BlackSky Technology Inc. Class A

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 2024. 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 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 2024, 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?

Thanks, Ali, and good morning, everyone. Thank you for joining us on today's call. Let's begin with slide three. I'm pleased to report that BlackSky delivered another strong quarter as we continue to demonstrate revenue growth, the strong operating leverage of our business, and positive adjusted EBITDA operations. Our performance in Q2 was primarily driven by the ongoing demand we're seeing for our differentiated space-based intelligence solutions from new and existing government customers around the world. Let me share some of the Corridor's key highlights. First, we delivered strong year-over-year revenue growth in Q2 of 29%. Demand for our imagery and analytic services continues to grow as customers incorporate high-frequency, low-latency black-sky data into their daily workflows. Second, we were awarded $40 million in new awards and extensions in the quarter, supporting U.S. and international government agencies demonstrating strong customer demand for BlackSky's capabilities. Third, we delivered another quarter of positive adjusted EBITDA, driven by our strong revenue growth and operating leverage. This was our third consecutive quarter of positive adjusted EBITDA. And fourth, our next generation, very high resolution Gen 3 satellites are in the final stages of assembly, integration, and test. Our team is actively preparing for launch and commissioning operations and are excited that our first 35 centimeter resolution satellite remains on track for a planned launch in late Q4. I will talk more about our Gen 3 constellation and our progress in ramping satellite production at Leostella in a few minutes. These highlights demonstrate how we're executing well on our business plan and meeting the growing global demand for space-based intelligence. We continue to deliver strong operating leverage through our high-margin imagery and analytic services while we remain focused on responsible cost management. Our ability to deliver strong quarterly performance has us on the right path toward long-term profitable growth. I would now like to share some operational highlights from the quarter. Turning to slide four, during the quarter, we won several new and follow-on contracts across various U.S. agencies. demonstrating the ongoing demand for our imagery and analytic services across the U.S. government. I'm pleased to report that the NRO extended its subscription to our high-frequency Gen 2 imagery services under the Electro-Optical Commercial Layer, or EOCL, contract. This extension represents continued confidence in Black Sky as a trusted mission partner as the NRO leverages commercial space to support national security needs. We look forward to unlocking future EOCL subscription services as our Gen 3 capacity comes online. During the second quarter, we want a new task order with the U.S. Air Force Research Laboratory. This new order continues advanced development of AI-enabled moving target detection services. Under this contract, the government is leveraging our advanced AI capabilities to detect, track, and identify moving targets using multiple government and commercial data sources. We've also won several contracts and options with new customers acquired through the Global Data Marketplace, or GDMP. For those who may not know, the GDMP is a new online marketplace whereby U.S. government agencies can connect with commercial providers to contract for a broad range of data and analytic services in support of various mission needs. This service enables government end users to quickly request and get delivery of unclassified intelligence through a streamlined acquisition process. BlackSky has been successful in reaching new customers through this marketplace who are looking to quickly access our advanced high-frequency imagery and AI-enabled analytic services. The contracts we've won through the GDMP are rapid, quick turnaround services, providing a new channel that puts the power of real-time space-based intelligence in the hands of many more government end users. Although GDMP is still in its early stages, We look forward to winning a growing number of similar contracts over time and using this marketplace as a new sales tool that's part of our land and expand strategy. Turning to slide five, the need for real-time intelligence continues to expand across many international markets due to an ever-changing geopolitical and economic environment. More and more international governments are looking to invest in space-based capabilities in support of their national security and economic growth initiatives. In the second quarter, we announced a $7 million contract renewal with one of our long-term international government customers. This customer will continue to access our high-frequency imaging services, as well as task multiple third-party data sources through the BlackSky Spectra platform. This offering provides this customer with a single, easy-to-use platform to access black sky and a constellation of partner satellites to provide comprehensive, high-frequency, all-weather, day-and-night imaging and analytic services to meet their daily mission requirements. During the quarter, we were also awarded multiple six-figure subscription contracts in support of various international government agencies. we're making great progress expanding our international customer base as we continue to execute and deliver on our land and expand strategy. In fact, revenues from international customers in the second quarter more than doubled over the prior year quarter, with revenues from international customers now representing 40% of our business. Building a diverse customer base with high visibility subscription revenue is a key element of our plan toward long-term, sustainable, profitable growth. I'm pleased that we continue to make progress in many markets around the world and believe we are well-positioned to expand these accounts over time when our 35-centimeter Gen 3 constellation comes online. Turning to slide six, I'd now like to share a customer use case that highlights the power of our space-based intelligence capabilities and how our on-demand Spectra platform enables end users to rapidly respond to important events that may impact their security or economic interests. In this case, our dynamic monitoring services, accessible through our Spectra software, played a key role in a counter-drug operation in Latin America. About six weeks ago, an international defense organization detected a suspicious aircraft entering their country's airspace, which they believed was carrying illegal narcotics. After assessing the situation, this customer ultimately decided to take down the aircraft to intercept the illegal transport of drugs. As part of this mission, their operations team used Black Sky Spectra's self-service platform to task our high-frequency constellation, to obtain real-time imagery of the area where the plane was shot down. Because of our real-time service, we were able to successfully capture high resolution imagery of a specific location and deliver timely and actionable intelligence during their active mission. This is just one example of how BlackSky is changing the user experience and putting the power of space-based intelligence directly in the hands of users through a fully automated AI-enabled Spectre platform. Through subscription-based access to our imagery and analytics services, government agencies around the world can rapidly respond and receive space-based intelligence to meet their needs for timely and accurate mission-critical intelligence. Moving on to slide seven. We're pleased to report that the production of our Gen 3 satellites is on track, and the first units are in the final phases of assembly, integration, and test. Our team has already begun mission dress rehearsals and are planning for the launch of our first Gen 3 satellite in late Q4. Our Gen 3 satellites will add very high-resolution, 35-centimeter imagery to our existing dynamic hourly monitoring constellations. When combined with our Spectra AI platform, our Gen3 Constellation will provide our customers with transformative space-based intelligence that will deliver a next level of speed, performance, and AI-enabled insights for a first-to-act advantage. Our Gen3 Constellation remains on track to unlock our next phase of growth. The improved resolution, combined with high-frequency imaging, and automated AI analytics will enable new timely insights that are not achievable using traditional mapping constellations. The demand for this capability is evidenced by the significant contracted backlog we've been able to secure over the past few years from major U.S. and international customers through multi-year subscription-based contracts. As we start a deployment cadence of Gen 3 satellites in 2025, we expect to start unlocking our next phase of growth through the delivery of services from this contracted backlog and through the expansion of existing land and expand contracts. Turning to slide eight. As a reminder, our Gen 3 satellites are being produced by Leostella, our satellite manufacturing joint venture. This state-of-the-art manufacturing capability was built from the ground up to support agile and rapid small satellite production. Lea Stella has an exceptional track record of producing highly reliable, high-performing small satellites, as evidenced by the deployment of our Gen 2 constellation over the past several years. The Gen 2 constellation continues to perform well and is meeting or exceeding all of our performance and expected mission life objectives. This level of performance and on-orbit heritage has been incorporated into our Gen 3 design and satellite production line. In addition to the production of our first Gen 3 satellites, Leostella has been ramping up supply chain and production operations to support a sustained rate of production of these satellites to meet our Constellation deployment objectives. The fact that we are beginning to launch our next generation of satellites in less than two years from the completion of our Gen 2 constellation demonstrates how BlackSky is changing the industry by combining the agility and speed of a new space architecture with a real-time and fully automated AI-enabled software platform. Lea Stella further enhances this competitive advantage through vertical integration that enables us to bring responsive solutions to market at disruptive speed and economics. enabling customers to accelerate their space-based intelligence initiatives. In summary, we're pleased that our Gen 3 satellites remain on track and that Q2 was another strong quarter, highlighted by strong bookings, continued revenue growth, operating leverage, and positive adjusted EBITDA operations. I'll now turn it over to Henry to go through the quarterly financial results. Henry?

Thank you, Brian, and good morning, everyone. I'm pleased with the execution we've made across many aspects of our business and with our second quarter financial results. Beginning with slide 10, total revenue for the second quarter of 2024 was $24.9 million, an increase of $5.6 million, or 29% over the prior year quarter. Imagery and analytics revenue grew to $17.5 million, an increase of $2.2 million, or 14% over the prior year period. The year-over-year increase was primarily driven by incremental customer orders for BlackSky's imagery services. Professional and engineering services revenue grew to $7.4 million in the second quarter of 2024, compared to $4 million in the prior year quarter. The 87% year-over-year increase was primarily driven by the step-up in the execution of multiple major international contracts we won last year. Keep in mind, Revenues recognized from these types of contracts, which are largely milestone-based, may have quarter-over-quarter revenue variability depending on a project's estimated cost and percentage of completion. Turning to cost of sales, we continue to demonstrate strong operating leverage in our imagery and analytics business as shown on slide 11. For the first half of 2024, imagery and analytics cost of sales, excluding stock-based compensation, depreciation, and amortization expenses was $6.8 million compared to $7 million the same period last year. The $200,000 year-over-year decrease was primarily driven by cost savings in our satellite and software operations. With imagery and analytics revenues for the first half of 2024 increasing nearly 14% and the respective cost of sales decreasing 3% over the prior year period, we continue to demonstrate how incremental high margin revenues flow directly to the bottom line, which is a key driver to our long-term profitable growth. Let's move to slide 12 and talk about cash operating expenses, which excludes stock-based compensation and depreciation and amortization expenses, as we believe these non-GAAP financial measures enable us to better manage our expenses without having non-cash items obscuring the underlying performance. For the second quarter of 2024, cash operating expenses were $16.3 million, a $500,000 improvement compared to our prior year quarter. This year-over-year improvement was primarily driven by ongoing reductions in general corporate costs which more than offset investments we've been making in our go-to-market initiatives. Over the last four quarters, we've reported year-over-year reductions in cash operating expenses which further demonstrates our laser focus on managing costs responsibly and our success in running an efficient business model. Turning to slide 13, our adjusted EBITDA for the second quarter of 2024 was $2.1 million. This was an increase of $7.9 million compared to the prior year period. Not only was this a strong performance over the prior year, but we're pleased that we delivered our third consecutive quarter of positive adjusted EBITDA. The year-over-year improvement in adjusted EBITDA that we continue to realize on a quarterly basis is primarily driven by increased revenues from new and expanded customer contracts, improved margin performance, especially in our core imagery and analytics business, and cost savings and efficiencies in our cash operating expenses. Moving on to our balance sheet, we ended the second quarter of 2024 with $42.3 million of cash, restricted cash, and short-term investments, which included $20 million we received in the quarter from a commercial bank line. As of the end of June, we had over $28 million in contract assets, which we expect to receive in payments over the next 12 months as interim milestones on a few major customer contracts are met and expected to be built. Together with the vendor financing we have in place for our upcoming Gen 3 launches and the adjusted EBITDA improvements we expect to continue delivering, we believe we have sufficient liquidity for the foreseeable future. Now let's move on to our 2024 outlook as shown on slide 14. We're pleased with our first half operating results and are anticipating a strong second half of the year. As a result, we are maintaining our full year 2024 guidance of revenue between 102 to $118 million, adjusted EBITDA of between eight to $16 million, and capital expenditures of between 55 and $65 million. In summary, we're pleased with our financial performance in the second quarter and the progress we've made across many aspects of our business. With that, I'll turn it back over to Brian for some closing remarks. Brian?