On May 25 the National Reconnaissance Agency (NRO) made headlines when it announced it had awarded a record-breaking contract to three of the leaders in the Earth-imaging space: Maxar Technologies (MAXR), Planet Labs (PL), and BlackSky (BKSY).
Considered one of the "big five" intelligence agencies, the NRO is a sub-agency of the U.S. Department of Defense that designs, builds, and launches reconnaissance satellites, as well as provides satellite intelligence to several government agencies, including the NSA.
The contracts, which the NRO called its “largest-ever commercial imagery contracting effort,” each have five-year commitments with the respective companies and options stretching to 2032. BlackSky’s new contract is worth up to $1 billion over the 10-year timeframe, while Maxar’s five-year base contract is worth $1.5 billion, with one-year options afterwards worth up to $1.74 billion.
As Planet Labs is in a quiet period leading up to its June 14 first-quarter earnings release, the company has not disclosed the details of its contract with the NRO.
The Rise of Geospatial Intelligence
While Earth-imaging technology has always been considered of vital importance to the U.S. military, the recent Russia-Ukraine conflict has highlighted the need for detailed, accurate images from the private sector that can not only aid the intelligence community in decision-making, but can also help the public understand what is happening on the ground.
Additionally, tracking the buildup of weapons systems by hostile regimes has only ramped up in recent years as countries such as Iran and North Korea have sought to expand their nuclear capabilities.
The increasing focus of the private sector on Environmental, Social, and Corporate (ESG) governance has also expedited the need for detailed images that show mankind's impact on nature. Many of these initiatives are spurred on by agricultural companies that seek to understand the changes in their land over time, as well as investment banks that have backed farms and other food-producing ventures.
Whether it's in the public or private sector, Earth-imaging has applications to dozens of different industries, and the three companies featured in the NRO's contract are some of the most promising players in this burgeoning field.
1.) Planet Labs (PL)
A San-Francisco based company, Planet Labs went public in November of 2021 in SPAC deal that raised over $435 million. The deal also included a $200 million PIPE round (private investment in public equity) led by Google (which owns 10% of Planet) BlackRock, Koch, and Marc Benioff's TIME Ventures.
The company designs, launches, and operates its own fleet of satellites, and primarily serves the agriculture, mapping, finance, and insurance industries. It also supports federal and local governments with ecological planning and disaster response initiatives.
Planet’s customer contracts are set up as subscriptions, with 90% of these listed as recurring annual contracts. Existing revenue is largely split between four sectors: Civil (24%), Agriculture (23%), Defense (22%), and Mapping (17%).
Unique Attributes
Part of the reason Planet has generated so much attention from the media and investors is the size of the company's satellite fleet and its trove of historical images.
Currently, Planet has over 200 satellites in orbit - more than ten times the size of any of its competitors. Planet refers to these satellites as Doves, and it has launched many of them through the help of Elon Musk's company, SpaceX.
Since its founding in 2010, Planet has been imaging the entire Earth daily, meaning it has mountains of historical data that its newer competitors simply can't replicate. And in April of this year, Planet announced it would be offering customers the ability to track "planetary variables" on various plots of land, which include metrics such as soil water content, land surface temperature, and vegetation biomass.
Will Marshall, Planet Labs' CEO, is quick to point out that Planet is not a technology company but a data company. Ultimately, Planet's goal is to create a "Bloomberg Terminal" system for Earth data.
Areas of Concern
While Planet has projected its revenue to grow every year, with estimates of $170-190 million for fiscal year 2023, the company is burning cash at a rapid rate and expects adjusted EBITDA to be between approximately negative $75 million and negative $50 million for the current fiscal year.
Despite its revolutionary products, it is likely Planet will not become profitable for at least one or two years.
2.) Maxar Technologies (MAXR)
Created in 2017 from the combination of MacDonald, Dettwiler and Associates (MDA) and DigitalGlobe, MAXR is headquartered in Westminster, Colorado and its stock is dual-listed in both Canada (TSX exchange) and the U.S.
Of the three companies that received pieces of the recent NRO contract, Maxar has the longest relationship with the U.S. government and has been providing satellite images to various agencies since 2000.
Maxar imagery is used daily by the U.S. government for mapping, mission planning, and emergency response activities, and the company claims on its website that that 90% of the foundational geospatial intelligence used by the U.S. for national security and keeping troops safe on the ground comes from its fleet of 90 satellites.
Prominence in Ukraine Conflict
Recent world events, including the war in Ukraine, have brought increased attention to Maxar's product offering.
The company's detailed images of the Russian military convoy heading towards Kiev in the early months of the war generated widespread media attention and were featured in a number of prominent publications.
Maxar also released imagery on May 12 that showed the impact of strikes on several locations in southern Ukraine, including the Azvostal plant in Mariupol, Zmiinyi (or Snake) Island in the Black Sea, and in the city of Odesa.
Overall, MAXR reported total revenues of $405 million in the first quarter, up from $392 million in the same quarter last year. However, the company also posted a net loss of $7 million in the quarter.
3.) BlackSky Technology Inc. (BKSY)
The smallest of the three companies that took a piece of the recent NRO contract, BlackSky has a market cap of just over $402 million. However, the news has seen the stock skyrocket in the past week, with the price rising over 100% to $3.6 since the May 25th contract announcement.
BlackSky has also been helped by its high-profile images highlighted in the Ukraine conflict, as well as the successful launch by its partner Rocket Lab on April 2, 2022, which delivered two new satellites into orbit and brought the company's total constellation size to 14.
History
BlackSky started out as a subsidiary of Spaceflight Industries as its geospatial intelligence service, to offer on-demand images from a constellation of satellites. Their first satellite, BlackSky Pathfinder-1, was launched on 26 September 2016, and the first images were released publicly on November 14, 2016.
First Quarter Earnings Report
While BlackSky reported total revenue for the first quarter of 2022 of $13.9 million, a 91% jump year-over-year, the company reported a total operating loss of $27.1 million.
Overall, imagery and software analytical services revenue was $9.8 million. BlackSky revealed the figure was primarily composed of new and existing government contracts, which represented approximately 70% of total revenues.
BlackSky also disclosed a number of key contract awards, such as a multi-million-dollar contract with an unidentified international government to provide on-demand satellite imagery, and a task order for the Economic Indicator Monitoring project with the National Geospatial-Intelligence Agency (NGA).
