Redwire Corporation Q1 2023 Earnings Call
Ladies and gentlemen, thank you for your patience. Please remain on the line your conference will begin momentarily.
And we do appreciate your patience. Please remain on the line your conference will begin momentarily. Thank you.
[music].
Greetings and welcome to the Red Wire Corporation, Q1, 2023 earnings call.
At this time all participants are in a listen only mode and the floor will be open for questions. Following the presentation. If you should require assistance throughout the conference. Please press star zero to reach a live operator as a reminder, this conference is being recorded at this time, it's my pleasure to turn the call.
Jeff Zelnick, Sir the floor is yours.
Thank you Karen and good morning, everyone. Welcome to <unk> first quarter 2020 earnings call. We hope that you've seen in our earnings release, which we issued yesterday afternoon. It has also been posted in the Investor Relations section of our website at Red wire space Dot com.
Let me remind everyone that during the call Red wire management may make forward looking statements that reflect our beliefs expectations intentions or predictions of the future.
Our forward looking statements are subject to risks and uncertainties that are described in more detail on slide two.
Additionally to the extent, we discuss non-GAAP measures during the call. Please leave slide three our earnings of our earnings release or the Investor presentation on our website for the calculation of these measures and non-GAAP reconciliations.
I am Jeff Zuni Red why our senior Vice President of financial planning and analysis. Joining me on today's call are Peter Cuneo, Chairman and Chief Executive Officer, and Jonathan Bayless, Chief Financial Officer with that I would like to turn the call over to Pete Pete.
Thank you Jess during today's call I will take you through a discussion of our key accomplishments in the first quarter of 2023, followed by Jonathan who will present the financial highlights for the same period. We will also discuss our continuing outlook for the remainder of 2023 after which we will open the floor for Q&A.
Please move to slide six.
Before we get into the details as I did last quarter I'd like to start with an overview of red wires high level positioning in the space industry.
Wires and integrated pure play space infrastructure company with mission solutions and payloads for civil commercial and National security space customers and our mission is to accelerate humanities expansion into space by delivering reliable.
Economic coal and sustainable infrastructure for future generations.
With decades of proven flight heritage combined with innovative products and culture Red wire is uniquely positioned to assist our customers in solving the complex challenges of future space missions and industries.
Red wire has three primary areas of focus that form our business number one.
As a fully integrated mission enabler Red wire is empowering space mission providers, such as government agencies, and large prime contractors with a broad portfolio of space infrastructure systems subsystems and components that can be that.
That can be procured either as a single item or in a tailored bundle for maximum supply chain efficiency.
In addition to efficiency. This scalable model is currently solving some of our customers' most critical supply chain issues by providing resiliency and reliability.
Number two.
Providing the infrastructure and technology needed for people to permanently explore live and work in space, increasing our understanding of the Moon Mars and beyond as well as developing breakthrough commercial technologies for the benefit of life on Earth that can only be produced in micro gravity.
This area is generating real revenue and gross profit today.
And lastly, supporting multinational access to space for countries that recognize space as a unique opportunity to build national prestige and accelerate economic development.
We continually demonstrate our commitment to an expertise in our three key areas focus areas in a variety of ways such as by having red wire products on two launches in Q1.
Having developed 20 research facilities for the I S. S. With 10 currently operating on the I S S to deliver world leading research.
Possessing well over 100 years of fight heritage across our various legacy business businesses.
And growing to over 700 employees at 10 facilities in both the United States and Europe .
Please turn to slide seven.
The first quarter of 2023 was another record quarter for Red wire.
Our revenues of $57 6 million were the highest of any quarter to date.
We achieved positive adjusted EBITDA of $4 3 million, an improvement of 5.1 million versus the fourth quarter of 2022.
And improved our net loss to $7 3 million a significant improvement from the same period last year.
More on that in a moment.
We ended the quarter with contracted backlog of $286 8 million as an administrative note starting with this quarter, we have switched from focusing on total backlog, which included both contracted and on contracted backlog to simply reporting contracted backlog. There was no change in our calculation of <unk>.
<unk> backlog from previous reporting and we made this change to simplify reporting an increase comparability of the company's performance metrics with industry peers.
Notably in this quarter. We also launched three solutions on two launches continuing our proven track record of delivering real flight heritage.
Please turn to slide eight.
Beating our previous record in the last quarter of 2022 Red wires revenue growth achieved a new record record level of 57 6 million during the first quarter of 2023.
Year over year compared with the first quarter of 2022 Red wires total revenue grew by 75, 3%.
And on a sequential basis, we grew red wires total revenue by seven 3% over our previous record revenue in fourth quarter of 2022.
Notably, even if you exclude revenue contributions from our acquisition of space N V. Red wire revenues grew by 37.9% year over year.
Which demonstrates strong performance from our baseline operations in the same quarter last year.
Please turn to slide nine.
Although strong revenue growth is very positive we are not solely focused on topline growth. We are also focused on profitable growth.
As such we are pleased to report we have achieved a year over year improvement of net income on the order of a 10 million dollar positive moves to the upside as our losses decreased from a $17 3 million net loss in the first quarter of 2022 to seven 3 million.
Net loss in the first quarter of 2023.
Moving to adjusted EBITDA I am very pleased to report that our adjusted EBITDA has increased by $9 million on a year over year basis.
For this first quarter of 2023, we generated an adjusted EBITDA of positive $4 3 million versus a negative $4 7 million adjusted EBITDA for the first quarter of 2022.
Achieving positive adjusted EBITDA for the first time as a public company is an important milestone and then outstanding accomplish on both an absolute and percentage growth basis and has given us significant financial momentum heading into the remainder of 2023.
Please turn to slide 10.
Yeah.
Now, let's move beyond the numbers to continue to emphasize that this financial performance is driven by our proven ability to deliver differentiated solutions for our customers Slide 10 to 15 share just a few examples of successes in the first quarter of 2023 that highlight the importance of our capabilities.
Yeah.
For example in Q1, the U S space Force and Spacex launch the GPS III S V O six satellite from Cape Canaveral, Florida with two complete Red wire fine sensor find some sensor systems Award.
<unk> sensor consisted of four fine sand sensor heads and two processor electronics.
Red wire Sun sensors are key navigational tools that provide some acquisition solar array pointing and fail safe recovery options for GPS III S V O six as it orbits 12550 miles above the surface of the Earth.
Red wire has been a key supplier of critical San sensors for more than 50 years and this technology has enabled more than 70 NASA missions. A clear example of our incredible space Heritage.
Please turn to slide 11.
During the first quarter of 2023 Red wire delivered two more Rosa wings numbers, five and says to Boeing to be launched on an upcoming commercial resupply mission to the international space station.
To date for Rosa wings had been launched and installed and are operating efficiently and effectively with the addition of wings five and six the overall power generating capability of the I S. S will be improved by 20% to 30% a substantial increase.
Grocers are not only used for the international space station Red wire is also producing various modular versions of Rosa for many government and commercial space flight applications, including the power and propulsion element for Nasa's Gateway program.
Please turn to slide 12.
As I mentioned at the beginning of this presentation red wire as a leader when it comes to developing breakthrough commercial intellectual property for the benefit of life on Earth that can only be produced in micro gravity.
As an example, we are currently managing research and micro gravity to discover a new type of electronics system.
During Q1 'twenty days of on orbit experiments were completed with the Red wire managed poor formation and mobility investigation facility as part of the asymmetric saw tooth cavity enhanced nucleation, driven transport investigation or PSM I ascent.
The findings of the P. S M. I a cent space Physics study will help with the design of passive cooling systems for space craft electronics, which are often limited by available space in electric power and for consumer electronics here on Earth. The five experiments that have been completed on orbit represent the first half of the P. S. M. S N <unk>.
Destination.
Please turn to slide 13.
Yes.
As we enter a new era of space exploration and commercialization red wire as a leader in developing inspirational content with commercial thought leaders to inspire future generations.
As an example, red wires collaborating with Microsoft to create a unique learning opportunity inspired by Marvel Studios Guardians of the Galaxy volume three to engage students in science technology Engineering, the arts and mathematics topics, including three D printing for future space exploration and micro.
Gravity R&D and manufacturing for the benefit of humanity.
In conjunction with Guardians of the Galaxy volume three red wire and Microsoft have producing engaging educational video to motivate the next generation of astronauts Engineering's engineers and scientists.
In addition through our sponsorship from the I S. S National Laboratory Red wire and Microsoft intends to three D printing, Microsoft Zoom on the I S. S. Using red wires additive manufacturing facility to illustrate space Mays space based manufacturing and an engaging way.
Red wire has manufactured more than 200 parts in space and as the only company currently providing commercial three D printing on the ISS Red wire was the natural choice to <unk> print star wards Zune.
On the right side of this slide you can see our guardians of the Galaxy Sten promotional patch featuring Cosmo and rocket from the movie as well as a highly visible digital cube display in times square in New York City, promoting the Marvel Microsoft and Red wire team.
It is important to note that this effort was not a paid promotion by red wire, but rather we were a paid partner as part of Microsoft's plan to leverage the power of space and their branding. We believe this is an excellent template for future red wire offerings to provide space space branding content.
Our other commercial partners.
For more information on this effort please visit zune dot net.
Please turn to slide 14.
Space is a multinational endeavor and red wire space as a global leader in international space missions in the first quarter of 2023 Red wire space Europe fully integrated two European Space Agency Probus, III spacecraft that will perform the worlds first precision forming.
<unk> flying mission and.
In the probe three mission two small satellites will launch together and separate and maintaining a specific distance and working as one unit as they orbit around the Earth on this program Red wire is building and integrating the satellites themselves to include developing the onboard computer.
And advanced avionics.
This mission is important improving orbital formation flying technologies and rendezvous experiments for future science astronomy, and Earth observation missions that will require satellites to seamlessly cooperate on orbit.
Please turn to slide 15.
Next I'd like to highlight a red wire space Europe projects that kicked off during the first quarter of 2023, a three D bio printing system.
We have discussed red wires NASA funded by our fabrication facility on previous earnings calls, but this is a completely different mission funded by the European Space Agency.
Redwood Aerospace N V was awarded a 14 million euro contract to design develop and qualify the three D printing the three D bio printing system.
System will leverage the latest three D bio printing technologies to provide a modular powerful and unique system to sustain a large number of experiments with the three D. Bio printing system Red wire is expanding its leadership in space manufacturing and bio printing on the international space station for it.
For exploration and improving life here on Earth.
Please turn to slide 16.
Turning back to the numbers our bookings during the first quarter were $29 7 million. However, as a reminder, our contracted awards for the fourth quarter of 2022 totaled $91 2 million. It is important to note that red wires bookings are typically lumpy in the first quarter historically is usually the lowest.
The year using a longer period of measured to smooth out the lumpiness as of Q1 2023, our last 12 months book to Bill ratio was 1.6.
I'd like to point out that during the first quarter of 2023 Red wire made two changes with respect to our key performance indicators first we changed to using contracted backlog only.
Second we changed the book to Bill calculation to present this metric on a last 12 months or LTM basis, whereas prior period disclosures were presented on a year to date basis. We believe these presentation change changes will provide meaningful insights and to contract award trends and increased comparability of the.
The company's performance metrics with industry peers.
Finally, as you can see from the Bar chart on the right hand side of this slide our contracted backlog has more than doubled since March 31st 2022 of last year to our contracted backlog at the end of Q1 2023 of $286 8 million.
This 108, 8% growth in contracted backlog is one factor that gives us confidence in our future growth and stability.
With that I'd now like to turn the call over to Jonathan Balas Red wires, Chief Financial Officer Jonathan.
Yes.
Thank you please turn to slide 17.
Before we begin the financial section I'd like to highlight the picture shown on slide 17. This is the Red wire managed plant habitat zero three experiment on the ISS the ability to grow fresh crops in space will be critical for exploring living and working in space. One of the three focus areas for <unk> that Pete talked about.
Red why Youre doing critical work now and earning revenue and gross profit now to support space industries, including the agricultural industry in orbit.
Please turn to slide 18.
Similar to last quarter I will help quantifying expound on a number of first quarter 2023 themes that <unk> talked about including one key financial takeaways, starting with quarterly revenue here on the right hand chart.
And then continuing with other quarterly financial information.
And to a brief update to our financial outlook for the remainder of the year.
Key points to reiterate in detail for this quarter's financials.
One red wires excellence in execution initiatives continue to deliver on our promise and path to profitability as we scale our business with record revenues and record gross profit.
We are providing our government and marquee customers with critical proven and differentiated space infrastructure and payload from the Rosa wings. The GPS III <unk> son sensors to the PMI ascent and three D Biosystem facility.
These and other solutions digital engineering and payload created in our over 300000 square feet of facilities by our outstanding team members across the globe drove this first quarter 2023 revenue and gross profit growth.
Yes.
<unk> first quarter 2023 saw our first positive adjusted EBITDA quarter, since becoming a public company and record positive adjusted EBITDA overall.
In the first quarter of 2023 Red Bar has continued to win and deliver on more profitable contracts to more than doubled gross profit, but we're also doing this more efficiently as we drove more operating leverage into the business with absolute and percentage reductions in operating expenses and SG&A this quarter.
Turning to revenue as you can see from the chart on the right. We had $57 6 million for the first quarter of 2023 versus $53 7 million for the fourth for the fourth quarter of 2022, representing an increase of seven 3% on a sequential basis on.
On a year over year basis. This represents 75, 3% increase over revenues of $32 9 million in the first quarter of 2022.
On a last 12 months basis, we also grew at a rate of over 33%.
Importantly, excluding the revenue contributed by space Envy, our first quarter revenues were $45 $3 million, a comparable 37, 9% increase over Q1 2023 revenues.
With almost 40% growth is an important milestone as historically the first quarter has generally been a lower revenue growth quarter.
We're able to achieve this in the legacy U S businesses due to the significant growth in backlog not just due to the excellent partnership and acquisition of space N V. As Youll see on the next slide but also as our government business expanded over 85% of our revenue is derived from funding covered funded government programs or from <unk>.
Global marquee customers for delivery in the National security, Leo commercialization and habitation and exploration of space demand.
Please turn to slide 19.
Continuing with revenue. This is our year to date revenue slide for fiscal year 2023. So given it is our first quarter the growth is identical to the previous slide.
But let's discuss the makeup of that growth.
First radar saw year over year revenue growth across all the three primary focus areas, whether it be space systems as an integrated space mission enabler, where payloads to explore live and work in space.
Or with Red wire Europe , with our multinational space leadership, all focus areas saw growth year over year.
From a customer's perspective again, all customer types national security Civil and commercial grew on a year over year basis to.
To remind you on the call of these types civil customers are with civilian space agencies, like NASA Isa or the Luxembourg space Agency.
National Security revenue was derived from U S and Allied countries defense for security departments and ministries like Space Force SDA and Air Force Research Labs.
Finally commercial revenue is derived from predominantly large marquee global Prime aerospace systems and service providers.
And it is important to note that this commercial type of revenue is mostly derived from funded government programs that ultimately face a national security for civil space entity of.
Of note for this quarter, our commercial revenues have seen the largest percentage increase more than 129% year over year.
So our customer diversity is balanced, especially now that our customer types include a larger portion globally.
Please turn to slide 20.
Revenue Red wires path to profitability continued successfully in this quarter as you can see from the progress made on the chart on the right with a steady March quarterly financial improvement in 2022 now continuing in 2023 with growth we discussed on the previous slides leading to more profitable growth.
Over the past year.
Under U S. GAAP, we had a significant improvement $10 million improvement from a net loss of $17 3 million a year ago to a net loss of $7 3 million during the first quarter of 2023 and sequentially, we improved even more compared to the fourth quarter of 2022.
We also saw our quarterly adjusted EBITDA improved $9 million year over year to a positive $4 3 million an improvement of 193% and.
Sequentially. This positive $4 3 million was an improvement of $5 1 million over the fourth quarter of 2022.
This adjusted EBITDA improvement was primarily driven by our improvement in Red wire gross profit or.
Our excellence in execution initiatives, the roll off of lower margin contracts better labor utilization better program management and cost control increased our year over year gross margin from 15, 7% to 24, 7%.
With our year over year gross profit nearly three times higher from $5 2 million to $14 2 million.
The adjusted EBITDA improvement was also supported by being more efficient with our indirect operating expenses.
First quarter Red wire SG&A year over year improvement occurred on both an absolute and percentage of revenue basis.
Absolute SG&A declined 23, 4% from 21 million in the first quarter of 2000 $22 million to $16 million in the first quarter of 2023 and now stands at 27, 8% of revenue. This represents a significant drop from <unk> first quarter of 2022 SG&A margins.
Please turn to slide 21.
Similar to our fourth quarter on the left hand chart, we show free cash flow as a reminder, free cash flow provides a perspective based on our operating cash flow and Capex unadjusted for one time items.
As you can see during the first quarter 2023 free cash flow consumption increased to a use of cash of $14 8 million compared with the fourth quarter of 2020, twos $5 5 million.
Although we saw a significant improvement in our profit and loss statement. The sequential increase in free cash flow consumption was driven by a historic increase in net working capital driven by our topline growth and given the significant backlog growth going into 2023.
This quarter's consumption was very different from last year's as the cash consumption was attributable last year to losses due to a significantly lower gross profit and much higher SG&A.
This quarter's net working capital build was the primary result of growth in our contracted assets and decrease in our deferred revenue and.
And since the end of March we're seeing much less cash consumption with a notable reduction in net working capital.
Red wires management remains very focused on improvement trend in our free cash flow as we execute on the revenue growth conversion of our $287 million of contracted backlog.
On the right hand chart, we show our available liquidity as of March 31, 2023, which totaled $36 3 million.
This quarter's liquidity is much improved from a year ago as we continued our path to profitability and again since the end of Q1, we're seeing much less cash consumption with a notable reduction in net working capital.
Finally, given our improved financial position, especially our improvement in gross profit and adjusted EBITDA and effective may 1st the company met the requirements to end the incremental 2% Pik interest required under our credit facility with Adam Street partners.
This achievement save significant expense and as a direct result of the global Red wire team's commercial and operational successes, leading to an excellent start to the year that Pete and I had been discussing throughout this call.
I will now turn the presentation back over to Pete to provide a brief outlook for the remainder of 2023.
Please turn to slide 22.
Thank you Jonathan.
Please turn to slide 23.
A brief reminder of the outlook for the remainder of 2023.
Our most recent first quarter was a strong start to the year as a result for 2023, we affirm that we expect our full year revenue to be between 220 million to $250 million, which represents 46% year over year growth at the midpoint of the range.
With that I'd like to thank all of the Red wire employees for an excellent first quarter.
Thank you for all the hard work you do across the World every day to accelerate humanities expansion in this space go Red wire.
Thank you and we will now open the floor for questions.
Thank you ladies and gentlemen, the floor is now open for questions. If you do have a question. Please press star one on your telephone keypad at this time again Thats Star. One if you do have a question or comment please hold as we poll for questions.
And we will take our first question from Mike Crawford from B Riley. Please go ahead Mike.
Thank you just to start off where we left off I was hoping we could go a little bit further into your outlook, where you're talking about.
Our program management and cost control to increase gross margin and we expect gross margin improvement during the year, but do.
Do you expect I know, there's a big range.
So it's like star sensors sensors on the lower side and Roes on the higher side, but what more can you tell us about gross margin percentages that youre targeting directionally for the rest of this year.
Maybe we could start with that.
Okay.
Hey, guys, Hey, Mike how are you.
Thank you for your question so that was a lot so.
Yeah.
Hum.
The gross margin part because I think that was the the sensor.
Sense of it is yes as you can see we're significantly improving our gross margin over time.
And some of the reason for this is if you think about the history of Red wire. One is the built in systemic efficiencies that we're able to achieve is to take a lot of the companies that were previously small businesses and inject.
More programmatic discipline better systems through things like ERP implementations.
And.
And taking a hard look at the gross margins and the pricing power that we can achieve by going to market in the integrated bundles.
And things like that is a much larger company so all of those.
Different improvements are what you see happening in gross margins.
To date and the improvements that you see there and then we expect to continue to be able to improve on those gross margins as we continue into the future and thats essentially the plan because.
I can tell you some of it really unique technologies that we have that are highly differentiated like you mentioned Rosa have increasing pricing power in the marketplace.
And are gaining much wider adoption now that we have so many wings on the ISS Jonathan anything you want to add to that I would just say we improved our gross margin from $15 seven to $24 seven I would say that level of improvement is aspirational, Mike I know you want a specific number but we do believe we can start.
Moving this gross margin into from not just from the mid twenties, but higher than that it's just from a timing standpoint.
Just being able to do that in three four months. It takes it takes a number of months to do it but we have and intend to do it we're seeing the performance improvement. This is a 65% improvement over gross margin even last quarter I just want to warn you that being able to get that level of improvement on a quarter over quarter basis is more aspirational I do believe we can get there just.
I wouldn't want to put it all in 2023.
And to that end I do know, there's a wide variance in margin on Japan.
Products that you are delivering and so.
It's not necessarily going to be a straight line is that correct.
That's right Mike when we look at it it's a bit of a product mix.
But I would say across all of our focus areas, whether it be enabling space missions and space industries with the payloads and in Europe , we're improving margins across across the board because of the excellence in execution that Pete talked about and so in certain areas youre seeing multiple for a 500 basis points of <unk>.
<unk> improvement.
And as we again see the roll off of older contracts that people that Pete talked about you just start to see that positive impact create kind of a virtuous cycle.
Okay, and just one more on this if you don't mind I think you mentioned 300000 square feet of space, a lot of that manufacturing and how.
How much room does.
<unk> had to grow before you have to.
We have significant Capex, which was you know under a million dollars in the quarter.
Yeah, No great question, no I think that there's a healthy amount of growth in that space. That's already out there as you know a lot of our.
Facilities, and not necessarily our facilities, but our capabilities that would otherwise be capex is paid for by our customers and.
In many cases and because we.
We've really acquired a lot of significant.
In place.
Capabilities I think we're we have what we need to achieve the goals. We've we've outlined for 2023.
Okay, Great one of the reasons, we're seeing margins improve one of the reasons, we're seeing margin improvement as we're efficiently using these facilities.
Okay.
Again, I do reference the question with I know, there's a there's a mix issue on revenue. So you can't answer you know specifically regarding EBITDA, but.
Good.
I think it's fair to assume.
Steady.
Higher.
SG&A now as opposed to those that going down further from here.
So the SG&A, there's still opportunities to continue to improve on our SG&A as a percentage of revenue. So in an absolute basis as revenue grows of course, SG&A will grow as well, but we're very.
Very focused on.
On maintaining SG&A in a level.
Commensurate to a revenue that achieves our overall profit objectives I think the the broader idea is would be within SG&A.
Swing in.
Internal research and development and how much we spend on that that that will be more variable based on the number of opportunities.
That we have that present themselves throughout the year.
Excellent. Thank you very much.
Great. Thanks, Mike Thanks, Mike.
Thank you and we will take our next question from Greg Konrad from Jefferies. Please go ahead Greg.
Good morning, and great quarter.
Thanks, Greg Greg.
Maybe not.
Not to continue the last set of questions, but obviously EBITA was very strong in the quarter. I mean, you talked about some of the drivers you had the EAC is last year.
And some mix I mean, how are you thinking about just sustainability on an EBITDA perspective, just given <unk> headwinds through the year I mean should we expect.
To remain positive from an EBITDA perspective for the rest of the year.
So again, just to kind of expand a little bit more on the.
The last question.
So there is a fair amount of efficiency that we can continue to pull out just through excellence in execution.
And that is kind of our broad.
Nomenclature for this idea of.
Enhancing our delivery systems.
Through a more disciplined approach.
And then perhaps some of the <unk>.
Legacy.
Organizations and some of the legacy projects that.
Comprise red wire as we came together over the last couple of years. So there's a there's amount of profitability that we can.
Our pull out of that and that of course is typically tied to the eac's. However.
There is also what we what we are.
We are doing from a strategic perspective, because when you look at our growth.
Growth rate.
30% plus growth rates is there is a lot of demand out there on the marketplace that we don't want to Miss out on if it required some sort of Iran investments. So the swing factor in EBITDA for us is.
Is going to be.
Steady increases in efficiencies, but.
Throttling up or down I read based on the opportunities that are presented throughout the year.
Does that makes sense.
Yeah I mean.
So there's some variability when you when you think out in the plan based on inter.
Internal actions.
Correct, maybe a little bit harder to forecast.
Correct.
Just thinking about the revenue and obviously the last couple of years have been weird, but typically there is some sequential build through through the year and if I just look at the midpoint of your revenue outlook. It kind of implies that revenues are kind of flattish sequentially through the year obviously.
On a good Q1 are there any puts or takes there can you maybe talk about the dynamics there just thinking about kind of how you built up the year's revenue outlook.
Yes, no. It's interesting one of the things we're very focused on is making sure that we look at the right time period, and we don't react to things.
And it space. This is especially important for a company like red wire because.
We have.
Programs and products.
That can materially move.
The needle on any given quarter right. For example, we mentioned and Mike mentioned, we have everything from the fine sand sensors, all the way to the Roses.
Opportunities in the pipeline.
That are really big and depending on when those hit which can be difficult to predict.
Predict both in the government and the commercial.
Based on.
Sure.
<unk> spending profiles.
So quarter to quarter, it's a lot more.
More difficult to predict.
Then year over year.
So what we're really focused on is if you go back to the idea that excluding space NV.
We grew 37, 9%.
Last year our midpoint.
For this year is to grow 46% mid point on the range that we gave.
So the focus is really on having that 30%, 40% revenue growth year over year and.
When it actually occurs but can be more challenging to predict.
Okay, and then maybe just lastly, you talked about some of the two changes around your Kpis and looks like the pipeline is still healthy, but stepped down quite a bit sequentially.
What accounted for that whether it was submitted bids are just evolution of programs moving in and out.
And just how youre thinking about the pipeline more broadly.
Jonathan Yes.
Just mathematics now we have a pipeline that's roughly five years. So we're coming into 2023. So now we extended out a year right and Theres no doubt that there are going to be a filling of that pipeline in 2008 as we go through the year and the same thing happened last year Youll start to see the pipeline start to move right. So it's just a mathematical.
<unk>, we're shifting it out a year and in that year a lot of the 600 actually has found its way into backlog right. So a lot of what you see in this company, which is pretty special you can see the pipeline turn into contracts that we're bidding on turning to backlog turn into revenue and now you have seen we have a path to profitability with this.
Gross margin moving up right and we continue again there was a focus on the last.
Analysts on gross margin that's the place to look that's where we're trying to really move the needle from the mid twenties get that higher with the with the idea that we're taking this larger pipeline turning it into backlog revenue, obviously on a path to profitability to free cash flow too.
It makes sense.
Thank you.
And the other reminder, NASA Glenn.
Okay.
Correct.
There aren't more if you'd like.
You had I thought I thought youre going to have another one but go ahead.
I'll throw in one more quick one.
But can you maybe just talk about that 14 million euro contract announced under <unk>.
For the <unk> Biosystems I think you did mentioned space N V. But I know you also have quite a bit of.
A three D printing technology before that can you maybe just talk about the legacy position and kind of cross sell opportunities that youre seeing with that business.
Yeah, absolutely well so it's a good point in terms of taking a.
Capability and moving beyond just the U S to a much larger total addressable market worldwide right. So red wire was already previously the leader in bio manufacturing on orbit with RBS as this.
Creates expands our leadership to more of a global presence presence and I think that the most critical factor here and this applies to.
Red wires business overall is there there is a certain point in the company's history, where it transition transitions from being about flying single experiments to actually building a business.
And I think thats, what youre seeing here in the biomass factoring specifically is there may be startups and of course.
Uh huh.
Many years ago. Some of these technology started in startups. So it's a it's an important part of the ecosystems, but their startup typically is flying single experiments right in order to prove out the technology and in this particular case, what's really exciting about the three D bio printing coming out of <unk> when added to the BFS the bio.
<unk> facility already funded by NASA as you can see that this is shifting from being single experiment offerings like our full offering within red wire with multiple customers. So it's really about scaling and building technical momentum in an area and Thats. What I think is probably most exciting to us about.
Sure.
When you see us combining these technologies and leveraging the broader red wire expertise in this area to grow that segment as.
Not just an area, where we're pushing technology, but a business offering that generates real revenue and profitability.
Yes.
I will officially leave it at that thank you.
Thanks, Craig Thanks, Greg.
As a reminder, that star one if you do have a question archon.
And our next question comes from Sujit de Silva from Roth MKS.
Please go ahead.
Hi, Peter Hi, Jonathan Congratulations on hitting EBITDA positive great accomplishment there.
Thank you yeah looking at yeah looking at the revenue lines, just trying to understand is that Matt just maybe a hard question to answer but you have you cited metrics for the number of launches in the and the systems in there and then also some of the.
Sensor systems and the Rosa systems I'm, just curious is there a way to think about an ASP quote unquote kind of a revenue per here as you start to do more of these systems and provide those kind of unit metrics at least or is it just all over the map and hard to really trace out that way.
Go ahead John .
So first of all I appreciate the question and we do have obviously unit economics, we have a very good I D of it we generally don't present, those because of competitive reasons right.
We can say that we are bidding and winning larger contracts that youre seeing directly in the improvement of margin to 24, 7% in the first quarter, but we don't provide unit economics, yet due to competitive reasons. However, we are going to be moving towards what I.
Call of Red wire, 101, and being able to talk to the investment community concerning unit economics based on our enabling space missions explore live and work in space and then obviously, our European but really global business with multinationals. So we will be able to do that in the future, but right now we don't give the specifics on different product areas.
For competitive reasons, which is common in the aerospace industry.
Yeah.
I appreciate the sensitivity there and then my other question is on a longer term.
Model, perhaps I mean, you've had do you have this.
Payload business and the Isa contract. The first milestone 14 million Euro is there opportunity for that business model to evolve longer term into a type of revenue share or per unit type of or some sort of business like that versus staying a contract business with milestone payments.
Yes, I think thats right so as the.
The market evolves, you're going to see a lot more activity in commercial space.
Which is going to generate a lot of different <unk>.
New ways of.
Bob.
Providing value.
So right now typically a lot of these things like a bio printing for instance is.
Is funded through a government organization as a project like the $14 million Euro, we're having out of Asia, but thats not the ultimately goal in either for red wire or <unk> for that matter, where they are trying to do is stimulate that economy in space.
We're a commercial organizations like red wire can have major breakthroughs.
<unk>.
Things like being able to print organoid.
That are really important to the pharmaceutical industry or cell manufacturing or on the in space manufacturing side.
Some of the work that we've done with forming crystals.
For pharmaceuticals, so ultimately.
Red wire in a way get two bites of the Apple we get paid to do.
Develop these technologies as the government pushes the.
Key technologies necessary for future space exploration.
And Microgravity research, but we also maintain this critical intellectual property as we look at the commercial opportunities associated with what are the different products that could be.
Manufacturing at scale and space and sold on a per unit basis too.
Industries like I mentioned pharmaceuticals.
Thanks, It's important to note that we're getting there and the margins on this business can be quite high if we look at the ability again on going back to gross margin you talk about the ability to generate higher gross margin this quarter versus.
2022 first quarter a lot of it was due to that explore live and work in space.
But mostly driven by the traditional business model of being paid by government customers.
Got it that's great and thanks for the preview of the business model to come guys I appreciate it. Thanks.
Thank you.
As a reminder, star one if you do have a question or comment.
And there are no further questions at this time I would like to turn the floor back over to management for closing remarks.
Yes, again I would like to thank everybody for joining the call and reiterate just how proud red wire is of our employees for delivering a great first quarter and looking forward to.
Through the remainder of 2023, thank you and have a good day.
Thank you ladies and gentlemen, this does conclude today's teleconference. We thank you for your participation you may disconnect. Your lines at this time and have a great day.
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