[Satellite News 03-16-12] While Orbcomm’s 2011 fourth fiscal quarter adjusted EBITDA fell 8 percent short of analysts’ forecast due to weaker-than-expected hardware margins, the metric grew 9 percent sequentially to mark the highest level in the company’s history.
“Orbcomm has made great strides in recent months,” Orbcomm CEO Marc Eisenberg said in the company’s latest fiscal results issued March 15. “Our StarTrak and LMS acquisitions have solidified our leadership position in cold chain and transportation management solutions, adding great products, customer relationships, and talented employees. The integration is proceeding as planned, and we look forward to capitalizing on the strength of the combined platform.”
Orbcomm’s quarterly revenue of $13.7 million was 7 percent above estimates, supported by higher subscriber count, improving ARPUs, and the company’s StarTrak acquisition in May 2011, which significantly contributed to its overall service revenues. The company reported a 29 percent jump in core service growth, with overall service revenues improving 52 percent year-over-year, or about 29 percent excluding the StarTrak contribution.
Raymond James Analyst Chris Quilty gave high marks to Orbcomm’s 2011 fiscal performance and strength of stock. “Trading at three-times our 2012 EBITDA forecast, Orbcomm remains one of the most inexpensive, and yet one of the fastest growing, companies in our universe,” Quilty said in a report issued to Satellite News. “Despite the stock’s negative price action, Orbcomm showed impressive progress in all the areas that matter: better than expected service revenue, ARPU, service margins, and subscriber growth.”
ARPUs jumped about 39 percent year over year to approximately $5.67, which Quilty said was aided by an expanded subscriber base and improved mix. “This trend should continue into the first half of 2012, driven by the LMS acquisition and strength in the OEM channel.”
Orbcomm fourth quarter net subscriber additions jumped 15 percent compared to the same period last year, with 22,000 new customers taking services. Quilty said the net add-ons represented the company’s best performance in three years and the first time ever it has seen a sequential increase in the fourth quarter.
“The strength was mostly attributable to OEM demand, which has also contributed to higher ARPUs,” he said. “Looking ahead to the first quarter of 2012, Orbcomm will add roughly 19,000 subscribers from its recent LMS acquisition, and we are modeling roughly 22,000 net adds from its core business.”
In January, Orbcomm launched the second of its AIS satellites, and Eisenberg noted that both satellites are providing drastically improved vessel data and collecting significantly more unique vessels per day than earlier satellites.
“With the successful launch of VesselSat-2 in January, and based on the strength of the service and the frequency at which we are viewing ship traffic, we have experienced the return of several of our largest AIS customers,” said Eisenberg. “We look forward to continuing to build upon our success with our AIS-enabled OG2 satellites scheduled to begin launching later this year.”
Management also confirmed that AIS revenues should reach an approximate $2 million run-rate in 2012, similar to the company’s first AIS satellites launched in 2008, which carry a $3 million to $4 million run-rate through 2013.
“After launching 18 satellites, the AIS business has the potential to generate $10 million to 15 million annually, with a 90 percent EBITDA contribution margin,” said Quilty.
Eisenberg recently spoke on SATELLITE 2012’s MSUA-9 CEO panel, “The Best is Yet to Come: MSS CEOs Speak Out,” and opened up on the theme of 2011 as a rebuilding year. “As far as profits and stability are concerned, we think 2011 was Orbcomm’s best year to date,” said Eisenberg. “We don’t plan on getting too comfortable with that achievement. We want to follow up with a solid year in 2012 and we expect to launch a new generation of satellites that will augment that growth.”