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[Satellite News 08-28-12] While the second quarter is usually one of the weaker periods of the fiscal year for most satellite companies, the 2012 second quarter cultivated more than a few surprising results in a wide variety of markets. The satellite industry continues to battle macro-economical challenges: the slow pace of recovery from the recession; tightening budgets for governments and household consumers; and unfavorable exchange rates between unsteady world economic powers. Despite these issues, satellite turned in a stronger than expected performance in the second quarter. Satellite News highlights five of the most noteworthy reports from the sector.
SiriusXM Breaks Quarterly Subscriber Addition Record
Satellite broadcaster SiriusXM Radio grew its revenues by 13 percent in the second quarter of 2012 to $838 million on top of a jump in subscribers that prompted its management to boost the company’s annual profit forecast.
SiriusXM CEO Mel Karmazin said that despite mixed macroeconomic trends, the company added more than 600,000 subscribers in the second quarter, representing a record for the broadcaster during the time after its merger with XM.
“We also attained a record-level free cash flow of $230 million — the highest single quarterly free cash flow figure in SiriusXM’s history,” Karmazin said in a statement. “We are excited to deliver our new SiriusXM on-demand service to our subscribers via the Internet and smartphones, and our program to launch a personalized music feature via these same channels by the end of the year is on track. We are very pleased with the strong operating results we have delivered since the merger, especially our performance in 2012.”
SiriusXM’s adjusted EBITDA for the second quarter was $237 million — a 28 percent increase from the $185 million it reported in the second quarter of 2011.
Com Dev Profits More Than Quadruple from Last Year
Com Dev International’s profits surged amid higher margins in its 2012 second fiscal-quarter. The company’s net earnings climbed to $5.2 million on $50.1 million in revenue generated in the three-month period ending April 30, compared with a profit of $1.3 million on $53.1 million in sales recorded in the previous year.
The company’s space equipment division posted sales of $47.5 million, which was down from $51 million a year earlier, but the unit’s margins rose to 24 percent from 22 percent in the 2011 second-quarter. Com Dev data services revenue rose from $2 million in 2011 to $2.5 million in 2012, while gross margins jumped from 8 percent to 12 percent during the same period of time.
Com Dev’s gross margins widened to 25 percent from 21 percent, thanks to stronger results in the core equipment business and progress in the data services unit, the company said in the report.
DigitalGlobe’s Surprising Post-Merger Revenue Spike
Earth imagery provider DigitalGlobe reported a surprising 23 percent increase in its 2012 second-quarter revenues to $102 million, beating analysts’ consensus of $93 million and marking the company’s third consecutive quarter of double-digit growth. Just weeks after DigitalGlobe announced its merger with former rival GeoEye, the company showed a vast improvement in its EBITDA margins to 47.1 percent and deliverable EBITDA at $48 million, compared to market forecasts of $40 million.
DigitalGlobe management credited strong growth in its government business for the strong performance. Raymond James Analyst Chris Quilty highlighted the fact that, despite macro budget headwinds created by the merger, DigitalGlobe’s Defense & Intelligence segment grew 27 percent year-over-year, which were aided by an approximate $11 million bump in SLA payments and a surprising $5.5 million increase in value-added services (VAS).
“While the SLA bump should be sustainable, management is less sanguine regarding future VAS funding levels,” Quilty said in an Aug. 1 research note. “We reiterate our ‘strong buy’ rating and $25 price target for DigitalGlobe after the company easily beat the consensus second quarter 2012 forecast and raised its full-year outlook in the face of material merger and acquisition costs that were above the line. While not reflected in our model, we believe the proposed acquisition of GeoEye will significantly boost DigitalGlobe’s growth and profitability, while decreasing the company’s risk profile, including government market exposure.”
DigitalGlobe’s commercial revenues also increased 10 percent compared with the same period in 2011, with sales to international civil customers in markets such as Russia and China increasing 67 percent. Quilty noted that an increasing percentage of DigitalGlobe’s customers are committing to long-term contracts as opposed to one-time orders, as recurring revenues now account for approximately 85 percent of the company’s annual sales.
“We are raising our 2012 EBITDA forecast for DigitalGlobe by 2 percent to $182 million, while maintaining our 2013 estimate of $213 million,” said Quilty. “Our $25 price target assumes that DigitalGlobe can trade at a multiple of 6.5 over our 2013 EBITDA estimate of $213 million, which is within the stock’s three-year historical range. Our 2013 EBITDA forecast does not reflect the impact of the proposed GeoEye acquisition, which could include an additional $13 per share in value to DigitalGlobe.”
Numerex Yields 116,000 Net Subscriptions
On-demand and interactive machine-to-machine (M2M) technology and solutions provider Numerex added a company record 116,000 net subscriptions in its 2012 fiscal second quarter, which more than doubled its 42,000 net additions in the same period last year, according to the company’s latest financial results issued July 31.
Numerex’s second quarter performance brings its total subscriber net gains in the first half of 2012 to 199,000, which also is more than double the 95,000 net subscriptions it recorded by this time in 2011. Additionally, the company’s subscription-based recurring revenue growth reached 16 percent in the first half of the year and 5.4 percent in sequential growth from the first quarter of this year, representing an annualized rate of 21.6 percent.
Numerex’s consolidated gross margin for the second quarter increased slightly to 44.3 percent from 43.8 percent in the second quarter of 2011. Numerex Chairman and CEO Stratton Nicolaides said his company’s strong performance in the second quarter was the result of an across-the-board increase in demand for its interactive and on-demand services and solutions.
“We have added several new customers this year who have introduced new innovative M2M solutions during the first half of the year, contributing significantly to our subscription base,” Nicolaides said in a statement. “In addition, our existing customer base continues to add subscriptions at a robust pace. Our on-demand subscription-based model is highly scalable and is expected to drive improved financial results over the balance of the year as we continue to deliver on-demand and interactive device management, network, and application services from our fully integrated and hosted M2M platform.”
Orbcomm Builds on AIS Momentum
Global satellite data communications provider Orbcomm has reported its second consecutive quarter of Automatic Identification System (AIS) revenue growth after a year of struggles to get the shipboard broadcast system moving in the maritime market. Orbcomm’s adjusted EBITDA of $4.2 million beat analysts’ estimates of $4 million, backed by a 38 percent year-over-year increase in service revenues to $12.4 million — a new record for the company. Orbcomm management said the growth was aided by a higher subscription count and a 13 percent increase in ARPUs compared with the same period in 2011.
The company’s overall second quarter revenues increased 51 percent from the corresponding period last year to $16.3 million due to strong organic growth and Orbcomm’s recent acquisition of PAR LMS, though barely fell short of the $16.4 million market consensus.
Orbcomm CEO Marc Eisenberg said that the company’s ARPUs should flatten in the next several quarters pending the mid-2013 launch of its first batch of OG2 satellites.
“Our AIS solution was selected to be the sole provider by the European Maritime Safety Agency (EMSA), which awarded us a multi-year contract to provide satellite-based AIS data used for ship tracking and maritime navigation safety efforts,” Eisenberg said in a statement. “This is a major endorsement by EMSA to be the sole provider of AIS because our product provides the best service and value on the market. We also added two heavy equipment customers in recent months.”
Sierra Nevada Corp. recently completed environmental testing for Orbcomm’s second-generation prototype spacecraft. The spacecraft will be launched in October on SpaceX’s next Falcon-9 launch vehicle along with first Cargo Re-supply Services mission to the International Space Station.
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