Mr. Mike Greenley reports

MDA REPORTS FOURTH QUARTER AND FISCAL 2023 RESULTS

MDA Ltd. has released financial results for the fourth quarter and year ended Dec. 31, 2023.

"In 2023, the MDA team delivered another year of strong growth and execution with revenues up 26 per cent and adjusted EBITDA [earnings before interest, taxes, depreciation and amortization] up 24 per cent on a year-over-year basis, further solidifying our position as a trusted mission partner and leader in the expanding space industry," said Mike Greenley, chief executive officer of MDA. "We secured a number of strategic contracts, including the Telesat Lightspeed LEO constellation award, valued at $2.1-billion and a $180-million authorization to proceed contract to initiate work on a new non-geostationary orbit satellite constellation, with the full contract expected to be awarded this year. With these awards MDA has now secured three constellation contracts in the past two years, highlighting the strong momentum we are seeing in our satellite systems business driven by customer demand for communication satellite constellations.

"Our teams also continued to advance work on the Canadarm3 program with the first elements of the external robotic interfaces going into production in 2023, a major milestone for the program. On Chorus, our next-generation Earth observation constellation, the team made significant development progress and has started subsystem building and assembly as we prepare for the mission launch in late 2025. These accomplishments reflect tangible progress against our strategic growth plan and position us well for the coming years.

"I am also pleased with our fourth quarter performance which demonstrated solid revenue growth and profitability as our teams remain focused on execution and delivering on our customer commitments. With a strong book of business and robust opportunity funnel, MDA is well positioned to meet growing customer demand across our end markets."

Full-year 2023 highlights:

• Order bookings for the full year totalled $2.5-billion, largely driven by awards in the satellite systems business. Backlog of $3.1-billion as of Dec. 31, 2023, was at a record level for the company and represents a 125-per-cent increase compared with Dec. 31, 2022.
• Full-year revenues of $807.6-million were up 26 per cent year-over-year, driven by execution on MDA's backlog, with strong contributions from its satellite systems and robotics and space operations businesses.
• Full-year adjusted EBITDA of $174.2-million was up 10.3 per cent year-over-year, driven by higher volumes across MDA's businesses. Adjusted EBITDA margin was 21.6 per cent for the full year.
  • Excluding the impact of the historical investment tax credits (ITC) settlement income recognized in 2022, adjusted EBITDA was $141.1-million in 2022, compared with $174.2-million in 2023, representing an increase of 23.5 per cent year-over-year. Adjusted EBITDA margin excluding the aforementioned item was 21.6 per cent in 2023, in line with the 22-per-cent margin level reported in 2022.
• Full-year adjusted net income of $97.9-million was up 24.1 per cent year-over-year, driven by higher operating income and lower finance costs. Adjusted diluted earnings per share of 81 cents in 2023 were up 26.6 per cent year-over-year. Operating cash flow of $13.5-million in 2023 compared with $57-million in the prior year.
• Operating cash flow in 2023 included a total of $59.4-million in working capital outlays related to prepayments made in 2023 for future inventory, and vendor deposits for the Chorus constellation launch.
• The company continued to invest in a number of strategic initiatives that align with its long-term plan and are instrumental in driving future growth, including developing Chorus, investing in new satellite manufacturing capabilities and facilities, and developing commercial products of Canadarm3 technology. In 2023, MDA's capital expenditures totalled $193.2-million compared with $180.1-million in the prior year.
• MDA acquired SatixFy Space Systems U.K. Ltd., the digital payload division of SatixFy Communications Ltd. The transaction, valued at $40-million (U.S.), will help further strengthen the company's global leadership position in the growing market for digital satellite communications solutions.
• Net debt to adjusted EBITDA ratio stood at 2.4 times as of Dec. 31, 2023. The increase in leverage reflects the aforementioned company investments in strategic growth initiatives.
• MDA announced plans to more than double its U.K. work force and operational footprint in 2024 in an effort to expand its talent base and operational capacity across the United Kingdom as the global space economy continues to grow.
• The company added 890 new staff in 2023 as part of its focus on talent and recruitment to support current and future growth.

Fourth quarter 2023 highlights:

• Revenues of $205-million in Q4 2023 were up 10.2 per cent year-over-year, driven by strong contributions from robotics and space operations and satellite systems businesses. Adjusted EBITDA of $42.1-million in Q4 2023 was up 5.5 per cent year-over-year, driven by higher volumes of work as MDA executes on its backlog.
• Adjusted EBITDA margin of 20.5 per cent in Q4 2023 was in line with the 21.4-per-cent margin level achieved in Q4 2022.
• Adjusted net income of $27.8-million in Q4 2023 was up 24.7 per cent year-over-year, driven by lower income tax expense and finance costs. Adjusted diluted earnings per share were 23 cents in the latest quarter compared with 18 cents in Q4 2022.
• Operating cash flow was a use of $41.2-million in Q4 2023 compared with an inflow of $40.3-million in Q4 2022. Operating cash flow in the latest quarter was impacted by higher working capital requirements, including $28.9-million related to the aforementioned vendor deposits for the Chorus constellation launch.

2024 financial outlook

As a trusted mission partner and 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. MDA's strategic initiatives, which span across its three businesses, include investing in next-generation space technology and services, expanding its presence in high-growth markets and geographies, and scaling and expanding skills, talent and operations to meet current and future market demand. The company 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 and new 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.

For fiscal 2024, MDA expects full-year revenues to be $950-million to $1,050-million, representing robust growth of approximately 25 per cent at the midpoint of guidance compared with 2023 levels. It expects revenue growth to accelerate in the second half of 2024 as it ramps up work volume on a number of programs. MDA expects full-year adjusted EBITDA to be $190-million to $210-million, representing approximately 19-per-cent to 20-per-cent adjusted EBITDA margin. It expects capital expenditures to be $210-million to $230-million in 2024, primarily comprising growth investments to support Chorus and the previously outlined growth initiatives across its business areas.

For Q1 2024, MDA expects revenues to be $205-million to $215-million as it continues to execute on its backlog.

Revenues

Consolidated revenues for the fourth quarter of 2023 were $205-million, representing an increase of $18.9-million (or 10.2 per cent) from the fourth quarter of 2022. The year-over-year increase in revenues was primarily driven by strong contributions from the robotics and space operations and satellite systems businesses.

By business area, revenues in geointelligence for the fourth quarter of 2023 were $49.9-million, which represents a decrease of $4-million (or 7.4 per cent) from the same period in 2022 due to timing of programs. Revenues in robotics and space operations for the fourth quarter of 2023 were $64.9-million, which represents an increase of $17-million (or 35.5 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 fourth quarter of 2023 were $90.2-million, which represents an increase of $5.9-million (or 7 per cent) from the same period in 2022, driven by slightly higher work volume on the Globalstar program and the initial ramp-up of the Lightspeed program which was awarded in Q3 2023.

Consolidated revenues for the year ended Dec. 31, 2023, were $807.6-million, which were $166.4-million (or 26 per cent) higher than the same period in 2022. The year-over-year increase in revenues was primarily driven by strong contributions from the satellite systems and robotics and space operations businesses.

By business area, revenues in geointelligence for the year ended Dec. 31, 2023, were $197.5-million, which represents an increase of $2.2-million (or 1.1 per cent) from the same period in 2022, reflecting relatively steady volume of work. Revenues in robotics and space operations for the year ended Dec. 31, 2023, were $248.4-million, which represents an increase of $54.7-million (or 28.2 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 year ended Dec. 31, 2023, were $361.7-million, which represents an increase of $109.5-million (or 43.4 per cent) from the same period in 2022 driven by higher volumes related to satellite constellation work, including the Globalstar program which commenced in Q1 2022 and additional awards to support U.S. Department of Defense constellations.

Gross profit and gross margin

Gross profit reflects MDA's revenues less cost of revenues. Q4 2023 gross profit of $57.8-million represents a $1.1-million (or 1.9-per-cent) decrease over Q4 2022 driven by program mix and higher depreciation expense as new assets come into service, offset by higher work volumes. Gross margin in Q4 2023 was 28.2 per cent, which is in line with the company's expectations and compares with a gross margin of 31.6 per cent in Q4 2022.

For the year ended Dec. 31, 2023, gross profit of $244-million represents a $15.6-million (or 6.8-per-cent) increase over 2022 driven by higher volume of work performed year-over-year, partially offset by $16.8-million of higher ITCs recorded in Q1 2022 related to the resolution of historical claims. Gross margin for the year ended Dec. 31, 2023, was 30.2 per cent, which is in line with MDA's expectations, driven by an evolving program mix and higher depreciation expense. Comparatively, gross margin in 2022 was 33 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 fourth quarter of 2023 was $42.1-million compared with $39.9-million for the fourth quarter of 2022, representing an increase of $2.2-million (or 5.5 per cent) year-over-year driven by higher work volume as MDA continues to execute on its backlog. Adjusted EBITDA margin was 20.5 per cent for the fourth quarter of 2023, in line with the 21.4-per-cent adjusted EBITDA margin reported for the fourth quarter of 2022.

Adjusted EBITDA for the year ended Dec. 31, 2023, was $174.2-million compared with $157.9-million for the same period in 2022, representing an increase of $16.3-million (or 10.3 per cent) year-over-year. Adjusted EBITDA for the year ended Dec. 31, 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 $33.1-million (or 23.5 per cent) year-over-year. The improvement was driven by higher volumes of work performed year-over-year. Adjusted EBITDA margin was 21.6 per cent for the year ended Dec. 31, 2023, compared with 22 per cent in 2022, excluding the previously noted historical ITC claims resolution.

Adjusted net income

Adjusted net income for the fourth quarter of 2023 was $27.8-million compared with $22.3-million for the fourth quarter of 2022, representing an increase of $5.5-million (or 24.7 per cent) year-over-year driven by lower income tax expense and finance costs in Q4 2023. Adjusted net income for the year ended Dec. 31, 2023, was $97.9-million compared with $78.9-million for the year ended Dec. 31, 2022, representing an increase of $19-million (or 24.1 per cent) year-over-year. The increase for the full-year period is driven by higher operating income and lower finance costs.

Backlog

Backlog as at Dec. 31, 2023, was $3,097-million, an increase of $1,718.8-million compared with the backlog at Dec. 31, 2022, driven by new order bookings, including the Telesat Lightspeed LEO constellation awarded in Q3 2023, partially offset by continued conversion of MDA's backlog into revenue.

Conference call and webcast

MDA will host a conference call and webcast to discuss these financial results on Wednesday, Feb. 28, at 8:30 a.m. ET. Interested parties can join the call by dialling 416-764-8609 (Toronto area) or 1-888-390-0605 (toll-free North America) or 080-0652-2435 (toll-free international) and entering the conference ID 26825361. 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 March 6, 2024, by dialling 1-888-390-0541 and entering the passcode 825361 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 3,000 staff across Canada, the United States and the U.K., 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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