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MAXR Maxar

Filed: 4 Aug 21, 4:17pm

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934

For the Quarterly Period Ended June 30, 2021

or

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission file number: 001-38228

Maxar Technologies Inc.

Delaware

83-2809420

(State or jurisdiction of incorporation)

(IRS Employer Identification Number)

1300 W. 120th Avenue, Westminster, Colorado

80234

(Address of principal executive offices)

(Zip Code)

303-684-7660

(Registrant’s telephone number, including area code)

N/A

(Former name, former address and former fiscal year, if changed since last report)

Securities registered pursuant to Section 12(b) of the Act:

Title of each class

Trading Symbol(s)

Name of each exchange on which registered

Common stock par value of $0.0001 per share

MAXR

New York Stock Exchange

Toronto Stock Exchange

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Yes  No 

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).  Yes  No 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and emerging growth company in Rule 12b-2 of the Exchange Act.

Large Accelerated Filer

Accelerated Filer 

Non-accelerated Filer 

Smaller Reporting Company  Emerging Growth Company

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act).  Yes  No 

Securities registered pursuant to Section 12(b) of the Act:

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.

As of July 28, 2021, there were 72,496,088 shares of the registrant’s common stock, at $0.0001 par value, outstanding.

PART I. FINANCIAL INFORMATION

MAXAR TECHNOLOGIES INC.

Unaudited Condensed Consolidated Statements of Operations

(In millions, except per share amounts)

Three Months Ended

Six Months Ended

June 30, 

June 30, 

    

2021

    

2020

    

2021

    

2020

Revenues:

Product

$

190

$

157

$

332

$

264

Service

283

282

533

556

Total revenues

473

439

865

820

Costs and expenses:

Product costs, excluding depreciation and amortization

156

144

304

289

Service costs, excluding depreciation and amortization

100

87

193

180

Selling, general and administrative

88

79

172

147

Depreciation and amortization

 

73

 

89

 

147

 

179

Impairment loss

14

Operating income

 

56

 

40

 

49

 

11

Interest expense, net

 

24

 

48

 

102

 

97

Other income, net

(3)

(4)

(4)

(7)

Income (loss) before taxes

 

35

 

(4)

 

(49)

 

(79)

Income tax benefit

 

(10)

 

(2)

 

(10)

 

Equity in income from joint ventures, net of tax

(2)

(1)

Income (loss) from continuing operations

45

(39)

(78)

Discontinued operations:

Income from operations of discontinued operations, net of tax

2

32

Gain on disposal of discontinued operations, net of tax

304

304

Income from discontinued operations, net of tax

306

336

Net income (loss)

$

45

$

306

$

(39)

$

258

Basic net income (loss) per common share:

 

Income (loss) from continuing operations

$

0.62

$

$

(0.57)

$

(1.29)

Income from discontinued operations, net of tax

5.05

5.56

Basic net income (loss) per common share

$

0.62

$

5.05

$

(0.57)

$

4.27

Diluted net income (loss) per common share:

 

Income (loss) from continuing operations

$

0.60

$

$

(0.57)

$

(1.29)

Income from discontinued operations, net of tax

4.94

5.56

Diluted net income (loss) per common share

$

0.60

$

4.94

$

(0.57)

$

4.27

See accompanying notes to the Unaudited Condensed Consolidated Financial Statements.

3

MAXAR TECHNOLOGIES INC.

Unaudited Condensed Consolidated Statements of Comprehensive Income (Loss)

(In millions)

Three Months Ended

Six Months Ended

June 30, 

June 30, 

    

2021

    

2020

    

2021

    

2020

Net income (loss)

$

45

$

306

$

(39)

$

258

Other comprehensive income (loss), net of tax:

Foreign currency translation adjustments

 

 

(1)

(49)

Reclassification of currency translation adjustment to gain on disposal of discontinued operations

(64)

(64)

Unrealized gain (loss) on interest rate swaps

 

4

 

10

(15)

Gain on pension and other postretirement benefit plans

1

2

1

Other comprehensive income (loss), net of tax

 

5

(64)

 

11

(127)

Comprehensive income (loss), net of tax

$

50

$

242

$

(28)

$

131

See accompanying notes to the Unaudited Condensed Consolidated Financial Statements.

4

MAXAR TECHNOLOGIES INC.

Unaudited Condensed Consolidated Balance Sheets

(In millions)

    

June 30, 

    

December 31, 

2021

2020

Assets

Current assets:

Cash and cash equivalents

 

$

10

$

27

Trade and other receivables, net

 

 

400

 

327

Inventory

 

 

43

 

31

Advances to suppliers

16

24

Prepaid and other current assets

64

59

Total current assets

 

 

533

 

468

Non-current assets:

 

 

 

  

Orbital receivables, net

 

 

333

361

Property, plant and equipment, net

 

 

896

883

Intangible assets, net

 

 

840

895

Non-current operating lease assets

151

163

Goodwill

 

 

1,627

1,627

Other non-current assets

90

86

Total assets

 

$

4,470

$

4,483

Liabilities and stockholders’ equity

 

 

Current liabilities:

 

 

Accounts payable

 

$

112

$

115

Accrued liabilities

63

65

Accrued compensation and benefits

 

 

76

 

105

Contract liabilities

 

 

272

 

278

Current portion of long-term debt

 

 

13

 

8

Current operating lease liabilities

42

41

Other current liabilities

45

51

Total current liabilities

 

623

 

663

Non-current liabilities:

 

 

Pension and other postretirement benefits

 

 

186

192

Contract liabilities

1

Operating lease liabilities

144

158

Long-term debt

 

 

2,121

2,414

Other non-current liabilities

96

119

Total liabilities

 

 

3,170

 

3,547

Commitments and contingencies

Stockholders’ equity:

 

 

Common stock ($0.0001 par value, 240 million common shares authorized; 72.4 million and 61.2 million outstanding at June 30, 2021 and December 31, 2020, respectively)

 

 

Additional paid-in capital

 

 

2,211

1,818

Accumulated deficit

 

 

(803)

(763)

Accumulated other comprehensive loss

 

 

(109)

(120)

Total Maxar stockholders' equity

1,299

935

Noncontrolling interest

1

1

Total stockholders' equity

 

 

1,300

 

936

Total liabilities and stockholders' equity

 

$

4,470

$

4,483

See accompanying notes to the Unaudited Condensed Consolidated Financial Statements.

5

MAXAR TECHNOLOGIES INC.

Unaudited Condensed Consolidated Statements of Cash Flows

(In millions)

Six Months Ended

June 30, 

    

2021

    

2020

Cash flows (used in) provided by:

Operating activities:

 

Net (loss) income

$

(39)

$

258

Income from operations of discontinued operations, net of tax

32

Gain on disposal of discontinued operations, net of tax

304

Loss from continuing operations

(39)

(78)

Adjustments to reconcile net income (loss) to net cash (used in) provided by operating activities:

Depreciation and amortization

 

147

 

179

Stock-based compensation expense

 

21

 

13

Amortization of debt issuance costs and other non-cash interest expense

7

8

Loss from early extinguishment of debt

41

7

Cumulative adjustment to SXM-7 revenue

25

Impairment loss

14

Other

9

2

Changes in operating assets and liabilities:

Trade and other receivables

(72)

40

Accounts payable and liabilities

(60)

(65)

Contract liabilities

(6)

(38)

Other

(23)

(16)

Cash provided by operating activities - continuing operations

 

50

66

Cash used in operating activities - discontinued operations

(30)

Cash provided by operating activities

50

36

Investing activities:

Purchase of property, plant and equipment and development or purchase of software

 

(105)

 

(128)

Return of capital from discontinued operations

20

Cash used in investing activities - continuing operations

 

(105)

 

(108)

Cash provided by investing activities - discontinued operations

723

Cash (used in) provided by investing activities

(105)

615

Financing activities:

Repurchase of 2023 Notes, including premium

(384)

(169)

Net proceeds from issuance of common stock

380

Net proceeds from Revolving Credit Facility

 

53

 

Net proceeds from issuance of 2027 Notes

147

Settlement of securitization liability

(6)

(7)

Repayments of long-term debt

(4)

(521)

Other

(6)

1

Cash provided by (used in) financing activities - continuing operations

33

(549)

Cash used in financing activities - discontinued operations

(24)

Cash provided by (used in) financing activities

33

(573)

(Decrease) increase in cash, cash equivalents, and restricted cash

(22)

78

Effect of foreign exchange on cash, cash equivalents, and restricted cash

(5)

Cash, cash equivalents, and restricted cash, beginning of year

32

110

Cash, cash equivalents, and restricted cash, end of period

$

10

$

183

Reconciliation of cash flow information:

Cash and cash equivalents

$

10

$

179

Restricted cash included in prepaid and other current assets

1

Restricted cash included in other non-current assets

3

Total cash, cash equivalents, and restricted cash

$

10

$

183

See accompanying notes to the Unaudited Condensed Consolidated Financial Statements.

6

MAXAR TECHNOLOGIES INC.

Unaudited Condensed Consolidated Statements of Changes in Stockholders’ Equity

(In millions)

Three and six months ended June 30, 2021:

Common Stock

Additional

Accumulated

Accumulated other

Noncontrolling

Total stockholders’

Shares

Amount

paid-in capital

Deficit

comprehensive income (loss)

interest

equity

Balance as of December 31, 2020

61.2

$

$

1,818

$

(763)

$

(120)

$

1

$

936

Common stock issuance, net of transaction fees

10.0

380

380

Common stock issued under employee stock purchase plan

0.1

2

2

Equity classified stock-based compensation expense

0.4

7

7

Dividends ($0.01 per common share)

Comprehensive (loss) income

(84)

6

(78)

Balance as of March 31, 2021

71.7

$

$

2,207

$

(847)

$

(114)

$

1

$

1,247

Common stock issued under employee stock purchase plan

0.1

2

2

Equity classified stock-based compensation expense

0.6

2

2

Dividends ($0.01 per common share)

(1)

(1)

Comprehensive income

45

5

50

Balance as of June 30, 2021

72.4

$

$

2,211

$

(803)

$

(109)

$

1

$

1,300

Three and six months ended June 30, 2020:

Common Stock

Additional

Accumulated

Accumulated other

Noncontrolling

Total stockholders’

Shares

Amount

paid-in capital

Deficit

comprehensive income (loss)

interest

equity

Balance as of December 31, 2019

59.9

$

$

1,784

$

(1,064)

$

41

$

1

$

762

Common stock issued under employee stock purchase plan

0.2

2

2

Equity classified stock-based compensation expense

4

4

Dividends ($0.01 per common share)

Comprehensive loss

(48)

(63)

(111)

Balance as of March 31, 2020

60.1

$

$

1,790

$

(1,112)

$

(22)

$

1

$

657

Reclassification of liability classified stock-based compensation awards to equity classified

(2)

(2)

Equity-settled stock-based compensation recovery from disposal of discontinued operations

(1)

(1)

Common stock issued under employee stock purchase plan

0.2

1

1

Equity classified stock-based compensation expense

0.4

6

6

Dividends ($0.01 per common share)

(1)

(1)

Comprehensive income (loss)

306

(64)

242

Balance as of June 30, 2020

60.7

$

$

1,794

$

(807)

$

(86)

$

1

$

902

See accompanying notes to the Unaudited Condensed Consolidated Financial Statements.

7

Table of Contents

MAXAR TECHNOLOGIES INC.

Notes to the Unaudited Condensed Consolidated Financial Statements

(Tabular amounts in millions of United States dollars, except per share amounts)

1.

GENERAL BUSINESS DESCRIPTION

Maxar Technologies Inc. (the “Company” or “Maxar”) is a partner and innovator in Earth Intelligence and Space Infrastructure. Maxar delivers value to government and commercial customers to help them monitor, understand and navigate our changing planet; deliver global broadband communications; and explore and advance the use of space. The Company’s approach combines decades of deep mission understanding and a proven commercial and defense foundation to deploy solutions and deliver insights with speed, scale and cost effectiveness. Maxar’s stock trades on the New York Stock Exchange and Toronto Stock Exchange under the symbol “MAXR.”

2.

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of presentation

The Unaudited Condensed Consolidated Financial Statements include the accounts of Maxar Technologies Inc., and all consolidated subsidiary entities. The Company’s Unaudited Condensed Consolidated Financial Statements have been prepared in accordance with U.S. GAAP, and the rules and regulations of the U.S. Securities and Exchange Commission (“SEC”). All intercompany balances and transactions are eliminated on consolidation.

The Company’s Unaudited Condensed Consolidated Financial Statements are presented in U.S. dollars and have been prepared on a historical cost basis, except for certain financial assets and liabilities including derivative financial instruments which are stated at fair value. References to “C$” refer to Canadian currency.

The Unaudited Condensed Consolidated Financial Statements should be read in conjunction with the Company’s annual audited consolidated financial statements and notes thereto included in the Company’s most recent Annual Report on Form 10-K filed with the SEC. Unless otherwise indicated, amounts provided in the Notes to the Unaudited Condensed Consolidated Financial Statements pertain to continuing operations (See Note 3 for information on discontinued operations). Certain amounts in the prior year financial statements have been reclassified to conform to the current year presentation. In management’s opinion, all adjustments of a normal recurring nature that are necessary for a fair statement of the accompanying Unaudited Condensed Consolidated Financial Statements have been included. 

Use of estimates, assumptions and judgments

The preparation of the Unaudited Condensed Consolidated Financial Statements in accordance with U.S. GAAP requires the Company to make estimates and judgments that affect the reported amounts of assets and liabilities and the disclosure of contingencies at the reporting date, as well as the reported amounts of revenues and expenses during the reporting period. Estimates have been prepared using the most current and best available information; however, actual results could differ materially from those estimates.

Purchase Price Allocation

On July 1, 2020, the Company closed the acquisition of Vricon, Inc. During the three months ended March 31, 2021, the Company finalized the purchase price allocation related to the acquisition. There were no adjustments from the preliminary purchase price allocation determined as of December 31, 2020.

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Table of Contents

MAXAR TECHNOLOGIES INC.

Notes to the Unaudited Condensed Consolidated Financial Statements

(Tabular amounts in millions of United States dollars, except per share amounts)

Recent Accounting Guidance Not Yet Adopted

Reference Rate Reform

In March 2020, FASB issued ASU 2020-04, Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting (“ASU 2020-04”), which together with subsequent amendments is intended to provide temporary optional expedients and exceptions to the U.S. GAAP guidance on contract modifications and hedge accounting to ease the financial reporting burdens related to the expected market transition from the London Interbank Offered Rate and other interbank offered rates to alternative reference rates. This guidance was effective beginning on March 12, 2020, and the Company may elect to apply the amendments prospectively through December 31, 2022. The Company expects that it will elect to apply some of the expedients and exceptions in ASU 2020-04 and subsequent amendments. The Company has completed its preliminary analysis and does not expect that the adoption of ASU 2020-04 and subsequent amendments will have a material impact on the Company's financial statements.

3.

DISCONTINUED OPERATIONS

On April 8, 2020, the Company completed the sale of its former Canadian subsidiary (“MDA Business”), to Neptune Acquisition Inc., a corporation existing under the laws of the Province of British Columbia and an affiliate of Northern Private Capital Ltd. (“MDA Purchaser”), for an aggregate purchase price of $729 million (C$1.0 billion) (“MDA Transaction”). The Company recognized an after-tax gain on disposal of discontinued operations of $317 million, net of $12 million in taxes, on the MDA Transaction for the year ended December 31, 2020. The operating results and cash flows related to the MDA Business are reflected as discontinued operations in the Unaudited Condensed Consolidated Statements of Operations and the Unaudited Condensed Consolidated Statements of Cash Flows for the three and six months ended June 30, 2020. There was no activity within discontinued operations for the three or six months ended June 30, 2021.

In addition, the Company and the MDA Purchaser entered into a Transition Services Agreement pursuant to which the MDA Purchaser received certain services (“Services”). The Services were provided based on an agreed upon fee arrangement that ended on April 8, 2021.

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MAXAR TECHNOLOGIES INC.

Notes to the Unaudited Condensed Consolidated Financial Statements

(Tabular amounts in millions of United States dollars, except per share amounts)

Income from discontinued operations, net of tax for the MDA Business in the Unaudited Condensed Consolidated Statement of Operations consists of the following:

Three Months Ended

Six Months Ended

June 30, 20201

June 30, 20201

Revenues:

Product

$

5

$

44

Service

6

42

Total revenues

11

86

Costs and expenses:

Product costs, excluding depreciation and amortization

4

38

Service costs, excluding depreciation and amortization

3

24

Selling, general and administrative

13

Depreciation and amortization

 

4

Impairment loss

12

Operating income (loss)

4

 

(5)

Interest expense, net

 

1

Other expense (income), net2

2

(34)

Income before taxes

 

2

 

28

Income tax expense (benefit)

(4)

Income from operations of discontinued operations, net of tax

2

32

Gain on disposal of discontinued operations, net of tax

304

304

Income from discontinued operations, net of tax

$

306

$

336

1

For the three and six months ended June 30, 2020, MDA results are presented through April 7, 2020.

2

Other expense (income), net includes the $39 million recovery of the previously recorded liability in relation to the Company’s dispute with a customer for the six months ended June 30, 2020.

4.

TRADE AND OTHER RECEIVABLES, NET

June 30, 

December 31, 

2021

    

2020

Billed

$

194

$

181

Unbilled

 

156

 

95

Total trade receivables

350

276

Orbital receivables, current portion

50

49

Other

3

Allowance for doubtful accounts

(1)

Trade and other receivables, net

$

400

$

327

During the first quarter of 2021, the Company reduced its outstanding receivables related to the SXM-7 satellite for the final milestone and expected orbital payments of $15 million and $14 million, respectively. See Note 11 for additional details regarding the adjustment to revenue.

As of June 30, 2021 and December 31, 2020, non-current orbital receivables, net of allowance for expected credit losses were $333 million and $361 million, respectively.

The Company had orbital receivables from 14 customers for which the largest customer’s value represents 22% and 19% of the stated current and non-current balance sheet values as of June 30, 2021 and December 31, 2020, respectively.

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MAXAR TECHNOLOGIES INC.

Notes to the Unaudited Condensed Consolidated Financial Statements

(Tabular amounts in millions of United States dollars, except per share amounts)

The changes in allowance for expected credit losses related to non-current orbital receivables for the six months ended June 30, 2021, consist of the following:

Orbital Receivables Allowance

Allowance as of December 31, 2020

$

(49)

Additions

 

0

Allowance as of June 30, 2021

$

(49)

Securitization liabilities as of June 30, 2021 and December 31, 2020, are as follows:

June 30, 

December 31, 

2021

    

2020

Current portion

$

15

$

14

Non-current portion

 

40

 

47

Total securitization liabilities

$

55

$

61

5.

INVENTORY

June 30, 

December 31, 

    

2021

    

2020

Raw materials

$

31

$

22

Work in process

12

9

Inventory

$

43

$

31

6.PROPERTY, PLANT AND EQUIPMENT, NET

June 30, 

December 31, 

    

2021

    

2020

Satellites

$

397

$

397

Equipment

217

207

Computer hardware

91

78

Leasehold improvements

82

81

Furniture and fixtures

15

15

Construction in process1

602

572

Property, plant and equipment, at cost

1,404

1,350

Accumulated depreciation

 

(508)

(467)

Property, plant and equipment, net

$

896

$

883

1Construction in process is primarily related to the construction of the Company’s WorldView-Legion satellite constellation.

Depreciation expense for property, plant and equipment was $21 million and $23 million, and $44 million and $47 million for the three and six months ended June 30, 2021 and 2020, respectively.

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MAXAR TECHNOLOGIES INC.

Notes to the Unaudited Condensed Consolidated Financial Statements

(Tabular amounts in millions of United States dollars, except per share amounts)

7.

INTANGIBLE ASSETS

June 30, 2021

December 31, 2020

Gross carrying value

Accumulated amortization

Net carrying value

Gross carrying value

Accumulated amortization

Net carrying value

Customer relationships

$

615

$

(168)

$

447

$

615

$

(146)

$

469

Technologies

367

(243)

124

369

(211)

158

Software

343

(144)

199

298

(125)

173

Backlog

 

129

 

(95)

 

34

 

129

 

(79)

 

50

Image library

80

(65)

15

80

(58)

22

Trade names and other

38

(17)

21

38

(15)

23

Intangible assets

$

1,572

$

(732)

$

840

$

1,529

$

(634)

$

895

Amortization expense related to intangible assets was $52 million and $66 million, and $103 million and $132 million for the three and six months ended June 30, 2021 and 2020, respectively.

8.

LONG-TERM DEBT AND INTEREST EXPENSE, NET

June 30, 

December 31, 

    

2021

    

2020

Syndicated Credit Facility:

 

Revolving Credit Facility

$

53

$

Term Loan B

1,444

1,444

2023 Notes

500

850

2027 Notes

150

150

Deferred financing

29

32

Debt discount and issuance costs

 

(45)

 

(57)

Obligations under finance leases and other

 

3

 

3

Total long-term debt

 

2,134

 

2,422

Current portion of long-term debt

 

(13)

 

(8)

Non-current portion of long-term debt

$

2,121

$

2,414

The Company’s senior secured syndicated credit facility (“Syndicated Credit Facility”) is composed of: (i) a senior secured first lien revolving credit facility in an aggregate capacity of up to $500 million maturing in December 2023 (“Revolving Credit Facility”) and (ii) a senior secured first lien term B facility in an original aggregate principal amount of $2.0 billion maturing in October 2024 (“Term Loan B”).

The maximum consolidated debt leverage ratios permitted under the Original Syndicated Credit Facility are 7.50x at the end of each fiscal quarter until the fiscal quarter ending September 30, 2021, 7.25x at the end of each fiscal quarter thereafter until the quarter ending September 30, 2022, 6.25x at the end of each fiscal quarter thereafter until the fiscal quarter ending March 31, 2023, and 5.50x for each fiscal quarter thereafter (subject to a 0.25x reduction in each maximum level upon a disposition of a business line for greater than $500 million).

The Revolving Credit Facility includes an aggregate $200 million sub limit under which letters of credit can be issued. As of June 30, 2021 and December 31, 2020, the Company had $28 million and $31 million, respectively, of issued and undrawn letters of credit outstanding under the Revolving Credit Facility.

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MAXAR TECHNOLOGIES INC.

Notes to the Unaudited Condensed Consolidated Financial Statements

(Tabular amounts in millions of United States dollars, except per share amounts)

In December 2019, the Company issued $1.0 billion in principal amount of 9.75% Senior Secured Notes due 2023 (“2023 Notes”). The 2023 Notes were offered and sold to qualified institutional buyers in the U.S. pursuant to Rule 144A and outside the U.S. pursuant to Regulation S under the Securities Act of 1933, as amended. The 2023 Notes were issued at a price of 98% and are recorded as long-term debt in the consolidated financial statements. The 2023 Notes bear interest at the rate of 9.75% per year, payable semi-annually in cash in arrears, which interest payments commenced in June 2020.

On June 25, 2020, the Company repurchased $150 million aggregate principal amount of its 2023 Notes using proceeds from the MDA Transaction. The 2023 Notes were repurchased (“2023 Notes Repurchase”) at approximately 112.45% of the principal amount thereof.

On March 26, 2021, the Company redeemed $350 million aggregate principal of its 2023 Notes using a portion of the net proceeds from the common stock offering (“Offering”). The Company paid premiums of approximately $34 million related to the early redemption. This resulted in a loss on debt extinguishment of $41 million that was recorded in the first quarter of 2021, which is included as part of Interest expense, net within the Unaudited Condensed Consolidated Statements of Operations for the six months ended June 30, 2021. See Note 10 for additional details on the Offering.

On June 25, 2020, the Company issued $150 million in principal amount of 7.54% Senior Secured Notes due 2027 (“2027 Notes”). The 2027 Notes were offered and sold to qualified institutional buyers in the U.S. pursuant to Rule 144A and outside the U.S. pursuant to Regulation S under the Securities Act of 1933, as amended. The 2027 Notes were issued at a price of 98.25% and bear interest at the rate of 7.54% per annum, payable semi-annually in cash in arrears, for which interest payments commenced December 2020. The 2027 Notes are guaranteed on a senior secured basis by each of the Company’s existing and future subsidiaries that guarantee the Syndicated Credit Facility and the 2023 Notes.

The Company accounted for the 2027 Notes and 2023 Notes Repurchase as debt modifications. As a result, the 12.45% premium paid on the repurchase of the $150 million of 2023 Notes is accounted for as an incremental discount that is amortized over the life of the 2027 Notes. Separately, the previously incurred unamortized debt discount and debt issuance costs are amortized over the remaining life of the outstanding 2023 Notes.

Interest expense, net on long-term debt and other obligations is as follows:

Three Months Ended June 30, 

Six Months Ended June 30, 

2021

    

2020

2021

    

2020

Interest on long-term debt

$

33

$

48

$

77

$

102

Loss on debt extinguishment

7

41

7

Interest on orbital securitization liability

1

2

2

3

Imputed interest and other

1

Interest expense on advance payments from customers

1

3

Capitalized interest

(10)

(10)

(19)

(18)

Interest expense, net

$

24

$

48

$

102

$

97

9.

FINANCIAL INSTRUMENTS AND FAIR VALUE DISCLOSURES

Factors used in determining the fair value of financial assets and liabilities are summarized into three categories in accordance with ASC 820 - Fair Value Measurements:

Level 1: Unadjusted quoted prices in active markets that are accessible at the measurement date for identical, unrestricted assets or liabilities

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Notes to the Unaudited Condensed Consolidated Financial Statements

(Tabular amounts in millions of United States dollars, except per share amounts)

Level 2: Inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly (i.e. as prices) or indirectly (i.e. derived from prices)

Level 3: Inputs for the asset or liability that are based on unobservable inputs

The following tables present assets and liabilities that are measured at fair value on a recurring basis (at least annually) by level within the fair value hierarchy. A financial asset or liability’s classification within the hierarchy is determined based on the lowest level input that is significant to the fair value measurement. The Company had no assets measured at fair value as of December 31, 2020.

Recurring Fair Value Measurements as of June 30, 2021

Level 1

Level 2

Level 3

Total

Assets

 

 

 

 

Interest rate swaps

$

$

1

$

$

1

$

$

1

$

$

1

Liabilities

Interest rate swaps

$

$

11

$

$

11

Long-term debt1

2,146

2,146

$

$

2,157

$

$

2,157

Recurring Fair Value Measurements as of December 31, 2020

Level 1

Level 2

Level 3

Total

Liabilities

Interest rate swaps

$

$

20

$

$

20

Long-term debt1

2,556

2,556

$

$

2,576

$

$

2,576

1

Long-term debt excludes finance leases, borrowings under the Revolving Credit Facility, deferred financing and other and is carried at amortized cost. The outstanding carrying value was $2,049 million and $2,387 million at June 30, 2021 and December 31, 2020, respectively. The carrying value of borrowings under the Revolving Credit Facility approximates their fair value.

In April 2021, $500 million of the Company’s interest rate swaps matured. On June 15, 2021, the Company entered into interest rate swaps at a notional value of $500 million. In total, an aggregate amount of $1.0 billion of the Company’s variable rate long-term debt is fixed at an average rate of 1.43% (excluding the margin specified in the Syndicated Credit Facility). In April 2022 and June 2023, the Company will have interest rate swap maturities of $500 million, respectively.

The Company determines fair value of its derivative financial instruments based on internal valuation models, such as discounted cash flow analysis, using management estimates and observable market-based inputs, as applicable. Management estimates include assumptions concerning the amount and timing of estimated future cash flows and application of appropriate discount rates. Observable market-based inputs are sourced from third parties and include interest rates and yield curves, currency spot and forward rates and credit spreads, as applicable.

The Company determines fair value of long-term debt that is actively traded in the secondary market using external pricing data, including any available quoted market prices and other observable inputs from available market information. For debt that is not actively traded in the secondary market, the fair value is based on the Company’s indicative borrowing cost derived from dealer quotes or discounted cash flows.

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Notes to the Unaudited Condensed Consolidated Financial Statements

(Tabular amounts in millions of United States dollars, except per share amounts)

Cash and cash equivalents, accounts receivable, accounts payable and accrued liabilities are all short-term in nature; therefore, the carrying value of these items approximates their fair value.

There were 0 transfers into or out of each of the levels of the fair value hierarchy during the periods ended June 30, 2021 and December 31, 2020.

10.

STOCKHOLDERS’ EQUITY

On March 22, 2021, the Company completed the Offering of 10 million shares of common stock, par value $0.0001 per share, at a public offering price of $40 per share. The Company received proceeds of $380 million, net of $20 million of transaction fees.

As of December 31, 2020, the Company had 2.4 million shares authorized and 0 shares outstanding of the Series A Preferred stock. On May 17, 2021, the Company filed a Certificate of Elimination of Series A Junior Participating Preferred Stock with the Delaware Secretary of State, thereby removing the Certificate of Designations of the Series A Preferred stock from the Company’s Amended and Restated Certificate of Incorporation. Therefore, as of June 30, 2021, the Company had 0 shares authorized and 0 shares outstanding of the Series A Preferred stock.

Changes in the components of Accumulated other comprehensive income (loss) are as follows:

Foreign Currency Translation Adjustments

Unrealized Loss on Interest Rate Swaps

Loss on Pension and Other Postretirement Plans

Total Accumulated Other Comprehensive Loss

Balance as of December 31, 2020

$

1

$

(20)

$

(101)

$

(120)

Other comprehensive (loss) income

(1)

6

1

6

Tax benefit (expense)

Balance as of March 31, 2021

$

$

(14)

$

(100)

$

(114)

Other comprehensive income

4

1

5

Tax benefit (expense)

Balance as of June 30, 2021

$

$

(10)

$

(99)

$

(109)

11.

REVENUE

On June 30, 2021, the Company had $1.5 billion of remaining performance obligations, which represents the transaction price of firm orders less inception-to-date revenues recognized. Remaining performance obligations generally exclude unexercised contract options and indefinite delivery/indefinite quantity contracts. The Company expects to recognize revenues relating to existing performance obligations of approximately $0.6 billion, $0.6 billion and $0.3 billion for the remaining six months ended December 31, 2021, the year ending December 31, 2022 and thereafter, respectively.

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MAXAR TECHNOLOGIES INC.

Notes to the Unaudited Condensed Consolidated Financial Statements

(Tabular amounts in millions of United States dollars, except per share amounts)

Contract liabilities by segment are as follows:

As of June 30, 2021

    

Earth Intelligence

    

Space Infrastructure

    

Total

Contract liabilities

$

39

$

233

$

272

As of December 31, 2020

    

Earth Intelligence

    

Space Infrastructure

    

Total

Contract liabilities

$

45

$

234

$

279

The decrease in contract liabilities is primarily due to revenues recognized based upon the satisfaction of performance obligations on commercial contracts in the Earth Intelligence segment.

The Company’s primary sources of revenues are as follows:

Three Months Ended June 30, 2021

    

Earth Intelligence

    

Space Infrastructure

    

Eliminations

    

Total

Product revenues

$

$

190

$

$

190

Service revenues

 

283

 

 

 

283

Intersegment

 

16

 

(16)

 

$

283

$

206

$

(16)

$

473

Three Months Ended June 30, 2020

    

Earth Intelligence

    

Space Infrastructure

    

Eliminations

    

Total

Product revenues

$

$

157

$

$

157

Service revenues

 

278

 

4

 

 

282

Intersegment

23

(23)

$

278

$

184

$

(23)

$

439

Six Months Ended June 30, 2021

    

Earth Intelligence

    

Space Infrastructure

    

Eliminations

    

Total

Product revenues

$

$

332

$

$

332

Service revenues

 

533

 

 

 

533

Intersegment

29

(29)

$

533

$

361

$

(29)

$

865

Six Months Ended June 30, 2020

    

Earth Intelligence

    

Space Infrastructure

    

Eliminations

    

Total

Product revenues

$

$

264

$

$

264

Service revenues

 

549

 

7

 

 

556

Intersegment

45

(45)

$

549

$

316

$

(45)

$

820

Certain of the Company’s contracts with customers in the Space Infrastructure segment include a significant financing component since payments are received from the customer more than one year after delivery of the promised goods or services. The Company recognized orbital interest revenue of $7 million and $14 million for the three and six months ended June 30, 2021 and 2020, respectively, related to these contracts, which is included in product revenues.

Revenue in the Space Infrastructure segment is primarily generated from long-term construction contracts. Due to the long-term nature of these contracts, the Company generally recognizes revenue over time using the cost-to-cost method of accounting to measure progress. Under the cost-to-cost method of accounting, revenue is recognized based on the

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MAXAR TECHNOLOGIES INC.

Notes to the Unaudited Condensed Consolidated Financial Statements

(Tabular amounts in millions of United States dollars, except per share amounts)

proportion of total costs incurred to estimated total costs-at-completion ("EAC"). An EAC includes all direct costs and indirect costs directly attributable to a program or allocable based on program cost pooling arrangements. Estimates regarding the Company’s cost associated with the design, manufacture and delivery of products and services are used in determining the EAC. Changes to an EAC are recorded as a cumulative adjustment to revenue.

The Company recognized a cumulative adjustment to revenue of $25 million in the first quarter of 2021 related to the Sirius XM contract with Sirius XM Holdings Inc. (“Sirius XM”). This resulted primarily from adjusting the EAC transaction price for the amount of the final milestone and expected orbital payments due to the non-performance of the SXM-7 satellite and other adjustments. There was 0 cumulative adjustment to revenue from the Sirius XM contract for the three months ended June 30, 2021. In addition to the cumulative adjustment recognized in the first quarter of 2021, incremental costs of $3 million were incurred related to the SXM-7 recovery efforts during the first quarter of 2021. There were 0 incremental costs incurred from SXM-7 recovery efforts for the three months ended June 30, 2021. See Note 4 for additional details regarding the adjustment to trade and other receivables.

The Company did not incur COVID-19 related EAC growth during the three and six months ended June 30, 2021, respectively, compared to $6 million and $24 million of COVID-19 related EAC growth for the three and six months ended June 30, 2020, respectively.

The Company has certain programs in the Space Infrastructure segment which contain significant development efforts that have experienced delays and cost growth primarily due to the complexity of the programs resulting in an overall loss position. The Company recorded $13 million and $23 million in EAC adjustments on loss contracts during the three and six months ended June 30, 2021, respectively. The Company recorded $17 million and $36 million in EAC adjustments on a commercial satellite loss contract which included significant development efforts further delayed by COVID-19 for the three and six months ended June 30, 2020, respectively.

Revenues based on the geographic location of customers are as follows:

Three Months Ended June 30, 

Six Months Ended June 30, 

2021

    

2020

2021

    

2020

United States

$

372

$

356

$

695

$

658

Australia

37

10

48

17

Asia

20

23

 

42

 

50

Europe

21

24

 

36

 

42

Middle East

13

13

27

26

South America

5

6

 

7

 

15

Other

5

7

 

10

 

12

Total revenues

$

473

$

439

$

865

$

820

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MAXAR TECHNOLOGIES INC.

Notes to the Unaudited Condensed Consolidated Financial Statements

(Tabular amounts in millions of United States dollars, except per share amounts)

Revenues from significant customers are as follows:

Three Months Ended June 30, 2021

Earth Intelligence

Space Infrastructure

Eliminations

Total

U.S. federal government and agencies

$

180

$

61

$

$

241

Commercial and other

103

145

(16)

 

232

Total revenues

$

283

$

206

$

(16)

$

473

Three Months Ended June 30, 2020

    

Earth Intelligence

    

Space Infrastructure

Eliminations

    

Total

U.S. federal government and agencies

$

203

$

75

$

$

278

Commercial and other

75

109

(23)

 

161

Total revenues

$

278

$

184

$

(23)

$

439

Six Months Ended June 30, 2021

Earth Intelligence

Space Infrastructure

Eliminations

Total

U.S. federal government and agencies

$

351

$

127

$

$

478

Commercial and other

182

234

(29)

 

387

Total revenues

$

533

$

361

$

(29)

$

865

Six Months Ended June 30, 2020

    

Earth Intelligence

    

Space Infrastructure

Eliminations

    

Total

U.S. federal government and agencies

$

402

$

140

$

$

542

Commercial and other

147

176

(45)

 

278

Total revenues

$

549

$

316

$

(45)

$

820

The Company had revenues from a commercial customer in the Space Infrastructure segment that represented 21% and 20% of total revenues for the three and six months ended June 30, 2021, respectively. The revenues from this commercial customer in the Space Infrastructure segment were less than 10%of the Company’s total revenues for the three and six months ended June 30, 2020.

12.

SEGMENT INFORMATION

The Company’s business is organized into 2 reportable segments: Earth Intelligence and Space Infrastructure. The Earth Intelligence reportable segment is a supplier of high-resolution space-based optical and radar imagery products and analytics. The Space Infrastructure reportable segment is a provider of Space Infrastructure that designs, builds, integrates and tests solutions for space-based communication satellites, on-orbit servicing, robotic assembly and space exploration.

The Company’s Chief Operating Decision Maker (“CODM”) measures the performance of each segment based on revenue and Adjusted EBITDA. Adjusted EBITDA is defined as earnings before interest, tax, depreciation and amortization (“EBITDA”) adjusted for certain items affecting comparability as specified in the calculation. Certain items affecting comparability include restructuring, impairments, satellite insurance recovery, gain (loss) on sale of assets, CEO severance and transaction and integration related expense. Transaction and integration related expense includes costs associated with de-leveraging activities, acquisitions and dispositions and the integration of acquisitions. Corporate and other expenses include items such as corporate office costs, regulatory costs, executive and director compensation, foreign exchange gains and losses, and fees for audit, legal and consulting services.

Intersegment sales are generally recorded at cost plus a specified margin, which may differ from what the segment may be able to obtain on sales to external customers.

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MAXAR TECHNOLOGIES INC.

Notes to the Unaudited Condensed Consolidated Financial Statements

(Tabular amounts in millions of United States dollars, except per share amounts)

The following table summarizes the operating performance of the Company’s segments:

Three Months Ended June 30, 

Six Months Ended June 30, 

2021

    

2020

2021

    

2020

Revenues:

  

 

  

 

  

 

  

Earth Intelligence

$

283

$

278

$

533

$

549

Space Infrastructure

 

206

 

184

 

361

 

316

Intersegment eliminations

(16)

(23)

(29)

(45)

Total revenues

$

473

$

439

$

865

$

820

Adjusted EBITDA:

Earth Intelligence

$

131

$

146

$

238

$

279

Space Infrastructure

27

11

15

(28)

Intersegment eliminations

(7)

(7)

(12)

(14)

Corporate and other expenses

(19)

(12)

(42)

(22)

Transaction and integration related expense

(3)

(4)

Impairment loss

(14)

Depreciation and amortization

(73)

(89)

(147)

(179)

Interest expense, net

(24)

(48)

(102)

(97)

Interest income 1

1

1

Equity in income from joint ventures, net of tax

(2)

(1)

Income (loss) from continuing operations before taxes

$

35

$

(4)

$

(49)

$

(79)

1

Included in Other income, net on the Unaudited Condensed Consolidated Statements of Operations.

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MAXAR TECHNOLOGIES INC.

Notes to the Unaudited Condensed Consolidated Financial Statements

(Tabular amounts in millions of United States dollars, except per share amounts)

The Company’s capital expenditures are as follows:

Three Months Ended June 30, 2021

Earth Intelligence

    

Space Infrastructure

    

Corporate and Eliminations

Total

Capital expenditures:

Property, plant and equipment

$

15

$

4

$

12

$

31

Intangible assets

 

22

 

 

2

 

24

$

37

$

4

$

14

$

55

Three Months Ended June 30, 2020

Earth Intelligence

    

Space Infrastructure

    

Corporate and Eliminations

Total

Capital expenditures:

Property, plant and equipment

$

28

$

5

$

11

$

44

Intangible assets

 

20

 

 

4

 

24

$

48

$

5

$

15

$

68

Six Months Ended June 30, 2021

Earth Intelligence

    

Space Infrastructure

    

Corporate and eliminations

Total

Capital expenditures:

Property, plant and equipment

$

28

$

8

$

21

$

57

Intangible assets

 

42

 

 

6

 

48

$

70

$

8

$

27

$

105

Six Months Ended June 30, 2020

Earth Intelligence

    

Space Infrastructure

    

Corporate and eliminations

Total

Capital expenditures:

Property, plant and equipment

$

62

$

8

$

18

$

88

Intangible assets

 

36

 

 

4

 

40

$

98

$

8

$

22

$

128

Substantially all of the Company’s long-lived tangible assets were in the United States as of June 30, 2021 and December 31, 2020.

13.

EMPLOYEE BENEFIT PLANS

The following table summarizes the components of net periodic benefit income for the Company’s pension plans:

Three Months Ended June 30, 

Six Months Ended June 30, 

2021

2020

2021

2020

Interest cost

$

4

$

5

$

7

$

9

Expected return on plan assets

(7)

(7)

(14)

(13)

Amortization of net loss

2

1

3

1

Expenses paid

1

1

Net periodic benefit income

$

(1)

$

(1)

$

(3)

$

(2)

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MAXAR TECHNOLOGIES INC.

Notes to the Unaudited Condensed Consolidated Financial Statements

(Tabular amounts in millions of United States dollars, except per share amounts)

Contributions

The funding policy for the Company’s pension plans is to contribute at least the minimum required by applicable laws and regulations or to directly make benefit payments where appropriate. In December 2020, the Company prefunded approximately $16 million to its qualified pension plan. Due to the December 2020 prefunding, there are 0 required contributions for the Company’s qualified pension plan for the year ended December 31, 2021.

14.

INCOME TAXES

For the three months ended June 30, 2021 and 2020, the effective tax rate on pre-tax continuing operations was (28.6)% and 50.0%, respectively. For the six months ended June 30, 2021 and 2020, the effective tax rate on pre-tax continuing operations was 20.4% and 0.0%, respectively. The effective tax rates for the three and six months ended June 30, 2021 and 2020 differ from the statutory U.S. federal income tax rate of 21.0% primarily due to a change in the estimated 2020 Base Erosion and Anti-Abuse Tax driven by a change in tax strategy enabled by a reduction in forecasted interest expense, estimated permanent differences, tax on foreign earnings and changes in valuation allowance. The Company does not anticipate a significant change to the Company’s gross unrecognized tax benefits within the next 12 months.

The Company assesses the deferred tax assets for recoverability on a quarterly basis. Based upon all available positive and negative evidence, the Company maintains a valuation allowance to reduce the net U.S. deferred tax asset to the amount that is more-likely-than-not realizable.

The Company computes an estimated annual effective tax rate (“AETR”) each quarter based on the current and forecasted continuing operating results. The income tax expense or benefit associated with the interim period is computed using the most recent estimated AETR applied to the year-to-date ordinary income or loss, plus the tax effect of any significant or infrequently occurring items recorded during the interim period. The computation of the estimated AETR at each interim period requires certain estimates and significant judgments including, but not limited to, the expected operating income (loss) for the year, projections of the proportion of income earned and taxed in various jurisdictions, permanent differences and the likelihood of recovering deferred tax assets generated in the current year. The accounting estimates used to compute the provision for income taxes may change as new events occur and additional information becomes known or as the tax environment changes.

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Notes to the Unaudited Condensed Consolidated Financial Statements

(Tabular amounts in millions of United States dollars, except per share amounts)

15.

NET INCOME (LOSS) PER COMMON SHARE

The following table includes the calculation of basic and diluted net income (loss) per common share:

Three Months Ended June 30, 

Six Months Ended June 30, 

    

2021

    

2020

    

2021

    

2020

Income (loss) from continuing operations

$

45

$

$

(39)

$

(78)

Income from discontinued operations, net of tax

306

336

Net income (loss)

$

45

$

306

$

(39)

$

258

Weighted average number of common shares outstanding-basic

72.2

60.6

68.5

60.4

Weighted dilutive effect of equity awards

 

2.5

 

1.4

 

 

Weighted average number of common shares outstanding-diluted

74.7

62.0

68.5

60.4

Basic net income (loss) per common share:

Income (loss) from continuing operations

$

0.62

$

$

(0.57)

$

(1.29)

Income from discontinued operations, net of tax

5.05

5.56

Basic net income (loss) per common share

$

0.62

$

5.05

$

(0.57)

$

4.27

Diluted net income (loss) per common share:

Income (loss) from continuing operations

$

0.60

$

$

(0.57)

$

(1.29)

Income from discontinued operations, net of tax

4.94

5.56

Diluted net income (loss) per common share

$

0.60

$

4.94

$

(0.57)

$

4.27

The weighted average number of common shares outstanding for the three and six months ended June 30, 2021 includes 10 million shares of the Company’s common stock issued in connection with the Offering completed on March 22, 2021. See Note 10 for further details.

For the three months ended June 30, 2021 and 2020 approximately 2 million and 3 million awards, and for the six months ended June 30 2021 and 2020 approximately 4 million and 3 million awards, respectively, were excluded from the diluted weighted average number of ordinary common shares outstanding calculation because their effect would have been anti-dilutive.

16.

COMMITMENTS AND CONTINGENCIES

Contingencies in the Normal Course of Business

Satellite construction contracts may include performance incentives whereby payment for a portion of the purchase price of the satellite is contingent upon in-orbit performance of the satellite. The Company’s ultimate receipt of orbital performance incentives is subject to the continued performance of its satellites generally over the contractually stipulated life of the satellites. A complete or partial loss of a satellite’s functionality can result in loss of orbital receivable payments or repayment of amounts received by the Company under a warranty payback arrangement. The Company generally receives the present value of the orbital receivables if there is a launch failure or a failure caused by a customer error, but will forfeit some or all of the orbital receivables if the loss is caused by satellite failure or as a result of Company error. The Company recognizes orbital performance incentives in the financial statements based on the amounts that are expected to be received and believes that it will not incur a material loss relating to the incentives recognized. With respect to the Company’s securitized liability for the orbital receivables, upon the occurrence of an

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MAXAR TECHNOLOGIES INC.

Notes to the Unaudited Condensed Consolidated Financial Statements

(Tabular amounts in millions of United States dollars, except per share amounts)

event of default under the securitization facility agreement or upon the occurrence of limited events, the Company may be required to repurchase on demand any effected receivables at their then net present value.

The Company may incur liquidated damages on programs as a result of delays due to slippage, or for programs which fail to meet all milestone requirements as outlined within the contractual arrangements with customers. Losses on programs related to liquidated damages result in a reduction of revenue. Changes in estimates related to contracts accounted for using the cost-to-cost method of accounting are recognized in the period in which such changes are made for the inception-to-date effect of the changes. Unrecoverable costs on contracts that are expected to be incurred in future periods are recorded in program cost in the current period. Additionally, construction contracts may have termination for default clauses, which if triggered, could result in potential losses and legal disputes.

The Company enters into agreements in the ordinary course of business with resellers and others. Most of these agreements require the Company to indemnify the other party against third-party claims alleging that one of its products infringes or misappropriates a patent, copyright, trademark, trade secret or other intellectual property right. Certain of these agreements require the Company to indemnify the other party against claims relating to property damage, personal injury or acts or omissions by the Company, its employees, agents or representatives.

From time to time, the Company has made guarantees regarding the performance of its systems to its customers. Some of these agreements do not limit the maximum potential future payments the Company could be obligated to make. The Company evaluates and estimates potential losses from such indemnification based on the likelihood that the future event will occur. The Company has not incurred any material costs as a result of such obligations and has not accrued any liabilities related to such indemnification and guarantees in the Unaudited Condensed Consolidated Financial Statements.

The Company has entered into industrial cooperation agreements, sometimes referred to as offset agreements, as a condition to entering into contracts for its products and services from certain customers in foreign countries. These agreements are designed to return economic value to the foreign country and may be satisfied through activities that do not require a direct cash payment, including transferring technology and providing manufacturing, training and other consulting support to in-country projects. These agreements may provide for penalties in the event the Company fails to perform in accordance with offset requirements. The Company has historically not been required to pay any such penalties.

Risks and uncertainties related to COVID-19

The near and long-term impacts of the current pandemic on the cost and schedule of the numerous programs in the Company’s existing backlog and the timing of new awards remain uncertain. The Company is observing stress in its supplier base inside and outside the U.S. and will continue to monitor and assess the actual and potential COVID-19 impacts on employees, customers, suppliers and the productivity of the work being done, all of which to some extent will affect revenues, estimated costs to complete projects, earnings and cash flow.

COVID-19 represents a force majeure event and as such, the Company has notified certain customers that it will be exercising its legal rights given the uncertain nature of the current pandemic and the near and long-term impacts on the cost and schedule of the numerous programs in the existing backlog.

Legal proceedings

On January 14, 2019, a Maxar stockholder filed a putative class action lawsuit captioned Oregon Laborers Employers Pension Trust Fund, et al. v. Maxar Technologies Inc., No. 1:19-cv-00124-WJM-SKC in the United States District Court for the District of Colorado (“Colorado Action”), naming Maxar and members of management as defendants alleging,

23

Table of Contents

MAXAR TECHNOLOGIES INC.

Notes to the Unaudited Condensed Consolidated Financial Statements

(Tabular amounts in millions of United States dollars, except per share amounts)

among other things, that the Company’s public disclosures were deficient in violation of the federal securities laws and seeking monetary damages. On October 7, 2019, the lead plaintiff filed a consolidated amended complaint alleging violations of Sections 10(b) and 20(a) of the Securities Exchange Act of 1934 against the Company and members of management in connection with the Company’s public disclosures between March 26, 2018 and January 6, 2019. The consolidated complaint alleges that the Company’s statements regarding the AMOS-8 contract, accounting for its GEO communications assets, and WorldView-4 were allegedly false and/or misleading during the class period. On September 11, 2020, the court granted in part, and denied in part, defendants’ motion to dismiss. On July 16, 2021, the court in the Colorado Action certified a class consisting of investors who purchased or acquired Maxar stock between May 9, 2018 and October 30, 2018, inclusive. Also, in January 2019, a Maxar stockholder resident in Canada issued a putative class action lawsuit captioned Charles O’Brien v. Maxar Technologies Inc., No. CV-19-00613564-00CP in the Ontario Superior Court of Justice against Maxar and members of management claiming misrepresentations in Maxar’s public disclosures and seeking monetary damages. On November 15, 2019, Mr. O’Brien and another Maxar stockholder resident in Canada issued a new putative class action lawsuit captioned Charles O’Brien v. Maxar Technologies Inc., No. CV-19-00631107-00CP, naming Maxar and certain members of management and the board of directors as defendants as well as Maxar’s auditor, KPMG LLP. On February 7, 2020, the January 2019 lawsuit was discontinued. The Statement of Claim alleges that the Company’s statements regarding the AMOS-8 contract, accounting for its GEO communications assets, and WorldView-4 were false and/or misleading during the class period and claims damages of $700 million. On April 24, 2020, the plaintiffs served their motion record for leave under the Securities Act (Ontario) and to certify the action as a class proceeding, which motion is currently pending. The Company believes that these cases are without merit and intends to vigorously defend against them. 

 

On October 21, 2019, a Maxar stockholder filed a putative class action lawsuit captioned McCurdy v. Maxar Technologies Inc., et al., No. I9CV35070 in the Superior Court of the State of California, County of Santa Clara, naming Maxar, and certain members of management and the board of directors as defendants. The lawsuit alleges violations of Sections 11, 12(a)(2) and 15 of the Securities Act of 1933 in connection with the Company’s June 2, 2017 Registration Statement and prospectus filed in anticipation of its October 5, 2017 merger with DigitalGlobe, Inc. On April 30, 2020, the plaintiff filed an amended complaint alleging the same causes of action against the same set of defendants as set forth in his original complaint. The lawsuit is based upon many of the same underlying factual allegations as the Colorado Action. Specifically, the lawsuit alleges the Company’s statements regarding its accounting methods and risk factors, including those related to the GEO communications business, were false and/or misleading when made. On January 24, 2021, the court granted in part, and denied in part, defendants’ motion to dismiss. The Company believes that this lawsuit is without merit and intends to vigorously defend against it. 

 

On November 14, 2019, a derivative action was filed against Maxar and certain current and former members of management and the board of directors in United States District Court for the District of Delaware, captioned as Dorling, Derivatively on Behalf of Nominal Defendant Maxar Technologies Inc. v. Lance, et al., No. 19-cv-02134-UNA. On September 18, 2020, another purported derivative action was filed in the same court against Maxar and certain current and former members of management and the board of directors, captioned as Golub, Derivatively on Behalf of Maxar Technologies Inc. v. Lance, et al., No. 20-cv-01251-UNA. Both complaints concern the same factual allegations as asserted in the Colorado Action. The court has consolidated and stayed both derivative cases.

  

The Company maintains insurance policies for settlements and judgments, as well as legal defense costs, for lawsuits such as those described in the preceding paragraphs. The Company is a party to various other legal proceedings and claims that arise in the ordinary course of business as either a plaintiff or defendant. As a matter of course, the Company is prepared both to litigate these matters to judgment, as well as to evaluate and consider all reasonable settlement opportunities. The Company has established accrued liabilities for these matters where losses are deemed probable and reasonably estimable. The outcome of any of these other proceedings, either individually or in the aggregate, is not expected to have a material adverse effect on the Company’s financial position, results of operations or liquidity. The Company expenses legal fees related to contingencies as incurred.

24

Table of Contents

MAXAR TECHNOLOGIES INC.

Notes to the Unaudited Condensed Consolidated Financial Statements

(Tabular amounts in millions of United States dollars, except per share amounts)

17.

SUPPLEMENTAL CASH FLOW

Selected cash payments and non-cash activities are as follows:

Six Months Ended June 30,

2021

2020

Supplemental cash flow information:

Cash paid for interest

$

73

$

122

Supplemental non-cash investing and financing activities:

Accrued capital expenditures

12

41

25

ITEM 2.MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

This management’s discussion and analysis (“MD&A”) contains “forward-looking statements” as defined in Section 27A of the United States Securities Act of 1933, as amended, and Section 21E of the United States Securities Exchange Act of 1934, as amended (“Exchange Act”). Forward-looking statements usually relate to future events and anticipated revenues, earnings, cash flows or other aspects of our operations or operating results. Forward-looking statements are often identified by the words “believe,” “expect,” “anticipate,” “plan,” “intend,” “foresee,” “should,” “would,” “could,” “may,” “estimate,” “outlook” and similar expressions, including the negative thereof. The absence of these words, however, does not mean that the statements are not forward-looking. These forward-looking statements are based on our current expectations, beliefs and assumptions concerning future developments and business conditions and their potential effect on us. While management believes that these forward-looking statements are reasonable as and when made, there can be no assurance that future developments affecting us will be those that we anticipate.

All of our forward-looking statements involve risks and uncertainties (some of which are significant or beyond our control) and assumptions that could cause actual results to differ materially from our historical experience and our present expectations or projections. Known material factors that could cause actual results to differ materially from those contemplated in the forward-looking statements include those set forth in Part II, Item 1A, “Risk Factors” and elsewhere in this MD&A. We caution you not to place undue reliance on any forward-looking statements, which speak only as of the date hereof. We undertake no obligation to publicly update or revise any of our forward-looking statements after the date they are made, whether as a result of new information, future events or otherwise, except to the extent required by law.

*****

Unless stated otherwise or the context otherwise requires, references to the terms “Company,” “Maxar,” “we,” “us,” and “our” refer collectively to Maxar Technologies Inc. and its consolidated subsidiaries.

OVERVIEW

We are a partner and innovator in Earth Intelligence and Space Infrastructure. We help government and commercial customers monitor, understand and navigate our changing planet; deliver global broadband communications; and explore and advance the use of space. Our approach combines decades of deep mission understanding and a proven commercial and defense foundation to deploy solutions and deliver insights with speed, scale and cost effectiveness. Our businesses are organized and managed in two reportable segments: Earth Intelligence and Space Infrastructure, as described below under “Segment Results”.

Unless otherwise indicated, our significant accounting policies and estimates, contractual obligations, commitments, contingencies and business risks and uncertainties as described in our MD&A and consolidated financial statements for the year ended December 31, 2020, are substantially unchanged.

RECENT DEVELOPMENTS

Common stock offering

On March 22, 2021, we completed an underwritten public offering of 10 million shares of our common stock, par value $0.0001 per share, at a public offering price of $40 per share (“Offering”). We received proceeds of $380 million, net of $20 million of transaction fees as of March 31, 2021. The underwriters did not exercise the option to purchase an additional 1.5 million shares of our common stock prior to the expiration of the option.

On March 26, 2021, we redeemed $350 million aggregate principal of our 2023 Notes using a portion of the net proceeds from the Offering. Additionally, we paid premiums of approximately $34 million related to the early redemption.

26

COVID-19 operational posture and current impact

We have begun to transition from our pandemic crisis response plan, while maintaining a focus on the protection of the health and safety of our employees, families, customers and communities. All our locations continue to operate through a combination of work from home and personnel working on-site, though in some cases capacity utilization and productivity are below normalized levels. We continue to monitor and assess the actual and potential COVID-19 impacts on employees, customers, suppliers and the productivity of the work being done, all of which, to some extent, will affect revenues, estimated costs to complete projects, earnings and cash flow. Our results of operations for the three and six months ended June 30, 2021, were not materially impacted by COVID-19.

WorldView Legion satellite constellation update

We have continued to encounter certain issues with component suppliers and subsystems (including software, integration and testing) related to our WorldView Legion satellite constellation, which have led to delays from our expected timetable. We have resolved some of the supplier issues and continue to make progress on the other issues identified. While we will continue to search for ways to accelerate our launch, we have decided to delay the launch of our WorldView Legion satellites and now expect a launch timeframe between March and June of 2022.

Segment Results

Our Chief Operating Decision Maker (“CODM”) measures performance of our reportable segments based on revenue and Adjusted EBITDA. Our operating and reportable segments are: Earth Intelligence and Space Infrastructure.

Earth Intelligence

In the Earth Intelligence segment, we are a global leader in high resolution space-based Earth observation imagery products and analytics. We launched the world’s first high resolution commercial imaging satellite in 1999 and currently operate a four-satellite imaging constellation, providing us with 20 years and 125 petabytes of imagery over our history (referred to as our “ImageLibrary”) of the highest-resolution, commercially available imagery. Our imagery solutions provide customers with timely, accurate and mission-critical information about our changing planet and support a wide variety of government and commercial applications, including mission planning, mapping and analysis, environmental monitoring, disaster management, crop management, oil and gas exploration and infrastructure management. Our principal customers in the Earth Intelligence segment are U.S. and other international government agencies (primarily defense and intelligence agencies), as well as a wide variety of commercial customers in multiple markets. We are a market leader in the commercial satellite Earth observation industry.

We also provide geospatial services that combine imagery, analytic expertise and innovative technology to deliver intelligence solutions to customers. Our cleared developers, analysts and data scientists provide analytic solutions that accurately document change and enable geospatial modeling and analysis that help predict where events will occur. Our primary customer of geospatial services is the U.S. government, but we also support intelligence requirements for other U.S. allied governments, global development organizations and commercial customers.

Space Infrastructure

In the Space Infrastructure segment, we design, build, integrate and test solutions for space-based communications satellites, Earth observation, on-orbit servicing, robotic assembly and space exploration. We address a broad spectrum of needs for our customers, including mission systems engineering, product design, spacecraft manufacturing, assembly integration and testing. We provide advanced, reliable and affordable spacecraft that enable our commercial customers to deliver valuable global services. We are successfully partnering with the U.S. government in new space opportunities leveraging our high-performance spacecraft subsystems. Our principal customers in the Space Infrastructure segment are commercial satellite operators and government agencies worldwide.

27

RESULTS OF OPERATIONS

Three Months Ended June 30,

$

%

Six Months Ended June 30,

$

%

    

2021

    

2020

    

Change

Change

2021

    

2020

Change

Change

($ millions)

Revenues:

Product

$

190

$

157

$

33

21

%

$

332

$

264

$

68

26

Service

283

282

1

0

533

556

(23)

(4)

Total revenues

473

439

34

8

$

865

$

820

$

45

5

Costs and expenses:

Product costs, excluding depreciation and amortization

156

144

12

8

304

289

15

5

Service costs, excluding depreciation and amortization

100

87

13

15

193

180

13

7

Selling, general and administrative

88

79

9

11

172

147

25

17

Depreciation and amortization

73

89

(16)

(18)

147

179

(32)

(18)

Impairment loss

*

14

(14)

(100)

Operating income

$

56

$

40

$

16

40

%

$

49

$

11

$

38

*

Interest expense, net

24

48

(24)

(50)

102

97

5

5

Other income, net

(3)

(4)

1

(25)

(4)

(7)

3

(43)

Income (loss) before taxes

$

35

$

(4)

$

39

*

%

$

(49)

$

(79)

$

30

(38)

Income tax benefit

(10)

(2)

(8)

*

(10)

(10)

*

Equity in income from joint ventures, net of tax

 

(2)

2

(100)

(1)

1

(100)

Income (loss) from continuing operations

45

45

*

$

(39)

$

(78)

$

39

(50)

Discontinued operations:

Income from operations of discontinued operations, net of tax

2

(2)

(100)

32

(32)

(100)

Gain on disposal of discontinued operations, net of tax

304

(304)

(100)

304

(304)

(100)

Income from discontinued operations, net of tax

306

(306)

(100)

336

(336)

(100)

Net income (loss)

$

45

$

306

$

(261)

(85)

%

$

(39)

$

258

$

(297)

(115)

* Not meaningful.

Product and service revenues

Three Months Ended June 30, 

$

%

Six Months Ended June 30,

$

%

    

2021

    

2020

    

Change

    

Change

    

2021

    

2020

Change

    

Change

($ millions)

Product revenues

 

$

190

$

157

$

33

 

21

%

$

332

$

264

$

68

26

%

Service revenues

283

282

1

0

533

556

(23)

(4)

Total revenues

 

$

473

$

439

$

34

 

8

%

$

865

$

820

$

45

5

%

Total revenues increased to $473 million from $439 million, or by $34 million, for the three months ended June 30, 2021, compared to the same period of 2020. The increase was primarily driven by a $33 million increase in revenue in our Space Infrastructure segment. We also had an increase in revenue in our Earth Intelligence segment; however, the increase was partially offset by a $30 million decrease in the recognition of deferred revenue related to the EnhancedView Contract.

Total revenues increased to $865 million from $820 million, or by $45 million, for the six months ended June 30, 2021, compared to the same period of 2020. The increase was primarily driven by a $68 million increase in revenue in the Space Infrastructure segment which was partially offset by a $23 million decrease in the Earth Intelligence segment. We

28

also had an increase in revenue in our Earth Intelligence segment, however; the increase was partially offset by a $60 million decrease in the recognition of deferred revenue related to the EnhancedView Contract.

Further discussion of the drivers behind changes in revenues is included within the “Results by Segment” section below.

See Note 11, “Revenue” to the Unaudited Condensed Consolidated Financial Statements in Part I, Item 1, “Financial Information” for product and service revenue by segment.

Product and service costs

Three Months Ended June 30, 

$

%

Six Months Ended June 30,

$

%

    

2021

    

2020

    

Change

    

Change

    

2021

    

2020

Change

    

Change

($ millions)

Product costs, excluding depreciation and amortization

 

$

156

 

$

144

$

12

 

8

%

$

304

 

$

289

$

15

5

%

Service costs, excluding depreciation and amortization

100

87

13

15

193

180

13

7

Total costs

 

$

256

 

$

231

$

25

 

11

%

$

497

 

$

469

$

28

6

%

Total costs of product and services increased to $256 million from $231 million, or by $25 million, for the three months ended June 30, 2021, compared to the same period of 2020. The increase in costs was driven by an increase in product costs within our Space Infrastructure segment and an increase in service costs within our Earth Intelligence segment.

Total costs of product and services increased to $497 million from $469 million, or by $28 million, for the six months ended June 30, 2021, compared to the same period of 2020. The increase in costs was driven by an increase in products costs within our Space Infrastructure segment and an increase in service costs within our Earth Intelligence segment.

Selling, general and administrative

Three Months Ended June 30, 

$

%

Six Months Ended June 30,

$

%

    

2021

    

2020

    

Change

    

Change

    

2021

    

2020

Change

    

Change

($ millions)

Selling, general and administrative

 

$

88

 

$

79

$

9

11

%

$

172

 

$

147

$

25

 

17

%

Selling, general and administrative costs increased to $88 million from $79 million, or by $9 million, for the three months ended June 30, 2021, compared to the same period of 2020. The increase was primarily due to an increase in labor related expenses of $6 million driven by an increase in headcount and employee compensation.

Selling, general and administrative costs increased to $172 million from $147 million, or by $25 million, for the six months ended June 30, 2021, compared to the same period of 2020. The increase was primarily due to an increase in labor related expenses of $14 million and an increase in stock-based compensation expense of $8 million. The increase in labor related expenses was primarily driven by an increase in headcount and employee compensation. Stock-based compensation expense increased primarily due to a higher stock price which increased the fair market value of equity awards granted in addition to the incremental expense related to liability classified awards for the six months ended June 30, 2021.

29

Depreciation and amortization

Three Months Ended June 30, 

$

%

Six Months Ended June 30,

$

%

    

2021

    

2020

    

Change

    

Change

    

2021

    

2020

    

Change

    

Change

($ millions)

    

Property, plant and equipment

 

$

21

 

$

23

$

(2)

 

(9)

%

$

44

 

$

47

$

(3)

(6)

%

Intangible assets

 

52

 

66

(14)

 

(21)

103

 

132

(29)

(22)

Depreciation and amortization expense

 

$

73

 

$

89

$

(16)

 

(18)

%

$

147

 

$

179

$

(32)

(18)

%

Depreciation and amortization expense decreased to $73 million from $89 million, or by $16 million, for the three months ended June 30, 2021, compared to the same period of 2020. The decrease was primarily driven by a decrease in amortization expense for backlog acquired as part of the acquisition of DigitalGlobe, Inc. on October 5, 2017. We recognized a full quarter of amortization expense for the three months ended June 30, 2020, compared to none for the three months ended June 30, 2021, as all of the U.S. government acquired backlog was fully amortized as of October 2020. This decrease was partially offset by the inclusion of depreciation and amortization expense from property, plant and equipment and intangible assets acquired as part of Vricon, Inc. (“Vricon Acquisition”) on July 1, 2020, compared to no such expense in the same period of 2020.

Depreciation and amortization expense decreased to $147 million from $179 million, or by $32 million, for the six months ended June 30, 2021, compared to the same period of 2020. The decrease was primarily driven by a decrease in amortization expense for backlog acquired as part of the acquisition of DigitalGlobe, Inc. on October 5, 2017. We recognized two full quarters of amortization expense for the six months ended June 30, 2020, compared to none for the six months ended June 30, 2021, as all of the U.S. government acquired backlog was fully amortized as of October 2020. This decrease was partially offset by the inclusion of depreciation and amortization expense from property, plant and equipment and intangible assets acquired as part of Vricon, Inc. (“Vricon Acquisition”) on July 1, 2020, compared to no such expense in the same period of 2020.

Impairment loss

Three Months Ended June 30, 

$

%

Six Months Ended June 30,

$

%

    

2021

    

2020

    

Change

    

Change

    

2021

    

2020

Change

    

Change

($ millions)

    

Impairment loss

 

$

 

$

$

 

*

%

$

 

$

14

$

(14)

(100)

%

* Not meaningful.

There were no impairment losses recorded for the three or six months ended June 30, 2021. For the six months ended June 30, 2020, the impairment loss of $14 million related to our orbital receivables. This impairment loss was primarily due to a decrease in credit ratings associated with our largest orbital customer. There were no impairment losses recorded for the three months ended June 30, 2020.

30

Interest expense, net

Three Months Ended June 30, 

$

%

Six Months Ended June 30,

$

%

    

2021

    

2020

    

    

Change

    

Change

    

2021

    

2020

Change

    

Change

    

($ millions)

Interest expense:

Interest on long-term debt

 

$

33

 

$

48

$

(15)

 

(31)

%

$

77

 

$

102

$

(25)

(25)

%

Loss on debt extinguishment

7

(7)

(100)

41

7

34

*

Interest on orbital securitization liability

1

2

(1)

(50)

2

3

(1)

(33)

Imputed interest and other

*

1

1

*

Interest expense on advance payments from customers1

1

(1)

(100)

3

(3)

(100)

Capitalized interest

(10)

(10)

(19)

(18)

(1)

6

Interest expense, net

 

$

24

 

$

48

$

(24)

 

(50)

%

$

102

 

$

97

$

5

5

%

*Not meaningful.

1

Under the EnhancedView Follow-On (“EnhancedView Contract”), we received advanced payments from the U.S. government during the construction phase of the WorldView-1 satellite, which was more than one year before capacity was made available to them. The effect of imputing interest on these advanced payments was to increase contract liabilities with an offsetting charge to interest expense. As capacity was provided to the customer, revenue was recognized and the contract liabilities balance decreased. The remaining revenue was fully recognized as of August 31, 2020.

Interest expense, net decreased to $24 million from $48 million, or by $24 million, for the three months ended June 30, 2021, compared to the same period in 2020. The decrease was primarily driven by a $15 million decrease in interest on long-term debt primarily due to lower principal balances on Term Loan B and the 2023 Notes due to a repayment made on Term Loan B in the second quarter of 2020 as well as a redemption made on the 2023 Notes in the first quarter of 2021. The decrease was also driven by a $7 million loss on debt extinguishment for the three months ended June 30, 2020, compared to no loss on debt extinguishment for the three months ended June 30, 2021.

Interest expense, net increased to $102 million from $97 million, or by $5 million, for the six months ended June 30, 2021, compared to the same period in 2020. The increase was primarily due to a $41 million loss on debt extinguishment from the partial redemption of our 2023 Notes using proceeds from the Offering. The increase was partially offset by a $25 million decrease in interest on long-term debt primarily driven by lower principal balances on Term Loan B and the 2023 Notes due to a repayment made on Term Loan B in the second quarter of 2020 as well as a redemption made on the 2023 Notes in the first quarter of 2021. There was also a decrease in interest expense on advance payments from customers of $3 million.

Income tax expense

Three Months Ended June 30, 

$

%

Six Months Ended June 30,

$

%

    

    

2021

    

2020

    

    

Change

    

Change

    

2021

    

2020

Change

    

Change

    

($ millions)

Income tax (benefit) expense

 

$

(10)

 

$

(2)

$

(8)

 

*

%

$

(10)

 

$

$

(10)

*

%

*Not meaningful.

Income tax expense changed to a benefit of $10 million from a benefit of $2 million, or by $8 million, for the three months ended June 30, 2021, compared to the same period in 2020, primarily due to a change in the 2020 estimated Base Erosion and Anti-Abuse Tax driven by a change in tax strategy enabled by a reduction in forecasted interest expense and tax on foreign earnings. During both comparative quarters, we have a valuation allowance recorded for the U.S. deferred tax assets that are more-than-likely to not be recognized. In computing income tax benefit for the three months ended June 30, 2021 and June 30, 2020, we applied the estimated AETR to the pre-tax income (loss) and adjusted the valuation allowance accordingly.

31

Income tax expense changed to a benefit of $10 million from $0 million, or by $10 million, for the six months ended June 30, 2021, compared to the same period in 2020, primarily due to a change in the estimated 2020 Base Erosion and Anti-Abuse Tax driven by a change in tax strategy enabled by a reduction in forecasted interest expense and tax on foreign earnings. During both comparative quarters, we have a valuation allowance recorded for the U.S. deferred tax assets that are more-than-likely to not be recognized. In computing income tax benefit for the six months ended June 30, 2021 and June 30, 2020, we applied the estimated AETR to the pre-tax income (loss) and adjusted the valuation allowance accordingly.

Discontinued operations

Three Months Ended June 30, 

$

%

Six Months Ended June 30,

$

%

    

    

2021

    

2020

    

    

Change

    

Change

    

2021

    

2020

Change

    

Change

    

($ millions)

    

Discontinued operations:

 

 

 

 

Income from operations of discontinued operations, net of tax

$

$

2

$

(2)

(100)

%

$

$

32

$

(32)

(100)

%

Gain on disposal of discontinued operations, net of tax

304

304

(304)

(100)

Income from discontinued operations, net of tax

$

$

306

$

(2)

(1)

%

$

$

336

$

(336)

(100)

%

There was no income from discontinued operations, net of tax for the three or six months ended June 30, 2021 as the MDA Business was disposed of in the second quarter of 2020.

There was $306 million in income from discontinued operations, net of tax for the three months ended June 30, 2020, primarily due to the $304 million after-tax gain on disposal of the MDA Business and $2 million in income from operations of discontinued operations net of tax.

There was $336 million in income from discontinued operations, net of tax for the six months ended June 30, 2020, primarily due to the $304 million after-tax gain on disposal of the MDA Business. Income from discontinued operations, net of tax was also impacted by a $39 million recovery of a previously recorded liability in relation to the Company’s dispute with a Ukrainian customer. The recovery was partially offset by decreases in program margins driven by EAC growth and lower volumes and an impairment loss of $12 million related to MDA’s investment in a privately held company.

32

RESULTS BY SEGMENT

We analyze financial performance by segments, which group related activities within our business. We report our financial performance based on two reportable segments: Earth Intelligence and Space Infrastructure. Intrasegment transactions have been eliminated from the segmented financial information discussed below.

Three Months Ended June 30, 

$

%

Six Months Ended June 30, 

$

%

2021

    

2020

    

Change

   

Change

    

2021

    

2020

Change

   

Change

($ millions)

Revenues:

 

  

 

  

 

  

 

  

Earth Intelligence

$

283

$

278

$

5

2

%

$

533

$

549

$

(16)

(3)

%

Space Infrastructure

 

206

 

184

 

22

12

 

361

 

316

 

45

14

Intersegment eliminations

(16)

(23)

7

(30)

(29)

(45)

16

(36)

Total revenues

$

473

$

439

$

34

8

%

$

865

$

820

$

45

5

%

Adjusted EBITDA:

Earth Intelligence

$

131

$

146

$

(15)

(10)

%

$

238

$

279

$

(41)

(15)

%

Space Infrastructure

27

11

16

145

15

(28)

43

(154)

Intersegment eliminations

(7)

(7)

(12)

(14)

2

(14)

Corporate and other expenses

(19)

(12)

(7)

58

(42)

(22)

(20)

91

Total Adjusted EBITDA

$

132

$

138

$

(6)

(4)

%

$

199

$

215

$

(16)

(7)

%

Total Adjusted EBITDA is a non-GAAP measure. See “Non-GAAP Financial Measures” below for further discussion of Adjusted EBITDA disclosures.

Earth Intelligence

The following table provides selected financial information for the Earth Intelligence segment.

Three Months Ended June 30, 

$

%

Six Months Ended June 30, 

$

%

    

    

2021

    

2020

Change

    

Change

    

2021

    

2020

    

Change

    

Change

    

($ millions)

  

 

  

  

 

  

    

Total revenues

$

283

 

$

278

$

5

 

2

%

$

533

 

$

549

$

(16)

(3)

%

Adjusted EBITDA

$

131

 

$

146

$

(15)

(10)

%

$

238

 

$

279

$

(41)

(15)

%

Adjusted EBITDA margin
(as a % of total revenues)

46.3

%  

52.5

%  

44.7

%  

50.8

%  

For the three months ended June 30, 2021, Earth Intelligence segment revenues increased to $283 million from $278 million, or by $5 million, compared to the same period in 2020. The increase was primarily driven by a $24 million increase in revenue from international defense and intelligence customers, a $6 million increase from new commercial programs and a $5 million increase in revenue from new contracts with the U.S. government. These increases were partially offset by a $30 million decrease in the recognition of deferred revenue related to the EnhancedView Contract. We recognized $30 million of deferred revenue from the EnhancedView Contract for the three months ended June 30, 2020, compared to none for the three months ended June 30, 2021, as it was fully recognized as of August 31, 2020.

For the six months ended June 30, 2021, Earth Intelligence segment revenues decreased to $533 million from $549 million, or by $16 million, compared to the same period in 2020. The decrease was primarily driven by a $60 million decrease in the recognition of deferred revenue related to the EnhancedView Contract. We recognized $60 million of deferred revenue from the EnhancedView Contract for the six months ended June 30, 2020, compared to none for the six months ended June 30, 2021, as it was fully recognized as of August 31, 2020. The decrease was partially offset by a

33

$28 million increase in revenue from international defense and intelligence customers, a $10 million increase in new and expanded commercial programs and a $5 million increase in revenue from new contracts with the U.S. government.

Adjusted EBITDA decreased to $131 million from $146 million, or by $15 million, for the three months ended June 30, 2021, as compared to the same period of 2020. The decrease was primarily driven by a decrease in the recognition of deferred revenue related to the EnhancedView Contract as mentioned above. The decrease was also driven by an increase in service costs and selling, general and administrative costs for the three months ended June 30, 2021, as compared to the same period of 2020. These decreases were partially offset by growth on contracts with international defense and intelligence customers and the U.S. government.

Adjusted EBITDA decreased to $238 million from $279 million, or by $41 million, for the six months ended June 30, 2021, as compared to the same period of 2020. The decrease was primarily driven by a decrease in the recognition of deferred revenue related to the EnhancedView Contract as mentioned above. The decrease was also driven by an increase in service costs and selling, general and administrative costs for the six months ended June 30, 2021, as compared to the same period of 2020. These decreases were partially offset by growth on contracts with international defense and intelligence customers and the U.S. government.

Space Infrastructure

The following table provides selected financial information for the Space Infrastructure segment.

Three Months Ended June 30, 

$

%

Six Months Ended June 30, 

$

%

    

    

2021

    

2020

Change

Change

    

2021

    

2020

Change

Change

($ millions)

  

 

  

  

 

  

    

Total revenues

$

206

$

184

$

22

 

12

%

$

361

$

316

$

45

14

%

Adjusted EBITDA

$

27

$

11

$

16

145

$

15

$

(28)

$

43

(154)

%

Adjusted EBITDA margin
(as a % of total revenues)

13.1

%  

6.0

%  

4.2

%  

(8.9)

%  

Changes in revenues from year to year are influenced by the size, timing and number of satellite contracts awarded in the current and preceding years and the length of the construction period for satellite contracts awarded. Revenues on satellite contracts are recognized using the cost-to-cost method of accounting to determine the percentage of completion over the construction period, which typically ranges between 20 to 36 months, and up to 48 months in certain situations. Adjusted EBITDA margins can vary from quarter to quarter due to the mix of our revenues and changes in our estimated total costs-at-completion (“EAC”) as our risks are retired and as our EACs are increased or decreased based on contract performance.

Revenues from the Space Infrastructure segment increased to $206 million from $184 million, or by $22 million, for the three months ended June 30, 2021, compared to the same period in 2020. Revenues increased primarily as a result of an increase in revenues from commercial programs of $36 million due to higher volumes related to new programs and lower EAC growth and no COVID-19 program impacts for the three months ended June 30, 2021. The increase is partially offset by a $14 million decrease in revenues from U.S. government contracts.

Revenues from the Space Infrastructure segment increased to $361 million from $316 million, or by $45 million, for the six months ended June 30, 2021, compared to the same period in 2020. Revenues increased primarily as a result of an increase in revenues from commercial programs of $73 million due to higher volumes related to new programs and lower EAC growth primarily due to no COVID-19 program impacts for the six months ended June 30, 2021. Revenues were negatively impacted by a $14 million decrease year over year related to our contract with Sirius XM Holdings Inc. (“Sirius XM”). The six months ended June 30, 2021, included a $25 million cumulative adjustment to revenue primarily related to the loss of final milestone and expected orbital payments due to the non-performance of the SXM-7 satellite and other adjustments that was recorded in the first quarter. After exhausting efforts to fully recover the satellite and further discussions with Sirius XM, in April 2021, we made the determination to record the cumulative adjustment to

34

revenue. In addition, there were $3 million of costs incurred in the first quarter related to attempts to repair and fully recover the SXM-7 satellite. The aggregate impact for the six months ended June 30, 2021, was $28 million which compares favorably to the previously disclosed potential exposure of $38 million. The $28 million decrease was partially offset by the non-reoccurrence of a $14 million adjustment to revenue due to the identification of a design anomaly on the commercial satellite program, which was recorded for the six months ended June 30, 2020. In addition, the total increase was also partially offset by a $13 million decrease in revenues from U.S. government contracts.

Adjusted EBITDA increased to $27 million from $11 million, or by $16 million, for the three months ended June 30, 2021, compared to the same period of 2020. The increase in the Space Infrastructure segment was primarily related to a $24 million increase in commercial program margins due to new programs and fewer negative EAC impacts during the period as compared to the three months ended June 30, 2020, which included negative EAC impacts due to COVID-19. The increase in commercial program margins has been driven by a change in program mix related to the completion of less profitable programs offset by new, more profitable programs. The remaining $8 million change is related to an increase in indirect costs and selling, general and administrative costs.

Adjusted EBITDA increased to $15 million from a loss of $28 million, or by $43 million, for the six months ended June 30, 2021, compared to the same period of 2020. The increase in the Space Infrastructure segment was primarily related to a $68 million increase in commercial program margins due to new programs and fewer negative EAC impacts during the period as compared to the six months ended June 30, 2020, which included negative EAC impacts due to COVID-19. The increase in commercial program margins has been driven by a change in program mix related to the completion of less profitable programs offset by new, more profitable programs. These increases were partially offset by the $14 million reduction in revenue related to the above-mentioned SXM-7 satellite impacts and a $9 million increase in indirect costs and selling, general and administrative costs.

Corporate and other expenses

Corporate and other expenses include items such as corporate office costs, regulatory costs, executive and director compensation, foreign exchange gains and losses, retention costs and fees for legal and consulting services.

Corporate and other expenses for the three months ended June 30, 2021 increased to $19 million from $12 million, or by $7 million, compared to the same period in 2020. The increase was primarily driven by a $6 million increase in selling, general and administrative costs primarily due to an increase in labor related expenses driven by an increase in headcount and employee compensation.

Corporate and other expenses for the six months ended June 30, 2021 increased to $42 million from $22 million, or by $20 million, compared to the same period in 2020. The increase was primarily driven by an $11 million increase in selling, general and administrative costs primarily due to an increase in labor related expenses driven by an increase in headcount and employee compensation. There was also an increase in stock-based compensation expense of $4 million primarily driven by a higher stock price. The increase was also driven by a $1 million foreign exchange loss for the six months ended June 30, 2021, compared to a $2 million foreign exchange gain for the six months ended June 30, 2020.

Intersegment eliminations

Intersegment eliminations are related to projects between our segments, including our WorldView Legion satellite constellation. Intersegment eliminations were $7 million for the three months ended June 30, 2021 and June 30, 2020, respectively.

Intersegment eliminations have decreased to $12 million from $14 million, or by $2 million, for the six months ended June 30, 2021, compared to the same period in 2020, primarily related to a decrease in intersegment satellite construction activity.

35

BACKLOG

Our backlog by segment from continuing operations is as follows:

June 30, 

December 31, 

2021

2020

($ millions)

Earth Intelligence

$

752

$

880

Space Infrastructure

797

1,024

Total backlog

1,549

1,904

Unfunded contract options

918

856

Total

$

2,467

$

2,760

Order backlog, representing the estimated dollar value of firm contracts for which work has not yet been performed (also known as the remaining performance obligations on a contract), was $1.5 billion as of June 30, 2021 compared to $1.9 billion as of December 31, 2020. Order backlog generally does not include unexercised contract options and potential orders under indefinite delivery/indefinite quantity contracts.

Backlog in the Space Infrastructure segment is primarily comprised of multi-year awards, such as satellite builds. Fluctuations in backlog are driven primarily by the timing of large program wins. Backlog in the Earth Intelligence segment consists of both multi-year and annual contracts, which renew at various times throughout the year. As a result, the timing of when contracts are awarded and when option years are exercised may cause backlog to fluctuate significantly from period to period.

Although backlog reflects business that is considered to be firm, terminations, amendments or cancellations may occur, which could result in a reduction in our total backlog.

Unfunded contract options represent estimated amounts of revenue to be earned in the future from negotiated contracts with unexercised contract options and indefinite delivery/indefinite quantity contracts. Unfunded contract options as of June 30, 2021 were primarily comprised of the option years in the EnhancedView Contract (September 1, 2021 through August 31, 2023). This contract may be replaced by other contracting vehicles prior to the exercise of existing contract options.

LIQUIDITY & CAPITAL RESOURCES

Our sources of liquidity include cash provided by operations, access to existing credit facilities, collection or securitization of orbital receivables and, when available and efficient, access to the capital markets. We generally maintain limited cash on hand and use available cash to pay down borrowings on our Syndicated Credit Facility. Our primary short-term cash requirements are to fund working capital, including requirements on long-term construction contracts (including our geostationary satellite contracts), fixed overhead costs, and to fund increased capital expenditures, including the construction of our WorldView Legion satellite constellation. Working capital requirements can vary significantly from period to period, particularly as a result of the timing of receipts and disbursements related to long-term construction contracts.

Our medium-term to long-term cash requirements are to service and repay debt and to invest, including in facilities, equipment, technologies, and research and development for growth initiatives. These capital investments include investments to replace the capability or capacity of satellites which have or will go out of service in the future. Over the near-term to medium-term, it is also possible that our customers may fully or partially fund the construction of additional Legion satellites. Cash is also used to pay dividends and finance other long-term strategic business initiatives.

While our first maturity of long-term debt is in the fourth quarter of 2023, we had a significant debt redemption in the first quarter of 2021 using proceeds from our Offering. On March 26, 2021, we redeemed $350 million aggregate principal of our 2023 Notes using a portion of the net proceeds from the Offering.

36

We have significant purchase obligations in the normal course of business for goods and services, under agreements with defined terms as to quantity, price and timing of delivery. Purchase obligations represent open purchase orders and other commitments for the purchase or construction of property, plant and equipment or intangible assets, operational commitments related to remote ground terminals, or with subcontractors on long-term construction contracts that we have with customers in the normal course of business.

We also have short and long-term requirements to fund our pension plans within the Space Infrastructure segment. Funding requirements under applicable laws and regulations are a major consideration in making contributions to our pension plans. Failure to satisfy the minimum funding thresholds with respect to appropriate laws and regulations could result in restrictions on our ability to amend the plans or make benefit payments. With respect to our qualified pension plan, we intend to contribute annually not less than the required minimum funding thresholds. In December 2020, we prefunded $16 million related to our qualified pension plan. Due to the December 2020 prefunding, there are no required contributions for our qualified pension plan for the year ended December 31, 2021. In addition, the American Rescue Plan Act of 2021 includes provisions for pension funding relief in future periods. We intend to take advantage of these provisions and anticipate lower required contributions for our qualified pension plan in the upcoming fiscal years.

Our ability to fund our cash needs will depend, in part, on our ability to generate cash in the future, which depends on our future financial results. Our future results are subject to general economic, financial, competitive, legislative and regulatory factors that may be outside of our control. Our future access to, and the availability of credit on acceptable terms and conditions is impacted by many factors, including capital market liquidity and overall economic conditions.

We believe that our cash from operating activities generated from continuing operations during the year, together with available borrowings under our Revolving Credit Facility, will be adequate for the next twelve months to meet our anticipated uses of cash flow, including working capital, capital expenditure, debt service costs, dividend and other commitments. While we intend to reduce debt over time using cash provided by operations, we may also seek to meet long-term debt obligations, if necessary, by obtaining capital from a variety of additional sources or by refinancing existing obligations. These sources include public or private capital markets, bank financings, proceeds from dispositions or other third-party sources.

Summary of Cash Flows

Summary of cash flows

Six Months Ended June 30, 

    

2021

    

2020

($ millions)

Cash provided by operating activities - continuing operations

 

$

50

 

$

66

Cash used in operating activities - discontinued operations

(30)

Cash provided by operating activities

50

36

Cash used in investing activities - continuing operations

 

(105)

 

(108)

Cash provided by investing activities - discontinued operations

723

Cash (used in) provided by investing activities

(105)

615

Cash provided by (used in) financing activities - continuing operations

 

33

 

(549)

Cash used in financing activities - discontinued operations

(24)

Cash provided by (used in) financing activities

33

(573)

Effect of foreign exchange on cash, cash equivalents and restricted cash

(5)

Cash, cash equivalents, and restricted cash, beginning of year

 

32

 

110

Cash, cash equivalents, and restricted cash, end of period

 

$

10

 

$

183

Operating activities

Cash flows from operating activities can vary significantly from period to period as a result of our working capital requirements, given our portfolio of large construction programs and the timing of milestone receipts and payments with customers and suppliers in the ordinary course of business. Investment in working capital is also necessary to build our business and manage lead times in construction activities. We expect working capital account balances to continue to vary from period to period. We fund our working capital requirements with the Revolving Credit Facility (as defined below).

37

Cash provided by operating activities from continuing operations decreased to $50 million from $66 million, or by $16 million, for the six months ended June 30, 2021 compared to the corresponding period in 2020, respectively. This change was primarily driven by unfavorable changes in working capital for the period ended June 30, 2021, compared to the same period in 2020, offset by a decrease of $49 million in cash paid interest for the six months ended June 30, 2021, compared to the same period in 2020.

Investing activities

Cash used in investing activities from continuing operations decreased to $105 million from $108 million, or by $3 million, for the six months ended June 30, 2021 compared to the corresponding period in 2020, respectively. The primary investing activities included expenditures on property, plant and equipment of $57 million and $88 million for the six months ended June 30, 2021 and 2020, respectively, and investments in intangible assets primarily related to internally developed software of $48 million and $40 million for the six months ended June 30, 2021 and 2020, respectively. Property, plant and equipment expenditures for the six months ended June 30, 2021 and 2020 primarily related to the build of our WorldView Legion satellite constellation. Cash used in investing activities for the six months ended June 30, 2020 was partially offset by a return of capital from discontinued operations of $20 million.

Financing activities

Cash provided by financing activities from continuing operations for the six months ended June 30, 2021 increased to $33 million compared to cash used in financing activities for the six months ended June 30, 2020 of $549 million, or by $582 million. During the six months ended June 30, 2021, cash provided by financing activities from continuing operations primarily included net proceeds from the issuance of common stock of $380 million and $53 million in net proceeds from the Revolving Credit Facility. These were partially offset by cash used from financing activities from the partial redemption of the 2023 Notes of $384 million including approximately $34 million related to the early redemption, settlement of the securitization liability of $6 million and repayments of long term debt of $4 million. During the six months ended June 30, 2020, cash used in financing activities from continuing operations included by debt repayments of $521 million, a repurchase of the 2023 notes of $169 million and settlement of the securitization liability of $7 million. These payments were partially offset by net proceeds from the issuance of the 2027 Notes of $147 million.

Long-term debt

The following table summarizes our long-term debt: 

June 30, 

December 31, 

    

2021

    

2020

($ millions)

Syndicated Credit Facility:

 

Revolving Credit Facility

$

53

$

Term Loan B

1,444

1,444

2023 Notes

 

500

 

850

2027 Notes

150

150

Deferred financing

29

32

Debt discount and issuance costs

 

(45)

 

(57)

Obligations under finance leases and other

 

3

 

3

Total long-term debt

 

$

2,134

 

$

2,422

As of June 30, 2021 and December 31, 2020, we were in compliance with our debt covenants.

38

Syndicated Credit Facility

As of June 30, 2021, the senior secured syndicated credit facility (“Original Syndicated Credit Facility”, as amended prior to December 31, 2019, including as described below, the “Syndicated Credit Facility”) is composed of: (i) a senior secured first lien revolving credit facility maturing in December 2023 (“Revolving Credit Facility”) and (ii) a senior secured first lien term B facility maturing in October 2024 (“Term Loan B”). The Revolving Credit Facility includes an aggregate $200 million sub limit under which letters of credit can be issued. As of June 30, 2021 and December 31, 2020, we had $28 million and $31 million, respectively, of issued and undrawn letters of credit outstanding under the Revolving Credit Facility.

Senior Secured Notes due 2023

In December 2019, we issued $1.0 billion in principal amount of 2023 Notes in a private placement to institutional buyers. The 2023 Notes were issued at a price of 98% and are recorded as long-term debt in our consolidated financial statements. The 2023 Notes bear interest at the rate of 9.75% per year, payable semi-annually in cash in arrears, for which interest payments commenced in June 2020. The 2023 Notes are guaranteed on a senior secured basis by each of the Company’s existing and future subsidiaries that guarantee the Syndicated Credit Facility. As of June 30, 2021, we had $500 million of our 2023 Notes outstanding.

Senior Secured Notes due 2027

On June 25, 2020, we issued $150 million in principal amount of 2027 Notes in a private placement to institutional buyers. The 2027 Notes were issued at a price of 98.25% and bear interest at the rate of 7.54% per annum, payable semi-annually in cash in arrears, for which interest payments commenced in December 2020. The 2027 Notes are guaranteed on a senior secured basis by each of the Company’s existing and future subsidiaries that guarantee the Syndicated Credit Facility and the 2023 Notes.

Leaseback Deferred Financing

In December 2019, we completed the sale and subsequent leaseback of our owned properties in Palo Alto, California for proceeds of $291 million. We determined that the leaseback terms were off-market. In accordance with ASC 842 – Leases, we accounted for the excess of the leaseback payments over the present value of market rental payments as additional financing, separate from the lease liability. This resulted in recognition of a deferred financing liability of $33 million which is repayable over the 10-year leaseback term.

See Note 8, “Long-term debt and interest expense, net” to the Consolidated Financial Statements in Part I, Item 1, “Financial Information” for further details on our long-term debt.

Securitization liability

We have in place, a revolving securitization facility agreement with an international financial institution. Under the terms of the Syndicated Credit Facility, we may offer to sell eligible orbital receivables from time to time with terms of seven years or less, discounted to face value using prevailing market rates. There were no sales of eligible receivables executed in the three and six months ended June 30, 2021 or 2020, respectively.

The orbital receivables that were securitized remain on our balance sheet because the accounting criteria for surrendering control of the orbital receivables were not met. The net proceeds received have been recognized as a securitization liability that has been subsequently measured at amortized cost using the effective interest rate method. The securitized orbital receivables and the securitization liability are being drawn down as payments are received from customers and passed on to the international financial institution. We continue to recognize orbital interest revenue on the orbital receivables that are subject to the securitization transactions and recognize interest expense to accrete the securitization liability.

39

Interest rate swaps

In April 2021, $500 million of our interest rate swaps matured. On June 15, 2021, we entered into interest rate swaps at a notional value of $500 million. In total, an aggregate amount of $1.0 billion of our variable rate long-term debt is fixed at an average rate of 1.43% (excluding the margin specified in the Syndicated Credit Facility). In April 2022 and June 2023, we will have interest rate swap maturities of $500 million, respectively.

Off-balance sheet arrangements

As of June 30, 2021, we had no outstanding foreign exchange sales contracts. As of June 30, 2021, we had certain letters of credit guaranteed by the Syndicated Credit Facility, while indemnified by us. Such arrangements are not expected to have a material effect on our liquidity or capital resources, financial position or results of operations.

We use, from time to time, derivative financial instruments to manage existing foreign currency exposures. We consider the management of financial risks to be an important part of our overall corporate risk management policy. Foreign exchange forward contracts are used to hedge our exposure to currency risk on sales, purchases, cash, net investments and loans denominated in a currency other than the functional currency of our domestic and foreign operations.

CRITICAL ACCOUNTING POLICIES AND ESTIMATES

There were no material changes to our critical accounting policies, estimates or judgments, that occurred in the period covered by this report from those discussed in our Annual Report on Form 10-K for the year ended December 31, 2020.

RECENT ACCOUNTING PRONOUNCEMENTS

See Note 2, “Summary of Significant Accounting Policies” to the Unaudited Condensed Consolidated Financial Statements in Part I, Item I, “Financial Information” in this Quarterly Report on Form 10-Q for a discussion of recent accounting pronouncements.

NON-GAAP FINANCIAL MEASURES

In addition to results reported in accordance with U.S. GAAP, we use certain non-GAAP financial measures as supplemental indicators of our financial and operating performance. These non-GAAP financial measures include EBITDA and Adjusted EBITDA.

We define EBITDA as earnings before interest, taxes, depreciation and amortization, Adjusted EBITDA as EBITDA adjusted for certain items affecting comparability as specified in the calculation and Adjusted EBITDA margin as Adjusted EBITDA divided by revenue. Certain items affecting comparability include restructuring, impairments, satellite insurance recovery, gain (loss) on sale of assets, CEO severance and transaction and integration related expense. Transaction and integration related expense includes costs associated with de-leveraging activities, acquisitions and dispositions and the integration of acquisitions. Management believes that exclusion of these items assists in providing a more complete understanding of our underlying results and trends, and management uses these measures along with the corresponding U.S. GAAP financial measures to manage our business, evaluate our performance compared to prior periods and the marketplace, and to establish operational goals. Adjusted EBITDA is a measure being used as a key element of our incentive compensation plan. The Syndicated Credit Facility also uses Adjusted EBITDA in the determination of our debt leverage covenant ratio. The definition of Adjusted EBITDA in the Syndicated Credit Facility includes a more comprehensive set of adjustments that may result in a different calculation therein.

We believe that these non-GAAP measures, when read in conjunction with our U.S. GAAP results, provide useful information to investors by facilitating the comparability of our ongoing operating results over the periods presented, the ability to identify trends in our underlying business, and the comparison of our operating results against analyst financial models and operating results of other public companies.

40

The table below reconciles our net income to EBITDA and Adjusted EBITDA for the three and six months ended June 30, 2021 and 2020: 

Three Months Ended June 30, 

Six Months Ended June 30, 

    

2021

    

2020

    

2021

    

2020

($ millions)

Net income (loss)

$

45

$

306

$

(39)

$

258

Income tax benefit

(10)

(2)

(10)

Interest expense, net

24

48

102

97

Interest income

(1)

(1)

Depreciation and amortization

73

89

147

179

EBITDA

$

132

$

441

$

199

$

533

Income from discontinued operations, net of tax

(306)

(336)

Transaction and integration related expense

3

4

Impairment loss

14

Adjusted EBITDA

$

132

$

138

$

199

$

215

Adjusted EBITDA:

Earth Intelligence

131

146

238

279

Space Infrastructure

27

11

15

(28)

Intersegment eliminations

(7)

(7)

(12)

(14)

Corporate and other expenses

 

(19)

 

(12)

 

(42)

(22)

Adjusted EBITDA

$

132

$

138

$

199

$

215

Net income (loss) margin

9.5

%  

69.7

%  

(4.5)

%  

31.5

%  

Adjusted EBITDA margin

27.9

%  

31.4

%  

23.0

%  

26.2

%  

ITEM 3.QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

There have been no material changes to our market risks from those discussed in our Annual Report on Form 10-K for the year ended December 31, 2020 and as updated in this Quarterly Report on Form 10-Q.

ITEM 4.CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures

We performed an evaluation of the effectiveness of our disclosure controls and procedures as of June 30, 2021. The evaluation was performed with the participation of senior management of each business segment and key corporate functions, under the supervision of the Chief Executive Officer (“CEO”) and Chief Financial Officer (“CFO”). Based on this evaluation, the CEO and CFO concluded that our disclosure controls and procedures were effective as of June 30, 2021.

Changes in Internal Control over Financial Reporting

There were no changes that occurred during the second quarter of 2021 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

PART II. OTHER INFORMATION

ITEM 1.LEGAL PROCEEDINGS

Currently, we are involved in a number of legal proceedings. For a discussion of contingencies related to legal proceedings, see Note 16, “Commitments and Contingencies” to the Unaudited Condensed Consolidated Financial

41

Statements in Part I, Item I, “Financial Information” in this Quarterly Report on Form 10-Q, which is hereby incorporated by reference.

ITEM 1A.

RISK FACTORS

We operate in a changing global environment that involves numerous known and unknown risks and uncertainties that could materially adversely affect our business, financial condition and results of operations. The occurrence of any of the following risks could materially and adversely affect our business, financial condition, prospects, results of operations and cash flows. Additional risks and uncertainties not currently known to us or that we currently deem to be immaterial may also materially adversely affect our business, prospects, financial condition, results of operations and cash flows.

Risk Factors Summary

Below is a summary of the principal risk factors that could adversely affect our business. This summary does not address all the risks that we face. Additional discussion of the risks summarized in this risk factor summary, and other risks, can be found after this summary in Item 1A of this Quarterly Report on Form 10-Q.

We are unable to predict the extent to which the global COVID-19 pandemic may adversely impact our business operations, financial performance, results of operations and stock price.
The future revenue and operating results of the Space Infrastructure segment are dependent on our ability to generate a sustainable order rate for the satellite and space manufacturing operations and develop new technologies to meet the needs of our customers or potential new customers.
Our business with various governmental entities is subject to the policies, priorities, regulations, mandates and funding levels of such governmental entities and may be negatively or positively impacted by any change thereto.
Our revenue, results of operations and reputation may be negatively impacted if our programs fail to meet contractual requirements or our products contain defects or fail to operate in the expected manner.
Satellites are subject to construction and launch delays, launch failures, damage or destruction during launch, the occurrence of which can materially and adversely affect our operations.
If our satellites fail to operate as intended, it could have a material adverse effect on our business, financial condition and results of operations.
Loss of, or damage to, a satellite and the failure to obtain data or alternate sources of data for our products may have an adverse impact on our results of operations and financial condition.
Interruption or failure of our infrastructure or national infrastructure could hurt our ability to effectively perform our daily operations and provide and produce our products and services, which could damage our reputation and harm our operating results.
Any significant disruption in or unauthorized access to our computer systems or those of third parties that we utilize in our operations, including those relating to cybersecurity or arising from cyber-attacks, and security threats could result in a loss or degradation of service, unauthorized disclosure of data, or theft or tampering of intellectual property, any of which could materially adversely impact our business.
We are a party to legal proceedings, investigations and other claims or disputes, which are costly to defend and, if determined adversely to us, could require us to pay fines or damages, undertake remedial measures or prevent us from taking certain actions, any of which could adversely affect our business.
Acquisitions or divestitures could result in adverse impacts on our operations.
Our business with various governmental entities is concentrated in a small number of primary contracts. The loss or reduction in scope of any one of our primary contracts would materially reduce our revenue.

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Disruptions in U.S. government operations and funding could have a material adverse effect on our revenues, earnings and cash flows and otherwise adversely affect our financial condition.
Changes in U.S. government policy regarding use of commercial data or Space Infrastructure providers, or material delay or cancellation of certain U.S. government programs, may have a material adverse effect on our revenue and our ability to achieve our growth objectives.
We operate in highly competitive industries and in various jurisdictions across the world, which may cause us to have to reduce our prices or to lose market share.
We may be required to recognize impairment charges.
Uncertain global macro-economic and political conditions could materially adversely affect our results of operations and financial condition.
Our business involves significant risks and uncertainties that may not be covered by insurance.
We often rely on a single vendor or a limited number of vendors to provide certain key products or services and the inability of these key vendors to meet our needs could have a material adverse effect on our business.
Disruptions in the supply of key raw materials or components and difficulties in the supplier qualification process, as well as increases in prices of raw materials, could adversely impact us.
We are dependent on our ability to attract, train and retain employees. Our inability to do so, or the loss of key personnel, would cause serious harm to our business.
Changes in our accounting estimates and assumptions could negatively affect our financial position and results of operations.
Our business is capital intensive, and we may not be able to raise adequate capital to finance our business strategies, including funding future satellites, or we may be able to do so only on terms that significantly restrict our ability to operate our business.
Our ability to obtain additional debt or equity financing or government grants to finance operating working capital requirements and growth initiatives may be limited or difficult to obtain, which could adversely affect our operations and financial condition.
Our indebtedness and other contractual obligations could adversely affect our financial condition, our ability to raise additional capital to fund our operations, our ability to operate our business, our ability to react to changes in the economy or our industry and our ability to pay our debts and could divert our cash flow from operations for debt payments.
Our current financing arrangements contain certain restrictive covenants that impact our future operating and financial flexibility.
Our actual operating results may differ significantly from our guidance.
We could be adversely impacted by actions of activist stockholders, and such activism could impact the value of our securities.
The price of our common stock has been volatile and may fluctuate substantially.
Our operations in the U.S. government market are subject to significant regulatory risk.
Failure to comply with the requirements of the National Industrial Security Program Operating Manual could result in interruption, delay or suspension of our ability to provide our products and services, and could result in loss of current and future business with the U.S. government.
Our business is subject to various regulatory risks that could adversely affect our operations.
Changes in tax law, in our tax rates or in exposure to additional income tax liabilities or assessments may materially and adversely affect our financial condition, results of operations and cash flows.

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Our ability to use our U.S. federal and state net operating loss carryforwards and certain other tax attributes may be limited.
Our operations are subject to governmental law and regulations relating to environmental matters, which may expose us to significant costs and liabilities that could negatively impact our financial condition.

Risks Related to Our Business

We are unable to predict the extent to which the global COVID-19 pandemic may adversely impact our business operations, financial performance, results of operations and stock price.

The COVID-19 outbreak, declared a pandemic by the World Health Organization, has impacted nearly all regions of the world. Preventative measures taken to contain or mitigate the outbreak have affected, and continue to affect, the global economy, the U.S. economy and the global financial markets causing significant volatility, including the market price of our common stock, and have raised the prospect of an extended global recession. Public health problems resulting from COVID-19 and preventative measures instituted by governments and businesses to mitigate its spread, including travel restrictions and quarantines, have resulted in a general slowdown in the global economy, the effects of which have adversely impacted our business and the businesses of our customers, including the U.S. and foreign governments, and suppliers.

Our supply chain is under stress inside and outside of the U.S., and we continue to monitor and assess the actual and potential COVID-19 or related force majeure impacts on the supply chain, our operations and customer commitments. There is a risk that these schedule delays could result in obligations for material liquidated damages owed to our customers.

Our customers have been, and may continue to be, affected by COVID-19 and the business slowdown caused by preventative measures, which has resulted in a variation in the consumption of access minutes; however, this could be more significant in the future, which could negatively impact revenue. Additionally, to the extent our international customers experience political or economic disruption as a result of COVID-19 and/or the business slowdown caused by preventative measures, their funding for our products and services could be materially impacted. We believe that COVID-19 represents a force majeure event and as such, we have notified certain customers that we will be exercising our contractual legal rights given the uncertain nature of the current pandemic and its near and long-term impacts on the cost and schedule of the numerous programs in our existing backlog. Additionally, our customers may slow down their development of new projects or may be in financial difficulties impacting their ability to fund projects already in backlog.

We are both receiving and seeking reimbursement of COVID-19-related costs under our U.S. Government contracts under Section 3610 of the Coronavirus Aid, Relief and Economic Security Act (“CARES Act”), which allows federal agencies to reimburse contractors at the minimum applicable contract billing rate for costs to keep its employees or subcontractors in a ready state. Reimbursement of any costs under Section 3610 of the CARES Act increases sales, but is not fee bearing. On March 11, 2021 the American Rescue Plan Act of 2021 was enacted which extended Section 3610 of the CARES Act through September 30, 2021.

Changes in our operations in response to COVID-19 or employee illnesses resulting from the pandemic have resulted in inefficiencies or delays of our projects, impacts to service level contracts, including in sales and product development efforts and additional costs related to business continuity initiatives, that cannot be fully mitigated through succession planning or employees working remotely. We have begun to transition more of our employees back into Maxar worksites and will continue to do so over the coming months. As a result of this transition, we may experience disruptions to our business operations and manufacturing processes which could adversely impact our business, sales, financial condition, liquidity and results of operations.

We cannot predict the degree to which, or the time period that, global economic conditions and our sales and operations will continue to be affected by this outbreak and the resulting preventative measures. The degree to which COVID-19 will continue to impact us will depend on numerous factors and future developments, including, but not limited to, the

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unknown duration of the pandemic, the success and efficacy of the COVID-19 vaccines, the impact of potential future resurgences and new virus variants and any actions that may be taken by governmental authorities to minimize the spread of the pandemic or to stimulate the economy. We also cannot predict the degree to which the disruption of global financial markets could have a negative impact on our ability to raise capital in the future. The long-term impacts of COVID-19 on government budgets and funding priorities that impact demand for our products and services are difficult to predict.

Even after the COVID-19 pandemic has subsided, we may experience an impact to our business as a result of any economic downturn, recession or depression that has occurred or may occur in the future. The effects of these risks on our business, sales, financial condition, liquidity and results of operations could be material.

The future revenue and operating results of the Space Infrastructure segment are dependent on our ability to generate a sustainable order rate for the satellite and space manufacturing operations and develop new technologies to meet the needs of our customers or potential new customers.

The Space Infrastructure segment’s financial performance is dependent on its ability to generate a sustainable order rate for its satellite and space manufacturing operations. This can be challenging and may fluctuate on an annual basis as the number of satellite construction contracts awarded varies and in 2018 there was a substantial step down in the total number and dollar value of geostationary communication satellite contracts awarded compared to such historical averages prior to 2015. Many satellite operators in the communications industry have continued to defer new satellite construction awards to evaluate geostationary and other competing satellite system architectures and other market factors. If we are unable to win new awards or execute existing contracts as expected, our business, results of operations and financial position could be further adversely affected.

The cyclical nature of the commercial satellite market could negatively impact our ability to accurately forecast customer demand. The markets that we serve may not grow in the future and we may not be able to maintain adequate gross margins or profits in these markets. Specifically, sales of the 1300 bus have historically been important to our results and there is no assurance that this market will continue to grow or demand levels will increase, nor is there assurance that the market for the smaller bus, which spans a range from 500kg to 1300kg, will offset any decreases in the market for the 1300 bus or provide future growth. Our growth is dependent on the growth in the sales of services provided by our customers, our customers’ ability to anticipate market trends and our ability to anticipate changes in the businesses of our customers and to successfully identify and enter new markets. If we fail to anticipate such changes in demand, our business, results of operations and financial position could be adversely affected.

On January 1, 2019, we completed a reorganization of our corporate structure pursuant to which we directly acquired all of the issued and outstanding shares of Maxar Technologies Ltd. (“Maxar Canada”) and we replaced Maxar Canada as the publicly-held parent company of the Maxar group (“U.S. Domestication”). As part of our U.S. Domestication we believe that we will continue to capitalize on projected benefits within the Space Infrastructure segment. These benefits include anticipated growth within our U.S. government customer base as well as diversifying into national and civil missions. The failure to do so may have a material adverse effect on our business, results of operations and financial condition.

The satellite manufacturing industry is driven by continued investment in technologies to meet changing customer demand for complex and reliable services. Our satellite systems embody complex technologies and may not always be compatible with current and evolving technical standards and systems developed by others. Other satellite manufacturers have developed or are developing digital payloads which increase flexibility for geostationary satellites in circumstances with unpredictable demand. We plan to team with providers of this technology to enhance our offering if our customers express interest in it.

Failure or delays to develop technologies or team with providers to obtain technologies to meet the requisite and evolving industry or user standards could have a material adverse effect on our business, results of operations and financial condition. Failure of suppliers to deliver against end customer requirements could lead to a material adverse effect on our financial results within the Space Infrastructure segment.

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Our business with various governmental entities is subject to the policies, priorities, regulations, mandates and funding levels of such governmental entities and may be negatively or positively impacted by any change thereto.

Changes in government policies, priorities, regulations, use of commercial data providers to meet U.S. government imagery needs, government agency mandates, funding levels through agency budget reductions, the imposition of budgetary constraints or a decline in government support or deferment of funding for programs in which we or our customers participate could result in contract terminations, delays in contract awards, reduction in contract scope, performance penalties or breaches of our contracts, the failure to exercise contract options, the cancellation of planned procurements and fewer new business opportunities, all of which could negatively impact our business, financial condition, results of operations and cash flows.

We are subject to the procurement policies and procedures set forth in the Federal Acquisition Regulation (“FAR”). FAR governs all aspects of government contracting, including contractor qualifications and acquisition procedures. The FAR provisions in U.S. government contracts must be complied with in order for the contract to be awarded and provides for audits and reviews of contract procurement, performance and administration. Failure to comply with the provisions of the FAR could result in contract termination.

In addition, contracts with any government, including the U.S. government, may be terminated or suspended by the government at any time and could result in significant liability obligations for us. We seek to have in place as standard provisions, termination for convenience language which reimburses us for reasonable costs incurred, subcontractor and employee termination and wind-down costs plus a reasonable amount of profit thereon. However, reparations for termination may fall short of the financial benefit associated with full completion and operation of a contract. In addition, we may not be able to procure new contracts to offset the revenue or backlog lost as a result of any termination of government contracts. The loss of one or more large contracts could have a material adverse impact on our business, financial condition, results of operations and cash flows.

Our revenue, results of operations and reputation may be negatively impacted if our programs fail to meet contractual requirements or our products contain defects or fail to operate in the expected manner.

We sell complex and technologically advanced systems, including satellites, products, hardware and software. Sophisticated software, including software developed by us, may contain defects that can unexpectedly interfere with the software’s intended operation. Defects may also occur in components and products that we manufacture or purchase from third parties. Most of the satellites and systems we have developed must function under demanding and unpredictable operating conditions and in harsh and potentially destructive environments. In addition, we may agree to the in-orbit delivery of a satellite, adding further risks to our ability to perform under a contract. Failure to achieve successful in-orbit delivery could result in significant penalties and other obligations on us.

We employ sophisticated design and testing processes and practices, which include a range of stringent factory and on-site acceptance tests with criteria and requirements that are jointly developed with customers. Our systems may not be successfully implemented, pass required acceptance criteria, or operate or give the desired output, or we may not be able to detect and fix all defects in the satellites, products, hardware and software we sell or resolve any delays or availability issues in the launch services we procure. Failure to do so could result in increased costs, lost revenue and damage to our reputation and may adversely affect our ability to win new contract awards. We manufacture satellites with the intention of receiving full contractual value for builds; however, due to the inherent complexity, a number of adverse variables could negatively impact our ability to collect on the full amount of contractual consideration. Such variables include, among others, schedule delays, including those caused by suppliers or major subcontractors, contractual disputes, failure to meet technological requirements and customer solvency concerns. These variables could lead to termination for convenience or default on our contracts which could have a material adverse effect on our financial results. Historically, we have experienced significant delays in the building of certain satellites. We are currently experiencing a number of schedule delays, some of which are significant, in our satellite builds due to a number of factors, inclusive of COVID-19 delays, subcontractor issues and technological requirements and we are working closely with our customers as we continue to address these delays. We have, where appropriate, asserted force majeure provisions in our contracts but these can be subject to dispute.

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Satellites are subject to construction and launch delays, launch failures, damage or destruction during launch, the occurrence of which can materially and adversely affect our operations.

Delays in the construction of satellites and the procurement of requisite components and launch vehicles, limited availability of appropriate launch windows, possible delays in obtaining regulatory approvals, satellite damage or destruction during launch, launch failures, or incorrect orbital placement could have a material adverse effect on our business, financial condition and results of operations. The loss of, or damage to, a satellite due to a launch failure could result in significant delays in anticipated revenue to be generated by that satellite. Any significant delay in the commencement of service of a satellite would delay or potentially permanently reduce the revenue anticipated to be generated by that satellite. In addition, if the loss of a satellite were to occur, we may not be able to accommodate affected customers with our other satellites or data from another source until a replacement satellite is available, and we may not have on hand, or be able to obtain in a timely manner, the necessary funds to cover the cost of any necessary satellite replacement. We may also dispute with customers the extent and consequences of any loss or delay. Any launch delay, launch failure, underperformance, delay or perceived delay could have a material adverse effect on our results of operations, business prospects and financial condition.

If our satellites fail to operate as intended, it could have a material adverse effect on our business, financial condition and results of operations.

The manufacturing, testing, launching and operation of satellites involves complex processes and technology. Our satellites employ advanced technologies and sensors that are exposed to severe environmental stresses in space that have and could affect the performance of our satellite. Hardware component problems in space could lead to deterioration in performance or loss of functionality of a satellite. In addition, human operators may execute improper implementation commands that may negatively impact a satellite’s performance. Exposure of our satellites to an unanticipated catastrophic event, such as a meteor shower or a collision with space debris, could reduce the performance of, or completely destroy, the affected satellite. In December 2018, our WorldView-4 satellite experienced a failure in its control moment gyros, preventing the satellite from collecting imagery.

We cannot provide assurances that our satellites will continue to operate successfully in space throughout their expected operational lives. Even if a satellite is operated properly, technical flaws in that satellite’s sensors or other technical deficiencies or anomalies could significantly hinder its performance, which could materially affect our ability to collect imagery and market our products and services successfully. While some anomalies are covered by insurance policies, others are not or may not be covered, or may be subject to large deductibles.

If we suffer a partial or total loss of a deployed satellite, we would need a significant amount of time and would incur substantial expense to replace that satellite. We may experience other problems with our satellites that may reduce their performance. During any period of time in which a satellite is not fully operational, we may lose most or all of the revenue that otherwise would have been derived from that satellite. Our inability to repair or replace a defective satellite or correct any other technical problem in a timely manner could result in a significant loss of revenue. If a satellite experiences a significant anomaly such that it becomes impaired or is no longer functional, it would significantly impact our business, prospects and profitability. Additionally, our review of satellite lives could extend or shorten the depreciable lives of our satellites, which would have an impact on the depreciation we recognize.

Loss of, or damage to, a satellite and the failure to obtain data or alternate sources of data for our products may have an adverse impact on our results of operations and financial condition.

In the Earth Intelligence segment, we rely on data collected from a number of sources including data obtained from satellites. We may become unable or limited in our ability to collect such data. For example, satellites can temporarily go out of service and be recovered, or cease to function for reasons beyond our control, including the quality of design and construction, the supply of fuel, the expected gradual environmental degradation of solar panels, the durability of various satellite components and the orbits and space environments in which the satellites are placed and operated. Electrostatic storms, collisions with other objects or actions by malicious actors, including cyber related, could also damage the satellites. Additionally, in certain instances, governments may discontinue for periods of time the access to or operation

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of a satellite for any particular area on the Earth and for various reasons may not permit transmission of certain data, whether from a satellite owned by the government or not.

We cannot offer assurances that each of our satellites will remain in operation. Our satellites have certain redundant systems which can fail partially or in their entirety and accordingly satellites may operate for extended periods without all redundant systems in operation, but with single points of failure. The failure of satellite components could cause damage to or loss of the use of a satellite before the end of its expected operational life. Certain of our satellites are nearing the end of their expected operational lives and we can offer no assurance that our satellites will maintain their prescribed orbits or remain operational and we may not have replacement satellites that are immediately available.

Interruption or failure of our infrastructure or national infrastructure could hurt our ability to effectively perform our daily operations and provide and produce our products and services, which could damage our reputation and harm our operating results.

We are vulnerable to natural disasters and significant disruptions including tsunamis, floods, earthquakes, fires, water shortages, other extreme weather conditions, epidemics or pandemics, acts of domestic or foreign terrorism, workplace violence, power shortages and blackouts, aging infrastructures and telecommunications failures. Furthermore, climate change has, and may continue to, increased the rate, size and scope of these natural disasters. In the event of such a natural disaster or other disruption, we could experience: disruptions to our operations or the operations of suppliers, subcontractors, distributors or customers; destruction of facilities; and/or loss of life.

The availability of many of our products and services depends on the continuing operation of our satellite operations infrastructure, satellite manufacturing operations, information technology, communications systems and national infrastructure. Any downtime, damage to or failure of our systems could result in interruptions in our service, which could reduce our revenue and profits. Our systems are vulnerable to damage or interruption from floods, fires, power loss, aging infrastructure, telecommunications failures, computer viruses, computer denial of service attacks or other attempts to harm our systems. We do not currently maintain a back-up production facility from which we can continue to collect, process and deliver imagery in the event of the loss of our primary facility. In the event we are unable to collect, process and deliver imagery from our facility, our daily operations and operating results would be materially and adversely affected. In addition, our ground terminal centers are vulnerable to damage or interruption from human error, intentional bad acts, earthquakes, hurricanes, floods, fires, war, terrorist attacks, power losses, hardware failures, systems failures, aging infrastructure, telecommunications failures and similar events. Our satellite manufacturing operations are located in California in proximity to the San Andreas fault line, one of the longest and most heavily populated earthquake-prone rifts in the world. Our satellite manufacturing facilities are also subject to risks associated with an aging infrastructure. An infrastructure failure could result in the destruction of satellites under construction or inventory, manufacturing delays or additional costs incurred. We do not maintain back-up manufacturing facilities or operations. The occurrence of any of the foregoing could result in lengthy interruptions in our services and/or damage our reputation, which could have a material adverse effect on our financial condition and results of operations.

Any significant disruption in or unauthorized access to our computer systems or those of third parties that we utilize in our operations, including those relating to cybersecurity or arising from cyber-attacks, and security threats could result in a loss or degradation of service, unauthorized disclosure of data, or theft or tampering of intellectual property, any of which could materially adversely impact our business.

Our operations, products, solutions, analysis and intellectual property are inherently at risk of loss, inappropriate access, or tampering by both insider threats and external bad actors. In particular, our operations face various cyber and other security attacks and threats, including attempts to gain unauthorized access to sensitive information, intellectual property, mission operations and networks. Our systems (internal, customer and partner systems) and assets may also be subject to damage or interruption from natural and other disaster events or disruptions including tsunamis, floods, earthquakes, fires, water shortages, other extreme weather conditions, epidemics or pandemics, acts of domestic or foreign terrorism, workplace violence, power shortages and blackouts, aging infrastructures and telecommunications failures. In addition, insider threats, threats to the safety of our directors and employees, threats to the security of our facilities, infrastructure and supply chain and threats from terrorist acts or other acts of aggression, including the spreading of inaccurate, misleading or deceptive information, could have a material adverse impact on our business.

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Our products, solutions and analysis that we develop and or delivery to our customers are also at risk of disruption, loss, or tampering. The integrity of the data (e.g., pixels), information and analysis in our products and services is at risk to be manipulated either before or after delivery to a customer. Our products with derived information characteristics are also at risk of being incorrect due to deceptive practices by others or errors.

Our customers and partners (including our supply chain and joint ventures) face similar threats. Customer or partner proprietary, classified, or sensitive information stored on our networks is at risk. Assets and intellectual property and products in customer or partner environments are also inherently at risk. We also have risk where we have access to customer and partner networks and face risks of breach, disruption or loss as well. Our supply chain for products and services also is becoming more diverse and therefore the risk is growing.

While we have implemented certain systems and processes to help thwart bad actors and protect our data and our systems and assets, the techniques used to gain unauthorized access are constantly evolving, and we may be unable to anticipate or prevent all unauthorized access, disruption, loss, or harm. Because of our highly desired intellectual property and our support of the U.S. government and other governments, we (and/or partners we use) may be a particularly attractive target for such attacks by advanced, persistent and highly organized adversaries, including nation states and hostile foreign governments. From time to time, we have experienced attacks on our systems from bad actors that, to date, have not had a material adverse effect on our business. We cannot offer assurances, however, that future attacks will not materially adversely affect our business.

A security event or other significant disruption of our systems, assets, products or solutions could:

disrupt the proper functioning of our networks, applications and systems and therefore our operations and/or those of certain of our customers, or partners;
result in the unauthorized access to, and destruction, loss, theft, misappropriation or release of, our or our customers’ proprietary, confidential, sensitive or otherwise valuable information, including trade secrets, which others could use to compete against us or for disruptive, destructive or otherwise harmful purposes and outcomes;
destroy or degrade assets including space, ground and intellectual property assets;
manipulate or tamper with our products, solutions, analysis, or other systems delivered to our customers or partners;
compromise other sensitive government functions; and
damage our reputation with our customers (particularly agencies of various governments) and the public generally.

A security event that involves classified or other sensitive government information or certain controlled technical information, could subject us to civil or criminal penalties and could result in loss of our secure facility clearance and other accreditations, loss of our government contracts, loss of access to classified information, loss of export privileges or debarment as a government contractor. The risk that these types of events could seriously harm our business is likely to increase as we expand the number of web-based products and services we offer as well as increase the number of countries within which we do business.

We are a party to legal proceedings, investigations and other claims or disputes, which are costly to defend and, if determined adversely to us, could require us to pay fines or damages, undertake remedial measures or prevent us from taking certain actions, any of which could adversely affect our business.

We are, and in the future may be, a party to legal proceedings, investigations and other claims or disputes, which may relate to subjects including commercial transactions, intellectual property, securities, employee relations, or compliance with applicable laws and regulations.

For instance, in January 2019, a Maxar stockholder filed a putative class action lawsuit in the Federal District Court of Colorado, naming Maxar and members of management as defendants alleging, among other things, that our public disclosures were false or misleading in violation of the Securities and Exchange Act of 1934 and seeking monetary

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damages. An amended consolidated complaint was filed in that case in October 2019. On September 11, 2020, the court granted in part, and denied in part, Maxar’s motion to dismiss. On July 16, 2021, the Federal District Court of Colorado certified a class consisting of investors who purchased or acquired Maxar stock between May 9, 2018 and October 30, 2018, inclusive. Also, in January 2019, a Maxar stockholder resident in Canada issued a putative class action lawsuit in the Ontario Superior Court of Justice against Maxar and members of management claiming misrepresentations in our public disclosures and seeking monetary damages under Canadian securities laws. In November 2019, a second putative class action lawsuit was issued by the same Maxar stockholder resident in Canada, adding a second representative plaintiff and three additional defendants, including Maxar’s auditor KPMG LLP. The second claim expands the proposed class period and the breadth of the allegations against us. In February 2020, the January 2019 Canadian lawsuit was discontinued. In October 2019, a Maxar stockholder filed a putative class action lawsuit in California state court, naming Maxar and certain members of management and the board of directors as defendants. The lawsuit is based upon many of the same underlying factual allegations as the federal putative class action but asserts claims under the Securities Act of 1933. An amended complaint was filed in April 2020. In November 2019, a purported derivative complaint was filed against Maxar, certain current and former members of management and the board of directors in the Federal District Court of Delaware, also based on the same factual allegations as the federal putative class action. On September 18, 2020, a second purported derivative case was filed in the Federal District Court of Delaware, based on the same allegations as the earlier derivative case. The two derivative cases have been consolidated and are stayed.

These legal proceedings could result in substantial costs and diversion of management’s attention and resources and could harm our stock price, business, prospects, results of operations and financial condition. These and other legal proceedings and investigations are inherently uncertain and we cannot predict their duration, scope, outcome or consequences. There can be no assurance that these or any such matters that have been or may in the future be brought against us will be resolved favorably. In connection with any government investigations, in the event the government takes action against us or the parties resolve or settle the matter, we may be required to pay substantial fines or civil and criminal penalties and/or be subject to equitable remedies, including disgorgement or injunctive relief. Other legal or regulatory proceedings, including lawsuits filed by private litigants, may also follow as a consequence. These matters are likely to be expensive and time-consuming to defend, settle and/or resolve and may require us to implement certain remedial measures that could prove costly or disruptive to our business and operations. They may also cause damage to our business reputation. The unfavorable resolution of one or more of these matters could have a material adverse effect on our business, results of operations, financial condition or cash flows.

Acquisitions or divestitures could result in adverse impacts on our operations.

In order to grow our business, we may acquire additional assets or companies, including for example, our recent Vricon Acquisition completed on July 1, 2020. In connection with the Vricon Acquisition or any future acquisitions, there can be no assurance that we will be able to identify, acquire, or obtain the required regulatory approvals, or profitably manage the additional businesses or successfully integrate any acquired businesses, products or technologies without substantial expenses, delays or other operational, regulatory, or financial problems. In addition, any acquired businesses, products or technologies may not achieve anticipated revenues and income growth.

Further, acquisitions may involve a number of additional risks, including diversion of management’s attention, failure to retain key personnel, or failure to attract the necessary talent to manage organizational growth. We may become responsible for unexpected liabilities that were not discovered or disclosed in the course of due diligence in connection with historical acquisitions and any future acquisitions. Additionally, acquisitions with international operations such as the Vricon Acquisition with operations in Sweden, expose us to greater international business risks. If we do not realize the expected benefits or synergies of an acquisition, such as revenue gains or cost reductions, there could be a material adverse effect on our business, results of operations and financial condition.

We may also seek to divest portions of our businesses which may no longer be aligned with our strategic initiatives and long-term objectives. Various factors could materially affect our ability to successfully do so, including the availability of buyers willing to purchase the assets on terms acceptable to us, difficulties in the separation of operations, the diversion of management's attention from other business concerns, the disruption of our business, the potential loss of key employees and the retention of uncertain contingent liabilities related to the divested business. We cannot assure that we will be successful in managing these or any other significant risks that we encounter in divesting a business or

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product line, and any divestiture we undertake could materially and adversely affect our business, financial condition, results of operations and cash flows.

Our business with various governmental entities is concentrated in a small number of primary contracts. The loss or reduction in scope of any one of our primary contracts would materially reduce our revenue.

Our business with various governmental entities is concentrated in a small number of primary contracts. We recognize significant revenue from U.S. government agencies and a significant amount of our U.S. government revenue is generated from a single contract, the EnhancedView Contract. The EnhancedView Contract is a service level agreement to provide image-tasking capacity on our satellites, and other imagery-derived products and services to the U.S. government. Our ability to service other customers could be negatively impacted if we are unable to maintain our current collection capacity. In addition, any inability on our part to meet the performance requirements of the EnhancedView Contract could result in a performance penalty or breach of that contract. A breach of our contract with government customers or reduction in service to our other customers could have a material adverse effect on our business, financial condition and results of operations. The U.S. government may also terminate or suspend our contracts, including the EnhancedView Contract, at any time with or without cause. Additionally, any changes in the size, scope or term of the EnhancedView Contract could impact our satellite replenishment strategy and our ability to repay or refinance our long-term debt. Although our contracts generally involve fixed annual minimum commitments, such commitments, along with all other contracts with the U.S. government, are subject to annual Congressional appropriations and the federal budget process, and as a result, the U.S. government may not continue to fund these contracts at current or anticipated levels. Similarly, our contracts in other jurisdictions are also subject to government procurement policies and procedures.

Disruptions in U.S. government operations and funding could have a material adverse effect on our revenues, earnings and cash flows and otherwise adversely affect our financial condition.

Any disruptions in federal government operations could have a material adverse effect on our revenues, earnings and cash flows. A prolonged failure to maintain significant U.S. government operations, particularly those pertaining to our business, could have a material adverse effect on our revenues, earnings and cash flows. Continued uncertainty related to recent and future U.S. federal government shutdowns, the U.S. budget and/or failure of the U.S. government to enact annual appropriations, such as long-term funding under a continuing resolution, could have a material adverse effect on our revenues, earnings and cash flows. Additionally, disruptions in federal government operations may negatively impact regulatory approvals and guidance that are important to our operations.

Changes in U.S. government policy regarding use of commercial data or Space Infrastructure providers, or material delay or cancellation of certain U.S. government programs, may have a material adverse effect on our revenue and our ability to achieve our growth objectives.

Current U.S. government policy encourages the U.S. government’s use of commercial data and Space Infrastructure providers to support U.S. national security objectives. Under the EnhancedView Contract, our contractual counterparty acquires imagery and imagery-derived products on behalf of our customers within the U.S. government. We are considered by the U.S. government to be a commercial data provider. U.S. government policy is subject to change and any change in policy away from supporting the use of commercial data and Space Infrastructure providers to meet U.S. government imagery and Space Infrastructure needs, or any material delay or cancellation of planned U.S. government programs, including the EnhancedView Contract, could materially adversely affect our revenue and our ability to achieve our growth objectives.

We face competition that may cause us to have to either reduce our prices for imagery and related services or to lose market share.

Our services compete with satellite and aerial imagery and related services offered by a range of private and government providers. Our current or future competitors may have superior technologies or greater financial, personnel and other resources than we have. The value of our imagery may also be diluted by Earth imagery that is available free of charge.

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The U.S. government and foreign governments may develop, construct, launch and operate their own imagery satellites, which could reduce their need to rely on us and other commercial suppliers. In addition, such governments could sell or provide free of charge Earth imagery from their satellites and thereby compete with our imagery and related services. Also, governments may at times make our imagery freely available for humanitarian purposes, which could impair our revenue growth with non-governmental organizations. These governments could also subsidize the development, launch and operation of imagery satellites by our current or future competitors.

Our competitors or potential competitors could, in the future, offer satellite-based imagery or other services with more attractive features than our services. The emergence of new remote imaging technologies or the continued growth of low-cost imaging satellites, could negatively affect our marketing efforts. More importantly, if competitors develop and launch satellites or other imagery-content sources with more advanced capabilities and technologies than ours, or offer services at lower prices than ours, our business and results of operations could be harmed. Due to competitive pricing pressures, such as new product introductions by us or our competitors or other factors, the selling price of our services may further decrease. If we are unable to offset decreases in our average selling prices by increasing our sales volumes or by adjusting our service mix, our revenue and operating margins may decline and our financial position may be harmed.

We operate in highly competitive industries and in various jurisdictions across the world, which may cause us to have to reduce our prices.

We operate in highly competitive industries and many of our competitors are larger and have substantially greater resources than we have. Our primary competitors for satellite manufacturing contracts include the Boeing Company, Lockheed Martin Corporation, Northrop Grumman Corporation in the United States and Thales S.A. and Airbus Defence and Space, a subsidiary of the Airbus Group, in Europe. We may also face competition in the future from emerging low-cost competitors in India, Russia and China. Competition in our Earth Intelligence segment is highly diverse, and while our competitors offer different products, there is often competition for contracts that are part of governmental budgets. Our major existing and potential competitors for our Earth Intelligence segment include commercial satellite imagery companies, state-owned imagery providers, aerial imagery companies, free sources of imagery and unmanned aerial vehicles. Our Earth Intelligence segment faces competition from companies that provide geospatial analytic information and services to the U.S. government, including defense prime contractors such as L3Harris and Booz Allen Hamilton.

In addition, some of our foreign competitors currently benefit from, and others may benefit in the future from, protective measures by their home countries where governments are providing financial support, including significant investments in the development of new technologies. Government support of this nature greatly reduces the commercial risks associated with satellite development activities for these competitors. This market environment may result in increased pressures on our pricing and other competitive factors.

We may be required to recognize impairment charges.

Long-lived assets, including goodwill and intangible assets, are tested annually for impairment in the fourth quarter or whenever there is an indication that an asset may be impaired. In the past, we have recognized significant impairment losses related to goodwill, intangible assets, property, plant and equipment, inventory and orbital receivables.

Disruptions to our business, unexpected significant declines in our operating results, adverse technological events or changes in the regulatory markets in which we operate, and significant declines in our stock price have resulted and may result in further impairment charges to our tangible and intangible assets. Any future impairment charges could substantially affect our reported results.

Uncertain global macro-economic and political conditions could materially adversely affect our results of operations and financial condition.

Our results of operations are materially affected by economic and political conditions in the United States and internationally, including inflation, deflation, interest rates, availability of capital, energy and commodity prices, trade

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laws and the effects of governmental initiatives to manage economic conditions. Current or potential customers may delay or decrease spending on our products and services as their business and/or budgets are impacted by economic conditions. The inability of current and potential customers to pay us for our products and services may adversely affect our earnings and cash flows.

Our business involves significant risks and uncertainties that may not be covered by insurance.

A significant portion of our business relates to designing, developing and manufacturing advanced space technology products and systems. New technologies may be untested or unproven. Failure of some of these products and services could result in extensive property damage. Accordingly, we may incur liabilities that are unique to our products and services.

We endeavor to obtain insurance coverage from established insurance carriers to cover these risks and liabilities. However, the amount of insurance coverage that we maintain may not be adequate to cover all claims or liabilities. Existing coverage may be canceled while we remain exposed to the risk and it is not possible to obtain insurance to protect against all operational risks, natural hazards and liabilities.

We have historically insured satellites in our constellation to the extent that insurance was available on acceptable premiums and other terms. The insurance proceeds received in connection with a partial or total loss of the functional capacity of any of our satellites would not be sufficient to cover the replacement cost, if we choose to do so, of an equivalent high-resolution satellite. In addition, this insurance will not protect us against all losses to our satellites due to specified exclusions, deductibles and material change limitations and it may be difficult to insure against certain risks, including a partial deterioration in satellite performance and satellite re-entry.

The price and availability of insurance fluctuate significantly. Although we have historically been able to obtain insurance coverage for in-orbit satellites, we cannot guarantee that we will be able to do so in the future. We intend to maintain insurance for our operating satellites, but any determination we make as to whether to obtain insurance coverage will depend on a variety of factors, including the availability of insurance in the market, the cost of available insurance and the redundancy of our operating satellites. Insurance market conditions or factors outside our control at the time we are in the market for the required insurance, such as failure of a satellite using similar components, could cause premiums to be significantly higher than current estimates and could reduce amounts of available coverage. The cost of our insurance has been increasing and may continue to increase. Higher premiums on insurance policies will reduce our operating income by the amount of such increased premiums. If the terms of in-orbit insurance policies become less favorable than those currently available, there may be limits on the amount of coverage that we can obtain, or we may not be able to obtain insurance at all.

In addition, even though we carry business interruption insurance policies, any business interruption losses could exceed the coverage available or be excluded from our insurance policies. Any disruption of our ability to operate our business could result in a material decrease in our revenues or significant additional costs to replace, repair or insure our assets, which could have a material adverse impact on our financial condition and results of operations.

We often rely on a single vendor or a limited number of vendors to provide certain key products or services and the inability of these key vendors to meet our needs could have a material adverse effect on our business.

Historically, we have contracted with a single vendor or a limited number of vendors to provide certain key products or services, such as construction of satellites and launch vehicles and management of certain remote ground terminals and direct access facilities. In addition, our manufacturing operations depend on specific technologies and companies for which there may be a limited number of vendors. If these vendors are unable to meet our needs because they fail to perform adequately, are unable to match new technological requirements or problems, or are unable to dedicate engineering and other resources necessary to provide the services contracted for, our business, financial position and results of operations may be adversely affected. While alternative sources for these products, services and technologies may exist, we may not be able to develop these alternative sources quickly and cost-effectively, which could materially impair our ability to operate our business. Furthermore, these vendors may request changes in pricing, payment terms or other contractual obligations, which could cause us to make substantial additional investments.

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Additionally, some of our suppliers’ employees are represented by labor unions. Labor union actions at suppliers can also affect us. Work stoppages and instability in our relationships with labor unions could delay the production and/or development of our products, which could strain relationships with customers, cause a loss of revenues and adversely affect our operations.

Disruptions in the supply of key raw materials or components and difficulties in the supplier qualification process, as well as increases in prices of raw materials, could adversely impact us.

Many raw materials, major components and product equipment items, particularly in our Space Infrastructure segment, are procured or subcontracted on a single or sole-source basis. Although we maintain a qualification and performance surveillance process and we believe that sources of supply for raw materials and components are generally adequate, it is difficult to predict what effects shortages or price increases may have in the future. Our ability to manage inventory and meet delivery requirements may be constrained by our suppliers’ inability to scale production and adjust delivery of long-lead time products during times of volatile demand. Our inability to fill our supply needs would jeopardize our ability to fulfill obligations under commercial and government contracts, which could, in turn, result in reduced sales and profits, contract penalties or terminations and damage to customer relationships and could have a material adverse effect on our operating results, financial condition, or cash flows.

Key raw materials used in our operations include metals such as aluminum and titanium, which are usually procured by our suppliers who manufacture parts in accordance with our drawings. We also purchase materials such as chemicals; composites; electronic, electro-mechanical and mechanical components; subassemblies; and subsystems that are integrated with the manufactured parts for final assembly into finished products and systems. We are impacted by increases in the prices of raw materials used in production on fixed-price business.

We monitor sources of supply to attempt to assure that adequate raw materials and other supplies needed in manufacturing processes are available.

Although we have not experienced significant difficulty in our ability to procure raw materials, components, sub-assemblies and other supplies required in our manufacturing processes, prolonged disruptions in the supply of any of our key raw materials or components, difficulty completing qualification of new sources of supply, implementing use of replacement materials, components or new sources of supply, or a continuing increase in the prices of raw materials, energy or components could have a material adverse effect on our operating results, financial condition, or cash flows.

We are dependent on resellers of our services for a portion of our revenue. If these resellers fail to market or sell our services successfully, our business could be harmed.

The Earth Intelligence segment has historically generated a portion of its revenue from foreign and domestic resellers. In the Earth Intelligence segment, we rely on foreign resellers and partners to market and sell the majority of our services in the international market. Our foreign resellers and partners may not have the skill or experience to develop regional commercial markets for our services, or may have competing interests that negatively affect their sales of our services. If we fail to enter into reseller agreements on a timely basis or if our resellers and partners fail to market and sell our services successfully, these failures could negatively impact our business, financial condition and results of operations.

We may not be successful in developing new technology and the technology we are successful in developing may not meet the needs of our customers or potential new customers.

The markets in which we operate are characterized by changing technology and evolving industry standards. Despite years of experience in meeting customer systems requirements with the latest in technological solutions, we may not be successful in identifying, developing and marketing products or systems that respond to rapid technological change, evolving technical standards and systems developed by others. Our competitors may develop technology that better meets the needs of our customers. If we do not continue to develop, manufacture and market innovative technologies or applications that meet customers’ requirements, sales may suffer and our business may not continue to grow in line with historical rates or at all. If we are unable to achieve sustained growth, we may be unable to execute our

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business strategy, expand our business or fund other liquidity needs and our business prospects, financial condition and results of operations could be materially and adversely affected.

Our technology may violate the proprietary rights of third parties and our intellectual property may be misappropriated or infringed upon by third parties, each of which could have a negative impact on our operations.

If any of our technology violates proprietary rights, including copyrights and patents, third parties may assert infringement claims against us. Certain software modules and other intellectual property used by us or in our satellites, systems and products make use of or incorporate licensed software components and other licensed technology. These components are developed by third parties over whom we have no control. Any claims brought against us may result in limitations on our ability to use the intellectual property subject to these claims. We may be required to redesign our satellites, systems or products or to obtain licenses from third parties to continue offering our satellites, systems or products without substantially re-engineering such products or systems.

Our intellectual property rights may be invalidated, circumvented, challenged, infringed or required to be licensed to others. An infringement or misappropriation could harm any competitive advantage we currently derive or may derive from our proprietary rights.

To protect our proprietary rights, we rely on a combination of patent protections, copyrights, trade secrets, trademark laws, confidentiality agreements with employees and third parties and protective contractual provisions such as those contained in license agreements with consultants, subcontractors, vendors and customers. Although we apply rigorous standards, documents and processes to protect our intellectual property, there is no absolute assurance that the steps taken to protect our technology will prevent misappropriation or infringement. Litigation may be necessary to enforce or protect our intellectual property rights, our trade secrets or determine the validity and scope of the proprietary rights of others. Such litigation may be time-consuming and expensive to prosecute or defend and could result in the diversion of our time and resources. In addition, competitors may design around our technology or develop competing technologies.

The acceptance of our imagery services may not continue and our historic growth rates should not be relied upon as an indicator of future growth.

We cannot accurately predict the extent of the market acceptance of our services or whether there will continue to be a market for our services on terms we find acceptable. Market acceptance of our commercial high-resolution Earth imagery and related services depends on a number of factors, including the quality, scope, timeliness, sophistication, price and the availability of substitute services. Changes in the market acceptance of our offerings, or other services that utilize our imagery, failure of new markets to develop or our need to make significant investments to achieve acceptance by the market would negatively affect our business, financial condition and results of operations. We may not continue to grow in line with historical rates or at all. If we are unable to achieve sustained growth, we may be unable to execute our business strategy, expand our business or fund other liquidity needs and our business prospects, financial condition and results of operations could be materially and adversely affected.

We are dependent on our ability to attract, train and retain employees. Our inability to do so, or the loss of key personnel, would cause serious harm to our business.

Our success is largely dependent on the abilities and experience of our executive officers and other key personnel to oversee all aspects of our operations and to deliver on our corporate strategies. Competition for highly skilled management, technical, research and development and other personnel is intense in our industry. In order to maintain our ability to compete, we must continuously retain the services of a core group of specialists in a wide variety of disciplines. To the extent that the demand for qualified personnel exceeds supply, we could experience higher labor, recruiting or training costs in order to attract and retain such employees, or could experience difficulties in performing under contracts if our need for such employees is unmet. We may not be able to retain our current executive officers or key personnel or attract and retain additional executive officers or key personnel as needed to deliver on our corporate strategy. Furthermore, the recent volatility in our stock price may undermine the use of our equity as a retention tool and may make it more difficult to retain key personnel.

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Changes in our accounting estimates and assumptions could negatively affect our financial position and results of operations.

We prepare our consolidated financial statements in accordance with U.S. GAAP. These accounting principles require us to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of our financial statements. We are also required to make certain judgments that affect the reported amounts of revenues and expenses during each reporting period. We periodically evaluate our estimates and assumptions including, but not limited to, those relating to business acquisitions, revenue recognition, including our long-term contracts accounted for utilizing the cost-to-cost method, restructuring costs, recoverability of assets including customer receivables, valuation of goodwill and intangibles, contingencies, stock-based compensation and income taxes. We base our estimates on historical experience and various assumptions that we believe to be reasonable based on specific circumstances. These assumptions and estimates involve the exercise of judgment and discretion, which may evolve over time in light of operational experience, regulatory direction, developments in accounting principles and other factors. Actual results could differ from these estimates as a result of changes in circumstances, assumptions, policies or developments in the business, which could materially affect our consolidated financial statements.

Pension and other postretirement benefit obligations may materially impact our earnings, stockholders’ equity and cash flows from operations, and could have significant adverse impacts in future periods.

We maintain defined benefit pension and other postretirement benefits plans for some of our employees. Potential pension contributions include discretionary contributions to improve the plans’ funded status. The extent of future contributions depends heavily on market factors such as the discount rate and the actual return on plan assets. We estimate future contributions to these plans using assumptions with respect to these and other items. Changes to those assumptions could have a significant effect on future contributions, annual pension and other postretirement costs, the value of plan assets and our benefit obligations.

Significant changes in actual return on pension assets, discount rates and other factors could adversely affect our results of operations and require cash pension contributions in future periods. Changes in discount rates and actual asset returns different than our expected asset returns can result in significant non-cash actuarial gains or losses which we record in the fourth quarter of each fiscal year and, if applicable, in any quarter in which an interim re-measurement is triggered. With regard to cash pension contributions, funding requirements for our pension plans are largely dependent upon interest rates, actual investment returns on pension assets and the impact of legislative or regulatory changes related to pension funding obligations.

We also provide other postretirement benefits to certain of our employees, consisting principally of health care, dental and life insurance for eligible retirees and qualifying dependents. Our estimates of future costs associated with these benefits are also subject to assumptions, including estimates of the level of medical cost increases and discount rates.

For a discussion regarding how our financial statements can be affected by pension and other postretirement plan accounting policies, see Part II, Item 7, “Management's Discussion and Analysis—Critical Accounting Policies and Estimates” in our Annual Report on Form 10-K for the year ended December 31, 2020.

Fluctuations in foreign exchange rates could have a negative impact on our business.

Our revenues, expenses, assets and liabilities denominated in currencies other than the U.S. dollar are translated into U.S. dollars for the purposes of compiling our consolidated financial statements. We have in the past and may in the future, use hedging strategies to manage and minimize the impact of exchange rate fluctuations on our cash flow and economic profits. There are complexities inherent in determining whether and when foreign exchange exposures will materialize, in particular given the possibility of unpredictable revenue variations arising from schedule delays and contract postponements. Furthermore, if we use hedging strategies in the future, we could be exposed to the risk of non-performance of our hedging counterparties. We may also have difficulty with our hedging strategy in the future depending on the willingness of hedging counterparties to extend credit. Accordingly, no assurances may be given that

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our exchange rate hedging strategy would protect us from significant changes or fluctuations in revenues and expenses denominated in U.S. dollars.

Our restructuring activities and cost saving initiatives may not achieve the results we anticipate.

We have previously and may in the future undertake cost reduction initiatives and organizational restructurings to improve operating efficiencies, optimize our asset base and generate cost savings. For example, in 2018 and 2019 we undertook restructuring plans intended to reduce headcount and implement other efficiency initiatives. We cannot be certain that these initiatives have been or will be completed as planned or without business interruption, that these initiatives will not generate additional costs, such as severance or other charges, or that the estimated operating efficiencies or cost savings from such activities will be fully realized or maintained over time.

Risks Related to Our Indebtedness and Our Common Stock

Our business is capital intensive, and we may not be able to raise adequate capital to finance our business strategies, including funding future satellites, or we may be able to do so only on terms that significantly restrict our ability to operate our business.

The implementation of our business strategies, such as expanding our satellite constellation and our products and services offerings, requires a substantial outlay of capital. As we pursue our business strategies and seek to respond to opportunities and trends in our industry, our actual capital expenditures may differ from our expected capital expenditures, and there can be no assurance that we will be able to satisfy our capital requirements in the future. We are highly leveraged, but we currently expect that our ongoing liquidity requirements for sustaining our operations will be satisfied by cash on hand and cash generated from our existing and future operations supplemented, where necessary, by available credit. However, we cannot provide assurances that our businesses will generate sufficient cash flow from operations in the future or that additional capital will be available in amounts sufficient to enable us to execute our business strategies. Our ability to increase our debt financing and/or renew existing credit facilities may be limited by our existing financial and non-financial covenants, credit objectives, or the conditions of the debt capital market generally. Furthermore, our current financing arrangements contain certain restrictive financial and non-financial covenants (e.g., the achievement or maintenance of stated financial ratios) that may impact our access to those facilities and significantly limit future operating and financial flexibility.

Our ability to obtain additional debt or equity financing or government grants to finance operating working capital requirements and growth initiatives may be limited or difficult to obtain, which could adversely affect our operations and financial condition.

We need capital to finance operating working capital requirements and growth initiatives and to pay our outstanding debt obligations as they become due for payment. If the cash generated from our businesses, together with the credit available under existing bank facilities, is not sufficient to fund future capital requirements, we will require additional debt or equity financing. Our ability to access capital markets on terms that are acceptable to us will be dependent on prevailing market conditions, as well as our future financial condition. Further, our ability to increase our debt financing and/or renew existing facilities may be limited by our existing leverage, financial and non-financial covenants, credit objectives and debt capital market conditions.

We have in the past, and may continue in the future to, receive government grants for research and development activities and other business initiatives. Any agreement or grant of this nature with government may be accompanied by contractual obligations applicable to us, which may result in the grant money becoming repayable if certain requirements are not met. A failure to meet contractual obligations under such agreements and grants and a consequent requirement to repay money received could negatively impact our results of operations and financial condition.

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Our indebtedness and other contractual obligations could adversely affect our financial condition, our ability to raise additional capital to fund our operations, our ability to operate our business, our ability to react to changes in the economy or our industry and our ability to pay our debts and could divert our cash flow from operations for debt payments.

We have a significant amount of indebtedness and leverage. Our level of indebtedness increases the possibility that we may be unable to generate cash sufficient to pay the principal of, interest on, or other amounts due with respect to our indebtedness. Our long-term debt under our Syndicated Credit Facility bears interest at floating rates related to U.S. LIBOR (for U.S. dollar borrowings), plus a margin. As a result, our interest payment obligations on such indebtedness will increase if such interest rates increase. Our leverage and debt service obligations could adversely impact our business, including by:

impairing our ability to meet one or more of the financial ratios contained in our credit facilities or to generate cash sufficient to pay interest or principal, including periodic principal payments;
increasing our vulnerability to general adverse economic and industry conditions;
limiting our ability to obtain additional debt or equity financing on favorable terms, if at all;
requiring the dedication of a portion of our cash flow from operations to service our debt, thereby reducing the amount of our cash flow available for other purposes, including capital expenditures, dividends to stockholders or to pursue future business opportunities;
requiring us to sell debt or equity securities or to sell some of our core assets, possibly on unfavorable terms, to meet payment obligations;
limiting our flexibility in planning for, or reacting to, changes in our business and the industries in which we compete; and
placing us at a possible competitive disadvantage with less leveraged competitors and competitors that may have better access to capital resources.

Any of the forgoing factors could have negative consequences on our financial condition and results of operation.

Our current financing arrangements contain certain restrictive covenants that impact our future operating and financial flexibility.

Our current financing arrangements contain certain restrictive covenants that may impact our future operating and financial flexibility. Our debt funding is provided under our financing agreements, which contains a series of positive and negative covenants with which we must comply, including financial and non-financial covenants. If we fail to comply with any covenants and are unable to obtain a waiver or other cure thereof, the lenders under the Syndicated Credit Facility or under the 2023 or 2027 bond issuances may be able to take certain actions with respect to the amounts owing under such agreements, including requiring early payment thereof. Any such actions could have a material adverse effect on our financial condition. These covenants could also have the effect of limiting our flexibility in planning for or reacting to changes in our business and the markets in which we compete.

Our actual operating results may differ significantly from our guidance.

From time to time, we release guidance regarding our future performance that represents our management’s estimates as of the date of release. This guidance, which consists of forward-looking statements, is prepared by our management and is qualified by, and subject to, the assumptions and the other information contained or referred to in the release. Our guidance is not prepared with a view toward compliance with published guidelines of the American Institute of Certified Public Accountants, and neither any independent registered public accounting firm nor any other independent expert or outside party compiles, examines or reviews the guidance and, accordingly, no such person expresses any opinion or any other form of assurance with respect thereto.

Guidance is based upon a number of assumptions and estimates that, while presented with numerical specificity, is inherently subject to significant business, economic and competitive uncertainties and contingencies, many of which are beyond our control and are based upon specific assumptions with respect to future business decisions, some of which will change. We generally state possible outcomes as high and low ranges which are intended to provide a sensitivity

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analysis as variables are changed but are not intended to represent that actual results could not fall outside of these ranges. The principal reason that we release this data is to provide a basis for our management to discuss our business outlook with analysts and investors. We do not accept any responsibility for any projections or reports published by any such persons.

Guidance is necessarily speculative in nature, and it can be expected that some or all of the assumptions of the guidance furnished by us will not materialize or will vary significantly from actual results, particularly any guidance relating to the results of operations of acquired businesses or companies as our management will be less familiar with their business, procedures and operations. Accordingly, our guidance is only an estimate of what management believes is realizable as of the date of release. Actual results will vary from the guidance and the variations may be material. Investors should also recognize that the reliability of any forecasted financial data will diminish the farther in the future that the data are forecast. In light of the foregoing, investors are urged to put the guidance in context and not to place undue reliance on it.

Any failure to successfully implement our operating strategy or the occurrence of any of the events or circumstances set forth in our Quarterly Report on Form 10-Q for the quarter ended June 30, 2021 could result in the actual operating results being different than the guidance, and such differences may be adverse and material.

We could be adversely impacted by actions of activist stockholders, and such activism could impact the value of our securities.

We value constructive input from our stockholders and the investment community. However, there is no assurance that the actions taken by our Board of Directors and management in seeking to maintain constructive engagement with our stockholders will be successful. Certain of our stockholders have expressed views with respect to the operation of our business, our business strategy, corporate governance considerations or other matters. Responding to actions by activist stockholders can be costly and time-consuming, disrupting our operations and diverting the attention of management and our employees. The perceived uncertainties as to our future direction due to activist actions could affect the market price of our stock, result in the loss of potential business opportunities and make it more difficult to attract and retain qualified personnel, board members and business partners.

The price of our common stock has been volatile and may fluctuate substantially.

Our common stock is listed on the NYSE and the TSX and the price for our common stock has historically been volatile. The market price of our common stock may continue to be highly volatile and may fluctuate substantially due to the following factors (in addition to the other risk factors described in this section):

general economic conditions;
fluctuations in our operating results;
variance in our financial performance from the expectations of equity and/or debt research analysts;
techniques employed by short sellers to drive down the market price of our common stock;
conditions and trends in the markets we serve;
additions of or changes to key employees;
changes in market valuations or earnings of our competitors;
trading volumes of our common stock;
future sales of our equity securities and/or future issuances of indebtedness;
changes in the estimation of the future sizes and growth rates of our markets; and
legislation or regulatory policies, practices or actions.

In addition, the stock markets in general have experienced extreme price and volume fluctuations that have at times been unrelated or disproportionate to the operating performance of the particular companies affected. These market and industry factors may materially harm the market price of our common stock irrespective of our operating performance.

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A significant or prolonged decrease in our market capitalization, including a decline in stock price, or a negative long-term performance outlook, could result in an impairment of our assets which results when the carrying value of our assets exceed their fair value.

In the past several years, our securities have been the subject of short selling. Reports and information have been published about us that we believe are mischaracterized or incorrect, and which have in the past been followed by a decline in our stock price. If there are short seller allegations in the future, we may have to expend a significant amount of resources to investigate such allegations and/or defend ourselves.

In addition, in the first quarter of 2019, we became subject to certain securities class action litigation as a result of volatility in the price of our common stock, which could result in substantial costs and diversion of management’s attention and resources and could harm our stock price, business, prospects, results of operations and financial condition. See Part II, Item 1, “Legal Proceedings” in this Quarterly Report on Form 10-Q for additional information.

Uncertainty with respect to the cessation of the London Interbank Offered Rate (“LIBOR”) at the end of 2021 could impact our cost of borrowing and interest rate risk

We have outstanding debt and interest rate swaps with variable interest rates using LIBOR as a factor to determine the interest rates. In July 2017, the United Kingdom’s Financial Conduct Authority announced that it intends to stop persuading or compelling banks to submit LIBOR rates after 2021. In addition, on March 5, 2021, the ICE Benchmark Administration confirmed its intention to cease publication of (i) one week and two month USD LIBOR settings after December 31, 2021 and (ii) the remaining USD LIBOR settings after June 30, 2023. It is unclear if at that time whether or not LIBOR will cease. Recent proposals for alternative overnight and term rates may result in the establishment of new methods of calculating one or more alternative benchmark rates.

In the United States, the Alternative Reference Rate Committee ("ARRC"), a group of diverse private-market participants assembled by the Federal Reserve Board and the Federal Reserve Bank of New York, has begun publishing a Secured Overnight Financing Rate (“SOFR”), and has emerged as the ARRC's preferred alternative rate upon cessation of LIBOR. SOFR is a broad measure of the cost of borrowing cash overnight collateralized by Treasury securities in the repurchase agreement market. At this time, it is not possible to predict how markets will respond to SOFR.

The cessation of LIBOR, including the exact timing of its cessation, as well as its transition to another benchmark rate, or rates, could have adverse impacts on our outstanding interest rate swaps maturing in 2022 and 2023 and our Syndicated Credit Facility maturing in 2023 and 2024. This change may necessitate updates to our swaps and Syndicated Credit Facility, and ultimately, adversely affect our financial condition and results of operations.

If securities or industry analysts discontinue publishing research or reports about our business, or publish negative reports about our business, our stock price and trading volume could decline.

The trading market for our common stock depends in part on the research and reports that securities or industry analysts publish about us, our business, our market and our competitors. We do not have any control over these analysts. If one or more of the analysts who cover us downgrade our stock or change their opinion of our stock, our stock price would likely decline. If one or more of these analysts cease coverage of our company or fail to regularly publish reports on us, we could lose visibility in the financial markets, which could cause our stock price or trading volume to decline.

Our amended and restated certificate of incorporation and our amended and restated bylaws may impede or discourage a takeover, changes in management or changes in the Board of Directors, which could reduce the market price of our common stock.

Certain provisions in our amended and restated certificate of incorporation and our amended and restated bylaws may delay or prevent a third-party from acquiring control of us, even if a change in control would be beneficial to our existing stockholders. These provisions include:

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no cumulative voting in the election of directors, which limits the ability of minority stockholders to elect director candidates;
the exclusive right of the Board of Directors to elect a director to fill a vacancy created by the expansion of the Board of Directors or the resignation, death or removal of a director, which prevents stockholders from being able to fill vacancies on the Board of Directors;
the ability of the Board of Directors to issue shares of preferred stock and to determine the price and other terms of those shares, including preferences and voting rights, without stockholder approval, which could be used to significantly dilute the ownership of a hostile acquirer;
a prohibition on stockholder action by written consent, which forces stockholder action to be taken at an annual or special meeting of stockholders;
the requirement that a special meeting of stockholders may be called only by the chairman of the Board of Directors or two or more stockholders who hold, in the aggregate, at least ten percent (10%) of the voting power of our outstanding shares, which may delay the ability of our stockholders to force consideration of a proposal or to take action, including the removal of directors; and
advance notice procedures that stockholders must comply with in order to nominate candidates to the Board of Directors or to propose matters to be acted upon at a stockholders’ meeting, which may discourage or deter a potential acquirer from conducting a solicitation of proxies to elect the acquirer’s own slate of directors or otherwise attempting to obtain control of our business.

These provisions could impede a merger, takeover or other business combination involving us or discourage a potential acquirer from making a tender offer for our common stock, which, under certain circumstances, could reduce the market price of our common stock. In addition, our amended and restated certificate of incorporation requires, to the fullest extent permitted by law, that derivative actions brought in our name, actions against our directors, officers and employees for breach of fiduciary duty and other similar actions may be brought only in the Court of Chancery in the State of Delaware.

There can be no assurance that we will continue to pay dividends on our common stock.

Our Board of Directors significantly reduced our dividends in the first quarter of 2019. Although our Board of Directors has historically declared a quarterly cash dividend which we have paid, the payment of future dividends is subject to a number of risks and uncertainties, and we may not pay quarterly dividends in the same amounts or at all in the future. The declaration, amount and timing of cash dividends are subject to capital availability and determinations by our Board of Directors that such dividends are in the best interest of our stockholders and are in compliance with all respective laws and applicable agreements. Our ability to pay dividends will depend upon, among other factors, our cash balances and potential future capital requirements for strategic transactions, including acquisitions, debt service requirements, results of operations, financial condition and other factors that our Board of Directors may deem relevant. The elimination of our dividend payments and/or our dividend program could have a negative effect on our stock price.

Risks Related to Legal and Regulatory Matters

Our operations in the U.S. government market are subject to significant regulatory risk.

Our operations in the U.S. government market are subject to significant government regulation. A failure by us to maintain the relevant clearances a