This deep into 2022, you might think that SPAC deals were over, done, dusted, forgotten. And yet, TechCrunch recently reported that Intuitive Machines is pursuing a SPAC-led debut to the public markets as we speak.
You might not be familiar with the company if you don’t keep close tabs on the space business. Let me catch us all up.
Intuitive Machines is combining with Inflection Point Acquisition Corp. in a deal that will see the moon-focused company valued at $1.15 billion in equity terms and $815 million when we consider its anticipated enterprise value.
The gap between the two is the company’s anticipated post-combination cash on hand; to reassure possible investors that that figure will not evaporate through redemptions as the combination date nears, Intuitive Machines has secured $55 million of what it calls “committed capital,” or funds that are pledged to non-redemption agreements or external funding (PIPE) from “entities affiliated” with the SPAC in question.
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Intuitive Machines will hit the public markets as a unicorn if things go as planned. A unicorn in space? Given the reported value of SpaceX, Intuitive Machines won’t be the first. But it’s also one of a sector that isn’t hyperdense, like, say, enterprise software.
How will Intuitive Machines live up to its price tag as a public company and how much money is there in space-related work? Let’s find out!
To the moon!
Today, Intuitive Machines generates the bulk of its revenues from activities it calls “Lunar Access Services,” with a nibble of top line this year anticipated to come from “Space Products and Services.” Starting in 2023, Intuitive Machines expects revenues from”Lunar Data Services” and “Orbital Services” as well.
Let’s get some definitions in place:
- Lunar Access Services: Landing stuff on the moon via Intuitive Machines’ lander series in the service of Commercial Lunar Payload Services (CLPS) contracts from NASA, the U.S. space agency.
- Space Products and Services: A grab bag of things, per the company, including “developing propulsion systems,
servicing engineering contracts, and NASA awards for lunar mobility vehicles (rovers & drones), power plants, and human habitation systems.” - Lunar Data Services: Data to and from the moon.
- Orbital Services: Satellite care (servicing, refueling) and perhaps “orbital debris removal,” per the Intuitive Machines investor deck.
Got all that? Cool, right? But is any of it, well, real? The answer is, partially, yes. Intuitive Machines is not a company pursuing a SPAC-led debut on the public markets with slim to no revenues. Instead, it actually has a notable history of revenue growth:
- 2018 revenue: $8 million.
- 2019 revenue: $20 million.
- 2020 revenue: $44 million.
- 2021 revenue: $73 million.
Looking ahead, Intuitive Machines expects revenue to grow somewhat modestly in 2022 to $102 million, and then scale rapidly from there as other business categories pick up traction:
Image Credits: Intuitive Machines investor deck
As you can see, the current business of the company (“Lunar Access Services”) grows at a pretty healthy clip over time, while other categories of revenue may quickly accrete, boosting top-line additions rather rapidly. Let’s talk a bit more about where all that demand for the company’s products and services is coming from.
National security, national pride
The United States once raced the Soviet Union to the moon, with an international space race playing out as part of a larger cold war between market and planned economies more generally. Today we’re living through a repeat of the same, albeit with the United States up against China, once again setting up a race between open and closed countries, speaking loosely.
Intuitive Machines stresses in its investor deck that there is a “21st century space race underway,” highlighting Russian and Chinese efforts in the area to expand their extraplanetary capabilities.
The United States is not sitting idly by, however. An effort called The Artemis Program wants to get humans back to the moon by 2025, and per Intuitive Machines, “eventually achieve human exploration of Mars.” Hell yes! NASA, in its own language, calls the effort the “first step in the next era of human exploration.”
Like anything involving space, it’s a big push to get done. That’s where Commercial Lunar Payload Services (CLPS) comes into play, an endeavor that Intuitive Machines explains to its backers as “created to deliver scientific instruments and equipment to the moon to gather data in preparation for the human landing.” That’s where the Intuitive Machines lander series comes into play, with the company consuming CLPS contracts to help get stuff, well, to the moon.
It’s all very cool, frankly, but do the above efforts constitute a good business? Let’s take a peek at the forecast.
The data we have
Sadly, after digging through all related Securities and Exchange Commission filings and related materials, we were unable to scrounge up historical financial results for Intuitive Machines past what was shared in the investment deck (the above-listed revenue details). Here’s that dataset — which only looks forward, mind — for our consumption:
Image Credits: Intuitive Machines investor deck
As with many SPAC investor decks, this one anticipates rapid revenue expansion. However, it also anticipates gross margins to start slim and then greatly expand. This is notable, in that it tells us that Intuitive Machines’ gross margins today are more than lackluster and that it will take a few years for the company’s gross profit to begin to limit its overall profitability; the company expects losses to rise next year before starting to fall in 2024, we infer from its EBITDA forecasts.
Moving from 10% gross margins to 31% gross margins in two years is massive improvement, implying that the share of revenue that Intuitive Machines expects to be able to use to cover operating costs will improve in the near future. This makes revenue growth at the company a fraction of anticipated gross profit expansion, a fact that could bode well for longer-term profitability.
Speaking of which, Intuitive Machines reports it “is targeting a 3-5 year gross margin of 52%+.” That’s pretty good, actually; as the company’s revenue is expected to rapidly scale into the hundreds-of-millions range, a greater than 50% gross margin would generate material gross profit that the company could use to fund itself. Still, with the company expecting $102 million in top line this year at just a 10% gross profit margin, we’re a bit skeptical of how reasonable its projections really are. We’ve seen similarly exciting SPAC forecasts come up short time and again in the last few years.
It’s up to Intuitive Machines to convince investors its product road map is solid, its market is expanding and that it can live up to its product hopes — but also that NASA’s Artemis effort continues to well, happen. The U.S. government is not famous today for its high level of functioning.
Still, it’s worth saying that Intuitive Machines’ historical revenue growth is solid and its geopolitical argument valid; there is rising competition between leading economies (USA, China), and some regional powers clinging to prior influence (Putin’s Russia). Perhaps this will all math out for the upstart space company, and it can turn leaving the gravity well into buckets of cash.