Q1 2024 Blacksky Technology Inc Earnings Call

Participants

Ali Bonilla; Vice President, Investor Relations; Blacksky Technologies Inc

Brian O'toole; President, Chief Executive Officer, Director; Blacksky Technology Inc

Henry Dubois; Chief Financial Officer; Blacksky Technology Inc

Greg Burns; Analyst; Sidoti & Company

Edison Yu; Analyst; Deutsche Bank

Jaeson Schmidt; Analyst; Lake Street Capital Markets

Josh Sullivan; Analyst; The Benchmark Company LLC

Jeff Van Rhee; Analyst; Craig-Hallum Capital Group LLC

Caleb Henry; Analyst; Quilty Analytics

Scott Buck; Analyst; H.C. Wainwright & Co., LLC

Chris Quilty; Analyst; Quilty Analytics, LLC

Presentation

Operator

Good day, ladies and gentlemen, and welcome to BlackSky Technologies first-quarter 2024 earnings conference call. (Operator instructions) Please note this conference call is being recorded.
I would now like to turn the call over to Ali Bonilla, BlackSky's Vice President of Investor Relations. Please go ahead.

Ali Bonilla

Good morning, and thank you for joining us. Today, I'm joined by our Chief Executive Officer, Brian O'Toole; and our Chief Financial Officer, Henry Dubois. On today's call, Brian will provide some highlights on the quarter and give a strategic update on the business. Henry will then review the company's first-quarter financial results and outlook for 2024. Following our prepared remarks, we will open the line for your questions.
A replay of this conference call will be available from approximately 12:30 PM Eastern Time today through May 22. Information to access the replay can be found in today's press release. Additionally, a webcast of this earnings call will be available in the Investor Relations section of our website at www.blacksky.com. In conjunction with today's call, we have posted a quarterly earnings presentation on the Investor Relations website that you may use to follow along with our prepared remarks.
Before we begin, let me remind you that certain statements made during today's conference call regarding our future plans, objectives, and expected performance, including our financial guidance for 2024, are forward-looking statements. Actual results may differ materially as these statements are based on our current expectations as of today and are subject to risks and uncertainties, including those stated in our Form 10-K. We encourage you to review our press release, Form 10-K ,and other recent SEC filings for a full discussion of the risks and uncertainties that pertain to these statements and that may affect future results or the market price of our stock. BlackSky assumes no obligation to update forward-looking statements, except as may be required by applicable law.
In addition, during today's call, we will refer to certain non-GAAP financial measures, including adjusted EBITDA, adjusted imagery and software analytical services, cost of sales and cash operating expenses, a reconciliation of these non-GAAP financial measures to their most comparable GAAP measures are included in today's accompanying presentation, which can be viewed and downloaded from our Investor Relations website. At this point I'll turn the call over to Brian O'Toole. Brian?

Brian O'toole

Thanks, Ali, and good morning, everyone. Thank you for joining us on today's call. Let's begin with slide 3.
I'm happy to report that Q1 was another strong quarter as we continue to make great progress across all aspects of our business. Demand for our space-based intelligence remained strong as we continue to secure more new customers and expand the services we are delivering to existing customers. We also continue to demonstrate strong operating leverage in our business as revenue growth from our high margin imagery and analytics services delivers improving operating margins, combined with our disciplined cost management and streamlined operating efficiencies, we continue on our path of delivering positive adjusted EBITDA results. Let me share some of the quarter's key highlights.
First, we delivered strong year-over-year revenue growth of 32%. Our imagery and analytics revenue continued to grow with many of our existing customers placing incremental orders for our high-frequency imaging services.
Second, we were awarded $30 million in new contracts and renewal agreements in the quarter, supporting US and international government agencies. These contracts demonstrate the growing demand from customers looking to obtain black skies unique space-based intelligence solutions.
Third, we delivered another quarter of positive adjusted EBITDA, driven by our strong revenue growth and operating leverage inherent in our business model. As our business continues to scale, we look forward to delivering improved EBITDA performance over time.
Fourth, we continued to make significant progress on the production of our Gen 3 satellites. Our Constellation remains on track with Gen three satellites planned to start launching this year. And finally, we secured a 20 million commercial bank line in April, which strengthens our liquidity position and provides us with additional financial flexibility. Henry will go into more details on this transaction later.
These highlights, along with the growing market demand for our imagery and analytics services and space-based intelligence solution reinforces our confidence that we are well positioned to capitalize on new sales opportunities and are progressing towards sustainable long-term profitable growth.
I would now like to share some operational highlights from the quarter.
Turning to slide 4. During the quarter, we continued to invest in advanced AI capabilities, which are resulting in the capture of new customers and contracts one of our recent awards was with the Air Force Research Laboratory or AFRL. Through this IDIQ contract, which is valued up to $24 million. We will develop and deliver advanced moving target engagement services in support of emerging surveillance, reconnaissance and tracking or tactical SRT. missions, which is one of the key commercial investment areas identified in the U.S. Space Force has recently released commercial space strategy, which I will talk about more in a few minutes. The program will leverage our advanced AI capabilities that feature highly scalable and high speed machine learning technology that can process data from our proprietary satellites and from other data sources to provide a deeper understanding of pattern of life changes. These data sources can include government intelligence, surveillance and reconnaissance or ISR, as well as data from other commercial providers. Combining multiple data sources through machine learning techniques, increases our capability to detect track and identify moving targets more accurately and at a much greater scale.
Turning to slide 5. We continue to see government agencies at home and abroad, increasing their investments in space-based capabilities to meet their country's specific intelligence, surveillance and economic development needs. This trend is driving strong demand for Black Sky's products and services worldwide, resulting in new customer wins and the expansion of services to existing customers. One example is a multi-million dollar contract we won during the first quarter with an existing defense and intelligence customer. We're happy to provide this customer with advanced space-based intelligence capabilities that are essential to their day-to-day operations. In addition, we successfully closed over 10 six-figure contracts and renewal agreements in the quarter. Many of these contract wins are multiyear awards, demonstrating the customer's commitment to adopt long contract periods in order to secure access to our capacity. These multi-year contracts helped to further strengthen our base of long-term customers and provides black Sky with good revenue visibility. We're happy that our land and expand strategy continues to gain traction as these new and expanded contracts help to further build the foundation for recurring subscription imagery and analytics revenue.
Moving on to slide 6, I would like to provide an update on the contract supporting the government of Indonesia that we announced last quarter within 30 days after contract award, we sent a black Sky Team to Indonesia to provide training to government end users and how to task our Gen two satellite constellation and receive a I driven analytics through our Spectra AI software platform. We're pleased to report the training program was a success and that the Indonesian government now has direct access to our spectrum AI. platform to receive high revisit satellite imagery and analytics with Black Sky software. First, AI approach end users through our spectrum AI. platform can receive real-time space-based intelligence, giving them a strategic first to act advantage and mission critical objectives. We continue to see strong interest in this new adoption and acquisition model from governments around the world. This new model enables customers to immediately take advantage of black skies, real-time imagery and analytics solutions, while also enabling them to develop and accelerate their sovereign based space capabilities over time, leveraging rapidly advancing commercial space and AI technology.
Turning to slide 7. Last month, the US-based Force announced their new commercial space strategy strategy outlines a framework and a commitment for integrating commercial space solutions to deliver technological innovations that supplement government owned and operated capabilities strategy aims to leverage commercial space solutions, combined with organic and Allied capabilities into a hybrid architecture to enhance national security and other military requirement. A key part of this strategy will be to strengthen partnerships with commercial space companies in order to develop more resilient space architectures and expand the number of solutions that can be addressed by the commercial industry. This is very encouraging for BlackSky as we have anticipated this market opportunity and have spent the last several years building an architecture capable of supporting these objectives. We have already won a number of multimillion dollar R&D programs with organizations such as the defense innovation unit and AFRL. for capabilities such as moving target engagement and advanced tactical ISR capabilities from space. These program wins align with several of mission areas outlined in the space Force's commercial strategy. We believe this has us well positioned as the Space Force moves forward with this plan over the next several years.
Moving to slide 8. We continue to make significant progress on our Gen 3 satellite program and remain on track to begin launching this year. Our Gen 3 satellites are in production and are currently in the integration phase. As a reminder, these satellites will deliver very high resolution 35 centimeter imaging, along with other advanced capabilities such as short, Wave IR and high-speed communications to further improve the timeliness and the delivery of actionable intelligence. Keep in mind, we already have contracts in hand for Gen three capacity and are excited to bring these new capabilities to market to unlock these revenue growth opportunities as these satellites begin to come online we anticipate this new capacity and enhanced capabilities will meet the strong demand we're seeing for space-based intelligence and drive even more opportunities over time.
In summary, we're pleased with the progress we made in the first quarter and the strong execution in our business.
I'll now turn it over to Henry to go through the quarterly financial results. Henry?

Henry Dubois

Thank you, Brian, and good morning, everyone. We're pleased to have delivered another quarter of strong revenue growth and positive adjusted EBITDA. Now I'll walk you through the details beginning with Slide 10. Total revenue for the first quarter of 2024 was $24.2 million, an increase of $5.8 million or 32% over the prior year quarter. Imagery and analytics revenue grew to about $17.8 million, an increase of $2.1 million or 13% over the prior-year period. The year-over-year increase was primarily driven by incremental customer orders for BlackSky's imagery services, professional and engineering services revenue grew to $6.4 million in the first quarter of 2024 compared to $2.6 million in the prior-year quarter. The significant year-over-year increase was primarily driven by new customer wins and the step-up in the execution of multiple major international contracts we won last year. Keep in mind, revenues recognized from these types of contracts which are largely milestone-based, may have quarter over quarter revenue variability. As a reminder, these strategic contracts deepen our relationship with these customers and are oftentimes precursors to securing long-term subscription subscription contracts for imagery and analytics services.
Moving on to slide 11, our imagery and analytics business continued to demonstrate strong operating leverage, imagery and analytics cost of sales, excluding stock-based compensation, depreciation and amortization expenses was $3.4 million in the first quarter of 2024 compared to $3.6 million in the prior year quarter. The $200,000 year-over-year decrease was primarily driven by cost savings in our satellite and software operations.
Put another way our first quarter 2024 imagery and analytics. Revenue increased 13% year over year, while our cost of sales decreased 6%, resulting in another quarter where our incremental high-margin revenues flowed directly to the bottom line. This consistently strong performance further demonstrates the operating leverage in our business and is a fundamental driver to our long-term profitable growth.
Let's move to slide 12 and talk about cash operating expenses, which exclude stock-based compensation and depreciation and amortization expenses. For the first quarter of 2024, cash operating expenses were $16.1 million, an improvement of $300,000 compared to the prior-year quarter. This 2% reduction in our expenses demonstrates our lean business model and ability to effectively manage costs while continuing to substantially grow our top line, especially when compared with the revenue growth of 32% over the same period. This year-over-year improvement was primarily driven by reductions in general corporate costs such as insurance rent and various professional fees fees, cost savings more than offset investments we've made in our go-to-market initiatives, which include expanding our sales team to capitalize on new opportunities and investing in our AI capabilities and R&D efforts.
Turning to slide 13. Our adjusted EBITDA for the first quarter of 2024 was $1.4 million, an increase of $5.5 million compared to the prior year period. Year-over-year improvement was primarily driven by greater volumes of our high-margin imagery and analytics revenue, coupled with cost savings and cash operating expenses. As I just mentioned.
Moving on to our balance sheet. We ended the first quarter of 2024 with $35.8 million of cash, restricted cash and short-term investments as you may have seen in April, we entered into a $20 million commercial bank line, which together with our ending cash position in Q1, brings our total liquidity to $55.8 million on a pro forma basis. In addition, we expect to further enhance our liquidity from the receipt of approximately $24 million from a few major customer contracts that include interim milestones for which revenue and costs have already been recognized, but have not yet been billed. These activities, combined with the vendor financing in place for upcoming launches and anticipated continuing adjusted EBITDA improvements, reinforce our position that we have sufficient cash for the foreseeable future to execute on our business plan.
Lastly, our capital expenditures in the first quarter of 2024 were $14.6 million, in line with our expectations and primarily due to milestone payments for our Gen 3 satellite production and software development spend to enhance our spectrum AI platform.
Now, let's move on to our 2024 outlook as shown on slide 14. As mentioned earlier, we are continuing to win new contracts and expand existing agreements with US and international government customers as demand for our space-based intelligence solutions remains strong. With continued revenue growth and ongoing disciplined cost management, we expect to carry on the strong operating leverage our business has consistently delivered. Therefore, we are maintaining our full year 2024 guidance with revenues between $102 million to $118 million. Adjusted EBITDA between $8 million to $16 million and capital expenditures between $55 million and $65 million.
In summary, we're pleased with our financial performance in the first quarter and the continued momentum we're seeing across our business. We look forward to continued progress throughout the year.
With that, I'll now turn it back over to Brian for some closing remarks. Brian?

Brian O'toole

Thank you, Henry. In closing, we're off to a strong start in 2024 as we continue to deliver critical intelligence that our customers rely on every day in support of their national security needs we're pleased with our first quarter results and the strong execution across all aspects of our business. We're continuing to deliver revenue growth while demonstrating strong operating leverage in our business. We're advancing our leadership position in AI as we continue to win more contracts driven by our advanced AI technology for capitalizing on a growing US and international market for Black Sky space-based intelligence, and we're advancing our leadership in space, and we're ready to unlock our next phase of growth with the launch of our Gen three constellation, we built a strong foundation are executing well on our plan and are on track to deliver sustainable long-term profitable growth.
This concludes our remarks for the call, and we'll now take your questions.

Question and Answer Session

Operator

(Operator instructions) Greg Burns, Sidoti & Company.

Greg Burns

Warning on the first two year period of the OCO contract is coming up, I think this month from what's your outlook for that? Do you expect them government to increase funding there or maintain it at the same level? Any color you can give on that would be helpful. Thank you.

Brian O'toole

Yes, thanks, Greg. Good morning. Yes, just under you'll see out just we're performing really well under that contract and meeting all of our delivery requirements.
And also as a reminder, as we had some reported in earlier quarters, our successful integration with the government's commercial interface. So all that is going well. And because that interfaces in place, it's driving a higher distribution within the government and use of our data and critical intelligence activities. We are in active discussions up for renewal agreement to continue service and by the annual service date, which is in June.

Greg Burns

Okay. I guess you don't know exactly if they're going to just what are the what are the options like how could this play out for you where they can be on another traunch and layer that on top of the existing revenue, extend the revenue, like what are the scenarios that could potentially play out with this renewal for?

Brian O'toole

You know, there's multiple options that are being discussed on first and foremost, is the renewal of the base subscription, and then there's additional options on top of that to continue the service hub for Gen two capability that we have now a Gen three type services will come later after we get those satellites on orbit.

Greg Burns

Okay. And then with the Gen 3s on what is the turnaround time from launch to operations?

Brian O'toole

Typically, in the past after we've had a few launches, we've been able to bring satellites into operations within 24 hours of what we expect with these Gen threes. It'll be 60 to 90 days since these are brand new satellites to get those commissioned and will have a regular launch cadence that goes along with that. So we'll click will click. We will quickly ramp operations.

Greg Burns

Thank you.

Operator

Edison Yu, Deutsche Bank.

Edison Yu

Thank you for taking our questions. First, can you just clarify on the $24 million that you're getting from the from the customers. What exactly is driving that delay?

Brian O'toole

Good morning, Edison.

Edison Yu

Can you clarify, I guess idea the timing, the $24 million in cash, I think you had mentioned that you recognize the revenue and costs but haven't been built for yet.

Brian O'toole

Well, yes, let me let me hand it over to Henry.

Henry Dubois

On that one page it is in the summary of what that is as we make progress against various milestones on a couple of these large international contracts we talked about and because we recognize the revenue and the cost they're already sitting there in the in the revenue and cost cuts. We've got the margins already and are baked in. However, because we only can bill against actual milestone completion. They're sitting in our other contract assets at the moment. And we would expect that when we hit those milestones that we'll be able to bill and that would be cash directly to the balance sheet because we've already incurred the associated cost with that revenue.
And would that be coming in 2Q or is that spread throughout the rest of the year, how do we go about timing, but over the next, it's going to be spread over the next 12 months.

Edison Yu

Okay. And then on the I guess on the on the gross for I&S, it seems to be kind of in the if we average it out the last last three quarters, kind of mid 10s. I'm curious, do you think that can step up as we go forward and what's sort of a more, I guess, normalized growth considering all the on the backlog you have?

Brian O'toole

Well, I think there's a couple of things at play here, Edison, where we remain highly focused on capturing long-term anchor defense and intelligence customers through a land and expand strategy. And that's working. And you can see the results through those large contracts and their renewals. We also announced this quarter of a number of new customers starting out with initial initial kind of six-figure pilots that then grow over time. I mean what you've probably witnessed is really a step function as we go through that bringing onto these new customers and the ramp of those services. And then we anticipate a decent step-up as we begin to get Gen3 online.

Edison Yu

Understood. And last one for me, you've got all these contract wins. Obviously. Could you maybe share anything about win rates or how I guess the competitive dynamics are they helpful?

Brian O'toole

Yes. I would say, Edison, we're not because of what we offer, which is this high-frequency dynamic monitoring capability. This is a new capability for most of these customers. So we're not we're not in a so-called head to head competition. It's more of an adoption type curve. So we're just incrementally bringing those customers on and they're adopting our services and integrating it into their environments.

Edison Yu

Great. Thank you.

Operator

Jaeson Schmidt, Lake Street.

Jaeson Schmidt

Yes, thanks for taking my questions. Brian, just wanted to follow up on you noting sorry, those 10 six-figure contracts and the renewals in the quarter. Is this pretty consistent with past quarters or is this sort of a step up compared to what you saw in 2023?

Brian O'toole

I think I'd start we're starting to see a step up from the on some of the sales cycles for these long-term customers are a little longer, and we've been and in the market with our high-frequency capability now for 18 months. So I think you're seeing you're seeing the step-up related to sales cycle timing and where we are in the market.

Jaeson Schmidt

Got it. And then regarding the Gen three satellites, I know you noted contracts in hand for this capacity are most of these contracts currently utilizing Gen two today like Indonesia or are they waiting for Gen3 to launch?

Brian O'toole

I would say almost all of these contracts are utilizing Gen2 capacity today.

Jaeson Schmidt

Okay. And then just last one for me and I'll hop back into queue. Henry, I think this first quarter where you sort of Eclipse that 70% plus on gross margin, should we think about this sort of a new run rate throughout 2024?

Henry Dubois

Well, I mean, as you can see in this quarter, we did hit about 81% on the inventory and analytics. And we did we were able to deliver some pretty good performance on professional services and engineering around the 40, 44% or so gross margin.
Mark, I mean as we go forward, as long as we continue our growth, I mean, we're feeling pretty good. We have stepped up from where we were last year from 65% for the first quarter of last year to 71% overall for the first quarter of this year.

Jaeson Schmidt

Sounds good. Thanks a lot, guys.

Operator

Josh Sullivan, The Benchmark Company.

Josh Sullivan

So you buy one of your hubs is first Gen three. What you see is the largest technical manufacturing or otherwise, no hurdles that remain before we're going to launch.

Brian O'toole

As I mentioned, Josh, we're in the we're in the final assembly and integration phase. So this is putting together all of the subsystems and assemblies and bringing that together into an integrated satellite and testing the software. So we're in a normal position for satellite at this stage. And as I mentioned, we we remain on track to begin launching the satellites this year.

Josh Sullivan

And then as far as the Indonesian contract, what has been the response from other international prospects? You mentioned some new customer activity. Is that deal driven incremental interest in the pipeline?

Brian O'toole

Well, we've as I've been reporting the last year, so there's very strong interest in growth opportunities internationally. I think the Indonesian deal represents on a new adoption model and a faster adoption model, which we can then, you know, bring to these customers and the conversations we've had ongoing for several years as we look to bring them on. So I think it's just enhancing our ability to close these customers and accelerate programs with them over time.

Josh Sullivan

And then just one last one. The comment on commercial applications in the prepared remarks you mentioned there were three. What markets are you seeing early interest in that?

Brian O'toole

And I don't think I commented on commercial applications, but there is a company, Josh, I think maybe you're referring to the commercial strategy for the race for us. So yes, I think for sure, I think the obviously the space for us has now put out a formal strategy that is committing them to integrate with commercial space capabilities through what they call hybrid architectures. What we're seeing is things that align with our purpose built architecture, our related to tactical SRT. very similar capabilities to what we announced in our on our $24 million AFRL. contract. Other areas are space domain awareness and then some other some resiliency and command control capability. So we're excited as these things all align with the architecture that we have at BlackSky.

Operator

Jeff Van Rhee, Craig-Hallum.

Jeff Van Rhee

Thank you. Good morning, guys. Couple for me. Maybe just to start on the on the $30 million in new and renewals in terms of contracts signed, what's the air are on the $30 million -- about $30 million?

Henry Dubois

Some of those, for example, one of those is a contract that we're doing some work with the U.S. government on that was one day. We announced it starting off at about the 3.9 over about an 18-month period. That was in a press release earlier this year. And others are continuing to work forward or they're all typically multi-year. And we work our way through them as we get the task orders.

Jeff Van Rhee

So any bounds you can put around that I mean, generally speaking, should I take that number and divide it by two three, four or five like a typical duration, just to get a swag and how much ARR was signed?

Henry Dubois

Well, I mean, you heard Brian talk about the 10 contracts that are in the six figures that are multi-years. I mean, they kind of go all all over the place. But given the fact they are all multi years, the typical range of those is probably in that three year sort of time period.

Jeff Van Rhee

Okay. How are you thinking about path to free cash flow and timing?

Henry Dubois

Well, as we as we said in the prepared remarks, we've got we feel like we've got a pretty good amount of liquidity on the books including the commercial bank line we just put in place, we would have had about 55.8 at the end of the quarter. We did just talk earlier on the Q&A about the roughly $24 million of liquidity that will be coming in over time from the front from a comment from the major contracts that we've been progressing on the milestones. And we also, as you may recall, have our launches of vendor finance for the first couple of launches. So we feel like we're in pretty good shape to get our Gen threes up and get to the next stage of our of our growth.

Jeff Van Rhee

Okay. I guess just last one for me then on the software line, specifically software. So $1.3 million in the quarter and Spectra and some of the capabilities there have long been talked about and certainly from our work looked to be differentiated in terms of capabilities from a revenue standpoint, I got to believe that's not target not hitting where you sort of targeting that line. If I look over the last three years, it's just generally flat to modestly down. What is it about that line that is not growing.
And does it cause you to rethink about the competitive landscape? Is it just timing just a little more a little more specifics, if you would.

Brian O'toole

Yes, I would say, Jeff, the real competitive advantage we have is the Spectre AI. platform, which is driving it increased a new user experience and then which is which is what is behind our increasing imagery and analytics revenues. We had strong growth in that area, particularly around the the NGAEIM. program in the past. And that program is transitioning to a new program called Lucknow, which is currently in the proposal process. And as a multiyear budget that will be four or five times that of of the IBM. So we feel we're well positioned for that and that will drive our or helped drive some of the future analytics revenues.

Jeff Van Rhee

Okay. Thank you.

Operator

Caleb Henry with Quilty Space.

Caleb Henry

Thanks for taking my questions. At the few from me because I know that BlackSky has always had a focus on AI., but I was wondering if the recent hype around generated a eye, if that's had any impact whatsoever on BlackSky?

Brian O'toole

Yes, we've been using AI for quite a bit for quite a while here. We use it across all aspects of our operations from intelligent tasking too tipping and queuing to machine vision and learning on our imagery and analytics. We have used generative AI type capabilities against Open Source feeds to identify on emerging events. And so we're excited about where AI is right now. We are using it every day, and we're seeing that as really an amplifier to our core imagery and analytics business over time.

Caleb Henry

Okay. There was a mention of space domain awareness earlier in the call. I was wondering if you could clarify that as it is Black Friday planning on services that involve like imaging other satellites? Or is it something else?

Brian O'toole

Our current satellites have a capability of looking up in fact that that capabilities available to the government today, and we see that as an emerging market opportunity.

Caleb Henry

Okay. All right. Yes, that's cool. I hadn't heard about that before. Can you give a little bit more specifics on the Gen three and how many of those do you anticipate launching this year?

Brian O'toole

As I said, we are we are on track to begin launching this year. I should also mention know, in parallel with getting the first a couple of satellites up and working, there is a full production line that is being ramped up. So we will we will get into a steady cadence of satellites coming off the line and then in the Orbit over time.

Caleb Henry

Okay. One or two more questions. It looks like as D&A was a little bit higher this quarter. Can you give any color on why that was depreciation and amortization?

Henry Dubois

Do you mean --

Caleb Henry

Yes.

Henry Dubois

Well, depreciation and amortization went up because we had more satellites in the year as compared to a year ago at this time.

Caleb Henry

Okay. And then last one for me. I was wondering if there any additional steps for the Indonesia contract or is that training it? And then with I think there's $7 million in revenue recognized last quarter. Is that kind of at the expected rate in quarters to come? Or is there any kind of change along that quarter over quarter and that that program will progress on two fronts?

Henry Dubois

The first is their access to our imagery, Nomadik analytic services through a subscription multiyear subscription agreements. So that will that will ramp over time. And then the delivery of satellites, which will which will ramp as we make progress against the delivery of those satellites. That will be a little lumpier. But those are the two paths for that program.

Caleb Henry

Yes, but those are my questions. Thank you.

Brian O'toole

Thank you.

Operator

Scott Buck, H.C. Wainwright.

Scott Buck

You want to go through a time for you. Can you give us any indication of what what kind of stepped up pricing looks like for customers utilizing Gen three versus Gen two.

Brian O'toole

I'm not going to I'm not going to go into pricing specific pricing, but I think it's safe to say that the Gen three capability is a significant, some step-up in capability, both from a resolution perspective, the fact that we're adding a short wave IR capability and will have improved timeliness. So all of those things combined, we will be delivering a much higher service to customers as opposed to the current gen two capability.

Scott Buck

Great. I appreciate that. And then second one for me. Just given that it's an election year, I'm sure you guys have done some internal handicapping of outcomes and what kind of impact that may have on the business or programs you're working with and any thoughts you can share with us there?

Brian O'toole

Well, I think on the programs that we have, yes, visibility into, obviously our EOCL., which is which is a 10-year program of record. And so that gives us good confidence in long-term budgets for that they are subject to annual renewals. The Lucknow program by NGA is now a new program of record, which will which will drive a whole new set of revenue opportunities for that program ramps online. And then obviously, the Space Force strategy is putting budget in place for those capabilities. So everything we're looking at is tied to long-term US government programs.

Scott Buck

Great. I appreciate the additional color, guys. Thanks again.

Brian O'toole

Thank you.

Operator

(Operator instructions) Chris Quilty with Quilty Space.

Chris Quilty

For you guys tag team in here this week is geo and weak. Are there any announcements out of that that you think are worth highlighting? And maybe can you comment specifically? I think there was an NGA. fairness announcement. Is that something that you feel position?

Brian O'toole

Yes. I think if you look at a lot of the remarks at Jubilant this year, they're highly reinforcing of the government's adoption of commercial imagery and analytics. As you mentioned, there's now a new program related to maritime surveillance. That's a capability we support today with some of our other partners and have demonstrated that. So that's an exciting opportunity for us. Obviously, Lucknow is coming online. And then there were also remarks coming out of the space force related to the potential opportunities for commercial capabilities being involved with our hybrid architectures in the future. So we love the we love the momentum and we and we love that. That's the directionality that's coming out of the government.

Chris Quilty

Great. Henry. With the $20 million bank line, is that all the borrowings you will need between here and free cash flow positive? Or might we need another slug of looking out into next year?

Henry Dubois

Yes, yes. Thanks, Chris. M, as we said, we were pretty excited about bringing that extra that $20 million I think, bring in as a commercial bank line. It's a very good cost of capital, if you will, relative to other forms. So it gives us a fair bit of liquidity there. As I mentioned earlier, in the call that plus the vendor financing plus some of these other unbilled receivables that we will be collecting over the next couple of years. I think they are they fully fund us on our path towards our next stage of growth.

Chris Quilty

Great. Final question here. As you start to ramp up Gen three production, we're three years out from COVID date. Every single quarter. I still you're seeing supply chain challenges for a lot of the companies I work with. And how do you feel about the supply chain is? Are there any break particular component vendor that you're concerned about as that production scales?

Brian O'toole

We have, Chris, we have really good visibility into that supply chain. The advantage we have is we're not building one or two satellites. We're building a on a production line that has a cadence, as you mentioned, over the next several years. So we're able to get out in front of in front of this by ordering long-lead components, Critical Path components, well ahead of when we need the satellites. And that's reflected in our overall plan.

Chris Quilty

And congrats on the quarter.

Operator

Thanks, Chris, and at this time, there are no further questions. This will conclude BlackSky's first-quarter 2024 earnings conference call. Thank you for joining the call today. You may disconnect at this time.