BlackSky Reports Fourth Quarter and Full Year 2022 Results

Full Year Revenue of $65.4 million, at High-End of Guidance, up 92% from Prior Year

Company Provides Full Year 2023 Outlook

BlackSky Technology Inc. (“BlackSky” or the “Company”) (NYSE: BKSY) announced results for the fourth quarter and full year ended December 31, 2022.

Fourth Quarter Financial Highlights:

  • Revenue of $19.4 million, up 69% from the prior year period
  • Imagery & software analytical services revenue grew 196% over the prior year's quarter
  • Capital expenditures of $9.7 million

Full Year Financial Highlights:

  • Revenue of $65.4 million, up 92% compared to the prior year
  • Imagery & software analytical services revenue grew 209% over the prior year
  • Capital expenditures of $44.1 million

“2022 was a foundational year for BlackSky, we won up to $1.3 billion in multi-year contracts, nearly doubled revenues to $65.4 million, and demonstrated significant margin performance; this high level of execution has put us on a path to achieving positive adjusted EBITDA in Q4 of 2023,” said Brian E. O’Toole, BlackSky CEO. “Increased customer demand worldwide for BlackSky’s dynamic monitoring and analytic solutions drove record revenues in the fourth quarter growing 69% year-over-year to $19.4 million. In addition, we’ve successfully scaled our operations and are now delivering thousands of high-resolution images reliably each day with AI-driven analytics to customers around the world. I want to thank our team for all their hard work and dedication that enabled us to achieve all these milestones. We look forward to another strong year of execution and carrying this strong momentum into 2023.”

Recent Highlights

The Company is announcing the award of a $150+ million, multi-year subscription contract with a major international ministry of defense. BlackSky will provide this customer with next generation space-based tactical geospatial intelligence services to support their country’s most critical intelligence needs. Further details can be found in a separate press release. BlackSky is proud to support this international government customer to provide them with a tactical advantage to support their mission operations. With this contract, the Company’s multi-year backlog increases to over $250 million.

In addition, the Company announced a private placement of approximately $29.5 million from a syndicate of new and existing institutional investors, further strengthening the balance sheet. BlackSky intends to use the net proceeds from the transaction for general corporate purposes and investments in its space and software platforms.

Financial Results

Revenues(1)

Total revenue for the fourth quarter of 2022 was $19.4 million, up $7.9 million, or 69%, from the fourth quarter of 2021. Imagery and software analytical services revenue was $16.2 million, up 196% over the prior year period primarily driven by increased demand from new and existing U.S. and international government customers. Professional and engineering services revenue contributed $3.3 million in the fourth quarter of 2022.

For the full year 2022, total revenue was $65.4 million, up $31.3 million, or 92% from 2021. Imagery and software analytical services revenue was $47.4 million, up $32.1 million, or 209% over the prior year period primarily driven by several new government and international contract awards.

Cost of Sales(1)(2)

Cost of sales as a percent of revenue was 40% for the fourth quarter of 2022, compared to 89% in the fourth quarter of 2021. Imagery and software analytical services cost of sales as a percent of revenue was 24% in the fourth quarter of 2022, compared to 70% in the fourth quarter of 2021. The year-over-year improvement was primarily driven by greater volumes of imagery and analytical services revenue that inherently have a low fixed-cost structure as a percent of revenue and a decrease in stock-based compensation expense. Cost of sales excludes depreciation and amortization expense.

For the full year 2022, cost of sales as a percent of revenue was 55%, compared to 102% in 2021, with sequential improvements reported each quarter throughout 2022.

Operating Expenses

Operating expenses for the fourth quarter of 2022 were $30.0 million, which included $3.3 million of non-cash stock-based compensation expense, compared to operating expenses of $33.2 million in the fourth quarter of 2021, which included $12.1 million in non-cash stock-based compensation expense. Excluding stock-based compensation expense from both years, operating expenses increased to $26.7 million in the fourth quarter of 2022 from $21.1 million in the prior year quarter. Of the $5.6 million year-over-year increase, $5.0 million was due to higher depreciation expense.

For the full year 2022, operating expenses were $116.1 million, which included $18.1 million of non-cash stock-based compensation expense. For the full year 2021, operating expenses were $119.5 million, which included $38.5 million in non-cash stock-based compensation expense and $18.4 million in satellite impairment charges. Excluding the stock-based compensation expense from both years and the satellite impairment loss in 2021, operating expenses in 2022 were $97.9 million compared to $62.6 million in the prior year. Of the $35.3 million year-over-year increase, $21.4 million was due to higher depreciation expense, with the remaining increase due primarily to investments in sales, software, and artificial intelligence and a full year of public company operating costs.

Operating Loss

Operating loss for the fourth quarter of 2022 was $18.3 million, compared to an operating loss of $31.9 million in the fourth quarter of 2021. The year-over-year improvement was primarily a result of higher gross profit driven by increased imagery and software analytical services revenue, as well as a decrease in stock-based compensation expense, partially offset by higher depreciation expense.

For the full year 2022, operating loss was $86.5 million, compared to an operating loss of $120.1 million in 2021. The year-over-year improvement was primarily driven by higher gross profit, a one-time satellite impairment charge in 2021, and a decrease in stock-based compensation expense, partially offset by higher depreciation expense.

Adjusted EBITDA(3)

Adjusted EBITDA loss for the fourth quarter of 2022 was $4.6 million, compared to an adjusted EBITDA loss of $14.4 million in the prior year quarter. The $9.8 million year-over-year improvement was primarily a result of strong operating leverage achieved by increased revenue growth that significantly exceeded incremental costs.

For the full year 2022, Adjusted EBITDA loss was $29.5 million, compared to an Adjusted EBITDA loss of $44.4 million in 2021. The year-over-year improvement was primarily driven by strong operating leverage achieved by increased revenue growth that significantly exceeded incremental costs.

Balance Sheet & Capital Expenditures

As of December 31, 2022, cash and cash equivalents, restricted cash, and short-term investments totaled $75.0 million. Capital expenditures for the fourth quarter of 2022 were $9.7 million and for the full year 2022 totaled $44.1 million.

2023 Outlook

BlackSky expects full year 2023 revenue to be between $90 million and $96 million, a 42% increase over 2022 revenue at the mid-point of this range. With strong revenue growth, high incremental contribution margins, and prudent cost management, the Company anticipates achieving positive Adjusted EBITDA in the fourth quarter of 2023. In addition, the Company expects capital expenditures for the full year 2023 to be between $40 million and $45 million.

(1) Effective January 1, 2022, the Company reorganized its classification on the consolidated statements of operations and comprehensive loss to better align the Company’s broad portfolio. As a result, the prior period amounts presented to reflect the impact of the reorganization have been recast.

(2) Cost of sales is defined as imagery and software analytical services costs and professional and engineering services cost, less depreciation and amortization.

(3) Non-GAAP financial measure. See “Non-GAAP Financial Measures” below and reconciliation table at the end of this release.

Investment Community Conference Call

BlackSky will host a conference call and webcast for the investment community this morning at 8:30 AM ET. Senior management will review the results, discuss BlackSky’s business, and answer questions. To access the live webcast or the archived webcast following completion of the call, please visit the Company’s investor relations website at http://ir.blacksky.com and then select “News & Events” for the link to the webcast. A presentation accompanying the webcast can also be found on the investor relations website. To access the conference call, participants should dial 1-877-589-7299 (domestic) or 1-201-689-8778 (international) at least ten minutes prior the start of the call. To listen to a replay of the conference call, please dial 1-877-660-6853 or 1-201-612-7415 using access code 13736553. The audio replay will be available from approximately 12:30 PM ET on March 7, 2023, through March 21, 2023.

About BlackSky Technology Inc.

BlackSky is a leading provider of real-time geospatial intelligence. BlackSky delivers on-demand, high frequency imagery, monitoring and analytics of the most critical and strategic locations, economic assets and events in the world.

BlackSky designs, owns and operates one of the industry’s leading low earth orbit small satellite constellations, optimized to capture imagery cost-efficiently where and when our customers need it. BlackSky’s Spectra AI software platform processes data from BlackSky’s constellation and from other third-party sensors to develop the critical insights and analytics that our customers require.

BlackSky is relied upon by U.S. and international government agencies, commercial businesses, and organizations around the world. BlackSky is headquartered in Herndon, VA, and is publicly traded on the New York Stock Exchange as BKSY. To learn more, visit www.blacksky.com and follow us on Twitter.

Non-GAAP Financial Measures

Adjusted EBITDA is defined as net income or loss attributable to BlackSky before interest income, interest expense, income taxes, depreciation and amortization, as well as significant non-cash and/or non-recurring expenses as our management believes these items are not as useful in evaluating the Company’s core operating performance. These items include, but are not limited to, realized loss on conversion of bridge notes, stock-based compensation expense, unrealized (gain) loss on certain warrants/shares classified as derivatives, satellite impairment loss, proceeds from an earnout payment, gain on debt extinguishment, (gain) loss from discontinued operations, net of income taxes, severance, income on equity method investment, transaction-related legal settlements, and transaction costs associated with equity instruments accounted for as derivative liabilities.

Adjusted EBITDA is a non-GAAP financial performance measure. It should not be considered in isolation or as an alternative to measures determined in accordance with GAAP. Please refer to the schedule herein and our SEC filings for a reconciliation of Adjusted EBITDA to Net Loss, the most comparable measure reported in accordance with GAAP and for a discussion of the presentation, comparability, and use of Adjusted EBITDA.

Forward-Looking Statements

Certain statements and other information included in this release constitute forward-looking statements under applicable securities laws. Words such as "may", "will", "could", "should", "would", "plan", "potential", "intend", "anticipate", "believe", "estimate", "future", "opportunity", "will likely result", or "expect" and other words, terms, and phrases of similar meaning are often intended to identify forward-looking statements, although not all forward-looking statements contain these identifying words. Forward-looking statements involve estimates, expectations, projections, goals, forecasts, assumptions, risks, and uncertainties, as well as other statements referring to or including forward-looking information included in this release.

Forward-looking statements are subject to various risks and uncertainties, which could cause actual results to differ materially from the anticipated results or expectations expressed in this release. As a result, although BlackSky's management believes that the expectations and assumptions on which such forward-looking statements are based are reasonable, undue reliance should not be placed on the forward-looking statements because BlackSky can give no assurance that they will prove to be correct. The risks that could cause actual results to differ materially from current expectations include, but are not limited to, the risk factors and other disclosures about BlackSky and its business included in BlackSky's disclosure materials filed from time to time with the U.S. Securities and Exchange Commission ("SEC"), which are available on the SEC's website at www.sec.gov or on BlackSky's Investor Relations website at ir.blacksky.com.

The forward-looking statements contained in this release are expressly qualified in their entirety by the foregoing cautionary statements. All such forward-looking statements are based upon data available as of the date of this release or other specified date and speak only as of such date. BlackSky disclaims any intention or obligation to update or revise any forward-looking statements in this release as a result of new information or future events, except as may be required under applicable securities law.

BLACKSKY TECHNOLOGY INC.

CONSOLIDATED STATEMENTS OF OPERATIONS

AND COMPREHENSIVE (LOSS) INCOME

(unaudited)

(in thousands, except per share amounts)

 

Three Months Ended December 31,

 

Years Ended December 31,

 

2022

 

2021

 

2022

 

2021

Revenue

 

 

 

 

 

 

 

Imagery & software analytical services

$

16,166

 

 

$

5,454

 

 

$

47,415

 

 

$

15,365

 

Professional & engineering services

 

3,251

 

 

 

6,035

 

 

 

17,935

 

 

 

18,720

 

Total revenue

 

19,417

 

 

 

11,489

 

 

 

65,350

 

 

 

34,085

 

Costs and expenses

 

 

 

 

 

 

 

Imagery & software analytical service costs, excluding depreciation and amortization

 

3,925

 

 

 

3,830

 

 

 

14,462

 

 

 

13,013

 

Professional & engineering service costs, excluding depreciation and amortization

 

3,783

 

 

 

6,348

 

 

 

21,365

 

 

 

21,735

 

Selling, general and administrative

 

20,222

 

 

 

28,676

 

 

 

79,672

 

 

 

86,655

 

Research and development

 

290

 

 

 

27

 

 

 

739

 

 

 

112

 

Depreciation and amortization

 

9,495

 

 

 

4,502

 

 

 

35,661

 

 

 

14,306

 

Satellite impairment loss

 

 

 

 

 

 

 

 

 

 

18,407

 

Operating loss

 

(18,298

)

 

 

(31,894

)

 

 

(86,549

)

 

 

(120,143

)

Gain on debt extinguishment

 

 

 

 

4,134

 

 

 

 

 

 

4,059

 

Gain on derivatives

 

1,183

 

 

 

35,047

 

 

 

11,812

 

 

 

23,885

 

Income on equity method investment

 

1,222

 

 

 

234

 

 

 

1,916

 

 

 

1,027

 

Interest income

 

452

 

 

 

 

 

 

1,116

 

 

 

 

Interest expense

 

(1,669

)

 

 

(1,502

)

 

 

(5,425

)

 

 

(5,165

)

Other income (expense), net

 

2,135

 

 

 

4

 

 

 

2,081

 

 

 

(147,656

)

(Loss) gain before income taxes

 

(14,975

)

 

 

6,023

 

 

 

(75,049

)

 

 

(243,993

)

Income tax (expense) benefit

 

 

 

 

 

 

 

 

 

 

 

(Loss) income from continuing operations

 

(14,975

)

 

 

6,023

 

 

 

(75,049

)

 

 

(243,993

)

Discontinued operations:

 

 

 

 

 

 

 

(Loss) gain from discontinued operations

 

 

 

 

(628

)

 

 

707

 

 

 

(1,650

)

Income tax (expense) benefit

 

 

 

 

 

 

 

 

 

 

 

(Loss) gain from discontinued operations, net of income taxes

 

 

 

 

(628

)

 

 

707

 

 

 

(1,650

)

Net (loss) income

 

(14,975

)

 

 

5,395

 

 

 

(74,342

)

 

 

(245,643

)

Other comprehensive income

 

 

 

 

 

 

 

 

 

 

 

Total comprehensive (loss) income

$

(14,975

)

 

$

5,395

 

 

$

(74,342

)

 

$

(245,643

)

 

 

 

 

 

 

 

 

Basic and diluted (loss) income per share of common stock:

 

 

 

 

 

 

 

(Loss) income from continuing operations

$

(0.13

)

 

$

0.05

 

 

$

(0.64

)

 

$

(3.37

)

(Loss) gain from discontinued operations, net of income taxes

 

 

 

 

(0.01

)

 

 

0.01

 

 

 

(0.02

)

Net (loss) income per share of common stock

$

(0.13

)

 

$

0.04

 

 

$

(0.63

)

 

$

(3.39

)

 

 

 

 

 

 

 

 

Weighted average common shares outstanding - basic and diluted

 

119,064

 

 

 

113,645

 

 

 

117,821

 

 

 

72,462

 

Note: Effective January 1, 2022, the Company reorganized its classification on the consolidated statements of operations and comprehensive loss to better align the Company’s broad portfolio. As a result, the prior period amounts presented to reflect the impact of the reorganization have been recast.

BLACKSKY TECHNOLOGY INC.

CONSOLIDATED BALANCE SHEETS

(unaudited)

(in thousands, except par value)

 

 

December 31,

 

December 31,

 

2022

 

2021

Assets

 

 

 

Current assets:

 

 

 

Cash and cash equivalents

$

34,181

 

 

$

165,586

 

Restricted cash

 

2,835

 

 

 

2,518

 

Short-term investments

 

37,982

 

 

 

 

Accounts receivable, net of allowance of $0 and $39, respectively

 

3,112

 

 

 

2,629

 

Prepaid expenses and other current assets

 

4,713

 

 

 

6,264

 

Contract assets

 

5,706

 

 

 

1,678

 

Total current assets

 

88,529

 

 

 

178,675

 

Property and equipment - net

 

71,584

 

 

 

70,551

 

Operating lease right of use assets - net

 

3,586

 

 

 

 

Goodwill

 

9,393

 

 

 

9,393

 

Investment in equity method investees

 

5,114

 

 

 

4,002

 

Intangible assets - net

 

1,918

 

 

 

2,480

 

Satellite procurement work in process

 

50,954

 

 

 

40,102

 

Other assets

 

2,841

 

 

 

560

 

Total assets

$

233,919

 

 

$

305,763

 

Liabilities and stockholders’ equity

 

 

 

Current liabilities:

 

 

 

Accounts payable and accrued liabilities

$

14,367

 

 

$

10,837

 

Amounts payable to equity method investees

 

3,728

 

 

 

5,613

 

Contract liabilities - current

 

6,783

 

 

 

11,266

 

Other current liabilities

 

2,048

 

 

 

2,819

 

Total current liabilities

 

26,926

 

 

 

30,535

 

Liability for estimated contract losses

 

714

 

 

 

6,054

 

Long-term contract liabilities

 

109

 

 

 

568

 

Operating lease liabilities

 

3,132

 

 

 

 

Derivative liabilities

 

5,113

 

 

 

16,925

 

Long-term debt - net of current portion

 

76,219

 

 

 

71,408

 

Other liabilities

 

2

 

 

 

653

 

Total liabilities

 

112,215

 

 

 

126,143

 

Stockholders’ equity:

 

 

 

Class A common stock, $0.0001 par value-authorized, 300,000 shares; issued, 121,938 and 117,160 shares; outstanding, 119,508 shares and 114,452 shares as of December 31, 2022 and 2021, respectively.

 

12

 

 

 

11

 

Additional paid-in capital

 

666,973

 

 

 

650,518

 

Accumulated deficit

 

(545,281

)

 

 

(470,909

)

Total stockholders’ equity

 

121,704

 

 

 

179,620

 

Total liabilities and stockholders’ equity

$

233,919

 

 

$

305,763

 

BLACKSKY TECHNOLOGY INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(unaudited)

(in thousands)

 

 

Years Ended December 31,

 

2022

 

2021

Cash flows from operating activities:

 

 

 

Net loss

$

(74,342

)

 

$

(245,643

)

Gain (loss) from discontinued operations, net of income taxes

 

707

 

 

 

(1,650

)

Loss from continuing operations

 

(75,049

)

 

 

(243,993

)

Adjustments to reconcile net loss to net cash used in operating activities:

 

 

 

Depreciation and amortization expense

 

35,661

 

 

 

14,306

 

Operating lease right of use assets amortization

 

1,640

 

 

 

 

Gain on debt extinguishment

 

 

 

 

(4,059

)

Bad debt (recovery) expense

 

(22

)

 

 

58

 

Stock-based compensation expense

 

20,025

 

 

 

42,571

 

Loss on issuance of 2021 convertible Bridge Notes

 

 

 

 

99,669

 

Issuance costs for derivative liabilities and debt carried at fair value

 

 

 

 

48,009

 

Amortization of debt discount and issuance costs

 

1,805

 

 

 

1,807

 

Gain on equity method investment

 

(1,916

)

 

 

(1,027

)

Loss on disposal of property and equipment

 

 

 

 

24

 

Gain on derivatives

 

(11,812

)

 

 

(23,885

)

Satellite impairment loss

 

 

 

 

18,407

 

Interest income

 

(656

)

 

 

 

Other, net

 

106

 

 

 

 

Changes in operating assets and liabilities:

 

 

 

Accounts receivable

 

(461

)

 

 

216

 

Contract assets - current and long-term

 

(5,996

)

 

 

2,118

 

Prepaid expenses and other current assets

 

1,413

 

 

 

(5,207

)

Other assets

 

(12

)

 

 

(309

)

Accounts payable and accrued liabilities

 

(75

)

 

 

2,543

 

Other current liabilities

 

(1,180

)

 

 

(2,680

)

Contract liabilities - current and long-term

 

(4,942

)

 

 

(5,262

)

Liability for estimated contract losses

 

(5,340

)

 

 

(198

)

Other liabilities

 

2,355

 

 

 

3,020

 

Net cash used in operating activities

 

(44,456

)

 

 

(53,872

)

Cash flows from investing activities:

 

 

 

Purchase of property and equipment

 

(11,677

)

 

 

(1,266

)

Satellite procurement work in process

 

(32,385

)

 

 

(62,643

)

Purchase of short-term investments

 

(50,343

)

 

 

 

Proceeds from maturities of short-term investments

 

13,000

 

 

 

 

Purchase of domain name

 

 

 

 

(7

)

Proceeds from equity method investment

 

804

 

 

 

302

 

Cash flows used in investing activities - continuing operations

 

(80,601

)

 

 

(63,614

)

Cash flows used in investing activities - discontinued operations

 

(978

)

 

 

 

Net cash used in investing activities

 

(81,579

)

 

 

(63,614

)

Cash flows from financing activities:

 

 

 

Proceeds from recapitalization transaction, net of payment of equity issuance costs

 

 

 

 

244,880

 

Payments of transaction costs related to Sponsor Shares

 

 

 

 

(291

)

Proceeds from issuance of debt

 

 

 

 

58,573

 

Proceeds from options exercised

 

47

 

 

 

130

 

Proceeds from warrants exercised

 

 

 

 

163

 

Capital lease payments

 

 

 

 

(2

)

Debt payments

 

 

 

 

(22,198

)

Payments for deferred offering costs

 

(31

)

 

 

 

Payments for debt issuance costs

 

 

 

 

(6,238

)

Withholding tax payments on vesting of restricted stock units

 

(5,069

)

 

 

 

Net cash (used in) provided by financing activities

 

(5,053

)

 

 

275,017

 

Net (decrease) increase in cash, cash equivalents, and restricted cash

 

(131,088

)

 

 

157,531

 

Cash, cash equivalents, and restricted cash – beginning of year

 

168,104

 

 

 

10,573

 

Cash, cash equivalents, and restricted cash – end of period

$

37,016

 

 

$

168,104

 

BLACKSKY TECHNOLOGY INC.

RECONCILIATION OF NET LOSS TO ADJUSTED EBITDA

(unaudited)

(in thousands)

 

Three Months Ended December 31,

 

Years Ended December 31,

 

2022

 

2021

 

2022

 

2021

Net loss

$

(14,975

)

 

$

5,395

 

 

$

(74,342

)

 

$

(245,643

)

Interest income

 

(452

)

 

 

 

 

 

(1,116

)

 

 

 

Interest expense

 

1,669

 

 

 

1,502

 

 

 

5,425

 

 

 

5,165

 

Depreciation and amortization

 

9,495

 

 

 

4,502

 

 

 

35,661

 

 

 

14,306

 

Loss on issuance of Bridge Notes, including debt issuance costs expensed for debt carried at fair value

 

 

 

 

 

 

 

 

 

 

147,387

 

Stock-based compensation expense

 

3,636

 

 

 

13,306

 

 

 

20,025

 

 

 

42,571

 

Gain on derivatives

 

(1,183

)

 

 

(35,047

)

 

 

(11,812

)

 

 

(23,885

)

Satellite impairment loss

 

 

 

 

 

 

 

 

 

 

18,407

 

Proceeds from earn-out payment

 

(2,000

)

 

 

 

 

 

(2,000

)

 

 

 

Loss (gain) from discontinued operations, net of income taxes

 

 

 

 

628

 

 

 

(707

)

 

 

1,650

 

Severance

 

435

 

 

 

 

 

 

1,196

 

 

 

 

Income on equity method investment

 

(1,222

)

 

 

(234

)

 

 

(1,916

)

 

 

(1,027

)

Forgiveness of non-trade receivables

 

 

 

 

 

 

 

106

 

 

 

 

Contingent legal liability

 

 

 

 

(301

)

 

 

 

 

 

399

 

Transaction costs associated with derivative liabilities

 

 

 

 

 

 

 

 

 

 

291

 

Gain on debt extinguishment

 

 

 

 

(4,134

)

 

 

 

 

 

(4,059

)

Adjusted EBITDA

$

(4,597

)

 

$

(14,383

)

 

$

(29,480

)

 

$

(44,438

)

 

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