Q1 2022 Blacksky Technology Inc Earnings Call

May 11, 2022

Greetings and welcome to the Black Sky Technology, Q1, 2022 earnings conference call.

Greetings and welcome to the Black Sky Technology Q1 2022 earnings conference call. At this time, all participants are in a listen-only mode. A brief question and answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please press star zero on your telephone keypad. As a reminder, this conference is being recorded. It is now my pleasure to...

This time all participants are in a listen only mode. A brief question and answer session will follow the formal presentation. If anyone should require operator assistance. During the conference. Please press star zero on your telephone keypad.

Winder This conference is being recorded.

It is now my pleasure to introduce your host Alibaba yet.

vice president of investor relations.

Vice President of Investor Relations. Thank you you may begin.

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, Johann Brookhasen. On today's call, Brian will provide some highlights on the quarter and give a strategic update on the business. Johann will then review the company's first quarter financial results and outlook for 2022. Following our prepared remarks, we will open the line for your questions.

Good morning, and thank you for joining us today I'm joined by our Chief Executive Officer, Brian No tool and our Chief Financial Officer, Johan Brocade and on today's call Brian will provide some highlights on the quarter and give a strategic update on the business. Johan will then review the company's first quarter financial results and outlook for 2000.

22, 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 May 25. 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.

A replay of this conference call will be available from approximately 12 30 P. M. Eastern time today through May 25th 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 dot.

Black Sky Dot com.

Before we begin, let me remind you that today's conference call includes forward-looking statements, including financial performance and guidance for our fiscal 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.

Before we begin let me remind you that today's conference call includes forward looking statements, including financial performance and guidance for our fiscal 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.

<unk> 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 state funds.

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. In addition, during today's call we will refer to certain.

In addition, during today's call, we will refer to certain non- GAAP financial measures including adjusted EBITDA. A reconciliation of these non- GAAP measures to the most comparable GAAP measures 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 ?

non-GAAP financial measures, including adjusted EBITDA, a reconciliation of these non-GAAP measures to the most comparable GAAP measures 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 tool Brian.

Thanks, Allie. And good morning, everyone. Thank you for joining us on today's call.

Thanks, Allie and good morning, everyone. Thank you for joining us on today's call.

I'm pleased to report that the first quarter of 2022 was the strongest in the company's history.

I am pleased to report that the first quarter of 2022.

Was the strongest in the company's history.

We delivered strong first quarter financial results and continue to make significant progress across many aspects of our operations as we are now in a phase of rapidly...

We delivered strong first quarter financial results and continued to make significant progress across many aspects of our operations. As we are now in a phase of rapidly scaling our business.

Demand for Black Sky's high-frequency imagery, monitoring, and analytics has accelerated as world events have placed an even greater level of importance and value for just-in-time information and insight.

Demand for Black skies high frequency imagery monitoring analytics.

Has accelerated as world events have placed an even greater level of importance and value.

For just in time information and insights.

Now more than ever, our world needs real-time geospatial intelligence.

Now more than ever.

Our world needs real time Geospatial intelligence.

From the crisis in Ukraine to the monitoring of critical assets in eastern Asia, to understanding commodity volumes and supply chain logistics in the U.S.

From the crisis in Ukraine to the monitoring of critical assets in eastern Asia to understanding commodity volumes and supply chain logistics in the U S.

There's a growing need for real-time global intelligence and insights that Black Sky provides for

There is a growing need for real time global intelligence and insights.

That black Sky provides for critical decision, making.

Our strategy has always been to combine a best-in-class software platform with our proprietary high-performance constellation.

Our strategy has always been to combine our best in class software platform with our proprietary high performance constellation.

that as a single platform can automatically test the constellation, integrate other data and sensors, and run sophisticated analytics.

That is a single platform can automatically task the constellation.

Integrate other data and sensors and run sophisticated analytics to deliver information and insights that decision makers rely on as part of their day to day operations.

to deliver information and insights that decision makers rely on as part of their day-to-day operation.

Yeah.

This software-first strategy, which is of equal importance to the constellation, is what differentiates us in the market.

This software first strategy, which is of equal importance to the constellation.

It is what differentiates differentiates us in the market.

And what is now paying dividends.

Today, using our platform any customer can log in.

Today, using our platform, any customer can log in.

task the constellation and have imagery and analytics delivered to their inbox in roughly 90 minutes or less.

Past, the constellation and have imagery and analytics delivered to their inbox.

Roughly 90 minutes or less.

All fully automated.

This is a capability that is now fully operational and we believe has uniquely positioned BlackSky to capture a significant market opportunity that has been unmet with traditional imagery and geospatial solutions.

This is a capability that is now fully operational and we believe has uniquely positioned black sky to capture significant market opportunity that has been unmet with traditional imagery and geospatial solutions.

Our strong Q1 performance was driven by several major facts.

Our strong Q1 performance was driven by several major factors.

First, a growing global demand for our real-time imagery and analytics services across U.S. government, international, and commercial market sectors.

First.

A growing global demand for our real time imagery and analytics services across the U S government international and commercial market segments.

Second, our ability to capture this growing demand due to the investments we've made in expanding our sales force and global reseller network over the past year.

Second.

Our ability to capture this growing demand due to the investments we've made in expanding our sales force and global reseller network over the past year.

We are now seeing the results from these investments as we are converting this demand into new business.

Third, the achievement of a 14 satellite baseline constellation.

Third.

The achievement of our 14th satellite baseline constellation.

that combined with our Spectre AI software platform can provide on-demand tasking and hourly monitoring of the most important strategic and critical assets and locations in the world.

That combined with our spectrum <unk> AI software platform can provide on demand tasking and hourly monitoring of the most important strategic and critical assets and.

And locations in the world.

Our integrated space and software platform is delivering a rapid revisit rate of up to 15 times daily, dawn to dusk imaging, and information and insights delivered in

Our integrated space in software platform is delivering a rapid revisit rate of up to 15 times daily.

Dawn to dusk imaging.

And information and insights delivered in under 90 minutes.

We now have the needed performance and capacity to support the growth of our business over the next couple of years.

What this means is that we can see and analyze critical and strategic aspects

What this means is that we can see and analyze critical and strategic assets.

on roughly an hourly basis and provide customers with unprecedented real-time intelligence that they never had before.

Roughly an hourly basis and provide customers with unprecedented real time intelligence that they never had before.

Fourth.

ideal market conditions and timing as our imaging capacity is coming into the market at a time when there is increasing demand for services from trusted suppliers.

Ideal market conditions and timing.

As our imaging capacity is coming into the market at a time.

When there is increasing demand for services from trusted suppliers while.

while the capacity from legacy providers is highly constrained and diminishing as satellites from their aging constellations are reaching end of life.

While the capacity from legacy providers is highly constrained and diminishing as satellites from their aging constellations are reaching end of life.

Fifth.

improving operating efficiencies as we begin to monetize capacity and grow our merges.

Improving operating efficiencies as we begin to monetize capacity and grow our margins.

And finally, improving capital efficiencies as we optimize our CapEx spend to align with market demand and in parallel gain benefits from what longer than expected mission life of our satellite.

Finally, improving capital efficiencies as we optimize our capex spend to align with market demand.

And in parallel gained benefits for longer than expected mission life of our satellites.

Looking beyond these operational achievements, this quarter has demonstrated that what we are doing matters.

Looking beyond these operational.

<unk> this quarter has demonstrated that what we are doing matters.

It is making a difference.

Black Sky is relied upon by some of the most important customers and missions in the world.

Black Sky is relied upon by some of the most important customers emissions in the world.

In the past 30 days alone, we delivered over 1,000 images to U.S.

In the past 30 days alone we delivered over 1000 images to U S.

and international security agencies, humanitarian organizations, and the media in support of the citizens of Ukraine and our allies in Europe .

And international security agencies.

Humanitarian organizations and the media and.

In support of the citizens of Ukraine, and our allies in Europe .

We are proud that we are having an impact in providing transparency, delivering timely intelligence and providing information to humanitarian organizations who are working to save lives.

We are proud that we are having an impact and providing transparency delivering timely intelligence and providing information to humanitarian organizations.

We are working to save lives.

To quote one senior government officials in the U S.

On behalf of the country, our allies, and the people of Ukraine, we want to thank the BlackSky team for your efforts in support of this crisis.

On behalf of the country, our allies and the people of Ukraine.

Want to thank the black Sky team for your efforts and support of this crisis.

What you are doing is important to our nation and the world and is contributing to saving lives. We are grateful for your dedicated efforts.

What you are doing is important to our nation and the world.

And is contributing to saving lives.

We are grateful for your dedicated efforts to this cause.

Yes.

I would also like to add to that comment.

I would also like to add to that comment, and that I'm very proud of our team and want to thank our team for their efforts to

And then I am very proud of our team I want to thank our team.

For their efforts during this this crisis.

We are demonstrating to the world that BlackSky has achieved operational capabilities at scale and are changing the way we see and understand important events around the world.

We are demonstrating to the world that black Sky has achieved operational capabilities at scale.

And are changing the way, we see and understand important events around the world.

providing a cost-effective tool for national security and economic intelligence.

Providing a cost effective tool for national security and economic intelligence.

This timing aligns well with the secular shift we're seeing within the U.S. international government sector.

This timing aligns well.

With the secular shift we're seeing within the U S International government sector.

that is looking to leverage commercial satellite operators for more and more national security, defense, and intelligence operations.

That is looking to leverage commercial satellite operators for more and more national security.

<unk> and intelligence operations.

Although we experienced increased demand from the crisis in Ukraine, the larger contributor to our incremental growth in Ukraine.

Although we experienced increased demand from the crisis in Ukraine.

The larger contributor.

Two our incremental growth in the quarter.

Came from outside.

the Eastern European region, in areas such as Asia Pacific and the Middle East, signaling a strong global division.

The eastern European region and.

In areas, such as Asia Pacific and the Middle East.

Signaling a strong global demand for our capabilities.

I'm pleased that we successfully carried the momentum we showed in Q4 of last year into Q1 of this year as we started the year on a strong note.

I am pleased that we successfully carried the momentum we showed in Q4 of last year into Q1 of this year.

As we started the year on a strong note.

Highlights of the first quarter include.

Record revenues of $13.9 million, up 91% over the prior year period.

Record revenues of $13 9 million up 91% over the prior year period.

new and expanded contracts with U.S. government customers, new and expanded contracts with international government customers in Europe , Asia Pacific, and the Middle East.

New and expanded contracts with U S government customers, new and expanded contracts with international government customers in Europe Asia Pacific and the Middle East engagement with several new major company spanning multiple vertical markets.

Engagement with several new major companies spanning multiple vertical markets.

Expansion of our software platform to include new imagery, sensor and analytic capability.

Expansion of our software platform to include new imagery sensor and analytic capabilities.

successful launch and commissioning of two additional satellites in April .

The successful launch and commissioning of two additional satellites in April <unk>.

expanding our constellations, revisit, and imaging capacity.

Expanding our constellations revisit and imaging capacity.

and the continued expansion and growth of our sales force and global reseller network.

And the continued expansion and growth of our sales force and global reseller network.

We were also proud to announce our new strategic advisory group.

Sure.

We were also proud to announce our new strategic Advisory group.

that included the appointment of three of our country's distinct national security leaders.

That included the appointment of three of our country's distinct national security leaders.

These include Vice Admiral Jill Kernan, former Under Secretary of Defense for Intelligence

These include Vice Admiral Joe Kernan, former under Secretary of Defense for intelligence.

Lieutenant General John Mulholland, Jr., former associate director for military affairs at the CIA.

Lieutenant General John Mahalla Junior former Associate director for military affairs at the CIA.

and Colonel Michael Dickey, former Space Force Chief Architect.

And Colonel Michael Dickey, former space Force Chief architect.

We are proud to have them join our team and look forward to their guidance and insights on our national security strategy.

I'll now talk in more detail about each of these highlights beginning with revenue.

I will now talk in more detail about each of these highlights beginning with revenues.

First quarter revenue grew to $13.9 million.

First quarter revenue grew to $13 $9 million.

a 91% increase over the same period last year, and a new revenue record for the company.

A 91% increase over the same period last year and a new revenue record for the company.

Revenue in Q1 also grew sequentially from Q4 of last year.

as our efforts in expanding our direct sales team and reseller network continue to gain traction.

Our efforts in expanding our direct sales team and our reseller network continue to gain traction.

In fact, for the third consecutive quarter, our imagery software and analytics services revenue experience strong double-digit sequential growth. These are the highest margin of recurrence.

In fact for the third consecutive quarter, our imagery software and analytic services revenue experienced strong double digit sequential growth.

These are the highest margin and recurring revenue elements of our business.

Yohan will provide more details on the first quarter financial results later.

Johan will provide more details on our first quarter financial results later.

Now I'd like to provide an update on the progress you made in our government and commercial businesses.

Now I would like to provide an update on the progress we made in our government and commercial businesses.

Starting with the government business.

Customer demand continues to be strong for a high revisit imaging and analytic products and services both in the US and

Customer demand continues to be strong for our high revisit imaging and analytic products and services.

Both in the U S and internationally.

In the first quarter, we won several new opportunities and experienced significant rise in orders for imagery and analytics from existing customers. In fact, demand for imagery monitoring analytics in March.

In the first quarter, we won several new opportunities and experienced significant rise in orders for imagery and analytics from existing customers.

In fact demand for imagery monitoring analytics in March.

Is that an all time high for the company.

In Q1, we saw increased demand in order activity with the National Reconnaissance Office, or NRO, for Black Sky's real-time intelligence on targeted locations around the world.

In Q1, we saw increased demand in order activity with the national reconnaissance office or NRO.

For blacks guys real time intelligence on targeted locations around the world.

In particular, demand over Ukraine rose throughout the quarter as the crisis escalated in that region.

In particular demand over Ukraine rose throughout the quarter as the crisis escalated in that region.

underscoring the vital importance of real-time geospatial intelligence for military, commercial, and humanitarian applications.

Underscoring the vital importance of real time, geospatial intelligence for military commercial and humanitarian applications.

As a reminder, we expanded our existing contract with the NRL last summer and have continued

As a reminder, we expanded our existing contract with you on our ROE last summer.

We have continued.

to see growth over the last several quarters, demonstrating the NRO's confidence in black sky's capability.

To see growth over the last several quarters.

Demonstrating the <unk> confidence in <unk> capabilities.

We believe this in turn positions us well to capture a portion of the upcoming electro-optical commercial layer or EOCL contract.

We believe this in turn positions us well.

To capture a portion of the upcoming electro optical commercial layer or EOC all contract.

As many of you know, the EOCL contract is the largest U.S. government contract.

As many of you know <unk> contract is the largest U S government contract.

for purchasing commercial satellite imagery and will be the vehicle through which the U.S. government acquires these services over the next 10 years.

For purchasing commercial satellite imagery and.

And we will be the vehicle through which the U S government acquired these services over the next 10 years.

The NRO has recently indicated they are targeting toward the OCL contract this summer, and we look forward to hearing from you.

The MRO has recently indicated they are targeting towards the CL contract. This summer.

And we look forward to the award announcements.

Another large and long-time government customer we support is the National Geospatial Intelligence Agency.

Another large and long time government customer we support as the National Geospatial Intelligence Agency.

Or NGA.

In Q1, we received an additional task order under the NGA's Economic Indicator Monitoring program that leverages our high-revisited

In Q1, we received additional task order under the Mga's economic indicator monitoring program.

That leverages, our high revisit satellite imaging.

Combined with our AI driven software analytics to provide monitoring services and insights into global activity.

Since we were first awarded the five-year $30 million contract in Q3 of last year,

Since we were first awarded a five year $30 million contract in Q3 of last year.

Black Sky's services under this program have continued to expand each quarter, further integrating us into the agency's day-to-day operations.

<unk> services under this program have continued to expand each quarter further integrating us into the agencies day to day operations.

This award in the expansion of services we've seen to date demonstrates the value that NGA has in BlackSky's analytics as a service offered.

This award and the expansion of services, we've seen to date demonstrates the value of that NGA Hasnt Black skies analytics as a service offering.

The combination of high-frequency spike monitoring from our constellation and AI-driven analytics that fuse together high-resolution imagery.

The combination of high frequency site monitoring from our constellation.

And AI driven analytics it fused together high resolution imagery and.

and sensor data from multiple sources, such as synthetic aperture radar.

And sensor data from multiple sources, such as synthetic aperture radar.

through our unique SAS platform is providing users with access to new types of actionable intelligence.

Through our unique SaaS platform is providing users with access to new types of actionable intelligence.

These new and advanced monitoring and analytics services.

that are powered by our Spectre AI software platform provide us with a competitive advantage as the government is looking to buy more and more commercial analytics services.

That are powered by our spectra <unk> AI software platform.

Provide us with a competitive advantage as the government is looking to buy more and more commercial analytics services.

The U.S. government has recently expressed greater interest in utilizing commercial satellite technology for essential imagery and

The U S government has recently express greater interest in utilizing commercial satellite technology.

For essential imagery and intelligence capabilities.

We started positioning for this market opportunity several years ago with the successful award of the U.S. Army Tech Geo Program and others.

We started positioning for this market opportunity several years ago.

With the successful award of the U S Army <unk> program and others.

which we believe will lead to significantly more opportunities in the future.

Which we believe will lead to significantly more opportunities in the future.

with the DoD and Space Force customers for tactical ISR.

With the Dod.

And space force customers for tactical ISR.

We believe the ISR market is beginning a large-scale shift.

We believe the ISR market is beginning a large scale shift.

where billions of dollars that were once spent on airborne systems are shifting to space and looking to leverage constellations of satellites to support new and emerging missions.

Where billions of dollars that were once spent on airborne systems are shifting to space and looking to leverage constellation of satellites to support new and emerging missions.

An example is the emerging opportunities with the Space Force as the U.S. government expands this agency for tactical reconnaissance and surveillance.

An example is the emerging opportunities with the space force as the U S government expands this agency.

For tactical reconnaissance and surveillance missions from space.

In addition, the government is looking to develop other leading space capabilities for organizations supporting the Army, Air Force, and the Space Development Agency to name a few.

In addition, the government is looking to develop other leading space capabilities for organization supporting the Army Air Force and the space Development agency to name a few.

Our long-standing history working with the NRO, the NGA, and other government and defense agencies puts Black Sky in a great position to benefit from the growing number of programs requiring our capabilities.

Our longstanding history working with the NRO, the NGA and other government and defense agencies puts black sky in a great position to benefit from the growing number of programs requiring our capabilities.

Moving on to our international business.

Customer demand for our products and services increased in Q1 with our international business driving a large part of our growth this quarter as we added customers

Customer demand for our products and services increased in Q1 with our international business driving a large part of our growth this quarter as we added customers in.

and expanded contracts in Europe , Asia Pacific, and the Middle East.

And expanded contracts in Europe , Asia Pacific and the Middle East.

We are seeing strong demand coming from several international governments around the world as they turn to Black Sky to provide them with mission-critical intelligence and analytics on strategic

We are seeing strong demand coming from several international governments around the world as they turned to black sky to provide them with mission critical intelligence and analytics.

On strategic locations and assets.

For example, we were awarded a multi-million-dollar contract from an international government to find them with on-demand, high-frequency satellite imagery and analytics.

For example, we were awarded a multimillion dollar contract from an international government.

And them with on demand high frequency satellite imagery and analytics.

for monitoring strategic locations in their region. We also signed additional agreements with a number of other international governments

For monitoring strategic locations in their region.

We also signed.

Additional agreements with a number of other international governments.

As this customer base continues to expand.

in the use of black skies real-time imagery and analytics in high-demand locations grow.

And the use of black skies, realtime imagery analytics and high demand locations grows.

We are now supporting several major international ministries of defense.

and are continuing to grow our pipeline of opportunities with many more customers around the world.

And are continuing to grow our pipeline of opportunities with many more customers around the world.

with the world focus on understanding how to navigate various global events.

With the world focused on understanding how to navigate various global events.

We anticipate international demand for Black skies products and services will continue to grow in order.

We anticipate international demand for Black Sky's products and services will continue to grow.

In order to meet this rising demand.

We will continue to expand our international sales team and partner network to capitalize on this growth and drive incremental sales.

Turning now to our commercial business.

We're seeing greater interest for black skies disrupted on-demand imagery and analytics.

We're seeing greater interest for black skies disruptive on demand imagery and analytics.

delivered through our AI driven software platform across a number of vertical markets, including finance.

Delivered through our AI driven software platform across a number of vertical markets.

Including financial services.

geospatial information systems, commodities, and natural resources.

Geospatial information systems commodities and natural resources.

as we continue to drive awareness of our high-revisit imagery and Spectre AI's platform capabilities.

As we continue to drive awareness of our high revisit imagery and spectra <unk> platform capabilities.

We are seeing an increase in incoming leads and opportunities across a range of industries.

As a result, we are engaged with several new major commercial customers.

in Q1 and look forward to expanding these opportunities over time through our land and expand strategy.

In Q1, and look forward to expanding these opportunities over time through our land and expand strategy.

In addition, we expanded our global reseller network by over 25%.

Further strengthening BlackSky sales distribution channels and extending our customer reach to multiple regions around the world.

Further strengthening black sky sales distribution channels, and extending our customer reach to multiple regions around the world.

We're pleased with the progress we made standing up our commercial business over the last couple quarters and are excited to capitalize on the new sales opportunities that lie ahead as we continue to build our business.

We're pleased with the progress we made standing up our commercial business over the last couple of quarters.

And are excited to capitalize on the new sales opportunities.

Lie ahead as we continue building out the sales team.

Moving on to our operational capabilities, which are anchored by our Spectre AI software platform and our proprietary satellite constellation.

Moving on to our operational capabilities, which are anchored by our spectra <unk> AI software platform and our proprietary satellite constellation.

But let me first start with our software platform, which we believe is one of the biggest competitive advantages that we have. We're seeing increased amount of content.

Let me first start with our software platform, which we believe is one of the biggest competitive advantages that we have.

We're seeing increased demand from existing customers.

who already rely on BlackSky for timely, critical, and accurate analytics and insights, as well as some new customers who are discovering the power and benefits that our platform can deliver.

We're already rely on black sky for timely critical and accurate analytics and insights as well as from new customers, who are discovering the power and benefits that our platform can deliver <unk>.

Black Sky's software platform provides customers with affordable, on-demand, and autonomous

<unk> software platform provides customers with affordable.

Demand in autonomous satellite tasking.

with fully automated analytic intelligence and insights, a real game changer.

With fully automated analytics intelligence and insights.

A real game changing capability for the industry.

Customers can easily log in through a web browser, task our satellites, receive imagery and custom analytics within 90 minutes.

Customers can easily log in through a web browser task, our satellites receive imagery and custom analytics within 90 minutes.

They no longer have to navigate a lengthy, complicated process or wait days to get images and insights, but now can get them from black sky on demand.

No longer have to navigate a lengthy complicated process or wait days to get images and insights, but now can get them from black sky on demand.

During the quarter, we continued to improve our platform's capabilities.

During the quarter, we continue to improve our platform's capabilities.

With new analytics sensors and imagery products are.

Our Spectre AI software platform integrates information from multiple sources including synthetic aperture radar or SAR, enabling all weather and nighttime monitoring.

Our spectrum <unk> AI software platform integrates information from multiple sources, including synthetic aperture radar SAR.

Enabling all weather and nighttime monitoring.

visible infrared imaging or veers, allowing for wildfire detection and monitoring the status of refineries in upstream oil and gas operation.

Visible infrared imaging, our beers, allowing for wildfire detection and monitoring the status of refineries in upstream oil and gas operations.

and automatic identification systems or AIS, enabling maritime vessel tracking and monitoring for commodities and supply chain and telecommunications.

And automatic identification systems are aaas.

Enabling maritime vessel tracking and monitoring for commodities and supply chain intelligence.

In addition, we've enhanced the object detection capability in our platform, enabling us to better identify the various types of aircraft maritime

In addition, we've enhanced the object detection capability in our platform, enabling us to better identify the various types.

Of aircrafts maritime vessels and other objects.

This capabilities allows us to keep deeper insights and operational fleet trends, monitor assets.

This capability allows us to keep deeper insights and operational fleet trends monitor asset traffic.

traffic to and from sites of interest and give customers real-time alerts during anomalous events that can impact them.

Traffic to and from sites of interest and give customers real time alerts during.

Anomalous events that can impact our operations.

Together, these improvements open up a new set of customer use cases and commercial applications, making BlastGuide's platform even more valuable to customers.

Together these improvements open up a new set of customer use cases and commercial applications.

Blast guys platform, even more valuable to customers.

Let me turn to our satellite constellation.

Just last month, we launched two new satellites into orbit, bringing our total constellation to 14 satellites.

Just.

Last month, we launched two new satellites into orbit, bringing our total constellation to 14 satellites.

which provides more than enough capacity in revisit performance to satisfy customer demand for the next couple of years. In response to the crisis in Ukraine,

Which provides more than enough capacity and revisit performance to satisfy customer demand for the next couple of years.

In response to the crisis in Ukraine.

And to address demand in the region.

We changed the planned Orbitz for these two satellites 30 days ahead of the launch.

We changed the planned orbits for these two satellites 30 days ahead of the launch.

in order to improve the interday revisit frequency over Ukraine and the surrounding region.

In order to improve the intra day revisit frequency over Ukraine and the surrounding region.

This process can typically take almost a year.

But further demonstrates our agility and responsiveness to meet customer demand where and when they need it.

But further demonstrates our agility and responsiveness to meet customer demand, where and when they need it.

We're very proud that these satellites achieve commercial operations within 12 hours of launch and began taking high resolution images, generating revenue, and delivering information to customers.

We're very proud that the satellites achieved commercial operations within 12 hours of launch and began taking high resolution images.

Generating revenue and delivering information to customers.

Thereafter.

The additional satellites further expand BlackSky's constellation capacity, increasing the frequency of when images are taken and improving the hourly, dawn-to- dusk site monitoring capabilities for customers that need

The additional satellites further expand black skies constellation capacity, increasing the frequency of when images are taken improving the hourly dawn to dusk site monitoring capabilities for.

For customers that need real time insights.

Because of our satellites, I revisit times, customers have the flexibility to shift image and capacity where and when they require it to best suit their needs.

Because of our satellites high revisit times customers have the flexibility to shift imaging capacity.

Where and when they are required to best suit their needs.

We are also seeing extended performance from our first commercial satellites.

We are also seeing extended performance from our first commercial satellites providing.

providing us the optionality on the timing for when we need to replace these assets. As a result, we are shifting the timing of the launch for a

Providing us some optionality on the timing for when we need to replace these assets.

As a result, we are shifting the timing of the launch of our next two satellites to Q4 this year.

which will coincide with the four-year anniversary of our first two commercial satellites.

Which will coincide with the four year anniversary of our first two commercial satellites.

In parallel.

We're also <unk>.

focus on building and launching our next generation 3 satellite.

Our focus on building and launching our next generation three satellites.

We're excited for the new capabilities our Gen3 satellites will bring, which include taking our imaging resolution down to 35 to 50 centimeters and adding short wave IR imaging technology.

We're excited for the new capabilities of our Gen. Three satellites will bring.

Which include taking our imaging resolution down to 35% to 50 centimeters.

Adding shortwave IR imaging technology.

to enable a broad set of imaging conditions such as low light and at night.

To enable a broad set of imaging conditions, such as low light and at night.

We anticipate beginning to launch the first of these Gen3 satellites in 2023.

We anticipate beginning to launch the first of these gen three satellites in 2023.

In summary, we had great execution across the business, made overwhelming progress expanding our customer reach, and delivered strong first quarter operating results. I'll now turn it over to Johan to go through the financial results in more detail. Johan? Thank you, Brian . And good morning.

In summary, we had a we had great execution across the business made overwhelming progress expanding our customer reach and delivered strong first quarter operating results I'll now turn it over to Johan to go through the financial results in more detail Johan.

Thank you, Brian and good morning, everyone.

I would like to echo Brian's message of how proud we are as a company to be supporting massive humanitarian efforts in Eastern Europe as refugees flee the conflict in Ukraine, along with the critical support that we and others are giving to enable the Ukrainian people to defend their homeland. Black Sky is making a real difference in the world today, and all our employees are very proud to be part of this effort.

I would like to Echo Brian's message of how proud we are of the company to be supporting massive humanitarian efforts in eastern Europe as refugees sleeve of conflict in Ukraine, along with a critical support that we and others are giving to enable the Ukrainian people to defend their homeland Black Sky is making a real difference in the world today and all our employees.

Very proud to be part of this effort.

I am also particularly pleased to report that we started the year on a very strong financial note and have continued to make excellent progress in many aspects of our business.

With that said, let's jump right into our first quarter results.

Revenues.

Increased customer demand for our imagery and analytics solutions drove record first quarter revenues of $13.9 million. This was a 91% increase year-of-a-year. Our largest growth rate in nine quarters were $6.6 million in more revenue than Q1 a year ago.

Increased customer demand for our imagery and analytics solutions drove our record first quarter revenues of $13 $9 million. This was a 91% increase year over year, our largest growth rate in nine quarters were $6 $6 million in more revenue than Q1, a year ago.

Imagery and software analytical services revenue grew to $7.4 million, driven primarily by new and existing government contracts as these important customers looked to Black Sky to provide them with real-time intelligence and insights around the globe.

Imagery and software analytical services revenue grew to $7 $4 million, driven primarily by new and existing government contracts. As these important customers look to <unk> to provide them with real time intelligence and insights around the globe.

The revenue mix for imagery and software analytical services rose to approximately 70% of total revenues, demonstrating the value customers placed in our assured access, high-frequency imaging, and Spectra AI software platform capability.

The revenue mix for imagery and sulfur analytical services rose to approximately 70% of total revenues demonstrating the value customers place in our assured access high frequency imaging and spectra AI software platform capabilities.

Also contributing to the increase in total revenues was higher engineering and systems integration revenue of $4.1 million primarily driven by an increase in the percentage completion of certain satellite contracts for customers.

Also contributing to the increase in total revenues was higher engineering systems integration revenue of $4 1 million, primarily driven by an increase in the percentage completion of certain satellite contracts for customers.

Gross margins strong demand for imagery and software analytical services, which is our highest margin revenue drove gross margin excluding $801000 of noncash stock comp in this part of the business to about 48% in the first quarter an increase over the approximately 27% in the prior year period.

Strong demand for imagery and software analytical services, which is our highest margin revenue, drove gross margin, excluding $801,000 of non-cash stock comp in this part of the business to about 48% in the first quarter, an increase over the approximately 27% in the prior year period.

Total non-cash stock-based compensation expense within Costa Goodsville constituted about $921,000.

Total noncash stock based compensation expense within cost of goods sold constituted about $921000.

However, due to higher engineering and system integration expenses, largely attributable to non-recurring design costs and material procurement costs, total gross mileage in excluding non-cash comp in Q1 closed at approximately 28% versus prior year same period of approximately 24%.

However, due to higher engineering and system integration expenses, largely attributable to nonrecurring design costs and material procurement costs total gross margin excluding noncash comp in Q1 closed at approximately 28% versus prior year same period of approximately 24%.

Considering a larger part of our revenues come from imagery and self-analytical services, we anticipate gross margin to improve over time as we scale the business of the investments already made in the software stack and the constellation.

Considering the larger part of our revenues come from imagery and software analytical services, we anticipate gross margin to improve over time as we scale the business off the investments already made in the software stack and the constellation.

Operating expenses.

Turning to operating expenses, we incurred $30.1 million of operating expenses in the first quarter of 2022. This amount included $9.3 million of non-cash stock-based compensation expenses.

Turning to operating expenses, we incurred $30 1 million of operating expenses in the first quarter of 2022. This amount included $9 3 million of noncash stock based compensation expense.

Excluding the stock-based compensation expense of $9.3 million in Q1 of 22 and half a million in Q1 of 21, operating expenses increase $10 million a year every year.

Excluding the stock based compensation expense of $9 3 million in Q1 of 'twenty, two and half a million in Q1 of 'twenty, one operating expenses increased $10 million year over year about.

About half of this increase was due to higher depreciation expense driven by the six additional satellites that we placed into orbit in Q4 2021. Investments in building our sales, software and engineering teams also contributed to the increase in operating expenses, as well of course as higher public company operating costs to a lesser extent.

About half of this increase was due to higher depreciation expense driven by the six additional satellites that we placed into orbit in Q4 of 2021.

Investments in building our sales software engineering teams also contributed to the increase in operating expenses as well of course is higher public company operating costs to a lesser extent.

Adjusted EBITDA. We had an adjusted EBITDA loss of $9.5 million in the first quarter of 2022 compared to a loss of $6.2 million in the prior year period. The loss was driven by investments in sales software and engineering hires across the organization and of course public company operating costs.

Adjusted EBITDA, we had an adjusted EBITDA loss of $9 5 million in the first quarter of 2022 compared to a loss of $6 2 million in the prior year period.

Loss was driven by investments in sales software and engineering hires across the organization and of course public company operating costs.

The balance sheet and Capex to.

The company ended Q1 2022 with $138.4 million in cash. Capital expenditures in the first quarter were $13.4 million, with about 80% of this spend attributable to building and launching satellites.

The company ended Q1, 2022 with $138 $4 million of cash capital expenditures in the first quarter were $13 $4 million with about 80% of this spend attributable to building and launching satellites.

Yes.

Going to outlook and guidance.

As mentioned earlier, we are seeing strong demand for BlackSky's imagery and analytical insights stemming from both U.S. and international governments, and we are starting to see diversification of revenue streams as foreign customers increasingly are signing up to leverage the services that we are able to provide them. The crisis in Ukraine has clearly put a spotlight on the vital need for BlackSky's real-time geospatial intelligence, and we anticipate interest and demand to continue to grow throughout the year in several areas of strategic interest across the globe.

As mentioned earlier, we are seeing strong demand for black sky imagery, and analytical insights stemming from both U S and international governments and we are starting to see diversification of revenue streams as foreign customers increasingly are signing up to leverage the services that we are able to provide them the.

The crisis in Ukraine has clearly put a spotlight on the vital need for <unk> real time, Geospatial intelligence, and we anticipate interest and demand to continue to grow throughout the year in several areas of strategic interest across the globe.

All that being said, we are reiterating our full year revenue outlook for 2022 of between 58 and $62 million.

All that being said we are reiterating our full year revenue outlook for 2022 of between 58 and $62 million taken.

Taking the middle of the revenue range, this would represent a strong year-over-year growth of 76%.

Taking the middle of the revenue range. This would represent a strong year over year growth of 76%, we expect capital expenditures for 2022 to be between 52 and $56 million as previously guided.

We expect capital expenditures for 2022 to be between $52 and $56 million as previously guided.

Assuming the middle of the CapEx span range, this would represent a 15% reduction in span from 2021, as we believe we have more than enough capacity from our 14th satellite constellation to support increased customer demand for the next couple of years.

Assuming the middle of the Capex spend range. This would represent a 15% reduction in spend from 2021 as we believe we have more than enough capacity from our 14th satellite constellation to support increased customer demand for the next couple of years.

With growing revenues and responsible cost management, we believe our business is well positioned to scale and maximize return.

With growing revenues and responsible cost management, we believe our business is well positioned to scale and maximize returns.

With that, I'll turn it back over to Brian for some closing remarks. Brian ?

With that I'll turn it back over to Brian for some closing remarks, Brian .

Thank you, Johan. In closing, we're very happy we started the year strong and achieved several major milestones in Q1.

Thank you Johan in closing, we're very happy we started the year strong and achieved several major milestones in Q1.

Revenues and year-over-year growth are at record levels. We continue to win new customers and expand contracts with existing customers.

Revenues and year over year growth are at record levels, we continue to win new customers and expand contracts with existing customers.

Our operational capabilities in both software and satellite constellation continue to increase and are in place to drive our growth.

Our operational capabilities in both software and satellite constellation continued to increase.

And our in place to drive our growth over the coming years.

We're capitalizing on numerous efficiencies across the business and scaling our operations.

But most importantly, demand for black skies, real-time imagery and analytics services has never been higher.

But most importantly demand for black skies real time imagery and analytics services has never been higher.

With all of these accomplishments and significant opportunities ahead, we are excited to carry this momentum forward throughout the year.

With all of these accomplishments and significant opportunities ahead.

We're excited to carry this momentum forward throughout the year.

This concludes our remarks for the call, and we'll now take your questions.

This concludes our remarks for the call and we will now take your questions.

Thank you. We will now be conducting a question and answer session. If you would like to ask a question, please press star one on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press star two if you'd like to remove your question.

Thank you we will now be conducting a question and answer session. If you'd like to ask a question. Please press star one on your telephone keypad, a confirmation tone will indicate your line is in the question queue. You May press star two if you'd like to remove your question from the queue.

For participants using speakers, it may be necessary to pick up your hands before pressing the star key. One moment, please while we poll for questions.

For participants using speaker equipment, it may be necessary to pick up here.

Handset before pressing the star Q1.

One moment, please while we poll for questions.

Thank you. Our first question comes from Scott Ducharal with Credit Sleeves. Please proceed with your question.

Thank you. Our first question comes from Scott to Sheryl with Credit Suisse. Please proceed with your question.

Hey, guys. Good morning, Thanks for taking my questions.

Johan, you touched on it someone already, but can maybe just walk us through in a bit more detail. The gross margin performance you saw in the quarter, and then the drivers of the incrementals you saw in imagery and the decrementals you saw in engineering. I'm just curious for a little more detail there. Thanks, and have a few follow-ups.

Good morning, Johan touched on it somewhat.

You touched on it somewhat already but can you maybe just walk us through more detail.

The gross margin performance you saw in the quarter and then the drivers of the Incrementals you saw in imagery and the Decrementals you saw in engineering.

I'm just curious for a little more detail there thanks and have a few follow ups.

Yes sure. Thanks for the question.

So starting with gross margins, we did see as we said in improving our gross margins, which frankly is driven primarily by the increase we see in our high margin revenues, which are monitoring and analytics and imagery.

So starting with gross margins, we did see, as you said, an improvement in our gross margins, which frankly is driven primarily by the increase we see in our high margin revenues, which are monitoring analytics and imagery.

It's not unexpected given we've made investments into our software stack and into the satellite constellation and it is our expectation obviously that as we drive those revenues higher we would expect that the business will scale and margins will improve which is what you do see.

Not unexpected given we've made investments into our software stack and into the satellite constellation and it is our expectation obviously that as we drive those those revenues higher.

We would expect that the business will scale and margins will improve which is what you do see.

You know, we expect that to continue. Frankly, as long as we're driving those revenues higher, we would expect to see higher gross margins over time.

We expect that to continue frankly as long as we're driving those revenues higher we would expect to see higher gross margins over time.

and that's how the business scales. You also asked to believe about

And that's how the business scales.

You also asked a believe about.

Growth in those areas.

growth in those areas. I'm actually going to pass that one over to Brian . I think he has a lot of good news in terms of our imagery and monitoring analytics. So, Brian , if you want to talk about that, then we can come back to the other question here.

So you're going to pass that one over to Brian I think he has a lot of good news in terms of.

Our imagery and monitoring analytics or Brian if you want to talk about that then we can come back to the other question here.

Yeah, Scott, obviously we've been investing over the last eight years in our software and constellation and now we're moving into a phase of monetizing that capacity.

Yes, Scott obviously, we've been investing over the last eight years, and our software and constellation and now we're moving into a phase of monetizing that capacity.

And seeing incremental.

high-margin business come from the analytics that we also offer with the imagery so

High margin business come from the analytics that we also offer with the imagery. So.

as we're experiencing strong demand with the U.S. government.

As we are experiencing strong demand with the U S government.

And as we've outlined, significant demand in the international markets across multiple regions, you know, that's driving this improving revenue and margin performance.

And.

And as we've outlined.

Significant demand in the international.

Markets across multiple regions.

That's driving that's driving this improving revenue and margin performance.

Yeah, I'll just tag on that. We did see some pretty significant improvement in revenues internationally. And frankly, as we expected, it wasn't all driven in Eastern Europe . We saw.

Yes ill just got tag onto that I'll, just tag on that we did see some pretty significant improvement in our revenues internationally.

And frankly as we expected it wasn't all driven in eastern Europe , we saw.

you know, large increases in demand for our services outside of Eastern Europe as well out in the Asian Pacific region as well as the Middle East. And then you had a third part there that I think was around engineering integration. Is that right? Yeah, I was wondering about what drove the decrementals there. I'm just curious on if that'll be a factor to consider for the remainder of the years.

Large large increases in demand for our services outside of eastern Europe as well.

The Asia Pacific region, as well as the Middle East.

And then you had a third part there that I think was around engineering and integration is that right.

I was wondering what the what drove the Decrementals. There then just curious on if that will be a factor to consider for the remainder of the year as well. Thank you.

Yes, the engineering integration is essentially where we go out and build out satellite constellations, bid on and build out satellite constellations and satellites for customers, and it's an entry point to provide them the services that come there after. That is, those are tend to be large contracts, and because of that there are step functions up or down.

<unk> engineering integration is essentially where we go out and build out satellite constellations bid on and build out satellite constellations and satellites for customers and it's an entry point to provide them the services that come thereafter.

That is those are tend to be large contracts.

And because of that there are step functions up or down.

It's the nature of the game, and as I said, we do it for a number of reasons. One, we obviously have the expertise and ability to do that. And secondly, it gives us the opportunity in the opening to follow on with...

But it's the nature of the game and as I said, we do it for a number of reasons. One we obviously have the expertise and the ability to do that and secondly, it gives us the opportunity and the opening to follow on with.

with management of constellation and providing additional imagery and analytical services.

With management of constellation and providing additional imagery.

And analytical services.

Okay do you feel like it will create value for the business over time, just given that it is negative gross margin on the margins have gotten.

Okay, do you feel like it'll create value for the business over time, just given that it is negative gross margin and the margins have gone down as the business scales?

Gone down as it has grown as the business has scaled.

Yeah, I mean, they don't have the same, they don't carry the same margins as our imagery and analytical revenue, obviously. So from that perspective, it's diluted to gross margin. But as I said, we believe it drives additional revenue.

They don't have to say that and carry the same margins as are our imagery and analytical revenue obviously.

So from that perspective is dilutive to gross margin, but as I said, we believe it drives additional revenue.

And ultimately, I think the way one has to look at the business is probably to some of the parts. And certainly down the road, we'll see, you know, what opportunities present themselves in terms of what we do with that part of the business. But for right now, obviously, it's an important part of our revenue stream and it brings in cash flow. So, you know, we'll continue to do that.

And ultimately I think the way one has to look at the business is probably to some of the parts.

And certainly down the road, we'll see.

<unk>.

What opportunities present themselves in terms of what we do with that part of the business, but for right. Now obviously, it's an important part of our revenue stream on it brings in cash flow. So we.

We will continue to do that.

Scott, one thing I should add to that is, you know, one, these are highly strategic programs. They align us very deeply with important customers. Two, they offset R&D expenses and our funding advanced technologies that are interesting to those

Scott one thing I should add to that is.

One these are highly strategic programs, they align us very deeply with important customer.

Customers too.

They offset R&D expenses.

And and our funding advanced technologies that are interesting to those.

to those customers. And then three, they get typically bundled with our high-margin services. So, over time, they will drive significant value into the company. Okay. That makes

To those customers and then three they get.

Typically bundled with our high margin services so.

Over time, they will drive.

Significant value into the company.

Okay that makes sense and then.

I guess Johann just to clarify.

I guess, Johan, just to clarify, if I were to include or allocate depreciation of your satellites to the cogs of imagery and analytics.

If I were to include our allocate depreciation of your satellites to the Cogs of imagery and analytics with.

Would the imagery and analytics business still be generating positive gross margins? Or is a lot of that DNA?

With image with the imagery and analytics business still generating positive gross margins.

Or is a lot of that DNA actually for the engineering business.

Yes, so the short answer is absolutely, we would be generating positive growth margins on the imagery and monitoring analytics, so no doubt about that. And then how we allocate that.

Yes. So the short answer is absolutely we would be generating positive gross margins on the imagery and the monitoring and analytics is no doubt about that.

And then how we allocate that.

is across both those sections of the business, engineering integration as well as our software and imaging. But the reality is that even with DNA, we still have significantly high gross margin.

Is across both those sections of the business engineering integration as well as our software in imaging, but the reality is that even with DNA, we still have significantly.

Significantly higher gross margins.

Okay, so it's helpful, and sorry to take it so much time, but a few more. Johan, just the $10 million in stock comp and the quarter, is that a good run rate that we should expect over the remainder of the year?

That's helpful.

And sorry to take so much time, but a few more johan.

$10 million in stock comp in the quarter is that a good run rate that we should expect over the remainder of the year.

Uh, yes, I think 10 million in Comp is probably fairly, um, well, it's

Yes, I think $10 million in comp is probably fairly.

Well it's.

coming down over time, but this year at the current run rate, as I said, in my comments, there's about 900,000.

It's coming down over time, but this year at the current run rate as I said in my comments was about 900000.

921,000 sitting in cogs, right, and then the remainder in SG&A.

102921 sitting at Cogs right.

And then the remainder in SG&A.

But, you know, I don't worry too much about, frankly, too much about non-cash comp. I think it's something that, over time, will come down. And really, it doesn't impact our EBITUP, which is the thing we're most focused on alongside revenue. And is most of that comp related to prior equity grants and just the vesting over time, or is it new issuance? And just on its face, it would look to be 7% diluted for quarter if it was new issuance. So just trying to think about sketch out dilution over time at the current market. Yeah, thanks. It's a combination.

But I don't worry too much about frankly too much about noncash comp I think it's something overtime will come down.

And really it's it doesn't impact our EBITDA, which is the thing we got it focused on alongside revenue.

And is most of that comp related to prior equity grants and just divesting over time or is it new issuance I'm just.

On its face I would look to be 7% dilutive per quarter. If it was new issuance. So I'm just trying to just trying to think about sketch out dilution over time at the current.

It's a combination of the two.

Frankly, I don't know if to top my head what that split is as I sit here, but it is both prior equity that was issued to the team prior to getting public and then some new equity. But I can tell you that if you go through our public filings, you'll see that the amount of equity that's in the plan that's available to management team is very much in line with public companies.

Frankly, I don't know if the top of my head what that split is as I sit here, but it is both prior equity that was issued to the team prior to going public and then some new equity.

I can tell you that.

You go through our public filings, you'll see that the amount of equity that's in the plan. That's available to management team is very much in line with public companies.

Got it.

Last question, Brian , just APAC revenues, I think they grew 1.5 billion year-over-year.

Last question, Brian just APAC revenues I think they grew $1 5 billion year over year as the business tripled or quadrupled just if you could talk a little bit more about kind of the customers to those customers might be other kinds of services you guys are providing.

tripled or quadrupled, just you could talk a little bit more about kind of the customers, who those customers might be, other kinds of services you guys are providing.

I think that being a question to close Tom Thanks.

I'll just say generally we are seeing.

Yes, Scott I'll, just say generally.

We are seeing.

growing interest and demand across a number of regions worldwide.

Growing interest and demand.

Across a number of regions worldwide.

including the Middle East, Northeast Asia, Southeast Asia, obviously in Europe . And it's driven by two major

Including the Middle East Northeast Asia Southeast Asia, obviously in Europe .

And it's driven by two major.

trends that we see. One is there's more and more demand for monitoring strategic assets.

Trends that we see one is there is more and more demand for.

We're monitoring strategic assets and critical assets.

and critical assets in the world today and then also

In the World today and then.

So.

especially around our capability, where we can see throughout the day at very high frequencies, we're able to contribute intelligence.

Especially around our capability, where we can see throughout the day at very high frequencies.

We are able to contribute intelligence.

that a lot of these customers have not had before that go beyond just using imagery for mapping. So, and there's growing budgets across all of those regions. So, as I said in my earlier remarks, we're seeing ideal market conditions and timing for bringing our capacity and analytics into the market.

That a lot of these customers have not had before.

That go beyond just using imagery for mapping so.

And there is and there.

There is growing budgets across all of those regions. So.

As I said in my earlier remarks.

We're seeing ideal market conditions and timing for bringing our.

Capacity and analytics into the market.

Okay. Thanks, everyone.

Thanks Scott.

Thank you. Our next question comes from Colin Canfield with Barclays. Please proceed with your question.

Thank you. Good morning, guys. So, D or D commentary is suggesting that pretty constructive environment and your peers are talking about it being the best they've ever seen. So, if you can maybe talk about what your placeholder for E O C L is in 2022 guide and then what the aperture for growth looks like beyond that, maybe split between U S international and commercial.

Hey, good morning, guys.

So Judy commentary is suggesting that pretty constructive environment and your peers are talking about it being the best they've ever seen so if you can maybe talk about.

What youre a placeholder for iOS.

In 2022 guide.

Then what the aperture for growth it looks like beyond that maybe split between U S International and commercial.

Okay.

Sure. And good morning, Colin. Thanks for your question.

Sure and corn Colin Thanks for your question.

Yeah, so as we, as you know, EOCL is a very important contract program for us and we believe we're well positioned to win a portion of that contract as I've stated in the past.

Yes, so as we as you know.

<unk> is a very important contract program for us and we believe we're well positioned.

To win a portion of that contract.

As I have stated in the past.

Our contract was expanded last year, and we are now integrated into the day-to-day operations of this contract. And we've been experiencing quarter over quarter growth and demand from that customer.

Our contract was expanded last year and we are now integrated into the day to day operations.

This contract and we've been experiencing quarter over quarter growth in demand from that customer.

And so we feel we're really well positioned for that contract. And also, as I stated earlier, the government has

And so we feel we're really well positioned for that for that contract.

<unk>.

Also as I stated earlier the government has.

indicated they're working toward awards this summer.

Indicated there they are working toward awards this summer so.

We have forecasted an award in our revenue forecast this year, so we feel we're really

We have forecasted an award into our revenue forecast this year.

So we feel we're really well positioned for that.

And to your second part of the question, the international demand that we're seeing is growing very rapidly and we're starting to see

And to your to your second part of the question yes.

The international demand that we're seeing is growing very rapidly and.

And we're starting to see.

a lot of incoming from not only tier one.

A lot of incoming from not only tier one.

international ministries of defense governments, but a lot of Tier 2 and Tier 3 countries that are standing up geospatial intelligence and space-based capabilities.

International Ministries of defense governments, but a lot of tier two and tier three countries.

That are standing up.

Geospatial intelligence and space based capabilities.

for various applications within the government. So we're very excited about what's happening and that

For for various applications within the government so.

We're very excited about what's happening in that.

sector, in fact, we've been scaling our

Sector in fact, we've been scaling R. R.

our sales teams and reseller network, particularly to go capture that growing demand.

Our software team or I'm, sorry, our sales teams and reseller network, particularly to go capture.

That.

Is that growing demand and so.

You know, that's where you're seeing, we're experiencing in what we've demonstrated is driving a lot of the growth in the quarter and what we see going forward. The other element of that is both in the U.S. and internationally, the shift of using small satellites

That's where you are seeing.

Experiencing and what we've demonstrated is driving a lot of the growth in the quarter and what we see going forward.

The other element of that is.

Both in the U S and internationally the shift of using small satellites.

for tactical ISR applications, which there is a growing number of the growing budgets there for capitalizing and leveraging the technology such as what Black Sky has developed for those new applications. So all in all, as I've emphasized,

For tactical ISR applications, which there is a growing number of growing budgets there.

For capitalizing and using leveraging the technology that such as what <unk> has developed for those new applications. So all in all.

As Ive emphasized.

ideal market conditions and timing are what we're seeing in the sector.

Ideal market conditions and timing.

Our what we're seeing in the sector.

And then if we think about the cash flow break even targets contemplated within your stack slides, can you just talk about, you know, kind of what the cash lovers are to get there and how you think about your. Buckets of spend in engineering sales and then Gen 3 catbacks versus the underlying cash profitability of the business.

Got it and then if we think about that.

The cash flow breakeven targets contemplated within gets back slides can you just talk about.

Kind of what the cash numbers are to get there and how you think about your buckets of spend in engineering sales and Gen III capex versus.

The underlying cash profitability of the business.

Yes.

Uh, yeah, so, you know, we pulled, we pulled those numbers a long time ago.

Yes, so we've pulled we pulled those numbers a long time ago.

And it's self-evident that you still have copy of them when you look at it. We're obviously not going to get there this year, and as a result, no surprise, you would expect when we expect to get cash flow break even, no longer matches what's in that data, those data points either. We haven't given any guidance to the street externally as to when we expect to be cash flow break even, and we're not going to do that here today either.

And it's self evident that you still have copy other than when you look at it we're obviously not going to get there this year.

And as a result, most surprised you would expect when we expect to get cash flow breakeven.

No longer matches, what's in that data those data points either.

We haven't given any guidance to the street externally as to when we expect to be cash flow breakeven and we're not going to do that here today either.

Sure.

Was there a second part to the question on engineering integration that I'm not recollecting?

Was there a second part to the question of on engineering integration that I.

Recollecting.

Yeah, it's around the cash lovers and how you think conceptually around the cash lovers of the business split between, you know, underlying engineering failed and then many cap X related to gen three.

Yes, it's around the cash leverage and how you can conceptually around the cash levers of the business split between underlying engineering.

And then any capex related to Gen three.

Yep, sure. So we are obviously investing in particularly in our sales team, but also in the software stack. We do that. We're doing that responsibly. And as we mentioned in the previous earnings call on the CAPEX side, CAPEX is significantly lower this year from what it is last year. And most of that is coming from a decline in our satellite investments.

Yes sure. So we are obviously investing in particularly in our sales team, but also in the software stack, we do that we're doing that responsibly.

And as we mentioned in the previous earnings call on the Capex side Capex is significantly lower this year from what it has last year on most of that is coming from a decline in our satellite investments.

We've consistently said that at 14 satellites, we have at least two years capacity for two years worth of revenue that we project. We continue to see that. We'll allow our, the cadence of our satellite deployment and construction to be driven by customer demand. And so both of those things, expense run rates, but in particular CAPEX.

We.

Consistently said that in 2014 satellites, we have at least two years.

Capacity for two years with the revenue that we project. We continue to see that we will allow our said the cadence of our satellite deployment and construction to be driven by customer demand.

And so both of those things expense run rates.

But in particular Capex are the same at or better than what we projected and the spec numbers. So we continue to be able to pull both those levers. The company has a history of being able to manage cost aggressively and we will continue to do that.

are the same matter better than what we've projected in the SPAC numbers. So we continue to be able to pull both those levers. The company has a history of being able to manage cost aggressively. And we'll continue to do that. But at the same time, obviously, we do have to invest in the organization to ensure we drive revenues as fast as possible. So we're going to do that prudently.

But at the same time, obviously, we do have to invest into the organization to ensure we drive revenues.

As fast as possible, so we're going to do that prudently.

Those are the two main levers we have in terms of preserving cash. As I mentioned, we have $138 million on the balance sheet, which is a sizable amount. But we are in constant dialogue, obviously, with our...

Are those are the two main levers we have in terms of preserving cash as I mentioned, we have 138 million on the balance sheet, which is sizable amount.

But we are in constant dialogue, obviously with our.

With our bankers and others to try and tick.

with our bankers and others to try and take whatever steps we deem to be necessary to manage the company for the long term in terms of liquidity.

Take whatever steps, we deem to be necessary to manage the company for the long term in terms of liquidity.

Thank you. Our next question comes from Josh Sullivan with Benchmark. Please proceed with your question.

Hey, good morning.

Good morning, good morning, Josh.

Can you just provide some color on the longer life of the satellites you're getting, you know, what were the gating factors or getting life factors that you originally estimated that have now changed?

Can you just provide some color on the longer life of the satellites, you're getting where the gating factors to getting life sectors that you originally estimated that have now changed.

And do you think that's specific to black sky or do you think industry standards or components just improve?

Or do you think that's specific to black sky or do you think industry standards or components just the group.

Yes.

Well, I think Josh, when we started building these satellites years ago,

Well I think Josh when we started building these satellites years ago.

We used the best available engineering estimates on the expected life, which we thought would be about three years.

We use the best available engineering estimates on the expected life, which we thought would be about three years.

So, we now have our first two satellites which will be approaching their four-year anniversary this fall.

So we now have our first two satellites, which are will be approaching their four year anniversary. This fall.

but also keep in mind, Josh, that we have been implemented in agile space.

But also keep in mind, Josh that we have implemented an agile space.

approach in our business where we're constantly improving the satellites as we

<unk> in our business where.

We're constantly improving the satellites as we.

as we launch more over time within our manufacturing processes.

As we launch more overtime.

Within our <unk>.

Within our manufacturing processes so.

And at the time, you know, we hadn't had a lot of flight heritage, so we used very conservative estimates. So now we have

And at the time.

We hadn't had a lot of flight heritage. So we.

We use very conservative estimates so now we have.

14 satellites that are operating, we've got over three years of experience.

14 satellites that are operating we've got over three years of experience.

And we're starting to see that.

We're going to be able to squeeze expected longer life out of these than expected.

We're going to be able to squeeze expected longer than longer.

Longer life out of these unexpected.

I will say just industry-wide, you typically will see

I will say just industry wide.

You typically will see.

<unk> estimates that are expected mission life.

estimates that are expected mission life that end up

That ended up being.

shorter than the actual life, depending on each individual satellite. But we're very pleased with where we are, that's a great

Shorter than the actual life, depending on each individual satellite but.

We're very pleased with where we are that's a great.

That gives us a lot of optionality in the timing of when we deploy more satellites to replenish those so.

It gives us a lot of optionality in the timing of when we deploy more satellites to replenish those. So, we see and expect this trend to continue and is very favorable to our lives.

We see and expect this trend to continue.

<unk> is very favorable to our long term plan.

And then just on Gen 3 to be launched in 2023, as we think about CAPEX longer term, you know, it's a large cost differential with Gen 2, and maybe to frame it, you know, what was the differential between Gen 1 and Gen 2.

And then just on Gen three.

To be launched in 2023, and as we think about capex longer term sort of large cost differential with gen. Two.

And maybe to frame it what was the differential between Gen. One and Gen. Two.

I would say generally we have, we've kept in line the cost of these satellites between Gen 2 and Gen 3. It really demonstrates the opportunity.

I would say generally we.

Have.

We've kept in line the cost of the satellites between Gen two and Gen. Three.

It really demonstrates the opportunity.

With with small satellite economics, so that.

we're seeing the type of improvements we're making within the same cost basis. So, as we move from 1 meter to 35 to 50 centimeters with added

We're seeing the type of improvements, we're making within the same cost basis. So.

As we move from one meter to 35% to 50 centimeters with added.

with an added IR capability and other features on the spacecraft, such as onboard computing and communication, space communication capabilities.

With an added IR capability and other features on the space craft such as.

On board computing and communication space communication capabilities.

really, I think, demonstrates that

Really I think demonstrates that.

We're going to be able to continue delivering significant value improvements to our customers over time within the same cost framework.

We're going to be able to continue delivering significant value improvements to our customers over time.

Within the same cost framework.

Maybe just lastly, you know, a general market question, you know, what is pricey look like, you know, given you got strong demand here at Ukraine, you know, driving other regions as well, but many of competitor capacity announcements on the horizon inflation, you know, how does it all come together?

Then maybe just lastly.

Mark a question what does pricing look like given you've got strong demand here at Ukraine, driving other regions as well, but then your competitor capacity announcements on the horizon.

Inflation, how does that all come together in the current pricing environment.

I think we're seeing a favorable pricing environment, what we are.

I think we're seeing a favorable pricing environment.

Our particular.

particularly in these market areas that we've outlined internationally.

Particularly in these market areas that we've outlined internationally.

There's increasing demand for services from trusted suppliers while there's flatter diminished capacity in the market.

There is increasing demand for services from trusted suppliers, while there is flatter diminished capacity in the market.

from legacy players.

From from from legacy players so.

<unk>.

It's favorable in both in terms of pricing and demand for where we are right now.

Thank you for your time.

Thanks, Josh.

Okay.

Thank you. Our next question is Chris Quilty with Quilty Analytics. Please proceed with your question.

Thank you our next question, Chris Quilty with Quilty analytics. Please proceed with your question.

Thanks. I want to beat a dead horse on the the OPEX question. I just couldn't do the math quick enough with the new numbers you gave it. It looks like year over year excluding depreciation and dot com OPEX is up around 80%. You know, first of all, that order of magnitude correct. And I guess what I'm driving to is, you know, how should we look at OPEX on a go forward basis. You see the the current level you've now reflected.

Thanks, I wanted to beat a dead horse on the Opex question I just couldn't do the math quick enough with the new numbers you gave it looks like year over year, excluding depreciation and stock comp Opex is up around 80%.

First of all of that order of magnitude correct and I guess, what I'm driving to is.

How should we look at Opex on a go forward basis, you see the.

Current level, you've now reflected new hires public company costs should it be fairly stable from this point going forward or should we expect to see some creep as the year goes forward.

new hires, public company costs, should it be fairly stable from this point going forward, or should we expect to see some creep as the year goes forward?

Yes, so as I said, I'll fix a year of year and a quarter is up $10 million. Most of that is a combination.

Yes, so as I said opex year over year in the quarter was up $10 million.

Most of that is.

A combination of.

investments into our software talent, software hire, software engineer, sales, and of course public company

Investments into our software talent software hire software engineers sales.

And of course public company costs.

You know, we'll continue to grow that. I think you're looking a little bit at the law of small numbers, right? So there's a small denominator prior to going public, sort of nine months before that September timeframe. So I'm less concerned with the percentage growth. I don't think that's indicative. I think you need to look at a run rate that's more in line with dollars and heads and of course then any depreciation on satellites.

We will continue to grow that I think youre looking a little bit if the law of small numbers right. So there's a small denominator prior to.

Prior to going public sort of nine months before that September timeframe, so im less concerned with the percentage growth I don't think thats indicative.

I think you need to look at a run rate that's more in line with dollars and heads and of course then.

Any depreciation on satellites.

So I hope that's helpful.

Yeah, so maybe can you give a better sense of what the dollar increase might look like, you know, maybe what's a good run rate for OPEX exiting the year, excluding the depreciation.

So maybe can you give a better sense of what the dollar.

Increase might look like maybe what's a good run rate.

For Opex exiting the year.

Excluding depreciation and stock comp.

Yeah, as I said, we've put out revenue guidance, we've put out CAPEX guidance, I don't think we're going to get into OPEX and gross margins that will, by default, create an EBITDA guidance, which we're not going to do at this time.

Yes.

As I said, we've put out revenue guidance, we've put out Capex guidance I don't think were going to get into Opex and gross margins as well.

That will by default, creating EBITDA.

Guidance, which we're not going to do at this time.

Yes.

Okay. Fair enough. Question for you. I think with the Gen 3, you mentioned a space communications capability. I'm assuming you're referring to some sort of a relay capability. Can you talk more about that?

Okay fair enough.

Question for you I think with the Gen. III you mentioned, a space communications capability I'm, assuming you're referring to some sort of a related capabilities can you talk more about that.

Yeah, Chris, we've made provisions in the satellites to have a lot of flexibility and to

Yes, Chris we've made provisions and the satellites to have a lot of flexibility into.

space-to-space comms.

Space based comps.

<unk>.

that can come from a variety of different networks.

That can come from a variety of different networks. So.

We've made those provision that satellite.

Would that be focused primarily on sort of a TTNC capability or actually a downlink for imagery? And if so, are you thinking more about RF or opt-in?

Would that be focused primarily on sort of a <unk> capability or actually a downlink for imagery and if so are you thinking more about RF or optical.

It's primarily for TT and C because our primary objective is to.

It's primarily.

Merrily for TNC, because our primary objective is to.

reduce the timeline for our customers to task.

Reduce the timelines for our customers to task.

and receive imagery, so these are strategies to

And receive imagery so.

These are strategies too.

to improve those operating timelines over time, especially

To improve those operating timelines over time, especially.

for where we see the opportunity market around tactical ISR from space. So, and as I mentioned, we have an agile platform that allows us to put different types of technologies in there as needed.

For where we see the opportunity market around tax.

Tactical ISR from space, So and as I mentioned, we have an agile.

Platform that allows us to put different types of technologies in there as needed.

Great. As a follow-up to the satellite life question,

Great.

As a follow up to the satellite life question.

Sure.

How quickly can you turn, or I should say, how quickly can Leo Stela turn a new satellite order, you know, if you had an on orbit failure or saw increased demand, how long should we expect from, say, time of order to on orbit?

How quickly can you turn or I should say how quickly can Leo stellar turn a new satellite order.

You had and on orbit failure or saw increased demand how long should we expect from say time of order to on orbit.

Chris, it depends on really long-lead.

Chris It depends on.

Really long lead.

long lead items such as optics and sensors and other critical components.

Long lead items, such as the optics and sensors and other critical components.

I think we're seeing if we start from scratch, it's about a 24 month or less depending on the supply chain.

I think I think we're seeing if we start from scratch, it's about 24 months or less.

Depending on the supply chain.

Now what we also demonstrated last year is by having a pipeline of satellites as we

Now what we also demonstrated last years by having a pipeline of satellites.

As we have been doing.

We can work with launch providers to rapidly deploy capacity to meet replenishment or growing

We can work with launch launch providers to rapidly deploy capacity to me.

Punishment or growing.

demand and that's a really powerful aspect of our model. So we intend to keep a pipeline of satellites moving through Leastella and deploy them as needed to meet market demand or to address any on orbit issues, which is a significantly de-risk.

Demand and that's a really powerful aspect of our model. So we.

We intend to keep a pipeline of satellites moving through Lia, Stella and deploy them as needed to meet market demand or to address.

Any on orbit issues.

Which is a significantly de risked type of constellation to what it's been.

type of constellation to what has been

really conditions in the past where a single failure can be catastrophic to

Really conditions in the past, where a single failure can be catastrophic too.

the amount of capacity and performance that customers are relying on. So we really just demonstrated that.

The amount of capacity and performance that customers are relying on so.

We really just demonstrated that.

both in what we did in the fourth quarter by doubling our capacity in about 20 to 30 days.

Both on what we did in the fourth quarter by doubling our capacity in about 20 to 30 days.

And then also recently, as we made a decision to change the orbits of the satellites that we just launched in April to optimize capacity and performance over Eastern Europe to meet customer demand. So it's a different model, Chris, and one that sets us up to really address

And then also recently.

We made a decision to change the orbitz other satellites that we just launched in April .

Two.

Optimize capacity and performance over eastern Europe to meet customer demand so.

It's a different model Chris.

And one is one that's.

Sets us up to really address demand as needed.

Great. While we're talking about Leo Stella, when we look at the engineering services activities, is it fair to assume that that's a joint activity with Leo Stella? And if so, how do you handle, is there a cost sharing arrangement around those engineering costs?

Great.

We're talking about we have stellar when we look at the engineering services activities.

Is it fair to assume that that's enjoying activity with me is stellar and if so how do you handle is there a cost sharing arrangement around those engineering costs.

In some cases, we work with Leastella, anything that we do with Leastella, even though we own the company, at least half of it, is done at arm's length.

In some cases, we work with Leah Stella.

Anything that we do is stellar even though we own the company at least half of it.

Is done at arms length.

contracts, but we do align strategic investments on

Our contracts, but we do align strategic investments on.

satellite capability that we can leverage together. So it's an ideal partnership from that perspective and one that we're leveraging.

Satellite capability that we can leverage together so it's a it's a it's an ideal partnership from that from that perspective.

And one that we're leveraging very heavily across our business.

Great, and Paul, sorry.

Great.

Oh, sorry.

Sorry.

Chris, I was just going to say, if you go through the financials, you'll see Leostel is accounted for on equity investment basis. And so the revenue you see in our P&L is purely associated with our customer and the cost associated with that.

Chris I was just going to say if you go through the financials Youll see Leo sales accounted for in equity.

<unk> basis.

And so the revenue you see in our P&L, it's purely associated with our customer and the cost associated with that.

Great.

A follow-up question on EOCL, historically that, well, I guess the Enhanced View contract has run through September 30th, and assuming that they do award a contract this summer, is it fair to assume that the contracts that you've seen are structured so that any new revenues associated with EOCL would kick in starting on September 1st, or is there some

Follow up question on <unk>.

Historically that.

The enhanced view contract has run through September 30.

And assuming that they do.

Award a contract this summer.

Is it fair to assume that.

Contracts that you've seen are structured so that any new revenues associated with the <unk> would kick in starting on September 1st or is there some sort of.

delay period that we might encounter before actual revenues associated with the program begins.

Delay period.

That we might encounter before actual revenues associated with the program begin.

Well, one, you know, we're anticipating that the contract would go in force right away. We're already providing.

Well, one we're anticipating that the contract would go in for Us right away.

We're already providing.

services to that customer and it had been integrated with that customer and so I don't think September is a driver.

Services to that customer.

<unk> has been integrated with that customer and so.

I don't think September as a driver.

I think it's really just driven by the time of when they make the awards and when they turn on the service. So, and we're ready to start, we're ready to start on day one.

I think it is really just driven by the time of when they make the awards and when they turn on the service so and we're ready to start.

We're ready to start on day one.

Great. And final question here. When you look at your pipeline, I don't know whether you can quantify it like this. What is your current breakdown look like between government, commercial and international and how has that changed in the past year?

Great and <unk>.

A question here.

When you look at your pipeline, but.

Whether you can quantify it like this.

What is your current breakdown look like between government commercial and international and how has that changed in the past year.

Well, I think the overall pipeline is growing.

Well I think the.

The overall pipeline is growing.

driven by demand in all of those areas. As we have said, commercial is in its early days.

Driven by demand in all of those areas.

Have said commercial is in its early days.

It's more the type of customers and the applications that

It's more of the type of customers and the applications.

That.

we're seeing emerge.

Where we are.

We are seeing emerge.

So, and then as I've outlined, obviously, U.S. government, through ELCL, we're seeing

So and then as I've outlined.

Obviously U S government.

Through <unk>, we're seeing demand.

growing from NGA as we've outlined through our work in our analytics as a service.

Growing from NGA as we've outlined through our.

And our analytics as a service.

to the program we outlined and then the technicalized market we see is early and expanding.

To the program, we outlined and then the tactical ISR market, we see as early in <unk>.

Expanding but.

By far, I think we see the biggest growth coming internationally.

By far I think we see the biggest growth coming internationally.

<unk>.

both for imagery, geospatial analytics, and Svalbard.

Both for image for imagery geospatial analytics.

And sovereign ISR capability.

Yeah, Chris, there's a good desegregation of revenue in the 10Q that you can go and look at and get all the numbers.

Yes, Chris there is a good disaggregation of revenue and the 10-Q.

You can go and look at and get all the numbers.

Yeah, and I guess my question was regarding the pipeline and it sounds like I mean, you've said this throughout the call its international.

Yeah, and I guess my question was regarding the pipeline and it sounds like you've said this throughout the call. It's international.

Actually, I do have one follow-up question just regarding

For sure actually I do have one follow up question just regarding.

In the current quarter, did you see a disproportionate share of, I guess, what I'll call one time rather than contracted opportunity relative to what you've seen in the past and perhaps driven by Ukraine?

In the current quarter did you see a disproportionate share of I guess, what ill call one time, rather than contracted opportunity relative to what you've seen in the past and perhaps driven by Ukraine.

Yeah.

Well, what we've seen Chris is we have a very, so one, we saw a lot of increase in demand over that region for sure from both U.S.

Well, what we've seen chris's.

We have a very.

So one we saw a lot of increase in demand over that region for sure from both.

The us <unk>.

international and commercial customers.

International and commercial customers.

But two, we have flexible contracting relationships with

But two we have flexible contracting relationships with.

these customers so they can decide where they want to prioritize collections. So, we give them that flexibility and that we experience that in the quarter. And then, but as we outlined, the majority of our growth

These customers so they can decide where they want to prioritize.

Collections, so we give them that flexibility and that we experienced that.

In the quarter.

And then.

But as we outlined.

The majority of our growth.

In the quarter came from outside of that European region.

<unk>.

due to the demand that we're seeing in Asia PAC and growing demand in the Middle East.

Due to the demand that we're seeing in Asia Pac and.

Growing demand in the middle East.

Okay.

Great. Thanks for all the detail thank.

Thank you Chris.

Thank you. Our next question comes from Jason Schmidt with Lake Street.

Thank you. Our next question comes from Jason Schmidt with Lake Street. Please proceed with your question.

Hey guys thanks for taking my questions just two really quick ones and just following up on your comments on the international market and the momentum you're seeing I mean when I look at the international pipeline or when you guys think about it is it fair to say that the momentum here is outpacing what you guys would have thought kind of 12 to 18 months ago.

Hey, guys. Thanks for taking my questions. Just two early quick ones and then just following up on your comments on the international market and the momentum Youre seeing.

Look at the international pipeline or when you guys think about it is it fair to say that the momentum here is outpacing what you guys would have thought kind of 12 to 18 months ago.

Actually, we saw a lot of opportunity and demand in the international market. We are seeing it accelerate.

So actually we saw a lot of opportunity and demand.

In the international market, we are seeing it accelerate.

And I think it's really being driven by world events and the growing interest in the ability to leverage what can be done and has been demonstrated in space and analytics by companies like Black Sky. So I think we're seeing all of that coming together at the right time in the market.

And.

I think it's really being driven by world events and the growing interest in the ability to leverage what can be done and it has been demonstrated in space and analytics by companies like Black Sky. So I think we're seeing all of that coming together at the right time in the market.

We're also, as I've outlined, we've been investing heavily in expanding that sales team.

We're also as I've outlined we have been investing heavily in expanding that sales team.

And so, you know, now we're getting a lot more insight and understanding how we can begin converting that demand into new business. And the other thing I'll point out.

And so now we're getting a lot more insight and understanding how we can begin converting that demand into new business.

The other thing I'll point out.

Jason is that.

And this has been a key part of our strategy from the very beginning once you're

And this has been a key part of our strategy from the very beginning once once you're embedded.

embedded and trusted in the operations of those customers. They tend to be long-term.

Embedded and trusted in the operations of those customers tend to be long term.

recurring and growing relationships with these customers. And so that's been part of our strategy from day one.

Recurring and growing relationships with these customers and so thats been part of our strategy from day one.

Okay, that's helpful. And then just as a quick follow-up, obviously government procurement cycles in general are always lengthy, but the length that you're seeing in the international market, is it pretty comparable to what you've seen in the US market?

Okay. That's helpful. And then just as a quick follow up obviously government procurement cycles in general are always lengthy but the length that youre seeing in the international market is it pretty comparable to what <unk> seen in the U S market.

I would say they're they're different, but we understand each of them very well

I would say they are they're different but we understand each of them very well.

We have a land and expand strategy so we are getting into initial piling and initial operating capability with these customers very quickly. We did that in the first quarter and then once we're in there and operational, those contracts tend to expand over time. So you do have to have

We.

We start we have a land and expand strategy. So we are getting into.

Initial.

Pilot and initial operating capability with these customers very quickly.

We did that in the first quarter.

And then once we're in there and operational those contracts tend to expand over time so.

You do have to have.

You do have to work with them and plan for out-year budget cycles, which we do. But we understand that very well.

You have to work with them and plan for out year budget cycles, which we do.

But we all we understand that very well.

Okay. Thanks.

A lot guys.

Jason.

Thank you. Our next question comes from Caleb Henry with Quilty Analytics. Please proceed with your questions.

Thank you. Our next question comes from Caleb Henry with Quilty analytics. Please proceed with your question.

Hi guys, most of my questions have been answered, so just two, for Gen 3, do you anticipate keeping the same fleet size of around 14 satellites, or does that change? And then on the ground network side, I think we talked a lot about the spacecraft and the software, but are you still deploying gateways around the world, and especially with international customers, does that come with a need to deploy gateways in those countries?

Hey, guys. Most of my questions have been answered so just two for Gen. Three do.

Do you anticipate keeping the same fleet size of around 14 satellites or does that change.

And then on the ground network side, I think we talked a lot about being scrapped in the software, but are you still deploying gateways around the world, especially with international customers does that come with the need to deploy.

Gateways in those countries.

Yes so.

Okay, let's start with the constellation.

Okay, let's start with the constellation so.

Where we are today as we've achieved in 2014.

where we are today as we've achieved the 14 satellite baseline.

Satellite baseline.

that gives us the baseline capacity and performance and revisit we need for the next couple of years. We are.

It gives us the baseline capacity and performance and revisit we need for the next couple of years.

We are.

Our plan has not changed toward an objective of 30 satellites.

Our plan is.

Has not changed.

Toward an objective of 30 satellites.

We're going to begin deploying our Gen 3 capability next year to replenish the

We're going to begin deploying our gen III capability next year.

To replenish the.

the aging of Gen 2 capability and to start expansion, but we'll expand the constellation to align with market demand. So our long-term plans have not changed in terms of where we want to be in terms of the number of satellites.

The aging of.

Gen two capability and to start <unk>.

Expansion, but we will expand the constellation to align with market demand. So.

Our long term plans have not changed in terms of where we want to be in terms of the number of satellites.

We're just highly aligned with the growth and the capacity we need to do that.

We're just highly aligned with the growth and.

The capacity, we need to do that.

So.

So, and then on the ground, as the ground stations or gateways, as you refer, we're adding a couple more to improve timeliness performance.

And then on the ground.

The ground stations, our gateways as you refer we're adding a couple more to improve timeliness performance.

Yes.

Unlike others, we do not require our customers to buy hardware.

to do direct downlink or other tasking capabilities within their regions to achieve significant operations.

To do direct downlink or other tasks capabilities within their regions to achieve.

Significant operational performance so.

In some cases customers are interested in that and will provide it, but in the most part our service is primarily through software and integrated that way.

Some cases customers are interested in that and we will provide it.

In the most part.

Our services, primarily through software and integrated that way.

Alright, thank you.

Thank you. Our next question comes from Scott Duchel with credits. Please proceed with your question.

Thank you. Our next question comes from Scott <unk> with Credit Suisse. Please proceed with your question.

Hey guys, thanks for taking the follow-up. Just real quickly, Johan, how is R&D so low? Are there costs that are getting capitalized? I'm just curious how you manage.

Hey, guys. Thanks for taking the follow up just real quickly Johan <unk> House R&D, so low or other costs that are that are getting capitalized I'm just curious.

How you manage to keep that expense so thank you.

Yes, so we've historically not done a lot of R&D, obviously being cash constrained prior to getting public. Since then, we are pretty targeted and look into specific programs that we believe may have value in the future. That group is still ramping, so we don't have a lot of R&D expense currently, and it's very targeted and focused.

Yes, so we've historically not done a lot of R&D, obviously being cash constrained prior to going public. Since then we are a pretty targeted and look into specific.

Programs that we believe may have value in the future that that group is still ramping.

So we don't have a lot of R&D expense currently and it's very targeted and focused.

Okay, and then the cost to run machine learning training, is that something you guys invest in chips to do that in the past, or are you going through AWS?

Okay, and then the cost to run machine learning training is that something you guys invest in chips does that in the past or are you going to AWS.

Are there not larger costs for that or just historically I thought that that would be an expensive cost for

They're not larger costs for that historically I thought that that would be an expensive cost for <unk>.

Ml company. Thank you.

included in our OPEX, but yeah, we are investing heavily in software and

Included in our Opex, but yes, we are ahead in divesting heavily in software and.

I've been expanding our data science and machine learning team to enhance, provide that type of, they do that training of algorithms.

I have been expanding our data science and machine learning team too.

Enhance provide that type of.

They do that try to training of algorithms, but.

because we are seeing more and more customers want analytics delivered with their data.

Because we are seeing.

More and more customers want analytics delivered with their data.

And so, and then for us, that's also pretty significant incremental margin off of the data. So, we are continuing to invest very heavily in that.

And so and then for US that's also pretty significant incremental margin off of the data.

So we are continuing to invest very heavily in that.

Where is the cost for those employees going then? I mean R&D is less than a million dollars a year.

Thanks.

Whereas the cost for those employees going on that I mean, R&D is less than $1 million a year.

Whereas that costs flowing through the P&L.

Yes, so number one, that team is still ramping up to the extent they're providing services that are currently in revenue, obviously it goes to COGS, some of it gets capitalized as they develop those products and capabilities.

So that so number one that team is still ramping up to the extent they are providing services that are currently.

In revenue, obviously that goes to Cogs some of it gets capitalized as they develop those products and capabilities.

And what remains goes to OPEX as Brian indicated. I think a key takeaway to remember here is because we have our unproprided constellation, our cost to learn, if you will, is significantly lower than many other companies that don't own their own data, right?

And then what remains goes through Opex as Brian indicated.

So your takeaway I think a key takeaway to remember here is because we have our own proprietary constellation.

Our cost to learn if you will.

Significantly lower than many other companies that own their own data right.

Got it thanks guys.

Thank you. There are no further questions at this time. I'd like to turn the floor back over to Ali Bonilla for any closing.

Thank you there are no further questions at this time I would like to turn the floor back over to Alibaba Neil for any closing comments.

I want to thank everybody for participating on the call and we look forward to speaking to you again soon have a great day everybody.

I want to thank everybody for participating on the call and we look forward to speaking to you again soon. Have a great day everybody.

This concludes today's conference. You may disconnect your lines at this time. Thank you for your participation.

This concludes today's conference you may disconnect your lines at this time. Thank you for your participation.

Q1 2022 Blacksky Technology Inc Earnings Call

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