Nov 13, 2015

UrtheCast Shelves New ISS Camera To Focus on Satellite Constellation

by Peter B. de Selding — November 12, 2015

Estimated Article Reading Time: 3 min.

PARIS — UrtheCast said Nov. 10 it is refocusing its investment away from International Space Station-mounted cameras toward a planned constellation of Earth-imaging satellites.

In an earnings call with investors, the Vancouver, British Columbia-based Earth-observation imagery and services startup said it had 100 million Canadian dollars ($75 million) in firm orders as of Sept. 30, plus 30 million Canadian dollars in options.

UrtheCast said it had signed non-binding memoranda of understanding with two prospective customers for a total of 370 million Canadian dollars. Construction of the 16-satellite constellation will not begin until at least some portion of this amount is transformed into binding commitments.

UrtheCast transformed itself this year with the purchase of Deimos Imaging of Spain and Deimos’ two in-orbit optical Earth-imaging satellites.

The Deimos acquisition took effect July 15, giving UrtheCast some 75 days of revenue from the acquisition in the three months ending Sept. 30. During the same period, the company began initial operations of its high-resolution video camera, which was installed on the Earth-facing side of the space station alongside UrtheCast’s medium-resolution still camera.

Deimos had expected to report more than $40 million in revenue for 2015, with the summer months being the most active as is the case for most optical satellite imagery-delivery companies.

UrtheCast officials declined during the Nov. 10 earnings call to say how much of their revenue and backlog came with the Deimos purchase, and how much from the company’s two ISS-mounted cameras.

The high-resolution video camera’s pointing platform — provided by UrtheCast partner RSC Energia of Kaliningrad, Russia — was defective and required new cabling and a software patch. Full operations are expected to begin in the coming months.

UrtheCast had been investing in a second-generation camera system for the space station, but has shifted focus to prepare for a 16-satellite constellation of eight optical and eight synthetic-aperture radar satellites in low Earth orbit, all to be built by small-satellite specialist Surrey Satellite Technology Ltd. (SSTL) of Britain.

UrtheCast Chief Executive Scott Larson declined to speculate on when construction might begin, but confirmed that the company would be using customer commitments to finance construction of the satellites and would not commit to major spending before firm backlog was in place.

“These are long, technical agreements with a dozen or so interested groups,” Larson said. “We’ve moved two of these to MoUs for a total of about 370 million dollars. The funnel [of interested prospective customers] is big and we’re incredibly happy.”

The second-generation camera system for the space station — a dual-mode camera plus a synthetic aperture radar — will now be put on hold to support development of the constellation. Larson said one reason was a slip in the schedule of the new sensors’ deployment, and the second reason is that the constellation appears to be a more promising use of capital.

“The company will no longer proceed with the installation of the sensors on the International Space Station,” Larson said, adding that UrtheCast remains bullish on the future use of the station as an Earth observation platform.

One of the two customers that signed constellation-related MoUs had also signed an MoU valued at $65 million for data from UrtheCast’s second-generation camera system. Larson said a portion of that has now been shifted to the constellation as part of a non-binding MoU, totaling $175 million, with the same customer.

UrtheCast has not disclosed the level of firm backlog it would need before contracting with SSTL to begin hardware construction for the constellation. The company has said it would be launching the satellites in 2019 or 2020 and did not change that estimated schedule during the Nov. 10 conference call.

UrtheCast divides its business into two categories: engineering and support services; and Earth observation data sales.

The company is developing a Web-based imagery distribution platform, which it recently made open-source instead of obliging application developers to sign non-disclosure agreements. Outside observers have said the platform could become UrtheCast’s most-valuable asset over time.

For the three months ending Sept. 30, UrtheCast reported 4.2 million Canadian dollars in revenue from about 20 customers using its four in-orbit cameras – two Deimos satellites and the two space station cameras – and 5.1 million Canadian dollars in revenue from engineering services. Another 400,000 Canadian dollars came from Canadian government research and development grants.

The Earth observation data revenue carries the highest gross-profit margin, of 80-85 percent, Larson said, but engineering services is also “very profitable.”

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