Q1 2026 York Space Systems Inc Earnings Call

May 14, 2026

Speaker #1: Hello, everyone. Thank you for joining us, and welcome to York Space Systems' first quarter 2026 earnings call. After today's prepared remarks, we will host a question-and-answer session.

Operator 1: Hello, everyone. Thank you for joining us, and welcome to York Space Systems Q1 2026 Earnings Call. After today's prepared remarks, we will host a question and answer session. If you would like to ask a question, please press star one to raise your hand. To withdraw your question, press star one again. I will now hand the call over to Christopher Evenden, Vice President of Investor Relations. Please go ahead.

Operator: Hello, everyone. Thank you for joining us, and welcome to York Space Systems Q1 2026 Earnings Call. After today's prepared remarks, we will host a question and answer session. If you would like to ask a question, please press star one to raise your hand. To withdraw your question, press star one again. I will now hand the call over to Christopher Evenden, Vice President of Investor Relations. Please go ahead.

Speaker #1: If you would like to ask a question, please press star one (*1) to raise your hand. To withdraw your question, press star one (*1) again. I will now hand the call over to Christopher Evandon, Vice President of Investor Relations.

Speaker #1: Please go ahead.

Speaker #2: Hello, everyone, and welcome to York Space Systems' first quarter 2026 earnings call. With me on the line are Dirk Wallinger, our CEO, and Kevin Massalet, our CFO.

Christopher Evenden: Hello, everyone, and welcome to York Space Systems Q1 2026 earnings call. With me on the line are Dirk Wallinger, our CEO, and Kevin Messerle, our CFO. Please note that our earnings press release is available at ir.yorkspacesystems.com. In addition, we have posted an earnings presentation to accompany our prepared remarks on the same website. Lastly, after the call, we will post a transcript of our prepared remarks and an audio replay of this call. For those listening to the rebroadcast of this call, we remind you that the remarks made herein are as of today, Thursday, 14 May 2026, and have not been updated subsequent to this call. During this call, we will refer to certain non-GAAP measures. A reconciliation of these measures to the most directly comparable GAAP measures can be found in our earnings press release.

Speaker #2: Please note that our earnings press release is available at ir.yorksystems.com. In addition, we have posted an earnings presentation to accompany our prepared remarks on the same website.

Speaker #2: Lastly, after the call, we will post a transcript of our prepared remarks and an audio replay of this call. For those listening to the rebroadcast of this call, we remind you that the remarks made herein are as of today, Thursday, May 14th, 2026, and have not been updated subsequent to this call.

Christopher Evenden: For those listening to the rebroadcast of this call, we remind you that the remarks made herein are as of today, Thursday, 14 May 2026, and have not been updated subsequent to this call. During this call, we will refer to certain non-GAAP measures. A reconciliation of these measures to the most directly comparable GAAP measures can be found in our earnings press release.

Speaker #2: During this call, we will refer to certain non-GAAP measures. A reconciliation of these measures to the most directly comparable GAAP measures can be found in our earnings press release.

Speaker #2: We will also make statements that are considered forward-looking, including those related to our 2026 outlook, future revenue, growth prospects, backlog, growth of market share, and addressable market, M&A strategy, inventory building, and the benefits of the acquisitions of Orbion and Allspace.

Christopher Evenden: We will also make statements that are considered forward-looking, including those related to our 2026 outlook, future revenue, growth prospects, backlog, growth of market share and addressable market, M&A strategy, inventory building, and the benefits of the acquisitions of Orbion and ALL.SPACE. Listeners are cautioned that our forward-looking statements involve certain assumptions and are inherently subject to risks and uncertainties that can cause our actual results to differ materially from our current expectations. We advise listeners to review the risk factors and other discussions included in our 2025 annual report on Form 10-K, the Q1 Form 10-Q, and our other filings with the SEC. After the completion of our prepared remarks, we will open the call for questions. Now, I'll turn the call over to Dirk.

Speaker #2: Listeners are cautioned that our forward-looking statements involve certain assumptions and are inherently subject to risks and uncertainties that can cause actual results to differ materially from our current expectations.

Speaker #2: We advise listeners to review the risk factors and other discussions included in our 2025 Annual Report on Form 10-K, the Q1 Form 10-Q, and our other filings with the SEC.

Speaker #2: After the completion of our prepared remarks, we will open the call for questions. Now, I'll turn the call over to Dirk.

Speaker #3: Hello, and welcome to York's first quarter 2026 earnings call. I appreciate you taking the time to join us. Q1 marked a strong and focused start to the year, reflecting disciplined execution against our strategic priorities and the momentum established through our successful January IPO, we delivered revenue of $116 million, up 9% year on year, while also adding meaningful commercial and government awards in the quarter, strengthening our backlog, and positioning us for continued growth.

Dirk Wallinger: Hello, welcome to York Space Systems' Q1 2026 earnings call. I appreciate you taking the time to join us. Q1 marked a strong and focused start to the year, reflecting disciplined execution against our strategic priorities and the momentum established through our successful January IPO. We delivered revenue of $116 million, up 9% year on year, while also adding meaningful commercial and government awards in the quarter, strengthening our backlog and positioning us for continued growth. We also advanced key strategic initiatives, including the acquisition of Orbion to enhance vertical integration and production delivery times, and early steps to build out our inventory in support of future demand. In February, we finalized a $187 million commercial contract for a 20-plus satellite constellation built on the M-CLASS platform with a clear pathway for additional orders as the customer continues to build out its constellation.

Speaker #3: We also advanced key strategic initiatives, including the acquisition of Orbion to enhance vertical integration and production delivery times, and early steps to build out our inventory in support of future demand.

Speaker #3: In February, we finalized a $187 million commercial contract for a 20-plus satellite constellation built on the M-class platform. With a clear pathway for additional orders as the customer continues to build out its constellation.

Speaker #3: We have since completed our kickoff with the customer and begun early design work. We expect significant revenue contribution from this program in 2027. In March, we shared that York won multiple IDIQ awards supporting next-generation national security space architectures.

Dirk Wallinger: We have since completed our kickoff with the customer and begun early design work. We expect significant revenue contribution from this program in 2027. In March, we shared that York won multiple IDIQ awards supporting next-generation national security space architectures. These awards reinforce the continued confidence government customers place in York's mature production line. The IDIQs will support the development and deployment of critical national defense and warfighting space capabilities, including systems relevant to emerging, highly integrated systems that contribute to missions like Golden Dome. We expect task order issuances on the awarded contracts in the near term and are well-positioned to compete, win, and execute on such orders. We also saw continued growth with our civil government customers, including NASA, where we secured an extension to the PExT contract through 2027.

Speaker #3: These awards reinforce the continued confidence government customers place in York's mature production line. The IDIQs will support the development and deployment of critical national defense and warfighting space capabilities.

Speaker #3: Including systems relevant to emerging highly integrated systems that contribute to missions like Golden Dome. We expect task order issuances on the awarded contracts in the near term and are well positioned to compete, win, and execute on such orders.

Speaker #3: We also saw continued growth with our civil government customers, including NASA, where we secured an extension to the PEX contract through 2027. We are seeing strong new business activity across government, classified, and commercial markets, and our business development team is fully engaged and at full capacity across this pipeline.

Dirk Wallinger: We are seeing strong new business activity across government, classified, and commercial markets. Our business development team is fully engaged and at full capacity across this pipeline. Turning to capital allocation. The IPO has expanded our ability to invest in advancing our first-mover advantage. We have scaled our business development organization, adding capabilities across key markets, including Washington, D.C., Colorado, California, and Florida. In parallel, we are investing in inventory, initiating the build-out of the first 20 satellite platforms, allowing us to potentially reduce time to orbit by up to 75% to meet the rapid delivery demand signals for the market. The IPO also enabled us to accelerate our M&A strategy, which we are executing with the acquisition of Orbion in Q1 and the signing of ALL.SPACE in April.

Speaker #3: Turning to capital allocation. The IPO has expanded our ability to invest in advancing our first mover advantage. We have scaled our business development organization, adding capabilities across key markets, including Washington, D.C., Colorado, California, and Florida.

Speaker #3: In parallel, we are investing in inventory, initiating the build-out of the first 20 satellite platforms, allowing us to potentially reduce time to orbit by up to 75% to meet the rapid delivery demand signals from the market.

Speaker #3: The IPO also enabled us to accelerate our M&A strategy, which we are executing with the acquisition of Orbion in Q1 and the signing of Allspace in April, as I highlighted in our last earnings call.

Dirk Wallinger: As I highlighted in our last earnings call, Orbion strengthens our supply chain control and further integrates critical systems with flight-proven technology. We are seeing strong alignment and execution across the York and Orbion teams and are enthusiastic about the ability to contribute to accelerating our delivery timelines while operating successfully as a wholly-owned subsidiary. ALL.SPACE develops and manufactures next-generation, robust, jam-resistant, multi-band mobile tactical terminals for satellite communications. Their Hydra terminal systems provide resilient, network-agnostic communications on the move, enabling reliable connectivity across space, air, land, and maritime domains, designed specifically to ensure connectivity is maintained in dynamic and contested environments. With this acquisition, York expects to advance its strategy to build and complete communication ecosystems operating in contested environments across the commercial and government networks.

Speaker #3: Orbion strengthens our supply chain control and further integrates critical systems with flight-proven technology. We are seeing strong alignment and execution across the York and Orbion teams, and our enthusiastic about the ability to contribute to accelerating our delivery timelines while operating successfully is a wholly owned subsidiary.

Speaker #3: Allspace develops and manufactures next-generation robust GM-resistant multiband mobile tactical terminals for satellite communications. Their hydroterminal systems provide resilient network agnostic communications on the move, enabling reliable connectivity across space, air, land, and maritime domains.

Speaker #3: Designed specifically to ensure connectivity is maintained in dynamic and contested environments. With this acquisition, York expects to advance its strategy to build and complete communication ecosystems operating in contested environments across the commercial and government networks.

Speaker #3: It will also further position us to expand into adjacent high-growth addressable markets, particularly the rapidly growing unmanned systems market, by leveraging our space-based network.

Dirk Wallinger: It will also further position us to expand into adjacent high-growth addressable markets, particularly the rapidly growing unmanned systems market, by leveraging our space-based network. Together, York and ALL.SPACE bring complementary proven capabilities to enable real-time access to critical information and improve awareness, coordination, and mission execution across distributed operations. ALL.SPACE brings an established and highly credible platform with a track record of execution across critical defense programs and a strong base of existing customers. Upon closing, the business will continue to operate as a wholly-owned subsidiary, maintaining its focus and agility while contributing to York's broader strategic objectives. ALL.SPACE has demonstrated success supporting the U.S. Army and U.S. Navy, including through the next-generation tactical terminal and satellite terminal non-geostationary programs, reinforcing its position as a trusted provider of resilient communication solutions.

Speaker #3: Together, York and Allspace bring complementary proven capabilities to enable real-time access to critical information and improve awareness, coordination, and mission execution across distributed operations.

Speaker #3: Allspace brings an established and highly credible platform with a track record of execution across critical defense programs, and a strong base of existing customers.

Speaker #3: Upon closing, the business will continue to operate as a wholly owned subsidiary maintaining its focus and agility while contributing to York's broader strategic objectives.

Speaker #3: Allspace has demonstrated success supporting the U.S. Army and U.S. Navy, including through the next-generation tactical terminal and satellite terminal non-geostationary programs, reinforcing its position as a trusted provider of resilient communication solutions.

Speaker #3: These relationships not only validate the strength of the platform but also expand York's opportunity to deepen engagement across key defense customers. We see significant opportunity to scale into the mobile manned and rapidly growing unmanned systems market through our combined space-based network and mobile ground terminals, where demand for resilient on-the-move connectivity is accelerating.

Dirk Wallinger: These relationships not only validate the strength of the platform, but also expand York Space Systems' opportunity to deepen engagement across key defense customers. We see significant opportunity to scale into the mobile manned and rapidly growing unmanned systems market through our combined space-based network and mobile ground terminals, where demand for resilient on-the-move connectivity is accelerating. As we have seen in current conflicts, assured connectivity in contested environments continues to present significant challenges. ALL.SPACE is a leader in providing multi-band assured communication in contested environments, and this acquisition positions us well to capitalize on that opportunity, particularly as evolving geopolitical dynamics continue to drive increased reliance on unmanned and distributed systems in contested environments. The acquisition is expected to close in Q3, subject to regulatory approvals.

Speaker #3: As we have seen in current conflicts, assured connectivity in contested environments continues to present significant challenges. Allspace is a leader in providing multiband assured communication in contested environments and this acquisition positions us well to capitalize on that opportunity.

Speaker #3: Particularly as evolving geopolitical dynamics continue to drive increased reliance on unmanned and distributed systems in contested environments. The acquisition is expected to close in the third quarter, subject to regulatory approvals.

Speaker #3: Looking ahead, we will continue to pursue strategic acquisitions across two primary lanes. Assuring supply chain and vertical integration and leveraging our space domain expertise to continue to expand into rapidly growing adjacent markets further growing our TAM.

Dirk Wallinger: Looking ahead, we will continue to pursue strategic acquisitions across two primary lanes, assuring supply chain and vertical integration and leveraging our space domain expertise to continue to expand into rapidly growing adjacent markets, further growing our TAM. Let me close by reinforcing that York is well-positioned as we move into the H2 of 2026. We are deliberately investing to build inventory and reduce delivery timelines by up to 75%, expanding portfolio capabilities like the ATLAS ground network and continuing to expand our broad customer base. At the same time, we are leveraging our capital to execute a disciplined M&A strategy to strengthen our ability to deliver at speed, cost, and scale, while also expanding our total addressable market by leveraging our space expertise to expand in adjacent high-growth segments.

Speaker #3: Let me close by reinforcing that York is well positioned as we move into the second half of 2026. We are deliberately investing to build inventory and reduce delivery timelines by up to 75%.

Speaker #3: Expanding portfolio capabilities like the Atlas Ground network and continuing to expand our broad customer base. At the same time, we are leveraging our capital to execute a disciplined M&A strategy to strengthen our ability to deliver at speed, cost, and scale.

Speaker #3: While also expanding our total addressable market by leveraging our space expertise to expand in adjacent high-growth segments. Together, these efforts position York to capture significant opportunities emerging across an increasingly dynamic and contested global landscape.

Dirk Wallinger: Together, these efforts position York to capture significant opportunities emerging across an increasingly dynamic and contested global landscape. With that, I'll hand the call over to Kevin.

Speaker #3: And with that, I'll hand the call over to Kevin.

Speaker #4: Thanks, Dirk. As Dirk discussed, 2026 is set to be a transformational year for us with our January IPO opening several new avenues of growth.

Kevin Messerle: Thanks, Dirk. As Dirk discussed, 2026 is set to be a transformational year for us, with our January IPO opening several new avenues of growth. Revenue for the quarter was ahead of our expectations at $116.3 million, up $10.1 million or 9% on the prior year. The increase was primarily driven by growth in our major government programs, offset by a strong performance in Q1 last year as we accelerated production of our first 21 Tranche 1 transport layer communication satellites ahead of their launch last September. Gross margin, which includes allocated labor, overheads, and D&A, was 19%, down 4 percentage points year on year, driven by the net impact of certain EAC adjustments, which were a tailwind last year and a headwind this year, and a non-recurring depreciation expense this year.

Speaker #4: Revenue for the quarter was ahead of our expectations at $116.3 million up 10.1 million or 9% on the prior year. The increase was primarily driven by growth in our major government programs, offset by a strong performance in Q1 last year as we accelerated production of our first 21 tranche one transport layer communication satellites ahead of their launch last September.

Speaker #4: Gross margin, which includes allocated labor, overheads, and DNA, was 19%, down 4 percentage points year on year, driven by the net impact of certain EAC adjustments, which were a tailwind last year and a headwind this year, and a non-recurring depreciation expense this year.

Speaker #4: Gross margin dollars were 22.2 million in the quarter, down slightly from 24.6 million in the year-ago quarter, driven by the items I just mentioned offset by higher revenues.

Kevin Messerle: Gross margin dollars were $22.2 million in the quarter, down slightly from $24.6 million in the year-ago quarter, driven by the items I just mentioned, offset by higher revenues. Contribution margin grew 1 percentage point to 34% in the Q1, driven by a richer mix of our newer vintage programs, which tend to have higher margins than our older vintage programs. Contribution margin dollars grew to $40.1 million from $35.3 million last year, driven by the aforementioned mix and higher overall revenues. Turning to operating expenses, SG&A plus R&D expenses increased 35% year over year. This was primarily driven by an increase in overall headcount at York, increases in overhead related to public company uplift, and incremental salaries and costs related to the acquisitions of Atlas in August 2025 and Orbion in March 2026.

Speaker #4: Contribution margin grew 1 percentage point to 34% in the first quarter, driven by a richer mix of our newer vintage programs, which tend to have higher margins than our older vintage programs.

Speaker #4: Contribution margin dollars grew to $40.1 million from $35.3 million last year, driven by the aforementioned mix and higher overall revenues. Turning to operating expenses, SG&A plus R&D expenses increased 35% year over year.

Speaker #4: This was primarily driven by an increase in overall headcount at York, increases in overhead related to public company uplift, and incremental salaries and costs related to the acquisitions of Atlas in August 2025 and Orbeon in March 2026.

Speaker #4: As a result, adjusted EBITDA for the quarter was -3.6 million compared to 5.5 million last year. With regards to liquidity, as of March 31st, 2026, our cash and cash equivalents were $655.7 million and availability under our revolving facility was $150 million for total liquidity of $805.7 million.

Kevin Messerle: As a result, adjusted EBITDA for the quarter was -$3.6 million compared to $5.5 million last year. With regards to liquidity, as of 31 March 2026, our cash and cash equivalents were $655.7 million, and availability under our revolving facility was $150 million for total liquidity of $805.7 million. Loss per share was $1.51 per quarter. Approximately $1.07 of this is due to two substantial non-recurring non-cash charges associated with the IPO. Capital expenditures for Q1 2026 were $2.1 million as compared to $1.2 million in the year ago quarter.

Speaker #4: Loss per share was $1.51 per quarter. Approximately $1.07 of this is due to two substantial non-recurring non-cash charges associated with the IPO. Capital expenditures for Q1 2026 were $2.1 million as compared to $1.2 million in the year-ago quarter.

Speaker #4: Backlog has increased 18% to $642.3 million at quarter end from $542.6 million at December 31st, 2025. Driven by the commercial win we announced in March, partially offset by revenue recognized in the quarter.

Kevin Messerle: Backlog has increased 18% to $642.3 million at quarter end from $542.6 million at 31 December 2025, driven by the commercial win we announced in March, partially offset by revenue recognized in the quarter. Looking ahead, we expect revenue for the year to be in the range of $545 to 595 million, up 48% year over year at the midpoint. This is unchanged from our previous guidance. The recent changes at SDA have not reduced our nation's need for communications in contested environments. We continue to compete for that business based on the strengths we've shown in the past.

Speaker #4: Looking ahead, we expect revenue for the year to be in the range of $545 to $595 million, up 48% year over year at the midpoint.

Speaker #4: This is unchanged from our previous guidance. The recent changes at SDA have not reduced our nation's need for communications in contested environments. We continue to compete for that business based on the strengths we've shown in the past.

Speaker #4: With regards to Q2 in particular, I would note that we are experiencing delays in the supply of certain components that will push a portion of revenue associated with those costs into the second half of the year.

Kevin Messerle: With regards to Q2, in particular, I would note that we are experiencing delays in supply of certain components that will push a portion of revenue associated with those costs into the H2 of the year. We believe these near-term headwinds are balanced by the unprecedented bid activity in other areas, netting out to an unchanged forecast for the full year. Now I'll hand it back over to the operator for questions. Operator.

Speaker #4: We believe these near-term headwinds are balanced by the unprecedented bid activity in other areas netting out to an unchanged forecast for the full year.

Speaker #4: And now I'll hand it back over to the operator for questions. Operator?

Speaker #5: Thank you. We will now begin the question and answer session. Please limit yourself to one question and one follow-up. If you would like to ask a question, please press star one to raise your hand.

Operator 1: Thank you. We will now begin the question and answer session. Please limit yourself to one question and one follow-up. If you would like to ask a question, please press star one to raise your hand. To withdraw your question, press star one again. We ask that you pick up your handset when asking a question, and if you are muted locally, please remember to unmute your device. Please stand by while we compile the Q&A roster. Your first question comes from the line of Peter Arment from Baird. Your line is open. Please go ahead.

Operator: Thank you. We will now begin the question and answer session. Please limit yourself to one question and one follow-up. If you would like to ask a question, please press star one to raise your hand. To withdraw your question, press star one again. We ask that you pick up your handset when asking a question, and if you are muted locally, please remember to unmute your device. Please stand by while we compile the Q&A roster. Your first question comes from the line of Peter Arment from Baird. Your line is open. Please go ahead.

Speaker #5: To withdraw your question, press star one again. We ask that you pick up your handset when asking a question and if you're muted locally, please remember to unmute your device.

Speaker #5: Please stand by while we compile the Q&A roster. Your first question comes from the line of Peter Armont from Baird. Your line is open.

Speaker #5: Please go ahead.

Speaker #6: Hey, thanks. Good afternoon, Dirk, Kevin, Chris. Thanks for your time. Hey, Dirk, you're in a position to kind of clear things up and help, I guess, investors try to understand a lot of the moving parts that have really been going on in the Space Development Agency.

Peter Arment: Hey, thanks. Good afternoon, Dirk, Kevin, Chris. Thanks for your time. Hey, hey, Dirk. You, you're in a position to kind of clear things up and help, I guess, investors try to understand a lot of the moving parts that have really been going on in the Space Development Agency. You know, since justification books have come out and a lot of there's been a lot kind of thrown out there, how do you view kind of the positioning, if anything's changed for you or just maybe if you could just I know some of this, obviously, a lot of this is restricted and classified, but what you can give us kind of at a high level and how you're, how you're viewing it. Thanks.

Speaker #6: Since justification books have come out and a lot of there's been a lot kind of thrown out there, how do you view kind of the positioning, if anything's changed for you or just maybe if you could just I know some of this obviously a lot of this is restricted and classified, but what you can give us kind of at a high level and how you're viewing it.

Speaker #6: Thanks.

Dirk Wallinger: Sure thing. Sure thing. Good to hear from you, Peter. Appreciate the question. Yeah, I mean, it presents a real opportunity for us to clarify a lot because since, quite frankly, I mean, there's a little bit of confusion out there, right? Last earnings call, I think you'll recall that there were some questions about transport and how that might relate to Space Data Network. In that call, we suggested that or I suggested that more than likely, what we expected to see is that the transport capabilities, right, you know, the ability to support the warfighter in theater, and in domain was an enduring need. Independent of what the agency, you know, what agency or where that, you know, kind of need fell under that it would endure and would continue.

Speaker #4: Sure thing. Sure thing. So it's good to hear from you, Peter. Appreciate the question. So yeah, I mean, it presents a real opportunity for us to clarify a lot because quite frankly, I mean, there's a little bit of confusion out there, right?

Speaker #4: So last earnings call, I think you'll recall that there were some questions about transport and how that might relate to space data network. And that call, we suggested that or I suggested that more than likely what we expected to see is that the transport capabilities, right, the ability to support the war fighter in theater and in domain was an enduring need.

Speaker #4: And independent of what the agency—what agency, or where that kind of need fell under—that it would endure and would continue. So we're happy to see that that's pretty much exactly what happened.

Dirk Wallinger: We're happy to see that that's pretty much exactly what happened. The transport kind of capability where, you know, you have this assured communications, and you're gonna able to provide that directly to the war fighter, right, is a capability that continues to exist, and we're seeing that rolled into the Space Data Network. There's a lot of confusion. And, you know, I'll talk to the government about this, and they acknowledge this, and they're doing a lot of work to clarify. There's a lot of confusion because, you know, last year or the year before, you're hearing a lot of things about MILNET, things like that, right? What they're doing though is exactly what I said.

Speaker #4: So the transport kind of capability where you have this assured communications and you're able to provide that directly to the war fighter is a capability that continues to exist.

Speaker #4: And we're seeing that rolled into the space data network. So there's a lot of confusion and I'll talk to the government about this. And they acknowledge this and they're doing a lot of work to clarify.

Speaker #4: But there's a lot of confusion because last year, the year before, you're hearing a lot of things about Milnet, things like that, right? And so what they're doing, though, is exactly what I said.

Speaker #4: They're bringing all the different kinds of capabilities that you need from military commercial solution and they're going to put it under one architecture. And that architecture is called the space data network.

Dirk Wallinger: They're bringing all the different kinds of capabilities that you need from military commercial solution, they're gonna put it under one architecture, and that architecture is called the Space Data Network. I think because before there was an assumption that SpaceX, you know, was sole source MILNET, people believed that that was, you know, gonna perpetuate, that all of Space Data Network would become MILNET, that's just not accurate. You see that reflected in the budget. You know, if you look at the 2027 Department of Defense mandatory budget, you see some line items, you definitely see a Space Data Network backbone at, you know, roughly $3 billion.

Speaker #4: I think because before there was an assumption that SpaceX was sole-sourced Milnet, people believed that that was going to perpetuate. And that all of space data network would become "Milnet." And that's just not accurate.

Speaker #4: And you see that reflected in the budget. So if you look at the 27 Department of War mandatory budget, you see some line items and you definitely see a space data network backbone at roughly 3 billion.

Speaker #4: But what you also see is 'space data network backbone multiple vendor procurement.' And that's a separate line item from 'space data network,' which means this is for other vendors to compete for that backbone.

Dirk Wallinger: What you also see is Space Data Network backbone, "multiple vendor procurement." That's a separate line item from Space Data Network, which means this is for other vendors to compete for that backbone. Obviously, that's very encouraging to see a specific line item specifically for competition at $800 million. Congress has also been really supportive of more competition and understanding that that's critical to having a strong industrial base in the US. If that continues, York believes there's opportunity for material expansion into the $685 million for Space Data Network mesh and ground architectures. With those two alone, you're looking at about York's opportunity at about $1.5 billion. To put that into context

Speaker #4: And so obviously, that's very encouraging to see, a specific line item specifically for competition at 800 million. And Congress has also been really supportive of more competition and understanding that that's critical to having a strong industrial base in the US.

Speaker #4: And so if that continues, we believe York believes there's opportunity for material expansion into the $685 million for space data network mesh and ground architectures.

Speaker #4: So with those two alone, you're looking at about York's opportunity at about $1.5 billion. To put that into context, when we were looking at budgets before earlier kind of end part of last year, you'd see 200 million, 400 million as high as 500 million.

Dirk Wallinger: When we were looking at budgets before, you know, earlier kind of end part, end part of last year, you'd see, you know, $200 million, $400 million, as high as $500 million for transport. What we're seeing now is that in the new architecture under Space Data Network, we're seeing that opportunity more than tripled. Obviously, that's all, you know, very promising for us. We're very encouraged to see that. We like to see budgets for things where we are a key contributor triple, so that's great. Another thing to add is there also seems to be a little bit of confusion on kind of where York fits in the ecosystem and what our capabilities are.

Speaker #4: For transport. But what we're seeing now is that in the new architecture under Space Data Network, we're seeing that opportunity more than tripled. So, obviously, that's all very promising for us.

Speaker #4: We're very encouraged to see that. We like to see budgets for things where we are a key contributor triple. So that's great. But another thing to add is that they're also seems to be a little bit of confusion on kind of where York fits in the ecosystem and what our capabilities are.

Speaker #4: And obviously, for obvious reasons, there's a lot of focus on transport because it was an unclassified program for the most part as far as what it was asked to do.

Dirk Wallinger: Obviously, for obvious reasons, there's a lot of focus on transport because it was an unclassified program for the most part, as far as, you know, what it was asked to do. But we're seeing now that, look, there's very large budgets elsewhere. So that's why I'm pointing to our other capabilities because, you know, right now we are under contract for 7 different mission sets that are not Space Data Network. Right now we are executing advanced fire control, moving target indicator, remote proximity operations, tracking data relay, advanced waveforms, weather, and IVS. Those are all capabilities across the entire ecosystem, from classified programs over to Golden Dome programs. So when you look at the capabilities York has, obviously we have tremendous capabilities in SDN. Seeing that budget triple is phenomenal.

Speaker #4: But we're seeing now that, look, there's very large budgets elsewhere. And so that's why I'm pointing to our other capabilities because right now, we are under contract for seven different mission sets that are not space data network.

Speaker #4: Right now, we are executing advanced fire control, moving target indicator, remote proximity operations, tracking data relay, advanced waveforms, weather, and capabilities across the entire ecosystem from classified programs over to Golden Dome programs, right?

Speaker #4: And so, when you look at the capabilities York has—obviously, we have tremendous capabilities in FDN. Seeing that budget triple is phenomenal. But if you look at the classified side, we estimate the classified budget to be about $20.9 billion.

Dirk Wallinger: If you look at the classified side, we estimate the classified budget to be about $20.9 billion. It does have some overlap with the $17.5 billion for Golden Dome. Right now, we're tracking dozens of specific opportunities across five different classified mission areas. We also estimate our total opportunity is roughly about $16.3 billion. We obviously feel we're well-positioned for the unclassified $8 billion allocated to moving target indicator. When you're looking at the $20 billion for classified, $17 for Golden Dome, York looks like we have a target area of about $16 billion for work that we can do. That's why those other mission sets matter so much is 'cause we're the incumbent on a lot of those mission capabilities. We're doing it now.

Speaker #4: And it does have some overlap with the $17.5 billion for Golden Dome. But right now, we're tracking dozens of specific opportunities across five different classified mission areas.

Speaker #4: We also estimate our total opportunity is roughly about $16.3 billion. And we obviously feel we're well positioned for the unclassified $8 billion allocated to moving target indicator.

Speaker #4: So when you're looking at the $20 billion for Classified, $17 billion for Golden Dome, York, looks like we have a target area of about $16 billion for work that we can do.

Speaker #4: And so that's why those other mission sets matter so much is because we're the incumbent on a lot of those mission capabilities. We're doing it now.

Speaker #4: And we're one of probably only four companies, probably in the US, that is actually positioned to deliver hundreds of satellites immediately. So I kind of took it a little broad there, Peter.

Dirk Wallinger: We're one of probably only 4 companies in the US that is actually positioned to deliver hundreds of satellites immediately. I kind of, you know, took it a little broad there, Peter, but hopefully, that gives you a little more insight into what this budget actually says and what it actually looks like.

Speaker #4: But hopefully, that gives you a little more insight into what this budget actually says and what it actually looks like.

Speaker #5: That is really helpful, and I think it'll be very much appreciated. Maybe just a quick follow-up: Kevin, you mentioned there's no change in this year's annual guidance, but you did say things are shifting around.

Peter Arment: That is really helpful, and I think it'll be very much appreciated. Maybe just a quick follow-up. Kevin, you mentioned kind of there's no change in this year's annual guidance, but you did said things are shifting around. Could you just give it a little color what the supply chain issue is for Q2, or is it just a timing thing?

Speaker #5: Could you just give us a little color on what the supply chain issue is for Q2? Or is it just a timing thing?

Speaker #6: Yeah. Hey, Peter. Good question. And yeah, so just to reiterate, we are reaffirming our prior guidance of $545 to $595 million. And so what I mentioned in the prepared remarks is that we think a little bit of our two Q revenue that we were planning to hit in two Q will just be delayed into three likely three Q potentially some of that into four Q.

Kevin Messerle: Hey, Peter. Good question. Just to reiterate, we are reaffirming our prior guidance of $545 to 595 million. What I mentioned in the prepared remarks, is that we think a little bit of our Q2 revenue, that we were planning to hit in Q2 will just be delayed, into Q3, likely Q3, potentially some of that into Q4. It's all a timing thing. It doesn't change the, you know, the overall trajectory for the year. It is related to, you know, I would say a handful of suppliers. You know, I don't wanna publicly announce, you know, or who that might be.

Speaker #6: So it's all a timing thing. It doesn't change the overall trajectory for the year. And it is related to, I would say, a handful of suppliers. I don't want to publicly announce who that might be.

Kevin Messerle: You know, we're obviously, you know, we value our supply chain, and look, they're working on some challenging things for us in some instances. That's what's causing that, right? 'Cause we recognize revenue on a percentage of completion. Some of the development and the production status on certain of our purchase orders gets a little bit delayed. All that means is that revenue just kind of moves a little bit to the right in the year. I would say directionally, Peter, you know, one way to look at it, you know, although we don't guide quarterly revenue, you know, we anticipate Q2 2026 could be roughly flat year over year from Q2 2025.

Speaker #6: Obviously, we value our supply chain, and look, they're working on some challenging things for us in some instances. So that's what's causing that, right?

Speaker #6: Because we recognize revenue on a percentage of completion. So some of the production status on certain of our purchase orders gets a little bit delayed.

Speaker #6: All that means is that revenue just kind of moves a little bit to the right in the year. I would say, directionally, Peter, one way to look at it—although we don't guide quarterly revenue—we anticipate Q2 '26 could be roughly flat year over year from Q2 '25.

Kevin Messerle: Again, just a little bit of softness there, but, it's all just kind of moving to the right.

Speaker #6: So again, just a little bit of softness there, but it's all just kind of moving to the right.

Kevin Messerle: Again, just a little bit of softness there, but, it's all just kind of moving to the right.

Speaker #5: Thanks, gentlemen. Very helpful color. I'll jump back into Q.

Peter Arment: Thanks, gentlemen. Very helpful color. I'll jump back in queue.

Speaker #4: Your next question comes from the line of Austin Mueller from Canaccord Genuity. Your line is open. Please go ahead.

Operator 1: Your next question comes from the line of Austin Moeller from Canaccord Genuity. Your line is open. Please go ahead.

Operator: Your next question comes from the line of Austin Moeller from Canaccord Genuity. Your line is open. Please go ahead.

Speaker #7: Hi. Good afternoon, Jerk and Kevin. So first, could you just provide a little bit more color on the national security IDIQs? I think you hinted that it's somewhat related to Golden Dome or potentially the space data network solicitations in the J book.

Austin Moeller: Hi, good afternoon, Dirk and Kevin. First, could you just provide a little bit more color on the national security IDIQs? I think you hinted that it's somewhat related to Golden Dome or potentially the Space Data Network solicitations in the J book, but love any more detail on that.

Speaker #7: But love any more detail on that.

Speaker #6: Yeah. No, I appreciate that. Yeah. There's IDIQs or IDIQs to a lot of other folks. And so it's good for us to clarify that a little bit.

Dirk Wallinger: Yeah, no, I appreciate that. Yeah, there's, you know, IDIQs are IDIQs to a lot of other folks, you know, it's good for us to clarify that a little bit. There was some confusion that, you know, we kinda understood a little bit in the sense of there are a couple IDIQs that are for Golden Dome. They're on the unclassified side of things and, you know, there's a lot of people on them, right? It's, you know, 20, 40 people. I think 100 or something like that in one case. People were confusing that with the IDIQs I was talking about. Now to be clear, we are on those other IDIQs, but we're awardees there too, but we made no announcement about that.

Speaker #6: So there was some confusion that we kind of understood a little bit in the sense of there are a couple of IDIQs that are for Golden Dome.

Speaker #6: They're on the unclassified side of things. And there's a lot of people on them, right? It's 20, 40 people. I think 100 or something like that.

Speaker #6: In one case, people were confusing that with the IDIQs I was talking about. So now, to be clear, we are on those other IDIQs.

Speaker #6: But we're awardees there too. But we made no announcement about that. The two that I was referencing are basically, they're both for national security needs.

Dirk Wallinger: The two that I was referencing for, or referencing are basically, they're both for national security needs, so I'm not allowed to talk about the actual kind of mission set, but they were very selective. That's why we were excited about it, and that's why you heard me mention it last earnings call and there was a press release as well, is because they were extraordinarily selective about who they awarded to. It was a very small handful on both of those IDIQs. All the awardees on there, were, you know, basically had a long, storied history of successful execution in orbit, and have the ability to produce at scale.

Speaker #6: So I'm not allowed to talk about the actual kind of mission set. But they were very selective. So that's why we were excited about it.

Speaker #6: And that's why you heard me mention it in the last earnings call and there was a press release as well is because they were extraordinarily selective about who they awarded to.

Speaker #6: It was a very small handful on both of those IDIQs. All the awardees on there were basically had a long storied history of successful execution in orbit and have the ability to produce at scale.

Speaker #6: Both of those IDIQs, while I can't name what the mission sets are, I can say that they are both operational mission sets. Meaning that they are for capabilities that the government fields right now in very large quantities.

Dirk Wallinger: Both of those IDIQs, while I can't name what the mission sets are, I can say that they are both operational mission sets, meaning that they are for capabilities the government fields right now, in very large quantities. Being onboarded to both those IDIQs is obviously very exciting because it goes along the lines of, we can see now the overall theme of what the government has been doing is there's been a lot of frustration with, you know, what's going on with Golden Dome, what's going on with Space Data Network, et cetera. We can see now that what the government is doing is then putting contract vehicles in place with the vendors they think that can actually perform on these contracts and actually execute. That takes a lot of work for the government.

Speaker #6: So being onboarded to both those IDIQs is obviously very exciting because it goes along the lines of we can see now the overall theme of what the government has been doing is there's been a lot of frustration with what's going on with Golden Dome, what's going on with space data network, etc.

Speaker #6: And we can see now that what the government is doing has been putting contract vehicles in place with the vendors they think they can actually perform on these contracts and actually execute.

Speaker #6: And so that takes a lot of work for the government. That's still an area where we're not as fast as we probably need to be.

Dirk Wallinger: That's still an area where we're not as fast as we probably need to be. They've been working the last 2 quarters to get these contract awards in place, and I, you know, anticipate a large series of task orders coming out on both those IDIQs over the next 2 months. I can say that, you know, our business development team has been very busy responding to task order requests. We've actually just signed off on doubling our classified space, facility space as well. Very exciting 'cause they're operational missions. They were for a handful of people, not the hundreds that were on the unclassified IDIQ.

Speaker #6: But they've been working the last couple of quarters to get these contract awards in place, and I anticipate a large series of task orders coming out on both those IDIQs over the next couple of months.

Speaker #6: I can say that our business development team has been very busy. Responding to task order requests—actually just signed off on doubling our classified space facility space as well.

Speaker #6: So very exciting because they're operational missions. They were for a handful of people, not the hundreds that were on the unclassified IDIQs. So I wish I could tell you more about the mission.

Dirk Wallinger: I wish I could tell you more about the mission, but hopefully that gives you a little bit more insight that, you know, these are kinda real deal IDIQs. They're very exciting for us.

Speaker #6: But hopefully, that gives you a little bit more insight that these are kind of real deal IDIQs. And so they're very exciting for us.

Speaker #7: Okay. And you already discussed this at length, but I guess just to reiterate, if you can, you would think that on future contracts or program solicitations for space data network, Milnet, etc., Transportware, that it would be quite unusual for the Space Force, given their model for all the other contract vehicles they have, to sole source to a single vendor for anything, just given its reduction of competitiveness and you don't have a redundant second supplier.

Austin Moeller: Okay. You already discussed this at length, I guess just to reiterate, if you can, you would think that on future contracts or program solicitations for Space Data Network, MILNET, et cetera, transport-ware, that it would be quite unusual for the Space Force, given their model for all the other contract vehicles they have, to sole source to a single vendor for anything, just given its reduction of competitiveness and you don't have a redundant second supplier.

Dirk Wallinger: This is my perspective and opinion, so, take it for that. I'm in no way speaking on behalf of the government. I think there's kinda two gears going on. One is, look, we have an immediate need for capability in this country. I think that, you know, given events over the past couple months, you know, it's only really highlighted that. I do think that, look, if they've been working with suppliers and they've been producing successfully, they're gonna continue to do that. You don't wanna give up on a, on a great supplier and just suddenly shift gears. I do think there's a lot of congressional support and frankly support on the military side of things too, that, you know, we need to have a strong industrial base, which means that we need to have multiple suppliers.

Speaker #6: So this is my perspective and opinion. So take it for that. I'm in no way speaking on behalf of the government. But I think there's kind of two gears going on.

Speaker #6: One is, look, we have an immediate need for capability in this country. I think that given events over the past couple of months, it's only really highlighted that.

Speaker #6: So I do think that, look, if they've been working with suppliers and they've been producing successfully, they're going to continue to do that. You don't want to give up on a great supplier and just suddenly shift gears.

Speaker #6: But I do think there's a lot of congressional support. And frankly, support on the military side of things too that we need to have a strong industrial base, which means that we need to have multiple suppliers.

Speaker #6: So I wouldn't take it so far to say that they'll never sole source anything. I think it probably looks more like hey, let's continue to do the things that we're doing that are working, but look, we have a lot of dollars here.

Dirk Wallinger: I wouldn't take it so far to say that they'll never sole source anything. I think it probably looks more like, hey, let's continue to do the things that we're doing that are working. Look, we have a lot of dollars here. Congress has been very supportive of multiple suppliers, let's try and on-ramp other companies to produce at scale and see what they can do as well. I think it's more like that. I don't think it's quite as discrete. It's more of, you know, 2026 and 2027 and 2028 look like, let's get these companies from producing hundreds to producing thousands, and let's invest in multiple suppliers.

Speaker #6: Congress has been very supportive of multiple suppliers. So let's try an on-ramp. Other companies to produce at scale and see what they can do as well.

Speaker #6: So I think it's more like that. I don't think it's quite as discreet. It's more of 26 and 27 and 28 look like let's get these companies from producing hundreds to producing thousands.

Speaker #6: And let's invest in multiple suppliers.

Speaker #7: That's really helpful. Thanks for the details.

Austin Moeller: That's really helpful. Thanks for the details.

Speaker #6: Yeah. Well, and I'll add one more comment. So stuff like there was some Starlink terminals that were referenced in the budget. But so yeah, do you need Starlink terminals to work with Starlink?

Dirk Wallinger: Yeah. Well, I'll add one more comment. You know, stuff like, you know, there was some Starlink terminals that were referenced in the budget. You know. Like, yeah, do you need Starlink terminals to work with Starlink? Yes. That's probably a sole source for that one. That was, you know, $25 million of over, I think, $3.8 billion, when you include launch. I think that's a good example of, look, we'll continue to use things that work.

Speaker #6: Yes. So that's probably a sole source for that one. But that was 25 million of over, I think, 3.8 billion when you include launch.

Speaker #6: So I think that's a good example of, look, we'll continue to use things that work.

Speaker #7: And you have all explained terminals now, right?

Austin Moeller: And you have all-

Dirk Wallinger: We want to expand

Austin Moeller: terminals now, right?

Speaker #6: What was that?

Dirk Wallinger: What was that?

Speaker #7: You have flat panel antennas from AllSpace now.

Austin Moeller: You have flat panel antennas from ALL.SPACE now.

Speaker #6: We do. That's exactly right. So we're very excited about the addition of AllSpace. And obviously, we've decided definitive agreement. And we still have regulatory approvals.

Dirk Wallinger: We do. That's exactly right. We're very excited about the addition of ALL.SPACE, and obviously we've just signed a definitive agreement and we still have regulatory approvals. Yeah, that's the real capability that ALL.SPACE is bringing, is that it's a multi-beam antenna. I think it has 4 different beams. It can talk to GEO, HEO, LEO, and MEO, all of them. What the difference there is that it really provides this assured comm. You notice that York tends to be really focused on tactical capabilities like in the theater, and that's precisely what the ALL.SPACE capability does, is because it's multi-beam, because it's an electronically steered antenna, it's very hard to jam. It's very hard to basically take it out of communication. We've seen that, right?

Speaker #6: But yeah, that's the real capability that AllSpace is bringing, is that it's a multi-beam antenna. I think it has four different beams. It can talk to GEO, HEO, LEO, MEO.

Speaker #6: All of them. And what the difference there is, is that it really provides this assured calm. So you notice that York tends to be really focused on tactical capabilities, like in the theater.

Speaker #6: And that's precisely what the AllSpace capability does is because it's multi-beam, because it's an electronically steered antenna, it's very hard to jam. And it's very hard to basically take it out of communication.

Speaker #6: And we've seen that, right? We've seen in the places that we're in nowadays, we're having people are having a really hard time with communications.

Dirk Wallinger: We've seen, in the places that we're in nowadays, we're having a, people are having a really hard time with communications, that's what the Allspace antenna does. In addition, right, you'll notice just generally in the market, there's a lot of focus on unmanned systems, right? Rightfully so. There's a lot of excitement about all the unmanned boats and ships and subs and things like that we need capability for in the sea, same thing on the land, right? We're very focused on production right now, what we loved about the Allspace being added in was that when you have the production and it works, if you can't talk to it, then really doesn't matter, right?

Speaker #6: And so that's what the AllSpace antenna does. In addition, you'll notice just generally in the market there's a lot of focus on unmanned systems, right?

Speaker #6: Rightfully so. There's a lot of excitement about all the unmanned boats, ships, subs, and things like that that we need capability for in the sea.

Speaker #6: And same thing on the land, right? We're very focused on production right now. But what we loved about the AllSpace being added in was that when you have the production, and it works, if you can't talk to it, then really doesn't matter, right?

Speaker #6: If they're able to jam your communications, if they're able to jam your GPS, then that's going to be a major problem. And so the fundamental design of the AllSpace system is much more robust towards that.

Dirk Wallinger: If they're able to jam your communications, if they're able to jam your GPS, then that's gonna be a major problem. The fundamental design of the ALL.SPACE system is much more robust towards that. That's why it's gonna enable the unmanned systems to work in communication-denied environments as well. That's a little bit of a nuance that I think most people didn't get about really the brilliance of what Paul and ALL.SPACE were doing. Coupling that with an assured communication and capabilities backbone in space really gives you that global connectivity that frankly, as a country, we're gonna need. Excellent. Thank you.

Speaker #6: And so that's why it's going to enable the unmanned systems to work in communication-denied environments as well. So that's a little bit of a nuance that I think most people didn't get about, really, the brilliance of what Paul and AllSpace were doing. Coupling that with an assured communication and capabilities backbone in space really gives you that global connectivity that, frankly, as a country we're going to need.

Speaker #7: Excellent. Thank you.

Operator 1: Your next question comes from the line of John Godyn from Citigroup. Please go ahead.

Operator: Your next question comes from the line of John Godyn from Citigroup. Please go ahead.

Speaker #1: Your next question comes from the line of John Goodin from Citigroup. Please go ahead.

Speaker #8: Hey, guys. This is Max on for John. Thanks for taking my question. I was just wondering if you could double-click on the capital allocation strategy a bit.

[Analyst] (Citigroup): Hey, guys. This is Max on for John. Thanks for taking my question. I was just wondering if you could double-click on the capital allocation strategy a bit. You mentioned, you know, an M&A strategy of investing in growing adjacent markets. I was curious if this is part of the strategy of diversifying away from, like the SDN dependency, or it's just like part of, like, your inorganic growth strategy as a whole. If you can provide some high-level color into these rapidly growing adjacent markets. Thanks.

Speaker #8: You mentioned an M&A strategy of investing and growing adjacent markets. I was curious if this is part of the strategy of diversifying away from the SDN dependency or if just part of your inorganic growth strategy as a whole.

Speaker #8: And if you can provide some high-level color into these rapidly growing adjacent markets. Thanks.

Speaker #6: Yeah. So yeah. So on our earnings and today, we've always talked about there's two really areas that we're going to look at is the major focus.

Dirk Wallinger: Yeah. On our, you know, on our earnings and today, we've always talked about there's two really areas that we're gonna look at as the major focus. One of them is supply chain because as Kevin alluded to, you know, there's just a lot of areas where we are highly dependent on China and other countries, and that has to end. Solar cells are one prime example of pretty much everything on solar cells. For space, triple junction type of cells comes from China or places that are unfriendly, so we need to change that. You know, we had the Orbion acquisition as well. Like, they're a premier supplier of propulsion systems. They're operating phenomenally for us in orbit on numerous missions.

Speaker #6: One of them is supply chain because, as Kevin alluded to, there's just a lot of areas where we are highly dependent on China and other countries.

Speaker #6: And that has to end. Solar cells are one prime example of pretty much everything on solar cells. For space, triple junction type of cells comes from China or places that are unfriendly.

Speaker #6: And so we need to change that. We had the Orbean acquisition as well. They're a premier supplier of propulsion systems. They're operating phenomenally. For us in orbit on numerous missions and so bringing that kind of high technology capability in and then securing our supply chain from sources who we know will be unfriendly in the future, right?

Dirk Wallinger: Bringing that kind of high technology capability in and then securing our supply chain from sources who we know will be unfriendly in the future, right? That's important to us. The other piece is it isn't about you know, diversifying away from SDN. As I kind of alluded to, you know, earlier in the call, you know, we have 8 different mission sets. SDN is 1 of them, but we have 7 other ones. As far as diversity of capabilities and ability for us to grow in numerous mission markets that are all ripe for proliferation, we feel very good about where we're at from a satellite manufacturing capabilities perspective. The strategy, though, is more of, look, we provide global connectivity and global solutions. That's what we do. We build autonomous robots in space, right?

Speaker #6: That's important to us. But the other piece is it isn't about diversifying away from SDN. As I kind of alluded to earlier in the call, we have eight different mission sets.

Speaker #6: SDN is one of them. But we have seven other ones. So as far as diversity of capabilities, and ability for us to grow in numerous mission markets that are all ripe for proliferation, we feel very good about where we're at from a satellite manufacturing capabilities perspective.

Speaker #6: The strategy, though, is more of, look, we provide global connectivity and global solutions. That's what we do. We build autonomous robots, in space, right?

Speaker #6: They operate for weeks, months, could be years on end, right? And so they have these autonomy and controls and capabilities there. And what we want to do is leverage that knowledge and experience and help adjacent markets.

Dirk Wallinger: They operate for weeks, months, some, you know, could be years on end, right? They have these autonomy and controls and capabilities there, and what we wanna do is leverage that knowledge and experience and help adjacent markets. That's where we saw that by coupling with ALL.SPACE, we could take advantage of the massively growing and expanding unmanned markets. They are already doing phenomenally well in mobile markets. But unmanned markets, we can support that. By that terminal, being connected to our global system, what it means now is all these manufacturers for both subs, ships, land vehicles, et cetera, we can offer them a turnkey, assured connectivity and autonomy solution.

Speaker #6: And so, that's where we saw that, by coupling with AllSpace, we could take advantage of the massively growing and expanding unmanned markets. They're already doing phenomenally well in mobile markets.

Speaker #6: But unmanned markets, we can support that. And by that terminal, being connected to our global system, what it means now is all these manufacturers for both subs, ships, land vehicles, etc., we can offer them a turnkey assured connectivity and autonomy solution.

Dirk Wallinger: Yeah, we have a lot of interest that we see that, you know, robots, and, and everything like that is going to be important to what the United States is doing in the future. We're making offensive moves right now to try and help that market grow, and be successful, and execute. Right now the focus is a lot on manufacturing, but the next step is how do you get these things to work? How do you connect them? How do you make sure that they understand where they're at? How are you coordinating them? That's where we think that there's lots of opportunity for York to grow because, frankly, that's exactly what we do for satellite constellations right now.

Speaker #6: And so yeah, we have a lot of interest that we see that robots and everything like that is going to be important to what the United States is doing in the future.

Speaker #6: So we're making offensive moves right now to try and help that market grow and be successful in execute, because right now the focus is a lot on manufacturing.

Speaker #6: But the next step is how do you get these things to work? How do you connect them? How do you make sure that they understand where they're at?

Speaker #6: How are you coordinating them? And so that's where we think that there's lots of opportunity for York to grow, because frankly, that's exactly what we do for satellite constellations right now.

Speaker #8: Hey, that was helpful. I'm just going to add a quick little plug here. In the earnings deck that's posted to the website, there are some really helpful slides.

Kevin Messerle: Hey, Dirk. I'm just gonna add a quick little plug here. In the earnings deck that's posted to the website, there's some really helpful slides we think that will help kind of illustrate what Dirk just talked about as it relates to this whole ALL.SPACE ecosystem. Slides eight, nine, and ten. Whenever folks get a chance, I would encourage you to have a look at those slides.

Speaker #8: We think that will help kind of articulate or kind of illustrate what Dirk just talked about as it relates to this whole AllSpace ecosystem.

Speaker #8: So slides 8, 9, and 10, whenever folks get a chance, I would encourage you to have a look at those slides.

Speaker #6: Yeah. Kevin's piping up because he told me before the call. You might want to reference those. Fair good at it, Kevin. Thank you.

Dirk Wallinger: Yeah. Kevin's piping up 'cause he told me before the call. You might wanna reference those. Fair, fair. Good add, Kevin. Thank you.

Speaker #8: Great. That was helpful. That's all from me. Thank you.

[Analyst] (Citigroup): Great. That was helpful. That's all for me. Thank you.

Speaker #1: Your next question comes from the line of Seth Seifman from JPMorgan. Please go ahead.

Operator 1: Your next question comes from the line of Seth Seifman from JP Morgan. Please go ahead.

Operator: Your next question comes from the line of Seth Seifman from JP Morgan. Please go ahead.

Speaker #9: Okay, thanks very much, and good afternoon. I wanted to ask about the EACs in the quarter and what drove the cost growth that led to those, and whether that's associated at all with the schedule delays you're expecting, and whether those delays bring any profitability risk with them.

Seth Seifman: Okay. Thanks very much. Good afternoon. I wanted to ask about the EACs in the quarter, you know, what drove the cost growth that led to those, and you know, whether that's associated at all with the schedule delays you're expecting and whether those delays bring any profitability risk with them.

Speaker #6: Yeah, I'll take that one, Dirk. Hey, Seth, good to hear from you. Yeah, what I would say with the first quarter EAC change—it was negative.

Kevin Messerle: Yeah, I'll take that one, Dirk. Hey, Seth. Good to hear from you. Yeah. What I would say with the first quarter EAC change, it was negative. There's a kind of a good story behind it, and let me I'll share what I can with it. You know, we have a particular, you know, very important Government customer that has a very important mission. There's been, you know, over the past year or two, a little bit of uncertainty on particular technical capabilities. The good news is, in the first quarter, you know, our tech teams and the Government's tech teams, you know, came to an agreement on what that technical capability should look like.

Speaker #6: But there's a kind of a good story behind it, and I'll share what I can with it. We have a particular, very important government customer that has a very important mission.

Speaker #6: And there's been over the past year or two, a little bit of uncertainty on particular technical capabilities. And the good news is in the first quarter, our tech teams and the government's tech teams came to an agreement on what that technical capability should look like.

Speaker #6: And frankly, it's going to increase a little bit of material cost and a little bit of labor cost on our side. And we felt the right thing to do for this customer, and for this mission—which is an extremely important one for our nation—was to absorb that and not get into any sort of back-and-forth on getting a contract mod put in place for this.

Kevin Messerle: You know, frankly, it's gonna increase a little bit of material cost and a little bit of labor cost on our side. We felt the right thing to do for this customer and for this mission, which is an extremely important one for our nation, was to absorb that and not get into any, you know, sort of, back and forth on, you know, getting a contract mod put in place for this. That, that's really the punchline on that EAC change. That's about 1 point of the 4 points of margin decline year-over-year is associated to that one-time event. You know, there could be some upside, you know, if we end up accomplishing that below those costs we estimated.

Speaker #6: So that's really the punchline on that EAC change. And that's about one point of the four points of margin decline year over year. Is associated with that one-time event.

Speaker #6: There could be some upside if we end up below those costs we estimated. But we wanted to put forth a reasonably conservative estimate of what it would take to get this very important mission to the finish line, and we're going to get it done.

Kevin Messerle: We wanted to put forth a reasonably conservative estimate of what it would take to get this very important mission to the finish line, and we're gonna get it done, and it's gonna be a very important mission. The other thing worth mentioning in the gross margin decline year-over-year, about 2 points were caused by accelerated depreciation, a non-recurring depreciation charge of a satellite that we had in orbit. It's a hosted payload mission. We don't really do those anymore.

Speaker #6: And it's going to be a very important mission. The other thing worth mentioning in the gross margin decline year over year about two points were caused by accelerated depreciation a non-recurring depreciation charge of a satellite that we had in orbit.

Speaker #6: It's a hosted payload mission. We don't really do those anymore. A few years ago, those were some of the missions we were doing, where we would own the satellite, take a customer's payload, and then we would operate the satellite and the payload for the customer.

Kevin Messerle: A few years ago, those were some of the missions we were doing where we would own the satellite, take a customer's payload, and then we would operate the satellite and the payload for the customer. We don't do that anymore, but it was a one-time non-recurring depreciation charge related to that particular asset. What I would say, Seth, is that absent those two non-recurring events, we actually would've been up slightly year-over-year on a gross margin basis and up sequentially from Q4 on a gross margin basis.

Speaker #6: We don't do that anymore. But it was a one-time, non-recurring depreciation charge related to that particular asset. So what I would say, Seth, is that, absent those two non-recurring events, we actually would have been up slightly year over year on a gross margin basis and up sequentially from fourth quarter on a gross margin basis.

Speaker #6: So again, things that aren't going to recur again, and actually, like I said, the EAC is actually sort of a good story when you look at what we're doing here for that customer.

Kevin Messerle: Again, you know, things that aren't gonna recur again, and actually, like I said, that the EAC is actually sort of a good story when you look at what we're doing here for that customer. Okay. Excellent. And maybe just one clarification question to follow up. The revenue guide for the year, the unchanged revenue outlook, that's an organic outlook, correct? With no contribution from ALL.SPACE or any other acquisitions? That's correct, Seth. We're not, you know, until we close that deal, we're not gonna be adjusting guidance vis-a-vis ALL.SPACE. We'll take a look at that later in the later in the year. Okay. Excellent. Thanks very much.

Speaker #9: Okay. Okay. Excellent. And maybe just one clarification question to follow up. The revenue guide for the year, the unchanged revenue outlook, that's an organic outlook, correct?

Speaker #9: With no contribution from AllSpace or any other acquisitions?

Speaker #6: That's correct, Seth. We're not—until we close that deal, we're not going to be adjusting guidance vis-à-vis AllSpace. So we'll take a look at that later in the year.

Speaker #9: Okay. Excellent. Thanks very much.

Operator 1: Your next question comes from the line of Sheila Kahyaoglu from Jefferies. Please go ahead.

Operator: Your next question comes from the line of Sheila Kahyaoglu from Jefferies. Please go ahead.

Speaker #1: Your next question comes from the line of Sheila Kayaglu from Jefferies. Please go ahead.

Speaker #10: Hi, guys. This is Kyle on for Sheila. Thanks for taking my question. As it relates to sort of the full-year revenue guide, I'd appreciate a little bit of color in terms of sort of what is already in backlog today to get there.

[Analyst] (Jefferies): Hi, guys. This is Kyle on for Sheila. Thanks for taking my question. As it relates to sort of the full-year revenue guide, I'd appreciate, you know, a little bit of color in terms of, you know, sort of what is already in backlog today to get there. I know you called out some of the timing issues that seem more near term, but, you know, what is sort of still the go get or need to win to kind of hit the full-year guide?

Speaker #10: You called out some of the timing issues that seem more near-term. But what is sort of still the go-get or need to win to kind of hit the full-year guide?

Speaker #6: Kevin, I'll let you go, and then I can add insight onto some of the changing dynamics as far as revenue recognition and stuff from the 10,000-foot level.

Dirk Wallinger: Kevin, I'll let you go, and then I can add insight onto some of the changing dynamics as far as, you know, revenue recognition and stuff from the ten-thousand foot level. Sure. Yeah. You know, if you look at our, our range of $545 to $595, midpoint of $570, you know, as we mentioned on our last call in March, 70% of that is backlog, and that has not changed. That, you know, kind of implies obviously, right, that 30% of that $570 number, you know, is new business. We have chipped away, you know, frankly a little bit on that, on that go get for the new business.

Speaker #5: Sure. Yeah. So if you look at our range of 545 to 595 midpoint of 570, as we mentioned on our last call in March, 70% of that is backlog.

Speaker #5: And that has not changed. And so that kind of implies, obviously, right, that 30% of that 570 number is new business. We have chipped away, frankly, a little bit on that go-get for the new business.

Speaker #5: That's related to that commercial, the $187 million commercial contract that we signed in the first quarter. To be clear, it's not a super material number.

Kevin Messerle: That's related to that commercial the $187 million commercial contract that we signed in Q1. To be clear, it's not a super material number. Most of that's going to be 2027 revenue, it does contribute a little bit to that. That's kind of the high-level roadmap. You know, as we talked about on our March call as well, you know, this is consistent with our plan. You know, we were not anticipating any large scale, you know, contract, you know, government contract awards in Q1, or frankly, even in Q2. We think that is going to be a H2 event.

Speaker #5: Most of that's going to be 2027 revenue, but it does contribute a little bit to that. So that's kind of the high-level roadmap. As we talked about on our March call as well, this is consistent with our plan.

Speaker #5: We were not anticipating any large-scale government contract awards in the first quarter or, frankly, even in the second quarter. We think that is going to be a second-half event.

Speaker #5: And based on what I would say is robust activity going on with our BD and proposal folks, that's why we still feel very good about that new business go-get.

Kevin Messerle: Based on the what I would say, robust activity going on with our BD and proposal folks, that's, you know, we still feel very good about that new business go get. Dirk, I don't know if you have anything you wanna add. Yeah. I mean, that's one of the dynamics we're seeing, and I alluded to it, you know, on kind of one of the questions, was just that the government, you know, although some folks are a little frustrated with the transparency, but I understand where it's coming from because they've been working very diligently on basically putting all the contract vehicles in. Most of these are IDIQs and OTAs, so other transaction authorities.

Speaker #5: So, Dirk, I don't know if you have anything you want to add.

Speaker #6: Yeah. I mean, that's one of the dynamics we're seeing. And I alluded to it on kind of one of the questions was just that the government, although some folks are a little frustrated with the transparency, but I understand where it's coming from because they've been working very diligently on basically putting all the contract vehicles in.

Speaker #6: And most of these are IDIQs and OTAs, so Other Transaction Authorities. So they competitively compete them and award, so that after that, they can just put out task orders and get the dollars to flow.

Dirk Wallinger: They competitively compete them an award so that after that, they can just put out task orders and get the dollars to flow. That's what's pretty different about what's happening kind of today versus this industry for the past, I don't know, decade and a half that I've been working on it, is they're putting all the construction kind of capabilities so that they can let the dollars flow and flow quickly. What we're seeing is a few things. One is the time cycles for award are gonna be a lot shorter because they spent all their time getting people onto contracts, either through OTAs, of which I think we have 5 or 6, plus numerous IDIQs, of which I think we also have 5 or 6.

Speaker #6: And so that's what's pretty different about what's happening kind of today versus this industry for the past, I don't know, decade and a half that I've been working on it, is they're putting all the construction kind of capabilities so that they can let the dollars flow, and flow quickly.

Speaker #6: And so what we're seeing is a few things. One is the time cycles for award are going to be a lot shorter, because they spent all their time getting people onto contracts either through OTAs, of which we think we have five or six, plus numerous IDIQs, of which I think we also have five or six.

Speaker #6: And then what they're doing is issuing task orders so that they can immediately go to execute and issue the dollars. They're also doing a lot of RFIs that are awardable, which is rare.

Dirk Wallinger: What they're doing is issuing task orders, so that they can immediately go to execute and issue the dollars. They're also doing a lot of RFIs that are awardable, which is rare. The process used to be RFI.

Speaker #6: The process used to be RFI, draft RFP, RFP, award, then dollars. Right? And so now, because they have these contract vehicles in place, they're doing RFIs and they're saying, "By the way, we might just award it." So there's going to be a significant acceleration of task orders and dollars issued.

Dirk Wallinger: Draft RFP award, then dollars, right? Now, because they have these contract vehicles in place, they're doing RFIs and they're saying, By the way, we might just award it. There's just going to be a significant acceleration of, you know, task orders and dollars issued in, I think, in the next quarter or two. The programs themselves are much shorter. You know, historically for us, we're one of the faster builders and deployers, but that schedule was typically like 3 years plus. Now they're talking about 2-year schedules. The reason this matters is because, as Kevin alluded to, you know, we typically, you know, basically recognize our revenue as a function of cost. Well, if the program is shorter, you're recognizing that they're recognizing that contract value over a much shorter period. You know, contract vehicles are in place.

Speaker #6: And I think in the next quarter or two, the programs themselves are much shorter. So historically, for us, we're one of the faster builders and deployers.

Speaker #6: But that schedule was typically like three years plus. Now they're talking about two-year schedules. And the reason this matters is because, as Kevin alluded to, we typically basically recognize our revenue as a function of cost.

Speaker #6: Well, if the program is shorter, you're recognizing that contract value over a much shorter period. So contract vehicles are in place. Task orders are coming out.

Dirk Wallinger: Task orders are coming out. They've significantly shortened the procurement life cycle by awarding contracts ahead. The schedules themselves are significantly shorter as well. In our case, as I alluded to, you know, we're buying inventory, right? We're buying 20 space vehicles of inventory right now. I have another 11 already. What that means is that when you have inventory, we can immediately move it from inventory. When we're awarded a contract, it gets moved immediately over to the program cost, and we can recognize that immediately. There's also the kind of financial metrics of standing up a large production company like we have, where you're able to shorten these cycles, build inventory, recognize revenue quickly, and shorten these schedules.

Speaker #6: They've significantly shortened the procurement lifecycle by awarding contracts ahead. The schedules themselves are significantly shorter as well. And then, in our case, as I alluded to, we're buying inventory.

Speaker #6: Right? So we're buying 20 space vehicles of inventory right now. I have another 11 already. And so what that means is that when you have inventory, we can immediately move it from inventory—when we're awarded a contract, it gets moved immediately over to the program cost.

Speaker #6: And we can recognize that immediately. So there's also the kind of financial metrics of standing up a large production company like we have, where you're able to shorten these cycles, build inventory, recognize revenue quickly, and shorten these schedules.

Speaker #6: So, there's just a tremendous dynamic that's been going on. And it appears, I think, to a lot of folks who aren't familiar with what the government's doing, that there's not transparency.

Dirk Wallinger: There's just a tremendous dynamic that's been going on. It appears, I think, to a lot of folks who aren't familiar with what the government's doing, that, you know, there's not transparency and it just seems like it's dragging on. It actually hasn't. They've been doing a lot of work, we're starting to see the benefits of that work that they've done. Long way of saying we're gonna be able to recognize the revenue in shorter cycles is how I see it.

Speaker #6: And it just seems like it's dragging on. It actually hasn't. They've been doing a lot of work, and we're starting to see the benefits of that work. We're going to be able to recognize the revenue in shorter cycles, is how I see it.

Speaker #5: Understood. Very helpful and very thorough. If I could ask just one on the commercial side—with this large contract from February in, does that sort of change the construct of what growth could be in that end market?

[Analyst] (Jefferies): Understood. Very helpful and very thorough. If I could ask just one on the commercial side with, you know, this large contract from February end, does that sort of change the construct of what growth could be in that end market? I know you talked about the biz dev teams being very active across the different channels.

Speaker #5: I know you talked about the biz dev teams being very active across the different channels.

Speaker #6: Yeah, we're very excited about that commercial opportunity because it's the first of many constellations that this customer needs. And they've been very successful in the work that they've done on their side of things.

Dirk Wallinger: Yeah, we're very excited about that commercial opportunity because it's the first of many constellations that this customer needs. They've been, you know, very successful in the work that they've done on their side of things. Yeah, I think that there's gonna be tremendous growth on the commercial side of things. We're also working some different avenues to overcome the capital, the upfront capital that's typically required with satellites. Kevin's been doing a little work there too. No, commercial side, I see tremendous growth and the ability to leverage our, you know, production line and our production capabilities and our fully developed mission operations software suites is gonna be critical to help unlock and grow the commercial side of the business as well.

Speaker #6: So yeah, I think that there's going to be tremendous growth in the commercial side of things. We're also working some different avenues to kind of overcome the upfront capital that's typically required with satellites.

Speaker #6: And so Kevin's been doing a little work there too. But no, commercial side, I see tremendous growth. And the ability to leverage our production line and our production capabilities and our fully developed mission operations software suites is going to be critical to help unlock and grow the commercial side of the business as well.

Speaker #5: Thank you.

[Analyst] (Jefferies): Thank you.

Speaker #1: Your next question comes from the line of Ryan Koontz from Nedim & Co. Please go ahead.

Operator 1: Your next question comes from the line of Ryan Koontz from Needham & Company. Please go ahead.

Operator: Your next question comes from the line of Ryan Koontz from Needham & Company. Please go ahead.

Speaker #5: Great, thanks. I wanted to follow up on Allspace a bit more. Dirk, can you comment on the intellectual property and kind of track record of the products, number one, and, number two, when do you think that product will be able to ship and in material volumes?

Ryan Koontz: Great. Thanks. I wanted to follow up on ALL.SPACE a bit more. You know, Dirk, can you comment on, you know, the intellectual property and kind of track record of the products, number one. Number two, you know, when do you think you that product will be able to, you know, ship in material volumes, and is it, is the supply chain ready, or is there a lot of work to do there? Thank you.

Speaker #5: And is it supply chain ready, or is there a lot of work to do there? Thank you.

Speaker #6: Yeah, appreciate it. Yeah, Allspace is a phenomenal company. Their headquarters and their technical excellence are based in the UK, but their production capacity is actually in the US.

Dirk Wallinger: Yeah, appreciate it. Yeah, ALL.SPACE is a, you know, phenomenal company. Their headquarters and their, you know, their technical excellence is based in the UK, but their production capacity is actually in the US. It's not a, it's not an immature product by any means. They're already, you know, out there deployed and doing exercises. They have contracts with the U.S. Army and U.S. Navy. We'd love to work with them and expand their capability for the Air Force on the space side of things too, and I think we'll have a lot of success doing it. That terminal obviously is a phenomenal fit for Golden Dome. You know, assured communications that are far more resistant to jamming is definitely required for Golden Dome specifically. They have mass production in Alabama.

Speaker #6: So it's not an immature product by any means. They're already out there deployed and doing exercises. And they have contracts with the Army and Navy.

Speaker #6: We'd love to work with them and expand their capability for the Air Force, and on the space side of things too. And I think we'll have a lot of success doing it.

Speaker #6: That terminal, obviously, is a phenomenal fit for Golden Dome. Assured communications that are far more resistant to jamming is definitely required for Golden Dome specifically.

Speaker #6: And so they have mass production in Alabama. I think that we are going to—New York is opening an office in Alabama. As I alluded to in the prepared remarks, and so we're probably going to expand our footprint in Alabama as well, to support the kind of mass production that they're going to need.

Dirk Wallinger: I think that, York is opening an office in Alabama, as I alluded to in the prepared remarks. We're probably gonna expand our footprint in Alabama as well to support the kind of mass production that they're gonna need. I think they're really just the beginning. I mean, right now, you know, it's the military that is the main, you know, source of demand. As I alluded to, you know, as Kevin said, you know, if you look at the slides as well, right, slides, I think 9 and 10, what you see is that you need this capability to support unmanned systems at the scale that we are gonna need.

Speaker #6: And I think they're really just the beginning. I mean, right now, it's the military that is the main source of demand. But as I alluded to, as Kevin said—if you look at the slides as well, right, I think 9 and 10—what you see is that you need this capability to support unmanned systems at the scale that we are going to need.

Speaker #6: And that part actually has me personally the most excited, because that's really what you need—is you need these unmanned systems, but you need them out there in hundreds and thousands. The connectivity that Allspace and York bring together supports that capability and makes sure that it's going to work in the field when you need it.

Dirk Wallinger: That part actually has me personally the most excited because that's really what you need, is you need these unmanned systems, but you need them out there in hundreds and thousands. The connectivity that ALL.SPACE and York Space Systems bring together, support that capability and make sure that it's gonna work in the field when you need it.

Speaker #5: That's great, Dirk. Thanks so much.

Ryan Koontz: That's great, Dirk. Thanks so much.

Speaker #1: Your next question comes from the line of David Strauss from Wells Fargo. Please go ahead.

Operator 1: Your next question comes from the line of David Strauss from Wells Fargo. Please go ahead.

Operator: Your next question comes from the line of David Strauss from Wells Fargo. Please go ahead.

Speaker #7: Hi, this is Ben Tomikulin for David. I was just wondering if we could go back to the SDA and transport layer. For what you already have under contract for Tranche 1 and Tranche 2, is there any update to the launch schedule there?

Ben Tzakih: Hi, this is Ben Tzakih going for David Strauss. I was just wondering, if we could go back to the SDA and transport layer. For what you already have under contract for Tranche 1 and 2, is there any update to the launch schedule there? I know there were some delays. From that funding, how much of that has been recognized already?

Ben Tomick: Hi, this is Ben Tzakih going for David Strauss. I was just wondering, if we could go back to the SDA and transport layer. For what you already have under contract for Tranche 1 and 2, is there any update to the launch schedule there? I know there were some delays. From that funding, how much of that has been recognized already?

Speaker #7: I know there were some delays. And then, from that funding, how much of that has been recognized already?

Dirk Wallinger: Well, yeah. Kevin will talk to the funding piece. The launch schedule is actually controlled, and we need SDA's permission to do that. I think it's probably safe for me to say that the vehicles are very mature and we feel they're ready to ship, but it's up to the SDA to announce exactly when that next launch is scheduled. Kevin, maybe you can answer the other part. Yeah. On the funding, you know, we can't get into too many details on that, but broadly speaking, you know, we've only received funding, you know, for the both Tranche 2 programs, you know, is less than 50%, right?

Speaker #6: We have. So Kevin will talk to the funding piece. The launch schedule is actually controlled, and we need SDA's permission to do that. I think it's probably safe for me to say that the vehicles are very mature, and we feel they're ready to ship.

Speaker #6: But it's up to the SDA to announce exactly when that next launch is scheduled. But Kevin, maybe you can answer the other part.

Speaker #5: Yeah. On the funding, we can't get into too many details on that. But broadly speaking, we've only received funding for both Tranche 2 programs.

Kevin Messerle: Yeah. On the funding, you know, we can't get into too many details on that, but broadly speaking, you know, we've only received funding, you know, for the both Tranche 2 programs, you know, is less than 50%, right?

Speaker #5: It's less than 50%, right? So we're in significant contract asset status, meaning we've incurred more cost, we've recognized more revenue than cash received. So that's just a timing thing.

Kevin Messerle: We're in significant contract asset status, meaning we've incurred more costs, we've recognized more revenue than cash received. That's just a timing thing. It all kinda comes out in the wash.

Speaker #5: It all kind of comes out in the wash.

Speaker #7: Got it. And then, could you provide any update on current build rates, and maybe how progress has been on the Potomac facility?

Ben Tzakih: Got it. Could you provide any update on current build rates and maybe, like, how progress has been on the Potomac facility?

Ben Tomick: Got it. Could you provide any update on current build rates and maybe, like, how progress has been on the Potomac facility?

Speaker #6: Yeah. So Potomac's coming around really, really quickly. Right now, its main function is assembly, integration, and test. And they've improved that ability significantly. I mean, at the beginning of Q1, it took like, I believe—I'm kind of going off the top of my head—but I believe it took roughly a week for us to get through vibration testing through X, Y, and Z axes.

Dirk Wallinger: Potomac's coming around really, really quickly. You know, right now, its main function is assembly, integration, and test. They've improved that ability significantly. I mean, you know, at the beginning of, you know, T1, it took, like, I believe, you know, I'm kind of going off the top of my head. I believe it took roughly a week for us to get through vibration testing through X, Y, and Z axes. I think today they do it in, like, a day routinely. We've seen significant improvements there. We're receiving, we're standing up production capability in the sense of, like, we're starting to receive a lot of that, and we're starting in the process of starting some building over at Potomac.

Speaker #6: And I think today they do it in, like, a day routinely. So we've seen significant improvements there. We continue to—we're receiving—we're standing up production capability in the sense of, like, we're starting to receive a lot of that.

Speaker #6: And we’re starting in the process of starting some building over at Potomac. And so, that’s kind of a weird way where a lot of supply chain talks about the satellite hardware and capabilities there.

Dirk Wallinger: That's kind of a weird way where, you know, a lot of supply chain talks about the satellite hardware and capabilities there, but supply chain definitely affects your ground test equipment, and your, and your mission-specific test equipment as well. We're deploying that now. It'll take a little bit longer, but I think that we'll probably be full capacity by 2026, as far as, you know, with the goal of trying to achieve, you know, 1,000 a year.

Speaker #6: But supply chain definitely affects your ground test equipment and your mission-specific test equipment as well. And so we're deploying that now. It'll take a little bit longer, but I think that we'll probably be at full capacity by, like, 2026, as far as with the goal of trying to achieve 1,000 a year.

Speaker #7: Great. Thank you.

Ben Tzakih: Great. Thank you.

Ben Tomick: Great. Thank you.

Speaker #1: Your next question comes from the line of Mitch Ingles from Raymond James. Please go ahead.

Operator 1: Your next question comes from the line of Mitch Ingalls from Raymond James. Please go ahead.

Operator: Your next question comes from the line of Mitch Ingalls from Raymond James. Please go ahead.

Speaker #7: Hey, everyone. I'm on for Brian. Congrats on the solid quarter, and thanks for all the color—very helpful so far. So, I just had a quick question.

Mitch Ingalls: Hey, everyone. I am on for Brian Gesuale. Congrats on a solid quarter, and thanks for all the color. It has been very helpful so far. I just had a quick question. You mentioned you started building the first 20 platforms to accelerate your time to delivery. What is your target inventory level by the end of the year, and how should we think about any potential cash headwind from that and what you expect for revenue recognition as we speed up delivery cadence?

Mitch Ingles: Hey, everyone. I am on for Brian Gesuale. Congrats on a solid quarter, and thanks for all the color. It has been very helpful so far. I just had a quick question. You mentioned you started building the first 20 platforms to accelerate your time to delivery. What is your target inventory level by the end of the year, and how should we think about any potential cash headwind from that and what you expect for revenue recognition as we speed up delivery cadence?

Speaker #7: You mentioned you started building the first 20 platforms. To accelerate your time to delivery, what is your target inventory level by the end of the year?

Speaker #7: And how should we think about any potential cash headwind from that, and what do you expect for revenue recognition as we speed up delivery cadence?

Dirk Wallinger: I'm sorry, could you repeat the first part again?

Speaker #6: So could you repeat the first part again?

Speaker #7: On the, you announced the 20 platforms that you're building. Yeah. Do you have a target level for that for the end of the year?

Mitch Ingalls: On the, you announced the 20 platform-

Mitch Ingles: On the, you announced the 20 platform-

Mitch Ingalls: That you're building, yeah, do you have a target level for that for the end of the year? How much do you wanna accelerate that?

Mitch Ingles: That you're building, yeah, do you have a target level for that for the end of the year? How much do you wanna accelerate that?

Speaker #7: How much do you want to accelerate that?

Speaker #6: Yeah, so we're building 20 to inventory now. And like I said, we have 11 actually that I think we could make available for inventory as well.

Dirk Wallinger: Yeah. We're building 20 inventory now, and like I said, we have 11 actually that I think would be we could make available for inventory as well. We basically sized that based on launch vehicles. The M-CLASS is significantly larger, and we wanted to basically have a full stack so you could launch an entire rocket. That's where the sizing came from. We have numerous contract opportunities right now where I think that there's significant potential to move those platforms over immediately and start integrating payloads. Hypothetically, if we did that on something like some of the LX-CLASS that we have, I mean, we could be recognizing revenue within, you know, 2 or 3 months after contract signing, maybe even earlier.

Speaker #6: And we basically size that based on launch vehicles. So the M-class is significantly larger, and so we wanted to basically have a full stack so you could launch an entire rocket. That's where the sizing came from.

Speaker #6: We have numerous contract opportunities right now where I think that there's significant potential to move those platforms over immediately and start integrating payloads. So, hypothetically, if we did that on something like some of the LX class that we have, I mean, we could be recognizing revenue within two or three months.

Speaker #6: After contract signing, maybe even earlier. And then, depending if the payload is ready or not—if the payload is ready—we've shown that we can complete an entire spacecraft build with a brand new payload integrated, launch it, and have it operating in orbit in seven months.

Dirk Wallinger: Depending if the payload is ready or not, if the payload is ready, we've shown that we can complete an entire spacecraft build with a brand-new payload integrated, launch it, and be operating in orbit in 7 months. But look, that's very, you know, that's a very aggressive assumption. I would assume that, you know, if we kicked off contracts in I think, you know, Q3, Q4, we'd probably start to recognize revenue in Q4. Then it would be early kinda Q7 2027 or sorry, Q1 2027 as well. But we envision those because the inventory will be much shorter. Those programs might only be a year long or a year and a half for us to recognize the full value of the contract.

Speaker #6: But look, that's a very—that's a very aggressive assumption. So I would assume that if we kicked off contracts in, I think, Q3, Q4, we'd probably start to recognize revenue in Q4.

Speaker #6: And then it would be early, kind of Q1 '27 as well. But we envision those, because of the inventory, will be much shorter.

Speaker #6: So those programs might only be a year long or a year and a half for us to recognize the full value of the contract.

Speaker #7: Awesome. That's helpful. And then, I guess one last one for me on the commercial contract—expected starting revenues in 2027. So, how should we think about the cadence for that contract in terms of the timing of it, and how long that could last?

Mitch Ingalls: Awesome. That is helpful. I guess one last one from me on the commercial contract, expected, starting revenues in 2027. How should we think about the cadence for that contract in terms of the timing of it and how long that could last?

Mitch Ingles: Awesome. That is helpful. I guess one last one from me on the commercial contract, expected, starting revenues in 2027. How should we think about the cadence for that contract in terms of the timing of it and how long that could last?

Speaker #6: Yeah. That's you, Kevin.

Dirk Wallinger: Yeah. That's you, Kevin.

Speaker #5: Yeah. To be clear, there will be a portion of revenue associated with that contract this year. It's not huge—less than $30 million or so.

Kevin Messerle: Yeah. To be clear, there will be a portion of revenue associated with that contract this year. You know, it's not huge. You know, less than $30 million or so. We think most of it will be in 2027 and 2028. I would think of that program as probably closer to the longer end of some of our programs. You know, probably that when we talk, you know, 2 to 3 years, I'd say that one directionally is probably gonna be on the longer end. There's some pretty innovative payloads that our customer and our CTO are developing.

Speaker #5: We think most of it will be in '27 and '28. I would think of that program as probably closer to the longer end of some of our programs.

Speaker #5: Probably that when we talked two to three years, I'd say that one directionally is probably going to be on the longer end. There's some pretty innovative payloads that our customer and I are—and we are, not me.

Speaker #5: Our CTO are developing, so it's a little bit of a longer program than our traditional as we go forward with these SATCOM missions for the government.

Kevin Messerle: It's a little bit of a longer program than our traditional as we go forward with these, with these satcom missions for the government. You know, we've been there, done that. Those are gonna be very accelerated cycle programs. This one a little bit longer.

Speaker #5: We've been there, done that. Those are going to be very accelerated cycle programs. This one—a little bit longer.

Speaker #7: That's it for me. Thank you.

Mitch Ingalls: That's it for me. Thank you.

Mitch Ingles: That's it for me. Thank you.

Speaker #1: Your next question comes from the line of Alexandra Mandry from Truist Securities. Please go ahead.

Operator 1: Your next question comes from the line of Alexandra Manclark from Truist Securities. Please go ahead.

Operator: Your next question comes from the line of Alexandra Manclark from Truist Securities. Please go ahead.

Speaker #8: Hey, good afternoon, and thanks for taking my question. You mentioned labor earlier, and I just wanted to see if you could provide more color on the labor force and the ability to add and retain labor if needed.

Alexandra Manclark: Hey, good afternoon, and thanks for taking my question. You mentioned labor earlier, and I just wanted to see if you could provide more color on the labor force and ability to add and retain labor if needed. Thanks.

Alexandra Mandery: Hey, good afternoon, and thanks for taking my question. You mentioned labor earlier, and I just wanted to see if you could provide more color on the labor force and ability to add and retain labor if needed. Thanks.

Speaker #8: Thanks.

Speaker #6: Yeah, I can talk to that. So, right now, we feel very good about where we're sitting as far as labor goes. The vast majority of expertise that is required for our new missions obviously comes from the engineering group and software groups as well.

Dirk Wallinger: Yeah, I can talk to that. Right now, we feel very good about where we're sitting as far as labor goes. You know, the vast majority of expertise that are required for our new missions obviously comes from the engineering group and software groups as well. Those are staffed pretty well. You know, most of our missions are starting to launch, which is, you know, the big bulk of their development cycle is typically early in their program, so like a PDR, CDR, which would be kind of the first year of the program. You know, it doesn't completely drop off, but that's where you get most of the work. Then as you approach launch, it just becomes more software team and the engineering teams free up to work on new programs.

Speaker #6: And those are staffed pretty well. So most of our missions are starting to launch, which is the big bulk of their development cycle; it's typically early in their program.

Speaker #6: So, like a PDR, CDR, which would be kind of the first year of the program. And it doesn't completely drop off, but that's where you get most of the work.

Speaker #6: And then as you approach launch, it just becomes more software team, and the engineering teams free up to work on new programs. So I feel very good about where we're at on the engineering front.

Dirk Wallinger: I feel very good about where we're at on the engineering front. I mean, I anticipate, you know, it will grow a little bit, but it's definitely, you know, kind of leveling out. Now production's a different story. Production, you know, as we get more contracts and more capability, we're able to leverage, you know, highly skilled technicians that are in the area. We've had a lot of success, bringing more technicians on to support, you know, higher and higher numbers of production. We've also got significantly more efficient as well. You know, we will have to bring on more technicians, you know, as we, you know, as we continue to meet and exceed our projections for, you know, 2027, 2028.

Speaker #6: I mean, I anticipate it will grow a little bit, but it's definitely kind of leveling out. Now, production is a different story. So, production—as we get more contracts and more capability—we're able to leverage highly skilled technicians that are in the area.

Speaker #6: We've had a lot of success bringing more technicians on to support higher and higher numbers of production, but we've also gotten significantly more efficient as well.

Speaker #6: So we will have to bring on more technicians as we continue to meet and exceed our projections for '27, '28. But even in that case, we've done so much work on automating the testing on the ground and also standardizing on the bus platform itself, and the software that's required to execute and check out, that it's really reduced the number of hands required on the satellites as well.

Dirk Wallinger: That even on that case, we've done so much work on automating the testing on the ground, and also standardizing on, you know, the bus platform itself and the software that's required to execute and check out that it's really reduced the number of hands required on the satellites as well. Long way of saying, you know, engineering and management we think is, you know, leveling out. I don't see that, you know, being a linear curve going forward as we earn more and more contracts. Technicians, you know, won't quite be linear, but, you know, there'll be some growth there more than, more than, you know, 10%. I don't think it's we require any kind of doubling or anything of that drastic nature at all to support significantly more contracts and production capability.

Speaker #6: So, long way of saying, engineering and management, we think, is leveling out. And I don't see that being a linear curve going forward as we earn more and more contracts.

Speaker #6: Technicians, it won't quite be linear, but there will be some growth there—more than 10%. But I don't think we require any kind of doubling or anything of that drastic nature at all to support significantly more contracts and production capability.

Speaker #8: Great. That's all for me. Thanks.

Operator 2: Great. That's all for me. Thanks. At this time, there are no further questions. I would like to hand the conference over to Dirk Wallinger for closing remarks.

Operator: Great. That's all for me. Thanks. At this time, there are no further questions. I would like to hand the conference over to Dirk Wallinger for closing remarks.

Speaker #1: At this time, there are no further questions for Dirk Wallinger for closing remarks.

Speaker #6: Yeah, so really, really appreciate everyone taking the time to hear the story, and allowing us also the opportunity to clarify and add some more understanding of the budgets and where they fit, and where we fit.

Dirk Wallinger: Really appreciate everyone taking the time to hear the story and allowing us, you know, also the opportunity to clarify and, you know, add some more understanding of kind of the budgets and where they fit and where we fit. Obviously we're very excited to where the budgets are sitting. We're excited about our ability to deliver. With the number of contract vehicles that we have and the budgets allocated for all the different kinds of capabilities the country needs, we're extremely excited about what's gonna happen here in the next couple quarters in 2026 and 2027. Obviously very exciting about delivering on some of our commercial constellations as well. Really appreciate the time everyone took. Thank you so much and, you know, have a good day.

Speaker #6: So, obviously, we're very excited about where the budgets are sitting. We're excited about our ability to deliver. And with the number of contract vehicles that we have, and the budgets allocated for all the different kinds of capabilities the country needs, we're extremely excited about what's going to happen here in the next couple of quarters, in '26 and '27.

Speaker #6: And obviously, very exciting about delivering on some of our commercial constellations as well. So, really appreciate the time everyone took. Thank you so much.

Speaker #6: And have a good day.

Operator 2: This concludes today's call. Thank you all for attending. You may now disconnect.

Operator: This concludes today's call. Thank you all for attending. You may now disconnect.