Credit: AAC Clyde Space

MARGARETVILLE, N.Y.— Small-satellite builder AAC Clyde Space reported a 17.7% drop in revenue for the first six months of 2019 but a narrower EBITDA loss, saying current projects were costing more than expected and new orders were slowed by recruitment issues.

The Sweden- and Scotland-based company, which is positioning itself to become a major merchant supplier of satellite hardware and operations for the growing smallsat market, said its June rights issue and a healthy pipeline of prospective customers are reasons for optimism.

For the six months ending June 30, AAC Clyde Space reported revenue of 31.7 million Swedish krona ($3.41 million), down 17.7% from a year ago. EBITDA was a negative 14.2 million krona, compared to a negative 18.1 million krona a year ago.

The company in June completed a rights issue that was 39% oversubscribed and raised 82.5 million krona in gross proceeds. As of June 30, AAC Clyde reported 73.7 million krona of cash, compared to 12.2 million krona at Dec. 31.

The commercial constellations of small satellites for various telecommunications- and Earth observation-related missions are developing more slowly than was expected. Some companies are having trouble raising the necessary funds to support the required capex, or are slowing the passage from initial satellites to full constellations.

At AAC Clyde, the unexpected slowdown in business caused the resignation of the company’s chief executive and the head of its U.S. operations. Luis Gomes, a veteran executive from Surrey Satellite Technology Ltd., was named chief executive. Chief Strategy Officer Craig Clark, who founded Clyde Space, was named interim head of U.S. operations.

Success in the U.S. market is considered crucial for AAC Clyde Space. The company earlier this year booked a breakthrough contract with commercial IoT provider Orbcomm Inc. to build, launch and own two new satellites for Orbcomm, a “space as a service” contract that AAC Clyde hopes will become a model for other customers. The contract is valued at 54 million krona over five years.

AAC Clyde had told investors in May that back orders should improve the revenue picture later this year:

Credit: AAC Clyde Space

In an Aug. 22 statement, Gomes acknowledged that the hoped-for improvement in revenue for the three months ending June 30 compared to the previous quarter was not forthcoming. Quarterly revenue was down 24.4% from a year ago and the EBITDA loss was higher.

“[S]ome projects have incurred higher costs,” Gomes said of the operating loss. The revenue decline, he said, “is mainly due to a delayed start in new projects as the recruitment of personnel has taken time and some ongoing projects have taken longer to complete than expected. The sales process continues to be long, as is common in not-fully developed emerging sectors.”

AAC Clyde has recently filled 11 positions at its Glasgow, Scotland, facility. The company’s total work force at June 30 was 89, down from 98 a year ago. Gomes said AAC Clyde is continuing to “rationalize” its product lines to better target growth areas.

The dynamism of the smallsat market today is such that it has not settled on an accepted business model. The two largest commercial constellations, Planet and Spire Global, continue to believe that building and operating their own satellites is preferable to farming these tasks out to third parties.

AAC Clyde Space stock is traded on the Nasdaq First North Stockholm market. The company’s biggest investors are UBS Switzerland, with 14.5% of the equity; Fouriertransform AB, with 10.3%; Mediuminvest A/S, with 9.3%; and SIX SIS AG, with 8.5%.