# Spire Global, Inc.: Form 10-Q for the period ended Jun 30, 2023

- Company: [Spire Global, Inc.](/companies/spir.md) (CIK 1816017)
- Form: 10-Q
- Filed: 2023-08-09
- Accepted by EDGAR: Aug 9, 2023, 20:20 ET
- Period: 2023-06-30
- Accession: 0000950170-23-040632
- Inline XBRL: yes
- Main document: https://www.sec.gov/Archives/edgar/data/1816017/000095017023040632/spir-20230630.htm
- All documents and exhibits: https://www.sec.gov/Archives/edgar/data/1816017/000095017023040632/

## Figures reported in this filing

Standardized XBRL line items for the period ended 2023-06-30.

| Line item | Period | Value | XBRL concept |
| --- | --- | ---: | --- |
| Revenue | 3 months, 2023-04-01 to 2023-06-30 | $26.5m | us-gaap:RevenueFromContractWithCustomerExcludingAssessedTax |
| Revenue | 6 months, 2023-01-01 to 2023-06-30 | $50.7m | us-gaap:RevenueFromContractWithCustomerExcludingAssessedTax |
| Cost of revenue | 3 months, 2023-04-01 to 2023-06-30 | $9.6m | us-gaap:CostOfRevenue |
| Cost of revenue | 6 months, 2023-01-01 to 2023-06-30 | $20.0m | us-gaap:CostOfRevenue |
| Gross profit | 3 months, 2023-04-01 to 2023-06-30 | $16.9m | us-gaap:GrossProfit |
| Gross profit | 6 months, 2023-01-01 to 2023-06-30 | $30.7m | us-gaap:GrossProfit |
| Research and development | 3 months, 2023-04-01 to 2023-06-30 | $9.8m | us-gaap:ResearchAndDevelopmentExpense |
| Research and development | 6 months, 2023-01-01 to 2023-06-30 | $19.4m | us-gaap:ResearchAndDevelopmentExpense |
| Operating income | 3 months, 2023-04-01 to 2023-06-30 | −$11.0m | us-gaap:OperatingIncomeLoss |
| Operating income | 6 months, 2023-01-01 to 2023-06-30 | −$25.5m | us-gaap:OperatingIncomeLoss |
| Interest expense | 3 months, 2023-04-01 to 2023-06-30 | $4.7m | us-gaap:InterestExpense |
| Interest expense | 6 months, 2023-01-01 to 2023-06-30 | $9.3m | us-gaap:InterestExpense |
| Income tax | 3 months, 2023-04-01 to 2023-06-30 | $213.0k | us-gaap:IncomeTaxExpenseBenefit |
| Income tax | 6 months, 2023-01-01 to 2023-06-30 | $482.0k | us-gaap:IncomeTaxExpenseBenefit |
| Net income | 3 months, 2023-04-01 to 2023-06-30 | −$16.3m | us-gaap:NetIncomeLoss |
| Net income | 6 months, 2023-01-01 to 2023-06-30 | −$33.9m | us-gaap:NetIncomeLoss |
| Diluted EPS | 3 months, 2023-04-01 to 2023-06-30 | −$0.11 | us-gaap:EarningsPerShareDiluted |
| Diluted EPS | 6 months, 2023-01-01 to 2023-06-30 | −$0.23 | us-gaap:EarningsPerShareDiluted |
| Basic EPS | 3 months, 2023-04-01 to 2023-06-30 | −$0.11 | us-gaap:EarningsPerShareBasic |
| Basic EPS | 6 months, 2023-01-01 to 2023-06-30 | −$0.23 | us-gaap:EarningsPerShareBasic |
| Diluted shares (weighted) | 3 months, 2023-04-01 to 2023-06-30 | 147,751,593 shares | us-gaap:WeightedAverageNumberOfDilutedSharesOutstanding |
| Diluted shares (weighted) | 6 months, 2023-01-01 to 2023-06-30 | 146,271,668 shares | us-gaap:WeightedAverageNumberOfDilutedSharesOutstanding |
| Operating cash flow | 6 months, 2023-01-01 to 2023-06-30 | −$22.6m | us-gaap:NetCashProvidedByUsedInOperatingActivities |
| Capital expenditure | 6 months, 2023-01-01 to 2023-06-30 | $12.7m | us-gaap:PaymentsToAcquirePropertyPlantAndEquipment |
| Cash and equivalents | at 2023-06-30 | $43.1m | us-gaap:CashAndCashEquivalentsAtCarryingValue |
| Current assets | at 2023-06-30 | $97.8m | us-gaap:AssetsCurrent |
| Total assets | at 2023-06-30 | $268.4m | us-gaap:Assets |
| Current liabilities | at 2023-06-30 | $40.4m | us-gaap:LiabilitiesCurrent |
| Total liabilities | at 2023-06-30 | $174.8m | us-gaap:Liabilities |
| Long-term debt | at 2023-06-30 | $119.8m | us-gaap:LongTermDebtNoncurrent |
| Shareholders' equity | at 2023-06-30 | $93.5m | us-gaap:StockholdersEquity |

## Management's discussion and analysis

As filed, 92,827 characters.

*The following discussion and analysis of our financial condition and results of operations should be read in conjunction with the condensed consolidated financial statements and related notes thereto included in this Quarterly Report on Form 10-Q and the audited consolidated financial statements included in the Annual Report on Form 10-K for the year ended December 31, 2022 (the “2022 Form 10-K”). This discussion contains forward-looking statements that involve risks and uncertainties. Our actual results could differ materially from those anticipated by these forward-looking statements as a result of many factors. Factors that could cause or contribute to such differences include those identified below and those discussed in the section titled “Risk Factors” in the 2022 Form 10-K and in this Quarterly Report on Form 10-Q. Our historical results are not necessarily indicative of the results that may be expected for any period in the future.*

### Overview

We are a global provider of space-based data, analytics and Space Services, offering unique datasets and powerful insights about Earth from the ultimate vantage point—space—so that organizations can make decisions with confidence, accuracy and speed. We own and operate one of the world’s largest multi-purpose satellite constellations in low earth orbit. Our multi-receiver satellites obtain Automatic Identification Systems ("AIS") data from vessels, Automatic Dependent Surveillance–Broadcast (“ADS–B”) data from aircraft and radio occultation (“RO”) data utilizing Global Navigation Satellite Systems ("GNSS") satellites. Our fully deployed constellation consists of more than 100 satellites, and we believe it is also one of the world’s largest “listening” constellations, observing the earth utilizing radio frequency sensors. We enrich this hard-to-acquire, valuable data with analytics and predictive solutions, providing data as a subscription to organizations around the world so that they can improve business operations, decrease their environmental footprint, deploy resources for growth and competitive advantage and mitigate risk.

Our constellation covers the earth more than 200 times per day on average and our global ground station network performs thousands of contacts each day on average, reliably and resiliently collecting data with low latency. Our cloud-based data infrastructure in aggregate processes three terabytes of data each day on average, in creating our proprietary data analytics solutions. We provide customers these solutions through an application programming interface (“API”) infrastructure. The global proprietary data that we collect includes data that can only be captured from space with no terrestrial alternatives. We collect this data once and can then sell it an unlimited number of times across a broad and growing set of industries, including weather, aviation and maritime, with global coverage, real-time and near real-time data that can be easily integrated into our customers’ operations. Our Space Services offering enables our customers, commercial and government organizations, to go from idea to orbit simply, reliably, quickly and cost efficiently. We launch software, payloads and dedicated satellite constellations for our customers that we own and manage on their behalf. Just like our proprietary data and analytic solutions, our customers subscribe to the data that is collected through an API.

From our founding in 2012, we have set out to leverage data from space to solve problems on Earth. We aim to help inspire, lead, and innovate the business of space-based data. Today, our proprietary data and solutions are being used to help commercial and government organizations gain the advantage that they seek to innovate and solve some of the world’s greatest challenges, like climate change and global security. In November 2021, we acquired exactEarth (the "Acquisition"), a leading provider of global maritime vessel data for ship tracking and maritime situational awareness solutions in Canada.

Our platform applies our value-add insights and predictive analytics to this proprietary data to create commercially valuable datasets. We offer three data solutions to our customers, which vary in complexity and price and can be delivered in near real-time via our API that can be easily integrated into our customers’ business operations:

- ***Maritime***: Precise space-based data used for highly accurate ship monitoring, ship safety and route optimization.
- ***Aviation***: Precise space-based data used for highly accurate aircraft monitoring, aircraft safety and route optimization.
- ***Weather***: Precise space-based data used for highly accurate weather forecasting.

For each data solution, we have the capability to offer customers a variety of features and additional value. The four forms of data we monetize are:

- ***Clean data***: Clean and structured data directly from our proprietary nanosatellites;
- ***Smart data***: Clean data fused with third-party datasets and proprietary analysis to enhance value and provide insights;
- ***Predictive solutions***: Big data, AI, and ML algorithms applied to fused data sets to create predictive analytics and insights; and
- ***Solutions***: Data-driven actionable recommendations to solve specific business problems, utilizing the full spectrum of our data analytics suite.

These value-add data features allow customers to solve various use cases and provide a path to expand throughout the customer’s relationship.

As our fourth solution, we are also pioneering an innovative business model through our Space Services solution. We leverage our fully deployed infrastructure and large-scale operations to enable our customers to obtain customized data through our API. Our customers can begin receiving data in less than a year after engaging with us and receive data by entering into a subscription agreement. Our Space Services offering provides our customers with fast, scalable and reliable access to space.

Our solutions are offered to customers across numerous industries and we not only have the opportunity to upsell within each one, but we also have the opportunity to cross-sell among all our solutions.

We provide our solutions to global customers through a subscription model or project-based solutions. We currently sell directly to end customers and utilize reseller partners when beneficial.

### Highlights from the Three Months Ended June 30, 2023

- Our revenue was $26.5 million, an increase of 37% from the three months ended June 30, 2022.
- Our annual recurring revenue ("ARR") at June 30, 2023 was $112.8 million, an increase of $27.5 million, or 32%, from our ARR at June 30, 2022.
- We ended the quarter with 813 ARR solution customers under contract, a net increase of 32 customers from March 31, 2023. ARR net retention rate for the three months ended June 30, 2023 was 112%, up from 108% (excluding data from the Acquisition, referred to as our "organic" ARR net retention rate) in the same quarter a year ago.
- Our gross margin increased to 64%, an improvement of 13 percentage points from the three months ended June 30, 2022.
- Our operating loss was $11.0 million, an improvement of $5.4 million from the three months ended June 30, 2022.
- We signed an agreement with OroraTech to build, launch and operate an eight-satellite constellation dedicated to global temperature monitoring. OroraTech has successfully operated a precursor sensor in orbit on a satellite designed, built and operated by Spire for 18 months.
- We signed a renewed and increased contract from NASA as part of its Commercial Smallsat Data Acquisition program. The contract was increased to $6.5 million for one year of Earth observation data including: GNSS Radio Occultation, which can be assimilated into weather models; GNSS-Reflectometry, which can measure sea ice, soil moisture, and ocean surface wind speed; and space weather measurements.
- We recently announced that Navidium will integrate Spire’s data into its Voyage Optimization & Environmental Compliance products to help users track vessel position along a route, reoptimize routes based on various conditions and automatically record environmental compliance data. Navidium is also leveraging Spire’s historical and real-time AIS data to train machine learning algorithms.

### Macroeconomic and Geopolitical Impact

Over the past two years, we have been impacted by the macroeconomic environment, such as fluctuations in foreign currencies, the COVID-19 pandemic, increasing interest rates and the Russian invasion of Ukraine.

A weaker U.S. dollar relative to our foreign subsidiaries' local functional currencies for the three months ended June 30, 2023 as compared to the three months ended June 30, 2022 impacted our revenue, since approximately one-third of our sales are transacted in foreign currencies, though it negatively impacted our expenses, since a majority of our employees reside in countries outside of the United States.

The macroeconomic environment has caused existing or potential customers to re-evaluate their decision to purchase our offerings, at times resulting in additional customer discounts, extended payment terms, longer sales cycles, and a few contract cancellations.

Increasing interest rates in the three months ended June 30, 2023 resulted in higher interest expenses, as our credit facility is based on a floating interest rate. The Russian invasion of Ukraine and the continued conflict created additional global sanctions, which at times caused scheduling shifts or launch cancellations by third-party satellite launch providers, which has delayed revenue recognition of certain sales contracts.

If any of these factors continue or worsen, and/or if new macroeconomic or geopolitical issues arise, our results and financial condition could be further negatively impacted. We cannot predict the timing, strength, or duration of any economic slowdown, downturn, instability, or recovery, generally or within any particular industry or geography. Any downturn of the general economy or industries in which we operate would adversely affect our business, financial condition, and results of operations.

### Key Factors Affecting Our Performance

We believe that our current and future performance depends on many factors, including, but not limited to, those described below. While these areas present significant opportunity, they also present risks that we must manage to achieve successful results. For additional information about these risks, see the section titled “*Risk Factors”* in the 2022 Form 10-K and in this Quarterly Report on Form 10-Q. If we are unable to address these risks, our business and results of operations could be adversely affected.

### Expansion of and Further Penetration of Our Customer Base

We employ a “land and expand” business model that focuses on efficiently acquiring new customers (“land”) and then growing our relationships with these customers over time (“expand”). We have the capability to offer customers additional data sets and a variety of enhanced features that potentially grow the value of the services for which our customers contract with us. Our future revenue growth and our path to profitability are dependent upon our ability to continue to land new customers and then expand adoption of our solutions within their organizations.

We track our progress landing new customers by measuring the number of ARR Solution Customers (as defined below) we have from one fiscal period to the next. For instance, we have increased our number of ARR Solution Customers from 692 as of June 30, 2022 to 813 as of June 30, 2023. We track our progress in expanding our customer relationships by measuring our ARR Net Retention Rate (as defined below). Our ARR Net

Retention Rate was 112% for the three months ended June 30, 2023 and our organic ARR Net Retention Rate was 108% for the three months ended June 30, 2022.

### Expansion into New Industries and Geographies

As our solutions have grown, we continue to focus on further penetration of our initial industries including maritime, aviation, logistics, and government (civil and defense/intelligence) among others. We believe our technology and solutions give us the ability to also expand into additional industries, including energy, financial services, agriculture, transportation, and insurance, and into additional geographies, including Latin America, Africa and the Middle East. Our revenue growth is dependent upon our ability to continue to expand into new industries and geographies. The costs associated with these expansions may adversely affect our results of operations.

### Investment in Growth

We continue investing in growing our business and capitalizing on our market opportunities while balancing the uncertainties from the macroeconomic environment and the geopolitical environment. We intend to continue to add headcount to our global sales and marketing teams to acquire new customers and to increase sales to existing customers. We also intend to continue to add headcount as needed to our research and development teams and otherwise invest to improve and innovate our nanosatellite, ground station and data analytics technologies. For the three months ended June 30, 2023, our spending on research and development increased by $1.5 million, or 19%, from the three months ended June 30, 2022. Our total headcount across all functions increased from 378 employees as of June 30, 2022, to 411 employees as of June 30, 2023. The costs of these investments may adversely affect our results of operations, but we believe that these investments will contribute to our long-term growth.

### Acquisitions

Our business strategy may include acquiring other complementary solutions, technologies, or businesses, such as the Acquisition, that we believe will allow us to continue on our path to profitability, reduce the time or costs required to develop new technologies, incorporate enhanced functionality into and complement our existing solution offerings, augment our engineering workforce and enhance our technological capabilities.

### Impact of Foreign Exchange Rates

We report in U.S. dollars, and the functional currency of our foreign operating subsidiaries is the local currency, including the Euro, the British Pound, the Singapore Dollar and the Canadian Dollar. The U.S. dollar has weakened against many of these currencies since the three months ended June 30, 2022. In the three months ended June 30, 2023, approximately 26% of our revenues were generated in non-U.S. dollar-denominated currencies. The financial statements of these subsidiaries are translated into U.S. dollars using exchange rates in effect at each balance sheet date for assets and liabilities and average exchange rates during the period for revenues and expenses. To the extent we experience significant currency fluctuations, our results of operations may be impacted.

### Key Business Metrics

We review the following key business metrics to evaluate our business, measure our performance, identify trends affecting our business, formulate business plans, and make strategic decisions:

- ARR
- ARR Customers
- ARR Solution Customers
- ARR Net Retention Rate

### Annual Recurring Revenue

We define ARR as our expected annualized revenue from customers that are under contracts with us at the end of the reporting period with a binding and renewable agreement for our subscription solutions or customers that are under a binding multi-year contract that can range from components of our Space Services solution to a project-based customer solution. Customers with project-based contracts are considered recurring when there is a multi-year binding agreement that has a renewable component in the contract. Customers are also considered recurring when they have multiple contracts over multiple years. Customer contracts for data trials and one-time transactions are excluded from the calculation of ARR.

Our ARR growth in the three months ended June 30, 2023 was driven by landing new ARR Customers (as defined below) along with increasing the amount of business with our existing customers. This is reflected in the increase in the total number of ARR Customers as well as ARR Net Retention Rates that were over 100% for each of the three months ended June 30, 2023 and 2022. Due in part to the timing of some of our project-based contracts, including when engagements start and stop, our ARR has fluctuated from period to period in the past, and we expect our ARR to continue to fluctuate from period to period in the future. ARR is a leading indicator and accordingly will tend to outpace the revenue impact as we recognize the contract value over time.

The following table summarizes our ARR as of each period end indicated:

*(dollars in thousands)*

|  | As of June 30, 2023 | 2022 | % Change |
| --- | ---: | ---: | ---: |
| ARR | $112,818 | $85,316 | 32% |

### Number of ARR Customers and ARR Solution Customers

We define an ARR Customer as an entity that has a contract with us or through our reseller partners contracts, that is either a binding and renewable agreement for our subscription solutions, or a binding multi-year contract as of the measurement date independent of the number of solutions the entity has under contract. A single organization with separate subsidiaries, segments, or divisions may represent multiple customers, as we treat each entity that is invoiced separately as an individual customer. In cases where customers subscribe to our platform through our reseller partners, each end customer that meets the above definition is counted separately as an ARR Customer. All entities that have contracts for data trials and one-time transactions are excluded from the calculation of ARR Customers.

We define an ARR Solution Customer similarly to an ARR Customer, but we count every solution the customer has with us separately. As a result, the count of ARR Solution Customers exceeds the count of ARR Customers at each period end, as some customers contract with us for multiple solutions. Our multiple solutions customers are those that are under contract for at least two of our solutions: Maritime, Aviation, Weather, and Space Services. All entities that have contracts for data trials and one-time transactions are excluded from the calculation of ARR Solution Customers.

The growth in each of our ARR Customers and ARR Solution Customers at the dates presented was driven by landing new ARR Customers across our four solutions (Maritime, Aviation, Weather and Space Services), expanding our industry and geographical footprints, and having a low number of customers who have not renewed their contracts with us. We believe that our ability to expand our customer base is a key indicator of our market penetration, the growth of our business, and our future potential business opportunities.

The following table summarizes the number of our ARR Customers and ARR Solution Customers as of each period end indicated:

|  | As of June 30, 2023 | 2022 | % Change |
| --- | ---: | ---: | ---: |
| ARR Customers | 785 | 667 | 18% |
| ARR Solution Customers | 813 | 692 | 17% |

### ARR Net Retention Rate

We calculate our ARR Net Retention Rate for a particular fiscal period end by dividing (i) our ARR from those ARR Customers at that fiscal period end that were also customers as of the last day of the prior fiscal period end by (ii) the ARR from all customers as of the last day of the prior fiscal period. This calculation measures the overall impact from increases in customer contract value (upsells), the decreases in customer contract value (downsells) and the decreases in customer value resulting from customers that have chosen not to renew their contracts with us (lost customers).

The following table summarizes our ARR Net Retention Rate for the three and six months ending June 30, 2023. The ARR Net Retention Rate for the 2022 periods excludes the Acquisition data due to lack of comparable data which requires 2021 period data for renewal base calculations.

|  | Three Months Ended June 30, 2023 | June 30, 2022 | % Change | Six Months Ended June 30, 2023 | June 30, 2022 | % Change |
| --- | ---: | ---: | ---: | ---: | ---: | ---: |
| ARR Net Retention Rate | 112% | 108% | 4% | 110% | 107% | 3% |

Our ARR Net Retention Rate can be impacted from period to period by large increases or decreases in customer contract value and large decreases in contract value from customers that have not renewed their contracts with us. An ARR Net Retention Rate greater than 100% is an indication that we are growing the value of the solutions our customers are purchasing from us at a fiscal period end versus the prior fiscal period end. An ARR Net Retention Rate less than 100% is an indication that we are reducing the value of the solutions our customers are purchasing from us at a fiscal period end versus the prior fiscal period end. Our ARR Net Retention Rate increased by 4% and 3% for the three and six months ended June 30, 2023, respectively, from the three and six months ended June 30, 2022. These increases reflect our "land and expand" strategy of providing existing customers with additional coverage, data sets, a variety of enhanced features and services to our customer's contracts.

### Components of Results of Operations

### Revenue

We derive revenue from providing data, insights and access to our cloud-based technology platform sold on a subscription basis. Some of our customer arrangements include the delivery of specific performance obligations and subsequent customer acceptance of project-based deliverables, which may impact the timing of revenue recognition. Subscription periods for our solutions generally range from one to two years and are typically non-cancelable, with customers having the right to terminate their agreements only if we materially breach our obligations under the agreement. Our subscription fees are typically billed either monthly or quarterly in advance.

### Cost of Revenue

Cost of revenue consists primarily of personnel costs, depreciation, hosted infrastructure and high-power computing costs, third-party operating and royalty costs associated with delivering our data and services to our customers and amortization of purchased intangibles associated with the Acquisition. Personnel costs are primarily related to the cost of our employees supporting and managing our constellation operations including satellite operations, ground station control and launch management. Costs associated with the manufacture and launch of our satellites, including personnel costs, are capitalized and depreciated upon placement in service, typically over a four-year expected useful life. As satellites reach the end of their expected useful life, they are generally replaced with replenishment satellites to maintain our constellation at optimal performance. Costs associated with the acquisition and development of new ground stations, including the bill of materials and labor to install the ground station, are capitalized and depreciated upon placement in service typically over a four-year to ten-year expected useful life. We anticipate ongoing capital spending to repair and replenish ground stations as they reach their end of expected useful life to keep our ground station network at optimal performance. Our proprietary ground station network is primarily located in third-party locations where we incur lease and other operational charges. Cost of revenue also includes royalties associated with third-party data sets that we integrate into our data solutions.

### Operating Expenses

*Research and Development*. Research and development expenses consist primarily of employee-related expenses, third-party consulting fees and computing costs. Our research and development efforts are focused on improving our satellite technology, developing new data sets, developing new algorithms, enhancing our smart and predictive analytics and enhancing the ease of use and utility of our space-based data solutions.

*Sales and Marketing*. Sales and marketing expenses consist primarily of employee-related expenses, sales commissions, marketing and advertising costs, costs incurred in the development of customer relationships, brand development costs, travel-related expenses and amortization of purchased intangible backlog associated with the Acquisition. Commission costs on new customer contract bookings are considered costs of obtaining customer contracts. Commission costs for multi-year deals are considered contract acquisition costs and are deferred and then amortized over the period of the contract excluding the last twelve months, which are expensed at the beginning of that final twelve-month period. Commission costs on contracts completed with a term of twelve months or less are expensed in the period incurred.

*General and Administrative*. General and administrative expenses consist of employee-related expenses for personnel in our executive, finance and accounting, facilities, legal, human resources, global supply chain, and management information systems functions, as well as other administrative employees. In addition, general and administrative expenses include fees related to third-party legal counsel, corporate insurance, fees related to accounting, tax and audit costs, office facilities costs, software subscription costs and other corporate costs.

*Loss on Decommissioned Satellites*. Loss on decommissioned satellites consist of the write-off of the remaining capitalized costs associated with the manufacture and launch of our satellites prior to the end of the satellite’s useful life. We contract with third-party companies to launch, carry and deploy our satellites into space. A loss could result from a third-party launch or deployer failure, a technical failure of the satellite, or the deorbit or decommissioning of a satellite before the end of the satellite’s useful life. A technical failure could include a satellite that is not able to communicate with our network of ground stations or fulfill its intended technical mission for a duration greater than one month. The loss amount is presented net of any insurance proceeds received. Due to the nature of these events, we cannot predict the magnitude or frequency of future satellite deorbit and launch failure losses. While we sometimes purchase launch insurance when financially practical, the proceeds from these policies will typically only cover a portion of our loss in the event of an unplanned satellite deorbit or launch failure. We incurred a $0.5 million loss on decommissioned satellites in the three and six months ended June 30, 2023. We did not incur any such loss in the three and six months ended June 30, 2022.

### Other Income (Expense)

*Interest Income*. Interest income includes interest earned on our cash balances and short-term marketable securities.

*Interest Expense*. Interest expense includes interest costs associated with our promissory and convertible notes and amortization of deferred financing costs.

*Change in Fair Value of Contingent Earnout Liability.* Change in fair value of contingent earnout liability includes mark-to-market adjustments to reflect changes in the fair value of the contingent earnout liability.

*Change in Fair Value of Warrant Liabilities*. Change in fair value of warrant liabilities includes mark-to-market adjustments to reflect changes in fair value of warrant liabilities.

*Loss on Extinguishment of Debt*. Loss on extinguishment of debt includes accelerated debt issuance expenses, legal and other fees associated with the payoff or refinancing of existing debt.

*Foreign Exchange Gain/Loss.* Foreign exchange gain/loss consists of the net effect of realized and unrealized foreign currency gains and losses resulting from changes in the underlying currency rates relative to the U.S. dollar as we re-measure foreign currency denominated transactions and balances into the functional currency of the entities in which they are recorded.

*Other Expense, Net.* Other Expense, net consists primarily of tax credits, grant income, share of equity investment loss, sales and local taxes, and write-off of certain prepaid assets. We use the local currency as our functional currency for Luxembourg, United Kingdom, Singapore and Canada.

### Income Tax Provision

Provision for income taxes consists of federal income taxes in the United States and income taxes in certain foreign jurisdictions. We do not provide for income taxes on undistributed earnings of our foreign subsidiaries since we intend to invest these earnings outside of the United States permanently. We account for income taxes using the asset and liability method, whereby deferred tax assets and liabilities are recognized based on differences between the financial reporting and tax bases of assets and liabilities and are measured using the enacted rates and laws that will be in effect when the differences are expected to reverse.

### Results of Operations

*Three Months Ended June 30, 2023 Compared to Three Months Ended June 30, 2022 and Six Months Ended June 30, 2023 Compared to Six Months Ended June 30, 2022*

The following tables set forth selected condensed consolidated statements of operations data for each of the periods indicated:

*(in thousands)*

|  | Three Months Ended June 30, 2023 | 2022 | Six Months Ended June 30, 2023 | 2022 |
| --- | ---: | ---: | ---: | ---: |
| **Revenue** | $26,493 | $19,395 | $50,661 | $37,465 |
| **Cost of revenue(1)** | 9,633 | 9,573 | 19,993 | 19,419 |
| Gross profit | 16,860 | 9,822 | 30,668 | 18,046 |
| **Operating expenses(1):** |  |  |  |  |
| Research and development | 9,752 | 8,225 | 19,415 | 16,882 |
| Sales and marketing | 6,729 | 6,728 | 13,579 | 13,633 |
| General and administrative | 10,899 | 11,274 | 22,669 | 23,958 |
| Loss on decommissioned satellites | 472 | — | 472 | — |
| Total operating expenses | 27,852 | 26,227 | 56,135 | 54,473 |
| **Loss from operations** | (10,992) | (16,405) | (25,467) | (36,427) |
| Other income (expense): |  |  |  |  |
| Interest income | 636 | 106 | 1,201 | 120 |
| Interest expense | (4,709) | (2,785) | (9,287) | (5,828) |
| Change in fair value of contingent earnout liability | 128 | 2,370 | 204 | 9,253 |
| Change in fair value of warrant liabilities | 357 | 3,897 | 1,103 | 9,732 |
| Foreign exchange | (435) | (2,605) | — | (22,510) |
| Loss on extinguishment of debt | — | (22,510) | 589 | (3,540) |
| Other expense, net | (1,038) | (271) | (1,800) | (505) |
| Total other expense, net | (5,061) | (21,798) | (7,990) | (13,278) |
| Loss before income taxes | (16,053) | (38,203) | (33,457) | (49,705) |
| Income tax provision | 213 | 62 | 482 | 352 |
| **Net loss** | $(16,266) | $(38,265) | $(33,939) | $(50,057) |

(1) Includes stock-based compensation as follows:

*(in thousands)*

|  | Three Months Ended June 30, 2023 | 2022 | Six Months Ended June 30, 2023 | 2022 |
| --- | ---: | ---: | ---: | ---: |
| Cost of revenue | $48 | $43 | $125 | $120 |
| Research and development | 902 | 814 | 1,553 | 1,525 |
| Sales and marketing | 619 | 735 | 1,056 | 1,351 |
| General and administrative | 1,771 | 1,317 | 3,252 | 2,202 |
| Total stock-based compensation | $3,340 | $2,909 | $5,986 | $5,198 |

### Revenue

*(dollars in thousands)*

|  | Three Months Ended June 30, 2023 | 2022 | % Change | Six Months Ended June 30, 2023 | 2022 | % Change |
| --- | ---: | ---: | ---: | ---: | ---: | ---: |
| Revenue | $26,493 | $19,395 | 37% | $50,661 | $37,465 | 35% |

32

#### Three Months Ended June 30, 2023 Compared to Three Months Ended June 30, 2022

Total revenue increased $7.1 million, or 37%, driven primarily by the growth in the number of ARR Customers combined with our ARR Net Retention Rate greater than 100%. Our ARR Customers increased 18%, from 667 as of June 30, 2022 to 785 as of June 30, 2023, which contributed to an increase in revenue from new customers. Our ARR Net Retention Rate was 112% for the three months ended June 30, 2023, which contributed to an increase in revenue from our existing customer base.

For the three months ended June 30, 2023, we derived 60% of our revenue from the Americas, 30% of our revenue from Europe, Middle East, Africa (“EMEA”) and 10% of our revenue from Asia Pacific (“APAC”). For the three months ended June 30, 2022, we derived 45% of our revenue from the Americas, 38% of our revenue from EMEA and 18% of our revenue from APAC. For the three months ended June 30, 2023, we derived 73% of our revenue from subscription arrangements, compared to 67% for the three months ended June 30, 2022. This percentage mix can fluctuate significantly from period to period driven primarily by the timing of the non-subscription revenue recognition in our contracts.

#### Six Months Ended June 30, 2023 Compared to Six Months Ended June 30, 2022

Total revenue increased $13.2 million, or 35%, driven primarily by the growth in the number of ARR Customers combined with our ARR Net Retention Rate greater than 100%. Our ARR Customers increased 18%, from 667 as of June 30, 2022 to 785 as of June 30, 2023, which contributed to an increase in revenue from new customers. Our ARR Net Retention Rate was 110% for the six months ended June 30, 2023, which contributed to an increase in revenue from our existing customer base.

For the six months ended June 30, 2023, we derived 57% of our revenue from the Americas, 33% of our revenue from EMEA and 10% of our revenue from APAC. For the six months ended June 30, 2022, we derived 43% of our revenue from the Americas, 41% of our revenue from EMEA and 16% of our revenue from APAC. For the six months ended June 30, 2023, we derived 75% of our revenue from subscription arrangements, compared to 67% for the six months ended June 30, 2022. This percentage mix can fluctuate significantly from period to period driven primarily by the timing of the non-subscription revenue recognition in our contracts.

For the three months and six months ended June 30, 2023, our increase in the number of ARR Customers was driven by our continued spending on sales and marketing activities, the geographical expansion of our sales efforts into new countries and/or regions and the development and rollout of new data solutions. Our ARR Net Retention Rate greater than 100% was driven by further expansion with our existing customers by adding coverage, data sets and a variety of enhanced features and services to our customers’ contracts with us.

Over time, we expect the mix of our total revenue in the Americas and APAC to continue to increase with additional sales and marketing focus in those regions.

### Cost of Revenue

*(dollars in thousands)*

|  | Three Months Ended June 30, 2023 | 2022 | % Change | Six Months Ended June 30, 2023 | 2022 | % Change |
| --- | ---: | ---: | ---: | ---: | ---: | ---: |
| Total cost of revenue | $9,633 | $9,573 | 1% | $19,993 | $19,419 | 3% |
| Gross profit | 16,860 | 9,822 | 72% | 30,668 | 18,046 | 70% |
| Gross margin | 64% | 51% | 13% | 61% | 48% | 13% |
| Headcount (at end of period) | 31 | 40 | (23)% | 31 | 40 | (23)% |

#### Three Months Ended June 30, 2023 Compared to Three Months Ended June 30, 2022

Cost of revenue increased $0.1 million, or 1%, primarily driven by an increase in depreciation expense of $0.3 million, an increase in third-party royalty costs of $0.2 million, and an increase in ground station expenses of $0.1 million, partially offset by a decrease in computing costs of $0.2 million, a decrease in other miscellaneous expenses of $0.2 million and a decrease in personnel costs of $0.1 million. Depreciation expense increased from the prior period, driven by replacement of retired constellation satellites which were fully depreciated and the addition of Space Services solution satellites. The increase in third-party royalty costs was driven by an increase in sales activity, resulting in higher payments to third-party data set providers as they augment our data solutions. The decrease in computing costs was driven by cloud platform efficiencies. The decrease in personnel costs was driven by overall reduction in headcount.

Gross margin for the three months ended June 30, 2023 and 2022 was 64% and 51%, respectively. The increase in the three months ended June 30, 2023 compared to the three months ended June 30, 2022 was driven primarily by higher revenue. This metric can fluctuate significantly from period to period driven primarily by the timing of the revenue as well as the timing of our technology investments to support future revenue.

#### Six Months Ended June 30, 2023 Compared to Six Months Ended June 30, 2022

Cost of revenue increased $0.6 million, or 3%, primarily driven by an increase in third-party royalty costs of $0.4 million, an increase in depreciation expense of $0.3 million, and an increase in ground station expenses of $0.3 million, partially offset by a decrease in computing costs of $0.2 million, a decrease in personnel costs of $0.1 million, and a decrease in other miscellaneous expenses of $0.1 million. The increase in third-party royalty costs was driven by an increase in sales activity, resulting in higher payments to third-party data set providers as they augment our data solutions.

Depreciation expense increased from the prior period driven by replacement of retired constellation satellites which were fully depreciated and the addition of Space Services solution satellites. The increase in ground station expenses was driven by higher operating costs on the addition of incremental capacity to improve overall data latency. The decrease in computing costs was driven by cloud platform efficiencies. The decrease in personnel costs was driven by overall reduction in headcount.

Gross margin for the six months ended June 30, 2023 and 2022 was 61% and 48%, respectively. The increase in the six months ended June 30, 2023 compared to the six months ended June 30, 2022 was driven primarily by higher revenue. This metric can fluctuate significantly from period to period driven primarily by the timing of the revenue as well as the timing of our technology investments to support future revenue.

We expect cost of revenue, including depreciation and amortization expenses, third-party operating costs and royalties and high-powered computing costs, to increase in absolute dollars as our business grows.

### Operating Expenses

Operating expenses consist of our research and development, our sales and marketing and our general and administrative expenses, as well as loss on decommissioned satellites in some periods. As we continue to invest in our growth, including through hiring additional personnel, we expect our operating expenses to increase in absolute dollars as revenue grows; however, we expect our operating expenses as a percentage of revenue to decrease over time.

### Research and Development

*(dollars in thousands)*

|  | Three Months Ended June 30, 2023 | 2022 | % Change | Six Months Ended June 30, 2023 | 2022 | % Change |
| --- | ---: | ---: | ---: | ---: | ---: | ---: |
| Research and development | $9,752 | $8,225 | 19% | $19,415 | $16,882 | 15% |
| Percentage of total revenue | 37% | 42% |  | 38% | 45% |  |
| Headcount (at end of period) | 210 | 187 | 12% | 210 | 187 | 12% |

#### Three Months Ended June 30, 2023 Compared to Three Months Ended June 30, 2022

Research and development expenses increased $1.5 million, or 19%, primarily driven by an increase in personnel costs of $1.2 million, an increase in other miscellaneous operating expenses of $0.2 million, and an increase in travel and entertainment expenses of $0.1 million. The increase in personnel costs was driven by overall growth in headcount. The increase in travel and entertainment expenses was driven by eased COVID-19 restrictions.

#### Six Months Ended June 30, 2023 Compared to Six Months Ended June 30, 2022

Research and development expenses increased $2.5 million, or 15%, primarily driven by an increase in personnel costs of $2.3 million, an increase in travel and entertainment expenses of $0.3 million, and an increase in contractor expenses of $0.2 million, partially offset by a decrease in consulting expenses of $0.3 million. The increase in personnel costs was driven by overall growth in headcount. The increase in travel and entertainment expenses was driven by eased COVID-19 restrictions. The increase in contractor expenses was driven by technical resources required to enhance infrastructure security. The decrease in consulting expenses was driven by a reduction of external technical resources, and a shift to internal resources, to support new development processes and capabilities.

We expect research and development expenses to increase in absolute dollars in future periods primarily due to higher headcount as we continue to invest in the development of our solutions offerings and new technologies; however, we expect research and development expenses to decrease as a percentage of revenue in future periods as our revenue growth exceeds our increase in research and development spend.

### Sales and Marketing

*(dollars in thousands)*

|  | Three Months Ended June 30, 2023 | 2022 | % Change | Six Months Ended June 30, 2023 | 2022 | % Change |
| --- | ---: | ---: | ---: | ---: | ---: | ---: |
| Sales and marketing | $6,729 | $6,728 | 0% | $13,579 | $13,633 | (0)% |
| Percentage of total revenue | 25% | 35% |  | 27% | 36% |  |
| Headcount (at end of period) | 78 | 70 | 11% | 78 | 70 | 11% |

34

#### Three Months Ended June 30, 2023 Compared to Three Months Ended June 30, 2022

Sales and marketing expenses were materially unchanged, as an increase in personnel costs of $0.6 million and an increase in marketing expenses of $0.3 million were almost fully offset by a decrease in amortization expenses of $0.8 million and a decrease in other miscellaneous operating expenses of $0.1 million. The increase in personnel costs was driven by overall growth in headcount. The increase in marketing expenses was driven by growth in our expenditures for demand generation, brand awareness and public relations. The decrease in amortization expenses was due to the completion of purchased intangible amortization from the Acquisition, which was completed in the three-month period ended December 31, 2022.

#### Six Months Ended June 30, 2023 Compared to Six Months Ended June 30, 2022

Sales and marketing expenses decreased $0.1 million, or 0%, primarily driven by a decrease in amortization expenses of $1.6 million and a decrease in other miscellaneous operating expenses of $0.1 million, mostly offset by an increase in bad debt expenses of $0.7 million, an increase in personnel costs of $0.6 million, and an increase in travel and entertainment expense of $0.3 million. The decrease in amortization expenses was due to the completion of purchased intangible amortization from the Acquisition, which was completed in the three-month period ended December 31, 2022. The increase in bad debt expenses was driven by a charge taken for a specific customer reserve. The increase in personnel costs was driven by overall growth in headcount. The increase in travel and entertainment expenses was driven by eased COVID-19 restrictions.

We expect sales and marketing expenses to generally grow in absolute dollars in the future, primarily due to increased employee-related expenses as we grow our headcount, to support our sales and marketing efforts and our continued expansion of our sales capacity across our solutions; however, we expect sales and marketing expenses as a percentage of revenue to decrease in future periods as our revenue growth exceeds our increases in sales and marketing spend.

### General and Administrative

*(dollars in thousands)*

|  | Three Months Ended June 30, 2023 | 2022 | % Change | Six Months Ended June 30, 2023 | 2022 | % Change |
| --- | ---: | ---: | ---: | ---: | ---: | ---: |
| General and administrative | $10,899 | $11,274 | (3)% | $22,669 | $23,958 | (5)% |
| Percentage of total revenues | 41% | 58% |  | 45% | 64% |  |
| Headcount (at end of period) | 92 | 81 | 14% | 92 | 81 | 14% |

#### Three Months Ended June 30, 2023 Compared to Three Months Ended June 30, 2022

General and administrative expenses decreased $0.4 million, or 3%, primarily driven by a decrease in business insurance costs of $0.8 million, a decrease in professional services fees of $0.6 million, and a decrease in other miscellaneous operating expenses of $0.1 million, partially offset by an increase in software expenses of $0.4 million, an increase in personnel costs of $0.4 million, and an increase in facilities expenses of $0.3 million. The decrease in business insurance costs was driven by an improvement in annual rates. The decrease in professional services fees was driven by lower third-party accounting, legal and other consulting services as compared to the prior year quarter when there were increased costs related to the Acquisition and the Merger. The increase in software expenses was driven by headcount growth and scaling of operations. The increase in personnel costs was driven by overall headcount growth. The increase in facilities expenses was driven by overall headcount growth.

#### Six Months Ended June 30, 2023 Compared to Six Months Ended June 30, 2022

General and administrative expenses decreased $1.3 million, or 5%, primarily driven by a decrease in professional services fees of $2.1 million and a decrease in business insurance costs of $1.7 million, partially offset by an increase in personnel costs of $1.4 million, an increase in software expenses of $0.6 million, an increase in facilities expenses of $0.4 million, and an increase in other miscellaneous operating expenses of $0.1 million. The decrease in professional services fees was driven by lower third-party accounting, legal and other consulting services as compared to the prior year quarter when there were increased costs related to the Acquisition and the Merger. The decrease in business insurance costs was driven by an improvement in annual rates. The increase in personnel costs was driven by overall headcount growth. The increase in software expenses was driven by headcount growth and scaling of operations. The increase in facilities expenses was driven by overall headcount growth.

We expect our general and administrative expenses to generally grow in absolute dollars in future periods as our employee-related expenses increase to support our revenue growth; however, we expect our general and administrative expenses as a percentage of revenue to decrease as revenue growth exceeds our increases in general and administrative spend.

### Loss on Decommissioned Satellites

*(dollars in thousands)*

|  | Three Months Ended June 30, 2023 | 2022 | % Change | Six Months Ended June 30, 2023 | 2022 | % Change |
| --- | ---: | ---: | --- | ---: | ---: | --- |
| Loss on decommissioned satellites | $472 | $— | \* | $472 | $— | \* |
| Percentage of total revenues | 2% | —% | \* | 1% | —% | \* |

\*Not Meaningful

In the three and six months ended June 30, 2023 we recognized a non-cash expense of $0.5 million on decommissioned satellites due to the deorbit of two satellites prior to completion of their useful lives. There were no satellites decommissioned or impaired in the three and six months ended June 30, 2022.

Due to the nature of these events, we cannot predict the magnitude or frequency of future decommissioning losses. While we sometimes purchase launch insurance when financially practical, the proceeds from these policies will typically only cover a portion of our loss in the event of an unplanned satellite deorbit or launch failure.

### Other Income (Expense)

*(dollars in thousands)*

|  | Three Months Ended June 30, 2023 | 2022 | % Change | Six Months Ended June 30, 2023 | 2022 | % Change |
| --- | ---: | ---: | ---: | ---: | ---: | ---: |
| Interest income | $636 | $106 | 500% | $1,201 | $120 | 901% |
| Interest expense | $(4,709) | $(2,785) | 69% | $(9,287) | $(5,828) | 59% |
| Change in fair value of contingent earnout liability | $128 | $2,370 | (95)% | $204 | $9,253 | (98)% |
| Change in fair value of warrant liabilities | $357 | $3,897 | (91)% | $1,103 | $9,732 | (89)% |
| Foreign exchange | $(435) | $(2,605) | (83)% | $589 | $(3,540) | (117)% |
| Loss on extinguishment of debt | $— | $(22,510) | \* | $— | $(22,510) | \* |
| Other expense, net | $(1,038) | $(271) | 283% | $(1,800) | $(505) | 256% |

\*Not Meaningful

#### Three Months Ended June 30, 2023 Compared to Three Months Ended June 30, 2022

Interest income increased by $0.5 million as we shifted more liquid assets into short-term marketable securities that carried higher overall interest rates.

Interest expense increased $1.9 million, or 69%, primarily as a result of incurring higher interest and amortized debt issuance costs associated with our Blue Torch term loan.

Change in fair value of contingent earnout liability was a gain of $0.1 million in the three months ended June 30, 2023 compared to a gain of $2.4 million in the three months ended June 30, 2022, a reduction of 95%. The $0.1 million gain in the three months ended June 30, 2023 was primarily driven by the decline in the fair value of the liability as the underlying stock price has declined. For additional information, see Notes 2 and 8 to our unaudited condensed consolidated financial statements included in this Quarterly Report on Form 10-Q and Notes 2, 3 and 10 to our consolidated financial statements included in our 2022 Form 10-K.

Change in fair value of warrant liabilities was a gain of $0.4 million in the three months ended June 30, 2023 compared to a gain of $3.9 million in the three months ended June 30, 2022, a reduction of 91%. The $0.4 million gain in the three months ended June 30, 2023 was primarily driven by changes in the fair market value assessment of our public and private warrants. For additional information, see Notes 2, 6 and 8 to our unaudited condensed consolidated financial statements included in this Quarterly Report on Form 10-Q and Notes 2, 10 and 13 to our consolidated financial statements included in our 2022 Form 10-K.

We recognized a foreign exchange loss of $0.4 million in the three months ended June 30, 2023 compared to a foreign exchange loss of $2.6 million in the three months ended June 30, 2022. The loss of $0.4 million in the three months ended June 30, 2023 was driven by the strengthening of the U.S. dollar during the quarter relative to the local currencies of our subsidiaries, namely the Euro, British Pound Sterling, Singapore Dollar, and Canadian Dollar and the impact on the customer receivables recorded upon initial sale.

We had no loss on extinguishment of debt in the three months ended June 30, 2023 compared to a $22.5 million loss in the three months ended June 30, 2022. The loss in the previous year period was driven by the acceleration of unamortized debt issuance costs and other administrative expenses associated with the extinguishment of the loan under the credit agreement with FP Credit Partners, L.P. as agent for several lenders (the "FP Term Loan"), in June 2022.

Other expense, net increased by $0.8 million, or 283%, primarily driven by a $1.1 million expense taken for write-down of a Virgin Orbit launch prepayment, partially offset by $0.3 million of lower state tax expense.

#### Six Months Ended June 30, 2023 Compared to Six Months Ended June 30, 2022

Interest income increased by $1.1 million as we shifted more liquid assets into short-term marketable securities that carried higher overall interest rates.

Interest expense increased $3.5 million, or 59%, primarily as a result of incurring higher interest and amortized debt issuance costs associated with our Blue Torch term loan.

Change in fair value of contingent earnout liability was a gain of $0.2 million in the six months ended June 30, 2023 compared to a gain of $9.3 million in the six months ended June 30, 2022, a reduction of 98%. The $0.2 million gain in the six months ended June 30, 2023 was primarily driven by the decline in the fair value of the liability as the underlying stock price has declined. For additional information, see Notes 2 and 8 to our unaudited condensed consolidated financial statements included in this Quarterly Report on Form 10-Q and Notes 2, 3 and 10 to our consolidated financial statements included in our 2022 Form 10-K.

Change in fair value of warrant liabilities was a gain of $1.1 million in the six months ended June 30, 2023 compared to a gain of $9.7 million in the six months ended June 30, 2022, a reduction of 89%. The $1.1 million gain in the three months ended June 30, 2023 was primarily driven by changes in the fair market value assessment of our public and private warrants. For additional information, see Notes 2, 6 and 8 to our unaudited condensed consolidated financial statements included in this Quarterly Report on Form 10-Q and Notes 2, 10 and 13 to our consolidated financial statements included in our 2022 Form 10-K.

We recognized a foreign exchange gain of $0.6 million in the six months ended June 30, 2023 compared to a foreign exchange loss of $3.5 million in the six months ended June 30, 2022. The gain of $0.6 million in the six months ended June 30, 2023 was driven by the weakening of the U.S. dollar during the quarter relative to the local currencies of our subsidiaries, namely the Euro, British Pound Sterling, Singapore Dollar, and Canadian Dollar and the impact on the customer receivables recorded upon initial sale.

We had no loss on extinguishment of debt in the six months ended June 30, 2023 compared to a $22.5 million loss in the six months ended June 30, 2022. The loss in the previous year period was driven by the acceleration of unamortized debt issuance costs and other administrative expenses associated with the extinguishment of the FP Term Loan.

Other expense, net increased by $1.3 million, or 257%, primarily driven by a $1.1 million expense taken for write-down of a Virgin Orbit launch prepayment and $0.2 million of higher state tax.

We continue to experience foreign currency fluctuations as we re-measure foreign currency denominated transactions and balances into the functional currency of the entities in which they are recorded. Our results of operations are subject to fluctuations due to changes in the Euro, British Pound Sterling, Singapore Dollar, and Canadian Dollar. We may continue to experience favorable or adverse foreign currency exchange impacts due to volatility in these currencies relative to their respective functional currencies.

### Income Tax Provision

*(dollars in thousands)*

|  | Three Months Ended June 30, 2023 | 2022 | % Change | Six Months Ended June 30, 2023 | 2022 | % Change |
| --- | ---: | ---: | ---: | ---: | ---: | ---: |
| Income tax provision | $213 | $62 | 244% | $482 | $352 | 37% |

#### Three Months Ended June 30, 2023 Compared to Three Months Ended June 30, 2022

Income taxes increased by $0.2 million, or 244%, primarily driven by a higher tax provision for our U.K. subsidiary.

#### Six Months Ended June 30, 2023 Compared to Six Months Ended June 30, 2022

Income taxes increased by $0.1 million, or 37%, primarily driven by a higher tax provision for our U.K. subsidiary.

### Non-GAAP Financial Measures

We believe that in addition to our results determined in accordance with GAAP, non-GAAP Adjusted EBITDA is useful in evaluating our business, results of operations and financial condition. We believe that this non-GAAP financial measure may be helpful to investors because it provides consistency and comparability with past financial performance and facilitates period to period comparisons of operations, as this eliminates the effects of certain variables from period to period for reasons that we do not believe reflect our underlying business performance. In addition to our GAAP measures, we use this non-GAAP financial measure internally for budgeting and resource allocation purposes and in analyzing our financial results.

For the reasons set forth below, we believe that excluding the following items provides information that is helpful in understanding our results of operations, evaluating our future prospects, comparing our financial results across accounting periods, and comparing our financial results to our peers, many of which provide similar non-GAAP financial measures.

- Loss on satellite deorbit, launch failure and decommissioning. We exclude loss on satellite deorbit, launch failure and decommissioning because if there was no loss, the expense would be accounted for as depreciation and would also be excluded as part of our EBITDA calculation.
- Other (expense) income, net. We exclude other (expense) income, net because it includes one-time and other items that do not reflect the underlying operational results of our business.
- Stock-based compensation. We exclude stock-based compensation expenses primarily because they are non-cash expenses that we exclude from our internal management reporting processes. We also find it useful to exclude these expenses when we assess the appropriate level of various operating expenses and resource allocations when budgeting, planning, and forecasting future periods. Moreover, because of varying available valuation methodologies, subjective assumptions and the variety of award types that companies can use under FASB ASC Topic 718, *Stock Compensation*, we believe excluding stock-based compensation expenses allows investors to make meaningful comparisons between our recurring core business results of operations and those of other companies.
- Change in fair value of warrant liabilities and contingent earnout liabilities. Spire excludes this as it does not reflect the underlying cash flows or operational results of the business.
- Loss on extinguishment of debt. We exclude this as it does not reflect the underlying cash flows or operational results of the business.
- Foreign exchange gain/loss. We are exposed to foreign currency gains or losses on outstanding foreign currency denominated receivables and payables related to certain customer sales agreements, product costs and other operating expenses. As we do not actively hedge these currency exposures, changes in the underlying currency rates relative to the U.S. dollar may result in realized and unrealized foreign currency gains and losses between the time these receivables and payables arise and the time that they are settled in cash. Since such realized and unrealized foreign currency gains and losses are the result of macro-economic factors and can vary significantly from one period to the next, we believe that exclusion of such realized and unrealized gains and losses is useful to management and investors in evaluating the performance of our ongoing operations on a period-to-period basis.
- Amortization of purchased intangibles. We incur amortization expense for purchased intangible assets in connection with acquisitions of certain businesses and technologies. Amortization of intangible assets is a non-cash expense and is inconsistent in amount and frequency because it is significantly affected by the timing, size of acquisitions and the inherent subjective nature of purchase price allocations. Because these costs have already been incurred and cannot be recovered, and are non-cash expenses, we exclude these expenses for our internal management reporting processes. Our management also finds it useful to exclude these charges when assessing the appropriate level of various operating expenses and resource allocations when budgeting, planning and forecasting future periods. It is important to note that while this amortization expense is excluded for purposes of non-GAAP presentation, the revenue of the acquired businesses is reflected in the non-GAAP measures and that the assets contribute to revenue generation.
- Other acquisition accounting amortization. We incur amortization expense for purchased data rights in connection with the acquisition of exactEarth and certain technologies. Amortization of this asset is a non-cash expense that can be significantly affected by the inherent subjective nature of the assigned value and useful life. Because this cost has already been incurred and cannot be recovered, and is a non-cash expense, we exclude this expense for its internal management reporting processes. Our management also finds it useful to exclude this charge when assessing the appropriate level of various operating expenses and resource allocations when budgeting, planning and forecasting future periods. It is important to note that while this expense is excluded for purposes of non-GAAP presentation, the revenue of the acquired companies is reflected in the non-GAAP measures and that the assets contribute to revenue generation.
- Mergers and acquisition related expenses. We exclude these expenses as they are transaction costs and expenses associated with the transaction that are generally one time in nature and not reflective of the underlying operational results of our business. Examples of these types of expenses include legal, accounting, regulatory, other consulting services, severance, and other employee costs.
- Other unusual and infrequent costs. We exclude these as they are unusual items that do not reflect the ongoing operational results of our business. Examples of these types of expenses include accounting, legal and other professional fees associated with the preparation and filing of our September 2022 Form S-3 shelf registration statement and “at-the-market” offering prospectus supplement, and the December 2022 warrant exchange.
- EBITDA. We define EBITDA as net income (loss), plus depreciation and amortization expense, plus interest expense, and plus the provision for (or minus benefit from) income taxes.
- Adjusted EBITDA. We define Adjusted EBITDA as earnings before interest, taxes, depreciation and amortization, further adjusted for any loss on satellite deorbit, launch failure and decommissioning, change in fair value of warrant liabilities, change in fair value of contingent earnout liability, other (expense) income, net, stock-based compensation, loss on extinguishment of debt, foreign exchange gain/loss, other acquisition accounting amortization, mergers and acquisition related expenses, and other unusual costs. We believe Adjusted EBITDA can be useful in providing an understanding of the underlying results of operations and trends, an enhanced overall understanding of our financial performance and prospects for the future. While Adjusted EBITDA is not a recognized measure under GAAP, management uses this financial measure to evaluate and forecast business performance. Adjusted EBITDA is not intended to be a measure of liquidity or cash flows from operations or a measure comparable to net income as it does not take into account certain requirements, such as capital expenditures and related depreciation, principal and interest payments, and tax payments. Adjusted EBITDA is not a presentation made in accordance with GAAP, and our use of the term Adjusted EBITDA may vary from the use of similarly titled measures by others in our industry due to the potential inconsistencies in the method of calculation and differences due to items subject to interpretation.
- The presentation of non-GAAP financial information should not be considered in isolation or as a substitute for, or superior to, the financial information prepared and presented in accordance with GAAP. Investors should note that the excluded items may have had, and may in the future have, a material impact on our reported financial results. Investors should read this discussion and analysis of our

financial condition and results of operations together with the condensed consolidated financial statements and the related notes thereto also included within.

The following table outlines the reconciliation from net loss to Adjusted EBITDA for the periods indicated:

*(in thousands)*

|  | Three Months Ended June 30, 2023 | 2022 | Six Months Ended June 30, 2023 | 2022 |
| --- | ---: | ---: | ---: | ---: |
| Net loss | $(16,266) | $(38,265) | $(33,939) | $(50,057) |
| Depreciation & amortization | 3,967 | 4,507 | 7,883 | 9,341 |
| Interest, net | 4,073 | 2,679 | 8,086 | 5,708 |
| Taxes | 213 | 62 | 482 | 352 |
| EBITDA | (8,013) | (31,017) | (17,488) | (34,656) |
| Change in fair value of contingent earnout liability | (128) | (2,370) | (204) | (9,253) |
| Change in fair value of warrant liabilities | (357) | (3,897) | (1,103) | (9,732) |
| Foreign exchange loss (gain) | 435 | 2,605 | (589) | 3,540 |
| Loss on extinguishment of debt | — | 22,510 | — | 22,510 |
| Other expense, net | 1,038 | 271 | 1,800 | 505 |
| Stock-based compensation | 3,340 | 2,909 | 5,986 | 5,198 |
| Mergers and acquisition related expenses | — | 1,514 | 1,015 | 4,528 |
| Loss on decommissioned satellites | 472 | — | 472 | — |
| Other acquisition accounting amortization | 170 | 174 | 336 | 357 |
| Adjusted EBITDA | $(3,043) | $(7,301) | $(9,775) | $(17,003) |

### Limitations on the Use of Non-GAAP Financial Measures

There are limitations to using non-GAAP financial measures because non-GAAP financial measures are not prepared in accordance with GAAP and may be different from non-GAAP financial measures provided by other companies.

The non-GAAP financial measures are limited in value because they exclude certain items that may have a material impact upon our reported financial results. In addition, they are subject to inherent limitations as they reflect the exercise of judgments by management about which items are adjusted to calculate our non-GAAP financial measures. We compensate for these limitations by analyzing current and future results on a GAAP basis as well as a non-GAAP basis and also by providing GAAP measures in our public disclosures. Some of these limitations are:

- Although depreciation and amortization are non-cash charges, the assets being depreciated and amortized may have to be replaced in the future and Adjusted EBITDA does not reflect cash capital expenditure requirements for such replacements or for new capital expenditure requirements.
- Adjusted EBITDA does not reflect the significant interest expense, or the cash requirements necessary to service interest or principal payments, on our debt.
- Adjusted EBITDA does not reflect income tax payments that may represent a reduction in cash available to us.
- Adjusted EBITDA does not reflect the loss on satellite deorbit, launch failure and decommissioning and does not reflect the cash capital expenditure requirements for the replacements of lost satellites. While these expenses could occur in a given year, the existence and magnitude of these costs could vary greatly and are unpredictable.

Non-GAAP financial measures should not be considered in isolation from, or as a substitute for, financial information prepared in accordance with GAAP. We encourage investors and others to review our financial information in its entirety, not to rely on any single financial measure to evaluate our business, and to view our non-GAAP financial measures in conjunction with the most directly comparable GAAP financial measures.

### Liquidity and Capital Resources

Our principal sources of liquidity to fund our operations are from cash and cash equivalents, and marketable securities which totaled $64.2 million as of June 30, 2023, mainly from net proceeds from the Merger (as defined below), borrowings under the Blue Torch Credit Facility (as defined below), the issuance of convertible notes, and the sale of common stock under the Equity Distribution Agreement with Canaccord Genuity LLC, as sales agent (the "Equity Distribution Agreement"). Of the $64.2 million total, $43.1 million was in cash and cash equivalents of which approximately $17.0 million was held outside of the United States. The remaining $21.1 million was held in short-term marketable securities, all of which was held in the United States and which can be converted to cash with minimal transaction costs. These amounts compare to cash and cash equivalents, and marketable securities of $72.6 million as of March 31, 2023, of which $46.9 million was in cash and cash equivalents with $19.4 million held outside of the United States. The remaining $25.7 million was held in short-term marketable securities. The cash and cash equivalent amounts are exclusive of restricted cash which totaled $0.5 million as of June 30, 2023 and $0.4 as of March 31, 2023.

On March 10, 2023, Silicon Valley Bank (“SVB”) was closed by the California Department of Financial Protection and Innovation, which appointed the Federal Deposit Insurance Corporation (“FDIC”) as receiver. On March 13, 2023, the FDIC announced that it had transferred all deposits – both insured and uninsured – and substantially all assets of the former SVB to a newly created, full-service FDIC-operated “bridge bank” called Silicon Valley Bank, N.A. On March 27, 2023, First Citizens Bank & Trust Company ("First Citizens Bank") announced that it had entered into an agreement with the FDIC to purchase Silicon Valley Bridge Bank, N.A., which now operates as a division of First Citizens Bank. We continue to diversify our cash across multiple banks and institutions to ensure liquidity and access to operating funds.

Since our inception, we have been in an operating cash flow deficit as we have made significant investments in our technology infrastructure, built out our research and development foundation, grown sales and marketing resources to drive revenue, and scaled general and administrative functions to enable operating effectiveness.

We expect that our principal source of liquidity will be our cash and cash equivalents balance which includes the proceeds received from the Merger, the additional convertible notes issued, the Blue Torch Credit Facility and the Equity Distribution Agreement. We believe this will be sufficient to meet our working capital and capital expenditure needs over at least the next 12 months. Our future capital requirements will depend on many factors including our growth rate, the timing and extent of spending to support solution development efforts, the expansion of sales and marketing activities, the ongoing investments in technology infrastructure, the introduction of new and enhanced solutions, and the continuing market acceptance of our solutions. From time to time, we may seek additional equity or debt financing to fund capital expenditures, strategic initiatives or investments and our ongoing operations. In the event that we decide, or are required, to seek additional financing from outside sources, we may not be able to raise it on terms acceptable to us or at all. If we are unable to raise additional capital when desired, our business, financial condition, and results of operations could be adversely affected.

### Blue Torch Credit Agreement

On June 13, 2022, we, as borrower, and certain of our subsidiaries, as guarantors, entered into a financing agreement (the “Blue Torch Financing Agreement”) with Blue Torch Finance LLC, a Delaware limited liability company (“Blue Torch”), as administrative agent and collateral agent, and certain lenders (the “Lenders”). The Blue Torch Financing Agreement provides for, among other things, a term loan facility in an aggregate principal amount of up to $120.0 million (the “Blue Torch Credit Facility”). A portion of the proceeds of the term loan was used to repay our then-existing $70.0 million credit facility with FP Credit Partners, L.P., and the remainder of the proceeds of the term loan may be used for general corporate purposes.

The Blue Torch Credit Facility is scheduled to mature on June 13, 2026, upon which we must repay the outstanding principal amount of any outstanding loans thereunder, together with all accrued but unpaid interest, fees and other obligations owing under the Blue Torch Credit Facility. Subject to certain exceptions, prepayments of the Blue Torch Credit Facility will be subject to early termination fees in an amount equal to 3.0% of the principal prepaid if prepayment occurs on or prior to the first anniversary of the closing date, 2.0% of principal prepaid if prepayment occurs after the first anniversary of the closing date but on or prior to the second anniversary of the closing date and 1.0% of principal prepaid if prepayment occurs after the second anniversary of the closing date but on or prior to the third anniversary of the closing date, plus if prepayment occurs on or prior to the first anniversary of the closing date, a make-whole amount equal to the amount of interest that would have otherwise been payable through the maturity date of the Blue Torch Credit Facility.

The $120.0 million term loan was available and drawn at closing, of which $19.7 million was placed in an escrow account by Blue Torch with such amount to be released upon our achieving certain metrics related to annualized recurring revenue and a total annualized recurring revenue leverage ratio. These metrics were achieved and the $19.7 million was released from the escrow account and delivered to us in February 2023. The term loan accrues interest at a floating rate, to be based, at our election, on either a reference rate or a 3-month Term Secured Overnight Financing Rate ("SOFR") rate (subject to a 1.0% floor), plus an interest rate margin of 7.0% for reference rate borrowings and 8.0% for 3-month Term SOFR borrowings, plus an incremental Term SOFR margin of 0.26161%. We elected the Term SOFR rate which was 13.5032% as of June 30, 2023. Principal on the term loan is only payable at maturity and interest on the term loan is due and payable monthly for reference rate borrowings and quarterly for Term SOFR borrowings. We are also required to pay other customary fees and costs in connection with the Blue Torch Credit Facility, including a commitment fee in an amount equal to $2.4 million on the closing date, a $0.3 million agency fee annually and an exit fee in an amount equal to $1.8 million upon termination of the Blue Torch Financing Agreement.

Our obligations under the Blue Torch Financing Agreement are or will be guaranteed by certain of our domestic and foreign subsidiaries meeting materiality thresholds set forth in the Blue Torch Financing Agreement. Such obligations, including the guarantees, are secured by substantially all of our personal property and that of our subsidiary guarantors, including pursuant to a Security Agreement entered into on June 13, 2022 among us, Spire Global Subsidiary, Inc., Austin Satellite Design, LLC and Blue Torch. As of the closing date, such subsidiary guarantors were Spire Global Subsidiary, Inc., Austin Satellite Design, LLC, Spire Global Canada Subsidiary Corp. and exactEarth Ltd.

The Blue Torch Financing Agreement contains customary affirmative covenants and customary negative covenants limiting our ability and the ability of our subsidiaries to, among other things, dispose of assets, undergo a change in control, merge or consolidate, make acquisitions, incur debt, incur liens, pay dividends, repurchase stock and make investments, in each case subject to certain exceptions. We must also comply with a maximum debt to annualized recurring revenue leverage ratio financial covenant tested monthly during the first two years of the Blue Torch Financing Agreement, a maximum debt to EBITDA leverage ratio financial covenant tested monthly during the third and fourth years of the Blue Torch Financing Agreement and a minimum liquidity financial covenant tested at all times. As of June 30, 2023, we were in compliance with all applicable financial covenants under the Blue Torch Financing Agreement.

The Blue Torch Financing Agreement also contains customary events of default that include, among other things, certain payment defaults, cross defaults to other indebtedness, inaccuracy of representations and warranties, covenant defaults, change of control defaults, judgment defaults, and bankruptcy and insolvency defaults. If an event of default exists, Blue Torch as agent on behalf of the Lenders may require immediate payment of all obligations under the Blue Torch Financing Agreement and may exercise certain other rights and remedies provided for under the Blue Torch Financing Agreement, the other loan documents and applicable law. Under certain circumstances, a default interest rate will apply on all obligations during the existence of an event of default under the Blue Torch Financing Agreement at a per annum rate equal to 2.00% above the applicable interest rate.

On June 13, 2022, in connection with the Blue Torch Financing Agreement, we granted warrants to affiliates of the Lenders to purchase fully paid and non-assessable shares of Class A common stock (the “Blue Torch Warrants”), which are exercisable for an aggregate of 3,496,205 shares of our Class A common stock with a per share exercise price of $2.01.

In addition, on June 13, 2022, in connection with the closing of the financing, we paid Urgent Capital LLC, a Delaware limited liability company, a fee for introducing us to the Lenders, for the purpose of loan financing, in the amount equal to $0.6 million in cash and a warrant to purchase fully paid and non-assessable shares of Class A common stock (the “GPO Warrant” and, collectively with the Blue Torch Warrants, the “Credit Agreement Warrants”), which is exercisable for an aggregate of 198,675 shares of our Class A common stock with a per share exercise price of $2.01.

The Credit Agreement Warrants may be exercised on a cashless basis. The Credit Agreement Warrants are exercisable for a term beginning on the date of issuance and ending on the earlier to occur of ten years from the date of issuance or the consummation of certain of our acquisitions as set forth in the Credit Agreement Warrants. The number of shares for which the Credit Agreement Warrants are exercisable and the associated exercise price are subject to certain proportional adjustments as set forth in the Credit Agreement Warrants.

### FP Credit Agreement

On April 15, 2021, we entered into a credit agreement with FP Credit Partners, L.P., as agent for several lenders (the “FP Lenders”) (as amended on May 17, 2021, the “FP Credit Agreement”), for a $70.0 million term loan facility. Upon funding in May 2021, the FP Term Loan was used (i) to pay off our existing credit facilities with Eastward Fund Management, LLC and European Investment Bank and (ii) to fund working capital and for general corporate purposes. We incurred $12.3 million of debt issuance costs relating to the FP Term Loan. The FP Lenders were also entitled to a commitment fee of $1.75 million that was fully earned and paid upon signing the FP Credit Agreement. At the time of repayment, the FP Term Loan bore interest at a rate of 9.00% per annum. Prior to the Merger, the FP Term Loan bore interest at a rate of 8.50% per annum. Since the FP Lenders elected to exercise their conversion right in connection with the Merger, and we chose not to prepay the remaining, non-converted outstanding principal amount of the FP Term Loan at the closing of such transaction, our interest rate under the FP Term Loan increased to 9.0% per annum.

Interest on the FP Term Loan was payable quarterly in arrears. The total outstanding principal amount of the FP Term Loan was due and payable at maturity on April 15, 2026. We had the right to prepay the outstanding principal amount of the FP Term Loan at any time, in full but not in part. In addition, since the FP Lenders elected to exercise their conversion right in connection with the Merger, there was no premium or other contractual return in a prepayment. The aggregate amount required to be repaid in a prepayment to the FP Lenders would only have been the outstanding principal amount of the FP Term Loan and any accrued and unpaid interest thereon. Our obligations under the FP Credit Agreement were guaranteed by our material subsidiaries, as determined in accordance with the FP Credit Agreement, and secured by substantially all of our assets and the assets of the subsidiary guarantors.

The FP Credit Agreement contained customary affirmative and negative covenants, including covenants that limited our ability and our subsidiaries’ ability to, among other things, incur additional indebtedness, grant liens, make investments, pay dividends or other distributions on our capital stock, dispose of assets, consummate mergers or acquisitions and enter into transactions with affiliates, subject in each case to customary exceptions and qualifications. Prior to the consummation of a Qualifying IPO (as defined in the FP Credit Agreement), which included the Merger, we were required to maintain, as of the last day of each fiscal quarter, minimum unrestricted cash of at least $15.0 million, as determined in accordance with the FP Credit Agreement, provided that this covenant did not apply following any fiscal quarter in which we achieved positive EBITDA so long as we continued to maintain positive EBITDA in subsequent fiscal quarters. After the Merger, we were no longer required to maintain this financial covenant per the terms of the FP Credit Agreement.

The FP Credit Agreement included customary events of default, including, among other things, payment defaults, breaches of covenants or representations and warranties, cross-defaults with certain other indebtedness, bankruptcy and insolvency events and judgment defaults, subject to grace periods in certain instances. Upon the occurrence and during the continuance of an event of default, the FP Lenders could declare all or a portion of the outstanding obligations payable by us to be immediately due and payable, and exercise other rights and remedies provided for under the FP Credit Agreement. Under certain circumstances, a default interest rate would apply on all obligations during the existence of an event of default under the FP Credit Agreement at a per annum rate equal to 2% above the otherwise applicable interest rate.

On June 13, 2022, we repaid in full all obligations and all amounts borrowed, and all obligations have terminated, under the FP Credit Agreement, which was replaced by the Blue Torch Financing Agreement. The outstanding principal and interest under the FP Credit Agreement in an aggregate amount equal to approximately $72.8 million was repaid with proceeds of the term loan under the Blue Torch Credit Facility. We incurred no early termination penalties in connection with the termination of the FP Credit Agreement.

### Government Loan

As part of the Acquisition in November 2021, we assumed a loan agreement with the Strategic Innovation Fund ("SIF") which was recorded at fair value of the debt. As of June 30, 2023, $5.1 million was included in long-term debt, non-current on our unaudited condensed consolidated balance sheets related to the SIF loan agreement. Under this agreement and subsequent amendment, we are eligible to receive funding for certain expenditures incurred from February 13, 2018 to May 12, 2023, up to a maximum of $5.7 million. The loan is repayable in 15 annual payments beginning February 28, 2026 and has a stated interest rate of zero.

For additional information, see Note 6 to our unaudited condensed consolidated financial statements included in this Quarterly Report on Form 10-Q.

### Equity Distribution Agreement

On September 14, 2022, we entered into the Equity Distribution Agreement with Canaccord Genuity LLC, as sales agent. In accordance with the terms of the Equity Distribution Agreement, we may offer and sell shares of our Class A common stock having an aggregate offering price of up to $85.0 million from time to time through the agent pursuant to a registration statement on Form S-3, which became effective on September 26, 2022. In June 2023, we sold approximately 17.3 million shares of our Class A common stock through this arrangement, resulting in net proceeds of $7.9 million. As of June 30, 2023, approximately $76.8 million of shares were remaining, but had not yet been sold, under the Equity Distribution Agreement.

### Cash Flows

The following table summarizes our net cash used in operating activities, net cash used in investing activities, and net cash provided by financing activities for the periods indicated:

*(in thousands)*

|  | Six Months Ended June 30, 2023 | 2022 |
| --- | ---: | ---: |
| Net cash used in operating activities | $(22,591) | $(32,494) |
| Net cash used in investing activities | $(10,122) | $(33,103) |
| Net cash provided by financing activities | $28,174 | $25,634 |

#### Six Months Ended June 30, 2023 Compared to Six Months Ended June 30, 2022

### Cash Flows from Operating Activities

Our largest source of operating cash inflows is cash collections from our customers. Our primary uses of cash from operating activities are for employee-related expenditures, expenses related to our technology infrastructure, expenses related to our computing infrastructure (including computing power, database storage and content delivery costs), building infrastructure costs (including leases for office space), fees for third-party services, and marketing program costs.

Net cash used in operating activities for the six months ended June 30, 2023 was $22.6 million. This reflected our net loss of $33.9 million, adjustments for non-cash items of $15.0 million and a net decrease in our operating assets and liabilities of $3.6 million. Non-cash items primarily included $7.9 million of depreciation and amortization expense, $6.0 million of stock-based compensation, $1.1 million of amortization of operating lease right-of-use assets, $1.1 million of debt issuance amortization costs, $0.5 million of loss on decommissioned satellites, partially offset by a $1.1 million change in fair value of warrant liability, and a $0.2 million change in fair value of contingent earnout liability. Changes in operating assets and liabilities that increased net cash used in operating activities in the six months ended June 30, 2023 primarily included a $6.4 million increase in accounts receivable, net, a $2.5 million decrease in accounts payable, a $1.5 million increase in contract assets, and a $0.9 million decrease in operating lease liabilities. This was partially offset by a $5.5 million increase in contract liabilities, a $0.8 million decrease in other long-term assets, a $0.8 million increase in other accrued expenses, a $0.4 million increase in accrued wages and benefits, and a $0.3 million decrease in other current assets.

Net cash used in operating activities for the six months ended June 30, 2022 was $32.5 million. This reflected our net loss of $50.1 million, adjustments for non-cash items of $21.6 million, and a net decrease in our operating assets and liabilities of $4.1 million. Non-cash items primarily included a $22.3 million loss on extinguishment of debt, $9.3 million of depreciation and amortization expense, $5.2 million of stock-based compensation, $2.7 million of debt issuance amortization expense, and a $1.1 million reduction of operating lease right-of-use assets, offset by $9.7 million change in fair value of warrant liability and a $9.3 million change in fair value of earnout consideration. Changes in operating assets and liabilities that increased net cash used in operating activities in the six months ended June 30, 2022 primarily included a $6.7 million increase in accounts receivable, a $2.8 million decrease in accounts payable, a $2.4 million increase in contract assets, a $1.7 million decrease in accrued wages and benefits, and a $0.6 million decrease in operating lease liabilities. This was partially offset by a $4.4 million increase in contract liabilities, a $3.2 million decrease in other current assets, a $1.8 million increase in other accrued expenses, and a $0.8 million decrease in other long-term assets.

### Cash Flows from Investing Activities

The cash flows from investing activities primarily relate to cash used for business acquisitions, the procurement, development, and deployment of capital assets, including satellites, ground stations, machinery and equipment, furniture, computer equipment and software, and leasehold improvements.

Net cash used in investing activities for the six months ended June 30, 2023 was $10.1 million. This was driven by purchases of $25.8 million in short-term investments and $12.7 million of investment in property and equipment, partially offset by $28.4 million in maturities of short-term investments.

Net cash used in investing activities for the six months ended June 30, 2022 was $33.1 million. This was driven by $20.6 in short-term investments and $12.5 million of investment for property and equipment.

### Cash Flows from Financing Activities

The cash flows from financing activities relate primarily to net proceeds from the issuance of long term debt, convertible notes and Class A common stock.

Net cash provided by financing activities for the six months ended June 30, 2023 was $28.2 million. This was driven by $19.9 million of proceeds from long-term debt, $7.9 million of proceeds from issuance of common stock under the Equity Distribution Agreement, and $0.4 million of proceeds from our employee stock purchase plan. Long term debt proceeds were driven by the second tranche of the Blue Torch loan transaction.

Net cash provided by financing activities for the six months ended June 30, 2022 was $25.6 million. This was driven by $100.4 million of proceeds from long-term debt, $0.8 million of proceeds from exercise of stock options and $0.3 million of proceeds from our employee stock purchase plan, partially offset by $71.5 million of payments on long-term debt, and $4.3 million of payments of debt issuance costs. The long term debt and debt issuance cost items were driven by the Blue Torch loan transaction.

### Critical Accounting Policies and Estimates

Our condensed consolidated financial statements are prepared in accordance with GAAP. In the preparation of these condensed consolidated financial statements, we are required to make certain estimates and assumptions that affect the reported amounts of assets, liabilities, revenue, costs and expenses and related disclosures. On an ongoing basis, we evaluate our estimates and assumptions. Our actual results may differ from these estimates under different assumptions or conditions.

There have been no material changes to our critical accounting policies and estimates as compared to those disclosed in Part II, Item 7, "Management's Discussion and Analysis of Financial Condition and Results of Operations - Critical Accounting Policies and Estimates" in our 2022 Form 10-K.

### Accounting Pronouncements Recently Adopted and Not Yet Adopted

See Note 2 to our unaudited condensed consolidated financial statements included in this Quarterly Report on Form 10-Q.

### Emerging Growth Company Status

We are an “emerging growth company,” as defined in Section 2(a)(19) of the Securities Act of 1933, as amended, as modified by the Jumpstart our Business Startups Act (the "JOBS Act"). Under the JOBS Act, emerging growth companies can delay adopting new or revised accounting standards issued subsequent to the enactment of the JOBS Act until such time as those standards apply to private companies. We have elected to use this extended transition period for complying with new or revised accounting standards that have different effective dates for public and private companies until the earlier of the date that we are (i) no longer an emerging growth company or (ii) affirmatively and irrevocably opt out of the extended transition period provided in the JOBS Act. As a result, our consolidated financial statements may not be comparable to companies that comply with the new or revised accounting pronouncements as of public company effective dates.

### Smaller Reporting Company Status

Additionally, we are a “smaller reporting company” as defined in Item 10(f)(1) of Regulation S-K. Smaller reporting companies may take advantage of certain reduced disclosure obligations, including, among other things, providing only two years of audited financial statements. We will remain a smaller reporting company until the last day of the fiscal year in which (i) the market value of our common stock held by non-affiliates exceeds $250 million as of the prior June 30, or (ii) our annual revenues exceeded $100 million during such completed fiscal year and the market value of our common stock held by non-affiliates exceeds $700 million as of the prior June 30.

## Market risk

As filed, 3,386 characters.

### Foreign Currency Exchange Risk

Our results of operations and cash flows are subject to fluctuations due to changes in foreign currency exchange rates, particularly changes in the Euro, British Pound Sterling, Singapore Dollar, and Canadian Dollar and may be adversely affected in the future due to changes in foreign currency exchange rates. We continue to experience foreign currency fluctuations primarily due to the periodic re-measurement of our foreign currency monetary account balances that are denominated in currencies other than the functional currency of the entities in which they are recorded. Changes in exchange rates may negatively affect our revenue and other results of operations as expressed in U.S. dollars. We do not currently engage in foreign exchange hedging contracts. As we continue to expand our international presence, we will assess options for mitigating foreign exchange risk.

We have experienced and will continue to experience fluctuations in our net loss as a result of gains or losses related to revaluing certain asset and current liability balances that are denominated in currencies other than the functional currency of the entities in which they are recorded. For the three months ended June 30, 2023 and 2022, we had a loss of $0.4 million and a loss of $2.6 million, respectively, due to changes in foreign currency exchange rates. A hypothetical 10% strengthening or weakening of the U.S. dollar relative to the currencies in which our revenue and expenses are denominated would have resulted in an increase or decrease, respectively, in our reported three months ended June 30, 2023, pre-tax loss of approximately $0.7 million.

### Interest Rate Sensitivity

As of June 30, 2023, we had cash and cash equivalents totaling $43.1 million, which were held primarily in demand deposit accounts, and investment in short-term marketable securities of $21.1 million. The cash and cash equivalents are held for working capital purposes or strategic investment purposes.

We are exposed to market risks related to fluctuations in interest rates related to the Blue Torch Credit Facility. The Blue Torch Credit Facility accrues interest at a floating rate, to be based, at our election, on either a reference rate or a 3-month Term SOFR rate (subject to a 1.0% floor), plus an interest rate margin of 7.0% for reference rate borrowings and 8.0% for 3-month Term SOFR borrowings, plus an incremental Term SOFR margin of 0.26161%. Accordingly, increases in SOFR could increase our interest payments under the Blue Torch Credit Facility. For example, a hypothetical increase of 100 basis points in the interest rate of the Blue Torch Credit Facility would have an approximately $1.2 million impact on an annual basis on our results of operations. The SIF loan is interest free.

### Inflation Risk

We are exposed to inflation risk. Inflationary factors, such as increases in component parts, labor and other overhead expenses, could impair our operating results. Although there has been a significant increase in inflation in recent periods, it has not had a substantial impact on our results of operations for the three months ended June 30, 2023 or 2022. However, a higher rate of inflation in the future may have a negative impact on our operational and capital expenditures which we may not be able to pass along as cost increases to our customers.

## Controls and procedures

As filed, 15,073 characters.

### Evaluation of Disclosure Controls and Procedures

Disclosure controls and procedures are controls and other procedures that are designed to ensure that information required to be disclosed in our reports filed or submitted under the Securities Exchange Act of 1934, as amended ("Exchange Act"), is recorded, processed, summarized, and reported within the time periods specified in the SEC’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed in company reports filed or submitted under the Exchange Act is accumulated and communicated to management, including our principal executive officer and principal financial officer, to allow timely decisions regarding required disclosure.

We performed an evaluation under the supervision and with the participation of management, including our principal executive officer and principal financial officer, of the effectiveness of the design and operation of our disclosure controls and procedures (as such term is defined in Rule(s) 13a-15(e) and 15d-15(e) under the Exchange Act) as of June 30, 2023. Based upon that evaluation, our principal executive officer and principal financial officer concluded that our disclosure controls and procedures were not effective as of June 30, 2023 because of the material weaknesses in internal control over financial reporting described below.

Notwithstanding the material weaknesses described below, our management has concluded that our condensed consolidated financial statements for the periods covered by and included in this Quarterly Report are prepared in accordance with GAAP and fairly present, in all material respects, our financial position, results of operations and cash flows for each of the periods presented herein.

### Material Weaknesses in Internal Control over Financial Reporting

We have identified material weaknesses in our internal control over financial reporting. A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting such that there is a reasonable possibility that a material misstatement of our annual or interim financial statements will not be prevented or detected on a timely basis. The following material weaknesses were identified:

We did not design and maintain an effective control environment commensurate with the financial reporting requirements of a public company. Specifically, we lacked a sufficient number of professionals with an appropriate level of internal controls and accounting knowledge, training, and experience to appropriately analyze, record and disclose accounting matters timely and accurately. Additionally, the lack of a sufficient number of professionals resulted in an inability to consistently establish appropriate authorities and responsibilities in pursuit of our financial reporting objectives, as demonstrated by, among other things, insufficient segregation of duties in our finance and accounting functions. This material weakness contributed to the following additional material weaknesses:

(i) We did not design and maintain an effective risk assessment process at a precise enough level to identify new and evolving risks of material misstatement in our financial statements. Specifically, changes to existing controls or the implementation of new controls have not been sufficient to respond to changes to the risks of material misstatement in the financial statements.

(ii) We did not design and maintain effective controls over the segregation of duties related to journal entries and account reconciliations. Specifically, certain personnel have the ability to both (a) create and post journal entries within our general ledger system, and (b) prepare and review account reconciliations.

The material weaknesses above resulted in certain immaterial audit adjustments, which were recorded prior to the issuance of the consolidated financial statements as of and for the year ended December 31, 2020. Additionally, these material weaknesses could result in a misstatement of substantially all of our accounts or disclosures that would result in a material misstatement to the annual or interim consolidated financial statements that would not be prevented or detected.

(iii) We did not design and maintain effective controls related to the identification of and accounting for certain non-routine, unusual or complex transactions, including the proper application of GAAP to such transactions. Specifically, we did not design and maintain:

(a) controls to timely identify and account for warrant instruments, which resulted in the restatement of the previously issued financial statements of NavSight related to adjustments to warrant liabilities and equity;

(b) controls to account for business combinations, including the associated valuation estimates and the completeness and accuracy of the opening balance sheet, which did not result in a misstatement to our consolidated financial statements; and

(c) controls to timely identify and account for the fair value of the contingent earnout liability, which resulted in an error in the fair value of the contingent earnout liability in, and the restatement of, our previously issued unaudited condensed consolidated financial statements as of and for each of the interim periods ended September 30, 2021, March 31, 2022 and June 30, 2022 and our consolidated financial statements as of and for the year ended December 31, 2021.

Additionally, these material weaknesses could result in a misstatement of substantially all of our accounts or disclosures that would result in a material misstatement to the annual or interim consolidated financial statements that would not be prevented or detected.

(iv) We did not design and maintain effective controls over certain information technology (“IT”) general controls for information systems that are relevant to the preparation of our financial statements. Specifically, we did not design and maintain:

(a) user access controls to ensure appropriate segregation of duties and that adequately restrict user and privileged access to financial applications, programs, and data to appropriate company personnel;

(b) program change management controls for our financial systems to ensure that IT program and data changes affecting financial IT applications and underlying accounting records are identified, tested, authorized, and implemented appropriately; and

(c) testing and approval controls for program development to ensure that new software development is aligned with business and IT requirements.

These IT deficiencies did not result in a misstatement to the financial statements; however, the deficiencies, when aggregated, could impact our ability to maintain effective segregation of duties, as well as the effectiveness of IT-dependent controls (such as automated controls that address the risk of material misstatement to one or more assertions, along with the IT controls and underlying data that support the effectiveness of system-generated data and reports) that could result in misstatements potentially impacting all financial statement accounts and disclosures that would result in a material misstatement to the annual or interim financial statements that would not be prevented or detected. Accordingly, management has determined these deficiencies in the aggregate constitute a material weakness.

### Remediation Efforts on Material Weaknesses in Internal Control over Financial Reporting

In response to the material weaknesses identified, we have implemented several changes to our internal control over financial reporting and will continue performing remedial actions, as described below.

The remediation and ultimate resolution of each of the material weaknesses will be reviewed with the Audit Committee of the Company’s Board of Directors.

We have made progress to address the material weaknesses related to the control environment, as described below:

#### Key Professionals

In fiscal 2022 and continuing to date, we identified and hired a number of professionals with appropriate levels of internal controls and accounting knowledge to improve the overall domestic and international financial accounting and reporting departments. The positions hired include chief accounting officer, director of accounting and Americas controller, director of technical accounting, accounting manager, senior accountant, senior financial systems manager and staff accountant. In addition, we engaged with external consultants to provide technical accounting and financial systems services. The Company continues to monitor personnel requirements and expertise needed to have an effective control environment, including providing necessary ongoing training to its finance and accounting personnel.

#### Risk Assessment

We engaged a third-party consulting firm to assist in designing and implementing a risk assessment process to identify and evaluate changes in the Company’s business and the impact on its internal controls. We conducted a financial risk assessment to identify key business processes and establish internal materiality thresholds. We performed walkthroughs of all key processes, identified key controls, and developed narratives describing risk points, processes, and corresponding controls. A Risk and Control Matrix (RCM) has been created that will serve as the basis for a testing program planned for 2023.

We engaged a third-party consulting firm to complete an initial Enterprise Risk Assessment. With the assistance of the consulting firm, we identified key risks for technology-based organizations and interviewed management team members and the Chair of the Audit Committee to discuss key risk areas. We reviewed responses received, compiled a list of identified risks, and developed heat maps to depict the likelihood, impact, and preparedness of the Company to respond to the identified risks. Action and testing plans are being developed to address the risks, and results will be reviewed with management.

#### Segregation of Duties

We designed and implemented controls over the segregation of duties related to journal entries and account reconciliations. During the fourth quarter of 2022, we implemented automated controls, which replaced previously manual detective controls, designed to prevent the ability for the same person to create and post journal entries in our general ledger system. As a result of hiring key accounting personnel, we segregated the preparation and review of account reconciliations. During the year ended December 31, 2022, the Company completed its initial assessment on Segregation of Duties with assistance from a third-party and began its analysis across all processes and locations, including establishing appropriate authorities and responsibilities. We are in the process of testing the controls designed over segregation of duties.

#### Non-routine, Unusual or Complex Transactions

Over the course of 2022, we hired key accounting personnel and engaged with third-party technical accounting experts to improve our controls related to the identification of and proper application of GAAP accounting for non-routine, unusual, or complex transactions. Since the Merger that occurred in August 2021, warrant instruments have been accounted for in accordance with the Company’s accounting policies based on GAAP. During the fourth quarter of 2022, Management trained the accounting team and designed new controls to timely identify and account for the fair value of the contingent earnout liability, and hired a third-party technical accounting firm to assist with the proper application of GAAP for non-routine, unusual, or complex transactions, including any business combinations that may arise in the future. We have tested the controls designed for non-routine, unusual or complex transactions and are in the process of monitoring the controls for operating effectiveness.

#### IT General Controls

Management designed and maintained testing and approval controls for program development to ensure that the software is aligned with business and IT requirements. This includes final approval and testing of the software prior to migration to production. Over the course of 2022, the Company designed and implemented certain IT general controls, including controls over user access rights and privileges and change management.

While the above actions and planned actions are subject to ongoing management evaluation and will require validation and testing of the design and operating effectiveness of internal controls over a sustained period, we are committed to continuous improvement and will continue to diligently review our internal control over financial reporting. The material weaknesses will not be considered remediated until management completes the design and implementation of the measures described above, until the controls operate for a sufficient period of time, and until management has concluded, through testing, that the controls are effective.

### Limitations on Effectiveness of Controls and Procedures

Our management, including our principal executive officer and principal financial officer, do not expect that our disclosure controls and procedures or our internal control over financial reporting will prevent all errors and all fraud. A control system, no matter how well designed and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. Further, the design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, have been detected. These inherent limitations include the realities that judgments in decision-making can be faulty, and that breakdowns can occur because of a simple error or mistake. Additionally, controls can be circumvented by the individual acts of some persons, by collusion of two or more people, or by management override of the controls. The design of any system of controls is also based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions; over time, controls may become inadequate because of changes in conditions, or the degree of compliance with policies or procedures may deteriorate. Due to inherent limitations in a cost-effective control system, misstatements due to error or fraud may occur and not be detected.

### Changes in Internal Control over Financial Reporting

There were no changes in our internal control over financial reporting during our most recent fiscal quarter that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

## Risk factors

As filed, 4,960 characters.

*Our operations and financial results are subject to various risks and uncertainties. You should carefully consider the factors described in Part I, Item 1A, "Risk Factors" in our Annual Report on Form 10-K for the year ended December 31, 2022 (the “2022 Form 10-K”), and as described below, which could adversely affect our business, financial condition, results of operations, cash flows, and the trading price of our stock. Except as set forth below, there have been no material changes to our risk factors included in our 2022 Form 10-K. Our business, financial condition, results of operations, or prospects could also be harmed by risks and uncertainties not currently known to us or that we currently do not believe are material.*

#### The following new risk factor is added:

***Our failure to maintain compliance with the NYSE’s continued listing requirements could result in the delisting of our Class A common stock.***

Our Class A common stock is listed on the NYSE. In order to maintain this listing, we must satisfy minimum financial and other requirements. On March 24, 2023, we were notified by the NYSE that we are not in compliance with Rule 802.01C of the NYSE’s Listed Company Manual (“Rule 802.01C”) relating to the minimum average closing price of our Class A common stock required over a consecutive 30 trading-day period. We can regain compliance at any time within the cure period if, on the last trading day of any calendar month during the cure period, our Class A common stock has a closing share price of at least $1.00 and an average closing share price of at least $1.00 over the 30 trading-day period ending on the last trading day of that month. If we fail to regain compliance with Rule 802.01C by the end of the cure period, our Class A common stock will be subject to the NYSE’s suspension and delisting procedures.

The perception among investors that we are at a heightened risk of delisting could negatively affect the market price and trading volume of our Class A common stock. If our Class A common stock is delisted from the NYSE, the delisting could: substantially decrease trading in our Class A common stock; adversely affect the market liquidity of our Class A common stock as a result of the loss of market efficiencies associated with the NYSE and the loss of federal preemption of state securities laws; adversely affect our ability to issue additional securities or obtain additional financing in the future on acceptable terms, if at all; result in the potential loss of confidence by investors, suppliers, partners and employees and fewer business development opportunities; and result in limited news and analyst coverage. Additionally, the market price of our Class A common stock may decline further, and stockholders may lose some or all of their investment.

*The risk factor in our 2022 Form 10-K entitled “We rely on a limited number of government customers to provide a substantial portion of our revenue” is replaced in its entirety by the following:*

***We rely on a limited number of government customers to provide a substantial portion of our revenue.***

We have historically derived a significant portion of our revenue from contracts with federal, state, local, and foreign governments, which accounted for approximately 44% of our revenues for the six months ended June 30, 2023. We believe that the future success and growth of our business will depend in part on our ability to continue to maintain and expand government contracts. Within the government channel, approximately 74% of revenue for the six months ended June 30, 2023, was generated by three government customers. Contracts with any government entity may be terminated or suspended by the government at any time, with or without cause. There can be no assurance that any contract with the government of any jurisdiction will not be terminated or suspended in the future. For example, we were notified by the National Oceanic and Atmospheric Administration (“NOAA”) that it intends not to renew one of its weather contracts with us for the time period from mid-July 2023 through mid-January 2024. We expected this contract to provide approximately $9.9 million of revenue over that time period, and while we will have the opportunity to reapply for the contract during NOAA’s next six-month customer evaluation period, there can be no assurance that we will be successful in regaining this business.

Although we attempt to ensure that government contracts have standard provisions such as termination for convenience language which reimburses us for reasonable costs incurred, the payments are not assured and would likely not be sufficient to fully compensate us for any early termination of a contract. The loss of one or more of our government customers, or any significant decrease in sales to these customers, could reduce our net sales and adversely affect our business, financial condition, and results of operations.

Filed Aug 9, 2023.
Source: SEC EDGAR, the filing index for accession 0000950170-23-040632. Last ingested by Listed: Oct 24, 2026, 15:06 ET. No prices; not investment advice.