Q4 2023 MDA Ltd Earnings Call

Operator: and Mark Neville. And I'm Mark Neville. Thanks for watching. I'm Mark Neville. We'll see you next time. Good morning, my name is Sylvia, and I will be your conference operator. At this time, I would like to welcome everyone to the MDA Q4 2023 Earnings Conference. Note that all lines have been placed on mute to prevent any background noise. Following the speaker's remarks, there will be a question and answer session. If you would like to ask a question during this time, simply press star then number 1 on your telephone keypad. And if you would like to withdraw from the question queue, please press star then number 2. Thank you. I would now like to turn the call over to Shireen Zahawi. Please go ahead.

Good morning, My name is Sylvie and I will be your conference operator today at this time I would like to welcome everyone to D. M. D. Q4, 2023 earnings Conference call note that all lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question and answer session. If you would like to ask a question.

During this time simply press Star then the number one on your telephone keypad and if he would like to withdraw from the question queue. Please press Star then number two thank you I would now like to turn the call over to Sharon Zahawi. Please go ahead.

Thank you operator, good morning, and welcome to M. D. As fourth quarter 2023 earnings calls, Mike really our CEO and Peter <unk>, our CFO will lead todays call and share some prepared remarks before taking your questions before we begin I would like to remind you that today's call will include estimates and other forward looking information, which may do.

Shireen Zahawi: Thank you, operator. Good morning, and welcome to MDA's fourth quarter 2023 earnings call. Mike Greenlee, our CEO, and Vito Colmoni, our CFO, will lead today's call and share some prepared remarks before taking your questions. Before we begin, I would like to remind you that today's call will include estimates and other forward-looking information, which may differ from actual results. Please review the cautionary language in today's press release and public filings regarding various factors, assumptions, and risks that could cause actual results to differ. In addition, during this call, we will refer to certain non-IFRS financial measures. 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 to 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 reconciliations to the nearest IFRS measures. And with that, it's my pleasure to turn the call over to Mike. Thank you, Shireen.

Or from actual results.

Please review the cautionary language in today's press release and public filings regarding various factors assumptions and risks that could cause actual results to differ.

In addition, during this call we will refer to certain non ifr as financial measures. Although we believe these measures provide useful supplemental information about our financial performance. These measures do not have any standardized meaning under ifr us and our approach in calculating these measures may differ from that of other issuers and therefore may not be 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.

Mike Greenlee: Good morning, everyone, and thank you to those joining us today to discuss our fourth quarter and our full year 2023 financial results. We delivered a strong quarter in Q4, with double-digit revenue growth, solid profitability, and record backlog. Our Q4 revenues totaled $205 million, up 10% year-over-year, as we continue to execute on our backlog, which stood at $3.1 billion at year-end. Our adjusted EBITDA in the quarter was $42 million, and our adjusted EBITDA margin was a solid 20.5%.

Good morning, everyone.

Thank you to those joining us today to discuss our fourth quarter and our full year 2023 financial results.

We delivered a strong quarter in Q4 with double digit revenue growth solid profitability and record backlog.

Our Q4 revenues totaled $205 million up 10% year over year as we continue to execute on our backlog, which stood at $3 $1 billion at year end.

Our adjusted EBITDA in the quarter was $42 million and adjusted EBITDA margin was a solid 25%.

Mike Greenlee: This was a busy quarter for MDA, with a number of milestones worth highlighting. In October, we announced the selection of SpaceX as our launch partner for KORUS, our next-generation Earth observation constellation, and confirmed our launch window for Q4 2025. We also completed the acquisition of the Digital Payload Division of Satellite Communications in late October as we continue to invest in our digital satellite technology and our talent. And in November, we announced that we've secured a $180 million authorization to proceed contract to initiate work on a new non-geostationary orbit satellite constellation with a full contract expected to be awarded this year. We have now secured three Constellation contracts in the past two years, highlighting the strong momentum we are seeing in our satellite systems business, driven by customer demand for communications satellite constellations.

This was a busy quarter for MDA with a number of milestones worth highlighting.

In October we announced the selection of Spacex as our large as our launch partner for chorus are next generation Earth observation constellation and confirmed our launch window for Q4 2025. We also completed the acquisition of the digital payload Division of <unk> Communications and late October as we continue to.

Invest in our digital satellite technology and our talent.

And in November we announced that we secured a $180 million authorization to proceed contract to initiate work on a new non geostationary orbit satellite constellation with a full contract expected to be awarded this year.

We have now secured three constellation contracts in the past two years highlighting the strong momentum we are seeing in our satellite systems business driven by customer demand for communications satellite constellations.

Late last year, we also announced plans to double our workforce and operational footprint in the United Kingdom, as we continued to grow and scale our business globally.

Mike Greenlee: Late last year, we also announced plans to double our workforce and operational footprint in the United Kingdom as we continue to grow and scale our business globally. The fourth quarter's financial results and operational progress showcase the team's continued strong execution and the momentum we are seeing in our business and in our end markets. As we wrap up the year, I would like to thank our employees for their dedication and commitment to delivering for our customers. Our 3,000 talented people are key to our success, and we are fortunate to work in a field that energizes and attracts talent and pushes the boundaries of innovation every day.

The fourth quarter's financial results and operational progress showcased the team's continued strong execution and the momentum we are seeing in our business and in our end markets.

As we wrap up the year I would like to thank our employees for their dedication and commitment to delivering for our customers.

Our 3000 talented people are key to our success and we are fortunate to work in a field that energizes and attract talent and pushes the boundaries of innovation every day.

In 2023, the MDA team delivered another year of strong growth and execution with double digit growth in revenue and adjusted EBITDA further solidifying our position as a trusted mission partner and leader in the expanding space industry.

Mike Greenlee: In 2023, the MDA team delivered another year of strong growth and execution, with double-digit growth in revenue and adjusted EBITDA, further solidifying our position as a trusted mission partner and leader in the expanding space industry. We secured a number of strategic contracts, including the Telesatellite Speed Low-Earth Orbit Constellation Award, valued at $2.1 billion, and the previously noted $180 million authorization to proceed contract to initiate work on a new non-geostationary orbit satellite constellation. We also continue to advance work on the Canadarm3 program, with the first elements of the external robotic interfaces going into production in 2023, a major milestone for the program. On Chorus, the team made significant development progress and has started subsystem unit assembly as we prepare for the mission launch in late 2025.

We secured a number of strategic contracts, including the Telesat Lightspeed low Earth orbit Constellation Award valued at $2 1 billion and the previously noted $180 million authorization to proceed contract to initiate work on a new non geostationary orbit satellite constellation.

We also continued to advance work on the Kinder arm three program with the first elements of the external robotic interfaces going into production in 2023, a major milestone for the program.

And of course, the team made significant development progress and have started sub system unit Assembly as we prepare for the mission launch in late 2025.

Mike Greenlee: These accomplishments reflect tangible progress against our strategic growth plan and position us well for the coming years. Our backlog at year-end stood at $3.1 billion, a record level for the company, and we continue to see a significant growth pipeline across our businesses. In 2023, we secured $2.5 billion in awards, which included the Telesat Lightspeed Constellation Award, in addition to other strategic awards across our three business areas. We grew our revenue to $808 million for the year, an increase of 26% year-over-year, and expanded our adjusted EBITDA to $174 million, up 24% versus last year's levels when excluding non-recurring items. This translates to a robust 21.6% adjusted EBITDA margin for the full year. To support current and future growth, we continue to focus on talent and recruitment. In 2023, we added 890 new staff.

These accomplishments reflect tangible progress against our strategic growth plan and position us well for the coming years.

Our backlog at year end stood at $3 $1 billion a record level for the company and we continue to see a significant growth pipeline across our businesses.

In 2023, we secured $2 $5 billion in awards, which included the Telesat Lightspeed Constellation Award. In addition to other strategic awards across our three business areas.

We grew our revenue to $808 million for the year, an increase of 26% year over year and expanded our adjusted EBITDA to $174 million up 24% versus last year's levels, when excluding nonrecurring items.

This translates to a robust 21, 6% adjusted EBITDA margin for the full year.

To support current and future growth, we continued to focus on talent and recruitment.

In 2023, we added 890, new staff, we also deployed $193 million in capital expenditures, which included research and development spending on technologies related to chorus commercial robotics products digital satellite technologies and other growth initiatives.

Mike Greenlee: We also deployed $193 million in capital expenditures, which included research and development spending on technologies related to Quorus, commercial robotics products, digital satellite technologies, and other growth initiatives. Our research and development efforts are a critical differentiator for MDA. MarketResearchFirm, ResearchInfosource, which is focused on the Canadian R&D ecosystem, ranked MDA as 33rd in its ranking of Canada's top 100 corporate R&D spenders based on 2022 data.

Our research and development efforts are a critical differentiator for M D. A.

Market research firm research info source, which is focused on the Canadian R&D ecosystem ranked MDA as 33 in its ranking of Canada's top 100, corporate R&D spenders based on 2022 data.

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. We are in the early innings of a multi decade multi decade growth cycle, playing out in our end markets and MDA is uniquely qualified to take advantage of the growth.

Mike Greenlee: 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. We are in the early innings of a multi-decade growth cycle playing out in our end markets, and MDA is uniquely qualified to take advantage of the growth. With that growth market as our backdrop, today we are introducing our 2024 financial outlook. We expect 2024 to be another year of strong growth for the company. For the full year, we expect revenues to be in the $950 million to $1.05 billion range, representing robust year-over-year growth of approximately 25% at the midpoint of guidance. We expect full-year adjusted EBITDA to be $190-210 million, representing approximately 19-20% adjusted EBITDA margin.

With that growth market as our backdrop today, we are introducing our 2024 financial outlook.

We expect 2024 to be another year of strong growth for the company.

For the full year, we expect revenues to be in the $950 million to $1.05 billion, representing robust year over year growth of approximately 25% at the midpoint of guidance.

We expect full year, adjusted EBITDA to be $190 million to $210 million, representing approximately 19% to 20% adjusted EBITDA margin.

We expect capital expenditures to be in the $210 million to $230 million range as we continue to invest in our growth initiatives.

Mike Greenlee: We expect capital expenditures to be in the $210 million to $230 million range as we continue to invest in our growth initiatives. In summary, 2023 was a year of strong growth for MDA, and I'm extremely proud of how the team executed. As we look to 2024, the team is energized by the strong momentum and positive trends we are seeing in our end markets, and MDA has the right technology portfolio to capitalize on the opportunities ahead of us. I'll spend a few minutes now giving you a view of the industry and an update on MDA's three business areas, and then I'll pass it over to Vito for a deep dive on the financials. Starting with the global space market, 2023 was another strong year for space, with research firm Euroconsult estimating the space market grew to US$462 billion last year, up approximately 9% from 2022 levels, while the space economy, which also includes non-contracted government activity, reached $509 billion. Governments around the globe continue to invest in space, with 90 nations spending a total of $117 billion in 2023, up 15% year-over-year and Governments are allocating a higher share of their space budgets to defense programs as the gap between civil and defense spending continues to narrow.

In summary, 2023 with it was a year of strong growth for MDA and I'm extremely proud of how the team executed as we look to 2024. The team is energized by the strong momentum and positive trends. We are seeing in our end markets and M. D. A has the right technology portfolio to capitalize on the opportunities ahead of us.

I'll spend a few minutes now to give you a view of the industry and update on M. D. As three business areas and then I'll pass it over to Vito for a deep dive on the financials.

Starting with the global space market 2023 was another strong year for space with research firm Euro consult estimating the space market grew to U S $462 billion last year up approximately 9% from 2022 levels, while the space economy, which also includes non contracted government activity.

Reached $509 billion U S.

Governments around the globe continue to invest in space with 90 nations spending a total of $117 billion in 2023 up 15% year over year, and marking a historic high for government space spending.

Governments are allocating a higher share of their space budgets to defense programs as the gap between civil and defense spending continues to narrow.

Mike Greenlee: 2023 marked the first year where defense spending at U.S. $59 billion exceeded civil space investment. We are seeing increased integration of space-based capability as a routine component of defense and military budgets, driven by geopolitical tensions and demand for space-based surveillance and detection systems, as well as space-based communications for defense purposes. Looking at the big picture, EuroConsult estimates the size of the global space economy will grow to over $822 billion within a decade, representing a compound annual growth rate of 6% over the forecast period. The U.S. Chamber of Commerce projects that the space economy will exceed $1.5 trillion by 2040. Closer to home, notable developments last year included approximately $3 billion of incremental funding for space programs announced by the Government of Canada, including $1 billion of funding over 15 years for the RadarSat Plus portfolio, an initiative aimed at ensuring continuous, efficient, and sustainable access to critical and high-quality Earth observation data for Canada.

2023 marked the first year, where defense spending at <unk> $59 billion exceeded civil space investments.

We are seeing increased integration of space based capability as a routine component of defense and military budgets driven by geopolitical tensions and demand for space based surveillance and detection systems as well as space based communications for defense purposes.

Looking at the Big picture Eurocontrol estimated the size of the global space economy will grow to over $822 billion within a decade, representing a compound annual growth rate of 6% over the forecast period.

<unk> chamber of Commerce projects that this basic economy will exceed $1 five trillion.

By 2040.

Closer to home notable developments last year included approximately $3 billion of incremental funding for space programs announced by the Canadians by the government of Canada, including $1 billion of funding over 15 years for the radar side plus portfolio, an initiative aimed at ensuring continuous efficient and sustainable access to critical.

Coal and high quality Earth observation data for Canada.

Mike Greenlee: That October funding announcement builds on the momentum we saw earlier in 2023 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, or rover, to assist astronauts on the Moon. These commitments signal not only the pace of the market opportunity before us but the growing importance of the space economy on a national level. In the U.S., 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, and SDA's multiple LEO constellations, which will create a new ecosystem of satellites designed to enhance space infrastructure and help protect national interest, which is resulting in repeat orders for core technology suppliers like MDA.

That October funding announcement builds on the momentum we saw earlier in 2023, when Canada announced $2 $3 billion of investments for two space initiatives.

Canada's participation in the international space station and developing a contributing Ah lunar utility vehicle or Rover to assist astronauts on the moon.

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

In the U S. Both NASA and the U S Department of Defense Space Development Agency or SDA continued to advance civil and defense based programs, including Artemis Nasa's Lunar exploration program to send humans back to the Moon and Sda's multiple Leo constellations, which will create a new ecosystem of satellites.

Designed to enhance space infrastructure and help protect national interest, which is resulting in repeat orders for our core technology suppliers like M. D. A.

On the space exploration front, India became the first country to land as spacecraft near the Moon, South pole and Unchartered territory that scientists believe could hold vital reserves of frozen water.

Mike Greenlee: 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. Earlier this month, MDA joined space enthusiasts around the world in congratulating intuitive machines on completing the first U.S. moon landing in 50 years. These are just two of a number of countries with lunar and space exploration ambitions. The number of space exploration missions is projected to exceed 750 in the next decade, more than tripling the 236 missions we saw in the previous 10 years, as governments around the world support ambitious space exploration plans. In addition, we are seeing growing global interest in space exploration. In 2023, NASA added nine new signatories to its Artemis Accords, signaling these countries' commitments to safe, long-term, and ethical space exploration. As of February, 36 nations have signed up to the Artemis Accords.

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.

Earlier this month M D. A joined space enthusiasts around the world and congratulated intuitive machines on completing the first U S Moon landing in 50 years.

These are just two of a number of countries with lunar in space exploration ambitions. The number of space exploration missions are projected to exceed 750 in the next decade more than tripling. The 236 missions. We saw in the previous 10 years as governments around the world support ambitious.

Space exploration plans.

In addition, we are seeing growing global interest in space exploration in 2023, NASA added nine new signatories to its Artemis Records signaling these countries commitments to safe long term and ethical space exploration as.

As of February 36 Nations have signed up to the Artemis Accords.

Mike Greenlee: The Accords, which was unveiled in October 2020 to align nations on a common set of principles for space exploration, has steadily grown in size over the last three years, with interest from many non-traditional spacefaring nations, which are now building their own national space programs. In terms of space infrastructure, spacecraft launch activity continued to unfold at a record pace. In 2023, there were a total of 223 orbital launch attempts, up 20 percent versus 2022. A total of 2,911 payloads were launched globally, representing an increase of 17% versus 2022 levels. The higher activity levels are driven primarily by growth in Commercial Low Earth Orbit, or LEO, constellations.

<unk>, which was unveiled in October 2020 to align nations on a common set of principles for space exploration has steadily grown in size over the last three years with interest from many non traditional space very nations, which are now building their own national space programs.

In terms of space infrastructure. The spacecraft watch activity continued to unfold at a record pace in 2023, there were a total of 223 orbital watch attempts up 20% versus 2022.

Of 2911 payloads launched globally, representing an increase of 17% versus 2022 levels.

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

All of this activity bodes well for M D E and our future opportunity set which we estimate today at approximately $17 billion in cumulative pipeline over the next five years.

Mike Greenlee: All of this activity bodes well for MDA and our future 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. Now, I'll turn to our three business areas. In satellite systems, we are seeing good momentum in this market with our teams working to advance multiple requests for communication satellite solutions and a growing number of constellation projects. We are seeing good activity levels from customers, and our opportunity funnel remains strong. On the operational front, the team commenced engineering and program procurement activities on a new non-geostationary orbit satellite constellation in Q4 under the $180 million authorization to proceed contract that we mentioned. The full constellation, valued at a minimum of $750 million, is expected to include a minimum of 36 MDA software-defined digital satellites.

A level that we would characterize as very robust for the company.

Now I will turn to our three business areas.

And satellite systems, we are seeing good momentum in this market with our teams working to advance multiple requests for communication satellite solutions and a growing number of constellation projects. We are seeing good activity levels from customers in our opportunity funnel remains strong.

On the operational front the team commenced engineering and program procurement activities on our new non geostationary orbit satellite constellation in Q4 under the $180 million authorization to proceed contract, which we mentioned.

The full constellation valued at a minimum of $750 million is expected to include a minimum of 36 M. D. A software defined digital satellites.

Mike Greenlee: The definitive contract for the full constellation, for which MDA would be the prime contractor, is expected this year. This latest award includes the selection of our newly introduced software-defined satellite product line, which offers significant benefits to satellite operators looking to improve performance while at the same time driving time, cost, and complexity out of their LEO constellation. This is also our second customer for the fully integrated portfolio of modular digital satellite products and components we are rolling out following the Telesatellite Speed Constellation Award last August, where MDA was selected as the prime Satellite Contractor for the 198 satellite constellations. On the Lightspeed program, we made good progress on ramp-up activities in Q4. Our teams have been busy engaging with our supplier base and progressing early design work, systems requirements analysis, and subcontractor tender planning and preparation.

A definitive contract for the full constellation for which MDA would be the prime contractor as expected this year.

This latest award includes the selection of our newly introduced software defined satellite product line, which offer significant bandwidth benefits to satellite operators looking to improve performance while at the same time driving time cost and complexity out of their Leo constellations.

This was also our second customer for the fully integrated portfolio of modular digital satellite products and components. We are rolling out following the Telesat Lightspeed Constellation Award last August where MTA was selected as the prime satellite contractor for the 198 satellite constellation.

On the Lightspeed program, we've made good progress on ramp up activities in Q4, our teams have been busy engaging with our supplier base and progressing early design work systems requirements analysis, and subcontractor tender planning and preparation. We are currently focused on finalizing supplier selection for the program.

Mike Greenlee: We are currently focused on finalizing supplier selection for the program. We have also continued to advance work on a number of programs, including the GlobalSTAR program. In Q4, the team initiated flight hardware production and began flat-sat testing of the bus and payload systems. Additionally, following the completion of the Satellite Critical Design Review in Q3 of 2023, the team is currently progressing towards a Spacecraft Integration Readiness Review to take place this quarter. For the Global Star Program, MDA was selected as the satellite prime contractor to enhance Global Star's LEO constellation through the addition of 17 satellites, which support the SOS feature and direct-to-device communication on certain Apple products. And in late October, we completed the acquisition of SatexPi Space Systems in the United Kingdom, the digital payload division of SatexPi Communications.

We also continue to advance work on a number of programs, including the Globalstar program in Q4, the team initiated flight hardware production and began flats that testing of the bus and payload systems.

Additionally, following the completion of the satellite critical design review in Q3 of 2023. The team is currently progressing towards a spacecraft integration readiness review to take place this quarter.

For the Globalstar program MTA was selected as a satellite prime contractor to enhance global stars Leo constellation through the addition of 17 satellites, which.

Which support Sos feature and directed device communication uncertain Apple products.

And in late October we completed the acquisition of <unk> by space systems in the United Kingdom. The digital payload division of satisfy communications. The UK based team has been integrated into M. D. A U K and brings with its strong capabilities and expertise in digital payload technology.

This team, which is collaborating closely with our satellite systems business in Montreal helps expand our footprint in the U K market and add strategic in country capability to produce satellite payloads.

Mike Greenlee: The UK-based team has been integrated into MDA UK and brings with it strong capabilities and expertise in digital payload technology. This team, which is collaborating closely with our satellite systems business in Montreal, helps expand our footprint in the UK market and adds strategic in-country capability to produce satellite payloads. Moving to our Geointelligence Business Unit, customer demand for our Earth observation offerings remains robust, and we are seeing increased recognition of the role that commercial EO satellites can play to provide near real-time data and analytics to government and private enterprises. During the year, we made significant progress on the KORUS Constellation Program, which includes a fourth-generation, MDA-built C-band Synthetic Aperture Radar satellite in addition to an X-band satellite, which will be supplied by ISI.

Moving to our Geo intelligence business unit customer demand for our Earth observation offerings remains robust and we are seeing increased recognition of the role of the commercial E. O satellites can play to provide near real time data and analytics to government and private enterprise.

During the year, we made significant progress on the chorus constellation program, which includes our fourth generation M. D. A built C band synthetic aperture radar satellite in addition to an X band satellite, which will be supplied by eisai.

Our team completed the payload critical design review and is currently advancing 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.

In the fourth quarter, we also announced the selection of Spacex as our large partner for chorus with a launch window for Q4 2025.

Mike Greenlee: Our team completed the payload critical design review and is currently advancing 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. In the fourth quarter, we also announced the selection of SpaceX as our large partner for Qorus with a launch window for Q4 2025. We continue to engage in active discussions with both new and existing customers on how Quorus can help address Earth Observation, Data, and Analytics, and we are pleased with the response from customers thus far. In terms of other notable programs, work on the Canadian Surface Combatant Program, or CSC, one of our long-term government programs, is progressing in line with our expectations as the team continues to meet our technical milestones and complete capability testing as required. MDA is responsible for the design and integration of the electronic warfare system for this ship, which comprises a suite of sensors, including laser warning and electronic system technologies used to detect aerial threats to help protect the men and women of the Royal Canadian Navy.

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

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

MBA is responsible for the design and integration of electronic warfare system for the ship, 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 in activity levels on both the government and commercial fronts on.

On the government side, we continue to progress the design work on phase B of the Canadarm three contract, which MTA was awarded in early 2022 and that will see us completing the preliminary design of canadarm threes robotic systems to be used aboard the NASA led lunar gateway.

In 2023, we successfully closed out the systems definition review and made good progress towards the preliminary design review milestone expected to take place in 2024.

We also secured follow on contracts, where the canadarm three external robotics interfaces, including the final construction and delivery of the interfaces with these awards the external robotics interfaces become the first Kid arm three hardware components to go into production a major milestone for the count arm three program.

Mike Greenlee: Moving to our robotics and space operations business, we continue to see good traction and activity levels on both the government and commercial fronts. 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 that will see us completing the preliminary design of Canadarm3's robotic systems to be used aboard the NASA-led Lunar Gateway. In 2023, we successfully closed out the systems definition review and made good progress towards the preliminary design review milestone expected to take place in 2024. We also secured follow-on contracts for the Canadarm3 external robotics interfaces, including the final construction and delivery of the interfaces. With these awards, the external robotics interfaces become the first Canadarm3 hardware components to go into production, a major milestone for the Canadarm3 program.

In Q4, the team continued to engage with the Canadian Space Agency regarding contract awards for the next phases of work on canadarm, three including advancing detailed design.

And assembly manufacturing integration and test phases. We're also working with the Canadian Space Agency on follow on services contracts to provide engineering support to.

To the international space station robotics, including Canada them too.

As part of Canada's continued commitment to support the international space station until his retirement in 2030 timeframe.

On the commercial side, we are 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 area of the market.

Shifting to operations, we continued our hiring efforts to support the anticipated revenue ramp up.

In 2023, we added 890, new hires with more than 3000 highly skilled MTA staff today, 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.

In Q4, the team was busy planning and preparing for the move to our new Global headquarters and space Robotics Center of excellence here in Brampton, Ontario, which is currently underway. The purpose built facility feature state of the art labs manufacturing R&D and assembly integration and test facilities.

Mike Greenlee: In Q4, the team continued to engage with the Canadian Space Agency regarding contract awards for the next phases of work on Canadarm3, including advancing detailed design and assembly manufacturing integration, and testing. We are also working with the Canadian Space Agency on follow-on services contracts to provide engineering support to the International Space Station Robotics, including Canadarm2, as part of Canada's continued commitment to support the International Space Station until its retirement in the 2030 timeline. On the commercial side, we are exploring a number of opportunities to incorporate our robotic technology in applications to support space exploration and mobility and are encouraged by the level of customer activity in this area of the market. Shifting to operations, we continued our hiring efforts to support the anticipated revenue ramp-up. In 2023, we added 890 new hires.

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

With a number of sizable programs currently under contract we remain vigilant when it comes to our supply chain and 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.

For new programs, we are ensuring that our supply chain organization as full visibility early in the process to ensure orders are placed promptly and monitored constantly to mitigate delay risks.

Mike Greenlee: With more than 3,000 highly skilled MDA staff today, 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. In Q4, the team was busy planning and preparing for the move to our new global headquarters and Space Robotics Centre of Excellence here in Brampton, Ontario, which is currently underway. The purpose-built facility features state-of-the-art labs, manufacturing, R&D, and assembly integration and test facilities.

To recap I'm very proud of what the team has accomplished in 2023 and optimistic about the opportunities that lie ahead.

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.

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

Mike Greenlee: The Center of Excellence will also house a unique Space Robotics Mission Control Center, enabling MDA to provide critical on-orbit operations capabilities to commercial and government customers worldwide. With a number of sizable programs currently under contract, we remain vigilant when it comes to our supply chain and 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.

Interest.

Thanks, Mike.

Echo your comments around is such an exciting time in the industry or for MDA, an incredible year. Thank you everybody and good morning to you I hope you're all doing well for my update I'll walk you through our Q4 and full year 2023 financial results and provide a little more color on our 2024 outlook.

Overall Q4 was another strong quarter for M. D E and we're pleased with how the team has executed in the quarter. We saw strong revenue growth solid profitability and record backlog at quarter end, which all bode well for our performance in 2024.

Mike Greenlee: For new programs, we are ensuring that our supply chain organization has full visibility early in the process to ensure orders are placed promptly and monitored constantly to mitigate delay risk. To recap, I'm very proud of what the team accomplished in 2023 and optimistic about the opportunities that lie ahead. Our team is energized, and we remain laser-focused on our priorities, a strong focus on execution, converting opportunities in our funnel, and expanding our leadership in core markets while maintaining strong profitability and a healthy balance sheet to help us fund our growth initiatives. With that, I'll hand it over to Vito to walk us through it.

Total revenues for the quarter were $205 million. This represents an increase of $18 9 million or 10% over the same period last year driven by higher revenues, primarily from our robotics in space operations and satellite systems businesses on.

On a full year basis total revenues of $807 6 million were up $166 million or 26% over 2022 levels.

The increase in revenues were primarily driven by strong contributions from our satellite systems and robotics in space operations businesses.

By business area revenues and sat systems of $90 2 million in Q4, 2023 were $5 9 million or 7% higher compared to the same quarter in 2022, and this was driven by slightly higher work volume on the Globalstar program and the initial ramp up of the Lightspeed program, which was awarded.

Vito Colmoni: Thanks, Mike. I echo your comments around. It's such an exciting time in the industry for MDA. An incredible year. Thank you, everybody. And good morning to you.

Vito Colmoni: I hope you're all doing well. For my update, I'll walk you through our Q4 and full year 2023 financial results and provide a little more color on our 2024 outlook. Overall, Q4 was another strong quarter for MDA, and we're pleased with how the team has executed. In the quarter, we saw strong revenue growth, solid profitability, and record backlog at quarter end, which all bode well for our performance in 2024. Total revenues for the quarter were $205 million.

In Q3 of 2023.

On a full year basis revenues from satellite systems increased to 362 million for the latest year, representing $110 million increase of 43% growth over full year 2022.

Again, driven by higher volumes related to satellite constellation work, including the Globalstar program.

As you recall it commenced in Q1 of 2022.

Vito Colmoni: This represents an increase of $18.9 million, or 10% over the same period last year, driven by higher revenues primarily from robotics and space operations and satellite systems businesses. On a full-year basis, total revenues of $807.6 million were up $166 million, or 26 percent over 2022 levels. The increase in revenues was primarily driven by strong contributions from our satellite systems and robotics and space operations businesses.

And several additional rewards to support U S Department of defense constellations.

And robotics in space operations, we saw healthy year over year growth with revenues of $65 million in the quarter, representing 17 million or 35% increase versus Q4 of last year.

Growth is largely attributable to higher volume of work performed on the Canadarm three program for the full year 2023 robotics in space operations revenue were $248 million, representing $54 million or 28% year over year growth largely driven by increased activity.

Vito Colmoni: By business area, revenues in SAT systems of $90.2 million in Q4 2023 were $5.9 million, or 7% higher, compared to the same quarter in 2022. This was driven by slightly higher work volume on the Global Start program and the initial ramp-up of the Lightspeed program, which was awarded in Q3 of 2023. On a full-year basis, revenues from satellite systems increased to $362 million for the latest year, representing a $110 million increase of 43% growth over full year 2022.

The aforementioned Canada three program, Canada arm three program excuse me.

Revenues in our Geo intelligence business at $49 9 million in the quarter represents a decrease of $4 million or seven 4% year over year due to the timing of programs.

For the full year 2023 revenues per Geo intelligence we're.

Just under $198 million and that represented a $2 million or 1% increase compared to 2022 levels reflecting.

Relatively steady volume of work.

Vito Colmoni: Again, driven by higher volumes related to satellite constellation work, including the GlobalSTAR program, which, as you recall, commenced in Q1 of 2022, and several additional rewards to support the U.S. Department of Defense Constellation. In robotics and space operations, we saw healthy year-over-year growth with revenues of $65 million in the quarter, representing $17 million, or a 35% increase versus Q4 of last year. The growth is largely attributable to a higher volume of work performed on the Canadarm3 program. For the full year 2023, robotics and space operations revenue were $248 million, representing $54 million, or 28% year-over-year growth, largely driven by increased activity on the aforementioned Canada III program. Canada Arm 3 program. Revenues in our geointelligence business of $49.9 million in the quarter represent a decrease of $4 million, or 7.4% year-over-year due to the timing of programs.

Gross profit moving on to gross profit and it just as a reminder, gross profit represents our revenue less cost of revenue, which includes the material labor.

The allocated overhead and SRT credits in depreciation for.

For Q4 gross profit was just under $58 million, representing a $1 million or one 9% decrease over the same period last year and this decrease was driven by program mix and higher depreciation expense as new assets come into service offset by higher work volumes year over year.

<unk> gross margin and allowed us to slightly this quarter was 28, 2%, which is very healthy and in line with our expectations and that compares to 31, 6% margin for the same period in 2022.

On a full year basis gross profit was $244 million and this represented a $15.6 million or a 7% increase over 2022.

The year over year increase was driven by higher work volume performed partially offset by $17 million of higher investment tax credits or Itc's. You'll recall that were recorded in Q1 of 2022 related to the resolution of historical claims.

Vito Colmoni: For the full year 2023, revenues for geointelligence were just under $198 million, and that represented a $2 million or 1% increase compared to 2022 levels, reflecting a relatively steady volume of work. Gross Profit, moving on to Gross Profit, and just as a reminder, Gross Profit represents our revenue less cost of revenue, which includes material, labor, allocated overhead, SR&ED credits, and depreciation. For Q4, gross profit was just under $58 million, representing a $1 million, or 1.9 percent, decrease over the same period last year.

Gross margin for the full year 2023 was 32%, which again is in line with our expectations and driven by an evolving program mix and higher depreciation expense comparatively gross margin in 2022 was 33% excluding the impact of the aforementioned ITC claim.

Operating expenses Q4 operating expenses of just under 42 million slightly above last year's metric of $40 million again, reflecting slightly higher SG&A and R&D expenses somewhat offset by lower intangible amortization on a full year basis, our operating expenses were $166 million in 2020.

Vito Colmoni: This decrease was driven by program mix and higher depreciation expense as new assets come into service, offset by higher work volumes year over year. Gross margin in the latest quarter was 28.2 percent, which is very healthy and in line with our expectations. And that compares to 31.6 percent for the same period in 2022. On a full year basis, gross profit was $244 million.

Three compared to 154 million for the 12 months comparative period.

The year over year increase was primarily due to higher SG&A expenses to support growing work volumes and higher R&D costs, driven by the development activities on course, and other proprietary technology programs.

Overall, we're very pleased with the cost control and our SG&A programs.

Adjusted EBITDA adjusted EBITA in the latest quarter were $40 million to $42 million compared to $39 9 million in Q4 of 2022. This was driven by higher work volume as we continue to execute on our backlog adjusted EBITDA margin in the quarter was 25% compared to 20.

Vito Colmoni: And this represented $15.6 million, or a 7% increase over 2022. The year-over-year increase was driven by higher work volume performed, partially offset by $17 million of higher investment tax credits, or ITCs. You'll recall that were recorded in Q1 of 2022, related to the resolution of historical claims. Gross margin for the full year 2023 was 30.2%, which again is in line with our expectations and driven by an evolving program mix and higher depreciation. The comparatively gross margin in 2022 was 33%, excluding the impact of the aforementioned ITC.

One 4% in the same period last year.

On a full year basis, adjusted EBITDA was $174 2 million and this is up from 22 levels of 158 million. This represents a 16% increase 66, excuse me $16 million increase or just over 10% on a year over year basis exclude.

Excluding the impact of historical Itc's settlement recognized in 2022 of $17 million adjusted EBITDA was $141 million in 2022 compared to $174 million in 2023.

Vito Colmoni: Operating expenses, Q4 operating expenses of just under $42 million, slightly above last year's metric of $40 million, again reflecting slightly higher SG&A and R&D expenses, somewhat offset by lower intangible amortization. On a full-year basis, our operating expenses were $166 million in 2023, compared to $154 million for the 12-month comparative period. The year-over-year increase is primarily due to higher SG&A expenses to support growing work volumes and higher R&D costs driven by the development activities of courses and other proprietary technology programs.

Representing a year over year increase of approximately 23%.

Adjusted EBITDA margin for the full year 2023 was 21, 6% compared to 22, 2% for 2022, excluding the previously noted historical ITC resolution.

Throughout 2023, we demonstrated strong operating performance focusing on program execution and cost control, while simultaneously investing in growth initiatives, which contributed to higher levels of R&D expenses.

Vito Colmoni: Overall, we're very pleased with the cost control, our SG&A program, and Adjusted EBITDA. Adjusted EBITDA in the latest quarter was $42 million, compared to $39.9 million in Q4 of 2022. This was driven by higher work volume as we continue to execute on our backlog. Adjusted EBITDA margin in the quarter was 20.5 percent, compared to 21.4 percent in the same period last year

Yeah.

Adjusted net income in the latest quarter was $27 8 million compared to 22, a $22 3 million in Q4 of 2022 the increase over the.

Previous year of $5 5 million or 24, 7% is driven by lower income tax expense and finance cost in Q4 of 2023.

For the full year 2023, adjusted net income was $97 9 million up $19 million or 24% year over year, driven by higher operating income and lower finance costs.

Vito Colmoni: On a full year basis, Adjusted EBITDA was $174.2 million, and this is up from 22 levels of $158 million. This represents a $16 million increase, or just over 10%, on a year-over-year basis. Excluding the impact of the historical ITC settlement recognized in 2022 of $17 million, adjusted EBITDA was $141 million in 2022 compared to $174 million in 2023, representing a year-over-year increase of approximately 23 percent. Adjusted EBITDA margin for the full year 2023 was 21.6% compared to Throughout 2023, we demonstrated strong operating performance, focusing on program execution and cost control, while simultaneously investing in growth initiatives, which contributed to higher levels of R&D expenses. Adjusted net income in the latest quarter was $27.8 million, compared to $22.3 million in Q4 of 2022.

Adjusted diluting diluted earnings per share of <unk> 23 in Q4 of 2023 and <unk> 81 for the full year of 2023 were up 27, 7% and 26.6% respectively versus the same period last year.

Yeah.

Our backlog moving on to backlog, we ended the quarter with $3 1 billion in backlog and that represented an increase of 125% compared to 2022 year end levels. The growth in backlog was driven by new order bookings, including of course tell us that lightspeed Leo constellation, which was awarded in Q3 of 2023.

Partially offset by the continued conversion of our backlog into revenue of course.

Moving on to Capex, we remain focused as Mike has alluded to on making the right investments in the business to support our strategic growth initiatives. That's all going very very well in Q4 2023, we spent $57 6 million on capital expenditures. This was up from $47 million last year as we ramped up the development of course and other growth.

Initiatives growth Capex was 48 million in the latest quarter up from $38 million in Q4.

Vito Colmoni: The increase over a previous year of $5.5 million, or 24.7%, is driven by lower income tax expense and finance costs in Q4 of 2023. For the full year 2023, adjusted net income was $97.9 million, up $19 million or 24% year over year, driven by higher operating income and lower finance costs. Adjusted diluted earnings per share of $0.23 in Q4 of 2023 and $0.81 for the full year of 2023 were up 27.7% and 26.6%, respectively, versus the same period last year. Backlog, moving on to the next item. We ended the quarter with $3.1 billion in backlog, and that represented an increase of 125% compared to 2022 year-end levels. The growth in backlog was driven by new order bookings, including, of course, Telesat Lightspeed Leo Constellation, which was awarded in Q3 of 2023, partially offset by the continued conversion of our backlog into revenue.

2022, and on a full year basis, our capital spend was $193 2 million and that compares to $180 million. In 2022, we expect this level of spend to continue in 2024, as we advanced course and invest in initiatives to support our growing business, including expanding the modernizing our physical infrastructure.

Yeah.

In Q4 of 2023, we closed the acquisition of satisfy space systems UK Limited. This has a digital payload division of <unk> Communications Ltd.

You'll recall that the total value of that transaction was for us $40 million and during the quarter $18 million U S. Approximately 25 million Canadian of that 40 million U S was paid to the seller.

A further $20 million is payable in 2024 through the issuance of notes payable on demand over seven months and the remaining $2 million hold back will be released to the seller in 2025.

Cash from operations during the quarter was a use of $41 2 million compared to cash generation of $40 million in Q4 of 2022.

Not unusual to see some swings quarter over quarter, there operating cash flow in Q4, 2023 was impacted by higher working capital requirements, including $29 million related to vendor deposits for the course constellation launch expected in Q4 of 2025.

Vito Colmoni: Moving on to CapEx, we remain focused, as Mike has alluded to, on making the right investments in the business to support our strategic growth initiatives. And that's all going very, very well. In Q4 2023, we spent $57.6 million on capital expenditures. This was up from $47 million last year as we ramped up the development of QORUS and other growth initiatives. Growth CapEx was $48 million in the latest quarter, up from $38 million in Q4.

For the full year 2023 cash from operations generated $13 5 million and this was compares to a cash generation of just under 50.

<unk> $57 million in 2022 and.

And again operating cash flow in 2023 included a total of close to $60 million in working capital outlays related to prepayments made in 2023 for future inventory.

Vito Colmoni: We are excited to announce the final 2022. On a full year basis, our capital spend was $193.2 million, and that compares to $180 million in 2022. We expect this level of spend to continue in 2024 as we advance the course and invest in initiatives to support our growing business, including expanding and modernizing our physical infrastructure. In Q4 of 2023, we closed the acquisition of Satisfye Space Systems, UK Ltd. This is the Digital Payload Division of Satisfye Communications Ltd. You'll recall that the total value of that transaction was for U.S. $40 million, and during the quarter, $18 million U.S., approximately $25 million Canadian, of that $40 million U.S. was paid to the seller. Further $20 million is payable in 2024 through the issuance of notes payable on demand over seven months, and the remaining $2 million holdback will be released to Cash from operations during the quarter was a use of $41.2 million compared to cash generation of $40 million in Q4 of 2022.

And the vendor deposits for the course constellations I noted in Q4.

Balance sheet moving onto our balance sheet, we ended the quarter with net debt of $416 million available liquidity of close to $150 million and net debt to trailing 12 months adjusted EBITDA ratio of two four times all of this is in accordance with Eric.

With our plan and expectations and clearly the increase in debt levels reflect our investment in strategic growth initiatives to support our future growth.

In summary, this was a very strong quarter to wrap up fiscal 2023, and we're encouraged very encouraged by the positive momentum we're seeing across our business.

Now turning to outlook as Mike noted, we are introducing our 2024 financial outlook and are well positioned to capitalize on strong customer demand and robust market activity, given our diverse and a proven technology and product offerings.

For fiscal 2024, we expect full year revenues to be between 950, and $10 50 million reps.

Representing robust year over year growth of approximately 25% at the midpoint of guidance.

Vito Colmoni: It is not unusual to see some swings quarter over quarter there. Operating cash flow in Q4 2023 was impacted by higher working capital requirements, including $29 million related to vendor deposits for the Qorus Constellation launch expected in Q4 of 2025. For the full year, 2023, cash from operations generated $13.5 million.

We expect full year adjusted EBITDA to be 190 $210 million and this represents approximately 19%, 20% adjusted EBITDA margins.

We expect capital expenditures to be $210 million to $230 million in 2024 <unk>.

Primarily comprising of growth investments to support of course, and the previously outlined growth initiatives across our three business interesting to note that through 2024, then will be approximately 90% done with our course capex.

Vito Colmoni: And this compares to a cash generation of just under $57 million in 2022. And again, operating cash flow in 2023 included a total of close to $60 million in working capital outlays related to prepayments made in 2023 for future inventory and vendor deposits for the course concessions I noted in Q4. Moving on to our balance sheet, we ended the quarter with net debt of $416 million, available liquidity of close to $150 million, and a net debt to trailing 12-month adjusted EBITDA ratio of 2.4 times.

Turning to Q1.

<unk> 'twenty 'twenty four we expect revenues to be between 205 and $215 million as we continue to execute on our backlog and you'll see continued growth in quarter over quarter revenues are here through 2024.

With a number of large programs now in backlog or book of business is strong we remain focused on disciplined execution on our customer commitments.

And leveraging our capabilities and technology to grow profitably in core and emerging markets in line with our long term plan.

Vito Colmoni: All of this is in accordance with our plan and expectations, and clearly the increase in debt levels reflect our investment in strategic growth initiatives to support our future growth. In summary, this was a very strong quarter to wrap up fiscal 2023, and we're encouraged, very encouraged by the positive momentum we're seeing across our business. Turning to Outlook, as Mike noted, we're introducing our 2024 financial outlook and are well positioned to capitalize on strong customer demand and robust market activity, given our diverse and proven technology and product offerings. For fiscal 2024, we expect full-year revenues to be between $950 and $1050 million, representing robust year-over-year growth of approximately 25% at the midpoint of guidance. We expect full-year adjusted EBITDA to be between $190 and $210 million.

With that I'll turn it back to you.

Alright.

I guess without broken it up to questions. So that's really what the actual so operator you are in charge.

Ladies and gentlemen, if you would like to ask a question. Please press star followed by one on your Touchtone phone you will then hear a.

Sweet home prompt acknowledging your request if you would like to withdraw from the question queue. Please press star followed by two and if you're using a speaker phone you'll need to lift the handset before pressing anything. Please go ahead and press star one now if you do have any questions.

And your first question will be from Doug Taylor Canaccord. Please go ahead.

Yeah. Thank you hi, good morning, and congratulations on a strong year of growth.

A lot of focus here on the 2024 guidance given some of the substantial programs ramping up. This year are you able to break down for us the degree to which you're factoring in contributions from programs like telesat. So we can better understand how to think about the growth profile. This.

Vito Colmoni: This represents approximately 19% to 20% adjusted EBITDA margins. We expect capital expenditures to be between $210 million and $230 million in 2024, primarily comprised of growth investments to support QORUS and the previously outlined growth initiatives across our three businesses. It's interesting to note that through 2024, then, we'll be approximately 90% done with our QORUS CapEx. Turning to Q1 2024, we expect revenues to be between $205 and $215 million as we continue to execute on our backlog, and you'll see continued growth in quarter-over-quarter revenues here through 2024. With a number of large programs now in backlog, our book of business is strong. We remain focused on disciplined execution on our customer commitments and leveraging our capabilities and technology to grow profitably in core and emerging markets in line with our long-term plan. Mike, with that, I'll turn it back to you.

Year end is that program really hit its stride in the years ahead.

I won't use the exact numbers whenever we continue to talk about <unk> and it being in a ramp up year. I think you can see that on a number of these programs as we kind of come out of Q4 and into Q1 and we're you know we're just ramping up as we go through the year. So it'll be a ramp up year is the phrase that we would use to be able to do that.

And so we've appropriately.

Characterized those ramps in the in the guidance that we've given obviously.

These are large programs that have schedules and therefore, they will get done on time. So 'twenty five 'twenty six 'twenty seven these are going to be very chunky years with a much larger revenues in those out years as these projects get completed.

But there will be a gradual ramp up through 'twenty four you do anything else on that well no. The only other thing.

Operator: I guess with that, we're opening up to questions. That's really what's next. Operator, you are in charge. Thank you, sir. Ladies and gentlemen, if you would like to ask a question, please press star followed by one on your touch screen. You will then hear a three-tone prompt acknowledging your... And if you would like to withdraw from the question queue, please press star followed by 2. And if you're using a speakerphone, you will need to lift the handset before pressing star. Go ahead and press star 1 now.

Americas.

Doug it's great to hear your voice here, but clearly as you think about the quarterly revenue profile here in 2024.

The exit velocity coming out of the projected exit velocity coming out of 2024 boats for obviously, a robust 2025 or not here, giving 2025 guidance, but that consistent sort of $20 to 25% plus growth.

The trajectory for this organization is a is very.

Doug Taylor: If you do have any questions, and your first question will be from Doug Taylor at CatNetCourt. Please go ahead. Thank you. Good morning.

Very visible to us.

Okay I appreciate that maybe I'll I'll come out that are in a different direction. Then you know to what degree is the schedule for the design and early stage work for Telesat any the other award for which you have been working under our authorization to proceed known now and would those be.

Mike Greenlee: Congratulations on a strong year of growth. A lot of focus here on the 2024 guidance given some of the substantial programs ramping up this year. Are you able to break down for us the degree to which you factored in contributions from programs like Telesat so we can better understand how to think about the growth profile this year and as that program really hits stride in the years ahead? I won't use exact numbers, whatever.

Be you know a large considerations and in the range of guidance the $100 million from from top to bottom.

I I'd say like there you know.

There is a level of which is certainly known which we've included in guidance.

I think if you listen to our words and we have our engineering activities on the authorization to proceed with the unnamed customer, which will then convert into the full execution contract sometime during the year.

Mike Greenlee: We continue to talk about Telesat being in a ramp-up year. I think you can see that on a number of these programs as we kind of come out of Q4 and into Q1, and we're just ramping up as we go through the year. So it'll be a ramp-up year is the phrase that we would use to be able to do that. And so we've appropriately characterized those ramps in the guidance that we've given. Obviously, these are large programs that have schedules, and therefore, they will get done on time.

<unk> of which that switches thrown.

Could bring more enthusiasm similarly with lightspeed.

You've heard us say that we are finalizing all of our.

Supplier procurement.

Mike Greenlee: So 2025, 2026, 2027, these are going to be very chunky years with much larger revenues in those out-years as these projects get completed. But there will be a gradual ramp-up through 2024. Do you have anything else on that?

Decisions and getting ready to move out on that.

The pace at which we move out on that.

We can affect.

Revenue, so we're giving guidance on.

Things that we're very comfortable and confident in.

But there is opportunities for giddy up levels that you could do a bit better but.

Vito Colmoni: No, the only other thing that I'd like to say is, Doug, it's great to hear your voice here, but clearly, as you think about the quarterly revenue profile here in 2024, the projected exit velocity coming out of 2024 bodes for, obviously, a robust 2025. We're not here giving 2025 guidance, but that consistent sort of 20% to 25% plus growth projected for this organization is very visible to us. Okay, I appreciate that. Maybe I'll come at that from a different direction then.

It's important for us to make sure we're always doing what we say.

And maybe a better data point there Mike that is approximately 75% of our.

Yeah that revenue guidance that we provided it is in backlog as we come into 2024. So that's.

Yes, 75 to 80 is assuring showing me here is is in backlog as we stand here today.

Okay, maybe one more line of questioning before I pass the line you reiterated a number of large Canadian government program to say you've mentioned some of these in the past that have received are indicative funding over the past year can you speak to perhaps your updated view on the translation from funding announcement.

Doug Taylor: You know, to what degree is the schedule for the design and early stage work for Telesat and the other award for which you've been working under an authorization to proceed known now? And would those be, you know, large considerations in the range of guidance, the hundred million dollars from top to bottom? I'd say there is a level of which is certainly known, which we've included in guidance.

Two new procurement process timing and potential award on some of these other Canadian.

You know missions for which you've been a material.

The supplier in the past.

Oh, Yeah, then obviously that that'll be at the pace of the government agencies that are doing the procurement.

Mike Greenlee: I think if you listen to our words, and we have engineering activities on the authorization to proceed with the unnamed customer, which will then convert into the full execution contract at some time during the year, the pace at which that switch is thrown could bring more enthusiasm. Similarly, with Lightspeed, you've heard us say that we are finalizing all of our supplier procurement decisions and getting ready to move out on that. The pace at which we move out on that can affect revenues.

I think and we have not seen procurement documents being circulated for those as of yet.

If I was reading body language.

The activities around a radar side plus activities, where the government would want to get on with.

Picking up on other synthetic aperture radar satellite to.

<unk> enhanced reliability to the radar sat constellation mission I would.

Got to get moving probably before.

Ah lunar utility vehicle for example in terms of a large program. There are all of us remains to be seen I'm, just expressing my own personal view based on.

Mike Greenlee: So we're giving guidance on things that we're very comfortable and confident in, but there are opportunities for giddy-up levels that you could do a bit better, but it's important for us to make sure we're always doing what we can. And maybe another data point there, Mike, to add is that approximately 75% of the revenue guidance that we provided is in backlog as we come into 2024. 75 to 80, as Shireen is showing me here, is in the backlog as we stand here today.

By language and enthusiasm, but the no one has expressed a specific schedules yet so the things to watch out for in terms of triggers.

It would be a draft request for proposals that came out of the industry that we would be asked to comment on that all the industry would be asked to comment on followed by final requests for proposals for actual bids and certainly we will keep you posted as those things occur which would give us some solid indications.

Mike Greenlee: Okay, maybe one more line of questioning before I pass the line. You mentioned a number of large Canadian government programs. You've mentioned some of these in the past that have received indicative funding over the past year. Can you speak to, you know, perhaps your updated view on, you know, the translation from funding announcement to procurement process timing and potential award on some of these other Canadian emissions for which you've been a material supplier in the past? Yeah, obviously, that will be at the pace of the government agencies that are doing the procurement. I think, and we have not seen procurement documents being circulated for those as yet. I think if I was reading body language, the activities around Radarsat Plus, where the government would want to get on with picking up another synthetic aperture radar satellite to provide enhanced reliability to the Radarsat Constellation mission, I would expect that to get moving probably before a lunar utility vehicle, for example, in terms of a large program there.

Is that where you know once we start to see draft proposals, where it probably within a year and we haven't seen that yet.

Alright, Thank you Mike your personal views I appreciate it.

I'll pass the line.

Thank you next question will be from Kenneth Gupta at Scotiabank. Please go ahead.

Thanks, operator, good morning, everyone.

Good morning, if I can.

Ask about chorus, but perhaps.

Do you or would you expect Mike to see some customers signing commitments or contracts.

Before the Q4 2020 launch.

Yeah that can happen anytime over the next couple of years.

The Big announcement, there was necessary was the October announcement, where we actually said Q4 2025 is the launch window.

And announcing that we assigned Spacex as the customer and as Don mentioned, you would start to make you know launch down payments and things like that so everything becomes very real.

As a result of those Q4 activities.

Which then absolutely turns the conversation to orders and signing people up.

Mike Greenlee: All of this remains to be seen. I'm just expressing my own personal view based on body language and enthusiasm, but no one has expressed specific schedules yet. The things to watch out for in terms of triggers would be draft requests for proposals that come out to industry that we would be asked to comment on, that all industry would be asked to comment on, followed by final requests for proposals for actual bids, and certainly, we'll keep you posted as those things occur, which would give us some solid indications that we're once we see the draft proposals work probably within a year and we have, All right, thank you, I'll pass the flag.

So that activity is absolutely ongoing we.

We see really strong conversations with existing customers on radar sought to there would have the opportunities to roll and expand their services with Corus. In addition to new customers.

Would potentially want to secure priority positions on course, theres a bit of a thing there whereby with a fully task <unk> satellite.

Where people give us their request and we can look left look right and use different imaging modes and give them the imaging that they want the data that they want.

Being a certain level of priority in the request line for that tasking of the satellite matters to some customers and so coming in early and securing their place for that is.

Connort Gupta: Thank you. The next question will be from Connort Gupta at Scotiabank. Thanks, operator. Good morning, everyone.

It is important to them. So so these these conversations all get going are all are ongoing at the moment. They have expanded a number of new customers I can think of three immediately.

Mike Greenlee: Morning. If I can ask you something about Quorus first, perhaps. How soon do you or would you expect, Mike, to see some customers signing commitments or contracts, you know, before the Q4 2025 launch? Yeah, that can happen anytime over the next couple of years. The big announcement that was necessary was the October announcement where we actually said Q4 2025 as the launch window and announced that we had signed SpaceX as the customer, and as Vito mentioned, we start to make, you know, launch down payments and things like that So everything becomes very real as a result of those Q4 activities, which then absolutely turns the conversation to, you know, orders and signing people up. So that activity is absolutely ongoing.

That would be a new potential customers in our life.

We have engaged in conversations since those october's announcements.

The pace at which those will turn into orders a lot of those are government defense and intelligence customers those with a nice solid stable recurring customers that you'll want to have on a on a data driven satellite like this.

And so some of that procurement needs to occur at the pace of government. So it'll be a continual process throughout 'twenty four and 'twenty five as we as we head to launch and then we will make announcements as we go as we are as we sign people up.

No I appreciate that thanks in terms of financial outlook for that course program, then I think to <unk> point that the Capex is done for the vast majority this year by the end of this year.

Mike Greenlee: We have really strong conversations with existing customers on RadarSat-2 that would have the opportunity to roll out and expand their services with Qorus in addition to new customers that would potentially want to secure priority positions on Qorus. There's a bit of a thing there whereby, with a fully taskable satellite, where people give us their request, and we can look left and look right and use different imaging modes and give them the imaging that they want, the data that they want. You know, being at a certain level of priority in the request line for that tasking of the satellite matters to some customers. And so coming in early and, you know, securing their place for that, is important to them.

It seems like if you get more contracts new contracts of course next year. This year, you might see cash flow profitability on this program in 2025.

The cash.

Cash flow could could good that there is there is opportunity for people to put some cash upfront, we always look for that opportunity and that helps sometimes people secure their priority access.

So that can occur I think you used the word profitability you wouldn't be generating revenue yet because you wouldn't be delivering a service. So you might get some upfront cash, but youre not going to start picking out revenue and profit until you're actually fly in 2026.

Mike Greenlee: So these conversations all get going, or all are ongoing at the moment. They have expanded. A number of new customers, I can think of three immediately that would be new potential customers in our lives, have engaged in conversations since those October announcements. The pace at which those will turn into orders is unknown, but a lot of those are government, defense, and intelligence customers. Those are the nice, solid, stable, recurring customers that you'll want to have on a data-driven satellite like this. And so, you know, some of that procurement, you know, needs to occur at the pace of government. So, you know, it'll be a continual process throughout 24 and 25 as we head to launch, and then we'll make announcements as we go, as we sign people up.

Okay, Thanks, and if I can follow up on Capex and working cap quake.

It sounds like in 'twenty, three that it was like $16 million.

One time setup outlays for future inventory in the chorus launch deposits et cetera is there anything this year in 2004 bear you guys expect some sort of one time payments like land sales, so far our future projects and activities like corporates are pallet or something else or even satisfy.

No. Thanks for the question, Yeah, you're absolutely correct 2020.

Mike Greenlee: I appreciate that. Thanks. And in terms of the financial outlook for that training program, then I think to Vito's point, if the CapEx is done for the vast majority this year, by the end of this year, it seems like if you get more contracts or new contracts, of course, next year, this year, you might see cash flow profitability on this program in 2025. Is that fair to believe?

For 2023 included roughly $60 million of I'll call them onetime prepayments.

That clearly will unwind here in 2000 22025, so we'll get the benefit of those with a high degree of certainty when you look at the ultimate suppliers in both those cases of walnuts.

There's no risk associated with it in our mind in.

In regards to 2024 corner.

I expect us to be converting.

Operating cash flow pre interest costs against our EBITDA in the range of 65% to 70%.

Mike Greenlee: The cash flow could, there is an opportunity for people to put some cash up front. We always look for that opportunity, and that helps, sometimes, people secure their priority access so that can occur. I think you used the word profitability. You wouldn't be generating revenue yet because you wouldn't be delivering a service. So you might get some up-front cash, but you're not going to start picking up revenue and profit until you're actually flying in 2026. Okay, no, thanks.

So no expected one timers.

Okay I appreciate the color. Thank you.

Thank you next question will be from San OS Ms. Hopeless BMO. Please go ahead.

Hi, good morning.

I guess, maybe I can do the math based on the answer you just gave but remind us.

Your current thinking is on where the leverage ratio will peak supports that should come down.

Yes, I think we're at $2 four to enter the calendar year I think we'll we definitely don't expect it to be too much above three ish I would say call. It the three ish range.

Vito Colmoni: And if I can follow up on CapEx and working CapQuick, it sounds like in 23, there was like a $60 million one-time sort of outlays for future inventory and the Qorus launch deposit, etc. Is there anything this year in 24, where you guys expect some sort of one-time payments or advances for future projects and activities like Qorus or Palisade or something else, even satisfying? No, thanks for the question.

Plus or minus one or two there.

And then we expect a very accelerated deceleration from there as we move into the back half of 2024, but into 2025, so very comfortable with those levels of those.

Those levels of leverage in our existing arrangements right on the plan.

Alright, Mike.

Mike can you.

Due to the strength of the satellite systems backlog with other conservation programs.

Vito Colmoni: You're absolutely correct. 2020-2023 included roughly $60 million of, I'll call them, one-time prepayment that clearly will unwind here in 2024 and 2025. So we'll get the benefit of those with a high degree of certainty when you look at the ultimate suppliers in both those cases and whatnot. So there's no risk associated with that in our minds.

Any color you can provide in terms of the nature of those programs is it a mix of government as well as commercial work ladder.

Is it.

Just any color you can provide realized mimic limit what you can say for you you're talking about pipeline right now.

Yes, yes, yes.

Yeah. So it's a a lot of commercial activity for sure.

Vito Colmoni: In regards to 2024, I expect us to be converting operating cash flow pre-interest costs against our EBITDA in the range of $65,000 to $75,000. So no expected one-time cost. Okay. Thank you. Thank you. Next question will be from Thanos Motsopoulos at BMO. Please go ahead. Hi, good morning.

And you'll see that in our in our order book with like the the global stars and the Telesat type things coming through so there's a significant amount of commercial activity that we're seeing in the in the satellite systems.

Pipeline.

The application areas would include folks that want to build space based networks for broadband communication.

There are folks that want to build our networks for director device communications, such as we're seeing with the Globalstar example, where people want to talk directly from satellites to smartphones and smart devices. So a directed device communications and then there is a world out there of customers looking at the.

Thanos Motsopoulos: Vito, I guess we can do the math based on the answer you just gave, but remind us where your current thinking is on where the leverage ratio will peak before it starts to come down. Yeah, I think you know, we're at 2.4 to end the calendar year. I think we'll, you know, we definitely don't expect to be too much above three ish, I'd say call it the three ish range, plus or minus point one or point two there. And then we expect a very accelerated deceleration from there as we move into not only the back half of 2024 but into 2020. So very comfortable with those levels of those levels of leverage in our existing range, right on the plane.

We use the word internet of things right, so like that internet of things market, where people want to.

Connect all of their things up through space based networks that could be connecting all their agriculture vehicles are connecting all their cars for smart cars are connecting all their or anything else as.

Theres, a very large future potential market in the internet of things in terms of space based network. So those are the three categories largely commercial and then commercial customers would.

Thanos Motsopoulos: Great. Mike, you alluded to the strength of the satellite systems backlog with other constellation programs. Any color you can provide in terms of the nature of those programs, you know, is it a mix of government as well as commercial, more of the latter? You know, is it, just any color you can provide, realize there might be a limit to what you can say.

It would include folks that are traditional.

Traditional space network operators like global stars, where telesat that you've seen us get orders from in addition to.

New market entrant potentials. So people that are raising money to be able to do that and or corporations that are putting money aside to be able to do that so that's kind of how I would best.

Mike Greenlee: You're talking about the pipeline, right? Pipeline, yes. Yeah, so there's a lot of commercial activity for sure, and you see that in our order book with the Global Stars and the Telesat type things coming through, so there's a significant amount of commercial activity that we're seeing in the satellite systems pipeline. The application areas would include folks that want to build space-based networks for broadband communication. There are folks that want to build networks for direct-to-device communications, such as we're seeing with the Global Star example, where people want to talk directly from satellites to smartphones and smart devices.

Characterize the situation I think in general with the space market, it's kind of cool because when you you see things that start space markets typically have started with government activity and you get a certain stability.

From that and then your explosive potential comes from.

Our strong sudden growth in commercial activity and so we're seeing that now in satellite communications whereby.

50 years ago, when we all started working on satellite communications and over the decades. You know it was all about a lot of government activity military and weather and all that kind of stuff and then now as we're seeing these the space that <unk> commercial markets go we're seeing the rapid expansion.

Mike Greenlee: And then there's a world out there of customers looking at the, we use the word Internet of Things, right? So like that Internet of Things market, where people want to, you know, connect all their things up through space-based networks. That could be connecting all their agricultural vehicles, or connecting all their cars for smart cars, or connecting all their anything else.

In robotics in space operations historically, its always been about NASA missions and government space stations now we're seeing the emergence of commercial space stations and commercial missions and were seeing a pick up there and then in Earth observation right now the big stable customers are government defense and intelligence agencies that just one really good data for surveillance and then.

Mike Greenlee: There's a very large potential market for the Internet of Things in terms of space-based networks. So those are the three categories, largely commercial. And then commercial customers would include folks that are traditional space network operators like GlobalStars or Telesats, which you've seen us get orders from, in addition to new market entrants, so people that are raising money to be able to do that, and or corporations that are putting money aside to be able to do that. So that's kind of how I would best characterize the situation.

We all watch and wait and see and work on whats that explosive moment going to be where the commercial market finally kicks in so that's.

That's a that's the pattern that we always watch for and that we're starting to experience and certainly in satellite systems to go back to your question, we're seeing the commercial side of it really hit now in the pipeline.

Great. Thanks for that color, Mike I'll pass the line.

Thank you next question will be from Ken Herbert at RBC capital markets. Please go ahead.

Okay.

Yeah, Hi, Thanks, Good morning, Mike and Vito.

I wanted to first start out with a question on margins you ended 23 with better EBITDA margins I think than you started the year.

Mike Greenlee: I think in general with the space market it's kind of cool because when you see things that start, space markets typically start with government activity, and you get a certain stability from that, and then your explosive potential comes from a strong sudden growth in commercial activity. And so we're seeing that now in satellite communications whereby, you know, 50 years ago, we all started working on satellite communications and, over the decades, it was all about a lot of government activity, military, and weather and all that kind of stuff. And then now as we're seeing these spaces, these commercial markets go, we're seeing rapid expansion. In robotics and space operations, historically, it's always been about NASA missions and government space stations.

<unk> two can you talk about sort of the key factors as we think about the upper and lower end of the EBIT expectations for 'twenty four I can appreciate mix is a big factor in this but how should we think about the range of the EBIT guidance has the potential to maybe outperform the 19% to 20%.

Yeah. Thank you Ken and good to hear your voice.

So you know when you think about very pleased the biggest driver of EBIT performance is strong program execution.

Disciplined pricing mechanics strong market demand for our services.

And and obviously good cost control on the SG&A as you heard me reference. So you know I'd say checkmark to all those as we progress through 2023.

Mike Greenlee: Now, we're seeing the emergence of commercial space stations and commercial missions, and there's a pick-up. And then in Earth Observation right now, the big stable customers are governments, defense, and intelligence agencies that, you know, just want really good data for surveillance. And then we all watch and wait and see and work on, you know, what that explosive moment is going to be where the commercial market finally kicks in. So that's the pattern that we always watch for and that we're starting to experience. And certainly in satellite systems, to go back to your question, we're seeing the commercial side of it really take off now in the pipeline. Great, thanks for that color, Mike. I'll pass it along.

The teams have put forth their 2024 and strategic programs. So.

You know I'm relatively bullish on our margin profile.

You've seen us move from that 18 to 20 marker that we've sort of noted to a 19% to 20, so perhaps we're taking a bit of a measured step here.

And we've got a lot of that.

Big thing that's happened in our business here over the next three years. When you talk about automation large volume product position are that are going to have.

Ken Herbert: Thank you. Yeah, hi, thanks. Good morning, Mike and Vito.

Meaningful implications to our margins.

Vito Colmoni: Hey, I wanted to first start out with a question on margins. You ended the year with better EBITDA margins, I think, than you started the year guiding to. Can you talk about sort of the key factors as we think about the upper and lower ends of the EBITDA expectations for 24? I can appreciate mix is a big factor in this, but how should we think about the range of the EBITDA guidance and the potential to maybe outperform the 19 to 20%? Yeah, thank you, Ken. It's good to hear your voice.

And and from where we stand today, that's clearly neutral to what we're describing to potential upside associated with that but we will take one step at a time when it comes to that.

And move forward. So we're pleased with our guidance here in 19 to 20, we have over delivered against what we've described there, but we'll take it one step at a time to give you a little bit more color as we make our way through.

The calendar year here as we proceed through 2020 for anything else Mike Yeah, Yeah, No. That's good okay.

Vito Colmoni: So you know, when you think about being very pleased, the biggest driver of EBITDA performance is strong program execution, Discipline Pricing Mechanic, strong market demand for our services, and obviously good cost control on the SG&A, as you heard me reference. So, you know, I'd say checkmark to all those as we progress through 2023 as the teams have put forth their 2024 and strategic program. So, you know, I'm relatively bullish on our margin profile. You've seen us move from that 18 to 20 marker that we've sort of noted to a 19 to 20.

Thanks for you to appreciate that and maybe just as a follow up you've obviously signed a lot of large contracts here in 2023, the cost environment seems to be much improved relative to prior years, but.

You you just went through some of the offsets, but how can you or what comments can you make to really increase confidence that some of these large contracts won't face maybe incremental margin pressure down the road how are you.

Go through the bidding in the contracting process may be de risked some of the cost assumptions in the out years.

Vito Colmoni: So perhaps we're taking a bit of a measured step here and we've got a lot of big things happening in our business here over the next three years when you talk about automation, and large volume productization, that are going to have meaningful implications on our margins, and from where we stand today, that's clearly neutral to what we're describing the potential upside associated with that, but we'll take one step at a time when it comes So we're pleased with our guidance here in from 19 to 20. We have over delivered against what we've described there, but we'll take it one step at a time and give you a little bit more color as we make our way through the calendar year here as we proceed through 2024. Anything else Mike, you had there?

Yeah, there's no real change from like our normal tricks that.

We always talk about which is that typically these types of firm fixed price contracts are.

Two to four years in duration.

These all fall into that bucket.

We have therefore ensured that we have very very up to date a quote.

Quotes are going.

Going into going into that period of time.

We ensure that.

Loads from our suppliers are firm fixed price to us and then we are firm fixed price to our customers.

That ensures that the large what we call non labor or subcontracted basis is as firm fixed to us.

And then with our own labor and controls we included the escalation factors in that that are consistent with.

Ken Herbert: No, that's good. Thanks, Vito. I appreciate that. And maybe just as a follow-up, you've obviously signed a lot of large contracts here in 2023. The cost environment seems to be much improved relative to prior years, but you just went through some of the offsets. But how can you or what comments can you make to really increase confidence that some of these large contracts won't face maybe incremental margin pressure down the road? How have you, as you go through the bidding and the contracting process, maybe de-risked some of the cost assumptions in the out years?

Our business practices. So we don't expect surprises there.

And then we will include we do include risk in our pricing that is natural.

And that is commensurate with the actual risk on the program.

Our teams we have.

50 year history of firm fixed price program. So.

With these types of advanced technologies and space. So our teams are used to assessing.

What is the risk on this and including our.

Our risk factors in their in their firm fixed price contracting with the customers. So those those are those tools bode well for us.

Mike Greenlee: Yeah, it's no real change from our normal tricks that we always talk about, which is that, you know, typically, these types of firm-fixed-price contracts are, you know, two to four years in duration, and these all fall into that bucket. We have therefore ensured that we have very, very up-to-date quotes going into that period of time. We ensure that quotes from our suppliers are firm-fixed-priced to us, and then we are firm-fixed-priced to our customers.

When mapped up against a strong project management process to be able to monitor and control the execution of those firm fixed price contracts.

Great. Thanks, Mike I'll pass it back there.

Okay.

Thank you next question will be from Christina.

Stanley. Please go ahead.

Hey, good morning, guys.

Vito.

You execute any of your growth strategy, especially with all these new program wins.

Mike Greenlee: That ensures that the large, what we call the non-labor or subcontracted base is firm-fixed to us. And then, with our own labor and controls, we include escalation factors in that that are consistent with our business practices, so we don't expect surprises there. And then we will include, we do include risk in our pricing. That is natural, and that is commensurate with the actual risk on the program.

I wanted to ask on.

Operating cash flow.

In 2023, you had some pressure.

On working capital for future inventory in vendor deposits for chorus, you've noted that that can start reversing in 'twenty four 'twenty five but for these other big programs that you've won can you talk about you know are the the timing of cash flow do you also have to pre fund customer vendor payments.

Mike Greenlee: Our teams, you know, we have a, you know, 50-year history of firm-fixed-price programs, so with these types of advanced technologies in space, our teams are used to assessing what the risk is on this and including risk factors, you know, in their firm-fixed-price contracting with the customer. So those tools bode well for us when mapped up against a strong project management process to be able to monitor and control the execution of those firm-fixed-price contracts. Great Thanks, Mike. I'll pass it back there.

Things like that before you get customer cash and ultimately how do we think about operating cash flow in 2024.

Before Vito goes I would just say like.

It always is our practice to be cash neutral to cash positive on our projects and so our default position regardless of project size. It used to be able to make sure that we are bidding and negotiating and signing.

Cash neutral to cash flow positive projects and so there's a natural state is not to have some unique profile, where we're spending money upfront or occasionally.

Kristine Tan Liwag: Okay. The next question will be from Kristine Liwag at Morgan Stanley. Please go ahead. Hey, good morning, guys.

Mike Greenlee: You know, Mike, Vito, Doreen, it's great to see you executing your growth strategy, especially with all these new program wins. I wanted to ask you about operating cash flow. You know, in 2023, you had some pressure with unworking capital for future inventory and vendor deposits for Qorus. But you noted that that could start reversing in 24 or 25. But for these other big programs that you've won, can you talk about, you know, the timing of cash flow? Do you also have to pre-fund customer or vendor payments and things like that before you get customer cash?

For competitive reasons or to be a trusted mission partner we.

We will help somebody if we are confident in the return and it's.

Really make something work.

That can't happen, but our natural state is always going to be to be cash flow neutral to positive, but I just wanted to say that upfront and then yes in order to be at.

No Christine there's nothing in those large programs at all that that has us.

Pre funding and or outside normal cadence of what Mike just described.

Vito Colmoni: And ultimately, how do we think about operating cash flow in 2024? Before Veto goes, I just want to say it is always our practice to be cash neutral to cash positive on our projects. And so our default position, regardless of project size, is to be able to make sure that we are bidding, negotiating, and signing cash-neutral to cash flow positive projects. And so our natural state is not to have some unique profile where we're spending money up front. Occasionally, for competitive reasons or to be a trusted mission partner, we will help somebody if we are confident in the return and that it's going to really make something work. That can happen, but our natural state is always going to be cash flow neutral to positive. But I just wanted to say that up front and then pass it over to you.

So those are all very very positive and they will be.

Cash flow positive if you will as we make our way through 2024.

So if you're looking for sort of guidance on operating cash flow, maybe just before cash interest cash taxes are negligible for our organization given our threat profile that we have our SRT D. So they're de Minimis.

And continue to go down which is positive.

Pre cash interest.

As I said earlier in the call I expect to convert.

Roughly 70% to 80% off of our projected 2020 for EBITDA.

But to cash.

So very very healthy and and obviously, that's a we generate although 2023, but for those one timers that I described.

We generate strong cash from operations and I expect that to continue here in 2000 22025 without any material anomalies to that.

Great and you know I wanted to follow up on a few of that Mike.

Mike Greenlee: No, so Kristine, there's nothing in those large programs at all that has us... Pre-funding and or outside the normal cadence of what Mike just described. So those are all very, very positive, and they will be cashflow positive, if you will, as we make our way through 2024. So if you're looking for sort of guidance on operating cash flow, maybe just before cash interest, cash taxes are negligible for our organization, given our debt profile that we have, our SR&ED, so they're de minimis and continue to go down, which is positive, but pre-cash interest, as I said earlier in a call, I expect to convert roughly 70 to 80 percent of our projected 2024 EBITDA. So, very, very healthy.

Mike you mentioned that the target and they are the norm for the company as a neutral free cash flow is that factoring.

Factoring in both our operating cash flow headwinds and also capex or is that just on a <unk>.

<unk> capital basis.

And the second follow up to that I mean, you know Vito you talked about 70% adjusted EBITDA in 2024, more 90 to 210 and you have cash taxes negligible. But then you also have capex of two kinds of 230 <unk>.

Absent a big Hill.

Callaway to working capital it looks like 2024 could be another negative free cash flow year. How do you think about funding that and am I missing anything on a cash reversals that would be a tailwind in 2024 to make the full year be a positive free cash flow year.

Vito Colmoni: And obviously, we generate, although in 2023, but for those one-timers that I described, strong cash from operations, and I expect that to continue here in 2024 and 2025 without any material anomalies. Great.

No no you're absolutely right 2024, and this has all gone all in line with what we've been communicating.

Catering to the market and.

And our internal strategic financial plan 2024 will be a negative free cash flow year.

However, we need to account that obviously, we're largely funding.

Kristine Tan Liwag: And you know, I wanted to follow up on a few of those. So, you know, Mike, you mentioned that the target and the norm for the company is a neutral free cash flow. Is that factoring in both operating cash flow headwinds and also CapEx? Or is that just on a working capital basis?

Strategic initiatives and as I described in our commentary you know.

Through 2024 will be essentially 90% through course, which has been the lion's share of that Capex expenditures as we so 2024 will be negative cash flow, we expect our leverage incorporating all of that sort of get to the.

Vito Colmoni: And, you know, the second follow-up to that, I mean, Vito, you talked about 70%. Adjusted EBITDA, you know, in 2024 is 190 to 210. And you have cash taxes negligible, but then you also have capex of 210 to 230. So, you know, absent a big tailwind to working capital, it looks like 2024 could be another negative free cash flow year. How do you think about funding that? And am I missing anything on cash reversals that would be a tailwind in 2024 to make the full year a positive free cash flow year? No, no; you're absolutely right.

Three ish levels are all within our existing capabilities and capacity and then as we move into 2025, obviously, you'll start to see a growing EBITDA profile growing operating cash flow profile and perhaps that's the year, where we're at are at a crossroads, there where inflection period, where.

Free cash flow is plus or minus.

Breakeven.

Going forward. So the long term prospects for this business I wouldnt, even call them long term anymore called 2020, 520, <unk> significant free cash flow generation.

Vito Colmoni: 2024, and this is, again, all in line with what we've been communicating to the market and our internal strategic financial plan, 2024 will be a negative free cash flow year. However, we need to account that obviously we're largely funding growth strategic initiatives, and as I described in our commentary, you know, through 2024 will be essentially 90% through course, which has been the lion's share of that CapEx expenditures. So 2024 will be negative cash flow. We expect our leverage. Incorporating all of that to sort of get to the three-ish levels all within our existing capabilities and capacity and And then as we move into 2025 obviously you'll start to see a growing EBITDA profile growing operating cash flow profile And perhaps that's the year where we're at a at a crossroads there were inflection period where Free cash flow is plus or minus Break-even Going forward so the long-term prospects for this business.

But we're making our way through 2024, and it's an important strategic year for us and we will essentially largely derisked that with the EBITDA and the backlog profile.

Through the activity in 2023, so feeling incredibly confident and.

Securing the position that this organization is that.

Great. Thank you for the color guys I appreciate it.

Thank you.

Next question will be from David Mcfadden at core Mark Securities. Please go ahead.

Yeah, Hi, everyone.

A couple of questions just first of all stylists some of them on guidance.

Could you confirm that.

In your guidance since about 100 $150 million stemming from the telephone lines.

Yeah.

Yes, I mean, we.

We shied away from the.

The.

Program related.

Guidance, but but that guesstimate on your part David is not unreasonable.

Okay.

And then just on the AT&T contract.

Vito Colmoni: I wouldn't call them long-term anymore call 2025 2026 significant free cash flow generation, but we're making our way through 2024, and it's an important strategic year for us then, and We've essentially largely de-risked that with the EBITDA and the backlog profile through the activity in 2023, so feeling incredibly confident and, especially in the position this organization is in. Great, thank you for the color guys.

You know obviously at Harvard on attendance at the yet so therefore, the amount from that I guess would be pretty modest in guidance right now.

Is that the case.

Yeah, I guess the mucus.

Modest pressure.

When you are in <unk> mode.

So for sure it's modest yet and we are in <unk> mode.

We announced that dollar value, there, which was the approved ATP back in the fall.

When you're in an authorization to proceed on a program.

Vito Colmoni: I appreciate it. No problem, thank you. The next question will be from David McFadden at Cormark Securities. Please go ahead.

<unk>.

It can it can flex a bit so like you know we burned at all and we needed a bit more as you need to spend a bit more because the full contract wasn't signed yet or something then we would just be authorized to do so like you're just you're in the contract and you're moving and you have an authorization to proceed so.

David Mcfadden: Yeah, hi everyone. So a couple questions. Just first of all, start with some more guidance.

Mike Greenlee: Could you confirm that embedded in your guidance is about $100-$150 million in revenue from Health Outlook? Yeah, I mean, we shied away from program-related guidance, but that guesstimate on your part, David, is not unreasonable. OK, and then just on the ATP contract. You know, obviously, it hasn't gone to 750 yet, so the amount from that, I guess, would be pretty modest in guidance right now. Is that okay with you?

We can always even if we're not out there talking about a full contract yet we can be getting top ups on the on the ATP, but it's still it's still whenever your word was modest or moderate.

It's not super enthusiastic yet because we haven't signed the full thing.

Okay.

So I believe.

And you can correct me, if I'm wrong, but I believe you were hoping to have that contract move out to me 715.

Mike Greenlee: Yeah, I guess you could say it's modest, yeah, for sure. When you're in ATP mode, so for sure it's modest, yeah, and when you're in ATP mode, you know, we announced that dollar value there, which was the approved amount back in the fall. When you're in an authorization to proceed on a program... It can flex a bit, so if we burn it all and we need a bit more, if we needed to spend a bit more because the full contract wasn't signed yet or something, then we would just be authorized to do so. You're in the contract, and you're moving, and you have authorization to proceed. Even if we're not out there talking about a full contract yet, we can be getting top-ups on the ATP. But it's still, whatever your word was, modest or moderate.

Hum.

Sure.

T farmers out there today. So I was just wondering what's the reason for that delay can you share anything with us on that.

Oh, we're just continuing to do work on it like we have said I don't know what I don't remember all the words, we said, but for sure. It's just a 24 thing like the the the teams are working at a good pace. All the teams are working together very well.

Making good progress on the activity. So that's that's that the yeah. Just in terms of just what work at the customer level.

It is necessary to be able to.

Do the definitive station it is not I will say it is not a financing issue.

It is more of a just commercial activity issue.

And so that has to be completed to be able to.

Mike Greenlee: It's not super enthusiastic yet because we haven't, OK. So I believe, you can correct me if I'm wrong, but I believe you were hoping to have that contract move up to be 750 on or before you issued your... T4 results today. So I was just wondering what's the reason for the delay? Can you share anything with us on that? Now we're just continuing to do work on it, like we've said, I don't remember all the words that we've said, but for sure, it's just a 24 thing, like the teams are working at a good pace, all the teams are working together very well, making good progress on the activity, so that's that. Then, yeah, just in terms of just what work at the customer level is necessary to be able It is not, I will say it is not a financing issue.

To get it in place. So we're not we're not worried about it the team continues to work at solid base.

Strong customer engagement and collaboration.

And.

Yeah.

It'll it'll come out in its natural pace as the as the customer gets their work done.

Okay.

So a clean.

Hypothetically assume that sometime in.

This year about 180 lots of fantastic and there's obviously.

A reasonable expectation that guidance can be bumps right.

It'll depend on the burn profile of the contract so.

It depends on where we've gotten to and one of the big Swingers will just be similar to the Lightspeed conversation is when you turn on your subcontractors and suppliers and at what pace, you turn them on and so you'll notice on the authorization to proceed on the unnamed customer we've not talked about schedule and so.

Mike Greenlee: It is more of a just commercial activity issue. And so that has to be completed to be able to get it in place. And so we're not worried about it. The team continues to work at a solid pace, with strong customer engagement and collaboration. And yeah, just, it'll come out at its natural pace as the customer gets their work done. Okay, so if we hypothetically, you know, assume that sometime in this year, that 180 goes to 750, then there's obviously a reasonable expectation that their guidance could be bumped, right? It will depend on the burn profile of the contract, so it depends on where we've gotten to.

Some of that some of that.

We're obviously doing the authorization to proceed we're moving out on this thing.

Because there is some schedule pressure. So so the final the final look like kind of like.

Shotgun start here's.

Here's the contracts on a go.

It will be dependent on.

What work we've accomplished on the ATP phase of it and then what is the schedule that we've all agreed we're going to strive towards.

Those two variables will be needed to be able to talk about the burn rate.

So in those combination of options, yes, there is a possibility that you could say hey, we've accomplished some stuff and we're going to go to supervise and therefore, we're going to we're going to burn a bit harder than we forecast and get a bit more work done in 24 that is possible I was one of the options, but obviously that's not in our guidance.

Mike Greenlee: And one of the big swingers will be similar to the Lightspeed conversation is when you turn on your subcontractors and suppliers and at what pace you turn them on. So you'll notice in the authorization to proceed with the unnamed customer, we haven't talked about schedule. And so, you know, some of that, some of that, we're obviously doing the authorization to proceed, we're moving out on this thing because there is some schedule pressure. So the final shotgun start, here's the contract sign, go, will be dependent on what work we've accomplished on the ATP phase of it and then what is the schedule that we've all agreed we're going to strive towards. Those two variables will be needed to be able to talk about the burn rate.

Okay, because I was under the impression that that unnamed client is kind of in a rush to get this constellation up in space.

Often customer interaction and certainly the existence of an authorization to proceed.

Encourage parties to supports the notion that their interest, but you still got to get it all definitive so it's still it needs to get definitive <unk> two to get everybody aligned that this is the schedule, we're all going to work towards and the engineering questions that we're answering during the authorization to proceed work people need to have confidence in those answers to really step on the gas.

Mike Greenlee: So in those combination of options, yes, there's a possibility that you could say, hey, we've accomplished some stuff and we're going to go super fast and therefore we're going to burn a bit hotter than we forecast and get a bit more work done in 24. That is possible as one of the options, but obviously that's not in our. Okay, because I was under the impression that that unnamed client is kind of in a rush, to get this constellation up in space, no? Often customers are in a rush and certainly the existence of an authorization to proceed Encourages to support the notion that they're in a rush, but you still got to get it all definitized So it's still it needs to get definitized to to get everybody aligned This is the schedule we're all going to work towards and the engineering questions that we're answering during the authorization to proceed work People need to have confidence in those answers to really step on the gas, And so we just need to work this through a little bit.

And so and so we just need to work us through a little bit yeah.

And David Obviously 2020 for revenue is is important and.

I feel I hear where you're going on kind of be higher but Mike really the more important thing here is just the overall market demand that we're seeing our services our mission.

Our capabilities in this space people knocking on the door of the conversations we're having right. That's the bigger picture for I think that is the bigger but it is the bigger picture and which could also of course cause other activities like we talk we characterize our pipeline we've talked about the number of opportunities information is in our investor decks would say, we have a $17 billion pipeline.

Mike Greenlee: And David, obviously 2024 revenue is important, and I hear where you're going on, can it be higher, but Mike, really, the more important thing here is just the overall market demand that we're seeing, our services, our mission, our capabilities in the space, people knocking on the door, the conversations we're having, right? That's the bigger picture for us, I think. That is the bigger picture, which could also, of course, cause other activities to occur. We've characterized our pipeline, we've talked about the number of opportunities, information that's in our investor decks would say we have a $17 billion pipeline, the $10 billion of that is over on the satellite systems side of the house on these constellations, which means we're talking to a number of different constellations, giving them quotes, going back and forth We don't control their pacing; we just answer questions as fast as we can and give them confidence in our answers. If and when people pull the triggers, then off we go.

The $10 billion of that is over and satellite systems side of hours on these constellations, which means we're talking to a number of different constellations, giving them quotes going back and forth.

We don't control their pacing.

We just answer questions as fast as we can and give them confidence in our answers.

If and when people pull the triggers then off we go so.

Those can come into the house and anytime in the journey based on customer customer customer.

<unk> in their organization. So that's the other really really interesting thing to keep our eye on as well for sure.

So just following up on those remarks.

Given you are able to lower the cost of it.

The consultation.

Five and a half done.

Three and a half Italian U S.

Can you comment about.

Activity in terms of potentially getting.

Another prime contactor raw for another constellation like when do you think the 5 million isn't that in 'twenty one.

Mike Greenlee: These can come into the house at any time in the journey based on customer behavior in their organizations, so that's the other really interesting thing to keep our eye on as well, for sure. So just following up on those remarks, given you were able to lower the cost of the Lightspeed Constellation from $5.5 billion U.S. down to $3.5 billion U.S., can you comment on activity in terms of potentially getting another prime contractor role for another constellation? What do you think the probabilities are of that happening in 2021?

Like I say that that's a hard thing to give you the probability in 'twenty four but because it's a customer it's customer centric in terms of when they want to pull the trigger on something I will say and I continue to say like we are actively engaged in that.

The $10 billion pipeline, we're talking about like were not just sitting there watching it those are all people that were talking to were given quotes to we're answering questions too.

Some of those quotes are in early phases rough order of magnitude quotes some of those quotes are in the firm fixed price phases, where you're like getting very close to be independent of a boat estimates.

Mike Greenlee: Oh, like I say, that's the hard thing to give you the probability in 24 because it's customer-centric in terms of when they want to pull the trigger on something. I will say, and I continue to say, that we are actively engaged in that $10 billion pipeline we're talking about. Like, we're not just sitting there watching it. Those are all people that we're talking to, we're giving quotes to, we're answering questions to. Some of those quotes are in the early phases, rough order of magnitude quotes. Some of those quotes are in the firm fixed price phases, where you're like, you know, getting very close to being definitive about estimates. And then it's up to the customers in terms of, you know, are you the path they want to go on and how fast do they want to move out? I would say that I have characterized our pipeline as robust or very robust. The people that we are quoting and talking to have the money that they need in, I would say, 90% of the cases, and a couple people are just finishing up securing some funds.

And then it's up to the customers in terms of.

Are you the path they want to go and how fast do they wanted to move out.

I will say that I have characterize our pipeline as robust are very robust.

The people that we are quoting and talking to have the money that they need.

In the I would say 90% of the cases.

And a couple of people just finishing up securing some funds, but yeah. It's it's a it's a very robust solid pipeline and then it's based on when.

When customers are comfortable and ready to move out. So it is absolutely possible that other things could happen in 'twenty four it's also possible that they could slip into 'twenty five but there's.

There's lots of activity there.

Okay I'll just ask one more question sorry.

So your primary lead Lockheed.

Lockheed Martin M. G M glad you know chasing a massive contract assignments.

Mike Greenlee: But yeah, it's a very robust, solid pipeline. And then it's based on when customers are comfortable and ready to move out. So it is absolutely possible that other things could happen in 24. It's also possible that they could slip into 25.

The U S.

Yep.

So contract awards are not still expecting remarks next month.

Yeah, that's correct that they they were originally supposed to be last November in November 2023, and it was announced during the fall that they were going to slide that data out to March as.

Mike Greenlee: There's lots of activity there. Okay, I'll just ask one more question. So you've partnered with Lockheed Martin and GM, chasing a NASA contract for, I don't know, I think it's like $4 billion. Are the initial contract awards for that still expected in March, like next month? Yeah, that's correct. They were originally supposed to be last November, November 2023.

As far as we know that is the date that it continues to be held so yes next month.

We would expect them to announce a couple of teams that we'd be down selected and get going on some work there.

And so we remain hopeful and watching and waiting to see what happens.

Okay, Alright, thanks, guys.

The problem with them.

Question will be from Jason Gursky of Citigroup. Please go ahead.

Mike Greenlee: And it was announced in the fall that they were going to slide that date out to March. As far as we know, that is the date that continues to be held. So yes, next month, we would expect them to announce a couple of teams that would be downsized and get going on some work there. And so we remain hopeful and watch and waiting to see what happens. Okay. All right. Thanks, guys. The next question will be from Jason Gursky at Citigroup; please go ahead. Yeah, good morning, everybody.

Yes, good morning, everybody.

If I could I was wondering if you could provide.

Provide a little bit of an update on the.

The merchant.

Component business.

And the hardware.

Side of the house and talk about some of the trends that you've got going on there I know.

We had some nice success in getting some prime positions, but you do have a history of providing.

Systems and components to others can you just kind of provide some color on what that market something like these days.

Mike Greenlee: Mike, I was wondering if you could provide a little bit of an update on the merchant component business, on the hardware side of the house, and talk about some of the trends that you've got going on there. I know you guys have had some nice success in getting some prime positions, but you do have a history of providing subsystems and components to others. Can you just kind of provide some context on what that market's looking like these days? Yeah, sure.

Sure so that primarily existing satellite systems business.

As you say are sort of 60 year history, there has been being a very strong <unk>.

Merchant supplier of satellite sub systems and components to satellite manufacturers around the world.

That work continues and it's an important.

Part of the base load.

On the satellite systems business as you say all the expansion is in this.

I'm sort of <unk>.

Mike Greenlee: So that primarily exists in the satellite systems business. As you say, our sort of 60-year history there has been as a very strong merchant supplier of satellite subsystems and components to satellite manufacturers around the world. That work continues, and it's an important sort of part of the base load on the satellite systems business. As you say, all the expansion is in this sort of NGSO Constellation Prime mode, but there's a very solid merchant supplier base there. There is growth in that base, but it's very steady and or with a very small sort of more of a single-digit CAGR to it.

And GSO constellation Prime mode.

But there is a very solid.

Merchant supplier base there there is growth in that base.

It's very steady <unk> with a very small sort of more of a single digit CAGR to it.

We continue to provide.

Sub systems to the occasional geosynchronous orbit satellite awards that occur in the market.

And so we you know whenever you hear one of those were often involved in providing some technologies to that.

Mike Greenlee: We continue to provide subsystems to the occasional Geosynchronous Orbit satellite awards that occur in the market. And so whenever you hear one of those, we're often involved in providing some technologies to that. There are a number of those that are for the LEO and MEO types of satellite levels in the LEO Constellation market.

There are a number of those that are.

For the Leo and MEO type.

Satellite levels.

In the Leo constellation.

Market.

We continue to support some constellations that ask for orders.

Mike Greenlee: We continue to support some constellations that ask for orders, and that goes well. One of the strongest areas of that is in the U.S. Department of Defense SDA market, where we're providing antennas and then some other electronic boxes to all of the U.S. primes on the U.S. DoD constellations. So you'll hear us making announcements there regularly. I try to keep score. I think we're coming into our sort of... 10th and 11th, 12th in there, in that kind of range, repeat order across the primes on the U.S. DoD LEO constellations.

And.

That goes well one of the strongest areas of that is in the U S Department of defense SDA market, where we're providing antennas and then some other electronic boxes too.

All of the U S primes on.

The U S D O D constellations so you've.

You'll you'll hear us regularly be making announcements there I think I tried to keep score I think we're coming into our sort of <unk>.

10th and 11th 12th in there and that kind of range repeat order across the primes in the U S. D O D.

Mike Greenlee: That's really nice to see. It's becoming like the standard product that everybody wants to have on their satellites. It's a solid product. It's a good price.

Leo constellations and so that's really nice to see it's becoming like the standard product that everybody wants to have on their satellites. Its a solid product is a good price. It's highly reliable people just common take repeat orders. So it's a nice recurring business to be able to feed these constellations active.

Mike Greenlee: It's highly reliable. People just come and take repeat orders, so it's a nice recurring business to be able to feed these constellations at the merchant supplier level, and that's becoming a very efficient business as well, because it is highly repetitive. So that's very cool to see. They're good.

At the merchant supplier level and.

And Thats.

Becoming very efficient business as well.

Because it is it is highly repetitive so that's very cool to see.

They're good.

Mike Greenlee: Okay, great. And then you also mentioned commercial adoption of space-based services and communications. It seems to be the place that everybody is today, and maybe we'll get to space infrastructure at some point. And then you mentioned the geospatial world as well as a market that's potentially on the rise. Can you just talk a little bit more about the geospatial side of things, because obviously, you guys are building out a constellation there to provide services, your expectation of the customer mix for that constellation going forward, your view that this is going to be just largely governments at this point and that commercial adoption of this kind of technology is still a ways They'll be a bit of both, but it will be largely government.

Okay, Great and then.

You also mentioned.

Commercial adoption of <unk>.

Thanks based services and communications seems to be the place.

The body is today and maybe we get to.

No.

This infrastructure at some point and then you mentioned the <unk>.

Stay at home.

World as well as a market that's.

<unk> on the come.

I'll talk a little bit more about the geospatial side of things because obviously you guys are building out a constellation there.

<unk>.

Two to provide services.

Your expectation on customer mix.

For that constellation going forward is it your view that this is going to be largely governments at this point than that.

Commercial adoption of this kind of technology is still a ways out.

There'll be a bit of both but it will be largely government, what we see on radar side too in the conversations that we have on chorus.

Mike Greenlee: What we see on RadarSat-2 and the conversations that we have on Quorus, I would say the majority of those conversations are government. The majority of those are defense and intelligence type customers. They want to have really strong surveillance with a synthetic aperture radar satellite. You can see during the day, you can see during the night, you can see through clouds, you can see through weather, because you have an active sensor that's pinging the earth and measuring the return, so you can see through things.

You know I would say the majority of those conversations are government or the majority of those are defense and intelligence type customers.

They want to have really strong surveillance with a synthetic aperture radar satellite you can see during the day you can see during the night you can see through cloud you can see through whether because you have an active sensor thats pinging, the earth and measuring return. So you can see through things and so that really helps those types of customers.

Mike Greenlee: That really helps those types of customers to be able to pick up a broad area detection of what's going on regardless of time of day or weather. That's super important to them. Then, with the configuration of our constellation with a broad area surveillance C-band satellite with a trailing, more zoomed-in X-band satellite, the ability to detect something in a broad scan and then have a trailing satellite zoom in and see what's going on, it's just all set up for that government type of a mission, a defense and intelligence mission. We see strong demand there. The world is no less secure; if not, it is less secure every day these days.

To be able to pick up.

A broad area of detection of whats going on regardless of time of day or weather and so that's like Super important to them and then with the configuration of our constellation with a.

A broad area of surveillance C band satellite with a trailing more zoomed in X band satellite the ability to detect something in abroad scan and then have a trailing satellite zoom in and see what's going on.

It's just all set up for that government type of emission of defense and intelligence missions. So we see strong demand there.

World is.

No less secure if not it is less secure than ever.

Data these days.

Mike Greenlee: More countries want to be able to monitor the activities in their nations and their coastlines. We're very good at our satellite configurations and maritime domain awareness, so especially maritime countries, of which, of course, there are many, care about that. The C-band and X-band combination will improve our ability to provide a range of services over land, not just at sea.

More countries want to be able to monitor the activities in their nations and their coast lines were very good with our satellite configurations and maritime domain awareness.

So, especially in maritime countries of which of course there are many.

You know care about that the C band <unk> band combination will improve our ability.

To provide a range of services over land not just maritime so.

It's it's a robust conversation with these folks.

Mike Greenlee: It's a robust conversation with these folks. A lot of them are more sophisticated, so they want data. They want data from the satellite to their ground stations.

A lot of them are more sophisticated so they want data they want the data from the satellite to their ground stations.

Mike Greenlee: That's a nice, strong, high-margin business. You don't have to do anything, you don't have to process, or you don't have a manual labor element to that. You are collecting the data and delivering it to their ground stations, and then they're processing it and doing their work. So it's a nice, steady, high-volume, high-margin, defense and intelligence customer job. So absolutely no complaints about that. If you look at the market, anybody who's stable and growing in Earth observation likely has those types of customers. Everybody is dabbling in commercials.

Nice strong high margin business, you don't have to do anything.

Processor, you don't have a manual labor element to that you are collecting the data and delivering it through to their ground stations and then their processing and in doing their work. So it's nice steady high volume high margin defense and intelligence customer work, so absolutely no complaints about that.

Look at the market anybody who's Stabled.

And growing in Earth observation likely has those types of customers.

Everybody is dabbling in commercial for sure everyone's dialing in commercial and so when you dabble in commercial you typically are not delivering the raw data youre doing youre doing the analytics, you're creating information products and you're answering someone's question someone who might want an ice reported in the ocean or deforestation report to nongovernment organization or.

Mike Greenlee: For sure, everyone's dabbling in commercial. And so when you dabble in commercial, you typically are not delivering the raw data. You're doing the analytics, you're creating information products, and you're answering someone's question. Someone might want an ice report on the ocean or a deforestation report for a non-governmental organization or an oil or mining report for their corporation.

A and oil are mining report to their corporation.

Mike Greenlee: And so you're processing the data and delivering those reports. Analytics will come as a result, typically at slightly lower margins, but still good. But because you've got all the labor component that's in there, everyone's got a bit of that. People can get into the single digits, and tens of millions of dollars of doing that.

And so your processing the data in delivering those reports analytics will come as a result, typically has slightly lower margins, but still good.

But because you've got all the labor component that's in there and then everybody's everyone's got a bit of that everyone's got a bit of that people can get into the single digit tens of millions of dollars of doing that but you've never seen anybody cross and say I've got a $100 million of commercial Earth observation that has not happened in the global market, yet and so the.

Mike Greenlee: But you've never seen anybody cross and say, "I've got a hundred million dollars in commercial earth observation. That has not happened in the global market yet." And so the product management and packaging of information products and services, and corporations realizing that the speed and accuracy that they can get from space-based earth observation data can change their lives. But that hasn't kicked in in a way that you see now with space-based communications. As I mentioned, it's fully non-commercial now, and so we'll keep pushing that. We will keep participating in that, and we will have a part of Quorus that will be commercial for sure. But it's a nice stable base of defense and intelligence.

The product management and packaging of information products and services.

Incorporations, realizing that you know the speed and accuracy that they can get from space based Earth observation data could change their lives.

That all hasn't kicked in in a way that.

You see now with space based communications as I mentioned, it's pulling on commercial now and so we'll keep pushing that we will keep participating in that and.

And we will have part of course that will be commercial for sure, but it's a nice stable base of defense and intelligence and keep working that future opportunity, where the commercial market suddenly the discovers and we help them discover what you can really do with all this stuff.

Mike Greenlee: And keep working on that future opportunity where the commercial market suddenly discovers it, and we help them discover what you can really do with all this. Okay, that's great. Thanks, Mike. Thank you. Are we getting near the time?

Okay, that's great. Thanks, Mike.

Thank you probably getting their time.

Mike Greenlee: Yes. Okay, so we're good. All right. I just want to thank everybody for their time this morning. It's great to celebrate a good 2023.

Yes. Please proceed.

Okay. So we're good alright.

Want to thank everybody for their time. This morning, it's great to celebrate a good 2023, it's great to keep the growth going through 'twenty four is being able to talk about that now that's excellent I think you can tell that we're going to have some good conversations as we are we go through the year and we look forward to updating everybody on our next earnings call in May thanks, very much.

Mike Greenlee: It's great to keep the growth going through 2024 and be able to talk about that now. That's great. I think you can tell that we're going to have some good conversations as we go through the year and we look forward to updating everybody at our next earnings call in May. Thanks very much, and have a great day. Thank you, sir. Ladies and gentlemen, this does indeed conclude your conference calls for today.

And have a great day.

Thank you, Sir ladies and gentlemen, this does indeed conclude your conference call for today. Once again, thank you for attending and at this time, we ask that you. Please disconnect your lines.

Operator: Once again, thank you for attending, and at this time, we ask that you please disconnect your lines. Okay. Okay. Okay. Thank you. We appreciate it. Thank you. Thank you for watching. See you next time.

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