Q3 2023 Redwire Corp Earnings Call
[music].
Speaker 1: Greetings. Welcome to the Redwire Space Q3 2023 earnings call.
Greetings and welcome to the Red wire space Q3 2020.
At this time all participants are in a listen only mode. A question and answer session that will follow this presentation.
Speaker 1: Anyone should require operator assistance during the conference, please press star zero on your telephone keypad. Please note this conference is being recorded. I will now turn the call to the moderator.
When should we acquire operator assistance during the conference. Please press Star zero.
Please note this conference is being recorded.
Now I'll turn the conference over to your host.
Senior Vice President financial planning and analysis and Investor.
You may begin.
Speaker 2: Thank you, Shimali, and good morning, everyone. Welcome to Redwire's third quarter 2023 earnings call. We hope that you have seen our earnings release, which we issued yesterday afternoon. It has also been posted in the investor relations section of our website at redwirespace.com.
Thank you sure Molly and good morning, everyone and welcome to Red why our third quarter 2023 earnings call. We hope that you have seen our earnings release, which we issued yesterday afternoon. It has also been posted to the Investor Relations section of our website at Red wire space Dot com.
Speaker 2: Let me remind everyone that during the call, Redwire 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 2.
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 future.
Our forward looking statements are subject to risks and uncertainties that are described in more detail on slide two.
Speaker 2: Additionally, to the extent we discussed non-GAAP measures during the call, please see slide 3, our earnings release, or the investor presentation on our website for the calculation of these measures and GAAP reconciliation.
Additionally to the extent, we discuss non-GAAP measures during the call. Please see slide three our earnings release or the Investor presentation on our website for the calculation of these measures and the GAAP reconciliations.
Speaker 2: As previously mentioned, I am Jeff Zunig, Redwire Senior Vice President of Financial Planning and Analysis in investor relations.
As previously mentioned I am Jeff read why our senior Vice President of financial planning analysis, and Investor Relations. Joining me on today's call are Peter Cuneo, Chairman and Chief Executive Officer, and Jonathan Bailey, Chief Financial Officer, with that I would like to turn the call over to Pete Pete.
Speaker 2: Joining me on today's call are Peter Canito, Chairman and Chief Executive Officer, and Jonathan Bailiff, Chief Financial Officer. With that, I would like to turn the call over to Peter Canito.
Speaker 3: Thank you, Jeff. During today's call, I will take you through a discussion of our key accomplishments in the third 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.
Hey, Jeff during today's call I will take you through a discussion of our key accomplishments in the third 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.
Speaker 3: I am pleased to report that the third quarter was another record quarter for financial performance at Redwire. Our ability to deliver a wide breadth of high quality solutions and products to our customers is enabling us to deliver tangible financial results for our shareholders.
I am pleased to report that the third quarter was another record quarter for financial performance at Red why our ability to deliver a wide breadth of high quality solutions and products to our customers is enabling us to deliver tangible financial results for our shareholders.
During the third quarter of 2023, we once again achieved record revenues gross profit and adjusted EBITDA.
We expanded our margins with a beneficial shift in product mix, we continue to balanced topline and bottomline growth, which supports our sustainable financial position and we demonstrated resilience from our diversity of products customers and end markets during a highly dynamic period in the space industry.
Right.
Please turn to slide seven.
Speaker 3: The third quarter of 2023 was another excellent quarter for Redwire, during which we continued our momentum from the first half of 2023. We have now delivered three consecutive quarters of positive adjusted EBITDA and revenue growth.
The third quarter of 2023 was another excellent quarter for Red wire during which we continued our momentum from the first half of 2023, we have now delivered three consecutive quarters of positive adjusted EBITDA and revenue growth.
Speaker 3: We achieved $62.6 million in Q3 revenue, a year-over-year quarterly growth of 68.1% from the third quarter of 2022 to the third quarter of 2023.
We achieved $62.6 million in Q3 revenue year over year quarterly growth of 68, 1% from the third quarter of 2022 to the third quarter of 2023.
Speaker 3: We achieved positive adjusted EBITDA of $4.9 million in Q3, a $6.4 million increase on a year-over-year basis from the third quarter of 2022 to the third quarter of 2023.
We achieved positive adjusted EBITDA, a $4.9 million in Q3, a $66.4 million increase on a year over year basis from the third quarter of 2022 did the third quarter of 2023.
Speaker 3: We achieved a net loss of $6.3 million, a $4.1 million year-over-year improvement from the third quarter of 2022 to the third quarter of 2023, and we achieved free cash flow of negative $5.9 million, a year-over-year improvement of $6.7 million.
We achieved a net loss of $6 $3 million, a $4.1 million year over year improvement from the third quarter of 2022 to the third quarter of 2023, and we achieved free cash flow of negative $5 nine.
A million dollars a year over year improvement of $6 $7 million.
Speaker 3: Lastly, we also achieved cash from operations of negative $3.3 million, a year-over-year improvement of $8 million.
Lastly, we also achieved cash from operations of negative $3 $3 million a year over year improvement of $8 million.
Speaker 3: It is important to note that we achieve these positive financial results by developing and delivering critical innovations for our customers. In Q3, we continued our established track record of delivering dependable, flight worthy products and launched five solutions on three launches in the quarter.
It is important to note that we achieved these positive financial results by developing and delivering critical innovations for our customers. In Q3, we continued our established track record of delivering dependable flight worthy product and launched five solutions on three launches in the quarter.
Speaker 3: Beyond the numbers, this reliable performance for our customers provides a foundation for future growth.
Beyond the numbers this reliable performance for our customers provides a foundation for future growth.
Please turn to slide eight.
Speaker 3: At RedWire, our breadth of products and customers provides strengths and resilience to the business. Our ability to balance our focus across multiple customer markets provides stability to the organization.
And red wire, our breadth of products and customers provides strength and resilience to the business our ability to balance our focus across multiple customer markets provides stability to the organization.
Speaker 3: Therefore, it can be instructive to discuss some of the trends we see across these markets.
Therefore, it can be instructive to discuss some of the trends we see across these markets first.
Speaker 3: First, the national security market, which encompasses US and allied national security organizations including classified projects.
First the national security market, which encompasses U S and allied national security organizations, including classified projects.
Speaker 3: It is important to note that we see this as our fastest growing target market in the near future. Current geopolitical dynamics, most notably an emerging space race with China, are driving significant growth in the market, and we are well positioned to capitalize on this growth trend.
It is important to note that we've seen this is our fastest growing target market in the near future.
Current geopolitical dynamics, most notably in emerging space race with China are driving significant growth in the market and we are well positioned to capitalize on this growth trend.
Speaker 3: As example, we are participating on the Space Development Agency programs with multiple prime contractors on multiple tranches, providing critical capabilities that will enable the Space Force National Security Space architecture.
As example, we are participating on the space development agency programs with multiple prime contractors on multiple tranches, providing critical capabilities that will enable the space force national National Security space architectures.
One particular differentiator worth noting is our ability to perform unclassified contracts these contracts require facilities in <unk>.
Speaker 3: One particular differentiator worth noting is our ability to perform on classified contracts. These contracts require facilities and personnel that take time and funding to put in place. Redwire already has this capability, which puts us ahead of some of our competitors. This barrier to entry increases our total addressable market, or TAM, with limited competition.
Personnel, they take time and funding to put in place Red wire already has this capability, which puts US ahead of some of our competitors. This barrier to entry increases our total addressable market or Tam with limited competition.
Speaker 3: Another customer market we serve is the commercial space market.
Another customer market, we serve is the commercial space market.
Speaker 3: This market predominantly includes commercial space companies providing commercial services for a variety of end customers.
This market predominantly includes commercial space companies, providing commercial services for a variety of end customers.
Speaker 3: At Redwire, it is our opinion that the commercial space market has tremendous opportunity for growth.
At Red wire. It is our opinion that the commercial space market has tremendous opportunity progress. However, recent volatility in the capital markets has created a near term headwind for this market a reduction in capital for commercial space companies is delaying awards in this target market and we're seeing some cigna.
Speaker 3: However, recent volatility in the capital markets has created a near-term headwind for this market. A reduction in capital for commercial space companies is delaying awards in this target market and we're seeing some significant pipeline opportunities pushing out into the future quarter.
Efficient pipeline opportunities pushing out into the future quarters, However, large well funded commercial entities still show demand for red wires capabilities because of our space space flight heritage. Fortunately the growth in National Security should offset this near term trend.
Speaker 3: However, large, well-funded commercial entities still show demand for Redwire's capabilities because of our spaceflight heritage.
Speaker 3: Fortunately, the growth in national security should offset this near-term trend, and in some cases, our commercial customers are also ultimately targeting growth with national security customers.
And in some cases, our commercial customers are also ultimately targeting growth with national security customers.
Speaker 3: Lastly, we are also working in the civil space market, which includes civil space agencies such as NASA and ESA.
Lastly, we are also working in the civil space market, which includes civil space agencies, such as NASA and Isa.
Speaker 3: It is appropriate to acknowledge that there is some risk associated with the NASA budget due to potential congressional budgeting outcomes playing out in the U.S. government. However, again, our diversity here provides us some mitigation as demand for the European Space Agency remains strong. In addition, we are seeing strong demand signals from other multinational civil space agencies across the globe.
It is appropriate to acknowledge that there is some risk associated with the NASA budget due to potential congressional budgeting outcomes playing out in the U S. Government. However, again, our diversity here provides us some mitigation as demand for the European Space Agency remains strong in.
In addition, we are seeing strong demand signals from other multinational civil space agencies across the globe.
Speaker 3: So the bottom line is this, the space industry has entered a dynamic period with a number of different market trends affecting overall market demand.
So the bottom line is this the space industry has entered a dynamic period with a number of different market trends affecting overall market demand.
Speaker 3: However, Redwire's access to a rapidly growing national security market to include classified budgets provides balance to some emerging headwinds in commercial and US civil space markets. Additionally, our global footprint allows us to participate in multinational civil space opportunities with expanding budgets, such as in Europe .
However, red wires access to a rapidly growing national security market to include classified budgets provides balance to some emerging headwinds in commercial and U S. Civil space markets. Additionally, our global footprint allows us to participate and multinational civil space opportunities with.
Expanding budgets such as in Europe.
Speaker 3: The net result is a resilient position across diverse markets that provides many pathways to growth.
The net result is a resilient position across diverse markets that provides many pathways to grass.
Turning to slide nine.
Speaker 3: As RedWire continues on its path to profitability, one of our key approaches is to balance top-line growth and bottom-line profitability. As a result, RedWire's approach to growth balances risk with profitability, avoiding growth at any cost.
Is it Red wire continues on its path to profitability one of our key approaches is to balance top line growth and bottom line profitability as.
As a result, red water's approach to growth balances risk with profitability avoiding growth at any cost.
Speaker 3: This disciplined approach drives our financial performance through selective bidding. In addition, as discussed last quarter, Redwire continues to make prudent strategic investments that drive our return on investment. We'll discuss these investments in additional detail later in the presentation.
This disciplined approach drives our financial performance through selective bidding. In addition, as discussed last quarter Red wire continues to make prudent strategic investments that drive our return on investment.
We will discuss these investments in additional detail later in the presentation.
Speaker 3: Balancing top line and bottom line growth ensures we create value in the present while maintaining a strong foundation for the future.
Balancing topline and Bottomline growth insurers, we create value in the present, while maintaining a strong foundation for the future.
Turning to slide 10.
Speaker 3: As I just mentioned, our strong financial performance is driven by our proven ability to deliver differentiated solutions for our customers today, which is why we are confident that it is sustainable. On the next few slides, we'll share some examples of our recent operational successes and investments. As I mentioned...
As I just mentioned our strong financial performance is driven by our proven ability to deliver differentiated solutions for our customers today, which is why we are confident that it is sustainable.
On the next few slides will share some examples of our recent operational successes and investments.
As I mentioned National security spend is on the right.
Speaker 3: The U.S. Base Force budget request for fiscal year 2024 of $30 billion is $3.9 billion or almost 15% higher than the FY 2023 enacted budget.
The U S space Force budget request for fiscal year 2024 of $30 billion is 3.9.
$9 billion or almost 15% higher than the FY 2023 enacted budget in.
Speaker 3: In addition, the Department of the Air Force's comprehensive strategy for the Space Force for August showed a sizable portion of the Space Force budget dedicated to classified projects through 2028.
In addition, the department of the Air Force's comprehensive strategy for the Space Force for August showed a sizable portion of the space force budget dedicated to classified projects through 2028.
Speaker 3: With secure facilities in multiple geographies, cleared employees with critical skill sets, and leadership with proven national security experience, RedWire is well positioned to continue building its classified national security business.
With the Cook with secure facilities in multiple geographies cleared employees with critical skill sets and leadership with proven national security experience rapid wire is well positioned to continue building its classified national security business.
Speaker 3: For the year-to-date period through September 30, 2023, 21.2% of revenues were from national security. Please turn to...
For the year to date period through September 32023, 21, 2% of revenues were from National Security.
Please turn to slide 11.
Speaker 3: In our Mission Enabler Focus area, Redwire is proud to have delivered 10 core sun sensors for the Psyche spacecraft, which will journey to an asteroid located between Mars and Jupiter. Redwire sun sensors will help the Psyche spacecraft to accurately navigate the stars throughout its 2.2 billion mile journey.
And our mission enabled a focus area of Red wire is proud to have delivered 10 course sun sensors for the psyche space Crafts, which will journey to an asteroid located between Mars and Jupiter.
While your son sensors will help the psyche space craft to accurately navigate the stars throughout its $2 2 billion mile journey.
Speaker 3: This is only the latest space mission to rely on Red Wire Signed Fensers, which have supported a variety of high-profile missions from multiple rover missions to Mars, then that's as doubled asteroid redirection test in 2022. An excellent example of the power of our space heritage.
This is only the latest space mission to rely on red wire side, and sensors, which have supported a variety of high profile missions from multiple Rover missions Tomorrow is the masses doubled asteroid redirection test in 2022.
Excellent example of the power of our space Heritage.
Please turn to slide 12.
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Speaker 3: Redwire recently announced the first spaceflight mission for its cutting-edge, in-space pharmaceutical manufacturing platform, Pillbox, aboard SpaceX Commercial Resupply Services 29.
Red wire recently announced the first space flight mission for its cutting edge in space pharmaceutical manufacturing platform pillbox aboard space X commercial resupply services 29.
Speaker 3: The inaugural mission in partnership with Eli Lilly and Company will conduct three experiments focused on developing advanced treatments for diabetes, cardiovascular disease, and pain.
The inaugural mission in partnership with Eli Lilly <unk> Company will conduct three experiments focused on developing advanced treatments for diabetes cardiovascular disease and pain.
Speaker 3: To commemorate this breakthrough fight, RedWire developed the mission patch shown on the right of this slide.
To commemorate this breakthrough fight Red wire developed emission pad shown on the right of this slide.
Speaker 3: Building on RedWire's multi-decade space crystallization flight heritage dating back to the space shuttle era, Pillbox is a striking example of RedWire's ongoing leadership in space biotech solutions.
Building on Red wires, multi decade space crystallization flight heritage dating back to the space Shuttle era pillbox is a striking example of red wires ongoing leadership in space biotech solutions.
Yes.
Please turn to slide 13.
Speaker 3: Finally, space is a multinational endeavor, and Redwire Space continues to be a global leader in international space missions.
Finally space is a multinational endeavor and red wire space continues to be a global leader in international space missions.
Speaker 3: Redwire recently announced that it has been awarded a contract with OHB Italy to provide the onboard computer for the European Space Agency's Comet Interceptor mission.
Red wire recently announced that it has been awarded a contract with O H B, Italy to provide the onboard computer for the European space Agency's comments Interceptor mission.
Speaker 3: Commit interceptor will be the first spacecraft to visit a long period dynamically new comet. The onboard computer is a part of RedWire's third generation advanced data and power management system. And as the brains of the spacecraft, it is designed to monitor and control other critical components.
Commented interceptor will be the first spacecraft to visit a long period dynamically new comment.
The onboard computer is a part of Red wires third generation advanced data and power management system and as the brains of the space craft. It is designed to monitor and control other critical components.
Speaker 3: With our expanded multinational operations, we are very proud to have been selected to support exciting East activities, including comment interceptor. Please turn to slide four.
With our expanded multinational operations, we are very proud to have been selected to support exciting east activities, including comment interceptor.
Please turn to slide 14.
Turning to our bookings and backlogs are broken was during the third quarter were $46 $5 million an increase over our contracted awards for the second quarter of 2023, which totaled $45 $6 million or last 12 months book to Bill ratio was 1.38 times as of Q3 2023.
Speaker 3: Our brookings during the third quarter were $46.5 million, an increase over our contracted awards for the second quarter of 2023, which totaled $45.6 million. Our last 12 months Booktable Ratio was 1.38 times as of Q3 2023.
Yeah.
Speaker 3: Finally, as you can see on the right-hand side of this slide, our contracted backlog has increased 59.5% since September 30th of last year, to a contracted backlog at the end of Q3 2023 of $253.4 million.
Finally, as you can see on the right hand side of this slide our contracted backlog has increased 59, 5% since September 30th of last year to our contracted backlog at the end of Q3 2023 of $253 $4 million.
Speaker 3: The grossing contracted backlog is one factor that gives us confidence in our future growth and stability.
The growth in contracted backlog is one factor that gives us confidence in our future growth and stability.
Speaker 3: We continue to have a healthy pipeline with an estimated $4.5 billion of identified opportunities, including approximately $714 million in proposals submitted year-to-date through September 30th, 2023.
We continue to have a healthy pipeline with an estimated $4 $5 billion of identified opportunities, including approximately $714 million in proposals submitted year to date through September 30th 2023.
Please turn to slide 15.
Speaker 3: Not only did RedWire achieve positive adjusted EBITDA during the first three quarters of 2023, we did so while continuing to make prudent strategic investments. During the year-to-date period ending September 30th, 2023, we have made $5.2 million in capital expenditures, $4 million in investments in research and development, and $3 million in a variety of corporate investments in systems and infrastructure that flow through the SG&A line.
Not only did red wire achieve positive adjusted EBITDA during the first three quarters of 2023, we did so while continuing to make prudent strategic investments during the year to date period, ending September 32023, we have made $5.2 million in capital expenditures $4 million in <unk>.
<unk> and research and development and $3 million in a variety of corporate investments in systems and infrastructure that flow through the SG&A line.
Speaker 3: Clearly, we continue to demonstrate our ability to perform and deliver now while also investing in our future.
Clearly, we continue to demonstrate our ability to perform and deliver now while also investing in our future.
Please turn to slide 16.
Speaker 3: With that, I'd now like to turn the call over to Jonathan Vailas, Red Wires Chief Financial Officer, Jonathan.
With that I'd now like to turn the call over to Jonathan Bailiff Red wires, Chief Financial Officer Jonathan.
Speaker 2: Thank you Pete. Before I turn to the financial results, let me just highlight on this slide it's rendering for NASA's upcoming Dragonfly mission. Redwire is proud to have been selected to supply critical navigation technology with this groundbreaking mission to advance humanity's search for building blocks of life on Saturn's largest moon, Titan.
Thank you Pete before I turn to the financial results. Let me just highlight on this slide it's rendering for NASA as upcoming Dragonfly mission Red wire is proud to have been selected to supply critical navigation technology for this groundbreaking mission to advance humanity search for building blocks of life on Saturn largest moon Titan.
Please turn to slide 17.
Similar to the other quarters. This year. The next few pages for quantifying expound on a number of themes that Peter just talked about including key financial takeaways, starting with the financial quarterly metrics shown on these charts and then continuing on with other quarterly year to date and last 12 month financial information.
Speaker 4: Similar to the other quarters this year, the next few pages will quantify and expound on a number of themes that Pete just talked about, including key financial takeaways, starting with the financial quarterly metrics shown on these charts, and then continuing on with other quarterly year-to-date and last 12 month financial information.
Speaker 4: An important point to reiterate in detail for this third quarter's financials is that Redwire's excellence in execution initiatives and our global team continue to deliver on our growth promises and our path to profitability as we scale our business with record revenues, record gross margin and profit and record adjusted EBITDA once again this quarter.
An important point to reiterate in detail for this third quarter's financials is that red wires excellence in execution initiatives and our global team continued to deliver on our growth promises and our path to profitability as we scale our business with record revenues record gross margin and profit and record adjusted EBITDA once again this quarter.
So let's discuss the specifics.
Speaker 4: As Pete spoke about in his introduction, this chart shows the continuing 2023 trend of positive year-over-year results across all our financial metrics, starting with the achievement of record revenue of $62.6 million in the third quarter of 2023.
Speak as Pete spoke about in his introduction. This chart shows the continuing 2023 trend of positive year over year results across all our financial metrics, starting with the achievement of record revenue at $62 6 million in the third quarter of 2023.
Speaker 4: We achieved our third consecutive positive adjusted EBITDA quarter since becoming a public company. And again, a record adjusted EBITDA of $4.9 million in this third quarter.
We achieved our third quarter, our third consecutive positive adjusted EBITDA quarter since becoming a public company again, a record adjusted EBITDA of $4 9 million in this third quarter.
Speaker 4: Similar to the last two quarters, better adjusted EBITDA occurred primarily due to a more than doubling of gross profit year-over-year. And is attributable to discipline program management and continued cost controls.
Similar to the last two quarters better adjusted EBITDA occurred primarily due to a more than doubling of gross profit year over year and is attributable to disciplined program management and continued cost controls. These.
Speaker 4: These same factors also contributed to a 4.1 million year-over-year improvement in a net loss of 6.3 million in the third quarter of 2023.
These same factors also contributed to a $4 1 million year over year improvement and a net loss of $6 3 million in the third quarter of 2023.
Speaker 4: In the third quarter of 2023, we also achieved your over your improvement in free cashflow of 6.7 million. With that improvement in cashflow, free cashflow being driven by the improvement in cash from operations of 8.0 million.
In the third quarter of 2023, we also achieved year over year improvement in free cash flow of $6 7 million with that improvement in cash flow free cash flow being driven by the improvement in cash from operations of $8 3 million.
Please turn to slide 18.
Speaker 4: Specifically for quarterly revenue, as you can see from the chart, and as I talked about before, this quarter's record 62.6 million represented a 68.1% increase on a year-over-year basis, and an increase of 4.2% on a sequential basis.
Specifically for quarterly revenue as you can see from the chart and as I talked about before this quarter's record $62 6 million, representing a 68, 1% increase on a year over year basis, and an increase of four 2% on a sequential basis.
Speaker 4: On a full year last 12 month basis, Redwire grew revenue at 58.2% rate. An acceleration of the revenue growth from last quarter's similar period of 45.6%. With more than 85% of our revenue derived from funded government programs or from global market customers that he talked about, who are delivering in the national security area, leo-commercialization, and the exploration of space to name just a few.
On a full year last 12 month basis Red wire grew revenue at 58, 2% rate and acceleration of the revenue growth from last quarter similar period of 45, 6% with more than 85% of our revenue derived from funded government programs or from global marquee customers that Pete talked about we're delivering in the Nash.
Security area, Leo commercialization and the exploration of space to name just a few.
Speaker 4: excluding the revenue contributed by space and v are third quarter revenues were forty nine point one million an excellent organic growth rate of thirty one point eight percent on a comparable year-of-year basis especially as this is more profitable growth
Excluding the revenue contributed by space N V. Our third quarter revenues were $49 1 million, an excellent organic growth rate of 31, 8% on a comparable year over year basis, especially as this is more profitable growth.
Please turn to slide 19.
Speaker 4: For the year to date, for first nine months of 2023, Redwire recorded $180.3 million of revenue, which is a 68.8% Euro-Berier revenue growth. Excluding the revenue contributed by Space and V, we grew organically at 31.3% compared to the first nine months of 2022.
For the year to date for first nine months of 2023, Red why recorded $183 million of revenue, which is a 68, 8% year over year revenue growth.
Excluding the revenue contributed by space N V. We grew organically at 31, 3% compared to the first nine months of 2022.
Speaker 4: We saw growth across all three of our primary focus areas, with space systems and subsystems as an integrated mission enabler, payloads and infrastructure to explore, live and work in space, and with Redwire Europe spearheading our multinational space leadership.
We saw growth across all three of our primary focus areas with space systems and subsystems as an integrated mission enabler payloads and infrastructure to explore live and work in space and with Red wire Europe, spearheading our multinational space leadership.
Speaker 4: The revenue percentage breakdown by customer type for year to date through September , shown on this slide, also shows the diversification of our revenue. And adjusted EBITDA and Caslow streams with 45.9% of our revenue from Syville, 32.9% from commercial, and 21.2% from national security customers. Echoing peed's comments about the strength from balance and resiliency of our operations.
The revenue percentage breakdown by customer type for year to date through September shown on this slide also shows the diversification of our revenue and adjusted EBITDA and cash flow streams with 45, 9% of our revenue from civil 32, 9% from commercial and 21, 2% from National security customers Echoing pizza.
Comments about the strength from balance and resiliency of our operations.
Speaker 4: Of note, for the year-to-date period through September , our commercial customer revenues have seen the largest growth percentages of 90.2% year-over-year. Our civil customer revenues grew at 78.5% year-over-year, and our national security revenues grew year-over-year by 30.5% through September .
Of note for the year to date period through September our commercial customer revenues I've seen the largest growth percentages of 92% year over year, our civil customer revenues grew at 78, 5% year over year and our National security revenues grew year over year by 35% through September.
Please turn to slide 20.
Speaker 4: Redwire's path to profitability that we've discussed on prior calls continued successfully in this quarter, as you can see from the progress made on the chart on the right, with a steady march of quarterly financial improvement in 2022, now continuing through 2023 third quarter.
<unk> path to profitability that we've discussed on prior calls 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 through 2023 third quarter.
Speaker 4: The 2023 adjusted EBITDA is improving 6.4 million year-over-year to a record 4.9 million.
The 2023, adjusted EBITDA is improving $6 4 million year over year to a record $4 9 million.
Speaker 4: Once again, our record adjusted EBITOM improvement with a primarily driven barro improvement in Gross Profit, with a year of year third quarter Gross Profit growing 2.2 times higher, from $7.9 million to $17.1 million.
Once again, our record adjusted EBITDA improvement was primarily driven by our improvement in gross profit with a year over year third quarter gross profit growing 2.2 times higher from $7 9 million to $17 $1 million.
Speaker 4: The significant gross profit and gross margin improvement was primarily driven by better contract mix and the maturing of our program management.
The significant gross profit and gross margin improvement was primarily driven by better contract mix and the maturing of our program management.
Speaker 4: Our Adjusted EBITDA improvement was also supported by excellent cost control, with RedWare 3rd quarter SGNA expenses at 29.2% of revenue, a significant drop from the 41.4% in the 3rd quarter of fiscal year 2022.
Our adjusted EBITDA improvement was also supported by excellent cost control with Red wire third quarter SG&A expenses at 29, 2% of revenue a.
A significant drop from the 41, 4% in the third quarter of fiscal year 2022.
Please turn to slide 21.
Speaker 4: Similar to last quarter, on the left hand chart, we show free cash flow. As a reminder, free cash flow provides a metric based on our US gap, cash from operations minus capital expenditures for CAPEX.
Similar to last quarter on the left hand chart, we show free cash flow.
As a reminder, free cash flow provides a metric based on our U S. GAAP cash from operations minus capital expenditures for Capex.
Speaker 4: On a year-over-year basis, quarterly free cash flow improved by $6.7 million to a use of cash of $5.9 million, and this is due to an $8 million improvement in year-over-year cash from operations.
On a year over year basis quarterly free cash flow improved by $6 7 million to a use of cash of $5 9 million and this is due to an $8 million improvement in year over year cash from operations.
Speaker 4: Credit goes to the revenue growth and profitability improvements already discussed. But in addition, we had more efficient and effective working capital management over the third quarter, as you can see by the narrowing of our operating cash flow operations. This is helped by our diversity of cash flow that is not dependent on any one product or solution or any one customer class.
Credit goes to the revenue growth and profitability improvements already discussed but in addition, we had more efficient and effective working capital management over the third quarter as you can see by the narrowing of our operating cash from operations. This is helped by our diversity of cash flow that is not dependent on any one product or solution or any one customer class.
Speaker 4: Improvement in your overall quarterly cash used in operating activities was also offset by over $5 million of planned capital expenditures and other expenses associated with growth and resiliency initiatives like our radio frequency test chamber and our ERP implementation in the third quarter of 2023 just to name a few.
Improvement in year over year quarterly cash used in operating activities was also offset by by over $5 million of planned capital expenditures and other expenses associated with growth and resiliency initiatives like our radio frequency test chamber and our ERP implementation in the third quarter of 2023.
Just to name a few.
Speaker 4: These expenditures are intended to grow and diversify our revenue, scale our operations, and accelerate our path to profitability.
These expenditures are intended to grow and diversify our revenue.
Scale, our operations and accelerate our path to profitability.
Speaker 4: On the right-hand chart, we show our available liquidity as of September 30th, 2023, which totaled $30.9 million. This quarter's liquidity is much improved from a year ago as we continue our path to profitability. And I want to thank all of the RedWire's teams for this quarter's excellent results, a total global effort that we will work to continue and improve upon through 2023 and beyond.
On the right hand chart, we show our available liquidity as of September 32023, which totaled $39 million.
This quarter's liquidity is much improved from a year ago as we continue our path to profitability and I want to thank all of the <unk> teams for this quarter's excellent results a total global effort that we will work to continue and improve upon through 2023 and beyond.
Speaker 4: Please turn to slide 2022. Please turn to slide 22. And I will now turn the presentation back over to Pete to provide a brief outlook for the remainder of 23. Pete.
Please turn to slide 2022, please turn to slide 22, and I will now turn the presentation back over to Pete to provide a brief outlook for the remainder of 'twenty three.
Speaker 3: Thank you Jonathan. Please turn to slide 23 for brief discussion of the outlook for the remainder of 2023.
Thank you Jonathan Please turn to slide 23 for a brief discussion of the outlook for the remainder of 2023.
Speaker 3: For 2023, we reaffirm our full year guidance range of $220 million to $250 million, which represents 46% year-over-year growth at the midpoint of the range.
For 2023, we reaffirm our full year guidance range of $220 million to $250 million, which represents 46% year over year growth at the midpoint of the range.
Speaker 3: As you can see from our presentation, Redwire continues on our path to profitability and continues to deliver now with strong operational and financial performance while investing in our future, resulting in a strong pipeline and future backlog. With that, I'd like to thank all of the Redwire professionals around the world for their hard work and an excellent third quarter. And all our customers for trusting Redwire. We will now open the floor for questions.
As you can see from our presentation Red wire continues on our path to profitability and continues to deliver now with strong operational and financial performance, while investing in our future, resulting in a strong pipeline and future backlog with that I'd like to thank all of the red wire professionals around the world.
For their hard work and then excellent third quarter and all of our customers for trusting red wire.
We will now open the floor for questions.
Thank you and at this time, we'll be conducting a question and answer session. If you would like to ask a question. Please press star one on your telephone keypad.
Speaker 1: a question and answer session. If you would like to ask a question, please press star one on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press star one on your telephone keypad.
Confirmation tone will indicate your line is in the question queue.
You May press Star two if you would like to remove your question.
For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star.
Our first question comes from the line of Mike Crawford with B Riley Securities. Please proceed with your question.
Speaker 5: Thank you Pete and Jonathan. First of all, I'm really impressed by not only the gross margins, I know you mentioned mixed, but also the jump in pipeline by I think $800 million.
Thank you.
And Jonathan.
First of all.
Uh huh.
Really impressed by not only the gross margins I know you mentioned mix, but I'm also the jump in pipeline like I think $800 million from last quarter and in the 200 million job.
Speaker 5: last quarter and the $200 million jump and bids submitted waiting for proposal. Can you just dive into that bid pipeline in a little bit more detail for us? Have you lost any bids? Are there any big awards that you're expecting before the end of this year? I know Q4 is usually a pretty good bookings quarter for you.
Bids are submitted waiting for proposal can you just dive into that that bid pipeline and a little bit more detail for us like you have you lost any bids are there any big awards that you're expecting before the end of this year I know Q4 is usually a pretty good bookings quarter for you.
Speaker 3: Yeah, hey Mike, how are you? Good, this is Pete. Appreciate your question. Yeah, so again, we're always bidding.
Yeah, Hey, Mike how are you yeah the speed.
I appreciate your question Yeah. So again, we're always bidding.
Speaker 3: as a result we're always losing, but we're also always winning. And...
As a result, we're always losing [laughter].
We're also always winning.
And.
Speaker 3: I really am very proud, quite frankly, the team for the growth in that pipeline. So thank you for calling it out, because we are, we really have started to
I really am very proud quite frankly, the team for the growth in that pipeline. So thank you for calling it out.
Because we are we really have started to.
Speaker 3: hit our rhythm in terms of regularly being out in front of new opportunities and increasing our bid tempo. And that's really important for our growth. We don't typically project awards by quarter. There's a lot of reasons for them, not the least of which is that some of these are very hard to predict when you have a dynamic.
Hit our rhythm in terms of a regular regularly being out in front of new opportunities.
And increasing our bid tempo and that's really important for our growth.
We don't typically.
Project.
Awards by quarter.
There's a lot of reasons for them.
For that.
Not the least of which is that some of these are very hard to predict when you have a dynamic gov.
Speaker 3: government situation as well as just a general the general dynamic things going on in the space interest or industry right now. But yeah, we expect a regular tempo of awards. They do tend to be pretty lumpy. We are bidding things.
Government situation as well as.
Just the general the general dynamic things going on in the space interest our industry right now.
But yeah, we expect a regular tempo of awards they do tend to be pretty lumpy, we are bidding things.
Speaker 3: you know, over a hundred million dollars in our pipeline. So, you know, I know that I'll...
Over $100 million in our pipeline, so I know that all.
Speaker 3: If it's not your next question, one of the questions will be about our book-to-bill for the quarter. So I can start talking about that right away, but typically what will happen is we'll win a big bid and then we'll work it off for a while, while we're submitting more big bids, and then book-to-bill will pop up. But the timing of that is pretty difficult to predict, and that's why we always try to guide people towards...
If it's not your next question one of the questions there'll be about our book to Bill for the quarter.
So I can start talking about that right away, but.
Typically what will happen is when a big bid and then we'll work it off for a while while were submitting more big bids and then.
Book to Bill pop up and.
But the timing of that it's pretty difficult to predict and that's why we always try to guide people towards.
Speaker 3: uh... that yearly or last twelve months a book-to-bill ratio because the timing of our really large awards make it difficult to uh... uh... to really have a meaningful number in terms of book-to-bill on a quarterly basis
That yearly lower last 12 months, our book to Bill ratio, because the timing of our really large awards make it difficult to.
To really have a meaningful number in terms of book to Bill on a quarterly basis did I answer your question.
Speaker 5: Um, yeah, partially, um, maybe, uh...
Yep, partially P M.
Hum.
Speaker 5: If I come out from a slightly different angle in...
If I come back from a slightly different angle.
The context of the.
Speaker 5: reaffirmed guidance you gave of $220-$250 million for the year. I mean, that implies that fourth quarter revenue could be anywhere from $40 million to $70 million with the range that you have. I would imagine we'd have to have an absolute government shutdown for you to be anywhere near $40 million, but what would have to happen? What are things that could happen that could actually spike your revenue up to $70 million?
Our reaffirmed guidance you gave up 222 undertook filling in for the year I mean that implies that the.
Fourth quarter revenue could be anywhere from 40 million to $70 million.
What's the range that you have I would imagine we'd have to have absolutely a government shutdown.
For you to be anywhere near 40 million, but what what what what would have to happen, but what what are the things that could happen that could actually be spiky revenue up to $70 million in the fourth quarter.
Speaker 3: Yeah, well, the timing of awards is the key to that, right? So a lot of our customers, they're not focused on fiscal year end or things, or in the case of the government, their fiscal year ends in October or late September . So, you know, they're not seeing it as a calendar year dynamic. So, you know, the timing could materially shift.
Yeah, well the timing of awards is that is the key to that right. So.
A lot of our customers, they're not focused on.
Fiscal year end or things or in the case of the government fiscal year ends in October late September.
So they're not seeing it as a calendar year dynamic so.
The timing could materially shift.
Speaker 3: things one way or the other, although, you know, let me talk to you a little bit about our approach to guidance.
Things, one way or the other although you know.
Let me talk to you a little bit about our approach to guidance.
Speaker 3: As you know, we're a fairly young public company, and we've set out kind of three guiding principles for our guidance. Number one is to...
As you know, we're a fairly young public company and we've set out kind of three guiding principles for our guidance.
Number one is to keep it simple.
Speaker 3: Number two is to take a long-term view. And number three is to be somewhat conservative on our approach. So we're not giving people, we're not confusing the marketplace as we move forward here. So from the guidance perspective,
Number two is to take a long term view.
And number three is to be somewhat conservative on our approach so.
We're not giving people were not confusing the marketplace as we move forward here so from the guidance perspective.
Speaker 3: The approach that we're taking is giving guidance at the beginning of the year and then sticking with that guidance throughout the year despite the quarter-to-quarter perturbation as a way of just kind of keeping the guidance simple, accurately reflecting our year-on-year pathway and delivering.
The approach that we're taking is giving guidance at the beginning of the year.
And then sticking with that guidance throughout the year, despite the quarter to quarter perturbation.
As a way of just kind of keeping the simple the guidance simple.
Accurately, reflecting our year on year.
Pathway and.
Delivering what we say we're going to do.
Speaker 5: Okay, thank you. That's helpful. I'll just ask one more and it's more of a broader question about what you think the state of
Okay. Thank you that's helpful. I'll, just ask one more and it's more of a broader question about.
What you think the state of the what what is the.
Speaker 5: outlook for commercial LEO destinations in the ISS that might
Outlook for commercial.
Destinations are in the ISS my.
Speaker 5: ladder, but which might actually even be extended beyond 2030 now and where red wire fits in amongst all that. Thank you.
Provider, which might actually even be extended beyond 2030, now and where.
Where he led wire fits in amongst all that thank you.
Yes, I love that question.
So.
Speaker 3: What I'm excited about with Redwire is that we believe that the United States and our allies will always have a presence in LEO. Right now, that presence is the International Space Station. And we're participating a lot in the development, research and development that's happening in LEO on the ISS.
What I'm excited about with Red wire is that we believe that the United States and our allies will always have a presence in Leo right now that presence is the international space station.
And we're.
We're participating.
A lot.
In the.
Development Research and development, that's happening in Leo on the ISS.
As.
Speaker 3: Commercial LEO destinations come online, we're actively engaged with all of the different
Commercial Leo destinations come online, we're actively engaged with all of the different.
Speaker 3: providers out there to provide the capability that we've been providing to the ISS, and quite frankly, not only NASA, but ESA.
Providers out there to provide the capability that we've been providing to the ISS and quite frankly, not only NASA, but isa.
<unk>.
Speaker 3: So they see us as a leader because we're proven. And therefore, the net-net on commercial LEO to us, and of course, we're watching this very closely and weren't terribly surprised by the fact that NASA, if they need to, will extend the life of the ISS. We really, basically, continue to perform and generate revenue off of our services to LEO development, whether it's a
So they see us as a leader because we are proven and therefore, the net net on commercially owe to us and of course.
We're watching this very closely and Werent werent terribly surprised by the fact that NASA, if they need to will extend.
The life of the ISS.
We really basically continue to perform and generate revenue off of our.
Services too.
Leo development, whether it's a.
Government.
Speaker 3: space station or whether it's commercial space station. So for us, we feel pretty comfortable both ways.
Space station or whether it's commercial space station, so for us we feel pretty comfortable.
Both ways.
Okay, well, thank you very much.
Yes, Thanks, Mike.
Yeah.
Our next question comes from the line of Sushi de Silva with Roth.
Please proceed with your question.
Speaker 6: Hi, Peter. Hi, Jonathan. Congratulations on the progress here. So, just curious on the free cash flow, the CapEx spending, is that spending, does that need to happen ahead of your programs coming online, or is that something that customers, you're kind of doing on a success basis as programs?
Hi, Peter Hi, Jonathan Congratulations on the progress here.
So I'm just curious on the free cash flow the capex spending is that.
Spending does that need to happen ahead of your programs.
Coming online or is that something that customers.
You're kind of doing on a success basis as programs ramp.
Speaker 3: Hey, Suji, how are you? Good to hear from you.
Hey, Susan how are you good to hear from me.
<unk>.
Speaker 3: It depends. So we have CapEx expenditures associated with ground support equipment developing our
It depends so we have capex expenditures associated with ground support equipment.
Developing our.
Speaker 3: really large solar array wings for the power and propulsion element of Gateway. That would be a good example of a CAPEX supporting your term programs. We also have our most recently built RF chamber that supports our antenna business for
Really large solar array wings for.
The power and propulsion element of gateway that would be a good example of a capex supporting near term programs.
We also have our most recently.
<unk> built RF chamber that supports our antenna business for us.
Speaker 3: customers like the SDA, and a pretty large percentage of our feature pipeline, so associated with antennas. So, in some cases, it's to support ongoing operations, and in other cases, it's built to support a more recent and emerging.
Customers like the FDA.
And a pretty large.
Percentage of our future pipeline, so associated with antennas. So in some cases, it's to support ongoing operations.
And in other cases.
It is built to support a more recent and emerging.
Program wins as well as what we anticipate to be growth areas in the company.
Speaker 4: Jonathan, I don't know if you want to add anything to that. No, exactly. I mean, the expenditures that we make for equipment, a lot of it's captured in the contracts themselves and paid for by the contracts, right? But a lot of the CapEx that Pete, for example, used perfect examples is an example of CapEx that we can use. I mean, these pieces of equipment last a long time and can be used on other contracts. That's why you're seeing a level of inefficiency. The only thing I would add to Pete's comments is we watch these return on invested capital as CapEx.
Jonathan I don't know if you want to add anything to that no exactly I mean, the expenditures that we make for equipment a lot of it is captured in the contracts themselves and paid for by the contracts right. So but a lot of the Capex had Pete for example use perfect. Examples is an example of capex that we can use.
These pieces of equipment last a long time it can be used on other contracts. That's that's why you're seeing a level of inefficiency. The only thing I would add to Pete's comments is the return we watch these return on invested capital of this capex very very closely and Thats why youre seeing.
Speaker 4: very, very closely. And that's why you're seeing the narrowing of our cash flow from operations is happening because we're focused on those returns happening for our investments earlier and then obviously with a threshold that's got to meet. There's a discipline to this process, Suji.
The narrowing of our cash flow from operations is happening because we're focused on those returns happening for our investments earlier, and then obviously with our threshold.
Theres a discipline to this process.
Speaker 6: Great, and then sticking to the financials, the gross margin side, you talked in the prepared remarks about gross margin tailwind from mix, can you just remind us the relative gross margins, how should we think about that in segments and where the mix tailwinds are versus headwinds in gross margin or relative?
Okay, Great and then sticking on the financials. The gross margin side, you talked in the prepared remarks about.
Gross margin tailwind from mix can you just remind us the relative gross margins, how should we think about that segments and where the mix.
<unk> Saar versus headwinds in gross margin relative gross margins.
Speaker 3: Yeah, so we don't have segments, so you know, our gross margin is our gross margin. What I can tell you about gross margin is the way we think about it is one of the key things that I tried to highlight in my comments was this idea of avoiding growth at any cost. And...
And yes, so we don't have segment so.
Our gross margin as our gross margin what.
What I can talk to you about gross margin is the way we think about it is one of the key things that I tried to highlight in my comments was this idea of avoiding growth at any cost and.
Speaker 3: I would say a year, potentially two years ago, the industry was
I would say.
Year to potentially two years ago.
The industry was.
Speaker 3: on quite frankly the investor community was primarily focused on uh... top-line growth uh... really at any at any cost uh...
And quite frankly, the Investor community was primarily focused on <unk>.
Topline growth really at any at any cost.
Speaker 3: I'm not sure Redwire was ever all in on that concept, but certainly in the past year, we've been very selective about what we bid and we've been working very hard at sunsetting other programs that either came through acquisition or otherwise that had gross margin.
I'm not sure Red wire was ever all in on that concept, but.
Certainly in the past year we.
And we've been very selective about what we bid.
We've been working very hard at sunsetting.
Other programs that either came through acquisition or otherwise that had gross margin.
Speaker 3: less than what we're targeting. So that discipline approach of...
Less than what we're targeting.
So that disciplined approach of <unk>.
Speaker 3: uh... selected bidding on programs that uh... where we feel that we can maintain our margins is what's driving uh... the changes you're seeing in gross margins right now
Selective bidding on programs that where we feel that we can maintain our margins is what's driving the changes youre seeing in gross margins right now.
Does that answer your question.
Yes, it does.
Speaker 6: Yeah, good to hear that you're doing that on the acquisitions. And then last question really on the demand, the civil area, you talked about some volatility around the U.S. government. Are you seeing actual program pushouts or positive reductions yet, or is that just a sort of sense that there is some uncertainty there more broadly?
Yes, good to hear that you're doing that on the acquisitions and then last question really on the.
The demand the civil area, you talked about some.
Volatility around the U S. Government are you seeing actual program push outs or positive reductions yet or is that just a sort of sense that there is some uncertainty there more broadly.
Yes, I think I think it's being prudent about.
Speaker 3: Yeah, I think I think it's being prudent about watching closely what's going on in terms of budgeting, specifically for NASA. So I wouldn't say, you know, it's always difficult to understand why the government does what they do. They very publicly, I believe, just announced that they were pushing the LTV.
Watching closely what's going on in terms of budgeting specifically for NASA.
So I wouldn't say, it's always difficult to understand why the government does what they do.
Very publicly I believe just announced that they were pushing the LTV.
Speaker 3: procurement out, for instance, I can't say I don't have first-hand knowledge as to why that is.
Procurement out for instance, I can't say I.
Don't have firsthand knowledge as to why that is.
Speaker 3: uh... but you know we have to be realistic about that some of the congressional uh... budget that are being out there i'd leave uh...
You know we have to be realistic about that some of the congressional budget that are being out there I believe.
Speaker 3: Some of them are looking at rolling back masses budget to 2022 levels. Obviously we have a fair amount of congressional budgeting.
Some of them are looking at rolling back masses budget to 2022 levels. Obviously, we have a fair amount of congressional budgeting or I would say maybe just.
Speaker 3: or I would say maybe just U.S. government dysfunction going on right now. So.
Just use government dysfunction going on right now so.
Speaker 3: You know, that's certainly gonna find its way into the planning cycles. And so we just...
That's certainly going to find its way into the planning cycles.
And so we just.
Speaker 3: need everybody to be clear-eyed and realistic about the potential risk associated with those dynamics.
We need everybody to be clear eyed and realistic about.
The potential risk associated with those dynamics.
Okay.
Right. Thanks, Peter Thanks, Jonathan.
Speaker 4: Yeah, I mean, Suji, the only other thing I would say on that is, you know, it is one of, you know, we're pretty deliberate about, you know, we're celebrating the...
Yes, the only other thing I would say on that is it is one of we're pretty deliberate about we're celebrating the.
Speaker 4: uh... year uh... that we are partnered
Year that we are partnered.
Acquired space and V now Red wire Europe, and so we're pretty deliberate about that obviously you need to meet our financial thresholds, which.
Speaker 4: space and v now red wire Europe and so it would be deliberate about that obviously need to meet our financial thresholds which it would it's which it's meeting but also it allows us to diversify and the isa and and other european government
It's meeting, but also it allows us to diversify.
The Isa and other European governments are very much on a three year cycle of their budgeting as we've talked about with the with the investors in <unk> and that really helps diversify.
Speaker 4: are very much on a three-year cycle of their budgetions we've talked about with the investors in you. And that really helps diversify as part of what the regular overall strategy is to be this.
As part of the <unk> overall strategy is to be the <unk>.
Speaker 4: You know, still grow this business, grow it profitably, but also make sure that it's a lower risk.
They'll grow this business grow it profitably, but also make sure that it's a lower risk type of profile and take advantage of these opportunities as they come up globally.
Speaker 1: type of profile and take advantage of these opportunities as they come up globally. Yep. Okay. Great. Thanks. All right. Next question comes from the line of Greg Conrad.
Okay, great. Thanks.
Our next question comes from the line of Greg Konrad with Jefferies. Please proceed with your question.
Good morning, and good quarter.
Hey, Greg Thank you Greg.
Maybe just kind of.
Speaker 7: Brage or fall off to some of the prior questions. I mean, you're coming off the third straight, strong quarter around EBITDAI. I know you don't guide for the year. We can see what the revenue guidance is, but how are you thinking about the variability of profitability and took you for? How much is pie to volume versus mix? I think you've talked about investments in the past.
Page or follow up to some of the prior questions. I mean, you are coming off the third straight strong quarter around EBIT.
No you don't guide for the year, we can see with the revenue guidance is but how are you thinking about the variability of profitability into Q4, how much is tied to volume versus mix I think you've talked about investments in the past and how you're thinking about maintaining positive EBIT.
Speaker 7: you know, how are you thinking about, you know, maintaining positive EBITDA?
Today at year end.
Speaker 3: Yeah, no, thanks. I appreciate the question Greg. So if you think about some of the comments I made on bottom, on balancing top line and bottom line growth.
Yeah no. Thanks I appreciate the question Greg. So if you think about some of the comments I made on BARDA on balancing topline and Bottomline growth.
Speaker 3: I already touched on one aspect of this approach. That's the idea of being selective in our bidding. But we don't want to pass on very significant opportunities that may present itself.
I already touched on one aspect of this approach that's the idea of being selective in our bidding.
But we don't want to.
Pass on very significant opportunities that may present itself.
Speaker 3: in the pipeline that requires some investment upfront because we've kind of talked ourselves into a corner, if you will, around EBITDA. Right? So we're very focused on being profitable. We're very focused on selectively bidding programs that we can be profitable on. But there are instances where going back to the discussion on CAPEX, we may be required to make
In the pipeline that requires some investment upfront because we've.
Yes.
Talk ourselves into a corner, if you will around EBITDA right.
So we're very focused on being profitable we're very focused on.
Selectively bidding programs that we can be profitable on but there are instances where going back to the discussion on capex, we may be required to make.
Speaker 3: An investment, of course, that won't hit EBITDA, that'll hit cash flow more, but there's other internal SG&A or BNP or IRAD dollars that do flow through SG&A that we might have to ramp up on in order to take advantage of some particular positioning that we have. And we don't want to sub-optimize our approach.
And investment of course that won't hit EBITDA that'll hit cash flow more but theres other internal SG&A or BNP or IRA dollars that do flow through SG&A that we might have to ramp up on in order to.
Take advantage of.
Some particular positioning that we have.
And we don't want to we don't want to sub optimize our approach.
Speaker 3: you know, based on something like the guidance we're giving or what have you.
Based on something like the guidance, we're giving or what have you.
Speaker 3: So that's what we mean by balancing top line and bottom line growth is if there is a opportunity out there that includes a high probability win that will materially transform Redwire as a business and we need to spend some of our SG&A money to go after that, we're going to do it.
So that's what we mean by balancing topline and Bottomline growth is if there is a opportunity out there that includes the high probability win that will materially transform.
Red wire has the business and we need to spend some of our SG&A money to go after that we're going to do it. So does that answer your question, Yes thats helpful.
Speaker 7: Does that answer your question? Yeah, that's helpful. And then maybe just to follow up on pillbox and I think you've announced some other partnerships on the drug development side.
And then maybe just to follow up on pill box and I think you've announced some other partnerships on the drug development side with what you've done historically is there any way to think about the Tam of that market and just timing given some of your other partnerships and kind of where we are.
Speaker 7: what you've done historically, is there any way to think about the TAM of that market and
Speaker 7: timing given some of your other partnerships and kind of where we are in terms of adoption and tradition given it seems like there's a lot of options.
In terms of adoption and transition given it seems like there's a lot of opportunities in that market.
Speaker 3: Yeah, it's a very interesting market, you know, in the past when I've talked about red wires, having a blue chip foundation with venture optionality, the biotech segment of our business is certainly part of that venture optionality, which I think is very exciting and maybe not people who invest in the aerospace industry specifically, but certainly people who invest in the biotech industry can appreciate the value of that.
Yes, it's a very interesting market and in the past when Ive talked about red wire as having a blue chip foundation with venture Optionality the biotech.
<unk> of our business is certainly part of that venture Optionality, which I think is very exciting.
Maybe not people, who invest in the aerospace industry, specifically, but certainly people, who understood who invest in the biotech industry.
I can appreciate the value of that.
Speaker 3: It's interesting. There's a lot of opportunities there. We've obviously been working on this for a long time. So even though this is the inaugural launch of Pillbox, we have been working on crystallization, as I mentioned, all the way going back to Space Shuttle. There is some market information on there around crystallization done in
It's interesting there's a lot of opportunities there we've obviously.
Been working on this for a long time, so even though there.
This is the inaugural launch of pillbox, we had been working on crystallization as I mentioned, all the way going back the space Shuttle there is some market information on there around crystallization.
Done it Earth I don't have the Tam figures at my fingertips right now, perhaps that's an item.
Speaker 3: I don't have the TAM figures at my fingertips right now. Perhaps that's an item.
Speaker 3: for follow-up in a future earnings call that we have where we can talk about that. But this is an existing market. The only thing that we're bringing to the market is an innovation where we could potentially, if the experiments are successful, change that. But it's pretty early days. I would say...
For follow up in the future.
The earnings call that we have where we can talk about that.
But this is our existing market the only thing that we're bringing to the market as an innovation, where we could potentially if the experiments are successful.
Hi.
Change that but it's pretty early days I would say.
Speaker 3: The biggest step forward from a maturation perspective in my mind.
The biggest step forward from a maturation perspective in my mind is the fact that we now have this partnership with Eli Lilly So it's not just.
Speaker 3: is the fact that we now have this partnership with Eli Lilly, so it's not just NASA-funded research for the sake of research. There are actual commercial organizations who are really interested in the potential here, very serious commercial organizations, mind you. So that's encouraging. But again, we've got to fly pillbox, it's got to work, we've got to look at the results, and I think as this...
NASA funded.
Research for the sake of research there are actual commercial organizations, who are really interested in the potential here very serious commercial organizations mind you.
So that's encouraging but again, we got to fly pillbox.
It's got to work, we got to look at the results and I think as this progresses forward, we'll learn more the exciting thing about having a positioning where you have a blue chip foundation with venture Optionality is the future of Red wire is not dependent on the success of that one singular mission, but if we do make great strides.
Speaker 3: uh... will learn more exciting thing about having a positioning where you have a blue chip foundation with venture option ality is the future red wires not dependent on
Speaker 3: of the success of that one singular mission. But if we do make great strides here, along with if we make great strides, obviously, we announce the 3D printing of our meniscus and we have a number of really exciting opportunities associated with bioprinting on orbit as well as with those and other.
<unk> along with if we made great strides obviously.
We announced the.
<unk> three D printing of our meniscus in and we have a number of really exciting opportunities associated with bio printing on orbit as well as with those and other.
Speaker 3: biotech experiments that we're conducting on orbit if one of those takes off as you can imagine it It would be exciting for us as a company
Biotech experiments that we're conducting on orbit if one of those takes off.
As you can imagine it would be exciting for us as a company.
Speaker 4: johnson you want to get just just i want to remind you correct that we do talk about uh... in in what we've disclosed is what we call our our red wire one-on-one that the explorer live in work in space for the benefit of humanity which both of what he's talking about is
Jonathan you want to add just I want to remind you Greg that we do talk about.
And what we've disclosed is what we call our Red bar 101 that the explore live and work and space for the benefit of humanity, which both of what people are talking about is for the benefit of all of us on Earth, It's a $5 to $10 billion Tam.
Speaker 4: for the benefit of us on Earth. It's a $5 to $10 billion TAM over the next five years. That includes some level of biotech, but it scratches the surface.
Over the next five years that includes some.
Some level of.
Biotech, but it scratches the surface publicly disclosed numbers that we know the bio research right that doesn't include fairly things associated with printing meniscus is but just the pharma industry spends over $150 billion a year on research and development.
Speaker 4: publicly disclosed numbers that we know the bio research right that doesn't include necessarily uh things associated with printing vinescases but just the pharma industry
Speaker 4: spend over a hundred and fifty billion dollars a year on research and development uh... a year on you know and and this is the market that uh... just like they went to the amazon forty years ago they're gonna go to space and so for us we're going to be talking more about that on in the future but as pizza let's get our pillbox successfully launched and uh... but it's it's already uh... planned and getting up there uh... and so let's let's talk about it later but those give you some numbers here will teach it to the
Year end.
And this is the market that just.
Just like they went to the Amazon 40 years ago, they're going to go to space and so for US we're going to be talking more about that in the future, but as Pete said, let's get our pillbox successfully launched and but it's already planned in getting up there.
So let's talk about it later, Greg, but does give you some numbers here and allow you to see that we're only scratching the surface.
Speaker 4: I mean, it's the perfect name for the product. So it's good to have her name the products. But and then maybe we will thank John . Yeah, John Bellinger, you're out there. He runs this part and has been doing it for decades. And so he named it in association with Eli Lilly also.
I mean, it's the perfect name for the product so good to have or names of products, but.
We will thank God, John Bellinger Youre out there he runs.
Part and has been doing it for decades and so he named it.
In Association with Eli Lilly also.
Speaker 7: And then maybe just to dig into national security a little bit more, I mean, in the prepared remarks you talked a little bit about SBA and Tron.
And then maybe just to dig into the national security a little bit more I mean in the prepared remarks, you talked a little bit about SBA and tranches and.
Speaker 7: you know, that market's, you know, much more stable and you kind of have the drivers versus your commentary around, you know, some of the commercial near-term headwinds. I mean, what's driving that growth? I mean, is there any way to think about, you know, SDA versus some of the other areas of national security that are lifting that business today?
That market.
Much more stable and you kind of have the drivers versus your commentary around some of the commercial near term headwinds.
What's driving that growth I mean is there any way to think about.
SBA versus some of the other areas of National security that are lifting that business today.
Yeah.
So what's driving the growth.
Uh huh.
Speaker 3: national security spending in general is obviously what i
National Security space spending in general is obviously.
Speaker 3: talked about in the prepared remarks about the geopolitical dynamics associated with
Talked about it in the prepared remarks about the geopolitical dynamics associated with <unk>.
Speaker 3: space now being a war-fighting domain. SDA in the near term has been a big part of that. Proliferated LEO is fairly new, and so there's a fair amount of spending there. And as I mentioned, we're participating in those procurements.
<unk> now being a warfighting domain SBA in the near term has been a big part of that proliferated Leo is fairly new and so theres a fair amount of spending there and as I mentioned.
We're participating in those procurement on multiple teams multiple tranches and we will continue to do so so.
Speaker 3: on multiple teams, multiple tranches, and will continue to do so. So that is obviously a big part of it, but.
That is obviously, a big part of it but.
Speaker 3: There's also the classified budgets, which obviously are less public, but there's a lot of activity going on in there, too, through the intelligence community and other customers who operate against those budgets. So that's another, I think, critical aspect to the growth in national security. So again,
There is also the classified budgets, which obviously.
Our last public, but there's a lot of activity going on.
And there too through the intelligence community and other customers who operate.
Against those budgets. So that's another I think critical aspect to the growth in national security.
So again.
Speaker 7: Without going into too much detail, there's just a, there's a lot of, with the idea that space is now considered a warfighting domain and the establishment of the Space Force, they really got their legs under them now as a service. And I think you're starting to see spending grow in a number of different areas around their mission set. I'll leave it at that. Thank you.
Without going into too much detail. There is just a there's a lot of.
With the idea that space is now considered a warfighting domain and the establishment of the space Force.
They really got their legs under them now as a service and I think you are starting to see spending grow in a number of different areas around their mission set.
I'll leave it at that thank you.
Okay.
And our next question comes from the line of.
Brian.
<unk> with Alliance Global partners.
Please proceed with your question.
Great. Thanks, so much for taking my questions you reported bid submitted this year to date were $714 million I'm curious first if you could share the value of the total bids are still awaiting adjudication I take it those numbers are not the same what is your average win rate over the last year or two and then as you've discussed.
Speaker 6: You reported bids submitted this year to date were 714 million. I'm curious, first, if you could share the value of the total bids that are still awaiting adjudication. I take it those numbers are not the same. What is your average win rate over the last year or two? And then, as you've discussed the various market dynamics, what are your plans from now through, say, the end of 2024 in terms of investments, people or dollars, needed in sales and marketing to continue to grow your proposed bid?
The various market dynamics what are your plans from now through say the end of 2024 in terms of investments people are dollars needed in sales and marketing to continue to grow your proposal efforts.
Speaker 3: Okay, that was a lot. So let me take a couple of minutes. I'll start with the last one. We are making investments and growing our
Okay that was a lot so let me.
A couple of them at a time I'll start with the last one.
We are making investments in growing our.
Speaker 3: We're currently in the process, as we are every year at around this time, in building our budgets, so I don't have the exact figures for you for 2024, but we will continue to invest in that area. On the rest of it, I think Jonathan...
Bid and proposal efforts. We're currently in the process as we are every year at around this time and building our budget.
So I don't have the exact figures for you for 2024, but we will continue to invest.
In that area.
On the rest of it I think Jonathan.
Speaker 4: Yeah, let me help you out, Brian . First of all, if you look at last quarter, the year-to-date submitted bid.
Yes, let me let me help you out Brian first of all if you look at last quarter.
Year to date submitted bids.
Speaker 4: you know it it was roughly let's call it path i'm not gonna get the specifics we uh... you know but it publicly disclosed
It was roughly let's call it half I'm not going to give the specifics.
But it's publicly disclosed.
Speaker 4: A large increase in that are some of the bids that are pending. So without, you know, because then we don't talk about what the future in the fourth quarter is doing, but you can get a sense of that from a number standpoint. Historically, the win ratio, which we have disclosed, we haven't disclosed it this year, but in the past we've disclosed about a 40% win ratio. But I do have to emphasize what Pete talked about. We are very selective in what we're bidding to make sure that we are on that path to profitability of improved dividend, improved free cash flow, improved operating cash flow. It then gets to the idea of then CapEx and other investments. We believe that this path to profitability has to take into account those investments. The whole idea of RedWire as a differentiated investment in space is to be more, or as like any aerospace company, to be able to fund a lot of our organic growth, if not most of it, through organic cash flow. And so that's, we're on that path. A lot of it, we have to scale the business to be able to enjoy that. But we are on that path, as you can see, on a year-to-year basis. We don't give the specifics, but you look at the SG&A, a lot of that SG&A, even though it's gone down significantly, it's a percentage from 41%.
A large increase in that are some of the bids that are pending so without because then we don't talk about what the future in the fourth quarter is doing but you can get a sense of that from a number standpoint historically the win ratio, which we have disclosed we haven't disclosed it this year, but in the past we've disclosed about a 40% win ratio, but I do have to emphasize what <unk> talked about we are.
Selective.
And what we're bidding to make sure that we are on that path to profitability of improved EBITDA improved free cash flow improved operating cash flow and then gets the idea of then capex and other investments. We believe that this path to profitability has to take into account those investments the whole idea of red wire as a differentiated investment in.
Space is to be more or as like any aerospace company to be able to fund a lot of our organic growth if not most of it through organic cash flow and so that's we're on that path a lot of it we have to scale the business to be able to enjoy that.
But we are on that path as you can see on a year to year basis, we don't give the specifics, but you look at the SG&A a lot of that SG&A, even though it has gone down significantly as a percentage from 41% to.
Speaker 4: to you know uh... less than thirty percent a lot of that estimate is for growth right um... we don't distinguish it but it is for growth in resiliency uh... and so you know you just need to understand that we have it we have enough cash we have enough liquidity
Less than 30% a lot of that SG&A is for growth right.
We don't distinguish it but it is for growth and resiliency.
And so.
You just need to understand that we have we have enough cash we have enough liquidity to again continue with the growth rates that we've talked about for 2023.
Speaker 4: to again continue with the growth rate that we've talked about uh... for twenty twenty three uh... but we're not gonna do anything differently because it it's working
But we're not going to do anything differently because it's working.
Speaker 3: The only thing I'll add real quickly is that win rates change obviously a lot, right, depending on what you're bidding. It can go up, it can go down based on any specific award, especially if you're using total dollars or revenue awarded.
Great Yeah, the only thing I'll add.
Real quickly.
When rates change, obviously, a lot right depending on what Youre bidding. It can go up it can go down based on any specific award, especially if youre using total dollars.
Our revenue awarded so.
It is.
Speaker 3: If the goal or if what your question is getting at is this idea of taking the number of bids under submitted and trying to apply a win rate to it to project, I would say that because of the dynamic nature of the number of things that we're bidding, the size, the outsize of some of the bids.
If the goal or what your question is getting at is this idea of taking the number of bids under submitted.
Trying to apply a win rate to it to project I would I would say that.
Because of the dynamic nature of the number of things that we're bidding the size the outsize.
Some of the bids.
Speaker 3: And well, it's just how fast things are changing in general. I wouldn't use that as a straight thing. If you want to really.
And well is just how fast things are changing in general.
I wouldn't I wouldn't use that as the straight thing if you want to really.
Hi.
Speaker 3: if you're trying to kind of come up with an algorithm for projecting future growth.
Trying to predict if youre trying to kind of come up with an algorithm for projecting future growth.
Okay.
Speaker 8: I assume most of your contracts are fixed-price, I'm not sure, maybe you can share that, but in line with your strategy to grow profitably, how has your process for pricing of proposals changed over the last 12 to 18 months?
And then in <unk>.
I assume most of your contracts are fixed price I'm not sure maybe you can share that but in line with your strategy to grow profitably. How is your process for pricing. Our proposal has changed over the last 12 months to 18 months if at all.
Speaker 2: So, correct me if I'm wrong here, it is, do you have the exact percentages? Yeah, we generally say, publicly disclosed, that about 80% of our contracts are fixed price.
So correct or am I wrong here. It is do you have the exact percentages, yes, we generally say publicly disclosed that about 80% of our contracts are fixed price.
Speaker 3: So, I mean, again, one of the things that Jonathan mentioned in his prepared remarks was this concept of excellence in execution. Excellence in execution is an internal initiative that we have that really focuses on understanding the business.
So I mean again, one of the things that Jonathan mentioned in his prepared remarks was this concept of excellence in execution excellence and execution is an internal.
Initiatives that we have that really focuses on.
<unk>.
Understanding the business.
Speaker 3: in the details on how we bid and then how that bid translates into recognizing revenue and making sure that we have the programmatic discipline in place.
And the details on how we bid.
And then how that translates into recognizing revenue and making sure that we have the programmatic discipline in place.
Speaker 3: to hit our financial goals. So in that context, we spend a lot of time looking at pricing, and it has changed significantly, especially as I mentioned, we're not looking at growth at any cost. So for instance, when we look at our pricing, we're looking at making sure that we're pricing in a way that will give us the highest potential.
To hit our financial goals.
So in that context, we spent a lot of time looking at pricing.
And it has changed significantly, especially as I mentioned, we're not looking at growth at any cost. So for instance, when we look at our pricing we're looking at making sure that we're pricing in a way that will.
Give us the highest potential.
Speaker 3: path to profitability. So when you think about it from in that context...
The profitability.
So when you think about it from in that context.
Looking at all the different cost elements that go in we're making sure that we.
Apply risk factors associated with our firm fixed price bids.
Speaker 8: as is traditional in the market. So, we have a number of internal processes in place now and are continuously implementing process improvement across the business to make sure that we stay disciplined. Did that answer your question? Thank you so much. Yep, it did, thank you.
As is traditional in.
In the market. So we have a number of internal processes in place now and.
Continuously implementing process improvement across the business.
To make sure that we stay disciplined.
Did that answer your question how much did.
Thank you.
Okay.
Perfect.
And we have reached the end of the question and answer session I'll now turn the call back over to management for closing remarks.
Speaker 3: Yeah, no, I appreciate everybody's questions once again, it was a really exciting quarter for us. We're very pleased with performance and I just want to thank
Yes, no I appreciate everybody's questions. Once again, it was a really exciting quarter for us we're very pleased with the performance and I just want to thank.
Speaker 1: all of our employees and customers out there. That is really what RedWire is all about. At the end of the day, it's our employees that delivered these numbers and it's the trust our customers give in us that enable us to continue to drive our overall performance. So we appreciate everyone's time today. Thank you for listening and go RedWire. And this concludes today's conference and you may disconnect your lines at this time. Thank you for your participation.
All of our employees and customers out there.
That is really what red wire is all about at the end of the day, it's our employees that delivered these numbers and it's the trust our customers given us that enable us to continue.
Continue to drive our overall.
Performance. So we appreciate everyone's time today, thank you for listening and go Red wine.
And this concludes today's conference you may disconnect. Your lines at this time. Thank you for your participation.
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