Q4 2025 Earnings Call — February 26, 2026
Analyst Edison Yu (Deutsche Bank): Good morning, everyone, and thank you for taking your questions. First, I want to ask about the new eight-figure sovereign deal. I guess it's falling under Mission Solutions now. Can you give us a little bit more detail about both in terms of the customer, the pacing of how that revenue gets recognized, and more generally, the pipeline of similar opportunities going forward about deals like this or structures like this?
Executive Name (Title): Sure. Good morning, Edison. Thanks for the question. Yeah, as we outlined in our remarks, this is a, we'll call it an initial contract for a Gen 3 satellite that includes some ground capability and software as well as multi-year support services. It is bundled with a commercial contract for subscription-based access to our commercial constellation and AI services. That means that these types of contracts support both of those elements of our business. In this case, we were able to, as Henry mentioned, recognize a good portion of revenue of that in the fourth quarter as we were able to make immediate deliveries. The strength of this is that we were able to pull a satellite off the production line and accelerate the customer's schedule. So we will move forward on their schedule to launch the satellite as quickly as we can, either later this year or early next year. So we are seeing a general trend where a number of these types of customers will start with a few satellites with ambitions to expand much further beyond that and grow those over time.
Analyst Edison Yu (Deutsche Bank): Just to follow up, do you have a sense of how many of these type of programs or deals are in your pipeline? Is this something that could be multiple countries, dozens of countries? How does one think about that?
Executive Name (Title): Yeah, I think we're building a very strong pipeline. We're seeing this type of trend across a number of regions in the world and with a number of customers in each region. So I think, Edison, the way we think about this as a TAM expansion opportunity, maybe to put this in some numbers, about maybe less than five years ago, there were under 12 or 15 countries that had sovereign space capability. Now there's over 60. And many of them are in the early phases of building out their capability. This is a large and expanding market, and there's a number of customers that are coming into this with very little initial capability that we're able to help accelerate their long-term plans.
Analyst Edison Yu (Deutsche Bank): Patrick, if I could just sneak one more in. Would you expect to announce another similar type of deal this year?
Executive Name (Title): As I said, we have a very strong pipeline. We have a number of deals moving through the pipeline. Timing of international deals has always been challenging to predict exactly. And just also keep in mind, these tend to be lumpy. So, you know, these deals will come in and then you'll see these spikes in revenue as we recognize revenue, depending on the nature of the contract.
Analyst Jeff Van Ree (Craig Hallam Capital Group): Great. Thanks for taking the questions. Maybe to start with you, Henry, in terms of the guide, if I look at the low end of the guide, what has to happen here to hit that in terms of new bookings versus already having that in backlog?
Executive Name (Title): We've got a strong Jeff. Thanks for the question. This is Henry. We've got strong visibility. We do have a backlog, as we've said, maybe about $345 million. We've got nearly 75 million of that coming through in 2026. We also have renewals that are not yet in there. So that's kind of our standard modus operandi. So we've got strong visibility to get into the low end and actually into all the way into the full range there.
Analyst Jeff Van Ree (Craig Hallam Capital Group): Just to be clear, is the low end, assuming, I mean, can you give a ballpark of what kind of new bookings you need to make that, or is it already in the bag?
Executive Name (Title): Well, as I said, we've got a fair bit of renewals in there, so we feel pretty comfortable. Obviously, we wouldn't put a low end out that we didn't feel that we could hit.
Analyst Jeff Van Ree (Craig Hallam Capital Group): Got it. And then, Henry, you mentioned on the guide in terms of linearity, assume it's back-end loaded. Can you expand a little bit? You had this large eight-figure customer. It sounds like a lot, maybe most of that revenue fell in Q4. So how much of that does not recur in Q1? Just trying to get a sense of the step down and then how to build the ramp through the year.
Executive Name (Title): Well, I guess the way I would look at it, if you look at us historically over the last number of years, we've usually been in kind of like the – 45, 40, 45, less than 50% in the first half of the year, and 55 to as much as 60% in the second half of the year. That's kind of the way I would be looking at it.
Analyst Jeff Van Ree (Craig Hallam Capital Group): Got it. Okay, and then just last, on the Gen 3s, obviously I think compared to your initial hopes, expectations, the timeline of getting those in the sky has been slower than expected. Just curious, as you're looking back on kind of what's playing out there, is there anything that needs to change? Are you satisfied with the timelines it looks like in terms of how those are going to roll? And where do you think you're going to end 2026 in terms of the number of Gen 3s up?
Executive Name (Title): Yeah, Jeff, the way that we're looking at it right now is, you know, we've got these first three up, and they're meeting and exceeding expectations, performing exceptionally well. And that performance has driven success. The revenue ramp that we're experiencing in the fourth quarter and taking into this year. We have the next one already at the launch site. Our goal will be to have eight to nine Gen 3s on orbit by the end of this year. We're in very good shape. As we mentioned, we have found an issue in testing on the prior satellite. This is very typical with your first few satellites. I'll remind you with our Gen 2 constellation, we started with a similar cadence, and then we quickly got to the point where at one point we launched six satellites within 20 days. So we are on track, and the satellites are performing well, and our production operations are ramping.
Analyst Timothy Horan (Oppenheimer): Thanks guys. Any updated thoughts on is there an inflection point for where you get some scale when you hit like six, seven, eight satellites when maybe more general availability and do you see a little bit more operating leverage? Just thoughts on what the critical number is there.
Executive Name (Title): Yeah, good morning, Tim. I guess we don't think of it that way. I think the way we are seeing it is the three we have up there have been sufficient to put in front of customers so they can validate the performance and how they integrate this capability into their operations. And our sales cycle reflects that along with unlocking revenues from existing contracts. So the thing that maybe keep in mind is the number of satellites is not indicative of revenue. There's some companies with hundreds of satellites that have a certain revenue profile and others that have six to eight that have a completely different revenue profile. So we view it more as customer adoption rate and unlocking performance, and we scale that capacity commensurate with the level of service that we need to deliver, whether it's imaging, performance and quality revisit, or low latency delivered with AI-enabled intelligence. So it's a customer ramping and capacity ramping trend that we're working toward.
Analyst Timothy Horan (Oppenheimer): Got it. It does sound like you are a little bit capacity constrained on the manufacturing line, but I think you're implying that that's going to accelerate your ability to accelerate your manufacture of these satellites. Is that pretty accurate?
Executive Name (Title): Yeah, I wouldn't call it capacity constrained. I would call it being very measured with the first several satellites to ensure that the ones that are going up there are meeting our quality standards and we are in parallel optimizing supply chain and our production processes to hit a operating cadence out of production so as I said this is typical and we are feeling very good about where we are.
Analyst Timothy Horan (Oppenheimer): And then lastly just any thoughts on U.S. spend are you at this point from the government what are you kind of expecting this year are you seeing improvements there?
Executive Name (Title): Yeah, I think, let me just say, you know, we're happy that Congress approved the 26th budget, which includes funding for EOCL and other commercial imagery and analytics initiatives, both at NGA and Space Force. So for EOCL, we've taken a conservative approach in our forecast this year, and we expect that it will take some time into Q2 across all of these programs before we get better visibility into how this funding is going to be appropriated to specific programs and contracts. But we're seeing increased interest across the government in expanding use of commercial imagery and analytics.
Analyst Jason Schmidt (Lake Street): Yes, thanks for taking my questions. Just following up on the new eight-figure contract. Just curious how long you were in discussions with that customer before inking that contract and I guess relatedly what you're seeing from sort of a sales cycle timeline when it comes to some of these January contracts.
Executive Name (Title): Yeah, I think I think the way we think about it, Jason, it's. These are 12 to 18 month type sales cycles and. In this particular case, this was at the faster end of that. So I think we're seeing a very consistent trend around that length of sales cycle.
Analyst Jason Schmidt (Lake Street): Okay. Okay, that's helpful. And then just as a follow-up, not looking for specifics, but just curious at a high level, if the pricing of the Gen 3 capacity is in line with your prior expectations?
Executive Name (Title): Oh, it's exactly in line with our expectations and what we have modeled in our business plan. The thing that you need to keep in mind is we have increased the pricing commensurate with the from gen 2 to gen 3 with the improved 35 centimeter capability. Also keep in mind that these gen 3 satellites are producing imagery at a level of performance of much larger and more expensive satellites that in some cases can be 10 times more expensive so these types of compelling economics are really enabling us to provide our customers with exceptional value at competitive prices while delivering strong margin performance to the business.
Analyst Chris Quilty (Quilty Space): Board and gentlemen, looking out to 26, and thank you, by the way, for providing the new segment reporting that's definitely helpful. Can you give us a sense of what sort of a breakdown you expect revenue-wise between the segments? I'm thinking it's probably like a 70-30ish on the imagery and analytics.
Executive Name (Title): Yeah, good morning, Chris. Thanks for the question. Let me take the first question before I hand it over to Henry. Yeah, I think the mix is really consistent with where we've been in the past. This is just providing some visibility across those three elements. We expect that the space-based intelligence and AI services to contribute, you know, somewhere in that 60 to 70% of our revenues, which is, that's our higher margin subscription element of our business. The mission solutions element, know think of that being in this kind of 25 range at this point but we expect that to grow we expect them all to grow um that may that may grow a little bit more disproportionately as those are larger deals and then finally the uh technology development programs uh as I said we've had a long history of those um and we we expect to kind of sustain that and grow it you know think roughly you know, 15% or so of our of our total revenue. So no, really not much change in the blend, but just providing better visibility.
Executive Name (Title): Chris, kind of looking at kind of the mission solutions line, given the fact that these satellites do have some customization associated for each individual client because of the way they need to operate them a little bit, we are able to look at it from kind of an ETC basis or kind of a percent complete, as you're calling it, so that we do expect to be able to get some revenue recognition as we march through. And that's what we were able to do with this eight-figure contract in the fourth quarter.
Analyst Chris Quilty (Quilty Space): Great. And when you look at the, you know, the international sales model, I mean, we've certainly seen kind of two different models, one where transfer the satellite, you know, to the customer, another where you operate the satellite as a bespoke element of that customer's, you know, customer ownership, you're operating it and you monetize in different regions. Do you prefer either of those margins? What direction do you see that trend line going? And are there significant modeling considerations we should think about, depending upon which model you use?
Executive Name (Title): Yeah, Chris, I'm not sure we would say we prefer one model versus the other. I think what we're doing now is being responsive to how our customers want to structure these contracts. As I mentioned before, in the mission solutions, it's essentially giving them sovereign capability and control that may include operational support, leveraging our commercial infrastructure, and then bundling that with our commercial services that are giving them higher performing revisit and real-time AI-enabled intelligence that augment that. So there's a number of different business models, whether it's a constellation as a service or a turnkey system. We've developed a strategy where we're flexible to meet the customer where they are and be on that journey for them in the long haul of how they want to expand this over time.
Analyst Chris Quilty (Quilty Space): Great. Henry, are you going to give a quarterly breakdown of the new segment reporting in the K? For a historical, yes, we will. Historically, they will be.
Analyst Austin Mueller (Canaccord Genuity): Hi, good morning, Brian and Henry. So just my first question, can you comment on the NRO having 200 of its own satellites in orbit now? Do you know what modality they are? Are they like EO, infrared, SAR? And would you consider that to be complementary or competitive to Gen 3?
Executive Name (Title): Well, I think the U.S. government and other major governments have always had their own sovereign capability for critical national security needs. That's been the case for a long time. I think what's important to understand in the U.S. government is that there's several unique missions that the U.S. government has moved to commercial capabilities, and that those set of requirements have long been allocated to what is now EOCL, but prior to that, enhanced view and the predecessor contract. So I think the way we look at it is we're not competing with those systems. We're augmenting them. We can move much quicker in the innovation cycles. We can provide a resilient augmentation capability and then also which is extremely important, is everything we do is unclassified, which is shareable with our allies. So it's not a competition, it's an augmentation, and it's serving very specific missions that have been allocated to the commercial industry.
Analyst Austin Mueller (Canaccord Genuity): Okay. And are you able to comment on what the size of the commercial imagery budget was in 2026 now that the budget was passed? I know it's usually classified, but I don't know if that's been divulged yet.
Executive Name (Title): It's still, it's a classified budget line.
Analyst Scott Buck (HC Wainwright and Co.): Hi, good morning, guys. Thanks for the time. Brian, I'm curious, you guys talked about the significant international demand. Can we get a little more granular there? Is that Asia? Is that Europe? Or what can you tell us about where that's coming from? And then second, what do you think was left on the table in the U.S. in terms of revenue from the shutdown during the end of 25?
Executive Name (Title): Yeah, I think, Scott, I think we're seeing on the mission solution side internationally pretty much demand almost in every major region across the world, you know, Europe, Middle East, Asia Pacific, Southeast Asia, et cetera. So, like I said, you know, the number of countries that are putting significant dollars into building sovereign space capability, both for national security and economic development purposes is growing very rapidly. And so we do have a pretty strong pipeline worldwide. I think on the what was left on the table question, we talked about the impact of some of those government budget changes that we addressed in August. I don't know, Henry, if you want to maybe comment on that again, but I think we shared those numbers.
Executive Name (Title): Yeah, we have shared, Scott, back in some of our prior earnings calls, we did talk about how with the budget cuts and the impact that we had, that was in the neighborhood of about $2 million per month starting in August, so about a $10 million hit for the year. So that's what we've stated.
Analyst Scott Buck (HC Wainwright and Co.): Great. I appreciate that. And then as we move closer to 27, could you give us a little more color on how the rollout of Eros would work and maybe some color on what the revenue opportunity looks like versus the imagery business?
Executive Name (Title): Yeah, the Eros satellite is a TAM expansion opportunity for us. Our Gen 3 capability is high-frequency dynamic monitoring of strategic sites of interest. EROS is being designed as a large area mapping, digital mapping capability for large area change monitoring. Think of the large imagery demands and collection required for things like Google Maps and other digital platforms, including in support of next generation AI capabilities, the development of digital twins. And so Eros is being designed specifically for those set of requirements. The Gen3 and the Eros satellites will work cooperatively to deliver a high value service to our customers that need both of those capabilities. And then also it's a commercial expansion opportunity, particularly an area of digital mapping and other civil and other civil type markets that require that type of mapping. So it's a purpose-built satellite for a new market opportunity.
Analyst Sheila Kayalu (Jefferies): Good morning, everyone. This is Billy on for Sheila. Thanks for taking our questions. Just on the cash operating expenses, you've held them relatively flat while growing revenue, which is great. What are some of the drivers of the cost management? And as Gen 3 continues to scale, how are you thinking about OPEX and operating leverage?
Executive Name (Title): Yeah, I think I'll start. I can hand it over to Henry. We have from day one been building a platform that gives us significant operating leverage. As we get the business over the fixed price cost of running that and maintaining it, that's where you see significant margin performance that goes to the bottom line for every incremental amount of capacity that we sell. So you can see that in our EBITDA margin performance over the last couple of years as we've been monetizing that capacity off of a fixed operating, generally fixed operating base. I don't know, Henry, if you want to add anything.
Executive Name (Title): I think you covered it there, Brian. I mean, we're disciplined in kind of cost management. We do make investments in sales, marketing, and other R&D type stuff so that we are always making sure that we're growing, but we're also quite disciplined to make sure that we provide the leverage so that as we grow our top line, it will drop to the bottom.
Analyst Sheila Kayalu (Jefferies): Great. Thanks. Helpful. And then just one more on free cash flow for 2026. What do you see as the major moving pieces as you progress towards positive free cash flow for 2026? What are the working capital needs? And for the, you know, 55 million in CapEx, how do you think about the mix between Gen 3 investments and AI technologies?
Executive Name (Title): Well, we don't break CapEx down between those two in our guidance, but as you can look historically, I mean, we typically have a neighborhood of about 12 to $15 million of kind of general corporate development CapEx, AI CapEx, et cetera. But the big thing there is, as we're guiding, we're growing the adjusted EBITDA, which is a surrogate for operating cash flow, and we believe that we'll be able to hit the target ranges that we're putting out there.
Analyst Greg Burns (Sedoti): Good morning. Just to follow up on the EOCL question. Funding and I know it's the budgets classified, so maybe you don't have an exact number, but do you have any sense of whether or not the cuts the proposed cuts were enacted or if funding was restored to historic levels?
Executive Name (Title): As I mentioned earlier, it is classified, but what we are seeing is. There's multiple budget lines. There's been a couple that have been added. And we're sorting through how that is going to play out in actual implementation. So we're seeing some positive trends out of that, but we have to see how this shakes out over the next quarter.
Analyst Greg Burns (Sedoti): Okay. And I guess, is any part of your guidance range, does that include that the level of revenue from EOCL stepping back up or is that not anywhere in your guidance and that is potential kind of upside?
Executive Name (Title): I'll just say we've taken a very conservative approach to our forecast this year relative to EOCL and we'll see where this lands by later in the second quarter.
Analyst Greg Pendi (ClearStreet): Hey, guys. Thanks for taking my question. Just one real quick one. Under the old reporting, your Ks and Qs would break down imagery versus data, software, and analytics. And I think at the beginning of the call, you mentioned sort of that flywheel effect of getting the better imagery feeding into the AI capabilities framework. Thus far the data software and analytics growth has been pretty stagnant so you can you kind of give us a little bit of color on how the improved imagery kind of feeds into that area and how it would play out in 2026 with the better imagery?
Executive Name (Title): I think just first off you know last year because of the government budget issues that had an impact on the growth of that line but now that is being offset by the strong demand we're seeing in the international markets, particularly around Gen 3. And then the expansion of the improved AI capability that Gen 3 brings as well. And then the pricing increase. So we have very good visibility on how that line is going to be growing going forward.
Analyst Dave Storms (StoneGate): Good morning, and thanks for taking my questions. I wanted to circle back to cash management. Henry, I believe in your remarks you mentioned that we should see an accounts receivable burn throughout the year. Just curious if you could give us any more color there, maybe some of the points it takes on working capital management. If we should expect that AR balance rate to get back down to 2024 levels or not.
Executive Name (Title): Yeah, I mean, when you take a look in the press release about the balance sheet theory, our accounts are about that $37.5 million mark. A lot of that, as you might imagine, when we sign a contract late in the year and there's a fair bit of revenue, we bill for it, but you haven't lapsed that through that typical $30 million. 45-day receipt cycle, so you'd expect to kind of be able to bring that stuff back down. With the mission solutions, we may get some lumpiness on that, but we've never had a problem with collecting receivables.
Analyst Dave Storms (StoneGate): Understood. Very helpful. Thank you. And if I could just ask one clarifying question. I think you mentioned earlier in the call that the sales cycle is typically 12 to 18 months, and I think that was specific to those eight-figure contracts. Are you seeing a similar sales cycle for call at the 45 additional sovereign nations that have kind of come online in the last five years, or do they tend to have a little bit of a longer sales cycle?
Executive Name (Title): I think they're all a little different, Dave. It's hard to, especially when you have customers that are doing this for the first time and implementing new acquisition programs. So, you know, my range and sales cycle is really a general number. We'll see some go faster. We'll see some take longer.
Executive Name (Title): There are no further questions
at this time.
This concludes today's call. Thank you for attending. You may now disconnect.