Spire Global, Inc. Q4 FY2022 Earnings Call

Good afternoon and welcome to the Spire Global Fourth Quarter 2022 Earnings Call. At this time, all participants are in a listen-only mode. A question-and-answer session will follow the formal presentation. Please note this conference is being recorded. I will now turn the conference over to our host Ben Hackman, Head of Investor Relations. Thank you. You may begin.

Thank you. Hello everyone and thank you for joining us for our fourth quarter 2022 earnings conference call. Our results, press release, and SEC filings can be found on our Investor Relations website. A replay of today's call will also be made available. With me on the call today is Peter Platzer, CEO; and Tom Krywe, CFO. As a reminder, our commentary today will include non-GAAP items. Reconciliations between our GAAP and non-GAAP results, as well as our guidance can be found in our earnings press release. Some of our comments today may contain forward-looking statements that are subject to risks, uncertainties, and assumptions. In particular, our expectations around our results of operations and financial conditions are uncertain and subject to change. Should any of these fail to materialize or should our assumptions prove to be incorrect, actual company results could differ materially from these forward-looking statements. A description of these risks, uncertainties, and assumptions, and other factors that could affect our financial results is included in our SEC filings. With that, let me hand the call over to Peter.

Thank you, Ben, and thank you to everyone joining us on the call today. When we started this company over 10 years ago, we had a very simple mission to improve life on planet Earth. The human impact on Earth, both from a climate perspective and a global security perspective has been profound, and it is therefore up to us to identify ways to mitigate the negative impact and contribute to building a more sustainable, equitable, and prosperous future. The markets encompassing climate change and global security are large, global, and growing. Climate change impact on the global GDP is measured in the trillions of dollars; mitigating just 10% of that is worth hundreds of billions of dollars. Ocean shipping accounts for 80% to 90% of global trade and was estimated to reach roughly 25 trillion in 2022. Illegal, unreported, and unregulated fishing causes up to $50 billion of economic loss a year, and piracy accounts for $16 billion of annual economic loss. The global signal intelligence market is estimated to be over 13 billion currently, with a sizable and rapidly growing contribution from space-based geolocation and spectrum monitoring capabilities. These are all massive markets, and they are markets we are just beginning to capture share in. As demonstrated by our increasing net retention rate, our initial foothold in this market is growing, strengthened by substantial sustainable competitive advantages. We believe Spire's addressable market encompasses a range of $100 billion, including 150,000 to 200,000 customers. While we are immensely proud of growing from $1 million to nearly $100 million of ARR in just five years, we believe there is so much more opportunity ahead of us. We finished 2022 serving more than 730 ARR solution customers across 65 countries on six continents, leaving substantial opportunity right in front of us for continued growth. If you think about our business opportunities, it's obvious to start by considering the shipping companies that own around 55,000 merchant vessels, the 800 container ports, or the 5,000 airlines that own roughly 25,000 cargo and passenger aircraft. However, this is just a small subset of the customers that find value in our solutions. We track hundreds of thousands of vessels and over 60,000 aircraft daily. We are aware of only one other company that has the ability to provide clean satellite AIS data for tracking maritime movements and another very different company that has the ability to provide clean satellite ADS-B data for tracking global aviation movements and locations, and only two, again, different companies with the ability to provide clean satellite weather data via GPS-RO. We are not aware of any other company other than Spire that has all of these satellite data and analytics solutions combined under one roof available to help customers solve their most pressing challenges. Our customers include ports, financiers, insurance companies, traders, transportation and logistics companies, renewable energy companies, route planners, sports teams, and asset maintainers, to name just a few. These are each large industries that make up the ecosystem around shipping, aviation, and weather, and they are all part of Spire’s target customer base. For example, Spire provides our customer gravity real-time information and analytics based on global maritime Automatic Identification System technology. This information allows clients to get precise insights about maritime traffic, including the exact location of a ship carrying what they need, and when it will arrive at where it needs to be. This enhanced visibility of vessels enables organizations to make better data-driven decisions. In another customer example, SHIPNEXT, a freight matching platform covering bulk, oversized, and containerized cargo, leverages satellite data from Spire to gain real-time insight into fleet operations. There are estimated to be over 800 ship brokers and freight forwarders providing services similar to SHIPNEXT to nearly 20,000 shipping lines across the globe. The collaboration between SHIPNEXT and Spire has resulted in real-time visibility around ports, including congestion management solutions. This is powerful data as ships spend, on average, 40% of their time in port waiting to be called. On the aviation side, Spire was selected to provide ADS-B position information to Myairops so that operators could get an accurate picture of the operational landscape, including aircraft position, weather, crew requirements, and maintenance. Industry reports estimate that there are roughly 21,000 business jets in the nearly $3 billion aviation analytics market, a market expected to grow in double digits and reach $8 billion in 2030. Our relationship with Myairops was expanded when it was announced earlier this year that they will also be integrating Spire weather data into their platform. This is an example of how our weather data is being utilized beyond only generating weather forecasts. It's being utilized as another layer of insight on top of the maritime and aviation data we provide. Additionally, BluePulse combines data and artificial intelligence by integrating Spire’s weather data forecast into its refrigerated fleet energy simulation tool. Utilizing Spire's historical weather data of temperature, humidity, dew point, solar radiation, and wind, BluePulse ran different alternatives over 70 routes across the Atlantic and Pacific Ocean. What it found was that by only going 2% longer than the shortest possible route, 5% to 7% of the ship's fuel was saved on roughly 60% of the routes and from 300 to 700 megawatt-hours of resource energy was saved. This results in tens of millions of Euros saved and tens of thousands of equivalent tons of CO2 emissions saved annually. This is an exciting area of the business as the maritime industry is poised for digital transformation. BluePulse is part of over 1,000 SMEs and start-up companies in the maritime space, a number that has been growing steadily in double digits. In the scientific community, we continue to see strong demand for our weather data. We currently provide 3,300 radio occultation profiles to NOAA, but the scientific community has studied the significant impacts and improvements in numerical weather prediction by using 25,000 RO profiles a day, 50,000 profiles a day, all the way to over 100,000 profiles a day. These weather prediction improvements are often particularly strong for extreme weather events like hurricanes or heavy snow or rain. With the NOAA satellite data and information service budget at roughly $2 billion for FY’23 and dozens of similar agencies across the world, these studies indicate potential further demand for our data along with growing broader demand for our commercial weather data. This past year, Spire was awarded contracts to detect and geolocate certain objects based on targeted radio frequency or RF emissions. One such example was an award from Sierra Nevada Corporation for a cluster of 460 satellites. This is an example of how Spire can compete and win in the $13 billion and growing signals intelligence market. Spire’s spacecraft are equipped with highly sensitive radio signal detection devices that listen for the slightest changes of these signals. This capability allows us to measure the temperature in Earth's atmosphere with incredible accuracy or measure the level of moisture in the ground. Identifying and characterizing, where possible mitigating ground-based RF and GPS interferences is a critical component of correctly capturing this data. It also can have great importance for National Security and U.S. Space Force operations and organizations whose budget has grown to over $26 billion, up from $19.5 billion in 2022. RF signals intercepted in open airspace and liabilities that directly threaten on-orbit space assets pose significant risks to civilian, commercial, and military operations. Spire solutions are also utilized to protect life and property. A recent agreement with a launch provider has Spire supplying vessel tracking data for the coasts of California, Hawaii, Florida, and Texas in support of launch day planning and mission-critical situational awareness. To put this opportunity into perspective, there are over 30 active launch service providers, and we are tracking over 50 new launch vehicles. At Cape Canaveral in Florida alone, there are expected to be 87 orbital class launches in 2023, a sharp increase from the record-setting 57 in 2022. Globally, there has been a rocket launch every two days in 2022. By having better insights on marine traffic around launch operations, lives can be protected and launch delays can be prevented. In another example, one of our partners successfully used Spire data to find a lost boat in the Philippines and save the lives of the seafarers. We also heard from our customer that our data was being utilized to keep seafarers out of the path of hurricanes, with storms in the vicinity of their vessels; this customer was utilizing our dynamic air data to track their vessels and keep their employees out of harm's way and their cargo safe. With existing business and ample opportunities in front of us, Spire continued to prudently scale the company during 2022. Celebrating Spire's 10th anniversary, we grew our revenue 85% year-over-year and expanded our team by just 10% year-over-year, showcasing the enormous operational leverage that our business model has. The amazingly talented teammates at Spire are the fuel for our business growth and the source of immense customer satisfaction, highlighted by a net retention rate of 117% for 2022. Our team members representing over 45 countries bring exceptional diversity of thought and experience to our organization. At Spire, we are continually working to build a company where our teammates can learn, grow, and succeed. This past year, we invested in the employee experience by listening and investing heavily in opportunities for learning and development. These are investments in our team that we are happy and excited to make. As we prepare for the opportunities of the next decade, we continue to make prudent investment decisions to replenish and improve our infrastructure and enhance our technology, consistently adding to our already substantial competitive moat. During 2022, we had three launches, and we had our first launch of 2023 shortly after the New Year. In total, we have completed 34 launches with 10 different launch providers over the past decade. We have launched more than 160 satellites and accumulated over 500 years of space heritage. Only through the experience of operating in space does one understand exactly what it takes to be successful in that environment. Our substantial experience on this front further bolsters our competitive moat. With these recent launches, our space services customers were able to bring capabilities to market faster and more efficiently. Customers like OroraTech with its wildfire detection service and the Austrian Space Forum's ADLER-1 space debris monitoring satellite are just two examples highlighting capabilities in large growing markets. We were also able to continually upgrade our technology in orbit. Spire in-house developed optical laser-based inter-satellite links are examples of how Spire’s smart investments in R&D continually enhance the value we deliver to our customers and the competitive moat we enjoy in our business model. We deployed satellites equipped with an antenna and software-defined radio tuned to capture signals from L-Band SATCOM, which further improves our geolocation capabilities. We unveil the 16-year satellite bus that allows for more power, volume, and data capabilities. We increasingly see that our customers' missions require buses that offer the performance of a larger satellite, but with the agility of a nanosatellite. We also invested in Hyperspectral Microwave Sounder and polarimetric radio occultation to augment weather data and forecasting. The microwave sounders will enable a higher level of measurement accuracy for both moisture and temperature, which are essential in numerical weather prediction. This investment was awarded with a $4 million contract by NOAA for the development, integration testing, and demonstration of a hyperspectral microwave sensor payload. As we look to the future, there are generational trends that provide reliable tailwinds for our business and align with our mission of leveraging data and analytics from space to improve life on Earth. For decades, climate change has been impacting our planet. As populations continue to grow, humans are exacting an ever larger toll on the place we call home. For the three decades spending the 1950s, 1960s, and 1970s, there wasn’t a year in which the world experienced economic loss from weather-related disasters of more than $100 billion. Yet, during the 21st century, the annual economic loss associated with weather-related disasters has averaged over $300 billion, over three times as much. In addition to climate change, we have witnessed a rapid change in our global security environment. 2022 was a sober lesson in how quickly the world can change. Overnight, a sovereign country was invaded, millions of people were displaced, and the world was reminded of how fragile peace can be. With these real-time reminders, Spire remains steadfast in our mission of providing critical and actionable intelligence to provide truth and transparency from space. We believe that through the application of insights that can only be captured from space, Spire is making an outsized impact on the world as we increasingly apply AI and machine learning techniques to our data. Spire has been looking at different ways to detect essential climate variables so companies can reduce their operational weather risk and researchers can understand more about how the Earth is changing. In one example, GNSS reflectometry, Spire has been using the exceptional RF sensitivity of our space technology to measure and assess different climate indicators. Climate indicators have been explained by scientists as the cornerstone of the climate change jigsaw puzzle, connecting atmosphere, ocean, and ice processes. With the combination of analytics and machine learning, our customers have been impressed by the results. Scientists have stated that our team has successfully distinguished between Antarctic ice and ocean, as well as between first-year and multi-year ice with 90% accuracy, higher accuracy than was hoped for. One customer noted that this is a data resource that we've never really had. While this is just a single use case of the data that Spire collects, it opens the aperture of what is possible by combining data that is becoming available for the first time along with AI and machine learning. With robust business prospects and a strategic plan in place to scale the company, we are steadfastly focused on driving the company to profitability. We believe that we have identified the correct key markets for our solutions and remain focused on those markets. This focus has allowed us to extract high utilization from our assets. Our constellation supports three sizable market opportunities where we collect data once and sell it many times. Our expansion into space services further increases that utilization and monetization of the infrastructure and teams we have in place. By leveraging our R&D, manufacturing, operations teams, and ground station network, we can provide exceptional solutions to our customers and high operational leverage to our shareholders. Even as the macro environment continues to be challenging and we see extensions in the time to sign customer contracts, while businesses dynamically balance growth and profitability, our high asset utilization allows us to fully stay on track in our drive towards profitability. As our margins have continued to expand, our cash usage has declined significantly over the past two quarters despite our strong year-over-year growth rate. We have remained resolute on our projected profitability timeframe, which has remained unchanged since the time we introduced it one year ago. We feel this creates exceptional opportunities for those looking at the incredible strength, growth, and trajectory of our business. As we remain focused on execution, we are centered on what we can control. What inspires us is the tremendous long-term demand for our solutions, a demand that is rooted in Spire’s mission of improving life here on planet Earth. And with that, I’ll turn it over to Tom.

Thanks, Peter. The fourth quarter ended the fiscal year with results that clearly demonstrate our path to profitability and to positive free cash flow. Q4 revenue increased 49% year-over-year to $22.4 million, once again hitting a quarterly record. For the full fiscal year, we finished at $80.3 million, an 85% year-over-year improvement and within our guidance range provided this past November. ARR at quarter end was $99.4 million, up 41% year-over-year. We fell a little short of our goal of ending the fiscal year with just over $100 million of ARR due to continued pressure from the macro environment, such as customer timing delays, funding issues, and slower time to close the seven-digit-plus sales deals. However, in February, we received nearly $20 million of cash from the remaining amount of our existing $120 million credit facility after achieving the ARR milestone. We finished the year with 733 ARR Solution Customers, a 23% increase year-over-year and a net add of 135 customers during the fiscal year 2022. Our Q4 ARR net retention rate was 110%, and the rolling 12-month ARR net retention rate for fiscal year 2022 was 117%, up from 110% for the rolling 12-month for fiscal year 2021. Our land-and-expand strategy has continued to serve us well, as we once again finished another full fiscal year with an ARR net retention rate at or above 110%. These trends represent a healthy future revenue growth not only from new customers but with our existing customer base. Now, I’ll be discussing non-GAAP financial measures unless otherwise stated. We have provided a reconciliation of GAAP to non-GAAP financials in our earnings release that should be reviewed in conjunction with this earnings call. Spire has methodically progressed on our strong trajectory towards profitability and achieving positive free cash flow, driven by our leverage business model and high asset utilization. Our Q4 operating margin improved 40 points to negative 46% from negative 86% a year ago. In addition to the significant year-over-year improvement, we executed a 10-point sequential improvement from the third quarter of 2022. Our Q4 operating loss was $10.2 million, an improvement of $2.7 million from a year ago. For the full year, our operating loss was $44.5 million, which was over $1.3 million better than the midpoint guidance we had provided in March of 2022. Total adjusted EBITDA for the fourth quarter was negative $7.3 million, an improvement from negative $10.6 million a year ago. For the full year, adjusted EBITDA was negative $32.6 million, which was within the guidance range we had provided in March of 2022. We ended the quarter with cash, cash equivalents, restricted cash, and short-term marketable securities of $70.7 million. We utilized $8.1 million of free cash flow in the quarter, which was a 66% reduction over the same quarter a year ago, and over a 41% reduction in free cash flow usage from last quarter. While cash can fluctuate from quarter to quarter, this significant progress in lowering the net cash burn is in line with our objective of generating positive free cash flow in 12 to 18 months. Given the significant improvement in cash utilization over the past six months, along with receiving nearly $20 million of cash from the existing credit facility, we are feeling very comfortable with our balance sheet. Now turning to our outlook for the first quarter and full fiscal year 2023. For the first quarter, we expect revenue to range between $21.7 million and $23.7 million. Q1 revenue reflects the smaller amount of ARR added during the fourth quarter of fiscal year 2022, along with taking into account the timing of project-based revenue. For the full fiscal year, we expect a range of $104 million and $109 million, which represents growth of 33% at the midpoint from fiscal year 2022. Q1 ARR is expected to range between $104 million and $106 million, and we expect to finish the year with ARR ranging from $129 million to $135 million, which represents growth of 33% at the midpoint. ARR Solution Customers for Q1 is expected to range between 750 and 760, and we expect to end the fiscal year with 835 to 885 ARR Solution Customers. For Q1, we expect non-GAAP operating loss to range between $12.8 million and $10.8 million, which is a $1 million midpoint improvement from the first quarter of fiscal year 2022. For the full fiscal year 2023, we expect non-GAAP operating loss to range between $34 million and $29 million, a $13 million improvement from fiscal year 2022 at the midpoint. The improvement in non-GAAP operating loss reflects further leverage of our headcount and infrastructure across our four solutions. Adjusted EBITDA for the first quarter is expected to range from negative $9.6 million to negative $7.6 million, and we expect our non-GAAP loss per share for Q1 to range from negative $0.12 to negative $0.11, which assumes a basic weighted average share count of approximately 144.7 million shares. For the full fiscal year, we expect adjusted EBITDA to range from negative $19 million to negative $14 million, and we expect our non-GAAP loss per share to range from negative $0.36 to negative $0.33, which assumes a basic weighted average share count of approximately 148.4 million shares. In closing, Spire had a great year, bringing in solid top-line growth from new and existing customers, improving margins with scale and leverage, significantly lowering net cash burn quarter-over-quarter, and improving the balance sheet with additional cash sources. Our 2023 guidance reflects another year of focus and dedication to growing the business while taking further steps towards our path to profitability and being free cash flow positive. Thanks for joining us today. Now, I would like to open up the call for questions.

Thank you. Our first question comes from Erik Rasmussen with Stifel. Please state your question.

Yes. Thanks for taking the questions and congratulations on the lower net cash burn and the trajectory there. I wanted to just ask about the guidance for 2023. At the midpoint, you are guiding to 33% year-over-year growth. Obviously, still good growth but it is a deceleration from what we saw in 2022. Has anything changed in your business that is impacting your revenue opportunities? And then maybe you could just provide some high-level assumptions you have baked into that outlook for the year? And then I have a follow-up.

Of course, Erik, happy to do that. Nothing has really changed because the driving principle for us is profitability. When we start our process, we start at the bottom of the income statement because at the end of the day, what matters is not what enters the income statement at the top, but the cash that falls out at the bottom. That’s where we start. We look at the operational improvements, leveraging the infrastructure, the people, the processes that we have, and then we end up with a top line that represents prudent, meaningful growth. Yes, we grew 40% ARR roughly in 2022, and this is kind of like in the mid-30s forecast for 2023. You can always drive up your top line, but just spending more money on sales and marketing. However, that is not the right approach for a business whose job it is to produce cash. You can use that cash to invest in sales and marketing and keep on driving your top line. Nothing has really changed. We are cognizant of the macroeconomic environment, right? It might feel normal now, but in 2022, we started out the year — when we gave guidance, a war broke out, inflation surged, interest rates increased, people talked about recession, and the stock market dropped significantly. There’s been a lot of turbulence, and I don’t think it has worked its way through the system completely at this point in time. We believe the prudent way for us to build this business is to stay on our path, focusing on what we delivered in 2022, which is recognizing the bottom line and allowing the top line to follow.

I think one thing I’ll add, Erik, is that one key component we're heavily looking at for the path to profitability and the results on the bottom line is that, when you look at what the street has put out for the expectations, we are actually slightly ahead of the midpoint on the non-GAAP operating loss for our projections. So, we’re feeling very good on where we are and we’re achieving the right mix of the top line and getting that path to profitability. As Peter mentioned, we don’t want to over-index on sales and marketing to get a higher number if we don’t achieve those goals.

Very good. And then maybe just some comments if you can on the pipeline. Maybe some of the types of deals the team is tracking, are you starting to see any larger deals emerging? I know we had some seven and eight-figure deals, but maybe you could just sort of comment on that. Thank you.

Absolutely, Erik. You’re correct that 2022 has seen an increasing number of substantial sized seven-figure, eight-figure deals. That trend is something that we continue to see based on the additional products that we have been rolling out. We have released several analytics products leveraging AI capabilities inside Spire that are resonating strongly with the customer base, broadening our outreach and value. The RF geolocation capabilities that Spire has deployed in 2022 also continue to resonate and attract customer interest expressed in deals that are substantially larger. Finally, the offering of renting Spire’s infrastructure provides incredible scale and resilience, allowing both government and commercial customers to launch and deploy space-based solutions and products. This resonates strongly and goes from launching one or two payloads into orbit delivering data, to whole constellations of payloads. We foresee that trend continuing and we’re looking forward to seeing those deals contributing solidly to our top and bottom line in 2023.

Hi, good afternoon, Peter.

Good afternoon. How are you doing, Austin?

Very good. Hope you’re doing good as well?

That's correct. I am.

Great. My first question is, is there any pressure on the LEMUR constellation to get new satellites launched this year, just given the delays with Virgin Orbit? Or does the launch that you did in the first quarter and the progress on the root cause analysis make you confident that you can get those satellites launched on launch 1 this year or move to another provider?

Yes, we are extremely comfortable with the current capabilities of the constellation and the launch plan and manifest that we have, which is, I would say appropriate and conservative, not overly aggressive or in need of many launch vehicles or launches. I mean, we’ve done this 34 times, Austin; we have 10 different launch providers. The team at Spire has exceptional connections to the launch market, and there are several launch service providers outside of Virgin with which we have launched and continue to engage. So, we feel very relaxed about that side of our LEMUR constellation.

Okay, great. And then just on the dark shipping tracking service, is the Ukraine war driving more government customer demand for that? Just given Russia's been trying to move its crude oil through a lot of third-party shipping companies?

Yes.

Thanks. Good morning - afternoon everyone. Long day.

Good afternoon.

Yes. Hey, a couple of questions if I could. Thanks for the update on the cash flow. We were wondering when that was coming and remind us again, as far as the interest rate environment, how much interest expenses are going to be impacted as we think through this calendar year from drawing down on that?

Yes, I mean, it's roughly around $15 million if you keep going at the same pace that we’re currently seeing for the quarterly amounts that we have to pay, assuming rates stay roughly the same.

Okay. As you called out, obviously a couple of things you want to focus on what you can control, focus on the customers’s macro environment, any FX impact that affected you in 2022 and 2023?

In 2022, we did experience some impacts. Obviously, we did really well to achieve the guidance that we had set out. So there were impacts on that front; for 2023, we’re doing our best to incorporate that into our expectations and forecasts, so it's all built in. We’ve talked to a lot of folks out there in the banks, and we’ve gathered as many points and estimates that we could, and that’s all been factored into the guidance you have today.

Sorry. One thing to note is that we have made a very steady and deliberate effort to move more and more contracts into a U.S. dollar base, which will reduce our FX risk.

Yes. You can see that in our K and our Qs; the quarter-over-quarter keeps dropping down. We’re about down to 30% of our deals and revenues coming from currencies other than U.S. dollars.

And don’t forget that not all of our costs are in U.S. dollars. We don’t want to drive the number to zero. However, we are steering that cautiously to reduce volatility from FX. So, net-net, I think we are starting the year 2023 in a better position than we started the year in 2022 regarding FX risk.

And obviously, you’ve maintained a resolute focus on the free cash flow path and the timeline for March to September of 2024. What variables push you to the March side of that versus the September side? Is it revenues ramping, cost control, or CapEx? What drives the higher or lower end dates regarding when we'll see positive free cash flow?

You hit all the fronts. It’s a mix of everything, right? That’s why we put out the guidance that we had on the top line. We feel that’s a solid figure. We’re constantly looking for ways to improve and leverage the business even further, even though you can see in our results, we already have very strong leverage across all four of our solutions. And then on the CapEx front, we’re always managing that. We’ve been doing a great job year after year on satellite replenishment. This year, we actually spent a little less on that front than the normal amount of 10 to 12 million that we usually allocate for replenishment. So yes, all these factors are in play, and we’re looking to improve wherever possible. We have done wonderfully in our results in 2022 across these areas. The guidance we put out also reflects these considerations.

I wish you could be part of some of our operational meetings, Ric, and see the relentless drive that we have. This word has a real meaning for us; it’s one of Spire’s six values. It’s about continuously looking for operational improvements. I don’t think you get the operational leverage that you see in our margin improvements unless you constantly ask how to do more with the same resources while increasing customer satisfaction. It’s about decreasing costs and improving margins.

Hi. Thank you. Steven Pawlak on for Jeff. I guess the question around the ARR shortfall in the fourth quarter relative to guidance. I appreciate the detail, Tom, but can we get more detail? Was it just some larger contracts that took more time? Were the sales cycle lengthening happening across the market? Is it slower upsell or is it sort of new business issues? Any additional details on that would be helpful? Thanks.

Absolutely. I think one way to approach this is to look at our ARR for the full year. We grew 41% year-over-year. That represents some nice progress throughout the year by constantly adding more ARR. If you also look at our land-and-expand strategy, that added 135 net new customers in the ARR. So we added a solid pool of new customers across all four of our solutions. When looking at the expansion side, we achieved a 117% net retention rate, which is up from 110% the year before. You don’t achieve those kind of numbers without stickiness in your solutions, low customer churn, and numerous use cases for customers. We feel very good about our overall annual performance. However, the linearity of our quarterly performance is something where we wish we had done better. The macro environment hurt us there. We start the quarter, everything appears solid, and then as we progress through, particularly with those larger deals, we encountered delays due to additional required approvals or funding getting temporarily frozen.

If I might add, if you look at our mix between commercial and government, we try to maintain a roughly even balance. We experienced substantial growth on the commercial side in 2022, which left us slightly over-indexed in that area. We are making efforts to rebalance back to a 50/50 split. The commercial sector tends to feel the macroeconomic headwinds more so than the government sector. It wasn’t that people rejected the solution, rather that they encountered hurdles to getting it done at that moment. They wanted to proceed but needed more time to finalize approvals—the delays are more pronounced on the commercial side than the government side.

Hey guys, good afternoon. Thanks for taking the call.

Good afternoon.

Tom, looking at adjusted EBITDA for the full year guide and Q1, it looks like we should expect a sizable increase after Q1. I’m wondering if you could provide any info either on the drivers behind that or maybe the cadence behind it. Should we expect steady progression for Q2 through Q4 or maybe a more discreet inflection after Q1?

Yes. We do expect continuous improvement throughout the year. Q1 guidance includes what we currently know. The first quarter for us often coincides with when many customers finalize their annual budgets. Not everyone's budgets are perfectly wrapped up by December 31st, so many customers begin working with us throughout the first quarter once they get their budgets approved. Unfortunately, that doesn't always give us enough time to close things in Q1, so we built that consideration into the guidance. We expect a strong movement from the second to third and fourth quarters. Continuous progression is something we observed last year, and we expect that trend to continue.

Hi, good afternoon.

Good afternoon, Elizabeth.

Hi. So could you delve into the balance sheet a little bit and tell us how to think about the minimum amount of cash that you need on the balance sheet to operate the business versus your target for being cash flow positive?

Yes, I can answer that. Over the last two quarters, we had just over $11 million in cash usage, two quarters in a row. We just received roughly $20 million from the remaining amount of our credit facility. If you consider our path towards free cash flow, we went from negative $25 million to negative $13 million down to negative $8.1 million. We are seeing that reduction and leverage. We ended the quarter with $70.7 million, and with the addition of that extra $20 million, our quarterly cash burn is positioned well against our guidance for when we’re expected to reach free cash flow positivity.

So what is the minimum amount of cash that you need on the balance sheet to run day-to-day operations?

We’re using $11 million for our current expenditures, so we need at least $11 million every quarter. However, as we improve our performance throughout 2023, that number will start diminishing. We expect it to decrease as we keep delivering and improving metrics on the revenue and cost fronts.

Using that $11 million as a guideline for operational costs should provide a reasonable framework for modeling our requirements.

Thank you. There are no further questions at this time. I’ll hand the floor back to Peter Platzer for closing remarks.

Thank you. As we wrap up, I would really like to thank our customers, our employees, and our numerous suppliers for partnering with us as we continue in our substantial growth trajectory toward profitability. Without our customers, employees, and business partners, we would not be where we are today. On a daily basis, the news reminds us that climate change and geopolitical events shake the already fragile world we live in. However, with our data and solutions, we strive to provide transparency and stability for the world. I could not be more excited about the prospects for Spire as we work together to create a more sustainable, equitable, and prosperous future right here on planet Earth.

Thank you. And with that, we conclude today’s conference. All parties may disconnect. Have a great evening.