00:00The future of defense is moving into orbit with space-based systems now central to how nations project power and
00:06protect assets.
00:08As Bloomberg opinion Andreas Kluth writes, the first shots of the next world war will almost certainly be fired in
00:14space.
00:15Joining us now is Dirk Wallinger, CEO of York Space Systems, an aerospace and defense company.
00:20Dirk, you know this better than anybody.
00:22How has wartime footing changed the work that you're doing at York Space Systems?
00:29Yeah, really what it's done is it's going to accelerate pretty rapidly.
00:33I think, you know, when you're kind of not in a wartime kind of footing, you're looking more at, you
00:38know, what will happen, a lot of kind of hypotheticals.
00:42But really when you're in the position that we're in where we're going to be actually in battle here, what
00:47you're doing is what do we need right now, today, that we can field?
00:51And I think it's going to be a real boost for technology and obviously space-based capabilities as well.
00:55I want to get into some of the details of that.
00:57But first, I just want to give you a moment just to address what your share price has done before
01:02the close.
01:02At the close on Friday, you were down 36 percent since you IPO'd, down another 4 percent.
01:07You're talking about a really big opportunity for you and you've continued to do that in your earnings as well.
01:11What do you think this market is getting wrong?
01:15Yeah, well, really, since we IPO'd, it's been a unique set of circumstances, right?
01:20We had Anthropic and kind of the software pulldown.
01:24And then, you know, we engaged in Iran.
01:27But I think what we've seen from the share price was really positive was, you know, after the earnings call,
01:32when people heard that, you know, we're up 52 percent on revenue, up 133 percent as far as growth profit.
01:38You know, again, holding fixed costs pretty steady and we guided towards positive EBITDA, the market reacted really well to
01:44that.
01:44We were just in a position where we weren't able to tell our story.
01:47They're hearing that now.
01:48They're seeing us execute in orbit and they're seeing the demand signal really rise in the past few weeks.
01:54So we think that we're going to see positive growth as far as the stock goes.
01:58But obviously, our performance is really what's going to determine that.
02:00So how are you being used directly, if at all, in active conflicts now?
02:04And what does that look like as time goes on and you develop these technologies?
02:09Yeah, so we're deploying operational systems.
02:11So we can't go really into too much detail about specifically what we are doing.
02:15But I can say that they're operational systems.
02:17I can tell you that the United States is intent on using them.
02:21And we build a lot of communication systems, laser communications more specifically.
02:26So I imagine that those might be used in the future as well.
02:29I know that part of the appeal of York is that you're producing satellites at volumes.
02:34And you're doing it perhaps more cost-efficiently than some of your competitors.
02:37You also emphasize U.S.-based manufacturing.
02:40What tends to be the biggest bottleneck in that, Dirk?
02:42Is it parts? Is it labor? Is it capital? Is it something else?
02:45Well, it wouldn't be capital for us.
02:47We're in a really good position.
02:48We've built this production throughout the past decade and a half.
02:52Now we're starting to see a signal from the U.S. government that we actually need.
02:56So I think some of the hold-up in the past was just the inability to pass a budget.
03:00But I think that people are very determined that we definitely have a need.
03:04And so we need to accelerate that.
03:06So I think we're going to see a lot of contracts be awarded in the next couple quarters.
03:09That's really the main driver of what's going to ramp the production from where it is now to probably 2,
03:133x.
03:14Because that's at a minimum what we need.
03:17And I can say the Pentagon seems very, very optimistic that we need to get capabilities right now.
03:23It is a world that's grappling with another supply chain shock with the closure of the Strait of Hormuz.
03:28I mentioned, Dirk, that you emphasize U.S.-based manufacturing.
03:31How insulated are you from more global supply chain disruptions at the moment?
03:36Yeah.
03:37So as I alluded to, we've been doing this for about a decade and a half.
03:41And what that means is we've learned a lot of lessons in the past.
03:43So, you know, as an example, when Ukraine happened, we were using some propulsion systems with Xenon.
03:49And it turns out that the price of Xenon will 10x on you when there is a conflict between Ukraine
03:55and Russia.
03:55So we've been working at this for a long time.
03:58We've identified those kind of bottlenecks.
03:59And so now we're really in the second or third tier layer of our supply chain.
04:03I think there's nothing directly that will be a bottleneck for us with regard to supply chain.
04:08We are now trying to reduce some, you know, kind of rare earth like solar cells and things like that.
04:13Our supply chain team is really buying those and have been buying those in bulk for quite some time.
04:19So that really what we have at York is kind of a strategic storage just because we've been doing mass
04:24production for so long.
04:26So how do you then, if you're, you know, competing against a traditional prime, for example, how do you continue
04:33to fend them off?
04:34How do you make sure that you maintain the margins you have?
04:37If some of your competitors tried to catch up with you and have maybe the size and scale to attempt
04:42to create a more efficient supply chain?
04:48Yeah.
04:48So, I mean, the difference with York is that we were purpose built to do this.
04:51So York was built at the time.
04:53It was billion dollar satellites built over decades.
04:55And York was always built for the future that we're seeing now, which is proliferation, rapidly fielding technology and doing
05:02that in quick succession.
05:03The entire company and the entire architecture was built around doing that.
05:07Which the traditional primes just weren't built for that, really.
05:10And we've seen this dynamic before, right?
05:12So we've seen SpaceX versus ULA.
05:14And we've seen that SpaceX has been able to continuously improve their products.
05:18They've reduced part counts by probably 10x.
05:21They're using reusable platforms now.
05:23Meanwhile, competitors are still trying to get their first minimum viable product up.
05:27So you're going to see a similar thing from York.
05:29We have three different platforms that perform well.
05:31You're going to see us continue to make that product better.
05:34Meanwhile, other people are still trying to do the thing that we did two or three generations in the past.
05:39I mean, technology is advancing so quickly everywhere.
05:41And, Dirk, you mentioned that maybe your stock got caught up in some of the AI selling, which I kind
05:45of didn't even think about, that it would be part of the worldwide freakout we apparently had on our future
05:50and the disappearance of all of our jobs.
05:52Where does that type of new technology factor into the work you're doing at York Space?
05:57I think there is a lot of focus on AI.
06:01And I think there are applications of AI that we can leverage as far as network optimization.
06:06If you have thousands and thousands of satellites in orbit and you're operating constellations, AI is going to be a
06:11really helpful tool for you in helping to keep that network functioning the best that it can.
06:16Because nodes will drop out.
06:18Ground stations will drop out.
06:19And so you want to optimize that solution.
06:21So we use AI there.
06:22I think what's really changing the battlefield that's most important is there needs to be a much faster refresh on
06:29things.
06:29What we're seeing in Iran and Ukraine is that these attributable systems get used once and then you figure out
06:36what worked, what didn't work, and you go again.
06:38And that's just a tempo that the U.S. national defense architecture is not used to.
06:43So that's going to be our focus is how we continue to speed technology and get it deployed really, really
06:47quickly.
06:48The time of building really expensive, unique, kind of intricate systems and deploying them and hope that they're the panacea
06:56to everything that happens on the battlefield, I'm not sure that's going to work in the future.
07:00So we're all about how do you iterate more quickly.
07:02Does that then mean that the traditional primes, that the big defense companies of the world, Dirk, that they fall
07:09behind, too?
07:09Because what you're describing is the old system.
07:12Are they prepared?
07:13And if not, are there enough companies in the world out there like York Space Systems that can do the
07:18kind of rapid advancements that you're talking about?
07:21I think it's going to take a broad range of companies.
07:24I mean, I think where we fit is in this rapid technology refresh to deploy quickly.
07:28That's kind of where we fit.
07:30That doesn't mean that there isn't a place for where the traditional primes work really well, right?
07:34I mean, you know, the F-35, the F-16, those all came from traditional primes, and they work well.
07:38We're using them today.
07:40So there'll still be a place for that.
07:41But I think there's going to need to be a broad range from the supply chain in order to meet
07:46the needs of the military and what we're doing in the future.
07:48Commercial systems, too, quite frankly.
07:50But there will still be a need for the really advanced capability that the primes offer on slightly longer timescales.
07:57But I think there's this other area of rapid integration, and that's where, you know, companies like ours fit.
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