During fourth-quarter earnings calls, executives in the space industry discussed three levers they are pulling to create business value—sales, operating efficiency and investment.
Quarterly sales expanded in the sector, benefiting from increased global demand. At the same time, companies improved margins through a renewed focus on efficient business models, and they logged growth through strategic acquisitions.
Increased demand
In transcripts provided by Bloomberg, space and satellite company executives said geopolitical, economic and national security concerns were contributing to improving global demand. Brian O’Toole, chief executive officer of BlackSky Technology explained that demand is higher in “markets where governments are increasing their investments and accelerating programs to acquire space-based intelligence capabilities.”
Peter Cannito, chairman and CEO of Redwire Corp., said the improvement is the result of three main drivers:
- Space is evolving into a warfighter domain critical to the government’s military strategy. Major investment across the United States’ space enterprise is resulting from threats to America’s historical competitive advantage in space.
- As the U.S. returns to the moon with programs like Artemis or the recent Intuitive Machines commercial lunar landing, demand for lunar infrastructure is rising.
- Low Earth Orbit (LEO) satellite constellations are proliferating. Small satellite constellations serve many applications such as communications and earth observation.
Paul Jacobs, CEO of Globalstar Inc. agreed that the market for LEO capacity is increasing.
Improving margins
In addition to top-line growth, executives said they were focused on improving profit margins through operational efficiency.
David C. Burney, chief financial officer of Astronics Corp., highlighted his company’s margin expansion amid an operating strategy that favors up-front fixed cost investment and low variable expenses.
Peter Platzer, CEO of Spire Global, Inc. indicated Spire Global’s subscription business model has “cracked the code of building a high-growth, high-margin space company.” Meanwhile, Brian E. O’Toole shared a similar strategy for BlackSky, noting “significant operating achievement is attributed to the combination of strong revenue growth of our high-margin imagery and analytics services.”
M&A
Strategic acquisitions are the third business value lever space and satellite executives cited during their recent earnings calls, noting opportunities to grow through expansion of capabilities or vertical integration.
Read more of RSM’s insights on the space sector, government contracting and the middle market.
Adam Spice, CFO of Rocket Lab USA Inc., is bullish for acquisitions market, underscoring “a lot of opportunities out there to grow inorganically.” He said the company is seeing assets in the market that could fit in the portfolio and spur growth through vertical integration.
Redwire’s Cannito shared that his company is constantly scanning the market for value that fit strategically and have a good financial profile.
The takeaway
Earnings calls in the fourth quarter of 2024 highlighted the resilience of the U.S. space and satellites market. Despite challenging economic trends, space and satellite executives have been implementing growth strategies that are leading to improved sales and margins.
We look forward to next quarter with expectations they will boost their production capacity to fulfill global demand.
Craig Romanick contributed to this article.
