Spire Global, Inc. — Q2 2023 Form 10-Q
Reporting period: Quarter and six months ended June 30, 2023. Unaudited financial statements; monetary amounts below are USD millions unless stated otherwise.
Business context and performance
Spire provides space-based data and analytics across maritime, aviation, weather and Space Services, using a constellation of more than 100 satellites. Q2 revenue grew 37% year over year, driven by new customers and expansion within existing accounts.
- ARR at June 30 was $112.8 million, up 32% year over year. The company reported 785 ARR customers and 813 ARR solution customers. Q2 ARR net retention was 112%.
- Remaining performance obligations were $191.9 million; Spire expects to recognize 35% over the next 12 months and 65% thereafter.
- Q2 highlights included an eight-satellite constellation agreement with OroraTech and a renewed, expanded NASA contract valued at $6.5 million for one year.
Financial results and liquidity
| Metric | Q2 2023 | Q2 2022 | Six months 2023 | Six months 2022 |
|---|---|---|---|---|
| Revenue | $26.5 | $19.4 | $50.7 | $37.5 |
| Gross profit / margin | $16.9 / 64% | $9.8 / 51% | $30.7 / 61% | $18.0 / 48% |
| Operating loss | $(11.0) | $(16.4) | $(25.5) | $(36.4) |
| Net loss | $(16.3) | $(38.3) | $(33.9) | $(50.1) |
| Adjusted EBITDA, non-GAAP | $(3.0) | $(7.3) | $(9.8) | $(17.0) |
- Q2 subscription revenue was $19.4 million, or 73% of revenue, versus $13.2 million, or 68%, a year earlier. Six-month subscription revenue was $38.2 million, or 75%, versus $25.5 million, or 68%.
- Six-month operating cash use was $22.6 million, compared with $32.5 million in 2022. Investing cash use was $10.1 million, including $12.7 million of property and equipment purchases; financing provided $28.2 million. Cash, cash equivalents and restricted cash ended at $43.6 million.
- At quarter-end, cash and cash equivalents were $43.1 million and marketable securities were $21.1 million. Current assets were $97.8 million and current liabilities $40.4 million.
- Long-term debt was $119.8 million net of issuance costs; total debt before issuance costs was $125.6 million, including $120.5 million under the Blue Torch term loan. The loan bears floating interest; the elected Term SOFR rate was 13.5032% at June 30. The company was in compliance with its financial covenants.
Changes, outlook and risks
- Gross margin improved 13 percentage points in both Q2 and the first half, principally because revenue grew while cost of revenue increased only modestly. Operating losses narrowed; however, the company remained loss-making and cash-flow negative.
- Net loss comparisons also reflect unusual prior-period items: 2022 included a $22.5 million debt-extinguishment loss and larger noncash gains from changes in warrant and earnout fair values. Q2 2023 included a $0.5 million charge for two deorbited satellites and a $1.1 million write-down of a Virgin Orbit launch prepayment within other expense.
- Management said available liquidity should fund operations for at least 12 months from issuance of the statements, while noting actual cash needs depend on growth, renewals, spending and access to financing. No formal revenue or earnings guidance is provided in the supplied filing text.
- Government customers accounted for approximately 44% of first-half revenue; three government customers generated about 74% of government-channel revenue. NOAA notified Spire it did not intend to renew one weather contract for mid-July 2023 through mid-January 2024; Spire expected approximately $9.9 million of revenue from it and may reapply, with no assurance of regaining the business.
- Spire cited longer sales cycles, discounts, extended payment terms and some cancellations amid macroeconomic uncertainty; foreign exchange exposure; higher interest expense from floating-rate debt; and possible launch delays or cancellations related to geopolitical conditions.
- The NYSE notified Spire of noncompliance with its minimum share-price listing requirement. Failure to regain compliance within the cure period could lead to suspension and delisting. Shareholders approved authority for a reverse stock split, subject to board determination.
- Disclosure controls were deemed ineffective because of material weaknesses in the control environment, risk assessment, segregation of duties, complex-transaction accounting and IT general controls. Remediation is underway but was not considered complete. Management stated the interim financial statements fairly present results in accordance with GAAP.
- Management reported no current legal proceeding expected to have a material adverse effect, while noting litigation outcomes cannot be assured.
Important facts for investors to verify
- NOAA contract nonrenewal: actual revenue impact, reapplication outcome and any replacement business.
- Cash burn, capital spending and whether liquidity remains sufficient; terms and availability of any additional financing.
- Blue Torch debt cost, covenant headroom and sensitivity to interest-rate increases.
- NYSE minimum-price compliance status and any board decision on a reverse split.
- Progress and testing results for remediation of the reported material weaknesses.
- Customer concentration, receivable collection and sustainability of ARR growth and retention.