Stonegate Updates Coverage on BlackSky Technology, Inc. (NYSE: BKSY) 2Q24

DALLAS, TX -- August 9th, 2024 -- BlackSky Technology, Inc. (NYSE: BKSY): Stonegate Capital Partners updates their coverage on BlackSky Technology, Inc. (NYSE: BKSY).

Company Updates

• Financial Results: BKSY reported revenue, adj EBITDA, and EPS of $24.9M, $2.1M, and ($0.06), respectively. This compares to our/consensus estimates of $26.9M/$25.6M, $1.7M/$1.7M, and ($0.10)/($0.08). This marks the third quarter in a row of positive adjusted EBITDA, driven by revenue growth and strong operating leverage. The revenue growth was headlined by 86.8% y/y growth in the Engineering and Systems Integration segmentwhich was $7.5M, up from $4.0M in the prior year. Consolidated gross margins grew to 72.4%, an increase from 55.9% in 2Q23. Adj. EBITDA grew $7.9M from the $(5.8)M posted last year.
• Contracts: The Company remains on strong footing with ~60% of revenues derived from the U.S. market and ~40% derived from international markets. We believe that these are stable contracts of long duration, most of which contain significant potential for expansion. This potential for expansion is driven by BKSY being a trusted mission partner to entities and organizations that require the highest level of intelligence and insight. This is exemplified by BKSY being awarded a $7.0M contract with an international government.Along with this single large contract award, BKSY also secured numerous six figure contracts that allow customers to “try before you buy”. This is the backbone of the Company’s “land and expand” business model.
• Technological Advances: The Company continues to make significantprogress on the completion of its Gen 3 satellites. The current plan is for thefirst launches to begin in 4Q24. These Gen 3 satellites will combine high[1]frequency monitoring with 35cm very high-resolution imaging giving BKSY significant potential to expand revenues and margins. Additionally, the Company continues to win task orders under the multi-year contract with the U.S. Air Force Research Laboratory which is developing and demonstrating an AI-enabled moving target detection, tracking, and identification service.
• Balance Sheet and Liquidity: BKSY ended 2Q24 with a strong balance sheet. Cash and restricted cash at the end of the quarter were $26.6M. When combined with $15.7M in Stort Term Investments, the Company ended the quarter with $42.3M in liquidity. BKSY is expecting an additional ~$28.2M in liquidity over the next 12 months as cash that will be collected now that BKSY has reached certain milestones with certain customers. Capex outflows were $12.9M in 2Q, with full year capex guidance of $55.0M to $65.0M
• Guidance: BKSY maintained its FY24 revenue guidance in a range of $102.0M to $118.0M, driven by sizeable multi-year sales opportunities. The Company guides to an adj. EBITDA range of $8.0M to $16.0M. This guidance implies a year-over-year revenue growth of 16.4% at the midpoint and an adj. EBITDA margin of 10.9% at the midpoint, up from (1.1)% in FY23. Due to the Company’s strong backlog and strong potential for step[1]ups in contracts we view this guidance as reasonable and have adjusted our model accordingly.
• Valuation: We use a DCF Model and EV/EBITDA comp analysis to guide our valuation. Our DCF analysis produces a valuation range of $1.97 to $2.43 with a mid-point of $2.18. Our EV/EBITDA valuation results in a range of $1.97 to $2.43 with a mid-point of $2.20.