MDA Space Ltd (MDA) Q3 2026 Earnings Call Transcript

Operator: Welcome to the MDA Space conference call and webcast. This call and webcast are being recorded on November 5, 2026, 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. For those participating via webcast, please note that the company has included a presentation that will advance with today's discussion. If anyone experiences audio difficulties during the conference call, please press star zero for operator assistance at any time. I would now like to turn the call over to Jim Floros, Vice President of Investor Relations at MDA Space.

Jim Floros: Thank you, Vanessa. Good morning, and welcome to the MDA Space third quarter 2026 earnings call. Mike Greenley, our CEO, and Guillaume Lavoie, our CFO, will lead today's call by sharing some prepared remarks before taking your questions. Before we begin, I would like to remind you that today's call is accessible via webcast on our investor relations website. All of our disclosures, including the press release, MD&A, and financial statements, are also available on our investor relations website, in addition to SEDAR+ and EDGAR. 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 presentation and press release, as well as our other public filings regarding various factors, assumptions, and risks that could cause actual results to differ from those expressed here today. In addition, we may refer to certain non-IFRS financial measures. Although we believe these measures provide useful supplemental information about our financial performance, they 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 most recent quarterly report and other public filings for more information, including reconciliations to the nearest IFRS measures. With that, I will turn it over to Mike.

Mike Greenley: Thank you, Jim. Good morning, everyone, and thank you for joining us to discuss our Q3 results and business updates. Q3 was another strong quarter for MDA Space, not just in the numbers, but in what we continue to accomplish and what it says about where the company is headed. I will walk you through both before Guillaume takes you through the financials in detail. To begin, let's start with the headline numbers for this quarter and then the year to date. Q3 was once again a strong quarter, with revenue of CAD 498 million, up 22% year-over-year, leading to adjusted EBITDA of CAD 96 million and adjusted EBITDA margin of 19%. Just take a moment there, because it's like, I had a bit of a moment when I read those numbers myself. When we went public in 2021, five and a half years from now, those numbers were our numbers for the whole year. Now we just did the same amount in the third quarter. It caught me as I was reading those numbers today, just to share. This brings our year-to-date revenue to CAD 1.46 billion, up 29% year-over-year, with adjusted EBITDA of CAD 283 million and adjusted EBITDA margin of 19.4%. This consistent execution reflects a disciplined MDA Space team focused on delivering exceptional financial performance. Our business is performing well, giving us confidence to increase our full year 2026 outlook for both revenue and adjusted EBITDA. Let me walk you through some of the elements behind this consistent execution. We continue to make progress on our growth strategy, with several highlights in the quarter. However, before I get into some of these individual highlights in more detail, I want to reflect on several significant accomplishments throughout 2026 that we expect will help position MDA Space as one of the top space companies in the world. Earlier this year, we announced two pending acquisitions that will expand our global reach. First, with U.S.-based Blue Canyon Technologies, followed by European-based CLS, who operates sites in 19 countries. Both companies are growing, profitable, cash-generating businesses driven by leading technologies and strong operations. Their complementary technologies and footprint provide significant revenue synergies when combined with MDA Space and meaningfully expand our total addressable market. The quarter itself provided a defining moment in MDA Space history, with the successful launch of the initial replenishment satellites for Globalstar, making the first commercial communication satellites delivered by MDA Space to low Earth orbit as a prime contractor. As a follow-up, we are approaching another historical event with the launch of MDA CHORUS, our next-generation Earth observation constellation that will build upon the iconic heritage of the RADARSAT programs with innovative new technologies and operations concepts. In the meantime, we are not standing still on the product innovation side. The capabilities we unveiled this year enhance our position in fast-growing markets where demand is accelerating and our technology is genuinely differentiated. MDA AURORA BLACK and MDA MIDNIGHT are examples of how we continue to evolve and build proprietary technology, responding to real and urgent customer needs. To further complement this innovation, we recently announced LaunchPad Ventures, a new strategic program focused on identifying and investing in the next generation of Canadian space and defense companies, broadening our access within the Canadian technology ecosystem. Underpinning all of this is the manufacturing capacity and production readiness that we have been building. Our expanded Montreal facility, one of the largest high-volume production facilities in its class, and our MDA AURORA space-grade ASIC chips designed and now being shipped, provide us the ability to scale and meet the demand ahead. In addition, we continue to work very closely with the Canadian Space Agency to finalize the scope for Canadarm3, as we repurpose this technology for the lunar surface, with these efforts further supported through collaboration between NASA and the Canadian Space Agency. Since our last earnings call, we have signed a funded task authorization with the CSA to conduct detailed planning for the robotic solutions, interfaces, and mission operations technologies that are being contemplated for the multi-phase moon base. This funding also includes planning activities to identify impacts associated with adapting the large Gateway robotic arm to support LEO missions. We expect to be able to share more details around how Canadarm3 will continue to support NASA's Artemis mission in the near future. Lastly, we have seen order momentum building throughout the year, with awards as a prime contractor for significant digital payload work, as well as for subsystems supporting growth beyond this year. In fact, just last week, we were excited to announce that our most recent award, an authorization to proceed contract with Thales Alenia Space, to begin work on MDA AURORA broadband digital phased array antennas and the digital controller for the 66 Layer 1 IRIS² satellites, an entry point into this European sovereign constellation. The points I want to emphasize here is that MDA Space is executing at a high level. We are expanding our capabilities to capitalize on market demands, we are gaining market traction, and the opportunities ahead are compelling. Now, let me give you a closer look at a few of the key achievements. We achieved a significant milestone this quarter, and the image you see on the slide, for those looking at the webcast, captures this moment. This image shows one of the eight replacement satellites being deployed into orbit this past August as part of Globalstar's low Earth orbit communications constellation. The deployment was a success, as all satellites reached their intended orbital planes, with Globalstar confirming their team established communications with each satellite, and initial health assessments shortly after launch indicated the satellites were performing as expected. As I mentioned earlier, this was the first time MDA Space delivered a commercial LEO communications constellation as a prime contractor, and it marked a key milestone in the history of this company. As prime, we own the program, from design all the way through assembly, integration, test, and delivery. That is a definitive validation of what MDA Space is capable of and what we are offering to the market. What makes this milestone particularly meaningful is not just that we delivered, but how we delivered it. This program saw a major transformation in how we design and produce satellites, enabling us to accelerate development and manufacturing. With our new high-volume manufacturing facility now in operation in Montreal, we are ramping up even further, giving us the capacity to meet growing market demand. We have proven that we can do this, and we can do it repeatedly. The remaining nine more satellites are progressing well and expected to be delivered later this year. Once fully operational on orbit, these satellites will enable Globalstar to extend the life of its existing constellation, which supports direct-to-device satellite-enabled services on select mobile phones and Internet of Things applications. Another defining moment for this company, and one that the team is eagerly anticipating, comes with the expected launch of MDA CHORUS. We have invested significant capital and resources preparing for this moment. This will be the culmination of a multi-year program that, once fully commissioned, will significantly expand the revenue potential of our GeoIntelligence segment. This is more than just a product launch. MDA CHORUS is a complete multi-sensor Earth observation system that brings together satellites, ground infrastructure, and a full suite of intelligence products in harmony to give customers complete end-to-end control of the Earth observation workflow. The result is a three-satellite constellation, anchored by RADARSAT-2, that delivers significant global access coverage. The new C-band satellite images a 700 km-wide swath in a single pass, a width roughly equivalent to 6,400 football fields placed end to end. The new X-band satellite then narrows that view to sub-meter resolution, equivalent to less than the size of a pizza box. Together, they combine broad coverage capability with high-resolution precision, providing day or night imaging in all weather conditions. Once the MDA CHORUS constellation is live, customers will be supported from our mission control center in Quebec, which is already operational and ready to manage the full system. The complete product offering starts with MDA CHORUS COMMAND as the operational entry point for the ecosystem, providing a direct line to the constellation that lets customers plan and task with precision. The next level, MDA CHORUS COMMAND PRO, adds direct regional ground station access for maximum control in the system and faster data downlink with near-real-time local processing. Finally, MDA CHORUS INTELLIGENCE delivers satellite imagery and intelligence reports spanning raw data to fully processed insights built to fit the customer's mission. The market signal ahead of this launch is strong, as we have already announced early customer contracts and letters of interest, providing a strong commercial foundation before the constellation is operational. We expect the CLS acquisition will provide a meaningful accelerant, as it brings an established global sales and distribution network with deep customer relationships in multiple countries. One final note worth touching on. When CHORUS lifts off, it will be 19 years after RADARSAT-2 launched in December 2007. That heritage is what CHORUS is built on, and RADARSAT-2 will not sit idle. It will anchor the constellation from day one, complementing the capability of the two new satellites joining it on orbit. Speaking of CLS, let me briefly update you on the status of the two strategic acquisitions we announced earlier this year and provide a reminder of the strength of the combination of these businesses with MDA Space. We have various work streams ongoing, and our integration team is working diligently to close both acquisitions. I am pleased to report that both continue to progress to the closing timelines that we originally anticipated. While we are still working on achieving all necessary regulatory approvals and other closing conditions, we currently expect the BCT acquisition will close later this year, and the CLS acquisition will be completed in late 2026 or early Q1 of next year. BCT will give MDA Space greater participation in the global space economy through a complementary technology set, as well as a strategic footprint to serve the substantial U.S. defense market. Combined, we expect to unlock meaningful synergies across our portfolio by leveraging MDA's technology and experience to build BCT into a prime contractor while maintaining the ability to pursue classified U.S. government programs. CLS, on the other hand, brings a step change to our Earth observation capabilities, as I mentioned previously. It is expected to be a key revenue accelerant for MDA CHORUS. Upon integration of CLS into our Geo-Intelligence business segment, we expect to be a vertically integrated global space-based geo-intelligence leader, combining upstream satellites and near real-time data services with downstream AI-driven advanced data analytics. On a pro forma basis for 2026, BCT and CLS combined would have contributed almost CAD 700 million in additional revenue. Both companies fit nicely with our 2026 adjusted EBITDA margins expectations of 18%-20% and our established profitable cash-generating businesses. In addition, CLS is expected to double our recurring revenue as a company to over 30% of our annual revenue. Together, these acquisitions will reinforce our position as a global space company. Also supporting our growth strategy, we continue to invest in innovation and advancing our technology portfolio. In September, we unveiled MDA AURORA BLACK, an extension of our software-defined MDA AURORA product line, adding purpose-hardened layers of protection and resilience against cyber, physical, and other evolving threats. AURORA BLACK is designed to deliver secure, resilient, and agile communications for government and military customers, helping countries maintain tactical and strategic communications that are essential to data-centric operations. With enhanced features such as secure end-to-end connection, customizable protected waveforms, onboard anti-jamming capabilities, resistance to GPS spoofing, and perimeter and proximity sensing, MDA AURORA BLACK offers elevated mission assurance in contested environments across our direct-to-device and broadband product lines in both LEO and MEO orbits. Underpinning this latest offering is our MDA AURORA product line built on proprietary technologies that provide customers with capabilities not widely available in the market, reinforcing our competitive position. Our IP portfolio safeguards key technological differentiators of the MDA AURORA product line, including the overall architecture, subsystems, digital payloads, as well as both in-orbit and on-ground calibration. Our direct radiating array antennas and digital beamforming technologies are enabled by proprietary chips, with multiple patents securing exclusivity for this chip technology. Our innovation pipeline remains strong, with new patent filings supporting our next-gen MDA AURORA products. Overall, our AURORA patent portfolio reflects our commitment to innovation protection and is comparable in scale and scope to those of other leading companies in the digital satellite communications sector. MDA AURORA BLACK responds to growing international demand for sovereign and resilient space-based defense communications infrastructure and positions us well to meet that demand. Before I hand it over to Guillaume, I want to spend a couple of minutes on what this all means for MDA Space, because when you take everything I shared today and put it alongside the contracts we have secured and the opportunities in front of us, what emerges is a company with tremendous momentum and a very long runway ahead. Let me walk you through a select handful of awards from this year and opportunities we see ahead, because it tells a compelling story. On the contracted side, this year we have demonstrated the depth and quality of our customer relationships. Our Telesat Lightspeed contract was expanded to support connectivity across the Canadian Arctic as part of the Enhanced Satellite Communications Project – Polar. We confirmed an order for over 1,300 antennas from Airbus. We were contracted by the Canadian Space Agency to manufacture a replenishment satellite that will expand the RADARSAT Constellation Mission from three to four satellites, all of which are repeat orders that speak to the trust these customers place in our capabilities. Beyond that, longtime customer Mitsubishi Electric contracted us for a next-generation defense communications satellite program. As I mentioned previously, we received an authorization to proceed contract to support Europe's IRIS² constellation, both of which demonstrates how our next-generation digital payload technologies are enabling international opportunities. In addition, we secured a contract to deliver three ground-based optical observatories to support the Surveillance of Space 2 Space Domain Awareness Program for the Department of National Defence. Our 49North team renewed its long-term contract with the US Air Force for our Global Procedure Designer services. I want to highlight the pattern here. Many of these awards are from customers who come back to MDA Space. This is not a coincidence, but a direct reflection of our execution track record. Customers come back to MDA Space because of our advanced technologies, our ability to deliver, and the heritage that comes along with that. While these awards make up almost $4 billion of backlog, a number that continues to hold quarter after quarter, the view ahead is equally compelling. Our $40 billion opportunity pipeline underpins our confidence to continue our growth trajectory beyond the next couple of years. This includes $10 billion of down-selected or follow-on opportunities, including the ESCP-P program, where the government of Canada announced that we will serve as the prime contractor responsible for end-to-end mission delivery of the UHF and X-band services, positioning us for what is expected to be a major long-term program. Beyond this, we see meaningful opportunities around civil and defence Earth observation missions, additional demand for sovereign and commercial satellite communication networks, and opportunities for MDA SKYMAKER and MDA MIDNIGHT through early positioning in lunar robotics, in-orbit servicing, and commercial space stations, markets we believe are in the early stages of a significant long-term growth cycle. For those looking at slides, the slide on the screen demonstrates a company that is executing today and building for tomorrow across multiple programs, markets, and geographies. The contracted awards reflect the quality and loyalty of our customer relationships, and the opportunities reflect the breadth of what is ahead. The combination of both gives us a great deal of confidence in the growth trajectory of the business into 2027 and beyond. With that, I will hand it over to Guillaume to take you through this quarter's financial results.

Guillaume Lavoie: Thank you, Mike. Good morning, everyone. I will now take you through our Q3 financial results in detail, starting with headline numbers, then moving through backlog, cash flow, and into our full-year outlook. Total revenue for the third quarter was CAD 498 million, an increase of 22% year-over-year, mainly driven by higher volumes of work in satellite systems and geointelligence. Satellite systems contributed CAD 358 million, up 26% year-over-year, driven by the increased volume of work on the Telesat Lightspeed program. Robotics and space operations contributed CAD 80 million, up 2% year-over-year, reflecting a steady volume of work on the Canadarm3 program. Geointelligence contributed CAD 60 million, up 25% year-over-year, driven by higher volumes of work across programs, including the ISTAR program for the Royal Canadian Navy. This stronger revenue resulted in gross profit in the quarter of CAD 126 million, an increase of 17% over the same period last year, while gross margin of 25.3% was a decrease compared to 26.4% in Q3 of 2025, driven by a change in program mix. Adjusted EBITDA for the quarter was CAD 96 million, up 16% year-over-year, driven by the higher volumes of work. This translated into adjusted EBITDA margin of 19.3%, a slight decline compared to 20.2% in the third quarter of last year due to a change in program mix and higher planned investments in SG&A. Adjusted EBITDA in the quarter, however, was consistent with our full-year margin guidance of 18%-20%. Adjusted net income was CAD 60 million, up 26% year-over-year, which translated into adjusted diluted earnings per share of CAD 0.37 in the quarter, unchanged year-over-year, as the higher adjusted net income was offset by a higher number of shares outstanding following our share issuances in March and in July of this year. Turning to backlog, we ended Q3 just under CAD 4 billion, a decrease of CAD 444 million compared to the third quarter of last year, but in line with the previous quarter. We are encouraged by the order momentum over the past two quarters as the pace of bookings has increased, resulting in gross bookings of approximately CAD 1.6 billion through the first nine months of 2026, reflecting our ability to translate opportunities into firm contracts. This momentum has continued in Q4 with our recent announcement highlighting an award to begin work on supplying digital antenna subsystems for the IRIS² satellites. In fact, over the past 10 quarters, our backlog has averaged over CAD 4 billion, demonstrating the tremendous job our teams have done to capitalize on the demand environment in establishing a new baseline for the business. While our significant backlog provides revenue visibility for 2027 and beyond, our CAD 40 billion opportunity pipeline, including CAD 10 billion in down-selected or follow-on opportunities, gives us confidence that we can grow our backlog further. Shifting to cash flow. Year-to-date capital expenditures were CAD 190 million compared to CAD 168 million last year, keeping us on track with our stated full-year CapEx guidance range of CAD 225 million-CAD 275 million. For the first nine months of the year, operating cash flow was CAD 74 million compared to CAD 353 million for the same period in 2025. The year-over-year difference reflects normal and expected working capital fluctuations on our major programs. However, the third quarter saw a positive working capital contribution, resulting in operating cash generation of CAD 106 million for Q3. Free cash flow for the first nine months of the year was negative CAD 116 million, compared to positive CAD 185 million for the same period in 2025. That swing reflects both the working capital normalization I just mentioned, as well as higher capital expenditures as we continue to invest in the infrastructure that supports our growth. In the quarter, we were able to translate this strong operating cash flow result into CAD 62 million of positive free cash flow. From a balance sheet perspective, we are in a very strong position as we close the quarter with a net cash position of CAD 1.3 billion. We ended Q3 with total liquidity of CAD 2.9 billion, including cash on hand of CAD 2.2 billion, largely driven by the net proceeds received from our issuance of common shares and senior unsecured notes. The majority of this cash is earmarked to fund the closing of our BCT and CLS acquisitions, leaving us well-capitalized heading into the closing of each transaction. Turning to our outlook, on the strength of our year-to-date execution, we are raising our full year 2026 guidance. We now expect revenue in the range of CAD 1.9 billion-CAD 1.95 billion, which implies a year-over-year growth of approximately 18% at the midpoint and is up from our previous range of CAD 1.8 billion to CAD 1.9 billion. We are also raising our adjusted EBITDA guidance to a range of CAD 355 million-CAD 375 million, which implies year-over-year growth of approximately 13% at the midpoint and is up from CAD 330 million to CAD 370 million previously. The rest of our guidance remains the same as we continue to expect adjusted EBITDA margin of 18%-20%, capital expenditures to fall within CAD 225 million and CAD 275 million, and free cash flow to be neutral to negative. As a reminder, our 2026 guidance continues to exclude contributions from BCT and CLS acquisitions, as both transactions remain subject to regulatory approvals and closing conditions. In closing, we made substantial progress on our growth strategy this year while continuing to deliver exceptional financial performance. I want to thank the entire MDA Space team, as they are the driving force behind our success. With that, operator, we are ready for questions.

Operator: Thank you. Ladies and gentlemen, we will now begin the question-and-answer session. Should you have a question, please press star followed by one on your touch-tone phone. You will hear a prompt that your hand has been raised. Should you wish to decline from the polling process, please press star followed by two. If you are using the speakerphone, please lift the handset first before pressing any keys. We ask that you please limit yourself to one question and one follow-up question to allow enough time for others to enter the queue. Individuals can re-enter the queue if needed. We have our first question from Adam Samuelson with Jefferies.

Adam Samuelson: Yes, thank you. Good morning, everyone.

Mike Greenley: Morning.

Adam Samuelson: Morning. Mike, I guess maybe the first question is on Telesat and your backlog and their program kind of deployment schedule. I mean, they had some public comments last week around delaying the launch and alluded to kind of some software integration challenges or issues on some of the initial pilot satellites. Can you just provide an update on kind of where you are in terms of executing on that program? It does not seem like from the revenues that there is anything, or the outlook, if there is anything in your business that is really changed, but how do we think about a change in deployment schedule for them and the launch schedule to impact your revenue realization into 2027?

Mike Greenley: Yep. The key point that you mentioned there is that there is no change to our financial forecasts for the business or for Telesat Lightspeed. The discussions that are ongoing and the discussions coming out of Telesat's latest earnings call, just talking about the progress on their evolving network and what their planned schedules are. Obviously, on the scheduling side, there is a lot of moving parts that work together to create a schedule. It is always up to Telesat to talk about their program and their schedule with countering and balancing all the pieces in terms of completion of the satellites, the other parts of the network and system, and the access and availability of launch. So all that works together that contributes to them talking about schedule. For us, we continue to make really solid progress. We are completing the Pathfinder satellites. We are assembling all the elements to be able to go into full production of the satellites. So that remains sort of on pace for us. From a hardware perspective, we are in a solid place. As was mentioned, software development, which includes MDA Space software development and Telesat software development, continues to be completed with all expectations that, of course, the Pathfinder satellites will be completed prior to the recently communicated launch dates.

Adam Samuelson: Okay. All right. That is helpful. If I could just ask a follow-up, maybe this is for Guillaume Lavoie, as we think about the cash flow outlook for the year, reiterated for this year, how do we think about cash conversion moving into 2027? I mean, you finished the Montreal kind of facility investment. Would not think there is the capital, the CapEx needs are quite as significant. So should we think about an improvement in free cash conversion as we move into 2027 and 2028?

Guillaume Lavoie: Yeah, thanks for the question, Adam Samuelson. We are not ready to guide for 2027. We are right in the middle of our planning process. We will come to the market in early March with a more defined financial plan. This year, we maintain neutral to negative. We had a good third quarter. We have consumed a bit of cash year to date. Our teams are executing very well. We monitor all the inflows, the outflows, and we are managing that part of the free cash flow. We are also investing as per our plan in terms of the CapEx. For the fourth quarter, we could see a bit of consumption of cash. Again, there is a lot of things in flux, and we feel comfortable with our current guidance. With regards to 2027, we are going to be ramping up on some new contracts. Mike Greenley talked about those. That is all really exciting. It is going to come with some cash advance, obviously. There is a bit of an offset because we continue to be very busy with the Telesat Lightspeed contract, which will continue to consume a bit of working capital. On the CapEx, maybe a final point on that. You are right, we are ramping down on the capital intensity for the Montreal facility. With that said, we continue to have a lot of growth in front of us. Mike Greenley talked about product development, so that will entail some spending, and particularly surrounding chip development and things of that nature. Again, we will come with more details in the future. At the end of the day, we have been consistently converting EBITDA into operating cash, and then we have been able to fund our growth. Over the past five years, we have spent CAD 1.25 billion that we reinvested in our product lines and new facilities and things like that. We will continue to generate cash and allocate the capital to fuel our future growth.

Adam Samuelson: All right, great. That is all very helpful color. I will pass it on. Thank you.

Mike Greenley: Thanks.

Operator: We have our next question. Our next question comes from Aravinda Galappatthige with Canaccord.

Aravinda Galappatthige: Good morning. Thanks for taking my questions. I wanted to just focus on sort of the opportunities ahead of you, primarily focusing on Europe. I know it's been a sort of a relatively small piece of your mix geographically, but looking at what's coming up, wanted to get your updated thoughts. Obviously, there's talk of a sizable German constellation coming up, and then I know that with the CLS acquisition and also sort of the investment coming out of CSG, your links in Europe sort of strengthen even further. I was looking to see if there's some additional color on that front. Thanks.

Mike Greenley: Yeah, I think you're right. I think Europe does represent an increasing opportunity. I think that the authorization to proceed for us to provide digital payload elements for the IRIS² constellation, I think that's a really strategic entry point into a large European communications constellation that will have opportunities to grow as we go forward into the future. It's a really strong signal that our technologies are very relevant in the marketplace to a level where sometimes even when you're really searching for the maximum level of domestic content that you are enabling, in this case, Canadian technologies to be inserted into a European constellation. I think that's a really important signal to the market. I think that we see an increase in sovereignty programs all over the world, which includes Europe, as countries want to have increased control over their communications constellations from space and their Earth observation constellations from space. That posture increases the numbers of opportunities, increases our dialogue with folks in those countries around our ability to deliver, our ability to partner, and contribute to become a bigger part of the community. I think that Canada's increased conversations with Europe in terms of enhancing the collaboration between Canada and Europe tightens that relationship and increases the opportunity for us for partnership. As you mentioned, our investment in CLS and having a strong part of our business in geointelligence being led out of France, I think that's going to be extremely strategic and differentiated for us in terms of relationship with the European community. I think all these things will work together to cause increased activity. You mentioned the German thing, German constellation opportunities, and of course, Canada's relationship with Germany as a result of the submarine deal results in a strong desire to share industrial capability back and forth between Canada and Germany, which creates significant opportunities there as well. All these things are real. They take time to work through, obviously. As you see in the news, there is a lot of activities between Canada and Europe looking at how we can do more together and work more closely together. Our capabilities certainly have a strong potential to be part of all that.

Aravinda Galappatthige: Thank you.

Operator: Our next question is from Thanos Moschopoulos with BMO Capital Markets.

Thanos Moschopoulos: Hi, good morning. On CHORUS, you mentioned the contract traction you have had there. If you could clarify the nature of some of that business. Is that augmenting purchases that clients still are making from RADARSAT-2, or is this some new clients that you are signing on as well? It is just some color in terms of the customer base that you are seeing for that. Thank you.

Mike Greenley: Yeah, for sure. It is both. Certainly, I think, I do not have an exact number in my head, but from recollection, it was like well over a third of our letters of intent that will lead to future contracts were from new customers. You have a really strong mix of customers that have been with us for over a decade that want to keep going or, in a number of cases, expand the services we deliver to them as a result of CHORUS, especially with CHORUS' tipping and queuing capability. That is a very attractive offering to customers that are looking for real-time and near-real-time data services and information and intelligence services. That is really strong. A number of new customers that are in play for sure, like I mentioned, as a result of that. In terms of the status of these things, there has been a number of letters of intent that we mentioned previously. A number of those have turned into contracts already. There are definitely other ones in active negotiation, where contract documents are going back and forth between us and the purchasing party. It is a very active environment as we approach launch. It is a very positive feeling around the whole thing.

Thanos Moschopoulos: Great. Canada is working on the new national space strategy. What would be on your wish list for that in terms of how this shapes up?

Mike Greenley: Our wish list for national space strategy. I think that Canada has an opportunity at the national level to be a real leader in space. I think that we talk about, or not we, I do not talk about it, but the government talks about being a leading sort of middle power and working across middle powers in the market. Canada has an opportunity to be a leading or the leading space middle power as we go forward into the future. We have really strong space programs that are evolving in defense. You have heard of us, our history providing surveillance, our history providing surveillance of space assets that are tracking all the satellites in space, the recent announcements around ESCP-P to provide communications in the Arctic. There are other significant programs as Canada kind of stands taller and more independent on satellite-based communications for the military and on satellite-based Earth observation for the military. There are a number of programs on the civilian side to expand Earth observation activity and the activities going forward to the moon for Canada to be an increasing part of Artemis program, not just with NASA, but with other countries as well, as they want to do things in both LEO and in collaboration towards the lunar activities. Then with launch, there is a growing demand for launch around the world, and the focus on sovereignty increases the opportunity, not the opportunity, but the interest in people having sovereign access to launch. Launch has a geographic component to it, where, for example, in the center of continental Europe, you really do not have the opportunity to launch because you are launching out over dense populations. The ability to launch off the east coast of Canada, for example, is very strategically relevant internationally. So for Canada to really have a strategy that says we can absolutely, with our 60-year history, design space capabilities here in Canada, build those space capabilities here in Canada, build those space capabilities at high volume, build those capabilities in collaboration with other countries as required, and hopefully soon launch those capabilities from Canada as an integrated space program and space as a key element of our middle power posture with other middle powers that we are collaborating with. That is the type of vibe that we would like to see in a space strategy or a space act, I think, moving forward. Certainly all indications are that that could trend in that direction. We see yesterday, last night, Canada announced a new President to the Canadian Space Agency, and it will be really interesting to see how his interests click into this and his skill sets now come to help really leverage the Canadian defense space industrial base, I mean, to be able to contribute towards some kind of a strategy like that.

Thanos Moschopoulos: Thanks, Mike. Appreciate the color. I will pass the mic.

Operator: We have our next question from Justin Lang with Morgan Stanley.

Justin Lang: Yeah. Hi. Good morning. Thanks for taking the questions. Mike and Guillaume, I think you suggested last quarter that growth at Satellite Systems in the second half would be a bit more muted, and obviously very strong performance here in 3Q. Just want to understand maybe what changed and what we should expect from SatSystems to close the year here. Thanks.

Guillaume Lavoie: Yeah, maybe I'll take that one. Good morning, Justin. We are very, very pleased with how the team has performed at SatSystems. As you know, our revenue comes essentially from our backlog, so it's all about execution. When we entered the second half, we did our planning, and we were transparent, as we were at the time, expecting a bit of a slowdown due to a reduced level of activity on the Globalstar program. With that said, there was a lot of activity on the supply chain side of things that allowed us to recognize a little bit more revenue. We expect that the team will continue to perform in the fourth quarter, and that's why we have now raised our guidance for 2026. Initially, we were looking at a 10% year-over-year growth for the business. That's the entire business, not just Sat Systems, and now we're expecting 18%. That's really good. Again, it's our teams that are performing and delivering, which is good. It's all about execution. Now we have pretty good visibility, right, for the fourth quarter. We expect that at the higher end of the range, that revenue would be actually quite similar to the third quarter. Then because it's all about execution, we keep always a bit of wiggle room. That's why we kept a CAD 50 million range on the top line, just to make sure that we can deliver to the expectations. All of this is very positive. It's all about execution, and we're demonstrating again that we're progressing on all our contracts, obviously in Sat Systems, but also throughout the business.

Justin Lang: That's great color. Thanks. Maybe just one for Mike. I wanted to ask about Falcon 9, and whether you lose sleep at all over the potential for SpaceX to sunset that program in the coming years. In your conversations with customers, are you picking up on any new anxieties around maybe announcing or trying to finance new constellations when the launch picture might be a little more murky? Thanks.

Mike Greenley: Yeah. I'm not losing sleep yet, but it's a legitimate watch point, as you know. I think the global community is keeping watch. I think that our current programs, our current customers, they have access to launch. They seem to have launch arrangements, and I'm not feeling any heightened anxiety in the current programs and portfolios that we're talking to. The orders that are coming in, folks have plans related to launch. But it is a global topic of conversation as commercial investments in space continue, as government investments in space continue, as the U.S. wants to expand domestically its launch cadence in the United States, and lean even more heavily on the SpaceXs of the world. It's a legitimate watch point. We certainly, or I certainly, as a space company leader, get more involved globally with folks talking about launch capacity, launch programs, and contributing to conversations to ensure that customers are not slowed down by access to launch moving forward into the future. It's not a losing sleep topic at the moment, but it is a pay attention topic at the moment.

Justin Lang: Got it. Makes sense. Thanks.

Mike Greenley: Okay.

Operator: Our next question comes from Erin Kyle with CIBC.

Erin Kyle: Hi. Good morning. Thanks for taking the questions. Maybe just as a follow-up to one of the earlier questions. As we think about progress on Telesat Lightspeed so far, could you guide us on what remains in the backlog for that contract, or what percentage of the backlog Lightspeed represents? Then maybe as it relates to Telesat's update, is there any milestone payments that MDA is expecting related to the completion of those Pathfinder satellites, or any change on the cash flow side? Thank you.

Guillaume Lavoie: Good morning, Erin. I'll take that one. Yeah, sounds like it. Thank you, Mike. Good morning, Erin. Look, on the backlog, we still have a substantial backlog on the Telesat contract. It's going to continue to generate revenue for us, obviously beyond 2026. So we expect revenues in 2027, 2028, 2029. So we're sitting at around CAD 1.4 billion in backlog for the contract. Then to your question surrounding the cash inflows or milestone payments, we have a pretty sort of detailed milestone payment plan that's broken down in many, many steps. So there's no major payments expected for the Pathfinder satellites. Everything is broken down in small steps that come with smaller payments, but that's good because then we get consistent inflows quarter over quarter as we progress. So that's a good thing. So no major payment related to the delivery of the Pathfinder satellites.

Erin Kyle: Okay, that's helpful. Thank you, Guillaume. Maybe just if I could ask one more for you. Just on the guidance, the revised guide on the margin side, just looking at the implied guide for Q4 at the midpoint, it does seem to imply a step down in Q4 margins. Is there anything to call out there, or is it just reflecting some conservatism in the range that you've given for the year?

Guillaume Lavoie: Yeah. Thank you, Erin. That is a great question. Look, one thing that we do not want to do is to start changing our guidance too much, and we are not trying to be too precise here. We are reaffirming that this year will be 18%-20%. Our performance this quarter was pretty good. Year to date, we performed well. Yes, if you look at the math, you get closer to, I think, 18% for Q4. We will see where we land at the end of the year. Again, we will be within our range. There is nothing particular to call out, with the exception of the fact that we are investing in scaling up our business. That is really, really important to us. I mean, we are not necessarily focused that much on the next 12 months. We are focused on the big goals. As Mike stated, we want to be one of the top space companies in the world. We used to be a CAD 400 million-CAD 500 million business not so long ago, as Mike said, and now we are going to be this year close to CAD 2 billion. That comes with the need to scale up throughout the business, and you have seen our results, and you can see an increase, a gradual increase in SG&A spending. I mean, we need to invest in IT, we need to invest in AI capabilities, but also R&D. We are working already to continue to enhance our product roadmap, and so we need to invest. Nothing major here to call out, but that is a trend that is likely to also continue into 2027. Again, we will be within our range for the year.

Operator: Thank you. We have our next question from Seth Seifman with J.P. Morgan.

Seth Seifman: Hey. Thanks very much, and good morning, everyone. I definitely heard what you said earlier about not getting into 2027 yet, but I think we had spoken on the last call about kind of solidly double-digit organic growth next year, and I just wanted to see if that is still the case.

Guillaume Lavoie: Hey, Seth. We are poised to see another solid year of growth next year. We are not ready to call out a specific number. We would expect solid growth, double-digit growth on the current business. What is happening essentially is that next year, we will continue to drive a lot of revenue coming out of Telesat. I have talked about the backlog there. There is still a lot of work ahead for us on that program. Canadarm3 will be a steady contributor to revenue next year. We have talked about that already, like the Globalstar next-generation LEO constellation work will start to gradually ramp down. With that said, we have booked a lot of orders, and we are very pleased about the commercial developments. We have the additional satellite for the RADARSAT constellation. We have the new Mitsubishi Electric contract. We have the antennas for Airbus on the OneWeb constellation. We just announced a subsystem contract for the IRIS² constellation. In addition to that, I mean, we are going to see solid growth in the Geo-Intelligence segment coming partly from CHORUS, but also on existing programs on the non-space defense side of thing. From our perspective, there is going to be growth, solid growth next year on our current business. When we look at the addition of CLS and BCT, that is going to be meaningful revenue added to our top line. I mean, on a pro forma 2026 basis, it is like CAD 700 million. From our perspective, we continue to grow this business. We allocate capital to fuel our growth. Sometimes it is growth CapEx, but sometimes it is also M&A. All of that combined will result in a very, very significant growth for MDA Space in 2027. We will come with some more details in a few months.

Seth Seifman: Okay. Excellent. Thanks. Maybe a little bit bigger picture. You talked about the strategy of being a leading provider of space capability for sovereigns around the world. You also have talked about potentially becoming a prime in the U.S. and doing more in the U.S. When you think about those two different strategic routes, are there ways in which they are exclusive? Is it possible to do both? To the extent that the desire is to be a provider and a leading provider, and perhaps the leading provider to a lot of the world ex-U.S., I guess, why, and what gives you the confidence, and what makes their priority to also invest and look to grow in the U.S.?

Mike Greenley: Yeah. We are actually uniquely positioned to be able to do both as a standalone space company headquartered in Canada with very, very high levels of R&D and development and high-volume production of full satellites, but of course, as a result of that, the satellite sub-elements here in Canada. In terms of having an acquisition in BCT in the U.S., leading to the, what will be the creation of MDA Space USA, and having that under the appropriate structures that can deliver to the U.S. government, the U.S. Department of Defense as a prime contractor in the United States, that is a strong position in itself that gives access to well over half the world's space market. That's a very important footprint. That team, being 18 years experienced, with the support of the corporation, of course, is going to be fully capable of delivering our product lines, MDA AURORA, MDA MIDNIGHT, for example, very, very strong world-leading technologies into a very strong market. The fact that we've invested in products really also enables this stuff, whereby we've productized MDA AURORA, we're productizing MDA CHORUS, we've productized our robotics in MDA SKYMAKER, which means that we can take a U.S. entity, for example, and set up the assembly process. And set up the supply chain to deliver into it, so that they can produce and deliver domestically in their country. Similarly, that same product base can be partnered with folks in Europe to be able to assemble and deliver, if necessary, domestically in Europe. Our product base on something like a satellite, it could be configured to be majority U.S. components and subsystems and a U.S. solution, and built and delivered in the United States, and it can be configured to be a large majority European components and subsystems, and assembled and delivered as a European product in Europe. Because all the design processes have occurred here in Canada, then they're largely, they are like ITAR-free, so they're not managed by the U.S. government's State Department's export processes like all the U.S. technologies would be. We are uniquely positioned to be able to take a really strong product and technology base that we've developed and matured here in Canada, and then create a solid standalone business unit in the United States that can act as a U.S. prime and have the appropriate business development, management, and execution in the U.S. to take care of the U.S. market, while we collaborate and partner with new friends in Europe to be able to deliver into that market at the same time.

Seth Seifman: Great. Thank you. Thanks very much.

Operator: Our next question is from Ken Herbert with Royal Bank of Canada.

Mike Greenley: Morning, Ken.

Ken Herbert: Hey, good morning, Mike and Guillaume. Mike, I wanted to take a step back. You have obviously talked a lot about increased opportunities across defense, and even before we think about BCT and the other CLS in Europe. As you look to 2027, without getting specific on numbers, but where do you see the best sort of optionality? You talk about the opportunity pipeline today. Where do you see the best opportunity to really convert that into bookings in 2027?

Mike Greenley: Yeah. We'll work on talking about the future a little bit as we come in to giving guidance for 2027 in March. Guillaume and I have started the process of thinking about how to help everybody understand the future. On some of these larger defense programs, like something like an ESCP-P, for example, in Canada, which is a public topic of conversation, these things come in phases. These are very, very large programs that are in the billions of CAD range that come in chunks. We've done a little bit of work over the last year on ESCP-P, obviously seen a strong contracting piece of it in the military Ka portion to Telesat to leverage the Lightspeed constellation that's resulted in us getting CAD 500 million of additional orders there as just one initial bite out of that program, but there's other significant pieces to come. They'll come in orders. I think those types of programs will start to generate orders, but they'll come in chunks because military programs, especially when you're the prime, you have to go through definition phase activities to be able to get things all planned and organized, and then you'll get larger and larger chunks as you get in and closer to and into full production. We're going to work on how to help people characterize and understand that a little bit, but I do expect in the coming months to start to see movement on some of those. I think we'll start to see more opportunities that we can talk about, if we can figure out how to do that. Then we will for sure continue to see the opportunities to contribute technologies and getting orders on military programs, like you saw us do this year with things like contributing to IRIS² or things like contributing to Japan defense satellites with Mitsubishi Electric and our continued orders into U.S. primes for U.S. systems. I would expect those types of things to continue through the year where we're partnering and supplying elements. It'll be getting orders on part of military programs and partnerships internationally, and then talking about the next phases of contracts where we can be the prime in Canada.

Ken Herbert: Thanks, Mike. I will pass it back there.

Mike Greenley: Okay.

Operator: Our next question is from Doug Taylor with National Bank.

Doug Taylor: Yeah. Thank you. Good morning. Maybe a related question, Mike. Can I ask another question about IRIS² and your ambition?

Mike Greenley: Yeah

Doug Taylor: You referred to that as an entry point in your prepared remarks. It is clearly a large program. Can I get you to comment on what success there might look like? Is it for antennas for the full program with layer two, or are you angling for more content per satellite on all the layers as that supply chain is finalized? How should we think about that opportunity?

Mike Greenley: Yeah. The way I think about it is we have a lot to offer these types of programs. We have full satellite technical solutions in MDA AURORA for digital, like the most modern digital communications. That is in high production. That can deliver very quickly, probably as quick as anyone else could deliver or faster than others can deliver in the world at that level and sophistication of a satellite. We are here, we are available, and we are ready to go. However, those programs have high geopolitical and geo-content elements to them. When governments sponsor large multi-billion dollar or multi-billion EUR initiatives like that, they want to be doing their best to exercise and advance their domestic industrial bases. The entry point kind of comment is that, right now, and the critical element to ensure a modern digital communication satellite, we are here. We can take the MDA AURORA antennas, we can take some of the core elements, we can provide those into Thales Alenia Space, and we can enable them to have a modern capability in the first layer. As their industrial base picks up their orders and continues to perform as announced, that may well work out well. There may be other places, though, where our ready-to-go aspects of our solution in the digital systems level, at the bus level, at the full satellite level, whatever, we are just here, and we are on the team. As the Canada-Europe relationship gets tighter, as we build stronger relationships with partners in Europe to be able to deliver these systems, as we ourselves become more present in Europe following the CLS acquisition, I think that there will be more opportunity for us to be able to offer more into these programs. If they hold their ambitions around schedule, and we are here with proven technologies that are going to have heritage that are ready to deliver, then I just think that we will do as much as we can to be helpful in those environments while those governments are trying to also balance their geopolitical situation. Does that make sense?

Doug Taylor: Yeah, it does. Thank you for that added color, and let me squeeze in my follow-up. A few press releases recently around supporting new drone programs with 49North.

Mike Greenley: Yeah.

Doug Taylor: It's been some time since MDA had a material drone-related business. I think you need to go back a decade. Perhaps you can help us think about how you guys are sizing up that opportunity and where you think MDA could generate meaningful business there.

Mike Greenley: Yeah. If you look at historical drone contracts in Canada, 49North is one of the, if not the, larger drone program deliverers into the Canadian military. So we had the contracts to deliver and operate the drones with the Canadian military in Afghanistan. That same team had contracts with non-government organizations delivering drone activities and services to monitor activities in Ukraine pre the Russian invasion. So those are pretty modern drone programs there. That team has a strong position on the RPAS program with General Atomics, which is delivering the Currently in active, we are actively part of the team delivering the drones, those General Atomics drones on RPAS into the Canadian government. We've just won, in the last 24 months, we've just won the RCN ISTAR program. We are delivering the drones to the Canadian Navy to be able to operate off the surface ships in the Canadian Navy. We are modern, we are current, we have active contracts for drone deliveries, activities with the Canadian military today. Therefore, that team is naturally signing agreements and collaboration things whereby we can produce more and be part of more for Canada's drone posture moving forward into the future, in addition to some of the things that you might see whereby, as Canada wants to be more collaborative and be more supportive of Ukraine, our industrial base can do more there, and we're part of that. We can, through our partnerships, stand up and do more to help Canada provide capability to countries that are part of its foreign relations program. So, that remains an important element. The autonomous systems remains an important element of 49North's future.

Doug Taylor: Thank you.

Operator: That is all the time we have for questions today. Please reach out to the IR team with any further questions. I will now turn the call over to Mike Greenley for closing remarks.

Mike Greenley: Okay. Well, thanks very much. Hopefully folks have picked up the message here of another strong quarter. It is always great to have a beat and raise moment, and we will take them whenever we can get them. We appreciate the dialogue around that. We will stay focused getting closed and be back in the new year to talk about how that ended and then answer all the questions everyone is looking for in terms of talking about 2027 and beyond, as we pull all that together. We will work hard here to get these acquisitions closed and hopefully have a bigger story to tell when we talk again in March. Thanks very much, everyone. Have a good holiday season.

Operator: Ladies and gentlemen, this concludes today's conference call. We thank you for your participation, and you may now disconnect.