During third-quarter earnings calls, space executives discussed the use of artificial intelligence (AI) as a critical component of satellite and imagery technology. Solutions are needed at the speed of AI to maintain U.S. tactical prowess against adversarial countries.
Rising interest rates had executives pivoting to operational strategies to gain efficiency and improve profit margins. A low fixed-cost structure allows space companies to quickly gain economies of scale and expand shareholder value. Supply chain constraints are slowly easing, and executives are confident about full production resuming.
Three themes emerged from the earnings calls, transcripts of which were provided by Bloomberg.
Leveraging artificial intelligence
Space and satellite executives highlighted their investments in AI to enhance solutions with powerful analytic tools. Will Marshall, CEO of Planet Labs (PL), referred to AI-based vessel detection to support the U.S. Department of Defense’s commercial satellite capabilities.
Brian O’Toole, CEO of BlackSky Technology (BKSY), pointed to a similar capability: AI-enabled analytics required for detecting and understanding important developments.
AI analytical tools are rapidly becoming a critical component in gathering intelligence at high speed. Space and satellite companies have a unique market opportunity to help safeguard the nation.
Improving margins
As interest rates rose in the latter half of fiscal year 2023, the cost of capital made executives focus on other value drivers—specifically, operational strategies.
Marshall said PL’s non-generally accepted accounting principles gross margin was above the expected range, primarily driven by a company-wide focus on operational efficiency.
O’Toole referred to BKSY’s high-margin imagery and analytics service business, which has a low-fixed cost structure that results in strong operating leverage.
Adam Spice, CFO of Rocket Lab, shared a similar strategy. He said economies of scale driven by fixed-cost absorption helped the company increase profit margins and generate value.
Supply chain
Because supply chain constraints are easing, space and satellite companies are pushing ahead.
“Supply chain issues are behind us,” said David Kagan, CEO of Globalstar, Inc. “We are in full production.”
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Others were more cautious. Peter Gundermann, CEO of Astronics Corp., said the supply chain is not perfect but is getting better.
Some executives in the space and satellites ecosystem took a more aggressive approach to supply chain issues by vertically integrating. Marc Bell, CEO of Terran Orbital Corp., said, “You control your supply chain, you control your destiny.”
The takeaway
As space companies leverage AI and operational efficiency with low fixed-cost structure models, they will succeed in growing their profit margins. We expect that supply chains will continue to improve and help space companies reach full capacity.
Craig Romanick contributed to this article.
