MAXAR TECHNOLOGIES
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," "
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 endedDecember 31, 2020 , are substantially unchanged. RECENT DEVELOPMENTS Common stock offering OnMarch 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 ofMarch 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
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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 endedJune 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 areU.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 theU.S. government, but we also support intelligence requirements for otherU.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 theU.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 Table of Contents 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 * %
(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
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
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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 endedJune 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 endedJune 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 endedJune 30, 2021 . 29 Table of Contents
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 endedJune 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 ofDigitalGlobe, Inc. onOctober 5, 2017 . We recognized a full quarter of amortization expense for the three months endedJune 30, 2020 , compared to none for the three months endedJune 30, 2021 , as all of theU.S. government acquired backlog was fully amortized as ofOctober 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 ofVricon, Inc. ("Vricon Acquisition") onJuly 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 endedJune 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 ofDigitalGlobe, Inc. onOctober 5, 2017 . We recognized two full quarters of amortization expense for the six months endedJune 30, 2020 , compared to none for the six months endedJune 30, 2021 , as all of theU.S. government acquired backlog was fully amortized as ofOctober 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 ofVricon, Inc. ("Vricon Acquisition") onJuly 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 endedJune 30, 2021 . For the six months endedJune 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 endedJune 30, 2020 . 30 Table of Contents 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
- 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.
Under the EnhancedView Follow-On ("EnhancedView Contract"), we received
advanced payments from the
WorldView-1 satellite, which was more than one year before capacity was made 1 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 ofAugust 31, 2020 .
Interest expense, net decreased to$24 million from$48 million , or by$24 million , for the three months endedJune 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 endedJune 30, 2020 , compared to no loss on debt extinguishment for the three months endedJune 30, 2021 . Interest expense, net increased to$102 million from$97 million , or by$5 million , for the six months endedJune 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 endedJune 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 theU.S. deferred tax assets that are more-than-likely to not be recognized. In computing income tax benefit for the three months endedJune 30, 2021 andJune 30, 2020 , we applied the estimated AETR to the pre-tax income (loss) and adjusted the valuation allowance accordingly. 31
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Income tax expense changed to a benefit of$10 million from$0 million , or by$10 million , for the six months endedJune 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 theU.S. deferred tax assets that are more-than-likely to not be recognized. In computing income tax benefit for the six months endedJune 30, 2021 andJune 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 $ -
336 $ (336) (100) %
There was no income from discontinued operations, net of tax for the three or six months endedJune 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 endedJune 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 endedJune 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 Table of Contents 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
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Adjusted EBITDA decreased to$131 million from$146 million , or by$15 million , for the three months endedJune 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 endedJune 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 theU.S. government. Adjusted EBITDA decreased to$238 million from$279 million , or by$41 million , for the six months endedJune 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 endedJune 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 theU.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
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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 endedJune 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 endedJune 30, 2020 . In addition, the total increase was also partially offset by a$13 million decrease in revenues fromU.S. government contracts. Adjusted EBITDA increased to$27 million from$11 million , or by$16 million , for the three months endedJune 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 endedJune 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 endedJune 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 endedJune 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 endedJune 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 endedJune 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 endedJune 30, 2021 , compared to a$2 million foreign exchange gain for the six months endedJune 30, 2020 .
Intersegment eliminations
Intersegment eliminations are related to projects between our segments,
including our WorldView Legion satellite constellation. Intersegment
eliminations were
Intersegment eliminations have decreased to$12 million from$14 million , or by$2 million , for the six months endedJune 30, 2021 , compared to the same period in 2020, primarily related to a decrease in intersegment satellite construction activity. 35 Table of Contents BACKLOG
Our backlog by segment from continuing operations is as follows:
June 30, December 31,
2021 2020
($ 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 inour 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 ofJune 30, 2021 were primarily comprised of the option years in the EnhancedView Contract (September 1, 2021 throughAugust 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. OnMarch 26, 2021 , we redeemed$350 million aggregate principal of our 2023 Notes using a portion of the net proceeds from the Offering. 36 Table of Contents 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. InDecember 2020 , we prefunded$16 million related to our qualified pension plan. Due to theDecember 2020 prefunding, there are no required contributions for our qualified pension plan for the year endedDecember 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.
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