WESTMINSTER, Colo. — (BUSINESS WIRE) — March 2, 2020 — Maxar Technologies (NYSE: MAXR) (TSX: MAXR) (“Maxar” or the “Company”), a trusted partner and innovator in Earth Intelligence and Space Infrastructure, today announced financial results for the quarter and year ended December 31, 2019. All dollar amounts in this press release are expressed in U.S. dollars, unless otherwise noted.
Key points from the year include:
- Entered into a definitive agreement to sell our MDA business for C$1.0 billion
- Issued $1.0 billion in 2023 Notes and completed the sale and subsequent leaseback of our owned properties in Palo Alto, California, the net proceeds of which were used to pay down debt
- Consolidated revenues from continuing operations of $1,666 million
- Net income of $109 million
- Diluted income per share from continuing operations of $1.38
- Adjusted EBITDA1 from continuing operations of $416 million and Adjusted EBITDA1 margin of 25.0 percent
- Re-segmented our historical Imagery, Services, and Space Systems segments into three reportable segments: Earth Intelligence, Space Infrastructure and MDA
1 This is a non-GAAP financial measure. Refer to section “Non-GAAP Financial Measures” in this earnings release.
“We made solid progress during the year in positioning Maxar for sustained top and bottom-line growth, including efforts to reduce debt and leverage levels, re-engineer the Space Infrastructure business, position our Earth Intelligence and MDA businesses for long-term growth, and create a leaner, more agile organization with a reduced cost structure,” stated Dan Jablonsky, President and Chief Executive Officer.
Jablonsky continued, “The year ended with a flurry of activity, including a sale leaseback of a facility in Palo Alto, California, the refinancing of our nearer-term debt maturities, and the announced divestiture of MDA, our Canadian subsidiary. We expect these transactions to better align our debt maturities with cash flow streams and to reduce both leverage and debt levels in the near-term. The year also included several strategic wins across the Company, including the Power Propulsion Element with NASA and two GEO Comsats with commercial customers in our Space Infrastructure segment, as well as a four-year contract for our Global-EGD offering with the US government and several direct and rapid access contracts with international allies in our Earth Intelligence segment. Combined, these actions and business development successes better position the Company for sustainable growth going forward.”
“Full year results were largely consistent with expectations,” stated Biggs Porter, Chief Financial Officer. “Adjusted EBITDA benefited from recent restructuring and reshaping efforts in Space Infrastructure, as well as growth in Earth Intelligence, while free cash flow benefited from the timing of cash inflows and capital expenditures. Our leverage and debt levels remain in line with expectations and are expected to further improve with the closure of the MDA divestiture later this year.”
In the fourth quarter of 2019, we entered into a definitive agreement to sell MDA to a consortium of private investors led by Northern Private Capital, for C$1 billion subject to customary adjustments and regulatory approvals (“MDA Transaction”). We expect to use the net proceeds to repay debt and improve our capital structure to prioritize investments for growth in our core areas of Earth Intelligence and Space Infrastructure. The MDA Transaction includes all of MDA’s Canadian business, encompassing ground stations, radar satellite products, robotics, defense and satellite components, representing approximately 1,900 employees. As a result of this announcement, this business, whose results were previously in the MDA segment (described below), was classified as discontinued operations. We expect the transaction to close in the spring or early summer of 2020.
In December 2019, we issued $1.0 billion in principal amount of 9.75% Senior Secured Notes due 2023 (“2023 Notes”) in a private placement to institutional buyers. The 2023 Notes were issued at a price of 98% and bear interest at the rate of 9.75% per year, payable semi-annually in cash in arrears. Interest payments will commence in June 2020. The 2023 Notes are guaranteed on a senior secured basis by each of our existing and future subsidiaries that guarantees the Syndicated Credit Facility.
The proceeds from the 2023 Notes and the sale of our owned properties in Palo Alto, California were used to repay the outstanding borrowings under our existing senior secured first lien Term A facility and the majority of the outstanding borrowings on the Revolving Credit Facility.
In connection with Mr. Jablonsky’s appointment in January 2019 as President and Chief Executive Officer of Maxar, our Chief Operating Decision Maker (“CODM”) also changed. During 2019, Mr. Jablonsky rolled out a transformative plan to integrate, stabilize, and position Maxar for future growth. As part of this plan, we streamlined our operating structure to reflect a more efficient model and integrated our existing business units so that they are more aligned and collaborative. This resulted in a change in the evaluation of our business by our CODM, which was completed in the fourth quarter of 2019. The changes to our segments align our business units to our future growth strategy. The CODM reviews revenue and Adjusted EBITDA based on three reportable segments: Earth Intelligence, Space Infrastructure and MDA. In connection with the MDA Transaction discussed above, the MDA segment was classified as discontinued operations as of the year ended December 31, 2019. The Earth Intelligence segment includes the financial results of the legacy Imagery and Services segments, excluding the legacy Canadian radar imagery business. The Space Infrastructure segment includes the financial results of our legacy Space Solutions business (previously referred to as Space Systems/Loral LLC or SSL), which was included within our legacy Space Systems segment. The MDA segment includes the financial results of the MDA and legacy Canadian radar imagery business.
Total revenues from continuing operations decreased to $410 million from $418 million, or by $8 million, for the three months ended December 31, 2019, compared to the same period of 2018. The decrease in revenues was primarily driven by a net decrease in revenues in the Space Infrastructure segment.
Total revenues from continuing operations decreased to $1,666 million from $1,804 million, or by $138 million, for the year ended December 31, 2019, compared to the same period of 2018. The decrease was primarily driven by a decrease in revenue in our Space Infrastructure segment partially offset by an increase in revenue in our Earth Intelligence segment.
For the year ended December 31, 2019, net income from continuing operations increased to $83 million from a net loss of $873 million, or by $956 million, compared to the same period of 2018. The increase is primarily driven by a decrease in impairment losses of $635 million, a decrease in selling, general and administrative expense of $121 million, a decrease in product and service costs of $113 million and a decrease in depreciation and amortization expense of $63 million. Additionally, we benefited from a satellite insurance recovery of $183 million and an increase in gain on sale of assets of $103 million.
For the fourth quarter of 2019, Adjusted EBITDA was $100 million and Adjusted EBITDA as a percentage of consolidated revenues (“Adjusted EBITDA margin percentage”) was 24.4%. This is compared to Adjusted EBITDA of $70 million and Adjusted EBITDA margin percentage of 16.7% for the fourth quarter of 2018. The increase was driven largely by higher Adjusted EBITDA from the Earth Intelligence and Space Infrastructure segments, partially offset by higher corporate and other expenses.
We had total order backlog of $1.6 billion as of December 31, 2019 compared to $2.1 billion as at December 31, 2018. Backlog decreased primarily due to declines in backlog in our Earth Intelligence segment partially offset by an increase in our Space Infrastructure segment backlog as a result of new awards during the year. Earth Intelligence backlog declined primarily due to the recognition of EnhancedView revenue during the year and the loss of our WorldView-4 satellite. As of December 31, 2019 and December 31, 2018, our unfunded contract options totaled $1.4 billion and $1.2 billion, respectively.
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.