Filtronic posts earnings hike on SpaceX sales

The UK maker of RF, microwave and mmWave components and subsystems revealed it expects EBITDA for the year to the end of May to come in at £4.8 million. That's a pretty small sum relative to the broader telecoms equipment industry, but the important thing here is the level of growth. Filtronic posted earnings of £1.3 million in fiscal 2023, so it is looking at an almost fourfold increase.

Similarly, the firm puts FY2024 revenue at £25.4 million, an on-year increase of 56%. And its cash position is looking healthy too; net cash at 31 May was £5.2 million, up from £2.4 million six months earlier.

The numbers are, Filtronic says, "ahead of market expectations as trading momentum continues to build, in what has been a transformational year for the business, after entering into a Strategic Partnership with SpaceX as we previously announced on 24 April 2024."

And that's why Filtronic's announcement is noteworthy: it demonstrates the impact the rapid expansion of low-earth orbit (LEO) satellite market is already having on the industry.

Filtronic already had a deal in place with SpaceX for the supply of E-band Solid State Power Amplifiers (SSPA). In April it strengthened ties with the company, revealing a $19.7 million (£15.8 million) order from SpaceX for E-band SSPAs for the Starlink constellation to be delivered in fiscal 2025 and the expectation of more orders further in the future. SpaceX committed to ordering equipment from Filtronic for the next five years.

In addition, SpaceX picked up 21.7 million Filtronic warrants, convertible into a maximum of 10% of Filtronic's shares once it has made at least $60 million (£48 million) worth of equipment orders with the vendor.

At the time, Filtronic noted that its financials for 2024 and 2025 would exceed expectations and – understandably – its share price rocketed and remains high at above the 70 pence mark, having traded at or below about 20 pence for years prior to 2024.

Today's trading update just confirms that announcement. And it serves as yet another indicator that LEO satellites are big news.

"The business operations scaled significantly in H2 due to strong product demand within the core markets we serve," Filtronic said. "A key driver of this was the emerging market of low earth orbit ('LEO') space and in particular, sales to our lead customer, SpaceX, the market leader in this sector."

SpaceX's latest launch came just two days ago when it sent 20 Starlink satellites into orbit, including 13 with direct-to-cell capabilities, taking its total to 356 launches to date. According to Space.com, the firm has averaged one launch every 2.8 days so far in 2024.

For now LEO satellite operators – and Starlink is the largest of a fair number – are focusing on improving broadband Internet coverage in hard-to-reach places and are starting to look at direct-to-cell services in partnership with telecoms operators, to boost mobile reach. But further ahead they look set to play an important role in 6G mobile, which will likely require network coverage beyond cellular to reach its potential.

Filtronic seems to be in the right place at the right time.