Kleos Space has provided the following update for the quarter ending 30 September 2022 (Q3 2022), along with its Appendix 4C cash flow report.
Commenting on the Company’s third-quarter progress, Kleos CEO Andy Bowyer said: “Our initial contract with the US National Reconnaissance Office (NRO) is a significant achievement for Kleos. Recognised as one of the five key US intelligence agencies, the NRO provides satellite, signals, and imagery intelligence to organisations such as the National Security Agency (NSA) and Defense Intelligence Agency (DIA) and is continuously looking for differentiated solutions to address critical defence and security challenges.
“The NRO is assessing the capability of Kleos’ technology to support the US Government’s current and future commercial radio frequency (RF) reconnaissance needs.
“The contract success is indicative of our technological innovation and the value RF geolocation data can provide in improving operational decision making in time-critical, high-risk situations which is driving exceptional demand for our data.
“New technology development delays are frustrating in every emerging technology company, and in our case often exasperated by the speed and challenges of working in Space, where even minor changes take a phenomenal engineering effort and commensurate timeline. I am proud to say that we have a world class team working on world class solutions to deliver against customer requirements, building shareholder value for the long term.”
CEO TRANSITION
Kleos advises the role of Chief Executive Officer will transition from co-founder Andy Bowyer, who has been CEO since the Company’s inception in 2017 and is also an Executive Director, to current Chief Financial Officer Alan Khalili by the end of 2022.
The change in CEO to a US citizen will enable Kleos to capitalise on the US opportunity whilst also being able to manage the Company’s European technology development and satellite operations.
Alan Khalili joined Kleos as CFO in July 2022. A US citizen, Alan brings over 20 years’ senior management experience with direct industry expertise in Data-as-a-Service (DaaS), aerospace, satellites, wireless voice, and IoT telecommunications. He previously served as CFO of SpaceLink, and was co-founder and CFO of Aireon LLC, a space-based DaaS business responsible for directing all financial and administrative activities. Alan has also held corporate development, investment banking and public accounting roles at Reuters, Credit Suisse, and Ernst & Young, respectively.
Commenting on the transition, Kleos’ current CEO, Andy Bowyer, said, “We are currently experiencing strong, growing traction from defence and intelligence customers. This executive change will allow Kleos to take full advantage of the exceptional market opportunity the US provides, as well as accelerate our ability to capture high-value government contracts in different markets.
“Recent engagement with the US Government has demonstrated the operational and decision-making usefulness of commercial RF GEOINT data. It has also highlighted another key strength of our technology – the ability to leverage our unique data set and fuse it with other intel resources. I’m excited for this next phase of Kleos’ development and look forward to supporting Alan throughout the official transition and beyond.”
Alan Khalili said, “Andy has been the driving force behind Kleos’ success to date, laying the foundations for our business. On behalf of the entire team, we thank him for his significant contribution to the Company over the past five years. Importantly, Andy remains with Kleos, ensuring continuity for our customers, partners, and global team. I’m excited to lead Kleos through its next phase of growth, as we commercialise our data and launch additional satellites to meet growing industry demand.”
Kleos Chair, Peter Round said, “On behalf of the Board, I offer Andy our heartfelt thanks for his contribution to Kleos and I am delighted to continue working with him and Alan through this growth phase.”
Andy Bowyer will continue in a strategic Director role post-transition and the succession and recruitment plan for CFO role responsibilities is being managed through the transition period to ensure a smooth handover. A further announcement will be made to confirm Mr Khalili’s commencement date and advise of the material terms of his engagement.
COMMERCIAL PROGRESS i, ii, iii, iv
During the quarter, cash receipts from customers were AUD$0.53M (€0.34M) and Kleos received €0.3M of non-refundable cash receipts, which were booked as deferred revenues.
Kleos currently has a global pipeline of more than 260 government and commercial qualified deals, spanning defence departments, national security agencies, coast guards, sanctions agencies and data aggregators. Kleos’ current contract structures mean revenue is generally recognisable once the entire contract is complete, whereas cash is received as certain contract milestones are met.
Investors should therefore expect a lag between cash receipts and revenue recognition, with cash receipts a good proxy for future revenue to be recognised.
The catalyst for the next phase of revenue generation is the Vigilance (KSF1) cluster reaching formation with at least three satellites, scheduled for November 2022.
First stage contract from the US National Reconnaissance Office (NRO)
During the quarter, Kleos was awarded a first stage contract from the US National Reconnaissance Office as part of the Strategic Commercial Enhancements Broad Agency Announcement (SCE BAA) Framework.
After a multiple-phase proposal process, Kleos was awarded the first stage contract under the NRO’s SCE BAA Framework, focused on the analysis, modelling, and simulation of Kleos’ capabilities to support the U.S. Government’s current and future commercial radio frequency reconnaissance needs. The NRO’s SCE framework continuously evaluates new and emerging capabilities and providers.
Under the contract, Kleos will provide insights into their capabilities, how Kleos may optimise evolving commercial RF geolocation capability to enhance and augment existing capabilities in a persistent, resilient, cost-effective manner that is also easily shareable across the U.S. Government, and with international partners and allies.
TECHNOLOGY & INTELLECTUAL PROPERTY
Kleos’ raw satellite data is used to create fully processed radio frequency geolocation data (LOCATE), which is highly sought after by defence departments, national security agencies, coast guards and commercial entities. The Company’s industry-leading digital signal processing capability is driving demand for Kleos’ LOCATE product, which can be used as a standalone dataset or to tip and cue other commercial data.
Vigilance Mission – Cluster 2
In-orbit commissioning of the Vigilance Mission (KSF1) satellites is nearing completion with three satellites to be in formation in November 2022. The fourth satellite is delayed joining the formation due to a bus communication software anomaly that is being reviewed as part of the ongoing commissioning process. Any delay related to the fourth satellite should have no impact on the three-satellite formation’s ability to generate accurate RF geolocation data, ensuring the Vigilance Mission will enable Kleos to commence fulfilling its existing DaaS and MaaS contracts, with recurring revenues to commence shortly after data delivery.
Patrol Mission – Cluster 3
The Patrol Mission (KSF2) satellites have completed initial bus commissioning. A recent software update to the satellites will enable payload and thruster commissioning before the satellites are moved into their operational formation. The advantageous orbits that these satellites were placed in by D-Orbit’s orbital transfer vehicle, ION, will reduce the time it takes to enter their operational formation compared to KSF1. Launched into a 500km Sun Synchronous orbit, the Patrol Mission cluster increase Kleos’ global data collection capability by an additional 119 million km² per day and is expected to become operational in Q1 2023.
Observer Mission – Cluster 4
In October, Kleos’ Observer Mission (KSF3) satellites completed all environmental test phases and are awaiting shipment to the Cape Canaveral Space Force Station in Florida, ahead of a planned Q4 2022 launch on the Transporter-6 SpaceX mission. Once at the launch site, the KSF3 satellites will be integrated with the launch deployers. Kleos’ Observer Mission satellites are the Company’s most sophisticated, having incorporated learnings from the first three clusters. The satellites are equipped with VHF and X-Band collection capabilities and incorporating updated software. The Observer Mission expands Kleos’ data collection capability and improves revisit rates over commercial areas of interest. The KSF3 satellites will be deployed into a Sun Synchronous orbit by ISILAUNCH under contract from Spaceflight Inc. These satellites are expected to be operational in H1 2023.
CORPORATE DEVELOPMENT
Events & Conferences
Industry events and conference speaking opportunities are key activities for Kleos, showcasing the team’s expertise. These events bring visibility to Kleos’ technology, raise the brand awareness and are an opportunity to meet, and continue to engage with, potential customers and partners.
- The Company participated in several key conferences during the quarter:
- In August Kleos exhibited at Eurosatory 2022 in Paris, as part of the Luxembourg national pavilion
- In September, Kleos took part in the World Satellite Business Week and participated in the Earth Observation panel, discussing GEOINT and RF transmission data
- In October Kleos’ CEO, Andy Bowyer gave a keynote presentation at the RAeS President’s Conference tackling the subject “Old vs New Space”
- Kleos exhibited on October 25-27 at the 59th Annual AOC International Symposium & Convention, October 25-27, 2022, in Washington, DC.
Videos & podcasts
In July, Kleos released a new episode of its Kleos Insights interview series on YouTube and Spotify. The latest interview features co-founder and Chief Innovation Officer Miles Ashcroft and Chair Peter Round discussing Kleos’ innovations over the next five years and is a continuation of previously released episode four.
FINANCIAL ACTIVITY
Secured A$10 million debt facility
In August, Kleos closed a four-year $10 million debt facility with PURE Asset Management. The first tranche of A$6 million was completed on 12 August.
Summary i,iv
Q3 2022 cash receipts were AUD$0.53M (€0.34M). Of those cash receipts, €0.3M are deferred revenues that have been contractually earned and are not refundable. The Appendix 4C quarterly cash flow report for Q3 2022 is attached. Cash and cash equivalents were €3.9M (AUD$6.0 M) as of 30 September 2022. Total cash outflow in the quarter was €1.5 million (AUD$2.3 million), after a net operating cash outflow of €1.5M (-AUD$2.33M), investment activities of €0.84M (-AUD$1.3M) and financing inflows of €3.83M (AUD$6.0M).
