York Space Systems (YSS) Q2 FY26 earnings call: guidance and Q&A

What are the expectations for the shape and potential size of new government contracts secured under the IDIQ approach, and how will they convert to larger operational programs?

The potential size of these contracts can be inferred from the President's budget for areas like space data networks and missile tracking. Confirmed that recent OTAs (Other Transaction Authorities) are for the space data network, indicating competition and York's strong position as a proven provider.

“I can confirm that they were OTAs under space data network... it's very exciting for us to see.”

asked by John Godyn (Citi) - Bradley Oster · answered by Dirk Wallinger

Is the $11.5 billion identified pipeline pursued organically, or does it require further M&A?

The identified pipeline consists of specific opportunities that York is pursuing with its current capabilities, without the need for additional acquisitions or M&A activity. The earnings deck provides a breakdown of commercial, classified, and government non-classified opportunities within this pipeline.

“So right now, that pipeline is identified pipeline. So those are specific opportunities that we are pursuing with our capabilities today with no need for further acquisition or any type of M&A activity.”

asked by John Godyn (Citi) - Bradley Oster · answered by Dirk Wallinger

Can you quantify the contribution of supply chain issues versus the new government acquisition approach to the revenue guidance cut, and how much backlog conversion is impacted?

The guidance reduction is primarily due to removing new business (approximately 30% of prior guidance) that was expected from rapid RFPs, which shifted to IDIQs. Supply chain issues also contributed, pushing revenue into 2027. Both factors (supply chain push-out and new revenue push-out) are roughly equal contributors to the guidance change.

“The one thing I would add into that is we took the new business out as we described earlier and we continue to see some of the supply chain issues and that those amounts kind of pushed into 2027. That was part of the equation here.”

asked by Seth Seifman (JPMorgan) - Alex · answered by Unknown Executive

Can you provide more color on the specific supply chain issues being experienced?

Management declined to provide specific vendor details but confirmed they are continuously monitoring the situation and working with vendors to mitigate delays. They noted that the identified push-out into 2027 was necessary based on current assessments.

“Yes, that's right, Dirk. We shouldn't do that. But we're continuing to monitor it.”

asked by Seth Seifman (JPMorgan) - Alex · answered by Unknown Executive

How should investors think about the decremental margin on the lower revenue base for the second half of the year, particularly if Q2 EBITDA performance is indicative?

The gross profit margin is expected to remain in the mid-20% range for the balance of the year. This figure can be used as a factor when considering the impact of reduced revenue on EBITDA.

“As I talked about in our -- in the prepared remarks, we do think the gross profit margin is going to hang in there around the mid-20% range.”

asked by Adam Samuelson (Jefferies) · answered by Unknown Executive

Can you update on the real-time delivery opportunity from inventory build and discuss the use cases and sales channels for the ALL.SPACE acquisition?

Inventory build is progressing, allowing for shorter delivery times and improved win rates, particularly for task orders. ALL.SPACE's technology enables assured communications and GPS in denied environments, which is critical for the proliferation of unmanned systems in future warfare. They continue to win new programs and contracts, with significant growth potential in the next 2-3 years.

“So we're definitely seeing the benefits as far as our delivery time line capability in contrast to some of our competitors who would need to start from scratch.”

asked by Ryan Koontz (Needham & Co.) · answered by Dirk Wallinger

Will the ALL.SPACE acquisition contribute significantly to the company's backlog?

The ALL.SPACE backlog was not included in the Q2 FY26 reported backlog figure (as of June 30) but will be updated and included in the Q3 FY26 report, leading to a small increase in the total backlog.

“We've included -- actually, we've not included the ALL.SPACE backlog in our number because our number was as of June 30, but we'll be updating that into Q3. So there will be a small increase related to ALL.SPACE backlog when we report Q3.”

asked by Ryan Koontz (Needham & Co.) · answered by Unknown Executive

Can you provide details on the types of mission sets within the identified commercial pipeline?

The commercial pipeline includes traditional earth observation (visible, synthetic aperture radar, infrared imagery) and services that were historically government-provided but are now shifting to commercial, such as precise GPS capabilities and weather services. These areas represent significant growth opportunities.

“One of the sample cases that could be worked or is in that pipeline is earth observation... Other areas that we're seeing are things that used to be government-provided capabilities that the government really at this point, no longer really needs to do anymore and could shift that to commercial.”

asked by Noah Poponak (Goldman Sachs) - Thomas Rozon · answered by Dirk Wallinger

How does the margin profile for commercial customers compare to what was outlined during the Analyst Day?

The margin profile for commercial customers is largely similar to previous expectations, though it is slightly lower than what is seen on some government contracts. However, this difference is not expected to be significant enough to materially impact the overall revenue mix.

“I mean it's a little bit lower than what we see on some of the government loans, but I don't know that it'd be enough, particularly in the overall revenue mix to call it out that much.”

asked by Noah Poponak (Goldman Sachs) - Thomas Rozon · answered by Unknown Executive