What happened
Shares of Earth imaging satellite operator BlackSky Technology (BKSY 11.99%) popped 4.7% through 11 a.m. ET on Wednesday, despite missing analyst sales forecasts earlier in the morning.
Heading into the first quarter of 2023, Wall Street had forecast a $0.14-per-share loss for the space stock, on $20.4 million in quarterly sales. BlackSky met the Street's earnings target, but sales fell a bit short at $18.4 million.
NYSE: BKSY
Key Data Points
So what
So why are investors impressed by these results? Well consider, firstly, that although BlackSky "missed" the Street's sales target, it still grew sales by an impressive 32% (and revenue from high-margin imagery and analytics services surged 114%). Also worth noting is the fact that, while BlackSky lost money in Q1 2023, it lost less money than in Q1 2022, when losses were $0.17 per share.
That's not a lot of improvement, but it is some improvement. It's also indicative of a trend that, says CEO Brian O'Toole, maintains BlackSky's "trajectory toward achieving positive adjusted EBITDA in Q4 this year."
Now what
What's more, BlackSky sees its business accelerating as the year progresses. Reiterating guidance for the full year, management is forecasting sales between $90 million and $96 million in 2023 sales -- 42% better than 2022 revenue.
Management isn't promising to earn a profit according to generally accepted accounting principles (GAAP) on those sales, mind you, or to generate positive free cash flow -- "adjusted EBITDA" is a company-defined term that doesn't necessarily reflect either of those more commonly accepted terms. Analysts polled by S&P Global Market Intelligence, however, see BlackSky turning GAAP profitable in 2025 and generating positive free cash flow perhaps a year later, which would make BlackSky one of the first of the pandemic-era space special purpose acquisition companies to succeed at turning profitable.
Thus, while it's hard to hang a valuation on an unprofitable stock, BlackSky does at least appear to be heading in the right direction. The only question is whether, with $69 million in the bank and a cash-burn rate of $61 million a year, the company can get where it's going before running out of cash.
