MDA Space wins $1-billion contract to build Canadarm3 for NASA-led moon missions

Shares of MDA Space Ltd. jumped by more than 13 per cent Thursday after the Canadian Space Agency awarded a $1-billion contract to the company to build the latest version of the venerated Canadarm, for use on future moon missions.

The contract, which runs through March, 2030, was hardly a surprise: the 55-year-old Brampton, Ont.-based space equipment vendor had previously won two smaller contracts starting in 2020 totaling $309-million to do early concept and preliminary design work for the project, known as Canadarm3.

The robotic arm system – a Canadian innovation – will be used aboard the Gateway space station, a multinational undertaking led by the U.S. National Aeronautics and Space Administration (NASA). Gateway will orbit the moon and support human and robot missions to its surface as part of the Artemis program. Canadian astronaut Jeremy Hansen is slated to become the first non-American astronaut to fly to the moon when he participates in the Artemis 2 flight scheduled for late 2025.

MDA Space and predecessor Spar Aerospace also built the two previous Canadarms used on NASA’s space shuttles and the International Space Station, and it plans to bid for the future contract to operate and maintain Canadarm3. “I see this as a continuation of the work many would have assumed they would do anyways,” said Canaccord Genuity analyst Douglas Taylor.

Nevertheless, the deal counts as the latest in a string of wins for the company as it seeks to position itself as a key player in the latest space race, an increasingly commercialized sector featuring fleets of low-earth orbit (LEO) satellites powering next-generation internet communications as well as space tourism.

MDA Space supplies geo-intelligence from satellite imagery, autonomous robotics and vision sensors that operate in space, and systems and spacecraft to enable space-based services and broadband internet. But in recent years it has increasingly shifted from subcontracting to becoming a prime contractor and full mission provider. Last August, satellite operator Telesat Corp. awarded it a $2.1-billion contract to design, build and test an entire constellation of at least 198 LEO satellites. That was an upgrade from original plans for MDA Space to make phased array antennas for the project. It was also selected in 2022 by American satellite communications company Globalstar, Inc. to build 17 satellites that will provide service to Apple iPhone users.

“We’re moving up the value chain,” said MDA Space chief executive Mike Greenley in an interview. He noted that the technology the company has developed for the moon mission will serve as its foundation for a new line of MDA Skymaker robotics systems geared toward the commercial space market. That business is expected to skyrocket as launch costs continue to drop, from US$20,000 per kilogram during the space-shuttle era to around US$2,000 today, to an expected US$200 in five years, Mr. Greenley said.

The company, originally known as MacDonald, Dettwiler and Associates, went public in spring 2021, less than a year after an investor group including John Risley, Jim Balsillie, Senvest Capital and Fonds de solidarité FTQ bought the company from its U.S. parent Maxar Technologies Inc. for $1-billion and repatriated it to Canada.

It set out three years ago with an ambitious plan to double revenue by 2022 from $411.5-million in 2020 and then reach $1.5-billion in 2025. But the company fell short of its fundraising goals, raising $400-million from investors, and only generated $641.2-million revenue in 2022 due to delays in expected contracts. Its stock has been choppy, trading below its $14-a-share issue price for most of the past three years, and at a discount to other aerospace and defence companies. However, MDA Space has significantly outperformed other space companies that rushed to public markets early this decade, many through mergers with special purpose acquisition companies.

Despite its stock performance, MDA Space “has done a very good job of executing since the IPO,” said BMO Capital Markets analyst Thanos Moschopoulos. Revenue surpassed $800-million in 2023, one year behind its goal and nearly double 2020 levels, and is on track to reach $1-billion this year, Mr. Greenley said. Adjusted operating earnings and diluted earnings per share have also risen steadily, reaching $174-million and 40 cents, respectively, in 2023.

In March, the company was added to the S&P/TSX Composite Index and also named one of the most innovative space companies by technology magazine Fast Company.

The company ended 2023 with a record $3.1-billion backlog and has more doubled the size of its pipeline for potential new business since the IPO, to $23-billion, Mr. Greenley said. He said that despite the space industry’s history of producing inconsistent “bursts” of business, “it’s different now. The last five years has seen a transition to a persistent, growing, increasingly commercial market. I think people need to continue to see it to believe it so they can have confidence this ramp we’re going up is real and won’t fall away.”