Please stand by. Good day ladies and gentlemen, and welcome to Spire Global Third Quarter 2021 Earnings Conference Call. [Operator Instructions] At this it is my pleasure to turn the floor over to your host, Head of Communications and Investor Relations, Hillary Yaffe. Ma’am the floor is yours.

Thank you. Hello everyone. And thanks for joining us for our third quarter conference call. Our results, press release, and SEC filings can be found on our Investor Relations website at ir.spire.com. A replay of today’s call will also be made available. With me on the call today is Peter Platzer, CEO; and Tom Krywe, CFO. As a reminder, our commentary today will include non-GAAP items. Reconciliations between our GAAP and non-GAAP results, as well as our guidance can be found in our earnings press release. Some of our comments today may contain forward-looking statements that are subject to risks, uncertainties, and assumptions in particular, our expectations around the impact of the pending acquisitions, results of operations and financial conditions are uncertain and subject to change. Should any of these 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 Peter.

Thank you, Hillary. Good afternoon. And thank you for joining us today. I am truly excited to be sharing with you the team's progress along our four growth pillars and our mission to leverage space, to solve problems on earth. This has been a very busy quarter where we became a public company, we are listed on the New York Stock Exchange and signed a definitive agreement to exactEarth, a leader in maritime data space with over 150 customers and over $18 million in last 12 months revenue, all, while growing our ARR Solutions Customers 69% year-over-year. This would not have been possible without our exceptional team of over 330 professionals from over 40 different countries. That is relentlessly executing with a true sense of urgency every single day. And I'm truly fortunate to be part of such a globally diverse, collaborative and dedicated team. And I want to take this opportunity to relay my heartfelt thanks to each and every one of them. Winning is a team sport, as we say, and we would not be here today without you. So, thank you. Since we started the company in 2012, we had a simple, yet powerful mission to leverage data from space to solve global problems on earth. And today Spire owns and operates the world’s largest multipurpose satellite constellation. Our fully deployed constellation and vertically integrated data platform provides our over 200 customers with unique and comprehensive data and analytics, assisting them in fulfilling their missions and solving their business problems. Be it port operations, commodity trading, route optimization, weather risk mitigation, renewable energy production, logistics planning, or hundreds of other use cases. Our customers rely on our data to help them solve some of their most vexing business challenges and grow their business faster, more profitably and…

Thank you, Peter. Before I kick off a review of our third quarter results and our outlook for Q4 and fiscal year 2021, I would like to point you to our earnings release sent over the wire today after market close. In the release, you will find both the detail of our GAAP to non-GAAP reconciliation and our outlook for Q4 and fiscal year 2021. Q3 2021 was a solid quarter for us on the topline with the revenue increasing 33% year-over-year to $9.6 million and ARR increasing 51% year-over-year to $45.2 million with ARR representing a very nice sequential jump of $8.6 million versus Q2 2021 ending ARR of $36.6 million. The year-over-year increase in revenue was driven by the addition of 92 net new ARR solution customers versus the prior period, a 69% increase highlighting our focus during the second half of the year on adding new ARR customers and our last 12 months net retention rate of 119%. Q3 net retention rate was 111% as mentioned earlier in the year this reflects a lower rate compared to the rates in 2020 due to delays in existing customers, buying decisions and some non-subscription based business taking longer to deliver due to launch delays and customer workstream delays. Based on the concentration of new versus existing customer activity and having a larger overall base we expect net retention rate to generally be lower than what we had in 2020. As this rate can fluctuate per quarter, ranges are likely to be between 100% to 135%, depending on the quarter. We ended Q3 with 225 ARR solution customers representing a 69% year-over-year growth from the prior year period. We track ARR solution customers as a key metric, a good indicator of growth in our reoccurring revenue base. We define an…

Thank you. The floor is now open for questions. [Operator Instructions] And we take our first question from Jeffrey Meuler at Baird. Please go ahead.

Yes. Thank you. We'd love any additional detail you can provide on the ARR progression. Obviously the nice jump and you called out the two sizeable wins, but it sounds like it's probably broader than that. And the Q4 guidance implies a fairly nice further sequential increase. So would just love any additional color on the breadth of the strength and the pipeline beyond the two mega ones that you discussed?

Sure. I'll start with the first one with the ARR and the sequential jump of $8.6 million from Q2 to Q3. As you mentioned, we did land some really good wins within the quarter. We had customers like EUMETSAT, Myriota and Hancom as new wins. And not only did we have some really good new wins in the quarter, we had some up-selling with existing customers with NASA and NOAA. So we did see some really positive activity in all those fronts on – from customers from new and also on the up-selling front. We added 71 net new ARR solution customers from the beginning of the year to Q3 and we had a 69% on a year-over-year standpoint for our ARR solution customers. So heavy focus on that front.

Awesome. And then on the accelerated investment to support future revenue growth. I understand that you just raised a lot of capital to do just that, but I guess you had a business plan that was already assuming increased investment, and now you're also acquiring exactEarth and you're going to onboard headcount and other capabilities from that. So can you just help me understand relative to the prior growth plan and investment plan, like what are you incrementally spending on or investing in?

So there are two areas and Jeff that we are investing in; one of them is in the pure technology side, right where the optical into to satellite links is really a technology that we are quite excited about of what it can bring to our customers. And there are certainly investments that we had to take there. The other one is really related to a dramatic change in the availability of resources to run a public company. By roughly in the middle of the year we had an over 190% increase in IPO's in the U.S. year-over-year. So what that means is that it really stressed the labor market and the services market, be the accountants, be that lawyers and be that financial professionals. To give you just one small example; the Director's in officer's insurance came in, I think it's over 30% higher than what the original quote was because that market was so stressed but is massive increase in IPO's and invest in the infrastructure of being a public company is the other element where we have invested and had to compare with that increase in the cost base, due to the high increase of IPLs.

Got it. And then last one for me before I hand it over. So your constellation as I understand it has full coverage, and as the frequency that you need, the exactEarth capabilities can you just help me understand if there's some reason why the data aggregation or something about their capabilities is complimentary, or should there also be expense synergies at some point, in addition to the cross selling opportunity and the on-boarding of talented headcount and everything else that comes with the acquisition?

So the exactEarth transaction once it closes really supports all four off our growth pillars, right? It expands our investment in sales and marketing bringing on a highly experienced salesforce and marketing team that has been operating in the market for maritime data analytics. And on the product side, it expands our capability two fold. Number one that affords us a lower latency data, and number two that transaction will come with about a 10-year database of maritime traction data that will allow us to drive more value for our customers with more efficient and effective use of AI and machine learning. The transaction also of course, forces with the additional customers that Tom had mentioned earlier over 150 that we can offer our additional products and services to. And then of course it brings certain amounts of revenue. Tom mentioned over $18 million year-to-date last 12 months revenue that had been growing at 30% over the last 12 months also year-to-date, which will meaningfully add to our ARR. So it really supports all four off our growth pillars, which is why we are engaged in the definitive agreement sometime on September of this quarter.

All right. Thank you very much.

Our next question or comment comes from the line of Josh Sullivan with The Benchmark Company. Please go ahead.

Can you hear me?

Yes.

Yes Josh.

Just to put a finer point on that last question, just as far as the sales force build out here, with exactEarth and what they bring on the marketing and sales front. Is there any way to kind of just help us think about what the salesforce needs would have been versus what they will be with exactEarth. Just how we're modeling that going forward?

Of course. So maritime is one of our four segments and with the transaction once it closes, we as quite meaningfully to our global coverage, both in the direct salesforce that has done this for many years, as well as through distributors which exactEarth also has for many years. So it wouldn't impact our investment in sales, in our other markets, aviation, whether, space services, but it certainly augments our coverage globally and our salesforce in the maritime segment quite substantially.

And then on the aviation market, as markets are reopening here, are you seeing an increase in demand out of at a global airline to activity?

We do. We absolutely do see. Yes, the markets are opening, but the cost pressure on the industry is still pretty high. And while the aviation industry in general, we feel is a bit further along in the digitalization off its economy, as compared to, for example, the maritime industry those costs precious still drive adoption of data and analytics at an accelerated pace and we are definitely a beneficiary of that trend.

And then were you represented at COP26? Any specific engagements there that you can seize up for us or conversations that you had coming out of those meetings?

I just had two meetings today about COP26. Being right there in Glasgow and having a focus on weather and climate change clearly there's been a number of engagements and conversations that we were a part off. In all honestly I don't have all of them on top of my head right now. We'd be happy to follow up with the detailed engagements and some of the potential follow-ups that have come out of our engagement in COP26.

And then just one on Myriota right relationship. As far as the ownership that came with exactEarth and then I believe you mentioned that they're also a customer. Can you just help us understand how that relationship moves forward?

Myriota is a fantastic customer and we are extremely focused on making them very successful. That's really the focus. Yes, we'll get the front row seat in the IoT from space industry as well, but as a company that focuses clearly and definitively on making the customer successful by delivering our service to them.

Thank you for the questions.

Our next question or comment comes from the line of Weston Twigg with Piper Sandler. Please go ahead.

Hey, thanks for taking my question. You had really good ARR traction this quarter, and I'm just wondering if you could help translate that into visibility or revenue growth thoughts through next year. I haven't been using the long-term model, that was a pre-stack model, but I would love some visibility into your growth expectations through next year?

Yes. The one piece with the $8.6 million of incremental from Q2 to Q3, that's now going to translate into the revenue out into the next couple of four quarters, right? So we'll get that flow through for Q4 all the way through roughly Q3 of next year. So that that piece, and then along with adding all those new ARR solution customers, now we have that opportunity to go expand with them and gain some further growth out in there. We're not providing any 2022 guidance at this point, but yes, we're really excited about those ARR solution ads we had plus that incremental piece quarter-over-quarter that flows that revenue into the future.

Well, I guess maybe what I'm getting at is this kind of ARR growth sustainable through the next few quarters?

Again, we're not giving any 2022 guidance because the reason being also, if we close the transaction with EE and exactEarth in the fourth quarter, we're going to combine that guidance and combine that consolidated and really go out looking at what's going on there. And then we'll get – we'll provide that in the fourth quarter earnings.

If I were to augment Tom's statement here, we got 200 customers – over 200 customers today. You add in the customers that exactEarth might bring to the table once the transaction closes. But even that is still a very small percentage off the estimated 200,000 customers that make up the totality of our estimated $90 billion market. So the penetration rate that we see is still actually quite low relative to the opportunity set that we have in front of us.

Okay, perfect. That makes sense. But just to clarify too, on the sort of the pre-stack back model, that was, I think the last reference in June that is not something we should reference any longer, correct?

I think the best information to use is always the most recent and latest information. And I think we've provided solid numbers to use today that could help you understand how the company operates today.

Okay, perfect. Another question I had was around gross margin progress through next year. I know you're not giving out your guidance, but it looks like even the guidance for next quarter was slightly lower than at least I expected. And I'm just wondering you talked about the higher investment. Do you see that gross margin getting back to stabilizing in the mid-60% range, or do you think it would be sort of in that kind of high-50s to mid-60s level, the outline for Q4?

Yes, that guidance for Q4 is ranging between 59% and 65%. So, we are getting back up into the 60s a big uptick from the third quarter. And that's mainly around some timing issues that we had on the third quarter, but to also that revenue growth that we're kicking in, in from the ARR increase that will now flow into the revenue, which will drive up that business. Plus, we continually have that leverage cost structure model with our touch CapEx and all those different fronts that we're able to increase that over the course of time. And we'll be able to, like I said, provide you some guidance in 2022, once we get that exact [indiscernible] built in and we build that model out for both companies combined, and then we'll be able to provide that in the next quarter earnings.

That’s helpful. And then just last question from me. Can you split out the data solutions and space services, revenue in Q3 and the split for Q4 guidance as well?

Yes, we're unable to split out our pieces just because the way our contracts in nature is. A lot of things are combined since we have four solutions, multiple customers buy multiple things. So, we have a hard time breaking all that stuff out. Also with our leverage technology, we're providing ultimate solutions to customers solving multiple use cases. So, we're unable to break those things out.

Understood. All right. Thank you.

We go next to Ric Prentiss with Raymond James. Your line is open.

Good evening.

Hey, Ric.

A couple of questions. Hey. Couple of questions for you all. First, it's been about two months since you announced the exactEarth acquisition. Have you heard anything from your own customers on how they feel about the acquisition, or have you been hearing any feedback from exactEarth customers about coming into your thought about what it might mean to them? So, any customer interactions in the last two months from either side?

So, the two companies have to operate very separately until the transaction closes. And so, the simple answer is Ric, no, we have not. It's just a very separate operation. We have not seen people on our side, right? So, I can talk to anything which refers to customers on the exactEarth side, right. On our side, our business has been growing nicely. The customer interactions have been positive. So unfortunately, I can't tell you anything more. We are a public company and so they are a public company. I just can't talk to more because we can't talk with each other until the transaction closes.

I understand that. I just had a big transaction in this space this week with Inmarsat and Viasat. And there was talk about how some customers were excited to see the acquisition, not crossing over public company, the public company lines, sometimes customers call in and they go, hey, I like what I see. So, I wasn't sure if you had any of those kinds of incoming calls, not anything about operating separately or anything like that. Okay. Second question on my side is obviously everybody is anxious for 2022, guidance you can't give it yet. Maybe just the flip the question this way on how you feel about your visibility into 2022? As you're coming here into mid-November, looking into 2022, how visible is 2022 from the standpoint of happier, full year, not getting any numbers, but just how comfortable are you getting on the visibility?

Yes, we've been spending quite a bit of time with the executive team, with the salesforce, and the leaders that run the sales teams huddling together quite often talking about all the opportunities, the pipeline we're again, yes, I can't give any specifics on the 2022 yet as we go through the activity with hopefully when exactEarth closes and combine everything. But we're feeling very confident about 2022, about the pipeline and the four solutions that we have to [indiscernible] and all those use cases that we're solving for our customers. The key wins that we had and that keeps carrying forward, we're excited.

Okay. And final one for me, a little more of a housekeeping one, you mentioned obviously the G&A public cost came in higher. How should we think about, is this a good run rate third quarter, or is there more to come you think through the impact in fourth quarter? Just kind of where is a good run rate number on the G&A side of things?

Yes, the one thing that will be hard is we’re going to go through this acquisition. So, we we'll have to sense out all this third party as Peter mentioned this activity with all these IPOs, all these third parties are taking advantage it unfortunately for us which is marking up their prices on everything. So, it's going to be hard to tell if these third parties keep raising prices and keep making things a little bit harder for us. But I think they will see similar activity again this quarter, because we'll have another transaction to go through.

Okay. Appreciate it. Stay well.

We go next to the line of [indiscernible] with Barclays, please proceed.

Good evening, guys. Bit of a higher-level question here, but earlier this week we got the NGA's commercial earth intelligence strategy. Can you maybe talk a little bit about what that means for you guys and how you expect to sell into the government customer, whether it's subscription based or imagery data or anything else?

Of course, Colin [ph], happy to talk about that. We have a pretty nice mix between commercial and government revenue. And the reason for that is that there are long-term fundamental trends that drive the demand on both sides, right. You have ESG adopting to climate change, digitalization of the global economy on one side, and you have an intensification of the space, contested-ness, security concerns, all of that on the other side. If you listen to the talks that are coming out of the U.S. Government, you just mentioned one of them, but there are many others, not least the creation of the Space Force. You can see that the interest in technologies and solutions that Spire has is absolutely increasing. And we have a specific team that is serving the United States Government. We have teams globally that is serving, I would say, friendly governments all across the world. And we do indeed seed an increase in the demand from those types of customers helping them solve their use cases.

Got it. Got it. And then I understand that the spec slides are probably a little bit dated, but if we think about your CapEx estimates and kind of what you're assuming on launch cost, can you maybe just talk us through how you are thinking about procuring launches, whether it's going to be ride shared services versus small set launchers and the premium that you are on kind of direct orbit insertion versus a ride share service?

So, Spire just completed its 31st launch campaign. We have launched with nine different launch vehicles. So, we certainly have an extremely diverse relationship with launch providers and experience working with them. And that has really helped us a lot. As I look forward it seems that almost everyone in the ground are starting a launch company. And we certainly appreciate that. We love working with them. We love that more and more of those capabilities are coming online, be that dedicated launch vehicles, as you mentioned, or be that orbital transfer vehicles that take advantage of very big rockets with extremely low-cost per kilogram launch prices. The way that our constellations are structured is that we have probably more flexibility than some others, right. We certainly want to be in a particular area, a particular orbit, a particular inclination, but it's not that tight. And so, for us, we look at the launch place as one that is getting better every single month. Is it today where I would like it to be? No, it’s not, rockets still blow up in and are delayed, but it is getting better.

Got it. And then the last question from me you talked a little bit about inflation corporate costs but maybe you can just discuss kind of the labor costs that you're experiencing within your AI and machine learning build out. And now that's impacting your ability to ramp kind of delivering complete solutions to the customer versus a raw data sale.

So, Spire from its very early days has set up as a global company, which means that we can take advantage of like a large number of labor markets and not just a concentrated or maybe more contested one. And we certainly see that benefit accruing to us as we can hire in different labor markets. And with the pending close off the exactEarth transaction once it closes, we are having access to yet another location in Canada, right in this Cambridge Waterloo University area, where there is a highly educated, highly motivated workforce where we can offer them a unique type of experience. What we have found is that those people that are in the AI and machine learning space and that can choose where they work when you offer them to work with space data, their eyes light up just a little bit more.

You say those two, but you are not having any issues with getting headcount onboarded?

I've always said that the largest execution risk for us is hiring, right. Finding the right people, at the right point in time, at the right location, with the right skillset and the right cultural mix, is absolutely a challenge because we are pretty proud of the culture that we have in the company. And so, we want to stick with that and grow with that. So, hiring anyone who says hiring is easy, I think, is just lying themselves in their pocket. So, I'm not going to tell you that hiring is easy, but we are a space company and that helps a great deal.

Got it. Thank you so much for the questions.

This concludes our question-and-answer session. We return to CEO, Peter Platzer for closing remarks.

Thank you. In closing, we are immensely positive about the momentum we see in the business and recognizing the fortunate position we occupy at the very crest of this massive transformation wave of leveraging space to solve problems on earth. The team and I are highly encouraged by the progress we continue to make against our four growth pillars. And we execute with typical sense of urgency, like signing a definitive agreement to acquire exactEarth just weeks after becoming a public company. And we relentlessly drive for growth, leveraging our cutting-edge technology and innovation we endeavor to help our customers and humanity solve often truly global challenges and strive for a more sustainable and equitable future. And with that, I thank you for your time, interest and questions.

This concludes today's teleconference. We thank you for your participation. You may disconnect your lines at this time. Have a great day.