Firefly Aerospace (FLY.US) Q3 Earnings Call: Major AST Deal Marks Company's Shift from Launch Provider to "Engine Technology Exporter," CEO Says "Building the Road to the Moon"

Firefly Aerospace (FLY.US), the "space upstart" that just landed on Nasdaq this August, released its second quarterly report since going public: revenue of US$110.7 million, a year-over-year surge of 259%, total backlog hitting a record US$1.7 billion, and the lower bound of full-year revenue guidance raised; however, in the three trading days before the earnings release, the stock had already surged roughly 60% cumulatively on the back of a US$1.3 billion AST SpaceMobile engine mega-deal and selection for NASA's US$10 billion CLPS 2 lunar program, and the stock edged lower after hours following the reportthe pricing tug-of-war between "good news priced in early" and "high growth, high cash burn" formed the undercurrent of this earnings call. **Results Beat Expectations** Revenue of US$110.7 million, +259% year-over-year (US$30.8 million in the year-ago period), the second consecutive quarter of revenue above US$100 million, above market expectations of roughly US$102 millionUS$104 million; of which Spacecraft business was US$106 million and Launch business was US$4.7 million Gross margin 22.9% (20.3% last quarter); Non-GAAP net loss of US$75.4 million, loss per share of US$0.45, better than market expectations of US$0.49US$0.60; GAAP net loss of US$94.2 million, loss per share of US$0.56 (net loss of US$133.4 million in the year-ago period); adjusted EBITDA loss of US$69.5 million, widened from US$46.3 million in the year-ago period Q3 free cash flow outflow of US$85.3 million (outflow of US$106.3 million last quarter, including roughly US$24 million in remaining SciTec acquisition payments); cumulative free cash flow outflow of approximately US$270 million in the first nine months of the year Total liquidity of US$839.7 million (cash and short-term investments of US$534.7 million + US$305 million undrawn revolving credit facility) Guidance: full-year 2026 revenue raised to US$440 millionUS$450 million (prior guidance US$420 millionUS$450 million, midpoint raised by US$10 million)implying Q4 single-quarter revenue needs to reach approximately US$130 millionUS$140 million **Orders and Contracts** Total backlog of US$1.7 billion, a record high (US$1.5 billion last quarter, US$1.3 billion in the year-ago period); over US$300 million in new customer contracts in Q3 AST SpaceMobile strategic partnership (over US$1.3 billion, announced November 6, detailed on this call): composed of three partsapproximately US$800 million Miranda/Vera engine IP license (including US$400 million cash + 10 million14 million AST Class A ordinary shares, with a lock-up period), US$250 million support services, US$250 million engine deliveries; Firefly will manufacture, test and deliver 27 Miranda first-stage engines + 9 Vera upper-stage engines (3 complete flight sets) for AST's first three reusable heavy-lift rockets, with Firefly retaining full ownership of the engine IP; revenue booked in the Launch business, substantively starting next year, ramping from the second year Launch side: Lockheed Martin multi-launch agreement extended to 2031 (up to 25 Alpha Block II launches); two Alpha launches signed with Swedish SSC Space at the Esrange Space Center (the company's first European contracts); up to 10 launches through 2030 signed with Japanese SAR company Synspective; third hypersonic mission order from a confidential customer Defense software (SciTec): awarded US$94 million first phase of the Space Force Ground-Based Radar Digitization (GBARD) contract (potential additional US$400 millionUS$500 million); selected for the US$981 million NITESTAR IDIQ (task orders through 2032); FORGE missile warning system reached an operational milestone; Air Force CBC2 contract extended and expanded with counter-UAS sensor integration Lunar/deep space: five lunar missions advancing in parallel; won the company's first Mars contracta US$13 million subcontract from NASA JPL for SkyFall mission aeroshell manufacturing (target launch by end of 2028); selected for NASA's US$10 billion CLPS 2 large cargo lander IDIQ; Starcloud signed as the first commercial customer for a cislunar AI data center; Zeno Power Systems signed for a near-side lunar mission (carrying radioisotope heaters) **Key Operational Milestones** Alpha Flight 8 delayed to Q1 2027 launch (national security customer requested a launch sequence adjustment), which will be the Block 2 configuration's debut; the 2027 launch target will be announced at the Q4 earnings call; CEO said Alpha demand is "in the most supply-constrained state in the company's history" Eclipse (medium-lift rocket co-developed with Northrop Grumman): Miranda engine qualification testing has begun, with cumulative more than 175 hot fires, 4,230 seconds, covering 20 engines The cleanroom expansion funded by a non-dilutive grant from the Texas Space Commission is completed and operational, capable of integrating up to 12 lunar landers/orbiters simultaneously **Call Focus** **AST SpaceMobile Mega-Deal: From Launch Provider to "Engine Technology Exporter"** CEO Jason Kim emphasized the landmark significance of this over US$1.3 billion contract right at the opening: "When a company sets out to build its own rocket, the engine is the hardest, highest-stakes decision they make. AST chose Firefly, and that tells you everything you need to know about where our technology stands." CFO Darren Ma detailed the deal structure and addressed key questions: even if there are delays on AST's side, it does not affect Firefly's revenue recognition; the IP license + support services portion will "steadily expand gross margin" (current company gross margin is in the 20% range); all except the equity portion is booked into operating cash flow. Management said the agreement is a non-dilutive source of funding, and together with the Texas Space Commission cleanroom grant forms this quarter's "non-dilutive financing portfolio." **Alpha Delayed to Q1 2027, but "Most Supply-Constrained"** Flight 8 (Block 2 debut) delayed to Q1 2027 due to a national security customer's request to adjust the launch sequence; Flights 912 have all entered the manufacturing process, with 24 Reaver engine combustion chambers (about 6 sets) in production. CEO gave a live example: "In three hours today, we completed qualification hot fires of two Reavers, one Lightning, and one Miranda at Rocket Ranch." Management committed to giving the 2027 launch cadence target at the Q4 earnings call. **Lunar Narrative: "Building the Road to the Moon"** CEO proposed that "Firefly is building the road to the Moon" ("The Moon is the ultimate high ground"), and cited a DIA report to play up the China cislunar threat to emphasize the national security dimension. Beyond CLPS 2 (US$10 billion IDIQ), management offered a larger imagination space: NASA's Moonbase project represents an approximately US$30 billion opportunity, of which "about 10% may go to the Space Force, potentially as high as 25%"; in the Q&A, they disclosed that CLPS 1.0 still has at least three pending opportunities, one of which could be awarded as early as Q4. **Funding Roadmap Under a High Cash-Burn Model** Q3 free cash outflow of US$85.3 million; management explicitly stated that next year cash burn will rise due to AST-related R&D and capital expenditures; but emphasized that funding sources are primarily non-dilutive (AST contract, Texas grant), and disclosed "a robust pipeline of M&A targets." GMTEight's commentary was blunt: the company "must convert orders into revenue before cash runs out"whether Q4 can deliver over US$130 million in single-quarter revenue, and whether Miranda qualification and Eclipse's first flight can proceed on schedule, will determine whether the market continues to pay for this story. **Call Transcript Summary** **I. Executive Remarks** Alpha: Flight 8 delayed to Q1 2027 launch (Block 2 configuration debut), due to a national security customer's request to adjust the launch sequence; Flight 9 structure and tanks completed, four Reaver + Lightning engines being assembled; Flight 10 passed proof testing; Flight 11 tank structure manufacturing completed; Flight 12 composites in production; 24 Reaver engine combustion chambers in production (about 6 sets); AFP automated fiber placement machines producing in parallel; 2027 launch target to be announced at the Q4 earnings call; "Alpha demand is in the most supply-constrained state in the company's history" Launch sites and contracts: the same pad at Wallops will be able to launch both Alpha and Eclipse, with the goal of achieving launches in Virginia next year (no earlier than); two Alpha launches signed with SSC Space at Sweden's Esrangethe first European contracts; third hypersonic mission order from a confidential customer; Lockheed Martin multi-launch agreement extended; up to 10 launches through 2030 signed with Synspective (two satellites deployed per launch); selected for NASA Vandenberg SPOC spacecraft processing operations contract Eclipse: Miranda qualification testing begunmore than 175 hot fires, cumulative 4,230 seconds, 20 engines; first-flight engines being manufactured; "the world needs Eclipse more than ever" Blue Ghost/lunar: five lunar missions in parallel; new Austin cleanroom operational (up to 12 landers/orbiters integrated simultaneously); selected for CLPS 2 (US$10 billion IDIQ), capable of carrying larger payloads such as light terrain vehicles Blue Ghost Mission 2 ("Riders Through the Dark"): completed proof testing, stack 22 feet tall, carrying payloads from the US, Australia, Canada, the UAE, and the UK, launching next year Gruithuisen Domes mission: entered hardware production, launching 2028; StarCloud signed to carry an AI computing payload on Electra (using the Solix autonomous vision system obtained from the SpaceNG acquisition), validating a lunar orbit data center Lunar south pole mission: completed critical design review (searching for water ice); Zeno Power Systems signed for a near-side lunar mission, carrying radioisotope heaters (to cope with lunar night temperatures of about minus 275 degrees Fahrenheit) Electra: Moonfall mission passed PDR (delivering a lunar drone in partnership with JPL); new DIU deorbit services contract; won NASA SkyFall Mars mission subcontract (the company's first Mars contract); DIU Project Cinequone spacecraft entered integration testing (launching next year); DARPA LASSA project with Benchmark Space Systems entered the next phase SciTec/defense software: FORGE (Buckley Air Force Base) operational, adding GEO wide-field-of-view satellite data, accumulating over 45 years of missile warning/tracking algorithms; GBARD awarded US$94 million first phase (potential additional US$400 millionUS$500 million); Knightstar selected for US$981 million Air Force IDIQ (through 2032); ABMS/CBC2 contract extended, integrating counter-UAS sensors, received Air Force system interoperability testing certification; also selected for a US$66 million test and instrumentation IDIQ AST partnership statement (original quote): "When a company sets out to build its own rocket, the engine is the hardest, highest-stakes decision they make. AST chose Firefly, and that tells you everything you need to know about where our technology stands." [CFO Darren Ma's key points] Q3 revenue of US$110.7 million (+259%), second consecutive quarter above US$100 million; this quarter's revenue did not include revenue recognition from Q2's accelerated national security hardware orders Revenue mix: Spacecraft US$106 million / Launch US$4.7 million; recognition modelSpacecraft on percentage-of-completion, Alpha at launch point, Elytra on milestones (transitioning to point-in-time recognition after operations) Gross margin 22.9%; stock-based compensation expense of US$15.3 million; operating expenses and operating loss rose slightly quarter-over-quarter Non-GAAP net loss of US$75.4 million (loss per share of US$0.45); adjusted EBITDA loss of US$69.5 million Weighted average shares of 168.4 million, 171.6 million at period end, expected to increase by about 1 million per quarter Cash flow and liquidity: Q3 operating cash flow outflow of US$69.7 million, free cash flow outflow of US$85.3 million; total liquidity of US$839.7 million (cash and short-term investments of US$534.7 million + US$305 million undrawn revolving credit) Backlog of US$1.7 billion, a record high, mainly from GBARD, additional hardware server orders, and new Alpha hypersonic mission orders; over US$300 million in new customer contracts in Q3 Guidance: full-year 2026 revenue raised to US$440 millionUS$450 million AST deal structure (three parts): approximately US$800 million IP license (US$400 million cash + 10 million14 million AST Class A ordinary shares, priced at forward VWAP, with a lock-up period); US$250 million support services; US$250 million engine deliveries; Firefly retains full ownership of the engine IP; revenue substantively starts next year, with engine deliveries ramping from the second year; IP/services portion recognized on percentage-of-completion and will steadily expand gross margin, engine deliveries recognized at delivery point Funding strategy: non-dilutive sources (Texas Space Commission cleanroom grant, AST agreement) **II. Q&A Summary** Sheila Kahyaoglu (Jefferies)CLPS 2 and the lunar economy: Kim said CLPS 2 is a US$10 billion IDIQ, capable of launching larger cargo landers; NASA's Moonbase project is an approximately US$30 billion opportunity, of which "about 10% may go to the Space Force, potentially as high as 25%"; there is already an RFI for up to 5 cislunar satellites; "the lunar surface area is roughly equal to Africa, and the usable south pole resource region is about the size of Washington, DC." CLPS 1.0 still has at least three pending opportunities: one awarded as early as Q4 (lunar far side/south pole), one for commercial high-resolution imaging services of the lunar surface, and one expected to be awarded in early 2027. Edison Yu (Deutsche Bank)AST revenue recognition risk: Ma confirmed that even if there are delays on AST's side, it does not affect Firefly's revenue recognition; the IP + services portion will bring gross margin expansion (current gross margin in the 20% range). Kyle Benvenuto on behalf of Christine Liwag (Morgan Stanley)SciTec growth: GBARD first phase US$94 million, additional space US$400 millionUS$500 million; algorithms portable to PNT, AMTI/GMTI, space domain awareness; "need to be inside the adversary's OODA loop." Michael Leshock (KeyBanc)pricing power: Victus SOL mission contract of US$22 million, "opportunities seen recently are priced higher"; medium-lift Eclipse also commands higher pricing. Alex on behalf of Seth Seifman (JP Morgan)launch cadence: Kim gave same-day datatwo Reavers, one Lightning, and one Miranda qualification hot fires completed at Rocket Ranch within three hours. Mike Crawford (B. Riley)lunar mission progress: five missions in parallel, Blue Ghost Mission 2 launching next year. Ben Thomas on behalf of David Strauss (Wells Fargo)cash flow: Q3 free cash flow outflow of US$85.3 million; next year cash burn will rise due to AST-related R&D/capex; CLPS 1.0's three pending opportunities timing as above. Anthony Valentini (Barclays)funding and M&A: non-dilutive funding strategy; "we have a robust pipeline of M&A targets." Colin Canfield (Cantor)cash flow structure: Ma confirmed that all of the AST agreement except the equity portion is booked into operating cash flow. Sujitha Silva (Roth Capital): (question related to technology progress) Ryan Koons (Needham): (question related to business execution) Chris Quilty (Quilty Space)NSSL certification: co-developed with Northrop Grumman, the Miranda first stage can be used on both rockets; prior to certification, commitments can be given with a clear launch year.