Exhibit 99.1

 

 

 

FOR IMMEDIATE RELEASE:

February 28, 2019

 

Maxar Technologies Reports 2018 Year End Results

Announces Organizational Restructuring to Drive Savings and Reduce Cost Structure

Concludes Review of Strategic Options for GEO Comsat Business

 

Westminster, CO – Maxar Technologies Inc. (“Maxar” or the “Company”), a global technology innovator powering the new space economy, today reported financial results for the year ended December 31, 2018. All dollar amounts in this press release are expressed in U.S. dollars unless otherwise noted.

 

Key points from the year include:

 

 

1This is a non-GAAP financial measure. Refer to section “Non-GAAP Financial Measures” in this earnings release

“Since our CEO transition was announced 45 days ago, we have been focused on strengthening our operational and financial performance, developing a strategy to drive long-term revenue, profit, and cash flow growth, and assessing the optimal capital structure for the Company,” stated Dan Jablonsky, President and Chief Executive Officer. “To that end, today we are announcing a number of actions to address these priorities, including an organizational restructuring that will create a leaner and more agile business designed to achieve customer objectives and drive improved profitability for the Company, with estimated annual cost savings of $60-$70 million. Following a thorough review of strategic options for the GEO Comsat business, we have determined to continue operating the business while right sizing the organization to better align its costs with revenue. After careful consideration, we concluded that the GEO Comsat business will generate more value as part of Maxar compared to the alternatives that were evaluated. Finally, the Board has decided to reduce our quarterly dividend to $0.01, which follows the recent sale of a facility in Palo Alto and an amended credit agreement with our lenders. Combined, these actions demonstrate the meaningful steps we are taking to strengthen Maxar’s financial position and drive long-term value.”

 

“Our fourth quarter results reflect a continuation of trends we saw throughout 2018, with our Imagery and Services segments posting positive year-over-year revenue growth and our Space Systems segment reflecting the cyclical downturn in the GEO Comsat market and the expected wind-down of work on the multi-year RCM project,” stated Biggs Porter, Chief Financial Officer. “Free cash flow was within our expectation for the year. We recognized a net $883 million in impairment and other charges during the quarter, driven by the decline in our market value relative to book value, the loss of our World View-4 satellite, and the continuation of a weak GEO Comsat market. We completed a number of significant milestones during the year, including our domestication to the United States and the subsequent process of transitioning our financial reporting to US GAAP standards.”

 

Consolidated revenue for the fourth quarter of 2018 was $496 million compared to $545 million for the same period of last year. The decrease was primarily driven by a decline in the Space Systems segment, in part offset by growth in Imagery and Services.  The

decline in Space Systems was a continuation of headwinds experienced throughout 2018 as the GEO Comsat market remains in a cyclical downturn and revenues from the Company’s RCM project nears completion.  Imagery revenue growth was driven primarily by higher revenues from the US government while Services growth was driven by ramping revenue streams on recently awarded contracts, primarily with the US government.

Total revenue increased $510 million in 2018 compared to 2017. The increase in revenue was primarily driven by the inclusion of a full year of revenue related to the DigitalGlobe businesses as compared with only approximately three months of revenue in 2017. The increase in Services revenue is primarily driven by a $725 million increase in revenue related to DigitalGlobe’s imagery and services business as well as an increase in Services revenue of $50 million in the Space Systems segment. Product revenue decreased $268 million in the Space Systems segment. Further discussion of the drivers behind the decrease in revenue within the Space Systems segment is included within the “Results by segment” section below.

For the fourth quarter of 2018, adjusted EBITDA was $84 million and adjusted EBITDA as a percentage of consolidated revenues (“adjusted EBITDA margin percentage”) was 17.0%. This is compared to adjusted EBITDA of $116 million and adjusted EBITDA margin percentage of 21.3% for the fourth quarter of 2017. The decline was driven largely by reduced profitability in the Space Systems segment.

For the year ended December 31, 2018, net (loss) income decreased $1.3 billion compared to the same period of 2017, primarily due to the impairment losses taken in 2018. For the year ended December 31, 2018, adjusted EBITDA was $472 million and adjusted EBITDA as a percentage of consolidated revenue was 22.0%. This is compared to adjusted EBITDA of $251 million and adjusted EBITDA margin percentage of 15.4% for the year ended December 31, 2017. These increases are primarily due to the inclusion of the financial results of DigitalGlobe’s imagery business, partially offset by a decrease in the adjusted EBITDA from the Space Systems segment.

The Company had total funded order backlog of $2.4 billion as at December 31, 2018 compared to $3.3 billion as at December 31, 2017.  Bookings in 2018 have been negatively impacted by the market outlook for the GEO Comsat business inside the Company’s Space Systems segment.  Unfunded backlog ended 2018 at $1 billion vs. $119 million in 2017 and included $900 million in the Imagery segment for the EnhancedView Follow-on contract with the National Reconnaissance Office that was signed in November 2018.

The Company has declared a quarterly dividend of $0.01 per common share on March 29, 2019 to shareholders of record at the close of business on March 15, 2019.  

Financial Highlights

 

In addition to results reported in accordance with GAAP, the Company uses certain non-GAAP financial measures as supplemental indicators of its financial and operating performance. These non-GAAP financial measures include EBITDA and adjusted EBITDA. The Company believes these supplementary financial measures reflect the Company’s ongoing business in a manner that allows for meaningful period-to-period comparisons and analysis of trends in its business.

 

 

 

 

 

Segment Results

The Company analyzes financial performance by segment, which combine related activities within the Company.

 

1    This is a non-GAAP financial measure. Refer to section “Non-GAAP Financial Measures” in this earnings release.

 

Space Systems Results

 

Changes in revenues from year to year are influenced by the size, timing and number of satellite contracts awarded in the current and preceding years and the length of the construction period for satellite contracts awarded. Revenues on satellite contracts are recognized on a percentage of completion method over the construction period, which typically range between 20 to 36 months and up to 48 months in special situations. Adjusted EBITDA margins can vary from quarter to quarter due to the mix of our revenues and changes in our estimated costs to complete as our risks are retired and as our estimated costs to complete are increased or decreased based on contract performance.

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 expects revenue to decline in the future absent any new awards.

For the three months ended December 31, 2018, revenue decreased $49 million in the Space Systems segment.  Revenue decreased primarily due to programs either nearing completion or launched in the fourth quarter of 2018 as compared to the same period of 2017.

Space Systems segment revenue decreased $141 million, in 2018 compared to 2017. This decline was partially offset by an increase in revenue primarily due to the Legion satellite constellation. Revenue decreased due to an increase in estimated liquidated damages, and a significant increase in estimated costs to complete programs primarily as a result of supplier performance issues and delays experienced during the second half 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 our Legion satellite imaging constellation is eliminated in consolidation.

In the fourth quarter of 2018, adjusted EBITDA margin percentage from the Space Systems segment decreased from 6.5% to (11.9)%. The decrease is primarily related to an increase in estimated costs to complete programs as a result of supplier performance issues and delays experienced in the last quarter of 2018. In addition, we incurred $18 million of liquidated damages in the fourth quarter of 2018, compared to a recovery of liquidated damages during 2017, which also contributed to the decrease in Adjusted EBITDA.

Adjusted EBITDA margin percentage from the Space Systems segment decreased in 2018 compared to 2017 from 11.9% to 0.4%. The decrease from 2017 to 2018 is primarily related to an increase in estimated costs to complete programs as a result of supplier

performance issues and delays experienced during the second half of 2018, as well as unanticipated impacts of lower volume in our Palo Alto factory, which resulted in lower productivity and overhead absorption. In addition, we incurred $28 million of liquidated damages in 2018, compared to a recovery of liquidated damages during 2017, which also contributed to the decrease in Adjusted EBITDA.

Imagery Segment Results

 

For the three months ended December 31, 2018, revenue increased $13 million in the Imagery segment driven largely by growth in the segment’s US Government business and by the inclusion of revenues from the DigitalGlobe Imagery business, which added four additional selling days in the quarter.    

Revenues from the Imagery segment increased $615 million in 2018 compared to 2017. The increase was primarily driven by the inclusion of DigitalGlobe’s imagery business for a full year compared to only one quarter of results in 2017. During this period DigitalGlobe’s imagery business drove an increase in revenues of $613 million to the Imagery segment before intercompany eliminations. Excluding revenue from DigitalGlobe’s imagery business, revenue from the Imagery segment before intercompany eliminations increased $2 million period over period.

In the fourth quarter of 2018, adjusted EBITDA margin percentage from the Imagery segment decreased from 63.5% to 57.3%. The decrease is primarily related to revenue mix and higher costs.

Adjusted EBITDA margin percentage from the Imagery segment for 2018 was 61.3%, compared to 62.2% in 2017. The decrease in margin percentage reflected the blend of margins from DigitalGlobe’s imagery business for a full year as compared with only approximately three months in 2017.

 

Services Results

 

For the three months ended December 31, 2018, revenue increased $5 million in the Services segment.  Revenue increased due to growth from new contract awards and the expansion of programs in the Department of Defense and the Intelligence Community, as well from the inclusion of revenues from the DigitalGlobe businesses, which added four additional selling days in the quarter. The increase in revenue was partially offset by a decrease in production on GEOINT Production work year over year.

Services segment revenue increased $122 million in 2018 compared to the same period in 2017. The increase was primarily driven by the inclusion of DigitalGlobe’s services business for a full year compared to only one quarter of results in 2017. The inclusion of the DigitalGlobe’s services business drove an increase in revenues of $112 million year over year before intercompany eliminations. Excluding the revenue from the DigitalGlobe Transaction, the Services segment revenue increased $10 million period over period.

In the fourth quarter of 2018, adjusted EBITDA margin percentage from the Services segment decreased from 15.9% to 8.8%. The decrease is primarily driven by GEOINT Production work being down significantly in the three months ended December 31, 2018 as compared to the same period of 2017.

Adjusted EBITDA margin percentage from the Services segment for 2018 was 9.4%, compared to 16.0% in 2017. The decrease in margin percentage reflected the blend of margins from DigitalGlobe’s services business for a full year as compared with only

approximately three months in 2017.

Revenue and Adjusted EBITDA by Segment

The following table summarizes revenue and adjusted EBITDA by segment quarterly for 2018 and year to date 2017 and 2016, in U.S. dollars.

 

 

 

 

 

 

 

 

 

MAXAR TECHNOLOGIES INC.

Unaudited Condensed Consolidated Statements of Operations

(In millions of United States dollars, except per share amounts)

 

 

 

 

 

 

 

 

MAXAR TECHNOLOGIES INC.

Unaudited Condensed Consolidated Balance Sheets

(In millions of United States dollars, except per share amounts)

 

 

 

 

 

 

 

 

MAXAR TECHNOLOGIES INC.

Unaudited Condensed Consolidated Statements of Cash Flows

(In millions of United States dollars)

 

 

 

 

 

 

 

 

NON-GAAP FINANCIAL MEASURES

In addition to results reported in accordance with U.S. GAAP, we use certain non-GAAP financial measures as supplemental indicators of our financial and operating performance. These non-GAAP financial measures include EBITDA, Adjusted EBITDA and Adjusted EBITDA margin. 

We define EBITDA as earnings before interest, taxes, depreciation and amortization, and Adjusted EBITDA as EBITDA adjusted for certain items affecting comparability as specified in the calculation. Adjusted EBITDA margin is defined as EBITDA as a percentage of revenues. Management believes that exclusion of these items assists in providing a more complete understanding of our underlying results and trends, and management uses these measures along with the corresponding U.S. GAAP financial measures to manage our business, evaluate our performance compared to prior periods and the marketplace, and to establish operational goals. Adjusted EBITDA is a measure being used as a key element of our incentive compensation plan. The Syndicated Credit Facility also uses Adjusted EBITDA in the determination of our debt leverage covenant ratio. The definition of Adjusted EBITDA in the Syndicated Credit Facility includes a more comprehensive set of adjustments.

We believe that these non-GAAP measures, when read in conjunction with our U.S. GAAP results, provide useful information to investors by facilitating the comparability of our ongoing operating results over the periods presented, the ability to identify trends in our underlying business, and the comparison of our operating results against analyst financial models and operating results of other public companies.

EBITDA and Adjusted EBITDA are not recognized terms under U.S. GAAP and may not be defined similarly by other companies. EBITDA and Adjusted EBITDA should not be considered alternatives to net income (loss) as indications of financial performance or as alternate to cash flows from operations as measures of liquidity. EBITDA, Adjusted EBITDA and Adjusted EBITDA margin have limitations as analytical tools and should not be considered in isolation or as a substitute for our results reported under U.S. GAAP.  The table below reconciles our net loss (income) to EBITDA and Adjusted EBITDA for the years ended December 31, 2018 and 2017, and the three months ended December 31, 2018 and 2017.

 

1This is a non-GAAP financial measure.

2Net of gain on sale of building.

3This is included in Other expense (income), net on the Consolidated Statements of Operations.