Q2 2023 BlackSky Technology Inc Earnings Call
Yeah.
[music].
Good morning, ladies and gentlemen, and welcome to Black box technologies second quarter 2023 earnings Conference call. All lines have been placed on mute to prevent any background noise.
After the Speakers' remarks, there will be a question and answer session.
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I would now like to turn the call over to Alibaba and yet backed guys Vice President of Investor Relations. Please go ahead.
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, Henry Dubois on today's call, Brian will provide some highlights on the quarter and give a strategic update on the business.
He will then review the company's second quarter financial results and outlook for 2023.
Following our prepared remarks, we will open the line for your questions.
A replay of this conference call will be available from approximately 12 30 P. M. Eastern time today through August 23rd 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 blacks.
Sky Dot com in conjunction with today's call. We have posted a quarterly earnings presentation on the Investor Relations website or you may use to follow along with our prepared remarks.
Before we begin let me remind you that certain statements made during today's conference call regarding our future plans objectives and expected beforehand, including our financial guidance for 2023 are forward looking statements actual results may differ materially as these statements are based on our current expectations as of.
Today and are subject to risks and uncertainties, including those stated in our Form 10-K, we encourage you to review our press release Form 10-K, and other recent SEC filings for a full discussion of the risks and uncertainties that pertain to these statements.
And that may affect future results or the market price of our stock.
<unk> assumes no obligation to update forward looking statements, except as may be required by applicable law. In addition, during today's call we will refer to certain non-GAAP financial measures, including adjusted EBITDA adjusted imagery and software analytical services cost of sales and cash operating expense.
A reconciliation of these non-GAAP financial measures to their most comparable GAAP measures are included in today's accompanying presentation.
It can be viewed and downloaded from our Investor Relations website at this point I'll turn the call over to Brian No tool right. Thanks.
Thanks, Sally and good morning, everyone. Thank you for joining us on today's call.
I am pleased to report that Black Sky delivered another strong quarter, because we continue to demonstrate revenue growth substantial operating leverage and effective cost management that has us on a path towards profitable growth.
Our progress is being driven by strong demand for our high frequency imagery and analytics for major defense and intelligence customers around the world.
Black Sky's unique dawn to dusk monitoring capabilities are relied upon everyday to deliver critical intelligence to decision makers and some of the world's most important events.
A relevant example illustrated on slide four.
Related to the recent rebellion in Russia by the Wagner group.
In this case black Sky was monitoring activities related to the location of Wagner leader promotion days after the failed to attack.
By combining our high frequency monitoring capabilities with other data sources.
Able to capture imagery of two planes linked to the Wagner leader.
Belarus, harefield outside the country's capital city.
The intelligence collected by Black Sky was used by an independent third party analyst to corroborate the findings and was featured in exclusive reporting by C. N N.
Over the days, leading up to this discovery blacks.
Black Sky Mono dislocation over 170 times.
Which was an essential part of capturing this critical of that.
Our unique time diverse constellation.
Allows us to do this in a way no one else can.
Another example is shown on slide five.
Where our dynamic monitoring capabilities were used to reveal critical strategic activities by China.
Associated with the rapid construction of a major naval facility in Cambodia.
Here you can see two images taken about a year apart.
Showing the rapid construction of a Chinese military naval station off the coast of Green Cambodia.
Although only two images are shown here black.
Black Sky collected over 500 high resolution images.
The first signs of construction of the peer began in June of last year.
This high revisit imaging combined with AI enabled analytics.
As an essential capability required for detecting and understanding important activity such as this.
Others like it that are taking place.
All around the world.
This type of critical intelligence is what governments around the world are requiring in their day to day mission operations.
And what is driving strong demand for blacks, guys current and future capabilities.
How are unique hourly monitoring capabilities combined with industry, leading AI enabled analytics.
Because what is differentiating us in the market.
And is driving our success as we continue to win large contracts and expand our customer base, a major U S and international government customers.
Now, let's turn to slide six and recent highlights that reinforced the strong momentum we are continuing to build across all aspects of our business.
First we continued to deliver strong year over year revenue growth.
Imagery and analytics revenue grew 51% over the prior year quarter.
Demand for our services continued to rise.
As a result of successfully winning a number of new contracts and renewal agreements with existing customers.
Second our imagery and analytics business delivered a 97% incremental contribution margin for the first half of the year.
This high margin imagery and analytics service business contains a low fixed cost structure that results in strong operating leverage and as the prime driver on our path to sustainable profitable growth.
Third.
We went over $35 million in new contracts and renewal agreements primarily.
Supporting International and U S government agencies.
We continue to see strong global demand for our high frequency imagery and advanced analytics.
Especially as more and more countries look to secure access to our capacity.
An important regions around the world.
Fourth.
Our success in winning new contracts. This year has produced over $200 million in total year to date bookings.
Demonstrating strong customer demand for black Sky's capabilities.
We anticipate further growth in our bookings in the second half of the year as we are actively working with several major customers on a number of sizable contracts.
Yes.
In June we were chosen to be added to the Russell 3000 index.
Making black sky more visible to a wider range of institutional investors.
And finally, we continued to make good progress on our very high resolution Gen three satellites.
Announcing yesterday that we signed a launch agreement with rocket lab for our next five dedicated launches.
This agreement secures flexible launch capacity that supports replenishment replacement and expansion of our constellation, including the initial launch of Gen. Three satellites in 2024.
The success, we've had this year in expanding our customer base.
Coupled with the strong market demand, we are seeing for our imagery and analytics services worldwide.
US confidence that we are well positioned to realize sustainable profitable growth.
We remain on track to achieve positive adjusted EBITDA operations in the fourth quarter.
Which is one of our major business objectives for this year.
I would now like to share some operational highlights from the quarter.
Yeah.
Turning to slide seven.
We continue to see growing demand for black Sky's unique capabilities across many international markets as.
As the need for real time intelligence continues to expand due to an ever changing geopolitical and economic environment.
Looking at the global market the conflict in Ukraine, and rising tensions around the world, including the Middle East and East Asia.
Increased demand from various countries seeking to secure access to our dynamic monitoring and geospatial intelligence capabilities.
More and more international governments are looking to invest in space space capabilities in support of National security and economic growth initiatives.
Our focus on supporting these countries as.
Is significantly contributing to our growth growing book of business.
And includes multiyear agreements for our shared capacity.
Which is a key driver towards strong long term revenue growth.
During the second quarter, we successfully closed a number of new contracts.
And renewals demonstrating that demand for our products and services.
It remains strong.
Here are a few of our key wins.
First.
We were awarded a 30 million dollar contract renewal with an international defense sector customer.
We've been supporting this customer for several years and have built a strong relationship with them over time.
Because they now have come to rely on black Sky and supported their day to day operations.
This renewal agreement expands upon an existing contract with a total value of the new contract three times larger than the previous.
In addition, the new contract is a multi year agreement, which is an expansion above the prior one year term.
The progression we've seen but this customer is.
As representative of how many how many of our customer relationships are evolving.
As part of our land and expand strategy.
Traditionally many customers start with a small pilot study contract with.
What's the duration of less than a year.
After a successful evaluation customers typically renew and expand the agreement.
Creasing, either the total contract value or length of the contract term or both.
As these customers fully integrate black sky imagery and analytics into their operations.
They seek to enter into multiyear multimillion dollar contracts for assured capacity over their region of interest.
This was the evolution of this customer.
And as the trajectory we're on with many other international government organizations.
As we will highlight and other wins, we achieved during the quarter.
Second we want a two year multimillion dollar contract with a key international customer for ground station infrastructure.
This infrastructure will be installed as an extension to the black Sky ground network, providing this customer with an additional access point and improved latency performance.
This new contract demonstrates that customers long term commitment to secure a shared access to our current.
In future imagery and analytic capabilities.
Third.
We won a two year multimillion dollar renewal agreements supporting another ministry of defense customer.
Through this contract we are providing them with advanced subscription based tactical imagery.
AI enabled analytic services.
We've been working closely with this customer to meet their specific requirements and are pleased to have renewed our agreement with them.
And lastly, we were awarded a multiyear contract and supported an international Nongovernment organization.
With this contract we are providing this important group a group with on demand imagery.
AI enabled analytics to assist with their mission directives and their broader global efforts.
Black Sky is supporting this multinational customer with commercial imagery.
An essential element of their operation and in particular provides a means to openly share intelligence with their key mission partners.
During the quarter and throughout the first half of the year, we have successfully closed on many new international sales opportunities.
Thanks in part to the investments, we made last year and the expansion of our international sales team.
This strategy is now paying dividends as we are now growing this pipeline of business and converting these opportunities into contracts.
We continue to see strong customer demand worldwide.
With many customers turning to block sky to secure a shared access.
Our current and future constellation under long term subscription agreements.
We're proud to support these countries and global customers and look to further capitalize on the growing international market demand.
Moving onto slide eight.
We continue to see U S government demand for our commercial imagery and analytics through the expansion of projects that are utilizing the capabilities of commercial space companies.
In support of their space space Geospatial intelligence requirements.
During the quarter, we won several new and follow on contracts with various U S agencies.
Demonstrating the ongoing demand for black skies imagery and analytic capabilities across the U S government.
One of our new contract wins.
With a major department of defense customer to provide them with on demand imagery related mission solutions.
This annual subscription contract is the first with this customer.
Pleased to have the opportunity to support their important mission.
In addition, we were awarded two new contracts with the NRO.
These contracts are focused on exploring shortwave infrared imaging capabilities as well as looking at techniques to drive further reductions in latency associated with the tasking collection and delivery of commercial imagery.
We have a long track record working with the NRO and just completed a successful first year of delivering daily high volume advanced imagery under our historic 10 year <unk> contract.
Yes.
As a result of this success, we've been able to capture new contracts with this customer as they continue to look to black sky to support their long term national security.
And defense needs.
Also in the second quarter, we received a number of new work orders from NGA and department of defense customers to extend and expand services are already providing under existing contracts.
The U S government continues to be an important customer for black sky.
We believe we are well positioned to capitalize on emerging opportunities.
The government is seeking to leverage commercial space capabilities.
In support of our nation's long term defense intelligence and National security needs.
Turning to slide nine.
In addition to our government business, we continue to make progress on the commercial front.
With some exciting new partnerships and contract wins.
In May we announced that we were selected by Sin Max.
Leading energy intelligence company to assist them in monitoring coal inventory at power plants.
Our partnership with <unk> will create a timely and accurate.
Energy intelligence assessment that will help.
Support National energy transition initiatives.
From fossil fuels and more towards sustainable energy resources.
<unk> was selected by <unk> following a competitive bid process.
Are they chose our rapid revisit.
Low latency imagery services.
Bind with our advanced burst imagery capabilities.
First imagery is where our satellites focus on a single location.
And can take five images repeatedly over 15 second period.
The imagery collected in this manner allows for multiple view angles as well as motion tracking of objects at the location.
<unk> will use our first imagery to generate three D volumetric products.
And provide its clients with critical information on.
Coal stockpiles for effective decision, making.
We're happy to partner with an innovative industry leader like send Max and support them.
And achieving a competitive advantage using our real time dynamic monitoring capabilities.
Last quarter, we also announced a partnership with spire global to create a commercially available AI driven maritime custody service.
This innovative surveillance and analytics service will utilize radio frequency emissions from ships.
Automatically task our satellite constellation.
And collect high resolution imagery in thousands of vessels worldwide.
Our AI enabled spectra software will integrate these images to detect and classified the vessels.
Eight cargo onboard and track activity over time.
Monitoring global Maritime activity is becoming increasingly critical to national security to.
To help identify illegal activities.
And monitor supply chain and commodity markets.
In fact, we're seeing increased interest in market demand worldwide for maritime services and.
In our dressing this growth opportunity through partnerships like this.
Moving on to slide 10 during the quarter, we continue to make good progress on our Gen. Three satellites, which are designed to deliver up to 35 centimeters of high resolution imagery.
And we will also include a swear imaging capability.
In preparation for the initial launch of our Gen. Three satellites I'm happy to report that yesterday, we signed an agreement with rocket lab to secure a block of five dedicated launches.
Disagreement locks and launched capacity for the replacement replenishment and expansion of our constellation.
<unk> includes the appointment of our initial Gen three satellites in 2024.
Securing this launch capacity will ensure resiliency of our satellite operations and provides us with the agility to deploy satellites, where and when we want.
Best need meet our customer needs.
We've partnered with rocket lab on a series of successful missions and are looking forward to expanding our constellation.
In summary, we're pleased that Q2 was another strong quarter highlighted by continuing revenue growth.
Proving operating leverage and the delivery of strong bookings performance during the first half of the year.
I'll now turn it over to Henry to go through the quarterly financial results in more detail Henri.
Thank you, Brian and good morning, everyone I am pleased with the execution, we have made across many aspects of our business and with our second quarter financial results.
Beginning with slide 12.
Revenue for the second quarter of 2023 was $19 3 million, an increase of $4 2 million or 28% over the prior year quarter.
Imagery and analytics revenue grew to $15 3 million, a 51% increase over the prior year period, primarily driven by greater volumes of imagery delivered to customers worldwide.
Professional engineering services revenue was $4 million in the second quarter of 2023 compared to $4 $9 million in the prior year quarter.
The decrease of $900000 was primarily due to timing of some R&D programs as a few new projects began to ramp up this year, while a few large projects from last year came to an end.
Keep in mind revenues recognized from these types of projects are largely milestone based and can fluctuate significantly quarter over quarter, depending on our projects estimated cost and percentage of completion.
Turning to cost of sales, we continued to demonstrate strong operating leverage in our imagery and analytics business as shown on slide 13.
Excluding stock based compensation depreciation and amortization expenses imaging and analysts cost of sales was $7 million in the first half of 2023 compared to $6 $7 million in the first half of 2022.
The small $300000 increase in cost of sales on a revenue growth of $13 $5 million results in a high incremental contribution margin of 97% for the first half of the year.
This performance is in line with the incremental contribution margins in the prior year and further demonstrates our consistent and strong track record of operating leverage we've always said that black skies core business of imagery and analytics services hasnt inherently low marginal cost for each incremental dollar received and these results continue to improve.
At that point.
I also want to point out that for the second quarter of 2023, we incurred a $2 5 million dollar expense to professional engineering service cost of sales primarily due to the accounting treatment of an R&D project that is partially customer funded for our gen III satellite capabilities.
Since we generate revenue on these projects the total cost incurred on these development efforts and not just the portion funded by the customers needs to be expense rather than capitalized.
This has the benefit of offsetting corporate Capex investments with government funded R&D, which helps our cash flows.
And they also enable us to build relationships with strategic customers that can lead to long term subscription contracts for imagery and analytics services.
As a result, our portion of the development cost hits, the P&L rather than the balance sheet.
Let's move to slide 14, and briefly talk about operating expenses.
For this discussion I will refer to cash operating expenses, which excludes stock based compensation and depreciation and amortization expenses.
This approach enables us to compare our year over year costs and run rates for the business without having the noncash items cloud the underlying performance of the business.
For the second quarter of 2023 cash operating expenses were $16 $8 million compared to $15 $2 million in Q2 of last year.
This year over year increase in cash operating expenses of $1 $6 million or 10% was primarily due to the expansion of our sales team in order to capture new opportunities in the market and to continue to develop it on our AI software platform to further support our customers with greater analytics.
In addition, as you can see on the slide our growth in cash operating expenses is significantly lower than our revenue growth rate and most importantly, a fraction of our growth rate for imagery and analytics revenues.
Turning to slide 15.
For the second quarter of 2023, we reported an adjusted EBITDA loss of $5 8 million, a 35% improvement over the $8 $8 million loss in the prior year period.
The year over year improvement was primarily driven by strong revenue growth in our imagery and analytics services business delivered at high incremental contribution margins significantly offsetting the small increase in cash operating expenses.
Keep in mind this past quarter, we incurred a $2 5 million dollar expense to our professional and engineering service cost as previously discussed.
Without this impact we would have reported an adjusted EBITDA loss of just $3 $3 million.
Regarding our balance sheet.
We ended the second quarter of 2023 with $59 $5 million of cash restricted cash and short term investments.
Our capital expenditures in the second quarter of 2023 were $12 $6 million and brings our total capex for the first half of this year to $28 $4 million.
These investments are primarily to advance our gen III satellite constellation and enhance our AI software capabilities.
We continue to closely manage these investments and believe we have sufficient cash and liquidity for our needs for the foreseeable future.
Now, let's move on to our 2023 outlook as shown on slide 16.
We continue to see strong global demand for our imagery and analytic capabilities as evidenced by the number of new and expansion agreements. We've recently won.
We're highly focused on realizing profitable growth and remain on track to achieve positive adjusted EBITDA in Q4 of this year.
This is a result of our expected revenue growth in our high margin imagery and analytics business, coupled with our continued focus on managing costs responsibly.
On revenue.
We're actively working with several major customers at a number of sizable new multiyear contracts.
However, as is typical for deals of this nature. There is some degree of uncertainty surrounding the timing of revenues associated with these long procurement cycles.
As this can introduce quarter to quarter variability, we are widening the range of about 2023 revenue outlook to be between $84 million and $96 million.
Even at the low end of this revenue range, we expect to achieve positive adjusted EBITDA in Q4 this year.
In addition, we are maintaining our expectation for full year 2023 capital expenditures to be between 40% and $45 million as we continue to invest in building our gen. Three satellites and further enhancing our spectrum AI driven software.
In summary, we're pleased with our financial performance in the second quarter and the progress we've made across many aspects of our business.
With that I'll now turn it back over to Brian for some closing remarks.
Ryan.
Thank you Henry.
In closing we are pleased with the strong second quarter performance and the momentum we are carrying into the second half of the year.
Demand for our products and services has never been higher.
As we continue to see an increasing number of defense and intelligence customers.
Turning to black Sky for their mission critical needs.
Our unique high frequency hourly monitoring and AI enabled analytics.
What differentiates us in the market.
And is becoming an essential capability for national security missions around the world.
Our strategy to focus on this market is paying dividends.
As this increased demand has translated into a large and growing pipeline of sales opportunities.
Which we are successfully converting into sizable multiyear contracts with highly strategic and long term customers.
The revenue growth from our high margin imagery and analytics sales is demonstrating the operating leverage of our business model.
And combined with prudent and responsible cost management has us on track to achieve positive adjusted EBITDA in the fourth quarter and beyond.
While our focus is on profitable long term growth.
We continue to invest in the future and in technologies that provide the highest long term value to meet our customers' needs.
We are growing our expertise and capabilities in AI, while advancing our space architecture to include very high resolution Gen. Three satellites, which remain on track for initial deployment next year.
We look forward to the next phase of expansion of our constellation to meet the strong demand for these capabilities.
Finally, I want to thank the entire black sky team for their hard work and dedication.
As they work every day to deliver on our commitments to customers around the world have commentary rely on black Sky.
We are all very proud to be partnered with these customers and most importantly that our capabilities are being used to shine a light on events that threaten the security of our country.
And our allies around the world.
This concludes our remarks for the call and we will now take your questions.
Thank you we will now begin the question and answer session.
To ask a question you May Press Star then one on your touch telecom.
You are using a speakerphone please pick up your handset before pressing the keys to withdraw your question. Please press Star then two.
At this time, we will pause momentarily to assemble our roster.
Our first question comes from the line of Jason Smith with Lake Street. Please.
Please proceed with your question.
Hey, guys. Thanks for taking my questions just wanted to start with the updated guidance curious if this is more related to contracts that you guys had previously won that are getting pushed to the right or contracts that you had previously expected to close at this time that just won't start contributing until later this year.
Okay.
Hi, Good morning, Jason Thanks for the question.
It's primarily timing.
And it's related to both renewals and new contracts.
So we're.
As we mentioned we are actively working with several major customers on a number of new sizable contracts.
And as is the case of contracts of this nature, the sales cycle, sometimes takes longer especially contracts with new government customers.
Especially true internationally so.
This can introduce variability quarter to quarter. So.
That's why we ultimately widened our guidance here to address for that variability.
Okay understood and then just following up on that I mean that pipeline of contracts or in negotiations with are those primarily with existing customers looking at expanding or new customers coming online.
It's a combination of both there are several expansion contracts, but also several contracts with new customers.
Okay, great I'll jump back into queue. Thanks, a lot guys. Thanks.
Thanks, Jason.
Our next question comes from the line of Edison Chu with Deutsche Bank. Please proceed with your question.
Hey, Thanks. Good morning, I was wondering you obviously had a lot of momentum.
The booking side can you give any sense of the cadence or the timeframe at all.
All you had.
Recognize some of that some of the bigger widens for example, the 30 million renewal.
How does this sort of start flowing through either this year or next.
Yes, Thanks, Edison I think as we stated.
Many of these contracts are multiyear contracts and are subscription based and so.
<unk>.
Those contracts will.
Start to be recognized over.
Over the course of that couple of year period.
As we deliver capacity and in some cases these are take or pay type contracts where.
They subscribed to our capacity and they pay on a quarterly basis to access that capacity.
Alright.
And then I guess more broadly speaking.
One of the one of your competitors out there has been seeing.
A decent amount of slowdown on the commercial side.
Could you maybe just talk about on the government side.
Is that the case it sounds like it's not but.
Just any thoughts about how you're seeing the various end markets.
Okay.
Great each other.
Yeah, we're not seeing a slowdown in our core markets. We then.
As you know.
We've been primarily focused on the global defense and intelligence sector.
And we're seeing.
That that.
That market rapidly growing and where there is clear demand for our products and services and so.
For Us this has always been our strategy and this focus is paying off.
As you can see in the growth of our sales pipeline the quality of our bookings and the growth of our customer base. So.
This has been our strategy all along and we're continuing to see strong demand there.
Great and if I could sneak one more in on the Gen. Three obviously, great great to see that the rocket lab contract do you have any sense of how many gen III, maybe contemplating for for next year.
We have we have is that as soon as we've said in the past we will deploy satellites as we need to.
To replace.
And replenish what we have on orbit and we'll expand that over time. So we've commenced a.
<unk> production of Gen three satellites and as we get into next year, we will.
And get closer to <unk>.
Those deployments will provide an update on timing and how many.
Okay. Thank you.
Okay.
Our next question comes from the line of Josh Sullivan with Debenture <unk> Company. Please proceed with your question.
Hey, good morning.
Good morning, Josh sorry.
As contract renewals, you mentioned the $30 million renewables almost three X. The previous one what is your recompete or renewal rate look like over the next 12 months.
Josh I would say generally the majority of our customers renew with us and as I mentioned, we go through.
A process where.
They typically start.
With the initial pilot capability.
Expand that over time, we're seeing almost no churn.
With the customers that we have in most cases they are all expanding.
Okay.
And then as far as the EBITDA breakeven target how much of that is volume or how much that is controlled by cost at this point to get you there.
Josh This is Henry Thanks for that question and the way we look at it is it I mean, we we have been responsible on our cost management all along so we're very comfortable with where we are and we are continuing to grow and hire people.
But we don't need to do that are ahead of our ahead of our need.
And so the way we're looking at it is we do have some revenue growth that we're expecting throughout the rest of this year I mean as you see with our guidance will be growing in the second half.
But we feel comfortable that we will be hitting that that EBITDA positive in Q4.
And then maybe just one last one how is the relationship aspire evolving what has customer interest look like and then how are you sharing the value between yourself inspire.
Yes, Josh as we mentioned we're seeing.
Really significant interest and maritime related.
Solutions worldwide, particularly in the National security sector.
And in order to in order to address that need.
It is important to combine the RF type capabilities with spire with high frequency imaging capabilities in AI analytics.
That we offer through our spectrum AI.
Software platform. So we are in the process of.
Bringing that joint offering.
The market in bringing those to customers around the world.
Thank you for the time.
Our next question comes from the line of Greg Visteon.
West Park capital. Please proceed with your question.
Yes. Thank you for taking my question.
As your customers renew can you talk about any changes or adjustments to the subscription terms that you have put in into your contracts.
Regarding you know episodic ordering as opposed to commitments.
The frequency and volume thanks.
Thanks for the question, Greg I think most of the.
These larger renewals are you can think of them as take or pay type agreements were.
Theyre subscribing to a certain amount of capacity.
On a quarterly basis.
And they have access to that capacity as part of their subscription and so.
It gives us.
Very.
Good.
Subscription based revenue and visibility into where and when.
Those customers need our <unk>.
Capacity.
Thank you.
And as a reminder, if anyone has any questions you May press star one on your telephone keypad to join the questioners to queue.
Our next question comes from the line of Griffin Bosley B Riley Securities.
See with your question.
Hi, Thanks, good morning.
So back to the Gen. Three launches just thinking back to your launch in March and that satellite entered revenue generating operations within 18 hours I think it was and you mentioned you're already selling capacity for Gen. Three so when we're thinking about those future Gen. Three deployments I understand part of this new capacity is going to.
Replace existing capacity, but generally would we be correct to look at these launches sort of as revenue inflection points, where essentially a day. After you launch your firing up new contracts and capabilities with customers or is it not so much of a step function.
I think the way to look at it.
Griffin as initially these gen three satellites will replace.
Existing capacity.
So youll see continued revenue growth as we've been experiencing.
And the last couple of years, so that'll that'll continue.
As we reach a certain level of gen three capacity over the coming years, you will begin to see.
A step function related to certain contracts.
Okay understood. Thanks for the color there and then I wanted to jump back to the previous question on spire and get clarification. What's the go to market strategy. With this is this is this an add on feature to the spectra platform or sold as a separate service from both you inspire.
It's an add on feature to the spectra platform.
And it's a capability that we're bringing to our existing and targeted customers.
Great. Okay. Thanks for taking my questions appreciate it.
Thank you.
And our next question comes from the line of Henry royalty Space. Please proceed with your question.
Hey, guys.
Couple of questions I also want to revisit the topic of Gen. Three.
Wording on the rocket that deal it sounds like not all of the launches are for Gen. Three.
Just wondering if you could clarify if that means you guys have decided to launch some gen. Two stairs or even continue production of Gen. Two before moving moving up.
Well the general aspect of the deal is that with rocket labs as we can deploy capacity.
And different types of satellites, when where and when we went to the.
The primary primarily those launches are for Gen three capability.
Okay.
And then just a question about that.
Solar context.
There's been a lot of full or whether that's been impacting constellation operator, as you've seen this with the Skype and others.
Is that having an impact on your current fleet operations as long as you're planning for Gen. Three just to be in an environment, where the atmosphere is kind of inflated and thats, having an impact on spacecraft lifetimes and lowest orbit.
Let me just start with that.
Our constellation is healthy and performing as expected.
We designed.
Our satellites to deal with that type of environment in space and.
We've reached the point.
Where we've incrementally deploy this constellation over the course of the last couple of years and have deployed significant amount of capacity to meet our.
Growth objectives, and we're now entering a point in time, where some of those satellites are reaching end of life. So you'll start seeing us replace those.
Is really reflected in the contract we just signed with rocket lab and the progress you made on Gen. Three.
Okay, and then can you talk about the imaging capacity that you expect the Gen. Three we'll have I understand that theyre slightly bigger satellites, but typically a higher resolution.
Sometimes high resolution comes at the expense of.
Surface area that can be covered so I'm just wondering if you can share some color on that.
The satellites will have.
Volumetric.
<unk> similar to our Gen two satellites.
But as you mentioned they will have increased resolution up to 35.
Centimeters and also will include a short way by our capability.
Okay and then just the last question a quick one Leo stellar had announced a new larger bus.
I think for the small Tech conference in Utah is that what black Sky plans to use for Gen. Three.
Gen three.
Is utilizing a different technology, but I think what youre seeing.
With a seller.
As a strategic investor.
JV partner in that in that company.
That type of progress in there.
Their bus technology over time is something we can take advantage of as part of our business.
Alright, those are all my questions. Thanks, guys.
And at this time there are no further questions I will turn it back over to Alexander Zach Skies, as Vice President of Investor Relations go ahead Charlie.
Okay. Thank you I want to thank everybody for joining us on the call today, we will be participating in several upcoming investor conferences, and we look forward to speaking to you again soon have a great day everybody.
And this concludes today's conference you may disconnect. Your lines at this time. Thank you for your participation.
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