Blacksky Technology Inc Class A Stock

Thank you. Ladies and gentlemen, thank you for joining us and welcome to BlackSky Technology Second Quarter 2026 Earnings Call. [Operator Instructions] I will now hand the conference over to Aly Munia, Vice President of Investor Relations. 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 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. 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 3, 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, 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 4. 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.

Now 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 1/5 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. And 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 space capabilities. Our capital-efficient approach to advancing our edge in space is delivering strong operating results. Gen 3 related products and services are winning in the market and driving 90% of our growth at attractive margins.

Moving to slide 5, 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 customer's defense technology stack.

We have developed a vertically integrated and purpose-built platform to meet this moment in the market. And 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 6. 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 continue to increase our contract backlog and our revenue visibility. Fourth, we continue to diversify our customer base and grew revenues from our international customers by 200% over the prior period. And 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.

Now let's move on to key highlights from each of the 3 elements of our business. Turning to slide 7 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 delivered during the quarter.

We are achieving this operating leverage by combining a right-size 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 8. 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 2 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 8 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.

Now let's turn to Mission Solutions on slide 9. 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. We are on track for an on-time delivery of our first sovereign Gen 3 satellite in 2026 and expect to hit other major delivery milestones this year, contributing to second half revenue growth. As Gen 3 continues to demonstrate exceptional on-orbit performance, we are actively growing our pipeline and working to capture a number of new sovereign opportunities to build additional backlog and contribute to our future growth.

Our strategy of bundling our subscription services with sovereign space solutions enables us to deliver high-margin growth while building long-term relationships that will drive recurring revenue. We have a distinct advantage in that our customers can operate firsthand the capabilities they are seeking to acquire from a mature and proven commercial on-orbit system. This massively reduces their risk of designing, building, and deploying an unproven capability, and when combined with our attractive economics and our ability to rapidly deliver systems through a scaled production capacity, provides customers with better cost, schedule, and performance certainty.

We believe we are well positioned to rapidly grow this business, especially at a time when countries are accelerating the development and deployment of their current and future space-based intelligence capabilities and are demanding proven best-in-class assets and technology. Moving on to slide 10 and our advanced technology programs. This element of our business continues to serve as another growth vector, while extending our technology leadership in space and AI that is highly aligned with customer needs. 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 and here are some of the highlights from the quarter. First, we were awarded an 8-figure contract from the U.S. government to accelerate AROS development to meet mission-critical foundation mapping needs and provide a cost-effective alternative to traditional commercial capabilities. Second, we grew revenues from our growing portfolio of advanced technology programs by 65% over the prior quarter. Third, we won additional R&D contracts for the advancement of AI-enabled space-based solutions in support of defense-related tactical intelligence.

And finally, we expanded multiple existing contracts associated with the development of optical intersatellite links and advanced payload technologies as an extension to current and next-generation space platforms. This part of our business is accelerating our ability to leverage customer-funded development programs to advance critical technologies and space capabilities that in turn ultimately strengthen our commercial offerings and competitive differentiation. This model results in improving capital efficiency and increasing revenue growth while minimizing R&D costs.

Turning to slide 11, we continue to make excellent progress advancing the development of AROS. And with the NRO contract award, we are able to accelerate this program to support a targeted launch in 2028. The AROS satellites are being designed to address a critical market need in that timeframe. A number of legacy systems are expected to reach end of life and leave a gap in the market. This capacity gap creates an opportunity for cost-effective and very high-resolution solutions to support country-scale digital mapping, broad area monitoring, maritime surveillance, and 3D digital twin applications. This capability will deliver foundational services in support of current and emerging tactical mission applications.

This system will leverage Gen 3 technology and our existing space infrastructure, software platform, and operational architecture. When integrated with our Gen 3 constellation, customers will be able to combine broad area search and mapping with high-frequency dynamic monitoring and AI-driven analytics through a unified platform. In summary, we have established multiple growth vectors of a highly capital-efficient platform that is driving a flywheel effect for long-term sustainable growth. The execution of this strategy is clear. Space-based intelligence generates high-margin recurring revenue. Mission Solutions expands strategic customer relationships and drives growth through the delivery of sovereign solutions.

And advanced technology programs accelerate innovation and extend our technology leadership through customer-funded investments. Together, these business elements reinforce one another, creating a highly differentiated platform that is an essential element of our customers' defense technology stack as the space autonomous and AI-enabled solutions accelerate in the market. For that, I'll turn it over to Henry to go through the financial results. Henry?

Thank you, Brian. And good morning, everyone. The second quarter marked an important financial milestone for BlackSky as we delivered record space-based intelligence revenue, significant year-over-year revenue growth, expanded gross margins, strong positive adjusted EBITDA, continued backlog growth, and a strengthened balance sheet. Perhaps most importantly, these financial results demonstrate the strong operating leverage inherent in our business model. As Gen 3 capacity expands and high-margin subscription services become a larger portion of our revenue mix, we're beginning to realize the financial benefits of our business.

With that, let's turn to our results. Beginning with slide 13, revenues for the second quarter of 2026 were $33.3 million, up 50% over the prior year quarter, and up 60% sequentially from Q1. This strong performance was driven by our space-based intelligence and AI services business which delivered a record revenue of $24.5 million, representing a 50% growth from Q1. This growth was attributable to a step up in our recurring subscription revenue driven by the expansion of international customer demand. In fact, our international space-based intelligence and AI services revenue grew 150% as compared to Q2 2025.

In Q2, our Mission Solutions revenue contributed to year-over-year growth as we continued strong execution against major contract milestones. Our advanced technology program revenue also drove growth in the quarter as we began work on the NRO contract to support the development of AROS that we won earlier in the quarter. As you can see, all aspects of our business contributed to the significant growth in the quarter. Turning to slide 14, Q2 cash operating expenses for the quarter remain flat while we grew revenues by 50% year-over-year. This performance demonstrates the strong operating leverage in our business. As a reminder, cash operating expenses exclude stock-based compensation, depreciation, and amortization expenses.

Moving on to slide 15, our adjusted EBITDA for the second quarter of 2026 increased to $4.7 million, a $7.5 million improvement over the prior year quarter. Driven by 50% growth in our high-margin space-based intelligence and AI services revenue, the $4.7 million achievement represents an adjusted EBITDA margin of 14.2% on total revenues of $33.3 million. Let's move on to our cash and liquidity position as shown on slide 16. We ended the second quarter with a cash balance of $244.1 million, representing an increase of over 150% compared to the prior year quarter. We raised $150 million through our ATM offerings.

This capital raise was executed opportunistically to strengthen our balance sheet and cash position. At the end of Q2, our total liquidity position exceeded $325 million, representing a 108% increase compared to the prior year. Capital expenditures during the quarter were approximately $15 million, bringing year-to-date capital expenditures to about $31 million in line with our expectations. Turning to slide 17, we are reaffirming our full year guidance, which we previously updated back in May. Specifically, we expect revenue between $130 million and $150 million, adjusted EBITDA between $12 million and $24 million, and capital expenditures between $50 million and $60 million.

After increasing our guidance last quarter and with a strong performance in the second quarter, we remain confident in achieving our full year outlook. In summary, I'm pleased with the strong financial performance in Q2 and the growing momentum in our business. With strong revenue growth, increasing profitability, and a solid balance sheet, we believe we are well positioned to capitalize on the significant market opportunities ahead. With that, back to you, Brian.

Thanks, Henry. In closing, we're pleased with the strong operating performance we delivered in the quarter, which marks an important inflection point for the business. The exceptional performance of Gen 3 is driving strong customer demand across all aspects of our business that is now translating into accelerating revenue and expanding earnings growth. As I described earlier, we are achieving a powerful flywheel effect that is fueling long-term sustainable growth. Space-based intelligence generates high-margin recurring revenue. Mission Solutions expands strategic customer relationships and drives growth through the delivery of sovereign solutions.

And advanced technology programs accelerate innovation and extend our technology leadership through customer-funded investments. The strong execution of our strategy is playing out as evidenced by the results in the quarter, and we're well positioned to build on this momentum in the second half of the year and accelerate that growth into 2027. This concludes our remarks for the call and we'll now take your questions.

[Operator Instructions] Your first question comes from the line of Edison Yu at Deutsche Bank. Your line is now open. Please go ahead.

I want to come back to a comment, Brian, you made about, I think you said 20 satellites in the pipeline. Any more color you can provide on that? In particular, how many of those do you think are for yourself versus potential sovereign customers?

Yes, good morning, Edison. Thanks for the question. I think there's a balance of use of those assets. You know, first off, you know, our goal is to maintain an hourly revisit service with our commercial constellation. So that's a constellation of about 12 to 15 satellites. There's obviously a lot of demand, and we have existing contracts for Mission Solutions customers. So some of those assets will be used for those. The remaining satellites are creating inventory that we can leverage and improve our competitive posture for some of the Mission Solution programs that we're pursuing. We believe that by having that inventory on hand and a scalable production environment, we can start delivering to customers, you know, within a year or so of getting those orders, which is highly differentiated if they wanted, if they were going to others and had to start from scratch, what may take as long as 3 to 5 years. So we struck a really good balance, building the capacity and the inventory and having assets available to drive the growth in the business.

Understood. And then separately, just follow up on AROS. I know you got the funding from the NRO. I guess what's the next kind of commercial milestone we may be looking for? Is it something with Apple or Google? And if I think 2028 is the timeline, would you need to get some type of commitment from the commercial guys before 2028 to take off or is the NRO commitment enough?

Right now, the NRO commitment is enough. There's clearly a gap coming and we're seeing strong commercial opportunities for AROS. So right now, this was a pretty significant contract award. It's sufficient capital, along with some internal investments that we'll use to augment that to keep this thing on track. So I guess you'll see some incremental announcements over time as we are talking to other customers and continue to evaluate the size of that constellation and the rate at which we need to produce those satellites. But right now we're in really good shape. There's clear demand, and it's a capital-efficient approach to getting this capability into the market.

Your next question comes from the line of Chris Quilty. One moment, please.

In the space-based intelligence and AI, you had a nice $8 million sequential step up. And I was wondering is that, were there any one-time elements in there or is that a good base on a go-forward basis?

Good morning, Chris. Sorry, I think we missed the beginning of your question. Could you say it again?

In the space-based intelligence and AI, you had a nice $8 million sequential step up. And I was wondering is that, were there any one-time elements in there or is that a good base on a go-forward basis?

It's a really good base on a go-forward basis. It's all subscription revenue. You know, as we've been saying, as we get the first tranche of Gen 3 satellites in orbit and delivering that service, we expect to begin to unlock revenue growth from that part of the business. And that's what you saw happen in the second quarter. And of course, you're seeing that revenue step up translate into bottom-line growth. So we see this as a base for moving forward and we anticipate this type of performance is going to continue.

Got you. So that's genuinely just a Gen 3 unlock of contracts you had in place. I guess the question is, did all of your customers turn on their Gen 3 contracts in a quarter, or are there more that will in the back half of the year?

Oh, there's more customers coming. I think also keep in mind, there is still a lot of our customers that also use Gen 2. So, what you saw happening here was new customers. As we've been saying, we had a number of customers that last year started with some small pilots that quickly went to 7- and 8-figure subscription deals so you're seeing those kick in, seeing other pilot programs come online, and we're also seeing other existing customers to expand their contracts and transition into Gen 3 services. So we're seeing a lot of momentum and opportunity across multiple vectors for driving growth around Gen 3 services.

Great. And Henry, it looks like that NRO contract is now up around like $150 million. Can you remind us how that's going to flow through the P&L and also is it reflected as part of the backlog?

Yes, Chris, let me take that one. I think when you look at that broader number, it's the total amount of contract dollars that we've, we're getting through that contract, which consists of the base subscription for EOCL imagery services, as well as things like the AROS development, which is more of an R&D program rather than a subscription business. So I just want to be clear that when you hear that number, that's a total number from a point of year to date. And then how that revenue gets applied to the business is the EOCL subscription revenue falls under the space-based intelligence business. And right now the AROS work goes into the advanced technology program line.

And that's a contracted date number. Got you. And so when would we see that ramp and would it shift, would it stay in the advanced technology programs? We're anticipating that it'll shift into Mission Solutions.

And it will also as we build out the commercial aspect of that drive revenue in the space-based intelligence business as well. But I think we're seeing opportunities for AROS where there is strong interest both here and internationally for a government-owned commercially operated model for AROS, which would be part of the Mission Solutions offering. And we see a pure play commercial imagery service for those type of mapping capabilities that would come off of a baseline commercial constellation.

Got you. And so obviously you had a design for the system. You had a customer who stepped in and said, you know, we like this and we'd like to do certain things with it. Does that imply that there will be 2 designs, you know, a specific one for that customer and then another baseline that you'll operate on? Or is it same design?

Same design. Yes, and Chris, just to be clear, the reason moving forward with this is, as I mentioned in my remarks, there's a lot of the mapping capacity in the market right now comes from a handful of really large, expensive satellites that are coming out of service in the next couple of years, creating a gap. So customers have been coming to us seeking this solution. So we've optimized the design to be a single design to support the commercial and the government requirements. And I should also add, it's really building on the advanced and superior technology we have in Gen 3. So that's giving the customers a lot of comfort in that Gen 3 obviously is a best-in-class space vehicle built on a long heritage of small satellite capability that we've developed here at BlackSky. So that's giving us a significant competitive advantage.

Your next question comes from the line of Jeff Van Rhee from Craig-Hallum Capital Group. Please go ahead.

Brian, last quarter you mentioned you had a couple dozen Gen 3 6-figure pilots working through. And just curious if you can quantify to the degree that that pipeline has expanded evolution there, paths to full deploy, just maybe a little more color along that sort of set of metrics that would be nice.

Yes, Jeff, I think the way to think about it is, you know, we've been continuing to expand the pilot projects. You can see from some of our announcements, those pilots are transitioning to 7- and 8-figure subscription contracts. We've got a very good pipeline of customers that are moving through that funnel. So I mean, without getting into quantifying it, it's a significant number of customers that are looking at the system and trying it out. And then what we're seeing is a very high conversion rate of those customers into the next phase of contract growth.

Maybe just one follow on there. If you look at the very large portion of the pipeline, very large deal portion of the pipeline, primarily sovereigns, just any color on the evolution of those deals and how changes and how those deals are moving forward, things they're focused on, competitive landscape timing, that kind of thing. Just maybe an update on the sovereign slash very large deal portion.

Yes, I think what we're seeing Jeff, and I think it's really, as I mentioned in my remarks, the exceptional performance of Gen 3 as a best-in-class space vehicle is a competitive differentiator and as we bundle that with the very high-resolution imaging services from our Gen 3 constellation, it's a very attractive offer for these customers that are seeking to accelerate their capabilities. So what we're seeing is because of that success, we're seeing a growth in the pipeline. And that is also triggering initial subscription contracts. And it's driving expanded discussions on how to accelerate their programs with Gen 3 satellites that we can take off the production line. Yes, and that's, again, Jeff, another driver to why we have invested in the inventory for the 20 satellites that I mentioned.

Yes, yes, makes sense. And congrats on the Gen 3, by the way. The imagery you guys are sharing is just fantastic. One last for me on space domain awareness. Just kind of curious, you know, a lot of folks talking, although it's very seemingly misunderstood in terms of the in-space warfare aspect and just awareness of who's where doing what. You made a couple announcements about some of the things you're capable of and starting to do there. Just any sense of scope, timing, when you think that'll turn into anything material?

Yes, I would say we're early days on that. We have an architecture that supports non-Earth imaging. You've seen some of that come out of Gen 2. It's extremely compelling and high performance and we're able to support those applications with our real-time architecture. Gen 3 will be able to provide that capability as well. We have been receiving funding under some of our advanced technology programs to enhance the automation of this. So we have some incremental programs and revenue moving through the system and it's still early, but we're going to expect that to grow.

Your next question is from the line of Timothy Horan from Oppenheimer. Please go ahead.

Can you talk about how rapidly your AI analysis is improving and your time to delivery maybe, you know, where you were a year or 2 from now, and how are you improving on that? And can you just elaborate a little bit more on these new space-based systems? You know, what's your skill set that's unique and customers are looking for from you? Just, you know, any more color on your...

Yes, maybe I'll start with your second question first. You're obviously seeing the performance of Gen 3 is exceptional, and customers are seeing that exceeded expectations right out of the gate. And the on-orbit performance of that has emerged as a best-in-class space vehicle. 35-centimeter image quality for this class is exceptional and you can see that being reflected in the growth of our revenue and earnings on the bottom line. I think what's important to understand is we were able to achieve this level of performance and technology lead right out of the gate, because this is the third-generation satellite for us. And we're building on significant on-orbit experience and a strong technology heritage for satellites of this class. You know, if you look back, we haven't had to launch tech demos to prove out the technology. Our satellites have worked right out of the box as expected. You know, there's others in the market that have not internally built a satellite of this class before. And when you look at the technology that's going into orbit, there's a huge difference in image quality.

And this is the part of the system that matters most to customers as we're in a time when mission capability is critical. Also, when you kind of look at the cost performance perspective of this, compared to the larger, more expensive satellites, we're offering really significant value at an attractive point for customers, which is also contributing to the performance of Gen 3. I'd say this technology heritage also extends into AI. We started investing in AI 10 years ago. It's been built into our platform from day 1. And we deliver AI-enabled intelligence in real time. So as the data is coming off the satellites, we're able to bring that directly to the customers without having to bring it to the ground, process it for hours and then deliver it to customers.

So we're scaling our AI capability in multiple directions. We are improving the speed of that capability. And at the same time, we're improving the quality of the algorithms and the performance of the insights that we can derive off of satellites. The exceptional performance of Gen 3 gives us another competitive advantage because the very high-resolution case when applying AI algorithms delivers exceptional insights and other analytic products that are more difficult to achieve with lower resolution satellites. Now, I also want to add that this technology baseline translates into the competitive advantage for our Mission Solutions business where customers can try all of this out firsthand as they're developing their acquisition program. So I think we built a very strong, technology-based, experienced team. And, you know, we're on our third generation of this, and that's being reflected in the leadership we're bringing to the market.

And then lastly, you know, we hadn't really ever modeled in sovereign all that much or these new space-based systems. Can you talk about what percentage of revenue these 2 could represent if we're going out, you know, 5 longer term? You know, just any sense.

Yes, look, I think right now, space-based intelligence services, the high-margin part of the business is about 70% of our revenues. Obviously, that's going to continue to grow. I think as we get into next year and the year after and we start to capture some larger Mission Solutions deals, you'll see some of the growth in that business. But I think the goal is because we're bundling these things together, we're going to be able to maintain a very high gross margin performance across all 3 elements of the business.

And that 70%, will that be maintained or these other businesses will be growing a lot faster, maybe that drops to 50%?

I don't want to get into forecasting that, but I think that keep in mind these Mission Solutions tend to be very large and they get delivered over a couple of years. You know those are lumpy businesses, so we'll see how that plays out. But we expect all of, as I mentioned in my remarks, all 3 aspects of our business we expect to grow. And as we win Mission Solutions deals, you can expect there is going to be some large lumpy ones that are going to create some quarter-over-quarter variability.

Your next question comes from the line of Austin Moeller at Canaccord Genuity. Please go ahead.

On the Mission Solutions, are those all sovereign governments or are there potential U.S. intel agencies that would be interested in a responsive launch of an ISR satellite?

We see opportunity both within the U.S. government and internationally. I would say the strongest demand right now is internationally, but obviously, we do a lot of work with the U.S. government and we feel there's some emerging opportunities there.

And within the current quarter, are you seeing the most meaningful budget dollars from the U.S. customer coming out of the fiscal year '26 budget as people are trying to spend the appropriated dollars before the end of the year? Or are you also starting to see funds from reconciliation bills like [ Big Beautiful Bill ] that had some space funding.

I think that's all still playing out. I think we're seeing all that flow through multiple types of contracts. You know, EOCL obviously continues at the current levels for us. You're seeing an uptick from us in U.S. government funding for advanced technology programs both for AROS and our next-generation payloads with advanced segmented optics capabilities. So, and then of course, we're pursuing a number of other opportunities that leverage both of those things. So the budget's still playing out, even though it's getting late in the year, but we're capturing what we planned.

Your next question is from the line of Sheila Kahyaoglu from Jefferies. Please go ahead.

This is Adam Samuelson on for Sheila. I guess the first question is in the space-based intelligence and AI, just trying to get a better sense of how much of your customer base is already converted to Gen 3 versus kind of, or what's that mix looked like today? Just thinking about the potential kind of revenue uplift that would come as you see more customers switching to the Gen 3 offering.

I think almost all the customers we have, the large ones are using both because they're taking advantage of the constellation of Gen 2s and Gen 3s to get this very high revisit responsive tactical capability. What we're seeing is that, you know, as they start to use Gen 3 in their operations that, you know, they're going to be shifting to higher levels of Gen 3 tasking over time, which is a win-win in the sense that they'll start getting high valued, very high-resolution imagery as a higher value product for us. So, that helps drive our earnings growth. I think at the end of the day, we've got a very compelling offering with the constellation we have. And as we add more Gen 3s, that's going to keep getting better.

Okay. And then just a quick follow-up in the quarter. Prepared remarks to 150% international revenue growth. I know in the filings you've provided North American revenue, so it's not quite necessarily international, but if international is growing 150% and presumably the most support from all of North America is the U.S. Why is the U.S. business was flat, maybe slightly down in the quarter? Is that correct or am I missing something there?

Yes, I would say what we're seeing in the U.S. is what we expected, primarily driven by EOCL. And that's, as we've said in the past, that last year, you know, we assume this year last year's run rate, right? So, I think you're seeing that reflected in the quarterly numbers. Henry, do you have anything you want to add to that?

Yes, I mean, Adam, if you take a look at the Q2 this year versus Q2 last year, you may recall last year we had some adjustments on the U.S., between the second quarter and third quarter. And so the second quarter, you still had higher U.S. government spending. And so it's the growth from the international in that quarter to the growth in international this quarter that we were comparing.

Your next question is from the line of Greg Pendy from Clear Street. Please go ahead.

Just want to shift gears a bit to the balance sheet. You know, the ATM gave you, you raised $150 million. You said total liquidity is at $325 million. And that stacks against CapEx at $50 million to $60 million. So just wondering, you know, what's How should we think about that? I think in the last quarter you said AROS could be a CapEx lite strategy with partnerships? Does this give you flexibility to possibly just do this alone? wondering how we should think about the strong liquidity position you're on now.

Yes, I think the way to think about it is we had a good opportunity to raise that capital to strengthen our balance sheet and improve our cash position. And it's there for if and when we need it. We are employing a CapEx lite strategy for AROS. As you can see, we won an 8-figure contract from a customer to essentially fund that program out of the gate. And so, yes, that $150 million is there opportunistically and it's there if and when we need it.

Your next question is from the line of Ryan Koontz at Needham & Company. Please go ahead.

Just reflecting on your progress in your non-traditional U.S. government business. Maybe share a little more color in your differentiation on the mission systems and kind of operations support that you've got there for onboarding new customers and also reflect on maybe changes you've made, investments in go-to-market that give you reach and how do you plan to support these sort of customers to scale in an OPEX efficient way.

Yes, as I said before, our advantage in the Mission Solutions business is the exceptional on-orbit performance of Gen 3, combined with the unit economics of that platform and our ability to quickly pull those satellites, pull satellites off the production line and put that capability, a high level of certainty to customers, both from a cost performance perspective to meet their requirements. Also, you know, we can bundle that with our commercial services, which give them immediate additional capabilities and the opportunity for them to test the system and try it out firsthand with mature technology and mature operating capability. That's a competitive advantage for us in the sense that our software platform, the real-time capabilities with AI is highly mature and works operationally at scale and the satellites are best-in-class. So that combination of capability is creating a number of opportunities for us.

How about investments in go-to-market on that line? How does that scale going forward? Do you feel like you have the resources you need? How has that evolved over the last several quarters?

We have been investing in sales and marketing. We have been investing in the scaling of our sales organization, including our partner network, which is giving us scale globally, so we're making very good progress from that perspective. And again, we started focusing on this international strategy years ago and you're seeing the results.

Your next question is from the line of Greg Burns at Sidoti. Please go ahead.

What is the size of the Mission Solutions backlog?

Greg, we don't break that out. We just provide a single number for the total business.

Okay. And then we saw a strong kind of unlock from Gen 3 this quarter with a big step up in imaging revenue. Is there another unlock to happen, or now we add a run rate? Do you get up 4 more satellites and there's another unlock, or does it kind of build incrementally from this level now that you have, you know, 4 Gen 3 operational now? Like, how should we think about kind of the revenue progression?

Yes, I think we've established a very strong base, which is to build and grow from as a strong subscription base. So the way you should think about it is that you'll start seeing that incrementally grow, both top line and bottom line, quarter-over-quarter. We will put additional Gen 3 satellites on orbit, which will improve the service and the level of capacity in different regions. So that will contribute to the scaling of that business. But you should think about where we are now as a solid baseline of subscription revenue. And as we mentioned at this $100 million run rate, which gets us over a revenue hurdle, which is driving bottom-line performance for every incremental dollar we generate from there going forward.

Okay. And what is the NRO's current budget for broad area mapping? How much are they spending a year currently on that?

Yes, that's something I can't share in public.

Okay. And do you have a sense of the NRO budget, like where that's landing? Is funding getting restored to prior levels? Do you have any thoughts on that? sense of, you know? Maybe that that revenue line item stepping back up to where it was.

We're seeing how that manifests in the '26, we've got good visibility. That '27, it's still unclear. I just think from our perspective, we assumed that the current levels from last year, but we are seeing growing interest in adoption on Gen 3. And they're very interested in that capability. And we think that's going to drive some growth going into '27.

Your next question is from the line of Dave Storms at Stonegate. Please go ahead.

The CapEx guide was obviously unchanged. You started investing in AI like 10 years ago, but is there anything about the broader AI infrastructure build out that's causing, you know, any constraints or higher costs or competition for AI talent, you know, anything like that, you're navigating?

Not really. I think, as you said, we started investing in this 10 years ago, both with technology, scalable infrastructure and talent. We're able to acquire the talent we need. I'll say we have been able to build quite a bit of efficiencies into our AI processing. We are really set up with our architecture to process where we can generate revenue to minimize our costs and maximize the value we're delivering to customers. And so I think we're in a great spot. And the expansion of our AI capabilities is baked into our model.

Got it. That's helpful. And then maybe one quick follow-up. I know you can't share specifics, but broadly, you know, how do you think about M&A? Are there any capabilities or assets you'd consider adding through another kind of LeoStella type transaction?

Yes, Dave, we're always looking at opportunities that can grow our business or improve our competitive posture. So whether that's in space or on ground in AI or through expanding customers' reach. We look at those things all the time and if we see something that's interesting and makes sense we'll take a look at it.

There are no further questions at this time. We have reached the end of the Q&A session. This concludes today's call. Thank you for attending. You may now disconnect.

Ladies and gentlemen, thank you for joining us, and welcome to the BlackSky Technology First Quarter 2026 Earnings Call. [Operator Instructions]

I will now hand the conference over to Aly Bonilla, Vice President of Investor Relations. 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 first quarter financial results and updated 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'll 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. 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 3. I'm happy to report that we are off to a strong start to 2026.

With up to $160 million in contract awards, we are rapidly growing backlog, accelerating revenues and on track to deliver strong earnings growth driven by demand for our Gen-3 solutions. This quarter, we achieved a clear inflection point in our business as Gen-3 capabilities are now fully operational and delivering mission-critical intelligence to customers worldwide.

Demand for our Gen-3 capabilities has never been stronger. And as a result, we are growing our pipeline and transitioning new and existing customers from early pilot programs into long-term 7 and 8-figure subscription contracts.

Based on the strong year-to-date sales performance, in-year revenue visibility and accelerated pipeline growth, we are increasing our revenue and adjusted EBITDA forecast and full year guidance. As we move through the year, we expect this momentum to continue, driving increased revenues, margin expansion and improved profitability.

Now let's move on to key highlights across the 3 major elements of our business. Moving on to Slide 4 and our space-based intelligence and AI services.

Gen-3 continues to exceed expectations, delivering exceptional 35-centimeter imaging performance at a time when real-time space-based intelligence has never been more important. With 4 Gen-3 satellites in operation, we are now unlocking significant revenue growth from new and existing customers.

We won over $60 million in new contract awards from major international and U.S. government customers that will contribute to in-year revenue performance, improve margins and drive out-year backlog growth. At the same time, we continue to onboard new customers and expand existing accounts as interest for Gen-3 on-demand and assured subscription services grows.

During the quarter, we secured the next wave of new Gen-3 customers and expect these accounts to grow over time as part of our land and expand strategy. It is important to note that subscription-based contracts drive predictable revenue and strong visibility into future growth as these are highly sticky accounts with almost no churn.

The major wins so far this year have us on track to grow this element of our business in 2026 by over 50%, achieving a projected annual run rate of over $100 million. This highly profitable subscription revenue is on track to deliver gross margins of around 80%, which is accelerating improving adjusted EBITDA margins.

The operating leverage, capital efficiency, unit economics of our constellation and the scale of our business model is translating directly to bottom line performance.

Looking forward, we expect to continue strong growth internationally and are starting to see momentum from the U.S. government as funding from the fiscal year '26 budget is moving through the system, which is further improving our visibility this year.

Turning to Slide 5. Customers around the world are rapidly integrating our advanced 35-centimeter imaging and real-time AI analytics into their operations at a time when conflict and geopolitical tensions around the world are driving an increasing need for assured, responsive and low-latency space-based intelligence, which is essential for critical national security missions.

To give you a sense of how we are supporting typical customer operations today, users are casting hundreds of images over the course of a few days within a specific area of operations.

Our dynamic tasking services and Spectra support a rapid and responsive cadence as operators are reacting to changing conditions on the ground. Once collections are casted by the user, we are achieving imagery delivery time lines consistently less than 40 minutes, including processing for AI-enabled analytics.

Over the course of several days of an operation, our AI analytics detected and classified over 5 million objects as part of customer workflows, providing vital real-time intelligence. Our automated Spectra platform is compressing time lines dramatically, enabling end users to make informed decisions while providing maximum tasking and operational flexibility to respond to developing situations. This combination of high-resolution imagery, AI-powered automated analytics and rapid delivery time lines is driving customer adoption and service expansion.

Moving on to Slide 6. Our AI capabilities are operational today and are delivering critical intelligence. Our proprietary AI capabilities are purpose-built for real-time geospatial intelligence and have been validated by major defense and intelligence organizations as a trusted solution.

What differentiates BlackSky is that we have moved AI into real-world deployment where our capabilities are embedded directly into customer workflows and are driving daily decision-making.

Our Spectra platform is continuously processing high revisit Gen-2 and very high-resolution Gen-3 imagery, applying automated detection and classification and delivering actionable insights in minutes.

This allows customers to move from data collection to decision advantage faster than ever before, which is vital in today's dynamic geopolitical environments. At scale, we are processing millions of AI-enabled detections, monitoring large areas of interest simultaneously and enabling persistent automated surveillance across critical global assets.

This is not just improving efficiency but fundamentally changing how intelligence is generated, reducing reliance on manual analysis while increasing speed, accuracy and mission impact.

Turning to Slide 7 and an update on our Gen-3 constellation. In March, we successfully launched our fourth Gen-3 satellite, which delivered first light imagery within hours of launch and was commissioned into operations in less than a week.

By reducing the commissioning time line to just days, we're providing customers with rapid access to new capacity while maximizing the operational lifespan and return on investment of our constellation. This ability to quickly and reliably move from launch to mission operations is a distinct advantage for our customers.

With 4 Gen-3 satellites in operation, we achieved a major operational milestone with daily revisit rates for very high-resolution 35-centimeter imaging services across key regions of interest worldwide.

When combined with our Gen-2 constellation, we have added very high-resolution imaging to our dynamic hourly monitoring services. This is providing customers with assured and flexible collection operations. We are continuing to expand the Gen-3 constellation with our next Gen-3 satellite ready to be shipped and remain on track to meet our objectives of at least 8 Gen-3s on orbit this year.

Now let's move on to Mission Solutions on Slide 8. Our sales pipeline continues to grow due to the on-orbit success of Gen-3 and our ability to deliver industry-leading 35-centimeter imaging performance at compelling economics and attractive delivery schedules.

Having proven on-orbit performance is an important criteria for customers that are making important acquisition decisions now that will impact their road maps and long-term investment strategies for their sovereign programs.

We're seeing increasing interest from international customers and acquiring more expansive end-to-end solutions that not only include satellites and ground infrastructure, but now include enhanced secure operations and AI-enabled analytic capabilities. The combination of best-in-class Gen-3 satellites and industry-leading software and AI capabilities operating in a proven real-time architecture has us well positioned to address this growing market opportunity.

Turning to Slide 9 and our advanced technology programs. While we are making great progress scaling our core space-based intelligence and Mission Solutions business, we are also advancing our lead in space through the rapid evolution of the Gen-3 platform, the development of AROS, our new wide area collection system and the advancement of new leap-ahead payload technologies that can change the future of earth and space domain observation.

We were pleased to announce this quarter a major new contract worth up to $99 million with the U.S. Air Force Research Lab for the development of an advanced large aperture optical payload. This is an advanced technology that we have been developing for the past several years and is now at a point where the approach has been assessed and validated by industry-leading government experts.

As a result, we were awarded a multiyear sole-source contract to move ahead with the development and demonstration of the critical payload technologies. This program represents significant customer-funded investment that not only reinforces our technology strategy, but offsets internal R&D and is in strong alignment with U.S. government priorities to advance innovative commercial space-based capabilities.

Moving to Slide 10. As we advance our technologies through customer-funded R&D, we are transitioning these innovations into our space portfolio. At the core of this portfolio is our Gen-3 platform.

As we iterate and enhance this architecture, we are incorporating next-generation capabilities such as on-orbit processing and optical intersatellite links or OISL, which will enable low-latency space-based communications that is critical to reducing delivery time lines and increasing resiliency.

Looking ahead, we are advancing AROS, our next-generation wide area search and mapping system. This new constellation, when combined with real-time AI processing, will overcome the limitation of traditional mapping systems through transformative always-on intelligence and information services.

This is an expanded market opportunity that will address a wide range of applications, including broad area monitoring and change detection, maritime surveillance and the delivery of 3D digital twins in support of rapidly growing opportunity for AI-enabled autonomous systems.

As we move forward into the details of the AROS design, we see strong interest from a number of key customers and partners for this capability. We will have additional details to share on our progress as we move forward throughout the year.

In summary, we are excited with the strong start to the year and the progress we are seeing across all aspects of our business as the need for space-based intelligence has never been more important. The progress we've made so far this year reflects a major inflection point for the business and is a clear indication of the traction we are gaining in the market.

With that, I'll now turn it over to Henry to go through the financial results. Henry?

Thank you, Brian, and good morning, everyone. I'm pleased with the strong start to the year. With the recent wins and our market momentum, we're excited for 2026.

Now let's begin with Slide 12. Our first quarter revenue was $20.8 million. With Gen-3 coming into commercial operations, we started to see a return to growth in our space-based intelligence and AI services revenue, which was up 14% over the prior quarter. When comparing this quarter's total revenue to Q1 of 2025, keep in mind, Q1 of 2025 benefited from a $9 million revenue milestone for our Mission Solutions program.

With strong year-to-date sales, we are expecting to further increase space-based intelligence and AI services revenue by over 50% this year, achieving a $100 million annual run rate. With the momentum we are seeing for Gen-3 services, we are increasing our revenue guidance for the year from our previous range of $120 million to $145 million to an updated range of $130 million to $150 million, representing an overall growth rate of over 30% at the midpoint as compared to 2025.

Turning to Slide 13. You can see that our cash operating expenses, which excludes stock-based compensation, depreciation and amortization expenses remained flat as compared to our prior first year quarter operating expenses.

On Slide 14, our first quarter adjusted EBITDA was a loss of $5.1 million, in line with our internal expectations. Given our growing revenue streams, which we believe will translate into strong adjusted EBITDA performance, we are increasing our guidance for adjusted EBITDA for the year from a previous range of $6 million to $18 million to an updated range of $12 million to $24 million, yielding a 13% adjusted EBITDA margin at the midpoint.

Let's move on to our cash and liquidity position, as shown on Slide 15. With cash CapEx for the quarter of $15.8 million, we ended the quarter with $117.5 million in cash, restricted cash and short-term investments and total liquidity of over $195 million.

This liquidity gives us substantial flexibility to fund strategic growth initiatives, continued Gen-3 investments and provide for the operational infrastructure investments needed to support our rapidly growing customer base. Even though we are increasing our revenue and adjusted EBITDA guidance, we are not increasing our capital expenditure targets, demonstrating the leverage we are achieving in our capital deployed to develop our Gen-3 constellation.

In summary, I'm pleased with the strong year-to-date sales momentum, which is continuing to grow our backlog, strengthen our financial position and further validate the operating leverage in our business model.

I mentioned earlier and as shown on Slide 16, we are raising revenue guidance to be between $130 million and $150 million, adjusted EBITDA guidance to be between $12 million and $24 million and reaffirming our capital expenditure guidance of $50 million and $60 million.

With that, back to you, Brian.

Thanks, Henry. In closing, we have clearly reached an inflection point in our business with the success of Gen-3, which is now delivering mission-critical intelligence to major customers around the world.

We are proud to be a trusted mission partner and support the day-to-day operations of important national security missions, both now and in the future. The proven operational performance of our real-time space-based intelligence services is leading to strong sales performance and rapid customer adoption, which in turn is accelerating revenue and margin growth.

We are pleased with the momentum in the business and that our year-to-date sales are ahead of plan, which is driving the raise of our full year guidance.

This concludes our remarks for the call and we'll now take your questions.

[Operator Instructions] Your first question comes from the line of Jeff Van Rhee with Craig-Hallum.

Congrats, numbers look good. So just a couple of questions. Brian, as it relates to the pipeline, can you talk to -- you've talked about these pilots coming in and then obviously, customers are getting a sense of Gen-3 and converting.

Can you put a little finer point on the quantity of pilots coming in the top of the funnel? Give us a sense of the magnitude of the pipeline, how many have converted, how many are there? How many you've added in this last quarter? Any quantification about funnel and particularly pilots?

Yes. You may have seen this week, we had a release on securing our next wave of customers. This was in the scale of a couple of dozen. And we're seeing that momentum really pick up. So they all start with 6-figure type pilots and you're seeing, as a result, that moving into 7 and 8-figure subscription contracts.

They're all in different points in the pipeline. So it's difficult to kind of quantify timing and all of that. But we're just seeing strong momentum and the pipeline is looking good.

Is there -- if I could follow up on that, is there anything you could share with respect to what I'd call the mega deals? Obviously, you've got a lot of sovereign momentum out there. A number of players in the space are talking about 9-figure deals working through their pipe. Can you give us any sense of the frequency in which you're seeing those and seeing those work through your pipeline?

Yes. I think we announced the $30 million 1-year subscription contract. That started with a 6-figure pilot about 6 months ago. And we are seeing a lot of that type of activity, particularly as customers now have had an opportunity to evaluate Gen-3 performance tied to the operational flexibility, the timeliness and the quality of the imagery and how that can integrate into their operations.

And so these are major customers and we're seeing a pretty strong pipeline of those worldwide. It's hard to, again, quantify the timing of some of these deals. But you can see we also announced another large deal as well. So a lot of momentum with these larger contracts.

Yes. Real nice traction on the signings. Just 2 other quick ones, if I could. Spectra and analytics, what are you seeing in terms of new customer attach rates on the analytics side? What do you anticipate based on pipeline?

Well, Jeff, that's why our pipeline and the conversion rate is going so well. It's not just the attachment rate. It's the fact that all of these things are integrated into the service.

So it's highly flexible access to dynamic monitoring and tasking with the AI integrated as part of the service and then the short delivery time lines, which are really critical to what -- as you can imagine, the things are happening around the world today.

So it's the combination of those 3 things that has us differentiated in the market and what customers are responding to. And as I mentioned in our remarks, our AI is operational and it is embedded in our customer workflows. And so it's not just a tech demo or some offline processing capability. It's happening in real time and it's delivering real information intelligence.

Yes. Got it. That's helpful. And then just lastly on Gen-3. I know maybe sometime last year, you were thinking 8 Gen-3s early-ish in the year. It looks like you're now thinking that later this year, if I caught your comment in the script.

Just curious to what extent that influences your ability to book customers, influences your ability to sign incremental revenue if you're capacity constrained in any way, assuming it doesn't present any gating factors. I was just kind of trying to figure out how I should think about that capacity and its potential influence on your ability to sign new business.

Yes. Jeff, as I said, we're on track to get 8 up this year. The real inflection point, as I'll say, in customer adoption was the performance of Gen-3. I've always said, once we have a few up there and get to a daily service, it provides customers a very good experience.

So that's now happened. And the growth and what you're seeing in that line of business is not limited by our capacity and we're in good shape this year with what we have and we'll just continue to grow the constellation.

Your next question comes from the line of Timothy Horan with Oppenheimer.

[Technical Difficulty] compared to what you've done historically and how do you think that's going to ramp? And are there any kind of new areas or new customers that are surprising you or new use cases? Any color would be helpful.

Yes. I mean, the customer sales and adoption cycle is not surprising. We've had very good visibility in our pipeline and there has been lot of interest by a lot of major customers in our Gen-3 capabilities.

So now that we're getting over the hump on that and they're getting firsthand experience with it, we're just seeing a natural growth in that business. As we mentioned in our remarks, we announced several large contracts, but we now are expecting the space-based intelligence and AI services, which is our primary subscription business to grow over 50% this year. This is our high-margin business.

So you're also seeing how that is translating directly into improving EBITDA margins and performance, particularly because that part of our business has -- is delivering about 80%-type gross margin. So no surprises in the sales pipeline.

If anything, current events are accelerating opportunities as the demand for this type of capability has never been stronger. And we're in a good position where we're now just converting the pipeline into new contracts.

And can you talk about the sovereign satellite capability? Are you seeing more interest there?

Yes. As I mentioned, we are seeing demand increase. There is major investments happening worldwide in space programs by governments around the world. We're seeing both opportunities for large constellations and opportunities related to countries that are just getting started.

We have seen a pick-up in interest around Gen-3 because it's proven on-orbit performance at this 35-centimeter capability is a really important factor as they're looking at other options in the market and our ability to manufacture Gen-3 at scale and also deliver that under a very competitive time lines is an attractive offering.

So we have a lot in the pipeline. We're pursuing a number of opportunities and moving them through and we expect this to be picking up as we go out through the year and into next year.

Lastly, Henry, can you give us a sense of the revenue -- quarterly revenue or maybe exit run rate at the end of the year? How should things pace? Is it linear? Is it hockey stick? Any color there would be helpful.

Sure, Tim. We'll be filing the Q this afternoon in there. You'll see how we've got our backlog -- our backlog -- full backlog is about $351 million as of March 31st, but that does not include the -- some of the large contracts that we signed in early April.

So that would be total backlog, including those about $380 million. Of that $380 million, we would expect about $90 million to be already booked for 2026. There will be some step functions in there and we've got a lot more pipelines coming in as well.

So we do expect the second half of the year to be a much stronger than the first half. And as we go, we'll hit that -- we do expect to get to that $100 million run rate by the end of the year.

Your next question comes from the line of Edison Yu with Deutsche Bank.

This is [ Laura ] on for Edison. So firstly, I want to ask about how the Middle East conflicts impacting your growth? Has that led to like large increase in usage year-to-date? And how you see that trend continue?

I would say, if anything, we've already -- we already had a very strong sales pipeline for Gen-3 capability and you're seeing that we're converting that into long-term subscription contracts.

I think if anything, the conflict in the Middle East is amplifying for other customers the need to lock in long-term contracts for capacity in the event these types of crisis events occur. And that's been traditionally how the market operates is because we serve the national community -- national security community.

The business is not driven by singular events. It's driven by day-to-day needs for a range of national security missions. So we don't see ebbs and flows around these events. But if anything, they amplify the importance of entering into these long-term contracts.

But also, I will say the capabilities that we have are -- do shine in these type of events when you're really trying to -- you can see the importance of really rapid and flexible intelligence that these operations need to monitor what's going on.

Okay. Got it. Appreciate it. Also want to follow up on this -- your AI efforts. So how should we think about the AI road map over the next 12 to 24 months? And what are the priorities there? And would you try to bring in some AI partners on either the model side or some cloud platform, et cetera?

Yes. I think the first major point is our AI is a proprietary capability. It was purpose-built for real-time space-based intelligence. So it's -- it was really designed to operate in customer workflows at scale and at speed.

So we will continue to expand over time the -- our ability to not only detect and classify important objects and things of that nature, but then how we start to see patterns and changes that are important to customers.

That's really the bottom line. AI is really just an enabler, but it's really all about providing that actionable intelligence to decision-makers at rapid time line. So we do incorporate a lot of third-party technology. But at the core, it's our proprietary capabilities around this mission set that has us leading in the market.

Your next question comes from the line of Austin Moeller with Canaccord Genuity.

So just my first question here, is there a critical mass of Gen-3s that need to be launched in order to get access to more contract dollars from either EOCL or Luno?

Or is it just a matter of the '26 budget being in place and task orders going out now from the program executive offices?

Yes. I would say our growth in that line of business is not dependent on a rate of launching satellites. We've got a core amount of capacity on orbit. And you have to remember, when combined with Gen-2, we have over 15 satellites up there that are providing dynamic hourly monitoring capability.

So now that Gen-3 is proven, we're just seeing a ramp in those contracts. More satellites means more capacity. And improve frequency and the very high-resolution capability. But we don't have anything right now that will be triggered by more satellites. We'll just continue to grow.

Okay. And can you comment on how Spectra's AI object classification capabilities compare with some of your peers that have expertise in mapping and geo data analytics?

I would just say that, as I said in my remarks, we are delivering this operationally today. They've been validated by major defense and intelligence customers.

So they trust the results that we're delivering and we're constantly improving and refining the training of those algorithms. The models are operational real-time. So that's a major differentiator.

It's not an offline process. But all I can say is you've seen our performance on Luno in the past in winning contracts because of the performance of our AI. And now you're seeing it working operationally. And I think that should give you a sense of why that capability is winning in the market right now.

Your next question comes from the line of Greg Burns with Sidoti.

Just a follow-up on the last question around EOCL. Does the updated guidance still contemplate revenue levels at the current level where they exited last year? Or are you expecting that to build back up to where they were prior to when they were haircut last year?

Yes. I think the assumption we have now is they remain at the current levels, the levels we exited last year. There are multiple funding lines that were in the fiscal year '26 budget for commercial imagery that are in the process of being allocated to specific programs and contracts and we're actively following the process.

We'll see better visibility throughout the quarter. But for now, we've been conservative, assuming the levels we exited the year at.

It's also important to note that, as we talked about, we're seeing the increase now on that business line. And these large contracts we're winning have significantly diversified our customer base.

And international is now a much larger percentage of our revenues. So we've minimized the impacts of some of the annual budget effects of the U.S. government.

Your next question comes from the line of Sheila Kahyaoglu with Jefferies.

This is Billy on for Sheila. Just continuing on the international side, there's a lot of momentum there. And how do you think about the pipeline and untapped opportunity going forward? And how do we think about progression of current customers expanding versus new customers?

Yes. I think we're seeing growth from a couple of dimensions. We are expanding the revenues with customers we've had for a long time as they start transitioning in scaling the use of Gen-3.

So we're seeing that. And then in parallel, we're adding new customers and I talked about that earlier. And then we're continuing to grow the pipeline to continue bringing a wave of those new customers into service.

So the other thing I'll mention is the quality of Gen-3 is demanding a higher premium than Gen-2 because of the 35-centimeter capability. So the dollars per sold capacity are increasing.

You're seeing an expansion of existing contracts. We're seeing new customers coming online and then the translation of those new customers in small initial pilots transitioning to 7 and 8-figure type subscription. So there's multiple growth vectors as we bring new and existing customers into higher levels of service.

Great. And then just like following up on that. In terms of international mix, like it's higher now. How do we think about that going forward? And how do we think about domestic versus international contributing to the 50% plus growth for the rest of the year?

Yes. As I mentioned earlier, we're -- we've assumed the U.S. government EOCL kind of maintains its current level. The majority of the growth is coming internationally.

Although we did announce a new subscription contract this quarter from another U.S. government agency that's leveraging the capacity of our Gen-2 constellation, so we are seeing new opportunities emerging with the U.S. government as well. So -- but the revenue mix will be growing significantly internationally as compared to the U.S. government.

Your next question comes from the line of Chris Quilty with Quilty Space.

I wanted to follow up on something that was already discussed. Just regarding the typical customer journey, is that accelerating, slowing down, staying the same? Are there any reasons that you're seeing a change in how quickly they're converting?

Yes. We're seeing an acceleration. As I mentioned, I think getting Gen-3 operational at a daily service level and putting that in the hands of customers to experience that firsthand is driving an increase in the pipeline and it's increasing the rate at which things are moving through the pipeline.

So -- and it's all -- it's really -- it's fundamentally based on the level of service that's available to these customers when combining 35-centimeter imaging with low-latency, flexible tasking operations with integrated analytics.

That's a first-of-its-kind capability in the market that's giving customers operational intelligence faster than ever and a lot of flexibility in how to leverage that capability across a lot of different mission sets. So it's not just about the pixels. It's about the level of service and how that's being integrated and used in a dynamic environment.

Got you. So for Henry, I mean, you did $16.5 million in the space-based intel and AI in the first quarter, which is the average of what you did all last year. So obviously, to ramp to $100 million, you're going to see a significant quarterly step-up.

Is that due simply to the contracts you have in backlog and those just falling in? Or is there a higher level of book and ship type business that you expect this year?

We've got a couple of things that are going to help that step up. You recall, we just announced that roughly $30 million 1-year subscription contract. If you take that and divide that by 4, you've got a pretty big step-up on that one contract alone.

That contract we signed in early April. So that should be kicking in here in the second quarter. So then when you take a look at our total backlog, we will -- we've got a lot of that already booked and we've got some additional renewals coming on board as well in the near term. So we feel pretty comfortable on it. We're going to get a step-up here in the second quarter, but bigger step-ups as we go into the third and fourth.

Got you. And remind me, the backlog in terms of the breakdown, I think you said $90 million to ship this year and which business segment that falls across?

We don't break it down between the different business segments and business elements. But for the most part, a lot of that is Gen-3 subscription, most of it is Gen-3 subscription.

Got you. Brian, also a follow-up on the EOCL. Back when that was awarded like 3 years ago, I was always under the impression that the uptake in the revenue because it didn't have a material impact at the time, but that the upside to the contract was based on Gen-3 capability being added into the contract. Is that not correct? Are they simply paying on the number of satellites and volume and not on resolution improvement?

Chris, if you remember, when it was originally awarded 10-year contract heavily back-end-loaded around Gen-3 services that grew over time. So the initial service levels were primarily around Gen-2 capacity.

And that was really the subscription that we've been operating under the last couple of years. Gen-3 is -- they are looking at integrating Gen-3 into that subscription this year. There's a lot of interest in that.

And as I said, we're watching how this -- the funding from the fiscal year '26 budget is going to flow through. But we are at a point with Gen-3 that's an attractive offering to the U.S. government and we'll have better visibility in that, I think, by the time we get through the second quarter. But there's a lot of interest in Gen-3 and the contract is primarily back-end-loaded for that capability.

Okay. Great. And Brian, you mentioned earlier the latency of the content delivery and goals to improve it. Can you talk about like what would be your sort of mid to long-term goals for where you think latency should get? And does that drive higher revenue as you drive the latency down? Or is that just becoming the table stakes of being in this business?

I think there's 2 ways to think about it. I think low latency is a requirement these days. You -- we're responding to dynamic events on the ground. And Chris, as you know, we've built a -- this is a purpose-built capability around responsive tactical operations.

So to us, it is a required part of the service and it's what customers are asking for. We -- in addition to the basic commercial service, we've also -- have the ability to directly downlink into customers' environments and that brings that down into minutes as well.

And so what you'll see from us continuing is just a constant improvement in that latency, not only in the imagery tasking and delivery time lines, but as we're processing more and more AI, we're doing that in real-time. So imagine we're interrogating this imagery and looking for objects and activities across a lot of things in parallel. So -- but we see it as really a core part of our offering and it's what customers are really looking for.

Got it. And maybe if I can, a final question. I know you don't do backlog breakdown, but I'm going to ask you a question on pipeline breakdown. Can you just give us a general sense when you talk about your business pipeline, either where you're currently seeing the largest area of pipeline or alternatively, where you're seeing the greatest growth in pipeline opportunity?

I think proportionately, we're seeing growth in all 3 aspects of our business. We're seeing growth in the pipeline around our space-based intelligence and AI services as you're seeing that translate into new contract wins.

I already talked about the Mission Solutions pipeline as the demand for sovereign is increasing and we're seeing an acceleration of those types of programs. And we're also seeing a lot of interest in the advanced technology programs.

As you know, Chris, as you know as well as anybody, space is a long game. And so customers are understanding that it's not only about what you have now, but where this is going to be in the future in the next 3 to 5 years.

So we're seeing a step-up in that part of it as well. And we see that as a key part of our strategy is leveraging those investments and then translating that into the innovation and a leadership position in our space portfolio. So we're seeing growth across all 3 aspects of the sales pipeline.

Your next question comes from the line of Scott Buck with Titan Partners.

I think most of my questions have been answered, but just one. Brian, as demand for sovereign increases, are you seeing more [Technical Difficulty].

I'm sorry, Scott, can you repeat that?

Yes, yes, sure. As demand for sovereign increases, are you seeing more competition for these opportunities?

I think, yes, there are a lot of -- there are -- there is increasing competition, but they're from a number of companies that have really not demonstrated proven operational performance.

And as I mentioned in my remarks, having a capability like Gen-3 that is delivering the quality of 35-centimeter imaging at the level of performance that we're seeing -- and then having that on orbit and proven and operational at the economics of that spacecraft is a really compelling proposition for customers.

As you know, these types of customers aren't going to risk their long-term road maps on unproven space capability. And so we feel like we have a very good advantage there. Gen-3 worked right out of the box and it has been exceeding expectations and that is giving customers a lot of confidence in our ability to support their long-term programs.

So we feel we're really well positioned. There are not -- Gen-3 is a best-in-class capability and we're seeing that in the opportunities that are coming at us.

Your final question comes from the line of Preston Graham with Stonegate.

Preston sitting in for Dave. You touched in the prepared remarks on land and expand. And so I guess for customers and pilot programs for Gen-3, are most using the broader full analytics suite from the beginning? Or do they typically start with imagery and then expand into analytics over time?

Yes, I think the way you have to think about it is they have access to a platform and that platform has a lot of different capability that they can tap into. And so they can task imagery from Gen-2 and Gen-3 satellites.

They can also, as part of that tasking operation, request different types of AI-enabled analytics as part of the natural workflows.

So what we typically see is customers start with the basic operations, which is a dynamic tasking. And then as they integrate that, then they start adding the AI analytics as part of the service.

So I think it's an important comment in that it's a full service offering that we have through the platform. And again, that's not typical in the market. So that's another factor of what's driving the increase in our demand and the customer traction.

Got it. So you wouldn't even say it's not like 35-centimeter, the quality of the imagery is the main driver. It's the platform, it's the whole suite. It's all of it.

It's all of it. 35-centimeter is an important aspect because very high resolution matters. The more resolution you have, the better insights you get from the imagery, but also the level of analytics you can extract with AI goes up as well.

So -- but I'll also say timeliness matters and time diverse collection throughout the day matters as well. So it's a combination of all those things. And keep in mind, just a few years ago, this went from really commercial being mapping capabilities. So now we're in dynamic monitoring with real-time intelligence from space. So it's a major paradigm shift around our purpose-built capability.

Understood. And then maybe just one final one. You've talked about in the past kind of vertical integration gives you better visibility into production and deployment. Are there any kind of current supply chain constraints that could impact Gen-3 production or launch timing or still feeling good about the road map?

As I said, we're on track. We did bring LeoStella into the company over a year ago now to improve our visibility in the supply chain and streamline production operations. That's going very well.

We have ordered long lead supply components so that we can maintain a regular cadence of production of Gen-3. And through that cadence of production, we can use those satellites to expand our commercial constellation or accelerate deliveries on Mission Solutions contracts, which is a competitive advantage in the market.

So the vertical integration we've achieved is paying off and you're going to see that scale as we move throughout the year and into next year.

There are no further questions at this time. This concludes today's call. Thank you all for attending. You may now disconnect.

Ladies and gentlemen, thank you for joining us, and welcome to BlackSky Technology Q4 2025 Earnings Call. [Operator Instructions]

I will now hand the conference over to Aly Bonilla, Vice President of Investor Relations. 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'll 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. 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 3. I'm pleased to report that we delivered a strong finish to 2025 with a near-record performance in Q4. The momentum we are seeing in the business is driven by the successful deployment and demonstration of our Gen-3 satellites last year.

Our Gen-3 satellites are highly differentiated in the market and are a fundamental step forward in our space capabilities, delivering proven on-orbit 35-centimeter imaging performance that is exceeding customer expectations. Now that these initial satellites are fully operational and validated by major customers around the world, we are seeing growing adoption and the ramping of revenues related to this new imaging capacity. Our progress on Gen-3 in 2025 was a significant operational milestone that is now a major catalyst for our future growth.

Turning to Slide 4. In 2025, we successfully launched and commissioned 3 Gen-3 satellites with each deployment demonstrating our ability to rapidly bring new capacity online. Most notably, our last Gen-3 satellite began delivering very high-resolution imagery within 12 hours of launch and entered commercial operations in just 3 weeks, setting a new industry benchmark for satellites of this class of imaging performance and accelerating access for our customers.

Gen-3 satellites are consistently delivering 35-centimeter imaging performance on par with much larger, more expensive and complex satellite systems. Enhanced image clarity dramatically advances our real-time AI-enabled analytics. This level of imaging and analytics performance is driving new customer adoption, converting early access pilots into long-term subscription contracts and unlocking Gen-3 related revenues from existing contracts. We are on track to further expand the constellation throughout 2026 with a pipeline of Gen-3 satellites in production and our next satellite already at the launch site.

Now let's move on to Slide 5 and some of our major highlights from last year. First, as a result of strong global demand and the performance of our advanced Gen-3 satellites, we secured $240 million in contract bookings with the majority comprised of international multiyear contracts. This success contributed to our growing backlog to $345 million, providing strong revenue visibility.

Second, we delivered near-record revenue in Q4 of $35 million, representing a 16% year-over-year increase, which drove annual revenues to $107 million with a significant step-up in revenue contribution from international contracts.

Third, we achieved our second consecutive year of positive adjusted EBITDA. This performance demonstrates disciplined execution, scalability and operating leverage of our business.

And finally, we significantly strengthened our balance sheet and increased our liquidity position to over $225 million. These highlights underscore the momentum in our business and the growing visibility toward free cash flow operations and long-term profitable growth.

Moving to Slide 6. Before we get to some of the operational highlights, I would like to take a moment to talk about how we are aligning the 3 key elements of our business to address a large and expanding market opportunity for space-based intelligence. These elements are not new to our strategy, but rather we are increasing the focus, visibility and capture of these opportunities across 3 primary growth vectors. With spending and demand expected to increase over the next decade, we are seeing growth opportunities in commercial, space-based intelligence and AI services, sovereign mission solutions and advanced technology programs.

Space-based intelligence and AI services is what we referred to in the past as our imagery and analytics business. This is our core high-margin subscription business that leverages our commercial satellite constellation and our Spectra AI platform to deliver real-time imagery, monitoring and AI-enabled insights through subscription contracts. This name change better reflects the depth and breadth of the types of AI-enabled solutions we are bringing to market now and in the future.

For the mission solutions element of our business, we have been winning new contracts for sovereign space-based intelligence solutions over the past several years and, for example, have successfully captured major programs with customers in India, Indonesia and others for Gen-3 related solutions. We are now consolidating these types of programs into mission solutions that include the delivery of satellites, ground system hardware and software as well as the integration of these capabilities into customer environments. We are seeing increased demand for sovereign space-based intelligence solutions as a TAM expansion opportunity and believe that this change will provide better visibility into this aspect of our business going forward.

For the advanced technology programs part of our business, we have had a longstanding strategy to partner with key customers to develop and demonstrate advanced space and AI capabilities through funded R&D programs. Over the course of many years, these contracts have augmented our own internal R&D and capital investments and have been instrumental in driving innovation and advancing leading edge capabilities such as inter-satellite optical crosslinks, next-generation satellites and payloads and advanced multispectral AI and analytics solutions. We expect this trend to continue as customers around the world are seeking new and innovative ways to accelerate next-generation space and AI capabilities. We believe that these 3 elements are well aligned to capture opportunities in a growing and expanding market.

Now let me share some recent highlights from each of these major elements of our business. Let's move on to Slide 7 and some recent highlights under space-based intelligence and AI and AI services. Throughout Q4 and carrying into this year, we are making good progress in closing new customers for early access Gen-3 pilot programs and quickly converting them into longer-term subscription contracts. One example is a new international customer that started with a small pilot and rapidly grew within a couple of months to what is now a 7-figure quarterly run rate to support their time-sensitive mission-critical operations.

For existing customers, we are adding access to Gen-3 services and ramping revenues under those contracts. For example, in Q4, we moved into the next phase of a $100 million multiyear subscription contract we announced last year and have now added assured access to Gen-3 imaging services to support this major international customer. As part of a 7-figure contract we announced last year with the U.S. government, we are ramping up their use of Gen-3 in their operations.

Our leading AI capabilities continued to deliver incremental revenue with the award of additional options under the NGA Luno contract. We also continued to win new orders through the U.S. Space Force Global Data Marketplace. We expect to continue this momentum and unlock additional revenue growth while we expand the Gen-3 constellation throughout the year.

Now let's turn to Slide 8, and mission solutions. We are continuing to see increasing demand for Gen-3 sovereign solutions from governments around the world. Just recently, we announced an 8-figure multiyear contract with a new international customer. This new contract includes the delivery of a Gen-3 satellite, ground station capabilities and satellite operation support. In addition, it also includes assured access to our commercial imagery and analytics services that will be delivered through our space-based intelligence and AI services.

Last year, we highlighted the capture of a new multiyear contract valued at over $30 million to integrate Gen-3 tactical ISR services into the operational environment of a major international customer. In Q4, we successfully delivered against some of the major milestones of that contract, which contributed to our strong Q4 performance.

And finally, we continued our strong execution on some of our other contracts that included major milestone deliveries that drove conversion and burn down of prior unbilled receivables.

Moving to Slide 9 and some updates on our advanced technology programs. In parallel to our primary business, we continue to advance our space and AI capabilities through a number of customer-funded R&D programs. We are making significant progress on a number of key technology initiatives that include optical intersatellite crosslinks for next-generation low-latency space-based communications, the development of AROS, our future advanced large area mapping and change monitoring satellites and advanced AI training, algorithm and model development, including the deployment of real-time AI processing into space and edge environments.

Throughout 2025, we continued to see increased interest from our customers to accelerate these and other future capabilities in support of long-term space-based intelligence imperatives. And as a result, we expect to expand our portfolio of these types of projects throughout 2026.

The highlights in 2025 are a direct result of the successful deployment, demonstration and introduction of Gen-3 performance and capacity into the market. With proven and reliable on-orbit performance, we are seeing strong momentum across all aspects of these 3 key elements of our business and are excited to carry that momentum into 2026.

With that, I'll now turn it over to Henry to go through the financial results. Henry?

Thank you, Brian, and good morning, everyone. I'm pleased with the strong finish to 2025 and the strong momentum we're seeing in the business. We continue to focus on long-term profitable growth and have now delivered 2 consecutive years of positive adjusted EBITDA. We strengthened our balance sheet as we ended the year with over $225 million in liquidity, and we have over $345 million of contracted backlog that is increasing our revenue visibility.

Now let's begin with Slide 11. Total revenue for the fourth quarter of 2025 was $35.2 million, up 16% year-over-year. This growth was primarily driven by a few key factors. First, as Brian mentioned earlier, we won a new mission solutions contract with an international customer. This contract agreement includes the sale of a Gen-3 satellite and other mission solutions services, of which we were able to recognize a significant amount of revenue within the quarter.

Second, we achieved key program milestones against recently awarded Gen-3 contracts for tactical ISR service integration work that also contributed to increased revenues.

And third, a number of our international customers ramped up use of their subscription access to our space-based intelligence and AI services as well as additional orders received from NGA's Luno program and from the U.S. Space Force's Global Data Marketplace. The strong Q4 revenue performance demonstrates our ability to rapidly monetize Gen-3 capabilities.

For the full year, our total revenues increased to $106.6 million. This performance was attributable to the growth in our mission solutions business, the ramp-up of our Gen-3 capabilities and continued expansion of our international customer base. We were able to achieve this growth despite U.S. government budget challenges. In fact, revenues from international customers grew over 50% from the prior year and now represent more than half of our total revenues.

Let's now turn to Slide 12 and talk about cash operating expenses, which excludes stock-based compensation, depreciation and amortization expenses. For the fourth quarter of 2025, cash operating expenses were $17.7 million compared to $16.9 million in the prior year period. For the full year, our cash operating expenses were $74.3 million, up from $64.9 million in 2024. This increase is primarily attributable to our LeoStella acquisition in 2024.

Moving to Slide 13. Our adjusted EBITDA for the fourth quarter of 2025 was $8.8 million, a 20% increase compared to an adjusted EBITDA of $7.4 million in the prior year quarter. The year-over-year increase of $1.4 million was primarily driven by higher revenues, as I outlined a moment ago, and continued responsible cost management. The strong Q4 performance drove full year adjusted EBITDA to $900,000, delivering a second consecutive year of positive adjusted EBITDA. We continue to remain focused on scaling our revenue while maintaining operating discipline, which we believe will drive improving margins as we continue to sell more constellation capacity.

Let's move on to our cash and liquidity position, as shown on Slide 14. We ended the fourth quarter of 2025 with $125.6 million of cash, restricted cash and short-term investments, which is more than double our cash balance of $53.8 million from a year ago. During the quarter, we achieved major milestones across multiple contracts that triggered invoicing of prior unbilled receivables. As a result, we ended the year with $26.6 million of unbilled contract assets, a significant reduction from about $43 million at the end of the third quarter. With the billing from these milestones and the additional contracts we won, our accounts receivable balance ended at $37.6 million, which we expect to collect in the near term.

We also signed a new vendor financing agreement, securing additional Gen-3 launches in 2026, which provides us with a total of $37.4 million in available launch financing. Taking all these items together brings our total liquidity position to over $225 million or an 84% increase over the position we ended with in 2024. With this liquidity position and our continuing strong operating performance, we believe that we have sufficient liquidity to deploy our Gen-3 constellation, grow our business and continue on our path towards positive free cash flow.

Turning to the outlook on Slide 15. We expect full year 2026 revenue to be between $120 million and $145 million, representing a 24% growth over 2025 at the midpoint of this range. This annual growth is driven by strong backlog visibility, which we expect to convert into revenue throughout the year, continued Gen-3 satellite deployments, delivering increased capacity to our customers and a growing pipeline of sales opportunities. Historically, our revenue performance in the second half of the year has always been stronger than in the first half, and we anticipate this year to be the same.

We expect full year 2026 adjusted EBITDA to be between $6 million and $18 million, reflecting our continued progress towards sustained profitability while maintaining investments in a number of growth initiatives. Capital expenditures for the full year 2026 are projected to be between $50 million and $60 million and are primarily focused on building out our Gen-3 constellation and advancing our next-generation satellite and AI technologies.

In summary, we're pleased with our fourth quarter and full year financial performance, the momentum we're seeing across the business and our expanding international customer portfolio.

With that, I'll now turn it back over to Brian for some closing remarks. Brian?

Thanks, Henry. We're pleased with the strong finish to 2025 and the momentum we're carrying into 2026. Building on the success, proven on-orbit performance and customer validation of Gen-3, we are off to a strong start to the year. The growing market opportunity for space-based intelligence is accelerating, and BlackSky is well positioned to meet this demand through an industry-leading space, ground and AI technology stack that we are successfully leveraging across multiple lines of business to capitalize on a number of growth vectors.

We enter 2026 with a strong balance sheet, a growing backlog of high-visibility revenue for our space-based intelligence and AI services and mission solutions and a clear and strong execution strategy for growth.

This concludes our remarks for the call, and we'll now take your questions.

[Operator Instructions] Your first question comes from the line of Edison Yu with Deutsche Bank.

First, I want to ask about the new 8-figure sovereign deal. I guess it's falling under mission solutions now. Can you give us a little bit more detail both in terms of the customer, the pacing of how that revenue gets recognized and more generally, the pipeline of similar opportunities going forward about deals like this or structures like this?

Sure. Thanks for the question. Yes, as we outlined in our remarks, this is a -- we'll call an initial contract for a Gen-3 satellite that includes some ground capability and software as well as multiyear support services. It is bundled with a commercial contract for subscription-based access to our commercial constellation and AI services. So that means that these types of contracts support both of those elements of our business. This is -- in this case, we were able to, as Henry mentioned, recognize a good portion of revenue of that in the fourth quarter as we're able to make immediate deliveries.

The strength of this is that we were able to pull a satellite off the production line and accelerate the customers' schedule. So we will move forward on their schedule to launch the satellite as quickly as we can either later this year or early next year. So we are seeing a general trend where a number of these types of customers will start with a few satellites with ambitions to expand much further beyond that and grow those over time.

Just a follow-up. Do you have a sense of how many of these type of programs or deals are in your pipeline? Is this something that could be multiple countries, dozens of countries? How does one think about that?

Yes. I think we're building a very strong pipeline. We're seeing this type of trend across a number of regions in the world and with a number of customers in each region. So I think, Edison, the way we think about this as a TAM expansion opportunity, maybe to put this in some numbers about maybe less than 5 years ago, they were under 12 or 15 countries that had sovereign space capability. Now there's over 60. And so -- and many of them are in the early phases of building out their capabilities.

So this is a large and expanding market, and there's a number of customers that are coming into this with very little initial capability that we're able to help accelerate their long-term plans.

Got you. If I could just sneak one more in. Would you expect to announce another similar type of deal this year?

As I said, we have a very strong pipeline. We have a number of deals moving through the pipeline. Timing of international deals has always been challenging to predict exactly. And just also keep in mind, these tend to be lumpy. So these deals will come in and then you'll see these spikes in revenue as we recognize revenue depending on the nature of the contract.

Your next question comes from the line of Jeff Van Rhee with Craig-Hallum Capital Group.

Maybe to start with you, Henry, in terms of the guide. If I look at the low end of the guide, what has to happen here to hit that in terms of new bookings versus already having that in backlog?

We've got strong -- Jeff, thanks for the question. This is Henry. We've got strong visibility. We do have a backlog, as we've said, maybe about $345 million. We've got nearly $75 million of that coming through in 2026.

We also have renewals that are not yet in there. So that's kind of our standard modus operandi. So we've got strong visibility to get into that -- into the low end and actually all the way into the full range there.

Yes. Is the -- just to be clear, is the low end assuming -- I mean, can you give a ballpark of how -- what kind of new bookings you need to make that? Or is it already in the bag?

Well, as I said, we've got a fair bit of renewals in there. So we feel pretty comfortable that obviously we wouldn't put a low end out that we wouldn't feel that we could hit.

Okay. Got it. And then, Henry, you mentioned on the guide in terms of linearity, you assume it's back-end loaded. Can you just expand a little bit? You had this large 8-figure customer. It sounds like a lot, maybe most of that revenue fell in Q4. So how much of that does not recur in Q1? Just trying to get a sense of the stepdown and then how to build the ramp through the year.

Well, I guess the way I would look at it, if you look at us historically over the last number of years, we've usually been in kind of like the 45% -- 40%, 45%, less than 50% in the first half of the year and 55% to as much as 60% in the second half of the year. That's kind of the way I would be looking at it.

Got it. Okay. And then just last. On the Gen-3s, obviously, I think compared to your initial hopes, expectations, the time line of getting those in the sky has been slower than expected. Just curious, as you're looking back on kind of what's playing out there, is there anything that needs to change? Are you satisfied with the timelines it looks like in terms of how those are going to roll? And where do you think you're going to end 2026 in terms of the number of Gen-3s up?

Yes, Jeff, the way that we're looking at it right now is we've got these first 3 up and they're meeting and exceeding expectations, performing exceptionally well. And that performance has driven the revenue ramp that we're experiencing in the fourth quarter and taking into this year. We have the next one already at the launch site.

Our goal will have -- will be to have 8 to 9 Gen-3s on orbit by the end of this year. The -- we're in very good shape. As we mentioned, we had -- we found an issue in testing on the prior satellite. But we -- this is very typical with your first few satellites.

I'll remind you with our Gen-2 constellation, we started with a similar cadence, and then we quickly got to the point where at one point, we launched 6 satellites within 20 days. So we are on track and the satellites are performing well and our production operations are ramping.

Yes. Congrats. I mean that first flight performance is pretty exceptional and the imagery just looks outstanding. So best of luck.

Your next question comes from the line of Timothy Horan with Oppenheimer.

Any updated thoughts on -- is there an inflection point for where you get some scale when you hit like 6, 7, 8 satellites or maybe more general availability and you see a little bit more operating leverage? Just thoughts on what the critical number is there.

Tim, I guess we don't think of it that way. I think the way we are seeing it is the 3 we have up there have been sufficient to put in front of customers so they can validate the performance and how they integrate this capability into their operations. And our sales cycle reflects that along with unlocking revenues from existing contracts.

So the thing that maybe keep in mind is the number of satellites is not indicative of revenue. There's some companies with hundreds of satellites that have a certain revenue profile and others that have 6 to 8 that have a completely different revenue profile. So we view it more as customer adoption rate and unlocking performance, and we scale that capacity commensurate with the level of service that we need to deliver, whether it's imaging, performance and quality, revisit or low-latency delivery with AI-enabled intelligence. So it's a customer ramping and capacity ramping trend that we're working toward.

Got it. It does sound like you are a little bit capacity constrained on the manufacturing line, but I think you're implying that that's going to accelerate your ability to accelerate your manufacture of these satellites. Is that pretty accurate?

Yes, I wouldn't call it capacity constrained. I would call it being very measured with the first several satellites to ensure that the ones that are going up there are meeting our quality standards. And we are in parallel, optimizing supply chain and our production processes to hit an operating cadence out of production.

So as I said, this is typical, and we are feeling very good about where we are.

Got it. And then lastly, just any thoughts on U.S. spend at this point from the government? What are you kind of expecting this year? Are you seeing improvements there?

Yes. I think let me just say we're happy that Congress approved the '26 budget, which includes funding for EOCL and other commercial imagery and analytics initiatives, both at NGA and Space Force. So for EOCL, we've taken a conservative approach in our forecast this year, and we expect that will take some time into Q2 across all of these programs before we get better visibility in how this funding is going to be appropriated to specific programs and contracts. But we're seeing increased interest across the government and expanding use of commercial imagery and analytics.

Your next question comes from the line of Jaeson Schmidt with Lake Street.

Just following up on the new 8-figure contract. Just curious how long you were in discussions with that customer before inking that contract? And I guess, relatedly, what you're seeing from sort of a sales cycle timeline when it comes to some of these Gen-3 contracts?

I think the way we think about it, Jaeson, it's -- these are 12- to 18-month type sales cycles. And in this particular case, this was at the faster end of that. So I think we're seeing a very consistent trend around that length of sales cycle.

Okay. That's helpful. And then just as a follow-up, not looking for specifics, but just curious at a high level, if the pricing of the Gen-3 capacity is in line with your prior expectations?

It's exactly in line with our expectations and what we have modeled in our business plan. The thing that you need to keep in mind is we have increased the pricing commensurate with the -- from Gen-2 to Gen-3 with the improved 35-centimeter capability.

Also keep in mind that these Gen-3 satellites are producing imagery at a level of performance of much larger and more expensive satellites that, in some cases, can be 10 times more expensive. So these types of -- these compelling economics are really enabling us to provide our customers with exceptional value at competitive prices while delivering strong margin performance to the business.

Your next question comes from the line of Chris Quilty with Quilty Space.

Looking out to '26, and thank you, by the way, for providing the new segment reporting that's definitely helpful, can you give us a sense of what sort of a breakdown you expect revenue-wise between the segments? I'm thinking it's probably like a 70-30-ish on the imagery and analytics.

And the second part of the question for Henry, can you just talk to us about the accounting methodology for the sale of satellites to customers, both during the production process? Is there a percentage completion? Or is it done more at final sale?

Yes. Chris, thanks for the question. Let me take the first question before I hand it over to Henry. Yes, I think the mix is really consistent with where we've been in the past. This is just providing some visibility across those 3 elements. We expect that the space-based intelligence and AI services to contribute somewhere in that 60% to 70% of our revenues, which is -- that's our higher-margin subscription element of our business.

The mission solutions, think of that being in this kind of 25% range at this point, but we expect that to grow. We expect them all to grow. That may grow a little bit more disproportionately as those are larger deals. And then finally, the technology development programs, as I said, we've had a long history of those. And we expect to kind of sustain that and grow it, I think roughly 15% or so of our total revenue.

So no really -- not much change in the blend, but just providing better visibility.

Chris...

Henry?

Yes. Looking at kind of the mission solutions line, given the fact that these satellites do have some customization associated for each individual client because of the way they need to operate them a little bit, we are able to look at from kind of an ETC basis or kind of a percent complete as you're calling it. So that we do expect to be able to get some revenue recognition as we march through. And that's what we were able to do with this 8-figure contract in the fourth quarter.

Great. And when you look at the international sales model, I mean, we've certainly seen kind of 2 different models, one where transfer of the satellite to the customer, another where you operate the satellite as a bespoke element of that customer's customer ownership, you're operating it and you monetize in different regions. Do you prefer either of those margins? What direction do you see that trend line going? And are there significant modeling considerations we should think about depending upon which model you use?

Yes, Chris, I'm not sure we would say we prefer one model versus the other. I think what we're doing now is being responsive to how our customers want to structure these contracts. As I mentioned before, in the mission solutions, it's essentially giving them sovereign capability and control that may include operational support, leveraging our commercial infrastructure. But -- and then bundling that with our commercial services that are giving them higher-performing revisit and real-time AI-enabled intelligence that augment that.

So there's a number of different business models, whether it's a constellation as a service or a turnkey system. We've developed a strategy where we're flexible to meet the customer where they are and be on that journey for them in the long haul of how they want to expand this over time.

Great. And Henry, are you going to give a quarterly breakdown of the new segment reporting in the K?

For historically, yes, we will. Historically, there will be.

Your next question comes from the line of Austin Moeller with Canaccord Genuity.

So just my first question, can you comment on the NRO having 200 of its own satellites in orbit now? Do you know what modality they are? Are they like EO, infrared, SAR? And would you consider that to be complementary or competitive to Gen-3?

Well, I think the U.S. government and other major governments have always had their own sovereign capability for critical national security needs. That's been the case for a long time. I think what's important to understand in the U.S. government is that there's several unique missions that U.S. government has moved to commercial capabilities. And that -- those set of requirements have long been allocated to what is now EOCL, but prior to that, [ EnhancedView ] and the predecessor contracts. So I think the way we look at it is we're not competing with those systems. We're augmenting them.

We can move much quicker in the innovation cycles. We can provide a resilient augmentation capability. And then also, which is extremely important is everything we do is on classified, which is shareable with our allies. So it's not a competition. It's an augmentation and it's serving very specific missions that have been allocated to the commercial industry.

Okay. And are you able to comment on what the size of the commercial imagery budget was in 2026 now that the budget was passed? I know it's usually classified, but I don't know if that's been divulged yet.

It's still -- it's a classified budget line.

Your next question comes from the line of Scott Buck with H.C. Wainwright & Co.

Brian, I'm curious, you guys talked about the significant international demand. Can we get a little more granular there? Is that Asia? Is that Europe? Or what can you tell us about where that's coming from?

And then second, what do you think was left on the table in the U.S. in terms of revenue from the shutdown during the end of '25?

Yes. I think -- Scott, I think we're seeing on the mission solutions side internationally, pretty much demand almost in every major region across the world, Europe, Middle East, Asia Pacific, Southeast Asia, et cetera.

So like I said, the number of countries that are putting significant dollars into building sovereign space capability, both for national security and economic development purposes is growing very rapidly. And so we do have a pretty strong pipeline worldwide.

I think on the -- what was left on the table question, we talked about the impact of some of those government budget changes that we addressed in August. I don't know, Henry, if you want to maybe comment on that again, but I think we've shared those numbers.

Yes. We have shared, Scott -- I mean, back in some of our prior earnings calls, we did talk about how with the budget cuts and the impact that we had, that was in the neighborhood of about $2 million per month starting in August, so about a $10 million hit for the year. So that's what we stated.

Great. I appreciate that. And then as we move closer to '27, could you give us a little more color on how the rollout of AROS would work? And maybe some color on what the opportunity -- the revenue opportunity looks like versus the imagery business?

Yes. The AROS satellite is a TAM expansion opportunity for us. Our Gen-3 capability is high-frequency dynamic monitoring of strategic sites of interest. AROS is being designed as a large area mapping -- digital mapping capability for large area change monitoring.

Think of the large imagery demands and collection required for things like Google Maps and other digital platforms, including in support of next-generation AI capabilities, the development of digital twins. And so AROS is being designed specifically for those set of requirements. And the Gen-3 and the AROS satellites will work cooperatively to deliver a high-value service to our customers that need both of those capabilities.

And then also, it's a commercial expansion opportunity, particularly in area of digital mapping and other -- civil and other civil type markets that require that type of mapping. So it's a purpose-built satellite for a new market opportunity.

Your next question comes from the line of Sheila Kahyaoglu with Jefferies.

This is [ Billy ] on for Sheila. Just on the cash operating expenses, you've held them relatively flat while growing revenue, which is great. What are some of the drivers of the cost management? And as Gen-3 continues to scale, how are you thinking about OpEx and operating leverage?

Yes. I think I'll start. I can hand it over to Henry. We have, from day 1, been building a platform that gives us significant operating leverage. As we get the business over the fixed price cost of running that and maintaining it, that's where you see significant margin performance that goes to the bottom line for every incremental amount of capacity that we sell. So you can see that in our EBITDA margin performance over the last couple of years as we've been monetizing that capacity off of a fixed operating -- generally fixed operating base.

I don't know, Henry, if you want to add anything.

I think you covered it there, Brian. I mean, we're disciplined in kind of cost management. We do make investments in sales, marketing and other R&D type stuff so that we are always making sure that we're growing, but we're also quite disciplined to make sure that we provide the leverage so that as we grow our top line, it will drop to the bottom.

Great. Helpful. And then just one more on free cash flow for 2026. What do you see as the major moving pieces as you progress towards positive free cash flow? And for 2026, like what are the working capital needs? And for the $55 million in CapEx, how do you think about the mix between Gen-3 investments and AI technologies?

Well, we don't break CapEx down between those 2 in our guidance. But as you can look historically, I mean, we typically have in the neighborhood of about $12 million to $15 million of kind of general corporate development CapEx, AI CapEx, et cetera. But the big thing there is as we're guiding, we're growing the adjusted EBITDA, which is a surrogate for operating cash flow, and we believe that we'll be able to hit the target ranges that we're putting out there.

Your next question comes from the line of Greg Burns with Sidoti.

Just a follow-up on the EOCL funding. And I know it's -- the budget is classified, so maybe you don't have an exact number. But do you have any sense of whether or not the cuts -- the proposed cuts were enacted or if funding was restored to historic levels?

Yes, as I mentioned earlier, it is classified, but what we are seeing is there's multiple budget lines. There has been a couple that have been added, and we're sorting through how that is going to play out in actual implementation. So we're seeing some positive trends out of that, but we have to see how this shakes out over the next quarter.

Okay. And I guess, is any part of your guidance range, does that include that -- the level of revenue from EOCL stepping back up? Or is that not anywhere in your guidance and that is potential kind of upside?

I'll just say we've taken a very conservative -- yes, we've taken a very conservative approach to our forecast this year relative to EOCL, and we'll see where this lands by later in the second quarter.

Your next question comes from the line of Greg Pendy with Clear Street.

Just one real quick one. Under the old reporting, your Ks and Qs would break down imagery versus data software and analytics. And I think at the beginning of the call, you mentioned sort of that flywheel effect of getting the better imagery feeding into the AI capabilities. Thus far, the data, software and analytics growth has been pretty stagnant. So can you kind of give us a little bit of color on how the improved imagery kind of feeds into that area and how it would play out in 2026 with the better imagery?

I think just first off, last year, because of the government budget issues that had an impact on the growth of that line. But now that is being offset by the strong demand we're seeing in the international markets, particularly around Gen-3 and then the expansion of the improved AI capability that Gen-3 brings as well. And then the pricing increase. So we have a very good visibility on how that line is going to be growing going forward.

Your next question comes from the line of Dave Storms with Stonegate.

I wanted to circle back to cash management. Henry, I believe in your prepared remarks, you mentioned that we should see an accounts receivable burn throughout the year. Just curious if you could give us any more color there, maybe some of the puts and takes on working capital management and if we should expect that AR balance maybe get back down to 2024 levels or not?

Yes. I mean when you take a look at the press release and the balance sheet there, our accounts receivable is about that $37.5 million mark. A lot of that, as you might imagine, when we signed a contract late in the year, and there's a fair bit of revenue, we built for it, but you haven't lapsed that through that typical 30- to 45-day receipt cycle. So we expect to kind of be able to bring that stuff back down.

With mission solutions, we may get some lumpiness on that. But we've never had a problem with collecting receivables.

Understood. Very helpful. And if I could just ask one clarifying question. I think you mentioned earlier in the call that sales cycle is typically 12 to 18 months, and I think that was specific to those 8-figure contracts. Are you seeing a similar sales cycle for, call it, the 45 additional sovereign nations that have kind of come online in the last 5 years? Or do they tend to have a little bit of a longer sales cycle?

I think they're all a little different, Dave. It's hard to -- especially when you have customers that are doing this for the first time and implementing new acquisition programs. So my range in sales cycle is really a general number. We'll see some go faster. We'll see some take longer.

There are no further questions at this time. This concludes today's call. Thank you for attending. You may now disconnect.

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 2025. 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 p.m. Eastern time today through November 13th. 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 certain statements made during today's conference call regarding our future plans, objectives, and expected performance, including our financial guidance for 2025, are forward-looking statements. 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. We encourage you to review our press release, Form 10-K, and other 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 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. The reconciliation of these non-GAAP financial measures to their most comparable GAAP measures are included in today's accompanying presentation, 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?

Thanks, Aly, and good morning, everyone. Thank you for joining us on today's call. Beginning with Slide 3, I'm pleased with the strong momentum in the business as the success of Gen-3 is delivering best-in-class imagery and analytics and driving significant demand toward unlocking our next phase of growth. We are gaining customer traction, growing our pipeline, and building backlog for both our imagery and analytics services and for Gen-3 powered sovereign solutions.

Customers around the world are recognizing Gen-3's superior performance, especially at a time when they are seeking to accelerate their sovereign space based intelligence capabilities. BlackSky is well positioned to capitalize on this market opportunity by leveraging a full technology stack that includes real-time software, advanced AI, Gen-3 satellites, and vertically integrated satellite production capabilities.

While the quarter reflected anticipated impacts related to U.S. government budget uncertainty, we closed significant new contract awards and expect to remain on track to hit our full-year financial objectives. Strong international demand is outpacing the near-term U.S. government business, and as such, we are anticipating a strong Q4 and expect to take that momentum into 2026.

Now let me share some recent highlights as shown on Slide 4. First, we were awarded more than $60 million in new contracts, primarily with international customers, as we continue to diversify our customer base and revenue mix. In addition, these contract wins are predominantly for the delivery of Gen-3 services, demonstrating the traction we are seeing for this capability around the world. We expect this momentum to continue as we move forward on the deployment of the Gen-3 constellation over the coming months.

Second, we are pleased to have been awarded a contract valued at over $30 million to integrate Gen-3 high-cadence tactical ISR services into a strategic international defense customer secure environment. This contract demonstrates how BlackSky is accelerating sovereign space-based intelligence capabilities by leveraging proven commercial space technology to address their mission-critical requirements.

Third, traction for our Gen-3 imagery continues to build as we expand the number of customers participating in our early access program, including a new seven-figure contract to commence delivery of Gen-3 imagery services to the U.S. government. We are starting to see contributions from Gen-3 imagery revenues and expect this trend to continue as we bring more Gen-3 capacity online.

Fourth, we're seeing our AI and analytics solutions continue to gain traction across our customer base, including with NGA Luno, the global data marketplace, and with major international government programs. Fifth, our Gen-3 constellation continues to expand. Our latest satellite is at the launch site, and we're excited to get the satellite launched as we move forward in our plans to have a baseline Gen-3 commercial constellation fully operational next year.

And finally, our cash balance increased more than 50% from last year following the successful raise we completed in July, bringing our total liquidity to over $200 million. Our stronger balance sheet and cash position puts us on a clear path toward free cash flow operations. These highlights underscore how our space, software, and AI capabilities are well positioned to provide customers with mission-critical intelligence that they rely on every day for their national security needs. I would now like to share some more details on the operational highlights from the quarter.

Turning to Slide 5, as I highlighted a moment ago, we're seeing international demand for sovereign solutions continue to accelerate and, in the near term, is outpacing our U.S. government business. In fact, revenues from international customers now represent about half of our total revenues, driven by new contracts and expanded service agreements with a number of ministries of defense and organizations around the world. And we expect this trend to continue. We should also note that over 90% of our backlog is related to international contracts for Gen-3 capabilities.

Countries around the world are accelerating their investments in space-based intelligence solutions in support of national security and economic development imperatives. This is driving a major shift and expansion of the market, which is being reflected in growing space-based defense budgets and sovereign investment funds.

BlackSky is well positioned to capitalize on these market dynamics, as our vertically integrated technology enables us to accelerate an organization's space-based intelligence capabilities, leveraging proven and mature software, AI and satellite technologies. We are winning new contracts and building an expanded sales pipeline, as demand for our Gen-3 powered sovereign solutions continues to gain traction worldwide.

Moving to Slide 6, we recently won a multi-year contract valued at over $30 million with a strategic international defense customer to integrate our Gen-3 high-cadence tactical ISR services into their secure operational environment. This expanded solution will enable BlackSky tasking and AI-enabled analytics services to operate seamlessly within the customer's workflows, delivering a new level of fully secure and autonomous operations.

The tactical ISR services being delivered under this program feature high-frequency Gen-3 tasking combined with real-time AI enabled detection, identification and classification of tactical objects delivered through a low-latency architecture. This win marks a step forward in the operational deployment of our Gen-3 capabilities in support of delivering secure, real-time tactical ISR solutions for 24/7 time-dominant missions.

Turning to Slide 7, we continue to win contracts and task orders on programs such as the Global Data Marketplace and NGA Luno program. In Q3, we received a seven-figure delivery order under the NGA Luno program, bringing our total orders won this year under this contract to about $30 million. This follow-on award leverages our proprietary computer vision algorithms and AI capability to automatically detect and identify areas of change caused by human activity. Our proven AI software is very effective in identifying anomalies, detecting infrastructure changes, and delivering alerts within minutes, giving defense analysts a crucial first to know advantage.

Moving to Slide 8. We're seeing significant demand and growing traction for our Gen-3 imaging services as additional customers have signed up for early access agreements in Q3, including a new 7 figure contract with the U.S. government. The positive customer feedback we've received from early adopters confirms that Gen-3's very high-resolution imagery, combined with our AI-driven analytics, is delivering high-value intelligence at compelling performance for the class of this satellite. And we expect this momentum to continue as we build out the constellation.

Turning to Slide 9. We're pleased that our next Gen-3 satellite has arrived at the launch site, and we anticipate its deployment in the coming weeks. Gen-3 satellites continue to move through our production line, and we will continue a cadence of launches to build out our constellation in 2026. The Gen-3 satellites on orbit are performing well and generating revenue.

Moving to Slide 10. We believe the long-term opportunities with the U.S. government remain strong as many agencies are seeking to leverage mature commercial space technologies to advance national capabilities, especially missions that require proven technology to support proliferated low-Earth satellite constellations.

We continue to make important progress across our U.S. government portfolio, including advanced R&D for capabilities like the integration of optical intersatellite crosslinks into our current and next-generation capabilities. Although we are experiencing near-term impacts of the fiscal year 2026 budget on the EOCL program, we are seeing congressional support to restore funding to the program. We expect to have better visibility once the final budget is approved.

As the U.S. government expands its investments in space, we see opportunities for companies like BlackSky, who have proven agile space capabilities and tech stacks that can rapidly deploy technology to support cost-effective government programs. In particular, there are programs such as Golden Dome, where aggressive deployment schedules and non-traditional acquisition models favor proven commercial space capabilities. We have a strong track record of supporting these types of customers and feel we are well-positioned as these future opportunities unfold.

Turning to Slide 11, we continue to make progress on our AROS initiative. Recall that AROS is a new satellite designed to provide wide area mapping, monitoring, and change detection to address an anticipated gap in these capabilities in the 2028 time frame. We continue to work through the design phase and engage potential customers and partners on the development of this constellation. We will have more to report as we progress on this program through 2026.

With that, I will now turn it over to Henry to go through the financial results. Henry?

Thank you, Brian, and good morning, everyone. Starting with Slide 13, total revenue for the first nine months of 2025 was $71.4 million, consistent with the prior year period. While we were expecting imagery and analytics revenue growth in the third quarter of 2025, our revenue was negatively impacted in August and September by approximately $4 million due to reductions made in the EOCL contract. Our professional and engineering services revenue for the first 9 months of 2025 grew to $20.8 million, a 9% increase over the same period in the prior year.

Let's now turn to Slide 14 and talk about cash operating expenses, which excludes stock-based compensation, depreciation, and amortization expenses. For the first 9 months of 2025, cash operating expenses were $56.6 million compared to $48 million in the prior year period. The year-over-year increase in cash operating expenses was driven by about $9 million of overhead expenses in 2025 from the integration of LeoStella.

These costs would have been previously capitalized into our satellite assets and not included as operating expenses. Therefore, excluding the LeoStella overhead expenses, year-to-date 2025 cash operating expenses would have been in line with the prior year period, demonstrating the discipline we have in managing our costs while still making investments in our business.

Moving to Slide 15. Our adjusted EBITDA for the first 9 months of 2025 was a loss of $7.9 million compared to an adjusted EBITDA of $4.3 million in the prior year period. The year-over-year decrease was primarily attributable to EOCL and LeoStella, as I've mentioned earlier. Excluding these two impacts, we would have reported a positive adjusted EBITDA of approximately $5 million for the first nine months of 2025. We remain committed to achieving adjusted EBITDA growth and margin expansion.

Let's move on to our cash and liquidity position, as shown on Slide 16. We ended the third quarter of 2025 with $147.6 million of cash, restricted cash, and short-term investments, which is more than double our cash balance from a year ago. This amount includes $65.9 million in net cash proceeds from a convertible node offering and $10.8 million from the exercise of warrants, both completed in July.

In addition to the cash, we also have $43.4 million in unbilled contract assets, of which $36 million is anticipated to be billed and received over the next 12 months. Together with a $13.5 million of available launch financing, this brings our total liquidity position to over $200 million. This position reflects an increase of $85 million or a 71% growth over the position we had in the third quarter of 2024 and provides BlackSky with sufficient cash to deploy our Gen-3 constellation, invest in strengthening our in-house AI capabilities, continue the design and development of our AROS program, and put this on a path to positive free cash flow.

Turning to Slide 17, we are maintaining our guidance for full-year 2025 revenue, adjusted EBITDA and capital expenditures. We are maintaining the current range as we are actively working to close on a number of large sales opportunities that we expect will impact the fourth quarter. In summary, we are pleased with the momentum in our business, a growing sales pipeline, our strong cash and liquidity position. We look forward to a strong fourth quarter, high visibility growth in 2026 and continuing our path to free cash flow.

With that, I will now turn it back over to Brian for some closing remarks. Brian?

Thanks, Henry. In closing, we are pleased with the strong momentum in our business, and the growing demand for our space-based intelligence solutions. As we look ahead, we expect a strong finish to 2025, and significant high visibility growth in 2026. This visibility is anchored by a strong backlog of international contracts and a growing pipeline for our imagery and analytics services and sovereign solutions.

Customers around the world are recognizing Gen-3's superior performance, especially at a time when they are seeking to accelerate their sovereign space-based intelligence capabilities. The opportunities ahead are significant and we remain confident in our ability to capitalize on the growing global market for our space-based intelligence solutions.

This concludes our remarks for the call, and we'll now take your questions.[ id="-1" name="Operator" /> [Operator Instructions] And your first question comes from the line of Edison Yu of Deutsche Bank.

First, I wanted to check on the Gen-3 deployment cadence. Is that still progressing on the same kind of deployment number as you were previously looking for?

Yes. As we mentioned, the next satellite is at the launch site, and we expect that to be deployed here in the coming weeks. We did find a faulty component in that satellite during final testing, so we experienced some delays, but it was non-systemic to the rest of the constellation, and so we fixed that, and we're moving forward. Obviously, there's some delays, but we're continuing on the plan that we outlined earlier.

Understood. And I know you mentioned in the deck that next year will be fully operational. Can you just remind us, what does that mean? Exactly how many satellites does it have to be fully operational?

As I mentioned before, our goal is to have at least 12 up by the end of next year.

Understood. And then just, if I could sneak one in on the financials, the range for 4Q is quite wide. So, if we want to kind of take that as a jumping-off point, what are sort of the main factors in getting to the low end or the high end? Is the government shutdown hurting that? Just trying to get an understanding of what kind of the delta is text?

Yes. I think, Edison, I think maybe first off, as you've seen in the past couple years, we've had -- tend to have really strong Q4 performance, and that's the case again this year. We are expecting a step up from contracts that we have in place and others that we expect to close shortly. The wide range really is just accounting for the timing of these deals. So, we're seeing a lot of momentum. We've got, as Henry outlined, a number of large deals that are in play right now, and the range reflects really just where we are in the timing of those.

[ id="-1" name="Operator" /> Your next question is from the line of Jeff Van Rhee of Craig-Hallum.

This is Daniel Hibshman on for Jeff. Just maybe if you could talk through us a little bit on the early access agreements, just kind of where those are at, how those are progressing, those early access agreements for Gen-3, and then a little bit more about the steps you see need to take place to get those to a more significant revenue line, just if that's all about the size of the fleet you're deploying or about the customer's internal processes or about them getting budget in place, just how those will progress and the steps to get there.

Yes, the early access program is progressing really well. The way that is playing out is we have customers that are coming online with six-figure type early access agreements to basically test and evaluate Gen-3 performance in their operations. What we're seeing is a couple things. One is we're adding more of those types of agreements as we are still early in the deployment of Gen-3, but we're also seeing an acceleration of some of those transitioning to longer-term, much larger contracts.

And then finally, just as a reminder, as I indicated in our backlog, there's already pretty significant Gen-3 services in our backlog as we continue to deploy the constellation. So, all in all, we're very pleased at the momentum we have with bringing on new customers, their evaluation and our visibility into transitioning those customers into long-term subscription revenue.

And then to be clear on the $4 million of impact from EOCL for August and September, is that significant enough that, just to be clear, is that a total pause on the program right now, or is that just a significant reduction?

It's not a pause, and I'm not sure I would deem it a significant reduction at this point. The government made some adjustments to our contract to reflect the potential baseline budget that was submitted by the administration for fiscal year '26. But keep in mind the budget is not final and we have seen marks from multiple committees to restore funding to the EOCL line in the budget. But we won't really know until the budget is finalized. These reductions that we're experiencing, were set to carry into Q2 of next year, which would align with timing of a CR and a final fiscal year '26 budget.

Okay. That's helpful. And then maybe just on satellite sales slash dedicated capacity, however you think about it, but those deals that you got with Indonesia and India in terms of dedicated Gen-3 capacity, if you could talk to us a little, I mean, those are large kinds of opportunities. Talk to us a little bit about the pipeline for those kinds of opportunities and how go to market is progressing or evolving in that area?

Yes, I would say, as I mentioned in my remarks, the demand for those types of solutions is growing very rapidly. We have a significantly growing pipeline for those types of arrangements. I think what we're also seeing is building on the success of Gen-3. The interest is increasing as we're demonstrating significant performance for this class of satellite, both in terms of image quality and economics.

So we see as we continue to deploy Gen-3 and also demonstrate Gen-3's performance with our AI capabilities that these types of opportunities will continue to expand and will begin to continue to capture more contracts that were similar to what we announced in India and Indonesia.

[ id="-1" name="Operator" /> Your next question comes from the line of Timothy Horan of Oppenheimer.

Can you just give us the number, how many satellites did you actually have in operation at the end of the quarter? And what are you expecting here by the end of the year? And if you can give us a rough guess on the first quarter, it would be helpful.

Right now, we have 2 Gen-3s and 11 Gen-2s. So we've got 13 satellites on orbit. As I mentioned, we have another satellite at the launch pad and another one coming out of production later this year. So the Gen-2s that we have up on orbit are continuing to perform well. They'll carry well into next year, not longer. And the early Gen-3s that we have are performing well as well. So we'll just continue a regular cadence of Gen-3 launches going into '26.

So you think about two per quarter is still a relatively good guide?

That's a reasonable assumption. Keep in mind we have to deal with timing of launches and those types of things, which are normal course.

And the Gen-2s, how much longer, what's the cadence of them coming down?

As I mentioned, those were deployed in sequence. And so we expect at least half of the satellites up there will still be in service by the end of next year.

Okay. Got it. And then professional engineering services were very strong in the fourth quarter last year. So, should we assume a kind of a similar rebound this year? And I guess somewhat related to that, too, like Indonesia and India contracts, when do they start kicking in and where does that revenue kind of show up in the line item space?

You can expect a similar type of trend that you saw last year in Q4 with respect to Indonesia and the India contracts. We're recognizing revenue as those programs progress. So that's kind of a smooth ramping of revenue from those programs.

Got it. Very helpful. And so what do you assume for the government budget? Fourth quarter guide and going into next year and your guide for the fourth quarter?

Yes, as I mentioned or responded in the prior question, we -- the EOCL program in particular has been set at the levels that it are at now through Q2 of next year and that's what we expect in our planning for Q4 and into the early half of next year.

Very helpful. And just last, I know you kind of mentioned on it. And so on that point on EOCL, so there could be upside if the budget is approved to the trends, I mean, would you expect if the budget is approved, there could be a step up there?

There could be. As I mentioned, we're seeing positive uh activity out of Congress in the marks to this budget to restore the funding. We think that could be a positive upside next year, but we'll have to wait and see what actually comes out in the budget.

And I think you said international is half the revenues. Can you say what that was a year ago?

I think a year ago it was 60% to 75% -- U.S. government was 60% to 75%.

So 60-40?

60-40, yes.

Got it. Got it. And then lastly, I know you kind of touched on it also. how is the pipeline looking now? I guess, qualitatively, maybe just not quantitatively. Are you talking to a large increase of new customers? And are these customers willing to spend much -- well, can you charge them much more per image than you had kind of historically?

Yes. The quality of the pipeline is excellent, types of customers that we're engaged with and then the scope of services that range from long-term Gen 3 subscription services to these types of sovereign programs that we're successfully executing on in places like India and Indonesia. So I'll say both quantitatively and qualitatively, we're very pleased with where the pipeline is and how it's growing.

[ id="-1" name="Operator" /> The next question is from the line of Austin Moeller of Canaccord Genuity.

Just my first question here. Does the shutdown affect the timing of government customers being able to use the early access program for Gen-3?

Not affected at all as we mentioned, we closed a 7 figure contract recently for the government to begin accessing Gen-3. So that's moving ahead.

Okay. And you've already done this with some customers, but how do you think about the TAM opportunity for building and operating exclusive remote sensing satellites for them as a service versus building the satellites for your own fleet and then providing customers with access to a Spectra subscription?

I think we're seeing pretty strong demand for both. There's really a couple different models. One is where customers want to the satellites, but we fly them for them using our Spectra platform and ground network. And that is a form of a sovereign capability. And then there's another variant where it's fully owned and operated and run within a customer's environment.

And then you have a hybrid approach where customers are buying satellites from us through one of those first 2 models, but also bundling and subscription access to our Gen-3 commercial constellation. So we're finding that what customers are finding attractive is they get the benefit of a sovereign capability very quickly, that we can pull satellites and deploy software that already exists.

And then they get the benefit of our commercial constellation, which is providing very high-frequency monitoring capability. Our -- we see the bundling of this as being a pretty exciting opportunity for us.

[ id="-1" name="Operator" /> And your next question is from the line of Greg Burns of Sidoti.

Can you just talk about maybe some of the non-government opportunities? I know you announced an expansion of a contract for non-earth imaging. How much of an opportunity are incremental services like that for you, and how should we think about maybe some of the commercial opportunities for the business to find growth outside of the government marketplace?

Yes, I think we're continuing to see traction on our non-Earth imaging capability. We just renewed a 7 figure contract, subscription contract for that. I think relative to commercial, we'll look to see that starting to expand later next year as we get our baseline constellation deployed and are able to service those types of customers with a high frequency Gen-3 capability. But for now, we're staying highly focused on this opportunity in the U.S. and international government sector.

Okay. And then just, in terms of the guidance, I know you maintain the ranges, but should we be thinking about you coming in towards the low end of those ranges? I mean are the top end still feasible? Or is it -- how should we think about that just because it implies a pretty significant step-up in the fourth quarter?

It does. And as I said this is pretty consistent in the way that we. performed in the fourth quarter over the past couple years. We are expecting a major step up in contracts that we already have in place. You've seen some of the announcements and then we are working a number of fairly large contracts right now that we expect to close shortly. The wide range really is accounting for the timing of these deals. So that's why we're maintaining that range at this point.

Okay. And are the step-ups tied to the Gen-3 satellites? You need to launch, like, is that -- the trigger like the Gen-3 up in orbit?

No, I don't believe any of the deals that we have in play right now are relying on us to launch satellites in the coming months.

[ id="-1" name="Operator" /> [Operator Instructions] And your next question is from the line of Dave Storms of Stonegate.

Just want to start by asking if you could give us a little more detail on the sales that you're expecting in the 4Q that will get to the guidance. Is that expected to continue to be primarily international? Is there any Gen-3 versus Gen-2 components? Any more detail on that would be great.

Yes, I think primarily, these are international deals. We are seeing -- we have a number of opportunities in the U.S. government that are in -- that are active right now, but that's been slowed due to the shutdown. But the range that we're talking about is primarily tied to international contracts.

Perfect. And just thinking about those international contracts, should we expect -- if your backlog right now is about 90-10 international versus domestic, historically, revenues have been 40-60 international versus domestic. Where do you think that normalizes out on a revenue level? Do you think it shakes out to more 50-50 in the near future? Or do you think international continues to grow proportionately?

Well, now we're about 50-50 coming out of the third quarter. From what we can see in our backlog and the pipeline, we're expecting the international to continue its growth in that trend, and '26 will likely outpace the contribution from the U.S. government.

Understood. Appreciate that. And then just one more, if I could. Thinking about the software side of Gen 3, what are you seeing in terms of attracting and retaining AI talent as you continue to put these satellites up in the air?

Yes. We've been very successful in attracting AI talent. Dave, as you know, we've been investing in our AI capabilities, infrastructure, training and model development and deployment in real-time environments now for 10 years. And we built a proprietary capability that's a competitive advantage. And you can see that playing out as we're winning -- we're successfully winning contracts based on that capability at a point when we see others just outsourcing their AI to third-party platforms.

So we feel that when you combine this proprietary AI, which is very high performance in real time with the satellite constellation, it's a really significant differentiator in the market, and we're bundling those things together, and we're getting very positive response from customers for that capability.

[ id="-1" name="Operator" /> And your next question is from the line of Caleb Henry of Quilty Space.

First one is, can you talk about how the average contract value for Gen-3 compares to Gen-2? And are you seeing -- I assume because of the international mix, new customers? Or are we talking about existing customers upgrading more so?

Yes, I think what we're experiencing is we're seeing open the contracts for winning and the deals that are in our pipeline is a pretty market step up in the overall contract values, both in terms of the size of the contracts and the duration. They're all turning to be much larger and multi-year type arrangement.

So -- and we're -- I think, again, Gen 2 was an exceptional capability to demonstrate the performance of a high-frequency constellation. Now when you bring in very high resolution with the type of AI with a satellite of this performance and economics, the attractiveness of that is being reflected in the pipeline and the structure of these deals.

Can you talk about how revenue recognition compares for international customers versus U.S. government? Is that something that's roughly at the same speed? Or is that faster or slower with different compliance requirements?

I don't think there's a difference between U.S. and international. It's just dependent on the structure of the contract. Imagery tends to be very stable as a subscription. And then we've always had these other projects under our professional engineering and services line that tend to be milestone driven. But I don't know, Henry, do you want to comment on that?

Yes. I mean whether it's an international contract or U.S. government, it's imagery and analytics revenues tend to be subscription-based so kind of smooth and easy to predict. The professional engineering services, as Brian said, they tend to be more milestone and lumpier. And those tend to be more internationally focused.

And then how are you thinking about leverage? And what do you have in terms of a midterm target there?

Tyler, I mean, we just raised the convertible notes, and we're quite comfortable with the liquidity that we have on the books at the moment. So I think we're in a pretty good position at the moment.

[ id="-1" name="Operator" /> And at this time, there are no further questions. This does conclude BlackSky's third quarter 2025 earnings conference call. Thank you for joining the call today.