Release Date: August 06, 2026
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Record quarterly revenue of $117.1 million, up 89.6% year-over-year and 20.7% sequentially.
- Record gross margin of 27.8%, driven by stronger defense tech contribution and shift to production.
- Record backlog of $542.1 million, with a book-to-bill ratio of 1.42 for the quarter and 1.52 on a last-12-month basis.
- Strengthened balance sheet with $557.8 million in cash, a 6x increase year-over-year, and reduced total debt by 75%.
- Historic agreement to purchase a SpaceX Starfall spacecraft, enabling large-scale microgravity manufacturing with up to 32 pillboxes per mission.
Negative Points
- Adjusted EBITDA remained negative at -$3.2 million for the quarter.
- Net loss of $41 million, though improved by $56 million year-over-year.
- Elevated internal R&D spending increased to $12.5 million, up from $1.7 million year-over-year, pressuring near-term profitability.
- Inventory build-up increased 23% sequentially, a drag on cash flow, with further increases expected in Q3.
- Gross margin guidance remains conservative at low-to-mid 20s, despite the record 27.8% quarter, due to potential EAC adjustments.
Q & A Highlights
Q: Can you talk about the sustainability of the gross margin and the near-term and medium-term opportunity to expand it? Also, where is the share count today after the balance sheet restructuring?
A: Chris Edmonds, CFO: We are very proud of the record 27.8% gross margin in Q2, but we maintain our near-term guidance of low-to-mid 20s. As we replenish the space backlog and see solid growth in defense tech, there is an opportunity to grow gross margins over time. We had a very mild EAC adjustment quarter, but given the forward-leaning technology, we are staying with the low-to-mid 20s guide. The share count is currently 249.9 million common shares.
Q: As we approach the second half of '26 and anniversary the full company, how should we think about year-over-year growth for the Space versus Defense segments?
A: Peter Canito, CEO: We see great opportunities in both segments and continue to expect double-digit growth for both going forward. Defense Tech is currently growing faster than Space, but there are many Space opportunities working through the system that we are well positioned on. We are bullish on both, with Defense Tech growing a bit faster at this point, though Space has the opportunity to catch up.
Q: How would you describe the award tempo during the quarter and what are your expectations for the back half of 2026?
A: Chris Edmonds, CFO: We focus on the LTM book-to-bill ratio, which is at 1.5, a strong growth signal. Order flow can be lumpy, but we are coming off a couple of great quarters. Space pulled back slightly this quarter after over 2x book-to-bill in Q1 and Q4. We consider the macro environment very supportive for the back half of the year, and we are a couple of points ahead of where we thought we would be at this time.
Q: You kept the revenue range of $450-500 million for the year. Can you frame what gets you to the high end versus the low end?
A: Peter Canito, CEO: Fundamentally, we are scaling, and the year is set up to show growth over time. We have a number of indicators, including our growing backlog, that support our confidence in the second half. Chris Edmonds, CFO: Exiting Q1, we had about 75% visibility into the guidance at the midpoint. With the Q2 bookings profile, we are now up in the 90% range from a visibility standpoint, which is a good place to be halfway through the year.
Q: What is the team's appetite for M&A and how do you think about scaling milestones relative to the team's capacity to do deals?
A: Peter Canito, CEO: M&A is fundamental to our DNA, and we are postured to do deals with our strengthened balance sheet. The critical point is finding the right deal at the right accretive value. We consider M&A a competitive advantage, and the Edge Autonomy integration has gone well, with significant momentum in the first half. We are capitalized to execute accretive M&A, and it remains a big part of our investment framework.
Q: What was the biggest driver of the 23% sequential inventory build-up, and what does that mean for working capital and cash going forward?
A: Chris Edmonds, CFO: The inventory build is a strategic response to market signals, specifically in our UAS space, to cut down turnaround times and be more responsive to customers. We expect inventory levels to come up a bit more in Q3, which will be a use of working capital, but it opens up the aperture to deliver more quickly. We are focused on improving cash use through operations on a net balance sheet basis.
Q: How many NATO countries are in your discussion pipeline for Penguin and Stalker, and are there any U.S. allies that need State Department approval before you can sell to them?
A: Peter Canito, CEO: We do not disclose the number of allies explicitly. NATO allies are interested in our battlefield-proven platforms and our unique offering of both a U.S.-manufactured platform (Stalker) and an organic European-manufactured platform (Penguin in Latvia). This is important as Europe builds its organic industrial base. We also have global interest, including sales to Taiwan. We adhere to all ITAR regulations and have a sophisticated export control capability as a long-time global operator.
Q: Where are most of your R&D dollars going, and will the Huntsville expansion cause a step-up in CapEx in the back half of '26 and into '27?
A: Peter Canito, CEO: The vast majority of our investments are focused on our high-value platforms, whether in space or maturing our UAS platforms. We are also investing heavily in payloads and our microgravity capability (Starfall), which is a game-changing opportunity. We evaluate each proposal based on market size, ability to capture great gross margins, and competitive advantage. We are spreading investments across our five key value drivers, including orbital data centers and lunar infrastructure.
Q: Can you talk about the Defense Tech products currently in the pipeline, particularly within UAS?
A: Peter Canito, CEO: The two primary UAS products in the pipeline are the Stalker Block 40 and the Penguin Mark III. We are investing in our solid oxide fuel cell technology to enable longer range and duration, allowing our Group II UAS to take on more Group III missions at a better price point. We are also investing in maritime capability for the Block 40 and expanding the Mark III's performance across Europe. Additionally, our Octopus EOIR gimbal payload saw 15% year-over-year growth, and new E140 and E180 MWIR products are gaining early traction on third-party platforms. We are also exploring RF payload opportunities for UAS platforms, leveraging synergies from the Edge Autonomy acquisition.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
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