Space42

1. Company Overview & Earnings Context

Space42 PLC is an Abu Dhabi-based, ADX-listed space technology company, with Group 42 Holding Ltd as its parent and controlling party. Its activities are organized into two business units:

• Space Services (SPA): Satellite communications for government and mission-critical applications, mobility and connectivity services.

• Smart Solutions (SOL): Earth observation, geospatial intelligence and industry-specific solutions through its AI-driven GIQ platform.

For 9M 2026, Space42 reported revenue of USD 404.2 million, up 11.4% year-on-year, and profit attributable to shareholders of USD 49.4 million, up 31.2%. Adjusted EBITDA increased to USD 194.1 million, while normalized Adjusted EBITDA reached USD 194 million, up 30% according to management.

The period reflects growth across both business units, the start of Thuraya-4 operations, improving profitability in Smart Solutions and continued investment in satellite infrastructure. The company also reported USD 6.2 billion in contracted future revenues, providing significant visibility over future business.

2. Financial Performance Snapshot

Key financial metrics

Figures in USD million, except EPS. Calculated percentages are based on reported figures.

Profitability and margins

• Adjusted EBITDA margin improved to approximately 48.0%, compared with 42.7% in 9M 2025.

• Operating profit margin increased to approximately 11.6%, compared with 6.8%.

• Net profit attributable to shareholders increased to USD 49.35 million, with a margin of approximately 12.2%.

• Management's normalized Adjusted EBITDA was USD 194 million, up 30%, with a 48% margin versus 41% in the prior-year period.

• Normalized net profit increased 52% to approximately USD 50 million, compared with USD 33 million.

Underlying performance

Revenue growth was supported by double-digit growth in both Space Services and Smart Solutions. The improvement in Adjusted EBITDA was stronger than revenue growth, reflecting lower cost of revenue and the recovery in Smart Solutions profitability.

Depreciation and amortisation increased by 14% to USD 147.28 million, reflecting the start of Thuraya-4 operations. Net finance income declined to USD 6.20 million from USD 16.87 million, mainly reflecting higher finance costs. Finance costs increased to USD 20.75 million from USD 9.49 million.

Management's normalized measures indicate that the improvement was not dependent on a major one-off gain in 2026: normalized EBITDA was broadly equal to reported Adjusted EBITDA. In 2025, normalization removed one-off items, including an Al Yah 3 insurance claim. These are non-GAAP measures and should be considered alongside the IFRS results.

3. Operating Performance & Major Programs

A. Space Services

Space Services generated revenue of USD 340.18 million, compared with USD 307.39 million, representing approximately 10.7% growth.

Key developments:

• Thuraya-4 began contributing to operations, with services distributed across 120 countries in EMEA and Central Asia.

• Coverage was extended to eight additional countries compared with Thuraya-2.

• Management reported the launch of 16 new products and expansion of Thuraya-4 distribution into South Africa.

• Space Services delivered a normalized EBITDA margin of approximately 59%, according to management.

• The USD 700 million, 15-year Thuraya-4 Government contract is expected to provide a full-year revenue contribution as operations develop.

B. Smart Solutions

Smart Solutions revenue increased to USD 63.97 million, compared with USD 55.26 million, representing approximately 15.8% growth.

Key developments:

• Growth was supported by government demand for geospatial intelligence, situational awareness and sovereign solutions.

• The GIQ platform had more than 1,200 users and over 40 features.

• Management highlighted daily country-scale change detection, automatic reporting and an Arabian Gulf oil-spill model.

• GIX, the sovereign government edition, had 12 sovereign-specific object-detection AI models in progress.

• Smart Solutions became EBITDA-positive in Q3 2026, according to management, indicating progress in its transition towards programmatic activities.

The recovery in Smart Solutions is particularly important because it contributed to the improvement in group profitability, rather than growth being driven exclusively by the established satellite communications business.

C. Equatys – Direct-to-Device Connectivity

Space42 and Viasat signed a binding agreement to establish Equatys, a shared space and ground infrastructure platform for direct-to-device (D2D) and advanced mobile satellite connectivity.

• The founders agreed to initial subscriptions totalling USD 400 million, USD 200 million each.

• Space42 may commit an additional amount of up to USD 400 million, subject to funding arrangements.

• Terrestar Solutions joined the initiative.

• The platform is intended to support direct-to-device connectivity for smartphones, IoT devices and other compatible terminals.

• Management described a potential scalable constellation of up to 2,800 satellites.

The financial statements state that incorporation, procurement of the initial satellite constellation and definitive agreements remain subject to customary closing conditions, including regulatory approvals. This is therefore a strategic opportunity, not yet a fully operational revenue stream.

D. Al Yah 4 and Al Yah 5 Satellite Program

• The Al Yah 4 and Al Yah 5 programme continued to progress as planned.

• The programme is supported by a USD 5.1 billion, 17-year government contract.

• Revenue from the contract is expected to commence from Q4 2026 onwards.

• Space42 received the final advance payment of approximately USD 200 million during the quarter.

• The programme remains a major contributor to capital expenditure and future contracted revenue.

E. Other Strategic Developments

• Foresight constellation: Five of seven SAR satellites were in orbit and operational. Foresight-3, -4 and -5 imagery was commercialized across dual-use applications.

• Mira Aerospace: Continued development of high-altitude platform systems, with management reporting more than 100 flights globally and 72-hour flight endurance.

• Autonomous mobility: Space42 signed its first commercial agreement with Autonomous A2Z to advance Level-4 autonomous mobility solutions in the UAE.

4. Key Performance Drivers

1. Growth across both business units

Space Services revenue increased by approximately 11%, while Smart Solutions grew by approximately 16%. This broad-based performance reduced reliance on a single operating segment.

2. Thuraya-4 commencement

The commencement of Thuraya-4 operations supported Space Services growth and is expected to contribute further as the government contract progresses. It also contributed to higher depreciation and amortisation.

3. Smart Solutions turnaround

The move to positive EBITDA in Q3 and the increase in its revenue base indicate improving operating performance. Management identified this recovery as a major contributor to the improvement in group normalized profitability.

4. Better operating cost efficiency

Cost of revenue declined to USD 59.75 million from USD 76.56 million, despite higher revenue. Staff costs and other operating expenses increased, but overall operating cost growth remained below revenue growth according to management.

5. Higher expected credit loss charges

The financial statements recorded an expected credit loss charge of USD 6.48 million for the nine-month period, compared with USD 2.63 million in 9M 2025. This is a point to monitor as receivables and contract assets increase.

6. Contracted revenue visibility

The company reported USD 6.2 billion in contracted future revenue as at 30 September 2026. Management stated that 97% relates to Space Services and 99% is with highly rated counterparties. This provides significant visibility, although timing of execution and conversion into cash remain important.

7. Higher finance costs

Finance costs increased materially following additional borrowing, partly offsetting the improvement in operating performance.

5. Balance Sheet, Backlog & Cash Flow

Balance sheet position

Key balance-sheet observations

• Cash and short-term deposits increased by approximately 31% to USD 1.31 billion.

• Total assets increased by approximately 10% to USD 4.02 billion.

• Total equity increased to USD 1.82 billion.

• Borrowings increased, mainly reflecting the Al Yah 4 and Al Yah 5 ECA drawdown, partly offset by repayments.

• Contract liabilities increased to USD 884.59 million, reflecting customer advances and amounts received ahead of revenue recognition.

• Trade and other receivables also increased, which makes collections and working-capital management important to monitor.

Management reported negative net debt of approximately USD 747 million and a net leverage ratio of -2.8x. These management measures use gross debt excluding unamortised transaction costs and should not be confused with the carrying value of borrowings in the financial statements.

Cash flow performance

Operating cash flow: Net cash generated from operations increased to USD 199.18 million. Cash generation benefited from higher operating profit before working-capital changes and an increase in contract liabilities. However, trade and other receivables absorbed USD 73.41 million of cash.

Investing cash flow: Investing activities used USD 244.51 million. This included USD 133.51 million of purchases of property, plant and equipment, USD 1.10 million of intangible asset purchases and USD 136.15 million placed in term deposits with original maturities over three months, partly offset by interest received and a government grant.

Financing cash flow: Financing activities generated USD 219.93 million, primarily due to USD 366.62 million of new borrowings. This was partly offset by debt repayments, transaction costs, lease payments, interest and the purchase of treasury shares.

The company ended September with USD 1.17 billion in cash and cash equivalents. Including short-term deposits, the balance-sheet figure was USD 1.31 billion.

Backlog and contracted future revenue

USD 6.2 billion contracted future revenue

Management reported contracted future revenue of approximately USD 6.216 billion at 30 September 2026, compared with USD 6.463 billion at 31 December 2025.

Key observations:

• Approximately 97% of contracted future revenue relates to Space Services.

• Management stated that 99% is contracted with highly rated counterparties.

• The USD 5.1 billion Al Yah 4 and Al Yah 5 government contract is a major contributor to long-term revenue visibility.

• Revenue from Al Yah 4 and Al Yah 5 is expected to begin from Q4 2026.

The contracted revenue figure is a forward-looking operating indicator, not the same as recognized revenue or cash already received.

Capital commitments and contingent liabilities

• Capital commitments – committed and contracted: USD 395.02 million, compared with USD 451.96 million at December 2025.

• Contingent liabilities from performance bonds and letters of credit: USD 1,147.27 million, compared with USD 943.02 million.

Capital commitments mainly relate to the Al Yah 4/5 satellite programme, low-earth-orbit satellites and high-altitude platform systems. The contingent-liability figure represents bank-provided performance bonds and letters of credit in the normal course of business; it is not equivalent to recognized debt.

6. Investor Takeaway

Space42 delivered a strong 9M 2026 performance, with revenue growth across both operating segments, a significant increase in Adjusted EBITDA and higher profit attributable to shareholders. The improvement in Smart Solutions profitability is a particularly positive development, as it demonstrates progress beyond the established Space Services business.

The company also has a substantial liquidity position, with USD 1.31 billion in cash and short-term deposits, negative net debt according to management and USD 6.2 billion in contracted future revenue. The Al Yah 4 and Al Yah 5 programme and Thuraya-4 operations provide important support for future revenue.

However, investors should monitor the increase in borrowings and finance costs, the higher expected credit loss charge, the rise in receivables and the substantial capital requirements associated with satellite and connectivity programmes. Equatys also represents a potentially significant opportunity, but its investment and execution commitments remain subject to further agreements and regulatory conditions.

Overall assessment: Space42's 9M 2026 results show strong operating momentum, improving margins and substantial contracted revenue visibility. The key investment question is whether the company can convert its large contract base and strategic investments into sustained cash generation while maintaining disciplined capital allocation.