Satellogic Inc.(SATLW)Q4 2025 法說會逐字稿

Good morning, and welcome to the Satellogic Fourth Quarter and Full Year 2025 Financial Results Conference Call. During today's call, we may make statements that relate to our goals and objectives for future operations, financial and business trends, business prospects, future financial metrics, statements regarding customer contacts 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 annual report on Form 10-K. Our actual results, performance and 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 U.S. GAAP, including EBITDA, adjusted EBITDA and free cash flow. Reconciliation of these non-GAAP measures to the most directly comparable GAAP measures are presented in the earnings materials posted on our website today. A 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 Senior Vice President of Sales, Jeff Kerridge. With that, I'll turn the call over to Mr. Kargieman. Please go ahead.

Thank you, operator, and good morning, everyone. I'm Emiliano Kargieman, Founder and CEO of Satellogic. Joining me today are our CFO, Rick Dunn; and our Senior Vice President of Sales, Jeff Kerridge. Before we walk through the results, I want to briefly frame the context in which those results were delivered to ensure a solid understanding of how we got there and the journey that we're on. The work we began in 2024, aggressively restructuring the cost base and rationalizing the organization was difficult but necessary to reposition Satellogic for durable growth. 2025 was the year those structural changes took full effect. Three strategic shifts, in particular, define the new Satellogic. First, we completed our U.S. domicile in March 2025. This strategic shift directly unlocks U.S. government, defense, and intelligence contracting, opening a path to approach allied governments internationally. Markets previously closed to us are now active opportunities. Second, we fundamentally restructured our cost base, achieving a 25% year-over-year reduction in total operating expenses. This is a durable structural change that significantly derisks our path to profitability and ensures we operate lean and fast. Third, we matured our product offering, focusing on our core differentiators, affordable, scalable, quality capacity across both the data and analytics and Space Systems business lines. As a result of these decisions, we ended 2025 with strong growth and commercial traction, a healthy backlog and a strong pipeline, and with a dramatically strengthened balance sheet, ending the year with $94.4 million. The result is a company that looks meaningfully different than it did 18 months ago: leaner, better capitalized, commercially active and now positioned to scale in the markets that matter most. We are a leader in high-performance, low-cost Earth observation platforms, delivering unique sovereign solutions and AI-First monitoring for the defense, intelligence, government, and commercial markets. We design and manufacture our own satellites and every component in them, giving us a strong competitive edge and very healthy margins for sovereign solutions, and we operate our own constellation and deliver high-resolution imagery and analytics at unparalleled scale and cost, all on a single scalable platform. Our constellation of 19 new satellites in orbit offers 50-centimeter resolution imagery, intraday revisits over any point on Earth, tasking to delivery in under 3 hours and analytic delivery in under 30 minutes. Our $1.3 million all-in cost per new satellite gives us a structural economic advantage. Our ample capacity means we are ready for scale and can onboard large defense and commercial programs immediately. Looking ahead, I'll come back to our 2026 roadmap in the final sections of this call with a very exciting update. But the through line from where we've been to where we're going is one of intentional transformation and the 2025 results reflect that. With that context in mind, I'll turn it over to Rick to walk through the financials.

Thank you, Emiliano. Good morning, everyone. I'm pleased to walk through a strong set of financial results today. The headlines are as follows: revenue up 38%, operating expenses down 25%, adjusted EBITDA loss improved 48% and the strongest balance sheet in Satellogic's history. Let me walk you through each. Revenue. For the full year 2025, total revenue was $17.7 million, up 38% year-over-year from $12.9 million in 2024. The growth was driven primarily by a $4.9 million increase in data and analytics revenue as we added new and expanded existing customer relationships. Data & Analytics represented 90% of total revenue at $16 million with Space Systems contributing $1.7 million or 10%. Geographically, North America was our largest market at $12.1 million, followed by Europe at $2.8 million, Asia and Asia Pacific at $2.5 million and South America at $0.3 million. Operating expenses. Total operating expenses for the year were $48.7 million, down 25% from $65.1 million in 2024. Every line of the cost structure improved. Cost of sales, excluding depreciation, declined 3% to $4.9 million. Engineering expenses decreased 28% to $10.4 million, reflecting the workforce reductions completed in 2024 and continued cost discipline. SG&A declined 22% to $25.7 million, driven primarily by a $6.9 million reduction in professional fees, including the expiration of the advisory fee under the Liberty Subscription Agreement and partially offset by increased stock-based compensation. Lastly, depreciation decreased 39% to $7.7 million as some of our longer-lived assets reached the end of their useful life. Operating loss improved 41% year-over-year to $31 million from $52.2 million in 2024. Net loss and adjusted EBITDA. Net loss for the full year 2025 was $4.8 million compared to a net loss of $116.3 million in 2024, an improvement of $111.5 million. The improvement was primarily driven by an $85.9 million favorable year-over-year change in the fair value of financial instruments, combined with the $21.2 million improvement in operating loss. Non-GAAP adjusted EBITDA loss improved 48% to $17.4 million from $33.7 million in 2024. This marks our strongest performance on this metric to date and was driven primarily by the disciplined structural reductions we made to our operating expenses throughout the year. Turning to the fourth quarter. Q4 2025 revenue was $6.2 million, up 94% from $3.2 million in Q4 2024. Q4 adjusted EBITDA loss was $3.1 million, an improvement of $4.4 million compared to Q4 2024. Moving to the balance sheet. We ended the year with $94.4 million in cash and cash equivalents compared to $22.5 million at year-end. That increase reflects the $90 million public offering we completed in October 2025, net of operating cash usage. Net cash used in operating activities was $26.9 million for the year, down 25% from $35.9 million in 2024. Subsequent to year-end in January 2026, we closed a $35 million registered direct offering, further strengthening our liquidity position. We are entering 2026 in the best financial shape in our history. Moreover, our noncancelable remaining purchase obligations effectively our backlog as of 12/31 stands at $65.1 million with $28.6 million expected to be recognized within 1 year, $6.7 million in years 1 to 2, $8 million in years 2 to 3 and $21.8 million thereafter. This underpins our confidence in continued revenue growth. With that, I'll turn it back to Emiliano.

Thank you, Rick. 2025 was a year of strategic development and significant commercial progress across our 2 business lines, Data & Analytics and Space Systems. And that commercial progress continues at an accelerated pace in 2026. In our Data & Analytics business line, we recently launched Aleph Observer, our flagship persistent global intelligence capability. Rather than episodic tasking, Aleph Observer enables continuous monitoring of hundreds of sites daily for our customers in their areas of interest with predictable, reliable delivery. This is a category-defining product for defense and intelligence organizations that need sustained situational awareness, not just snapshots. We also signed a 7-figure agreement with Suhora in India in Q3, providing daily revisits and high-resolution coverage across a large portfolio of priority sites and extended our countrywide monitoring agreement with the Government of Albania for an additional 11 months in Q1 2026. In our Space Systems business line, one of our more significant wins was an $18 million agreement with CEiiA, the Center for Engineering and Product Development in Portugal, signed in Q4 for the supply and in-orbit delivery of 2 NewSat Mark V satellites. This is Satellogic's first European sovereign Earth Observation deployment, with ownership and operational control transferring to CEiiA in Q2 and Q3 2026. That speed of delivery is only possible because of our vertically integrated manufacturing and rapid launch cadence. We also advanced our partnership with HEO in Australia, supporting the establishment of Australia's first sovereign sub-meter Earth Observation capability and Space Domain Awareness. Platform and Strategic development. We completed our move to U.S. jurisdiction through Delaware domicile finalized in March 2025, directly unlocking access to U.S. government defense and intelligence contracting. We expanded our HEO agreement to provide exclusive access to our constellation for non-Earth imaging and space domain awareness. And we advanced our AI-first constellation strategy, supported by a $30 million contract from a customer funding the development of our next-generation satellite capabilities. Before I give you more detail on our 2026 roadmap, I'd like to bring in our Senior Vice President of Sales, Jeff Kerridge, who joined Satellogic 90 days ago and has spent the time getting close to our customers and our pipeline and can share his perspective from the front lines. Jeff, the floor is yours.

Thanks, Emiliano. Good morning, everyone. I'm Jeff Kerridge, Senior Vice President of Global Sales at Satellogic. For a brief bit of background, I've spent over 35 years in the geospatial defense and intelligence community. That includes over a decade at the CIA, followed by senior leadership roles across the commercial space sector, most notably spending over 27 years helping to build and scale Maxar's international sales organization. I came into this role 90 days ago, specifically because looking at the landscape, I believe the market opportunity here at Satellogic was both real and vastly underappreciated. And what I've seen in the field over these past 90 days has only validated and reinforced that the market opportunity is real and accelerating. Let me share 3 observations from the field. First, the sovereign and defense appetite is strong and accelerating. Governments worldwide are accelerating their investments in sovereign space capabilities. They demand absolute control, assured access, and independence from geopolitical constraints, all at an accessible price point. The Portugal CEiiA transaction is a leading indicator of that trend, not a one-off. Our non-ITAR design, our ability to offer in-country AIT and the speed at which we can deliver operational capability, these are not just differentiators. They are direct answers to what defense and sovereign customers are asking for. As a U.S. company, we are a credible partner for the U.S. government and allied programs in a way we simply were not 18 months ago. Second, our capacity is a genuine competitive weapon. Legacy competitors are capacity constrained, tasking queues are long, SLAs are unreliable, and customers are very frustrated. Satellogic's capacity on our existing constellation means we can walk into a customer conversation and offer something nobody else can: guaranteed, reliable, affordable, high cadence access starting now. That is solving an immediate pain point for customers who cannot wait 18 months for a competitor to build capacity. Third, the pipeline velocity is real. The deals across Portugal, Albania, Australia, India, and Malaysia are not isolated wins. They represent a pattern. Customers are coming to us with the needs they cannot solve elsewhere, and we are converting at a pace I find genuinely exciting. Our backlog of $65.1 million in noncancelable RPOs gives us a strong foundation, and the pipeline behind it reflects growing momentum in the markets that matter most to us. I'll hand it back to Emiliano to walk through the 2026 roadmap.

Thank you, Jeff. That perspective from the front lines is exactly why we brought Jeff into this leadership role, and it validates what we see in the data. Let me now turn to the 2026 roadmap and what I believe represents the next fundamental shift in how Satellogic creates value. The traditional Earth Observation model is episodic. The customer places a tasking order, waits and receives an image. That model has worked, but it is not what the most sophisticated defense and commercial customers need today. They need persistent, continuous, reliable intelligence. They still need to know what is happening at a specific site when there's a trigger event. But even more, they need to go from being reactive to being proactive by monitoring an ever-expanding portfolio of sites every single day to anticipate events. Aleph Observer is our answer to that need, and it is live today, running on the current NewSat constellation. With Aleph Observer, what it provides is assured capacity, reliable cadence at scale without the traditional tasking bottlenecks. It enables ongoing monitoring of hundreds of customer-selected sites every single day. Customers do not have to guess what will be important tomorrow, manage tasking, and pray that they can get access to available capacity. They subscribe to persistent intelligence on the sites they care about, and it is delivered. The built-in AI analytics detecting and identifying vessels, aircraft, and land equipment allow analysts to triage change and prioritize their analytics workflows, seamlessly allowing teams of analysts to increase the number of sites that they can monitor by orders of magnitude. Aleph Observer represents a fundamental shift for Satellogic. We're moving from selling images to delivering continuous intelligence. This is a shift from reactively tasking imagery of critical sites to delivering and monitoring as a service, and it changes everything about how we price, how we contract, and how sticky our customer relationships become. But Aleph Observer is only the beginning because the next question our customers ask is, what if I need to monitor more than 100 sites, more than a few thousand? What if I need to monitor an entire region or the entire planet? That is where our next constellation, Merlin, is designed to deliver. Let me introduce you to a completely new capability that has been 15 years in the making. It's very dear to my heart and will change how we monitor Earth. 15 years ago, when we started Satellogic, we had a very simple idea. What if we could create a living map of the Earth, not a map that updates every few years, not a map that updates every few weeks, but a very detailed map that updates every single day, a living record of human activity on this planet. For a long time, that idea simply wasn't possible. You could either see the planet frequently, but within sufficient detail to drive decision-making, or you could see it in high detail, but only in small areas occasionally. The Earth observation industry has historically been forced to make a trade-off between scale and resolution. Today, we are removing that obstacle. Today, we're introducing Merlin. Merlin is a new constellation designed to remap the entire planet every day at 1-meter resolution, globally, at a level of detail where you can actually understand human activity. That capability simply does not exist today, and it changes what Earth observation can be used for because once you have a daily baseline of the entire planet at the right resolution, the question is no longer, can I get an image of this place? The question becomes, what changed today? That shift is incredibly powerful. Instead of tasking satellites one image at a time, analysts will be able to monitor entire networks of activity simultaneously: every airbase, every port, every border crossing, every critical piece of infrastructure every day. Merlin will continuously collect imagery across the planet, process it in-orbit with onboard AI, and deliver real-time alerts when meaningful activity is detected through its inter-satellite links. And when something important happens, our high-resolution constellation can immediately focus in to capture greater details at 50 centimeters today with our NewSat Mark Vs and sub-30 centimeters in the future with our NextGen. In other words, Merlin turns Earth observation from imagery collection into continuous awareness. And this capability comes to life inside our monitoring product, Aleph Observer. Aleph Observer customers today have the ability to monitor hundreds or sometimes thousands of sites. With Merlin, that scale moves to millions of locations worldwide, not a few selected points, but an unlimited number, entire systems, entire regions, entire economies. This fundamentally changes how Earth observation is consumed. Instead of buying images seen by scene, our customers subscribe to persistent monitoring of the world that matters to them. That is a transition we believe will define the next generation of this industry, and Merlin is the constellation designed to enable it. This isn't a public relations effort. The Merlin constellation is fully funded by our customer contracts and in full production. The first Merlin satellite is expected to launch in October 2026 and the full system expected to be operational in the first half of 2027. We're incredibly excited about what this unlocks because for the first time, we will have the ability to observe the entire Earth as a dynamic system, a living continuously updated map of our planet. And this is the real shift Merlin enables. Earth observation stops being about collecting images. It becomes about continuously understanding what is happening on Earth. Customers can use Aleph Observer today to monitor hundreds to thousands of sites across their areas of interest. With Merlin, persistent monitoring moves to an entirely new scale. Just as importantly, the system removes one of the traditional constraints in Earth observation: capacity. There are no tasking bottlenecks and no competition for satellite availability. We will be able to support an unlimited number of customers monitoring an unlimited number of sites at the same time. We are actively transforming what's possible in Earth observation with this new platform as Satellogic moves from selling imagery to delivering continuous intelligence. Let me close with the 4 takeaways I want investors to carry from today's call. One, we're at a genuine commercial inflection point. Revenue grew 38% in 2025 to $17.7 million, with Q4 revenue growth accelerating 94% year-over-year. Our $65.1 million noncancelable RPO backlog and growing pipeline provide multiyear visibility. Two, the balance sheet has never been stronger. We ended 2025 with $94.4 million in cash, the strongest in our history, and closed a $35 million registered direct offering in January 2026. The capital to execute our strategy is in place. Three, our structural cost improvements are durable. Our total operating expenses are down 25% and adjusted EBITDA loss improved 48% to $17.4 million. These are structural changes, not one-time items, and they carry forward. Four, the technology roadmap is fully funded and underway. Aleph Observer is live today. Merlin is fully funded by customer contracts, and we're targeting the first launch in October 2026, scaling our persistent monitoring capability from hundreds of sites to the entire planet. This is the disruptive technology upgrade that positions Satellogic for the next generation of defense and commercial Earth observation programs. We look forward to demonstrating what this inflection point means in 2026 and beyond and providing updates on our progress as we move forward. We will now open the call for questions.

And our first question is from Jeff Van Rhee with Craig-Hallum.

Congrats on the call and some just fantastic numbers here. Emiliano, maybe start, you're touching on Merlin. Obviously, it's going to bring some pretty compelling capabilities, global rescan and 1-meter, highly differentiated and pretty rare to see these timelines pull in as I had expected that maybe a bit later than what you're now talking. So fully operational H1 '27. Expand a bit more on that. How many units are we talking? And any other color you can tell us about the capabilities of that? And then correlate that with my second question, which is you commented at a high level; we're an AI-first platform. That means a lot of different things to a lot of different people. What does that mean to Satellogic?

Yes. No. Thanks, Jeff. I mean thanks for the question. Super good. Thanks for covering the company, too. So great question. Look, we haven't announced Merlin before, but the reality is we have been working on this constellation since April 2025 when we announced that $30 million contract for our AI-first constellation. So even though we have been doing this out of the public eye, we have been working on the design and the initial procurement that we needed, putting the supply chain in place. So the satellites are currently in full production in our facility and the first launch is expected for October this year, followed by the full constellation being completely in orbit in the first half of next year. The first tranche of this constellation is 8 satellites. That will give us the ability to provide the service fully in 2027. And AI-first for us, what it means is a couple of things, I would say. The first one is these satellites have enough compute capacity and power to process every pixel they collect in real time through a multi-headed AI pipeline directly in orbit. So we can run the same algorithms we currently run on the ground to do object detection, identification, and classification. We will be able to run this on our Merlin platform directly in orbit and generate using these algorithms generate a couple of things. First, real-time alerts that we will be able to download from the constellation in real time using inter-satellite links. And most interestingly, real-time retasking. So we'll be able, for example, to detect an event at 1-meter of resolution with a Merlin satellite and in real time, retask a satellite from our higher-resolution fleet to go take a deeper look at what's going on. So when we deliver the imagery to our customers and when we deliver the analysis to our customers, we do so with not only the Merlin baseline, but also with a higher resolution confirmation from one of our other satellites in the fleet. Does that make sense?

Got it. That's very helpful. One more question for you, Emiliano, and then a couple for Jeff. Regarding the sovereign opportunity, first, congratulations on the $18 million deal in Portugal. Can you provide some insight into the competitive landscape and explain why you succeeded there? Additionally, what does the pipeline look like for similar deals, both sovereign and of that scale? It seems there is a rapidly growing awareness in EMEA about the importance of enhancing their sovereign capabilities and significant funding available. I’m interested in hearing more about the pipeline for sovereign deals and a bit more detail on the Portugal deal would be appreciated.

Yes, that's perfect. There are three main reasons why we excel in this contract and what sets our satellites apart in the sovereign space. First, is the quality of the data from our platform. Our satellites, particularly the Mark V series, have been battle-tested and have been operational for several years, with over 55 satellites launched and more than 150 years of cumulative in-orbit experience. This creates a stable and reliable platform. Second, our cost base is very competitive, allowing customers to consider launching multiple satellites instead of just one, which enhances their revisiting capabilities at an attractive price point. This is a significant advantage. Lastly, our ability to deliver swiftly has been crucial, especially in Portugal, where we transitioned from contract signing to operational deployment of the first satellite within days. The second satellite will follow within months, meaning we can deliver both satellites in approximately four months from signing. This rapid turnaround is quite unique in the industry. Given the current geopolitical climate, our speed of delivery and proven platform at the right cost really distinguish us. Our strong pipeline supports this, with over $1 billion in opportunities that we have developed over a long period. Customers have an immediate need, so we anticipate more activity moving forward.

Yes. Very helpful. And Jeff, a couple for you. On the pipeline side, maybe to the extent you can share just what's been accomplished thus far in terms of growth in the late-stage pipeline value? And then secondarily, just I know, obviously, you've announced a broad range of some pretty compelling channel partnerships and relationships. I think you've referenced Vantor and a number of others. If you could just talk there, maybe which ones you'd want to call out as showing particular traction, and maybe what kind of direct versus indirect mix you see going forward. So growth in late-stage pipeline value, and then just channel mix direct versus indirect.

I think we lost Jeff. Jeff, this is EK. So let me see if we can get Jeff to connect in a bit. Do you have any other questions in the meantime?

Sure. Just one more for you and Rick. I realize you're not providing guidance for fiscal '26. However, when you think about this business and the growth in the pipeline, what would you consider disappointing growth for 2026 in terms of top line? Could you provide some general insights on the trajectory you foresee for this business based on the pipeline and its growth? It's clear that your RPOs offer strong visibility, especially since your 12-month RPOs exceed my 12-month revenue estimates. While you have good visibility, I'm curious about the potential upside and what you consider to be a base growth rate for 2026.

Yes, sure. What would be disappointing, I guess, is having flat growth relative to 2025. We certainly don't expect that. I think that yourself and the other analysts covering the company have done a lot of work in terms of understanding our business and building good models. And I think the estimates that are out there are in line and perhaps a little conservative relative to our own expectations for 2026.

Our next questions are from the line of Mike Latimore with Northland Capital Markets.

Congrats on the first call here and the results in the Merlin launch. It looks great. I guess first question would be the notion that there's a lot of countries, nations that want to have their own satellites and capacity. I guess, can you quantify that? Like how many countries do you think are actually kind of pursuing their own satellite constellations? And then do they look for an exclusive provider? Or are there a couple of options or chance for a couple of suppliers per country?

Yes, we are observing growing demand for satellite capabilities in various regions outside of the U.S., particularly in the Middle East, Asia Pacific, and Europe. Over recent years, it has become evident that many countries do not want to depend solely on commercial satellite systems or information from the U.S. and its allies for their defense and intelligence needs. Consequently, these nations are focused on developing their own satellite capabilities. They aim to operate their own satellites in orbit and establish the capacity to launch additional satellites as required. This trend is significant, and we believe we are well-positioned to meet this demand. Our unique advantages in satellite quality, cost, and speed, combined with the fact that our technology is not subject to ITAR restrictions, enable us to provide comprehensive technology and knowledge transfer programs. This includes establishing local assembly and integration facilities, which not only allows these countries to deploy satellites now but also gives them the capability to launch more satellites locally in the future. This trend is consistent across various regions, including Asia, Southeast Asia, the Middle East, and Europe.

Okay. Great. And then I guess in terms of just the Portugal deal and now the Merlin launch, can you talk a little bit about just the revenue recognition timing on those? When do you expect to sort of recognize the revenue on Portugal? And then what's the pattern on recognizing on the Merlin constellation over time?

Yes, generally speaking, revenue is recognized when the customer gains control of the promised goods and services. Each contract has specific performance obligations, and we assess and allocate the transaction price to those obligations in each agreement. More details on revenue recognition can be found in our accounting policy footnote in the financial statements. Regarding Merlin, the primary revenue we have currently is from the $30 million contract we announced last April. With the constellation set to become operational in the first half of 2027, we anticipate starting revenue recognition on that contract at that time.

Okay. Got it. Great. And then on the Aleph Observer, it seems like that's something you can go back to sell into your current base and then obviously sell to new customers. I guess, can you talk a little bit about the potential for just usage increase from that? It seems like current customers, if they want to add this persistent monitoring for a couple of hundred sites or whatever, that's almost a way to immediately impact some usage levels. But I guess can you talk a little bit about does that impact usage levels from current customers? Does it increase the deal size for new ones? Just how does that sort of impact the model here?

Yes, that's a great question, Mike. To start, Aleph Observer enables customers to utilize our existing capacity, which comes from the 19 satellites we operate in orbit. This capacity allows us to focus on regions of interest for our customers, whether it's Iran, China, Ukraine, or Russia, where they want to monitor activity. Unlike other constellations that can only capture a few targets each day, we can provide hundreds of sites daily. This significant increase transforms how customers approach monitoring in these areas. Instead of reacting to daily events with a few satellite images for validation, they can proactively oversee a larger portfolio of sites to gather intelligence and prioritize their focus. Operationally, this shift is substantial. Our business model has also evolved; we're moving from charging customers for each image captured to offering subscription plans that allow them to monitor multiple sites—10, 20, 50, or even 100—at various price points. This change provides access to a much larger capacity, and on a cost-per-capture basis, our pricing is highly competitive, significantly lower than what customers currently spend on tasking imagery. Collectively, these subscription contracts enhance customer loyalty and offer predictable future revenue. Essentially, we are transitioning into a business model that can be measured as Annual Recurring Revenue, similar to traditional subscription services. This represents a major shift for us and is clearly meeting a pressing demand from customers.

I have one final question. Regarding the Merlin constellation AI-first, can you explain the ability to run algorithms on the satellites in addition to those on the ground? Specifically, will the algorithms that are currently being used on the ground be migrated to the satellite constellation? Are there new algorithms that you plan to develop, or will your customers be developing new ones? How should we perceive the pace of algorithm and AI innovation? Additionally, how does this influence the revenue per customer opportunity?

Yes. Taking a step back, we're living in a very unique time right now. I think AI is fundamentally changing how we make decisions all across the Board, right? And in geospatial, we're still at the beginning. I would say a couple of things on the Merlin side. One, yes, we can run our own algorithms in orbit. We can also run our customers' algorithms in orbit. We basically can also run foundational models in orbit to generate embeddings for every pixel that we collect. That allows us to do things like similarity search, segmentation, classification, and object identification. So there's a number of things that we can do. You can think of the same visual language models that are being run now on the ground, like Google's Earth algorithms or even the visual language models that are being developed by some of the leading AI labs; we will be able to run similar models or the same directly in orbit, right? So that is extremely powerful because we can now extend seamlessly what you can do with agents, with AI agents looking at the information on the ground to what we can do in orbit. That gives you the ability to do a couple of things. First, prioritize the data distribution speed. So if you find something that is critical, you can deliver the result very quickly in minutes instead of having to wait until the satellite goes over the ground station, all of the data for that orbit is downloaded, then it is processed on the ground, then it is classified, and then you can generate an alert. That reduces the time from the satellite seeing something happening until the customer getting an alert from hours to minutes, right? And that is extremely significant, right? The other thing that you have to think about is Merlin will be creating this completely new data set of daily remaps of the entire planet at 1-meter resolution. And that data set will sit in our service on the ground, and foundational models and AI models will be able to go crazy with data and start generating matching patterns and answering questions. So you will be able to interact with this data set in a way that we just can't interact with Earth today. And we have been hinting at this in some of our blog posts over 2025, but now Merlin is going to make this very, very real very soon. So it's very exciting.

Our next questions are from the line of Andres Sheppard with Cantor Fitzgerald.

Congratulations on a very strong quarter. I think a lot of our questions have now been asked, but maybe coming back to Merlin. Just curious what kind of maybe launch cadence might you target after that first launch? And also, maybe help us understand how would you prioritize Merlin versus perhaps increasing the utilization capacity of your existing fleet?

Yes, thanks, Andres. What's interesting about Merlin is that we don't need hundreds of satellites to achieve our goals. We can accomplish this with a few satellites that are already scheduled for launch. These satellites are designed to operate for about five years in orbit, which means we won't need to replenish the constellation for several years to provide daily remaps at one-meter resolution. We may choose to increase launch frequency or introduce new satellites if new technologies become available that we want to put in orbit. However, such decisions would be based on customer contracts that support them. In the meantime, our plan for maintaining the constellation aligns well with our existing launch schedule. It's also important to note that since we are fully vertically integrated, we design and build every component of our satellites, including star trackers, reaction wheels, and telescopes. This allows us to maintain the same cost efficiency with the new constellation as we have with our Mark V satellites. Overall, it's a highly efficient platform for collecting data globally at an unprecedented scale, which is crucial to remember.

Wonderful. That's super, super helpful. I appreciate all that color. Maybe just my last one. I think we touched on this a little bit, but just given the geopolitical conflict in the Middle East, what impacts maybe positively or negatively might you expect to the business?

Yes. As I mentioned earlier, this geopolitical shock accelerates many of the discussions we've been having with government customers. While we aren't providing specific guidance about potential spikes in demand, it's evident that many governments are feeling pressured to quickly enhance their capabilities and access available resources. We're committed to supporting our customers in this effort as effectively and swiftly as possible.

Our next questions are from the line of Caleb Henry with Quilty Space.

An exciting call. Starting with the mix on commercial and defense, I was wondering if you could talk about what you saw in 2025 and then how you see that changing over the next year or 2.

Yes, sure. It's been predominantly defense and intelligence and government for us, although I think with Merlin in particular, there are commercial applications there that are significant. But 2025 was definitely skewed towards D&I and government. I think space systems going forward will also continue to be skewed in that direction. But data and analytics certainly will expand into the commercial space significantly going forward with the capabilities we're bringing to the market with Merlin.

Okay. And then where do you see the greatest growth opportunity? Is that in selling sovereign systems like the Portugal deal? Or are you more excited about the imagery and intelligence opportunities that come from things like Merlin?

What’s interesting is that we see these two business lines as very complementary and part of the same process. Our global customers in the defense and intelligence sectors need a variety of solutions, as none of these options are sufficient on their own. They require the ability to monitor numerous sites quickly, which is where Aleph Observer comes in, whether over our existing satellite system or the future NextGen system we plan to develop. Additionally, they need sovereignty and the ultimate ability to control their own future, including ownership of satellites and the capability to deliver intelligence independently, without depending on third-party suppliers. This is where the space systems sovereign deals we are pursuing play a role, encompassing satellite sales, technology transfer, establishing local AIT facilities, and more. When we collaborate with a customer to provide a solution, it will likely consist of both data and analytics as well as space sovereign systems in the defense and intelligence area, which complement each other. On the commercial side, we believe that once Merlin is fully operational, it will significantly boost our commercial business. We set out to democratize access to Earth observation data and remap the Earth with high resolution and frequency, which we believe is essential for achieving that goal. We also recognize that currently, 90% of our customers come from the defense and intelligence sector. Therefore, even as we develop Merlin, which we believe will impact the commercial side, we are designing it with the defense community's needs in mind. Merlin is initially built for defense clients, but we foresee that, similar to other defense technologies like GPS, it will greatly affect the commercial sector, despite being primarily intended for military use.

Right. Okay. Quick 2 more questions. One is technical. On the cross links, are those RF or are those optical? And is that also a component that you're building in-house? Because I understand that's a fairly challenging one.

We're currently using RF inter-satellite links. And it's a combination of some things built in-house and some things that we're currently procuring from some suppliers. But over time, we expect 100% would be built in-house.

Okay. And then lastly, what kind of U.S. government opportunities are you seeing in the year since redomiciling to Delaware?

Yes, that's a good question. There are many opportunities on the U.S. side. Since we redomiciled, we have started to pursue these opportunities, particularly through partnerships. We have had a strong partnership with Palantir, which has been a great supporter of data for the U.S. government. Recently, we have also been working with Maxar and now Vantor, who are using our data to serve defense customers in the U.S. Specifically, we are involved with them on the Luno program for the NGA, which is quite interesting and closely related to our Aleph Observer offering. Additionally, we have entered into the CSDA contract with NASA, and we expect that relationship to grow. We are intentionally developing a strategy to target significant opportunities, which currently involves working through primes in the U.S. Our presence in the U.S. or operating satellites under NOAA license provides a strong foundation for these discussions, yet we continue to primarily engage with primes to access government business.

At this time, I would now like to turn the call back over to Mr. Kargieman for his closing remarks.

Well, thank you, operator. Thank you all for joining us today. Satellogic is evolving beyond a traditional Earth observation provider towards a more scalable global intelligence and analytics company. And the progress we shared today is the foundation of that transformation. If we were unable to address any of your questions today, please reach out to the IR team directly at ir@satellogic.com, and have a great day. Thank you.

This will conclude today's conference. You may disconnect your lines at this time. We thank you for your participation.