Greetings and welcome to the BlackSky Technology Q1 2022 earnings conference call. At this time, all participants are in listen-only mode. A brief question and answer session will follow the formal presentation. If anyone should require Operator assistance during the conference, please press star, zero on your telephone keypad. As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Aly Bonilla, Vice President of Investor Relations. Thank you, you may begin.

Good morning and thank you for joining us. Today I’m joined by our Chief Executive Officer, Brian O’Toole and our Chief Financial Officer, Johan Broekhuysen. On today’s call, Brian will provide some highlights on the quarter and give a strategic update on the business. Johan will then review the company’s first quarter financial results and outlook for 2022. 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 PM Eastern time today through May 25. Information to access the replay can be found in today’s press release. Additionally, a webcast of this earnings call will be available in the Investor Relations section of our website at www.blacksky.com. Before we begin, let me remind you that today’s conference call includes forward-looking statements, including financial performance and guidance for our fiscal year 2022, and that actual results may differ from the expectations reflected in these statements due to factors such as long sales cycles, customer demand, and our ability to estimate expense, operational, and liquidity needs. We encourage you to review our press release and most recent SEC filings for a full discussion of the risks and uncertainties that pertain to these statements and that may affect future results or the market price of our stock. BlackSky assumes no obligation to update forward-looking statements. In addition, during today’s call, we will refer to certain non-GAAP financial measures, including adjusted EBITDA. A reconciliation of these non-GAAP measures to the most comparable GAAP measures is included in today’s earnings press release, which can be viewed and downloaded from our Investor Relations website. At this point, I’ll turn the call over to Brian O’Toole. Brian?

Thanks Aly, and good morning everyone. Thank you for joining us on today’s call. I’m pleased to report that the first quarter of 2022 was the strongest in the company’s history. We delivered strong first quarter financial results and continue to make significant progress across many aspects of our operations as we are now in a phase of rapidly scaling our business. Demand for BlackSky’s high-frequency imagery, monitoring, and analytics has accelerated as world events have placed an even greater level of importance and value for just-in-time information and insights. Now more than ever, our world needs real-time geospatial intelligence. From the crisis in Ukraine to the monitoring of critical assets in Eastern Asia to understanding commodity volumes and supply chain logistics in the U.S., there’s a growing need for real-time global intelligence and insights that BlackSky provides for critical decision making. Our strategy has always been to combine a best-in-class software platform with our proprietary high-performance constellation that as a single platform can automatically task the constellation, integrate other data and sensors, and run sophisticated analytics to deliver information and insights that decision-makers rely on as part of their day-to-day operations. This software-first strategy, because of equal importance to the constellation, is what differentiates us in the market and what is now paying dividends. Today, using our platform, any customer can log in, task the constellation, and have imagery and analytics delivered to their inbox in roughly 90 minutes or less, all fully automated. This is a capability that is now fully operational, and we believe has uniquely positioned BlackSky to capture significant market opportunities that have been unmet with traditional imagery and geospatial solutions. Our strong Q1 performance was driven by several major factors. First, a growing global demand for our real-time imagery and analytics services across U.S. government, international, and commercial market segments. Second, our ability to capture this growing demand due to the investments we made in expanding our sales force and global reseller network over the past year. We are now seeing the results from these investments as we are converting this demand into new business. Third, the achievement of a 14-satellite baseline constellation that combined with our Spectra AI software platform can provide on-demand tasking and hourly monitoring of the most important strategic and critical assets and locations in the world. Our integrated space and software platform is delivering a rapid revisit rate of up to 15 times daily, dawn-to-dusk imaging, and information and insights delivered in under 90 minutes. We now have the needed performance and capacity to support the growth of our business over the next couple of years. What this means is that we can see and analyze critical and strategic assets on roughly an hourly basis and provide customers with unprecedented real-time intelligence that they never had before. Fourth, ideal market conditions and timing as our imaging capacity is coming into the market at a time when there is increasing demand for services from trusted suppliers while the capacity from legacy providers is highly constrained and diminishing as satellites from other aging constellations are reaching end of life. Fifth, improving operating efficiencies as we begin to monetize capacity and grow our margins; and finally, improving capital efficiencies as we optimize our capex spend to align with market demand and in parallel gain benefits from a longer than expected mission life of our satellites. Looking beyond these operational achievements, this quarter has demonstrated that what we are doing matters and is making a difference. BlackSky is relied upon by some of the most important customers and missions in the world. In the past 30 days alone, we delivered over 1,000 images to U.S. and international security agencies, humanitarian organizations, and the media in support of the citizens of Ukraine and our allies in Europe. We are proud that we are having an impact and providing transparency, delivering timely intelligence, and providing information to humanitarian organizations who are working to save lives. To quote one senior government official in the U.S., on behalf of the country, our allies, and the people of Ukraine, we want to thank the BlackSky team for your efforts in support of this crisis. What you are doing is important to our nation and the world and is contributing to saving lives. We are grateful for your dedicated efforts to this cause. I would also like to add to that comment that I’m very proud of our team and want to thank our team for their efforts during this crisis. We are demonstrating to the world that BlackSky has achieved operational capabilities at scale and are changing the way we see and understand important events around the world, providing a cost-effective tool for national security and economic intelligence. This timing aligns well with the secular shift we’re seeing within the U.S. and international government sector that is looking to leverage commercial satellite operators for more and more national security, defense, and intelligence operations. Although we experienced increased demand from the crisis in Ukraine, a larger contributor to our incremental growth in the quarter came from outside the Eastern European region in areas such as Asia Pacific and the Middle East, signaling a strong global demand for our capabilities. I’m pleased that we successfully carried the momentum we showed in Q4 of last year into Q1 of this year as we started the year on a strong note. Highlights of the first quarter include: record revenues of $13.9 million, up 91% over the prior year period; new and expanded contracts with U.S. government customers; new and expanded contracts with international government customers in Europe, Asia Pacific, and the Middle East; engagement with several new major companies spanning multiple vertical markets; expansion of our software platform to include new imagery, sensor, and analytic capabilities; the successful launch and commissioning of two additional satellites in April, expanding our constellation’s revisit and imaging capacity; and the continued expansion and growth of our sales force and global reseller network. We were also proud to announce our new strategic advisory group that included the appointment of three of our country’s distinct national security leaders. These include Vice Admiral Joe Kernan, former Undersecretary for Defense for Intelligence; Lieutenant General John Mulholland Jr., former Associate Director for Military Affairs at the CIA; and Colonel Michael Dickey, former Space Force Chief Architect. We are proud to have them join our team and look forward to their guidance and insights on our national security strategy. I’ll now talk in more detail about each of these highlights, beginning with revenues. First quarter revenue grew to $13.9 million, a 91% increase over the same period last year and a new revenue record for the company. Revenue in Q1 also grew sequentially from Q4 of last year as our efforts in expanding our direct sales team and reseller network continued to gain traction. In fact, for the third consecutive quarter, our imagery, software, and analytics services revenue experienced strong double-digit sequential growth. These are the highest margin and recurring revenue elements of our business. Johan will provide more details on the first quarter financial results later. Now I’d like to provide an update on the progress we made in our government and commercial businesses, starting with the government business. Customer demand continues to be strong for our high-revisit imaging and analytics products and services, both in the U.S. and internationally. In the first quarter, we won several new opportunities and experienced significant rise in orders for imagery and analytics from existing customers; in fact, demand for imagery, monitoring, and analytics in March was at an all-time high for the company. In Q1, we saw increased demand in order activity with the National Reconnaissance Office, or NRO for BlackSky’s real-time intelligence on targeted locations around the world. In particular, demand over Ukraine rose throughout the quarter as the crisis escalated in that region, underscoring the vital importance of real-time geospatial intelligence for military, commercial, and humanitarian applications. As a reminder, we expanded our existing contract with the NRO last summer and have continued to see growth over the last several quarters, demonstrating the NRO’s confidence in BlackSky’s capabilities. We believe this in turn positions us well to capture a portion of the upcoming electro-optical commercial layer, or EOCL contract. As many of you know, the EOCL contract is the largest U.S. government contract for purchasing commercial satellite imagery and will be the vehicle through which the U.S. government acquires these services over the next 10 years. The NRO has recently indicated they are targeting to award the EOCL contract this summer and we look forward to the award announcement. Another large and long-time government customer we support is the National Geospatial Intelligence Agency, or NGA. In Q1, we received additional task order under the NGA’s economic indicator monitoring program that leverages our high-revisit satellite imaging combined with our AI-driven software analytics to provide monitoring services and insights into global activity. Since we were first awarded the five-year $30 million contract in Q3 of last year, BlackSky’s services under this program have continued to expand each quarter, further integrating us into the agency’s day-to-day operations. This award and the expansion of services we’ve seen to date demonstrates the value that NGA has in BlackSky’s analytics as a service offering. The combination of high-frequency site monitoring from our constellation and AI-driven analytics that fuse together high-resolution imagery and sensor data from multiple sources, such as synthetic aperture radar through our unique SaaS platform, is providing users with access to new types of actionable intelligence. These new and advanced monitoring and analytic services that are powered by our Spectra AI software platform provide us with a competitive advantage as the government is looking to buy more and more commercial analytic services. The U.S. government has recently expressed greater interest in utilizing commercial satellite technology for essential imagery and intelligence capabilities. We started positioning for this market opportunity several years ago with the successful award of the U.S. Army TACGEO program and others, which we believe will lead us to significantly more opportunities in the future with the DoD and Space Force customers for tactical ISR. We believe the ISR market is beginning a large-scale shift where billions of dollars that were once spent on airborne systems are shifting to space and looking to leverage constellations of satellites to support new and emerging missions. An example is the emerging opportunities with the Space Force as the U.S. government expands this agency for tactical reconnaissance and surveillance missions from space. In addition, the government is looking to develop other leading space capabilities for organizations supporting the Army, Air Force, and the Space Development Agency, to name a few. Our longstanding history working with the NRO, the NGA, and other government and defense agencies puts BlackSky in a great position to benefit from the growing number of programs requiring our capabilities. Moving onto our international business, customer demand for our products and services increased in Q1 with our international business driving a large part of our growth this quarter as we added customers and expanded contracts in Europe, Asia Pacific, and the Middle East. We are seeing strong demand coming from several international governments around the world as they turn to BlackSky to provide them with mission-critical intelligence and analytics on strategic locations and assets. For example, we were awarded a multi-million dollar contract from an international government to provide them with on-demand high-frequency satellite imagery and analytics for monitoring strategic locations in their region. We also signed additional agreements with a number of other international governments as this customer base continues to expand and the use of BlackSky’s real-time imagery and analytics in high-demand locations grows. We are now supporting several major international ministries of defense and are continuing to grow our pipeline of opportunities with many more customers around the world. With the world focused on understanding how to navigate various global events, we anticipate international demand for BlackSky’s products and services will continue to grow in order to meet this rising demand. We will continue to expand our international sales team and partner network to capitalize on this growth and drive incremental sales. Turning now to our commercial business, we’re seeing greater interest for BlackSky’s disruptive, on-demand imagery and analytics delivered through our AI-driven software platform across a number of vertical markets, including financial services, geospatial information systems, commodities, and natural resources. As we continue to drive awareness of our high-revisit imagery and Spectra AI’s platform capabilities, we are seeing an increase in incoming leads and opportunities across a range of industries. As a result, we are engaged with several new major commercial customers in Q1 and look forward to expanding these opportunities over time through our land-and-expand strategy. In addition, we expanded our global reseller network by over 25%, further strengthening BlackSky’s sales distribution channels and extending our customer reach to multiple regions around the world. We’re pleased with the progress we made standing up our commercial business over the last couple of quarters and are excited to capitalize on the new sales opportunities that lie ahead as we continue building out the sales team. Moving on to our operational capabilities, which are anchored by our Spectra AI software platform and our proprietary satellite constellation, let me first start with our software platform which we believe is one of the biggest competitive advantages that we have. We’re seeing increased demand from existing customers who already rely on BlackSky for timely, critical, and accurate analytics and insights, as well as from new customers who are discovering the power and benefits that our platform can deliver. BlackSky’s software platform provides customers with affordable, on-demand, and autonomous satellite tasking with fully automated analytic intelligence and insights, a real game-changing capability for the industry. Customers can easily log in through a web browser, task our satellite to receive imagery and custom analytics within 90 minutes. They no longer have to navigate a lengthy complicated process or wait days to get images and insights, but now can get them from BlackSky on demand. During the quarter, we continued to improve our platform’s capabilities with new analytics, sensors, and imagery products. Our Spectra AI software platform integrates information from multiple sources, including synthetic aperture radar, or SAR enabling all-weather and nighttime monitoring, visible infrared imaging, or VIIRs allowing for wildfire detection and monitoring the status of refineries in upstream oil and gas operations; and automatic identification systems, or AIS enabling maritime vessel tracking and monitoring for commodities and supply chain intelligence. In addition, we’ve enhanced the object detection capability in our platform, enabling us to better identify the various types of aircraft, maritime vessels, and other objects. This capability allows us to keep deeper insights into operational fleet trends, monitor asset traffic to and from sites of interest, and give customers real-time alerts during anomalous events that can impact their operations. Together, these improvements open up a new set of customer use cases and commercial applications, making BlackSky’s platform even more valuable to customers. Let me turn to our satellite constellation. Just last month, we launched two new satellites into orbit, bringing our total constellation to 14 satellites which provides more than enough capacity and revisit performance to satisfy customer demand for the next couple of years. In response to the crisis in Ukraine and to address demand in the region, we changed the planned orbits for these two satellites 30 days ahead of the launch in order to improve the intra-day revisit frequency over Ukraine and the surrounding region. This process can typically take almost a year, but further demonstrates our agility and responsiveness to meet customer demand where and when they need it. We’re very proud that these satellites achieved commercial operations within 12 hours of launch and began taking high-resolution images, generating revenue and delivering information to customers thereafter. The additional satellites further expand BlackSky’s constellation capacity, increasing the frequency of when images are taken, improving the hourly dawn-to-dusk site monitoring capabilities for customers that need real-time insights. Because of our satellites’ high revisit times, customers have the flexibility to shift imaging capacity where and when they require it to best suit their needs. We are also seeing extended performance from our first commercial satellites, providing us some optionality on the timing for when we need to replace these assets. As a result, we are shifting the timing of the launch for our next two satellites to Q4 of this year, which will coincide with the four-year anniversary of our first two commercial satellites. In parallel, we’re also focused on building and launching our next generation-3 satellites. We’re excited for the new capabilities our gen-3 satellites will bring, which include taking our imaging resolution down to 35 cm to 50 cm and adding short wave IR imaging technology to enable a broad set of imaging conditions such as low light and at night. We anticipate beginning to launch the first of these gen-3 satellites in 2023. In summary, we had great execution across the business, made overwhelming progress expanding our customer reach, and delivered strong first-quarter operating results. I’ll now turn it over to Johan to go through the financial results in more detail. Johan?

Thank you Brian, and good morning everyone. I would like to echo Brian’s message of how proud we are as a company to be supporting massive humanitarian efforts in Eastern Europe as refugees flee the conflict in Ukraine along with the critical support that we and others are giving to enable the Ukrainian people to defend their homeland. BlackSky is making a real difference in the world today, and all our employees are very proud to be part of this effort. I am also particularly pleased to report that we started the year on a very strong financial note and have continued to make excellent progress in many aspects of our business. With that said, let’s jump right into our first quarter results. Revenues - increased customer demand for our imagery and analytic solutions drove record first quarter revenues of $13.9 million. This was a 91% increase year-over-year, our largest growth rate in nine quarters, or $6.6 million more revenue than Q1 a year ago. Imagery and software analytical services revenue grew to $7.4 million, driven primarily by new and existing government contracts as these important customers look to BlackSky to provide them with real-time intelligence and insights around the globe. The revenue mix for imagery and software analytical services rose to approximately 70% of total revenues, demonstrating the value customers place in our assured access, high-frequency imaging, and Spectra AI software platform capabilities. Also contributing to the increase in total revenues was higher engineering and systems integration revenue of $4.1 million, primarily driven by an increase in the percentage completion of certain satellite contracts for customers. Gross margins - strong demand for imagery and software analytical services, which is our highest margin revenue, drove gross margin excluding $801,000 of non-cash stock comp in this part of the business to about 48% in the first quarter, an increase over the approximately 27% in the prior year period. Total non-cash stock-based compensation expense within cost of goods sold constituted about $921,000; however, due to higher engineering and system integration expenses largely attributable to non-recurring design costs and material procurement costs, total gross margin excluding non-cash comp in Q1 closed at approximately 28% versus the prior year same period of approximately 24%. Considering a larger part of our revenues come from imagery and software analytical services, we anticipate gross margin to improve over time as we scale the business off the investments already made in the software stack and the constellation. Operating expenses - turning to operating expenses, we incurred $30.1 million of operating expenses in the first quarter of 2022. This amount included $9.3 million of non-cash stock-based compensation expense. Excluding the stock-based compensation expense of $9.3 million in Q1 of 2022 and $0.5 million in Q1 of 2021, operating expenses increased $10 million year-over-year. About half of this increase was due to higher depreciation expense driven by the six additional satellites that we placed into orbit in Q4 of 2021. Investments in building our sales, software, and engineering teams also contributed to the increase in operating expenses, as well of course as higher public company operating costs to a lesser extent. Adjusted EBITDA - we had an adjusted EBITDA loss of $9.5 million in the first quarter of 2022 compared to a loss of $6.2 million in the prior year period. The loss was driven by investments in sales, software, and engineering hires across the organization, and of course public company operating costs. The balance sheet and capex - the company ended Q1 2022 with $138.4 million of cash. Capital expenditures in the first quarter were $13.4 million with about 80% of this spend attributable to building and launching satellites. Going to outlook and guidance, as mentioned earlier, we are seeing strong demand for BlackSky’s imagery and analytical insights stemming from both U.S. and international governments, and we are starting to see diversification of revenue streams as foreign customers increasingly are signing up to leverage the services that we are able to provide them. The crisis in Ukraine has clearly put a spotlight on the vital need for BlackSky’s real-time geospatial intelligence, and we anticipate interest and demand to continue to grow throughout the year in several areas of strategic interest across the globe. All that being said, we are reiterating our full-year revenue outlook for 2022 of between $58 million and $62 million. Taking the middle of the revenue range, this would represent strong year-over-year growth of 76%. We expect capital expenditures for 2022 to be between $52 million and $56 million, as previously guided. Assuming the middle of the capex spend range, this would represent a 15% reduction in spend from 2021 as we believe we have more than enough capacity from our 14 satellite constellation to support increased customer demand for the next couple of years. With growing revenues and responsible cost management, we believe our business is well positioned to scale and maximize returns. With that, I’ll turn it back over to Brian for some closing remarks. Brian?

Thank you Johan. In closing, we’re very happy we started the year strong and achieved several major milestones in Q1. Revenues and year-over-year growth are at record levels. We continue to win new customers and expand contracts with existing customers. Our operational capabilities in both software and satellite constellation continue to increase and are in place to drive our growth over the coming years. We’re capitalizing on numerous efficiencies across the business and scaling our operations. Most importantly, demand for BlackSky’s real-time imagery and analytic services has never been higher. With all of these accomplishments and significant opportunities ahead, we are excited to carry this momentum forward throughout the year. This concludes our remarks for the call, and now we’ll take your questions.

Thank you. Our first question comes from Scott Deuschle with Credit Suisse. Please go ahead with your question.

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

Morning Scott.

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

Yes, sure. Thanks for the question. Starting with gross margins, we did see, as we said, an improvement in our gross margins, which frankly was driven primarily by the increase we see in our high margin revenues, which are monitoring, analytics, and imagery. Not unexpected given we’ve made investments into our software stack and into the satellite constellation, and it is our expectation, obviously, that as we drive those revenues higher, we would expect that the business will scale and margins will improve, which is what you do see. We expect that to continue, frankly. As long as we’re driving those revenues higher, we would expect to see higher gross margins over time and that’s how the business scales. You also asked, I believe, about growth in those areas. I’m actually going to pass that one over to Brian - I think he has a lot of good news in terms of our imagery and monitoring analytics, so Brian, if you want to talk about that, then we can come back to the other question he had.

Yes Scott, obviously we’ve been investing over the last eight years in our software and constellation, and now we’re moving into a phase of monetizing that capacity and seeing incremental high-margin business come from the analytics that we also offer with the imagery. As we’re experiencing strong demand with the U.S. government and, as we’ve outlined, significant demand in the international markets across multiple regions, that’s driving this improving revenue and margin performance.

Got it.

I’ll just tag on that, we did see some pretty significant improvement in revenues internationally and, frankly, as we expected, it wasn’t all driven in Eastern Europe. We saw large increases in demand for our services outside of Eastern Europe as well, out in the Asia Pacific region as well as the Middle East. Then you had a third part there that I think was around engineering integration - is that right?

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

Engineering integration involves building satellite constellations and satellites for customers, serving as a starting point to provide them with subsequent services. These contracts are typically large, leading to significant fluctuations in our workload. We pursue this for several reasons: we have the necessary expertise and capabilities, and it allows us to expand into managing constellations while offering additional imagery and analytical services.

Okay. Do you feel like it will create value for the business over time, just given that it is negative gross margin and the margins have gone down as the business has scaled?

Yes, they don’t have the same margins as our imagery and analytical revenue, so from that perspective, it negatively impacts gross margin. However, we believe it generates additional revenue, and ultimately, one should view the business as the sum of its parts. In the future, we’ll evaluate the opportunities related to that segment of the business, but for now, it’s a crucial part of our revenue stream and contributes to cash flow, so we will keep pursuing it.

Scott, one thing I should add to that is, one, these are highly strategic programs; two, they offset R&D expenses and are funding advanced technologies that are interesting to those customers; and then three, they are typically bundled with our high-margin services, so over time they will drive significant value into the company.

Okay, that makes sense. Then I guess Johan, just to clarify, if I were to include or allocate depreciation of your satellites to the COGS of imagery and analytics, would the imagery and analytics business still be generating positive gross margins or was a lot of that D&A actually for the engineering business?

Yes, so the short answer is absolutely we would be generating positive gross margins on imagery and monitoring and analytics - there’s no doubt about that, and then how we allocate that is across both those sections of the business, engineering and integration as well as our software and imaging, but the reality is that even with D&A, we still have significantly higher gross margins.

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

Yes, I think $10 million in compensation is likely reasonable. It's decreasing over time, but at the current run rate this year, there was about $900,000, or $921,000 included in COGS, and the rest in SG&A. However, I'm not too concerned about non-cash compensation. I believe it will decrease over time, and it really doesn't affect our EBITDA, which is our main focus along with revenue.

I understand. Is most of that compensation related to prior equity grants and their vesting over time, or is it due to new issuance? It seems like it would be 7% dilutive each quarter if it were new issuance, so I'm trying to consider the dilution over time at the current rate. Thank you.

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

Got it. Last question, Brian, just APAC revenues, I think they grew $1.5 billion year-over-year, so the business tripled or quadrupled. If you could talk a little bit more about the customers, who those customers might be and other kinds of services you guys are providing. I think that’ll be the question to close this out on, thanks.

Yes Scott, I’ll just say generally we are seeing growing interest and demand across a number of regions worldwide, including the Middle East, Northeast Asia, Southeast Asia, obviously in Europe. It’s driven by two major trends that we see. One is there’s more and more demand for monitoring strategic assets and critical assets in the world today, and then also especially around our capability where we can see throughout the day at very high frequencies, we’re able to contribute intelligence that a lot of these customers have not had before that go beyond just using imagery for mapping. There are growing budgets across all of those regions, so as I said in my earlier remarks, we’re seeing ideal market conditions and timing for bringing our capacity and analytics into the market.

Okay, thanks everyone.

Thanks Scott.

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

Good morning, everyone. It seems the commentary indicates a positive environment, and your peers are claiming it's the best they've ever experienced. Could you discuss your expectations for EOCL in the 2022 forecast and your outlook for growth beyond that, particularly differentiating between U.S., international, and commercial markets?

Sure, good morning Colin, thank you for your question. EOCL is a significant contract program for us, and we believe we are well positioned to secure a portion of it. Our contract was expanded last year, and we are now integrated into the everyday operations of this contract. We have been seeing consistent growth in demand from that customer, which reinforces our confidence in our position. Additionally, the government has indicated they aim to finalize the award this summer, so we have included that potential award in our revenue forecast for this year. Regarding your second question, we are witnessing rapid growth in international demand, with interest coming from not only Tier 1 international ministries of defense but also many Tier 2 and Tier 3 countries developing geospatial intelligence and space-based capabilities for various governmental applications. We are very enthusiastic about the developments in this sector. Consequently, we have been expanding our sales teams and reseller network to capture this growing demand, which is driving much of our growth this quarter and into the future. Moreover, both in the U.S. and internationally, there is a shift towards utilizing small satellites for tactical ISR applications, supported by increasing budgets for technologies like those developed by BlackSky. Overall, the market conditions and timing we are observing are very favorable for our sector.

Got it, and then if we think about the cash flow breakeven targets contemplated, I think it backslides. Can you just talk about what the cash levers are to get there and how you think about your buckets of spend in engineering, sales, and then gen-3 capex versus the underlying cash profitability of the business?

Yes, so we pulled those numbers a long time ago and it’s self-evident if you still have a copy of them, when you look at them, we’re obviously not going to get there this year. As a result, no surprise, you would expect when we expect to get cash flow breakeven no longer matches what’s in that data, those data points either. We haven’t given any guidance to the street or externally as to when we expect to be cash flow breakeven, and we’re not going to do that here today either. Was there a second part to the question on engineering integration that I’m not recollecting?

Yes, around the cash levers and how you think conceptually around the cash levers of the business split between underlying engineering, sales, and then any capex related to gen-3.

We are investing particularly in our sales team as well as in our software stack, doing so responsibly. As mentioned in the previous earnings call, capital expenditures are significantly lower this year compared to last year, primarily due to a decline in our satellite investments. With 14 satellites, we have at least two years' worth of projected revenue capacity. We will continue to align our satellite deployment and construction with customer demand. Both expense run rates and capital expenditures are performing at or better than our projected figures, allowing us to manage both effectively. The company has a strong history of aggressive cost management, and we will maintain that approach while also making necessary investments to drive revenue growth. We are committed to doing this prudently. These are our main strategies for preserving cash. Currently, we have $138 million on the balance sheet, which is a significant amount. We are continuously engaging with our bankers and other partners to take whatever steps we feel are necessary to manage the company’s long-term liquidity.

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

Good morning.

Morning Josh.

Can you just provide some color on the longer life of the satellites you’re getting? What were the gating factors or gating life factors that you originally estimated that have now changed, and do you think that’s specific to BlackSky or do you think industry standards or components have just improved?

When we started developing these satellites years ago, we relied on the best engineering estimates at the time, which suggested a lifespan of about three years. Now, as our first two satellites approach their four-year mark this fall, it's important to note that we've adopted an agile approach in our operations, continuously improving the satellites as we launch more and enhance our manufacturing processes. Initially, without much flight history, we made conservative estimates. Now that we have 14 operational satellites and over three years of experience, it appears we're likely to achieve a longer lifespan than we initially anticipated. Generally speaking, in the industry, mission life estimates are often shorter than the actual lifespans for individual satellites, but we're very pleased with our progress. This situation provides us with flexibility regarding when we deploy additional satellites for replenishment, and we expect this positive trend to continue, which is highly advantageous for our long-term strategy.

Then just on gen-3 to be launched in 2023, as we think about capex longer term, is there a large cost differential with gen-2, and maybe to frame it, what was the differential between gen-1 and gen-2?

I would say we have maintained the cost of these satellites between generation two and generation three. This reflects the advantages of small satellite economics, as we are achieving improvements while remaining within the same cost structure. As we transition from one meter resolution to 35 and 50 centimeters with added infrared capability and other features such as onboard computing and space communication, it indicates that we will continue to provide significant value enhancements to our customers over time without altering the cost framework.

Maybe just lastly, a general market question. What does pricing look like, given you’ve got strong demand here with Ukraine driving other regions as well, but then you have competitor capacity announcements on the horizon and inflation. How does it all come together in the current pricing environment?

I think we’re seeing a favorable pricing environment, but we are, particularly in these market areas that we’ve outlined internationally, there is increasing demand for services from trusted suppliers while there is flat or diminished capacity in the market from legacy players. It’s favorable both in terms of pricing and demand for where we are right now.

Thank you for the time.

Thanks Josh.

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

Thanks. I don’t want to beat a dead horse on the opex question, I just couldn’t do the math quick enough with the new numbers you gave. It looks like year-over-year excluding depreciation and stock comp, opex is up around 80%. First of all, is that order or magnitude correct, and I guess what I’m driving to is how should we look at opex on a go-forward basis? Do you see the current level you’ve now reflected, new hires, public company costs, should it be fairly stable from this point going forward or should we expect to see some creep as the year goes forward?

Yes, so as I said, opex year-over-year in the quarter is up $10 million. Most of that is a combination of investments into our software talent, software hires, software engineers, sales, and of course public company costs. We’ll continue to grow that. I think you were looking at little bit at the law of small numbers, right, so there’s a small denominator prior to going public, sort of nine months before that September time frame, so I’m less concerned with the percentage growth. I don’t think that’s indicative. I think you’d need to look at a run rate that’s more in line with dollars and heads, and of course then any depreciation on satellites. I hope that’s helpful.

Maybe can you give a better sense of what the dollar increase might look like? Maybe, what’s a good run rate for opex exiting the year, excluding depreciation and stock comp?

As I said, we’ve put out revenue guidance, we’ve put out capex guidance. I don’t think we’re going to get into opex and gross margins - that will by default create an EBITDA guidance, which we’re not going to do at this time.

Okay, fair enough. Question for you - I think with the gen-3, you mentioned a space communications capability. I’m assuming you were referring to some sort of a relay capability. Can you talk more about that?

Yes Chris, we’ve included provisions in the satellites that allow for considerable flexibility and space-to-space communications, which can be sourced from various networks. We’ve implemented those provisions on the satellite.

Would that be focused primarily on a TT&C capability or actually a downlink for imagery, and if so, are you thinking more about RF or optical?

It’s primarily for TT&C because our primary objective is to reduce the timeline for our customers to task and receive imagery, so these are strategies to improve those operating timelines over time, especially for where we see the opportunity in the market around tactical ISR from space. As I mentioned, we have an agile platform that allows us to put different types of technologies in there as needed.

Great. Then a follow-up to the satellite life question, how quickly can you turn, or I should say how quickly can Leostella turn a new satellite order, you know, if you had an on-orbit failure or saw increased demand? How long should we expect from, say, time of order to on orbit?

Chris, it depends on really long lead items such as optics and sensors and other critical components. I think we’re seeing if we start from scratch, it’s about 24 months or less depending on the supply chain. Now, what we also demonstrated last year is by having a pipeline of satellites as we have been doing, we can work with launch providers to rapidly deploy capacity to meet replenishment or growing demand, and that’s a really powerful aspect of our model. We intend to keep a pipeline of satellites moving through Leostella and deploy them as needed to meet market demand or to address any on-orbit issues, which is a significantly de-risked type of constellation to what has been conditions in the past, where a single failure can be catastrophic to the amount of capacity and performance that customers are relying on. We really just demonstrated that both in what we did in the fourth quarter by doubling our capacity in about 20 to 30 days, and then also recently as we made a decision to change the orbits of the satellites that we just launched in April to optimize capacity and performance over Eastern Europe to meet customer demand. It’s a different model, Chris, and one that sets us up to really address demand as needed.

Great. While discussing Leostella, can we assume that the engineering services activities are a collaborative effort with Leostella? If so, how do you manage any cost-sharing related to those engineering expenses?

In some cases, we work with Leostella. Anything that we do with Leostella, even though we own the company, at least half of it, is done at arm’s length contracts. But we do align strategic investments on satellite capability that we can leverage together, so it’s an ideal partnership from that perspective and one that we’re leveraging very heavily across our business.

Great, and a follow-up, sorry?

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

Great. I have a follow-up question on EOCL. Historically, I believe the enhanced view contract has run through September 30. If they award a contract this summer, is it reasonable to expect that the contracts you've seen are structured so that any new revenues linked to EOCL would begin on September 1, or is there a potential delay before we see actual revenues from the program?

Well, one, we’re anticipating that contract would go in force right away. We’re already providing services to that customer and have been integrated with that customer, and so I don’t think September is a driver. I think it’s really just driven by the time of when they make the award and when they turn on the service, so, and we’re ready to start on day one.

Great, and a final question here, when you look at your pipeline, and I don’t know whether you can quantify it like this, what does your current breakdown look like between government, commercial, and international, and how has that changed in the past year?

I believe the overall pipeline is expanding due to increasing demand in all these areas. As we've mentioned, our commercial segment is still in the early stages. We're observing different types of customers and emerging applications. Additionally, demand from the U.S. government, particularly through EOCL and NGA, is on the rise, largely due to our work in analytics as a service. The tactical ISR market is also in its early stages but is growing. However, I see the most significant growth potential internationally, especially in imagery, geospatial analytics, and sovereign ISR capabilities.

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

Yes, I was asking about the pipeline, and it seems like you've mentioned throughout the call that it’s focused internationally.

For sure.

Actually, I do have one follow-up question just regarding in the current quarter, did you see a disproportionate share of, I guess what I’ll call one-time rather than contracted opportunity, you know, relative to what you’ve seen in the past and perhaps driven by Ukraine?

What we’ve observed is a significant increase in demand in that region from U.S., international, and commercial customers. Additionally, we have flexible contracting arrangements with these customers, allowing them to prioritize collections as they see fit, which played a role this quarter. However, as we mentioned, most of our growth in the quarter was derived from outside the European region, driven by demand in Asia-Pacific and increasing interest in the Middle East.

Great, thanks for all the detail.

Thank you Chris.

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

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

We are noticing significant opportunities and demand in the international market, which is accelerating due to global events and the increasing interest in utilizing space and analytics, as demonstrated by companies like BlackSky. Everything seems to be aligning perfectly in the market at this moment. As I mentioned, we have been heavily investing in expanding our sales team, which is giving us greater insights into how to convert this demand into new business. Additionally, I want to emphasize that once we establish trust and become integrated into our customers' operations, these relationships tend to be long-term, recurring, and expanding. This approach has been a fundamental part of our strategy from the start.

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

I would say they’re different, but we understand each of them very well. We have a land-and-expand strategy, so we quickly pilot an initial operating capability with these customers. We did that in the first quarter, and once we are operational, those contracts tend to expand over time. It’s important to work with them and plan for future budget cycles, which we do, but we understand that very well.

Okay, thanks a lot, guys.

Thanks Jason.

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

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

Okay, let’s start with the constellation. Where we are today is we’ve achieved a 14 satellite baseline that gives us the baseline capacity and performance and revisit we need for the next couple of years. Our plan has not changed toward an objective of 30 satellites. We’re going to begin deploying our gen-3 capability next year to replenish the aging of gen-2 capability and to start expansion, but we’ll expand the constellation to align with market demand, so our long-term plans have not changed in terms of where we want to be, in terms of the number of satellites. We’re just highly aligned with the growth and capacity we need to do that. Then on the ground, the ground stations or gateways, as you refer, we’re adding a couple more to improve timeliness performance. Unlike others, we do not require our customers to buy hardware to do direct downlink or other tasking capabilities within their regions to achieve significant operational performance, so in some cases customers are interested in that and we’ll provide it, but for the most part our service is primarily through software and integrated that way.

All right, thank you.

Thank you. Our next question comes from Scott Deuschle with Credit Suisse. Please proceed with your question.

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

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

Is the cost of running machine learning training something you've invested in before, or are you utilizing AWS? Are there higher costs associated with that? I thought historically it would be a significant expense for an AI ML company. Thank you.

We include it in our operating expenses, but we are heavily investing in software and expanding our data science and machine learning team to improve and offer analytics alongside our data. This also provides us with a significant increase in margins from the data, so we will continue to invest substantially in that area.

Where is the cost for those employees going? I mean, R&D is less than a million dollars a year. Where is that cost going through the P&L?

Number one, that team is still ramping up. To the extent they’re providing services that are currently in revenue, obviously it goes to COGS. Some of it gets capitalized as they develop those products and capabilities, and then what remains goes through opex, as Brian indicated. I think a key takeaway to remember here is because we have our own proprietary constellation, our cost to learn, if you will, is significantly lower than many other companies that don’t own their own data.

Got it, thanks guys. That’s it.

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

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

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