Q4 2023 Spire Global Inc Earnings Call

Operator: The Ultimate Parody Site! Hello, and welcome to the Spire Global fourth quarter and full year 2023 conference calling webcast. If anyone should require operator assistance, please press star zero on your telephone keypad. A question and answer session will follow the formal presentation. You may be placed on the question queue at any time by pressing star one on your telephone keypad. It's now my pleasure to turn the call over to Ben Hackman, head of investor relations. Please go ahead, Ben.

Hello, and welcome to the spire global fourth quarter and full year 2023 conference call and webcast. If anyone should require operator assistance. Please press star zero on your telephone keypad.

And answer session will follow the formal presentation, even if you placed in the question queue at any time by pressing star one on your telephone keypad. If found my pleasure to turn the call over to Ben Hackman head of Investor Relations. Please go ahead Ben.

Yeah.

Ben Hackman: Thank you. Hello, everyone. And thank you for joining us for our fourth quarter 2023 earnings conference call. Our earnings press release and SEC filings can be found on our IR website at ir.spire.com. A replay of today's call will also be made available.

Thank you Hello, everyone and thank you for joining us for our fourth 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 today on the call is Peter plots are CEO and Leo Pesola CFO.

Ben Hackman: With me today on the call is Peter Platzer, CEO, and Leo Basola, 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 and in our investor presentation, both of which can be found on our IR website at ir.spire.com. Additionally, some of our comments today contain forward-looking statements that are subject to risks, uncertainties, and assumptions. In particular, our expectations around our results of operations and financial conditions are uncertain and subject to change. Should any of these expectations fail to materialize or should our assumptions prove to be incorrect, actual company results could differ materially from these forward-looking statements. A description of these risks, uncertainties, and assumptions and other factors that could affect our financial results is included in our SEC filing. With that, I will hand the call over to Peter. Thank you, Ben. Good afternoon, everyone.

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 and in our Investor presentation, both of which can be found on our IR website at IR dot spire dot com.

Some of our comments today contain forward looking statements that are subject to risks uncertainties and assumptions in particular, our expectations around our results of operations and 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.

A 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.

Thank you Ben and good afternoon, everyone I am thrilled to welcome you to todays call.

Peter Platzer: I am thrilled to welcome you to today's call. As we embark on this discussion, I want to extend my deepest gratitude to our dedicated team whose resilience and innovation propelled us from pre-profitability to a landmark year. In 2023, we achieved not only positive operating cash flow but also positive adjusted EBITDA that surpassed our expectations for Q4. Our journey last year was nothing short of remarkable.

We embarked on this discussion I wanted to extend my deepest gratitude to our dedicated team.

Their resilience and innovation propelled us from pre profitability to Atlanta, Mike here.

H 2023 we achieved not only positive operating cash flow, but all of the positive adjusted EBITDA.

Our expectations for Q4.

Our journey last year it was nothing short of remarkable.

Peter Platzer: We rallied together as a team with grit and determination to be a reliably collaborative partner for our customers. We captured the surging demand for our radiofrequency geolocation data, vital for addressing global security threats, and we forged strong partnerships to build powerful solutions for the future. This translated into significant achievements for Spire.

Rallied together as a team with grit and determination can be reliably collaborative partner for our customers.

We captured the surging demand for our radiofrequency geolocation data Beitzel boy dressing global security threats, and we forged strong partnerships to build powerful solutions for the future.

This translated into significant achievements for spire.

Peter Platzer: We secured multiple million-dollar contracts reinforcing our market value and trust with our customers. We celebrated the signing of three pivotal, significant space services deals involving 18 satellites, showcasing our expanding capability. A launch of 23 satellites across multiple missions marked a record for the operational versatility and applicability of our solution. The introduction of our deep vision platform and high-resolution weather model revolutionized the way our customers can understand and prepare for imminent weather patterns.

We secured multiple million dollar contract reinforcing our market value and trust with our customers.

Celebrated the signing of three pivotal significant space services deals involving 18 satellites showcasing our expanding capabilities.

The launch of Twinkies three satellites across multiple missions marked a record for the operational versatility and applicability of our solutions. The introduction of our deep vision platform at high resolution, whether model revolutionized where our customers how they can understand and prepare for a minute by the patents they didn't.

Peter Platzer: The deployment of our satellite mission operations platform signified a leap forward for the industry in efficiency, reliability, and management of space assets. And the signing of a strategic partnership and investment in AI ML-powered solutions set the foundation for cutting-edge advancements in maritime domain awareness. These milestones contributed to our tenth consecutive quarter of record revenue and a substantial 32% annual revenue growth rate. We met and exceeded our objective of generating positive operating cash flow, and we achieved positive adjusted EBITDA earlier than anticipated. These milestones also align with two global megatrends that shape our world today and have been at the core of Spire's long-term business plan since its inception almost 12 years ago: climate change and global security. From intensifying weather events to geopolitical tensions, these trends underscore the critical nature of our work at Spire.

Appointment of final satellite mission operations platform signified a leap forward for the industry in efficiency reliability and management of space assets.

And the signing of a strategic partnership and investment in AI ml powered solutions set the foundation for cutting edge advancement in maritime domain awareness.

These milestones contributed to our 10th consecutive quarter of record revenue and a substantial 32% annual revenue growth rate.

We met and exceeded our objective of generating positive operating cash flow and we achieved positive adjusted EBITDA earlier than anticipated.

These milestones also aligned with two global Mega trends that shape, our world today and it's been at the core of smiles long term business plan since its inception, almost 12 years ago climate change and global security.

Well, they intensifying whether events geopolitical tensions these trends underscore the critical nature of our work it's fire.

Peter Platzer: From floods to droughts to wildfires and devastating storms, a scan of the daily headlines reminds us of the weather volatility that is becoming increasingly common. Warmer temperatures are leading to record heatwaves throughout the globe and rapid intensification of storms, while wildfires are contributing to poor air quality in cities thousands of miles away. The U.S. set a new record for the number of billion-dollar weather disasters in 2023, at 28 in total, six more than the previous record, which was set only three years earlier. Already in 2024, shocking images emerged of a lake forming at Death Valley, no less, one of the hottest places on earth. And how this is balancing on the edge of a cliff after record amounts of rainfall have caused land to collapse into the ocean.

From floods and droughts to wildfires and devastating scores and scan after daily headlines reminds us of the weather volatility that is becoming ever more calm.

Well my temperatures are leading to a record heat base throughout the globe and rapid intensification of storms, while wildfires are contributing to poor air quality in cities thousands of miles away.

<unk> set a new record for the number of billion dollar whether these sources in 2023 and 28 in total six more than the previous record, which was set only three years earlier alright.

Already in 2024 shocking images have emerged although at lake, forming and death Valley No less one of the hottest places on Earth and houses balancing on the edge of a cliff after record amounts of rainfalls have caused land to collapse into the ocean.

Peter Platzer: Meanwhile, the world is watching a number of upcoming elections and the events surrounding those elections. Speculation abounds on what may result from the outcomes. There has been ongoing conflict in Europe, the Middle East, and strained tensions in Asia; shipping has been interrupted in the Red Sea; funding of certain geopolitical activities and sanctions against other activities have resulted in a highly dynamic environment, an environment in which truth and transparency have never been more important, an environment that remains supportive and, some might say, in need of Spire's solution. Spire has continued to make investments in its products to capture demand stem Last fall, we announced a new weather platform, DeepVision, along with a high-resolution weather model. Forecasts from the Spire high-resolution weather model achieve world-class accuracy and allow our users to make decisions concerning the weather faster than ever. Through the incorporation of Spire's weather data into government weather forecasts, individuals across the world have better, more valuable weather predictions. The rapid emergence of AI and machine learning capabilities in weather prediction is swiftly moving the power from those with access to massive supercomputers to those with access to massive amounts of data, in particular from space.

Meanwhile, the world is watching a number of upcoming elections and the events surrounding those elections speculation in balance with what my result from those outcomes. It has.

It's been ongoing conflict in Europe, the middle East and strained tensions in Asia chip.

<unk> has been interrupted in the Red sea funding of certain geopolitical activities and sanctions against other activities has resulted in a highly dynamic environment and.

Environment, and which truth and transparency have never been more important.

And environment.

Main supportive and so I'd say in need of spires solutions.

So that has continued to make investments in our products to capture demand stemming from these trends last fall, we announced the new web platform deep vision, along with a high resolution by the model.

Forecast, despite a high resolution whether model and she world class accuracy and allow our users to make decisions concerning the weather faster than ever Julien.

Through the incorporation of spy is when the data into government weather forecast individuals across the world has better more valuable better predictions.

The rapid emergence of AI and machine learning capabilities in the weather prediction is swiftly moving the power from those with access to massive supercomputers to those with access to massive super data in particular from space spire is at the very forefront of capitalizing on this.

Peter Platzer: Spire is at the very forefront of capitalizing on this shift, and I could not be more excited about the new products, services, and partnerships that the Spire team is rolling out to help communities, corporations, and countries tackle the challenges of climate and weather to their safety, business models, and security. Our technological advancements and strategic alliances, like the partnership with SignalOcean, are a testament to our leadership. Spire will contribute its unique proprietary dataset, relevant for precise monitoring of the maritime domain, while SignalOcean will bring its best-in-class expertise in AI, machine learning, and, in particular, natural language processing, to create new, innovative solutions.

And I could not be more excited about the new product services and partnerships that despite a team is rolling out to help communities corporations in countries tackle the challenges of climate and weather to their safety business models and security.

Our technological advancement and strategic alliances like the partnership with signal Ocean are a testament to our leadership.

<unk> will contribute its unique proprietary dataset relevant for precise monitoring of the maritime domain well signaled ocean will bring its best in class expertise in AI machine learning and in particular natural language processing to create new innovative solutions.

Peter Platzer: Together, we are enhancing maritime digitalization and global security. Moreover, we have continued to see demand for our differentiated, highly valuable solutions. A couple of weeks ago, we announced a multi-million-dollar award from the European Maritime Safety Agency for vessel monitoring, particularly in the polar region, where coverage outside of Spire's space-based data is very limited. During the fourth quarter and early January, we announced agreements to build and operate a six-satellite dedicated IoT constellation for Lacuna Space, a multimillion-dollar award related to weather data from Umids As geopolitical interests are more frequently turning towards space, space situational awareness is becoming more important in an increasingly contested environment.

Together, we are enhancing maritime Digitization and global security.

Moreover, we have continued to see demand for our differentiated highly valuable solutions.

Couple of weeks ago, we announced a multimillion dollar award from the European Maritime Safety agency or vessel monitoring, particularly in to pull the region. The coverage outside of spire space based data is very limited indeed.

During the fourth quarter in early January we announced agreements to build and operate a six satellites dedicated Iot constellation for Lacuna space, a multimillion dollar award related to weather data from humans said and a $9 4 million dollar award from Noah for eight months or whether they.

As geopolitical interests are more frequently training to its space space situational awareness, it's becoming more important in an increasingly contested environment.

Peter Platzer: We were excited to be deploying the first commercial space situational awareness satellite constellation for Northstar through our space services offering. Our white glove, end-to-end space services offering allows companies to quickly deploy and rapidly scale a constellation to take advantage of emerging trends from, for example, space situational awareness to wildfire and greenhouse gas monitoring. What stars is a handful of satellites can quickly multiply to a full constellation in a matter of just a few years, as the capability and power of smaller satellites continue to improve tenfold every five years.

We were excited to be deploying the first commercial space situational awareness satellite constellation for Northstar through our space services offering all white glove and joint space services offering allows companies to quickly deploy and rapidly scale at constellation to take advantage of.

All of the emerging trends from for example space situational awareness to wildfire and greenhouse gas monitoring.

What started as a handful of satellites can quickly multiply two a full constellation in a matter of just a few years.

Has the capability and power of smaller satellites continue to improve tenfold every five years, we are now able to deploy a full constellation in roughly the same timeframe in which a single legacy satellite, which traditionally have been produced.

Peter Platzer: We are now able to deploy a full constellation in roughly the same time frame in which a single legacy satellite would traditionally have been produced. This is transformational technical capability at work, creating a more prosperous and safe future for all. Looking ahead to 2024 and beyond, our track record speaks for itself. Over the last two years, we've not just met our profitability targets, but we have more often than not exceeded them, even amid the roller coaster of economic conditions during this period. This speaks volumes about our strategic focus and operational excellence. Our ability to meet or surpass our ambitious annual profitability guidance set each March underscores our unwavering commitment to financial health and shareholder value. Navigating through a period marked by unprecedented challenges, from geopolitical tensions to economic uncertainties, including inflation, potential recession, and rapid shifts in central bank policy, our strategy has been unwavering.

This is transformational technical capability at work create.

Creating a more prosperous and say future world.

Looking ahead to 'twenty 'twenty, four and beyond our track record speaks for itself.

The last two years, they've not just met our profitability targets, we more often than not exceeded them even amid their roller coaster economic conditions. During this period.

This speaks volumes about our strategic focus and operational excellence.

Our ability to meet or surpass our ambitious annual profitability guidance set each march underscores our wavering commitment to financial health and shareholder value.

And navigating through a period marked by unprecedented challenges from geopolitical tensions to economic uncertainties and clothing inflation potential recession in the rapid shifts in central Bank policies. Our strategy has been on labor at all.

Peter Platzer: Our adaptability in the face of such adversity has not only kept us on course but has also proven the resilience and robustness of our business. Despite the external pressures, we have not only stayed the course but have also marked significant milestones toward our goal of sustained profitability. Our anticipation of positive free cash flow by the summer is a commitment we made two years ago, one we are poised to fulfill. This achievement is not just a mere milestone.

Our adaptability in the face of such diversity, it's not only kept us on course, but has also proven the resilience and robustness of our business model.

Despite the external pressures we have not only stayed the course, but if it was a market significant milestones towards our goal of sustained profitability.

Our anticipation of positive free cash flow by the summer is a commitment we made two years ago. One we are poised to fulfill them.

This achievement is not just the mere milestone.

Peter Platzer: It is a clear indication of our strategic foresight and the effective execution of our business plan. Our ability to pivot and adapt all while driving towards profitability demonstrates the strength and sustainability of our model. Spire's unique subscription business model is the cornerstone of this success, by blending the high barriers to entry and large addressable markets characteristics of deep tech with the cost efficiencies and scalability of software companies.

It is a clear indication of our strategic foresight and the effective execution of our business plan.

Our ability to pivot and adapt all while driving towards profitability demonstrates the strength and sustainability of our model.

Spires unique subscription business model is the cornerstone of this success.

I blending the high barriers to entry and large addressable market characteristics of deep tech with the cost efficiencies and scalability of software companies. We have created a model that not only supports rapid growth, but also ensures profitability.

Peter Platzer: We have created a model that not only supports rapid growth but also ensures profitability. Spire clearly stands out in the industry landscape as our high gross margins and growth rates are not just numbers; they are a reflection of an innovative business model designed for resilience and long-term financial health. Given that all our products are sold as a subscription, we benchmark ourselves against the SaaS metrics of public companies. In 2023, public SaaS companies saw a slowdown in a few of their growth metrics as the industry pivoted to focus on profitability.

Spire clearly stands out in the industry landscape is a high gross margins and growth rates and not just numbers. They are a reflection of an innovative business model and design for resilience and long term financial health.

Given that all of our products are sold as a subscription we benchmark ourselves against the SaaS metrics of public companies.

In 2020 three public SaaS companies, so a slowdown in a few of the gross metrics as the industry has pivoted to focus on profitability.

Peter Platzer: Spire has been focused on reaching profitable growth since becoming a public company. As a result of this focus, we have been able to maintain a strong growth rate while dramatically improving our profitability metrics, reaching our first profitable quarter on an adjusted EBITDA basis in Q4. While revenue growth for public SaaS companies cooled from about 28% to 19% in 2023, Spire excelled with a growth rate of 32%, mitigating the contraction in net retention rate to a mere 15 percentage points, a figure inclusive of a key contract secured at the onset of 2024 and better than public comparables. With ICE trades on to 2024, we anticipate strong top line growth surpassing 30% and steering towards a Delving a bit deeper into profitability indicators, the lifetime value of a customer relative to customer acquisition cost shines a spotlight on the profitability of your customer base and whether additional value can be created by investing in more sales and marketing. A benchmark ratio of about three times is deemed quite robust in this estimate.

Spire has been focused on reaching profitable growth since becoming a public company.

As a result of this focus we have been able to maintain a strong growth rate, while dramatically improving each quarter, our profitability metrics, reaching our first profitable quarter on an adjusted EBITDA basis in Q4.

While revenue growth for public SaaS companies cooled form about 28% to 19% in 2023 aspire itself, but the growth rate of 32% mitigating the contraction in net retention rate to a mere 15 percentage points.

Inclusive of our key contracts secured at the onset of 'twenty, 'twenty, four and better than public Comparables.

Strange onto 'twenty 'twenty, four we envision strong topline growth, surpassing 30% in steering towards a 35% midpoint growth guidance.

I don't think a bit deeper into profitability indicators, the lifetime value of the customer relative to customer acquisition cost shines a spotlight on the profitability of your customer base and whether additional value can be created by investing in more sales and marketing.

Our benchmark ratio of about three times it seemed quite robust in this estimate.

Peter Platzer: Spire, however, currently generates lifetime value of over 12 times our customer acquisition cost. A vivid demonstration of the exceptional and lasting value Spire delivers to its customers. Thanks to its very high gross retention rates, customers may stay with Spire for many, many years.

Spire. However, currently generates the lifetime value of over 12 times, our customer acquisition costs.

Vivid demonstration of the exceptional and lasting value spire delivers to its customers.

Thanks to spy is very high gloss retention rates customers may stay with fire for many many years as such we always are tracking in more conservative metric, which discounts the value of future money to a net present value.

Peter Platzer: As such, we're also tracking a more conservative metric, which discounts the value of future money to a net present value. This more conservative net present lifetime value still covers our customer acquisition cost eight times over. This bolsters our confidence to accelerate Spire's growth by strategically channeling further investment into our sales and marketing efforts, all while preserving a robust bottom line. With our subscription business model, Spire has cracked the code for building a high growth, high margin space company. As we project our goals further out, we're not content with just maintaining a trajectory; we aim to accelerate, driving top-line growth consistently above 30%, achieving gross margins over 70%, and maintaining positive cash flow. These are more than objectives.

This more conservative net present lifetime value still covers our customer acquisition cost eight times over.

This bolsters, our confidence to accelerate spires growth, but to teach them the challenging further investment into our sales and marketing efforts all while preserving a robust bottom line.

With our subscription business model spire has cracked the code of building a high growth high margin space company.

As we project out goes further out we're not content with just maintaining a trajectory we aimed to accelerate.

Driving topline growth consistently above 30% and she is in gross margin is over 70% and maintaining positive cash flow.

These are more than objectives.

Peter Platzer: These are the hallmark of great subscription companies, and we plan to stand firmly among them. Our achievements today are just the beginning of this journey, yet they already set us apart in the competitive landscape. We are committed to continuing this trajectory, driving value for our shareholders and redefining the possibilities for our industry. Base has inspired people for millennia, bringing hope for a better future, with the space economy estimated to reach $1 trillion or more by 2030. And thousands and thousands of companies look for and find ways to leverage space. Spire is bringing that hope to people and places all around the world.

The hallmark of great subscription companies and we plan to stand firmly among them.

Our achievements to date are just the beginning of this journey yet they already set us apart in the competitive landscape.

We are committed to continuing this trajectory driving value for our shareholders and redefining the possibilities for our industry.

Space has inspired people won't be linear, bringing hope for a better future.

With this space economy estimated to reach one trillion or more by 20 30000.

Thousands and thousands of companies look for and find ways to leverage space spire is spring that hope to people and places all around the world.

Peter Platzer: We are mission-driven to improve life on Earth with data and insights that can only be collected from space. Our commitment to this mission is stronger than ever, and I'm excited for Spire to deliver on this promise in increasingly impactful ways. And with that, I'll turn it over to Leo. So, thank you, Peter.

We are a mission driven to improve life on Earth with data and insights that can only be collected from space.

Our commitment to this mission is stronger than ever and I'm excited for spire to deliver on this promise and increasing the impactful base and thank you for your trust and support on this journey.

And with that I'll turn it over to Liam.

So thank you Peter I hope listeners are as excited as I am about spire for any C. P. A that would be a tough act to follow but let me keep the energy high our results clearly support that level of excitement the fourth quarter was yet another quarter of strong execution at $27 $7 million of revenue.

Leo Basola: I hope listeners are as excited as I am about Spire. For any CPA, that would be a tough act to follow, but let me keep the energy high. Our results clearly support that level of excitement. The fourth quarter was yet another quarter of strong execution. At $27.7 million in revenue, we met our expectations for the fourth quarter, an even more significant achievement considering that the launch of our North Star Constellation moved from December 2023 to January 2024 and delayed some revenue recognition. Our Q4 results yet again show a trend of continued record revenue for the 10 quarters we have been a public company. Full year revenues of $105.7 million fell within our guidance range and, at 32% growth, met our expectations for annual The reported ARR at quarter end was $106.8 million. This excludes a $9.4 million, 8-month contract for radio occultation, or RO, weather data. This award was received on January 4, 2024, only 96 hours after the close, due to an administrative systems issue on our customer's side.

We met our expectations for the fourth quarter and even more significant achievement considering that the launch of our north star constellation.

From December 2023 through January of 'twenty, 'twenty, four and delayed some revenue recognition. Our Q4 results yet again, so a trend of continued record revenue for the 10 quarters, we have been a public company, our full year revenues of $105 $7 million fell within our guidance range and up 32% growth.

Met our expectations for annual revenue year over year growth of over 30%.

Reported a or are at quarter end was $106 $8 million.

This excludes and $9 4 million dollar eight month contract for radio occupation or Arrow, whether data. This award was received January 4th 'twenty 'twenty four only 96 hours after close due to an administrative systems issue on our customer side.

Leo Basola: As a result of this contract not being formally awarded by December 31st, we prepaid $2 million of principal on our Blue Torch debt to remain in compliance with the ARR covenant through the end of 2023, and including this ARO contract awarded in early 2024, which represents $14.1 million of ARR. We're currently at over $120 million in ARR, a level above the highest ARR required by our debt covenant. With this achievement, we will no longer be providing guidance on this metric, but we'll continue to report our ARR results in our quarterly and annual financial reports. Consistent with the maturing of the company, our covenants will shift to adjusted EBITDA, and we will provide guidance on adjusted EBITDA as we have done thus far. We will also start to provide insights on other SAS metrics with the intention of giving additional transparency around our superior business model. Another metric that we feel provides insight into our future revenues is our remaining performance obligations. As of the end of the fourth quarter, we had almost $200 million of remaining performance obligations that have not yet been recognized as revenue.

As a result of this contract not being formally awarded by December 31st.

We prepaid 2 million of principal on our Blue torch debt to remain in compliance with the covenant through the end of 2023, including this our old contract awarded in early 'twenty 'twenty, four which represents $14 1 million a RR were currently at over $120 million in Iraq and level over there.

Highest air are required by our debt covenants.

This achievement, we will no longer be providing guidance on this metric, but we'll continue to report on our results and our quarterly and annual financials.

Consistent with the maturing of the company, our covenants will shift to adjusted EBITDA we.

We will provide guidance on adjusted EBITDA as we have done thus far.

We will also start to provide insights on other SaaS metrics with the intention of giving additional transparency around our superior business model.

Another metric that we feel provides insight into our future revenues is our remaining performance obligation.

As of the end of the fourth quarter, we had almost 200 million of remaining performance obligations that have not yet been recognized as revenue 40% of that revenue is scheduled to materialize in the next 12 months. This.

Leo Basola: Forty percent of that revenue is scheduled to materialize in the next 12 months. This creates a good line of sight regarding a meaningful amount of contractually committed future revenue. For full year 2023, gross margins expanded to 60% on a gap basis and 64% on a non-gap basis. This reflects a 10 percentage point improvement over 2022 on a gap basis and a 9 percentage point improvement on a non-gap

This creates a good line of sight regarding a meaningful amount of contractually committed future revenues.

For full year 2023, gross margins expanded to 60% on a GAAP basis and 64% on a non-GAAP basis. This reflects a 10 percentage point improvement over 2022, when he got basis, a nine percentage point improvement on a non-GAAP basis as we look forward to the end of 2024.

Leo Basola: As we look forward to the end of 2024, we expect further improvement in our full-year gross margins compared to 2023. Next, I'll discuss non-GAAP financial measures, unless otherwise stated. We have provided a reconciliation of GAAP to non-GAAP financials in our earnings release and investor presentation, both of which are available on our investor relations website and should be reviewed in conjunction with this earnings call.

We expect further improvement in our full year gross margins compared to 2023.

Next I'll discuss non-GAAP financial measures unless otherwise stated we have provided a reconciliation of GAAP to non-GAAP financials in our earnings release and Investor presentation, both of which are available in our Investor Relations website and should be reviewed in conjunction with this earnings call.

Leo Basola: The Q4 operating loss was better than the high end of our guidance range at negative $3.6 million. This reflects a 65% year-over-year improvement and a 43% improvement sequentially quarter-over-quarter. Operating margin was negative 13% for the quarter and represents a 33 percentage point operating margin improvement year over year. The overperformance can be attributed to diligent management of discretionary spend and a tight control of headcount, which resulted in lower compensation and benefit payout.

Our Q4 operating loss was better than the high end of our guidance range at negative $3 $6 million. This reflects a 65% year over year improvement and a 43% improvement sequentially quarter over quarter operating margin was negative 13% for the quarter and represents a 33.

Three percentage point operating margin improvement year over year.

The over performance can be attributed to diligent management on the discretionary spend and a tight control of head count, which resulted in lower compensation and benefit payouts are.

Leo Basola: Adjusted EBITDA turned positive for the fourth quarter, a result that was not expected until the first half of 2024. At positive 2.1 million, or 8% of revenue, adjusted EBITDA was over $1 million above the high end of our range. For the full year, adjusted EBITDA was negative 11 million dollars, a 66% improvement from full year 2022 results. This full-year result reflects the operational leverage we're able to generate from our deployed assets. Let's now move on to the balance sheet and specifically our cash position. We ended the quarter with cash, cash equivalents, and shorter marketable securities of almost $41 million, which was in line with our expectations.

Adjusted EBITDA turned positive for the fourth quarter. A result that was not expected until the first half of 2024.

Positive $2 1 million or 8% of revenue adjusted EBITDA was over 1 million above the high end of our range for the full year adjusted EBITDA was negative $11 million and 66% improvement from full year 2022 results.

This full year result reflects the operational leverage we're able to generate from our deployed assets.

Let's now move onto the balance sheet and specifically our cash position. We ended the quarter with cash cash equivalents and short term marketable securities of almost $41 million, which was in line with our expectations. We successfully generated positive cash flow from operations as committed with a $9 $2 million.

Leo Basola: We successfully generated positive cash flow from operations as committed. With a $9.2 million sequential improvement, we achieved positive cash flow from operations of $4.1 million. Turning to free cash flow, we saw an 86% sequential improvement to negative $2.2 million in the fourth quarter. This included a $4.5 million prepayment of debt.

When should improvement we achieved positive cash flow from operations of $4 $1 million.

Turning to free cash flow, we saw an 86% sequential improvement to negative $2 $2 million in the fourth quarter. This includes a $4 $5 million prepayment of debt, we feel confident in our journey to deliver positive free cash flow in the summer of 2024.

Leo Basola: We feel confident in our journey to deliver positive free cash flow in the summer of 2024. Now, we usually receive this question from investors regarding what we will do with the cash we expect to generate as we become free cash flow positive. As you know, there are mainly three uses of cash: debt repayment, share repurchases, and investments in growth.

Now we usually receive this question from investors regarding what we will do with the cash we expect to generate as we become free cash flow positive.

As you know there are mainly three uses of cash debt repayment share repurchases and investments in growth I would like to expand a bit on the last one because this is where we will most likely allocate most of the cash flow, we generate going forward as Peter mentioned in his opening remarks, we benchmark spire.

Leo Basola: I would like to expand a bit on the last one because this is where we will most likely allocate most of the cash flow we generate going forward. As Peter mentioned in his opening remarks, we benchmark Spire against SAS Business, and we have some of the strongest SAS metrics in the industry. Not only have we grown revenues at over 30% year over year, but our LTV2CAC is over 12 times undiscounted and over 8 times discounted. We plan on providing additional SAS metrics in the future, and what you should take away from this is that Spire provides superior value to our customers with our proprietary data assets and solutions, and that given our high ARR net retention rates of over 102% for 2023. With Strong Gross Retention, and Efficient Direct Sales Approach, we believe the company valuation can benefit significantly over the long run from reinvestment in growth areas, particularly sales, product, and marketing. Going back to the second use of cash, debt repayment. The existing loan terms resulted in Spire paying roughly $16.7 million in net interest payments, or about $0.85 a share, in 2023.

[noise] against SaaS businesses, and we have some of the strongest SaaS metrics in the industry.

Not only have we grown revenues at over 30% year over year, our LTV to CAC is over 12 times undiscovered and over eight times discounted we plan on providing additional SaaS metrics in the future and what you should take away from this is that spire provides superior value to our customers without appropriate Terry data assets.

And solutions and that given our high a or our net retention rates of over 102% for 2023 <unk>.

Strong gross retention rates and efficient direct sales approach, we believe the company valuation can benefit significantly over the long run from reinvestment in growth areas, particularly sales product and marketing.

Going back to the second use of cash debt repayment. The existing loan terms resulted inspire paying roughly $16 $7 million of net interest payment or about 85 cents a share in 2023.

Leo Basola: We continue to foster a good relationship with our current lenders, and as we discussed last quarter, we believe our credit profile and rating is better than what we're currently paying for. As a comparison, in the quarters prior to taking out our current loan, Spire was burning over $16 million of operating cash flow each quarter. Last quarter, Spire generated over $4 million of positive operating cash flow, and we expect to continue generating positive operating cash flow going forward. Additionally, we achieved positive adjusted EBITDA in Q4, and we added $10 million to our balance sheet in February through a strategic investment that valued our shares at $12 per share, or roughly a 50% premium on our market price at the time of the announcement. These achievements set us up for continued dialogue with more traditional lenders to explore opportunities for interest rates more in line with our current credit risk profile. It remains our objective to refinance our current loan in the second half of 2024 or very early 2025 at the latest.

We continue to foster a good relationship with our current lenders and as we discussed last quarter, we believe our credit profile and rating is better than what we're currently paying for.

As a comparison in the quarters prior to taking out their current loan spire was burning over 16 million of operating cash flow each quarter last quarter spire generated over $40 million of positive operating cash flow and we expect to continue generating positive operating cash flow going forward. Additionally.

Additionally, we achieved positive adjusted EBITDA in Q4, and we added $10 million to our balance sheet in February through a strategic investment that valued our shares at $12 per share or roughly a 50% premium on our market price at the time of the announcement.

These achievements set us up for continued dialogue with more traditional lenders to explore opportunities for interest rates more in line with our current credit risk profile. It remains our objective to refinance our current loan in the second half of 'twenty 'twenty four.

Early 2025 at the latest.

Leo Basola: Now, turning to our outlook for the first quarter and full year of 2024, we believe 2024 will be a marquee year for Spire, one where we sustain positive adjusted EBITDA for the year and start seeing positive free cash flow in the summer. Quarterly results can still fluctuate given the quarterly timing of various metrics, but we're confident in our annual commitment, supported by our strong track record. As a reminder, we met or exceeded all six of our bottom-line guidance metrics for 2022 and 2023 that were set in March of each respective year. For the first quarter, we expect revenue to range between $27 million and $29 million before stepping up in the second, third, and fourth quarters as new space service assets begin to deliver data.

Now turning to our outlook for the first quarter and full year of 2024, we believe 2024 will be a marquee year for spire, one way, we sustain positive adjusted EBITDA for the year and start seeing positive free cash flow in the summer quarterly results can still fluctuate given the quarterly timing of there.

Those metrics, but we're confident in our annual commitment supported by our strong track record.

And there we met or exceeded all six of our bottom line guidance metrics for 2022, and 2023 that were set in March of each respective year.

For the first quarter, we expect revenue to range between 27 million and $29 million before stepping up into second third and fourth quarter as new space service assets begin to deliver data.

Leo Basola: For the full year, we expect revenue of $138 million to $148 million. The 2024 midpoint reflects yet another high double-digit growth year at 35% year-over-year growth. Given the operational leverage we are continuing to see across our business, we anticipate full-year 2024 non-GAAP operating earnings to range from negative $5.5 million to positive $2.5 million, which is a 24.3 million improvement year-over-year at the... For the first quarter, we expect non-GAAP operating losses to range between $8 million and $6 million and then turn positive after the second quarter, driven by higher revenues as space service assets begin to deliver data. Adjusted EBITDA for the full year is expected to range from positive $13 million to positive $19 million, which represents an improvement of $27 million year over year at the.

For the full year, we expect a revenue range from 138 million to $148 million.

The 2024 midpoint reflects yet another high double digit growth year at 35% year over year growth.

Given the operational leverage we are continuing to see across our business. We anticipate full year 2024, non-GAAP operating earnings to range from negative $5 $5 million to positive $2 $5 million, which is a $24 3 million improvement year over year at the midpoint.

For the first quarter, we expect non-GAAP operating loss to range between $8 million and $6 million and then turn positive after the second quarter driven by higher revenues are spaced service assets begin to deliver data.

Adjusted EBITDA for the full year is expected to range from positive $13 million to positive $19 million, which represents an improvement of $27 million year over year at the midpoint for the first quarter, we're expecting a range from negative $2 million to zero and then for adjusted.

Leo Basola: For the first quarter, we're expecting a range of negative two million to zero, and then for adjusted EBITDA to remain positive starting in Q2 of 2021. We expect our non-gap loss per share for the first quarter to range from negative $0.36 to negative $0.27, which assumes a basic weighted average share count of approximately 22 million shares. For the full year, we expect our non-gap loss per share to range from negative 24 cents to positive 11 cents, which assumes a basic weighted average share count of approximately 22.5 million.

EBITDA remained positive starting in Q2 of 2024.

We expect our non-GAAP loss per share for the first quarter to range from negative 36 cents to negative 27 cents.

Which assumes a basic weighted average share count of approximately 22 million shares.

For the full year, we expect our non-GAAP loss per share to range from negative <unk> 24 cents to positive 11 cents, which assumes a basic weighted average share count of approximately 22 5 million shares.

Leo Basola: Turning to our Replenishment CapEx needs for 2024, we expect to spend between $5 and $7 million to replenish our constellation that supports our data and analytics business. This is in line with our Replenishment CapEx in 2022 and 2023, data that we're now providing in our 10K as we're continuing to provide additional transparency around our cap. Spire has a strong track record of delivering on our... At Spire, we call it being reliable, which is at the core of our values, alongside being faster and relentless. That's the kind of team we have at Spire, and that's what motivates me every day.

Turning to our replenishment capex needs for 2024, we expect to spend between five and $7 million to replenish our constellation that supports our data and analytics business. This is in line with our replenishment Capex in 2022, and 2023 data that we're now providing in our 10-K is working.

<unk> to provide additional transparency around their business.

<unk> has a strong track record of delivering on our commitments that's fire we call it being reliable which is at the core of our values alongside with faster and relentless that's the kind of team we have at spire and that's what motivates me everyday thanks.

Operator: Thanks for joining us today. Now, I would like to open up the call for questions. Thank you. We'll now be conducting a question and answer session. If you'd like to be placed into question Q, please press star 1 on your telephone keypad. A confirmation tone will indicate your line is in question Q. You may press star 2 if you'd like to remove your question from the queue.

Thanks for joining us today now I would like to open up the call for questions.

Thank you well now be conducting a question and answer session if you'd like to be placed in the question queue. Please press star one on your telephone keypad.

Formation tone will indicate your line is in the question queue. You May press star two if he'd like to remove your question from a Q1 moment. Please while we poll for questions.

Austin Moeller: One moment, please, while we poll for questions. Our first question is coming from Austin Moeller from Kennecore Genuity. Your line is now live. Hi, good afternoon, great quarter. My first question here, probably for Leo, since free cash flow use was so low in Q4, can you detail what working capital or other CapEx items are leading you to maintain positive free cash flow guidance in Q2 to Q3, or does summer technically indicate that it's moved to the left a little bit? Austin, thank you.

Our first question is coming from Austin Moeller from Canaccord Genuity. Your line is that what.

Hi, good afternoon, and great quarter.

My first question here, probably for Leo since free cash flow use was so low in Q4 can you detail what working capital or other capex items are leading you to maintain positive free cash flow guidance in Q2 to Q3 or does summer technically indicate that its moved to the left.

But.

Austin, Thank you and listen the free cash flow for summer is what we said before around Q2 Q3 is the timeline, where we expect that to be the case free cash flow includes capex and our Capex. In total is also subject to the space services launches in this space services activities.

Leo Basola: And listen, the free cash flow for summer is what we said before, around Q2-Q3 is the timeline where we expect that to be the case. Free cash flow includes CAPEX, and our CAPEX in total is also subject to the Space Services launches and Space Services activity. So when you think about free cash flow becoming positive, it's a combination of the timing of the space services activities that we do, the builds and the launches, and also our ability to turn on some of those data provision contracts that, as I described and you can see in our presentation, are extremely positive cash flow generators after they go effectively in service. So we have a bunch of those that launched late in 2024 and early in Q1.

So when you think about our free cash flow, becoming positive. It's a combination of the timing of the space services activities that we do the builds in the launch and also our ability to turn on some of those data provision contracts that as I described and you can see in our presentation are extremely positive cash flow generator after they.

Go effectively in service. So we have a bunch of those are that launched late in 2024 and in early in Q1 as those become operational it will become a significant contributor to our cash flow position.

Leo Basola: As those become operational, they will become a significant contributor to our cash flow. Great And just to follow up, this question might be for Peter, but when do you expect ESA might award a follow-on contract with the Uriolo Constellation after you finish the first demo satellite? So, the timeline, thanks a lot for the question, is that towards the end of the Ureala project, which was always targeted to be a two to three-year project, the European Commission has come out and said, like, that's roughly when we So, I would expect, given the timeline of the European institutions, that those discussions will start to get underway as the Ureala project reaches kind of like its midpoint, maybe a little bit further, but I do not expect them to be awarded much before, if at all, the end of the Ureala project.

Great.

Follow up this question might be for Peter but when do you expect the Isa might award a follow on contract with your yellow constellation. After you finish the first demo satellite.

So the timeline things off with a question.

Is that towards the end of the year reality project, which was always our target to be a two to three year project. The European Commission has come out and things like that's roughly when we want to get going in and having a massive constellation up.

Probably a few hundred spacecraft that provide a few second latency of our civilian aircraft tracking over the European area without the need for the GPS signal that is embedded in IV SB information.

I would that I would expect given the timeline of European institutions that those discussions will start to get underway as the reality project reaches kind of like its mid point, maybe a little bit further, but I do not expect them to be actually awarded much before if at all.

And also your yellow projects.

Peter Platzer: Great, that's very helpful. Thanks for the details. Of course. Thank you. The next question is coming from Ric Prentiss from Raymond James. Your line is now live. Thanks. Good evening, everybody.

Great. That's very helpful. Thanks for the details.

Of course.

Your next question is coming from Ric Prentiss from Raymond James Your line is now live.

Thanks, Good evening everybody.

The only couple of call your names.

Ric Prentiss: Hey, a couple of questions. First, I appreciate the calendar year and calendar quarter guidance to say, okay, here's what we're going to do in revenue for the year. That's much appreciated.

Hey couple of questions first I appreciate the calendar year calendar quarter guidance to.

So to say, okay, here's what we're gonna do revenue in the year with so much appreciated.

A couple of questions I had is obviously you've got the new space assets does that hit cost of service depreciation in <unk> and is that kind of the levels. We should expect or was there something unusual in that going from kind of below 10 millions almost 13 buying on a corner.

Ric Prentiss: The couple of questions I had are, obviously, you've got the new space assets. Did that hit cost of service depreciation in 4Q? And is that kind of the level we should expect?

Leo Basola: Or was there something unusual about going from kind of below 10 million to almost 13 million and a quarter? Yeah, so I think one thing that you need to consider is every year we do an assessment of our asset lives, and this is not different from any other year where we basically assess the asset lives that we have. One of the things that came out in Q4 was a new study on the solar cycle that NOAA and NASA gave us. We were able to reassess the extent of the impact of that solar cycle on the useful life of our satellites. Some of the older satellites basically will de-orbit a little bit earlier than we had anticipated, and we had to reset the useful lives for some of the satellites. That's really all you're seeing in that, and Okay, and what are the results? Let me just speak out a little bit for a second here.

Yeah. So I think one thing that you need to consider as every year, we do an assessment of our asset lives and this is no different from any other year, where we basically assess the asset lives that we have a one of the things that came out in Q4 was a new study on the solar cycle are there.

No on NASA, you know gave us and we were able to reassess the extent of the impact of that solar cycle in the useful life of our satellites that some of the older satellites I'm basically will the orbit a little bit earlier than we had anticipated and we had to reset the useful lives for some of the satellites, that's really all you're seeing in in that.

You know reset.

Okay, and what are you Gonna, let me tell you got them all of them.

Second here as you know.

Peter Platzer: As you know, the sun has a cycle of roughly 11 years where its activity increases and then decreases. And when the activity of the sun increases, it kind of like expands the Earth's atmosphere a little bit. And that is impacting all activities in space. If you go to higher orbits, you also have certain events that are called a single event upstate and total ionizing dose that are above different Allen belts where things get a little bit more rough. In the lower orbits, you have a certain spacecraft that just deorbits a little bit quicker.

No that's something that has a cycle of roughly 11 years, where its activity increases and decreases in when the activity of the sun increases it kind of like expand the earth atmosphere, a little bit.

And that is impacting all activities in the space and if you go to higher Orbitz you all have a certain events that caused them.

A single event up seats and in total ionizing dose that a biopsy and Alan bounce, where things get a little bit more rock.

In the in the lower ore grades you have a certain spacecraft that just the orbit a little bit quicker than anyone. He is very very beneficial for spire, great resilience of our constellation that is deployed as well as the comps that increasing capability.

Peter Platzer: I think what is very, very beneficial for Spire is the great resilience of our constellation that is deployed, as well as the constant increase in capabilities. A spacecraft today might do something that three years ago took 10 spacecraft. So I would expect that over time, the total number of spacecraft that deliver the data that we deliver today to customers and beyond is actually going to come down rather than go up, simply because more and more assets that we launch are more and more effective compared to the assets that are currently in orbit. As this 10X performance improvement every five years principle is so deeply embedded, not just in the industry, but in particular in Spire, given the full vertical integration of the company. Okay, and what kind of useful life are you seeing across the different types of your own satellite? So we do, sorry, go ahead Leo.

Our spacecrafts today my view something that three years ago took 10 spacecraft. So I would expect that over time. The total number of spacecraft that deliver the data that we deliver to the agent estimates and beyond is actually going to come down rather than go out simply because more than.

More assets.

That'd be launch I am more and more effects there compared to the assets that are currently in orbit and 10 extra performance improvement every five year principal is so deeply embedded not just in the industry, but in particular inspire given.

All the vertical integration of the company.

Okay, and what kind of useful life are you seeing across the different types of your yourselves.

No.

Yeah, Sorry go ahead, yeah, I think it depends significantly on you know the the timing of when you launch them and the size of the asset and then whether they do or don't have propulsion and the type of mission that we have so on average our own constellation still has a four year average useful life, which is.

Leo Basola: I think it depends significantly on, you know, the timing of when you launch them and the size of the asset and then whether they do or don't have propulsion and the type of mission that we have. So, on average, our own constellation still has a four year average useful life, which is kind of what we expect, and we said, you know, four to five years usually what we would have expected to see. Some of the larger assets tend to have propulsion, and they tend to last a bit longer. So for space services, we have some assets that, you know, could be in the air longer than the five year average four to five years that we have on our, Okay.

What we expect and we said you know four to five years would I expect it to see.

Some of the larger assets tend to have propulsion and they tend to last a bit longer. So force based services, we have some assets that could be in the Arab no longer than the five year average of four to five year than we that we have on our assets.

Okay.

Leo Basola: And you mentioned that some of your, as you produce free cash flow, glad to see that still on track for summer, positive free cash flow, invest back in growth with likely sales products and marketing. If we look at the fourth quarter, sales and marketing were a little lighter, and G&A was a little lighter. Is that what we should expect going forward unless you're ready to start investing some of that free cash flow? Or how should we think about investing in sales and marketing versus what we've seen kind of as the year ended? Yeah, so I would say that that is exactly what you should expect.

You mentioned that some of your how did you produce free cash flow and glad to see that still on track for summer our positive free cash flow.

Best back in growth with well likely sales parts and marketing if you look at the fourth quarter.

This sales and marketing was a little lighter and G&A was a little lighter is that we should expect going forward unless you're ready to start investing some of that free cash flow how should we think about investing in sales and marketing.

Versus what we've seen kind of a new year round. It out yeah. So I would say that that is exactly what you should expect I mean, there are a couple of things that we certainly would want to invest in our offering is heavily skewed towards their data provision and we want to invest a bit more in analytics and predictive analytics are we.

Leo Basola: I mean, there are a couple of things that we certainly would want to invest in. Our offering is heavily skewed towards data provision. And we want to invest a bit more in analytics and predictive analytics. We will also expand our product offerings and launch new products. And you will see a bit more spend on marketing and sales on the street activities as we start to generate that free cash flow. We also described the lifetime value of the cost of acquiring a customer.

Also will.

Expand kind of our product offerings and launching new products and you will see a bit more spend in marketing and sales feet on the street.

Activities as we start to generate that free cash flow. We described also the lifetime value to cost of acquiring a customer and that's effectively where we think the biggest you know return would be for the shareholders. At this point because we have very very strong.

Leo Basola: And that's effectively where we think the biggest return would be for the shareholders at this point, because we have very, very strong returns on those investments on the acquisition side. Okay, and then, obviously, the replenish capex appreciates you breaking that out five to 7 million, similar to 22 and 23. But obviously, space services can be kind of lumpy, lumpy, and chunky.

Returns on those investments on the acquisition side yet.

Okay, and then obviously the replenish capex appreciate you breaking that out five to 7 million similar to 22 and 23, but obviously the services can be kind of lumpy lumpy and chunky.

Leo Basola: For the guidance of positive free cash flow by summertime, does that assume that some of those space services projects are more later in the year or, so they are basically, so the launch happens at one particular time? There's a significant amount of cost associated with the launch. You go to the page where we try to illustrate how the space services deal works from a cash inflow and outflow standpoint. You will see that all of that CAPEX is pre-funded by the customer. There are fees that basically support that.

The guidance of positive free cash flow by Summertime does that assume that some of those services projects are more lateral in a year or.

So they they are they are basically so the launch happens at one particular time, there's a significant amount of cost associated to the launch if you go to the page what we tried to illustrate how this space services Oh deal works from a cash inflow and outflow standpoint, you will see that all of that Capex.

<unk> is pre funded by the customer there are fees that basically support that but it's lumpy because you can see money that comes that design manufacturing a big you know bar that goes out when we pay for the launch prepay for their lunch dinner and lunch happens and then from there on the cash inflows are very material. So of course from a P&L standpoint.

Leo Basola: But it's lumpy because you can see money that comes in at design, manufacturing, a big, you know, bar that goes out when we pay for the launch, prepare for the launch, and then the launch happens. And then from there on, the cash inflows are very material. So of course, from a P&L standpoint, the gap profit is fairly leveled because we start depreciating those assets that we own. But from a cash standpoint, yes, it can be somewhat lumpy depending on when the assets get launched effectively.

The GAAP profit is fairly leveled because we start depreciating those assets that we own but from a cash standpoint, yes. He couldn't can be somewhat lumpy depending on when the assets get launched effectively but generally speaking you should expect us to have as we said $5 million to $7 million of replenishment Kathy.

Leo Basola: But generally speaking, you should expect us to have, as we said, $5 to $7 million of replenishment CAPEX of our own that will go through the year, right? And, you know, it's, as we said, like we just said, we replenish satellites. They last for five years, four to five years.

So all of our own and we will go through the year right in and you know it's as we said like we just said we replenish satellite they last for five years four to five years and as we put new satellites.

Leo Basola: And as we put new satellites, you know, in orbit, they do way more than the older ones did, so we don't need to replace them one for one. And then we continue to invest in our capabilities, the type of antennas that we have in our ground stations and the bands and the speed of the downlink and all of that jazz. I would say that for space services, it can be a bit lumpy, but generally speaking, you should think about this as. When you see more CAPEX, that's actually good. It means more growth, it means more revenue, and it means more cash in the future. Okay, very good. Thanks, everyone.

In orbit, they do way more than what the older ones did so we don't need to raise room finished one for one.

And then we continue to invest in our capabilities on the type of and then is that we have in our ground stations and the bands and the speed of the downlink and all of that jazz I would say that for space services. It can be a bit lumpy, but generally speaking you should think about this as well.

When you see more capex, that's actually good it means more growth it means more revenue it means more cash in the future.

Okay very good thanks, everyone.

Jeffrey P. Meuler: Thank you. The next question is coming from Jeff Mueller from Barrier Line. Is that live?

Thank you next question is coming from Jeff Mueller from Baird. Your line is that lives.

Leo Basola: Yeah, thank you. Good afternoon. So it was helpful commentary on the impact of the timing of, I think, the NOAA contract as it relates to ARR. And I understand that normalized for that, there's good progression, but I think it would still have been below your guidance normalized for that contract timing. Can you just comment on that dynamic as well as on the ARR solution customer trend? I know you're de-emphasizing smaller customers, but it just looks like it's stepped down more sequentially than I would have expected. Yeah, so you're right. And Jeff, thanks for your question.

Yeah. Thank you and good afternoon. So it was helpful commentary on the impact from the timing of I think the no contract as it relates to a R. R and I get that normalized for that there is good progression but.

Think it would've still been below your guidance normalize for that contract timing can you just comment on that dynamic as well as on the AOR solution customer trend I know you were de emphasizing smaller customers. It just looks like it's stepped down more sequentially than I would've expected, yeah, So you're right and Jeff.

Thanks for your question the the.

Leo Basola: The AR guidance was around $130 million, and we would have been at $120 with the NOAA contract. And the issue is really, you can see it in the news, some of our orders on the federal side were actually delayed because we had the continuing resolution giving some of the agencies a bit of a pause on, you know, when to place those orders. And then on top of that, we saw we delayed the launch of our constellation for North Star, and, of course, when that moves from December to January, there are domino effects on their side and the customer side on, you know, proving that these assets work and that they get additional funding for a subsequent order. So those are the kind of things that impacted our estimate.

The guidance was around $130 million and we would've been at 120 within NOAA contract and the issue is really you can see it in the news some of our orders on the federal side were actually delayed because we had the continuing resolution are giving some of the agencies a bit of pause.

POS on you know when to place those orders and then on top of that we'll use to solve we delayed the launch from our constellation for North Star and of course when that moves from December to January there, a domino effect on their side and the customer side on you know proving that these assets work and that they get additional funding for a subsequent <unk>.

So those are the kind of things that impacted our estimate and you can go line by line and in the reconciliation is actually a little bit of a push out into Q1 or first half of 2024 on those orders.

Leo Basola: And you can go line by line, and the reconciliation is actually a little bit of a push out into Q1 or the first half of 2024 on those orders. I would say generally that's the nature of ARR, that a small move in timing can make a very different change in what you report. We have not seen any change in the demand for and interest from customers for our product. It's quite the opposite.

Got it I would say general bogs anything like that.

That's the nature of IRR that a small movement in timing can make you know make it very different change in what you report we have not seen any change in the demand and interest from the customer for our products. It's quite the opposite you know we are scrambling every way we can do you have enough capacity inside.

Leo Basola: You know, we are scrambling everywhere we can to have enough capacity inside the system to fulfill the demands that customers are throwing our way. Got it. Yep, that makes sense. And I mean, I guess this is related to that. But as you hit free cash flow positive and start to invest more in sales, product marketing, etc. Just given that that's through the income statement in period, Can you give us any sort of framework? around multi-year margin expansion, like should we expect margins to be more flattish for a few years? Or are you just signaling that we should expect a more moderated pace of margin expansion? Can you just say anything to help us better model what you're trying to signal?

The system to fulfill the demands that customers are throwing holloway.

Got it yeah that makes sense and I guess this is related to that but as you had free cash flow positive and start to invest more in sales product marketing et cetera.

Just given that that's through the income statement in period.

Can you give us any sort of like framework.

<unk> multi year margin expansion like should we expect margins to be more flattish for a few years or are you just signaling that we should expect a more moderated pace of margin expansion.

Anything you can say to help us better model, what you're trying to signal.

Peter Platzer: Yeah, the trajectory that we continue to operate against and we have talked about, and we feel very positive and strong about, is about 30% growth on the top line, above 70% across margin and across margin side free cash for positive. I think that is a very, very good framework to think about how this will continue to shake out and move. Okay, thank you.

Yeah, the trajectory that we continue to operate against and you have talked about and we feel very positive and strong about it.

About 30% growth on the top line above 70% gross margin and the gross margin side free cash flow positive and I think that is a very very good framework to think about how this well are continue to shake out and move.

Okay. Thank you.

Erik Rasmussen: Thank you. The next question is coming from Erik Rasmussen from Stifel; your line is now live. Yeah, thanks, and congratulations on the results in the positive operating cash flow. Thank you.

Thank you. Your next question is coming from aircraft must spend from Stifel. Your line is now live.

Yeah, Thanks, and congrats on the results and the positive operating cash flow.

Thank you.

So just wanted to.

Leo Basola: So, just wanted to follow on with that gross margin comment. So, you know, obviously, gross margin stepped down a little bit on an adjusted basis from Q3. And but if we're going to think about that 70% sort of target, is that something that is more of a second half that, you know, as you sort of get to that free tax flow and also sort of coincides with, you know, the top line sort of picking up as the space services piece starts to generate data and start to get revenue recognition from that? Yeah, I would say that you should expect margins to accrete as our revenue continues to grow And in effect, I would say that you should model, you know, margin expansion, like we said, and our expected target is to go to 70% gross profit. And that's what you should use in your models.

Follow on with that gross margin comment.

So you know obviously margin stepped down a little bit.

The basis from Q3.

And but if we think about that 70% sort of target is that something that is more of a second half.

That you you know as you sort of get to that free cash flow in and also sort of coincides with you know with the top line sort of picking up as we speak services piece starts to generate data and start to get revenue recognition from that.

Yeah, I would say that you should expect margins to accrete as our revenue continues to grow as we have told and that affect the in fact I would say that you should model you know margin expansion like we said in our expected target is to go to 70% gross profit.

And that's what you should use in your models and <unk>.

Leo Basola: And, I cannot tell you more than that, I think there is a lot of leverage in our model. So every time we get one of those space services, produced by Mashable Productions, Maritime Contract that we just announced, they come with a significant amount of leverage, right? So there's not an incremental investment on our side on the gross profit side to achieve, you know, that revenue value generation, and effectively that generates expansion. Great.

I cannot tell you more than that I think.

There is a lot of leverage on our model. So every time, we get one of those space services.

Deals on right then they start generating data they generate you know very good margins both on the cash and the gross profit side every time, we sell a new contract like you just saw them with basic D day.

Maritime contract that we just announced they come with a significant amount of leverage right. So there's not incremental investment on our side on the gross profit side to achieve them you know that revenue.

Regeneration and effectively that generates expansion.

Leo Basola: And then just the revenue guidance for Q1, that's essentially flat at the midpoint from Q4. But it sounds like that's all, again, related to the space services. And do you expect then Q2 to be the step up and then step up throughout the rest of the year? Or is there any, you know, and is Q1 sort of the low point for the year?

Great and then just the revenue guidance Q1.

Safely flat at the midpoint.

Q4.

But it sounds like that's all again related to the space services and you expect in Q2 to be the step up and then step up throughout the rest of the year or is there any or is it you know and as Q1 sort of the low point of the year.

Leo Basola: What could sort of bring Q2 a little bit lighter than expected, you know, versus sort of the media comments earlier, Q2 being the step up? Yeah, I think I mentioned one of the things that needs to be unlocked for us to see that step up is the continuing resolution. So as we do that, some of the agency demand that we have seen since Q4 and hasn't really materialized, will materialize in Q1 and then deliver revenue for Q2, Q3 and forward. I would say that after Q2, you should expect things to remain relatively flat, you know, increasing slightly from Q2 to Q3 to Q4. But there is a material step up between Q1 and Q2 as we deploy some of these space services agreements. That's helpful.

What could sort of bring Q2, a little bit lighter than expected you know versus sort of your comments earlier Q2 beat them. Yeah. I think I mentioned, one of the things that needs to unlock for us to see that step up is the continuing resolution. So as we do that some of the agency. The man that we have seen since Q4 and it hasnt.

Really materialized will materialize in Q1, and then deliver revenue for Q2, three and forward them I would say that after Q2, you should expect things to remain relatively flat you know increasing slightly from Q2 to Q3 to Q4, but there is a material step up between Q1 and Q2 as we deploy some of these base services.

[noise] agreements.

That's helpful Great and then.

Leo Basola: And then, you know, it seems like the space services business is picking up. Can you just maybe comment on how revenues have trended? What's the split in relation to, you know, your data services business? And then, you know, how do you see that sort of split progressing throughout 2024? Yeah, perfect.

You know.

It seems like the speed services business is picking up can you just maybe comment on how revenues have trended what's the split in relation to use your data services business and then you know how do you see that sort of split through progressing throughout 2024, Yeah. Perfect. You you know.

Leo Basola: You know, we talked about the four main business units that we have, right? So maritime, weather, aviation, and space services. I would say that the three big ones, and you can consider them kind of in a similar range, are Maritime, Weather, and Space Services; the fourth one, aviation, is emerging. I would say that it's a fraction of the other three, so if you do the math, you can come up with, You can do the simple math on 3-3-10, 3-3-3-10, something like that.

We talked about the four main business units that we have right. So maritime whether aviation and space services I would say that the three big ones and you can consider them kind of in a similar range or maritime weather and space services. The fourth one aviation is emerging I would say that it's our fracs.

One of the other three so if you do the math you can come up with.

Yeah got.

Can you can do the simple math on three three and 333 turns right something like that but my my.

Leo Basola: You asked how we're going to grow. All of the business units are growing double-digits. Aviation starts from a smaller base, and they're going to grow high double-digits as the Urealo project and the technology that ensues from that project turn into one or two or three or four commercial agreements when we're able to deploy real-time ADS-B data sets to our customers, right? So there's a significant amount of upside potential on the aviation solution. Great. And then maybe just one last question.

You asked how we're gonna grow all of the business units are growing double digit aviation starts from a smaller base and they're gonna grow high double digits as the euro yellow project and the technology that ensues from that project turns into a one or two or three or four commercial agreements.

When we're able to deploy our real time, a D. S. B data sets to our customers right. So there's a significant amount of upside potential on the aviation solutions.

[laughter].

Great and then maybe just the last.

Leo Basola: Just maybe, can you talk about the transition to the larger accounts? You know, you mentioned last quarter, too, the change in strategy. I know we're still sort of early in that process, but any sort of observations you could share in terms of the momentum or, you know, potential upside that you've seen from that change? Yeah, I think, Erik, you can see it in our numbers, right? So we have already seen the result of our price actions and our conscious decision not to pursue very, very small accounts. They tend to be the least creative, and they don't continue to grow.

Last question, just maybe can you talk about the transition of the large accounts. You know you mentioned last quarter that shows the change in strategy I know, it's still sort of early in that process, but any sort of observations you can share in terms of the whole bedroom or potential upside that you can see from that that change yeah. I think Eric you can see it in our numbers right. So we have already.

<unk> seen the result of our price actions and our conscious decision to not to pursue a very very small accounts.

They tend to be the least accretive and they don't continue to grow they don't expand so our strategy of land and expand is a very important factor of our growth equation and the smaller accounts tend to be small forever. So we want accounts that have an opportunity to really buy more of what we.

Leo Basola: They don't expand. So our strategy of land and expand is a very important, you know, factor in our growth equation. And the smaller accounts tend to be small forever. So we want accounts that have an opportunity to really buy more of what we can offer, and we want a larger share of the wallet, but we also need a larger wallet. So our decision to really de-emphasize that and reprice some of the smaller accounts, you can see already in some of the numbers that we have published for our... AAR Customer Solutions that came down significantly, but that's because of our conscious approach to really not invest time in things that don't have the right payback.

Can offer and we want a larger share of wanted but we also need a larger wallet. So our decision to really deemphasize that and reprice. Some of the smaller accounts you can see already in some of the numbers that we have published a four hour.

Our customer solutions.

That came down significantly, but that's because of our conscious approach to really not.

Invest time and things that don't have the right payback.

Leo Basola: Great, that's helpful. I appreciate it. Thank you. Next question is coming from Sujitha Silva from Rotem Cam. Your line is now live.

Great. That's helpful. I appreciate it.

Thank you next question is coming from Suzhou Silva from Roth home camera line is that a lot.

Sujitha Silva: Hi Peter, hi Leo. On the North Star win and just the opportunity in national security, I want to understand, you know, in terms of targeting that, the U.S. and global governments, you know, how large is the incremental opportunity from beyond North Star and how soon can that come online? Is it being delayed by some of what's going on in the government? Just curious and thoughts on that.

Hi, Peter Hi, Leo Congrats on the strong quarter on the on the the North Star when and just the opportunity in National Security I want understand you know in terms of targeting that the U S and global governments you know how large is the incremental opportunity from beyond North star and how soon can that come come online is it being delayed by some of the what's going on in the government just curious on thoughts there.

Sure.

Peter Platzer: Yeah, so it's clearly packing two questions into one, so I will try to answer both of them sequentially. North Star is really a customer who's, you know, I would say in service to humanity we are particularly proud of supporting. They are generating more space situational awareness information with their assets than I think anyone else, definitely commercially, has been able to do. That data is of relevance indeed in the commercial sector, but it is also, as you rightfully point out, of great relevance on the defense side. And overall, the conversation that we have on planet Earth is often about wildfires and greenhouse gases.

Yeah. So.

It's probably packing two questions into one so I'll try to answer both of them sequentially.

Northstar is really of a customer who is.

I would say almost service to humanity, we are particularly proud of supporting them. They they are generating more space situational awareness information with their assets than I think anyone else.

Definitely commercially has been able to do them.

That data is of relevance indeed in the commercial sector, but it is also as you rightfully point out Oh, great relevance on the defense side.

And overall and the conversation that we have the planet Earth is often about wildfire and greenhouse gases.

Peter Platzer: The conversations we have in space are generally equally intense and heated up about space situational awareness. And so I think we're quite excited for the growth of North Star's business. And the powerful thing about that of the business, as I think Leo had mentioned in some of his remarks, is that something that starts off at, you know, one, two, three, four spacecraft can then, very, very rapidly grow to, you know, eight, 16, 32 spacecraft and beyond.

Foundations, we have in spaces generally equally tens and heated up in both spaces.

Awareness and so I think I think they're quite excited for the AR growth up North stars business and a powerful thing of that are of the business and I think got Alere I had mentioned in some of his remarks is that something that starts off but you know once you three four spacecraft and then very very rapidly grow.

Two 816, 32, a spacecraft and beyond so the.

Peter Platzer: So the upsell opportunities to grow with our customers' business are very, very rapid, as FIRE has the ability to answer the demand from our customers, who are trying to answer the demand from their customers very, very rapidly. And certainly, demand for space situational awareness, who is doing what, where, and when, and how, is certainly increasing both on the civil side and the defense side. But overall, the defense side is definitely a market which, for better or worse, is one where we see a tremendous amount of opportunity for FIRE to contribute to a more safe and balanced and transparent world. As the intensity of conflict increases all across the world, the ability to generate activity reports, the ability to geolocate assets that use radio frequency, which is just about any asset on planet Earth, is becoming more and more valuable.

The upsell opportunities to grow with our customers business is very very rapidly and inspire has the ability to answer the demand from our customers, which are trying to answer the demand from their customers very very rapidly and certainly the amount of space situational awareness, who is doing what where and when.

And how you're starting to increasing both on the civil side on the defense side, but overall the defense side is definitely a market, which for I guess better or worse.

Is one where we see tremendous amount of opportunity with spire to contribute to an MRI safe in bounds and transparent world as he is the intensity of conflict increases all across the world the ability to generate activity reports the ability to geo locate assets that are.

Use radio frequency, which is just about any assets Oh planet Earth is becoming more and more valuable and it's certainly something that we are excited to be a provider of the transparency in supporting those that are trying to shine a light into those activities and be a contributor to a more safer world and.

Peter Platzer: And it's certainly something where we are excited to be a provider of transparency in supporting those that are trying to shine a light on those activities and be a contributor to a safer world. And we certainly see a lot of future possibilities there for FIRE as a company. Thanks, Peter.

We certainly see a lot of our future possibilities, there or if our suppliers and company.

Okay, great. Thanks, Peter and then my other question is on the maritime market you've talked on your in your materials and it doesn't Mr materials about it being lagging other logistics and transportation and the industries in Digitization I'm curious how the partnership with signal Ocean in the AI ml assets, they have kind of maybe accelerates our maritime into that better.

Peter Platzer: And then my other question is about the maritime market. You've talked in your materials and with Mr. Materials about it being lagging behind other logistics and transportation industries and digitization. I'm curious how the partnership with SignalOcean and the AI ML assets they have kind of maybe accelerates maritime into that better. Any color there would be helpful to understand as we go forward.

Any color there would be helpful to understand as we go forward.

Peter Platzer: Yeah. We believe that the maritime industry is just on the cusp of a new era of digitalization. As more and more companies recognize the value of the data that can enhance operations, that can enhance what is happening in the oceans, which is driving over 90% of global trade. It is feeding the planet. It is doing, you know, not just transportation, but feeding a commodity market. So it is an incredibly rich economy that some people say is like $4 trillion, but it is driving an even much larger portion of the global $100 trillion economy.

Yeah.

We believe that the maritime industry is is just on the cusp of a new era. This utilization as more and more companies recognize the value of the data.

That Ah I can enhance the operations there.

What is happening on life on the oceans, which is driving over 90% of global trade. It is feeding the planet is doing you know not just the transportation.

Feeding a commodity market. So it is an incredibly rich economy that some people say, it's like four trillion dollars, but it is driving and even much larger portion of the call behind the trillion dollar economy and so the additional legislation is really at the cost and spire really sees itself is wanting.

Peter Platzer: And so digitalization is really at the cusp, and Spire really sees itself as wanting to be the premier data provider in this universe and enabling other companies to grow based on that best-in-class data set. AI and machine learning now is a technology that really enhances the value of this data if you have the right AI and machine learning technologies and capabilities yourself. And I think that is really where SignalOcean shines in having some exceptional capabilities there.

To be the premier data provider in this universe, enabling other companies to grow based on that fast in class dataset.

AI and machine learning now is is that is a technology that really enhances the value of this data. If you have the right AI and machine learning technologies and capabilities yourself and I think that is really where we're sitting on the ocean shine and having some some exceptional capabilities there and I believe that this partnership.

Peter Platzer: And I believe that this partnership can enable other players to make the most of the combined value of more data that can generate more insight through AI and machine learning. And so we're quite excited about continuing to be a positive force for change towards this digitalization curve with our partnership with SignalOcean, but also a lot of other conversations that we have here in parallel about those partnerships to drive the digitalization of the maritime economy as one of the, if not the largest, provider of clean, valuable, premier data on what is happening on the oceans every single day, every single minute. Thanks, Peter. I appreciate the call. Of course, Thank you. We have reached the end of our question and answer session. And that concludes today's teleconference and webcast. You may disconnect your lines at this time and have a wonderful day. We thank you for your participation today.

Enable other players to make the most of the combined value of more data that can be generating more insights AI and machine learning and so we're quite excited.

Continuing to be a positive force for change to what's this digitalization curve with a partnership with single Ocean, but all of that a lot of our conversations at the half year in parallel for those partnerships to drive the digitization of the maritime economy, and it's one of the if not the largest provider of.

Clean valuable Premier data what is happening on the oceans every single day every single day.

Okay. Thanks, Peter I appreciate the color thanks, guys.

Yeah.

Of course.

Thank you we reached end of our question and answer session and that does conclude today's teleconference and webcast. You may disconnect. Your lines at this time and have a wonderful day, we thank you for your participation today.

Yeah.