York Space Systems (NYSE:YSS) reported a 7% decline in third-quarter revenue and recorded a $749.7 million non-cash goodwill impairment as the satellite manufacturer navigates uncertainty over the timing of government contract awards.
Revenue fell to $84.2 million from $90.8 million a year earlier, while adjusted EBITDA was a loss of $27.6 million. The company narrowed its full-year revenue outlook to $380 million to $400 million, keeping its previous midpoint of $390 million.
CEO Dirk Wallinger said York has secured contract positions in areas including the Space Data Network, missile warning and tracking, and intelligence missions. Management expects larger awards in 2027 and beyond, although CFO Brian Frantz said the timing and value of those awards remain unclear.
Impairment and spending weigh on results
Frantz said York’s earlier reduction in revenue expectations and a share price below book value triggered a more extensive review of goodwill. The resulting impairment reflected assumptions about future revenue and the timing of awards, among other factors.
“We remain very bullish in terms of future awards coming in in 2027 and 2028,” Frantz told analysts, adding that he did not expect a repeat of the impairment. He said the company’s analysis assumed new awards would begin to arrive later in 2027 and in 2028.
Third-quarter gross margin fell to 18% from 22% a year earlier, partly because of one-time inventory adjustments at subsidiaries. Revenue from the Tranche 1 satellite program declined as the remaining satellites were launched, and increases from Tranche 2 and subsidiaries did not fully offset that decrease.
York expects full-year gross margin in the low 20% range. Its contribution margin rose to 40% from 35%, which Frantz attributed to improved Tranche 2 performance. He also said operations and sustainment revenue is beginning to rise as more satellites enter orbit; all 42 Tranche 1 satellites are in orbit and healthy, according to the company.
Combined selling, general and administrative and research and development expenses increased 66% from a year earlier, reflecting acquisitions, higher headcount and public-company costs. Frantz expects those expenses to be generally in line with third-quarter levels in the fourth quarter, while the adjusted EBITDA loss is expected to widen slightly.
Backlog and contract opportunities
Funded backlog stood at $581 million at Sept. 30. York reported $2.84 billion in potential unawarded contracts, a $14.9 billion identified pipeline and $750 million in unexercised options on existing contracts. The identified pipeline grew more than 30% from the prior quarter, Wallinger said.
Frantz said four contract wins and modifications to existing contracts added $17.3 million to backlog, while subsidiaries contributed another $44 million, mostly from ALL.SPACE, which was included for the first time. The third-quarter wins included a classified customer contract York calls Palm Springs.
York is working on two Space Data Network task orders involving exchange points intended to connect systems that use different laser technologies. Wallinger said he expects decisions on how to proceed with related constellations around mid-2027, while cautioning that options depend on budget funding.
Wallinger said York is building Tranche 2 satellites in two months, compared with nine months 18 months ago. The company also added 30 manufacturing cells at its Potomac facility during the quarter, bringing the total to 40.
Expansion into unmanned systems
York announced a proposed acquisition of Outlook Industries as part of its plan to expand into unmanned systems. Wallinger said the deal would add a platform capability to York’s existing communications terminals, ground network, mission operations and software. He described Outlook as a smaller company and said York also intends to partner with other platform providers.
The company plans a demonstration on Dec. 15 involving space-based tasking and autonomous operation of an unmanned system. York has submitted proposals to military customers for the capability, Wallinger said.
Separately, the U.S. Navy placed follow-on orders after the quarter for 59 ALL.SPACE HydraMAX 2 terminals, bringing its total fleet to 108, including 49 previously delivered systems.
York ended September with $309 million in cash and a fully available $150 million revolving credit facility. Frantz said the primary use of cash during the quarter was $155 million related to the ALL.SPACE transaction. He expects subsidiaries to account for more than 20% of revenue in 2027, compared with the previously discussed 10% to 15% range for 2026.
About York Space Systems (NYSE:YSS)
York Space Systems designs, manufactures and operates spacecraft and related systems. Its offerings include satellite platforms, spacecraft integration, mission operations and ground-system services for customers developing and operating satellite missions. The company’s product portfolio includes standardized spacecraft platforms designed to support a range of payloads and mission requirements. York serves government and commercial customers, including organizations involved in national security, civil space and communications missions.
