Greetings and welcome to BlackSky’s fourth quarter 2021 earnings conference call. At this time, all participants are in listen-only mode. A 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 call is being recorded. I’d like to turn the conference over to your host, Aly Bonilla, Vice President of Investor Relations. Please go ahead.

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 from last year and give a strategy update on the business. Johan will then review the company’s quarterly and full year 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 11:30 am Eastern time today through March 8. 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. Please note that our net income for Q4 that is included in our earnings release is subject to the completion of our financial closing procedures and…

Thank you Brian, and good morning everyone. I’m pleased to say that we made good progress across numerous aspects of the business in the fourth quarter and ended the year on a strong note, positioning us well as we start the new year. Today, I’ll begin by giving you an update on our fourth quarter financial results followed by a summary of the full year 2021 results, and then lastly provide an outlook for 2022. Total revenue for the fourth quarter was $11.5 million, up $5.1 million or 79% from the prior year period. Imagery and software analytical services revenue was $7.4 million, driven primarily by new and extended government contracts and represented approximately two-thirds of total revenues. Also contributing to the increase in total revenues was the higher engineering and systems integration revenue of $4.1 million. Turning to operating expenses for the quarter, I will use the term normalized here to exclude specific non-recurring items, including pre-merger stock-based comp related to business combination, satellite impairment costs, and non-recurring public company transaction costs. Normalized operating expenses in the fourth quarter of 2021 were $16.7 million compared to $11 million in the fourth quarter of 2020. Of the $5.7 million year-over-year increase in normalized operating expenses, $2.5 million were primarily from a 50% increase in headcount as we invested in sales, technology and engineering hires across the organization. Also contributing to the increase were $2.4 million in additional costs to operate as a public company, such a directors and officers insurance and SOX compliance fees, as well as $1.1 million from higher depreciation expense. GAAP operating expenses were $33.2 million in the fourth quarter of 2021. The GAAP amount includes $12.1 million of non-cash stock-based compensation expense related to specific pre-merger equity awards to key employees as part of the company’s…

[Operator instructions] Your first question from the line of Josh Sullivan with The Benchmark Company. Please go ahead.

Hey, good morning. Brian O’Toole: Morning Josh.

When you’re looking at the guidance for ’22, how important or how much do you factor in the EOCL contract this year, and then does the continuing resolution have any impact on timing, and maybe any other thoughts around the total contract size or mechanisms at this point could be helpful. Brian O’Toole: Good morning Josh. Our revenue guidance for the year factored in--it does include revenues from the NRO for ongoing contracts and an expansion through the EOCL contract award. We have factored in potential timing scenarios with respect to that award and we feel confidence in our ’22 revenue guidance based on that.

Got it, and then with the new constellation flexibility, has that altered your long term view of the constellation needs? When you say foreseeable future, I think you mentioned 2023 for this size, but maybe what level of sales metrics would you need to add more satellites, or just how are you measuring that growth at this point, the growth needs? Brian O’Toole: Yes Josh, I’ll say fundamentally our strategy has not changed related to our constellation. I think what we’re emphasizing here is we can responsibly manage the growth of our constellation aligned with demand. We have the flexibility when we launch and expand to meet that demand. That’s always been part of our agile aerospace strategy, and of course as you know, we’ve taken a software-first approach to the market, it’s not just about the satellites but it’s about integration that data with a lot of other data and information to provide a customer experience that’s very innovative in the market right now and deliver that information and analytics as a subscription service. We think we’ve done a very well managed balance of our capital investments in space, but we’re accelerating our investments more in software and analytics, which is really positioning us to address the larger part of the TAM, and frankly the fastest growing part of the TAM.

Josh, just to pile on there for one second, I think a key takeaway is that there’s plenty of capacity in the constellation to support our revenue stream going out into the future here.

Got it, and then just on the commercial sales side, the total number of commercial customers and maybe average deal size, where do some of those metrics stand at this point?

Josh, we are working on getting those together and obviously being thoughtful and deliberate about when we come out with them. Key of course is that we’re able to measure those things accurately and timely internally, and we want to harden them for the public markets, so they’re in the works and you should expect us to come out with them as soon as we believe we have them firmly under control.

Okay, and then kind of tying those two together, just as far as the flexibility and the hardware, how are you thinking about the flexibility and the commercial sales force build-out, as well as resellers? How are you approaching that go to the commercial market at this point? Brian O’Toole: Yes, as we’ve stated, we expanded our sales force in ’21 and we’re continuing to expand it in 2022. There’s multiple approaches we’re taking to going to market. One, as we outlined, is growing our reseller network globally, that’s allowing us to reach more customers both in the government and across multiple vertical markets. We’ve also taken a strategy as we’ve announced with our relationship with Palantir, where by integrating our platform services into their platform we can reach their customers with more advanced solutions, so we think we have a very robust go-to-market strategy here to accelerate our capture and adoption of new customers.

Got it, and then just one last one, what do you think the optimal revisit rate is at this point? I think you mentioned the example of the ferry, I think last quarter you talked about 90 minutes, but with the new constellation here, what do you think is the optimal revisit rate for your target customer set? Brian O’Toole: Our goal has always been to achieve about a one-hour revisit, not just revisit but to have time diverse collection, so throughout the entire day. It’s not just revisit at a particular location but it has to be revisit throughout the entire day with rapid timelines of delivering that insight within 90 minutes or less, and we’ve been able to achieve that through our AI and software-driven approach to our operating platform.

Thank you for the time. Brian O’Toole: Thank you Josh.

Thank you. Again to ask a question, please press star followed by one on your touchtone phone now. We have the next question from the line of Chris Quilty with Quilty Analytics. Please go ahead.

Thanks guys. Wanted to follow up on the constellation sizing question. Obviously you provided very long term forecasts back with the going public transaction, and I guess fundamentally with the reduction in the planned size of the constellation, is it reasonable to assume that we’re probably not going to be able to achieve that sort of a ramp but with the increased capital efficiency, it’s probably a net-net, it works out the same from a return on invested capital? Brian O’Toole: Good morning Chris, thanks for the question. First, I just want to emphasize we are not indicating that we have plans to build a smaller constellation. What we’re emphasizing is we have, one, sufficient capacity over this year and well into 2023 to meet our growth objectives, and two, we’re taking a very measured approach to when we expand the constellation to align with demand. For example, our gen-e satellites, we’re continuing to invest in those, those remain on track to be launched in 2023 to align with our plans, so we’re not--we have not altered the fundamentals of our overall strategy.

Has anything changed with the intended design of gen-3, given either end market demand requirements or competitive issues? Brian O’Toole: No, gen-3 is, I think as you’re well aware, has been in development now for well over a year. That’s starting to enter into production, and the attributes--the advanced attributes of that satellite remain on track as we’ve outlined before in terms of improved resolution and other features of that spacecraft.

Great. The two satellites that are being retired, presumably those were some of the first ones that were launched. Can you give us any kind of an assessment of perhaps what’s the limiting factor on the life of these satellites - is it fuel, is it power, altitude, and what are the intentions for gen-3 in terms of some of the some of the design line? Brian O’Toole: I think Chris, to start out with the satellites that we’re anticipating replacing are now beyond their expected life, so that’s a positive development. Those satellites were launched well over three years ago with an expected life of three years, so we’re beyond that at this point. Those satellites continue to operate, so we’re encouraged by what we’re seeing with the design of the spacecraft and the health of the spacecraft that are up there. This means we can expect some of the other gen-2 satellites to exhibit the same type of characteristics. Gen-3 is designed with an even longer mission life, which is also giving us encouraging insights into the potential of that design, so all in all highly favorable in terms of expected design and mission life, which of course has a very positive impact on capex as the time to replenish gets stretched out.

Got you, and one follow-up question on gen-3, is the initial design and production of those satellites being done internally or with LeoStella, and as I guess as part of that, I know LeoStella, which is a separate company, separate entity had been ramping production to, like, 40 satellites a year, how does your plans for lower production quantities impact either the pricing of the satellites or any contractual obligations? Brian O’Toole: Well yes, Josh, we are partnered with LeoStella through our joint venture, for LeoStella to manufacture our satellites. We own the design of the satellites and they simply are the production facility for us. I will also say that we have very good insight into the cost of our satellites - that’s all been proven and baselined as part of our gen-2 system, and our gen-3 capability is an extension of that, so very good visibility into the cost, which ultimately is reflecting in the disruptive economics that we’re providing to the market through the data and analytics that we can get from those satellites.

Great. Wanted to ask a question on the commercial side of the business and the growth you’re seeing there. Is the growth primarily from adding new customers or is it growth within your current customer base, and I guess as a follow-on to that, you’ve just added a lot of imaging capacity recently, do you see indications that existing customers are going to uptake that new capacity and generate higher revenues? Brian O’Toole: To your first question, the commercial growth is driven by new customers, so we’ve got a lot of strong interest coming in. There are several factors that we’re seeing from those customers of why they’re choosing BlackSky, and that’s particularly around the ease of use and the customer experience, and then the economics related to delivering the analytics and insights they need for their businesses. Most of these new customers are not interested in buying pure pixels or imagery, they’re interested in the high frequency monitoring that can yield unique insights that impact their operations, so that’s where we offer a unique value proposition to the market through an easy to use experience. Then as we have outlined before, we have a land-and-expand strategy with these customers, so typically they will start working with us on monitoring certain locations and those locations, numbers of locations can expand over time, as well as the depth and breadth of the analytics that we’re delivering through the subscription contracts with those customers, so we’re seeing strong interest and validation in the subscription-based analytics model.

And how much of that subscription base is related to Spectra AI versus other platforms? Brian O’Toole: I think most of it is all going through Spectra AI.

Actually, it was a good demo you guys did the other day, appreciated that, and I don’t know whether it’s posted on the website or something, but a very powerful platform. Is that same platform used for both the commercial and the government side, or are there different versions of that, that you offer to government customers? Brian O’Toole: Yes Chris, thanks, we were really happy to provide that demo to give you some insights into where we’re going as a business. It’s the same platform we’re leveraging both in the government and the commercial business. We can plug in different services for different customers, which makes this thing massively scalable. As I outlined in my remarks, NGA is a subscriber to this platform, for example, and that got renewed in the fourth quarter, and then we have several international ministries of defense that use it, but it is the sole platform by which we service our commercial providers, our commercial customers as well, so massively scalable platform that we get extremely good operating margin leverage from across both sectors of our business.

Great, and final question, I don’t know if you guys have an opinion on this, but if we get stuck in another CR, have you seen any analysis of whether the EOCL program qualifies as a new start and may get frozen out, or whether in fact that would be funded under a CR, and if that program is awarded later this summer, presumably it’s on the same schedule that enhance view was on, which is, I think, September 1, sort of a start for the program? Brian O’Toole: I think as we outlined, we already have an existing contract with NRO, and that contract was expanded last year as there was an uptick in demand for our high revisit imaging capability, so that contract--we’re operating under that contract today and well into this year, so there’s multiple options for us, and we’ve factored in potential timing scenarios of the EOCL award.

Great, thank you. Brian O’Toole: Thank you Chris.

Thank you. Again, to ask a question, participants can press star followed by one on your touchtone phone now. Ladies and gentlemen, we have reached the end of the question and answer session. I’d like to turn the call back to Aly Bonilla for closing remarks. Over to you, sir.

I want to thank you for participating on the call. I’d also like to everybody know that we will be hosting demo days in the near future to provide a hands-on demonstration of our BlackSky Spectra AI platform and share several ways our customers benefit from the analytical insights. Please reach out to me for further details, and also check out our website for the latest news on the company at www.blacksky.com. We look forward to speaking to you again soon and have a good day.

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