Ladies and gentlemen, greetings, and welcome to the Intuitive Machines Second Quarter 2023 Earnings Conference Call. As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Josh Marshall. Please go ahead, sir.

Good afternoon. Welcome to Intuitive Machines second quarter 2023 earnings call. Chief Executive Officer, Steve Altemus; and Chief Financial Officer, Erik Sallee, are leading today's call. Before we begin, please note that some of the information discussed during today's call will consist of forward-looking statements setting forth our current expectations with respect to the future of our business, the economy, and other events. These include projections of financial items, statements on plans and objectives, and management expectations of future economic performance. The company's actual results could differ materially from those indicated in any forward-looking statements due to many factors. These factors are described under forward-looking statements in the company's earnings press release and the company's most recent 10-Q filed with the SEC. We do not undertake any obligation to update forward-looking statements. We also expect to discuss certain financial measures and information that are non-GAAP measures as defined in applicable SEC rules and regulations. Reconciliations to the company's GAAP measures are included in the earnings release filed on Form 8-K. Finally, we are posting an earnings call presentation on our website, which provides additional context to our financial performance. You can find this presentation on our Investor Relations page at www.intuitivemachines.com/investors. Now, I'll turn the call over to Steve Altemus.

Thank you, Josh. Welcome, everyone, to the Intuitive Machines second quarter 2023 earnings call. I'll begin today with a brief overview of our company for any new investors and analysts online. Then I'll provide updates across the company's four business units, followed by a summary of the quarter and upcoming milestones. After, I will hand the call to our Chief Financial Officer, Erik Sallee for a review of our financial results for the second quarter of 2023. Intuitive Machines is a space infrastructure and services company founded in 2013 that contributes to establishing lunar infrastructure and commerce on the moon. We believe the company has a first-mover position in the development of lunar space and operates through four distinct business areas: Lunar Access Services, Lunar Data Services, Orbital Services, and Space Products and Infrastructure, each with a specific focus and set of services. Lunar Access Services provide reliable and affordable means for governments, companies, and individuals to explore and place spacecraft in cislunar space or on the lunar surface. Intuitive Machines has developed a complete lunar program that includes Mission Control, our Nova-C lunar lander, a space-to-ground communications network, and a series of launch vehicle contracts with SpaceX. The company has three missions on the flight manifest with plans to increase the frequency and complexity of missions over time. Lunar Data Services consists of a private and secure network called the Lunar Data Network that sends and receives secure communications, navigation, and imagery to and from the moon. The LDN is designed to support data relay services for spacecraft in cislunar space and systems on the lunar surface. We expect LDN to provide backup services to NASA and the U.S. Space Force. Orbital Services provide in-space orbital services for commercial and government organizations. These services include repair, refueling, and raising the orbits of existing satellites, as well as rideshare. Finally, Space Products and Infrastructure offers its customers reliable and cost-effective space products. These offerings include propulsion systems, navigation systems, lunar mobility vehicles, including rovers and drones, power infrastructure, and human habitation systems. Intuitive Machines' core business unit supports NASA's $93 billion Artemis program and extends across new revenue streams, including defense and energy. With that, let's move into our second quarter operational highlights. During the second quarter, we were laser-focused on the final assembly process in preparing IM-1 for launch. The test campaign set forward last quarter to prepare IM-1 for launch included a complete engine vibration test, a complete spacecraft test run, engine acceptance, and final assembly and integration. Today, our IM-1 lander is complete and will be prepared for delivery in September. The company has secured a launch window from pad 39A, preserving a six-day launch window starting on November 15. In case of unfavorable launch conditions in November or a change due to high priority launches on our launch pad, we have a second launch window in December. Right now, we are manifested on a Falcon 9 launch scheduled in November. With the congestion for launches using pad 39A at Kennedy Space Center, we recognize that higher-priority missions are always possible. However, our attention remains firmly fixed on the aspects we can control. Our IM-1 Nova-C is completely built, and we continue to execute the rest of our business with the same intensity that will deliver a lunar lander ready to go to the moon in September. Progress continues throughout the company. We're building the primary IM-2 structure, integrating payloads and mechanisms to the second lander. This includes the integration of NASA's TRIDENT drill that will prospect for lunar water ice, completing payload deployment mechanisms and the anticipated completion of our rocket-fueled drone, Micro Nova, in September. This remarkable progress toward IM-2 is a capitalization on valuable insights gained from IM-1. We expect IM-2 to be completed in the company's new lunar production and operations facility at the Houston Spaceport. Our ribbon-cutting ceremony scheduled for September 29 will officially start operations inside our new home designed to support NASA's Artemis program and growing commercial demand for each of our four business units. As our near-term launch approaches, we're focusing on sustainable and longer-term exploration. Throughout the first half of 2023, we invested time in advancing our in-space capabilities to extend our lunar missions and apply those technologies using nuclear power in the Orbital Services market. Turning to recent awards and proposals. In July, NASA's Space Technology and Mission Directorate awarded a $15 million Tipping Point initiative to Intuitive Machines' team for the development of a radioisotope power system that may enable lunar assets like Nova-C to survive and operate through the lunar night and in permanently shadowed regions of the moon. The lunar night cycle refers to the period of darkness on the moon that lasts approximately 14 earth days. During this time, temperatures on the lunar surface drop drastically, reaching as low as minus 279 degrees Fahrenheit. By surviving the lunar night, a mission on the surface of the moon could extend from two earth weeks to several years. Intuitive Machines' role is to assist Zeno Power in developing an interoperable Americium-241 radioisotope sterling generator that may be integrated into lunar landers to enable them to survive the lunar night cycle. Unlocking this capability in support of NASA's Artemis program is paramount for Intuitive Machines and the entire space exploration industry. The application of these radioisotope power systems extends beyond lunar surface longevity. Intuitive Machines entered the proposal pool for the Air Force Research Lab's Joint Energy Technology Supplying On-orbit Nuclear Power called JETSON low-power contract this month. The proposal calls for Intuitive Machines and its team to develop satellite positioning and maneuverability solutions using radioisotope power systems in support of NASA's Gateway, a multipurpose outpost orbiting the moon. Intuitive Machines' JETSON team will leverage its nuclear power systems, power generation, and space exploration expertise, building on our existing Lunar Fission Surface Power reactor contract, which we briefed the Department of Energy and NASA. The second phase, a $4.5 million award for our Fission Surface Power contract, is expected later this year. While NASA remains a fundamental pillar of our success, these nuclear in-space opportunities spread across the defense, energy, and civil agencies represent an exciting opportunity for Intuitive Machines to evolve as a dynamic, adaptable, and forward-looking company. In April, NASA awarded its five-year $719 million Omnibus Multidiscipline Engineering Services, referred to as OMES, to develop technologies enabling services, including satellite servicing and refueling, satellite repositioning, and orbital debris removal. In the days leading up to this call, the U.S. Government Accountability Office affirmed NASA's evaluation of OMES III proposals, resulting in Intuitive Machines retaining the award. We expect to start our transition soon and look forward to growing in the Orbital Services marketplace. Since the first quarter, Intuitive Machines has submitted more than $3 billion in proposals spread across aerospace and defense sectors, including human space flight. We submitted our bid as the prime contractor for NASA's Lunar Terrain Vehicle Services contract as the Moon Racer team for the exploration and development of the South Pole region of the moon. The Lunar Terrain Vehicle is a key part of NASA's Artemis program and would be Intuitive Machines' prime contractor debut in human space flight. The company is taking steps to positively mitigate the effects of outside control of program award date changes. For example, NASA's CP-22, which calls for a Nova-C class lander to deliver a drill to the moon's South Pole, has moved from the third quarter to November, and the agency's Near Space Network services contract awards have moved from 2023 to early 2024. Before I conclude, I wanted to mention a new Director. To help support and facilitate our growth trajectory, we have appointed Nicole Seligman to the Intuitive Machines Board of Directors. Nicole's distinguished career has included senior leadership roles in global public companies. With Nicole's valuable expertise now enriching our Board, we continue to forge ahead in our endeavors. With that, I'll turn the call over to Intuitive Machines Chief Financial Officer, Erik Sallee.

Thanks, Steve, and thanks to everyone joining us today. I'll begin by going through our second quarter 2023 results. We ended the second quarter with a contracted backlog of $137.3 million. This backlog does not include the NASA OMES III contract, which, as Steve mentioned earlier, the protest resolved in our favor last week, clearing the way for us to start transition and begin work in Q4 of this year. Driven primarily by NASA's Commercial Lunar Payload Services initiative, or CLPS, the company concluded second quarter '23 with $18 million in revenue compared to $19.2 million in revenue in the second quarter of 2022. Operating loss was negative $13.2 million versus negative $2.2 million in the year prior period. This is primarily due to schedule impacts Steve mentioned earlier as well as public company costs. We ended the second quarter of '23 with a cash balance of $39.1 million. Given delays in government customer acquisition timelines and U.S. federal budget uncertainty, we are withdrawing our previously issued financial guidance for full year 2023. This is not a result of the loss of anticipated material government customer commitments for contract awards. With that, operator, we are now ready for questions.

Thank you. Ladies and gentlemen, we will now be conducting a question-and-answer session. Our first question comes from the line of Suji Desilva with Roth MKM.

Steve, Erik, congratulations on the progress here. Certainly, a lot of exciting things coming. Maybe you can talk about the program pushouts and I guess, the withdrawn guidance. Maybe you can give us a sense, Erik, maybe or Steve, the drivers here and how much each one is a factor of U.S. government spending uncertainty versus what you cited in the press release, which is program delays and then launch pad congestion. I just want to understand which of these maybe is more of a meaningful factor.

Suji, thanks for the question. This is Steve. With respect to U.S. government funding, it's really the federal budget in this leading up to an election year provides an overall sense of uncertainty. But we still see a commitment to human space flight in the Artemis program. We share generous bipartisan support for the NASA budget, which is our primary source. In particular, you see that growth in human space flight with our contract bid for the Lunar Terrain vehicle. You also can look at geopolitics globally and see the Russian launch recently to the Lunar South Pole and the Indian launch to the Lunar South Pole, which means this is right upon us, and it's good that we have a commitment from the federal government to support the human space flight programs. However, we did see some delays in major awards like the OMES contract. We talked about the protest. That award was initially offered in July and has moved out now to post-protest to the November timeframe. We also saw the Near Space Network services, the communications program that we bid on between the first and second quarter. We're in a really good position for that one, partnering with and teaming with Raytheon. That moved from late third quarter, early fourth quarter to the first quarter of 2024. And then also, we saw the CLPS award or the CLPS proposal for CP-22, which is the next mission coming in the sequence of missions from the NASA CLPS program out of the Science Mission Directorate. That moved from the third quarter into well into the fourth quarter before they make that award. And then other smaller ones like the Tipping Point, which we did receive an award, we expected that award in the May timeframe, and it wasn't until July that we saw that award, and that will affect implementation and when we onboard for that contract. All good news, they are all commitments that still stay with us. It's just they're generally sliding to the right, and that has an effect on things. I think you can look at in terms of what's left to go this year; we have some significant milestones, as I've been talking about in terms of our Mission 1 launch in November, the next CLPS award to occur late November, the LTV award to occur possibly here in the fourth quarter, the OMES transition to execution will occur in the fourth quarter, both the follow-on for the Fission Surface Power reactor next phase and the JETSON AFRL proposal, we expect both of those to start in this late third quarter timeframe. And so that's kind of where we stand, and that's kind of an assessment of where we're going with the external environment and its pressures on us.

Okay. And I understand these programs can move around, obviously. Maybe specifically on OMES now that you are starting to line that up for revenue, just a sense of how that progresses linearity-wise. Is it front-end loaded, back-end loaded? Or does it kind of progress relatively steadily through the quarters, once I guess, let's just say, 1Q '24 as in the first full quarter?

Well, right now, we'll start with the negotiation portion of the contract to kind of set the transition time period. There are several dates ahead of us that NASA is considering on when we actually move from transition to execution. There'll be a ramp-up from a time depending on what the initial task orders will be. We don't expect it to be the total value divided by the number of months that are on that contract. We actually think that there'll be a ramp-up period, and we're kind of thinking about how that will unfold here in the November-December timeframe.

And then lastly, and I'll move on here. The LTV contract sounds interesting to me in the sense that maybe your first win as a prime. What's your likelihood of winning that versus competition, just to kind of handicap that because I think that will be an important milestone for you guys.

Yes. We have been very transparent about our pipeline of opportunities, providing a P-go and a P-win for each one. We evaluate the competition and assess the strength of our partnerships before determining the associated P-win. We anticipate multiple awards and recognize that there are few entrants in this field, with our team being exceptionally strong, featuring Intuitive Machines as the prime contractor and Boeing, Northrop Grumman, and AVL as our subcontractors.

Our next question comes from the line of Austin Moeller with Canaccord Genuity.

Just my first question here. Just to clarify, so the timing of the NASA contract award for essentially what would be the IM formation, that's still expected in the fourth quarter, right? That would be with fiscal '23 already appropriated dollars, correct?

So Austin, it was initially trying to get out by the end of September, but NASA delayed that towards the end of November. So, we saw essentially a two-month slip in that next CLPS submission.

And then do you expect your $39 million cash balance to be sufficient to execute on the contracts under your plate? Or do you expect more cash receipts from the current NASA contracts like OMES and the other IM missions to satisfy your needs there?

Yes. We expect our current cash balance and the cash receipts from our existing contracts to be sufficient to take care of our cash needs. I mean I think you saw that our operating cash flow in Q2 was actually positive, which is a great sign. Obviously, you've seen, I think, as you're following us, Austin, our cash is lumpy. Our inflows and outflows are both milestone-based. And so from quarter to quarter, you've got some lumpiness in there, and you've really got to look at this on a full year basis. And we've always tried to be resilient, as we've talked about, to be able to withstand these types of program delays like this. So, the cash on our balance sheet plus the milestones we have on the books should take us through. And then we also obviously have the $50 million committed equity facility, which we can use opportunistically to provide further cushion if needed.

And then just one more, if I may. Can you expand on what you're seeing in the congressional versions of the fiscal year '24 NASA budget in regards to CLPS and other important programs to you? I mean as you mentioned on the call earlier, Russia sending Luna-25 to the Lunar South Pole doesn't seem indicative to me that there's going to be any slowdown there in terms of the program of record?

Yes. Austin, we do see a commitment in the Artemis program in human space flight. Where that will affect is the overall pressure across the U.S. federal budget will affect and force NASA to have to make some trades within their budget to lower priority items. And so you'll see a fencing, I believe, in terms of technology dollars that are flowing out from the Space Technology Mission Directorate and competing with science dollars that will flow out of the Science Mission Directorate across the science portfolio and who will receive those dollars, those limited dollars that will come out of what appears to be a reduced NASA budget, at least in the negotiations that are occurring between the House and the Senate today. So that's where we really see that, that sorting out will occur, but we still see that the highest priority items from the human space flight Artemis program, namely the human lander, namely the space suits and the Lunar Terrain Vehicle as the top items that should receive funding.

Our next question comes from the line of Laura Li with Deutsche Bank.

Congratulations on good execution last quarter, and it's nice to see your IM-1 launch scheduled. And my question would be, could you elaborate more on the next steps prior to the launch?

Yes. Thanks, Laura. I appreciate the question. Like I said, we've made some incredible execution progress over the past quarter and subsequent to date, completing a full burn of our flight engine and the hot fire test, which is a test where the engine is integrated with the lunar lander and then we fill that with propellants and fire that, and that was a wild success. Going forward, with the lander assembly complete, we'll run about two weeks of flight software functional testing to make sure that every pin-out connection and every wire harness works in conjunction with our flight software. That series of testing will then go into electric magnetic interference test to make sure that there's no adverse effect on our payloads when the lander is all powered up. And then we'll do center of gravity measurements, mass measurements, and get the vehicle ready to be buttoned up in its shipping container and prepared to ship to the cape. We expect that to be all completed by September 15. And then from there, just making sure that there's no congestion on the pad before we actually ship out to the launch site. We only have about 35 days at the launch site to do the processing and to make sure that all the gases are filled and the propellants are ready to go. Then we'll get encapsulated into fairing. And then from that point, it's a wet dress rehearsal and a launch.

Our next question comes from the line of Andres Sheppard with Cantor Fitzgerald.

Steve, Erik, congrats on the quarter. Wanted to just clarify on the guidance withdrawal. So to be clear, does that apply to the revenue guidance, the gross margin, and the cash? Or is it exclusively the revenue guidance?

Yes, we're withdrawing guidance across the board. Revenue and gross margin are interrelated, and this decision is tied to the uncertainty surrounding the timing of awards and significant milestones occurring in Q4 at year-end. We have a few crucial milestones that may happen in November, December, or January. Regarding the company's health, any timing would be favorable, but we believe that trying to pinpoint specific weeks around year-end wouldn't focus on what is essential for our business's success and for executing our vision and strategy. Therefore, we felt uncomfortable making estimates on those dates, especially when it comes to space launch, where timelines can shift. We've not lost anything significant from our forecast; it's all just been pushed out. All related metrics reflect this situation. We aim to keep you informed about relevant milestones, including the latest on OMES, launch dates, and important award timings, as they will impact profitability, cash flow, and revenue based on how they unfold. This hopefully provides more insight into our statement.

So I guess, at this time, is there any additional visibility you might be able to give us in terms of either revenue or margins? Should we be expecting positive margins by year-end? And I know in the past, you had mentioned the positive EBITDA was a target by later this year. Any thoughts around that as to where that might stand?

Yes, I can't comment on everything. I mean one thing we think we feel good about is if we land successfully this year, gross margin should be positive in the second half, which I think is a good sign, obviously, pointing toward the future. And then we will be mitigating our CapEx. I'd say mitigating that's the wrong word, but CapEx is going to naturally come down over the second half of the year relative to the first half. Then some of our non-COGS OpEx. So, SG&A, that will mitigate as well over the second half as we're through some of the public company costs and other things that kind of created an increased run rate on that over the first half. So, those are some of the maybe high-level thoughts in terms of directionally where we're headed in the second half.

And maybe one last question, if I may. With the upcoming lockup period ending for the rollover and for the sponsor, how do you think the market should consider this increase in float? Or are these shares now being unlocked? Any thoughts on that? Any visibility on how we should approach it?

You bet, Andres. Honestly, it's difficult for the company to have an opinion on that. So, we'll let you correctly stated what the timing is on that. That's public information, but we'll let the market decide.

Congrats again.

Thank you. As there are no further questions, I would now hand the conference over to Steve Altemus, Co-Founder, President, and Chief Executive Officer, for his closing comments.

Well, thank you for joining us today and appreciate the time you spent with us. We look forward to continuing our execution intensity and making history together in just a few short months. Thank you very much.

The conference of Intuitive Machines has now concluded. Thank you for your participation. You may now disconnect your lines.