Mr. Mike Greenley reports

MDA REPORTS FIRST QUARTER 2023 RESULTS

MDA Ltd. has released its financial results for the first quarter ended March 31, 2023.

"We are off to a solid start in 2023. In Q1, the MDA team delivered another quarter of strong performance demonstrating impressive revenue and EBITDA [earnings before interest, taxes, depreciation and amortization] growth as we convert our backlog and meet customer commitments," said Mike Greenley, chief executive officer of MDA. "With our backlog at a healthy level following a strong year of contract awards in 2022, our team is laser-focused on execution. We continue to see healthy market demand and interest in space technology with both government and commercial customers increasingly recognizing and funding civil and defence programs. We were particularly pleased to see the government of Canada recently commit to $2.5-billion in new space spending and look forward to working with the Canadian Space Agency and other organizations to realize these new missions."

Q1 2023 highlights:

• Q1 revenues of $201.9-million were up 57 per cent year-over-year (YoY), driven by higher revenues across MDA's three business areas with strong contributions from satellite systems and robotics and space operations businesses.
• Adjusted EBITDA of $48.9-million in Q1 2023 was up 10 per cent YoY, driven by higher volumes of work across MDA's businesses:
  • Excluding the impact of historical investment tax credit (ITC) claims of $16.8-million recognized in Q1 2022, adjusted EBITDA was $48.9-million in the latest quarter compared with $27.7-million in Q1 2022, representing a 77-per-cent YoY increase driven by higher work volumes;
  • Adjusted EBITDA margin, excluding the previously mentioned ITC claims, was 24.2 per cent in Q1 2023 compared with 21.6 per cent in Q1 2022. The YoY margin improvement reflects disciplined selling, general and administrative cost control.
• Backlog of $1.2-billion at quarter-end was at a healthy level following a year of strong contract awards in 2022.
• Operating cash flow of $45.8-million in Q1 2023 compared with $14.7-million in Q1 2022; the 212-per-cent YoY increase was driven by higher net income and positive working capital contributions in Q1 2023 versus the same period last year.
• Healthy financial position with net debt to adjusted EBITDA ratio of 1.2 times at quarter-end.

2023 financial outlook

As a leading space technology provider, MDA is leveraging its capabilities and expertise to execute on targeted growth strategies across its end markets and business areas. The company's strategic initiatives, which span across its three businesses, include expanding its share of the growing constellation market, leveraging its leading robotics technology platform to capitalize on emerging commercial opportunities and further strengthening its positioning in geointelligence through the development of its Chorus Earth observation constellation. MDA continues to make good progress against its long-term strategic plan.

MDA is well positioned to capitalize on strong customer demand and robust market activity given its diverse and proven technology offerings. The company's growth pipeline is significant and underpinned by existing contract awards of key programs and its book of business is healthy. MDA sees activities ramping up in line with its expectations, and is encouraged by the team's solid execution. The company continues to closely monitor developments related to supply chain disruptions, and is taking pro-active measures across its three business areas to mitigate the impact on its operations to the extent possible.

For fiscal 2023, MDA reaffirms the previous outlook provided in its Q4 2022 earnings release and continues to expect full-year revenues to be $750-million to $800-million, representing robust year-over-year growth of approximately 20 per cent at the midpoint of guidance. MDA continues to expect full-year adjusted EBITDA to be $145-million to $155-million, representing approximately 19-per-cent to 20 per-cent adjusted EBITDA margin. The company reaffirms its expectations that capital expenditures will be $220-million to $240-million in 2023, primarily comprising growth investments to support Chorus and the previously outlined growth initiatives across the company's three business areas. MDA expects Q2 2023 revenues to grow by approximately 25 per cent compared with Q2 2022 levels as it continues to execute on its backlog.

Revenues

Consolidated revenues for the first quarter of 2023 were $201.9-million, representing an increase of $73.5-million (or 57.2 per cent) compared with the first quarter of 2022. The year-over-year increase in revenues was primarily driven by strong contributions from MDA's satellite systems and robotics and space operations businesses.

By business area, Q1 2023 revenues in geointelligence of $51.3-million represent an increase of $2.4-million (or 4.9 per cent) compared with Q1 2022, reflecting slightly higher volume of work related to the CSC program. Revenues in robotics and space operations of $62.9-million in Q1 2023 represent a $20.5-million (or 48.3-per-cent) increase year-over-year, primarily driven by the higher volume of work performed on the Canadarm3 program. Revenues in satellite systems of $87.7-million in the latest quarter were $50.6-million (or 136.4 per cent) higher compared with the same quarter in 2022. The revenue increase was driven by higher levels of activity on a number of programs, including the Globalstar program which was awarded in Q1 2022.

Gross profit and gross margin

Gross profit reflects MDA's revenues less cost of revenues. Q1 2023 gross profit of $67.2-million represents a $5.5-million (or 8.9-per-cent) increase over Q1 2022, primarily driven by higher volume of work performed year-over-year, largely offset by $16.8-million of higher ITCs recorded in Q1 2022 related to the resolution of historical claims. Excluding the impact of the historical ITC claims recognized in Q1 2022, gross profit increased by 49.7 per cent. Gross margin in Q1 2023 was 33.3 per cent, which is in line with MDA's expectations as the company's program mix evolves. Comparatively, gross margin in Q1 2022 was 48.1 per cent, or 35 per cent excluding the aforementioned impact of the historical ITC claims recognized in Q1 2022.

Adjusted EBITDA and adjusted EBITDA margin

Adjusted EBITDA for the first quarter of 2023 was $48.9-million compared with $44.5-million in Q1 2022, representing an increase of $4.4-million (or 9.9 per cent) year-over-year, primarily driven by higher gross profit as MDA continues to execute on its backlog. Q1 2022 adjusted EBITDA included $16.8-million of ITC income from the aforementioned resolution of historical ITC claims. When excluding the impact of the $16.8-million historical ITC claims, adjusted EBITDA in the latest quarter was $48.9-million compared with $27.7-million in Q1 2022, representing an increase of $21.2-million (or 76.5 per cent) year-over-year. The $21.2-million improvement is primarily driven by the net effect of an improvement in gross profit of $22.3-million (exclusive of the impact of the historical claims resolution in Q1 2022).

Adjusted EBITDA margin was 24.2 per cent in Q1 2023 compared with 34.7 per cent in Q1 2022. Adjusted EBITDA margin, excluding the previously noted historical ITC claims resolution, was 24.2 per cent in Q1 2023 compared with 21.6 per cent in the prior quarter, reflecting disciplined SG&A cost control.

Backlog

Backlog as at March 31, 2023, was $1,232.4-million, a decrease of $284.4-million compared with the backlog at March 31, 2022, driven by continued conversion of backlog into revenue and the booking of two sizable awards in Q1 2022 (Globalstar and Canadarm3). The attached table shows the buildup of backlog for Q1 2023 as compared with the same period in 2022.

Conference call and webcast

MDA will host a conference call and webcast to discuss these financial results on Friday, May 12, 2023, at 8:30 a.m. ET. Interested parties can join the call by dialling 416-764-8609 (Toronto area), 1-888-390-0605 (toll-free North America) or 080-0652-2435 (toll-free international) and entering the conference ID 97252249. A live webcast of the conference call and an accompanying slide presentation will be available on MDA's website.

A replay of the conference will be archived on the MDA website following the call. Parties may also access a recording of the call which will be available until May 19, 2023, by dialling 1-888-390-0541 and entering the passcode 252249 followed by the pound key.

About MDA Ltd.

Serving the world from its Canadian home and global offices, MDA is an international space mission partner and a robotics, satellite systems and geointelligence pioneer with a 50-year story of firsts on and above the Earth. With over 2,700 staff across Canada, the United States and the United Kingdom, MDA is a leading partner in the pursuit of viable moon colonies, enhanced Earth observation, communication in a hyperconnected world and more. MDA has a record of making space ambitions come true, and enables highly skilled people to continually push boundaries, tackle big challenges, and imagine solutions that inspire and endure to change the world for the better, on the ground and in the stars.

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