Applied Aerospace & Defense — Third Quarter 2026 Earnings Summary

Financial Performance:

• Consolidated revenue for the three months ended September 30, 2026, reached $182.1 million, a 48.6% increase year-over-year from $122.5 million.
• Net income for the quarter was $30.6 million, compared to $2.7 million in the prior year period; diluted earnings per share were $0.18 versus $0.03.
• Adjusted EBITDA was $39.7 million, up 37.4% year-over-year from $28.9 million, with an Adjusted EBITDA margin of 21.8% compared to 23.6% in the prior year.
• Revenue growth excluding acquisitions completed in 2026 was 20.3% ($24.9 million increase).
• For the nine months ended September 30, 2026, total revenue was $483.7 million compared to $347.0 million in the prior year.
• Gross profit for the quarter was $42.7 million; operating income was $16.4 million compared to $15.7 million in the prior year.
• Cash and cash equivalents were $11.5 million as of September 30, 2026, down from $15.5 million at December 31, 2025.
• Total debt (current and long-term) was $404.5 million as of September 30, 2026, down from $634.0 million at December 31, 2025.
• Free cash flow for the nine months ended September 30, 2026, was $(113.2) million, compared to $(32.7) million in the prior year period.

Guidance and Future Outlook:

• Updated full-year 2026 revenue guidance is set between $660 million and $670 million.
• Updated full-year 2026 non-GAAP Adjusted EBITDA guidance is set between $137 million and $142 million.
• Management expects near-term demand in Advanced Sensing and Precision Strike Systems to remain supported by missile and munition rearmament, layered missile defense priorities, and continued national defense budget investments.
• The company noted that a reconciliation of forward-looking non-GAAP measures to GAAP cannot be prepared without unreasonable effort due to the difficulty of projecting event-driven transactional items.

Business Segments and Product Lines:

• Space and Launch Systems revenue grew to $39.1 million for the quarter (up $9.3 million year-over-year), driven by increased content on launch vehicle programs amid higher launch cadence.
• Defense Aviation and Airborne Systems revenue grew to $94.2 million for the quarter (up $13.9 million year-over-year), driven by sustained aftermarket demand across military rotorcraft and continued new production activity.
• Advanced Sensing and Precision Strike Systems revenue grew to $48.7 million for the quarter (up $36.3 million year-over-year), driven by increased sales volume of integrated air and missile defense systems.
• All three core end markets delivered double-digit revenue growth in the third quarter.
• Contract backlog increased to nearly $1.3 billion ($1.26 billion specifically) as of September 30, 2026, providing multi-year revenue visibility.

Market and Competitive Landscape:

• Global defense budgets are increasing across a broad range of fixed-wing and rotorcraft platforms, including funding for next-generation fixed-wing, vertical lift, and autonomous airborne systems.
• The company maintains embedded positions on both enduring programs of record and next-generation programs.
• Recent acquisitions completed in 2026 added capabilities and capacity in areas critical to customer needs.

Risks and Challenges:

• Risks include changes in U.S. or foreign government defense spending, policies, and priorities.
• Potential for significant declines in business with key customers or cancellation, reduction, or deferral of orders.
• Risks related to the company's ability to control costs on contracts and programs.
• Risks associated with the company's acquisition strategy, including integration of acquired businesses.
• Potential shortages, delays, or increased costs for critical components, raw materials, and services.
• Risks related to technology failures, cybersecurity incidents, and unauthorized access to information systems.
• Indebtedness and restrictive covenants under credit facilities may affect operational and financial flexibility.

Management Commentary and Tone:

• CEO Trip Ferguson described the quarter as reflecting "broad-based demand across our end markets" and highlighted "diversity of our growth."
• Management emphasized that long-standing customer relationships and embedded positions provide multi-year revenue visibility.
• The company is making strategic investments to support growth and expand content on existing programs.

Other Key Points:

• The company completed an initial public offering (IPO) in 2026, resulting in net proceeds of $635.6 million from the issuance of common stock.
• Capital contributions received during the nine-month period totaled $18.7 million.
• The company acquired businesses in 2026, with payments for acquisitions, net of cash acquired, totaling $305.8 million for the nine months ended September 30, 2026.
• Goodwill increased to $582.7 million and Intangible assets increased to $343.0 million as of September 30, 2026, compared to $342.5 million and $199.7 million respectively at December 31, 2025.
• Share-based compensation expense was $113.3 million for the nine months ended September 30, 2026, compared to $2.4 million in the prior year period.
• Transaction costs related to mergers, acquisitions, and the IPO were $21.0 million for the nine months ended September 30, 2026.
• Integration and restructuring costs were $7.8 million for the nine months ended September 30, 2026.
• The company operates 11 purpose-built facilities across six states with over 1.5 million square feet of production capacity.