BlackSky Technology Inc. 2026 Q2 Earnings Call

Aly, 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, Henry Dubois. On today's call, Brian will provide some highlights on the quarter and give a strategic update on the business. Henry will then review the company's financial results and outlook for 2026. Following our prepared remarks, we will open the line for your questions. A replay of this conference call will be available later today. 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. In conjunction with today's call, we have posted a quarterly earnings presentation on the investor relations website that you may use to follow along with our prepared remarks.

Before we begin, let me remind you that we will make forward-looking statements during today's conference call, including statements about our plans, objectives, and future outlook. Actual results may differ materially as these statements are based on our current expectations as of today and are subject to risks and uncertainties, including those stated in our Form 10-K and SEC filings. BlackSky assumes no obligation to update forward-looking statements except as may be required by applicable law. In addition, during today's call, we will refer to certain non-GAAP financial measures, including adjusted EBITDA and cash operating expenses. Definitions and reconciliations between our GAAP and non-GAAP results are included in our earnings press release and presentation, which are posted on our investor relations website. At this point, I'll turn the call over to Brian O'Toole.

Brian? Thanks, Aly, and good morning, everyone.

Thank you for joining us on today's call. Beginning with slide three, I'm happy to report that the second quarter delivered strong operating performance and growing business momentum. The exceptional performance of Gen-3 is driving increasing customer demand and strong sales growth across all aspects of our business. This quarter marked an important milestone as Gen-3 imagery services began to scale and accelerate significant top-line revenue and bottom-line earnings growth. We have now unlocked a phase of rapid growth driven by a growing backlog and strong visibility from multi-year subscription contracts for our high-margin space-based intelligence and AI services. We are well-positioned to maintain this momentum and deliver a strong second half of the year while capturing new opportunities to continue this growth trajectory in 2027, which has us on a path towards sustainable long-term profitable growth. Turning to slide four. Behind our growing momentum is the success of Gen-3.

Our Gen-3 satellites continue to exceed expectations and are consistently delivering exceptional 35-centimeter imaging performance. Our space-based intelligence and sovereign mission solutions are rapidly becoming an essential capability for major customers around the world at a time when real-time space-based intelligence is critical to national security imperatives. With over a year of on-orbit operating performance, Gen-3 is a proven best-in-class space vehicle delivering high-quality imagery, operational agility, and scalability at about a fifth the cost of legacy platforms. We are successfully leveraging the superior technology, cost, and performance advantages of Gen-3 as a major differentiator, fueling TAM expansion opportunities and multiple growth vectors that span each of the elements of our business.

First, the very high-resolution imagery from our Gen-3 constellation, combined with low latency delivery and real-time AI insights from our Spectra platform, is driving high-quality revenue growth in our space-based intelligence and AI subscription services. Second, the proven on-orbit performance and unit economics of Gen-3 satellites are an attractive high-performance, low-risk option for customers seeking to accelerate their sovereign space-based intelligence capabilities. Third, the Gen-3 architecture offers a proven technology platform that can be expanded and leveraged to accelerate the development of next-generation space systems. We are winning major new advanced technology programs from customers that are seeking to rapidly develop and deploy advanced base capabilities. Our capital-efficient approach to advancing our edge in space is delivering strong operating results as Gen-3 related products and services are winning in the market and driving 90% of our growth at attractive margins. Moving to slide five. With a rapidly changing global landscape, now more than ever, real-time space-based intelligence is an essential element of national security.

Tactical and autonomous space sensors, combined with AI, are fueling major economic growth opportunities as space has transitioned from a niche set of capabilities to an emerging growth industry. For major governments and enterprises around the world, sovereign space capabilities are no longer an option, but a necessity. BlackSky saw this opportunity years ago before the need for tactical space-based intelligence emerged as a critical layer in our customers' defense technology stack. We have developed a vertically integrated and purpose-built platform to meet this moment in the market. The execution of that vision is now translating into numerous growth opportunities for the company and driving top and bottom-line performance. Now let me turn to key highlights from the quarter. Moving to slide six. When we entered 2026, we expected to unlock a phase of strong growth as we scaled and brought Gen-3 related offerings to market.

In Q2, we hit that inflection point and are proud to report strong operating results driven by focused execution in the first half of the year. First, total revenues in Q2 grew 50% year-over-year, driven by record space-based intelligence and AI services revenue. Second, we delivered significant positive adjusted EBITDA growth unlocked by high-margin Gen-3 imaging services revenue. Third, we secured up to $200 million in year-to-date bookings and continued to increase our contract backlog and our revenue visibility. Fourth, we continued to diversify our customer base and grew revenues from our international customers by 200% over the prior period.

Finally, we significantly strengthened our balance sheet and cash position through a successful $150 million capital raise, increasing our total liquidity to over $325 million. With this strong start to the year, we are well-positioned to sustain this growth through the second half of the year and beyond. Let's move on to key highlights from each of the three elements of our business. Turning to slide seven and our space-based intelligence and AI services. Gen-3 adoption, combined with a major step-up in imagery subscription contracts, was a key driver to delivering 50% sequential growth in this part of the business. During the quarter, we hit an important milestone, achieving a $100 million annual run rate for our high-margin imagery and AI subscription services.

This was a major achievement as this revenue hurdle begins to accelerate incremental earnings growth, as evidenced by the positive adjusted EBITDA performance we delivered during the quarter. We are achieving this operating leverage by combining a right-sized constellation with high-quality satellites and imaging capability. This strategy results in a highly optimized and capital-efficient model to deliver strong revenue and earnings growth and significant returns on invested capital. As you can see from our Q2 performance, we're delivering 14% adjusted EBITDA margins on $33 million of revenue driven by our high-performing constellation. We have a business model that is working with high-performing small satellites that provide strong operating leverage, which we can scale efficiently to meet demand and rapidly launch new capacity as needed, commensurate with the needs of our customers and the business.

Our superior Gen-3 technology, combined with our industry-leading intelligence platform, enables us to meet mission-critical customer needs for real-time tactical intelligence in a rapidly changing global environment. As a result, we are continuing to see strong demand internationally, as evidenced by 150% year-over-year growth in international subscription revenues. Multi-year international contracts for space-based intelligence subscription services now comprise over 80% of our total funded backlog. We expect this momentum to continue as new customers adopt Gen-3 services and current customers expand existing contracts to take advantage of growing Gen-3 capacity, improving latency, and revisit performance. Moving on to slide eight. We are continuing to successfully scale our Gen-3 production operations to support the delivery of Gen-3 satellites for the expansion of our commercial constellation while meeting delivery milestones for a number of sovereign Mission Solutions programs.

Our next two satellites in our commercial constellation are on track for launch in Q3. Despite some launch-related delays, we remain on track with our deployment plans to have eight Gen-3 satellites on orbit by the end of the year. As a reminder, we do not require any additional Gen-3 satellites to hit our 2026 revenue targets. We have a pipeline of over 20 Gen-3 satellites underway and are scaling production of these satellites to support future capacity demands and anticipated expansion of the Mission Solutions business. Let's turn to Mission Solutions on slide nine. We are continuing strong execution across our portfolio of key Mission Solutions programs, as evidenced by ongoing revenue growth from this part of the business.