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Spire Global ($NSH - $SPIR) Breakdown

Spire Global ($NSH - $SPIR) Breakdown

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“The true currency of life is time…and we have all got a limited stock!” - Robert Harris

To all the Time Investors,

As we dive deeper into the Space Industry, I wanted to focus on the series of SPACs that have monopolized all of our interests. Among the many that have announced going public, there are a few interesting companies that stick out. Today we are going to break down the third-largest satellite provider in the world in terms of satellites in orbit. The company is called Spire Global ($NSH - $SPIR) and it is planning to go public this year at a valuation of $1.6B.

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📖What is Spire Global?

Spire is a Space-as-a-Service company that operates satellites and delivers data and predictive analytics to customers. The company collects space-based data using a proprietary constellation of nanosatellites. The company utilizes the power of data to deliver insights across the following categories:

  • Maritime Activity: global vessel tracking and monitoring, and high traffic zones for route optimization

  • Global weather coverage and forecasts

  • Aviation Activity: tracking and monitoring of flight operations

  • Space Software Services: deployment of software to existing satellites, host satellites on a full integrated space, ground, and web platform, and manufacturing of cost-effective nanosatellites

📈Market Opportunity

The $368B space economy is estimated to grow to $1T by 2040. The company believes that it can dominate three subsectors within the overall market:

  1. Space-Based Data and Analytics (weather, aviation, maritime): $52B by 2025E

  2. Orbital Services: $39B by 2025E

  3. Weather Forecast: $180B by 2025E

The company believes that they are in a position to pioneer the space-as-a-service model and help solve some of the planet’s problems.

👨‍💻What are the Strategic Resources?

Product Portfolio:  As of January 2021, the company has 141 nanosatellites launched and covering the earth.

  1. Spire LEMUR (low-earth multiuse receivers) Constellation and Ground Stations:

    • The company’s in-house nanosat design and assembly cost $30k/month and takes about 3-6 months to be launch-ready (~$180K total cost). This is about 0.1% of a traditional satellite ($180M)

    • Proprietary ground station network (~30 ground stations) that enhance the collection of data, provides operational resiliency and security

    • 550+ software updates deployed to the fleet

    • 245M automatics identification system messages (maritime), 415M automatic dependent surveillance-broadcast messages (aviation), and 11k radio occultation profiles (weather)

  2. Spire Data Platforms:

    • The company can cleanse, standardize, and fuse data collected from ground stations to provide predictive analytics. The company claims to have 99.9% system uptime.

  3. SpireSight Software Analytics

    • Customers receive the refined data seamlessly through simple APIs. Customers receive 1 terabyte of data per day.

Developing Resources:

Spire Global has 24 registered patents and 20 licenses to operate commercially with assets in space and in the ground. The company continues to expand its R&D from $13M in 2018 to $21M in 2020 representing about 75% of its revenue.

Customer Landscape + Partnerships:

The company delivers proprietary data and insights to 150+ product customers.

  • Currently, they have annual recurring revenue of $235K per customer, a net revenue retention rate of 145%, and less than seven months of payback customer acquisition cost.

  • Top customers include NASA, Aerion Supersonic, VesselBot, Oldendroff, Australian Office of National Intelligence.

    • More recently Spire entered into a collaboration agreement with Findus Venture to launch satellites for debris detection rates and climate change patterns.

  • To launch the satellites the company partners with every single launch services company (SpaceX, Rocket Lab, etc).

Business Model and Growth Strategies:

Unlike traditional space companies, Spire Global executes a subscription-based model for its customers with monthly payments. The company has not specified the specific subscription amount it charges its customers and whether the customer pays for a specific period upfront versus a flexible month-to-month model. However, the average contract length is ~21 months.

The company can achieve a subscription model because they have ensured that the cost of each satellite is 0.1% of a traditional satellite and the cost to launch is 1/100th of a traditional launch due to the strategy of sharing payloads.

  • 2020A Revenue: $28M | 2025E Revenue: $913M – 139% CAGR

  • 2020A ARR: $36M | 2025E ARR: $1.2B

  • 2020A Gross Profit: $18M (63%) | 2025E Gross Profit: $830M (91%) – 160% CAGR

  • 2020A EBITDA: -$18M (-63%) | 2025E EBITDA: $425M (47%)

  • 2020A FCF: $-29M | 2025E FCF: $357M (84% of EBITDA)

  • Enterprise Value: $1.2B

    • 67% company ownership post-merger

The company plans to continue accelerating growth through the following initiatives:

  1. Merger: The company will go public through a SPAC with NavSight Holdings. The company will be fueled with $408M in cash to continue market share expansion in the commercial satellite and analytics space.

  2. Market Capture: Expand external product, sales, and marketing team to equip sales operations

  3. Geographic Expansion: Focus resources to increase presence in Latin America and the Middle East

  4. Acquisitions: Acquire third party data provides to enrich the library of data collected

  5. Proprietary Data Set Development: Significantly expand DoD and Intel community footprint

💪Key Strategic Moats

  1. Technology: The company has built satellites that are cost-effective, high quality, rapidly produced, and with the ability to deliver proprietary data. The company has then closed the circle to provide predictive analytics to the end customer (optimization of routes of airplanes/ships, the expected weather around the globe). The company can deliver 20 satellites into orbit for global coverage in under 12 months at a cost of $12M.

  2. Vertical Integration: The company designs 95% of the components of its satellites and produces 100% in-house. The company also controls the ground equipment and its entire data analytics platform/solutions. The entire supply chain except for the launch into space is controlled.

  3. Scale: Spire can produce 10x the number of satellites than the next largest manufacturer. Satellites can be completed within 3-6 months and the company aims to launch at least 20+ a year. The company owns 5% of the earth’s orbit based on the number of satellites.

⚠️Key Critical Risks

  1. Competition: While the company has been around since 2012, there are larger competitors armed with more capital. SpaceX and Planet Labs are private competitors who have a higher share of the orbital space. It is inevitable that the company’s high margin and low-cost assets will attract competition in the space.

  2. Product Waste: While the industry is young, the earth’s orbit is about to be congested with ~23k satellites by 2040. These satellites will surely create “space junk” that will require maintenance and costs. Companies will be held responsible to manage the waste thus incurring unforeseen costs and profit reduction. Currently, 60% of the satellites are space junk.

  3. Subscription Model: Customer churn can certainly accelerate as satellite providers compete on price. With more low-cost satellites entering the market the company must be able to adapt to customers’ dynamic needs and ensure competitive value propositions.

🧬Team DNA and Vision

Key Leaders:

  • Peter Platzer, CEO, Co-Founder – Prior, Pete was a Senior Portfolio Manager for Vegasoul Capital, trading commodities and global futures. He also led quant teams for Deutsche Bank and the Rohatyn Group. From a space perspective, he has focused on space commercialization and nanosatellites where he holds a series of patents.

  • Jeroen Cappaert, CTO, Co-Founder – Prior, Jeroen was the Lead Payload & Avionics engineer. He specialized in spacecraft avionics and payload design and low-thrust astrodynamics in NASA.

  • Joel Spark, VP Space Systems, Co-Founder – Prior, Joel has led the management of the Spire space program as Lead Engineer. He ultimately designed, built, and operated the companies first satellites.

Team Composition: The company is composed of a highly technical workforce amounting to 140 engineers and scientists. This represents about 56% of the workforce highlighting strong domain expertise in space and satellite technology.

🤯Key Insights for Time Investors:

  • The massive data collected from satellites will be a competitive advantage as the space economy continues to grow. Spire Global is the third-largest satellite company in terms of satellites in orbit. SpaceX leads the pack followed by Planet Labs. In this market, the winner will be the one that contains the most data to deliver the insights necessary for customers. With 100+ satellites and 5 terabytes of data processed every day, Spire Global is certainly in a position to continue growth and market expansion.

  • Most of its supply chain except for the launch portion is in control by Spire. This is powerful because as the company continues to enhance its space infrastructure, it will see a dramatic drop in CAPEX requirements. Ultimately, this allows Spire to expand and preserve SAAS-like margins. By 2025 the company is expected to high 91% margins.

  • While traditional satellites are time-sensitive and capital intensive, Spire has built out proprietary nanosatellites that deliver quality proprietary data and are also cost-effective. This gives the company an advantage as they continue to launch ~20 satellites per year to further their mission.

  • Spire has been around since 2012 and supported by some well-respected investment teams (Bessemer Venture Partners, RRE Ventures, Seraphim Capital, Qualcomm, and Mitsui & Co.) attracting $180 million of capital to date. Unlike many of the space SPACs, the company has a working subscription software-based business model with a 5% share of the orbital space around the earth.

  • It is important to note however that SpaceX does lead the pack in the industry. Other large players with growing space divisions will also be attracted to the concept of nanosatellites and high margins. Expect increased competition as funding continues to accelerate in the space economy.

Stay incurably curious!

-Igli G. Laçi

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Additional resources and sources I used for all the Time Investors (Leeeetttsss Gooooooo!!!)

Disclaimer:  The companies mentioned in my newsletter are not investment advice. This is simply information researched to help you learn about industries and various public companies

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