LUNR - NASDAQ

Thank you for standing by. My name is Andrea, and I will be your conference operator today. At this time, I would like to welcome everyone to the Intuitive Machines Second Quarter 2025 Earnings Call. [Operator Instructions] I would now like to turn the call over to Head of Investor Relations, Stephen

Good morning. Welcome to the Intuitive Machines Second Quarter 2025 Earnings Call. Chief Executive Officer, Steve Altemus; and Chief Financial Officer, Pete McGrath, are leading the call today. Before we begin, please note that some of the information discussed during today's call will consist of forward-looking statements, setting forth our current expectations with respect to the future of our business, the economy and other events. The company's actual results could differ materially from those indicated in any forward- looking statements due to many factors. These factors are described under forward-looking statements in the company's earnings press release and the company's most recent 10-K and 10-Q filed with the SEC. We do not undertake any obligation to update forward-looking statements. We also expect to discuss certain financial measures and information that are non-GAAP measures as defined in the applicable SEC rules and regulations. Reconciliations to the company's GAAP measures are included in the earnings release filed on Form 8-K. Finally, we posted an earnings call presentation on our website, which provides additional context on our operational and financial performance. You can find this presentation on our Investor Relations page at www.intuitivemachines.com/investors. Now I'll turn the call over to Steve Altemus.

Intuitive Machines is built to do the hard things first. With 2 lunar missions completed in 12 months, our story is one of perseverance, technical depth and a commitment to fielding the indispensable tech and infrastructure for space exploration. Our ability to operate end-to-end from earth to the lunar surface and back led to our selection for NASA's Near Space Network services contract, an award that could transform Intuitive Machines from completing one lunar surface mission a year into a sustained deep space infrastructure service provider. We believe data transmission is the keystone for enabling space flight at scale. It's how spacecraft talk, navigate and execute autonomously. It's how we connect landers to satellites, astronauts to mission control and infrastructure to opportunity. Our long-term vision is to become a new space prime contractor, providing communications, navigation and control services for defense, civil and commercial markets. To achieve that vision, we've executed decisively in the second quarter. Internally, we've brought satellite manufacturing in-house, helping to ensure performance, schedule clarity and tight integration with our landers and space systems. Externally, we moved to acquire KinetX, a team that delivers exactly the kind of analysis and real-time decision software that our future network will depend on. Together, these moves put Intuitive Machines in a uniquely capable position to design and operate dual-use satellites and ground infrastructure to serve civil and national security space, including commercializing NASA's deep space network, replacing the tracking and data relay satellite system and pioneering the next generation of Mars data relay satellites and network. We also continue to make progress on our core programs. On IM-3 or Mission 3, we've completed procurements of new navigation sensors and are in active performance testing of the optical and laser navigation system. Our targeted flight readiness review, which is the last review prior to shipping the lander to the launch site is scheduled for May of 2026. On Mission 4, we've completed our procurements, initiated manufacturing and are testing the payload accommodation mechanisms. The launch date remains on schedule for the second half of 2027. We received a $9.8 million Phase 2 award to complete the design of our orbital transfer vehicle, the final step before manufacturing. We believe this award signals confidence from a national security space customer outside our traditional NASA portfolio and reinforces our strategy to retire risk by using contracted funds to build a family of vehicles that evolve from our flight proven systems and operate within our existing network. We continue executing on our sole-source Stealth nuclear-powered satellite development for the Air Force Research Laboratory. We're completing the first phase this month and anticipate a follow-on contract later this year to deliver a flight demonstration unit for the satellite's power generation system to the International Space Station. Our candidacy for the Lunar Train vehicle contract remains active, building on a year's work in autonomy simulation and crew center design with our motion-based driving simulator, astronaut assessment testing and flight-proven navigation systems, we believe Intuitive Machines is positioned as a leading candidate to deliver and operate the mobility system on the moon. We're finalizing our proposal for NASA's next phase of the LTV program, which will award a contract to build, fly and operate the vehicle. If selected later this year, we believe the company will be in a strong position for follow-on awards, potentially spanning a decade of lunar surface operation and billions in mission services. In Earth Orbit, we continue to work on our Earth reentry vehicle under the Texas Space Commission's $10 million award. In the second quarter, we completed several milestones, including reviews required to start customer sales cycles. We completed forming a commercial reentry team that includes biotechnology, semiconductor and nationally accredited material handling partners. Reentry is a natural extension of our delivery pillar and aligns with our broader mission to return the value of space exploration, including Lunar sample return. Throughout the quarter, we continued advocating for NASA's OSAM-1 mission under the OMS 3 contract. In the latest fiscal year 2026 Defense Appropriations markup, Congress had directed NASA and the U.S. Space Force to submit a funding profile and plan to launch OSAM-1 by 2028, signaling strong legislative intent around its readiness and value for national security space operations. While this language is not yet fully enacted, it creates meaningful potential momentum. Taken together, these programs reinforce our ability to execute in multiple regions of space with diverse customers, while setting the stage for contract-driven growth. The second quarter presented an opportunity to extend proven space flight operational capabilities into foundational infrastructure. NASA's Near Space Network services contract is the connection between our Lunar flight heritage and the future of commercial, national security space and civil deep space data transmission. During the second quarter, we completed additional technical verification milestones on NSS, further maturing the system design. Our satellite constellation optimized for Lunar and Cislunar mission support is ready to build. These systems are thoughtfully engineered with the capability to extend beyond the moon, including Mars. In the second quarter, we submitted a proposal to NASA to evolve our Lunar constellation into Mars capable data relay satellites. To execute the NSNS vision with scheduled confidence and cost control, we made the strategic decision to vertically integrate satellite production. Just as we did with our landers, we're taking a government-backed program and building scalable business, investing contract dollars internally. We believe this model gives us schedule control, safeguards intellectual property, opens access to new markets like Golden Dome and reduces our largest cost driver, launch, by enabling lander and satellite rideshare on a single launch vehicle. As a result, we're able to project schedule in our satellite production, allowing us to align the IM-3 mission with satellite readiness, now targeted in the second half of next year. Satellite manufacturing for NSNS is expected to cost less than what it would take to procure satellite buses externally, allowing us to be more capital efficient in the initial NSNS task orders. In parallel, we started expanding our infrastructure to support the vehicles now in development. In the days following the second quarter, Houston City Council approved our headquarters expansion to scale government and commercial operations. And just before this earnings call, we signed a second lease for a nearby spaceport facility already equipped with turnkey production equipment, including test facilities we have been contracting services for, allowing us to expand manufacturing capability efficiently and cost effectively. Capitalize on this approach means we have to bring in the talent, expertise, technology and IP to design, develop, test and operate the systems and space. As such, we announced our intent to acquire KinetX, the only commercial company certified by NASA to perform deep space navigation. With its full flight software suite over a dozen mission credits, including our first 2 lunar missions and profitable operations across defense and commercial programs, KinetX enhances our capabilities in satellite constellation design, ground operations and precision tracking of spacecraft. We believe it strengthens our position in data transmission, national security space and emerging deep space opportunities, including Mars Data Relay. In terms of capital deployment beyond current operations, our acquisition of KinetX is one example of our strategic M&A process where we focus on key capabilities and assets that complement our existing services to expand our offerings and capture higher-margin service revenues. Finally, we formalized a strategic partnership with Goonhilly Earth Station to explore new global opportunities for ground segment data transmission. Goonhilly is already a part of Intuitive Machines' Lunar data network and a commercial provider of deep space communication services to space agencies around the world. Together, we are submitting a joint response to NASA for the commercialization of the Madrid Deep Space Communications Complex. This is the first of 3 NASA DSN sites we expect to be commercialized within the next 2 years. The market opportunity is to commercially operate the full data life cycle between ground segments and spacecraft in deep space. The strategic decisions we made in the second quarter, vertical integration, facility expansion, targeted acquisition were directly tied to customer demand, contract execution and scalable service model. These choices strengthen our ability to deliver high-value infrastructure with greater cost control, IP retention and schedule clarity. Just as important, they position Intuitive Machines to align awarded programs like IM-3 and NSNS with internal capabilities that improve execution speed and profitability. As we head into the second half of the year, we're positioned for multiple business catalysts, a new clips task order, repurposed OSAM-1 for the Space Force, Lunar Terrain Vehicle Services Award, stealth satellite flight demonstration for AFRL, growth in commercial reentry and the beginning of deep space satellite production aligned to NSNS. We will continue to remain opportunistic on further strategic M&A, while also evaluating internal investments to accelerate growth and drive long-term shareholder value. We have a detailed and robust pipeline of both tuck-in and transformative M&A opportunities and intend to remain aggressive in the marketplace, particularly in data services and national security space markets. With that, I'll hand it over to Pete McGrath, our Chief Financial Officer.

Thank you, Steve, and thanks to everyone joining us today. As Steve mentioned, we made some strategic decisions in the quarter to be more capital efficient, align mission schedules and deliverables, open new markets and ultimately drive long-term value creation. These decisions impacted revenue in the quarter. Q2 revenue was $50.3 million, up 21% year-over-year, driven primarily by CLPS, LTVS and SNS execution. We have completed negotiations with NASA on IM-2 post-mission closeout and expect $5.7 million in success payments in Q3. OMS revenue was $19.6 million in the quarter as expected. As Steve mentioned, we are pleased with the legislative language from the Defense Appropriations markup, which includes funding to launch OSAM-1 for the Space Force and we will shift this program from civil space to national security and may increase revenues later this year. Q2 revenue also includes an estimate at completion or EAC adjustment impacting cost and schedule on IM-3, which were driven by our strategic decision to shift satellite manufacturing capital from external procurements to internal investments in ourselves. This vertical integration decision is not only more cost effective, but also expands our market opportunities to satellite manufacturing and data services across civil, commercial and national security customers. This EAC adjustment aligns the timing for IM-3 with our internal production of our first satellite. The EAC adjustments did not impact total contract revenues. Revenue recognition is based on cost. Given we added cost to increase probability of mission success and extended schedule to align with our NSNS satellite completion, revenue moved from 2025 to 2026 on IM-3. The result of the EAC adjustments was a reduction of $10.1 million to revenue and a cost increase of $9.7 million for a total earnings reduction of $19.8 million in the quarter. Gross margin was negative $11.8 million, an improvement versus negative $16.1 million in Q2 of 2024. EACs aside, we continue to see high gross margins from key programs such as LTVS and NSNS. SG&A for the quarter was $16 million and relatively flat versus the prior quarter of $16.1 million in Q1 of 2025. Current SG&A costs reflect a steadier state of business going forward in support of our growth trajectory. Operating loss for the quarter was $28.6 million versus a loss of $27.5 million in the second quarter of 2024. Adjusted EBITDA was negative $25.4 million in the quarter, relatively flat to prior year as profit from our higher-margin programs such as LTVS and NSNS were offset by a quarter's EAC adjustment. Operating cash used was $19.3 million in the quarter with capital expenditures of $8.1 million, resulting in negative free cash flow of $27.3 million in the quarter. Negative operating cash came in as expected due to the timing of milestone payments. Recall in Q1, free cash flow was positive $13.3 million and was driven primarily by timing of milestone payments from IM-3, IM-4 and LTV, which did not repeat in Q2. CapEx was driven primarily by the investments in our data relay satellites and ground networks. Going forward, we expect to see continued CapEx for our 5 satellite constellation around the moon and our ground network in support of NSNS. These CapEx levels will be offset by higher margin revenues from follow-on task orders as the program matures. Looking at free cash flow for the first half of the year is more reflective of current operations. First half free cash flow was an outflow of $14 million, a significant improvement for the first half of 2024, which was an outflow of $41.5 million. As we said in the past, we continue to drive towards higher margins and improved profitability, which will lead to lower cash burn and eventually cash flow breakeven. We ended Q2 with a cash balance of $344.9 million, and we continue to believe we have more than sufficient capital to fund our current operations, inclusive of our facility expansion and satellite manufacturing capabilities. In addition, we will always be opportunistic on M&A, specifically in the areas of software, satellite and data services for the national security community. Moving on to backlog. We ended the second quarter with contracted backlog of $256.9 million compared to $272.3 million in Q1 of 2025 and $213 million in Q2 of 2024. Q2 backlog includes orders for task order 2 for NSNS, which was $18 million, a $10 million grant from the Texas Space Commission for our Earth reentry vehicle and a letter contract for $4 million on an Orbital transfer vehicle Phase 2 award for a government customer. Since the end of Q2, we definitized the Orbital transfer vehicle contract at a value of $9.8 million, which will be reflected in our Q3 backlog. When looking at our Q2 2025 backlog, we expect to recognize 30% to 35% of that in 2025, 40% to 45% in 2026 and the remainder thereafter. Keep in mind, we are awaiting the outcome of several new awards this year, such as the next CLPS award, new OMS task orders, LTV Phase 2 and the next phase of Jetson. As of August 4, our shares outstanding are 178.7 million with 117.8 million shares of Class A and 60.9 million Class C. Before we get to guidance, let's reflect on the strong first half we've seen thus far. Year-to-date revenue is $113.3 million, which includes the $10 million EAC impact this quarter and does not include the majority of the IM-2 success milestones, which are expected to come in Q3. On a run rate basis, we factor the Q2 EAC impact and the IM-2 success milestone, we are running at approximately $240 million in revenue for the year with sufficient award decisions expected in the second half. As such, for full year guidance, we are now expecting to be near the low end of prior outlook with additional opportunities in the latter part of the year that supports revenue near the midpoint of our prior outlook, which was $275 million. We continue to expect positive adjusted EBITDA in 2026. Looking ahead, we have line of sight to significant procurements in the second half of the year to grow organically. Meanwhile, current market conditions are also supportive of inorganic opportunities to execute on our vision of being a new space prime provider of communications, navigation and control services for defense, civil and commercial markets. With that, operator, we are now ready for questions.

And your first question comes from the line of Griffin Boss with B. Riley Securities.

I just want to start off on KinetX. Are there any details you could provide on the revenue profile of that business or any potential synergies you might see with your existing data business?

Absolutely, Griffin. The -- I'll let Pete comment on the revenues, but about $9.8 million worth of revenue, about 14% of that is EBITDA. The KinetX acquisition of highly specialized talent is extraordinary. These people are phenomenal, the talent in deep space navigation and constellation management and systems engineering. They've done some things with missions out to asteroids like the OSIRIS-REx mission. They've done things out to the Trojan asteroids around Jupiter, missions to Pluto. The only certified company to do this kind of deep space trajectory work like NASA does at JPL. They have proprietary software that's going to help us with our deep space navigation, our constellation management. So that's also a significant piece of this. They also have part of the MUOS constellation and that's a global satellite constellation management work that they do. So, it's very synergistic with us. We've been working with them on Mission 1 and 2. They have -- they're an excellent group of engineers and scientists, and we look forward to working with them and welcoming them to our team.

You have anything to add there? Yes.

Yes, I was just going to say that, that was 2024 revenue that Steve referenced. It was 9.8% and a 14% EBITDA.

Okay. Great. All right. And just forgive my ignorance, but what exactly does it mean to be the only NASA certified commercial company here? Does that imply that other companies are unable to do these missions because they are not certified? Or is this the only company NASA will work with? Any comments there?

Yes, the company that NASA certifies trust to handle these discovery class and above kind of missions that need to place spacecraft with precision in various spots around the solar system. The other players that do that is really Jet Propulsion Laboratory, so -- which is an FFRDC for NASA. So, this is a commercial enterprise that does that same kind of highly specialized trajectory and navigation work that Jet Propulsion Laboratory does.

Got it. Okay. That makes sense. And then just yes, last one for me. Given the move to vertical satellite manufacturing, what, if any, guidance could you give on the increase in expected operating expenses associated with that?

Yes. So our initial investment is going to be about $5 million in NRE to get the first satellite through design and development. And then our recurring cost is actually at or below current market numbers. When we made the decision to do this, we are evaluating other options and found that internally, we can be more cost effective, not to mention it, allows us to have an internal organic capability that now we can go into other markets with.

And next question comes from the line of Suji Desilva with ROTH Capital.

Pete, congrats on the progress. So, the satellite market as you come into it, Steve, maybe the constellations for perhaps lunar orbit spacecraft, what are Lunar's competitive advantages as we see multiple companies talk about this opportunity?

Well, we talk a lot about the Near Space Network contract. There's a sole award for Intuitive Machines, which we're supposed to put a -- and we are working on a constellation of satellites of a minimum of 5 satellites around the moon that need replacement on a span of about every 5 years. And so, there's a constant replenishment needed beyond those 5 satellites. We know also that the low earth orbit and GEO satellites don't quite fit the Cislunar market in terms of performance in that environment and performance at that distance. That means with radios, with power, with Delta-v propulsion. And so, our unique experience with flying in and around the moon with our Lunar lander systems means we understand what it takes to work at that -- those distances away from Earth. Couple that with our ground segment that's currently 8 antennas in 6 different countries, that coupling gives Intuitive Machines or Lunar a competitive advantage above the rest of the industry, with respect to communicating out to the moon. And now we look at what capabilities have we developed around the moon that can now move not only down towards earth, but out towards Mars for Mars Data Relay. So, I think we're very well positioned with this strategic investment in ourselves to build satellites in-house.

That's great color. I appreciate it, Steve. And then on the pipeline, maybe you could talk about the highest probability opportunities in the next 6 to 12 months and the magnitude of those, if they convert to backlog, that would be helpful to understand.

Yes. I would say that I'll hold off on the magnitude specifically, but the most transformative award that we're expecting and believe we're in the pole position for that award is the Lunar Terrain Vehicle Services contract. That contract, as you know, is about $4.6 billion. And the first demonstration, which is what we're competing for, roughly close to $1 billion, but I won't give you the exact number because we're in competition. So that makes a significant award in our infrastructure services pillar in and around the moon.

Pete, congrats on the progress on the acquisition.

And your next question comes from the line of Andres Sheppard with Cantor [ Tenke ].

Congrats on all the great progress, Steve, Pete and Steve. Maybe a bit of a off-topic question, but I saw the news from Secretary Duffy and NASA looking to get a nuclear reactor on the moon. Curious how this could fit into Intuitive Machines' plans.

Andres and thanks for the question. You know, Intuitive Machines have been active in Phase 1 and 1a of Fission Surface Power technology development for NASA and the Department of Energy. And we're working on technologies for a 40-kilowatt reactor for the surface of the moon. So, this announcement by Sean Duffy, the acting administrator to put a 100-kilowatt reactor on the moon by 2030 was quite interesting. We're 1 of 3 companies or teams that are working on this technology. In particular, we're doing a demonstration at vacuum right now for the heat transfer technology for the reactor, the 40-kilowatt reactor. This is a race with China. And so, in order to be competitive, we see the Fission Surface Power as a way to compete head-to-head with China. And with infrastructure services as a primary pillar, we always thought of providing not only data communications, navigation, but power, sustainable power to the surface of the moon as part of that infrastructure. So, we look forward to the details as it comes out, what that procurement will look like, what that acquisition will look like. And you can trust that Intuitive Machines will be at the forefront of trying to compete for that.

Got it. That's helpful. Very interesting. And maybe as a quick follow-up, I wanted to maybe touch on Suji's question. As we look ahead, I'm curious if you can maybe remind us the key catalysts that we should be looking forward to that we can maybe point to investors. Obviously, we have IM-3 mission, IM-4 mission, LTV, but just make sure I'm not missing anything. So just remind us maybe the key catalysts to look for decisions, et cetera.

Okay. There's another CLPS award to be competed that's -- we're going through the payload appendix and the Industry Day and those. So that CLPS award will compete. That's called CT4, should be awarded by the end of the year. You heard us talk about OSAM and the defense approes language or the markup and seeing that come from the brink of cancellation to actually active and interest from Space Force. We'll see what -- how that takes shape during the balance of the year as the House and the Senate come back from recess. LTV is what I talked about is the most transformative potential award in the late November, December time frame. And then our Stealth satellite, Jetson, we've had conversations with AFRL, and they're interested in doing a technology demo on International Space Station for the Stirling engine kind of demonstration there. So that's an interesting one. And then you'll see us move more into developing the reentry systems for Intuitive Machines. Long-term, that's lunar sample return. But in the near term, all this work from low earth orbit with biopharma and semiconductor commercial customers, exercising the muscles of reentry earth entry to sent and landing is very important. Another highly specialized skill, Intuitive Machines is cultivating to capture that market and extend out to the moon. And then the last one I would say is we did put a proposal into NASA for demonstrating Mars Data Relay from the moon in a precursor fashion before the potential for deploying satellites out to Mars to replace aging infrastructure. So, all of those are in our robust pipeline moving forward and have an opportunity to generate some revenue this year.

And your next question comes from the line of Edison Yu with Deutsche Bank.

I wanted to double-click on the satellite production coming in-house. How do you view this opportunity going forward in the context of, obviously, there being potentially other customers, there are external customers out there? And how much of the [ BOM ] or how much of the components do you really want to control in-house within these types of satellites?

We see an opportunity, Edison, thanks for your question. We see an opportunity with other customers as we build a very capable satellite bus with a high Delta-v and power surplus, it allows us to fly not only communications gear and position navigation and timing gear, but actually other payloads and sensors that can serve multiple customers. That's the first order. But then also, once you build that capable bus, you can think about replacing aging Mars infrastructure. And then ultimately, we're talking with NASA and other government agencies about the tracking data relay satellite services replacement, which is aging TDRS and to commercialize that, we'll be in a good position having brought this capability of production in-house to compete for that TDRS replacement service. The other part of your question was really about, I think, vertical integration of the components. With the lander systems that we've done, we've done 85% of the lander system vertical integration in-house. That means we write all the software. We -- of 56 computer boards on board, the lander, we build 52 in-house. So, avionics, the controllers that drive the avionics subsystems are all built by Intuitive Machines, the harnesses, the propulsion system. So, if you think about all that capability in machining, fabrication, manufacturing, assembly, test and integration, we have the bulk of it. And so now to change the form and build satellites is not a great leap for us. And our anticipation that this may occur, we investigated facility expansion and how fortunate to have closed on those facilities expansion so that we can hit the ground running as we were doing design, what are we going to do about production, and we've got that solved already with very little capital investment in those production facilities.

Fantastic. And then a follow-up on Mars actually. You may have seen SpaceX announced something this morning about a, I think, agreement with Italy. How do we think about the timing of potentially some type of Mars mission that you could be on? And I think is it safe to assume that would be significantly more valuable than a cross mission?

Well, I would say that if you look at the President's budget request, there was a significant amount of dollars for working on plans and efforts and infrastructure in and around Mars. I think it was $1 billion allocated to that activity. We know that the infrastructure around Mars in terms of weather satellites, communication satellites, surveyors is way out of its life cycle and need to be replaced. The commercial model like CLPS is the appropriate way. And we are hearing that that's the direction that the agency wants to go. And so we're looking at a different way by doing precursor missions around the moon demonstrating the capability to communicate with the kind of performance that you'll need at Mars. And then you have a design that can be a direct drop-in for Mars when the time is right. So, we think here in our satellite constellation, when we start to think about flying satellites 4 and 5, we'll already have Mars designs ready to go and deploy. So that's kind of the way I look at it. And certainly, they're going to be more costly than the CLPS missions because we're going much further out. But proportionately, I think we can be cost efficient and agile in deploying that. So, I think it gives us a competitive advantage to kind of participate in this. Not everything is about landing humans on Mars. It's about putting infrastructure in and around Mars so that we can continue that research and continue striving to reach there with humans.

Your next question comes from the line of David Strauss with Barclays.

This is Josh Korn on for David. I want to ask -- do you still expect positive EBITDA in Q4 this year?

Given the EAC that we had this year, we're looking more towards EBITDA positive in '26, not at the end of this year.

Okay. And then I know you've talked about some of the opportunities at the end of the year, but kind of directionally, where do you expect backlog at the end of the year?

We expect to add the backlog the topics that Steve referenced earlier with regards to the potential CLPS award, potential OSAM revenue increase depending on the decision from the Space Force on extending that. Also the LTV procurement to Jetson, as well as maybe an opportunity on the Mars relay. Those are the ones we're looking at to add to backlog. Specific numbers are still not defined.

Next question comes from the line of Austin Moeller with Canaccord Genuity.

My first question, is there still a CLPS contract expected to be awarded in November? Has that moved right? And how are you feeling about your P win for that?

Yes, that's what I mentioned, CLPS award CT4. Currently, we're in a competitive environment with that one. We're confident. We talked about Mission 3. We've got to the root cause of the laser rangefinder issue on Mission 3. We've got rearchitected our sensor suite for the optical navigation, laser navigation. We have put all those procurements on order. We're actively testing, and we're confident in the system upgrades we've made out of IM-2 through that hot wash process and in place for IM-3 and 4, and we have this road map of development that will put us in a very competitive place for CT4.

And just a follow-up. Do you see any opportunity for Golden Dome for your spacecraft platforms? Or do you view a Pentagon or Intel Community X geo contract as being distinct from that?

Well, I think both, Austin. I think there's distinct opportunities beyond Golden Dome. Golden Dome is one thing. It's a buzzword that a lot of people are chasing right now. There's a lot of hard work to do in national security space to ensure that we have the right systems in place, the right sensors in place, and we're doing that. With respect to Golden Dome, we're putting a quite capable near space network in place that includes a ground segment around the world. That includes a data relay constellation that includes very unique solutions for position, navigation and timing. I think all of that is applicable to the instantiation of Golden Dome going forward in the future. So, the future is bright in that area. We're going to have to see how that architecture for Golden Dome shakes out. It is not yet defined. And so trying to figure out exactly where Intuitive Machines plugs in. But with the assets that we're deploying in space and the platforms that we are developing, I think they're applicable to those architectures that are being proposed moving forward.

And your next question comes from the line of Greg Pendy with Clear Street.

I think earlier in the call, we mentioned the Fission Reactor, and I guess that's competing against China and then about SpaceX relationship with Italy. Is there anything else on the global front that as the U.S. has to maintain the leadership position in space we should be aware of that might be hot butts and opportunities for you guys?

On the global stage, already, we're working with a global ground segment network to build out the communication stations around the world that allow us to have a fully up, reliable communication link with the moon and out to 2 million kilometers. The world is interested in that. We're talking with ESA and others about how do we work together to use their assets as part of the network that we're building in concert with NASA to create a more capable network in the near space region of space and shared assets that would lead to not only business for the United States, but business for Europe and Asia, et cetera. So that's pretty interesting. The other thing is we recently were to Madrid at the Madrid Space Communications Complex for the Deep Space network. NASA is talking about commercializing the deep space network sites in Madrid, Spain, in Canberra, Australia and in Goldstone in California. And we're there to look at how we can take what we've done and what we're learning about the near space network and apply it to commercializing the deep space network. And that will have implications globally also. So really, again, in data transmission, communications, position navigation and timing, you'll see Intuitive Machines at the forefront of that globally.

Our next question comes from the line of Ronald Epstein with Bank of America.

This is Alex Preston on for Ron this morning. I was wondering if you could talk a little bit more about your strategic investment for vertically integrating on NSNS and maybe sort of the rationale. Did you just see an opportunity for cost improvements? Was there a maybe discrete supply or something running behind you needed to correct sort of maybe if you could walk me through a little bit about what your thought process was there.

Yes, I can do that. When we surveyed the satellite market and looked at the capabilities, there's low earth orbit sized satellite buses for communication. That fit low earth orbit, but don't necessarily have the Delta-v, the [ omp ] in the propulsion system or the power to drive the radios and the comm communications gear necessary out at the moon. It's orders, it's 1,000x further out to the moon than it is a low earth orbit in a very unique environment. So, stretching a low earth orbit satellite to meet the performance capabilities of around the moon is very difficult. And so we saw some struggles in the supply chain with that. And so knowing what we've been able to do with the landers and operating out of the moon with our experience on Mission 1 and Mission 2, we've been in orbit something like 39 times around the moon operating, communicating, navigating. And so we kind of -- we know what it takes to get out there. And so one was the supply chain. The other one is we're talking roughly about $100 million worth of satellites that we're going to put in place for the NSNS contract over the next 4, 5 years. Now that's $100 million invested in Intuitive Machines to build out capability. What can we do with that? And that was the core of the decision is put that money to work in our people, in our facilities, in our machines so that we have a capability to build new systems because after all, that's what we do, right, build space systems and operate them in space. So, that was as simple as it got, and it made a lot of sense here at the Spaceport Houston, where we get incentivized by the city of Houston. We get tax incentives, we get land incentives, we get rent or lease offsets for these facilities. And essentially, we have a campus now for production and operations of spacecraft. And as we see, we're growing into heavy cargo, Nova-D, into LTV Lunar terrain vehicle into continued CLPS missions, now we add satellites to that, we needed more floor space. And so we did that. And fortunately, the City Council was -- endorsed our presence here and is feeding our growth forward.

Got it. That's really helpful. And if I could squeeze a quick housekeeping one in. I was wondering what's driving the pushout on the IM-2 success payments. I think last quarter, you talked about there was some -- a bunch of like different NASA directorates needed to be closed out, and that was a bit of a headache. Is that sort of still what's driving the delay there?

Yes. This is all just a function of negotiations back and forth and data packets flowing back and forth and getting the procurement and contracts language all lined up. We're close to about $6 million worth of success payments. We're -- finished the negotiations. Those will be in, in quarter 3. We have confidence in. It's just waiting on that invoicing, getting all the Ts crossed and Is dotted. So we're confident that, that's coming in at this point. It was just a matter of crossing the quarter boundary.

Our next question comes from the line of Jeff Van Rhee with Craig-Hallum.

Most of mine have been answered. Just maybe a couple that I still wanted to get to. In terms of the KinetX acquisition, can you just expand a bit more on their constellation experience? I'm not as familiar with them in terms of what they might have done in the past. But give me a sense of their scope. You seem very excited about the skill sets you're bringing there, maybe the splits, commercial and defense backlog presumably is relatively small, but just some incremental color there would be great.

Well, they have worked in specific constellation management. They have some constellation management software that's proprietary, and they're involved in commercial Iridium satellite constellation management, as well as a national security customer in MUOS is the program that they run for national security space. And so that global satellite constellation management is interesting. And also that precision trajectory and precision navigation in deep space is a very, very specialized skill that we have in-house, but we need more of. And so we've worked closely with them. I think there's Mission 1 and Mission 2, they were incredibly helpful in our orbit determination to know specifically where we were in space, how we entered lunar orbit, where we were above the surface when we did Power descent. And so this is a natural match to put the 2 companies together. Their CEO and myself talk a lot about a good fit, and it's in the family and it's culturally aligned, so it made a lot of sense. We talked about the revenue that was all trailing revenue 2024. Looking forward, they do have a growth pipeline we're talking about. I think what matters most is the $10 million roughly in revenue that they have trailing and a 14% EBITDA, that's nice. It's what we do together that complements us going forward with the business that we have to make sure that we deliver for this customer and provide the greatest level of service that we can.

Helpful. And on NSNS, you touched on this a bit earlier, but if you kind of revisit there, I'm just curious on the long-tail revenue opportunity once you get into the permitted charges and sort of how margin opportunity once they're in the air. And as you're seeing the competitive landscape evolve with potential substitutes and other efforts to try to encroach on that opportunity. Just talk about your position there, the certainty from your vision -- from your standpoint of those future revenue streams, barriers to entry. I don't want to spend too much time there, but it just would be helpful if you would expand there a second.

Yes. What's unique is, we went through a competitive process already. We ended up being the sole awarde of the near space network. To our knowledge, there's no on-ramp opportunities for that. What it is, it's a capability that we have to put in place for the U.S. government and operate -- own and operate commercially. That's an incredibly wide and deep moat for Intuitive Machines. So we look at -- we work closely with the customer in terms of the ground segment, where we're putting in place tri-band dishes, X, X and K – XS and Ka band and ground segment antennas around the world. As soon as we get that first milestone done to have a fully operational XS and K tri-band antenna on earth, operational task orders will come to offload some of the deep space network. So we know that's where the higher-margin revenue occurs. Also with the first satellite in and around the moon that we are holding Mission 3 for, that's so important to fly that satellite around the moon. We'll have operational task orders kick in to sell data and navigation services back to the government from that satellite, which is the only U.S. satellite communication satellite around the moon. We'll show interoperability with the Lunar Reconnaissance Orbiter, which is the other U.S. satellite around the moon. So we know there's targets of opportunity for operational task orders. We just got to get the hardware built and in place around the moon.

And your final question comes from the line of Josh Sullivan with Benchmark.

Just maybe broader picture, how are you thinking about the 3-pillar approach that you've talked about, the acquisition of KinetX, the NSNS margin profile long term is pretty attractive. Is there a pillar you're leaning more towards as we think about Intuitive longer term?

Josh, thanks for the question. Yes, you can tell kind of the emphasis we're putting where you see that center pillar of data services, data transmission data services move to the forefront. The hard things first are landing on the moon. Landing on the moon, though, is an annual cadence of missions, and it's this binary event of success or failure every year and everybody holds their breath that you land on the moon. But while we've done that, we've built some incredible capability and this long-term sustainable infrastructure service provider is where the company is going. This long-term view, investing in ourselves, investing in satellites, pushing to the forefront data services and data transmission is creating long-term shareholder value. And I hope people realize that, that this is not about this quarter. This is about the investment in ourselves to build out a capability that allows us to get to a sustainable service model that allows for multi-years and multibillions of dollars worth of service revenue in the future.

And I will now turn the call back over to Steve Altemus for closing remarks.

Well, thank you, everyone, for joining today's call. We're looking forward to executing our growth opportunities as we expand our footprint here in Houston Spaceport, while also expanding our capabilities with the KinetX team. Let me be the first to welcome the KinetX team to Intuitive Machines. And thank you again. Operator, that is all.