Satellogic Inc. (SATL) Earnings Call Transcript & Summary

Good afternoon, and welcome to the Satellogic Second Quarter 2026 Financial Results Conference Call. [Operator Instructions] During today's call, management may make statements relating to goals and objectives for the future operations, financial and business trends, business prospects, future financial metrics, customer contracts and pipeline, revenue generation and expectations for future performance that constitute forward-looking statements under the federal securities laws. Any such forward-looking statements reflect management expectations based upon currently available information and are not guarantees of future performance. They involve certain risks and uncertainties that are more fully described in Satellogic's SEC filings, including the Risk Factors section of our quarterly report on Form 10-Q for the quarter ended June 30, 2026, our annual report on Form 10-K for the fiscal year ended December 31, 2025, and other filings with the SEC. Actual results, performance or achievements may differ materially from those expressed in or implied by these forward-looking statements. Satellogic undertakes no obligation to update or revise any forward-looking statements to reflect events or developments after the date of this call. On this call, management will also discuss financial measures not determined in accordance with U.S. GAAP, including EBITDA, adjusted EBITDA and adjusted operating cash flow. Reconciliations of these non-GAAP measures to the most directly comparable GAAP measures are presented in the appendix to today's presentation and in the earnings materials posted on the Investor Relations section of the website. A press release detailing these results was issued this afternoon and is available at satellogic.com. Hosting today's call will be Satellogic's Founder and Chief Executive Officer, Emiliano Kargieman; and Chief Financial Officer, Rick Dunn. With that, I will now turn the call over to the CEO. Please go ahead, sir.

Thank you, operator, and good afternoon, everyone. Welcome to Satellogic's Second Quarter 2026 Earnings Conference Call. Joining me today is Rick Dunn, our Chief Financial Officer. I'll start with the quarterly results and the commercial wins that drove them and then comment on where our contracted backlog stands for the balance of this year. Rick will then take you through the financials in detail. After that, I'll come back to where this market is going, why we think we're positioned to lead it and provide an update on Merlin on our infrastructure build-out. I'll then close with key takeaways before we open the line for questions. In the second quarter, we grew revenue 259% year-over-year to $15.9 million, generated positive operating income and positive adjusted EBITDA for the first time in the company's history. And while revenue grew 259%, operating expenses increased only 46%, demonstrating the real operating leverage of our vertically integrated model. This milestone represents a major step towards sustained profitability and validates the operating leverage we have discussed over the past few quarters. We had 4 key sovereign and defense wins and milestones as follows: First, we successfully delivered the first satellite in Portugal's $18 million CEiiA program, converting nearly half the program to recognized revenue. Second, we secured and started delivery of an international Aleph Observer agreement with a defense customer valued at more than $18 million, moving from initial trial to full-scale deployment in under 6 months. Third, in April, we closed a $12 million agreement for the in-orbit delivery and transfer of a commissioned NewSat satellite to a sovereign defense customer. This is the third sovereign transaction we have announced in the past 2 quarters. And fourth, we announced strategic collaborations with SynMax and SpaceKnow to build AI-powered geospatial intelligence products in our platform. We recognized $22 million in revenue in the first half of the year and ended the quarter with $80.7 million in contracted non-cancellable total remaining performance obligations. Significantly, $45.8 million of that RPO is contracted for realization within the next 12 months. This gives us strong top line visibility as we continue to convert our growing defense pipeline and lean into the strong global sovereign demand. To ensure we capture this demand, we expanded our sales organization with 3 senior industry leaders and ramped up satellite production at our Montevideo facility to support our Merlin, NewSat and NextGen programs alongside sovereign deliveries. During the quarter, we also welcomed retired Lieutenant General, Michael E. Williamson, to our Board as an Independent Director. Now before sharing updates on Aleph Observer, the transition to Persistent Global Intelligence and the build-out of our Merlin constellation, I will hand the call over to Rick to walk you through the financial details. Rick?

Thank you, Emiliano, and good afternoon, everyone. Today's geospatial data market is supply constrained with customers demanding significantly more data at lower costs. Because we operate one of the largest high-resolution constellations in the world, we benefit from considerable operating leverage. By utilizing our existing in-orbit fleet capacity and fully leveraging our cost leadership, we're well positioned to capture this demand. The second quarter and the first half of 2026 mark a structural and financial inflection point for Satellogic. Starting with revenue. Total revenue for the second quarter was $15.9 million, up 259% year-over-year. For the first 6 months of 2026, total revenue reached $22 million, representing an increase of 181% compared to $7.8 million in the first half of 2025. Looking at our Q2 business lines, Space Systems contributed $8.8 million or 55% of revenue, driven by sovereign satellite deliveries. Data and Analytics contributed $7.1 million or 45% of revenue as customer subscriptions for persistent monitoring expanded. We also expanded our geographic reach across our sovereign and defense customer base. Europe led the second quarter at 58% of revenue or $9.2 million, driven by CEiiA delivery. The Middle East and North Africa contributed $3.6 million or 22% of revenue, while the Americas generated $2.3 million or 14% of revenue and Asia-Pacific represented $900,000 or 6% of revenue. Turning to margins and cost structure. We delivered these results with an 82% gross margin in the second quarter, exclusive of depreciation. Total operating expenses were $15.7 million, up 46% in comparison to the 259% revenue growth, highlighting the operating leverage inherent in our vertically integrated model. This operating leverage drove profitability metrics for Satellogic as follows: First, we achieved positive quarterly operating income of just over $300,000 for the quarter. Second, we delivered positive adjusted EBITDA of $2.8 million for the quarter. Both of these are first for the company. Lastly, adjusted EBITDA loss improved $8.7 million year-to-date coming in at $1.4 million compared to $10.1 million in the first half of 2025. Our GAAP net loss for the quarter was $20 million, which includes a $19.7 million noncash fair value charge resulting from the remeasurement of financial instruments tied to stock price movement. Turning to cash flow. Net cash used in operating activities was $8.6 million in the second quarter compared to $4.3 million used in the prior year period. It is important to note that GAAP operating cash flow excludes $8.3 million in proceeds from the sale of an in-orbit satellite originally capitalized as part of our own fleet. These proceeds are presented within investing activities. From an adjusted operating cash flow basis, which includes the in-orbit satellite sale, our operating cash flow for the first half was essentially breakeven at $100,000. Looking at the balance sheet, we closed the quarter in a strong liquidity position with $112.8 million in cash and cash equivalents. In terms of backlog, total non-cancelable remaining performance obligations stood at $80.7 million as of June 30, with $45.8 million expected to be recognized in the next 12 months. This is an increase of $15.9 million this quarter, reflecting $28.6 million of additions to backlog and $12.7 million recognized as revenue in the quarter. Additionally, we delevered by $12 million as a result of an equity conversion exercised by our secured convertible note holder during the quarter. Our secured convertible debt reduced from $30 million to $18 million during the quarter. With our operating leverage, growing recurring revenue and expanding defense pipeline, we expect 2026 to be a major step towards sustained profitability, crossing into positive free cash flow in 2027 as Merlin enters operational service. With that, I will turn the call back over to Emiliano.

Thank you, Rick. We see the earth observation market undergoing a fundamental transformation. For years, the gaps in this market were not so much a technology problem, but a unit economics and business model problem. Legacy providers did not build the infrastructure required to capture information globally and persistently at a reasonable cost and could not deliver data at the scale required. Customers suffered the consequences. Sparse, expensive and capacity limited systems were insufficient to serve the growing demand for geospatial awareness and force the legacy earth observation business model to be transactional, expensive and exclusive. A customer requests an image of a specific coordinate, receives a fragmented snapshot, experiences breaks and cadence and buys imagery scene-by-scene at a high cost, leaving them with an incomplete view and exposing them to decision risk. With the technology stack that Satellogic has built over the last few years, that is no longer the case. Our satellite capacity, unit economics and scalability allow us to build the infrastructure required to deliver Persistent Global Intelligence. Persistent Global Intelligence is a different category. The requirement is to identify and monitor areas continuously, delivering an uninterrupted stream of situational awareness. As persistent monitoring becomes available in the market, customers are leaning into continued monitoring service to replace episodic imagery. We believe this shift is structural, supported by our unit economic breakthroughs and fueled by heightened geopolitical urgency, distributed threats and the coming of age of AI and analytics. Defense and intelligence customers are starting to prioritize persistent monitoring over transactional bots. That moves our business towards high-margin multi-quarter subscription programs. This quarter, we started to see the impact of this change in our numbers rather than only in customer conversations. Our Data and Analytics revenue, as Rick mentioned, was $7.1 million in the second quarter, up from $4.6 million in the first, a 54% sequential growth on the subscription side of business, even in a quarter where satellite deliveries were the headline. Aleph Observer, the persistent monitoring platform we launched in February is converting one-off imagery buyers into multi-quarter monitoring subscriptions. Six months ago, Persistent Global Intelligence was a thesis we were describing to you. It is now becoming a core driver of the company's business. This brings me to why we are positioned to lead this category. Vertical integration and our payload innovations are what make persistent global scale coverage economically viable and poised for growth. This comes down to physics and unit economics. Our patent-protected camera design lets us capture an exceptional volume of high-resolution imagery from a small set form factor and combined with a fully loaded NewSat cost of approximately $1.3 million per satellite, a small fraction of the industry standard, that collection efficiency sets our operating economics apart. That cost structure is why we can serve persistent monitoring at theater scale and still hold the gross margins that Rick just walked us through and why our margin profile improves rather than compresses as we scale collection. As the market shifts to always-on monitoring, Satellogic builds the infrastructure that produces the persistent intelligence. For sovereign defense customers, this infrastructure delivers strategic autonomy, intelligence continuity and decision advantage independent of third-party priorities and without key dependencies on foreign suppliers. Here is how this [ infrared sector ] is built across a series of integrated layers. First, operational monitoring with NewSats. Our 50-centimeter class Mark V and Mark VI satellite constellation is operational today, powering persistent monitoring across thousands of priority sites daily and driving subscription revenue through Aleph Observer. Second, the global baseline detection layer we're building with Merlin. Our Merlin constellation is on track to start launching in October 2026. The first satellite is fully integrated and ready to ship to the launcher, having passed all environmental and functional tests. Merlin is our daily global remap constellation designed to create a dedicated global baseline detection layer. Building on the onboard computing, Edge AI and inter-satellite links we engineer for usage fleet, Merlin satellites incorporate a white swath , high-resolution imager and the ability to process data directly in-orbit and communicate across our entire constellation in real time. Rather than waiting for a ground station downlink, Merlin can detect changes at the edge and automatically tip and cue our high-resolution constellation in seconds, collapsing what used to be a multi-hour ground loop to minutes. The third layer is precision verification with NextGen, or 30-centimeter class system currently in development to confirm, characterize and verify activity. On top of these data collection layers sit power on our partners' AI and analytics and our customers' agentic platforms, implementing the automated workflows that deliver decisions at scale and on time. The true power is in the AI-first automated loop amongst these layers. The baseline detects, the monitoring layer sustains and the precision layer verifies, giving our customers an integrated always-on decision advantage. Our product offering across data and analytics and space systems, ranging from imagery archive all the way to local assembly and integration facilities and supply chain localization is built to support our customers in their journey towards operating a truly sovereign autonomous and independent infrastructure for Persistent Global Intelligence. As a quick aside, I mentioned that Merlin is on track for its October launch, and I want now to draw your attention to this image showing the first Merlin satellite, MELI 1, fully integrated in our clean room last month. This is our first flight model built end-to-end in-house based on our extensive bus heritage from the NewSat constellation after having successfully passed all environmental qualification and functional testing. The hardware is ready to ship to the launch site in time for a planned October launch window, and the team is now focused on the integration of the next set of satellites in the fleet. It is good to be able to share this picture and highlight that Merlin is progressing as planned, executing against the core fundamentals we committed to. Before summarizing our key takeaways, I want to share an important leadership update. As we previously disclosed, August 21 will be Rick Dunn's last day as Chief Financial Officer of Satellogic. Rick has been with us for 7.5 years. He built the financial infrastructure that carried this company to going public through operational scaling and through to the strong financial results that we reported today. Our search for a permanent successor is active. To ensure a seamless transition, Dustin Greer, our Senior Vice President and Corporate Controller, will assume the role of Interim CFO effective August 21, if a permanent successor has not yet been appointed. Dustin is supported by an exceptional finance team, and we have complete confidence in their continued execution. I will hand the floor to Rick for a few brief comments.

Thanks, Emiliano. After 7.5 years, when I look at where we started against where we stand today, recording our first positive operating income and adjusted EBITDA this quarter, I'm immensely proud of what this team has built. We established a financial foundation for the first vertically integrated geospatial company and stood up the infrastructure for Persistent Global Intelligence. The company's financial footing is the strongest it has ever been, and we've built a resilient finance organization to support the business as it continues to scale. The trajectory is clear, and I look forward to watching Satellogic execute on its next phase of growth. Thank you, everyone.

Thank you, Rick. On behalf of our Board and the entire team, thank you for your leadership and your dedication. To wrap up, I want to leave you with 5 takeaways from the second quarter. First, financial inflection has been achieved. Our record Q2 revenue of $16.9 million and positive adjusted EBITDA of $2.8 million proved the operating leverage of our business model. Second, the Persistent Global Intelligence market shift is underway. The market is transitioning from transactional imager buys to always-on monitoring, and we build an infrastructure that powers the subscription preference. Third, vertical integration is our moat. In-house design and manufacturing and the differentiated cost structure and scalability it supports makes theater scale persistent monitoring economically viable and highly profitable. Fourth, we are fully funded to global awareness. Operating one of the world's largest commercial constellations today, our Merlin constellation remains on track for its first launch in October 2026 and fully funded to launch a global baseline detection layer equipped with Edge AI and intersatellite links with full service in the second half of 2027. And fifth, Satellogic is well capitalized to respond to strong market demand. We are operating from a position of strength with $112.8 million in cash, debt principal reduced to $18 million and strong market traction with sovereign customers across all of our product lines. With that, operator, please open the line for questions.

[Operator Instructions] The first question we have comes from Andres Sheppard of Cantor Fitzgerald.

Congratulations on the quarter. Rick, wishing you all the best as well. It's been great working with you. And again, wishing you all the best. In terms of questions, first one is on Merlin. So you reaffirmed that Merlin is on track for the October launch window, which is very exciting. I guess a few quick questions here is, Emiliano, can you maybe remind us what are the key milestones left towards bringing it to the path that investors should be tracking? And more importantly, as we move towards operational capacity next year, my other question there is, how are you thinking about the cadence for future launches? And how quickly do you think you could potentially ramp up? Thank you.

Excellent. Andres, thank you for the question. So yes, Merin is fully on track now for our first launch window, which is in October. The -- all of the functional tests, all of the environmental tests on the satellite have been performed. The satellite is essentially packaged at our manufacturing facility and ready for pickup. So next phase is it will go to the launcher and be integrated into a launch vehicle, in this case, SpaceX transporter mission in time for the launch window in October. So on the Satellogic side, I would say, is the shipping and receiving the satellite in the other side and the launch campaign, so putting satellite in the rocket, which we've done already 50 -- more than 50 times in the past. So it's something that we're quite familiar with. And then the satellite will go up in October. There's a commissioning phase for the first satellite. While, we continue to produce the next Merlin satellite that will be launched in 2 launches in 2027. And we expect both launches in the first half of the year. So the full constellation for -- to provide complete service will be up if all goes according to plan in the first half of the year. And then we will start delivering full service in the second half of the year. We might -- and we are expecting to work with some of our anchor customers and initial customers as soon as we launch the first satellite in October to familiarize them with the data and to build the processing pipelines that they will need to operate at scale. So there will be a phase there of development -- software development with our initial customers. But yes, full service will be second half of 2027, we expect.

Excellent. Thank you very much. That was very, very helpful. I appreciate all that color. And maybe just a quick follow-up. So your backlog increased materially quarter-over-quarter, and you provided a great slide with great granularity, which we appreciate. My question here is, you also talked about a lot of the macro landscape and things that are unfolding. So I guess my question is, what other opportunities are you currently potentially working on that are not included in the backlog that you might be able to maybe share with us? And how are you thinking about continuing to increase the pipeline going forward?

Yes. So we are experiencing, I think, good tailwinds from the market in the sense of growing demand internationally and in the U.S. Obviously, geopolitical tensions tend to increase the need for persistent intelligence. And so all customers and some of the customer conversations that we've been having over, I would say, the last few years are accelerating because of this. On top of that, there's an increase in defense budgets across the board from U.S. allies around the world, which is also helpful to build up these pipelines. And we also see a structural factor contributing here in the wide adoption of AI and analytics and integrating AI analytics into processing pipelines to deliver decision-grade intelligence in the defense and intelligence side. And analytics and AI are essentially allowing our customers to basically consume a lot more data at a faster pace and still derive the right signals that they need for intelligence. So I think all of these factors, we see contributing to increased demand. To respond to that demand, we have brought in some fantastic new members to our sales team that have the relationships and the international experience to help us bring what we're doing to customers at a faster pace, right? So we are responding to that demand. I think our pipeline is, I think, is very strong. So we continue to see traction in the market. We continue to see increased interest. And we expect that pipeline to continue to convert in the second half of the year into 2027 at a fast pace.

The next question we have comes from Jeff Van Rhee of Craig-Hallum Capital Group.

Rick, it's certainly been a pleasure working with you. Wish you all the best. Emiliano, just a few things. I guess, Emiliano, on Aleph Observer, February 26 launch, I think you mentioned this was the year of pilots. Can you dive a little deeper there, maybe even quantify how many pilots, how are they progressing? What's the feedback, all of that relative to expectations? Any other color you'd share would be great.

Sure. Jeff. Thanks for the question. So yes, I mean, in reality, I would say we expected 2026, as we mentioned before, to be a year of pilots because typically, a new product like this requires customers to get familiar with it. And for them, particularly government customers on the defense side, it requires that they find the budgets to pay for distinct subscriptions and so on. So we expect that 2026 to be able to tap into a portion of their discretionary budgets or pilots and then those convert into full range services at a kind of the cadence that we expect or the number of sites that we expect them to monitor just going to 2027, right? I think we've been pleasantly surprised by the speed at which we are converting some of these pilots into full programs. I think the $80 million contract we announced a few months ago is a very good example. I think we went from the initial pilot to a full-scale program that's at $80 million per year in less than 6 months, I think. And so that's been a really good surprise. We obviously do not expect all of the pilots that we're doing to progress at the same speed, but that was a really good -- I think that is a really good indication of the traction that we're getting in the market. And the team is working -- actively working with customers across all of the geographies that we serve now on the initial pilot program. So we really expect to have more news to share in the second half of the year.

Got it. And more broadly then, just as I look at the pipeline or as you look at the pipeline, cycle times, deal sizes, deal types, competition, geography, I mean, any aspects that are notable in your mind that have changed maybe in the last 180, maybe even last 90 days?

Nothing out of what we have already commented on, which is we are seeing some of the conversations that we're having on accelerated time lines, let's say. We expect that typically, we would expect sovereign spaces and deals because they are large deals, they -- we expect typically longer sales cycles over a year or so. And we are seeing some cases in which we are seeing deals progress through the pipeline at a faster pace. This is also due to, I think, the factors that we mentioned before. So we're seeing some of the sales cycles on the Space Systems in particularly being compressed, which is good news. But in general, I would say the -- both business lines, Data and Analytics and Space Systems still follow the same patterns that we are expecting, right, with Space Systems being lumpier deals with longer sales cycles and Data and Analytics deals being smaller ticket sizes, faster sales cycles, but also subscription-based recurring revenue that helps us build a predictable base, right? So I think those business lines are behaving pretty much to expectation, I would say.

Yes. That's great. Maybe one last. I mean, I think certainly, you commented [indiscernible] is driving almost infinite need. AI wants all the sensor data it can provide. So I think with Merlin and a lot of things you're talking about, you're playing directly to that. But I'm curious on the AI front. Has your perspective on the AI impact on your business changed in any material ways last kind of 90, 180 days?

We believe that AI is here -- basically as a structural [ parts ] in our market is here to stay, right? Like we believe there is a huge impact in terms of the ability of our customers to consume more data at a faster pace and it creates more demand for the data that we produce and for constellations we produce in the future, right? So we think this is a structural change. We don't think this is a fad. So I think that supports our outlook into the future. I think it supports also this year being such a transformational year for the company and kind of a breakout year as we start to -- as Rick was saying, as we start to show the impact of our operating leverage by increasing our top line. But yes, nothing has fundamentally changed in our mind yet. I think we're seeing a lot of confirmation from the market of the trends.

Yes. Well, nice numbers. Love the incremental margins, a lot here to like. So congrats to you and the team.

The next question we have comes from Suji Desilva of ROTH Capital Partners.

Best of luck in the transition, Rick. So on the data analytics revenue, it was very strong sequentially. I know you mentioned that customers upgrading to persistent monitoring. Can you talk about maybe the metrics that could show that kind of Q-over-Q strength is happening and maybe whether it will persist, things like ARPU or customer utilization, maybe anything that will help us understand the transition from imagery to persistent monitoring?

Yes. No, that's a super good question. And we're not sharing those metrics yet, but we're definitely collecting them. And we've had 2 quarters, almost -- less than 2 quarters since the launch of Aleph Observer. So we would like to observe the performance for a couple of more quarters before we start sharing metrics like ARPU or MRR or long-term customer value and so on, right? Like we think those are valuable as longer-term trends. But we're definitely looking at them, and we believe the subscription business that we're building on the data analytics side is really -- should have metrics compatible with Data-as-a-Service or Software-as-a-Service business models in general. So I think those are the benchmarks that we are using internally to measure performance.