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Operator: Welcome to Intuitive Machines Third Quarter 2023 Conference Call. At this time, all participants are in a listen-only mode. After the speakers’ presentation, there will be a question-and-answer session. [Operator Instructions] As a reminder, this conference is being recorded. I would now like to turn the conference over to your host, Stephen Zhang. Please go ahead, sir.

Stephen Zhang: Good morning. Welcome to the Intuitive Machines Third Quarter 2023 Earnings Call. Chief Executive Officer, Steve Altemus; and Chief Financial Officer, Erik Sallee, 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 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 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 financial performance. You can find this presentation on our Investor Relations page at www.intuitivemachine.com/investors. Now I’ll turn the call over to Steve Altemus.

Stephen Altemus: Thanks, Stephen. Welcome, everyone, and thank you for joining us. In today’s presentation, I will provide updates and accomplishments across the company’s 4 business units. After, I will hand the call to our Chief Financial Officer, Erik Sallee, to review our financial results for the third quarter of 2023. Let’s begin with our Lunar Access Services accomplishments. During our second quarter call, we mentioned that we believe launchpad congestion was going to determine the priority of launches through the rest of the year. In coordination with NASA and SpaceX, lift off of the IM-1 Lunar Mission is now targeted for a multi-day launch window, which opens on January 12, 2024. In case of unfavorable launch conditions, such as poor weather, backup opportunities are available and will be determined based on the Lunar blackout window and other factors.

I’d like to take a moment to expand on this change to add context and perspective. Intuitive machines completed its Lunar Lander actually in September, and we were looking forward to launching it in November. We also know better than most that there are inherent challenges of space flight. Schedule changes and mission adjustments are a natural consequence of pioneering lunar exploration. Preparing to return the United States to the surface of a moon has been an incredible journey. Our Lunar lander is performing beautifully in all its testing, and we are authorized to deliver it to Florida later this month. We have a launch date and the necessary approvals ready to go. This is a great achievement for the company and a lesson in patience. This delay is a small price for making history.

Meanwhile, we are smartly using this extended interval before the planned launch date to continue offline confidence testing. Specifically, we’ve pulled in work planned for pad processing, which included a fit check to our separation ring and spacecraft adapter. We tested the fitment and the separation of the vehicle to the spacecraft adapter. In addition, we still plan to run another mission sequence test to provide additional training for the operations team in preparation for the mission and to do additional testing on the flight and ground software. Finally, we continue confidence testing with our propulsion system in our offline vertical test facility, continually refining propulsion system parameters. Our second plan mission is benefiting from all the testing we have done for mission one and is quickly taking shape.

Intuitive Machines’ engineers completed helicopter testing of the LiDAR navigation system for IM-2 at the Kennedy Space Center. The use of LiDAR to land our second mission allows us to land in shaded regions of the moon targeted by NASA’s Artemis program. IM-2’s propulsion and structural components are in-house undergoing assembly, and we’re working on the integration of NASA’s ice mining drill and commercial payloads. Our Micro-Nova Hopper, which is designed to search for water ice and permanently shadowed regions of the moon is assembled and undergoing thermal vacuum and vibration testing. Nokia’s Lunar 4G/LTE network is taking shape, including integration with the Lunar Surface Rover, which we’ll deploy from the lander to test and validate the robustness and performance of Nokia’s cellular network communication between the Rover and the lander in the harsh lunar environment.

At the end of the quarter, we submitted a proposal for another contracted mission with NASA. This is the CP-22 task order contract under the agency’s commercial lunar payload services initiative. We believe this is still on target for award notification later this month. And looking ahead, we’re excited to share that this past week, we were selected by a leading international space agency for a $16.8 million contract to deliver 2 payloads through our Lunar Rover services. These services include the deployment of the Rover and payloads with our Nova Sea lander, along with data relay and communication services back to Earth. This award is our largest international payload contract to date and demonstrates our continued focus on diversifying our customer base as we expand into international markets.

For Lunar Data Services, as we look forward to providing communication capabilities between assets using Nokia’s 4G/LTE on the Lunar surface, we’re continuing to expand our LUNAR data services business line to support the evolving needs of the future Cislunar market communications and data between the earth and moon. In preparation for our Lunar mission, the operations team and Mission Control has completed all required ground station interface checks. These checks give assurance that our commercial lunar telemetry and tracking network is operational and prepared to provide near 24/7 coverage of our mission and any future tracking missions, whether that’s from the civil, defense or commercial sectors. In addition, the Mission Control team is continuing to complete payload data transmission and mission sequence testing.

These functional practice sessions will continue all the way through the scheduled launch in January to fully appreciate and understand all the nuances in the software and the ground network. As mentioned last quarter, NASA’s award for the near space network services contract award is expected in early 2024. In Orbital services, we began customer transition for NASA’s 5-year $719 million Omnibus multi-engineering services contract or OMS 3, and expect revenue to start December 1. To date, we’ve secured more than 87% of the total workforce for the contract and will be ready to support NASA in the next month. For Space products and infrastructure, we believe the energy sector will continue to develop across our space products and infrastructure business line.

In the days leading up to this call, Intuitive Machines announced a $9.5 million award from the Air Force Research Laboratory to develop satellite positioning and maneuverability solutions using radioisotope power systems. The award feeds into our growing space products and infrastructure business line and is an exciting opportunity for Intuitive Machines to evolve as a dynamic, adaptable and forward-looking company diversifying into defense and energy. During the third quarter, we started our 1-year program to develop a radioisotope power system to enable in-space assets like our Lunar Landers to survive the Lunar night, potentially extending lunar missions from roughly 2 weeks to several years. As we mentioned in our second quarter call, Intuitive Machines completed Phase 1 of its Fission Surface Power Reactor contract for the Department of Energy at NASA.

Now the company is proposing Phase 1a, which would extend the contract by 8 months for early risk reduction on hardware and design maturation. We expect the work completed during Phase 1 and 1a will give the company valuable insights to our Department of Energy and NASA’s $4.5 million second phase of the contract. Looking ahead, we submitted our bid as the prime contractor for NASA’s Lunar terrain vehicle services contract earlier this year 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 our prime contractor debut in human space flight. We’re expecting multiple down selected prime contract awards and the expected award timing is now at the end of quarter one 2024.

Finally, Intuitive Machines has expanded its ability to support each of the business units in our fully operational Lunar production and operations center at the Houston Space Port. We opened the facility with a ribbon cutting with over 400 people in attendance, including federal and state representatives, Houston Mayor and city council members. By moving into our new operations center, the company now has the ability to simultaneously manufacture multiple spacecraft, including up to 4 Lunar landers. Moving into our new home designed to support NASA’s $93 billion Artemis program marks a new beginning on our journey for growth and expansion. With that, I’ll turn the call over to Intuitive Machines’ Chief Financial Officer, Erik Sallee.

Erik Sallee: Thank you, Steve. And thanks to everyone joining us today. We ended the third quarter with a contracted backlog of $135.2 million. This backlog does not include the $719 million NASA OMS 3 contract, which will be booked as task orders are received. As Steve mentioned earlier, the OMS transition is nearly complete, and we expect revenue to begin in December. Revenue for the quarter was driven primarily by NASA’s commercial Lunar payload services initiative, or CLPS as the company concluded third quarter ‘23 with $12.7 million in revenue compared to $10.3 million for the third quarter of 2022. Revenue run rate was down from the first half due to updated launch timing and an increase in cost estimates required to successfully deliver our 3 Lunar landings with NASA.

Operating loss was a negative $23.2 million versus negative $11.8 million in the year prior period. This was primarily due to the updated cost estimates as well as public company costs. G&A also included $1.4 million of onetime transaction costs related to the equity raise we secured in the quarter. On the cash side, we ended the third quarter with a cash balance of $40.7 million. Free cash flow in the quarter was an outflow of $14.6 million, of which $7.2 million was operating cash use and $7.5 million was CapEx. The primary use of CapEx was related to the new Lunar production and operations center. Within financing cash flows, we received a $20 million equity investment from an institutional investor in the quarter. This was partially offset by a onetime member distribution of $3.7 million relating to taxes.

As we discussed last quarter, the OMS protest along with the timing of major awards, have impacted our results this year. However, none of the significant awards were lost. We won OMS and are still looking forward to successful outcomes on NSNS, LTV and additional CLPS missions in the first half of 2024. In the interim, we are taking steps to retire risk and manage costs. For example, our SG&A of approximately $9 million per quarter is best-in-class as we remain capital and cost efficient. On the portfolio side, we continue to diversify across not only various government entities in civil, energy and national security but also across budgetary line items within each entity. The JETSON contract moves us into the Department of Defense, and Steve mentioned earlier our success with the international market.

Additionally, should we be successful with the Lunar Terrain Vehicle award next year, we will secure a spot on a key piece of infrastructure within the Artemis program and budget, capitalizing on the growing Lunar and space economy. We remain optimistic on the over $3 billion in outstanding proposals and look forward to the prime contract award decisions on CP-22, NSNS and LTV, while we focus on execution and manage cost efficiently in the interim. With that, operator, we are now ready for questions.

Operator: Thank you. [Operator Instructions] Our first question is from Josh Sullivan with The Benchmark Company. Please proceed.

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Joshua Sullivan: Hey, good morning.

Stephen Altemus: Good morning, Josh.

Erik Sallee: Good morning, Josh.

Joshua Sullivan: Just want to get your thoughts on NASA’s commitment to the commercial service model. This international Lunar services contract appears to be following that model. I’m just curious on your current thoughts there.

Stephen Altemus: Yes. Thanks for the question, Josh. It’s really interesting. Last week, I was up on Capitol Hill and talking to the staffers associated with the authorization appropriations for Artemis, and we see quite a bit of support for NASA’s programs and in particular, CLPS as a precursor to Artemis as ability to set a regular cadence of missions as and if Artemis launches move around on the schedule, as you know, that those missions are highly complex, and they have a tendency to move to the right. And CLPS offers an opportunity for NASA to have the case submission and activities towards the moon. And by doing so, we see the international partners coming up and suggesting to fly their payloads earlier using the CLPS benders and the CLPS program as opposed to waiting for manifesting on the Artemis missions.

So we’re very encouraged about the House and the Senate commitment to CLPS and the Artemis program. And the way it’s structured now, CLPS has – is in a position to serve any and covering any gaps that might occur in delays in the Artemis program.

Joshua Sullivan: And then as far as the near space network contract, does your January mission help provide any past performance metrics, which might be helpful in the scoring for NSN?

Stephen Altemus: Well, I believe that the relevant experience of past performance would have already been considered in the competition and the evaluation of the proposals by January already. So what we have done is included all of the validation work that we’ve done with our ground sites against the Lunar reconnaissance orbiter in space around the moon and validate that the whole system works and is tied together and able to bring the communications back down to the ground. So even prior to flying our first mission in January, we’ve done the groundwork or the leg work to test our ground against the Lunar distance communication, and that will go into contributing to our experience when the NSN is selected.

Joshua Sullivan: Got it. And then just one last one. On OMS, can you just help us with the cadence through ‘24, how we should think about that?

Erik Sallee: Yes, Josh, this is Erik. As you know, it’s – the top line dollar value of the contract is $719 million. That’s over 5 years. There’ll be an initial ramp-up period of a matter of months. But then after that, we think it will be pretty steady state month-over-month equally divided over that time period, help contributing to our top line.

Joshua Sullivan: Okay. Thank you for the time.

Stephen Altemus: Thank you, Josh.

Operator: Our next question is from Edison Yu with Deutsche Bank. Please proceed.

Edison Yu: Hey, thanks for taking our question. Just one on the, I guess, the government funding situation. Are we concerned at all about the continuing resolution? Anything about the government shutdown that could be impacting the money side?

Stephen Altemus: Good morning, Edison. Glad to have you with us, and yes, great question. Like I said to Josh, that I was up on Capitol Hill talking to the staffers. And generally, I would say there’s quite a bit of optimism and hard work going on to get us through at least a partial CR or a CR for a short term to keep the government open. And so nobody is wanting to shut down. It seems like generally, everyone was optimistic that a CR or at least interim would be approved to get us time into January before the full CR or budget could be passed. So that was encouraging, and I’m optimistic there. We’re well into our transition for the OMS contract with 87% of the workforce on board or at least captured. That will continue on.

And we think the commitment to Artemis program, the outlook is good for Intuitive Machines. These CRs and shutdown associated with it tend to be short-term outlook. So in the long term, it doesn’t look like it’s going to have any effect on the company this year.

Edison Yu: Got it. A longer-term question. I know you had some advancements on the nuclear side. Do you have any sense of time line on when we could see some actual applications of that? I know typically, it’s – when we hear about it, it’s quite long term, but curious if you have any sort of views on that.

Stephen Altemus: Yes. So you see in what we outlined, there’s been some movement there in 3 different areas of nuclear space that we’ve captured and that’s a follow-on to – well, we’re negotiating a follow-on to the fission surface power. That’s Phase 1a which is a continuation of Phase 1 for another eight months and lining up for Phase 2. We think that, that will eventually in the long term, like you say, turn into a development activity for fission reactor. You see the JETSON satellite procurement, that’s a new AFRL contract. And what’s great about that one is we’re – is that one can actually grow faster into a real satellite. So we’ll do this first execution on the low-power JETSON satellite, and then we’ll see if they pick that up at the end of the year.

That’s about a 12-month runway. And then also that technology from the JETSON contract, we’re also developing under NASA STMD tipping point award for the radioisotope power system. So there’s some dovetailing of technology between those two. And I’m really happy to see that while they’re not large dollars for those contracts, what they are is their commitment and some movement in the right direction for an overall cohesive story in the government about nuclear space and how we should advance the nuclear space. So it’s quite an encouraging sign that we’re starting to converge on the types of materials we’ll use, the types of systems we’ll use and to make some progress in the design so that maybe the proprietors can make some decisions about the systems of the future.

Edison Yu: Great. Thank you.

Stephen Altemus: Thank you, Edison.

Operator: Our next question is from Andres Sheppard with Cantor Fitzgerald. Please proceed.

Andres Sheppard-Slinger: Hi, good morning, everyone. Congrats on the quarter and thanks for taking our questions.

Stephen Altemus: Good morning, Andres.

Andres Sheppard-Slinger: Hey, good morning, guys. I was just wondering if you can give us an update on the IM Missions 2 and Missions 3, just when they’re scheduled for? Or what is the current target for? I know in the past, you had mentioned about the second mission being in the first half of next year, possibly in the first quarter. So just wondering if that delay in the IM-1 mission might have an impact on the second mission and so forth. Thank you.

Stephen Altemus: Yes. I appreciate that, and everyone is interested in launch dates. We are planning three missions in 2024. Obviously, you see how we did with our first mission, balancing all the stakeholder needs between NASA and SpaceX and our payload customers. That’s a pretty complicated set of negotiations that get you to everybody’s needs and where you can actually launch and land. The other complication in terms of pinpointing a date for those missions is really in the orbital dynamics and trying to get to the South Pole and specifically, there’s seasons for that. And so trying to shuffle the missions around and find the particular month we want to go for each of the missions based on not only our stakeholder needs but on the landing site – in the landing site selection.

So we’re currently negotiating with NASA on the landing site for Mission 2. And like I said, we have an initial date and the landing site determination we’ll adjust. We’ll move that around. And then as a result, Mission 3 will fall out in a few months following Mission 2. So more to come on that in terms of specific dates as we get closer and as we pinpoint the exact position of the Mission 2 South Pole ice drilling mission. So we’re excited about that one. So – but you can count on at least our firm plans are to put Mission 1, 2 and 3 in the history books in 2024.

Andres Sheppard-Slinger: Got it. That’s super helpful. Maybe one question for Erik. With a cash balance now of about $40 million as of Q3, would you mind just reminding us the run rate, looks like cash used in the quarter was about $7.2 million? So pretty low burn rate. But just what is the expected run rate, particularly as you get closer and closer to these missions?

Erik Sallee: Yes, you bet. So that’s a pretty good indication from an operational cash standpoint. There’s not necessarily increased cash outflows associated with emissions specifically. Obviously, there’s some costs related to launch, but then other costs associated with the missions such as material procurements and other things are dying down at that point, right? So it’s not – we’re not going to see – that’s not going to cause necessarily a big increase or decrease in operating cash one way or the other. So I would say from an operational perspective, that’s a good indicator. Obviously, from the investing cash flows, you saw the new building was the main use there, and we’re completing that this quarter.

So that should tail off. So we’re happy about that. So from that perspective, we can even become even more capital efficient as we talked about, right, moving forward. So I don’t know if you have a follow-up on that or if that kind of gives you an idea of what you were looking for.

Andres Sheppard-Slinger: Yes. No, that’s perfect. That’s helpful. Thanks, Eric, and congrats again on the quarter, and I’ll pass it on. Thank you.

Stephen Altemus: Thank you, Andres.

Operator: Our next question is from Austin Moeller with Canaccord Genuity. Please proceed.

Austin Moeller: Hi, good morning. So it sounds like you’ve spent some time on the hill in the past couple of weeks. But if we just think about the fiscal year ‘24 budget as it comes together, I mean, we’ve got a split Congress now. And so do you think that despite the fact that there’s a lot of bipartisan support for NASA, especially Artemis that there could be some prioritization in the budget for Artemis versus CLPS or other related programs just given that it looks like there’s going to be a lot more control on spending at this point?

Stephen Altemus: Austin, thanks for the question. Yes, I think there’s quite a number of competing priorities within the NASA budget for sure. You see the Mars sample return is under independent review and possibly replanning as it’s over budget. You see the Artemis program having a large price tag and moving to the right, what we find is there’s strong support for Artemis, bipartisan support, as you said. But we do understand that it’s going to flip to the right as it’s a complex program. So what happens with CLPS in our position, as CLPS has been a nontraditional procurement, as you know, and is able to move with some speed and agility at lower cost than these major programs of record. And so CLPS is in a position to be a tool for proprietors and NASA to keep in the public’s mind regular cadence submissions and the moon as an activity that’s of importance.

And so, it serves to make some near-term accomplishments while the major programs get their capabilities in place and get ready to launch. You see that the other parts of the budget are going to be affected as they figure out which programs are of higher priority and which ones need to be trimmed like I mentioned, Mars sample return is probably twice over budget by 100% over its life cycle. And so there’s some room there. That’s got to be reprioritized. And then you’ll see some of that trimming coming out of the Science Mission Directorate possibly and Planetary Science in those areas in terms of what can be accomplished with all these other priorities. So you’ll see this mix occurring – but I think in the long term, CLPS is the right type of contract at the right time in history to provide great value to the government and to NASA.

And so I’m hopeful that we’ll see more CLPS-like type contracts as a solution to trimming areas of overspend in NASA budget.

Austin Moeller: Great. That’s helpful. And then it looks like one of your competitors on the CLPS program is trying to get on board a competing launch vehicle, although like the Vulcan hasn’t launched yet. So just what are your – what is your thinking there in terms of that timing and how it might impact additional down selects for future task orders on CLPS?

Stephen Altemus: Well, I think it’s fantastic that the country we have multiple missions aiming to land on the moon in the same kind of time frame. Currently, the Astrobotic is set to launch on Christmas Eve on December 24, with the landing on January 20. If all goes well, they’ll touch down on the 20th. We’re set to launch on January 12 with a landing, believe it or not, on January 19. So we’ll make it there a day ahead, but to have 2 missions flying in space at the same time aiming for the moon is quite incredible, actually. And Austin, you know, I think we’ve talked before about our particular mission and how our propulsion systems design and the kind of trajectory that we fly gets us to the moon at about 4.5 days with about one day of loiter and that’s how we’re able to land roughly a week after we launch, whereas the other trajectories used by other CLPS vendors tend to be a more circuitous wrap to the moon using gravity assist with a lower specific propulsion system that takes up to 30 to 60 days to get to the moon.

And that’s what the disparity is between the 2 type submissions. But we’re excited for our competimates in Astrobotic to make a shot a moon and to be in the space at the same time.

Austin Moeller: And just taking that gravity assist maneuver approach to getting into lunar orbit. I mean that puts you in space longer period of time and you’re subject to more radiation, correct?

Stephen Altemus: That’s right, Austin. And that’s one of the architectural decisions that we made was to minimize the risk of transition through the Van Allen Radiation Belts and minimize those radiation hits to our electronic sensitive electronics. So we make one pass-through and on to the moon where the radiation environment is fundamentally different and somewhat easier than the high concentration of radiation you get in the Van Allen Radiation Belts. So yes, a great observation.

Austin Moeller: Awesome. Thanks for the details.

Stephen Altemus: Thanks, Austin.

Operator: Our next question is from Suji Desilva with ROTH Capital Partners. Please proceed.

Sujeeva Desilva: Hi, Steve. Hi, Eric. A good catch up. I just want to understand the payloads, the customers are committing to you on IM-1, 2 and 3. As the dates move later, and the customer rates increases, does that mean you can take on more payloads and increase your revenue opportunity? Or are all those payloads already committed today? I’m just trying to understand how that works as these missions maybe move on, that can be a tailwind in some ways.

Stephen Altemus: Yes. Good morning, Suji. Actually, the manifest for this particular mission has been set for some time now. And we’ve maximized this mission so that it is sold out. And so we don’t have any opportunity to take on additional payloads. All the payloads that we started with have stayed with us. So that’s a series of NASA payloads and commercial payloads that make up the complement for this mission. And they’ve been quite understanding about the delays we’ve had during the development of this particular mission. They understood that when we started and everybody is getting very excited about our launch date. All the payloads are integrated, all the payloads have been tested both on our offline flat set and on the vehicle. And so everything seems to be working in perfect order and folks are trained and ready for the mission. So looking forward to early January.

Sujeeva Desilva: Okay. And Steve, IM-2 and IM-3 are already fully committed at this point, just to understand?

Stephen Altemus: Yes. IM-2 and IM-3 mission payloads are essentially committed in terms of what we’re taking to the surface. And again, a combination of NASA and commercial and international payloads. The area that we’re still shuffling around and have some capacity that we’re negotiating to take on additional revenues is in the ride share component. As you know, we fly a lander attached to a spacecraft adapter, which is attached to a payload adapter ring. On that payload adapter ring, we can take some 800 kilograms of payloads to a TransLunar Injection orbit. And we have a complement of those payloads but filling out both Mission 2 and Mission 3 and having a complete set of payloads to fly on those. We’re moving those around and adjusting them as payload customers are keenly interested in taking ride share out this far into space, which in the past has not been available to them.

And our missions to the moon provide that availability and that seems to be the fastest-growing area of our Lunar Access business.

Sujeeva Desilva: Okay. Thanks Steve. Thank you.

Stephen Altemus: Thanks, Suji.

Operator: We have reached the end of our question-and-answer session. I would like to turn the conference back over to management for closing comments.

Stephen Altemus: Well, thank you, everyone, for joining us this morning. The coming months are set to be pivotal moment in history for the company and indeed for the United States as a whole. So thank you for listening in, and wish us luck for January.

Operator: Thank you. This concludes today’s conference. You may disconnect your lines at this time, and thank you for your participation.