The following is a discussion and analysis of our financial condition and results of operations as of, and for, the periods presented. You should read the following discussion and analysis of the Company’s financial condition and results of operations together with "Risk Factors" in Item 1A of Part I of the 2025 Annual Report on Form 10-K, the section entitled "Special Note Regarding Forward-Looking Statements" and our unaudited condensed consolidated financial statements and related notes included in Item 1, of Part I of this Quarterly Report on Form 10-Q. This discussion and analysis contains forward-looking statements, including statements regarding our expectations for the future of our business and our liquidity and capital resources as well as other non-historical statements. These statements are based upon our current plans, expectations, and beliefs, and are subject to numerous risks and uncertainties, including but not limited to the risks and uncertainties described in “Risk Factors” in Item 1A of Part I of the 2025 Annual Report on Form 10-K and the section entitled “Special Note Regarding Forward-Looking Statements.” Our actual results may differ materially from those contained in or implied by these forward-looking statements.
Business Overview
On January 28, 2026, the Registration Statement on Form S-1 ("the Registration Statement") filed with respect to our IPO was declared effective and on January 29, 2026, our stock began trading on the "NYSE" under the ticker “YSS”. Refer to Note 1 – Description of Business and Basis of Presentation of the accompanying notes to the unaudited condensed consolidated financial statements included in Item 1 of Part I of this Quarterly Report on Form 10-Q for additional information.
York is a leading, U.S.-based, national defense and commercial prime providing a comprehensive suite of mission-critical solutions for national security, government and commercial customers. York is one of the only space and defense primes with proprietary hardware and software capabilities designed to address customers’ complex mission requirements across the critical elements of the entire space ecosystem throughout the mission lifecycle. York is a partner of choice for our customers, with differentiated performance versus traditional primes based on price, speed to deployment, and sophistication of capabilities. For contracts which we have been awarded, our price per satellite has been approximately half the price per satellite of our competitors. We have also been the first to deliver and launch satellites for multiple DoW programs. York is the first and only company to demonstrate Link-16 connectivity from space, highlighting our unique and innovative capabilities.
York is purpose built to address evolving national security space challenges and to adapt to the ongoing shift in the U.S. government’s mission needs and procurement processes, where economics, agility, rapid capabilities, and heritage drive customer decision making. We deliver mission-critical solutions in a zero-tolerance for error environment where systems must work, and we believe we are well positioned to win awards to successfully leverage production capabilities at scale in our core markets. York provides customers a vertically integrated, full technology stack of solutions including design, production, integration, and operation of spacecraft with turnkey offerings to manage spacecraft and constellations throughout their entire mission lifecycle. York has significant space heritage, having 74 missions with flight heritage, created 17 products with flight heritage, and logged over four million on-orbit hours. York’s position as a prime enables us to monetize the entire space vertical from launch to mission operations, from spacecraft to payloads, and from edge computing to data transfer.
York was founded to create an innovative space technology mission prime, with a goal of meeting the evolving national security threats from space by providing mission-critical spacecraft at scale, faster, and at lower cost. We provide our customers with the ability to quickly and effectively field responsive space-based technologies. We have a demonstrated ability to win contracts in space and are a trusted partner to U.S. national security, intelligence and defense agencies, such as the U.S. Air Force and classified customers, as well as commercial and civil customers. Our proprietary hardware, software and mission operations solutions are designed to address the United States’ national security priorities: missile defense (crucial to the Golden Dome), counter-space capabilities, space domain awareness, space data network and space sensing and targeting capabilities.
Our capabilities include a differentiated suite of spacecraft solutions with proven, common technologies. We offer the S-CLASS, LX-CLASS, and M-CLASS spacecraft, which are high-quality, low-cost satellite platforms that are proven and scalable to a wide array of space market needs. Our spacecraft are supported by proprietary satellite software enabling versatile integration of a variety of payloads for customers and supply chain commonalities across platforms.
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Our model allows us to capture recurring revenue driven by ongoing satellite-based software and services as well as hardware replacement cycles. Once spacecraft are fielded, we provide continuous operational support, ground terminal usage, and proprietary software solutions, including on-spacecraft upgrades during the full orbital lifespan. Contracts have historically provided a fixed cost for software maintenance with upgrade options available for purchase. The expected replacement cycle for the current portfolio of space vehicles is approximately five to six years. Our full lifecycle solution and ongoing operational support distinguishes us from our competitors, positioning us to act as prime for the replacement and potential expansion of competitors’ aging constellations. As a result, we expect our recurring revenue to increase as the installed base of spacecraft in orbit grows, creating a highly visible revenue model, accelerating growth and increasing margins.
We have significant production capability and believe we will be able to meet demand to manufacture and test over 1,000 satellites annually, supporting our position as a leader in rapid, high volume spacecraft delivery. This investment in infrastructure and inventory is meant to create a durable competitive advantage, enabling us to capitalize on the rapidly growing space economy with the ability to reliably deliver spacecraft faster and more affordably than traditional primes.
Backlog
We view backlog as a key measure of our business growth. Backlog represents our estimate of the revenue we expect to realize in future periods as a result of performing work on contracts that have been awarded to us (net of any revenue already recognized as of the backlog date). We include the aggregate expected revenue of awarded contracts in our backlog upon the execution of a legally binding agreement, even though our contracts include certain termination rights exercisable by our customers with advance notice. We exclude unexercised contract options from our backlog. Contract liabilities recognized on our unaudited condensed consolidated balance sheets consists of payments and billings that we have received in excess of revenue that we have recognized. Because cash receipts from these contracts have not been recognized into revenue, they are included in our backlog calculation.
We monitor our backlog because we believe it is a forward-looking indicator of potential sales which can be helpful to investors in evaluating the performance of our business and identifying trends over time. Although backlog reflects business associated with contracts that are considered to be firm, terminations, amendments, or contract cancellations may occur, which could result in a reduction in our total backlog and potential future revenue that is never recognized.
($ in thousands) As of June 30, 2026 As of December 31, 2025
Backlog $ 592,049 $ 542,557
The increase in backlog as of June 30, 2026 compared to December 31, 2025 was primarily due to the execution of a new commercial contract during the period partially offset by revenue recognized during the period. We expect to recognize over 55% of our backlog as of June 30, 2026 as revenue within the next 12 months, and the balance thereafter.
Recent Developments
Solestial Space Technology Acquisition
On May 15, 2026, we entered into the Solestial Merger Agreement. The transaction closed on June 4, 2026. Pursuant to the Solestial Merger Agreement, we acquired all of the issued and outstanding equity interests of Solestial, Inc. in exchange for consideration consisting of cash totaling $15.5 million and approximately 1.7 million shares of the Company's common stock. Pursuant to the Solestial Merger Agreement, the number of shares delivered to the sellers was calculated using an agreed upon price of $34.00 per share. Solestial is headquartered in Tempe, Arizona and is the only space solar provider with self-healing silicon technology proven on orbit, enabling performance while maintaining a path to high-volume manufacturing. Refer to Note 4 – Acquisitions of the accompanying notes to the unaudited condensed consolidated financial statements included in Item 1 of Part 1 in this Quarterly Report on Form 10-Q for additional information.
All.Space Holdings, Inc. Acquisition
On April 29, 2026, we entered into the All.Space Merger Agreement. The transaction closed on July 8, 2026. Pursuant to the All.Space Merger Agreement, the Company undertook a series of contributions, after which the Company
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acquired the outstanding equity interests of All.Space, and All.Space became an indirect wholly owned subsidiary of the Company. The Company acquired All.Space for $155 million in cash and approximately 5.9 million shares of the Company’s common stock, which at a price per share of common stock on the NYSE as of July 8, 2026, totaled consideration of approximately $300 million. Refer to Note 16 – Subsequent Events of the accompanying notes to the unaudited condensed consolidated financial statements included in Item 1 of Part I in this Quarterly Report on Form 10-Q for additional information.
Other
In July 2026, we successfully deployed 21 satellites of the second layer of the DoW Tranche 1 Transport Layer mission and confirmed healthy status of all 21 satellites in less than five hours after launch from a dedicated Falcon 9 rocket.
Trends and Key Factors Affecting Performance
Contract Award Outlook
Through 2026, and increasingly into the second quarter of 2026, we have seen the U.S. Government transition from a linear constellation deployment approach to one where Indefinite Delivery, Indefinite Quantity contracts ("IDIQs") are awarded as on-boarding opportunities for large operational systems. We had previously expected Congress to pass a new budget resolution which we anticipated to have funding for new contract awards in several key areas where we have competitive advantages. However, we believe it is more likely for Congress to pass smaller program specific funding bills as well as continuing resolutions in order to incrementally fund existing programs. As a result, we, as well as other space primes, have not been awarded the large contracts that we expected in 2026, and instead have been awarded several IDIQs.
We were awarded three IDIQ’s in the second quarter of 2026 and another in the third quarter and have been awarded two task orders against those IDIQs thus far. While these initial task orders are for less dollars than the contract awards we had expected to win earlier in the year, we believe these on-ramp task orders with these new classified customers will lead to more significant task orders in 2027.
With the success of our Dragoon program, the SDA recently shifted priorities away from T1DES and has subsequently descoped the planned launch for the remaining T1DES constellation. The SDA has also indicated that it intends to make available hardware originally designated for T1DES to support other U.S. government priorities. While negotiations with us are ongoing regarding how this contract change will be implemented, we do not currently anticipate any material financial impact to our consolidated financials based on the terms of our effective contract with the SDA.
Macroeconomic Pressures
In recent years, geopolitical instability, including wars, such as the war in Iran, and conflicts, as well as impacts from other global events, have resulted in opportunities for companies in the space and defense technology market. However, certain disruptions to the global economy, including market disruptions, monetary, and fiscal policy uncertainty, supply chain challenges and high interest rates have contributed to an inflationary environment that has adversely affected, and may continue to adversely affect, the price and availability of certain products and services necessary for our operations, which in turn may adversely impact our business and operating results. In addition, the global trade environment is uncertain and rapidly evolving. Tariffs imposed by the U.S. presidential administration or retaliatory tariffs announced by other countries have resulted in trade wars and can lead to market disruptions and supply chain interruptions for equipment. The impact of tariffs on our business and results of operations will depend on their timing, duration, and magnitude.
Ability to Continue to Innovate and Expand our Product and Service Offerings
To continue gaining market share and attracting customers, we plan to continue investing in our infrastructure to expand our production capabilities, including our satellite-based services, and to create a durable competitive advantage with the goal of enabling us to capitalize on the rapidly growing space economy. Our growth opportunity is dependent on our continued ability to expand our addressable market, including but not limited to, space data network, space-based sensing and targeting, as well as Golden Dome missions, and to develop our portfolio of products and services related to our offerings. We intend to expand our operations and offerings significantly, but any difficulties in achieving or effectively managing our growth could have a negative effect on our operating results.
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Acquisitions
We consider strategic acquisitions of businesses and other investments to expand our software and services footprint, deepen vertical integration, and accelerate entry into adjacent mission areas, with the goal of expanding our current portfolio and accessing new customers and technologies. We target companies that not only enhance our technical capabilities but also embed us more deeply into our customers’ mission workflows. By integrating strategic acquisitions with our strong internal execution, we aim to build a broader product and service offering with a goal of enhancing our growth and market share. These strategic transactions are costly, time consuming and challenging to consummate and/or integrate with our existing businesses, and may result in fluctuations in our operating results and financial position across periods that may be unrelated to our underlying performance. A portion of the consideration of the acquisitions we have completed recently has consisted of shares of our common stock, which dilute existing stockholders. Any particular acquisition or other investment we make could prove less successful than anticipated, cause further stockholder dilution and have a negative effect on our business.
Results of Operations
We manage and assess our business based on performance on contracts, which are typically long-term and involve the design, development and manufacturing of our core offerings and related activities with varying delivery schedules. Therefore, the results of operations for a particular year, or period over period comparison may not be indicative of future operating results. Substantially all of our contracts are accounted for under the percentage-of-completion cost-to-cost method. As a result, revenues on contracts are recorded over time based on progress towards completion for a particular contract, including the estimate of the profit to be earned at completion.
Components of Results of Operations
Revenue—substantially all of our revenue is derived from long-term FFP production contracts for the design of small satellites, launch services, and ground services with both U.S. Federal Government-controlled agencies as well as domestic commercial customers. Our contracts generally span several years in duration. We account for a contract when it has approval and commitment from both parties, the rights of the parties are identified, payment terms are identified, the contract has commercial substance and collectability of consideration is probable. We recognize revenue upon the satisfaction of the performance obligations identified in the contract, which is achieved through the transfer of control of the promised good or service to the customer over time.
For FFP contracts satisfied over time, progress is measured using a POC cost-to-cost method, which accurately reflects the transfer of control to the customer. This method assesses the extent of progress based on the ratio of costs incurred to date against the total estimated costs to complete the performance obligation. Estimating total costs to completion requires us to make informed estimates regarding subcontractor performance, material costs and availability, labor costs and productivity and overhead expenses. Frequently, the period of performance of a contract extends over a long period and, as such, revenue recognition and our profitability from a particular contract may be affected to the extent that EACs are revised, delivery schedules are delayed, performance-based milestones are not achieved, or progress under a contract is otherwise impeded. Accordingly, our revenues and operating profit from period to period can fluctuate significantly depending on when contractual obligations are achieved.
In the event that the estimated total costs to be incurred on a contract surpass the anticipated total revenue, we recognize a provision for the entire loss on the contract in the period when the loss is identified. For further discussion of the critical judgments and estimates related to our revenue recognition policies, see the section entitled “Critical Accounting Estimates.”
Cost of Revenues—primarily consists of direct material and labor costs, which include salaries, bonuses, and benefits directly attributable to fulfilling our obligations under customer contracts, and related overhead. Overhead costs primarily include allocable amounts of rent, software subscriptions, depreciation and amortization expense on assets used directly in revenue producing activities, indirect materials, and production and test administrative expenses. Our cost of revenues in absolute dollars moves directionally as we perform under current contracts as well as being impacted by strategic acquisitions and investments.
Selling, General and Administrative Expenses—primarily consists of employee-related expenses for personnel in our executive, finance and accounting, facilities, legal, human resources, and information technology and security functions, as well as other administrative employees. In addition, selling, general and administrative expenses include fees for legal, accounting, tax and audit services, software subscriptions, facilities, sales commissions, other corporate costs, depreciation
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and amortization, marketing and advertising and transaction costs. We expect to incur additional selling, general, and administrative expenses as a result of operating as a public company, including expenses related to compliance with public company reporting obligations and additional compensation expense, and increased costs for insurance, investor relations, and professional services.
Research and Development—primarily consists of employee-related labor costs, software subscriptions, and supplies and materials for new product development. Research and Development ("R&D") is expensed as incurred. We expect to continue investing in R&D and, accordingly, expect our R&D expenses to increase and vary as we continue developing and improving our products' capabilities.
Income Tax (Expense) Benefit—includes the recognition of deferred tax assets and liabilities for the expected future tax consequences of events that have been included in the financial statements or tax returns. Deferred tax assets and liabilities are determined based on the difference between the financial statement carrying amount and the tax basis of assets and liabilities, along with net operating loss carryforwards using enacted tax rates in effect for the year in which the differences are expected to reverse.
Comparison of the Three Months Ended June 30, 2026 to the Three Months Ended June 30, 2025
The following table sets forth a summary of our unaudited condensed consolidated results of operations for the periods indicated, and the changes between periods.
For the three months ended June 30,
($ in thousands, except percentages) 2026 % of revenue 2025 % of revenue $ Change % Change
Revenue $ 92,547 100 % $ 83,839 100 % $ 8,708 10 %
Cost of revenues 70,367 76 % 74,313 89 % (3,946) (5 %)
Gross profit 22,180 24 % 9,526 11 % 12,654 133 %
Operating expenses
Selling, general and administrative expenses 40,825 44 % 25,790 31 % 15,035 58 %
Stock-based compensation expense 10,893 12 % — — % 10,893 100 %
Research and development expense 5,766 6 % 4,893 6 % 873 18 %
Transaction costs 6,009 6 % 75 — % 5,934 7912 %
Total operating expenses 63,493 69 % 30,758 37 % 32,735 106 %
Loss from operations (41,313) (45 %) (21,232) (25 %) (20,081) 95 %
Other (expense) income
Interest expense (2,884) (3 %) (7,118) (8 %) 4,234 (59 %)
Interest income 4,208 5 % 218 — % 3,990 1830 %
Other (expense) income, net 928 1 % 1,201 1 % (273) (23 %)
Total other expense 2,252 2 % (5,699) (7 %) 7,951 (140 %)
Loss before provision for income taxes (39,061) (42 %) (26,931) (32 %) (12,130) 45 %
Income tax (expense) benefit (282) — % 2,697 3 % (2,979) (110 %)
Net loss $ (39,343) (43 %) $ (24,234) (29 %) $ (15,109) 62 %
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Net EAC Adjustments
We record changes in costs estimated at completion (net EAC adjustments) using the cumulative catch-up method of accounting. Net EAC adjustments have in the past had, and may in the future have, a significant effect on reported revenues and gross profit. The table below presents the aggregate amounts for the following periods:
For the three months ended June 30,
($ in thousands) 2026 2025
Gross favorable EAC adjustments $ 207 $ 11
Gross unfavorable EAC adjustments (1,029) (13,461)
EAC adjustments, attributable to loss contracts 383 (362)
Net EAC adjustments, before income taxes $ (439) $ (13,812)
Net EAC adjustments, net of income taxes $ (442) $ (12,429)
Two contracts accounted for 64% and 36% respectively, of the gross unfavorable EAC adjustment for the three months ended June 30, 2026 which were primarily due to additional unplanned labor, materials and subcontractor costs. Two contracts accounted for 47% and 35% of the gross unfavorable EAC adjustment for the three months ended June 30, 2025, due to unplanned labor, materials and subcontractor costs. Refer to Note 3 - Revenues of the accompanying notes to the unaudited condensed consolidated financial statements included in Item 1 of Part I in this Quarterly Report on Form 10-Q for additional information related to our net EAC adjustments.
Revenue
Revenue increased by $8.7 million, or 10%, to $92.5 million during the three months ended June 30, 2026, as compared to $83.8 million during the three months ended June 30, 2025. The period-over-period increase in revenue was primarily driven by revenue generated from recently acquired businesses and increased revenue from ground services during the three months ended June 30, 2026, as compared to the three months ended June 30, 2025. Refer to Note 3 - Revenues of the accompanying notes to the unaudited condensed consolidated financial statements in Item 1 of Part I of this Quarterly Report on Form 10-Q for additional information related to our net EAC adjustments.
Cost of Revenues
Cost of revenues decreased by $3.9 million, or 5%, to $70.4 million for the three months ended June 30, 2026, as compared to $74.3 million for the three months ended June 30, 2025. The period-over-period decrease in cost of revenues was primarily driven by decreases of $10.3 million in direct materials and subcontractor costs offset by an increase in direct labor of $3.5 million. Other increases were attributable to depreciation and amortization of $0.8 million and other overhead costs of $2.1 million as well as the impact of the Company's acquisition activity.
Gross Profit
Gross profit increased by $12.7 million, or 133%, to $22.2 million for the three months ended June 30, 2026, as compared to $9.5 million for the three months ended June 30, 2025. As a percentage of revenues, gross margin was 24% and 11% for the three months ended June 30, 2026 and 2025, respectively. The period-over-period increase in gross margin as a percentage of revenues was primarily attributed to lower net unfavorable EAC adjustments during the three months ended June 30, 2026, as compared to the same period in 2025.
Selling, General and Administrative (“SG&A”) Expenses
SG&A expenses increased by $15.0 million, or 58%, to $40.8 million for the three months ended June 30, 2026, as compared to $25.8 million for the three months ended June 30, 2025. The period-over-period increase in SG&A expenses was primarily attributed to increases in compensation and other employee-related costs, professional fees for audit, tax and legal services, higher advertising expenses and the impact of the Company's acquisition activity.
Stock-based Compensation Expense
Stock-based compensation expense was $10.9 million for the three months ended June 30, 2026, as compared to $0 for the three months ended June 30, 2025. See Note 10 – Stock-based Compensation of the accompanying notes to the unaudited condensed consolidated financial statements in Item 1 of Part I of this Quarterly Report on Form 10-Q for additional information related to our stock compensation.
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Research and Development Expenses
R&D increased by $0.9 million, or 18%, to $5.8 million for the three months ended June 30, 2026, as compared to $4.9 million for the three months ended June 30, 2025. The period-over-period increase in R&D costs was primarily driven by R&D activity of recently acquired businesses subsequent to their dates of acquisition.
Transaction Costs
Transactions costs were $6.0 million for the three months ended June 30, 2026, as compared to $0.1 million for the three months ended June 30, 2025. Transaction costs relate to the Company’s acquisition activity.
Interest Expense
Interest expense decreased by $4.2 million, or 59%, to $2.9 million for the three months ended June 30, 2026, as compared to $7.1 million for the three months ended June 30, 2025. The period-over-period decrease is attributable to a decline in the floating interest rate tied to Secured Overnight Financing Rate ("SOFR") during the three months ended June 30, 2026, as compared to the same period in 2025, combined with a lower fixed-rate component under the Term Loan Facility during the three months ended June 30, 2026, as compared to the Original Term Loan Facility for the same period in 2025.
Interest Income
Interest income increased by $4.0 million, to $4.2 million for the three months ended June 30, 2026, as compared to $0.2 million for the three months ended June 30, 2025. The period-over-period increase in interest income was primarily driven by higher cash and cash equivalent balances, as well as higher market interest rates that increased yields on those balances.
Other (Expense) Income, net
Other (expense) income, net decreased by $0.3 million to $0.9 million of other income for the three months ended June 30, 2026, as compared to $1.2 million of other income for the three months ended June 30, 2025. This period-over-period decrease was driven by a decrease in unrealized loss on foreign exchange derivative instruments offset with a gain from our investment in Solestial.
Income Tax (Expense) Benefit
Income tax benefit decreased by $3.0 million to $0.3 million income tax expense for the three months ended June 30, 2026, as compared to $2.7 million income tax benefit for the three months ended June 30, 2025. The decrease in the income tax (expense) benefit is primarily due to the valuation allowance of U.S. Federal and U.S. State deferred tax assets.
Comparison of the Six Months Ended June 30, 2026 to the Six Months Ended June 30, 2025
The following table sets forth a summary of our unaudited condensed consolidated results of operations for the periods indicated, and the changes between periods.
For the six months ended June 30,
($ in thousands, except percentages) 2026 % of revenue 2025 % of revenue $ Change % Change
Revenue $ 208,890 100 % $ 190,091 100 % $ 18,799 10 %
Cost of revenues 164,560 79 % 155,963 82 % 8,597 6 %
Gross profit 44,330 21 % 34,128 18 % 10,202 30 %
Operating expenses
Selling, general and administrative expenses 77,531 37 % 52,591 28 % 24,940 47 %
Stock-based compensation expense 95,589 46 % — — % 95,589 100 %
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Research and development expense 11,055 5 % 9,294 5 % 1,761 19 %
Transaction costs 11,934 6 % 106 — % 11,828 11158 %
Total operating expenses 196,109 94 % 61,991 33 % 134,118 216 %
Loss from operations (151,779) (73 %) (27,863) (15 %) (123,916) 445 %
Other (expense) income
Interest expense (5,783) (3 %) (14,177) (7 %) 8,394 (59 %)
Interest income 8,828 4 % 759 — % 8,069 1063 %
Other (expense) income, net (5,279) (3 %) 1,315 1 % (6,594) (501 %)
Total other expense (2,234) (1 %) (12,103) (6 %) 9,869 (82 %)
Loss before provision for income taxes (154,013) (74 %) (39,966) (21 %) (114,047) 285 %
Income tax (expense) benefit (172) — % 4,003 2 % (4,175) (104 %)
Net loss $ (154,185) (74 %) $ (35,963) (19 %) $ (118,222) 329 %
Net EAC Adjustments
We record changes in costs estimated at completion (net EAC adjustments) using the cumulative catch-up method of accounting. Net EAC adjustments have in the past had, and may in the future have, a significant effect on reported revenues and gross profit. The table below presents the aggregate amounts for the following periods:
For the six months ended June 30,
($ in thousands) 2026 2025
Gross favorable EAC adjustments $ 4,022 $ 11
Gross unfavorable EAC adjustments (2,521) (14,033)
EAC adjustments, attributable to loss contracts (2,694) 775
Net EAC adjustments, before income taxes $ (1,193) $ (13,247)
Net EAC adjustments, net of income taxes $ (1,194) $ (11,920)
Two contracts accounted for 60% and 28%, respectively, of the gross favorable EAC adjustment for the six months ended June 30, 2026 which were primarily due to lower‑than‑anticipated labor, materials, and subcontractor costs required to meet customer requirements in our sale of satellites. In contrast, two contracts accounted for 64% and 36% respectively, of the gross unfavorable EAC adjustment for the six months ended June 30, 2026, primarily due to additional unplanned labor, materials and subcontractor costs. Two contracts accounted for 49% and 33% of the gross unfavorable EAC adjustment for the six months ended June 30, 2025, due to additional unplanned labor, materials and subcontractor costs. Refer to Note 3 - Revenues of the accompanying notes to the unaudited condensed consolidated financial statements included in Item 1 of Part I in this Quarterly Report on Form 10-Q for additional information related to our net EAC adjustments.
Revenue
Revenue increased by $18.8 million, or 10%, to $208.9 million during the six months ended June 30, 2026, as compared to $190.1 million during the six months ended June 30, 2025. The period-over-period increase in revenue was primarily driven by increases in progress towards completion and achievement of certain milestones and revenue generated from recently acquired businesses during the six months ended June 30, 2026, as compared to the six months ended June 30, 2025. These increases were partially offset by a decrease in progress as a significant project was completed during the six months ended June 30, 2026. The period-over-period increase in revenue was largely driven by existing contracts, with 55% of the revenue growth related to contracts that were already in place at June 30, 2025. Refer to Note 3 - Revenues of the accompanying notes to the unaudited condensed consolidated financial statements in Item 1 of Part I of this Quarterly Report on Form 10-Q for additional information related to our net EAC adjustments.
Cost of Revenues
Cost of revenues increased by $8.6 million, or 6%, to $164.6 million for the six months ended June 30, 2026, as compared to $156.0 million for the six months ended June 30, 2025. The period-over-period increase in cost of revenues was primarily driven by increases of $5.9 million in direct labor related to larger contracts that have increased progress towards the design and build of satellites during the period. Other increases were attributed to depreciation and
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amortization of $4.0 million, other overhead costs of $3.7 million and the impact of the Company's acquisition activity partially offset by a decrease in direct materials and subcontractor costs of $5.0 million.
Gross Profit
Gross profit increased by $10.2 million, or 30%, to $44.3 million for the six months ended June 30, 2026, as compared to $34.1 million for the six months ended June 30, 2025. As a percentage of revenues, gross margin was 21% and 18% for the six months ended June 30, 2026 and 2025, respectively. The period-over-period increase in gross margin as a percentage of revenues was primarily attributed to lower unfavorable EAC adjustments during the six months ended June 30, 2026, as compared to the same period in 2025.
Selling, General and Administrative (“SG&A”) Expenses
SG&A expenses increased by $24.9 million, or 47%, to $77.5 million for the six months ended June 30, 2026, as compared to $52.6 million for the six months ended June 30, 2025. The period-over-period increase in SG&A expenses was primarily attributable to increases in compensation and other employee-related costs, professional fees for audit, tax and legal services, higher advertising expenses and the impact of the Company's acquisition activity.
Stock-based Compensation Expense
Stock-based compensation expense was $95.6 million for the six months ended June 30, 2026, as compared to $0 for the six months ended June 30, 2025. See Note 10 – Stock-based Compensation of the accompanying notes to the unaudited condensed consolidated financial statements in Item 1 of Part I of this Quarterly Report on Form 10-Q for additional information related to our stock compensation.
Research and Development Expenses
R&D increased by $1.8 million, or 19%, to $11.1 million for the six months ended June 30, 2026, as compared to $9.3 million for the six months ended June 30, 2025. The period-over-period increase in R&D costs was primarily driven by increases in compensation and other employee-related costs and R&D activities of recently acquired businesses subsequent to their dates of acquisition.
Transaction Costs
Transactions costs were $11.9 million for the six months ended June 30, 2026, as compared to $0.1 million for the six months ended June 30, 2025. Transaction costs relate to the Company’s acquisition activity.
Interest Expense
Interest expense decreased by $8.4 million, or 59%, to $5.8 million for the six months ended June 30, 2026, as compared to $14.2 million for the six months ended June 30, 2025. The period-over-period decrease is attributable to a decline in the floating interest rate tied to Secured Overnight Financing Rate ("SOFR") during the six months ended June 30, 2026, as compared to the same period in 2025, combined with a lower fixed-rate component under the Term Loan Facility during the six months ended June 30, 2025, as compared to the Original Term Loan Facility for the same period in 2025.
Interest Income
Interest income increased by $8.1 million to $8.8 million for the six months ended June 30, 2026, as compared to $0.8 million for the six months ended June 30, 2025. The period-over-period increase in interest income was primarily driven by higher cash and cash equivalent balances, as well as higher market interest rates that increased yields on those balances.
Other (Expense) Income, net
Other (expense) income, net decreased by $6.6 million to $5.3 million of other expense for the six months ended June 30, 2026, as compared to $1.3 million of other income for the six months ended June 30, 2025. This period-over-
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period decrease was driven by a loss on derivative liability associated with the Class P Units fair value adjustment as well as a loss from our initial investment in Orbion, offset by a gain from our initial investment in Solestial.
Income Tax (Expense) Benefit
Income tax benefit decreased by $4.2 million to $0.2 million income tax expense for the six months ended June 30, 2026, as compared to $4.0 million income tax benefit for the six months ended June 30, 2025. The decrease in the income tax (expense) benefit is primarily due to the valuation allowance of U.S. Federal and U.S. State deferred tax assets.
Non-GAAP Financial Measures
We believe that in addition to our results determined in accordance with U.S. generally accepted accounting principles ("GAAP"), our non-GAAP financial measures, contribution margin, contribution margin %, EBITDA, and Adjusted EBITDA provide useful information to management, investors, and analysts in assessing our financial performance and results of operations across reporting periods by excluding items we do not believe are indicative of our core operating performance. In addition to our GAAP measures, we use these non-GAAP financial measures to evaluate our operating performance, generate future operating plans, and make strategic decisions, including those relating to operating expenses and the allocation of internal resources, including budgeting for infrastructure.
Contribution Margin
We refer to revenue less direct material costs of revenue as “contribution margin” and contribution margin divided by revenue as “contribution margin %”. Contribution margin and contribution margin % are each non-GAAP financial measures. The closest comparable GAAP financial measures to contribution margin and contribution margin % are gross profit and gross profit margin %, respectively. We believe contribution margin and contribution margin % are useful measures of the variable costs that we incur in order to provide services to our customers. These non-GAAP financial measures are used to supplement the financial information presented on a GAAP basis and should not be considered in isolation or as a substitute for the relevant GAAP measures and should be read in conjunction with information presented on a GAAP basis. Our presentation of contribution margin and contribution margin % should not be construed as an inference that our future results will be unaffected by variable costs.
The table below presents contribution margin and contribution margin %, respectively, for the following periods:
For the three months ended June 30, For the six months ended June 30,
($ in thousands, except percentages) 2026 2025 2026 2025
Revenue $ 92,547 $ 83,839 $ 208,890 $ 190,091
Direct material costs 53,240 63,555 129,517 134,505
Contribution margin (non-GAAP) $ 39,307 $ 20,284 $ 79,373 $ 55,586
Contribution margin % (non-GAAP) 42 % 24 % 38 % 29 %
Contribution margin increased by $19.0 million to $39.3 million for the three months ended June 30, 2026, as compared to $20.3 million for the three months ended June 30, 2025. The period-over-period increase in non-GAAP contribution margin was primarily attributed to increased volume of production on certain contracts with more favorable contribution margins. This increase was partially offset by net unfavorable EAC adjustments for the three months ended June 30, 2026.
Contribution margin increased by $23.8 million to $79.4 million for the six months ended June 30, 2026, as compared to $55.6 million for the six months ended June 30, 2025. The period-over-period increase in non-GAAP contribution margin was primarily attributed to increased volume of production on certain contracts with more favorable contribution margins. This increase was partially offset by net unfavorable EAC adjustments for loss contracts for the six months ended June 30, 2026.
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The table below presents a reconciliation of contribution margin, which is a non-GAAP measure of our financial performance, to Gross profit, which is the most directly comparable financial measure presented in accordance with GAAP for the periods indicated:
For the three months ended June 30, For the six months ended June 30,
($ in thousands, except percentages) 2026 2025 2026 2025
Revenue $ 92,547 $ 83,839 $ 208,890 $ 190,091
Less: Cost of revenues 70,367 74,313 164,560 155,963
Gross profit (GAAP) $ 22,180 $ 9,526 $ 44,330 $ 34,128
Gross profit % (GAAP) 24 % 11 % 21 % 18 %
Add: Direct labor costs 11,119 7,661 21,275 15,385
Add: Direct overhead costs 3,736 1,669 7,079 3,384
Add: Depreciation and amortization 2,272 1,428 6,689 2,689
Contribution margin (non-GAAP) $ 39,307 $ 20,284 $ 79,373 $ 55,586
Contribution margin % (non-GAAP) 42 % 24 % 38 % 29 %
EBITDA and Adjusted EBITDA
EBITDA and Adjusted EBITDA are financial measures that are not calculated in accordance with GAAP. Net loss is the most directly comparable GAAP measure to Adjusted EBITDA. These non-GAAP financial measures are used to supplement the financial information presented on a GAAP basis and should not be considered in isolation or as a substitute for the relevant GAAP measures and should be read in conjunction with information presented on a GAAP basis. Our presentation of EBITDA and Adjusted EBITDA should not be construed as an inference that our future results will be unaffected by unusual or non-recurring items.
We define EBITDA as net income (loss) adjusted for interest expense, interest income, income tax (expense) benefit, and depreciation and amortization. Adjusted EBITDA is defined as EBITDA adjusted for changes in the fair value of derivatives, transaction costs, gains or losses on foreign exchange, and other non-recurring items.
The table below presents a reconciliation from net loss to Adjusted EBITDA for the periods indicated:
For the three months ended June 30, For the six months ended June 30,
($ in thousands) 2026 2025 2026 2025
Net loss $ (39,343) $ (24,234) $ (154,185) $ (35,963)
Interest expense 2,884 7,118 5,783 14,177
Interest income (4,208) (218) (8,828) (759)
Income tax expense (benefit) 282 (2,697) 172 (4,003)
Depreciation and amortization 14,886 12,225 30,989 24,261
EBITDA (non-GAAP) $ (25,499) $ (7,806) $ (126,069) $ (2,287)
Changes in the fair value of derivatives (1,117) (1,254) 3,713 (1,396)
Stock-based compensation expense 10,893 — 95,589 —
Transaction costs(1) 6,009 75 11,934 106
Other(2) 211 66 1,691 112
Adjusted EBITDA (non-GAAP) $ (9,503) $ (8,919) $ (13,142) $ (3,465)
(1)Represents costs for legal, advisory fees and other costs incurred in connection with the Company's acquisition activity and one-time IPO costs.
(2)Other includes a gain and loss on the initial investments for Solestial and Orbion, respectively, net gain on foreign exchange and one-time non-cash expense.
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Limitations on the Use of Non-GAAP Financial Measures
There are limitations to using non-GAAP financial measures because non-GAAP financial measures are not prepared in accordance with GAAP and may be different from non-GAAP financial measures provided by other companies.
Non-GAAP financial measures are limited in value because they exclude certain items that may have a material impact on our reported financial results. In addition, they are subject to inherent limitations as they reflect the exercise of judgments by management about which items are adjusted to calculate our non-GAAP financial measures. We compensate for these limitations by analyzing current and future results on a GAAP basis as well as a non-GAAP basis and also by providing GAAP measures in our public disclosures. Some of these limitations are:
•although depreciation and amortization are non-cash charges, the assets being depreciated and amortized may have to be replaced in the future, and EBITDA, Adjusted EBITDA, contribution margin and contribution margin percentage do not reflect cash capital expenditure requirements for such replacements or for new capital expenditure requirements;
•contribution margin and contribution margin percentage do not reflect fixed costs that are directly or indirectly related to revenue generated from our customers;
•EBITDA, Adjusted EBITDA, contribution margin and contribution margin percentage do not reflect the significant interest expense, or the cash requirements necessary to service interest or principal payments, on our debt; and
•EBITDA, Adjusted EBITDA, contribution margin and contribution margin percentage do not reflect income tax payments that may represent a reduction in cash available to us.
Non-GAAP financial performance measures are used to supplement the financial information presented on a GAAP basis. This non-GAAP financial measure should not be considered in isolation or as a substitute for the relevant GAAP measures and should be read in conjunction with information presented on a GAAP basis. Because not all companies use identical calculations, our presentation of non-GAAP measures may not be comparable to other similarly titled measures of other companies.
Liquidity and Capital Resources
We measure liquidity in terms of our ability to fund the cash requirements of our business operations, including working capital needs, capital expenditures, contractual obligations, debt service, acquisitions, and other commitments with cash flows from operations and other sources of funding. Our principal sources of liquidity to date have included amounts raised through issuances of equity capital and borrowings under our financing agreements.
On January 29, 2026, the Company completed its IPO of 18.5 million shares of its common stock at a public offering price of $34 per share. The Company received net proceeds of $583.4 million, net of underwriting discounts and commissions and offering costs. The proceeds from the IPO will be used for general corporate and working capital purposes.
Our primary requirements for liquidity and capital on a short- and long-term basis are for our material cash requirements, including working capital needs, satisfaction of our indebtedness and contractual commitments, investment in expanding our breadth and footprint through acquisitions as well as investment in facilities, equipment, technologies, and research and development for our growth initiatives and general corporate needs.
Our ability to fund our cash needs is dependent upon the successful execution of our business strategy and future operating results. Our future operating results are subject to a variety of risks and uncertainties, including, among others, general economic conditions, including as a result of heightened inflation, fluctuating interest rates and supply chain pressures, competitive dynamics in our target markets as well as legislative and regulatory factors that may be outside of our control. As part of our business and debt management strategy, we continuously evaluate opportunities to further strengthen our financial and liquidity position, including by issuing additional equity or debt securities, refinancing or otherwise restructuring our existing credit facilities, or entering into new financing arrangements. There can be no assurance that any of these actions will be sufficient to allow us to adequately service our debt obligations, meet our debt covenants, or that such actions will not result in an adverse impact on our business.
As of June 30, 2026, our cash and cash equivalents were $534.0 million, our financial debt was $148.1 million, and our $150.0 million Revolving Credit Facility was undrawn. We have a limited history of operations and have incurred
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negative cash flows from operating activities and losses from operations in the past as reflected in the accumulated deficit of $423.2 million as of June 30, 2026. We believe that our cash will be adequate to meet our liquidity requirements for at least the next 12 months. Our future long-term capital requirements will depend on several factors, including our ability to generate positive cash flow from operations, our growth initiatives and our acquisitions activity. We may raise additional capital, whether in the public or private markets, as conditions warrant. If financing is not available, or if the terms of financing are less desirable than we expect, we may be forced to decrease our level of investment in service development or scale back our operations, which could have a material adverse impact on our business and financial prospects, seek protection under insolvency laws, or cease our operations altogether.
Indebtedness
On November 14, 2025, we entered into the Credit Agreement among Yellowstone Interco Holdings, LLC (“Interco Holdings”), Yellowstone Borrower, LLC (the “IPO Borrower”), the Company, only after the Company became a party thereto as a borrower pursuant to the Credit Agreement following our IPO, the Lenders and Issuing Banks party thereto from time to time and Wells Fargo Bank, National Association, as the administrative agent, the collateral agent and the swingline lender. The Credit Agreement provides for the Term Loan Facility in the aggregate principal amount of $150.0 million and the Revolving Facility in the aggregate principal amount of $150.0 million. Borrowings under the Term Loan Facility and Revolving Facility bear interest at a floating rate on the unpaid principal amount thereof equal to (i) initially, (x) 3.00% per annum in the case of Term SOFR and (y) 2.00% per annum in the case of ABR Loans and (ii) on and after the Leverage Covenant Toggle Date, the applicable rate per annum set forth in the pricing grid below under the caption “Term SOFR Margin” or “ABR Margin,” as the case may be, based upon the Total Net Leverage Ratio as of the end of the Company’s fiscal quarter:
Level Total Net Leverage Ratio Term SOFR Margin ABR Margin
I If the Total Net Leverage Ratio is greater than 3.00:1.00 2.75% 1.75%
II If the Total Net Leverage Ratio is less than or equal to 3.00:1.00 and greater than 2.00:1.00 2.50% 1.50%
III If the Total Net Leverage Ratio is less than or equal to 2.00:1.00 2.25% 1.25%
The Term Loan Facility and Revolving Facility mature on November 14, 2029. The Credit Agreement contains customary mandatory prepayments, including with respect to asset sale proceeds, proceeds of certain recovery events, and proceeds from certain incurrences of indebtedness. The principal amount owed under the Credit Agreement shall be due and payable on the maturity date. The Credit Agreement contains customary affirmative covenants and negative covenants. The Credit Agreement contains (i) a minimum revenue covenant, in effect from March 31, 2026 to (but not including) the first business day following the occurrence of a Leverage Covenant Toggle Date, that requires us to maintain a minimum amount of revenue set forth below as of the last day of each such fiscal quarter and measured on a trailing twelve month basis:
Date Minimum Revenue
March 31, 2026 $ 245,591,268
June 30, 2026 $ 264,387,082
September 30, 2026 $ 319,190,794
December 31, 2026 $ 372,510,143
March 31, 2027 $ 426,903,024
June 30, 2027 $ 501,782,812
September 30, 2027 $ 554,984,539
December 31, 2027 $ 616,972,315
March 31, 2028 $ 676,839,498
June 30, 2028 $ 722,972,451
September 30, 2028 $ 758,499,673
(ii) a minimum liquidity covenant, in effect from March 31, 2026 to (but not including) the first business day following the occurrence of a Leverage Covenant Toggle Date, that requires us not to permit Liquidity (defined as unrestricted cash
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together with amounts available for borrowing under the Revolving Facility), as of the last day of each fiscal quarter, to be less than (x) initially, $105,000,000 or (y) upon and after the repayment of the Term Loan Facility in full, 35.0% of the outstanding revolving commitment as of such date, and (iii) a maximum consolidated first lien net leverage ratio covenant, in effect commencing upon the occurrence of a Leverage Covenant Toggle Date, that requires us to maintain a consolidated total net leverage ratio of less than (x) 4.50 to 1.00 for the fiscal quarters ending March 31, 2026, June 30, 2026, September 30, 2026 and December 31, 2026, (y) 4.25 to 1.00 for the fiscal quarters ending March 31, 2027, June 30, 2027, September 30, 2027 and December 31, 2027 and (z) 4.00 to 1.00 for the fiscal quarters ending March 31, 2028, June 30, 2028 and September 30, 2028. The Credit Agreement also includes customary equity cure provisions that permit us to cure defaults in respect of either of the foregoing financial covenants. The Company was in compliance with all financial debt covenants as of June 30, 2026.
The obligations under the Credit Agreement (collectively, the “Credit Agreement Obligations”) are guaranteed by the Company's existing and future direct and indirect material wholly owned subsidiaries subject to customary exceptions (in such capacity, the “Credit Agreement Guarantors”). The Credit Agreement Obligations are secured by first priority liens on substantially all assets, subject to customary exceptions, of the Company and the Credit Agreement Guarantors.
Off-Balance Sheet Arrangements
We do not engage in any off-balance sheet activities or have any arrangements or relationships with unconsolidated entities, such as variable interest, special purpose, and structured finance entities.
Contractual Obligations
Lease Commitments
We lease buildings that are used in production and for administrative activities. Our leases are classified as operating and financing leases with various expiration dates through 2036. Our total remaining fixed lease payment obligations as of June 30, 2026 and December 31, 2025 are $46.3 million and $38.8 million, respectively, with $9.0 million due in less than one year from June 30, 2026.
Tax Receivable Agreement
Prior to the consummation of the IPO, the Company entered into the TRA with the TRA Holders. The TRA requires the Company to make payments to the TRA Holders in an amount equal to 85% of certain tax savings (or expected tax savings) in respect of certain tax attributes of the Company. At the date of the IPO and as of June 30, 2026, the realization of those benefits is uncertain, and as such, the Company does not believe payment of TRA benefits is probable. Accordingly, the Company does not anticipate recording the TRA liability until such time as payments become probable. As of June 30, 2026, the Company estimates the TRA attributes were approximately $347.0 million. See Note 8 - Accounting for Income Taxes of the accompanying notes to the unaudited condensed financial statements in Item 1 of Part I in this Quarterly Report on Form 10-Q for additional information related to the TRA.
Cash Flows
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The table below summarizes certain information from the unaudited condensed consolidated statements of cash flows for the six months ended June 30, 2026 and 2025:
For the six months ended June 30,
($ in thousands) 2026 2025
Cash and cash equivalents at beginning of the year $ 162,573 $ 104,656
Operating activities:
Net loss (154,185) (35,963)
Reconciling adjustments to net loss 138,551 24,323
Changes in working capital (171,003) (88,182)
Net cash (used in) operating activities (186,637) (99,822)
Net cash (used in) investing activities (29,738) (8,772)
Net cash provided by financing activities 587,766 25,000
Net increase/(decrease) in cash and cash equivalents 371,391 (83,594)
Effect of foreign currency rate changes on cash and cash equivalents 36 156
Cash and cash equivalents at end of period $ 534,000 $ 21,218
Net Cash (Used In)/Provided by Operating Activities
Net cash used in operating activities increased by $86.8 million, or 87%, to $186.6 million during the six months ended June 30, 2026, as compared to $99.8 million of cash used in operating activities during the six months ended June 30, 2025.
Changes in working capital increased by $82.8 million, or 94%, primarily attributable to the timing of cash receipts and cash payments for the period. Net cash used in operating activities was primarily attributable to increases in accounts receivable, contract assets, and inventories, as well as a decrease in contract liabilities resulting from the recognition of previously deferred revenue. These uses of cash were partially offset by increases in accounts payable and accrued expenses. We actively manage our contract assets and contract liabilities, along with the related billing and collection efforts.
The net increase in non-cash adjustments between the six months ended June 30, 2026 and the six months ended June 30, 2025, was primarily driven by a $95.6 million increase in stock-based compensation expense, a $6.7 million increase in other non-cash expenses, and a $6.7 million increase in amortization and depreciation.
Net Cash (Used In) Investing Activities
Net cash used in investing activities increased by $21.0 million, to $29.7 million for the six months ended June 30, 2026, as compared to $8.8 million for the six months ended June 30, 2025, primarily due to cash used to fund our acquisitions of Orbion and Solestial. This increase is partially offset by cash proceeds from settlement of notes receivable of $5.0 million.
Net Cash Provided by Financing Activities
Net cash provided by financing activities was $587.8 million for the six months ended June 30, 2026, as compared to $25.0 million for the six months ended June 30, 2025, primarily due to proceeds from issuance of the Company's common stock in connection with the IPO, net of underwriting discounts and commissions and other offering costs, of $589.6 million.
Critical Accounting Estimates
Our unaudited condensed consolidated financial statements have been prepared in accordance with GAAP. Preparation of the unaudited condensed consolidated financial statements requires our management to make judgments, estimates, and assumptions that impact the reported amount of net sales and expenses, assets and liabilities, and the disclosure of contingent assets and liabilities. We consider an accounting judgment, estimate, or assumption to be critical when the estimate or assumption is complex in nature or requires a high degree of judgment and the use of different judgments, estimates, and assumptions could have a material impact on our unaudited condensed consolidated financial
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statements. We periodically review our estimates and make adjustments when facts and circumstances dictate. To the extent that there are material differences between these estimates and actual results, our financial condition or results of operations will be affected.
Revenue Recognition
Our revenues are primarily derived from long-term FFP construction contracts with both domestic U.S. Federal Government-controlled agencies as well as commercial customers that generally span several years in duration. For FFP contracts, we recognize revenue over time (versus point in time recognition) using the POC method, as our performance creates an asset with no alternative use to us and we have an enforceable right to payment for performance completed to date.
Under the POC method, revenue is recognized based on the proportion of total costs incurred relative to total EAC. EAC includes all direct costs and indirect costs directly attributable to a contract or allocable based on our project cost pooling arrangements. We believe that this method represents the most faithful depiction of our performance because it directly measures value transferred to the customer. Estimates regarding our cost associated with the design, manufacture and delivery of products and services are used in determining the EAC. Contract estimates are based on various assumptions to project the outcome of future events that may span several years. These assumptions include, but are not limited to, the amount of time to complete the contract, including the assessment of the nature and complexity of the work to be performed, availability and cost of materials, components and subcontractor services, the availability and timing of funding from the customer, and the risk and impact of delayed performance and the level of indirect cost allocations. We bear the risk of changes in estimates to complete on a fixed-price contract, which may cause profit levels to vary from period to period.
Accounting for long-term contracts requires significant judgment relative to estimating total contract revenues and costs, in particular, assumptions relative to the amount of time to complete the contract, including the assessment of the nature and complexity of the work to be performed. Our estimates are based upon the professional knowledge and experience of our engineers, program managers and other personnel, who review each long-term contract monthly to assess the contract’s schedule, performance, technical matters and estimated cost at completion.
If, at the time of contract award or at any time during the life of a contract it becomes probable that total contract costs will exceed total contract revenue, the expected loss is recognized immediately in the consolidated statements of operations and comprehensive loss. We evaluate the contract value and cost estimates at completion for performance obligations no less frequently than quarterly, and more frequently when circumstances significantly change. Changes in contract estimates occur for a variety of reasons including, but not limited to, changes in contract scope, labor productivity, the nature and technical complexity of the work to be performed, availability and cost volatility of materials, subcontractor and vendor performance, volume assumptions, inflationary trends, and schedule and performance delays. We utilize information available to us at the time when making changes in contract EACs and apply consistent judgment across the full portfolio of programs.
Management’s estimates of total costs to be incurred are highly subjective and depend on past experience and operations. Given our limited history of operations, our rapid development and commercialization of new products, as well as our continued focus on improving and refining our manufacturing processes, these estimates are inherently subject to a high degree of estimation uncertainty and may fluctuate significantly from period to period.
Goodwill
Goodwill represents the excess of the purchase price over the fair value of net tangible and intangible assets acquired in a business combination. We evaluate goodwill for impairment annually at October 1 and whenever events or circumstances make it more likely than not that impairment may have occurred. We have determined that our business comprises one reporting unit. We have the option to first assess qualitative factors to determine whether events or circumstances indicate it is more likely than not that the fair value of a reporting unit is greater than its carrying amount. We consider factors in performing a qualitative assessment including, but not limited to, general macroeconomic conditions, industry and market conditions, company financial performance, changes in strategy, and other relevant entity-specific events. If we elect to bypass the qualitative assessment or do not pass the qualitative assessment, a quantitative assessment is performed.
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When a quantitative assessment is performed, we utilize a discounted cash flow approach, which incorporates assumptions regarding future growth rates, terminal values, and discount rates. This process compares the estimated fair value of the reporting unit to the reporting unit’s carrying value, including goodwill. We recognize a goodwill impairment charge for the amount by which the reporting unit’s carrying amount exceeds its fair value up to the amount of goodwill. If the fair value of a reporting unit exceeds its carrying value, goodwill of the reporting unit is considered not to be impaired.
Recently Issued Accounting Standards
Newly adopted accounting standards are described in Note 2 to our unaudited condensed consolidated financial statements in Item 1 of Part I of this Quarterly Report on Form 10-Q.
The Company has considered all other recently issued accounting pronouncements and does not believe the adoption of such pronouncements will have a material impact on its unaudited condensed consolidated financial statements.
Emerging Growth Company Accounting Election
Section 102(b)(1) of the JOBS Act exempts emerging growth companies from being required to comply with new or revised financial accounting standards until private companies are required to comply with the new or revised financial accounting standards. The JOBS Act provides that a company can choose not to take advantage of the extended transition period and comply with the requirements that apply to non-emerging growth companies, and any such election to not take advantage of the extended transition period is irrevocable. We are an “emerging growth company” as defined in Section 2(a) of the Securities Act, and have elected to take advantage of the benefits of this extended transition period, which means that when a standard is issued or revised and has different application dates for public or private companies, we, as an emerging growth company, may adopt the new or revised standard at the time private companies are required to adopt the new or revised standard. We are expected to remain an emerging growth company at least through the end of the fiscal year ended December 31, 2026, and are expected to continue to take advantage of the benefits of the extended transition period. This may make it difficult or impossible to compare our financial results with the financial results of another public company that is either not an emerging growth company or is an emerging growth company that has chosen not to take advantage of the extended transition period exemptions for emerging growth companies because of the potential differences in accounting standards used.
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