Redwire : Quarterly Report for Quarter Ending March 31, 2026 (Form 10-Q)

About this update from Redwire Corporation

Management's Discussion and Analysis of Financial Condition and Results of Operations The following discussion and analysis is provided as a supplement to, and should be read in conjunction with, the condensed consolidated financial statements and accompanying notes included in this Quarterly Report on Form 10-Q. Certain information contained in this discussion and analysis includes forward-looking statements that involve risks and uncertainties. Our actual results may differ materially from those anticipated in these forward-looking statements as a result of many factors. For information identifying important factors that could cause actual results to differ materially from those anticipated in the forward-looking statements, please refer to Item 1A. "Risk Factors" and the "Cautionary Note Regarding Forward-Looking Statements" sections of this Quarterly Report on Form 10-Q. Unless the context otherwise requires, all references in this section to the "Company," "Redwire," "we," "us" or "our" refer to Redwire Corporation and its consolidated subsidiaries. Business Overview Redwire is an integrated space and defense company focused on advanced technologies including next-generation spacecraft, space infrastructure, autonomous systems and multi-domain operations leveraging digital engineering and artificial intelligence automation. Redwire's proven and reliable airborne and space-based capabilities include our space and defense technology and platform offerings of avionics, sensors, and payloads; power generation; structures and mechanisms; radio frequency ("RF") systems; airborne and spacecraft platforms and missions; and microgravity payloads. Redwire combines decades of flight heritage and proven experience with an agile and innovative culture. Redwire's primary business model is providing proven, mission critical solutions based on core airborne and space infrastructure offerings through both short- and long-duration projects for U.S. and international government and commercial customers. Redwire operates in two business segments: Space and Defense Tech. We organize our business segments based on the nature of the products and services offered. Redwire's Space segment focuses on delivering next-generation spacecraft, large space infrastructure, and microgravity capabilities to serve civil, national security, and commercial space customers globally. Our core space offerings are flight-proven and have supported hundreds of spacecraft, missions, and operations, including, but not limited to, the International Space Station, the European Space Agency's ("ESA") Project for On-Board Autonomy ("PROBA"), the National Aeronautics and Space Administration's ("NASA") Double Asteroid Redirection Test and the Orion space capsule, and the Space Force's GPS. We are also a provider of innovative technologies with the potential to help transform the economics of space and create new markets for its exploration and commercialization. Redwire's Defense Tech segment focuses on delivering combat-proven autonomous systems, optical sensors, advanced optics, resilient energy solutions and radio frequency payloads that provide intelligence, surveillance, and reconnaissance capabilities for customers including the U.S. Department of War ("DoW", formerly known as the Department of Defense), U.S. Federal Civilian Agencies and allied governments across multiple domains. Our defense technology offerings include field-proven airborne products and services that have decades of innovation and more than 400,000 flight hours. Key operations include developing and manufacturing Uncrewed Aerial Systems ("UAS") for commercial, government, and military applications in areas such as surveillance, logistics, reconnaissance, border security, and emergency response. Redwire is committed to delivering innovative space and airborne platforms to help transform the future of multi-domain operations. The following discussion should be read along with the financial statements included in this Form 10-Q, as well as "Management's Discussion and Analysis of Financial Condition and Results of Operations," "Liquidity and Capital Resources," and "Risk Factors" included in the Company's Annual Report on Form 10-K for the year ended December 31, 2025, as filed with the SEC on February 27, 2026 (the "Company's Annual Report"), which provides additional information on our business, the environment in which we operate and our operating results. Recent Developments During the first quarter of 2026: • Revenues increased 58% for the three months ended March 31, 2026 compared to the same period in 2025. • Gross margin increased to 27% for the three months ended March 31, 2026 from 15% during the same period in 2025. • Net loss increased $73.6 million for the three months ended March 31, 2026 compared to the same period in 2025. • Book-to-bill ratio increased to 1.92 for the three months ended March 31, 2026 from 0.92 for the same period in 2025. • Backlog increased to $498.1 million as of March 31, 2026 from $411.2 million as of December 31, 2025. • Awarded a $12.8 million contract to deliver Extensible Low-Profile Solar Array ("ELSA") wings to Moog, Inc. marking the first sale of ELSA, a new high-performance, low-mass solar array product. • Received purchase orders totaling more than $20.0 million during the first quarter supporting the Portfolio Acquisition Executive Robotic Autonomous Systems Aircraft Program Management Office Family of Small UAS Team, encompassing the Marine Corps' first acquisition of the Advanced Navigation version of the Stalker Block 30. • Supported a cancer therapy investigation led by Aspera Biomedicines that launched during the quarter using PIL-BOX; in addition, announced the award of an additional $4.0 million from NASA to support new drug development investigations on the International Space Station. • Awarded a contract to develop a quantum-secure satellite under the European Space Agency's Quantum Key Distribution Satellite ("QKDSat") program as part of a multi-country consortium that includes Honeywell Aerospace. • Subsequent to the end of the first quarter of 2026, Redwire's advanced imaging and navigation technology launched on board the Orion spacecraft as part of NASA's historic Artemis II mission, the first crewed mission for the Artemis program. Industry and Regulatory Updates U.S. Budget Environment On February 3, 2026, Congress passed, and the President signed into law, the Consolidated Appropriations Act of 2026 , that includes full FY 2026 appropriations for most of the federal government, exclusive of the Department of Homeland Security, which remains under a short-term continuing resolution. The bill provided $839.2 billion in total discretionary defense funding, including research and development funding. The bill includes $13.4 billion in funding for missile defense and space programs to augment and integrate in support of the "Golden Dome for America" initiative. In March 2026, NASA announced a strategic shift in its lunar exploration program, pausing further development of the Lunar Gateway space station to focus resources on establishing a sustained human presence at the Moon's South Pole. Under the revised plan, approximately $20 billion in projected funding over the next seven years is being redirected from orbital infrastructure toward surface-based systems and habitation capabilities. This realignment is expected to accelerate timelines associated with developing a permanent lunar surface base and related mission support activities. The full impact of this policy shift is still being evaluated across the industry. International Developments In March 2025, the European Commission introduced the Readiness 2030 package (previously dubbed "ReArm Europe"), to deploy nearly €800 billion over four years for collective defense, including drone systems, missile defense, cyber and autonomous platforms. The package includes a suspension of fiscal constraints allowing up to 1.5% of Gross Domestic Product ("GDP") to be put toward additional defense spending and launched the €150 billion Safe Action for Europe ("SAFE") loan facility. During the first quarter of 2026, implementation of the Readiness 2030 initiative advanced, including adoption of implementing decisions for multiple member states under the SAFE financing mechanism and expected initial loan disbursements beginning in the second quarter of 2026. The European Commission formally introduced the EU Space Act in June 2025 as a proposed regulation to harmonize legal frameworks across the EU for space activities. It establishes a single market for space service providers and applies to EU and non-EU operators whose activities impact the EU internal market. The regulatory structure will be focused on three areas: safety (including orbital debris mitigation and space situational awareness), resilience (including space-based cybersecurity), and sustainability (including in-orbit servicing). If enacted by the European Parliament and Council, the regulation is designed to apply from January 1, 2030, with a two-year transition period for existing missions not yet launched by that date. Discussions and commentary on the EU Space Act progressed during the first quarter of 2026, but no comprehensive language has yet been agreed by relevant stakeholders. U.S. and international government spending levels and timely funding thereof may adversely affect our financial condition and operating performance over the short and long term. Please refer to Item 1A. "Risk Factors" included in this Quarterly Report on Form 10-Q, for additional information related to government funding risks. Geopolitical Environment We operate in a complex and evolving global space and defense environment and our business is affected by geopolitical issues. Russia's invasion of Ukraine significantly elevated global geopolitical tensions and security concerns, and following the acquisition of Edge Autonomy, a portion of the combined company's sales are to customers in Ukraine. Those sales have been declining and may continue to decline in the event that the war and hostilities in Ukraine end, decline or change, or as a result of changes in international support for military assistance to Ukraine. Additionally, U.S. involvement in the conflict with Iran may have an impact on U.S. and allied defense spending, but the current impact remains unclear. Results of Operations Substantially all of our contracts within the Space segment and some of our contracts within the Defense Tech segment 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. The following discussion of material changes in consolidated revenues should be read in tandem with the subsequent discussion of changes in consolidated cost of sales because changes in revenues are typically accompanied by a corresponding change in cost of sales due to the nature of the percentage-of-completion cost-to-cost method. 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 can have a significant effect on reported revenues and gross profit and the table below presents the aggregate amounts for the following periods: Three Months Ended (dollars in thousands) March 31, 2026 March 31, 2025 Gross favorable $ 8,356 $ 3,470 Gross unfavorable (9,458) (6,568) Total net EAC adjustments impact to gross profit $ (1,102) $ (3,098) The Company evaluates 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, s ubcontractor and vendor performance, volume assumptions, inflationary trends, and schedule and performance delays. We utilize information available to us at the time when revising our estimates and apply consistent judgment across the full portfolio of programs. The gross unfavorable EAC adjustments in 2026 were primarily due to $6.8 million unfavorable adjustments in the Space segment as a result of an increase in estimates made for the programmatic and technical assumptions based on the nature and technical complexity of the work to be performed to meet customer specifications. This was partially offset by $5.6 million of favorable adjustments in the Defense Tech segment, inclusive of the reversal of loss reserves in the amount of $3.6 million. Refer to Note N - Revenues of the accompanying notes to the condensed consolidated financial statements for additional information. Results of operations for the three months ended March 31, 2026 compared to the three months ended March 31, 2025: Three Months Ended $ Change from prior year period % Change from prior year period (in thousands, except percentages) March 31, 2026 % of revenues March 31, 2025 % of revenues Revenues $ 96,972 100 % $ 61,395 100 % $ 35,577 58 % Cost of sales 71,164 73 52,354 85 18,810 36 Gross profit 25,808 27 9,041 15 16,767 185 Operating expenses: Selling, general and administrative expenses 82,887 85 18,746 31 64,141 342 Transaction expenses 40 - 3,799 6 (3,759) (99) Research and development 12,582 13 813 1 11,769 1,448 Operating income (loss) (69,701) (72) (14,317) (23) (55,384) 387 Interest expense, net 2,467 3 3,594 6 (1,127) (31) Loss on extinguishment of debt 2,545 3 - - 2,545 100 Other (income) expense, net 1,148 1 (14,781) (24) 15,929 (108) Income (loss) before income taxes (75,861) (78) (3,130) (5) (72,731) 2,324 Income tax expense (benefit) 641 1 (182) - 823 (452) Net income (loss) $ (76,502) (79) % $ (2,948) (5) % $ (73,554) 2495 % For purposes of the following discussion and analysis, the financial impact related to the June 2025 acquisition of Redwire Defense Tech Intermediate Holdings, LLC (f/k/a Edge Autonomy Intermediate Holdings, LLC) and its subsidiaries, is referred to as the "Edge Autonomy Acquisition." Revenues Revenues increased by $35.6 million, or 58%, for the three months ended March 31, 2026, as compared to the three months ended March 31, 2025. The increase in revenues is primarily driven by $36.4 million of revenues related to the Edge Autonomy Acquisition and $4.0 million of revenue related to a favorable shift in the Company's contract mix. The increase is partially offset by $4.8 million of net unfavorable EAC adjustments for the three months ended March 31, 2026 as compared to $3.1 million of net unfavorable EAC adjustments for the same period in 2025. Cost of Sales Cost of sales increased $18.8 million, or 36%, for the three months ended March 31, 2026, as compared to the three months ended March 31, 2025. The year-over-year increase in cost of sales was primarily driven by $19.3 million of costs related to the Edge Autonomy Acquisition, which was completed in the second quarter of 2025 and therefore has no comparable amounts in the first quarter of 2025. Gross Profit and Margin Gross profit increased $16.8 million for the three months ended March 31, 2026, as compared to the three months ended March 31, 2025. Further, as a percentage of revenues, gross margin increased to 27% for the three months ended March 31, 2026 from 15% during the same period in 2025. The year-over-year increase in gross profit and margin was primarily driven by the Edge Autonomy Acquisition amounting to $17.1 million. Further, this amount was offset by $1.1 million due to net unfavorable EAC adjustments for the three months ended March 31, 2026. Please refer to Note N - Revenues of the accompanying notes to the condensed consolidated financial statements for additional information related to the Company's net EAC adjustments. Selling, General and Administrative ("SG&A") Expenses SG&A expenses increased $64.1 million for the three months ended March 31, 2026, as compared with the same period in 2025. This contributed to a year-over-year increase of SG&A as a percentage of revenue to 85% for the three months ended March 31, 2026 from 31% for the same period in 2025. The year-over-year increase was primarily due to $59.1 million in SG&A expenses related to the Edge Autonomy Acquisition, including $42.1 million related to the accelerated vesting of the Edge Incentive Units, for which there was no comparable cost in the same period of 2025. The increase was further driven by increased costs for acquisition integration support and increased investment in bid and proposal solicitation activities. Transaction Expense Transaction expenses decreased $3.8 million for the three months ended March 31, 2026, as compared with the same period in 2025. The decrease is primarily due to pre-acquisition costs incurred during the three months ended March 31, 2025, consisting of due diligence and expenses related to prospective acquisitions, including the Edge Autonomy Acquisition of which there is minimal comparable expense during the three months ended March 31, 2026. Research and Development Research and development expenses increased $11.8 million during the three months ended March 31, 2026, as compared with the same period in 2025. The increase is primarily related to $7.9 million of costs related the Edge Autonomy Acquisition for which there was no comparable costs during same period in 2025. The remaining increase of $3.9 million is primarily driven by strategic investments in the development of high potential, emerging opportunities within the Space segment. Interest Expense, net Interest expense, net decreased $1.1 million for the three months ended March 31, 2026, as compared with the three months ended March 31, 2025. The decrease was due to a decrease in the effective interest rate year-over-year primarily due to a reduced interest rate on the JPM A&R Credit Agreement entered into during the three months ended March 31, 2026 and the Company no longer holding the term loans and revolver loans under the Adams Street Credit Agreement. Refer to Note H - Debt of the accompanying notes to the condensed consolidated financial statements for additional information related to the Company's debt obligations. Loss on Extinguishment of Debt The Company recognized $2.5 million as a loss on extinguishment of debt related to the write-off of unamortized discount and deferred financing costs associated with the refinancing of the JPM A&R Credit Agreement and the termination of the Adams Street Credit Agreement. Please refer to Note H - Debt of the accompanying notes to the condensed consolidated financial statements for additional information related to the Company's debt obligations. Other (Income) Expense, net Other (income) expense, net increased by $15.9 million for the three months ended March 31, 2026, from net income to net expense as compared to the same period in 2025. The year-over-year change was primarily due to loss recognized as a result of changes in the fair value of the private warrant liability of $0.3 million during the three months ended March 31, 2026 as compared to a $13.6 million gain recognized during the same period of 2025, resulting in a total change of $14.0 million. Refer to Note D - Fair Value of Financial Instruments of the accompanying notes to the condensed consolidated financial statements for additional information related to the fair value of private warrants. Income Tax Expense (Benefit) The table below provides information regarding our income tax expense (benefit) for the following periods: Three Months Ended (in thousands, except percentages) March 31, 2026 March 31, 2025 Income tax expense (benefit) $ 641 $ (182) Effective tax rate expense (benefit) 0.8 % (5.8) % The Company recorded tax expense of $0.6 million for the three months ended March 31, 2026, as compared to a tax benefit of $0.2 million for the three months ended March 31, 2025. This change in income tax expense is primarily related to the increase in the valuation allowance for the three months ended March 31, 2026 . Refer to Note K - Income Taxes of the accompanying notes to the condensed consolidated financial statements for further discussion. Business Segment Results of Operations The Company operates in two business segments: Space and Defense Tech. We organize our business segments based on the nature of products and services offered and based on the financial information that is provided and regularly reviewed by the CODM in deciding how to allocate resources and in assessing performance. Revenues, gross profit and operating profit of our business segments exclude inter-segment sales, cost of sales and profit as these activities are eliminated in consolidation and thus are not included in management's evaluation of performance of each segment. Business segment operating profit excludes a portion of corporate costs not considered allowable or allocable to contracts, and other items not considered part of management's evaluation of segment operating performance. Revenues, cost of sales and operating profit for each of our business segments were as follows: Three Months Ended (in thousands) March 31, 2026 March 31, 2025 Revenues Space $ 52,669 $ 52,133 Defense Tech 44,303 9,262 Total revenues $ 96,972 $ 61,395 Cost of sales Space $ 47,766 $ 45,155 Defense Tech 23,398 7,199 Total cost of sales $ 71,164 $ 52,354 Operating income (loss) Space $ (4,003) $ 3,208 Defense Tech (46,902) 1,721 Total business segment operating income (loss) $ (50,905) $ 4,929 Unallocated items Corporate charges $ 18,756 $ 15,447 Transaction expenses 40 3,799 Total unallocated, net 18,796 19,246 Total consolidated operating income (loss) $ (69,701) $ (14,317) Corporate charges mainly consists of corporate overhead costs maintained at the corporate level, including gains and losses related to financial instruments measured at fair value. These expenses include costs relating to treasury, accounting, consulting, advisory, legal, tax and audit, insurance, financial reporting services and various administrative expenses related to the corporate headquarters. Space Redwire's Space segment focuses on delivering next-generation spacecraft; large space infrastructure; critical avionics, as well as microgravity capabilities to serve civil, national security, and commercial space customers. Space's operating results included the following: (in thousands, except percentages) March 31, 2026 March 31, 2025 Revenues $ 52,669 $ 52,133 Operating income (loss) $ (4,003) $ 3,208 Operating margin (8) % 6 % Space segment revenues increased by $0.5 million, or 1%, for the three months ended March 31, 2026, as compared to the three months ended March 31, 2025. The year-over-year increase in revenues is primarily related to timing in the stage of production cycles year-over-year for certain contracts in the next-generation space and space infrastructure offering. This increase is partially offset by $6.8 million of net unfavorable EAC adjustments for the three months ended March 31, 2026 as compared to $2.6 million of net unfavorable EAC adjustments for the same period in 2025. Operating income (loss) decreased by $7.2 million for the three months ended March 31, 2026, as compared to the three months ended March 31, 2025. Operating margin also decreased from 6% to (8)% year-over-year. The decrease in operating income (loss) and margin is partially due to a decrease in gross margin as a result of the unfavorable EAC adjustments recognized during the three months ended March 31, 2026, further reducing the portfolio margin compared with the same period in 2025. The decrease is also due to increased costs for research and development of $3.8 million year-over-year as a result of the Company investing in high potential opportunities. Defense Tech Redwire's Defense Tech segment focuses on delivering combat-proven autonomous systems, optical sensors and radio frequency payloads that provide intelligence, surveillance, and reconnaissance capabilities for U.S. and allied nations across multiple domains. Defense Tech's operating results included the following: (in thousands, except percentages) March 31, 2026 March 31, 2025 Revenue $ 44,303 $ 9,262 Operating income (loss) $ (46,902) $ 1,721 Operating margin (106) % 19 % Defense Tech segment revenues increased by $35.0 million for the three months ended March 31, 2026, as compared to the three months ended March 31, 2025. The year-over-year increase in revenues was primarily due to $36.4 million of revenue related to the Edge Autonomy Acquisition. Operating income (loss) decreased by $48.6 million for the three months ended March 31, 2026, as compared to the three months ended March 31, 2025. Operating margin also decreased from 19% to (106)% year-over-year. The decrease in operating income (loss) and operating margin is primarily due to an increase of $42.5 million in equity-based compensation related to the accelerated vesting of the Edge Incentive Units and an $8.2 million increase in depreciation and amortization as a result of the Edge Autonomy Acquisition. Supplemental Non-GAAP Information We use Adjusted EBITDA 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 which are not calculated in accordance with U.S. Generally Accepted Accounting Principles ("U.S. GAAP") and are considered to be Non-GAAP financial performance measures. These Non-GAAP financial performance measures are used to supplement the financial information presented on a U.S. GAAP basis and should not be considered in isolation or as a substitute for the relevant U.S. GAAP measures and should be read in conjunction with information presented on a U.S. 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. Adjusted EBITDA is defined as net income (loss) adjusted for interest expense, net, income tax expense (benefit), depreciation and amortization, impairment expense, transaction expenses, acquisition integration costs, acquisition earnout costs, purchase accounting fair value adjustment related to deferred revenue and inventory, severance costs, capital market and advisory fees, disposal of long-lived assets, litigation-related expenses, equity-based compensation, committed equity facility transaction costs, debt financing costs and extinguishment losses, gains on sale of joint ventures, net of costs incurred, and warrant liability change in fair value adjustment. The table below presents a reconciliation of Adjusted EBITDA to net income (loss), computed in accordance with U.S. GAAP for the following periods: Three Months Ended (in thousands) March 31, 2026 March 31, 2025 Net income (loss) $ (76,502) $ (2,948) Interest expense, net 2,467 3,594 Income tax expense (benefit) 641 (182) Depreciation and amortization 11,250 3,046 Transaction expenses (i) 40 3,799 Acquisition integration costs (i) 225 - Severance costs (ii) 262 177 Capital market and advisory fees (iii) 2,015 968 Litigation-related expenses (iv) 426 - Equity-based compensation (v) 46,735 2,912 Debt financing costs and extinguishment losses (vi) 2,925 - Warrant liability change in fair value adjustment (vii) 319 (13,634) Adjusted EBITDA $ (9,197) $ (2,268) i. Redwire incurred acquisition costs including due diligence, integration costs and additional expenses related to pre-acquisition activity. ii. Redwire incurred severance costs related to separation agreements entered into with former employees. iii. Redwire incurred capital market and advisory fees related to advisors assisting with the implementation of internal controls over financial reporting, including material weakness remediation efforts, and the internalization of corporate services, including, but not limited to, implementing enhanced enterprise resource planning systems across U.S. and foreign operations. iv. Redwire incurred expenses related to settlements of legal matters. v. Redwire incurred expenses related to equity-based compensation under Redwire's equity-based compensation plan and Edge Incentive Units. vi. Redwire incurred expenses related to debt financing agreements, including amendment related fees paid to third parties that are expensed in accordance with U.S. GAAP, and losses on debt extinguishments. Refer to Note H - Debt of the accompanying notes to the condensed consolidated financial statements for additional information. vii. Redwire adjusted the private warrant liability to reflect changes in fair value recognized as a gain or loss during the respective periods. Key Performance Indicators The following Key Performance Indicators ("KPIs") are used by Management to assess the financial performance of the Company, monitor relevant trends and support financial, operational and strategic decision-making. Management frequently monitors and evaluates KPIs against internal targets, core business objectives as well as industry peers and may, on occasion, change the mix or calculation of KPIs to better align with the business, its operating environment, standard industry metrics, or other considerations. If the Company changes the method by which it calculates or presents a KPI, prior period disclosures would be recast to conform to current presentation. Book-to-Bill Our book-to-bill ratio was as follows for the periods presented: Three Months Ended Last Twelve Months Ended (in thousands, except ratio) March 31, 2026 March 31, 2025 March 31, 2026 March 31, 2025 Contracts awarded Space $ 114,567 $ 53,707 $ 298,622 $ 217,387 Defense Tech 71,961 2,537 273,141 33,545 Total contracts awarded $ 186,528 $ 56,244 $ 571,763 $ 250,932 Revenues Space $ 52,669 $ 52,133 $ 210,207 $ 230,174 Defense Tech 44,303 9,262 160,751 47,530 Total revenues $ 96,972 $ 61,395 $ 370,958 $ 277,704 Book-to-bill ratio Space 2.18 1.03 1.42 0.94 Defense Tech 1.62 0.27 1.70 0.71 Total book-to-bill ratio 1.92 0.92 1.54 0.90 Book-to-bill is the ratio of total contracts awarded to revenues recorded in the same period. The contracts awarded balance includes firm contract orders, including time-and-material contracts, awarded during the period and does not include unexercised contract options or potential orders under indefinite delivery/indefinite quantity contracts. Although the contracts awarded balance reflects firm contract orders, terminations, amendments, or contract cancellations may occur which could result in a reduction to the contracts awarded balance. We view book-to-bill as an indicator of future revenue growth potential. To drive future revenue growth, our goal is for the level of contracts awarded in a given period to exceed the revenue recorded, thus yielding a book-to-bill ratio greater than 1.0. Our book-to-bill ratio was 1.92 for the three months ended March 31, 2026, as compared to 0.92 for the three months ended March 31, 2025. For the three months ended March 31, 2026 and 2025, none of the contracts awarded balance relates to acquired contract value. Our book-to-bill ratio was 1.54 for the Last Twelve Months ("LTM") ended March 31, 2026, as compared to 0.90 for the LTM ended March 31, 2025. For the LTM ended March 31, 2026, contracts awarded includes $73.7 million of acquired contract value from the Edge Autonomy acquisition, which was completed in the second quarter of 2025, and included in the Defense Tech segment. For the LTM ended March 31, 2025, contracts awarded includes $21.9 million of acquired contract value from the Hera Systems acquisition, which was completed in the third quarter of 2024, and included in the Space segment. Backlog The following table presents our contracted backlog as of March 31, 2026 and December 31, 2025, and related activity for the three months ended March 31, 2026 as compared to the year ended December 31, 2025: (in thousands) March 31, 2026 December 31, 2025 Organic backlog, beginning balance $ 333,690 $ 296,652 Organic additions during the period 122,530 257,318 Organic revenue recognized during the period (60,558) (228,267) Foreign currency translation (1,964) 7,987 Organic backlog, ending balance 393,698 333,690 Acquisition-related contract value, beginning balance 77,556 - Acquisition-related contract value acquired during the period - 73,716 Acquisition-related additions during the period 63,998 110,444 Acquisition-related revenue recognized during the period (36,414) (107,114) Foreign currency translation (756) 510 Acquisition-related backlog, ending balance 104,384 77,556 Contracted backlog, ending balance $ 498,082 $ 411,246 Contracted backlog by segment: Space $ 359,716 $ 299,804 Defense Tech 138,366 111,442 We view growth in backlog as a key measure of our business growth. Contracted backlog represents the estimated dollar value of firm funded executed contracts for which work has not been performed (also known as the remaining performance obligations on a contract). Our contracted backlog includes $104.7 million and $81.0 million in remaining contract value from contracts which recognize revenue at a point in time as of March 31, 2026 and December 31, 2025, respectively. Organic backlog change excludes backlog activity from acquisitions for the first four full quarters since the entities' acquisition date. Contracted backlog activity for the first four full quarters since the entities' acquisition date is included in acquisition-related contracted backlog change. After the completion of four fiscal quarters, acquired entities are treated as organic for current and comparable historical periods. Organic contract value includes the remaining contract value as of January 1 not yet recognized as revenue and additional orders awarded during the period for those entities treated as organic. Acquisition-related contract value includes remaining contract value as of the acquisition date not yet recognized as revenue and additional orders awarded during the period for entities not treated as organic. Organic revenue includes revenue earned during the period presented for those entities treated as organic, while acquisition-related revenue includes the same for all other entities, excluding any pre-acquisition revenue earned during the period. The acquisition-related backlog activity presented in the table above is related to the Edge Autonomy acquisition completed during the second quarter of 2025. Although contracted 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. In addition, some of our multi-year contracts are subject to annual funding. Management expects all amounts reflected in contracted backlog to ultimately be fully funded. Contracted backlog from international operations was $195.4 million and $193.1 million as of March 31, 2026 and December 31, 2025, respectively. These amounts are subject to foreign exchange rate translations from their respective local currencies to U.S. dollars that could cause the remaining backlog balance to fluctuate with the foreign exchange rate at the time of measurement. Liquidity and Capital Resources Our operations are primarily funded with cash flows provided by operating activities, proceeds from equity offerings, including the ATM facility, and access to existing credit facilities. As of March 31, 2026, we had $144.5 million in cash and cash equivalents and $30.0 million in available borrowings from our existing credit facilities. Our primary requirements for liquidity and capital are for the Company's 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, among others, general economic conditions, including as a result of heightened inflation, rising 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 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. In the event that we require additional financing, we may not be able to secure such financing on terms acceptable to us or at all. For further information, please refer to the risk factors contained in the Company's Annual Report on Form 10-K for the year ended December 31, 2025. We believe our existing sources of liquidity will be sufficient to meet our working capital needs and debt service obligations and to comply with our debt covenants for at least the next twelve months from the date on which our condensed consolidated financial statements were issued. Indebtedness Please refer to Note H - Debt of the accompanying notes to the condensed consolidated financial statements for additional information related to the Company's debt obligations. Contractual Obligations During the three months ended March 31, 2026, there were no material changes to the Company's contractual obligations as presented in "Management's Discussion and Analysis of Financial Condition and Results of Operations" included in the Company's Annual Report that were outside the ordinary course of our business. Off-Balance Sheet Arrangements From time to time, we are a party to certain off-balance sheet arrangements, such as standby letters of credit. Liabilities related to these arrangements are generally not reflected in our consolidated balance sheets. We do not expect any material impact on our cashflows, results of operations or financial condition to result from these off-balance sheet arrangements. As of March 31, 2026 and December 31, 2025, respectively, we had $0.7 million of standby letters of credit. Our standby letters of credit outstanding generally relate to submitted proposals and performance guarantees, which are secured by our restricted cash. Refer to Note B of the accompanying notes to the condensed consolidated financial statements for additional information related to the Company's restricted cash. Cash Flows The table below summarizes certain information from the condensed consolidated statements of cash flows for the following periods: Three Months Ended (in thousands) March 31, 2026 March 31, 2025 Cash, cash equivalents and restricted cash at beginning of year $ 95,183 $ 49,071 Operating activities: Net income (loss) (76,502) (2,948) Reconciling adjustments to net income (loss) 62,889 (8,266) Changes in working capital 6,947 (33,867) Net cash provided by (used in) operating activities (6,666) (45,081) Net cash provided by (used in) investing activities (6,036) (4,055) Net cash provided by (used in) financing activities 63,075 54,190 Effect of foreign currency rate changes on cash, cash equivalents and restricted cash (345) 96 Net increase (decrease) in cash, cash equivalents and restricted cash 50,028 5,150 Cash, cash equivalents and restricted cash at end of period $ 145,211 $ 54,221 Operating activities Net cash used in operating activities decreased by $38.4 million year-over-year. The change was primarily due to an increase of $71.2 million in the effects of reconciling adjustments to net income (loss) and a decrease in cash used by working capital of $40.8 million, partially offset by an increase of $73.6 million in cash used related to the Company's net loss for the three months ended March 31, 2026 in comparison to 2025. The increase in non-cash adjustments is primarily related to increases in share-based compensation of $43.8 million and depreciation and amortization expense of $8.2 million both of which are primarily related to the Edge Autonomy Acquisition. The increase was also due to a loss recognized for the change in fair value of the outstanding private warrants of $0.3 million during the three months ended March 31, 2026 compared to gain of $13.6 million recognized in 2025. Please refer to Note D - Fair Value of Financial Instruments of the accompanying notes to the condensed consolidated financial statements for additional information related to the fair value of warrants. The decrease in cash used by working capital was primarily due to an increase of $19.8 million and $10.6 million in deferred revenue and accounts payable and accrued expenses, respectively, for 2026 compared to a decrease of $7.6 million and $8.2 million in deferred revenue and accounts payable and accrued expenses, respectively, for 2025 as well as an increase in cash provided by accounts receivable year-over-year. These changes were partially offset by an increase in cash used for inventory of $14.1 million year-over-year. The increases in accounts payable and accrued expenses were primarily a result of timing of payments and recognition of liability. The changes in deferred revenue and accounts receivable were primarily driven by the timing of billable milestones during the three months ended March 31, 2026 compared to 2025 and the changes in inventory are primarily related to the Edge Autonomy Acquisition. Investing activities Net cash used in investing activities increased by $2.0 million year-over-year. The change was due to an increase in capital expenditures primarily related to equipment and leasehold improvements. Financing activities Net cash provided by financing activities increased by $8.9 million during the three months ended March 31, 2026, as compared to 2025. The change was primarily due to the Company repaying an advance from third-parties of $(7.8) million during the three months ended March 31, 2025 for which there is no comparable activity during the three months ended March 31, 2026. Foreign Currency Exposures Our operations in Europe conduct transactions that are primarily denominated in euros, which limits our foreign currency exposure. However, changes in exchange rates will affect the Company's condensed consolidated financial statements as expressed in U.S. dollars. Critical Accounting Estimates There have been no material changes to our critical accounting policies and estimates as disclosed in our audited financial statements included in the Company's Annual Report.

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