MDA Space Ltd. Q3 FY2025 Earnings Call

Good morning, ladies and gentlemen, and welcome to MDA Space Limited Conference Call and Webcast. This call is being recorded on November 14, 2025, at 8:30 a.m. Eastern Time. Following the presentation, we will conduct a question-and-answer session. Instructions will be provided at that time for you to queue up for questions. I'd now like to turn the conference over to Shereen Zahawi, Head of Investor Relations at MDA Space. Please go ahead.

Thank you, operator. Good morning, and welcome to MDA Space Third Quarter 2025 Earnings Call. Mike Greenley, our CEO; and Guillaume Lavoie, our CFO, will lead today's call and share some prepared remarks before taking your questions. A couple of housekeeping items before we begin. Today's call is accessible via webcast on our Investor Relations website. All our disclosures, including the press release, MD&A and financial statements are available from our Investor Relations website and from SEDAR+. I would also like to remind you that today's call will include estimates and other forward-looking information, which may differ from actual results. Please review the cautionary language in today's press release and public filings regarding various factors, assumptions and risks that could cause actual results to differ. In addition, during this call, we will refer to certain non-IFRS financial measures. Although we believe these measures provide useful supplemental information about our financial performance, these measures do not have any standardized meaning under IFRS, and our approach in calculating these measures may differ from that of other issuers and therefore, may not be directly comparable. Please see the company's quarterly report and other public filings for more information about these measures, including reconciliations to their nearest IFRS measures. And with that, it's my pleasure to turn the call over to Mike.

Thank you, Shereen. Good morning, everyone, and thank you for joining us today to discuss our third quarter 2025 financial results. In Q3, the MDA Space team delivered another quarter of strong financial performance with double-digit growth in both revenue and profitability. Our revenues totaled $410 million, up 45% year-over-year. Adjusted EBITDA was $83 million, up 49% year-over-year, and adjusted EBITDA margin was a solid 20.2%. Operating cash flow was healthy at $33 million, and we ended the quarter with a strong balance sheet. Our backlog of $4.4 billion at quarter end provides revenue visibility for 2025 and 2026 and beyond. Q3 and the subsequent period was a busy one for MDA Space. In early July, we closed the previously announced acquisition of SatixFy Communications, a leader in next-generation satellite communication solutions based on in-house design chipsets. SatixFy's operations and full technology portfolio is now part of the Satellite Systems business area of MDA Space and integration activities are well underway. As you know, during the quarter, we also announced our selection by EchoStar to be the prime contractor on a new low Earth orbit direct-to-device satellite constellation valued at approximately USD 1.3 billion, whereby MDA Space was tasked with the design, manufacture and testing over 100 software-defined MDA AURORA direct-to-device satellites. EchoStar subsequently terminated the contract for convenience in September 2025. As per our contract, MDA Space is entitled to and expects to be compensated for all related termination costs and fees and is in discussions to finalize that contract termination agreement. While we are disappointed with the EchoStar development, as we have said previously, it is unrelated to MDA Space performance and our products and services. These remain in high demand. In events and forums around the world this fall, we continue to be encouraged by the high level of customer interest we are seeing in our space technology, which is uniquely positioned to serve the emerging and evolving needs of the space market. We are also pleased and honored to be named the 2025 Global Satellite Business of the Year by Novaspace and presented with the award, which celebrates excellence in satellite business at the annual World Space Business Week in Paris this past September. I want to take this opportunity to congratulate and thank our MDA Space team for their commitment, expertise and award-winning industry leadership. Subsequent to quarter end, we announced a $10 million equity investment in Maritime Launch Services, a Canadian-owned commercial space company that is developing Spaceport in Nova Scotia, Canada's first commercial orbital launch complex. The investment will help accelerate the Spaceport's readiness for orbital launch operations, providing reliable domestic launch capability for commercial, civil government and defense clients in Canada. We are also reaffirming our previous 2025 full year outlook, which we provided with our Q2 2025 earnings release with full year revenues expected to be between $1.57 billion and $1.63 billion representing year-over-year growth of approximately 48% at the midpoint of guidance and full year adjusted EBITDA expected to be between $305 million and $320 million, representing year-over-year growth of approximately 45% at midpoint of guidance. We look forward to delivering another year of solid financial performance in 2025. I want to take a moment to speak to what we see as an increasing market opportunity for MDA Space related to the growing focus on defense investment as NATO countries rapidly move to reinvest to build capabilities and infrastructure. With the space domain increasingly recognized as a critical domain for defense and security, we believe MDA Space is well positioned for this opportunity to extend our mission capabilities and support the strategic sovereignty and security requirements of Canada and its partners and allies. We are in the early days of a new and what is projected to be a prolonged investment cycle. We are noticing a change in pace and intensity of defense space conversations and are actively engaged in these discussions. I'll now give you an update on our 3 business areas and then pass it to Guillaume for a deep dive on the financials. In Satellite Systems, we continue to see good momentum in this market with our teams working to advance multiple requests for communication satellite solutions and a growing number of constellation projects from multiple markets and geographies. We are also seeing good activity levels from customers and our opportunity funnel remains strong. In Q3, our teams were busy advancing work on our programs. On the Telesat Lightspeed program, our teams are currently working on the program's detailed engineering and manufacturing preparation phase, including the critical design review, which is taking place this year. The team is also advancing work on the Globalstar next-generation LEO constellation, where MDA Space was selected as the prime contractor to manufacture more than 50 MDA AURORA software-defined digital satellites. The team is making good progress on the engineering, development and procurement activities for the program and is progressing work related to the critical design review milestone. In July, our Satellite Systems team also achieved an industry first by demonstrating digital beam forming and steering multiple beams with Ka-band direct radiating arrays using direct sampling. These are among the key features of the MDA AURORA Ka-band DRA and the demonstration marks a key milestone in the development of the digital payload technology for the MDA AURORA software-defined product line. We also continue to advance work on the initial Globalstar program, where MDA Space is the prime contractor to enhance Globalstar's LEO constellation through the addition of 17 satellites, which support SOS features and direct-to-device communication on certain Apple products. In Q3, the team progressed flight hardware production. The team continues to advance final satellite integration and test work with 9 spacecraft currently on the shop floor in our Montreal facility. Due to delays resulting from a number of factors, including the supply chain, the delivery of these satellites is now expected in early 2026. We are currently in discussions with Globalstar to address any potential liquidated damages that might result from this delay. It's important to note that our contracts with our supply chain are structured in a manner that embeds liquidated damage clauses as well. So we have recourse in the event of supplier delays. We're also making solid progress on our facility expansion in Montreal, Quebec, which will add 185,000 square feet to our existing satellite production facility. A portion of the office space is now complete and a number of engineers have moved in with great excitement. And we continue to finalize interior elements of the production facility, which remains on track to be completed this year. Once complete, it will be the world's largest high-volume manufacturing facility in its satellite class with capacity to deliver 2 MDA AURORA digital satellites per day. Finally, in late October, 21 low Earth orbit satellites for the Space Development Agency's Tranche 1 Transport Layer were successfully launched from California's Vandenberg Space Force Base and MDA Space was part of this mission. We provided all Ka-band and L-band antennas as well as motor control electronics for the satellites. The SDA's Tranche 1 Transport Layer, a mesh network of 126 satellites will deliver resilient, low-latency connectivity to support military operations in the United States. Our technology plays a key role in enabling secure and reliable communication across the constellation. Congratulations to everyone involved in making this achievement possible. Moving to our Robotics & Space Operations business. We continue to see good traction and activity levels on both the government and commercial fronts. In Q3, we continued to ramp up work volumes on Phase C of the Canadarm3 program, which we were awarded together with Phase D in 2024. During the quarter, our teams were busy actively building and testing engineering models of the system elements. Phase C will see us completing the final design before we move on to Phase D, which will see the construction, system assembly, integration and test of the full robotic system as well as a ground segment for command and control. We also announced in July that an MDA Space-led team was selected by the Canadian Space Agency to conduct an early phase study for Canada's proposed Lunar Utility Vehicle or LUV. Recall that the Canadian Space Agency announced $1.2 billion in funding for a Canadian utility rover that would be contributed to the Artemis program and would support human exploration on the lunar surface. This initial phase study is a first critical step in defining the LUV mission concept and technology development plan. As part of this effort, the team will integrate MDA SKYMAKER, our full suite of scalable and modular space robotics derived from Canadarm technology, paving the way for scalable autonomous mobility solutions on the lunar surface. Moving to our Geointelligence business. Customer demand for our Earth observation offering remains robust, and we are seeing increased recognition of the role that commercial Earth observation satellites can play to provide near real-time data and analytics to governments and private enterprises. Notable awards in Q3 include 2 contracts to equip the Royal Canadian Navy's Halifax-class ships and up to 6 new Uncrewed Aircraft Systems. Part of the Intelligence, Surveillance, Target Acquisition and Reconnaissance Uncrewed Aircraft System project, these new systems will significantly enhance the Navy's ability to detect and monitor potential maritime threats, both at home and abroad. The award includes an acquisition contract valued at approximately $39 million for the initial procurement of 2 uncrewed aircraft systems with options to procure 4 additional systems and an in-service support contract estimated at $27 million over an initial 5-year period to sustain operations with opportunities for extension beyond the initial period. We were also selected to deliver enhanced space situation awareness to the Department of National Defense. The standing offer awarded to MDA Space in partnership with a Canadian-based group underscores the growing importance of space domain awareness in safeguarding Canada's critical space assets amid a rapidly evolving and increasingly congested orbital environment. Building on MDA Space's proven legacy as a space domain mission partner, the new service integrates high-fidelity sensor data with secure cloud-based infrastructure optimized for tracking and assessing satellite and space objects in the geosynchronous belt, approximately 36,000 kilometers above the Earth's surface. We also continue to advance work on MDA CHORUS. Our spacecraft electrical integration and testing activities continued, and we have all spacecraft units on hand. Solid progress was made in building and testing the SAR antenna panels, and we're building up the last of 4 panels in parallel with electrical and RF characterization and test activities of the second and third panels. On the ground segment side, the MDA Space team continues to track to development and release plans. Construction works also continue for a new mission control center from where MDA CHORUS will be operated. And while we are pleased with the performance of our supply chain, we have encountered some delays with certain units, which are impacting the program timeline. As a result of those delays, we are now targeting a launch window for MDA CHORUS in late 2026. We are looking forward to delivering the constellation's enhanced functionality to our current and future customers with many active discussions of future opportunities in our pipeline. I also want to provide an update with respect to a proposed class action claim that MDA Space was served subsequent to quarter end. The allegations are related to the announcement and subsequent cancellation of the EchoStar constellation contract that was announced by MDA Space in the third quarter of 2025 and the sales by certain insiders of shares after the announcement of the contract and before its termination. MDA Space believes the claims are without merit and intends to vigorously defend itself. With that, I'll hand it over to Guillaume to walk us through the financial details.

Thank you, Mike, and good morning, everyone. For my update, I will walk you through our Q3 financial results and provide more details on our 2025 financial outlook. Overall, Q3 results were solid with growth in revenue and profitability and a strong balance sheet and backlog, providing us good revenue visibility for the remainder of 2025, 2026 and beyond. Total revenues for the third quarter were $410 million. This represents a $127 million or 45% increase over the same period last year. The year-over-year increase is driven by higher volumes of work performed in our Satellite Systems and Robotics & Space Operations businesses. By business area, revenues in Satellite Systems of $284 million in the third quarter were $116 million or 69% higher compared to the same period in 2024. The growth was driven by the ramp-up of the Telesat Lightspeed program and the Globalstar next-generation LEO constellation program. In Robotics & Space Operations, revenue of $78 million in the latest quarter represented a $12 million or 18% increase versus Q3 of last year, driven by the continued ramp of Phase C of the Canadarm3 program. Revenues in our Geointelligence business of $48 million in the latest quarter were in line with our expectations and the levels reported in that business segment last year. Moving to gross profit. For Q3, gross profit was $108 million, representing a $32 million or 43% increase over the same period last year, again driven by higher volumes of work. Gross margin in the latest quarter was 26.4% and compares to 26.8% for the same period in 2024. Adjusted EBITDA in the latest quarter was $83 million compared to $56 million in Q3 2024, representing an increase of $27 million or 49% year-over-year, again driven by higher work volumes as we continue to execute on our backlog. Adjusted EBITDA margin was 20.2% in the latest quarter, consistent with the company's full year margin guidance of 19% to 20% and compares to adjusted EBITDA margin of 19.7% reported in the third quarter of 2024. Adjusted net income for Q3 was $46 million compared to $35 million in the same period last year. The year-over-year increase of $11 million or 33% is primarily driven by higher operating income after adjusting for the amortization of intangibles expenses incurred in Q3 2025 and attributable to the SatixFy Communications transaction, which we've closed on July 2, 2025. Moving to our backlog. We ended the quarter with $4.4 billion in backlog, a decrease of $185 million or 4% compared with the backlog as of September 30, 2024, driven by continued conversion of our backlog into revenue. Last 12-month book-to-bill ratio stood at 0.9x at quarter end and our current backlog provides us with high revenue visibility for the remainder of 2025, 2026 and beyond. Moving to CapEx. We remain focused on making investments in the business to support our strategic growth initiatives. In Q3, we spent $70 million on capital expenditures compared to $53 million last year as we continue to progress our development of CHORUS, where most of the investment has been incurred. And other growth initiatives such as the expansion of our Montreal satellite manufacturing facility. Cash from operations during the quarter generated $33 million compared to a cash generation of $259 million in Q3 2024. The year-over-year change was primarily due to working capital fluctuations. Free cash flow was negative $37 million in the quarter, and compares to $205 million for the same period in 2024, with the year-over-year change attributed to the previously noted working capital fluctuations. Excluding growth CapEx, free cash flow was $26 million in the latest quarter and compares to $253 million for the same period last year. Moving to our balance sheet. We ended the quarter with cash of $196 million, available liquidity of $404 million under our revolving credit facility and total liquidity of $600 million. Our net debt to last 12 month adjusted EBITDA ratio stood at 0.3x at quarter end. The slight uptick in leverage is due to the completion of the previously announced SatixFy Communications Ltd. acquisition, which closed again on July 2, 2025. Recall that the company used cash on hand and borrowings from our revolving credit facility to pay for the transaction. In summer, this was a strong quarter, and I'd like to thank our teams for their dedication and efforts to make this happen. Let me now turn to our full year outlook. As Mike noted, we are reaffirming the previous 2025 outlook provided in our Q2 '25 earnings release. For fiscal '25, we continue to expect full year revenue to be between $1.57 billion and $1.63 billion, representing year-over-year growth of approximately 48% at the midpoint of guidance. We continue to expect full year adjusted EBITDA to be between $305 million and $320 million representing year-over-year growth of approximately 45% at the midpoint of guidance and approximately 19% to 20% adjusted EBITDA margin. We reaffirm capital expenditures to be between $210 million and $240 million, comprising of growth investments to support the previously outlined growth initiatives across our business areas. Lastly, we expect full year free cash flow to be neutral to positive in 2025. Note that the financial outlook provided does not factor any potential impact from tariffs. We continue to expect our potential exposure, if any, to be manageable. We are monitoring the situation and may elect to update our financial outlook if deemed necessary. With our $4.4 billion backlog, combined with a robust $20 billion opportunity pipeline, we are confident in delivering continued growth while remaining focused on disciplined execution and profitability.

Mike, with that, I will turn it over back to you.

First, we will hear from Benoit Poirier at Desjardins Capital Markets.

Yes, Mike and Guillaume. Could you provide an update on Globalstar and how a potential sale might affect your contracts? If Globalstar were to sell itself, what protections, if any, do you have in place? I understand this is beyond your control, but any insights you can share would be appreciated.

Thanks. As you would appreciate, as a matter of company policy, we can't really comment on rumors or speculation concerning another company or what people are talking about it. For us, with Globalstar, we're actively involved in executing on our 2 contracts. We are making good progress on those 2 contracts as we've indicated. On our original contract, we have 9 satellites being completed and getting ready to be shipped out in early 2026, ready for launch. And in our second larger contract, we continue to execute well on those satellites moving forward. These satellites are important to Globalstar for their constellations, and we are actively engaged in getting them delivered.

Okay. That's great. And in terms of outlook, obviously, you're very encouraged with all the discussion you have. But could you maybe quantify your bidding pipeline and talk also about how it has evolved versus last quarter? And I would be curious to see where do you see the greatest opportunities among them.

The company has a pipeline of approximately $20 billion over the next five years, consisting of specific opportunities we're discussing in various markets. Out of this $20 billion, around $13 billion is expected to come from the Satellite Systems area, mainly in constellation projects for broadband satellites and direct-to-device satellites. Beyond that, there are strong opportunities in Geointelligence, particularly with larger projects involving satellite systems for government programs related to Earth and space observation. Additionally, there is a solid pipeline in robotics, focusing on robotics and rover systems for both government and commercial initiatives.

Okay. You mentioned some delays related to Globalstar and CHORUS. What are the potential outcomes for MDA in terms of liquidated damages? Could you provide more details on what's causing the delays? Is it the same supplier? Do you see an opportunity for vertical integration?

Yes. In both Globalstar and CHORUS, I mentioned that there have been delays, each due to issues with different suppliers. Each situation involves distinct challenges, but we have collaborated with these suppliers to find solutions. Although these delays occurred, we have addressed the issues and are prepared to move forward. Regarding Globalstar and liquidated damages, it's standard practice for us to have liquidated damages clauses in all our firm fixed price contracts, which have been disclosed by both Globalstar and ourselves. Because of the late deliveries attributed to supplier problems, we are now discussing the implications of these clauses. We typically have back-to-back liquidated damages clauses with our suppliers, enabling us to impose penalties if they are late. The main goal is to complete the satellites and prepare them for a launch in early 2026, and everyone involved in the project is focused on achieving this. In the case of CHORUS, a different supplier caused some delays, but that issue has been resolved. We are currently finalizing the assembly of the satellite units and preparing them for testing. Consequently, we have shifted our target launch date to the end of 2026, but we are making progress based on this new timeline.

Okay. And last one for me, just for Guillaume. In terms of capital allocation, given the recent drop in share price, how does it impact your capital allocation strategy? Do you still see some attractive M&A opportunities out there? Or do you see an opportunity for buyback?

Yes. Thank you, Benoit. We obviously always look at capital allocation. I'm not going to comment too much on the share price movement other than saying that, yes, we are where we are right now. It's not just MDA. The whole sector is down. Our strategy regarding M&A hasn't changed really. We're focused in 2 areas. One of which is, if there are opportunities for us to continue to strategically pursue supply chain opportunities, we'll do that. We did that this year with SatixFy. And the other area of focus for us is to consider expanding in new regions, primarily targeting Europe and the U.S. And obviously, we always think about what type of financing we would need for such potential acquisitions, but I'll leave it at that for the moment, Benoit.

Next question will be from Konark Gupta at Scotiabank.

I wanted to ask you, Mike, you mentioned in the opening remarks about space defense. I think you're attending and maybe presenting at a conference next week in Ottawa. What kind of space defense opportunities are we talking about here? Like is it all constellation related, just geo, maybe robotics, it's all across? Or anything specific you're focusing on in the near term?

Sure. From an MDA Space capabilities perspective, space defense provides a number of opportunities. One of the areas would be in defense communication networks. You would have heard in my remarks that we do provide key technologies into the communication satellites in the United States for their Department of Defense communication satellites. We have opportunities in multiple countries to provide satellites and satellite technologies for military communication networks. A second area would be in Earth observation. We own and operate RADARSAT-2 where, as we just discussed, heading towards the launch of CHORUS. Our provision of synthetic aperture radar-based imagery to defense and intelligence customers around the world is obviously a strong defense asset to provide Earth observation for military surveillance operations. Another area is space observation, whereby it was announced in my remarks that we just recently picked up a new contract in partnership with a group in Canada to provide space observation to track the activities of satellites in orbit, which is tracking what people are up to and who's moving around and who's going where in orbit with their satellites, which is an important defense-related activity. There are a number of opportunities in Canada and around the world for us to provide space observation technologies, both from the Earth and from orbit, which means from satellites to be able to contribute to space domain awareness or space observation pictures. Once you observe activity in space, sometimes you want to do something about it from a military operations perspective, which is starting to open up a market in the counter space domain. I call it the counter space domain. You would have seen announcements in some countries recently talking about guard satellites, for example. These are defense departments putting up satellites that can sense what other satellites are doing that can maneuver to protect satellites and keep other satellites away from them and/or go and inspect or investigate other satellites from a military perspective. Our really strong experiences in satellite design and operation and proximity operations from our 40 years of robotics activity. We have a very strong background in proximity operations and our experience in robotics. All of these capabilities put us in a strong position to be able to offer counter space or guard satellite solutions for the market. And militaries around the world are increasingly looking for those as the space domain becomes more congested. So that's the long story. The short story is there's opportunities in all 3 business areas.

That's great. Great to hear that. And if I can follow up, your recent equity investment in Maritime Launch, what's the idea there? I mean, are you guys looking to eventually become more vertically integrated like with obviously SatixFy now on the supply side and now the launch maybe? Or is it just a one-off to support Canada's missions?

Yes, it's a bit of a longer-term strategic view. Certainly, the words that you just used, which is to support the Canadian space ecosystem is an important element of this. MDA Space, as the largest space company in Canada has a number of roles in addition to delivering a good business. We also have a leadership or championship role that we have in the country to be able to help make everything work in the space ecosystem. One of those areas, as countries get more interested in sovereignty, being able to just take care of themselves as a country. One of the key areas from the space domain for both civil and military purposes is to have domestic launch capability. Canada is moving towards this. Maritime Launch has been advancing this over the last few years. So our small investment gives us a position with the company. It gives us certain investor rights such as Board positions and the like, so that we can be involved in helping to shepherd the advancement of that capability in the country. Over time, we'll continue to monitor that participation, which could result in increased investments in the future or not. But it certainly allows us to leverage our size, scope and leadership and different skill sets to the Maritime Launch capability to ensure that Canada advances an effective domestic launch capability through the Spaceport in Nova Scotia.

Got it. And the last question from me before I pass it over. Maybe Guillaume can address this. Observing the changes in working capital, I believe they are quite typical. These fluctuations are occurring. Is there anything unusual that you can highlight in the third quarter? I'm particularly interested in the contract liability item. I think that increased. Some of it is obviously due to the SatixFy acquisition, because you incorporated them, but it seems that even without SatixFy, there was also an increase in liabilities. Is that increase being driven by new contracts or by existing contracts like SatixFy or Globalstar?

Yes. Konark, so first of all, the fluctuation in Q3 is totally normal. We've been saying all along that from one quarter to the other, we will be seeing working capital fluctuations. So we had a bit of a reversal this quarter. Overall, our free cash flow performance year-to-date is quite strong. But yes, we maintain our outlook of neutral to positive for this year. We are always being conservative on the cash planning. We're happy with the progress with our programs and overall with our cash management. And from a contract liability, this is just like us progressing the work. And you can see the balance sheet fluctuations associated with that, but there was nothing outside of the ordinary for this quarter, Konark.

Next question will be from Thanos Moschopoulos at BMO Capital Markets.

Mike, with respect to the pipeline for Satellite Systems, how would you characterize the mix between government relative to commercial opportunities and how that's evolved? Is it a good split? Or is it heavily weighted towards one versus the other? And then on commercial, are we talking mostly about incumbent operators looking for satellites? Are we talking about maybe corporate entities who are new to the satellite industry, but want to buy infrastructure? Is it start-ups, all of the above? Just any color on the nature of the customers there would be helpful.

Sure. Yes, satellite opportunities are mainly commercial. There are some government opportunities, but they are mainly commercial, to answer your first question. On commercial opportunities, they are varied. They include experienced satellite operators for sure. Maybe the majority would be experienced satellite operators around the world. There are some that are pulling together new investments to be able to produce space-based networks as a business opportunity. And then there are some that would be corporations looking to have networks. But the majority would be established financed space network operators.

Okay. And with respect to your digital cable technology, how important is that becoming a differentiator? Like obviously, you've talked in the past about new customers needing some education maybe in terms of the benefits. But are your advantages there now becoming more recognized? Or are most of the RFPs still looking for analog satellites?

I think that people are increasingly appreciating the opportunity that digital satellites offer. I think that in my remarks, I mentioned our demonstration capability that we now have in our facility in Montreal to be able to demonstrate dynamic beam forming. This is very important for customers to be able to come in and actually see dynamic beam forming in operation. So to have those technologies advance to the demonstration level is extremely important for those customers to be able to not only mathematically realize the benefits of a digital satellite, but to visually see and experience that technology in operation. I think that, that is really important. I think that our completion of our expanded satellite production facility, high-volume production facility, as I mentioned, with engineers now moving into their spaces, in an exciting development and thus now finishing the manufacturing environment as we complete 2025 puts us in a position where we not only have this digital technology, we can demonstrate this digital technology, but we're entering into a production mode where we can do it at scale and at pace. And so the space-based network market is competitive. There's a lot of activity in this sector, especially in the direct-to-device element of the sector. And so the race to revenue is important. And so our ability to be able to have shorter high-volume delivery times of an advanced demonstratable digital technology is definitely a differentiating element of competitive conversations.

Next question will be from Doug Taylor at Canaccord Genuity.

Mike, I want to ask another question on the direct-to-device market. You referenced a very dynamic situation right now with some of the participants. I think investors are grappling with what the end state of that market looks like with all these vertically integrated participants moving pretty quickly to consolidate spectrum. Can you talk about how you see that end state evolving here from where you sit in your conversations as a supplier into that market?

Yes, I agree that it is indeed dynamic and a busy time in the market. There have been significant moves by various players, such as SpaceX's acquisition of EchoStar spectrum, which has taken many by surprise and prompted adjustments. Several parties are actively pursuing revenue and working swiftly to advance their direct-to-device network projects. As a supplier of satellite technology, we have a number of opportunities in our pipeline to provide our MDA AURORA digital satellite to those looking to establish and operate direct-to-device networks. Our discussions continue, and as companies assess their plans alongside those of competitors and potential collaborators, it has led to some interesting and dynamic conversations about future collaborations in the market. It truly is a busy and dynamic period, but there are clear opportunities available.

Okay. And a lot of focus on that direct-to-handset application of the LEO network. And maybe I can flip to talking about some of the other parts of that communications satellite market being the broadband and satellite-based backhaul applications, more of that Lightspeed type model. How the pipeline on that side progress and that market evolved in response to all this?

Yes, it's solid. There are strong commercial opportunities to establish Lightspeed-like relationships globally, and we are actively pursuing those conversations. There are also government opportunities emerging. One significant geopolitical shift over the last year has been countries expressing a desire for increased sovereignty in defense, security, and economics, which often translates to a need for domestic communication and Earth observation capabilities. As nations focus on boosting government spending for sovereignty and security, communication and observation systems become essential components of these strategies. This trend is observed not only in the commercial sector and the Telesat Light companies worldwide but also in the government sector, leading to heightened interest in space-based communication networks.

And so last question for me with everything that you've just said, and I think you previously talked about the potential for another LEO satellite constellation award within the next year or 12-month time frame even after the EchoStar situation. Is that still the case? Are there programs out there with that kind of immediacy in the pipeline?

Yes, the order pace is determined by the customers regarding when they wish to place an order. I always focus on the maturity of bids, which become more defined as we engage with customers. There are several opportunities right now at a stage where customers might choose to move within the next year. While that is a possibility, it is not a necessity. The backlog mentioned by Guillaume, which exceeds $4 billion, is very robust and puts us in a strong position. It’s crucial for us to execute well on that backlog. With our current company size, we effectively have a three-year backlog of signed contracts that we are working on, which puts us in a favorable situation. Over the next couple of years, we certainly need to secure more orders, and there are many opportunities available to do that. Some may arise in the next year, but there’s no urgency; we have plenty of opportunities to explore as we advance through our pipeline.

Next question will be from David McFadgen at Cormark Securities.

Yes, a couple of questions. Can you give us an update on what's happening with that Artemis contract, the USD 4 billion contract for the vehicle, the Lunar vehicle? What's happening there? I thought that to be awarded this year?

The original plan involves the Lunar Terrain Vehicle System, or LTVS. Our team is part of the Lunar Terrain Vehicle System, specifically the Lunar Outpost team, and we are making significant progress on the development of our rover solution and our proposal to NASA. NASA intended to announce a winner for this project, but there have been delays due to the government shutdown in the United States, which limits what can be done during such periods. It appears that the situation is improving now, and as it does, we hope they can finalize their assessment and announcement process.

Okay. But do you expect they will announce that contract award in 2025 or is it more likely to be 2026?

We still think there's a chance of talking about it in 2025. We don't obviously control the pace of the U.S. government making announcements, but our indications are that there's still a chance that the winner could be discussed publicly in 2025. If not, obviously, it would drift into 2026, but we're still hopeful that something could be said this year.

Okay. And then what about the Canada's plans for the RADARSAT Constellation Mission replacement? I haven't heard anything about this for quite some time.

Yes. Canada announced over a year ago that they set aside funds for several initiatives, including enhancing radar satellite capabilities for the RADARSAT Constellation Mission to ensure its future reliability. They are also exploring radar-based and Earth observation services, as well as conducting studies on next-generation synthetic aperture radar capabilities for the country. The government is actively working on all three of these areas and is soliciting industry input. Progress is being made, although I do not have a specific timeline for when these updates will be publicly available. There is certainly solid advancement occurring within the government and through interactions with industry.

Okay. Can I ask a couple of questions about your pipeline? Are you in discussions with Apple and Globalstar to increase the number of satellites in the second constellation?

Right now, our focus with Globalstar is execution on our current work. And so that's our absolute focus right now is to make sure that we get those satellites built and moving forward into orbit.

Okay. And of the $13 billion pipeline that you said on the satellite side, how much of that would be, say, direct-to-device versus broadband?

I don't have an exact percentage number, but I'm thinking it could be around 50-50 or 60-40. However, there is a significant mix of each of those categories in the pipeline.

Okay. And then just lastly, you talked about defense and how defense spending is going up around the world. We all know that. Is defense a material part of the pipeline right now? And is it growing?

I would say it has the potential to grow in the pipeline. We do have significant opportunities in our pipeline related to defense, and that is why I made remarks about it in my comments because the number of conversations in the defense sector is increasing. This is likely to lead to further and new opportunities in the pipeline. I expect that we don’t add things to the pipeline until we can discuss a program with a budget that we believe will progress, and then we include it. We will have numerous conversations with people about the potential to pursue initiatives before they become specific opportunities with defined parameters. In the defense sector, the intensity of conversations is definitely increasing, and the number of questions being asked is rising. Therefore, I believe there will be opportunities to add more defense initiatives to our pipeline as we move forward.

Next question will be from Ken Herbert at RBC Capital Markets.

Maybe Guillaume, can you clarify how much of the third quarter revenues were from EchoStar and what you anticipate the full year run rate will be for that? Also, will all of those negotiations be finalized, or will there be any recognition of EchoStar revenues or reimbursements extending into 2026?

Thank you for the question, Ken. So we have not recognized a lot of revenue, obviously, for EchoStar. It was very small in Q3. And now we're working with them to have a contract termination agreement. So I won't speculate on the timing of that. And that's why we left our guidance basically intact because that's one thing that's in flux right now, but very minimal revenue associated to that contract in Q3, Ken.

Okay. You've mentioned supply chain challenges for both CHORUS and Globalstar. Are you encountering any additional risks regarding the supply chain with Lightspeed? Also, do the issues or delays with Globalstar and CHORUS present any possibility to expedite Lightspeed?

I don't think there would be an opportunity to advance Lightspeed. I also don't see any unique incremental supply chain risk at the moment. I'm just considering the elements of Lightspeed, and I don't believe this is something I should be focused on right now. The Lightspeed project is progressing well through its critical design review process, and you would have heard from their CEO recently during their earnings call.

Just finally on that, Mike, do you have any update on the timing for when the options on either of the existing contracts could potentially be expected?

I don’t have any specifics on that. All those customers with options are continuously assessing their businesses, their activities, and the health, size, and capacity of their networks to meet their demand. They will make decisions accordingly. I don’t have specific guidance on when we might expect those things. They remain valid and active opportunities for us, but I can't provide any specific time estimates.

Next, we will hear from Kristine Liwag at Morgan Stanley.

This is Justin on for Kristine. Mike, just on the $13 billion satellite systems pipeline, I know you've mentioned in the past that the opportunities can span anywhere from $1 million to over $2 billion. Is there any way to put a finer point on that? Maybe how many discrete opportunities are in that pipeline that are valued around $1 billion or more potentially?

Yes, I don't have a specific number in my head, but there's certainly the number. I would say the range of those would be sort of $250 million to $2.5 billion plus, like in terms of the range of sizes, it depends on the size of constellations that people want to talk about and what orbit they're in. I think that there are definitely a number of them. I think your question was how many are over $1 billion. I don't have a specific number, but there are definitely more than a handful.

Okay. Great. And then just a quick one. Guillaume, the free cash flow guidance looks like it would imply significant free cash flow burn in 4Q if you get close to that neutral guide, and that would be on lighter implied CapEx. So just curious what you're expecting from working capital to end the year? And if you can provide any color on the drivers there would be helpful.

Justin, so look, we haven't changed our guidance. I think overall, when I take a step back here, we're looking at significant growth year-on-year on the top line. I mean, at the midpoint, it's going to be 48% adjusted EBITDA, 45% growth. And yes, we continue to invest in our business. So far from a CapEx standpoint, we've been sort of spending at the rate we were expecting. And we have a good position on the free cash flow year-to-date, slight consumption in Q3 related to working capital. And so we decided to keep our neutral to positive guidance. I think we're in a good position. And I think that we always plan conservatively. We could see some working capital consumption in the fourth quarter. But again, back to Konark's question, I mean, this is normal as part of our business. And for the time being, we remain focused on getting our milestones completed and then invoicing our customers, getting the cash in the door and then obviously managing our outflows. And as I mentioned earlier, we're very pleased so far with how we've been able to manage our working capital throughout this year. So I'll leave it at that. But for now, there's no concerns on the working capital from my perspective for the fourth quarter.

At this time, Mr. Greenley, we have no further questions registered. Please proceed.

Okay. Well, thank you. Thanks for the operator, and thank you, everyone, for your time this morning. We look forward to updating everyone on our progress at our next earnings call. Have a great day.

Thank you, sir. Ladies and gentlemen, this does indeed conclude your conference call for today. Once again, thank you for attending. And at this time, we do ask that you please disconnect your lines. Have a good weekend.