Q1 2024 MDA Ltd Earnings Call

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Operator: Good morning, ladies and gentlemen. Welcome to the MTA space conference call and webcast. This call is being recorded on May 9, 2024, at 8.30 a.m. Eastern Time. Following the presentation, we will conduct a question and answer session. Instructions will be provided at that time for you to queue up for questions. If anyone has any difficulties hearing the conference, please press star followed by zero for operator assistance at any time. I would now like to turn the call over to Shereen Zahawbi, Senior Director of Investor Relations at MDA Space. Please go ahead. Thank you, Operator.

Speaker Change: Good morning, ladies and gentlemen, welcome to M. D. H <unk> conference call and webcast. This call is being recorded on May nine 2020 for like 830, a M eastern time.

Speaker Change: Following the presentation, we will conduct a question and answer session.

Speaker Change: Instructions will be provided at that time.

Speaker Change: Quick question.

Speaker Change: If anyone has any difficulties hearing the conference. Please press star followed by zero for operator assistance at any time.

British: I would now like to turn to call or British arrange a hobby senior director of Investor Relations at M. D. C. Please go ahead.

Shereen Zahawi: Thank you, Operator. Good morning, and welcome to MDA Space's First Quarter 2024 Earnings Call. Mike Greenley, our CEO, and Vito Culmone, our CFO, will lead today's call and share some prepared remarks before taking your questions. Before we begin, I'd like to remind you that today's call will include estimates and other forward-looking information, which may differ from actual results. Please review the cautionary language in today's press release and public filings regarding various factors, assumptions, and risks that could cause actual results to differ.

Arran Hobby: Thank you operator, good morning, and welcome to M. D. A space first quarter 'twenty 'twenty four earnings calls my Greeley, our CEO and Vito Cumani, our CFO will lead todays call and share some prepared remarks before taking your questions before.

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

Shereen Zahawi: 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.

British: 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, it may not be directly comparable please see the Companys quarterly report and other public file.

British: For more information about these measures, including reconciliations to the nearest ifr S measures.

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

Mike: Thank you Sherry.

Mike: Good morning, and.

Michael Greenley: morning, and thank you to those joining us today to discuss our first quarter 2024 financial results. We are off to a solid start in 2024. In Q1, the team drove another quarter of strong performance as we continue to deliver on our customer commitments and grow our book of business. Our Q1 revenues totaled $209 million, driven by backlog conversion, with our backlog now standing at $3.3 billion, at quarter end. Our adjusted EBITDA in the quarter was $42 million, and our adjusted EBITDA margin was a solid 20.1%.

Mike: And thank you to those joining us today to discuss our first quarter 'twenty 'twenty four financial results.

Mike: We are off to a solid start in 2024.

Mike: In Q1, the team drove another quarter of strong performance as we continued to deliver on our customer commitments and grow our book of business.

Mike: Our Q1 revenues totaled $209 million driven by backlog conversion with our backlog now standing at $3 $3 billion at quarter end.

Mike: Our adjusted EBITDA in the quarter was $42 million and adjusted EBITDA margin was a solid 21%.

Michael Greenley: I'm very pleased with the team's performance during Q1. It exceeded the internal management plan for the quarter, and the team did an excellent job achieving these results. That management plan is the basis of our guidance for the year, and we are reaffirming our previous 2024 full-year financial outlook, which we provided with our Q4, 2023, earnings release.

Speaker Change: I'm very pleased with the team's performance during Q1, it exceeded the internal management plan for the quarter and the team did an excellent job in achieving these results.

Speaker Change: That management plan as the basis of our guidance for the year and we are reaffirming our previous 2020 for full year financial outlook, which we provided with our Q4 2023 earnings release.

Michael Greenley: In terms of business activity, we secured a number of contract awards in the quarter, including a contract to deliver the fleet of MQ-9B SkyGuardian remotely piloted aircraft systems for the Canadian Armed Forces. Additionally, subsequent to Quarter End, we received a $250 million contract extension from the Canadian Space Agency to continue supporting robotics operations on the International Space Station until its planned retirement in 2030. In Q1, we also announced our rebranding to MDA Space, a natural brand evolution that further positions us to lead in a new era of space innovation.

Speaker Change: In terms of business activity, we secured a number of contract awards during the quarter, including a contract to deliver the fleet of MQ 90, Sky Guardian remotely piloted aircraft systems for the Canadian Armed forces.

Speaker Change: Subsequent to quarter end, we received a $250 million contract extension from the Canadian Space Agency to continue supporting robotics operations on the international space station until its planned retirement in 2030.

Speaker Change: In Q1, we also announced our rebranding to MDA space in.

Speaker Change: Natural brand evolution that further positions us to lead in a new era of space innovation.

Michael Greenley: In addition, as part of our strategy to commercialize and productize our world-leading technology to meet changing market needs, we unveiled two new product brands. MDA Aurora is our new software-defined digital satellite product line that positions us to capitalize on the market transition from analog to digital satellite technology. And MDA SkyMaker is our full suite of scalable and modular space robotics and services that enables us to offer the world's most flight-proven capabilities to any mission or application in an efficient, adaptable, and highly accessible kit.

Speaker Change: In addition, as part of our strategy to commercialize and product ties our world, leading technology to meet changing market needs. We unveiled two new product brands M.

Speaker Change: M D Aurora, because our new software defined digital satellite product line that positions us to capitalize on the market transition from analog to digital satellite technology.

Speaker Change: At MDA Sky maker is our full suite of scalable and modular space robotics and services that enables us to offer the worlds most flight proven capabilities to any mission or application and an efficient adaptable and highly accessible kit.

Michael Greenley: We were also pleased to see increased recognition for MDA Space and the progress we are making from industry and peers. To name a few, Fast Company magazine recognized MDA Space on its prestigious list of the most innovative companies for 2024. Our own Luigi Pazibon, Vice President of Satellite Systems at MDA Space, was named an executive of the year by the Globe and Mail, and I was humbled and honored to accept the 2023 Satellite Executive of the Year recognition awarded by VIA Satellite Magazine, a recognition of our team's effort in expanding our satellite business. In addition, our efforts to increase gender diversity earned us a spot on the Globe and Mail's report on business magazine's Women Lead

Speaker Change: We were also pleased to see increased recognition for MDA space and the progress we are making from industry and peers to name a few fast company magazine recognized MDA space and it's pretty in its prestigious most innovative companies list for 2024.

Speaker Change: Our own Luigi posit born Vice President of satellite systems at MDA space was named an executive of the year by the Globe and mail.

Speaker Change: And I was humbled and honored to accept the 2023 satellite executive of the year recognition awarded by via satellite magazine, a recognition of our team's effort in expanding our satellite business.

Speaker Change: In addition, our efforts to increase gender diversity earned us a spot on the Goldman Mail's report on business magazines women lead here list.

Michael Greenley: We were also added to the S&P 500 Composite Index earlier this year, an important milestone in our life as a public company. And most recently, we were selected as Employer of the Year by the University of Toronto's Personal Experience Year co-op program, a wonderful acknowledgement of the real and meaningful work and mentorship that our team provides our next generation of space leaders. Of course, none of this would have been possible without the hard work and dedication of the entire MDA space team, whom I'd like to thank and acknowledge. I'll now give you a view of the industry and an update on MDA's three business areas and pass a debito for a deep dive on the financials. In terms of the broader space market, that continues to expand, mature, and gain momentum, a few items are worth

Speaker Change: We were also added to the S&P <unk> composite index earlier this year, an important milestone in our life as a public company.

Speaker Change: And most recently we were selected as employer of the year by the University of Toronto personal experience your co op program.

Speaker Change: Wonderful acknowledgment of the real and meaningful work and Mentorship that our team provides our next generation of space leaders.

Speaker Change: Of course, none of this would have been possible without the hard work and dedication of the entire MDA space team wed like to thank and acknowledge.

Speaker Change: I will now give you a view of the industry and update on M. D. As three business areas and pass it to veto for a deep dive on the financials.

Veto: In terms of the broader space market that continues to expand mature and gain momentum.

Speaker Change: New items are worth highlighting.

Michael Greenley: Starting with the global space economy, a recently published report from the World Economic Forum estimates that the global space economy is now projected to reach $1.8 trillion by 2035, growing at 9% annually from 2023 to 2035, driven by the increased reach of space across industries as the world becomes more connected, mobile, and informed. The backbone or core segment of the space economy, those areas where revenues accrue directly to space hardware and service providers, is projected to grow at 7% annually to $755 billion by 2035, from U.S. $330 billion today, driven by both government and commercial investments to provide the underlying infrastructure and commercial applications.

Veto: Starting with the global space economy, a recently published report from the World Economic Forum estimates that the global space economy is now projected to reach $1 eight trillion by 2035 growing at 9% annually from 2023% to 2035, driven by increased reach of space across industries as the world becomes more connected mobile.

Speaker Change: And informed.

Speaker Change: The backbone or core segment of the space economy, those areas, where revenues accrue directly to space hardware and service providers is projected to grow at 7% annually to $755 billion by 2035 from U S $330 billion today, driven by both government and commercial investments to provide the underlying infrastructure.

Speaker Change: Structure and commercial applications.

Michael Greenley: For MDA Space, we are experiencing this momentum in the space market firsthand. The last couple of months have been busy for us, with our teams participating in a number of industry conferences and trade shows, including Satellite 2024 in Washington, the National Space Symposium in Colorado Springs, and the GEOINT Symposium taking place this week in Florida. The pace and volume of business development at these global industry events continue to grow, reflecting the robustness of the space industry.

Speaker Change: For MDA space, we are experiencing this momentum in the space market firsthand. The last couple of months have been busy for us with our team is participating in a number of industry conferences and trade shows, including satellite 2024, and Washington, The National Space Symposium in Colorado Springs, and Julian Symposium, taking place this week in Florida.

Speaker Change: The patient volume of business development at these global industry events continues to grow reflecting the robustness of the space industry.

Michael Greenley: MDA space is increasingly in high demand with customers seeking to discuss how we can provide advanced technology and services for future missions and how our newly unveiled robotics and digital satellite products can meet evolving customer needs. Our business development teams report high levels of momentum and engagement. South of the border, NASA announced in early April that it has selected three teams to advance the capabilities of a lunar terrain vehicle that Artemis astronauts will use to travel around the lunar surface and conduct scientific research.

Speaker Change: MBA space is increasingly in high demand with customers seeking to discuss how we can provide advanced technology and services to future missions and how our newly unveiled robotics and digital satellite products and meet evolving customer needs are.

Speaker Change: Our business development teams report high levels of momentum and engagement.

Speaker Change: South of the border Nasser announced in early April but it has selected three teams to advance the capabilities for our lunar terrain vehicle that Artemis astronauts will used to travel around the lunar surface and conduct scientific research.

Michael Greenley: MDA Space is a member of the Lunar Dawn team, one of the three teams selected by NASA, working alongside an impressive group of industry leaders led by Lunar Outpost and including Lockheed Martin, General Motors, and Goodyear, along with MDA Space. Leveraging MDA SkyMaker, our role on the team will be to design the robust, versatile robotic arm and robotic interfaces that will enable the rover to transport and manipulate a variety of pay

Speaker Change: MBA space as a member of the lunar Dawn team one of the three teams selected by an asset working alongside an impressive group of industry leaders led by lunar outpost in including Lockheed Martin General Motors, and Goodyear along with MDA space.

Speaker Change: Leveraging MDA sky maker or raw material will be the design the robust bristletail robotic arm and robotic interfaces that will enable the rover to transport and manipulate a variety of payloads. We're excited to be part of this important and historic program.

Michael Greenley: We are excited to be part of this important and historic program. Globally, we continue to see increased interest in space exploration, with Switzerland, Sweden, and Slovenia being the latest countries to sign on to NASA's Artemis agreement, signaling their commitment to safe, long-term, and ethical space exploration. The latest entries bring the group size to 39 nations now, with interest from many non-traditional spacefaring nations which are now building their own national space programs. This level of industry activity bodes well for MDA Space and our future opportunity funnel. Now I'll turn to our three business areas.

Speaker Change: Globally, we continue to see increased interest in space exploration, with Switzerland, Sweden, and Slovenia being the latest countries to sign onto Nasa's Artemis <unk> signaling their commitment to safe long term and ethical space exploration delayed.

Speaker Change: The latest entries, bringing the group size of 39 nations now with interest from many non traditional space very nations, which are now building one national space programs.

Speaker Change: This level of industry activity bodes well for MDA space and our future opportunity funnel.

Speaker Change: Now I'll turn to our three business areas.

Michael Greenley: In satellite systems, we are seeing good momentum in this market, with our teams working to advance multiple requests for communications satellite solutions and a growing number of Constellation projects. We are seeing good activity levels from customers, and our opportunity funnel remains strong and has grown in the last quarter. On the operational front, our teams are busy working on a number of programs. For example, on the Telesad Light Speed program, we continue to make good progress on ramp-up activities in Q1.

Speaker Change: And satellite systems, we are seeing good momentum in this market with our teams working to advance multiple requests for communications satellite solutions and a growing number of constellation projects.

Speaker Change: We are seeing good activity levels from customers in our opportunity funnel remains strong and has grown in the last quarter.

Speaker Change: On the operational front, our teams are busy working on a number of programs.

Speaker Change: On the Telesat Lightspeed program, we continued to make good progress on ramp up activities. In Q1, we've now finalized our source selection for the subcontractors that we will engage and we'll be moving out on contracting with announcements expected over the next several weeks.

Michael Greenley: We've now finalized our source selection for the subcontractors that we will engage, and we'll be moving out on contracting with announcements expected over the next several weeks. We're also making good progress on the engineering and program procurement activities for the new non-geostationary orbit satellite constellation we announced in Q4, awarded under a 180 million dollar authorization to proceed. The Constellation, valued at a minimum of $750 million, is expected to include a minimum of 36 MDA software-defined digital satellites, the MDA Aurora satellites.

Speaker Change: We're also making good progress on the engineering and program procurement activities for the new non geostationary orbit satellite constellation, we announced in Q4 awarded under a $180 million authorization to proceed contract.

Speaker Change: The constellation valued at a minimum of $750 million is expected to include a minimum of 36 MTA software defined digital satellites, the MDA Aurora satellite.

Michael Greenley: The definitive contract for the full constellation, for which MDA will be the satellite prime, is expected this year. Most of these constellations use our newly introduced software-defined satellite product line, MDA Aurora, and offer significant benefits to satellite operators looking to improve performance while at the same time driving time, cost, and complexity out of their LEO. We also continue to advance work on the GlobalSTAR program. In Q1, the team progressed flight hardware production and flat sat testing of the bus and payload system.

Speaker Change: The definitive the definitive contract for the full constellation for which MDA will be the satellite Prime is expected this year.

Speaker Change: Most of these constellations use our newly introduced software defined satellite product line MDA Aurora and offer significant benefits to satellite operators looking to improve performance while at the same time driving time cost and complexity out of their Leo constellations.

Speaker Change: We also continue to advance work on the Globalstar program in Q1, the team progressed flight hardware production and flaps that testing of the bus and payload systems.

Michael Greenley: 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. As you know, MDA is a prime contractor to enhance Global Star's Leo Constellation through the addition of 17 satellites, which support SOS features and direct-to-device communication on certain Apple products.

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

Speaker Change: As you know MDA as a satellite prime contractor to enhance global stars Leo constellation through the addition of 17 satellites, which support Sos features and directed device communication on certain Apple products.

Michael Greenley: Moving to our geointelligence business, 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 governments and private enterprises. In Q1, as I noted previously, we received a $74 million contract from General Atomics to deliver the fleet of MQ9B Sky Guardian remotely piloted aircraft systems, recently ordered by the Canadian Armed Forces.

Speaker Change: Moving to our Geo intelligence business customer demand for our Earth observation offerings remains robust and we are seeing an increased recognition of the role that commercial satellites can play to provide near real time data and analytics to governance and private enterprise.

Speaker Change: Q1, as I noted previously we received a $74 million contract from general Atomics to deliver the fleet of MQ nine be Sky Guardian.

Speaker Change: We piloted aircraft systems recently ordered by the Canadian Armed forces.

Michael Greenley: MDA Space will complete the assembly of the Rpass Ground Control Stations at our Richmond, British Columbia facility and will also deliver the combat search and rescue radios for the program and design the Ground Control Center information management system that controls how information flows, is secured, and shared.

Speaker Change: NBA space will complete the assembly of our past ground control stations at our Richmond, British Columbia facility, and we will also deliver the combat search and rescue radios for the program and design the ground control Center information management system that controls how information flows is secured and shared.

Michael Greenley: We also continue to advance work on MDA Quorus, our next generation Earth observation constellation. Our team 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 operation plans and processes. We continue to engage in active discussions with both new and existing customers on how Quorus can help address their Earth observation data and analytics needs, and we are pleased with the response from customers.

Speaker Change: We also continued to advance work on NDA of course, our next generation Earth observation constellations.

Speaker Change: Our team is currently advancing unit and sub system level work for the platform payload and bus avionics as well as building the ground segment sub systems and detailing constellation operation plans and processes.

Speaker Change: We continue to engage in active discussions with both new and existing customers on how <unk> can help address their earth observation data.

Speaker Change: And analytics needs and are pleased with the response from customers.

Michael Greenley: 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. 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 for Phase B of the Canadarm3 contract, which we were awarded in early 2022.

Speaker Change: 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.

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

Speaker Change: On the government side, we continue to progress the design work of phase B of the Canadarm three contract, which we were awarded in early 2022, and I will see you guys completing the preliminary design of canadarm threes robotic systems to be used aboard the NASA led lunar gateway.

Michael Greenley: And that will see us completing the preliminary design of Canadarm3's robotic systems to be used aboard the NASA-led Lunar Gateway. In Q1, the team continued to make good progress towards the Preliminary Design Review Milestone, with milestone completion for each element expected through Q2 and Q3 of this year. We also continue to engage with the Canadian Space Agency regarding contract awards for the next phases of work on Canada Arm 3, including the advanced detailed design, detailed design, and manufacturing integration and test phases of work.

Speaker Change: In Q1, the team continued to make good progress towards the preliminary design review milestone with milestone completion for each element expected through Q2 and Q3 of this year.

Speaker Change: We also continued to engage with the Canadian Space Agency regarding contract awards for the next phases of work on Canadarm three including the advanced detailed design detailed design and manufacture integration and test phases of work.

Michael Greenley: Subsequent to quarter end, we received a $250 million contract extension from the CSA to provide engineering support to the International Space Station Robotics, including Canadarm2, as part of Canada's commitment to support the ISS until its retirement in 2030. On the commercial side, we are exploring a number of opportunities to incorporate our robotic technology into applications to support space exploration and mobility. During the quarter, we unveiled MDA SkyMaker, our new suite of space robotics built to meet the diverse needs of our customers' most ambitious missions in an efficient, adaptable, and highly accessible kit, making this offering particularly attractive to commercial customers.

Speaker Change: And subsequent to quarter end, we received a $250 million contract extension from the CSA to provide engineering support to the international space station robotics, including Canadarm to as part of Canada's commitment to support the ISS until his retirement in 2030.

Speaker Change: On the commercial side, we are exploring a number of opportunities to incorporate our robotic technology on applications to support space exploration and mobility.

Speaker Change: During the quarter, we unveiled MDA sky maker, our new suite of space robotics built to meet the diverse needs of our customers most ambitious missions and efficient adaptable and highly accessible kit, making this offering particularly attractive to commercial customers.

Michael Greenley: The immediate industry response to MDA SkyMaker has been exciting and encouraging. Shifting to operations, we continued our hiring efforts to support the anticipated revenue ramp-up, adding approximately 1,900 new hires over the last 12 months. With more than 300 highly skilled MDA staff today, we have the people and talent to help propel our growth and give us the scale to execute on the market opportunities we see emerging. In Q1, the team completed the move to our new Global Headquarters and Space Robotics Center of Excellence in Brampton.

Speaker Change: Median industry response to MDA Sky maker has been exciting and encouraging.

Speaker Change: Shifting to operations, we continued our hiring efforts to support the anticipated revenue ramp up adding approximately 100, new hires over the last 12 months.

Speaker Change: With more than 300 highly skilled MDA staffed 300 with more than 3000 highly skilled NBA staff to date, we have the people and talent to help propel our growth and give us the scale to execute on the market opportunities we see emerging.

Speaker Change: In Q1, the team completed the move to our new Global headquarters and space Robotics Center of excellence in Brampton, Ontario.

Michael Greenley: The purpose-built facility features state-of-the-art labs, manufacturing, R&D, and assembly integration and test facilities. The Center of Excellence also houses a unique Space Robotics Mission Control Center, enabling MDA to provide critical on-orbit operations capabilities to commercial and government customers worldwide. We are looking forward to hosting grand opening ceremonies, most likely in 2025, once we are fully settled in. To recap, we are pleased with our performance this quarter, with momentum building across our operations.

Speaker Change: Purpose built facility features state of their labs manufacturing R&D and assembly integration and test facilities.

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

Speaker Change: We are looking forward to hosting grand opening ceremonies, most likely in 2025 once we are fully settled in.

Speaker Change: To recap we are pleased with our performance this quarter with momentum building across our operations. Our team is energized and we remain laser focused on our priorities our strong focus on execution converting opportunities in our funnel and expanding our leadership in core markets, while maintaining strong profitability and a healthy balance.

Michael Greenley: 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 the detailed financials.

Speaker Change: Sheet to help US fund our growth initiatives with that I'll hand, it over to Vito to walk us through the detailed financials.

Vito Culmone: Thank you, Mike, and good morning, everyone. For my update, I'll walk you through our Q1 financial results and provide a little more color on our 2024 outlook. As Mike noted, overall, Q1 was a strong quarter for MDA, and we're pleased with how the team is executing. In the quarter, we saw healthy revenue growth, solid profitability, and a record backlog at quarter end, which all bode well for our performance in 2024. Total revenues for the first quarter were $209.1 million.

Vito Culmone: Thank you, Mike and good morning, everyone. My update I'll walk you through our Q1 financial results and provide a little more color on our 2020 for outlook.

Vito: As Mike noted overall Q1 was a strong quarter for MDA and we're pleased with how the team has executed in the quarter, we saw healthy revenue growth solid profitability and a record backlog at quarter end, which all bode well for our performance in 2024.

Vito Culmone: Total revenues for the first quarter were $209 1 million. This represents a $7 2 million or three 6% increase over the same period last year.

Vito Culmone: This represents a $7.2 million, or 3.6% increase, over the same period last year, primarily driven by higher revenues from our robotics and space operations business. My business area's revenues and satellite systems of $87 million in Q1 2024 were $700,000, or 0.8% lower compared to the same quarter in 2023, driven by completion of various programs in 2023, offset by ramp-up of new programs in 2024. In robotics and space operations, we saw healthy year-over-year growth with revenues of $70.6 million in the quarter, representing $7.7 million, or a 12.2% increase versus The growth is largely attributed to a higher volume of work performed on the Canada Arms III program.

Vito Culmone: Primarily driven by higher revenues from our robotics in space operations business.

Vito Culmone: By business area revenues and satellite systems of $87 million in Q1, 2024 were 700000 or 8% lower compared to the same quarter in 2023, driven by completion of various programs in 2023 offset by ramp up of new programs in 2024.

Vito Culmone: In robotics in space operations, we saw healthy year over year growth with revenues of $70 6 million in the quarter, representing $7 7 million or 12, 2% increase versus Q1 of last year.

Vito Culmone: The growth is largely attributed to a higher volume of work performed on the Canada, <unk>, Canada arm three program.

Vito Culmone: And lastly, revenues in our geointelligence business, at $51.5 million in the quarter, represented an increase of $200,000 or 0.4% year-over-year, representing steady work volumes on-program. Moving to gross profit, and as a reminder, gross profit represents our revenues less cost of revenue, which includes material, labor, allocated overhead, SR&ED credits, and depreciation. For Q1, 20204, gross profit was $57.9 million, representing a $9.3 million or 13.8% decrease over the same period last year, driven by program mix and higher depreciation expense as new assets come into service.

Vito Culmone: And lastly revenues in our dual intelligence business at $51 5 million in the quarter represents an increase of 200000 or 4% year over year, representing steady work volumes on program.

Vito Culmone: Moving to gross profit and as a reminder, gross profit represents our revenues less cost of revenue, which includes material labor allocated overhead S R&D credits and depreciation.

Vito Culmone: For Q1, 2024 gross profit was $57 9 million, representing a $9 3 million or 13, 8% decrease over the same period last year, driven by program mix and higher depreciation expense as new assets come into service.

Vito Culmone: Gross margin in the latest quarter was 27.7%, which is very much in line with our expectations, reflecting mixed and higher depreciation expense and compares to 33.3% for the same period in 2020. Q1 operating expenses of $42.7 million were slightly above last year's metric of $40.7 million, reflecting higher SG&A spend to support growing work volumes, including higher spend on business development and bids and proposal activities, and higher share-based compensation expense due to additional RSU and PSU grants throughout 2023, offset somewhat by slightly lower R&D expenses due to the timing of spend on proprietary technology.

Vito Culmone: Gross margin as the late in the latest quarter was 27, 7%, which is very much in line with our expectations, reflecting mix and higher depreciation expense and compares to 33, 3% for the same period in 2023.

Vito Culmone: Q1 operating expenses of $42 7 million was slightly above last year's metric of $40 7 million reflector, reflecting higher SG&A spend to support growing work volumes, including higher spend on business development and bid and proposal activities higher share based compensation expense due to additional RSC and PSU grants.

Vito Culmone: Throughout 2023, offset somewhat by slightly lower R&D expenses due to timing of spend on proprietary technology.

Vito Culmone: Adjusted EBITDA in the latest quarter was $42 million compared to $48.9 million in Q1 of 2023, representing a decrease of $6.9 million or 14.1% year-over-year. Adjusted EBITDA margin of 20.1% in Q1 2024 is consistent with the company's full-year margin guidance of 19% to 20% and compares to 24.2% in the same period last year. The year-over-year change was largely in line with the variance in gross margin over the same period, driven by devolving program metrics.

Vito Culmone: Adjusted EBITDA in the latest quarter was $42 million compared to $48 nine in Q1 of 2023, representing a decrease of $6 9 million or 14, 1% year over year.

Vito Culmone: <unk> EBITDA margin of 21% in Q1 2024 is consistent with the company's full year margin guidance of 19% to 20% and compares to 24, 2% in the same period last year.

Vito Culmone: The year over year change was largely in line with the variance in gross margin over the same period driven by evolving program mix.

Vito Culmone: Adjusted net income in the latest quarter was $18.1 million compared to $26.5 million in Q1 2023. The year-over-year decrease of $8.4 million, or 31.7%, is again predominantly driven by the previously noted variance in gross margin over the same period. Adjusted diluted earnings per share of $0.15 in Q1 2024 compared to $0.22 in Q1 of last year, driven by the reduction in adjusted net worth. Moving to Backlog, we ended the quarter with $3.3 billion in backlog, which represented an increase of 169% compared to Q1, 20203, and 7% over Q4 2020.

Vito Culmone: Adjusted net income in the latest quarter was $18 1 million compared to $26 5 million in Q1 2023, a year over year decrease of $8 4 million or 31, 7% is again predominantly driven by the previously noted variance in gross margin over the same period adjusted diluted earnings per share of <unk> 15.

Vito Culmone: In Q1 2024 compared to 22.

Vito Culmone: In Q1 of last year, driven by the reduction in adjusted net income.

Vito Culmone: Moving to backlog, we ended the quarter with $3 $3 billion in backlog, representing an increase of 169% compared to Q1, 2023, and 7% over Q4 of 2023%.

Vito Culmone: The sequential growth and backlog were driven by new order bookings in the quarter, including the previously mentioned ARPAS award in our geointelligence business, as well as a number of contract awards in our satellite systems and robotics business, partially offset by continued conversion of our backlog into revenue. Moving on to investing activities, we remain focused on making the right investments into businesses to support our strategic growth initiatives. In Q1 2024, we spent $40.2 million on capital expenditures, in line with the levels of spending we reported last year.

Vito Culmone: The sequential growth in backlog was driven by new order bookings in the quarter, including the previously mentioned, our Paas and our G O.

Vito Culmone: Diligence business as well as a number of contract awards in our satellite systems and robotics business, partially offset by continued conversion of our backlog into revenue.

Vito Culmone: Moving on to investing activities, we remain focused on making the right investments in the businesses to support our strategic growth initiatives.

Vito Culmone: In Q1, 2024, we spent $42 million on capital expenditures in line with the levels of spending we reported last year.

Vito Culmone: During the quarter, we collected cash proceeds of $7.4 million related to the sale of our terrestrial nuclear assets, the Kalian Group. We also made an $11.6 million payment related to three months of notes payable on demand against the acquisition of Satex-5 Space Systems, UK Ltd., the digital payload division of Satex-5 Communications Ltd., which we closed in Q4 of 2023. There are four months of payments remaining in 2024, with the remaining $2 million U.S. holdback to be released to the seller in 2025.

Vito Culmone: During the quarter, we collected cash proceeds of $7 $4 million related to the sale of our terrestrial nuclear assets at Calyon group we.

Vito Culmone: Also made $11 $6 million payment related to three months of notes payable on demand against the acquisition of aesthetic Spice space systems UK limited the digital payload division of satisfying Communications limited, which we closed in Q4 of 2023.

Vito Culmone: There are four months of payments remaining in 2024 with the remaining $2 million of U S hold back to be released to the seller in 2025.

Vito Culmone: Cash from operations during the quarter generated $24.7 million compared to cash generation of $45.8 million in Q1 of 2023. Operating cash flow in Q1 was impacted by a slightly higher use of working capital and higher cash interest paid in the period. Again, all in line with expectations. Moving to our balance sheet, we ended the quarter with net debt of $439.3 million and available liquidity of $185.6 million. During Q1, we exercised the accordion feature on our senior credit facility, which increased the size of the credit facility by $100 million.

Vito Culmone: Cash from operations during the quarter generated $24 7 million compared to cash generation of $45 8 million in Q1 of 2023 operating cash flow in Q1 was impacted by slightly higher use of working capital and higher cash interest paid in the period.

Vito Culmone: All in line with expectations.

Vito Culmone: Moving to our balance sheet, we ended the quarter with net debt of $439 $3 million and available liquidity of $185 6 million.

Vito Culmone: During Q1, we exercised the accordion feature.

Vito Culmone: On our senior credit facility, which increased the size of the credit facility by $100 million.

Michael Greenley: The net debt to trailing 12-month adjusted EBITDA ratio at quarter end stood at 2.6 times. The increase in leverage versus the Q4 2023 metric of 2.4 times reflects our continued investments in strategic growth initiatives to support future growth. In summary, this was a very solid quarter, and our business continues to perform in line with our expectations. We're encouraged and energized by the positive momentum we're seeing across our business. Turning to Outlook, as Mike noted, we are reaffirming our 2024 Financial Outlook, and we are well positioned to capitalize on strong customer demand and robust market activity, given our diverse and proven technology and product offering.

Vito Culmone: Net debt to trailing 12 month adjusted EBITDA ratio at quarter end stood at two six times the increase in leverage versus Q4 2023 metric of two four times reflects our continued investments in strategic growth initiatives to support future growth.

Michael Greenley: In summary, this was a very solid quarter and our continued and our business continues to perform in line with our expectations. We are encouraged and energized by the positive momentum we're seeing across our businesses.

Michael Greenley: Turning to outlook as Mike noted, we are reaffirming our 2024 financial outlook and we are well positioned to capitalize on strong customer demand and a robust market activity, given our diverse and proven technology and product offerings for.

Michael Greenley: For Fiscal 2024, we continue to expect full-year revenues to be $950 to $1,000. 0.05 million, representing robust year-over-year growth of approximately 25% at the midpoint of guidance. We expect full-year adjusted EBITDA to be $190 to $210 million, representing approximately 19% to 20% adjusted EBITDA margin. We expect capital expenditure to be 210 to 230 million in 2024, primarily comprising growth investments to support Chorus and the previously outlined growth initiatives across our three business areas.

Michael Greenley: For fiscal 2024, we continue to expect full year revenues to be 952 one.

Michael Greenley: Zero 5 million, representing robust year over year growth of approximately 25% at midpoint of guidance.

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

Michael Greenley: We expect capital expenditures to be $210 million to $230 million in 2024.

Michael Greenley: Merely comprising of growth investments to support of course, and the previously outlined growth initiatives across our three business areas.

Michael Greenley: Turning to Q2 of 2024, we expect revenues to be between $215 million and $225 million as we continue to execute on our backlog. As previously indicated, we expect revenue growth to accelerate in the second half of 2024 as we ramp up work volume on a number of programs, including Telesat Lightspeed, where we're currently finalizing the onboarding of suppliers and expect to see more meaningful revenue contributions from suppliers and subcontractors in the second half of 2024 as that program continues to ramp up. We remain focused on disciplined execution and the leveraging of our capabilities and technology to grow profitably in line with our long-term plan. Mike, with that, I'll turn it back to you. Thank you, Bito.

Michael Greenley: Turning to Q2 of 2024, we expect revenues to be $250 million to $225 million as we continue to execute on our backlog.

Michael Greenley: As previously indicated we expect revenue growth to accelerate second half of 2024, as we ramp up work volume on a number of programs, including pellets at light speed, where we are currently finalizing the onboarding of suppliers and expect to see more meaningful revenue contributions from suppliers and subcontractors.

Michael Greenley: In the second half of 2024.

Michael Greenley: That program continues to ramp up.

Michael Greenley: We remain focused on disciplined execution and leveraging of our capabilities and technology to grow profitably in line with our long term plan.

Speaker Change: Mike with that I'll turn it back to you. Thank you Bruno.

Operator: Operator, I think we'll open it up to questions, please.

Mike: I think we'll open it up to questions. Please.

Operator: Thank you. Ladies and gentlemen, we will now begin the question-and-answer session. If you have a question, please press the star followed by the one on the touch-down phone. You will hear a prompt that your hand has been raised. Questions will be taken in the order received. Should you wish to cancel your request, please press the star followed by 2. If you are using a speakerphone, please lift the handset before pressing any key.

Speaker Change: Thank you, Sir ladies and gentlemen, we will now begin the question and answer session.

Speaker Change: I have a question. Please press the star followed by the one other Touchtone phone you will you get your hands has been great.

Operator: Please note that you may only ask one question and kindly repeat if you have a follow-up. Once again, that is Star 1 should you wish to ask a question. Your first question is from Konark Gupta from Scotiabank. Please ask your question.

Konark Gupta: Thanks, operator. Morning, everyone. So, you know, good morning, Mike.

Michael Greenley: You guys have a lot of opportunities ahead of you. And you kind of mentioned, obviously, you've been on a hiring spree over the last few quarters to support that. I just want to understand, you know, like in terms of production ramping up and taking on sort of more orders, where do you see the bottlenecks right now across the system? And even if you don't see them today, like what exactly are you doing in terms of, you know, continuity planning? Should there be bottlenecks down the road?

Michael Greenley: Doing and in terms of contingency planning should there'd be bottlenecks down the road.

Michael Greenley: Yep, I can take that a bit. I don't; we don't see any bottlenecks. But in terms of continuously planning and building capacity for the future, you know, we obviously have a strong forecasting system, and we look out into the future and make sure that we are ramping up on both people, facilities, and subcontractors, as Vito noted, to be able to execute on the programs moving forward. Hiring continues at pace. As you noted, we hired about 900 people. We talked about hiring last year. I didn't say it out loud, but we've already hired over 400 people this year, and it's only been the first quarter.

Speaker Change: Yes, I can take that a bit I don't we don't see any bottlenecks, but in terms of the continuous planning and building capacity for the future well, we obviously have strong forecasting system and we look out into the future and make sure that we are.

Michael Greenley: Ramping up on both our people facilities and subcontractors as well.

Michael Greenley: Noted to be able to execute on the programs moving forward hiring continues at pace. As you noted we did about 900 people. When you talked about hiring last year I didn't say it out loud, but we've already hired over 400 people. This year, it's only been in the first quarter. So we continue to be very successful in bringing talent into the business.

Michael Greenley: So we continue to be very successful in bringing talent into the business. The big facility expansion activity that we're involved in right now is in satellite systems to ensure that we can move to a higher volume production facility for our MDA Aurora digital satellite product. That project has been initiated. Over the next 18 months, that project will be executed so that, you know, as we're entering 2026, we're going to be in a position to produce two satellites a day at the volume of that new product.

Michael Greenley: Big a facility expansion activity that we're involved in right now is in satellite systems too.

Michael Greenley: To ensure that we can move to a higher volume production facility for our MDA Aurora digital satellite product.

Michael Greenley: That project has been initiated over the next 18 months that will that project will be executed. So that as we are entering 2026, we're going to be in a position to be able to produce two satellites a day.

Michael Greenley: Volume of that new product.

Michael Greenley: With that capacity, we will have certainly more than the existing order book and lots of room to be able to accommodate the orders coming in our pipeline. So we're we're doing that in advance and in anticipation of the volumes that we expect to see in the future based on our activities in our pipeline today.

Michael Greenley: With that capacity, we will certainly have more than the existing order book and lots of room to be able to accommodate the orders coming in our pipeline. So we're doing that in advance and in anticipation of the volumes that we expect to see in the future based on our activities in our pipeline today.

Michael Greenley: It makes sense.

Konark Gupta: Yeah, no, thanks. That's great, actually. Perfect. Thank you. And then, you know, in terms of labor, there's been some negotiations going on, I guess, with Unix over here in Canada. Any updates on those negotiations and any other kind of, you know, unions where there's a bit of an issue, call it, in terms of, you know, the contracts coming up for renewal or negotiations progressing, you know, maybe some, you know, I don't know, inch points in terms of, you know, negotiations are not going as well as you would have expected?

Speaker Change: Yes, no. Thanks, that's great actually perfect. Thank you and then.

Konark Gupta: In terms of labor.

Konark Gupta: They're seeing some negotiations going on I guess, the beginning floor.

Konark Gupta: Here in Canada, any updates on those negotiations and any any.

Konark Gupta: Kind of unions there this bit of an issue in terms of.

Konark Gupta: Are the contracts coming up for renewal negotiations progressing maybe some.

Konark Gupta: I dunno pinch points in terms of.

Konark Gupta: Negotiation not going as good as you would have expected.

Michael Greenley: Yeah, everything's trucking along. I think if we start with the overall labor situation, I've already mentioned it, we have an expanding business. We have an attractive work environment. We are hiring at pace, like I've indicated, with 900 last year and already over 400 this year. So we're attracting really good talent into the company. For MDA as a business, it's a very unique work opportunity to be able to work on the projects that we have.

Speaker Change: Yeah, Everything's everything is trucking along I think if we start with the overall labor situation I've already mentioned on it we have an expanding business.

Michael Greenley: We have an attractive work environment.

Michael Greenley: Hiring at pace like I've indicated with 900 last year.

Michael Greenley: And already over 400 this year, so we're attracting really good talent into the company.

Michael Greenley: NDA as a business has.

Michael Greenley: A very unique work opportunity to be able to work on the projects that we have.

Michael Greenley: We have a strong, solid compensation framework that includes good base salaries that are market competitive and excellent benefits. And we have a really strong program to make sure that we've got a nice equitable and fair compensation system across the business. In the company, we have a range of non-representative and representative personnel. You're mentioning labor and unions and the like, and associations. We have those.

Michael Greenley: We have a strong solid compensation framework that includes you know good base.

Michael Greenley: Base salaries that are market competitive and excellent benefits and we haven't really strong program to make sure that we've got.

Michael Greenley: Nice equitable.

Michael Greenley: And fair compensation systems across the business.

Michael Greenley: In the company, we have a range of non representative and representative personnel you mentioned in labor and <unk>.

Michael Greenley: <unk> in the Lake and associations, we have those.

Michael Greenley: And from time to time, those folks, in their collective bargaining agreements, you know, will exercise their right to be able to strike and, you know, use that as one of their tools in the negotiations process within our employer's, you know, labor relations activities. So when that happens, we respect that right. We do have one strike that's ongoing at the moment, and, you know, we'll continue to work that through. And we would expect that to be resolved over the coming weeks. There are multiple unions and associations in the company. We successfully negotiated two very large collective bargaining agreements last year with all of our engineering populations.

Michael Greenley: And from time to time.

Michael Greenley: Those folks and their collective bargaining agreements.

Michael Greenley: Exercise their right to be able to strike and.

Michael Greenley: Use that as one of their tools in the negotiations process within our employer labor relations activities. So that'll occurs we respect that right. We do have one strike this ongoing at the moment.

Michael Greenley: And we will continue to work that through and we would expect that to be resolved over the over the coming weeks.

Michael Greenley: There are multiple unions and associations in the company, we renegotiated successfully two very large collective.

Michael Greenley: Agreements last year with all of our engineering populations and we will have a couple more to go as we go through this year related to technicians and assemblers. So it's just part of the normal ongoing work and when those associations choose to exercise their right.

Konark Gupta: And we'll have a couple more to go as we go through this year related to technicians and assemblers. So it's just part of the normal ongoing work. And when those associations choose to exercise their right to strike, we respect that. And it's just part of the process. Makes sense. Perfect. Thanks.

Konark Gupta: Strike, we respect that and it's just part of the process.

Speaker Change: Makes sense perfect. Thanks, I'll turn the call over.

Konark Gupta: Makes sense, perfect. Thanks, I'll turn the call over to you.

Operator: Thank you. Your next question is from Christine Lelag from Morgan Stanley. Please ask a question.

Speaker Change: Thank you. Our next question is from <unk> <unk> from Morgan Stanley. Please ask your question.

Kristine Tan Liwag: Hey, good morning, everyone. Great. And, you know, Vito, Mike, it's great to see all the contracts that you're winning. I was wondering, you know, at this point, you've got a fairly robust backlog with a lot of visibility. You're clearly winning contracts. But how are the cash terms of incremental contracts, you know? How are they compared to the existing ones you have? You know, we have another quarter here of negative free cash flow. Are the cash terms getting better for these incremental wins to help your cash situation?

Kristine Tan Liwag: Hey, good morning, everyone.

Kristine Tan Liwag: Alright, and Vito Mike previously all the contracts that you're winning.

Kristine Tan Liwag: I was wondering you know for at this point, you've got a fairly robust backlog with a lot of visibility are clearly winning contract how are the cash terms of incremental contracts how are you.

Kristine Tan Liwag: Are they versus existing ones. You have you know we have another quarter here of negative free cash flow or the cash terms getting better for these incremental wins so to help your.

Kristine Tan Liwag: Your your cash situation.

Vito Culmone: Hi Kristine, it's Vito. You know, we're very proud of our operating agreements and our negotiated Douglas Taylor, Shereen Zahawi, Vito Culmone, Michael Greenley, When you look at the operating cash flow for the quarter, we're actually positive this quarter with working capital essentially in neutral. So these new agreements that you're referring to, whether it be obviously Lightspeed coming on or the ATP that we signed, focus on operating cash flow is clearly key for us as we move forward.

Vito Culmone: Hey, Christine its Vito.

Kristine Tan Liwag: We're very proud of our operating agreements that are negotiated.

Vito Culmone: For their customers, that's something that from a cash profile it perspective hasn't been embedded in the business for years.

Vito Culmone: So the negative cash flow that you are referring to not only in this quarter, but in previous quarters, obviously reflects to our strategic capital investments that we're making in the business when.

Vito Culmone: When you look at the operating cash flow for the quarter, we were actually positive this quarter.

Vito Culmone: Working capital essentially a neutral so.

Vito Culmone: New agreements that you're referring to whether it would be obviously lightspeed coming on or the ATP that we sign.

Vito Culmone: Focus on operating cash flow is clearly for us as we move forward and I have a high degree of confidence that working capital requirements will be largely neutral as we grow this business. So that's very positive.

Vito Culmone: And I have a high degree of confidence that working capital requirements will be largely neutral as we grow this business, so that's very positive. In respect to 2024, where we expect, we obviously expect significant operating cash flow throughout the course of the year. We will continue to be free cash flow negative for total in 2024, to the tune of $100 million to $130 million, $140 million. Again, that's driven by the capital investments that we're making, strategic investments, largely Kors and others, and all very manageable within our capital structure framework. I don't expect leverage to get over the three level, three times the level, during the course of the year, and if it does, just very small levels.

Vito Culmone: With respect to May 20, where we expect to be obviously expenses.

Vito Culmone: Operating cash flow throughout the course of the year.

Vito Culmone: We will be continue to be free cash flow negative for total 2024 to the tune of 100 to 130 $140 million again, thats driven by the capital investments that we're making strategic investments largely of course and others.

Vito Culmone: And all very manageable within our capital structure framework I don't expect the leverage to get over the three level three times level.

Vito Culmone: During the course of the year and if it does just Barry.

Vito Culmone: Small level, so we're really happy with it.

Vito Culmone: So we're really happy with our capital structure and our facilities. As you may have heard in my prepared remarks, we triggered the accordion for $100 million, just significant, robust support by the banks, which is very, very important and oversubscribed. So yeah, we're feeling really, really good about obviously the capacity and balance sheet we have to support this very impressive growth profile for the organization here over the next few years.

Vito Culmone: Our capital structure and our facilities.

Vito Culmone: You may have heard in my prepared remarks, we are.

Vito Culmone: Triggered the accordion for $100 million, just significant robust support by the banks, which is very very poor and oversubscribed. So yeah. We are feeling really really good about obviously the capacity and balance sheet, we have too.

Vito Culmone: So.

Vito Culmone: Port is very impressive growth profile for the organization here over the next few years.

Speaker Change: Thanks, Peter that's very helpful and if I could do a second question on robotics, I mean, NDA Sky maker.

Kristine Tan Liwag: Thanks, Vito. That's very helpful. And if I could do a second question on robotics, I mean, MDA SkyMaker, I mean, presumably you're targeting more commercial customers as well as traditional government customers. Can you talk about what's rolled out in this product line and give us a sense of demand from commercial players for your robotics products? I mean, there seems to be a number of ISS replacement concepts under development. I'm just trying to understand how far in advance they might be ordering from you and what the size of the opportunity is.

Kristine Tan Liwag: Presumably you're targeting more commercial customers as well as the traditional government customers could you talk about whats rolled up in this product line and give us a sense of demand from commercial players for your <unk> products. I mean, there seems to be a number of ISS replacement concepts under development, just trying to understand how far in advance.

Kristine Tan Liwag: It might be ordering from you and what the size of the opportunity is.

Michael Greenley: Yeah, so the nature of the MDA SkyMaker product line is to ensure that we have a solid range of commercial products available for the market, set up as a kit, you'll hear me use the word kit a lot, but in terms of making sure that we all have the main components for a broad range of robotic systems that we can click together, available on a commercial basis. That will result in a broad range of opportunities in the commercial market in space.

Speaker Change: Yeah. So.

Kristine Tan Liwag: The nature of the MBA.

Michael Greenley: MBA Sky Mager product line.

Michael Greenley: Is to ensure that we have a a.

Michael Greenley: A solid range of commercial products available for the market.

Michael Greenley: Set up as a we are you heard me use the word kit a bunch.

Michael Greenley: But in terms of making sure that we all have the the main components for a broad range of robotic systems that we can click together.

Michael Greenley: Available on a commercial basis.

Michael Greenley: That's for a broad range of opportunities in the commercial market in space. You you had mentioned commercial and government, but it's mainly commercial.

Michael Greenley: You mentioned commercial and government, but it's mainly commercial to ensure that we're able to address that market. You mentioned commercial space stations. Yes, there are commercial space stations under development, and we would be wanting to engage those in our pipeline. There are commercial businesses that are being developed to do on-orbit servicing of satellites and on-orbit assembly of satellites. There are potential future markets for spacecraft that would have proximity operations and robotics that could be applied in the military sector; that would be a government example.

Michael Greenley: To ensure that we're able to address that market.

Michael Greenley: You mentioned commercial space stations, yes through our commercial space stations under development.

Michael Greenley: We would be.

Michael Greenley: Wanting to engage those in our pipeline there are commercial businesses that are being developed to do on orbit servicing of satellites on orbit assembly of satellites.

Michael Greenley: There are potential future markets for spacecraft that would have proximity operations in robotics that could be applied in the military sector that would be a government example.

Michael Greenley: In addition to a lot of activity coming up on the moon, with the 39 countries now signing up to the Artemis Accords and the global community progressing towards the moon to be able to have humans on the moon, have habitats, the new rover programs that I mentioned that we're a part of on the moon with the MDA SkyMaker product, there will be a range of applications on the lunar surface. For robotic systems as well.

Michael Greenley: In addition to a lot of activity coming up on the move with the 39 countries now signing up to the <unk> and the <unk>.

Michael Greenley: Global community progressing towards the moon to be able to have humans on the moon have habitats, the new Rover programs that I mentioned.

Michael Greenley: There were a part of it on the Moon with the MBA Sky maker product there will be a range of applications on the lunar surface.

Michael Greenley: So all of these are going on. It's a good, robust pipeline. We're in a fortunate situation that as that commercial market evolves, you ask about timing. It'll evolve over the next couple of years We get to, you know, really hunker down and work on Canadarm3 get a lot of growth and lift from that as we work on the AI-based robotics for gateway And then spin off these commercial derivatives in SkyMaker for the broader commercial market Opportunity as it emerges over the next couple of years Great

Michael Greenley: For robotic systems as well so all of these are going on.

Michael Greenley: It's a good robust pipeline we're.

Michael Greenley: We're in a fortunate situation that is that commercial market evolves you asked about timing it'll evolve over the next couple of years.

Michael Greenley: We get to.

Michael Greenley: Really hunker down and work on Canadarm, three get a lot of growth in lift from that as we work on the.

Michael Greenley: AI based robotics for gateway.

Michael Greenley: And then spinoff these commercial derivatives and sky maker for the broader commercial market opportunity as it emerges over the next couple of years.

Kristine Tan Liwag: Great, thank you for all the color, and I'll keep it there. Thanks.

Speaker Change: Great. Thank you for all the color and keep it there. Thanks.

Speaker Change: Okay. Thanks Christine.

Operator: Thank you. Your next question is from David McPaghan of Cornwall Securities. Please ask a question.

Kristine Tan Liwag: Thank you. Our next question is from David with Passion from Cormack Securities. Please ask your question.

David John McFadgen: Okay, great. Yeah, a couple of questions. So we talked about ramping up work for Telesat. But I don't, I don't believe Telesat has announced that they've signed definitive agreements with the government of Seattle. Maybe I'm, maybe I'm wrong. Can you give us an update on that?

David John McFadgen: Okay, great Yeah, a couple of questions.

David John McFadgen: So you talked about ramping up and work for talent side.

David John McFadgen: But I don't I don't believe telecom has announced that they've signed opinions agreements at the Congress, yet or maybe I'm, maybe I'm wrong.

David John McFadgen: No update on that.

Michael Greenley: I think that Telesat's earnings call is tomorrow morning, so I think we should focus on what they have to say there, and I'll make sure that Telesat communicates the Telesat news. From our perspective, as we know, we're under contract. We know we've made our source selections, and we know that we are moving out in terms of awarding contracts to our suppliers as we go through the next several weeks.

David John McFadgen: I think that would tell us Thats earnings call is tomorrow morning. So I think we should focus on what they have to stay there and I'll make sure that tell us that communicates Telesat news from our perspective as we know we are under contract. We know we've made of our source selections and we know that we are moving up in terms of awarding.

Michael Greenley: As contracts to our suppliers as we go through the next several weeks.

David John McFadgen: Okay, so just on the Globalstar contract, is that expected to basically finish in 24?

Michael Greenley: Okay.

Michael Greenley: So just on the global SAR contract.

David John McFadgen: How do you expect it to basically finish in 'twenty, Florida.

Michael Greenley: No, it'll go into 25. I think that contract was awarded in February, March, and a timeframe, and it was sort of a three-year contract, so it'll leak into 25.

David John McFadgen: No it'll go into 25, I think that contract was awarded in February March.

Michael Greenley: And timeframe and it was a sort of a three year contract. So it'll it'll leak into 'twenty five.

David John McFadgen: OK, and just on that ATP contract. Do you expect to convert this into a full prime contractor role in H1 this year or H2?

Michael Greenley: Okay and.

Michael Greenley: And just on that.

David John McFadgen: ATP contract.

David John McFadgen: Do you expect to convert this into full.

David John McFadgen: Prime contractor on an H one is hearings too.

Michael Greenley: Um, yeah, that's interesting. I don't think I could predict that. I wouldn't want to pin that H1, H2, Q2, Q3.

Speaker Change: Yes, that's interesting.

Michael Greenley: I don't think I could predict that I wouldn't want to pin that each one <unk> to Q2 Q3, it will certainly be in that zone, but it's really based on customer customer behavior and activity.

David John McFadgen: It'll certainly be in that zone, but it's really based on, you know, customer behavior and activity. You know, we're working a way on it under the authorization to proceed, and we're engaged, obviously, with the customer on the definitive contract. That is work that progresses for sure, but it'll be, you know, largely based on customer pacing in terms of when, in their minds, everything's finalized. So, but, you know, the Q2, Q3 zone is the zone to think about for sure.

David John McFadgen: We're working away on it under the authorization to proceed and we're engaged obviously with the customer on the definitive contract that is work that progresses for sure.

David John McFadgen: But it'll be largely based on customer facing in terms of when in their minds everythings finalized so but the Q2 Q3 zone is theres only to think about for sure.

David John McFadgen: Okay, and then just on backlog. You know, obviously, you added a fair amount to the backlog 400 million dollars there. I was just wondering if you could give us some details as to what goes into the growth there the backlog. I guess it's I guess the 250 million contract you know today with CSA is in there. You can give us some color.

David John McFadgen: Okay.

David John McFadgen: And then just on backlog.

David John McFadgen: Let me see you added a fair amount to the background fun in a refinery millionaire.

David John McFadgen: I was just wondering if you can give us some detail sensitive.

David John McFadgen: And the growth there in the backlog I guess, it's I guess, the $250 million contract you announced today with CSA isn't that just give us some color.

Michael Greenley: Well, for sure in the Q1 backlog. There'll be some RPAS activity in there. There'll be a little bit of robotics activity and stuff that's in there.

Speaker Change: Well for sure in the Q1 backlog for sure there'll be some of our past activity in there there'll be a little bit of robotics activity and stuff. That's in there I think that probably the $2 50 might not have been in the quarter that might have actually been in April.

Michael Greenley: I think that probably the 250 might not have been in the quarter. That might actually have been in April. Yeah, that would be a Q2 order. We talk about it because it's, you know, been announced prior to this earnings call. But it'll actually, that 250 number would be part of the Q2 numbers.

Michael Greenley: That'd be a Q2 order we talk about it because it's been announced prior to this earnings call.

Michael Greenley: But it will actually that $2 50 number would be part of the Q2 numbers.

Vito Culmone: And David, also, in the Q1 order profile of the $400 million you referenced, there's a $100-$150 million subsequent adjustment to the Lightspeed order. And you'll always see us continue to tweak that as we move through, even as we move through Q2 here. And that just reflects refinement in scoping as the teams have worked very diligently together, and as Mike has said, we are moving out. So tremendous progress here, both in Q4 and into Q1, in finalizing the design, the contact, the scope, the pricing elements, and whatnot. So there's about $100-$150 of further Lightspeed increases, if you will, reflected in that Q1 order profile.

Michael Greenley: And David also.

Vito Culmone: In Q1 order profile of a $400 million you referenced there is a $100 million to $150 million.

Vito Culmone: Subsequent adjustment to the light speed order and you'll always see us continue to tweak that as we move through even as we move through Q2 here and that just reflects refinement and.

Vito Culmone: Sculpey as the teams have worked very diligently together and as Mike has said we are moving out a tremendous progress here both in Q4 and into Q1 in finalizing.

Vito Culmone: The the design to contact a scoping pricing elements and whatnot. So there's about a one.

Vito Culmone: 100 to 150.

Vito Culmone: Light speed.

Vito Culmone: Further it increases if you will reflected in that Q1 order profile.

David John McFadgen: So I might understand then that the Telesat Lightspeed contract for you is now $2.2 to $2.3 billion?

Vito Culmone: So Mike I understand then that then contact Knight's been contract for you is now $2 80 to $2 3 billion.

Vito Culmone: That's what's currently sitting in the backlog, correct? Okay.

David John McFadgen: That's what's currently sitting in backlog correct.

David John McFadgen: Okay, all right. So given you're going to put the CSA 250 million contract into backlog in Q2, should we expect that backlog to grow again in Q2 sequentially?

Vito Culmone: Okay, Alright, so given youre going on and put the CSA 259 contract into backlog in Q2 should we expect that backlog could grow again in Q2 sequentially.

Speaker Change: Yes, yes, sorry, your brain starts to calculate how much backlog or are you going to burn in Q2 right at the same time.

Michael Greenley: Yeah, sorry, your brain starts to calculate how much backlog you are going to burn in Q2, right, at the same time. Yes, backlog. Yes, burning. That's right.

Michael Greenley: Earning interact.

Michael Greenley: Yes.

David John McFadgen: Okay, so it's still expected to grow sequentially.

Michael Greenley: Okay.

Michael Greenley: Still expected to grow sequentially.

David John McFadgen: Thank you, that's a quarter over quarter backlog. Okay, that's pretty good.

Speaker Change: Exactly yeah, Yeah, we expect.

David John McFadgen: Quarter over quarter backlog increases here.

David John McFadgen: Okay.

David John McFadgen: That's pretty good.

David John McFadgen: Okay. All right. That's it for me. Thanks.

Speaker Change: Okay, Alright, thats it from me thanks.

David John McFadgen: Dave.

Operator: Thank you. Your next question is from Ted Herbert from RBC Capital Markets. Please ask your question. Hey, good morning, everybody.

Speaker Change: Thank you.

David John McFadgen: Our next question is from Ken Herbert from RBC capital markets. Please ask your question.

Operator: Hey, good morning everyone. This is Teach Trackhouse on 4KenHerbert. Your bookings in the quarter were really nice, just kind of following up on the backlog conversation. Can you maybe discuss how your new bookings, maybe starting with the Canada Arm 3 extension, and then potential future contracts that you're looking to bid, kind of just how those can affect your margin profile?

Operator: Hey, Good morning, everyone. This is Steve strike us on for Ken Herbert.

Operator: Your bookings this quarter were really nice just kind of following up on the backlog conversation can be especially your new bookings, maybe starting with Canada, Canada arm, three extension and potential future contracts that youre looking to bid.

Operator: Can you just hold those can affect your margin profile.

Michael Greenley: So I think there are a few things there. I think, in terms of our overall margin profile, I don't think we would have anything to say about changing our margin profile. We talked for the last, you know, three years consistently about guiding towards an 18 to 20% margin rate profile. We have, I realize, exceeded that a bunch in the last few years, but, you know, we continue to talk and guide, like we did this year in the 19 to 20% range. And as you saw, Q1 was a 20% range.

Speaker Change: So I think there's a few things that I really like in terms of our overall margin profile I don't think we would have anything to say about changing our margin profile. We talked for the last three years consistently about guiding towards an 18% to 20% margin rate profile.

Michael Greenley: Have I realize exceeded out a bunch in the last few years, but we continue to talk and guide like we're doing this year in the 19% to 20% range.

Michael Greenley: And as you saw in Q1 was a 20% range. So there's nothing that we would want to say that we would want to change expectations on margin rate.

Michael Greenley: So there's nothing that we would want to say that would change expectations about margin rate. In terms of the nature of the bookings that have just occurred, we just kind of talked about that. We had the unmanned vehicle booking. We had the, you know, additional adjustments to the light speed backlog in the quarter. And then the $250 million is our next dollop or probably final dollop, I guess, of recurring revenue that has been recurring for, you know, the last 25 years or so.

Michael Greenley: In terms of the the nature of the bookings that have just occurred we just kind of talked about that we had the the unmanned vehicle booking we had the.

Michael Greenley: Additional adjustments to the lightspeed backlog in the quarter and then the $250 million is.

Michael Greenley: <unk>.

Michael Greenley: Next door for them, probably final dollop I guess of recurring revenue that has been recurring for the last 25 years, almost we talk about having a.

Michael Greenley: We talk about having a, you know, sort of $30 to $50 million a year of recurring revenue in terms of our support to Canadarm2 and related operations on the International Space Station. And that $250 million is the next top up to that, to get us to the International Space Station, you know, going out of service in the 2030 timeframe. So that's actually, like we just said, an April or Q2 booking. It's just that we talk about it right now because it happened subsequent to quarter end.

Michael Greenley: Sort of $30 million to $50 million a year of recurring revenue in terms of our support to canadarm, two and related operations on the international space station and that $250 million is the next top up to that to get us to international space station.

Michael Greenley: Going out of service in the 2030 timeframe. So that's actually like we just said in April or Q2 booking. It's just that we talk about it right now because it's occurred subsequent to quarter end.

Michael Greenley: In terms of the in terms of the future pipeline like we have a strong future pipeline in general we talk about that as being a $17 billion plus pipeline. It remains so it continues to obviously get new trees into it we don't provide details on specific pursuits, but.

Michael Greenley: In terms of the future pipeline, like we have a strong future pipeline in general. We talk about that as being a $17 billion plus pipeline. It remains so. It continues to obviously get new entries into it. We don't provide details on specific pursuits, but it continues to be a robust $17 million-ish pipeline, which would have an order window of over the next five years.

Michael Greenley: It continues to be robust.

Michael Greenley: $17 million ish dollar pipeline, which would have an order window of over the next five years.

Michael Greenley: With regard to some of that $17 billion pipeline, do you find that you're becoming any more selective on some of the contracts that you're bidding for better margins, or are you still just kind of thinking about them in terms of long-term growth?

Michael Greenley: With regard to some of that $17 billion pipeline.

Michael Greenley: Blend that you are becoming any more selective on some of the contracts that you're bidding for better margins or are you still just kind of thinking about it in terms of long term growth.

Michael Greenley: I think that we'll get selective for sure, but probably more selective based on ensuring the solidity of the customers to make sure that the customers are solid, that they've got their financing, and that what they're interested in is in strong alignment with our offering. With the introduction of product lines in terms of MDA SkyMaker and robotics and MDA Aurora and satellite systems, we're seeing a great pipeline of customers with strong business cases and financing whose requirements align with our product lines. And so that everything fits well.

Speaker Change: I think that we get selective for sure, but probably more selective based on ensuring the solidity of the customers to make sure that the customers are solid that they've got their financing that what they are interested in is in strong alignment with our offering with the introduction of product lines.

Michael Greenley: In terms of MDI Sky maker in robotics, and NDA Aurora and satellite systems.

Michael Greenley: No.

Michael Greenley: A great pipeline of emerging of customers with strong business cases with financing that their requirements aligned with our product lines and so that all that all fits well. So those decisions are based those selections I guess are based on <unk>.

Michael Greenley: So those decisions are based, those selections, I guess, are based on picking solid customers to really work with and pursue and invest in that align well with our business. To be honest, it's not a margin-driven conversation, but because the opportunities align with our product base, the productization of us will give us opportunities over time, like several years. Things get more productized, then you get more learning, you get more opportunities for volume, and you get some margin expansion opportunities.

Michael Greenley: <unk> solid customers to really work with and pursue and invest in that align well with our business.

Michael Greenley: To be honest, it's not a margin driven conversation, but because the.

Michael Greenley: Opportunities aligned with our product base the product validation of us will give us opportunities overtime like several years.

Michael Greenley: Things get more product ties than you get more learning you get more opportunities for volume and you would get the margin expansion opportunities, but I'm just being dead honest with you that's not the driving force of our decision making in the pipeline are driving forces to make sure. We've got solid customers to work with that lineup with our offering.

Michael Greenley: But I'm just being dead honest with you, that's not the driving force of our decision making in the pipeline. Our driving force is to make sure we've got solid customers to work with that line up with our offer. That's great, thanks. I'll leave it there.

Michael Greenley: That's great. Thanks. I'll leave it there.

Speaker Change: That's great. Thanks, I'll leave it there.

Michael Greenley: Yeah.

Operator: Thank you once again. Should you have a question, please press star 1. Your next question is from Thanos Moschopoulos from BMO Capital Markets. Please ask your question.

Speaker Change: Thank you once again should you have a question. Please press star one. Your next question is from Anna <unk> from BMO capital markets. Please ask your question.

Thanos Moschopoulos: Hi, good morning. Could you comment on the level of certainty with respect to your forecast for telesatellite speed in 2024? So what I mean is that if the stars were to align, is there an opportunity for the revenue contribution to be significantly higher than you're currently assuming? Or given the timeframe involved in ramping up the program and bringing on some contractors and so forth, is that going to kind of mitigate the opportunity for exceeding what you're currently forecasting?

Thanos Moschopoulos: Hi, good morning.

Thanos Moschopoulos: Could you comment on the level of <unk>.

Thanos Moschopoulos: Certainty with respect to your forecast for <unk>.

Thanos Moschopoulos: Satellite feed in 2024, so what I mean is that if the stars align.

Thanos Moschopoulos: Is there an opportunity for the revenue contribution to be significantly higher than you're currently assuming or given the timeframe involved for ramping up the program and bringing on some contractors and so forth.

Thanos Moschopoulos: Is that kind of mitigate the opportunity for far exceeding what youre currently forecasting.

Michael Greenley: I think right now at this time, we would just be holding to our guidance for the year, like there's really nothing much to talk about beyond that. You know, Lightspeed is a key part of our profile for the year. We've incorporated that in our business plan and our guidance, and we continue to hold to that guidance, as Vito indicated in his remarks.

Speaker Change: I think right now at this time, we would just be holding to our guidance for the year like Theres really nothing much to talk about beyond that.

Michael Greenley: Lightspeed is a key part of our profile for the year, we've incorporated that in our business plan and our guidance and we continue to hold to the guidance as Vito indicated in his remarks.

Thanos Moschopoulos: Okay. With respect to the Canadian Boomer program, can you remind us as far as the timeframe for a potential decision on a prime contract to work in the government?

Michael Greenley: Okay.

Michael Greenley: With respect to the <unk>.

Thanos Moschopoulos: Canadian Lunar Rover program can you remind us as far as the timeframe for a potential decision.

Thanos Moschopoulos: Prime contract to work in governance.

Michael Greenley: Yeah, that comes in phases. And so the initial phase that the three teams are working on now, there'll be a 12 to 18 month first phase that everyone will work through. And then subsequent phases will result in a down select activity. I don't have in my head, just off the top of my head, the target date for the final, final award date. So that's something I need to go and get in my head. So I'm sorry about that.

Thanos Moschopoulos: Yeah.

Thanos Moschopoulos: Now that comes in phases and so.

Michael Greenley: The initial phase that theres. The three teams are working on now will be like.

Michael Greenley: At 12 months to 18 months first phase that everyone will work through.

Michael Greenley: And then subsequent phases will result in a down select activity I don't have in my head just off the top of my head the target date for final final.

Michael Greenley: The award date, so that's something I need to go and get it in my head so I'm sorry about that.

Thanos Moschopoulos: Finally, at the recent satellite industry conference, there was a lot of talk about the direct to handset market. You obviously have some involvement there with GlobalStar. Just curious about your take on that market; when you look at your pipeline, does that encompass a number of such opportunities? Are there still some challenges that need to be worked out from an industry perspective as far as business models and so forth, or are there active discussions with operators looking to deploy that kind of service?

Michael Greenley: Finally at the recent.

Michael Greenley: Satellite industry conference.

Thanos Moschopoulos: Talk about the direct to handset market you, obviously have some involvement there.

Thanos Moschopoulos: Globalstar.

Thanos Moschopoulos: Just curious on your take on that market. When you look at your pipeline.

Thanos Moschopoulos: Does that encompass a number of such opportunities.

Thanos Moschopoulos: Are there still.

Thanos Moschopoulos: Some challenges I think you've worked out from your perspective as far as business models, and so forth or are there actual discussions with.

Thanos Moschopoulos: Operators looking to Rob.

Thanos Moschopoulos: It's really that kind of service.

Michael Greenley: Yeah, so the direct-to-device market is, I'll just start by saying it's real, and it's expanding, I think, in terms of people thinking about the feasibility and the importance of the direct-to-device market as we move forward into the future. We have opportunities, for sure, in our pipeline, multiple ones related to the direct-to-device market. In addition, following that, the Internet of Things market, which is also very interesting in terms of people looking to put up space networks to connect to and track everything, whether that be agricultural vehicles or cars or logistics or anything.

Speaker Change: Yeah. So the directed device market is.

Michael Greenley: Start by saying it's real.

Michael Greenley: It is expanding I think in terms of people.

Michael Greenley: About the feasibility and the importance of the directed device market as we move forward into the future we have opportunities for sure in our pipeline.

Michael Greenley: Multiple ones related to the directed device market.

Michael Greenley: In addition, following that to the Internet of things market, which is also very interesting in terms of people looking at wanting to put up space networks to connect to and track.

Michael Greenley: Everything.

Michael Greenley: Whether that'd be agriculture vehicles or cars or logistics or anything.

Michael Greenley: So the directed device market followed by the Internet of Things market are both strong market opportunities to come that are starting to emerge in the pipeline, but we would expect to actually continue to expand as we go forward.

Michael Greenley: So they're the directed device market, followed by the Internet of things market or both.

Michael Greenley: Strong market opportunities to come.

Michael Greenley: Theyre starting to emerge in the pipeline, but we would expect to actually continue to expand as we go forward into the future.

Thanos Moschopoulos: Great. I'll pass the line. Thanks.

Michael Greenley: Great.

Michael Greenley: Thanks.

Speaker Change: Okay. Thanks.

Thanos Moschopoulos: Yeah.

Operator: Thank you. There are no further questions at this time. Please proceed with the closing remarks.

Speaker Change: Thank you there are no further questions at this time. Please proceed to closing remarks.

Michael Greenley: Okay, well, thanks, folks, for your time this morning. We look forward to updating you on our progress during our next earnings call in August. Thanks again, and have a great day.

Speaker Change: Okay, well, thanks folks for your time this morning, and we look forward to updating you on our progress during our next earnings call in August.

Speaker Change: Thanks, again and have a great day.

Operator: Thank you, ladies and gentlemen. The conference has now ended. Thank you all for joining us. You may all disconnect.

Speaker Change: Thank you ladies and gentlemen, the conference has now ended thank you all for joining you may all disconnect.

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