Firefly Aerospace (FLY.US) Q3 conference call: AST Dasan represents the company from launch service provider to “engine technology exporter”, CEO says “building a path to the moon”

The Zhitong Finance App learned that the “space upstart” Firefly Aerospace (FLY.US), which just landed on NASDAQ in August this year, released its second quarterly report after launch: revenue of US$117 million, surged 259% year on year, total backlog of orders reached a record US$1.7 billion, and raised the lower limit of the annual revenue guidance; however, within the three trading days before the release of the earnings report, the stock price had already surged by about 60% due to the large order of the 1.3 billion US dollar AST SpaceMobile engine and being selected for NASA's $10 billion CLPS February plan. Stock prices fell slightly — the pricing game between “favorable early cash out” and “high growth and high cost” became the undertone of this conference call.

Performance exceeded expectations

Revenue of US$117.7 million, +259% YoY (US$30.8 million in the same period last year). Revenue for the second consecutive quarter broke US$100 million, higher than market expectations of US$102 million to US$104 million; of these, the Spacecraft (spacecraft) business was US$106 million and the Launch (launch) business was US$4.7 million

Gross profit margin of 22.9% (20.3% in the previous quarter); NongAAP net loss of US$75.4 million, loss of $0.45 per share, better than market expectations of US$0.49-0.60; GAAP net loss of US$94.2 million and loss per share of US$0.56 million (net loss of US$133.4 million for the same period last year); adjusted EBITDA loss of US$69.5 million, up from US$46.3 million in the same period last year

Q3 free cash outflow of US$85.3 million (outflow of US$106.3 million in the previous quarter, including the final payment of SciTec's acquisition of approximately US$24 million); cumulative free cash outflow for the first nine months of this year was approximately US$270 million

Total liquidity of US$839.7 million (cash and short-term investments of US$534.7 million plus US$305 million in undrawn revolving credit lines)

Guidelines: 2026 annual revenue raised to US$440 million to US$450 million (original guideline of US$420 million to US$450 million, median increase of US$10 million) - implied that Q4 revenue in a single quarter should reach approximately US$130 million to US$140 million

Orders and contracts

The total backlog of orders was 1.7 billion US dollars, setting a record (1.5 billion US dollars in the previous quarter, 1.3 billion US dollars in the same period last year); new customer contracts exceeded 300 million US dollars in Q3

AST SpaceMobile strategic cooperation (over 1.3 billion US dollars, announced on November 6, detailed in this conference call): three components — approximately US$800 million Miranda/Vera engine IP license (including US$400 million in cash plus 10 million — 14 million shares of AST Class A common stock, with a lock-up period), US$250 million in support services, and 250 million US dollars in engine delivery; FireFly will manufacture, test and deliver 27 Miranda Class 1 engines to AST's first batch of three reusable heavy duty rockets plus 9 Vera Class engines (3 complete flight kits), Firefly retains full ownership of the engine IP; revenue is included in the Launch business, which will actually launch next year and launch in the second year

Launcher: Lockheed Martino launch agreement extended to 2031 (maximum 25 Alpha Block II launches); signed two alpha launches at Esrange Space Center with Sweden's SSC Space Center (the company's first batch of European contracts); signed up to 10 launches with Japan's SAR company Synthetic until 2030; received a third hypersonic mission order from a confidential customer

Defense Software (SciTEC): Received a $94 million Space Force Ground-based Radar Digitization (GBARD) contract in the first phase (potential additional $400-500 million); shortlisted for $981 million NITESTAR IDIQ (mission order until 2032); FORGE missile warning system reached operational milestones; Air Force CBC2 contract extended to expand anti-drone sensing integration

Lunar/Deep Space: Advance five lunar missions in parallel; won the company's first Mars contract -- $13 million subcontract for the NASA JPL SkyFall mission air shell (target launch by the end of 2028); shortlisted for NASA's $10 billion CLPS 2 large cargo lander IDIQ; StarCloud signed a contract to become the first commercial customer of the AI data center around the moon; Zeno Power Systems signed a contract for a near-lunar mission (carrying radioisotope heaters)

Core operating nodes

The launch of Alpha Flight 8 has been postponed to the first quarter of 2027 (national security customers require adjustments to the launch sequence) and will debut in the Block 2 configuration; the 2027 launch target will be announced at the Q4 earnings conference; the CEO says Alpha demand is “in the most short supply state in the company's history”

Eclipse (medium rocket jointly developed with Norge): Miranda engine certification tests have begun, with a cumulative total of more than 175 hot ignites, 4,230 seconds, covering 20 engines

The clean room expansion funded by the Texas Space Commission's non-dilution grant was completed and put into operation. It can integrate up to 12 lunar landers/orbiters at the same time

Conference focus

AST SpaceMobile Big Order: From Launch Service Provider to “Engine Technology Exporter”

CEO Jason Kim emphasized the iconic significance of this more than $1.3 billion contract: “When a company decides to build its own rocket, the engine is the hardest and riskiest decision. AST's choice of Firefly shows where our technology is.” CFO Darren Ma explained the transaction structure in detail and answered key questions: even if progress is delayed on the AST side, it will not affect Firefly's revenue recognition; the IP license+support service section will “steadily expand gross profit margin” (currently the company's gross margin is in the 20% range); all but the equity portion is included in operating cash flow. Management said the agreement was an undiluted source of funding, and together with the Texas Space Commission Clean Room Grants, it forms an “non-diluting financing package” for the current quarter.

Alpha postponed to 2027 Q1, but “most in short supply”

Flight 8 (Block 2 debut) was postponed until Q1 2027 due to national security customer requirements; Flight 9-12 has all entered the manufacturing process, and 24 Reaver engine combustion chambers (about 6 sets) are in production. The CEO gave an example at the scene: “Within three hours today, we completed certification hotfires for two Reavers, one Lightning, and one Miranda at Rocket Ranch.” Management promised that the 2027 launch pace target will be given at the Q4 earnings conference.

Lunar Narrative: “Building a Path to the Moon”

The CEO proposed that “Firefly is building the path to the Moon” (“The Moon is the ultimate high ground”) and quoted the DIA report to portray China's CisLunar threat to emphasize national security attributes. In addition to CLPS 2 ($10 billion IDIQ), management gave more room for imagination: the NASA Moonbase project has about $30 billion in opportunities, of which “about 10% may go to the Space Force, or up to 25%”; the Q&A revealed that CLPS 1.0 still has at least three pending opportunities, one of which was awarded as early as Q4.

Funding roadmap under the high-cost model

There was an outflow of 85.3 million US dollars in free cash in Q3. Management indicated that the burning of money will increase next year due to AST-related R&D and capital expenses; however, they emphasized that funding sources are mainly undiluted (AST contracts, Texas grants), and revealed “a robust pipeline of M&A targets (robust pipeline of M&A targets).” Zhitong Financial Review put it bluntly: The company “must convert orders into revenue before cash runs out” — whether Q4 can deliver more than 130 million US dollars in revenue in a single quarter, and whether the Miranda certification and Eclipse's first flight can proceed as scheduled will determine whether the market continues to pay for this story.

Summary of meeting minutes

I. Executive speeches

Alpha: Flight 8 delayed until 2027 Q1 launch (Block 2 configuration debut), due to requests from a national security customer to adjust the launch sequence; Flight 9 structure and storage tank completed, four Reaver+ Lightning engines assembled; Flight 10 passed proof testing; Flight 11 storage tank structure completed; Flight 12 composite material production in progress; 24 Reaver engine combustion chambers in production (about 6 sets); AFP automatic wire paving machine Parallel production; the 2027 launch target will be announced at the Q4 earnings conference; “Alpha demand is in the most short supply state in the company's history”

Launch site and contract: The same station at the Wolps launch site will be able to launch Alpha and Eclipse, with the goal of launching in Virginia next year (no earlier); signing two Swedish Esrange Alpha launches with SSC Space — the first batch of European contracts; adding a third hypersonic mission order from a confidential customer; extending the Lockheed Martindor launch agreement; signing up to 10 launches with Synthetic until 2030 (deploying 2 satellites each time); entering NASA's Vandenberg SPOC spacecraft processing and operation contract

Eclipse: Miranda Qualification Test Launched - Over 175 Hot Ignition Times, Total 4230 Seconds, 20 Engines; Manufacturing First Flight Engines; “The World Needs Eclipse More Than Ever Before”

Blue Ghost/Moon: Five parallel lunar missions; launch of a new clean room in Austin (up to 12 landers/orbiters are integrated simultaneously); shortlisted for CLPS 2 ($10 billion IDIQ), which can carry larger loads such as light terrain vehicles

Blue Ghost Mission 2 (“Riders Through the Dark”): Proof testing completed, stacked at a height of 22 feet, carrying payloads from the US, Australia, Canada, the United Arab Emirates, and the UK, to be launched next year

Gruithuisen Domes mission: Entered hardware production and launched in 2028; StarCloud signed an AI calculation payload on Electra (using the Solix autonomous vision system obtained by acquiring Spaceng) to verify the lunar orbital data center

Lunar South Pole Mission: Complete key design review (search for water ice); Zeno Power Systems signed a near-lunar mission to carry a radioisotope heater (to handle temperatures as low as minus 275 degrees Fahrenheit on the lunar night)

Electra: The Moonfall mission passed PDR (cooperating with JPL to deliver lunar drones); added a DIU off-orbit service contract; won the bid for the NASA SkyFall Mars mission subcontract (the company's first Mars contract); the DIU Project Cinequone spacecraft enters integrated testing (launch next year); the DARPA LASSA project and Benchmark Space Systems enter the next phase

SciTec/Defense Software: FORGE (Buckley Air Force Base) operation added GEO wide field of view satellite data and accumulated missile warning/tracking algorithms for more than 45 years; GBARD received $94 million in the first phase (potential additional 400 million to 500 million US dollars); KnightStar entered the 981 million US dollar Air Force IDIQ (until 2032); ABMS/CBC2 contract extended, integrated anti-drone sensors, obtained air force system interoperability testing certification; another 66 million US dollar test and instrument IDIQ

AST collaboration statement (original words): “When a company sets out to build its own rocket, the engine is the strongest, higheststakes decide they make. AST talks Firefly, and that tells you everything you need to know about where our technology stands.” [CFO Darren Ma's Statement Highlights]

Q3 revenue of US$117.7 million (+259%), breaking US$100 million for the second consecutive quarter; this quarter's revenue did not include revenue confirmation from Q2 accelerated national security hardware orders

Revenue structure: Spacecraft $106 million/launch $4.7 million; confirmation model -- Spacecraft is based on the completion percentage method, Alpha is based on launch time, and Elytra is confirmed by milestones (confirmed in time after operation)

Gross profit margin of 22.9%; equity incentive expenses of US$15.3 million; operating expenses and operating losses rose slightly from month to month

NonGaap net loss of US$75.4 million (loss of $0.45 per share); adjusted EBITDA loss of US$69.5 million

The weighted average number of shares is 168.4 million shares, and 171.6 million shares at the end of the period. It is expected to increase by about 1 million shares each quarter

Cash flow and liquidity: Q3 operating cash outflow of US$69.7 million, free cash outflow of US$85.3 million; total liquidity of US$834.7 million (cash and short-term investments of US$534.7 million plus US$305 million unwithdrawn revolving credit)

The backlog of orders reached a record high of 1.7 billion US dollars, mainly from GBARD, additional hardware server orders, and additional Alpha hypersonic mission orders; new customer contracts exceeded 300 million US dollars in Q3

Guidance: 2026 annual revenue raised to US$440 million to US$450 million

AST transaction structure (three parts): IP license of approximately US$800 million (US$400 million in cash plus 10 million to 14 million shares of AST Class A common stock, forward VWAP pricing); US$250 million in engine delivery; Firefly retains full ownership of engine IP; revenue actually starts next year and engine delivery volume from the second year; the IP/service portion is confirmed and the gross profit margin will be steadily expanded according to the completion percentage. Engine deliveries are confirmed at the time of delivery

Funding Strategy: Non-Dilutable Sources (Texas Space Commission Clean Room Grants, AST Agreements)

II. Q&A session summary

Sheila Kahyaoglu (Jefferies) — CLPS 2 and the lunar economy: Kim said that CLPS 2 is a $10 billion IDIQ and can deliver larger cargo landers; the NASA Moonbase project has an opportunity of about 30 billion dollars, of which “about 10% may go to the Space Force, up to 25%”; there is already an RFI of up to 5 CisLunar satellites; “The surface area of the Moon is about the size of Africa, and the available Antarctic resource area is about the size of Washington DC.” CLPS 1.0 still has at least three pending opportunities: one to be awarded as early as Q4 (back of the moon/south pole), one for commercial services for high-resolution imaging of the lunar surface, and one expected to be awarded in early 2027.

Edison Yu (Deutsche Bank) - AST revenue recognition risk: MA confirms that even AST-side delays will not affect Firefly revenue recognition; the IP+ service portion will lead to gross margin expansion (currently in the 20% range).

Christine Liwag (Morgan Stanley), generation of Kyle Benvenuto — SciTec growth: GBARD in the first phase of $94 million, additional space of $400 million to $500 million; algorithms can be ported to PNT, AMTI/GMTI, and spatial situation sensing; “within the opponent's OODA cycle”.

Michael Leshock (KeyBanc) — Pricing rights: The Victus SOL mission contract is $22 million, and “recently seen opportunities are more expensive”; the mid-sized carrier Eclipse also enjoys higher pricing.

Alex Seth Seifman (JP Morgan) - Launch pace: Kim gave data for the day - Rocket Ranch completed the hot ignition of two Reavers, one Lightning, and one Miranda within three hours.

Mike Crawford (B. Riley) — Moon mission progress: Five missions in parallel, Blue Ghost Mission 2 to launch next year.

Ben Thomas's representative David Strauss (Wells Fargo) — Cash flow: Q3 free cash outflow of US$85.3 million; next year, due to AST-related R&D/capital expenses, the burning of money will rise; the timing of the three pending opportunities for CLPS 1.0 is as above.

Anthony Valentini (Barclays) — Funding and Mergers and Acquisitions: An Undiluted Funding Strategy; “We have a robust pipeline of M&A targets (Robust Pipeline of M&A Targets).”

Colin Canfield (Cantor) — Cash flow structure: MA confirmed that the AST agreement included operating cash flow except for the equity portion.

Sujitha Silva (Roth Capital): (Questions related to technological progress)

Ryan Koons (Needham): (Business Execution Related Questions)

Chris Quilty (Quilty Space) - NSSL certification: Co-developed with Norge, Miranda Level 1 can be used on two types of rockets; prior to certification, promises can specify the year of launch.