Orbcomm says remaining OG2 satellites are stable, inthinc acquisition boosting revenue

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WASHINGTON — A communications glitch affecting three of Orbcomm’s second-generation satellites does not appear to afflict the other dozen spacecraft in the recently deployed constellation.

Rochelle Park, N.J.-based Orbcomm incurred a $31 million impairment charge on the three OG2 satellites, though recovery teams are still searching for a means to recover them, Orbcomm CEO Marc Eisenberg said Nov. 2.

Speaking to investors during a morning conference call, Eisenberg said the 12 functioning OG2 satellites provide enough resiliency so that machine-to-machine and Internet of Things service revenue remain unimpaired while the company investigates what caused loss of contact with the other three.

“We have not found a systemic flaw in the OG2 constellation, and we are not experiencing issues on the other OG2 spacecraft. Our team was able to narrow down these anomalies to the two most likely causes, and have developed comprehensive operational procedures and are implementing software enhancements to mitigate these issues from reoccurring,” he said.

Eisenberg said Orbcomm and the contractor team that built OG2 discovered bouts of flash memory corruption happening once every couple of months. If that memory is corrupted at a specific location “it could lead to a loss of contact.”

Sierra Nevada Corp. built the OG2 constellation, with payloads supplied by Boeing.

Fixing the memory corruption and rebooting the spacecraft typically resolved the issue, Eisenberg said, but straining payloads from the rebooting process became a second probable cause.

“We are also focused on the payload part stresses,” he explained. “There is a possibility that the payload was — that the repower cycling would create part stresses, so we implemented new procedures to power cycling when we reboot to reduce the potential part stress.”

No additional spacecraft have malfunctioned, Eisenberg said.

Inmarsat’s orbital reinforcements

Rather than immediately draft plans for a third-generation gapfiller, coined OG3, Eisenberg said Orbcomm is investing in products that leverage both its constellation and that of British mobile satellite services operator Inmarsat. Similar to smartphones roaming between carriers, customers will be able to switch between Orbcomm’s low-Earth orbit network and Inmarsat’s L-band geostationary satellites when needed.

Eisenberg said the first dual-mode chipsets to enable use of both constellations should be ready in the second half of 2018. Orbcomm customers will gain faster service with Inmarsat since they won’t need to wait for a LEO satellite to pass over their location — a delay that can take several minutes — while Inmarsat customers gain improved coverage in places that lack direct line of sight to a geostationary satellite.

Inmarsat invited Orbcomm to collaborate on protocols for the sixth-generation I-6 satellites under construction by Airbus Defence and Space, he said. The two I-6 satellites are being built with L- and Ka-band payloads, and the first is scheduled to launch in 2020 on a Japanese H2-A rocket. Eisenberg said those satellites have operational life expectancies of around 20 years, about five years longer than a traditional geostationary satellite.

Orbcomm’s current fleet consists of 12 second generation and 17 remaining first generation satellites, Eisenberg said. OG2 satellites are six times as powerful as the first generation, which is losing numbers as they exhaust their fuel supply.

Orbcomm’s OG2 constellation would have been 18 satellites were it not for five satellite anomalies and one lost in an underperformed SpaceX Falcon 9 launch. Eisenberg said Orbcomm has lots of choices if the operator chooses to proceed with an OG3 gapfiller.

“If we see a need where we need to launch more satellites to replenish this constellation, it’s not another $200 million — maybe we do another four to six and it’s $40 million or $30 million. We are working through what the next generation can do and we’re watching really closely how these fixes have worked on the current OG2 spacecraft. So far, knock on wood, everything is going well,” he said.

M&A boosting revenue, but done buying for now

Orbcomm revenues grew by 50 percent year over year to $69.4 million, and subscriber numbers rose by more than 70,000 for the three months ending Sept. 30, bringing total subscribers to 1.9 million, a year over year increase of 12.5 percent. The operator reported a net loss of $39.7 million to common stockholders during the quarter, largely because of the OG2 impairment charge.

Eisenberg said the June acquisition of vehicle telematics and driver safety products company inthinc is already starting to bear fruit. He said inthinc broke even for earnings before interest, taxes, depreciation and amortization during the quarter — which was sooner than expected.

“From a service revenue perspective, one inthinc sub has the same economics as eight to 10 cargo deployments,” he said, adding that 5,000 inthinc subscribers should have the same effect as up to 40,000 to 50,000 cargo assets.

Blue Tree Systems, an Irish transportation management solutions company acquired in October, hasn’t contributed to revenue yet, but Eisenberg said the purchase boosts Orbcomm’s strength in Europe, the Middle East and Africa. The addition folds in about 37,000 new subscribers and more than 300 customers from around the world, he said. Eisenberg said Blue Tree in 2017 is about a $20 million business with a 70-30 mix of hardware to service revenue.

Orbcomm has been very active in merger and acquisition activity, purchasing one or more companies every year for the past few years. Eisenberg said Orbcomm doesn’t plan any additional acquisitions in the coming months.