BKSY - BlackSky Technology Continues To Make Progress

2023-12-04 17:30:16 ET

Summary

• Today, we revisit satellite imaging concern BlackSky Technology Inc., for the first time since this Spring.
• The company posted quarterly numbers four weeks ago that saw improvements in margins and a better than 25% rise in revenues.
• We take a deeper look at recent results and update our analysis around BlackSky Technology in the paragraphs below.

In a total surveillance state, complicity is much more likely than ignorance .”? Cliff Jones Jr.

Today, we put BlackSky Technology Inc. ( BKSY ) back in the spotlight for the first time since our last article on this small cap concern back on May 1st of this year. This small cap satellite imaging company posted quarterly results four weeks ago that shows that BlackSky continues to make progress on several fronts. An updated analysis follows below.

Company Overview:

BlackSky Technology, Inc. is headquartered just outside of Washington, DC in Herndon, VA. The company provides geospatial intelligence, imagery and related data analytic products and services, and mission systems that include the development, integration, and operations of satellite and ground systems to government and commercial customers. The stock currently trades just over $1.25 a share and sports an approximate market capitalization of $190 million.

BlackSky owns and operates one of the leading low earth orbit small satellite constellations. This network is optimized to capture imagery cost-efficiently where and when our customers need it. It is an interesting and growing space. BlackSky's satellites average 60-minute revisits, with product delivery of about 90 minutes from the most critical global locations. Its imagery and software analytical services are available via SaaS and make up the bulk of the company's overall revenue base.

Third Quarter Results:

The company posted its third quarter numbers on November 8th. The company broke even on a GAAP basis, 13 cents a share above expectations. BlackSky saw negative Adjusted EBITDA of $400,000 during the quarter, a significant improvement from the negative $6.6 million of Adjusted EBITDA it posted in 3Q2022. Net income was $700,000 for the quarter, compared to a net loss of $13.3 million in the same period a year ago. Revenues rose just over 25% on a year-over-year basis to just over $21.2 million, slightly under the consensus. Margins improved as operating expenses stayed relatively flat ($29 million versus $28.6 million in 3Q2022) despite the solid rise in overall revenues.

Imagery and software analytical services revenue rose 11% from the same period a year ago to $15.3 million. Professional and engineering services revenue came in at $6 million, an 86% increase driven by new contract wins in 2023. Management narrowed its FY2023 sales guidance to between $84 million to $90 million.

Analyst Commentary & Balance Sheet:

Since third quarter results were posted, both Benchmark & Co. ($3 price target) and Lake Street ($4 price target) have reissued Buy ratings on the stock.

Approximately seven percent of the outstanding float is currently held short. Several insiders sold just under $130,000 worth of shares collectively in March. That has been the only insider activity in the stock so far in 2023. The company ended the third quarter with just over $50 million of cash and marketable securities on its balance sheet. Management stated it expected $48 million to $54 million in capital expenditures, mainly around its Gen-3 constellation deployment. $35.9 million of those cap-ex costs were booked in the third quarter. The company lists no long-term debt on its third quarter 10-Q .

Verdict:

BlackSky Technology lost 63 cents a share on just over $65 million worth of revenue in FY2022. The two analyst firms that have offered up projections on BKSY have sales rising to some $85 million in FY2023 and losses falling to 40 cents a share. Their median estimate for FY2024 is for a 28 cent a share loss on just over $118 million in sales.

The company has made some solid progress since we last looked at in May. BlackSky is seeing improving margins, has a solid balance sheet and continues to deliver solid revenue growth. At that time of our last look at the company just over seven months ago, BKSY merited a small " watch item" position until the firm got closer to profitability. Given the stock trades right near the same levels despite the increase in revenues and continuing progress, that remains the investment call.

Memory is like surveillance footage: Everything gets picked up but you don't really review it unless there's an incident .”? Tony Dokoupil.

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