Maxar Technologies Inc. (“Maxar” or the “Company”) (NYSE:MAXR)
(TSX:MAXR), a global technology innovator powering the new space
economy, today reported financial results for the quarter ended March
31, 2019. All dollar amounts in this press release are expressed in U.S.
dollars.
Key points from the quarter include:
- Consolidated revenues of $504 million
- Net loss of $0.99 per share
-
Adjusted EBITDA1 of $117 million and Adjusted EBITDA1
margin of 23 percent - Quarterly dividend of $0.01
| 1 |
This is a non-GAAP financial measure. Refer to section “Non-GAAP |
|
“We remain focused on our near-term priorities to position Maxar for
sustained top and bottom-line growth. We are working on reducing debt
and leverage levels, re-engineering the satellite business based out of
Palo Alto, positioning our Imagery, Services, and MDA businesses for
long-term growth, and creating a leaner, more agile organization with a
reduced cost structure,” stated Dan Jablonsky, President and Chief
Executive Officer.
Jablonsky continued, “This quarter, our Palo Alto satellite business
experienced quarter-over-quarter profit improvement, Imagery signed on
several new subscription-based customers, Services captured a number of
new wins, and MDA garnered its first contract for work on the Canadian
Surface Combatant program. We continued to advance our organizational
restructuring to strengthen our financial position and drive long-term
value for our shareholders and customers.”
“First quarter results were consistent with expectations,” stated Biggs
Porter, Chief Financial Officer. “Cash flows and capital expenditures
reflect the timing of interest and milestone payments and the ramp of
the WorldView Legion program. After the quarter end, our insurance
carriers accepted the Company’s $183 million claim for loss arising from
the WorldView-4 satellite on-orbit failure and we have collected $154
million in proceeds. We expect a full recovery of the remaining balance
by the end of the second quarter.”
Consolidated revenues for the first quarter of 2019 were $504 million
compared to $557 million for the same period of last year. The decrease
in revenues was primarily driven by the Space Systems segment given
lower GEO Comsat revenues and the expected wind-down of work on the
multi-year RCM project, and a decrease in the Imagery Segment given the
loss of the Company’s WorldView-4 satellite.
For the quarter ended March 31, 2019, net loss of $59 million compared
to net income of $15 million in the comparative period of 2018. The
decrease is primarily driven by a lower tax benefit, higher
restructuring costs, and lower Adjusted EBITDA from the Imagery segment
given the loss of the Company’s WorldView-4 satellite.
For the first quarter of 2019, Adjusted EBITDA was $117 million and
Adjusted EBITDA as a percentage of consolidated revenues (“Adjusted
EBITDA margin percentage”) was 23.2%. This is compared to Adjusted
EBITDA of $151 million and Adjusted EBITDA margin percentage of 27.1%
for the first quarter of 2018. The decline was driven largely by lower
Adjusted EBITDA from the Imagery segment given the loss of the Company’s
WorldView-4 satellite and lower revenues and profits in the Space
Systems segment.
The Company had total order backlog of $1.9 billion as of March 31, 2019
compared to $2.4 billion as at December 31, 2018. Backlog decreased
primarily due to declines in backlog in our Space Systems and Imagery
segments. Space Systems backlog decreased primarily as a result of
revenue recognized on existing contracts and no new satellite awards
during the quarter. Imagery backlog declined primarily due to the
recognition of EnhancedView revenue during the quarter and the loss of
our WorldView-4 satellite. Unfunded contract options as of March 31,
2019 totaled $1.3 billion vs. $1.2 billion in 2018. The increase in
unfunded contract options was primarily driven by awards in our Services
segment.
Financial Highlights
In addition to results reported in accordance with U.S. GAAP, the
Company uses certain non-GAAP financial measures as supplemental
indicators of its financial and operating performance. These non-GAAP
financial measures include EBITDA and Adjusted EBITDA. The
Company believes these supplementary financial measures reflect the
Company’s ongoing business in a manner that allows for meaningful
period-to-period comparisons and analysis of trends in its business.
| Three months ended | |||||||||||
| March 31, | |||||||||||
| 2019 | 2018 | ||||||||||
| ($ millions, except per share amounts) | |||||||||||
| Revenue | $ | 504 | $ | 557 | |||||||
| Net (loss) earnings | (59 | ) | 15 | ||||||||
| Adjusted EBITDA1 | 117 | 151 | |||||||||
| Net (loss) earnings per share, diluted | $ | (0.99 | ) | $ | 0.26 | ||||||
| Weighted average number of common shares outstanding (millions): | |||||||||||
| Basic | 59.5 | 56.4 | |||||||||
| Diluted | 59.5 | 56.7 | |||||||||
|
1 |
This is a non-GAAP financial measure. Refer to section “Non-GAAP Financial Measures” in this earnings release. |
|
Revenue by segment is as follows:
| Reported | ||||||||||||
| Three months ended | ||||||||||||
| March 31, | ||||||||||||
| 2019 | 2018 | |||||||||||
| ($ millions) | ||||||||||||
| Revenue | ||||||||||||
| Space Systems | $ | 274 | $ | 293 | ||||||||
| Imagery | 200 | 211 | ||||||||||
| Services | 68 | 70 | ||||||||||
| Intersegment eliminations | (38 | ) | (17 | ) | ||||||||
| Total Revenue | $ | 504 | $ | 557 | ||||||||
The Company analyzes financial performance by segment, which combine
related activities within the Company.
| Three months ended | ||||||||||||
| March 31, | ||||||||||||
| 2019 | 2018 | |||||||||||
| Adjusted EBITDA: | ||||||||||||
| Space Systems | 10 | 28 | ||||||||||
| Imagery | 121 | 134 | ||||||||||
| Services | 7 | 4 | ||||||||||
| Intersegment eliminations | (3 | ) | (2 | ) | ||||||||
| Corporate and other unallocated expenses | (18 | ) | (13 | ) | ||||||||
| Adjusted EBITDA1 | $ | 117 | $ | 151 | ||||||||
|
1 |
This is a non-GAAP financial measure. Refer to section “Non-GAAP Financial Measures” in this earnings release. |
|
Space Systems Results
| Reported | ||||||||||||
| Three months ended | ||||||||||||
| March 31, | ||||||||||||
| 2019 | 2018 | |||||||||||
| ($ millions) | ||||||||||||
| Revenue | $ | 274 |
|
$ |
293 |
|||||||
| Adjusted EBITDA | $ | 10 |
|
$ |
28 |
|||||||
| Adjusted EBITDA margin percentage | 3.6 | % | 9.6 | % | ||||||||
Space Systems segment revenues decreased $19 million in the first
quarter of 2019 compared to the same period of 2018. Revenues decreased
primarily due to an increase in estimated costs to complete programs as
well as impacts of lower volume in our Palo Alto factory and lower
revenues on the RADARSAT Constellation Mission (“RCM”) program in
Canada. These decreases were partially offset by increased intercompany
revenue on the construction of the Company’s WorldView Legion
constellation.
Adjusted EBITDA decreased $18 million in the Space Systems segment in
the first quarter of 2019 compared to the same period of 2018. The
decrease from 2018 to 2019 is primarily related to an increase in
estimated costs to complete certain satellite build programs, as well as
impacts of lower volume in our Palo Alto factory. Adjusted EBITDA was
also lower due to a decrease in RCM revenue and the change in product
mix. These increases were partially offset by a decrease in selling,
general and administrative expense due to headcount reductions as a
result of prior year restructuring initiatives.
Imagery Segment Results
| Reported | ||||||||||||
| Three months ended | ||||||||||||
| March 31, | ||||||||||||
| 2019 | 2018 | |||||||||||
| ($ millions) | ||||||||||||
| Revenue | $ | 200 |
|
$ |
211 |
|||||||
| Adjusted EBITDA | $ | 121 |
|
$ |
134 |
|||||||
| Adjusted EBITDA Margin | 60.5 | % | 63.5 | % | ||||||||
Revenues from the Imagery segment decreased $11 million in the first
quarter of 2019 compared to the same period of 2018. The decrease was
primarily driven by the loss of WorldView-4 revenue and higher than
normal seasonal revenue from international defense and intelligence
customers in first quarter of 2018, in part offset by growth from our
commercial customers and the U.S. government.
Adjusted EBITDA decreased $13 million in the first quarter of 2019
compared to the same period of 2018. The decrease was primarily driven
by the loss of WorldView-4 which had higher margins.
Services Results
| Reported | ||||||||||||
| Three months ended | ||||||||||||
| March 31, | ||||||||||||
| 2019 | 2018 | |||||||||||
| ($ millions) | ||||||||||||
| Revenue | $ | 68 |
|
$ |
70 |
|||||||
| Adjusted EBITDA | $ | 7 |
|
$ |
4 |
|||||||
| Adjusted EBITDA Margin | 10.3 | % | 5.7 | % | ||||||||
Services segment revenues remained relatively unchanged in the first
quarter of 2019 compared to the same period in 2018. Adjusted EBITDA
increased for the first quarter of 2019 compared to the same period of
2018 primarily as a result of the loss on the sale of a subsidiary
recognized in the first quarter of 2018 and did not recur in 2019.
| MAXAR TECHNOLOGIES INC. | ||||||||||||
|
Unaudited Condensed Consolidated Statements of Operations |
||||||||||||
|
(In millions of United States dollars, except per share amounts) |
||||||||||||
| Three Months Ended | ||||||||||||
| March 31, | ||||||||||||
| 2019 | 2018 | |||||||||||
| Revenues: | ||||||||||||
| Product | $ | 194 | $ | 228 | ||||||||
| Service | 310 | 329 | ||||||||||
| Total revenues | 504 | 557 | ||||||||||
| Costs and expenses: | ||||||||||||
| Product costs, excluding depreciation and amortization | 197 | 187 | ||||||||||
| Service costs, excluding depreciation and amortization | 110 | 119 | ||||||||||
| Selling, general and administrative | 103 | 103 | ||||||||||
| Depreciation and amortization | 98 | 111 | ||||||||||
| Operating (loss) income | (4 | ) | 37 | |||||||||
| Interest expense, net | 49 | 53 | ||||||||||
| Other expense, net | 6 | 1 | ||||||||||
| (Loss) before taxes | (59 | ) | (17 | ) | ||||||||
| Income tax benefit | (1 | ) | (32 | ) | ||||||||
| Equity in loss from joint ventures, net of tax | 1 | — | ||||||||||
| Net (loss) income | $ | (59 | ) | $ | 15 | |||||||
| (Loss) earnings per common share: | ||||||||||||
| Basic | $ | (0.99 | ) | $ | 0.27 | |||||||
| Diluted | $ | (0.99 | ) | $ | 0.26 | |||||||
| MAXAR TECHNOLOGIES INC. | ||||||||||||
|
Unaudited Condensed Consolidated Balance Sheets |
||||||||||||
|
(In millions of United States dollars, except per share amounts) |
||||||||||||
|
March 31, |
December 31, | |||||||||||
| 2019 | 2018 | |||||||||||
| Assets | ||||||||||||
| Current assets: | ||||||||||||
| Cash and cash equivalents | $ | 45 | $ | 35 | ||||||||
| Trade and other receivables, net | 467 | 464 | ||||||||||
| Inventory | 26 | 31 | ||||||||||
| Advances to suppliers | 17 | 42 | ||||||||||
| Income taxes receivable | 16 | 14 | ||||||||||
| Prepaid and other current assets | 61 | 51 | ||||||||||
| Total current assets | 632 | 637 | ||||||||||
| Non-current assets: | ||||||||||||
| Orbital receivables | 400 | 407 | ||||||||||
| Deferred tax assets | 108 | 103 | ||||||||||
| Property, plant and equipment, net | 768 | 747 | ||||||||||
| Intangible assets, net | 1,175 | 1,232 | ||||||||||
| Non-current operating lease assets | 129 | — | ||||||||||
| Goodwill | 1,751 | 1,751 | ||||||||||
| Other assets | 115 | 124 | ||||||||||
| Total assets | $ | 5,078 | $ | 5,001 | ||||||||
| Liabilities and stockholders’ equity | ||||||||||||
| Current liabilities: | ||||||||||||
| Accounts payable | $ | 190 | $ | 209 | ||||||||
| Accrued liabilities | 62 | 116 | ||||||||||
| Accrued compensation and benefits | 101 | 100 | ||||||||||
| Contract liabilities | 309 | 361 | ||||||||||
| Current portion of long-term debt | 19 | 17 | ||||||||||
| Current operating lease liabilities | 33 | — | ||||||||||
| Other current liabilities | 52 | 46 | ||||||||||
| Total current liabilities | 766 | 849 | ||||||||||
| Non-current liabilities: | ||||||||||||
| Pension and other postretirement benefits | 194 | 196 | ||||||||||
| Contract liabilities | 43 | 60 | ||||||||||
| Operating lease liabilities | 137 | — | ||||||||||
| Long-term debt | 3,174 | 3,030 | ||||||||||
| Other non-current liabilities | 184 | 222 | ||||||||||
| Total liabilities | 4,498 | 4,357 | ||||||||||
| Stockholders’ equity: | ||||||||||||
|
Common stock ($0.0001 par value, 240 million common shares authorized and 59.6 million outstanding at March 31, 2019; nil par value, unlimited authorized common shares and 59.4 million outstanding at December 31, 2018) |
— | 1,713 | ||||||||||
| Additional paid-in capital | 1,774 | 59 | ||||||||||
| Accumulated deficit | (1,271 | ) | (1,211 | ) | ||||||||
| Accumulated other comprehensive income | 76 | 82 | ||||||||||
| Total Maxar stockholders’ equity | 579 | 643 | ||||||||||
| Noncontrolling interest | 1 | 1 | ||||||||||
| Total stockholders’ equity | 580 | 644 | ||||||||||
| Total liabilities and stockholders’ equity | $ | 5,078 | $ | 5,001 | ||||||||
| MAXAR TECHNOLOGIES INC. | ||||||||||||
|
Unaudited Condensed Consolidated Statements of Cash Flows |
||||||||||||
|
(In millions of United States dollars) |
||||||||||||
| Three Months Ended | ||||||||||||
| March 31, | ||||||||||||
| 2019 | 2018 | |||||||||||
| Cash flows provided by (used in): | ||||||||||||
| Operating activities: | ||||||||||||
| Net (loss) income | $ | (59 | ) | $ | 15 | |||||||
|
Adjustments to reconcile net (loss) income to net cash used in operating activities: |
||||||||||||
| Depreciation of property, plant and equipment | 30 | 37 | ||||||||||
| Amortization of intangible assets | 68 | 74 | ||||||||||
| Stock-based compensation expense (recovery) | 1 | (1 | ) | |||||||||
|
Amortization of debt issuance costs and other noncash interest expense |
2 | 2 | ||||||||||
| Inventory impairment | 3 | — | ||||||||||
| Foreign exchange losses | 6 | 1 | ||||||||||
| Deferred income tax (benefit) | — | (24 | ) | |||||||||
| Other | 4 | 2 | ||||||||||
| Changes in operating assets and liabilities: | ||||||||||||
| Trade and other receivables | 6 | (35 | ) | |||||||||
| Accrued compensation and benefits | 1 | (26 | ) | |||||||||
| Trade and other payables | (11 | ) | (47 | ) | ||||||||
| Accrued liabilities | (56 | ) | 22 | |||||||||
| Contract liabilities | (71 | ) | (26 | ) | ||||||||
| Advances to suppliers | 25 | 15 | ||||||||||
| Deferred tax assets | (5 | ) | (18 | ) | ||||||||
| Deferred tax liabilities | 2 | 31 | ||||||||||
| Other liabilities | 4 | (28 | ) | |||||||||
| Other | (8 | ) | (7 | ) | ||||||||
| Cash used in operating activities | (58 | ) | (13 | ) | ||||||||
| Investing activities: | ||||||||||||
| Purchase of property, plant and equipment | (59 | ) | (43 | ) | ||||||||
| Purchase or development of intangible assets | (14 | ) | (17 | ) | ||||||||
| Disposal of subsidiary and short-term investments | — | 5 | ||||||||||
| Cash used in investing activities | (73 | ) | (55 | ) | ||||||||
| Financing activities: | ||||||||||||
| Net proceeds from revolving credit facility | 150 | 90 | ||||||||||
| Repayments of long-term debt | (6 | ) | (5 | ) | ||||||||
| Settlement of securitization liability | (4 | ) | (4 | ) | ||||||||
| Payment of dividends | (1 | ) | (16 | ) | ||||||||
| Change in overdraft balance | — | 2 | ||||||||||
| Cash provided by financing activities | 139 | 67 | ||||||||||
| Increase (decrease) in cash, cash equivalents, and restricted cash | 8 | (1 | ) | |||||||||
|
Effect of foreign exchange on cash, cash equivalents, and restricted cash |
1 | — | ||||||||||
| Cash, cash equivalents, and restricted cash, beginning of year | 43 | 42 | ||||||||||
| Cash, cash equivalents, and restricted cash, end of period | $ | 52 | $ | 41 | ||||||||
| Reconciliation of cash flow information: | ||||||||||||
| Cash and cash equivalents | 45 | 25 | ||||||||||
| Restricted cash included in prepaid and other current assets | 6 | 7 | ||||||||||
| Restricted cash included in other assets | 1 | 9 | ||||||||||
| Total cash, cash equivalents, and restricted cash | $ | 52 | $ | 41 | ||||||||
NON-GAAP FINANCIAL MEASURES
In addition to results reported in accordance with U.S. GAAP, we use
certain non-GAAP financial measures as supplemental indicators of our
financial and operating performance. These non-GAAP financial measures
include EBITDA, Adjusted EBITDA and Adjusted EBITDA margin.
We define EBITDA as earnings before interest, taxes, depreciation
and amortization, and Adjusted EBITDA as EBITDA adjusted for
certain items affecting comparability as specified in the calculation. Adjusted
EBITDA margin is defined as Adjusted EBITDA as a percentage of
revenues. Management believes that exclusion of items in Adjusted EBITDA
assists in providing a more complete understanding of our underlying
results and trends, and management uses these measures along with the
corresponding U.S. GAAP financial measures to manage our business,
evaluate our performance compared to prior periods and the marketplace,
and to establish operational goals. Adjusted EBITDA is a measure being
used as a key element of our incentive compensation plan. The Syndicated
Credit Facility also uses Adjusted EBITDA in the determination of our
debt leverage covenant ratio. The definition of Adjusted EBITDA in the
Syndicated Credit Facility includes a more comprehensive set of
adjustments.
We believe that these non-GAAP measures, when read in conjunction with
our U.S. GAAP results, provide useful information to investors by
facilitating the comparability of our ongoing operating results over the
periods presented, the ability to identify trends in our underlying
business, and the comparison of our operating results against analyst
financial models and operating results of other public companies.
EBITDA and Adjusted EBITDA are not recognized terms under U.S. GAAP and
may not be defined similarly by other companies. EBITDA and Adjusted
EBITDA should not be considered alternatives to net income (loss) as
indications of financial performance or as alternate to cash flows from
operations as measures of liquidity. EBITDA, Adjusted EBITDA and
Adjusted EBITDA margin have limitations as analytical tools and should
not be considered in isolation or as a substitute for our results
reported under U.S. GAAP. The table below reconciles our net (loss)
income before taxes to Adjusted EBITDA for the three months ended March
31, 2019 and 2018.
| Three months ended March 31, | ||||||||||||
| 2019 | 2018 | |||||||||||
| ($ millions) | ||||||||||||
| Net (loss) income | $ | (59 | ) | $ | 15 | |||||||
| Income tax benefit | (1 | ) | (32 | ) | ||||||||
| Interest expense, net | 49 | 53 | ||||||||||
| Depreciation and amortization | 98 | 111 | ||||||||||
| EBITDA | $ | 87 | $ | 147 | ||||||||
| Acquisition and integration related expense | 4 | 4 | ||||||||||
| Restructuring | 20 | — | ||||||||||
| Inventory impairment | 3 | — | ||||||||||
| CEO severance | 3 | — | ||||||||||
| Adjusted EBITDA | $ | 117 | $ | 151 | ||||||||
| Adjusted EBITDA: | ||||||||||||
| Space Systems | 10 | 28 | ||||||||||
| Imagery | 121 | 134 | ||||||||||
| Services | 7 | 4 | ||||||||||
| Intersegment eliminations | (3 | ) | (2 | ) | ||||||||
| Corporate and other unallocated expenses | (18 | ) | (13 | ) | ||||||||
| Adjusted EBITDA | $ | 117 | $ | 151 | ||||||||
Cautionary Note Regarding Forward-Looking Statements
Certain statements and other information included in this release
constitute “forward-looking information” or “forward-looking statements”
(collectively, “forward-looking statements”) under applicable securities
laws. Statements including words such as “may”, “will”, “could”,
“should”, “would”, “plan”, “potential”, “intend”, “anticipate”,
“believe”, “estimate” or “expect” and other words, terms and phrases of
similar meaning are often intended to identify forward-looking
statements, although not all forward-looking statements contain these
identifying words. Forward-looking statements involve estimates,
expectations, projections, goals, forecasts, assumptions, risks and
uncertainties, as well as other statements referring to or including
forward-looking information included in this presentation.
Forward-looking statements are subject to various risks and
uncertainties which could cause actual results to differ materially from
the anticipated results or expectations expressed in this presentation.
As a result, although management of the Company believes that the
expectations and assumptions on which such forward-looking statements
are based are reasonable, undue reliance should not be placed on the
forward-looking statements because the Company can give no assurance
that they will prove to be correct. The risks that could cause actual
results to differ materially from current expectations include, but are
not limited to, the risk factors and other disclosures about the Company
and its business included in the Company’s continuous
disclosure materials filed from time to time with U.S. securities and
Canadian regulatory authorities, which are available online under the
Company’s EDGAR profile at www.sec.gov,
under the Company’s SEDAR profile at www.sedar.com or
on the Company’s website at www.maxar.com.
The forward-looking statements contained in this release are expressly
qualified in their entirety by the foregoing cautionary statements. All
such forward-looking statements are based upon data available as of the
date of this presentation or other specified date and speak only as of
such date. The Company disclaims any intention or obligation to update
or revise any forward-looking statements in this presentation as a
result of new information or future events, except as may be required
under applicable securities legislation.
*****
Unless stated otherwise or the context otherwise requires, references to
the terms “Company,” “Maxar,” “we,” “us,” and “our” to refer
collectively to Maxar Technologies Inc. and its consolidated
subsidiaries. Financial information and results of operations presented
in this Annual Report on Form 10-K for the periods prior to January 1,
2019 relate to Maxar Technologies Inc., our predecessor issuer, and
relate to Maxar Technologies Inc. after January 1, 2019.
Investor/Analyst Conference Call
Maxar President and Chief Executive Officer, Daniel Jablonsky, and
Executive Vice President and Chief Financial Officer, Biggs Porter, will
host an earnings conference call on May 9, 2019, reviewing the first
quarter results, followed by a question and answer session. The call is
scheduled to begin promptly at 3:30 p.m. MT (5:30 p.m. ET). To
participate, dial:
Toll free North America: 1-866-211-3067
Toronto: 1-647-689-6610
The Conference Call will also be Webcast live and then archived at:
https://event.on24.com/wcc/r/1983809/3460E7909E09A4D6F6D105596068098E
Telephone replay will be available from Thursday May 9, 2019 at 6:30
p.m. MT (8:30 p.m. ET) to Thursday May 23, 2019 at 9:59 p.m. MT (11:59
p.m. ET) at the following numbers:
Toll free North America:
1-800-585-8367
Toronto: 1-416-621-4642
Passcode: 4188454#
About Maxar
As a global leader of advanced space technology solutions, Maxar is at
the nexus of the new space economy, developing and sustaining the
infrastructure and delivering the information, services and systems that
unlock the promise of space for commercial and government markets. The
operations of DigitalGlobe, SSL and Radiant Solutions were unified under
the Maxar brand in February; MDA continues to operate as an independent
business unit within the Maxar organization. As a trusted partner with
5,900 employees in over 30 global locations, Maxar provides vertically
integrated capabilities and expertise including satellites, Earth
imagery, robotics, geospatial data and analytics to help customers
anticipate and address their most complex mission-critical challenges
with confidence. Every day, billions of people rely on Maxar to
communicate, share information and data, and deliver insights that Build
a Better World. Maxar trades on the New York Stock Exchange and Toronto
Stock Exchange as MAXR. For more information, visit www.maxar.com.
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