Satellogic Inc. Q4 FY2025 Earnings Call

Good morning, and welcome to the Satellogic Fourth Quarter and Full Year 2025 Financial Results Conference Call. During today's call, we may make statements about our goals and objectives for future operations, financial and business trends, business prospects, future financial metrics, statements regarding customer contracts and pipeline, our ability to generate revenue, and management's expectations for future performance that may be considered forward-looking statements under federal securities laws. Any forward-looking statements reflect management expectations based on currently available information and are not guarantees of future performance. They involve certain risks and uncertainties, which are more fully described in our SEC filings, including the Risk Factors section of Satellogic's annual report on Form 10-K. Our actual results and performance may differ materially from those expressed in or implied by such forward-looking statements. We do not undertake any obligation to update or revise any forward-looking statements to reflect events or developments after the date of this call. On this call, we will also discuss financial measures not determined in accordance with U.S. GAAP, including EBITDA, adjusted EBITDA, and free cash flow. Reconciliation of these non-GAAP measures to the most directly comparable GAAP measures is presented in the earnings materials posted on our website today. A press release detailing these results was issued this morning and is available in the Investor Relations section of our company's website at satellogic.com. Hosting today's call will be Satellogic's Founder and Chief Executive Officer, Emiliano Kargieman; Chief Financial Officer, Rick Dunn; and Senior Vice President of Sales, Jeff Kerridge. With that, I'll turn the call over to Mr. Kargieman. Please go ahead.

Thank you, operator, and good morning, everyone. I'm Emiliano Kargieman, Founder and CEO of Satellogic. Joining me today are our CFO, Rick Dunn; and our Senior Vice President of Sales, Jeff Kerridge. Before we walk through the results, I want to briefly frame the context in which those results were delivered to ensure a solid understanding of how we got there and the journey that we're on. The work we began in 2024, aggressively restructuring the cost base and rationalizing the organization was difficult but necessary to reposition Satellogic for durable growth. 2025 was the year those structural changes took full effect. Three strategic shifts, in particular, define the new Satellogic. First, we completed our U.S. domicile in March 2025. This strategic shift directly unlocks U.S. government, defense and intelligence contracting, opening a path to approach allied governments internationally. Markets previously closed to us are now active opportunities. Second, we fundamentally restructured our cost base, achieving a 25% year-over-year reduction in total operating expenses. This is a durable structural change that significantly derisks our path to profitability and ensures we operate lean and fast. Third, we matured our product offering, focusing on our core differentiators: affordable, scalable, quality capacity across both the data and analytics and Space Systems business lines. As a result of these decisions, we ended 2025 with strong growth and commercial traction, a healthy backlog and a strong pipeline, and with a dramatically strengthened balance sheet, ending the year with $94.4 million. The result is a company that looks meaningfully different than it did 18 months ago: leaner, better capitalized, commercially active and now positioned to scale in the markets that matter most. We are a leader in high-performance, low-cost Earth observation platforms, delivering unique sovereign solutions and AI-first monitoring for the defense and intelligence, government and commercial markets. We design and manufacture our own satellites and every component in them, giving us a strong competitive edge and very healthy margins for sovereign solutions, and we operate our own constellation and deliver high-resolution imagery and analytics at unparalleled scale and cost, all on a single scalable platform. Our constellation of 19 new satellites in orbit offers 50-centimeter resolution imagery, intraday revisits over any point on Earth, tasking to delivery in under 3 hours and analytic delivery in under 30 minutes. Our $1.3 million all-in cost per new satellite gives us a structural economic advantage. Our ample capacity means we are ready for scale and can onboard large defense and commercial programs immediately. Looking ahead, I'll come back to our 2026 roadmap in the final sections of this call with a very exciting update. But the through line from where we've been to where we're going is one of intentional transformation and the 2025 results reflect that. With that context in mind, I'll turn it over to Rick to walk through the financials.

Thank you, Emiliano. Good morning, everyone. I'm pleased to walk through a strong set of financial results today. The headlines are as follows: revenue up 38%, operating expenses down 25%, adjusted EBITDA loss improved 48% and the strongest balance sheet in Satellogic's history. Let me walk you through each. Revenue. For the full year 2025, total revenue was $17.7 million, up 38% year-over-year from $12.9 million in 2024. The growth was driven primarily by a $4.9 million increase in data and analytics revenue as we added new and expanded existing customer relationships. Data & Analytics represented 90% of total revenue at $16 million, with Space Systems contributing $1.7 million or 10%. Geographically, North America was our largest market at $12.1 million, followed by Europe at $2.8 million, Asia and Asia Pacific at $2.5 million and South America at $0.3 million. Operating expenses. Total operating expenses for the year were $48.7 million, down 25% from $65.1 million in 2024. Every line of the cost structure improved. Cost of sales, excluding depreciation, declined 3% to $4.9 million. Engineering expenses decreased 28% to $10.4 million, reflecting the workforce reductions completed in 2024 and continued cost discipline. SG&A declined 22% to $25.7 million, driven primarily by a $6.9 million reduction in professional fees, including the expiration of the advisory fee under the Liberty Subscription Agreement and partially offset by increased stock-based compensation. Lastly, depreciation decreased 39% to $7.7 million as some of our longer-lived assets reached the end of their useful life. Operating loss improved 41% year-over-year to $31 million from $52.2 million in 2024. Net loss and adjusted EBITDA. Net loss for the full year 2025 was $4.8 million compared to a net loss of $116.3 million in 2024, an improvement of $111.5 million. The improvement was primarily driven by an $85.9 million favorable year-over-year change in the fair value of financial instruments, combined with the $21.2 million improvement in operating loss. Non-GAAP adjusted EBITDA loss improved 48% to $17.4 million from $33.7 million in 2024. This marks our strongest performance on this metric to date and was driven primarily by the disciplined structural reductions we made to our operating expenses throughout the year. Turning to the fourth quarter. Q4 2025 revenue was $6.2 million, up 94% from $3.2 million in Q4 2024. Q4 adjusted EBITDA loss was $3.1 million, an improvement of $4.4 million compared to Q4 2024. Moving to the balance sheet. We ended the year with $94.4 million in cash and cash equivalents compared to $22.5 million at year-end. That increase reflects the $90 million public offering we completed in October 2025, net of operating cash usage. Net cash used in operating activities was $26.9 million for the year, down 25% from $35.9 million in 2024. Subsequent to year-end in January 2026, we closed a $35 million registered direct offering, further strengthening our liquidity position. We are entering 2026 in the best financial shape in our history. Moreover, our noncancelable remaining purchase obligations, effectively our backlog as of 12/31 stands at $65.1 million, with $28.6 million expected to be recognized within 1 year, $6.7 million in years 1 to 2, $8 million in years 2 to 3 and $21.8 million thereafter. This underpins our confidence in continued revenue growth. With that, I'll turn it back to Emiliano.

Thank you, Rick. 2025 was a year of strategic development and significant commercial progress across our two business lines, Data & Analytics and Space Systems. And that commercial progress continues at an accelerated pace in 2026. In our Data & Analytics business line, we recently launched Aleph Observer, our flagship persistent global intelligence capability. Rather than episodic tasking, Aleph Observer enables continuous monitoring of hundreds of sites daily for our customers in their areas of interest with predictable, reliable delivery. This is a category-defining product for defense and intelligence organizations that need sustained situational awareness, not just snapshots. We also signed a seven-figure agreement with Suhora in India in Q3, providing daily revisits and high-resolution coverage across a large portfolio of priority sites and extended our countrywide monitoring agreement with the Government of Albania for an additional 11 months in Q1 2026. In our Space Systems business line, one of our more significant wins was an $18 million agreement with CEiiA, the Center for Engineering and Product Development in Portugal, signed in Q4 for the supply and in-orbit delivery of two NewSat Mark V satellites. This is Satellogic's first European sovereign EO deployment with ownership and operational control transferring to CEiiA in Q2 and Q3 2026. That speed of delivery is only possible because of our vertically integrated manufacturing and rapid launch cadence. We also advanced our partnership with HEO in Australia, supporting the establishment of Australia's first sovereign sub-meter Earth Observation capability and Space Domain Awareness. Platform and Strategic development. We completed our move to U.S. jurisdiction through Delaware domicile finalized in March 2025, directly unlocking access to U.S. government defense and intelligence contracting. We expanded our HEO agreement to provide exclusive access to our constellation for non-Earth imaging and space domain awareness. And we advanced our AI-first constellation strategy, supported by a $30 million contract from a customer, funding the development of our next-generation satellite capabilities. Before I give you more detail on our 2026 road map, I'd like to bring in our Senior Vice President of Sales, Jeff Kerridge, who joined Satellogic 90 days ago and has spent the time getting close to our customers and our pipeline and can share his perspective from the front lines. Jeff, the floor is yours.

Thanks, Emiliano. Good morning, everyone. I'm Jeff Kerridge, Senior Vice President of Global Sales at Satellogic. For a brief bit of background, I've spent over 35 years in the geospatial defense and intelligence community. That includes over a decade at the CIA, followed by senior leadership roles across the commercial space sector, most notably spending over 27 years helping build and scale Maxar's international sales organization. I came into this role 90 days ago, specifically because looking at the landscape, I believe the market opportunity here at Satellogic was both real and vastly underappreciated. And what I've seen in the field over these past 90 days is only validated and reinforced that the market opportunity is real and accelerating. Let me share three observations from the field. First, the sovereign and defense appetite is strong and accelerating. Governments worldwide are accelerating their investments in sovereign space capabilities. They demand absolute control, assured access and independence from geopolitical constraints, all at an accessible price point. The Portugal CEiiA transaction is a leading indicator of that trend, not a one-off. Our non-ITAR design, our ability to offer in-country AIT and the speed at which we can deliver operational capability, these are not just differentiators. They are direct answers to what defense and sovereign customers are asking for. As a U.S. company, we are a credible partner for the U.S. government and allied programs in a way we simply were not 18 months ago. Second, our capacity is a genuine competitive weapon. Legacy competitors are capacity constrained, casting queues are long, SLAs are unreliable and customers are very frustrated. Satellogic's capacity on our existing constellation means we can walk into a customer conversation and offer something nobody else can: guaranteed, reliable, affordable, high cadence access starting now. That is solving an immediate pain point for customers who cannot wait 18 months for a competitor to build capacity. Third, the pipeline velocity is real. The deals across Portugal, Albania, Australia, India, Malaysia are not isolated wins. They represent a pattern. Customers are coming to us with needs they cannot solve elsewhere, and we are converting at a pace I find genuinely exciting. Our backlog of $65.1 million in noncancelable RPOs gives us a strong foundation, and the pipeline behind it reflects growing momentum in the markets that matter most to us. I'll hand it back to Emiliano to walk through the 2026 roadmap.

Thank you, Jeff. That perspective from the front lines is exactly why we brought Jeff into this leadership role, and it validates what we see in the data. Let me now turn to the 2026 roadmap and what I believe represents the next fundamental shift in how Satellogic creates value. The traditional Earth Observation model is episodic. The customer places a tasking order, waits and receives an image. That model has worked, but it is not what the most sophisticated defense and commercial customers need today. They need persistent, continuous, reliable intelligence. They still need to know what is happening at a specific site when there's a trigger event. But even more, they need to go from being reactive to being proactive by monitoring an ever-expanding portfolio of sites every single day to anticipate events. Aleph Observer is our answer to that need, and it is live today, running on the current NewSat constellation. With Aleph Observer, what it provides is assured capacity, reliable cadence at scale without the traditional tasking bottlenecks. It enables ongoing monitoring of hundreds of customer-selected sites every single day. Customers do not have to guess what will be important tomorrow, manage tasking, and pray that they can get access to available capacity. They subscribe to persistent intelligence on the sites they care about, and it is delivered. The built-in AI analytics detect and identify vessels, aircraft, and land equipment, allowing analysts to triage change and prioritize their analytics workflows, seamlessly allowing teams of analysts to increase the number of sites that they can monitor by orders of magnitude. Aleph Observer represents a fundamental shift for Satellogic. We're moving from selling images to delivering continuous intelligence. This is a shift from reactively tasking imagery of critical sites to delivering and monitoring as a service, and it changes everything about how we price, how we contract, and how sticky our customer relationships become. But Aleph Observer is only the beginning because the next question our customers ask is, what if I need to monitor more than 100 sites, more than a few thousand? What if I need to monitor an entire region or the entire planet? That is where our next constellation, Merlin, is designed to deliver. Let me introduce you to a completely new capability that has been 15 years in the making. It's very dear to my heart and will change how we monitor Earth. 15 years ago, when we started Satellogic, we had a simple idea: what if we could create a living map of the Earth, not a map that updates every few years, not a map that updates every few weeks, but a very detailed map that updates every single day, a living record of human activity on this planet. For a long time, that idea simply wasn't possible. You could either see the planet frequently, in sufficient detail to drive decision-making or you could see it in high detail, but only in small areas occasionally. The Earth observation industry has historically been forced to make a trade-off between scale and resolution. Today, we are removing that obstacle. Today, we're introducing Merlin. Merlin is a new constellation designed to remap the entire planet every day at 1-meter resolution globally, at a level of detail where you can actually understand human activity. That capability simply does not exist today, and it changes what Earth observation can be used for because once you have a daily baseline of the entire planet at the right resolution, the question is no longer, can I get an image of this place? The question becomes what changed today? That shift is incredibly powerful. Instead of tasking satellites one image at a time, analysts will be able to monitor entire networks of activity simultaneously: every air base, every port, every border crossing, every critical piece of infrastructure every day. Merlin will continuously collect imagery across the planet, process it in-orbit with onboard AI and deliver real-time alerts when meaningful activity is detected through its inter-satellite links. And when something important happens, our high-resolution constellation can immediately focus in to capture greater details at 50 centimeters today with our NewSat Mark Vs and sub-30 centimeters in the future with our NextGen. In other words, Merlin turns Earth observation from imagery collection into continuous awareness. And this capability comes to life inside our monitoring product, Aleph Observer. Aleph Observer customers today have the ability to monitor hundreds or sometimes thousands of sites. With Merlin, that scale moves to millions of locations worldwide, not a few selected points, but an unlimited number: entire systems, entire regions, entire economies. This fundamentally changes how Earth observation is consumed. Instead of buying images seen by scene, our customers subscribe to persistent monitoring of the world that matters to them. That is a transition we believe will define the next generation of this industry, and Merlin is the constellation designed to enable it. This isn't a public relations delivery. The Merlin constellation is fully funded by our customer contracts and in full production. The first Merlin satellite is expected to launch in October 2026 and the full system is expected to be operational in the first half of 2027. We're incredibly excited about what this unlocks because for the first time, we will have the ability to observe the entire Earth as a dynamic system, a living continuously updated map of our planet. And this is the real shift Merlin enables. Earth observation stops being about collecting images; it becomes about continuously understanding what is happening on Earth. Customers can use Aleph Observer today to monitor hundreds to thousands of sites across their areas of interest. With Merlin, persistent monitoring moves to an entirely new scale. Just as importantly, the system removes one of the traditional constraints in Earth observation, capacity. There are no tasking bottlenecks and no competition for satellite availability. We will be able to support an unlimited number of customers monitoring an unlimited number of sites at the same time. We are actively transforming what's possible in Earth observation with this new platform as Satellogic moves from selling imagery to delivering continuous intelligence. Let me close with the four takeaways I want investors to carry from today's call. One, we're at a genuine commercial inflection point. Revenue grew 38% in 2025 to $17.7 million, with Q4 revenue growth accelerating 94% year-over-year. Our $65.1 million noncancelable RPO backlog and growing pipeline provide multiyear visibility. Two, the balance sheet has never been stronger. We ended 2025 with $94.4 million in cash, the strongest in our history, and closed a $35 million registered direct offering in January 2026. The capital to execute our strategy is in place. Three, our structural cost improvements are durable. Our total operating expenses are down 25% and adjusted EBITDA loss improved 48% to $17.4 million. These are structural changes, not one-time items, and they carry forward. Fourth, the technology roadmap is fully funded and underway. Aleph Observer is live today. Merlin is fully funded by customer contracts, and we're targeting first launch in October 2026, scaling our persistent monitoring capability from hundreds of sites to the entire planet. This is the disruptive technology upgrade that positions Satellogic for the next generation of defense and commercial Earth observation programs. We look forward to demonstrating what this inflection point means in 2026 and beyond and providing updates on our progress as we move forward. We will now open the call for questions.

And our first question is from Jeff Van Rhee with Craig-Hallum.

Congrats on the call and some fantastic numbers here. Emiliano, maybe start, you're touching on Merlin. Obviously, it's going to bring some pretty compelling capabilities, global rescan and 1-meter, highly differentiated and pretty rare to see these timelines pull in as I had expected that maybe a bit later than what you're now talking. So fully operational H1 '27. Expand a bit more on that. How many units are we talking? And any other color you can tell us about the capabilities of that? And then correlate that with my second question, which is you commented at a high level, we're an AI-first platform. That means a lot of different things to a lot of different people. What does that mean to Satellogic?

Yes. No. Thanks, Jeff. I mean thanks for the question. Super good. Thanks for covering the company too. So great question. Look, we haven't announced Merlin before, but the reality is we have been working on this constellation since April 2025 when we announced that $30 million contract for our AI-first constellation. So even though we have been doing this out of the public eye, we have been working on the design and the initial procurement that we needed, putting the supply chain in place. So the satellites are currently in full production in our facility and the first launch is expected for October this year, followed by the full constellation being completely in orbit in the first half of next year. The first tranche of this constellation is eight satellites. That will give us the ability to provide the service fully in 2027. And AI-first for us, what it means is a couple of things, I would say. The first one is these satellites have enough compute capacity and power to process every pixel they collect in real time through a multi-headed AI pipeline directly in orbit. So we can run the same algorithms we currently run on the ground to do object detection, to do identification, to do classification. We will be able to run this on our Merlin platform directly in orbit and generate using these algorithms generate a couple of things. First, real-time alerts that we will be able to download from the constellation in real-time using inter-satellite links. And most interestingly, real-time retasking. So we'll be able, for example, to detect an event at 1-meter of resolution with a Merlin satellite and in real time, retask a satellite from our higher-resolution fleet to go take a deeper look at what's going on. So when we deliver the imagery to our customers and when we deliver the analysis to our customers, we do so with not only the Merlin baseline, but also with a higher resolution confirmation from one of our other satellites in the fleet. Does that make sense?

Got it. That's very helpful. Emiliano, I have one question for you, and then I have a few for Jeff. Regarding the sovereign opportunity, first, congratulations on the $18 million deal in Portugal. Could you provide some insight into the competitive landscape and explain why you were successful there? Additionally, I would like to know more about what you see in the pipeline for similar deals, both sovereign and at that scale. There's clearly a rapidly growing awareness in EMEA about the need to improve their sovereign capabilities, and significant funding is becoming available. I'm curious about the state of the pipeline for sovereign deals and would appreciate some details about the Portugal deal as well.

Yes. No, that's perfect. So there's three things why we win in this contract, in general, three things that differentiate our satellites in the sovereign space, right? The first one is the quality of the data that comes from our platform, the capabilities of the platform, the fact that these satellites are battle tested that we have been flying the satellites or Mark V satellites now for a number of years before that for Mark IV, we have launched over 55 satellites, accumulated over 150 satellite years of in-orbit experience with this platform. So it's really a stable, strong working platform, right, that is proven. I think that's one thing. The second one is obviously our cost base. I mean we are able to provide these satellites to customers at a really, really interesting and affordable price. And that allows them to think about instead of launching one satellite, they can think about launching three, six and get daily revisits or revisits a couple of days in their area of interest with sovereign capabilities, right, for the same price. So that is really also a huge differentiation. And finally, I think what's very interesting, and this has been key, particularly in the case of Portugal, is that we are able to deliver very quickly, right? We went from contract signing in Portugal to delivering the first satellite in operations for them in a matter of days. Okay? And the second satellite will be launched a few months after contract signing. So we will deliver two satellites within a period of maybe four months since contract signing. That is very unique, right? I don't think there's any other company today that is able to do the same thing. And at this particular stage, with the current geopolitical shocks that we're seeing, the speed to delivery and the ability to provide a proven platform at the right cost. I think those three characteristics are really what differentiates us. And this is supporting a very strong pipeline, right? I think we have been working on building up this pipeline of opportunities for a long period of time. We have over $1 billion in opportunities in our pipeline today. And we have the ability to deliver and the customers obviously have a very, very immediate need. So we expect to see a lot more coming.

Yes. Very helpful. And Jeff, A couple for you. On the pipeline side, maybe to the extent you can share just what's been accomplished thus far in terms of growth in the late-stage pipeline value? And then secondarily, just I know, obviously, you've announced a broad range of some pretty compelling channel partnerships and relationships. I think you've referenced Vantor and a number of others. If you could just talk there, maybe which ones you'd want to call out as showing particular traction, maybe what kind of direct versus indirect mix you see going forward. So growth in late-stage pipeline value and then just channel direct. Are you there, Jeff?

I think we lost Jeff. Jeff, this is EK. So let me see if we can get Jeff to connect in a bit. Do you have any other questions in the meantime?

Sure. Just one more for you and Rick. I realize you're not providing guidance for fiscal '26. When you think about this business and the growth in the pipeline, what would you consider disappointing growth for 2026 in terms of top line? Could you provide some broad ideas about the trajectory you believe this business is on based on pipeline growth? Your 12-month RPOs indicate strong visibility, exceeding my 12-month revenue estimates. I'm curious about what the potential upside is and how you view a floor growth rate for 2026.

Yes, sure. What would be disappointing, I guess, having flat growth relative to 2025. We certainly don't expect that. I think that yourself and the other analysts covering the company have done a lot of work in terms of understanding our business and building good models. And I think the estimates that are out there are in line and perhaps a little conservative relative to our own expectations for 2026.

Our next questions are from the line of Mike Latimore with Northland Capital Markets.

Congrats on the first call here and the results in the Merlin launch. It looks great. I guess first question would be the notion that there's a lot of countries, nations that want to have their own satellites and capacity. I guess, can you quantify that? Like how many countries do you think are actually pursuing their own satellite constellations? And then do they look for an exclusive provider? Or are there a couple of options or chance for a couple of suppliers per country?

Yes, we see demand growing significantly in regions outside of the U.S., particularly in the Middle East, Asia Pacific, and Europe for various reasons. It's become evident that countries do not want to depend solely on commercial constellations and information from the U.S. or allied governments for their defense and intelligence. As a result, many countries aim to establish and operate their own satellites in orbit while also developing the capability to create and launch new satellites as necessary. This trend presents a significant opportunity for us, as we are uniquely positioned to meet this demand with our superior satellite quality, cost effectiveness, and timely launch capability. Furthermore, since our satellites are not subject to ITAR restrictions, we can offer full technology and knowledge transfer programs, including establishing local assembly and integration facilities and localizing supply chains. This not only allows us to provide satellites in orbit today but also enables these countries to produce and launch more satellites locally in the future. We observe this trend consistently across various regions, including Asia, Southeast Asia, the Middle East, and Europe.

Okay. Great. And then I guess in terms of just the Portugal deal and now the Merlin launch, can you talk a little bit about just the revenue recognition timing on those? When do you expect to sort of recognize the revenue on Portugal? And then what's the pattern on recognizing on the Merlin constellation over time?

Yes, of course. Generally, revenue is recognized when the customer gains control of the promised goods and services. Each contract includes specific performance obligations, and we assess and allocate the transaction price to those obligations within each contract. More detailed information on revenue recognition can be found in our accounting policy footnote in the financials. Regarding Merlin, the primary revenue we have is the $30 million contract announced last April. With the constellation expected to become operational in the first half of 2027, we anticipate starting revenue recognition on that contract at that time.

Okay. Got it. Great. And then on the Aleph Observer, seems like that's something you can go back to sell into your current base and then obviously sell to new customers. I guess, can you talk a little bit about the potential for just usage increase from that? It seems like current customers, if they want to add this persistent monitoring for a couple of hundred sites or whatever, that's almost a way to immediately impact some usage levels. But I guess can you talk a little bit about does that impact usage levels from current customers? Does it increase the deal size for new ones? Just how does that sort of impact the model here?

Yes, that's a great question, Mike. The key point is that Aleph Observer enables customers to fully utilize our existing capabilities. With our 19 operational satellites, we have significant capacity, allowing us to focus on areas of interest for customers, whether that's Iran, China, Ukraine, or Russia. Unlike other constellations that can only collect a few targets daily, we can provide our customers with hundreds of locations each day. This represents a major shift in how they approach surveillance of those regions. Instead of merely reacting to current events and allocating a few satellites to capture images on demand, they can now proactively monitor a broad range of sites to gather crucial intelligence and prioritize their focus areas. This operational change is significant. From a business model perspective, we are transitioning from charging customers for each individual image per square kilometer to a subscription model. Customers can choose to monitor multiple sites—10, 20, 50, or 100—at varying price points. This approach offers them much greater access to capacity, making our pricing highly competitive compared to what they’re currently spending on tasking imagery. These subscriptions not only enhance customer retention but also provide us with predictable revenue streams. Essentially, we are evolving into a model that can be quantified in terms of annual recurring revenue, similar to traditional subscription services. This represents a substantial shift for us and addresses a critical need for our customers right now.

Excellent. I have one last question. Regarding the Merlin constellation and its AI capabilities, can you discuss the ability to run algorithms on the satellites in addition to those on the ground? Specifically, will the algorithms that are currently used on the ground be transitioned to the satellite constellation? Are you planning to develop new algorithms, or will your customers be creating new ones? How should we view the pace of algorithm and AI innovation in this context? Additionally, how does this influence the revenue opportunities per customer?

Yes. Taking a step back, we're living in a very unique time right now. I think AI is fundamentally changing how we make decisions all across the board, right? And in geospatial, we're still at the beginning. I would say a couple of things on the Merlin side. One, yes, we can run our own algorithms in-orbit. We can also run our customers' algorithms in-orbit. We basically can also run foundational models in-orbit to generate embeddings for every pixel that we collect. That then allows us to do things like similarity search, things like segmentation, classification, object identification. So there's a number of things that we can do. You can think of the same visual language models that are being run now on the ground like Google's Earth algorithms or even the visual language models that are being developed by some of the leading AI labs; we will be able to run similar models or the same directly in orbit, right? So that is extremely powerful because we can now extend seamlessly what you can do with agents, with AI agents looking at the information on the ground; you can extend it seamlessly into what we can do in orbit. And that gives you the ability to do a couple of things. First, prioritize the data distribution speed. So if you find something that is critical, you can deliver the result very quickly in minutes instead of having to wait until the satellite goes over the ground station, all of the data for that orbit is downloaded, then it is processed on the ground, then it is classified, and then you can generate an alert. That reduces the time from the satellite seeing something happening until the customer gets an alert from hours to minutes, right? And that is extremely significant, right? The other thing that you have to think about is Merlin will be creating this completely new data set of daily remaps of the entire planet at 1-meter resolution. And that data set will sit in our service in the ground and foundational models and AI models will be able to go crazy with data and start generating matching patterns and answering questions. So you will be able to interact with this data set in a way that we just can't interact with Earth today. And we have been hinting at this in some of our blog posts over 2025, but now Merlin is going to make this very, very real very soon. So it's very exciting.

Our next questions are from the line of Andres Sheppard with Cantor Fitzgerald.

Congratulations on a very strong quarter. I think a lot of our questions have now been asked, but maybe coming back to Merlin. Just curious what kind of maybe launch cadence might you target after that first launch? And also, maybe help us understand how would you prioritize Merlin versus perhaps increasing the utilization capacity of your existing fleet?

Yes, thank you, Andres. What's interesting about Merlin is that we don't require hundreds of satellites to operate effectively. We can manage with just a few satellites, which we have already included in our launch schedule. These satellites are designed to operate for about five years in orbit, meaning we won’t need to replenish the constellation for several years to achieve daily remaps at 1-meter resolution. At some point, we might choose to increase our launch frequency or introduce new satellites as new technologies emerge that interest us. However, these decisions would depend on the customer contracts we secure to support such expansions. Without those contracts, our current constellation replenishment aligns well with our launch schedule. It's also important to note that as a fully vertically integrated company, we not only design and integrate our satellites but also manufacture every component, including star trackers, reaction wheels, and telescopes. This vertical integration allows us to apply the same unit economics we have with our Mark V satellites to this new constellation. Overall, it's an incredibly efficient platform for global data collection at an unprecedented scale, which is crucial to remember.

Wonderful. That's super, super helpful. I appreciate all that color. Maybe just my last one. I think we touched on this a little bit, but just given the geopolitical conflict in the Middle East, what impacts maybe positively or negatively might you expect to the business?

Yes. As I mentioned earlier, these geopolitical shocks are accelerating many discussions we’ve been having with sovereign customers. While we aren't providing specific guidance on whether there's an increased demand due to this situation, it is evident that many governments around the world feel pressured to quickly enhance their capabilities and access all available resources. We are focused on supporting those customers as effectively and swiftly as possible.

Our next questions are from the line of Caleb Henry with Quilty Space.

An exciting call. Starting with the mix on commercial and defense, I was wondering if you could talk about what you saw in 2025 and then how you see that changing over the next year or two.

Yes, sure. It's been predominantly defense and intelligence and government for us, although I think with Merlin in particular, there are commercial applications there that are significant. But 2025 was definitely skewed towards D&I and government. I think that space systems going forward will also continue to be skewed in that direction. But data and analytics certainly will expand into the commercial space significantly going forward with the capabilities we're bringing to the market with Merlin.

Okay. And then where do you see the greatest growth opportunity? Is that in selling sovereign systems like the Portugal deal? Or are you more excited about the imagery and intelligence opportunities that come from things like Merlin?

What’s interesting is that these two business lines are very complementary and part of the same system. Our customers in the defense and intelligence sectors require a broad range of solutions. No single solution is sufficient on its own. They need to monitor numerous sites quickly, utilizing the capacity of Aleph Observer over the current and future NextGen constellations we will develop. They also require sovereignty, possessing the ultimate ability to control their destiny by owning their satellites and delivering intelligence independently from third-party suppliers. This is where the sovereign space systems deals we are pursuing come into play, including satellite sales, technology transfer, and establishing local AIT facilities. When we collaborate with customers to provide a solution, it typically encompasses both data and analytics along with space sovereign systems in defense and intelligence, which inform and enhance each other. On the commercial side, we believe Merlin will play a crucial role in driving our future commercial business once fully operational. We started this company aiming to democratize access to Earth observation data and facilitate high-resolution remapping of the Earth, which we see as essential to achieving our goals. We believe that the largest addressable market for this technology will ultimately be in the commercial sector, which excites us. However, it is important to note that currently, 90% of our customers come from the defense and intelligence sector. Therefore, even as we develop Merlin with its significant potential for commercial impact, we are doing so with the needs of the defense community in mind. Merlin is initially designed for defense customers, but we anticipate that, similar to other past defense technologies like GPS, it will also have a significant impact on the commercial sector despite its primary military purpose.

Right. Okay. Quick two more questions. One is technical. On the cross links, are those RF or are those optical? And is that also a component that you're building in-house? Because I understand that's a fairly challenging one.

We're currently using RF inter-satellite links. And it's a combination of some things built in-house and some things that we're currently procuring from some suppliers. But over time, we expect 100% would be built in-house.

Okay. And then lastly, what kind of U.S. government opportunities are you seeing in the year since redomiciling to Delaware?

Yes, that's a good question. There are definitely many opportunities in the U.S. market. Since we re-domiciled, we have started to pursue these opportunities, especially through partnerships. We have had a strong partnership with Palantir, which has been a significant advocate for our data in dealings with the U.S. government. More recently, we've collaborated with Maxar and now Vantor, who are utilizing our data for U.S. defense customers. Specifically, we're working with them on the Luno program for the NGA, which is quite interesting and closely connected to our Aleph Observer offering. We have also engaged in the CSDA contract with NASA, and we anticipate that relationship will continue to expand. We're deliberately crafting a strategy for targeting key opportunities, which primarily involves working with primes in the U.S. Being based in the U.S. and having our satellites operating under a NOAA license provides us with a solid foundation for these discussions, but we are mainly partnering with primes to tap into the government business.

At this time, I would now like to turn the call back over to Mr. Kargieman for his closing remarks.

Well, thank you, operator. Thank you all for joining us today. Satellogic is evolving beyond a traditional Earth observation provider towards a more scalable global intelligence and analytics company. And the progress we shared today is the foundation of that transformation. If we were unable to address any of your questions today, please reach out to the IR team directly at ir@satellogic.com, and have a great day. Thank you.

This will conclude today's conference. You may disconnect your lines at this time. We thank you for your participation.