Seraphim Space Investment Trust Plc (SSIT) Earnings Call Transcript & Summary

Good morning, everyone, and welcome to the Seraphim Space Investment Trust Q1 Results webinar. This presentation is hosted by the Chief Executive, Mark Boggett; Chief Investment Officer, James Bruegger; Chief Operating Officer; Sarah Shackleton; and Chair, Will Whitehorn. Once the presentation has concluded, the team will be available for questions. [Operator Instructions] I will now pass you on to Will to begin the presentation.

Good morning, everybody, and welcome to the highlights from the Seraphim Space Investment Trust annual report in the first quarter ending 30th September 2025. The space investment sector is continuing to motor at an unprecedented rate. There's been record funding, and there is a maturing ecosystem now where capital is spread across multiple growth segments in the industry. And in the last month alone, we've had a seminal event to the industry, which is a second reusable large rocket launch by Blue Origin, which will become a rival in the market to SpaceX and make sure that the cost of launch, which has fallen dramatically continues to remain very competitive. So that's good news in the long term for our portfolio. The expansion in investment is being driven mainly by significant government initiatives in the U.S., China and in Europe to bolster domestic space and defense capabilities. And that's where the SSIT portfolio is well positioned to capture market share. This momentum will continue to grow into the next year, and I'm sure the year beyond as well, fueled by the rollout of new commercial satellite networks, additional satellites and existing networks and increased government procurement, creating substantial opportunities for the dual-use technologies in which we excel in our investment portfolio. As we look ahead, the Board remains very confident in the company's ability to deliver long-term value by backing some of the sector's most innovative and impactful businesses. And they are continuing to achieve operational and commercial milestones as we speak. I will now hand over to Mark Boggett, the CEO of Seraphim Manager to provide more details on the results and the progress made by the portfolio over the course of the last quarter. Thank you.

Thanks, Will, and thanks for everyone joining us today. So before I go into the detail of the Q1 results, I wanted to take a step back to remind folks about the bigger picture for Seraphim. Seraphim is the most prolific investor in space globally with a portfolio of nearly 150 space tech companies across our public and private funds. Seraphim was the first manager to launch a space-focused VC in 2016, and SSIT represents the one and only listed investment fund focused on space globally. Our partners and backers include some of the biggest space corporates globally, and our position at the heart of the global space ecosystem enables us to receive a massive global deal flow. We're seeing the majority of all deals at all stages. And this information asymmetry and the conviction that we generate from seeing all of these deals is the bedrock of our past and our future success. We triage deal flow between early and late stage with early going to our affiliated accelerator program and early-stage space VC fund, and the growth stage going to SSIT. We're a value-add hands on investor, joining the Board at the majority of the portfolio companies, and this allows us to continue to build conviction. Now let's turn to SSIT and the Q1 results for the period ending the 30th of September 2025. Let's start off with the headlines. NAV per share has increased by 0.9% from 118.52p to 119.5p, setting a new record for our NAV. Over the same period, the company's share price has decreased from 85.6p to 20 -- to 70.8p with the discount to NAV having increased from 28% to 41%. Net assets of GBP 284 million are valued at only GBP 168 million by the market. As we've consistently stated, we believe that the discount does not represent the true reflection of the value of the portfolio, which has continued to go from strength to strength over recent quarters as defense contracts are won across the portfolio. This is particularly true in some of the fund's most important holdings such as ICEYE and HawkEye 360, where they've witnessed significant increases in fair value in recent quarters. With good visibility of further increase in value from these holdings in the year ahead, we believe this should provide the market with a strong indication of positive trajectory for the fund's NAV, which we believe should translate into the discount being narrowed over time. The left-hand chart reflects the performance of SSIT share price over the last year against a range of different indices across generalist tech, aerospace, defense and climate. And as you can see, SSIT share price has moderately outperformed these indices over the year to 30th of September 2025. Looking at the right-hand chart, which compares SSIT's performance against that of the AIC peer group of other growth capital trusts, you can see that SSIT share price has fluctuated relative to the peer group. Taking us into the detail, let's start with the attribution analysis table. The value of the portfolio increased from GBP 260 million to GBP 265 million during the period. Just GBP 1.5 million of follow-ons in the period, a slight decrease in the unrealized fair value of GBP 0.4 million, and this has been more than offset by unrealized FX gain of GBP 3.8 million during the period. 150 basis point increase in the closing portfolio value versus portfolio cost including FX movements with fair value now standing at 133% of cost. Next, we turn to the balance sheet as of the 30th of September. And this table sets out the NAV bridge. The NAV slightly increased over the period to GBP 283.6 million, whereas in June and the 30th 2025, it was GBP 281.1 million. The portfolio fair value, including FX movements increased by GBP 3.4 million over the period. The NAV per share increased from 118.52p to 119.55p over the period. And importantly, I wanted to note that the portfolio is well capitalized. And we hold 6.8% of NAV, that's GBP 19.4 million in cash, but we also have GBP 8.7 million in listed holdings as of the 1st of September. Turning next to the investment activity within the portfolio over the period. There is only a limited amount of follow-on activity with a total of GBP 1.5 million invested across 3 different holdings and no new investments were made. The most notable transaction was ALL.SPACE, where the funds advanced a further tranche of bridge funding alongside other existing shareholders as the company continued to work towards the anticipated close of a new sizable equity and debt financing round. So this is a slide that we used in the previous set of results, that sets out the alignment of SSIT's portfolio with some of the primary areas of application of space tech within the broader defense market. I now want to spend a few minutes providing more background on the category of the defense market that perhaps has the most relevant to SSIT today, and that's namely intelligence, surveillance and reconnaissance, or ISR, for short. As a reminder, space tech ISR entails using large constellations of satellites to collect widespread, regular, reliable and actionable intelligence, whereas this used to be the domain of highly specialized, very expensive government spy satellites and more recent years, commercial players have entered the market with large constellations of low-cost satellites that complement the capabilities of the exquisite government satellites. On the -- as the chart on this slide shows, SSIT's portfolio has a particular concentration in this category with key holdings such as ICEYE and HawkEye 360, alongside emerging companies such as SatVu and Pixxel, each collecting different proprietary data that is in high demand by governments around the world. This slide takes a closer look at the various different types of data that can be captured by satellites, and how this maps to SSIT's relevant portfolio companies. Typically, a company will specialize in just one or two of these areas with individual satellites carrying payloads designed to capture just one of these types of data. To help you better understand these categories, I'll talk you through them. Optical. So this uses cameras, similar to those in your smartphone to capture pictures of earth. Large constellations are used to capture very regular imagery of the entire earth to help provide militaries with a holistic view of their adversaries' activities. Worth noting that we've proactively chosen not to invest in this category as it's highly competitive and crowded. Radio frequency signals. So if optical satellites are seeing satellites, then RF signal satellites are listening satellites that passively collect radio signals emitted from a wide array of different objects on earth. This signals intelligence, or SIGINT, for short, is a very powerful way to collect intelligence across huge areas. Next up is Synthetic Aperture Radar, or SAR, which you may already be familiar with as a result of the funds holding in ICEYE. As a reminder, SAR satellites use radar to collect information about the earth in all weather conditions and at all times of day. This makes it a very powerful form of intelligence that's very hard for adversaries to hide from. Infrared satellites measure heat signatures from objects on earth. This is unique in being able to provide intelligence about activity going on inside a building or at a specific location. Think of being able to tell if a building is occupied by whether its air conditioning unit is turned on or being able to see that, that car engine is still warm, so it must have arrived recently. And lastly, hyperspectral, which captures information that's invisible to the human eye. Using these satellites, it's possible to identify the unique spectral signature of a wide array of different chemical and biological fingerprints that have a broad application in defense. To provide more context, the earth observation market, which comprises of all of these different sensor modalities is worth around $5 billion today with Governments and Department of Defense, by large the biggest consumers of this data. It's only very recently that companies such as those in the SSIT portfolio have deployed enough satellites to have critical mass in terms of both coverage and frequency of data capture. We therefore anticipate rapid growth in the years ahead as people find novel ways to exploit these very powerful complementary data sets. Key to this, we'll be using AI to draw these enormous data sets to find out ways to use these different types of intelligence together. And as a final important point, it's worth calling out that each of the portfolio companies identified is the leader within its respective category. So in our previous quarters, we've profiled ICEYE. Now we turn to another of our leading ISR portfolio companies, HawkEye 360. So what does HawkEye 360 do? It's a company that utilizes satellites to detect and locate radio signals coming from earth. These satellites listen rather than watch. The signals aren't phone calls or music, they're things like ships, radios, cellular devices, GPS devices, radars and emergency beacons across a very broad range of different frequencies. So how does it work? HawkEye have launched clusters of small satellites into orbit. Each satellite listens for radio transmissions. By comparing what multiple satellites here and HawkEye have 12 clusters each with three satellites, they can calculate the exact position of the signal source by using triangulation. This process is called geolocation. And today, HawkEye has geo located hundreds of millions of RF signals. So what customers want this data? Well, they're very broad. National security, governments are tracking ships and aircraft and vehicle in areas where radar or cameras don't work so well, things like large open oceans. It can be used to attract a legal activity, helping spot smugglers or piracy or even unauthorized radio use. Then we have disaster response, quickly locating distressed signals through ships or planes in trouble. And then finally, spectrum monitoring, companies and regulators can check if radio frequencies are being used properly. So defense is currently the big driver of activity. So how does defense use this capability? So first of all, situational awareness. The military and security agencies need to know what's happening in areas they can't easily see, like open oceans or remote regions. Radio signals reveal the presence and movements of ships and aircraft and ground vehicles, even when they're not broadcasting their own location. Adversaries often turn off their tracking systems like AIS on ships, for example, to hide their position, but they still use radios for communication or navigation. So SIGINT satellites can detect those emissions and uncover dark ships or dark aircraft. Strategic Intelligence. So by analyzing patterns of radio use, defense agencies can infer troop movements, naval deployments or preparations for military operations without relying on any visual imagery. Next, we've got search and rescue. Defense forces often lead emergency responses, locating distressed signals quickly, saves lives, during maritime accidents or natural disasters. So this slide looks at HawkEye 360 satellites, and how they can be used to detect and address electronic warfare. So what is electronic warfare? Well this typically involves flooding an area with radio frequency signals to impact the ability of various electronic equipment to function. It also includes GPS jamming and spoofing. So in Ukraine, Russia has made widespread use of electronic warfare, both as an offensive capacity to degrade Ukrainian systems, but also as a defensive capacity to disguise their own activities. The image you can see here is from HawkEye 360, which uses its listing satellites to track and identify sources of electronic interference. In example, A, HawkEye identified two locations where GPS is being blocked. An example B, UAVs have identified GP interference, whereas HawkEye is able to identify the location and direction of the interference. These sorts of insights have been crucial, enabling Ukrainian forces to focus on high-value targets of interest. So this is just one example of known defense use case for HawkEye's data and there are many, many more. Now I'll return to key developments during and post the period, firstly, with ICEYE. Today, they've launched their next generation of satellites with resolution moving from 25 centimeters to 16 centimeters, a move which creates the highest fidelity SAR Imagery available. This means objects and features on the ground can now be distinguished at much higher resolution, which is roughly the size of a dinner plate versus the size of a car tire in their previous generation. ICEYE's field of view has also been increased by 250%, extending for 150 kilometers to 400 kilometers. A single satellite can now monitor a vast area like an entire naval task force or a major boarder crossing in just one pass. ICEYE continues to build the impressive contract wins during the period, adding Finland to the material contracts won with other nation states during the course of the last year. It's not just the EU 27 or NATO members that ICEYE is winning, they've just won a key Japanese contracts that they've recently announced. And outside of the period, ICEYE also announced the completion of their joint venture with the German defense manufacturer, Rheinmetall to build ICEYE's SAR satellites at scale. In relation to HawkEye 360, the launch of Cluster 12 in July represents a major step forward in coverage and throughput. Similar to ICEYE, this next-generation capability brings major upgrades to their ability to detect and geo-locate GPS jamming and spoofing. Key new features include a 15x increase in geo-location density, locating them down to a kilometer level precision. Lockheed Martin announced how its partnership with HawkEye 360 is transforming commercial RF data into surveillance track using machine-to-machine integration to streamline, center to command and the control chain. At historical first, the successful integration of commercial RF data into systems that compromise combat systems and military data links. The company has also announced key leadership changes during the period with a new CFO, Craig Searle, and the appointment of the former CEO of Intelsat as the Independent Nonexecutive Director. Now moving on to other announcements. The recent ALL.SPACE announcement deserves some attention. Aalyria's Spacetime performance is a software-defined networking solution that orchestrates connectivity across diverse networks from ground, aerial, maritime and space. Combined with ALL.SPACE's, advanced antenna terminals, which can be deployed onto vehicles, ships, tanks and aircraft. This system enables simultaneous connections to satellites across low-earth orbit, mid-earth orbit and geostationary orbit using multiple frequency bands such as Ku, Ka, and X. This collaboration delivers the first fully autonomous multi-orbit mesh network, a breakthrough for defense operations. It ensures resilient, real-time communications so that sensors, command posts and effectors remain connected even in contested environments with jamming or interference. Other news includes Tomorrow.io's announcement of a partnership with Palantir to integrate hyperlocal, highly accurate weather intelligence into Palantir's platforms. This capability enhances the predictive modeling of sectors like defense, logistics and energy, where weather decisions are critical. We're proud that Skylo has achieved a major milestone, enabling voice calls directly via satellites, bypassing the traditional cell towers. Following successful end-to-end satellite voice call trials, this development accelerates the vision of ubiquitous connectivity, especially in remote or infrastructure limited regions. And then finally, Pixxel is emerging as a leader in hyperspectral earth observation, a key ISR capability. In August, Pixxel launched three additional Firefly satellites, completing phase 1 of its commercial constellation now with six satellites in orbit. Each satellite offers 5-meter ground sampling resolution, which is roughly 6x sharper than standard hyperspectral systems. And with six satellites, Pixxel now enables daily global coverage, meaning every points on earth can be imaged every 24 hours. This unlocks predictive insights for agriculture, environmental monitoring and of course, defense intelligence. As reported in the annual results, we've sold down some of the listed holdings. Arqit, GBP 3.3 million of proceeds were received for the holding, where that we sold -- at a sale price of 15% of the initial sterling cost of the holding. And in the case of Spire, GBP 2.9 million proceeds were received at the holding at a sale price of 29% of the initial sterling cost of the holding. So this slide provides a snapshot of the portfolio. No major changes to the data in the left-hand side of the screen since the last quarter, looking at the NAV chart on the right, there were two notable fair value changes during the period. Firstly, HawkEye 360, we saw a GBP 9 million increase in fair value, reflecting a combination of strong performance in the underlying business and corporate activity currently underway. Secondly, ICEYE, which saw a modest downward adjustment in its fair value that fully reflects the terms of corporate activity currently underway. Now the details of both companies' corporate activity remains confidential at this time, and we're, therefore, unable to share any further insights of these private companies. Had both businesses continued to be valued exclusively on the basis of market multiples as we did last quarter, there would have only been a modest increase relative to the results we are publishing today. In line with the company's valuation policy, given the growth trajectory of both of these businesses, we expect to revert back to valuing each business based on market multiples within 6 months. So this is the final slide before we open to Q&A. Investment into the global space domain hit new heights during the period to the 30th of September with GBP 3.5 billion of private capital invested, which eclipsed the previous highest quarter, which was established in 2021. This is a trend that we expect to continue. Several key portfolio companies are now starting to show breakout success as leaders within direct builds of ISR. This is now demonstrably being witnessed in contracts, revenue growth and valuations in both HawkEye and ICEYE. In terms of outlook for the year ahead, the space investment sector is accelerating at an unprecedented pace. And this is propelled by record funding and the maturing ecosystem in which capital flows across multiple high-growth segments are underway. This expansion is driven by major government initiatives in the U.S., in China and in Europe to strengthen domestic and defense capabilities. These are areas where SSIT's portfolio is strategically positioned to capture substantial market share. Looking ahead, momentum is set to persist as commercial satellite networks from online and government procurement rises. These trends create meaningful opportunities for dual-use technologies across both commercial and defense markets. We believe that the SSIT portfolio is well positioned for growth with leading companies in every segment of the space defense market. We're particularly excited about the constellation businesses in the portfolio, leaders within their respective fields, such as Xona Space Systems, Pixxel and satellite view. The Board remains confident in the company's ability to deliver long-term value by backing some of the sectors most innovative and impactful businesses, consistently achieving operational and commercial milestones. So thank you today for your attention. Myself, James Bruegger and Sarah Shackleton will now take your questions.

[Operator Instructions] We have a first one here, which says, what are the prospects for further IPOs or liquidity events in the next 12 to 24 months?

I'll take that one. So we obviously had two portfolio companies that have gone public in the last couple of years. And as we talked about in the last set of results, we believe that the most successful companies within our portfolio will naturally look to become public companies, and there is long-standing heritage measured over decades and that being a pathway for successful businesses. And as we've also previously reported, in the case of ICEYE, the CEO has gone on record, the same that he expects ICEYE to become a public company in due course. And we have other significant holdings within the top 10 that are also working to get to the point of being IPO already. Timing of IPOs, selling aside of external conditions, I think will really be driven by three things. So one is the relative scale of the businesses and their growth. Two is the profitability of the businesses. And three is the visibility and predictability of the company's performance going forward. And we expect significant progress against all three of those metrics in key holdings in the 12 months ahead. So we do believe there is reasonable prospects for further IPOs within the portfolio over the next 1- to 2-year time horizon, subject, of course, to the caveat of external market conditions.

Another one here is the recent Space Index set a record GBP 3.5 billion have been invested in the space industry in the last quarter. What areas is the money flowing into, and are there new sectors you're focusing your investment strategy on?

Mark, I'll take that one first if you want. So as we reported with the index, we think that it's a really encouraging and healthy sign and the levels of activity are reaching record levels of heights particularly given that, that level of activity is now much more evenly distributed over a larger number of very large $100 million dollar transaction. So whereas historically, we had only one or two businesses, the likes of SpaceX and one we're raising very, very large rounds to drive the overall level of investment. We're now seeing quite consistently quarter-on-quarter, a significant number of large late-stage investment rounds, including, obviously, into SSIT portfolio. So we see that as a very positive sign that has now sustained growth at late stage to complement the record levels of quarter-on-quarter early-stage activity that we've been reporting on for the last couple of quarters. In terms of area of investment focus, I don't think there is a significant change there. As we've reported, our strategy remains to be focused on supporting predominantly those companies we've already invested in.

That marks the last question we've had from the audience. So as nothing new has come through, I will pass back to Mark and Will for the closing remarks. Thank you, everyone, for attending.

Thank you. So the defense opportunities are now evident within the portfolio as can be seen by contracts won by both ICEYE and HawkEye, and the changes that have come through in their valuations. I hope today that the deep dive into ISR was useful. We believe that other category leaders in the portfolio, such as Pixxel and SatVu, will soon start generating their own contracts news flow. Today, we're announcing the second record NAV, and we believe that this really sort of paints the trajectory of where the portfolio is heading in the quarters ahead. And we hope that, that will lead to a narrowing of the discount. So we remain very confident in the company's ability to deliver long-term value by backing the most innovative companies across the global space sector. Thank you. Will, have you got any comments to panel?

Yes. Thank you, Mark. I was going to say also that as well as our Capital Markets Day coming up tomorrow, there is a space Expo next week in Glasgow at the SEC, which anybody is welcome as a member of the public to attend. And there'll be a Space Expo in London in March. That just shows how quickly this industry is maturing. And as far as I'm concerned, I'm a buyer of these shares. In fact, I'm buying some today. Thank you very much.

Thank you, everyone.