BlackSky Technology Inc. 10-Q Summary
Business Context and Reporting Period
This Form 10-Q covers the three and nine months ended September 30, 2021. BlackSky provides real-time geospatial intelligence, satellite imagery, data analytics, software, and mission systems to government and commercial customers. The company had six satellites in commercial operation at quarter-end.
On September 9, 2021, Osprey Technology Acquisition Corp. merged with Legacy BlackSky in a reverse recapitalization. Historical results represent Legacy BlackSky, while post-merger results include the combined public company. Consequently, period comparisons may not be fully comparable. Spaceflight, Inc., sold in June 2020, is reported as discontinued operations.
Key Financial Metrics
| Metric | Q3 2021 | Q3 2020 | Nine Months 2021 | Nine Months 2020 |
|---|---|---|---|---|
| Total revenue | $7.9 million | $5.3 million | $22.6 million | $14.7 million |
| Imagery and software analytical revenue | $6.5 million | $5.5 million | $17.6 million | $13.3 million |
| Engineering and systems integration revenue | $1.4 million | $(0.2) million | $5.0 million | $1.5 million |
| Operating loss | $(49.0) million | $(12.5) million | $(88.2) million | $(32.7) million |
| Net loss | $(46.9) million | $(14.4) million | $(251.0) million | $(9.1) million |
| Adjusted EBITDA | $(16.3) million | $(9.1) million | $(30.1) million | $(24.1) million |
| Cash flow from operations | Not separately provided | Not separately provided | $(38.7) million | $(27.4) million |
| Free cash flow | Not separately provided | Not separately provided | $(88.2) million | $(37.2) million |
Reported direct costs exceeded revenue by $4.7 million in Q3 and $2.0 million for the nine-month period, implying approximate gross margins of negative 59% and negative 9%, respectively. Operating margins were approximately negative 617% in Q3 and negative 391% for the nine-month period. These calculated margins include substantial stock-based compensation and other unusual items.
Revenue increased 49.3% in Q3 and 53.4% for the nine months. Imagery revenue rose to $2.8 million in Q3 from $0.8 million, while data, software, and analytics revenue declined to $3.8 million from $4.7 million. Revenue from U.S. federal government and agency customers represented $18.9 million, or approximately 84%, of nine-month revenue.
At September 30, 2021, cash and cash equivalents were $194.9 million and total cash, cash equivalents, and restricted cash were $197.7 million. Current assets were $210.4 million versus current liabilities of $27.4 million. Long-term debt, net of issuance costs, was $78.0 million, primarily related to loans from Intelsat and Seahawk. The company reported $152.8 million of stockholders’ equity and an accumulated deficit of $476.3 million.
Material Changes Versus the Prior Comparable Period
- Revenue grew $7.9 million, or 53.4%, for the nine months, primarily from increased imagery orders, expanded constellation capacity, and progress on engineering contracts.
- Operating loss increased by $55.6 million for the nine months, driven by higher selling, general and administrative costs, stock-based compensation, depreciation, and an $18.4 million satellite impairment charge.
- Net loss increased by $241.9 million, primarily because of $147.4 million of Bridge Note issuance losses and related debt issuance costs, compared with no comparable charge in 2020.
- Stock-based compensation increased to $29.3 million from $1.7 million, including a cumulative adjustment associated with restricted stock units triggered by the merger.
- Cash used in operations increased to $38.7 million from $27.4 million, while satellite procurement and related investing outflows increased to $49.0 million from $18.1 million.
- Financing activities provided $275.3 million, including approximately $245.2 million of net reverse recapitalization proceeds and $58.6 million of Bridge Note proceeds, partially offset by debt repayments and issuance costs.
- The May 2021 loss of two satellites following a Rocket Lab launch failure resulted in the $18.4 million impairment charge.
Guidance, Outlook, Risks, Contingencies, and Unusual Items
Management stated that cash proceeds from the merger and related financings were expected to fund working capital and capital expenditures for at least the next 12 months, and, if managed responsibly, forecasted needs through fiscal 2023. The company expects significant continued spending on satellite development, launches, platform investments, sales and marketing, and public-company infrastructure.
Management expected imagery and software analytical revenue and engineering and systems integration revenue to grow during 2021. However, in November 2021 the company further adjusted its fiscal 2021 revenue projection and withdrew its prior fiscal 2021 projections for net loss and Adjusted EBITDA; the filing text does not provide the revised revenue figure.
Remaining performance obligations were $36.4 million at September 30, 2021, with expected recognition of $11.7 million in the fourth quarter of 2021, $23.1 million in fiscal 2022, and $1.6 million thereafter.
- Disclosure controls and procedures were not effective at the reasonable assurance level as of September 30, 2021. The material weakness related primarily to controls over forward-loss contracts and complex accounting for significant transactions.
- The company had an estimated $1.8 million indirect tax liability and a $0.7 million accrued legal expense related to merger-related stockholder claims and attorneys’ fees.
- Commitments included approximately $16.1 million for five launches covering up to ten satellites, $9.4 million remaining under the LeoStella satellite purchase contract, and a $2.2 million non-refundable commitment for additional satellite components.
- Public and private placement warrant liabilities totaled $36.6 million at quarter-end and are remeasured through earnings, creating potential earnings volatility.
- The company depends heavily on U.S. government customers, has incurred recurring operating losses and negative operating cash flow, and faces risks from satellite failures, launch delays, contract timing, customer concentration, competitive conditions, and the ability to raise additional capital.
Most Important Facts to Verify
- Whether management’s revised fiscal 2021 revenue outlook was subsequently achieved and whether withdrawn net-loss and Adjusted EBITDA guidance was replaced.
- The pace of satellite launches, constellation expansion, and any additional launch failures or delays.
- Cash burn, satellite procurement spending, and whether available liquidity remains sufficient for the stated 2022–2023 funding horizon.
- Progress in remediating the material weakness over forward-loss contracts and complex accounting controls.
- Customer concentration, contract awards, remaining performance obligations, and conversion of backlog into revenue and cash collections.
- Future fair-value changes in warrant and sponsor earn-out liabilities, as well as the impact of substantial stock-based compensation.