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

Good morning and thank you for joining us. Today I’m joined by our Chief Executive Officer, Brian O’Toole and our Chief Financial Officer, Johan Broekhuysen. On today’s call, Brian will provide some highlights on the quarter and give a strategic update on the business. Johan will then review the company’s first quarter financial results and outlook for 2022. Following our prepared remarks, we will open the line for your questions. A replay of this conference call will be available from approximately 12:30 pm Eastern time today through May 25. Information to access the replay can be found in today’s press release. Additionally, a webcast of this earnings call will be available in the Investor Relations section of our website at www.blacksky.com. Before we begin, let me remind you that today’s conference call includes forward-looking statements, including financial performance and guidance for our fiscal year 2022, and that actual results may differ from the expectations reflected in these statements due to factors such as long sales cycles, customer demand, and our ability to estimate expense, operational and liquidity needs. We encourage you to review our press release and most recent SEC filings for a full discussion of the risks and uncertainties that pertain to these statements and that may affect future results or the market price of our stock. BlackSky assumes no obligation to update forward-looking statements. In addition, during today’s call we will refer to certain non-GAAP financial measures, including adjusted EBITDA. A reconciliation of these non-GAAP measures to the most comparable GAAP measures is included in today’s earnings press release, which can be viewed and downloaded from our Investor Relations website. At this point, I’ll turn the call over to Brian O’Toole. Brian? Brian O’Toole: Thanks Aly, and good morning everyone. Thank you for joining us on today’s call.…

Thank you Brian, and good morning everyone. I would like to echo Brian’s message of how proud we are as a company to be supporting massive humanitarian efforts in Eastern Europe as refugees flee the conflict in Ukraine along with the critical support that we and others are giving to enable the Ukrainian people to defend their homeland. BlackSky is making a real difference in the world today and all our employees are very proud to be part of this effort. I am also particularly pleased to report that we started the year on a very strong financial note and have continued to make excellent progress in many aspects of our business. With that said, let’s jump right into our first quarter results. Revenues - increased customer demand for our imagery and analytic solutions drove record first quarter revenues of $13.9 million. This was a 91% increase year-over-year, our largest growth rate in nine quarters, or $6.6 million more revenue than Q1 a year ago. Imagery and software analytical services revenue grew to $7.4 million, driven primarily by new and existing government contracts as these important customers look to BlackSky to provide them with real-time intelligence and insights around the globe. The revenue mix for imagery and software analytical services rose to approximately 70% of total revenues, demonstrating the value customers place in our assured access, high frequency imaging and Spectra AI software platform capabilities. Also contributing to the increase in total revenues was higher engineering and systems integration revenue of $4.1 million, primarily driven by an increase in the percentage completion of certain satellite contracts for customers. Gross margins - strong demand for imagery and software analytical services, which is our highest margin revenue, drove gross margin excluding $801,000 of non-cash stock comp in this part of the business…

[Operator instructions] Thank you. Our first question from Scott Deuschle with Credit Suisse. Please proceed with your question.

Hey guys, good morning. Thanks for taking my questions. Brian O’Toole: Morning Scott.

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

Yes, sure. Thanks for the question. Starting with gross margins, we did see, as we said, an improvement in our gross margins which, frankly, was driven primarily by the increase we see in our high margin revenues, which are monitoring, analytics and imagery. Not unexpected given we’ve made investments into our software stack and into the satellite constellation, and it is our expectation, obviously, that as we drive those revenues higher, we would expect that the business will scale and margins will improve, which is what you do see. We expect that to continue, frankly. As long as we’re driving those revenues higher, we would expect to see higher gross margins over time and that’s how the business scales. You also asked, I believe, about growth in those areas. I’m actually going to pass that one over to Brian - I think he has a lot of good news in terms of our imagery and monitoring analytics, so Brian, if you want to talk about that, then we can come back to the other question he had. Brian O’Toole: Yes Scott, obviously we’ve been investing over the last eight years in our software and constellation, and now we’re moving into a phase of monetizing that capacity and seeing incremental high margin business come from the analytics that we also offer with the imagery. As we’re experiencing strong demand with the U.S. government and, as we’ve outlined, significant demand in the international markets across multiple regions, that’s driving this improving revenue and margin performance.

Got it.

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

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

Yes, so engineering integration is essentially where we go out and build out satellite constellations, bid on and build out satellite constellations and satellites for customers. It’s an entry point to provide them the services that come thereafter. That is--those tend to be large contracts and because of that, there are step functions up or down. It’s the nature of the game, and as I said, we do it for a number of reasons. One, we obviously have the expertise and the ability to do that; and secondly, it gives us the opportunity and the opening to follow on with management of constellation and providing additional imagery and analytical services.

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

Yes, I mean, they don’t have the same--they don’t carry the same margins as our imagery and analytical revenue, obviously, so from that perspective it’s dilutive to gross margin. But as I said, we believe it drives additional revenue and ultimately I think the way one has to look at the business is probably the sum of the parts. Certainly down the road we’ll see what opportunities present themselves in terms of what we do with that part of the business, but for right now, obviously it’s an important part of our revenue stream and it brings in cash flow, so we’ll continue to do that. Brian O’Toole: Scott, one thing I should add to that is, one, these are highly strategic programs, they align us very deeply with important customers; two, they offset R&D expenses and are funding advanced technologies that are interesting to those customers; and then three, they are typically bundled with our high margin services, so over time they will drive significant value into the company.

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

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

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

Yes, I think $10 million in comp is probably fairly--well, it’s coming down over time, but this year at the current run rate, as I said in my comments, there was about $900,000, $921,000 sitting in COGS, right, and then the remainder in SG&A. But I don’t worry too much, frankly, about non-cash comp. I think it’s something that over time will come down, and really it doesn’t impact our EBITDA, which is the thing we’re most focused on alongside revenue.

Got it, and is most of that comp related to prior equity grants and just the vesting over time, or is it new issuance? I’m just--on its face, it would look to be 7% dilutive per quarter if it was new issuance, so just trying to think about--sketch out dilution over time at the current [indiscernible]. Thanks.

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

Got it. Last question, Brian, just APAC revenues, I think they grew $1.5 billion year-over-year, so the business tripled or quadrupled. If you could talk a little bit more about the customers, who those customers might be and other kinds of services you guys are providing. I think that’ll be the question to close this out on, thanks. Brian O’Toole: Yes Scott, I’ll just say generally we are seeing growing interest and demand across a number of regions worldwide, including the Middle East, Northeast Asia, Southeast Asia, obviously in Europe. It’s driven by two major trends that we see. One is there’s more and more demand for monitoring strategic assets and critical assets in the world today, and then also especially around our capability where we can see throughout the day at very high frequencies, we’re able to contribute intelligence that a lot of these customers have not had before, that go beyond just using imagery for mapping. There is growing budgets across all of those regions, so as I said in my earlier remarks, we’re seeing ideal market conditions and timing for bringing our capacity and analytics into the market.

Okay, thanks everyone.

Thanks Scott.

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

Hey, good morning guys. [Indiscernible] commentary is suggesting that it’s a pretty constructive environment and your peers are talking about it being the best they’ve ever seen, so if you can maybe talk about what your placeholder for EOCL is in the 2022 guide and then what the aperture for growth looks like beyond that, and maybe split between U.S., international and commercial. Brian O’Toole: Sure, and good morning, Colin, thanks for your question. Yes, so as you know, EOCL is a very important contract program for us and we believe we’re well positioned to win a portion of that contract. As I’ve stated in the past, our contract was expanded last year and we are now integrated into the day-to-day operations of this contract, and we’ve been experiencing quarter-over-quarter growth in demand from that customer, so we feel we’re really well positioned for that contract. Also as I stated earlier, the government has indicated they’re working toward award this summer, so we have forecasted an award into our revenue forecast this year so we feel we’re really well positioned for that. To your second part of the question, the international demand that we’re seeing is growing very rapidly and we’re starting to see a lot of incoming from not only Tier 1 international ministries of defense governments, but a lot of Tier 2 and Tier 3 countries that are standing up geospatial intelligence and space-based capabilities for various applications within the government, so we’re very excited about what’s happening in that sector. In fact, we’ve been scaling our software--sorry, our sales teams and reseller network particularly to go capture that growing demand, and so that’s where you’re seeing we’re experiencing and what we’ve demonstrated is driving a lot of the growth in the quarter and what we see going forward. The other element of that is both in the U.S. and internationally, the shift of using small satellites for tactical ISR applications, which there is a growing number--the growing budgets there for capitalizing and using, leveraging the technology such as what BlackSky has developed for those new applications. So all in all, as I’ve emphasized, ideal market conditions and timing are what we’re seeing in the sector.

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

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

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

Yes, sure. We are obviously investing particularly in our sales team but also in the software stack. We’re doing that responsibly, and as we mentioned in the previous earnings call on the capex side, capex is significantly lower this year from what it is last year, and most of that is coming from a decline in our satellite investments. We’ve consistently said that with 14 satellites, we have at least two years--capacity for two years’ worth of revenue that we project. We continue to see that. We’ll allow the cadence of our satellite deployment and construction to be driven by customer demand, and so both of those things, expense run rates but in particular capex, are the same at or better than what we projected in the spec numbers, so we continue to be able to pull both those levers. The company has a history of being able to manage cost aggressively and we’ll continue to do that, but at the same time obviously we do have to invest into the organization to ensure we drive revenues as fast as possible, so we are going to do that prudently. Those are the two main levers we have in terms of preserving cash. As I mentioned, we have $138 million on the balance sheet, which is a sizeable amount, but we are in constant dialog, obviously, with our bankers and others to try and take whatever steps we deem to be necessary to manage the company for the long term in terms of liquidity.

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

Good morning. Brian O’Toole: Morning Josh.

Can you just provide some color on the longer life of the satellites you’re getting? What were the gating factors or gating life factors that you originally estimated that have now changed, and do you think that’s specific to BlackSky or do you think industry standards or components have just improved? Brian O’Toole: I think, Josh, when we started building these satellites years ago, we used the best available engineering estimates on the expected life, which we thought would be about three years. We now have our first two satellites, which will be approaching their four-year anniversary this fall, but also keep in mind, Josh, that we have implemented an agile space approach in our business where we’re constantly improving the satellites as we launch more over time within our manufacturing processes, so. At the time, we hadn’t had a lot of flight heritage, so we used very conservative estimates. Now we have 14 satellites that are operating, we’ve got over three years of experience, and we’re starting to see that we’re going to be able to squeeze expected longer life out of these than expected. I will say just industry wide, you typically will see estimates that are expected mission life, that end up being shorter than the actual life depending on each individual satellite, but we’re very pleased with where we are. It’s a great--it gives us a lot of optionality in the timing of when we deploy more satellites to replenish those, so we see and expect this trend to continue. It’s very favorable to our long term plan.

Then just on gen-3 to be launched in 2023, as we think about capex longer term, is there a large cost differential with gen-2, and maybe to frame it, what was the differential between gen-1 and gen-2? Brian O’Toole: I would say generally we have--we’ve kept in line the cost of these satellites between gen-2 and gen-3. It really demonstrates the opportunity with small satellite economics so that we’re seeing the type of improvements we’re making within the same cost basis. As we move from one metre to 35 to 50 cm with added--with an added IR capability and other features on the spacecraft such as onboard computing and space communication capabilities, really I think demonstrates that we’re going to be able to continue delivering significant value improvements to our customers over time within the same cost framework.

Maybe just lastly, a general market question. What does pricing look like, given you’ve got strong demand here with Ukraine driving other regions as well, but then you have competitor capacity announcements on the horizon and inflation. How does it all come together in the current pricing environment? Brian O’Toole: I think we’re seeing a favorable pricing environment, but we are, particularly in these market areas that we’ve outlined internationally, there is increasing demand for services from trusted suppliers while there is flat or diminished capacity in the market from legacy players. It’s favorable both in terms of pricing and demand for where we are right now.

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

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

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

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

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

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

Okay, fair enough. Question for you - I think with the gen-3, you mentioned a space communications capability. I’m assuming you were referring to some sort of a relay capability. Can you talk more about that? Brian O’Toole: Yes Chris, we’ve made provisions in the satellites to have a lot of flexibility and to space-to-space comms that can come from a variety of different networks. We’ve made those provisions on the satellite and--

Would that be focused primarily on a TT&C capability or actually a downlink for imagery, and if so, are you thinking more about RF or optical? Brian O’Toole: It’s primarily for TT&C because our primary objective is to reduce the timeline for our customers to task and receive imagery, so these are strategies to improve those operating timelines over time, especially for where we see the opportunity in the market around tactical ISR from space. As I mentioned, we have an agile platform that allows us to put different types of technologies in there as needed.

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

Great. While we’re talking about Leostella, when we look at the engineering services activities, is it fair to assume that that’s a joint activity with Leostella, and if so, how do you handle--is there a cost sharing arrangement around those engineering costs? Brian O’Toole: In some cases, we work with Leostella. Anything that we do with Leostella, even though we own the company, at least half of it, is done at arm’s length contracts. But we do align strategic investments on satellite capability that we can leverage together, so it’s an ideal partnership from that perspective and one that we’re leveraging very heavily across our business.

Great, and a follow-up--sorry?

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

Great. A follow-up question on EOCL. Historically that--well, I guess the enhanced view contract has run through September 30, and assuming that they do award a contract this summer, is it fair to assume that the contracts that you’ve seen are structured so that any new revenues associated with EOCL would kick in starting on September 1, or is there some sort of delay period that we might encounter before actual revenues associated with the program begin? Brian O’Toole: Well, one, we’re anticipating that contract would go in force right away. We’re already providing services to that customer and have been integrated with that customer, and so I don’t think September is a driver. I think it’s really just driven by the time of when they make the award and when they turn on the service, so, and we’re ready to start on day one.

Great, and a final question here, when you look at your pipeline, and I don’t know whether you can quantify it like this, what does your current breakdown look like between government, commercial and international, and how has that changed in the past year? Brian O’Toole: Well, I think the overall pipeline is growing driven by demand in all of those areas. As we have said, commercial is in its early days. It’s more the type of customers and the applications that we’re seeing emerge, so--and then as I’ve outlined, obviously U.S. government through EOCL, we’re seeing demand growing from NGA, as we’ve outlined through our work in our analytics as a service to the program we outlined, and then the tactical ISR market we see as early and expanding, but by far I think we see the biggest growth coming internationally both for imagery, geospatial analytics, and sovereign ISR capability.

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

Yes, I guess my question was regarding the pipeline, and it sounds like--I mean, you’ve said this throughout the call, it’s international.

For sure.

Actually, I do have one follow-up question just regarding in the current quarter, did you see a disproportionate share of, I guess what I’ll call one-time rather than contracted opportunity, you know, relative to what you’ve seen in the past and perhaps driven by Ukraine? Brian O’Toole: Well, what we’ve seen, Chris, is we have a very--so one, we saw a lot of increase in demand over that region for sure from both U.S., international and commercial customers. But two, we have flexible contracting relationships with these customers, so they can decide where they want to prioritize collections, so we give them that flexibility and we experienced that in the quarter. But as we outlined, the majority of our growth in the quarter came from outside of that European region due to the demand that we’re seeing in Asia-Pac and growing demand in the Middle East.

Great, thanks for all the detail. Brian O’Toole: Thank you Chris.

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

Hey guys, thanks for taking my questions. Just two really quick ones, and just following up on your comments on the international market and the momentum you’re seeing. When I look at the international pipeline or when you guys think about it, is it fair to say that the momentum here is outpacing what you guys would have thought 12 to 18 months ago? Brian O’Toole: Actually, we saw a lot of opportunity and demand in the international market. We are seeing it accelerate, and I think it’s really being driven by world events and the growing interest in the ability to leverage what can be done and has been demonstrated in space and analytics by companies like BlackSky. I think we’re seeing all of that coming together at the right time in the market. We’re also, as I’ve outlined, we’ve been investing heavily in expanding that sales team, and so now we’re getting a lot more insight and understanding how we can begin converting that demand into new business. The other thing I’ll point out, Jason, is that--and this has been a key part of our strategy from the very beginning, once you’re embedded and trusted in the operations of those customers, these tend to be long term recurring and growing relationships with these customers, and so that’s been part of our strategy from day one.

Okay, that’s helpful. Then just as a quick follow-up, obviously government procurement cycles in general are always lengthy, but the length that you’re seeing in the international markets, is it pretty comparable to what you’ve seen in the U.S. market? Brian O’Toole: I would say they’re different, but we understand each of them very well. We start--we have a land-and-expand strategy, so we are getting into initial--piloting an initial operating capability with these customers very quickly. We did that in the first quarter, and then once we’re in there and operational, those contracts tend to expand over time. You do have to work with them and plan for out-year budget cycles, which we do, but we understand that very well.

Okay, thanks a lot, guys. Brian O’Toole: Thanks Jason.

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

Hey guys. Most of my questions have been answered, so just two. For gen-3, do you anticipate keeping the same fleet size of around 14 satellites, or does that change? Then on the ground network side, I think we talked a lot about the spacecraft and the software, but are you still deploying gateways around the world, and especially with international customers, does that come with a need to deploy gateways in those countries? Brian O’Toole: Okay, let’s start with the constellation. Where we are today is we’ve achieved a 14 satellite baseline that gives us the baseline capacity and performance and revisit we need for the next couple years. Our plan has not changed toward an objective of 30 satellites. We’re going to begin deploying our gen-3 capability next year to replenish the aging of gen-2 capability and to start expansion, but we’ll expand the constellation to align with market demand, so our long term plans have not changed in terms of where we want to be, in terms of the number of satellites. We’re just highly aligned with the growth and capacity we need to do that. Then on the ground, the ground stations or gateways, as you refer, we’re adding a couple more to improve timeliness performance. Unlike others, we do not require our customers to buy hardware to do direct downlink or other tasking capabilities within their regions to achieve significant operational performance, so in some cases customers are interested in that and we’ll provide it, but for the most part our service is primarily through software and integrated that way.

All right, thank you.

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

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

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

Okay, and then the cost to run machine learning training, is that something you guys invested [indiscernible] in the past, or are you going through AWS? Are there not larger costs for that? Historically I thought that would be an expensive cost for an AI ML company. Thank you. Brian O’Toole: It’s included in our opex, but yes, we are investing heavily in software and have been expanding our data science and machine learning team to enhance and provide that type of--they do the training of algorithms, but because we are seeing more and more customers want analytics delivered with their data, and so--and then for us, that’s also pretty significant incremental margin off of the data, so we are continuing to invest very heavily in that.

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

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

Got it, thanks guys. That’s it.

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

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

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