Spire Global, Inc. (SPIR) Q3 2022 Earnings Call Transcript

Spire Global, Inc. (SPIR)

Q3 2022 Earnings Conference Call

November 09, 2022 05:00 PM ET

Company Participants

Ben Hackman - Head, IR

Peter Platzer - CEO, President and Director

Tom Krywe - CFO

Conference Call Participants

Ric Prentiss - Raymond James

Stefanos Crist - CJS Securities

Scott Deuschle - Credit Suisse

Elizabeth Grenfell - Bank of America



Greetings and welcome to the Spire Global Third Quarter 2022 Call. At this time, all participants are in a listen-only mode. A question-and-answer session will follow the formal presentation. [Operator Instructions] Please note this conference is being recorded.

I will now turn the conference over to our host Ben Hackman, Head of IR. You may begin.

Ben Hackman

Thank you. Hello everyone and thank you for joining us for our third quarter 2022 earnings conference call. Our results, press release, and SEC filings can be found on our IR website at ir.spire.com. A replay of today's call will also be made available. With me on the call today is Peter Platzer, CEO and Tom Krywe, CFO.

As a reminder, our commentary today will include non-GAAP items. Reconciliations between our GAAP and non-GAAP results, as well as our guidance can be found in our earnings press release.

Some of our comments today may contain forward-looking statements that are subject to risks, uncertainties, and assumptions. In particular, our expectations around our results of operations and financial conditions are uncertain and subject to change.

Should any of these fail to materialize or should our assumptions prove to be incorrect, actual company results could differ materially from these forward-looking statements. A description of these risks, uncertainties, and assumptions, and other factors that could affect our financial results is included in our SEC filings.

With that, let me hand the call over to Peter.

Peter Platzer

Thank you, Ben and thank you for joining us on the call today. I know there are a lot of things going on. Spire continued to gain momentum in Q3 and the results truly speak for themselves. We had record revenue generation, achieved almost $100 million of ARR, and met our objectives for non-GAAP operating margin and EBITDA margin.

These proof points showcase our continued trajectory towards positive free cash flow. Being on the cusp of achieving $100 million of ARR just five years since we had our first million of ARR puts us among the fastest growing subscription businesses to reach such a level and speaks to the exceptional value that our data and solutions bring to our customers.

Driven by rising demand and a growing recognition of the value of space-based data to help with climate change and global security, Spire is poised to execute within these expanding markets and continue along our growth trajectory. There was no shortage of attention grabbing weather and global security events during the third quarter.

Florida saw one of the strongest hurricanes ever to hit it state, the same hurricane that wreaked havoc and knocked out Cuba's power grid a few days before. Pakistan saw record rainfall and subsequent flooding, whereas third of the country was underwater.

While Pakistan was flooding, major rivers in Europe and the United States were at such low levels that commercial barge traffic was impeded, adding to the supply chain challenges the world is facing.

King crab and snow crab harvests in Alaskan waters were canceled due to declining trout populations most likely, from stressors of warmer water. That drinking water supply in parts of the United States is threatened as salt water from the Gulf of Mexico is overwhelming the low flow of water from the Mississippi River.

Asia and New Zealand saw their fourth warmest and second warmest August respectively, while the Arctic Sea ice extent reached a record low for the month. And when the world wasn't witnessing and/or reading about climate change, geopolitics captured the headlines. Shipments of grain out of Ukraine food that feeds the world were closely being watched and continued to be so.

Oil and natural gas supplies are closely being monitored as sanctions remain in place, winter draws near and demand for heating fuels increases. Sabre rattling regarding nuclear weapons caught the world's attention. Authoritarian regimes around the world continue to impose their will on populations that are fighting for their lands, rights, and freedoms.

While this is not the world we desire, it is the world in which we find ourselves. At Spire, we strive not simply to provide insights on the world as it exists today, but to provide insights to make the world a safer place for ourselves and future generations.

Diving more into climate change, the world is seeing a higher number of weather-related events that are causing significant damage and cost. That pace has only quickened in recent years.

According to the National Oceanic and Atmospheric Administration, and EM-DAT, the international disaster database, between 1980 and 1990, the world saw three mega disasters, each causing over $20 billion in damages. In the 10 years from 2010 to 2020, that number increased nearly five times to 14. Yet in 2021, in a single year, the world saw five mega disasters, causing over $20 billion in damages. And in addition, 2021 had 47 weather disasters that each cost over $1 billion of damage or state and then another way, the world saw on average, at $1 billion weather disaster once every eight days.

It is against this backdrop of increasingly severe weather that the Spire team is working tirelessly to provide data and solutions to meaningfully change the current trajectory.

We reject the idea of standing idle by as climate change occurs, and the demand from our customers proves that we are not alone in that notion. Since the inception of the company, our goal has been to utilize space to positively impact life on Earth. Our team of talented engineers has been innovating for more than 10 years, pushing the boundaries of what was once thought possible.

It's with this mindset that we do our part to tackle climate change, empowering both our government and commercial customers by offering data and solutions that are increasingly being utilized to reduce the economic impact, while helping humanity measure and learn, adapt to and mitigate the impacts of climate change.

During the quarter, we continued to position our weather products infrastructure to allow for enhanced functionality, efficiency, and scalability. We heard from the International Radio Occultation Working Group, a group of scientists co-sponsored by the World Meteorological Organization that Spire's radio occultation data, was having a definitively positive impact on numerical weather prediction.

We announced a nearly $10 million award from NOAA to provide six months of weather data. This is data that will be utilized not solely by NOAA, but data that is open to the world scientists as they collaborate to find new and meaningful weather and climate insights.

What's notable is that this was the third multimillion dollar award from NOAA in 2022, highlighting the diversity of use cases we can solve and the execution of our land-and-expand strategy.

Shortly after announcing this award, we announced a separate $4 million two-year contract with NOAA for hyperspectral, microwave sensor payload development, integration test and demonstration. NOAA was assuming that if prototypes such as this would need to be developed on an airborne or balloon platform first. However, because of Spire's proven space capabilities and our partnership with RAL Space, Spire offered to develop the prototype in the actual environment, it will be utilized, space. This was a significant differentiator along with our demonstrated track record of providing high quality commercial data that let NOAA to select us for this competitive and challenging mission.

The HIMS Instrument, as it is called, is a next-generation technology that delivers microwave sounding information to measure atmospheric moisture at critical measurement for more accurate and numerical weather predictions.

Also, during the quarter, we announced an award from NASA, which is focused on demonstrating a new remote sensing technique for measuring soil moisture. As part of the mission, Spire performed a custom collection of signals enabled through a software upgrade to our on-orbit satellites.

The lower frequency of some of the signals allows the radio emissions to penetrate farther into the soil, enabling the team to obtain measurements deeper below the surface when compared to other techniques.

These deeper measurements provide better data for applications like agricultural production forecasting and flood prediction. As we continue to enhance our dataset, we have seen customers utilize is our solution to adapt to climate change.

Our Dynamic AIS products collect real-time data from hundreds of thousands vessels on the open oceans. We provide highly relevant attributes including positions, speed, course, destination, and ETA.

Given our differentiated product offerings, we can also overlay weather. With increasing frequency of severe weather events, the ability to know where a vessel is, where it is going and the expected weather along its course can be a lifesaving combination. And that's exactly what we recently heard from one of our customers.

With tropical storms in the vicinity of their vessels, this customer was utilizing our dynamic AIS data to track their vessels and keep their employees out of harm's way and their cargo safe. This is a powerful example of AIS and weather being augmented into a 24/7 fleet monitoring and advisory tool.

Another example Spire Weather Data is used by a Power & Light Company for around-the-clock weather support center. Meteorologists advise the customer regarding upcoming significant weather events and help to evaluate threats to life and property....

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