Yes. Yeah. All right. Apologies, everyone. But welcome to day one here of Stifel CSI Conference. We have Spire Global. They're a leading space-based data analytics company. We have the Co-founder and CEO, Peter Platzer, here with us today, and Ben Hackman is in the room. I think today's format's gonna be fireside, but first, we're gonna start with a few slides, give an overview, and then we'll jump into Q&A. And then if anybody has questions, please feel free to raise your hand.
Perfect.
Peter, thank you.
Yeah, it's, it's a pleasure to be here, Erik, every single year. Welcome, everyone. Some of you might know the story of Spire, some might not, so I figured I'd give a, I'd give a brief overview of the company. From a mission perspective, the company is really focused on leveraging space and data from space to improve life on Earth. We were founded about, 12, over 12 years ago now, in, in San Francisco, and went public now almost 3 years ago. There is a number of companies leveraging space to improve life on Earth, and, it's a good way to categorize them because those categories are similar to the, transportation industry, where you have, let's say, ships and planes and trucks.
They all serve a similar purpose or used as similar means, but actually not competitive, and the same thing in space. You have what we call looking, listening, and talking spacecraft. Looking spacecraft, they use the reflection of the sunlight on the surface of Earth as it goes towards the heaven, and that's how they capture the data. It works out really well during the day, and it works really well when there is good weather, and that is kinda like the main form of data capture from them. And you have heard of companies like, like Maxar and Planet and BlackSky and Satellogic and Airbus and others. And then you have the category of what we call talking satellites. They are basically transporting data from one spot on Earth, via space, to another spot on Earth.
There is a number of space companies in there that I'm sure you have heard of: Kuiper, SpaceX or Starlink, OneWeb, SES, Viasat, AST. Those are all companies that are transportation of data companies via space or what we call talking companies. And then you have listening companies that use radio waves to observe what is happening on or around Earth. Radio waves means that you don't require the sun, so it works day and night, and because radio waves give you information about the weather, it's also weather independent. So it really gives you full 24/7 information about what is happening on or around planet Earth.
You have companies in there like a HawkEye, a PlanetIQ, a GeoOptics, a Kleos, as well as Spire, which is indeed actually the largest company by a number of metrics in that category. We own and operate the world's largest listening constellation, a multipurpose constellation. It is the fourth largest commercial constellation in the world, the only one that is fully deployed. We're capturing and covering every single spot on Earth over 100 times a day, and are now in full monetization mode of that fully deployed constellation, which is also software-defined, meaning it can change and adapt what type of data it collects. A couple of high-level stats about the company. We have launched over 175 of those spacecraft.
The whole technology stack is IP from Spire. So both the sensors on the spacecraft, the spacecraft themselves, the ground stations, the software, the analytics, all of that is IP from Spire. We have an extensive launch record, over 40 launch campaigns with 10 different launch providers, meaning we launch every few weeks, few months, we have a launch campaign, getting up a few spacecraft here and there, to augment and replace and replenish spacecraft, as well as for customers that are dedicated to it. We have a large ground station network, 17 antennas in 16 countries, that is proprietary to us. And one of the unique things about space, which gives us a massive competitive advantage, is that you cannot simulate space on Earth.
You actually have to go to space, and that's true for us as well as for NASA and anyone in between. Spire has accumulated over 600 years of experience or space heritage, as it is called, of our technology on orbit, and that is a, that is a massive experience advantage. We have over 400 employees in a natural 24/7 operations by offices on three continents, over 700 customers and over $100 million in revenue. The business model of the company is a classic data and analytics as a subscription business model. We collect the data once and then sell it across an unlimited amount of time.
It is this business model, which is one of the key ingredients for the long-term gross margins in the 70%+ range of the company, where we collect the data once and we clean it up, we make it easily available through an API, and that's like the first level of subscription. We call it clean data, and then we add third-party data to it, fuse into it, we add some simple analytics to it. We call that smart data and make that available as a subscription. And then, of course, we have this massive data vault. Hundreds of millions of data points that are only and exclusively available from space, that we then mine with advanced analytics, AI, and machine learning to create predictions of what is going to happen, selling that as a subscription.
And then lastly, of course, you have full-blown solutions, helping customers make decision based on all of those elements. I think given the versatile nature of the business, we had asked someone, a well-known global consulting company, to assess market opportunity and use cases. They identified over 175 use cases, over 150,000 potential customers in our main segments of maritime, aviation, weather, and space services. And it is like this massive TAM of, they call it $100 billion, that has allowed the company to grow very, very quickly since our first $1 million of revenue, to this year at over 100% compound annual growth rate. I think their assessment of that TAM is now a few years old.
There was just a few days ago a very, very well-known investment firm came out and assessed that the weather market alone, where Spire has a dominant position in not just capturing commercial weather data, but also making exceptionally precise weather forecasts. That market alone was assessed by that investor of being over $100 billion. I wanted to leave you with, like, just a few ideas of how customers have used our capabilities, our product and services in Earth observation, connectivity, signals intelligence, and space situational awareness, which are just some themes of where those 175 use cases fall into. You know, we have companies that are in wildfire monitoring and early detection, in greenhouse gas monitoring that is using Spire technologies.
We have companies that are using it for IoT applications, as well as blockchain applications for defense applications. Defense is also a part of our customer base, as well as the preservation of space as an area where everyone can operate safely, using our technology to capture data from and for that. Maybe with that, Erik, we can stop the introduction unless there are any burning questions right off the bat.
Great. Yep. Thanks, Peter.
Of course.
So I'll dive in. So, you know, maybe we'll just start with some of the recent results. You, revenue's a little bit lighter, but you did manage to hit on EBITDA line. You had, you know, some good strength and good momentum in the business, but you know, the outlook was lowered. Maybe just sort of unpack maybe the strengths you're seeing in the quarter and for the year, but also maybe just some of the, you know, the challenges you saw that lowered the outlook.
Of course, of course. So I think, you know, you mentioned already a few of the things that we talked about that are completely unchanged and actually have strengthened, right? The first one is that the global demand drivers that were like a foundational principle of starting the company have and, if anything, has actually strengthened. You know, when we started the company, we had a firm belief that climate change and global security are exponentially rising challenges for humanity for this century, and that certainly has not changed, you know, one iota. On the margin, what we have seen is companies' and countries' interest in tackling those challenges has increased, which is a very strong long-term demand driver that we have seen.
We've also not changed, and then, of course, what that means from a growth trajectory, where we say we continue to see the subscription business growing at a very, very strong clip, 20%-30% or more, for the next decade or more, given those long-term demands and given the positioning that the company has. We've also not changed the profitability metrics. As you said, in Q1, you know, we hit it right in the middle. And the important one that we have been working towards now for over two years, despite the very dynamic global environment through those two years of wars, inflation, recessions, interest rates, and the like, of being free cash flow positive this summer, has not changed.
And the reason why, you know, we believe this time frame to be important and achievable is the underlying strength of the business model, where we have a very CapEx-like model. We spend about $5 million-$7 million of CapEx a year to support that quasi unlimited amount of data revenue for us. Any additional spacecraft that we launch are actually paid for directly by customers and don't come out of our pocket at all. So it's a very CapEx light business that operates just like any subscription business, where we have metrics of way over 100% of net retention rate now for a very, very long period of time, and where the high barriers to entry of the company mean that we have a very, very efficient sales force.
Our long-term value to customer acquisition cost ratio is, like, in the double digits. Very, very high for enterprise sales businesses. Now, in the short term, yes, we did see. You know, there was, Space is a very dynamic environment, and, in a 7-year to 11-year cycle, the sun gets, a little bit more active, and that causes certain disturbances, and that had a short-term impact on data production for us, where we then, put in mitigating measures, both on the software side, and particularly decreasing latency from existing assets, putting in additional ground stations, as well as having the, the replenishment of, of our spacecraft. Very soon, there's, more spacecraft going up on the SpaceX launch.
We also had the Continuing Resolution, which has been to be resolved for a long time now and eventually got resolved, but it was something like 4 days before the end of the quarter. And that certainly delayed some of those contracts we have seen on the government side. Then there is certainly a bit of a precarious and difficult supply chain situation with regards to propulsion in the space sector. We had, after a very rigorous process, selected a vendor, worked with them, and unfortunately, their delivered units failed to perform up to standard, which delayed moving customer assets into production. And that was another one that we saw there.
But again, from a long-term perspective, nothing has changed at all. On the margin, the premise that we have built the company over a decade ago has been playing out and strengthening even further. And so we look at with just the same amount of confidence and excitement into the coming quarters and years as we did a few quarters ago.
Great. So within those sort of three areas, the continuing resolution, the solar storm, you know, solar activity, and the propulsion, obviously, Q1 had some impact. But if you think about the outlook for the year, what's sort of the lingering impact to that outlook, and what sort of, where can you see some risks to that, you know, outlook right now as you see it?
Yeah, I mean, as I started off by saying, nothing has changed from the long-term outlook of the company. You know, we've always built the company for decades. I'm European, and that's kinda like how we tend to think. We don't tend to think in, like, a few weeks or a few months. And so things moving to the right is not changing anything in the fundamental business of the company, and we haven't seen anything change fundamentally.
But yes, you do move things to the right, as you assess, we're like, "Okay, so how is the government gonna come out of the Continuing Resolution?" You see some of the craziness on the political sphere, and you know that November is coming, and so you start pricing in, you know, how those two things might happen as they start to converge with each other from a timeline perspective. You think about the delayed ramping up of assets and how that, you know, because of the propulsion issue, and how that might impact confidence of customers in moving and upgrading what they have been consuming from us.
So you kinda like you assess all of these, and if you look at the track record of Spire, it is now, what is it? 12 quarters or, like, almost three years, we have, like, an exceptional track record of meeting and exceeding guidance. And so we approach every single one of those guidance settings, you know, as prudently as we possibly can, taking, you know, both the risk and the opportunities into consideration. One thing that we have seen, Erik, is that the contract size has continued to increase for Spire. You know, six-figure contracts are becoming seven-figure contracts. Seven-figure contracts are becoming eight-figure contracts, and larger.
As you can probably appreciate, sometimes the closing certainty from a date perspective of a nine-figure contract is different from the closing certainty of a five-figure contract. We, you know, we have increasingly larger opportunities in our pipeline that we're quite excited about. But pinning down a government, a large corporation, on, like, a particular date is a little bit more tricky. And so you wanna be, you know, prudent in that as well, while at the same time being, of course, excited that the underlying premise of why we actually did go public, almost three years ago, which is access to larger contracts, continues to play out, and we certainly have seen that. If you look at our average ARR per customer, just over the last year, that has grown over 30%.
Great. Maybe then just, you know, you mentioned sort of pipeline. But, what sort of opportunities are you looking at when you're thinking of sort of these pipeline deals? And is it sort of the existing land and expand type of customers that you've been obviously doing well with? Or how should we think about then expanding and broadening out to other customers as well, and what- how does that fit within sort of that pipeline framework that you're looking at?
Yeah. So it literally is both of us, Erik. You know, when you think, I don't know which, but let's pick weather, for example, where our contracts have, again, now increased in size. We recently announced a financial services firm, a multi-seven-figure contract with Spire for precision weather forecasting. That is a customer that we had been working somewhat beforehand, but definitely not to this extent.
Is this the financial firm?
Financial firm.
Correct.
Correct. Correct, right. When you think about the aviation sector, where we won a very, very intense process in Europe for an almost $20 million contract for secure civilian aircraft surveillance... where the technology requirement was, you can track, but you can also geolocate where the aircraft is, given that in particular in Europe, for obvious reasons, GPS signals have been denied, degraded, and diminished, and in some instances being, you know, not made available at all through jamming, which has massive repercussions for civilian air traffic. And so, that was a new contract, that we won there in the aviation sector.
And then you have, you have companies with us that are expanding what they're doing, companies that have been using our technology for, for their type of data, for example, wildfire or greenhouse gases or others, that are now moving from having that on, you know, three, four, or five payloads on orbit into double-digit numbers of payloads on orbit. So again, an expansion of this. So really it is a combination of existing customers growing with us, as well as new customers selecting Spire for its space heritage, its resilience, its reliability, and its technological capability, being able to deliver services that others cannot.
What I thought was really interesting and timely with all this, you know, talk about AI, you know, your collaboration with NVIDIA. Maybe you could just sort of give us some of the highlights of that and what that really does in terms of the weather predictability for you and how AI changes the game for you. And then maybe just as sort of following down, is there anybody else doing this? How differentiated is that?
Well, let's take a step back about AI and kind of like highlight what AI does as a technology. When it comes to very complex analytics processes, like weather prediction, for example, in the past, those with access to supercomputers definitely had an edge, because the prevailing wisdom was that you need, you know, a $100 million supercomputer to be able to do weather prediction. Spire has been able, as for a long time, the only one commercial company to provide government-level weather prediction, but it was a costly undertaking from a compute perspective. You know, we're talking 10,000+ cores, running on like, you know, hours and hours, basically 24/7. What AI does, it moves the power from those with access to supercomputers to those with access to super data.
Because the AI short-circuits the computational power, but is hyper starved for data, far more so than the traditional, compute models. Because the traditional compute models are based on physics and laws. That is their input. AI models are based on raw data that has to feed them so that they can derive the outcomes. So that growth of AI was one of the three supporting trends that we had in our premise when we started the company, knowing that it will move towards those with access to superpower, the strength in providing services. And that's exactly what we see here. Now, to create the models, you need a massive GPU infrastructure, which is the business model of NVIDIA. They want to sell, you know, GPUs.
To sell GPUs, the best way to do that is to make it obvious to more and more people how you could use those GPUs, with weather prediction being one of them. And so they created a partnership with us where we get access to their compute infrastructure, and they get access to our data to train models to showcase what you can do with their GPUs and their models. Which for us means, A, access to cheap compute infrastructure, but B, it is an explosion of the customer universe. In the past, we had, you know, seven, eight-figure contracts for weather data from space only in the government, because only government agencies had the necessary compute power to actually leverage this data.
Now, NVIDIA, with those models coming out of, like, their Earth digital twin, is totally democratizing ability to consume data and produce a weather forecast with Spire producing more commercial weather data than the rest of the world combined. And in many instances, we produce more commercial weather data from spacecraft than all the governments of the world combined. So it is a very, very fruitful relationship where NVIDIA keeps to continuously improve the quality of their model, which is part of their sales pitch. And for Spire, we get access to compute power as well as a much, much broader universe of customers for our data.
Is anybody else doing this right now? Is there any other collaboration or any other partnerships that you've heard of?
No. No, we're not. I think, we certainly see, you know, as I mentioned earlier, companies saying, "Oh, we can provide services to help with weather prediction," which is a fantastic demand signal for us, and those entities are getting funded by investors that see, you know, as I mentioned earlier, the investor saying it's a $100 billion market out there. But there is no one which has the combined capability of providing weather prediction services at a very, very high resolution with proprietary capabilities and proprietary global satellite-based weather data, which is, you know, driving 70%-80%, according to scientists, the forecast accuracy. Because you need the global picture of the weather data from spacecraft, given that unpopulated areas, it's very, very hard to capture data.
The weather here and today, because of the, you know, proverbial Butterfly Effect, is dominated by what happened halfway across the world three days ago.
Great. You mentioned free cash flow positive as sort of like. You drew a line, line in the sand two years ago, or more or less two years ago. You're approaching that now, free cash flow positive, summertime. What's next? Sort of like, if we think about the next 12 or 24 months, what are the next metrics the company is sort of focusing on as you keep evolving the business?
Yeah, I think, I think we actually talked about it as well, that the company has achieved its, like, very rapid growth to being north of $100 million revenue and ARR company. And then the next goal is this free cash flow profitability. We've already achieved adjusted EBITDA positive at the end of Q4 last year, positive cash flow from operations at the end of Q4, and now, you know, for this summer, positive free cash flow. And then the next step is that individual segments of our business, maritime, weather, aviation, and space services, become $100 million businesses, executing on their specific strategies that exist for those individual areas to grow from being a contributor to Spire, to being a $100 million business by themselves.
And that's a combination of investing in sales and marketing, especially in the short term, leveraging the extremely efficient sales metrics that we have. As well as thinking about maybe certain products that we want to develop. And depending on how all of that pans out, you know, there certainly are opportunities as well for buying back shares, given what we see as the most useful place for us to deploy our cash. I would consider that a good question to ponder, and I look forward to pondering it every quarter as we go past this milestone of free cash flow profitability.
Great. Anyone have questions? So I mean, I just want to ask, maybe extend us a few more minutes, if you don't mind, because I think.
It's always dangerous to get between people and food.
It'll be. It's waiting for everybody. Don't worry. You know, you mentioned sort of like, one of the three pillars of you getting to that is, I'd say, this tech development process. What is on the horizon in terms of, like, technology and innovation, as you see sort of the next, you know, part of the company?
So the capabilities of the technology that we have developed continues to follow a core principle that came out of my last graduate degree, which is the equivalent of Moore's Law that is happening in small spacecraft right now, which is about 10x capability every 5 years. So we see that in the efficiency of our sensors capturing data. To give you an example of that, the first 4 spacecraft-tracking ships, they took combined 4 months to get 1 million tracking points from ships. We now have spacecraft that collect 1 million tracking points on a single spacecraft in a single day, and we're looking forward to the next generation that can double that amount again. So it gives you the sense of technology improvement.
Then there is latency improvement of the data, which is driven by connecting the spacecraft through so-called intersatellite links. When we started the company, I was not allowed to say it, but now I can say it. It's literally lasers in space. So we have deployed what's called optical intersatellite links that connect the spacecraft with lasers. And then there are new data types.
One of the most valuable data points in global weather prediction is microwave soundings, where Spire has numerous programs developing and deploying sensors, collecting microwave soundings, which is, in particular, moisture and temperature of the atmosphere, and delivering that to customers, as well as using it ourselves, which is another a data type on the horizon, with, I think, a massive market opportunity, just to name a few.
Great. Just maybe parting, you know, comments, if you would sort of leave investors with sort of some highlights of why they should be looking at Spire and, you know, we'll end it there then.
Yeah. Well, I would say you're looking at a subscription business, extremely sticky customer base, high growth rate, that is free cash flow positive. That already, you know... I mean, I was—I used to be an investor on Wall Street for 10 years as a quantitative investment manager. That already is a number of metrics that is very, very rare to find. And if you then look at as an, an ARR or revenue multiple of the company in the very, very low digits compared to, like, the, the normal average digits of, like, seven, eight, nine, or 10, or more, then, you know, it's. I would consider it back then, that's something worthwhile to dig in, because those opportunities don't come along that often.
Great. Thank you, Peter. This was a great overview, and.
My pleasure.
Thank you.
Thanks, everyone.