Speedcast International reported a 100% renewal rate with energy-sector customers in the first six months of 2017, with Q2 energy revenue stable from Q1. Speedcast views this as confirmation that its late-2016 purchase of Harris CapRock, for $425 million, occurred at the bottom of the cycle for the energy sector. Credit: Speedcast

PARIS — Satellite enterprise services provider Speedcast International on Aug. 29 said the multi-year depression in the energy-services sector is showing signs of a rebound and that its purchase of Harris CapRock looks to have been well-timed.

As expected, the unofficial “consolidator-in-chief” of the satellite services business reported mixed results, with its Enterprise and Emerging Markets business reporting zero growth but its larger Energy and Maritime businesses buoyed by acquisitions.

Speedcast reported a 100% energy-customer renewal rate for the six months ending June 30, and that its market share is increasing.

Sydney, Australia-based Speedcast purchased Harris CapRock for $425 million in late 2016, giving it a much larger scale in a sector that had been in an oil-price related downturn that prompted Harris Corp. to sell it six years after it paid $922.5 million for the business in two separate transactions.

Energy now represents 39% of Speedcast’s revenue, which totaled $246.3 million for the six months ending June 30, more than double the $172 million of a year earlier.

EBITDA margin at 21.4%, against 16.7% a year ago

EBITDA, or earnings before interest, taxes, depreciation and amortization, was 21.4% of revenue, versus 16.7% a year earlier.

Falling satellite bandwidth prices have helped offset the downturn in the maritime and energy-exploration sectors, both of which remain dispersed and ripe for continued consolidation.

The merged Harris CapRock business gives Speedcast the scale it needs to expand its service portfolio and business volume to offset the continued downward price pressure in the energy sector.

The same forces are at work in Speedcast’s Enterprise and Emerging Markets business division, which is 20% of the company’s revenue and overall was flat from a year ago. Service revenue declined on higher churn. “Price pressure has been significant in the Pacific region,” the company said in its Aug. 29 investor presentation.

Speedcast in July purchased UltiSat, a specialist in satellite communications services to government customers, for $65 million, with another $35 million to come assuming UltiSat meets sales targets.

Like others in the business, Speedcast is counting on substantial growth in demand from the cellular-backhaul market. The company said its Enterprise and Emerging Markets services business is expected to report growth of at least 10% growth in 2018.

Speedcast’s largest business is the maritime sector, accounting for 41% of revenue in the first half of 2017. The company said it added 200 vessels to its customer fleet in the first six months of 2017, bringing the total — excluding heritage Harris CapRock customers — to 1,187 as of June 30.

With new-vessel activations averaging a record 60 per month since April, and a backlog of more than 400 VSAT satellite terminals awaiting installation, Speedcast said the maritime business will remain solid.

Exclusing the purchases of Harris CapRock and European maritime service provider WINS Ltd. in 2016, Speedcast’s maritime business reported a 15% increase in revenue for the six months ending June 30.

Notwithstanding the acquisitions, Speedcast’s debt declined slightly, totaling $333 million at June 30 compared to $356 million at Dec. 31.

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Peter B. de Selding
Peter B. de Selding

Peter de Selding is a Co-Founder and editor for SpaceIntelReport.com. He started SpaceIntelReport in 2017 after 26 years as the Paris Bureau Chief for SpaceNews where he covered the commercial satellite, launch and the international space businesses. He is widely considered the preeminent reporter in the space industry and is a must read for space executives. Follow Peter @pbdes

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