Q1 2024 BlackSky Technology Inc Earnings Call
Please standby we're about to begin.
Speaker Change: Good day, ladies and gentlemen, and welcome to Black Sky Technologies' first quarter 2024 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.
To ask a question you May Press Star then one on your Touchtone phone.
Speaker Change: Draw. Your question you May Press Star then two.
Speaker Change: Please note this conference call is being recorded.
Speaker Change: I'd now like to turn the call over to Elliot Bania Blue Sky Black Skies, Vice President of Investor Relations. Please go ahead.
Speaker Change: 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 give a strategic update on the business. Henry will then review the company's first quarter financial results and outlook.
Speaker Change: For 2024, following our prepared remarks, we will open the line for your questions.
Speaker Change: A replay of this conference call will be available from approximately 12 30 P. M. Eastern time today through may 22nd.
Speaker Change: Information to access the replay can be found in today's press release.
Speaker Change: <unk> a webcast of this earnings call will be available in the Investor Relations section of our website at Www Dot Black Sky Dot com.
Speaker Change: In conjunction with today's call we have posted a quarterly earnings presentation on the Investor Relations website.
Speaker Change: May use to follow along with our prepared remarks.
Speaker Change: Before we begin let me remind you that certain statements made during today's conference call regarding our future plans objectives and expected performance, including our financial guidance for 2020 for our forward looking statements actual results may differ materially as these statements are based on our <unk>.
Speaker Change: Current expectations as of today and are subject to risks and uncertainties, including those stated in our Form 10-K.
Speaker Change: 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.
Speaker Change: Black Sky assumes no obligation to update forward looking statements, except as may be required by applicable law. In addition, during today's call we will refer to certain non-GAAP financial measures, including adjusted EBITDA adjusted imagery and software analytical services cost of sales and cash opera.
Speaker Change: <unk> expenses, a reconciliation of these non-GAAP financial measures to their most comparable GAAP measures are included in today's accompanying presentation, which can be viewed and downloaded from our investor relations website at.
Speaker Change: At this point I'll turn the call over to Brian O tool Brian.
Speaker Change: Thanks, Sally and good morning, everyone. Thank you for joining us on today's call.
Brian OToole: Let's begin with slide three.
Brian OToole: I'm happy to report that Q1 was another strong quarter as.
Brian OToole: As we continue to make great progress across all aspects of our business.
Brian OToole: Demand for our space based intelligence remains strong as we continue to secure more new customers and expand the services, we are delivering to existing customers.
Brian OToole: We also continue to demonstrate strong operating leverage in our business as revenue growth from our high margin imagery and analytics services delivers improving operating margins.
Brian OToole: Combined with our disciplined cost management and streamlined operating efficiencies, we continue on our path of delivering positive adjusted EBITDA results.
Speaker Change: Let me share some of the quarter's key highlights.
Speaker Change: First we delivered strong year over year revenue growth of 32%.
Speaker Change: Our imagery and analytics revenue continue to grow.
Speaker Change: With many of our existing customers, placing incremental orders for our high frequency imaging services.
Speaker Change: Second we were awarded $30 million in new contracts and renewal agreements in the quarter.
Speaker Change: Supporting U S and international government agencies.
Speaker Change: These contracts demonstrate the growing demand from customers looking to obtain black Sky's unique space based intelligence solutions.
Speaker Change: Third we delivered another quarter of positive adjusted EBITDA.
Speaker Change: Driven by our strong revenue growth and operating leverage inherent in our business model.
Speaker Change: As our business continues to scale.
Speaker Change: We look forward to delivering improved EBITDA performance over time.
Speaker Change: Fourth we continued to make significant progress on the production of our Gen three satellites.
Speaker Change: Our constellation remains on track with Gen. Three satellites planned to start launching this year.
Speaker Change: And finally, we secured a $20 million commercial bank line in April.
Speaker Change: Which strengthens our liquidity position and provide us with additional financial flexibility.
Speaker Change: And he will go into more details on this transaction later.
Speaker Change: Okay.
Speaker Change: These highlights along with the growing market demand for our imagery and analytics services can space based intelligence solution.
Speaker Change: Reinforces our confidence that we are well positioned to capitalize on new sales opportunities and are progressing towards sustainable long term profitable growth.
Speaker Change: I would now like to share some operational highlights from the quarter.
Speaker Change: Turning to slide four.
Speaker Change: During the quarter, we continued to invest in advanced AI capabilities.
Speaker Change: Which are resulting in the capture of new customers and contracts.
Speaker Change: One of our recent awards was with the Air Force Research laboratory or <unk>.
Speaker Change: Through this idea IQ contract, which is valued up to $24 million.
Speaker Change: We will develop and deliver advanced moving target engagement services in support of emerging surveillance.
Speaker Change: <unk> <unk>.
Speaker Change: And tracking.
Speaker Change: Or tactical SRT missions.
Speaker Change: Which is one of the key commercial investment areas.
Speaker Change: Identified in the U S Space Force has recently released commercial space strategy.
Speaker Change: Which I will talk about more in a few minutes.
Speaker Change: Yeah.
Speaker Change: The program will leverage our advanced AI capabilities that feature highly scalable and high speed machine learning technology.
Speaker Change: That can process data from our proprietary satellites and from other data sources to provide a deeper understanding of pattern of life changes.
Speaker Change: These data sources can include government intelligence surveillance and reconnaissance or ISR as well as data from other commercial providers.
Speaker Change: Combining multiple data sources through machine learning techniques.
Speaker Change: Increases our capability to detect track and identify moving targets more accurately.
Speaker Change: At a much greater scale.
Speaker Change: Turning to slide five.
Speaker Change: We continue to see government agencies at home and abroad, increasing their investments in space based capabilities to meet their country's specific intelligence surveillance and economic development needs.
Speaker Change: This trend is driving strong demand for black Sky's products and services worldwide.
Speaker Change: Resulting in new customer wins, and the expansion of services to existing customers.
Speaker Change: One example is a multimillion dollar contract we won during the first quarter with an existing defense and intelligence customer.
Speaker Change: We're happy to provide this customer with advanced space based intelligence capabilities that are essential to their day to day operations.
Speaker Change: In addition, we successfully closed over 10, six figure contracts and renewal agreements in the quarter.
Speaker Change: Many of these contract wins are multi year awards, demonstrating our customers' commitment to adopt long contract periods in order to secure access to our capacity.
Speaker Change: These multi year contracts helped to further strengthen our base of long term customers and provides black sky with good revenue visibility.
Speaker Change: We're happy that our land and expand strategy continues to gain traction.
Speaker Change: As these new and expanded contracts helped to further build the foundation for recurring subscription imagery and analytics revenue.
Speaker Change: Moving on to slide six.
Speaker Change: I would like to provide an update on the contract supporting the government of Indonesia that we announced last quarter.
Speaker Change: Within 30 days after contract award <unk>.
Speaker Change: A black sky team to Indonesia to provide training to government end users and how to task our Gen two satellite constellation.
Speaker Change: And receive AI driven analytics through our spectrum <unk> AI software platform.
Speaker Change: We're pleased to report the.
Speaker Change: The training program was a success and that the Indonesian government now has direct access to our spectrum AI platform to.
Speaker Change: To receive high revisit satellite imagery and analytics.
Speaker Change: But black Sky software first AI approach.
Speaker Change: End users through our spectrum AI platform.
Speaker Change: Can receive real time space based intelligence, giving them a strategic first to act advantage.
Speaker Change: Mission critical objectives.
Speaker Change: We continue to see strong interest in this new adoption and acquisition model from governments around the world.
Speaker Change: This new model enables customers to immediately take advantage of black skies real time imagery and analytics solutions, while also enabling them to develop and accelerate their sovereign base space capabilities over time.
Speaker Change: Leveraging rapidly advancing commercial space.
Speaker Change: And AI technologies.
Speaker Change: Turning to slide seven.
Speaker Change: Last month, the U S space Force announced their new commercial space strategy.
Speaker Change: The strategy outlines a framework.
Speaker Change: And a commitment for integrating commercial space solutions to deliver technological innovations that supplement government owned and operated capabilities.
Speaker Change: This strategy aims to leverage commercial space solutions, combined with organic N allied capabilities into a hybrid architecture.
Speaker Change: To enhance national security and other military requirements.
Speaker Change: A key part of this strategy will be to strengthen partnerships with commercial space companies.
Speaker Change: In order to develop more resilient space architectures and expand the number of solutions that can be addressed by the commercial industry.
Speaker Change: This is very encouraging for black sky as we have anticipated this market opportunity and have spent the last several years building an architecture capable of supporting these objectives.
Speaker Change: We have already won a number of multimillion dollar R&D programs with organizations such as the defense innovation unit in <unk>.
Speaker Change: For capabilities, such as moving target engagement and advanced tactical ISR capabilities from space.
Speaker Change: These program wins align with several of <unk> areas outlined in this space forces commercial strategy.
Speaker Change: We believe this has us well positioned as the space force moves forward with this plan over the next several years.
Speaker Change: Moving to slide eight.
Speaker Change: We continue to make significant progress on our Gen three satellite program and.
Speaker Change: And remain on track to begin launching this year.
Speaker Change: Our Gen. Three satellites are in production and are currently in the integration phase.
Speaker Change: As a reminder, these satellites will deliver very high resolution 35 centimeter imaging.
Speaker Change: Along with other advanced capabilities, such as short wave IR and.
Speaker Change: In high speed communications to further improve the timeliness and the delivery of actionable intelligence.
Speaker Change: Keep in mind, we already have contracts in hand for Gen three capacity.
Speaker Change: And are excited to bring these new capabilities to market to unlock these revenue growth opportunities.
Speaker Change: As these satellites begin to come online we anticipate this new capacity.
Speaker Change: And enhanced capabilities will meet the strong demand we're seeing.
Speaker Change: For space based intelligence and drive even more opportunities over time.
Speaker Change: In summary, we're pleased with the progress we made in the first quarter and the strong execution in our business.
Speaker Change: I'll now turn it over to Henry to go through the quarterly financial results Henry.
Henry Edward Dubois: Thank you, Brian and good morning, everyone. We're pleased to have delivered another quarter of strong revenue growth and positive adjusted EBITDA now I'll walk you through the details.
Henry Edward Dubois: Beginning with slide 10 total revenue for the first quarter of 2024.
Henry Edward Dubois: It was $24 2 million, an increase of $5 8 million or 32% over the prior year quarter.
Henry Edward Dubois: Imagery and analytics revenue grew to about $17 8 million, an increase of $2 1 million or 13% over the prior year period.
Henry Edward Dubois: The year over year increase was primarily driven by incremental customer orders for black skies imagery services.
Henry Edward Dubois: Professional engineering services revenue grew to $6 4 million in the first quarter of 2024 compared to $2 $6 million in the prior year quarter.
Henry Edward Dubois: The significant year over year increase was primarily driven by new customer wins and the step up in the execution of multiple major international contracts, we won last year.
Henry Edward Dubois: Keep in mind revenues recognized from these types of contracts, which are largely milestone based may have quarter over quarter revenue variability.
Henry Edward Dubois: As a reminder, these strategic contracts deepen our relationship with these customers and are oftentimes precursors to securing long term subscription contracts for imagery and analytics services.
Henry Edward Dubois: Moving on to slide 11.
Henry Edward Dubois: Our imagery and analytics business continued to demonstrate strong operating leverage.
Henry Edward Dubois: <unk> and analytics cost of sales, excluding stock based compensation depreciation and amortization expenses was $3 $4 million in the first quarter of 2024 compared to $3 $6 million in the prior year quarter.
Henry Edward Dubois: The $200000 year over year decrease was primarily driven by cost savings and our satellite in software operations.
Henry Edward Dubois: Put another way our first quarter 2020 for imagery and analytics revenue increased 13% year over year, while our cost of sales decreased 6%, resulting in another quarter, where our incremental high margin revenues flow directly to the bottom line.
Henry Edward Dubois: This consistently strong performance further demonstrates the operating leverage in our business and is a fundamental driver to our long term profitable growth.
Henry Edward Dubois: Let's move to slide 12, and talk about cash operating expenses, which excludes stock based compensation and depreciation and amortization expenses.
Henry Edward Dubois: For the first quarter of 2020 for cash operating expenses were $16 1 million, an improvement of $300000 compared to the prior year quarter.
Henry Edward Dubois: This 2% reduction in our expenses demonstrates our lean business model and ability to effectively manage cost while continuing to substantially grow our top line, especially when compared with the revenue growth of 32% over the same period.
Henry Edward Dubois: This year over year improvement was primarily driven by reductions in general corporate costs, such as insurance rent and various professional fees.
Henry Edward Dubois: These cost savings more than offset investments we've made in our go to market initiatives, which include expanding our sales team to capitalize on new opportunities.
Henry Edward Dubois: And investing in our AI capabilities and R&D efforts.
Henry Edward Dubois: Turning to slide 13.
Henry Edward Dubois: Our adjusted EBITDA for the first quarter of 2024 was $1 $4 million, an increase of $5 5 million compared to the prior year period.
Henry Edward Dubois: The year over year improvement was primarily driven by greater volumes of our high margin imagery and analytics revenue, coupled with cost savings and cash operating expenses as I just mentioned.
Henry Edward Dubois: Moving on to our balance sheet.
Henry Edward Dubois: We ended the first quarter of 2024 with $35 $8 million of cash restricted cash and short term investments.
Henry Edward Dubois: As you may have seen in April we entered into a $20 million commercial bank line, which together with our ending cash position in Q1 brings our total liquidity to $55 $8 million on a pro forma basis.
Henry Edward Dubois: In addition, we expect to further enhance our liquidity from the receipt of approximately $24 million from a few major customer contracts that include interim milestones for which revenue and costs have already been recognized but have not yet been billed.
Henry Edward Dubois: These activities combined with the vendor financing in place for upcoming launches and anticipated continuing adjusted EBITDA improvements reinforce our position that we have sufficient cash for the foreseeable future to execute on our business plan.
Henry Edward Dubois: Lastly, our capital expenditures in the first quarter of 2024 were $14 6 million in line with our expectations and primarily due to milestone payments for our Gen. Three satellite production and software development spend to enhance our spectra AI platform.
Henry Edward Dubois: Now, let's move on to our 2024 outlook as shown on slide 14.
Henry Edward Dubois: As mentioned earlier, we are continuing to win new contracts and expand existing agreements with U S and international government customers as demand for our space based intelligence solutions remained strong.
Henry Edward Dubois: With continued revenue growth and ongoing disciplined cost management, we expect to carry our strong operating leverage our business has consistently delivered.
Henry Edward Dubois: Therefore, we are maintaining our full year 2020 guidance with revenues between $102 million to $118 million adjust.
Henry Edward Dubois: Adjusted EBITDA between $8 million to $16 million and capital expenditures between 55 and $65 million.
Henry Edward Dubois: In summary, we're pleased with our financial performance in the first quarter and the continued momentum we're seeing across our business. We look forward to continued progress throughout the year.
Henry Edward Dubois: With that I'll now turn it back over to Brian for some closing remarks.
Henry Edward Dubois: Brian.
Henry Edward Dubois: Henry.
Brian: In closing we're off to a strong start in 2024 as we continued to deliver critical intelligence that our customers rely on every day and supported their national security needs.
Brian: We're pleased with our first quarter results and the strong execution across all aspects of our business.
Brian: We're continuing to deliver revenue growth, while demonstrating strong operating leverage in our business.
Brian: We're advancing our leadership position in AI as we continue to win more contracts driven by our advanced AI technology.
Brian: We're capitalizing on our growing U S and international market for Black skies space based intelligence.
Brian: And we're advancing our leadership in space and.
Brian: And we're ready to unlock our next phase of growth with the launch of our Gen three constellation.
Brian: We built a strong foundation.
Brian: Executing well on our plan and are on track to deliver sustainable long term profitable growth.
Brian: Yes.
Speaker Change: This concludes our remarks for the call.
Speaker Change: We will now take your questions.
Speaker Change: Thank you we will now begin the question and answer session to ask a question you May Press Star then one on your Touchtone phone.
Speaker Change: If youre using a speakerphone please pick up your handset before pressing the keys.
Speaker Change: To withdraw your question. Please press Star then two.
Speaker Change: At this time, we will pause momentarily to assemble the roster.
Speaker Change: Okay.
Speaker Change: We will go first to Greg Burns with Sidoti <unk> company.
Gregory John Burns: Good morning.
Gregory John Burns: The first two year period of the U S. TL contract is coming up I think this month.
Gregory John Burns: What's your outlook for that do you expect.
Gregory John Burns: The government to increase funding there or maintaining it at the same level any color you can give on that would be helpful. Thank you.
Speaker Change: Yes, thanks, Greg good morning.
Speaker Change: Yes, just under <unk>.
Speaker Change: We're performing really well under that contract and meeting all of our delivery requirements and also as a reminder.
Speaker Change: We had some.
Speaker Change: Reported in earlier quarters are successful integration with the governments.
Speaker Change: Commercial interface, so all of that is going well.
Speaker Change: And because of that interfaces in place that's driving.
Speaker Change: Higher distribution within the government and use of our data.
Speaker Change: Critical intelligence activities.
Speaker Change: We are in active discussions.
Speaker Change: For renewal agreement to continue service in.
Speaker Change: By the annual service date, which is in June.
Speaker Change: Okay.
Speaker Change: Yes.
Speaker Change: You don't know exactly if they are going to just.
Speaker Change: Well what are the what are the options like how could this play out for you what do they can they.
Speaker Change: On another tranche and layer that on top of the existing revenue extend the revenue like what are the scenarios that.
Speaker Change: Play out with this renewal for you.
Speaker Change: There's multiple options that are being discussed.
Speaker Change: First and foremost is the renewal of the base subscription and then Theres additional options on top of that to continue the service.
Speaker Change: For Gen two capability that we have now.
Speaker Change: Gen III type services will come later after we get those satellites on orbit.
Speaker Change: Okay.
Speaker Change: Okay and then.
Speaker Change: With the Gen threes.
Speaker Change: What is the turnaround time from launch to its operations.
Speaker Change: Typically in the past after we've had a few launches we've been able to.
Speaker Change: Bring satellites into operations within 24 hours.
Speaker Change: But we expect.
Speaker Change: With these gen threes it'll be 60 to 90 days since these are brand new satellites too.
Speaker Change: To get those commissioned and will have a regular launch cadence that goes along with that so we'll quit real quick we will quickly ramp operations.
Speaker Change: Okay. Thank you.
Speaker Change: We will go now with Edison <unk> with Deutsche Bank.
Edison: Hey, Thank you for taking our questions first can you just clarify on the.
Edison: $24 million that Youre getting.
Edison: From the <unk>.
Edison: From the customers what exactly is driving that delay.
Edison: Good morning, Edison the delay can you clarify.
Edison: Alright.
Edison: The tiny display.
Edison: $84 million in cash I think you had mentioned that you recognize the revenue and costs.
Edison: Oh, Yeah, let me, let me hand, it over to Henry on that one.
Henry Edward Dubois: Henry Yes.
Henry Edward Dubois: Yes, what that is as we make progress against various milestones on a couple of these large international contracts, we talked about and because we recognize the revenue and the cost they are already sitting there in the.
Henry Edward Dubois: In the in our revenue and cost of capital we've got the margins already in our baked in however, because we only can bill against.
Henry Edward Dubois: Actual milestone completion there.
Henry Edward Dubois: They are sitting in our other contract assets at the moment.
Henry Edward Dubois: And we would expect it as we hit those milestones that we'd be able to bill and that would be cash directly to the balance sheet, because we've already incurred the associated costs with that revenue.
Henry Edward Dubois: And would that be coming in Q.
Henry Edward Dubois: Is that spread throughout the rest of the year.
Henry Edward Dubois: Better over the next it's going to be spread over the next 12 months.
Henry Edward Dubois: Okay.
Henry Edward Dubois: And then on the I guess on the gross four ians.
Henry Edward Dubois: Hi.
Henry Edward Dubois: It seems to be kind of in the if we average it out the last last three quarters kind of <unk>.
Henry Edward Dubois: Mid teens.
Henry Edward Dubois: I'm curious do you think that can step up.
Henry Edward Dubois: As we go forward and what sort of a more I guess normalized growth considering all the on the backlog you have.
Speaker Change: Well I think Theres, a couple of things at play here Edison.
Henry Edward Dubois: We remain highly focused on.
Henry Edward Dubois: Capturing long term anchored defense and intelligence customers through a land and expand.
Henry Edward Dubois: <unk>, that's working you can see the results.
Henry Edward Dubois: Through those large contracts in their renewals, we also announced this quarter.
Henry Edward Dubois: A number of new customers.
Henry Edward Dubois: Starting out with an initial kind of six figure.
Henry Edward Dubois: Pilots that then grow over time.
Henry Edward Dubois: I mean, what you've probably witnessed is really.
Henry Edward Dubois: A step function as we go through that bringing onto these new customers and the ramp of those <unk>.
Henry Edward Dubois: Services and then we anticipate.
Henry Edward Dubois: A decent step up as.
Henry Edward Dubois: As we begin to get Gen three online.
Henry Edward Dubois: Understood.
Speaker Change: And last one for me you've got all these contract wins obviously.
Speaker Change: You may be share anything about win rates or how I guess the competitive dynamics are.
Henry Edward Dubois: Yeah.
Speaker Change: That'd be helpful. Thanks.
Speaker Change: Yes, I would say Edison we're not.
Speaker Change: Because of what we offer which is this unique.
Speaker Change: High frequency dynamic monitoring capability. This is a new capability for most of these customers. So we're not.
Speaker Change: We're not in a so-called head to head competition, it's more of an adoption.
Speaker Change: Type curves so we're just.
Speaker Change: Incrementally, bringing those customers on and they are adopting our services and integrating it into their environments.
Speaker Change: Great. Thank you.
Speaker Change: Next we'll hear from Jason Smith with Lake Street.
Jason Smith: Hey, guys. Thanks for taking my questions. Brian just wanted to follow up on EU, noting sorry, Boes 10, six figure contracts and our renewals in the quarter is this pretty consistent with past quarters or is this sort of a step up compared to what you saw in 2023.
Jason Smith: Okay.
Brian: I think I'd start we're starting to see a step up.
Jason Smith: The.
Jason Smith: Yes.
Brian: Some of the sales cycles for these long term customers are a little longer and we have been.
Jason Smith: In the market with our high frequency capability now for 18 months, So I think youre seeing.
Jason Smith: We're seeing the step up.
Speaker Change: Related to sales cycle timing and where we are in the market.
Speaker Change: Got it and then regarding the Gen. Three satellites I know you noted contracts in hand for this capacity are most of these contracts currently utilizing gen. Q today like Indonesia or are they waiting for gen three to launch.
Speaker Change: I would say almost all of these contracts are utilizing gentoo capacity today.
Speaker Change: Okay.
Speaker Change: And then just the last one for me and I'll hop back into queue. Henry I think this first quarter, where you sort of clips that 70% plus gross margin should we think about this sort of a new run rate throughout 2024.
Henry Edward Dubois: Well I mean as you can see in this quarter, we did hit about 81% on the imagery and analytics and we did we were able to deliver some pretty good performance out of professional services and engineering around the 40, 44% or so gross margin Mark I mean, as we go forward as long as we continue our growth.
Henry Edward Dubois: We're feeling pretty good we have stepped up from where we were last year from 65% for the first quarter of last year to 71% overall for the first quarter of this year.
Speaker Change: Sounds great. Thanks, a lot guys.
Henry Edward Dubois: Our next question comes from Josh Sullivan with the benchmark company.
Joshua Ward Sullivan: Hey, good morning.
Joshua Ward Sullivan: Good morning, Josh hubs as far as jumped three what do you see as the largest technical manufacturing or otherwise hurdles that remain before we get to launch.
Joshua Ward Sullivan: As I mentioned, Josh we're in.
Joshua Ward Sullivan: We're in the final.
Joshua Ward Sullivan: Assembly and integration phase. So this is putting together all of the subsystems and assemblies and bringing that together into an integrated satellite and testing the software.
Joshua Ward Sullivan: So we're in a normal position for satellite at this stage.
Joshua Ward Sullivan: And as I mentioned, we.
Joshua Ward Sullivan: We remain on track to begin launching the satellites this year.
Joshua Ward Sullivan: And then as far as the Indonesian contract what has been the response from other international prospects you mentioned, some new customer activity as that deal driven incremental interest in the pipeline.
Joshua Ward Sullivan: Well, we've as I've been reporting the last year or so there's very strong interest and growth opportunities internationally I think.
Joshua Ward Sullivan: The Indonesian deal.
Joshua Ward Sullivan: Represents.
Joshua Ward Sullivan: Yes.
Joshua Ward Sullivan: A new adoption model and a faster adoption model.
Joshua Ward Sullivan: Which we can then.
Joshua Ward Sullivan: Bring to these customers and the conversations we've had ongoing for several years as we look to bring them on so.
Joshua Ward Sullivan: I think it's just enhancing our ability to close these customers in.
Joshua Ward Sullivan: Accelerate programs with them over time.
Joshua Ward Sullivan: And then just one last one the comment on commercial applications in the prepared remarks, you mentioned there.
Joshua Ward Sullivan: Sure.
Joshua Ward Sullivan: So you've seen early interest in that.
Joshua Ward Sullivan: I don't think Ive commented on commercial applications.
Joshua Ward Sullivan: There was a company Josh I think maybe you're referring to the commercial strategy for <unk>.
Speaker Change: For US yes, okay. So yes I think.
Speaker Change: For sure I think the.
Speaker Change: Obviously the space for Us is now.
Speaker Change: Put out a formal strategy.
Speaker Change: That is committing them to integrate.
Speaker Change: With commercial.
Speaker Change: Space capabilities.
Speaker Change: Through what they call hybrid architectures, what we're seeing is.
Speaker Change: Things that align with our purpose built architecture.
Speaker Change: Our related to tactical SRT very similar capabilities to what we announced in our on our $24 million <unk> contract.
Speaker Change: Other areas our space domain awareness and then.
Speaker Change: Other.
Speaker Change: Brazilian C and command and control capability. So we're excited as these things all aligned with the.
Speaker Change: The architecture that we have a black sky.
Speaker Change: Thank you for that.
Speaker Change: Okay.
Speaker Change: We'll go next to Jeff Van <unk> with Craig Hallum.
Jeffrey Van Rhee: Thank you good morning, guys. A couple for me, maybe Andrew just to start on the on the $30 million in new and renewals in terms of contract sign what's the IRR on the $30 million.
Jeffrey Van Rhee: Well $30 million some of those.
Jeffrey Van Rhee: For example, one of those is a contract that we are doing some work with the U S government on.
Jeffrey Van Rhee: That was one day, we announced it starting off at about the $3 nine over about an 18 month period.
Jeffrey Van Rhee: And that was in our press release earlier this year and others are continuing to work forward. So they're all typically multi year and we work our way through them.
Jeffrey Van Rhee: As we get the task orders.
Jeffrey Van Rhee: So any bounds you can put around that I mean, generally speaking should I take that number and divide it by 234 or five like a typical duration just to give a swag at how much <unk> was signed.
Speaker Change: Well I mean, you heard Brian talk about the 10 contracts that are in the six figures that are multi years. They kind of go all over the place, but given the fact that they are all multi years.
Speaker Change: The typical range of those is probably in that three year sort of time period.
Speaker Change: Okay.
Speaker Change: Yes.
Speaker Change: How are you thinking about path to free cash flow and timing.
Speaker Change: Well as we as we said in the prepared remarks, we've got we feel like we've got a pretty good amount of liquidity on the books, including the commercial Bank line would just put in place. We would have had about $55 eight at the end of the quarter. We did just talk earlier on the Q&A about the roughly $24 million of liquidity that will be coming in over time.
Speaker Change: From the.
Speaker Change: From a client from the major contracts that we have been progressing on the milestones and we also as you may recall have our launches our vendor finance for the first couple of launches. So we feel like we're in pretty good shape too.
Speaker Change: To get our Gen III ease up and get to the next stage of our of our growth.
Speaker Change: Okay. I guess just last one for me then on the software line, specifically software so $1 3 million in the quarter.
Speaker Change: And spectrum some of the capabilities there have long been talked about and certainly from our worked looked to be differentiated in terms of capabilities from a revenue standpoint, I've got to believe that's not target not hitting where you sort of targeting that line. If I look over the last three years. It's just generally flat to modestly down what is it about that line.
Speaker Change: That is not growing and does it cause you to rethink about the competitive landscape is it just timing just a little more.
Speaker Change: More specifics if you would.
Speaker Change: Yes.
Speaker Change: Yes, I would say.
Jeffrey Van Rhee: Jeff the real.
Speaker Change: <unk>.
Speaker Change: Competitive advantage, we have is that spectra AI platform, which is driving.
Speaker Change: Increased.
Speaker Change: A new user experience and then which is which is what is behind our increasing imagery and analytics.
Speaker Change: Revenues.
Speaker Change: We've had strong growth in that area.
Speaker Change: Particularly around the.
Speaker Change: The NGA am.
Speaker Change: <unk> in the past.
Speaker Change: And.
Speaker Change: That program is transitioning to a new program called <unk>.
Speaker Change: Which is currently in the.
Speaker Change: Proposal process.
Speaker Change: <unk>.
Speaker Change: Has a multiyear budget that will.
Speaker Change: Before five times that of.
Speaker Change: Of the Iam, so we feel we're well positioned for that and.
Speaker Change: That will drive our.
Speaker Change: <unk> helped drive some of the future analytics revenues.
Speaker Change: Okay. Thank you.
Speaker Change: We will go now Kayla pen rate with Quilty space.
Kayla Penrate: Hi, Thanks for taking my questions. Just a few for me because I know that <unk> has always had a focus on AI, but I was wondering if the recent high brand generated AI, if that's had any impact.
Speaker Change: And blacks Guy.
Kayla Penrate: Yes, we've been using AI for quite a bit for for quite a while here we use it across all aspects.
Guy: Of our operations from intelligent tasking to tipping and queuing to machine vision and learning on our imagery and analytics.
Guy: We have used generative AI type capabilities against.
Guy: Open source feeds two to identify.
Guy: Emerging events and so we're excited about.
Guy: Where AI is right now we are using it every day and we're seeing that is really an amplifier.
Guy: Two our core imagery and analytics business over time.
Speaker Change: Okay, and then there was a mention of space domain awareness earlier in the call I was wondering if you could clarify that is that.
Speaker Change: As black start planning on the services that involve like imaging other satellites in space or is it something else.
Speaker Change: Our current satellites have a capability of looking up in fact.
Speaker Change: Capabilities available to the government today, and we see that as an emerging market opportunity.
Speaker Change: Okay, Alright, that's cool I hadn't heard about that before can you give a little bit more specifics on the gen. Three plants, how many of those do you anticipate launching this year.
Speaker Change: As I said, we are we are on track to begin launching this year.
Speaker Change: I should also mention in parallel with getting the first.
Speaker Change: A couple of satellites up and working there is a full production line.
Speaker Change: That is being ramped up so we will we will get into a steady cadence of satellites come.
Speaker Change: Coming off that line and then up.
Speaker Change: In the orbit overtime.
Speaker Change: Okay.
Speaker Change: One or two more questions it looks like a DNA with a little bit higher.
Speaker Change: This quarter can you give any color on why that was.
Speaker Change: Depreciation and amortization do you mean, yes, yes.
Speaker Change: Depreciation and amortization went up because we had more satellite in the air as compared to a year ago at this time.
Speaker Change: Okay.
Speaker Change: And then last one from me.
Speaker Change: Wondering if there any additional steps for the Indonesia contract or is that trading it and then with <unk> I think there was $7 million in revenue recognized last quarter is that kind of.
Speaker Change: The expected rate in quarters to come or is there any kind of change along that.
Speaker Change: Quarter over quarter.
Speaker Change: That program will progress on two fronts. The first is.
Speaker Change: Their access to our imagery noetic analytic services through a subscription multiyear subscription agreement so that will that will ramp over time.
Speaker Change: And then the delivery of satellites, which will.
Speaker Change: Which will ramp as we make progress.
Speaker Change: Against the delivery of those satellites that will be a little lumpier.
Speaker Change: But.
Speaker Change: Are the two paths for that program.
Speaker Change: Hmm.
Speaker Change: Okay. Those are all my questions. Thank you.
Speaker Change: Thank you.
Speaker Change: We will go now to Scott Berg with HC Wainwright.
Scott Berg: Hi, Good morning, guys. Thanks for the time.
Scott Berg: Brian can you give us any indication of what kind of stepped up pricing looks like for customers utilizing gen three versus gen. Two.
Scott Berg: Well I'm not going to I'm not going to go into pricing specific.
Scott Berg: Specific pricing, but I think.
Scott Berg: It's safe to say that.
Scott Berg: The Gen three capability is a significant.
Scott Berg: Step up in capability, both from a resolution perspective.
Scott Berg: The fact that we're adding a short way by our capability and we will have improved timely.
Scott Berg: Timeliness, so all of those things combined.
Scott Berg: We will be delivering a much higher <unk>.
Scott Berg: Service to customers as opposed to the current Gen II capability.
Speaker Change: Great I appreciate that and then second one for me just given that it's an election year I'm sure you guys have done some internal handicapping of outcomes and what kind of impact that may have on the business or programs Youre working with and any thoughts you can share with us there.
Speaker Change: Well I think.
Speaker Change: The programs that we have.
Speaker Change: Yes.
Speaker Change: Visibility into obviously, our <unk>, which is which is a 10 year program of record.
Speaker Change: And so that gives us good confidence in long term budgets for that.
Speaker Change: They are subject to annual renewals.
Speaker Change: The lunar program by NGA has now a new program of record.
Speaker Change: Which will which will drive a whole new set of revenue opportunities.
Speaker Change: As that program ramps online and then obviously the space force strategy is putting budget in place for those capabilities. So.
Speaker Change: Everything we're looking at is tied to long term.
Speaker Change: Programs.
Speaker Change: Great I appreciate the additional color guys. Thanks again.
Speaker Change: Thank you.
Speaker Change: As a reminder, ladies and gentlemen, it is star one if you would like to ask a question again star one.
Speaker Change: We will go now to Chris Quilty with Quilty space.
Christopher David Quilty: Thanks, guys.
Speaker Change: Tag team in here.
Speaker Change: This week is weak.
Speaker Change: Weak.
Speaker Change: The announcements out of that.
Speaker Change: That you think are worth highlighting and maybe can you comment specifically I think there was an NGA.
Speaker Change: Maritime domain awareness announcement is that something that you feel well positioned to.
Speaker Change: Yes, I think if you look at a lot of the remarks at <unk>. This year they are highly.
Speaker Change: Reinforcing of the government's adoption of commercial.
Speaker Change: Imagery and analytics.
Speaker Change: As you mentioned.
Speaker Change: There is now a new program related to maritime surveillance.
Speaker Change: That's a capability we support today with some of our other partners and have demonstrated that so that's an exciting opportunity for us.
Speaker Change: Obviously Luna.
Speaker Change: Is coming online and then there were also.
Speaker Change: Remarks coming out of the space Force.
Speaker Change: Related to the potential opportunities for.
Speaker Change: Commercial capabilities being involved with their hybrid architectures in the future. So.
Speaker Change: We love the we love the momentum and we love the.
Speaker Change: The directionality, that's coming out of the government.
Speaker Change: Great Henry with the $20 million Bank line.
Caleb Henry: Is that all of the borrowings you will need between here and free cash flow positive or might we need another slug.
Caleb Henry: Looking out into next year as things were I'm, sorry is the Gen Z program starting to ramp.
Henry Edward Dubois: Thanks, Chris as we said we are pretty excited about bringing that extra that $20 million I think bring in as a commercial bank line.
Henry Edward Dubois: It's had very good cost of capital if you will relative to other forms. So it gives us a fair bit of liquidity there.
Henry Edward Dubois: As I mentioned earlier in the call that plus the vendor financing plus some of these other.
Henry Edward Dubois: Unbilled receivables that we will be collecting over the next couple of years I think they are they fully fund us on a path.
Henry Edward Dubois: <unk> towards our next stage of growth.
Speaker Change: Great and.
Henry Edward Dubois: Final question here as you start to ramp up Gen three production.
Henry Edward Dubois: I know, we're three years out from Covid.
Henry Edward Dubois: Every single quarter I still keep hearing supply chain challenges for a lot of the companies I worked with.
Henry Edward Dubois: How do you feel about the supply chain.
Henry Edward Dubois: There are any particular components or.
Henry Edward Dubois: Vendor that youre concerned about as that production scales.
Speaker Change: We have Chris we have really good visibility into the <unk>.
Speaker Change: Supply chain. The advantage. We have is we're not building one or two satellites for building.
Speaker Change: A production line that has a cadence as you mentioned over the next several years so.
Speaker Change: We're able to get out in front of.
Speaker Change: In front of this by ordering long lead components critical path components, well ahead of when we need the satellites and that's reflected in our overall plan.
Speaker Change: Very good congrats on the quarter. Thanks.
Speaker Change: Thanks, Chris.
Speaker Change: And at this time there are no further questions. This will conclude blacks guys first quarter 2024 earnings conference call. Thank you for joining the call. Today you may disconnect at this time.