Earnings Call: Q3 2025

Jun 4, 2025

Summary

Portfolio fair value rose 3% to £223m, while NAV per share remained broadly flat at 100.78p. Defense-led demand and portfolio contract wins supported the outlook, alongside post-period ICEYE deals and Voyager’s planned IPO.

Good morning, everyone, and welcome to the Seraphim Space Investment Trust Q3 results webinar. I will shortly hand over to the Chief Executive, Mark Boggett, Chief Investment Officer, James Bruegger, and Chief Operating Officer, Sarah Shackleton, to run through the results presentation. Once the presentation has concluded, the team will be available for questions. If you do have a question, please type it into the Q&A box and we will answer them. I will now pass you on to James to begin the presentation. Ladies and gentlemen, I'm afraid that SSIT Chair, Will Whitehorn, cannot join us for the presentation today. I'm James Bruegger, the Chief Investment Officer for Seraphim Space Manager, and I'm pleased to share the highlights of Seraphim Space Investment Trust PLC's latest quarterly results. As we reported last quarter, geopolitics, and in particular, the actions of the new U.S. administration are having a major impact on the SpaceTech market. Whilst ongoing turbulence in the global economy precipitated by President Trump's trade wars continue to be a factor, overall, the prospects for the SpaceTech market, and by extension SSIT's portfolio, appear to be improving quarter over quarter. Since our last set of results, the renewed focus by European governments on bolstering sovereign defense has increased in momentum. Alongside the EU's EUR 800 billion Rearm Europe initiative and Germany's own EUR 500 billion boost to defense spending, we've also now seen major sovereign wealth funds from the likes of Norway and the U.K. being reorientated towards defense. In just the last few days, the U.K. government has published its defense spending review, designed to put the U.K. on a trajectory for its own defense spending to hit 3% of GDP. As the spending review makes clear, the space sector plays a critical role in not just our everyday lives and our economy, but also our security. We welcome the U.K. government's renewed focus on defense-related space technologies, and in particular, its recognition of the strategic importance of cutting-edge dual-use technology being innovated by startups and scale-ups such as those in the SSIT portfolio. We are pleased to see that since our last set of results, there has been tangible progress on a number of fronts within the portfolio, including the announcement of major government contracts, international partnerships with leading defense primes, M&A activity by portfolio companies acting as market consolidators, and the announcement of a planned IPO within the portfolio. These developments are, for the most part, as a direct result of the increase in demand for SpaceTech capabilities by governments in response to their renewed focus on defense. I'll now hand over to Mark Boggett, CEO of Seraphim Space Manager, to present the results for the period to 31st of March 2025. Mark, over to you. Thank you, James. Before we go into the detail of the report, I wanted just to take a step back to remind folks about the big picture for Seraphim. Seraphim is the most prolific investor in the space market globally, with a portfolio of over 140 SpaceTech companies across our public and private funds. Seraphim was the first VC to launch a space fund in 2016, and SSIT represents the one and only listed investment fund focused on space anywhere in the world. Our partners and backers include some of the world's biggest SpaceTech companies globally, and we continue to receive a massive global deal flow. We're seeing virtually all deals at all stages, and this provides us with an incredible information asymmetry over the global sector. We triage deal flow between early and late stage, early going to our affiliated accelerator program and venture fund, and the later stage going to our investment trust. We're a value-add investor. We're a hands-on investor. We typically join the boards of most of the portfolio companies, and this allows us to be able to build conviction. Information asymmetry and conviction is the bedrock to our past and to our future success. Before getting into the SSIT results, I just wanted to take a moment to reflect on the historic events that have unfolded during the quarter that James has just alluded to. On March 3, the U.S. suspended its defense support for Ukraine following a contentious meeting, as we'll all remember, between Presidents Trump and Zelensky. As the charts here show, since inception of NATO in 1949, America has been a dominant member. Over the last decade, America has spent more than twice as much as the rest of the NATO members combined. The U.S. has consistently spent more than 3% of their GDP on defense, other NATO members have collectively remained below 2% of their GDP. With clear indications that the U.S. may no longer be willing to shoulder the burden for Europe's security, the challenge is for European countries and for other NATO members to compensate for America's contributions. This is an immense requirement. Although we've seen recent announcements about the EU implementing an EUR 800 billion plan to increase European defense spending, and in Germany, the parliament approving a new EUR 500 billion infrastructure defense fund. These are all encouraging, but these initiatives still fall short of matching the American defense expenditure. U.K. and European governments need to overhaul their procurement processes. They need to leverage technology innovation to fill important gaps in capability. The UK Strategic Defense Review was published on Monday, and this sends a strong signal about the fundamental role that space plays in our daily lives, in our economy, and of course, our national security. Space-based capabilities are no longer just a strategic advantage. They're integral to all aspects of modern defense, from surveillance and communication to navigation and to missile guidance. The key driver of this transformation is the increasing contribution from the commercial sector. Dual use and defense-related innovations are now primarily emerging from commercial companies, which are developing cutting-edge technologies that can be rapidly integrated into defense systems. Commercial off-the-shelf solutions are reshaping the economics of defense and making advanced capabilities more accessible and more affordable. To capitalize on this trend, there's a concerted effort to overhaul the Ministry of Defence's procurement process. The goal is to enable rapid adoption of innovative solutions developed by startups and scale-ups, ensuring that our defense capabilities stay ahead in the rapidly changing environment. The creation of a new defense innovation organization and a GBP 400 million ring-fence budget is a welcome step in the right direction. The review highlights that private capital will play a central role in this ecosystem by catalyzing investment into defense and space-related startups. Private investors are helping to transform these companies into significant growth engines for the U.K. economy. The synergy between private investment and technology innovation is vital for maintaining our strategic edge. Finally, there is a recognition of the need for the U.K. to develop and procure greater sovereign space capability. Key areas such as satellite communication, intelligence, surveillance, reconnaissance, and positioning and navigation and timing are all critical to future security. Building a strong and independent space capability ensures that the U.K. is not only solely reliant on external partners and can effectively operate in a complex and contested environment. SpaceTech is inherently dual use, which means that both commercial and government applications are capable from the same technology, the same satellite serving both military and commercial markets. Very often, new space companies are initially developed for military applications, with the Department of Defense being the earliest and the biggest initial customers. The chart here crudely illustrates the dual-use nature of the SSIT portfolio. ICEYE, for example, covering both insurance and defense. HawkEye, maritime and defense. ALL.SPACE, covering telco, transport, and defense. As at the 31st of March 2025, over 70% of NAV is predominantly focused on defense, and well over 60% of NAV is invested in U.K. and European companies. Now I am going to turn to the quarterly report and start with the headlines. As at the 31st of March, the share price was up by 1.5% to 55.2 pence. However, as you are all aware, there has been a positive trajectory since the end of the quarter with the share price today in the 70s. NAV per share was broadly flat at close, which was at 101 pence, and the portfolio valuation was up by 3% at GBP 223 million. Since April 2024, SSIT's share price experienced a quarter of outperformance versus its peers, followed by 10 months of relative underperformance. Outside of the period, over the past month, there has been a strong rally, as shown by the chart. SSIT's NAV per share has largely been stable over the period but underperforming the peer group, which has shown relative steady increases since April 2024. Similar to the previous slide, SSIT experienced significant share price outperformance versus the most relevant indices, as outlined in the chart below, between April and July 2024, followed by a less significant underperformance until recent weeks, when the share price rallied. On the 2nd of June, SSIT ends well above all the indices on the chart, which is rebased to 100 on the 31st of March 2024. Unsurprisingly, the MSCI World Aerospace and Defense Index has outperformed the other indices, particularly in recent months on the back of defense spending and these announcements. Taking us into the detail, let us start with the attribution analysis table. The value of the portfolio increased from GBP 216 million to GBP 223 million during the period. GBP 4.1 million of new investment and GBP 2 million of follow-ons in the period. An increase in unrealized fair value of 4.9 million, and the main driver was the fair value increase in ICEYE, reflective of a higher premium applied to the enterprise value due to strong performance and large contract wins, which we'll come on and talk about later. This has been partially offset by reductions in the fair value of other companies and an unrealized FX loss of GBP 4.5 million during the period. GBP 222.7 million of fair value of portfolio at the end of the period, and the portfolio fair value versus cost was broadly flat. Next, let's turn to the balance sheet as at the 31st of March, and this table sets out the NAV bridge. The NAV slightly increased over the period from GBP 239 million from GBP 239.7. The NAV per share slightly reduced from 101.04 to 100.78 over the period. Whilst the period end liquidity resources of GBP 16.5 million represented just 6.9% of NAV, and listed holdings of GBP 11.2 million represented a further 4.7% of NAV. Worth noting that as at the 2nd of June, the company had GBP 22.6 million of cash reserves following the divestment of one of our listed holdings, which I'll detail more about later. On to the investments. During the quarter, SSIT undertook three transactions, investing GBP 6.1 million, including one new investment, Zeno Power, a U.S. nuclear power battery company. Seraphim invested $5 million into Zeno Power as part of a $50 million B series syndicate that was led by Hanaco Ventures. Zeno's developing nuclear power batteries, which are the size of a microwave, to provide a 10-year power supply and modular energy requirements. This company's headquartered in Seattle and Washington, D.C., and its funding is expanding its workforce and its manufacturing footprint as it aims to deliver a demonstratable full-scale systems in 2026 and deliver the first commercially built nuclear batteries to power frontier environments in 2027. The company secured over $60 million in government contracts from the Department of Defense and NASA, supporting prototypes for highly maneuverable satellites, seabed infrastructure, and lunar landers. One current project involves a nuclear-powered satellite backed by the U.S. Air Force, which Zeno plans to demonstrate next year. Nuclear energy is having a renaissance, and Zeno is at the forefront of bringing nuclear batteries to defense and space, and over the longer term, the potential is to transform how energy's delivered in remote and distributed environments. Next, ALL.SPACE. They're the developer of the world's most advanced Satcom antennas for resilient communication. With space becoming an increasingly contested domain, that means that satellites are potentially being targeted for cyber and kinetic attacks. With the rise of electronic warfare potentially interfering with critical communication systems, modern militaries are having a pressing need for resilient communication. The key to resilient communication is the ability to simultaneously connect to multiple different satellites from different operators. This means that if one operator is attacked or jammed, communication will still be possible via other satellites that the antenna is connected to. ALL.SPACE has developed a flat panel antenna designed to fit on virtually any mobile platform. That's planes and boats and trains and tanks, and it provides exactly this form of capability. Unlike other providers, ALL.SPACE's antennas are also software defined. What this means is that they can also provide a range of high-value software applications that includes using the antennas as an alternative GPS for navigation in areas where GPS may have been jammed. These game-changing capabilities are why ALL.SPACE has already been selected by several different branches of the U.S. DOD. The business also counts the likes of the UK MOD amongst its existing customers. With several term sheets now in hand, Seraphim and internal investors invested into an instrument that converts to the terms of the equity round underway. The final of the new investments during this period, Skylo. They raised $30 million in an oversubscribed funding round led by NGP Capital, NGP Capital. That is Nokia's corporate venture fund. This business is looking to scale its direct-to-device satellite services worldwide. Aligned to this round, Seraphim invested a further $1.3 million via a secondary in order to avoid dilution. Skylo is another portfolio company that is focused on communications. Despite advances in mobile phone networks, 85% of the planet still lacks reliable cellular coverage. Skylo's network solves this challenge by working natively with existing chipsets, now in virtually all mobile phone handsets, allowing these devices to seamlessly switch from cellular to satellite when coverage is lost. Skylo connects regular cellular devices to satellites instead of cell towers using existing satellite networks to provide coverage in remote areas where cell towers don't exist. Consumers can connect their device as if they would connect to a normal cellular network, but the signal is relayed through satellites instead to ensure connectivity absolutely anywhere. This means that consumers can access emergency services, they can send messages, they can use apps such as WhatsApp from any place on earth. Skylo has got partnerships with some of the largest technology and mobile network operators globally, including Google, Verizon, and Deutsche Telekom. There has been lots of activity elsewhere in the portfolio during the period. Radar constellation and our largest investment company is ICEYE. They have signed a memorandum of understanding during the quarter with the Swedish aerospace and defense company, Saab, alongside a cooperation agreement with NATO to provide synthetic aperture radar data to its situation center in Brussels. HawkEye, the signals intelligence constellation, enjoyed a record quarter for earnings buoyed by defense contracts as it prepares to launch its clusters 12 and 13 of its geolocating micro-satellites. The maritime satellite constellation company Spire Global completed the $241 million sale of its commercial maritime tracking business to a Belgium firm called Kpler. AST SpaceMobile, this is the in-space cell tower operator, is now very well capitalized following a $460 million raise of a convertible senior note. They also secured a $43 million contract with the U.S. Space Development Agency to support the Proliferated Warfighter Space Architecture. They also announced a partnership with Vodafone to create a jointly owned European satellite operator focused on providing direct-to-smartphone services. SpaceWERX, the commercial outreach arm of the U.S. Space Force, selected eight companies for Strategic Funding Increase agreements, known as StratFIs, for 2025 worth combined $440 million in government and private funding. The StratFi public-private partnership helps bridge the notorious valley of death that can prevent promising technologies from reaching operational deployment. Two of these eight companies were Seraphim portfolio companies. Space situational awareness leader LeoLabs was selected for a $60 million StratFi to deploy its next generation radar technology in the Indo-Pacific region. The initiative is expected to include an additional $15 million from government sponsors and $30 million in private capital to enhance the capabilities of LeoLabs' global radar network. Private GPS constellation Xona was also selected by SpaceWERX to receive funding through the StratFi agreement, and they were also awarded an additional $5 million contract by the U.S. Air Force Research Lab to develop and demonstrate its advanced satellite navigation system as a resilient alternative to the government-owned GPS. On a roll, this company also signed their first commercial partnership with Trimble to provide high-precision satellite positioning for applications ranging from geospatial to low-power mass mobile and IoT. A huge amount of activity has occurred after the end of the period that we're discussing today. In particular, ICEYE announced a trio of deals. They announced a deal worth up to EUR 200 million with the Polish government around their defense requirements. This is the second contract of such magnitude signed by ICEYE since the start of the year. It also announced plans to establish a joint venture with the German technology manufacturing group, Rheinmetall, a leader in defense, to jointly build SAR satellites. In addition, ICEYE signed a memorandum of understanding with Japanese heavy industry group IHI Corporation to start cooperating on the development of a SAR constellation of up to 24 satellites. A huge amount of activity underway there for our largest invested company. D-Orbit completed the acquisition of an Italian geospatial analytics firm called Planetek to drive innovation in space-based data processing, artificial intelligence, and cloud computing. Voyager announced two acquisitions, LEOcloud, which is a space-based cloud computing company deploying micro data centers to the International Space Station, and The Optical Physics Company, an optical physics company, a developer of star trackers and other optical systems for space applications. Finally, Voyager itself filed a preliminary prospectus with the U.S. Securities and Exchange Commission for its planned IPO imminently. As shown on the slide, SSIT also sold down its holding in AST post the period. As at the 2nd of June, SSIT had £22.6 million of cash reserves with a further £4.7 million of potential liquidity via the remaining listed holdings following the sale of our holding in AST. This slide provides a snapshot of the portfolio. Drawing out some of the insights from the donuts on the left into the ecosystem chart in the top right. More than half the portfolio is invested in platform, and that means constellations, satellite constellations. These are the businesses developing the digital platform in the sky, providing capability of data and insights from large fleets of low-cost satellites. The biggest customer today for these businesses is defense, given the considerable increase in defense budgets since the Ukraine war broke out. In relation to geography, it's pretty evenly balanced between the U.S., Europe, and the U.K. In relation to stage, the bottom left chart, 75% of the value is in the growth rounds of C and D. Next, turning our attention to the NAV chart on the right, the top 10 companies dominate NAV, accounting for 80%, with cash at 7%, noting that figure has now increased to GBP 22 million post the sale of our AST holding. ICEYE, the largest holding in the portfolio at 25% of NAV, was one of the portfolio companies we've consciously doubled down on based on our high level of conviction. That conviction is now paying off. As per recent major contract wins announced, this business is performing exceptionally well on all measures. This is the final slide before we open to Q&A. The Seraphim Space Index, which we've been publishing every quarter since 2017, tracks the global private investment trends in the SpaceTech domain, showed the sector continuing to attract capital. In the last 12 months to the 31st of March, 12% increase in the total capital invested and a 17% increase just during the last quarter, with deal numbers up by 30%. Looking ahead, the tailwinds are accelerating as defense budgets in the U.S. are announced at $1 trillion, with lucrative contracts to build the Golden Dome in focus for the space industry. Here in Europe, over EUR 1 trillion of new budgets have been announced and allocated to defense. A rearmament revolution is underway. We consider that the SSIT portfolio is uniquely positioned to benefit from these trends across both sides of the pond. Thank you for your attention. Myself and James Bruegger and Sarah Shackleton will now take your questions. Thank you, Mark. As mentioned earlier, if you do have a question, please type it into the Q&A box, and we will make sure to answer as many questions as possible. The first one we have here is, "Does the Voyager IPO make it more likely that the other three portfolio companies considering IPO will do so soon? James, will you take that one? Yes, certainly. I think it's fair to say that the prospective IPO of Voyager is being seen by the space industry as a whole as a bit of a bellwether transaction. Clearly it remains to be seen whether the IPO proceeds and is obviously subject to a range of external factors. But on the assumption that the IPO does go ahead at a decent valuation and then trades well in the aftermarket, if those combination of things manifest, then I think that is likely to result in a range of other later-stage companies potentially looking to accelerate their own IPO plans. We do have a number of other companies in the portfolio that we've indicated previously have plans to prepare for an IPO, albeit guidance we've given previously is, we've said 2026 and 2027, more likely than 2025. It remains to be seen whether there's any further movement within the portfolio subject to the Voyager IPO being successful. I think just to build on what James is saying there, one of the key things here is that whilst Voyager has got hundreds of millions in revenues, this is still a loss-making company. This is why it's going to be a bellwether as to how the market is willing to IPO and support companies that are still not profitable. Thank you. The next one is, "How will Skylo compete successfully against companies that are already well advanced in the direct-to-device market, such as AST SpaceMobile and Starlink? I'll take this one again. They're doing similar but sufficiently different things, is the short answer. If you take AST and Starlink, both of those companies are putting up their own satellites to essentially act as cell towers in space with a view of ultimately being able to deliver 4 and 5G high-speed broadband connectivity from space direct to your smartphone. That is a service that in the last 6 to 12 months, Starlink has launched with a limited number of partners in the U.S. market at relatively high price points. The expectation is that AST will probably follow suit in terms of pricing when it launches its initial service planned for later this year. Contrast against that, Skylo is not putting up its own satellites. What it is doing is partnering with incumbents. These are the incumbent SATCOMS providers, the Viasat and Intelsat and Eutelsat and SES of this world, to avail of their existing connectivity. They are doing that direct-to-device, but they are focused on low data rates, in contrast to AST and Starlink that are focused on high data rates. This is, as Mark has described, really around small packets of data to do with messaging and application data, being able to work in environments where there's otherwise no terrestrial connectivity. As a consequence of that, the value proposition of Skylo is at a fundamentally different price point. This is a modest incremental price relative to the cost of either the mobile phone or whatever telephony package a user has. Contrast that against AST and Starlink, where it's a much more significant premium that is being commanded for their capability. We see these as being different propositions focused on different parts of the market. We're equally bullish on both of them in the broader context of our thesis around an increasing overlap between the SATCOMS industry, which was historically entirely separate from that of the much larger terrestrial telecoms market. I'll just build on that again. For those of you who've got an iPhone, you'll recognize that when you get out of cellular coverage, there's now a small icon of a satellite that enables you to actually be able to make emergency calls. What Skylo is doing is effectively the Android version of that. This is why they're working closely with Google and why they're growing so quickly, and why they're working with these other existing satellite operators to be able to provide that service. Thank you. The next one is: For the benefit of others on the call, could you please talk to the significance of the quality of revenue streams that many portfolio companies are securing, that is, the stable and sticky government revenue streams? I will happily have first pass at this. Clearly my response comes with the caveat that not all of our companies have the same business model. They are not all servicing the same customers in the same manner. But if I talk at an overall level about the portfolio in the context of defense and government being the primary customer, which is true for a majority of the companies, I think there is some consistency there. First and foremost, if we take a company like ICEYE for example, that has been winning, as we have reported, some very large nine-figure contracts in the recent past. Those sort of contracts are multiyear contracts that once they are secured, provide for very good visibility on both revenues and cash flows associated with those contracts. They are typically milestone-based through the life of the contract. Equally, you can appreciate that winning sort of nine, and in the future potentially 10-figure contracts, these tend to be quite lumpy, and predicting timing of them from one quarter to a next remains a challenge for both ICEYE, but just businesses more generally. What we do typically find is that once companies have secured governments as customers, that they do tend to be very sticky. We have seen evidence in a number of companies, including important ones like ICEYE and like HawkEye 360, where we are seeing evidence of a sort of land and expand strategy of broadening out the range of engagement that the companies have with governments, as governments build confidence in these companies' ability to deliver. Thank you, James. Another one here is: Could you provide an update on Quadsat, please? Certainly, I will provide a very brief update. We expect to be able to provide a more full update on key developments at Quadsat next quarter. We are excited about the range of newly emerging opportunities to leverage Quadsat's technology in defense-related applications, including in the context of the conflict in Ukraine. I am afraid that is all that I am able to disclose at this particular juncture, albeit, as I say, I hope we are going to be in a position to provide some more detail on that at the next set of results. Thank you. The last one that we have on the written questions is: What caused the down valuation of the Ventures II holding versus last quarter? Was this driven by FX changes? Sarah, do you want to take that one? Yeah. I am happy to take that. Yes, it was FX changes. It was a very slight downward trend. In fact, outside of FX, the fund continues to do well and is actually growing and the valuation is going up slightly. Thank you, Harry. That's all of the questions that we've had written in. I would like to pass back to Mark for any closing statements, and then we will end the webinar. Thank you. Thank you, Harry. Yeah. So really, hopefully this quarter really just builds upon the material that we've been providing you in previous quarters. Space is dual use inherently, which means that there's a defense customer, but then there's commercial customers as well. The defense market has changed beyond all recognition in the space of the last quarter, with unprecedented size budgets that are being announced on either side of the pond. A trillion dollars versus EUR 1 trillion. We believe that a significant proportion of this funding is going to find its way into space companies, and in particular, new space companies like those that we back in the Seraphim Trust. Because they are at the cutting edge of providing new forms of communication resiliently and providing new forms of data that provide for intelligence and understanding. We've all heard the statements that have been made by Keir Starmer this week about how the U.K. needs to prepare for war in order to be able to avoid a future war, hopefully. That's true of Europe and America, and we anticipate that our portfolio will continue to thrive as they're able to provide that kind of capability and the commercial needs of defense. Bear in mind that also there's a commercial kicker from these companies that are taking revenues from defense customers, developing their capability and growing their satellite infrastructure. Ultimately, the bigger revenues will come from insurance and real estate and oil and gas and climate and all of the other commercial sectors that will ultimately become the biggest customers for the types of companies that we're investing into. So thank you for your time and interest today.