Q1 2025 MDA Ltd Earnings Call
Good morning ladies and gentlemen, welcome to MBA Space Limited Conference call and webcast.
This call is being recorded on May 8, 2025 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. Thank you very much.
For those of you who are soliciting via webcast, please note that the company will be using a presentation.
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I would now like to turn the call over to Shereen Zahawi, Head of Investor Relations at MBA Space. Please go headman.
Thank you John .
Speaker Change: Good morning and welcome to M.D.A. Space, 1st quarter, 2025 earnings call.
Speaker Change: Mike Greenley, RCO and Guillaume Lavoie, RCO will lead today's call and share some prepared remarks before taking your questions.
Speaker Change: A couple of housekeeping items before we begin. Today's call is accessible via webcast on our investor relations website. All our disclosures, including the press release, MDNA and financial statements are available from our investor relations website and from Cedar
Speaker Change: I would also like to remind you that today's call will include estimates on other forward looking information which may differ from actual results. Please review the cautionary language in today's press release on public filings regarding various factors, assumptions and risks that could cause actual results to differ.
Speaker Change: In addition, during this call, we will refer to certain non-IFRS financial measures.
Speaker Change: Although we believe these measures provide useful supplemental information about our financial performance, these measures do not have any standardized meaning under IFRS and our approach in calculating these measures may differ from that of other issuers and therefore may not be directly comparable.
Speaker Change: Please see the company's quarterly report and other public filings for more information about these measures, including reconciliation to the nearest IFRS measures, and with that it's my pleasure to turn the call over to Mike.
Mike Greenley: Thank you, Shereen. Before my remarks this morning I just want to speak to my quality of voice.
Speaker Change: So a nasty cold has caught me in the last week and as a result my voice will seem a little bit weird today. In addition, I may break into an enthusiastic copying burst from time to time. If that does happen, I will go on mute for a few seconds and then I welcome back.
Speaker Change: So good morning, everybody, and thank you to those for joining us today to discuss our first quarter 2025 financial results. The MBA Space Team delivered another strong quarter in Q1, driven by solid execution, as we continue to convert our backlog and meet our customer commitments.
Speaker Change: Our Q1 revenues totaled $351 million, up 68% year-over-year, adjusted EBITDA with $69 million, up 63% versus last year, and adjusted EBITDA margin was a solid 19.5%
Speaker Change: Operating cash flow was strong at $267 million and we ended the quarter with no debt and a net cash position of $376 million. Our backlog of $4.8 billion at quarter end provides us with good revenue visibility for 2025 and beyond.
Speaker Change: The strength of our backlog was significantly enhanced in February . We announced the MDA space has been awarded a $1.1 billion dollar follow on contract from Global Start.
Speaker Change: To manufacture its next generation, Low Earth Warbit Constellation, which will include over 50 MD Aurora digital satellites. This is our third Leo Constellation contract in three years, and second Constellation with Global Start.
Speaker Change: Further highlighting the continued momentum we are seeing in our satellite systems business driven by strong customer demand for our innovative technology.
Speaker Change: With a solid start to the year, we are reaffirming our previous 2025 Full-Year Financial Outlook, which we provided.
Speaker Change: with which we provided with our Q4 2024 earnings release. We remain confident and continue to expect revenues to be between 1.5 billion to 1.65 billion, representing year-over-year growth of approximately 45% at the midpoint of guidance.
Speaker Change: We expect full-year adjusted EBITDA to be between $290 million to $320 million, representing year-over-year growth of approximately 40% at the midpoint of guidance and approximately 19 to 20% adjusted EBITDA margin rates.
Speaker Change: We continue to expect capital expenditures to be between $210 million to $240 million as we invest in our growth initiatives.
Speaker Change: Q1 and the subsequent period was a busy one for MDA Space.
Speaker Change: Throughout the quarter, our teams have continued to execute on our existing programs, including major programs like Tell us at light speed, as well as both low-earth orbit constellations for global star.
Speaker Change: We also continue to execute on the development of our Canada Free Robotics Program and MVA Chorus, our next generation Earth Observation Constellation.
Speaker Change: and subsequent accordingly, we announced an MVA space has entered into a definitive agreement to acquire all outstanding shares of static-spy communications limited in an all-cash transaction of US $2.10 per share.
Speaker Change: The transaction which represents an equity value for static spy of approximately US $193 million is expected to further enhance the end-to-end satellite systems offering of MDA space as demand for next-generation digital satellite communications continues to accelerate.
Speaker Change: The transaction represents a total cast consideration of approximately US $269 million, after accounting for static-spies existing debt, which MDA space plans to retire immediately upon closing.
Speaker Change: We expect a transaction to close in the third quarter of 2025, subject to customary closing conditions and required regulatory approvals.
Speaker Change: As always, our strong performance in Q1 would not have been possible without the hard work and continued dedication of the entire MDA space team we would like to thank and acknowledge.
Speaker Change: As we look to the balance of 2025, the team is energized by the solemn momentum we are seeing in our end markets and NBA space as the right technology portfolio to capitalize on the opportunities ahead of us.
Speaker Change: I'll now give you an update on our free business areas and then pass it over to Guillaume for a deep dive on the financials.
Speaker Change: In satellite systems, we continue to see good momentum in this market, with our teams working to advance multiple requests for communication satellite solutions and a growing number of constellation projects.
Speaker Change: We're also seeing good activity levels from customers, and our opportunity final remains strong.
Speaker Change: In Q1, our teams were busy advancing work on a number of programs. On the Teleside Lightspeed program, our teams have now transitioned to the program's detailed engineering and manufacturing phase, including the critical design of you.
which is taking place later this year.
[inaudible]
Speaker Change: This follows the successful completion of the preliminary design review which took place in Q4 of 2024.
Speaker Change: With all critical subsystem suppliers now under contract, the stage is set for work volumes to accelerate this year, consistent with our program plans.
Speaker Change: As I noted earlier, N.G.A. Space has been selected by Global Star. It was the prime contractor for the
Speaker Change: RMBA Space for Manufacturing more than 50 MDA Aurora Software Defying Digital Satellites.
Speaker Change: The contract valued at approximately $1.1 billion is a follow-on to an initial authorization to proceed contract, we previously announced in November 2023 with an undisclosed customer.
Speaker Change: A contract value of approximately $750 million was added to the company's backlog in the first quarter of 2025. This amount is in addition to the ATP value of approximately $350 million that was previously added to backlog in 23 and 24.
Speaker Change: The team is going to give you good progress on the engineering development and program procurement activities for this program and is transitioned towards the critical design of you taking place in the second half of this year.
David McFadgen, David McFadgen, David McFadgen,
Speaker Change: We are also continued to advance work on the initial Global Star program, where MBA space is the prime contractor to enhance Global Star's Leo Constellation through the addition of 17 satellites which support SOS features and direct the device communication on certain Apple products.
Speaker Change: In Q1, the team progressed flight hardware production and flat-sack testing of the bus and payload systems. The team continues to advance solid integration work following its successful spacecraft integration readiness review.
Speaker Change: We're also making good progress on our facility expansion in Quebec, which will add 185,000 square feet to our existing satellite production facility.
Speaker Change: The building shell has now been completed and we continue to progress construction on the interior elements of the facility. Once complete, it will be the world's largest high volume manufacturing facility in its satellite class.
with Capaciting to deliver two M.D.A. Award Visual Satellites per day.
Speaker Change: The production line is expected to be operational in the second half of 2025.
Speaker Change: Moving to our robotics and space operations business, we continue to see good traction and activity levels on both government and commercial fronts.
Speaker Change: Q1, we continued to ramp up work volumes on phases of the Canadarm Free program, which we were awarded together with phase IV in June of 2024.
Speaker Change: Our contract for Canada arm, three is with the Canadian Space Agency, and the government of Canada, and not NASA and there has been no change to any N D. A space contract as a result of these U S budget recommendations, we are in discussion with C SA.
Speaker Change: It is recent update now it's in his signal it's commitment to work with Artemis partners, which include the Canadian Space Agency Unexpanding opportunities for meaningful collaboration on the Moon, and Mars and to repurpose components for use in other missions NASA I.
Speaker Change: [noise] irrespective of the Gateway project, Nasa's increasing commercial orientation bodes well for M. D. A space, we continue to advance opportunities to incorporate our robotic technology on multiple near term opportunities, including lunar mobility programs.
Speaker Change: Including commercial space stations and ongoing space exploration opportunities during the quarter, we progressed, a design and development of the MDA Skymaker robotics for the lunar outpost lunar terrain vehicle services or ltbs contract and supported.
Speaker Change: Preliminary design review with NASA.
Speaker Change: [noise] moving to Geo intelligence business customer demand for our Earth observation offering remains robust and we are seeing increased recognition of the role the commercial Earth observation Sidelights can play to provide near real time data.
Speaker Change: Price.
Speaker Change: In Q1, we continue to advance work on M. D. A chorus the M. D. A space team finished harness installation and started unit installation in the main spacecraft body. The first four sarna panels progressed through its electrical characterization are SOR.
Speaker Change: We're now well into a busy second quarter, where we plan to test and characterize the second SAR Intenope and expect to complete testing of the remaining units before installation into the aircraft. The NDA space team also delivered another iteration.
Speaker Change: And our tracking continuous development and release plans overall, we continue to make good progress in MBA chorus and are excited to deliver the constellations enhanced functionality to all of our current and future customers.
Speaker Change: [noise] shipping to operations, we continued our hiring efforts to support the growth we see in our business with close to 3500 Hotty skilled M. D. A space dive today, we have the people and talent to help propel our growth and give us a scale to.
Speaker Change: Communities, we are seeing.
Speaker Change: We also wanted to provide an update on the imposed U S tariff and counter tariffs announced by the Canadian government.
Speaker Change: As we noted in our last earnings call in early March we see the situation as very manageable Ramva space. We continue to actively engage with government and regulatory bodies in both the U S and Canada regarding terror mechanics, and our teams are.
Speaker Change: Including compliance with U S. MCA on the latter our preliminary analysis for some of our more complex products that we export including finished satellites suggest that these products are largely us MCA compliant as a reminder, at the end of Q1.
Speaker Change: Absolutely, 80% of our backlog of $4.8 billion derived from geographies outside of the U S and when we look at our supply chain, particularly for our satellite manufacturing business is well diversified with little over a quarter of suppliers based in the U S. In most cases the technology.
Speaker Change: Offering a differentiated and cost competitive and as a result, not easily replaced we continue to see strong desire by customers and potential customers do engage with us in our opportunity pipeline remains very strong we'll be monitoring this situation closely as it remains.
Speaker Change: A U as necessary to recap or please with our performance this quarter and the momentum we are seeing in our markets. Our team is energized we remain laser focused on our priorities a strong focus on execution converting opportunity.
Speaker Change: By business area revenues and satellite systems of 222 million in the first quarter were 135 million or 155% higher compared to the same quarter in 2024, the strong growth was driven by.
Speaker Change: At light speed program and the Global Star next generation Leo Constellation program. The latter contract was finalized in February of 2025 in Rabotics and space operations revenues of 77 million in the latest quarter.
Speaker Change: Million or 9% increase versus Q1 of last year, driven by the gradual ramp of phase C of the Canada Armed three program, which was awarded in Q2 2024 by the Canadian Space Agency as Mike noted.
There has been no changes to the Canada armed three program as a result of the recent budget Deliverations in the U S and we continue to engage closely with the C. S. A on this program while focusing on.
Speaker Change: Revenues and our Geo intelligence business of 52 million in the latest quarter were flat year over year, reflecting steady word volumes in line with our expectations moving to gross profit for Q1 25 gross.
Speaker Change: Representing a 22 million or 38% increase over the same period last year driven by higher volumes of work performed in our satellite systems and robotics and space operations businesses gross margin in the latest quarter was 20.
Speaker Change: Which is in line with our expectations and compares to 27.7% for the same period in 2024 the year over year change in gross margin is driven by our evolving program mix and higher the.
Speaker Change: Expenses as new assets come into service.
Speaker Change: Adjusted EBITDA in the latest quarter was 69 million compared to 42 million in Q1, 2024, representing an increase of 27 million or 63% year over year again, driven by higher or volumes as we continue.
Speaker Change: Adjusted EBITDA margin was 19.5% in Q1 2025, consistent with the company's four year margin guidance of 19% to 20% and compares to adjusted EBITDA margin of 20.1%.
Speaker Change: First quarter of 2024.
Speaker Change: Adjusted net income in Q1, 2025 was 37 million compared to 18 million in the same period in 2024, the year over year increase of 19 million or 103% is largely due to higher operating income.
Speaker Change: D Q1 of 2025 moving to backlog, we ended the quarter with a solid 4.8 billion in backlog, representing an increase of 46% year over year. The growth in the backlog was driven by the addition of a number of sizable awards, including the global start.
Speaker Change: Generation Leo constant.
Speaker Change: Moving to Capex, we remain focused on making investments in the business to support our strategic growth plan. In Q1 2025, we spent 62 million on capital expenditures up from 44 million last year as we continue to.
Speaker Change: Two months of chorus, and the expansion of our Montreal satellite manufacturing facility operating cash flow during the quarter generated 267 million compared to 25 million in Q1 of 2024 the year over year increase.
Speaker Change: Contributions primarily from the global start next Gen Leo constellation and Teles at light speed programs free cash flow was 205 million in the latest quarter and compares to negative 16 million in the previous year.
Speaker Change: Over year improvement largely due to the previously noted working capital contributions.
Speaker Change: Moving to our balance we ended the quarter with a strong financial position with net cash of 376 million available liquidity of 690 million under our revolving credit facility and total liquidity of cost.
Speaker Change: As a result of our strong cash position year to date, we expect our net debt to last 12 month adjusted EBITDA ratio to be below one time EBITDA once the satisfied acquisition closes which is expected.
Speaker Change: Again subject to the closing conditions and required regulatory approvals in summary, this was a strong quarter and a solid start to 2025 now let me turn to our full year outlook as Mike noted we are we affirming.
Speaker Change: 25 outlet provided in our two 424 earnings release, and we are well positioned to capitalize on strong customer demand and robust market activity, given our diverse improvement technology and product offerings for fiscal 25.
Speaker Change: At full year revenues to be 1.5 to 1.65 billion, representing a year over year growth of approximately 45% at the midpoint of the guidance. We continue to expect full year adjusted EBITDA to be between 290 and 300.
Speaker Change: Representing year over year growth at approximately 40% at the midpoint of the guidance and approximately 19% to 20% adjusted EBITDA margin, we reaffirm capital expenditures to be between 210, and 240 million and 25.
Speaker Change: Growth investments to support the previously outlined growth initiatives across our business areas. Finally, we expect full year free cash flow to be neutral to positive in 2025 for the second quarter 2025, we expect.
Speaker Change: Start with our customers to identify solutions and explore potential mitigation strategies. We will continue to monitor the situation and may elect to update our financial outlook if necessary.
Speaker Change: To solve it backlog and L. T pipeline, you remain focused on discipline execution on our customer commitments and leveraging our capabilities and technology to grow profitable at in a profitable way in core an emergency markets in line with our.
Speaker Change: Life with that I'll turn back to you. Okay. Sadieo operator, we can now open it up for questions.
Speaker Change: Yes, Sir thank you, ladies and gentlemen, we will now begin the question and answer session and as a reminder, if you wish to ask a question. Please press star one on your telephone keypad and wait for your name to be announced once again star in one if you wish to ask a question. Please.
Speaker Change: File the QA roster.
Speaker Change: Thank you for waiting we now have our first question and this comes from Conar Gupta from Scotia Bank. Your line is now open. Please go ahead.
Speaker Change: Thanks after the good morning, everyone, maybe I can begin with the the cannon three contract you know obviously, the recent headlines where we're clearly not indicating that you know there's a lot of confidence with the Nash budget, clearly, but I don't.
Speaker Change: Suggesting that you're seeing a lot of risk to count down three C. S. A is is the backstopping customer on that now. The question I have is you know what had been the discussions lately with C S a or indirectly with NASA.
Speaker Change: I mean, if NASA does not get the budget. They want how can they support the program the artist and you know what could Canada do differently to to continue to fund this program.
Speaker Change: I think there's not a strong history of talking about this particular topic because the inputs from the White house on the budget were just that like preliminary inputs from the White house on the budget. So that kind of essentially comes out of nowhere you know it.
Speaker Change: They would like people to talk about as they go through the budget cycles. So those inputs have now been received within the last week and now everyone will start to talk about them. So for all of US. We just continue to do our work we have a contract with Union space Agency the community Space Agency.
Speaker Change: Three continues to have a commitment to NASA to provide robotics for the Moon and we just continue with that as we go through next several months the U S budget loves to go through its process. These inputs, including the White house input will be reviewed.
Speaker Change: Okay. All of her departments. The Progressional staff will start to opine on things that they care about there will be I guess a draft budget that will come out later in May and then there'll be the congressional review process that occurs through the summer towards an.
Speaker Change: It's like O's in October season for a budget you know should it get conducted and it doesn't go into your resolution. So for us that means that you know largely 2025 for us at the moment is just get your work done keep developing the program keep advancing the robotic system and.
Speaker Change: That budget process continue in the background. So that's that's really the position that we're in at the moment. Okay. No. That's that's fair Mike I understand obviously a lot of things are on the move here shifting airs the market you guys have obviously two big contracts.
Speaker Change: And there's a pipeline, which is pretty strong would you would you say like you know given your positioning in the market you know being sort of an early mover on digital satellites. The reason why you don't have more than two customers on digital side is because of the.
Speaker Change: Montreal or is it because of the brand reputation that you know the market did not recognize your reputation like a few years ago.
Speaker Change: No I'd say that.
Speaker Change: We have a very strong bright lane, we're in a very good position with a number of additional constellations and all that remains in place people, who would make orders for new satellites say if anybody ordered some in.
Speaker Change: Not you know be in production in a factory until sometime in late 26, and early 27, and so those customers in our pipeline understand the capacity that's being built and they've been you know they've seen it they viewed it they seen computer.
Speaker Change: Two or through the construction sites, they're very aware of you know what will come as we go through 2025 and they believe in our ability to have capacity. So there are no concerns with the limitations of our capacity I think N D. A space as a provider of lower.
Speaker Change: Is very well known by those that are building lower forbid constellations in the market I would say all of the premium constellation projects that are available for competition would probably be talking to NBA space in one way or another.
Speaker Change: Those are very good dialogues I think that that's it you have not I don't think because I'm not aware of any heard of any constellations outside of space X or Amazon kyper that would be progressing any announced.
Speaker Change: That's spa.
Speaker Change: Space is also the provider of satellites for it but we are not losing any competitions.
Mike Greenley: Yeah, that's fair thanks for the caller, Mike and sorry to make you speak so much.
Mike Greenley: No problem I'm here to speak.
Mike Greenley: Thank you and the next question comes from the line of Ken Herbert from R. B C. Your line is now open. Please go ahead.
Ken Herbert: Yeah, Hi, good morning, everybody Ken.
Speaker Change: A like maybe the to start off you're involved in a number of the commercial space station opportunities that are that are very early stages, but I'm just thinking depending upon how the NASA reorganization goes to what extent could commercial.
Speaker Change: Technology, maybe offset some potential risk or timing from the CSA and maybe can you just give us a little bit more detail on your commercial initiatives on the robotic side as it relates to C. Three.
Speaker Change: Yeah in terms of the the construct of offsetting Canada arm three opportunities. So when you speak of that you're suggesting that perhaps in the final execution of the entire budget process. You know that later in 2025, we learned that yes for real Canada arm three.
Speaker Change: To you know gateway as a space station in that outcome, we have already heard the leaders of the space agencies indicate that they are all communicating which with each other and we'll continue to communicate with each other about the use of their country.
Speaker Change: So the leader program includes you know the space station Gateway. It includes the spaceships that go to the Moon. It includes all the logistics vehicles and activities to move things around the Moon. It includes the vehicles that'll be used for doing.
Speaker Change: Reuse for example, if the if the if the work Dot com was ever come like you know a year from now.
Speaker Change: In terms of the use of Canadian robotics technology for the commercial space stations in Lowearth orbit, Yes, we talk with all of those commercial space stations today, our MDA skymaker derivatives of the Canada arm three technology our bid Nanim.
Speaker Change: Commercial space stations, and we remain engaged in that so there is strong opportunity for us to deploy Canadian robotics to the commercial space stations in lower Thorbit as well yes.
Ken Herbert: Great that's helpful and and maybe a question for Geome you had really good cash generation in the first quarter you've maintained the full year breakeven a positive how should we think about the cadence of of the free cash flow do we do we continue to see positive free cash in.
Speaker Change: Second quarter or or how does this flow through the year.
Speaker Change: Hey, good morning, Ken Yeah, we're pretty happy with you know the free cash flow generation in the first quarter again like I said, it's a good start to the year, but we still have you know three quarters to go. So we maintain our guidance of you know neutral to.
Speaker Change: So I think the way to think about Q2, three and four is yeah neutralish with potentially some you know variation in between the quarters with regards to you know the working capital.
Speaker Change: That again, we just want to be prudent here, we had a strong start to the year and then from my perspective, you know we keep the guidance and you know we'll update everyone as we progress through through the year.
Speaker Change: Great. Thank you I'll pass it back there. Thank you. Thank you Ken. Thank you and the next question comes from the line of Stephen Masselson from BMO capital markets. Your line is now open. Please go ahead hi, Thanks for taking my question my.
Stephen Masselson: Question about Terrace, I know you said in the past that you've been able to manage them for the existing projects, but I'm just wondering in your conversations for perspective constantly.
Speaker Change: Projects, how are tariffs coming into those conversations.
Speaker Change: Yep the whole the notion of tariff is always in a contract it's a little more popular at the moment as a topic area in contract negotiations, but it's really just working through you know who owns what responsibility for what aspects of Traffo.
Speaker Change: And then working with the customers with our mutual understanding of how would tariffs work on this particular project you know how a tariffs work what would the potential impact be and which of US is gonna be responsible for which pieces of them and so that's the discussion that we have on each contract okay and.
Speaker Change: The answers to any of those questions been changing in the last six months versus what you've seen historically in terms of who's responsible for what.
Speaker Change: Not really you know it goes back and forth with different customers in different situations in a I think maybe the only difference might've been that on some contracts you know we might want to consider changing roles of who's responsible for what just to be able to make the situation work out.
Speaker Change: But yeah, no no big changes, okay and on M. A so after you close the acquisition of Statics by how do you think about your capacity to do more M. A and are you seeing any more opportunity maybe amongst.
Speaker Change: Just given the disruption that tariffs might caused.
Speaker Change: I think that we will continue with our M. A plans as we've indicated in previously we've always indicated that there's two categories of MA for US one is vertical integration to be able to maybe bring some suppliers vertically integrated into the business like we're doing with satisfy in order T.
Speaker Change: Make sure we can control our roadmaps for the future. There are some very small activities. In addition to MA maybe some licensing deals and things like that that we work on in that category as well just to make sure that we are we're doing that's a theme for us in the business. The second theme would be.
Speaker Change: Expansion to be able to get you know more production capacity, maybe in Europe, or the United States try to open up the government pipelines more in those regions. We will continue to look at those things as well, we definitely have capacity to do so as we indicated we'll do this deal on set.
Speaker Change: In a good strong cash position and of course, our revolver is is totally available and so we might get into situation as Geome said, we end up with a small bit of leverage you know less than one turn as we go through the year and close that transaction.
Speaker Change: On the that side and of course, you know if anything substantial came there was really going to be transformational I'm sure. We could raise equity if we needed. It we have an enthusiastic and supportive community around us. So you know we don't we feel we can do acquisitions, if the right. If the right opportunity comes along and we continue to work on those.
David Mctaggan: Alright, thanks for answering my questions I'll pass the line. Okay. Thanks, a lot. Thank you and the next question comes from David Mctaggan from Comart Securities. Your line's now open. Please go ahead. Okay. Thank you a couple of questions.
David Mctaggan: First of all just start off with the Canada arm. If I may So last year, you announced you know the 1 billion dollar contract for account arm three comprises they C. N D can you give us a breakdown of that one billing between C and.
David Mctaggan: No I cannot stop my head, sorry, Okay, and and how much of the backlog right. Now 4.8 billion is is represented by Canon Army.
David Mctaggan: Yeah, it's it's under under a billion obviously as we've been executing the program. Since we were awarded the phases C. N D. So it's I would say under 900 million at the moment.
David Mctaggan: Hundred 900 million at the moment yeah. Okay.
David Mctaggan: [noise]. So I just wondering you know by the time Congress decides yes or no about the gateway project what percentage of the can arm. The 1 billion dollar contract do you think you will have.
David Mctaggan:
David Mctaggan: All depends on when that stuff happens right. So like I think we'll go through 2025 normally while the U S finishes its budget process that budget process could conclude that gateway remains and everything stays exactly the way. It is that can be an outcome.
David Mctaggan: Things related to the Artemis program, they're discussed in the budget is the SLS rocket system and gateway the space station and there's certainly a number of congressional elements out there that are not willing to allow that to go through the budget and so.
David Mctaggan: Maybe a lot of review and discussions that occur as people go through the summer and we'll see what happens in terms of the U S. Reaching a budget, which is obviously a large budget with a proposed $163 billion of reductions in government spending people have.
David Mctaggan: The budget that could happen on time for October or there could be a continuing resolution that is necessary. While they continue to debate budgets that could go on to this time next year. So we who knows we will just continue to work on the project as we as we.
David Mctaggan: Name and keep getting our work done. Okay. It's also it's also important to know it's also important to note that in in a situation on large programs like this in the aerospace and defense sector like globally. If approach you know.
David Mctaggan: There's a whole process to pay industry and all of its suppliers, where all of their costs and the associated expenses with actually buttoning up the project and shutting it down if that were to ever occur and so there's a lot of water.
Speaker Change: As we go forward into the future. If you know anybody who feels that because they U S. White house budget input made a suggestion that gateway be closed means that that will lead to Canada not building, Canada, three and that will lead to us not.
Speaker Change: That's a a false interpretation of the situation. We will continue to work fully through 25, I would expect and I would expect there would be significant work beyond that whenever the budget is done and I know that all the parties are working on you know what.
Speaker Change: What different purposes on the moon or commercially can Canada on three serve in the future. So we are a very very long way away from talking about any changes to our our contract structure.
Speaker Change: Okay.
Speaker Change: Okay and just on Artemis have you heard any discussion about that for a billion U S contract for the lunar train vehicle 'cause you know, it's expected to be announced and believe in April we heard nothing just wondering.
Speaker Change: An update there yeah, it's you're still continues and they're evaluations for sure that is progressing we have to submit updated inputs into that process on a regular basis. We're doing some updated inputs at the moment. So yep that continues as a live pu.
Speaker Change: Okay, and then just moving on the Sidelights. So you know just when you look at your pipeline do you do you see more demand to build your broadband satellite or your direct to device satellite.
Speaker Change: There's definitely demand for both I think the most active discussions at the moment are probably more in the directed device side, but there are some broadband folks that have you know continue to come along and ask for proposals. So both both parts of Interactory active.
Speaker Change: I'm on the director device. These days, Okay, and then and then just last thing just on Sunsatics by you know there's a go shop period, it's still alive I would imagine if there was another interested party in the company you would be aware of it have you seen any comp.
Speaker Change: Yeah, we have we have matching rights, we've announced that publicly in the in the process and we have not been informed of any formal bids that we would need to respond from a matching perspective against that is not occurred yet and if I may just add.
Speaker Change: And on May 16th so yeah, it's coming quickly right. Okay, alright, thanks, guys.
Speaker Change: Thanks, David Thanks, Dave. Thank you. The next question comes from Christine Lee from Morgan Stanley. Your line is now open. Please go ahead.
Speaker Change: [noise] Hey, this is [noise] Justin on for Christine. This morning. Thanks for taking the question just to start with for Giom. It looks like gross margins stepped down a bit in the quarter and you know what it was in line with expectations, but you could expect.
Speaker Change: And what you're expecting moving through the year is this low twenty's range sort of the new normal or do you expect to get back up to that mid to high twenties approaching 30 is you've done a storically no I think we've been very clear.
Speaker Change: That's our gross margin is evolving due to our changing program mix and then the other component is really you know all the investments that we're doing and that we've made into the business now. We're we're you know.
Speaker Change: Having more depreciation as all those assets come into into service. So yapping margin. The gross margin was right, where we expected it to be and again this translates into us delivering between 19% to 20%.
Speaker Change: And we expect that this will continue for the foreseeable future. So everything's asked for our plan and consistent with our expectations.
Speaker Change: Very helpful. And then Mike just double back to the NASA budget, and maybe putting gateway and kind of arm. Three aside were there any other sort of risks opportunities that I understand. This is initial proposal, but anything pop out to you outside of sort of gateway count arm three and then.
Speaker Change: Is there a good way to think about total NASA exposure for you as an end customer even considering that Canadian space efficiency is the contracting.
Speaker Change: You have a contract with them, but ultimately now is the end customer any way to source size that exposure. Thanks.
Speaker Change: Yeah, I don't really have a natural exposure number I think there's a you know there's a growing NASA opportunity for sure earlier questions on the NASA L. B T. S program, that's us teaming with American firms Niding directly into NASA. For example, so that's also part of our life.
Speaker Change: Budget one of the most encouraging things that we said was you know the geopolitical competition with China on getting to the Moon and that you know I think some statements were made about ensuring that the United States gets you know.
Speaker Change: Or at least as fast as China I think both sides are endeavoring to do that before 2030, what that means is a strong focus on launch systems and return systems to get back and forth to the moon over the next three four years in addition to.
Speaker Change: Things like Luna terrain vehicles habitats and the other things that you need on the lunar surface. Once you have humans on the lunar surface continue to progress at pace to be able to keep up with that and so I think that's one of the most important.
Speaker Change: Nine at you know the Artemis Accords have been signed by over 50 countries working with the United States in collaboration to live and work on the Moon and that consortium of enthusiastic participants you know is not gonna concede to China, and the 11 countries working with it.
Speaker Change: Activities on the Moon, So I think that that that geopolitical tension continues to hold and it can and did hold in the budgetary remarks. The so the the reconfiguration of budgets to focus on certain things like insuring, we get to the Moon and insurance.
Speaker Change: Cars I think are very positive for the opportunities that we continue to track in our pipeline okay. Great. Thanks, so much.
Speaker Change: Thank you. The next question comes from the line of Benoit Porier from.
Speaker Change: Gardens. Your line is now open. Please go ahead.
Speaker Change: Dot Hi, Mike Haigion, just talking about your bidding pipeline for satellite system back back in December you mentioned earlier that you were seeing about half of winnable bidding opportunities over the next two years obviously the.
Speaker Change: Whether it you're getting more confidence that you you could get at least one this year or maybe we could see two constellation awards in 2025.
Speaker Change: I think the feedback from customers on the acquisition of satisfies be very positive people are very supportive of that they think us for doing that and they see that as US you know the whole phrase of that we use as trusted mission partner. It's a you know that's not a marketing bus word or anything.
Speaker Change: Whole thing, it's like our customers see that we get it we're committed to these digital satellites, we're gonna own the solution and we're gonna be able to evolve the roadmap for that solution through M. D. A roar version one two and three you know as we go through the next several years and so people really appreciate that.
Speaker Change: Congratulations and thanking us for doing that so that's that's really good the pipeline does remain strong people continue to move forward.
Speaker Change: With their plans for space based networks people want to get those things done quickly, which is good to see and you know as a result, our bidding activity with network operators remains robust, it's a very very an.
Speaker Change: You know lately I think over the next year that we should expect to be able to see an opportunity for at least another constellation maybe too I still I still believe that that over the next year that that can happen that one or two can come through based on the maturity that some of these bids are at.
Speaker Change: Bids will move from early discussions to rough orders of magnitude estimates to then not to exceed estimates often the firm fixed price commitments and then with the terms of conditions around them. They go through a process of increasing maturity and there's.
Mike Greenley: Sure enough that if the customers decided to move they could as they go through the next year. So that that remains the case, okay. That's great and Mike when we look at your the supply chain environment, you've done a good job secreting your supply chain in the past could you talk a little bit about.
Speaker Change: Yeah supply chain environment, and there are any parts that are more fragile at this point.
Mike Greenley: Yeah, I think it's it's it's strong it's solid like we we always want really strong performers. Obviously, that's been a big part of our history, having delivered over 450 missions to space in our history that you know having suppliers that have.
Mike Greenley: Ability to work and deliver in space is very important to us to maintain our trust admission partner status with our customers. So we're very comfortable with our supply chain I have commented a number of times that as we've gone through especially on satellites as we've gone through the next year the.
Mike Greenley: Yes, very clear on our roadmap over the next two or three versions of satellites and mature our conversations with our customers about what we might need from them over the next five years and so it's just a it's just a good conversation with everybody that's maturing and letting everybody have information.
Mike Greenley: Say, a little bit ahead of demand to be ready to be able to scale up or be ready with the next generation of solution. So it's generally working well. Okay. That's right then maybe last one for Guion I. Appreciate your comment with respect to this free cash flow.
Mike Greenley: Could could you maybe talk a little bit about the assumption in terms of booking activity in order to what what we should what's your assuming for the remaining quarters in terms of free cash flow and also maybe the key milestones to watch that could influence.
Mike Greenley: Yeah. Thank you for your question Benoi. Good morning, well you know on the you know free cash flow planning, we're typically conservative in the sense that you know we really don't include you know.
Mike Greenley: Contracts that we haven't won just yet so that's one thing. So obviously if you know we have new awards that could have a potentially you know beneficial impact to our our plan.
Mike Greenley: Secondly in terms of the program execution, you know each of our programs as a lot of different milestones. You know you can you can think of a couple hundred milestones for example on a given contract and you know.
Mike Greenley: All of those milestones very closely we have you know reviews, you know on a monthly basis to to look at the progress of the work and how we're doing in terms of cash inflows and obviously cash outflows. So we have a good rasp on our forecast and I would say as Mike said really for.
Mike Greenley: We're tracking all the milestones and so far our guidance takes into account the execution and a wide range of potential outcomes, which again, we are comfortable with in saying that will be neutral to.
Mike Greenley: This year and again you know we had a good start to the year. So we're happy about that but we still have three quarters to go and we're focused on executing those milestones. So we can you know collect our cash.
Speaker Change: Thank you and the next question comes from the line of Jason Gerski from Cityroot. Your line's now open. Please go ahead.
Speaker Change: Yeah, Good morning, everybody Hey, Mike on.
Speaker Change: The Artemis program. Overall this is something that was started by the Trump administration Trump won so to speak.
Speaker Change: What do you think it's changed here kind of why the change is hard on gateway at this point, what's been the major driver for the decision to to make a move here.
Speaker Change: I think that my Sensibi.
Speaker Change: You know folks are looking like they are everywhere in government for any opportunities for efficiency. You know the two main items that have been discussed as ideas to talk about in this latest budget input has been the S. L. S rocket system and gateway as a space station.
Speaker Change: Bsl's rocket system is extremely expensive, it's a multibillion dollar per launch activity and arguments have been made that there could be more effective or efficient ways of of doing launch and then.
Speaker Change: People talk about space programs. They talk about the architecture of a space program. So the the in the architecture of the elements of the Artemis program. The Gateway was there as part of that architecture. So it's a space station that allowed people to launch from Earth travel to the space station spend some time there.
Speaker Change: Is it from the space station down to the lunar surface do their business, maybe come back up to the space station then continue back to Earth, they're gonna be people in the space station, providing supervisory roles over what's going on down in the lunar surface et cetera. So there's a role for that space station in the architecture of lunar missions.
Speaker Change: Fox I, I'm, assuming and suggesting that maybe gateway go away, our suggesting that maybe the architecture could change maybe we don't need a space station at the Moon and you could just launch from Earth and go directly to the Moon do your business and then launch back off the Moon and come back to Earth and don't worry about having a space station.
Speaker Change: Alright, Okay. That's helpful and then Hey, Locky Martin mentioned that Canadian service combatant. This quarter on there earnings call I hadn't heard them do that in quite some time well. Thanks. The question do you kind of what what's the update there for MD on.
Speaker Change: Canadian service combatant, Yeah, we're seeing a bit of better burst of activity. There right now I think that the designs and stuff are starting to get really finalized in terms of what's on the ship what's off the ship and that's all that going to work there'll be contract movement.
Speaker Change: Next couple of quarters as people get under contract for what's called the implementation phase, which is like you know really get on with it you know and get these first three ships built which is the first block of ships. So I think that I'm not I'm not aware what.
Speaker Change: Remarks were but certainly there's a leaning forward posture I think that we're feeling right now as people are leaning into you know getting going and getting things done and I know our people are busy responding to questions and answers and stuff within the within the project. So yeah.
Speaker Change: Shifted one way or another for you is you is moving now further into this project yeah. There's nothing official yet there's in the discussion points like you get asked to chip in on stuff and give your inputs on on this and that.
Speaker Change: And sometimes that is related to what things could be done and then sometimes that's related to you know what if we didn't do this thing what would be the implications of that and so you answer that back and forth questions, but we're waiting to see what all the the final strokes here is on these implementation contracts that are now people.
Speaker Change: Yeah understood, Okay, great things I'll pass all in.
Speaker Change: Okay. Thanks, Jason Thank you and we don't have any further questions that came through at this time I will now turn the call over back to Mike Greenley. Please go ahead Sir.
Mike Greenley: Okay. Thank you operator in February else. Thanks for your time. This morning, it's been a great first quarter, a great start to the year really impressed with the team and everything that they're doing people are working extremely hard this new large larger team that keeps getting harder here at MBA space, but really appreciate.
Mike Greenley: Alright, and doing a great job and we will continue to lead into it we look forward to updating you on our progress during our next earnings call, which will be in August have a great day. Thanks, everybody.
Mike Greenley: F.
Mike Greenley: You. This concludes our conference call for today. Thank you all for participating you may now disconnect.