Prepared remarks
Good morning, and welcome to the Satellogic First Quarter 2026 Financial Results Conference Call. During today's call, we may make statements relating to our goals and objectives for future operations, financial and business trends, business prospects, future financial metrics, statements regarding customer contracts and pipeline, our ability to generate revenue and management's expectations for future performance that constitute forward-looking statements under federal securities laws. Any such forward-looking statements reflect management expectations based upon currently available information and are not guarantees of future performance and involve certain risks and uncertainties that are more fully described in our SEC filings, including the Risk Factors section of Satellogic's quarterly report on Form 10-Q, annual report on Form 10-K for the fiscal year ended December 31, 2025, and our filings with the SEC.
Our actual results, performance or achievements may differ materially from those expressed in or implied by such forward-looking statements. We undertake no obligation to update or revise any forward-looking statements to reflect events, or developments after the date of this call. On this call, we will also discuss financial measures not determined in accordance with the U.S. GAAP, including EBITDA, adjusted EBITDA and free cash flow. Reconciliations of these non-GAAP measures to the most directly comparable GAAP measures are presented in the earnings materials posted on our website today. Our press release detailing these results was issued this morning and is available in the Investor Relations section of our company's website at satellogic.com. Hosting today's call will be Satellogic's Founder and Chief Executive Officer, Emiliano Kargieman, Chief Financial Officer, Rick Dunn, and Vice Admiral Frank Whitworth III, U.S. Navy retired. With that, I will turn the call over to Mr. Kargieman.
Thank you, operator, and good morning, everyone. Welcome to Satellogic's First Quarter 2026 Earnings Conference Call. Joining me on today's call are Rick Dunn, our Chief Financial Officer; and a special guest Vice Admiral Frank Whitworth III, U.S. Navy retired, who recently joined Satellogic as a strategic adviser. We're pleased to have him with us today. I'll begin with a brief company overview and the key themes of the quarter before introducing Vice Admiral Whitworth, who will share his remarks on his role and our defense and intelligence engagement. Rick will then walk you through our Q1 2026 financial results in detail before I cover our commercial update and recent wins, walk through our 2026 product roadmap, including our Aleph Observer platform and Merlin constellation and close with key takeaways before we open the line for questions. With that, let's begin. The first quarter of 2026 marked a clear inflection point for Satellogic.
We grew revenue 80%, improved our adjusted EBITDA loss by 32%, generated positive net cash from operating activities for the first time in our history and exited the quarter with $121.9 million in cash. Just as importantly, the commercial momentum we built exiting 2025 is broadening across sovereign defense, recurring intelligence subscriptions and U.S. government engagement. Based on our current cost base, backlog, growing recurring revenue and current pipeline, we believe 2026 can be a year of substantial progress towards sustained profitability, and we expect Merlin to be an important driver of free cash flow as it enters service. This was one of the strongest starts to a year in our company's history, and our most ambitious product roadmap to date is now executing on schedule. There are five things I want investors to take away from the quarter. First, on our unique sovereign and defense solutions, our non-ITAR design, vertical integration and free trade on manufacturing in Montevideo allow us to deliver disruptively priced sovereign capabilities to align governments around the world with rapid technology transfer and in-country assembly, integration and test.
In the quarter, we deepened our U.S. defense engagement through the expansion of our partnership with IDT Corporation and the U.S. Office of Naval Research for Phases 2 and 3 of the Slingshot program, advancing in-orbit demonstration of our rapid testing and high-resolution capabilities in support of U.S. Navy mission requirements. And just last week, we announced a $12 million agreement with a sovereign defense customer to deliver a commissioned in-orbit NewSat from our Aleph-1 constellation, the second sovereign in-orbit transaction in two quarters. And I'll come back to why that matters. Second, we have significant customer traction. We continue to diversify our customer base internationally with Asia Pacific revenue growing more than eightfold year-over-year to $3 million in Q1 2026. The growth was led by significant contributions from customers in Australia and Malaysia and reflects the global demand we're seeing for sovereign and high-frequency monitoring capabilities.
Third, we have unmatched capacity and scale. As of March 30, we continue to operate one of the largest high-resolution constellations in the world. Our capacity advantage is significant based not only on the number of satellites, but also on our patent-protected camera design that enables us to capture approximately ten times more imagery per satellite than our peers at an all-in cost per satellite of approximately $1.3 million, a fraction of the industry standard. That cost and capacity advantage is what allows us to realize the unit economics to deliver persistent daily monitoring at scale. The capacity of our constellation has enabled us to sell in-orbit satellites to sovereign customers without impacting our ability to meet existing demand and expected future growth in our data and analytics business. Fourth, revenue growth with operating leverage in action. Revenue grew 80% year-over-year to $6.1 million, while our adjusted EBITDA loss improved 32% to $4.2 million.
And for the first time in our history, we generated positive net cash from operating activities in the quarter. The recurring revenue shift we are beginning to see is being driven in part by Aleph Observer, our persistent monitoring product launched in February. That is the operating leverage of our vertically integrated model becoming visible, combined with $121.9 million of cash on hand, it materially strengthens our path to sustained profitability. And fifth, a strengthened leadership team. Our Board and management team bring deep public company finance, defense and policy experience. Over the last two quarters, we have built up our sales leadership with the incorporation of Jeff Kerridge and a seasoned team of sales executives. Today, I'm pleased to introduce a new addition who we believe will be meaningful to accelerate our trajectory in defense and intelligence. In late March, we welcomed Vice Admiral Frank D. Whitworth III U.S. Navy retired as a strategic adviser.
Vice Admiral Whitworth most recently served as the eighth Director of the National Geospatial-Intelligence Agency, NGA, where he led the delivery of geospatial intelligence supporting U.S. national security operations worldwide. His decades of experience operationalizing geospatial intelligence at the highest levels of the U.S. defense and intelligence communities position him uniquely to advise our team as we deepen our engagement with that customer base. It's an honor to have him with us today. Vice Admiral, the floor is yours.
Thank you, Emiliano, and good morning, everyone. It's a privilege to be with you today. Let me start with a few words on why I joined Satellogic. Most recently, I had the honor of serving as the eighth Director of the National Geospatial-Intelligence Agency, or NGA for short, from June 2022 until my retirement just last December. In that role, I was responsible for the delivery of geospatial intelligence support of U.S. national security operations worldwide. One of the priorities during my tenure was the maturation of NGA Maven, the Department of Defense's primary initiative for operationalizing artificial intelligence and machine learning. We transitioned that program from an experimental framework into an operational capability that meaningfully increased the speed and scale of intelligence analysis integrated with mission command across the department. That experience reflected my view of where geospatial intelligence needs to go.
What attracts me to Satellogic is that this company is purpose-built to address the same imperative. The combination of scale, frequency and resolution that the Satellogic constellation is designed to deliver, coupled with low-latency analytics and near real-time tipping, queuing and alerts, this is precisely what we need to enable the shift from periodic observation to continuous awareness. In my role as strategic adviser and always adherent to my ethics restrictions against communicating with NGA and the Navy, I have been and will continue to be working with the team across three areas: strategic engagement with global defense and intelligence customers, the development of the company's product and technology roadmap, including the Merlin constellation which Emiliano will discuss shortly, and the integration of high-frequency earth observation into modern intelligence architectures. I am impressed by what this team has built.
The U.S. defense and intelligence communities are actively rethinking how they source persistent geospatial intelligence. And Satellogic's combination of sovereign-grade capability with commercial economics is uniquely matched to that demand. I look forward to helping the team serve that mission and to translate that demand into long-term programs of record. With that, I'll turn it over to Rick to walk you through the financial results. Rick?
Thank you, Admiral, and good morning, everyone. Our first quarter results reflect the commercial momentum and financial discipline we built exiting 2025, and they mark several important inflection points in our business. The headlines are revenue up 80%, adjusted EBITDA loss improved 32%, the first quarter of positive net cash from operating activities in our history and $121.9 million of cash on the balance sheet, our strongest position to date. Let me walk you through each. Revenue. Total revenue for the quarter was $6.1 million, up 80% year-over-year from $3.4 million in Q1 2025. The increase was driven primarily by a $1.6 million increase in imagery ordered by new and existing data and analytics customers. By business line, our data and analytics line of business, which includes our Constellation as a Service offering, generated $4.6 million of revenue, up $3 million from the prior year period.
Space Systems contributed $1.5 million of revenue. Geographically, the quarter reflected a meaningful diversification of our customer mix. Asia Pacific generated $3 million in revenue, up more than eightfold from $0.4 million in the prior period, with Australia and Malaysia as the primary contributors. Europe contributed $1.1 million, up from $0.5 million. Americas contributed $2 million, primarily reflecting timing rather than any change in customer demand. Our U.S. pipeline continues to be very strong, and we look forward to executing on that pipeline in the remainder of the year. South America contributed $0.1 million. Taken together, this geographic diversification is an important indicator of the increasingly global demand for our services and of the durability of our international customer base. Total costs and expenses for the quarter declined 3% year-over-year to $12.5 million. Within that, cost of revenues, which is exclusive of depreciation, was $1.5 million, up 17% on higher ground station costs at scale with our growing operations.
Engineering expense was $3.1 million, up 24%, reflecting investment in software, professional services and stock-based compensation tied to the broader employee population. SG&A expense was approximately flat at $6.5 million with an increase in salaries and benefits associated with workforce expansion in anticipation of 2026 growth, offset by a $0.8 million decrease in legal and professional fees that were elevated in Q1 of last year due to our U.S. domestication. Depreciation expense decreased 48% to $1.4 million, reflecting a reduction in the number of satellites with remaining depreciable useful lives, although we continue to utilize these fully depreciated assets so long as they're capable of capturing commercially viable imagery. The result is an operating loss of $6.4 million for the quarter, an improvement of $3.2 million or 33% compared to the prior period. Below the operating line, we recorded a $113 million change in fair value of financial instruments.
I want to be unambiguous about what this is. It is a noncash, nonoperational charge, and it reflects the increase in our Class A common stock during the quarter, driven by the standard remeasurement of our secured convertible notes, warrants and earn-out liabilities. A higher share price drives a larger accounting charge against earnings and net income. It has no bearing on the cash generation of the business. Net loss for the quarter, including this $113 million noncash expense, was $118.3 million. This is not indicative of underlying operating performance, and we report adjusted EBITDA to give investors a clearer view of the operating business. Adjusted EBITDA and operating cash flow. On a non-GAAP basis, adjusted EBITDA loss for the quarter was $4.2 million, an improvement of $2 million or 32% compared to the prior period. This is a function of both top line growth and continued expense discipline, and it underscores the operating leverage inherent in our vertically integrated model as revenue scales.
Just as importantly, we generated positive net cash from operating activities of $0.2 million in the quarter, an improvement of $4.9 million from the $4.7 million of cash used in operating activities in Q1 2025. This is the first time in Satellogic's public history that we have generated positive operating cash flow in a quarter, and it is a tangible early indicator of the financial trajectory I'll come back to in a moment. Balance sheet. We ended the quarter with $121.9 million in cash and cash equivalents, up from $94.4 million at the end of year 2025. The increase reflects the $35 million registered direct offering we completed at $4.73 per share in late January, partially offset by capital expenditures of $5.6 million to support the construction of our Merlin constellation. Backlog and remaining performance obligations. Our noncancelable remaining performance obligations stood at $64.8 million as of March 31, with $29.2 million expected to be recognized within one year, $7.9 million in years one to two, $7.5 million in years two to three and $20.2 million thereafter.
Capital structure update. Subsequent to quarter end in early April, the holder of our secured convertible notes initiated a partial conversion of approximately $6 million of principal into 5 million shares of common stock, reducing outstanding principal to $24 million and further simplifying our capital structure. Our liquidity position is strong, extends our operating runway, derisks our Merlin development timeline and provides the flexibility to invest in the growth initiatives Emiliano will discuss in a moment. Looking forward, we are seeing the operating leverage inherent in our vertically integrated model take hold. With our current cost base, growing recurring revenue from Aleph Observer and a strengthening pipeline of multimillion-dollar opportunities across defense, sovereign and commercial customers, we expect 2026 to be a meaningful step forward on our path to sustained profitability. With that, I'll turn it back to Emiliano.
Thank you, Rick. The first quarter delivered a sustained cadence of commercial, operational and strategic milestones. And the through line is that what looked like isolated wins six months ago is now basically becoming a repeatable commercial engine. Let me walk you through the highlights in three categories. First, on our sovereign defense demand. Demand is real and it is repeatable. In January, we signed an $18 million agreement with CEiiA, the Center of Engineering and Product Development in Portugal for the supply and in-orbit delivery of two NewSat Mark V 50-centimeter class satellites. Ownership and operational control are expected to transfer to CEiiA in the second and third quarters of this year. Also, in January, we sold NuSAT34 to Australia, establishing the country's first sovereign submeter earth observation capability. And just last week, on April 30, we announced a $12 million agreement with a sovereign defense customer for the in-orbit delivery of a commissioned NewSat satellite from our Aleph-1 constellation with full transfer of ownership and operations expected in early 2027.
I want to underscore why this transaction matters beyond its dollar value. It is the second sovereign in-orbit transaction we have closed in two quarters, and it demonstrates a differentiated value proposition in the market. The ability to deliver a fully commissioned, flight-proven satellite to a sovereign customer with speed and cost efficiency that traditional procurement programs simply cannot match. Importantly, we are approaching this model selectively. Our priority is to monetize in-orbit assets where the economics are compelling by continuing to manage constellation capacity to support our data and analytics customers and broader mission requirements. Moreover, we may have the ability to buy back capacity at attractive prices from certain space systems customers. With our $1.3 million all-in NewSat cost and frequent contracted launch cadence, we believe sales of in-orbit satellites can potentially play a larger role in our Space Systems strategy as we scale the constellation over time.
Second, our commercial engine is broadening and shifting to recurring subscription revenue. Beyond the eightfold expansion of our Asia Pacific revenue Rick already highlighted, the underlying mix of our commercial business is changing in a way that meaningfully improves revenue quality. In January, we signed a seven-figure monitoring agreement with a strategic customer, providing daily revisit and high-resolution coverage over a large portfolio of priority sites, exactly the kind of recurring engagement that compounds over time. We also extended our countrywide monitoring agreement with the government of Albania, continuing the persistent national Earth Intelligence we have been delivering with our NewSat Constellation. And in February, we launched Aleph Observer, our persistent geospatial intelligence platform, which is now in market. I'll spend more time talking about it in a moment, but the commercial impact is already visible.
We're converting one-off imagery customers into multiyear subscription customers. Together, the shift from project revenue to platform revenue is what underpins the durability of our growth trajectory. Third, strategic and platform milestones supporting the next leg of growth. On the operational side, on March 30, we successfully launched NewSat 53 and NewSat 54 on the SpaceX mission from Vandenberg Space Force Base, expanding our in-orbit capacity and flight heritage. On the capital side, in January, we closed a $35 million registered direct offering at $4.73 per share, materially strengthening the balance sheet and derisking the Merlin development pipeline. On the U.S. defense engagement side, we expanded our Slingshot partnership with IDT Corporation and the U.S. Office of Naval Research into Phases 2 and 3, and we welcomed Vice Admiral Whitworth as Strategic Adviser. And on the commercial leadership side, we have continued to build out our global sales organization with senior defense and intelligence industry veterans, extending the work that began with the appointment of our SVP of Global Sales last year.
The commercial muscle of this company today is materially stronger than it was 12 months ago. The takeaway is straightforward. The breadth and quality of commercial, operational and strategic activity in the first quarter and in the four weeks since speaks to a commercial engine that has matured. We're no longer a constellation looking for customers. We're a vertically integrated platform serving a growing multi-hundred-million-dollar pipeline of qualified opportunities across defense, intelligence, sovereign and commercial markets with the unit economics to win on price and the capability to deliver immediately. I want to take a moment to ground the conversation in what we believe is an important strategic shift happening in commercial earth observation today. For two decades, the dominant model of commercial earth observation has been transactional. Customers tested individual images, visibility was episodic and tasking capacity constrained by a limited number of satellites built at high cost.
The result was reactive, event-driven intelligence and an industry that, frankly, struggled to scale. Persistent global intelligence is fundamentally a different category. It is continuous and always on. The foundation is a daily planetary baseline. With our constellation today, it already enables the simultaneous monitoring of thousands of sites and moves customers from reactive observation to proactive awareness. With the future launch of our Merlin constellation, the foundation layer becomes ubiquitous, going from thousands to an unlimited number of sites. With persistent global intelligence, the commercial model shifts from per-scene transactions to recurring subscription revenue, and it materially improves the predictability and lifetime value of every customer relationship. The reason we believe Satellogic is uniquely positioned to lead this category transformation is rooted in physics and unit economics.
Our patent-protected stabilized pushbroom camera design reaches approximately ten times more imagery throughput per satellite than our competitors. Combined with a $1.3 million all-in satellite cost and the vertical integration that allows us to scale our constellation at a fast pace, that throughput is what enables persistent monitoring at unit economics that no one else in the industry can match. We believe the market is still early in this transition from episodic to persistent global intelligence, but the customer demand signals are clear. Aleph Observer is a new product that allows customers to subscribe to persistent monitoring of portfolios of strategic sites with reliable revisit cadence, image delivery within hours and analytics layered on top. It allows our customers to go from monitoring a handful to hundreds of sites on a daily basis. And as of February, it is in the market and commercially available.
It was built on three pillars: one, the scale. Aleph is able to persistently monitor hundreds of sites simultaneously at a frequency and cost structure that no traditional tasking-based service can match. Second, assurance. Aleph has capacity to scale and a reliable cadence over priority regions, meaning customers can plan around the data and not the other way around. And third, built-in analytics. Aleph delivers images roughly within three hours of capture with automated object detection layered in at no additional cost. The analytics enable fast triage and prioritization of intelligence analyst workflows, a requirement at this scale. The example coverage map you see on the slide illustrates the kind of persistent monitoring footprint Aleph Observer enables. In this case, the regional intelligence picture across Iran. Customer adoption to date includes sovereign government users, defense customers and commercial monitoring buyers across multiple regions.
This is what we believe is the future direction of the market, and we believe Satellogic is the company in the industry best positioned to deliver it today. Now if Aleph Observer is a product in market today, Merlin is the infrastructure layer that expands that product from high-value targeted monitoring into planetary-scale persistent intelligence. Merlin is our AI-first defense-oriented constellation, purpose-built for daily 1-meter global coverage and real-time intelligence. A few things to highlight. First, Merlin is fully funded. Its development is anchored by a $30 million customer contract from a strategic defense and intelligence customer, which means we're not asking shareholders to underwrite this build-out or customers. Second, Merlin is designed for planetary scale. The constellation when fully deployed is intended to cover the entire planet daily at 1-meter resolution. The architecture combines ten spectral bands aligned with Sentinel-2, AI-first onboard processing and intersatellite links to enable real-time alerting.
This is a step change in what commercial earth observation can deliver. And third, we're happy to mention Merlin is on track. We have made strong progress against production milestones in Q1, and we remain confident in our October 2026 first launch window, now roughly five months away, with the initial constellation rollout expected to be complete in the first half of 2027. I'd like to leave you with four takeaways from the quarter. First, our commercial momentum continues to strengthen. We completed two sovereign in-orbit transactions in two quarters, including Portugal CEiiA and the $12 million agreement we announced last week with no impact to the needs of existing and expected data and analytics customers. We also expanded Slingshot Phases 2 and 3 with the U.S. Navy. We're seeing growing demand across both our Data and Space Systems businesses with customers increasingly moving from pilot programs to our larger operational deployments and longer-term engagements.
Second, the business model is beginning to demonstrate meaningful operating leverage. Revenue grew 80%. Our adjusted EBITDA loss improved 32%. We generated positive net cash from operating activities for the first time in our history, and we exited the quarter with $121.9 million in cash. We believe these results reflect the benefits of our vertically integrated architecture and increasing scale. Third, Aleph Observer established Satellogic's position in persistent geospatial intelligence. Customers are increasingly moving from buying individual images to subscribing to continuous monitoring and actionable awareness over the strategic areas of interest. We believe this transition represents a major evolution in the earth observation market. Earth observation is evolving from a data business into an intelligence infrastructure business, and Q1 showed meaningful progress in our positioning for that transition.
Fourth, the technology roadmap is fully funded and on schedule. Aleph Observer is live and in market. Merlin's first launch is on track for October 2026, and the initial constellation rollout is expected to be complete in the first half of 2027. Our Q1 launches of NewSat 53 and 54 expanded our in-orbit capacity and flight heritage. We're executing on time, on budget and at scale. Taken together, these highlights signal we're on the right path for our continued growth and constitute the basis for our confidence going forward. I want to take a moment to thank our customers, our partners, our employees and our shareholders for their continued support. And a special thanks to Vice Admiral Whitworth for joining us today. With that, operator, please open the line for questions.
Questions and answers
First question, Michael Latimore with Northland Capital Markets.
Congrats on the excellent results here. I guess first, I wanted to touch on Aleph Observer. Can you give us a little more detail there? Maybe how many customers have signed up for that? What are sales cycles like? What kind of incremental revenue do you see when a customer does sign up for...
So yes, we're still early commercially in Aleph Observer. It was launched in February, but we are very encouraged by the engagement we're seeing. Customers are already using the platform operationally across portfolios and there are areas of interest that range from dozens of sites for some customers to hundreds of monitored sites for others, depending on the use case. What is especially important for us is that the conversations we're having are increasingly centered around ongoing monitoring workflows rather than isolated imagery requests. And that's the behavioral transition we are looking for. Our expectation is to sign a number of initial pilots in 2026 for Aleph Observer and as customers factor in this new procurement method for recurring services into their budget, expand and scale into 2027.
Yes. Makes sense. Great. And then maybe just a little more color on the pipeline. How many sovereign nations do you see in the pipeline potentially wanting a Space Systems deal or the portfolio? And maybe a little breakup between larger Tier 1 countries and smaller ones.
Yes. That's a good question. So I don't have the breakup numbers here in front of me. But anecdotally, what I can share is the pipeline we're seeing is growing very strong in Asia Pacific, in the Middle East and in Europe. Those are the areas where we're seeing most of the progress. Currently, our Space Systems pipeline sits just under $1 billion on opportunities that we're pursuing, and this is mostly sovereign customers.
Next question, Andre Sheppard from Cantor Fitzgerald.
Congrats on all the great progress. Again, I wanted to touch on maybe Merlin. So it looks like we are reaffirming the timeline for later this year and operational capacity next year. Rick, just curious if you can maybe give us a high-level view on how we should expect those revenues from Merlin to ramp up, how we should think about those? And maybe what will that do to the cost structure?
Thanks, Andres. Yes. As you know, we have a $30 million contract for the Merlin services. And we've collected a decent amount of cash upfront from that contract. But in terms of revenue recognition, that won't begin really until we get to the point where we're fully operational in the first half of 2027. So that revenue will start getting recognized annually and in chunks as we deliver those services. And as far as the pipeline, we're working on a number of opportunities that would also leverage the Merlin constellation. And those also would not start to get recognized until we're fully operational in 2027.
Got it. Okay. That's super helpful. I appreciate it. And maybe just a quick follow-up, a bit of a housekeeping one. So there was a high concentration of revenue from Asia Pacific this quarter. Just curious if we should see that more as a trend or more as an outlier going forward? Any color there would be helpful.
Yes, sure. And just a follow-up on your last question. That $30 million contract is also a five-year deal. So it mirrors the expected life of the Merlin satellites themselves. With respect to Asia Pacific this quarter, I think that will continue. It was buoyed by customers in Australia, specifically AGO that we announced publicly, where they purchased an in-orbit satellite earlier this year and then also a customer in Malaysia. But we're seeing demand for our products and services globally increase. So I think this isn't a one-off, and I think you'll see continued growth across all geographic regions going forward.
We see several structural drivers at work in defense intelligence procurement. In particular, there's a driver around modernization of defense and heightened focus on sovereign earth observation capabilities. That's playing out in Asia Pacific, in particular, with many governments in the region looking to reduce dependency on third-party imagery providers. That's driving part of our pipeline there. So yes, we expect to see continued growth there, as Rick was saying.
Next question, Jeff Van Rhee with Craig-Hallum.
Great. I'll add my congrats, guys. A couple for me. Emiliano, on Aleph Observer, you talked about the ability to monitor unmatched costs, unmatched value overall. Can you just expand a bit more on that, how it stacks up versus the competitive landscape, competitive offerings?
Sure. I think the biggest differentiator of Aleph Observer starts with the underlying economics and capacity of the constellation itself. As we mentioned before, our new satellites have a fully loaded cost around $1.3 million and with roughly ten times the data collection capacity of our peers, the unit economics per site that we're monitoring are very differentiated. The other factor is because we're currently operating one of the largest commercial constellations of high-resolution imaging, the number of sites that we can monitor compared to our peers is significantly larger. We don't have encumbered capacity in many areas of the world, and that also helps. That's really what makes Aleph Observer different from everything else: the number of sites you can monitor on a daily basis at a cost that's still affordable. On top of that, we're layering analytics and allowing our customers to use those analytics to triage and to prioritize the time that human analysts spend on the sites.
A lot of the industry can generate analytics on top of imagery. The harder problem is delivering persistent monitoring at scale with a reliable cadence and with economics that support operational use cases. Our focus has been on building a system that is capable of monitoring large portfolios of sites continuously and affordably. Aleph Observer is a software and workflow layer built on top of large operational capability. That's the important part.
Very helpful. And Rick, a couple for you. The sovereign defense customer signed in April for $12 million. Can you just talk to how that likely lands in terms of revenue and if there's a follow-on opportunity to that in addition to that $12 million?
Sure. With respect to Space Systems in general, we will be delivering three satellites this year to customers and recognizing revenue associated with those. The sovereign defense customer is one of those. That particular delivery may straddle the second and third quarter, likely June or July. The other two deliveries are for our Portuguese customer that we announced in January, and we expect to deliver one of those in the June time frame and likely the second late in the fourth quarter.
And just the second part of the question there, the opportunity to sell additional imagery down the road or additional follow-on data sales?
Yes, absolutely. The sovereign defense customer is a large customer. We expect follow-on opportunities with them with respect to both data and analytics sales as well as Space Systems sales. We're pretty excited about that one.
And then maybe on the Slingshot deal, I wanted just to clarify, was that in RPOs? And does it show up in RPOs? And I know it's in three stages, but just trying to get a sense of the scope of the opportunity from that program. Maybe Emiliano or Rick, walk through what the opportunity is there.
I can start and then Emiliano can add some color. It is in the remaining performance obligations (RPOs). It's not a particularly large contract by itself. I think what's more important is what we're doing with IDT and ONR on that project and how that could translate for other customers going forward. I'll let Emiliano comment further.
I think why we see this program as particularly interesting is because it is allowing us to operationalize, for the first time, inter-satellite links for tipping and queuing between different satellites in our fleet. There is scalability in the program that is interesting. More importantly, as these capabilities that we are developing with ONR become part of our standard product offering, that's where the impact of this program will be realized.
Helpful. Maybe if I could sneak one last one in. Regarding U.S. government purchasing of commercial data: it looked like there was a lot of momentum a couple of years ago, then a pause. There's been discussion for many years of buying more commercial. Just curious if the conviction is there that we see a ramp in U.S. commercial buys? And to the extent that you're engaged with the right buyers, how do you see the sales track in North America, particularly U.S. government going forward?
Happy to take this one. What we're seeing is the procurement environment in the U.S. is creating different avenues for procurement and broader consideration of commercial suppliers that includes us. We are seeing significant opportunity growth for our engagement with the U.S. government in general. We expect that to contribute to future growth.
Next question, Jason Silva with ROTH Capital Partners.
On the data analytics revenue and the transition to more recurring visible revenue from per-image, where are we in that transition? What's a realistic expectation of how that mix can shift in the next year or two to understand the pace of that transition?
I think we're early in the transition. In 2025, we did $18 million of revenue. We've got tremendous momentum on the data and analytics side as well as Space Systems for 2026, and you're starting to see that as we make announcements on contract wins. In terms of the mix, it's tough because Space Systems deals tend to be large and episodic and can be lumpy. But I do think that with Aleph Observer and Merlin coming online in 2027, our data and analytics revenue will grow substantially. We have a lot of capacity and a strong sales team out there selling that data now, so we expect more linear scaling in data and analytics going forward.
If you're talking about the transition toward persistent intelligence and recurring monitoring, we are still early in that transition. Most of our revenue today is not recurring in the traditional SaaS sense. But what we're increasingly seeing is customers moving from one-off tasking towards ongoing monitoring relationships with us. That's exactly what Aleph Observer was designed to do. While the accounting profile is still evolving, customer behavior is changing in that direction, and that's the leading signal we're excited about.
That's great. That's helpful, Emiliano. And then a second question maybe for Emiliano. On the product roadmap around increasing AI compute on the satellite: can you talk about that roadmap and what that would look like over the next few years in terms of increased opportunity, revenue or products and services?
You see us evolving our roadmap in a few directions. One, increasing resolution: our NewSats are 50-centimeter resolution and we're moving toward next-generation satellites that will be able to do 35-centimeter resolution imagery. Two, real-time analytics and inter-satellite links with onboard processing capable of running multi-headed AI pipelines on our collected data. And three, Merlin: broad-area monitoring for global daily remaps at 1-meter resolution. These three directions—higher resolution, real-time analytics/inter-satellite links, and Merlin's global coverage—come together toward our vision of persistent global geospatial intelligence and a searchable planet or digital twin enabling daily signals in near real time. An important point is that many of these capabilities are being funded by customers, which is exciting for us.
Next question, Scott Buck with Titan Partners.
Rick, I'm curious, is positive operating cash flow sustainable in Q2 and beyond? Or was the first quarter aided by timing of certain contract collections that may not repeat?
We were marginally positive on operating cash flow. I think it's going to be a little touch and go for a couple of quarters as revenue ramps. What aided our cash flow positivity this quarter was some advanced collections from customers. Going forward, we're going to be making investments in scaling the business, and that will require working capital. We are still at an adjusted EBITDA loss, and with continued growth and scaling, working capital will bounce around a bit as we make investments in inventory and so forth.
Great. That's helpful. And then given the current level of geopolitical turbulence, are you seeing an acceleration of sales cycles or interest from new commercial customers?
Periods of geopolitical instability do tend to increase awareness of the value of persistent intelligence. We are seeing conversations accelerate across the board. That said, we believe the broader shift we're seeing in the market is structural, not merely event-driven. Governments and enterprises increasingly want continuous awareness of infrastructure, supply chains, maritime activity, borders and strategic assets regardless of any single conflict. While geopolitical events can accelerate procurement cycles, we view the demand transition as broader and longer term.
Next question, Chris Quilty with Quilty Analytics.
I had a somewhat technical and business question around the sale of the in-orbit NewSat. If I recall, this is the first time I can think of an operational satellite being sold to a customer. Is that true? And do you think that is an expandable business model?
Yes, Chris, we do see this as an expandable business model. Depending on how you count, this is the first or the second one because the sale to CEiiA in Portugal was executed shortly after launch, which could count as an in-orbit transfer. We see this as a possibility that might expand as we maintain a cadence of launches and manufacturing. We're launching satellites roughly every quarter and can deliver capability much faster than traditional procurement, often within four to six months. Customers are willing to pay a premium for rapid delivery. Because we have in-orbit capacity and can make selective transfers without affecting our data and services business, this model can continue to be part of our strategy as we grow the constellation.
So you have excess capacity now, but as the revenue per satellite grows, the technical part of the question is, was this satellite in SSO or inclined? Because that matters a lot for revisit. Would you consider changing inclinations or launching capacity to inclinations where customers might purchase them?
Good question. We have built and launched satellites into many different inclinations in the past, including a mission with Tata in India. The satellite design supports that and our operations support it. The satellite in this transaction was in an appropriate orbit for the customer's needs. For customers that want a small number of satellites, milli-inclination constellations can introduce persistent blackouts and may not be ideal with a small fleet. But we do have the flexibility to engage with customers on inclination when it makes sense. It can be complementary to our sun-synchronous offering.
Got you. And for Rick, how does this get booked? And we've seen some transactions where customers have less need for the satellite's total coverage and there are capacity sellbacks. Are those arrangements part of this agreement or something you would consider?
When we book Space Systems deals, it's based on our performance obligations under each contract. At the moment, these contracts are fairly bespoke, but over time they may become more consistent and predictable. The largest value to the customer is the in-orbit satellite, though in many cases we transfer knowledge, provide light technology transfer and offer mission ops support. Those services are secondary. In terms of buying back capacity, that is an absolute possibility. We don't currently have the right to do that with existing deals, but it may be something we negotiate in future contracts.
Just to clarify, Rick, this is a sale of an asset. Does it show up as a one-time revenue recognition event, or are there continuing services that will be recognized over time?
The performance obligation associated with the transfer of the satellite is recognized when that transfer occurs, so that's a one-time recognition event per satellite. Services like transfer of knowledge, technology transfer and mission ops will be recognized over the period we deliver those services.
I would like to turn the floor over to Emiliano for closing remarks.
Well, thank you, and thank you all for joining us. Q1 was a meaningful step on the path we have been describing for the past few years: a leaner, better capitalized, commercially active Satellogic now demonstrating the operating leverage of our vertically integrated model. With our existing constellation, Aleph Observer in the market, Merlin on track for October and the deepening of our defense and intelligence engagement, we are positioned to lead the transformation of commercial earth observation into persistent global intelligence at a planetary scale and to do it on a path to sustained profitability and free cash flow. If we were unable to address any of your questions today, please reach out to our IR team directly at ir@satellogic.com. Thank you.
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