On February 20th, AAC Clyde (STO: AAC) released its year-end financial results for 2024, reporting record quarterly revenue and net profit for Q4 2024. The company became the first new space public company to achieve two consecutive profitable quarters. The robust revenue figures were anticipated, as management had previously projected total revenue for 2024 to be between 350 and 400 million SEK following Q3. By the end of Q3, AAC Clyde had generated SEK 209.8 million, leaving investors expecting a Q4 revenue between 140.2 million and 190.2 million SEK. The actual Q4 revenue came in at 143 million SEK, landing at the lower end of that range. Following this announcement, the stock surged by 21%.
Backlog decline and potential DaaS order cancellations
However, not everything is as encouraging as it may initially seem. While we have generally maintained a bullish outlook on AAC on this site, a note of caution is warranted. The latest quarter has adversely impacted AAC Clyde’s backlog, as the company delivered products more rapidly than new orders could replenish. If this trend continues, sustained revenue growth may become challenging.
Additionally, a closer examination reveals that investors’ most valued revenue segment—Data-as-a-Service (DaaS)—may have faced cancellations. The Q4 backlog dropped by more than the amount of DaaS revenue recognized in Q4 compared to the Q3 backlog. At the end of Q3 2024, AAC Clyde reported approximately 268 million SEK in DaaS backlog, but by the end of Q4, DaaS revenue totaled only 15 million SEK, bringing the DaaS backlog down to approximately 168 million SEK. This discrepancy suggests there may have been at least 85 million SEK in DaaS order cancellations. Since Data-as-a-Service offers the highest margins, investors expect to see growth in this backlog rather than cancellations.
Apparent year-on-year decline in Products segment revenue
AAC Clyde has consistently reported segment revenues, highlighting that strong growth in the Products segment has been a key driver of the company’s overall revenue growth. This is positive, as the Products segment typically offers higher margins than the “Space Missions” segment (i.e., sales of complete satellites).
In the past, AAC has disclosed quarterly segment revenues along with eliminations for each segment. When AAC Clyde sells a product or service to one of its subsidiaries, this revenue is eliminated in accordance with accounting standards. However, in AAC Clyde’s 2024 year-end report, segment eliminations were no longer reported individually; instead, the report presented only a cumulative total for all segments. This lack of detail makes it impossible to accurately calculate external revenue by segment. If we rely solely on the segment revenue figures reported for 2024 without considering eliminations, it may appear that all segments experienced revenue growth.
Nonetheless, AAC Clyde had 38 million SEK in eliminations for 2024. In 2023, 29.8% of the total eliminations were attributed to DaaS, 4.2% to Space Missions, and 65.9% to Products. Assuming a similar distribution for 2024 allows for the calculation of external revenue by segment. This analysis indicates that the Products segment actually retreated during 2024, while the least profitable segment—Space Missions—contributed most significantly to overall revenue growth for the year.
Lack of financial forecasts from management
In AAC Clyde’s 2023 year-end report published in February 2024, AAC presented 2024 revenue and EBITDA guidance. This guidance was suspiciously missing from AAC Clyde’s 2024 year-end report just published. CEO Luis Gomes previously told investors that 2025 guidance would come out in early 2025. Anytime an executive goes back on his word and delays guidance gives reason for investors to be nervous.
Closing thoughts
AAC Clyde crushed it in 2024. As of the date of this post, the stock has risen 52% since the release of its Q4 financials. Notably, AAC Clyde seems to be the only profitable publicly traded company in the new space sector. Currently, it trades at a P/E ratio of 8x of twice the value of the prior two quarter’s earnings. Even with the 52% stock price increase, AAC Clyde still is likely one of the most undervalued stocks among all companies in the space industry.