Blacksky Technology Inc. annual report, FY2023

BlackSky Technology Inc. — FY2023 Form 10-K Summary

Reporting period: Fiscal year ended December 31, 2023. Although the request references 2023 Q4, this filing is an annual Form 10-K and the provided text does not include separate fourth-quarter financial results.

Business context

BlackSky operates a space-based intelligence business combining a high-revisit low-Earth-orbit satellite constellation with the BlackSky Spectra software platform. It provides real-time imagery, data, analytics, monitoring, professional services, and satellite-related engineering services, primarily to U.S. and international government and defense customers.

  • The company operated 279 employees as of December 31, 2023.
  • Revenue is generated through imagery and software analytical services and professional and engineering services.
  • BlackSky owns 50% of LeoStella, its satellite manufacturing joint venture with Thales Alenia Space.
  • Management expected to launch the first Gen-3 satellites in 2024, with enhanced resolution, short-wave infrared capability, and faster data communications.

Financial performance and key metrics

MetricFY2023FY2022Change
Total revenue$94.5 million$65.4 million+44.6%
Imagery and software analytical services$65.4 million$47.4 million+37.9%
Professional and engineering services$29.1 million$17.9 million+62.3%
Direct costs, excluding depreciation and amortization$33.8 million$35.8 million-5.7%
Operating loss$(56.0) million$(86.5) millionImproved by $30.6 million
Net loss$(53.9) million$(74.2) millionImproved by $20.3 million
Adjusted EBITDA$(1.0) million$(29.5) millionImproved by $28.5 million
Basic and diluted loss per share$(0.40)$(0.63)Improved by $0.23

Margins: Direct-cost gross margin was approximately 64.2% in 2023 versus 45.2% in 2022, based on revenue less imagery/software and professional/engineering service costs and excluding depreciation and amortization. Operating margin was approximately negative 59.2%, net margin approximately negative 57.0%, and Adjusted EBITDA margin approximately negative 1.1% in 2023.

  • Depreciation and amortization increased 21.8% to $43.4 million, largely due to more satellites in service, capitalized software, and new office buildout.
  • Selling, general and administrative expense declined 8.9% to $72.6 million, primarily because stock-based compensation fell $8.0 million following elevated 2022 vesting activity.
  • Interest expense increased 71.5% to $9.3 million after the debt amendment increased the effective interest rate.
  • Non-cash derivative gains were $7.7 million, down from $11.8 million in 2022.
  • 2023 equity-method investment income included a $9.5 million gain from the sale of the company’s X-Bow investment.

Cash flow, liquidity, debt, and capital resources

MetricDecember 31, 2023December 31, 2022
Cash and cash equivalents, excluding restricted cash$32.8 million$34.2 million
Restricted cash$0.6 million$2.8 million
Short-term investments$19.7 million$38.0 million
Total short-term liquidity, including restricted cash$53.1 millionNot clearly stated as a combined figure
Long-term debt, net$83.5 million$76.2 million
Accumulated deficit$599.0 million$545.1 million
  • Net cash used in operating activities was $17.4 million, compared with $44.5 million in 2022.
  • Net cash used in investing activities was $15.2 million, including $43.7 million of capital expenditures, partially offset by proceeds from short-term investment maturities and the X-Bow sale.
  • Net cash provided by financing activities was $29.1 million, including proceeds from equity issuances.
  • Capital expenditures included $28.4 million for satellite procurement work in process and $15.3 million for property and equipment.
  • In March 2023, BlackSky raised $29.4 million of gross proceeds in a private placement of 16.4 million shares and accompanying warrants. It also raised $5.0 million gross under its ATM program, leaving up to $70.0 million available under the $75.0 million authorization at year-end.
  • The related-party debt facility had an outstanding principal balance of $84.6 million, an effective interest rate of approximately 12.23% to 12.57%, and a maturity date of October 31, 2026. The facility is secured by substantially all company assets.
  • Debt covenants require minimum cash and cash equivalents of $10.0 million and future minimum trailing-four-quarter Adjusted EBITDA thresholds of $5.0 million beginning in 2024 and $10.0 million beginning in late 2025. The company reported compliance at December 31, 2023.
  • A launch financing agreement provides for a $3.0 million initial payment and up to $27.0 million of additional financing tied to launches, bearing interest at 12.6%; no amount had been drawn or accrued at year-end.

Material changes versus FY2022

  • Revenue accelerated, led by increased imagery and analytics orders, new subscription contracts, and international government engineering contracts.
  • Operating loss and Adjusted EBITDA loss narrowed materially, although the company remained unprofitable and cash-flow negative.
  • Revenue mix shifted toward professional and engineering services, which increased to 30.8% of total revenue from 27.4%; imagery and software analytical services represented 69.2% versus 72.6%.
  • International government revenue increased to $34.6 million from $11.4 million, while U.S. federal government and agency revenue increased to $58.4 million from $53.2 million.
  • Cash and short-term investments declined in aggregate, while debt increased and interest costs rose following the May 2023 debt amendment.
  • Backlog increased to $261.7 million at year-end, with $65.1 million expected to be recognized in 2024, $34.4 million in 2025, and $162.2 million thereafter.
  • Customer concentration remained significant: three customers represented 67% of 2023 revenue, compared with 42% in 2022. U.S. federal government and agencies represented 62% of 2023 revenue and 83% of accounts receivable.

Guidance, outlook, commentary, and unusual items

  • Management expects continued growth in imagery and software analytical services from stronger customer demand and sales orders, as well as meaningful contributions from professional and engineering services.
  • Management expects to continue investing in Gen-3 satellite procurement and launches, Spectra software, infrastructure, sales, marketing, and product development.
  • The company stated that cash and cash equivalents and cash generated from operations are expected to meet working-capital and capital-expenditure needs for the foreseeable future, but acknowledged that additional debt or equity financing may be required.
  • Management expects to manage the timing of certain satellite capital expenditures to preserve liquidity flexibility and progress toward positive operating cash flow.
  • Unusual or non-recurring items included the $9.5 million X-Bow investment-sale gain, $7.7 million of non-cash derivative gains, $1.7 million of debt and equity financing transaction costs, and $0.6 million of severance in Adjusted EBITDA reconciliation.
  • Professional and engineering revenue included a negative $1.5 million aggregate estimate-at-completion adjustment in 2023, reflecting changes in expected contract economics.
  • The company has no current plans to pay cash dividends.

Principal risks and contingencies

  • Persistent losses, negative operating cash flow, substantial accumulated deficit, and dependence on future financing.
  • Debt covenant compliance and secured debt exposure, including the risk that a default could permit lenders to foreclose on substantially all assets.
  • High customer concentration and exposure to government budgets, appropriations, contract options, protests, and termination-for-convenience provisions.
  • Satellite development, launch, commissioning, anomaly, capacity, space-debris, weather, and ground-station risks; certain satellites are nearing the end of their expected lives.
  • Dependence on LeoStella as the sole satellite manufacturer and on a limited number of suppliers and launch providers.
  • Execution risk in delivering Gen-3 satellites on time and within budget.
  • Cybersecurity, classified-information, data privacy, export-control, licensing, and government-contract compliance risks.
  • Competition could reduce pricing, margins, demand, or market share.
  • Revenue recognition and contract profitability depend on estimates of costs to complete fixed-price contracts; changes can cause cumulative catch-up adjustments.
  • The company reported no material pending legal proceedings and no cybersecurity incident that management believed was reasonably likely to have a material effect as of the filing date.
  • Goodwill of $9.4 million was not impaired in the 2023 qualitative assessment, but future declines in operating results, cash flows, or market capitalization could produce impairment charges.

Investor verification checklist

  • Verify the pace and cost of Gen-3 satellite production, launches, commissioning, and revenue contribution during 2024.
  • Track operating cash flow, Adjusted EBITDA, capital expenditures, and compliance with the $10.0 million minimum-cash and future EBITDA debt covenants.
  • Assess whether the $261.7 million backlog converts into revenue as scheduled and how much is funded versus unfunded.
  • Monitor customer concentration, renewals, contract awards, government appropriations, and international government collections.
  • Reconcile the company’s direct-cost gross margin and Adjusted EBITDA with its non-GAAP definitions and excluded items.
  • Review dilution from the 2023 equity issuance, 16.4 million private-placement warrants, existing warrants, options, and restricted stock units.
  • Evaluate liquidity after satellite, launch, lease, ground-station, and other contractual commitments, including the $8.4 million minimum commitment under the launch financing agreement and $6.6 million of other operational commitments.
  • Confirm the impact of the higher-cost related-party debt, payment-in-kind interest, and the October 2026 maturity.