Sidus Space, Inc. [SIDU] Conference call transcript for 2022 q2
2022-08-12 14:07:14
Fiscal: 2022 q2
Operator: Welcome to the Sidus Space Second Quarter 2022 Results. All participants will be in listen-only mode. Please note this event is being recorded. I would now like to turn the conference over to Carol Craig, Chief Executive Officer of Sidus Space. Please go ahead.
Carol Craig: Good morning and thank you for joining us. My name is Carol Craig and I am the Chief Executive Officer of Sidus Space. With me today is Teresa Burchfield, our Chief Financial Officer. On this call I will provide highlights on the quarter and give a strategic update on the business. Teresa will review the company's second quarter financial results for 2022. But before we begin, let me refer you to Slide 2 of the presentation, which contains our Safe Harbor disclaimer. 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. These factors include our ability to estimate operational expenses and 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, www.sidusspace.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. So thank you all for joining us and welcome to our inaugural earnings call to discuss Sidus' overall strategy and roadmap along with Q2 and year-to-date key business accomplishments and results. I know many of you may be new to our story, so I think it was important that I provide some background on who we are and what our goals are as we rapidly scale up our business. Sidus Space has been in business for over 10 years, supporting both government and commercial space with manufacturing and engineering solutions. As a spinoff from Craig Technologies, an industry recognized government engineering and technical services provider, Sidus began operations in 2012. Craig Technologies remains the majority shareholder of Sidus Space and is a valued partner on several government and commercial contracts. In December, Sidus Space went public through an IPO and became the first female founded space company to go public. Collectively, our executive team has over 150 years of experience in the space industry and provides the perfect combination of traditional and new space expertise and leadership. Slide 4 and 5 provide an overview of our strategy and expertise, but let me talk you through it. With operations in Cape Canaveral and Merritt Island, Florida and a 35,000 square foot manufacturing assembly, integrations and testing facility, we are a vertically integrated provider of Space-as-a-Service solutions, including end-to-end satellite support. We focused on mission-critical hardware manufacturing, multi-disciplinary engineering services, satellite design, manufacture, launch planning, mission operations and in-orbit support, on-orbit testing of space ecosystem technologies and hardware and data and customer driven analytics derived from satellite space-based data. As I mentioned, we have over 10 years of commercial, military and government manufacturing experience combined with space qualification experience, existing customers and pipeline and International Space Station or heritage hardware. We support commercial space, aerospace, defense, underwater marine and other commercial and government customers. Unlike others, we take a broad view of what Space-as-a-Service means and encompasses. We like to describe our company as Space-as-a-Service with a capital S. What that really means is end-to-end or full stack solution support and carve outs everywhere in between. It isn't just about building and launching a satellite constellation to deliver space-based data, but supporting all needs related to space. The push for this type of Space-as-a-Service is a more collaborative and sustainable trend in the industry whereby we pool resources to access data from space responsibly. With our decade of organic heritage and experience, we believe we are well positioned to be the leader in this area. Moving to slide six, you can get a sense of our unique positioning. As a new space entrant with a very seasoned space hardware and services heritage, we are not looking to duplicate the model of the traditional larger more entrenched players or the recent entrance into the rapidly expanding space market. Sidus Space is leading the Space-as-a-Service model. We are focused on bringing customized, cost effective, timely solutions to customers that would otherwise last the opportunity to achieve their space aspirations. Leveraging our existing manufacturing operations, flight hardware manufacturing experience and commercial off-the-shelf subsystem hardware, we believe that we can deliver on customer needs in months, rather than years. In addition, we intend to deliver high impact data for insights on aviation, maritime, weather, space services, earth intelligence and observations, financial technology and the Internet of Things. While our business has historically been centered on the design and manufacture of space hardware, our expansion into spacecraft manufacturing as well as on-orbit constellation management services and space data applications has resulted in many space specific innovations. We continue to patent our products including our satellites, external platforms, and other disruptive technologies. At the time of our IPO, we considered the possibility that we would raise capital again as opportunities presented themselves. These are opportunities to invest in our future and the massive market opportunity in a high barrier-to-entry sector. Like many growing companies, upfront investment is required to position the company to deliver future revenues. Earlier this week, we entered into a $30 million common stock purchase equity agreement with B. Riley Principal Capital to further enable our growth strategy through previously mentioned initiatives, including acquisitions and to address supply chain challenges more aggressively as we accelerate our satellite production and launch cadence. The committed equity facility provides us with the right, not the obligation to sell an issue up to $30 million of our Class A common stock over a period of 24 months to B. Riley at the company's sole discretion subject to certain limitations and conditions. This equity facility provides Sidus with the most cost effective options to provide incremental capital when needed to support our growth as the space economy itself grows. The ability to use our discretion to raise additional capital when market conditions are favorable is important to our long-term mission and vision. This last quarter, we continued to win contracts, customers and purchase orders while expanding existing partnerships. Our expansion into satellite manufacturing and operations allows us to offer a legacy plus disruption model in a highly technical field, while maintaining meaningful control for our customers through our vertically integrated satellite production. As many of you know, Sidus Space is building a multi-mission satellite constellation using our hybrid 3D printed multipurpose satellite to provide continuous, near real-time Earth Observation and Internet-of-Things data for the global space economy. Sidus Space has designed and is manufacturing LizzieSat, depicted on Slide 7, for its LEO satellite constellation operating in diverse orbits, 28° to 98° inclination, 300 to 650 kilometer altitude, as approved by the International Telecommunication Union in February 2021. LizzieSat is expected to begin operations in 2023. Initial launches are planned via NASA Commercial Resupply Services program and also launch service rideshare contracts. Each LizzieSat is 100 kilograms with 20 kilograms dedicated to payloads including remote sensing instruments. Payloads, Sidus or customer owned, can collect data over multiple Earth based locations, record it onboard, and downlink via ground passes to Sidus Mission Control Center in Merritt Island, Florida. Our proprietary small satellite LizzieSat is in advanced stages of development and offers many unique selling propositions for our customers. LizzieSat is a multi-mission satellite that supports custom payloads and multiple customer needs leveraging space flight proven communications, power, navigation and computing subsystems to provide domestic and international customers with valuable data from low earth orbit. They are partially 3D manufactured, which allows for more payload and customer space due to the lighter weight associated with 3D printed materials. The sizing of our satellite allows us to include propulsion and provide precision pointing and maneuvering otherwise not available to smaller cubesats. Additionally, propulsion provides a longer life on-orbit, which means continued data transfer and revenue opportunity. The larger mass also allows us to design redundancy and reliability into our spacecraft. Slide 8 outlines the critical components of our end-to-end solutions and value proposition for the space economy as a Space-as-a-Service company. A key goal of ours is to help customers understand how space-based data can be impactful to day to day business. Our strategy includes increasing the demand downstream by starting with the end user in mind. While others are focused on data verticalization strategy specializing on a key sectors or problem set, we believe that flexibility in production, low-cost bespoke design and Bringing Space Down to Earth for consumers will provide a scalable model for growth in all sectors. We are on track to meet planned milestones for our initial LizzieSat hybrid 3D printed satellite from the International Space Station, however, regarding our previous disclosure of the launch of our satellite at the end of 2022, Sidus has recently been informed by NASA that its launch date has moved from Q4 2022 to Q1 2023. There is no expected impact to production milestones or 2022 revenue as a result of this change. This timeline continues to be dependent on the small satellite launch vehicle industry, weather and unforeseen launch conditions. Preliminary Design Review was successfully completed in Q1 2022. Our initial contracts and customers for the launch were signed in December of 2021 with NASA and Mission Helios and we continue to build our pipeline in all areas including payload hosting and data related to our planned satellite launches over the next 24 months. And over the last several months, we evaluated and worked with multiple commercial rocket launchers in addition to the ISS CRS launch providers to ensure that we have several options at the most cost efficient solution. While there are many companies who provide brokering of launch services, we believe that it is important to work directly with the small satellite launchers, including those who are still in development to explore all options. As we finalize these agreements, we will share the information publicly. Looking at Slide 9, you can see the depth and breadth of our space experience. The majority of our revenues to date have been from our space related hardware manufacturing, however, 2022 revenue to date includes revenue related to our multi-mission constellation and our hybrid 3D printed LizzieSat satellite. Over time, we expect revenue from satellite technology integration and data subscriptions to exceed our other revenue stream. As previously announced, in June, we were notified that our Exploration Extravehicular Activity Services, or xEVAS team was one of two teams awarded a contract from NASA. The xEVAS program is expected to include the design, development, production, hardware processing and sustainment of an integrated Extravehicular Activity capability that includes a new Spacesuit and ancillary hardware, such as Vehicle Interface Equipment and EVA tools. This EVA capability is to be provided as a service for the International Space Station, the Artemis Program, Gateway and Human Landing System, and Commercial Space missions. The full xEVAS contract is a potential value of 3.5 billion through 2034 with a 10-year based contract plus two option years and was awarded to Collins Aerospace and Axiom Space. We are very proud to be a part of the Collins xEVAS team in development and manufacturing of the next generation space suits to support ISS and Artemis, allowing humans to walk and explore the moon. We are looking forward to playing a meaningful role in this exciting opportunity, continuing our legacy of creating new revenue streams through strong partnerships. We will share more information about this contract as soon as weâre able. As mentioned, our pipeline of existing customers and associated work continues to grow. In Q2, we increased our scope of work and revenue with Teledyne Marine to include manufacturing components for Teledyne Marineâs Massachusetts facility, while continuing to supply components to Teledyne Marineâs facilities in Texas and Florida. Sidus Space signed its first two-year master supply agreement with Teledyne Marine in July 2019, followed by a two-year product pricing agreement in September 2021 and is a trusted partner to Teledyne Marine. The unforgiving and extreme underwater environment is similar to space, and we believe that our expertise and focus on quality for both mission critical sectors demonstrates why we continue to expand our customer base. Another long-term customer of Sidus Space is L3Harris. Sidus has manufactured mission critical hard work for multiple is L3Harris divisions over the past several years, but recently contracted with is L3Harris to use their mission critical operations software for command and control and mission planning for the LizzieSat Constellation. This partnership continues to grow as we regularly deliver quality hardware to L3Harris to support their mission of securing the world around us. As we continue to innovate and focus on space 4.0, we are also proud to support important traditional space programs such as NASAâs Artemis Program. The program aims to put humans back on the moon sometime this decade and starts with the uncrewed Artemis I mission and its plan to take an Orion capsule on a four to six week journey to the moon and back. August 29, in our Space Coast backyard Artemis I is the first flight of the agencyâs space launch system or SLS super heavy lift launch vehicle. And the first flight of the Orion command module that will one day house astronauts. Artemis I will put itself into the moonâs orbit and then return to earth. And Iâm sharing all of this because this flight is happening due the hard work of thousands of civil servants and suppliers, including Sidus Space. We supported ground and flight hardware for Exploration Ground Systems, Mobile Launcher 1, Orion Spacecraft, Core Stage and Solid Rocket Boosters. Our specific contributions include, but are not limited to the following: Wire harness fabrication, fluid systems design and support electronic cabinet design and build, crew and service module hardware manufacturing, design, build, fabrication and testing event purge and hazardous gas, quick disconnects and flight wire harnesses for the core stage of the SLS. And finally we manufactured frangible bolts and ground support equipment for the Solid Rocket Boosters. And as you can see on Slide 10, our offering is broad based. Thereâs a significant opportunity ahead of us and our comprehensive vertically integrated offerings position as well to capture a significant portion of the overall total addressable market of the space ecosystem. Our Space-as-a-Service solutions are made up of multiple revenue streams, the varying profit margins customers and length of contract timeline. Our goal is to continue to share significant contracts and milestones with as much detail as our customers will allow we do. Although achieving profitability can be challenging for any emerging growth company. We believe that diversity of our customers, offering, experience and geography continues to position us for successful scalability, stability, and profitability. We are confident we are on the right track and taking the necessary steps on our path towards profitability while driving our mission of bringing space down to earth forward. And with that, I will turn the call over to Teresa Burchfield, CFO, who will briefly cover our quarterly results.
Teresa Burchfield: Thanks, Carol. We continue to be pleased with the trajectory of our business and the progress towards launching our satellites, which we expect to result in increased revenues and margins over time, despite the challenging supply chain and cost backdrop of todayâs landscape. Looking at our results, as of the end of June, on Slide 12, you can see our second quarter sales at approximately $1,850,000 were in line with Q1 and up almost 700% versus second quarter 2021. Sales continue to be primarily driven through the space hardware manufacturing side of the business, along with the slightly lower amount of satellite-related revenue this quarter versus in the first quarter., Gross margin for the quarter at 19% is up 43 percentage points versus last yearâs second quarter. Our margins will continue to evolve as revenue continues to grow. Our gross margins will remain choppy when looking at them quarter-to-quarter, depending on the mix of revenue, but will smooth out when looked at over a longer period of time. Our operating expense for the quarter was $2.3 million higher than last year. This increase is primarily to support the growth of our business through the expansion of our staff and facilities, as well as increased insurance, investor relations, legal accounting fees that are all associated with being a publicly traded company. For additional details, please reference our second quarter 10-Q, which was filed with the SEC this morning. We ended the quarter with a net loss of $2.5 million as compared to a loss of approximately $500,000 in Q2 2021. This was expected due to the increased operating expenses associated with being a public company and our expanded sales and engineering operations. Looking at year-to-date numbers, on Slide 13, revenue at $3.6 million is up almost 850% versus last year. And itâs driven by variation in types and links of contracts, the diversity of revenue streams, as well as previous sales and business development efforts. Current revenue continues to be driven largely by our space hardware manufacturing side of the business, as well as satellite related revenue to a slightly lesser degree. As I mentioned earlier, gross margin will continue to be choppy as we build out our various revenue streams. Our year-to-date gross margin at 36%, 85 percentage points higher than year-to-date last year. Our gross margin is mixed driven and itâs more accurate when looked at over a longer period of time. Our operating expenses year-to-date were almost $6 million. They included a one-time non-cash related charge of $1.2 million in stock-based consulting fees for investor relations incurred in the first quarter, as well as increased investment in infrastructure to support company growth and incremental cost associated with being a public company, such as increased insurance, legal, accounting, and investor relations expense. Now looking at the balance sheet, on Slide 14, you can see, we ended the quarter with a cash balance of $6.8 million. The use of cash continues to support the growth and expansion of the business and revenue streams through increased general operating expense, such as increased staffing to build out the management team as well as personnel to support satellite development and the expansion of our facilities to support the manufacturer of our satellite. As we navigate the supply chain challenges in the market, we are also encountering more vendors that are requiring prepayments in order to secure components and materials. Additionally, we strategically chose to purchase multiple sets of subsystems, which results in cost savings and mitigation of the risk of supply chain delays, impacting production and launch schedules of our satellites. You will also note an increase in our property equipment as we continue to ramp up purchases related to our satellite side of the business. Moving on to Slide 15, looking at our liabilities and shareholder equity, most notably, we show a decrease in both our notes payable related party current and notes payable related party non-current balances. This is the result of the debt forgiveness agreement we entered into with Craig Technical Consulting, our majority shareholder. Whereby Craig Technical Consulting agreed to forgive the entire unpaid principal of our notes payable and accrued interest as of June 3, 2022. Sidus Space is seeing strong market demand for our product and services across our various revenue streams. We have invested and are continuing to invest heavily in public company infrastructure, business development, and R&D to drive growth and position us to drive operational efficiencies and leverage profitability as our revenue continues to grow. We are in the process of executing actions that we are confident will ensure the company has sufficient resources to execute on our initiatives and fuel ongoing growth. As Carol mentioned, the company entered into a common stock purchase agreement and registration rights agreement with B. Riley subject to the satisfaction of conditions set forth in the purchase agreement that provides the company the opportunity to sell the B. Riley up to $30 million in newly issued Class A common stock from time to time to fuel the growth. With that, Iâll turn it back over to Carol for closing remarks.
Carol Craig: Thank you, Teresa, and thank you everyone for joining us on this call and for being an important partner in our mission of bringing space down to earth. We are excited about what lies ahead for Sidus and the space ecosystem as we continue to expand our hardware manufacturing relationships and take key steps towards serving more customers through our vertically integrated satellite production as we prepare to launch Lizzie Sat. We are confident we are taking the necessary steps on our path toward profitability and look forward to keeping you updated as we make additional progress. Thank you very much.
Q - :Operator: The conference has now concluded. Thank you for attending todayâs presentation. You may now disconnect.
