Q4 2024 Spire Global Inc Earnings Call
Greetings and welcome to the spire global fourth quarter and full year 2024 call.
At this time all participants are in a listen only mode.
<unk> and answer session will follow the formal presentation, if anyone should require operator assistance during the call Conference. Please press Star Zero line telephone keypad and as a reminder, this conference is being recorded.
Speaker Change: It is now my pleasure to introduce your host Ben Hackman head of Investor Relations.
Dan: Dan you may begin.
Dan: Thank you Hello, everyone and thank you for joining inspires fourth quarter and fiscal year 2024 earnings conference call.
Dan: Our earnings press release and related SEC filings are posted on the company's IR website at IR dot spire Dot com.
Speaker Change: A replay of today's call will also be made available with me on the call today is <unk> CEO and Tom Cry week interim CFO.
Speaker Change: 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, which can be found on our IR website at IR dot spire dot com.
Speaker Change: Our comments today contain forward looking statements that are subject to risks uncertainties and assumptions.
Speaker Change: In particular, our expectations around our result of operations and financial condition 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.
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.
Teresa: With that let me hand, the call over to Teresa.
Teresa: Thank you Ben good afternoon, and thank you for joining us today.
Teresa: As we close 2024 and shift our focus to the opportunities ahead in 2025.
Teresa: The demand for spires products and technology solutions continues to be strong.
Teresa: The increasing frequency and severity of extreme weather events, such as wildfires droughts floods and hurricanes.
Teresa: Amplify is the need for differentiated weather data and forecasts for our customers.
Teresa: Growing concerns around GNL, spoofing and jamming border security threats dark ship activity and elicit satellite phone use are driving shifts in global security strategies, sparking significant interest from a variety of customers in the critical government intelligence sector.
Teresa: Sure.
Teresa: By focusing on solutions that address the challenges of severe weather and global security, while providing proven on orbit capabilities for companies and governments eager to participate in the rapidly expanding space economy spire is strategically positioned for growth.
Teresa: And the weather and climate portion of our business, we expect further opportunities for government data purchases.
Teresa: There has been a decades long shift away from in house government programs to commercial services contracts.
Teresa: Particularly with satellite communications satellite imagery and rocket launches.
Teresa: Today.
Teresa: We're from 50% to 60% of U S government budgets in those categories are used to purchase commercial solutions.
Teresa: In fact, the U S space Force has described their acquisition strategy as exploiting what they have buying what they can and only building what they must.
Teresa: The purchase of commercial whether data from satellites is starting to follow the same path.
Teresa: We will likely be accelerated by changes in the U S political environment.
Teresa: With some agencies, having budgets of $1 billion to $2 billion for weather data.
Teresa: A small shift in building less to buying more can create meaningful opportunities for spire space based weather data.
Teresa: A severe weather becomes more common.
Teresa: Scientists are highlighting how valuable radio occultation data is in improving the accuracy of weather forecasting.
Speaker Change: Hey, numerical weather prediction study called the radio Occultation modeling experiment was recently undertaken by a consortium of meteorology experts.
Speaker Change: And demonstrated that forecast accuracy improves as more radio occultation measurements are incorporated.
Speaker Change: This particular experiment incorporated aspire data and showed forecast improvement with up to 35000 radio occultation profiles per day.
The findings from the radio Occultation modeling experiments study will likely influence operational weather agencies, such as Noah in shaping how radio occultation observations are purchased for numerical weather prediction.
Speaker Change: While this research focused on one particular data type.
Speaker Change: Spire also offers a range of other valuable datasets.
Speaker Change: <unk> soil moisture and ocean wins.
Speaker Change: We are also deploying advanced collection techniques like microwave sounders, which deliver important information to address the challenges posed by severe weather.
Speaker Change: Fire is continuing to enhance the company's weather modeling capabilities.
Speaker Change: Last year, we announced a collaboration with Nvidia to integrate our radio occultation and proprietary data assimilation capabilities within videos Earth to cloud E. P. I.
Speaker Change: Building on this momentum we recently introduced our AI driven whether models.
Speaker Change: Which deliver medium range and sub seasonal forecasts out to 45 days and run 1000 times faster than traditional physics based models.
Speaker Change: They are built on our proprietary data assimilation techniques and integrate data from our extensive satellite network, including atmospheric profiles soil moisture readings and ocean surface wins.
Speaker Change: Unlike traditional deterministic models, the AI models provide probabilistic forecast offering a range of potential weather outcomes, rather than a single prediction.
Speaker Change: Our new AI models help companies better anticipate and effectively respond to weather disruptions.
Speaker Change: Accurate forecasts are especially important for industries, such as energy and commodities.
Speaker Change: Which can face significant operational disruptions and inflated costs due to unexpected weather changes.
Speaker Change: Beyond spires, whether solutions, we are responding to heightened demand for our space reconnaissance solutions, given the geopolitical environment.
Speaker Change: In the past month, the European Union, Germany, and United Kingdom have disclosed their intent to raise their defense budgets.
Speaker Change: The UK has discussed plans to increase defense spending from two point to 3% of G. D. P. Two 2.6% in 2028 couple.
Speaker Change: Coupled with an intention to drive industrial growth through support of onshore production.
Speaker Change: The EU has proposed an 840 billion dollar plan to quickly increase defense spending in Germany has voted to remove the debt ceiling to enable greater investment in defense.
Speaker Change: Aspire is building a satellite technology in the United States, Canada, the United Kingdom and Germany.
Speaker Change: Allowing us to offer local solutions as governments invest in sovereign defense capabilities.
Speaker Change: Fire expects increased defense and intelligence spending to drive a portion of our revenue growth in the coming years.
Speaker Change: We are seeing some near term results already.
Speaker Change: Fire has been awarded a low seven figure maritime data deal from a long term spire customer in preparation for U S government demand.
Speaker Change: We specifically decided to retain the U S government portion of the maritime business, given the near term opportunities.
Speaker Change: We have also received an award from a defense organization for spire aviation data.
Speaker Change: Which is an expanded use case for what is normally considered a civil safety dataset.
Speaker Change: In February we were awarded a $72 million Canadian dollar contract from the Canadian Space Agency for the wildfire such program.
Speaker Change: This win is an example of governments investing in sovereign space capabilities to support their needs and a new willingness to prime with commercial companies like spire.
Speaker Change: To better support the dramatic inbound interest in defense and intelligence applications from governments around the world.
Speaker Change: Officially established a space reconnaissance business unit with dedicated resources to drive our solutions and growth in this emerging global addressable market.
Speaker Change: What began as an R&D initiative using existing payloads in orbit has evolved into a scalable commercial offering delivering solutions to customers worldwide.
Speaker Change: In addition to winning new business spire is intensifying its focus on efficiency productivity and standardization.
Speaker Change: We have established a dedicated program management office that is enhancing program governance and accountability and.
Speaker Change: And fostering greater cross functional collaboration among engineering operations and business teams.
Speaker Change: The program management office is optimizing our resource allocation processes.
Enhancing our risk management frameworks, eliminating waste and elevating product quality.
Speaker Change: Our satellite development and manufacturing processes have been integrated to emphasize design for manufacture ability and continuous improvement in satellite production.
Speaker Change: All of these initiatives result in shorter project timelines.
Speaker Change: Proved market responsiveness.
Speaker Change: Entire margins that enhance shareholder value.
Speaker Change: These initiatives are being driven by our new chief operating officers Geely pillar.
Speaker Change: In cooperation with our Chief transformation Officer, Gabriel Oh Man.
Speaker Change: They are pivotal improvements as we scale our capabilities for growth, while driving meaningful improvements to our revenue and cash flow.
Speaker Change: Recently, we announced that Ali Engel will join spire as our new permanent CFO effective tomorrow.
Speaker Change: Ali will be based out of our D C office.
Speaker Change: She joins the spire team after most recently serving as CFO of lease accelerator.
Speaker Change: Software as a service company that was similarly sized to spire.
Speaker Change: Prior to that she was the CFO of Gannett, a public diversified media company best known for USA today from 2015 to 2020.
Speaker Change: Ali has a track record of navigating complex challenges and rapidly evolving industries.
Speaker Change: Experiencing complex hardware deployments and.
Speaker Change: And years of judgment and navigating the financial reporting and control requirements of a public company.
Speaker Change: We are excited to welcome her to the spire team.
Speaker Change: Fire is continuing to pursue a dual track process and closing the sale of the maritime business.
Speaker Change: We speak with the buyer on a regular basis to resolve transition questions working towards a transaction close in the next two to four weeks.
Speaker Change: At the same time spire is continuing to move forward with the legal process and to preserve our rights.
Speaker Change: The court has set the trial date for May 28th.
Over the past months, we have successfully completed the restatement process launched new satellites raised additional capital hired an experienced CFO and find important new business related to our focus areas of climate and global security.
Speaker Change: <unk>.
Speaker Change: Aspire remains intent on driving profitable growth enhancing operational efficiency and ensuring reliable execution.
Tom: With that I will turn it over to Tom.
Tom: Thank you Teresa I would discussing non-GAAP financial measures unless otherwise stated we've provided a reconciliation to 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.
Tom: Our 2024 results almost in all cases exceeded the high end of the range of the preliminary results, we announced during our third quarter call.
We had another successful year of methodically progressing on our trajectory towards profitability and free cash flow positivity with non-GAAP operating loss adjusted EBITDA cash flow from operations and free cash flow all improving on a year over year basis.
Tom: GAAP revenue for the fiscal year, 2024 was $110 5 million, increasing 13% year over year. This growth was primarily driven by increased annual reoccurring revenue business combined with growth in revenue recognized from space services contracts.
Tom: The variance in revenue sequentially was impacted by the treatment of certain space services contracts, but as those older contracts terms expire we expect to have our revenue stabilize into more traditional subscription based model in the future.
Tom: At quarter end was $112 2 million up 5% year over year.
Tom: non-GAAP operating loss improved 21% to negative $30 4 million for fiscal year, 2024, and adjusted EBITDA improved 36% to negative $16 1 million for the fiscal year 'twenty 'twenty four.
Tom: These results continue to reflect the underlying operating leverage of our business model.
Tom: We have a diversified portfolio of solutions to sell collecting our unique space based data once and selling at an unlimited number of times, while leveraging our head count and space based technology across all of these solutions.
Tom: Moving now to the balance sheet for 'twenty 'twenty, four we utilized $45 million of free cash flow, which was a 16% year over year improvement.
Tom: Just over half of our full year free cash flow utilization occurred in the fourth quarter as expenses increased significantly for accounting consulting and legal costs associated with the restatement and the maritime transaction.
Tom: We ended the year with cash cash equivalents and short term marketable securities of approximately $20 million.
Tom: During the first quarter of 2025, we raised $40 million of gross proceeds and a private placement to bolster our cash position, while we continue to work on closing the maritime transaction.
Tom: Now turning to our outlook.
Tom: Giving the timing variability to closing the maritime transaction and the associated impacts to annual revenue and expenses at this time, we will only be providing full guidance for the first quarter of 2025, we will though share and expected growth range for a pro forma view of the remaining business, excluding the held for sale maritime.
Tom: Business.
Tom: We expect to provide full year 2025 guidance shortly after closing the maritime transaction.
Tom: For the first quarter, we expect revenue to range between 22 million to $24 million for.
Tom: For the full year, we expect revenue, excluding the held for sale and maritime business to grow at approximately 12% to 17% with the larger growth coming in the second half of the year.
Tom: These estimates take into account the impact of our revised revenue accounting for our space services contracts that we explained during our March 3rd earnings call.
The timing of revenue in 2024, and 2025 was and will be impacted by these base services contracts with having some of the older contracts with less deferred revenue expire and the newer space services contracts, having revenue deferred until we complete our pre space portion of the contract terms.
Tom: This timing issue created a few quarters with limited space services revenue from the fourth quarter of 2024 through the second quarter of 2025, while we launch and commission satellites and begin to deliver the data to those customers.
Tom: We expect to see that revenue will start to flow in as we head into the second half of 2025 and into future years.
Tom: As we look to 2026, we expect to see approximately 20% revenue growth excluding the held for sale maritime business.
Tom: We expect to finish Q1, 'twenty twenty-five with ending a or are ranging between $128 million and $130 million.
Tom: Which represents a $16 8 million dollar sequential increase quarter over quarter, and a 7% year over year growth rate at the midpoint.
Tom: The maritime held for sale a portion of this error or is approximately $42 million.
Tom: On a GAAP basis, we do expect to have higher than normal level of accounting legal and financial advisor fees in the first quarter due to completing our restatement process managing the maritime transaction and successfully completing $40 million of funding.
Tom: We anticipate Q1, non-GAAP operating loss to range between negative 11 million and negative $13 million.
Tom: For the first quarter, we expect adjusted EBITDA to be in the range of negative $7 5 million and negative $9 5 million.
Tom: For non-GAAP loss per share, we expect a range from negative 63 cents to negative 65 cents for the first quarter, which assumes a basic weighted average share count of approximately $26 8 million shares.
Tom: We expect to end the first quarter with cash cash equivalents restricted cash and short term marketable securities of 34 million to 36 million up $15 3 million quarter over quarter at the midpoint.
Tom: Now I would like to open the call up for questions.
Tom: Thank you.
Tom: We will now be conducting a question and answer session. If you would like to ask a question. Please press star one on your telephone keypad.
Tom: Confirmation tone will indicate your line is in the question queue.
Tom: You may price starts to move yourself.
Tom: Participants using speaker equipment, it may be necessary to pick up the handset before pressing the star keys.
Tom: One moment, please while we poll for question.
Speaker Change: And our first question comes from the line of Austin <unk> with Canaccord Genuity. Please proceed with your question.
Austin: Hi, Good afternoon, Teresa and Tom So my first question here to what degree should we expect that most of the revenue growth being in the second half has to deal with.
Austin: The continuing resolution and the the government's inability to issue New program start contracts until a final budget is put into place.
Speaker Change: Thanks, Austin, Yeah, I'll start and I'll, let Chris add in if she wants to add.
Speaker Change: As far as the growth in the second half a lot of it is just the flow out of the committed revenue that we have on the books. So we have $68 million of of revenue that we've got committed that's will flow out.
Speaker Change: We were running about a 70% subscription base percentage for the 2024 year, which we don't expect to change too much and twenty-five so a lot of that revenue flow out as is all the existing contracts and and the flow through of a business that we already have.
Speaker Change: Obviously for the bookings in other activities, maybe I'll, let Theresa answer the question just about how we see it progressing later in the year for the for how we book new stuff, but most of that revenue will start to flow more into 2026 rather than into 2025.
Theresa: Yeah, Hi, Hi, Austin I think the only other thing that I I'll add there is that you know as.
Theresa: As we look to the second half of the year of course, we're seeing a lot of increase in budget in other places other than the United States.
Theresa: That's something that is going to be driving growth in the second half of the year and we do of course expect that certain changes in the administration, especially as it relates to working them more fully with commercial companies on commercial data buys is something that also starts to increase in the second half of the year.
Speaker Change: Okay, and just a follow up question should we expect customers that are using the new AI, whether models and associated data to pay a higher subscription fee and what is the gross margin profile look at on like subscriptions using AI versus the previous numerical model.
Speaker Change: So I don't know that you shouldn't necessarily expect dramatically different gross margins. When we look at it on a product by product basis, I think really the way to think about it is just overall for the company's fire and the trajectory of our gross margins, which.
Speaker Change: <unk> has always been to collect the data once and sell it multiple times and do all the analytics on it. We just released those AI models and so we'll go into the monetization phase of that on a go forward basis.
Speaker Change: Yeah, and Austin, you can continually just expect that that continual upward movement on our gross margins, we did reset the bar with the restated type of numbers now so it's a it's a little bit lower than it was before with the how the restatement flowed and worked but you'll continually see that leverage business model is where you got the diversified solutions to <unk>.
Speaker Change: Sell more and more of that revenue keeps coming in and then that leverage infrastructure with our with our head count and with the the technology side being very leveraged across all of those solutions. So you'll still continually see that upward movement as we go into this year and into next year.
Speaker Change: Great. That's very helpful. I'll pass it back there. Thanks.
Speaker Change: Okay.
Speaker Change: Thank you.
Speaker Change: Our next question comes from the line of Ric Prentiss with Raymond James. Please proceed with your question.
Hey, Thanks, everyone. This is Brent pentair on for Rick.
Brent Pentair: First question I appreciate the update on the maritime sale.
Brent Pentair: Can you just give us a little bit more color on your level of confidence in track one in the next kind of two to four week closing timeline, what milestones need to happen.
Brent Pentair: Is your partner cooperating as expected in terms of our weekly progress.
<unk> reports and whatnot.
Speaker Change: Hi, what I, what I can share on trap. One is that we are very regularly speaking with the buyer. We are regularly working with them on how they are planning to run the maritime business post close and all the details around the transition services.
Speaker Change: Kremen, so that is very regular and intense engagement between the teams.
Speaker Change: Coming out of all of that interaction and they're continuing our voice to us that they intend to close this transaction as soon as possible is why we've continued to stick with the timeline that Peter mentioned in the earnings call back about a month ago, where he said this was six to eight weeks.
Speaker Change: Timeline and so we're reiterating that should be now a month later or two to four week timeline.
Speaker Change: There's there's nothing more I can say at this point, we continue to hold that this transaction should have already closed and are working closely with the buyer in that regard at the same time, we are a full force pursuing the legal pathway and as you know we have a may 20.
Speaker Change: A court date, so both of those are coming quite soon.
Speaker Change: Got it and then I appreciate the guidance out to 'twenty six.
Speaker Change: What gives you the confidence in that accelerating growth next year.
Speaker Change: Right.
Speaker Change: The second half weighted part of it.
Speaker Change: But what areas are really driving that and what portion of that is locked in contractually.
Speaker Change: Yeah. So Tom do you want to start with a portion that is locked in contractually and I'll I'll talk more about business outlook overall, yeah. So we do have and we've had this in our filing which you can get to the details of the split out splits by year, but there's $216 million that we have from committed customer revenue.
Speaker Change: They're all binding contracts are about.
Speaker Change: 68 of that will flow into 2025. So that's why we got the comfort comfort level on that revenue flowing in like I mentioned, we have a good subscription models that are flowing out the revenue for the rest of this year plus we just came you know in our guidance for the midpoint of $129 million of air are ending the first quarter.
Speaker Change: That means that we will also have that flow out flowing into the rest of this year and then that will also continue into 'twenty 'twenty six we had 20 satellites launch in the first quarter and with those launches that's what's going to trigger some of this space services revenue also to kick in and most of those type of contracts.
Speaker Change: In a pre and post Ah phase type of revenue, where you can't take any of the revenue during the pre space portion and you take the revenue you deferred up until the point that you actually start to the satellites go up in space. The data starts being collected and given to the customer and then we then spread the revenue out over roughly a three year span. So that revenue is now going to start.
Speaker Change: Kicking in and then and that's why we have the later half of this year, having the higher revenue and then that revenue flows all the way out into the future also so so that's our confidence confidence level on the the growth rates for this year and why we also expect that to expand into 2026.
Speaker Change: And if I can just add on the kind of business outlook as we get into the second half of the year and into 2026, it's really repeating some of the comments I made.
Speaker Change: The first portion of the call, which is really the increased focus on defense and intelligence budgets that we're seeing particularly in Europe, but also and in urgency in other parts of the world as well worst fire is signing and closing contracts not always ones that we can talk about and it was.
Speaker Change: Continue to think that that's going to be a growth area for us. The other thing that we mentioned is the increased focus of the current administration in the United States to work more fully with commercial companies on commercial services contracts and so we do expect to see a change in how pro.
Speaker Change: Chairman has done in that regard and then the final thing that I want to mention is the increased focus on sovereign capabilities that we're seeing from a lot of countries, you're seeing it out of Canada urologists being out of the U K and out of Europe, where these countries are no longer looking at just purchasing.
Speaker Change: Defense capabilities from U S companies to build all the technology in the United States is used to happen and they're focusing more on how can they work with companies that do production locally.
Speaker Change: As well as you know having management and control locally inspire is really well positioned to take advantage of these opportunities because we're already set up like that.
Speaker Change: Got it and then last one for me on free cash flow you all had talked about summer 2024 is the turning point.
Speaker Change: You did you achieved it with positive but I'm.
Speaker Change: In fact negative again and a lot of moving pieces in there with the legal costs and the deal costs, but also potentially potentially being debt free. So how should we think about what free cash flow looks like from here in terms of.
Speaker Change: Going positive again, and then staying positive and ramping from there.
Speaker Change: Yeah, I think you look at the first quarter, it's going to be very similar to the fourth quarter as far as obviously the extra set of expenses in there with the legal.
Speaker Change: We finished up the restatement. So we had some extra accounting in the first quarter and then we also did some additional funding which triggered some some fees in there on the on the financial advisory side. So first quarter has got a bit more of that.
Speaker Change: As <unk> mentioned the transaction closing.
Speaker Change: Expected in the two to four weeks of course, then we'll have a little bit more expenses as we head into the second quarter around the transaction itself, so there'll be a bit more of that.
Speaker Change: That will affect the free cash flow, but if you take away all that noise and the abnormal activity.
Speaker Change: It's gonna be back to the normal flow in the normal track that you were seeing with the continual progression towards free cash flow positive because of again, having that diversified set of solutions to sell multiple revenue streams coming in collecting that data one selling it as many times as possible and then having the leveraged our cost structure built around that so.
It just will keep allowing us to get to that now.
Speaker Change: The the transaction goes through that will bring the revenue down a bit and then obviously, there's a build back up again to a to get to the free cash flow positive.
Speaker Change: Because the billings will drop obviously in and the revenue will flow down. So we'll have a little bit of a build back up again, but there's still the same functionality. The same the same foundation of what we've had in the past on that path to profitability will still be there.
Speaker Change: Got it thanks, everyone.
Speaker Change: Thank you.
Speaker Change: Thank you.
Speaker Change: Our next question comes from the line of Jeff Miller with Baird. Please proceed with your question.
Jeff Miller: Yes. Thank you so the guidance for Q1.
Jeff Miller: That's including commercial maritime so, it's something like $12 million at the midpoint, excluding commercial maritime is that correct for revenue.
Jeff Miller: Yeah. The the first quarter does include the maritime a transaction. So we do have that built in there.
Jeff Miller: So I think that that implies that youre going from somewhere around that 12 million dollar figure that might not be precise but up to 'twenty, one and a half million.
Jeff Miller: Per quarter over the balance of the year just.
Speaker Change: Maybe a different way to ask the question that you were asked earlier, but that's a pretty big step up so how much of that is kind of the <unk>.
Speaker Change: Their pocket related to space services Rev rack, how much of that is in the hand, how much of that is based on pipeline conversion. It just seems like a pretty sizable step up.
Speaker Change: Yeah. So the as I mentioned, there is that gap in time, where we had some of the older contracts that had revenue that was more spread out evenly throughout the contract and.
Speaker Change: And now we're <unk>.
Speaker Change: All of the newer contracts, where there's pretty good suppose pose space services type contracts, where we have to defer the revenue. So we got this gap of time, where we're really not getting very much revenue at all if you looked at the fourth quarter subscription percentage it was about 90%.
Speaker Change: When we did the full year around 70, so really there was not much of that that other chunk of revenue that were normally getting in and this is a similar trend in that for the first quarter as I mentioned, we're starting to come out a little bit in the second quarter, but then the third and fourth quarter, we really kick into gear with the higher contracts, we signed the Canadian space Agency deal in the first quarter.
Speaker Change: That's going to drive significant revenue increases as we go later in the year. We had 2020 launches satellites launched now all those space services contracts will start those customers now will be getting the data and that's going to drive the kick up in this space services and then the other businesses will continually flow as they are as the growth we had projected for them.
Speaker Change: Got it and then.
Speaker Change: Just.
Speaker Change: Can you put some pullback I guess the weather balloon launches from the weather service can you just try to talk about like the cost effectiveness of.
Speaker Change: Maybe oro profiles relative to weather balloons, or other methodologies radar or whatnot.
Speaker Change: Maybe cost effectiveness and statistical lift or to what degree it's orthogonal et cetera.
Speaker Change: Yeah. So the there has been analysis done on the cost of launching weather balloons, and and I think I don't have the exact numbers on hand, but based on all of the infrastructure that has to happen and that type of pricing per aro profile.
Speaker Change: Kyle.
Speaker Change: Radio Occultation soundings are very cost effective for the government when they're purchasing vertical soundings now you you can't really compare one for one what you got from radio Occultation, and what you get from the weather balloons Something's overlap in terms of measurement some things don't.
Speaker Change: What I would say is that all of this contributes to the demand for commercial services that companies like spire can provide in a cost effective way and that is not just radio all colocation. It's the other types of datasets that that we can provide as we've mentioned talking about soil.
Speaker Change: Mr talking about ocean surface wins, starting to talk about microwave and I think there is a demand and expectation going forward that commercial companies, we'll be providing more of these datasets in the future.
Speaker Change: Got it and then last one for me the 20% pro forma growth that you're talking about in 2026 does that contemplate or require increased investment using some of the divestiture proceeds.
Speaker Change: Proceeds or is that just kind of like Oh, how you kind of view of normalized growth rate without that increased investment for the remain co business. Thank you.
Speaker Change: This is going to be an ongoing normal business growth I think we're going to want to continue to do more investment on the sales and marketing side to take advantage of these demand opportunities, but it's not an expectation of some.
Speaker Change: Kind of brand new product brand, new infrastructure that is out of the ordinary.
Speaker Change: Okay. Thank you.
Speaker Change: Thank you.
Speaker Change: Our next question comes from the line of Erik Rasmussen with Stifel. Please proceed with your question.
Erik Rasmussen: Yeah. Thanks for taking the questions maybe I'll just ask it a different way your guidance. This year is 12 to 17 per se I'm, just trying to understand though.
Erik Rasmussen: Obviously that growth rate is a little bit lower and even sort of lost some momentum, but if you had to sort of.
Erik Rasmussen: Speak to the two areas, where you're probably getting the headwind one has lost momentum with.
With customers based on all that.
Erik Rasmussen: The different things you guys and challenges you guys faced last year.
Erik Rasmussen: The push out of the close of the deal.
Erik Rasmussen: Maybe or and versus the headwinds from the restatement you know it seems like that's about a 10 million dollar headwind in any given year.
Erik Rasmussen: Just help me frame sort of.
Erik Rasmussen: On balance the two in terms of how you arrived at that 12% to 17%.
Tom: I think I can start Tom and then if you want to add to it. So we did have quite a bit of disruption in the second half of 'twenty 'twenty four and now going into the first half of 2025, which is a product of the restatement.
Tom: And as a product of the sale of the maritime business and how that impacted that business how it impacted the timing event of some of our other contracts such as the Canadian space Agency, one that had some delay because of the maritime transaction in the entity that we were going to contract with.
Tom: And then of course, there's still ongoing disruption as we work to close out the sale of the maritime transaction. So those have had an impact in the early portion of this year.
Tom: As we go into the second half of the year and everything starts to get back to the focus on execution. We started to also see some of the benefits of what the new executive team is doing in terms of efficiency and in terms of product quality and we start to see.
Tom: Revenue growth kick in as we've already talked about from all of these satellites that have been launched in the early part of this year.
Tom: Yeah, and just some quick math around there I know, it's a lot of this stuff is in the what.
Tom: What we just described and also in the 10-K, but just to help you with the math.
Tom: If you look at how we got to the baseline number for 2024 on a pro forma basis revenue was around just over $110 million, we mentioned that 43 and a half of that was roughly coming from the pro forma held for sale business. So you've got about a $67 million pro forma number for 'twenty 'twenty four you build the <unk>.
Tom: <unk> to 17% on that another way to triangulate, though to get that how that math also works is if you take our a R. R. We ended the year at 100, roughly $112 million there are where we're saying that we're going to end the first quarter on the midpoint of $129 million or they are if you average those two.
Tom: Numbers out you've got about $120 million of air are and then we said the maritime business is about a $42 million.
Tom: Held for sale Maritime business. So you subtract that out you're getting at but you know around a $78 million number which is at the high end of our range.
Tom: So.
Speaker Change: That's helpful. Great and then you know you are.
Tom: Uh huh.
Tom: Again, just because of all the noise, but when do you think you could actually it adjusted EBITDA positive.
Tom: We are looking at about nine.
Tom: Nine to $7 8 million.
Tom: Million negative in Q1, but can you actually see positive adjusted EBITDA sometime in the second half of the year.
Tom: You know as we mentioned here, we we didnt put out the guidance on this stuff because we wanted to make sure. We just get through the transaction and we have clarity on all of those all those details, but I will say the trajectory that were on prior to some of this noise and other activity that we had as you mentioned we.
Tom: We were on that path, we were heading towards free cash flow positive. We were heading for the profitability also on an adjusted EBITDA standpoint, again, because that structure is still 100% there of having the diversified solutions and having the leverage infrastructure. So we do have that path or we're going to get there.
Tom: You know again, we didn't guide for the for all the components.
Tom: But the fundamentals are there and how is that revenue keeps growing we're going to we're going to get to that to that point. So again, we just have to build back up the revenue to get to the levels that we had when we were getting to the to that point.
Tom: Maybe just.
Tom: Specifically on the <unk> satellites that were launched recently for Aurora.
Tom: Can you share with us.
Tom: Other satellites are performing any observations are thus far.
Tom: Satellites are going through the the checkout and commissioning process like normal. So I think there's there's nothing to share at the moment other than they're going through what is expected process.
Speaker Change: Great. Thanks, Thanks for taking the questions.
Speaker Change: Thank you. Our next question comes from the line of Jeff Van <unk> with Craig Hallum. Please proceed with your question.
Jeff Van: Great. Thanks for taking the questions a few for me Tom on the on the Q1 outlook. Just can you put a little finer point around how much unusual is in there and maybe I can back into it you gave quite a few data points for Q1, but just a little finer point on what is your estimate of whats unusual in Q1.
Speaker Change: You know what.
Speaker Change: The Q4, and the Q1 are going to be very very similar if you kind of look at the numbers.
Speaker Change: Everything's like slightly better than the Q4 numbers, but the flow of how those extra curricular activities very similar to the fourth quarter.
Speaker Change: You know the only bigger difference there is that the revenue yeah. You know we're doing better on the revenue for the first quarter guidance than we than we had for the fourth quarter that revenue flow down is almost exactly the same you'll get to the same sets of margin. So the extra curricular expenses is very similar.
Speaker Change: We stopped the restatement type of expenses, but then we had a funding expense for getting the $40 million of gross funding into the quarter. So we had that a little extra bit in there.
Speaker Change: And then the the maritime the managing the maritime transaction had very similar.
Speaker Change: <unk> in the fourth and the first quarter.
Speaker Change: Okay, and maybe just to give you an opportunity I think in terms of the forward years, we all build our models.
Speaker Change: So you still have maritime I'm presuming, we'll all have it in there and our outlooks until you close the sale.
Speaker Change: Or would you want us to think about a plug figure for maritime for 25.
Speaker Change: Yeah.
Speaker Change:
Speaker Change: The flow has been pretty similar in that business as far as the quarter as Asian. So you know we did give an annualized number.
Speaker Change: For for 2020 are four so I think just applying that I mean, the business isn't isn't soaring while it's in this hell a held for sale moment. So.
Speaker Change: Would assume a very similar type of trajectory as you as you kind of you know you have for Q1 and then in the two to four weeks to kind of model out for us for the coming quarter here in Q2.
Speaker Change: Okay.
Speaker Change: And then Teresa just a question on the Tolleson and obviously you've got some other wells that you've either worked on our working or had gotten to some degree of a finish line and then presumably the situation with the non current financials and the Kepler sale and you referenced all these things kind of throwing it back into the year.
Speaker Change: Excuse me presuming, we get this Kepler transaction closed in four to six weeks.
Speaker Change: The debt situation is taken care of any reason to think things with transactions like talus.
Speaker Change: Have changed other than just simply a pause to wait until you get past these hurdles, namely our other than these major contracts have they gone away or been permanently lost I'm thinking specifically of <unk>, but if you can comment there or a little more broadly would be great.
Speaker Change: I would say in general things have not gone away and you can see that from the Canadian space Agency contract that we keep referencing them and that is with a marquee name that has a a lot of.
Okay and publicity behind it and we can win deals like that in and we'll continue to do so.
Speaker Change: When it comes to childless as you know we announced last year that we had started the very beginning kind of phase of that contract, which was related to the design of the satellite architecture and constellation. We continue to meet very regularly with Tal ash as well as the wider consortium on that project.
Speaker Change: <unk> to the next steps and the timeline.
Speaker Change: Tied in closely with that is the work that we're doing on your yellow, which is the G. NSS independent civil aviation surveillance demonstration that we've also talked about in the past that one is deep in execution mode, and we're continuing to work with with.
Speaker Change: Palace as well as the consortium on what that looks like as a follow on phase that will be discussed at the upcoming European space Agency ministerial.
Speaker Change: Mhm.
Speaker Change: Okay, Great and last one for me then I'll also futures on on the you mentioned the space Recognizance.
Speaker Change: Since a business unit dedicated resources.
Speaker Change: <unk> is an R&D effort and our scalable unit, maybe a little more emphasis there then then I.
Speaker Change: I had expected or maybe you could just flesh that out a little bit more kind of your what what's changing there tell us about this unit and in how we got to this point.
Speaker Change: Yeah. So I think you probably heard us talk about our radio frequency G. O location, a number of times in the past and so we've over probably the past two years have started to take assets that are in orbit that are already they're doing things like the weather data collection and <unk>.
Speaker Change: Starting to operate them in a different way and then do a different type of processing on it to be able to do things like detection of G. N S. S jamming and NGL location and so as we started to see growth in that market. We started to see greater urgency of demand for that type of data.
Speaker Change: Especially as the geopolitical situation has continued to change and at the same time. There are very few other players that are able to collect this type of data in the commercial market.
Speaker Change: And on the government side. This has been listed as one of the data types for our commercialization it started off with.
Speaker Change: Large purchases on the satellite imagery side and this one is on the list so a little bit far behind from imaging, but we expect to be coming up and they've already started buying and that will grow in the future as well as the demand that we're starting to see from non U S type of buyer.
Speaker Change: So we've made the effort to take this from an R&D initiative and really put it together so that the people working on it the focus that it gets the duty cycle that it gets across the constellation has a very specific focus that will allow us to keep growing and acts.
Speaker Change: Italy are meeting the demand that we're seeing now in the market and this is an area that I I think is very interesting for spire. It's one where there are not a lot of other players who have assets in orbit that are able to do this type of collection and is going to be an area that continues.
Speaker Change: To grow for us.
Speaker Change: That's great last one for me then on the.
Speaker Change: Commentary around increased defense spend certainly a lot of talk in it and it is definitely appears to be headed towards.
Speaker Change: Actual output in terms of incremental spend I'm, just curious if theres any other anecdotes or quantification in terms of what it's meant thus far in the pipeline. How that's all that's just manifesting in your day to day discussions in cycles.
Speaker Change: Yeah, I I think you know of course, and it's going to take a little bit longer in Europe as everyone is starting to commit greater defense funds to to see how those actually start happening and flowing.
Speaker Change: But one thing we have definitely seen I would say across the board and around the world is much greater urgency.
Speaker Change: In in getting contracts signed and in understanding our capabilities.
Speaker Change: And seeing a demo data of what we're able to do so I think we have started to see the change already and what is coming.
Speaker Change: Great. Thanks, so much.
Speaker Change: Yeah.
Speaker Change: Thank you.
Speaker Change: Our next question comes from the line of Brian Kingston.
<unk> partners. Please proceed with your question.
Speaker Change: Great. Thanks, so much I think you made it clear the second half revenue ramp is from signed contracts and satellites that are going to have access to it where our customers will have access to data. So what I want to focus on these business development I'm wondering I know you haven't provided it but can you quantify contract awards in 2024.
Speaker Change: For non maritime business, maybe what the pipeline is for 2025 and do you expect 2025 will be a stronger year of business development given the trends you talked about in Europe, or overall will it be weak or given what's going on in the U S.
Speaker Change: I think in general I'm expecting it to be stronger on a year by year basis, we are always having a growth in sales which of course you. You then start to see as growth in the revenue numbers. So I it it it will be greater.
Speaker Change: Sure Greater order intake and greater sales expectation for 2025, which is something that we always see on a year on year basis.
Speaker Change: Yes, absolutely.
Speaker Change: Yeah.
Speaker Change: No I was going to say just to add on I mean, obviously this growth is not only going to flow in from the space services side like we mentioned with those contracts now starting to flow in but as Theresa mentioned our F. G. L. A area is going to see obviously a pickup in growth over over the course of time, the more and more satellites, we launch that have that capability.
Speaker Change: The the better opportunity we have on the revenue front with the without Avenue to and and I think your other question, Brian I think we're going to see this on both both sides of the pond.
Speaker Change: Great. Thank you.
Speaker Change: Okay.
Speaker Change: Thank you.
Speaker Change: And then just generally we have reached the end of the question and answer session.
Speaker Change: Also this concludes today's conference you may disconnect. Your lines at this time, we do thank you for your participation.
Speaker Change: Okay.
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