Intuitive Machines - Earnings Call - Q2 2025

Executive Summary

• Q2 2025 revenue was $50.3M, up 21% YoY but down sequentially due to a strategic Estimate-at-Completion adjustment shifting IM-3 revenue and costs into 2026; adjusted EBITDA was -$25.4M and gross margin was -$11.8M.
• Guidance now points to revenue near the low end of the prior $250–$300M range, with potential to reach near the prior midpoint ($275M) on late-year awards; positive adjusted EBITDA remains targeted for 2026.
• Balance sheet strengthened: ended Q2 debt-free with $344.9M cash; contracted backlog was $256.9M (recognition weighted to 2026).
• Strategic moves: in-house satellite manufacturing for NSNS, facility expansion, and a $30M definitive agreement to acquire KinetX (deep-space navigation/software), expected to enhance data services and national security positioning.
• Near-term catalysts: LTVS award (demonstration scope ~$1B), OSAM-1 potential shift to Space Force, NSNS task orders, IM-2 success payments (~$5.7M expected in Q3), and OTV Phase II definitization ($9.8M).

What Went Well and What Went Wrong

• What Went Well

  • Vertical integration of satellite manufacturing and KinetX acquisition aim to reduce cost, retain IP, and accelerate NSNS execution; “We’ve executed decisively... brought satellite manufacturing in-house... moved to acquire KinetX”.
  • Strong liquidity: ended Q2 debt-free with $344.9M cash; management reiterated sufficient capital for operations and strategic M&A in data and national security space.
  • Program momentum and pipeline breadth (LTVS, OSAM, NSNS, JETSON, reentry): “We are positioned for multiple business catalysts... and intend to remain aggressive in the marketplace”.

• What Went Wrong

  • IM-3 EAC adjustment reduced Q2 revenue by $10.1M and increased costs by $9.7M (total earnings reduction $19.8M), driving negative gross margin and operating loss.
  • Backlog declined to $256.9M from $272.3M in Q1 and $328.3M at year-end as performance outpaced new awards; recognition profile skews to 2026 (40–45%).
  • Profitability timeline: management guided away from prior run-rate EBITDA positive by year-end; now expects adjusted EBITDA positive in 2026 (Q&A confirmed no Q4 2025 EBITDA positive).

Transcript

Speaker 0

Thank you for standing by. My name is Andrea, and I will be your conference operator today. At this time, I would like to welcome everyone to the Intuitive Machines second quarter 2025 earnings call. All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question and answer session. If you would like to ask a question during this time, simply press star followed by the number one on your telephone keypad. If you would like to withdraw your question, press star one again. I would now like to turn the call over to Head of Investor Relations, Stephen Zhang. Thank you. Please go ahead.

Speaker 2

Good morning. Welcome to the Intuitive Machines second quarter 2025 earnings call. Chief Executive Officer, Steve Altemus, and Chief Financial Officer, Pete McGrath, 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 press 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. Intuitive Machines is built to do the hard things first. With two lunar missions completed in 12 months, our story is one of perseverance, technical depth, and a commitment to fielding the indispensable tech and infrastructure for space exploration. Our ability to operate end-to-end from Earth to the lunar surface and back led to our selection for NASA's Near Space Network Services contract, an award that could transform Intuitive Machines from completing one lunar surface mission a year into a sustained deep space infrastructure service provider.

We believe data transmission is the keystone for enabling space flight at scale. It's how spacecraft talk, navigate, and execute autonomously. It's how we connect landers to satellites, astronauts to mission control, and infrastructure to opportunity. Our long-term vision is to become a new space prime contractor, providing communications, navigation, and control services for defense, civil, and commercial markets. To achieve that vision, we've executed decisively in the second quarter. Internally, we've brought satellite manufacturing in-house, helping to ensure performance, schedule clarity, and tight integration with our landers and space systems. Externally, we moved to acquire KinetX Aerospace, a team that delivers exactly the kind of analysis and real-time decision software that our future network will depend on.

Together, these moves put Intuitive Machines in a uniquely capable position to design and operate dual-use satellites and ground infrastructure to serve civil and national security space, including commercializing NASA's Deep Space Network, replacing the tracking and data relay satellite system, and pioneering the next generation of Mars data relay satellites and network. We also continue to make progress on our core programs. On IM3, or Mission 3, we've completed procurements of new navigation sensors and are in active performance testing of the optical and laser navigation system. Our targeted flight readiness review, which is the last review prior to shipping the lander to the launch site, is scheduled for May of 2026. On Mission 4, we've completed our procurements, initiated manufacturing, and are testing the payload accommodation mechanisms. The launch date remains on schedule for the second half of 2027.

We received the $9.8 million Phase 2 award to complete the design of our orbital transfer vehicle, the final step before manufacturing. We believe that the award signals confidence from a national security space customer outside our traditional NASA portfolio and reinforces our strategy to retire risk by using contracted funds to build a family of vehicles that evolve from our flight-proven systems and operate within our existing network. We continue executing on our sole source, stealth nuclear-powered satellite development for the Air Force Research Laboratory. We're completing the first phase this month and anticipate a follow-on contract later this year to deliver a flight demonstration unit for the satellite's power generation system to the International Space Station. Our candidacy for the Lunar Terrain Vehicle contract remains active, building on a year's work in autonomy, simulation, and crew-centered design.

With our motion-based driving simulator, astronaut assessment testing, and flight-proven navigation systems, we believe Intuitive Machines is positioned as a leading candidate to deliver and operate the mobility system on the moon. We're finalizing our proposal for NASA's next phase of the LTV program, which will award a contract to build, fly, and operate the vehicle. If selected later this year, we believe the company will be in a strong position for follow-on awards, potentially spanning a decade of lunar surface operation and billions in mission services. In Earth orbit, we continue to work on our Earth reentry vehicle under the Texas Space Commission's $10 million award. In the second quarter, we completed several milestones, including reviews required to start customer sales cycles. We completed forming a commercial reentry team that includes biotechnology, semiconductor, and nationally accredited material handling partners.

Reentry is a natural extension of our delivery pillar and aligns with our broader mission to return the value of space exploration, including lunar sample return. Throughout the quarter, we continued advocating for NASA's OSAM-1 mission under the OMS 3 contract. In the latest fiscal year 2026 defense appropriations markup, Congress directed NASA and the U.S. Space Force to submit a funding profile and plan to launch OSAM-1 by 2028, signaling strong legislative intent around its readiness and value for national security space operations. While this language is not yet fully enacted, it creates meaningful potential momentum. Taken together, these programs reinforce our ability to execute in multiple regions of space with diverse customers while setting the stage for contract-driven growth. The second quarter presented an opportunity to extend proven space flight operational capabilities into foundational infrastructure.

NASA's Near Space Network Services contract is the connection between our lunar flight heritage and the future of commercial national security space and civil deep space data transmission. During the second quarter, we completed additional technical verification milestones on NSNS, further maturing the system design. Our satellite constellation, optimized for lunar and cislunar mission support, is ready to build. These systems are thoughtfully engineered with the capability to extend beyond the moon, including Mars. In the second quarter, we submitted a proposal to NASA to evolve our lunar constellation into Mars-capable data relay satellites. To execute the NSNS vision with scheduled confidence and cost control, we made the strategic decision to vertically integrate satellite production. Just as we did with our landers, we're taking a government-backed program and building scalable business, investing contract dollars internally.

We believe this model gives us schedule control, safeguards intellectual property, opens access to new markets like Golden Dome, and reduces our largest cost driver, launch, by enabling lander and satellite rideshare on a single launch vehicle. As a result, we're able to project schedule in our satellite production, allowing us to align the IM3 mission with satellite readiness, now targeted in the second half of next year. Satellite manufacturing for NSNS is expected to cost less than what it would take to procure satellite buses externally, allowing us to be more capital efficient in the initial NSNS task orders. In parallel, we started expanding our infrastructure to support the vehicles now in development. In the days following the second quarter, Houston City Council approved our headquarters expansion to scale government and commercial operations.

Just before this earnings call, we signed a second lease for a nearby spaceport facility already equipped with turnkey production equipment, including test facilities we had been contracting services for, allowing us to expand manufacturing capability efficiently and cost-effectively. Capitalizing on this approach means we have to bring in the talent, expertise, technology, and IP to design, develop, test, and operate the systems in space. As such, we announced our intent to acquire KinetX Aerospace, the only commercial company certified by NASA to perform deep space navigation. With its full flight software suite, over a dozen mission credits, including our first two lunar missions, and profitable operations across defense and commercial programs, KinetX Aerospace enhances our capabilities in satellite constellation design, ground operations, and precision tracking of spacecraft. We believe it strengthens our position in data transmission, national security space, and emerging deep space opportunities, including Mars data relay.

In terms of capital deployment beyond current operations, our acquisition of KinetX Aerospace is one example of our strategic M&A process, where we focused on key capabilities and assets that complement our existing services to expand our offerings and capture higher margin service revenues. Finally, we formalized a strategic partnership with Goonhilly Earth Station to explore new global opportunities for ground segment data transmission. Goonhilly Earth Station is already a part of Intuitive Machines' lunar data network and a commercial provider of deep space communications services to space agencies around the world. Together, we are submitting a joint response to NASA for the commercialization of the Madrid Deep Space Communications Complex. This is the first of three NASA DSN sites we expect to be commercialized within the next two years. A market opportunity is to commercially operate the full data lifecycle between ground segments and spacecraft in deep space.

The strategic decisions we made in the second quarter, vertical integration, facility expansion, and targeted acquisition, were directly tied to customer demand, contract execution, and scalable service model. These choices strengthen our ability to deliver high-value infrastructure with greater cost control, IP retention, and schedule clarity. Just as important, they position Intuitive Machines to align awarded programs like IM3 and NSNS with internal capabilities that improve execution speed and profitability. As we head into the second half of the year, we're positioned for multiple business catalysts: a new CLPS task order, repurpose OSAM-1 for the U.S. Space Force, Lunar Terrain Vehicle Services Award, stealth satellite flight demonstration for AFRL, growth in commercial reentry, and the beginning of deep space satellite production aligned to NSNS. We will continue to remain opportunistic on further strategic M&A while also evaluating internal investments to accelerate growth and drive long-term shareholder value.

We have a detailed and robust pipeline of both tuck-in and transformative M&A opportunities and intend to remain aggressive in the marketplace, particularly in data services and national security space markets. With that, I'll hand it over to Pete McGrath, our Chief Financial Officer. Thank you, Steve, and thanks to everyone joining us today. As Steve mentioned, we made some strategic decisions in the quarter to be more capital efficient, align mission schedules and deliverables, open new markets, and ultimately drive long-term value creation. These decisions impacted revenue in the quarter. Q2 revenue was $50.3 million, up 21% year over year, driven primarily by CLPS, LTVS, and NSNS execution. We have completed negotiations with NASA on IM2 post-mission closeout and expect $5.7 million in success payments in Q3. Almost revenue was $19.6 million in the quarter as expected.

As Steve mentioned, we are pleased with the legislative language from the defense appropriations markup, which includes funding to launch OSAM-1 for the U.S. Space Force and will shift this program from civil space to national security and may increase revenues later this year. Q2 revenue also includes an estimate at completion, or EAC adjustment, impacting costs and schedule on IM3, which were driven by our strategic decision to shift satellite manufacturing capital from external procurements to internal investments in ourselves. This vertical integration decision is not only more cost-effective but also expands our market opportunities to satellite manufacturing and data services across civil, commercial, and national security customers. This EAC adjustment aligns the timing for IM3 with our internal production of our first satellite. The EAC adjustments did not impact total contract revenues. Revenue recognition is based on cost.

Given we added cost to increase probability of mission success and extended schedule to align with our NSNS satellite completion, revenue moved from 2025 to 2026 on IM3. The result of the EAC adjustments was a reduction of $10.1 million to revenue and a cost increase of $9.7 million for a total earnings reduction of $19.8 million in the quarter. Gross margin was negative $11.8 million, an improvement versus negative $16.1 million in Q2 of 2024. EACs aside, we continue to see high gross margins from key programs such as LTVS and NSNS. SG&A for the quarter was $16 million and relatively flat versus the prior quarter of $16.1 million in Q1 of 2025. Current SG&A costs reflect a steadier state of business going forward in support of our growth trajectory.

Operating loss for the quarter was $28.6 million versus a loss of $27.5 million in the second quarter of 2024. Adjusted EBITDA was negative $25.4 million in the quarter, relatively flat to prior year, as profit from our higher margin programs such as LTVS and NSNS were offset by a quarter's EAC adjustment. Operating cash used was $19.3 million in the quarter, but capital expenditures of $8.1 million, resulting in a negative free cash flow of $27.3 million in the quarter. Negative operating cash came in as expected due to the timing of milestone payments. Recall in Q1, free cash flow was positive $13.3 million and was driven primarily by timing of milestone payments from IM3, IM4, and LTV, which did not repeat in Q2. CapEx was driven primarily by the investments in our data relay satellites and ground networks.

Going forward, we expect to see continued CapEx for our five satellite constellations around the moon and our ground network in support of NSNS. These CapEx levels will be offset by higher margin revenues from follow-on task orders as the program matures. Looking at free cash flow for the first half of the year is more reflective of current operations. First half free cash flow was an outflow of $14 million, a significant improvement for the first half of 2024, which was an outflow of $41.5 million. As we've said in the past, we continue to drive towards higher margins and improved profitability, which will lead to lower cash burn and eventually cash flow break-even. We ended Q2 with a cash balance of $344.9 million, and we continue to believe we have more than sufficient capital to fund our current operations, inclusive of our facility expansion and satellite manufacturing capabilities.

In addition, we will always be opportunistic on M&A, specifically in the areas of software, satellite, and data services for the national security community. Moving on to backlog, we ended the second quarter with contracted backlog of $256.9 million compared to $272.3 million in Q1 of 2025 and $213 million in Q2 of 2024. Q2 backlog includes orders for Task Order 2 for NSNS, which was $18 million, a $10 million grant from the Texas Space Commission for our Earth reentry vehicle, and a letter contract for $4 million on an orbital transfer vehicle Phase 2 award for a government customer. Since the end of Q2, we've defenditized the orbital transfer vehicle contract at a value of $9.8 million, which will be reflected in our Q3 backlog.

When looking at our Q2 2025 backlog, we expect to recognize 30% to 35% of that in 2025, 40% to 45% in 2026, and the remainder thereafter. Keep in mind, we are awaiting the outcome of several new awards this year, such as the next CLPS award, new OMS task orders, LTV Phase 2, and the next phase of Jetson. As of August 4th, our shares outstanding are 178.7 million, with 117.8 million shares of Class A and 60.9 million Class C. Before we get to guidance, let's reflect on the strong first half we've seen thus far. Year-to-date revenue is $113.3 million, which includes the $10 million EAC impact this quarter and does not include the majority of the IM2 success milestones, which are expected to come in Q3. On a run-rate basis, we factor the Q2 EAC impact and the IM2 success milestone.

We are running at approximately $240 million in revenue for the year, with sufficient award decisions expected in the second half. As such, for full-year guidance, we are now expecting to be near the low end of prior outlook, with additional opportunities in the latter part of the year that support revenue near the midpoint of our prior outlook, which was $275 million. We continue to expect positive adjusted EBITDA in 2026. Looking ahead, we have line of sight to significant procurements in the second half of the year to grow organically. Meanwhile, current market conditions are also supportive of inorganic opportunities to execute on our vision of being a new space prime provider of communications, navigation, and control services for defense, civil, and commercial markets. With that, operator, we are now ready for questions.

Speaker 0

Thank you. At this time, I would like to remind everyone, in order to ask a question, press star one on your telephone keypad. If you would like to withdraw your question, press star one again. Your first question comes from the line of Griffin Taylor Boss with B. Riley Securities. Thank you. Please go ahead.

Hi, good morning. Thanks for taking my questions. I just want to start off on KinetX Aerospace. Are there any details you could provide on the revenue profile of that business or any potential synergies you might see with your existing data data business?

Speaker 2

Oh, absolutely, Griffin. I'll let Pete comment on the revenues, but about $9.8 million worth of revenue, about 14% of that is EBITDA. The KinetX Aerospace acquisition of highly specialized talent is extraordinary. These people are phenomenal, the talent in deep space navigation and constellation management and systems engineering. They've done some things with missions out to asteroids like the OSIRIS-REx mission. They've done things out to the Trojan asteroids around Jupiter, missions to Pluto. The only certified company to do this kind of deep space trajectory work like NASA does at JPL. They have proprietary software that's going to help us with our deep space navigation, our constellation management. That's also a significant piece of this. They also have a part of the MUOS constellation, and that's a global satellite constellation management work that they do. It's very synergistic with us.

We've been working with them on mission one and two. They're an excellent group of engineers and scientists, and we look forward to working with them and welcoming them to our team.

That's great, Tyler. Thank you. If you have anything to add there, yeah.

Yeah, I was just going to say that that was 2024 revenue that Steve referenced. It was $9.8 million and a 14% EBITDA.

Okay, great. All right, thanks for that. Forgive my ignorance, but what exactly does it mean to be, you know, the only NASA-certified commercial company here? Does that imply that other companies are unable to do these missions because they are not certified, or is this the only company NASA will work with?

The company that NASA certifies trusts to handle these Discovery Class and above kind of missions that need to place spacecraft with precision in various spots around the solar system. The other players that do that is really Jet Propulsion Laboratory, which is, you know, an FFRDC for NASA. This is a commercial enterprise that does that same kind of highly specialized trajectory and navigation work that Jet Propulsion Laboratory does.

Got it. Okay, that makes sense. Just, yeah, last one for me. Given the move to vertical satellite manufacturing, what, if any, guidance could you give on the increase in expected operating expenses associated with that?

Yeah, our initial investments can be about $5 million in NRE to get the first satellite through design and development. Our recurring cost is actually at or below current market numbers. When we made the decision to do this, we were evaluating other options and found that internally we could be more cost-effective. Not to mention, it allows us to have an internal organic capability that now we can go into other markets with.

Got it. Okay, great. Thank you for taking my questions. Appreciate it.

Thank you, Griffin.

Speaker 0

Thank you. Next question comes from the line of Suji Desilva with ROTH Capital Partners. Thank you. Please go ahead.

Hi, Steve. Hi, Pete. Congrats on the progress. The satellite market, as you come into it, Steve, maybe the constellations for, you know, perhaps lunar orbit spacecraft, what are Intuitive Machines' competitive advantages as we see multiple companies talk about this opportunity?

Speaker 2

You know, we talk a lot about the Near Space Network contract. It's a sole award for Intuitive Machines, which we're supposed to put a, when we are working on a constellation of satellites, a minimum of five satellites around the moon that need replacement on a span of about every five years. There's a constant replenishment needed beyond those five satellites. We know also that the low Earth orbit and geo satellites don't quite fit the cislunar market in terms of performance in that environment and performance at that distance. That means with radios, with power, with delta-v propulsion. Our unique experience with flying in and around the moon with our lunar lander systems means we understand what it takes to work at those distances away from Earth. Couple that with our ground segment that's currently eight antennas in six different countries.

That coupling gives Intuitive Machines or Lunar a competitive advantage above the rest of the industry with respect to communicating out to the moon. Now we look at what capabilities have we developed around the moon that can now move not only down towards Earth but out towards Mars for Mars data relay. I think we're very well positioned with this strategic investment in ourselves to build satellites in-house.

That's great, Tyler. Appreciate it, Steve. On the pipeline, maybe you could talk about the highest probability opportunities in the next six to 12 months and the magnitude of those, if they convert to backlog. That'd be helpful to understand. Thanks.

Yeah, I would say that I'll hold off on the magnitude specifically, but the most transformative award that we're expecting, and believe we're in the pole position for that award, is the Lunar Terrain Vehicle Services contract. That contract, as you know, is about $4.86 billion. The first demonstration, which is what we're competing for, is roughly close to $1 billion, but I won't give you the exact number because we're in competition. That makes us a significant award in our infrastructure services pillar in and around the moon.

Okay, thanks, Steve. Pete, congrats on the progress and the acquisition.

Thanks, Sujay.

Speaker 0

Your next question comes from the line of Andres Juan Sheppard-Slinger with Cantor Fitzgerald & Co. Thank you. Please go ahead.

Hey everyone, good morning. Thanks for taking our questions and congrats on all the great progress, Steve, Pete, and Steve. Maybe a bit of an off-topic question, but I saw the news from Secretary Duffy and NASA looking to get a nuclear reactor on the moon. Curious how this could fit into Intuitive Machines' plans. Thank you.

Speaker 2

Good morning, Andres, and thanks for the question. You know, Intuitive Machines have been active in phase one and one A of fission surface power technology development for NASA and the Department of Energy. We're working on technologies for a 40-kilowatt reactor for the surface of the moon. This announcement by Sean Duffy, the Acting Administrator, to put a 100-kilowatt reactor on the moon by 2030 was quite interesting. We're one of three companies or teams that are working on this technology. In particular, we're doing a demonstration at vacuum right now for the heat transfer technology for the reactor, the 40-kilowatt reactor. This is a race with China. In order to be competitive, we see the fission surface power as a way to compete head-to-head with China.

With infrastructure services as a primary pillar, we always thought of providing not only data, communications, navigation, but power, sustainable power to the surface of the moon as part of that infrastructure. We look forward to the details as it comes out, what that procurement will look like, what that acquisition will look like. You can trust that Intuitive Machines will be at the forefront of trying to compete for that.

Got it. That's helpful. Very interesting. Maybe as a quick follow-up, wanted to maybe touch on Suji's question. You know, as we look ahead, I'm curious if you could maybe remind us the key catalysts that we should be looking forward to that we can maybe point to investors. Obviously, we have IM3 mission, IM4 mission, Lunar Terrain Vehicle, but just make sure I'm not missing anything. Just remind us maybe the key catalysts to look for, decisions, etc. Thanks.

Okay, there's another CLPS award to be competed that's, you know, we're going through the payload appendix and the industry day and those. That CLPS award we'll compete, that's called CT4, should be awarded by the end of the year. You heard us talk about OSAM and the defense approach language or the markup and seeing that, you know, come from the brink of cancellation to actually active and interest from U.S. Space Force. We'll see how that takes shape during the balance of the year as the House and the Senate come back from recess. LTV is what I talked about as the most transformative potential award in the late November, December timeframe. Our stealth satellite, Jetson, we've had conversations with AFRL and they're interested in doing a technology demo on the International Space Station for the Sterling engine kind of demonstration there. That's an interesting one.

You'll see us move more into developing the reentry systems for Intuitive Machines. Long term, that's lunar sample return. In the near term, all this work from low Earth orbit with biopharma and semiconductor commercial customers, exercising the muscles of reentry, Earth entry, descent, and landing is very important. Another highly specialized skill Intuitive Machines is cultivating to capture that market and extend out to the moon. The last one I would say is we did put a proposal into NASA for demonstrating Mars data relay from the moon in a precursor fashion before the potential for deploying satellites out to Mars to replace aging infrastructure. All of those are in our robust pipeline moving forward and have an opportunity to generate some revenue this year.

Excellent. Thank you so much, Steve. Look forward to it. Congrats again. I'll pass it on.

Okay, thanks, Andres.

Speaker 0

Your next question comes from the line of Edison Yu with Deutsche Bank. Thank you. Please go ahead.

Hey, good morning everyone, and thanks for taking our questions. I wanted to double click on the satellite production coming in-house. How do you view this opportunity going forward in the context of obviously there being potentially other customers, other external customers out there, and how much of the BOM or how much of the components do you really want to control in-house within these types of satellites?

Speaker 2

We see an opportunity, Edison, thanks for your question. We see an opportunity with other customers as we build a very capable satellite bus with a high delta-v and power surplus that allows us to fly not only communications gear and position navigation and timing gear, but actually other payloads and sensors that can serve multiple customers. That's the first order. Once you build that capable bus, you can think about replacing aging Mars infrastructure. Ultimately, you know, we're talking with NASA and other government agencies about the tracking data relay satellite services replacement, which is aging TDRS. To commercialize that, we'll be in a good position having brought this capability of production in-house to compete for that TDRS replacement service. The other part of your question was really about, I think, vertical integration of the components.

With the lander systems that we've done, we've done 85% of the lander system vertical integration in-house. That means we write all the software. Of 56 computer boards onboard the lander, we build 52 in-house. Avionics, the controllers that drive the avionics subsystems are all built by Intuitive Machines, the harnesses, the propulsion system. If you think about all that capability in machining, fabrication, manufacturing, assembly, tests, and integration, we have the bulk of it. Now to change the form and build satellites is not a great leap for us. Our anticipation that this may occur, we investigated facility expansion and how fortunate to have closed on those facilities expansions so that we can, you know, hit the ground running as we were doing design. What are we going to do about production? We've got that solved already with very little capital investment in those production facilities.

Fantastic. For a follow up on Mars, actually, you may have seen SpaceX announce something this morning about an agreement with Italy. How do we think about the timing of potentially some type of Mars mission that you could be on? I think, is it safe to assume that would be significantly more valuable than a CLPS mission?

If you look at the president's budget request, there was a significant amount of dollars for working on plans and efforts and infrastructure in and around Mars. I think it was $1 billion allocated to that activity. We know that the infrastructure around Mars in terms of weather satellites, communication satellites, surveyors are way out of its life cycle and need to be replaced. The commercial model, like CLPS, is the appropriate way. We are hearing that that's the direction that the agency wants to go. We're looking at a different way by doing precursor missions around the moon, demonstrating the capability to communicate with the kind of performance that you'll need at Mars. You have a design that can be a direct drop-in for Mars when the time is right.

We think here in our satellite constellation, when we start to think about flying satellites four and five, we'll already have Mars designs ready to go and deploy. That's kind of the way I look at it. Certainly, they're going to be more costly than the CLPS missions because we're going much further out. Proportionally, I think we can be cost-efficient and agile in deploying that. I think it gives us a competitive advantage to kind of participate in this. Not everything is about landing humans on Mars. It's about putting infrastructure in and around Mars so that we can continue that research and continue striving to reach there with humans.

Great. Thank you.

Sure.

Speaker 0

Your next question comes from the line of David Strauss with Barclays. Thank you. Please go ahead.

Hi, good morning. This is Josh Korn on for David. Thanks for taking the question.

Speaker 2

Good morning.

Good morning, do you still expect positive EBITDA in Q4 this year?

Given the EAC that we had this year, we're looking more towards EBITDA positive in 2026, not at the end of this year.

Okay, thanks. I know you've talked about some of the opportunities at the end of the year, but kind of directionally, where do you expect backlog at the end of the year? Thanks.

We expect to add to backlog the topics that Steve referenced earlier with regards to a potential CLPS award, potential OSAM revenue increase, depending on the decision from the U.S. Space Force on extending that. Also, the Lunar Terrain Vehicle procurement, the Jetson, as well as maybe an opportunity on the Mars relay. Those are the ones we're looking at to add to backlog. Specific numbers are still not defined.

Okay, thank you.

Appreciate it.

Speaker 0

Thank you. Next question comes from the line of Austin Nathan Moeller with Canaccord Genuity Corp. Thank you. Please go ahead.

Hi, good morning. My first question, is there still a CLPS contract expected to be awarded in November? Has that moved right? How are you feeling about your P win for that?

Speaker 2

Good morning, Austin. Yes, that's what I mentioned, CLPS award CT4. Currently, we're in a competitive environment with that one. We're confident. You know, we talked about mission three. We've got to the root cause of the laser range finder issue on mission three. We've re-architected our sensor suite for the optical navigation, laser navigation. We have put all those procurements on order. We're actively testing, and we're confident in the system upgrades we've made out of IM2 through that hot wash process and in place for IM3 and 4. We have this roadmap of development that'll put us in a very competitive place for CT4.

Do you see any opportunity for Golden Dome for your spacecraft platforms, or do you view a Pentagon or Intel community ex-geo contract as being distinct from that?

I think both, Austin. I think there's distinct opportunities beyond Golden Dome. Golden Dome is one thing. It's a buzzword that a lot of people are chasing right now. There's a lot of hard work to do in the national security space to ensure that we have the right systems in place, the right sensors in place, and we're doing that. With respect to Golden Dome, we're putting a quite capable near space network in place that includes a ground segment around the world, that includes a data relay constellation, that includes very unique solutions for position, navigation, and timing. I think all of that is applicable to the instantiation of Golden Dome going forward in the future. The future's bright in that area. We're going to have to see how that architecture for Golden Dome shakes out.

It is not yet defined, and trying to figure out exactly where Intuitive Machines plugs in. With the assets that we're deploying in space and the platforms that we are developing, I think they're applicable to those architectures that are being proposed moving forward.

Great. Thanks for all the details.

Thank you, Austin.

Speaker 0

Thank you. Next question comes from the line of Greg Pendy with Clear Street. Thank you. Please go ahead.

Hey, thanks for taking my question. I think earlier in the call, we mentioned the fission reactor, and I guess that's competing against China, and then about SpaceX's relationship with Italy. Is there anything else on the global front that, as the U.S. tries to maintain a leadership position in space, we should be aware of that might be hot buttons and opportunities for you guys? Thanks.

Speaker 2

On the global stage, you know, already we're working with a global ground segment network to build out the communication stations around the world that allow us to have a fully up, reliable communication link with the moon and out to 2 million kilometers. The world is interested in that. You know, we're talking with ESA and others about how do we work together to use their assets as part of the network that we're building in concert with NASA to create a more capable network in the near space region of space and shared assets that would lead to, you know, not only business for the United States, but business for Europe and Asia, etc. That's pretty interesting. The other thing is we recently were to Madrid at the Madrid Space Communications Complex for the Deep Space Network.

NASA is talking about commercializing the Deep Space Network sites in Madrid, Spain, in Canavera, Australia, and in Goldstone in California. We're there to look at how we can take what we've done and what we're learning about the Near Space Network and apply it to commercializing the Deep Space Network. That'll have implications globally also. Really, again, in data transmission, communications, position, navigation, and timing, you'll see Intuitive Machines at the forefront of that globally.

Thanks a lot. That's helpful.

Okay.

Speaker 0

Thank you. Next question comes from the line of Ronald Epstein with BofA Securities. Thank you. Please go ahead.

Speaker 2

Hey guys, this is Alexander Christian Preston on for Ron this morning. Good morning. Hey Alex, good morning. I was wondering if you could talk a little bit more about your strategic investment for vertically integrating on NSNS and maybe sort of the rationale. Did you just see an opportunity for cost improvements? Was there a maybe discrete supplier or something running behind that you needed to correct? Maybe if you could walk me through a little bit about what your thought process was there. Yes, I could do that. You know, when we surveyed the satellite market and looked at the capabilities, you know, there's low Earth orbit sized satellite buses for communication that fit low Earth orbit but don't necessarily have the delta-v, you know, the oomph in the propulsion system or the power to drive the radios and the communications gear necessary out at the moon.

It's orders, it's, you know, a thousand times further out to the moon than it is at low Earth orbit in a very unique environment. Stretching a low Earth orbit satellite to meet the performance capabilities of around the moon is very difficult. We saw some struggles in the supply chain with that. Knowing what we've been able to do with the landers and operating out of the moon with our experience on mission one and mission two, we've been in orbit something like 39 times around the moon, operating, communicating, navigating. We know what it takes to get out there. One was a supply chain. The other one is, we're talking roughly about $100 million worth of satellites that we're going to put in place for the NSNS contract over the next four or five years. Now that's $100 million invested in Intuitive Machines to build up capability.

What can we do with that? That was the core of the decision, put that money to work in our people, in our facilities, in our machines so that we have a capability to build new systems because after all, that's what we do, right? Build space systems and operate them in space. That was as simple as it got. It made a lot of sense here at the Spaceport Houston where we get incentivized by the city of Houston. We get tax incentives, we get land incentives, we get rent or lease offsets for these facilities. Essentially, we have a campus now for production and operations of spacecraft. As we see, we're growing into heavy cargo, NovaD, into LTV, the Lunar Terrain Vehicle, into continued CLPS missions. Now we add satellites to that. We needed more floor space, and we did that.

Fortunately, the city council endorsed our presence here and is feeding our growth forward. Got it. Thanks. That's really helpful. If I could squeeze a quick housekeeping one in, I was wondering what's driving the push out on the IM2 success payments. I think last quarter you talked about there was a bunch of the different NASA directorates needed to be closed out, and that was a bit of a headache. Is that sort of still what's driving the delay there? Yeah, this is all just a function of negotiations back and forth and data packets flowing back and forth and getting the procurement and contracts language all lined up. We're close to about $6 million worth of success payments. We've finished the negotiations. Those will be in in quarter three. We have confidence in it. It's just waiting on that invoicing, getting all the T's crossed and I's dotted.

We're confident that that's coming in at this point. It was just a matter of crossing the quarter boundary. Got it. Thanks, guys, for the help. Thank you.

Speaker 0

Thank you. Next question comes from the line of Jeff Henry with Craig-Hallum. Thank you. Please go ahead.

Great, thanks. Thanks for taking my questions. Most of mine have been answered. Just maybe a couple that I still wanted to get to. In terms of the KinetX Aerospace acquisition, can you just expand a bit more on their constellation experience? I'm not as familiar with them in terms of what they might have done in the past, but give me a sense of their scope. You seem very excited about the skill sets you're bringing there. Maybe the splits commercial and defense. Backlog presumably is relatively small, but some incremental color there would be great.

Speaker 2

They have worked a specific constellation management. They have some constellation management software that's proprietary, and they're involved in commercial Iridium satellite constellation management, as well as a national security customer in MUOS is the program that they run for national security space. That global satellite constellation management is interesting. Also, that precision trajectory and precision navigation in deep space is a very, very specialized skill that we have in-house, but we need more of. We've worked closely with them. I think there's, you know, Mission One and Mission Two, they were incredibly helpful in our orbit determination and know specifically where we were in space, how we entered lunar orbit, where we were above the surface when we did power descent. Just a natural match to put the two companies together.

Their CEO and myself talked a lot about a good fit, and it's in the family, and it's culturally aligned, so it made a lot of sense.

Yeah, go ahead.

We talked about the revenue that was all trailing revenue 2024. Looking forward, they do have a growth pipeline we're talking about. I think what matters most is the $10 million roughly in revenue that they have trailing and a 14% EBITDA. That's nice. It's what we do together that complements us going forward with the business that we have to make sure that we deliver for this customer and provide the greatest level of service that we can.

Helpful. On NSNS, you touched on this a bit earlier. If you kind of revisit there, I'm just curious on the long tail revenue opportunity once you get into the per minute charges and sort of margin opportunity once they're in the air. As you're seeing the competitive landscape evolve with potential substitutes and other efforts to try to encroach on that opportunity, just talk about your position there, the certainty from your vision, from your standpoint of those future revenue streams, barriers to entry. I don't want to spend too much time there, but it'd just be helpful if you would expand there a second.

Yes, what's unique is we went through a competitive process already. We ended up being the sole awardee of the Near Space Network. To our knowledge, there's no on-ramp opportunities for that. What it is, it's a capability that we have to put in place for the U.S. government and operate, own, and operate commercially. That's an incredibly wide and deep moat for Intuitive Machines. We look at, you know, we work closely with the customer in terms of the ground segment where we're putting in place tri-band dishes, X, S, and KA band, and ground segment antennas around the world. As soon as we get that first milestone done to have a fully operational X, S, and KA tri-band antenna on Earth, operational task orders will come to offload some of the Deep Space Network. We know that's where the higher margin revenue occurs.

Also, with the first satellite in and around the moon that we are holding Mission 3 for, that's so important to fly that satellite around the moon, we'll have operational task orders kick in to sell data and navigation services back to the government from that satellite, which is the only U.S. communications satellite around the moon. We'll show interoperability with the Lunar Reconnaissance Orbiter, which is the other U.S. satellite around the moon. We know there's targets of opportunity for operational task orders. We just got to get the hardware built and in place around the moon.

Got it. Great. Thank you.

Thank you, Jeff.

Speaker 0

Your final question comes from the line of Josh Sullivan with Benchmark. Thank you. Please go ahead.

Speaker 2

Hey, good morning.

Morning, Josh.

Maybe broader picture, how are you thinking about the three-pillar approach that you've talked about in the acquisition here at KinetX Aerospace? The NSNS margin profile looks long-term, it's pretty attractive. Is there a pillar you're leaning more towards as we think about Intuitive Machines longer term?

Josh, thanks for the question. You can tell, you know, kind of the emphasis we're putting where you see that center pillar of data services, data transmission, data services move to the forefront. The hard things first are landing on the moon. Landing on the moon, though, is an annual cadence of missions, and it's, you know, this binary event of success or failure every year, and everybody holds their breath that you land on the moon. While we've done that, we've built some incredible capability. This long-term sustainable infrastructure service provider is where the company's going. This long-term view, investing in ourselves, investing in satellites, pushing to the forefront data services and data transmission is creating long-term shareholder value. I hope people realize that, that this is not about, you know, this quarter.

This is about the investment in ourselves to build out a capability that allows us to get to a sustainable service model that allows for multi-years and multi-billion dollars' worth of service revenue in the future.

Great. I'll leave it there. Thank you.

All right. Thank you, Josh.

Speaker 0

Thank you. I will now turn the call back over to Steve Altemus for closing remarks.

Speaker 2

Thank you, everyone, for joining today's call. We're looking forward to executing our growth opportunities as we expand our footprint here in Houston Spaceport, while also expanding our capabilities with the KinetX Aerospace team. Let me be the first to welcome the KinetX Aerospace team to Intuitive Machines. Thank you again. Operator, that is all.

Speaker 0

Thank you, ladies and gentlemen. That concludes today's call. Thank you all for joining. You may now disconnect.