Closing Bell - Manifest Space: Sierra Space Unveils Satellite Bus Line, Discusses Potential IPO Plans with CEO Tom Vice 4/5/24

Episode Date: April 5, 2024

Sierra Space, a private space tech company valued at $5.3 billion has been thirty years in the making. Now, it’s unveiling a line of buses—the main bodies of satellites—to sell to others. CEO Tom Vice joins Morgan Brennan to discuss the product launch, its Dream Chaser spaceplane’s maiden voyage, and plans to go public.

Sierra Space is ready for its debut. Almost. Spun out of defense contractor Sierra Nevada Corporation three years ago, Sierra Space touts a 30-year spacecraft legacy and is the result of a big bet on commercial space by the billionaire Osmond family. The company touts a diverse portfolio of space and defense tech businesses, spanning space transportation, space habitats, propulsion, and satellites. It's perhaps best known for its NASA-contracted space plane Dream Chaser, which is poised to make its first flight later this year.

But it's also working on a commercial space station with Jeff Bezos' Blue Origin called Orbital Reef. And in January, won a high-profile Defense Department contract to develop a constellation of missile-tracking satellites. Now, Sierra Space is pushing more deeply into spacecraft subsystems, unveiling a line of buses, which are the main bodies of satellites, to sell to others. Today we're announcing, we're introducing a new bus line called Eclipse. Kind of perfect timing.

Was it coincidental, the name? No, we've actually been waiting for six months. So this was really thought about. And I think the name is very appropriate because I think it will change everything in terms of the affordability of building the next generation buses for next generation satellites. Sierra Space's CEO, Tom Weiss, who's been at the helm since it became an independent subsidiary, says the focus has been on de-risking the business, getting DreamChaser flying, and preparing for a possible IPO.

Sierra Space's sales are expected to double in 2024. Its backlog currently tops $4 billion, and it is finalizing a Series B round of funding. Really think a lot about how to bring all this together in a way that builds the first integrated platform that creates the ability for us to think about not just what we can put in space, but now for the first time what we can do in space. On this episode, Weiss breaks down the portfolio and why he believes Sierra Space will help usher in, quote, the most profound industrial revolution in human history. I'm Morgan Brennan, and this is Manifest Space. Tom Weiss, CEO of Sierra Space, it's so great to sit down with you. It's so great to sit down with you as well. Thanks for having us.

I mean, you have so much stuff going on at Sierra Space, but I think first let's start with, okay, we've got space habitats, we've got space transportation vehicles, we've got propulsion systems, and we have low Earth orbit satellites. I guess, what's taking up most of your time right now, or is it sort of smorgasbord? We really think a lot about how to bring all this together in a way that builds the first integrated platform that creates the ability for us to think about not just what we can put in space, but now for the first time what we can do in space. We're a company that thinks a lot about ushering in the most profound industrial revolution in humanity's history. We think that the next generation of biotech products for oncology, longevity, and industrial products are gonna be built in space. So we think about then how to build out

that technology and business platform. And part of it is we have to revolutionize transportation. That's the dream chaser product line, right? If you think about everything we bring back from space today, whether it's people or cargo, we bring back in a capsule and we plunge it into the ocean. We just think very differently about how to do this in the future. We built a space plane that can literally land at any runway 737 MAX or an A321 NEO can land in. That's thousands of runways around the world. So

it starts with Dream Chaser. And we're really excited. It's coming out of seven years of development. We're going to launch it this year. It's the first mission we're taking cargo up to the International Space Station. The second part of pulling all this together is to reinvent the space station itself. Every space station before us has been built with metallic structures. That doesn't create the economics. For us, we can put up a structure in space that's six times larger than a rocket that takes it up. So today we're going up you know if let's say we go up on a Vulcan rocket that has a five meter fairing we put up a 300 cubic meter space station. If we go up on a Starship right we put up a 7,000 cubic meter space station five times the

size of the ISS. So it creates that unit economics so that biotech companies industrial tech companies for the first time in their board meetings could start to say, is it time to create the next big oncology drug? Or let's go and see if we can actually cure leukemia. Now we can use microgravity as a way to do that. And we know that there's pent up market demand because the ISS has been flying for three decades. And we know that there's pent-up market demand because the ISS has been flying for three decades,

and there's all kinds of things we're developing on the ISS today. The third part is if we're going to build out a vibrant economy in space, then our company is very focused on making sure that we protect space. So a big part of our company is defense tech. We've announced over the last 10 months that we've won $1.3 billion of prime satellite contracts for the Department of Defense. But we're using the same technology, right? We use it to go into space planes or space stations or satellite systems. It allows us to move extremely fast. And I think that's why you're seeing the excitement around the company and the investment we've been able to bring in we now have you know 4.4 billion dollars

in a contract valued at 5.3 billion our business because I think it's the richness of the of the revenue streams we're not just a niche player and that's not just in satellites or rockets or in particular you know subsystem components we build out a company de-risked it de-risked the portfolio de-risked the or rockets, or in particular, subsystem components. We build out a company, de-risk it, de-risk the portfolio, de-risk the business plan, and we bring a very diverse revenue stream that gives us multiple different flywheels.

So then it allows us to think about what would be the right timing to go from private to public? And I think that's how we're building the company. So what is the right timing? Well you know this year we've been very focused for the last three years when we spun the company out from Sierra Nevada de-risking the business plan as I mentioned de-risking the technology stack getting Dream Chaser into flight and as I think we start to look at 2025 you know we'll start to look at that as an option and make the decision depending on what the markets

look like. But we'll keep that as an option. But I think we're very quickly becoming a company that has been able to demonstrate significant top line growth. This year we're doubling the size of the company where we were last year. We're very focused on becoming- In terms of sales, you're doubling it. Doubling the size of sales. Actually double the size of the employee base too,

which we're excited about. But doubling the size of revenue. But we're a company that's not just about top-line growth. We're a company that's very focused on net income growth. So we're becoming very focused very quickly on even positive, getting free cash flow positive. And I think when all those things start to look to trigger, which are coming up i think fairly soon then we'll decide whether we go ahead and you know exercise the option of going public okay will you go to the private markets in the meantime or do you feel good about your position financially we feel very good about our financial position you know we um it's it's known that we're finishing up the second phase of a series b

between our series a and our B, we've raised 1.7 billion, but the capital that we would raise in a B is just to give us additional capital in case we were to look at inorganic growth. But we're well capitalized and our focus is on, you know, using this as our last capital raise as we think about a potential IPO. I say potential because lots of things have to happen, as you know. But it's a really great set of opportunities for us. We could stay private. But I think as we look at where we are in the de-risking of the company,

I think the public markets would really see us as a very differentiated space tech company that has a significant part of our business and defense tech so I think we'd be rewarded for that and so if you were to go to were being the key word if you were to go public you do it as a traditional IPO not as a spec absolutely you know we got you can imagine in 2021 when we spun all these businesses out the technology that we had we were getting lots of offers for spec I never believed it was the right thing for us. It might have been right for others. But what we wanted to do is to spend a good three years, once we spun the

company out, again getting back to de-risking everything. And I think that's what we've done. We wanted to de-risk the DreamChaser product line. We wanted to de-risk the technology, build out our software systems, our hardware. I think you're seeing that now play out in a number of announcements we've had. We're actually leveraging that. And I think we really wanted to think about making sure we had very strong differentiated revenue streams, not just, again, in one particular part of the market, but I think a very broad set of parts of the market. So, again, transportation, destinations, in-space infrastructure, national security and satellites, particular part of the market but I think a very broad set of parts of the market so again transportation destinations in space infrastructure

national security and satellites in our components business through basically a space a commercial space conglomerate I'll call you with a very heavy technology base and yeah so so in terms of some of those different lines of business revenue streams what is growing the fastest right now? What in the near term offers the most opportunity? Yeah, I'm very excited about we're able to compete and win against the large aerospace and defense primes in national security. We're moving extremely fast. You're watching it play out, whether it's the Space Development Agency, the the nro many parts of the space dod

infrastructure are looking at commercial best practices commercial companies to move fast and we've been able to show that we understand the mission lots of our folks have spent much of their their their career in national security i've been in national security space for what, over 30 years. So we understand the mission. We understand what the aggressors, the adversaries are doing in space. And we've been investing heavily in technology to de-risk the technology and allows us to move fast. We can go from contract now to in space orbiting new constellations within three years. And I think that really resonates with the Department of Defense. And you're seeing that play out. We've been winning big contracts, multiple different constellations. The one that I think was the most recent was with

the Space Development Agency, 18 different satellites. And it's different because you're seeing some of the new space companies win satellite constellations with, you know, a desk band radio, for example. Our contract was to do missile warning, missile classification, tracking, and ultimately fire control against advanced weapons like hypersonics. And we won that against some of the biggest aerospace and defense primes, established primes, in the business. So we're very good on the growth rate of national security. We're also very excited about Dream Chaser. Obviously it's entering into commercial

service. It's flying this year. It's flying this year. Do we have a date yet? We'll say at the end of the, closer to the end of the year, so the last quarter of the year. If we beat that, that'll be great. I'll be back on to tell you that, but right now we'll track to that. There's a lot of things that have to play into that. This is not a demonstration mission. This is taking up cargo to the International Space Station. And so we're dependent on NASA's manifesto to the ISS. We're working with the FAA to get a reentry license. So we're working through all that.

But the vehicle itself is looking really good. It's in Thermovac, which is the thermo testing. So it's a test that actually puts you in the environment of space, both in a vacuum of space and the thermal environment of space. We'll finish that up. It's at NASA now up in Ohio. Three weeks from now it'll be at Kennedy Space Center. We'll finish up some testing there, integrate it with the Vulcan rocket from ULA, and then we're ready to go. But we'll see where we end up, but I'm very confident that we'll be flying this year. Okay. In terms of that project, that business line specifically, you have six contracted flights to resupply

International Space Station with NASA, correct? Seven. Seven. Okay. Seven. We also know that the ISS is going to be retiring probably at the end of the decade. Right. And you've also talked about the fact that maybe you repurpose this plane to be able to carry crew as well. How are you thinking about this beyond those seven flights? How soon can we see people on board? And how does this tie back into space habitats, which I know you're working on as well? Yeah, the beauty of Dream Chaser is we own both vehicles. So the first vehicle is called Tenacity.

The second one is already in production called Reverence. So we'll have two. We produce those vehicles to be highly reusable. We initially started at 15 missions apiece. We think we're probably well over 20 now. And so we'll fly seven for NASA under the current contract. We highly believe that will be extended, so additional missions for ISS. We also think when Dream Chasers flying and people have the choice whether to get plunged into the ocean,

that capsule, or fly back to Kennedy Space Center and land on the runway or, you know, into a commercial runway, we think it's going to gain more attention for potential missions. But Dream Chaser is also a vehicle that can spend, you know, a year on orbit and be its first, you know, orbiting space station for microgravity research. It's a very versatile system. So we think there's a number of what we're calling just missions that are going to be up to do research and development inside of Dream Chaser. And then if you look at Dream Chaser, it carries 11,500 pounds of payload.

It carries a very unique cargo module that can be used as a mission module. So we think that it'll have some really incredible potential with other parts of the government for missions. Do you already have customers, government or otherwise, for being able to use Dream Chaser as essentially an orbiting lab? We're working with people on Orbiter Lab.

We have several MOUs with biotech companies that are looking to utilize both working with us on a space station as well as they just want to do microgravity research. They want to find their next breakthrough drug. So we'll get them up potentially on a Dream Chaser first and then transition them over to our space station. So we're very excited about that and we do have study contracts to use the Dream Chaser for other government missions, primarily DOD. Now you're also developing a habitat with Blue Origin, Orbital Reef. Correct. Where are we in terms of that development process?

So we're developing now. We've just finished up our sixth successful structural test. This one that we did at Marshall Space Flight Center was a full-size space station, right? our sixth successful structural test. This one that we did at Marshall Space Flight Center was a full-size space station, right? We built an entire expandable life station, put it down at Marshall, took it to full burst test. Very successful.

We exceeded all of NASA's safety requirements by 27%. So this year we head back in, we'll do three more tests this year. Of course those life modules get delivered to Blue Origin as part of our agreement on Orbiter Reef, but we also have the ability to put up one of those life modules along with a service module and bring up Dream Chaser to ED for an early demonstration of a space station before Orbiter Reef is up. And we're really excited about that as well.

And the nice thing about Dream Chaser you mentioned earlier, not only does it serve as the international space station, but commercial space stations will become the new international space station, and the vehicle that we think is going to be the most pervasive in terms of cargo and people is Dream Chaser. So Dream Chaser is going to serve as low Earth orbit for decades to come, not just the ISS. Dream Chaser is reusable. How many flights do you think it'll be able, each one of these vehicles to be able to do? Yeah, we designed it from the beginning to be 15.

But as we've now gone through a lot of testing of the vehicle, we're somewhere around 22 missions per vehicle. We think ultimately we'll get to 25. Okay. Yeah. I mean, it's pretty incredible to be having this conversation about low Earth orbit and the commercialization of low Earth orbit that policy has enabled as well. I guess your thoughts on how all of this develops, this emerging low Earth orbit economy develops, and whether we really truly have our arms around what that market opportunity is going to look like.

I think it's going to be huge. We did a full report, a full study on the utilization of microgravity, looked at all of the research that had been done on the ISS for the last three decades, worked with a number of biotech companies and industrial tech companies on what we could do from space. In that analysis, we decided that we were going to focus on four markets, three in biotech and one in industrials around glass, industrialized glass. Glass goes almost every market. In the biotech side, we largely looked at adult stem cells and stem cells. We looked at areas of oncology associated with a number of specific cancers. and then we looked at new and

novel vaccines, annualizations of monoclonal antibodies for example. Those four segments, terrestrial markets, were 900 billion dollars in 2022. They're huge. They're growing at a rate that'll put those markets somewhere around 3.7 trillion by 2038. Our focus on putting up a space station is actually to disrupt terrestrial markets by using microgravity in the difference of the space environment that's just 250 miles above our head. So you think about the next factories in biotech, right, aren't somewhere on the globe. They're 250 miles above our head because there

you can do some things that are radically different in terms of protein crystallization that we know actually will produce better drugs so we think actually this is a huge market for us it is it will be our largest market in sierra space because again what we're going after is disruption of terrestrial markets in biotech and industrial tech. That's huge. And this kind of goes back to what you said right out of the gate, which is that you believe that we are on the eve of the largest industrial age that we've known in history. I might be paraphrasing. No, I actually think that this, we're on the cusp of a number of technologies coming together, right? These technologies of low-cost launch,

new and cheaper rockets, different ways to transport things to and from space, dream chaser, very different technology to build out infrastructure in space that actually can you can actually access get access to at a fraction of the cost. Even the things that we're doing in our company today, we look at how to produce drugs and novel drugs, injecting AI and to speed up the delivery of those drugs. All those things are coming together. So when you take a step back and you think about what's going to happen over the next 10, 15, 20 years, I do believe it's going to be the largest industrial revolution because it will be changing GDPs. Again, if you think about what you can do from space is to grow the biotech market,

we think that's huge. Industrial tech market, we think that we can produce different kinds of battery chemistry. And I think what you're going to see over time is more and more of the factories are going to move to low Earth orbit. If you can bring the cost of putting stuff 250 miles above our head, from the companies that we work with, it's going to revolutionize their product line. And for Sierra Space, we're not only building the infrastructure, right, we're actually getting a piece of that revenue stream. And that's what's big for us. So we've seen the cost of launch or access to space come down. We've seen the cost of certain types of manufacturing of space hardware come down,

which is the other area that I want to focus on with you, which is this Eclipse line of satellites or satellite buses. Really speaks to, for lack of a better term, the commoditization that we've seen of the satellite market. Yeah, we're excited. You know, we released a couple months back a series of new satellites. One was called Spectre, one was called Ghost, and our AI software we call Sierra Black OS. Today we're introducing a new bus line called Eclipse. Kind of perfect timing. Was it coincidental, the name? No, we've actually been waiting for six months.

So this was really thought about. And I think the name is very appropriate because I think it will change everything in terms of the affordability of building the next generation buses for next generation satellites. There's three new satellites in that line. Our smallest one is called Velocity for purpose. It has really unique ability to do proximity operations, rendezvous with a satellite, service a satellite, refuel a satellite. So you can imagine there's commercial applications and non-commercial applications. The second one is Horizon. It's a mid-level bus. Things for, again, missile

warning, missile detection, communications. But we also think that it's going to be a potential game changer for directed device market. You see it really growing rapidly. And then our largest is Titan, appropriate name. And it's a satellite that is in geo, geosynchronous orbit, and cislunar. And it will have unique properties, most of which will end up in the Department of Defense. So those three lines are being introduced today.

All right, let me talk about it. So I'm going to wrap this up, but just first, when you bring up cislunar, it raises the question, how are you thinking about space exploration? I mean, we've talked about commercialization of low-Earth orbit and the role that CRS space is going to play in that. How are you thinking about the opportunities where lunar economy is concerned and beyond? No, we think a lot about the infrastructure on the lunar surface.

We have been working with NASA now for many years. We were the first to demonstrate we could take regolith, I call it moon dirt, and convert it to oxygen. And if we're going to get back to the moon, right, let's make sure we get back to the moon to stay this time, which means you have to build infrastructure on the moon. So we're taking the habitats that we're building for low earth orbit, right, we actually designed those for Mars transit, right, and then use them for LEO. So we're going to use them on the lunar surface, and then we're going to create oxygen facilities

on the lunar surface. So if you think about other people will get human beings to the surface once they're there, we think they're going to be inside of Sierra Space infrastructure on the moon. Although we're only three years old with Sierra Space, we have 30 years of spacecraft heritage. We've been 500 different missions, 49 interplanetary missions. We've been supporting missions to Mars. We've had 14 successful Mars missions. We're currently working on the Europa Moon mission. So we've got a lot of deep space technical heritage. But we first focused on LEO because

LEO isn't about exploration. LEO is about the full commercialization of focusing on products, on ecology, on longevity. That's very different. The Moon is still about exploration. Get on the lunar surface. It's going to be largely funded by governments for the next 20 years. Eventually we'll get to mining on the Moon and then resource allocations. But LEO is 250 miles. The moon is 240,000. And then if you think about Mars, right, at the closest, Mars is 35 million miles. On average, you know, time frame, it's 100 million, right?

So we focus on what we think is going to have the largest impact on humanity. And the beauty about that is it's only 250 miles away. This has to be straight up. That's why we spend so much time. We're not a company that thinks about, you know, giving billionaires joy rides to space. We spend no time on it. Zero. We're not a company that's thinking about how to escape from the planet. This is a really unique place. I kind of like living here, right? I don't want to have to live on the surface of mars and so our our focus is create the products that solve humanity's hardest problems get factories that are polluting our planet off the planet and make sure we're focused on the benefiting eight billion people

that's what we think about tom vice ceo of cr space great to speak with you nice to speak with you 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.