ispace,inc. Q3 FY2025 earnings call

Mission Progress

• Mission 2: Successfully launched January 15, 2025 via SpaceX Falcon 9, in a historic dual launch of two private lunar landers (ispace and Firefly Aerospace) on a single rocket. As of the call (February 12, 2025), 4 of 10 success milestones (launch preparation, launch/separation, stable cruise, first orbital maneuver) were completed; lunar flyby (Success 5) was completed successfully as scheduled on February 15. Lunar landing is scheduled for late May to early June 2025. Compared to Mission 1, development time is shortened by 40%, development cost is cut by 50%, and initial post-launch operation time is shortened by 60% via reuse of proven hardware and process improvements from Mission 1 experience.
• Mission 3 (US-based, scheduled 2026 launch): Selected for NASA's CLPS CP-12 program, targeting landing on the far side of the Moon with 2 relay communication satellites. Existing NASA payload contract was increased from 54 million USD to 62 million USD, and a new 350,000 EUR payload contract was signed with the Italian Space Agency (the company's first commercial contract with Italy), bringing total contracted value to 65 million USD. Remaining payload capacity is available for new customer contracts.
• Mission 4 (previously Mission 6, Japan-based, scheduled 2027 launch): Renumbered from Mission 6 to align with adjusted launch sequencing. Awarded the maximum 12 billion yen (1.2 billion yen) in SBIR program subsidies from the Japanese government. Basic design of all subsystems for the Series 3 Lander is nearly complete, with preliminary design review upcoming. The company is on track to contribute to JAXA-ESA lunar exploration cooperation using this mission.

Strategic Updates

• Adjusted mission numbering and sequencing: The previously planned Mission 4 (US APEX 1.0 mass-produced lander) is now rescheduled to Mission 5 and beyond, to prioritize the Japanese SBIR-funded mission as the company's fourth launch. The company maintains flexible sequencing to align with customer demand and program timelines, and shares lessons learned across Japanese and US teams while complying with trade regulations.
• New US subsidiary governance: Added a Board Chairperson role filled by former NASA astronaut Ronald Garan, with Elizabeth Kryst promoted to US subsidiary CEO to strengthen the company's positioning in the growing US space market and better support participation in Artemis program opportunities.
• Sales pipeline: Maintains a total sales pipeline of over 395 million USD (~60 billion yen), and signed 4 new MOUs with global entities (Taiwan National Space Center, US Magna Petra, Mongolia ONDO Space, South Korea HANCOM InSpace) in the quarter for future collaboration on payload delivery and lunar resource exploration.

Long-Term Growth Strategy

• Target increasing payload capacity to over 100kg per mission to drive revenue growth, while reducing development costs via repeated missions and mass production (already demonstrated 50% cost reduction from Mission 1 to Mission 2).
• Current high initial costs come from non-recurring engineering for the first units of APEX 1.0 and Series 3 landers; per-mission profitability will improve gradually as mass production scales, and the company targets 2-3 missions per year long-term to accelerate profitability.

For the third quarter cumulative period: 1. Mission 2 (Lunar Exploration & Payload Delivery): No full launch cost recognition in Q3, with full recognition scheduled for Q4 FY2025. Total contracted payload revenue is approximately 16 million USD, most of which was received prior to launch. 2. Mission 3 (US CLPS Program): Revenue increased 87.1% year-over-year, with total contracted value reaching 65 million USD. 3. Overall company: Cumulative Q3 revenue is 1.989 billion yen, up from the prior year period despite the absence of 575 million yen in one-time revenue from Mission 1 completion that was recorded in the prior year. Operating loss is 6.434 billion yen (wider YoY), net loss is 7.365 billion yen (wider YoY, driven by the absence of 3.793 billion yen in one-time special insurance income from the prior year). Selling, general and administrative expenses: R&D expense is 3.709 billion yen (up YoY), salaries and benefits are 1.185 billion yen (up YoY from 51 additional employees). Total full-year FY2025 revenue is projected to be 4.467 billion yen, which represents ~90% growth over the prior full year.

• Full-year FY2025 guidance is revised upward: Revenue is increased by 434 million yen (43.4 million yen? No conversion: 4億3400万円 = 0.434 billion yen), gross profit increased by 1.803 billion yen, operating loss reduced by 3.293 billion yen, and net loss reduced by 1.702 billion yen compared to the prior forecast. The upward revision is driven primarily by the change in revenue recognition for Mission 2.
• The change in Mission 2 revenue recognition from the cost recovery method to the progress-based method (similar to percentage-of-completion accounting) will bring forward approximately 1.7 billion yen of revenue that was originally scheduled for recognition after mission completion next fiscal year, to Q4 of the current fiscal year. This will also recognize catch-up revenue and gross profit in the current fiscal year.
• A 1.438 billion yen reduction in projected Mission 3 revenue this fiscal year is offset by the Mission 2 revenue increase, resulting in net revenue growth. The Mission 3 revenue reduction is only a timing difference from delayed cost recognition and component delivery delays (which do not impact Mission 3's overall development schedule), and all revenue will be recognized in future fiscal years.

• Lunar mission development and execution carries inherent technical risk; any failure of a mission milestone could impact customer confidence and future contract acquisition.
• Mission 4 SBIR subsidy recognition has been partially delayed to next fiscal year due to a longer-than-planned initial inspection period, which increases projected net loss for the current fiscal year by 1.204 billion yen.
• Component delivery delays for Mission 3 have pushed revenue recognition to future periods, though no impact on overall development schedule is expected.
• Policy uncertainty related to US space policy and the Artemis Program remains, and the full impact of recent changes is not yet clear.

Q: What is your view on the impact of the confirmed US-Japan partnership for the Artemis Program on ispace's future missions? / A: The positive mention of the Artemis Program by the US-Japan summit is welcome, but details are still unconfirmed and it is too early to judge the concrete impact on ispace. The company expects existing programs like NASA CLPS to proceed as planned, and will continue to execute its existing mission schedule as originally planned.

Q: When does ispace expect to reach operating profitability? / A: The company cannot name an exact period, but maintains a target of achieving profitability within several years. Currently the company is in the high-cost first-unit development phase for the APEX 1.0 and Series 3 landers, but has already demonstrated 50% cost reduction from Mission 1 to Mission 2 via learning and reuse. Future missions will increase payload capacity (and thus revenue potential) while continuing to cut costs, which will drive the company toward profitability over the coming years.

Q: Why do Mission 3 and Mission 5 (both using APEX 1.0 lander) have different maximum payload weights? Is there a planned design change? / A: Both use the same base APEX 1.0 design. The 300kg figure for Mission 3 is a conservative minimum based on current development progress, while the 500kg maximum for Mission 5 reflects the company's ongoing goal to incrementally increase payload capacity through iterative design improvements. No major redesign is planned; the company will continue to optimize the design to increase available payload weight over time.

Q: If Mission 2 landing is successful, what will be the impact on revenue, and what does it mean for future payload sales? / A: The revenue impact for Mission 2 will not change even if the mission fails: the 16 million USD total contracted value is structured to allow recognition regardless of outcome, as part of the company's risk mitigation strategy. A successful landing would improve customer confidence, increase the company's credibility, and improve the prospects for winning future payload contracts, which management views as a very positive potential outcome for future growth.