YSS earnings call transcript, November 12, 2026

After the completion of our prepared remarks, we will open the call for questions. And now, I'll turn the call over to Doug.

Hello, everyone, and welcome to York's third quarter 2026 earnings call. I appreciate you taking... 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... ...Compliance, Brian 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. As of quarter end, our funded backlogs to $581 million. Potential unawarded contracts of $2.84 billion, an identified pipeline of $14.9 billion, and $750 million of unexercised options on existing contracts, up 394% from last quarter. Brian 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 additional awards. 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 the corresponding realignment of U.S. government budget resources across proven providers. Certain companies will be better better. position 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 price. The testing 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 more. 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 27 years. 28 and beyond. 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. The classified customer, which we call Palm Springs. The award expands our capabilities into additional missionaries and presents a significant opportunity for follow on constellations. It brings our total to nine contract wins in 2026.

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 your capabilities and integrated ecosystem. We discussed our selection for the night. Start 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 Allspace, Mobile Terminals, and Atlas Global Ground Network. Allspace is also secured in 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 Allspace's resilient communications technology. As recently announced, following... ...and close of the third quarter, the U.S. Navy placed follow-on orders for 59 Hydra Max 2 terminals, bringing its total Allspace Terminal fleet to 108 systems, including 49 previously delivered terminals. This expansion demonstrates continued customer confidence in Allspace. ...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. 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. 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. 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 So, thank you. our rapidly deployable space systems continues to grow. Our mission capabilities have expanded rapidly with the addition of the M-Class, VLEO, LX-Ultra, and Geosystems. 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. 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 auto schedule and fleet autonomy already being implemented across government and commercial mission operation 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. Our expansion into unmanned systems represents another significant opportunity to leverage the infrastructure we have already built. Through Atlas and Allspace, York is... ...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... ...in 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's intelligence. ...status analysis. Combined with our communications and ground infrastructure, we also see opportunities in the unmanned surface and underwater vessel markets, which are estimated by Markets & Markets to be $10.3 billion. These represent approximately $13 billion. ...$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 warfighters further from the fight. We also see significant international opportunities for our... ...for 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. Turning to the government market, our focus is on the scale...

...of the opportunity in 27 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 27. Intelligence community requirements represent significant additional opportunities, while Army and Navy needs could add another $3 billion. Independent of budgets, we're seeing an increase... ...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. At the same time, the Department of War has made its need for a diversified industrial... ...drill 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 interoperability... critical 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, North Virginia, Washington, DC, New Mexico, and Colorado. 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've 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. 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 Allspace's mobile communication terminals, Atlas 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. We set up

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. 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.

The highlight of the third quarter was the closing of the Allspace 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 one satellites during the third quarter, our year on year revenues from that program decreased from the prior year. Although tranche two 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 one gross margin was 18% in the current year quarter down 400 bips from the prior year quarter as we made some one time inventory adjustments at our subsidiaries which compressed margins. We're 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 billion. dips 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 launch 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. The average contribution margin dollars increased slightly growing to 34 million up from 31.7 million last year, driven by the performance improvement on tranche two, 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. 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. 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 provide 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. 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 Allspace 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 Allspace, 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 to $400 million. Retaining the midpoint of $390 million as discussed in our previous earnings call. We believe we are well positioned to win new contract awards, but visibility into the timing and amount of these awards.

2027 remains unclear. And now I'll hand it back to Dirk for a quick summary.

So 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 percent. 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. We believe this realignment of government resources across proven providers. will further strengthen New 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 plan 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 capability of the U.S. our customers need to keep the warfighters safe. And now, I'll hand it back to the operator for questions. Operator?

Your first question comes from the line of Seth Safeman with J.P. Morgan. Your line is now open.

Guggenheim Securities. Your line is now open.

Clark Jeffries with Piper Sandler. Your line is now open. A reminder to unmute your device.

Sounds like we lost him. I will move on. And if they want to press star 1 to rejoin, they can.

Your next question will come from the line of Sheila Kayagaloo with Jeffries. Your line is now open.