24 April 2024

Filtronic plc

("Filtronic" or the "Company")

Strategic Agreement with SpaceX for Starlink constellation

Filtronic secures a long-term partnership with SpaceX in the LEO space market

Filtronic plc (AIM: FTC), the designer and manufacturer of products for the aerospace, defence, space and telecoms infrastructure markets, is delighted to announce that it has entered into a strategic partnership and commercial agreement (the "Strategic Partnership") with Space Exploration Technologies Corp. ("SpaceX"), which designs, manufactures, launches and operates the world's most advanced rockets and spacecraft. The Strategic Partnership includes the ongoing supply of E-band Solid State Power Amplifiers ("SSPA") in addition to the development and supply of similar products at other frequency bands within SpaceX's Starlink platform.

The Strategic Partnership contract was executed with an initial irrevocable purchase order of $19.7m (£15.8m) to supply E-band SSPA modules, scheduled for delivery in FY2025, with further order flow expected to continue thereafter to support the ongoing deployment of SpaceX's Starlink constellation, which provides high-speed, low-latency high-speed internet to users all around the world.

As part of the Strategic Partnership, the Company has is issuing a total of 21,712,109 warrants to SpaceX across two tranches, to enable SpaceX to subscribe for up to a maximum of 10% of the Company's existing share capital, with such warrants expected to vest, on a variable basis, with full vesting of the warrants once approximately $60m (£48m) of orders have been placed by SpaceX. The two warrant tranches, which are split equally, are detailed below:

Tranche 1: a maximum of 5% vesting on a variable basis from order flow of the E-band SSPA platform; and

Tranche 2: a maximum of a further 5%, also vesting on a variable basis, for order flow of products developed at alternative frequency bands which would involve partnering with SpaceX on new product development.

Summary of Warrant Terms

1)           Filtronic is issuing SpaceX with equity warrants up to a maximum of 5% of its existing share capital (10,856,055 warrants) and such warrants will vest based on the receipt of purchase orders against a staged vesting profile for E-band SSPA modules. All warrants in this tranche will fully vest once SpaceX has placed a minimum of $37m (£30m) of irrevocable purchase orders with Filtronic.

2)           Filtronic is issuing SpaceX with additional equity warrants up to a maximum of another 5% of its existing share capital (10,856,054 warrants). Such warrants will vest based on the receipt of purchase orders, against a staged vesting profile for SSPA modules at other operational frequency bands. The warrants in this tranche will fully vest on a similar profile to those in point 1.

3)           The strike price for the warrant 33 pence, being the closing mid-market price of Filtronic's ordinary shares of 0.1p each on 23 April 2024, being the last business day before the Strategic Partnership contract was executed.

4)           SpaceX must place a minimum order value in each subsequent 12-month period from the Contract Date of $10m to be delivered within 12 months. SpaceX must also maintain a cadence of order flow, so that the timing between purchase orders does not surpass a 12 month-period. If order flow is not maintained in accordance with these two tests, within the 5-year warrant period, then the warrants will expire 6 months from that date.

5)           The warrants will expire five (5) years from the date the Strategic Partnership contract was executed. The warrants will expire earlier if certain minimum order volumes are not met by SpaceX. Vested warrants can be exercised in whole (or in part, in minimum amounts of 500,000) at any time prior to their expiration, to the extent the agreed vesting conditions have been satisfied.

21,512,000 of the warrants are being issued utilising (to their full extent in this particular regard) the existing shareholder authorities granted at the Annual General Meeting of the Company held in October 2023, with the remaining balance (of 200,109 warrants) to be issued following the grant of similar authorities at this year's Annual General Meeting.

Richard Gibbs, Chief Executive Officer, of Filtronic commented: "We are delighted to enter into this important Strategic Agreement with SpaceX, a market leader in LEO satellite constellations. This milestone development in our SpaceX partnership underlines our core value proposition of high-quality engineering and operational excellence. It also provides Filtronic with the opportunity to scale manufacturing, build capability and execute our technology roadmap.  The team at Filtronic are excited to formalise and develop our existing relationship with SpaceX and secure the ongoing supply of E-band SSPAs. We also look forward to working alongside the SpaceX engineering team to develop new products for use in the Starlink system."

Mike Nicolls, SpaceX's Vice President of Starlink Engineering commented: "Filtronic has been an outstanding supplier for Starlink. They have matched our rate ramp and increasing demand for high-quality parts. Their strong engineering teams have taken ownership of their production process to meet our needs, taking their designs from wafer to functional unit, and are delivering quality parts in E-band which will enable the Starlink network to continue to grow and connect millions of more people around the world with high-speed, low-latency broadband internet."

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Note: This announcement contains inside information which is disclosed in accordance with the Market Abuse Regulation.