BlackSky Technology Inc. Class A

Good morning, ladies and gentlemen. Welcome to Black Sky Signal Use third quarter 2024 earnings conference call. All lines have been placed in mute to prevent any background noise. After the speaker's remarks, there will be a question and answer session. To ask the questions, you may press star 10-1 on your touchtone phone. To withdraw your question, please press star 1 again. Please note this conference call is being recorded. I would now like to turn the call over to Ali Banila, Black Sky'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 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 November 21st. 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 .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 plan, 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 Black Sky delivered another strong quarter as we made great progress across many aspects of our business and continue to deliver -over-year revenue growth. Demand for our space-based intelligence solutions has never been higher as we delivered near-record bookings, which is further expanding our customer base and strengthening Black Sky's position to achieve long-term, profitable growth. Let me share some of our recent highlights. First, we won new and follow-on contracts valued at up to $780 million. This was one of our strongest quarters for bookings in the past two years as demand for Black Sky space-based intelligence solutions continues to grow from government customers around the world. Second, we raised over $45 million in growth capital to fully fund our baseline Gen 3 constellation, which further strengthens our balance sheet. Third, we are excited that our first very high-resolution Gen 3 satellite is completing final pre-ship testing and is expected to ship to the launch site in the next few weeks. Next, we delivered our fourth consecutive quarter, a positive adjusted EBITDA, driven by our high-margin imagery and analytics revenue and the strong operating leverage inherent in our business model. And finally, we delivered -to-date revenue growth of 22% as compared to last year. As we ramp revenues from new contract awards and work to close additional major contracts in the fourth quarter, we remain on track to deliver against our full year revenue and adjusted EBITDA goals. I'd also like to mention that we are honored to have won the 2024 Leading Earth Observation Business Award by Nova Space, formerly known as EuroConsult, at this year's World Space Business Week in Paris. This award recognizes the most forward-thinking companies and innovators shaping the future of the global space sector, and we're happy to have received this distinguished honor. This award, along with our recent highlights, continues to exemplify how Black Sky is leading a new era of space-based intelligence. I would now like to share some operational highlights from the quarter. Turning to slide four, we continue to see strong growth from U.S. defense and intelligence agencies looking for Black Sky's high-frequency imagery and advanced analytics. During the quarter, we were pleased to announce that Black Sky was awarded the LUNO-A contract, valued up to $290 million from the National Geospatial Intelligence Agency, or NGA, which is the first part of the larger LUNO program. The LUNO program is one of the government's largest contracts to procure commercial space-based analytics services and demonstrate the government's long-term interest and commitment in acquiring subscription-based monitoring and analytics services. This multiyear IDIQ contract award is a follow-on contract to the Economic Indicator Monitoring, or EIM, program, which we won back in 2021 and has successfully supported through multiple delivery orders. Through this LUNO-A contract, we will assist NGA in the monitoring and analysis of global economic and environmental activity, as well as military capability, using our current Gen 2 and future Gen 3 satellite constellation. Throughout the program, we will be leveraging our advanced AI technology to automatically detect and identify objects, such as ships, aircraft, vehicles, and shipping containers, and deliver intelligence and change monitoring services over critical areas of interest. This advanced analytics capability is powered by our Multi-Inch Spectra software platform, which is enabling new and innovative broad area search techniques to process a large number of images at a massive scale, utilizing data from multiple sensors and third-party sources. By combining AI-driven detection analytics with our high-frequency constellation and our proprietary broad area search capabilities, we will enable NGA to receive real-time and mission-critical insights on changes and emerging events. We're pleased to have won this award and have already received the first delivery order under the Lunaway contract. We look forward to expanding our long-term partnership with NGA as they begin to ramp up the award of new task orders in 2025. Moving to slide five. Another major contract win in the quarter was with NASA to support their commercial small-sat data acquisition program. This multi-year IDIQ contract award is valued at up to $476 million. Under this contract, Black Sky will provide NASA with time-diverse, high-revisit satellite imaging data, providing new insight in support of the agency's important research on Earth and applied science. NASA-backed researchers worldwide will be able to use Black Sky imagery to broaden their understanding and develop actionable scientific observations around the most critical changes taking place on Earth. Integrating Black Sky's advanced data into NASA's research data repository provides another valuable example where government agencies can significantly benefit from our real-time dynamic monitoring capabilities. Turning to slide six. We're also continuing to win new and expansion contracts with existing defense and intelligence customers. I'm pleased to report that we signed a $6 million contract expansion with one of our long-time international defense sector customers. With this increased subscription agreement, the customer's total annual contract value increases to nearly $18 million and validates how Black Sky's space-based intelligence solutions are relied upon every day to support mission-critical operations. We continue to win various awards for the rapid delivery of our space-based intelligence solutions through the Global Data Marketplace, or GDMP. These awards are for short-term services occurring within weeks to months that quickly translate into incremental revenue. As a reminder, the GDMP is a new online marketplace that streamlines the acquisition process for U.S. government end users looking to contract and quickly receive a broad range of commercial data and analytics services in support of various mission needs. We are seeing increasing opportunities through the GDMP and believe this can become a long-term, viable sales distribution channel to a broader set of missions and end users. In addition, we awarded contracts with multiple U.S. government customers looking to explore applications for integrating optical inter-satellite link terminals, or OISL, into our Gen 3 satellites. For those who may not know, OISL are laser-based communication relays that enable faster communication and transmission of data through satellite networks. We are currently in the process of incorporating OISL terminals into our Gen 3 design. The objective is to be compatible with both the Space Development Agency's transport layer and commercial space transport layers. Once operational, we expect delivery timelines to improve by 10 times, further reducing the already low latency delivery of our imagery and analytics services that we are delivering today. This type of program validates our agile approach to space as we can rapidly deliver incremental enhancements to our space network aligned with our customers' evolving mission needs. We look forward to enhancing our Gen 3 constellation with OISL capabilities and providing government customers with real-time access to imagery to support time-sensitive tactical ISR missions and military operations around the world. Moving on to slide seven, we're excited to announce that we recently launched a new product offering to provide automated non-Earth imaging services to meet the growing demand for Space Domain Awareness, or SBA. Space Domain Awareness missions are vital for identifying, characterizing, and tracking objects in space and understanding their operational environments. Delivering non-Earth imaging services is made possible due to the agility of our satellites, which enable us to capture images of objects in space. This capability offers additional revenue generating opportunities at a time when our satellites are either passing over the ocean or traveling across the dark side of the Earth. In response to this new service offering, we were awarded seven-figure contracts with government and commercial customers. One of these new contracts is with HEO, an Australian space company dedicated to delivering non-Earth imaging solutions at scale to government, defense, and commercial customers. Through a subscription data services contract, Black Sky will enable HEO to task and receive high-resolution non-Earth imaging services to give their customers actionable space-based intelligence about on-orbit objects of interest. Another contract we won provides non-Earth imaging services to the US government to address critical needs in Space Situational Awareness, or SSA. SSA data is critical for maintaining space safety and facilitating real-time space traffic coordination, as well as helping space operators predict and avoid collisions between objects or avoid debris that might affect operations. As part of this contract, Black Sky will integrate Gen 2 satellite imagery of on-orbit spacecraft into the customer's collection of space domain awareness assets. Our non-Earth imaging services is a new way to further monetize our constellation capacity and expand the revenue potential for high-margin imagery and analytics services. We expect this new subscription-based offering will expand over time as we are seeing increasing demand for data services to support this important mission. We are excited to bring this new and innovative offering to market to serve a broad array of SDA missions worldwide and expand our customer base. Turning to slide eight, we're excited to report that our first very high-resolution Gen 3 satellite is in the final testing phase in preparation for launch. Once final testing is complete, we will ship this first unit to Rocket Lab's launch site in New Zealand, where we have a dedicated rocket ready to go through our launch services agreement. As we narrow down the ship date, we will be working on finalizing the launch window, which we expect will open three to four weeks after shipment. Expanding our constellation with our new Gen 3 satellites will provide customers with new space-based intelligence solutions powered through a -its-kind platform that combines high-frequency monitoring with very high-resolution 35-centimeter imaging and real-time AI-enabled insights. There is strong demand for this capability as evidenced by the significant contracted backlog we have already secured from leading defense and intelligence customers around the world. We look forward to introducing the advanced performance of our Gen 3 satellite in the first quarter of 2025. We are excited about the transformative solutions that this constellation will deliver for years to come and delivering new mission-critical insights to our customers while unlocking our next phase of growth. Moving to slide nine, while we remain focused on getting our first Gen 3 satellite into orbit and operations, we have also been focused on the scalable production of these satellites to support a regular launch cadence beginning next year. To that end, our Gen 3 production line is up and running with a number of Gen 3 satellites in various stages of production that extend from securing long lead supply chain component deliveries to the assembly and integration phases of our next units. Once we demonstrate on-orbit performance of the first satellite, we plan to begin a regular cadence of Gen 3 deployments starting in 2025. To support our Gen 3 production objectives, we've taken active steps to further optimize the Gen 3 supply chain and production operations, which includes the acquisition of our partner stake in Leostela. We are excited to be able to combine the expertise of both the Black Sky and Leostela teams to drive rapid innovation on our Gen 3 platform, deliver unparalleled value to our customers, and fuel growth for our business. In summary, we're pleased with the operating performance in the quarter, highlighted by the significant number of large contract wins, continued revenue growth, strong operating leverage, and the progress we made on getting Gen 3 ready for launch. 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 how we're progressing year to date. Beginning with slide 11, the year to date revenue for 2024 was $71.7 million, an increase of $12.7 million, or 22 percent over the prior year period. We did see some timing delays in Q3 related to our new customer contract wins and the associated ramp-up of those imagery and analytic revenues, as well as the expansion of services with an existing government customer. But we expect these revenues to shift into Q4 and not impact our full year results. Year to date imagery and analytics revenue was $52.6 million, an increase of $6.2 million, or 13 percent over the prior year period. The year over year increase was primarily driven by instrumental customer orders for Black Sky's imagery services. Year to date professional and engineering services revenue was $19.1 million, an increase of $6.5 million, or 52 percent over the prior year period. The year over year increase was primarily driven by new engineering projects that began in late 2023 and ramped up this year, as well as higher professional services fees from new customer contracts. Looking at professional and engineering service revenue on a year to date basis minimizes the quarter over quarter variability that is often attributed to these types of contracts, which are largely milestone based. Turning to cost of sales, we continue to demonstrate strong operating leverage in our imagery and analytics business, as shown on slide 12. On a year to date basis, imagery and analytics cost of sales, excluding stock-based compensation, depreciation, and amortization expenses, remained flat as compared to the same period last year at $10.4 million. Keeping year over year cost of sales flat, while increasing imagery and analytics revenue 13 percent, validates once again how our incremental high margin revenues pass directly to the bottom line. This performance is a result of our low cost operating structure and cost effective financial model that gives Black Sky the significant ability to grow and scale our business efficiently. Let's move to slide 13 and talk about cash operating expenses, which excludes stock-based compensation, depreciation, and amortization expenses, as we believe this non-GAAP financial measure enables us to better manage our expenses without having non-cash items obscure the underlying performance. For year to date 2024, cash operating expenses were $48 million, a small improvement compared to the $48.7 million in the prior year period. The reduction in cash operating expenses was primarily driven by ongoing reductions in general corporate costs, which more than offset investments made into our business. As discussed on prior calls, we continue to maintain a disciplined cost management approach and consistently look for areas where we can further drive efficiencies in our business. Turning to slide 14, we're pleased to report that we delivered another quarter of positive adjusted EBITDA in Q3, making it our fourth consecutive quarter of positive results. On a year to date basis, adjusted EBITDA was $4.3 million compared to an adjusted EBITDA loss of $10.3 million in the prior year period. The strong -over-year improvement of $14.6 million was primarily driven by increased revenues, improved gross margin performance, in both our core imagery and analytics service, as well as our professional and engineering service business, in reductions in our cash operating expenses. Moving on to our balance sheets, we're pleased that we successfully completed an equity capital raise in late September, generating $46 million in gross proceeds. This additional growth capital further strengthens our balance sheet and we believe fully funds our baseline Gen 3 Constellation Business Plan. As a result of this transaction, we ended the third quarter of 2024 with $64.4 million of cash, restricted cash and short-term investments. This ending balance included net proceeds of approximately $44.6 million raised in the quarter, less a $10 million debt repayment on the commercial bank line, which remains available to us if we choose to draw on it again. Also, as of the end of September, we had $26.7 million in contracted assets, down from $28.2 million at the end of June 2024, as we met certain contract milestones during the quarter and were able to invoice for these services. We expect to build and receive payments on the current $26.7 million in contract assets over the next 12 months as we continue to meet interim milestones on a few major customer contracts. These actions, combined with the adjusted EBITDA improvements we expect to continue delivering, will contribute to our strong liquidity position and push us on a path to reach free cash flow break even. Now let's move on to 2024 outlook as shown on slide 15. We're pleased with our -to-date operating results and the recent success we've had winning new contracts. We're signing some ramp-up revenues from these new contract awards while also continuing to work on closing a number of sizable new contracts and expanding agreements with existing customers in the fourth quarter. However, there is some degree of uncertainty surrounding the timing of these contracts and when we can begin to recognize revenue. Taking this into consideration, we are maintaining our full year 2024 guidance of revenue between 102 to $118 million, adjusted EBITDA of between $8 to $16 million, and capital expenses of between 55 and $65 million. In summary, we're pleased with the progress we continue to make across many aspects of our business. With that, I'll now turn it back over to Brian for some closing remarks.

Brian? Thank you, Henry. In closing, we're pleased with the growing demand we're seeing for our space-based intelligence solutions as demonstrated by the near-record multi-year contract bookings we delivered this quarter. We are excited that our Gen 3 satellites are readying for launch and the innovative solutions that we will begin to deliver in 2025 as we begin a regular cadence of launches to meet the strong demand for this capability. With the capital raised this quarter, we have strengthened our position to execute on our business plan. We are looking forward to a strong finish to the year in line with our full year guidance and the opportunity to deliver the best of the best of the best that lie ahead in 2025. This concludes our remarks for the call, and we'll now take your questions.

Thank you. At this time, I would like to remind everyone in order to ask a question, press star then the number one in your touchtone phone. To withdraw your question, please press star one again. We will pause for just a moment to compile the Q&A roster. Again, press star one to join the queue. And your first question comes from the line of Jason Smith with Lake Street. Thank you. Please go ahead.

My question is, I just want to touch on your comments on some of the revenue being pushed out of Q3 and into Q4. Just curious if you could quantify how much revenue was actually pushed.

Morning, Jason. You know, as Henry mentioned in his call, his remarks, we had some revenues that pushed into the quarter. We're also working on ramping revenues from contracts that we recently won. So, as you know, we do have some lumpiness in the business tied to some of these milestone driven contracts. And so, this is natural for the business. And we're, you know, we're expecting that deliver a strong fourth quarter and remain in line with our guidance.

Okay. No, that's great to hear. And then you noted some really nice bookings activity in Q3. Just curious how much of this was related to Gen 3 capacity. And I guess relatedly, if you could just comment on what you're seeing from bookings activity so far here in Q4.

Yeah, I think what's exciting about what we delivered in Q3 was I don't think any of it was related specifically to Gen 3. It was primarily driven by what we have today. Moving into Gen 3, the LUNO award was really driven by our software and AI analytics capabilities that we demonstrated in the early phases of EIM, which drove some nice revenue growth there and have us well positioned to capitalize on that new contract. So, you know, we've secured a lot of Gen 3 contracts as we have talked about in the past. These contracts are really not only for Gen 3, but really driven by software and AI.

Okay. No, that's really helpful. Thanks a lot, guys. Thank

you. Thank you. And your next question comes from the line of Scott Buck with HCC Wenright. Thank you. Please go ahead.

Hi. Good morning, guys. Thanks for taking my questions. First, I'm curious of the 26 or just under 27 million of milestone payments expected over the next 12 months, what is the cadence look like? Are those evenly distributed or should we expect, you know, a lumpy or significant amount of that coming in a single quarter?

Yeah, I may throw it over to Henry, but I think, you know, they're all tied to milestone based contracts that are all different. So you're not going to see a smooth recognition. But, you know, as you said, you know, those are planned for the next 12 months. But Henry?

Yeah, sure. Scott, this is Henry. Yeah, no, we do expect those coming in over the next 12 months. They are somewhat lumpy. You can see between Q2 of this year and Q3 of this year, we had a net reduction of about one and a half million. So we are being able to hit some of those milestones a little bit earlier. And then we'll just kind of continue to do that. I mean, we'll always have a little bit there, but the vast majority will be able to collect without putting new bookings into there.

Great. I appreciate that. And then second, Henry, with the GEN3 launches coming up and I guess being more active in 2025, any change in OPEX? Are there any costs that are directly tied to managing the GEN3s that are not in 2024 OPEX?

As we're looking at our business line, I mean, we're maintaining our guidance for this year in terms of both revenue adjusted if it's on CAPEX. So that kind of keeps us pretty well covered here. As we go into 2025 and working with our GEN3s, it's using the same ground network that we're having. It's using the same infrastructure, so there shouldn't be any significant changes.

Perfect. That's great. And then last one, just curious if you guys are seeing any change in the sales cycle, any urgency or people going to move faster or just the broader macro, there's been some hesitation, or not really macro, but geopolitical. David, a little?

I think, Scott, we're seeing a couple of things. I think we're definitely seeing growing demand. And you're seeing that reflected in the contracts we're winning and the backlog that we're building. The cycles themselves are still remaining pretty typical for government contracts, both in the US and internationally. So the good news there, we have a pretty good handle on those cycles, and we're performing on capturing contracts to capitalize on the demand.

I appreciate the time, guys.

Thank you, Scott.

Thank you. Your next question comes from the line of Josh Sullivan with the Benchmark Company. Thank you. Please go ahead.

Hey, good morning. Good morning, John. Hey, just following up on the operating leverage question there, we look at this quarter's results, and you talked about lumpiness and with revenues moving out or moving to the right. But on the other side, when we think about that regular cadence in 2025 on the launch of the Gen 3 and as that picks up, is there any way to just kind of frame what that operating leverage might look like in 25, just as you get maybe past some of this lumpiness?

Well, I think as Henry said, we are demonstrating strong operating leverage due to the kind of fixed, generally fixed operating platform that we have in the ground and in our software. I think what, Josh, you can expect to see is we're securing contracts, particularly things like Luno, which should begin to ramp nicely for us in a way we similarly performed under the prior contract. As we bring Gen 3 capability online next year, we're going to begin to start unlocking the revenues from the backlog we already secured around that capability. So we will always continue to do some of these professional engineering projects, so that there'll be some lumpiness related to that, but we do expect that some of the imagery and analytics revenues will begin to smooth and grow. But Henry, do you want to add to that?

Sure. I mean, Josh, as we talk in the script and we talked in the prepared remarks, we take a look at our operating costs associated with imagery and analytics. We did about 10.4 million of operating costs this year over the first nine months, so call that a neighborhood of three and a half to four million a quarter. That's basically what it costs to run our ground station, our ground network. Yes, there will be a little incremental increases for additional data transmissions, but as I said earlier on the call, I wouldn't expect there to be any significant increase in costs associated with our imagery and analytics, our key component of the business.

Okay. Got it. And then just on the OISL design that's being integrated into Gen 3 here, how much of a lift is that design addition, and then is there anything proprietary on the black sky front that's being added into that technology?

Well, in our Gen 3 design, we've already made considerations in provisioning in the design for this type of capability. What we're doing now is looking at very specific implementation related to different types of terminals and networks that we're going to integrate with. I think from a proprietary aspect, our focus is on really delivering high-frequency, low-latency intelligence solutions, which we're already doing today. So this, and the software in the AI is also a pretty critical component of enabling that to happen. So this is pretty exciting in the sense of what will happen on the hardware side, but the really important aspect of this is when it's implemented in the total system of the speed and low latency that we'll be able to achieve in delivering actionable information and insights to our customers.

Great. Thank you for the time.

Thank you. And your next question comes from the line of Jeff Andre with Craig Helm. Thank you. Please go ahead.

Yeah, thank you. Good morning, guys. Apologies. I missed most of the initial comments. I was in the queue waiting for an operator here, so some of these might be redundant. Henry, as it relates to the guide, I'm curious. Obviously, we've got a very steep ramp here, Q3 to Q4. What are you expecting? How much of that ramp, sequentially here, is going to come from professional services, trying to understand the data that's being used? The sequential jump, Q3 to Q4.

Well, we don't guide by individual product or revenue lines, revenue streams at the moment, but when you take a look at where we are, we've got about, when the queue comes out, you'll see we've got about $25 million already sitting in backlog, consistent with where we were about this time last year. We do have a number of projects that we're working on, as Brian would have mentioned earlier, that relate to work that we're already completing in anticipation of these contracts to be completed. Some of those would be professional services, some of those would be imagery and analytics projects.

OK, so you're looking at for about $7.5 million of sequential at the low end, and last year you had three flat sequential quarters, a big jump in Q4. This year you've had three flat sequential quarters, you're looking for a big jump in Q4. When you look at that jump, Q3 to Q4, how many contracts did drive it last year and is expected to drive it this year? Trying to understand the drivers here.

Yeah, I think, Jeff, there's a couple of drivers. I think Q4 is a natural quarter where a number of our long-term existing customers renew. So we get a natural step up in the fourth quarter related to those renewals and expansions. And then, you know, we continue to close other larger deals, which has some lumpiness to it. So it's a combination of both. But there is some natural step up in Q4 as it relates to the timing of contracts.

Is there anything implicit in what you're guiding here for Q4 that is not sustainable in the following quarter, Q1? Trying to understand if I can look at what you're implying as a baseline for Q4, as a starting point for Q1 of the following fiscal?

I think Q4 will reflect what we planned in the business, which have a continued growth in our imagery and analytics combined with additional projects related to professional and engineering services.

OK. And then lastly, I guess for me, as you look at the overall bookings value, any ability to provide us more of an ACV-based bookings sense that gives us a little more clarity on what the annual values are as opposed to the overall contracts you're part of and are multi-year?

Yeah, we're not providing that at this point, but I think it's what you can assume is we are building nice backlog and strong visibility into ACV related to the subscription contracts that we have. The EOCL is a good example of that. Luno is a task order-based contract, but we grew that very nicely into subscription revenues. You saw the announcement on our renewal, I think our fifth renewal of the major international customer, which is driving about $18 million of annual commitments from them. So we are building to a strong ACV business related to that. But there's still some lumpiness, so we're hesitant about guiding to it.

OK. Thank you.

Thank you. Again, if you would like to ask a question, press star 1 on your touchtone phone. And your next question comes from the line of David Storm with Stonegate. Tinky, please go ahead.

Good morning, and thank you for taking my questions. My first one is just around Gen 2, after Gen 3 starts going up. What's kind of the remaining life of your Gen 2 satellites, and is there any decommissioning costs that we should be thinking about as Gen 3 starts to go up?

Yeah, so first off, Gen 2 is... Our constellation is operating extremely well. We have 12 satellites up there right now that are driving our revenue growth. We expect that constellation to continue to perform well throughout 25 and into 26. And then we'll begin to dovetail Gen 3 satellites into that constellation. As those Gen 2 satellites age out, there are no material incremental decommissioning costs related to that.

Understood. That's very helpful. And then I just wanted to ask one more around the new non-Earth imaging offerings. With these new offerings, is there any notable differences between the technology needed or the contracts or margins or anything of that nature?

No, I think what's exciting about that offering is that it leverages the capacity we already have on orbit, and it actually enables to expand how we monetize that capacity through our high margin imagery and analytic services. Bringing that type of capability to market is a testament to two things. The agility of our satellites enable to actually support that mission. But also as importantly is our software and AI capabilities use the command and process that type of data and deliver that to customers in a timely and reliable way. Think of this type of new services as incremental. High margin imagery and analytics revenues off of the capacity we already have on orbit.

Understood. Thank you for taking my questions and good luck in Q4. Thank you.

Thank you. And your next question comes from the line of Caleb Henry with Squilty Space. Thank you. Please go ahead.

Thank you. A couple of questions, I think most of mine have been answered at this point. But there's a mention in the presentation of the baseline constellation for Gen 3. Has Black Sky finalized what exactly that baseline constellation will be in terms of how many satellites?

Caleb, good morning. Our baseline constellation today is 12 to 14 satellites. That's what we have on orbit with Gen 2. The plan here for this baseline is to maintain those levels of satellites. So we'll begin to dovetail Gen 3 into that constellation. The primary driver of that number of satellites is maintaining our reliable hourly monitoring capability from space. So that is our baseline. We will look at expanding that constellation over time, commensurate with contracts and demand.

Okay. And then the presentation also makes mention of a partner stake in Leo Stella. I was wondering if you could clarify that a bit more because there are already a joint venture partner that makes Black Sky is increasing the stake. And if so, how does that change or reshape the relationship with Leo Stella?

Yes. Yes, as you noted, we had a 50% ownership stake in Leo Stella through our partner, Talis. We did acquire their stake in the company. And, you know, that's primarily driven by our objectives of scaling and driving efficiencies around the delivery of Gen 3. There's a lot of demand for that capability. Our partnership with Talis remains really strong. We're continuing to partner worldwide on bringing Gen 3 capability combined with their offerings to the market. And, you know, just as you recall, you know, we're continuing to pursue the types of contracts that we jointly closed with countries like Indonesia, which are bringing Gen 3 capability, our high margin data services, along with some of the space capabilities from Talis. So this is really just a step in just further scaling and optimizing our Gen 3 capabilities.

Okay. And then one other just follow up on that question. Does that mean that Leo Stella is going to be solely focused on the Black Sky constellation going forward, or are you going to continue to try and use that for third party sales that could potentially offset some of the Gen 3 costs?

Well, right now, you know, Black Sky is the primary customer for Leo Stella. So we've been essentially funding that business through our existing satellite production contract. So the focus right now, as I mentioned, is on the scaling of Gen 3 and optimizing those production operations. And so, you know, we think that this type of this move will give us better operating leverage because of the current situation. And we believe may result in better Gen 3 unit economics. So it's really, again, a step in strengthening our Gen 3 offerings.

Okay. And then just two quick questions. One is on Luno A. I was wondering if you could talk a bit about how that contract is split between imagery and analytics providers, if there is such a split and if Black Sky is able to participate in both, and then the opportunity that you see in the new NEI SSA market, that's something you expect to continue to grow?

Yeah, I think first on Luno A, I believe there was a published piece on the companies that won that contract. I believe there's 10. There's a mix of companies that are pure play analytics companies and others that are satellite operators with AI capability. We happen to be in a great position relative to the fact that we have a proprietary space capability and have demonstrated our ability to deliver the AI and software capabilities for this program under the EIM predecessor program. What's also positive for us is we have a prime position on the contract like we did before, but we are also able to serve as a vendor to the other providers to provide them data for their Luno task order. So pretty exciting for us. We think we're well positioned to capitalize on this program. And it's also pretty exciting that the government has really made this step in committing a significant amount of budget toward buying commercial space analytics services. So this was an important contract win and we're excited to begin ramping this going into next year. Oh, and then let me get to your NEI question. Yeah, I think as we outlined in the call, we have launched that new service that's leveraging the capacity we already have on orbit and our software and AI capabilities to deliver that type of monitoring and analytic solution. We are seeing a significant amount of demand for that capability. As we announced, we've already won a couple of seven-figure contracts for this capability and we're seeing that demand increasing. So we expect to continue to ramp revenues from that offering and also evolve the platform to further address the demand in the market for that. So pretty exciting development and again, another way to monetize what we already have invested in on orbit and drive high margin imagery and analytics revenues.

Thanks, guys. Appreciate the time.

Thanks, Caleb.

Thank you. At this time, there are no further questions. This concludes Black Sky's third quarter 2024 earnings conference call. The company thanks you for joining the call today.