Q: How do you view the industry trend of the Department of War looking for second suppliers for leading platforms? Is this a positive, neutral, or potentially negative impact on Karman's business? A: John Rambo (CEO): I would call it a net opportunity for Karman. We have leaned out ahead in terms of anticipating demand, getting equipment on order, and facilities in place. While customers are being asked to look at second sourcing, our commitment is to convince them we have the capacity to support the volume and remain a reliable partner. On the other side, this is a big positive for us to go on offense and become a second source where other suppliers haven't been able to build confidence with primes. We have a number of opportunities that have either come through or we feel confident will come through, including meaningful large long-term upside opportunities.

Q: You mentioned a 20% to 25% organic growth framework for the business post-2026. Does this represent a slowdown from this year, and what gives you confidence in this outlook? A: John Rambo (CEO): I did not intend to communicate a slowdown. We see a very steady trend over time across the last five quarters since being public, and we see a consistent trajectory for the foreseeable future. Looking at the end markets, particularly missiles, munitions, interceptors, space and launch, and unmanned systems, it easily supports that continued demand signal at least through the end of the decade.

Q: Can you walk through what is driving the EBITDA margin drop in the second half of the year despite higher sales? What is the normalized EBITDA margin as we go into 2027? A: Mike Willis (CFO): Our guidance on the full-year EBITDA margins is in line with what we guided to a quarter ago, slightly better. The stronger first-half margins were due to a mix of contract type, which relates to acquisitions. The Siemens and MSC acquisition has a much higher percentage of cost-plus contracts, which naturally carry a lower EBITDA margin than firm-fixed-price contracts. We saw a more favorable contract mix in the first half, and we see that normalizing in the second half, but still better than we thought a quarter ago.

Q: Can you provide details on the new long-term agreement (LTA) within Space and Launch, including timing and when it will start to contribute to the top line? A: John Rambo (CEO): This was the contingent supply agreement we mentioned last quarter, approximately $250 million in value. It came through just a bit below that number but not too far from it. It's a five-year agreement, so some amount will start to feather in over the balance of this year, and it will burn off at a relatively level rate across the following four and a half years.

Q: Given the focus on free cash flow, how should we think about conversions in the near term and longer-term as growth continues and investments moderate? A: Mike Willis (CFO): Longer-term, we maintain that free cash flow should be in the range of 80% to 90% of net income. In this growth cycle, we have a use of cash for working capital and CapEx. On working capital, at this level of growth, we see an increase in receivables, which is expected. We are also leaning forward to support the upcoming ramp, so inventory and contract assets are on the rise. Long-term, we maintain that 5% of revenue on CapEx is an adequate level to support growth for the rest of the decade.

Q: Can you discuss the shape of organic growth in the back half of the year? What could be a source of upside surprise to organic growth from here? A: Mike Willis (CFO) & John Rambo (CEO): We believe on the year we will be at 25% or slightly better on organic growth, so you will see an acceleration in the second half. In terms of upside surprise, if the framework agreements convert earlier than the end of the year, there could be additional upside. We are planning for those to really start hitting in the first part of 2027, but there is a sense of urgency to get that work contracted, and we are hopeful we might see some opportunity for upside.

Q: You mentioned fully unlocking the value of Karman and margins. Do you think there could be upside beyond the 30% EBITDA margin level over the long term? A: John Rambo (CEO): I don't want to set an expectation that margins will exceed 30% on a continuing basis. However, we are focused on finding opportunities for financial flexibility. We recognize customers may put pressure on pricing, and we want to have contingency in place to manage that while maintaining margin performance. We are also looking at reinvestment in the business to capture next-generation franchises. The third opportunity would be to deliver additional margin if that's the best long-term value for shareholders. It's a strategy we will pursue intentionally and provide updates as we make progress.

Q: What is the margin difference between a second source opportunity and a legacy Karman sole source program? Should second source become a bigger piece of revenue, what is the margin impact? A: John Rambo (CEO): I don't see an appreciable increase or decrease in margins as a result of second source opportunities. We might be a bit more aggressive initially in pricing to secure a long-term franchise, but we wouldn't enter into something significantly dilutive to margins over the long term. We want to be competitive with the price point customers are paying today and make the business case close in terms of capital investment. For the ones already in the pipeline, we feel comfortable that Karman-type margins would be in family with these new ones.

Q: Can you provide details on the New Glenn anomaly and the impact it had, if any, given Blue Origin is a meaningful customer within the space segment? A: John Rambo (CEO): The long-term outlook for space and launch continues

For the complete transcript of the earnings call, please refer to the full earnings call transcript .