BlackSky Technology Inc. Class A

Good morning, ladies and gentlemen, and welcome to Black Sky Technologies' third quarter 2023 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 a question, you may press star, then one on your touchtone phone. To withdraw your question, please press star, then two. Please note this conference call is being recorded. I would now like to turn the call over to Ali Benia, BlackSky's 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 third quarter financial results and outlook for 2023. Following our prepared remarks, we will open the line for your questions. A replay of this conference call will be available from approximately 12.30 p.m. Eastern Time today through November 22nd. 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 certain statements made during today's conference call regarding our future plans, objectives, and expected performance, including our financial guidance for 2023, are forward-looking statements. Actual results may differ materially as these statements are based on our current expectations as of today and are subject to risks and uncertainties, including those stated in our Form 10-K. We encourage you to review our press release, Form 10-K, and other 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 by applicable law. In addition, during today's call, we will refer to certain non-GAAP financial measures, including adjusted EBITDA, adjusted imagery and software analytical services cost of sales, and cash operating expenses. A reconciliation of these non-GAAP financial measures to their most comparable GAAP measures are included in today's accompanying presentation, 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?

Brian O'Toole Thanks, Ali, and good morning, everyone. Thank you for joining us on today's call. I'm pleased to report that BlackSky delivered another strong quarter with record revenues, continued expansion of our customer base, and nearly break-even adjusted EBITDA. We continue to see growing demand from government agencies around the world for BlackSky's space-based intelligence capabilities and are capitalizing on this opportunity by successfully converting our increasing sales pipeline into new and expanded contracts. The combination of our growing customer base, effective cost management, and the strong operating leverage of our business has us on a clear path toward long-term profitable growth. Before I begin, I want to take a moment to express our empathy for those affected by the crisis in Israel and Gaza. This is a very difficult time for many, and our hearts go out to the people who have lost loved ones and are living through this horrific conflict. From the conflict in the Middle East to this week's earthquake in Nepal, or the ongoing war in Ukraine, space-based intelligence is playing a critical role in supporting humanitarian, economic, and national security interests both here and abroad. Whether it's the delivery of humanitarian aid, providing transparency to crisis events, or protecting the homeland, Black Sky is proud to be supporting our customers by reliably delivering thousands of images and analytic products every day on critical events all over the world. The demand for Black Sky's high frequency imagery and AI-driven analytics continues to accelerate as defense and national security organizations worldwide seek to expand their capabilities and secure our capacity to meet their long-term mission needs. Now let's turn to slide five and our recent highlights, which continues to demonstrate strong quarter-over-quarter operating performance and growing customer demand for BlackSky's products and services. First, we achieved record third-quarter revenue of over $21 million, a 26 percent increase over the prior year quarter. Demand for our products and services remained strong, as we continue to meet our customer commitments through focused execution and reliable delivery of our space-based capabilities. Second, we signed new contracts and renewal agreements with multiple U.S. and international government agencies valued at up to $20 million. These contract wins demonstrate how Black Sky is increasingly relied upon by some of the most demanding customers around the world and brings our year-to-date contract bookings to over $220 million. Third, for the first nine months of the year, our imagery and analytics revenue grew $15 million, or 48 percent compared to the same period in 2022. This revenue increase delivered an incremental contribution margin of 98 percent and further illustrates the strong operating leverage of our business. This is a key driver in scaling our business to profitability. Fourth, as a result of strong operating leverage and continued focus on responsible cost management, we reported nearly break-even adjusted EBITDA in Q3. This quarter's performance keeps us on track toward achieving our goal of positive adjusted EBITDA in the fourth quarter. And finally, we're honored to have been named to the 2023 Deloitte Technology Fast 500 list, joining many other fast-growing companies. These highlights demonstrate strong, focused execution and the ongoing momentum we are experiencing across all aspects of our business. We continue to see increasing interest from government agencies worldwide looking to secure access to our high-frequency satellite imagery and AI-driven analytics. This growing market demand puts us in a strong position to capitalize on new sales opportunities and realize sustainable, profitable growth. I would now like to share some operational highlights from the quarter. Turning to slide six, global demand for our products and services continues to remain strong as many governments around the world are increasing their investments in space-based intelligence. in support of their country's critical national security and economic interests. We're seeing more international governments engaging with BlackSky to secure immediate and long-term access to our high-frequency imaging and analytic capabilities. One example is a multi-year master services agreement we recently signed for a new International Ministry of Defense customer. This contract, valued up to $8 million, provides the customer with on-demand and assured access to our high-frequency imagery and analytic services. Through our Spectra software platform, customer end users will be able to directly task our satellite constellation to monitor critical areas of interest that matter most to them. This contract also enables the customer to access capacity from our upcoming Gen 3 constellation once these new advanced satellites come online. We are proud to add this customer to our growing customer base, supporting major defense and intelligence organizations around the globe. Also during the quarter, we expanded a contract with an existing international defense customer for increased assured access to BlackSky's imaging capacity. In a supply-constrained environment, governments are seeking multiyear agreements in order to secure capacity over their critical regions of interest. This contract also includes the development of a next-generation architecture to support their long-term tactical needs. Moving on to slide seven, we continue to see strong demand for BlackSky's products and services from the U.S. government. U.S. intelligence agencies, as well as Department of Defense customers, continue to expand their interests in leveraging commercial space capabilities for a variety of existing and emerging mission applications. During the quarter, we expanded some of our major existing contracts and closed on a number of new contracts. First, we were awarded over $9 million in contract expansions with existing U.S. government agencies for our advanced imagery and analytic services. We're pleased that many government agencies continue to rely on BlackSky for our space-based capabilities, and we look forward to continuing to build our relationships with them. Second, we won a contract with the U.S. Air Force Research Laboratory, funded by the U.S. Space Development Agency, to provide an automated target recognition service to track mobile assets in real time. This contract will leverage our proprietary AI capability to fuse together multiple satellite data sources, such as radio frequency and electro-optical sensor data, to track and maintain custody of moving vehicles. This project will demonstrate secure dissemination of actionable intelligence to remote devices and analysts worldwide. This is another example of some of the advanced capabilities BlackSky is developing to support Department of Defense requirements for space-based intelligence. Turning to slide eight, a major achievement during the quarter was the successful integration of our high-frequency imagery services with the NRO's commercial imagery architecture. The U.S. government has been designing and building a commercial imagery and data architecture to streamline the ordering and receipt of products. This capability enables commercial providers like BlackSky to integrate and scale the delivery of imagery via a series of APIs and enterprise interfaces to government end users. BlackSky has been working with the NRO on the integration into this architecture since the beginning of the EOCL contract. In Q3, we successfully completed the initial operating capability, or IOC, milestone required under the contract. Black Sky is the first commercial imagery company to successfully integrate and validate performance of this architecture. This was an important milestone as it further improves access and utilization of Black Sky's imagery within the U.S. government. As evidenced by some of the key wins this quarter, BlackSky continues to win new advanced R&D programs to support emerging mission requirements. Slide 9 shows some of our capabilities supporting recent contract awards. For example, earlier this year, we released our multi-frame burst imagery capability, which takes multiple images in succession to achieve a near video collection. This burst capability can be used by our AI algorithms to identify moving targets and create 3D models. Another example is the AI platform that we developed as part of the government's IARPA Smart Program, which uses AI to provide broad area search capability and analytics on over 35 million square kilometers of imagery. In anticipation of the U.S. government's growing requirements for space situational awareness, we've been able to demonstrate the use of our satellites to capture non-Earth images of objects in space, showing the versatility of our satellite constellation. Customers have also taken advantage of our advanced AI-enabled site monitoring capabilities, which provide automated detection and classification of objects of interest. such as airports, ports, and ships around the world. Through the combination of our AI-enabled analytics with our high-performance constellation, we are able to rapidly develop and deliver innovative next-generation technology solutions that can be instrumental in our customers' ability to leverage space-based intelligence. Turning to slide 10, I'm happy to report that our Gen 3 satellite program remains on track for launch in 2024. We are now receiving critical and long lead components and are moving into the assembly and integration of the first units. We are also scaling our satellite manufacturing production line and will provide more details on specific timing of the program as we progress in 2024. In summary, we're pleased with the record revenues achieved in Q3, demonstrating the strong customer demand in the market and the ongoing momentum in winning new contracts and renewal agreements that position us for continued revenue growth. I'll now turn it over to Henry to go through the quarterly financial results in more detail. Henry?