Q4 2025 Earnings Call — March 19, 2026
our first question comes from the line of John Gooden of Citi. Your line is open. Please go ahead. Appreciate it. I wanted to, there are a few things to follow up on, but I guess the one that I'll focus on is this acquisition, Orbian. Maybe you could just talk a little bit more about that, how it came about, what the terms were. And I was curious if this was the deal that was contemplated in the S-1. There was a note in the S-1 about, you know, a letter of intent for an acquisition. Was this that or was it a different one? Yeah, sure. Happy to dive into that one a little bit. Thanks, John. I appreciate the question. Yes, it is the acquisition that we were contemplating from the S1. We're really excited about Orbeon for a few different reasons. We've launched a good amount of satellites at this point. We've worked with a wide range of propulsion providers. Orbeon was really a clear winner as far as their ability to execute, their ability to perform. Their hardware has performed really well in orbit. It's a really great team to work with. So we're excited about bringing that on.
And it kind of goes to the vision of, you know, when we were doing the IPO, right? We spoke about the four different things that we were going to do and how we're going to go on offense. And one of those was some inorganic associated with bringing great technologies kind of in-house so we could align our technology roadmap. Kind of give them a better vision of where the market was headed, where we were headed so that they could be more successful in developing those products kind of right out the gate. And that kind of communications is going to be critical because, you know, we're already a leader as far as cost and schedule go. But with Orbeon with us now, we'll be able to align that technology roadmap, give them assurance of the kind of size of production cadence they're going to need in the coming years so that they'll be really prepared to deliver for us. And so they've been a phenomenal performer for us for years now. And so we think this will make them an even better performer for us and the rest of the market as well. So they will continue to execute as a wholly owned subsidiary. That's fantastic.
And do you guys are willing to give us a sense of how much revenue that's contributing to this year? And then just, you know, on M&A in general, are there any other acquisitions contemplated that we should be aware of? Thanks. Yeah, Kevin, correct me if I'm wrong. I mean, I don't think that we're breaking out them individually. Right. I think it's we're going to still report at the top level. Right. Yeah, that's right. We're not issuing specific guidance, John, on Orbeon, but we can confirm that it's included in our consolidated guidance figure. And to the latter question about additional M&A, I mean, I do think there's some opportunity for some additional M&A. I think people in the industry and in this segment kind of see what we're doing. They're very excited about it. They want to be a part of it. And so there'll be some other things where like Orbian, they make sense, right? They're the best technologies. It will help us continue to drive down cost even further and make that advantage that we have larger, but then also kind of align that so that our schedules continue to be the best in the sector. So I think there could be some more opportunity for that.
And there's also opportunities where, you know, we might start to look at kind of adjacent markets and things like that. Perfect. Thanks, guys.
Your next question comes from the line of Seth Seifman of JP Morgan. Your line is open. Please go ahead. Thanks very much and good afternoon. I wanted to start off talking about some of the opportunities for new business that you mentioned coming later in the year. Is it some of the Golden Dome opportunities moving maybe to the left of initial expectations for 2027? Is it in the intelligence community? Is it the next tracking layer? And what are the prospects to exit this year with, you know, a backlog that's bigger than where it is now? Well, yeah, I mean, I think that we feel pretty great about that, Seth, so I appreciate the question. You know, I thought the pretty exciting part of the call was where we mentioned that we just want a new Constellation 4M class for a commercial customer. 20 plus constellation. It's the first constellation of many planned for this customer. So I thought that was an exciting part. I thought that that would add to the backlog, but so, you know, obviously that's pretty exciting for us as well. As you know, general good line is kind of attested to and been a more public in general with regard to golden dome and national defense, just in general.
I mean, we, Everyone focuses on the name Golden Dome, but the reality is it's National Defense, right? So independent of what it's called. He's spoken a lot more about the absolute need to lower the cost, to move faster, and then to leverage existing acquisition vehicles. We check the box on all three of those. And so I think that's why we're starting to see a little bit more come out about National Defense and Golden Dome, what that's going to be. I can't go into any more details right now other than to say that it's a Late breaking news that we have not won one, but we've won two IDIQ contracts now for different classified customers. So on this call alone, we have not only our healthy backlog and our ability to convert that backlog into revenue, which Kevin reported on, we've won a new commercial contract for the first of many constellations for our M class. And then we have now won two IDIQs for different classified customers. So we feel very bullish about the position that we're in. I think generally though, I mean, just as a commentary, you're not going to hear a ton about Golden Dome.
General Gutlein has been pretty clear that most of the work is going to be classified and that's kind of what we're seeing, right? We're seeing contracts being awarded on the classified side of things. So I'd be happy to talk more about those contracts that we've won for the different classified customers, but that'll be kind of coming in the next few weeks as we kind of sketch those out in a little bit more detail and what we're allowed to discuss and what we're not. So we're still working on that, but hopefully that gives you more insight. I mean, I think that we're in a, Pretty bullish position with our performance and our ability that, you know, just between IPO and now we've already added quite a bit more to the backlog. So I think we feel like we're in a good position and we're going to execute like we always do. Excellent. Excellent. Maybe to follow up then on the commercial win there. I guess the pieces of the TAM that you guys have laid out in the past were pretty national security oriented.
So how do we think about that commercial piece coming into it and how maybe the size of that relative to the other pieces of the TAM and how significant that could get within your mix? Yeah, I mean, I feel, you know, focus historically has been on national defense, but that's mostly because, you know, the reality is that's where the dollars were. That's where the contracts were. So we won the contracts that were available to us. And we did a very good job on them and executing on them as well. And so that success led to more contracts. So, you know, we're happy with that. But I'm very I'm more and more bullish every day on what commercial can do. You know, unfortunately, we can't disclose who that customer is right now, but I'm very excited about the mission and what they're doing. It's very much aligned with with the trends that we're seeing today. And also what I think we're going to see is a lot more growth in this area. Really, you know, traditionally commercial has kind of struggled with kind of getting that kind of total gravity, I guess, for lack of a better term, on, you know, really garnering the attention it needs and the dollars it needs to really be at scale.
But we're really seeing that shift. We're also seeing this administration say that they want to leverage more commercial, which obviously encourages investment in it as well. So, you know, I'm in hopes this is the first of many. I mean, I know for this customer alone, this is the first of many in the constellations that they're going to deliver to orbit, right? So we're obviously very happy to be in the position with that. But I think in general, commercial, we're just going to see more and more. The nice part is, is. you kind of have a giant surge in national defense, right? Which is a great market for us. And we're now, you know, showing some pretty significant diversity in customer base on that front. And then to have some big commercial wins is really great too. So I think both markets are going to surge. Obviously, I think that we're in a good position to win that work. We just got to continue to execute as we have been, deliver at scale. And I think both of those markets are going to see healthy growth for many years to come. No one's saying we need less satellites in the future. Excellent. Excellent. Thanks very much.
Your next question comes from the line of Peter Armant of Baird. Your line is open. Please go ahead. Hey, good afternoon. Good afternoon, Kevin and Dirk. Thanks for your time. Hey, Dirk, just maybe just to circle back a little bit on your comments about kind of Golden Dome slash, you know, the National Defense Contracts. TAB, Mark McIntyre, has their we're dealing with a lot of investors are kind of very focused on if there's been a material change of what you view the pw I say. TAB, Mark McIntyre, kind of architecture is I was wondering if you could just maybe shed light it do you view it to be materially changing or is it just morphing into the various classified version of the golden Dome just any insight would be helpful thanks. I think it's along the lines of what you said in the latter part there. So, you know, look, if it's called PWSA, if it's called Space Data Network, if it's called PLEO, you know, whatever the name is, the government is definitively moving towards it. And they're delivering contracts pretty quickly now out to performers who are going to execute on this. They need this executed really quickly.
So I don't think it's about, you know, hey, does PWSA, is that going away? Is Milnet going away? There's nothing going away. Communications is there. not only absolutely critical for Golden Dome and national defense in general, it's the most important thing. Nothing else happens without communication. So I think it's more of there's definitely a realization that this is going to be the architecture of the future for the United States. And if it is going to be the architecture for the United States, that it needs to be more coordinated. Right. That's a general theme that we're hearing across anything, whether that's space, whether that's sea, land, air, it has to be more coordinated. So I think a lot of the shifts, quote unquote shifts, I guess, that you're seeing in PWSA transport or or Milnet or what have you. Isn't really about do we need this? It is about we do need this. How are we going to get them to talk to one another? And maybe we should look at that in more detail and definitize that more before we continue on kind of separate, disparate paths, which is kind of what got us into the into the challenges the United States faces today is.
We have lots of amazing capabilities, but they're disparate and they don't talk to one another. So I think it's really more about that is, you know, whatever the name is, it doesn't matter. It's needed. I think it's just more about, let's make sure that they're going to talk to one another because we shot ourselves in a foot in the foot, like a couple of times over this. So let's not do that anymore. I think it's really more about that. Like that's the mentality. Got it. That's helpful color. And just, it is exciting obviously with the new commercial win that you announced in February. Could you maybe talk a little bit about, expectations of delivery of those 20-plus satellites just over what timeline? Thanks again. Yeah, so, you know, T1 is an operational system, and as such, the readiness of the system is controlled information. So I can't discuss, you know, actual launch date, but we are very far along on production, and I think shipping is eminent. I probably can't get any more specific than that. Got it. Congrats on that one. Thanks, Derek. Yeah,
thank you.
Your next question comes from the line of David Strauss of Wells Fargo. Your line is open. Please go ahead. Thanks. Good evening. DEREK, WANTED TO ASK ABOUT IN THE FISCAL 26 DOD BUDGET THAT WAS PASSED, I THINK, END OF JANUARY OR EARLY FEBRUARY, THERE WERE STILL A WHOLE BUNCH OF TRANCH 1 AND TRANCH 2 FUNDING IN THERE. SO HAVE YOU ACTUALLY RECEIVED ALL OF THE TRANCH 1 AND TRANCH 2 FUNDING? IS THAT REFLECTED IN BACKLOG TODAY FOR YOU, OR IS THERE STILL A FAIR AMOUNT? that funding that has to come through and be put in your backlog related to Trunch 1 and Trunch 2. I believe it's all included in the backlog, but Kevin, maybe, you know, if you think I'm mistaken, you can speak up. That's right, Derek. What we report as backlog are only exercised options and only funded exercised options. So it's all our backlogs and entirely funded. Okay, so even though that wasn't, you know, the funding wasn't passed until January, you know, after the end of your, you know, 2025 year, that's in the backlog or it isn't in the backlog? So let me try it this way. So all of the programs that we're on, right, have funds appropriated for them.
And then just the way, just to get into some of the nuances of how the government funding works, is yes, as we move into different fiscal years, they will then technically fund it, right? So the funding does come over time. I think the bigger point is that all these programs, the money is budgeted and set aside for it, but yes, there's a technical sort of nuance of how the, over time, the actual money moves technically to that program. So within our backlog, Again, it's all exercised contracts or exercised options within those contracts. We don't include unexercised options. A lot of those are the right of launch ONS portion. So that's not included in the backlog. And then to your point, things over time that when the funding actually moves it, we don't move our backlog up and down by the, by the funding amount, just because it's a very small portion that's not funded. And we know that the funds are there. It's just more of a technicality of, of when they, when they occur. Okay.
And then can you talk about kind of your, your current build rate? You know, what, what are you producing at today? And, What kind of build rate underlies the 2026 revenue guide as compared to 2025? Yeah, I mean, so I would say that build rate is definitely not going to be, is not the challenge for us. We're not building up our production in hopes of meeting the demand that we have or meeting future demand. Quite the opposite. So York is invested pretty heavily in our production capacity. In our Willow facility alone, we have all the capacity to meet all the production needs through 2028, right? So that's Willow alone. It does not include production capacity at our Wazee facility, which is a little bit smaller, but nonetheless, a completely different production facility. And most importantly, our Potomac facility, which is actually four times larger than than our Willow facility. So we've actually built out, invested in, and are prepared for massive production numbers on the order of up to 1,000 satellites a year. So that's what we've invested in, and that's what our capacity is today.
And that's a little bit of a differentiator between a lot of other companies who are still trying to prove their first product. And even after they approve the first product, you know, try to get to scale. And that's that's a little bit different for us. So everything at just our Willow facility alone meets all our projections through twenty eight. And we have, you know, four X more capacity in our Potomac facility. So we're we're very well positioned for the growth that we expect, you know, going on through twenty six, twenty eight, twenty nine. Yeah, I'll just maybe add a few things here, Dirk. There's a pretty helpful slide we have in our earnings deck. I think you should all have access to that either now or after the call, but it's slide eight. And it shows that right now we have 33 satellites on orbit. But then we provide some general guidance to the satellites that we have currently in our backlog being produced. It's 107 and we expect all 107 of those to be launching over the course of 26 and 27. As Dirk mentioned earlier, we can't provide specific launch timing for specific programs. That's controlled information.
But what we can say is broadly speaking, Um, we'll have a total of 140 satellites on, on orbit by the end of 2027, uh, if, if not sooner. And, and so the way to think about how that ties to our, you know, you touched on our, our revenue, um, you know, again, over 70% at the midpoint of our guidance is, is backlog. And that's really just pretty highly predictable, uh, revenue stream. It's driven off our cost and currents. And we have a pretty mature, at this point, supply chain. And we have daily and weekly discussions, depending on the vendor and the program. But it's all to say we have a pretty good line of sight into the tempo of that revenue. And it's all generally tied to the higher theme that over the course of the next two years, we're going to be putting 107 satellites into, into orbit. And that, that actually does not include that 107 number I'm citing does not include to be clear that new commercial constellation. We're still working with that customer to fine tune some of the expectations for, for launch dates there. Great. Thank you very much. If you would like to ask a question, please press star 1 on your telephone keypad. To withdraw your question, press star 1 again.
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Your next question comes from the line of Austin Merler of Canaccord Genuity. Your line is open. Please go ahead. Hi, good afternoon, Dirk and Kevin. Just my first question here. Given the funding already included in Big Beautiful Bill and the fiscal year 26 budget for Golden Dome, what funding do you think might be allocated in this $450 billion reconciliation bill for space that they're talking about? Do you think it might include more satellites or more ground infrastructure for Space Force and DOW? I mean, at the 10,000 foot level, it's going to include more for both, for sure. Space is absolutely going to be critical to the national defense and what we're doing in the future. But that does include a significant amount of ground effort as well. Ground will need to tie, like I said, all the disparate systems together. That's kind of the main challenge that we have is we have all the capabilities we need. We need to be more efficient in how they talk to one another. So ground will be a huge part of that. Building out ground is important. And that's, you know, that's one of the IDIQs that I mentioned was a contract win for us is about York helping to contribute to that.
Us helping to contribute on how you, you know, operate hundreds and thousands of satellites in orbit. how you feed that information and how you distribute that information and disseminate it. And satellites are really the best way of disseminating information. It's, you know, it's kind of above the entire battlefront. So there's going to be a significant amount, you know, for both ground and satellites for both. Now, all that said, our pipeline that we've identified and, you know, We have to update it, I'm sure. But we have, you know, 11 billion in identified pipeline right now. So, you know, that's that's seemingly only going to grow. I've seen more requests for more funding for some of our more recent engagements as well. So, you know, our identified pipeline is 11 billion. And that was before a lot of the growth that you're talking about here. Okay.
And as the production lots for Golden Dome or PWSA grows with additional contracts for that constellation or those constellations, what gives you confidence in maintaining the target gross and contribution margins going forward? Is it just the strong execution record and timely delivery and best-in-class product? Yeah, I mean, for us, it's always the three main metrics is that best capability, best performance, best schedule, which we meet on all those fronts. But historically, we have executed a price point that is half the price of our competitors. And we've done it with the margins that we are very close to now. And we think that we have opportunity to increase that because we're only becoming more and more efficient. So just as a kind of a side note, Story, I guess, or an example is critical design review is one of the most critical reviews for any of our programs. I can say that for the T1 program at CDR, we had 65 engineering heads working that program. And at the same critical design review for T2, we had 15. So we are seeing significant improvements in our efficiency and our ability to execute.
So, Kevin, I mean, you might have some more comments on those margins there, but those are the margins that we plan to. Those are the margins that we price to. Those are the margins that we execute on. And we've been doing it at those margins at half the price. But, Kevin, I don't know if there's – No, I think you covered it really well, Dirk. What I would say is that, yes, given that we are already half the price of our competition, we're starting from a pretty enviable pricing position, right? So I don't feel like we need to – certainly lower price at all. I think our strategy is Dirk has outlined in the past is, you know, probably maintain this pricing. We make nice margins at it, but what we can do and what we are doing right is as our, as our supply chain matures and we're ordering more volumes, we're going to see, you know, just the, our supply base or our cost base start to come down. Right. So, so definitely I think there's more upside to contribution margin and, Uh, just from a sort of an accounting perspective, uh, you know, some of these vertical integration plays that we've done, um, those are highly, um, highly creative to contribution margin.
Uh, just, just the way that the intercompany, uh, math works with, with, with their profit margin, basically getting kind of canceled out. Um, so it's all to say, feel very good about contribution margin, uh, growing from here. Another aspect of that, frankly, is we've been producing at large scale for a couple of years now, which is something a lot of our competition probably, you know, still has ahead of them. And so we've learned just a lot by being in the trenches and fielding these large constellations. So we, there's no more surprises of, you know, things that we perhaps forgot to price in when we bid a contract a couple of years ago. That's what you get from the level of experience and repetition that we've had. So we don't expect any surprises on the material cost side. And again, the trend will be to continue to drive down our supply chain costs. Awesome. Thanks for all the details.
Your next question comes from the line of Ryan Kuntz of Needham & Co. Your line is open. Please go ahead. Great. Thanks for the question. And I want to ask a big picture here in regards to the 26 guide. And, you know, I see over 70% of that's already in backlog. But if you can expand on the kind of revenue, the types of revenue or the mix of revenue that's not currently backlogged that you'd expect to see in 26 for us. Thank you. Ryan, what I'd say is that we are expecting new business award activity to start to pick up as some of these dollars get allocated in the eventual spending agencies that will ultimately be awarding the contracts. We think that's going to take a little bit of time. We think once we kind of get to that mid-year and into the second half, we're going to start to see some pretty robust award activity. And that's the basis of our range of 545 to 595 of REV.
So we do think most of that will be from our traditional Department of Defense government sector, whether that's PWSA or Golden Dome or IC, you know, is one of the themes Dirk has touched on today is that, you know, wherever it comes out of, we're a bit agnostic to that because we just believe the capabilities we have are, you know, positioned as well across the board. There'll be a little bit of commercial, that new commercial contract. You know, we're not anticipating substantial revenue recognition from that one this year. So I would say it's going to be largely, you know, second half, you know, government defense awards and a little bit of commercial. Helpful. That's really great. And anything on the supply chain you'd call out as challenging these days? You know, we hear about it in other areas of tech getting tough. But in particular areas you're concerned about and having to invest maybe extra working capital to be prepared? Yeah, I mean, we do hear a lot about supply chains now, but I think that we're a little bit differentiated in that sense.
And how I mean that is, you know, we are at production capacity now, which means that we were tackling supply chain issues several years ago. And so I think it's a little bit new for folks trying to ramp up now, but we've done that investment. I think, you know, acquisitions like Orbian are very, very helpful in the sense of we can better plan with our partners on kind of what kind of numbers we're going to need and when. And we can co-invest if that's required. And so we've done a lot of that already. And so our supply chain is, you know, very robust, very secure. We worked these issues many years ago. We did things like buy solar rays in bulk ahead of a need. ahead of challenges that were coming ahead. We co-invested on some laser capability to stand up production on that. But again, that was for a T0 contract. So we basically retired a lot of that investment we needed to make in our supply chain. We're kind of more now in improvement cycle. where we're trying to improve it, make it more efficient and make it a little bit better.
But us kind of delaying schedule and things like that because of supply chain is a problem that we looked at a couple of years ago and we feel like we have a good handle on it. I think when we did the IPO, we did talk about that we were going to inventory a lot of our spacecraft. We're in a unique position to be able to do that. We have a very large backlog. We have a consistent product. We know that it works. We know that it works in orbit. And so we are going to invest in some inventory, which should help with the supply chain challenges as well. The reality is, is something being delayed is only really a problem if you're already behind, right? But if you are ahead of the need, and ahead of a schedule and have inventory product, you know, if something shows up, you know, three weeks later than it should have, but you have inventory spacecraft and you have ahead of a need, then you're able to kind of sustain those impacts. So that's where we're focused more is standing up, you know, basically supporting our supply chain to be more efficient. And then we're going to build inventory spacecraft. And that's going to really take that kind of lead time out of the equation for us.
Great. Just a quick clarification there. If you're building that inventory and shipping from inventory, is that a different form of RevRec than traditionally? No. What it does is effectively accelerate the revenue recognition. So as Dirk said, we want to be smart about building up some satellite platforms in inventory, and then that way our BD folks can be empowered to to say, hey, how quickly do you need this mission flown? Because we've proven, I think Dirk touched on in his prepared remarks with our Dragoon mission, right? ATP to orbit was seven months, which is pretty unheard of. So what that'll do is we'll kind of build up the cost structure on the balance sheet in inventory. And then once we get that allocated to a particular revenue generating program, it'll be a very fast cycle, um, rev rack. So it'll, it'll be pretty exciting to see that happen. Yeah. That's cool. Thanks guys. Appreciate the color. Yep.
Your next question comes from the line of Sheila of Jeffrey's. Your line is open. Please go ahead. Good afternoon guys. And congrats on your first quarter. Um, Maybe if I could ask first on just the margin comments and the pricing, you know, you guys offer an affordable solution. What's driving some of the higher margins? I know you talked about the supply chain improvements. What is that? Is that more like supply chain pricing? And how do we think about the volume leverage? And maybe if we could clarify on Orbian, how do we think about the revenue contribution there, given that that's a vertical integration play as well? Kevin, I'll let you talk to that, yeah. I'll touch on that. Yeah, we'll start with the Orbeon one. So the way it works, broadly speaking, when we acquire a company like Orbeon and like Atlas, it's the same thing for Atlas. So they do York business and non-York business. So when our consolidated numbers are put out, the net impact is just on the non-York business. Because the way it works from an accounting perspective is that our their York business, that revenue gets canceled out and the associated cogs from us. So their, their revenue is our cog, so to speak, those, those net out in the elimination. So, so again, they are baked into our, our, our projections. They're not a, I would say not a substantial portion of our