Q3 2021 Blacksky Technology Inc Earnings Call
Greetings welcome to the Black Sky Technology third quarter 2021 earnings call. At this time all participants are in a listen only mode. A question and answer session will follow the formal presentation.
Anyone should require operator assistance during the conference. Please press star zero on your telephone keypad.
Please note. This conference is being recorded I'll now turn the conference over to your host CFO Johan Brookhaven you may begin.
Good morning, everyone I'd like to welcome you to the first ever Black Sky earnings call fiscal third quarter 2021.
Today's call will include comments from our Chief Executive Officer, Brian O tool, followed by our Chief Financial Officer, and Johan Brookhaven, and then wrap up comments by Brian and we will open the call up to that for live Q&A session.
A replay of this earnings call will also be available on our website information to access. The replay is listed in today's press release, which is available at black Sky Dot com in the Investor Relations section.
Before we begin I would like to remind everyone that todays call well in today's call, we will be making forward looking statements regarding future events and financial performance and guidance for our fiscal year 2021.
These forward looking statements are subject to known and unknown risks assumptions and uncertainties, including our outlook and guidance anticipated start date, the government contracts and customer capture our expectations regarding the impact of COVID-19, our ability to grow our business, which depends in part on the successful production launch commissioning.
Andrew operation of our satellites and related ground systems software and analytical technologies, all of which are subject to many uncertainties and our ability to keep pace with technological advances in our industry and successfully compete in a highly competitive market.
<unk> cautions that these statements are not guarantees of future performance Black Sky undertakes no obligation to revise any statements to reflect changes that occurs. After this call you should review our most recent SEC filings for a complete discussion of these factors and other risks that could cause actual results to have a material difference from these forward looking statements and.
It may affect our future results or the market price of our stock.
In addition, during today's call, we will refer to certain non-GAAP financial measures, including adjusted EBITDA.
Reconciliations of non-GAAP to GAAP measures and certain additional information a 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.
And with that we'll begin by turning the call over to our CEO, Brian O tool.
Thank you Johan and thank you for taking the time today to join US for our third quarter earnings call for fiscal year 2021.
And our first as a public company.
I'm pleased to report that we are continuing strong execution across all aspects of our business.
As we continue our mission of providing our customers the first advantage.
And leading a new era in real time global intelligence.
Achievements during the quarter include positive sales traction expansion of our global sales force and pipeline.
And progress on the expansion of our constellation and AI enabled.
SaaS platform.
Third quarter marked several major milestones.
Most importantly, black Sky completed its business combination with osprey.
<unk> $283 million of cash to fund our growth plan.
In addition, we bolstered the ranks of our executive management team with.
With several strategic executive hires all with public experience.
Including a chief Development Officer, Chief revenue Officer Chief.
Chief Financial Officer, and General Counsel.
<unk> also completed the build out of our board of directors with the appointment of subordinate and.
And Jim tolling at both seasoned veterans in their respective areas of expertise.
We now have a high caliber experienced team in place to.
To help drive our aggressive growth plans.
Demand remains strong in both the commercial and government sectors.
Hi, revisit imaging products and AI enabled analytics.
Starting with our defense and intelligence business.
<unk> was awarded several new multiyear contracts and extensions that include.
The expansion of our existing commercial imagery contract with.
With the NRO.
Which is driven by an increase in demand from operational end users for black skies high revisit imagery.
Imagery deliveries under this contract increased to 100% from the second to the third quarter.
Demand from the U S. Government has continued to grow as black Sky is now integrated into the day to day operations of the government.
We also announced the award of a $30 million five year IQ contract.
With the National Geospatial Intelligence agency.
This is for AI enabled economic monitoring.
This is a significant contract in that it reflects nga's move.
Our commercial analytics services.
In September we entered into a strategic commercial agreement with talented <unk>.
To accelerate black sky solution to <unk> customers and end users.
Through the integration of our platforms.
As part of this partnership talents here invested in black Sky through a subscription agreement.
We were also encouraged by the release of the <unk>.
Final RFP from the NRO for the electro optical commercial layer contract.
With proposals now due in early December.
As a reminder, this is the largest U S government contract to purchase commercial satellite imagery.
Over the next 10 years.
The objective of this new procurement is to open.
The market for multiple suppliers to the U S government.
The release of the RFP is a significant milestone in that it provides good visibility.
Due to the timing of contract awards, which are expected by the spring of 2022.
Internationally, we continue to support several major DNI customers and during the quarter added several new regional accounts we.
We see a large market opportunity here as we believe this is a supply constrained market with legacy players facing aging and supply constraint constellations.
Turning to our commercial business.
We are experiencing growing interest and opportunities across a range of industries and through major channel partners.
These opportunities are being driven by our disruptive customer experience, which.
Which is enabling users to affordably access our data and analytics.
Our on demand platform.
Today customers can log in tasked our constellation.
Data and AI derived analytics.
And under 90 minutes.
During the quarter, we added several new commercial customers and are making progress with major enterprise opportunities for the solutions in mining.
Services transportation and construction.
Today Im happy to announce the award of a five year multimillion dollar.
So source blanket agreement contract with NASA.
To provide high revisit satellite imagery.
Support of Nasa's existing Earth observation research.
With the objective to advance their capabilities.
And predictive analytics.
To spearhead our growth in our commercial business.
Last week, we announced our new Chief commercial Officer, Amy Minnick.
Who is a seasoned industry product and commercial markets executive.
Amy brings a strong track record.
Bringing commercial products to market at companies such as Lexis Nexis IH.
IHS and Digitalglobe.
Moving on to the expansion of our sales pipeline and global sales capacity.
Our sales pipeline continues to expand with growth being driven by strong demand.
From the government sector for analytics and advanced AI as.
As well as a broad range of commercial opportunities.
To address these opportunities we significantly expanded our global sales force.
And our government business, we brought on Jr. Riordan as our Chief revenue Officer.
Jr. Is a seasoned executive in the remote sensing market and brings significant expertise in developing national security solutions.
Solutions.
We also added Andy Stevenson, our new VP of international sales to spearhead our international efforts.
Sandy brings decades of experience in this market.
And is working to expand our international sales team.
During the quarter, we also expanded our reseller network to 13 resellers.
Turning to the status of our constellation.
We continue to make progress on the expansion of our hybrid revisit satellite constellation we.
Two satellites ready for launch next week with rocket lab and what's exciting is that we remain on track to launch as many as four more <unk>.
Satellites by the end of the year.
The successful launch of these satellites will double our current capacity.
And enable us to provide customers with hourly revisit imaging K.
Capability.
In addition, we have made significant progress on our Gen III satellite program.
And remain on track to expand our constellation over the coming years.
Moving on to our outlook.
Despite strong operational execution, we are experiencing a delay in the start of some new contracts the.
The ramp of revenue from these contracts and supply chain impacts.
Due to COVID-19.
The supply chain delays have impacted the execution schedule of some of our engineering and integration projects.
And thus the recognition of revenue from these programs.
As a result, we are revising our 2021 revenue forecast.
From $40 million to a range of $30 million to $34 million.
With that said recent awards from the NRO NGA and NASA.
Demonstrate that we are emerging as a partner of choice and that customers are realizing the value of our high revisit imagery.
Advanced analytics.
And the first to know advantage.
We are winning and extending multi year contracts, which is strengthening our visibility into our out year revenues.
We believe that the investment and achievements of this quarter set black sky on a trajectory for.
For long term success.
In summary, our third quarter was solid and we are excited about the multiple growth opportunities in front of us.
And we remain focused on executing on our plan.
With that I'll turn it over to Johan to provide more details on our third quarter financial results.
Thank you Brian.
I would like to start off by saying how excited I am about the opportunity to be the CFO at Black Sky I.
I believe that black Sky has an incredible opportunity in this industry to be an innovator and a disruptor.
I am confident that its AI driven platform will transform traditional satellite imaging into a SaaS type service that blends imaging from blacks, guys, hi, revisit rate constellation and other terrestrial and space based sensors into actionable intelligence and information in real time for governments and commercial operations.
Yeah.
I would also like to start by giving you a brief update on the spec transaction then I'll go through the quarters financial results and then we'll turn it back over to Brian for some final comments on thoughts there. After we will open the call up to take some of your questions.
As a reminder, this morning, my remarks will talk both GAAP and non-GAAP financial numbers, we show a reconciliation of GAAP measures in the press release, which is available in the Investor Relations section of our web Sky at Black Sky Dot Com.
And online with the SEC Edgar database.
Unfortunately, today's financial disclosures will be limited to Capsulate numbers, and so I will be briefer than I would typically be at a quarter and I.
I would like to stress that we do expect to meet the SEC's reporting deadline of Monday November 15th to file a black Sky 10-Q.
Starting with the Osprey merger.
With the closing of the spec transaction on September 19, 2021, Black Sky was able to recapitalize its balance sheet and gross transaction proceeds were approximately $283 million.
After a required debt repayments satellite capex that was due and other related costs. We ended the quarter with $197 million of cash in our bank account. We believe that this allows us to continue to fund operations expand our constellation and invest in our AI platform and sales forces needed to execute the business plan.
Moving onto our quarterly results.
For the three months ended September 2021 for.
For the third quarter of 2021 revenue was $7 9 million, which is up 49% from the third quarter of 2020, and 8% growth over Q2 2021.
For the third quarter of 2021 operating loss was $48 9 million compared to a loss in the prior year of $12 $5 million.
Third quarter 2021, there was a net loss of $46 9 million or <unk> 67 per diluted share after.
Of the 67 cents loss 41 cents is attributable to noncash stock comp due primarily to longstanding legacy Black Sky management.
And seventh is attributable to noncash transaction related costs associated with the merger.
The third quarter 2021 had an adjusted EBITDA loss of $16 $2 million.
Moving on to the nine months ended September 2021.
Year to date in the third quarter.
We had $22 $6 million of revenue this is 53% higher than for the same nine months a year ago.
Year to date third quarter operating losses were $88 $2 million compared to a loss of $32 $6 million in the same period of the prior year.
Year to date third quarter, net losses were $251 million or $4 33 per diluted share.
$2.74 of this loss is attributable to noncash costs associated with the Osprey transaction.
50 of the per share loss is attributable to noncash stock comp.
Through the third quarter of this year, the adjusted EBITDA loss was $30 million.
While these results demonstrate real growth we are disappointed about the downward adjustment to the 2021 revenue outlook. Despite the impact of the timing issues. We experienced in Q3, we continue to believe that the opportunities over the next 12 months and beyond are undiminished as the market continues to expand.
At this point, we do not intend to provide additional guidance for 2021, nor any guidance for 2022.
Everybody and I will now turn it back over to Brian for some closing remarks.
Thank you Johan to summarize we are seeing strong demand for our high revisit imagery and AI enabled analytics.
This demand is reflected in our progress with major government customers around the world and.
And our competitive wins to deliver AI powered analytics to these customers we.
We are proud to be supporting some of the most important customers in the world.
That rely on our insights every day to support their mission critical operations.
We are excited that the U S government.
<unk> program is moving forward, which we expect will provide an award by the second quarter of 2022.
And that we have strengthened our long term revenue visibility.
Through the award of several multi year contracts with organizations, such as NGA and NASA.
With the expansion of our constellation and ongoing enhancements to our AI enabled SaaS platform.
We are on track to bring significant new capability analytics into the market over the next six months.
We are well positioned to meet and disrupt the growing $40 billion market opportunity.
First based data and analytics.
In closing.
We are excited about where we are and our continued prospects for execution and growth.
We've taken important steps to set the company on a course for growth and expansion as we head into 2022.
Our successful spec transaction is behind us.
We are funded and we're funded to achieve our growth plan.
We have strengthened our team we are growing our customer base and are expanding the delivery AI enabled insights.
And our constellation expansion remains ahead of schedule.
We're looking forward to the opportunities that lie ahead as we enter our next phase of growth and leading a new era of real time Global intelligence.
We will now be happy to take some of your questions.
Thank you and at this time, we will be conducting a question and answer session. If you'd like to ask a question. Please press star one on your telephone keypad.
Emission tone will indicate your line is in the question queue.
You May press Star two if you would like to remove your question from the queue for participants using speaker equipment. It may be necessary to pick up your handset before pressing the star keys.
One moment, please while we poll for questions.
Our first question comes from Josh Sullivan with the Benchmark Company. Please proceed with your question.
Hey, good morning.
Good morning, Josh.
Just maybe we could dig into some of the COVID-19 delays and with the startup of new contracts is that customer labor issues is that budgetary driven could we just get a little more detail there.
Yes, I think.
Sure.
It's really supply chain impacts so existing contracts. These are large fixed price contracts.
What we're seeing is the impact of the supply chain on delivery.
Ponant.
And then the and then the and then as those stretch out the impact to near term revenues. So that's the primary driver there Josh.
Got it.
And then just on the pipeline. It looks like you guys have expanded to $2 5 billion I think it was $1 seven earlier earlier in the year can you can you just.
Give us some detail on that Delta there and what are the new opportunities there.
Yes, Josh we're seeing growth in the pipeline across all three aspects of our business. The U S government international and commercial.
Our largest growth in the pipeline is coming from.
The DNI sector, both U S and internationally.
International that's being driven by.
The demand in the market Thats growing for high revisit imagery combined with AI enabled analytics.
Got it.
And then just within the commercial market uptake.
Which industries are quoting a little faster than others at this point between some of the commercial opportunities that you mentioned there.
Yes, I think Josh.
We're seeing strong interest from.
Multiple enterprises Fortune 1000 companies in the from mining.
In mining financial services construction and transportation those are the those are the strongest.
Attunity is that were seeing and thats consistent across a number of different customers.
Got it okay I'll get back in the queue. Thank you. Thank.
Thank you Jeff.
And just as a reminder, if anyone has any questions you May press star one on your telephone keypad to join to Q&A.
Inc.
Great.
And again, our next question comes from the line from Josh Sullivan with Benchmark Company. Please proceed with your question.
Yes, just maybe you could talk a little bit about the sales force expansion I think you've mentioned 13 resellers versus your internal growth with direct sales.
Are you seeing the most traction or how should we think about that going forward.
Yes, Josh we are we are expanding our global sales capacity.
Across all aspects of our business, so we more than doubled our sales force.
Since the second quarter.
It's a combination of building out our U S government team as well as.
Expanding our our international team we're also.
Expanding our commercial sales capacity both through inside sales.
Reps that we've added and then.
Through the expansion of our global reseller network. So we're highly focused on continuing to expand.
Net sales network across the entire business.
Yeah.
And then leave you said youre going to launch as many as four more satellites by the end of the year.
Where will that take your constellation and then by the end of 'twenty two.
Should we think about that constellation team.
Yes so.
We have right now two satellites ready to launch next week with rocket lab and then we've got launches lined up for two more launches with two satellites each.
In this quarter as well so that'll that'll double.
Our current capacity.
By the end of the year, so that'll give us a 12 satellite constellation.
And then we have more satellites planned in early next year, which will.
Brings us to a steady state of 12 to 14 satellites.
Going into next year.
Okay.
And then just one last one on the NASA Award. This morning. Congratulations can you just give us some detail on how large that award might be over the five years and are there any follow on opportunities coming from that that we should think about.
Yes, Josh it's a five year, what's exciting is it's a five year contract.
It provides an assay the ability to.
By imagery from us on an annual basis.
The scale of multiple millions of dollars per year.
They've been they've been increasing their interest in commercial.
Imagery and analytics for.
For things related to climate change and other research. So that's an exciting opportunity and we expect to see.
More of that.
From <unk>.
From a number of different commercial customers.
Thank you for that.
Thank you Josh.
And we have reached the end of the question and answer session and I'll now turn the call back over to Johan for closing remarks.
Thanks, very much operator.
I don't have any remarks beyond thank you to everybody that joined the call and I'll give the last word to Brian. Thanks.
Thanks, Jan and I, just want to thank everybody for joining us This morning, and I appreciate you taking the time.
And we look forward to.
To talking to you in the future. Thank you thanks very much.
And this concludes today's conference and you may disconnect. Your lines at this time. Thank you for your participation.
Okay.
[music].
Okay.
[music].
Okay.
Yes.
Okay.
[music].