Maxar Technologies reports third quarter 2018 results, declares quarterly dividend

Space Systems Results



Reported


Reported



Three months ended


Nine months ended



September 30, 


September 30, 



2018


2017


2018


2017

($ millions)









Revenue

$

262.5

$

297.8

$

885.8

$

977.5


Adjusted EBITDA1

$

19.0

$

61.2

$

115.8

$

184.8


Adjusted EBITDA Margin1


7.2

%

20.6

%

13.1

%

18.9

%

1

This is a non-IFRS financial measure. Refer to section "Non-IFRS Financial Measures" in this earnings release.

Total revenues from the Space Systems segment were $262.5 million in the third quarter of 2018 compared to $297.8 million in the same period of 2017. The decrease in revenue is primarily due to a significant increase in estimated costs to complete programs as a result of supplier performance issues and delays experienced during the third quarter of 2018, as well as unanticipated impacts of lower volume in our Palo Alto factory, which resulted in higher overhead burden on existing programs and reduced labor productivity. An increase in estimated costs to complete directly impacts revenue, as revenue is recognized over time under the cost-to-cost method. Revenue attributable to the Company's Legion satellite imaging constellation is eliminated in consolidation.

There has been a step down in total number and dollar value of geostationary communication satellite awards compared to historical averages prior to 2015. Revenues have decreased year-over-year as programs awarded prior to 2015 have been completed and have been replaced by a lower level of award value since 2015. Many satellite operators in the communications industry have continued to defer new satellite construction awards to evaluate geostationary and other competing satellite system architectures and other market factors. The Company continues to review strategic alternatives for its geostationary communications satellite business to improve its financial performance and is in active discussions with potential buyers of the business. No final decision has been made and there can be no guarantee that a transaction will result.

Adjusted EBITDA margin percentage from the Space Systems segment for the three months ended September 30, 2018 was 7.2% compared to 20.6% for the same period in the prior year. The decrease for the three months ended September 30, 2018 compared to the three months ended September 30, 2017 is primarily related to an increase in estimated costs to complete programs as a result of supplier performance issues experienced during the third quarter of 2018 as well as impacts of lower volume in our Palo Alto factory, which resulted in lower productivity and increased overhead burden. In addition, a recovery of liquidated damages which occurred during 2017 contributed to the decrease in EBITDA year-over-year. 

Recent Business Developments

On July 16, 2018, the Company acquired Neptec Design Group Ltd. ("Neptec"), a leading electro-optical and electro-mechanical systems and high-performance intelligent Light Detection and Ranging company for C$40.2 million, comprised of approximately C$7.8 million in cash and the balance in common shares of Maxar. With Neptec, the Company will deliver end-to-end robotic systems and an expanded set of solutions, positioning it to capture growth in U.S., Canadian and global space exploration markets and accelerate advancement into new and expanding space segments. 

The Company announced in Q1 2018 that Space Systems/Loral, LLC ("SSL"), a wholly owned subsidiary of Maxar, was selected by Spacecom to build its AMOS-8 advanced communications satellite. In September 2018, this contract became void when the customer did not make the initial payment and it became evident that the Spacecom would not achieve financing on the project. The voiding of this contract did not have an impact on the Company's backlog, as it was not a definitive award and was not included in backlog.

During the three months ended September 30, 2018 the Company recognized impairment losses of $345.9 million and inventory obsolescence of $37.7 million related to the GeoComm business. Refer to the section entitled "Significant Accounting Policies and the Use of Estimates" of the Company's "MD&A – English" filed with Sedar.

Notable bookings in the Space Systems segment in the third quarter of 2018 included:

  • A five-year agreement with an undisclosed customer, to provide broad area land and maritime surveillance imagery from MDA's RADARSAT-2 synthetic aperture radar satellite in support of a global defense and security mission. The agreement is for an initial period of two years and three additional option years.
  • Two contracts were signed with Airbus which are comprised of: Antennas and deployable reflectors to be integrated into Turksat 5A and 5B telecommunications satellites which will significantly expand the existing Internet and tele-communication services, and Antenna subsystems to be integrated into a second satellite of the Inmarsat-6 mobile communications program.
  • Two contracts were signed to build two antennas.


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