Good morning, everybody. Tim Horan here, the Oppenheimer Satellite Digital Infrastructure and Communications Analyst. My pleasure to be hosting for a fireside chat or presentation and fireside chat BlackSky the CFO, Henry Dubois. As you will tell from this presentation, this is a pretty revolutionary technology and a revolutionary industry. The whole satellite industry has seen an explosion of innovation. Costs are plummeting, quality is greatly improving. Launch costs are set to come down quite a bit, and it enables services like you're about to witness, which are just mind-blowing, where we can get incredibly high-resolution satellite images very, very quickly with analysis and analytics on it that have never been seen before for basically a tenth of the price of what their competitors have ever done.
This is a brand new white spaces market for satellite imaging that BlackSky is dominating at this point in time in this phenomenal niche that we think is set for explosive growth. The risk was that we didn't get these gen satellites up in time or they didn't work real well, but that risk now is largely behind us. We are launching basically analytics on it that have never been seen before for basically a tenth of the price of what their competitors have ever done. This is a brand new white spaces market for satellite imaging that BlackSky is dominating at this point in time in this phenomenal niche that we think is set for explosive growth. The risk was that we didn't get these gen satellites up in time or they didn't work real well, but that risk now is largely behind us.
We are launching now basically analytics on it that have never been seen before for basically a tenth of the price of what their competitors have ever done. This is a brand new white spaces market for satellite imaging that BlackSky is dominating at this point in time in this phenomenal niche that we think is set for explosive growth. The risk was that we didn't get these gen satellites up in time.
Hello gentlemen, we'll be moving to tech diff. One moment.
Behind us, we are launching now.
Hi, everybody. Sorry for the technical difficulty. Tim Horan here. I'm hosting BlackSky CFO, Henry Dubois. Henry's going to start with the presentation.
Thanks, Tim, and thanks everyone for joining us today. As Tim said, we believe we've got a great opportunity ahead of us. We're a real-time space-based intelligence company that has a constellation of about a dozen satellites circling the Earth. As you can see here from one of these pictures here, our new Gen-3 satellites that we've just gotten two up, one in February and one in June. They're getting incredible resolution of these images. You can see those lines there that give great definition. That really is able to provide a lot of information for customers. One of our key things is that we're a high revisit, high-resolution constellation that allows us to see pretty much any spot on the Earth about once an hour from dawn to dusk.
Wherever you are, we would be able to take an image of that spot if we were asked to and be able to deliver it back to you within about less than 90 minutes of the taking. The satellite goes around, it drops it off to one of our ground stations. We process it, as we'll see shortly. We can process these very quickly to get to the information and the analytics that are required. We've won contracts valued at up to about $2.4 billion over the last couple of years, which has generated growth. A lot of those contracts relate to our Gen-3 satellites. While the Gen-2 satellites perform well and provide some really good information, allowing us to get to over $100 million in revenue, we believe the Gen-3 satellites will be game-changing as we approach a very large addressable market.
As you can see on this next page, we've had some pretty good revenue growth over the last four years, going from with an annual CAGR of about $44 million. We're forecasting this year or giving guidance this year between $105 million - $130 million as we work through the U.S. government budgets this year. They seem a little more choppy than they have been in the past, other than that, we expect that we are well positioned to grow quite well. The U.S. government is about 60% of our business through last year. Actually, the first half of this year, they were only about 50%. Our international revenues are growing quite nicely, and significant demand is coming from that group as well.
As you can see, we're adjusted EBITDA positive, and we expect to be able to get to free cash flow positive in the next 18 - 24 months or so. The rest of the numbers there, about 325 employees, which allows us to be lean and mean. As we just reported last week in our earnings report, some recent highlights. We did receive a $24 million contract from the National Geospatial-Intelligence Agency for what we call a LUNO Award. This is significant because that's a contract that utilizes Gen-2 imagery for some analytics. Over time, we'll be able to upgrade that or rather use our Gen-3 imagery for that as well. Right now, it's all Gen-2, which shows that there's still significant demand for that 70-centimeter resolution as well.
We've signed a number of early access agreements for Gen-3, where customers around the globe are actually starting to get imagery coming from our two satellites up there now. They're already revenue generating, even though we haven't opened up general commercial availability. We expect to do that in about the fourth quarter as we get to that four to six satellite constellation. What's magic about four to six is that gets us to daily revisit. Our total constellation with Gen-2 and Gen-3 satellites right now, we've got about 12 to 13 total. That gets us the hourly revisit. We've got a third Gen-3 satellite in its final testing phase and getting ready to ship. We expect that to go up here in this third quarter, and we're working hard to get that up so that we continue to build out our constellation.
Also, in the month of July, we were able to raise $185 million in a convertible note, which was significant in that we used that predominantly to repay our senior secured note that was coming due in 2026, extending that maturity out to eight years from just one year, and also reducing the interest cost from about 12% down to a quarter percent. It also put about $65 million of additional cash on the balance sheet, which we believe more than positions us to get to free cash flow positive and be able to make some incremental investments as we see fit. In terms of the market, we believe we've got a large and growing market. We've got about a 13% CAGR on that market, but today, it's about $100 billion, give or take.
We believe that given our imagery and our analytics capability, we believe that that's a market that we can tap well into. As you know, with only $100 million, we're just barely denting the surface at the moment and believe there's a lot of upside for us. When you take a look at how we differentiate ourselves from our competitors, the main thing is we look at ourselves as a monitoring company. By that, I mean we're able to see pretty much any spot on the Earth about once per hour. The reason we're able to do that is we've got those yellow satellites there that are going around on inclined orbits versus our competitors who are more mapping companies. They've got the gray satellites that are coming around from the North Pole to the South Pole.
A mapping satellite company will want to be on that sort of orbit because they need to be able to see pretty much any spot on the Earth at the same sun angles, elevations, and they'll cross the equator, therefore, at about 10:30 A.M. or 1:30 P.M. so that they're able to stitch that imagery together. That's what's important about having the same elevations and sun angles. We're less concerned about that because we want to see what's going on on a real-time basis. For example, this allows us to see, as you see here on this next slide, we can see stuff on this periodic timeline multiple times across the day, whereas our competitors would only see it once in the morning and once in the afternoon. This is important from a tactical perspective because, as you know, things don't happen just once or twice a day.
They can happen at any time of day. It's not set in stone as to when they occur. Being able to have this capability where you're seeing stuff on a real-time basis really allows for tactical decisions. That's the reason our customers are looking for us. Important to that is the fact that we are moving forward and continuing to get our Gen-3 launches up successfully. We've already gotten two up. We've got two more coming on a Rocket Lab and then two more after that. We're targeting to get six up by the end of this year, eight by the end of the first quarter or so, and 12 by the end of 2026. We'll continue to march our way towards that.
This is what the satellites look like, and they'll point down, and they'll take the great imagery that we're seeing, as you can see from this picture of the airport in Sydney, Australia. This picture was taken early on, shortly after we had launched our first Gen-3. They're coming right out of the box. The Gen-3 satellites have been working well beyond our expectations. If you had a higher resolution screen that you were looking at, you'd be able to go down and kind of read some of the tail numbers on these wings down here. In addition, from a real-time event perspective, here's an image of the drone attack that the Ukrainians undertook against some Russian Air Force bases well inside the base or well inside the Russian country.
As you can see here, we get the resolution where you can see what the types of airplanes that have been destroyed, what they're doing to kind of repair them, etc. In this case, in this next slide, the results of some of the Tomahawk cruise missiles on the Isfahan, Iran. The benefit of our ability to get this imagery quickly is the fact that we can take it at any time, day or night, throughout the day, as I've said. On this next slide, you kind of show the different types of missions that we have available to us. You get that ability to kind of get that really high-resolution so you get the clarity of what's going on. We're able to do with our Spectra AI platform, which we've been developing and utilizing for the past decade or so.
We're able to automatically identify objects on the ground and then also be able to take a look at from a perspective of patterns of life so that you get kind of how things are happening, what things are moving, what change detection is going on, etc. In this last scene, we actually are able to track and kind of show movement of cars and how they've moved over time when we can take what we call burst mode images, and we show that kind of how the vehicle has moved across the spectra there. On this image, this just is to highlight the speed with which we're able to access and gather imagery. You take a look at this satellite here, or the satellite imagery here. You've got over 256 million pixels in there.
In about 51 seconds, we were able to identify about 29,000 separate objects, which allows us to be able to get this image with the information to our customers on a near real-time basis so that they're able to undertake the activities that they need to study. Moving on to slide 15 here, our customer base is both U.S. government and international governments. As you can see, we've been growing quite nicely across multiple countries that we work with. In our backlog, about 85% of our backlog is from international governments. U.S. government is always going to be a fairly small % of backlog because they only fund on an annual basis with their annual appropriations. We're always, we only are having their funding through about June or so of next year. We are looking at them and trying to work through their current budget.
Other than that, we think that from a strong tailwind that they provide us with strong tailwinds for us to continue the growth. Our international customer base is growing quite well as well. Going on to our next, I won't call it the next generation because it's a different mission. Some areas that we've been working on to expand our capabilities is to get into the mapping business. We talked about how our customers were working on the mapping side. We see a lot of those customers or competitors having satellites that age out over time. A lot of those, there could be a supply gap, if you will, come around 2027, 2028.
That's why we're focused on this Arrows constellation, which would be able to undertake those mapping missions and be a high-performance, large area collector where it's coming down and doing large swaths, utilizing cross-satellite links, as you can see here, to allow for a quick delivery to the Earth and really meet a market that we believe is going to be underserved as some of those satellites age out somewhere in that 2027 sort of time period, which would be in line with when we might be able to get this up as early as 2027. In terms of kind of where we are, we talked a little bit about our revenue before. We've been growing quite nicely at about 44% CAGR. We have very little churn. Most of our customers have been with us for quite some time.
None of our international customers of magnitude have ever moved away, let's put it that way. We've got some 50% year-over-year revenue growth on our international markets since 2022. We're looking for some nice growth from them as well. The imagery and analytics, we expect to increase as we get our Gen-3 satellites up. We're expecting to get to general availability somewhere in the kind of the fourth quarter and would expect to start having some revenue upticks at that point. We believe that there's strong global demand, and we believe that we'll be able to continue to show growth, even though this year, our trailing 12 months has been pretty flat. We'll be able to show growth as we go forward. From an EBITDA perspective, we have been getting to a positive adjusted EBITDA. We've made some investments this year with our AROS constellation as we acquired LeoStella.
That stuff goes through OpEx. As you can see, in the absence of the LeoStella, it would be in the neighborhood of about $12 million of adjusted EBITDA for the trailing 12 months. We believe we've got the strong operating leverage, and we'll be positive adjusted EBITDA for the year, as we'll talk in a moment. From there, we are targeting to get to a free cash flow positive within the next 18 - 24 months. From a revenue guidance perspective and adjusted EBITDA for 2025, we did adjust these down in July with the offering that we did or at the same time as we did the offering. The rationale for that is just the U.S. government budget uncertainty at the moment. We're expecting to get into a continuing resolution, which has slowed down the delivery of some contracts this year. We believe that's a short-term bump.
Long-term, we should be able to get back to some really handsome growth. Adjusted EBITDA break even to $10 million, and capital expenditures staying at where we thought they'd be, somewhere in that $60 million - $70 million range to support getting six satellites up by the end of this year and another six up by the end of next year. Total by 12 by the end of 2026. Speaking of long-term, we do expect that we would be in a position to be having year-on-year revenue growth of 20% - 30% as we get our Gen-3 satellites up. Imagery and analytics software growth margins, the 80%+. In the second quarter, we're at 81%. I think this is highly achievable and will be able to be continued. We're approaching that 75% overall gross margin line as well. All of that then contributes down to our adjusted EBITDA margin of about 40%+.
I think we're in pretty good shape to achieve that. It's just a matter of as we get our Gen-3 satellites up and grow the revenue base. Finally, we believe we're at a forefront of the industry, as Tim was talking about. Our imagery provides real service to our customer base. We've seen a lot of growth as individual countries have realized that they want to be able to have access to their own imagery and analytics analysis as opposed to just relying on others. The market we believe is growing and will be expanding the TAM as we get into our AROS constellation. With that, Tim, I'm happy to take any questions.
I got lots, Henry. Thanks for the time. Good presentation. Sorry about the technical glitch, everybody, but hopefully we're OK now. On government spending, obviously there seemed to be a bit of a pause with the new administration and with the Department of Defense and a little bit of uncertainty out there. Do you think that's, what are you seeing now from the government? Have things picked back up?
Right now, thanks, Tim. Right now, we're seeing some near-term uncertainty from the U.S. government's fiscal 2026 budget, which is now working its way through Congress. It's a dynamic situation. It's unclear as to what's going to manifest in the actual budget. We may not know that until early next year, say the first quarter, as there will most likely be the continuing resolution, as I was mentioning. There is significant demand for Gen-3 capabilities within the U.S. government. We anticipate the government will want access to Gen-3 services in addition to the Gen-2 services that they've already contracted for through the end of next year, and we've been delivering for the last number of years as well. We believe there are significant long-term opportunities with the U.S.
government because our capabilities do match the administration's agenda, as we've talked, of increased national defense, leadership in space, and the use of cost-effective commercial solutions for government programs. While this is a near-term bump, we see long-term lots of opportunity.
I guess, you know, in that regard, is there also cutbacks? I mean, it seems like you're primarily defense and intelligence, your budget or where you're getting your revenue from. Has there been a slowdown there or a cutback there, or is it just we just don't know yet because of the budget for next year?
As we go into the budget, we just don't know yet. I mean, there have been talks that they're looking at kind of how do they allocate their funds. We believe that, again, that we're well positioned to meet their requirements and their needs and their policies. We're really just kind of waiting to see. That's why we think this is a near-term blip, and long-term, we should be, those budgets will come back.
Got it. Out of curiosity, it seems like you're providing, in some cases, a new service, but they have had options historically. Do you think overall you're saving them money with your service versus what they could have done historically, and the information they gather is saving them money?
I think what we provide is, as a commercial solution, as we get our constellations up, the U.S. government is not paying for 100% of that constellation the way they would for their own services. Therefore, they're able to leverage the fact that we are selling to others and spreading the cost across many other customers. In addition, as a commercial service, we provide them something that they can't get from the national services. That is, our imagery is not classified. As a result of that, it can be shared freely to allies, across agencies, etc., unlike some of the imagery coming off of the national assets.
Is some of it classified, or none of it's classified?
None of our imagery is unclassified.
OK, that's really, really helpful to know. Do you think that's a very big deal?
It has been. I mean, that's one of the things that has always been important from the commercial sector. I mean, even if we work with a classified program, our imagery itself is not classified.
That's a really good point that the costs are essentially shared amongst multiple countries. Actually, the cost per image in many ways could be a lot cheaper than what they can do on their own.
Correct. I mean, if the U.S. government was 100% of our business, they'd be paying for 100% of the cost. The fact that they aren't, they're paying pro rata.
The NGA LUNO program, they recently awarded you $24 million. What exactly is that program, and how did you get that award?
Yeah, that LUNO award, I mean, that kind of continues on from the economic indicator monitoring contract that we'd had back in 2022, 2023, and early 2024, which is using Gen-2 imagery to monitor a number of assets, a number of targets around the globe for the government. Through this contract, our AI-powered Spectra AI platform assists the National Geospatial-Intelligence Agency in monitoring kind of strategic military economic facilities, airfields, rail yards, ports, you name it, and being able to get to that pattern of life and what is happening down there to give them real-time information. With our Spectra AI platform, as we showed earlier on the slides, we can pull this imagery down very quickly and get it in the hands of the analysts so that they can make decisions that they need to make.
That's mostly for doing economic indicators and economic predictions?
They call it economic, but it's also kind of port activities, which get into strategic issues, which get into all sorts of things.
Got it. All right. Interesting, interesting. Are you working with the federal government on the Golden Dome project? Is that something you can help provision?
You know, we're seeing emerging opportunities for programs both at home and abroad. In the U.S., when you talk about Golden Dome, we do think there are some things where we could leverage our space capabilities to work in that. We have been working with and attending industry days to kind of see how this thing is starting to flesh out. As the opportunities become clearer, I think that's something that we can assist and would look to invest in.
Got it. Now, you know, with Gen-3 satellites, can you just talk about what you think the demand looks like? When it becomes generally available, can you give us a sense of what type of revenue that could generate or what that really means? I guess maybe related to that, if we can get some sense of what the pricing of these eight satellites looks like versus maybe the Gen-2 satellites on a like-for-like basis?
Sure. I mean, our Gen-3 imagery is providing a lot of information. It's getting to a lot higher clarity resolution on the images as we've seen. What you're looking at there is the demand for that. We have signed up a number of international customers for early access, which means that they're actually starting to utilize commercially our Gen-3 satellites, even though we only have two up. We do expect that to grow, the amount of use and amount of Gen-3 imagery to be part of our revenue streams to grow as we get incrementally more satellites up and get to that daily revisit. I think there's a lot of opportunity. We've seen our international markets grow from about 15% of our total revenue a couple of years ago to as much as 50% of our total revenue in the first half of this year.
We've got a strong backlog of $356 million, 85% of which is for international customers. Most of that $356 million is also for our Gen-3. We see that as moving up the chain quite nicely. In terms of pricing, our Gen-3 pricing, because of the added value and the amount of data that you're collecting, is about three to four times the price of our Gen-2 imagery. You get that value that it provides is well worth it.
I mean, all things being equal, shouldn't we be 18 months, two years from now when you have the whole Gen-3 constellation up, shouldn't revenues be three to four times higher than what we saw with Gen-2 last year, or is there not a direct correlation with that?
We're not providing, haven't been providing guidance for a couple of years out. When you take a look at kind of our constellation and how it is growing and the capacity that's coming down, looking at it from a volume perspective, your math is logical. We believe that we should be growing our business quite nicely. We believe the Gen-3 satellites, a 12-constellation satellite, probably has in the neighborhood of a capacity of $250 million - $300 million or so before you even get into the analytics. We believe that we do have a lot of run rate here.
Very helpful. What percentage of revenue right now is analytics, roughly?
Roughly right now, I mean, we combine both imagery and analytics into the same revenue line item because they both, once you take the imagery, there's no human in the loop. It's all AI-generated solutions. It really depends on what the customers are asking for. A lot of this will go into their data streams. Some already analyze, some not. I would expect our analytics revenues to continue to grow nicely. They've been a little bit slower this year because of the delay in the LUNO contract. That was a big use of our analytics in the past. It's a little bit slower, but it's probably, it's a meaningful %, but it's not as significant as we want it to become at the moment.
Historically, has it been like, you know, a quarter of the revenues, 35% just to get it done?
It's been in the neighborhood of about probably 15% - 20%.
15% - 20%. OK. That's really helpful.
Of the imagery and analytics revenues, correct.
I mean, theoretically, maybe you're going to be able to do a lot more analytics, right, with a lot more information. I mean, should that maybe not increase from 15% - 20% to 20% - 25%?
I would expect that to increase over time.
OK. Yeah. Got it. Basically, on the same page there. All righty. Just, you know, on your backlog, it's always a little bit confusing because there's like two or three different definitions almost of backlog. You have kind of potential, I'm using the word incorrectly, you have a different term, potential contracts are like $2.5 billion, and your backlog is $356 million. I know most of that is because you only count the U.S. government when they actually give you the purchase order, which is only like one year. Can you break down a little bit the gap between the potential, you know, five-year revenue generation and what your backlog looks like now and what really, you know, any other way to think about backlog over a five-year period, I guess, is the question.
Sure. I mean, and you're right. We've won contracts that have a value of up to $2.4 billion. That includes the EOCL contract, for example, which has a billion-dollar value, but they only fund on an annual basis. That's why in the backlog numbers that we have, it's probably only about $40 million or so of the $356 million, about 15%. When you take a look at it from that perspective, the additional things that show up in the won contracts are things like the LUNO contracts, which are about $500 million, but they're of IDIQ. They're not sitting in the funded backlog as we report on our 10Q until we get assigned a task order. Same for a NASA contract and same for our others, some others.
That's why the international customers have such a large proportion of our funded backlog, because they're not necessarily as constrained in terms of how many years they can fund in their contracts. For example, we announced in January a $100+ million contract with an international Ministry of Defense. All of that contract is now in our backlog because they were able to fund a seven-year, commit to a full seven-year access to our Gen-3 satellites, which we took as quite a step because this was before we had even launched the first Gen-3. They were committing to being our customer for seven years for the Gen-3 capability. Another customer similar to that did that back in 2023 and to the tune of $150+ million. Those sorts of numbers are what sits in our backlog.
In terms of how we burn off the funded backlog, we've got about $45 million of the funded backlog that we expect to deliver here in the second half of 2025, about $65 million in 2026, and the rest in 2027 and beyond.
It's a little complex because of the $2.4 billion. That's potential, but you haven't, it's not firm, right? I mean, I guess two questions there. How much do you think you have 90% visibility on, like of the $2.4 billion? Should you win like a billion of that, a billion and a half? What's the duration of that $2.4 billion?
The full duration of that is probably in the neighborhood of, if I did it on a weighted average basis, probably about five years. Because you've got the LUNO contracts, which are five years. You've got the EOCL contract. Actually, it'd be probably more than that. EOCL contract, which is 10, with another seven to go, give or take. The international contracts are typically five to six years. The $2.4 is probably over a five to six-year sort of type time horizon. In terms of visibility on that, you'd have to go contract by contract. EOCL, we feel long-term, we should be in pretty good shape, although we do have a couple of bumps in the road at the moment. The LUNO contracts, those are IDIQ contracts that were let to probably about 10 prime, us being one of the primes.
We do have a very strong track record in the prior economic indicator monitoring contracts because we won probably the lion's share of that set of contracts. On that $500 million, we feel like we've got some pretty good headway to getting into a good chunk of that $500 million. We just announced the $24 million win, which is the largest award underneath the LUNO contracts to date.
I mean, the $2.4 billion, we probably are in, like you should win $1 billion - $1.4 billion of that $2.4 billion. Is that a reasonable guess?
Yeah, it's a reasonable guess. As I said, we're not giving that full guidance, but that sounds, it wouldn't scare me over time.
Perfect. I got two more important questions for you I really want to get to. AI, you're now going to be collecting a lot more data. I mean, how are you improving your own AI capabilities? Is this, are you pulling ahead of the competition?
As you know, we've been working with AI for the last 10+ years in our Spectra AI platform. It was always designed to be able to be automated and use language learning models in order to be able to constantly improve. Having access to our own library of data, our Gen-2 data and the coming Gen-3 data, allows us to continually train it. We believe that gives us a real leg up. We're not outsourcing our AI development. We're doing that in-house. We think that's part of our secret sauce. I know some of our competitors have been outsourcing it. I think we've got, it will be a competitive advantage.
As you saw on one of the slides here, we were able to process an entire image and identify the 29,000 or so objects within less than a minute, which is unheard of when you think about what the NGA or other analysts used to do by hand. You can't do it that fast, which is really important as we get into broad area searches, which we have another contract with the U.S. government on, to be able to process data and be able to pinpoint where you want human eyes to be focused. It can really be a real optimizer, if you will, for the utilization of both the AI capabilities. You do still need, certain times you still want a human in the loop.
Let's say the demand is very strong for Gen-3 in three years. Can you go above the 12 satellite constellation? Will it be predicated on demand?
Absolutely. We can flex our constellation based on demand. Our satellites are relatively inexpensive, about $15 million - $16 million a pop. Given the fact that we own LeoStella, we're able to manage the supply chain and keep production lines warm so that we'd be able to get additional satellites up fairly quickly. We do plan to keep an eye on that and will flex the satellite constellation size as predicated by demand.
Roughly, how many satellites would you need for the AROS constellation? Is that kind of a similar cost per satellite?
That satellite is probably going to be a little bit more expensive, but nothing compared to what our mapping competitors are spending per satellite. We're still with fractions of that.
How many do you need to have a service?
We're still working our way through that. It's probably in the four to six sort of range, but it's not really, it hasn't been fully defined yet.
OK. Do you think it'll be similar returns that you're getting on your Gen-2?
We believe so. We believe that, and that's also going into a market where we believe there'd be a supply gap. We'd be plugging a hole as opposed to growing a market.
Henry, fascinating stuff as usual. I really appreciate the candid color and the presentation. Thank you for your time. Thank you, everybody.
Appreciate it, Tim.