Atlas Space Operations

Quick Facts

Company Name: Atlas Space Operations, Inc.
Industry: Space Communications
Business Model: Space SaaS
Total Raise: $4m
VCapital Allocation: Up to $1.5m
Lead Investor: Revolution’s Rise of the Rest Fund ($2.25m-$2.5m)
Investment: Series A Preferred Stock
Terms: $15,000,000 pre-money valuation
Website: www.atlasground.com

Company Purpose:

ATLAS Space Operations (“Atlas”) provides affordable communication solutions to satellites at the highest level of service.

Problem:

The global hunger for data collected from space is insatiable. There is an exploding demand for internet bandwidth and space-based earth imagery. As the price of commercial space launches fall, companies, universities, and government organizations are launching more satellites. Current networks cannot satisfy the growing data access demands that are being generated.

Companies are paying for an expensive product that is difficult to use. Space companies are using outdated 1950’s era technology to connect with their satellites. Owners and operators within the space industry currently endure process limitations and challenges that no other modern high-tech sector would accept:

  • Only one satellite can be communicated with at a time.
  • Data latency (the delay before a transfer of data begins) in transmissions is incredibly long.

This is a captive market with few attractive options. To communicate with commercial satellites, owners and operators have only two options:

  • The capital-intensive process of building their own vertically integrated communication infrastructure.
  • Purchasing time from oversubscribed Kongsberg Satellite Services or the Swedish Space Corporation.

The data bottleneck (the current way for ground communications):

Existing networks are problematic due to the following:

  1. Outdated, legacy hardware
  2. Limited bandwidth
  3. Lack modern software
  4. Not automated
  5. Prone to failure
  6. Require human operators

Not only are existing networks costly to maintain and operate, but they cannot keep up with the growth of the industry and amounts of data being collected by satellites, forecasted to have a 10-fold increase in capacity (about 17 Tbps by 2026).¹

Solution:

Atlas provides a revolutionary approach to satellite communications. In 2017, Morgan Stanley listed Atlas as a top 12 disruptor in the satellite industry, by providing satcom as a service. Atlas modernizes satellite communications by offering a system that is both more advanced and cheaper than competitors’ offerings. Atlas’ advanced technologies allow for satellite owners and operators to:

  • Communicate with multiple satellites simultaneously during a single session.
  • Seamlessly transfer and process data that reduces latency from up to twelve minutes to eight seconds.

In addition, the company’s satellite systems are approximately 1/10 the cost of competing options.

The result is an easy to use satellite communication system that eliminates headaches for owners and operators.

The Atlas solution:

Benefits include:

  • Antenna technology that provides for multiple satellites to simultaneously connect
  • Software-centric cloud based network that is fully automated
  • Allows for more data and faster speeds
  • Significantly reduced costs
Market Size:

Atlas’ growth will be driven by Big Data. As mentioned above, the amount of data that a satellite transfers is expected to increase dramatically in the near future. Current legacy satellite communication systems cannot handle the exponential increase in data demanded by commercial and government operators.

The amount of small satellites orbiting the earth is rapidly increasing. According to Bryce Space and Technology (an analytic consulting firm to the space and satellite industry), there were 6x as many smallsats launched in 2017 compared to 2012. As the cost of launching satellites continues to fall and the usage of microsatellites becomes more prevalent, it is expected that the number of satellites in orbit will dramatically increase. It has been projected that 3,000 nano/microsatellites will be launched over the next 6 years with 70% being commercial.

The commercial space managed services market is valued at $6.2 billion (as of 2016) and grew at 13-15% CAGR for the previous two years.²

Competition:

 

Major Players

  • Kongsberg Satellite Services (KSAT) and Swedish Space Corporation (SSC) – both have expensive legacy technology with high overhead costs.
    • The cost of KSAT and SSC support is equivalent to building a small satellite which does not make sense for small companies.
    • The data latency of these methods is approximately 12 minutes and there are no back-end data processing/interpretation services provided.
    • The legacy technologies these companies utilize do not allow an operator to simultaneously communicate with multiple orbiting satellites.
    • These two major players are both foreign owned companies which is not preferable for US government contracts.

Minor Players

  • Spaceflight Networks – Limited network expansion due to capital commitments and cost.
  • RBC Signals – Limited commanding and Russian funded. A US company had data security issues with their service.
  • Telesat – Primarily operates and leases time to users of their own fleet of commercial satellites.
  • Intelsat – Primarily operates and leases time to users of their own fleet of commercial satellites.
  • Audacy – A startup attempting to operate a network of 3 satellites to relay information.
    • The minor players listed above are either reselling their own satellite communications or are largely limited in their ability to expand their network.

Vertical Integration

  • Customer Insourcing – Limited to operating needs and requires massive capital outlay to establish
The Atlas Product:

ATLAS Links System and Freedom Platform

Communication Steps

  1. When up to four orbiting satellites come into range of an Atlas antenna array, the Atlas Site Server tunes the array to the appropriate receiving channel and automatically begins receiving raw data.
  2. The Atlas in a Box (AIB) compiles the transmission received from each part of the array into one coherent signal.
  3. This data is transmitted as it is received to Amazon Web Services (AWS) which decodes the data into a usable format.
  4. When the satellite stops transmitting information, the AIB stops the array from receiving information.
  5. The client may immediately use the data as their business needs dictate

A description of the conventional method satellite communications can be found in Appendix A.

Atlas improves satellite communications by automating the process. Traditional methods result in a data latency of up to 12 minutes. Atlas Space Operations can provide significantly faster data latencies of 8 seconds. This improvement in speed stems from two factors:

  • A traditional satellite operator will receive all of the data before transferring it to a client. Atlas will send the data to the client as it is being received.
  • Traditional satellite operators will wait until a satellite is out of range before stopping the transmission receiving process and then sends out the data. Atlas automatically stops the data receiving process when the data transmission ceases.

An analogy – Blockbuster (established methods) vs. Netflix (Atlas). The established methods are similar to Blockbuster. One first has to drive to the store; rent the DVD; return home; and then finally begin watching the movie. The Atlas method is like Netflix; one may begin instantly watching the movie as it downloads to their television/computer.

According to the CEO of Atlas, “ATLAS is set up to be the world’s premier provider of space to ground communications access. Whether from LEO (low earth orbit), MEO (medium earth orbit), GEO (geostationary earth orbit), the Moon (and beyond), RF data or optical, these companies turn to us for solutions/advice. They also want to form partnerships with us, because of our expertise and plans for global expansion in both RF and optical.

“We have found a way to build multi-channel predictable revenue streams through a single market segment. The customers are companies who launch satellites (Vector), companies who currently own/operate satellites (Spire), companies building satellites (PlanetIQ), and the government (who does all three). We sell managed services through ATLAS Freedom to satellite owner/operators, satellite builders, and launch providers. We sell what we are calling “Direct Access”, instead of hardware sales, to companies like Spire and Planet. Direct Access is the sale of the capabilities afforded by ATLAS Freedom/LINKS. We are creating a new market paradigm where no customer should have to purchase, own, maintain, and depreciate hardware. They purchase capability. That is Satellite Operations as a Service. It’s the AWS, Sun/Oracle, Drobox way of doing business.”

Sales & Distribution:.

Atlas is post-revenue with 4 main lines of revenue*

Current and prospective customers include:

  • Government – NOAA, NASA, Air Force
  • Network Services – BlackSky Global, Space Systems Loral, USEI
  • Launch Support – Vector, Rocket Lab, Virgin, Firefly, Aevum
  • Hardware Sales – Telespazio, teleport operators and ground equipment vendors

*Future market expansion in geospatial, IoT and mobility discussed below.

Revenue Generating Services

  • Freedom Access Services
    • A subscription service that includes both the Atlas Links system and Atlas Freedom interface. Service plans vary according to data usage.
  • Freedom Direct Access
    • Upfront equipment and installation charge for usage of the Atlas Links system. The customer integrates the Atlas Links system into their own satellite communication operations.
    • Annual cost for access

Atlas will use the government’s validation as leverage as it expands into the private sector

  • Contract already executed with the National Oceanic and Atmospheric Administration (NOAA) for up to $4m
  • Contract award pending with NASA for up to $50m
  • Development contract pending with the Air Force for up to $100m

Commercial traction in the private satellite sector has already started with Master Service Agreements to support future satellites with BlackSky Global, Helios Wire, Astro Digital, PlanetIQ, Blink-Astro, SpaceQuest, Vector Launch and Firefly. Below is the potential for new constellations.

 

The majority of this Series A round will pay for the network buildout (please see map below)

  • 9 locations to be operational by the end of 2018
  • 12 additional locations planned for 2019

 

Commercialization of LINKS (antenna)

  • Early targeted adopters include:
    • Spire
    • Planet Labs
    • Analytical Graphics
    • Kratos
    • US Air Force
    • US Army

Future Business Development in the Big Data Market ($5b market potential)

  • Atlas is capable of providing secure data transport and warehousing to support all markets such as geospatial data consumers (agriculture, oil & gas, telehealth and mobility) and IoT connected devices (75b projected by 2025)
  • Target markets include mega constellation companies (i.e., SpaceX, OneWeb (which is projecting 15,000 satellites)), existing constellation owners/operators (i.e., Intelesat, EchoStar, GlobalStar) and data consumers (i.e., Bayer/Monsanto and ConAgra)
Management:

Casey Cowell, Executive Chairman of the Board
Casey Cowell graduated from the University of Chicago receiving an A.B. degree in Economics in 1975. In 1976, at the age of 23, he co-founded U.S. Robotics, Inc. (USR). He served as Chairman and CEO throughout the company’s history culminating in its merger into 3COM Corporation. A $200 post-college start-up, U.S. Robotics became the world’s largest manufacturer of modems and related products that connected computers to the global telephone network. In addition to a broad array of other products and technologies, USR also brought to market the Palm Pilot, the first highly successful handheld organizer. USR distinguished itself by designing and manufacturing all of its products in its own factories in the US in a period when US companies were focused on moving offshore. Its revenues grew from $50 million in 1990, the year before it went public, to $2.5 billion in 1997. Casey is an active investor, advisor and board member in a broad range of companies with an emphasis on start-ups and early stage. He is engaged in many civic and philanthropic efforts and organizations with emphasis on upper Michigan and Traverse City.

Sean McDaniel, CEO and President
Sean began his career in the aerospace industry by enlisting in the United States Air Force in 1993. In 1997 Sean was commissioned as an officer in the USAF through the ROTC program at Michigan State University, where he earned a BS in Mathematics. Sean served as a Space Launch Officer and a Space Flight Test Manager. He holds a MS in Aerospace Engineering from the University of Colorado – Boulder, with an emphasis on Space Flight Dynamics. In 2004, Sean worked for the Northrop Grumman Corp in design, test, and operations one of the most complex space-based optical infrared sensor systems ever launched and operated on orbit. He also worked as Senior System Test Manager of Northrop’s Unmanned Aerial Systems (UAS) Division.

Brad Bode, Chief Technology and Chief Innovation Officer
Brad joined TRW (now Northrop Grumman) after graduating with an MS in Computer Science from Northern Illinois University in 2001 and quickly gravitated to R&D. He developed the prototype for a Measures and Signals Intelligence web portal for sharing and delivering content across the classified internet, and created the Pervasive Intelligence Surveillance and Reconnaissance platform, successfully coordinating various classified government sensors. Critical to ATLAS’s success, Brad created a Mission Management Platform for building and maintaining satellite to ground communication schedules which was used on a high-profile Missile Defense Agency program to replace software that was a thousand times more expensive, leading to his product being used within a Northrop Grumman Product Line.

Mark Malosh, Chief Operating Officer
Prior to joining ATLAS, Mark, was a founding member of the technical team at Gogo Inflight, Inc., the world’s leading in-flight communications provider. Serving as Senior Vice President, Mark was responsible for the delivery of technical product and services for both domestic and international airlines. Mark also managed technical operations for GoGo’s national wireless network and infrastructure along with aircraft engineering and supply chain, as well as installation, service, and maintenance of equipment for more than 3,000 commercial aircraft. Mark holds degrees in Electrical Engineering, with a Bachelor of Science from Michigan Technological University, and a Master of Science from the University of Illinois- Chicago; and he holds a Master of Business Administration from the University of Chicago. His experience within the communications industry includes technical oversight and leadership of RF and Network engineering, operations, data centers, as well as field operations and deployment, supply chain and logistics.

Mike Cary, Chief Strategy Officer
General Mike Carey brings over three decades of relevant experience in satellite and space-related operations to shape ATLAS’s future through strategy development, business planning and market engagement. The former CEO of AAC Microtec North America, Inc, General Carey brings fresh market insight to the small satellite industry. As an experienced veteran from the Air Force Satellite Control Network, the Eastern, Western test ranges and founder of the Space Test and Training Range, General Carey has a comprehensive technical and political appreciation of American technical prowess in space C2 markets.

Michael Rendine, Vice President and Founder
Mike entered the US Air Force after graduation from Rutgers University, School of Engineering. His initial Air Force assignment required the flight-testing of equipment in combat conditions, and he received a Bronze Star (V) and Air Medal for his service during Tet and the siege of Khe Sanh. His subsequent assignments included development and test of the F-15 and F-16 fighter aircraft and AIM-9 air-to-air missile. During both Reagan Administrations he served as a project manager in the Strategic Defense Initiative Organization (SDIO). He retired as a full colonel and joined the Brilliant Pebbles program at Lawrence Livermore National Laboratory. He subsequently served as the Vice President of Army launch vehicles at Orbital Sciences, Chandler AZ before founding Assured Space Access Technologies (ASAT), First Shot Cycle Parts, and ATLAS Space Operations, Inc.

Joe Winowecki, Chief Financial Officer
Joe Winowiecki is a 30-year finance and business executive with demonstrated success in helping companies achieve high growth and profitability. Joe is a strong finance professional skilled in: Accounting Principles, Policies, Systems and Procedures; Treasury Management; Human Resources; Strategic Planning; Business Development; Business Process Improvement; and Mergers and Acquisitions. Prior to joining the ATLAS team, Joe served as CFO of Versus Technology, Inc. where as a key member of the leadership team, he helped lead this healthcare automation company through double-digit growth and profitability and ultimately the sale of the company. Joe’s experience includes ownership of four other companies and negotiation/integration of several acquisitions and mergers. Joe’s education includes a Bachelor of Arts in Finance and Accounting from Michigan State University and a Master of Business Administration in Accountancy and Taxation from DePaul University. Joe earned his CPA designation in 1989.

Atlas has assembled an experienced team of 15 full-time employees. Many of the co-founders composed the management of Assured Space Access Technologies(an engineering service provider focused on defense space system engineering, system test, software engineering and process improvement services and solutions). The management team has demonstrated a capability to develop cutting edge space communication technologies.

Recent hires have augmented the team’s capabilities. Mark Malosh (the COO), formerly of GoGo, will focus on improving the company’s ability to secure and close transactions with both corporations and government agencies. He was the 8th employee at Gogo Inc. (currently has a $900m market cap and 1,183 employees).

Metrics:

Key market growth statistics indicate rapid market growth. The number of launches and orbiting satellites has been growing rapidly. Intense competition amongst reusable rocket manufactures such as SpaceX and Blue Origin will further depress one-time rocket launch costs as these technologies approach commercial capabilities. The miniaturization of satellites and emergence of the ‘micro-satellite’ class of devices have also improved launch economics. It is now easier for a single rocket to launch a greater number of smaller and lighter devices. Please see below charts from Spaceworks Enterprises, Inc.’s 2018 Small Satellite Report.

Financial Projections:

 

Note for 2018:

  • Realized revenue YTD is $320k
  • Upside to $4.1m with LaserLight, Millenium Space Systems, Raytheon and Nova
  • Original 2018 sales forecasts of $6m were not met due to the following:
    • Two launches had been postponed representing $2 million in contracts
    • A $2.5 million sale of antennas (with Miles Space) had not been closed. The contract with Miles Space and their antenna has recently been re-negotiated in perpetuity subject to standard termination provisions such as breach, bankruptcy, etc.
    • The U.S. Air Force is signing a $1.5 million 6-month contract in Q4, 2018 and will be invoiced in Q1, 2019.

 

 

Exit Strategy:

Active industry consolidation

  • MacDonald Dettwiler & Associates bought Digital Globe for $2.4 billion and Space Systems/Loral for $875 million in 2012
  • Comtech acquired Telecommunications Systems in 2016 @ 11x EBITDA ($431 million)
  • Google bought Skybox (Terrabella) for $500 million in 2014
  • Planet bought Blackbridge (2015) and Terrabella (2017)
  • Swedish Space Corp acquired Universal Space Network @ 11x EBITDA in 2009

Target

  • Equity purchase @ 10-12x EBITDA
  • Projected EBITDA for Atlas of $84.7 million in 2022 and $123.4m in 2023
  • Based on projected EBITDA per Atlas and comps mentioned above, target exit price is between $840m-$1.2b in 2022/2023

¹ Rousseau, Claude. Via Satellite Digital, Six Things NSR Learned at the Global Connected Aircraft Summit. August 2018. http://interactive.satellitetoday.com/via/august-2018/how-do-you-value-data-from-space/

² Bryce Space and Technology, State of the Satellite Industry Report (2017).

Appendix A: Traditional Satellite Communication Method

Traditional Satellite Communications

Communication Steps

  1. When one orbiting satellite comes into range of a ground antenna an operator begins to receive raw data.
  2. The data is recorded onto a local sever at the satellite ground station.
  3. The operator (human) waits until the satellite is no longer within communication range and stops the transmission.
  4. The client initiates a data transfer and the recorded data is sent over a wide area network (WAN) such as the internet to the client.
  5. The client’s server interprets the raw data and makes into a useable format.
  6. The client uses the data as their business needs dictate
Appendix B: Atlas Links System

Atlas Links System

Communication Steps

  1. When up to four orbiting satellites come into range of an Atlas antenna array the Atlas Site Server tunes the array to the appropriate receiving channel and automatically begins receiving raw data.
  2. The Atlas Site Server compiles the transmission received from each part of the array into one coherent signal.
  3. The client integrates the transmission with their existing data systems.
Appendix C: Sales Traction by Service

Freedom Network Services – Commercial

  • BlackSky Global – $600k, 36 month contract awarded, expecting to add 4 additional sites in 2019 for another $1.2M and proposal to support BSG constellation of 20 Satellites with the potential of $18M over 5 years
  • LaserLight – $18M, 60 month contract awarded with $1.8M advance payment due in Q4, 2018 and $3.2M annual revenue
  • Space Systems Loral – $400k contract awarded which is 75% complete, discussions for future services underway
  • AAC Microtec – $250k initial contract pending, projected to close Q4, 2018
  • Blink Astro – ATLAS selected as network service provider for constellation of 8 satellites, $1.5M contract expected to be executed Q4, 2018
  • Harris – Contract awarded, first billable services starting in Q4, 2018*
  • Astro Digital – Contract to be awarded in Q4, 2018 to provide network services for 2 satellite constellations*
  • SpaceQuest – $500k contract pending, Q4, 2018

Government

  • NOAA – COSMIC 2, $3.8M, 48 month contract awarded with potential additional $1M to be awarded for additional sites in 2019; NOAA also piloting Freedom Software for managing their entire constellation
  • NASA – Deep Space and Near-Earth Network (potential $50 million/yr.)
  • USAF – Expect $1.5M joint development contract to be awarded in Q4 2018, with potential 5-year, up to $100M contract to follow

LINKS Hardware and Software

  • Telespazio – $300k joint development agreement Q4, 2018 with potential of $5M contract
  • Aerospace Industry: Millenium Space Systems (Boeing), Raytheon and NOVA – proposals and negotiations underway for LINKS antenna deployments with initial short-term (Q4, 2018/ Q1, 2019) value of $2M and long-term potential in the $50M – $100M range

Launch Range Services

  • Vector Launch, Inc. – Contract signed ($100k/launch, $2.6 million/yr.)
  • Rocket Labs – ATLAS selected as exclusive provider of launch support; final contract negotiations expected to be completed Q3, 2018*
  • Helios Wire – Contract awarded, first billable services starting in Q4, 2018*
  • Aevum – Contract signed, ATLAS selected as exclusive provider of launch support*
  • Virgin Orbit – Proposal and negotiation for launch support contract*

* potential to be north of $500k to $1M over 24 to 36 months

Appendix D: Selected Interview Quotes

Richard Ullman, Deputy Division Chief at NOAA

  • Atlas has competitive price, team is very responsive and technically very good
  • The government prefers US-owned companies. (Competitors are all foreign)
  • NOAA has more work than Atlas can handle; Atlas has the tiger by its tail

Kjell Stakkestad, President and CEO of KinetX

  • Antenna on the ground is a commodity which no one wants to own and maintain.
  • Small satellite companies are finally taking off (inflection point) and are affordable, they need Atlas
  • The first launch will be Dec. 2018 and they are finalizing the terms of the contract this summer. Within 18 months, the plan is to launch another 39 satellites and then build 3/yr. going forward
  • Goal is to arrange a deal where Atlas provides the antennas, commands satellites and sends the data down

Jim Cantrell, CEO of Vector Launch, Inc.

  • Atlas is the only company with software defined ground stations which are very agile and allow for more throughput and usefulness
  • Over next 5 years, contracts with Atlas could be between $50-$90m

Chris McCormick, Founder, Chairman, and CEO of PlanetIQ

  • The system is great because you can talk to satellites simultaneously.
  • It’s easier (for Atlas) to get permission to place a dish since you do not have to build a facility or place an enormous send/receive dish.

Dr. Darren Garber, Chief Scientist and Founder of Vector Launch

  • Atlas is a ‘genius move’ that helps new space companies avoid vertical integration. There is no distribution team to handle satellite communications.
  • Atlas does back end processing; end-to-end encryption; regulation; fees; and deals with other countries for clients which is one less thing to worry about.

Jeff Stoen, Operations Technical Director at Space Systems Loral (SSL)

  • System is an electronically steered dish (phased array) versus others who provide parabolic antennas which are much costlier and only provide a full 2 degrees (in beam width)

Robert Sproles, R&D Program Manager, Spire

  • No moving parts on their antennas which reduces maintenance costs
  • The antennas have a lower wind profile which can survive in areas where their current antennas cannot
  • One person set up for Atlas antenna vs. several people
  • Signal to noise ratio may be better
  • 1:8 antenna to satellite ratio would be very helpful
Our Take Report: Atlas Space Operations

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