Closing Bell - Manifest Space: Hurricane Watch with ICEYE U.S. CEO Eric Jensen 10/11/24

Episode Date: October 11, 2024

In the wake of Hurricane Milton – space companies like ICEYE are enabling real-time data and analysis of conditions on the ground. ICEYE U.S. CEO Eric Jensen joins Morgan Brennan to lay out how the company is collecting data of earth to help governments and companies respond faster and how the startup is channeling Apple to build its satellites. 

In the wake of Milton, the second devastating hurricane to sweep through the southeastern U.S. in less than two weeks, space companies like ICEYE are enabling better response efforts. We've been very proud to support recovery, really advanced response and recovery efforts for both Helene and now for Milton. In the case of Helene, we're working with, I would say, federal, state, local government agencies and also NGOs. As an example, we've directed over 60 rescue and emergency medical supply helicopter missions. So, for example, when infrastructure and communication systems are down, folks on the ground have, for example, gotten access to Starlink for free. They've then requested imagery from us.

We're taking that imagery through the night and through whatever storms may still persist. That imagery allows us to see what infrastructure is damaged, which roads are damaged, which roads are passable. We can also see building-level damage, so we can direct response crews, let's say, to the most affected areas. IceEye owns the world's largest constellation of synthetic aperture radar, or SAR, satellites. Unlike Earth imaging technology, radar doesn't need the sun's illumination of Earth to operate, meaning sensors can work through clouds, darkness, smoke, even hurricanes. IceEye is a European startup, but has an American subsidiary. Eric Jensen is the IceEye U a European startup but has an American subsidiary. Eric Jensen is the IceEye US CEO.

I think the thesis that the remote sensing industry has kind of always operated on is that eventually we'll get to a point where we're much more analogous to how GPS is integrated into different systems that consumers are using today. We're kind of seeding that today with our work in the natural catastrophe domain where we created essentially an app that is for flood response. And when we deliver our flood data to customers, federal, state, local customers of ours in an emergency, they don't really want a picture and they sure as hell don't want a satellite. They want the answer to the problem of how bad is the flood and where should we go to avoid the worst of the worst. On this episode, IceEyes Jensen discusses how the company is collecting data of Earth to help governments and companies better understand the world and how the six-year-old startup is channeling Apple to build its satellites. I'm Morgan Brennan, and this is Manifest Space.

Eric Jensen, IceEyes U.S. CEO, thanks for joining me. It's great to have you on Manifest Space. Eric Jensen, IceEye US CEO. Thanks for joining me. It's great to have you on Manifest Space. Pleasure to be here. Thanks for the time. All right. So I just want to start sort of really basic at the beginning. What does IceEye do? We deliver a source of truth from space to improve life on Earth. That's our vision. And we do that by operating the world's largest constellation of radar imaging satellites. In general, we offer products that span what we call kind of missions, data, and solutions. So we deliver turnkey space and ground systems to customers. We deliver data from our constellation to customers, and we deliver answers to hard problems across civil intelligence and defense domains. So when you talk about this constellation, what does radar enable, especially in a broader market of Earth observation, where we know imaging is an area that's very competitive?

In Earth observation, radar is great because of the nature of the sensing modality. It's an active sensor, meaning it doesn't need the sun's illumination of Earth to operate. It thus can work through clouds, through darkness, through smoke, through hurricanes. We can essentially always see what's going on on Earth from space. That's the big differentiator. And so what are you seeing right now? Because as you mentioned, you work with governments, but you also work with commercial customers. We just had another devastating hurricane come through the southeastern U.S. with Hurricane Milton.

I would imagine you're tracking all of that data. We've been very proud to support recovery, really advanced response and recovery efforts for both Helene and now for Milton. In the case of Helene, we're working with, I would say, federal, state, local government agencies and also NGOs. As an example, we've directed over 60 rescue and emergency medical supply helicopter missions. So, for example, when infrastructure and communication systems are down, folks on the ground have, for example, gotten access to Starlink for free. They've been requested imagery from us. We're taking that imagery through the night and through whatever storms may still persist. That imagery allows us to see what infrastructure is damaged, which roads are damaged, which roads are passable. We can also see building level damage.

So we can direct response crews, let's say, to the most affected areas versus the least affected areas. We can measure the thickness of water on earth and the extent of that flood as well. So we can look at water over here is, let's say, eight feet in depth. Over in that region is, let's say, under two feet. So we would choose the worst of the two, for example, if we're doing emergency response. And we've been really proud to support all that. It's still ongoing. We've got people on the ground right now in Florida. We've got a team of meteorologists, of SAR, or radar system operators working, again, hand in hand with those local authorities to provide advanced capabilities from space to support response. And so what does that data enable? The fact that you have this data, you can share it with government officials, NGOs, et cetera. What does it enable in terms of disaster response that maybe

didn't exist before your constellation was there? I think the two big things are precision and responsiveness. What I mean by precision is instead of waiting for floodwaters to recede and sending crews out whose sole purpose it is to go assess the damage, be that by taking pictures of things, measuring the depth of water with yardsticks floating around in boats, reporting that back to like a central kind of command control center, and then directing resources, we can deliver the result in near real time. I mean, within minutes. So what I mean by result is we can measure all those things from space. We can measure the collapsed buildings. We can measure the collapsed bridge. We can measure the destroyed roads. We can deliver that

in a data package in real time to an end user so they can take action much sooner than they otherwise could. So that's, I guess, the combination of precision and responsiveness because it's, again, we're doing it in space. We're unencumbered by clouds, darkness. We can do it at any time of day or night. And you do work with, in addition to governments, you do work with insurance companies and the like as well. Does a situation like this mean that you're working with those types of companies too? And I guess perhaps just as importantly, in these key moments, what does it mean in terms of driving demand to have your product for these types of responses? I think, yeah, it's twofold. So I would say that on one hand, the insurance companies are incentivized to pay out quickly to those they insure. And in order to do that both efficiently

and accurately, they need a much more accurate source of data. And that's what we provide. So we're working with them basically to, in some cases, be their sole source of truth data about what's actually happening on ground. And for example, we may image an area prior to a hurricane arriving in that location. Let's say we've taken a lot of imagery of Tampa and really across the entire Florida Peninsula in the last week. And so we have a very accurate representation of exactly what was before the hurricane happened. And now we know exactly what's happened and what kind of is as the hurricane is still kind of making its way across that landmass.

And so we give them a very clear picture of, you know, before and after. I think that's one way we're doing it. The second way is working with insurance providers in what's called kind of a parametric modeling initiative, such that they're then relying on our data over time to develop models where they can preemptively make some assumptions about the level of damage given, you know, the strength of an event, be it a hurricane, a high wind event, a flood event, those kinds of things. So what I mean by that is they may subscribe to our service to monitor a bridge, for example, or all the bridges in a given region over time. They would note that relative to weather events or, you know, seismic events, et cetera, the infrastructure

stability has changed. And we can measure that and give them a model that they can track and say, like, hey, we actually think that something's going to go awry in the next however many months because of what we've tracked to date. So I think not only is it a litmus test to our responsiveness in real time, but also over time with some of those insurance companies. Makes sense. You mentioned Starlink. Are you partnered up with Starlink, or how does that access the infrastructure and that dynamic work? To the degree that both companies, iSci and SpaceX, view it as their core ethos to help. We're partnered with them, but I would say not in a formal way. It's just kind of by osmosis turned out that people in need really rely upon Starlink in this moment to get access to communication services, likes of which they can't because local

terrestrial telephone lines are down. And then to give them situational awareness of what's going on local and even beyond kind of their local communities, we can provide that service. So we found ourselves to be, I would say, excellent partners with SpaceX as it relates to people on the ground who are using our capabilities. Interesting. And of course, you are, your company, IceEye, it's European headquartered, but it's got a US business, a US segment as well. But you're doing this type of work for clients all over the world. So I guess just in terms of whether it's natural disasters and climate events, or whether it's work for government, and I would imagine a certain amount of reconnaissance and intelligence work that you're gathering data around as well.

Just walk me through the portfolio and what's growing, what's growing quickly and what those opportunities look like for your service. Sure. Yeah, we're truly a multinational company. We've got offices in Europe, Asia, here in the US, Latin America. We work with, as I mentioned before, you know, intelligence, defense, and civil organizations around the world. In some cases, we're delivering governments their first ever national security system of spacecraft that they can use to monitor their borders. We've done that in the case of the Brazilian Air Force, as an example, wherein they were very concerned about deforestation, legal deforestation happening on their territory. They're using our satellites to essentially map and assess what illegal deforestation is happening in real time. They've then created an analog to what impact to GDP those illegal activities have.

And then they've justified an amount of resources to go either interdict or prevent that from happening in the future. And that also, as I mentioned, have a solutions business, as we call it, that's primarily focused on natural catastrophe. And you're right, Morgan, we're working with really companies around the world who are dealing with everything from hurricanes to tornadoes to typhoons to earthquakes. And it's been amazing to see the response. We've had people say to us, we didn't know this was possible. We had no idea that based on data from space, we could get real-time situation awareness and respond to those events. You know, as an example, back when the fires happened on Maui over a year ago now, you know, the Navy called us up just based on kind of connections we had from veterans that we've hired to their former colleagues. And they said, look, we have, you know, six or eight Blackhawks that are on a carrier waiting to provide emergency burn kits,

MREs, water, et cetera. We have no idea where to land on the island. We can't get a hold of anybody who was on the ground. Can you at least give us a map that tells us where to go and where not to go? Essentially create a landing zone for us. And within 90 minutes, they had exactly what they wanted, set those helicopters down, unloaded all the material, connected with local first responders, second responders, et cetera, and got that emergency response material where it needed to go to help the people who were in need of it most. So that's the kind of level of responsiveness and access that this company provides now globally. It's a great example, the one you just gave. What is enabling this technology and iSci to

have this constellation now? You know, it's been a nexus of a few things. I think one has just been pure inventive curiosity that our company decided to kind of throw out the book, so to speak, as to how one would design a radar-based small satellite, which, you know, really hadn't been done before with our kind of design philosophy until we did it. And that's, I think, what we're most proud of is we figured out a way to miniaturize the components. We figured out a way to proliferate their production. We're building at a cadence that is very uncommon for the industry. No longer are companies building monolithic traditional satellites that take four years to design, three years to build, a year to launch, two years to tune, and then last on orbit for 15 years. We're building satellites akin to how Apple builds iPhones.

Every 18 months, we've got a new generation we put out. It's all software driven. It's software first. The hardware is just a host for the software. And that means that we can tune the system and update it on like a weekly basis on orbit. So it's essentially taking kind of that software first model that's now, I think, permeating across the defense ecosystem in a really wonderful way amongst the US and allies. And it's putting that model in space. So when you say 18 months, does that mean that a satellite basically has a shelf life of 18 months or that you're just launching more that are complementary to the constellation that are already in place? We launch new satellites every quarter. The 18 months I mentioned was more around that's our typical span between revised generations. So

for example, if iPhone 15 comes out and then 18 months later, 16 comes out, that's the analog I was trying to create, which is that our generation three satellite would come out and then our generation four satellite would come out 18 months after that. If a customer, for example, comes to us and says, hey, we want a satellite, the advantage of building in the way that we are is that we can say, well, do you want it in six months or 12 months or how fast do you need it? Because we have a live production line going and we can tailor and customize those products to customer needs in a way that's just been very uncommon with respect to kind of traditional aerospace approaches.

How quickly can you build a satellite? And perhaps just as importantly, how does it speak to the vertical integration of your supply chain? We can build a satellite with all parts in-house in between three and six months. It really is a testament to the value in being vertically integrated. And we, we are, I would say kind of like 95% vertically integrated. I mean, we do everything from, you know, the, the breadboards up in-house, small subsystems, small components to the full assembled satellite.

Our satellites are the size of an American dishwasher. So it's not as if we're building kind of a school bus size, a very complicated piece of hardware. The component count is low enough where we can really increase the production cadence and really work on efficiencies in terms of like scale production. So that's long and short of what we're able to do and why we're able to do it. And so how do you see this earth observation and data collection market evolving, especially given the fact that I know you're on the synthetic aperture radar side of things, the SAR side of things, radar side of things. But we do also have earth imaging and there are a number of startups and some

longstanding traditional players in this broader market. It's a very dynamic market. And I think partly that's because it exists as this interesting nexus between government versus commercial systems and capabilities. We then have kind of domestic versus internationally based capabilities that are out there. We've got countries that have technical domain experience in given fields. So and then on top of that, there's a lot of regulatory, I would say, layers to work through, be it frequency licensing, remote sensing, licensing, that kind of thing, all which is well intended, but it adds up to a very dynamic place. And that's kind of been the history of remote sensing from really the early nineties through now. Back in the early nineties, there was something called the Land Remote Sensing

Act that made it legal for companies in the US to receive a license to operate their systems that are looking down at earth in a commercial fashion. And what happened was those companies that were previously building only, let's say, defense-oriented or national-only systems decided, hey, we can commercialize this technology, get it licensed to operate it, and we should take a run at this commercial market. Those were the pioneers. And those companies predominantly focused not on radar, which was still subject to, I would say, higher level of restrictions on the United States munitions list and from an ITAR perspective, but they focused on

electro-optical systems, so big telescopes in space. And they found that they had a niche in large area kind of foundational mapping of the world, which wasn't really being done by systems that were being built by governments because those systems were mainly focused on tactical needs at the time and so really for the next 20 years or so we didn't have you know a proliferation of small satellites at all you know companies in the us canada france germany italy were very focused on building large versions of um telescopes and then transitioning a bit to kind of radar systems. Really, it wasn't until the late 20-teens when ISI came along and figured out a way to miniaturize those systems, wherein we can build a significantly higher number of them to increase the persistence with which we can monitor anything happening on Earth and still achieve the same level of performance of some of those legacy systems. And that's just a testament to the evolution of technology and the advancements in software.

And so I think now we see this kind of interesting amalgamation of companies that have historically built large systems that are transitioning to building more and smaller systems. And I think what we're going to see is, you know, commercial radar, for example, is just really approaching the kind of adoption chasm. We've got like early, early majority adopters and innovators who have realized very quickly that they need the capability. They really like it. They know what to do with it. We then have kind of the early majority that's now wrestling with how do we adopt this stuff in our existing workflows? It's here. It's available. These companies have invested billions of dollars, hired thousands of STEM educated people in the States, launched 50 some odd satellites.

It's really gotten to on the radar side. It's really gotten to like a critical mass much faster i think than some of our customers even expected and i think that's a good thing i don't think it's a testament to uh you know a misalignment of timing i think that what's happened is that the us government by policy has done exactly what um you know we're excellent at which is incentivize companies not only to invest here domestically and build capabilities here, but also return that value back to the government and proliferate it amongst commercial use cases as well. And it's really a great news story. So I think I'm really excited about the future. And I think we're going to see a lot more innovation, a lot more excitement, a lot of kind of more activity with companies that are going direct to, frankly, consumer-based issues like we just discussed with disaster response and natural catastrophes So it's a great example of the benefit of space-based systems like

ours. I'm glad you highlighted that because this whole idea of public-private partnerships and commercialization of space, I mean, space has really sort of become the test bed and the successful case study thus far in government contracting and thinking about pulling in commercial industry in a different way. And to your point, incentivizing companies. You've actually won a number of these contracts or competing in a number of these contracts that are much more about this kind of commercial aspect to it. And I just wonder what that opportunity looks like for ISI and how you expect that to continue to grow. Yeah, I think, and thanks for saying that. We're super privileged to be working with all of our

customers. We view ourselves as a mission partner first. We hire, and we're very proud of hiring a lot of veterans, intel officers, et cetera, across all service branches. They kind of speak the mission. We hire a lot of scientists who speak that kind of earth science, climate science mission. And that really allows us to, I think, identify deeply with the challenges that our customers are trying to solve with our capacity and our services. You know, I think the thesis that the remote sensing industry has kind of always operated on is that eventually we'll get to a point where we're much more analogous to how GPS is integrated into different systems that consumers are using today. When you use your Yelp app to look for great restaurants in your area, it's pinging GPS systems. You get that little arrow in the top left-hand corner of your screen

that tells you that it's using that as a data source. But as a consumer, you don't think about that happening. And you shouldn't. It should be transparent to you. And that's what is really cool about the GPS infrastructure that we have. I do think that we're now approaching a point in time where we have sufficient kind of critical mass in terms of diversity of systems and like the quantity of systems that are on orbit in different constellations wherein we can create a a we envision like a data layer on which multiple third-party apps are developed over time you know we're kind of seeding that today with our work in the natural catastrophe domain where we created essentially an app that is for flood response and we're not delivering when we deliver our flood data to customers federal state local

customers of ours in an emergency they don't really want a picture and they sure as hell don't want a satellite. They want the answer to the problem of how bad is the flood and where should we go to avoid the worst of the worst. And being able to do that, I think, is a proof point and a testament to the fact that this market is transitioning down the value chain. And we're going to start seeing more use cases proliferate that abstract the actual imagery itself and start mapping to the actual solution to the problem. So I think, as with many other industries today, commercial radar imaging companies are focused on B2G engagement, business to government engagements. That's where the existing workflows exist. I think that's where there's a concentration of revenue that we're staring at, both domestically and around the world. I think soon there'll be a transition

to kind of business to enterprise level collaboration in the same domains of utility. So, you know, civil, defense, intelligence, et cetera. But working kind of business to enterprise will be the next tranche. And that could be, again, insurance companies, civil, defense, intelligence, et cetera. But working kind of business to enterprise will be the next tranche. And that could be, again, insurance companies, could be defense primes, et cetera. And I think eventually it will transition to more of a widespread use case B2C longer term. Again, it won't be in the that makes, you know, kind of abstracts the fact that we're operating this awesome space constellation and really maps to what, you know, problems are being addressed that society faces and how do we kind of make an app out of it, let's say. And we won't necessarily do that all ourselves. We'll be feeding an ecosystem of developers and that will

become kind of the new way of doing things. And I think that's been the dream for a long time. What's not allowed it to be reality to date? I think that the high capital investment required to field robust and reliable space systems in a quantity that can support the level of data required and the persistence required and the refresh rates of just awareness of what's going on has been prohibitive, but that's all changed in the last five years and ISI is really at the forefront of that. In some ways, that's sort of the Apple analogy again. So I hear you talking about this and basically the thesis here and what the value proposition of ISI is not just about data collection, but it's also about analysis of that data. And you talked about sort of leading

with software. So as we start to wrap up this conversation, obviously the next question for you, the natural question is AI and how that's going to factor into all this. I love it. And, you know, I think that there's so many cliches around AI. We don't really exactly know, you know, what it's going to become. I don't think that artificial general intelligence is going to be something that we as a company are investing in the short term. However, I will say that if we look at the first principles of what we look at, what we kind of assign AI to be today, wherein we have large language models that are operating with, you know, computational power that follows kind of like an exponential curve in terms of its capacity around the world and also in like a neural network-based system, which we would, again,

assign like an AI moniker to wherever they're at. And I think that that access is something that companies like us have to harness if we're going to remain competitive and if we're going to deliver really the best products fastest to market. And so we are certainly looking into AI. I would say that it's more than just like something we're dabbling in. I think we're actually pretty invested in it as it applies to lots of things about how our system operates. It could be, for example, managing our capacity in space. That's a great example of a problem that has knowable boundary conditions, but high degree of complexity in terms of the variables that could be tuned. And so it's actually a really good example where you could apply, you know, artificial intelligence techniques that would

then take the place of, you know, many, many people who are like working on that problem, free them up to frankly work on harder problems. I think also on the product side, you know, as we look at, we were mentioning earlier and discussing earlier, you know, parametric insurance prevailing thesis of where that's going to go. I think large language models and AI can really help make our predictions much more accurate for things like that. But also as far as it relates to natural catastrophes and our responsiveness to them, I think that's a great domain that we can really apply a lot of that computational power. So we're staring into AI. And I think, frankly, from a very enthusiastic adopter perspective, this company is rooted in engineering and kind of product centricity first in order to improve life on earth with our customers I mentioned. So I think it's only natural for us to really harness the latest and greatest technology as a leader in our field.

Great. Final question for you. IPO plans anytime soon? I think it's only natural for us to really harness the latest and greatest technology as a leader in our field. Great. Final question for you. IPO plans anytime soon? I think that companies like us have a lot of options available to them. I think we're to choose what's in the put in all those mechanisms, compliance, governance systems, such that we are operating at a tempo and with a level of transparency and security, the likes of which would be expected by a company that's public. We've done that to give us optionality in the future because we think it's the most efficient thing for us to do to scale. And I would just say that we've not made any decision one way or another, but, uh, as the company's growth continues to,

I would say be significant amongst our peers in the industry. Um, we're going to be looking at ways to skill the business in a, uh, you know, an even more massive way in the future. And that definitely requires capital. And so we'll be looking at kind of, uh, which, which direction we want to go in it. You know, it's also subject, of course, to kind of what the market will bear and what kind of interest rates are doing and, you know, how things economically look in what parts of the world. So we've been in a really interesting time right now. And I think as we're kind of entering the next election, you know, we're in the election cycle, but I think right now is the time to be patient

to kind of see what happens. And then we'll be looking at how do we need to evolve our capital structure, our base going into next year. Eric Jensen, IceEye US CEO. Great to speak with you. Thanks for taking the time. Thank you so much. My pleasure. That does it for this episode of Manifest Space.

Make sure you never miss a launch by following us wherever you get your podcasts and by watching our coverage on Closing Bell Overtime. I'm Morgan Brennan.