Item 1. Business
ITEM 1. BUSINESS
Overview
Founded in 2014, BlackSky is a leading provider of real-time geospatial intelligence. We deliver on-demand, high frequency imagery, monitoring and analytics of some of the most critical and strategic locations, economic assets, and events in the world. We design, own, and operate one of the industry’s leading low earth orbit (“LEO”) small satellite (“smallsat” or “smallsats”) constellations, optimized to capture imagery cost-efficiently where and when our customers need it. Our Spectra AI software platform processes data from BlackSky's constellation and from other third-party sensors to develop the critical insights and analytics that provide our customers with the actionable intelligence they require to execute on important decisions. U.S. government, allied nations, commercial businesses, and organizations around the world rely on our products. Our vision is to define a new category of space-based products and services: real-time geospatial and analytics driven intelligence delivered through an easy-to-use platform designed to empower a variety of customers to make decisions.
In the last few years, the market has been shifting away from static, low-frequency satellite imagery and geospatial solutions toward dynamic and on-demand, high-frequency imagery and advanced analytics that together deliver real-time geospatial intelligence. During this time, we have seen the number of commercial sensors on orbit expand from a handful of large, expensive commercial satellites to now hundreds and soon to be thousands of space-based sensors that are changing the way we see and understand our world. To capitalize on this paradigm shift, BlackSky has deployed a proprietary satellite constellation providing high-frequency, high-resolution imagery and built a fully operational software platform capable of integrating our proprietary data with the data from this proliferation of sensors and other third-party information, such as millions of GPS-enabled terrestrial data sources and Internet of Things ("IOT") connected devices. Our proprietary software platform, Spectra AI, then applies artificial intelligence ("AI") and machine learning ("ML") techniques to transform these raw data feeds into real-time actionable intelligence that provides customers with a first-to-know advantage.
Our mission is to enable customers to improve their decision-making processes by incorporating on-demand imagery and AI-driven analytics into their daily operations through our modern, easy-to-use, software-as-a-service ("SaaS") customer experience. We can deliver our proprietary, on-demand imagery at a lower cost than legacy providers due to our scalable software platform, our capital efficient constellation design, and adaptable pricing models, among other things.
Our Vertically Integrated Strategic Assets
The need for real-time geospatial intelligence is more important than ever. Recent global events, like the war in Ukraine or the earthquakes in Turkey and Syria, have demonstrated what customers can expect from the real-time geospatial intelligence that space-based technology can deliver. BlackSky is changing the way space is used to deliver vital, actionable intelligence through our two key strategic assets: our high-revisit earth observation smallsat constellation and our AI-enabled software platform.
Our Satellite Constellation
We design, develop, manufacture, and operate a constellation of proprietary high-resolution, high-revisit LEO smallsats. Our constellation is optimized to provide reliable and dynamic hourly monitoring of among the most strategic, high-value locations and assets where we believe approximately 90% of the world's gross domestic product occurs. Our current constellation images most locations between the latitudes of 55 degrees North and 55 degrees South, on-demand, providing our customers with insights and situational awareness throughout the day and as events unfold. Historically BlackSky imagery was available from dawn to dusk; recently we have introduced a night-time monitoring capability. Our satellites have agile pointing capabilities that enable our customers to task our constellation on-demand to collect specific locations of interest. We believe that the focus of our constellation on critical, strategic, and economic infrastructure and software that enables customer tasking of our constellation differentiates us from our competitors, who are dedicated primarily to mapping the entirety of the Earth on a routine basis and who, therefore, require a larger or more expensive constellation to support their mission. BlackSky's unique architecture delivers highly valued imagery and intelligence with a smaller, more capital efficient, and agile constellation.
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In 2022, we achieved a baseline satellite constellation of 14 LEO smallsats that are currently in operation. In the first half of 2023, we plan to launch two additional satellites to primarily replace the two initial satellites that were deployed in 2018, which have been in operation for more than four years and are approaching their end of life. As the majority of our constellation was launched within the past 18 months, we believe we have sufficient capacity to meet existing customer requirements and support our customer's needs in the future. Under optimal conditions and measured from dawn until dusk, our constellation achieves a peak revisit rate of up to 15 revisits a day and an average revisit rate of eight to ten revisits a day or approximately every 60-90 minutes, which allows us to collect thousands of images a day. As our satellite constellation grows, we expect our revisit rate to improve, thereby increasing the amount of data we are able to collect and providing incremental utility to customers.
Our current satellites ("Gen-2") are purpose-built to serve our mission and form the foundation of our Spectra AI platform. Weighing about 55 kilograms each, these compact, high-tech satellites are comparable in size to a miniature refrigerator. Each satellite is equipped with a modern, commercially-derived optical telescope that collects imagery with a resolution between 80-100 centimeters. Launched into a Low Earth Orbit approximately 450 kilometers above the surface of the Earth, our constellation is optimally distributed to provide maximum coverage for our customers. We have strategically located our ground stations around the world to further accelerate our delivery capabilities. Our satellite design is further complemented by our autonomous tasking, mission planning, command and control services, and satellite health and safety monitoring embedded within Spectra AI. With these design advantages, we can distinguish landscape features such as roads and buildings, and gauge commercial activities and patterns such as movements from ships in ports, progress at construction sites, and changes in production by estimating the number of cars in a parking lot. U.S. and allied militaries rely on our services for high-revisit monitoring of airfields, vehicle depots, troop movements, and other high-value locations to detect changes in pattern-of-life.
We have designed our next generation satellites (“Gen-3”) to include significantly enhanced capabilities, such as improved imaging resolution to between 35-50 centimeters and short-wave infrared imaging technology for expanded imaging capabilities in low-light or nighttime. We anticipate launching our first Gen-3 satellites in 2024. We believe these Gen-3 advancements will improve our analytics and increase the value we can deliver to our customers.
We are vertically integrated and manufacture our satellites through LeoStella, a 50%-owned satellite manufacturing joint venture with Thales Alenia Space. LeoStella has capacity to manufacture up to 40 satellites per year. This vertical integration enables BlackSky to control our satellites through the entire design, manufacturing, and operation process and optimize performance per unit cost. The LeoStella partnership further allows us to learn from and leverage their manufacturing expertise and commercial best practices.
While our constellation and ground station infrastructure enables us to capture imagery at higher cadences and lower costs than many of the legacy providers, our software platform, Spectra AI, enables us to provide actionable intelligence to our customers.
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Our Software Platform
BlackSky’s Spectra AI software platform processes 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, IoT connected devices, internet-enabled narrative sources, and a variety of geotemporal data feeds. Spectra AI employs advanced, proprietary AI and ML techniques to process, analyze, and transform these data feeds into fully automated alerts, information, and insights for our customers. These critical insights provide customers with actionable intelligence that supports daily decision making.
Customers access Spectra AI’s data and analytics through an easy-to-use web interface on their desktops or mobile devices. Through Spectra AI, customers can task BlackSky's constellation, which uses proprietary mission operations software that optimizes revisit rates and collection capabilities, and receive high-resolution imagery and analytics in, on average, under 90 minutes. Importantly, customers can set-up alerts so that Spectra AI automatically generates and distributes images from BlackSky satellites and analytics upon the occurrence of certain conditions or changes, giving customers a first-to-know advantage. Understanding the flexibility needed to engage a wide range of customers, the Spectra AI software gives customers the ability to order imagery from other providers. Customers can also access BlackSky products through application programming interfaces ("APIs"), which are typically embedded with customers or certain reseller channels such as Palantir Technologies.
As we collect data, we establish a baseline view of important conditions around the world. Incremental data enables us to detect and understand changes to or deviations from the baseline. Spectra AI leverages this data, much of it proprietary, to accelerate its learning using neural networks. We believe that Spectra AI will benefit from a “flywheel learning effect” as we continuously expand and enrich our proprietary data repository.
Designed with security and scalability in mind, Spectra AI is built on the Amazon Web Services platform. Spectra AI offers a full software stack that includes a data and sensor integration layer, an extract, transform, load (“ETL”) layer, an analytics layer that hosts our AI and ML algorithms, an application layer for our customers, an API framework for developers, and our global intelligence database that captures sensor data.
Spectra AI has been operating for eight years and is continuously updated and refreshed. We have designed our software stack with a strong focus on API compatibility to enable developers to easily integrate our software with our customers’ information technology platforms. Our goal is for customers to be able to access Spectra AI with minimal incremental technology investment. Software development is an important focus for our future as Spectra AI is the key to turning our geospatial data into actionable intelligence that improves and enhances our customers’ business processes and decisions.
Our Key Services and Products
Our offerings support a broad range of applications including national and homeland security, supply chain intelligence, crisis management, critical infrastructure monitoring, economic intelligence, and others. We generate revenue by selling imagery and software analytics services through our Spectra AI platform and by providing professional and engineering services to customers on a project-by-project basis.
Imagery and Software Analytical Services
• Imagery Services : We offer high-revisit, high-resolution, on-demand satellite imaging services. Through our Spectra AI platform, customers can directly task our 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, including basic subscription plans for on-demand tasking or multi-year assured access programs, where customers can secure priority access and imaging capacity over a region of interest on a take or pay basis.
• Data, Software, and Analytics : Our analytics are also offered on a subscription basis and provide customers with access to our site monitoring, event monitoring, and global data services. 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 include 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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While we offer a variety of pricing and utilization options for our imagery and software analytical service offerings, most of our agreements are structured as subscription contracts, followed by usage-based pricing and transactional licenses. These options provide customers with flexibility to utilize our imagery and software analytical services in a manner that best suits their business needs. We offer pricing tiers that enable the customer to manage collection priorities. For example, during critical events, customers may pay a premium to prioritize their monitoring and collection requirements, while at other times, customers can select lower priority collections to allow for more economical utilization.
Professional and Engineering Services
We develop and deliver advanced launch vehicle, satellite, and payload systems for strategic customers that desire to leverage our capabilities in mission systems engineering and operations, ground station operations, software, analytics and systems development. Launch vehicle, satellite, and payload systems are typically sold to government customers under fixed price contracts that provide BlackSky with funded research and development to offset our capital investments. These contracts provide the benefit of accelerating technological developments for our own satellites and building long-term customer relationships that are often expanded into agreements for our imagery and data software services.
We also provide professional service solutions to support customer-specific software feature requests and the integration, testing, and training of our imagery and software analytical services into a customer’s organizational processes and workflows. Finally, we offer software systems engineering development services to support the integration of high volume and mass quantities of data into customer's operating platforms.
(1) Included in imagery and software analytical services in our Consolidated Statements of Operations and Comprehensive Loss
(2) Included in professional and engineering services in our Consolidated Statements of Operations and Comprehensive Loss
Our Customers
Many of the most important and demanding government and commercial organizations in the world, including United States defense and intelligence agencies and international ministries of defense, rely on the actionable intelligence we provide. To compete effectively in today’s data-driven military battlefields and commercial market environments, governments and organizations of all sizes and industries face a growing need for timely and affordable geospatial intelligence and analytics to help shape critical decisions. To meet these customer demands, next generation geospatial intelligence platforms must have the ability to deliver situational awareness, location intelligence, and insights into events and activities as they unfold.
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Our current customer base and market mix are weighted towards U.S. defense and intelligence customers, as we have a long history serving these agencies as a trusted mission partner. 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 domestic and international customers. Management classifies our customer base predominantly into three categories:
• U.S. Federal Government & agencies : We sell to multiple U.S. government agencies that span defense, intelligence, and federal and civilian agencies. Our intelligence customers include the National Reconnaissance Office (“NRO”) and the National Geospatial-Intelligence Agency ("NGA"). In 2022, NRO awarded our largest imagery contract to date, valued at up to $1 billion over a 10-year period. We provide analytic services to the NGA under a 5-year $60 million contract. We also have won contracts across a range of other governmental customers including Department of Defense customers such as the Air Force, Army, and the Intelligence Advanced Research Projects Agency (“IARPA”).
• International Governments and Organizations : We sell to multiple foreign governments, agencies, and organizations worldwide. For example, an Asian customer recently awarded us a $10 million follow-on subscription contract to provide on-demand, high-resolution imagery services to an Asian government ally.
• Commercial and Other : Currently, commercial and industrial customers represent a small but important emerging portion of our business. Our services and products can benefit customers in a variety of commercial and industrial infrastructure 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, retail, and consumer behavior.
Our Competitive Differentiation
We believe that we are well-positioned to compete with legacy satellite imaging providers and other emerging geospatial intelligence providers. Our strategy to combine a high-revisit satellite constellation with an AI-enabled SaaS platform has been validated by contract awards from the most demanding customers. Our unique approach removes three important barriers that we believe have hindered the legacy industry from achieving a broader market adoption including: low-costs, ease of use through a modern software interface and platform, and assured access to imaging services where, when, and at the frequency customers need it. Key elements of our competitive differentiation include the following:
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• Low-cost imagery capture . Our constellation leverages the disruptive economics of small satellites to enable us to capture data in a more cost-effective manner than lega cy satellite imagery providers and offer a variety of pricing models. Lower cost, more adaptable products allow us to expand the market for our services.
• High-revisit rate, dawn-to-dusk imagery collection . We have optimized our constellation to deliver high-revisit collection capability of critical, strategic, and economic assets and locations where we estimate about 90% of the world's GDP occurs. Under ideal conditions and measured from dawn until dusk, we are capable of revisiting specific locations on Earth up to 15 times per day .
• On-demand satellite tasking capabilities . Using our Spectra AI software platform, which can be accessed through a web-browser or via APIs, customers can easily task our constellation and receive high-resolution imagery and advanced analytics delivered to their email, in-house ERP system, or cloud environment in, on average, under 90 minutes. This first of its kind capability enables an expansion in the market for geospatial intelligence by eliminating the need for customers to deploy resources to design their own platform or employ geospatial analysts.
• Integration of proprietary and third-party sensor data . By combining proprietary and third party data sources, we can increase the value of our database of sensor-based information at low cost and serve as a full-service geospatial data solution provider.
• Continuously growing proprietary intelligence data repository . As our data repository grows, we expect to benefit from a flywheel effect whereby incremental data enhances our baseline understanding of the world, thereby enabling the delivery of increasingly valuable insights and analytics to our customers.
• Proprietary, cloud-based software stack. Our cloud-based software platform includes proprietary customer applications-such as an ETL layer, advanced AI/ML modules, and our API framework-that enhance Spectra AI's ability to scale quickly and efficiently deliver meaningful data.
• Vertical integration. We design our satellites and manufacture them at LeoStella, our satellite manufacturing joint venture. Control of the satellite production process from design through manufacturing enables us to upgrade our satellites during production and continuously improve our satellites’ capabilities, as well as build and maintain our optimal constellation size at a relatively low cost.
• API kit for developers to build geospatial intelligence into next gen applications . We support our customers with a robust, flexible API kit that enables them to integrate our capabilities into their existing platforms and applications with a low upfront financial and time investment.
Industry Overview
We operate in a large and growing geospatial market that includes both imaging services and analytic solutions. The industry has been evolving over time from a focus on static observation and mapping to a focus on dynamic, high-frequency monitoring capabilities that enable on-demand actionable intelligence. Geospatial intelligence is playing an increasingly critical role in decision-making for government agencies, commercial enterprises and organizations around the world. At the same time, a growing number of government defense and intelligence agencies are increasing their reliance on commercial satellite providers to complement their in-house geospatial data sources. According to Markets and Markets, an independent industry research firm, the global geospatial analytics market is projected to grow from about $67 billion in 2022 to about $120 billion by 2027, resulting in a compound annual growth rate of 12.2%.
Organizations like the U.S. Space Force, U.S. Army, and Space Development Agency are seeking to leverage commercial small satellite constellations for space-based defense and mission-critical intelligence, a priority in the U.S. defense budget. U.S. investments in space programs are outpacing broader defense spending and are viewed by those in government as vital to our country's national security and defense strategy. In late 2022, the U.S. Space Force and the Space Development Agency increased its fiscal year 2023 budget to over $26.3 billion, a 34% increase over fiscal year 2022 levels. We believe BlackSky's innovative architecture and operational capabilities are well aligned to support the U.S. government's space-based defense priorities.
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The increase in demand for geospatial imaging and intelligence is coming at a time of limited supply growth. We believe that legacy satellite imaging providers may not be able to provide the capacity needed to meet the growing demand as their aging constellations are being replaced with lower capacity satellites. We believe the expansion of our capacity will be met by strong demand and that we are well positioned to capture a significant share of the growth in the space data and analytics market.
Compliance with Government Regulations
Our industry is highly regulated and our operations are subject to various foreign, federal, state, and local laws and regulations. We must comply with, and are affected by, laws and regulations relating to the formation, administration, and performance of U.S. government and foreign government contracts. Changes to or additional government regulations or policies relating to our business could increase regulatory uncertainty and may have an adverse effect on our business, financial condition and results of operations. For example, our business requires licenses and permits from the Federal Communications Commission (the “FCC”) and review by and/or coordination with other agencies of the U.S. Government, including the Department of Defense, the National Oceanic and Atmospheric Administration (“NOAA”) and the National Aeronautics and Space Administration (“NASA”), as well as foreign regulators, such as the New Zealand Space Agency. Additional information about the government regulations affecting our business and the risks relating to government contracts appears in “Risk Factors” in Item 1A of this Annual Report on Form 10-K.
Intellectual Property
We own an intellectual property (“IP”) portfolio that includes a significant amount of proprietary code and actively pursue internal development of proprietary software and other intellectual property. Our portfolio also includes trademarks, service marks, domain names, unpatented trade secrets, know-how, data, and software. While our IP rights in the aggregate are important to our operations, we do not believe that any particular trade secret, trademark, license, or other IP right is of such importance that its loss, expiration, or termination would have a material effect on our business.
Employees and Human Capital
As of December 31, 2022, we had 259 employees. BlackSky employs a highly technical workforce, with 58% of our employees working in engineering or operations functions and the remainder in our sales and general and administrative functions. Many of our employees bring significant experience from prior positions working for leading defense contractors, satellite manufacturers, other commercial and military aerospace and defense companies, and government agencies.
Since our inception, BlackSky has sought to recruit qualified and creative employees who possess diverse business capabilities and align with our core corporate values. Our human capital objectives include identifying, recruiting, retaining, incentivizing and integrating our existing and new employees, advisors, and consultants In addition to competitive salaries, the principal purposes of our cash and equity incentive plans are to attract, retain, and reward personnel through the granting of cash-based and stock-based incentive awards. We believe such plans increase stockholder value by motivating individuals to perform to the best of their abilities and achieve corporate objectives. As we move into the next stage of our growth, we are devoting more resources to our human capital, in particular sales talent; and are building the infrastructure necessary to support our workforce and promote communication, respect, and diversity across our team.
We are committed to a set of core corporate values. They include:
• People First . We operate with respect and transparency. We provide a rich environment for people to grow, fulfill their ambitions and achieve their full potential.
• Accountability . We are accountable to meeting and exceeding our commitments to customers and shareholders.
• Innovation . We are innovators and thought leaders. We are passionate and relentless about solving problems that matter.
• Integrity . We conduct ourselves ethically and honestly. Trust is paramount.
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• Diversity . We believe that diversity of background and opinion are essential to the strength of our culture. We are committed to an equitable and inclusive environment.
• Positive Impact . We are here to contribute to a smarter and safer world. Our shared goal is to contribute to the good of society through the responsible use of our assets.
• Celebration . We celebrate our wins and recognize the individual and collective accomplishments of our teams.
Corporate Information
On September 9, 2021, our predecessor company Osprey Technology Acquisition Corp. (“Osprey”), consummated its merger (the "Merger") with Osprey Technology Merger Sub, Inc., a wholly owned subsidiary of Osprey, and BlackSky Holdings, Inc. (“Legacy BlackSky”). Immediately following the Merger, Osprey changed its name to BlackSky Technology Inc. Legacy BlackSky survived the Merger and is now a wholly owned subsidiary of BlackSky Technology Inc. Unless the context otherwise requires, references in this Annual Report on Form 10-K to “BlackSky”, “the Company”, “we”, “us” and “our” refer to the business and operations of Legacy BlackSky and its consolidated subsidiaries prior to the Merger and to BlackSky Technology Inc. and its consolidated subsidiaries, following the closing of the Merger.
Our corporate headquarters is located at 13241 Woodland Park Road, Suite 300, Herndon, VA 20171. Our website is located at www.blacksky.com. The contents of our website are not incorporated into this Annual Report on Form 10-K.
Our Class A Common Stock (“Class A common stock”) and warrants are listed on the New York Stock Exchange (the “NYSE”) under the symbols “BKSY” and “BKSY.W”, respectively.
Available Information
Our investor relations website is https://ir.blacksky.com. Copies of our Annual Report on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K, proxy statements, registration statements, and amendments to these reports filed or furnished pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934, are available free of charge on our investor relations website as soon as reasonably practicable after we file such material electronically with or furnish it to the Securities and Exchange Commission (the "SEC"). The SEC also maintains a website that contains our SEC filings at www.sec.gov. We use our investor relations website to post important information for investors, including news releases, analyst presentations, and supplemental financial information, and as a means of disclosing material non-public information and for complying with our disclosure obligations under Regulation FD. Accordingly, investors should monitor our investor relations website, in addition to following press releases, SEC filings and public conference calls and webcasts.