During first-quarter earnings calls, space executives were concerned about economic factors affecting cash flow during a period of high investment in manufacturing. Executives also highlighted how the changes in consumer behavior are affecting the market. Companies plan to meet changing demands through innovative product offerings and by transforming their contracting models.
Four themes emerged from the earnings calls, transcripts of which were provided by Bloomberg:
Cash flow constraints
Space executives continue to be concerned about the impact of economic conditions on cash flow. Peter Platzer, chief executive officer of Spire Global Inc., addressed the threats of a slowing economy and increased unemployment. Platzer said that according to the Conference Board Measure of CEO Confidence, executives remain cautious, and 93% of the CEOs surveyed are preparing for a U.S. recession over the next 12 to 18 months. According to Platzer, economic uncertainty is making it harder for space companies to increase margins through pricing strategies, and it is taking longer to close deals.
David Burney, chief financial officer of Astonics Corp., said economic factors that constrained supply chains over the last few years have caused organizations to increase inventory levels to mitigate parts shortages, increased lead times, and caused distribution delays. Burney said high levels of inventory are putting pressure on operating cash flow. He said space companies need to be more strategic with investments due to cash flow constraints.
Demand drives manufacturing investments
Domestic and international demand continues to increase in the space market due to technological advancement, geopolitical events and new regulations.
John Rood, chief executive officer of Momentus Inc., referred to a recent Euroconsult Group report that stated the global space market grew by 8% last year and is expected to reach $737 billion within a decade. Rood said the number of active satellites in orbit is expected to increase by more than 900% by 2030 and that the space transportation market is projected to double within two years.
Rood referred to the new Federal Communications Commission regulation that as of September 2024, all satellites that orbit below 2000 kilometers must be deorbited within five years of their mission’s conclusion. Executive expect this rule to create large market opportunities as satellites are taken out of orbit.
To meet the expected demand, space companies are investing in manufacturing and development facilities. Marc Bell, chief executive officer of Terran Orbital Corp., referred to facility investments that will help the company manufacture around 20 satellites per month, starting this year.
Peter Beck, chief executive officer of Rocket Lab, reiterated the need for manufacturing and development investments in facilities. Beck said that Rocket Lab’s strategic decision to increase vertical integration within its manufacturing programs is key to winning large multiyear contracts.
Changing customer needs
Executives highlighted innovative products that could lead to space market expansion. Chris Kemp, chief executive officer of Astra Space Inc., said hardware industry products influenced Astra’s adoption of new development kits. Kemp said providing tools and support through kits, similar to the hardware industry’s approach, will accelerate the spacecraft development process.
Jay Monroe, executive chairman of Globalstar Inc., spoke about the increased demand for private networks. Monroe said Globalstar’s terrestrial spectrum, Band 53, is adapting to consumer demands and creating unique terrestrial spectrums. He said more companies have critical infrastructures, and a new trend is to operate on a private LTE or 5G network instead of operating over Wi-Fi. Monroe said the change in consumer behavior is an opportunity for market expansion, rather than an impediment to serving public networks.
Evolving contracting models
Space executives echoed the growing trend of customers looking for long-term subscription-based contracts rather than traditional spot buys or usage purchasing. Brian O’Toole, chief executive officer of BlackSky Technology Inc., said government agencies and mission-critical companies are seeking subscription contracts to secure assured priority access to information related to intelligence and surveillance. O’Toole said a growing trend is for international government agencies to use multiyear subscriptions for their next-generation commercial constellation expansions. He said governments are signing long-term agreements to secure access to the latest imagery and analytic services.
Will Marshall, chief executive officer of Planet Labs, attributed the change in contracting behavior to customer hesitation over heightened budgetary constraints and longer government contract lead times. Marshall referred to the impact on Planet Labs’ revenue because of the timing of subscription-based awards. He said that once subscription customers are acquired, the business model offers steadier and more predictable income for companies.
The takeaway
Space industry executives are attempting to balance economic factors that restrict cash flow with investments in manufacturing to meet increased demand. Space companies are looking to expand the market by offering innovative products that meet changing consumer behaviors and needs.
