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MDA Space Interim / Quarterly Report 2025
48075_rns_2025-05-08_b41927f7-ac65-4f21-b6b3-f3ac7d551724.pdf
Interim / Quarterly Report
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MDA Space Ltd.
Interim Condensed Consolidated Financial Statements
For the three months ended March 31, 2025 and 2024
(In millions of Canadian dollars)
MDA Space Ltd.
Unaudited Interim Condensed Consolidated Statement of Comprehensive Income
For the three months ended March 31, 2025 and 2024
(In millions of Canadian dollars except per share figures)
| Note | Three months ended March 31, 2025 | Three months ended March 31, 2024 | |
|---|---|---|---|
| Revenue | 5, 6 | $ 351.0 | $ 209.1 |
| Cost of revenue | |||
| Materials, labour and subcontractors | 7 | (257.6) | (140.7) |
| Depreciation and amortization of assets | 9, 10, 11 | (13.7) | (10.5) |
| Gross profit | 79.7 | 57.9 | |
| Operating expenses | |||
| Selling, general and administration | 7 | (23.4) | (18.9) |
| Research and development, net | 7 | (5.5) | (9.0) |
| Amortization of intangible assets | 11 | (11.6) | (12.3) |
| Share-based compensation | 13 | (3.9) | (2.5) |
| Operating income | 35.3 | 15.2 | |
| Other income (expenses) | |||
| Unrealized gain on financial instruments | 0.1 | 0.9 | |
| Foreign exchange gain | 13.1 | 2.3 | |
| Finance income | 1.7 | 0.7 | |
| Finance costs | (4.9) | (6.1) | |
| Other income | — | 6.5 | |
| Income before taxes | 45.3 | 19.5 | |
| Income tax expense | (12.4) | (5.7) | |
| Net income | 32.9 | 13.8 | |
| Other comprehensive income | |||
| Loss on translation of foreign operations | (0.8) | (1.2) | |
| Gain on cash flow hedges | — | 2.6 | |
| Remeasurement gain (loss) on defined benefit plans | 17 | (2.0) | 8.3 |
| Total comprehensive income | $ 30.1 | $ 23.5 | |
| Earnings per share: | |||
| Basic | 15 | $ 0.27 | $ 0.12 |
| Diluted | 15 | $ 0.26 | $ 0.11 |
| Weighted-average common shares outstanding: | |||
| Basic | 15 | 122,239,378 | 119,582,207 |
| Diluted | 15 | 127,589,192 | 123,263,439 |
The accompanying notes are an integral part of these interim condensed consolidated financial statements
MDA Space Ltd.
Unaudited Interim Condensed Consolidated Statement of Financial Position
March 31, 2025
(In millions of Canadian dollars)
| As at | Note | March 31, 2025 | December 31, 2024 |
|---|---|---|---|
| Assets | |||
| Current assets: | |||
| Cash | $ 376.3 | $ 166.7 | |
| Trade and other receivables | 72.1 | 75.9 | |
| Unbilled receivables | 271.1 | 250.1 | |
| Inventories | 12.4 | 8.1 | |
| Income taxes receivable | 48.0 | 54.0 | |
| Other current assets | 8 | 71.2 | 71.7 |
| 851.1 | 626.5 | ||
| Non-current assets: | |||
| Property, plant and equipment | 9 | 529.0 | 496.6 |
| Right-of-use assets | 10 | 115.8 | 115.4 |
| Intangible assets | 11 | 585.8 | 580.0 |
| Goodwill | 11 | 441.6 | 441.0 |
| Deferred income tax assets | 6.0 | 9.9 | |
| Other non-current assets | 8 | 321.5 | 328.1 |
| 1,999.7 | 1,971.0 | ||
| Total assets | $ 2,850.8 | $ 2,597.5 | |
| Liabilities and shareholders' equity | |||
| Current liabilities: | |||
| Accounts payable and accrued liabilities | $ 283.9 | $ 248.7 | |
| Income taxes payable | 2.3 | 1.9 | |
| Contract liabilities | 938.3 | 761.3 | |
| Current portion of net employee benefit payable | 64.4 | 60.2 | |
| Current portion of lease liabilities | 10 | 17.9 | 16.2 |
| Other current liabilities | 1.7 | 2.7 | |
| 1,308.5 | 1,091.0 | ||
| Non-current liabilities: | |||
| Net employee defined benefit payable | 24.1 | 23.7 | |
| Lease liabilities | 10 | 120.2 | 120.6 |
| Deferred income tax liabilities | 181.3 | 185.4 | |
| Other non-current liabilities | 1.5 | 0.8 | |
| 327.1 | 330.5 | ||
| Total liabilities | 1,635.6 | 1,421.5 | |
| Shareholders' equity | |||
| Common shares | 991.4 | 975.8 | |
| Contributed surplus | 31.5 | 38.0 | |
| Accumulated other comprehensive income | 20.7 | 23.5 | |
| Retained earnings | 171.6 | 138.7 | |
| Total equity | 1,215.2 | 1,176.0 | |
| Total liabilities and equity | $ 2,850.8 | $ 2,597.5 |
The accompanying notes are an integral part of these interim condensed consolidated financial statements
MDA Space Ltd.
Unaudited Interim Condensed Consolidated Statement of Changes in Shareholders' Equity
For the three months ended March 31, 2025 and 2024
(In millions of Canadian dollars)
| Note | Common Shares | Contributed Surplus | Accumulated other comprehensive income | Retained earnings | Total shareholders' equity | ||
|---|---|---|---|---|---|---|---|
| Number | Amount | ||||||
| As at January 1, 2025 | 121,531,699 | $ 975.8 | $ 38.0 | $ 23.5 | $ 138.7 | $ 1,176.0 | |
| Share-based awards common shares issuance | 13 | 1,141,051 | 15.6 | (6.9) | — | — | 8.7 |
| Net income | — | — | — | — | 32.9 | 32.9 | |
| Other comprehensive income | — | — | — | (2.8) | — | (2.8) | |
| Equity-settled share-based compensation | 13 | — | — | 2.8 | — | — | 2.8 |
| Tax effect of share-based compensation | — | — | (2.4) | — | — | (2.4) | |
| As at March 31, 2025 | 122,672,750 | $ 991.4 | $ 31.5 | $ 20.7 | $ 171.6 | $ 1,215.2 | |
| As at January 1, 2024 | 119,514,919 | $ 956.1 | $ 31.3 | $ 18.6 | $ 58.7 | $ 1,064.7 | |
| Share-based awards common shares issuance | 13 | 340,078 | 2.7 | (1.9) | — | — | 0.8 |
| Net income | — | — | — | — | 13.8 | 13.8 | |
| Other comprehensive income | — | — | — | 9.7 | — | 9.7 | |
| Equity-settled share-based compensation | 13 | — | — | 2.5 | — | — | 2.5 |
| Tax effect of share-based compensation | — | — | 0.4 | — | — | 0.4 | |
| As at March 31, 2024 | 119,854,997 | $ 958.8 | $ 32.3 | $ 28.3 | $ 72.5 | $ 1,091.9 |
The accompanying notes are an integral part of these interim condensed consolidated financial statements
MDA Space Ltd.
Unaudited Interim Condensed Consolidated Statement of Cash Flows
For the three months ended March 31, 2025 and 2024
(In millions of Canadian dollars)
| Note | Three months ended March 31, 2025 | Three months ended March 31, 2024 | |
|---|---|---|---|
| Cash flows from operating activities | |||
| Net income | $ 32.9 | $ 13.8 | |
| Items not affecting cash: | |||
| Income tax expense | 12.4 | 5.7 | |
| Depreciation of property, plant, and equipment | 9 | 7.0 | 4.2 |
| Depreciation of right-of-use assets | 10 | 3.3 | 3.5 |
| Amortization of intangible assets | 11 | 15.0 | 15.1 |
| Gain on disposal of assets | — | (5.8) | |
| Equity-settled share-based compensation | 13(a) | 2.8 | 2.5 |
| Investment tax credits accrued | (8.0) | (8.2) | |
| Finance costs, net | 3.2 | 5.4 | |
| Unrealized gain on financial instruments | (0.1) | (0.9) | |
| Changes in operating assets and liabilities | 18 | 195.8 | (2.9) |
| 264.3 | 32.4 | ||
| Interest paid | (2.3) | (8.1) | |
| Income tax received | 5.0 | 0.4 | |
| Net cash generated in operating activities | 267.0 | 24.7 | |
| Cash flows from investing activities | |||
| Purchases of property and equipment | (39.8) | (27.0) | |
| Purchases/development of intangible assets | (21.9) | (13.2) | |
| Proceeds from disposal of assets | 4 | 0.2 | 7.4 |
| Acquisition of subsidiary, net of cash | — | (11.6) | |
| Net cash used in investing activities | (61.5) | (44.4) | |
| Cash flows from financing activities | |||
| Borrowings from senior credit facility | — | 30.0 | |
| Payment of lease liability (principal portion) | (2.4) | (3.1) | |
| Proceeds from stock options exercised | 8.7 | 0.8 | |
| Net cash provided by financing activities | 6.3 | 27.7 | |
| Net increase in cash | 211.8 | 8.0 | |
| Net foreign exchange difference on cash | (2.2) | (1.2) | |
| Cash, beginning of period | 166.7 | 22.5 | |
| Cash, end of period | $ 376.3 | $ 29.3 |
The accompanying notes are an integral part of these interim condensed consolidated financial statements
F-5
MDA Space Ltd.
Notes to the Unaudited Interim Condensed Consolidated Financial Statements
For the three months ended March 31, 2025 and 2024
(Amounts in millions of Canadian dollars, except share-based compensation awards and per share amounts)
1. Nature of operations
MDA Space Ltd. and its subsidiaries (collectively "MDA Space" or the "Company") is a trusted mission partner of leading-edge space missions. The Company's recognized engineering capabilities, portfolio of space technologies, and space mission expertise makes it a trusted partner of choice for a broad range of customers worldwide. The Company leverages its capabilities to enable next generation space exploration and infrastructure, space-based communication, and both earth and space observation missions. The Company's space technology solutions and services enable governments and businesses to develop and operate critical space infrastructure used for exploration and space-based science, to research, develop and operate space-based communications supporting our connected world, and to monitor global activities including climate change, illegal and unregulated fishing, and detection of oil spills. The Company's technologies and solutions are also deployed for defence and intelligence applications and space observation missions. MDA Space operates across three business areas: Geointelligence, Robotics & Space Operations, and Satellite Systems, with facilities and sites in Canada, United Kingdom, and United States. The Company collaborates and partners with governments and space agencies, commercial space companies and defence and aerospace prime contractors in the space industry.
MDA Space Ltd. was incorporated pursuant to a series of legal entity restructuring. On April 8, 2020, Neptune Acquisition Inc. ("NAI"), an affiliate of Northern Private Capital Ltd. purchased 100% of the equity interest in MDA GP Holdings Ltd., MDA Systems Inc., and Maxar Technologies ULC from Maxar Technologies Inc. The consideration for this transaction was $1 billion. Immediately after closing, NAI amalgamated with Maxar Technologies ULC, and changed its name to Neptune Operations Ltd. ("NOL"). On June 2, 2020, Neptune Acquisition Holdings Inc. ("NAHI") was formed under the laws of the Province of Ontario and became the parent of its wholly owned subsidiary NOL. In March 2021, NAHI changed its name to MDA Ltd, and again to MDA Space Ltd. in April 2024.
MDA Space Ltd. is incorporated and domiciled in Canada, with its head office located at 7500 Financial Drive, Brampton, Ontario L6Y 6K7, Canada. MDA Space's common shares are traded on the Toronto Stock Exchange under the symbol "MDA".
2. Basis of preparation
(a) Statement of compliance
These accompanying unaudited interim condensed consolidated financial statements of the Company have been prepared in accordance with IAS 34, Interim Financial Reporting, using accounting policies consistent with IFRS Accounting Standards as issued by the International Accounting Standards Board ("IASB"). The same accounting policies and methods of computation as those used in the preparation of the consolidated financial statements for the year ended December 31, 2024 were followed in the preparation of these interim condensed consolidated financial statements. The interim condensed consolidated financial statements do not include all the information and disclosures required in the annual consolidated financial statements and should be read in conjunction with the Company's consolidated financial statements for the year ended December 31, 2024.
The unaudited interim condensed consolidated financial statements were approved by the Board of Directors of MDA Space on May 7, 2025.
(b) Basis of measurement
The interim condensed consolidated financial statements are presented in Canadian dollars, the Company's functional currency.
The interim condensed consolidated financial statements have been prepared on the historical cost basis except for pension plan assets and liabilities and the following assets and liabilities which are measured at fair value: financial instruments at fair value through profit or loss ("FVTPL") or fair value through other comprehensive income ("FVOCI"), derivative financial instruments, and initial recognition of assets acquired and liabilities assumed in a business combination. Pension plan assets and liabilities are recognized as the present value of the defined benefit obligation net of the fair value of the plan assets.
F-6
MDA Space Ltd.
Notes to the Unaudited Interim Condensed Consolidated Financial Statements
For the three months ended March 31, 2025 and 2024
(Amounts in millions of Canadian dollars, except share-based compensation awards and per share amounts)
(c) Seasonality
The Company's operations historically have not experienced seasonality. However, the Company's results period over period are affected by its stage in the work in progress in each of its long-term contracts. Therefore, the results of operations over a given interim period may not be indicative of full fiscal year results.
(d) Critical accounting estimates and judgments
The preparation of the Company's interim condensed consolidated financial statements requires management to make estimates, assumptions and judgments that affect the application of accounting policies and the reported amounts of assets, liabilities, revenues and expenses. Significant estimates and judgments used in preparation of the interim condensed consolidated financial statements are described in the Company's consolidated financial statements for the year ended December 31, 2024.
- Changes in accounting policies and accounting pronouncements
Forthcoming Issuance of IFRS 18 Presentation and Disclosure in Financial Statements replacing IAS 1, Presentation of Financial Statements
IFRS 18 aims to achieve comparability of the financial performance of similar entities and will impact the presentation of primary financial statements and notes, including the statement of earnings where companies will be required to present separate categories of income and expense for operating, investing, and financing activities with prescribed subtotals for each new category. The standard will also require management-defined performance measures to be explained and included in a separate note within the consolidated financial statements. IFRS 18 is effective for annual reporting periods beginning on or after January 1, 2027, with earlier application permitted. Management is currently assessing the impact of adopting IFRS 18 on its consolidated financial statements.
- Sale of terrestrial nuclear services assets
On March 5, 2024, the Company completed the sale of its terrestrial nuclear services assets for a total consideration of $7.6 and a gain of $5.8. The Company received $7.4 in 2024, and the remaining $0.2 in escrow was received during the three months ended March 31, 2025. The gain has been recognized on the consolidated statement of comprehensive income as part of other income in Q1 2024.
- Revenue from contracts with customers
All of the Company's revenue is derived from contracts with customers. Disaggregation of revenue from contracts with customers by business areas are presented in the table below:
| Three months ended March 31, 2025 | Three months ended March 31, 2024 | |
|---|---|---|
| Business Areas | ||
| Geointelligence | $ 51.7 | $ 51.5 |
| Robotics and space operations | 77.3 | 70.6 |
| Satellite systems | 222.0 | 87.0 |
| $ 351.0 | $ 209.1 |
- Geographic information
Segmented information is reported in a manner consistent with the internal reporting provided to the chief operating decision maker ("CODM"), and reflects the way the CODM evaluates performance of, and allocates resources within, the business. The Company operates substantially all of its activities in one reportable segment, which includes the
F-7
MDA Space Ltd.
Notes to the Unaudited Interim Condensed Consolidated Financial Statements
For the three months ended March 31, 2025 and 2024
(Amounts in millions of Canadian dollars, except share-based compensation awards and per share amounts)
Geointelligence, Robotics & Space Operations and Satellite Systems operating segments. The reportable segment earns revenue by providing space solutions to customers in a similar market and is managed by the CODM.
Revenues are attributed to geographical regions based on the location of customers as follows:
| Three months ended March 31, 2025 | Three months ended March 31, 2024 | |
|---|---|---|
| Revenue | ||
| Canada | $ 232.5 | $ 122.7 |
| United States | 96.6 | 71.3 |
| Europe | 12.9 | 9.3 |
| Asia and Middle East | 8.5 | 3.5 |
| Other | 0.5 | 2.3 |
| $ 351.0 | $ 209.1 |
The Company's property, plant and equipment, right-of-use assets, intangible assets and goodwill are attributed to geographical regions based on the location of the assets as follows:
| March 31, 2025 | December 31, 2024 | |
|---|---|---|
| Canada | $ 1,603.5 | $ 1,564.0 |
| Other | 68.7 | 69.0 |
| $ 1,672.2 | $ 1,633.0 |
7. Cost of revenue and operating expenses
The following table shows the breakdown of materials, labour and subcontractors costs included in cost of revenue:
| Three months ended March 31, 2025 | Three months ended March 31, 2024 | |
|---|---|---|
| Labour, materials and other | $ 135.9 | $ 108.3 |
| Subcontractors | 129.9 | 40.5 |
| Investment tax credits recognized | (8.2) | (8.1) |
| $ 257.6 | $ 140.7 |
The following tables show the breakdowns of selling, general and administration expenses and research and development, net included in operating expenses:
| Three months ended March 31, 2025 | Three months ended March 31, 2024 | |
|---|---|---|
| Selling, general and administration | ||
| General and administration | $ 13.5 | $ 10.0 |
| Selling and marketing | 9.9 | 8.9 |
| $ 23.4 | $ 18.9 | |
| Research and development, net | ||
| Research and development expense | $ 9.6 | $ 11.2 |
| Research and development expense recovery | (4.1) | (2.2) |
| $ 5.5 | $ 9.0 |
MDA Space Ltd.
Notes to the Unaudited Interim Condensed Consolidated Financial Statements
For the three months ended March 31, 2025 and 2024
(Amounts in millions of Canadian dollars, except share-based compensation awards and per share amounts)
8. Other assets
| Note | March 31, 2025 | December 31, 2024 | |
|---|---|---|---|
| Prepaid expenses and Advances to suppliers | $ | 178.6 | $ 194.7 |
| Investment tax credits receivable | 146.0 | 149.2 | |
| Investment in equity securities | 14 | 13.3 | 13.2 |
| Derivative financial assets | 13.5 | 3.4 | |
| Pension plan assets | 12.3 | 16.2 | |
| Long-term unbilled receivable | 19.6 | 22.0 | |
| Other | $ | 9.4 | $ 1.1 |
| $ | 392.7 | $ 399.8 | |
| Current portion | $ | 71.2 | $ 71.7 |
| Non-current portion | $ | 321.5 | $ 328.1 |
9. Property, plant and equipment
| Land, buildings and leasehold improvements | Equipment | Furniture, fixtures and computer hardware | Capital in progress | Total | |
|---|---|---|---|---|---|
| Cost | |||||
| As at December 31, 2024 | $ 142.5 | $ 66.7 | $ 38.8 | $ 305.0 | $ 553.0 |
| Additions | 1.5 | 1.0 | 0.9 | 36.0 | 39.4 |
| Transfers | 11.0 | 1.3 | 0.6 | (12.9) | — |
| As at March 31, 2025 | $ 155.0 | $ 69.0 | $ 40.3 | $ 328.1 | $ 592.4 |
| Accumulated depreciation | |||||
| As at December 31, 2024 | $ (20.1) | $ (17.8) | $ (18.5) | $ — | $ (56.4) |
| Depreciation expense | (2.1) | (3.1) | (1.8) | — | (7.0) |
| As at March 31, 2025 | $ (22.2) | $ (20.9) | $ (20.3) | $ — | $ (63.4) |
| Net book value | |||||
| As at December 31, 2024 | $ 122.4 | $ 48.9 | $ 20.3 | $ 305.0 | $ 496.6 |
| As at March 31, 2025 | $ 132.8 | $ 48.1 | $ 20.0 | $ 328.1 | $ 529.0 |
Depreciation expense included in cost of revenue for the three months ended March 31, 2025 is $7.0 (three months ended March 31, 2024 – $4.2).
As at March 31, 2025, the Company is committed under legally enforceable agreements for purchases relating to property, plant and equipment of $78.3 in 2025, nil in 2026 and onward.
10. Leases
The Company has lease contracts for buildings and equipment used in its operations. Leases of buildings generally have lease terms between 5 and 20 years, while equipment generally have lease terms between 1 and 5 years.
(a) Right-of-use assets
Set out below are the carrying amounts of right-of-use assets recognized and the movements during the period:
MDA Space Ltd.
Notes to the Unaudited Interim Condensed Consolidated Financial Statements
For the three months ended March 31, 2025 and 2024
(Amounts in millions of Canadian dollars, except share-based compensation awards and per share amounts)
| Buildings | Equipment | Total | |
|---|---|---|---|
| As at December 31, 2024 | $ 111.8 | $ 3.6 | $ 115.4 |
| Additions | 3.6 | — | 3.6 |
| Depreciation expense | (2.9) | (0.4) | (3.3) |
| Effect of movements in exchange rates | 0.1 | — | 0.1 |
| As at March 31, 2025 | $ 112.6 | $ 3.2 | $ 115.8 |
Depreciation expense included in cost of revenue for the three months ended March 31, 2025 is $3.3 (three months ended March 31, 2024 – $3.5).
(b) Lease Liabilities
Set out below are the carrying amounts of lease liabilities and the movements:
| Lease liabilities | |
|---|---|
| As at December 31, 2024 | $ 136.8 |
| Additions | 3.6 |
| Accretion of interest | 2.3 |
| Payments | (4.7) |
| Effect of movements in exchange rates | 0.1 |
| As at March 31, 2025 | $ 138.1 |
Accretion of interest is included in finance costs in the consolidated statement of comprehensive income.
As at March 31, 2025, the Company also had commitments of $7.9 over 10 years in relation to leases not yet commenced.
11. Intangible Assets and Goodwill
| Goodwill | Proprietary technologies | Contractual backlog | Customer relationships | MDA trademark | Software | Total | |
|---|---|---|---|---|---|---|---|
| Cost | |||||||
| As at December 31, 2024 | $ 441.0 | $ 281.0 | $ 41.0 | $ 458.5 | $ 25.6 | $ 51.7 | $1,298.8 |
| Additions | — | 13.6 | — | — | — | 6.1 | 19.7 |
| Effect of movements in exchange rates | 0.6 | 1.3 | — | — | — | — | 1.9 |
| As at March 31, 2025 | $ 441.6 | $ 295.9 | $ 41.0 | $ 458.5 | $ 25.6 | $ 57.8 | $1,320.4 |
| Accumulated amortization | |||||||
| As at December 31, 2024 | $ — | $ (50.6) | $ (41.0) | $ (153.8) | $ (6.0) | $ (26.4) | $ (277.8) |
| Amortization expense | — | (4.3) | — | (8.1) | (0.4) | (2.2) | (15.0) |
| Effect of movements in exchange rates | — | (0.2) | — | — | — | — | (0.2) |
| As at March 31, 2025 | $ — | $ (55.1) | $ (41.0) | $ (161.9) | $ (6.4) | $ (28.6) | $ (293.0) |
| Net book value | |||||||
| As at December 31, 2024 | $ 441.0 | $ 230.4 | $ — | $ 304.7 | $ 19.6 | $ 25.3 | $1,021.0 |
| As at March 31, 2025 | $ 441.6 | $ 240.8 | $ — | $ 296.6 | $ 19.2 | $ 29.2 | $1,027.4 |
For the three months ended March 31, 2025, the amortization expense related to proprietary technologies and software of $3.4 (three months ended March 31, 2024 – $2.8) are included in cost of revenue. For the three months ended March 31, 2025, the amortization expense related to all other intangible assets of $11.6 (three months ended March 31, 2024 – $12.3) are included in operating expenses.
F-10
MDA Space Ltd.
Notes to the Unaudited Interim Condensed Consolidated Financial Statements
For the three months ended March 31, 2025 and 2024
(Amounts in millions of Canadian dollars, except share-based compensation awards and per share amounts)
As at March 31, 2025, the Company is committed under legally enforceable agreements for purchasing relating to intangible assets of $15.9 in 2025, $0.0 in 2026 and onward.
12. Long-term debt
(a) Senior revolving credit facility
The Company has a senior revolving credit facility in the form of CORRA Loans. This facility bears interest at the bank's prime rate or alternate base rate of Canada plus an applicable margin of 45 to 175 basis points ("bps") or CORRA plus an applicable margin of 145 to 275 bps, based on the Company's total debt to EBITDA ratio.
As at March 31, 2025 and December 31, 2024, the Company had no borrowings under the senior revolving credit facility. Accordingly at March 31, 2025 and December 31, 2024 the weighted average interest rate on the outstanding CORRA Loans was nil.
The Company also had $6.8 letters of credit at March 31, 2025 (December 31, 2024 - $6.8), bearing an applicable margin of 97 bps plus a fronting fee of 25 bps.
(b) Security and guarantees
The senior revolving credit facility is guaranteed by all subsidiaries of NOL other than certain excluded subsidiaries (immaterial subsidiaries and non-wholly owned subsidiaries) and secured by all of the present and future assets, property and undertakings of NOL and its subsidiary guarantors, as well as a limited recourse guarantee and pledge of NOL from the Company.
The Company must satisfy certain financial covenants as defined by the credit agreement, including the following:
- The Company is required to maintain an interest coverage ratio of at least 3.0 to 1 at all times
- The Company is required to maintain a specified total debt to EBITDA ratio of less than or equal to 4.0 to 1 at all times
As at March 31, 2025 the Company was in compliance with these covenants.
(c) Interest expense on long-term debt
Interest expense on the Company's long-term debt for the three months ended March 31, 2025 is $0.1 (three months ended March 31, 2024 - $7.4). This amount is included in finance costs in the consolidated statement of comprehensive income.
Interest expense is net of the expense capitalized on certain qualifying assets that take a substantial period of time to prepare for their intended use. Capitalized interest is a component of both property, plant and equipment and intangible assets. The capitalization amount for the three months ended March 31, 2025 is nil (three months ended March 31, 2024 - $3.9) as the Company had no borrowings under the senior revolving credit facility during the three months ended March 31, 2024 and the capitalization rate used to capitalize interest was nil (March 31, 2024 - 6.32%).
13. Share-based compensation
The Company has equity-settled and cash-settled share-based compensation plans.
(a) Equity-settled share-based compensation plans
In 2021, the Company established an Omnibus Long-term Incentive Plan ("Omnibus Plan"). The Omnibus Plan is a share-based plan, under which the Company receives services from directors and employees as consideration for equity instruments of the Company. The Company can issue stock options, deferred share units ("DSUs"), restricted share units ("RSUs"), and performance share units ("PSUs") pursuant to the terms and conditions of the Omnibus Plan and the related award agreements entered into thereunder.
The Company also has in place an Employee Share Trust Agreement arrangement, where eligible employees are issued shares held in a company trust ("Trustee Shares") and released upon meeting prescribed conditions.
F-11
MDA Space Ltd.
Notes to the Unaudited Interim Condensed Consolidated Financial Statements
For the three months ended March 31, 2025 and 2024
(Amounts in millions of Canadian dollars, except share-based compensation awards and per share amounts)
Stock Options
The Company did not grant any stock options during the three months ended March 31, 2025. The existing granted stock options have graded vesting schedules ranging from 1 to 4 years from the grant date. Vesting is conditional on continuous employment from the grant date to the vesting date. The stock options have a maximum term of 10 years.
The stock options are measured at fair value using the Black-Scholes option pricing model on the grant date and subsequently expensed on a graded basis over the vesting period. The amount expensed for the three months ended March 31, 2025 was $0.2 (three months ended March 31, 2024 – $0.5).
Trustee Shares
Trustee Shares have graded vesting schedules ranging from 1 to 4 years from the grant date. Vesting is conditional on continuous employment from the grant date to the vesting date and the meeting of specified price targets. The amount expensed for the three months ended March 31, 2025 was nil (three months ended March 31, 2024 – $0.1).
DSUs
The Company has offered DSUs to its independent directors since 2022, entitling them to receive all or a portion of their annual compensation in the form of DSUs in place of cash. The DSUs vest immediately upon grant and are equity-settled, entitling participants to receive one common share for each DSU. The amount expensed for the three months ended March 31, 2025 is $0.4 (three months ended March 31, 2024 - $0.4). There was no DSU grant during the three months ended March 31, 2025 as the Company's insiders were subject to a blackout under the Company's Insider Trading Policy throughout this period.
RSUs and PSUs
The Company grants RSUs and PSUs to eligible employees. The RSUs vest over 1 to 3 years in annual installments from the grant date. Vesting is conditional on continuous employment from the grant date to the vesting date. The PSUs vest over 3 years from the grant date and vesting is conditional on continuous employment as well as meeting performance targets. The amount expensed for the three months ended March 31, 2025 is $2.2 (three months ended March 31, 2024 – $1.5).
Award units continuity – Stock Options, Trustee Shares, DSUs, RSUs and PSUs
The table below shows the movement in the award units outstanding over the three months ended March 31, 2025:
| Stock Options | Trustee Shares | DSUs | RSUs | PSUs | |
|---|---|---|---|---|---|
| As at January 1, 2025 | 7,616,195 | 19,529 | 266,146 | 1,088,312 | 526,748 |
| Forfeited/Cancelled | — | — | — | (7,683) | — |
| Exercised/Converted | (795,022) | — | — | (346,029) | — |
| As at March 31, 2025 | 6,821,173 | 19,529 | 266,146 | 734,600 | 526,748 |
(b) Cash-settled share-based compensation plan
In 2024, the Company established an employee share purchase plan ("ESPP"). The ESPP is a cash-settled share-based payment plan whereby employees of the Company can acquire common shares through regular payroll deductions. Company-matched employee contributions, up to a maximum of five thousand dollars per annum, are restricted to a one-year holding period. The employees' and Company's contributions are remitted to an independent plan administrator, who is responsible for purchasing common shares on the market on behalf of the employees.
The amount expensed for the three months ended March 31, 2025 is $1.1 (three months ended March 31, 2024 - nil).
F-12
MDA Space Ltd.
Notes to the Unaudited Interim Condensed Consolidated Financial Statements
For the three months ended March 31, 2025 and 2024
(Amounts in millions of Canadian dollars, except share-based compensation awards and per share amounts)
14. Financial instruments and fair value disclosures
(a) The classification of financial instruments and their carrying amounts are as follows:
| March 31, 2025 | December 31, 2024 | |
|---|---|---|
| Financial assets (liabilities) measured at FVTPL | ||
| Derivative financial assets | $ 13.5 | $ 3.4 |
| Derivative financial liabilities | (1.3) | — |
| Investment in equity securities | 13.3 | 13.2 |
| Financial assets (liabilities) measured at amortized cost | ||
| Cash | $ 376.3 | $ 166.7 |
| Trade and other receivables | 72.1 | 75.9 |
| Unbilled receivables | 271.1 | 250.1 |
| Accounts payable and accrued liabilities | (283.9) | (248.7) |
Derivative assets and investment in equity securities are included in other assets on the interim condensed consolidated statement of financial position, as presented in note 8. Derivative liabilities are included in other liabilities.
The fair values of cash, trade and other receivables, and accounts payable and accrued liabilities approximate their carrying amounts due to their short-term nature. For the other financial instruments presented, the table below shows their respective fair values with their levels in the fair value hierarchy:
| March 31, 2025 | December 31, 2024 | |||||||
|---|---|---|---|---|---|---|---|---|
| Level 1 | Level 2 | Level 3 | Total | Level 1 | Level 2 | Level 3 | Total | |
| Assets | ||||||||
| Derivative financial instruments | $ — | $ 13.5 | $ — | $ 13.5 | $ — | $ 3.4 | $ — | $ 3.4 |
| Investment in equity securities | 3.7 | 9.6 | — | 13.3 | 3.5 | 9.7 | — | 13.2 |
| Liabilities | ||||||||
| Derivative financial instruments | $ — | $ 1.3 | $ — | $ 1.3 | $ — | $ — | $ — | $ — |
Over the three months ended March 31, 2025, no transfers occurred between levels of the fair value hierarchy.
Level 2 derivative financial instruments comprise foreign exchange embedded derivatives within revenue and purchase contracts. The Company determines fair value of its derivative financial instruments based on management estimates and observable market-based inputs. Management estimates include assumptions concerning the amount and timing of estimated future cash flows. Observable market-based inputs are sourced from third parties and include currency spot and forward rates.
The Company mitigates its foreign exchange risk through reducing mismatches between currencies in its foreign currency revenue contracts and the related purchase contracts to create natural economic hedges. The Company also utilizes foreign exchange forward contracts to supplement its natural hedge strategy, where needed, to further reduce the exposure arising from expected foreign currency denominated cash flows. The term of the foreign exchange forward contracts can range from less than one month to several years. At March 31, 2025, the Company had no outstanding foreign exchange forward contracts. The Company does not enter into foreign exchange forward contracts for trading or speculative purposes and does not have any qualifying hedges for accounting purposes.
F-13
MDA Space Ltd.
Notes to the Unaudited Interim Condensed Consolidated Financial Statements
For the three months ended March 31, 2025 and 2024
(Amounts in millions of Canadian dollars, except share-based compensation awards and per share amounts)
15. Earnings per share
The following table reflects the net income and share data used in the basic and diluted earnings per share calculations:
| Three months ended March 31, 2025 | Three months ended March 31, 2024 | |
|---|---|---|
| Net income | $ 32.9 | $ 13.8 |
| Weighted average shares outstanding – basic | 122,239,378 | 119,582,207 |
| Adjustments for | ||
| Employee stock options | 3,922,305 | 2,418,957 |
| Trustee shares | 18,004 | 62,415 |
| DSUs | 266,146 | 215,428 |
| RSUs and PSUs | 1,143,359 | 984,432 |
| Weighted average shares outstanding – diluted | 127,589,192 | 123,263,439 |
| Basic earnings per share | $ 0.27 | $ 0.12 |
| Diluted earnings per share | 0.26 | 0.11 |
At March 31, 2025, no options and trustee shares (March 31, 2024 – no options and trustee shares) were excluded from the diluted weighted average number of ordinary shares calculation because their effect would have been anti-dilutive.
16. Government assistance
(a) Investment tax credits
During the three months ended March 31, 2025, the Company recognized investment tax credits related to its Canadian operations of $8.4 (three months ended March 31, 2024 – $8.2) as a reduction in cost of materials, labour and subcontractors, and research and development, net, on the interim condensed consolidated statement of comprehensive income.
As at March 31, 2025, the Company has investment tax credits of approximately $179.6 (December 31, 2024 - $179.9) available to offset future Canadian Federal and Provincial income taxes payable which expire between 2030 and 2045. Investment tax credits are only recognized in the consolidated financial statements when the recognition criteria have been met as described in note 3(q) of the Company's interim condensed consolidated financial statements for the year ended December 31, 2024. Investment tax credits that are expected to be realized within 12 months are classified as current; investment tax credits that are expected to be realized beyond 12 months are classified as non-current.
(b) Long Term Economic Benefits to Province of Ontario Grant (the "Ontario Grant"):
The Ontario Grant was awarded to the Company in March 2022 by the Minister of Economic Development, Job Creation and Trade to encourage investment in Ontario, which will benefit Ontario's economic growth. Under this grant agreement, the Ontario Government will fund 24.74% of eligible spending to a maximum of $25.0, conditional on the Company investing a minimum of $101.0 in eligible project expenditures. The Company will use the funding received under the grant towards the building of its centre of control and excellence in Brampton, Ontario, as well as development of proprietary technology. For the three months ended March 31, 2025 and 2024, the Company has not recorded any recoveries and has not received any proceeds related to this grant.
(c) Investissement Québec Forgivable Loan (the "IQ Loan"):
The Company entered into a definitive agreement with Investissement Québec in respect of the IQ Loan in February 2025. The forgiveable loan, in an amount up to $75.0 is intended to support with infrastructure projects and the expansion of development capabilities to design and produce satellites at the Company's facilities in Québec. The loan will be forgiven if certain requirements related to these projects are met. As at March 31, 2025, the Company has not yet submitted any requests for borrowing in connection with the IQ Loan.
F-14
MDA Space Ltd.
Notes to the Unaudited Interim Condensed Consolidated Financial Statements
For the three months ended March 31, 2025 and 2024
(Amounts in millions of Canadian dollars, except share-based compensation awards and per share amounts)
17. Remeasurement gain (loss) on defined benefit plans
A remeasurement of the assets and obligations in the Company's defined benefit pension plans and other post-retirement benefit plans was performed and an actuarial loss of $2.0 was recorded for the three months ended March 31, 2025, (three months ended March 31, 2024 – gain of $8.3) in other comprehensive income.
18. Supplementary cash flow information
The below table provides changes in operating assets and liabilities:
| 2025 | 2024 | ||
|---|---|---|---|
| Trade and other receivables | $ | (3.1) | 56.5 |
| Unbilled receivables | (18.6) | (81.6) | |
| Inventories | (4.3) | (0.2) | |
| Prepaid expenses and advances to suppliers | 16.1 | (10.0) | |
| Other assets | (10.2) | 1.9 | |
| Trade and other payables | 34.3 | (4.5) | |
| Contract liabilities | 177.0 | 43.9 | |
| Employee benefits | 5.7 | (6.8) | |
| Other liabilities | (1.1) | (2.1) | |
| $ | 195.8 | (2.9) |
19. Subsequent Events
On April 1st, 2025, the Company signed a definitive agreement to acquire SatixFy Communications Ltd ("SatixFy"), a leader in next-generation satellite communication solutions based on in-house-designed chipsets. The transaction represents an equity value for SatixFy of approximately US$193 million (approximately $278 million). MDA Space also intends to retire SatixFy's existing debt of approximately US$76 million (approximately $109 million) immediately upon closing. This acquisition follows the Company's previous acquisition of SatixFy's digital payload division in August of 2023.
The Company expects the transaction to close in the third quarter of 2025 subject to customary closing conditions being satisfied and required regulatory approvals being obtained.
F-15