York Space Systems Q3 2026 Earnings Results & Report

York Space Systems EPS Results

• Actual EPS: -$5.99
• Consensus EPS: -$0.23
• Beat/Miss: Missed by -$5.76
• One Year Ago EPS: N/A

York Space Systems Revenue Results

• Actual Revenue: $84.17 million
• Expected Revenue: N/A
• Beat/Miss: N/A
• YoY Revenue Growth: N/A

York Space Systems (NYSE:YSS) designs, manufactures and operates spacecraft and related systems. Its offerings include satellite platforms, spacecraft integration, mission operations and ground-system services for customers developing and operating satellite missions.

The company’s product portfolio includes standardized spacecraft platforms designed to support a range of payloads and mission requirements. York serves government and commercial customers, including organizations involved in national security, civil space and communications missions.

Founded in 2012 and based in Denver, Colorado, York Space Systems was established to make spacecraft production more scalable and cost-efficient. Founder Dirk Wallinger has served as the company’s chief executive officer.

York Space Systems Q3 2026 Earnings Call Transcript

Key Takeaways

• Negative Sentiment: Q3 revenue fell 7% year over year to $84.2 million, adjusted EBITDA was a loss of $27.6 million, and gross margin declined to 18%, partly due to one-time inventory adjustments. York recorded a $749.7 million non-cash goodwill impairment after lowering revenue expectations; it expects the Q4 adjusted EBITDA loss to widen slightly, while maintaining 2026 revenue guidance of $380 million–$400 million.
• Positive Sentiment: York reported $581 million in funded backlog, $750 million in unexercised options (up 394% from the prior quarter), and a $14.9 billion identified pipeline. The company said it won nine contracts in 2026 and believes its contract positions could lead to larger awards, though management said timing and amounts remain uncertain and significant awards are expected mainly in 2027 and beyond.
• Positive Sentiment: York said it has cut Tranche 2 satellite build time from nine months to two months, a 78% improvement, and added 30 manufacturing cells during the quarter. It also said inventory, launch capacity, ground infrastructure, and mission operations could enable turnkey mission delivery up to 75% faster than traditional timelines.
• Neutral Sentiment: York announced a proposed acquisition of Outlook Industries to expand into unmanned systems, alongside its communications, ground-network, and mission-software capabilities. Management cited a combined estimated $13.4 billion addressable market and plans for a mid-December demonstration, but the acquisition is proposed and the opportunity is not yet established revenue.

Presentation

[Christopher Evenden, VP of Investor Relations at York Space Systems]

Hello, everyone, and welcome to York Space Systems Third Quarter 2026 Earnings Call. With me on the line are Dirk Wallinger, our CEO, and Brian Frantz, 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, November 12, 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.

[Christopher Evenden, VP of Investor Relations at York Space Systems]

We will also make statements that are considered forward-looking, including those related to our 2026 outlook, our business strategy, including our planned expansion into unmanned systems, future revenue and growth prospects, anticipated award times, backlog, potential unawarded contracts and pipeline, award opportunities, M&A strategy, the proposed acquisition of Outlook and its benefits, as well as the benefits of other acquisitions, and inventory and systems build-out. 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 2026 Form 10-Qs, 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.

[Dirk Wallinger, CEO at York Space Systems]

Thanks, Chris. Hello, everyone, and welcome to York's Third Quarter 2026 Earnings Call. I appreciate you taking the time to join us. I'm pleased to announce that Brian Franz has been appointed the CFO of York. As I said in our last call, Brian joined us as a Chief Accounting Officer in September 2025 and played a central role in our transition to a public company. With direct responsibility for financial reporting, internal controls, and SEC compliance, Bryan brings more than three decades of financial leadership experience across public and private companies, and I'm delighted to have him in the role. We continue to deliver for our customers, expand our mission capabilities, and strengthen the foundation for our next phase of growth. Revenue for the quarter was $84.2 million, down 7% year-over-year, and adjusted EBITDA was a loss of $27.6 million.

[Dirk Wallinger, CEO at York Space Systems]

As of quarter end, our funded backlogs stood at $581 million, with potential unawarded contracts at $2.84 billion, an identified pipeline of $14.9 billion, and $750 million of unexercised options on existing contracts, up 394% from last quarter. Bryan will walk you through the financial details shortly. Over the past three quarters, York has maintained backlog at approximately $600 million while converting $293 million into revenue, demonstrating our ability to replenish backlog through new awards and additions to existing contracts in an uncertain budgetary climate. However, the recent election results give us a clear picture of the path forward. In any budgetary climate, one thing seems clear. There will be demand for increased competition, including on the largest national defense programs. We expect a significant reduction in the concentration of contracts among specific vendors and a corresponding realignment of U.S. government budget resources across proven providers.

[Dirk Wallinger, CEO at York Space Systems]

Certain companies will be better positioned to take advantage of that shift, and there will be beneficiaries independent of total budget size. We believe York is one of those companies. Our proven track record of delivery at scale gives us a strategic advantage over new entrants, and our competitive pricing enables customers to procure the quantities required to support the proliferation of these systems. York is exceptionally well-positioned in the U.S. government's highest priority mission areas, including the Space Data Network, resilient missile warning tracking, and multiple intelligence mission areas. These represent some of the largest and most enduring areas of government investment. With broad bipartisan support, we have secured the critical contract positions we targeted in 2026, positioning us to compete for significant awards in 2027, 2028, and beyond.

[Dirk Wallinger, CEO at York Space Systems]

Combined with our demonstrated execution, flight-proven capabilities, and competitive pricing, we believe York continues to be well-positioned as these programs are anticipated to advance towards larger future awards. During the third quarter, York won a new contract with a classified customer, which we call Palm Springs. The award expands our capabilities into additional mission areas and presents a significant opportunity for follow-on constellations. It brings our total to nine contract wins in 2026 alone. We also secured $17.3 million in additional business through new awards and increase to existing contracts as customers continue to expand their use of York capabilities and integrated ecosystem. We discussed our selection for the NITE-STAR IDIQ on our last call. This program contract is now fully executed. It positions us to compete for task orders that combine our spacecraft with ALL.SPACE mobile terminals and ATLAS Global Ground Network.

[Dirk Wallinger, CEO at York Space Systems]

ALL.SPACE has also secured an award from the Defense Innovation Unit, which has provided a path to demonstrating its technology and scaling its adoption across the Department of War. We are also seeing growing demand for ALL.SPACE's resilient communications technology. As recently announced, following the close of the third quarter, the U.S. Navy placed follow-on orders for 59 HydraMAX 2 terminals, bringing its total ALL.SPACE terminal fleet to 108 systems, including 49 previously delivered terminals. This expansion demonstrates continued customer confidence in ALL.SPACE's technology and growing demand for resilient multi-orbit communications. It also reinforces the opportunity to expand adoption of these capabilities across government and defense markets as part of York's broader integrated ecosystem. As I mentioned on the last call, we launched our second plane of Tranche 1 Transport Layer satellites in Q3.

[Dirk Wallinger, CEO at York Space Systems]

Between Tranche 0 and the two planes of Tranche 1, we've iterated three generations of satellite, increasing satellite performance and accelerating manufacturing each time. As a result, we're building satellites for Tranche 2 78% faster than 18 months ago, reducing build time from nine months to just two months. Our target is a 90% reduction. This quantifies one of our core competitive advantages. We can manufacture, integrate, launch, and operate proliferated systems at scale. But speed is more than just a schedule metric. It changes what our customers can procure, how quickly vital national security capabilities can be fielded, and ultimately, what proliferated architectures will cost. Our investment in manufacturing capacity and spacecraft inventory extends this advantage beyond satellite production to the delivery of complete missions.

[Dirk Wallinger, CEO at York Space Systems]

By inventorying available platforms, securing launch capacity, and integrating our ground infrastructure and mission operations capability, we can deliver turnkey missions up to 75% faster than traditional market timelines. This allows customers to move from mission requirements to operational capability on timelines that would not be possible under traditional procurement and manufacturing models, providing a significant competitive advantage for York as demand for rapidly deployable space systems continues to grow. Our mission capabilities have expanded rapidly with the addition of the M-CLASS, VLEO, LX Ultra, and GEO systems. We announced our VLEO offering in September and expect to deliver our Nemesis GEO satellites to the customer this quarter. Together with our ATLAS ground infrastructure and ALL.SPACE communication terminals, these capabilities significantly broaden the mission and procurement opportunities we can pursue.

[Dirk Wallinger, CEO at York Space Systems]

Combined with growing commercial demand over the past two quarters, our identified pipeline has grown by over 30% compared to last quarter. We believe that our demonstrated execution across a broad range of mission areas, combined with flight-proven systems and superior price points, gives us a strategic advantage over our competitors. Our track record separates us from unproven providers, and we simultaneously beat traditional primes on price, capability, and time to orbit. We are now moving forward on our plans to leverage York's established space ecosystem to expand into adjacent markets. We were working to bring four commercial software products to market. All four products are under customer evaluation, with AutoScheduler and Fleet Autonomy already being implemented across government and commercial mission operations centers. This represents an opportunity to generate additional revenue from capabilities developed to support our own mission, extending our software to a broader customer base.

[Dirk Wallinger, CEO at York Space Systems]

Our expansion into unmanned systems represents another significant opportunity to leverage the infrastructure we have already built. Through ATLAS and ALL.SPACE, York has brought together global ground infrastructure, mobile satellite communication terminals, and mission software to support distributed unmanned operations. Our proposed acquisition of Outlook Industries, announced earlier today, would extend that ecosystem to unmanned platforms operating in the field and establish the foundation for York Terrestrial Systems. Together, these capabilities are intended to support integrated fleet management and autonomous operations across significant distances, including where terrestrial communications are disrupted and GPS is degraded or denied. The proposed acquisition would open access to an estimated $3.1 billion unmanned ground system market, according to Mordor Intelligence's latest analysis. Combined with our communications and ground infrastructure, we also see opportunities in the unmanned surface and underwater vessel markets, which are estimated by MarketsandMarkets to be $10.3 billion.

[Dirk Wallinger, CEO at York Space Systems]

These represent approximately $13.4 billion in combined addressable markets. We are targeting mid-December for an initial demonstration of space-based autonomous unmanned surface vehicle tasking and execution, and have already submitted proposals to military customers for this capability. As demand grows for larger fleets of unmanned systems, we see significant opportunities to provide the connectivity, software, and operational infrastructure needed to coordinate them at scale while keeping more fighters further from the fight. We also see significant international opportunities for our core business and full-stack unmanned autonomy architecture. We are working with Terma, a leading European defense, aerospace, and security company, to evaluate expansion into European markets, where our mature production infrastructure, demonstrated execution, and competitive pricing position us to address demand for rapidly deployable solutions. We are also evaluating opportunities in Asia, where we see an opportunity to harness growing demand.

[Dirk Wallinger, CEO at York Space Systems]

Turning to the government market, our focus is on the scale of the opportunity in 2027 and beyond. Based on the government's proposal budgets, coupled with conversations we have had with key stakeholders, we anticipate significant investment in mission areas that map to York's core capabilities. These capabilities include observation, such as space domain awareness and moving target indication in the air and on the ground; tracking, including missile warning and missile tracking; communications through the Space Data Network and resilient military communications; classified, including support for a multitude of phenomenologies; the ability to respond with proliferated architectures that connect sensors, decision-makers, and effectors quickly enough to matter in a contested environment. Across Space Force, we estimate approximately $14 billion in potential contract opportunities that the government could award before the end of fiscal year 2027.

[Dirk Wallinger, CEO at York Space Systems]

Intelligence community requirements represent significant additional opportunities, while Army and Navy needs could add another $3 billion. Independent of budgets, we are seeing an increased sense of urgency from the government with regard to space infrastructure. According to a fact sheet posted by the Space Force in July, China has over 1,500 satellites in orbit today, with over 500 of them being ISR vehicles, and China is aiming to launch a rocket almost every two and a half days, which will result in 140 launches in 2026, up over 50% year over year. Perhaps as a result, there are encouraging signs of the government moving faster to award contracts. The IDIQs we have won are the necessary first steps towards major awards. The U.S. government is using selective IDIQ awards and early concept studies to establish the supplier base for larger operational programs.

[Dirk Wallinger, CEO at York Space Systems]

At the same time, the Department of War has made its need for a diversified industrial base explicit. In an August press release, U.S. Space Force Colonel Frazier, the acting portfolio acquisition executive for SBST, emphasized the importance of avoiding dependence on a single provider. More recently, the Space Force's award of SDN task orders focused on interoperability, demonstrates that this commitment is translating into funded programs and tangible contract opportunities. These awards reinforce the government's intent to establish a diversified, interoperable architecture for critical national security capabilities. We are investing to support that demand, but doing so with discipline. Over the past year, we have substantially expanded our business development organization. We now have people close to major customer centers in Alabama, Northern Virginia, Washington D.C., New Mexico, and Colorado.

[Dirk Wallinger, CEO at York Space Systems]

Much of that build-out is now in place, and we do not expect to continue adding resources at the same pace. To support our recent wins with classified customers, we have also expanded our secure infrastructure, including by adding more SCIF capacity. To deliver faster for our customers, we have added another 30 manufacturing cells in our Potomac facility this quarter, bringing the total to 40. Let me put all this in context of our investment thesis. York has built an industrial model for delivering spacecraft platforms at scale, with cost, schedule, and execution advantages from standardized platforms and integrated mission architectures. We are now beginning to commercialize the software and operational capabilities developed within that ecosystem, while pursuing expansion into unmanned systems through our proposed acquisition of Outlook Industries. We believe these adjacent markets can create significant new revenue opportunities beyond our core business lines.

[Dirk Wallinger, CEO at York Space Systems]

Our planned acquisition of Outlook represents a significant step in our expansion into unmanned systems, opening an entirely new market for York by leveraging the mature space, ground, mission operations, and software ecosystem we have already built. With Outlook, we intend to extend that ecosystem to include unmanned platforms operating in the field, positioning York to deliver integrated solutions for autonomous operations across multiple domains. The mid-December demonstration that I mentioned earlier will bring together ALL.SPACE's mobile communication terminals, ATLAS's global ground network and network software, York's mission operations centers, and our commercial software capabilities. Together, these capabilities are designed to enable remote tasking through space and autonomous operation of unmanned systems. This illustrates how we can draw on York's existing ecosystem to enter new markets and support the next generation of distributed autonomous defense operations. This is an extension of the vision on which I founded York.

[Dirk Wallinger, CEO at York Space Systems]

We set out to change how satellites are built and operated. Today, our manufacturing model and on-orbit record give us a foundation to address a much larger problem: how to connect and sustain autonomous distributed force of the future. The new political environment further strengthens York's competitive position. We believe increased demand for competition and a realignment of U.S. government resources across proven providers will create significant opportunities for York, independent of total budget size. The market increasingly values the things York was built to deliver: speed, scale, resilience, and proven execution at a competitive price point. We remain focused on delivering for customers, converting our capabilities into new business, and building long-term value for shareholders. With that, I hand the call over to Brian.

[Brian Frantz, CFO at York Space Systems]

Thank you, Dirk. The highlight of the third quarter was the closing of the ALL.SPACE transaction, as well as four new contract wins that have the potential to grow into larger awards in 2027 and 2028. Revenue for the third quarter was $84.2 million, down $6.6 million, or 7%, compared to the same quarter in the prior year. As we launched the rest of the Tranche 1 satellites during the third quarter, our year-on-year revenues from that program decreased from the prior year. Although Tranche 2 revenues increased over the comparable quarter, they did not fully offset the decrease from other programs. The increase in subsidiary revenues also partially offset the decrease from Tranche 1. Gross margin was 18% in the current year quarter, down 400 basis points from the prior year quarter, as we made some one-time inventory adjustments at our subsidiaries, which compressed margins.

[Brian Frantz, CFO at York Space Systems]

We are beginning to see the benefit of post-launch operations and support work, as we have more satellites in orbit currently than we did a year ago. We expect gross margin for the full year to be in the low 20% range. Gross margin dollars were $15.5 million in the quarter, down $20.3 million in the prior year quarter, driven primarily by lower revenues in the quarter. Our contribution margin expanded 500 basis points to 40% in the third quarter, driven by improved performance on our Tranche 2 program over the prior year. Our direct materials expenses decreased quarter-over-quarter, driven primarily by Tranche 1, as we launched the remaining 21 SVs during the quarter. As we now have all 42 of these satellites successfully in orbit and healthy, our operations and sustainment revenues are beginning to increase, and they have a higher contribution margin than the company average.

[Brian Frantz, CFO at York Space Systems]

Contribution margin dollars increased slightly, growing to $34 million, up from $31.7 million last year, driven by the performance improvement on Tranche 2, as I previously mentioned. Turning to operating expenses. SG&A plus R&D expenses increased 66% compared to the prior year quarter. This increase was primarily driven by incremental salaries and costs related to our 2026 acquisitions, an increase in overall headcount, and increases in overhead related to the public company uplift. We expect our Q4 2026 SG&A plus R&D to be generally in line with third quarter levels. Most of the increase in our public company SG&A infrastructure is now complete. In the third quarter, given our previously announced reduction in revenue expectations, the accounting rules required that we initiate an analysis of the recoverability of our goodwill.

[Brian Frantz, CFO at York Space Systems]

As a result of this analysis, we recorded a non-cash goodwill impairment charge of $749.7 million during the third quarter of 2026. I would echo Dirk's earlier comments. We still believe larger program awards are forthcoming in 2027 and beyond, but the timing and the amount of such awards is uncertain and has pushed out to the right. Adjusted EBITDA for the quarter was a loss of $27.6 million, which is larger than the 2026 level. Our new subsidiaries were capital deprived up to the dates of acquisition, and as such, were unable to devote significant resources toward inventory purchases. After each transaction, we provided necessary liquidity to ramp up production levels in advance of sales to better align with operating cost levels. We expect the fourth quarter adjusted EBITDA loss to be slightly higher than Q3 of 2026. Our liquidity remains strong.

[Brian Frantz, CFO at York Space Systems]

As of September 30, 2026, we had cash and cash equivalents of $309 million, and our $150 million revolving credit facility remains fully available to us for total liquidity of $459 million. I would note the primary use of cash in the quarter was the $155 million related to the ALL.SPACE transaction. Our backlog stood at $581 million on September 30, down only slightly in the third quarter. Our backlog benefited from the four contract wins plus modification of existing contracts for a total of $17.3 million, as well as increases coming from our subsidiaries of $44 million, most of which is from ALL.SPACE, which is included in our numbers for the first time. Turning to full year 2026 revenue guidance. We have tightened our previous range to $380 million-$400 million, retaining the midpoint of $390 million as discussed in our previous earnings call.

[Brian Frantz, CFO at York Space Systems]

We believe we are well-positioned to win new contract awards, but visibility into the timing and amount of these awards into 2027 remains unclear. Now, I'll hand it back to Dirk for a quick summary.

[Dirk Wallinger, CEO at York Space Systems]

Thanks, Brian. To conclude, York has built a strong foundation for growth with proven execution and expanding portfolio capabilities and opportunities to generate revenue across more markets. We have secured the critical contract positions we targeted this year in some of the U.S. government's highest priority mission areas, including the Space Data Network, missile warning and tracking, and intelligence missions. Our IDIQ awards are already converting into task orders, positioning us to compete for larger awards, contract expansions, and option exercises in 2027 and beyond. Our expanding capabilities and growing demand across government and commercial markets have increased our identified pipeline by more than 30% compared to last quarter. Following the recent election, we expect the new Congress to place greater emphasis on competition and vendor diversity, reducing the concentration of major contracts among a small number of suppliers.

[Dirk Wallinger, CEO at York Space Systems]

We believe this realignment of government resources across proven providers will further strengthen York's position. Our opportunity is to gain share through demonstrated performance, production capacity, and competitive pricing, independent of total budget size. We are also beginning to commercialize capabilities with software and pursuing expansion into unmanned systems through our proposed acquisition of Outlook Industries, with customer proposals submitted and initial demonstration planned for mid-December. These initiatives build on technology, manufacturing capacity, and operational infrastructure we have already invested in. They broaden our addressable market and position York to support the government's transition to distributed autonomous fleets. We remain focused on turning that foundation into new business, increased profitability over time, and long-term shareholder value, while delivering the capabilities our customers need to keep the war fighter safe. Now, I'll hand it back to the operator for questions. Operator?

[Operator]

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 to allow for optimum sound quality. 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 Seth Seifman with JPMorgan. Your line is now open.

[Alex Ladd, Analyst at JPMorgan]

Yeah. Hey, guys. This is Alex on for Seth. Good afternoon.

[Brian Frantz, CFO at York Space Systems]

Hi.

[Alex Ladd, Analyst at JPMorgan]

Hey. Wanted to ask, maybe to start off with this goodwill impairment charge. Obviously, a pretty big number, especially when we look at kind of the total goodwill that you guys had last quarter, I think was around $790 million. Curious if you can maybe dig into that a little bit more. I mean, was this related to a prior acquisition that you guys have made? In terms of thinking about the company, obviously, you guys have been pretty acquisitive. How should we be able to gain some confidence that there won't be kind of a repeat of this in the future?

[Brian Frantz, CFO at York Space Systems]

Yeah.

[Dirk Wallinger, CEO at York Space Systems]

It's all you, Brian.

[Brian Frantz, CFO at York Space Systems]

I'll take this one, Alex. Under the accounting rules, we have to evaluate our goodwill literally every quarter for realization. Most of those reviews are fairly routine, and most of them are qualitative. However, in this instance, when you have some of the triggering events, which are defined in the literature, we have to go a little bit deeper. In the third quarter, we had two of those triggers, the primary one being the reduction of revenue that we talked about back in August, as well as our share price then trading below book value. So we went through an extensive analysis, which you can imagine is really heavily weighted on discounted cash flow. We went through that analysis and ended up recording a $750 million non-cash impairment charge.

[Brian Frantz, CFO at York Space Systems]

But I will say, to answer the rest of your question, this is all based on our expectation of revenue, as Dirk, and when we take revenue down as we did, this is kind of the way that works. But I would add, we remain very bullish in terms of future awards coming in in 2027 and 2028, just as Dirk said. So I wouldn't expect that this would occur again. I think we've gotten past this.

[Alex Ladd, Analyst at JPMorgan]

Okay, great. That is really helpful. Then maybe a quick follow-up. First, on the top line for Q4, I think it is implying, if you take the midpoint of your guidance, it implies a little bit of a sequential uptick in sales. Curious kind of why that is. Also, I think you guys talked about for the full year, the gross margin being somewhere in the low 20s range. I think that implies that the gross margin in Q4 is going to jump up into maybe the mid-20s versus the kind of closer to 18% level that you guys had in Q3. Would love to kind of hear your thoughts on why those things should change at Q4.

[Brian Frantz, CFO at York Space Systems]

Yeah, sure. I will take those as well. I will kind of start with the latter part of that on the gross margin. I still think we will end up probably in the low 20s versus the mid-20s for the year. We feel confident with that. I mean, hopefully we can outperform, but I do not want to put that out there too far out. In terms of the revenue line, yes, I mean, you are seeing some of that backlog coming off. But what I would say is, now that we have got all of these subsidiaries in the fold, they are starting to get some traction, and that is why you are going to see a little bit of that uplift in revenues in the fourth quarter.

[Alex Ladd, Analyst at JPMorgan]

Okay, thanks. That is it for me. Thanks, guys.

[Operator]

Your next question comes from the line of David Strauss with Wells Fargo. Your line is now open.

[Ben Tomick, Analyst at Wells Fargo]

Hey, this is Ben Tomick on for David. I was just wondering, could you guys give us an update on the state of the supply chain? I know last call you had talked about some of the revenue from this year flipping to 2027 because of that. Just, have you seen any improvement there, and then any areas of weakness you can call out?

[Dirk Wallinger, CEO at York Space Systems]

Yeah, I mean, I'll let Brian kind of talk more specifically. But generally, I mean, we're seeing significant improvement in supply chain. As we've placed larger and larger orders with more consistency, we're seeing that things are tending to come in basically on time. That was kind of a one-time shift on some propulsion units, or propulsion supplies, I believe, where that kind of shifted over a line. I think generally the trend is towards the supply chain definitely is getting stronger. Some consistency, quite frankly, from the government and budget would help with that also, but I think it's improving. But Brian, I don't know if there's more you want to add.

[Brian Frantz, CFO at York Space Systems]

Yeah, I mean, I think that's right. I mean, you still see pockets of it here and there, but companies like us are actually trying to get ahead of that by monitoring the supply chain. One of the things we're working on is to build up our inventory levels on some of these key components so that we can avoid and mitigate some of the industry-wide issues that are going on out there. So, we're watching it, we're keeping a close eye on it, and really don't have much of a change to report in it from where we were three months ago.

[Dirk Wallinger, CEO at York Space Systems]

I mean, just to add on that, just a little bit more in the sense of, one thing that is unique about what we can do is because of the kind of the maturity of the production line and where we're at as far as company growth and production, we're able to invest in inventory. The reality is when you're ordering on kind of the need date that you have, things are going to be late. But for us, we've invested in inventory now, and so what that means is that we will have the capability when the customer asks for it immediately, and we won't be waiting for other things to happen. That is a bit of a differentiator between where York sits in our production maturity versus some of our peers.

[Ben Tomick, Analyst at Wells Fargo]

Got it. Thanks. Maybe shifting over to SDN, could you just provide a little more color on the task orders you guys were awarded and the next steps there and milestones? Then maybe just where you see York's biggest opportunity on SDN, whether that's more spacecraft, ground network, or a mix of both.

[Dirk Wallinger, CEO at York Space Systems]

Yeah, so there's two different task orders that we won for SDN that's public, so that's available out there. We're working those currently. They're going really well. We're really enjoying working with Space Systems Command and Colonel Frazier on the SDN. So those continue to progress forward. It's the general approach that they're taking of, look, they want to kind of see small-scale milestones, proven ability to execute, then we anticipate that there could potentially be follow-on for follow-on spacecraft orders. Given our experience on SDA's Transport Layer, right, and the fact that we're operating satellites for that system right now in orbit, kind of gives us a leg up in the sense that it's our bread and butter to be able to build and deploy constellations and communication systems. So, I think those task orders are going really well.

[Dirk Wallinger, CEO at York Space Systems]

I think with some of the changes that we've seen this past week, I think there's going to be a demand for more competition there, and obviously competition is something that we're a big supporter of and an area where we can definitely help the SDN with production.

[Ben Tomick, Analyst at Wells Fargo]

Great. Thanks.

[Operator]

Your next question comes from the line of Michael Ciarmoli with Guggenheim Securities. Your line is now open.

[Michael Ciarmoli, Analyst at Guggenheim Securities]

Hey. Good evening, guys. Thanks for taking the question. I guess, Brian, just back to the write-down, can you specifically say what programs drove that? Should we think revenue generally stays in this range, given the write-down and the tests you had to perform there?

[Brian Frantz, CFO at York Space Systems]

Yeah. Let me try to address that as best I can. There is a lot of assumptions that go into this. Certainly, we are looking at our existing programs, but when you are doing a discounted cash flow analysis that goes out for years, you are making a lot of other assumptions that are out there. We do have to make assumptions about the timing of when new awards would come in and the amounts of those. What we did in our model was consistent with what we are talking about here on this call with new awards starting to come more late 2027 and 2028. At the same time, there is a lot of other factors for a discount rate and control premiums and all kinds of other things. It is around those programs. I would say, coming back to the equation here is, it is non-cash.

[Brian Frantz, CFO at York Space Systems]

We feel good about the execution piece of what we are set up to do here for the rest of 2026 as well as on the rest of our contracts going forward. It is really more about the expectation of future revenues, which is what we talked about in our last call. They are going to come, it is just a matter of when, and that is really what the trigger point was.

[Michael Ciarmoli, Analyst at Guggenheim Securities]

Okay. Dirk, on the acquisition of Outlook, I mean, you've got terminals, you've got the ATLAS network, you've got your ops center and software. Why not just look to partner with someone? Why bring an unmanned ground manufacturer in-house, something that might become rapidly commoditized with competition? Is this more just to complete the demonstration, to kind of showcase? Or just maybe give me a better understanding as to why it makes sense to have that inside the York umbrella and not partner with an unmanned manufacturer.

[Dirk Wallinger, CEO at York Space Systems]

Yeah, sure. It's probably more of the latter of what you were saying. Look, Outlook Industries has great technologies. Their autonomy capability, their software capability, their ability to manufacture are all fantastic. So, don't get me wrong there. But it is a smaller company. It was a smaller acquisition for us, right? Didn't require filing of an eight-K or anything else. But with this acquisition, right, we're doing a demonstration on December 15. So, it allowed us the ability to really demonstrate the full architecture all the way down to actual execution and commanding of a ground asset autonomously, which we thought was important and worthy of the investment. Allows us to kind of to do a little bit of R&D and make sure that that complete system's going to work kind of under our own control. Now, all that said, are we partnering with other people?

[Dirk Wallinger, CEO at York Space Systems]

Yes, we are. I don't think there's a need for us to fully vertically integrate across every single platform there could be, whether that's surface vessels, underwater vessels, et cetera. But us understanding that complete ecosystem and having the confidence that it does work and it's turnkey ready to basically proliferate across all those systems, that was worth us having our own kind of capability for at least one system. Hopefully that gives more insight.

[Michael Ciarmoli, Analyst at Guggenheim Securities]

Perfect. Yeah, that's great. Thanks, guys. I'll jump back in the queue.

[Operator]

Your next question comes from the line of Austin Moeller with Canaccord Genuity. Your line is now open.

[Austin Moeller, Analyst at Canaccord Genuity]

Hi. Good afternoon. My first question, it sounded like Senator Kennedy on the Senate floor yesterday was talking about at least $200 billion in reconciliation. If they push that $17.5 billion in Golden Dome funds into the reconciliation, how would that flow through to some of the IDIQs you have already won?

[Dirk Wallinger, CEO at York Space Systems]

I believe that it would flow through. I think there is obviously going to be some contested parts of Golden Dome and some of the reconciliation that are going to be definitive challenges. In my opinion, I do not think Space Data Network or things like AMTI are in that bucket. I think that those are generally agreed upon as being needed. In fact, something like Space Data Network, where there is such a concentration of resources dedicated to a single vendor, is actually an area where if there was increased funding for that, it is probably more likely to go to competition than it would be to the current provider. I think those are all good things. I think it is a matter of whether they can find compromise to focus on the main core areas and not push into areas that basically are going to be contested pretty heavily.

[Dirk Wallinger, CEO at York Space Systems]

There is some hope, I think, that a reconciliation could pass.

[Austin Moeller, Analyst at Canaccord Genuity]

Okay. If we think about the optimal production volume in your factories between M and LX-CLASS, what sort of volumes do you need to be at relative to the current quarter to get to whatever you think are ideal run rate gross margins?

[Dirk Wallinger, CEO at York Space Systems]

I mean, look, generally at the top level, we're at the production levels that we need to be at. The nice part is that it isn't really M, LX, S dependent. They share 75%-80% of the same hardware, so they're basically building the same thing all the way until I would say the last 30% of the build, is where you start to get some diversion between the platforms. So that's a nice part where we're very efficient. Brian, I can kind of let you take the second half of that as far as gross margins go.

[Brian Frantz, CFO at York Space Systems]

I think continuing with our gross margins, if we can keep those in the low 20s or build those up into the mid-20s as we go through 2027, 2028, I mean, that's going to cut into this EBITDA loss in a hurry. So, I think that's what this is about. It's getting these additional awards that we keep talking about.

[Austin Moeller, Analyst at Canaccord Genuity]

That's very helpful. I'll pass it back there. Thank you.

[Operator]

Your next question comes from the line of Ryan Koontz with Needham. Your line is now open.

[Ryan Koontz, Analyst at Needham]

Great. Appreciate the question. Maybe you can help me understand in terms of the progress you have so far on these IDIQ orders. I understand that some of these larger orders for constellations and such are probably pushing out, but maybe can you shed a light on what that process looks like inside the DoW and kind of what we're looking at here, what milestones we can look at and hopefully see that those will turn into orders?

[Dirk Wallinger, CEO at York Space Systems]

Yeah. I mean, you can see some reflection of it if you kind of look at the presentation that we put out this quarter versus last. If you look at unexercised and additional phases, we can see that we've grown that. For last quarter, it was about $109 million unexercised options to where now it's $750 million. We grew that by 394%. That's obviously indicative of the kind of status of how we're doing on these milestones and how we're executing. Unfortunately, we're not allowed. The SDN has to let us say what we did and where we're at in the milestones. But the fact that they have asked for options to proceed the work that we're doing, and those options have grown by 400%, I think is a pretty positive sign for how we're executing.

[Dirk Wallinger, CEO at York Space Systems]

I think it's probably, this is my estimate to be clear, but it's probably mid-2027, where you're going to start to see some decisions made on how to proceed forward with those constellations we've given them. We have provided them with the options that they asked for, what they look like.

[Ryan Koontz, Analyst at Needham]

That's really helpful, Dirk. Maybe just shifting gears on the commercial side, any update there? It looks like a pretty big step up in your commercial pipeline. What types of customers or opportunities are you looking at? How would you characterize that market right now for you?

[Dirk Wallinger, CEO at York Space Systems]

Yeah. Commercial continues to look very, very promising. I think, historically, over the past couple years, there have been challenges where a commercial kind of entity might get through a series A, B, or C, and then would tend to struggle when it came to the larger rounds, which is where you start to move a demo into constellations. That has changed quite a bit. That's why I think we're feeling a lot more bullish about our commercial pipeline, because what we're seeing is that they do have prototypes in orbit that we've worked with them on, and the funding continues to progress well.

[Dirk Wallinger, CEO at York Space Systems]

I think that's the main change, is that the finance end of things has tended to work a little bit better for commercial sides to transition from kind of VC backed, basically transition that to PE, because you really need the PEs if you're going to deploy those. We're seeing a lot more opportunities, for a lot more different things. It used to be kind of more focused just on GPS or more focused on visible imagery. We're starting to see that the government is demanding other phenomenologies and other kind of capabilities. The government might buy it as a commercial entity, but it is still sometimes the government buying it. But they're varying in how much they're willing to buy and how much they're willing to do from commercial. That's really the uptick that you're seeing in that pipeline.

[Ryan Koontz, Analyst at Needham]

That's really helpful, Dirk. Yeah, I agree. Funding environment's been real well, so real great. Thanks very much.

[Operator]

Your next question comes from the line of Clarke Jeffries with Piper Sandler. Your line is now open. A reminder to unmute your device.

[Brian Frantz, CFO at York Space Systems]

Going, going, gone. Sounds like we lost him.

[Operator]

I will move on. If they want to press star one to rejoin, they can. Your next question will come from the line of Sheila Kahyaoglu with Jefferies. Your line is now open.

[Adam Samuelson, Analyst at Jefferies]

Yeah. Hi, it's Adam Samuelson on for Sheila. I was hoping to maybe come back to a point that was just made in one of the earlier responses, Brian, talking about gross margins from here and eating into the EBITDA loss. I guess I'm just trying to reconcile the OPEX spend in the quarter, excluding obviously the goodwill impairment and the stock comp, but still in the neighborhood of $60 million of SG&A and R&D. I mean, is that a fair quarterly run rate from here with ALL.SPACE now in the fold, or does that have to step down some?

[Adam Samuelson, Analyst at Jefferies]

I am trying to think about that OPEX spend moving forward relative to where the revenues are and mid-20s gross margin, and kind of think about the trajectory and the revenue level needed to actually get to that EBITDA, positive EBITDA break level. Thank you.

[Brian Frantz, CFO at York Space Systems]

Yeah. Thanks for the question, Adam. I think looking forward for the rest of 2026, as you indicated, you look at everything in that operating expense line down, obviously save the goodwill impairment line, but I think those are going to be relatively good proxies for what we are going to see in Q4. I do think, as we said earlier in prepared remarks, I think that EBITDA number will go up slightly. I am sorry, the loss will increase just slightly in the fourth quarter, but it is going to be in that same general area. We are ramping up activities at all of our subsidiary levels in particular. So their SG&A and R&D is a little bit elevated for where you might think they would be from a sales side.

[Brian Frantz, CFO at York Space Systems]

What they have done is invested in things, and now that we are providing the liquidity for them to build inventory, which will result in more sales in 2027, you will see some of that reduction starting to happen there. In Q4, I think those SG&A and R&D lines will be pretty well in line with what we saw in Q3.

[Dirk Wallinger, CEO at York Space Systems]

Just to add a little bit on that, when we talk about inventory, whether that is York Spacecraft or inventory, whether that is Orbion propulsion modules or inventory for ALL.SPACE Systems, one thing that comes out of that is that we do invest in the inventory upfront, but it allows for a much shorter conversion cycle for that to become revenue. So, when we are procuring the long lead items over nine months, we have to recognize that revenue over nine months. When we have built it to inventory, a sale and a shipment allows us that conversion cycle to be very, very short. So that is one of the things we are investing in too, is shortening that revenue recognition cycle as well.

[Adam Samuelson, Analyst at Jefferies]

Okay. That's helpful. I guess I'm just to make sure, I appreciate that ALL.SPACE and some of the subsidiaries will have probably higher gross margin potential than some of the satellite production business. But I guess I'm trying to think about the revenue levels implied by an OPEX that's annualizing to the $240 million range. That's probably revenues 75% or more higher than in 2026 level. Am I missing something in that math to think about what it's going to take to get, not that the operating profit break even, but it's still a pretty sizable uplift on the revenue side that needs to occur to get the company to profitability.

[Brian Frantz, CFO at York Space Systems]

Yeah. It's a good question to ask. And if you think about where these businesses were, particularly if you looked at Orbion and you look at ALL.SPACE in particular when we bought them, they were very capital deprived. So they had some of the SG&A infrastructure, they had the R&D structure, but they literally didn't have much in the pipeline because they couldn't afford the cash in order to make those orders, what Dirk Wallinger was talking about. We've provided that liquidity, and so now some of these longer lead items, we're working on those. We're building units at both places, and you're going to see a pretty significant increase in those revenues going forward into 2027.

[Brian Frantz, CFO at York Space Systems]

One of the things we talked about on our last call is that total revenues from our subsidiaries was going to be in the range of 10%-15% of our total revenues. I do think you will see that rise in 2027, probably even north of 20% as we move forward.

[Adam Samuelson, Analyst at Jefferies]

Okay. All right. That's helpful, caller. I'll pass it on. Thank you.

[Brian Frantz, CFO at York Space Systems]

Thank you.

[Operator]

Your next question comes from the line of Clarke Jeffries with Piper Sandler. Your line is now open.

[Clarke Jeffries, Analyst at Piper Sandler]

Hello. Can you hear me?

[Brian Frantz, CFO at York Space Systems]

Now we got you.

[Clarke Jeffries, Analyst at Piper Sandler]

Yes. Thank you. Thank you for taking the question. First is just, I think there have been a lot of coverage around new prospects for the backbone versus existing assets in orbit and sort of fundamental incompatibilities with the technology. Just curious on your thoughts there around the difficulty with integrating with a sort of one solution in terms of a laser interconnect, and how you think that all will settle out in terms of ultimately multiple tranches integrating into future investment vehicles for the backbone.

[Dirk Wallinger, CEO at York Space Systems]

Yeah. I mean, there's technical challenges there, none of which we haven't faced before and overcome. I mean, the reality is that even on the Tranche 0 Transport Layer, York is one of the only people who are able to connect with the SpaceX space platform. Those were with similar lasers, but there were still two vendors doing it. So that was really a first. On the SDN task orders, I mean, that is what we're working on. We are working on the Space Exchange Points that would allow connectivity from other systems into the Space Data Network backbone. That's an absolute need and a requirement because the reality is that other systems use other lasers, and they're not going to be compatible, so you have to have an exchange to make that connectivity.

[Dirk Wallinger, CEO at York Space Systems]

It's obviously not a good decision from a national security standpoint or any standpoint, period, to have just a single system and a single supplier, right? I mean, that makes it extremely susceptible to lots of different adversaries, attacks, and things like that. By working on the Space Data Exchange Points, we're going to give that diversity to this backbone, which makes the backbone more resilient and makes the other providers more resilient. So that's exactly the piece that we're working on. That's public. That's the Space Data Network task orders that we're working on right now. So we're attacking that problem.

[Clarke Jeffries, Analyst at Piper Sandler]

Perfect. Then just one follow-up to the commentary around the rise and the unexercised and additional phases, IDIQ. Just curious if you could maybe parse out some of those that might have obvious 2027 timelines of the phases versus things that might be more conditional on an exercising of a contract that might be funding contingent. Just curious if funded versus unfunded, but there are these phases that you have pretty good visibility in happening in 2027 when they sort of reach the appropriate period.

[Dirk Wallinger, CEO at York Space Systems]

Well, I mean, I think in any case, it is going to be dependent on some kind of budget. That is just the nature of it. Now, there is some pieces of it that a CR we might be able to execute a little bit on. But my reading of the tea leaves is that I think there is probably going to be another short-term CR going into January or early February. And I think a defense bill is probably late February or March. If that scenario plays out, I think those are all very good things for our unexercised options.

[Clarke Jeffries, Analyst at Piper Sandler]

Perfect. Thank you very much.

[Operator]

There are no further questions at this time. I will now turn the call back to Dirk Wallinger for closing remarks.

[Dirk Wallinger, CEO at York Space Systems]

Yeah. I just want to thank everyone for joining us. We look forward to speaking with you again next quarter and appreciate the time.

[Operator]

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

Participants

Executives

• Christopher Evenden, VP of Investor Relations
• Dirk Wallinger, CEO
• Brian Frantz, CFO

Analysts

• Alex Ladd, Analyst at JPMorgan
• Ben Tomick, Analyst at Wells Fargo
• Michael Ciarmoli, Analyst at Guggenheim Securities
• Austin Moeller, Analyst at Canaccord Genuity
• Ryan Koontz, Analyst at Needham
• Adam Samuelson, Analyst at Jefferies
• Clarke Jeffries, Analyst at Piper Sandler