MDA Ltd.
3Q23 beat and raise highlights broad strength in business, backlog to over $3B
TSX: MDA | CAD 11.80 | Outperform | Price Target CAD 14.00
Sentiment: Positive
MDA Ltd. (MDA) reported 3Q23 earnings results with revenue of $205M, up 19% YoY and ~5% ahead of consensus. EBITDA was significant in the quarter as well at $42.8M compared to our estimate of $36.7M and consensus at $35.7M. The top-line growth in the quarter was again driven by Satellite Systems (up 31%) and Robotics & Space Operations (up 13%). We view the quarterly print as positive, as the company has again delivered on top-line growth while beating on margin expectations. The focus for investors is likely to further shift to 2024 with the majority of 2023 revenues in the current backlog.
The company posted the $2.1B Telesat order in 3Q23. The total backlog is now at just over $3B, and the TTM bookings were ~ $2.5B. The LTM book-to-bill is now at 3.1x. The company currently has ~90% of its 2023 revenues in the backlog, and the Telesat award should support confidence for growth into 2024. The Telesat award reversed several quarters of declining bookings, but is consistent with management’s expectations that 2H23 would see an improvement in the bookings, largely due to anticipated awards in the LEO market.
Management raised the FY23 guidance expectations with today's results. MDA narrowed the revenue guidance to $790M - $810M from $785M - $810M. Additionally, they increased the adj. EBITDA outlook by raising it to $165M - $170M (from $155M - $165M), which implies a ~20.5% margin. With the revenue update, total sales for the full year are expected to be up ~25% YoY. Management also narrowed the capital expenditure guide for the full year, by bringing in the high estimate by $10M now to a spend of $200M - $210M.
MDA will host a conference call today at 8:30 am ET. We expect the focus to start to shift for 2024. With the strong bookings and guidance raise, we believe 2023 is largely de-risked. We believe investors will focus on the margin outlook, after the strong 2023 performance, the capital requirements, and the pace of the Telesat program ramp and investment requirements. We also expect some discussion on the outlook for incremental LEO orders for the company, and we also expect the company to provide an update on its existing franchise programs.