BlackSky Technology Inc. (BKSY) Q3 2026 Earnings Call Transcript

Operator: Ladies and gentlemen, thank you for joining us and welcome to the Black Sky Technology Third Quarter 26 Earnings Call. After today's prepared remarks, I will now hand the conference over to Aly Bonilla, Vice President of Investor Relations. Aly, please go ahead.

Aly Bonilla: Good morning, and thank you for joining us. Today, I am joined by our chief executive officer, Brian O'Toole and our Chief Financial Officer, Henry Edward 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 www.blacksky.com. In conjunction with today's call, we have posted a quarterly earnings presentation on the Investor Relations website that you may use to follow along with our prepared remarks. Before we begin, let me remind you that we will make forward looking statements during today's conference call. Including statements about our plans, objectives, and future outlook. Actual results may differ materially as these statements are based on our current expectations as of today and are subject to risks and uncertainties, including those stated in our Form 10-K and SEC filings. BlackSky assumes no obligation to update forward looking statements except as may be required by applicable law. In addition, during today's call we will refer to certain non-GAAP financial measures including adjusted EBITDA and cash operating expenses. Definitions and reconciliations between our GAAP and non-GAAP results are in our earnings press release and presentation. Which are posted on our Investor Relations website. At this point, I will turn the call over to Brian O'Toole. Brian?

Brian O'Toole: Thanks, Aly. Good morning, everyone. Thank you for joining us on today's call. Beginning with Slide 3, I am excited to report that we delivered the strongest quarter in our company's history. We continue to experience strong momentum across all aspects of our business, as Gen-3 sales and customer demand translated into record revenues and earnings growth. During the quarter, we delivered year over year revenue growth of nearly 120% and adjusted EBITDA margins of 30% as Gen-3 continued to unlock and accelerate strong top and bottom line performance. We have reached an inflection point for the annual run rate of our high margin space based intelligence services that has grown to over $100 million with a right sized, capital efficient constellation. This is a major business milestone as incremental revenues from these subscription services contributed to ongoing margin expansion and positive operating cash flows. Our strong year to date sales performance has secured the backlog required to meet our full year revenue objectives. And when combined with strong program execution, we are raising full year revenue and adjusted EBITDA guidance. For the second time this year. We expect this momentum to continue in Q4 and into 2027. As we expand our Gen-3 capacity and continue on a trajectory toward sustained long term profitable growth and free cash flow operations. Turning to Slide 4. The growth in our business can be directly attributed to the critical need for real time space based intelligence. Now more than ever, major organizations around the world require assured access to timely intelligence that is vital to their national security and economic interests. This demand is reflected in the significant step up in defense and space related budgets worldwide. Especially at a time when we are seeing a dramatic increase in consequential world and geopolitical events. BlackSky is well positioned to meet this demand. With the success of Gen-3, we have achieved a high performance tech stack that includes a combination of space, software, and AI capabilities that are purpose built to deliver assured real time intelligence of the most important and strategic locations in the world. We are providing customers with an unmatched combination of assured access and capacity with the speed and clarity that deliver operational certainty and decision advantage. That is essential to see, understand, and respond to today's global events. The proven on orbit performance and superior image quality of Gen-3 is driving sales growth customer adoption and utilization of our space based intelligence services and mission solutions as investments in these mission critical capabilities continue to expand around the world. Now let's turn to some key highlights from the quarter. Moving to Slide 5, Q3 was a record quarter and a result of strong sales growth in our space based intelligence and AI services. As Gen-3 adoption continued to expand. We also continued strong execution across our major mission solutions and advanced technology programs, hitting major progress milestones which also contributed to growth in the quarter. Here are some of the operational highlights. First, total revenues for the quarter more than doubled year over year, to $43 million led by record sales in our space-based intelligence and AI services business. Second, we continue to grow beyond $100 million in annual run rate revenue for our space based intelligence and AI services. Driven by strong growth in Gen-3 Assured subscriptions and pilot programs. Third, our adjusted EBITDA margin expanded to 30%, more than twice the margin we delivered in Q2. Demonstrating the operating leverage of our business model and strong margin expansion. Fourth, we were selected as the exclusive provider of very high-resolution electro-optical satellites as part of a $1 billion international initiative to build the world's largest artificial intelligence infrastructure in space. A key win for our Mission Solutions business. And finally, in September, we successfully deployed our fifth Gen-3 satellite achieving first light imagery and revenue generating operations in less than 24 hours after launch. The proven on orbit performance of Gen-3 has been a major catalyst and our strong financial results delivered this year which has manifested into our historic Q3 performance. Now let's move on to some operational highlights from the 3 major elements of our business. Turning to Slide 6, and our space based intelligence and AI services. We delivered record revenue of $33 million up 107% year over year and 34% sequentially. Increasing Gen-3 utilization is unlocking growth as customers move from evaluating the performance of our imagery and AI services during initial pilots to long term subscription contracts where they are integrating our services into their daily operations. Strong year to date sales performance has enabled us to secure the back backlog necessary to achieve full year growth of 50% over 2025. In this part of our business. This growth in our high margin Gen-2 and Gen-3 subscription revenues is a major driver in accelerating our adjusted EBITDA performance. Our land and expand sales strategy continues to deliver, as we converted multiple pilot programs into 7 figure contracts across government, international and commercial markets. During the quarter, we completed a 7-figure, 2-month pilot for Gen-3 assured services with a major U. S. Government customer. In addition, an international defense partner expanded its Gen-3 Assured subscription after growing it from a small Gen-2 pilot into a 7 figure contract in less than 6 months. And finally, our longtime partner, Heo, also signed a 7-figure annual extension adding Gen-3 to their non earth imaging services. Moving on to Slide 7. We were also excited to announce a major new pilot with SkyFi, that is an opportunity to open new commercial sales channels for subscription based Gen-3 imaging and AI analytics services. During the quarter, SkyFi selected BlackSky as the first satellite imagery provider for its satellite intelligence platform. Under this pilot program, our Gen-3 35 centimeter imagery will power automated monitoring facility insights into Robinhood. This opportunity brings our rapid revisit very high resolution imagery into a new workflow. Enabling retail investors to receive real time insights into questions about activity and patterns taking place at facilities associated with publicly traded companies. The initial applications include monitoring vehicle production, logistics activity at e commerce fulfillment hubs, data center construction and progress, and theme park attendance. The same constellation and automated spectra architecture that supports our customers' most demanding defense, and intelligence missions can now help deliver timely insights into economic activity to a broader commercial audience. This pilot is an example of how partners and developers can use our APIs and platform infrastructure to create new applications to reach new users and expand the commercial market opportunities for our real time intelligence services. Turning to Mission Solutions on Slide 8. We continued strong execution on our major Mission Solutions programs. And are on track to hit several major Gen-3 delivery miles milestones in the fourth quarter. Mission Solutions revenue in Q3 was up about 5x compared to the prior year quarter, as we are successfully executing and meeting major program commitments. In parallel, we are successfully ramping our Gen-3 production capacity and are on track for multiple Gen-3 deliveries in Q4. Our first Gen-3 Sovereign satellite is ready to ship and available for launch in less than 1 year after receiving the contract award. With over 20 satellites in process, our ability to accelerate our customers' sovereign space programs leveraging a proven Gen-3 design, that can be rapidly delivered from our production facility provides us with a strategic advantage to capture new sales opportunities. We are continuing to actively develop and work a multibillion dollar sales pipeline for Gen-3 and ROS related mission solutions. The combination of our shared subscription services and our sovereign space solutions enables us to provide customers with immediate access to assured real time intelligence capabilities that grow over time and are aligned with their long term defense intelligence and economic development imperatives. Moving to Slide 9 and a major win for our Mission Solutions business. We are proud to be selected as the exclusive provider of very high-resolution electro-optical satellites as part of a new international initiative to build the world's largest artificial intelligence infrastructure in space. This $1 billion initiative is led by a consortium of international leaders that is bringing together best in class AI and space technologies to accelerate the development of new applications for AI and space. The initial constellation of 50 satellites will carry radar, optical and other sensors and is designed to serve users across France, Europe, and The UAE. The proven and superior on orbit performance of Gen-3 has a best-in-class 35-centimeter-imaging satellite was a major factor in this key win. We believe that these types of international partnerships will be instrumental as a model for capturing and growing sovereign mission solutions worldwide. We recently received a contract to commence initial program development activities and expect to provide additional details on the scope and timing of the program in the coming months. Turning to Slide 10. Our advanced technology programs. Revenues for this element of our business in Q3 grew approximately 80% year over year. Primarily driven by government funded AROS development to support a launch in 2028. We are also continuing development work on optical inter satellite links and advanced payload technologies under other advanced programs. These programs are aligned with customer requirements and strengthening the technology foundation of our future offerings. This approach allows us to advance critical capabilities reduce internal R&D expenses, and extend our competitive advantage. Together with our space based intelligence subscription services, and Mission Solutions business, these programs create multiple growth vectors from a common technology platform. Moving to Slide 11. We are successfully scaling Gen-3 production capabilities to support the deployment of our commercial constellation, while also building production capacity of Gen-3 satellites for current and future Sovereign Mission Solutions programs. In September, we launched our fifth Gen-3 satellite, which delivered first light imagery in less than 20 hours after launch and entered revenue generating operations within 24 hours. Our ability to rapidly commission new satellites enables us to scale very high resolution imaging capacity commensurate with demand to provide customers with expanding assured capacity where and when they need it. Our capital efficient approach employs a right sized and highly optimized constellation that maximizes collection capacity over the most consequential and high value locations around the world. This strategy underpins the strong operating leverage and capital efficiency that is reflected in the performance that we delivered in recent quarters. We are on track to launch 2 more Gen-3 satellites this year for our commercial constellation, with our eighth satellite expected to launch in early 27. In parallel, we are also on track with multiple Gen-3 sovereign satellite deliveries scheduled for customers in Q4. Our demonstrated ability to scale Gen-3 production has us well positioned to meet our growth objectives. For space based intelligence and AI services and mission solutions business in 2027 and beyond. In summary, we delivered the strongest quarter in Black Sky history. The speed, clarity and assured performance of Gen-3 is driving customer adoption and increasing capacity utilization. Which is translating into high margin growth across all elements of our business. With that, I will now turn it over to Henry to go through the financial results. Henry?

Henry Edward Dubois: Thank you, Brian. Good morning, everyone. Building on the momentum from the second quarter, I am pleased that we delivered a strong third quarter with record revenue record adjusted EBITDA, growing margins, positive operating cash flow, and a strong balance sheet. Now let's get into our financial results. Turning to Slide 13, Total revenue for the third quarter of 2026 was $42.8 million compared with $19.6 million in the prior year quarter. A year over year increase of 118%. Revenue also increased approximately 30% sequentially from Q2. This strong performance was driven by over 100% growth in our space-based intelligence and AI services business growing to $32.7 million which included a successful Gen-3 Assured pilot program with the US government and continued growth in our subscription business. Mission Solutions contributed $4.7 million in the quarter a 5x increase over the prior year period as we executed against customer program milestones. We anticipate revenues from our Mission Solutions business to increase in Q4 with multiple Gen-3 deliveries, as Brian mentioned. Advanced technology programs revenue increased approximately 80% to $5.4 million primarily driven by government funded AROS development work. I am happy to report that all 3 elements of our business contributed to growth in the quarter. Turning to slide 14 and our cost of sales. During the quarter, our space based intelligence and AI services revenue grew $17 million over the prior year while corresponding cost of sales remained essentially flat. This performance demonstrates that over 90% of every incremental dollar in revenue contributes to the bottom line. Moving forward, growth in our space based intelligence and AI services revenue will drive margin expansion. Turning to slide 15. Cash operating expenses for the third quarter were $21.4 million compared with $18.3 million in the prior year quarter. Combined with our strong revenue growth, cash operating expenses decreased to 50% of revenue. Revenue growth significantly outpaced operating expense growth by 7x. As a reminder, cash operating expenses excludes depreciation and amortization expenses and stock based compensation, within selling, general, and administrative expenses. On to slide 16. Adjusted EBITDA for the third quarter of 2026 was a record $12.8 million an improvement of $17.3 million over the prior year quarter and $8 million sequentially. This represents an adjusted EBITDA margin of 30% which is more than double the margin we reported in Q2. We also reported net income of $18.5 million compared with a net loss of $15.3 million in the prior year quarter. Let's move to our cash and liquidity position as shown on slide 17. We ended the third quarter with $231 million in cash, cash equivalents restricted cash, and short term investments, an increase of 57% over the prior year quarter. I am pleased that the strong revenue and margin performance enabled us to deliver positive operating cash flow this quarter. This is significant as we achieved this milestone as part of our normal course of operations and it did not include any extraordinary onetime cash receipts such as prepayments which as you know typically create large deferred liabilities. Capital expenditures during the quarter were $15.4 million bringing year to date CapEx to $46.5 million in line with our expectations. We believe our liquidity and cash position is sufficient to complete our baseline Gen-3 constellation in 2027 with ample cash available to pursue other strategic growth initiatives. Our focus remains on disciplined cost management efficient capital deployment, growing our operating margins, and driving returns on our invested capital. Turning to Slide 18. Based on our strong year to date sales and visibility into the remainder of the year, we are raising our full year guidance for revenue and adjusted EBITDA for the second time this year. We now expect revenue between $140 million and $150 million and adjusted EBITDA between $18 million and $24 million For capital expenditures, we are maintaining our guidance of $50 million to $60 million. In summary, we are pleased with the record Q3 financial performance the performance of our business model, the strength of our balance sheet, and the visibility into the remainder of the year and expect to continue the momentum into 2027. With that, back to you, Brian.

Brian O'Toole: Thanks, Henry. In closing, Q3 was a historic quarter. We delivered record financial performance and achieved a major inflection point in our business. Our year to date sales performance has enabled us to secure the backlog to raise our full year outlook for the second time this year. Our strong revenue growth combined with the operating leverage of our business, enabled us to deliver strong earnings growth and positive operating cash flows. This margin performance, combined with other initiatives this year, resulted in improved liquidity and a strengthened balance sheet. Providing ample cash to complete our baseline Gen-3 constellation in 2027 and support investments in other strategic initiatives, to accelerate our growth. We believe we are well positioned to maintain this trajectory and continue on our path towards sustained long term profitable growth. We are looking forward to a strong finish to 2026 and carrying that momentum into 2027. 1 final note. We look forward to sharing more about our vision and growth strategy at our upcoming Investor Day event taking place December 2 in New York We hope to see you all there. This concludes our remarks for the call. And we will now take your questions.

Operator: To allow for sound quality. You are muted locally, please remember to unmute your device. Your first question comes from the line of Austin Moeller with Canaccord Genuity. Your line is now open.

Austin Mueller: Hi. Good morning, Brian and Henry. So just my first question here, what do you view as the app appetite of the new congress for commercial ISR imagery procurement? And presumably, I would assume there is going to be a renewed interest in imagery over Eastern Europe.

Brian O'Toole: Good morning, Austin. Thanks for the question. I think we look at it this way. there is always been very strong interest and demand for commercial imagery, both from the US government and international customers. Worldwide, I think from our perspective, the need for real time intelligence is growing. And the success of Gen-3 and our ability to deliver assured capacity with speed and clarity is now an essential part of government operations worldwide, and that is growing. So I think I think we can see expanding opportunities that can come. And we are already seeing that reflected in defense and intelligence budgets worldwide.

Austin Mueller: And I understand there is a multibillion dollar sales pipeline for Gen-3 sovereign satellites, you have got 3 coming up for delivery. What percentage of the backlog does that look like? And can you talk about maybe where some of those customers are geographically?

Brian O'Toole: Well, just to be clear, backlog is not related to our pipeline. Pipeline are new opportunities and these are opportunities that are both related to our space based intelligence services and our mission solutions. So we are tracking several billion dollars in opportunities related to those 2 parts of our business. The opportunities we see in there are worldwide. Both from the US government and from abroad customer base of international opportunities. So it is very exciting. I think the success of Gen-3 is really has us well positioned to go capitalize on those things. The. You know, just to remind you, there is a. Just a range of things in that pipeline from early pilots to very large constellation programs. That all have different sales cycles. So and so we are pretty pleased with the pipeline and the broad opportunities that are there worldwide and the diverse customer base that is creating our growth opportunities.

Austin Mueller: that is great. Thanks for all the thoughts.

Brian O'Toole: Thanks, Austin.

Operator: Your next question comes from the line of Timothy Horan with Oppenheimer. Your line is now open.

Timothy Horan: So I-- Can you just maybe give us qualitative, how does it compare now to 6 months ago or a year ago? Seems like you are getting to a lot of new markets that I had not really contemplated a year ago.

Brian O'Toole: Timothy, sorry, could you repeat the question? You are-- the beginning-- Yes, sure, Brian. Can you give us a little bit more color on the pipeline? It seems to have expanded dramatically. I mean, you seem to be entering a lot of new markets that we were not really aware of was around 12, 18 months ago. So I guess, can you just qualitatively talk about how much larger the pipeline is now versus a year ago? Yeah. I can say that the pipeline has expanded significantly over the last 12 to 18 months. I think there are 2 primary factors. I think the success of Gen-3 exceeding our expectations and the level of service we are able to provide customers has reached has been validated. And so now we are seeing the increase in the adoption and interest to access those services from customers around the world. I think there is been a massive shift in budget growth around mission solutions. And, again, Gen-3 being a proven on orbit capability is really critical for these customers that are planning to acquire proven capabilities to support their long term sovereign capabilities. And so I think those 2 factors. And it is really anchored on the success and highly differentiated capabilities we have in our tech stack and the Gen-3 performance that has driven that. And I will add you know, we are delivering extremely high value services off of that stack. at extremely compelling economics at a price point that is delivering very high value to our customers, but also for us translating into top line and bottom line performance.

Timothy Horan: And then of the new AI Constellation, Henry, I know when you kind of referenced in August that there was a new kind of constellation that would be game changer. Was this 1 you were referencing?

Brian O'Toole: Yes. Timothy, this was 1 that is been in our pipeline. We were. This is a really exciting project. For the industry, and it has the potential think, to significantly shape the future of AI enabled space constellations and infrastructure. So we are proud to have been selected to be part of that industry leading technology team. And that program was just announced and, you know, there will be more details coming on that. But this was something back to the question on pipe that we have been tracking for a long time. We have been shaping and working this for a while. And, you know, now we are going to see that result and translate into a significant growth opportunity for the company.

Timothy Horan: And just lastly, I know your images are really high quality, and you are going to be getting a lot more data. Can you talk about how your AI models and platforms have been improving or performing with usage?

Brian O'Toole: I think as you know, we have been-- We have invested in advanced AI machine learning capabilities now for over a decade. We have processes and capabilities that are constantly improving those models. And then that is translating into better value for our customers with better intelligence. So those are constantly improving. Gen-3 is significant and that the improved resolution and image quality allows us to deliver even higher levels of accuracy and improved insights. So this is something we are constantly improving, and as we talked about before, these are things that we are bringing to our customers. I think it is also important to mention that our AI models are purpose built for this real time intelligence capability. These are not generic. Party AI models. These are proprietary that leverage our ability to train off of our proprietary data that also can be deployed into real time environments to deliver high value solutions to our customers.

Timothy Horan: Thank you.

Operator: Your next question comes from the line of Jeff Van Rhee with Craig Hallum Capital Group. Your line is now open.

Daniel: Hey. Good morning, Brian and Henry. This is Daniel on for Jeff. Yes, congrats on a great quarter. In terms of maybe the Gen-3 delivery expand on what that means? and you talked about 2 commercial gen 3 units to go up and then these 3 sovereign gen 3 deliveries for a total of 5. Does that mean 5 total satellites launching, or is delivery in this context mean more like physical delivery of a satellite, like, on the ground to a sovereign customer? Just what does that mean? And then in terms of rev-rec, is that. Are those deliveries sort of the key rev-rec milestone, or how should we think about which events are the key ones where the bulk of the rev-rec lands for these sovereign satellites?

Brian O'Toole: Yes. Good morning, Daniel. Thanks for the question. Yes, you can think of these as hardware system deliveries out of the production environment. And so from there, in our case, for our commercial constellation, they are available for launch at that point. And then for some of the customer programs, it is a progress delivery milestone related to the contract. And in some cases, we launched. We will be launching those satellites for them. In other cases, they will take. They have launch responsibilities. The rev-rec for those programs is progress based. And maybe, Henry, you wanna add some color on that?

Henry Edward Dubois: Sure, Daniel. On the rev-rec on these it is-- These are-- there is some customization on each individual for each individual customer. There we are able to recognize the revenue over time on progress. There is some triggers, though, as we hit the delivery milestone.

Brian O'Toole: And, Daniel, I will add. I think the important point here is we are demonstrating the scalability to produce gen threes at a rate that is significant to support the growth in our commercial constellation while meeting and being able to accelerate deliveries for our Mission Solutions customers.

Daniel: Yes, that is helpful. And then in the deck, on the slide that is about imagery, it talks about securing the backlog to achieve full year growth of 50% over 2025. So just to be clear, is that guiding to 50% year over year inventory growth in 2026 over fiscal 25.

Brian O'Toole: Yes. For that slide, I think you are referring to the 50% growth in our space based intelligence and AI services. So that is correct. We have secured the backlog at this point that will drive 50% in that growth in that part of the business year over year.

Daniel: Okay. that is helpful. And then last of all for me, just Henry, do you have the backlog and next 12 month backlog numbers?

Henry Edward Dubois: Are you sharing those? So we will be filing the queue aftermarket. They will be in there, but right now, we have got a total backlog of $355 million of which we expect about $45 million of that to be in the fourth quarter.

Daniel: Thanks. Congrats on the quarter.

Operator: Your next question comes from the line of Sheila Kahyaoglu with Jefferies. Your line is now open.

Adam Samuelson: Yes. Hi. it is Adam Samuelson on for Sheila. Good morning, everyone. I guess my first question is just making sure you are saying kind of the fourth quarter implied guidance. Revenues are flat to up $10 million or so sequentially from the third quarter, but EBITDA is flat at the high end of that range.

Analyst: I guess some of the comments on Gen-3 deliveries and mission solutions suggest that there is mission solution revenue that is coming in that comes in with lower margin. But you know, it is bridge it. it is kind of-- Revenue's up flat to up $10 million sequentially and EBITDA that would be declining quarter-on-quarter in the guidance?

Brian O'Toole: Yes, I think maybe a couple of comments. I think as we mentioned in our remarks, there is some significant satellite related deliveries in the fourth quarter. Which will affect the mix, revenue mix. So you are gonna see that. I think you are also you know, with respect to the range, we have strong visibility and secured the backlog. If the objectives. these objectives this year, A little bit of variability you are seeing is the ramping of some recent awards and accounting for potential timing of deliverables of related revenues and programs. So I also should add that as we perform on pilot programs for our space based intelligence and assured and AI services that will add some We are seeing strong annual growth in that part of the business that we report, as you have seen us report in the quarter. It does introduce some lumpiness as these pilots kind of come in and out quarter over quarter. So those are all the factors that are contributing to different mix in the fourth quarter.

Adam Samuelson: Okay. that is that is helpful. Maybe just on that last point, as we think about maybe in space-based intelligence, kind of distinct-- distinguishing between kind of the subscription-type contract business versus some of those pilots. And specifically, the subscription side is kind of a baseline that can keep growing into 2027. How. I mean, how much work were the pilots? If you could parse that just so we think about kinda what that underlying kind of steady base is versus some of the lumpier kind of increments on top?

Brian O'Toole: Yeah. there is a wide range of pilots. Anything from a 6-figure pilot that might go for a few months to 7-figure pilots. And so I think the way to think about the run rate from that business is we are continuing to build a strong base of recurring subscription revenue. That will grow over time. And the success of Gen-3 has enabled us to build that up. Build up that base And when you combine it with these pilot programs, it is enabled us to reach this $100 million run rate for these high margin services And as I just mentioned, you should expect to see some variability quarter to quarter as the size and timing of the pilots can introduce some lumpiness on top of those. Subscription base. And then, you know, the last factor is as we have these successful pilots, the time to transition and ramp into subscription contracts also introduces some variability. So I hope that provides you some color on kind of how that part of our business is working.

Adam Samuelson: that is all very helpful. I appreciate the color, and I will pass it on.

Analyst: Thank you.

Brian O'Toole: Thanks, Adam.

Operator: Your next question comes from the line of Edison Yu with Deutsche Bank. Your line is now open.

Laura Ying: Hi. This is Laura Ying for Edison. Thank you for taking our questions. So I want to come back to the 50 satellite AI constellation with the consortium, So since you have received the initial contract to begin the development, so what is the initial contract worth? And is it in the backlog?

Brian O'Toole: Yeah. This is just a small initial contract to get started. We are working-- we are working on the definitive agreements for the much larger contract. And so you can expect that we will have more to report on that in the coming months as that solidifies.

Laura Ying: Okay. I got it. Yeah. I know some of the details probably not defined yet, but, like, conceptually, what is the, like, total opportunity you can potentially capture out of this, like, the total $1 billion initiative? Are we thinking about more of, like, 8 or 9 figure?

Brian O'Toole: Yeah. I think at this point, I am gonna just wait until we firm that up. Keep in mind, this is part of a very significant international consortium, so there is a lot of-- there is a lot of stakeholders involved with this. And so and they are leading this effort. So I think for now, we will have more to report on this in the coming months.

Laura Ying: Okay. Okay. Got it. And, also, just looking ahead to 2027, are there any early thoughts you can share? Like, the growth drivers, any contract you would highlight? Basically, how should we think about the trajectory from Q4? Especially considering the multibillion dollar pipeline and the expansion that you just discussed about?

Brian O'Toole: Yeah. At this point, we are not guiding to 2027. We will do that. We will do that in the first quarter. I think I will just say that we expect strong momentum in both our space based intelligence and AI services to continue, and we are working a very large pipeline of mission solutions opportunities. And as I mentioned, we will have more to report on the size and scope and impacts of the billion dollar initiative here in the coming months.

Laura Ying: Okay. Okay. I appreciate it.

Operator: Your next question comes from the line of Gregory Pendy with Clear Street. Your line is now open.

Greg Pendy: Just wanted to go into space domain awareness a little bit given the contract extension that you guys had during the quarter with the Australian company. I think it is HEO. Kind of what are the opportunities in that market, and what are the margin profile? Because it seems like you are getting a dual use of your satellites. With space domain awareness? So are there other opportunities in what does that market look like?

Brian O'Toole: Yes. I think thanks, Gregory, for the question. I guess I view this from 2 perspectives. it is a nascent market. But there is very high demand. For improved space domain awareness because of the activity that is happening in space from a national security perspective. So this is early, and so we see this as a new and growing opportunity. As far as the margin aspect of this, we see this as an exceptional opportunity because we are able to use our satellites for this kind of capability nighttime and at other times of day when we are not imaging for customers. So it is an extremely high margin use of assets that we already have on Orbit, which will drive additional margin to our bottom line.

Greg Pendy: that is very helpful. Thanks a lot. Oh, and just 1 more if I can get it. Just on the Robinhood deal, is that exclusive, or could that be can you possibly pursue other financial firms? With a similar-type approach.

Brian O'Toole: This is not an exclusive contract. I think what it really signals is the real time capabilities of our platform that can be accessed by developers, AI enabled applications, and other platforms is really a powerful way for us to go to market in multiple channels vertically into vertical markets. And so and I think that creates a really strong TAM expansion opportunity for us. To expand commercially off of our common tech stack. Using these types of channels to drive revenue and earnings growth.

Greg Pendy: that is very helpful. Thanks a lot.

Operator: Your next comes from the line of David Storms with Stonegate Capital Partners. Your line is now open.

Maximus: Hello. Good morning. This is Maximus on with a question for David this morning. Wanted to touch follow-up on the Robinhood relationship. What exactly are you guys looking to validate during the pilot? And how long do you expect it to run, and what milestone. What milestones would you to be reached before this becomes a broader commercial agreement? Thank you.

Brian O'Toole: Yeah. I think the. there is several objectives related to the pilot. I think it is the it is on the on the sky SkyFi side. it is the development of the application. And then testing that with Robinhood. And so there will be aspects of testing the service itself And then I also think there will be some work exploring the long term subscription and business model. So this is expect we expect this pilot to execute over several months. And that will inform the next phase.

Maximus: Got it. Got it. Thank you for that. And so just to confirm, is the way you guys are participating in the revenue is through the subscription model, And if so, how would those margins compare to the existing intelligent subscription model?

Brian O'Toole: it is the it is the same. it is a subscription model. And, you know, as Henry walked through kind of the operating leverage in our business, every incremental dollar of revenue we generate has a 95% contribution whether it is an intelligence customer or a commercial subscription.

Maximus: Thank you. And then just 1 last point. On slide 11, you guys talked about scaling satellite production. With CapEx expected to be 50 million to $60 million this year. Can you help distinguish the spending required to sustain existing constellation from Invest? Some investment in additional capacity?

Brian O'Toole: I can let Henry chime in, but the majority of our CapEx is around deploying the Gen-3 constellation. There is CapEx in there for investments in software and AI in our tech stack. And that is been consistent over the last several years.

Henry Edward Dubois: Yeah. that is correct. I mean, out of the. The 50-60 primarily supports getting our Gen-3 constellation up. there is a little bit for our CapEx software. and I--

Brian O'Toole: it is good. It probably important to point out that we are well along in the investments on the baseline Gen-3 constellation at this point. and are positioned to achieve that baseline in 2027.

Maximus: Thank you so much, and congrats on the quarter.

Brian O'Toole: Thanks, Maximus.

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