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DATE
Nov. 10, 2026
CALL PARTICIPANTS
- Founder and Chief Executive Officer - Emiliano Kargieman
- Interim Chief Financial Officer - Dustin Greer
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TAKEAWAYS
- Revenue -- $16.0 million, representing a 342% increase driven by record performance in both the space systems and data analytics segments.
- Adjusted EBITDA -- Positive $1.2 million, marking the second consecutive quarter of positive performance on this metric compared to a loss of $4.9 million in the prior year.
- Nine-Month Revenue -- $38.1 million, which is more than double the total revenue generated during the entire 2025 fiscal year.
- Space Systems Revenue -- $9.5 million, accounting for 59% of total revenue due to the in-orbit delivery of the second satellite for Portugal's CEiiA.
- Data and Analytics Revenue -- $6.6 million, representing 41% of total revenue and more than doubling the prior year period due to higher task orders and contract volumes.
- Gross Margin -- 78%, exclusive of depreciation, representing an improvement from 68% in the third quarter of 2025.
- Operating Loss -- $2.3 million, narrowing 72% from a loss of $8.1 million in the prior year as revenue growth outpaced the increase in costs.
- Post-Quarter Agreement -- $37 million, representing the company's largest sovereign satellite contract to date for the transfer of three satellites.
- Total Sovereign Contracts -- Approximately $67 million, the aggregate value of agreements signed in 2026 across three different segments.
- Cash and Equivalents -- $106.5 million as of Sept. 30, 2026, compared to $94.4 million at the end of 2025.
- Remaining Performance Obligations -- $66.9 million, down from $80.7 million sequentially due to revenue recognition from completed satellite deliveries.
- Next-12-Month RPO -- $33.4 million, the portion of the backlog expected to be recognized as revenue within the next year.
- Regional Revenue (Europe) -- $10.1 million, contributing 63% of quarterly revenue primarily through the CEiiA project.
- Regional Revenue (MENA) -- $3.3 million, or 21% of total revenue, representing significant growth from zero revenue in the Middle East and North Africa during the prior year.
- SG&A Expenses -- $9.9 million, compared with $6.4 million a year ago, reflecting higher personnel costs as the company scaled its global sales organization.
- Engineering Expenses -- $3.8 million, up from $2.6 million, driven by investments in Merlin and NewSat Mark VI technical capabilities.
- Qualified Pipeline -- Over $550 million, consisting of opportunities where customers have identified budgets and selected the company's offering.
- Launch Visibility -- Manifested slots secured through the first half of 2029 to ensure multi-year coordination of production and deployment.
- Adjusted Net Cash Used in Operating Activities -- $5.5 million, an improvement from $8.4 million used in the third quarter of 2025.
- Free Cash Flow -- Negative $11.7 million, reflecting $6.2 million in capital expenditures primarily for Merlin and NewSat production.
- GAAP Net Income -- $28.3 million, or $0.14 per diluted share, which included a $30.0 million non-cash gain from the remeasurement of financial instruments.
SUMMARY
Satellogic Inc. (NASDAQ:SATL) reported third-quarter results characterized by a transition to positive operating profitability on an adjusted basis and the expansion of its sovereign space systems business. Management stated that the company is shifting customers from transactional imagery orders toward recurring monitoring programs through its Aleph Observer platform and the newly launched Merlin constellation. The company reported a significant increase in sovereign satellite contracts, noting that governments are increasingly prioritizing owned space infrastructure over commercial access. Management indicated that its vertical integration and flight-proven hardware allow for satellite deliveries on accelerated timelines to address immediate national security requirements. The company confirmed it has secured launch capacity through early 2029, providing visibility for multi-year constellation expansion and customer deliveries.
- CEO Kargieman stated, "The successful launch of Merlin.01 on October 1 was another major milestone, achieved 18 months after program kickoff, on schedule and on budget."
- Management reported that the new $37 million agreement signed after the quarter ended covers the in-orbit transfer of one NewSat Mark V and two Mark VI satellites, with completion expected by mid-2027.
- The company expanded its Slingshot III program work with the U.S. Office of Naval Research to integrate six additional NewSat Mark VI satellites for autonomous maritime domain awareness.
- The Mark VI satellites are equipped with inter-satellite links that, according to Kargieman, "let our satellites work together as one coordinated system" to provide real-time alerts and data downloads.
- Management reported a three-year extension of its relationship with HEO for non-Earth imaging and in-orbit inspections, which includes a minimum annual commitment in the seven-figure range.
- The company is in ongoing discussions regarding the extension of its agreement with Palantir, which was scheduled to expire in Nov. 2026.
- The Merlin constellation is designed to remap the entire planet daily at one-meter resolution, enabling automated change detection that cues high-resolution satellites for 50-centimeter follow-up imagery.
INDUSTRY GLOSSARY
- Persistent Global Intelligence (PGI): Satellogic's strategic approach to providing continuous, proactive monitoring of global assets and activities.
- Merlin Constellation: A fleet of satellites optimized for broad-area daily remapping and automated change detection to identify areas requiring closer inspection.
- NewSat Mark VI: The latest generation of the company's satellites, featuring inter-satellite links and edge computing nodes for real-time orbit-based analytics.
- Remaining Performance Obligations (RPO): The total contract value of signed agreements that have not yet been recognized as revenue.
- Aleph Observer: A data analytics platform that allows customers to monitor hundreds of specific points of interest through recurring satellite tasking.
- Inter-satellite Link (ISL): Technology that allows satellites to communicate directly with one another in orbit to speed up data delivery and tasking coordination.
- Non-Earth Imaging: The use of satellite sensors to observe and inspect other objects in space, such as satellites, rocket bodies, or debris.
Full Conference Call Transcript
Operator: Good afternoon and welcome to the Satellogic Third Quarter 2026 Financial Results Conference Call. All lines have been placed in a listen-only mode, and the floor will be open for your questions following the presentation. During today's call, management may make statements relating to goals and objectives for future operations, financial and business trends, business prospects, future financial metrics, customer contracts and pipeline, revenue generation, and expectations for future performance that constitute forward-looking statements under federal securities laws. Any such forward-looking statements reflect management expectations based on currently available information and are not guarantees of future performance.
They involve certain risks and uncertainties that are more fully described in Satellogic's SEC filings, including in the risk factor section of our quarterly report on Form 10-Q for the quarter ended September 30, 2026, our annual report on Form 10-K for the fiscal year ended December 31, 2025, and other filings with the SEC. Actual results, performance, or achievements may differ materially from those expressed in or implied by these forward-looking statements. Satellogic undertakes no obligation to update or revise any forward-looking statements to reflect events or developments after the date of this call. On this call, management will also discuss financial measures not determined in accordance with the U.S.
GAAP, including EBITDA, adjusted EBITDA, adjusted net cash used in operating activities, and free cash flow. Reconciliations of these non-GAAP measures to the most directly comparable GAAP measures are presented in the appendix of today's presentation and in the earnings materials posted on the Investor Relations section of our website. A press release detailing these results was issued this afternoon and is available at satellogic.com. Hosting today's call will be Satellogic's founder and Chief Executive Officer, Emiliano Kargieman, and Interim Chief Financial Officer, Dustin Greer. With that, I will turn the call over to Mr. Kargieman.
Emiliano Kargieman: Thank you, operator, and good afternoon, everyone. Welcome to Satellogic's Third Quarter 2026 Earnings Conference Call. Joining me today is Dustin Greer, our Interim Chief Financial Officer. I'll start with the quarter's results and our commercial progress. Dustin will then take you through the financials in detail. After that, I'll come back to how we're moving customers to Persistent Global Intelligence, the infrastructure we're building for it, and Merlin, now that the first satellite is in orbit. I'll close with the key takeaways before we open the line for questions. We delivered an excellent third quarter with record revenue and our second consecutive quarter of positive adjusted EBITDA.
Revenue grew 342% year-over-year to $16 million, following $15.9 million in the second quarter, as we continue to execute across both data analytics and space systems. For the first nine months of 2026, revenue reached $38.1 million, more than twice what we generated in all of 2025, with a quarter still left in the year. These results continue to demonstrate our progress in scaling the business and converting commercial activity into revenue. On our space systems business, we completed the second satellite delivery under our $18 million agreement with Portugal's CEiiA, demonstrating our ability to deliver working sovereign capabilities on accelerated timelines.
Over the past 12 months, we have closed four satellite sale agreements covering seven satellites, including the sale of two satellites to CEiiA, Continuum-1 to HEO, a $12 million satellite transfer to a sovereign defense customer, as well as a new agreement signed since quarter end that I will cover in a moment. Building up an inventory of assets in orbit that we can transfer to customers on an expedited timeline constitutes a novel solution for rapid response capabilities that is being well received by the market. During this quarter, we also expanded our work with defense and intelligence partners, including Innovative Defense Technologies and SynMax. First, we expanded our Slingshot III work with IDT in support of the U.S.
Office of Naval Research. The expansion includes integrating six additional NewSat Mark VI satellites into the program architecture and running on-orbit activities and tests through 2027 and 2028, moving Slingshot from proof of concept demonstrations towards operationally relevant capability. Second, SynMax's Theia platform became our selected channel for maritime intelligence derived from Merlin, which puts a proven dark-vessel detection and sanctions monitoring capability on top of Merlin's daily global coverage from the first day of service. Third, Continuum-1, the NewSat we built and sold to HEO, performed a rendezvous and proximity operations maneuver, holding position within 27 km of a derelict Chinese rocket body for sustained inspection.
As space becomes increasingly contested, the ability of our platform and flight software to be reprogrammed in orbit to perform demanding space domain awareness missions on short notice highlights the flexibility of the assets we're positioning in space. We also extended our six-year relationship with HEO through a new three-year non-Earth imaging agreement that runs through 2029, with a seven-figure minimum annual commitment in each year. It covers our Mark IV, Mark V, and Mark VI satellites, including the new inter-satellite link-equipped spacecraft, and it shows that customers who start with one mission come back for more.
In data analytics, Aleph Observer continues to support our customers to monitor hundreds of points daily in the most contested theaters around the world, and it is helping us move customers from individual imagery orders towards recurring monitoring programs. Building on these relationships and adding to our backlog remains a priority as we continue to grow the business. In October, we also launched two NewSat Mark VI satellites equipped with inter-satellite links and an additional NewSat Mark V earmarked for sovereign space systems program. That program gives allied governments a pathway from commercial access to dedicated sovereign control capability, and it builds on a body of proof points.
Portugal purchase of sovereign satellites or execution of the first commercial in-orbit transfer of a satellite, Tata's operation of dedicated capacity for India, and HEO's first-of-a-kind sovereign capability for Australia. The Mark V launch is a direct response to the growing demand we are seeing from governments that want to own their intelligence capability, while the Mark VI inter-satellite links let our satellites work together as one coordinated system. Sovereign customers also come back to us for replenishment, fleet growth, and local integration, which makes space systems a source of repeat demand rather than a one-time sale. The successful launch of Merlin.01 on October 1 was another major milestone, achieved 18 months after program kickoff, on schedule and on budget.
Merlin.01 is now operating in orbit, with commissioning activities advancing according to plan. I will come back to Merlin in more detail shortly. We also strengthened the team to capture the demand we see. In September, Trey Whitworth, who led the National Geospatial-Intelligence Agency until late last year and joined us as strategic advisor in March, became our President. I am excited to have Trey on the team. He spent his career as the customer for what we build, and he brings that perspective to how we run the company and how we build for defense and intelligence missions.
In August, Jamil Kawar joined us as Senior Vice President of Space Systems, bringing two decades of sovereign satellite sales experience across the Middle East, Europe, and beyond. Dustin Greer, who has served as our Corporate Controller since 2022, stepped in as Interim Chief Financial Officer. Since quarter end, we have signed a new sovereign satellite agreement covering three satellites with a contract value of approximately $37 million. Because this agreement was signed after September 30, it is not included in the remaining performance obligations Dustin will walk you through momentarily, and we expect this to be added to our fourth quarter total.
To provide a little bit more background on the detail, this $37 million agreement is our largest sovereign satellite contract to date. It covers the in-orbit transfer of a NewSat Mark V and two Mark VI satellites. Totaling up our sovereign space systems wins, including CEiiA's January agreement and the April agreement, we have now signed approximately $67 million in sovereign satellite contracts in 2026 across three segments. Sovereign demand is broadening and deepening as customers build their own space infrastructure with Satellogic technology. Governments want to own the capabilities their national security depends on, not rent them.
Access to imagery can be revoked, throttled, or repriced, and no nation wants to discover that in a crisis, so sovereign Earth observation has moved from a long-term goal to an immediate priority. We meet that urgency by delivering a commissioned, flight-proven satellite in months rather than a multi-year cycle of a traditional build, with no ITAR restrictions, no dependence on foreign suppliers for key components, and no outside shutter control. Two of the three satellites in this agreement are already in orbit, and we expect to complete the transfers by mid-2027, subject to standard contractual and regulatory milestones.
Space Systems generated 59% of our third quarter revenue, and selling satellites in orbit does not constrain our data and analytics business. Our unit economics, vertical integration, and secured launch slots let us replace the capability quickly on the same platform that supports our persistent global intelligence services. Each transfer also starts a longer relationship through training, support, additional satellites and monitoring services, and brings another government into our infrastructure. With that, I will hand the call over to Dustin to walk you through the financial details. Dustin?
Dustin Greer: Thank you, Emiliano, and good afternoon, everyone. Third quarter revenue was $16 million, up 342% from $3.6 million in the third quarter of 2025, and up slightly from $15.9 million in the second quarter. For the first nine months of 2026, revenue reached $38.1 million, an increase of 232% compared to $11.5 million in the same period of 2025, and 115% above our full year 2025 revenue of $17.7 million. We've added the nine-month comparison to the slide so you can see the momentum alongside the quarter. Looking at our business lines, Space Systems contributed $9.5 million, or 59% of revenue, driven by the in-orbit delivery of the second CEiiA satellite.
Data and Analytics contributed $6.6 million, or 41% of revenue, more than double the prior year period, driven by higher contract volumes and task orders. Sequentially, Data and Analytics revenue declined modestly, primarily reflecting lower non-cash revenue recognized under the Palantir agreement. The current agreement expires in November. We are in ongoing discussions regarding the extension and will keep you updated as those conversations progress. By geography, Europe represented $10.1 million, or 63% of revenue, driven by the CEiiA delivery. The Middle East and North Africa contributed $3.3 million, or 21% of revenue, compared with essentially no revenue from the region in the prior year period.
The Americas generated $1.8 million, or 11%, and Asia Pacific represented $0.8 million, or 5%. Turning to margins and cost structure, gross margin exclusive of depreciation was 78%, compared to 68% in the prior year period. Total costs and expenses were $18.3 million, up 56% year-over-year, as we expanded our commercial organization and technical capabilities. Selling, general, and administrative expenses were $9.9 million compared to $6.4 million a year ago, primarily reflecting higher personnel costs as we scaled our global sales organization and strengthened our corporate functions. Engineering expenses were $3.8 million compared with $2.6 million, reflecting investment in our technical workforce to support Merlin, NewSat, and Space Systems capabilities. Sequentially, total costs and expenses increased by $2.7 million.
Nearly $2.1 million of that increase was compensation-related, split roughly evenly between cash compensation and non-cash stock-based compensation. The increase reflects organizational growth and stock-based compensation expenses associated with our mid-year equity grants. On a nine-month basis, total cost expenses rose 31% to $46.4 million against revenue growth of 232% to $38.1 million, which reflects the operating leverage in our model. These results produce the following. For the quarter, operating loss narrowed to $2.3 million from $8.1 million in the prior year period, a $5.8 million, or 72% improvement. Adjusted EBITDA improved to a positive $1.2 million from a loss of $4.9 million in the prior year period, marking our second consecutive positive quarter.
For the first nine months of 2026, adjusted EBITDA was nearly break-even at a loss of $0.2 million, compared to a loss of $15 million a year ago. Our GAAP net income for the quarter was $28.3 million, which includes $30 million non-cash gain from the remeasurement of financial instruments. The gain primarily reflected remeasurements of warrants and earnout liabilities ahead of the first quarter of 2027 expiration. As we said in the first and second quarters, these fair value movements are non-cash and are not indicative of underlying operating performance. Turning to cash flow, net cash used in operating activities was $10.4 million in the third quarter compared to $8.4 million in the prior year period.
In accordance with GAAP, $4.8 million of proceeds from the in-orbit satellite sale were classified as investing activities. Our non-GAAP measure, adjusted net cash used in operating activities, includes those proceeds and showed cash use of $5.5 million compared with $8.4 million a year ago. Accounts receivable increased $2.8 million during the quarter, reflecting increased activity and the timing of quarter-end billings. On a year-to-date basis, net cash used in operating activities was $18.8 million compared to $17.4 million in the prior year period. Adjusted net cash used in operating activities showed cash use of $5.7 million in 2026 compared to cash use of $17.4 million in 2025.
Capital expenditures were $6.2 million in the quarter, primarily for Merlin and NewSat production, and $17.4 million year-to-date. Our free cash flow measure, which we calculate as adjusted net cash used in operating activities less capital expenditures, was negative $11.7 million for the quarter and negative $23.1 million for the first nine months. We ended September with $106.5 million in cash and cash equivalents and $66.9 million in total remaining performance obligations, with $33.4 million expected to be recognized in the next 12 months. RPO stepped down from $80.7 million as of June 30th, primarily because we recognized revenue on the second CEiiA satellite delivery during the quarter.
That figure reflects contracts in place at the September 30th cutoff and includes the recently announced three-year HEO agreement, which was signed prior to the end of the quarter. Additionally, the approximately $37 million sovereign satellite deal Emiliano just highlighted is not included in our third quarter RPO, as this agreement was signed after quarter end. We expect it to add to RPO in the fourth quarter. We continue to advance additional sovereign opportunities and look forward to announcing further agreements as they close. Turning to our capital structure, our secured convertible note principal remains stable at $18 million.
With Merlin.01 in orbit and the program fully funded by customer contracts, we are directing our capital towards producing the next Merlin satellites and the ISL-equipped NewSat Mark VI fleet. We remain well-capitalized, supported by our cash position, and we will stay focused on disciplined spending while strategically investing for growth as we progress towards positive free cash flow. With that, I will turn the call back over to Emiliano.
Emiliano Kargieman: Thank you, Dustin. The results we have discussed today give us confidence in the trajectory of the business. We are converting demand into contracts, delivering against those commitments, and generating more revenue from the platform we have built. I want to spend a few minutes now on where we believe that continues. Over the next several years, we see the opportunity available to Satellogic expanding materially around two connected needs: sovereign space capabilities and persistent intelligence. In space systems, governments increasingly see sovereign space capabilities as part of their critical national infrastructure and defense posture.
They need autonomy and control over collection, the ability to deploy on operational timelines, and the economics to expand their fleets from an initial satellite or set of satellites into much larger constellations. Our focus on reducing deployment costs and delivery timelines makes those capabilities accessible to more customers and allows existing customers to consider larger programs. We are already seeing how those relationships with those customers can develop. An initial delivery can lead to additional satellites, replenishment, training, and local integration. That creates the potential for repeat satellite orders and ongoing services for many years. The platform we have built also gives us foundation to address a wider range of sensing requirements.
Our satellite buses, flight software, manufacturing capabilities, and operational experience can support the development of systems with additional payloads. We see opportunities to extend that foundation into modalities such as radar, thermal imaging, and radio frequency sensing, including through partnerships with specialist payload providers. Beyond Earth observation, our work with HEO already demonstrates how technology developed for Earth observation can support space domain awareness and in-orbit inspection. We see further potential in the infrastructure that supports connected constellations, including data relay, onboard processing, and the ability to deploy and replenish capacity rapidly. These opportunities build on capabilities and investments we have already made. We intend to pursue them selectively as customers' requirements and commercial commitments support the development.
Our addressable opportunity can therefore expand both as investment in space grows and as we develop the capabilities and industrial relationships to serve more of that demand. Additional sensing modalities, missions beyond Earth observation, and local integration can each open programs and customer budgets that we have not served so far. Our ambition is to become a leading provider of sovereign space capabilities to the U.S. and allied governments. Our combination of flight heritage, delivery speed, and cost gives us a strong foundation to pursue that opportunity. In data and analytics, customers increasingly want ongoing awareness of the places and activities that matter to them.
Aleph Observer addresses their demand by turning repeated collection over priority sites into a recurring monitoring service. Our broader ambition is to help customers detect, understand, and follow relevant activity across their areas of interest, including activity beyond the locations they already know to monitor. That expands the questions we can help them answer. What has changed across an entire region? What activity is emerging? How does it compare with historical patterns? Where should they focus their attention, and what needs closer observation? That is the purpose of the integrated infrastructure we are building. Broad area detection with Merlin connected to high-resolution monitoring with NewSats, and the analytics and agents that turn observations into useful intelligence.
As we combine repeated observations with historical context and complementary data sources, we can build a more complete understanding of how places, assets, and activities change over time. The commercial opportunity extends into the intelligence products and applications built on top of that foundation. Recurring alerts, assessments, and monitoring services can become part of our customers' daily operations. As we help them address more of their operational requirements, we see the potential to expand the scope and value of each relationship and participate in a larger share of their spending on intelligence and decision support. In defense and intelligence, that means expanding from monitoring priority sites toward broader awareness across areas of interest.
It also creates opportunities in civil and commercial markets, where more frequent and affordable observations can support applications such as maritime intelligence, food security, and the monitoring of energy assets and critical infrastructure. We intend to reach those markets both directly and through partners. In some applications, we can deliver the intelligence service to the end customer. In others, our data and collection infrastructure can power specialist analytic providers and the systems our customers already use. That allows us to extend our commercial reach and participate in more applications as the underlying infrastructure scales. Merlin and subsequent generations of our constellation can expand coverage, increase the frequency of observation, and improve the economics of those services over time.
That can make additional use cases commercially viable and allow customers to monitor larger areas and more assets within their budgets. The business we're growing today already gives us the revenue base, customer relationships, and operational experience on which to build. Our near-term focus remains expanding those relationships and converting demand into recurring monitoring programs. Over time, we see the opportunity to serve more customers, deliver more valuable intelligence products, and support a wider ecosystem of applications built on our infrastructure. Our ability to pursue these opportunities rests on years of investments in our technology, our team, and our manufacturing capabilities. Merlin is an important demonstration of what that investment makes possible.
We took a new satellite architecture from concept to orbit in less than 18 months, on schedule and on budget. Merlin.01 is now in orbit, healthy, fully functional, and with commissioning progressing according to plan. We achieved that by building on our NewSat bus heritage, reusing technology proven through years of operations, and combining it with a new payload architecture. Our vertical integration gives our engineers control over the design, manufacturing, software, and testing needed to bring those elements together in record time. That matters well beyond a single program. It gives us the ability to respond to new customer requirements, develop additional capabilities, and bring them to market on timelines that customers increasingly need.
The highly specialized and scalable industrial platform we have built supports both the satellites we deliver to sovereign customers and the infrastructure we operate for our own intelligence services. Advances in our technology and production capabilities therefore strengthen both businesses. As demand and the need for responsiveness grows, we believe that our ability to deliver proven and new capabilities quickly at a cost that supports deployment at scale will become an increasingly important competitive advantage. Capturing that demand requires not only the production capacity, but access to the launch required to deliver it in orbit.
At a time when the industry faces a launch capacity crunch, driven by SpaceX's planned wind-down of Falcon 9 for commercial missions, we have launch slots manifested and booked through the first half of 2029. That gives us visibility to plan satellite production, support deliveries to space systems customers, and continue building our own infrastructure in orbit. Securing those slots is an important part of turning commercial demand into an executable delivery plan. It allows us to coordinate manufacturing and deployment over a multi-year horizon. We are geared for higher satellite production as customer demand and our own constellation requirements grow.
Our facilities allow us to increase throughput while preserving the quality, cost discipline, and delivery speed that underpins our offering. We intend to scale our production capacity in step with commercial commitments and the deployment needs of our business without incurring disproportionate costs. That discipline matters as we pursue both growth and positive free cash flow. To wrap up, I want to leave you with five key takeaways. First, we are delivering at a substantially higher level. Revenue reached a record $16 million in the quarter, up 342% year-over-year, and $38.1 million in the first nine months, more than twice our revenue for all of 2025. We also delivered our second consecutive quarter of positive adjusted EBITDA.
Second, our commercial relationships are deepening. Sovereign satellite programs, recurring monitoring services, and agreements such as our three-year extension with HEO demonstrate the potential to grow with our customers over time. Four in-orbit satellite agreements covering seven satellites over the past 12 months, and the $37 million new sovereign agreement signed this quarter end, further strengthen our visibility into deliveries in 2027. Third, our addressable opportunity is expanding across both businesses. As space becomes an integral part of sovereign infrastructure, our platform gives us a foundation in space systems to serve additional sensing modalities and missions beyond Earth observation.
In data and analytics, persistent glow intelligence creates opportunities to deliver more valuable intelligence products and reach additional defense, civil, and commercial customers. Fourth, we have demonstrated the ability to execute and are preparing to deliver at a greater scale. Merlin went from concept to orbit in less than 18 months, on schedule and on budget. That reflects our vertical integration and technology heritage. With launch slots booked through the first half of 2029, we have greater visibility to coordinate production, customer deliveries, and expansion of our own infrastructure. Fifth, we have the resources to pursue growth with discipline. We ended September with $106.5 million in cash, and Merlin is fully funded by customer contracts.
Our focus is on converting commitments into deliveries, expanding recurring monitoring revenue, and increasing production while progressing towards positive free cash flow. The commercial traction and execution we're demonstrating gives us confidence in building on this year's growth in 2027, while positioning Satellogic for the larger opportunity ahead. With that, operator, please open the line for questions.
Operator: Our first question is from Jeff Van Rhee with Craig-Hallum Capital Group. Please proceed with your question.
Vijay: Hey, Emiliano and Dustin. It's Vijay on for Jeff. Congrats on the quarter. Just the first question from me on the sale post-quarter of the three satellites for $37 million. Just what kind of additional opportunities do you see there going forward? Do you expect that to continue to show up in the same way, maybe in the coming years as it showed up this year?
Emiliano Kargieman: Yeah. Thanks. That's a good question. The reality is we're seeing demand for sovereign satellites, if anything, increasing. We have seen it throughout this year with four deals that we announced in the last 12 months for a total of seven satellites, and we see continuing demand. Our qualified pipeline of opportunities for space systems is growing, and the demand shows no If anything, it shows it's going up, right? We expect to see more of this. As part of that, in this deal we just announced, but also over the last year, I think, three of the satellites that we announced so far are in-orbit transfers.
We also see this as a big part of what's allowing us to respond very quickly to this customer demand, being able to transfer satellites in orbit. That's also, I think, something that we will continue to build, continue to build this inventory in orbit to be able to transfer satellites quickly to customers when they need them. If anything, the sovereign demand, we think, is exceeding our expectations at the beginning of the year. The pipeline is growing extremely rapidly.
Speaker 3: Yeah. Yeah, definitely. It's great to hear. Next, maybe you could just talk a little bit about the impact of going from Mark V to Mark VI, in particular, you were talking about the optical inter-satellite links. Any quantification you could put on the speed there or what that allows you to do would be great.
Emiliano Kargieman: Yeah. These are RF inter-satellite links, not optical. The basic advantage of the inter-satellite links is it allows us to download data and alerts in real time. So instead of having to wait for the satellites to go over a ground station to download results to the ground, we can use the inter-satellite links to download data in real time or generate real-time alerts. The satellites, the Mark VI satellites are equipped with inter-satellite links. They're also equipped with edge computing nodes that allow us to run AI and analytics in orbit directly in the satellites.
So we can look at an image, identify objects that we're looking for, and generate the real-time alert using the inter-satellite links, or use them to retask another one of our satellites in our constellation, right? Today, this happens between Mark VI satellites, and now that we're starting to launch our Merlin constellation, it will happen between the Merlin satellites and the Mark VIs in the constellation too. So we will be able to use detections in our Merlin constellation to retask higher resolution Mark VI satellites in real time to go make a confirmation after a detection, right? So, the main advantage is in the ability to deliver data, alerts, and retasking in real time.
Speaker 3: Great. Maybe if I could just sneak one more in. Just on Merlin, if you could talk a little bit about any plans for timeline, maybe on pilots, maybe on the launch schedule, just anything that you've nailed down there on the timeline since last quarter. Thanks.
Emiliano Kargieman: Yeah. As you know, we launched Merlin.01 on October 1. We are particularly happy about the timeliness there. We built the satellite from concept to orbit in 18 months, and on budget and on time. We expect to continue to deploy the Merlin satellites in the first half of next year, to have the service operational in the second half of the year. So we are on track to those dates that we announced.
Speaker 3: Great. Thanks for taking the questions.
Emiliano Kargieman: Thanks.
Operator: Our next question is from Andres Sheppard with Cantor Fitzgerald. Please proceed with your question.
Peter: Hi, everyone. This is Peter on for Andres. Congrats on the quarter, and thank you for taking our questions. First and foremost, congratulations on the first Merlin launch. Very exciting. I was just wondering if you could talk a little bit more about how we should think about the Merlin ramp-up, and particularly the revenue ramp-up starting in the second half of next year.
Emiliano Kargieman: Sure. And hi, Peter. Thanks for the question. Yeah, as you know, we have no revenue from Merlin expected in 2026 and the first half of 2027. In our plans for 2027, we are not counting on a very large ramp-up in the second half of the year. We expect the second half of the year we'll have the satellites fully operational, we'll start delivering to the anchor customer contracts that we sign up, we'll start deliver to the First Missions. Most of the impact of the Merlin satellites will come as we expected, and we have been saying, from 2028 forward. We do expect to generate revenue already in the second half of the year in 2027.
Speaker 4: Got it. Very helpful. Thank you. As a quick follow-up, are you also able to provide a bit more granularity on the recently signed three-year non-Earth imaging agreement with HEO? Are we able to quantify further some of the annual commitments and revenue expectations there?
Emiliano Kargieman: Yeah, we're not putting specific numbers there. It's a three-year deal. It's a seven-figure deal per year, but we're not disclosing the specifics of the contract. The initial commitment that we have there is a minimum commitment, so we could be generating much more revenue that's on the minimum commitment there. We see this as an extension of the partnership that we started with HEO six years ago, so we're extending this partnership for another three years. Really, it's also a great proof point of the capabilities of our satellites.
As you know, we have designed the satellites initially for Earth observation, but over the last six years, we've turned this into a fantastic platform to do non-Earth imaging, to do in-orbit inspections, with the maneuver that we shown with Continuum-1, the satellite that we sold to HEO earlier in the year, and we would build together. We were able to fly the satellite very close to a derelict Chinese second stage of a rocket and take pictures from very, very close, around 27 km away. We see increasing demand for space-to-space imaging, and we think that having a platform that's flexible to allow us to do this, it really shows the power of the infrastructure we're putting in orbit.
Speaker 4: Got it. Very helpful. Thank you. We will pass it on.
Operator: Our next question is from Alex Latimore with Northland Capital Markets. Please proceed with your question.
Alex Latimore: Hey, guys. Great quarter here. Thanks for taking my questions. I am curious on the pipeline. Can you talk maybe about the quantity and size of deals in the pipeline, and then what percent are space systems?
Emiliano Kargieman: Yeah. I do not have the specific percentages top of mind, but typically we see, we have currently over $550 million in qualified pipeline. So these are deals that are in qualified stages of the pipeline where the customer has the budget in place and has selected our offering. We are not giving guidance, obviously, but we see at any particular time when you look at our pipeline, you can see that a larger percentage is space systems and data, but I think that is just the nature of the sales cycles in these deals, right?
Space systems deals stay longer in the pipeline because they take longer to be developed, whereas data analytics deals move through the pipeline a little bit faster, right? So without any specific numbers, I think you can usually see a larger percentage of space systems deals. But we're seeing very significant traction both on space systems, as I mentioned before, as we see in data and analytics. When we launched Aleph Observer earlier in the year, we said we expected 2026 to be a year of pilots that would convert into full contracts in 2027. I think we're still looking forward to those conversions and to update you guys as we get more of the sales signed.
Alex Latimore: On Aleph Observer, what impact on data usage and maybe subscription revenue growth are you witnessing?
Emiliano Kargieman: Yeah. Again, we're tracking a lot of these metrics internally in terms of average revenue per user. On Aleph Observer, we're tracking monthly recurring revenue. But we only have a couple of quarters of data under our belts, right? We launched Aleph Observer in February, signed the first customers in April. So we're waiting to have a few more quarters before we start sharing metrics, if you want software services metrics with you guys. What we are seeing is real traction.
We're seeing customers using Aleph Observer, if anything, I think the adoption in 2026 has been faster than we expected at the beginning of the year, and we really look forward to keeping you all updated as we make progress there.
Operator: We have reached the end of our question and answer session. I would now like to turn the call over to Mr. Kargieman for closing remarks.
Emiliano Kargieman: Thank you, operator. Thank you all, everyone, for joining us today. In the second quarter, we told you that Satellogic had crossed over. In this third quarter, we built on that position, record revenue, second consecutive quarter of positive adjusted EBITDA, four in-orbit satellite agreements covering seven satellites over the past 12 months, a new constellation in orbit inside the window that we committed to, a new agreement that we signed since quarter end that will add to backlog in the fourth quarter. We really look forward to announcing further agreements as they close, and we will update you on our progress on the next quarter.
If we were unable to address any of your questions today, please reach out to us on our investor relations teams at ir@satellogic.com. Thank you and have a great afternoon.
Operator: This concludes today's teleconference. You may disconnect your lines at this time. Thank you for your participation.
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