Orbital Lands $600K US Order That Could Unlock 3x Recurring Revenue Deal
Orbital secures US customer order worth A$600,000 for 150HFE engines
Orbital Corporation (ASX: OEC) has received a purchase order from a US-based unmanned aircraft systems company valued at USD $392,420 (approximately A$600,000). The order encompasses five 150HFE heavy fuel engines, a FlexDT Diagnostic and ECU Management Tool, a Power Management System, and Non-Recurring Engineering services.
The engines are destined for a Group 3 long-endurance UAS platform that demonstrated 24-hour continuous flight in March 2025 and holds commercially approved Beyond Visual Line of Sight (BVLOS) clearance in the US National Airspace System. Delivery of all five engines and completion of Non-Recurring Engineering is scheduled across a structured milestone payment programme concluding in October 2026, with the first milestone commencing immediately.
The order represents both a technical validation of Orbital’s 150HFE engine in demanding BVLOS applications and the establishment of a new customer relationship with potential for recurring revenue. The customer’s demonstrated operational capability and regulatory approvals position them competitively for upcoming US government procurement opportunities in the maritime Intelligence, Surveillance and Reconnaissance sector.
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What is Power by the Hour and why it matters for Orbital
Power by the Hour (PBH) is a service-based revenue model where Orbital supplies and supports engines under multi-year operational contracts rather than one-time hardware sales. Under this arrangement, the company generates recurring revenue based on operating flight hours, providing maintenance, overhaul, performance support and replacement across the customer’s operational fleet.
Orbital estimates that total revenue per engine over the life of a PBH service contract is approximately 3x the equivalent direct hardware sale price. This transforms the revenue profile from transactional hardware sales to predictable, recurring revenue streams with significantly higher lifetime value per engine.
The current purchase order is positioned as a strategic precursor to a potential PBH arrangement. Should the US customer secure work under the US Coast Guard programme, Orbital anticipates the opportunity to transition to an ongoing service contract by Q3 FY2027. This pathway reflects the company’s broader strategy of converting hardware relationships into long-term service partnerships where operational circumstances support such arrangements.
US Coast Guard programme represents major long-term opportunity
The US Coast Guard has issued a Request for Information (RFI) for a Contractor Owned Contractor Operated (COCO) UAS ISR Services programme. The programme covers both shore-based and ship-board persistent maritime Intelligence, Surveillance and Reconnaissance services under a Basic Ordering Agreement with a 5-year initial term plus a 5-year option period.
Based on the RFI specifications, Orbital estimates the programme could require up to 80 UAS systems. The company characterises this as one of the largest sustained COCO UAS ISR opportunities in the US Department of Homeland Security procurement portfolio. However, Orbital has stated it is unable to accurately quantify the future revenue stream arising from supply of PBH services under this programme at this time.
| Programme Element | Detail |
|---|---|
| Contract Type | Contractor Owned Contractor Operated (COCO) |
| Services | Maritime ISR (shore-based and ship-board) |
| Agreement Structure | Basic Ordering Agreement |
| Initial Term | 5 years |
| Option Period | 5 years |
| Estimated Fleet Size | Up to 80 UAS systems |
The revenue opportunity for Orbital is contingent on the customer’s success in securing work under the Basic Ordering Agreement. The procurement process timeline and competitive dynamics remain external factors beyond the company’s control.
The 150HFE engine’s specifications and track record
The 150HFE is an air-cooled opposed twin-cylinder heavy fuel engine purpose-matched to the demanding endurance and reliability requirements of persistent maritime ISR operations. Key specifications include:
- 11.9hp (8.8kW) output at 20,000 ft AMSL
- 750-hour Time Between Overhaul
- Optimised for long-endurance maritime surveillance missions
Orbital’s broader Flex DI technology platform delivers up to 40% greater fuel efficiency than conventional injection systems, along with multi-fuel capability across JP-5/8, Jet-A and gasoline. The engines feature cold-start capability within two minutes, addressing operational deployment requirements in diverse environmental conditions.
The company’s heavy fuel engines have logged more than 1 million hours of operational flight time with the US Navy. This operational track record demonstrates proven reliability in defence applications, de-risking adoption by new customers targeting similarly demanding use cases in the maritime ISR segment.
CEO sees order as beginning of substantial customer relationship
Stephen Pearce, CEO
“This order marks an important milestone for Orbital. It is both a validation of our 150HFE engine’s capability in a demanding long-endurance BVLOS application and the beginning of what we anticipate could be a substantial, long-term customer relationship… For Orbital, the real strategic prize is the Power by the Hour opportunity that follows with a multi-year, recurring revenue stream that could be worth multiples of the initial hardware sale.”
The CEO’s commentary emphasises the dual significance of the order: immediate validation of technical capability in a commercially approved BVLOS platform, and strategic positioning for potential transition to a recurring revenue model. Management’s characterisation of PBH as “the real strategic prize” underscores the company’s focus on service-based revenue models as a value creation pathway distinct from transactional hardware sales.
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What comes next for Orbital
The structured milestone programme provides visibility on near-term revenue realisation, whilst the larger strategic opportunity remains tied to the customer’s procurement success:
- Immediate commencement of first NRE milestone
- Engine deliveries and NRE completion by October 2026
- Customer’s progression through US Coast Guard procurement process
- Potential PBH transition by Q3 FY2027 if customer secures Basic Ordering Agreement work
Investors should monitor for updates on the customer’s success in the Coast Guard procurement and any subsequent PBH agreement announcements. The revenue trajectory beyond the initial A$600,000 hardware order depends on external procurement outcomes currently beyond Orbital’s control. However, the establishment of this customer relationship in a platform with demonstrated operational capability and regulatory approvals positions Orbital to participate in potential fleet-scale deployment should procurement outcomes materialise favourably.
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