Seraphim Space Investment Trust (LSE:SSIT) — Q1 Results

0:00 Good morning, everybody, and welcome to our first set of results. In the few short months since SERAPHIM SPACE INVESTMENT TRUST first launched, hardly a day has passed that the space sector being almost front page news. At the time of our float, the dawn of the era of space tourism was born with to Richard Branson, Jeff Bezos, both blasting off into space and Elon Musk doing another set of launches of Starlink satellites at the same time. Now although they were competing with an accolade to be the first space to us, in fact, the important thing behind what they were doing was that their new space launch systems such as the SpaceX system, the Virgin Orbit seven four seven based satellite launch system, and Jeff Bezos' artificial intelligence craft that took him and a group of others into space, they all herald an industrial revolution in space because they've lowered the cost of space launch dramatically.

0:57 There's been an absolute slew of market listings and m and a that has followed in... Especially in The US market, and space tech investment has set new records over the past year. Thus, most importantly, COP twenty six has shown both the urgency with which the world must act to combat climate change and the unique role SPACE TECH can play in achieving this. Some of our investments presented at COP twenty six, and Mark will be saying more about that during his

1:23 presentation. But having hit the ground running with five transactions completed during the period, we fully expect SSIT's portfolio companies to be central protagonists in the space sector's quest to help solve some of our world's most pressing issues. And you're gonna hear all about that now from Mark Bogut. Over to you, Mark. Thank you, Will. So good morning, everyone. Thrilled to be presenting our first quarter results to you today. So I'm the chief executive of the organization. We've also got James Brugge, chief investment officer of SERAPHIM SPACE, the manager of the INVESTMENT TRUST. We've worked together since 2006 alongside our colleague who's not with us today, Rob Desborough. So a bit of background on us first of all. So we are genuine pioneers of SPACE TECH INVESTMENT

2:21 investment vehicle, the INVESTMENT TRUST TRUST that we're talking about today. So over the last five years, we've established ourselves as the go to investment team for any space business globally. We've built a strong track record delivering shareholder returns and have built a portfolio of some of the highest profile emerging space tech businesses. So before we jump into the quarter two... Quarterly results, what I wanted to do is just provide some background on SERAPHIM, give you a brief overview of why we consider that the space tech sector is such an exciting long term growth opportunity. So next slide, please. So let me explain our playbook. So first of all, we're pioneers in the multi corporate model.

3:08 We have partners in some of the biggest space players in Europe, in Asia, in The US. So our investors include a range of corporate partners such as Airbus, SES, Telespasio, MDA. These are some of the biggest players globally in the space tech ecosystem. So they acknowledge that their sector is being disrupted by VC backed startups. So they invested into SERAPHIM for technology horizon scanning, for co investment opportunities, and potentially to build a pipeline of of m and a for the future. In return, they provide us with access to their business units. Between them, they've got hundreds of thousands of space specialists that we get access to for our due diligence purposes.

3:55 So we've also got an incredible investment advisory committee. This includes a couple of entrepreneurs that have built and scaled space tech's businesses, selling them for billions of dollars. Candace Johnson founded SES, one of Europe's largest space tech businesses. Matt O'Connell founded GOI, an earth observation business that he sold for more than $1,000,000,000. So we have privileged access to space corporates, to government agencies, for origination, for due diligence, for portfolio partnerships, and this is the key element of our proposition. We actually get to see between 50 to a 100 space investment opportunities every month, and we have done for the last five years. And what we've been able to evidence is that that's more than 75% of the global deal flow. We're getting to see virtually everything from seed stage through to IPO to turnaround. You name it, it's crossing our desk normally two or three times.

4:53 So this puts us in a privileged position. It provides us with information asymmetry because we're getting to see virtually all of the private businesses in a particular market category. We then... We can then we can then use that information to make an informed decision as to which one of those companies that we back. It really isn't rocket science. We just bought the best team with the best traction and those that have got demonstrable leadership credentials. So we take all of these businesses. We filter them. Some of them go directly to our fund. Others go to our complementary accelerator activities. The SERAPHIM SPACE COMP Accelerator, which is focused on early stage companies, but we also run the Amazon Space Accelerator, which is focused on later stage growth companies.

5:38 So these accelerators act as a feeder for the space trust. So bringing this all together, we've become one of the most prolific space tech investment groups globally. We have a portfolio of more than 70 early stage space tech companies. So that covers our credentials for the sector. The next few slides, I'm going to introduce why space presents such an exciting long term investment opportunity.

6:07 So two drivers have reduced the cost of working in space between a 100 and a thousand x. So I'm sure you're all familiar with SpaceX and their reusable rockets. They've dramatically reduced the cost of launch. As you can see in the chart here, launch in the eighties cost $80,000 per kilo. It's now less than $1,000 per kilo and is set to continue to fall. The other side of the equation is the revolution that's happened in the satellite industry. Satellites used to be the size of a car or the size of a bus. They cost 500,000,000 to more than a billion dollars. But today, they're the size of a microwave or indeed something that fits into the palm of your hand. They cost a few 100,000 to a few million dollars. So bringing these two things together, low cost launch, low cost miniaturized satellites, it's now possible to deploy constellations of hundreds or even thousands of satellites.

7:04 Now what this creates is a digital infrastructure in the sky. You can see in the picture there a picture of our planet surrounded by satellites looking down at the Earth, enormous quantities of unique global datasets in near real time, universal abundant connectivity. This digital infrastructure is gonna deliver capabilities that are gonna define our society over the forthcoming decade and beyond. In fact, SPACE TEC is a platform that's gonna catalyze some of the megatrends that are gonna change our world. Sustainability, big problems around population growth, urbanization, climate change. Space is going to help address them. Connectivity, Half the world still can't connect to the Internet. When they do, it's gonna drive health.

7:51 It's gonna drive education. It's gonna drive commerce. It's gonna have a global impact. It's going to reduce the inequality that's caused by Internet poverty. Then we've got mobility or autonomous mobility. Now space is the driver of your autonomous vehicle, the flyer of the the flying taxis, the drone deliveries by Amazon to your front door. Then we've got smart cities. We've got IoT, things like food security, tracking every cow, every sheep from the farm to the supermarket. So this is an enormous multi trillion dollar investment opportunity that we're focused upon today. We're investing in the emerging category leaders that will define these new markets. Next slide, please. So this next chart helps you understand where we are on the curve today.

8:41 This graph shows how many satellites have been launched and provides a forecast for the future. So by way of background, only 11,000 satellites have ever been launched in the history of the space age. 20% of those were deployed in the last four years by just four companies. These constellations have been predominantly financed by private capital. And as a minimum, those four companies plan to put up another 10,000 satellites. Indeed, two of those companies have got aspirations to put up nearly a 100,000 satellites. But more importantly, behind those four companies, there's another 100 companies that have got plans to put satellites into space. Many have already launched their initial satellites. So recognizing this huge opportunity that's presented by this new space market, there's a flourishing ecosystem of privately funded space tech startups.

9:37 So as a consequence, private investors have been increasingly focusing on this market. Next slide, please. So these charts are drawn from the SERAPHIM SPACE INVESTMENT. This is a quarterly report that we've put out for the last five years that gets massive amounts of global coverage. They paint a picture of how the new space market has developed over recent years. So let me talk you through this. So the top left, massive growth in VC investment in space tech in recent years. You can see it's all happened in the last five years. Top right, space tech is one of the fastest growing segments in the wider venture community in the tech market. 2020 was a record year despite COVID, nearly 8,000,000,000 invested. But, incredibly, year to date, for the first three months of twenty twenty one, we've already reached that record that was set in 2020.

10:29 Growth investors are flocking to this sector. They've watched the incredible success of SpaceX. They're looking to invest in other businesses that are driving growth in this sector. Bottom left hand side, you can see that that's had a impact on the average deal size for the growth rounds, the c rounds, the d rounds, significant amounts of capital going into these businesses to provide the entrepreneurs the investment that require to deliver against their their ambitions. So this has already resulted in a whole range of unicorns as you can see on the right hand side. There's a number of our portfolio companies already in there, but we're only at the start. There are thousands of space startups globally, and we believe that they're going to be many billion dollar businesses built in every category of this market.

11:16 Next slide, please. So with the space investment opportunity education piece behind us, I can now turn to the results for the first quarter since the SERAPHIM SPACE INVESTMENT TRUST IPO ed in July. Next slide.

11:31 So I'll kick off with the highlights. So we've built and maintained a strong premium since that... Since the IPO on the July 14. The share price was at £1.25 on the September 30, and today, it's it's at exactly the same price. So that's a market capitalization of 266,000,000. NAV per share is at £1.04, which is 6% up based on the initial 98p costs after the expenses. So the portfolio is valued at 99,000,000 with total assets of 221,000,000, which includes 124,000,000 of cash. So next slide, please.

12:18 So the headline performance is that the portfolio has increased by 17% during the quarter. We're thrilled with that level of performance. This attribution table breaks down how the portfolio has developed to reach 99,400,000 by the end of the period. At the IPO in July, the trust acquired 15 businesses from our SERAPHIM SPACE LP fund for a total cost of 28,400,000, and that was acquired by the issue of shares. The additions relate to to two further portfolio companies that were subsequently acquired from the SERAPHIM SPACE LP during September. This is ARKIT and SPIRE GLOBAL. They were acquired for a further 34,700,000, again, through the issuance of new shares.

13:07 So these are two of the four agreed acquisitions at the time of IPO that were deferred pending the completion of transactions that were underway in each of these assets. So the trust has also invested 22,000,000 of cash from the 150,000,000 that we raised as follow invest in... Follow on investments into three of our portfolio companies. So during the quarter, the portfolio generated 14,200,000 of increase in fair value against the cost of the investments. This breaks down as 11,300,000 as an increase in the underlying valuation of four of our portfolio companies, and ARKIT was the biggest driver of this performance. And then we have 2,900,000 due to favorable currency movements, principally as a result of sterling having weakened against the dollar.

14:01 So overall, this is a very satisfactory first quarter. Five investments demonstrate that we've really hit the ground running. Next slide, please. So this next slide looks at the NAV bridge. It sets out the growth from the 150,000,000 of fresh capital that was invested at the IPO to the 220.6 closing NAV at the September 30. The opening NAV of a 175,000,000 consisted of a 150,000,000 of cash plus 28,400,000 of shares that related to the acquisition of the 15 assets acquired from the SERAPHIM SPACE LP fund, and that's less the 3,500,000 of IPO costs.

14:48 We then had further issuance of 33,700,000 shares that was in connection with the acquisition of the interest Inspire Global and ARKIT. And then the NAV was boosted by that 14,200,000 increase in fair value of the portfolio. This was offset against our management fee of of 500,000, company expenses of of 300,000, and an accrual of 1,500,000 that's against our future performance fee. So at the end of the period, the trust had a 124,000,000 of liquid resources. However, we've already undertaken an additional two investments outside of the period, which brings this cash figure down to 99,000,000 today.

15:34 So next slide, please.

15:37 So let's take a look at the portfolio. So the charts on the left hand side call out the different ways to slice and dice the portfolio. So these are all based on the fair value of the portfolio. So let me explain the the stage terminology. So unicorns, these are companies that are valued at more than $1,000,000,000. SUNYCORMS, now these are companies that we believe that will become unicorns in two years' time. MiniCORMS are companies that we believe will become SUNYCORMS in two years' time, and SEEDCORMS are seed stage companies. So you can see the the breadth that we have with the with the majority focused around the later stage businesses. Then you can see the different parts of the ecosystem, the seven different categories that we're invested into with a with a bias towards platforms.

16:29 This is the digital infrastructure in space. Then you can see the breadth of the rounds, the last rounds that we've invested into. This signifies the stages of the companies in the portfolio. And then you've got geography where you can see that the majority of the portfolio is currently in The UK and The US. So calling out a few observations on the table on the right, the top 10 holdings account for 44% of NAV, whilst the other seven companies in the portfolio only account for naught point 9% of NAV. That's where we believe there's gonna be significant value in the future. Cash accounts for 56.2% of NAV as at the September 30. It's worth noting that two additional retained assets, two recently closed transactions, and some transactions underway will make a considerable change to the composition and diversity of the top 10 companies over the coming quarter. So we really look forward to reporting to you on those next quarter at the interims. Can we move on to the next slide, please?

17:35 Okay. We're nearly getting there to the more interesting part of the portfolio where... This presentation where we talk about the portfolio companies. I'm gonna I'm gonna pass this over to James to to bring this portfolio to life through adding more color on individual portfolio companies. But before I pass over to James, let me give you just some of the headlines. So we've invested 57,000,000 in the period, plus a further 23,000,000 invested after the period end. That's a total of seven companies we've invested into, three in The UK, four in The US. That's two retained assets that we've acquired by share issue. And as per the terms of the IPO, they were valued on a seven day weighted average share price post their market debuts.

18:21 We've invested into three follow on investments. So these are into our existing portfolio companies during the quarter, and we did one follow on investment post the end of the of the quarter. Now it's important to note that SERAPHIM was the lead investor in two of these transactions. And then finally and most recently, we closed a new deal of 18,600,000, which is $25,000,000, where we led the 145,000,000 d series for a company called Hawkeye. So at this point, I'm gonna hand over to James, who's gonna talk about the exciting investments in some more detail that we've made since we did the IPO. James? Thanks very much, Mark. If you go to the next slide, please. Great. So as you've already heard from Mark, during the period the the acquisition of stakes in in two of the retained assets, Spire and, Arket. So let me just spend a few minutes giving you some color on these businesses.

19:20 So first up, Spire. Spire listed on New York Stock Exchange in August with the trust purchasing, its stake a few weeks later in September. So the primary problem that Spire is looking to address is that today, weather disrupts 70% of businesses worldwide and costs more than $600,000,000,000 each year in The US alone. And this problem is getting worse due to climate change induced extreme weather events. So SPIRE's solution is to have launched a constellation of more than a 100 of shoebox sized satellites. That's one of the biggest constellations of satellites in the world to collect weather and climate data from beneath the Earth's surface to the edge of the atmosphere. SPIRE uses this proprietary high fidelity weather data to to power highly accurate weather forecasts.

20:08 These same satellites also collect signals for tracking ships and aircraft. Moving on to to ARKit. So ARKit listed on NASDAQ in September with the trust buying its, its interest in the business a few weeks later. So the the problem that ARKit is addressing is that the encryption used by the Internet and the entire digital economy today will stop working when quantum computers arrive over the next few years. So all of our data is going is going to be at risk of becoming vulnerable. So our kit solution is to launch a constellation of satellites that use lasers to send information with unhackable quantum safe encryption. This has massive application to governments, critical national infrastructure, telco providers, banks, and data centers. And it's our view that this company has the potential to become the foundation for how the Internet, communications, and data storage are all secured in the post quantum era.

21:08 Next slide, please. So moving on to the three follow on investments that that that we closed. So, in the handful of days after our IPO, we made a 2,100,000 investment into portfolio company, LeoLabs, through a combination of primary and secondary share subscriptions. This investment formed part of Leo Labs' 65,000,000 series b funding round, which was led by Insight Partners, a very large US based growth investor. So the problem that Leo Labs is addressing is that today, satellites are largely flying blind. They're unable to see the hundreds of thousands of pieces of space debris and space junk that are currently in orbit. For those of you that might be familiar with the film Gravity, this represents the risk of a catastrophic event caused by collision with debris or indeed between two satellites.

21:55 So the solution of LEO Labs is to have developed a network of ground based radars that can track every piece of debris down to two centimeters in size up to a thousand kilometers away in in orbit. So by mapping the skies, LEO Labs is creating what is a traffic control system for space that rocket launchers, satellite operators, and regulators, and insurance will come to rely upon. Next up, was Zona, when in August, we invested £1,800,000 into Zona's $8,000,000 series seed round. The trust was the lead investor in this round, and other investors in the round included Venture Arm of Toyota, one of the world's leading car manufacturers. As a result of this round, the trust's existing stake in this company increased by more than 50% in value.

22:43 So the problem that Zona is addressing is that today, the current GPS solutions that trillions of dollars of the global economy rely upon lack accuracy and security that's required to power our autonomous futures. Zona's solution is to launch their own constellation of small sats that act as GPS signal boosters capable of delivering centimeter level accuracy and military grade security.

23:08 One of the interesting things about Zona is that we actually met this company, which was founded by some ex space and ex... SpaceX engineers pre incorporation. They then participated in our Space Camp Accelerator, which led to us making a small investment in their first financing round before they're now stepping up to be the lead investor. This is a great example of the SERAPHIM model in action that Mark was alluding to earlier. And then last up on this side, Isotropic, where we, invested £18,000,000 in September as the lead in Isotropic's $37,000,000 series b funding round. Other investors in that round included Boeing's recently spun out venture up. As a result of this round, the trust existing holding in this company increased by more than a 150%. So the problem that Isotropic is addressing is that there have been billions and billions of dollars invested in these mega constellations that you may have read about by the likes of SpaceX and OneWeb and in due course, from the likes of Amazon and others.

24:09 All of these constellations of huge numbers of satellites are promising the offer of ubiquitous connectivity, blanketing the earth in in in high speed, Internet. However, these ambitious project... Projects alongside those of the next generation satellites from the industry incumbents risk failing unless there are high performance, low cost antennas for people and vehicles to actually connect to all of these networks. So Isotropic solution is to aim to create a mesh network of satellite connectivity by developing an antenna that is capable of connecting to any satellite in any constellation in any orbit with applications from IoT connected cars through to aircraft, trains, and ships. Thank you. Next slide, please.

24:56 So just to to to wrap up on profiling, the two, investments that, we've announced post, the the period ending thirtieth of of September. So first up, Satellite View, which was a follow on investment. So in October, the trust invested £4,000,000 in £15,000,000 series a pound at brand. And, again, the trust was the the the lead investor. And this financing round resulted in an uplift in the value of the trust's existing stake by nearly 500%. This is another one of the companies that has been a graduate of our accelerator. So the problem that Satellite Boo is addressing is that 40 of all carbon emissions are either directly or indirectly derived from buildings. Finding a way to pinpoint the worst energy wasting buildings at global scale is a pressing problem if the world is to achieve net zero.

25:46 Satellite Boost solution is to launch the world's first constellation of smallsats that use infrared cameras to monitor the thermal footprint of any building on Earth every few hours. And then last up, as Mark mentioned, we've recently completed, our our first new investment outside of, the assets acquired from SERAPHIM SPACE LP into a US business called Hawkeye three sixty, where earlier this month, we invested, just over £80,000,000, in their series d family round. We were the co lead investor in that round, once again alongside, Insight Partners who, were also the the investor in Lear Labs. So the problem that that that, that Hawkeye is addressing is that an inability to act quickly enough hinders the ability of first responders to save lives and law enforcement to halt hidden illegal activity.

26:38 Hawkeye's solution to this is to launch a constellation of satellites that can pick up radio signals generated on Earth from everything from VHF radios, radars, cell towers, satellite phones, emergency beacons, more to deliver near real time actionable intelligence. Applications for this amongst others include maritime to where... Domain awareness, where this sort of insight is absolutely critical in the fight against things like illegal phishing and piracy. So, hopefully, that's given you a flavor of some of the exciting companies in in our portfolio. Mark, back over to you. Thanks, James. So, I hope you got a sense of the true diversity of the companies that, we're invested into, but importantly, the impacts that these businesses are going to have on our society.

27:23 So this is the final slide in the presentation, and I wanted just to end with a summary of the extremely productive first quarter. We've delivered on everything that we set out to do at the point of IPO. In relation to activity levels, I wanted to point out that three of the investments were into companies that have gone through our accelerator program, Satellite View and Zona through our space camp, and Hawkeye through the Amazon Space Accelerator that we also manage. These programs are unique, and they're a key feeder to the trust. They enable us to be able to work with a broad range of companies programmatically. We only step up to invest when we see companies hitting predefined milestones.

28:09 But importantly, it's also a platform to get to know the management teams. We're investors in people. As our conviction grows, so does the size of the checks that we'll write to participate in their investment rounds.

28:24 So the outlook is bright. We've got two fantastic businesses that will join the portfolio shortly. These are the two other retained assets, iSIGHT and Diorbit, that we've been already invested into for many years. We've got high level of conviction about these businesses. So I look forward to profiling these to you once they're in the portfolio. The next time I update you about the fund will be at the interim results. And at that time, I'm gonna focus on environmental, social, and governance, ESG. I'm gonna draw out the impactful nature of the portfolio, and importantly, how collectively they're all addressing virtually all of the United Nations sustainability development goals.