Avanti Sees Healthy Revenue Growth While Prepping for Hylas 3 and 4

David Williams, CEO of Avanti. Photo: Avanti

[Via Satellite 02-09-2016] Avanti Communications increased its revenue by 27.7 percent during the company’s second quarter, bringing in $17.3 million and increasing revenue for the first half of its financial year to $31 million total. The company released its Q2 earnings results Feb. 4, reaffirming the goal of 50 percent growth in continuing revenue on a constant currency basis in the full 2016 financial year.

Avanti has three satellites in orbit today: Hylas 1 at 33.5 degrees west, Hylas 2 at 31 degrees east, and Artemis at 21.5 degrees east; and two more under construction. The Hylas 3 hosted payload from MacDonald, Dettwiler and Associates (MDA) is scheduled to launch aboard the European Data Relay Satellite C (EDRS C), and Hylas 4, announced in August 2014 is under construction by Orbital ATK. Currently, Avanti expects Hylas 4 to launch first, in the first quarter of 2017. The European Space Agency’s (ESA) is presently declaring a mid-2017 launch for the OHB Systems AG-built EDRS C with Hylas 3.

Avanti is investing heavily in High Throughput Satellite (HTS) services for the Europe, Middle East and Africa (EMEA) region. According to the company, the addressable market accessible through its orbital slots and Ka-band spectrum exceeds 1.7 billion people. Avanti has invested $1.2 billion in building a telecommunications network of satellites, gateway Earth stations, data centers and a fiber ring. In 2015, the company fully funded the last satellite, Hylas 4, through $125 million in senior secured notes.

Avanti’s average fleet utilization grew in Q2 up to the 25 to 30 percent range, up from 20 to 25 percent in the first quarter. Demand increased from the company’s biggest customers, with top-20 customer bandwidth revenue growth increasing by 44 percent during the first half of financial year 2016.

In the earnings release, Avanti said Q2 earnings were “slightly lower” than planned, attributing the modestly underwhelming performance to deals closing toward the end of the quarter, which concluded Dec. 31, 2015, or in January of this year. However, the company noted the signing of “significant framework contracts” that will further spur on growth.

“Critically, management now have $40 million of new contracts signed with incremental customers in 1H16 that have started to bill from early January. Assuming this revenue is recognized over 1.5 years, the circa $13 million of incremental revenue to be recognized in 2H16 goes a long way to validate the reiterated guidance,” Giles Thorne, equity analyst at Jeffries, wrote in a Feb. 4 research note.

Avanti said the government and broadband sectors were the strongest verticals during the quarter. The company is supporting national broadband deployments in the United Kingdom, South Africa, Kenya and Tanzania, and cited multiple new defense contracts. Avanti’s customer base now consists of more than 180 customers.

“Our growth prospects are supported by both our recent order wins and a very strong pipeline of near-term opportunities that are in advanced stages of negotiation. Avanti is strongly capitalized with more than adequate cash headroom. In a pioneering market, the combination of a good product, good customers and a fully funded model assures us that Avanti has a successful trajectory ahead,” Williams said in a Feb. 4 statement.

In preparation for the launch of Hylas 4, Avanti is preselling capacity, though this is perhaps less of an emphasis for the company than for traditional satellite operators. Williams told Via Satellite in August 2015 that Avanti’s priorities would now shift to filling out the capacity on its fleet, but noted that the nature of Avanti’s business tends to make presales less effective.

“Avanti is different from most other satellite operators in that we are a telecoms company. We think of ourselves as an altnet, so we are closer in many ways to fixed-line telephone companies than the satellite companies that rent transponders to video companies,” he said. “In telecoms you have to fill your capacity one customer at a time, and one tends not to see very long term contracts, so presales, long term contracts are not a focus. The key element of success for us is in building the highest quality distribution platform, and we certainly are putting a lot of effort into that ahead of the launch of Hylas 3 and Hylas 4.”

For the full financial year 2016, Avanti expects capital expenditure to be in the range of $100 million to $110 million, falling to approximately $70 million in financial year 2017. The company’s business plan is fully funded through to the launches of Hylas 3 and 4 in 2017. Avanti anticipates having positive Earnings Before Interest, Taxes, Depreciation and Amortization (EBITDA) during the second half of the financial year ending June 30, 2016. At present, the operator has undrawn consented credit capacity of $71 million from multiple facilities, creating surplus cash headroom at the low point in the company’s business plan in mid 2018 of more than $90 million.