You've heard us talk about the transition that we're making and we're making a transition to the new digital satellite product, which has strong overlap across multiple opportunities in our growing pipeline.

And that will then we're modifying our both of our.

Engineering processes around more of a product based framework.

As a result, and we're modifying our.

Operations and production facilities around a product line and so that's the transition that we're making in the business is to this product and this product production.

Speaker 3: And so that's the transition that we're making in the business is to this product and to this product production.

Speaker 3: That's one significant transition, but we're doing it. And it's going well. The result of that is that we can then produce two satellites a day. We keep saying that number that this will allow us to produce two satellites.

That's one significant transition, but we're doing it.

And it's going it's going well.

The result of that is that we can then produce two satellite today.

We keep saying that number that this will allow us to produce two satellites a day.

Speaker 3: I, of course, going around telling people to help them fill in with the math, whereby two satellites a day is 400 satellites a year. And on a five-year block, that would be 2000 satellites and a five-year block if you do the math. And tell us that it's ordered 200 of those 2000 over the next five years.

I of course going around telling people, helping people with the math whereby two satellite today is 400 satellites a year and on a five year block that would be 2000 satellites in a five year block and you can do the math.

And tell US that's ordered 200 of those 2000 over the next five years and so if we got a top up for another 100 from them then that would be fine that fits in the capacity that we're establishing in the business.

Speaker 3: And so, you know, if we got a top up for another hundred from them, then that would be fine. That fits in the capacity that we're establishing in the business.

Speaker 3: If somebody else came along and ordered another chunk, then that's fine too. It fits in with that capacity.

Somebody else came along and ordered another chunk then thats fine too it fits in with that capacity and so we're making this one transition to give ourselves. This capacity and then I get to stare down the sales team to say, Okay. We sold 202000, we got to get 1800 more.

Speaker 3: And so we're making this one transition to give ourselves this capacity, and then I get to stare down the sales team to say, okay, you know, you sold 200 at 2,000, we got to go get 1,800 more. And everybody smiles back. But that's what we're working on. So definitely we have the capacity to be able to receive those types of top-up or follow-on

And everybody smiles back, but thats what were working on so so definitely we have the capacity.

To be able to receive those types of top up or follow on orders.

Speaker 5: That's very helpful. And just as you think about that transition to the clearly more of a product-based approach, and I can appreciate probably the most recent acquisition fits into this, but what are the risks inherent in that transition, or how should we think about maybe where there could be either positive or negative surprises as part of this transition over the next few quarters?

That's very helpful and just as you think about that transition to the clearly more of the products based approach.

And I can appreciate probably the most recent acquisition fits into this.

But what are the risks inherent in that transition or how should we think about maybe where there could be.

Either positive or negative surprises as part of this transition over the next few quarters.

Speaker 3: Yeah, I think that in any transition, well, in all of our growth, you know, we've always said when everyone says, what are your big worry beads, we always talk about talent.

Yes, I think that in any in any transition well and all of our growth. We've always said when everyone says what are your what are your big worry beads, we always talk about talent.

Speaker 3: We've hired a lot in the last few years. We continue to hire and hire well.

We've hired a lot in the last few years, we continue to hire and hire well.

Speaker 3: You know, strong engineers are coming into the company, strong manufacturing techs are coming into the company People are attracted by space and so we are able to hire well But we massively continue to focus on that because human talent

<unk>.

At strong engineers are coming into the company strong manufacturing tax are coming into the company people are attracted by space and so we are able to hire well, but we massively continue to focus on that because human talent.

Speaker 3: is what gets us here and keeps us here. And so that's a big area of focus. As you mentioned, the acquisition of the UK brings in some talent. Also brings in a new team in location. We can tuck a few more people in and around them as we go forward into the future as well. So it gives us a couple of different areas where we can add talent to the business. So we'll pay attention to that. Other big things that we focus on, the transition to the more advanced manufacturing.

Is what gets us here and it keeps us here.

So that's a big area of focus as you mentioned the acquisition in the UK brings in some talent also brings in a new team in location. We can talk a few more people in and around them as we go forward into the future as well so it gives us.

A couple of different areas, where we can add talent to the business. So so we will pay will pay attention to that.

Other big things that we focus on.

The transition to the more.

Advanced manufacturing.

Is is an incremental step really we've been doing this for several years now as we've gone through our role in constellation's over the last number number of years.

Speaker 3: is an incremental step really. We've been doing this for several years now, as we've gone through our role in constellations over the last number of years.

Speaker 3: through O3B and RIDIUM next and then the one web constellations. You certainly not one web const that transitioned to one web which was you know very much a robotics based manufacturing and test transition So as we produced over two thousand satellites for you know the first generation of the one web constellation

Through <unk> and Iridium next and then the one web constellations.

Certainly not one way that transitioned to one web which was very much a robotics based manufacturing and test.

Transition.

So as we produced over 2000 satellites for the first generation of the one web constellation did I say satellites I mean at Tennant's 2000 tenants yet for the first generation.

Speaker 3: Did I say satellite? I mean, at 10 is, 2010 is for the first generation. So that's, you know, got us, you know, got our chops all tuned up to be able to do this stuff. And now we're transitioning all those skills, you know, with support about side experts into the full satellite advanced manufacturing production. So that's more of an incremental step. One of the key things at the moment that we need to pay attention to, when I mentioned in my remarks, is our continued focus on our supply chain.

Thats.

Got us.

<unk> got our chops, all tuned up to be able to do this stuff and now we're transitioning all those skills with support of outside experts.

Into the into the full satellite advanced manufacturing production. So that's more of an incremental step.

One of the key things at the moment that we need to pay attention to and I mentioned in my remarks is our continued focus on our supply chain.

Speaker 3: So we're now out in the market buying very high volumes, and so us making the right choices there and us making sure that our supply chain can scale with us is also a very important laser-focused item for us.

So we're now out in the market buying very high volumes, and so us, making the right choices, there and us making sure that our supply chain can scale with US is also a very important laser focus item for us.

Yeah.

Speaker 5: Great, Mike. Appreciate all the cover. I'll pass it back there. Okay. Thank you.

Okay, Mike I appreciate all the color I'll pass it back there.

Okay. Thank you.

Thank you. Our next question comes from Kunal <unk> from Scotia Bank. Please go ahead. Your line is open.

Speaker 1: Thank you. Our next question comes from Kona Gupta from Scorsha Bank. Please go ahead. Your line is open.

Thanks, operator.

Speaker 6: Thanks, operator, and congrats on a good quarter. Just wanted to ask about margins first. You're still trending about 20% margin so far this year. And I know you've been talking about 18% to 20% margins long term. Was there anything specific in the quarter that held the margins in terms of mix?

That's a good quarter.

Just wanted to.

Ask about margins.

You're still spending about 20% margin.

This year I know you've been talking about 18% to 20% margins long term.

Was there anything big in the quarter that helped the margins in terms of mix and.

Speaker 6: And your Q4 implied guidance kind of suggests 18% margin. So is that mix shifting into Q4 more than you anticipated? Or what's really happening in these two quarters?

Q4 implied guidance kind of suggests an 18% margin. So is that mix shifting into Q4 more than you anticipated.

What's really happening.

These two quarters.

<unk>.

Speaker 4: Hi, Conarch, it's Vito. Excuse me. No, we just continue to see great execution. I mean, obviously, MIX contributes. A satellite, in particular, business is a bigger component, but they're executed very well. And the absorption of the overhead as we scale up in the application to the programs continues to be ahead of our expectations. So it's, overall, just continued good execution.

Excuse me no. We just continue to see great execution, I mean, obviously mix mix contributes a satellite in particular business is a bigger component, but there are executed very well and the absorption of the overhead as we scale up.

And the application to the programs continues to be ahead of our expectations. So it is overall just continued good execution.

Speaker 4: You're right in regards to what we're implying there for Q4, and Q4, typically, you do have some seasonal effects there that, in addition, we don't expect any significant.

Youre right in regards to what we're implying there for Q4.

And Q4, typically you do have some seasonal effects there.

In addition, we don't expect any significant quarter over quarter mix related issues Q3, and Q4, that's more maybe just reflecting some seasonality.

Speaker 4: quarter over quarter mix related issues Q3 and Q4. That's more maybe just reflecting some seasonality that we typically see in Q4, although if you have cast your eye to prior year you also see healthy margins there as well. So we'll continue to refine our guidance and continue to execute towards it. But

That we typically see in Q4, although if you cast your eye to prior year. You you also see healthy margins there as well. So we will continue to refine our guidance and continue to execute towards it but.

Speaker 4: you know, the credit goes to the entire operations team. And also, you know, as our revenue grows clearly, an objective is to continue to make the proper...

The credit goes to the entire operations team in and also.

As our revenue grows clearly an objective is to continue to make the proper and appropriate long term investments in our SG&A and R&D, but the expectation of course is that we'll get some operational efficiencies on our as a percentage of revenue through that and that also helps margins as we go forward. So you haven't heard us talk about.

Speaker 4: and appropriate long-term investments in our SG&N R&D, but the expectation, of course, is that we'll get some operational efficiencies as a percentage of revenue through that, and that also helps margins as we go forward.

Speaker 4: You haven't heard us talk about 18 for a long time, but maybe night.

2018 for a long time, but maybe 19% to 2021 as we move forward here, we'll give refine guidance as we move February but very pleased with our margin performance. Thank you for asking the question.

Speaker 4: here we'll give or find that and just be moved February but very pleased with our march.

Speaker 6: That's great, Peter. Thanks so much. And then the respective growth outlook, I know you guys will be providing full year guidance in the next three months or so. We're just going to like, you know, conceptually thinking about what do you have in your backlog?

Yeah, that's great. Thanks, so much and then.

With respect to growth.

Look.

I know you guys will be providing full year guidance in the next three months or so.

But just kind of like.

Inception would be thinking about what do you have in your backlog. So for 'twenty three I think you have about 98%.

Speaker 6: So for 23, I think you have about 98% of revenue, planned revenue and backlog. Is there any comparable number, like, you know, without getting into too much detail, but like, what's the high level sort of secured revenue in 24 that's in the backlog right now?

New planned revenue and backlog.

Is there any comparable number.

Without getting into too much detail.

The high levels of secured revenue in 'twenty forward, that's in the back right now.

Yes, maybe we will just I think that gets us into 2024 February perspective, a little bit, but clearly as you know as you as you see us moving and evolving from a backlog perspective as we provide guidance.

Speaker 4: Yeah, maybe we'll just, I think that gets us into 2024 February perspective a little bit, but clearly as you see us moving and evolving from a backlog perspective.

Speaker 4: As we provide guidance, there's a more significant component of FIRM in our backlog as we move forward, you know, TBD on light speed based on what we described earlier around, you know, the pace of the ramp and whatnot, but from a perspective of predictability and whatnot, as we move forward.

More significant component of firm in our backlog as we move forward.

BD on Lightspeed based on what we described earlier around the pace of the ramp and whatnot, but from a perspective of predictability and whatnot as we move forward.

Develop a larger revenue base.

Speaker 4: to develop a larger revenue base. We're meaningfully, the short term sort of view of on the revenue side of things. So we'll give you a little bit more color on our QSB as we move forward with our guidance.

We are we're meaningfully de risking in the short term sort of view on the revenue side of things. So we will give you a little bit more color konak SP as we move forward with our guidance.

Speaker 4: You know, I think it's a fair question, and February , I deserve to say how much of our 2024 guidance is actually in backlog, but we'll take it once that bit of time and just hold off there until long.

I think it's a fair question in February to sort of say how much of our 2024 guidance is actually in backlog.

But we'll take it one step at a time and just hold off there until until we do that.

Speaker 6: You know, I appreciate that. And then just just a quick follow up on chorus, maybe perhaps more from my.

I appreciate that and then just a quick follow up on quarters, maybe perhaps more for Mike.

Speaker 6: The earth inside you might, it's first for me for sure, but what is the discussion like there with customers and like you're talking to existing customers as well as new customers and what exactly are they doing at that event? Are they looking at the technology and like you know you start discussing the contract opportunities with them or it's just like more like showing or showcasing what you have as a product for now and then maybe you get eventually the contract to the orders in the next couple of years.

Okay.

Mike.

Last for me for sure but.

What does the discussion like better with customers.

Talking to existing customers as well as new customers.

What exactly are they doing.

Looking at the technology and.

You started discussing the contract opportunities with them or just more like showing are showcasing what you have is a product for now and then maybe you get the launch will be the contracts of the orders in the next couple of years.

Yes, it's really a it's a.

Speaker 3: Yeah, it's really a, it's all those things in addition to the customers talking about what they're doing in their communities with Radarsat 2.

All of those things in addition to.

The customers talking about what theyre doing in.

The customers talking about what theyre doing in.

In their communities with radar set too.

Speaker 3: data and our maritime insight platform software application.

Data and our maritime insight platform.

Software applications. In addition to what they would like to be able to do with Corus and so it's a bit of us talking about where we are and where we're going it's a bit of us introducing new.

Speaker 3: in addition to what they would like to be able to do with chorus. And so it's a bit of us talking about where we are and where we're going.

Speaker 3: It's a bit of us introducing new capabilities that we might have added or tweaked on Riders 2 and or are about to introduce on chorus.

New capabilities that we might have added or tweak done radar side to <unk> are about to introduce on cores and then there's like fireside chats and panel discussions with customers and community.

Speaker 3: And then there's like fireside chats and panel discussions with customers community for them to be able to talk about, you know, what they're doing and where they're going and what they're seeing in the market. So it's a very, it's a very collaborative kind of community team building thing.

For them to be able to talk about.

What theyre doing and where they're going and what they're seeing in the market. So it's a very it's a very collaborative community team building thing.

Speaker 3: that occurs. During the time, there is one on one conversations that do occur off to the side with key customers. Everybody can request one-on-one conversations to get a little bit more sort of personal about where they wanna go, you know, what they're buying, what they'd like to buy, that kind of stuff. And so you do end up with some of the side sales conversations as well during that session. What they're working on, and try to go, they're being locally friendly. What they're going to, that we're closing again, think that they'll get a better communication.

That occurs during the time there is one on one.

Conversations that do occur after the side.

With.

Key customers everybody can request one on one conversations to get a little bit more sort of personal about where they want to go.

What their volume what they'd like to buy that kind of stuff and so you do end up with.

Some of the side sales conversations as well.

During that session.

Got it. Thank you so much I appreciate the time thats obvious.

Thank you.

Thank you. Our next question comes from David Macdonald from Kumar. Please go ahead. Your line is open.

Speaker 1: Thank you. Our next question comes from David MacLachlan from Cooma. Please go ahead, the line is open.

Okay, great. Thank you.

Speaker 7: All right, thank you. A couple of questions. When, what quarter do you expect the Chorus CapEx to end?

So a couple of questions.

What quarter do you expect core capex to end.

Speaker 4: CapEx for chorus essentially, you know, will be through the back of it as we conclude 2024.

Capex for the full course of essentially.

We will be through the back of it as we conclude 2024.

Speaker 4: with maybe one exception. One of the items related to launch cost.

With maybe one exception.

The items related to launch costs Youre seeing us start to make some prepayments on launch to Spacex.

Speaker 4: You're seeing us start to make some prepayments on launch the SpaceX.

Speaker 4: And that's going to actually sit in our prepaid accounts until we actually launch and then it flips into it. So it will essentially be largely funded, I'll say, through 2024. Technically we'll have a little bit of, call it, you know, that those launch costs flipping from prepaid into capital in 2025. But we essentially break the back of it through the 2024 from a cash flow perspective.

And that's going to actually sit in our prepaid accounts until we actually launch and then it flips into it yet so it will essentially be largely funded all safe through 2024.

Technically we will have a little bit of.

Call it.

That those launch costs flipping from prepaid into capital in 2025, but we essentially break the back of it through the 2024 from a cash flow perspective.

Okay.

Speaker 7: Okay. And then when you report your fourth quarter results, do you expect to issue 24 guidance to Anna, yes?

And then when you report your first quarter results do you expect to see in 2020 guidance and I guess.

That's correct yes.

Speaker 4: That's correct. Yeah, okay. Maybe cross all the metrics, obviously revenue margin, capital, all those. You're right. Number I'll jump start your

Okay.

Across all the metrics, obviously rapid revenue margin.

Capital all those.

Insistent with how we're doing it today yet.

Okay, and then maybe you could give us a couple of updates.

Speaker 7: Okay, and then maybe you can give us a couple of updates. So on the Canada Lunar Utility Vehicle Program, $1.2 billion, I thought that the Canadian government might announce the award of this contract this year or maybe $24. Can you give us an update on that?

So on that Canada, and then our utility vehicle program $1 $2 billion I thought that the Canadian government announced the award of this contract. This year, maybe 24 can you give us an update on that.

Speaker 3: I don't think we've got an exact schedule from them on that. They're definitely working that through. What they've done from the Canadian Space Agency perspective is they've just announced an industry day. I think the December 6th time, I think, is what stuck in my head that first week of December to be able to provide an industry update on their thinking around all their programs, which would include.

Yes, I don't think we have got an exact schedule from them on that they are definitely working that through what they've done from the Canadian space Agency perspective, as they've just announced an industry day.

But in the December six timeframe I think is what stuck in my head that first week of December.

To be able to provide an industry update on their thinking around all of their programs, which would include.

Speaker 3: anticipated schedule. So we'll be looking for an update in that first week.

The anticipated schedules. So we'll be looking for an update in that first week of December.

Okay, and then would there also be giving an update on the <unk>.

Speaker 7: Okay. And then would they also be giving an update on the RADARSAT Constellation mission replacement, the billion-dollar contract there?

Later, Scott Constellation mission replacement billion dollar contract there.

Speaker 3: I'd expect they'll for sure they're going to talk about it They've just made that announcement, you know in the last couple of weeks and so they were they were pretty clear that the the billion dollars that they announced had a couple of components there one was to

I would expect for sure they're going to talk about it they've just made that announcement in the last couple of weeks and so they were they were pretty clear that the the $1 billion of the announced had a couple of components. There one was too.

Speaker 3: you know, put another satellite into the Raider-Sat Constellation Mission to give it some more resiliency while starting the early phases of the Raider-Sat Constellation Mission replacement program. So, we know that, but then for sure that would be an opportunity for them, you know, post the big announcement to give more information.

<unk>.

Put another satellite into the radar sat constellation mission to give it some more resiliency.

Starting in the early phases of the radar sat constellation mission replacement program. So so.

So.

That but.

But then for sure that would be an opportunity for them.

Post the big announcement to give more information at that industry day in December.

Okay.

Speaker 7: Okay. And do you have an idea regarding the billion dollars, the breakdown between satellite costs versus just annual maintenance and operations?

And do you have an idea.

Regarding the $1 billion of breakdown between satellite cause nurses, Jess annual maintenance and operation.

Not at this time no its pretty early days here, we just got a big announcements so.

Speaker 3: Uh, not at this time. No, it's pretty early days here. We just got a big announcement. So

We'll see how this all plays out I understand the requirements understand what theyre thinking.

Speaker 3: We'll see how this all plays out. Understand the requirements, understand what they're thinking.

Okay.

Speaker 3: And then I was wondering if you could give us an update on the potential $4 billion contract coming out of NASA. I know you've partnered with Lockheed Martin and GM on that one. I think they were supposed to announce some awards in November , but I was wondering if you could give us an update on that. Yeah, they were supposed to announce in November , you're right, but as that approached, they indicated that they're going to switch that to March. And so they need some more time to think that through, so they moved their November to March.

And then I was hoping you can give us an update on <unk>.

The potential of $5 billion contact coming out and as I know you've partnered with Lockheed Martin and GM on that one.

They are supposed to announce some awards in November.

And if you can give us an update on that yes. They were supposed to announce in November youre right, but.

Is that approached they indicated that theyre going to switch that to March and so they need some more time to think that through so they move their November to March.

Okay.

Speaker 7: And then I believe you held or you're going to hold sort of a

Right.

And then I believe you are you're going to start and then.

Speaker 7: chorus unveiling for future clients, talk about the capabilities.

Chorus unveiling for future clients talk about the capabilities.

Speaker 7: I don't know if you did that or not, but I was wondering if you can give us an update on that.

I don't know if you had if you did that or not I wondering if you can give us an update on that.

Speaker 3: Yeah, so that was that Earth Insights Conference that we were just talking about a few minutes ago in October there. So we had, I forget the number, 60, 70 folks come in for that from around the world, all over the world that are Radarstat 2.

Yes, so that was that Earth insights conference that we were just talking about a few minutes ago in October there. So we had.

I forget the number 60 70 folks come in for that from around the world all over the world that are radar side to customers <unk> potential corus customers and everyone got together around that.

Speaker 3: Customers and or potential chorus customers and everyone got together around that And you know really good discussions on that so when we would when we would explain

And really good discussions on that so when we would when we would explain.

Speaker 3: chorus to that crowd. You know, they're all, that a gap at your radar.

For us to that crowd.

They are all synthetic aperture radar users so.

Speaker 3: So, you know, I stood up and did my, you know, executive hand waving and talked about launch dates. And then as soon as I sit down, it goes real technical, real fast in that crowd because they all live in that world. So, yeah, they got right into it and, you know, get through all the detailed capabilities of that.

I stood up and did my executive hand, waving and talked about launch dates and then as soon as I sit down it goes real technical or real fast.

And that crowded because they all live in that world. So, yes, they've got right into it.

Get through all the detailed capabilities of that.

Speaker 3: of that constellation, the capabilities of the satellites, the impact of the...

Of that constellation.

The capabilities of the satellites the impact of the orbital path to ground station concepts and what all that means in terms of operational performance are people really good sessions, a lot of excitement and enthusiasm around those conversations.

Speaker 3: orbital paths, the ground station concepts, and what all that means in terms of operational performance for people. Really good sessions, a lot of excitement and enthusiasm around those conversations.

Speaker 7: Okay. And then lastly, you know, you've been awarded the prime contractor role for two satellite constellations. I don't know if you can disclose this, but I'm just kind of wondering, in your sales funnel, how many other contracts are you chasing where you'd be prime contractor on a satellite constellation build?

Okay.

And then lastly, you've been.

Awarded the prime contractor role too.

Online constellations I don't know if you can disclose this but I'm just kind of wondering in your sales funnel, how many other contracts, how you're chasing where you the prime contractor on that satellite constellations out.

Yes, well more than one that's for sure.

Speaker 3: Yeah, more than one, that's for sure. I think these days that, you know, in the satellite systems business, you have two large buckets of opportunity. One is in our merchant supplier business, where we continue to have like a robust relationship with the market to provide

These days that.

Satellite systems business, you have to two large buckets of opportunity one is in our merchant supplier business, where we continue to have like a robust relationship with the market to provide.

To provide antennas electronics and payloads and then the other is in the full systems prime role those opportunities themselves. The full systems prime roles split into two sub buckets. One is grupo opportunities, where we could be the satellite Bryan and then another is the opportunities where we can be the payload prime where someone else is going to do.

Speaker 3: to provide antennas, electronics, and payloads. And then the other is in the full systems prime role. Those opportunities themselves, the full systems prime role, split into two sub-buckets.

Speaker 3: One is a group of opportunities where we could be the satellite prime.

Speaker 3: And then another is the opportunities where we get to be the payload prime, where someone else is going to do, you know, the full satellite integration, but we would be the payload prime for the for the digital payload. And so that that's kind of how the pipeline breaks down. We've got a bunch of emergent supplier work.

The full satellite integration, but we would be the payload prime for the for the digital payload and so that's kind of how the pipeline breaks down we've got a bunch of merchant supplier work and then a bunch of prime work than the Prime work is either a satellite prime of which there are there are there are several and then there are payload programs of which there are several.

Speaker 3: and then a bunch of prime work, then the prime work is either a satellite prime, of which there are several, and then there are payload primes, of which there are.

Okay Alright.

Speaker 7: All right, thank you. Okay, thank you.

Alright, thank you.

Okay. Thank you.

Thank you. Our next question comes from Steven Michaels from BMO Capital markets. Please go ahead. Your line is open.

Speaker 1: Thank you. Our next question comes from Stephen Michelson from BMO Capital Markets. Please go ahead, your line is open.

Hey, guys. So you noted that the satellite systems pipeline remains strong just to clarify is the pipeline continues to strengthen with new opportunities in the recent months or would you just say that it's more of a sustained strong levels.

Speaker 8: Hey guys, so you noted that the satellite systems pipeline remains strong, just to clarify, is the pipeline continuing to strengthen with new opportunities in the recent months, or would you just say that it's more at a sustained strong level? No, there will be more opportunities.

No there'll be more opportunities in the recent months.

Speaker 3: Yeah, so like, you know, we we've had a strong pipeline for several years, we've moved things out of pipeline into backlog, such as like 2 billion worth in the Lightspeed example. And then that's been replaced and expanded by other opportunities. So it's it's an active, healthy pipeline.

Yes, so like.

We've had a strong pipeline for several years, we've moved things out a pipeline into backlog such as like $2 billion worth in the Lightspeed example.

That's been replaced and expanded by other opportunities. So it's an active healthy pipeline.

Speaker 8: Okay, now with the Canadian Surface Combatant program, can you remind us when that is, when you expect that to hit the full revenue run rate?

Okay.

Now with the Canadian surface Combatant program can you remind us when that is when do you expect that to hit our full revenue run rate.

Speaker 3: Um, let me think, probably as we go through 25 for sure, uh, because, you know, there's a 26, I think is a current year of like steel cutting on those ships. And so they're going to need stuff in a couple of years after that. So, um, you know, there'll be some rampant in 24 and then 25 for sure. You get into more of a full production picture.

Let me think probably as we go through 'twenty five for sure.

Because there's 26 I think is a current year of like steel cutting on those ships and so they're going to need stop in a couple of years after that so.

There'll be some ramping in 2004, and then 25 for sure you get into more of a full production picture.

Okay. Thanks for the color on that final question, there had been more awards with the.

Speaker 8: Okay, thanks for the color on that. Final question. There have been more awards with the, like the layer two programs in the states and understand you guys have roles with providing intent on that. Any updates on discussions with some of the prime contractors for this new phase and future phase?

Like the layer two programs even at this stage and I understand you guys have roles with providing intent on that.

Any update on discussions with some of the prime contractors for this new phase in future phases.

Speaker 3: It's a really robust thing for us. The really cool thing in general for Leo Constellations is the opportunity for repeat and follow-on business.

It's a really robust thing for us.

The really cool thing in general for Leo constellations.

Is the opportunity for.

Repeat and follow on business.

Speaker 3: and the whole SDA community and the different tranches is definitely turning out to be such an opportunity. So we continue to have repeat opportunities to bid that leads to repeat orders for sure. So we're in.

And the whole SDA community and the different tranches is definitely turning out to be such an opportunity and so we continue to have repeat opportunities to bid that leads to repeat orders for sure. So we're in continuous discussions across all the primes.

Speaker 3: continue with discussions across all the primes and all the various tranches that are out there for bid in terms of opportunities for ourselves. So with their success, we hope for our success and we would expect to see announcements in the future of more continued follow-on orders for our antennas into that.

And.

All the various tranches that are out there for bid.

In terms of opportunities for ourselves so.

With their success, we hope for our success.

We would expect to see announcements in the future of.

More continued follow on orders for our antennas into that market.

Okay. So just to be clear for the latest tranche that was awarded those are still out for bid or have they been awarded.

Speaker 8: Okay, so just to be clear for the latest that was awarded, those are still at for bed or have they been awarded?

Speaker 3: There was just an announcement there on Tranche 2, I think, that Lockheed Martin and Northrop Grumman, between the two of them, just received about 1.5 billion U.S. of orders for Tranche 2 satellites. Announcements have not been made yet about any, you know, in their supply chain for various things. And so, you know, that would be an opportunity potentially for us in the future to be able to announce some success there. So we'll see how that goes over the next few years.

There was just an announcement they are on tranche, two I think that Lockheed Martin and Northrop Grumman between the two of them just received about $1 5 billion U S sub orders for Trowbridge <unk> satellites.

<unk> have not been made yet about any.

And their supply chain.

For various things and so.

That would be an opportunity potentially for us in the future to be able to announce some success. There. So we'll see how that goes over the next few weeks.

Speaker 8: Got you. I appreciate the color. I'll pass the line now.

Yes, I appreciate the color I'll pass the line now okay.

Okay.

Speaker 1: Thank you. As a reminder to register for a question, please press star followed by the one on your touchtone phone. Our next question comes from Christine Luac from Morgan Stanley . Please go ahead. Your line is open. Hey, good morning.

As a reminder to register for a question. Please press star followed by the one on your question.

Our next question comes from Kristine <unk> from Morgan Stanley. Please go ahead. Your line is open.

Hey, good morning, guys. Thanks gene.

Speaker 9: Okay, you know, pre-cache for burn came in a little higher than expectations. Fido, you mentioned that this was related to timing of milestone payments. So what degree do they reverse in 4Q? And where do you expect pre-cache for to net out for the full year?

Free cash flow burn came in a little higher than expectation Vito you mentioned that this was related to timing of milestone payments.

What degree do they reverse in <unk>, and where do you expect free cash flow to net out for the full year.

C&I, Yes, Youre right, we had a we had a larger than.

Speaker 4: Yeah, you're right, we had a larger than, when you look at the quarters, the historical quarters here, the last several quarters swing than you would have otherwise seen, but very much in line with expectations for us, so there's no surprises.

When you look at the quarters the historical quarters here the last several quarters swing than you would have otherwise seen.

But very much in line with expectations for us So there's no surprises.

Speaker 4: with our cash flow is moving. One of the important things to think about at the end of Q, is to examine our working capital. Look at our working capital at the end of Q3, notwithstanding the 50 million plus swing, if you will, in the quarter. At the end of Q3, we're essentially at a...

With our cash flow is.

Is moving.

One of the important things to think about at the end of Q is to examine our working capital and look at our working capital at the end of Q3 notwithstanding the.

The $50 million plus swing if you will in the quarter at the end of Q3 were essentially at a at a net working capital position of call. It just under $30 million.

Speaker 4: at a networking capital position of call it just under 30 million usage. And so that's quite normative for us to be in that sort of

Usage.

So that's quite normative for us to be in that sort of.

Plus or minus 30 range so.

Speaker 4: plus or minus 30 range, so I think what you're seeing there was just a bit of a swing into more of a normative position for us through the end of the quarter, and we're very much in our normal sort of range as we move forward. One of the things that, when you look at that Q3 balance that I just described, is maybe

I think what Youre, what youre seeing there was just a bit of a.

A swing into more of a normative physician for us through the end of the third.

Through the end of the quarter and we're very much in our normal sort of range as we move forward.

One of the things that when you look at that Q3 balance.

That I just described is.

Maybe just to call out some of the.

One timers that are in our cumulative working capital we have been making some prepayments to satisfy in respect to the.

Speaker 4: one-timers that are in our cumulative working capital. We have been making some prepayments to satx-fi and respect to the chips and whatnot. And...

The chips.

And whatnot and.

Speaker 4: And as at the end of the quarter, there's roughly 30 million-ish Canadian that sits there with respect to that. So that's obviously reflected in the cash flows through cumulatively through Q3. And also you're starting to see us make some payments to prepayments to SpaceX on launch. In relation to Q4, your question on Q4, I would expect free cash flow to be, from an operating cash flow perspective,

And as at the end of the quarter, there is roughly $30 million ish Canadian.

Sits there with respect to that so that's obviously reflected in the cash flows through.

Cumulatively through Q3, and also youre starting to see us make some payments to us.

Prepayments that Spacex on launch.

In relation to Q4. Your question on Q4, I would expect free cash flow to be from an operating cash flow perspective to be roughly flattish plus or minus maybe 10 ish.

Speaker 4: roughly flat-ish, plus or minus maybe ten-ish, and we'll have some additional SpaceX-related payments going through in Q4.

We will have some additional spacex related payments going through.

In Q4 as well.

Yes.

Thank you very helpful.

Speaker 9: Thank you, Biko, very helpful. And maybe taking a step back on cash, right? Look, it's clear that the growth ahead of the company is visible and that's a testament to the strong wins your team is able to get and the significant orders. But if 4Q free cash flow may be still under pressure, I mean, for year 2023, would that be potentially the third year of a negative free cash flow for the company? And I know you'd provide more guidance next quarter for next year.

Back.

Yes right.

It's clear that the growth ahead of the company is visible in the testament to the strong winds.

Kim <unk> able to get.

And orders.

For Q3 cash flow, maybe still on the question.

Full year 2023, with Darby potentially the third year of a negative free cash flow for the company and I know you'll provide more guidance next quarter for next year.

Speaker 9: But just taking a step back and taking a higher view, how do you think about funding for growth? Because it seems like, you know, CAPEX to support these programs. They're gonna come online and the prepayments you mentioned, I'm not sure to what degree they start reversing in 2024. But how are you gonna fund this growth? And I mean, you're still well below your debt covenant. So there's a room there. But how high of a leverage are you comfortable with?

Could you put back into the higher view.

Think about funding for growth because it seems like.

To support these programs are going to come online and the prepayments that you mentioned I'm not sure to what degree they start reversing in 2024, but how are you going to fund this growth.

And I know, you're still well below your debt covenants.

The room there.

The leverage are you comfortable with.

Yes, no thats a terrific question.

Speaker 4: Yeah, no, that's a terrific question. I mean, I just need to emphasize that.

Just need to emphasize that.

Speaker 4: You know, everything that's transpiring is in line with our expectations and what we've given guidance to the market on. So, you know, leverage at the end of the quarter, 1.7. We will cross the two leverage likely in Q4, again, very much in line with expectation.

Everything that's transpiring is in line with our expectations and what we've given guidance to the market on so leverage at the end of the quarter one 7%, we will cross the two leverage likely in Q4 again very much in line with expectations.

Speaker 4: Your comment around negative free cash flow, absolutely accurate as it relates to 2023 as we predicted, and that is largely in line with obviously the growth capex that we are funding. 2024 will be a same or similar year in that regard, if you will, with respect to growth capex. And again, we'll refine guidance, but that's consistent with what we've described all the way through.

Your comments around negative free cash flow absolutely accurate as it relates to 2023 as we predicted and that is largely in line with obviously the growth Capex that we are that we are funding 2024 will be the same or similar year in that regard if you will with respect to <unk>.

Capex and again, we will refine guidance, but that's consistent with what we've described all the way through in terms of in terms of comfort from a leverage perspective.

Speaker 4: In terms of in terms of comfort from a leverage perspective, you know, I would say, you know, that that three sort of the mark for us.

I would say.

That three sort of the mark for US, we sort of see that obviously, our covenants are well in excess of that and the liquidity and the availability as well in excess of that but we understand the nature of the business. We have strong operating cash flow as we move forward into these years and as we make our way through 2024.

Speaker 4: We sort of see that, obviously our covenants are well in excess of that and the liquidity and availability is well in excess of that, but we understand the nature of the business. We have strong operating cash flow as we move forward into these years.

Speaker 4: And as we make our way through 2024, I think, you know, largely that growth capex is, you know, meaningfully.

I think largely that growth capex is.

Meaningfully I'll say behind us a little bit we'll still have some in 2025, but of course as I've articulated will be largely behind us. So we feel uber confident and comfortable with how it's progressing and it all starts with obviously, a strong revenue and EBITDA margin profile.

Speaker 4: I'll say behind us a little bit, we'll still have some in 2025, but of course as I've articulated, it will be largely behind us.

Speaker 4: So we feel Uber confident and comfortable with how it's progressing. And it all starts with obviously a strong revenue and EBITDA margin profile. And once you've got that operating cash flow as a backbone, it gives you a little bit of, obviously play there when it comes to the balance sheet. But don't make it, you know, any mistake about it, we will obviously will be very prudent and run a conservative balance sheet as we move forward.

Once you've got that operating cash flow as a backbone. It gives you a little bit of obviously play there when it comes to the balance sheet.

But.

They'll make any mistake about it we obviously will be very prudent and in.

And run a conservative balance sheet as we move forward.

Great. Thank you very much for all the color.

Welcome. Thanks.

Thank you. This is the end of the question answer session I will turn the conference back to the speakers for closing comments.

Speaker 1: Thank you. This is the end of the question. Answer session or return the conference back to the seat. Just a close in comment.

Alright, thanks, very much thanks, everyone for your time this morning.

Speaker 3: All right, thanks very much. Thanks everyone for your time this morning. As we've discussed multiple times through this call, we look forward to updating you on our progress that our next earnings call at the end of February , where we can also talk a little bit about what we're seeing for 2024. Thanks for the time, and we'll talk to y'all then.

As we've discussed multiple times through this call. We look forward to updating you on our progress at our next earnings call at.

At the end of February where we can also talk a little bit about what we're what we're seeing for 2024. So thanks for the time and we'll talk to you all then.

Speaker 1: Thank you. This does conclude today's conference call. Thank you all for attending. You may now disconnect your lines.

Thank you. This does conclude today's conference call. Thank you for attending you may now disconnect your lines.

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Okay.

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Yes.

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