BlackSky Reports Higher Revenues, Narrower Loss for 3rd Quarter

BlackSky’s Spectra AI combines the power of high-resolution satellite imagery with AI/ML techniques to automatically create detailed maps indicating activity along roads, buildings, waterways, construction sites, and more. (Photo: BlackSky)

BlackSky Technology has announced that it increased revenues to $16.9 million in the third quarter, an increase of 113% over the same period last year, while narrowing its net loss to $13 million from $48 million in the second quarter.

“I’m pleased that Q3 was another strong quarter as we continued strong execution across all aspects of our business, building on the momentum from the first half of the year,” said CEO Brian E. O’Toole. “Third quarter revenue grew 113% year-over-year to $16.9 million, another quarterly revenue record driven by a full quarter of subscription imagery revenue under the EOCL contract with the National Reconnaissance Office.

Revenues for the first nine months of the year were $38.1 million, an increase from $17.65 during the same period last year. BlackSky’s net loss for the year was $59.3 million, a sharp reduction from the $251 million net loss during the first three quarters of 2021. The company’s cash balance was $90.7 million as of Sept. 30.

“International revenues more than doubled over last year as we continue to benefit from investments in expanding our international sales team and strong global demand. With our expanding customer base, strong pipeline, and growing contracted backlog, we are looking forward to a strong finish to 2022 and carrying this momentum into 2023. Given our trajectory, we anticipate full year 2022 revenues to come in at the upper end of our guidance range,” O’Toole said added.

BlackSky’s earnings announcement and financials are below.

BlackSky Technology Announces Third Quarter Earnings

  • Q3 Revenue up 113% Compared to Prior Year Quarter
  • Imagery and Software Analytical Services Revenue Grew to 89% of Total Revenue
  • Company Affirms Upper End of Full Year 2022 Revenue Guidance

HERNDON, Va., November 08, 2022 — BlackSky Technology Inc. (“BlackSky” or the “Company”) (NYSE: BKSY) announced results for the third quarter ended September 30, 2022.

Third Quarter Financial Highlights:

  • Revenue of $16.9 million, up 113% from the prior year period
  • Imagery & software analytical services revenue grew 130% over the prior year’s quarter and to 89% of total revenues
  • Net loss of $13.0 million
  • Adjusted EBITDA(1) loss of $6.5 million
  • Cash balance(2) at the end of September 2022 was $90.7 million
  • Capital expenditures of $8.8 million
(1) Non-GAAP financial measure. See “Non-GAAP Financial Measures” below and reconciliation table at the end of this release.
(2) Cash balance includes cash and cash equivalents, restricted cash, and short-term investments.

“I’m pleased that Q3 was another strong quarter as we continued strong execution across all aspects of our business, building on the momentum from the first half of the year,” said Brian E. O’Toole, BlackSky CEO. “Third quarter revenue grew 113% year-over-year to $16.9 million, another quarterly revenue record driven by a full quarter of subscription imagery revenue under the EOCL contract with the National Reconnaissance Office. International revenues more than doubled over last year as we continue to benefit from investments in expanding our international sales team and strong global demand. With our expanding customer base, strong pipeline, and growing contracted backlog, we are looking forward to a strong finish to 2022 and carrying this momentum into 2023. Given our trajectory, we anticipate full year 2022 revenues to come in at the upper end of our guidance range.”

Recent Business Accomplishments

  • Successfully ramped up and achieved daily delivery rates of advanced imaging subscription services under the Electro Optical Commercial Layer (EOCL) contract with the National Reconnaissance Office (NRO), valued at up to $1 billion over the next 10 years
  • Won a $10 million, one-year follow-on subscription contract with an international ministry of defense customer in Asia to provide on-demand, high-frequency imagery services on a take or pay basis
  • Received multiple task order awards in the third quarter under our Economic Indicator Monitoring contract with the National Geospatial-Intelligence Agency (NGA), resulting in $14 million in total orders received within the first year of the five-year, $30 million contract
  • First order for $1.7 million in imagery services under the Commercial Smallsat Data Acquisition (CSDA) program with the National Aeronautics and Space Administration (NASA)
  • Recipient of the Pioneer in Space Business Award from Euroconsult, a leading global space and satellite consulting and market intelligence firm, recognizing BlackSky’s innovative contributions to the space industry

Financial Results

Revenues

Total revenue for the third quarter of 2022 was $16.9 million, up $9.0 million, or 113% from the third quarter of 2021. Imagery and software analytical services revenue was $15.0 million, up 130% over the prior year period primarily driven by increased demand from new and existing U.S. and international government customers. The mix of revenue from imagery and software analytical services grew to approximately 89% of total revenues. Engineering and systems integration revenue contributed $1.9 million in the third quarter of 2022.

Cost of Sales

Cost of sales as a percent of revenue was 46% for the third quarter of 2022, compared to 159% in the third quarter of 2021. For imagery and software analytical services, cost of sales as a percent of revenue was 35% in the third quarter of 2022, compared to 111% in the third quarter of 2021. The year-over-year improvement was primarily driven by greater volumes of imagery and analytical services revenue that inherently have a low fixed-cost structure as a percent of revenue and a decrease in stock-based compensation expense. Cost of sales excludes depreciation and amortization.

Operating Expenses

Operating expenses for the third quarter of 2022 were $28.5 million, which included $2.9 million of non-cash stock-based compensation expense, compared to operating expenses of $44.2 million in the third quarter of 2021, which included $25.6 million in non-cash stock-based compensation expense. Excluding stock-based compensation expense in both years, operating expenses increased to $25.6 million in the third quarter of 2022 from $18.6 million in the prior year quarter. The increase was primarily due to higher depreciation expense from additional satellites placed into orbit in the fourth quarter of 2021 and second quarter of 2022, as well as public company operating costs.

Operating Loss

Operating loss for the third quarter of 2022 was $19.4 million, compared to an operating loss of $48.9 million in the third quarter of 2021. The year-over-year improvement in operating loss was primarily due to a decrease in stock-based compensation expense and higher gross profit driven by increased imagery and software analytical services revenue, partially offset by higher depreciation expense.

Adjusted EBITDA (1)

Adjusted EBITDA loss for the third quarter of 2022 was $6.5 million, compared to an adjusted EBITDA loss of $16.3 million in the prior year period. The $9.8 million year-over-year improvement was primarily due to significant operating leverage achieved by increased revenue growth significantly exceeding incremental costs.

(1) Non-GAAP financial measure. See “Non-GAAP Financial Measures” below and reconciliation table at the end of this release.

Balance Sheet & Capital Expenditures

As of September 30, 2022, cash and cash equivalents, restricted cash, and short-term investments totaled $90.7 million. Capital expenditures for the third quarter of 2022 were $8.8 million and totaled $34.3 million for the nine months in 2022.

2022 Outlook

The Company is seeing strong global demand for its high-resolution imagery, dynamic monitoring, and AI-driven analytic solutions. As a result, the Company expects its full year 2022 revenue to achieve the upper end of the guidance range previously provided of between $62 million and $66 million. The Company continues to expect capital expenditures for the full year 2022 to be between $52 million and $56 million.

Investment Community Conference Call

BlackSky will host a conference call and webcast for the investment community this morning at 8:30 AM ET. Senior management will review the results, discuss BlackSky’s business, and answer questions. To access the live webcast or the archived webcast following completion of the call, please visit the Company’s investor relations website at https://ir.blacksky.com and then select “News & Events” for the link to the webcast. A presentation accompanying the webcast can also be found on the investor relations website. To access the conference call, participants should dial 1-877-589-7299 (domestic) or 1-201-689-8778 (international) at least ten minutes prior the start of the call. To listen to a replay of the conference call, please dial 1-877-660-6853 or 1-201-612-7415 using access code 13733375. The audio replay will be available from approximately 12:30 PM ET on November 8, 2022, through November 22, 2022.

About BlackSky Technology Inc.

BlackSky is a leading provider of real-time geospatial intelligence. BlackSky delivers on-demand, high frequency imagery, monitoring and analytics of the most critical and strategic locations, economic assets and events in the world.

BlackSky designs, owns and operates one of the industry’s leading low earth orbit small satellite constellations, optimized to capture imagery cost-efficiently where and when our customers need it. BlackSky’s Spectra AI software platform processes data from BlackSky’s constellation and from other third-party sensors to develop the critical insights and analytics that our customers require.

BlackSky is relied upon by U.S. and international government agencies, commercial businesses, and organizations around the world. BlackSky is headquartered in Herndon, VA, and is publicly traded on the New York Stock Exchange as BKSY. To learn more, visit www.blacksky.com and follow us on Twitter.

Non-GAAP Financial Measures

Adjusted EBITDA is defined as net income or loss attributable to BlackSky before interest expense, income taxes, depreciation and amortization, as well as significant non-cash and/or non-recurring expenses as management believes these items are not as useful in evaluating the Company’s core operating performance. These items include, but are not limited to, realized loss on conversion of bridge notes, stock-based compensation expense, unrealized (gain)/loss on certain warrants/shares classified as derivatives, satellite impairment loss, (gain)/loss on debt extinguishment, (gain)/loss from discontinued operations, severance, loss/(gain) on equity method investment, transaction related legal settlements, and transaction costs associated with derivative liabilities.

Adjusted EBITDA is a non-GAAP financial performance measure. It should not be considered in isolation or as an alternative to measures determined in accordance with GAAP. Please refer to the schedule herein and our SEC filings for a reconciliation of Adjusted EBITDA to Net Loss, the most comparable measure reported in accordance with GAAP and for a discussion of the presentation, comparability, and use of Adjusted EBITDA.

BLACKSKY TECHNOLOGY INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS
(unaudited)
(in thousands)

Three Months Ended September 30, 2022Three Months Ended September 30, 2021Nine Months Ended September 30, 2022Nine Months Ended September 30, 2021
Revenue
Imagery & software analytical services$14,991$6,529$38,113$17,645
Engineering & systems integration1,9441,4087,8204,951
Total revenue16,9357,93745,93322,596
Imagery & software analytical service costs, excluding depreciation and amortization5,2517,26616,50815,816
Engineering & systems integration costs, excluding depreciation and amortization2,5365,38712,0208,754
Selling, general and administrative18,71340,67458,98857,979
Research and development1975744985
Depreciation and amortization9,5983,50326,1669,804
Satellite impairment loss18,407
Operating loss(19,360)(48,950)(68,198)(88,249)
Gain (loss) on derivatives7,1353,81310,629(11,162)
(Loss) income on equity method investment(776)(170)694793
Interest income486664
Interest expense(1,226)(1,225)(3,756)(3,663)
Other expense, net(14)(365)(54)(147,735)
Loss before income taxes(13,755)(46,897)(60,021)(250,016)
Income tax (expense) benefit
Loss from continuing operations(13,755)(46,897)(60,021)(250,016)
Discontinued operations:
Gain (loss) from discontinued operations (including loss from disposal of Spaceflight Inc. of $707, $0, $707, and $(1,022) for the three and nine months ended September 30, 2022 and 2021, respectively)707707(1,022)
Income tax (expense) benefit
Gain (loss) from discontinued operations, net of income taxes707707(1,022)
Net loss(13,048)(46,897)(59,314)(251,038)
Other comprehensive income541
Total comprehensive loss$(13,048)$(46,356)$(59,314)$(251,038)
Basic and diluted loss per share of common stock:
Loss from continuing operations$(0.12)$(0.67)$(0.51)$(4.29)
Gain (loss) from discontinued operations, net of income taxes0.010.01(0.02)
Net loss per share of common stock$(0.11)$(0.67)$(0.50)$(4.31)
Weighted average common shares outstanding – basic and diluted118,58269,975117,40358,297

BLACKSKY TECHNOLOGY INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(unaudited)
(in thousands, except par value)

September 30, 2022December 31, 2021
Assets
Current assets:
Cash and cash equivalents$37,201$165,586
Restricted cash2,8352,518
Short-term investments50,699
Accounts receivable, net of allowance of $0 and $39, respectively5,1012,629
Prepaid expenses and other current assets5,4876,264
Contract assets5,9151,678
Total current assets107,238178,675
Property and equipment – net78,15770,551
Goodwill9,3939,393
Investment in equity method investees4,1504,002
Intangible assets – net2,0582,480
Satellite procurement work in process41,66440,102
Other assets1,675560
Total assets$244,335$305,763
Liabilities and stockholders’ equity
Current liabilities:
Accounts payable and accrued liabilities$14,579$10,837
Amounts payable to equity method investees1,6675,613
Contract liabilities – current9,01811,266
Other current liabilities1,5312,819
Total current liabilities26,79530,535
Liability for estimated contract losses1,9666,054
Long-term contract liabilities42568
Derivative liabilities6,29616,925
Long-term debt – net of current portion72,95671,408
Other liabilities2,867653
Total liabilities110,922126,143
Commitments and contingencies
Stockholders’ equity:
Class A common stock, $0.0001 par value-authorized, 300,000 shares; issued, 121,357 and 117,160 shares; outstanding, 118,906 shares and 114,452 shares as of September 30, 2022 and December 31, 2021, respectively.1211
Additional paid-in capital663,654650,518
Accumulated deficit(530,253)(470,909)
Total stockholders’ equity133,413179,620
Total liabilities and stockholders’ equity$244,335$305,763

BLACKSKY TECHNOLOGY INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited)
(in thousands)

Nine Months Ended September 30, 2022Nine Months Ended September 30, 2021
Cash flows from operating activities:
Net loss$(59,314)$(251,038)
Gain (loss) from discontinued operations, net of income taxes707(1,022)
Loss from continuing operations(60,021)(250,016)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization expense26,1669,804
Bad debt expense134
Stock-based compensation expense16,38929,265
Loss on issuance of 2021 convertible Bridge Notes96,476
Loss on issuance of 2021 convertible Bridge Notes Rights Offering3,193
Issuance costs for derivative liabilities and debt carried at fair value48,009
Amortization of debt discount and issuance costs1,5491,311
Gain on equity method investment(694)(793)
Loss on disposal of property and equipment24
(Gain) loss on derivatives(10,629)11,162
Satellite impairment loss18,407
Interest income(373)
Other, net106
Changes in operating assets and liabilities:
Accounts receivable(2,485)(2,010)
Contract assets(4,237)1,487
Prepaid expenses and other current assets657(4,428)
Other assets(1,335)(423)
Accounts payable and accrued liabilities692(15)
Other current liabilities(581)(2,195)
Contract liabilities – current and long-term(2,774)(1,960)
Liability for estimated contract losses(4,088)1,385
Other liabilities2,2162,496
Net cash used in operating activities(39,429)(38,742)
Cash flows from investing activities:
Purchase of property and equipment(8,905)(532)
Satellite procurement work in process(25,421)(48,951)
Purchase of short-term investments(50,343)
Purchase of domain name(7)
Proceeds from equity method investment546
Net cash used in investing activities(84,123)(49,490)
Cash flows from financing activities:
Proceeds from issuance of debt58,573
Proceeds from options exercised37100
Proceeds from warrants exercised163
Debt payments(22,198)
Payments for deferred offering costs
Payments for debt issuance costs(6,238)
Withholding tax payments on vesting of restricted stock units(4,551)
Net cash (used in) provided by financing activities(4,516)275,331
Net (decrease) increase in cash, cash equivalents, and restricted cash(128,068)187,099
Cash, cash equivalents, and restricted cash – beginning of year168,10410,573
Cash, cash equivalents, and restricted cash – end of period$40,036$197,672

BLACKSKY TECHNOLOGY INC.
RECONCILIATION OF NET LOSS TO ADJUSTED EBITDA

(unaudited)
(in thousands)

Three Months Ended September 30, 2022Three Months Ended September 30, 2021Nine Months Ended September 30, 2022Nine Months Ended September 30, 2021
Net loss$(13,048)$(46,897)$(59,314)$(251,038)
Interest income(486)(664)
Interest expense1,2261,2253,7563,663
Depreciation and amortization9,5983,50326,1669,804
Loss on issuance of Bridge Notes, including debt issuance costs expensed for debt carried at fair value147,387
Stock-based compensation expense3,16328,49316,38929,265
(Gain) loss on derivatives(7,135)(3,813)(10,629)11,162
Satellite impairment loss18,407
(Gain) loss from discontinued operations, net of income taxes(707)(707)1,022
Severance56761
Loss (income) on equity method investment776170(694)(793)
Forgiveness of non-trade receivable31106
Contingent legal liability700700
Transaction costs associated with derivative liabilities291291
Loss on debt extinguishment7575
Adjusted EBITDA$(6,526)$(16,253)$(24,830)$(30,055)