Sidus Space, Inc. (NASDAQ:SIDU) Q3 2023 Earnings Call Transcript November 15, 2023
Operator: Ladies and gentlemen, good morning, and welcome to the Sidus Space Third Quarter 2023 Earnings Conference Call. At this time, all participants are in a listen-only mode. A brief question-and-answer session will follow the formal presentation. [Operator Instructions]. As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Walter Pinto, Managing Director, KCSA. Please go ahead.
Walter Pinto: Good morning, everyone. And thank you for joining us today for the Sidus Space third quarter 2023 earnings conference call. Joining us today from the company is Carol Craig, Founder and Chief Executive Officer; and Teresa Burchfield, Chief Financial Officer. During today’s call, we may make forward-looking statements. These statements are based on current expectations and assumptions, and as a result, are subject to risks and uncertainties. Many factors could cause actual results to differ materially from the forward-looking statements made on this call. These factors include our ability to estimate operational expenses and liquidity needs, customer demand, supply chain delays, including launch providers and extended sales cycles.
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For more information about these risks and uncertainties, please refer to the risk factors in the company’s filings with the Securities and Exchange Commission, each of which can be found on our website, www. sidusspace.com. Listeners are cautioned not to put any undue reliance on forward-looking statements. And the company specifically disclaims any obligation to update the forward-looking statements that may be discussed during this call. At the conclusion of our prepared remarks, we’ll be answering questions submitted in advance. If we do not get to your questions within the time frame allotted for this morning’s call, please email our team at sidus@kcsa.com. At this time, I would like to turn the call over to Carol. Carol, please go ahead.
Carol Craig: Thank you, Walter, and welcome, everyone. I’m pleased to provide an update on Sidus today at a truly pivotal time for both our company and the industry. We continue to execute our strategic plans as an innovative, multifaceted space and data as a service company, and we’re laser-focused on progressing towards the launch of LizzieSat. We expect the launch of LizzieSat to be a significant catalyst for our business as we believe it will provide us with the opportunity to develop additional high-margin revenue streams, driven by the sale of both data and payloads on these missions. We expect the enhanced capabilities of these satellites to provide space infrastructure as well as critical data that will create a high-margin, are rapidly scalable recurring revenue business model.
The company is continuously working to secure agreements that will provide us with a predictable business model. Our goal is to secure additional high-margin revenue generation opportunities through the revenue streams that we will develop even following our LizzieSat launch. As we move towards 2024, we are targeting three areas that we feel will positively impact the share price, both in the short-term and the long-term: first, ensuring the success of not only the initial LizzieSat launch but subsequent satellites as well, second, securing agreements to sell the data that we plan to collect from this constellation and as mentioned above, we believe these agreements have significant revenue generating potential and third, securing agreements to sell technology payload space on our upcoming LizzieSat missions and then working at the same time to convert those payload customers to data customers.
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Q&A Session
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We recently completed initial environmental vibration testing of the LizzieSat satellite, which is one of the critical steps necessary to validate LizzieSat. We’ve been concentrating on ensuring all necessary pre-launch requirements are met so that we will be well are prepared for this transformative milestone. We’re also continuing to secure additional data customers. We believe that data as a service will provide some of the highest margins of our revenue streams, which also include technology hosting aboard our LizzieSat and mission-critical hardware manufacturing. Delivery of that data is expected to begin 30 days after the deployment of LizzieSat. For our Data as a Service offering, we’re targeting gross margins of 75% to 80%, similar to Software as a Service margins.
Our mission-critical hardware manufacturing, which we’ve been successfully operating for over 10 years, targets gross margins of approximately 25%. During the third quarter, we took the significant step of acquiring the assets of Exo-Space, a cutting-edge California-based firm specializing in edge artificial include intelligence software and hardware for space applications. The transaction provides the opportunity for us to enhance our presence in the earth and space observations market by providing actionable solutions for our customer’s needs rather than just raw data. The acquisition of Exo-Space was highly complementary to our existing business model and also in line with our existing strategy. The additional revenue-generating opportunities that Exo-Space’s technology presents are enhancements to our prior offerings that will position Sidus to compete in the current market where AI-led data-driven services give us a significant competitive advantage.
And in addition to raw data by applying our onboard FeatherEdge AI, near real time actionable intelligence will be available to our customers. This combination of advanced data collection harnessed from our adaptability set provides organizations with the heightened decision-making capabilities, and this leads to increased confidence, precision, and accelerated insights for those customers. Sidus augments this distinctive and unique data collection with adaptable analytics tailored to our customers’ own needs and then also offer that subscription-based access across multiple industries. Few companies know how to process data and with the additional AI functionality, Sidus is able to provide not just data but that critical information that provides answers to our customers.
This offering can be a standalone service as well as part of another service model. Through these decisive steps to integrate AI, we’re leveraging the potential of AI technologies within our own service offerings, which expand our services, amplifies our market presence, and then also our customer relationships. One advantage of our business model that I highlight our flexible, agile service offering that allows us to control our production and our launch cadence in coordination with customer demand. As customer requirements and the industry landscape changes, we’re able to strategically evaluate varying scenarios related to launches and orbits and focused on the most economical solutions that support our path to profitability. And when combined with the inclusion of additional sensors and enhanced AI capabilities, we expect the new orbits to add value as we get closer to initiating these launches and developing these new high-margin business lines.
And therefore, our agile model ensures we’re lining up our launches with the most valuable demand and doing what’s in the best interest for company and shareholders. We also continued to progress on accelerating our manufacturing plans, developing mission-critical hardware manufacturing to support multiple large organizations. During the third quarter, we continued to establish relationships with new and existing significant, and customers and we announced several contracts that we were awarded, further validating Sidus’ ability to deliver mission-critical hardware to our key partners and vendors. Earlier this month, we announced that we had signed an additional agreement to sell data that we expect to collect from LizzieSat. We believe we will continue to expand these opportunities as our constellation grows.
While we’re often prohibited from releasing the details of our client agreements, we plan to continue to update our shareholders on our progress as we build these new revenue streams that will result from the launch of our LizzieSat constellation. And in another complementary strategic move, we recently signed a contract to provide services to a U.S. owned company in support of their commercial lunar program. This new contract will provide another revenue generation opportunity for the company, and while the lunar contract will not replace our lower earth orbit strategy, we do recognize the potential importance of lunar missions to build an infrastructure that enables human permanence on the moon and a transition to commercial operations past lower earth orbit and onto more distant destinations.
