MDA Space Ltd. (MDA) Earnings Call Transcript & Summary

All right. Hello, everybody, in the room and online. Apologies to those online and to those in the room for getting started a few minutes late. We had some technical difficulties getting the audio here connected to the webcast, but I think we're up and running and are live now. My name is Jason Gursky. I'm the Aerospace and Defense Analyst here at Citi. I have a great pleasure of welcoming and I can -- I think, genuinely, is probably the only time I'm going to say this on the stage this week and welcoming a friend to the stage here. Mike and I have some shared life experiences, we're both alumni of Maxar Technologies. I'll just -- I'll hand it over to Mike to give a little bit more background on the company for those that may not be as familiar with MDA, but it is, for lack of a better word or phrase, I guess, I should say, Canada's space company and was a part of Maxar until 2020 as when the spend, I think, was consummated.

And so Mike and I had the pleasure of overlapping for a couple of years while we were both at Maxar. Mike, maybe we'll just open it up with a really big-picture question and maybe have you describe kind of the problems that MDA is trying to solve for its customers from a technology perspective, how you all kind of go about that and what differentiates MDA in the market. And maybe just start with a little bit of history lesson for those that may not be as familiar with the company and the rich heritage that the company has.

Sure. So MDA is a pure-play space company. It's been around for 55 years this year, which is kind of neat. The -- are sort of areas of business that we've gotten into over the years and have been in a fortunate position to become legitimate kind of world leaders in each of the 3 areas we do business. So if you look at like why people launch into space, typically, it's for 1 or 3 reasons to do earth observation, to do space-based communications or to do space exploration and infrastructure. And we have like legit world-leading positions in each of those 3 things. So we've got a business in GeoIntelligence, earth and space observation where we own and operate a radar-based satellite to deliver radar imagery to largely defense and intelligence customers around the world. And we've got our own good little niche there where we've got broad area surveillance, fully taskable radar satellites that largely defense and intelligence customers ask us for data on a daily basis, and that continues to go very well. It's our largest area of investment in the business to replace that satellite. So we are -- we have a unique position where we're technically differentiated in our radar satellite. And then we're making the investments necessary to stay ahead in that area for the next decades. In robotics and space operations, our second business area, we're in the space infrastructure business. And so we built a robotic systems for space shuttle and flew 100 missions and then the robotics for the International Space Station, which we've done for 25 years. And now we're building the robotics for Gateway, the new space station for the moon. And we're differentiating ourselves even further now by creating commercial derivatives. So we've got a commercial product line of robotics for the growing commercial market for commercial space stations and the like. And the third area is space communications. We've worked in space communications for older than the company actually because of acquisitions with over 60 years, delivering communication technology to satellite manufacturers in a merchant supplier model, which is still a strong foundation of that business. But now we've transitioned into a full satellite prime role to deliver satellites as the prime contractor for low-earth orbit or LEO constellations. And we've launched a new digital satellite product. So very differentiated there in terms of leading the market with a fully digital, dynamically reconfigurable satellite for space-based communications. So in each area, we've got decades of heritage in earth observation and space infrastructure and in space communications. But then we're making the necessary investments in the last few years to be able to stay at the leading edge of each of those 3 areas as we move forward.

Great. You mentioned -- maybe we'll go through all 3 of those areas. Yes, it's a great way to do this. I think it aligns well with the set of questions that we've prepared for this. So let's start out on communications. You had some nice wins here over the last several years, right, both analog, I think as well as on the digital side. So maybe we'll start with the simpler stuff. The analog stuff, which I think you guys have quite a bit of experience designing payloads for in the past and antennas, et cetera. And now you're moving up into that prime position on that Globalstar. Yes. So maybe talk a little bit about how that program is progressing. What are the key milestones ahead of us? Just kind of any flavor of -- maybe talk about the size and scope of the program to give listeners a sense of that as well. But just kind of give us an update on that program, how it's progressing and kind of what's next for Globalstar and how you might participate in that, too?

Yes. So 2 years ago, we picked up the Globalstar contract. Globalstar operates space-based networks for a living. It's generally known in the market that Apple is their primary customer that takes at least 85% of their capacity these days for direct-to-device communications for services to iPhones and the family of digital products there for Apple. Yes, so we're in a competition. We were asked to join a competition to provide the satellites for Globalstar 3 years ago, and we won that. And it's been great. It's been a great relationship. The program has stayed completely on track through the first 2 years. And so we went through PDR, right on track through critical design review, CDR, right on track. Now we're in production. And so we'll be doing sort of March to March coming up here is our third and final year of that program and be delivering all of our -- all of the 17 satellites we were ordered. There's an option in that contract for 9 more. That hasn't been activated yet. We're just working on the first 17 right now. But yes, that's going extremely well. So Globalstar seems to be a happy customer. It's good.

Yes. Great. So there's additional options, those all would flow to you by design those...

We have options. We have a value in our contract, the options there. And then with any communication constellation customer, you're always watching for 2 things as well. You're looking for the opportunity for expansion. Are they going to expand their constellation in addition to over time, replacement satellites? And so it's always important to look at how many like satellite slots people have filed for with the ITU through different countries. And so Globalstar, they filed for 3,000 slots over time. So they have lots of room to do expansion of networks in space based on whatever ambitions they pick up over time. So they're a great customer because they can really do solid expansion in the future. And then you'd also look for the opportunity for replacement satellites over time as well.

Yes. I guess 2 questions on the Globalstar constellation is kind of double-clicking a bit on it. So the phone to satellite communication, the ones that you're designing now, are those meant for largely data and kind of SOS kind of messaging? Or are we going to start doing voice over those things?

Yes. So I think that the different customers will move in different spaces, different speeds. Globalstar Apple is one customer base. We talk to other opportunities in the world for direct-to-device communications and different people are looking at different levels of intensity. Certainly, right now, the current satellites that Globalstar is operating and Apple service is an SOS service. You put up more satellites with more capacity. You could move into more texting and more data. There are some in the market for sure that are looking at much more powerful satellites that would be able to do more sort of higher volume, texting, e-mail, voice, even someday applications. So people are looking at all those different levels in the market right now.

What unlocks that market? Is it the device here on the ground? Or is it the satellite technology?

Well, both have to work together for sure. So you need technology in both. And I think the full technology base to be able to do that is available, like we get involved in studies and design work across that full spectrum of capability for direct-to-device. So it's going to be there. I think there's -- then there's going to also just be the whole market pickup, right? Where do satellites fit in with mobile operators, how does that all work together in the marketplace? That just needs time to just gradually emerge as people get used to it. Just like it's always happened in communications. When we first started with the Internet, right, it was like slow basic capability, and we went from like 256 to 512 to a megabit like that. So just kind of build your way up. All that same stuff is going to happen gradually, maybe not so gradually on the satellite side.

Yes. Maybe this question will serve as the transition into the digital payload and the Telesat program. But why did Globalstar decide to do analog versus digital?

They had an existing -- well, I don't know exactly, but I do know that like they have 24 satellites up today, and they were able to turn those on and start some service. And then our additional 17 were made to be compatible with those existing 24. So you could have like just a bigger network of the same technology base. And so that's what that was designed for. Other folks like our Telesat win, they're building a new broadband capability, and they just wanted -- or saw the benefits of moving to digital straightaway and -- because that was a brand-new constellation.

Right. So look, I think the -- transitioning maybe for a minute to Telesat and speed constellation. One of the most frequently asked questions that I get from investors on that program is you had Talos that was there, getting ready to build that for a certain price point. And if you all were able to come in with some differentiated technology and lower the price point on it. So maybe you can walk us through how you were able to do that. And yes, maybe start there, just to...

That's cool. With digital satellites, you end up with a software-defined satellite. You end up with a dynamically reconfigurable satellite and you're doing digital beam forming of your communication beams from the satellite, you're configuring and steering and adjusting those digitally in real time as you operate your satellite. As a result of that, you can have more communication beams on the satellite in addition to making sure that they're dynamically reconfigurable in real time. The digital technology enables you to be able to sort of do more with less. So you end up with -- you can deliver a similar capability with less power demands. And so you get less power, less mass on your satellite, your satellite can be smaller, you have less heat management, so it can be cheaper. So you've got a -- you can end up with a more efficient design that way. And then in the operation of the satellite, it's more efficient. So if you've got an analog system, your beams are pointing where they're pointing. And as the satellite flies, that's where they're pointing, if you're flying over an ocean, you're just pointing off into ocean and not having a lot of customers being served, right? Whereas with a digital beam forming satellite, you can be aiming all your beams over towards the land and you can be condensing those beams over like New York City or Miami here, where we are right now and delivering like very powerful service at the right times a day where you've got the most customers and so you can optimize your service and be making the most money making opportunity possible out of your satellite. So it can be cheaper to build and then a lower cost per bit to operate. And so you get -- it's a solid economic advantage to switch to a digital satellite.

The thing is a question why didn't they go that direction to begin with?

It was technology maturity. So Telesat was a journey. They were in the market for several years. You'll notice that when's that, when they went out into the market, that's all analog technology. They route a few years earlier. Telesat was talking in the market. They had looked at digital for sure. Telesat's a very well-informed engineering team, a very experienced satellite communications company. So they had looked at digital technologies and felt that it wasn't quite there yet. When they had 2 years earlier or 3 years earlier, kind of instantiated that Talos-led deal, which we were part of. It was good work for us. And then over time, as that continued to like not turn into a final deal, we have been doing research and development and investment in a digital satellite solution. And we felt we were there. Telesat asked us questions about it and they felt we were there, and so they switched over.

So talk a little bit about the technology maturation of it. Like what got them comfortable? I know that you all have gone out subsequent to the announcement of winning that business and made an acquisition to bring in some of that technology so that you kind of control it. So maybe talk to us a little bit about 5, 8 years ago, where the digital technology was, where it is today, what got them comfortable and kind of where you are in your development process.

Yes. So for us, like technology -- or whatever is at multiple levels. And so core technology and digital satellites, you get into the chips themselves. So you don't want space-grade ASICs to be able to have in a design. They continue to mature in the market. There are a few providers around the world that are working on those. SatixFy, which is the acquisition that you mentioned, we acquired their digital payload team. Their company was split into 2 divisions, one that was designing and building chips, the other that was using those chips to design digital payloads. We design and build digital payloads. So -- sorry. We wanted to pick up -- we picked up their digital payload division, which gave us more capacity and allowed their remaining company to just focus on the chips and finish the completion of the latest generation of technology and then work on their road maps for the future. And so that worked out really well for us. They're in a place where they have proven chips. They have proven space-grade chips that we've seen, and they've got a road map that we were aligned with in terms of like feeling comfortable working with that. By picking up their digital payload team, it gave us even more confidence from a risk reduction perspective, that we had the most knowledgeable people to use those chips to complete them in our satellite design. So that's working out well. We've seen their chips. We have our hands on them. We've tested them. We understand them. So you get confidence that you are ready to go and stay. And then the systems design side, where you're doing all of your systems design for your digital antennas, your onboard processors on the satellite that they had just matured to a level whereby we had proven tested designs that we could take to the Street or take to the orbit. And so both the core technology and the systems designs had all reached a level of maturity where it's very clear in the conversations around the world that we're coming to market with this new digital satellite product, and then we mentioned it to tell us that they could see us coming to market with this digital satellite product and said, hey, like what's that going to look like? Let us learn more about that, and that's what caused the deal to switch over to us.

Okay. Great.

Which then, by the way, really helped in the pipeline, right? So it's a great thing to have a digital satellite product. It's an even better thing to have an anchor customer buying 200 of them to then give other customers confidence. They're like, okay, I want to talk to these guys too. So the phone did start ringing a bit after that as people need to check that out now in the market, right? So it's hard for people to ignore. And so it's been good for the pipeline.

Yes. So that's a good thing. I did -- this is a good segue. You mentioned pipeline. I was just going to go there. So talk a little bit about the pipeline because I know you are fairly constructive on the outlook for that part of your business. You've got a satellite facility that you've talked about having throughput of maybe as many as 400 satellites a year, and I want to get to that event. But let's talk about the pipeline first. And then phone ringing off the hook where that -- were those for people that have analog constellations now that want to figure out whether they need to be converting over or were these people that have got about ready to issue an RFP for something?

I think both. Yes, definitely both. For folks, Telesat was pretty vocal that they were making a switch and it had economic value to them. The CEO of Telesat was pretty vocal about that. So people hear that and say, well, we should check that out too, right? So people call and I want to talk about that in addition to folks that were already in the market looking for digital solutions right from the get-go. So both of those are there. We talk as a business right now when we look at our company, like in all 3 of these business areas we've been discussing for the next 5 years, we're tracking about a $17 billion pipeline. We're public about that and about $10 billion of that would be in low-earth orbit or non-geosynchronous orbit satellite solutions, NGSO satellite solutions, most of which are digital. And so that's a really active part of the business. And the current wave of growth in the space market, that non-geosynchronous orbit satellite business is one of the -- it is the highest growing area of the space market right now for us. And so that's pretty active. So for us to be tracking sort of $10 billion of opportunity over the next 5 years, that's -- it's a nice busy spot to be in, and you're able to really focus on customers that have the financial capability to do their projects. And there are definitely a number of folks that have the financial capability to do their projects. So you talk to a market that has broadband services, people that operate space-based networks for a business and want to deliver broadband. You talk to corporations largely that want to talk about Internet of Things because they want to put up networks to track their things around the world, whether it can be vehicles or other technology items. And then you've got this direct-to-device communications market we were talking about where folks want to build networks for that. And then the military market for communications, which is moving more into low-earth orbit constellations, which is currently mainly analog, would have a strong potential to go digital as well. So there's a good demand load here on the pipeline.

Right. This would be a quick one on the military side of things. Where can you play, which markets? Can you be down here in the United States to an SDA work?

We work on the SDA for sure, all of the primes on SDA pickup antennas from us. So we're supplying all the primes. So we've been in a fortunate position, as you mentioned earlier, in our merchant supplier business. We've always been a leader in antennas. This journey into low-earth orbit constellations for us is not a new thing. And I was doing an interview the other day and someone said, well, you guys have like an overnight success. And I said, no, we're like an overnight success in Nashville where you've been like singing in the bars for 10 years and then you finally had a hit song. And so like we've been doing this for quite a while. So in the low-earth orbit constellation market, like we worked on O3B and Iridium NEXT and then OneWeb was great for us because that was a 600 satellite constellation. We did all the antennas. So 2,500 antennas. We had to deliver for that, which does to additive manufacturing, much more 3D printing, far fewer parts, advanced manufacturing, robotic assembly and test. And so that really got us into a good groove. So we got like really efficient tight products that we could produce quickly, high volume, low quality, good price. So when FDA came along, everyone needed attendance for all these low-earth orbit constellations, our merchant supplier business just connected with all those folks, and we're able to supply to all of them, which is great. I think that, that role, where you're a technology provider into a U.S. prime for U.S. DoD work as a Canadian-based company that works for us, I think if we ever needed to shift and become more of a satellite prime in the defense market, then you -- we do have that capability in North America, the Defense Production Act for North America would allow that activity. But you get into like probably some Congress people would disagree, right? So you might want to become a little bit more present state side if you wanted to get in that game a bit more. But we're very happy where we are right now. We have large volumes, large growth. I think we just signed our 10th and 11th repeat order for technologies on SDA constellation work. So it's a great repeat business model right now is that constellation in the different tranches continues to expand.

Yes. It seems like that business hit at a really good time because your work on OneWeb was probably starting to...

Like I say, there's a great evolution for us. Yes. Well, OneWeb -- the next thing will happen on OneWeb is it will get into replacement satellites pretty soon, right? Because it's getting near that first 5 years. And so their design life of those satellites, they'll need to do some refresh. So it could be -- that's one of the greatest things about the transition in the space business the last few years with low-earth orbit constellations, you get very large numbers of satellites, so slightly lower design lives, so you get into recurring or replacement, however you want to call it, revenue. And so we're pretty close to the time when OneWeb should come back around and want to be doing some replacement work on those first 600.

Yes. So last question on the space hardware business. Just talk a little bit about the competitive environment. So you had SDA starting to roll out some buys and the primes ran to you guys to get antennas. Who do you compete against in the antenna business?

Yes. I don't even know. Like you didn't understand -- like everybody -- typically, we compete, honest to God, like our biggest competitor is often internal departments inside an Airbus or a Talos or a Lockheed or a Northrop or L3Harris, they've got antenna groups inside their compounds. And so it's really -- it's a make-buy decision for these folks, which is, is it better. So what we found historically for us is that things like SDA, where we've got a really tight product, we can do high volume, good quality, good price, is that you've got an efficient solution for them. And then there'll be another -- there'll be a layer where they'll just use their internal departments. And then when it gets really complicated, they'll often come to us again, right? So when it gets really hard on the antenna side, a lot of those folks will come to us to take that on.

Yes. Okay. And then on the digital payload side, who do you think are going to be the primary competitors there?

Yes. So different folks -- like different people have digital solutions from [ Geisinger ], right? Boeing is on digital, Airbus has done digital, Talos could do some digital. So like different folks could choose to come forward in the LEO market with digital capability. And people will. Any of those large primes can pick up the chip technology, develop a solution. It takes a couple of years to do that. We're fortunate that we kind of timed it right a little bit in terms of working on our solution at a time where we were able to now introduce that straight into some good constellation opportunities. The more that people switch to digital, the more that obviously, the suppliers will switch to digital, and it will be a little bit more competitive. And then we'll just work hard and stay ahead.

Yes. It seems like that's a logical place to go. I mean we certainly saw that Geo, where people transitioned away from analog into digital. Okay. Great. Maybe switching gears, let's go to robotics. If for no other reason that I want to talk about the bag in the $5 bill, is it still the case that Canadarm on it?

Canadarm is still the image on the back of the CAD 5 bill. So it's cool to run a technology company in Canada, where your technology is on the currency. We've had our Canadarm on the back of $5 bill for years, and we used to have our radar satellites on the $100 bill. So -- and we've got a whole range of postage stamps and everything else. So it's a pretty neat thing in Canada where you've got a global space company but headquartered in Canada. So it is a pretty solid source of national pride. Yes.

Yes. I'll never forget the first trip I took into Toronto, took a cab over -- from the airport over to something in the neighborhood where your office...

In Brandon.

Yes, the cab driver drops me off and said oh my God, you work at MDA, that's so cool. I'm like, how does a cab driver know? Why is he excited about the fact that I work at MDA? But there you go.

I know, reach all those cab drivers to buy stock.

Right. So in the robotics area, I know you've got -- and then the space exploration, maybe we'll call it the space exploration business. Generally speaking, I know that you guys are involved in a project that might have some exciting news as early as tomorrow. Maybe you can talk a little bit the lunar landing that's coming up, right? You got some sensors on that?

For sure, we do. Yes. Intuitive machines is sending potentially North America's first spacecraft to the moon since the Apollo days as opposed to land intuitive machines should land on Thursday at 5 that is tomorrow. I'm just going through the data in my head for press release at 5:00, I think, is when that's supposed to happen. And yes, so that's pretty cool. So our lunar landing sensors are on that. So the first thing tomorrow afternoon, hopefully, that will be pinging down to the lunar surface would be MDA lunar landing sensors pinging the ground. So that's kind of a neat exciting moment for people. MDA had technology on the Apollo spacecraft, that landed on the moon back in the -- circle. And so this is like our second time on the moon with a big 50-year gap but yes, pretty cool for our people and a lot of excitement. Those particular sensors come out of MDA in the U.K., our team there. And so I'll actually be in the U.K., the rest of the week. So there's -- my phone's lighten up a little bit with media in the U.K. right now. So there's a lot of excitement over there to have these products being -- going up to the moon tomorrow afternoon. Pretty fun on that side of the space exploration business.

Yes. Look, I think it's worth highlighting as well for investors that this U.K. business that you're talking about, those sensors came from an acquisition because you are making some acquisitions. I think it's significant to highlight.

A little ones over time. Yes. We bought a company in 2018. It was called Neptec at the time I had a Canadian group and a U.K. group. And yes, a lot of our proximity sensors and laser-based sensors are from those businesses. And so yes, we've got some projects like these ones. There's multiple sales. We've had like 5 orders for lunar landing sensors for upcoming missions to the moon. We've got some other laser-based sensor contracts for a mission that's going to go and land on [ Phobos ], one of the moons of Mars that's out of Japan. So there could be some -- there are neat stories that come out of that in the future. So yes, it's an interesting aspect of the business. And you need the sensor business because of the robotics business. So whenever you're using your robotics, you're often doing proximity operations between 2 things that haven't been built to meet each other. And so you've got to do 3D scanning and real-time imagery to be able to dock and birth or get close to something and then use robotics to assess it, repair it, inspect it, move its orbit. So there's a growing market with more and more satellites going up, the business of doing on-orbit servicing and maintenance of other spacecraft is increasing. And so our sensors business and our robotics business and our satellite systems business, they're starting to come together more so we can build a satellite or a spacecraft, put sensors on it to come close to something else, put robotics on it to be able to maintain or maneuver. So there's -- as the space market expands, new opportunities for new types of spacecraft increase. And because we work on these multiple areas, we're able to have solutions now that combine the different business lines, which is kind of fun to see.

Right. And most important program in this business, of course, I think is a Canadarm3.

Canadarm3 for Gateway. So Gateway is a new space station. It's going to orbit the moon. So we had the robotics on shuttle, like I said, robotics on the International Space Station. Now it's a robotics for Gateway. Gateway's a new space station that will orbit the moon. It will go up in a few years. And then we also pick up operations for the robotics for that from our new mission control centers we're going to build in Toronto. And so that's an expansion of our recurring revenue that we can have from these space infrastructure solutions that we're delivering, which is pretty exciting. And it's a big new challenge. Like the current space station orbits the earth about 400 kilometers up and Gateway is 400,000 kilometers up. So different communications, more artificial intelligence, so we can operate more autonomously out there by the moon. And then with further habitation of the moon, we're on teams with Lockheed Martin and General Motors here in the United States to bid to NASA Rovers for the moon, for example. And we've had technology on Rovers on Mars the last 15 years, but now we get the chance to look at rover fleets for the moon and being able to work with both U.S. and Canadian customers on that, which will also involve robotics applications. So certainly, increasing opportunities. The more that we build commercial space stations in low-earth orbit, Gateway out of the moon and then robotics and infrastructure on the moon, a number of new commercial opportunities for robotic systems.

Okay. Great. I do remember at one point, there was some tech transfer that was going on into the health -- the medical devices industry. Has there been any further traction?

Yes, that still continues. One of the -- we've had the adoption of our space robotics technology for brain surgery devices that are still in the market. There's one right now, we're a minority owner of a sort of a spin out of MDA technology that's focused on cancer diagnostics. So the first robotic system has been for breast cancer diagnostics to be able to do the whole biopsy and then eventually treatment. That's just received actually FDA approval. So its ability to move into the market now is going to be significantly enhanced now that it's got its FDA approvals. And yes, so we continue to see those opportunities when they come along. Our robotics are very highly dexterous robotics for space and very, very precise control systems. So it doesn't apply to everything. There's often very simple robotics applications that ours are basically too sophisticated for. But things like the brain surgery or the breast cancer diagnostics, like those make sense for our level of robotics and control systems, and we've seen the transfer, like you say, application.

Right. Okay. Good. Maybe switching gears into the GeoIntelligence business. Maybe before we get into the SAR satellites and CHORUS, maybe talk a little bit more about the rest of that business, the stuff that's away from the operation of the satellites. And maybe describe a little bit about what you're doing in that business. And just remind me, is this where the service combatant...

It is. So in the GeoIntelligence business, it's all about GeoIntelligence, it's all about sensors and sensing primarily from space or of space. So we build earth observation satellites and space observation satellites to track all the satellites in orbit. But then that same skill set has been applied to non-space. So we do, do work, you raise the surface combined, an example. So when Canada is producing a new fleet of surface ships for the Navy, we picked up a role as the electronic warfare suite system integrator, and we're building laser and radar-based sensors which is what we do in space, laser and radar-based sensors, we're doing that for a terrestrial application on ships. And so that's a good program. It's going along. It got slowed down a bit because the Canadian -- the Navy, big naval procurements, they went through a protracted requirements review process and all of that. But that work continues. So that's interesting. But the main activities on the space side, for sure, whereby we own and operate radar-based earth observation satellites. We have delivered a satellite called Sapphire for space observation to the Canadian Department of Defense, and then we have a contract to operate that for them and it contributes into the North American defense picture of what's going on in space. Both of those worlds have lots of follow-on business. And so lots of follow-on business in radar-based earth observation satellites and lots of follow-on business in space surveillance satellites.

So are you guys the ones that found the Russian nuclear technologies?

No, I don't think so. But you got meeting on that the last couple of weeks, so...

Yes, no doubt about it. Okay. So on the -- maybe just on the Canadian service combatant because I know that one has gotten some investor attention over time. What's the latest and greatest on ramping into production? You mentioned that it's been a...

It's been slow a bit. But yes, as we come into like the '25, '26 time frame, they have to start cutting steel on those ships. There's a bigger shipbuilding strategy for the country. And so -- and those ships really need to be built. So they'll come in to cutting steel, which means that all of these systems that fit into that steel haul have to be completed and ready to go. So as we go through the second half of this year, everything should pick up speed, '25, '26, they'll be building ships. Technology has to be delivered as we go through the second half of the 2020s for the first sets of ships. So it will pick up pace now.

And I just want to confirm, like because I'm not reading the headlines in Canada every day like you are. But from a budget perspective, this one's got a lot of support to...

Yes. It just kind of has to. It's a tricky thing because it's the largest expense in the military in Canada. We don't have a United States like budget at all, right? So for defense. But it is the largest historical military procurement in Canada. But the ships that the Canadian Navy has today, they were built in the '70s and early '80s, and they're just worn out and so this must happen now. The world is not getting any safer. And you need to -- glacier's melting from a domestic perspective, you've got oceans on 3 sides that are emerging now for sure. And then just being part of the big team, you've got to be in the Middle East more, you got to be in the Sochi more. So Canada needs a functioning Navy. So it's expensive, but it's like absolutely necessary. And so it just needs to get done.

It sounds like a question on the time. It sounds like it's the second half of the decade kind of the story for you all. It's a way to frame it. Okay. Let's give a few minutes then on earth observation and the SAR satellites. We're down a couple of minutes. Great. We got one question, you go long winded one. Time is out here. But talk to us a little bit about what you're seeing generally in the SAR market. So you've got RADARSAT-2 today that you all know, right and you're building out -- you're building one of your own or a couple of your own. I can't remember the number and then you're procuring some from my side, I think, is that right?

Yes. So we own and operate RADARSAT-2 today, which is a single low-earth orbit synthetic aperture radar-based satellite. It's been up for about 15 years now. It's operating well. It's healthy. But it needs to be -- you got to make sure that you've got continuity, you don't leave anybody hanging, and so -- and we want to be able to expand our capability. So we've invested in CHORUS. It's a 2-satellite constellation to get going with. It includes a large broad area of surveillance satellite like RADARSAT-2 so that we have all the same imaging modes plus some new ones so that we can like keep all those customers with us. And then with a trailing X-Band satellite that we're getting from ICEYE. And so if you think of like our C-band satellite is a large broad area of surveillance, fully taskable satellite, it can look left and write the big 500-kilometer wide swaths of the earth. And then behind it, like 1.5 hours behind or whatever, you got an X-Band satellite, which is doing like 15-kilometer swath, but zoomed in. You can pick stuff up in a broad area of scan and then zoom in on with a trailing satellite. That's called tipping and queuing to be able to offer a richer information service to our customers. And so we've announced that we're going to launch that in the fourth quarter at '25, so a little bit less than 2 years from now. And we're looking forward to that. It's pretty exciting. And so our business is mainly defense and intelligence space. If you look at most successful earth observation companies around the world that are delivering services, most of them have at least some defense and intelligence anchor customers and then everyone is dabbling and finding ways to connect with commercial customers. But what you need that strong defense and intelligence anchor, we have that in multiple countries around the world. And then we also do a range of different commercial dabbling in the market for folks as people learn how to make more out of earth observation data for their businesses. And so that -- so that's what's going on there. So that will be the next big thing.

So should we think of CHORUS as continuity and helping to sustain the revenue that you have now? Or should we view that as a growth driver for this business?

So for sure, it's continuity and our customers will roll with this, they're excited about it. But it does offer additional features and capabilities that extend the use cases for synthetic aperture radar. As a result, existing customers are talking about buying more than they historically have. And definitely new customers are coming to us and saying, hey, this is cool. This is a brand-new thing. We put a 15-year design life into it. And so that means it's probably in the last at least 20 years barring anything accident or something, like so that's a great relationship for multiple nations to have with you to be able to get the surveillance that they're looking for.

Yes. And the ICEYE satellite is also designed for 15?

No, it's for last, it would have to be replaced a few times during that cycle, but it's a much smaller, cheaper object, you can just throw another one up.

Right. Okay. I think the clock is going up on us, which means that we're supposed to get off the stage.

Okay. Whatever you say.

Thank you very much. Thanks for your time today.

Great. Thanks a lot.

Yes. Thank you, everybody.

Thanks.