bksy-20240630

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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

___________________________________

FORM 10-Q

___________________________________

(Mark One)


☒			QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2024


o			TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission file number 001-39113

___________________________________

BLACKSKY TECHNOLOGY INC.

___________________________________

(Exact name of registrant as specified in its charter)


Delaware			83-1833760
(State or other jurisdiction of incorporation or organization)			(I.R.S. Employer Identification No.)
13241 Woodland Park Road Suite 300 Herndon, Virginia			20171
(Address of Principal Executive Offices)			(Zip Code)

(571) 267-1571

Registrant’s telephone number, including area code

___________________________________

Securities registered pursuant to Section 12(b) of the Act:


Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Class A common stock, par value $0.0001 per share	BKSY	The New York Stock Exchange
Warrants, each whole warrant exercisable for one share of Class A common stock at an exercise price of $11.50	BKSY.W	The New York Stock Exchange

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports); and (2) has been subject to such filing requirements for the past 90 days. Yes ý No o

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes ý No o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):


Large accelerated filer	o	Accelerated filer	o
Non-accelerated filer	☒	Smaller reporting company	☒
		Emerging growth company	☒

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.o

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act).Yes o No ý

As of August 6, 2024, there were 148,910,354 shares of the registrant’s Class A common stock, at $0.0001 par value, outstanding.

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		Page
	Part I. Financial Information
Item 1.	Financial Statements	4
	Condensed Consolidated Balance Sheets	5
	Condensed Consolidated Statements of Operations and Comprehensive Loss	6
	Condensed Consolidated Statements of Changes in Stockholders’ Equity	7
	Condensed Consolidated Statements of Cash Flows	8
	Notes to Condensed Consolidated Financial Statements	10
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	27
Item 3.	Quantitative and Qualitative Disclosures about Market Risk	41
Item 4.	Controls and Procedures	41
	Part II. Other Information
Item 1.	Legal Proceedings	43
Item 1A.	Risk Factors	43
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	43


Item 5.	Other Information	44
Item 6.	Exhibits	45
	Signatures	46

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SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

This Quarterly Report on Form 10-Q contains, and our officers and representatives may from time to time make, forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), which statements involve substantial risks and uncertainties. All statements contained in this Quarterly Report on Form 10-Q other than statements of historical fact, including statements regarding our future results of operations and financial position, our business strategy and plans, and our objectives for future operations, are forward-looking statements. The words “believe,” “may,” “will,” “potentially,” “estimate,” “continue,” “anticipate,” “plan,” “intend,” “could,” “would,” “expect” and similar expressions that convey uncertainty of future events or outcomes are intended to identify forward-looking statements. Forward-looking statements included in this Quarterly Report on Form 10-Q include, but are not limited to, statements regarding:

• our ability to retain or recruit key employees;

• our ability to grow distribution channels and partner ecosystems;

• our anticipated capital expenditures, liquidity, and our estimates regarding our capital requirements;

• our ability to integrate proprietary and third-party sensor data;

• our ability to add new satellites to our commercial operations;

• our ability to invest in our software, research and development capabilities;

• our ability to grow a third-party developer community;

• our ability to expand our services and offerings to customers both domestically and internationally;

• our ability to continue delivering data in a cost-effective manner;

• our ability to maintain and protect our brand;

• our ability to expand within our current customer base;

• our ability to compete with legacy satellite imaging providers and other emergent geospatial intelligence providers;

• our ability to maintain intellectual property protection for our products or avoid or defend claims of infringement;

• our ability to comply with laws and regulations applicable to our business;

• our expectations about market trends and needs;

• our estimates of market growth, future revenue, expenses, including stock-based compensation expense, cash flows, capital requirements and additional financing;

• our ability to grow our imagery and software analytical services revenue;

• our ability to manage the timing of capital expenditures to allow for additional flexibility to optimize our long-term liquidity requirements;

• our ability to optimize our cash spend to meet short- and long-term operational needs;

• the volatility of the trading price of our common stock;

• the performance of our BlackSky Spectra platform;

• our plans and expectations for our next generation satellites (“Gen-3”), including expected launch timing and satellite capabilities;

• the impact of local, regional, national and international economic conditions and events; and

• other factors including but not limited to those detailed under the section entitled “Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2023 and filed by us with the Securities and Exchange Commission (the “SEC”).

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We have based these forward-looking statements largely on our current expectations and projections about future events and trends that we believe may affect our financial condition, results of operations, business strategy, short-term and long-term business operations and objectives and financial needs. These forward-looking statements are subject to a number of risks, uncertainties and assumptions, including those described in Part I, Item 1A. “Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2023. Moreover, we operate in a very competitive and rapidly changing environment. New risks emerge from time to time. It is not possible for us to predict all risks, nor can we assess the impact of all factors on our business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking statements we may make. In light of these risks, uncertainties and assumptions, the forward-looking events and trends discussed in this Quarterly Report on Form 10-Q may not occur and actual results could differ materially and adversely from those anticipated or implied in the forward-looking statements.

You should not rely upon forward-looking statements as predictions of future events. Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee that the future results, performance, or events and circumstances reflected in the forward-looking statements will be achieved or occur. We undertake no obligation to revise or publicly release the results of any revision to these forward-looking statements, whether written or oral, except as required by law.

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PART I. FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

BLACKSKY TECHNOLOGY INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(unaudited)

(in thousands, except par value)


	June 30,		December 31,
	2024		2023
Assets
Current assets:
Cash and cash equivalents	$	25,552	$	32,815
Restricted cash	1,097		619
Short-term investments	15,680		19,697
Accounts receivable, net of allowance of $22 and $151, respectively	8,218		7,071

Prepaid expenses and other current assets	3,736		3,916
Contract assets	28,166		15,213
Total current assets	82,449		79,331
Property and equipment - net	52,479		67,116
Operating lease right of use assets - net	4,220		1,630
Goodwill	9,393		9,393

Intangible assets - net	1,076		1,357
Satellite procurement work in process	71,716		55,976
Other assets	2,963		9,263
Total assets	$	224,296	$	224,066
Liabilities and stockholders’ equity
Current liabilities:
Accounts payable and accrued liabilities	$	11,480	$	11,573
Amounts payable to equity method investees	2,378		10,843
Contract liabilities - current	4,580		3,670
Debt - current portion	309		—
Other current liabilities	933		1,405
Total current liabilities	19,680		27,491


Operating lease liabilities	6,868		3,041
Derivative liabilities	10,130		15,149
Long-term debt - net of current portion	108,273		83,502
Other liabilities	2,814		1,724
Total liabilities	147,765		130,907
Commitments and contingencies (Note 14)
Stockholders’ equity:
Class A common stock, $0.0001 par value-authorized, 300,000 shares; issued, 148,910 and 145,232 shares; outstanding, 146,530 shares and 142,837 shares as of June 30, 2024 and December 31, 2023, respectively.	15		14
Additional paid-in capital	700,693		692,115
Accumulated deficit	(624,177)		(598,970)
Total stockholders’ equity	76,531		93,159
Total liabilities and stockholders’ equity	$	224,296	$	224,066

See notes to unaudited condensed consolidated financial statements

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BLACKSKY TECHNOLOGY INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS

(unaudited)

(in thousands, except per share amounts)


	Three Months Ended June 30,				Six Months Ended June 30,
	2024		2023		2024		2023
Revenue
Imagery & software analytical services	$	17,469	$	15,328	$	35,302	$	31,088
Professional & engineering services	7,469		3,999		13,872		6,636
Total revenue	24,938		19,327		49,174		37,724
Costs and expenses
Imagery & software analytical service costs, excluding depreciation and amortization	3,432		3,456		6,877		7,155
Professional & engineering service costs, excluding depreciation and amortization	3,450		5,070		7,038		7,849
Selling, general and administrative	18,214		18,768		37,030		37,717
Research and development	286		176		742		392
Depreciation and amortization	11,277		11,776		22,461		21,431


Operating loss	(11,721)		(19,919)		(24,974)		(36,820)

Gain (loss) on derivatives	5,273		(11,098)		5,019		(9,567)
Income on equity method investment	—		56		—		585
Interest income	330		648		730		1,083
Interest expense	(3,029)		(2,242)		(5,663)		(4,095)
Other income (expense), net	2		(867)		3		(1,810)
Loss before income taxes	(9,145)		(33,422)		(24,885)		(50,624)
Income tax expense	(252)		(9)		(322)		(122)





Net loss	(9,397)		(33,431)		(25,207)		(50,746)
Other comprehensive income	—		—		—		—
Total comprehensive loss	$	(9,397)	$	(33,431)	$	(25,207)	$	(50,746)

Basic and diluted loss per share of common stock:


Net loss per share of common stock	$	(0.06)	$	(0.24)	$	(0.17)	$	(0.39)

See notes to unaudited condensed consolidated financial statements

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BLACKSKY TECHNOLOGY INC.

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY

(unaudited)

(in thousands)


			Six Months Ended June 30, 2024
	Common Stock	Additional Paid-In		Accumulated		Total Stockholders'
			Shares	Amount		Capital		Deficit		Equity
Balance as of January 1, 2024			142,837	$	14	$	692,115	$	(598,970)	$	93,159
Stock-based compensation			—	—		3,488		—		3,488
Issuance of common stock upon exercise of stock options			70	—		1		—		1
Issuance of common stock upon vesting of restricted stock awards			8	—		—		—		—
Issuance of common stock upon vesting of restricted stock units			854	—		—		—		—
Issuance of common stock, net of equity issuance costs			953	—		1,294		—		1,294
Withholding of stock units to satisfy tax withholding obligations upon the vesting of restricted stock units and exercise of stock options			(288)	—		(419)		—		(419)
Net loss			—	—		—		(15,810)		(15,810)
Balance as of March 31, 2024			144,434	14		696,479		(614,780)		81,713
Stock-based compensation			—	—		2,515		—		2,515
Issuance of common stock upon exercise of stock options and ESPP shares purchased			219	—		156		—		156
Issuance of common stock upon vesting of restricted stock awards			8	—		—		—		—
Issuance of common stock upon vesting of restricted stock units			330	—		—		—		—
Issuance of common stock, net of equity issuance costs			1,638	1		1,648		—		1,649
Withholding of stock units to satisfy tax withholding obligations upon the vesting of restricted stock units and exercise of stock options			(99)	—		(105)		—		(105)
Net loss			—	—		—		(9,397)		(9,397)
Balance as of June 30, 2024			146,530	$	15	$	700,693	$	(624,177)	$	76,531


			Six Months Ended June 30, 2023
	Common Stock	Additional Paid-In		Accumulated		Total Stockholders'
			Shares	Amount		Capital		Deficit		Equity
Balance as of January 1, 2023			119,508	$	12	$	666,973	$	(545,111)	$	121,874
Stock-based compensation			—	—		3,214		—		3,214
Issuance of common stock upon exercise of stock options			129	—		3		—		3
Issuance of common stock upon vesting of restricted stock awards			11	—		—		—		—
Issuance of common stock upon vesting of restricted stock units			787	—		—		—		—
Issuance of common stock, net of equity issuance costs			16,404	2		11,127		—		11,129
Net loss			—	—		—		(17,315)		(17,315)
Balance as of March 31, 2023			136,839	14		681,317		(562,426)		118,905
Stock-based compensation			—	—		2,488		—		2,488
Issuance of common stock upon exercise of stock options			95	—		2		—		2
Issuance of common stock upon vesting of restricted stock awards			8	—		—		—		—
Issuance of common stock upon vesting of restricted stock units			668	—		—		—		—
Issuance of common stock, net of equity issuance costs			1,039	—		995		—		995
Withholding of stock units to satisfy tax withholding obligations upon the vesting of restricted stock units and exercise of stock options			(240)	—		(414)		—		(414)
Net loss			—	—		—		(33,431)		(33,431)
Balance as of June 30, 2023			138,409	$	14	$	684,388	$	(595,857)	$	88,545

See notes to unaudited condensed consolidated financial statements

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BLACKSKY TECHNOLOGY INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(unaudited)

(in thousands)


	Six Months Ended June 30,
	2024		2023
Cash flows from operating activities:
Net loss	$	(25,207)	$	(50,746)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization expense	22,461		21,431

Operating lease right of use assets amortization	374		613

Bad debt expense	108		15
Stock-based compensation expense	5,725		5,323
Amortization of debt issuance costs and non-cash interest expense	4,382		189
(Gain) loss on derivatives	(5,019)		9,567
Non-cash interest income	(495)		(337)
Income on equity method investment	—		(585)
Loss (gain) on disposal of assets	46		(22)



Changes in operating assets and liabilities:
Accounts receivable	(1,256)		(4,278)
Contract assets - current and long-term	(6,693)		(4,101)
Prepaid expenses and other current assets	(94)		1,142
Other assets	403		1,117
Accounts payable and accrued liabilities	(1,961)		1,015
Other current liabilities	(309)		(1,097)
Contract liabilities - current and long-term	1,958		(3,491)
Other liabilities	(25)		8,620
Net cash used in operating activities	(5,602)		(15,625)
Cash flows from investing activities:
Purchase of property and equipment	(6,576)		(8,446)
Satellite procurement work in process	(20,984)		(19,925)
Purchases of short-term investments	(13,488)		(19,416)
Proceeds from maturities of short-term investments	18,000		41,110

Proceeds from sale of property and equipment	—		22

Net cash used in investing activities	(23,048)		(6,655)
Cash flows from financing activities:
Proceeds from issuance of debt	20,000		—
Proceeds from equity issuances, net of equity issuance costs	2,947		30,074

Proceeds from options exercised and ESPP shares purchased	157		5
Payments for debt issuance costs	(632)		—
Withholding tax payments on vesting of restricted stock units	(524)		(414)

Payments for deferred offering costs	(83)		—
Payments of transaction costs for debt modification	—		(561)
Payments of transaction costs related to derivative liabilities	—		(905)
Net cash provided by financing activities	21,865		28,199
Net (decrease) increase in cash, cash equivalents, and restricted cash	(6,785)		5,919
Cash, cash equivalents, and restricted cash – beginning of year	33,434		37,016
Cash, cash equivalents, and restricted cash – end of period	$	26,649	$	42,935

See notes to unaudited condensed consolidated financial statements

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The following table provides a reconciliation of cash, cash equivalents, and restricted cash reported within the unaudited condensed consolidated balance sheets that sum to the total of the same such amounts shown in the unaudited condensed consolidated statements of cash flows:


	June 30,
	2024		2023

Cash and cash equivalents	$	25,552	$	41,100
Restricted cash	1,097		1,835
Total cash, cash equivalents, and restricted cash	$	26,649	$	42,935


	Six Months Ended June 30,
	2024		2023
	(in thousands)
Supplemental disclosures of cash flow information:
Cash paid for interest	$	1,026	$	—
Cash paid for income taxes	377		122
Supplemental disclosures of non-cash financing and investing information:
Increase of debt principal for paid-in-kind interest	$	4,105	$	3,490
Property and equipment additions accrued but not yet paid	3,953		2,334

Vendor financed satellite procurement costs	1,500		—
Credits from LeoStella applied to satellite procurement costs	966		81
Leasehold improvements funded by tenant improvement allowance	701		—
Accretion of short-term investments' discounts and premiums	495		317
Capitalized stock-based compensation	278		379

Deferred offering costs accrued but not yet paid	111		—
Equity issuance costs accrued but not yet paid	17		203

Debt modification costs accrued but not yet paid	—		756
Capitalized interest for property and equipment placed into service	—		220
Satellite procurement costs included in settlement with LeoStella	—		36

See notes to unaudited condensed consolidated financial statements

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BLACKSKY TECHNOLOGY INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

June 30, 2024

1. Organization and Business

BlackSky Technology Inc. (“BlackSky” or the “Company”), headquartered in Herndon, Virginia, is a space-based intelligence company that delivers real-time imagery, analytics and high-frequency monitoring. The Company owns and operates an advanced purpose-built commercial, real-time intelligence system that combines the power of the BlackSky Spectra tasking and analytics software platform and the Company's proprietary high-resolution low earth orbit (“LEO”) small satellite constellation. The constellation is optimized to cost-efficiently capture imagery at high revisit rates where and when customers need it. The BlackSky Spectra software platform processes millions of observations a day by integrating data from the Company's proprietary satellite constellation and from other third-party sensors such as synthetic aperture radar and radio frequency satellites, millions of GPS-enabled terrestrial data sources and Internet of Things (“IoT”) connected devices. BlackSky Spectra applies advanced, proprietary artificial intelligence ("AI") and machine learning (“ML”) techniques to process, analyze, and transform these raw feeds into actionable intelligence via alerts, information, and insights. Customers can access BlackSky Spectra's data and analytics through easy-to-use web services or through platform application programming interfaces.

BlackSky has two primary operating subsidiaries, BlackSky Global LLC and BlackSky Geospatial Solutions, LLC. The Company also owns fifty percent of LeoStella LLC (“LeoStella”), its joint venture with Thales Alenia Space US Investment LLC (“Thales”). LeoStella is a vertically-integrated small satellite design and manufacturer based in Tukwila, Washington, from which the Company procures satellites to operate its business. The Company accounts for LeoStella as an equity method investment.

The Company's equity issuances during the six months ended June 30, 2024 were in the form of an at-the-market (“ATM”) offering whereby 2.6 million shares were sold at an average purchase price per share of $1.24, resulting in gross proceeds of $3.2 million. The transaction costs of $0.3 million for the equity issuances incurred during the six months ended June 30, 2024, consisting of legal fees and placement agent fees, have been recorded as a reduction to additional paid-in capital in the unaudited condensed consolidated statements of changes in stockholders’ equity and consolidated balance sheets, and as a reduction to the proceeds from the transaction in the consolidated statements of cash flows.

2. Basis of Presentation and Summary of Significant Accounting Policies

Basis of Preparation

The Company has prepared its unaudited condensed consolidated financial statements in accordance with Generally Accepted Accounting Principles in the United States of America (“GAAP”) and the instructions to Form 10-Q and Article 8 of Regulation S-X of the Securities and Exchange Commission (the "SEC"). The accompanying unaudited condensed consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries. In addition, the unaudited condensed consolidated financial statements include the Company’s proportionate share of the earnings or losses of its equity method investments and a corresponding increase or decrease to its investments, with recorded losses limited to the carrying value of the Company’s investments. All intercompany transactions and balances have been eliminated upon consolidation.

The Company’s unaudited condensed consolidated financial statements have been prepared on a historical cost basis, except for certain financial assets and liabilities, including derivative financial instruments, which are stated at fair value. Unless otherwise indicated, amounts presented in the Notes pertain to the Company’s continuing operations.

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Use of Estimates

The preparation of the unaudited condensed consolidated financial statements requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingencies at the reporting date, and the reported amounts of revenue and expenses during the reporting period. These estimates are based on management’s best knowledge of current events and actions the Company may undertake in the future. Actual results could materially differ from these estimates. Significant estimates made by the Company include, but are not limited to, revenue and associated cost recognition, the collectability of accounts receivable, the recoverability and useful lives of property and equipment, the valuation of equity warrants and warrant liabilities, fair value estimates, the recoverability of goodwill and intangible assets, the provision for income taxes, the incremental borrowing rate to measure the operating lease right of use assets, the effective interest rate of the vendor financing agreement, and stock-based compensation.

Investments

The Company invests in short-term investments, which generally consist of A-1, or higher, rated corporate debt and governmental securities. The investments are classified as held-to-maturity and have a stated maturity date of one year or less from the balance sheet date. Any investments with original maturities less than three months are considered cash equivalents.

As of June 30, 2024 and December 31, 2023, the Company’s short-term investments had a carrying value of $15.7 million and $19.7 million, respectively, which represents amortized cost, and an aggregate fair value of $15.7 million and $19.7 million, respectively, which represents a Level 1 measurement based off of the fair value hierarchy.

Equity Method Investments

Investments where the Company has the ability to exercise significant influence, but not control, are accounted for under the equity method of accounting and are included in investment in equity method investees on the Company's unaudited condensed consolidated balance sheets. Significant influence typically exists if the Company has a 20% to 50% ownership voting interest in the investee or retains a voting seat on the investee's board of directors. In evaluating whether the Company has significant influence, the Company considers the nature of its ownership interest in the investee, as well as other factors that may give the Company the ability to exercise significant influence over the investee's operating and capital financial policies. Under this method of accounting, the Company's share of the net earnings or losses of the investee are included in the Company's unaudited condensed consolidated statements of operations and comprehensive loss. The Company did not recognize any percentage of LeoStella's estimated net loss during the six months ended June 30, 2024 since its investment in LeoStella was $0 as of December 31, 2023. The investment in LeoStella was $0 in the Company's unaudited condensed consolidated balance sheets as of June 30, 2024. The Company currently accounts for its LeoStella joint venture as its only equity method investment. The investment in LeoStella is not significant to the financial statements.

Intra-entity profits arising from the sale of assets from the equity method investments to the Company are eliminated and deferred if those assets are still held by the Company at the end of the reporting period. The intra-entity profits will be recognized as the assets are consumed. As of June 30, 2024 and December 31, 2023, the Company had differences between the carrying value of its equity method investment and the underlying equity in the net assets of the investee of $0.3 million and $1.2 million, respectively.

Equity method investments are evaluated for impairment whenever events or changes in circumstances indicate that the carrying amounts of such investments may be impaired. If a decline in the value of an equity method investment is determined to be other than temporary, a loss is recorded in earnings in the current period.

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Debt Issuance Costs and Debt Discount

Debt issuance costs are capitalized and amortized to interest expense using the effective interest method over the life of the related debt. Short-term and long-term debt are presented net of the unamortized debt issuance costs and debt discount in the unaudited condensed consolidated balance sheets.

Fair Value of Financial Instruments

The Company accounts for certain assets and liabilities at fair value. Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date.

The process for analyzing the fair value measurement of certain financial instruments on a recurring, or non-recurring, basis includes significant judgment and estimates of inputs including, but not limited to, share price, volatility, discount for lack of marketability, application of an appropriate discount rate, and probability of liquidating events. The Company utilizes the market valuation methodology and specific option pricing methodology, such as the Monte Carlo simulation, to value the more complex financial instruments and the Black-Scholes option-pricing model to value standard common stock warrants and common stock options.

The framework for measuring fair value specifies a hierarchy of valuation techniques based on whether the inputs to those valuation techniques are observable or unobservable. Observable inputs reflect market data obtained from independent sources, while unobservable inputs reflect the Company's assumptions. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurement) and the lowest priority to unobservable inputs (Level 3 measurement).

The three levels of the fair value hierarchy are as follows:

Level 1 Inputs. Inputs are unadjusted quoted prices in active markets for identical assets or liabilities available at the measurement date.

Level 2 Inputs. Inputs are unadjusted quoted prices for similar assets and liabilities in active markets, quoted prices for identical or similar assets and liabilities in markets that are not active, inputs other than quoted prices that are observable, and inputs derived from or corroborated by observable market data.

Level 3 Inputs. Inputs are unobservable inputs which reflect the Company’s own assumptions on what assumptions market participants would use in pricing the asset or liability based on the best available information.

Revenue Recognition

The Company generates revenue from the sale of imagery and software analytical services and professional and engineering services. Imagery and software analytical services revenue, which is mostly from contracts from domestic and international government agencies, includes imagery, data, software, and analytics. This revenue is primarily recognized from services rendered under non-cancellable subscription order agreements or, in limited circumstances, variable not-to-exceed purchase orders. Professional and engineering services revenue is generated from time and materials basis, firm fixed price service solutions, and firm fixed price long-term engineering and construction contracts.

In accordance with Accounting Standards Update No. 2014-09, “Revenue from Contracts with Customers (Topic 606)” (“ASC 606”), the Company uses the five-step model of identifying the contract with a customer, identifying the performance obligations contained in a contract, determining the transaction price, allocating the transaction price, and determining when performance obligations are satisfied, which can require the application of significant judgment, as further discussed below.

Revenue is measured at the fair value of consideration received or receivable and net of discounts. The Company applies a policy election to exclude transaction taxes collected from customer sales when the tax is both imposed on and concurrent with a specific revenue-producing transaction. The Company estimates any

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variable consideration, and whether the transaction price is constrained, upon execution of each contract. The Company did not have any active contracts with significant variable consideration as of June 30, 2024.

Imagery & Software Analytical Services Revenue

Imagery

Imagery services include imagery delivered from the Company’s proprietary satellite constellation and Spectra software platform and in limited cases directly uploaded to certain customers. Customers can directly task the Company's proprietary satellite constellation to collect and deliver imagery over specific locations, sites and regions that are critical to their operations. The Company offers customers several service level subscription options that include on-demand tasking or multi-year assured access programs, where customers can secure priority access and imaging capacity at a premium over a region of interest on a take or pay basis. Imagery revenue is recognized ratably over the subscription period based on the promise to continuously provide contractual satellite capacity for tasked imagery or analytics at the discretion of the customer.

Data, Software, and Analytics

The Company leverages proprietary AI and ML algorithms to analyze data coming from both the Company’s proprietary sensor network and third-party space and terrestrial sources to provide hard-to-get data, insights, and analytics for customers. The Company continues to integrate and enhance its offerings by performing contract development, while retaining the intellectual property rights. The Company also offers services related to object, change and anomaly detection, site monitoring, and enhanced analytics, through which the Company can detect key pattern of life changes in critical locations such as ports, airports, and construction sites; retail activity; commodities stockpiles; and other sites that contain critical commodities and supply chain inventory.

The Company's analytics services are also offered on a similar subscription basis and provide customers with access to the Company's site monitoring, event monitoring and global data services. Analogous with the recognition of revenue for imagery, software analytical services revenue is recognized ratably over the subscription period.

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Professional and Engineering Services Revenue

The Company performs various professional services, that are highly-interrelated, including providing technology enabled professional service solutions to support customer-specific software development requests, integration, testing, and training. The Company also provides engineering services, which include developing and delivering advanced satellite and payload systems for a limited number of customers that leverage the Company’s capabilities in mission systems engineering and operations, ground station operations, and software and systems development. These services, based on the context of the contract, are capable of being distinct performance obligations.

For firm fixed price professional and engineering service contracts, the Company recognizes revenue over time using the cost-to-complete method to measure progress to complete the performance obligation ("Estimate at Completion" or "EAC"). A performance obligation's EAC includes all direct costs such as labor, fringe, materials, subcontract costs and overhead. Significant judgment is used to estimate total costs at completion on a contract by contract basis including, but not limited to, labor productivity, program schedule, technical risk analysis, complexity, scope of the work to be performed and other identified risks. Due to the continuous nature of the work, as well as when a change in circumstances warrants a modification, the EAC is reviewed and may result in cumulative changes to the contract profit. The Company recognizes changes in estimated contract sales or costs and the resulting changes in contract profit on a cumulative basis in the period in which the change is identified. If, at any time, the estimate of contract profitability indicates a probable anticipated loss on the contract, the Company recognizes the total loss as and when known. The following table presents the effect of aggregate net EAC adjustments on the Company's professional and engineering services contracts:


	Three Months Ended June 30,				Six Months Ended June 30,
	2024(1)		2023(2)		2024(1)		2023(2)
	(in thousands)
Revenue	$	1,264	$	(1,145)	$	1,003	$	(1,500)
Basic and diluted net loss per share	$	0.01	$	(0.01)	$	0.01	$	(0.01)

(1) For the three and six months ended June 30, 2024, the Company had favorable EAC adjustments of $2.1 million and $1.9 million, respectively, for an existing individual professional services contract. The remaining EAC adjustments are not individually significant to the Company.

(2) For the three and six months ended June 30, 2023, the amounts represent the effect of aggregate net EAC adjustments on two professional and engineering service contracts.

For contracts structured as cost-plus-fixed-fee or on a time and materials basis, the Company generally recognizes revenue based on the right-to-invoice when practically expedient, as the Company is contractually able to invoice the customer based on the control transferred to the customer in an amount that corresponds directly with the value to the customer of the entity’s performance completed to date.

Imagery and Software Analytical Service and Professional and Engineering Service Costs

Imagery and software analytical service costs primarily include internal labor to support the ground station network and space operations, third-party data and imagery, and cloud computing and hosting services. The Company recognizes stock-based compensation expense for those employees whose work supports the imagery and software analytical service costs it provides to customers, under imagery and software analytical service costs, excluding depreciation and amortization. For those employees who provide these services to support customer-based programs, the stock-based compensation expense is classified under imagery and software analytical services costs.

Professional and engineering service costs primarily include the cost of internal labor for design and engineering in support of long-term development contracts for satellites and payload systems, as well as subcontract direct materials and external labor costs to build and test specific components, such as the communications system, payload demands, and sensor integration. In addition, the Company also recognizes internal labor costs and external subcontract labor costs for its customer-centric software service solutions. The Company recognizes stock-based compensation expense for those employees who provide professional and engineering services support to customers, under professional and engineering service costs, excluding depreciation and amortization.

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Sponsor Shares

On September 9, 2021, BlackSky's predecessor company, Osprey Technology Acquisition Corp. (“Osprey”), completed its merger (the "Merger") with Osprey Technology Merger Sub, Inc., a wholly-owned subsidiary of Osprey, and BlackSky Holdings, Inc. Osprey pre-Merger Class B common shares were exchanged for shares of the Company’s Class A common stock (the "Sponsor Shares") upon completion of the Merger. The Company accounted for the Sponsor Shares in accordance with the guidance contained in ASC 815-40, under which the Sponsor Shares did not meet the criteria for equity treatment and were recorded as derivative liabilities in the Company’s unaudited condensed consolidated balance sheets as of June 30, 2024. The Sponsor Shares are adjusted to fair value at each reporting period and the change in fair value is recognized in gain (loss) on derivatives in the Company’s unaudited condensed consolidated statements of operations and comprehensive loss.

Stock-Based Compensation

Restricted Stock Awards and Restricted Stock Units

The Company has granted restricted stock awards ("RSAs") and grants restricted stock units ("RSUs") to certain employees, for which the grant date fair value is equal to the fair value of the Class A common stock on the date of grant. In order to determine the fair value of its Class A common stock on the date of grant prior to the Merger, the Company historically performed a valuation analysis using a combination of market and income approaches. Subsequent to the Merger, the Company uses the New York Stock Exchange (“NYSE”) trading price as the fair value of the Class A common stock for valuation purposes. For all awards for which vesting is only subject to a service condition, including those subject to graded vesting, the Company has elected to use the straight-line method to recognize the fair value as compensation cost over the requisite service period.

Certain of the Company’s outstanding RSUs had performance vesting conditions that were triggered upon the consummation of the Merger. Therefore, since the performance conditions attributable to these RSUs had been met, the Company commenced recording the associated compensation expense, inclusive of a catch-up amount for the service period between their grant date and satisfaction of the performance condition, as of the closing of the Merger. The fair value of the RSUs that include a performance condition is recognized as compensation expense over the requisite service period using the accelerated attribution method, which accounts for RSUs with discrete vesting dates as if they were separate awards. Expense related to stock-based payments is classified in the unaudited condensed consolidated statements of operations and comprehensive loss based upon the classification of each employee's cash compensation. As of June 30, 2024, 58 thousand RSUs with performance vesting conditions were outstanding and the associated remaining expense of $0.1 million will be recognized through September 30, 2025.

Stock Options

The Company uses the Black-Scholes option pricing model to value all options, including options under the 2021 Employee Stock Purchase Plan ("ESPP"), and the straight-line method to recognize the fair value as compensation cost over the requisite service period. The fair value of each option granted was estimated as of the date of grant. The Company did not grant any options during the six months ended June 30, 2024. The Company uses the following inputs when applying the Black-Scholes option pricing model:

Expected Dividend Yield. The Black-Scholes valuation model requires an expected dividend yield as an input. The dividend yield is based on historical experience and expected future changes. The Company has not historically paid and currently has no plans to pay dividends on its Class A common stock.

Expected Volatility. The Company does not have sufficient historical share price history; therefore, the expected volatility was estimated based upon the historical share price volatility of guideline comparable companies.

Risk-free Interest Rate. The yield on actively traded non-inflation indexed U.S. Treasury notes was used to extrapolate an average risk-free interest rate based on the expected term of the underlying grants.

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Expected Term. For options granted in 2021 through 2023, since there was not a history of option exercises as a public company, the Company considered the option vesting terms and contractual period, as well as the demographics of the holders, in estimating the expected term. For options granted prior to 2021, the expected term was the estimated duration to a liquidation event based on a weighted average consideration of the most likely exit prospects for that stage of development. BlackSky Holdings, Inc. ("Legacy BlackSky") was privately funded and, accordingly, the lack of marketability was factored into the expected term of options granted. The Company will review its estimate in the future and adjust it, if necessary, due to changes in the Company’s historical exercises.

The most significant assumption used to determine the fair value of the Legacy BlackSky equity-based awards was the estimated fair value of the Legacy BlackSky Class A common stock on the grant date. In order to determine the fair value of its Class A common stock on the date of grant prior to the Merger, Legacy BlackSky historically relied on a valuation analysis performed using a combination of market and income approaches. Subsequent to the Merger, the Company uses the NYSE trading price as the fair value of the Company's Class A common stock for valuation purposes.

Legacy BlackSky historically adjusted the exercise price of certain outstanding stock options. For each award with an adjusted exercise price, Legacy BlackSky calculated the incremental fair value, which was the excess of the fair value of the modified award over the fair value of the original award immediately before the modification. The incremental fair value was recognized as stock-based compensation expense immediately to the extent that the modified stock option already had vested, and for stock options that were not yet vested, the incremental fair value has been recognized as stock-based compensation expense over the remaining vesting period.

3. Accounting Standards Updates (“ASU”)

Accounting Standards Recently Issued But Not Yet Adopted

On November 27, 2023, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") No. 2023-07 Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures. Among other new disclosure requirements, ASU 2023-07 requires companies to disclose significant segment expenses that are regularly provided to the chief operating decision maker ("CODM"). ASU 2023-07 will be effective for annual periods beginning on January 1, 2024 and interim periods beginning on January 1, 2025. ASU 2023-07 must be applied retrospectively to all prior periods presented in the financial statements. The Company is assessing the effect of this update on its consolidated financial statements and related disclosures.

On December 14, 2023, the FASB issued ASU No. 2023-09 Income Taxes (Topic 740): Improvements to Income Tax Disclosures. ASU 2023-09 requires companies to disclose, on an annual basis, specific categories in the effective tax rate reconciliation and provide additional information for reconciling items that meet a quantitative threshold. In addition, ASU 2023-09 requires companies to disclose additional information about income taxes paid. ASU 2023-09 will be effective for annual periods beginning January 1, 2025 and will be applied on a prospective basis with the option to apply the standard retrospectively. The Company is assessing the effect of this update on its consolidated financial statements and related disclosures.

4. Revenue

Disaggregation of Revenue

The Company earns revenue through the sale of imagery and software analytical services and professional and engineering services. The Company’s management primarily disaggregates revenue as follows: (i) imagery; (ii) data, software and analytics; (iii) professional services; and (iv) engineering services. This disaggregation allows the Company to evaluate market trends in certain imagery and software analytical services and professional and engineering services.

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The following table disaggregates revenue by type for the three and six months ended June 30, 2024 and 2023:


	Three Months Ended June 30,				Six Months Ended June 30,
	2024		2023		2024		2023
	(in thousands)
Imagery	$	15,323	$	12,778	$	31,218	$	25,690
Data, software, and analytics	2,146		2,550		4,084		5,398
Professional services	5,572		3,707		9,659		6,335
Engineering services	1,897		292		4,213		301
Total revenue	$	24,938	$	19,327	$	49,174	$	37,724

The approximate revenue based on geographic location of end customers is as follows for the three and six months ended June 30, 2024 and 2023:


	Three Months Ended June 30,				Six Months Ended June 30,
	2024		2023		2024		2023
	(in thousands)
North America	$	15,029	$	14,492	$	30,221	$	28,511
Middle East	4,150		1,370		6,644		2,895
Asia Pacific	5,526		3,177		11,774		5,802
Other	233		288		535		516
Total revenue	$	24,938	$	19,327	$	49,174	$	37,724

Revenue from categories of end customers for the three and six months ended June 30, 2024 and 2023 is as follows:


	Three Months Ended June 30,				Six Months Ended June 30,
	2024		2023		2024		2023
	(in thousands)
U.S. federal government and agencies	$	13,948	$	14,069	$	28,705	$	27,739
International governments	10,028		4,871		19,047		9,254
Commercial and other	962		387		1,422		731
Total revenue	$	24,938	$	19,327	$	49,174	$	37,724

Backlog

Backlog represents the future sales the Company expects to recognize on firm orders it receives and is equivalent to the Company’s remaining performance obligations at the end of each period. It comprises both funded backlog (firm orders for which funding is authorized and appropriated) and unfunded backlog. The Company's backlog excludes unexercised contract options. As of June 30, 2024, the Company had $260.6 million of backlog, which represents the transaction price of executed contracts less inception to date revenue recognized. The Company expects to recognize revenue relating to its backlog, of which a portion is recorded in deferred revenue in the unaudited condensed consolidated balance sheets, of $42.1 million, $50.9 million, and $167.6 million in the six months ended December 31, 2024, fiscal year 2025, and thereafter, respectively.

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5. Contract Assets and Liabilities

The components of contract assets and contract liabilities consisted of the following:


	June 30,		December 31,
	2024		2023
	(in thousands)
Contract assets - current:
Unbilled revenue	$	28,166	$	15,213

Total contract assets - current	$	28,166	$	15,213

Contract assets - long-term:
Unbilled revenue - long-term	$	1,332	$	8,150
Other contract assets - long-term	1,168		610
Total contract assets - long-term(1)	$	2,500	$	8,760

Contract liabilities - current:
Deferred revenue - current	$	4,580	$	3,670

Total contract liabilities - current	$	4,580	$	3,670

Contract liabilities - long-term:

Other contract liabilities - long-term	$	1,217	$	169
Total contract liabilities - long-term	$	1,217	$	169

(1) Total contract assets - long term is included in other assets in the unaudited condensed consolidated balance sheets.

Contract liabilities include payments received and billings made in advance of the satisfaction of performance obligations under the contract and are realized when the associated revenue is recognized under the contract. Contract assets include (i) unbilled revenue, which is the amount of revenue recognized in excess of the amount billed to customers, where the rights to payment are not just subject to the passage of time; and (ii) costs incurred incremental to the contract and to fulfill contract obligations. Other contract assets and other contract liabilities primarily relate to contract commissions on customer contracts.

Changes in short-term and long-term contract assets and contract liabilities for the six months ended June 30, 2024 were as follows:


	Contract Assets		Contract Liabilities
	(in thousands)
Balance as of January 1, 2024	$	23,973	$	3,839
Billings or revenue recognized that was included in the beginning balance	(6,162)		(3,219)
Changes in contract assets or contract liabilities, net of reclassification to receivables	11,229		4,065
Cumulative catch-up adjustment arising from changes in estimates to complete	1,068		(11)
Cumulative catch-up adjustment arising from contract modifications	—		76
Changes in costs to fulfill and amortization of commission costs	558		—
Changes in contract commission costs	—		1,047
Balance as of June 30, 2024	$	30,666	$	5,797

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6. Property and Equipment - net

The following summarizes property and equipment - net as of:


	June 30,		December 31,
	2024		2023
	(in thousands)
Satellites	$	116,219	$	125,124
Software	27,140		20,384
Software development in process	2,321		2,673
Computer equipment	1,770		1,642
Office furniture and fixtures	4,252		4,039
Other equipment	1,696		811
Site equipment	2,466		2,557
Total	155,864		157,230
Less: accumulated depreciation	(103,385)		(90,114)
Property and equipment — net	$	52,479	$	67,116

7. Debt and Other Financing

The carrying value of the Company’s outstanding debt consisted of the following amounts:


	June 30,		December 31,
	2024		2023
	(in thousands)
Current portion of long-term debt	$	375	$	—
Non-current portion of long-term debt	109,808		84,578
Total long-term debt	110,183		84,578
Unamortized debt issuance costs	(1,601)		(1,077)
Outstanding balance	$	108,582	$	83,502


	Effective Interest Rate	June 30,			December 31,
Name of Loan		2024			2023
		(in thousands)
Loans from Related Parties	12.23% - 12.57%	$	88,683		$	84,578
Satellite Procurement Vendor Financing	12.04%	1,500			—
Commercial Bank Line	9.98%	20,000		—	—
Total		$	110,183		$	84,578

Satellite Procurement Vendor Financing

In November 2023, the Company entered into a vendor financing agreement for multiple launches providing for $27.0 million, of which a portion will be drawn down equally per launch and will be repaid quarterly on a pro-rata basis across a three-year period after each successful launch milestone. Payments will accrue interest at 12.6% per annum, beginning on each launch date. The Company may prepay at any time until

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the maturity date without premium or penalty. During the six months ended June 30, 2024, the Company incurred $1.5 million of long-term debt related to the vendor financing agreement.

Commercial Bank Line

In April 2024, the Company, and certain subsidiaries of the Company, as co-borrowers, entered into a commercial bank line with Stifel Bank. The commercial bank line provides for a $20.0 million revolving credit facility, including a $0.5 million sub-facility for the issuance of letters of credit and other ancillary banking services. As of June 30, 2024, there was $20.0 million outstanding under the revolving credit facility. The commercial bank line matures on June 30, 2026.

The commercial bank line accrues interest at a rate equal to the greater of (A) the prime rate or (B) 6%. Interest on the loan is payable quarterly in arrears. The Company is required to pay an unused line fee of 0.25% per annum, payable quarterly in arrears. The Company may borrow, prepay and re-borrow revolving loans, without premium or penalty. The principal amount of outstanding loans, together with accrued and unpaid interest, is due on the loan maturity date. The Company is also obligated to pay a fee to the lender upon the occurrence of certain change of control events or the refinancing, repayment, or termination of the commercial bank line, along with other customary fees for a loan facility of this size and type.

The Company’s obligations under the commercial bank line are secured by substantially all of the Company’s assets, including intellectual property. Pursuant to a subordination arrangement, the security interest granted to Stifel Bank is senior to the security interest the Company granted to Intelsat Jackson Holdings SA pursuant to that certain Amended and Restated Loan and Security Agreement, dated as of October 31, 2019, as amended.

The commercial bank line contains customary affirmative and negative covenants, including covenants limiting the Company's ability to, among other things, incur debt, grant liens, pay dividends and distributions on its capital stock, make investments and acquisitions, and make capital expenditures, in each case subject to customary exceptions for a loan facility of this size and type. The commercial bank line also contains financial covenants requiring compliance with a minimum revenue covenant, measured at the end of each fiscal quarter, and maintenance, at all times, of unrestricted cash and cash equivalents with Stifel Bank or in controlled accounts in an aggregate amount at least equal to the outstanding obligations under the commercial bank line. If the Company fails to meet the minimum cash covenant, the commercial bank line provides the Company with the ability to cure the breach with the deposit of proceeds from the issuance of capital stock or subordinated debt.

Fair Value of Debt

The estimated fair value of the Company’s outstanding long-term debt was $115.9 million and $78.7 million as of June 30, 2024 and December 31, 2023, respectively, which is different than the historical cost of the long-term debt as reflected in the Company’s unaudited condensed consolidated balance sheets. The fair value of the long-term debt was estimated using Level 3 inputs, based on interest rates available for debt with terms and maturities similar to the Company’s existing debt arrangements and credit rating.

8. Equity Warrants Classified as Derivative Liabilities

Warrant Valuation

Equity warrants that are classified as derivative liabilities must be measured at fair value upon issuance and re-valued at the end of each reporting period through expiration and are included in derivative liabilities in the Company's unaudited condensed consolidated balance sheets. Any change in fair value between the respective reporting dates is recognized as an unrealized gain or loss in the accompanying unaudited condensed consolidated statements of operations and comprehensive loss (see Note 13). The Company's derivative liabilities were made up of only equity warrants and the Sponsor Shares as of June 30, 2024 and December 31, 2023.

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The following table is a summary of the number of shares of the Company’s Class A common stock issuable upon exercise of warrants at June 30, 2024:


	Number of Shares	Exercise Price		Redemption Price		Expiration Date	Classification	Gain in Value for the Six Months Ended June 30, 2024		Fair Value as of June 30, 2024
	(in thousands)							(in thousands)
Public Warrants	15,813	$	11.50	$	18.00	9/9/2026	Liability	$	275	$	520
Private Placement Warrants - Issued October 2019	4,163	11.50		18.00		9/9/2026	Liability	250		167
Private Placement Warrants - Issued October 2019	4,163	20.00		18.00		9/9/2026	Liability	83		83
Private Placement Warrants - Issued March 2023	16,404	2.20		N/A		9/8/2028	Liability	3,937		8,530

In addition, the Company has 1.8 million Class A common stock warrants outstanding which have an exercise price of $0.11 and expiration dates from June 27, 2028 to October 31, 2029. These warrants are equity classified and are included in additional paid-in capital in the Company’s unaudited condensed consolidated balance sheets.

9. Other Income (Expense)


	Three Months Ended June 30,				Six Months Ended June 30,
	2024		2023		2024		2023
	(in thousands)
Transaction costs associated with debt and equity financings	$	—	$	(833)	$	—	$	(1,738)
Other	2		(34)		3		(72)
	$	2	$	(867)	$	3	$	(1,810)

10. Net Loss Per Share of Class A Common Stock

The following table includes the calculation of basic and diluted net loss per share:


	Three Months Ended June 30,				Six Months Ended June 30,
	2024		2023		2024		2023
	(in thousands except per share information)
Net loss available to common stockholders	$	(9,397)	$	(33,431)	$	(25,207)	$	(50,746)

Basic and diluted net loss per share	$	(0.06)	$	(0.24)	$	(0.17)	$	(0.39)

Shares used in the computation of basic and diluted net loss per share	145,186		137,208		144,214		130,712

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The potentially dilutive securities listed below were not included in the calculation of diluted weighted average common shares outstanding, as their effect would have been anti-dilutive during the three and six months ended June 30, 2024 and 2023.


	Three and Six Months Ended June 30,
		2024	2023
		(in thousands)
Restricted Class A common stock		8	38
Class A common stock warrants		1,770	1,770
Stock options		7,070	7,705
Restricted stock units		14,971	6,187
Public Warrants (exercisable for Class A common stock) treated as liability		15,813	15,813
Private Placement Warrants (exercisable for Class A common stock) treated as liability		24,729	24,729
Sponsor Shares		2,372	2,372

11. Stock-Based Compensation

The stock-based compensation expense attributable to continuing operations is included in the unaudited condensed consolidated statements of operations and comprehensive loss as indicated in the table below:


	Three Months Ended June 30,				Six Months Ended June 30,
	2024		2023		2024		2023
	(in thousands)
Imagery & software analytical service costs, excluding depreciation and amortization	$	38	$	52	$	104	$	145
Professional & engineering service costs, excluding depreciation and amortization	102		112		251		294
Selling, general and administrative	2,222		2,147		5,370		4,884
Total stock-based compensation expense	$	2,362	$	2,311	$	5,725	$	5,323

The Company recorded stock-based compensation related to capitalized internal labor for software development activities of $0.2 million during the three months ended June 30, 2024 and 2023, respectively, and $0.3 million and $0.4 million during the six months ended June 30, 2024 and 2023, respectively. These amounts are included in property, plant, and equipment - net in the unaudited condensed consolidated balance sheets.

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12. Related Party Transactions

A summary of the Company’s related party transactions during the six months ended June 30, 2024 and 2023 is presented below:


							Amount Due to Related Party as of
			Total Payments in the Six Months Ended June 30,				June 30,		December 31,
	Nature of Relationship		2024		2023		2024		2023
Name		Description of the Transactions	(in thousands)
LeoStella	Joint Venture with Thales Alenia Space	The Company owns 50% of LeoStella, its joint venture with Thales. The Company contracts with LeoStella for the design, development and manufacture of satellites to operate its business.	$	16,816	$	11,325	$	2,378	$	10,843


Ursa Space Systems	Strategic Partner	The chairman of the Company’s board of directors, Will Porteous, is also an investor and member of the board of directors of Ursa Space Systems. The Company has a non-cancelable operational commitment with Ursa Space Systems.	292		250		—		42
Thales Alenia Space	Shareholder and Parent of Wholly-owned Subsidiary, Seahawk (Debt Issuer)	Design, development and manufacture of telescopes.	2,696		3,464		970		750
Seahawk	Debt Issuer and subsidiary of Thales Alenia Space	In 2019, the Company raised and converted $18.4 million from prior debt into new, outstanding debt and issued 13.5 million warrants to purchase Legacy BlackSky common stock.	277		—		23,900		22,793
Intelsat	Debt Issuer	In 2019, the Company entered into a term loan facility for $50.0 million and issued 20.2 million warrants to purchase Legacy BlackSky common stock.	1,050		—		64,783		61,785

The Company recorded revenue from related parties of $1.5 million and $3.5 million for the three and six months ended June 30, 2024, respectively. The Company did not record revenue from related parties for the three and six months ended June 30, 2023. Accounts receivable from related parties was $0 as of June 30, 2024 and December 31, 2023.

Interest on the term loan facility is accrued and is due semi-annually. The Company made interest payments of $1.0 million during the three and six months ended June 30, 2024. The Company did not make any interest payments during the three and six months ended June 30, 2023. As of June 30, 2024, the Company had interest due to related parties of $1.8 million, of which $0.4 million is to be paid as cash interest on a semi-annual basis and was included in other current liabilities and $1.4 million is paid in kind as principal due on the maturity date and was included in other liabilities. As of December 31, 2023, the Company had interest due to related parties of $1.7 million, of which $0.3 million was included in other current liabilities and $1.4 million was included in other liabilities.

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13. Fair Value of Financial Instruments

The following tables present information about the Company’s liabilities that are measured at fair value on a recurring basis as of June 30, 2024 and December 31, 2023 and indicate the fair value hierarchy level of the valuation techniques and inputs that the Company utilized to determine such fair value:


June 30, 2024	Quoted Prices in Active Markets		Significant Other Observable Input		Significant Other Unobservable Inputs
	(Level 1)		(Level 2)		(Level 3)
	(in thousands)
Liabilities
Public Warrants	$	520	$	—	$	—
Private Placement Warrants - Issued October 2019	—		—		250
Private Placement Warrants - Issued March 2023	—		—		8,530
Sponsor Shares	—		—		830
	$	520	$	—	$	9,610


December 31, 2023	Quoted Prices in Active Markets		Significant Other Observable Input		Significant Other Unobservable Inputs
	(Level 1)		(Level 2)		(Level 3)
	(in thousands)
Liabilities
Public Warrants	$	795	$	—	$	—
Private Placement Warrants - Issued October 2019	—		—		583
Private Placement Warrants - Issued March 2023	—		—		12,467
Sponsor Shares	—		—		1,304
	$	795	$	—	$	14,354

The carrying values of the following financial instruments approximated their fair values as of June 30, 2024 and March 31, 2024 based on their maturities: cash and cash equivalents, restricted cash, accounts receivable, prepaid expenses and other current assets, accounts payable, accrued liabilities, and other current liabilities.

There were no transfers into or out of any of the levels of the fair value hierarchy during the six months ended June 30, 2024 or 2023.

Changes in the fair value of the Level 3 liabilities during the six months ended June 30, 2023 of $26.1 million included the Sponsor Shares, the October 2019 Private Placement Warrants, and the March 2023 Private Placement Warrants. The following is a summary of changes in the fair value of the Level 3 liabilities during the six months ended June 30, 2024:


	Sponsor Shares		Private Placement Warrants - Issued October 2019		Private Placement Warrants - Issued March 2023
	(in thousands)
Balance as of January 1, 2024	$	1,304	$	583	$	12,467
Gain from changes in fair value	(474)		(333)		(3,937)
Balance as of June 30, 2024	$	830	$	250	$	8,530

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14. Commitments and Contingencies

Legal Proceedings

From time to time, the Company may become involved in various claims and legal proceedings arising in the course of business, which, by their nature, are inherently unpredictable. Regardless of outcome, litigation and other legal proceedings can have an adverse impact on the Company because of defense and settlement costs, diversion of management resources and other factors.

On May 7, 2024, a putative class action relating to the Merger of Legacy BlackSky on September 9, 2021 with a wholly-owned subsidiary of Osprey was filed in the Delaware Court of Chancery. The action is captioned Drulias v. Osprey Sponsor II, LLC, et al. (“Drulias”) (Del. Ch. 2024). The Drulias complaint asserts breach of fiduciary duty and unjust enrichment claims against the former directors of Osprey (the “Osprey Board”); the former officers of Osprey; and Osprey Sponsor II, LLC (the “Sponsor”); and aiding and abetting breach of fiduciary duty claims against HEPCO Capital Management, LLC; JANA Partners LLC; and a director of Legacy BlackSky. The Drulias complaint seeks, among other things, damages and attorneys’ fees and costs. The terms of the Merger required the Company to indemnify the directors of Osprey. The Company believes that the complaint is without merit and the Company is evaluating potential outcomes.

On May 8, 2024, a putative class action relating to the Merger was filed in the Delaware Court of Chancery. The action is captioned Cheriyala v. Osprey Sponsor II, LLC (“Cheriyala”) (Del. Ch. 2024). The Cheriyala complaint asserts breach of fiduciary duty claims against the former directors of the Osprey Board, the former officers of Osprey, and the Sponsor; aiding and abetting breach of fiduciary duty claims against BlackSky Holdings, Inc. and certain directors and officers of Legacy BlackSky; and unjust enrichment claims against an Osprey director. The Cheriyala complaint seeks, among other things, damages and attorneys’ fees and costs. The Company believes that the complaint is without merit and the Company is evaluating potential outcomes.

Though BlackSky Technology Inc. is not named in either suit, the Company expects to have certain indemnification requirements of directors, officers and former directors and officers.

Compliance with Debt Covenants

As of June 30, 2024, all debt instruments contain customary covenants and events of default. The Company was in compliance with all financial and non-financial covenants as of June 30, 2024.

Other Commitments

During 2023, the Company entered into a new operating lease for office space with a commencement date in January 2024 and an expiration date in August 2036. The Company recognized an operating lease right-of-use asset and a long-term operating lease liability of $3.7 million in its unaudited condensed consolidated balance sheets during the six months ended June 30, 2024.

In addition to the above, the Company entered into various operational commitments for the next several years totaling $2.0 million during the six months ended June 30, 2024.

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15. Concentrations, Risks, and Uncertainties

The Company has a concentration of contractual revenue arrangements with the U.S. federal government and agencies as well as with commercial customers. Accounts receivable related to U.S. federal government and agencies was $5.6 million and $6.0 million as of June 30, 2024 and December 31, 2023, respectively. The Company had the following customers whose revenue and accounts receivable balances individually represented 10% or more of the Company’s total revenue and/or accounts receivable:


	Revenue
	Three Months Ended June 30,		Six Months Ended June 30,
	2024	2023	2024	2023
	(in thousands)
U.S. federal government and agencies	56%	73%	58%	74%
Customer B	15%	16%	15%	15%
Customer C	17%	*	13%	*

Accounts Receivable

As of June 30, 2024

As of December 31, 2023

(in thousands)

U.S. federal government and agencies

68%

83%

Customer B

14%

Customer C

11%

* Revenue and/or accounts receivable from these customers were less than 10% of total revenue and/or accounts receivable during the period.

The Company generally extends credit on account, without collateral. Outstanding accounts receivable balances are evaluated by management, and accounts are reserved when it is determined collection is not probable. As of June 30, 2024 and 2023, the Company evaluated the realizability of the aged accounts receivable, giving consideration to each customer’s financial history and liquidity position, credit rating and the facts and circumstances of collectability on each outstanding account, and did not have a significant reserve for uncollectible accounts.

16. Subsequent Events

The Company evaluated subsequent events through August 8, 2024 and determined that there have been no events that have occurred that would require adjustments to its disclosures or the consolidated financial statements.

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ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our consolidated financial statements and related notes appearing elsewhere in this Quarterly Report on Form 10-Q. As discussed in the section titled “Special Note Regarding Forward-Looking Statements,” the following discussion and analysis contains forward-looking statements that involve risks and uncertainties, as well as assumptions that, if they never materialize or prove incorrect, could cause our results to differ materially from those expressed or implied by such forward-looking statements. Factors that could cause or contribute to these differences include, but are not limited to, those discussed in the section titled “Risk Factors” under Part I, Item 1A of our Annual Report on Form 10-K for the year ended December 31, 2023 and filed with the SEC. Unless the context otherwise requires, references in this “Management’s Discussion and Analysis of Financial Condition and Results of Operations” to “BlackSky,” “the Company,” “we,” “us” and “our” refer to the business and operations of BlackSky Holdings, Inc. (“Legacy BlackSky”) and its consolidated subsidiaries prior to the completion of its merger on September 9, 2021 with a wholly-owned subsidiary of Osprey Technology Acquisition Corp. (the “Merger”) and of BlackSky Technology Inc. and its consolidated subsidiaries, following the closing of the Merger.

Company Overview

We own and operate one of the industry's leading high-performance low earth orbit small satellite constellations. Our constellation is optimized to cost-efficiently capture imagery at high revisit rates where and when our customers need it. The orbital configuration of our constellation is designed to collect data on the most critical and strategic locations in the world. Our constellation is able to image certain locations approximately every 90 minutes, from dawn to dusk, providing our customers with insights and situational awareness throughout the day. Our satellites are designed with agile pointing capabilities that enable our customers to task our constellation on demand to collect specific locations of interest. The constellation is optimized for agility and capacity and delivers high revisit imaging and analytic products without a dependency on an individual satellite. This approach enables us to strategically deploy capacity to meet customer needs and tailor the capability over time to meet market demand. Our tasking methodology employs proprietary artificial intelligence (“AI”)-enabled software to efficiently collect images of the most important strategic and economic assets and areas of interest to our customers. We believe that our focus on critical strategic and economic infrastructure and the AI-enabled tasking of our constellation differentiates us from many of our competitors, who are primarily dedicated to mapping the entirety of the Earth on a routine basis. Our differentiated approach to space enables us to deliver highly targeted and valuable intelligence with a smaller constellation fleet that has the added benefit of greater operating and capital efficiencies.

Our BlackSky Spectra software platform can, among other things, process millions of observations a day from our proprietary satellite constellation and from multiple external data sources including imaging, radar and radio frequency satellites, environmental sensors, asset tracking sensors, Internet-of-Things connected devices, internet-enabled narrative sources, and a variety of geotemporal data feeds. BlackSky Spectra employs advanced, proprietary AI and machine learning (“ML”) techniques to process, analyze, and transform these data feeds into alerts, information, and insights that our customers receive, all fully automated. Customers can access BlackSky Spectra's data and analytics through easy-to-use web services or through platform application programming interfaces.

Our next generation satellites (“Gen-3”), expected to launch in the fourth quarter of 2024, are designed to improve imaging resolution even further and include short wave infrared imaging technology for a broad set of imaging conditions, including nighttime and low-light. We believe these advancements will expand the relevance and certainty of our analytics to continue to ensure our importance to our customers. We also believe the combination of our high-revisit, small satellite constellation, our BlackSky Spectra platform, and low constellation cost is transforming the market for real-time, space-based imagery and analytics.

Our operating strategy is to continue to enhance the capabilities of our satellite constellation, to increase the number of third-party data sources processed by our BlackSky Spectra platform, and to expand our analytics offerings in order to increase the value we deliver to our customers. Our two strategic assets—our satellite constellation and our BlackSky Spectra platform—are mutually reinforcing: as we capture more information about the world’s most important strategic and economic assets and locations, our proprietary database expands and increases its utility, enabling us to better detect, understand, and predict changes that matter most to our customers.

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Our business has a natural and powerful “flywheel” effect: the more data we collect and analyze, the more valuable the insights we can deliver to our customers.

Our current customer base and end market mix are weighted towards U.S. and international defense and intelligence customers and markets. We believe there are significant opportunities to expand our imagery and software analytical services, as well as our professional and engineering service offerings, to a broad set of customers both domestically and internationally. In addition, our services and products can benefit customers in a variety of commercial markets including, but not limited to, energy and utilities, insurance, commodities, mining, manufacturing, logistics, supply chain management, agriculture, environmental monitoring, disaster and risk management, engineering and construction, and retail and consumer behavior.

We generate revenue by selling On-Demand and Assured product and service offerings that support a broad range of applications including national security, supply chain intelligence, crisis management, critical infrastructure monitoring, economic intelligence, and others. These offerings are comprised of a predefined, standard set of imagery and software analytics products accessible via our basic subscription plan through our BlackSky Spectra software platform, plus professional and engineering services provided to customers on a project-by-project basis. We offer a variety of pricing and utilization options for our imagery and software analytical service offerings, with the majority of our agreements structured as subscription contracts, followed by usage-based pricing and transactional licenses. These options provide customers flexibility to utilize our imagery and software analytical services in a manner that best suits their business needs. We offer a range of pricing tiers that enables the customer to manage collection priorities, when during critical events they can pay a premium to prioritize their monitoring and collection requirements. At other times, customers can select lower priority collections to allow for more economical utilization. Variable and fixed price plans allow our customers to choose what matters most to them—platform licensing-levels, priority for imagery tasking, and whether to apply analytics or monitoring capabilities overtop the imaging service.

Components of Operating Results

Revenue

Our revenue is generated by selling imagery and software analytics services through our BlackSky Spectra platform and by providing professional and engineering services to strategic customers on a project basis.

•Imagery and Software Analytical Services Revenue

◦Imagery: We offer our customers high-revisit, on-demand high resolution electro optical satellite imaging services. Through our BlackSky Spectra software platform, customers can directly task our proprietary satellite constellation to collect and deliver imagery over specific locations, sites, and regions that are critical to their operations. We offer customers several service level options that include basic plans for access to capacity subscriptions for on-demand tasking or multi-year assured access programs, where customers can secure priority access and imaging capacity at a premium over a region of interest on a take or pay basis.

◦Data, Software, and Analytics: Our analytics services are also offered on a subscription basis and provide customers with access to our site monitoring, event monitoring and global data services. We leverage our proprietary AI and ML algorithms to analyze data coming from both our proprietary sensor network and third-party space sources in real-time to provide data, insights, and analytics for our customers. We provide services related to object, change and anomaly detection, site monitoring, and enhanced analytics through which we can detect key pattern of life changes in critical locations. These critical locations can include strategic locations and infrastructure such as ports, airports, and construction sites; retail activity; commodities stockpiles; and other sites that contain critical commodities and supply chain inventory.

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We expect continued revenue growth in our offerings year over year as a result of increases in our sales orders with new customers and incremental sales orders driven by stronger customer demand with existing customers.

•Professional and Engineering Services Revenue—We develop and deliver advanced satellites and payload systems for specific strategic customers that desire to leverage our capabilities in mission systems engineering and operations, ground station operations, software, analytics and systems development. These systems are sold to government customers under fixed price contracts and are often sold with imagery service subscriptions. We retain rights to intellectual property for developed technology of certain systems.

We also provide technology enabled professional service solutions, which are highly-interrelated, to support customer-specific feature requests and to support the integration, testing, and training of our imagery and software analytical services into the customer's organizational processes and workflows. We also provide software systems engineering development services to support the integration of high volume and mass quantities of data in their operating platforms.

We expect continued meaningful contribution from our professional and engineering services revenue, which we expect will be primarily from contracts with existing U.S. and international defense and intelligence customers with whom we have contracted to perform development work prior to the implementation of their subscription service contracts.

Costs and Expenses

Our costs and expenses are incurred from the following categories:

•Imagery and software analytical services costs primarily include internal aerospace and geospatial software development labor, third-party data and imagery, internal labor to support the ground stations and space operations, and cloud computing and hosting services. Costs are expensed as incurred except for incremental costs to obtain a contract, which are primarily sales commissions on contracts greater than one year and are capitalized and amortized to selling, general, and administrative expenses on a systematic basis consistent with the transfer of goods and services and directly identifiable costs to fulfill a contract. Expense related to stock-based payments is classified in the unaudited condensed consolidated statements of operations and comprehensive loss based upon the classification of each employee's cash compensation. We recognize stock-based compensation expense for those employees whose work supports the imagery and software analytical services costs we provide to customers, under imagery and software analytical service costs, excluding depreciation and amortization.

•Professional and engineering service costs primarily include the cost of internal labor for design and engineering in support of long-term development contracts for customer satellites and payload systems as well as subcontract direct materials and external labor costs to build and test specific components, such as the communications system, payload demands, and sensor integration. In addition, we recognize internal labor costs and external subcontract labor costs for our customer-centric software service solutions. We also recognize stock-based compensation expense for those employees who provide professional and engineering services support to customers, under professional and engineering service costs, excluding depreciation and amortization.

Operating Expenses

Our operating expenses are incurred from the following categories:

•Selling, general, and administrative expense consists of salaries and benefit costs, development costs, professional fees, and other expenses which include other personnel-related costs, stock-based compensation expenses for those employees who generally support our business and operations, and occupancy costs. Our development costs include internal labor costs to design and plan critical real-time software and geospatial analytic solutions and solution enhancements, including mapping, analysis, site target monitoring, and news feeds.

•Research and development expense consists of employees’ salaries, taxes, and benefits costs incurred for data science modeling and algorithm development related to our BlackSky Spectra software platform, and

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for the strategic development efforts to support our long-term strategy. In addition, we employ and classify third-party vendors who fulfill our strategic projects as research and development expense. We intend to continue to invest appropriate resources in research and development efforts, as we believe that investment is critical to maintaining our competitive position.

•Depreciation expense is related to property and equipment, which mainly consist of operational satellites. Amortization expense is related to intangible assets, which mainly consist of customer relationships.

Results of Operations for the Three and Six Months Ended June 30, 2024 and 2023

The following table provides the components of results of operations for the three and six months ended June 30, 2024 and 2023:


	Three Months Ended June 30,				$		%		Six Months Ended June 30,				$		%
	2024		2023		Change		Change		2024		2023		Change		Change
	(dollars in thousands)
Revenue
Imagery & software analytical services	$	17,469	$	15,328	$	2,141	14.0	%	$	35,302	$	31,088	$	4,214	13.6	%
Professional & engineering services	7,469		3,999		3,470		86.8	%	13,872		6,636		7,236		109.0	%
Total revenue	24,938		19,327		5,611		29.0	%	49,174		37,724		11,450		30.4	%
Costs and expenses
Imagery & software analytical service costs, excluding depreciation and amortization	3,432		3,456		(24)		(0.7)	%	6,877		7,155		(278)		(3.9)	%
Professional & engineering service costs, excluding depreciation and amortization	3,450		5,070		(1,620)		(32.0)	%	7,038		7,849		(811)		(10.3)	%
Selling, general and administrative	18,214		18,768		(554)		(3.0)	%	37,030		37,717		(687)		(1.8)	%
Research and development	286		176		110		62.5	%	742		392		350		89.3	%
Depreciation and amortization	11,277		11,776		(499)		(4.2)	%	22,461		21,431		1,030		4.8	%



Operating loss	(11,721)		(19,919)		8,198		41.2	%	(24,974)		(36,820)		11,846		32.2	%

Gain (loss) on derivatives	5,273		(11,098)		16,371		147.5	%	5,019		(9,567)		14,586		152.5	%
Income on equity method investment	—		56		(56)		(100.0)	%	—		585		(585)		(100.0)	%
Interest income	330		648		(318)		(49.1)	%	730		1,083		(353)		(32.6)	%
Interest expense	(3,029)		(2,242)		(787)		(35.1)	%	(5,663)		(4,095)		(1,568)		(38.3)	%
Other income (expense), net	2		(867)		869		100.2	%	3		(1,810)		1,813		100.2	%
Loss before income taxes	(9,145)		(33,422)		24,277		72.6	%	(24,885)		(50,624)		25,739		50.8	%
Income tax expense	(252)		(9)		(243)		NM		(322)		(122)		(200)		(163.9)	%





Net loss	$	(9,397)	$	(33,431)	$	24,034	71.9	%	$	(25,207)	$	(50,746)	$	25,539	50.3	%

•NM - Fluctuation in terms of percentage change is not meaningful.

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Revenue


	Three Months Ended June 30,						$		%		Six Months Ended June 30,						$		%
	2024			2023			Change		Change		2024			2023			Change		Change
	(dollars in thousands)
Imagery & software analytical revenue	$	17,469		$	15,328		$	2,141	14.0	%	$	35,302		$	31,088		$	4,214	13.6	%
% of total revenue	70.0		%	79.3		%					71.8		%	82.4		%			<