Q3 2024 BlackSky Technology Inc Earnings Call
Keeping year over year cost of sales flat, while increasing imagery and analytics revenue, 13% validates once again, how our incremental high margin revenue passed directly to the bottom line.
This performance is a result of our low cost operating structure and cost effective financial model that gives blackstone, a significant ability to grow and scale our business efficiently.
Let's move to slide 13, and talk about cash operating expenses, which excludes stock based compensation depreciation and amortization expenses as we believe this non-GAAP financial measure enables us to better manage our expenses.
Having noncash items obscure the underlying performance.
Our year to date 2020 for cash operating expenses were $48 million, a small improvement compared to the $48 7 million in the prior year period.
The reduction in cash operating expenses was primarily driven by ongoing reductions in general corporate costs, which more than offset investments made into our business.
As discussed on prior calls we continue to maintain a disciplined cost management approach and consistently look for areas, where we can further drive efficiencies in our business.
Turning to slide 14, we are pleased to report that we delivered another quarter of positive adjusted EBITDA in Q3, making our fourth consecutive quarter of positive results.
On a year to date basis, adjusted EBITDA was $4 3 million compared to an adjusted EBITDA loss of $10 3 million in the prior year period.
The strong year over year improvement of $14 6 million.
Was primarily driven by increased revenues improved gross margin performance in both our core imagery and analytics service as well as our professional and engineering service business and reductions in our cash operating expenses.
Moving onto our balance sheet. We're pleased that we successfully completed an equity capital raise in late September generating $46 million in gross proceeds.
This additional growth capital further strengthen our balance sheet and we believe fully funds our baseline Gen III constellation business Paul.
Speaker Change: As a result of this transaction we ended the third quarter of 2024 was $64 4 million of cash restricted cash and short term investments.
This ending balance included net proceeds of approximately $44 $6 million raised in the quarter, plus a $10 million debt repayments on the commercial bank line, which remains available to us should we choose to draw on it again.
Speaker Change: Also as of the end of September we had $26 $700 million.
Speaker Change: And contracted assets down from $28 2 million at the end of June 2024, as we met certain contract milestones during the quarter and were able to invoice for these services.
Speaker Change: We expect to bill and receive payments on the current $26 7 million in contract assets over the next 12 months as we continue to meet interim milestones on a few major customer contracts.
Speaker Change: These actions combined with the adjusted EBITDA improvements, we expect to continue delivering will contribute to our strong liquidity position and puts us on a path to reach free cash flow breakeven.
Speaker Change: Now, let's move on to 2024 hour as shown on slide 15.
Speaker Change: We're pleased with our year to date operating results and the recent success, we've had winning new contracts.
Speaker Change: The science will ramp up revenues from these new contract awards, while also continuing to work on closing a number of sizable new contracts and expanding agreements with existing customers in the fourth quarter.
Speaker Change: However, there is some degree of uncertainty surrounding the timing of these contracts and when we can begin to recognize revenue.
Speaker Change: Taking this into consideration we are maintaining our full year 2020 guidance of revenue between $102 million to $118 million adjusted EBITDA of between $8 million to $16 million and capital expenditures of between 55% and $65 million.
Speaker Change: In summary, we're pleased with the progress we continue to make across many aspects of our business.
Brian: With that I'll now turn it back over to Brian for some closing remarks.
Ryan.
Ryan: Thank you Henry in closing, we're pleased with the growing demand, we're seeing for our space based intelligence solutions.
Ryan: As demonstrated by the near record multi year contract bookings, we delivered this quarter.
Ryan: We are excited that our gen. Three satellites are readying for launch and the innovative solutions that we will begin to deliver in 2025 as.
Ryan: As we begin a regular cadence of launches to meet the strong demand for this capability.
Ryan: With the capital raised this quarter, we have strengthened our position to execute on our business plan.
Speaker Change: We're looking forward to a strong finish to the year in line with our full year guidance and the opportunities that lie ahead in 2025.
Speaker Change: This concludes our remarks for the call and we will now take your questions.
Speaker Change: Thank you at this time I would like to remind everyone in order to ask a question. Chris Star then the number one and your Touchtone term can we draw. Your question. Please press star one again.
Speaker Change: We will pause for just a moment to compile the Q&A roster again first I wanted to join the queue.
Speaker Change: And your first question comes from the line of Jason Smith with Lake Street.
Speaker Change: Please go ahead.
Speaker Change: Great questions just wanted to touch on your comments on some of the revenue being pushed out of Q3 and into Q4, just curious if you could quantify how much revenue was actually pushed.
Speaker Change: Good morning, Jason.
Speaker Change: As Henry mentioned in his call.
His remarks.
Speaker Change: We had some revenues that pushed into the quarter. We're also working on.
Ramping.
Speaker Change: Revenues from contracts that we recently won so as you know we do have some lumpiness in the business tied to.
Speaker Change: Some of these milestone driven contracts and so this is natural for the business.
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Speaker Change: And we are.
We're expecting that <unk>.
Speaker Change: Deliver a strong fourth quarter in Maine in line with our guidance.
Speaker Change: Our focus is on really delivering high frequency low latency intelligence solutions, which we're already doing today. So this.
Speaker Change: And the software and the AI is also a pretty critical component of enabling that to happen. So.
Speaker Change: This is a pretty exciting.
Speaker Change: And in the sense of what will happen on the hardware side, but.
Speaker Change: They're really important aspect of this is when its implemented in the total system.
Speaker Change: Of the of the speed and low latency that will be able to achieve.
Speaker Change: And delivering actionable information and insights to our customers.
Speaker Change: Great. Thank you for the time.
Okay.
Speaker Change: Thank you and your next question comes from the line of Jeff Van <unk> with Craig Hallum. Thank you. Please go ahead.
Speaker Change: Thank you and your next question comes from the line of Jeff Andree with Craig Helen. Thank you, please go ahead.
Speaker Change: Yes. Thank you good morning, guys apologies I missed most of the initial comments I was in the queue waiting for an operator here. So some of these might be redundant.
Speaker Change: Henry as it relates to the guide I'm curious obviously, we've got a very steep ramp here Q3 to Q4, what are you expecting how much of that ramp sequentially here is going to come from professional services trying to understand this the sequential jump Q3 to Q4.
Speaker Change: Well, we don't guide by individual product.
sequential jump Q3 to Q4.
Speaker Change: Product revenue lines revenue streams at the moment, but.
Speaker Change: But when you take a look at where we are we've got about when the Q comes out you'll see we've got about $25 million already sitting in backlog consistent with where we were at about this time last year. We do have a number of projects that we're working on it.
Speaker Change: consistent with where we were about this time last year. We do have a number of projects that we're working on as a as Brian would have mentioned earlier that
Speaker Change: As Brian would've mentioned.
Speaker Change: Earlier that relate to work that we are already completing in anticipation of these contracts to be completed some of those would be professional services. Some of those would be imagery and analytics projects.
Speaker Change: relate to work that we're already completing in anticipation of these contracts to be completed. Some of those would be professional services, some of those would be imagery and analytics projects.
Speaker Change: Okay. So youre looking at for about $7 $5 million of sequential at the low end and last year, you had three flat sequential quarters, a big jump in Q4. This year, you've had three flat sequential quarters, you're looking for a big jump in Q4. When you look at that jump Q3 to Q4, how many contracts as did drive it last year and is expected to drive at this youre trying to understand the driver.
[inaudible]
Speaker Change: Okay, so you're looking at for about seven and a half million dollars of sequential at the low end and last year You had three flat sequential quarters a big jump in Q4 this year You've had three flat sequential quarters You're looking for a big jump in Q4 When you look at that jump Q3 to Q4 how many contracts is is did drive it last year and is expected to drive it This year trying to understand the drivers here
Sure.
Speaker Change: Yeah, I think, Jeff, there's a couple of drivers, I think.
Speaker Change: Q4 is a natural quarter where a number of our long-term existing customers renew so we get a natural step up in the fourth quarter related to those renewals and expansions and then you know we continue to to close other larger
Speaker Change: deals which has some lumpiness to it so it's a it's a combination of both but there is some there is some natural step up in Q4 as it relates to the timing of contracts.
Speaker Change: Is there anything implicit in what you're guiding here for Q4 that is not sustainable in the following quarter Q1? Trying to understand if I can look at what you're implying as a baseline for Q4 as a starting point for Q1 of the following fiscal.
I think Q4 will reflect.
Speaker Change: what we planned in the business which have a continued growth in our imagery and analytics combined with additional projects related to professional and engineering services.
Speaker Change: Okay, and then lastly, I guess for me, you know, as you look at the overall bookings value and the ability to provide us more of an ACV based bookings sense,
Speaker Change: that gives us, yeah, a little more clarity on what the annual values are as opposed to the overall contracts you're part of and in our multi-year.
Speaker Change: Yeah, we're not we're not providing that at this point, but I think it's what you can assume is we are building
Nice backlog and strong visibility into ACV.
related to the subscription contracts that we have.
The EOCL is a good example of that.
Speaker Change: Luna was a task order based contract, so but we grew that very nicely Into subscription revenues you saw the announcement on our
Speaker Change: renewal I think our fifth renewal of a major international customer which is driving
Speaker Change: About 18 million dollars of annual commitments from them. So We are building to a strong ACV business related to that But there's still some lumpiness that we're we're hesitant about guiding to it
Okay, thank you.
http://TheBusinessProfessor.com
Speaker Change: Thank you again. If you would like to ask a question, press star 1 on your touchtone phone. And your next question comes from the line of David Storm with Stonegate. Thank you. Please go ahead.
David Storm: Good morning and thank you for taking my questions. My first one is just around Gen 2 after Gen 3 starts going up. What's kind of the remaining life of your Gen 2 satellites and is there any decommissioning costs that we should be thinking about as Gen 3 starts to go up?
Speaker Change: We have 12 satellites up there right now that are driving our revenue growth
Speaker Change: We expect that Constellation to continue to perform well throughout 25 and into 26.
Speaker Change: and then we'll begin to dovetail Gen 3 satellites into that.
Speaker Change: constellation. As those Gen 2 satellites age out, there are no material incremental decommissioning costs related to that.
Speaker Change: Understood, that's very helpful. And then I just wanted to ask one more around the new non-Earth imaging offerings. With these new offerings, is there any notable differences between the technology needed or the contracts or margins or or anything of that nature?
Speaker Change: No, I think what's exciting about that offering is that it leverages
Speaker Change: the capacity we already have on orbit, and actually able to expand how we monetize that capacity through our high-margin imagery and analytic services. Bringing that type of capability to market is a testament to two things.
Speaker Change: the agility of our satellites and able to actually support that mission.
Speaker Change: but also as importantly as our software and AI capabilities use the command and process that type of data and deliver that to customers in a timely and reliable way. So think of this type of new services as incremental.
Speaker Change: high-margin imagery and analytics revenues off of the capacity we already have on orbit.
Speaker Change: Understood. Thank you for taking my questions and good luck in Q4.
Thank you.
Speaker Change: Thank you, and your next question comes from the line of Caleb Henry with Squilty Space. Thank you, please go ahead.
Speaker Change: Thank you. A couple of questions, I think most of mine have been answered at this point, but there's a mention in the presentation of the baseline constellation for Gen 3. Has Black Sky finalized what exactly that baseline constellation will be in terms of how many satellites?
Well Caleb, good morning. Our baseline constellation today is...
Speaker Change: 12 to 14 satellites that's what we have on orbit with with Gen 2 so the the plan here
Speaker Change: for this baseline is to maintain those levels of satellites so we'll begin to dovetail
Speaker Change: Gen 3 into that constellation. The primary driver of that number of satellites is maintaining our reliable hourly monitoring capability from space.
Speaker Change: So that is our baseline. We will look at expanding that constellation over time commensurate with contracts and demand.
Nicole? Nicole Johnson Brendan? Neal?
Speaker Change: And then the presentation also makes mention of a partner stake in Leo Stella. I was wondering if you could clarify that a bit more, because there's already a joint venture partner, does that mean that Black Sky is increasing the stake? And if so, how does that change or reshape the relationship with Leo Stella?
Speaker Change: Yes, as you noted, we had a 50% ownership stake in Leostella through our partner Talus. We did acquire their stake in the company.
and you know that's primarily driven by
Speaker Change: Our objectives of scaling and driving efficiencies around the delivery of Gen 3. There's a lot of demand.
Speaker Change: for that capability. Our partnership with Talus remains really strong. We're continuing to partner worldwide on bringing Gen 3 capability combined with their offerings to the market.
Speaker Change: and, you know, just as you recall, you know, we're continuing to pursue...
Speaker Change: the types of contracts that we jointly closed with countries like Indonesia.
Speaker Change: which are bringing Gen 3 capability or high margin data services along with some space capabilities from TALIS. So this is really just a
Speaker Change: a step in just further scaling and optimizing our Gen 3 capabilities.
Speaker Change: Okay and then one other just follow-up on that question. Does that mean that Leo Stella is going to be totally focused on the Black Sky Constellation going forward or are you going to continue to try and use that for third-party sales that could potentially offset some of the gen costs?
Speaker Change: But right now, you know, Black Sky is the primary customer for for Leo Stella, so we've been essentially
Speaker Change: funding that business through our through our existing satellite production contract.
Speaker Change: The focus right now, as I mentioned, is on the scaling of Gen 3 and optimizing those production operations.
And so, you know, we think.
Speaker Change: that this type of this move will give us better operating leverage because of the current situation and
Speaker Change: and we believe may result in better Gen 3 unit economics. So it's really, again, a step in strengthening our Gen 3.
Offerings
Okay.
Speaker Change: And then just two quick questions. One was on Luno A. I was wondering if you could talk a bit about how that contract is split between imagery and analytics providers, if there is a split and if Black Sky is able to participate in both.
Speaker Change: And then the opportunity that you see in this new NEI SSA market, that's something you expect to continue to grow.
Speaker Change: Yeah I think first on Luno A, I believe there was a published
Speaker Change: piece on the companies that won that contract. I believe there's 10. There's a mix of
Speaker Change: companies that are pure play analytics companies and others that are satellite operators with AI capability. We happen to be in a great position relative the fact that we have a proprietary space capability and
Speaker Change: have demonstrated our ability to deliver the AI and software capabilities for this program under the EIM.
Speaker Change: predecessor program. What's also positive for us is we so we have a prime position on the contract.
Speaker Change: like we did before, but we are also able to serve as a vendor to the other providers to give them, provide them data.
Speaker Change: for their Luno task order. So pretty exciting for us. We think we're well positioned to capitalize on this program.
It's also pretty exciting that the government has...
Speaker Change: really made this step in committing a significant amount of budget toward buying commercial space analytics services. So this was an important contract win and we're excited to begin ramping this.
Speaker Change: Oh, and then let me get to your NEI question. Yeah, I think...
Monitoring and analytic.
solution, we are seeing a significant amount of demand.
Speaker Change: for that capability. As we announced, we've already won a couple seven-figure contracts.
Speaker Change: for this capability, and we're seeing that demand increasing. So we expect it to continue to.
Speaker Change: ramp revenues from that from that offering and also evolve the platform.
Speaker Change: to further address the demand in the market for that. So pretty exciting development and again, another way to monetize.
what we already have invested in on Orbit and Drive.
high-margin imagery and analytics revenues.
Thanks guys, appreciate the time.
Thanks, Caleb.
Speaker Change: Thank you. At this time there are no further questions. This concludes BlackSky's third quarter 2024 earnings conference call. The company thanks you for joining the call today.
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