Q1 2024 Spire Global Inc Earnings Call

Greetings and welcome to the spire global first quarter 'twenty 'twenty four.

Operator: Greetings and welcome to the Spire Global First Quarter 2024 call. At this time, all participants are in a listen-only mode. A brief question and answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please press star zero on your telephone keypad. As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Ben Hackman, Head of Investor Relations. Thank you, sir. You may begin.

At this time all participants are in a listen only mode.

A brief question and answer session will follow the formal presentation.

If anyone should require operator assistance during the conference. Please press star zero on your telephone keypad.

As a reminder, this conference is being recorded.

Speaker Change: It's now my pleasure to introduce your host Ben Hochman head of Investor Relations. Thank you Sir you may begin.

Ben Hochman: Thank you Hello, everyone and thank you for joining us for our first quarter 'twenty 'twenty four earnings conference call. Our earnings press release, and SEC filings can be found on our IR website at IR dot spire Dot com.

Benjamin Hackman: Thank you. Hello, everyone, and thank you for joining us for our first quarter 2024 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. With me on the call today are 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.

A replay of today's call will also be made available with me on the call. Today is Peter plots are CEO and Lee about Sola CFO.

Ben Hochman: 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 Dot com.

Benjamin Hackman: 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, let me hand the call over to Peter.

Ben Hochman: 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.

Ben Hochman: 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.

Peter: 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.

Peter Platzer: Thank you, Ben. Good afternoon, everyone, and welcome to today's call.

Peter: Thank you Ben good afternoon, everyone and welcome to today's call.

Peter: I want to start off by extending my deepest gratitude to our exceptional team dedicated to improving life on earth with data from space.

Peter Platzer: I want to start off by extending my deepest gratitude to our exceptional team dedicated to improving life on Earth with data from space. Their unwavering commitment and boundless innovations are propelling us forward, delivering industry-wide firsts on a regular basis. We have grown at a compound annual growth rate of over 100% since achieving $1 million in revenue in 2017. At the end of last year, we delivered our first quarter of positive adjusted EBITDA ahead of plan.

Peter: Their unwavering commitment and boundless innovations are propelling us forward delivering industrywide first on a regular basis.

Peter: It's grown at a compound annual growth rate of over 100% since achieving $1 million of revenue in 2017.

Peter: At the end of last year, we delivered our first quarter of positive adjusted EBITDA.

Off plant.

Peter Platzer: And today, we are at the doorstep of full profitability, starting with continued positive adjusted EBITDA in Q2 and positive free cash flow thereafter. We aim to set the standard in our industry by being a high-margin, profitable, high-growth space company, something that so far has not been demonstrated. We are inspired by leading SaaS companies that grew profitably by more than 20% for 20 years, increasing their market cap over 150 times. And we believe Spire's market and growth opportunity are at least as large, driven by our commitment to improving life on Earth with data from space and supported by massive generational trends, including climate impact, security threats, and the power of AI and machine learning for the digital economy of the future.

Peter: Today, we are at the doorstep of full profitability, starting with continued positive adjusted EBITDA in Q2 and positive free cash flow thereafter.

Peter: We aim to set the standard in our industry by being a high margin profitable high growth space company something that's so far has not been demonstrated.

Peter: We are inspired by leading SaaS companies that grow profitably by more than 20% for 20 years, increasing their market cap over 150 times and we believe spire marketing growth opportunity are.

Peter: At least as large driven by our commitment to improving life on Earth, we stayed up from space and supported by massive generational trends, including climate impact security threats and the power of AI and machine learning for the digital economy after future.

Peter Platzer: Our team at Spire is shaping the future of our industry, and I could not be more excited about that journey ahead. For over a decade, Spire's trajectory has been shaped by two enduring exponential global megatrends. Global Security Challenges and the Escalating Impacts of Climate Change. The ongoing conflict in Ukraine, the expanding geopolitical landscape in the Middle East, and the persistent tensions in the South China Sea underscore the ever-evolving complexities of our world.

Our team expiry shaping that future off our industry and I could not be more excited about the journey ahead.

For over a decade spires trajectory has been shaped by two enduring exponential global Mega trends.

Peter: Global security challenges and the escalating impacts of climate change.

Peter: The ongoing conflict in Ukraine, the expanding geopolitical landscape in the middle East and a persistent tensions in the south China Sea underscored the ever evolving complexities of our world.

Peter Platzer: Meanwhile, climate change-induced weather volatility continues to surprise the world. Just recently, Dubai experienced a deluge, receiving more rain in a 24-hour period than it typically does in an entire year. This led to widespread flooding and disruptions, including at one of the world's busiest airports.

Peter: While climate change induced weather volatility continues to surprise the world just recently Dubai experienced a deluge receiving more rain in a 24 hour period than it typically does in an entire year. This led to widespread flooding and disruptions, including in one of the worlds busiest airports.

Peter Platzer: Furthermore, scientific records reveal that this past March was the warmest in 175 years of climate data. With elevated sea surface temperatures, experts are bracing for an extremely active Atlantic hurricane season, projected to spawn up to 23 named storms. These stark realities highlight the enduring relevance and criticality of Spire's mission. Our impact will not be measured on a quarterly basis but over the decades to come. In the first quarter, our revenue fell short of expectations, yet our commitment to achieving profitability never wavered.

Peter: Furthermore, scientific records reveal that this past March was the warmest in 175 years of climate data with elevated sea surface temperatures experts are bracing for an extremely active Atlantic hurricane season projected just smalling up to 23 named storms.

Peter: The Stark reality is highlight the enduring relevance and criticality of smiles mission, our impact will not be measured on a quarterly basis, but over the decades to come.

In the first quarter, our revenue fell short of expectations in our commitment to achieving profitability never wavered. We successfully reached the midpoint of our adjusted EBITDA guidance and we remain on track for positive free cash flow. This summer.

Peter Platzer: We successfully reached the midpoint of our adjusted EBITDA guidance, and we remain on track for positive free cash flow this summer. As we've done in the past, we optimized the business for profitability and maintained our steadfast drive to sustained profitable growth. We have established a strong business foundation, coupled with a highly efficient, operationally leveraged business model. As we continue to scale, we anticipate achieving strong profitability, allowing us to prudently reinvest in the business.

Peter: As we've done in the past, we optimize the business for profitability and maintain Dallas, that's fast drive towards sustained profitable growth.

Peter: We have established a strong business foundation, coupled with the highly efficient operationally leveraged business model.

Peter: We continue to scale, we anticipate achieving strong profitability, allowing us to prudently reinvest in the business looking ahead to the second quarter and beyond we expect further pivotal moments in our journey driven by high customer demand and improving bottom line metrics.

Peter Platzer: Looking ahead to the second quarter and beyond, we expect further pivotal moments in our journey driven by high customer demand and improving bottom line metrics. As Spire delivers innovative solutions that address the most formidable challenges in global security and climate change, we are also integrating cutting-edge advancements in artificial intelligence and machine learning. The speed of change associated with these technologies is astounding. We are at the beginning of a new industrial revolution with the emergence of artificial intelligence, similar to the industrial revolutions that took place with the emergence of computers and the Internet.

Peter: Aspire delivers innovative solutions that address the most formidable challenges in global security and climate change. We are also integrating cutting edge advancements in artificial intelligence and machine learning the speed of change associated with these technologies is astounding we are at the beginning of a new.

Peter: Industrial Revolution with the emergence of artificial intelligence similar to the industrial revolutions that took place with the emergence of computers and the internet.

Peter Platzer: AI and machine learning are quickly reshaping the boundaries of what can be achieved, propelling us to new horizons of possibility. Spire early on recognized the potential for these technologies to drive demand for our proprietary data. They facilitate a paradigm shift where power now lies with those possessing unique hearts to acquire data rather than those with access to massive supercomputers.

Peter: Machine learning I quickly reshaping the boundaries of what can be achieved propelling us to which new horizons of possibility spy.

Peter: Spire early on recognized the potential for these technologies to drive demand for our proprietary data. They facilitate a paradigm shift where power now lies with those possessing unique hodge to acquire data rather than those with access to massive supercomputers.

Peter Platzer: Our wealth of data that can only be collected from space affords us the opportunity to deliver to customers capabilities that surpass previous standards in accuracy, applicability, and value. And the weather industry is one in which we are seeing AI and machine learning quickly upend traditional processes. For decades, the industry has relied on physics-based numerical weather prediction models requiring supercomputing power and lengthy processing times to generate forecasts. Even two years ago, weather experts expressed skepticism regarding the efficacy of AI-driven weather models.

Peter: Our wealth of data that can only be collected from space affords us the opportunity to deliver to customers capabilities, that's a pos previous standards and accuracy applicability and value.

Peter: And the weather industry is one in which we are seeing AI and machine learning quickly up and traditional processes for decades. The industry has relied on physics space numerical weather prediction models, requiring supercomputing power and lengthy processing times to generate forecast just two years ago.

Peter: Weather experts expressed skepticism regarding the efficacy of AI driven whether models. However, within a year a prominent global weather agency began establishing an a I weather forecasting team and model.

Peter Platzer: However, within a year, a prominent global weather agency began establishing an AI weather forecasting team and models. Recent analysis has revealed that their AI model surpasses the accuracy of their long-standing physics-based model. And this advancement was achieved in a remarkably short span of time.

Peter: [noise] analysis has revealed that their AI models surpasses the accuracy of their long standing physics based model and this advancement was achieved in a remarkably short span of time.

Peter Platzer: This aligns with the rapid changes we are seeing in the industry. Instead of running on a supercomputer that costs 80 to 120 million dollars, these weather models are run on a single GPU. Instead of requiring hours to process the data, Spire's AI models run a 10-day global forecast in less than one minute. With these seismic changes in the industry, we are now seeing new AI weather models announced every few weeks. Most of these models have been trained on the same set of initial data, which means that having an additional set of unique data is a major differentiator.

This aligns with the rapid changes, we're seeing in the industry instead of running on a supercomputer that costs $80 million to $120 million. The sweat of models are run on a single GPU.

Peter: Instead of requiring hours to process the data spires AI models run at 10 day global forecast in less than one minute.

Peter: With these seismic changes in the industry. We are now seeing new we I went a models announced every few weeks most of the smallest have been trained on the same set of initial data, which means that having an additional set of unique data is a major differentiator that's west spire comes in.

Peter Platzer: That's where Spire comes into this rapidly changing industry. Spire has world-class data assimilation capabilities. Beyond aggregating conventional data sources, we capture our own proprietary space-based data. This rich data set encompasses a spectrum of information from pressure, temperature, humidity, and precipitation to soil moisture, ocean winds, and sea ice, among others. This comprehensive data set allows us to generate data assimilation grids tailored for training and inference of this new class of AI weather models.

Peter: This rapidly changing industry.

Peter: Spire has world class data assimilation capabilities beyond aggregating conventional data sources, we capture our own proprietary space based data. This rich dataset encompasses a spectrum of information from pressure temperature humidity and precipitation to soil moisture ocean wins and see.

Among others. This comprehensive dataset allows us to generate data assimilation grits tailored for training and inference of this new class I forgot what the models. Furthermore, the computational efficiency of AI models combined with our deep knowledge and experience in weather prediction allows us to.

Peter Platzer: Furthermore, the computational efficiency of AI models, combined with our deep knowledge and experience in weather prediction, allows us to generate massive ensembles comprised of hundreds of individual forecasts. This augmentation empowers us to generate forecasts for low-probability but high-impact events such as rapidly intensifying hurricanes or severe flooding. Previously, the computational demand was too high for these types of forecasts, resulting in the omission of such events from forecast and probability assessment.

Peter: Generate massive ensembles comprised of hundreds of individual forecast.

Peter: This augmentation empowers us to generate forecast for low probability, but high impact events, such as rapidly intensifying hurricanes or severe flooding.

Peter: Previously the computational demand was too high for these types of forecasts, resulting in the omission of such events from forecast and probability assessments.

Peter Platzer: Additionally, we are actively pursuing the development of our proprietary AI weather models. AI modeling is an area in which we are prudently investing, in addition to collaborating with industry leaders such as NVIDIA. Crafting our own model empowers us to meticulously tailor the neural network architecture, thereby effectively extracting information from Spire's proprietary data and ultimately enhancing the accuracy and reliability of our AI weather predictions. As we progress along each step of this journey, we are looking to monetize our data and capabilities.

Peter: We are actively pursuing the development of our proprietary I would've models.

Peter: I'm modeling is an area in which we are prudently investing in addition to collaborating with industry leaders such as Nvidia crafting our own model empowers us to meticulously tailor the neural network architecture, thereby effectively extracting information from spy is proprietary data and ultimately in <unk>.

Peter: The accuracy and reliability of our AI weather predictions.

Peter: As we progress along each step of this journey, we are looking to monetize our data and capabilities beyond enriching the input side of our models, our AI and machine learning capabilities also extend to the post processing face, enabling us to introduce innovative solutions to the market. A recent example is the.

Peter Platzer: Beyond enriching the input side of our models, our AI and machine learning capabilities also extend to the post-processing phase, enabling us to introduce innovative solutions to the market. A recent example is the introduction of Spire's Advanced Soil Moisture Insight Solution. By leveraging exclusive soil moisture measurements obtained by our satellite constellation and integrated sophisticated AI and ML algorithms, we can offer an unparalleled view of soil moisture around the globe.

Introduction of spy is advanced soil moisture insight solution by leveraging exclusive soil moisture measurements obtained by our satellite constellation and integrated sophisticated AI and ml algorithms. We can offer an unparalleled view of soil moisture around the globe.

Peter Platzer: We are seeing early success of our solutions in the marketplace. We recently announced that we secured a multi-million dollar deal with a financial firm for our six day high resolution weather forecast and to develop an AI powered model for long range forecast. This is just the beginning of a long list of opportunities. Weather impacts almost every aspect of the human experience. We expect interest from governmental organizations, logistics companies, energy and commodity firms, insurance companies, and companies with infrastructure that can be impacted by adverse weather.

Peter: We are seeing early success of our solutions in the marketplace. We recently announced that we secured a multimillion dollar deal with a financial firm for our sixth state high resolution weather forecast and you develop an AI powered model for long range forecasting. This is just the beginning of a long list of opportunities.

Peter: Weather impacts almost every aspect of the human experience we.

Peter: We expect interest from governmental organization logistics companies energy and commodity firms insurance companies and companies with infrastructure that can be impacted by adverse weather.

Peter Platzer: It is estimated that weather impacts $30 trillion of GDP, and 10% of that, or $3 trillion, is mitigatable. This is an absolutely massive market, and Spire is in a prime position to capture a portion of it. Our distinctive space-based data positions us as a significant contributor to the revolution being driven by AI and machine learning. Our announced award is the first of what is anticipated to be many opportunities as the marketplace rapidly adopts these new capabilities. Sinzauer Founding.

Peter: It is estimated that weather impact 30 trillion dollars of G D P and 10% of that or three trillion dollars is mitigated.

Peter: This is an absolutely massive market and spire is in a prime position to capture a portion of it.

Peter: Our distinctive space based data positions us as a significant contributor to the revolution being driven by AI and machine learning.

Peter: Announced award is the first of what is anticipated to be many opportunities as the marketplace rapidly adopt these new capabilities.

Peter: Since our founding.

Peter Platzer: We have focused on leveraging space to improve life on Earth. As technologies have advanced, so too have the capabilities that Spire can bring to combat climate change and global security. We have the opportunity and the fortitude to provide previously unattainable knowledge and insight about Earth from the ultimate vantage point of space to help people make smarter, better, faster decisions about what to do next in a rapidly changing world. As humans look up to the vastness of space for a glimpse of hope or a sign of the future, space stares back, compelling us to act. At Spire, we are progressing every day with the hope and belief of an even brighter future. And with that, I'll turn it over to Leo.

Peter: We have focused on leveraging space to improve life on Earth.

Peter: Technologies have advanced so to have the capabilities that spire can bring to combat climate change and global security Yeah.

Peter: We have the opportunity and fortitude.

Peter: To provide previously unattainable knowledge and insight about Earth from the ultimate vantage point of space to help people make smarter better faster decisions about what to do next in a rapidly changing world.

Peter: As humans look up to the vastness of space for a glimpse of hope or a sign of the future space their spec compelling us to act at spire. We are progressing every day with the hope and belief of an even brighter future.

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

Liam: Thank you Peter.

Leo Basola: Peter, during my section, I will be discussing 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 release. Cap revenue for our first quarter was $25.7 million, 6% year-over-year growth. This was below our expectations.

Liam: During my section I will be discussing 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. There should be reviewed in conjunction with this earnings call.

Liam: GAAP revenue for our first quarter, it was $25 $7 million, 6% year over year growth.

Liam: This was below our expectations there were three main drivers for our revenue performance.

Leo Basola: There were three main drivers for our renewed performance. First, the data production from our LEMUR constellation was impacted by the increased solar cycle activity. Some early deorbiting coupled with a delay in the implementation of countermeasures resulted in lower than anticipated sales, although from delivery of clean data to some customers. Second, the continuing resolution in the U.S. federal government was not resolved until very late in Q1 2024, resulting in the delay of new and follow-on orders from government agencies. This was particularly evident in Radio Frequency Geolocation, or RFGL.

Liam: First the data production from our Lima constellation was impacted by the increased solar cycle activity.

Liam: Some early the orbiting coupled with the delay in the implementation of countermeasures resulted in lower than anticipated sales.

Liam: Delivery of clean data to some customers.

Liam: Second the continuing resolution in the U S. Federal government was not resolved until very late in Q1, 'twenty 'twenty four resulting in delay of new and follow on orders from government agencies.

Liam: This was particularly evident in radio frequency Geo location or R. F. G L.

Leo Basola: The short cycle, high volume nature of this business impacted both orders and revenues in the quarter. Finally, a third-party propulsion unit integrated into a set of space services assets underperformed to its stated design capability, resulting in a longer than anticipated lapse between launch and full operation and consequent revenue production for that mission. Nonetheless, and consistent with our commitment to our number one near-term priority of achieving profitability, we kept our costs under tight control and landed at the midpoint of our first quarter non-gap operating loss and adjusted EBITDA guide.

Liam: The short cycle high volume nature of this business impacted both orders and revenues in the quarter.

Liam: Finally, a third party propulsion unit integrated into a set of space services assets underperformed their stated design capabilities.

Liam: I'll take any longer than anticipated lapse between lunch and full operation and consequent revenue production for that mission.

Liam: Nonetheless, and consistent with our commitment to our number one near term priority of achieving profitability, we kept our costs under tight control and landed at the midpoint of our first quarter non-GAAP operating loss and adjusted EBITDA guidance.

Leo Basola: For the first quarter, our non-GAAP operating loss was a negative $7 million, aligned with our expectations. This reflects a 28% improvement year-over-year. Adjusted EBITDA for the first quarter was negative $1.1 million, also aligned with our expectations, and reflects an 84% improvement over the prior year. The first quarter marks another quarter of strong execution since early 2022 in meeting or beating our non-GAAP operating laws and adjusted EBITDA guidelines. Over the last two years, we have been navigating through a period marked by challenges, from geopolitical tensions to economic uncertainty.

Liam: For the first quarter non-GAAP operating loss was a negative $7 million aligned with our expectations. This reflects a 28% improvement year over year.

Liam: <unk> EBITDA for the first quarter was negative $1.1 billion also aligned with our expectations and reflects an 84% improvement over the prior year.

Liam: The first quarter marks another quarter of strong execution since early 2022, and meeting or beating our non-GAAP operating loss and adjusted EBITDA guidance.

Liam: Over the last two years, we have been navigating through a period marked by challenges from geopolitical tension to economic uncertainties.

Leo Basola: However, our strategy has been unwavering, delivering a sustainable stream of positive adjusted EBITDA and free cash flow from 2024 onward. Although growth is paramount to value generation, I believe that a self-sustaining, profitable company that also grows is regarded much more positively in the markets from both an equity investor and debt provider perspective. Generating our own cash flow opens up additional opportunities for Spire given the significant long-term growth opportunities within our addressable market. Turning quickly to a few additional metrics, reported ARR at quarter end was over $120 million, reflecting a 15% year-over-year growth. Spire's ARR net retention rate exceeded 100% at 102%.

However, our strategy has been unwavering delivering a sustainable stream of positive adjusted EBITDA and free cash flow from 'twenty to 'twenty four onwards.

Liam: Although growth is paramount to value generation I believe that a self sustaining profitable company that also grows is regarded much more positively in the markets from both an equity investor and they provide their perspective generating our own cash flow opens up additional opportunities for spire, given the significant long term growth opportunities.

Liam: Within our addressable markets.

Liam: Turning quickly to a few additional metrics reported E. R. R. At quarter end was over $120 million, reflecting a 15% year over year growth.

Liam: Buyers are our net retention rate exceeded 100% at 102% our remaining performance obligations remained robust at approximately $196 million, we expect a little over 40% of this revenue to be recognized in the next 12 months.

Leo Basola: Our remaining performance obligations remain robust at approximately $196 million. We expect a little over 40% of this revenue to be recognized in the next 12 months. Let's now move to the balance sheet and specifically our cash position. We ended the quarter with cash, cash equivalents, and short-term marketable securities of approximately $64 million.

Liam: Let's now move to the balance sheet and specifically our cash position.

Liam: We ended our quarter with cash cash equivalents and short term marketable securities of approximately $64 million during.

Leo Basola: During the first quarter, we raised gross proceeds of $40 million at an average price of $13.44 per share and have used $10 million to prepay a portion of our outstanding debt and reduce our financial costs. We expect positive adjusted EBITDA in Q2'24 and remain on track for positive free cash flow this summer. We believe these accomplishments put us in an even stronger position to refinance our existing Blue Torch Capital loan to lower our cost of funding.

Liam: During the first quarter, we raised gross proceeds of $40 million at an average price of $13 $44 per share.

Liam: And have used 10 million to prepay a portion of our outstanding debt and reduce our financial costs.

Liam: We expect positive adjusted EBITDA in Q2, 'twenty four and remain on track for positive free cash flow. This summer we believe these accomplishments.

Liam: It is in an even stronger position to refinance our existing blue torch capital loan to lower our cost of funding. We have continued to make progress on this front, having spent time with numerous financial institutions to better understand the current market landscape.

Leo Basola: We have continued to make progress on this front, having spent time with numerous financial institutions to better understand the current market landscape. Given market conditions prevalent as of today, we're targeting to have the refinance completed by the end of 2024.

Liam: Given the market conditions prevalent as of today.

Sort of getting to have the refinance completed by the end of 2024.

Liam: Now turning to our outlook for the second quarter and the full year, we expect a strong rebound in revenue in the second quarter to a record amount in the range of $29 million to $33 million.

Leo Basola: Now turning to our outlook for the second quarter and the full year. We expect a strong rebound in revenue in the second quarter to a record amount in the range of $29 to $33 million. Given the operationally leveraged nature of our business, we expect this strong revenue growth to largely flow through to the bottom line. We anticipate Q2 non-GAAP operating loss or income to range between negative $3 million and positive $1 million, with a midpoint of negative $1 million.

Liam: Given the operationally leveraged nature of our business. We expect this strong revenue growth to largely flow through to the bottom line we.

Liam: We anticipate Q2, non-GAAP operating loss or income to range between negative $3 million and positive $1 million with a midpoint of negative $1 million.

Leo Basola: The midpoint represents a $5 million improvement year over year and would also represent Spire's best ever non-gap operating loss performance. We expect Adjusted EBITDA to once again turn positive and be in the range of positive $2 million to positive $5 million. We expect adjusted EBITDA to remain positive from Q2-24 onwards. For non-GAAP loss per share, we expect a range of negative 31 cents to negative 15 cents for the second quarter, which assumes a basic weighted average share count of approximately 24.7 million shares.

Liam: The midpoint represents a $5 million improvement year over year and it would also represent spires best ever non-GAAP operating loss performance.

Liam: We expect adjusted EBITDA to once again turned positive and be in the range of positive $2 million to positive $5 million.

Liam: We expect adjusted EBITDA to remain positive from Q2 'twenty four onwards.

Liam: For non-GAAP loss per share, we expect a range from negative 31 cents to negative 15 cents for the second quarter, which assumes a basic weighted average share count of approximately 24 7 million shares.

Leo Basola: I would like to turn now to the full-year outlook. Some of the events that impacted revenue in the first quarter also impact our full-year revenue expectations. We expect full-year revenue to range from $122 to $132 million. This represents 20% year-over-year growth at the midpoint of our guide. In line with our focus on profitability, we expect to maintain tight cost controls. We anticipate a non-gap operating loss between negative $11 million and negative $1 million, which at the midpoint represents a nearly $20 million improvement year over year.

Liam: I would like to turn now to the full year outlook.

Liam: Some of the events that impacted revenue in the first quarter also impact our full year revenue expectations. We.

Liam: We expect full year revenue to range from $122 million to $132 million. This represents 20% year over year growth at the midpoint of our guide.

Liam: In line with our focus on profitability, we expect to maintain tight cost controls, we anticipate non-GAAP operating loss between negative $11 million of negative $1 million, which at the midpoint represents a nearly $20 million improvement year over year.

Leo Basola: We expect adjusted EBITDA to range from positive $7 million to positive $15 million, which at the midpoint represents a $22 million improvement year over year. For the full year, we expect our non-gap loss per share to range from negative $1.11 to negative 70 cents, which assumes a basic weighted average share count of approximately 24.2 million shares.

Liam: We expect adjusted EBITDA to range from positive 7 million to positive $15 million, which at the midpoint represents a $22 million improvement year over year.

For the full year, we expect our non-GAAP loss per share to range from negative $1.11 to negative 70 cents, which assumes a basic weighted average share count of approximately $24 2 million shares.

Liam: Before we jump into Q&A. If you allow me I would like to share my perspective on our company's strengths and future.

Leo Basola: Before we jump into Q&A, if you allow me, I would like to share my perspective on our company's strengths and future. I joined Spire in pursuit of a personal dream, to align myself with a company that mattered, a company that would allow me to look back and proudly tell my grandchildren that the work I did contributed to resolving the most challenging problems we face on Earth, and those are certainly issues related to climate change and the ever-increasing geopolitical tensions that are escalating daily.

Liam: I joined spire in pursuit of a personal dream to align myself with a company that matter a company that will allow me to look back and probably tell my grandchildren and their work and they've contributed to resulting in the most challenging problems we face on Earth.

Liam: And those are certainly issues related to climate change and the ever increasing geopolitical tensions that are escalating daily.

Leo Basola: Spire has demonstrated, since its inception, a strong capability to offer valuable solutions for those challenges through superior and original innovation. In only ten years, Spire moved from manufacturing a nanosatellite to managing a full-deployed constellation of satellites, a skill that we're now offering as a service to our customers. We improved the quality and increased the type of data we capture from space, starting with AIS, ADS-B, and radio occultation for maritime, aviation, and weather applications. Now we're widening our frontiers, pushing the boundaries of our capabilities with new assets, detecting GPS jamming and spoofing, capturing greenhouse gas emissions data, space awareness images, and data for wildfire tracking and prevention. Wow!

Liam: Aspire has demonstrated since its inception, a strong capability to offer valuable solutions for those challenges.

Liam: Through superior and original innovation.

Liam: In only a decade spired moved from manufacturing and nano satellite.

Liam: To managing a full deployed constellation of satellites.

Liam: His skill that we're now offering this service to our customers.

Liam: We improve the quality and increases the type of data we capture from space, starting with a S. E T S B and radio station for Maritime aviation and whether applications.

Now we're widening our frontier is.

Liam: Pushing the boundaries of our capabilities with new assets.

Liam: Detecting G P S jamming and spoofing, capturing greenhouse gas emissions data.

Liam: Space awareness images and data for wildfire tracking on prevention.

Liam: Wow.

Leo Basola: The journey has had and will have challenges along the way, but it's the unwavering and relentless commitment of my colleagues at Spire that makes all the difference. This is just the beginning, and I see a significant step change ahead of us as we turn free cash flow positive in the summer and then deliver sustainable profitability. Just imagine what this team will be able to achieve when that happens. And now I would like to open the call for questions.

Liam: The journey had and will have challenges along the way.

It's the unwavering and relentless commitment of my colleagues at spire that makes all the difference. This is just the beginning and I see a significant step change ahead of us as we turn free cash flow positive in the summer and then deliver sustainable profitability just imagine what this team will be able to achieve when that happens.

Liam: And now I would like to open the call for questions.

Speaker Change: Thank you we will now.

Operator: Thank you. We will now be conducting a question and answer session. If you would like to ask a question, please press star 1 on your telephone keypad. A confirmation tone will indicate that your line is in the question queue. You may press star 2 if you would like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star key.

Speaker Change: I will be conducting a question and answer session if you'd like to ask a question. Please press star one on your telephone keypad.

Speaker Change: I wanted to get your line is in the question Kim.

Speaker Change: You May press star two if he would like to move your question from the queue.

Speaker Change: For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star.

Operator: One moment, please, while we poll for questions. Thank you. Our first question comes from the line of Austin Moeller with Canaccord Genuity. Please proceed with your question.

Speaker Change: One moment please poll for questions.

Speaker Change: Thank you. Our first question comes from the line of Austin Muller with Canaccord Genuity. Please proceed with your question.

Speaker Change: Yeah.

Austin Nathan Moeller: Hi, good afternoon. Just my first question here. If you have to accelerate LEMUR depreciation, do you expect CAPEX to materially change this year or next year to maintain the constellation?

Austin Nathan Moeller: Hi, Good afternoon, just my first question here.

Austin Nathan Moeller: If you have to accelerate lemur depreciation do you expect capex to materially change this year or next year to maintain the constellation.

Leo Basola: Hey, thanks for the question. And no, really not.

Speaker Change: Hey, Thanks for the question and no really not I mean, we basically have it fully deployed constellation and it's basically a replenishment well, we're planning and as I mentioned last call. The solar cycle is clearly impacting some of our assets are you know the orbiting timing a lot of it.

Leo Basola: I mean, we basically have a fully deployed constellation, and it's basically a replenishment of what we're planning. And as I mentioned last call, the solar cycle is clearly impacting some of our assets, you know, the orbiting timing. A lot of those assets were fully depreciated, and we anticipated that, eventually, they would also deorbit soon. Some of the assets that we're seeing deorbit, we will replace and replenish. And no, we still believe that it's between $5 and $7 million, as we mentioned, what we will need for our internal, for our own needs from a data generation standpoint. So most of our CAPEX, I would say a ratio of 80 to 20%. 80% is really space services, and 20% is our own constellation needs.

Austin Nathan Moeller: Okay, that's helpful. And then, could you go into particular for the space services customer about the propulsion system failure? And if you fall, how do you prevent that from happening again? And also, did you have an insurance policy on that particular customer satellite?

Speaker Change: Those assets were fully depreciated and we anticipated that eventually they would also the orbit soon and some of the assets that we're seeing are.

The Orbitz will replace and replenish and no. We still believe that it's between five and $7 million as we mentioned, we will need for our internal them for our own them you know needs from a data generation standpoint, so most of our Capex I'll tell you a ratio of 80% to 20%, 80% is really space services and 20%.

Speaker Change: Is our own constellation needs.

Okay. That's helpful. And then could you go into particular for the space services customer about the propulsion system failure, and if you fall treat that from happening again and also did you have an insurance policy on that particular customer satellite.

Peter Platzer: Sure, Austin; happy to do that. But, as you know, better than many, the supply chain in the smaller satellite space is still not the most robust one. We had gone through a very, very stringent selection process, looking at over a dozen vendors, whittling them down, seeing factories, talking with people before we selected one. And, unfortunately, you know, the deployed and delivered units once in space came up short with a sub-nominal performance from the fact sheet that has been, you know, run to the ground.

Austin: Sure Austin happy to do that so.

Austin: As you know a better better than many of the the supply chain in the smaller satellite space is still not the most robust one we had gone through a very very stringent selection process looking at over a dozen vendors willing then down seeing factory is talking with people.

Before we selected one.

Austin: And Unfortunately, you know I'm the deployed and delivered units once in space came up short with a subnormal performance.

Austin: The if I'm from the fact sheet that has been Ah Ah you now run through the ground and we have five you have taken they their corrective measures. So that there's not going to happen again in the future with with this vendor and so and we do not expect that.

Peter Platzer: And we have taken the corrective measures, so that is not going to happen again in the future with this vendor. And so we do not expect that to be, you know, repeat issues with that. And then you had one last question that I forgot. Austin, what was the last item of your question?

Austin: B you know repeat issues with that and then you add a last question.

Austin: Austin what was the last item of your question.

Peter Platzer: Oh, I just asked if you had an insurance policy on that customer satellite. Right, right?

Speaker Change: Oh I just ask if you had an insurance policy on that customer right right. So we do not have insurance policies for on Orbitz spacecraft and the insurance market. So far is available for most launch vehicles, especially the ones that we're currently using.

Peter Platzer: So we do not have insurance policies for on-orbit spacecraft. However, the insurance market so far is available for most launch vehicles, especially the ones that we are currently using. But once these types of spacecraft are deployed in orbit, there is not yet an insurance market available for them. I do expect that in the future, as it becomes more and more normal to deploy spacecraft, that the insurance market will embrace that as a revenue opportunity. But at this point in time, there is not an insurance market available, unfortunately. Okay, that's very helpful. I'll pass it back to you.

Speaker Change: But one Saturday. These types of spacecraft are deployed on the Orbitz, there's not yet an insurance market available for it I do expect that in the future as it becomes more and more normal to deploy spacecraft that the insurance market will embrace that as a revenue opportunity.

But at this point in time, there is not an insurance market available. Unfortunately.

Speaker Change: Okay. That's very helpful. I'll pass it back thank you.

Austin: Thanks, so much Austin.

Speaker Change: And our next question comes from the line of Jeff Miller with Baird. Please proceed with your question.

Austin Nathan Moeller: And our next question comes from the line of Jeff Meuler with Baird. Please proceed with your question.

Jeffrey P. Meuler: Yeah, thank you. So I think you said that some of the Q1 events impact full year revenue expectations, but the magnitude of the full year revenue guidance reduction is quite a bit more material. So could you just kind of bridge what from Q1 kind of carries on to a greater order of magnitude and any other factors that go into the full year guidance and then maybe talk about demand more broadly and if there's any sort of change in demand drivers?

Jeffrey P. Meuler: Yeah. Thank you. So I think you said that some of the Q1 events impacted full year revenue expectations, but the magnitude of the full year revenue guidance reduction.

Jeffrey P. Meuler: It was quite a bit more material. So could you just kind of bridge.

Jeffrey P. Meuler: What from Q1 kind of carries onto a greater order of magnitude and any other factors that go into the full year guidance and then just maybe talk about demand more broadly.

Jeffrey P. Meuler: And if there's any sort of like change in in demand drivers. Yeah. Just that first of all let me tell you that for the hour.

Jeffrey P. Meuler: Jeff, first of all, let me tell you that our secular demand drivers have not changed, right? So the issues that we see with climate change and the global security challenges have, if anything, intensified. I mean, they haven't really decreased in any meaningful way. When you think of some of the drivers that I mentioned in my commentary, for example, the continuing resolution, right? So this was resolved late in March.

Jeffrey P. Meuler: We're a secular demand drivers have not changed right. So the issues that we see with climate change and the global security challenges.

Jeffrey P. Meuler: If anything intensified I mean, they haven't really decreased in any meaningful way. When you think of some of the drivers that I mentioned in my commentary for example, they continuing resolution right. So this was resolved late in March a lot of the orders that we expected anticipated from the agencies did not happen in Q1.

Leo Basola: A lot of the orders that we expected and anticipated from the agencies did not happen in Q1, and some of those orders are trickling through slowly in Q2 also. So the impact is not going to be only a Q1 item, but everything kind of shifts to the right when you think about when we're expecting these orders to come through from some of the government agencies, particularly here in the U.S. When you think about the issues that we have with the solar cycle, for example, we have countermeasured timely now in the latter part of Q1 and Q2 the latency issues that we had because of the deorbiting of a few of our assets that created not necessarily a volume issue with data provision but mostly a latency and quality issue.

Jeffrey P. Meuler: And some of those orders are trickling through slowly in Q2 also so the impact is not going to be only a Q1 item, but everything kind of shifts to the right. When you think about when we were expecting these or are there still come through from some of the government agencies, particularly here in the U S. When you think about the issues that we have with them.

Jeffrey P. Meuler: Solar cycle for example.

Jeffrey P. Meuler: We have counter measured a timely now and in the latter.

Jeffrey P. Meuler: Later part of Q1, and Q2 are the latency issue that we had because of the auditing of a few of our assets that created not necessarily a volume issue whether data provision, but mostly in latency and quality issue, but that's solar cycle will not finish until the end of the year I think I believe and I said no.

Leo Basola: But that solar cycle will not finish until the end of the year. I think I believe NASA and NOAA basically peaked this in midway through 2024, so things will improve in that regard after 2024. And what we can see is that these things will continue to become a problem that we cannot necessarily overcome fully and timely during the year. Our replenishment strategy and so on puts us on a good path to recover some of the latency issues that we've had with some data provisioning, and this is why we have right-sized our growth expectation to where we basically are showing it at 20% at the midpoint.

Jeffrey P. Meuler: Sure basically peak this in mid way through 2024, and so things will improve and in that regard.

Jeffrey P. Meuler: You know after 'twenty 'twenty four and what we can see is that these things will continue to become a problem, though we cannot necessarily overcome are you now fully and timely during the year, our replenishment strategy and so on puts us in a good path to recover some of our you know the latency issues that we that we've had with them.

Jeffrey P. Meuler: Our provision of data and this is why we have right sized our gross expectation too where we basically are showing it at 20% and the midpoint.

Peter Platzer: And if I add to that, Austin, you know, you ask about the demand picture, nothing has changed. If anything, it has gotten stronger.

Austin: And if I, if I add to that Austin, you know on the you asked about the demand picture.

Austin: Nothing has changed if anything it has gotten more stronger and you start to see that coming through in some of our numbers the the air or per customer has grown almost 30% year over year as we focus continuously on larger contracts on on customers with substantially more growth potential.

Peter Platzer: And you start to see that coming through in some of our numbers. The ARR per customer has grown almost 30% year over year as we focus continually on larger contracts with customers with substantially more growth potential. And that is true in every single segment.

Austin: And that that is true in every single segment and in every single segment. We see contracts are showing up that are 10 times the size of those contracts. He used to be six figure contracts become a seven figure contract seven figure contracts become eight figure contract and and and we do see further our firm.

Peter Platzer: In every single segment, we see contracts showing up that are 10 times the size that those contracts used to be. Six-figure contracts have become seven-figure contracts. Seven-figure contracts have become eight-figure contracts, and we do see further demand in this kind of regard as well. Just as we leave today, one of our customers that delivered this connectivity of Bluetooth to spacecraft, deciding to use Spire for that still quite magical feat of having a Bluetooth device to connect to a spacecraft, announced that their constellation has a target size of 96 spacecraft.

The demands in this kind of regard as well chest that would relieve today one of our customers that delivered this connectivity all Bluetooth two spacecraft deciding to use spire for that still you know quite magical feats of having a bluetooth devices are.

Austin: Connects to a spacecraft you know announced that their constellation has a target size of 96 spacecraft and there's a number of other similar stories that I expect we will we're talking about here in the coming weeks and months and so the demand picture has not changed one iota.

Peter Platzer: And there are a number of other similar stories that I expect we will be talking about here in the coming weeks and months. So the demand picture has not changed one iota. And as I think Leo indicated early on, Spire's impact on those generational challenges... Climate Change Impact, Global Security, as those continue to rise exponentially, is not going to be measured in an impact of a month or a quarter or a few of them. It's going to be measured in years and decades as we have the platform, the business model, and the underlying technology to make a massive impact here for years and decades to come.

Austin: I think Leo indicated early on spy has impact on those generational challenge yes.

Austin: Climate change impact global security and as those continue to rise exponentially.

Austin: Not gonna be measured in our impact off a month or a quarter or a few of them, it's going to be measured in years and decades as we have the platform the business model and the underlying technology, Jamaica massive impact here for years and decades to come.

Jeffrey P. Meuler: And then I respect the ongoing profitability progress and reiterate the positive free cash flow positive inflection. Just given the magnitude of the revenue adjustment, can you just help us understand what you're doing differently in terms of what expenses you're maybe reducing in the model, just given it was my understanding you were already running pretty lean.

Austin: Got it and then I respect our ongoing profitability progress and I'm reiterating the free cash flow positive inflection.

Speaker Change: Just given the magnitude of the revenue adjustment can you just help us understand what are what you're doing differently in terms of what expenses are your maybe reducing in the model just given it was my understanding you are already running pretty lean.

Speaker Change: So we basically are in this making decisions around expenses every day right. So we are basically slowing down on the discretionary spend and basically prioritizing the things where we see the biggest growth potential, particularly on the marketing and sales are opportunities that we have.

Leo Basola: We basically are making decisions around expenses every day, right? So we are basically slowing down on the discretionary spend and basically prioritizing the things where we see the biggest growth potential, particularly in the marketing and sales opportunities that we have. I don't think that we're doing anything that is outrageous when it comes to expense management, just diligent expense control. And you can see the run rates that we saw from Q4 to Q1 to Q2. We're basically getting to a similar run rate without a significant amount of expansion in expenses, but there's nothing at the moment that should lead you to believe that we're doing anything extraordinary. No, quite the opposite.

Speaker Change: I don't think that we're doing anything that is outrageous when it comes to expense management, just diligent expense control and you can see our run rates you know that we see from Q4 to Q1 to Q2, I mean, we're basically guiding to a similar run rate without a significant amount of expansion on expenses, but nothing at the moment that should they use it.

Speaker Change: The thing that we're doing anything extraordinary no quite the opposite I mean, Germany, you do have to spend money to grow and if that growth is a little bit shifted out then you shift out the money that you would spend to grow so there's nothing actually in particular any magical here. It's just like money that we would have spent four for something that is happening now we have not gone up.

Peter Platzer: No, quite the opposite. I mean, generally, you do have to spend money to grow. And if that growth is a little bit shifted out, then you shift out the money that you would spend to grow. So there's nothing actually particularly magical here. It's just like money that we would have spent on something that is happening now; we're not going to spend it later. And so you see that flowing through in the profitability numbers.

Spent later and so you see that flowing through into the profitability numbers.

Speaker Change: Okay. Thank you.

Speaker Change: Of course.

Speaker Change: The next question comes from the line of aircrafts and listen with Stifel. Please proceed with your question.

Operator: Our next question comes from the line of Erik Rasmussen with Stiefel. Please proceed with your question.

Speaker Change: Yeah. Thanks for taking the questions and I guess I'm trying to understand I mean, we had earnings in March.

Erik Peter Rasmussen: Yeah, thanks for taking the questions. I guess I'm trying to understand. I mean, we had earnings on March 7th, so two full months in a week. And, you know, at that time, I'm assuming you still knew about the solar activity, customer resolution seemed like that was something out of your control, because I think everyone was in the same camp that that would be resolved a little bit sooner. And then, you know, you can appreciate things getting slower kind of coming out of that.

Speaker Change: So two full months in a week.

Speaker Change: And you know.

Speaker Change: And at that time, I'm, assuming you still knew about the solar activity customer resolution seemed like that was something out of your control because I think everyone's Esa Panther that'd be resolved sooner and then you know can appreciate things get slower kind of coming out of that and then you knew about the third party propulsion I'm I'm, just trying to wonder like.

Erik Peter Rasmussen: And then you knew about third-party propulsion. I'm just trying to wonder, like, what else has changed? And what didn't materialize? Because I mean, you were coming from this is part of what Jeff was trying to ask earlier is that, you know, we were at 35% year over year growth at the midpoint. And now we're lowered by 20%. And just trying to understand, like, what else and what else sort of accelerated that, you know, decrease.

Speaker Change: What else changed or what didn't materialize, because I mean, you've got coming from niches party with Jefferies trying to ask earlier is that you know we were at 35% year over year growth at the midpoint and now were lowered by 20% and just trying to understand like what else in.

Speaker Change: What else sort of accelerated that a decrease yes.

Peter Platzer: Yeah, so I think again looking at a number that is a few months out from a growth perspective, it is not what the Spire market demand is showing us. What we are seeing is still the same long-term demand for our products, and, if anything, it is increasing. So our long-term growth prospects, you know, way above 20%, have not changed one iota.

Speaker Change: Yeah, So I think again.

Speaker Change: Looking at a number that is a few months out for my girls perspective is not what our what the spire market demand is showing US well. We are seeing is still the same long term demand for our products and if anything that it is increasing so our long term growth prospects.

Eric: <unk>, you know way above 20% have not changed one iota and I wish I you know I you know I'm a physician is as you know, Eric but I think even the best physicists cannot really perfectly predict how the solar activity is doing things from a week to week and month to month basis Charlie.

Peter Platzer: And I wish, you know, I'm a physicist, as you know, Erik, but even the best physicists cannot really perfectly predict how the solar activity is doing things from a week-to-week and month-to-month basis. So it's a highly dynamic process where things can move from you have an asset for another six months to you have an asset for another six weeks. It can actually happen reasonably quickly, So they are reasonably dynamic and are not straightforward processes.

Eric: It's a highly dynamic process, where things can move from you have an asset for another six months to you have an assay to find out about six weeks can actually happen reasonably quickly right.

Eric: At the same thing from a continuing resolution pushback. There you know we certainly saw it it's going to be just about done and then he was not done for them for the for the full quarter and AR and the fully extended that early stage. After the launch from some of those assets on the propulsion side. It was also not clear how much the underperformance that is actually going.

Eric: To be and then you have to run the all of the dynamics are by figuring out how much underperformance you have to then figure out how much delay that is going to be so they are reasonably dynamic and are not straightforward processes and so we gave it like the best of our abilities to make.

Peter Platzer: And so we gave it the best of our abilities to make assessments at every given point in time, but sometimes those estimates turn out to be not 100% accurate. And that is, I think, what you're seeing right now.

Eric: Assessments at every given point in time, but sometimes those are those estimates turn out to be not 100% accurate and that is I think what you're seeing right now.

Speaker Change: I appreciate that it makes sense and then maybe just on that then so you talked about the long term growth prospects still has not really changed I mean, I think last call Oh can we still see 30% plus growth for revenue in the topline as we sort of come out of this so disease.

Peter Platzer: I appreciate that. That makes sense. And then maybe just on that, then, so you talked about the long-term growth prospects still not really changing. I mean, I think the last call, can we still see 30% plus growth for revenue in the top line then as we sort of come out of this sort of the episodic issues that you've had.

Speaker Change: Episodic issues that you've had.

Erik Peter Rasmussen: We still believe that this is a very, very achievable and sustainable long-term growth rate, where we can be both profitable and producing cash while growing at this rate, given the demand drivers. I mean, we talked about that, you know, many, many years ago. There are those two massive generational trends that are supported by three further trends that we consider not quite as generational but no less transformative. And the generational ones are, of course, the impact of weather and climate change and the heightened global security situation that is happening.

Speaker Change: We still believe that this is a very very achievable and sustainable long term growth rate, where we can be both profitable and producing cash all while growing at a at this rate given the demand drivers I mean, we talked about that you know many many years ago. There are those two massive generational trends.

Speaker Change: Supported by three further trying to say, we can say, they're not quite as generational, but no less transformative and the generational ones are of course, the impact of weather and climate change and the heightening global security situation that is happening and they're supportive trends are the digitization of.

Erik Peter Rasmussen: And the supportive trends are the digitalization of the global economy, making data the new oil and more and more valuable, again highlighting the power of those that can generate unique and separated data. AI and machine learning, which further tilts that power towards those that have that data because it removes the power of those that have access to supercomputers or reduces it substantially.

Speaker Change: The global economy, making data then you oil and more and more valuable again heightening the power of those that can generate unique and separate data AI and machine learning, which further shows that power to those that have that data because it removes the power of those who have access to supercomputers.

Peter Platzer: And the increasing investment and space race that is happening as nations and corporations drive into this space. Every single country wants to have its own space capabilities. And according to McKinsey, every single company needs to have a space strategy. Nothing has changed in those trends.

Speaker Change: It reduces substantially and the increasing investment in space race that is happening as the nations and cooperation strife.

Speaker Change: To this space.

Speaker Change: Every every single country wants to have that space capabilities and according to Mckinsey every single company needs to have a space strategy nothing has changed in those trends and spire is exceptionally well positioned to serve some of those demands itself with our own data and then.

Peter Platzer: And Spire is exceptionally well positioned to serve some of those demands itself with our own data and then be the picks and shovels for all these ideas that come up, just the one that I mentioned earlier to Jeff with Bluetooth to space. If you think about, if you will allow me for a second, an analogy, Amazon was selling books and CDs and other kinds of things, and that was its use of the Internet for its business model.

Jeff: <unk> be the picks and shovels for all of these ideas have come up just the one that I mentioned earlier, Jeff with Bluetooth to space.

Jeff: Think about if you allow me for a second that analogy Amazon was selling books and Cds and all that kind of things and that was its use of the internet for its business model and then they trade at Amazon Web services to fuel hundreds and thousands of other ideas off of leveraging the internet, providing the picks and shovels for others.

Peter Platzer: And then it created Amazon Web Services to fuel hundreds and thousands of other ideas for leveraging the Internet, providing the picks and shovels for others to drive their business. Spire has built a business selling weather data and maritime data and aviation data, but the infrastructure that is now available through Spire Space Services is a pick and shovel that allows hundreds and potentially thousands of other companies to drive their business models using our technology to deliver to their customers new products and services. Nothing has changed, and I believe the strength of those trends is more than sufficient for us to have an exceptionally high growth rate in the numbers you just mentioned.

Jeff: To drive their business.

Jeff: <unk> has built a business on selling weather data and married time data in aviation data, but the infrastructure that is now available through spire space services is it picks and shovels that allows hundreds and potentially thousands of other companies drive their business model using our technology.

Jeff: To deliver to their customers, new new products and services nothing has changed and I believe the strength of those trends are more than sufficient for us to have an exceptionally high growth rate and the numbers you just mentioned.

Jeff: I agree we have scratched the surface when it comes to the space services in aviation right. So we talked to you about the follow on orders right from our customers that start with a small number of satellites and really want to deploy a constellation.

Leo Basola: We have scratched the surface when it comes to space services and aviation, right, so we talk to you about the follow-on orders, right, from our customers that start with a small number of satellites and really want to deploy a constellation, and all of our customers seem to have that inclination because they really want to have coverage that is global, and we have, as I said, scratched the surface with maybe the first three or four customers that have done this with space services, and way more is to come on those, and shortly. And then on aviation, similarly, you know that we're working on a bunch of new technology that will allow us to provide potentially an additional with the Ural project that we mentioned, right, so a secondary air traffic control infrastructure for ESA, and there is, you know, a lot coming in terms of growth as we deploy that technology and are able to, you know, sign commercial applications of that technology, so significant growth drivers and very, very large infrastructure plays there also.

Jeff: And all of our customers seem to have that inclination because they really want to have coverage that is global and we have as I said scratched the surface with maybe the first three or four customers that have done this with a pay service just got way more is to come on those end shortly and then on aviation. Similarly, you know that we're working on.

Jeff: It's a bunch of new technology that will allow us to provide potentially a.

Jeff: No additional who with you around a project that we mentioned right. So it is secondary air traffic control infrastructure for Isa and there is a lot coming in terms of growth as we deploy that technology and are able to sign commercial applications.

Jeff: That technology.

Jeff: So significant growth drivers and very very large infrastructure plays there also.

Speaker Change: Got it.

Erik Peter Rasmussen: Got it. And maybe just if I get to the margins, obviously, a step down here, it's understandable with the revenue. But as we think of the, you know, the longer term or your more near-term guide, you talked about 70%. Is that still achievable this year? And then if we think about the longer term model, as you gain additional scale and, I guess, drive further efficiencies, where can margins go? And what's the path to get there? Yeah, so

Speaker Change: Maybe just two.

Speaker Change: So the margins.

Speaker Change: Obviously, a step down here, it's understandable with the the revenue, but as we think of the you know the longer term or are you more near term.

Speaker Change: You talked about 70% is that still achievable.

Speaker Change: This year and then if we think about the longer term model with it you know as <unk>.

Speaker Change: Net gain additional scale and drive further efficiencies where can margins go and what's the path to get there.

Leo Basola: Yeah, so we price effectively most of what we sell above 70%, and we're seeing effectively a short-term impact of the accelerated depreciation of the assets given the lifetime that we're now assigning to the assets for our solar cycle impacts. This is a short-lived impact.

Speaker Change: Yeah. So so we price effectively most of what we sell above 70% and we're seeing effectively a short term impact of the accelerated depreciation of the assets given the last time, there were no assigning to the assets for our solar cycle impacts.

Speaker Change: This is a short lived impact we saw it in Q4 Q1, where we're guiding the same thing for Q2, but as you go for the full year and we have taken most of those assets basically into consideration I think we're going to improve radically because you can see it in the P&L, it's really driven by depreciation and amortization at the most.

Leo Basola: We saw it in Q4, Q1, we're getting the same thing for Q2, but as you go for the full year, and we have taken most of those assets basically into consideration, things are going to improve radically because you can see it in the P&L. It's really driven by depreciation and amortization at the moment. The replenishment, and we talked about this several times, right, so we built a constellation of over 100 satellites and, you know, these satellites last for four years, and we love that that happens because when we replenish, the capabilities of the satellites are a factor of five to ten times what the early versions could do.

Speaker Change: The replenishment and we talked about this several times right. So we built a constellation of over 100 satellites and satellites.

Saturday last for four years, and we are we love that that happens because when we replenish the capabilities of the satellites are a factor of five to 10 times. What they were the early versions can do so we're not gonna replenish one for one from a satellite standpoint. So my Capex that has reduced significantly you can see it in my P&L for my own.

Leo Basola: So we're not going to replace one for one from a satellite standpoint. So my CapEx tab has reduced significantly, you can see it in my P&L, for my own needs because I can replace these assets, first of all, with, you know, higher performing assets and, second of all, with fewer numbers. So when you do the math on that, yes, you should expect my gross profit to continue to improve and remain in the 65 to 70% gap gross profit level, which is kind of where we see our business for the long run.

Speaker Change: It's because they can't replace these assets first of all with.

Higher performing assets and second of all with less numbers. So when you do the math on that yes, you should expect gross profit to continue to improve and remain in the 65% to 70% gross profit level, which is kind of where we see our business for the long run.

Leo Basola: And again, we do the same thing with Space Services. Space Services has a very significant data provisioning component after we launch, and those cash items are very significant, but also the depreciation that we will account for from those assets gets us to roughly that 70% margin for the long run.

Speaker Change: And and again, we do the same thing with space services space services has a very significant data provision component. After we launch and those cash items already significant but also the depreciation that we will account for from those assets gets us to roughly that 70% margin.

Speaker Change: For the long run also.

Speaker Change: Great. Thanks for taking the questions.

Erik Peter Rasmussen: Great, thanks for taking the questions.

Speaker Change: Of course.

Speaker Change: Your next question comes from the line of Brian winger with.

Operator: The next question comes from the line of Brian Kinslinger with Alliance Global Partners. Please proceed with your question.

Brian Winger: Global Partners. Please proceed with your question.

Brian Kinslinger: Hi, great. Thanks for taking my question. While you certainly commented that the demand environment hasn't changed, can you speak to the near-term pipeline? Do you see stronger awards in the second half of the year? I guess, what's the impact in the second half of the year, given the solar activity, and might this lead to some short-term delays?

Brian Winger: Okay, great. Thanks for taking my questions.

Brian Winger: While you certainly commented the demand environment hasn't changed can you speak to the near term pipeline do you see stronger awards in the second half of the year I guess, what's the impact in the second half of the year given the solar activity and like this lead to some short term delays.

Leo Basola: Yeah, so we clearly have a significant pipeline that supports our estimates for growth in the second half. This pipeline comes from both new accounts, and we have our strategy of "land and expand," right? So it's a combination of new accounts and expanding the share of wallet of existing customers.

Speaker Change: Yeah. So we clearly have a significant pipeline that supports our estimates for growth in the second half.

Speaker Change: This pipeline comes from both new accounts, and we have our strategy of land and expand right. So it's a combination of new accounts and expanding the share of wallet of the existing customers. We have good line of sight to follow on orders from critical space services customers are some of them.

Leo Basola: We have a good line of sight to follow on orders from critical space services customers. Some of them, you know, potentially will be announced in Q2 and in Q3 that are very, very significant. We have also launched campaigns that support basically our expansion of data, you know, assets during the second half. I would say that as we are able to countermeasure some of those, and again, remember we are the largest RO producer commercially, right?

Speaker Change: It will be announced in Q2 and in Q3 that are very very significant we have also launched campaigns that support basically their expansion of data.

Speaker Change: You know assets during the second half I would say that as we are.

Speaker Change: We're able to countermeasure some of those and again remember we are the largest R. O producer commercially right and what we're facing is not necessarily a volume, but mostly of quality of the.

Leo Basola: And what we're facing is not necessarily a volume but mostly the quality of the data that we provide and the latency that we have attached to those things. And we have plans to solve some of those problems. And some of the contracts are really not extremely long contracts for the data provision that we're talking about, and as they come out for renewal, they reset quantities and pricing, and so forth. So, all of that is put into consideration in how we're thinking about our second half growth potential and the targets that we're sharing with you.

Speaker Change: Data that we provide and the latency that we have attached to those things and we have plans to solve some of those things and some of the contracts are really not a extremely long contracts, whether they had a provision that were thought.

Speaker Change: Talking about and as they come out for a renewal they reset quantities and pricing and so forth. So all of that is put into consideration and how we're thinking about our second half growth potential and Italians that we're sharing with you and if you translate a little bit you know they the global trends into like the pipeline you started.

Peter Platzer: And if you translate a little bit, you know, the global trends into like the pipeline, you start to see some of that already. You know, the power of AI generating far more accurate and valuable forecasts was recently translated in a multimillion-dollar contract there for an industry which has, as I'm sure you're aware, many, many, many customers that actually are operating under the same kind of constraints and with an interest in the same kind of data.

Speaker Change: To see some of that already.

Speaker Change: And the the power of AI.

Speaker Change: Generating far more accurate and valuable forecast was recently translated in a multimillion dollar contract there for an industry, which has as I'm sure you're aware many many many customers that actually are operating under the same kind of like constraints.

Speaker Change: Interesting in the in the same kind of data so you're starting to see that and you're starting to see that translating into larger contract whenever aspire puts the assets of like a first launch off one of those space services customers into orbit very soon thereafter, they are keen to deploy them into.

Peter Platzer: So you start to see that, and you start to see that translating into larger contracts. Whenever Spire puts the assets of, like, a first launch of one of those space services customers into orbit, very soon thereafter, they are keen to deploy them into constellations. And again, I mentioned earlier the 96 satellite constellation from Hubble, a Spire customer, which now has assets in orbit and is operational. And so you start to see how every single time we do a new customer on one side, it translates into opportunities at a larger scale for more customers of the same type, or on the space services side, that customer growing many, many hundreds of percent because they go into a constellation. And that is what we see happening, and that is what is driving the confidence we have in the midterm, the long term, but also in the short term for the guidance that we have given.

Brian Kinslinger: Great. It leads me to my follow-up, and takes a little bit away from all the questions asked about some of the challenges right now.

Hubbell: <unk> and again I mentioned earlier, the 96 satellite constellation from Hubbell, our aspire aspire customer, which now has assets on orbit in operation and so you start to see how every single time, we do and new customer on one side. It translates in job, but you need cheese at a loss.

On a scale of four more customers offer the same type or in the space services side that cost them a growing many many 100% because they go into our constellation and that is what we are what we see happening and that is what is Oh, what is driving the are they the confidence we have in the midterm to long.

Hubbell: Hum, but also on the short term for the guidance that we've given.

Speaker Change: Right. It leads me to my follow up.

Speaker Change: It's going to be a way of all the questions you asked about some of the challenges right now.

Brian Kinslinger: In terms of space services, when you have a customer like Hancom, you just aspire to build and operate satellites, you announced two that are contracted for, how easy is it for them to use another space services provider for their launch of satellites? You mentioned they have this large constellation, they plan long term. What's the competitive advantage for you? Can they use multiple vendors, maybe take you through that?

Speaker Change: In terms of space services, when you have a customer like Anton.

Speaker Change: He was inspired to build and operate satellite you announced to date are you contracted for how easy is it for them to use another space services provider for their launch of satellites. You mentioned you know they have this.

Speaker Change: The large constellation day plan long term.

What's the competitive advantage, where you can they use multiple vendors may be take me through that.

Peter Platzer: So the simple answer is yes, of course. Like if you are buying, I don't know, BMWs as your cars for your company, you could then change that relationship and say, I'm gonna buy other cars as well.

Speaker Change: So they the simple answer is yes of course I gave you are buying I don't know B M. W's as your cars for your company you could then change that relationship and says I'm going to buy other costs as well there are costs for that when he gets to space.

Peter Platzer: There are costs for that. When it gets to space and you need this stuff to work, your switching costs become like a knot in your stomach because the technology is actually not that simple and straightforward. So, theoretically, but there is no one in the world who can talk to a customer and say, I am building my business on exactly the same technology as the one that you are using. If my stuff doesn't work, your stuff doesn't work. And if your stuff doesn't work, my stuff won't work.

Speaker Change: And you need this stuff to work.

Speaker Change: Your switching costs become like a and not in your stomach because the technology is actually not that simple and straightforward. So yes, theoretically but there is no one in the world. They can talk to a customer and say I am building my.

Speaker Change: [noise] business on exactly the same technology as the one that you are using.

Speaker Change: If my stuff doesn't work your stuff doesn't work and if your stuff doesn't work myself doesn't work. So my commitment aspire to make the technology work is unparalleled because for everyone else. They just say trug I'm going to try to fix it because theyre not using it no one is.

Peter Platzer: So my commitment as Spire to make the technology work is unparalleled. Because for everyone else, they just say, shrug, I'm going to try to fix it. Because they're not using it. No one is putting their technology through the paces as much as Spire. It's 600 years of space heritage. It's 75,000 contacts a month on multipurpose spacecraft on 70 dishes across the planet. There is no one doing that. So, yes, you can theoretically always switch. But it is a pretty high risk, and no one can prove to you the same resilience and proven reliability as Spire.

Speaker Change: Putting their technology as much through the paces as spire. It's 600 years of space Heritage. It's 75000 contracts a month a multipurpose a spacecraft on 70 dishes across the planet. There is no one doing that.

Speaker Change: So yes, you can see radically always switch.

Speaker Change: But it is a pretty high risk and no. One can prove to you the same resilience and proven reliability as spire.

Speaker Change: Great. Thank you so much.

Speaker Change: Of course.

Speaker Change: Our next question comes from the line of Caleb Henry with Quilty Space. Please proceed with your question.

Operator: Our next question comes from the line of Caleb Henry with Quilty Space. Please proceed with your question.

Caleb Henry: Hi, Thank you a question about the video partnership that's fire announced are a little bit ago can you share any more details about that and let us know if there's any near term economic benefit associated with that deal.

Caleb Henry: Hi, thank you. A question about the Nvidia partnership that Spire announced a little bit ago. Can you share any more details about that and let us know if there's any near-term economic benefit associated with that deal?

Peter Platzer: Sure, Caleb, it's my pleasure. So, NVIDIA, at least that's my understanding, maybe you have a similar one, is in the business of selling GPUs. And the best way to sell GPUs is to make it easy for people to use the GPUs for something that is useful for them, which in this case means they need to have access to data, and they need to be seated with ideas of what kind of problems they can solve running on their GPUs consuming data.

Speaker Change: Sure can I buy it's my pleasure so Nvidia at least that's my understanding maybe maybe you have a similar one is in the business of selling Gpus.

Speaker Change: And the best way to sell Gpus is like you make it easier for people to use the gpus for something that is useful for that.

Speaker Change: Which in this case means they need to have access to data and they need to be seeded with ideas of what kind of problems. They can solve running on the cheap you is consuming data for spire is getting access to cheap you infrastructure and.

Peter Platzer: For Spire, it is getting access to GPU infrastructure and, especially, for the training of models, massive GPU infrastructure. That's a hurdle. And so the trade here is that Spire provides data to NVIDIA so that they can train their models as sales material for selling GPUs, and Spire gets access to the GPUs to get the models and then run its models on them. What this does for NVIDIA is that it enlarges the universe of use cases, meaning more customers.

Speaker Change: Actually for the training of models massive cheap your infrastructure that said, that's a hurdle and so the trade here is that spire provides data to nvidia so that they can train their models as sales material for selling Gpus and spire gets access to the Gpus.

Speaker Change: To get the models and then run our models on it what this does for Nvidia is that it it enlarges the universe of use cases, meaning more customers. It does the same thing for spire because while in the past it was a very very as Terry and difficult time.

Peter Platzer: It does the same thing for Spire because, in the past, it was a very, very esoteric and difficult task to do weather forecasting; now you can take some of those models, you can buy some NVIDIA GPUs, and then you buy some data to run your weather model. Guess who has the largest fleet of spacecraft producing the largest variety and amount and veracity of space-based weather data? It's Spire.

Speaker Change: To do better forecasting now you can take some of those models you can buy something Nvidia Gpus, and then you'd buy some data too.

Ron: To Ron you're right our model guess, who has the largest fleet of spacecraft producing the largest variety and the amount and veracity of space based weather data it's fire.

Peter Platzer: So that's a very, very powerful combination. But it also allows us to build models at higher cost efficiency that we can then sell and make available to our customers. And some of that can then translate into potentially multi-million dollar contracts, as something we've recently announced.

Ron: So that's a very very powerful combination, but it also allows us to build them at a higher cost efficiency.

Ron: Models that we can sell and make available to our customers and some of that then translate into potentially multimillion dollar contracts and something we have recently announced.

Speaker Change: Okay. Thank you.

Peter Platzer: Okay, thank you. In the Space Services Division, you talked about Hubble, and I've seen some other commercial deals announced. Are you seeing any traction from government customers?

Speaker Change: On the space Services Division, you talked about Hubble and I've had some other commercial deals announced or are you seeing any attraction from government customers.

Caleb Henry: There are some constellations where we basically have some interest from agencies in countries that want to resolve some big issues. For example, wildfire tracking, right? And if you live close to Canada, you understand what I'm talking about. And yes, we have a significant amount of interest when it comes to that for space services, right? I mean, we also sell data and other intelligence data sets. I think for space services, what we're seeing right now is really around, you know, some of the wildfire protection assets that we have, potentially some greenhouse emissions, and then some intelligence applications.

Speaker Change: There are some constellations are where we have basically some interest from particularly agencies are in countries that want to resolve some big issues for example.

Speaker Change: Wildfire tracking right and if you live close to kind of you understand what I'm talking about and and yes, we have a significant amount of interest when it comes to that floor space services right. I mean, we also sell data and other intelligence datasets, but I think for space services, what we're seeing right now it's.

Leo Basola: Okay, thanks. And then just the last question, you talked about the propulsion issues. Has Spire given any thought to or planning to vertically integrate that, seeing how a lot of the other spacecraft systems are something that Spire already has in-house?

Speaker Change: Really around you know some of the some of the wildfire protection assets that we have potentially some greenhouse emissions and and then some intelligence applications yeah.

Speaker Change: Okay. Thanks, and then just the last question you talked about the propulsion issues.

Speaker Change: Or given any thought to or planning to to vertically integrate that seeing how a lot of the other spacecraft systems or something that inspire already has in house, we have a history of not necessarily vertical vertically integrating by basically going into manufacturing our own components. When we have issues and yes, I think at some point.

Leo Basola: We have a history of not necessarily vertically integrating but basically going into manufacturing our own components when we have issues. And yes, I think at some point we may consider propulsion also. It's not an immediate priority.

Speaker Change: We may consider propulsion all so it's not an immediate I'd say priority.

Leo Basola: We have not only this vendor but other vendors that we're working with, and we don't anticipate having these issues. By the way, I mean these issues that we have had. It's not like we couldn't fix the issues. It just took us a bit longer, right?

Speaker Change: We have not only their spend or about other vendors that we're working with them and we don't anticipate to have these issues, but by the way I mean these issues that we have had it.

Speaker Change: It's not like we can fix the issue that it took us a bit longer right. That's why I said in my remarks, but we will consider to in source. Some of these critical items. When we see that there is not only a capability issue, but also a demand issue or a cost issue, we have oh call. It a lot of steel.

Leo Basola: That's what I said in my remarks. But we will consider insourcing some of these critical items when we see that there is not only a capability issue but also a demand issue or a cost issue. We have what we call a lot of stupid parts, right, where the cost of the material is way more than what the unit should be costing. So, yeah, we have those on the docket for R&D for sure.

Speaker Change: [noise] bid parts right, where the cost of the material is way more than what they do and it shouldn't be costing so yeah. We have those under a decade for for R&D for sure.

Peter Platzer: A hundred percent. As Leo said, we have done this very successfully on just about every single component of the spacecraft, and we continue to do so. Even when we find reliable suppliers, we love working with them, and I think that experience is mutual because Spire is a very reliable, high-volume buyer. But very, very often, we find issues like the one we just talked about, and then, in the short term or the medium term, at some point, the discussion becomes, are we just going to insource it because the supply chain is not reliable, and Spire has a very, very successful track record in

Speaker Change: On a per cent as Leo said, we have done this very successfully on just about every single component on the spacecraft.

Speaker Change: And we continue to do so if and when we find reliable suppliers, we love working with them and I think that experiences mutual if he gets fire is a very reliable high volume buyer, but a very very often we find issues like they wanted it just talks and then or in the short term or the <unk>.

Speaker Change: Liam time at some point the discussion becomes so we're just going to in source. It because the supply chain is not reliable and supplier has a very very successful track record in doing that.

Speaker Change: Alright, thank you.

Caleb Henry: All right, thank you. There are no further questions.

Operator: Thank you. We have reached the end of our question and answer session, and with that, this will conclude today's teleconference. You may disconnect your lines at this time. Thank you for your participation.

Speaker Change: For the course.

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Speaker Change: Thank you.

Speaker Change: At the end of our question and answer session and with that this will conclude today's teleconference. You may disconnect. Your lines at this time. Thank you for your participation.

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