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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
___________________________________
FORM 10-Q
___________________________________
(Mark One)
☒
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 2024
OR
o
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
Commission file number 001-39113
___________________________________
BLACKSKY TECHNOLOGY INC.
___________________________________
(Exact name of registrant as specified in its charter)
Delaware
83-1833760
(State or other jurisdiction of
incorporation or organization)
(I.R.S. Employer
Identification No.)
2411 Dulles Corner Park
Suite 300
Herndon, Virginia
20171
(Address of Principal Executive Offices)(Zip Code)
(571) 267-1571
Registrant’s telephone number, including area code
___________________________________
Securities registered pursuant to Section 12(b) of the Act:
Title of each classTrading Symbol(s)Name of each exchange on which registered
Class A common stock, par value $0.0001 per shareBKSYThe New York Stock Exchange
Warrants, exercisable for shares of Class A common stock at an exercise price of $92.00 per shareBKSY.WThe New York Stock Exchange
Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports); and (2) has been subject to such filing requirements for the past 90 days. Yes ý No o
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ý No o
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer
o
Accelerated filer
o
Non-accelerated filer
☒
Smaller reporting company
☒
Emerging growth company
☒
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. o
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o No ý


As of November 5, 2024, there were 30,778,934 shares of the registrant’s Class A common stock, at $0.0001 par value, outstanding.

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SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

This Quarterly Report on Form 10-Q contains, and our officers and representatives may from time to time make, forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), which statements involve substantial risks and uncertainties. All statements contained in this Quarterly Report on Form 10-Q other than statements of historical fact, including statements regarding our future results of operations and financial position, our business strategy and plans, and our objectives for future operations, are forward-looking statements. The words “believe,” “may,” “will,” “potentially,” “estimate,” “continue,” “anticipate,” “plan,” “intend,” “could,” “would,” “expect” and similar expressions that convey uncertainty of future events or outcomes are intended to identify forward-looking statements. Forward-looking statements included in this Quarterly Report on Form 10-Q include, but are not limited to, statements regarding:

• our ability to retain or recruit key employees;
• our ability to grow distribution channels and partner ecosystems;
• our anticipated capital expenditures, liquidity, and our estimates regarding our capital requirements;
• our ability to integrate proprietary and third-party sensor data;
• our ability to add new satellites to our commercial operations;
• our ability to invest in our software, research and development capabilities;
• our ability to grow a third-party developer community;
• our ability to expand our services and offerings to customers both domestically and internationally;
• our ability to continue delivering data in a cost-effective manner;
• our ability to maintain and protect our brand;
• our ability to expand within our current customer base;
• our ability to compete with legacy satellite imaging providers and other emergent geospatial intelligence providers;
• our ability to maintain intellectual property protection for our products or avoid or defend claims of infringement;
• our ability to comply with laws and regulations applicable to our business;
• our expectations about market trends and needs;
• our estimates of market growth, future revenue, expenses, including stock-based compensation expense, cash flows, capital requirements and additional financing;
• our ability to grow our imagery and software analytical services revenue;
• our ability to manage the timing of capital expenditures to allow for additional flexibility to optimize our long-term liquidity requirements;
• our ability to optimize our cash spend to meet short- and long-term operational needs;
• the volatility of the trading price of our common stock;
• the performance of our BlackSky Spectra platform;
• our plans and expectations for our next generation satellites (“Gen-3”), including expected launch timing and satellite capabilities;
• the impact of local, regional, national and international economic conditions and events; and
• other factors including but not limited to those detailed under the section entitled “Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2023 and filed by us with the Securities and Exchange Commission (the “SEC”).
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We have based these forward-looking statements largely on our current expectations and projections about future events and trends that we believe may affect our financial condition, results of operations, business strategy, short-term and long-term business operations and objectives and financial needs. These forward-looking statements are subject to a number of risks, uncertainties and assumptions, including those described in Part I, Item 1A. “Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2023. Moreover, we operate in a very competitive and rapidly changing environment. New risks emerge from time to time. It is not possible for us to predict all risks, nor can we assess the impact of all factors on our business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking statements we may make. In light of these risks, uncertainties and assumptions, the forward-looking events and trends discussed in this Quarterly Report on Form 10-Q may not occur and actual results could differ materially and adversely from those anticipated or implied in the forward-looking statements.

You should not rely upon forward-looking statements as predictions of future events. Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee that the future results, performance, or events and circumstances reflected in the forward-looking statements will be achieved or occur. We undertake no obligation to revise or publicly release the results of any revision to these forward-looking statements, whether written or oral, except as required by law.

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PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS

BLACKSKY TECHNOLOGY INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(unaudited)
(in thousands, except par value)
September 30,December 31,
20242023
Assets
Current assets:
Cash and cash equivalents$56,159 $32,815 
Restricted cash1,147619
Short-term investments7,09019,697
Accounts receivable, net of allowance of $0 and $151, respectively
10,2847,071
Prepaid expenses and other current assets5,0863,916
Contract assets26,73615,213
Total current assets106,50279,331
Property and equipment - net46,94567,116
Operating lease right of use assets - net2,5591,630
Goodwill9,3939,393
Intangible assets - net9361,357
Satellite procurement work in process76,50455,976
Other assets2,616 9,263 
Total assets$245,455 $224,066 
Liabilities and stockholders’ equity
Current liabilities:
Accounts payable and accrued liabilities$12,683 $11,573 
Amounts payable to equity method investees—10,843
Contract liabilities - current4,2243,670
Debt - current portion324—
Other current liabilities1,5231,405
Total current liabilities18,75427,491
Operating lease liabilities7,0433,041
Derivative liabilities6,55615,149
Long-term debt - net of current portion98,42783,502
Other liabilities4,4081,724
Total liabilities135,188130,907
Commitments and contingencies (Note 14)
Stockholders’ equity:
Class A common stock, $0.0001 par value-authorized, 300,000 shares; issued, 30,779 and 18,154 shares; outstanding, 30,482 shares and 17,855 shares as of September 30, 2024 and December 31, 2023, respectively.
32
Additional paid-in capital747,032692,127
Accumulated deficit(636,768)(598,970)
Total stockholders’ equity110,26793,159
Total liabilities and stockholders’ equity$245,455 $224,066 

See notes to unaudited condensed consolidated financial statements
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BLACKSKY TECHNOLOGY INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE (LOSS) INCOME
(unaudited)
(in thousands, except per share amounts)
Three Months Ended September 30,Nine Months Ended September 30,
2024202320242023
Revenue
Imagery & software analytical services$17,276 $15,264 $52,578 $46,352 
Professional & engineering services5,273 5,996 19,145 12,632 
Total revenue22,549 21,260 71,723 58,984 
Costs and expenses
Imagery & software analytical service costs, excluding depreciation and amortization3,682 3,479 10,559 10,634 
Professional & engineering service costs, excluding depreciation and amortization2,968 3,288 10,006 11,137 
Selling, general and administrative17,961 17,572 54,991 55,289 
Research and development43 133 785 525 
Depreciation and amortization11,125 11,304 33,586 32,735 
Operating loss(13,230)(14,516)(38,204)(51,336)
Gain on derivatives3,574 17,012 8,593 7,445 
Income on equity method investment— 328 — 913 
Interest income257 519 987 1,602 
Interest expense(3,142)(2,532)(8,805)(6,627)
Other (expense) income, net(22)2 (19)(1,808)
(Loss) income before income taxes(12,563)813 (37,448)(49,811)
Income tax expense(28)(138)(350)(260)
Net (loss) income(12,591)675 (37,798)(50,071)
Other comprehensive income— — — — 
Total comprehensive (loss) income$(12,591)$675 $(37,798)$(50,071)
Basic and diluted (loss) income per share of common stock:
Net (loss) income per share of common stock$(0.66)$0.04 $(2.05)$(3.00)

See notes to unaudited condensed consolidated financial statements
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BLACKSKY TECHNOLOGY INC.
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY
(unaudited)
(in thousands)
Nine Months Ended September 30, 2024
Common StockAdditional Paid-InAccumulatedTotal Stockholders'
SharesAmountCapitalDeficitEquity
Balance as of January 1, 202417,855$2 $692,127 $(598,970)$93,159 
Stock-based compensation——3,488—3,488 
Issuance of common stock upon exercise of stock options9—1—1 
Issuance of common stock upon vesting of restricted stock awards1———— 
Issuance of common stock upon vesting of restricted stock units107———— 
Issuance of common stock, net of equity issuance costs118—1,294—1,294 
Withholding of stock units to satisfy tax withholding obligations upon the vesting of restricted stock units and exercise of stock options(36)—(419)—(419)
Net loss— — — (15,810)(15,810)
Balance as of March 31, 202418,054 2 696,491 (614,780)81,713 
Stock-based compensation——2,515—2,515 
Issuance of common stock upon exercise of stock options and ESPP shares purchased27—156—156 
Issuance of common stock upon vesting of restricted stock awards1———— 
Issuance of common stock upon vesting of restricted stock units41———— 
Issuance of common stock, net of equity issuance costs205—1,649—1,649 
Withholding of stock units to satisfy tax withholding obligations upon the vesting of restricted stock units and exercise of stock options(12)—(105)—(105)
Net loss———(9,397)(9,397)
Balance as of June 30, 202418,316 2 700,706 (624,177)76,531 
Stock-based compensation——2,667—2,667
Issuance of common stock upon exercise of stock options4—1—1
Issuance of common stock upon vesting of restricted stock awards1————
Issuance of common stock upon vesting of restricted stock units547————
Issuance of common stock, net of equity issuance costs11,676144,100—44,101
Withholding of stock units to satisfy tax withholding obligations upon the vesting of restricted stock units and exercise of stock options(62)—(442)—(442)
Net loss———(12,591)(12,591)
Balance as of September 30, 202430,482 $3 $747,032 $(636,768)$110,267 

See notes to unaudited condensed consolidated financial statements
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BLACKSKY TECHNOLOGY INC.
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY
(unaudited)
(in thousands)

Nine Months Ended September 30, 2023
Common StockAdditional Paid-InAccumulatedTotal Stockholders'
SharesAmountCapitalDeficitEquity
Balance as of January 1, 202314,939$1 $666,984 $(545,111)$121,874 
Stock-based compensation——3,214—3,214 
Issuance of common stock upon exercise of stock options17—3—3 
Issuance of common stock upon vesting of restricted stock awards1———— 
Issuance of common stock upon vesting of restricted stock units98———— 
Issuance of common stock, net of equity issuance costs2,050111,128—11,129 
Net loss———(17,315)(17,315)
Balance as of March 31, 202317,105 2 681,329 (562,426)118,905 
Stock-based compensation——2,488—2,488 
Issuance of common stock upon exercise of stock options12—2—2 
Issuance of common stock upon vesting of restricted stock awards1————
Issuance of common stock upon vesting of restricted stock units83————
Issuance of common stock, net of equity issuance costs130—995—995
Withholding of stock units to satisfy tax withholding obligations upon the vesting of restricted stock units(30)—(414)—(414)
Net loss———(33,431)(33,431)
Balance as of June 30, 202317,301 2 684,400 (595,857)88,545 
Stock-based compensation——2,562—2,562
Issuance of common stock upon exercise of stock options11—4—4
Issuance of common stock upon vesting of restricted stock awards1————
Issuance of common stock upon vesting of restricted stock units209————
Issuance of common stock, net of equity issuance costs101—908—908
Withholding of stock units to satisfy tax withholding obligations upon the vesting of restricted stock units(55)—(559)—(559)
Net income— — — 675 675 
Balance as of September 30, 202317,568 $2 $687,315 $(595,182)$92,135 

See notes to unaudited condensed consolidated financial statements

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BLACKSKY TECHNOLOGY INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited)
(in thousands)
Nine Months Ended September 30,
20242023
Cash flows from operating activities:
Net loss$(37,798)$(50,071)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization expense33,586 32,735 
Operating lease right of use assets amortization529 753 
Bad debt expense100 39 
Stock-based compensation expense8,244 7,725 
Amortization of debt issuance costs and non-cash interest expense6,727 249 
Gain on derivatives(8,593)(7,445)
Non-cash interest income(630)(551)
Loss on impairment of assets71 — 
Loss on disposal of assets44 127 
Income on equity method investment— (913)
Changes in operating assets and liabilities:
Accounts receivable(3,313)359 
Contract assets - current and long-term(5,133)(5,271)
Prepaid expenses and other current assets(1,148)(13)
Other assets2,525 1,144 
Accounts payable and accrued liabilities(967)834 
Other current liabilities194 (640)
Contract liabilities - current and long-term1,005 (175)
Other liabilities(10)5,316 
Net cash used in operating activities(4,567)(15,798)
Cash flows from investing activities:
Purchase of property and equipment(12,289)(12,296)
Satellite procurement work in process(28,410)(23,603)
Purchases of short-term investments(13,488)(29,167)
Proceeds from maturities of short-term investments26,725 50,110 
Proceeds from sale of property and equipment— 22 
Net cash used in investing activities(27,462)(14,934)
Cash flows from financing activities:
Proceeds from equity issuances, net of equity issuance costs47,343 30,868 
Proceeds from issuance of debt20,000 — 
Proceeds from options exercised and ESPP shares purchased157 9 
Debt payments(10,000)— 
Withholding tax payments on vesting of restricted stock units(967)(972)
Payments for debt issuance costs(632)— 
Payments of transaction costs for debt modification— (1,311)
Payments of transaction costs related to derivative liabilities— (905)
Net cash provided by financing activities55,901 27,689 
Net increase (decrease) in cash, cash equivalents, and restricted cash23,872 (3,043)
Cash, cash equivalents, and restricted cash – beginning of year33,434 37,016 
Cash, cash equivalents, and restricted cash – end of period$57,306 $33,973 
See notes to unaudited condensed consolidated financial statements
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The following table provides a reconciliation of cash, cash equivalents, and restricted cash reported within the unaudited condensed consolidated balance sheets that sum to the total of the same such amounts shown in the unaudited condensed consolidated statements of cash flows:
September 30,
20242023
Cash and cash equivalents$56,159 $32,138 
Restricted cash1,147 1,835 
Total cash, cash equivalents, and restricted cash$57,306 $33,973 
Nine Months Ended September 30,
20242023
(in thousands)
Supplemental disclosures of cash flow information:
Cash paid for interest$1,208 $— 
Cash paid for income taxes377 182 
Supplemental disclosures of non-cash financing and investing information:
Increase of debt principal for paid-in-kind interest$4,105 $3,490 
Property and equipment additions (credits received) accrued but not yet paid, net1,606 (226)
Vendor financed satellite procurement costs1,500 — 
Credits from LeoStella applied to satellite procurement costs966 122 
Accretion of short-term investments' discounts and premiums630 531 
Capitalized stock-based compensation426 539 
Equity issuance costs accrued but not yet paid313 90 
Capitalized interest for property and equipment placed into service— 220 
Satellite procurement costs included in settlement with LeoStella— 36 
Debt modification costs accrued but not yet paid— 6 
See notes to unaudited condensed consolidated financial statements
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BLACKSKY TECHNOLOGY INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
September 30, 2024

1. Organization and Business
BlackSky Technology Inc. (“BlackSky” or the “Company”), headquartered in Herndon, Virginia, is a space-based intelligence company that delivers real-time imagery, analytics and high-frequency monitoring. The Company owns and operates an advanced purpose-built commercial, real-time intelligence system that combines the power of the BlackSky Spectra tasking and analytics software platform and the Company's proprietary high-resolution low earth orbit (“LEO”) small satellite constellation. The constellation is optimized to cost-efficiently capture imagery at high revisit rates where and when customers need it. The BlackSky Spectra software platform processes millions of observations a day by integrating data from the Company's proprietary satellite constellation and from other third-party sensors such as synthetic aperture radar and radio frequency satellites, millions of GPS-enabled terrestrial data sources and Internet of Things (“IoT”) connected devices. BlackSky Spectra applies advanced, proprietary artificial intelligence ("AI") and machine learning (“ML”) techniques to process, analyze, and transform these raw feeds into actionable intelligence via alerts, information, and insights. Customers can access BlackSky Spectra's data and analytics through easy-to-use web services or through platform application programming interfaces.
BlackSky has two primary operating subsidiaries, BlackSky Global LLC and BlackSky Geospatial Solutions, LLC. The Company also owns fifty percent of LeoStella LLC (“LeoStella”), its joint venture with Thales Alenia Space US Investment LLC (“Thales”). LeoStella is a vertically-integrated small satellite design and manufacturer based in Tukwila, Washington, from which the Company procures satellites to operate its business. The Company accounts for LeoStella as an equity method investment.
In September 2024, the Company effected a one-for-eight reverse stock split (the "Reverse Stock Split") of its issued Class A common stock. As a result, every eight shares of its issued common stock were combined into one share of common stock. No fractional shares of the Company's common stock were issued as a result of the Reverse Stock Split. Each stockholder who would otherwise have been entitled to receive a fractional share as a result of the Reverse Stock Split received a cash payment equal to the product obtained by multiplying the number of shares of common stock held by such stockholder before the Reverse Stock Split that would otherwise have been exchanged for such fractional share interest by the closing price per share of the common stock as reported on the New York Stock Exchange ("NYSE") on September 6, 2024, the date of the effective time of the Reverse Stock Split. As a result of the Reverse Stock Split, proportionate adjustments were made to the per share exercise price and the number of shares issuable upon the exercise of all outstanding warrants to purchase shares of the Company's common stock. These notes to the unaudited condensed consolidated financial statements and the accompanying unaudited condensed consolidated financial statements give retroactive effect to the Reverse Stock Split for all periods presented. The shares of common stock retained a par value of $0.0001 per share.
The Company's equity issuances during the nine months ended September 30, 2024 included a public offering of shares and shares sold as part of the Company's at-the-market (“ATM”) offering program. In September 2024, the Company raised gross proceeds of $46.0 million via a public offering comprised of 11.5 million shares of the Company's Class A common stock for a public offering price of $4.00 per share. The Company also sold 500 thousand shares from the ATM offering at an average purchase price per share of $9.68, resulting in gross proceeds of $4.8 million during the nine months ended September 30, 2024. The transaction costs of $3.8 million for the equity issuances incurred during the nine months ended September 30, 2024, consisting of underwriting discounts and commissions, legal fees, and placement agent fees, have been recorded as a reduction to additional paid-in capital in the unaudited condensed consolidated statements of changes in stockholders’ equity and consolidated balance sheets.

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2. Basis of Presentation and Summary of Significant Accounting Policies

Basis of Preparation
The Company has prepared its unaudited condensed consolidated financial statements in accordance with Generally Accepted Accounting Principles in the United States of America (“GAAP”) and the instructions to Form 10-Q and Article 8 of Regulation S-X of the Securities and Exchange Commission (the "SEC"). The accompanying unaudited condensed consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries. In addition, the unaudited condensed consolidated financial statements include the Company’s proportionate share of the earnings or losses of its equity method investments and a corresponding increase or decrease to its investments, with recorded losses limited to the carrying value of the Company’s investments. All intercompany transactions and balances have been eliminated upon consolidation.
The Company’s unaudited condensed consolidated financial statements have been prepared on a historical cost basis, except for certain financial assets and liabilities, including derivative financial instruments, which are stated at fair value. Unless otherwise indicated, amounts presented in the Notes pertain to the Company’s continuing operations.

Use of Estimates
The preparation of the unaudited condensed consolidated financial statements requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingencies at the reporting date, and the reported amounts of revenue and expenses during the reporting period. These estimates are based on management’s best knowledge of current events and actions the Company may undertake in the future. Actual results could materially differ from these estimates. Significant estimates made by the Company include, but are not limited to, revenue and associated cost recognition, the collectability of accounts receivable, the recoverability and useful lives of property and equipment, the valuation of equity warrants and warrant liabilities, fair value estimates, the recoverability of goodwill and intangible assets, the provision for income taxes, the incremental borrowing rate to measure the operating lease right of use assets, the effective interest rate of the vendor financing agreement, and stock-based compensation.

Investments
The Company invests in short-term investments, which generally consist of A-1, or higher, rated corporate debt and governmental securities. The investments are classified as held-to-maturity and have a stated maturity date of one year or less from the balance sheet date. Any investments with original maturities less than three months are considered cash equivalents.
As of September 30, 2024 and December 31, 2023, the Company’s short-term investments had a carrying value of $7.1 million and $19.7 million, respectively, which represents amortized cost, and an aggregate fair value of $7.1 million and $19.7 million, respectively, which represents a Level 1 measurement based off of the fair value hierarchy.

Equity Method Investments
Investments where the Company has the ability to exercise significant influence, but not control, are accounted for under the equity method of accounting and are included in investment in equity method investees on the Company's unaudited condensed consolidated balance sheets. Significant influence typically exists if the Company has a 20% to 50% ownership voting interest in the investee or retains a voting seat on the investee's board of directors. In evaluating whether the Company has significant influence, the Company considers the nature of its ownership interest in the investee, as well as other factors that may give the Company the ability to exercise significant influence over the investee's operating and capital financial policies. Under this method of accounting, the Company's share of the net earnings or losses of the investee are included in the Company's
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unaudited condensed consolidated statements of operations and comprehensive (loss) income. The Company did not recognize any percentage of LeoStella's estimated net loss during the nine months ended September 30, 2024 since its investment in LeoStella was $0 as of December 31, 2023. The investment in LeoStella was $0 in the Company's unaudited condensed consolidated balance sheets as of September 30, 2024. The Company currently accounts for its LeoStella joint venture as its only equity method investment. The investment in LeoStella is not significant to the financial statements.
Intra-entity profits arising from the sale of assets from the equity method investments to the Company are eliminated and deferred if those assets are still held by the Company at the end of the reporting period. The intra-entity profits will be recognized as the assets are consumed. As of September 30, 2024 and December 31, 2023, the Company had differences between the carrying value of its equity method investment and the underlying equity in the net assets of the investee of $0.3 million and $1.2 million, respectively.
Equity method investments are evaluated for impairment whenever events or changes in circumstances indicate that the carrying amounts of such investments may be impaired. If a decline in the value of an equity method investment is determined to be other than temporary, a loss is recorded in earnings in the current period.

Debt Issuance Costs and Debt Discount
Debt issuance costs are capitalized and amortized to interest expense using the effective interest method over the life of the related debt. Short-term and long-term debt are presented net of the unamortized debt issuance costs and debt discount in the unaudited condensed consolidated balance sheets.

Fair Value of Financial Instruments
The Company accounts for certain assets and liabilities at fair value. Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date.
The process for analyzing the fair value measurement of certain financial instruments on a recurring, or non-recurring, basis includes significant judgment and estimates of inputs including, but not limited to, share price, volatility, discount for lack of marketability, application of an appropriate discount rate, and probability of liquidating events. The Company utilizes the market valuation methodology and specific option pricing methodology, such as the Monte Carlo simulation, to value the more complex financial instruments and the Black-Scholes option-pricing model to value standard common stock warrants and common stock options.
The framework for measuring fair value specifies a hierarchy of valuation techniques based on whether the inputs to those valuation techniques are observable or unobservable. Observable inputs reflect market data obtained from independent sources, while unobservable inputs reflect the Company's assumptions. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurement) and the lowest priority to unobservable inputs (Level 3 measurement).
The three levels of the fair value hierarchy are as follows:
Level 1 Inputs. Inputs are unadjusted quoted prices in active markets for identical assets or liabilities available at the measurement date.
Level 2 Inputs. Inputs are unadjusted quoted prices for similar assets and liabilities in active markets, quoted prices for identical or similar assets and liabilities in markets that are not active, inputs other than quoted prices that are observable, and inputs derived from or corroborated by observable market data.
Level 3 Inputs. Inputs are unobservable inputs which reflect the Company’s own assumptions on what assumptions market participants would use in pricing the asset or liability based on the best available information.

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Revenue Recognition
The Company generates revenue from the sale of imagery and software analytical services and professional and engineering services. Imagery and software analytical services revenue, which is mostly from contracts from domestic and international government agencies, includes imagery, data, software, and analytics. This revenue is primarily recognized from services rendered under non-cancellable subscription order agreements or, in limited circumstances, variable not-to-exceed purchase orders. Professional and engineering services revenue is generated from time and materials basis, firm fixed price service solutions, and firm fixed price long-term engineering and construction contracts.
In accordance with Accounting Standards Update No. 2014-09, “Revenue from Contracts with Customers (Topic 606)” (“ASC 606”), the Company uses the five-step model of identifying the contract with a customer, identifying the performance obligations contained in a contract, determining the transaction price, allocating the transaction price, and determining when performance obligations are satisfied, which can require the application of significant judgment, as further discussed below.
Revenue is measured at the fair value of consideration received or receivable and net of discounts. The Company applies a policy election to exclude transaction taxes collected from customer sales when the tax is both imposed on and concurrent with a specific revenue-producing transaction. The Company estimates any variable consideration, and whether the transaction price is constrained, upon execution of each contract. The Company did not have any active contracts with significant variable consideration as of September 30, 2024.

Imagery & Software Analytical Services Revenue
Imagery
Imagery services include imagery delivered from the Company’s proprietary satellite constellation and Spectra software platform and in limited cases directly uploaded to certain customers. Customers can directly task the Company's proprietary satellite constellation to collect and deliver imagery over specific locations, sites and regions that are critical to their operations. The Company offers customers several service level subscription options that include on-demand tasking or multi-year assured access programs, where customers can secure priority access and imaging capacity at a premium over a region of interest on a take or pay basis. Imagery revenue is recognized ratably over the subscription period based on the promise to continuously provide contractual satellite capacity for tasked imagery or analytics at the discretion of the customer.
Data, Software, and Analytics
The Company leverages proprietary AI and ML algorithms to analyze data coming from both the Company’s proprietary sensor network and third-party space and terrestrial sources to provide hard-to-get data, insights, and analytics for customers. The Company continues to integrate and enhance its offerings by performing contract development, while retaining the intellectual property rights. The Company also offers services related to object, change and anomaly detection, site monitoring, and enhanced analytics, through which the Company can detect key pattern of life changes in critical locations such as ports, airports, and construction sites; retail activity; commodities stockpiles; and other sites that contain critical commodities and supply chain inventory.
The Company's analytics services are also offered on a similar subscription basis and provide customers with access to the Company's site monitoring, event monitoring and global data services. Analogous with the recognition of revenue for imagery, software analytical services revenue is recognized ratably over the subscription period.

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Professional and Engineering Services Revenue
The Company performs various professional services, that are highly-interrelated, including providing technology enabled professional service solutions to support customer-specific software development requests, integration, testing, and training. The Company also provides engineering services, which include developing and delivering advanced satellite and payload systems for a limited number of customers that leverage the Company’s capabilities in mission systems engineering and operations, ground station operations, and software and systems development. These services, based on the context of the contract, are capable of being distinct performance obligations.
For firm fixed price professional and engineering service contracts, the Company recognizes revenue over time using the cost-to-complete method to measure progress to complete the performance obligation ("Estimate at Completion" or "EAC"). A performance obligation's EAC includes all direct costs such as labor, fringe, materials, subcontract costs and overhead. Significant judgment is used to estimate total costs at completion on a contract by contract basis including, but not limited to, labor productivity, program schedule, technical risk analysis, complexity, scope of the work to be performed and other identified risks. Due to the continuous nature of the work, as well as when a change in circumstances warrants a modification, the EAC is reviewed and may result in cumulative changes to the contract profit. The Company recognizes changes in estimated contract sales or costs and the resulting changes in contract profit on a cumulative basis in the period in which the change is identified. If, at any time, the estimate of contract profitability indicates a probable anticipated loss on the contract, the Company recognizes the total loss as and when known. The following table presents the effect of aggregate net EAC adjustments on the Company's professional and engineering services contracts:
Three Months Ended September 30,Nine Months Ended September 30,
2024
2023(2)
2024(1)
2023(2)
(in thousands)
Revenue$(785)$1,002 $218 $(498)
Basic and diluted net (loss) income per share$(0.04)$0.06 $0.01 $(0.03)
(1) For the nine months ended September 30, 2024, the Company had a favorable EAC adjustment of $1.2 million for an existing individual professional services contract. The remaining EAC adjustments are not individually significant to the Company.
(2) For the three and nine months ended September 30, 2023, the Company had favorable EAC adjustments of $1.0 million and $1.1 million respectively, for an existing individual professional services contract. The remaining EAC adjustments are not individually significant to the Company.

For contracts structured as cost-plus-fixed-fee or on a time and materials basis, the Company generally recognizes revenue based on the right-to-invoice when practically expedient, as the Company is contractually able to invoice the customer based on the control transferred to the customer in an amount that corresponds directly with the value to the customer of the Company’s performance completed to date.

Imagery and Software Analytical Service and Professional and Engineering Service Costs
Imagery and software analytical service costs primarily include internal labor to support the ground station network and space operations, third-party data and imagery, and cloud computing and hosting services. The Company recognizes stock-based compensation expense for those employees whose work supports the imagery and software analytical service costs it provides to customers, under imagery and software analytical service costs, excluding depreciation and amortization. For those employees who provide these services to support customer-based programs, the stock-based compensation expense is classified under imagery and software analytical services costs.

Professional and engineering service costs primarily include the cost of internal labor for design and engineering in support of long-term development contracts for satellites and payload systems, as well as subcontract direct materials and external labor costs to build and test specific components, such as the communications system, payload demands, and sensor integration. In addition, the Company also recognizes internal labor costs and external subcontract labor costs for its customer-centric software service solutions. The
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Company recognizes stock-based compensation expense for those employees who provide professional and engineering services support to customers, under professional and engineering service costs, excluding depreciation and amortization.

Sponsor Shares
On September 9, 2021, BlackSky's predecessor company, Osprey Technology Acquisition Corp. (“Osprey”), completed its merger (the "Merger") with Osprey Technology Merger Sub, Inc., a wholly-owned subsidiary of Osprey, and BlackSky Holdings, Inc. Osprey pre-Merger Class B common shares were exchanged for shares of the Company’s Class A common stock (the "Sponsor Shares") upon completion of the Merger. The Company accounted for the Sponsor Shares in accordance with the guidance contained in ASC 815-40, under which the Sponsor Shares did not meet the criteria for equity treatment and were recorded as derivative liabilities in the Company’s unaudited condensed consolidated balance sheets as of September 30, 2024. The Sponsor Shares are adjusted to fair value at each reporting period and the change in fair value is recognized in gain on derivatives in the Company’s unaudited condensed consolidated statements of operations and comprehensive (loss) income.

Stock-Based Compensation
Restricted Stock Awards and Restricted Stock Units
The Company has granted restricted stock awards ("RSAs") and grants restricted stock units ("RSUs") to certain employees, for which the grant date fair value is equal to the fair value of the Class A common stock on the date of grant. In order to determine the fair value of its Class A common stock on the date of grant prior to the Merger, the Company historically performed a valuation analysis using a combination of market and income approaches. Subsequent to the Merger, the Company uses the New York Stock Exchange (“NYSE”) trading price as the fair value of the Class A common stock for valuation purposes. For all awards for which vesting is only subject to a service condition, including those subject to graded vesting, the Company has elected to use the straight-line method to recognize the fair value as compensation cost over the requisite service period.
Certain of the Company’s outstanding RSUs had performance vesting conditions that were triggered upon the consummation of the Merger. Therefore, since the performance conditions attributable to these RSUs had been met, the Company commenced recording the associated compensation expense, inclusive of a catch-up amount for the service period between their grant date and satisfaction of the performance condition, as of the closing of the Merger. The fair value of the RSUs that include a performance condition is recognized as compensation expense over the requisite service period using the accelerated attribution method, which accounts for RSUs with discrete vesting dates as if they were separate awards. Expense related to stock-based payments is classified in the unaudited condensed consolidated statements of operations and comprehensive (loss) income based upon the classification of each employee's cash compensation. As of September 30, 2024, 6 thousand RSUs with performance vesting conditions were outstanding and the associated remaining expense of $0.1 million will be recognized through September 30, 2025.
Stock Options
The Company uses the Black-Scholes option pricing model to value all options, including options under the 2021 Employee Stock Purchase Plan ("ESPP"), and the straight-line method to recognize the fair value as compensation cost over the requisite service period. The fair value of each option granted was estimated as of the date of grant. The Company did not grant any options during the nine months ended September 30, 2024. The Company uses the following inputs when applying the Black-Scholes option pricing model:
Expected Dividend Yield. The Black-Scholes valuation model requires an expected dividend yield as an input. The dividend yield is based on historical experience and expected future changes. The Company has not historically paid and currently has no plans to pay dividends on its Class A common stock.
Expected Volatility. The Company does not have sufficient historical share price history; therefore, the expected volatility was estimated based upon the historical share price volatility of guideline comparable companies.
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Risk-free Interest Rate. The yield on actively traded non-inflation indexed U.S. Treasury notes was used to extrapolate an average risk-free interest rate based on the expected term of the underlying grants.
Expected Term. For options granted in 2021 through 2023, since there was not a history of option exercises as a public company, the Company considered the option vesting terms and contractual period, as well as the demographics of the holders, in estimating the expected term. For options granted prior to 2021, the expected term was the estimated duration to a liquidation event based on a weighted average consideration of the most likely exit prospects for that stage of development. BlackSky Holdings, Inc. ("Legacy BlackSky") was privately funded and, accordingly, the lack of marketability was factored into the expected term of options granted. The Company will review its estimate in the future and adjust it, if necessary, due to changes in the Company’s historical exercises.
The most significant assumption used to determine the fair value of the Legacy BlackSky equity-based awards was the estimated fair value of the Legacy BlackSky Class A common stock on the grant date. In order to determine the fair value of its Class A common stock on the date of grant prior to the Merger, Legacy BlackSky historically relied on a valuation analysis performed using a combination of market and income approaches. Subsequent to the Merger, the Company uses the NYSE trading price as the fair value of the Company's Class A common stock for valuation purposes.
Legacy BlackSky historically adjusted the exercise price of certain outstanding stock options. For each award with an adjusted exercise price, Legacy BlackSky calculated the incremental fair value, which was the excess of the fair value of the modified award over the fair value of the original award immediately before the modification. The incremental fair value was recognized as stock-based compensation expense immediately to the extent that the modified stock option already had vested, and for stock options that were not yet vested, the incremental fair value has been recognized as stock-based compensation expense over the remaining vesting period.

3. Accounting Standards Updates (“ASU”)

Accounting Standards Recently Issued But Not Yet Adopted
On November 27, 2023, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") No. 2023-07 Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures. Among other new disclosure requirements, ASU 2023-07 requires companies to disclose significant segment expenses that are regularly provided to the chief operating decision maker ("CODM"). ASU 2023-07 will be effective for annual periods beginning on January 1, 2024 and interim periods beginning on January 1, 2025. ASU 2023-07 must be applied retrospectively to all prior periods presented in the financial statements. The Company is assessing the effect of this update on its consolidated financial statements and related disclosures.
On December 14, 2023, the FASB issued ASU No. 2023-09 Income Taxes (Topic 740): Improvements to Income Tax Disclosures. ASU 2023-09 requires companies to disclose, on an annual basis, specific categories in the effective tax rate reconciliation and provide additional information for reconciling items that meet a quantitative threshold. In addition, ASU 2023-09 requires companies to disclose additional information about income taxes paid. ASU 2023-09 will be effective for annual periods beginning January 1, 2025 and will be applied on a prospective basis with the option to apply the standard retrospectively. The Company is assessing the effect of this update on its consolidated financial statements and related disclosures.

4. Revenue
Disaggregation of Revenue
The Company earns revenue through the sale of imagery and software analytical services and professional and engineering services. The Company’s management primarily disaggregates revenue as follows: (i) imagery; (ii) data, software and analytics; (iii) professional services; and (iv) engineering services. This disaggregation
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allows the Company to evaluate market trends in certain imagery and software analytical services and professional and engineering services.
The following table disaggregates revenue by type for the three and nine months ended September 30, 2024 and 2023:
Three Months Ended September 30,Nine Months Ended September 30,
2024202320242023
(in thousands)
Imagery$15,565 $13,507 $46,783 $39,197 
Data, software, and analytics1,711 1,757 5,795 7,155 
Professional services4,536 5,565 14,195 11,900 
Engineering services737 431 4,950 732 
Total revenue$22,549 $21,260 $71,723 $58,984 
The approximate revenue based on geographic location of end customers is as follows for the three and nine months ended September 30, 2024 and 2023:
Three Months Ended September 30,Nine Months Ended September 30,
2024202320242023
(in thousands)
North America$13,392 $14,433 $43,613 $42,944 
Middle East3,385 2,738 10,029 5,633 
Asia Pacific5,549 3,827 17,323 9,629 
Other223 262 758 778 
Total revenue$22,549 $21,260 $71,723 $58,984 
Revenue from categories of end customers for the three and nine months ended September 30, 2024 and 2023 is as follows:
Three Months Ended September 30,Nine Months Ended September 30,
2024202320242023
(in thousands)
U.S. federal government and agencies$12,903 $14,041 $41,608 $41,780 
International governments9,048 6,846 28,095 16,100 
Commercial and other598 373 2,020 1,104 
Total revenue$22,549 $21,260 $71,723 $58,984 

Backlog
Backlog represents the future sales the Company expects to recognize on firm orders it receives and is equivalent to the Company’s remaining performance obligations at the end of each period. It comprises both funded backlog (firm orders for which funding is authorized and appropriated) and unfunded backlog. The Company's backlog excludes unexercised contract options. As of September 30, 2024, the Company had $250.5 million of backlog, which represents the transaction price of executed contracts less inception to date revenue recognized. The Company expects to recognize revenue relating to its backlog, of which a portion is recorded in deferred revenue in the unaudited condensed consolidated balance sheets, of $24.6 million,
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$57.3 million, and $168.6 million in the three months ended December 31, 2024, fiscal year 2025, and thereafter, respectively.
5. Contract Assets and Liabilities
The components of contract assets and contract liabilities consisted of the following:
September 30,December 31,
20242023
(in thousands)
Contract assets - current:
Unbilled revenue$26,736 $15,213 
Total contract assets - current$26,736 $15,213 
Contract assets - long-term:
Unbilled revenue - long-term$1,321 $8,150 
Other contract assets - long-term1,049 610 
Total contract assets - long-term(1)
$2,370 $8,760 
Contract liabilities - current:
Deferred revenue - current$4,224 $3,670 
Total contract liabilities - current$4,224 $3,670 
Contract liabilities - long-term:
Other contract liabilities - long-term$620 $169 
Total contract liabilities - long-term(2)
$620 $169 
(1) Total contract assets - long term is included in other assets in the unaudited condensed consolidated balance sheets.
(2) Total contract liabilities - long term is included in other liabilities in the unaudited condensed consolidated balance sheets.
Contract liabilities include payments received and billings made in advance of the satisfaction of performance obligations under the contract and are realized when the associated revenue is recognized under the contract. Contract assets include (i) unbilled revenue, which is the amount of revenue recognized in excess of the amount billed to customers, where the rights to payment are not just subject to the passage of time; and (ii) costs incurred incremental to the contract and to fulfill contract obligations. Other contract assets and other contract liabilities primarily relate to contract commissions on customer contracts.
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Changes in short-term and long-term contract assets and contract liabilities for the nine months ended September 30, 2024 were as follows:
Contract AssetsContract Liabilities
(in thousands)
Balance as of January 1, 2024$23,973 $3,839 
Billings or revenue recognized that was included in the beginning balance(9,938)(3,252)
Changes in contract assets or contract liabilities, net of reclassification to receivables14,359 3,751 
Cumulative catch-up adjustment arising from changes in estimates to complete273 66 
Cumulative catch-up adjustment arising from contract modifications— (11)
Changes in costs to fulfill and amortization of commission costs 439 — 
Changes in contract commission costs— 451 
Balance as of September 30, 2024$29,106 $4,844 

6. Property and Equipment - net
The following summarizes property and equipment - net as of:
September 30,December 31,
20242023
(in thousands)
Satellites$107,004 $125,124 
Software30,02520,384
Software development in process2,6342,673
Computer equipment1,8301,642
Office furniture and fixtures7,2074,039
Other equipment866811
Site equipment2,5022,557
Total152,068157,230
Less: accumulated depreciation(105,123)(90,114)
Property and equipment — net$46,945 $67,116 

7. Debt and Other Financing
The carrying value of the Company’s outstanding debt consisted of the following amounts:
September 30,December 31,
20242023
(in thousands)
Current portion of long-term debt$375 $— 
Non-current portion of long-term debt99,808 84,578 
Total long-term debt100,183 84,578 
Unamortized debt issuance costs(1,432)(1,077)
Outstanding balance$98,751 $83,502 

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Effective Interest RateSeptember 30,December 31,
Name of Loan20242023
(in thousands)
Loans from Related Parties
12.23% - 12.57%
$88,683 $84,578 
Satellite Procurement Vendor Financing
10.86%1,500 — 
Commercial Bank Line11.46%10,000 — — 
Total$100,183 $84,578 
Satellite Procurement Vendor Financing
In November 2023, the Company entered into a vendor financing agreement for multiple launches providing for $27.0 million, of which a portion will be drawn down equally per launch and will be repaid quarterly on a pro-rata basis across a three-year period after each successful launch milestone. Payments will accrue interest at 12.6% per annum, beginning on each launch date. The Company may prepay at any time until the maturity date without premium or penalty. During the nine months ended September 30, 2024, the Company incurred $1.5 million of long-term debt related to the vendor financing agreement.
Commercial Bank Line
In April 2024, the Company, and certain subsidiaries of the Company, as co-borrowers, entered into a commercial bank line with Stifel Bank. The commercial bank line provides for a $20.0 million revolving credit facility, including a $0.5 million sub-facility for the issuance of letters of credit and other ancillary banking services. As of September 30, 2024, there was $10.0 million outstanding under the revolving credit facility. The commercial bank line matures on June 30, 2026.
The commercial bank line accrues interest at a rate equal to the greater of (A) the prime rate or (B) 6%. Interest on the loan is payable quarterly in arrears. The Company is required to pay an unused line fee of 0.25% per annum, payable quarterly in arrears. The Company may borrow, prepay and re-borrow revolving loans, without premium or penalty. The principal amount of outstanding loans, together with accrued and unpaid interest, is due on the loan maturity date. The Company is also obligated to pay a fee to the lender upon the occurrence of certain change of control events or the refinancing, repayment, or termination of the commercial bank line, along with other customary fees for a loan facility of this size and type.
The Company’s obligations under the commercial bank line are secured by substantially all of the Company’s assets, including intellectual property. Pursuant to a subordination arrangement, the security interest granted to Stifel Bank is senior to the security interest the Company granted to Intelsat Jackson Holdings SA pursuant to that certain Amended and Restated Loan and Security Agreement, dated as of October 31, 2019, as amended.
The commercial bank line contains customary affirmative and negative covenants, including covenants limiting the Company's ability to, among other things, incur debt, grant liens, pay dividends and distributions on its capital stock, make investments and acquisitions, and make capital expenditures, in each case subject to customary exceptions for a loan facility of this size and type. The commercial bank line also contains financial covenants requiring compliance with a minimum revenue covenant, measured at the end of each fiscal quarter, and maintenance, at all times, of unrestricted cash and cash equivalents with Stifel Bank or in controlled accounts in an aggregate amount at least equal to the outstanding obligations under the commercial bank line. If the Company fails to meet the minimum cash covenant, the commercial bank line provides the Company with the ability to cure the breach with the deposit of proceeds from the issuance of capital stock or subordinated debt.
Fair Value of Debt
The estimated fair value of the Company’s outstanding long-term debt was $114.1 million and $78.7 million as of September 30, 2024 and December 31, 2023, respectively, which is different than the historical cost of the long-term debt as reflected in the Company’s unaudited condensed consolidated balance
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sheets. The fair value of the long-term debt was estimated using Level 3 inputs, based on interest rates available for debt with terms and maturities similar to the Company’s existing debt arrangements and credit rating.

8. Equity Warrants Classified as Derivative Liabilities

Warrant Valuation
Equity warrants that are classified as derivative liabilities must be measured at fair value upon issuance and re-valued at the end of each reporting period through expiration and are included in derivative liabilities in the Company's unaudited condensed consolidated balance sheets. Any change in fair value between the respective reporting dates is recognized as an unrealized gain or loss in the accompanying unaudited condensed consolidated statements of operations and comprehensive (loss) income (see Note 13). The Company's derivative liabilities were made up of only equity warrants and the Sponsor Shares as of September 30, 2024 and December 31, 2023.
The following table is a summary of the number of shares of the Company’s Class A common stock issuable upon exercise of warrants at September 30, 2024:
Number of SharesExercise PriceRedemption PriceExpiration DateClassificationGain in Value for the Nine Months Ended September 30, 2024Fair Value as of September 30, 2024
(in thousands)(in thousands)
Public Warrants1,977 $92.00 $144.00 9/9/2026Liability$313 $482 
Private Placement Warrants - Issued October 2019520 92.00 144.00 9/9/2026Liability292 125 
Private Placement Warrants - Issued October 2019520 160.00 144.00 9/9/2026Liability83 83 
Private Placement Warrants - Issued March 20232,050 17.61 N/A9/8/2028Liability7,218 5,249 
In addition, the Company has 221 thousand Class A common stock warrants outstanding which have an exercise price of $0.88 and expiration dates from June 27, 2028 to October 31, 2029. These warrants are equity classified and are included in additional paid-in capital in the Company’s unaudited condensed consolidated balance sheets.

9. Other (Expense) Income
Three Months Ended September 30,Nine Months Ended September 30,
2024202320242023
(in thousands)
Transaction costs associated with debt and equity financings$— $— $— $(1,738)
Other(22)2 (19)(70)
$(22)$2 $(19)$(1,808)

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10. Net (Loss) Income Per Share of Class A Common Stock
The following table includes the calculation of basic and diluted net loss per share:
Three Months Ended September 30,Nine Months Ended September 30,
2024202320242023
(in thousands except per share information)
Net (loss) income available to common stockholders - basic and diluted$(12,591)$675 $(37,798)$(50,071)
Weighted average common shares outstanding:
Shares used in the computation of basic net (loss) income per share
19,120 17,360 18,394 16,683 
Dilutive effect of common stock equivalents
— 523 — — 
Shares used in the computation of diluted net (loss) income per share
19,120 17,883 18,394 16,683 
Basic and diluted net (loss) income per share$(0.66)$0.04 $(2.05)$(3.00)

The potentially dilutive securities listed below were not included in the calculation of diluted weighted average common shares outstanding, as their effect would have been anti-dilutive during the three and nine months ended September 30, 2024 and 2023.
Three Months Ended September 30,Nine Months Ended September 30, 2024
2024202320242023
(in thousands)
Restricted Class A common stock— 4 — 4 
Class A common stock warrants221 — 221 221 
Stock options880 1,034 880 1,143 
Restricted stock units2,558 411 2,558 2,275 
Public Warrants (exercisable for Class A common stock) treated as liability1,977 1,977 1,977 1,977 
Private Placement Warrants (exercisable for Class A common stock) treated as liability3,091 3,091 3,091 3,091 
Sponsor Shares296 296 296 296 

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11. Stock-Based Compensation
The stock-based compensation expense attributable to continuing operations is included in the unaudited condensed consolidated statements of operations and comprehensive (loss) income as indicated in the table below:
Three Months Ended September 30,Nine Months Ended September 30,
2024202320242023
(in thousands)
Imagery & software analytical service costs, excluding depreciation and amortization$34 $40 $138 $185 
Professional & engineering service costs, excluding depreciation and amortization108 97 359 391 
Selling, general and administrative2,377 2,265 7,747 7,149 
Total stock-based compensation expense$2,519 $2,402 $8,244 $7,725 
The Company recorded stock-based compensation related to capitalized internal labor for software development activities of $0.1 million and $0.2 million during the three months ended September 30, 2024 and 2023, respectively, and $0.4 million and $0.5 million during the nine months ended September 30, 2024 and 2023, respectively. These amounts are included in property, plant, and equipment - net in the unaudited condensed consolidated balance sheets.

12. Related Party Transactions
A summary of the Company’s related party transactions during the nine months ended September 30, 2024 and 2023 is presented below:
Amount Due to Related Party as of
Total Payments in the Nine Months Ended September 30,September 30,December 31,
Nature of Relationship2024202320242023
NameDescription of the Transactions(in thousands)
LeoStellaJoint Venture with Thales Alenia SpaceThe Company owns 50% of LeoStella, its joint venture with Thales. The Company contracts with LeoStella for the design, development and manufacture of satellites to operate its business.$23,422 $14,731 $— $10,843 
Ursa Space SystemsStrategic PartnerThe chairman of the Company’s board of directors, Will Porteous, is also an investor and member of the board of directors of Ursa Space Systems. The Company has a non-cancelable operational commitment with Ursa Space Systems.417 333 — 42 
Thales Alenia SpaceShareholder and Parent of Wholly-owned Subsidiary, Seahawk (Debt Issuer)Design, development and manufacture of telescopes.3,666 4,459 — 750 
SeahawkDebt Issuer and subsidiary of Thales Alenia Space
In 2019, the Company raised and converted $18.4 million from prior debt into new, outstanding debt and issued 13.5 million warrants to purchase Legacy BlackSky common stock.
277 — 23,900 22,793 
IntelsatDebt Issuer
In 2019, the Company entered into a term loan facility for $50.0 million and issued 20.2 million warrants to purchase Legacy BlackSky common stock.
1,050 — 64,783 61,785 
The Company recorded revenue from related parties of $0.4 million and $3.9 million for the three and nine months ended September 30, 2024, respectively. The Company did not record revenue from related parties for
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the three and nine months ended September 30, 2023. Accounts receivable from related parties was $0 as of September 30, 2024 and December 31, 2023.
Interest on the term loan facility is accrued and is due semi-annually. The Company made interest payments of $1.0 million during the nine months ended September 30, 2024. The Company did not make any interest payments during the three months ended September 30, 2024 or during the three and nine months ended September 30, 2023. As of September 30, 2024, the Company had interest due to related parties of $4.5 million, of which $0.9 million is to be paid as cash interest on a semi-annual basis and was included in other current liabilities and $3.6 million is paid in kind as principal due on the maturity date and was included in other liabilities. As of December 31, 2023, the Company had interest due to related parties of $1.7 million, of which $0.3 million was included in other current liabilities and $1.4 million was included in other liabilities.

13. Fair Value of Financial Instruments

The following tables present information about the Company’s liabilities that are measured at fair value on a recurring basis as of September 30, 2024 and December 31, 2023 and indicate the fair value hierarchy level of the valuation techniques and inputs that the Company utilized to determine such fair value:
September 30, 2024Quoted Prices in Active MarketsSignificant Other Observable InputSignificant Other Unobservable Inputs
(Level 1)(Level 2)(Level 3)
(in thousands)
Liabilities
Public Warrants$482 $— $— 
Private Placement Warrants - Issued October 2019— — 208 
Private Placement Warrants - Issued March 2023— — 5,249 
Sponsor Shares— — 617 
$482 $— $6,074 
December 31, 2023Quoted Prices in Active MarketsSignificant Other Observable InputSignificant Other Unobservable Inputs
(Level 1)(Level 2)(Level 3)
(in thousands)
Liabilities
Public Warrants$795 $— $— 
Private Placement Warrants - Issued October 2019— — 583 
Private Placement Warrants - Issued March 2023— — 12,467 
Sponsor Shares— — 1,304 
$795 $— $14,354 
The carrying values of the following financial instruments approximated their fair values as of September 30, 2024 and June 30, 2024 based on their maturities: cash and cash equivalents, restricted cash, accounts receivable, prepaid expenses and other current assets, accounts payable, accrued liabilities, and other current liabilities.
There were no transfers into or out of any of the levels of the fair value hierarchy during the nine months ended September 30, 2024 or 2023.
Changes in the fair value of the Level 3 liabilities during the nine months ended September 30, 2023 of $11.1 million included the Sponsor Shares, the October 2019 Private Placement Warrants, and the March 2023
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Private Placement Warrants. The following is a summary of changes in the fair value of the Level 3 liabilities during the nine months ended September 30, 2024:
Sponsor SharesPrivate Placement Warrants - Issued October 2019Private Placement Warrants - Issued March 2023
(in thousands)
Balance as of January 1, 2024$1,304 $583 $12,467 
Gain from changes in fair value(687)(375)(7,218)
Balance as of September 30, 2024$617 $208 $5,249 

14. Commitments and Contingencies

Legal Proceedings
From time to time, the Company may become involved in various claims and legal proceedings arising in the ordinary course of business, which, by their nature, are inherently unpredictable. Regardless of outcome, litigation and other legal proceedings can have an adverse impact on the Company because of defense and settlement costs, diversion of management resources and other factors.
On May 7, 2024, a putative class action relating to the Merger of Legacy BlackSky on September 9, 2021 with a wholly-owned subsidiary of Osprey was filed in the Delaware Court of Chancery. The action is captioned Drulias v. Osprey Sponsor II, LLC, et al. (“Drulias”) (Del. Ch. 2024). The Drulias complaint asserts breach of fiduciary duty and unjust enrichment claims against the former directors of Osprey (the “Osprey Board”); the former officers of Osprey; and Osprey Sponsor II, LLC (the “Sponsor”); and aiding and abetting breach of fiduciary duty claims against HEPCO Capital Management, LLC; JANA Partners LLC; and a director of Legacy BlackSky. The Drulias complaint seeks, among other things, damages and attorneys’ fees and costs. The terms of the Merger required the Company to indemnify the directors of Osprey. The Company believes that the complaint is without merit and the Company is evaluating potential outcomes.
On May 8, 2024, a putative class action relating to the Merger was filed in the Delaware Court of Chancery. The action is captioned Cheriyala v. Osprey Sponsor II, LLC (“Cheriyala”) (Del. Ch. 2024). The Cheriyala complaint asserts breach of fiduciary duty claims against the former directors of the Osprey Board, the former officers of Osprey, and the Sponsor; aiding and abetting breach of fiduciary duty claims against BlackSky Holdings, Inc. and certain directors and officers of Legacy BlackSky; and unjust enrichment claims against an Osprey director. The Cheriyala complaint seeks, among other things, damages and attorneys’ fees and costs. The Company believes that the complaint is without merit and the Company is evaluating potential outcomes.
At a hearing held on October 4, 2024, the Court of Chancery granted Drulias’ motion to (i) consolidate the Drulias and Cheriyala actions, and (ii) appoint Drulias as lead plaintiff, and Drulias’ counsel as lead counsel, in the consolidated action.
Though BlackSky Technology Inc. is not named in either suit, the Company expects to have certain indemnification requirements of directors, officers and former directors and officers.

Compliance with Debt Covenants
As of September 30, 2024, all debt instruments contain customary covenants and events of default. The Company was in compliance with all financial and non-financial covenants as of September 30, 2024.