Speedcast posts 136 percent revenue jump, seeks debt refinancing
WASHINGTON — Speedcast’s revenues more than doubled in 2017 as the satellite network operator began leveraging its acquisitions of U.S. companies Harris CapRock and UltiSat.
In an annual report issued April 20 on the Australian Stock Exchange, Speedcast said 2017 revenues reached $514.2 million, up 136 percent year over year. EBITDA, or earnings before interest, taxes, depreciation and amortization, skyrocketed 195 percent annually to $122.6 million.
Speedcast said it wants to refinance its existing bank facilities with a five year, $100 million revolving credit line and a seven-year, $425 million loan — resources it would like to have in place in the coming weeks.
A different company
Since 2012, Speedcast acquired 15 different companies, expanding its reach across maritime, oil and gas, enterprise and more recently government connectivity. Speedcast’s revenue has similarly grown by more than 15 times its 2012 level.
John Mackay, Speedcast’s chairman, said in the report that last year’s Harris CapRock and UltiSat acquisitions made Speedcast “the largest remote communications services provider in the world.” Speedcast relies on 40 teleports and more than 70 satellites to form a multiband network of C-, Ku-, Ka- and L-band connectivity.
Speedcast didn’t say if the refinancing would lead to additional merger and acquisition activity. The $425 million loan — the same amount used to buy Harris Caprock — would enable access to a deeper, more liquid market, extend the maturity of existing debt facilities, and “[e]nhance Speedcast’s financial flexibility,” the company said in a loan presentation.
Synergies from Harris CapRock measure around $30 million, about 25 percent more than Speedcast initially anticipated. UltiSat also outperformed Speedcast revenue expectations for 2017, generating $83.9 million, or about $5.4 million more than forecasted. Because the UltiSat’s acquisition closed in November, only two months ($14.1 million) in revenue was recognized last year, Speedcast said. Its Harris CapRock buy closed in January.
Maritime is Speedcast’s largest market, comprising 35 percent of revenue, followed by energy with 34 percent, enterprise and emerging markets at 17 percent and government at 15 percent.
Speedcast projected growth across each of its four market segments, including the challenged energy and government sectors. Oil and gas revenue grew nearly 500 percent from buying Harris CapRock.
Low oil prices shuttered many drilling sites in recent years, but Speedcast said to expect a return to growth in 2018 and 2019.
“Deepwater and off-shore projects are expected to increase in the next couple of years, increasing the need for satellite communications,” Speedcast said.
Speedcast customers comprise roughly 23 percent of the energy market by the company’s estimates. RigNet is its largest competitor in the energy market.
Government defense budgets are on the rise globally and UltiSat is well positioned to capture new spending, Speedcast said.
For enterprise and emerging markets, Speedcast said a contract with Australia’s National Broadband Network signed in 2017 should generate $30 million this year.
Speedcast said it has a backlog of more than 950 VSAT, or very small aperture terminals, to install for merchant ships, forming a promising growth driver in maritime. Last year, Speedcast installed 650 new maritime VSAT dishes, the company said.
Thanks to Harris CapRock, Speedcast estimates it serves more than 9,500 maritime vessels globally, including around 70 percent of cruise ship passengers — a high-bandwidth customer set. As evidence of success in the cruise connectivity business, Speedcast said it wrested away Fred. Olsen Cruise Lines from competitor Global Eagle Communications. Norway-based Marlink, which has also made a series of recent acquisitions including Spanish maritime company OmniAccess, and KVH, who Japanese fleet operator sky Perfect JSAT invested in this February, are also notable competitors in maritime, Speedcast said.