This conference call transcript was computer generated and almost certianly contains errors. This transcript is provided for information purposes only.EarningsCall, LLC makes no representation about the accuracy of the aforementioned transcript, and you are cautioned not to place undue reliance on the information provided by the transcript.
Operator
Welcome to the Intuitive Machine's first quarter 2024 conference call. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question and answer session. If you would like to ask a question, please press star and then 1 on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press star and then 2 if you would like to remove your questions from the queue. If anyone should require operator assistance during the conference, please press star then zero to signal an operator. As a reminder, this conference is being recorded. Now, I would like to hand the conference over to your host, Stephen Channel, Head of Investor Relations. Please go ahead, sir.
Stephen Channel
Good morning. Welcome to the Intuitive Machines first quarter 2024 earnings call. Chief Executive Officer Steve Altomus and Interim Chief Financial Officer and Controller Steve Bontour are leading the call today. Before we begin, please note that some of the information discussed during today's call will consist of forward-looking statements setting forth our current expectations with respect to the future of our business, the economy, and other events. The company's actual results could differ materially from those indicated in any forward-looking statements due to many factors. These factors are described under forward-looking statements in the company's earnings release and the company's most recent 10-K and 10-Q filed with the SEC. We do not undertake any obligation to update forward-looking statements. We also expect to discuss certain financial measures and information that are non-cap measures as defined in the applicable SEC rules and regulations. Reconciliations to the company's GAAP measures are included in the earnings release filed on Form 8-K. Finally, we posted an earnings call presentation on our website, which provides additional context on our operational and financial performance. You can find this presentation on our investor relations page at www.intuitivemachines.com slash investors. Now I'll turn the call over to Steve Altomus.
Steve Altomus
Thanks, Stephen. We had an excellent start to the year, anchored by our successful IM1 mission and a full quarter of OMES III operations. Revenue was $73.1 million in the quarter, an increase of over 300% versus quarter one of last year. This was yet another historic feat for the company and showcased our continued growth trajectory. The standout accomplishment in the first quarter was Intuitive Machines' first successful lunar mission, which fundamentally disrupted the economics of landing on the moon and broke economic and technological barriers to enable this new burgeoning lunar economy. Thank you to the Intuitive Machines team for their execution during this quarter, and willingness to challenge traditional paradigms of exploration. Intuitive Machines' efforts and successes do not stand alone. On May 3rd, China launched Chang'e 6 to the far side of the moon on their way to potentially being the first nation to return samples from the far side. The steady drumbeat of China's success demonstrates the strategic importance of the moon and we hope is a call to action for the U.S. government and the public of what Intuitive Machines is building and the importance of stable funding and commercial utilization. We are at the forefront of this new space race and committed to our position as a national asset supporting the global endeavors in space. In this rapidly evolving landscape, technological advancement is paramount. We believe Intuitive Machines is standing at the forefront of this imperative. The success of our complete lunar program in the first quarter showcased the commercial viability and agility required to put the industry firmly in the space race, with the company standing as a first mover in this effort. In the weeks following our lunar landing, we assessed how our four-year investment in technology development performed. Our team at Intuita Machines completed a comprehensive review of vehicle and mission operations, and systems performance. While successful in our first landing and customer data delivery, we continue to strive for perfection in navigating to pinpoint landing accuracy on the surface with our autonomous precision landing and hazard avoidance technology. Each mission exercises and refines a complex set of algorithms that makes such autonomy possible in the harshest environments of the moon, namely the South Pole. The review resulted in software and hardware advancements that we believe expand our technical capability to track our vehicle accurately in space and land with 20 times better precision on our next mission. In addition, we reviewed our lunar distance RF communications and orbit determination capabilities and found several technical adjustments we expect will improve mission performance and best position the company to provide lunar communication services in support of future human missions. The technical improvements for IM2 are vertically integrated capabilities within the company that we can perform with little to no impact on our intended quarter four 2024 launch date or require any additional capital investment while we continue assembly of the flight vehicle. At its core, this comprehensive review confirmed that the technology we developed to provide lunar access and lunar data services is robust, and we are capable of making agile adjustments that improve our customer experience on the lunar surface. This tech capability expansion in autonomous vehicle operations, precision landing, and navigation is focused on the goal of adding command control communications and surface operations to our current lunar access services in a sustainable way. Beyond our first of three planned lunar missions, the April 3rd announcement of Intuitive Machines Lunar Terrain Vehicle Services Award moves us beyond the delivery of science and discovery payloads and onto heavier cargo delivery and surface systems development and operations. The LTV delivery system, the rover design itself, and both the autonomous and crewed operations represent the first critical piece of infrastructure for the Artemis campaign. The Lunar Terrain Vehicle Contract has a total program value of over $4.6 billion and is structured across multiple phased awards. In the first phase, starting in the days following Q1, the Intuitive Machines-led MoonRacer team will take the next year to create a preliminary design for delivery, deployment, and autonomous operations of the LTV. The second phase, which we expect to be awarded in mid-2025, falls for the vehicle's delivery and deployment demonstration. If awarded, the second phase, Intuitive Machines' current Lunar Production and Operations Center in Houston will be the epicenter for the design, development, manufacturing, assembly, and tests of the larger cargo lander and the LTV surface vehicle itself as the program matures. It's important to note the company's cargo class lander uses the same core technologies as our smaller Nova Sea lander, and the LTV services project allows for NASA and commercial service operations led by Intuitive Machines. Beyond the initial demonstration, another phase of the contract will move into continuous operations on the lunar surface over a multi-year performance period. For intuitive machines, the next critical chess piece in laying the foundation for a cislunar economy is in the command and control and communications infrastructure in and around the moon. Every commercial, government, or international mission to the moon requires a very high degree of autonomy. Autonomous operations with reliable command and control communications are essential for the expansion of this lunar economy. Intuitive Machines' technological advancements in autonomous vehicle operations and precision navigation will be the backbone of its command and control system. These core technologies are applied to our lunar communications satellites currently in production, and Intuitive Machines is eagerly anticipating announcement of a significant NASA award for communications data relay services and position navigation and timing services. We are expecting this contract award announcement in the second quarter. Earlier I mentioned that we broke economic and technical barriers that enable cislunar expansion. I believe we are progressing with the necessary investments in technologies to demonstrate the same unprecedented economics deeper into the solar system. Already, we are seeing the United States government and NASA increase their reliance on procuring commercially provided systems and services. The ability of the U.S. to leverage the ingenuity and innovation of its economic and technical industrial base to break the price barriers of traditional aerospace systems speaks to the difference in the overall U.S. strategy for cislunar expansion and possibly the most powerful competitive advantage for the U.S. in this global space race. During our last call, we mentioned NASA's 2024 budget reduction, noting that much of the $2 billion shortfall came from the Mars Sample Return Program. Since that update, the agency has sought innovative commercial designs to disrupt the cost of delivering Mars samples back to Earth. Intuitive Machines has engaged the agency and intends to provide a solution set based on technology architecture we have been developing for lunar material return. Finally, we continue to make progress towards our IM2 mission that we expect to launch later this year to our South Pole landing site, potentially becoming the first company to land on the moon twice in one year. We anticipate our third mission in 2025, with the final landing date still in discussions with NASA. We now have more certainty about NASA's second quarter 2024 award of the next CLPS mission, CP22, that calls for launch in the 2027 timeframe. This shift in mission timing creates an opportunity for Intuitive Machines to insert its first fully commercial mission after IM3 as its fourth mission to the moon. With the success of Q1 in the execution of our business plan and now the stability recognized through our pending proposal awards, Intuitive Machines is prepared to issue full-year revenue guidance for 2024. Steve Vontour will go through the details of the guidance. I am pleased to report on the tremendous growth and maturity we have seen over this quarter, and I'm excited about what the balance of this year holds for Intuitive Machines. With that, I'll turn the call over to Intuitive Machines Interim Chief Financial Officer Steve Vontour.
Steve Vontour
Thank you, Steve, and thanks to everyone joining us today. I'll begin by going through our first quarter 2024 results, followed by a few comments on our liquidity backlog and 2024 revenue guidance. Revenue accelerated in the quarter and was $73.1 million compared to $18.2 million in the first quarter of 2023, driven primarily by our first full quarter of OMS III revenues of just over $40 million and rounded out with revenue from our three NASA Eclipse and related mission payloads. We had a couple of one-time revenue impacts in the quarter. First, we had about $12 million related to the IM1 mission success milestones. We also recorded an additional $5.6 million of revenue combined on the IM2 and IM3 CLPS task orders relating to contract modifications as we work with NASA to finalize updates to mission timing, payloads, and landing sites for the remaining two missions. As mentioned earlier by Steve, we expect the IM2 mission to launch in late 2024 and IM3 sometimes in 2025. Gross margin continued to improve versus prior quarters and was a positive 12.2 million this quarter, driven primarily by the IM1 mission success milestones and modifications on the other two missions, as well as the OMS3 activity. Operating loss for this quarter was 5.4 million versus 14 million in the first quarter of 2023. The lower operating loss in the quarter was, again, driven primarily by the items noted above and were partially offset by higher J&A. SG&A ran higher in Q1 2024 and was primarily driven by incentive comp and overall headcount increases, including higher non-cash equity awards that did not exist in the first quarter of the last year. In addition, we saw increases in other expenses such as accounting and legal professional fees bids and proposal expenses, and rent on the new corporate headquarters as we continue to support the company's rapid growth. Included in the quarter were one-time charges totaling approximately $5.7 million. On the cash side, we ended Q1 with a balance of $55.2 million, driven primarily by the $50.6 million in proceeds from warrant exercises. This is the strongest quarter in cash position ever. and reflects our continued focus on working capital management, coupled with capital conservation and liquidity. We continue to believe that our Q1 ending cash balance is sufficient to fund operations through the end of the year. In addition, we expect to add cash reserves throughout the remainder of the year as we execute on planned operations and continue to win new business. As we previously stated, we will continue to be opportunistic in the capital markets for defensive capital and to further strengthen our balance sheet. Operating cash used was $6.4 million in the quarter with capital expenditures of $1.6 million, resulting in free cash flow for the quarter of an outflow of $8 million, which reflects the lowest quarter cash burn since going public. We continue to strive towards free cash flow breakeven as we remain disciplined with expenditures while prioritizing a higher margin business. We ended the first quarter with contracted backlog of $222.3 million, an expected decline of about $46.3 million as we executed on our CLPS and OMS contracts. We expect backlog to grow during the remainder of the year, driven by key program awards, including LTV and the next OMS III task orders, coupled with new award decisions, including NSNS and CP22. Moving on to our Outlook for the Year, as Steve said, we had a great start with record revenues in the quarter. The recent LTBS award and the solid opportunities expected to be awarded in the next couple of quarters gives us confidence in providing a 2024 revenue outlook of between $200 and $240 million, representing an increase of 2.5 to 3.0 times prior year revenues. Overall, this was a record quarter both financially and operationally for Intuitive Machines. This strength gives us confidence to provide an expanded revenue outlook for the year, which showcases the company's tremendous opportunity for continued growth. We look forward to executing on this growth throughout the year. With that, operator, we are now ready for the questions.
Operator
Thank you, sir. Ladies and gentlemen, just a reminder, if you would like to ask a question, press star and then one now. The first question comes from the line of Suji De Silva with Roth MK. Please go ahead.
Suji De Silva
Hi, Steve. Congrats on the progress here. In talking about the guidance for 24, the backlog, I'm curious what the period covered there and how much of that covers your 24 new guidance of $240 million.
Steve Vontour
Hey, Suji. Thanks. Before the Backlog component, we have about 80% of our backlog sitting right now at about $222 million. We believe about 80% of that backlog will be burned through the remainder of the year.
Suji De Silva
Okay, that's great. And then additionally with that guidance for 24, are you assuming a new contract wins in that guidance or is it supported by existing wins and would any additional wins be upside to the
Steve Altomus
Yeah, hey there, Suji. The way we look at that is we probability weight the awards that we have in pending. So what that includes in the lower end of the guidance is the mod submission two that we're negotiating with NASA. But there's upside that takes us to the higher end of the range and maybe beyond. with a mod to IM3 on the negotiated landing time, the NSNS award, the next CLPS award, and then an IM2 success payment. So all of those are probability weighted, and that's what gives us the range that Steve described. Okay.
Suji De Silva
Appreciate the effort there. And then lastly, first time you guys mentioned potentially all commercial mission inserted between, I guess, IM3, IM4. I'm wondering if that would, Steve, in concept have an anchor customer with some ancillaries, or whether it would be equally kind of portioned out in the payloads across sort of a series of customers, what the general direction of that would be.
Steve Altomus
Yeah, right now we're aggregating a set of payloads, waiting to get to essentially critical manifests where we can go forward with the purchase of a booster. And so those payloads come in fairly evenly sized, and occasionally we'll get one that's a little bit larger. And in this case, that's what we're negotiating. That gets us to the point where we can actually declare we have this commercial mission. So it'll be kind of a mix, to not answer your question directly, but it's kind of a mix. as we go forward from smaller to medium to maybe a large payload. And that will round out the compliment.
Suji De Silva
That sounded fairly even. Thanks, Steve. Thanks, guys.
Operator
Thank you. Next question comes from the line of Josh Sullivan with the Benchmark Company. Please go ahead.
Josh Sullivan
Hey, good morning. Good morning, Josh.
Josh
Good morning, Josh. As far as the cash burn here, you know, down substantially year over year, but what are the big draws in the year end?
Steve Altomus
I missed the last part, Josh.
Josh
The big draws. I'm just trying to understand, you know, cash burns down here. You know, you're stating that you think you have a good cash balance here to get you through the end of the year. I'm just curious, you know, what are the large tentpoles, you know, for cash burn as we work into the end of the year?
Steve Altomus
Yeah, we run the indirect support at about $3.3 million a month is our indirect burn. And as part of cost of goods sold, the biggest payments or drawdown would be the booster payments for each of our missions. We have booster payments for IM2 and IM3 on the books for this year. And so I'd say those are the biggest ones that we have as accounts payable. Got it.
Josh
And then, you know, in your comments there, you mentioned the Chinese lunar mission. You have the Indians, you know, looking at their own sample return here. You know, what's your view of that strategic tempo or that conversation in the U.S. as other nations ramp up their lunar ambitions? You know, is it picking up, you know, these missions viewed as competition, or is NASA really moving at their own pace?
Steve Altomus
Well, I think we're fortunate, as I said, as the U.S. economy, where we have – NASA has, or the U.S. government, has kind of sparked the U.S. commercial economy to break the price power of what it takes to go to the moon. And if we can install an annual cadence of missions to the moon, we will, while it feels like we might be behind in that we aren't flying as frequently or as complex missions as China may be at this point, we'll catch up quickly as we have many more shots on goal. So I think the CLPS program in particular lends itself to building a bigger supply chain and base for us to commercialize the moon. While the heavy lift activity is occurring, which is of strategic interest, and heavy lift SLS might be moving to the right, CLPS can fill in with cargo missions to put the critical elements on the surface ahead of the humans. And I think that's where NASA's going and where the government's going. And we're happy to provide that service for them.
Josh
Great.
Operator
Thank you for your time. Thanks, Josh. Thank you. Next question comes from the line of Andres Shepherd with Cantor Fitzgerald. Please go ahead.
Andres Shepherd
Hey, everyone. Good morning. Congratulations on the quarter, and thanks for taking our questions. I wanted to maybe ask, you know, how should we be thinking about margins for the IM Mission 2 and also maybe for the OMS contract? Just curious if you can maybe point out or give some color there as to kind of what kind of margins might you expect? Thank you.
Steve Vontour
Well, Andre, thanks for the question. So as we've reported, historically, IM2 and IM3 emissions are lost projects or close to break even. So as we work the rest of that, those operations off of those contracts, we won't have any margin on that. OWMS margin is running in the 5% range on a consolidated basis. Again, don't expect any future losses on the IM2 or 3 contracts, but we may have some bumps to that with the final success fees, successful loss of fees like we had on IM1 once we land.
Andres Shepherd
Got it. That's super helpful. Appreciate that. And maybe just a quick follow-up. As it pertains to the lunar terrain vehicle contract, Can you just remind us what are maybe the next catalysts there? And I guess is that program, is the expectation that it's going to get narrowed from the three companies that have bid to either one or two? Just trying to understand how you might see that one playing out. Thank you.
Steve Altomus
Yeah, we have a period of about a year, 12-month period, 10- to 12-month period, to do the preliminary design of the delivery system and the LTV, as I stated. There's three companies that are doing that over the next year, roughly on the order of a $30 million task order we expect later this month, issued by NASA to kick that off. But then what will happen is there will be a demonstration portion to actually take and fully develop the design, build it, and deliver it to the moon as a demonstration. NASA has indicated that that could be multiple award. Right now, they're thinking possibly one, maybe two out of the three companies would go forward with that demonstration. However, let me point out that that's a $4.6 billion contract over 15 years, and it's written so broadly that there are a number of services that can be purchased under that multi-award IDIQ contract. And those services could include things like data sales or communications that go with and complement the LTV itself and the demonstration. So the bigger task order, though, is that one that's issued mid-2025 next year and we compete for the demonstration.
Andres Shepherd
Got it. Thanks, Steve. That's very helpful and very exciting. Congrats again on the quarter. I'll pass it on. Thank you.
Operator
Thank you. Next question comes from the line of Griffin Boss with B Riley Securities. Please go ahead.
Intuita Machines
Hi, good morning and thanks for taking my questions. I'll start on LTV. Can you talk more broadly about what NASA potentially will require from the LTV in terms of capacity or how much time NASA expects to utilize these LTVs and then in turn the possible leftover availability to leverage for commercial use cases? And then related to that, if you've received any initial interest already from potential commercial customers looking to use any excess capacity for the LTV?
Steve Altomus
Well, yeah, NASA plans to use the mission for both autonomous science and discovery, where they fly science payloads to use the LTV mobility capability to gather necessary science, as well as use it for astronauts when they're there present on the surface, moving around cargo and logistics and collecting geological samples and things like that. So there is a plan. I think the overarching plan ranges from about six to seven months a year of NASA use and, you know, five to six months of commercial use, which is quite exciting that, in this case, Intuita Machines would own the infrastructure and be able to operate the infrastructure while NASA's not there. That's quite unique in terms of the contract and the service that we provide. We have had interest for individuals or companies that want to do excavating and mining and harvesting of materials on the surface and caching those materials for later return to Earth. So that's quite interesting. And there was a number of, in our commercialization plan that we submitted to NASA, there were a number of letters of interest from companies I think we had on the order of 10 companies interested in using the LTV should we be awarded the contract. So quite a bit of interest, and I think as we move forward and it gets more attention, that interest will only grow.
Intuita Machines
Got it. Great. Thanks for the color there, Steve. And then more broadly, there's a lot of talk about SpaceX's Starship for various reasons, obviously, but I'd be curious to hear your thoughts on what a successful operational Starship could mean for the future of lunar transport in general and maybe for Intuitive specifically?
Steve Altomus
Yes, as I mentioned in a previous question, I think what's of strategic importance to the United States is the heavy lift capability. And whether that heavy lift comes in the version of the Space Launch System or the Starship it will be a critical component to sustain human presence on the moon. What's nice, though, is that Intuitive Machines is complementary to Starship. And Starship, while it has a very heavy cargo and a way to aggregate multiple mission elements on a single mission to the moon, we'll have regular cargo deliveries of smaller sizes to the moon and in various locations around the moon that will keep the cadence of missions up and will be enough to really feed a community of smaller delivery service companies that will be putting cargo and critical systems and satellites around the moon and on the moon.
Intuita Machines
Okay, excellent. And then just if I could sneak one more in there. Without putting words in your mouth, Steve, you talked about the first potential fully commercial mission after IM3. You said you were aggregating payloads. Would it be right to assume then that you're seeing enough demand today to fulfill a fully commercial mission, or are you expecting – to get whatever incremental demand that would warrant a fully commercial mission within the next two years?
Steve Altomus
We have signed contracts with multiple payloads that we've been aggregating and holding for this commercial mission. And as those come in and as we negotiate those contracts, we get to a point where we have enough to declare a mission. And those negotiations are signed contracts and negotiations underway that give us the opportunity to declare a commercial mission today. We expect more coming in over the next two years, and this gap between the last competed CLPS mission and CP22, which is the next one, is that two-year gap that we want to fill so that we maintain this cadence of missions going to the moon. We see a lot of commercial interest and international interest in terms of signed contracts to fly to the moon, and we see that growing continually over the next couple of years.
Intuita Machines
Excellent. Great. I appreciate you taking my questions. Thanks, everyone.
Operator
Thanks, Griffin. Thank you. Next question comes from the line of Austin Moeller with Canaccord Generity. Please go ahead.
Josh Sullivan
Hi. Good morning. Nice quarter. Just my first question here. Are all the S4 ring slots on IM2 and IM3 currently occupied? And if not, are you still seeking payloads to put on there before integration?
Steve Altomus
So all of the slots, good question, Austin. Good to hear from you. All of the slots on IM2 are filled and we're at max capacity and sold out. We still have some availability on an ESPA ring slot on IM3 that we're talking with payload, potential payload customers to fill that slot prior to that mission.
Josh Sullivan
Great. And just to follow up, what's currently the status of the first con relay satellite that was supposed to be riding aboard IM2? How should we be thinking about that?
Steve Altomus
So what we've done is we've combined, we went back and looked at that in anticipation of an NS award, which I mentioned should be coming out in the second quarter, where hopefully we're awarded that mission. We've built out a much better capability on CON2, or our second communications satellite, and found that the first satellite wasn't compliant with the requirements that NASA, we anticipate coming out of NASA, So we built a better or are building a better bus and comm relay on CON2, our second satellite, and we'll fly that on IM3.
Josh Sullivan
Excellent. Thanks for the details. Thanks, Austin.
Operator
Thank you. Next question comes from the line of Edison Yu with Deutsche Bank. Please go ahead.
Edison Yu
Hey, good morning. Thank you for taking our questions. What on the geopolitical angle, how do you think this aspect is sort of playing out, especially with the DOD's view on the system or economy at the moment?
Steve Altomus
Yeah. I missed the last part Edison detailed off there. The DOD's interest in this space race? Is that your comment?
Andres Shepherd
The system or economy.
Steve Altomus
oh okay yeah um well i think there's some uh as stated by a number of the uh do the leadership that there's a lot of uh interest in in what's going on in geo and xgo and that maintains their uh focus and priority at this point and i think as the uh traffic model increases in and around the moon that will then uh gain some priority but they're going to need to see more than one or two missions to the moon a year before they'll be able to reallocate budgets towards cislunar economies. So we're seeing the Space Force appetite for cislunar capabilities slowly growing over the next couple of years. And then, like I said, as the traffic model increases, that appetite for additional information and space traffic management and space domain awareness will increase.
Edison Yu
I understand. And just kind of more longer term, and brought a question on LTV, how do we think this sort of fits into the company's overall vision and strategy when we couple that with the upcoming NSNSN and CP22 awards?
Steve Altomus
So I think with respect to LTV, it's part of the strategy to, if I think about it, delivery, to be able to take things to the surface, to be able to communicate, essentially command and control communications around the moon is of critical interest, including navigation. And then the ability to do extreme mobility. And LTV gives you that. And because we can then move around the surface, we can begin to build infrastructure that supports sustained human presence on the moon. And so our company has built an ecosystem of capability in and around the moon in terms of delivery, command and control, communications, and extreme mobility. And that's how that all fits together. And we're anxiously awaiting, like I said, that last chess piece in the NSNS contract, to be able to deploy our data relay satellites and provide that service back to the government for communications around the moon.
Edison Yu
Great. Thank you.
Operator
Thank you, Edison. Thank you. There are no further questions. I would like to hand the floor back to Intuitive Machine CEO, Steve Altomus, for closing remarks.
Steve Altomus
Well, thank you, everybody, for attending and joining us today on the call. As you heard, we've had a historic first quarter, both operationally and financially, and we expect to build on that momentum throughout the year. I look forward to talking to you in the future. Thank you.
Operator
Thank you. This concludes today's teleconference. You may disconnect your lines at this time. Thank you for your participation.
Disclaimer