Even as space and intelligence companies grappled with a tight labor market and inflation in the second quarter, they still capitalized on vertical integration efforts and successful launch test phases to remain competitive, according to recent earnings calls.
Executives said they were seeking to generate a meaningful return on government and commercial business investments.
While demand is strong across a variety of end markets, the executives face uncertainty. With Russia’s announcement that it will depart from the International Space Station (ISS), who will keep the ISS afloat?
The executives shared their perspectives recently in earnings calls that covered their companies’ second-quarter results. Four themes emerged from the calls, transcripts of which were provided by Bloomberg:
Soaring space demand
Technological innovation and successful launches within the space industry remain key objectives, especially given increased interest from the federal government.
Demand for high-frequency satellite imagery and analytics has skyrocketed.
The prolonged Ukraine conflict presents opportunities for geospatial intelligence and space-based technology to track images of military troops and infrastructure.
Brian O’Toole, chief executive of BlackSky Technology, emphasized the need for greater government investment in space technology. Demand for high-frequency satellite imagery and analytics has skyrocketed from customers like the National Geospatial-Intelligence Agency as agencies look for timely insights over the Ukraine war. He said that the 2023 budgets for the Space Force and Space Development Agency were increased by 25% over 2022 to accommodate higher demand.
Pete Cannito, chief executive of Redwire, highlighted the recent Russian threat to depart from the ISS, which has driven increased momentum from commercial space stations to act upon the announcement.
Daniel L. Jablonsky, chief executive of Maxar Technologies, identified the company’s news bureau working with media outlets to increase global transparency and limit the spread of disinformation related to the Ukraine war. He added that the public has gained a better understanding of the company’s significance with satellite imagery in the geospatial community.
Labor constraints continue
While the labor market remains tight, optimism grew as attrition began to slow.
Adam Spice, chief financial officer of Rocket Lab, expressed such optimism. His company’s overhauled recruiting efforts in the second quarter yielded a downtick in labor attrition, he said.
Engineer attraction was a product of successful launches. When projects are successful, he said, that drives excitement and retention of a passionate workforce.
While some executives expressed optimism over workforce conditions, Peter J. Gundermann, chief executive of Astronics, emphasized that labor shortages still exist, and no company can be immune to the risk of turnover. He added that the pressure appears to be declining as the COVID-19 pandemic eases.
Capitalizing on vertical integration
Space executives acknowledged the realities of being in a complex and capital-intensive industry. Maximizing vertical integration to bring the supply chains under common ownership was a focus for many executives, even within a specialized sector with high barriers to entry.
Chris Kemp, chief executive of Astra, commented on risks tied to inflation. Vertically integrating manufacturing processes, coupled with factory investments, hedged exposure to achieve successful launches at lower prices.
Gundermann said that labor and material input prices are at a peak when companies pay a premium on secondary sources that constrain margins. For Astronics, such premiums are necessary to sustain timely delivery and meet customer quality expectations.
Peter Beck, chief executive of Rocket Lab, said that the company has never delayed a launch or delivery because of supply chain constraints thanks to its vertical integration.
Not all businesses pulled everything in-house, however. Andrew Rush, chief operating officer of Redwire Space, combated supply chain hindrances through vendor base expansion and facilitating strong strategic partnerships.
Climate change offers opportunities
Climate-related offerings continue to gain traction within the space industry and have led to strong partnerships among the private and public sectors.
Benjamin Hackman of Spire Global expressed excitement over continued contract awards from NASA for earth observation data, which is vital to U.S. government efforts to address climate change. Heat waves, flooding and droughts highlight the risks of extreme weather. The recently enacted Inflation Reduction Act apportions approximately $370 billion in clean energy and climate investments over 10 years. Companies are positioning themselves to partner with the government to address such challenges.
The takeaway
Executives’ hands are full as they respond to current demand and position their companies for growth. Innovation and new applications of space data remain front of mind while executives are also hedging exposures associated with inflation, supply chain bottlenecks and a tight labor market. The sector is looking to work with government and commercial partners to build a future where limitations extend far beyond the constellations.
