Shares of Maxar Technologies (MAXR) are under pressure on Thursday despite better than expected quarterly results, after the space company announced another delay to the launch of its next-generation imagery satellites. Following the news, Canaccord analyst Austin Moeller downgraded the stock to Hold, saying the successive delays of the initial Legion constellation launch continues to push out the incremental revenue and EBITDA generation from their new cutting-edge telescopes.
RESULTS: Maxar Technologies reported second quarter earnings per share of 60c and revenue of $473M, both better than the expected 14c and $441.4M, respectively. For the three months ended June 30, 2021, adjusted EBITDA was $132M and adjusted EBITDA margin was 27.9%. This compares to adjusted EBITDA of $138M and adjusted EBITDA margin of 31.4% for the same period of 2020. Maxar reported total order backlog of $1.5B as of June 30, 2021 compared to $1.9B as of December 31, 2020. "The decrease in backlog was driven by decreases in both the Earth Intelligence and Space Infrastructure segments. Our unfunded contract options totaled $0.9 billion as of June 30, 2021 and December 31, 2020, respectively," Maxar said.
The company's CFO Biggs Porter also said that, "Guidance remains unchanged from what we issued in the previous quarter […] Revenue guidance for Earth Intelligence remains unchanged from what we issued at year end, with a targeted range of $1.05 billion to $0.095 billion. […] Revenue expectations for Space Infrastructure remain in the range of $735 million to $770 million and we expect revenues to remain roughly consistent with Q2, as we continue to execute on commercial awards. […] At the consolidated level, our guidance for adjusted EBITDA also is unchanged. We've not changed our operating cash flow guidance and we expect to be free cash flow positive in the second half of the year and the full year."
SATELLITE LAUNCH DELAY: During the company's earnings call, Maxar CEO Dan Jablonsky said: "Moving to WorldView Legion, we have decided to delay the launch from the fourth quarter of 2021 into next year. This isn't a decision made lightly. There are two key drivers since the last update. First, while Honeywell [HON] has delivered the Reaction Wheel Sets for the first two satellites, the hardware from Raytheon [RTX] is coming to us later than anticipated. […] The Raytheon teams have been working hard and the second instrument should arrive in September, followed by the other four this fall. However, we had expected both of the first two instruments to reach us in July, and this has had a negative impact on schedule.
"Second, the return to work in California post the lifting of COVID restrictions on June 15th, while very positive for a variety of reasons, has not led to the achievement of the schedule we anticipated with our integration, testing and software teams, and of course, we're now all watching the Delta variant closely. […] While we continue to look for ways to reliably accelerate production and test, we now expect the launch time for in-between March and June next year for the first launch. We are continuing our progress with the other four spacecraft."
MOVING TO THE SIDELINES: Canaccord analyst Austin Moeller downgraded Maxar Technologies to Hold from Buy with a price target of $40, down from $50, after the company reported second quarter results and revealed during the associated call that the first two Legion satellites would not be launched until March-June of 2022. While the analyst welcomes Maxar's "improving execution" and margin expansion, he believes the successive delays of the initial Legion constellation launch continues to push out the incremental revenue and EBITDA generation from their new cutting-edge telescopes. Moeller now views it as likely that the Legion constellation will not be fully operational with significant capacity utilization until 2023.
Meanwhile, Credit Suisse analyst Robert Spingarn lowered the firm's price target on Maxar Technologies to $36 from $47, keeping a Neutral rating on the shares following quarterly results. The analyst noted that the company "disappointed" with another delay to the launch of the first tranche of WVL due to continued supply chain issues.
WHAT'S NOTABLE: Kerrisdale Capital said in series of tweets on Friday, July 30, that, "We're long $MAXR. [...] After some frustrating delays, our checks indicate supply-chain issues have been resolved and Maxar's long-awaited Legion constellation remains on track for 4Q launch ... The first among many catalysts to rerate the stock should occur next week, when mgmt will reiterate commitment to launching Legion by year end. With a launch date on final approach, we think the investor fixation on the risks of Legion should begin shifting to its reward ... Other investor concerns should also soon fade - a key government contract, EOCL, will be awarded next year inline with consensus views & fears of competition from smallsat operators is entirely misplaced. Assuming a valuation more in line with defense peers, $MAXR is an $85 stock"
PRICE ACTION: In Thursday afternoon trading, shares of Maxar Technologies have dropped over 10% to $30.59.
