Maxar Technologies Maxar Technologies presentation delivered at the 2019 Aviation, Transportation and Industrials Conference on Thursday, March 07, 2019 at 11:45 AM Seth Seifman: Hi, everyone. We're going to move along here. J.P. Morgan Aviation, Transportation and Industrials Conference. I'm Seth Seifman, the Aerospace Defense Equity Research Analyst. We are very happy to have Maxar here with us to give a presentation and answer some questions. We have Dan Jablonsky and Biggs Porter. Dan is going to kick it off with some slides. Then we'll open things up for some Q&A. Dan, please go ahead. Dan Jablonsky: Great. Thanks very much, Seth. Good to be here today. Thank you for staying around for the last presentation of the afternoon. I am Dan Jablonsky. I'm the CEO of Maxar Technologies. I've been in the position for just over 45 days. As Seth noted, we've been fairly busy during that period of time. Whoops. Obligatory forward-looking statements. Thank you. Everybody knows the information. What I thought we'd cover today is give you a brief overview of Maxar, talk about our markets and key capabilities, and some of the customers that we have. Give a few observations and impressions that I've had during the first 45 days, as well as go through some of the actions we've taken during that period of time. Give you a financial outlook on the company, update our leverage liquidity and cash flows. Then talk about the future and where we're headed and why I think this is a great and undervalued franchise play for a lot of people. A couple of things. First off, Maxar is a global leader. We are number one in many, many markets in which we participate. Those include advanced space technology solutions, geospatial data and analytics, satellite space robotics, space infrastructure, etc. We have over $2.1 billion in revenue, 5,900 employees across the world, primarily located in the 1 US and Canada, and customers in more than 70 countries. If you think about the breakdown of what we have, the imagery business, this is the legacy DigitalGlobe business. It does about $845 million in revenue. The services businesses is a combination of pieces of the business that DigitalGlobe previously bought and had. Analytics -- think about that as very heavy US government focused, and we'll talk about that in just a little bit -- and the space systems business, which is a combination of legacy, SSL, and MDA. It does a lot more than just space systems, but that's the bucket it's lumped into. We'll talk about some of those things. Why Maxar? This is a leader in a growing and stable market, and we'll talk a bit about who the customers are. We are, especially with the stock price today, I'd say an overlooked and undervalued franchise asset. If you think about the customers that we have, the predictive revenue and cash we're generating, we've got some things to work out. We'll talk about what those are as well. I think there's a great opportunity for investments in this portfolio of assets, as the company moves forward. We've got some challenges. We announced that we're maintaining the Palo Alto facilities and keeping the geo-communications portion of the business. That's not so much keeping the geo-communications portion of the business as it is, integrating that into what we think is going to be a success story going forward as we restructure and get back to profitability there but for space capabilities, engineering, manufacturing, and development of on-orbit assets. The MDA business is facing some difficult year-over-year comparables as they roll off a large program called RCM, which is the Canadian RADARSAT program. As they roll that off, you'll see a strong single-digit growth with healthy margins in the mid to high teens in that business. Into the future, as we talk about it, they've won some very large franchise programs or are in the competition for some very large franchise programs that they should win. The Canadian surface combatant electronic warfare suites for that, which also means electronic warfare suites for other navies. 2 The Canadarm 3, which was announced last week, which is the large robotics arm that will go billion-plus dollars' worth of investments. It will go on the lunar gateway NASA is working on to orbit the moon and back into space there. We're at a tipping point in the capital model. Capital intensity is higher this year than it will be in subsequent years. We're finishing off our internal WorldView Legion program which is the recapitalization of DigitalGlobe's earth observation satellite components. We're in the highest capex year of that. We've got a strategy towards scaling the analytics and insight business. End markets, think about them as three key end markets. The US government, that's our biggest set of customers, the most profitable set of customers that we have. We're across a number of agencies. Our penetration there is not going down. What we're seeing is increased budgets, particularly as the world gets more complicated. Intel, intelligence assets, earth observation, the ability to analyze information that's flowing through there, more and more key every day. We have large penetration in US allies, international governments. Think about these as countries that either do or don't have their own overhead architecture. If they do have their own architecture, we're a supplement to that and a resiliency play. If they don't have their own overhead architecture, we're effectively the national reconnaissance office for them. We have an increasing ability to do more and more analytics and behind the firewall applications with those customers. There's a strong growth path for that part of the business. Then commercial. In commercial, we do everything from components for satellites for other companies as a merchant vendor, building satellites for large telecommunications companies. On the imagery side of the business, if you carried a mobile phone around today and used an online mapping application or anything that might use imagery in that way, shape or form, you've used our stuff. Every good business starts with good customers, and we have great customers, and on that we are building the foundation for great business. 3 On the left side, you see many of the logos for our government customers, nation states, defense and intelligence programs that they handle, the largest organizations inside the US defense and military establishments. We've been with them for two decades now, many of them. On the right-hand side, you see commercial customers. The commercial customers are some of the most demanding customers in the world in terms of the applications we do, the resiliency we provide for them, the type of data we provide on a daily and ongoing basis, as well as putting some of their most critical assets in space and managing that aspect of the world for them. You can't have a great business without great customers and great products. We've got both, and that's a great foundation. What we don't have quite correct yet is the capital structure, and we'll talk about that and work on it. The imagery part of business, a quick snapshot for you. It did $845 million in revenue with 61.3 percent margins last year. It has a very healthy backlog, both funded and unfunded, and is a participant in major programs that have existed for more than a decade now, and are growing programs. We've grown them year over year and time over time. We've got a pipeline of very, very compelling pursuits as well for continued growth in the business -- satellite imagery, analytics, information products. Increasingly, we've been able to stabilize the business. It has historically been a very lumpy business, but with analytics and subscription products, we've been able to normalize some of the spikes that we saw previously, and also build a much better, resilient base for the business. We lost a satellite this past quarter. Even though we did that, we were able to hold revenue and EBITDA for 2019 flat. We lost one of five satellites and we're still able to hold revenue and EBITDA flat, and that's because of the resiliency of the business and the customer base that we have. A very exciting piece of work on the services business. Historically and today, this has been a US government-focused business, so doing some of the most cutting-edge analytics, and software development, and intelligence applications for customers. A number of major programs are listed here that support intel missions and otherwise -- a number of programs that aren't listed because they're classified -- for key customers. We're doing sensor- 4 to-ground modernization, data to add insight and analytics, and also agile intelligence. Think of those as code phrases for artificial intelligence, machine learning, and software development, mostly based on a services model. We are able to commercialize the output of that, so as we have deep penetration into the international defense and intelligence customers, nation states, we're able to increasingly grow this business abroad. Some of these applications and intellectual property are able to be productized and used in the commercial markets as well. Very nascent. We're just kind of getting ramped into and starting that.