Maxar Reports $7 Million Net First Quarter Loss

WESTMINSTER, Colo. (Maxar Technologies PR) — Maxar Technologies (NYSE:MAXR) (TSX:MAXR) (“Maxar” or the “Company”), a provider of comprehensive space solutions and secure, precise, geospatial intelligence, today announced financial results for the quarter ended March 31, 2022. All dollar amounts in this press release are expressed in U.S. dollars, unless otherwise noted.

Key points from the quarter include:

  • Consolidated revenues of $405 million
  • Net loss of $7 million
  • Diluted net loss per share of $0.10
  • Adjusted EBITDAof $84 million
  • Operating cash flows of $48 million
  1. This is a non-GAAP financial measure. Refer to section “Non-GAAP Financial Measures” in this earnings release.

“This was a historic quarter for Maxar and the geospatial industry as we helped to provide transparency on the conflict in Ukraine. We believe the world not only better understands what is going on in that region because of our efforts, but it also better appreciates the value of the geospatial data that we provide to our customers every day,” said Dan Jablonsky, President and Chief Executive Officer. “My thanks to our teams who have been working twenty-four seven. This not only puts us on the right side of history, but it also positions our industry, and Maxar specifically, for an increased role in better serving customer missions in the future.”

“We grew revenue, Adjusted EBITDA and trailing twelve-month free cash flow year-over-year in the first quarter despite a shift in the timing of expected revenue in the Earth Intelligence segment and higher than expected stock-based compensation driven by the performance of our shares since the onset of the Ukrainian conflict in February,” said Biggs Porter, Chief Financial Officer. “We expect to execute on the shifted revenue in the coming quarters and our pipeline of opportunities continues to grow. As such, our guidance ranges for 2022 remain materially unchanged.”

Total revenues increased to $405 million from $392 million, or by $13 million, for the three months ended March 31, 2022, compared to the same period of 2021. The increase in revenues was driven by an increase in product revenues within our Space Infrastructure segment.

For the three months ended March 31, 2022, our net loss was $7 million compared to a net loss of $84 million for the same period of 2021. The decrease was primarily driven by a decrease in interest expense of $55 million and a decrease of product costs within our Space Infrastructure segment of $21 million. The decrease in interest expense was primarily driven by a $41 million loss on debt extinguishment during the three months ended March 31, 2021 from the partial redemption of our 9.75% Senior Secured Notes due 2023 (“2023 Notes”) using proceeds from the March 2021 public offering of our common stock, compared to no loss on debt extinguishment for the same period of 2022. The decrease in interest expense was also driven by an $11 million decrease in interest expense on long-term debt primarily due to a lower principal balance on the 2023 Notes due to the partial redemption of the 2023 Notes in the first quarter of 2021. There was also a $13 million increase in revenues driven by an increase in product revenues within our Space Infrastructure segment. These decreases were partially offset by an increase in selling, general and administrative costs of $20 million.

The increase in selling, general and administrative costs of $20 million was primarily due to a $7 million increase in labor related expenses driven by annual merit increases, increases in fringe benefits and an increase in efforts related to internal business projects, including our enterprise resource planning (“ERP”) project for the three months ended March 31, 2022 compared to the same period of 2021. There was also an increase in stock-based compensation expense of $4 million for the three months ended March 31, 2022. The increase in stock-based compensation was primarily due to incremental expense related to liability classified awards driven by an increase in stock price. There was also an increase of $3 million in sales and marketing expenses primarily within our Space Infrastructure segment, a $3 million increase in professional service expenses primarily driven by our ERP project and a $2 million increase in research and development expenses within our Space Infrastructure segment for the three months ended March 31, 2022, compared to the same period of 2021.

For the three months ended March 31, 2022, Adjusted EBITDA was $84 million and Adjusted EBITDA margin was 20.7%. This is compared to Adjusted EBITDA of $67 million and Adjusted EBITDA margin of 17.1 % for the same period of 2021. The increase was primarily driven by higher Adjusted EBITDA from the Space Infrastructure segment, which was partially offset by lower Adjusted EBITDA from the Earth Intelligence segment.

We had total order backlog of $1,621 million as of March 31, 2022 compared to $1,893 million as of December 31, 2021. The decrease in backlog was driven by decreases in both the Earth Intelligence and Space Infrastructure segments. Our unfunded contract options totaled $763 million and $650 million as of March 31, 2022 and December 31, 2021, respectively. Unfunded contract options represent estimated amounts of revenue to be earned in the future from negotiated contracts with unexercised contract options and indefinite delivery/indefinite quantity contracts. Unfunded contract options as of March 31, 2022, were primarily comprised of the option year in the EnhancedView Contract (September 1, 2022 through July 12, 2023) and other U.S. government contracts. In November 2021, the National Reconnaissance Office (“NRO”) announced the release of the Electro-Optical Commercial Layer (“EOCL”) contract Request for Proposal (“RFP”) which is expected to replace the existing EnhancedView Contract. In December 2021, we submitted our response to the EOCL RFP and anticipate the NRO to award EOCL contracts prior to the expiration of the EnhancedView Contract, including remaining option years.

Financial Highlights

In addition to results reported in accordance with U.S. GAAP, we use certain non-GAAP financial measures as supplemental indicators of its financial and operating performance. These non-GAAP financial measures include EBITDA, Adjusted EBITDA and Adjusted EBITDA margin. We believe these supplementary financial measures reflect our ongoing business in a manner that allows for meaningful period-to-period comparisons and analysis of trends in its business.

($ millions) Three Months Ended
March 31, 2022
 Three Months Ended
March 31, 2021
Revenues$44177 $155
Adjusted EBITDA$19 $(12)
Adjusted EBITDA margin (as a % of total revenues) 10.7% (7.7)%

Revenues from the Space Infrastructure segment increased to $177 million from $155 million, or by $22 million, for the three months ended March 31, 2022, compared to the same period in 2021. Revenues increased primarily as a result of a $28 million aggregate impact due to the non-performance of the SXM-7 satellite during the three months ended March 31, 2021, which did not reoccur in the same period in 2022. This increase was partially offset by a $3 million decrease in revenues from U.S. government contracts and a $2 million decrease in revenues from recurring commercial programs during the three months ended March 31, 2022.

Adjusted EBITDA in the Space Infrastructure segment increased to $19 million from a loss of $12 million, or by $31 million, for the three months ended March 31, 2022, compared to the same period of 2021. The increase was primarily related to the above-mentioned SXM-7 satellite impacts which did not reoccur in the same period in 2022. The increase was also driven by an $11 million decrease in indirect costs primarily due to reduced overhead costs during the three months ended March 31, 2022. These increases were partially offset by a $9 million increase in selling, general and administrative costs primarily due to an increase in labor related expenses driven by employee compensation, fringe benefits and an increase in efforts related to internal business projects. There was also an increase in sales and marketing expenses and research and development expenses.

Corporate and other expenses

Corporate and other expenses include items such as corporate office costs, regulatory costs, executive and director compensation, foreign exchange gains and losses, retention costs and fees for legal and consulting services.

Corporate and other expenses increased to $25 million from $23 million, or by $2 million, for the three months ended March 31, 2022, compared to the same period in 2021. The increase was primarily driven by an increase in stock-based compensation expense of $3 million for the three months ended March 31, 2022, which was primarily due to incremental expense related to liability classified awards.

Intersegment eliminations

Intersegment eliminations are related to projects between our segments, including the construction of our WorldView Legion satellites. Intersegment eliminations increased to $9 million from $5 million, or by $4 million, for the three months ended March 31, 2022, compared to the same period in 2021, primarily related to an increase in intersegment satellite construction activity.

MAXAR TECHNOLOGIES INC.
Unaudited Condensed Consolidated Statements of Operations
(In millions, except per share amounts)

  Three Months Ended
March 31, 2022
Three Months Ended
March 31, 2021
  
Revenues:     
Product $154 $142
Service  251  250
Total revenues  405  392
Costs and expenses:      
Product costs, excluding depreciation and amortization  127  148
Service costs, excluding depreciation and amortization  93  93
Selling, general and administrative  104  84
Depreciation and amortization  68  74
Operating income (loss)  13  (7)
Interest expense, net  23  78
Other income, net  (3)  (1)
Loss before taxes  (7)  (84)
Income tax (benefit) expense    
Net loss $(7) $(84)
       
Net loss per common share:      
Basic $(0.10) $(1.30)
Diluted $(0.10) $(1.30)

MAXAR TECHNOLOGIES INC.
Unaudited Condensed Consolidated Balance Sheets
(In millions, except per share amounts)

   March 31, 2022 December 31, 2021
Assets      
Current assets:      
Cash and cash equivalents $22 $47
Trade and other receivables, net  333  355
Inventory, net  36  39
Advances to suppliers  25  31
Prepaid assets  31  35
Other current assets  22  22
Total current assets  469  529
Non-current assets:      
Orbital receivables, net  362  368
Property, plant and equipment, net  968  940
Intangible assets, net  761  787
Non-current operating lease assets  138  145
Goodwill  1,627  1,627
Other non-current assets  115  102
Total assets $4,440 $4,498
Liabilities and stockholders’ equity      
Current liabilities:      
Accounts payable $81 $75
Accrued liabilities  62  43
Accrued compensation and benefits  71  111
Contract liabilities  250  289
Current portion of long-term debt  29  24
Current operating lease liabilities  40  42
Other current liabilities  37  38
Total current liabilities  570  622
Non-current liabilities:      
Pension and other postretirement benefits  131  134
Operating lease liabilities  133  138
Long-term debt  2,060  2,062
Other non-current liabilities  71  79
Total liabilities  2,965  3,035
Commitments and contingencies      
Stockholders’ equity:      
Common stock ($0.0001 par value, 240 million common shares authorized; 73.4 million and 72.7 million issued and outstanding at March 31, 2022 and December 31, 2021, respectively)    
Additional paid-in capital  2,243  2,235
Accumulated deficit  (727)) (720)
Accumulated other comprehensive loss  (42)) (53)
Total Maxar stockholders’ equity  1,474  1,462
Noncontrolling interest  1  1
Total stockholders’ equity  1,475  1,463
Total liabilities and stockholders’ equity $4,440 $4,498

MAXAR TECHNOLOGIES INC.
Unaudited Condensed Consolidated Statements of Cash Flows
(In millions)

   Three Months Ended March 31, 2022  Three Months Ended March 31, 2021
Cash flows (used in) provided by:      
Operating activities:      
Net loss $(7) $(84)
Adjustments to reconcile net loss to net cash provided by (used in) operating activities:      
Depreciation and amortization  68  74
Stock-based compensation expense  15  11
Amortization of debt issuance costs and other non-cash interest expense  3  4
Loss from early extinguishment of debt    41
Cumulative adjustment to SXM-7 revenue    25
Other  5  4
Changes in operating assets and liabilities:      
Trade and other receivables, net  29  3
Accounts payable and liabilities  (25)  (49)
Contract liabilities  (39)  6
Other  (1)  (8)
Cash provided by operating activities  48  27
Investing activities:      
Purchase of property, plant and equipment and development or purchase of software  (64)  (50)
Acquisition of investment  (2)  
Cash used in investing activities  (66)  (50)
Financing activities:      
Net proceeds of revolving credit facility    25
Repurchase of 2023 Notes, including premium    (384)
Net proceeds from issuance of common stock    380
Settlement of securitization liability  (4)  (3)
Repayments of long-term debt  (1)  (2)
Other  (2)  1
Cash (used in) provided by financing activities  (7)  17
Decrease in cash, cash equivalents, and restricted cash  (25)  (6)
Effect of foreign exchange on cash, cash equivalents, and restricted cash    
Cash, cash equivalents, and restricted cash, beginning of year  48  32
Cash, cash equivalents, and restricted cash, end of period $23 $26
       
Reconciliation of cash flow information:      
Cash and cash equivalents $22 $22
Restricted cash included in prepaid and other current assets  1  4
Total cash, cash equivalents, and restricted cash $23 $26

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, Adjusted EBITDA as EBITDA adjusted for certain items affecting the comparability of our ongoing operating results as specified in the calculation and Adjusted EBITDA margin as Adjusted EBITDA divided by revenue. Certain items affecting the comparability of our ongoing operating results between periods include restructuring, impairments, insurance recoveries, gain (loss) on sale of assets, (gain) loss on orbital receivables allowance and transaction and integration related expense. Transaction and integration related expense includes costs associated with de-leveraging activities, acquisitions and dispositions and the integration of acquisitions. Management believes that exclusion of these items 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. Our senior secured syndicated credit facility (“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 that may result in a different calculation therein.

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, Adjusted EBITDA and Adjusted EBITDA margin 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 (loss) income as indications of financial performance or as alternate to cash flows from operations as measures of liquidity. EBITDA and Adjusted EBITDA have limitations as an analytical tool 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 income to EBITDA and Total Adjusted EBITDA and presents Total Adjusted EBITDA margin for the three months ended March 31, 2022 and 2021.

  Three Months Ended
March 31, 2022
  Three Months Ended
March 31, 2021
($ millions)      
Net loss $(7)$(84)
Income tax (benefit) expense    
Interest expense, net  23  78
Interest income  (1) (1)
Depreciation and amortization  68  74
EBITDA $83 $67
Restructuring  1  
Total Adjusted EBITDA $84 $67
       
Adjusted EBITDA:      
Earth Intelligence  99  107
Space Infrastructure  19  (12)
Intersegment eliminations  (9) (5)
Corporate and other expenses  (25) (23)
Total Adjusted EBITDA $84 $67
       
Net loss margin  (1.7)% (21.4)%
Total Adjusted EBITDA margin  20.7% 17.1%