Mr. Mike Greenley reports

MDA REPORTS SECOND QUARTER 2023 RESULTS

MDA Ltd. has released its financial results for the second quarter ended June 30, 2023.

"Q2 marked another strong quarter for MDA, with our team delivering double-digit revenue and adjusted EBITDA [earnings before interest, taxes, depreciation and amortization] growth, while maintaining solid profitability, strong operating cash flow generation and delivering on our customer commitments," said Mike Greenley, chief executive officer of MDA. "And this morning, we announced that MDA was awarded an approximately $2.1-billion contract from Telesat to act as the prime satellite contractor on the Telesat Lightspeed LEO [low Earth orbit] constellation. This award, MDA's second selection as prime satellite contractor in 18 months, reflects the ongoing growth in the LEO constellation market to meet increasing demand for space-based connectivity and communication services. Our selection is also a testament to MDA's innovative technology and manufacturing capabilities in this market. We look forward to working with the Telesat team on this strategic program, and to bringing enhanced digital connectivity in Canada and elsewhere.

"Given the strong execution in the first half of the year and forecasted contributions from the Telesat Lightspeed award, we are raising our 2023 financial guidance. With healthy demand trends across our end markets, we are seeing our opportunity funnel expand, boding well for MDA and our future growth."

Q2 2023 highlights:

• Q2 revenues of $196-million were up 26.7 per cent YoY (year-over-year), driven by higher revenues across the company's three business areas, with strong contributions from satellite systems, and robotics and space operations businesses.
• Adjusted EBITDA of $40.4-million in Q2 2023 was up 16.4 per cent YoY, driven by higher volumes of work across MDA's businesses.
• Adjusted EBITDA margin was 20.6 per cent in Q2 2023 compared with 22.4 per cent in Q2 2022. Adjusted EBITDA margin in the latest quarter was in line with the variance in gross margin year-over-year.
• Backlog of $1.1-billion at quarter-end was at a healthy level following a year of strong contract awards in 2022.
• Operating cash flow of $38.9-million in Q2 2023 compared with negative $5-million in Q2 2022. The YoY increase was driven by positive working capital contributions and higher adjusted EBITDA in Q2 2023 versus the same period last year.
• Healthy financial position, with net debt to adjusted EBITDA ratio of 1.2 times at quarter-end.
• Subsequent to quarter-end, the company announced an approximately $2.1-billion contract award from Telesat for the design, manufacture, assembly and test of 198 satellites, with options for Telesat to purchase up to 100 additional satellites. The Telesat award will leverage MDA's new digital satellite product line to deliver significant technology advancements, as well as cost and schedule improvements. The contract will be added to MDA's backlog in the third quarter of fiscal 2023.

Two thousand twenty-three financial outlook

As a leading global 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 the company's leading robotics technology platform to capitalize on emerging commercial opportunities and further strengthening MDA's 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. MDA's growth pipeline is significant, and underpinned by existing and new programs, and the company's book of business is healthy. MDA sees activities ramping up in line with its expectations, and are 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 the company's operations, to the extent possible.

For fiscal 2023, MDA is raising its financial outlook to reflect strong execution in the first half of the year and contributions from the recently announced Telesat Lightspeed program. MDA now expects full-year revenues to be $785-million to $810-million, representing robust year-over-year growth of approximately 25 per cent at the midpoint of guidance. For the full year, the company now expects adjusted EBITDA to be $155-million to $165-million, representing approximately 19-per-cent to 20-per-cent adjusted EBITDA margin. MDA now expects capital expenditures to be $200-million to $220-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 Q3 2023 revenues to grow by approximately 10 per cent to 15 per cent compared with Q3 2022 levels as it continues to execute on its backlog.

Financial overview

Revenues

Consolidated revenues for the second quarter of 2023 were $196-million, representing an increase of $41.3-million (or 26.7 per cent) from the second quarter of 2022. The year-over-year increase in revenues was primarily driven by strong contributions from the company's satellite systems, and robotics and space operations businesses.

By business area, revenues in geointelligence for the second quarter of 2023 were $47.9-million, which represents an increase of $900,000 (or 1.9 per cent) from the same period in 2022, due to slightly higher volume of work. Revenues in robotics and space operations for the second quarter of 2023 were $58.7-million, which represents an increase of $9.9-million (or 20.3 per cent) from the same period in 2022. This year-over-year increase is primarily driven by the higher volume of work performed on the Canadarm3 program. Revenues in satellite systems for the second quarter of 2023 were $89.4-million, which represents an increase of $30.5-million (or 51.8 per cent) from the same period in 2022, driven by higher volumes on new programs, including the Globalstar program which was awarded in Q1 2022.

Consolidated revenues for the six months ended June 30, 2023, were $397.9-million, which were $114.8-million (or 40.6 per cent) higher than the same period in 2022. The year-over-year increase in revenues was primarily driven by strong contributions from the company's satellite systems, and robotics and space operations businesses.

By business area, revenues in geointelligence for the first six months of 2023 were $99.2-million, which represents an increase of $3.3-million (or 3.4 per cent) from the same period in 2022, reflecting slightly higher volume of work. Revenues in robotics and space operations for the first six months of 2023 were $121.6-million, which represents an increase of $30.4-million (or 33.3 per cent) from the same period in 2022. The year-over-year revenue increase is primarily driven by the higher volume of work performed on the Canadarm3 program. Revenues in satellite systems for the first six months of 2023 were $177.1-million, which represents an increase of $81.1-million (or 84.5 per cent) from the same period in 2022, primarily driven by higher volumes on new 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. Q2 2023 gross profit of $61.3-million represents a $9.9-million (or 19.3-per-cent) increase over Q2 2022, driven by higher volume of work performed year-over-year. Gross margin in Q2 2023 was 31.3 per cent, which is in line with MDA's expectations as the company's program mix evolves. Comparatively, gross margin in Q2 2022 was 33.2 per cent.

For the six months ended June 30, 2023, gross profit of $128.5-million represents a $15.4-million (or 13.6-per-cent) increase over 2022, driven by higher volume of work performed year-over-year, partially offset by $16.8-million of higher ITCs (investment tax credits) recorded in Q1 2022 related to the resolution of historical claims. Gross margin for the six months ended June 30, 2023, was 32.3 per cent, which is in line with the company's expectations as its program mix evolves. Comparatively, gross margin in 2022 was 34 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 second quarter of 2023 was $40.4-million compared with $34.7-million in Q2 2022, representing an increase of $5.7-million (or 16.4 per cent) year-over-year, driven by higher gross profit as MDA continues to execute on its backlog. Adjusted EBITDA margin was 20.6 per cent in Q2 2023 compared with 22.4 per cent in Q2 2022, which is in line with the variance in gross margin year-over-year.

Adjusted EBITDA for the six months ended June 30, 2023, was $89.3-million compared with $79.2-million for the same period in 2022, representing an increase of $10.1-million (or 12.8 per cent) year-over-year. Adjusted EBITDA for the six months ended June 30, 2022, included $16.8-million of income from the aforementioned resolution of historical ITC claims. When excluding the impact of the $16.8-million related to historical ITC claims, adjusted EBITDA increased $26.9-million (or 43.1 per cent) year-over-year. The improvement was driven by higher volumes of work performed year-over-year. Adjusted EBITDA margin was 22.4 per cent for the six months ended June 30, 2023, compared with 22 per cent in 2022, excluding the previously noted historical ITC claims resolution.

Backlog

Backlog as at June 30, 2023, was $1,098.3-million, a decrease of $422.5-million compared with the backlog at June 30, 2022, driven by continued conversion of backlog into revenue, partially offset by new order bookings. The associated table shows the buildup of backlog for Q2 and the six months ended June 30, 2023, as compared with the same periods in 2022.

Conference call and webcast

MDA will host a conference call and webcast to discuss these financial results on Friday, Aug. 11, 2023, at 11 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: 29464883. A live webcast of the conference call and an accompanying slide presentation will be available at the company'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 Aug. 18, 2023, by dialling 1-888-390-0541 and entering the passcode: 464883 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 2,800 staff across Canada, the United States and the United Kingdom, MDA is leading the charge toward viable moon colonies, enhanced earth observation, communication in a hyperconnected world and more. With a record of making space ambitions come true, MDA 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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