PARIS — Launch delays continue to slow the deployment of a global satellite-based ship-identification system by Com Dev International of Canada but the company told investors June 9 that the service should have six payloads in orbit by late this year.
Cambridge, Ontario-based Com Dev’s exactEarth Ltd. subsidiary represents what is likely the highest growth potential in Com Dev’s business portfolio, which remains centered on providing satellite on-board electronics components.
Com Dev Chief Executive Mike Pley said the global commercial satellite market continues to grow but that some of Com Dev’s customers have opted to delay contract awards. In a conference call with investors, Pley said government contracts have also been slowed by agencies trying to manage their cash flow.
In Com Dev’s case, this has meant government customers extending existing authorizations to proceed on certain work without cementing the deal with a firm contract. Under Com Dev’s accounting rules, these monies are not booked as revenue until the actual contract is signed.
In a June 9 statement on the company’s financial performance for the three months ending April 30, Com Dev said it has maintained its status as a company likely to have work on most commercial satellites built anywhere in the world.
By Com Dev’s count, seven satellites — four commercial, three for civil government customers — were ordered worldwide in the three months ending April 30. Com Dev won orders for two of these and is bidding on work for three others.
Com Dev’s U.S. subsidiary, Com Dev USA, which was created in 2007, has now reached financial break-even with the work it does on government and commercial satellites for U.S. prime contractors. Com Dev Chief Financial Officer Gary Calhoun said during the conference call that the U.S. subsidiary should be well-positioned if the U.S. or other governments opt to place hosted payloads on commercial telecommunications satellites.
Com Dev USA provides, among other components, UHF-frequency multiplexers for satellites and has been able to parlay that expertise into work with Boeing Space and Intelligence Systems’ satellite manufacturing contracts with telecommunications fleet operator Intelsat of Washington and Luxembourg.
Intelsat has sold the UHF payload on one of its satellites to the Australian military, and expects to sell a second to the U.S. Department of Defense.
Com Dev’s main challenge in the past two years has been to complete work on five programs that have cost far more than the company estimated when it signed the firm, fixed-price contracts. The increased costs have torpedoed Com Dev’s profit margins in recent months.
Calhoun said getting these programs finished and out of Com Dev’s factory — “and slamming the door behind them” — is about completed. Three of the five are finished, and the remaining two are set for completion this year.
“We’re working on 200 programs at any given time,” Calhoun said. “It happens that five of those programs have caused us problems in the past year and a half.”
These programs, on which Com Dev is either losing money or making almost no profit, have kept its operating-profit margins below historical levels. Calhoun said Com Dev is returning to its previous profitability levels now but that program delays earlier this year resulted in lower-than-expected revenue.
For the three months ending April 30, Com Dev reported revenue of 54.2 million Canadian dollars ($55 million), down 10 percent from a year ago. The company is maintaining its forecast that full-year revenue will be flat compared to fiscal year 2010, which was 220.9 million Canadian dollars and was down 8 percent from the previous year.
Com Dev’s exactEarth subsidiary has been testing its Automatic Identification System (AIS) technology on two satellites launched in 2009 by SpaceQuest of Fairfax, Va. It launched its own AIS payload in April attached to India’s ResourceSat-2 Earth observation satellite.
That payload is designed to produce 1 million AIS messages per day on ship identity, cargo, destination and heading. Com Dev has another AIS payload slated to fly on a Russian rocket whose launch has been delayed again and is now expected to occur this fall.
Com Dev has ordered two of its own satellites from SpaceQuest, and both of these are scheduled for launch this summer.
With six payloads in orbit, exactEarth will be able to present its service as fully operational to customers who have been testing it but have hesitated to sign service contracts until more satellites are in orbit, Pley said.
The Canadian government has signed on as an early customer, and recently the governments of South Africa and Japan have contracted for AIS service. These three governments have committed to more than 3 million Canadian dollars of service.
Calhoun said exactEarth, which has lined up about 30 customers for trials of the AIS service, would be cash-flow break even at 12 million Canadian dollars in annual revenue, and reach break-even before taxes and interest at less than 20 million Canadian dollars in annual revenue.
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