Happy Sunday Friends,
In recent months, the once-thriving Space SPAC ecosystem has faced significant deflation, brought on by operational hurdles, delays, and challenges in raising funds. Over the last three years, more than a dozen space-focused companies went public through SPACs, yet the majority now trade at a significant discount to their deal valuation. Amidst this challenging landscape, lunar-focused space company Intuitive Machines is the latest to debut last month through a SPAC deal, which valued the company at close to $1 billion. Can Intuitive Machines overcome the challenges that have plagued a majority of its predecessors and carve out a unique position in the market?
Gravity-Defying Ambitions
Intuitive Machines was founded in 2013 by Stephen Altemus, Kam Ghaffarian, and Tim Crain. Headquartered in Houston, Texas, the company has grown to employ around 140 people and is currently completing its lunar program, which aims to provide lunar surface access, lunar orbit delivery, and communications at lunar distance.
Since its inception, Intuitive Machines has focused on developing a range of space technologies across four main business units: Lunar Access Services, Lunar Data Services, Orbital Services, and Space Products and Infrastructure. These units have allowed the company to work on a variety of projects, including propulsion systems and lunar vehicles. The company has designed airborne drones and spacecrafts such as the Universal Reentry Vehicle (URV), the Nova-C lunar lander, and other flight instrument systems.
In November 2018, the company was selected by NASA as one of the nine companies granted the right to bid on the Commercial Lunar Payload Services program (CLPS). Their lander, Nova-C, was proposed as the first lander of the CLPS program, which focuses on the exploration and utilization of the Moon's natural resources.
The company has built on top of this success by winning three NASA contracts under the Commercial Lunar Payload Services program, worth a combined total of $233 million. The first mission, known as IM-1, is slated for the second quarter of 2023 (sometime in June) and aims to deliver a combination of science and technology payloads to the moon's surface using the company's Nova-C lunar lander. Intuitive Machines has ambitious plans for annual cargo flights to the moon, facilitated by contracts with SpaceX to launch its payload using Falcon 9 rockets.
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Moonshot Mavericks
There are several significant tailwinds that could propel Intuitive Machine's revenues in the coming years. Key among them is the investments being made by the US government to once again explore space. The space race has intensified in recent years, driven by geopolitical developments involving russia, China, and other nations.
This renewed interest in lunar exploration has prompted increased government spending on moon launches, providing a substantial market opportunity for Intuitive Machines to capitalize on with its lunar-focused technologies and services. Furthermore, the company's diversification strategy could play a significant role in its future growth prospects. Intuitive Machines is venturing into the Earth-orbital products and services market, a $120 billion total opportunity over the next decade.
As the cislunar economy develops, the company's revenue is expected to transition from government contracts to substantial commercial services sales, broadening its market reach. Finally, the pedigree of Intuitive Machines' leadership team is a key asset in driving the company's success.
Boasting extensive experience from organizations such as NASA, Johnson Space Center, Project Morpheus, and Blue Origin, the team's expertise and industry knowledge give Intuitive Machines a competitive edge as they navigate the challenges of the space industry and the public market. These growth catalysts, when combined with the company's existing developments, paint a promising outlook for Intuitive Machines in the rapidly evolving lunar space market.
Financials and Valuations
Intuitive Machines reported $73 million in revenue in 2021 and $102 million in 2022. By 2024, Intuitive Machines expects its revenues to soar to $759 million, driven by diversified services for the moon, including landers, data access, infrastructure, and in-orbit servicing.
The company posted an EBITDA loss of $14 million for 2022 and is now forecasting that this loss will increase to $46 million in 2023 before breaking even in 2024. Despite the anticipated growth, Intuitive Machines faces potential liquidity challenges due to receiving far less cash from its merger than initially forecasted.
Intuitive Machines initially expected that the deal would generate gross proceeds of as much as $382 million, but mass redemptions from shareholders meant that the company was left with around $103 million in cash. This reduced cash infusion from the SPAC deal might lead to liquidity challenges, especially considering the company does not expect to reach break-even until 2024.
Intuitive Machines trades at close to $8.80/share, giving it a market cap of $760 million. This implies that the company currently trades at a Price/Sales ratio of close to 7.45x, which is a significant premium considering the company doesn't anticipate turning profitable over the next few years. Future gains in the company's stock will largely hinge on its ability to consistently hit operational and commercial milestones (which as seen recently have been a mixed bag).
Bottom Line
Intuitive Machines finds itself in a unique position to capitalize on the opportunities and overcome the challenges that have plagued many of its predecessors. The company's focus on lunar exploration and diversified services aligns with the growing interest and investment in space, driven by both governmental and commercial stakeholders. Ultimately, the company's success will hinge on its ability to execute its vision, leverage its technology, and overcome the liquidity and operational challenges that have largely plagued so many before. The company currently trades at a significant premium, but commercial/operational success in the next few quarters could help justify this valuation.
Source: Lunar Pioneers