Sidus Space Q1 2024 Earnings Call Transcript

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May 20, 2024

There are 4 speakers on the call.

Operator

Greetings, and welcome to the CytoSpace First Quarter 2024 Results Conference Call. At this time, all participants are in a listen only mode. As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Walter Pinto, Managing Director, KCSA. Thank you, Walter.

Operator

You may begin.

Speaker 1

Good evening, everyone, and thank you for joining us for the CytoSpace Q1 2024 Financial Results Conference Call. Joining us today from the company is Carol Craig, Founder and Chief Executive Officer and Bill White, Chief Financial Officer. During today's call, we may make certain forward looking statements. These statements are based on current expectations and assumptions and as a result are subject to risks and uncertainties. Many factors could cause actual results to differ materially from the forward looking statements made on this call.

Speaker 1

These factors include our ability to estimate operational expenses, liquidity needs, customer demand, supply chain delays, including launch providers and extended sales cycles. For more information about these risks and uncertainties, please refer to the risk factors in the company's filings with the Securities and Exchange Commission, each of which can be found on our website, cytospace.com. Listeners are cautioned not to put any undue reliance on forward looking statements, and the company specifically disclaims any obligation to update the forward looking statements that may be discussed during this call. At the conclusion of our prepared remarks, we will be answering questions submitted in advance. If we do not get to your question within the timeframe allotted for this evening's call, please email our team at cituskcsa.com.

Speaker 1

At this time, I'd like to turn the call over to Carol. Carol, please go ahead.

Speaker 2

Thank you, Walter, and welcome everyone. We had an excellent start to 2024 with a milestone Q1 as we successfully launched and deployed our 1st LISI SAT from the SpaceX Transporter-ten rideshare mission on March 4. LISI Sat-1 is the 1st 3 d printed AI enhanced multi mission small satellite focused on geospatial intelligence solutions or earth and space observation through the combination of multiple technologies and on a single satellite. The successful launch, deployment, commission and activation of Libesat is not a small feat and the magnitude of this achievement cannot be overstated. LIDISAT-one embodies our tagline of think outside the cube.

Speaker 2

At £275 her missions include commercial remote sensing using multiple imagers, messaging services, software solutioning and artificial intelligence products all in one satellite. LISI SAT-1 is the first of several planned satellites to launch into lower orbit. Our successful first launch sets the stage for our future growth with LISI-two and three currently in production and manifested for launch with SpaceX in the Q4 of this year. Production of satellites is on track with initial payload and data contracts secured and additional contracts in the pipeline. What's particularly exciting about the planned launch of LS-two and LS-two and LS-three on SpaceX's bandwagon mission later this year is that LS-1, LISI-1 is on a polar orbit and LS-two and three will be launched into equatorial orbits.

Speaker 2

And this gives Citus the potential for increased revenue opportunity tied to placing multiple LISVSAT into similar orbits, enabling us to capture higher revenue generating data by covering more populated areas, which then increases our potential for payload and data customers. We believe that in combination with the inclusion of additional and higher resolution sensors and enhanced AI capabilities, these new orbits will add value as we systematically build our multi mission constellation of 3 d printed AI enhanced satellites. With LISI sat 1 now in orbit and circling the earth approximately every 95 minutes, 16 times a day and providing consistent two way communication and data, our focus shifts to delivering results for our customers. And this includes data collection and expanding our constellation as a service and satellite manufacturing operations. And most commercial satellite manufacturing over the last few years has been concentrated on smaller cubesat operations with fewer experienced companies successfully launching midsized satellites in the 100 to 200 kilogram range.

Speaker 2

And as technology advances and non traditional industries show increased interest in space based data, we anticipate a growing demand for experienced satellite manufacturers and operators with expertise in satellites larger than CubeSat like ours. Our

Speaker 1

unprecedented success with LISI Sat highlights our capabilities and it emphasizes the importance of

Speaker 2

long term experience and heritage in the space industry. As we've always said, we're not only focused on lower orbit, but also the moon, Mars and beyond. And the moon focus provides an opportunity to build an infrastructure that enables human permanence on the moon and a transition to commercial operations past lower earth orbit and onto more distant destinations. Our research and development team is focused on expanding our offerings to include geostational Geostationary and lunar satellites. And to this point, we recently announced that we are part of NASA's Lunar Terrain Vehicle Services Award as a partner to Intuitive Machines, which involves heavier cargo delivery and moon surface systems development and operations.

Speaker 2

While the Q1 was largely focused on the launch of LYSYSAT-one, we also closed on or were awarded several contracts related to sales of data, payloads and manufacturing. These included a technology hosting payload contract with Intelligence Agency as a subcontractor to Solus Applied Science. That contract has a $794,000,000 ceiling in a 5 year base period plus an optional 2 years. And as task orders are released, we expect to support Solus in many areas and we're excited to demonstrate our capabilities related to geospatial intelligence solutions. One of our repeat customers that we're supporting is HEEL Robotics, who is focused on space situational awareness with their non earth imaging services to provide on demand imagery, including one of the best views of satellites in space.

Speaker 2

In fact, they recently released a spectacular image of the International Space Station from only 43 miles away. And we are flying HEAL Robotics homes imagers on both LS2 and LS3, again expected to launch in the Q4 of 2024. Our HEAL contracts are an example of our constellation as a service offering, which combines technology hosting and long term recurring data sales. As we focus on executing our mission to build a one of a kind multi mission constellation and expand our reach globally and in space, we also expanded our leadership team with the addition of Richard Berman to our Board of Directors and Bill White as our CFO. Bill has more than 30 years experience in financial management, operations and business development and his experience and knowledge are proving to be invaluable during this time of exceptional growth for our company.

Speaker 2

Richard's extensive experience in venture capital, senior management, M and A and public company board participation adds tremendous value to our Board of Directors. And we're delighted to have both Bill and Richard join our senior leadership team and I'm looking forward to working closely with them as we propel the company forward. As we look forward in 2024, our pipeline grows with increased interest in our satellite manufacturing, data offerings and long term partnerships. We're currently in discussions with industry leaders that include oil and gas companies and international partners that add to our current global contracts. We're progressing towards significant milestones related to our Netherlands TNO agreement, which includes a critical design review scheduled to occur in the next few weeks.

Speaker 2

The engineering teams from both TNO and Sidus work closely together to ensure that the TNO laser communication technology is successfully integrated into a future Lidysat and that TNO payload is currently manifested for our launch in Q1 of 2026. With LS2 and LS3 currently in production, the team is on track to meet critical milestones leading up to planned launch later this year. And a significant advantage of the LISI SAT architecture design is its flexibility and ability to be quickly customized. 3 d printing makes it easier to make modifications and our engineering team incorporated lessons learned from LS1 to improve on LS2 and LS3. And in a traditional manufacturing environment, changes like these are complex, costly and time consuming.

Speaker 2

And that is not the case with our design. Everything we do is carefully planned and executed with a focus on lean and cost efficient operations as we continue to deliver on our mission of bringing space down to earth. And I'll now hand the call over to Bill to discuss our recent successes and the impact on our business strategy and to discuss our financial highlights.

Speaker 3

Thank you, Carol. It's a pleasure to be here today to discuss our Q1 2024 financial results and to provide an update on our business strategy. Successfully launching Lidzysat into orbit was a major achievement for the company and a key element of our strategy to shift side of both greater revenues and higher margin recurring revenue. As Carol mentioned, each of our satellites are capable of downloading a minimum of 100,000 megabytes of data back down to earth every day. This translates to Sidus being able to theoretically generate $14,000,000 in high margin recurring revenue per satellite per year, assuming we sell 100 percent of the data at single time.

Speaker 3

This business model has the capacity to scale rapidly and generate meaningful high margin recurring revenue as we launch multiple satellites into orbit. Now on to our Q1 2024 financial results. Total revenue for the 3 months ending March 31, 2024 totaled approximately $1,100,000 a decrease of $1,200,000 compared to total revenue for the 3 months ending March 31, 2023. This decrease was primarily driven by the timing of fixed price milestone contracts and milestone payments related to satellite contracts and fewer contracts with our related party entered into with its customers requiring less outsourcing of its work to us than prior year. Gross profit margin decreased to 8% for the Q1 of 2024 as compared to 40% for the Q1 of 2023.

Speaker 3

This was largely driven by lower sales from higher margin satellite related business. SG and A expenses for the quarter ended March 31, 2024 totaled $3,600,000 as compared to $3,500,000 for the same period last year. The slight increase was primarily due to fundraising expenses from 2 capital raises in Q1, 2024, partially offset by a reduction in D and O insurance expense and marketing and investor relations expenses. Net loss for the 3 months ended March 31, 2024 was $3,800,000 as compared to a net loss of $3,400,000 for the same period last year. Turning to the balance sheet.

Speaker 3

As of March 31, 2024, the company had cash of $6,200,000 as compared to $1,200,000 at December 31, 2023. During the quarter, we strengthened our balance sheet by raising gross proceeds of $15,200,000 bolstering our financial position as we continue to expand our constellation through 20 24 and beyond. That, I'll hand the call back to Carol.

Speaker 2

Thank you, Bill. The launch of LISI Sat-1 is a significant corporate milestone that marks the beginning of an exciting new era for Citus and demonstrates our ability to execute on our strategic priorities. Our 3 d printed AI enhanced LizzySats are at the core of our high margin data as a service business model with the capability to integrate multiple technologies into a single satellite. Our satellites facilitate simultaneous data collections for agriculture, maritime, oil and gas and other industries and we intend to expand further into these industries to generate additional revenue resulting in increased value for our shareholders. We truly are just getting started in a pivotal year for the company.

Speaker 2

I'm highly encouraged by the success of our initial phases of operation and I could not be prouder of my team's dedicated hard work to ensure mission objectives continued to be met. Most initial launches in the industry involve a prototype satellite and I'd like to emphasize that LISI Sat-1 otherwise known as Thelma is much more than a prototype. LISI Sat-1 is a functional satellite and we've begun activating our payloads now that the commissioning phase is complete. I'll also add that most initial launches in the industry are followed by a bit of a lapse of time before a follow on launch. And as I mentioned earlier, our next two satellites are already well in production and manifested for launch.

Speaker 2

We're executing our plan to build a unique multi mission constellation and the steps we took early on like securing a multi launch agreement with SpaceX and purchasing subsystems with long lead times are making it possible to deliver the steady cadence of launches to meet the customer demand that we promise. The success we've already achieved with our very first satellite has built the confidence of our team, our industry, customers and potential customers as well as our shareholders. And I want to thank all of our shareholders for your continued support of Citus. For those that have been with us from the very beginning to those that have just joined us, you're all part of our story as we create access to space that has not been available before. And I remain committed to restoring shareholder value and I look forward to the higher revenue streams that we believe our satellite manufacturing and space data constellation will create.

Speaker 2

And we'll now move on to the Q and A portion of the call. We received a couple submitted questions from investors that we'd like to address. The first is how is Citus leveraging AI in its technology for customers? So when we talk about AI, we often describe our solution as edge computing. Edge machine learning or AI involves the execution of machine learning algorithms on computing devices located physically near the source of data.

Speaker 2

And this enables faster, more efficient, more secure processing in various applications across different industries. And this is especially useful for satellite operations and space based data solutions. Citus' feather edge product is a high performance computing platform that enables edge AI for satellites and other assets that operate in harsh, remote and often communication constrained environments. Algorithms can be deployed on the platform to regain to gain real time insights or to make decisions and predictions on the satellite, which minimizes the time from image capture to data delivery. One example where speed of delivery is important is monitoring or tracking illegal phishing activities.

Speaker 2

And there's a critical time component between detection of those activities and then the dispatch of authorities that plays a crucial role in the success of intercepting these vessels. Teather Edge is the platform that enables these types of AI use cases. So it's a highly flexible system. It's capable of being reprogrammed after deployment on orbit. And this means that algorithms can be updated and swapped out directly to the satellite as markets or mission needs change.

Speaker 2

In the short term, we're leveraging a variety of data processing, AI ML applications to deliver enhanced insights faster than our competitors. And in the long term, we'll additionally utilize AI and ML to optimize constellation operations and further improve on our data services. Next question is, can you talk through the data revenue model and what you project potential earnings could be? So as a reminder, we are an emerging growth company. We don't give guidance, but we understand the interest in how our data revenue model generates revenue.

Speaker 2

Without speculating on potential earnings, I'll instead describe the components which allow you to draw your own conclusions about potential revenue. Our data acquisition costs are approximately $0.02 per megabyte and we believe the market data pricing ranges anywhere from $0.40 to $1 per megabyte. And as Bill mentioned earlier, each of our satellites are capable of downloading 100,000 megabytes of data back to earth every day. This translates to Sidus theoretically being able to generate $14,000,000 in revenue per year per satellite, assuming we sell 100% of this data a single time. Our revenue will fluctuate because we will likely not sell 100% of the data.

Speaker 2

However, we may sell the same data many times. So in a collect once, sell many model. We can and we plan to continue to secure data customers for the life of the satellite, therefore building our customer base over time. Our technology payloads are often also data customers and we can sell data that's generated from their technology to other customers as well. The next question is, which industries and sectors do you foresee being the biggest potential growth areas for Sidus to capitalize on?

Speaker 2

The one in particular where we see a significant opportunity is in the oil and gas industry, especially with the new EPA rules coming into effect related to methane emissions. Our technology makes previously invisible emissions visible from space and the use of satellites in addressing this serious environmental concern is critical. And what's also key about this growth area is to develop partnerships, which we have with industry leaders to ensure that we meet the needs of the customers from the very beginning. Thank you to everyone who submitted questions. And thank you to all of you for joining us today for CytoSpace's Q1 2024 earnings conference call.

Speaker 2

I'll now ask the operator to close the lines.

Operator

This concludes today's conference. You may disconnect your lines at this time. Thank you for

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