Q3 2024 Spire Global Inc Earnings Call
So I couldn't just buyers Global's third quarter 2024 conference call at this time, all participants are in a listen only mode.
And answer session will follow the formal presentation. If anyone should require operator assistance. Please press star zero on your kind of some key pad.
Speaker Change: As a reminder, this conference is being recorded it is now my pleasure to introduce Ben Hoffmann head of Investor Relations. Thank you you may begin.
Okay.
Speaker Change: Thank you Hello, everyone and thank you for joining us for our third quarter 2024 earnings Conference call. Our earnings press release, and SEC filings can be found on our IR website at IR dot spire Dot com.
Speaker Change: A replay of today's webcast will also be made available for six months with me on the call today is Peter <unk>, Chairman and Leo the Sola CFO.
Speaker Change: As a reminder, our commentary today will include non-GAAP items reconciliations between our GAAP and non-GAAP results can be found in our earnings press release, which can be found on our IR website at IR aspire Dot com.
Speaker Change: Some of our comments today contain forward looking statements that are subject to risks uncertainties and assumptions.
Speaker Change: In particular, our expectations around our results of operations and financial conditions are uncertain and subject to change.
Speaker Change: Should any of these expectations failed to materialize or should our assumptions prove to be incorrect actual company results could differ materially from these forward looking statements a.
Speaker Change: 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: Thank you Ben.
Speaker Change: We are so pleased to be speaking with you today as it means we have successfully filed our restated financials. While this was an unforeseen activity. The spire team responded with bigger professionalism and determination aided by the exceptional work of another big four audit firm and our auditors.
Speaker Change: We completed a very thorough and detailed restatement.
Speaker Change: After everything he said and done the restatement is expected to have cost between 10 and $15 million in direct and indirect costs. Some of those costs were already incurred in Q3 2024, but the majority of the cost will be recorded in Q4, 'twenty 'twenty four and Q1 2025.
Speaker Change: This amount of resources dedicated to the effort showcases their high level of importance accountability and integrity spire attributed to getting this as right as humanly possible.
Speaker Change: Well the filings now completed last night, we are moving forward with that same vigor professionalism and determination to focus on capturing the large opportunities in front of us tackling global security challenges and climate change with powerful data and analytics from space.
Speaker Change: In addition, during the third quarter of 2024, we received unsolicited inbound interest and a portion of our business.
Speaker Change: Despite this not being anticipated and while still managing the complexity of the restatement process. The spire team quickly initiated a thorough and competitive bidding process with several interested parties.
Speaker Change: As a result of these comprehensive evaluation, we accepted an offer to sell our maritime business, excluding the United States government business for a total consideration of $241 million valuing this portion of our business and nearly six times its trailing 12 month revenue. This.
Speaker Change: Compares favorably to the then prevailing value of all of spire and below three times trailing 12 months revenue.
Speaker Change: There were four elements to this transaction, we felt would enhance shareholder value.
Speaker Change: First the transaction would eliminate that in a non dilutive manner.
Speaker Change: It would provide a comfortable cash position to invest in near and long term growth opportunities.
Speaker Change: He will further strengthen the focus off the organization on solutions that address climate change and global security challenges to key secular drivers of demand and force it would demonstrate the value of spires business to the public market.
Speaker Change: I mean currently fully expect the transaction to close in the next six to eight weeks with a closing off this transaction spy is expected to be a debt free company with a healthy balance sheet.
Speaker Change: Throughout this spirit spire continued to see engagement from new and existing customers that value the company's innovative data products and space services solutions in Q3, we set a company record booking the largest amount of annual contract value or ever.
Speaker Change: In a single quarter we.
Speaker Change: We booked notable contracts with long term customers like NASA and Nova along with renewals from space services customers and awards for Radiofrequency geolocation efforts that support global security initiatives.
Speaker Change: The key demand drivers, we have consistently highlighted over the past several years continue to remain strong.
Speaker Change: Severe weather has continued to impact individuals communities businesses and organizations.
Speaker Change: There were 27 severe weather events in the United States in 'twenty 'twenty four with each one having losses that exceeded $1 billion. This was just shy of the record 28 events in 2023.
Speaker Change: As we start 2025, we are seeing the same level of devastating impacts from severe weather and wildfires spy.
Speaker Change: Spire continues to bring to the market highly valuable solutions powered by differentiated data insights for instance, our high resolution soil moisture provides insights at 100 meter resolution more precise than our competitors, which can be applied to wildfire detection and agricultural monitor.
Speaker Change: Right.
Speaker Change: And we offer a high resolution hourly weather forecasts out two six days several days further than typical by the monks.
Speaker Change: Coupled with our own staff expert whether support team we are helping our customers have a better understanding of the impact from weather to their businesses and missions.
Speaker Change: Yeah.
Speaker Change: Recently, we have seen customers turned to our soil moisture solution to enhance their crop irrigation management, one customer in particular chose spire. After their previous provider failed to deliver the expected insights and now the client power and utility company is leveraging.
Speaker Change: Our deep vision, whether risk solution, whether models and whether support team to proactively prepare for and adjust operations in response to red flag warnings they could trigger a fire safety protocols.
Speaker Change: Additionally, this customer is utilizing spire solution to manage the impact of snow ice flooding high winds and lightning events that could disrupt service.
Speaker Change: Our ability to collect unique differentiated weather data and an unparalleled scale and volume gives us a distinct competitive edge in this market.
Speaker Change: Similarly demand driven by global security remains robust.
Speaker Change: Quick glance daily headlines highlights the ongoing geopolitical events around the world in this context radio frequency G. O intelligence has become increasingly essential in modern intelligence gathering even when objects are hitting their RF signal.
Speaker Change: Can reveal their location.
Speaker Change: By leveraging one of the world's most significant constellations of low Earth orbit satellites, our RF detection and location solutions offer pinpoint accuracy in identifying G&A is spoofing and jamming border security threats stock shape activity and other potential illicit.
Speaker Change: Satellite phone usage.
Speaker Change: <unk> intelligence continues to generate significant interest from customers in this critical sector.
Speaker Change: We are also witnessing the continued maturation of the space economy, and the U S administration that is supportive of commercial space activities there.
Speaker Change: The space economy is large and expanding with projections, indicating it could reach nearly two trillion dollars by the mid 20 threes.
Speaker Change: These projections underscore the immense size and potential of space based solutions.
Speaker Change: Through our space services offering we are leveraging over a decade of intellectual property and industry relationships to deliver comprehensive end to end space based solutions.
Actively meet our customers' needs.
Speaker Change: Cumulatively spire space technology has spent over 700 years in space.
Speaker Change: Truly rare achievement.
Speaker Change: We are seeing growing interest from both commercial and government sectors in our suite of space services the.
Speaker Change: The incoming U S administration, which established the space force doing his firsthand appears poised to continue supporting indeed accelerating commercial space initiatives and further the space Force acquisition strategy has been described as exploiting what they have been.
Speaker Change: <unk>, what they can and only building what they must we believe this stated strategy indicates the space force desire to leverage the capabilities of commercial space companies like spire.
Speaker Change: More specifically, we are leveraging opportunities through the tactical and civilians recognizance and tracking pilot program developed by space system Command.
Speaker Change: This program is designed to directly implement the U S space force commercial space strategy, but taken advantage of speech innovation and capabilities offered by the commercial sector.
Speaker Change: This program provides a rapid and dynamic acquisition process for commercial vendors to receive task inks and deliver analytical products through a one stop shop interface, allowing for the advertisement awards and funding of short term civilians recognizance and tracking contracts with.
Speaker Change: Commercial vendors.
Speaker Change: Additionally, we are exploring opportunities within this space task experiments platform program, which is looking to leverage commercially developed spacecraft to reduce cost streamline processes and accelerate the development of cutting edge space technologies for the joint Warfighter at this.
Speaker Change: This space Test program supports the entire defense Department and other government agencies by conducting end to end demonstrations of novel space Technologies and has executed over 300 mission is to advance new capabilities.
Speaker Change: Moreover, the international landscape is shifting as countries increasingly focus on strengthening their space strategies nations I evaluating submarine programs to safeguard and advance their interests training to companies with proven space capabilities to support these app.
Speaker Change: It's.
Speaker Change: For example, a few weeks ago, we announced winning a 72 million Canadian dollar contracts for the design launch and development.
Speaker Change: Constellation that will monitor wildfires in Canada from space.
Speaker Change: This mission will provide vital data on wildfire behavior smoke air quality and carbon emissions and dressing a significant gap in current wildfire monitoring.
Speaker Change: This is just one of many opportunities where spire given our high level of vertical integration and strong space heritage is in a leadership position to be the prime in delivering reliable scalable solutions from space to benefit us.
Speaker Change: The outlook remains as promising as ever and edge out opportunities grow ever larger we do plan and accommodate for longer lead times as these opportunities mature and fully materialize.
Speaker Change: As we have done in the past we plan to provide our 2025 financial outlook in conjunction with our Q4 and full year 2024 financial results later in March.
Speaker Change: In addition to securing New awards. We also remained focused on operations during the third quarter of 2024 with our 41st batch of satellites being launched the seven satellites deployed contain payloads for weather and space services missions and brought the total number of spire.
Speaker Change: The lights launched to 186 as of the end of the third quarter 'twenty 'twenty four.
Speaker Change: This launch further strengthens our expertise in navigating the complexities of this space industry expertise that is crucial for our space services customers as they evaluate trusted partners to deliver mission critical space based data that drives their business and supports the emission.
Speaker Change: Yes.
Speaker Change: We also continued to develop new technologies. During this time, which we believe enhances our capabilities and further distinguishes us in the marketplace. For instance, we continue to progress our optical into satellite links or OIS out solution and have demonstrated two way laser communication between.
Speaker Change: Satellites and space.
Speaker Change: O I S. L payload screen lasers that send information back and forth between satellites securely and almost instantaneously up to 5000 kilometers apart.
Speaker Change: This is our first ever achievement for spire and the industry. We have shrunk what is typically a large optical system the size of a microwave down to the size of a tissue box. We believe our OIS out payload is the smallest on the market, allowing us to deploy this technology.
Speaker Change: On our small form factor satellites, while delivering performance previously achievable only with much larger systems. It is literally lasers in space.
Speaker Change: R O I as al solution, and Hamzah state of transmission security speed and reliability for future mission.
Speaker Change: This technology has the ability to enhance applications such as weather forecasting secure global communications and remote sensing for navigation and environmental monitoring. This breakthrough has the potential to enhance our data and space services solutions, especially for applications that require.
Speaker Change: Continuous coverage with Boston very secure data relay with security of data, especially being of ever increasing concerns of our customers.
Speaker Change: And finally in the third quarter, we remain diligent and successfully achieved our long standing goal of achieving positive free cash flow something that we audaciously had stayed in that earnings call over two years earlier.
Speaker Change: Suffice to say it was a very busy third quarter.
Speaker Change: And as I look back on this third quarter I'm proud of the milestones we reached despite unexpected complexities we have to navigate these accomplishments would not have been possible without the immense work dedication and sacrifice of so many people at spire for that.
Speaker Change: I wanted to express a very heartfelt. Thank you.
Speaker Change: Now that the restatement is complete and the sale of the maritime business is in its final phase the whole team is excited to refocus on the future too.
Speaker Change: Teresa Condor assumed the CEO role at the start of 2025. She was spot after founding team and has led the expansion of spires offering and business lines. The board has been discussing the potential transition since early 'twenty 'twenty four and after careful consideration this.
Speaker Change: Sided to lean on to resist tremendous knowledge of spire and the space industry, along with her business experience. She brings that skill set to lead our company into its next phase of growth with a focus on streamlining operations financial responsibility and reliable execution at <unk>.
Speaker Change: Gail.
Speaker Change: I could not be more excited for the next chapter of spire under Theresa is leadership and continue to work towards our mission of improving life on Earth with data from space in my new role as executive Chairman with that let me hand, it over to Liam.
Liam: Thank you Peter before I jump into the financials I wanted to give a quick overview of how the restatement came about.
Liam: And some of the changes that are reflected in these restated values.
Liam: Although our contract structures revenue policies and cost policies had remained unchanged in recent years, our auditor raised some questions. During the Q2 24 close process.
Liam: A deeper review of certain contracts.
Liam: Fourth this process, we engaged a big four accounting term that provided thousands of hours of assistance, including support from its subject matter specialists.
Liam: The unique and innovative nature of our space services business wasn't factor in the time it took to complete the restatement process.
Liam: This line of business requires significant judgment and technical accounting knowledge to properly apply the accounting standards.
Liam: Turning to the performance obligations value of the services that are enough control transfer another key accounting conclusions accompany.
Liam: The company has consistently accounted for these contracts for years with clean audit opinions.
Liam: Nothing new or different was incorporated in the recent periods that were restated.
Liam: Simply that substantially deeper into the highly technical accounting nature of these contracts something their corrections and restatement.
Liam: We also updated and enhanced our documentation of detailed accounting effects like the potential existence of embedded leases, which Indiana turned out to be an infrequent situation with only one contract confirms to include an embedded in these endeavors statement.
Liam: The outcome of this process resulted in the following first revenue from our space services contracts will now typically be a recognized only during the data delivery phase of the contract. This has the effect of recognizing revenue later than we previously did second revenue from R&D service call.
Liam: Tracks will know typically be recognized utilizing percentage of completion methodology instead of their contractual milestones. This has the effect of recognizing revenue earlier than we previously did for this type of effort.
Liam: Third all R&D costs associated with the R&D service contracts have moved from RMB and the operating cost line to cost of revenues.
Liam: This has the effect of lowering the gross margin and gross margin percent, but does not impact operating income EBITDA or net income.
Liam: You can find the impact of the restatements in our 2023 10-K, a and first quarter of 2024 and QA filings in summary, as we anticipated there were no impacts to cash which shifted revenues between years less than $10 million in any one fiscal year, mostly.
Liam: Driven by the delay of free space activities revenues to that that that provision period.
And reduced our overall gross profit trend by 15% to 20 percentage points due to the inclusion of all R&D service contracts cost in cost of sales.
Liam: The increase in the cost of sales was offset by the reduction of our operating expenses, particularly in the R&D line on a dollar for dollar basis.
Liam: We also used this opportunity so retrospectively adjust several other items, we have found over the years that have not risen to the level of materiality on their own but we're taking into account your industrial statement process.
Liam: This is a standard procedure during a thorough and careful restatement process and required a significant amount of work on revenue, which necessarily impact the timeline for completing this exercise we believe this wasn't worthwhile tradeoff.
Liam: Now, let's jump into the third quarter results, which reflect this updated methodology.
Liam: 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, which is available on our Investor Relations website and should be reviewed in conjunction with this earnings call.
Liam: GAAP revenue for the third quarter was $28 $6 million, reflecting 29% year over year growth.
Liam: This growth was largely attributed to increased annual recurring revenue with our existing customers growth in space services contracts revenue and growth of R&D service contract revenue.
Liam: For the nine months ended September 32024 revenue was $88 8 million, reflecting 21% year over year growth for the full year 2024, we expect revenue to be approximately $108 million to $110 million, which takes into.
Liam: The volume of radios irritation, or our own profiles awarded under no us commercial weather data program.
Liam: Lower than anticipated revenue for unique and bespoke customer solutions and timing and revenue recognition of space service contracts for new and follow on orders as a reminder, revenue from our space services contracts will now typically the recognized only during the day that delivery phase of the contract.
Liam: Operating loss for the third quarter was negative $6 $1 million, reflecting a 49% improvement year over year.
Liam: Operating margin for the third quarter was negative, 21% or 34 point improvement on a year over year basis.
Liam: The nine months ended September 32020 for operating loss was $19 $2 million, reflecting a 39% year over year improvement in operating margin was negative 22%, reflecting a 21 point improvement on a year over year basis.
Liam: Adjusted EBITDA for the third quarter was negative $3 $1 million, reflecting a 66% improvement year over year for the nine months ended September 30th 20th waiting for adjusted EBITDA was negative $5 5 million, reflecting a 75% year over year improvement.
Liam: Loss per share was 43 cents.
Liam: In the third quarter based on $24 9 million shares, which equates to a 44% improvement in loss per share on a year over year basis.
Liam: For the nine months ended September 32024 loss per share was $1 38.
Liam: Based on $23 7 million shares, reflecting a 40% improvement on a year over year basis.
Liam: We believe these year over year improvements reflect our ongoing focus on cost control and drive towards profitability.
Liam: In the third quarter, we were free cash flow positive aspire.
Liam: Aspire generated $5 1 million of free cash flow in the quarter, which included $14 million of positive operating cash netted by approximately $8 $9 million of Capex.
Liam: As we look to the fourth quarter, we expect the results to be less favorable than the Q3 results, including the cost impact from the restatement process in our press release, we have provided a range of preliminary full year 2024 results.
Liam: Our actual results may differ from these preliminary results, including due to the completion of Yadkin financial reporting processes and audits.
Liam: These preliminary results reflect lower revenue associated with the lower volume of Arrow profiles awarded a significantly increased legal consulting and accounting expenses associated with the restatement process and the sale of the maritime business. These costs along with increased launch activity that took place.
Liam: In Q4 also weigh on our cash we do not expect the fourth quarter to show positive free cash flow.
Liam: You have seen in multiple filings our short term cash position is somewhat strained until we close the maritime transaction.
Liam: To bolster our short term cash and cash equivalents position, we intend to seek additional equity or debt financing.
Liam: Over the three last years, we have converted strong demand for space data based services into an improving top and bottom line as we drive towards profitability with the restatement now complete spire is refocusing on the future and opportunities ahead with that I would like to open the call for questions.
Yeah.
Speaker Change: Thank you if you would like to ask a question. Please press star one on your telephone keypad, a confirmation tone will indicate your line is in the question queue. You May press star two if he would like to remove 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 keys, we ask that you. Please limit to one question one moment, while we poll for questions.
Speaker Change: Our first question is from Austin Moeller with Canaccord. Please proceed.
Austin Moeller: Good morning. So just my question first I know you haven't put out any guidance for 2025, but how should we think about the capex spend.
Austin Moeller: To launch new satellites, just given that some had to be decommissioned or differentiated last year.
Speaker Change: Please check your mute or salary I think you're right.
Austin Moeller: Mute.
Austin Moeller: Yeah.
Austin Moeller: Hi can you hear me.
Austin Moeller: Yes.
Austin Moeller: Okay.
Austin Moeller: So just my question is.
Austin Moeller: How should we think about capex spend for 2025, just given that some satellites were decommissioned or or had to be depreciated last year and how should it compare to prior years.
Speaker Change: Nice to hear from you Austin.
Austin Moeller: And you can hear me as well.
Speaker Change: So I think for.
Speaker Change: For for the future Austin.
Speaker Change: Capex for replacement is along the same line.
Speaker Change: Tom.
Speaker Change: It has been in the past.
Speaker Change: Our long Oh I have to say.
Speaker Change: Five to 7 million to seven.
Speaker Change: $7 million, just as we had indicated in the past.
Speaker Change: At the.
Speaker Change: If fact.
Speaker Change: Hats off you just snap the line being way more cab.
Speaker Change: Capable.
Speaker Change: As Pos satellites.
Speaker Change: The reason is the reason for it wildly wildly square so much better.
Speaker Change: Okay that makes sense. So you expect each individual satellite to be less capital intensive.
Speaker Change: It's that.
Speaker Change: More so it is like that that I think.
Speaker Change: Power law that came out of my research in almost 15 years ago.
Speaker Change: 10, Xpress woman's every five years, meaning that each individual unit is way more capable than it was three or four years and go into parts.
Speaker Change: Excellent I'll pass it back there. Thank you.
Speaker Change: Our next question is from Jeff Mueller with Baird. Please proceed.
Jeff Mueller: Yes. Thank you good morning.
Jeff Mueller: I'm, just trying to sort through the good year to date results and positive bookings trends with what you're saying for Q4 and try to sort through how much of Q4 is kind of like negative variability.
Jeff Mueller: So maybe if you can just talk through like the I mean.
Jeff Mueller: It doesn't look like there's like great AOR growth coming out of Q3.
Jeff Mueller: So just.
Jeff Mueller: Just.
Jeff Mueller: What all goes into kind of Q4 have you seen bookings remained strong into Q4 and Q1, just as we think about modeling 2025 absent a 2025 guidance at this time.
Jeff Mueller: Yeah, Jeff This is Neil thank you.
Jeff Mueller: I think from a bookings standpoint, let me start by saying that bookings in Q4 like most of the operations in Q4 got delayed and you know to a certain extent.
Jeff Mueller:
Jeff Mueller: We were a bit more focused on finishing the restatement done the transaction.
Jeff Mueller: Took a lot of our attention away from some business for a short period of time and in some cases. The lawsuits also impacted some closing of deals you have seen in tag.
Jeff Mueller: TSA arrangement that we have and it can add space agency arrangement that we have closed in January.
Jeff Mueller: January basically they are in Q1.
Jeff Mueller: All 25, if that or there had come in Q4, which in normal circumstances. It would have we would have even a larger bookings Q4 than Q3, which was a record bookings time.
Jeff Mueller: So that's to address the bookings to begin with now in terms of the financials for Q4, a couple of things to mention there clearly Peter mentioned the incremental expenses associated to the.
Jeff Mueller: Transaction and two the restatement efforts.
A lot of those expenses really well hit in Q4 and to certain extent in Q1.
Jeff Mueller: So I think that's a little bit of what you will see coming through as an unusual or nonrecurring.
Jeff Mueller: Barry than on our expenses and our cash.
Jeff Mueller: And then from a revenue standpoint, we talked about and I know a contract being a little bit smaller in terms of volumes and then particularly from a revenue standpoint versus our previous estimates of run rates.
Jeff Mueller: We had.
Jeff Mueller: A particular contract with US based services customer, where we had a constellation of satellites deployed earlier in the year.
Jeff Mueller: Performance of the payloads on those satellites was not as anticipated attainment was selected by us by the customers I'm, a reputable vendor, but unfortunately those are not performing as we anticipated on the customer is not paying for those datasets because the quality is less than what we anticipated.
Jeff Mueller: And that.
Jeff Mueller: That reduction in revenues and hence the reduction in <unk>.
Jeff Mueller: You put all those together and yeah.
Jeff Mueller: It's not going to be as good as the year to date performance.
Jeff Mueller: From a revenue and expense standpoint, but.
Jeff Mueller: We believe that this isn't a short list.
And I think it will certainly be in recovering in 2025 for sure.
Jeff Mueller: Got it very helpful and maybe and then just on the truck.
Speaker Change: Oh, yes, sorry, if I might just add to that I think because you haven't been on your on your in your shoes. You know modeling forward is always kind of like tricky.
Speaker Change: Exercise I.
Speaker Change: I I think I think it's fair to.
Speaker Change: I assume that the noise over the signal in Q3 and Q4 in particular Q4, and Q1 is going to be pretty high.
Speaker Change: So I think.
Speaker Change: A constructive way to think about the future is to look at the consistent trajectory that the company had.
Speaker Change: Two years, almost I would say all the way into Q3, where the diligence in operation and execution paired with the increase in demand driven by the secular trends that you have seen from a climate change and the impact of weather.
Speaker Change: And global security challenges has combined we're very very clear and strong trajectory.
Speaker Change: Over this period. It Q4 Q1 may be part of Q2, you will see more noise, but I think after that posted transaction close I think.
Speaker Change: Absolutely expect that did you Jack theory that you have seen that model beforehand is going to be the trajectory that the company can and will execute against.
Speaker Change: Got it and just to be clear because you talked about the increased expenses that impact the preliminary results and that'll continue into Q1.
Speaker Change: That gets added back to adjusted EBITDA under the I guess exclude other unusual and infrequent cost in the reconciliation correct.
Speaker Change: They will yes for the most parts I mean, there are direct which we can certainly pinpoint and.
Speaker Change: Identify and exclude from adjusted EBITDA. There are some indirect costs, which are difficult to quantify and consequently will probably not include them.
Speaker Change: The delay in this CSA signature right. So there's revenue impacts on when we sign and when we start work and so on so forth difficult to quantify that I am as an example, right.
Speaker Change: Got it and then just on the change in presidential administration, and you called out kind of being more supportive of the privatization of space solutions.
Speaker Change: Can you just address the change maybe holistically. So what have you seen in terms of bookings our dialogue with the U S. Federal government since the election, and then anything in terms of.
Speaker Change: Second order effect, so like reading headlines about lease cancellations planned some NOAA weather forecasting centers, obviously, that's a contracting entity for you, but maybe that actually accelerates the shift to private market solutions.
Speaker Change: So I would say that.
Speaker Change: There was an election right in the election was one right in November and then it wasn't operation in January and it's still like a very very high right.
Speaker Change: No I don't think that we have seen the full impact of that change, yes in our checkbook.
Speaker Change: We have certainly seen it by the immense traffic on like you know E mails phone calls and the like.
Speaker Change: It is a drastic and dramatic shift towards the support of the private sector lending it services and operational excellence to the roll off the government one of which the one that's fires, particularly interested in is you know public safety b that from Hurricanes.
Speaker Change: Our b that from unfriendly.
Speaker Change: Unfriendly accidents.
Speaker Change: And we do expect that this will translate in a general boost to the commercial space industry.
Speaker Change: We combine what has been successful in the past and satellite imagery and satellite launch that electrum indication in.
Speaker Change: In areas that are particularly relevant for spy satellite whether information satellite RF geolocation of signal intelligence information.
Speaker Change: Where if you take it from a stack back United States government has shifted in some instances 60 70 or more percent of its total budget in terms of data or services acquisition to the private sector, providing those as a service rather than the government itself owning.
Speaker Change: If your infrastructure. The most visible one is like the space shuttle, which cost I think somewhere I read might not be true half a billion dollars.
Speaker Change: Flights and now is leaning on private companies to provide that lift services, but at the same thing you have done in our satellite communication satellite imagery and I think you will now increasingly see a similar portion of the budget being shifted 50, 60% or more to private sector in our weather data you mentioned one of them.
Speaker Change: Our contracting entities, there or an SAP a lot RMG out I think that was like the direct ones that we can and are seeing in terms of activity or ramping up or for action in the U S. As a little bit the dust will cycle off the activities of the first 100 or 200 days.
Speaker Change: But the second order effects are seen and another very strong lag of spire, where almost half I think it's about 45% of our revenue and business comes from which is Europe.
Speaker Change: Very few recently looked at something that is happening in the stock market. They're companies that provide security related services to governments in Europe have been going up 2030, 40 or more percent because there is a unified recognition.
Speaker Change: The amount of dollars flowing into national and regional and defense in Europe have to dramatically increase.
Speaker Change: Inspire is particularly many well positioned there.
Speaker Change: Given our history from like the founders being also strongly rooted in Europe, all our technology being not U S solar technology, but European technology.
Speaker Change: And Andy you kind of like the footprint that we have there from our offices.
So that shift that has happened in November I think overall, he's going to be very positive for efficiency effectiveness and scale off space space capabilities being provided to governments all across the world.
Speaker Change: This service from commercial companies.
Peter: Thank you Peter.
Peter: I've relationship.
Speaker Change: Our next question is from Erik Rasmussen with Stifel. Please proceed.
Erik Rasmussen: Yeah. Thanks for taking the question and congrats on getting this whole process wrapped up.
Speaker Change: Hmm.
Speaker Change: Peter.
Speaker Change: I just wanted to follow up with your comments it sounded obviously it sounds like Q4 is going to be weaker period, I think you're looking at around 30% sequential decline and it sounded like some of the factors that are impacting Q4 could spill into Q1, so with Q4 being the low point.
Speaker Change: If we're looking at it around a $20 million revenue number or could we still see some pressure in Q1 similar levels and then I guess I'm just trying to understand what that model looks like right. Now you said that you look at your past performance up until Q3, but you use.
Speaker Change: To talk about a 20%, 40% plus top line and gross margins of 70 plus percent, obviously with the restatements margins are being impacted just because of the allocation from opex to Cogs, but is that still a framework. We can think about as we're looking at 2025.
Speaker Change: And beyond.
Speaker Change: So I would say.
Speaker Change: The trajectory is exactly correct, 20% growth.
Speaker Change: Or more is exactly the right way to think about it.
Speaker Change: And another way to think about where the low point is going to be it's kind of like thinking it from a pre versus post close of the of the maritime transaction.
Speaker Change: We certainly had.
Speaker Change: Bob more intense activity around the restatement and then around the transaction and everything else going on in Q4 than we had in Q1 right where you know we were definitely in the tail end.
Speaker Change: Crossing all the Ts and all the i's and sometimes adding in IMTT to be crossing at a later point in time and doing so as well, but generally at the tail end of the restatement.
Speaker Change: A period as well as how much interaction perspective kind of like going to like kind of like the tail end of that.
Speaker Change: And that's it.
Speaker Change: You all know a very very transformational kind of like story for spire.
Speaker Change: Yes. The total number of revenue will of course be different because the maritime transaction comes out, but it will make a growth profile perspective.
Speaker Change: Maritime was a larger portion of our business and as such the growth rate that you have seen in some of our other markets be that RFG L. B that the U S government, whether it'd be that aviation has been actually very very strong.
Speaker Change: So what you had mentioned from a gross margin profile from a gross perspective is that beforehand. Those January still stand I think on the gross margin one I think New York has mentioned that.
Speaker Change: Based on this restatement, we have to reclassify some things from below the gross margin. So about the gross margin. It doesn't really change anything he doesn't have any impact on the EBITDA or the net profit line. It just moves in line item, which we beliefs are.
Speaker Change: I think for good reasons to be nothing in cost of goods sold is not in cost of goods sold so that in the short term will take some of them some percentage points away, but did you Jack story of growth and trajectory of the gross margins all of that and if he had beforehand and intact than ever and in particularly on the growth side maybe.
Speaker Change: Even a bit stronger going forward and as we have businesses that have.
Speaker Change: Recent years and quarters growing very very rapidly, maybe even a bit more rapidly than the maritime business either.
Speaker Change: Okay, Great that's helpful.
Speaker Change: Of course.
Speaker Change: Our next question is from Brian singer with Alliance Global Partners. Please proceed.
Brian Singer: Great. Thanks, so much it's great to see you guys are getting past this process. They think unless I didn't hear it I think the most important question that investors were wondering ROE right. Now is what gives you the confidence you'll be able to close the transaction for the maritime business from six to eight weeks what has changed that gives you that confidence.
Speaker Change: Okay.
Speaker Change: I think there is that there's a couple of elements. There. The first one is a it's just a very very strong contract.
Speaker Change: It has and as everyone has read a hell or high water provision, which is completely unambiguous.
Speaker Change: And that is.
Speaker Change: A great source of confidence for us and I think it should be a great source of confidence for the investors.
Speaker Change: The second one is that we have a partner that.
Speaker Change: With the right firm in the right.
Partner.
Speaker Change: To make sure that this halo high watermark.
Speaker Change: Is on it and they're very very timely fashion. The individuals that we are working with has deep experience.
Speaker Change: And that in closing those transactions and generally closing them before anything goes to trial because they are obviously to be closed one of the more recent examples of this partner has been the transaction around the sale of trade it.
Speaker Change: And the third element is the Spiro.
Speaker Change: Spiro up activity and D C.
Speaker Change: Stated in public stated expression from a counterparty that had.
Speaker Change: <unk>.
Speaker Change: And then a proclamation to the judge did they expect to have this closed before the early to mid part of April.
And the judge not having a data available around that point in time.
Speaker Change: In the area of that Okay, I want detailed weekly briefings on the on the progress there and I think that has been effective for both sides working very constructively and very efficiently to it's a very time to close of the transaction.
Speaker Change: Great I think that counterparty is what's changed in that that's an important piece my only other question I have that we haven't heard about since June.
Speaker Change: There has been.
Speaker Change: Well documented challenges among commercial out airlines in the United States right now.
Speaker Change: Amongst safety can you talk about the cooperation agreement with Dallas and E. S. S. P to develop the global satellite Air traffic management system, that's called the aviation market and then is there a similar discussions for upgrades in the U S.
Speaker Change: Yeah.
Speaker Change: So.
Speaker Change: Jim I wish that that's all I can keep airplanes flying and preventing the doors from falling out. Unfortunately, we have not yet developed that space based capability.
Speaker Change: But certainly from my tracking of where something is you know and efficiency open air space. The solution that that space has been a part off.
Speaker Change: Isn't 100% something that is coming.
Speaker Change: I think the noise that you spoke about beforehand.
Speaker Change: In Q4 and Q1.
Speaker Change: It wasn't even a bit louder in Europe, where and you know I'm European so I can truly feel into and empathize.
Speaker Change: Sue people in Europe, right, it's not something that is in the culture and the legal system is not set up well in the U S and it's kind of like you know and now that you say, maybe you minimize the Tuesday morning, and any asking when you do it again.
Speaker Change: So all of that noise about like lawsuits and refiling. It not financials caused a lot of anxiety in our European end to something we also Asia Pacific market with conversations continuing but with them more tension if tone and then wait and see.
Speaker Change: Moment.
Speaker Change: I would I would guess that now.
Speaker Change: Now that this is behind us and some of those other elements will hopefully clean itself out in the near future as well, that's pent up demand and indeed the situations that you have mentioned will have only increased that demand for secure.
Speaker Change: Aviation traffic will result in a pickup and acceleration of our conversations and in bookings there.
Speaker Change: We have participated in an.
Speaker Change: In RFP and in RFID in the U S as well.
Speaker Change: But again I think we have to be transparent and separate that various air safety and there is air safety.
Speaker Change: I actually have two with regards to tracking where a plane is including independent of and.
Speaker Change: At G N S S, which is what Youre Rialto project is about and that continues and that there is no talk of expanding that project from the European Commission that European Space Agency.
Alright somewhat different than some of the mechanical difficulties.
Speaker Change: And landing and takeoff difficulties that we have seen recently in the world.
Speaker Change: Where such as surveillance Africa can't really be that's helpful.
Speaker Change: Great. Thank you Peter.
Speaker Change: Of course.
Speaker Change: Our next question is from Jeff Van <unk> with Craig Hallum Capital Group. Please proceed.
Speaker Change: Great. Thanks, I apologize for the background noise a few remaining for me.
Speaker Change: In terms of the visibility I hate to beat the horse here in terms of the Q4 baseline but is there any based on signings that you already you have completed and completed are there any step function sort of step ups as large contracts that are already signed come live Q1, two three and visibility you have to get us.
Speaker Change: Adding to lift from that.
Speaker Change: $20 million baseline for Q4, and then after that.
Speaker Change: In all fairness, if we had any visibility at this point in time than we would have announced it already or if you have not announced it then it's going to be in the hopper and you're going to have to wait for those things to be announced I'm.
Speaker Change: I'm not going to be able to announce anything here that you Havent announced alright.
Speaker Change: Okay and on the 40 million of ACB from Q3.
Speaker Change: Can you comment on sort of the Canadian wildfire a great win for you can you talk to new net new HCV signed between 24, because I know that that 40 includes some renewals that would give us maybe a little help also on a forward growth trajectory.
Speaker Change: I will let Lee talk about to the extent, we can talk about the separation between what is what is renewal and what is new but I want to point out that the Canadian one that you mentioned actually would've been at Q4, if it hadn't been like this noise and situation we talked about.
Speaker Change: Generating yet another even larger ACB bookings quarter for us so that alone should give you some indication that the demand that we're seeing for our products across the whole product suite is very very strong.
Speaker Change: We have seen certain things being just a little bit delayed or put on pause as people wanted to figure out kind of like what is happening here. During this period of time.
Speaker Change: Maybe you can answer or add something to my answer.
Speaker Change: Yeah, I think the Canadian space agency contract easily could have been.
Speaker Change: Clearly different story, if we didn't have the restatement and the transaction impacting the legal entities that we were contracting with Canada and delaying things normally because of that it was scheduled to be closed in Q4, and then pushed into 'twenty five.
Speaker Change: A new business standpoint, clearly U S. Federal had a very significant Q3. This is an expected for U S. Federal because that's kind of where and when government is making their last.
Speaker Change: Or are there, but this was much stronger than we had seen before ride performance with some very interesting deals coming in that we're not necessarily only on renewals I mean, a lot of the renewals came with uplifts in the total because of where the NOAA.
Speaker Change: Came through with lower volumes.
Speaker Change: You'll.
Speaker Change: See that uplift in total, but some of the contracts with U S. Federal had significant uplift when some of the agencies and then it wasn't very significant activity in the radio frequency geolocation.
Speaker Change: Which will have an impact over the next a daily over Q4 in the next few quarters in terms of delivering those.
Speaker Change: Soundings so the new business performance was very strong in Q3 and as Peter said, Unfortunately Q4 was.
Speaker Change: And a lot of factors and distractions and out of the threat. Dennis if you want from our customers in Europe that delayed some of those contracts.
Speaker Change: Contracts and not only Europe, but kind of so.
Speaker Change: I think we are well positioned to continue to close the contracts in 2025, and the pipelines continue to be very strong.
Speaker Change: And whether in aviation and radio frequency Geo location based services.
Speaker Change: Yeah, that's great. Thanks, so much legal and congrats guys. It's good to hear the transaction timeline of six to eight weeks and you got some momentum there so great. Thank you.
Speaker Change: Thank you okay.
Speaker Change: Our next question is from Chris Quilty with Quilty analytics. Please proceed.
Chris Quilty: Alright, Thanks, Peter I was hoping could you perhaps elaborate a publicly on the Canadian wildfire deal and the arrangement there with.
Chris Quilty: Because the payload provider and you know where the capital is coming from and who owns and in sort of the revenue streams from that particular program and maybe as a backup like.
Chris Quilty: With the new space services accounting can you maybe give us and I don't know I didn't look if there was a slide deck that that came with the earnings report have you provided a breakdown of how.
Chris Quilty: Both the revenue recognition and the cash flow will flow under any changes that you've made to the accounting system there.
Leo: I will let last portion will be answered by Leo.
Leo: Who can you can give us all the detail.
Speaker Change: Maybe let me start on like the overall structure that you asked for.
Leo: Chris.
Leo: At the the wildfires that have you have announced so far is the first portion of the program, which is the design.
Leo: Testing qualification and I believe the launch of one test vehicle for the full constellation there.
Leo: There is a second portion which was part of the bidding process and everything else that the Canadian space Agency has decided to not immediately awards, but basically see how that first phase.
Leo: I believe two years ago.
Leo: And we won as the Prime This program and you know you are more familiar that and many others like prime and subprime work.
Leo: <unk> I guess is that like a subcontract address providing the payload and it certainly was the performance of the payloads on the spy a platform that was.
Leo: Is strongly contributing factor to us winning that.
Leo: That contract.
Leo: Maybe Neil you can't you cannot you can talk to like the.
Speaker Change: The second portion of Christian's question Yeah.
Yeah, Yeah, and I guess this was one thing that we mentioned from the early days. When we said that we would have it re filing that we did not anticipate any cash impact from the refining them that is the case our contracts and I think we explained this several times are well structured for space services, where there are milestones in.
Speaker Change: Pre space Phase, where we design, we manufacture will launch the satellites, where their customers actually pay and the completion of those milestones and the possible. We're recognizing revenue on those milestones some arguments on why.
Speaker Change: We weren't really giving them something or not at the time and that's what we're deferring that revenue recognition to the date of provision from a cash standpoint things don't change their contracts are structured so that for the most part.
Speaker Change: The free space activities are funded by the customer and then of course once we get to the data provision side are these contracts become lady significant cash accretive.
There's limited cash cost affectivity associated to the servicing of these contracts like any data provision.
Speaker Change: So that has not changed what you should expect is that from a P&L standpoint, the accounting side of things revenues will be somewhat delayed.
Speaker Change: Because it takes 12 to 18 months to really deploy and working satellite that is generating data.
Speaker Change: In the past we would have recognized some of that revenue at the milestone of these pre space activities. There going forward our approach will be that generally our contracts will recognize that revenue during only during the data from a vision side.
Speaker Change: So what youre going to see as cash inflows coming through as we hit those milestones deferred as contract liabilities are deferred revenues and then once the assets are placed in operating service when we stopped providing data that's going to be a larger revenue amount versus the cash that is coming in from the bidding of those service calls.
Speaker Change: And then the difference will be the leading that deferred revenue that we built over the first 18 months sorry.
Speaker Change: Sorry for the accounting lingo, but hopefully that's clear.
Speaker Change: That's helpful. It it remains mostly a cash flow neutral during the build phase.
Speaker Change: Yes.
Speaker Change: Okay, Yes, Oh look economically to make cash is king. So I think this is an important piece to clarify.
Speaker Change: Also just a clarification I mean, I I heard with regard to the fourth quarter blip or is it more of a blip or a baseline in terms of you know if it's guiding to around the 20 21 million Mark.
Speaker Change: Does it does it grow from that level on.
Speaker Change: On a go forward basis, I think Peter said, you know go back look at our last two year growth rate and that's where we grow.
Speaker Change: Or was Q4 meaningfully a blip in other words it at that.
Speaker Change: 'twenty 'twenty 1 million, it's lower than the go forward run rate.
Speaker Change: Yes, Q4 is a blip for sure you will see growth from Q4 onwards, well disclose all of that after we filed the 10-K as we said.
Speaker Change: But you also need to consider the fact that the transaction. After it happens will reset the baseline right and as Peter said, we believe that the growth rates will be a larger after the transaction because maritime representing roughly $30 million give or take of our.
Speaker Change: Our recurring revenue per year.
Speaker Change: Much lower growth rate than the other areas right now where I'm focusing more on whether radiofrequency geolocation aviation services the growth rate will be certainly larger.
Speaker Change: I understand final question just on your optical terminal I think you said a tissue box like I like the cube boxes or are you talking the rectangular one or 20% more for free size in terms of the unit itself.
Speaker Change: I think youre getting a little bit too.
Speaker Change: Bear bolus I'll ask specific here I think.
Chris Quilty: I think Chris.
Speaker Change: They're less technical people, everyone knows what that tissue boxes. They have a sense of the size for like Wow I got a laser in space from a tissue box.
Chris Quilty: And today, we can make any of the Pentagon.
Chris Quilty: Independent up until a decade or something because I hate or whenever wherever the customer wants.
Chris Quilty: They tend to hear whats taking people a sense of the size and no. One yet has complain to us about the shape of that no.
Chris Quilty: Somewhat teasing on the shape, but I guess the important question here I mean.
Chris Quilty: You at least implied in your script that you've done.
Chris Quilty: No connections at up to 5000 kilometers and there was a you know G. E. O report that just came out where there was this week or last week, noting the myriad of problems that the optical providers are having for the space development agencies P WSJ constellation and clearly.
Chris Quilty: You're not building to SDA specs, but.
Chris Quilty: If you have a working product you know it you know high data rates is this something that you would either offer you know on a merchant basis to other satellite manufacturers or something you would keep as a bespoke capability that you would offer to your satellite services customers.
Chris Quilty: I think that's an excellent question lots of course side Chris.
Chris Quilty: [laughter].
Chris Quilty: So a good question no answer at this point.
Chris Quilty: Yeah.
Chris Quilty: And I lose you.
There are no further questions.
Chris Quilty: I would like to conclude today's conference.
Chris Quilty: Thank you for your participation.
Chris Quilty: You may now disconnect.
Chris Quilty: Yeah.
Chris Quilty: Uh huh.
Chris Quilty: [music].
Chris Quilty: Yeah.
Chris Quilty: Okay.
Chris Quilty: Yeah.
Chris Quilty: [music].
Chris Quilty: