Welcome to the Intuitive Machines' First Quarter 2024 Conference Call. All participants are currently in listen-only mode. After the presentations, there will be a question-and-answer session. This conference is being recorded. I would now like to turn the conference over to your host, Stephen Zhang, Head of Investor Relations. Please go ahead.

Good morning. Welcome to the Intuitive Machines' first quarter 2024 earnings call. Chief Executive Officer, Steve Altemus; and Interim Chief Financial Officer and Controller, Steve Vontur are leading the call today. 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. 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 release and the company's most recent 10-K and 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 the 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 posted an earnings call presentation on our website which provides additional context on our operational and 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.

Thanks, Stephen. We had an excellent start to the year anchored by our successful IM-1 mission and a full quarter of OMES III operations. Revenue was $73.1 million in the quarter, an increase of over 300% versus quarter 1 of last year. This was yet another historic feat for the company and showcased our continued growth trajectory. The standout accomplishment in the first quarter was Intuitive Machines' first successful lunar mission, which fundamentally disrupted the economics of landing on the moon and broke economic and technological barriers to enable this new burgeoning lunar economy. Thank you to the Intuitive Machines team for their execution during this quarter and willingness to challenge traditional paradigms of exploration. Intuitive Machines' efforts and successes do not stand alone. On May 3, China launched Chang'e 6 to the far side of the moon on their way to potentially being the first nation to return samples from the far side. The steady drumbeat of China's success demonstrates the strategic importance of the moon and we hope is a call to action for the US government and the public regarding what Intuitive Machines is building and the importance of stable funding and commercial utilization. We are at the forefront of this new space race and committed to our position as a national asset supporting global endeavors in space. In this rapidly evolving landscape, technological advancement is paramount. We believe Intuitive Machines is standing at the forefront of this imperative. The success of our complete lunar program in the first quarter showcased the commercial viability and agility required to put the industry firmly in the space race with the company standing as a first mover in this effort. In the weeks following our lunar landing, we assessed how our four-year investment in technology development performed. Our team at Intuitive Machines completed a comprehensive review of vehicle and mission operations and systems performance. While successful in our first landing and customer data delivery, we continue to strive for perfection in navigating to pinpoint landing accuracy on the surface with our autonomous precision landing and hazard avoidance technology. Each mission exercises and refines the complex set of algorithms that make such autonomy possible in the harshest environments of the moon, namely the South Pole. The review resulted in software and hardware advancements that we believe expand our technical capability to track our vehicle accurately in space and land with 20 times better precision on our next mission. In addition, we reviewed our lunar distance, RF communications, and orbit determination capabilities and found several technical adjustments we expect will improve mission performance and best position the company to provide lunar communication services in support of future human missions. The technical improvements for IM-2 are vertically integrated capabilities within the company that we can perform with little to no impact on our intended quarter 4 2024 launch date or require any additional capital investment while we continue assembly of the flight vehicle. At its core, this comprehensive review confirmed that the technology we developed to provide lunar access and lunar data services is robust, and we are capable of making agile adjustments that improve our customer experience on the lunar surface. This tech capability expansion in autonomous vehicle operations, precision landing, and navigation is focused on the goal of adding command control communications and surface operations to our current lunar access services in a sustainable way. Beyond our first of three planned lunar missions, the April 3 announcement of Intuitive Machines Lunar Terrain Vehicle Services award moves us beyond the delivery of science and discovery payloads and onto heavier cargo delivery and surface systems development and operations. The LTV delivery system, the rover design itself, and both the autonomous and crewed operations represent the first critical piece of infrastructure for the Artemis Campaign. The lunar terrain vehicle contract has a total program value of over $4.6 billion and is structured across multiple phased awards. In the first phase, starting in the days following Q1, the Intuitive Machines led moon racer team will take the next year to create a preliminary design for delivery, deployment, and autonomous operations of the LTV. The second phase, which we expect to be awarded in mid-2025, calls for the vehicle's delivery and deployment demonstration. If awarded the second phase, Intuitive Machines' current lunar production and operations center in Houston will be the epicenter for the design, development, manufacturing, assembly, and testing of the larger cargo lander and the LTV surface vehicle itself as the program matures. It's important to note the company's cargo class lander uses the same core technologies as our smaller Nova-C lander, and the LTV services project allows for NASA and commercial service operations led by Intuitive Machines. Beyond the initial demonstration, another phase of the contract will move into continuous operations on the lunar surface over a multi-year performance period. For Intuitive Machines, the next critical chess piece in laying the foundation for a sustainable lunar economy is in the command and control and communications infrastructure in and around the moon. Every commercial, government or international mission to the Moon requires a very high degree of autonomy. Autonomous operations with reliable command and control communications are essential for the expansion of this lunar economy. Intuitive Machines' technological advancements in autonomous vehicle operations and precision navigation will be the backbone of its command and control system. These core technologies are applied to our lunar communication satellites currently in production, and Intuitive Machines is eagerly anticipating an announcement of a significant NASA award for communications, data relay services, and position navigation and timing services. We are expecting this contract award announcement in the second quarter. Earlier, I mentioned that we broke economic and technical barriers that enable cislunar expansion. I believe we are progressing with the necessary investments in technologies to demonstrate the same unprecedented economics deeper into the solar system. Already, we are seeing the United States government and NASA increase their reliance on procuring commercially provided systems and services. The ability of the US to leverage the ingenuity and innovation of its economic and technical industrial base to break the price barriers of traditional aerospace systems speaks to the difference in the overall US strategy for cislunar expansion and possibly the most powerful competitive advantage for the US in this global space race. During our last call, we mentioned NASA's 2024 budget reduction, noting that much of the $2 billion shortfall came from the Mars sample return program. Since that update, the agency has sought innovative commercial designs to disrupt the cost of delivering Mars samples back to Earth. Intuitive Machines has engaged the agency and intends to provide a solution set based on technology architecture we have been developing for lunar material return. Finally, we continue to make progress towards our IM-2 mission that we expect to launch later this year to our South Pole landing site, potentially becoming the first company to land on the moon twice in one year. We anticipate our third mission in 2025 with the final landing date still in discussions with NASA. We now have more certainty about NASA's second quarter 2024 award of the next CLPS mission CP-22 that calls for launch in the 2027 timeframe. This shift in mission timing creates an opportunity for Intuitive Machines to insert its first fully commercial mission after IM-3 as its fourth mission to the moon. With the success of Q1 in the execution of our business plan and now the stability recognized through our pending proposal awards, Intuitive Machines is prepared to issue full year revenue guidance for 2024. Steve Vontur will go through the details of the guidance. I am pleased to report on the tremendous growth and maturity we have seen over this quarter, and I'm excited about what the balance of this year holds for Intuitive Machines. With that, I'll turn the call over to Intuitive Machines' Interim Chief Financial Officer, Steve Vontur.

Thank you, Steve, and thanks to everyone joining us today. I'll begin by going through our first quarter 2024 results, followed by a few comments on our liquidity, backlog and 2024 revenue guidance. Revenue accelerated in the quarter and was $73.1 million compared to $18.2 million in the first quarter of 2023, driven primarily by our first full quarter of OMES III revenues of just over $40 million and rounded out with revenue from our three NASA CLPS and related mission payloads. We had a couple of one-time revenue impacts in the quarter. First, we had about $12 million related to the IM-1 mission success milestones. We also recorded an additional $5.6 million of revenue combined on the IM-2 and IM-3 CLPS task orders relating to contract modifications as we work with NASA to finalize updates to mission timing, payloads, and landing sites for the remaining two missions. As mentioned earlier by Steve, we expect the IM-2 mission to launch in late 2024 and IM-3 sometime in 2025. Gross margin continued to improve versus prior quarters and was a positive $12.2 million this quarter, driven primarily by the IM-1 mission success milestones and modifications on the other two missions, as well as the OMES III activity. Operating loss for this quarter was $5.4 million versus $14 million in the first quarter of 2023. The lower operating loss in the quarter was again driven primarily by the items noted above and were partially offset by higher G&A. SG&A ran higher in Q1 2024 and was primarily driven by incentive compensation and overall headcount increases, including higher non-cash equity awards that did not exist in the first quarter of last year. In addition, we saw increases in other expenses such as accounting and legal professional fees, bids and proposal expenses, and rent on the new corporate headquarters as we continue to support the company's rapid growth. Included in the quarter were one-time charges totaling approximately $5.7 million. On the cash side, we ended Q1 with a balance of $55.2 million, driven primarily by the $50.6 million in proceeds from warrant exercises. This is the strongest quarter-end cash position ever and reflects our continued focus on working capital management coupled with capital conservation and liquidity. We continue to believe that our Q1 ending cash balance is sufficient to fund operations through the end of the year. In addition, we expect to add cash reserves throughout the remainder of the year as we execute on planned operations and continue to win new business. As we previously stated, we will continue to be opportunistic in the capital markets for defensive capital and to further strengthen our balance sheet. Operating cash used was $6.4 million in the quarter with capital expenditures of $1.6 million, resulting in free cash flow for the quarter of an outflow of $8 million, which reflects the lowest quarterly cash burn since going public. We continue to strive towards free cash flow breakeven as we remain disciplined with expenditures while prioritizing a higher margin business. We ended the first quarter with contracted backlog of $222.3 million and expected decline of about $46.3 million as we executed on our CLPS and OMES contracts. We expect backlog to grow during the remainder of the year driven by key program awards including LTV and the next OMES III task quarters coupled with new award decisions including NSNS and CP-22. Moving on to our outlook for the year, as Steve said, we had a great start with record revenues in the quarter. The recent LTVS award and the solid opportunities expected to be awarded in the next couple of quarters gives us confidence in providing a 2024 revenue outlook of between $200 million and $240 million, representing an increase of 2.5 to 3.0 times prior year revenues. Overall, this was a record quarter both financially and operationally for Intuitive Machines. This strength gives us confidence to provide an expanded revenue outlook for the year, which showcases the company's tremendous opportunity for continued growth. We look forward to executing on this growth throughout the year. With that operator, we are now ready for the questions.

Thank you. The first question comes from Suji Desilva with ROTH MKM.

And talking about the guidance for '24, the backlog, I'm curious what the period covered there and how much of that covers your '24 new guidance of $240 million?

For the backlog component, we have about 80% of our backlog sitting right now at about $222 million. We believe about 80% of that backlog will be burned through the remainder of the year.

And then additionally with that guidance for '24, are you assuming new contract wins in that guidance or is it supported by existing wins and would any additional wins be upside to the '24 guidance?

Yeah. Hey there, Suji. The way we look at that is we probability weigh the awards that we have in pending. So what that includes in the lower end of the guidance is the mode for mission two that we're negotiating with NASA. But there's upside that takes us to the higher end of the range and maybe beyond with a mode to IM-3 on the negotiated landing time, the NSNS award, the next CLPS award, and then an IM-2 success payment. So all of those are probability weighted and that's what gives us the range that Steve described.

And then lastly, first time you guys mentioned potentially all commercial mission inserted between, I guess, IM-3, IM-4. I'm wondering if that would, Steve, in concept to have an anchored customer with some ancillaries or whether it would be equally kind of portioned out in the payloads across sort of a series of customers, what the general direction of that would be?

Yeah. Right now we're aggregating a set of payloads waiting to reach essentially critical manifest where we can go forward with the purchase of a booster. And so those payloads come in fairly evenly sized and occasionally we'll get one that's a little bit larger. And in this case, that's what we're negotiating. That gets us to the point where we can actually declare we have this commercial mission. So it'll be kind of a mix to not answer your question directly, but it's kind of a mix as we go forward from smaller to medium to maybe a large payload and that'll round out the complement.

Next question comes from the line of Josh Sullivan with The Benchmark Company.

As far as the cash burn here, down substantially year-over-year. But what are the big draws into year-end?

I missed the last part, Josh, the big draws.

I'm just trying to understand, cash burns down here. You're stating that you think you have a good cash balance here to get you through the end of the year. I'm just curious, what are the large tent poles for cash burn as we work into the end of the year?

Yeah. We run the indirect support at about $3.3 million a month as our indirect burn. And as part of cost of goods sold, the biggest payments or drawdown would be the booster payments for each of our missions. We have booster payments for IM-2 and IM-3 on the books for this year. And so I'd say those are the biggest ones that we have as accounts payable.

Got it. And then in your comments there, you mentioned the Chinese lunar mission. You have the Indians looking at their own sample return here. What's your view of that strategic tempo or that conversation in the US as other nations ramp up their lunar ambitions? Is it picking up these missions viewed as competition or is NASA really moving at their own pace?

Well, I think we're fortunate, as I said, as the US economy where we have NASA has or the US government has kind of sparked the US commercial economy to break the price barrier of what it takes to go to the moon. And if we can install an annual cadence of missions to the moon, we will. While it feels like we might be behind in that we aren't flying as frequently or as complex missions as China may be at this point, we'll catch up quickly as we have many more shots on goal. So I think the CLPS program in particular lends itself to building a bigger supply chain and base for us to commercialize the moon while the heavy lift activity is occurring, which is of strategic interest. And heavy lift SLS and might be moving to the right, CLPS can fill in with cargo missions to put the critical elements on the surface ahead of the humans. And I think that's where the NASA is going and where the government's going, and we're happy to provide that service for them.

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

I wanted to maybe ask how should we be thinking about margins for the IM Mission 2 and also maybe for the OMES contract? Just curious if you can maybe point out or give some color there as to kind of, what kind of margins might you expect?

So as we've reported historically, IM-2 and IM-3 missions are loss projects or close to breakeven. So as we work the rest of that, those operations off of those contracts, we won't have any margin on that. OMES margin is running in the 5% range on a consolidated basis. So again, don't expect any future losses on the IM-2 or IM-3 contracts, but we may have some bumps to that with the final successful milestone fees, like we had in IM-1 once we land.

And maybe just a quick follow-up. As it pertains to the lunar terrain vehicle contract, can you just remind us what are maybe the next catalyst there? And I guess is that program is the expectation that it's going to get narrowed from the three companies that have bid to either one or two? Just trying to understand how you might see that one playing out.

Yeah, we have a period of about a year, 10 to 12 months period to do the preliminary design of the delivery system and the LTV as I stated. There are three companies that are doing that over the next year, roughly on the order of a $30 million task order we expect later this month issued by NASA to kick that off. But then what will happen is there'll be a demonstration portion to actually take and fully develop the design, build it, and deliver it to the moon as a demonstration. NASA has indicated that that could be multiple awards. Right now, they're thinking possibly one, maybe two out of the three companies would go forward with that demonstration. However, let me point out that that's a $4.6 billion contract over 15 years, and it's written so broadly that there are a number of services that can be purchased under that multi-award IDIQ contract. And those services could include things like data sales or communications that go with and complement the LTV itself and the demonstration. So the bigger task order though is that one that's issued mid-2025 next year and we compete for the demonstration.

Next question comes from the line of Griffin Boss with B. Riley Securities.

I'll start on LTV. Can you talk more broadly about what NASA potentially will require from the LTV in terms of capacity or how much time NASA expects to utilize these LTVs, and then, in turn, the possible leftover availability to leverage for commercial use cases? And then related to that, if you've received any initial interest already from potential commercial customers looking to use any excess capacity for the LTV?

NASA intends to utilize the mission for both autonomous science and discovery. They will deploy scientific payloads using the LTV's mobility capability to collect essential science data, as well as support astronauts on the surface by moving cargo, managing logistics, and gathering geological samples. The overall plan is for NASA to use the LTV for about 6 to 7 months, while commercial use is expected to span 5 to 6 months. Intuitive Machines will own and operate the infrastructure when NASA is not present, which is a unique aspect of the contract. There has been interest from individuals and companies in excavating, mining, and harvesting materials on the lunar surface, with plans to cache these materials for future return to Earth. Our commercialization plan submitted to NASA included several letters of interest from about 10 companies eager to use the LTV if the contract is awarded. This level of interest is promising, and as we progress, it is likely to increase.

And then more broadly, there's a lot of talk about SpaceX's Starship, for various reasons, obviously, but I'd be curious to hear your thoughts on what a successful operational Starship could mean for the future of lunar transport in general, and maybe for Intuitive specifically?

Yeah. As I mentioned in a previous question, I think what's of strategic importance to the United States is a heavy lift capability. And whether that heavy lift comes in the version of the space launch system or the Starship, it will be a critical component to sustained human presence on the moon. What's nice though is that Intuitive Machines is complementary to Starship. And Starship, while it has a very heavy cargo capacity and a way to aggregate multiple mission elements on a single mission to the moon, we'll have regular cargo deliveries of smaller sizes to the moon and in various locations around the moon that will keep the cadence of missions up and be enough to really feed a community of smaller delivery service companies that will be put in cargo and critical systems and satellites around the moon and on the moon.

And then just if I could sneak one more in there. Without putting words in your mouth, Steve, you talked about the first potential fully commercial mission after IM-3. You said you were aggregating payloads. Would it be right to assume then that you are seeing enough demand today to fulfill a fully commercial mission or are you expecting to get whatever incremental demand that would warrant a fully commercial mission within the next two years?

We have signed contracts with multiple payloads that we've been aggregating and holding for this commercial mission. And as those come in and as we negotiate those contracts, we get to a point where we have enough to declare a mission. And those negotiations are signed contracts and negotiations underway that give us the opportunity to declare a commercial mission today. We expect more coming in over the next two years. And this gap between the last competed CLPS mission and CP-22, which is the next one, is that two-year gap that we want to fill so that we maintain this cadence of missions going to the moon. So we see a lot of commercial interest and international interest in terms of signed contracts to fly to the moon, and we see that interest growing continually over the next couple of years.

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

Just my first question here. Are all the aspiring slots on IM-2 and IM-3 currently occupied? And if not, are you still seeking payloads to put on there before integration?

All of the slots on IM-2 are filled and we are at max capacity and sold out. We still have some availability on an aspiring slot on IM-3 that we are talking with potential payload customers to fill that slot prior to that mission.

And just a follow-up, what's currently the status of the first satellite that was supposed to be riding aboard IM-2? How should we be thinking about that?

We revisited our plans in preparation for an anticipated NSNS award, which we expect to receive in the second quarter. We are hopeful that we will be selected for that mission. We have significantly enhanced our second communications satellite, Com 2, since we found that the first satellite did not meet NASA's requirements. Therefore, we are in the process of developing a more effective bus and communications relay for Com 2, which will be utilized in the IM-3 mission.

Next question comes from the line of Edison Yu with Deutsche Bank.

What are on the geopolitical angle, how do you think this aspect is sort of playing out, especially with the DoD's view on the system and our economy at the moment?

I missed the last part, Edison, you faded off there. The DoD's interest in this space race, is that your comment?

The cislunar economy?

There is significant interest among Department of Defense leadership regarding activities in Geo and ex-Geo, which remains a focus and priority for them. As traffic around the moon increases, this will likely gain more importance. However, they will need to observe more than just one or two moon missions per year before they can consider reallocating budgets to the cislunar economy. We are witnessing a gradual increase in the Space Force's interest in cislunar capabilities over the next few years. Additionally, as traffic models improve, there will be a heightened demand for information related to space traffic management and space domain awareness.

And just kind of more longer term and broader question on LTV. How do we think this sort of fits into the company's overall vision and strategy when we couple that with the upcoming NSNS and CP-22 awards?

So I think with respect to LTV, it's part of the strategy to, if I think about it, delivery to be able to take things to the surface, to be able to communicate essentially command and control communications around the moon is of critical interest, including navigation. And then the ability to do extreme mobility and LTV gives you that. And because we can then move around the surface, we can begin to build infrastructure that supports a sustained human presence on the moon. And so our company builds an ecosystem of capability in and around the moon in terms of delivery, command and control, communications, and extreme mobility. And that's how that all fits together. And we're anxiously awaiting, like I said, that last chess piece in the NSNS contract, to be able to deploy our data relay satellites and provide that service back to the government for communications around the moon.

Thank you. There are no further questions. I would like to hand the floor back to Intuitive Machines' CEO, Steve Altemus for closing remarks.

Well, thank you, everybody, for attending and joining us today on the call. As you heard, we've had a historic first quarter, both operationally and financially, and we expect to build on that momentum throughout the year. I look forward to talking to you in the future. Thank you.

Thank you. This concludes today's teleconference. You may disconnect your lines at this time. Thank you for your participation.