KLEOS SPACE LAUNCH SCHEDULED 1st week of NOVEMBER Please see an...

KLEOS SPACE LAUNCH SCHEDULED 1^st week of NOVEMBER

Please see an overview below on Kleos Space (ASX:KSS) from Evolution Equities.

Kleos Space SA (ASX:KSS)

Shares on issue: 117m

Top 3 Shareholders’ Holding: ~71m shares

Top 3 Shareholders’ Holding: ~60%

Market Cap at 30c: $35m

KEY HIGHLIGHTS

• Kleos has developed a cluster of small satellites to deliver a global picture of radio frequency data to assist governments and defence players by improving their maritime intelligence.

• Kleos’ launch date is set for beginning November 2020 and was delayed due to Coronavirus restrictions in India which have now been lifted - Satellite build 100% complete, transported to site and ready for launch
• +$8m revenue contracts already secured from major global Defence players from USA, EU, South America
• 130+ potential customers in current pipeline – equating to $80-100m in potential revenue with 1st cluster and doubling to $160m-$200m with 2nd cluster
• 2^nd cluster launch signed with SpaceX and scheduled for mid-2021 – 2nd cluster will double revenue of contracts due to increased data accumulation
• Former Managing Director for Airbus Intelligence South America, Pierre Duquesne managing South American Sales / US based Karyn Hayes Ryan 30+ years in US Gov intelligence and procurement for US Gov managing US sales

• Signed partnership with L3 Harris (NYSE:LHX)(US$45bn Market Cap), Kleos has been placed on GSA Schedule in USA to rapidly speed up US Government procurement cycle with immediate access to 100’s of US Gov Agencies (this usually takes 2 years to complete)
• MOU’s signed with leading global space and defence players to create higher value added products including Airbus, Ball Aerospace (NYSE:BLL) and Spire Global
• Pricing model for first Kleos DaaS Product released – Annual revenue per ‘Single User’ starting from A$120,000 up to A$1,000,000 for ‘Government User’
• DaaS model – Data as a service Allows an ‘unlimited’ number of potential customers
• Only competitor in the market, Hawkeye 360 raised US$70m at a US$200m Valuation in August 2019 and have already secured $50m of contracts
• Kleos Market Cap only $35m

WHAT DOES KLEOS DO?

• Kleos has developed a multi-satellite Scouting Mission that can deliver a global picture of Radio Frequency data.
• By detecting where there is or isn’t radio frequency data they can assist gov’s, defence players etc with maritime intelligence
• Think illegal fishing, pirates, illegal people smuggling, border protection, maritime insurance etc
• If a boat wants to go ‘hidden’ or dark, they can simply turn off their AIS and GPS monitoring, however the radios on board will still emit radio frequencies – KSS data can assist in detecting these locations when other data is unavailable
• Satellite build 100% complete, transported to site and ready for launch at the Indian Space Research Orgnisation (ISRO)
• 2nd cluster launch signed with SpaceX and scheduled for mid-2021

COMMERCIALISATION

SUMMARY

• +$8m revenue contracts already secured from major global Defence players from USA, EU, South America
• 130+ potential customers in current pipeline – equating to $80-100m in potential revenue with 1st cluster and doubling to $160m-$200m with 2nd cluster
• 2^nd cluster launch signed with SpaceX and scheduled for mid-2021 – 2nd cluster will double revenue of contracts due to increased data accumulation
• The following companies have entered into MOUs or have early adopter contracts in place with Kleos.
• Airbus, L3 Harris, Ball Aerospace, UTC Collins, Red Group Technologies, Oriondata Internacional, Telepazio, IMSL, Victoria Falls, Spire, ImageSat International, Brazilian Government Agency, Geollect, confidential Nation State, Earthlab, Chilean Geociences and Brazilian HEX Geospatial Technologies.

L3 HARRIS (NYSE:LHX) CONTRACT

• L3Harris (NYSE:LHX) 6th largest US Defence company to market Kleos DaaS Products to government agencies
• https://www.l3harris.com
• Market Cap US$45bn - Annual revenue US$17bn – customers in 130 countries
• This is the most significant deal Kleos could have signed anywhere in the world
• Importantly, L3 Harris placed Kleos on GSA portal - This is usually a 2 year procurement cycle to achieve

GSA PORTAL – importance of L3 Harris

• GSA portal is used to pre-negotiate gov contracts in the USA– GSA negotiates all terms including price and delivery etc so gov agenices can just log in and order products – no need to negotiate with end user as GSA portal has already negotiated terms of the deal
• Usually takes up to 2 years to be placed on GSA portal
• GSA Schedule Contracts are the most widely used US Government Contract accounting for $45Bn USD in annual sales
• 100’s of government agencies are on the GSA portal
• Every 10 customers captured will provide ~$10m revenue per year – with L3 Harris marketing KSS data on the portal we expect multiple contracts to occur from this deal
• This is why L3 Harris above is such a significant deal and underestimated by the market
• https://gsa.federalschedules.com/gsa-schedule/

EARLY ADOPTERS CONTRACTS

• Early adopter revenue contracts over $8m already secured from major global Defence players and governments from USA, Europe and South America
• 2 early adopter pre-orders with leading international defence and security contractors with combined annual revenues in the order of A$30 billion
• Brazilian Government recently signed a pre-order with Kleos
• In South America Kleos has secured pre-orders with leading Chilean, GEOCIENCIAS E.I.R.L and Brazilian HEX Geospatial Technologies for up to $1.5m per year.
• Further Brazilian integrator also signed for $500k per year minimum bolstering recurring revenue
• Geollect has signed a minimum EUR 300,000 agreement to use Kleos’ data. Geollect is a leader in geospatial intelligence and analysis in the UK and are used by the UK’s Royal Navy and other prominent global maritime organisations
• Multiple US Air Force programs currently in progress with multi-million projects and funding potential to be won from successful programs

OTHER DISTRIBUTION AGREEMENTS

• IMSL - commercial agreement with UK- based (IMSL) for them to purchase Kleos Scouting Mission Data as a Service and to integrate and sell the Kleos data with related analytics services to governmental and commercial customers around the world.
• VICTORIA FALLS - which allows procurement and integration of Kleos’ radio frequency reconnaissance data into US defence programmes including those projects proposed to the US Air Force Small Business Innovation and Research (SBIR) programme.

MOU’s SIGNED

Leading Global players want to partner with KSS data to create valuable products.

• Airbus MOU 1 – expand RF uses
  • to expand the international market of radio frequency monitoring, transmitter geolocation, and to investigate opportunities to collaborate.

• Airbus MOU 2 – in-space 3D printing
  • This MoU covers the companies’ agreement to collaborate on In-Space manufacturing technology

• Ball Aerospace (NYSE:BLL) – enter US market
  • to enter the significant US Geospatial Intelligence market - subsidiary of Ball Corporate (NYSE:BLL)

• ImageSat International – value add to current imagesat customers
  • Under the MoU, the companies will develop a value-add proposition for current and future iSi maritime customers.

• EarthLab – use RF data for Insurance sector
  • to examine collaboration opportunities for the use of Kleos RF Reconnaissance and Geolocation data for the insurance sector and for other different Geospatial intelligence (GEOINT) purposes.

• Spire Global –combine AIS and RF data
  • Kleos and Spire will collaborate to combine Spire AIS data with KLEOS RF data to create a new shared capability to bring safety at sea (Safety at Sea Collaboration).

REVENUE & PRICING MODEL

• Pricing model for first Kleos DaaS Product released – Annual revenue per ‘Single User’ starting from A$128,000 up to A$970,000 for ‘Government User’ - Doubles to A$256,000 up to A$1,940,000 after second cluster data resumes
• GSA portal has 100’s of Gov agencies
• Former Managing Director for Airbus Intelligence South America, Pierre Duquesne joins Sales Team to target South America
• US based Karyn Hayes Ryan 30+ years in US Gov intelligence and procurement for US Gov managing US sales
• DaaS model – Data as a service
• Allows an ‘unlimited’ number of potential customers
• The same data can be re-sold and re-sold over and over for no additional cost

COMPARABLE COMPANY - HAWK-EYE 360

• The company is of similarity to Hawkeye 360 and will generate similar data
• Hawkeye launched their satellites in 2019
• Hawkeye raised US$70m at a US$200m Valuation in August and have already secured $50m of contracts since launch.
• Importantly, customers have advised that rather then choose one or the other, they will have demand for BOTH hawkeye and Kleos data as an insurance policy if one fails, and also as a value add for more data
• These governments and defence organisations are intent on receiving as much data as possible – hence it is not a competition but rather both will supply users
• The quality of Kleos data is far superior as the information comes from a 4 satellite cluster vs Hawkeye360 only 3 satellites in its cluster.
• If you consider the customers already paying for the data, the cost of adding the other company’s data is minimal

SUMMARY

Kleos satellites have been transported to Launch Site in India and are now on site and ready for final stages of integration into ISRO’s launcher. Launch is scheduled for November 2020.

With current +$8m in contracts already secured pre-launch, combined with multiple contracts expected to be received once data is flowing from the satellites, 2021 should be a pivotal year for the company in which revenue ramp-up accelerates with existing and new customers and Kleos launches its 2^nd cluster with SpaceX.

Current Market Cap at 30c is only $35m