Q1 2020 Earnings Call
Listen to ask a question. During this session you will need to press star one on your telephone if you acquire any further assistance police I start zero.
Oh now like the hand, a conference to overthrow speaker today May summary, Mendoza, saying, you'll be P. and general counsel.
Thank you. Please go ahead ma'am.
Thank you.
Afternoon everywhere I think before joining us for the Cranston <unk> first word 2020 conference call with me today, and Eric Dimarco created as President and Chief Executive Officer, Indiana, Len, Kristen Executive Vice President and Chief Financial Officer.
Before we begin to substance today's call I'd like everyone to please take note of a safe Harbor paragraph to include is at the end of today's press release.
This paragraph emphasizes the major uncertainties and risks inherent in the forward looking statements and we will make this afternoon.
<unk> keep these uncertainties in red in line as we discuss future strategic initiatives potential market opportunities operational outlets and financial guide during today's call.
Today's call also include a discussion up nongaap by natural measures at that time as defined in regulation G. noncat by natural measures should not be considered in isolation from Oregon substitute for financial information presented in compliance with gap.
Accordingly at the end of today's press release, we have provided reconciliation are these non get financial measures to the company because the natural result appeared in accordance with gas, but that I will now tend to call over to air Tomorrow.
Thank you <unk>.
Good afternoon every once and thanks for joining us to that.
I Hope this call finds you in your family safe and healthy as we work.
To address the many issues brought on by the global covertly thing crisis.
As a corporation I can assure you the cradle says focused on taking the necessary steps to keep our employees safe, while remaining committed to delivering our systems products and solutions to our customers to address their critical national security missions and requirements.
Cradles has and will continue to implement protective measures consistent with C.D.C. state and local guidance, including encouraging our employees were possible to work from home.
Thing our office in manufacturing personnel, including what split shifts and modification for the workspace, providing in supporting to use a protective equipment bar employees and enhanced cleaning of our facilities.
We have also been reaching out communicating and working closely with our supply chain M. vendor base.
Polluting wherever possible.
During the additional inventory for T. programs on other actions I will comment more on covert 19 later in my prepared remarks.
If we begin the second quarter, we believe that cradles has demonstrated ability to rapidly developed demonstrate and field affordable systems is increasing demand by our customers as reflected by our two one bookings or increased the backlog in the new large programs of record, which we are now involved with.
All of which provides us increased visibility incompetence in our future forecast and expected future growth trajectory.
We firmly believe that the demonstrated affordability of credo systems and products will become even more of a competitive advantage going forward based on input from customers Congress and program offices.
Create us is continuing the successful execution of our plan of becoming a central critical supplier and element of the United States Defense Industrial base and the D.O.D. future and we believe that the Pentagon views us as an important new competitor in our primary business areas.
Since our last call there that a number of key developments, which we believe further position cradles for industry, leading future growth, including.
Cradles to see five I.S.R. business was selected by Northrop Grumman to support the United States Air Force ground based strategic deterrent or G.B.S.D. program, where cradles will provide highly complex missile in payload transporter systems.
G.B.S.D. as an estimate of 63 billion 20 year U.S. Air Force program to replace the minimum three intercontinental ballistic missile weapons system.
There could become one of cradle says largest future programs and organic growth drivers.
Credo c. by by US our businesses are recognized industry, leading system in sub system provider for unmanned aerial missile radar missile defense high powered directed energy C.B.R. any combat and other systems and the business performed approximately as we forecast it would in the.
First quarter.
<unk> is expected to be one of our company strongest future organic growth generators with the G.B.S.D. program expected to be a key contributor to this growth.
In in the coming weeks, we are hopeful of receiving or announcing other large new strategic program system Awards, we have been pursue it.
Also as an update and early Q1, we told you about of 50 million dollar contract Award Credo, C., five I.S.R. business receipt, which was protest to buy a competitor.
The situation remains unresolved at this time and accordingly, we will continue to exclude any future potential financial contribution in our forecast from this program until the situation is resolved.
It was recently reported that the United States Air Force has completed a round of test of a new first of its kind low cost per bowl jet engine.
This engine as a cradle syndrome developed by our recent acquisition of T.D.I.
We believe T.D.I. is extremely complementary to our 2019 acquisition of Florida turbine technologies with both companies focused on affordable leading technology engines for the expected to be very large future market for next generation crews and hypersonic missiles unmanned.
Drones and tactical systems, including Credo says.
These air Force experiments were part of the Gray Wolf program, which has focused heavily on the demonstration of technologies that could an able the development of low cost affordable cruise missiles, which will be filled it extremely large quantities.
The next generation, New cradles engine that powered and expendable test article from a large prime during the test flights and we believe this new cradles engine will also power other future expendable air launch systems munitions and unmanned aircraft.
The Air Force Research laboratory or air for L., which is responsible for the gray Wolf effort, which is expected to be part of the vanguard Golden Hort swarming drone ammunitions program.
Recently released a picture of an F. 16, Viper carrying the tests flight vehicle that is available to you in the public.
It key focus of cradles is overall corporate strategy is to address the pentagon's objective to beat the cost curve the military expects to encounter in future conflicts by designing low cost expendable unmanned aircraft missiles ammunitions that can overwhelm enemy defenses without breaking the budget.
Mass quantities of drones and you <unk> ammunition is a key element of the Golden horror program, which cradles is pursuing with several of our affordable engines drone and tactical system programs and initiatives.
We currently have several new next generation engines running.
Which we are positioning to be designed in on a number of platforms and systems.
Including or Black Dragon program, which has made important progress toward first system flight over the past few months and if successful we could we believe could be a game changer for our company.
We expect cradles turbine technologies similar to our unmanned systems business to be disruptive to the industry it'd be a significant future growth driver and value generator with thousands of missiles, a new way these requiring low cost engines in this class forecasted for the future.
K.T.T. performed approximately if we expected include one with EBITDARM margins currently lower than the K.G.S. average as we are in development on several engine programs than initiatives with typically carry lower margins in production programs.
[noise] in space and satellite it was recently reported that the United States military push the link every object on the battlefield is moving forward as most recently reflected by the release of a request for proposal or R.S.T. to Bill 20 tactical communication satellites by 2022.
Additionally, the year olds space development agency or S.D.A. recently hosted an industry day to brief industry about its plans for a transport satellite layer essentially orbiting communication nodes to transfer data related to intelligence Battle management navigation timing and more.
This new transport layer architecture will move very time sensitive data from drones and satellites and low Earth orbit and other sensors and will also be critically important for the hypersonic system tracking in defense.
The transport layer opportunity this architecture in this <unk> R.S.P.
Or just the most recent examples of several large new opportunities credo subspace and satellite business sees as future growth opportunities.
Another large new space opportunity for Cradle satellite businesses, O.P.I.R. program or overhead persistent infrared.
Which cradles is now under contract on.
And we are forecasting O.P.I.R. to become an important financial contributor beginning later, this year and increasing and 2021 and beyond.
Credo satellite business had a strong overall two one.
Including higher gross margins increased r. and D., an overall higher <unk> <unk> as we continue our transition to a software based or defines model and we continue to forecast future organic growth and expanding margins for this business.
Our expectation that credo space and satellite business will continue with strong execution and performance is a key reason we are competent and achieving both are <unk> dot and cash flow guidance for the rest of this year as both the nature of unexpected mix of our opportunity pipeline continues to both.
Expand it improves.
Incredible drone business there have been several new and positive developments since our last support to you.
It was recently reported that the United States Air Force wants to replace the services fleet of Reefer attacked rooms, with new drones that are capable of surviving of hostile airspace.
Although highly successful when if current commission the M.T.B. nine Reaper is relatively easy to shoot down making it vulnerable in 82 A.D. for battlefield protected by modern air defenses.
As we have discussed with you previously Pentagon is shifting from potential smaller low in fights for example, in Afghanistan, Iraq and elsewhere toward larger higher end contest, including with countries, such as Russia, or China, which is providing significant opportunities throughout cradles.
Including at our tactical jet drones.
Acknowledging the recurrence vulnerability to perform its mission and a contestant environment. The air forces now planning to cut its by of Reaper drones with the final drones purchase this year.
The Air Force intends to lay out its vision 14 Reaper replacement a drone that can operate in contested airspace in the 2022 budget.
We believe that affordability and the ability to perform its mission and survive will be important attributes for this new program.
There was also recently reported at the head of the Air Combat Command stated the A.C.C. is currently thinking through what is the fighter aircraft are the future.
And that a fighter mission will give way to a tradable aircraft loyal when men unmanned drones aircraft. In addition to the man fighters and it was also recently reported at the Air Force is looking at potentially replacing retiring block 25, and blocked 30 F. sixteens in the next few years and replacing them with.
<unk> unmanned drone aircraft.
[noise] and specifically related to the future for extremely large quantities of affordable drones and munitions.
It was reported that the air forces planning experiments and breathing senior leaders on progress toward its Arsenal plant initiative looking at multiple aircraft options to fly with a large weapons cache potentially including swarms of low cost cruise missiles, and drones to back up to strike assets.
We believe that each of these recent data points that I just went through.
The report replacement the fight or the future. The F. 16 replacement Andy Arsenal plane reflect the continued increased and building momentum and demand for rapidly developed affordable incredible jet drones of which cradles has several tactical drone types flying today.
Since our last report to you multiple system integration efforts have continued with <unk> and other tactical drones of cradles, including for weapons Communications electronic warfare, I.S.R. and other systems as we move toward <unk> increased operate.
<unk> capabilities and ultimate fielding of these existing and flying cradle drone aircraft.
We remain on <unk> on track with the 12 lot of 12, new excuse 58 days, we are in the process of producing in Oklahoma City.
With the first expected to be completed beginning and Q1 up next year.
We continue to take into consideration with our partners and the United States Air Force all the knowledge, we up games since our first tactical drone manned unmanned teaming flights in 2015, as we move toward forward with Valkyrie and other cradles tactical drone programs.
<unk>.
Credo says truly appreciate it a fantastic relationship with the Air Force Research lab, and the United States Air Force in the development and flight testing of the X. 258, A. Valkyrie through the low cost a credible strike demonstrator program one competitively by cradles.
Buying approaching the L.S.D. and related programs and a partnership fashion with the Air Force.
The ultimate and primary worldwide customer for high performance Tactical strike jet you way yes.
We have been able to design in from a blank sheet of paper, the key attributes and capabilities needed by the U.S.A.F. to enable their range of operational requirements.
If requirements range from the runway independence capability, the physical size of the vehicle.
The vehicles internal weapons Bay capabilities.
The system multi mission payload capability, and the <unk> refueled range and endurance and many other critical attributes.
And by partnering at the inception of the vehicle design stage with the Air Force a true designed to cost approach was achievable.
The United States built product, including sub systems and components, leveraging our proven low cost high performance jet composite firmly family of unmanned aircraft of which we currently produce over 100 annually demonstrating are true low cost capability every day.
The family of drones, we have flying today, new drones, we are working on which we will be flying very soon and our rapid design approach is truly an example of the century serious model for aircraft design and build cycles that Doctor Roper has consistently promoted as being key to the future of aircraft design.
Line development and production in the USA.
And create us as current and future tactical vehicle family.
All being almost entirely source than produced in the United States is a key contributor to the reinvigoration of the U.S. and the department of Defense Industrial base, and which is very important to our country our company employs stakeholders.
Related to our increase confidence in support for what we're doing here in the U.S. It was recently reported that there is significant additional funding.
Up to 125 million currently planned for the 2021 National Defense Authorization Act for the L. path X. 258 gave up or we drone initiatives.
Which would be in addition to the over 100 million already included for L. path affordable drones, and the 2020 M.D.A.
And also importantly.
Was recently reported by the Air Force Air Force stated that they are ready to begin procuring new what's readable drone aircraft and higher volumes this year under it sky for test and experimentation program.
I Hope you can see we continue to make progress and move forward.
Customers that also continues to move forward and we believe that we remain on track for significant valproic contractor contracts. This year and based on the most recent information we have received even more significant future valkyrie related contracts.
We believe that we were close to a contract awards just before the covert 19 virus cause serious disruptions.
Progress has recently been made.
And we believe that the air force will be making several announcements very soon based on recent correspondence.
We are more confident than ever that the drone related Vanguard Sky Board advanced Battle management system, or a B.M.S. and valcke related programs initially and initiatives.
Each of which we believe or major D.O.D. priorities will be transformative future growth opportunity for a company each of which we believe cradles is uniquely positioned for.
We also remain confident that the gremlins program will transition from DARPA to one of the services with our plan for Air Wolf and Santa Toasts to follow thereafter.
Flight scheduled for about 40, Gremlins Air Wolf at our initiative with Aerovironment, which we refer to as Rattlesnake have moved to the right with a B.M.S. and other program flights now planned to occur beginning and Q3 due to delays from D.O.D. covert 19 related travel distancing and.
The restrictions.
Cradles his target drone business is performing as expected with full rate production for two programs and increased production for an additional program now forecast for either later this year early next year based on the most recent customer communications and taking into consideration covert 19 deal.
The work at home requirement related impacts.
Also importantly, we recently received expected contract awards for approximately 20 target drone systems.
Which along with our few one unmanned business booked a bill ratio of 1.5 to one.
<unk> increased visibility and confidence in our forecast and we remain on track to achieve our long term target drone growth and profitability objectives.
Cradles as microwave electronics business, one of our company's highest profit margin in cash flow contributors.
A cheap solid performance into one including a book to Bill ratio of 1.9 to one for the quarter in Alaska 12 months <unk> Bill ratio now with 1.5 to one.
Reflects a strong global demand for electronic warfare attack missile radar see at the at another systems.
Or microwave businesses Q1 performance current record the backlog and book to Bill ratio provide us increased visibility incompetence and our financial forecast either dot and castle objectives.
Cradle since rocket system business also reported solid to one and based on recent communications with customers certain ballistic missile defense target and other missions launches have moved to the right. As a result of covert 19 related D.O.D. travel distancing and other restriction impacts with certain missions now.
Tentatively planned for later on this year early next year.
Since our last support to you the number of opportunities <unk> rockets support business is pursuing has increased significantly.
Including certain hypersonic system programs with Hypersonics currently being one of the strongest funded areas of the Pentagon budget.
<unk> turbine technologies and C. five I.S.R. businesses are also positioning for certain hypersonic opportunities.
Cradle says training business came in below our expectations into one as a certain credo sole source contract option was unexpectedly not renewed in February by an international customer that have significant covert 19 travel related other restrictions.
However, late in March we did successfully receive an extension on the U.S. Navy R.S.N.F. training program, which was also in a protest situation, which the animal walk through and her prepared remarks.
As of today Cradles has experienced no production facility or manufacturing plant closures as a result of the cold at 19 virus.
And we have approximately 200 job openings across our company also supporting our financial forecast.
Today, we have not experienced any material supplier or vendor disruptions and we routinely communicate with our supplier and vendor partners our customers and the government.
As we move forward or employees health and safety, our our number one priority.
And as I mentioned previously we are following the safety measures distancing and cleaning recommendations suggested by applicable federal state and local government authorities to the absolute best of our ability.
The application of these government restrictions and recommendations has resulted in a large number of cradles employees telecommuting and working from home, where possible split or staggered shifts that certain cradles production facilities and limitations or restrictions that our employees ability to travel to certain customer sites and location.
Formed their work, including F. related to target drone tactical drone and other planned exercises.
Though taking the safety steps was required in the right thing to do.
Obviously, there adversely impacting production execution flight testing and overall operations and operational efficiency to some extent.
We have also recently begun to see some delays and certainly supplier deliveries and the reduction in demand from certain of our commercial arrow and power customers, primarily with cradles per line technologies in our Mike with electronics business in our space and satellite Communications business recently saw one of our customers Oneweb file.
For bankruptcy.
We have attempted to take all of these factors current then forecast in our updated forecast, we're providing to you today.
Deanna.
Thank you very good afternoon.
This is first quarter 2020 revenues of 158.9 million, we're at the higher end of our estimate of 160 270 million with particular string.
Some segment, which we appointed revenues of 42 million, 20% first quarter 2019 34.9 million.
K.G.S.
126.9 million from 125.5 million in the first quarter 2020.
Rather than rather than the first quarter of 2020 and on my way products and rocket and ballistic missile defense.
Oh Court is financial performance K.T.T. in 2020.
I expected declined in or cleaning illusion.
Satellite communication and legacy government services.
Are just city, but that's 16.3 million exceeded our estimate at 12, and 16 million due to a favorable mixup revenues and execution, primarily in I spaces satellite communication.
System.
Are just a D.P.S. of nine cents.
End of our four or five cents Tonight.
Corridor.
The first quarter I meant system segment generated intensity the dog 2.3 million 2 million in the first quarter of 19, Yeah density that Don margin Me Me Me <unk>.
Due to the mix of development programs, which are typically lower margin programs.
And programs.
This increase mix of development programs is expected to continue into 2020 until a certain new production awards or increases in existing production programs hardly see.
H.G.S. generated adjust stupid top 14 million or 11% of revenues down from 15.5, 19, Q1 of 19 and operating income of 9.3 million downtime 11 way more than 91 night <unk> more favorable mix of operating margins in adjusted D., but Don margin in the company's space.
And satellite see my bias are unlikely products businesses in Q1, 20, offset primarily by expected less favorable margin in the company's training solution business as a result of the completion large international.
And the end of 2019.
Okay. One consolidated operating income was 4.7 million down from the first quarter of 19 operating at 8.2 million.
Really do tend to increase in noncash dot compensation expensive 2.1 million and increase depreciation expensive 800000.
Due to the capital investments we have made in.
<unk>.
Oh this past few years.
<unk> for the first quarter.
Saladin continuing operations.
The net income or loss attributable to non controlling into it.
And it excludes noncash stockbased confrontation.
A 4.7 million.
Or in transaction lie at 400000 and.
We just got your related items and other a 500000.
<unk>.
But first quarter was 200000.
Excuse me.
Including tax benefit at 1.4 million and lots of them discontinued operations at 400000.
[noise] moving onto the balance sheet illiquidity, our cash balance is 158.6 million at March 29.
Quarter, and we have zero amount outstanding a bank line of credit and 5.7 million of letters of credit outstanding.
Outstanding with 295.3 million accord around.
And that that was 136.7 million.
Right L.T.M., adjusted even <unk> 76.5 million within that leverage ratio 1.8 to one.
Cash flow generated from operations at first quarter was 4 million last comments of 6.4 million for free cash flow use of 2.4 million.
[laughter] during the quarter we utilized.
9.5 million for the acquisition of technical direction or T.D.I.. They turned nine technology company focus on tactical unmanned aerial driving and other systems, which Aaron discussed previously.
In addition, 4.7 million with paid during the quarter picked a bird purchase consideration related to the F.T.T. acquisition, though it was last year.
Also during the quarter, we collected 1.9 million related to me retain working capital of the legacy P.S.S.
Filled in 2018, bringing the total receipts we have collected two 5.6 million since we solve a business.
A contract minutes for the quarter was 78% fixed price, 17% cost plus five per cent time in materials.
Revenues generated from contracts with the U.S. federal government, 74%, including revenues generated the contact with the D.O.D. nine d. or the federal government agencies, an Ethernet which were approximately 9%.
We generated 8% them commercial customers and 18% unborn customers.
For our forecast, we're providing initial second quarter guidance of revenues of 160 to 170 million and adjust to leave at dawn of 12 million to 16 million.
We are for I mean, our full year 2020, adjusted even talk items of 72 278 million and we are affirming I've read cash flow operations guidance of 7 million to use of 18 million, including capital expenditures in 40 to 45 million.
Since it company, that's not how many pauses payment type contracts that changes recently made by the D.O.D. to increase percentage of such payments and 80% to 90% due to cope with 19 does not have them in material impact on the company I play 20 expected cash flows.
We are adjusting our full year 2020 revenue guidance from 740 780 million to 720 760 million primarily to reflect.
Currently forecast in the past that cover 19 on our business.
In our vendors suppliers and customers, including assets customers and customer side, the non renewal of an option on the sole source training contract by the international customer partially offset by the extension through the beginning of 2021 of the U.S. Navy Royal Saudi Naval forces training on time.
Affirmed adjusted either dog guidance reflects an overall forecasted improved revenue mix and profitability in our D.O.D., a national security business areas, including in our space satellite I mean system and microwave electronic compilations.
Our fiscal 2020 guidance exclude any potential contribution from expected value or other tactical drunk production or system contract with expected or is to be taken into consideration and our financial forecast.
Adjusted one such contract orders are received and the related financial contribution.
The 2020 capital expenditure forecast currently includes expected outlays at 15 to 17 million associated with production of 12 badly aircraft prior to the C. have expended customer awards, and therefore reflected as company on tactical until receipt of the related custom reward.
Each time the costs incurred would be transferred to project costs at approximately three to 5 million related to production of company owned aerial target drone systems in preparation of fulfilling forecasted customer requirements.
This will adjust.
And where we do sees initial forecasted capital expenditure outlays once expected customer orders are received and they're related financial contribution contractual terms can be estimated.
Thank you Deanna.
We will now turn it over to the moderator for any questions.
As a reminder to ask that question unit price Star one on your telephone again, a star one.
And you first question cost run a line of Pete Skibitski wet element global.
I'm, sorry, hi, guys Okay.
Yeah, sorry, I was up you guys.
But here you're doing well.
On the sole source international training contract a fixed price one that didn't get the cautioned renewed could you just size that for us.
Yeah, that's that's roughly about eight to 10 million per year.
Okay. Okay, and then just the expectation I guess it to Q. will be kind of the low revenue quarter for the year.
<unk> is the underlying assumption essentially that covert is impacting and maybe one or through the worst of this then things improvement in the back half of the or is that kind of a driving assumption.
Yeah. So that's that's part of the yes.
Okay. Okay.
Last question for me I'll get to the back at a cue [noise].
On the I'm a vowel curry select if we assume you get a contract later this year.
Do you start to book revenue on on a percentage of completion basis or or is it you know we wait till 2021 and you put the revenue on you don't know deliveries.
So it it depends paid on the type of contract if it's a production type contract then yes, it would be on a per cent complete basis or the cost incurred if it's a services contract then that would be based on what services are provided so it it really depends on the make up at the contract.
Okay, and that's still uncertain right. Now is is is what's going on.
It it it it could it could be boat yeah, okay. Okay.
Okay. So I guess the services contract is that's similar to what you do with targets I know you sort of land target services to some of the European countries. So it could be similar to that manner.
No what what we mean by that is.
And I'm, just giving examples here.
We could get we could receive a contract.
Four units that were selling.
We could get a contract to continue to integrate weapons systems command and control systems and other systems into the batteries.
We could get a contract or contracts.
Where cradles owned Valcke readers are involved in missions.
Like the A.B.M.S. mission or some other missions her demonstrations.
It could be in it in my opinion right now I think it's about a big some of each.
Okay. Okay. Okay. Appreciate the car guys I'll get back in Q. Thank you.
Yeah.
Hi, Unix consequences in cost front line see law.
Hello glue with jefferies'.
Hi get acting in <unk> Deanna. Thank you for the time.
Hey, Eric you mentioned the report a replacement maybe in the 2022 time frame how do we think about that just because it's you know <unk> five much larger drawn versus you're offering you know how could the airforce shape that.
Right I, so I I think she'll to some of them are actually root for doing all kinds of group fibrous opens in group five or things like global Global Hawks.
And I will I can only pass on in this forum what has been publicly announced by the.
The D.O.D.
And as I said my remarks with the D.O.D. has has said is that they they're planning on ending production.
This year.
Because they cannot perform uncontested environments their mission statement phenomenal and the the terrorist mission.
Symmetric warfare mission.
But they are.
Our forces them out and they said they want drones to replace them that can survive in an anti access area denied environment.
And we.
<unk>, we believe were very well positioned for this as we have a number of drones that are actually flying today.
Certain of which we believe could fill that in mission admirably. So that's all I should say on the snow. Okay. Now where is and then I made a mess. This in the prepared remarks I know you said a few like peffer pushed to the right can you just go over the latest <unk> you I think you had your fourth by test in January that was success.
Oh.
Kind of just a quick update their because I don't know if you mentioned, but <unk>.
Absolutely the so Jeff either yesterday or the day before yesterday, the Air Force announced that the next A.B.M.S. flight advanced Battle management system flight, which we are scheduled to participate in with the vowel Curry and several other up our jet drums. It has expanded now is currently planned.
For either August or September of this year, but they announced that just this week.
Okay got it and then in terms of the additional funding on the balcony potentially in 21 Camille over a go over what you know what we need to see what next steps are obviously, the first random funding first but kind of the pets and takes there.
Sure and so what is out there publicly is that the the chairman of the Senator Helms Senator Armed Services Committee. He made some remarks and those are publically available and in those remarks. He said he said that because of the progress that we're making because of the.
The boundary flying today and its capabilities that he was supporting an additional 125 million.
The 2021 N.D.A. to continue moving forward with affordable drone aircraft.
So that's what the the chairman said a few weeks ago Okay.
Thank you very much off.
Okay.
And you next question cost run a line of Peter Arnett <unk>.
Yeah, Good afternoon, Eric Bana.
Hi, Eric Eric just following up on the on the balcony. So if if you have another test flight in August September maybe you could just shape, how you're thinking about like the timing of a potential contractors, what's what's the road map look like they're once you have another flight.
Flight test.
I.
I believe that there there mutually exclusive.
I I believe him and I'll go with what the the Air Force announced a month ago.
The Air Force announced a month ago, they were going to move out post haste on.
Relative to Sky Board that was the context that they were talking in relative to Sky Board on.
Getting some information out relative to contracts for for production this year.
And as I send my prepared remarks, you know recent correspondents in communications.
The Air Force and I'm, not putting words in their mouth and my opinion, they could be announcing something.
Theory so.
So it's more financially before the flight okay. Yes, one of US are imperfect confirm that yeah, and then could you give us your latest thoughts on I know project office now air well you know when those flights will also be around a similar timeline or is that are on a different schedule.
They are currently scheduled for two three so their schedule for two three.
I believe gremlins are scheduled for two three.
Rattle snake with their environment is now scheduled for cheap three along with a B.M.S. and other valkyrie flights that we have we have not talked about in detail, we <unk> we can't.
And this all people us all have to do with the deal do you travel restrictions number one.
And social just social distancing relative to being in the coming out of control module relative took flights.
Appreciated the color. Thanks there.
Yes, Sir.
<unk> Herbert what kind of court.
Yeah, Hi, Eric Indiana.
Okay.
Eric I just wanted to ask you about T.D.I. is it possible to maybe give us a little more detail on on the revenue contribution from that acquisitions. This year, and then bigger picture I mean, it clearly sounds like basing your recur to Mark sure fairly optimistic about as you plan to to.
D.I. in with.
She and you go after what you what looks like it pretty pretty substantially expanding market in missiles cruise missiles and things like that can you can your hope maybe with sizing that market, a little bit or or just a little bit of the sort of parameters are there you're you're targeting now on the the engine side.
Absolutely.
So.
For this year's contribution it is it's not material.
Because they do not have any production contracts right now they are in development. They have a number of development programs in the one that's publicly out there of course is the one we talked about today with Gray Wolf and so the the this year's contribution is not material. However.
The thing if things go according to plan and they are tracking right now with the number of engines are running.
We see our turbine technology business potentially next year with tied into two engines in particular.
They could become much begin to become material financial contributors next year.
The the market opportunity as you indicated is very very large as we've talked about before the technologies that are out there right now or seventies or eighties technology that we're using the buildup of the missile systems in the eighties.
And with what's going on in the the self try to see it on the Pacific extended range is significant.
And that's why you see things like L., RASM, E.R. extended range or jazz E.R. extended range or harpoon E.R. extended range and there were several other than for competitive purposes. Because this is competitive I'm not going to get into many details, but I think I've said before relative to a K.T.T., there's a handful or so.
Programs that we're looking at getting designed in that we're working on getting decided on and that handful assuming we get a portion of that market. It's like 800 million over five years.
Okay very helpful.
And if I could just one other question for me on South Korea, as I listen to your <unk> prepared remarks, I mean, you're you're clearly outlining what sounds like and what was a very close collaborative effort with the air force as you've developed the the aircraft or the technology.
There's certainly other companies that seemed to be looking at this market with with a lot of interest can you just Parker and remind us again about the competitive advantages of the ball Korean and.
While you're in the pole position and how you think you can maintain that relative to with some other farmers maybe looking at doing as these move forward.
Absolutely. So we we believe one of our strategies is forced to market.
It was critical.
And <unk> and proven affordability.
Is equally critical.
As I mentioned enough you know our in 2015.
We flew jets high performance drones with manned aircraft <unk>, so that was what five years ago.
Four and a half years ago, we did that.
We we have a number of grown flying today, they're all 100% substantially source than the United States made in the United States, We believe that that's a competitive advantage.
We we are working with the United States Air Force as I said I'm I prepared remarks the premier.
Institution in the world globally.
Four.
Aircraft.
Remotely piloted aircraft man pilot aircraft et cetera.
The number of drones, we have that a flying today were integrating weapons systems and other systems into operationalizing them. Today. These aren't Powerpoint presentations are like little models. These are flying today.
The market as I went through is is is accelerating now is moving rapidly.
And on affordability as I mentioned, we were were building well over 100 drones eight year right now demonstrated cost points 250000 cough point for certain of 500000 for others a million for others and on the Valkyrie, Obviously, we know where we are targeting their 2 million bucks for a million Bucks. So we've demonstrated it.
We believe that those are all critically important competitive differentiators and we just need to continue to execute and move forward.
Great. Thank you very much.
<unk>.
Yeah.
And your next question counts on the line Oh, Michael Karmali wait times for us.
Hey, good evening guys. Thanks for taking the questions that glad to hear you guys are a safe and healthy.
<unk>, maybe I'm going back I think it was shoeless question on the reap or replacement.
Certainly if we think about you know.
How the Air force, how they develop the road map I mean are there other opportunities for you outside of a complete drones solution. You know you were just referencing T.D.I. and you know some of the development programs I mean could you potentially be a partner and provide turbine technology or.
Is this you know or you're going after it with a complete platform solution, maybe any color you could provide there.
Sure so.
We are in in <unk> compared to compare to mate land like compare to make we are we are we are competing head on hub.
With with the competitors and we are teaming.
With many of them.
On.
On programs. We we are we have incredible teaming relationships with blockade incredible teaming relationships with with Northrop with Raytheon, they're just they're phenomenal partners.
They are also ferocious competitors.
It's cool.
Okay, Okay, and then on the the A.B.M.S. drones, you said you've got more in addition to <unk> can you tell us a which which other up your drones are are participating in that.
I I cannot because I do not believe that that has been disclosed yet rather than what I said I'm sorry, okay.
On on South Korea, or you still expecting orders you know in in the range of 30, or so has anything changed you know certainly it sounds like there there's gonna be more funding, but what sort of the the general outlook in terms of a number of units you expect to secure.
I.
I've got I I don't want to comment on this Mike because it [noise] things are going to happen. If you go with what with what the Air Force as public we talked about in the last three or four weeks and obviously, we have some information as well.
The next next several weeks couple of months, let's just watch this play out I I I will though go with what I believe it was Dr. Roper said, where he's where I believe to eat in an interview. He said that we are looking to begin buying these quantities. This year I believe it's about.
Got it.
Last one for me, Yeah, obviously narrowed down or took down the revenue guidance you held <unk> sounds like you've got some higher margin businesswoman through can you tell us what percent of revenues your deriving today from from more of the higher margin software type cells.
The Anna what's.
How's our <unk> the vast majority that isn't the space side.
It is yeah.
Yeah.
And we don't.
Oh and somewhere.
Yeah, but it's the majority of it might extend our space business Oh, Okay. Its interface business, but it's also in the microwave business open microwave because this this just lifted right now.
Clip to what's going on welfare system [noise].
Ah Okay, perfect <unk> aspect right okay.
Hmm.
And you next question comes from the line of Mike Crawford would be Raleigh.
Thank you Hey, Eric you mention the Black Dragon program, a persistent flight is that with a smaller T.D.I. engine or the bigger T.T.T. is.
It's it's a K.T.T. program.
Okay.
And then you also you talked about <unk> really talk about rail words initiatives, including your standard appointments system that you've shown.
In that help reach H.U.I.D. environments is there any progress update their.
We we are planning on completing them having ready for delivery.
The first.
Containerized rail launch systems Middle of this year next few months.
We're working hand hand.
With the Air Force.
And and those orders and placed for those.
You can't talk about that right now.
Okay.
And last one to comment and now that's part of it it was targeted some U.I.D. opportunities I think the way the electronic systems.
<unk>.
Whether you're working with ducommun, maybe on engines or otherwise.
Ducommun isn't important partner of hours in our own business.
Thank you or.
Okay.
Unix costs and costs on the line of tossed salad.
I live in with being Smart and company.
Pretty name <unk> yeah.
I'm good each of us.
I just the I.N.G.B.S.D. are you able to provide some color what you're going to be supply another program.
I I other than.
The ground transport and missile transport systems.
Which is what north propose announced.
We are unable to provide because obviously, we're we're under an N.D.A. with Northrop and they're a great phenomenal partner, we cannot go beyond that so so <unk> pull up the <unk> threes and take a look at the ground transport equipment. The missile Erector systems and the missile transport systems and that'll give you an idea of what's been disclosed.
What we're doing.
Kind of.
That's the question on T.I. in the Golden word program, Yeah. The the mass quantities you referenced in a low cost the engines.
<unk> well P.D. I have the capacity to do that or do you need a partner direct your Oklahoma facility or one of the T.T.T. facilities.
So T.D.I. we we.
With the T.I. acquisition, we acquired a a very small.
Next leading technology.
Additive manufacturing.
In production company.
That's one piece K.T.T.
As significant.
Next generation engine manufacturing.
Techniques and technology.
We believe with the hand, we have now the hand of cards, we are in phenomenal shape.
For production runs <unk>.
Low cost very quick.
Very simple next generation engines, we feel were in good shape with what we got.
<unk>.
Yes, Sir.
And Unix question class front, a line of <unk> minimally J.P. Morgan.
Oh, thanks, very much and I get good afternoon.
I, it's kind of curious so with the revenue guide or the second quarter.
The application I guess is bad enough for a court in that there are run rate for the second half are going to get up to record level kind of 200 plot.
Of south.
You talk about what kind of <unk> gives you the the carpet ads in that that level of <unk> step huh.
The.
The book to Bill ratio the bookings in the first quarter were phenomenal.
Or as I, seven prepared remarks, or microwave business as a record backlog.
Are unmanned business right now is backlog is just under a couple of hundred million.
Yeah right we.
We we.
We're we have very good visibility right now than what's going on.
Excellent and then just on the on the training business to make sure I understand that the different pieces. There. So you know we're talking about two separate international contracts. One an option was not exercise that as I had when in Q.
To sequentially and I was here for the rest of the year as well along the lines of the size that you talked about with with Pete question on the Flipside, you did get an extension on Saudi up enough contract through the U.F. maybe.
You know how long did <unk> what is that you versus what you kind of hot in the guidance previously.
Yeah, so that there's a couple of pieces that so that there is the the nonrenewable of the international content that we did.
Awarded the bridge contract on the previous.
Contact that we we had discussed in the prior quarters.
There. There was also one one contract that was a a new dad that we that we lots that we in a new one that's under protest that was lost in March So natty and all those three items, it's about it and that.
Three to 5 million dollar shortfall from where we were <unk>.
The last time, we <unk>, we we provided the estimate.
Right. Okay. Okay got it Ah Okay Ah very good and then is that Saudi on the the that maybe I don't know is that it is that now in extension in that you know this is now or create a contract again or is the you know kind of it.
Gray extension, while there's the end of does it get occasion repaired huh.
It's a <unk> cradles, it's a cradles contracted through the end of the year.
Okay. Okay.
Excellent.
[noise] very good and thanks, thanks very much.
<unk>.
And Unix question costs front online no open that <unk> Goldman Sachs.
<unk>.
Hi.
Eric last quarter, when you gave the initial outlay.
Outlook for per 2020 initial 2020 guidance.
You you you you emphasized that you had excluded or significantly factor down.
Multiple items that you know could come your way in year.
And you know Deanna just went through the moving pieces there in the guidance and.
It's kind of small number of contracts in a small amount of revenue.
<unk> down in L. is that that was just no that was just for the training pieces that was a specific question that that south had asked on <unk>.
<unk>.
So if you if you have prepared remarks that we talked about the commercial air L.M. Pat.
In in our K.T.T. business and in our microwave products business.
<unk> <unk> <unk> <unk>, that's about 10 to 12 million.
No I I understood there as I I was about to say that.
You know, there's a global pandemic right. So [laughter], it's an unprecedented situation, but we're also were also watching other.
Defense companies, you know largely reiterate views or take guidance down very slightly.
I guess I'm, just wondering where the.
Things you excluded or things that were significantly factors are as offsets.
And are those still available to you in the back after the year.
Are we now looking at you know sort of <unk> I think so makes a good point that it's a pretty back then loaded profile based on the second quarter guidance do you still have these things that are excluded in factor that could be added later in year.
Early sorta clinging to the to the new range here.
The C. five I.S.R.
Contract 50 million that we won.
That was protested.
If we're successful there that could be added.
[noise] if we receive.
Contracts contract or contracts.
Related to.
<unk>.
Or other tactical drums.
Those could be those would be.
Added.
Oh, there are there are I'm going to say a handful of other.
Brand new opportunities.
That are expected to be awarded into three to to work two three.
If we're fortunate enough to win some of those.
Those could be additive because those are not in our forecast either.
Okay.
How many months of delay do you have in in.
And the the the next upcoming test flights curved rocker in gremlins.
From.
Corruption related to the took rubber.
So the the ones that are publically out there the the A.B.M.S. flight.
With Val Curry and some of our other drones was previously scheduled for May.
As I mentioned this week either yesterday during the day before the Air Force announced that they're shooting for August no later than September.
Or air will flights, which were scheduled for two two.
Or now scheduled for two three.
Okay.
The and then on the yeah.
The one with <unk>, the one with their environment.
Which was <unk> schedule for two two.
Is now scheduled for two three.
<unk>.
And then.
Eric You you had discussed previously how part and parcel to the 100 million dollar plus up.
In funding that <unk> saw that that came with a requirement for.
A.F.R.L. to submit a plan for that to Congress by I believe it was march 31st can use to whether or not that happened and.
If everything related to that timeline is still in place.
Yeah, absolutely happened.
Was submitted I I no I don't know if it was submitted by March 31st I don't know the date to be very carefully with you, but I know what has been submitted because I have been told.
It has been submitted it has been I haven't been told it has been accepted.
Then I have been pulled the those with some of the reasons why.
I believe in the near future the Air Force, maybe putting some information out.
Data.
Okay.
Thank you very good thank you.
And this <unk> you and I says you know like sort of hand to call back over to <unk>.
Right.
Thank you all for joining us and we will chat with you when we report.
Two two.
Later on this year. Thank you.
[music].