30 Jan 20. Weapons maker Raytheon tops profit estimates on strong international demand. U.S. weapons maker Raytheon Co (RTN.N) topped Wall Street estimates for quarterly profit on Thursday as strong international demand spurred sales in its defense systems unit, which makes the Patriot missile-defense system and surveillance radars.
CFO Toby O’Brien told Reuters in an interview on Thursday that for 2020 “we see strong sales growth for the year 6 to 8 percent.” He said “international and domestic are both expected to grow again in 2020 as they did in 2019.”
Defense contractors are expected to benefit from tensions between the United States and Iran after a top Iranian military commander was killed in a U.S. drone strike in Baghdad on Jan. 3, prompting Iran to retaliate with a missile attack against a U.S. base in Iraq days later.
Sales in Raytheon’s integrated defense systems unit, which also makes naval navigation systems and torpedoes, rose 17.6% to $1.98bn in the fourth quarter ended Dec. 31. Margins in the unit rose to 15.5% from 14.7%.
The company’s defense unit gained from two international missile defense orders received in the third quarter, and it also booked contracts for its Patriot missile-defense system worth $1.1bn.
Sales at Raytheon’s missile systems unit, its largest, rose 1.2% to $2.35bn in the quarter, while margins increased to 12.7% from 11.8%. O’Brien said he was pleased with the profit margin performance, but acknowledged the sales growth of 1% during the quarter was not as expected. He said that “some timing on some supplier deliveries, on some production programs” was the issue, adding “but nothing permanent.”
The unit makes weapons including radar threat-countering high-speed anti-radiation missiles and rapid-fire, radar-guided guns for ships.
The company said that its planned $120bn merger with United Technologies Corps (UTX.N) is expected to close early in the second quarter of this year.
“We don’t see any showstoppers,” with regard to formal regulatory approvals for the merger, O’Brien said.
Raytheon’s earnings from continuing operations rose to $3.16 per share in the quarter, from $2.93 per share a year earlier, beating analysts’ average estimate of $3.12 per share, according to IBES data from Refinitiv.
Total sales rose 6.5% to $7.84bn, but were below Wall Street’s estimate of $8.01bn. (Source: Reuters)
30 Jan 20. How corporate defense venture funds fit into the VC ecosystem. Venture capital firms are often cautious when investing in companies that are looking to get into the defense space, given the potential long-waits for a return on investments.
One potential option for companies in the defense sphere that need an influx of cash but can’t get a VC to bite? Looking to an array of corporate-backed venture funds from the largest prime contractors.
Those firms aren’t direct competition for the traditional VC players who want to “lead” a deal, according to John Tenet of 8VC, who participated in a Defense News roundtable in California about the Pentagon’s efforts to work more effectively with the tech community. Tenet also points to the relatively small dollar values of those corporate-backed funds. Lockheed Martin Ventures, for example, has invested only $190m since 2007. Boeing’s equivalent has made 25 investments, all less than $10m, since forming in early 2017. And there is a level of distrust for corporate-backed funds from the defense industry, with Trae Stephens of Founders Fund describing them as a white-washing attempt to hide the strong grip those firms have on the defense sector.
“When you’re a monopoly, you spend all of your time trying to convince people you’re not a monopoly. A corporate venture fund for the defense oligopoly is trying to convince people that there are other players that are relevant to the market,” Stephens said.
The appeal for companies themselves is also in question. Daniela Perdomo, founder of goTenna, and Ryan Tseng, founder of Shield AI, both have had talks with defense firm-backed venture funds but ultimately never went down that road. According to Tseng, there is a “strong preference” among leaders of tech firms for “pure-play investment firms” as opposed to defense primes.
“The deals are less complicated. The incentives are more strongly aligned. I think that strategic investment funds, the ones associated with the business whether a prime or major tech companies, they’re a little bit different flavor,” Tseng said.
Said Perdomo, “I talked to them. I did not take any money from any of them. It didn’t seem clear that there would be any value add. It was sold as this will allow us to partner on integrations or projects, but I didn’t understand why taking money from them would make [teaming up] more likely than if I didn’t take money.”
Essentially, she said, if the primes want her technologies badly enough they are willing to invest through a venture fund, they’ll need to partner with goTenna anyway.
So how do the corporate-backed firms fit into the broader VC sector? There’s two approaches they tend to bring, according to Brian Schettler, managing director of Boeing’s HorizonX venture, who acknowledged that the broader VC sector often has reason to complain about corporate-backed venture efforts, in particular due to efforts to lock up exquisite technologies.
Investments from corporate funds, whether in the defense world or not, often come with “some form of onerous terms and conditions in the language of the investments, the deal docs, or some other commercial arrangement that is trying to protect exclusivity or future options to buy the whole thing outright,” he told Defense News in January.
The other tactic, one taken by HorizonX when it was stood up in early 2017, is to serve as seed money for a range of technologies that could have positive impact on the aerospace and defense sector, while allowing those firms “as much decision space as possible” to sell to the entirety of a potential market, Schettler said – without trying to lock up exclusivity early.
If the defense sector, in particular, is “viewed as an unattractive market, where these corporates are just going to swoop in and either gobble me up early before I reach our full potential or just come with all of these terms that suck the life out of them for the enjoyment of being that entrepreneur, that’s not the ecosystem we want to promote,” Schettler said.
Like Schettler, Chris Moran, general manager of Lockheed Martin Ventures, said part of the reason defense primes are investing through venture capital is to tap into technologies that are being developed at a rapid pace
“We realized, in house, that the VC industry is basically replacing some of the R&D around the world,” Moran said, noting there will be over $400bn in VC investments worldwide this year, most of which is in R&D spending. “A vast amount of new developments are happening outside the four walls of the prime contractors of the world. We need to participate in those areas and keep pace to at least understand what’s going on, and hopefully to benefit from it by making these investments.”
When weighing whether to try and acquire a company after connecting through the VC arm, Moran said the decision often lies on whether a firm can work within Lockheed’s almost exclusively-defense oriented portfolio.
“Mostly what we’re looking for when we acquire are companies that could either become good suppliers of a technology we’d love to buy down the road. We’re not going to buy a business that’s 50 percent, or more, commercial. It just doesn’t fit what we want to do. What we’re trying to do is be that partner, ultimately, be that supplier, be a market for them,” he said, noting the size of Lockheed’s global staff that can be brought in to help out a young company.
And like his counterpart at Boeing, Moran made it clear he doesn’t take any negative comments from the non-corporate venture community personally, seeing it instead as a little but of a culture clash and a little bit of corporate gamesmanship.
“Realistically, 80% of start-up companies that become successful end up being acquired by corporate investors. Ultimately what it comes down to is, financial investors who seek a large exit don’t want the potential acquirers sitting around the table early. They believe they get better value that way,” Moran said.
“I’ve been doing this for 15 years as a corporate venture capitalist. Take off Lockheed or Boeing’s name from the fund and put in Shell, Daimler, any large company — the comments will be exactly the same,” he added. “There is a little competition between corporate and institutional investors for deals. So, there is a little bit of elbowing that goes on. It’s just the corporate-versus-institutional- investor gentle jostling.” (Source: Defense News)
30 Jan 20. Tech startups still face the Pentagon’s ‘valley of death.’ Brooklyn-based technology startup goTenna launched in 2014 with a candy bar-sized gadget that pairs with smartphones to create off-grid, no-network communications.
Though it was originally a commercial product, the company has received millions of dollars’ worth of government business since 2015, mostly with the U.S. Department of Homeland Security but also with Special Operations Command, the Air Force, the Navy and the Army. About 150,000 devices have shipped.
The Army has spent millions of dollars with goTenna, but the service cannot give the company one of the most important things for a small business ― the certainty of recurring revenue.
“Now the funding is out, and even the program officer for that program doesn’t know where we go next within the Army,” goTenna founder and CEO Daniela Perdomo said at a Defense News-hosted roundtable in December. “That’s in part why we’ve been spending more time, frankly, on civilian public safety. Because even though DHS is consistently [under funding restrictions], they seem to be moving. They seem to move faster.”
That sort of inconsistency and confusion is why tech startups dealing with the Pentagon, as well as investors, so dread the gap between their innovative product’s development and the Pentagon’s sluggish decisions to launch. That gap has a nickname: “the valley of death.”
The Pentagon has experimented with a variety of means to buy emerging technologies, an important goal as it seeks to preserve its edge against Russia and China. But one truism ― affirmed in a recent report from the Ronald Reagan Institute ― is that the federal government has been unable to fully adapt its practices to promote and harness private sector innovation, despite making strides.
Addressing the House Armed Services Committee on Jan. 15, former Under Secretary of Defense for Policy Michele Flournoy said the valley of death between a product’s development and the moment that product becomes part of a program of record remains an obstacle. She said that’s partly because acquisitions officials don’t use the new authorities granted by Congress over recent years.
The excitement of receiving development money from the Department of Defense stands in stark contrast to what often follows.
“[Startups] win the prototype competition: ‘Great, we love you.’ And that’s in, like, FY19,” Flournoy said. “And then they are told, ‘OK, we are going to have [a request for proposals] for you in ’21,’ and [the startups] are like: ‘OK, but what do I do in ’20? I have got a 10-year hole in my business plan, and my investors are pressuring me to drop the work on DoD because it’s too slow, it’s too small dollars.’”
How would Flournoy fix it? She advised the Pentagon to hire tech talent ― “smart buyers and developers and fielders of new technologies” ― and create a bridge fund for firms in competitive areas like artificial intelligence, cybersecurity and quantum computing. (The idea seemed to resonate with Texas Rep. Mac Thornberry, who is the panel’s top Republican and the author of multiple acquisitions reform laws passed in recent years.)
At the Defense News roundtable, leaders from the tech community said not only has it been difficult for small businesses to enter an aerospace and defense market dominated by five major firms, but it’s hard for startups to justify to investors that the government should be retained as a client when it is often the least decisive.
“I think the fundamental misunderstanding between the DoD and venture investors is just how difficult it is to keep the wheels on a fast-growing startup,” said Katherine Boyle of venture capital firm General Catalyst.
But the Pentagon is working to bridge the gap between prototype and production. Over the last year, the Defense Innovation Unit ― the department’s outpost in Austin, Texas; Boston, Massachusetts; and California’s Silicon Valley ― has launched two internal teams, for defense and commercial engagement, to envision these transitions and match them to the Pentagon’s five-year budgeting process, according to DIU’s director of strategic engagement, Mike Madsen.
These teams are tasked with learning the needs of the services, working with commercial industry to develop prototypes to meet those needs and then helping market the prototypes more broadly within the Defense Department. Along these lines, DIU helped a company that developed a predictive maintenance application for the Air Force ― Redwood City, California-based C3.ai ― win a predictive maintenance contract for Army ground vehicles. C3.ai has since created a federal arm unit.
A quarter of all prototypes awarded by DIU transitioned to programs of record, and another 50 percent are eligible for the transition. “It will take time for us to develop the right cultural instincts, but it’s already happening,” said DIU’s director of commercial engagement, Tom Foldesi.
Anduril Industries co-founder and Founders Fund partner Trae Stephens has often criticized the DoD’s approach to Silicon Valley. But speaking at the Defense News panel, he acknowledged progress through DIU’s ability to harness the flexible other transaction authority, a congressionally mandated contracting mechanism that makes it easier to prototype capabilities. He also praised the Air Force’s effort to rework Small Business Innovation Research funds to target more mature technologies.
“I don’t know who’s responsible for banging the table about it over and over, but somebody is out there saying it,” Stephens said. “It seems to be coming across in the messaging in some way.” (Source: Defense News)
30 Jan 20. Private investors are not yet lining up to back defense startups, but they are paying close attention. Two factors have created an opening that could lure venture capitalists to defense investments: first, a few select venture-backed technology startups are gaining traction; and second, there’s been a strategic shift in approach to weapons development from the U.S. Department of Defense, focusing more on information warfare and, as such, software.
In the words of Mike Madsen, director of strategic engagement at the Pentagon’s commercial tech hub, Defense Innovation Unit: “We’re at a significant inflection point right now that will be visible through the lens of history.”
Nonetheless, for the tech startups, it’s been slow going, as discussed during a Defense News roundtable in California. For the second year, leadership from DoD and the tech community came together to discuss the state of the Pentagon’s efforts to attract commercial startups — this time digging into the challenges and opportunities that come with investment in defense development.
“We went into this eyes wide open, knowing full well that to the venture community, the math doesn’t make sense. Making the choice to contribute to the advancement of artificial intelligence for DoD represented for us more of a mission-driven objective,” said Ryan Tseng, founder of artificial intelligence startup Shield AI.
But early on, “we were fortunate to get the backing of Andreessen Horowitz, a top-tier venture fund. They’re certainly leaning in, in terms of their thinking about defense technology — believing that despite the history, there might be a way to find an opening to create companies that can become economically sustainable and make substantial mission impact.” Shield AI has raised $50m in venture funding since 2015, with more rounds expected.
Indeed, a few key Silicon Valley investors have emerged as the exceptions to the rule, putting dollars toward defense startups. In addition to Andreessen Horowitz, which counts both Shield AI and defense tech darling Anduril in its portfolio, there’s General Catalyst, which also invested in Anduril, as well as AI startup Vannevar Labs.
And then of course there’s Founders Fund. Led by famed Silicon investors Peter Thiel, Ken Howery and Brian Singerman, among others, the venture firm was an early investor in Anduril, as well as mobile mesh networking platform goTenna. Founders Fund placed big bets on Palantir Technologies and SpaceX in the early days, which paid off in a big way.
Some of the early successes of these startups have “done an excellent job of making investors greedy,” said Katherine Boyle, an investor with General Catalyst. “There’s a growing group who are interested in this sector right now, and they’ve looked at the success of these companies and [are] saying: ‘OK, let’s learn about it.’ ”
Take Anduril: The defense tech startup — co-founded by Oculus founder Palmer Luckey and Founders Fund partner Trae Stephens — has raised more than $200m and hit so-called unicorn status in 2019, reaching a valuation of more than $1bn. As the successes piled up, so did the venture capital funding. According to Fortune magazine, those investors included Founders Fund, 8VC, General Catalyst, XYZ Ventures, Spark Capital, Rise of the Rest, Andreessen Horowitz, and SV Angel.
“I started my career at Allen & Company investment banking. Herbert Allen, who’s in his 80s, always said: ‘Hey, you should run into an industry where people are running away,’ ” said John Tenet, a partner with 8VC as well as a co-founder and vice chairman of defense startup Epirus.
“There’s so much innovation occurring, where the government can be the best and biggest customer. And there are people who really want to solve hard problems. It’s just figuring out where the synergies lie, what the ‘one plus one equals three’ scenario will be.”
Also attracting the attention of Silicon Valley investors is the growing emphasis by the Pentagon not only on systems over platforms, but software over hardware. Boyle described the shift as the “macro tailwind” that often drives innovation in a sector. Similar revolutions happened in industrials and automotive markets — both of which are also massive, global and slow-moving.
That emphasis on tech, combined with some recent hard lessons, also provides a glimmer of hope that the typical hurdles associated with defense investments — lengthy procurement cycles and dominance by traditional manufacturers, for example — could be overcome.
Consider U.S. Code 2377, which requires that commercially available items be considered first in procurement efforts, said Anduril’s Stephens. He also noted court decisions in lawsuits filed by SpaceX and Palantir, which ultimately validated claims that defense agencies had not properly ensured a level playing field for major competitions.
“These types of things are now at least in recent memory for Congress, and so they have some awareness of the issues that are being faced,” Stephens said. “It’s much easier now to walk into a congressional office and say, ‘Here’s the problem that we’re facing’ or ‘Here’s the policy changes that we would need.’ There are also enough bodies like DIU, like In-Q-Tel, like AFWERX, like the Defense Innovation Board, like the [Defense Science Board] — places where you can go to express the need for change. And oftentimes you do see that language coming into the [National Defense Authorization Act]. It’s part of a longer-term cultural battle for sure.”
For now, all these factors contribute to the majority of skeptical investors’ decisions to watch the investments with interest — even if they still take a wait-and-see approach. And that places a lot of pressure on the companies that are, in a sense, the proof of concept for a new portfolio segment.
“My fear is that if this generation of companies doesn’t figure [it] out, if they don’t knock down the doors and if there aren’t a few successes, we’re going to have 20, 30 years of just no investor looking around the table and saying we need to work for the Department of Defense,” Boyle said. “If there aren’t some success stories coming out of this generation of companies, it’s going to be very hard to look our partners in the eye and say: ‘We should keep investing in defense because look at how well things have turned out.’” (Source: Defense News)
30 Jan 20. Leonardo reports strong 2019 performance, meeting or exceeding expectations.
Strong growth: Orders and Revenues above FY 2019 Guidance range
EBITA at mid to upper-end of the Guidance with our main businesses executing very well through the fourth quarter, offsetting the challenges in the Joint Ventures
Strong cash-ins in Q4 leading to FOCF slightly above expectations
At the meeting today Leonardo Board of Directors completed an initial review of 2019 expected performance. The review showed that the Group has performed very well, delivering on its plans in the important fourth quarter.
As a result, it is now expected that, on constant currency basis, the Group will deliver full year Orders and Revenues above Full Year 2019 Guidance ranges. Full year EBITA is expected to be at mid to upper-end of the Guidance range led by a strong performance in main businesses, offsetting challenges in Space Manufacturing and ATR JVs. FOCF is expected to be slightly above expectations, after a strong final quarter. Favourable foreign exchange will provide additional benefits for 2019 Results.
Alessandro Profumo, Leonardo CEO, commented that “We are executing our Industrial Plan and delivering on promises, achieving or exceeding expectations. Leveraging commercial success, we are accelereting growth in the top-line, confirming the path to increasing profits and cash flow generation over the Plan. We are also investing in people, skills and innovative technologies to deliver long term sustainable growth and value creation”.
On 13 March 2020 the Group will present Full Year Results for 2019 and an update of the Industrial Plan. (*) Assuming Guidance exchange rate €/USD of 1.25 and €/GBP of 0.9. Favourable foreign exchange will provide additional benefits for 2019 Results.
30 Jan 20. In advance of its Annual General Meeting being held at 10.30am today, Avon Rubber provides the following trading update for its current financial year ending 30 September 2020.
The Board is pleased to report that the Group has enjoyed a positive start to its 2020 financial year, with continued strong order intake in both businesses. The Board therefore remains confident of achieving its expectations for the current financial year.
Avon Protection has enjoyed a solid start to the year, with order intake up 12% in the first quarter. Strong order intake in its Military business has more than offset the impact of our exit from the Fire self-contained breathing apparatus market.
We expect to receive further follow-on orders in the second quarter from the U.S. Department of Defense under the M69 aircrew mask and M53A1 mask and powered air system contracts.
We also continue to see a strong pipeline of Rest of the World Military and First Responder opportunities to further broaden our customer base across our product portfolio.
As previously announced, our acquisition of 3M’s ballistic protection business completed on 2 January 2020. The acquired business performed in line with our expectations in the calendar year 2019 and we remain confident of achieving our expectations for the 2020 financial year.
Global dairy market conditions have remained positive in the first quarter of our 2020 financial year. Improving milk prices, together with stable feed prices and production volumes, have led to improved farmer confidence, resulting in orders received in the first quarter up 10% at constant currency. This has supported strong trading for milkrite | InterPuls across all three lines of business. We expect global dairy market conditions to remain positive in the near term and this underpins our confidence in the prospects for the business in the current financial year.
30 Jan 20. Singapore Technologies Engineering Ltd (ST Engineering), a global technology, defence and engineering group today announced that for the fourth quarter of 2019, its business sectors secured more than $1.5bn of new contracts, bringing the full year 2019 contract value to $7bn. Including the contract for one unit of Polar Security Cutter, the Group’s total announced contract value for 2019 is about $8bn.
Contracts by the Aerospace sector worth about $1.1bn
About $1.1bn of new contracts were secured by the Group’s Aerospace sector, across its spectrum of aviation manufacturing and MRO service businesses including nacelle component, floor panel manufacturing, as well as airframe and engine maintenance services. This brings its total contract wins in 2019 to about $4.2bn, compared to $2.1bn the year before.
New MRO contracts included heavy maintenance service for a line of Boeing 757 for an America airline from the second half of 2020; transition checks for a freight operator’s MD-11s; and landing gear overhaul service for Japanese domestic airline, Solaseed Air’s Boeing 737-800 fleet over a four-year period. The MRO contracts also covered a number of maintenance-By-the-Hour (MBHTM) agreements, including the 15-year engine MBHTM programme to support Japan Transocean Air’s Boeing 737NG fleet, as announced in November 2019.
Contracts by the Electronics sector worth about $449m
Another $449m were secured by the Electronics sector for products and solutions in smart mobility, satellite communications (satcom), Internet of Things (IoT), cybersecurity, public safety and security, and defence. This brings its total contract wins in 2019 to about $2.8b, compared to about $2.2bn the year before.
A noteworthy contract was by the Group’s satcom business, recently strengthened by the combining of the business of newly acquired Newtec, with that of its US-based iDirect’s. Its customer, Speedcast will deploy a unified platform for the cruise sector to drive network efficiencies and create a better customer experience through the use of Newtec Dialog® platform.
The sector’s smart mobility business was appointed to deliver a communications system and an Automatic Fare Collection system for Suksa Witthaya, a new station to be added to Bangkok’s Mass Transit System Silom Line.
Its public safety and security business secured key new wins including an Air Traffic Control Tower Simulator system for the Civil Aviation Authority of the Philippines, equipped with five major 3D aerodrome models for Manila, Clark, Mactan, Davao and Plaridel airports.
In the UK, its Training and Simulation business was selected by Boeing Defence UK to deliver a comprehensive networked training capability to the Royal Air Force, based on UK Ministry of Defence’s requirements.
In addition to these contracts, the Group has other contract wins by its other business sectors not disclosed in this announcement due to customer confidentiality reasons.
The above developments are not expected to have any material impact on the consolidated net tangible assets per share and earnings per share of ST Engineering for the current financial year.
29 Jan 20. Comtech Telecommunications Corp. to Acquire Gilat Satellite Networks for $532.5m in a Strategic and Cash Accretive Transaction.
Comtech Telecommunications Corp. (Nasdaq: CMTL) (“Comtech”) and Gilat Satellite Networks Ltd. (Nasdaq: GILT; TASE: GILT) (“Gilat”) jointly announced today that Comtech has agreed to acquire Gilat in a cash and stock transaction for $10.25 per Gilat ordinary share of which 70% will be paid in cash and 30% in Comtech common stock, resulting in an enterprise value of approximately $532.5m. Founded in 1987 with its headquarters in Israel, Gilat is a worldwide leader in satellite networking technology, solutions and services with market leading positions in the satellite ground station and in-flight connectivity solutions markets and deep expertise in operating large network infrastructures.
Based on Comtech’s fiscal year 2019 actual results and Gilat’s trailing twelve-month results through June 30, 2019, on a pro-forma basis, Comtech would have reported approximately $926.1 m of revenue with Adjusted EBITDA of approximately $130.2m (see definition and reconciliation to GAAP financial measures in the table below). The combined companies would employ approximately 3,000 people and offer best-in-class satellite technology, public safety and location technology and secure wireless solutions to commercial and government customers around the world.
Fred Kornberg, Chairman of the Board and CEO of Comtech, said, “I am excited to have reached this agreement with Gilat and believe this combination is beneficial to the stakeholders of both companies. The acquisition better positions Comtech to take advantage of key marketplace trends, particularly the growing demand for satellite connectivity and the enormous long-term opportunity set that is emerging in the secure wireless communications market. I believe that the combination of accelerating satellite connectivity demand and the increasing availability of low-cost satellite bandwidth, makes this a perfect time to unify Comtech and Gilat’s solutions and offer our combined customers best-in-class platform-agnostic satellite ground station technologies. Gilat is an exceptional business that has developed extraordinary technology and has a well-respected product portfolio supported by strong research and development capabilities. I welcome Gilat’s entire talented workforce to the Comtech family.”
Dov Baharav, Chairman of the Board of Gilat, said, “The Gilat Board of Directors and management believe this highly strategic combination is compelling. It is an excellent outcome for our shareholders who receive both cash and an equity interest in a strong company with a broader range of products and the benefits of combined expertise and resources that is well positioned to create future value against a highly favorable industry backdrop. I have long admired Comtech’s commitment to technology leadership and I firmly believe that employees will have expanded opportunities for career development. No doubt, the future will be very bright for Comtech and Gilat and all of our stakeholders.”
Key Strategic Benefits for Comtech Include:
- Drives global market access by creating a world leader with combined pro-forma sales approaching nearly $1.0bn annually;
- Strengthens Comtech’s position as a leading supplier of advanced communication solutions, uniquely capable of servicing the expanding need for ground infrastructure to support both existing and emerging satellite networks;
- Expands Comtech’s product portfolio with highly complementary technologies, including Gilat’s high-performance TDMA-based satellite modems and its next generation solid-state amplifiers;
- Broadens leadership position in the rapidly growing in-flight connectivity and cellular backhaul markets which are expected to expand given the availability of lower-cost bandwidth and the adoption of satellite technologies into the 5G cellular backhaul ecosystem;
- Bolsters world-class research and development capabilities, enabling Comtech to offer customers more complete end-to-end technology solutions;
- Enhances ability to accelerate shareholder value creation by contributing to Comtech’s ongoing strategy to move toward higher margin solutions and by increasing customer diversification geographically and by market; and
- Potentially offers increased liquidity for existing and new Comtech shareholders, as Comtech plans to pursue a dual listing on the Nasdaq and Tel Aviv Stock Exchange (“TASE”) to become effective upon the closing of the transaction.
Acquisition Expected to be Cash Accretive and Have Minimal Integration Risks
Excluding the impact of acquisition plan costs (including transaction expenses) and with conservative anticipated synergies of only $2.0m derived from the elimination of Gilat’s public company costs, the acquisition of Gilat is expected to be cash accretive to Comtech during the first twelve months post-closing. Comtech believes that with careful planning and execution, it can capitalize on opportunities to achieve both sales growth and further efficiencies during the second-year post-closing.
Both companies’ talented global workforces are expected to remain in place and focus intently on meeting all customer commitments and expectations, including supporting all existing products, services and agreements. The transaction enlarges Comtech’s global market footprint with a significant physical presence in key international markets. This increased presence addresses a growing need for local touch points that can offer integrated secure connectivity solutions including public safety and location solutions. At the same time, Gilat will gain access to Comtech’s strong relationships with the U.S. government, allowing expanded distribution of Gilat’s products and solutions to the U.S. government. As such, Comtech believes the transaction carries minimal integration risk while creating numerous opportunities for potential long-term revenue and efficiency synergies going forward.
Comtech will continue to emphasize capturing growth opportunities from favorable market trends, including: expected increased demand for solutions to provide high speed in-flight satellite connectivity; the adoption of new satellite ground station technologies into the 5G cellular backhaul eco-system; and the expected need for equipment and network upgrades to accommodate an anticipated increase in satellite capacity when new Very High Throughput Satellites (“VHTS”) and high capacity Medium Earth Orbit (“MEO”) and Low Earth Orbit (“LEO”) satellite constellations are launched and fully operational. Together with its previously announced pending acquisition of UHP Networks, Comtech believes it will be uniquely positioned to take advantage of these important trends.
Gilat announced on November 19, 2019 that it expects to achieve sales of between $260.0m and $270.0m with Adjusted EBITDA ranging from $38.0m to $42.0m for its fiscal year ended December 31, 2019. Comtech announced on December 4, 2019 that it expects to achieve sales of between $712.0m and $732.0m with Adjusted EBITDA ranging from $99.0m to $103.0m for its fiscal year ending July 31, 2020. Neither Comtech nor Gilat is revising their previously announced respective fiscal year financial outlook.
In light of the agreement between Comtech and Gilat, Gilat has cancelled its fourth quarter and fiscal 2019 year-end conference call and webcast previously scheduled for February 19, 2020. Once the transaction closes, Comtech will provide combined revenue, Adjusted EBITDA and diluted earnings per share guidance in a future announcement.
Leadership and Business Structure
Fred Kornberg, Comtech’s Chairman of the Board and Chief Executive Officer (“CEO”) will continue in his role as CEO of the combined company. Michael Porcelain, Comtech’s Chief Operating Officer, who was promoted and named President of Comtech earlier today, will work hand-in-hand with both Comtech and Gilat employees to maximize the potential of the combined company. Michael Bondi will continue in his role as Chief Financial Officer (“CFO”) of the combined company. Comtech will continue to maintain its headquarters in Melville, New York.
Post-closing of the transaction, Gilat will become a wholly owned subsidiary of Comtech and will maintain its well renowned and highly regarded brand. Gilat will continue to maintain its corporate headquarters and research and development facility in Petah Tikva, Israel under the leadership of Yona Ovadia, Gilat’s CEO and Adi Sfadia, Gilat’s CFO. Mr. Sfadia will also be assuming the role of Gilat’s Chief Integration Officer, helping to plan a smooth acquisition and to maximize shareholder value.
No Comtech or Gilat facility locations are expected to be closed as a result of the transaction and each key business area is expected to continue to be led by its respective existing proven leadership teams after the transaction closes.
Transaction Structure and Terms
Under the terms of the agreement, unanimously approved by both companies’ Board of Directors, Gilat shareholders will receive total consideration of $10.25 per share, comprised of $7.18 per share in cash and 0.08425 of a share of Comtech common stock for each share of Gilat held.
The total consideration of $10.25 represents a premium of approximately 14.52% to Gilat’s 90-day volume-weighted average trading price.
Upon completion of the transaction, Gilat’s shareholders will own approximately 16.1% of the combined company.
Financing and Acquisition Plan Expenses
As of September 30, 2019, Gilat had approximately $53.1m of unrestricted cash and cash equivalents with debt of approximately $8.2m. As of October 31, 2019, Comtech had approximately $46.9m of cash and cash equivalents and debt of approximately $169.0m.
Comtech expects to fund the acquisition and related transaction costs by redeploying a portion of the $100.0m of pro forma combined cash and cash equivalents plus additional cash expected to be generated prior to closing, and by drawing on a new $800.0 m secured credit facility to be provided by Citibank, N.A., Manufacturers and Traders Trust Company (“M&T Bank”), Santander Bank, N.A., BMO Harris Bank, N.A. (“Bank of Montreal”), Regions Bank, Israel Discount Bank of New York and Goldman Sachs Bank USA. Comtech expects that the cash interest rate on this facility will approximate 4.0% to 5.0% on an annual basis, before any origination fees. Furthermore, Comtech expects the terms of the facility will be based on a net leverage ratio providing significant flexibility. The exact terms of the credit facility will be finalized at or prior to the closing of the acquisition.
On a pro forma basis including preliminary estimated combined acquisition plan expenses of approximately $27.0m, the repayment of Gilat bank debt and funding of Comtech’s other pending acquisitions, Comtech would have approximately $45.0m of unrestricted cash at closing with total net debt of approximately $500.0m or net leverage of 3.85x. Total net debt is expected to decrease quickly and significantly. Based on expected strong cash flows to be generated from the combined businesses, net leverage twelve months after closing will decrease to approximately 3.00x.
Comtech expects that it will maintain its annual targeted dividend of $0.40 per share.
In connection with the acquisition of Gilat, Comtech expects to incur acquisition plan expenses (including professional fees for financial and legal advisors and debt refinancing costs). Some of these expenses are expected to be immediately expensed both prior to and upon closing, another portion expensed during the first year following the closing and the balance capitalized. Pursuant to accounting rules, the acquisition is expected to result in a material increase in annual amortization expense related to intangibles and other fair value adjustments.
Shareholder Support and Closing Conditions
Gilat’s directors, executive officers and certain significant shareholders holding approximately 45% of Gilat’s issued and outstanding shares in the aggregate have entered into voting agreements pursuant to which they have agreed, subject to certain terms and conditions, to vote in favor of the transaction. In the upcoming weeks, Gilat will call for an Extraordinary General meeting of Shareholders to vote on the merger. The transaction requires the affirmative vote of the holders of a majority of the ordinary shares present (in person or by proxy) at the meeting and voting on such matter (including abstentions and broker non-votes).
The transaction is subject to customary closing conditions (including, among others, the approval of Gilat’s shareholders and expiration of the applicable waiting period under the Hart-Scott Rodino Antitrust Improvements Act of 1976) and the transaction is expected to close late in Comtech’s fiscal year 2020 or the first part of its fiscal 2021. No approval by Comtech stockholders is required and the consummation of the transaction is not subject to any financing condition.
CGC Technology Acquisition
Comtech is also announcing today that it has acquired CGC Technology Limited (“CGC”) for approximately $23.7m, of which $11.6m was settled in restricted stock and the remainder in cash. Founded in 1999, CGC is based in the United Kingdom and is a leading provider of high precision full motion fixed and mobile X/Y satellite tracking antennas, reflectors, radomes and other ground station equipment around the world. With significant growth in LEO and MEO satellite constellations expected, the acquisition adds another growth dynamic to Comtech and brings immediate relationships with several top-tier European aerospace companies and other government entities. The financial impact of the acquisition was not material to Comtech. (Source: BUSINESS WIRE)
29 Jan 20. General Dynamics tops profit estimates; submarine order beefs up backlog. General Dynamics (GD.N) on Wednesday reported a 28% jump in its order backlog due to an order for Navy submarines, and quarterly profits that topped Wall Street estimates helped by higher sales in its aerospace unit that makes Gulfstream business jets.
Shares fell 1.7% during morning trading after CEO Phebe Novakovic offered guidance during a conference call with investors. She said the company expects “slightly more than” $40.7bn of revenue, up 4% over 2019,” with an operating margin of 11.9%. Earnings per share in 2020 were expected between $12.55 and 12.60, up from $11.98 in 2019.
Weapons makers are expected to benefit from U.S. tensions with Iran over the past few months.
The company delivered 44 Gulfstream jets in the quarter, up from 42 a year ago. The new G700 business jet was unveiled and the company began taking orders for customer deliveries planned in 2022. Sales in the aerospace unit which makes the business jet grew 8.4% from a year earlier to $2.93bn.
In December, General Dynamics was named lead contractor on a $22.2 bn U.S. Navy contract to build nine Virginia-class submarines, the Navy’s largest-ever shipbuilding award.
Eighteen Virginia-class submarines have already been delivered to the Navy. The first ship of the nine new orders will be delivered in 2024. The Navy plans to buy 40.
The award is a major contributor to the General Dynamics backlog of orders which now totals $86.9bn, up 28.1% from a year ago.
General Dynamics Land Systems unit had the only on-time submission to replace the U.S. Army’s Bradley fighting vehicle, but the service went back to the drawing board and will restart the competition later.
Net earnings rose to $1.02 bn, or $3.51 per share, in the fourth quarter ended Dec. 31, from $909m, or $3.07 per share, a year earlier.
Analysts, on average, expected a profit of $3.44 per share, according to Refinitiv data.
The maker of a wide range of weapons and communications systems for the U.S. military posted a 3.8% rise in revenue at $10.77bn.
Defence contractors like General Dynamics, Lockheed Martin (LMT.N) and Northrop Grumman Corp (NOC.N) are expected to outperform this year, a general pattern for the sector during U.S. presidential election years.
Under President Donald Trump, defence spending has gone up. This year’s $738bn defence policy bill for fiscal 2020 increased defence spending by about $20 bn over last year. (Source: Reuters)
29 Jan 20. Mayville Engineering Company (MEC) Provides 2020 Financial and Market Outlook. Company Also Confirms 2019 Financial Outlook. Mayville Engineering Company, Inc. (the “Company” or “MEC”) today announced the company’s financial and market outlook for 2020, and confirmed its financial outlook for the year ended December 31, 2019.
2020 Financial Outlook
Based on the Company’s internal projections, the overall economic climate, and industry trends, the Company is providing the following financial outlook for 2020:
- Net sales are expected to be between $425m and $465m.
- Adjusted EBITDA is expected to be between $39m and $50m, which excludes stock-based compensation for 2020.
In addition, the Company is providing the following commentary:
- Net debt at December 31st, 2019 was approximately $73m, a decrease of approximately $14m from the balance as of September 30, 2019.
- The Company’s previously stated position that no earnout amount is due to Defiance Metal Products former shareholders has been confirmed.
- The Company made significant Capital Expenditures in new automation and technologies of approximately $26m during 2019.
- 2020 Capital Expenditures will continue to focus on adding new technologies as well as equipment upgrades. The Company expects to invest between $12m and $16m during the year.
- Free cash flow for 2020 is expected to remain strong, and is estimated to be greater than 50% of adjusted EBITDA.
- While the Company is constantly considering acquisition opportunities, it expects to maintain its stated goal of debt-to-EBITDA leverage ratio of three times EBITDA or less.
“Despite the rapidly shifting market demand dynamics, our long-term business prospects remain strong and we are well positioned for success in our served markets given our customer focus, market leading position, and strong balance sheet,” noted Robert D. Kamphuis, Chairman, President and CEO. “As we look at our projections for 2020, we see relative strength from new orders in the Power Sports and our Military markets being offset by declines in our Agriculture and Other markets. In addition, we expect the Construction and Commercial Vehicle markets will be significantly lower in 2020 when compared to 2019 results based on market demand dynamics.”
2020 Outlook by Market
The Company is also providing its 2020 expectations for the approximate breakdown of its business by market. This information is directional and will likely change by several percentage points as the year progresses and new programs ramp up while other programs may be reduced or discontinued.
- The Company’s business focused on the Commercial Vehicle (CV) market is expected to be down approximately 25% – 35% in 2020 as compared to 2019, as the slowdown in Class 8 truck market continues to take hold.
- Products produced for the Construction market are expected to fall by approximately 8% – 12% in 2020 when compared to the previous year, based upon lower general market demand and continued de-stocking expectations for the first half of 2020.
- In addition, products produced for the Power Sports market are expected to increase 5% – 9% due to further market penetration and the addition of a meaningful new OEM partnership in the utility terrain vehicle (UTV) market.
- This trend is also expected to impact sales to the Agriculture market, which are expected to be approximately 6% – 9% lower in 2020, as compared to the previous year.
- The Company’s sales to the Military market are expected to increase by approximately 1% – 3% in 2020 based on new product wins and increased production demands.
- Sales to the Other markets category are expected to be down approximately 4% – 8% due to generally softer market demand across a number of different markets including mining, rail and power generation.
Kamphuis added, “While we were already expecting a significant reduction in our CV business, the pace and depth of the demand reductions has been greater than we originally predicted. The CV business is also the hardest to realign given the longer lead times necessary for higher volume more complex products and OEM schedules with more dedicated capacity. Outside of the CV market, our flexible and agile selling and production processes are being implemented as planned. We have and will continue to adjust our cost structure to align with market conditions, which is consistent with our historical practices.”
Confirming 2019 Financial Outlook
The Company also confirmed its 2019 financial outlook as follows:
- Net sales are expected to be between $515m and $525m.
- Adjusted EBITDA is expected to be between $52m and $56m.
“As we finalize our financials for 2019, we expect our results will fall within our predicted ranges,” noted Todd M. Butz, CFO. “Net sales are expected to come in towards the middle of the current outlook range, while adjusted EBITDA is expected to be closer to the lower end of the range. The fourth quarter unfolded generally as expected, with the exception of some additional costs related to the finalization of plant and operational consolidation plans implemented in the fourth quarter. In addition, we continued to pay down debt during the fourth quarter and ended the year with a very strong balance sheet. Our net debt at the end of 2019 was approximately $73m, which equates to a debt-to-adjusted EBITDA leverage ratio of approximately 1.4 based on the lower end of our expected 2019 EBITDA range. We look forward to providing our full 2019 financial results as planned in late February.”
Founded in 1945, MEC is a leading U.S.-based value-added manufacturing partner that provides a broad range of prototyping and tooling, production fabrication, coating, assembly and aftermarket services. Our customers operate in diverse markets, including heavy- and medium-duty commercial vehicle, construction, powersports, agriculture, military and other markets. Along with process engineering and development services, MEC maintains an extensive manufacturing infrastructure in 21 facilities across eight states. These facilities make it possible to offer conventional and CNC stamping, shearing, fiber laser cutting, forming, drilling, tapping, grinding, tube bending, machining, welding, assembly and logistic services. MEC also possesses a broad range of finishing capabilities including shot blasting, e-coating, powder coating, wet spray and military grade chemical agent resistant coating (CARC) painting. (Source: BUSINESS WIRE)
29 Jan 20. Stanley Black & Decker buys Boeing supplier CAM for $1.5 bn, with caveat. U.S. toolmaker Stanley Black & Decker Inc (SWK.N) said on Wednesday it is acquiring Boeing Co (BA.N) supplier Consolidated Aerospace Manufacturing LLC (CAM) for as much as $1.5bn, with a portion of the price contingent on Boeing’s troubled 737 MAX aircraft returning to the skies.
The terms of the deal illustrate how consolidation among Boeing’s vendors is being reshaped by its woes. Boeing grounded the 737 MAX in March following two crashes that killed 346 people and has halted production as it updates the plane’s flight control system and software.
About $200m of the purchase price are contingent on the 737 MAX receiving U.S. Federal Aviation Administration authorization to return to service and Boeing achieving certain production levels, Stanley Black & Decker said in a statement.
When adjusted for approximately $185m of expected cash tax benefits, the net transaction value is between $1.1bn and $1.3bn, the company noted.
CAM, currently owned by investment firm Tinicum, makes fasteners and other components for the aerospace industry.
The acquisition will help Stanley Black & Decker diversify its business beyond tools and storage, which account for about two-thirds of its revenue.
The New Britain, Connecticut-based company has spent more than $10bn on acquisitions in the last two decades, including the tools business of Newell Brands Inc (NWL.O) for $1.84bn and the Craftsman brand of Sears Holdings Corp for $937m.
However, balking up on tools has increased the company’s exposure to big-box retailers such as Home Depot Inc (HD.N) and Lowe’s Companies Inc (LOW.N), which limits its bargaining power. The CAM deal would help it boost its engineered fastening and infrastructure business.
“Growing and diversifying our industrial business through M&A is a key priority for the company and a focus of our strategic capital deployment,” Stanley Black & Decker Chief Executive James Loree said in the statement.
The company on Wednesday also reported fourth-quarter earnings per share of $1.32, lagging analysts’ expectations of $2.18, according to Refinitiv.
Stanley Black & Decker shares were down 3.1% in early trading in New York. Reuters had reported on the talks between Stanley Black & Decker and CAM earlier this month. (Source: Reuters)
29 Jan 20. Leonardo buys Swiss helicopter firm. Italy’s Leonardo has dropped plans to develop a new, single-engine helicopter and opted instead to buy a small Swiss firm that has already built one. The Italian defense giant announced on Tuesday it was purchasing Kopter Group AG, which has developed the SH09, a five- to eight-seater helicopter built with carbon composite materials which first flew in 2014.
A clean-sheet design developed by a small group of engineers, the SH09 maximizes pilot view as well as interior space with a maximum takeoff weight of 2,850 kg, while its Honeywell HTS 900 engine provides an 800km range and 140 knots top speed.
With the purchase, which is worth $185m plus future pay-outs linked to the success of the program, Leonardo said it was saving itself the resources it had planned to use designing its own new helicopter in the category.
“This acquisition will replace the planned investment aimed at the development of a new single engine helicopter,” the firm said.
“Kopter’s SH09, a new single engine helicopter, is a perfect fit for Leonardo’s state of the art product range offering opportunities for future technological developments,” it added.
The Swiss company’s skills would also be used to develop new technologies like hybrid and electrical propulsion, Leonardo said.
A company spokesman said the SH09 was viewed as a civil program in the short term. “The priority is the civil market but in the future, we will see – a military application is not excluded. However for now our AW119 is our military product in the light, three-ton, single-engine class,” he said.
The purchase is an unusual step for the Italian firm, which has hitherto designed its own helicopters such as the AW139 and AW101, formerly under the AgustaWestland brand, which was retired before the company changed its name from Finmeccanica to Leonardo in 2016.
“Within the Helicopter Division of Leonardo, Kopter will act as an autonomous legal entity and competence centre working in coordination with us,” Leonardo said. (Source: Defense News)
30 Jan 20. EOS launches US expansion with acquisition of space comms business. Canberra-based EOS Holdings, acting through its wholly owned US subsidiary, EOS Defense Systems USA (EOSDS), will conduct a $10m acquisition of the business and all assets of US-based space communications company Audacy Corp.
As part of the acquisition, EOSDS will outlay approximately $10 m in cash for the acquisition, including the substantial costs associated with securing mandatory US government spectrum licences and other acquisition costs.
Until recently, EOSDS was principally focused on establishing a US production capacity for EOS remotely controlled weapons systems (RWS) and counter-unmanned aerial systems products.
EOSDS production capacity based at the company’s Huntsville, Alabama, facility is on schedule, with EOSDS being restructured during 2019 to support a wider range of operations and business activities in the US, with a particular focus on the areas of space, missile defence and space communications.
Dr Ben Greene, group CEO of EOS, welcomed the announcement of the acquisition, stating, “EOS has previously disclosed its intention to enter the space communications market, and the acquisition represents a logical next step towards that goal.”
Audacy Corp was granted a space station (satellite) spectrum licence by the United States Federal Communications Commission (FCC) authorising it to use specific microwave spectrum bands for communications to, from and among specific satellites and ground-based communications stations.
Implementing the licence requires the launch of a new constellation of mid-Earth orbit (MEO) satellites to establish a wideband communications capability for continuous, real-time data transfer with low-Earth orbit (LEO) satellites and other space vehicles.
The licensing agreement requires that the licensor launch the MEO satellite constellation by June 2024.
Chairman of EOSDS, Ambassador John Barry (Ret’d) explained, “Following the completion of the acquisition, EOS will be able to build a satellite network that will provide a comprehensive, end-to-end communications and data transfer business to government and commercial customers, globally through a new constellation of EOS satellites in MEO.”
Space station licences are legal permits allowing an entity to establish, operate and maintain communications satellites, including authorisation for use of specific spectrum bands.
Companies require the licences as part of a statutory requirement for all microwave communications, and are controlled globally by the International Telecommunications Union (ITU) and for US operators by the FCC.
EOS has established a space communications business with advanced technologies for both microwave and optical laser communications. In the long term, EOS expects most space-based communications to be implemented with optical communications – widely considered a disruptive technology that is not regulated or controlled because it does not interfere with other users.
Greene added, “Over 50 potential customers have executed non-binding memoranda of understanding relating to the proposed space communications service, and EOS expects to finalise the initial constellation design soon so that those MoU can be progressively converted to service contracts after completion.”
“The company will face challenges building and launching a new constellation of MEO satellites by June 2024. Therefore, satellite capacity and the related funding requirements will be scaled to meet regulatory and customer commitments. EOS will later decide whether to implement the new satellite constellation on its own or through a partnership with an existing space communications entity,” Greene explained.
EOSDS is not required to make any initial material payment for the acquisition until completion as occurred. EOS will fund the $10m required for the acquisition and related activities from the company’s cash holdings.
“EOSDS has been preparing for this acquisition for many months. We have already established a team of space communications specialists with, collectively, centuries of experience with satellite communications and space communications, including work on some of the largest space communications infrastructure projects undertaken,” Ambassador Barry added. (Source: Defence Connect)
29 Jan 20. Boeing expects 737 Max crisis to cost $18.6bn. Aircraft maker logged its first annual loss in more than two decades amid fallout from grounding. Boeing has placed the total cost of the 737 Max crisis at $18.6bn, more than double its previous estimate as it accounts for payments to airlines, reduced profits over the plane’s production cycle and expenses tied to halting manufacturing. The Chicago manufacturer on Wednesday reported a full-year loss of $636m on $76.6bn in revenue — its first annual loss in more than two decades as it grappled with the fallout from the grounding of its bestselling jet. For the fourth quarter, it recorded $17.9bn in revenue and a loss of $1bn. Boeing’s projected costs have ballooned since it forecast last year that the grounding of the jet would cost it $9.2bn. Since then it has stopped production and stretched to mid-year its estimate of when federal regulators might clear the Max to return to the skies. The plane maker now anticipates $8.3bn in payments to airlines for not delivering the jets and $6.3bn in costs over the Max’s entire production cycle, according to an investor presentation on Tuesday. Boeing also expects $4bn in “abnormal production” costs that include payments to suppliers and keeping Max workers on the payroll elsewhere in the company while the factory line in Renton, Washington is shut down. Boeing has struggled since regulators grounded the Max 10 months ago following two planes crashes within five months that killed a combined 346 people. A flight control system triggered by a single sensor was implicated in the disasters after it repeatedly pushed the noses of the planes downward. Fallout from the crisis led to the ouster of chief executive Dennis Muilenburg, who was replaced by board veteran David Calhoun. (Source: FT.com)
29 Jan 20. General Electric forecasts lower earnings growth due to Boeing hit. Industrial said outlook was ‘dependent on 737 Max’s return to service.’ General Electric forecast lower revenue growth and profits for 2020 in part linked to the grounding of Boeing’s grounded 737 Max, underlining the importance of the aircraft to the US industrial economy. The US manufacturing conglomerate on Wednesday projected industrial revenues would increase in the “low-single-digit range,” compared to 5.5 per cent in 2019. Earnings are likely to range from 50 to 60 cents per share, the company said, down from an adjusted figure of 65 cents last year. A joint venture of GE and Safran of France makes the Leap engine for the Max, which has been grounded since March after two crashes killed a total of 346 people. Boeing halted production this month and projected the grounding would last until mid-year. GE said its outlook was “dependent on the 737 MAX’s return to service, which GE is planning for in mid-2020, in line with Boeing.” The group reported sales of 420 Leap units in the fourth quarter, 41 more than the same period a year earlier. The company’s guidance also reflects the planned sale of Biopharma, a unit that provides biotechnology equipment, and less incoming cash as GE sells down its stake in oilfield services company Baker Hughes. For the fourth quarter of 2019, GE reported industrial revenue of $24.7bn, up 4.6 per cent on year. Net income from continuing operations rose 23 per cent to $854m. Adjusted for one-time items, earnings per share rose by 50 per cent to 21 cents, surpassing Wall Street estimates of 18 cents. GE has been working to turn round its business following problems concentrated in its energy sector. Larry Culp, chief executive, has called 2019 a “reset year.” “Our priorities looking forward are clear,” Mr Culp said. “We are solidifying our financial position, continuing to strengthen our businesses as improvement efforts build momentum, and driving long-term profitable growth. We remain committed to creating value as we continue our multiyear transformation.” (Source: FT.com)
28 Jan 20. Lockheed Martin Results. With revenue rising to $59.8bn from a previous year $53.7bn and net earnings of $6.2bn against a previous $5.0bn, FY19 results from the Bethesda, Maryland based Lockheed Martin have not surprisingly been well received by investors. The company ended the year with a record order backlog of $143.9bn and has opted to raise FY20 earnings estimates to a range between $23.65 per share to $23.95 per share. The first quarter 2020 dividend is declared at $2.40 per share. With operational improvements across all business areas (Aeronautics, Missile and Fire Control, Rotary and Mission Systems and Space) with operating margins rising to 9.4% (FY18 9.1%) together with strong cash flow, improved balance sheet, record order backlog combined with a strong outlook, these are an extremely impressive set of results. The company delivered 134 F-35 aircraft during the year to the US military and international customers compared to 91 aircraft the previous year. C130J deliveries rose to 28 in 2019 compared to 25 in 2018 although helicopter deliveries for Govt programs declined to 85 from a previous year 107. The company delivered 13 military helicopters in 2019 to international governments, this was unchanged on 2018 deliveries.
CEO Marillyn Hewson said in the statement that “The corporation had delivered outstanding performance throughout 2019, achieving exceptional sales growth, strong earnings, cash from operations, and a record backlog. As we look ahead to 2020, we remain focused on providing innovative global solutions for our customers, investing for growth across our portfolio, and generating long-term value for our shareholders.”
Lockheed Martin shares have risen by 16% over the past six-month and by 50% over the past year. This is fully justified in my view not only from the visibility of across the board improved performance but also on the strong belief that governments will continue to increase spending on defence. While the company is unlikely to receive clearance for full-rate F-35 production from the Pentagon until the end of this year or early in 2021 the overall outlook remains very positive. Rotary helicopter which was expanded in 2015 by the purchase of Sikorsky has performed well. (Source: Howard Wheeldon, FRAeS, Wheeldon Strategic Advisory Ltd.)
28 Jan 20. United Technologies says Max woes to hit profits at aerospace unit. Raytheon merger and new US regulation also expected to be a drag. United Technologies expects adjusted operating profit at its aerospace supply business to fall between 6 and 7 per cent this year thanks to the troubled 737 Max, the merger with Raytheon and new US regulation. Collins Aerospace Systems’ adjusted operating profit will drop between $275m and $325m in 2020, Connecticut-based UTC said on Tuesday. The business reported $4.4bn in adjusted operating profit in 2019. The company cited a headwind of $550m to $600m from the Max, divestitures stemming from the upcoming merger and new regulation requiring “automatic dependent surveillance, broadcast” (ADS-B) that requires aircraft to routinely transmit their position and groundspeed. UTC is a major supplier for the Max, and Boeing suspended production of the plane this month following a 10-month grounding after two fatal crashes. Chief executive Greg Hayes said UTC is assuming a 90-day production delay, based on direction from Boeing. When Collins Aerospace begins producing components for the Max again in the second half of the year, it will cut its production rate from 42 to 21. The company estimates it will lose about $600m in sales to Boeing and lose out on selling replacement parts over the year, and about half of that would go to operating profit. UTC also plans to pay its own suppliers an amount under $100m. “I hope (the forecast is) conservative,” he said. “We hope again that the production resumes more quickly. But as we sit here today, that’s the best outlook that we can give you.”
Mr Hayes said UTC did not plan to lay off workers given the length of the production delay and the difficulty of hiring talented aerospace workers. Instead, the workforce will tackle the backlog. “Will we work less overtime? Probably,” he said. “But it’s not significant in terms of the overall Collins business.” UTC’s outlook fell 11 per cent below Jefferies’s forecast, which already excluded the Max for nine months, said analyst Sheila Kahyaoglu. “We estimate the impact of ADS-B, Max and divestitures could be $70mn, $220mn, and $120mn, respectively,” Kahyaoglu said. Sales at Collins Aerospace are expected to slide by a “low single-digit” in 2020, according to the press statement. Collins Aerospace furnishes the Max with avionics, cabin components like seats and lighting, and mechanical systems like wheels and brakes. The company also plans a merger with Raytheon that it hopes to close in the first half of this year. The deal would make the new company, to be called Raytheon Technologies, the third largest aerospace and defence contractor in the world, after arch-rivals Boeing and Airbus, upping its negotiating power as a supplier.
Mr Hayes said the company’s 2020 outlook for Collins Aerospace includes plans to sell its military GPS business in Iowa and its surveillance systems business with locations in Colorado and Connecticut. More could follow after the merger closes. Mr Hayes promised a review of the combined portfolio of UTC and Raytheon, and “there will be places where we might elect . . . to cash out”. Overall, UTC reported increased sales in both the fourth quarter and 2019. Sales for the year rose 16 per cent to $77bn, lifted partly by fourth-quarter sales that increased 8 per cent to $19.6bn. Earnings per share rose 59 per cent to $1.32 but fell 1 per cent for the year to $6.41. UTC shares, which gained 40 per cent last year, were up 0.7 per cent in morning trade. (Source: FT.com)
28 Jan 20. SAS seeks to raise capital to fund satellite construction and launch. Australian Securities Exchange-listed space company Sky and Space Global (SAS) has launched a fresh pitch to raise the funds it needs to begin commercial operations. In an investor presentation, SAS said it was seeking to raise $14.2m in total, comprising $9.2m from their entitlement offer shortfall and $5m in share placement.
That will be used to fund construction, testing and launch of the company’s first eight commercial 6U nanosatellites and ground terminals for their proposed constellation, servicing the booming market for internet of things connectivity.
SAS said the launch of first batch of nanosatellites in first quarter 2021 will signal the start of revenue generation.
It already has more than 50 agreements with future customers, providing a strong pipeline of opportunities.
SAS incorporated in the UK in 2015 and listed on the Australian Securities Exchange in May 2016.
The company is based in Perth and is well advanced in plans for what it calls the Pearls constellation of as many as 200 nanosatellites in equatorial orbit, providing low cost communications, data and internet services for markets in Africa, South America and Asia.
SAS is proposing an additional satellite constellation, allowing full global coverage, including Australia, Russia, China, South Africa, Argentina and Canada. The company has more than 50 agreements in place for use of its services.
In 2017, SAS Global launched three prototype satellites on an Indian rocket to test its technology.
SAS said that gave it more than two years of space proven heritage de-risking deployment, operations and the business model.
It hasn’t proved easy with the company encountering problems raising the funds it needs. SAS shares have been suspended from trading on the ASX since April. At that time shares were trading under two cents.
“Why SAS? Why now? Leveraging SAS first-mover technology to meet growing IoT and telco connectivity demand,” the company said in its presentation.
It cites its first-mover advantage and the cast market potential. Only now are the big players such as SpaceX starting to populate their proposed small satellite communications constellations.
SAS said there is a market opportunity. Right now there are coverage gaps, with cellular connectivity not globally available and satellite solutions are expensive, complex and non-dedicated.
SAS can provide global reliable scalable connectivity via nanosatellites, at a fraction of the cost of traditional communications satellites, enabling new market opportunities.
Small satellites are projected to dominate the global satellite IoT market growth, and all satellite M2M/IoT applications are expected to grow, with revenue growth expected at 6.6 per cent compound annual growth rate, reaching $11.6bn in the next 10 years. (Source: Space Connect)
28 Jan 20. REDARC expands Australian defence industry presence. A new South Australian-based Defence company, REDARC Defence Systems, has been established by the owner and managing director of REDARC Electronics, Anthony Kittel. Since first exploring the defence market in 2015, REDARC has been demonstrating its capabilities in advanced design and manufacturing to meet the demands of defence. The first five years have seen the company gain a greater recognition in the industry.
Now with a growing defence team and a growing list of defence partnerships, the company said it was time to establish REDARC Defence Systems, an entity that will advance its defence portfolio.
Established in 1979, REDARC Electronics is an Australian, privately-owned, advanced manufacturer supplying patented solutions to the Australian and international heavy commercial and defence vehicle sectors.
REDARC Defence Systems has been set up to meet the growing needs of the Australian Defence market for wholly Australian-owned defence medium-sized enterprises that can foster the development of intellectual property in Australia.
Kittel said, “We recognise that there is a real requirement for fully Australian-owned medium level enterprises to meet the needs of the defence market, and the launch of REDARC Defence Systems allows us to provide a dedicated team of experts for our defence customers globally.”
REDARC Defence Systems is currently supported by three dedicated staff including two veterans, Mike Hartas, REDARC Defence Systems account manager and newly appointed industrial designer Ryan Kelly. Peter Serdar, a defence industry expert with over 20 years’ experience, fulfils the role of defence operations manager.
Kelly said, “As a veteran, it is great to be able to leverage my years of experience with the Australian Defence Force. I am proud to be a part of REDARC Defence Systems. This role gives me the opportunity to continue my involvement in defence and I have enjoyed being able to grow my skills in industrial design.”
REDARC Defence Systems will continue its involvement with the major international defence trade shows through Team Defence Australia.
Hartas stated, “Attendance at trade shows in Australia and overseas has proven to be effective. Our presence at events such as Eurosatory 2018, DSEI 2017 and 2019, and AUSA 2019 has grown our Defence exports.
“While each event takes significant preparation, the reward is seeing our customers’ confidence in our proven solutions. I look forward to the Team Defence Australia shows in 2020.” (Source: Defence Connect)
27 Jan 20. HLD Europe has entered into exclusive negotiations with the investment company IK Investment Partners, to become the majority shareholder of Exxelia, the European leader in the manufacturing of high reliability passive components and electromechanical systems. Exxelia develops and manufactures complex passive components and electromechanical solutions for niche industrial markets such as aeronautics, space, defense, medical and rail, where product reliability and performance are essential. The group addresses main institutional players, systems and equipment manufacturers. Exxelia offers a complete and custom product range (capacitors, inductors, resistors, filters, position sensors and rotary joints) embedded into a large number of programs: from the Airbus A350 to the Boeing Dreamliner, from the Ariane 6 launcher to satellite constellations (such as Galileo, Oneweb, etc.), from the Rafale to the F-35, from subway coaches to high-speed trains, from MRI medical equipment to defibrillators.
With an expected proforma revenue of around €170 for 2019 and around 2,000 employees, Exxelia is present today in more than 30 countries and operates in Europe and the United States, in Morocco and in Vietnam through its production sites, its design centers as well as its network of sales partners. With the support of its new shareholder, Exxelia will be able to intensify its operational excellence and innovation efforts, pursue its internationalization strategy with the penetration of high-growth markets such as India or China, and accelerate its development in the United States.
Paul Maisonnier, CEO of Exxelia: “I am delighted to embark on a new stage of development with our new shareholders, with whom we share the same vision. Together, we aim to strengthen Exxelia’s unique “one-stop-shop” by offering high-reliability custom products combined with a strong capacity for innovation. We will pursue our continuous improvement approach and our internationalization strategy to make Exxelia a world leader in our niche markets. In that regard, HLD’s experience in international business development is precious to us. We thank IK Investment Partners for its total support over the past 5 years which has enabled us to set up a solid platform capable of supporting our ambitions for global growth, which we are delighted to continue with HLD.”
Dan Soudry, Partner at IK Investment Partners: “As shareholders of Exxelia since 2015, we are very pleased to have supported the various stages of transformation and growth of the group, through a deep structuring phase led by the management team and an external growth strategy. This has strengthened the group’s presence in the United States, especially with the acquisition of Raf Tabtronics, Deyoung, and Micropen, and diversified its expertise on new product lines.”
Jean-Bernard Lafonta, Founding Partner of HLD Europe and Jean-Hubert Vial, Partner: “HLD supports successful companies with no restrictions on duration. We believe this specificity was important in the choice of Exxelia’s new shareholder: it is essential to achieve the ambition of growth while considering the long-term nature of Exxelia clients’ programs. We are delighted to be associated with the group’s project, whose entrepreneurial culture echoes the entrepreneurial spirit that drives HLD. We are convinced that we can help Exxelia’s teams by giving them the means to meet their ambitions.”
27 Jan 20. ASGN Acquires Blackstone Federal. Acquisition Deepens Differentiated Transformation, Engineering, and Creative Solutions for Federal Government Clients. ASGN Incorporated (NYSE: ASGN), one of the foremost providers of IT and professional services in the technology, digital, creative, engineering, and life sciences fields across commercial and government sectors, announced today the completion of its acquisition of the Federal division of Blackstone Technology Group (Blackstone Federal), for $85m in cash, which is now part of ASGN’s ECS government IT solutions and services segment. Blackstone Federal will be immediately integrated into ECS’ enterprise solutions group, which focuses on delivering digital solutions to Federal civilian customers.
Founded in 2002 in Arlington, Virginia, Blackstone Federal is comprised of roughly 100 technical and creative consultants who together deliver agile application development, cloud modernization and systems architecture, cybersecurity, user experience design, and branding services to government clients. Blackstone Federal has a long-standing relationship with the Federal government, including more than 18 years of experience providing highly technical support to the Department of Homeland Security (DHS) and its sub-agencies.
Blackstone Federal’s enduring success at DHS is attributed to its exclusive commitment to its customers’ missions. The Company is a leading player and prime contractor on major, full and open and flexible DHS contract vehicles, including the Architecture, Development, and Platform Technical Services (ADaPTS) Blanket Purchase Agreement. For 2019, Blackstone Federal generated approximately $44m in revenues and is expected to grow over 10 percent in 2020 and generate EBITDA margins in the mid-teens.
Commenting on the acquisition, Ted Hanson, ASGN’s President and Chief Executive Officer, said, “Blackstone Federal’s talented team and solution offerings are an excellent addition to our rapidly growing ECS segment, which is focused on large and complex IT solutions across key and attractive Federal government customers. This acquisition fits perfectly with ASGN’s hybrid growth and capital allocation strategy, to scale ECS to over $1bn in revenue through a combination of strong organic growth and complementary acquisitions in strategic technologies, capabilities, customers, and contract areas that together will enable us to even further enhance the solutions we provide to our customers.”
“ECS welcomes the Blackstone Federal team,” said George Wilson, President of ECS. “Both ECS and Blackstone Federal share innovative and solutions-driven cultures focused on the customer, collaboration, and quick decision-making. We’ve also both worked hard to deliver the most powerful technologies, tools, and strategies to our DHS customers. With our combined technologies and depth of talent, we will accomplish even more together. On behalf of ASGN, ECS is committed to continuing to attract, develop, and retain the best talent in our industry, and the addition of Blackstone Federal is no exception to this mission.”
In connection with the closing of the acquisition, ASGN will be granting restricted stock unit awards to seven Blackstone Federal employees for a total of approximately 31,000 shares. Subject to continued service to ASGN, the grants will vest: (i) one-half on the second anniversary of the grant date and (ii) 25 percent on each of the third and fourth anniversaries of the grant date. The restricted stock unit awards are being granted to the Blackstone Federal employees as employment inducement awards pursuant to New York Stock Exchange rules.
ASGN retained Sullivan & Cromwell LLP as legal counsel on the transaction. DC Advisory served as exclusive financial advisor to Blackstone Technology Group, and DLA Piper LLP served as its legal counsel. (Source: BUSINESS WIRE)
27 Jan 20. Boeing [NYSE: BA] and Embraer [B3: EMBR3, NYSE: ERJ] welcome the unconditional approval of their strategic partnership by the Administrative Council for Economic Defense (CADE)’s General-Superintendence (SG) in Brazil. The decision will become final within the next 15 days unless a review is requested by CADE Commissioners. The partnership has now received unconditional clearance from every regulatory jurisdiction with the exception of the European Commission, which continues to assess the deal.
“This latest clearance is yet another endorsement of our partnership, which will bring greater competition to the regional jet marketplace, better value for our customers and opportunities for our employees,” said Marc Allen, Boeing’s president of Embraer Partnership & Group Operations.
“Brazil’s approval of the deal is a clear demonstration of the pro-competitive nature of our partnership,” said Francisco Gomes Neto, president and CEO of Embraer. “It will not only benefit our customers, but also allow the growth of Embraer and the Brazilian aeronautical industry as a whole.”
Unconditional clearance has now been granted in Brazil, United States, China, Japan, South Africa, Montenegro, Colombia, and Kenya.
Boeing and Embraer have been in discussion with the European Commission since late 2018, and continue to engage with the Commission as it proceeds through its assessment of the transaction.
“We have been productively engaged with the Commission to demonstrate the pro-competitive nature of our planned partnership, and we look forward to a positive outcome,” Boeing’s Allen said. “Given the positive endorsement we’ve seen from customers across Europe and the unconditional clearance we’ve received from every other regulator who has considered the transaction, we look forward to securing final approval for the transaction as soon as possible.”
The planned strategic partnership between Embraer and Boeing comprises two joint ventures: one joint venture made up of the commercial aircraft and services operations of Embraer (Boeing Brasil – Commercial) in which Boeing will own 80 percent and Embraer will hold 20 percent; and another joint venture to promote and develop markets for the multi-mission medium airlift C-390 Millennium (Boeing Embraer – Defense) in which Embraer will own a 51 percent stake and Boeing will own the remaining 49 percent.
27 Jan 20. EU to rule on $120bn United Technologies, Raytheon deal by Feb. 28. EU antitrust enforcers will rule by Feb. 28 whether to approve United Technologies Corp (UTX.N) and U.S. contractor Raytheon Co’s (RTN.N) bid to create a $121bn (£92.5bn) aerospace and defence giant, a filing on the European Commission website showed. The EU antitrust watchdog can clear the deal with or without concessions during its preliminary review or open a five-month long investigation into the deal if it has deep concerns.
United Technologies makes electronics, communications and other equipment for mainly commercial plane makers whereas Raytheon primarily supplies the U.S. government with military aircraft and missile equipment.
Both companies have sought to address competition concerns, with UTC selling a military-focused GPS unit from its subsidiary Collins and Raytheon divesting an airborne tactical radios unit to British defence company BAE Systems (BAES.L) last week. The deal also needs U.S. approval. (Source: Reuters)
27 Jan 20. Boeing seeks financial flexibility as Max crisis drags. Debt, dividends, buybacks and defence contract bidding all in focus as company burns cash. The 737 Max crisis has taken a toll on Boeing’s financial health, torching cash, prompting credit rating downgrades and forcing the plane maker to seek a new $10bn loan. But while Boeing announced in April that it would pause share buybacks, new chief executive David Calhoun said on Wednesday the board never discussed halting a dividend that last year paid $3.9bn. Boeing “will stay on that path unless something dramatic changes”. The aerospace manufacturer will this week provide more detail on the financial trade-offs it may have to make after the worldwide grounding of the Max transformed the company’s workhorse jet from a growth driver to a cash sink. Boeing’s finances are at “some point between a bad case of the flu and a heart attack — in an otherwise healthy person able to recover”, said analyst Craig Fraser at Fitch Ratings, the credit rating agency, which downgraded Boeing’s investment-grade debt this month. The company’s defence and services businesses retained healthy revenues, margins and cash flows, he pointed out. “Once the cash drain to the Max ends, the entire company will be pulling in the same direction again.” But how soon? Analysts placed the cost of the grounding between $15bn and $20bn before Boeing said a week ago that the Max would remain earthbound until mid-year. Each month of extra delay costs the company about $1.5bn, said Bank of America Merrill Lynch analyst Ron Epstein. Some analysts think Mr Calhoun is setting a conservative timetable to avoid repeating the overly optimistic predictions that led to the ouster of his predecessor, Dennis Muilenburg.
But Fitch estimates the company’s debt nearly doubled last year to approximately $27bn. The company’s free cash flow collapsed as Boeing continued to make planes even as it was barred from delivering them to customers. Free cash flow went from $11.1bn in the first nine months of 2018 to a $1.6bn outflow for the same period a year later. The company stopped production this month. Wall Street banks chip in Boeing is working with its bankers to secure a new $10bn loan that would help fortify its balance sheet, according to multiple people briefed on the matter, and has received commitments from several large lenders including Bank of America, Citigroup, JPMorgan Chase, Wells Fargo and Morgan Stanley. As the company continues to work with regulators on the changes needed before the Max can be certified safe to fly, the loan has been structured to give Boeing plenty of flexibility. It is a delayed-draw loan with a two-year maturity, which would give Boeing access to the funds at a future date, according to one of the people briefed. The largest banks that have committed to the financing are expected to contribute roughly $1.5bn to $1.6bn each to fund the loan package. Mr Fraser said the loan could be used to cover Boeing’s cash burn in the first quarter, to repay an approximately $1bn maturing debt or to refinance commercial paper debt that has grown more expensive as Boeing’s credit profile has worsened. Boeing also has a $4.2bn cash payment coming up for the acquisition of Brazilian jet maker Embraer’s commercial aircraft business — a deal it had hoped to close by May — although European regulators requested additional information last week which likely will delay the transaction’s closing date. The effort to secure the new loan comes just months after Boeing increased its revolving credit facility with its lenders to $9.6bn. Bank of America, Boeing, Citi, JPMorgan, Wells Fargo and Morgan Stanley declined to comment. Boeing retains a solidly investment-grade credit rating despite the downgrades by Fitch and the two biggest rating agencies S&P Global and Moody’s.
But S&P warned last week that a second downgrade could be coming and that it was reviewing the A-minus rating it gave Boeing just last month. It could cut the rating if its analysts believed the “Max grounding had weakened Boeing’s competitive position such as by permanently damaging its reputation with customers and regulators”, it said. ‘Bank of Commercial’ is closed for now Chief financial officer Greg Smith said last year that Boeing had “a lot of levers” to pull to maintain financial flexibility. That might include delaying capital expenditures, Mr Fraser said, adding: “I sense there’s a general level of belt-tightening.” Another possibility is that Boeing bids less aggressively for defence work, said analyst Richard Aboulafia of the Teal Group. The strength of the company’s commercial aircraft business historically allowed it to undercut competitors and win contracts such as the US Air Force T-X advanced jet trainer, MH-139 missile field-support helicopter and the US Navy MQ-25 aerial refuelling drone. With the Max crisis causing a big cash burn, Boeing’s defence arm cannot rely on “the Bank of Commercial” to cover upfront losses on big contracts, Mr Aboulafia said. Share buybacks are likely to remain off the table through 2020 and possibly 2021, Mr Fraser said. Boeing bought back $43bn of its stock between 2013 and the first quarter of 2019, shrinking the number of outstanding shares by 25 per cent. Critics have charged that the company was more interested in providing shareholder returns than sinking profits into engineering. Boeing will report quarterly earnings on Wednesday. Cowen analyst Cai von Rumohr wrote in a January 22 note that the now-extended timetable to return the Max to service would hurt those earnings in two ways. Boeing has already taken a more than $5bn charge for payments it will owe to airlines for delayed delivery of the Max and Cowen had forecast Boeing would raise customer compensation reserves by $6bn. Meanwhile, the stated costs of producing the Max were expected to swell by $4bn. Both of those estimates, Mr von Rumohr wrote, now look low. (Source: FT.com)
22 Jan 20. Skylo’s Series B Round of Funding Garners $103m. Skylo has emerged from Stealth mode with $116m in total funding — the company previously raised $13m in a Series A round that was co-led by DCM and Innovation Endeavors and joined by Moore Strategic Ventures. This new Series B round raised $103m, led by SoftBank Group and joined by all existing investors.
According to Skylo, will bring instant, affordable and ubiquitous Internet of Things connectivity to millions of machines, sensors and devices, even in the most remote geographies. It is the world’s first company to leverage the cellular Narrowband Internet of Things (NB-IoT) protocol via satellite, making it possible to instantly connect billions of sensors on objects and machines in remote areas.
Skylo’s new satellite connectivity leverages existing geostationary satellites to bring reliable connectivity without the need to add new infrastructure in space. Skylo has successfully built and proven its end-to-end technology and completed successful commercial field trials with major enterprise and government customers. The company’s customers already include enterprise and government entities in a range of industries including automotive, railways, agriculture and maritime.
Skylo costs 95 percent less than existing satellite solutions, with connectivity starting at just $1 per user and hardware that costs less than $100. Skylo is the world’s most affordable satellite technology and will enable operations for remote businesses, increase safety, drive economic development and job creation, and help with disaster preparedness and response.
The use cases for Skylo are diverse and transformational for industry and government customers:
- Mobilizing data for shipping and logistics. Telemetry sensors are increasingly being built into and retrofitted onto trucks and railway cars, but the connectivity needed to make the data actionable has been missing. By equipping them with Skylo’s geographically ubiquitous connectivity, customers have a way to access real-time delivery updates, ensure the integrity of temperature-sensitive deliveries (like pharmaceuticals or food), monitor maintenance schedules, certify safety compliance, and more.
- Improving agriculture crop health and productivity. Skylo allows farmers to optimize operations by sending and receiving real-time data about growing conditions such as air temperature, moisture level or soil pH. The data can inform watering schedules, fertilizer needs, and growth cycles, resulting in lower energy costs, less water usage, and healthier crops. Skylo also supports emerging business models for equipment sharing, enabling “tractor sharing,” for instance. In this case, farmers and equipment owners can connect to and share heavy-duty machinery, which enables hundreds of millions of farmers to increase their productivity because of affordable access to farming equipment.
- Digitizing the fisheries industry. Globally, there are 4.6 million fishing vessels1 that can now be connected for the first time over Skylo. Skylo’s Hub connects to existing Android devices over Bluetooth or Wi-Fi, allowing fishermen to access life-saving two-way SOS communications, connect with their fleet operator, and access markets to transact their catch while still at sea.
- Connectivity for modern passenger transportation systems. Railway systems, long-distance buses, and other vehicles can use Skylo to transmit vehicle health data required for on-time performance and operational efficiency. Skylo can enable the delivery of preventative maintenance alerts and even saves lives by triggering alerts in the case of an abnormal track vibration, sudden braking or acceleration or sharp turns
Skylo Co-Founder and CEO Parthsarathi “Parth” Trivedi said that the company envisions a world where connectivity for machines, sensors and devices is as ubiquitous as the sky. This low-cost, global fabric of connectivity for machine data will be transformative for entire industries.
Skylo’s end-to-end solution encompasses the Skylo Hub, the Skylo Network, the Skylo Data Platform and Skylo API. Mass manufacturing of the Skylo Hub is underway and the Skylo Network is already live with early customers.
- Skylo Hub — The Skylo Hub is a self-installed, easy-to-use satellite terminal that connects to the Skylo Network. It has a suite of onboard sensors to sense geolocation and acceleration, and operates like a wireless “hot spot” for a variety of external sensors such as vehicle on-board diagnostics (OBD2), temperature sensors, and standard mobile or tablet devices. The Hub uses off-the-shelf components from the cellular world, which drastically reduces the cost of the Hub and increases sensor and device compatibility. Skylo’s breakthrough digitally-steered antenna technology makes the device so compact that the Hub itself is only 8” x 8”, and the antenna can even be OEM-installed onto most vehicles, utilities infrastructure, and other industrial equipment. The Skylo Hub has a built-in battery, or can connect directly to external power sources, including solar.
- Skylo Network — The Skylo Network can provide reliable connectivity anywhere in the world, regardless of geography, without needing new infrastructure in space. It is the world’s most affordable way to transmit data over satellite and leverages existing geostationary satellites available worldwide. Skylo has also developed a proprietary method of efficiently transmitting data; this technology minimizes satellite usage costs, a cost savings that is passed onto Skylo customers
- Skylo Data Platform and Skylo API — The Skylo Data Platform and API helps customers to manage their Skylo Hubs remotely and visualize, analyze and act on the data that is generated, sent, and received via connected devices.
Skylo was founded in 2017 by CEO Parth Trivedi, Chief Technology Officer Dr. Andrew Nuttall and Chief Hub Architect Dr. Andrew Kalman. The company’s current Board of Directors includes Board Chairman former U.S. Ambassador Terry Kramer, David Chao of DCM, Scott Brady of Innovation Endeavors, Harpinder “Harpi” Singh of Innovation Endeavors, and Skylo CEO Trivedi. Skylo has offices in San Mateo, California, Bangalore, India, and Tel Aviv, Israel, and is growing the team globally to support its fast-growing customer base.
Skylo will scale customer implementations first in India and other emerging markets, where it has already started implementing the technology in a range of industries. Skylo’s service will be commercially available later this summer and the company is in commercial trials with users in the U.S. and other world regions for subsequent launches and market expansion. (Source: Satnews)