BlackSky Technology Inc. Class A

Greetings and welcome to the Black Sky Technology Q1 2022 Earnings Conference Call. At this time, all participants are in a listen-only mode. A brief question and answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please press star zero on your telephone keypad. As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Ali Bonilla, Vice President of Investor Relations. Thank you. You may begin.

Good morning and thank you for joining us. Today I'm joined by our Chief Executive Officer, Brian O'Toole, and our Chief Financial Officer, Johann Brookhaysen. On today's call, Brian will provide some highlights on the quarter and give a strategic update on the business. Johann will then review the company's first quarter financial results and outlook for 2022. Following our prepared remarks, we will open the line for your questions. A replay of this conference call will be available from approximately 1230 p.m. Eastern Time today through May 25th. Information to access the replay can be found in today's press release. Additionally, a webcast of this earnings call will be available in the investor relations section of our website at www.blacksky.com. Before we begin, let me remind you that today's conference call includes forward-looking statements, including financial performance and guidance for our fiscal year 2022 and that actual results may differ from the expectations reflected in these statements due to factors such as long sales cycles, customer demand, and our ability to estimate expense, operational, and liquidity needs. We encourage you to review our press release and most recent SEC filings for a full discussion of the risks and uncertainties that pertain to these statements and that may affect future results or the market price of our stock. Black Sky assumes no obligation to update forward-looking statements. In addition, during today's call, we will refer to certain non-GAAP financial measures, including adjusted EBITDA. A reconciliation of these non-GAAP measures to the most comparable GAAP measures is included in today's earnings press release, which can be viewed and downloaded from our investor relations website. At this point, I'll turn the call over to Brian O'Toole. Brian?

Thanks, Ali, and good morning, everyone. Thank you for joining us on today's call. I'm pleased to report that the first quarter of 2022 was the strongest in the company's history. We delivered strong first quarter financial results and continue to make significant progress across many aspects of our operations as we are now in a phase of rapidly scaling our business. Demand for BlackSky's high-frequency imagery, monitoring, and analytics has accelerated as world events have placed an even greater level of importance and value for just-in-time information and insights. Now more than ever, our world needs real-time geospatial intelligence. From the crisis in Ukraine to the monitoring of critical assets in Eastern Asia to understanding commodity volumes and supply chain logistics in the U.S., there's a growing need for real-time global intelligence and insights that BlackSky provides for critical decision-making. Our strategy has always been to combine a best-in-class software platform with our proprietary high-performance Constellation that, as a single platform, can automatically test the Constellation, integrate other data and sensors, and run sophisticated analytics to deliver information and insights that decision makers rely on as part of their day-to-day operations. This software-first strategy which is of equal importance to the Constellation, is what differentiates us in the market and what is now paying dividends. Today, using our platform, any customer can log in, pass the Constellation, and have imagery and analytics delivered to their inbox in roughly 90 minutes or less, all fully automated. This is a capability that is now fully operational and we believe has uniquely positioned BlackSky capture a significant market opportunity that has been unmet with traditional imagery and geospatial solutions. Our strong Q1 performance was driven by several major factors. First, a growing global demand for our real-time imagery and analytics services across U.S. government, international, and commercial market segments. our ability to capture this growing demand due to the investments we've made in expanding our sales force and global reseller network over the past year. We are now seeing the results from these investments as we are converting this demand into new business. Third, the achievement of a 14 satellite baseline constellation that combined with our Spectre AI software platform can provide on-demand tasking and hourly monitoring of the most important strategic and critical assets and locations in the world. Our integrated space and software platform is delivering a rapid revisit rate of up to 15 times daily, dawn to dust imaging, and information and insights delivered in under 90 minutes. We now have the needed performance and capacity to support the growth of our business over the next couple years. What this means is that we can see and analyze critical and strategic assets, on roughly an hourly basis and provide customers with unprecedented real-time intelligence that they never had before. Fourth, ideal market conditions and timing as our imaging capacity is coming into the market at a time when there is increasing demand for services from trusted suppliers while the capacity from legacy providers is highly constrained and diminishing as satellites from their aging constellations are reaching end of life. Fifth, improving operating efficiencies as we begin to monetize capacity and grow our margins. And finally, improving capital efficiencies as we optimize our CapEx spend to align with market demand, and in parallel, gain benefits from longer than expected mission life of our satellites. Looking beyond these operational achievements, this quarter has demonstrated that what we are doing matters, and is making a difference. Black Sky is relied upon by some of the most important customers and missions in the world. In the past 30 days alone, we delivered over 1,000 images to U.S. and international security agencies, humanitarian organizations, and the media in support of the citizens of Ukraine and our allies in Europe. We are proud that we are having an impact in providing transparency, delivering timely intelligence and providing information to humanitarian organizations who are working to save lives. To quote one senior government official in the U.S., on behalf of the country, our allies, and the people of Ukraine, we want to thank the Black Sky team for your efforts in support of this crisis. What you are doing is important to our nation and the world and is contributing to saving lives. We are grateful for your dedicated efforts to this cause. I would also like to add to that comment in that I'm very proud of our team and want to thank our team for their efforts during this crisis. We are demonstrating to the world that Black Sky has achieved operational capabilities at scale and are changing the way we see and understand important events around the world. providing a cost-effective tool for national security and economic intelligence. This timing aligns well with the secular shift we're seeing within the U.S. international government sector that is looking to leverage commercial satellite operators for more and more national security, defense, and intelligence operations. Although we experienced increased demand from the crisis in Ukraine, the larger contributor to our incremental growth in the quarter came from outside the Eastern European region in areas such as Asia Pacific and the Middle East, signaling a strong global demand for our capabilities. I'm pleased that we successfully carried the momentum we showed in Q4 of last year into Q1 of this year as we started the year on a strong note. Highlights of the first quarter include Record revenues of 13.9 million, up 91 percent over the prior year period. New and expanded contracts with U.S. government customers. New and expanded contracts with international government customers in Europe, Asia Pacific, and the Middle East. Engagement with several new major companies spanning multiple vertical markets. Expansion of our software platform to include new imagery, sensor, and analytic capabilities. The successful launch and commissioning of two additional satellites in April expanding our Constellation's revisit and imaging capacity, and the continued expansion and growth of our Salesforce and global reseller network. We were also proud to announce our new strategic advisory group that included the appointment of three of our country's distinct national security leaders. These include Vice Admiral Joe Kernan, former Undersecretary of Defense for Intelligence, Lieutenant General John Mulholland, Jr., former Associate Director for Military Affairs at the CIA, and Colonel Michael Dickey, former Space Force Chief Architect. We are proud to have them join our team and look forward to their guidance and insights on our national security strategy. I'll now talk in more detail about each of these highlights, beginning with revenues. First quarter revenue grew to $13.9 million. a 91 percent increase over the same period last year, and a new revenue record for the company. Revenue in Q1 also grew sequentially from Q4 of last year, as our efforts in expanding our direct sales team and reseller network continue to gain traction. In fact, for the third consecutive quarter, our imagery, software, and analytics services revenue experienced strong double-digit sequential growth. These are the highest margin of recurring revenue elements of our business. Johan will provide more details on the first quarter financial results later. Now I'd like to provide an update on the progress we made in our government and commercial businesses, starting with the government business. Customer demand continues to be strong for a high revisit imaging and analytic products and services, both in the US and internationally. In the first quarter, we won several new opportunities and experienced significant rise in orders for imagery and analytics from existing customers. In fact, demand for imagery monitoring analytics in March was at an all-time high for the company. In Q1, we saw increased demand and order activity with the National Reconnaissance Office, or NRO, for BlackSky's real-time intelligence on targeted locations around the world. In particular, demand over Ukraine rose throughout the quarter as the crisis escalated in that region. underscoring the vital importance of real-time geospatial intelligence for military, commercial, and humanitarian applications. As a reminder, we expanded our existing contract with the NRO last summer and have continued to see growth over the last several quarters, demonstrating the NRO's confidence in Black Sky's capabilities. We believe this, in turn, positions us well to capture a portion of the upcoming electro-optical commercial layer, or EOCL, contract. As many of you know, the EOCL contract is the largest U.S. government contract for purchasing commercial satellite imagery and will be the vehicle through which the U.S. government acquires these services over the next 10 years. The NRO has recently indicated they are targeting to award the EOCL contract this summer, and we look forward to the award announcement. Another large and longtime government customer we support is the National Geospatial Intelligence Agency. or NGA. In Q1, we received additional task order under the NGA's Economic Indicator Monitoring Program that leverages our high revisit satellite imaging combined with our AI-driven software analytics to provide monitoring services and insights into global activity. Since we were first awarded the five-year $30 million contract in Q3 of last year, BlackSky's services under this program have continued to expand each quarter further integrating us into the agency's day-to-day operations. This award, in the expansion of services we've seen to date, demonstrates the value that NGA has in Black Sky's analytics as a service offering. The combination of high-frequency site monitoring from our constellation and AI-driven analytics that fuse together high-resolution imagery and sensor data from multiple sources, such as synthetic aperture radar, through our unique SAS platform is providing users with access to new types of actionable intelligence. These new and advanced monitoring and analytic services that are powered by our Spectre AI software platform provide us with a competitive advantage as the government is looking to buy more and more commercial analytic services. The US government has recently expressed greater interest in utilizing commercial satellite technology for essential imagery and intelligence capabilities. We started positioning for this market opportunity several years ago with the successful award of the U.S. Army TACGEO program and others, which we believe will lead to significantly more opportunities in the future with the DoD and Space Force customers for tactical ISR. We believe the ISR market is beginning a large-scale shift, where billions of dollars that were once spent on airborne systems are shifting to space and looking to leverage constellations of satellites to support new and emerging missions. An example is the emerging opportunities with the Space Force as the U.S. government expands its agency for tactical reconnaissance and surveillance missions from space. In addition, the government is looking to develop other leading space capabilities for organizations supporting the Army, Air Force, and the Space Development Agency, to name a few. Our longstanding history Working with the NRO, the NGA, and other government and defense agencies puts Black Sky in a great position to benefit from the growing number of programs requiring our capabilities. Moving on to our international business. Customer demand for our products and services increased in Q1, with our international business driving a large part of our growth this quarter as we added customers and expanded contracts in Europe, Asia Pacific, and the Middle East. We are seeing strong demand coming from several international governments around the world as they turn to BlackSky to provide them with mission-critical intelligence and analytics on strategic locations and assets. For example, we were awarded a multimillion-dollar contract from an international government to provide them with on-demand, high-frequency satellite imagery and analytics for monitoring strategic locations in their region. We also signed additional agreements with a number of other international governments as this customer base continues to expand and the use of BlackSky's real-time imagery and analytics in high-demand locations grows. We are now supporting several major international ministries of defense and are continuing to grow our pipeline of opportunities with many more customers around the world. With the world focused on understanding how to navigate various global events We anticipate international demand for BlackSky's products and services will continue to grow in order to meet this rising demand. We will continue to expand our international sales team and partner network to capitalize on this growth and drive incremental sales. Turning now to our commercial business, we're seeing greater interest for BlackSky's disruptive on-demand imagery and analytics delivered through our AI-driven software platform across a number of vertical markets, including financial services, geospatial information systems, commodities, and natural resources. As we continue to drive awareness of our high revisit imagery and Spectre AI's platform capabilities, we are seeing an increase in incoming leads and opportunities across a range of industries. As a result, we are engaged with several new major commercial customers in Q1, and look forward to expanding these opportunities over time through our land and expand strategy. In addition, we expanded our global reseller network by over 25%, further strengthening Black Sky's sales distribution channels and extending our customer reach to multiple regions around the world. We're pleased with the progress we made standing up our commercial business over the last couple quarters and are excited to capitalize on the new sales opportunities that lie ahead as we continue building out the sales team. Moving on to our operational capabilities, which are anchored by our Spectra AI software platform and our proprietary satellite constellation. Let me first start with our software platform, which we believe is one of the biggest competitive advantages that we have. We're seeing increased demand from existing customers who already rely on BlackSky for timely, critical, and accurate analytics and insights, as well as from new customers who are discovering the power and benefits that our platform can deliver. BlackSky software platform provides customers with affordable, on-demand, and autonomous satellite tasking with fully automated analytic intelligence and insights, a real game-changing capability for the industry. Customers can easily log in through a web browser, task our satellites, and receive imagery and custom analytics within 90 minutes. They no longer have to navigate a lengthy, complicated process or wait days to get images and insights, but now can get them from BlackSky on demand. During the quarter, we continue to improve our platform's capabilities with new analytics, sensors, and imagery products. Our Spectra AI software platform integrates information from multiple sources, including synthetic aperture radar, or SAR, enabling all weather and nighttime monitoring. visible infrared imaging, or VIIRS, allowing for wildfire detection and monitoring, the status of refineries and upstream oil and gas operations, and automatic identification systems, or AIS, enabling maritime vessel tracking and monitoring for commodities and supply chain intelligence. In addition, we've enhanced the object detection capability in our platform, enabling us to better identify the various types of aircrafts maritime vessels, and other objects. This capability allows us to keep deeper insights into operational fleet trends, monitor asset traffic to and from sites of interest, and give customers real-time alerts during anomalous events that can impact their operations. Together, these improvements open up a new set of customer use cases and commercial applications, making BlastGuide's platform even more valuable to customers. Let me turn to our satellite constellation. Just last month, we launched two new satellites into orbit, bringing our total constellation to 14 satellites, which provides more than enough capacity and revisit performance to satisfy customer demand for the next couple of years. In response to the crisis in Ukraine and to address demand in the region, we changed the planned orbits for these two satellites 30 days ahead of the launch in order to improve the intraday revisit frequency over Ukraine and the surrounding region. This process can typically take almost a year, but further demonstrates our agility and responsiveness to meet customer demand where and when they need it. We're very proud that these satellites achieved commercial operations within 12 hours of launch and began taking high resolution images, generating revenue and delivering information to customers. thereafter. The additional satellites further expand BlackSky's constellation capacity, increasing the frequency of when images are taken and improving the hourly dawn-to-dusk site monitoring capabilities for customers that need real-time insights. Because of our satellite's high revisit times, customers have the flexibility to shift imaging capacity where and when they require it to best suit their needs. We are also seeing extended performance from our first commercial satellites. providing us some optionality on the timing for when we need to replace these assets. As a result, we are shifting the timing of the launch for our next two satellites to Q4 of this year, which will coincide with the four-year anniversary of our first two commercial satellites. In parallel, we're also focused on building and launching our next Generation 3 satellites. We're excited for the new capabilities our Gen 3 satellites will bring, which include taking our imaging resolution down to 35 to 50 centimeters and adding shortwave IR imaging technology to enable a broad set of imaging conditions such as low light and at night. We anticipate beginning to launch the first of these Gen 3 satellites in 2023. In summary, we had great execution across the business, made overwhelming progress expanding our customer reach, and delivered strong first quarter operating results. I'll now turn it over to Johan to go through the financial results in more detail. Johan?