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MDA said slowdowns in two space programs will lead to fewer revenues in Q3, during financial results released Friday (Aug. 12). But the company emphasized that it is working on guidance for 2023 and that the overall space market is strong, along with MDA’s customer base.
MDA is one of Canada’s largest space contractors and its importance flows to the number of prime Canadian programs it supports, along with the number of subcontractors in its ecosystem. As such, officials said the company’s core business plan remains robust even though a few programs are suffering unexpected issues; other programs remain on schedule and MDA is working to position itself for other work, officials said while releasing the results.
Two major programs saw delays in Q2 for reasons that MDA said are largely outside its control. Security clearances associated with Canadarm3 subcontracts “resulted in slower than planned ramp up during the quarter; these logistical issues have now been largely addressed,” CEO Mike Greenley said during a phone call with analysts.
As for the other matter, ongoing delays with Telesat’s Lightspeed constellation induced by delays from prime builder Thales Alenia Space, MDA chose to remove the program’s contribution to the fiscal 2022 outlook in anticipation that revenues will not be available in this fiscal year. “We remain an active discussions with Telesat to support evolving program requirements and are confident MDA is positioned to support the program,” Greenley said.
The company revised its outlook to say that Q3 2022 revenues will grow by 40 percent to 50 percent compared by last year.
Capital expenditures will remain the same at $180 million to $220 million due to spending on CHORUS satellites, which is generating a lot of customer interest during early-stage development due to analytics and viewing capabilities, according to MDA. Another contract, the Canadian Surface Combatant program for the government, is proceeding well.
“We remain confident in MDA’s ability to support these programs by contributing our innovative and proven technology and expertise,” Greenley said.
The company pointed to the awards of two major contracts as signals of market interest in MDA technology among new customers that will diversify revenues: the U.S. Space Development Agency’s Tranche 1 Transport Layer LEO constellation for missile detection and warning, and a contract from Axiom Space (which is building modules for the International Space Station and an eventual commercial space station) related to Canadarm3 interfaces.
Larger market trends are also playing in MDA’s favour, according to Greenley. Space manufacturing, while still in an early stage, is being investigated seriously and creating awards for MDA to do proofs of concept. Satellite launches are accelerating across the industry, while Canada is seeing the NASA-backed Artemis Accords to govern space exploration internationally continuing to see partners added (there are more than 20 now.)
Satellite systems, Greenley said, are creating “good activity levels” in especially low Earth orbit constellations, which MDA is seeing through two recent contracts with defence primes – antennas and related electronics for Lockheed Martin (for the Tranche 1 contract) and another with York Space Systems for antennas, related to a space security program. MDA is also the prime contractor for Globalstar’s LEO constellation.
“Going forward, our priorities remain unchanged: strong focus on execution and varying opportunities in our pipeline, and expanding our leadership in core markets while maintaining strong profitability and a healthy balance sheet to help us fund our growth initiatives,” Greenley said.
Consolidated revenues for Q2 2022 were $154.7 million, an increase of $28 million (22%) over last year due to higher revenues in robotics and space operations, and MDA’s satellite systems businesses. Gross profit in Q2 was ($51.4 million), a $6.8 million (15.2%) boost over 2021, due to higher work volume.
