Maxar Technologies Inc (MAXR) 2020 Q4 法說會逐字稿

Ladies and gentlemen, thank you for standing by, and welcome to the Maxar Technologies Q4 2020 Conference Call and Webcast. (Operator Instructions)

I would now like to hand the conference over to your speaker today, Jason Gursky, President of Investor Relations and Corporate Treasurer. Thank you. Please go ahead, sir.

Great. Good afternoon, and thanks, operator. Welcome to our fourth quarter earnings call.

I'm joined today by the company's Chief Executive Officer, Dan Jablonsky; and its Chief Financial Officer, Biggs Porter. Both will make some opening remarks after which we're going to open up the line for your questions. We're shooting to wrap up the call in about an hour.

Before we get started, I'll refer listeners to the accompanying slides for today's presentation, which can be found on the company's website, maxar.com, in the Investor Events and Presentations section of the site.

Once there, please turn to Slide 2, where I'd like to remind you that part of today's discussion, including responses to various questions, may contain forward-looking statements, which represent the company's estimates future plans, objectives and expected performance at today's date. These statements are based on current assumptions that the company believes are reasonable, but are subject to a wide range of uncertainties and risks that could lead actual results to differ materially from the forward-looking information.

You refer to the advisory regarding forward-looking statements contained in our quarterly earnings releases, earnings call slide deck and the company's most recent MD&A section found in our Form 10-K which is available online under the company's SEDAR profile at sedar.com, under the company's EDGAR profile at sec.gov or on the company's website at maxar.com.

As we get started, I'd like you to now turn to Slide 3 in the deck. And with that, I'll turn the discussion over to Dan. Dan, go ahead.

Thanks, Jason, and good afternoon, everyone.

I appreciate you joining us for a review of our fourth quarter and full year results. Before we get started, I'd like to congratulate NASA and JPL on the successful landing of the Perseverance Rover on Mars. As you know, Maxar has provided robotic arms on 6 missions to the red planet, and we are extremely proud to be part of this one as well. We have a long and storied history of working with NASA, and we're very excited about the work we're doing today with Artemis, Perseverance, OSAM-1 and Psyche, and look forward to many decades of future missions with NASA.

Please turn to Slide 4 of the accompanying presentation for a discussion of the key highlights from 2020. A big story of the year, of course, was the global pandemic. I've spoken about its impact on the company and our stakeholders quite a bit in the past, and we've got a fair amount of disclosure in our filings. What I'd say at this point is that I'm really proud of the way our team has powered through. We remain focused on protecting our workforce while producing the products and solutions our partners need to complete their critical missions.

I'm pleased to report, consistent with every report we've made so far, that all Maxar locations continue to remain operational through a combination of work from home and certain key personnel working on site. I remain encouraged by the tremendous efforts of Maxar team members to driving mission success. These efforts helped drive 6% top line growth and 16% adjusted EBITDA growth in 2020, excluding the effects of the burn down from the EnhancedView deferred revenue, a solid outcome given where we all were back in March of 2020.

One of my top priorities since taking the helm of the company has been a position both Earth Intelligence and space infrastructure for sustained growth over the medium to longer term. And this year's performance is a positive proof point that we're making progress. In space infrastructure, we continued our reengineering efforts and reorganization to align authority and accountability across my leadership team.

As part of this effort, we developed a new business capture process under our global field operations organization that leverages robust mission architecture support provided by our technology teams. We also placed new talent in leadership roles, in particular, software development, mission architecture and business development through a combination of new hires and internal moves from Earth Intelligence.

Finally, we also continue to develop financial systems and processes to support CAS and FAR compliance, a key enabler in our pursuit of further diversifying the business in the military and intelligence programs with the U.S. government. In Earth Intelligence, our operational teams ended the year successfully, meeting or exceeding the performance requirements of our service level agreement for the EnhancedView follow-on contract for a 22nd consecutive month.

Over the course of the EnhancedView contract, we've met the demanding customer requirements an impressive 119 out of 124 months. This speaks volumes about our reliability, quality and our resilience even during the global pandemic. As we prepare for the next phases of the EnhancedView program, our ongoing performance is a compelling demonstration of our track record and the consistent value and continuity we deliver.

Importantly, we also saw continued growth in usage on our platforms. Global EGD now has more than 400,000 total users. NOAM has grown to over 3,500 users, and SecureWatch has passed 200 customers. These statistics demonstrate the growing value-add that our data and insights bring to our government and commercial customers around the globe.

Overall, I'm pleased with the financial performance of the company this year. Fourth quarter adjusted EBITDA came in a little bit lower than I would have liked, as some of our Earth Intelligence orders slipped into early 2021, and we had higher-than-anticipated stock compensation given the strong performance of our shares through December.

Biggs will go into more details in a moment, but hopefully, this latter point is something that listeners will appreciate. We also had a very solid year of bookings, with backlog growing 17% year-over-year despite absorbing $80 million of EnhancedView deferred burn down. In Earth Intelligence, we had key wins and deepened our relationship with the most discriminating and innovative customers in the world, including the National War Constance Office, National Geospatial Intelligence Agency, U.S. Army, U.S. Air Force, U.S. Space Force, Department of Homeland Security, ESRI, HERE, Toyota and key U.S. allies.

Of note, we recently expanded our relationship with a large technology company, by adding a multiyear contract, including for Maxar's 3D elevation data, in addition to our renewal for our on-demand imagery subscription services. Finally, in Earth Intelligence, Vricon was awarded Phase 2 of the U.S. Army's One World Terrain prototype contract worth $39.3 million, which puts our 3D products on firm footing for growth as we move into 2021 with $50 million of recent awards that we expect to convert into revenue this year for 3D capabilities.

In Space Infrastructure, we booked 6 new GEO Comsat awards and several civil programs, including development work for NASA's human landing system, where we're partnered with Dynetics. Also in 2020, we acquired the 50% of 3D software and data provider for Vricon that we didn't already own. As a reminder, we believe Vricon is the global leader in satellite-derived 3D data for defense and intelligence markets, which to date is focused on 3D mapping, earth observation, accelerating 5G infrastructure planning, precision-guided munitions, military simulation and training; and increasingly, the emerging needs for GPS denied navigation.

We initially invested in and then later purchased the company outright because of its strength in the defense and intel markets. However, I'm also pleased to report today that we have recently acquired licensing rights to the underlying intellectual property at Vricon for the consumer and commercial markets as well. It's early days, but the addition of these addressable markets further enhances our confidence in the long-term growth outlook for Vricon's capabilities.

And finally, we closed on the MDA divestiture back in April. That transaction, put our balance sheet on firmer footing as proceeds were used to reduce indebtedness. To say the least, it was a busy year, and we made solid progress toward achieving our longer-term goals. I'd like to thank all Maxar team members for their diligence and resilience in 2020. And I look forward to better things to come in 2021 and beyond.

Can you please turn to Slide 5. As we shift into the new year, our priorities will look pretty familiar to most of you. Our top priority is to win and earth intelligence and position the segment for sustained growth moving forward. This means we'll be focused on launching the Legion Constellation, successfully competing for the next iteration of the EnhancedView program and continuing to make investments in 3D, artificial intelligence and machine learning, our platforms, products and capabilities that accelerate sensor to decision time lines.

On Legion, we remain on track for a September launch window for our first launch. And as I mentioned above, we already have $50 million of awards for 3D and Vricon products. Our second priority this year is to continue to establish a firm foundation for growth of space infrastructure. This means we'll be focused on driving diversified bookings so that we achieve our target goal for revenue mix of 1/3 commercial, 1/3 civil and 1/3 military intelligence.

We've made some nice progress over the past 2 years, especially with NASA, Science and Exploration Missions, but there's still more work to be done. We'll also be focused on solid execution. Producing Spacecraft is a challenging task and a good day, but it's been made more difficult with COVID protocols. It's going to take another year of focused effort to drive us toward our 10% plus adjusted EBITDA margin targets, but we're on the right path. And lastly, we plan to continue to make investments in technologies and in systems that will allow us to effectively compete for and win the most demanding commercial and government programs.

Our third big priority this year is to maintain the financial flexibility that we'll need to grow the business over time. We'll be focused on driving cash flow and deploying capital in a disciplined fashion. And of course, we'll remain focused on reducing our goal -- or remain focused on our goal of reducing debt and leverage.

I'd like to now ask you to turn to Slide 6. We have a robust pipeline of diversified opportunities. In Space Infrastructure, demand for space systems and architectures is growing across both commercial and government markets. And there are several opportunities in the civil market for exploration and our science missions. In Earth Intelligence, we see growing demand for data and analytics, particularly with our government customers and the Legion constellation will be a key enabler in meeting our customers' needs.

All told, we see in excess of $25 billion in pipeline opportunities over the next 5 years, which compares quite favorably with the $1.9 billion of orders we booked this year. We're confident about the growth trajectory of the company in the years ahead, and Biggs is going to provide an update on our long-term targets in a minute.

Please turn to Slide 7. As I've mentioned several times now, Maxar is well aligned with the national defense strategy across multiple disciplines, including space and cyber, ISR, missile defense, joint lethality, forward force resilience and autonomous systems. What I'd like to do today is double-click a bit more on all of this. We're excited about the difficult technology problems we're helping to solve and that will help our nation maintain its competitive advantage over near peer threats in the future.

Please turn to Slide 8, which demonstrates the multiple domains in which the U.S. military operates and where Maxar is helping to address the complexity of the battlefield. From space assets to ground infrastructure to analytics solutions, we are well positioned. And we're currently supporting multiple customers and programs that are developing new technologies and capabilities for tomorrow's conflicts, including the Army's TITAN program and project convergence, USDI's project Maven, Air Force's advanced battle management system in the Navy's Overmatch program. All of these programs are at or near the center of the government's efforts to develop systems and capabilities to support joint all domain operations and joint all domain command and control across varied branches of the military.

Please turn to Slide 9. One of the key goals of these investments by the government is to achieve an advantage on the battlefield. By shortening the sensor to shooter time line from space, which is all about seeing, identifying, targeting and prosecuting dynamic targets at scale and at distance. Ultimately, DoD is driving to combine broad area of surveillance and automatic target recognition to support long-range precision fires at speeds required on future battlefields.

Today, most current sensor to shooter time lines are measured in hours. We believe the breadth of our coverage and the quality and accuracy of our imagery and our software processing capabilities are key enablers for dramatically reducing these time lines, particularly given that our data is AI and machine learning ready.

For example, in a recent exercise, we were able to collect, download and process data at high velocity in theater, and then in a matter of seconds, both GEO-register that data using Vricon's 3DR technology and inference at using our machine learning algorithms, all in one seamless workflow. We're really excited about being able to provide these valuable capabilities and are driving hard in this area.

The recent One World Terrain award I mentioned earlier, and the remote ground terminal award I mentioned on our third quarter call, both with the Army, are solid proof points of our traction with customers.

Please turn to Slide 10. Importantly, Maxar is uniquely positioned to assist in these and broader DoD efforts with capabilities across ISR systems, processing architectures, 3D modeling and simulation, advanced algorithms, systems engineering and intelligent product generation. In our view, we're at the right place at the right time to help our customers solve many of the tough problems at the center of the national defense strategy. And we are confident that this will, in turn, drive long-term growth for the company and returns for our investors. We're also confident that our growth and capabilities aren't limited to defense and intel, and we're expanding our market opportunities like with the expanded Vricon intellectual property rights for autonomous navigation, gaming and other commercial applications.

I'm tremendously excited about our future here.

With that, I'd like to turn the call over to Biggs for a review of the financials, including our outlook for 2021 and beyond.

Thanks, Dan.

Please turn to Slide 11, where we present year-over-year comparisons for the fourth quarter. Our net loss from continuing operations for Q4 was $52 million, and for the year, $46 million, driven primarily by the $33 million write-off of a remaining prepaid asset from a prior contract with a commercial provider of ground station services as we executed a new multiyear contract with more favorable terms.

Revenue increased 14% for the quarter and 3% for the full year. Without the effects of the EnhancedView contract deferred revenue burn-off, total company revenues increased 23% quarter-over-quarter, driven by recent wins in space infrastructure. Without the effects of the deferred revenue, adjusted EBITDA grew 36% quarter-over-quarter, that came in a little below the middle of our range due to higher-than-expected stock comp expense, given the performance of our shares during the quarter and the slip of the contract and Earth Intelligence that was signed in early 2021.

The you may recall that we raised our guidance after the second quarter. On a full year basis, without the effects of the EV deferred, total company revenues increased 6% and adjusted EBITDA grew 16%.

Please turn to Slide 12, where I would like to provide a little more background on stock comp and other expenses incurred during the year. For the full year 2020, stock comp increased $43 million from $20 million for 2019. Much of this increase was expected given the cadence of prior awards that caused a full loading of our 3-year vesting schedule to hit expense this year versus only 2 years in 2019.

However, our share performance did drive roughly $7 million of additional expense versus our expectations given the strong finish to the year. Moving forward, we expect our annual stock-based compensation to be roughly $36 million, subject to share of performance. Additionally, we incurred $27 million in COVID-19 related EAC growth due to our operating posture space infrastructure for the full year, including supplier delays and increased labor hours.

While the COVID posture continues to impact costs and schedules versus a normalized operating environment, it is, to a lesser degree at this point. And we do not expect to experience incremental cost growth like this again in 2021.

Please turn to Slide 13. Earth Intelligence revenue decreased 10% for the quarter and was roughly flat for the year. Earth Intelligence revenue increased 1% year-over-year without the effects of the EV deferred in the fourth quarter while adjusted EBITDA margins declined, driven largely by the timing of joint venture income in the fourth quarter of 2019, which made for a tough comp.

Recall we recorded Vricon net income our adjusted EBITDA without recognizing a revenue until their results were consolidated into our financials after acquisition in the third quarter of 2020. On a full year basis, without the effect of EV deferred, revenue increased 4% year-over-year, driven by growth in services, international customers and the Vricon acquisition, while margins declined modestly driven largely by the JV income dynamic I just described.

Please turn to Slide 14. Turnaround at Space Infrastructure continued into the fourth quarter, driven by our recent commercial and U.S. governmental awards reflecting progress on our diversification strategy. Revenue increased 46% year-over-year, while margins expanded 1,800 basis points, given the several charges recorded in the year ago period and higher levels of profitability on recent awards.

Of note, this marks the third consecutive quarter with adjusted EBITDA margins in the 6% range, driven by the execution on our recent wins partially offset by higher SG&A expenses, including stock-based compensation. And it is worth noting that despite the $27 million in COVID-related charges we took in the first 3 quarters of 2020, space infrastructure finished the year right around breakeven with revenue above guidance, while adjusted EBITDA was roughly in line.

Please turn to Slide 15. The company generated $62 million in operating cash flow for continuing operations in the fourth quarter and invested $84 million in CapEx and developed intangibles. Full year free cash consumption of $65 million exceeded the midpoint of the upper revised guidance we issued in our third quarter call, given favorable timing of cash collections and CapEx that came in at the lower end of our guidance.

The outperformance in 2020 is going to come in part at the expense of 2021, the details of which I'll cover in a moment during the discussion on guidance.

Please turn to Slide 16. We had roughly $496 million of liquidity at the end of the fiscal year, and our bank-defined leverage ratio ended the year at approximately 4.3x compared to our covenant of 7.5x. As a reminder, we have no significant maturities due until 2023.

Now please turn to Slide 17 for a discussion of 2021 guidance. We expect Earth Intelligence revenue to be in a range of $1.05 billion to $1.095 billion. This translation to 5% to 9% growth without the effect of EV deferred, driven primarily by product growth and the inclusion of Vricon. We expect revenue as space infrastructure to be in a range of $800 million to $835 million, a growth of 11% to 16%, driven by the solid bookings growth we experienced in 2020.

Intersegment elimination is expected to be roughly $45 million. We expect Earth Intelligence adjusted EBITDA to be in the range of $440 million to $470 million, which translates to growth of 5% at the midpoint without the effects of EV deferred, driven by the revenue growth, I mentioned earlier, offset by cost growth related to Legion Constellation as we continue investments in our ground and secure operations architectures.

We expect adjusted EBITDA Space Infrastructure to be in a range of $75 million to $95 million, up from roughly breakeven in 2020 as we execute on our backlog. Please note, the Space Infrastructure adjusted EBITDA guidance excludes any potential impact from recent events related to SiriusXM's 7 satellite. Intersegment eliminations are expected to decrease to roughly $16 million in 2021 as the lead on constellation work completes.

Corporate and other expenses are expected to increase to $80 million, reflecting increased investment in corporate-level system engineering and marketing expense. Additionally, we've reallocated approximately $4 million in marketing spend from Earth Intelligence to Corporate and will incur additional expenses related to investments in our mission architecture capabilities. We expect our adjusted EBITDA results to grow in the second half over the first half in 2021, with the first quarter being the lowest. The midpoint of our operating cash flow reflects growth year-over-year, while CapEx is expected to decline in 2020.

As I mentioned earlier, we outperformed on our expectations for free cash flow in 2020 and so some of that has come at the expense of this year as the beat was driven largely by timing. But even after considering that, the midpoint of our guidance has us free cash flow positive in 2021. Equally important, as I'll discuss in a couple of slides, we are more positive on our long-term cash flow outlook.

Please turn to Slide 18 for a refresh of our 2023 targets. We see a path towards up to $580 million in adjusted EBITDA by 2023, an increase of $40 million from what we previously described in our 2022-2023 target. Without the inclusion of the EV deferred revenue, we ended 2020 with roughly $340 million in adjusted EBITDA. Space infrastructure adjusted EBITDA is expected to grow by $95 million, which includes a $25 million reduction in intersegment eliminations, as space infrastructure replaces intercompany work of WorldView Legion with third-party billings. We expect this growth to be driven by solid execution on new awards and the roll-off of nonrecurring COVID-19 related to Asia growth, EAC growth and losses on the large development build that we've spoken of in the past. Additionally, we also expect the business to grow organically as we continue our diversification strategy across commercial, national and civil customers. In Earth Intelligence, we expect growth to be driven by Legion capacity in our product and service offerings, particularly in the area of 3D.

Corporate expenses are expected to increase $20 million from 2020 levels, but at roughly $80 million in total, in line with what I just gave as guidance for 2021. We made significant progress in 2020, and we're well positioned for the future as we continue to drive our business towards significant adjusted EBITDA growth.

Please turn to Slide 19. For our 2023 free cash flow targets, we expect to see total free cash flow growth of up to $390 million. The majority of this will come from earnings growth and reduction in CapEx spend as we complete the Legion Constellation and move towards a normalized CapEx spend of roughly $100 million by 2023. We also expect interest savings of $70 million as we reduce our leverage.

And with that, I'd like to hand the call back over to Dan before we go to Q&A.

Thanks, Biggs.

Please turn to Slide 20. You've heard me present this slide over the past 2 years, so I won't belabor it. But I do think it's an important reminder that we've been on a journey here at Maxar. In 2019 and 2020, we were focused on cleaning up the balance sheet, reengineering space infrastructure and recovering from the on orbit failure of the WorldView-4 satellite.

As 2021 begins, we remain focused on revenue, profit and cash flow growth. We'll also be looking to accelerate financial performance and further optimize our capital structure. In my view, this narrative and playbook remains as intact today as the day we introduced it to our investors a couple of years ago.

With that, I'd like to hand the call over to the operator for your questions. Operator, please open the lines.

(Operator Instructions) Your first question comes from the line of Kenneth Hubert from Canaccord.

I just wanted to first ask if you could -- can you talk about the sort of your bid pipeline, and what we should expect on the infrastructure side in '21 in terms of order activity, off of, obviously, the really strong backlog growth you saw in '20?

Yes. I think the first thing I'd say is we are continuing to diversify. So it's not just looking at the GEO Comsat market anymore, but we're looking at a range of different programs across both civil and defense and intelligence as well. We do currently expect the GEO Comsat market to be about flattish, but we'll be looking to get our fair share of those awards. There are some LEO opportunities out there, and we're watching those and engage closely in advance with engineering studies and that sort of thing.

And we continue to work with civil agencies like NASA that would -- I guess I'd point you to the HLS is a good example of a down-select when that occurs, where we're part with Dynetics and other work like Artemis that we're doing with NASA out there. So time lines and budgets are always something to be watched with a larger program. So we're pretty confident about the way things are looking. With defense and Intel, we're still kind of early innings there. It's a multiyear journey that we're on.

We do expect to gain programs over time, and we've been upgrading our talent to be able to tackle those. So overall, pretty good. I think in terms of backlog numbers this year, we've got already 90% of backlog for our Space Infrastructure programs. That's a pretty good number to be heading into the year as we get awards and get wins, that will have cash flow throughout the year there, too.

Okay. Great. And if I just could, on enhanced view and the recompete, what does the guidance assume or imply in terms of contribution this year? Obviously, I know most of it's baked in, but how do we think about that as the recompete, and how are you viewing that probability now on that contract?

Why don't I talk about the contract first, and then I'll hand it over to Biggs to talk about the -- how it matches into our guidance, particularly the longer-term range plans and stuff.

But as you know and we've discussed before, NRO gave us a 1-year study contract in June of 2019 that we completed in 2020. The government renewed, as they have done on schedule in every other year, the EnhancedView contract in September. At this point, we do expect, as they've told us, that prior to September '21, we'll be entering into a new government, but that's part of a larger process for expanding the use of geospatial data.

And so -- and we'll be watching that really closely. If that doesn't happen, then the default is that this year, we would -- as we've done every other year would expect to renew the contract in September at the current terms and conditions. We believe we're really well positioned, particularly given our performance over the past 2 decades and the investment we're making in Legion and that architecture coming online.

And the way we've been partnering with the U.S. government. So we're really excited about where the trend lines are there. What the customer needs are and what we're able to provide.

In terms of what that means in terms of guidance, I think that we've always said we, we expect the customer's commitment to commercial energy to grow, not to decline and that are to position in that overall trolling pie to be very strong. I haven't got more definitive that. I don't think it makes sense to start to put discrete numbers around that for '21 or all the way out to '23, except to say that we still very good -- we still feel very good about our position.

Your next question comes from the line of Carter Copeland from Melius Research.

Just a couple of quick questions. One, on the Vricon acquisition, I must have -- I didn't realize you didn't own that IP yet, but the consumer (inaudible) an IP purchase there. I wondered if you could just give us some color on what you see from an opportunity standpoint as a part of that and if there's anything else to acquire there or if not, you've got all those interest at this point?

Yes. Well, first off, we're really excited about it. We built the business case up on the defense and intel products and recently obtained the license rights to both the consumer and commercial markets as well, so we're really excited about that. We think it does open up just a whole another set of market opportunities for us.

I'm not going to be too specific yet. We're still a little newer in working through all of our go-to-market strategy for products in those areas, but things like gaming virtual reality and autonomous vehicles are on the table now. And we're really -- we think there's some nice confluence between the work we've been doing with the Department of Defense and the USDI in those areas and where we might take commercial and consumer applications as well. So yes, we're really excited about it. We're really excited about it. We're really excited about the traction we're seeing and initial discussions we're having with people.

Okay, great. And just with respect Biggs to the longer-term cash flow guidance, it looks like there's a lower CapEx assumption in there. And obviously, the comment was around finishing Legion and getting to a normal run rate, but is there something in there that moves that we should be aware of?

No. The -- I think that the story is pretty consistent, as we told it previously. We did present things in a little different fashion and make it clear where interest savings were and where CapEx savings were and try to make it clear between capitalized interest versus just pure cash interest.

So I don't know if that's creating any confusion trying to walk for on the old slice of this one, but the $180 million is very much made up of Legion and Legion-related CapEx. And I say Legion related is because in 2020, we were spending on ground infrastructure, also spending on interoperability with the customer. And so there was more spend than just the $600 million -- roughly $1 million Legion CapEx program. But the expectations here are still very much as they have been, that we'll be driving down over the next few years.

Okay. And with respect to that, that built in the existing constellation? Should you expand, obviously, we'd revisit that number?

Yes. It doesn't assume we're building any additional Legion in this time period. If the customer wanted that, then we obviously have to consider that. But this assumes just the constellation.

Our next question comes from the line of Robert Spingarn from Crédit Suisse.

Biggs, just on that 2023 cash flow number, I want to make sure I follow because I guess it's $135 million above the old guide. You said that some of that is CapEx, some of that's interest expense. Is the rest -- how do we think about the rest of it? Some of it's for Vricon, I imagine, what else is in there?

Well, I think some of those just conservatism than we had before. We could probably do better than what we put out there. When we first gave the guidance out, what was 3 years out for the future before. So but right time is a part of this, having a little bit of better visibility into each elements of the business and seeing what is a reasonable cash flow expectation off of that.

The -- so I don't think -- I wouldn't say we're being aggressive in this. I think we maybe were. We held some back before rather than 2 to 4 maybe because it's the first time we're going forward with it.

Sure. Okay. Dan, on that, just timing on Legion, tranche 2, I just want to get a good idea of where we are on tranche 1 and then tranche 2. And then Biggs, how much legion sell-through was in your 2023 EBITDA and cash flow numbers? Is that selling all 6 satellites fully? Or how do we think about that?

You want to take that one first, Biggs, and then I'll give you recap.

Sure. I know you've asked the question before implicitly how much excess capacity is there out there, and we've declined to answer as fully as you would like. And I'd just say, one of the problems of answering the question is, I mean, not all capacity is created equal. And so you can always have some capacity in areas that aren't in higher demand, irrespective of what's happening elsewhere. But we are going to have significant -- but you always have to think of it, too, in terms of, it's not just about the imagery. It's everything else that the imagery drives. And so capacity to generate revenue from Legion isn't solely determined just by the amount of imagery we could sell-off of it, but also what it enables and everything else in terms of the products we traditionally deliver and also all of the 3D products and all the analysis associated with imagery.

So it's more open-ended than you might think based upon just a number of passes and revisits around the world from the 6 satellite constellations. So that's the reason we're not me specific, but we don't expect to stop growing in '23 on any kind of assumption that we're tapped out in terms of our ability to continue to grow revenue off of the assets that we would have in place.

So Rob, yes, speaking to those assets. I was -- you remember, we toured that metal lab area last year about this time at the Investor Day. I was just out there with our team 2 weeks ago, they're beautiful. They're looking good. You -- too bad we can't get you out there right now with COVID protocols and everything to take a look, but satellites are really coming along. We are still on track for the first 2 in the September launch window, so we're excited about that. And the company is all geared up and moving towards that time frame.

On the next 4, which will be the second launch, those will be the ones that go in mid-inclination orbit, we're just now starting to work with SpaceX on what the launch windows look like. And I think on the last call, I said that we'd be expecting to launch those on the order of 3 to 6 months after the first to go up. So we're probably looking very early part of 2022 right now, would be my guess. But the complex program, we'll continue to work with SpaceX on the launch windows and everything else to get those lined up for that.

Okay. And then just as a last question, this has to do with EI. And I just wanted to revisit that business and get the latest on the breakdown between the imagery business and the analytics business, how those are both trending? And then a follow-up question to that is that there are some other players, smaller competitors perhaps, that are starting to accelerate their growth trajectory and trying to compete, I think, with Maxar and maybe some others on imagery and analytics through lower cost offerings and maybe higher revisit rates, or they may claim higher revisit rates. Do you see -- how do you see this competition that's starting to show up out there?

I guess what I'd say is we've got great trend lines. We've got great traction with our customers. And I think the wins we had in the performance we did this year, even during a COVID environment when we were capacity constrained and limited waiting for Legion Constellation, is a pretty good testament to that. And we've made great gains on each of the analytics as well as the imagery fronts, and they're becoming more seamlessly intertwined as we keep moving forward.

And the reason I say part of that is because the data that's coming off the birds is now -- we've got some blogs out today on this topic as well, but it's analyst-ready. It's AI. It's machine learning ready. And so that kind of seamlessly transitions into the type of software you run on this, the type of algorithms. If you're doing an artificial intelligence environment, whether that goes right into a convolutional neural network or something else. So that's pretty exciting for us. And I think the Vricon capability has only really supercharged that for us.

In terms of... yes, go ahead.

So I just say, are the 2 areas growing in parallel? Or would you say analytics is outgrowing imagery or the other way around?

Right now, analytics and software are outgrowing inventory, and most of that is due to the fact that we lost WorldView-4 and we're capacity constrained. I think that probably changes when Legion becomes operable towards the end of the year here. And that kind of flips into a lot of capacity that we can then -- because we'd be doubling our nearest 5 -- nearest 5.5 capacity there. So well, kind of the back and forth there.

On the others, I don't like to make specific comments about anybody in particular. I guess maybe a couple of points I'd make, though, that it's -- not exactly new entrants, they've been around for almost a decade now, some of them. So we're aware of them. We're aware of are their capabilities. We've had good traction with our customer sets. And look, we think it's all to the positive that there are other companies out there that are continuing to -- it's a growing market. I think that's a testament to this.

Maxar has been the leading commercial provider of geospatial data and analytics. We competed successfully with the advanced technologies we have, and we think it's good for the industry that there is competition. A strong competitive environment drives technology gains and innovation and lower cost for consumers. So we're all the more for that, and welcome those who are here, those who might get in and otherwise.

Next question comes from the line of Thanos Moschopoulos from BMO Capital Markets.

Dan, can you talk about the pipeline for Legion and how you're seeing that evolve. I realized that most of the selling happens once they're in space, but just in terms of the pipeline or some of the preselling activity. Has some of that been impeded because of the pandemic, or on the flip side, is it being helped by current geopolitical dynamic or demand environment? What do you see in that front?

Thanos, thanks for the question. Yes, so I think it's kind of a mixed bag on whether we've been helped or hurt by the pandemic. I was doing a signing ceremony with the New Zealanders on some cooperation agreements this week, and that would have taken me multiple days of travel, both ways to try and do something like that. So on the one hand, that it's a little bit easier to do some stuff like that. On the other hand, it is more difficult to get in, especially with the classified customers overseas into their defense and intelligence establishments and have the same level of conversation we might have without the ability to travel to some of those locations.

I think, as you said, there will be some countries and there will be some customers that will purchase once the assets -- once they can see the data and once it's on orbit, but we're having good early traction with the conversations we're having. People are really excited in watching the time lines and the progress and the pictures we send them on the constellation build out really closely. And we're seeing really, really good demand signals and customer uptake.

Some of those, because they're allied nations and they've got pretty discrete programs, we won't be able to announce them. We'll just be able to kind of talk about what kind of awards we're getting. And we're seeing really strong uptake on the commercial side as well with the large technology customers. They're very excited about the type and quantity and accuracy and revisit rates we're going to provide with Constellation.

Great. And in terms of the margins for intelligence now, they've all got up to here. Just help us understand, I mean, once the launch happens, is there maybe a temporary margin dip because of incremental OpEx that comes on? Or how do margins evolve throughout the year for that segment?

Want to take that one, Biggs?

I'll take it. I think we can't hear you if you're talking.

(technical difficulty)

My apologies, the line of Biggs is disconnected.

Okay, I'll take it. And then as Biggs comes back in -- or Jason, do you want to take that one?

Yes. What I would say, Thanos, on the margin track. You got to keep in mind that the satellites, we're having those aiming that as launched in September. We've talked about 1 -- or roughly a quarter to get the satellites in operation and producing revenue-generating kind of data. So there's not much baked into 2021 with regard to margins from a linear perspective.

Biggs did mention during his prepared remarks that we do have some incremental costs this year associated with the build-out of the infrastructure on the ground for the Legion Constellation. So we do have some extra costs this year. And as the Legion capacity comes online and begin generating revenue, that's when you ought to see incremental margins kind of accelerate as we move into that '22, '23 time frame.

As you can imagine, the margin -- we do expect margin expansion in the '22, '23 time frame as the Legion Constellation comes online and helps offset those increased costs that we're absorbing this year.

Okay. Great. And finally, Biggs mentioned that the Space Infrastructure guidance doesn't contemplate -- I forget the exact wording, but potential costs or potential implications of the CS -- XSM-7 failure. So just help us understand that. I mean, are there any potential costs? I presume you're still in the course of identifying the root cause that you might not be able to report at this point, but what would the potential exposure be, if any?

Yes. And we don't have anything to report on the continued troubleshooting work we're doing with the satellite with the customer. We did -- and I know you guys probably haven't had a chance to go through it, we've got some pretty extensive disclosure in our 10-K on this. As of December 31, 2020, we had $15 million in unbilled receivables and $14 million in collectible in-orbit payments or receivables that are over the orbit life of 15 years. So that $29 million there.

And then we've also got -- we're exposed to some liquidated damages that haven't previously been accrued of up to $9 million. So I think what I'd like to remind everyone is satellites are -- it's a hard business. We're continuing to work on this one, and we're going to do our best to get it to be as performant or back to specifications as we can.

We do have 90 Maxar-built satellites on orbit, and they're operating to their expected lives, and we really pride ourselves on the quality of our products. So we'll be looking for any learnings we can get from this and focus that on producing the X-90 spacecraft with the same type of reliability we're known and our customers know us for.

Dan, this is Biggs. My line was dropped, but I am back.

Biggs is in Texas. We're not sure how the storms are still going.

But it's pretty warm here now, I think. I don't like talking to this one.

Your next question comes from the line of Chris Quilty from Quilty Analytics.

Just a follow-up on that SXM-7 satellite since #8 is a twin of that satellite still on the production line. Is there a possibility that we could get some other EAC charges if you determine that there was some kind of an intrinsic fault with 7 that's going to need to be corrected with 8.

We're working with the customer to get 8 up as quickly as possible. It's part of the resiliency of their network, and we do expect to launch that as soon as we're able to here. In terms of additional charges, Biggs, do you want to handle that piece of it?

Yes. At this point in time, we don't expect anything. We're obviously focused on 7 and all the analysis there and doing what we can, making it optimized and operational. So I think that things will always unfold, but don't expect anything significant to have on -- in respect with a cost standpoint.

Okay. And a follow-up on the question about Vricon and the commercial consumer rights. Was that something that SOB has done anything with? Do they have any pre-existing business? Or was that rights to those activities simply sitting on the shelf for them on use?

I can't go into too much detail on it just because there's a large -- I think some third-party work here. But some of those rights were with a large technology company, and we've been able to work with that large technology company to acquire full access to the intellectual property rights there.

And so was there something I'll find in the 10-K in terms of the acquisition cost of those assets?

Biggs, do you want to take that?

I'm sorry. The question is, is there a cost associated with the commercial rights?

Yes. Are there any disclosures in the 10-K, which I haven't gotten to about the acquisition cost of the commercial rights?

There really is not a discrete acquisition and cost associated with those. We are not capitalizing any additional intangibles as a result of acquiring those as a part of a broader arrangement. No discrete costs associated with the IP.

Understand. So excluding the Vricon revenue pickup, I guess, the Earth Intelligence business was down a couple of percent this year. What were the primary factors in the revenue decrease in 2020?

I'm not sure I get to the same numbers on decrease.

Once you exclude the...

Are you looking just at the last quarter?

No, I'm saying on a full year basis, if you exclude the $8 million contribution from Vricon. We could circle back to that.

Yes, we can -- I'm sure I could get to the same data. Why don't you -- maybe you can do a follow-up with Jason on using what we've disclosed. But as we already talked about -- or Dan has talked about, the business is, otherwise, growing. There is good, good strength in we're doing from an analytics standpoint. We are a little constrained on the capacity side for imagery, but we don't see any real -- necessarily there's some timing at the end of the year of things slipping into '21. But other than that, the business is performing well, particularly in a COVID environment.

I think this was the last quarter, Chris, we had the burn-off of that EV deferred revenue. So on a year-over-year basis from last year, $40 million of noncash deferred revenue, which is 100% margin in the business, is finally gone out the books.

Yes. Chris, on a full year basis, if you look at the bottom of Page 13, you'll see the revenue streams without the effect of the deferred. And I think that will help you get to -- help answer your question.

Okay. I apologize if I was thinking you were asking the deferred, so I didn't answer on target. I'm sorry for that, but yes, the data is there.

No, no problem. So a question -- I know you guys don't report revenues in this way, but can you talk about where -- what you used to call your DAP business, is both in terms of revenues, the number of customers and pipeline as we prepare for Legion?

So I think the last time we did make disclosure, I don't know, we said it does in the 14 countries that had those types of facilities. We continue to see strong traction in the marketplace with both the direct access facilities themselves, the hardware and the software componentry as well as the virtual -- the Rapid Access Program. So there are some countries now that have virtual solutions for direct access. And increasingly, we're seeing those countries plus other countries come in under the secure watch contracts. So we're seeing sort of a blend of the software and the platform and the virtual and the hardware componentry there.

That's a great business for us. It continues to be a great business. It provides us an entrée to the top organizations in those countries to demonstrate, not just our capacity for the satellites and the on-orbit capabilities and the direct tasking features, but also increasingly, our software and our 3D-type solution.

So it's good. It's been very, very solid, which is, I think, has helped underpin our performance. Sometimes it runs a little up and down, ran a little down in COVID. A lot of people, I believe, their buildings -- and couldn't ask. And then depending on world situations in the threat environment, it runs back up in some areas of the world again faster than others. But we're -- every one of those customers is really looking forward to the Legion Constellation. And we're making upgrades to our software and ground infrastructure to make sure that as the Legion Constellation comes online, we can start the money by flowing on that right away.

Great. And final question, and this is, I guess, specific to the Earth Intelligence business. One of your competitors, Blacksky, filed this back, and there's obviously a presentation deck out there. They have, between now and 2023, I think, $200 million of incremental revenue growth over that time frame. In the last 2 years, I guess, as Maxar has been capacity constrained, you haven't seen, I think, $30 million of growth.

Do you see the marketplace in the next 2 years growing at I guess, in excess of $200 million, assuming that there's growth in there for Maxar and other competitors also?

Yes. I think what I'd say is, look, we keep very good tabs on everything that's happening in our industry, of course, seeing the decks and read them. I won't comment on them, other than to say, as we think about the marketplace, as we think about our track record, our competitive positioning, our -- the work we do day in and day out with customers, we think the market is growing, and we think that our piece of it is factored in very, very well into the numbers that Biggs gave you for our 2021 and longer-term 2023-type guidance.

So if you think about it that way, we've kind of factored in some things, including our capacity into those numbers, but we're very confident in what we're proposing for our numbers. I'm not going to speak to anybody else's.

Okay. Operator, we're about out of time here.

I'm going to thank everybody for joining us today. We've got a busy calendar with some sell-side conferences in the coming weeks, and we look forward to seeing many listeners on the call at those conferences and certainly look forward to returning this time next quarter for a discussion of our first quarter earnings. And we look forward to speaking with you all then. Thanks, and have a great day.

Ladies and gentlemen, this concludes today's conference call. Thank you for participating. You may now disconnect.