- 1 week ago
John Serafini, CEO of Hawkeye 360, breaks down the company’s 87% revenue growth, global demand for space-based intelligence and plans to scale its business.
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00:00From tracking radio signals from orbit to building a global defense data business,
00:05Hawkeye 360 is turning space-based intelligence into a fast-growing commercial opportunity.
00:11Joining us now to talk through all of this and more is John Serafini, CEO of Hawkeye 360.
00:16Thank you so much for being with us again, John.
00:18Hi, Justine. Great to see you again.
00:20Yeah, so nice to have you here.
00:22Talk to us a little bit about these earnings, right?
00:25Just reported $49.8 million in second quarter revenue, up 87% year-over-year.
00:30What's behind that surge?
00:32Talk to us about this demand for space-based RF intelligence that we're seeing.
00:35Well, thank you.
00:37It was a wonderful quarter, the least of which was we actually IPO'd the business back in May,
00:42so in the middle of Q2.
00:43Plus, we were supporting our customers in conflicts around the world to include places like Ukraine
00:49and the Middle East and other geopolitical hotspots and areas of turmoil.
00:55So we're very proud of the support we provide to our customers.
00:58But as you point out, we had a material win on the top line, 33% organic growth year-over
01:05-year,
01:05134% international growth year-over-year.
01:08Very proud of that and also proud of the excellent win on the bottom line.
01:14Turned in $7 million of adjusted EBITDA, which is meaningfully above what the street was expecting.
01:20So in sum, we're very proud of the performance in Q2, and we're able to do it even while we're
01:26IPO-ing the business.
01:28Yeah, it's very exciting.
01:29Congratulations again on that, as we've been talking about.
01:32I mean, you just completed your first full quarter as a public company.
01:35How has going public really changed the way that you think about investing in the business and scaling Hawkeye 360
01:40now that it really is a different business than it was before?
01:45Our focus is 100% on our customer, the warfighter, whether that's a U.S. military or intelligence agency or
01:52an allied entity.
01:53We're 100% focused on making that organization successful because they're doing very difficult things
01:59with the signals intelligence capabilities that we deliver to them.
02:02So regardless of whether we're a private company or now a public company, our emphasis is always on warfighter success.
02:08Yeah, and thinking about that success, I mean, you have a lot of opportunities right now with all of these
02:13conflicts going on around the world.
02:14You also have a lot more cash now, right?
02:16The IPO weighs $437.5 million in net proceeds.
02:21Where do you see the biggest opportunity to put that capital to work?
02:25That's true.
02:26We're sitting on half a billion dollars of cash on our balance sheet, and it does no one much good
02:30to have that sitting there earning T-bills.
02:32So we do feel an imperative to expand through M&A.
02:38We have experience in acquiring companies in the past.
02:42We bought ISA, which is a Texas-based company back in December.
02:47It's been a transcendent acquisition for us, not just from a revenue perspective and a customer access and market expansion
02:53perspective,
02:54but the technology integration has made our own processing very capable, about 10 times more signals that we can now
03:02detect with our own data in 10 times better speed.
03:06So wonderful acquisition.
03:08That's something that we want to replicate.
03:10And we anticipate now that we've built some institutional muscle for acquisitions that will use some of that $500 million
03:17on our balance sheet for similar types of acquisitions in the future.
03:21Yeah, I mean, it makes a lot of sense to have that kind of M&A strategy as you move
03:25forward here.
03:26Do you have any specific companies or at least types of companies, types of manufacturers, types of companies that you
03:32might be thinking about and having on the horizon?
03:34Or I don't know if you can talk about that.
03:37Well, we want to be the very best in the world at collecting RF signals data.
03:41And that's what we do.
03:42Any signal above a watt in power between 30 megahertz and 18 gigahertz going up to 40 gigahertz over time,
03:49we want to be able to detect whether that's a space-based collector or it's aerial or terrestrial.
03:54We want to focus and dominate that area.
03:57Secondly, is we want to be the best in the world at processing that data, geolocating, analyzing it, and converting
04:03it into an actionable insight or data product for our customer that is entirely sticky and depends upon by our
04:10customer base.
04:11So that's where we're going to focus our organic growth.
04:13And that's where we'll look to increase our focus on M&A growth in the future.
04:17I would mention that we have the luxury to deploy the half a billion dollars that we have in cash
04:23into things like M&A because we are a profitable company.
04:26On EBITDA basis, we turned in 14% EBITDA margins last quarter.
04:30We have an excellent cost structure because we are a software business selling data and data analytics.
04:36So because of that solid cost structure, we're able to focus our free cash into things like acquisitions in the
04:41future.
04:42Yeah, it seems like you're positioned well to be able to do that as you move forward with the rest
04:46of this year and beyond.
04:48You also are expanding your constellation with clusters 15 and 16 and its first Block 3 Kestrel satellite.
04:54So tell us a little bit more about those capabilities that you'll have and what those systems will be able
04:58to bring to customers.
04:59Sure.
05:00Well, your viewers will remember that we own and operate a constellation of 30-plus satellites that collects RF data
05:06and then converts that into valuable signals intelligence for our customers.
05:10We're continuously updating that constellation, adding new capabilities.
05:14So we launched Cluster 14 back in Q1.
05:17It's now fully commissioned and in use operationally by our systems.
05:22Clusters 15 and 16 are slated for launch in Q3.
05:26And then we have our first Block 3 in which we're pulling out 75% of the CapEx costs associated
05:32with building the cluster.
05:33That will be launched in the next six months.
05:35So we're very pleased with the amount of collection capacity that will be coming on board in the next six
05:40months or so.
05:41Yeah, it seems like you're just growing and scaling so much.
05:44It's so exciting to think about all of those opportunities headed your way.
05:47Also thinking about this in the kind of broader context here of so many companies really building space-based data
05:53and intelligence businesses right now.
05:55What do you think when this kind of comes to fruition a little bit more, maybe end of this year,
05:59the next five years even, what do you think will really separate the winners from the rest of the industry?
06:04Well, that's a wonderful question.
06:06And I would tell you it's customer adoption.
06:09It's customer appreciation.
06:10I mean, go back to point number one I made, which is we're servicing very demanding customers doing exceptionally difficult
06:17things in difficult environments.
06:19Think the Middle East, think Asia Pacific, think Ukraine, think the southern border.
06:24And you have to be dependent upon and be trustworthy and be humble and be sustainable for the customer to
06:29really leverage you.
06:31So what are the markers of that?
06:32Well, it's new contracts.
06:33And we've been operating under the past five years under an experimental testing and evaluation engagement contract from the National
06:41Reconnaissance Office, which is an important U.S. government customer.
06:44And I'm very pleased to announce that we just signed our new production contract for the next five years with
06:50the NRO with a material step-off in ceiling value that will allow us to provide exceptional value to the
06:56warfighter in the U.S. government for the foreseeable future.
06:59Yeah, that's incredible.
07:00Congratulations on that.
07:02There seems like there's so many milestones coming down the line for you.
07:05It's just great.
07:05Thinking about your revenue targets of $215 million to $220 million for 2026, what are the biggest execution risks you're
07:13watching as you work towards that goal?
07:17Well, forecasting is always a challenge.
07:19And you've got your firm revenue that we've locked in.
07:22That's a backlog.
07:23We've got approximately $82 million in growing and firm for the back half of the year.
07:27And then we've got to get deals done.
07:29There's a suite of different international deals and U.S. government deals across our heritage business, but also the ISA
07:36business, which we recently acquired.
07:38And we've got to convert a pipeline, sign those, and hit authorization to proceed to deliver high-quality value.
07:44We continue to have a great deal of confidence to achieve the $215 million to $220 million revenue forecasts that
07:50we provide to the street.
07:52We're laser-focused on doing it.
07:56Sorry, go ahead.
07:57Oh, just saying that we're laser-focused on doing it.
08:00Yeah, no, it's exciting to think about all of the potential that you have as you head into the rest
08:05of this year and beyond.
08:07I mean, looking down the line, what do you really want Hawkeye 360 to be known for?
08:11And how big do you really think that this commercial market for space-based intelligence can become as we move
08:16forward?
08:16And all of this really just, again, begins to grow even more than it already has.
08:21So we talked in the S1 and in the roadshow for the IPO about a $24 billion total addressable market
08:28size for signals intelligence.
08:30That's roughly two-thirds U.S., one-third international, but encompasses all the processing and the data science and the
08:37services work related to RF.
08:40And we believe that there's a couple of different incremental growth drivers beyond that $24 billion, new applications and new
08:47ways in which you can use signals intelligence that aren't predicated inside of that $24 billion,
08:53one of which is using our technologies for long-range fires, and that's more of a Title X Department of
09:00War application.
09:01We have proven this out in the most recent Valiant Shield exercise a couple of weeks ago that we did
09:06in partnership with our investor, Lockheed Martin,
09:09where we were able to track adversary vessels and to deliver high-quality track data about those vessels into various
09:17weapon systems
09:17to include the Aegis weapon system on a shipboard, and to do so in under 10 to 15 minutes,
09:23which is roughly 2X the improvement of speed than we did the year before.
09:28And when you're talking about 10 to 15 minutes of latency in the collection of RF data for track-quality
09:33data,
09:34we're talking about relevance for long-range fires for the kill chain, and that's one of the things that we're
09:39very focused on,
09:40not just because it provides exceptional value to our Warfire customer, but because it's also incremental to that $24 billion
09:47market size.
09:48Yeah, it's just fascinating to think about where you are, where you were with that IPO, and where you're headed
09:53next.
09:54We really appreciate you breaking this all down for us, John Serafini, CEO of Hawkeye 360.
09:58Thank you so much.
09:59Thank you, Justine. Good to see you.
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