SPIR - NYSE

Greetings, and welcome to the Spire Global Fourth Quarter and Full Year 2024 Call. At this time, all participants are in a listen-only mode. A question-and-answer session will follow the formal presentation. [Operator Instructions] And as a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Ben Hackman, Head of Invest Relations. Thank you, Ben. You may begin.

Thank you. Hello, everyone, and thank you for joining Spire's fourth quarter and fiscal year 2024 earnings conference call. Our earnings press release and related SEC filings are posted on the company's IR website at ir.spire.com. A replay of today's call will also be made available. With me on the call today is Theresa Condor, CEO, and Tom Krywe, Interim CFO. As a reminder, our commentary today will include non-GAAP items. Reconciliation between our GAAP and non-GAAP results, as well as our guidance, can be found in our earnings press release, which can be found on our IR website at ir.spore.com. Some of our comments today contain forward-looking statements that are subject to risks, uncertainties, and assumptions. In particular, our expectations around our results of operations and financial condition are uncertain and subject to change. Should any of these expectations 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 Theresa.

Thank you, Ben. Good afternoon, and thank you for joining us today. As we close 2024 and shift our focus to the opportunities ahead in 2025, the demand for Spire’s products and technology solutions continues to be strong. The increasing frequency and severity of extreme weather events, such as wildfires, droughts, floods, and hurricanes, amplifies the need for differentiated weather data and forecasts for our customers. Growing concerns around GNSS spoofing and jamming, border security threats, dark ship activity and illicit satellite phone use are driving shifts in global security strategies, sparking significant interest from a variety of customers in the critical government intelligence sector. By focusing on solutions that address the challenges of severe weather and global security, while providing proven on orbit capabilities for companies and governments eager to participate in the rapidly expanding space economy, Spire is strategically positioned for growth. In the weather and climate portion of our business, we expect further opportunities for government data purchases. There has been a decades-long shift away from in-house government programs to commercial services contracts, particularly with satellite communications, satellite imagery, and rocket launches. Today, anywhere from 50% to 60% of U.S. government budgets in those categories are used to purchase commercial solutions. In fact, the U.S. Space Force has described their acquisition strategy as exploiting what they have, buying what they can, and only building what they must. The purchase of commercial weather data from satellites is starting to follow this same path and will likely be accelerated by changes in the U.S. political environment. With some agencies having budgets of $1 billion to $2 billion for weather data, a small shift in building less to buying more can create meaningful opportunities for Spire’s space-based weather data. As severe weather becomes more common, scientists are highlighting how valuable radio occultation data is in improving the accuracy of weather forecasting. A numerical weather prediction study called the radio occultation modeling experiment was recently undertaken by a consortium of meteorology experts and demonstrated that forecast accuracy improves as more radio occultation measurements are incorporated. This particular experiment incorporated Spire data and showed forecast improvement with up to 35,000 radio-occultation profiles per day. The findings from the radio-occultation modeling experiment study will likely influence operational weather agencies such as NOAA in shaping how radio occultation observations are purchased for numerical weather prediction. While this research focused on one particular data type, Spire also offers a range of other valuable data sets, including soil moisture and ocean winds. We are also deploying advanced collection techniques like microwave sounders, which deliver important information to address the challenges posed by severe weather. Spire is continuing to enhance the company's weather modeling capabilities. Last year, we announced a collaboration with NVIDIA to integrate our radio occultation and proprietary data assimilation capabilities with NVIDIA's Earth-2 Cloud API. Building on this momentum, we recently introduced our AI-driven weather models, which deliver medium-range and sub-seasonal forecasts out to 45 days and run 1,000 times faster than traditional physics-based models. They are built on our proprietary data assimilation techniques and integrate data from our extensive satellite network, including atmospheric profiles, soil moisture readings, and ocean surface winds. Unlike traditional deterministic models, the AI models provide probabilistic forecasts, offering a range of potential weather outcomes rather than a single prediction. Our new AI models help companies better anticipate and effectively respond to weather disruptions. Accurate forecasts are especially important for industries such as energy and commodities, which can face significant operational disruptions and inflated costs due to unexpected weather changes. Beyond Spire's weather solutions, we are responding to heightened demand for our space reconnaissance solutions given the geopolitical environment. In the past month, the European Union, Germany, and the United Kingdom have disclosed their intent to raise their defense budgets. The UK has discussed plans to increase defense spending from 2.3% of GDP to 2.6% in 2028, coupled with an intention to drive industrial growth through support of onshore production. The EU has proposed an $840 billion plan to quickly increase defense spending, and Germany has voted to remove the debt ceiling to enable greater investment in defense. Spire is building satellite technology in the United States, Canada, the United Kingdom, and Germany, allowing us to offer local solutions as governments invest in sovereign defense capabilities. Spire expects increased defense and intelligence spending to drive a portion of our revenue growth in the coming years. We are seeing some near-term results already. Spire has been awarded a low seven-figure maritime data deal from a long-term Spire customer in preparation for U.S. government demand. We specifically decided to retain the U.S. government portion of the maritime business given the near-term opportunities. We have also received an award from a defense organization for Spire Aviation Data, which is an expanded use case for what is normally considered a civil safety data set. In February, we were awarded a CAD72 million contract from the Canadian Space Agency for the wildfire sat program. This win is an example of governments investing in sovereign space capabilities to support their needs and a new willingness to prime with commercial companies like Spire. To better support the dramatic inbound interest in defense and intelligence applications from governments around the world, we officially established a space reconnaissance business unit with dedicated resources to drive our solutions and growth in this emerging global addressable market. What began as an R&D initiative using existing payloads in orbit has evolved into a scalable commercial offering delivering solutions to customers worldwide. In addition to winning new business, Spire is intensifying its focus on efficiency, productivity, and standardization. We have established a dedicated program management office that is enhancing program governance and accountability and fostering greater cross-functional collaboration among engineering, operations, and business teams. The program management office is optimizing our resource allocation processes while enhancing our risk management frameworks, eliminating waste and elevating product quality. Our satellite development and manufacturing processes have been integrated to emphasize design for manufacturability and continuous improvement in satellite production. All of these initiatives result in shorter project timelines, improved market responsiveness, and higher margins that enhance shareholder value. These initiatives are being driven by our new Chief Operating Officer Celia Pelaz in cooperation with our Chief Transformation Officer, Gabriel Oehme. They are pivotal improvements as we scale our capabilities for growth while driving meaningful improvements to our revenue and cash flow. Recently, we announced that Ali Engel will join Spire as our new permanent CFO effective tomorrow. Ali will be based out of our DC office. She joins the Spire team after most recently serving as CFO of Lease Accelerator, a software as a service company that was similarly sized to Spire. Prior to that, she was the CFO of Gannett, a public diversified media company best known for USA today from 2015 to 2020. Ali has a track record of navigating complex challenges in rapidly evolving industries, experiencing complex hardware deployments, and years of judgment in navigating the financial reporting and control requirements of a public company. We are excited to welcome her to the Spire team. Spire is continuing to pursue a dual track process in closing the sale of the maritime business. We speak with the buyer on a regular basis to resolve transition questions working towards a transaction closed in the next two to four weeks. At the same time, Spire is continuing to move forward with the legal process and to preserve our rights. The court has set the trial date for May 28th. Over the past month, we have successfully completed the restatement process, launched new satellites, raised additional capital, hired an experienced CFO, and signed important new business related to our focus areas of climate and global security. Spire remains intent on driving profitable growth, enhancing operational efficiency, and ensuring reliable execution. With that, I will turn it over to Tom.

Thank you, Theresa. I would discuss non-GAAP financial measures unless otherwise stated. We have provided a reconciliation to GAAP to non-GAAP financials in our earnings release, which is available on our investor relations website and should be reviewed in conjunction with this earnings call. Our 2024 results, almost in all cases, exceeded the high end of the range of the preliminary results we announced during our third quarter call. We had another successful year of methodically progressing on our trajectory towards profitability and free cash flow positivity with non-GAAP operating loss, adjusted EBITDA, cash flow from operations, and free cash flow all improving on a year-over-year basis. GAAP revenue for the fiscal year 2024 was $110.5 million, increasing 13% year-over-year. This growth was primarily driven by increased annual reoccurring revenue business combined with growth in revenue recognized from space services contracts. The variance in revenue sequentially was impacted by the treatment of certain space services contracts, but as those older contracts terms expire, we expect to have our revenue stabilize into more traditional subscription-based model in the future. ARR at quarter end was $112.2 million, up 5% year-over-year. Non-GAAP operating loss improved 21% to negative $30.4 million for fiscal year 2024, and adjusted EBITDA improved 36% to negative $16.1 million for the fiscal year 2024. These results continue to reflect the underlining operating leverage of our business model. We have a diversified portfolio of solutions to sell, collecting our unique space-based data once and selling it an unlimited number of times while leveraging our headcount and space-based technology across all these solutions. Moving now to the balance sheet. For 2024, we utilized $45 million of free cash flow, which was a 16% year-over-year improvement. Just over half of our full year free cash flow utilization occurred in the fourth quarter as expenses increased significantly for accounting, consulting, and legal costs associated with the restatement and the maritime transaction. We ended the year with cash, cash equivalents, and short-term marketable securities of approximately $20 million. During the first quarter of 2025, we raised $40 million of gross proceeds and a private placement to bolster our cash position while we continue to work on closing the maritime transaction. Now turning to our outlook. Given the timing variability to closing the maritime transaction and the associated impacts to annual revenue and expenses, at this time we'll only be providing full guidance for the first quarter of 2025. We will though share an expected growth range for a pro forma view of the remaining business excluding the held-for-sale maritime business. We expect to provide full year 2025 guidance shortly after closing the maritime transaction. For the first quarter, we expect revenue to range between $22 million to $24 million. For the full year, we expect revenue excluding the held-for-sale maritime business to grow at approximately 12% to 17%, with the larger growth coming in the second half of the year. These estimates take into account the impact of our revised revenue accounting for our space services contracts that we explained during our March 3 earnings call. The timing of revenue in 2024 and 2025 was and will be impacted by these space services contracts with having some of the older contracts with less deferred revenue expire and the newer space services contracts having revenue deferred until we complete our pre-space portion of the contract terms. This timing issue created a few quarters with limited space services revenue from the fourth quarter of 2024 through the second quarter of 2025 while we launch and commission satellites and begin to deliver the data to those customers. We expect to see that revenue will start to flow in as we head into the second half of 2025 and into future years. As we look to 2026, we expect to see approximately 20% revenue growth, excluding the held-for-sale maritime business. We expect to finish Q1 2025 with ending ARR ranging between $128 million and $130 million, which represents a $16.8 million sequential increase quarter-over-quarter and a 7% year-over-year growth rate at the midpoint. The Maritime held-for-sale of this ARR is approximately $42 million. On a GAAP basis, we do expect to have higher than normal level of accounting, legal, and financial advisor fees in the first quarter due to completing our restatement process, managing the maritime transaction, and successfully completing $40 million of funding. We anticipate Q1 non-GAAP operating loss to range between negative $11 million and negative $13 million. For the first quarter we expect adjusted EBITDA to be in the range of negative $7.5 million and negative $9.5 million. For non-GAAP loss per share we expect a range from negative $0.63 to negative $0.65 for the first quarter which assumes a basic weighted average share count of approximately 26.8 million shares. We expect to end the first quarter with cash, cash equivalents, restricted cash, and short-term marketable securities of $34 million to $36 million, up $15.3 million quarter-over-quarter at the midpoint. Now I'd like to open the call up for questions.

Thank you. We will now be conducting a question-and-answer session. [Operator Instructions] And our first question comes from the line of Austin Moeller with Canaccord Genuity. Please proceed with your question.

Hi. Good afternoon, Theresa and Tom. So my first question here, to what degree should we expect the -- most of the revenue growth being in the second half has to do with the continuing resolution and the government's inability to issue new program start contracts until a final budget is put into place.

Thanks, Austin. Yes, I'll start and I'll let Theresa add in if she wants to. As far as the growth in the second half, a lot of it's just the flow out of the committed revenue that we have on the books. So we have $68 million of revenue that we've got committed that will flow out. We're running about a 70% subscription-based percentage for the 2024 year which we don't expect to change too much in 2025. So a lot of that revenue flow out is all the existing contracts and the flow through of business that we already have. Obviously, for the bookings and other activities, maybe I'll let Teresa answer the question just about how we see it progressing later in the year for how we book new stuff. But most of that revenue will start to flow more into 2026 rather than into 2025.

Yes. Hi, Austin. I think the only other thing that I'll add there is that, as we look to the second half of the year, of course, we're seeing a lot of increase in budgets in other places other than the United States. And that's something that is going to be driving growth in the second half of the year. And we do, of course, expect that certain changes in the administration, especially as it relates to working more fully with commercial companies on commercial data buys is something that also starts to increase in the second half of the year.

Okay. And just a follow-up question. Should we expect customers that are using the new AI weather models and associated data to pay a higher subscription fee? And what is the gross margin profile look at on like subscriptions using AI versus the previous numerical models?

So I don't know that you should necessarily expect dramatically different gross margins when we look at it on a product by product basis. I think really the way to think about it is just overall for the company Spire and the trajectory of our gross margins, which has always been to collect the data once and sell it multiple times and do all the analytics on it. We just released those AI models and so we'll go into the monetization phase of that on a go-forward basis.

Yes. And Austin, you can continually just expect that continual upward movement on our gross margins. We did reset the bar with the restated type of numbers now. So it's a little bit lower than it was before with how the restatement flowed and worked. But you'll continually see that leverage business model as we've got the diversified solutions to sell, more and more that revenue keeps coming in, and then that leveraged infrastructure with our head count and with the technology side being very leveraged across all those solutions. So you'll still continually see that upward movement as we go into this year and into next year.

Great. That's very helpful. I'll pass it back there. Thanks.

Thank you. Our next question comes from the line of Rick Prentiss with Raymond James. Please proceed with your question.

Hey, thanks everyone. This is Brent Penter on for Rick. First question, appreciate the update on the maritime sale. Can you just give us a little bit more color on your level of confidence in Track 1 in the next kind of two to four-week closing timeline? What milestones need to happen? And is your partner cooperating as expected in terms of weekly progress reports and whatnot?

Hi. What I can share on Track 1, is that we are very regularly speaking with the buyer. We are regularly working with them on how they're planning to run the maritime business post-close and all the details around the transition services agreement. So that is very regular and intense engagement between the teams. Coming out of all of that interaction and their continuing voice to us that they intend to close this transaction as soon as possible is why we've continued to stick with the timeline that Peter mentioned in the earnings call back about a month ago where he said this was six to eight week timeline. And so we're reiterating that to be now a month later, a two to four week timeline. There's nothing more I can say at this point. We continue to hold that this transaction should have already closed and are working closely with the buyer in that regard. At the same time, we are full force pursuing the legal pathway. And as you know, we have a May 28th court date. So both of those are coming quite soon.

Got it. And then appreciate the guidance out to 2026. What gives you the confidence in that and accelerating growth next year? I appreciate the second half-weighted part of it. But what areas are really driving that and what portion of that is locked in contractually?

Yes, so Tom, do you want to start with the portion that is locked in contractually and I'll talk more about business outlook overall?

Yes, so we do have, and we have this in our filing which can get to the details of the split out -- splits by year, But there's $216 million that we have from committed customer revenue. They're all binding contracts about $68 million of that will flow into 2025. So that's why we got the comfort level on that revenue flowing in. Like I mentioned, we have a good subscription model that's flowing out the revenue for the rest of this year. Plus, we just came in our guidance for the midpoint of $129 million of ARR ending the first quarter. That means that we will also have that flow out, flowing into the rest of this year, and then that will also continue into 2026. We had 20 satellites launch in the first quarter, and with those launches, that's what's going to trigger some of the space services revenue also to kick in. Most of those type of contracts are in a pre and post phase type of revenue where you can't take any of the revenue during the pre-space portion and you take the revenue, you defer it up until the point that you actually start the satellites go up in space, the data starts being collected and given to the customer. And then we then spread the revenue out over roughly a three year span. So that revenue is now going to start kicking in. And that's why we have the later half of this year having the higher revenue. And then that revenue flows all the way out into the future also. So that's our confidence, confidence level on the growth rates for this year and why we also expect that to expand into 2026.

And if I can just add on the kind of business outlook as we get into the second half of the year and into 2026, it's really repeating some of the comments I made during the first portion of the call, which is really the increased focus on defense and intelligence budgets that we're seeing, particularly in Europe, but also in urgency in other parts of the world as well, where Spire is signing and closing contracts, not always ones that we can talk about. And we continue to think that that's going to be a growth area for us. The other thing that we mentioned is the increased focus of the current administration in the United States to work more fully with commercial companies on commercial services contracts. And so, we do expect to see a change in how procurement is done in that regard. And then the final thing that I want to mention is the increased focus on sovereign capabilities that we're seeing from a lot of countries. You're seeing it out of Canada. You're also seeing out of the UK and out of Europe where these countries are no longer looking at just purchasing defense capabilities from US companies who build all the technology in the United States as used to have them. And they're focusing more on how can they work with companies that do production locally, as well as having management and control locally. And Spire is really well positioned to take advantage of these opportunities because we're already set up like that.

Got it. And then last one for me on free cashflow. You all had talked about summer 2024 as the turning point. And then you did, you achieved it, went positive, but back negative again and a lot of moving pieces in there with the legal costs and the deal costs, but also potentially being debt-free. So how should we think about what free cash flow looks like from here in terms of going positive again, and then staying positive and ramping from there?

Yes, I think if you look at the first quarter, it's going to be very similar to the fourth quarter as far as obviously the extra set of expenses in there with the legal, we finished up the restatement so we had some extra accounting in the first quarter. And then we also did some additional funding which triggered some fees in there on the financial advisory side. So first quarter's got a bit more of that. As Theresa mentioned, the transaction closing expected in the two to four weeks. Of course, then we'll have a little bit more expenses as we head into the second quarter around the transaction itself. So there will be a bit more of that that will affect the free cash flow. But if you take away all that noise and the abnormal activity, it's going to be back to the normal flow and the more normal track that you were seeing with a continual progression towards free cash flow positive because of, again, having that diversified set of solutions to sell multiple revenue streams coming in collecting that data one selling it as many times as possible and then having the leveraged cost structure built around that. So it just will keep allowing us to get to that. Now when the transaction goes through, that will bring the revenue down a bit and then obviously there's a build back up again to get to the free cash flow positive because the billings will drop obviously and the revenue will flow down. So we'll have a little bit of a build back up again. But we're still the same functionality, the same foundation of what we've had in the past on that path, profitability will still be there.

Got it. Thanks, everyone.

Thank you.

Thank you. Our next question comes from the line of Jeff Meuler with Baird. Please proceed with your question.

Yes. Thank you. So the guidance for Q1, that's including commercial maritime. So it's something like $12 million at the midpoint excluding commercial maritime. Is that correct for revenue?

Yes, the first quarter does include the maritime transaction, so we do have that built in there.

So I think that then implies that you're going from somewhere around that $12 million figure that might not be precise, but up to $21.5 million per quarter over the balance of the year. Just maybe a different way to ask the question that you were asked earlier, but that's a pretty big step up. So how much of that is kind of the air pocket related to space services [RevTrak] (ph)? How much of that is in the hand? How much of that is based on pipeline conversion? It just seems like a pretty sizable step up.

Yes. So as I mentioned, there is that gap in time where we had some of the older contracts that had revenue that was more spread out evenly throughout the contract end. And now all of the newer contracts are this pre and post-space services type contracts where we have to defer the revenue. So we got this gap of time where we're really not getting very much revenue at all. If you looked at the fourth quarter subscription percentage, it was about 90% when we did the full year around 70%. So really there was not much of that other chunk of revenue that we're normally getting in. And there's a similar trend in that for the first quarter, as I mentioned. We're starting to come out a little bit in the second quarter, but then the third and fourth quarter, we really kick in the gear with the higher contracts. We signed the Canadian Space Agency deal in the first quarter. That's going to drive significant revenue increases as we go later in the year. We had 20 launches, satellites launched. Now all those space services contracts will start. Those customers now will be getting the data and that's going to drive the kick up in the space services and then the other businesses will continually flow as the growth we had projected for them.

Got it. And then just with the pullback, I guess in the weather balloon launches from the weather service, can you just kind of talk about, like, the cost effectiveness of maybe RO profiles relative to weather balloons or other methodologies, radar or whatnot? So, just maybe cost effectiveness and statistical lift or to what degree it's orthogonal, et cetera.

So, there has been analysis done on the cost of launching weather balloons. And I think I don't have the exact numbers on hand, but based on all the infrastructure that has to happen and the type of pricing per RO profile, radio occultation soundings are very cost effective for the government when they're purchasing vertical soundings. Now, you can't really compare one for one what you get from radio occultation and what you get from the weather balloons. Some things overlap in terms of measurements, some things don't. What I would say is that, all of this contributes to the demand for commercial services that companies like Spire can provide in a cost-effective way. And that is not just radio occultation. It's the other types of data sets that we can provide, as we've mentioned, talking about soil moisture, talking about ocean surface winds, starting to talk about microwave. And I think there is a demand and expectation going forward that commercial companies will be providing more of these data sets in the future.

Got it. And then last one for me, the 20% pro-forma growth that you're talking about in 2026, does that contemplate or require increased investment using some of the divestiture proceeds, or is that just kind of like how you kind of view a normalized growth rate without that increased investment for the [indiscernible] business? Thank you.

This is going to be on ongoing normal business growth. I think we're going to want to continue to do more investment on the sales and marketing side to take advantage of these demand opportunities. But it's not an expectation of some kind of brand new product, brand new infrastructure that is out of the ordinary.

Okay. Thank you.

Thank you. Our next question comes in the line of Erik Rasmussen with Stifel. Please proceed with your question.

Yeah, thanks for taking the questions. Maybe I'll just ask it a different way. Your guidance for this year has 12% to 17%. I'm just trying to understand, though, obviously that growth rate is a little bit lower and you've sort of lost some momentum. But if you had to sort of speak to the two areas where you're probably getting the headwind. One is, lost momentum with customers based on all the different things you guys and challenges you guys faced last year and with the push out of the close of the deal. And versus the headwinds from the restatement, it seems like that's about a $10 million headwind in any given year. Just help me frame sort of -- balance the two in terms of how you arrive at that 12% to 17%.

I think I can start, Tom, and then if you want to add to it. So we did have quite a bit of disruption in the second half of 2024 and now going into the first half of 2025, which is a product of the restatement and is a product of the sale of the maritime business and how that impacted that business, how it impacted the timing even of some of our other contracts, such as the Canadian Space Agency one that had some delay because of the maritime transaction and the entity that we were going to contract with. And then, of course, there's still ongoing disruption as we work to close out the sale of the maritime transaction. So those have had an impact in the early portion of this year. And as we go into the second half of the year and everything starts to get back to the focus on execution, we start to also see some of the benefits of what the new executive team is doing in terms of efficiency and in terms of product quality and we start to see revenue growth kick in as we've already talked about from all these satellites that have been launched in the early part of this year?

Yes, and just some quick maths around there. I know a lot of this stuff is in what we just described and also in the 10-K, but just to help you with the math. If you look at how we got to the baseline number for 2024 on a pro forma basis, revenue was around just over $110 million. We mentioned that $43.5 million of that was roughly coming from the pro forma held for sale business. So you get about a $67 million pro forma number for 2024. You build the 12% to 17% on that. Another way to triangulate though, to get that -- how that math also works is, if you take our ARR, we ended the year at roughly $112 million ARR. We're saying that we're going to end the first quarter on the midpoint of $129 million of ARR. If you average those two numbers out, you get about $120 million of ARR, and then we said the maritime business is about a $42 million held for sale maritime business. So you subtract that out you're getting that around a $78 million number which is the high end of our range.

That's helpful. Great. And you are in an EBITDA loss again just because of all the noise, but when do you think you could actually get adjusted EBITDA positive? You're looking at about $9 million to $7 million, so $8.5 million negative in Q1. But can you actually see positive adjusts at EBITDA sometime in the second half of the year?

As we mentioned, we didn't put out the guidance on this stuff because we want to make sure we just get through the transaction and we have clarity on all those details. But I will say the trajectory that we were on prior to some of this noise and other activity that we had, as you mentioned, we were on that path. We were heading towards free cash flow positive. We were heading for the profitability also on an adjusted EBITDA standpoint. Again, because that structure is still 100% there of having the diversified solutions and having the leverage infrastructure. So we do have that path that we're going to get there. Again, we didn't guide for all the components, but the fundamentals are there. And as that revenue keeps growing, we're going to get to that point. So again, we just have to build back up the revenue to get to the levels that we had when we were getting to that point.

Great. Maybe just specifically on the eight satellites that were launched recently for Aurora Tech. Can you share with us how those satellites are performing, any observations thus far?

Satellites are going through the checkout and commissioning process like normal. So I think there's nothing to share at the moment other than they're going through what is expected process.

Great. Thanks. Thanks for taking the questions.

Thank you. Our next question comes from the line of Jeff Van Rhee with Craig-Hallum. Please proceed with your question.

Great, thanks for taking the questions. A few for me. Tom, on the Q1 outlook, can you put a little finer point around how much unusual is in there? Maybe I can back into it. You gave quite a few data points for Q1, but just a little finer point on what is your estimate of what's unusual in Q1?

You know what? The Q4 and the Q1 are going to be very, very similar. If you kind of look at the numbers, everything's like slightly better than the Q4 numbers, but the flow of how those extracurricular activity is very similar to the fourth quarter. The only bigger difference there is that the revenue -- we're doing better on the revenue for the first quarter guidance than we had for the fourth quarter. That revenue flow down is almost exactly the same. You get to the same sets of margins. So the extracurricular expenses is very similar. We stopped the restatement type of expenses, but then we had a funding expense for getting the $40 million of gross funding into the quarter. So we had that a little extra bit in there. And then the maritime -- the managing the maritime transaction had very similar expenditure in the fourth and the first quarter.

Okay. And maybe just to give you an opportunity, I think in terms of the forward years we all build our models, since you still have maritime, I'm presuming we'll all have it in there in our outlooks until you close the sale. How would you want us to think about a plug figure for Maritime for 2025?

Yes. I mean the flow has been pretty similar in that business as far as the quarterization. So we did give an annualized number for 2024. So I think just applying that, I mean, the business isn't soaring while it's in this held for sale moment. So I would assume a very similar type of trajectory as you kind of have for Q1 and then two to four weeks to kind of model out for the coming quarter here in Q2.

Okay. And then, Theresa, just a question on [Talus] (ph) and obviously if you've had some other whales that you've either worked on or had gotten to some degree of a finish line and then presumably the situation with the non-current financials and the Kepler sale and you referenced all these things kind of throwing it back into the air. Presuming we get this Kepler transaction closed in four to six weeks, the debt situation is taken care of, any reason to think things with transactions like Talus have changed other than just simply a pause to wait until you get past these hurdles, namely, are these major contracts, have they gone away or been permanently lost? I'm thinking specifically to Talus, but if you can comment there or a little more broadly, it'd be great.

I would say in general, things have not gone away. And you can see that from the Canadian Space Agency contract that we keep referencing. And that is with a marquee name that has a lot of focus and publicity behind it and we can win deals like that and we'll continue to do so. When it comes to Talus, as you know, we announced last year that we had started the very beginning kind of phase of that contract, which was related to the design of the satellite architecture and constellation. We continue to meet very regularly with Talus as well as the wider consortium on that project related to the next steps and the timeline. Tied in closely with that is the work that we're doing on [Uri Aloe] (ph), which is the GNSS independent civil aviation surveillance demonstration that we've also talked about in the past. That one is deep in execution mode, and we're continuing to work with Talus as well as the consortium on what that looks like as a follow-on phase that will be discussed at the upcoming European Space Agency Ministerial.

Okay, great. And last one for me then also for you Theresa on the -- you mentioned the space reconnaissance business unit dedicated resources started as an R&D effort now a scalable unit. Maybe a little more emphasis there than I had expected or maybe you could just flesh that out a little bit more. What's changing there? Tell us about this unit and how we got to this point.

Yes, so I think you've probably heard us talk about radio frequency geolocation a number of times in the past. And so, we've over probably the past two years have started to take assets that are in orbit that are already there doing things like the weather data collection and starting to operate them in a different way and then do a different type of processing on it to be able to do things like detection of GNSS jamming and then geolocation. And so as we started to see growth in that market, we started to see greater urgency of demand for that type of data, especially as the geopolitical situation has continued to change. And at the same time, there are very few other players that are able to collect this type of data in the commercial market. And on the government side, this has been listed as one of the data types for commercialization. It started off with kind of large purchases on the satellite imagery side, and this one is on the list, so a little bit far behind from imaging, but we expect to be coming up, and they've already started buying, and that will grow in the future, as well as the demand that we're starting to see from non-U.S. type of buyers. So we've made the effort to take this from an R&D initiative and really put it together so that the people working on it, the focus that it gets, the duty cycle that it gets across the constellation has a very specific focus that will allow us to keep growing and actually meeting the demand that we're seeing now in the market. And this is an area that I think is very interesting for Spire. It's one where there are not a lot of other players who have assets in orbit that are able to do this type of collection and is going to be an area that continues to grow for us.

That's great. Last one for me then. The commentary around increased defense spend, certainly a lot of talk and it definitely appears to be headed towards actual output in terms of incremental spend. I'm just curious if there's any other anecdotes or quantification in terms of what it's meant thus far in the pipeline? How that's just manifesting in your day-to-day discussions and cycles. Thanks.

Yeah, I think, of course, it's going to take a little bit longer in Europe as everyone is starting to commit greater defense funds to see how those actually start happening and flowing But one thing we have definitely seen, I would say, across the board and around the world, is much greater urgency in getting contracts signed and in understanding our capabilities and in seeing demo data of what we're able to do. So I think we have started to see the change already in what is coming.

Great. Thanks so much.

Thank you. Our next question comes from the line of Brian Kinstlinger with Alliance Global Partners. Please proceed with your question.

Great. Thanks so much. I think you made it clear the second half revenue ramp is from signed contracts and satellites that are going to have access to -- where customers all have access to data. So what I want to focus on is business development. I'm wondering, I know you haven't provided it, but can you quantify contract awards in 2024 for the non-maritime business, maybe what the pipeline is for 2025, and do you expect 2025 will be a stronger year of business development given the trends you talked about in Europe, or overall will it be weaker given what's going on in the U.S.?

I think in general I'm expecting it to be stronger on a year by year basis. We are always having a growth in sales, which of course you then start to see as growth in the revenue numbers. So it will be greater order intake and greater sales expectation for 2025, which is something that we always see on a year-on-year basis.

[Multiple Speakers] No, I was going to say, just to add on. I mean, obviously this growth is not only going to flow in from the space services side, like we mentioned with the contracts now starting to flow in, but as Theresa mentioned, the RFGL area is going to see, obviously, pick up and growth over the course of time, the more and more satellites we launch that have that capability, the better opportunity we have on the revenue front with that avenue, too.

And I think your other question, Brian, I think we're going to see this on both sides of the pond.

Great. Thank you.