BlackSky Technology Inc. Class A

Good morning, ladies and gentlemen, and welcome to Black Sky Technologies' second quarter 2022 earnings conference call. All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question and answer session. To ask your question, please press star 1 on your touch-tone phone. To withdraw your question, please press star 2. Please note this conference call is being recorded. I would now like to turn the call over to Ali Bonilla,

black skies vice president of investor relations please go ahead ali 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 henry dubois on today's call brian will provide some highlights on the quarter and give a strategic update on the business henry will then review the company's second 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 August 24th. 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. In conjunction with today's call, we have posted a quarterly earnings presentation on the investor relations website that you may use to follow along with our prepared remarks. Before we begin, let me remind you that today's conference call includes forward-looking statements, including financial performance and guidance for the full 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, except as may be required under applicable securities laws. In addition, during today's call, we will refer to certain non-GAAP financial measures, including adjusted EBITDA. The reconciliation of adjusted EBITDA to net loss, the most comparable GAAP measure, 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 the call today. Before I begin, I want to take a moment and introduce Henry Dubois. Henry was promoted to Chief Financial Officer in June after having served as the company's Chief Development Officer since August of last year and serving as an advisor to me and the Black Sky Board since 2018. He brings over 30 years of financial experience, including serving as an executive at two geospatial and commercial remote sensing companies. Henry has been a vital member of our executive team and we are excited to have him lead this role and drive our long-term financial strategy. Now let's begin with slide four. When we started this company many years ago, we believed geospatial intelligence would evolve from static observation and mapping to dynamic high-frequency monitoring. We also believed we needed to develop technology that would allow customers to easily task a satellite constellation from any device and get actionable intelligence on demand. Today, I can confidently say that we've accomplished that mission and achieved a critical milestone with our first-of-its-kind platform that is delivering reliable and dynamic hourly monitoring of the most important strategic and economic assets in the world. Our strategy and value proposition has been validated as governance and other entities around the world have selected BlackSky for significant contract awards. We are proud to be serving the most important customers as a long-term trusted mission partner, delivering vital intelligence in support of their critical operations. I'm excited to report that our second quarter was the strongest in the company's history. Specifically, we achieved another quarter of record revenues, and continue to see strong customer adoption and demand for our imagery and analytics. We won our company's largest ever contract award, validating that our technology and long-term strategy is the preferred choice by the U.S. government and one that's aligned with their new and expanded requirements for high-frequency advanced imaging services. And we've made significant advancements enhancing the functionality of our proven Spectra AI software platform Positioning black sky for our next phase of growth. Turning to slide five. As many of you know, the war in Ukraine showed the world the vital need for geospatial intelligence and the capabilities that space-based technology can provide. From capturing images of military troops moving toward the border, to showing damages inflicted on infrastructure in certain parts of the country, to providing analytics on border crossings and refugee movements, the need for real-time, actionable intelligence is now more important than ever. Black Sky has been there since the beginning of the crisis, delivering thousands of images and analytic insights to multiple government agencies and allied partners, humanitarian organizations, and news media worldwide. I am proud of the support that Black Sky has provided and continues to provide to the people of Ukraine and their partners, which we believe is making a difference and saving lives. The war in Ukraine has certainly shined a light on how space-based technology is currently being used and has changed what customers can expect from the timely insights it can deliver. Black Sky is changing the way we use space to deliver vital, actionable intelligence. We're doing this using two key strategic assets. First, our high-frequency, high-resolution imaging satellite constellation, And second, combined with our fully operational AI enabled software platform. Turning to slide six. We recently achieved a 14 satellite baseline constellation. We are now providing dynamic hourly monitoring of the most important and strategic economic assets in the world. While other companies may claim to have high satellite revisit rates, Black Sky's constellation can truly deliver reliable hourly monitoring and collection of imagery of a specific location up to 15 times a day from dawn to dusk. To achieve this, we've uniquely positioned our satellites in mid-inclination orbits, generally running west to east to optimize high-frequency collection of the most important locations in the world that have the highest economic value to our customers, and that can be substantially monetized. This is different from mapping constellations that use polar orbiting satellites traveling from north to south to map the entire earth at fixed times a day. This difference combined with a software first approach enables us to efficiently capture imagery throughout the day through automated intelligent tasking software. This operationally efficient approach enables us to right size and scale the constellation aligned with market demand. Our on-demand high-frequency monitoring is a new and unique offering in the market and is behind the strong demand we're seeing. Our recent wins, such as EOCL, and with new international customers, are evidence and validation of our strategy and is the momentum driving the acceleration of our business. Our current constellation provides BlackSky with more than enough capacity to meet customer requirements and achieve our revenue growth objectives for the next couple of years. We are scheduled to launch the last of our Gen 2 satellites in Q4 of this year, replacing our first two commercial satellites that went into service back in 2018. We are pleased with the performance of our constellation and are encouraged by the extended mission life we are seeing from our satellites. Our next generation satellite program remains on track. We expect to begin launching these new Gen 3 satellites in 2023. Let me remind you that our Gen 3 satellites are designed to bring our imaging resolution down to 35 to 50 centimeters and add a host of other capabilities. We'll provide more details on our Gen 3 deployment plans as the program progresses. Moving to slide seven. We've also spent the last eight years designing and developing our advanced and now fully operation AI-enabled software platform. which is what really sets us apart from others in the industry. Our Spectre AI platform is a first of its kind, providing users with on-demand satellite tasking capabilities. This is changing the customer experience, providing on-demand access to data and analytics to a whole new community of users. For example, we recently demonstrated this capability at the ESRI conference a few weeks ago and surprised many geospatial professionals with just how easy it is to task a satellite directly from any device, application, or through dynamic APIs, or in this case, directly from the Esri platform itself. I'll talk more about our integration with Esri and our new partnership in a few minutes. Right now, customers can task the constellation and receive imagery and analytics delivered directly into their email, in-house ERP systems, or cloud environment in under 90 minutes, all fully automated, and powered by our Spectre AI software platform. In Q2, we recently expanded our dynamic monitoring capabilities with new data sources such as radar and very high resolution satellite imagery through our new reseller partnership with Airbus. The addition of the Airbus constellation expands BlackSky's product offerings and provides customers with greater flexibility for tasking requests and monitoring all weather, day and night assets around the world. I'm pleased with the momentum we've seen in the last several quarters, which continued into Q2 of this year and delivered another strong quarter of revenue performance as shown on slide eight. Second quarter revenues grew to $15.1 million, a new record for the company and more than doubled last year's Q2 revenue. In fact, we've now reported 10 consecutive quarters of year-over-year revenue growth, demonstrating that more and more customers are choosing Black Sky and seeing the value of our products and services in their day-to-day operations. As a result of this strong first half, we are raising our full-year revenue guidance. Henry will provide more details on the second quarter financial results and revised full-year outlook later in the call. Now I'd like to provide an update on the progress we've made in our U.S. government, international, and commercial businesses, starting with the U.S. government business. In Q2, we won several large opportunities, including the historic EOCL contract award, which is shown on slide nine. In May, we announced the Electro-Optical Commercial Layer, or EOCL, contract with the National Reconnaissance Office, or NRO. The advanced imagery subscription service contract is valued up to just over a billion dollars over a 10-year period, consisting of a five-year base period and five one-year option periods. The NRO has placed a starting value of $85 million, of which $72 million is allocated within the first two years. Thereafter, we anticipate the NRO to provide regular funding updates, typical of many government programs, and expand the level of other imagery services from our current and future constellations. So far, we're off to a great start servicing this contract. Within the first 30 days, we ramped up collections and met contract requirements for delivery of high-volume daily imagery. This contract is our company's largest award received to date and validates BlackSky satellite technology and long-term strategy to provide dynamic, high-frequency imagery from both current and future constellations. We're happy to have won all elements of the contract we bid and believe the NRO awarded us such a large opportunity because of our proven capability to address their new and expanded requirements for high frequency and advanced imaging. Through this contract, Black Sky will provide comprehensive imagery services, including intelligent point and area collection, theater downlink to government remote terminals, and other advanced imaging services. I'm pleased that we've been a trusted mission partner to the NRO over the last three years. and look forward to continuing to support their most critical intelligence needs. Keep in mind, this award is only for the delivery of our imagery and does not include analytic products, which provide us the opportunity to sell monitoring and analytic services to other government agencies, such as the National Geospatial Intelligence Agency and the Space Force. On that note, turning to slide 10, in addition to EOCL award, We secured several other U.S. and international government customer wins in the quarter with various agencies. We secured three notable agreements that utilize our artificial intelligence enabled platform and analytic algorithms as additional proof of the relevance of our offering and advanced AI capabilities. The first is a win with the Joint Artificial Intelligence Center. This award leverages our expertise in space-based dynamic monitoring and our data-rich software platform to provide AI-enabled end-to-end capabilities for the Department of Defense Community. The second is a contract award from the Intelligence Advanced Research Projects Activity, or IARPA. This award is for the second phase of a multi-year space-based machine automated recognition technique, or SMART program, through which IARPA chose BlackSky's AI framework out of several other competitors to support their entire program moving forward. The SMART program is focused on automating the analysis of space-based imagery and with Black Sky support, aims to automatically recognize heavy construction projects such as military bases, stadiums, campuses, dams, and airports, all of which are key strategic assets and important indicators of strategic and economic activity. And third, we want to contract with the U.S. Air Force to provide them with advanced AI-enabled monitoring and analytic services for space-based defense and tactical intelligence and reconnaissance applications. Moving on to slide 11. The Air Force Award continues to expand our portfolio of programs with organizations such as the Space Force, U.S. Army and Space Development Agency, that are seeking to leverage small satellite constellations for space-based defense, which is a key priority in the U.S. defense budget. U.S. investments in space programs are outpacing broader defense spending and are viewed by those in government as vital to our country's national security and defense strategy. For example, the 2023 budget for the Space Force and the Space Development Agency was increased by 25 percent over fiscal year 2022 levels. We're pleased that our architecture and operational capabilities are well aligned with the U.S. government's space-based defense priorities. As we've discussed previously, our TACGEO program, for example, with the U.S. Army, is leveraging our Gen 3 satellites to demonstrate tactical space-based operations to inform future architectures. In addition to winning several large new customer agreements, we continue to see strong demand for our high-frequency imagery monitoring and analytic services from existing customers, such as the National Geospatial Intelligence Agency, or NGA. As part of our five-year economic indicator monitoring contract with NGA, we continue to execute and pursue additional task orders under that program. We're also seeing robust customer demand for our products and services internationally, which helped drive another solid performance in Q2. We are continuing to see increased demand in Europe, beyond just Ukraine, and in other regions such as the Middle East, Asia Pacific, and other key areas around the world. Throughout the quarter, we added and continued to support several major ministries of defense, providing them with mission-critical intelligence of their most important strategic assets and events. With the expansion of our international sales team on track, We are well poised to capture additional sales opportunities as international demand continues to grow. Turning now to our commercial business. As we announced last month, we entered into a strategic partnership with ESRI as outlined on slide 12. For those who may not know, ESRI is the global leader in geospatial intelligence software. It's by over 350,000 organizations across 100 countries. Anyone who has ever utilized geospatial mapping or geographic intelligence solutions most likely knows about Esri and uses their software in day-to-day operations. With our new partnership, BlackSky will provide Esri Online users for the first time with access to on-demand satellite tasking services right inside their application. This type of platform integration, similar to our integration with Palantir, is changing how users in any platform can access on-demand geospatial intelligence. ESRI users can now task our satellites when and where they want and receive high-resolution imagery automatically delivered into ESRI's ArcGIS online platform within hours. Thereafter, the imagery can be used in other ESRI applications to provide additional analysis for decision-making. This partnership was made possible because of our on-demand and fully automated software and tasking services, and is another validation that dynamic monitoring and on-demand access to data and insights are what customers are looking for today. Our proven high-frequency constellation, providing hourly dawn-to-dust monitoring of the most important strategic and economic assets in the world, provides a vital, important capability to a large geospatial community worldwide. We're also continuing to see an increase in commercial opportunities across a number of vertical markets, which we are pursuing through the expansion of our commercial sales team and global reseller network. In summary, we had a very strong second quarter, hitting significant operating milestones with our space and software platform, winning the historic and validating EOCL contract, and continuing to grow our customer base. I'll now turn it over to Henry to go through the quarterly financial results in more detail. Henry?