Q4 2025 Earnings Call — March 25, 2026
Analyst Name (Firm): Peter Arment (Baird) Executive Name (Title): John (Title)
Hey, thanks. Good afternoon, and congrats, Tony. Thanks for all your support over the last year. Really enjoyed it. And, John, congrats on the new role. Hey, could you guys talk a little bit about, you know, what we're seeing potentially with multi-year frameworks for the primes on – ramping up on not only interceptors, but missile production and how that might impact whether you guys are going to be part of those agreements, given your customer relationships there, and just how we might think of that. Thanks.
Yeah, this is John. Thank you, Peter. Appreciate the question. I guess the way I would address that is to say, as time continues to march forward, we continue to have a little bit more clarity on how these frameworks are going to be implemented. And certainly, Carmen will benefit from the outcomes of the frameworks. That being said, we still, I think, will need to work a little bit further with the primes to understand specifically what the demand profile is going to look like over what period of time. So if you think about the significant increases in production rates that are contemplated within those frameworks, you know, we don't see any of that really materializing in the form of orders for Carmen until at the earliest, say the fourth quarter of this year. So we really don't see that there's a lot of that in the 2026 guidance that we provided, but certainly we see that starting to materialize in, in 27 and beyond.
Okay. Thanks for that, John. And just a broad question, maybe Mike, for just on capacity, you guys talked about CapEx 5% revenues. Could you just remind us, you know, where capacity utilization stands today and your ability to kind of meet all the demand signals. Thanks again.
Yeah, you know, it's always one that's tough to put a number on, depends on the product, you know, and exactly where that constraint is. But, you know, we do have existing floor square footage to expand into before even the Salt Lake City facility opens. And then that will give us, you know, a tremendous boost in terms of square footage. But, you know, as we noted, it will quadruple our UAS launch capability and then give us redundant capability for nozzle production and on certain critical programs, double our rate on those. So we feel good about our immediate capacity today, but we're going to quadruple and double it depending on the product in the near future.
Analyst Name (Firm): Ken Herbert (RBC Capital Markets) Executive Name (Title): Management
Your next question comes from the line of Ken Herbert with RBC Capital Markets.
Hey, good afternoon and congratulations again, Tony, and welcome, John. I first wanted to ask, the record backlog exiting 25, how should we think about the margin represented in the backlog? And do we see any, as you're expanding the backlog, is there any sort of mixed benefit as you think about margins over the next one to two years from what's in the backlog? Or conversely, are you seeing any incremental pressure on pricing from your customers that could potentially be a headwind from a mixed standpoint?
Yeah, again, so I'd say as we exited the year with the $801 million in backlog, there's really no notable mixed changes in that number, whether it be positive or negative. It's pretty steady course from what we're used to. But I would just make mention that as we talk about Siemens now coming into our portfolio and the backlog that they bring, we have discussed that they have a bit of a different profile just given the content on cost plus contracts versus firm fixed. So that's going to change things in the near term. But over time, as those programs mature, we're going to work to put those into firm fixed contracts as well.
Analyst Name (Firm): Mark McIntyre (TAB) Executive Name (Title): Management
Great thanks and just to clarify on the increased revenue guide for 26 I know heading into the year you talked about.
50% basically 25% organic 25% from the acquisitions with the site tweak upwards on the guide for 26 now.
It should we assume that the increase again is roughly sort of half organic half acquisitions it looked like initially much of the increase, albeit small, but much of the increase was driven by timing of the acquisitions.
There are a few factors there. Certainly the timing of the acquisition on Siemens drove a lot of that change. So that would be the primary driver. But we still expect that in aggregate, we're going to have a pretty level split there between organic and inorganic.
Analyst Name (Firm): Clark Jeffries (Piper Sandler) Executive Name (Title): Management
Your next question comes from the line of Clark Jeffries with Piper Sandler.
Hello, thank you for taking the question. Just generally, I was curious, how has the last month changed your investment plans? Any part of the business that you may not have considered a priority for 2026, now 30 days later, you're considering a priority for this year?
I wouldn't say that it changed anything, call it more strengthening the convictions that we already had. So there's no, we'll call it shift in terms of our priorities, just gives us more conviction to lean into the investments we already had planned.
Yeah. This is John, I guess, just to add, we did take our planned CapEx expense up a bit for 26. As we looked forward, we were thinking about 4.5%. I think the last time we spoke and as we've evaluated opportunities for growth, we decided 5% was a better number, so we're going to plan for that.
Perfect. And then just, you know, exiting the year here with a really strong margin progression over the course of the year, I was wondering if you could maybe talk about M&A integration headwinds to EBITDA margins, whether underlying margin expansion is around that 50 basis points you've talked to earlier or higher than that, just... maybe some discussion around the EBITDA guide.
So from what we saw in the year, I'd say it was in line with expectations. And we've talked in the past about operating leverage bringing about 50 bps a year on expansion. But again, I would just point to And it's baked in our guide for 26 with that contract mix of Siemens and MSC and the heavy nature of cost-plus contracts. We do have that in our guidance numbers. And that's why you do see that is the primary reason and factor why adjusted even margin would be lower in 26 versus 25.
Analyst Name (Firm): John Godden (Citigroup) Executive Name (Title): John (Title)
Your next question comes from the line of John Godden with Citigroup.
Hey, guys. Thanks for taking my question. First, I just wanted to chat a little bit about the supply chain. How would you characterize the supply chain at present? Any bottlenecks and any ramifications from what's going on in the Middle East?
Yeah, this is John. I'll start and maybe hand it off to Jonathan. I guess one of the things I would start with saying here is that You know, in the first few days I've been with the business, I've spent some time with the team talking about, you know, both the growth trajectory as well as current operations. And as I asked questions, one of the things that surprised me was that there was not a significant concern raised to the large extent around supply chain. So, you know, as we look at the, you know, the Carmen operating model and strategy, the, you know, the bringing together of pieces of the supply chain into the integrated supply you know, family of Carmen product lines that we have here, you know, today, I think we've really de-risked to a great extent the supply chain concerns that would normally be seen at this layer of the overall defense supply chain.
A couple of minor areas that I think Jonathan might want to talk to here, but generally speaking, I would say supply chain risk is low.
Yeah, as our customers are engaging with us, collaborating with us on the rates and timing of the ramp ups, we are in kind doing the same with our suppliers, going to them, communicating the planned rates, understanding what their capacities are so that they're ready to support us. And as part of that, we're looking to engage with them on longer term deals so that we can secure our materials from a cost standpoint as well.
Right. Very helpful color. Just changing gears on Golden Dome. I think your phrasing was you have a lot of confidence Golden Dome will materialize, but the timing is uncertain. Maybe we could just sort of unpack that, the confidence that it will materialize, but then also, you know, what is driving uncertainty on timing? Whatever you're willing to, whatever color you're willing to offer. Appreciate it.
Yeah, I would say from a Golden Dome point of view, overall, it's clearly a priority initiative for the nation. And there's going to be a lot of emphasis on the program as we continue forward. How exactly all of the priorities of Golden Dome will be implemented is still a little bit unclear. And we, you know, given where we sit in the supply chain, would anticipate that that a lot of the volume to support Golden Dome will actually come through modifications to existing production programs. So think THAAD, PAC-3, Standard Missile, for example, those types of programs are already in place and the adjustments could be made to the production rates. And in fact, those have already been largely communicated to the public. So I think that the timing Again, is the question. And as I said earlier, I think that that we can perhaps start to see some of the upside driven by Golden Dome coming towards the end of the year in the form of orders with potential revenue as we start to look into 2027.
The only thing I would add is Golden Dome is call it, you know, one vector of growth that we'll see. You know, the supplemental, munition supplemental provides another opportunity. So we don't get a PO that says necessarily Golden Dome. And so that is baked into the ramp ups that we're collaborating with our customers on, you know, being able to support. Appreciate it, Connor. Thank you.
Analyst Name (Firm): Louis de Palma (William Blair) Executive Name (Title): Management
Your next question comes from the line of Louis de Palma with William Blair.
Congratulations, Tony, and congratulations, John. Thank you. Thank you, Louis. I was wondering for either Jonathan, Tony, or John, can you discuss the trends that you're seeing in your space business with NASA, Blue Origin and ULA and some of your other customers. I think the recent Vulcan launch experience been anomaly and there's been some changes with the Artemis program, but can you describe at a high level the trends you're seeing and how that impacts your 2026 projections? Thanks.
Yeah, I think from a space perspective, the way we're looking at it is that the demand for space launch is going to remain strong. And so having a strong position across the space launch prime supply chain, I think we have a good position here. And while we may see, for example, a temporary setback for ULA as they work through some technical challenges, and we may see others project perhaps more and more strong near-term opportunity to support launch initiatives or launch events, we have confidence that the trajectory we've been on will continue to be as it presses forward, even though the mix from one provider at the prime level to another may adjust.
Yeah, again, our strategy is to support all the launch providers. So, say, should one have a bumper road like ULA, we are supporting all of them. Interestingly enough, Artemis is showing some positive demand signals for us. So, we do have opportunity there on both SLS and Orion to support that program.
Analyst Name (Firm): John (Title) Executive Name (Title): Management
And for you, John, You bring unique perspective in that you came from L3 Harris and you also came from Lockheed, which are two of Carmen's larger customers. I was wondering, do you see opportunities for the defense prime to offload more of the research and development and offload more of the subsystems development to Carmen? Do you think there's potential there for you to gain market share from your customers in terms of the production of these munition systems?
In both instances, I think the answer to your question would be yes. I think there's certainly more opportunities for Carmen to support the primes. That's been part of the overall strategy of the company is to look at within the second tier of the supply chain and find opportunities to bring together companies that on their own may not have had the resources to invest at the levels required to scale in the way that the primes that, you know, both traditional and non-traditional primes are likely to be expected to in the coming years. And so we would look to be, you know, additional adjacent areas of support, whether that be development or production and continue to scale the volumes of the products that we're supporting today. So yes, I see significant additional opportunity as time continues on. I would temper that by saying the opportunity that we see at this point in time is in the 26 guidance.
Analyst Name (Firm): Alexandra Mandery (Truist Securities) Executive Name (Title): Management
Your next question comes from the line of Alexandra Mandery with Truist Securities.
Hi, nice results, and thank you for taking my question. I just want to ask, can you provide more color on the contract delays, including the size of the headwinds backlog and growth, and if this is embedded in Outlook, if at all?
The size of delay, you know, that might be a little bit more difficult in terms of the exact figure itself. We are in constant contact and communication dialogues with our customers, and so that is getting better. We have great confidence that it is truly just a delay and it's a timing matter rather than, you know, will the orders come through. So we are confident in that. Our customers are also confident that it is really just a timing matter.
Yeah. And I think having just joined the company and, you know, certainly talking with other companies in the industry over the last six months, I think that the delays that Carmen's experienced would be not inconsistent with what other companies and the industry experienced during that same period of time. If that helps.
That makes sense. Yeah, perfect. And then I guess one other follow-up is that we've seen a push towards low-cost, high-volume production of munitions and weapon systems by the Department of War. So are you working with any new entrants that are playing in this space?
Yes, we are. We have, you know, we enjoy a really healthy position here at Carmen. We're on over 130 programs and we're working with 80 different customers, most of which are primes across the space and defense landscape. Certainly all of the established, you know, primes as well as the newer entrants. So we're pretty well diversified from a coverage perspective. You know, and we're built from a manufacturing standpoint to support, you know, those type of lower cost, high volume systems that are gaining traction and demand. You know, as an example, ISP has a commercial offering of launch motors. And so we're able to leverage that commercial launch motors for DoD applications or DoW.
Analyst Name (Firm): Austin Bolick (Needham) Executive Name (Title): Management
Your next question comes from the line of Austin Bolick with Needham.
Hey guys, thanks for taking my question and congrats on the solid results. The first question just has to do with the new updated guidance and there's just some big supplemental packages possibly going through Congress related to the conflict in Iran. How should we think about potential upside with possible new funding that could be coming related to that war?
Yeah, thank you, Austin. Appreciate the question. I guess the first question is, if that supplemental continues to move forward, how long is it going to take to find its way into law and then into funding? Certainly, while we see there's good reason for that supplemental to be pushed forward, based on what we're seeing now on the Hill, it's a little bit unclear how long that's going to take to work its way through, and the path is not going to be an easy one. So timing would be a question. If that were to move quickly, certainly there might be something that could materialize before the end of this year. But again, our best guess at this point in time is those things that could present upside would likely materialize its orders as early as the fourth quarter of 2026 with real volume potentially in 2027.
Analyst Name (Firm): Michael Prast (Evercore) Executive Name (Title): John (Title)
Got it well, thank you, and I guess john one more question for you just just giving your deep background in the space and just giving carmen's history of being very acquisitive I guess like what capabilities, do you think.
are most of interest that that might make sense to go out and purchase the an m&a.
Yeah, look, I've had an opportunity to spend some time with the team looking at the M&A pipeline, and it continues to be one that has a number of opportunities in it that are under various stages of evaluation. Certainly, as you're thinking about things that might be of interest to Carmen, I would look at things that are complementary or adjacent to the things that we do today. If you look at how we've put the company together to date, that's largely been how we've constructed it. And there tends to be value that accrues across the broader portfolio with each one of these portfolio businesses that we've acquired. One thing we've been really thoughtful about is we are a supplier to 130 companies, most of them primes. And so we're really thoughtful about not wanting to directly compete with our customers. So we're looking at how we can bring together pieces of the sub-tier supply chain in a more meaningful way that brings greater value to the primes than if they were to try to do these things themselves. or as traditionally many cases has happened to try to piece them together with a number of smaller businesses that just have less capacity to invest and scale. So that's the lens that we're putting over the landscape. We're also looking for high technology, IP rich opportunities as has been our historical trend and our focus.
Analyst Name (Firm): Victor Santiago (Evercore) Executive Name (Title): Management
All right, well, thank you guys for taking the question.
Your next question comes from the line of Victor Santiago with Evercore.
Good afternoon. This is Victor Santiago on for Amit. Congratulations on a solid quarter and wishing Tony a happy retirement from the team. I wanted to ask about backlog. I understand that you guys don't guide by segment, but can you help us better appreciate the composition of your backlog and which segments might be driving the recent expansion?
I would just point you towards that we are seeing solid growth in now all four of our end markets. And the reason why I wouldn't maybe call out one in particular is because there is a timing aspect of contract awards, whether it's a space and launch commercial platform, award of longer term contracts, now of course with maritime. So the composition can shift from one quarter to the next. In a longer term horizon on a year, it's rather pretty well balanced in terms of bookings and what that looks like. But I would just leave it with all four have great growth drivers behind them. And, you know, we expect that that trend is going to continue on all four of those end markets.
Got it. Thank you. And to follow up on the last question around M&A, how can we think about Carmen's appetite to do another acquisition following the semen and MSC acquisition just given where net where net leverage is just every three times.
Yeah this is john look i would say as i've come on board it's it's impressed me how well carmen has perfected the process of m a integration and one of the things that's been really impressive to me and as you know can often trip up the integration process is culture And what I've seen is that, first off, the core Carmen business has a very healthy culture. And one of the things that really attracted me to this job is I got to know Tony and know the business was the way he's led this team is the way I would lead this team. And I will lead the team going forward. And the companies that have joined the portfolio are very enthusiastic about being a part of this business. They understand what's been happening here. They see it's something special. And they want to become part of this team. And that's really made the integration process very straightforward. I've met with representatives from all of the component parts of the company in my short time here these last few days. And honestly, there's just a lot of enthusiasm. And that's made the integration process more straightforward.
So back to the question of appetite, I think the appetite is there if you think about the the mix of organic and inorganic growth that we are projecting going forward. That will depend upon a certain amount of continued M&A activity. We won't get out over our ski tips and bite off more than we can chew, but I think there's a formula here, and as long as we stick to the formula, things will continue to go well. We'll continue to see that balanced mix of growth in the business for the years to come.
Analyst Name (Firm): Michael LaShock (T-Bank Capital Markets) Executive Name (Title): Management
Your next question comes from the line of Michael LaShock with T-Bank Capital Markets.
Hey, good afternoon. I wanted to follow up on the NASA ignition program announced yesterday to accelerate work on the moon. And you talked about your ability to support the launch providers, but Are there any other areas outside of just launch that you might have exposure to as NASA looks to build out the lunar base over the next decade, maybe within satellite technology or anything else there that you can highlight?
Yeah, we do have some participation outside of strictly the launch component of the full equation. In fact, space vehicles is an area where we do have some work that's active. Jonathan, I'm not sure how much we can say about that work if you wanna add anything to that.
Yeah, it's one of those where we look at the capabilities set that we have and they have broad ability to support our customers really kind of independent of what their mission ends up being. And so, yeah, we have built out at our Seattle facility, a large clean room to support spacecraft integration and assembly work. And so we would be able to support satellites, spacecraft from that facility, but certainly very engaged with the NASA and the prime customers on ignition program to see how we can support.
Analyst Name (Firm): Management Executive Name (Title): Management
Great. And then switching to hypersonics, just given the significant growth that we're seeing across the industry there, and clearly budget support for those initiatives Is there any more color you can provide on how significant some of these growth opportunities could be within hypersonics over maybe the next year or two?
Yeah, I'm not sure how much I want to speculate on the growth of specific initiatives in hypersonics. I mean, clearly it's a continued area of focus for our customers. It is an area where we do, again, have participation across a number of programs that are in various stages of development. We have some that are classified. We have some that are a little more out in the open. And again, we follow our customers' lead on those. So I would say it'll continue to be a significant focus for us. It's a part of our portfolio that continues to grow along with the other pieces. And I think we said that hypersonics and strategic missile defense grew for us about 31% year over year in 25, so it's a healthy growing part of the business.
Analyst Name (Firm): Ken Herbert (RBC Capital Markets) Executive Name (Title): Management
Your next question comes from the line of Ken Herbert with RBC Capital Markets.
Yeah, hi. Hey, appreciate the follow-up. I know the vast majority of what you sell, you're sole source, but are you aware of any specific efforts or even broader effort by your customers James Rattling Leafs, Try and add on second sources beyond yourself on any particular programs and, if so, how do you, how do you view that risk and and, obviously, how do you then then go about trying to prevent that Thank you.
Yeah, it can certainly, it's something we've talked about and I think that right now we aren't aware of any initiatives of our customers to second sources for performance or capacity or any other reasons. As we look though at the increases that are contemplated, one of our highest priorities is first off to make sure we're performing and meeting our commitments to our customers today. And I've been in touch with many of our customers in the last several days here to reinforce our commitment, and we'll be meeting with them in the weeks to come here. Our focus is to make sure that we never become a choke point, a bottleneck, or a risk for our customers. I mean, Jonathan mentioned the redundant. We're putting in additional capacity for nozzle production. We're also doing that deliberately at another location from our primary nozzle production, and part of that is to provide some redundancy to our customers without having to contemplate going elsewhere to get redundancy for those critical capabilities. So it's something we think about. It's something we talk about. It's something that is part of our strategy. And certainly we are committed not to be a choke point, a bottleneck that would put our customers in the position, frankly, of a time-consuming and costly qualification of another source.
Thank you. That concludes our questions. question and answer session. I will now turn the call back over to Stephen Gitlin for closing remarks.
Executive Name (Title): Management
Thank you, Tiffany, and thank you all for your attention today and for your interest in Carmen Space and Defense. An archived version of this call, all SEC filings and relevant company and industry news can be found on our website at carmen-sd.com. We wish you a good day, and we look forward to updating you on our continued progress in the quarters ahead. This concludes today's call. Thank you all for your participation. You may now disconnect.