Spire Global Inc. Q1 2023 Earnings Call
Greetings and welcome to the spire Global first quarter 2023 call at this time all participants are in a listen only mode.
<unk> and answer session will follow the formal presentation. If anyone should require operator assistance. During this conference. Please press star zero on your telephone keypad. Please note. This conference is being recorded I would now.
Now I'll turn the conference over to your host Ben Hackman head of Investor Relations you may begin.
Thank you Hello, everyone and thank you for joining us for our first quarter 2023 earnings Conference call. Our earnings press release, and SEC filings can be found on our IR website at IR Dot spire dotcom.
A replay of today's call will also be made available.
With me on the call today is Peter plots are CEO and Tom Cry, we CFO .
As a reminder, our commentary today will include non-GAAP items reconciliations between our GAAP and non-GAAP results as well as our guidance can be found in our earnings press release. Some of our comments today may contain forward looking statements that are subject to risks uncertainties and assumptions in particular, our expectations around our results of operations.
Financial conditions are uncertain and subject to change.
Should any of these expectations failed to materialize or should our assumptions prove to be incorrect actual company results could differ materially from these forward looking statements.
Description of these risks uncertainties and assumptions and other factors that could affect our financial results is included in our SEC filings with that let me hand, the call over to Peter.
The first quarter was yet another quarter of growth and progress towards profitability.
Spire added another quarter to an unbroken record of quarter over quarter revenue growth since becoming public.
Additionally margins took another step forward as we continue on our journey to profitability.
Inspite of the continuing macro headwinds our diverse solutions are resonating with customers.
When you see broad based demand for our solutions, which is reflected in our ear I, which has now increased to over $100 million.
Even in a challenging business environment. The margin progression. We are seeing is a direct result of the cost structure, we put in place prudently sharing infrastructure and resources across our four solutions.
Demand for our solutions remains strong across a wide and varied customer base.
We added 48 net new AOR solution customers in the first quarter, which is yet another proof point demonstrating how we are solving critical and challenging use cases for global commercial and government customers.
This growth shows cases, the potential business opportunities in the large untapped market that remain in front of us.
We continue to see diversity in the use cases for our data and analytics for example, as the world is looking for ways to combat climate change in government and so she can energy security cheap offshore wind energy, it's been looked to as one of the main energy sources for a better future.
According to the U S Department of energy instead.
Installed capacity for offshore wind energy is expected to grow significantly to 260, gigawatts or more by chance at 30.
This is up from the current installed capacity of 50, Gigawatts and the number of countries generating energy from offshore wind is expected to double over the next decade.
This growth provides opportunities for spire global weather forecast.
Which provides accurate ocean wind conditions and is crucial for operational efficiency and crew safety when planning constructing and operating offshore wind farms.
Just yesterday, we announced the Canadian Space Agency has awarded a contract with spire and Aurora attack.
To deliver preparatory work for wildfire monitoring satellite.
The contract is the initial step two which C. S. As planned wildfire mission, which aims to monitor all active wildfires in Canada from space on a daily basis.
This is yet another example of a developing market, but I'm more than 500 years of space Heritage can have an impact on human life at.
According to Muni greed global wildfire losses from 2018 to 2022 totaled 69 billion, Canada spends around 1 billion every year fighting wildfires with indirect cost estimated to be several times higher due to the resulting property destruction.
Infrastructure damage evacuations, and wider economic losses across business sectors, such as forestry energy and tourism.
As companies like spire have brought in new data and analytics to market. Okay.
Nations that are entrusted with providing intelligence to keep the world a safer place are evaluating and purchasing our data.
We recently announced that the N of ROE well continue to use spires data to evaluate how commercial radio frequency data will be integrated into its overhead architecture. The agency and member of the U S Intelligence community, which has requested a budget an increase of over 8% for FY 'twenty.
For he is looking at spire stater as it is expanding the acquisition and integration of commercial space based data for situational awareness.
Spire is fully deployed constellation of over 100 satellites monitors radio frequency signals to provide data and analytics on global weather intelligence ship in plain movements, and spoofing and jamming detection. After those satellites spinal operates over 40 that help detect and.
Relocate signal interference jamming and spoofing.
These satellites can identify the power location and directionality of such events in multiple frequency bands.
Beyond applications for intelligence communities knowledge of signal interference jamming and spoofing have applications within the commercial ecosystem for instance, inaccurate or spoof gnl's signals can cause significant disruptions to transportation and logistics industries that utilize the signals to track.
And monitor vehicles ships and airplanes.
Many businesses rely on G. N S. S. Four critical operations, such as precision agriculture surveying and mining.
And those responsible for managing our ocean fisheries seek to have critical insights on vessels operating within protected areas.
By collecting data that is unseen spike it helps to predict how patterns impact global securities economies and human life.
Also within the quarter spire announced that we have been awarded an indefinite delivery indefinite quantity contract by the National Oceanic and atmospheric administration for orders under a 59 million ceiling through March 20th century spire can provide NOAA with near real time R. O data that consists of vertical.
Files of atmospheric measurements, including pressure humidity and temperature across all points of the globe as well as ionosphere measurements.
These data has been used successfully finalized operational weather forecast space, whether models and climate research among other applications.
<unk> is the largest producer of radio quotations are powerful form of weather data.
That's by a fully deployed constellation of more than 100 satellites and offers a vast portfolio of current whether historical weather data and weather forecast solutions. They're currently capable of providing 20000 radio application profiles per day and could achieve up to 100000 profiles.
Day in as little as 18 to 24 months.
Additionally, we recently announced a deal with N clear.
And Claire is using spy assassin my data to offer up to date vessel information and erez positions to support freight bias port agents ship owners and charterers with business planning and foster document creation.
This enables clients to unlock time savings using automated document generation and reduce lead time processing by up to 40 minutes.
And Claire as part of 1000 small and medium enterprises in the maritime space a number that has been growing steadily in the double digits as the maritime industry is embarking on a digital transformation journey.
Turning to our aviation data analytics business spire announced a long term agreement with C. H aviation to supply global flight analytics and insights that will enhance its airline intelligence database.
The agreement includes access to spires daily fight report, which aggregates hundreds of millions of satellite and terrestrial agents be positions to provide actionable flight aircraft and airline data.
Despite his flight reports detects both scheduled and unscheduled flights occurring in near real time across the globe, including in remote regions well. It is not possible to track flights with terrestrial data services and traditional radio and radio systems.
CH aviation is integrating smile satellite data with its own data to derive insights on aircraft utilization provide post departure passenger capacity based on actual seat configurations flow.
Wet lease contracts in aircraft at maintenance repair and overhaul or MRO provide us automatically update then aircrafts status and location and allow users to create flight reports using fleet data criteria.
It will allow MRO provide us to track aircraft maintained by competitiveness lessors to monitor their assets airlines to benchmark their operational performance relative to competitors.
Charter brokers to see which contracts they missed out on the.
The aviation MRO market is roughly an 80 billion market and is expected to grow another 50 billion by 2030.
To share a handful of examples of the use cases are represented by the new logos signed this quarter multiple customers are using our data for marine domain awareness.
Marine domain awareness is a term for monitoring C related activities and it is a fast growing market there.
The global Maritime surveillance market size is valued at around $20 billion and is expected to grow nearly double digits and reached approximately four 2 billion by 'twenty 'twenty six.
This data is being utilized to support both defense and commercial agencies, such as intelligence agencies and agencies monitoring illegal fishing and dock shipping.
Marine industry experts have noted that they see a future where all points on the planet are connected at all time low cost tracking devices in a continuous coverage as possible. We're compliant vessels will be increasingly visible in maritime monitoring systems, causing noncompliant vessels.
To stand out.
As the world becomes more interconnected place there is additional interest in monitoring and securing ocean borders and exclusive economic zones, which span approximately 137 million square kilometers across the world.
And require a satellite data to effectively monitor.
Beyond Marine domain awareness, we are seeing a maritime data being utilized by the broader ecosystem with new customers in industries like trading firms utility firms and data intelligence firms with clients that include investors operators and government agencies.
And as we land these new customers and look to expand our business with them. We are encouraged by the continued broad based demand spending young growing companies taken advantage of the maritime digitalization trend as well as established fortune 100 companies.
While we are pleased with our continued growth during the first quarter, we are even more proud of our progression towards profitability in this very difficult macro environment.
We exceeded our expectations on operating loss adjusted EBITDA and loss per share as we continued our pursuit of profitability.
This strong execution came against the backdrop of challenging macro headwinds on multiple fronts.
You saw near term disruptions into launch market with the bankruptcy of the launch provider.
We're seeing multiple high profile bank failures, increasing interest rate risk appetite sliding to 12 months Loews and tightening lending standards across financial institutions to name just a few.
Banking concerns are having an impact on slowing economic pace initial jobless claims have been above expectations lay up in the tech industry are beginning to spread to other industries and uncertainty over recession continues to be a topic of conversation.
According to the conference board measure of CEO confidence.
Fields remain cautious at the start of 'twenty to 'twenty, three and 93% of the CEO surveyed are preparing for a U S recession over the next 12 to 18 months.
Fire has not been completely immune from this uncertainty.
This macro environment has hampered our ability to upsell and raise prices and as Alan gate at the sales cycle. As a result, we could not raise net retention rate during the quarter, but it still came in at a very healthy, 108%, which is higher than the retention rate in the first quarter of <unk>.
2022.
Even with these macro challenges, we were able to deliver better than expected revenue and bottom line results do you draw a portfolio of diversified solutions to sell and all operational leverage.
Our constellation to support our maritime aviation and whether solutions has been fully deployed for a number of years and since then only requires relatively small annual maintenance in our replenishment capex.
We utilize our manufacturing and operations team and all of our ground station assets across all four of our solutions, but beyond this built in operational leverage.
One area, where you can see those results is the improvement in our gross margins, which improved 11 percentage points year over year, and five percentage points quarter over quarter.
These are processes, we utilize each time, we put a satellite in orbit.
Once launched to space the satellites separates from the launch vehicle and we make contact with the satellite. We then proceed so at checkout procedure to ensure that capabilities tested on Earth survived the physical forces of the launch process.
By analyzing the behavior of our systems over the past 100 plus satellites.
It didn't define bottlenecks in the CNC process and being deliberate about execution efficiency, we have been able to take advantage of learnings, which resulted in process streamlining.
Earlier this year, we successfully reduced to C. N C time by 50% over the previous deployment.
And with our most recent deployment, we have demonstrated the ability to move a satellite through the process five times faster than the previous deployment and we have plans to accelerate this process even more.
This is particularly timely improvement as we will be deploying more space services satellites later this year.
Similarly, we improved our supply chain.
While external market forces are providing an uncertain outlook across all sectors. There are many adaptations inspire has undertaken to best mitigate the associated risks, while simultaneously improving efficiency in our supply chain.
To mitigate the tight capacity everyone is seeing in the market, we have sought out new suppliers and secured capacity.
Some key suppliers, our head of our manufacturing lead time to ensure that we can flex the supply chain to meet the needs of our customers.
You have secured stocks of raw materials, and electrical components, where we saw a risk and shortages simultaneously, reducing our lead times for these items in the future.
We have collaborated extensively with our key suppliers to improve the process time for training around quotes and orders as well as using the expertise in the supply base to help us better design our products for more streamlined manufacturing.
This helps us get our products into and through the manufacturing process in a faster timeframe, allowing us to deliver products faster, while maintaining reliable satellite build performance.
Like the improvements we are seeing with leveraging our manufacturing and satellite operation process.
We also see improvements in lowering our operating expenses as a percentage of revenue.
As we continue to scale the business, we are investing in our employees and Upskilling our in house capabilities.
We are leveraging our internal resources and systems and lowered our use of outside consultants.
We are seeing lower audit and legal fees and with our improving business results. We are obtaining lower insurance cost again, you can see this in our results as the first quarter 2023 non-GAAP G&A expenses were basically flat year over year, while the revenue growth 34% year over.
We're here.
Continued improvements across the business like these.
Give us confidence in our ability to reach and sustain profitability and become free cash flow positive.
While a substantial achievement, becoming profitable is just the first step for us.
As we look beyond the point in time spire begins to generate a profit we ever objectives based on our SaaS business model and unique data analytics offerings.
It is our objective to achieve average SaaS gross margins above 70% in the next two years.
And given continued demand for our unique data and analytics, we expect to be able to achieve these margins with substantially less sales and marketing costs as compared with average ratios seen from SaaS companies.
We expect our operational leverage to continue fueling margin expansion across the board as we pass through breakeven and continue into profitability.
Turning now to our technology.
We continue to see rapid technology improvements along the curve that has now been in place for decades, and spire continues to benefit from and deliver those improvements.
We have been able to demonstrate the geolocation of global navigation satellite system Jamous or G. N is S jamous with a single satellite.
By devising a detection solution utilizing our constellation scale and high revisit rate.
Traditionally these geolocation activities have been accomplished with a cluster of satellites at a higher cost.
One of the only companies that can offer allergy and as S detection solutions at scale for commercial entities like airports civil agencies responsible for weather data or the U S government or other sovereign defense entities truly benefiting global security.
Additionally, we have successfully completed the demonstration to detect and geo locate L band and niches utilizing adaptive existing three year satellites.
These L band frequencies up typically associated with handheld satellite phones, well known before they use it in the various activities such as piracy.
This demonstration is notable for the use of existing satellites, along with minimal nonrecurring engineering activities that spanned only a few months. In addition to the utilization of only two satellites to geo locate which makes it a very cost effective method.
The demonstration validates the ability to geo locate these objects without the need for a much cost there are clusters of satellites.
Finally, we have been able to demonstrate that we can run ground based geolocation algorithms in space on spire hardware and get equivalent results for single satellite E. R. S geolocation.
This is another step in our continuing journey to process. The data on the satellites, which allows us to transmit less stated to our ground station in turn providing foster insights.
Before I hand, it over to Tom I want to recap a few of the metrics from the first quarter.
This is our seventh quarter in a row reporting steady revenue growth as a public company.
During those seven quarters, we've demonstrated a strong trend towards profitability.
The first quarter of 2023 was no exception and further to those trends.
With an outstanding and reliable team in place speier exceeded expectations and reported record revenue in the first quarter.
We also exceeded expectations and reported our lowest loss from operations in those seven quarters.
We reported the best operating margin off those seven quarters.
And we exceeded expectations and reported our best adjusted EBITDA and EBITDA margin in the timeframe.
The first quarter was yet another quarter of relentless execution.
I could not be more excited about spire future as we continue penetrating our growing in global markets on convert our topline growth into bottom line profitability.
And our growing impact on making the world more safe sustainable and prosperous place for all and with that I'll turn it over to Tom.
Thanks, Peter we had a strong first quarter of execution with revenue non-GAAP operating loss adjusted EBITDA non-GAAP loss per share and they are a solution customers all coming in above the high end of our guidance.
Our results also provided another successful quarter of methodically progressing on our trajectory towards profitability.
Q1 revenue increased 34% year over year to $24 2 million once again, hitting a quarterly record and exceeding the high end of our guidance.
At quarter end was $104 8 million up 28% year over year.
And within our guidance range.
We finished the quarter above guidance with 781 AOR solution customers.
25% increase year over year.
And a net add of 48 customers quarter over quarter.
Our Q1 are our net retention rate was 108% up from 106% in the year ago quarter. The Rolling 12 month organic are our net retention rate was 116% essentially flat from last quarters, Rolling 12 month organic AOR net retention rate of 117%. These trends continue to represent a.
Healthy mix of landing a large amount of new customers, while expanding with our existing customer base.
Now I'll be discussing non-GAAP financial measures unless otherwise stated we provided a reconciliation of GAAP to non-GAAP financials in our earnings release that should be reviewed in conjunction with this earnings call driven by exceeding our Q1 revenue expectations, our leveraged business model across four solutions and high asset utilization.
Our Q1 operating loss came in better than guidance at $9 8 million, an improvement of $3 million year over year, and an improvement of over $400000 quarter over quarter.
Total adjusted EBITDA for the first quarter. It came in better than guidance of negative $6 7 million, a $3 million or 31% improvement from negative $9 7 million in the same period a year ago.
We ended the quarter with cash cash equivalents restricted cash and short term marketable securities of 73 million up $2 3 million quarter over quarter we.
We utilized $15 9 million of free cash flow in the quarter, which was a $3.3 million reduction year over year.
As expected this recent increase in cash usage.
Was due to timing of paying our annual compensation and a one time transaction.
Given the significant improvement in cash utilization over the past few quarters, along with receiving nearly $20 million of cash from the existing credit facility in February we were feeling comfortable with our balance sheet.
We remain on track with our objective of generating positive free cash flow intend to 16 months and achieving adjusted EBITDA profitability right before that.
Now turning to our outlook for the second quarter and the full fiscal year 2023.
For the second quarter, we expect revenue to range between $24 million and $25 million.
We expect to finish Q2 with AOR ranging between $112 5 million and her at $13 5 million, which represents a 32% year over year growth rate at the midpoint.
In our era solution customers to finish between 808 hundred 10.
We anticipate Q2, non-GAAP operating loss to range between $9 8 million and $8 8 million.
Which is roughly an $800000 improvement year over year at the midpoint and roughly a $500000 improvement quarter over quarter at the midpoint.
The improvement in projected non-GAAP operating loss reflects further leverage of our head count and infrastructure across our four solutions on our path to profitability.
Adjusted EBITDA for Q2 is expected to range from negative 6.4 to negative $5 4 million.
And we expect our non-GAAP loss per share for Q2 to range from negative 10 cents to negative nine cents, which assumes a basic weighted average share count of approximately $146 7 million shares.
Our full year guidance remains unchanged from what we previously provided on March eight 2023.
As a reminder, we expect full fiscal year revenue to range from $104 million to $109 million.
Which represents a year over year growth of 33% at the midpoint.
We expect to finish the year with are our ranging from 129 million to $135 million, which also represents a year over year growth of 33% at the midpoint, we anticipate full year air our solution customers to end at 835 to 885.
non-GAAP operating loss for the fiscal year is projected to range between 34 million and $29 million.
$13 million year over year improvement at the midpoint.
For the full fiscal year, we expect adjusted EBITDA to range from negative $19 million to negative $14 million and we expect our non-GAAP loss per share to range from negative 36 cents to a negative 33 cents.
Which assumes a basic weighted average share count of approximately 148 million shares.
First quarter results exceeded our expectations and leave spire, well positioned to deliver on our full year financial projections we.
We remain focused on execution, delivering customer success, and improving margins with scale and leverage.
Thanks for joining us today now I would like to open up the call for questions.
Thank you at this time, we will be conducting a question and answer session. If you would like to ask a question. Please press star one on your telephone keypad.
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Our first question comes from the line of Austin, whether with Canaccord Genuity.
Please proceed with your question.
Hi, Peter good afternoon.
Nice to see you.
Thank you Jill My first question is just around the RF geolocation business. As you stated earlier. The company. Currently has 40 lever satellites that are capable of RF silicon capability.
Are you planning to add more satellites as you were appointed as the constellation over time.
How has that capability to get beyond the 40 years 40 sufficient to provide global coverage.
So, yes and yes.
And we have at least 40 satellites I think he is exactly what I said that are providing this capability. We are collecting data that based on some some pricing information we have from customers is potentially worth hundreds of millions of dollars a year just with the X.
Listing capability that we have on all of it. Nonetheless, we continue to develop software capabilities to augment what existing satellites are capable of doing I think we talked about the they stay sat phone detection and geolocation that could be relevant for piracy and other things through through software stories, but me.
Do launch a new assets as well that have the existing but always a further capabilities, adding bands too that they're five or six bands that would be currently collect them over time and expanding it to other frequency ranges as well.
Okay, Great. That's interesting and then just on the the NOAA contract.
Under the terms of that contract being an idea IQ. If you do in the next 18 to 24 months to get to the point, where you can collect 100000 Oro vertical profiles per day does that enable you to increase the amount of Noah's paying you through that contract vehicle over the next several years.
That is correct. So they are abilities for nor is it customer to increase the sealing off that idea IQ. They all do have actually quite a bit more money and appropriated from Congress for commercial data bias. So there is also additional avenues for additional contract vehicles or.
Additional IDI cues for them to keep on procuring more data I mean, they have stated publicly especially from the wettest servicing the head of the wettest survey stopped the Morgan that they need at least 20000.
Our O W. G that the international community of our all weather forecast says that they need at least 25000 and then the sciences stuff. The global weather Enterprise have stated that at least the hundreds of thousands you don't see a decrease in the benefits and it still makes act forecast more accurate.
Especially when he comments to extreme weather events. So that certainly is a clearly expressed need from other customers you know in our case and the national weather service at NOAA as well as the strong support by boxes bipartisan from from Congress to enable NOAA to purchase this data.
It's just I mean, Austin you are familiar with that the U S government has a.
Our work there very well trodden path of leveraging commercial capabilities in satellite communication satellite launch satellite imagery, where you know some people say that over 60% of the government's needs on average is purchase commercially as a service no one's annual budget for.
For satellite data are somewhere between 1 billion and 2 billion. So satellite whether data areas just like the the last the latest one on that path is well understood by the government. It is well supported by our Congress and we are confident that we can continue to partner with them and deliver those capability and then Hans take.
Capability off the United States government as other companies have done it in satellite communication satellite launch and satellite imagery.
Awesome, great to hear they can throttle up utilization. Thanks for all the all the great details.
Of course.
Our next question comes from the line of Eric.
<unk> with Stifel. Please proceed with your question.
Yeah. Thanks, congratulations on the results and great job on the margin improvements.
Maybe just starting there.
On margins are and the outperformance you mentioned leveraging head count.
Restructure costs and other things.
As the year progresses or are there still levers you can pull from the eke out more leverage and how should we think about further improvements and where it may come from.
Yeah. Thanks, Eric Yeah, we definitely have room to continually improve their where we're not where we want to be on the on the gross profits for the future and the margins right, where you get what you can see the continual progression, we're making there and theres a lot more room to do that through a mix of things some of it with the topline growth as we're doing right we exceeded our top.
Under the guidance on revenue with a 30, 34% growth it was over the top and about 500 K.
So we got four solutions to sell we have a huge tam to go after and all the different areas. So a lot of room to grow on the top line, but then on the expense side. We continually just kept the leverage as you mentioned across the four for four solutions that we're selling.
Whether that's in the satellites themselves, whether that's reducing our bom costs over the course of time, whether that's leveraging our ground stations across the four solutions or whether it's a continued leverage of our head count within those operation areas. So we have a lot more room to grow in that front just like we've seen right, we had a 10% to 11%.
The increase year over year in gross margins, whether youre looking at GAAP or non-GAAP and there was a 5% increase quarter over quarter. So it seem that there, but we're also seeing efficiencies in the operating expenses too right. If you look at our GAAP expenses on a year over year base and the operating expenses were flat year over year. So we did not grow.
Our expenses at all on that front, but yet we grew 34%. So not only are we seeing the efficiencies on the in the gross margin area. We're also seeing it down below there and that's why we exceeded our top end of the guidance by about million dollars, whether you look at lowering our operating loss or exceeding the adjusted EBITDA targets.
Great and then maybe just your guidance.
Revenue Q1s outperformance.
And the commentary suggested that the company is on a good trajectory.
To achieve its 2023 guidance what could get you to the higher end or even above the higher end of that range and then may be just where the limitations at this point I know you talked about macro and <unk>.
<unk> sort of laid out a number of areas there, but if you could just talk a little bit more.
Yeah, No I think I'm the one areas like we did this quarter with the customer count right. We added 48 net new customers. If we keep going at that pace throughout the year of of adding large quantities of customers clearly that's going to help us drive up that revenue targets. Obviously as you get later in the year of the revenue gets a little bit harder.
Right, because you have less runway to to turn it into revenue from when you land them, but but just like we did in the first quarter landing that many customers and then getting the net retention rate I'm, you know still well above 100, you know those two things are really going to help ourselves get to that are the higher ends of the revenue front.
Great and maybe just one quick clarification I think Peter had mentioned.
Talking about.
Hi.
Gross margins of 70% in the next two years is that within that within two years, and then is that GAAP or non-GAAP basis.
It's within and it is GAAP.
Great. Thank you.
Our next question comes from the line of Ric Prentiss with Raymond James. Please proceed with your question.
Good afternoon everybody.
Good afternoon.
Hum.
You laid out.
Sure.
We're having a lot of Ceos concern prepping for a recession.
No.
Yes.
Do you have.
We agree but also then the comfort and the gross margins up individual conversations.
Customers.
How are your businesses.
Thanks Vincent.
So the secondary plans.
Overall global economy.
So I think I understand your Atkins I'm going to start and maybe maybe Tom can do some further decipher because there's a little they've got hit a little bit of background noise I apologize, there's probably an hour side I'm sorry.
It's me I'm at an airport travel.
Orleans jazz.
[laughter] okay.
So I think I think you know the first thing that I want to say, it's like we talk about here are we talking about SaaS, because we are a subscription business and by the very nature of that you know we have a lot of visibility.
Between now and the end of the year. So I think that is that is a very very positive a positive element in our solutions are so crucially embedded into our customers that they're really Austin, absolutely the inextricable from them running their business.
Quite the opposite of what we see is that customers use more and more from our solutions. The more they use us and that's you know reflected of course in <unk>.
Our and in our NR or.
So I would say like that is kind of like from the from the visibility perspective. It's also the flexibility that we have in our infrastructure you know I just talked about using software. It should change what satellite students you create a new product a new service that gives us a lot of flexibility.
To find the greatest use off the assets that we have deployed be that selling a service going forward, which you know it gets trickier to let's just say the second half of the year of course to add AD revenue.
As well as selling historical data as we continue to collect hundreds and hundreds and hundreds of millions of data points every single day store them in our data vault and with AI and machine learning being like this massive growth area that is genuinely bottlenecks by having access to data.
To train those models those historical data halls of spire, I'm getting more and more valuable by the day.
And Rick I think I'll, just add I'm also getting into areas that there's really just no competition or very limited competition right, where we come up with new solutions solve this new use cases and that those things could still sell during tough times, because we're selling things that people really need is really valuable for them.
But yet they don't they can't get their hands on it from from any other means so that's another area and then obviously on the other side of the fence no matter, what we're making sure. We've got all kinds of levers that we can take care of on the expense side as you can see in our results on the margin improvements, we're always looking for efficiencies and scale and if there's any issues that come up on the top line.
Along the way throughout the year, we're always ready to go on the expense side. So that we make sure. We can guarantee you to get to you know to get to those those margin targets that we put out there so I.
I think the best way to think about spire has two channels, Steve polymer and replace developers with profitability.
I have to say in his style.
Second question is.
You touched on it there a little bit AI, obviously, there's going to be a hot topic.
Some revenue opportunities for you, maybe flesh that out a little bit more or their cost and sensors with AI and other model as well for you.
Well from a revenue perspective, it's two fold is a that the value of our historical data increases.
As a as a product to sell to companies that need to train their models number one but number two it also becomes something that is more valuable for us is our own AI and machine learning algorithms have more and more data to work with to develop products that are relevant for our customers and that of course, then translate into new business opportunities for us.
S to generate products that are more relevant solving more unique use cases, and a more scalable fashion.
And anything on the cost side that AI could benefit.
So I would say that and I think I think I talked about it on our last call is that we are using AI not just on the product side, but on the operational side. So for example in marketing we are using it and it certainly has scalability benefits for us serving long tail youth.
Yeah, I and in particular and L. P. M type type of off capabilities allows you to be far more targeted to a much wider range.
A range of customers and so from that perspective, it creates operational leverage in the company, which we see less so from the leverage perspective, and like the technology and product side, but more like running the business marketing sales and some other areas.
Okay last one for me is more of a technicality, obviously you got.
You'll notice from the exchange stock price.
I think it's probably a shareholder vote, but something that's a little bit on the timing and thoughts on getting.
Getting back into compliance.
It says.
Who knows.
Hmm.
Yeah, we.
<unk> seen in some of the filings you've done recently now that we've got the annual shareholder meeting scheduled that was on the docket there for the vote. So we've got a reverse split them. Obviously, it's a range in there because as you know the prices changing at different times, but there's a range in there of the of what the the the.
<unk> would be so that that we've got that built into the shareholder meeting. So obviously, it's got to get past the vote, but that's that's it and they are in the docket for the approval.
This is more of a memory of the shareholder votes.
It's June the 13th.
Thanks, a lot and stay well.
Thanks, a lot and safe travels.
Okay.
Our next question comes from the line of Jeff Mueller with Baird. Please proceed with your question.
Yeah, Thanks, Peter breaking new ground using SaaS in gap in the same sentence.
Yeah.
So.
The E R R guidance.
You had a good quarter relative to your expectations great to see.
But the.
The guidance implies a step up in the pace of.
Sequential <unk> growth over the balance of the year and based on the Q2 guidance. It looks like it started in Q2 and I guess I'm just comparing it to like what it was the last couple of quarters.
So just help us understand the visibility into starting to see the bigger are our growth.
And uncertain macro including the line of sight to Q2, given that we're almost halfway through the quarter.
Yeah last year, we were in that $7 million per quarter range. We knew Q1 was going to be a little bit harder. It's usually is for us because most companies are going through their budgeting processes and time to get out of it. They they we usually can't then close those deals right in the first quarter.
Q2 is when that starts to pick up though right everybody's got their budgets. Our teams are out there selling away. So we had better visibility in the second quarter from some higher sequential growth quarter over quarter. So that's why we got that in the guidance. So yes, there is that step up.
And then it's similar type of numbers that we would need to do quarter over quarter from two to three and three to four to get to the annual guidance. So I'm doing that and then in getting those sequentially in the second third and fourth.
But yeah, it's just based on our pipeline, where we're at with our customer arrangements, whether it's existing customers or new logos, we've we've factored that all into the guidance.
Got it and then maybe a different take on the question.
Question can you just maybe update us on.
I guess two years ago. When you were doing the dis back Investor Day, you were talking about AI at that point in time and kind of the journey from Queen's day to smart data to more predictive solutions. So I know that you.
I know, it's become much more topical lately societally.
Doug investors, but it's something you've been working on for a while so just help us from a solution perspective on where you are in developing a more predictive solutions are where customers are adopting thank you yeah.
Yeah, absolutely as the as the individual solutions grow them closer to them individually being 100 million now that the company is out of many of our the next goal is of course to have the individual solutions delivering $100 million each and they do that by moving.
From the clean data sales to the right right. So the next step is the smart data.
Adding and other data sources fusing it and adding simple analytics to it and then you move to the right you have predictions of what's going to happen and then you move to the right as you have a solutions. If you think about it whenever you move from one you know, let's say clean data to smart data and you have like a three to five X <unk>.
Expansion and he moved from from Smart are predictive of three to five X from predictive solutions for each of five X and that's a pretty classic Tam expansion that you can see in all sorts of data market.
And that's exactly what we see and we make our way you know from the left to the right I would say in a in a deliberate pace of land and expand we like to be very.
A very strong player in an area rather than being weak player in like a whole bunch of areas I personally really.
Like the G E philosophy here off.
Beat a number one be the number two if you not have a very clear definitive plan to be one or number two and so as we move here to the right. It is less a race to get as quickly from left to right and more at deliberate attack off landing and then <unk>.
Spending in the market be that Oh.
Our customer use case speed at a region beat our solution.
That is our approach and I think that is the approach that leverage existing capabilities to the Max and before you go out and build a shiny new toy.
Okay. Thank you.
Of course.
Our next question comes from the line of Henry Coffee Space. Please proceed with your question.
Hey, guys. Thanks for taking questions. Some of mine have already been answered so I think I'll be brief.
Can you shed some light on your solutions revenue mix like the mix between a S. A S P weather and stay surfaces.
We do not break them out.
We are pretty balanced company there.
I think we talked about balances between our commercial.
Commercial and government and between the regions you know.
All of the four solutions that we have a very meaningful contributors to our top and bottom line.
I think as we've said in the past the aviation industry was hit the hardest by the Covid situation and we still see that as a as a deficiency that has made that solution not quite as are contributing to our overall results as the other three.
But it's it's it's it's not broken out because it's shared infrastructure in space. It's shared infrastructure on the ground. So it really doesn't easily lend itself. The very core idea of spire is shared infrastructure amortized over multiple solutions.
And that creates an incredibly attractive business model of subscriptions with shared infrastructure that drive rapid margin expansion.
Alright. Thanks.
And then last week aspire announced a new maritime weather service I was just wondering if you could share you know what was the impetus for that and if you kind of see a big gap in the market that that can serve.
Okay.
So our modus operandi has always we built what we have definitive requests from by the market. So the simple answer to your question is yes, absolutely we listen to our customers what they want us to build and when enough of them are asking for something then we built it.
And that product you know the team rolled out is and exact outcome off that very active engagement with our hundreds and hundreds of customers that we have in that in that space.
Okay.
And then my last question just we're continuing to see headlines about software company is laying off staff.
I'm wondering if that has created an opportunity for aspire just because the space industry is historically struggled to win software engineers over from kind of the bigger names like Google and Apple So.
Has that been an opportunity for aspire or are you guys kind of just watching more of a wait and see both on that.
You know the the change in that environment has certainly created tremendous opportunities and we certainly have seen some fantastic talent reach out to us and we have already taken advantage of some of those opportunities and bringing incredibly talented and motivated people.
To enhance and strengthen the already a fantastic team that's biomass.
Alright, that's all for me thanks, guys.
Yeah.
And our next question comes from the line of Andre Madrid with Bank of America. Please proceed with your question.
Hi, how are you guys nice to meet him.
Yeah.
So looking around at the.
The space in general there's still a lot of sat operators adult.
Provide maritime surveillance have you considered at any point a partnership with a data integrator too.
Maybe provide a more holistic surveillance solution something you know partnering with somebody that has land based surveillance and providing a more full solution.
So.
It really would have to be driven by definitive customer demand.
The only customers that asked for that would have to come out of the intelligence community.
And there are certain types of data fusion a request.
And there are some are customers of ours that are that do that.
But setting up.
Fifth solution so to speak that goes out and gets you know SAR data and imagery data and all sorts of other things and combines them I'm not sure that that is something where spire in particular, what how is the the prior questions just ask.
Closed at dramatic gap and need in the market place.
And so I'm not sure that I see that in our near term future right now.
Got you very helpful. Thank you of course.
Okay.
And we have reached the end of the question and answer session now I'll turn the call back over to CEO , Peter Blackmore for closing remarks.
In closing I would like to thank our customers employees and numerous suppliers for partnering with us and bringing innovative solutions to solve the challenges people communities and countries facing every day across the globe.
There's uncertainty and challenges in the world at large increase we see ever increasing demand for space based solutions be that supply chain mobility communications remote internet, whether climate change global security Agriculture energy the list of areas, which increasingly use and depend on space.
<unk> is growing.
Just like computers, and the Internet driven by Moore's law became inextricably linked with our lives in the global economy in the Eighty's Ninety's in two thousands we see the same thing happening today with space.
Driven by similar law of constant improvement tenfold every five years for satellite capabilities that has been working for a quarter century, now and we see no sign of abating anytime soon.
They're mission driven and incredibly motivated team at spire is proud to be part of and indeed shape. This transformational wave of change to create a safer more prosperous and sustainable future on Earth.
I was at Mckinsey recently say, it's two top fortune Ceos, if space is not yet part of your strategy it needs to be.
And this concludes today's conference and you may disconnect. Your lines at this time. Thank you for your participation.
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