Q4 2024 Redwire Corp Earnings Call
Speaker Change: [music].
Yeah.
Speaker Change: Greetings and welcome to the Red Wire Corporation, Q4, and full year 2024 earnings call. At this time all participants are in a listen only mode. A question and answer session will follow the formal presentation.
Jefferies: Anyone should require operator assistance. Please press star zero on your telephone keypad. As a reminder, this conference is being recorded its now my pleasure to introduce Jefferies unit S V P financial planning and analysis. Thank you you may begin.
Speaker Change: Good morning, and thank you Daryl welcome to Red wires fourth quarter and full year 2024 earnings call. We hope that Youll see 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.
Speaker Change: Let me remind everyone that during the call right wire management may make forward looking statements that reflect our beliefs expectations intentions or predictions of the future are forward looking statements are subject to risks and uncertainties that are described in more detail on slide three.
Speaker Change: Additionally to the extent, we discuss non-GAAP measures during the call. Please see slide four our earnings release or the Investor presentation on our website for the calculation of these measures and their reconciliation to U S GAAP measures.
Jeff Zoning: I am Jeff zoning right, why our senior Vice President of financial planning and analysis and Investor Relations.
Speaker Change: Joining me on today's call are Peter Cannito, Red wire, Chairman and Chief Executive Officer, and Jonathan Bela Red White, <unk>, Chief Financial Officer with that I would like to turn the call over to Pete Pete.
Pete Cannito: Thank you Jeff during today's call I will outline our key accomplishments during 2024 and Jonathan will then present the financial highlights for the same period. We will then discuss our 2025 outlook after which we will open the call for Q&A.
Speaker Change: Please turn to slide seven.
Speaker Change: During 2024 Red wire effectively executed on the four key principles of our 2024 growth strategy, leading to approximately 25% revenue growth and a strong positioning for 2025.
Speaker Change: During the year Red wire continued to provide critical picks and shovels as a trusted supplier to some of the most remarkable missions of the year. For example in 2024 Red wire delivered 186 sensors, including Sun sensors star trackers and cameras to our customers. Additionally.
Speaker Change: Red wire effectively scaled our production capabilities to meet growing demand through affordable capital investments. For example in 2024, we increased the number of Rosa arrays under contract by 23, 8% year over year.
Speaker Change: Also in order to better in order to be better positioned for scalability and growth Red wire effectively moved up the value chain from trusted supplier to a strategic platform provider with the introduction of five spacecraft platforms across multiple orbits serving the U S and.
Speaker Change: Markets <unk>.
Speaker Change: <unk> sat and fandom for V Leo Thresher, and hammerhead for Leo and Mako for me O G O.
Speaker Change: And finally red wire made incredible advancements in the field of micro gravity manufacturing that furthered our adventure Optionality strategy strategy by launching 27, Pillboxes for partners, including Eli Lilly, Bristol Myers, Squibb, and excessive excessive libero pharma.
Speaker Change: Okay.
Speaker Change: Please turn to slide eight.
Speaker Change: Taking a look at red why our 2020 for execution by the numbers.
Speaker Change: Red wire executed on programs for more than 100 customers with greater than 85% of revenues coming from our many government and marquee customers around the world showcasing our strong revenue diversity.
Speaker Change: In addition, red wire announced the launch of more than 70 products and solutions on 15 launches during the year and that doesn't include product launches that did not get announced due to customer confidentiality.
Speaker Change: We expanded our footprint across the globe, adding three facilities, two in California, and one in Poland.
Speaker Change: And as you can see in the right hand column, our performance resulted in a robust year over year topline growth of 24, 7% to record annual revenue of $304 $1 million.
Speaker Change: Yeah.
Speaker Change: Please turn to slide nine.
Speaker Change: Turning to our contract awards and backlog or contract awards during the full year 2024, or $229 $8 million. Our book to Bill ratio was <unk> 76 times for the year and we ended 2024 with a backlog of $296 $7 million.
Speaker Change: And we as we have continuously reinforced we often see lumpy contract awards from quarter to quarter.
Speaker Change: We continued to expand our pipeline with an estimated $7.1 billion of identified opportunities, including approximately $4.1 billion in proposals submitted during full year 2024.
Speaker Change: This is a result of our moving up the value chain and scaling production growth principles, leading to larger bids as you can see on the upper right hand side of this slide this represents a significant increase of 334, 3% over the corresponding prior year period.
Speaker Change: This growth in bids submitted and throughout the year is a result of our effort to increase the average size of the individual opportunities. We are pursuing we are now bidding on individual programs and the $100 million plus award value on a more regular cadence of course, there is no guarantee we will win these opportunities.
Speaker Change: However, we now have a pipeline of bids that could result in a substantial increase in backlog if we land some of these larger opportunities.
Speaker Change: Because of the success of our transformational investments building the Red wire platform. In 2024, we are now positioned to continuously pursue larger opportunities in 2025 and beyond.
Speaker Change: Please turn to slide 10.
Speaker Change: With that I'd now like to turn the call over to Jonathan Balas Red White, <unk>, Chief Financial Officer to discuss the final financial results for the fourth quarter and full year 2020 for Jonathan.
Speaker Change: Thank you Pete as we said before we're on slide 10, So let's review 2024 with a focus on full year results, starting with revenue red wires full year and fourth quarter performance illustrates the strong positive growth momentum that requires demonstrated during 2024 and over the past three years, our full year 2020 for revenue.
Speaker Change: <unk> reached a record $304 1 million or.
Speaker Change: 24, 7% increase on a year over year basis.
Speaker Change: This excellent revenue growth was achieved despite having a $17 $7 million net.
Net unfavorable estimate at completion or EAC adjustment that resulted from program re planning, which will discuss further.
Speaker Change: Turning to profitability in 2024, we recorded positive adjusted EBITDA for three out of four quarters and positive free cash flow for two out of four quarters, including fourth quarter 2024, However, our fourth quarter adjusted EBITDA was a negative $9 $2 million.
Speaker Change: Primarily due to unfavorable net EAC adjustments for the quarter as a result for full year 2024, <unk> realized an adjusted EBITDA loss of $8 million you should note that these eac's also impacted our net loss, which was additionally impacted by other one off items that I'll talk about momentarily.
Speaker Change: EAC adjustments our project accounting measurement, most often associated with fixed price contracts that occur when a project doesn't proceed exactly as planned EAC adjustments result from changes in project execution timing and costs that can either accelerate or delay recognition of revenue and regulators face both.
Speaker Change: An unfavorable EAC adjustment results in revenue being recognized in future periods, while costs remained at actual levels in the present and these adjustments then impact revenue gross profit net income and adjusted EBITDA.
Speaker Change: But turning to our cash from operations during the fourth quarter 2024, net cash provided by operations totaled a positive $7 1 million.
Speaker Change: This is a sequential and significant improvement of $24 7 million over the third quarter 2024 on.
Speaker Change: On a full year basis, we saw our use of cash from operations of $17 3 million and this is despite achieving two quarters of positive free cash flow during 2020 for the full year results reflect the deliberate investments, we have made into organic and M&A growth, including more than $20 million in capital expenditures internal research.
Speaker Change: Development and a variety of important corporate investments that flow through SG&A.
Speaker Change: This includes $4 1 million of capital expenditures in the fourth quarter of 2024, our highest quarterly capex spend since going public.
Speaker Change: We do expect these investments to yield better revenue growth scale and returns on invested capital in 2025 and beyond and we have clearly continued to demonstrate our ability to financially perform now while also making investments for growth risk reduction and profitability in 2025 and beyond.
Speaker Change: Finally, our total liquidity at the end of 2024 it was <unk>.
Speaker Change: $64 1 million comprised of $48 $7 million in available liquidity and $15 4 million in restricted cash.
Speaker Change: Subsequent to the end of 2024 and 2025 to date, our total available liquidity has been significantly expanded by the $65 $5 million, we've collected associated with the exercise and resumption of our public warrants through March seven 2025.
Speaker Change: Please turn to slide 11.
Speaker Change: In order to provide additional insight into the nature of our 2024 net loss. We provided here a breakdown of the key drivers of the year over year decrease in summary, <unk> 2024, net loss was primarily impacted by significant non routine activity as shown on this slide which bridges between 'twenty three and 'twenty four.
Key among these were the $49 $9 million increase in our loss recognized for the noncash warrant liability fair value adjustment.
Speaker Change: Also a $14 2 million increase in net unfavorable EAC impact already discussed a $9 $8 million increase in litigation settlement and related expenses and a $9 1 million increase in transaction expenses between 23 and 24.
Speaker Change: Please turn to slide 12.
Speaker Change: In summary, though not without growing pains 2024 was a transformational year for red wire, we enter 2025, well positioned with robust revenue growth demonstrated cost control and ample liquidity.
Speaker Change: And with that I'd like to turn the call over to Pete provide a discussion on our 2025 outlook.
Pete Cannito: Hey, Jonathan Please turn to slide 13.
Pete Cannito: Now we would like to focus on our 2025 growth strategy, which is centered around five key principles.
Pete Cannito: Providing picks and shovels, which means delivering on our strong foundation of proven products with demonstrated flight heritage that form the building blocks of space missions for our customers.
Pete Cannito: Delivering multi domain platforms, which means executing our platform strategy by delivering highly differentiated space and airborne platforms for critical missions to include multi domain missions.
Pete Cannito: Exploring the Moon, Mars and beyond which means capitalizing on our decades of experience in providing systems for space exploration and delivering on an ambitious missions to the lunar surface tomorrow and beyond.
Pete Cannito: Advancing venture Optionality, which means continuing to pursue breakthrough developments on advanced technologies that could create new markets with game changing potential.
Pete Cannito: And finally executing accretive M&A, which means continuing our proven track record of effectively creating enterprise value by acquiring technologically differentiated companies at accretive values, a key competitive advantage of red wire, which enables us to continue to rapidly scale as a public.
Pete Cannito: Platform.
Pete Cannito: Over the next few slides I will discuss examples of early successes to demonstrate how we are already executing against these focus areas.
Pete Cannito: Please turn to slide 14.
Pete Cannito: Yes.
Pete Cannito: Starting with providing picks and shovels in early 2025 to lunar landers with Red wire cameras onboard headed to the Moon Fireflies Blue Ghost, which landed on the lunar surface on March 2nd 2025, and intuitive machines, I am too which landed on the lunar surface on March six 2025 <unk>.
Pete Cannito: <unk> cameras, providing critical data in stunning images such as the ones shown on the right of this slide.
Pete Cannito: These cameras leverage decades of flight heritage and prestigious missions, including acting as the eyes of Orion on Nasa's Artemis One mission.
Pete Cannito: Please turn to slide 15.
Pete Cannito: Next delivering multi domain platforms.
Speaker Change: In early February Red wire was proud to announce that it has been awarded a contract to deliver a mako spacecraft to support Tetra six a U S space for space Systems Command mission in geosynchronous orbit or G O <unk>.
Speaker Change: <unk> six is a follow on contract to Tetra five for which red wire is delivering to Mako space craft. The Mako spacecraft for both the Tetra five and Tetra six missions will be the first satellites in G O to be refueled and demonstrate compatibility with multiple available refueling mechanisms.
Speaker Change: Okay.
Speaker Change: Please turn to slide 16.
Speaker Change: Moving next to exploring the Moon Mars and beyond <unk>.
Speaker Change: <unk> has been awarded a study contract by the European Space Agency to conceptualize conceptualize a spacecraft platform that could be delivered tomorrow as part of the agency's light ship initiative Red wire solution is built around an adapted version of our highly versatile small satellite platform hammerhead and are proven.
Speaker Change: Avionics capabilities.
Speaker Change: Red wires European facility in Belgium has more than 40 years of spaceflight heritage developing space craft platforms and success delivering innovative technology for game changing Easter programs, including as the prime contract contractor for <unk> Pro <unk> and pro both the missions.
Which have a combined flight history of 50 years without failure.
Speaker Change: Yeah.
Speaker Change: Please turn to slide 17.
Speaker Change: Turning to advancing venture Optionality Red wire is excited to announce our upcoming Goldenballs investigation, which is looking into the production of gold nano spheres, a high potential space enabled product for biomedical applications, including managing cancer or other diseases.
Speaker Change: There is an existing market for gold nano spheres, and <unk> and by producing them in space. During this investigation red wire aims to yield higher quality more uniform gold nano spheres.
Speaker Change: In addition to the Golden balls investigation Red wire also has several other payloads expected to launch in the coming months, including four additional Pillboxes building on the success of the 28 Pillboxes launched to date.
Speaker Change: Yes.
Speaker Change: Please turn to slide 18.
Speaker Change: Finally, when it comes to executing accretive M&A as many of you know in January 2025, Red wire announced that it has signed an agreement to acquire edge autonomy.
Speaker Change: This transaction is expected to transform red wire into a global leader in multi domain autonomous technology broadening its portfolio of mission critical space platforms to include combat proven autonomous airborne platforms.
Speaker Change: This transaction is expected to close during the second quarter of 2025.
Speaker Change: Please turn to slide 19.
Speaker Change: Now, let's turn our focus towards the combination of red wire and edge autonomy platforms edge autonomy as a leader in providing field proven innovative autonomy and Unscrewed airborne systems advanced optics, and resilient energy solutions and currently brings to airborne platforms to market the VX.
Speaker Change: Z 30 series and airborne platform focused on the U S market and the Penguins series, which is focused on the high potential European defense market as well as the global UAS market.
Speaker Change: Red wire is a leading provider of space based platforms to national security Civil and commercial customers and currently brings five space based platforms to market by.
Speaker Change: By combining with edge autonomy, we extend our platform strategy to become multi domain.
Speaker Change: <unk> domain capability is critical to our national security customers as they start moving towards the future of advanced Warfighting concepts, such as the joint all domain command and control or jazz situ strategy.
Speaker Change: Like our customers, we believe in our future where autonomous space and airborne vehicles collaborate during multi domain operations that deliver a strategic advantage.
Therefore, this combination provides competitive differentiation by supporting integrated missions from the surface of the Earth to the surface of the Moon Mars and beyond.
Speaker Change: Please turn to slide 20.
Speaker Change: The broad benefits of this transformational transaction can be categorized into three key areas technical.
Speaker Change: Operational and financial.
Speaker Change: Starting with the technical benefits of the combination.
Speaker Change: Edge autonomy systems leverage similar operational technology, such as avionics optical sensors computer vision, AI and autonomy software and like Red wire edge autonomy brings proven flight heritage as a result, these technologies are already in production.
Speaker Change: Moving to the operational benefits of the combination combining autonomous airborne and space platforms will meet customer mission requirements for multi domain operations.
Speaker Change: <unk> satellite and edge autonomy airborne airborne vehicles are designed for similar missions, such as intelligence collection and communications to name a few.
Speaker Change: Further red wire and edge autonomy have complementary geographic operations and paths to growth, especially in Europe, where space and defense markets are forecasted to grow.
Speaker Change: Finally, with respect to financial we expect the combination with edge autonomy to accelerate growth across key financial metrics with the added scale driving operating leverage and cash flows and deposition red right red wire with a stronger balance sheet and enhanced credit quality.
Speaker Change: I speak for the entire team when I say that we couldnt be more excited to welcome the edge autonomy team to Red wire and I look forward to building a multi domain defense Tech company together.
Speaker Change: Finally, please turn to slide 21 for a brief discussion of the outlook for 2025.
Speaker Change: As part of the announcement of our combination with edge autonomy, we provided a financial forecast for fiscal year 2025, as if the transaction closed on January one 2025, and we are reaffirming that forecast at this time.
Speaker Change: To reiterate.
Speaker Change: Taking the sum of the Standalone full year fiscal 2025 forecasts for Red wire and edge autonomy Red wire is forecasting full year 2025, combined revenue to be in the range of $535 million to $605 million, which represents a 52.
Speaker Change: Two 9% compound annual growth rate from FY2023 to the FY two FY 'twenty five revenue at the midpoint.
Speaker Change: In addition, we expect the added scale from the combination with edge autonomy will significantly significantly increased operating leverage and cash flow.
Speaker Change: As a result, and taking the sum of the Standalone full year $2025 forecast for Red wire and edge autonomy into account Red wire is forecasting full year combined adjusted EBITDA to be between $70 million and $105 million, which.
Speaker Change: Presents a 138, 8% compound annual growth rate from FY2023 to FY 'twenty five adjusted EBITDA at the midpoint.
Speaker Change: It is important to note that these numbers are intended to be conservative and do not include run rate synergies, but actually do include continued investments and expenses, including integration planned in FY 'twenty five.
Speaker Change: Even taking these investments into account, we expect the combined company to be free cash flow positive in 2025.
Speaker Change: Further the transaction consideration positions <unk> to have a significantly stronger balance sheet with enhanced credit quality as a result of better operational and financial scale.
Speaker Change: Yes.
Speaker Change: Please turn to slide 22.
Speaker Change: With that I want to thank the entire red wire team for their contribution to our results during 2020 for a truly global effort.
Speaker Change: We believe 2024 was a transformational year for Red wire as we balanced topline and Bottomline performance.
Speaker Change: In 2024, we capitalized on our solid foundation as a merchant supplier of critical space subsystems and components to transform into a strategic platform provider with soon to be two on crude airborne systems and five spacecraft to fuel our future expansion.
Speaker Change: We believe with the acquisition of edge autonomy, we are well positioned and stronger than ever and look forward to an exciting 2025.
Speaker Change: We will now open the floor for questions.
Speaker Change: Thank you we will now be conducting a question and answer session. If you would like to ask a question. Please press star one on your telephone keypad <unk>.
Speaker Change: A confirmation tone will indicate your line is in the question queue. You May press star two to remove yourself from the queue for participants using speaker equipment. It may be necessary to pick up your handset before pressing the star keys, we ask that you. Please limit yourself to one question and one follow up question. One moment. Please while we poll for your questions.
Speaker Change: Our first questions come from the launch of Greg Konrad with Jefferies. Please proceed with your questions.
Greg Konrad: Good morning.
Speaker Change: Hey, Greg.
Greg Konrad: Maybe just to start on the guidance I mean, I appreciate the pro forma guidance, but any insight into underlying red wire organic growth I mean, just given the wide pro forma range how much of that is timing of the deal versus other swing factors and maybe what are the main drivers of the top and bottom end of the range.
Speaker Change: Let me take that Greg.
Speaker Change: So look we're giving you actually a full year as if the deal was closing on December 31, as a combined forecast range as we get closer to giving pro forma information out on a U S GAAP basis.
Speaker Change: As we as we approach the end of the first quarter and then the second quarter Youll get more information to understand that but again, we're giving you everything you need to understand on a combined forecast for revenue and EBITDA now, let's just talk about the growth rates. If you look at the growth rates for Red wire, especially these last three years, we've grown at roughly between 15 and 20.
Speaker Change: 5% revenue growth and Thats pretty much on an organic basis. If you look at edge autonomy over their period of time, and even not going back too far but the last couple of years, they've grown between 20, and 30% organically the combined business, even without synergies should be able to grow around 20% organically without further ado.
Speaker Change: <unk> and so when we look at 25, which is still somewhat of a trends issued year for both companies as large contracts are still being formed in the companies themselves are bidding on especially a lot of European space and defense.
Speaker Change: We feel confident and that's why we're giving this range, but it's fairly wide because especially on the space side the nature of our business. So hopefully that answers your question.
Speaker Change: Or at least gives you more detail.
Speaker Change: And then maybe just combining the EAC is in cash.
Speaker Change: First on the EAC I mean, how do you think about those trending into 2025 and then just on cash you had a good Q4, a good working capital release I mean, how do you think about all of that rolling into free cash flow conversion in 2025, just given some of the investments that you've talked about.
Greg Konrad: Yeah. Good question, Greg I'll address the Acs and then I'll turn it over to Jonathan to talk about cash impact.
Greg Konrad: As you know when you first starting out bidding a program some of the nature of the firm fixed price debt.
Greg Konrad: The bids that we are bidding when we break into a new market.
Have some nonrecurring engineering associated with them as you develop these these new technologies that in some cases have never been built.
Greg Konrad: Built before and as a result, as you move through that through those.
That's part of the growing pain of entering these new markets and introducing these new technologies you some.
<unk> run into these.
Greg Konrad: Re planning on the programs that result in the ESC and an unfavorable unfavorable EAC that pushes the revenue out into a future period, while keeping the cost in the same period thats, having an impact both on revenue and the bottom line.
Greg Konrad: The goal is to continue to refine our bid processes.
Greg Konrad: And where possible.
Greg Konrad: To include more management reserve.
Greg Konrad: To reduce the total impact of the Eac's, but also as you move from early nonrecurring engineering.
Greg Konrad: When these.
Greg Konrad: <unk>, our first being developed.
Greg Konrad: And proven after you get the flight heritage you move into production and then those.
Greg Konrad: Revenue should be a lot more predictable and stable and youll see the EAC tail off over time, Jonathan do you want to talk a little bit I guess, yes, my comments I agree with everything Keith said again transformational year, but not without growing pains and this is an example of growing pains, let me just reemphasize no one.
Speaker Change: At Red wire is happy about BCH net EAC unfavorable adjustments.
Speaker Change: But we are in essence trying to do better on a total revenue basis, and youre seeing from a percentage standpoint, still pretty low compared to our peers, but but when we look at the future we're meant to be.
Speaker Change: Neutral on <unk> as we move forward with a number of tools at hand that Peter just talked about.
Speaker Change: I think as you pointed out the cash flows were positive despite the EAC.
Speaker Change: They don't have a direct cash impact on the period that there are recorded that's right.
Speaker Change: Okay. Thank you.
Speaker Change: Thank you our next questions come from the line of Scott Buck with H C. Wainwright. Please proceed with your questions.
Scott Buck: Hey, good morning, guys. Thanks for taking my questions.
Scott Buck: It sounds like a full year 25 revenue guide there are some potential potential benefits from combining the businesses that are not fully captured in the guidance can we get some additional color on what those synergies could look like.
Scott Buck: Yeah, Great question and the Euro.
Scott Buck: You're right as I pointed out.
Scott Buck: We didn't we took a conservative approach and didn't put revenue synergies.
Scott Buck: In there, but the fact of the matter is is.
Scott Buck: We have a really strong presence.
Graphically that aligned between the two companies.
Scott Buck: With major engineering centers in Belgium in Latvia and.
Scott Buck: New office for expansion in Poland.
Scott Buck: So theres opportunities there right there is opportunities to go into.
Scott Buck: Ministry of defense customers on the revenue side.
Scott Buck: That are either buying space craft now and are looking for opportunities to acquire.
Scott Buck: UAS systems from a trusted supplier and or vice versa.
Scott Buck: Countries that are currently buying UAS capabilities from edge autonomy that are very interested in expanding in space. So that's an example, you can also obviously do all the traditional playbooks.
Scott Buck: You look at M&A in terms of consolidating manufacturing capabilities not only in Europe, but also in the U S.
Scott Buck: But we think that the growth is the real story here.
Scott Buck: The organic intrinsic growth.
Scott Buck: Both of these organizations have.
Scott Buck: Demonstrated over the last three years.
Scott Buck: And Thats what were forecasting so any additional revenue synergies.
Scott Buck: That we squeeze out above.
Scott Buck: Any of the costs associated with integration will just be additional upside.
Speaker Change: Great I appreciate that and then my second one can you just remind us what edges pipeline looked like on a standalone basis.
Speaker Change: Sure. So we gave some description of that when we announced the transaction back in January their pipeline is different than ours. They have fleets of their stalkers and penguins out there in which they do fleet replacement fleet upgrades and a number of other.
Speaker Change: Aspects that mirrors, a bit more like commercial aerospace so their programs of record although growing is about $100 million is what we disclosed for 'twenty three we will give more updates but their sales cycle is very short right. They generally are much more mature company and so a lot of their customers will buy to increase those fleets.
Speaker Change: And that's in essence their competitive advantage because it's hard to replace the fleets.
Speaker Change: For there, especially <unk> customers and as those expand then you get almost like annual recurring revenue that happens as part of both the expansion replacement and upgrades, but it's about $100 million right now and again they are bidding in the future on very very large projects also so we do expect that to grow.
Speaker Change: So Jonathan highlights the key point here that I.
Talked about the benefits of.
Speaker Change: This transaction in the context of technical operational and financial and on the financial side. One of the things. We're really excited about is the UAS market is just a more mature industry than spaces right now so it looks different it has this a fleet replacement aspect to it that is much more.
Speaker Change: Predictable fewer eac's et cetera.
Speaker Change: And that's very complementary to red wire, which is in a less mature industry that tends to have a lot of this nonrecurring injury.
Speaker Change: Nonrecurring engineering, so when you think about it when you walk into a red wire facility, you'll see a lot of engineers and technicians are working on a single space craft.
Speaker Change: That is standardized but is highly bespoke for the particular customer mission in there and that's the way that has to do with the maturation of the industry, whereas in the U S. Industry. These are things that are being moved off of a production line much more like in the automotive industry. So it is very complimentary you have lower backlog.
Speaker Change: Because the sales cycles are smaller compared to the multiyear contracts that you get in a space contract, but they are complementary in the sense that they have less of that variability associated with.
Speaker Change: Doing technological things that have never been done before and we think thats going to smooth things out for us over time.
Speaker Change: And just to add one thing Scott briefly.
Speaker Change: <unk> pipeline also is changing quickly with the European defense environment.
Speaker Change: That dynamic environment, increasing and so we'll be giving more information about the pipeline, especially in Europe over the over the coming months.
Speaker Change: Great I appreciate the added color there guys and looking forward to 'twenty five.
Thank you.
Speaker Change: Our next questions come from the line of Brian Kit Slinger with Alliance Global Partners. Please proceed with your questions.
Speaker Change: Great. Thanks, so much with the new administration administration's clear positioning in Ukraine or unclear for that matter are there any changes you expect four edges, Ukraine related revenue compare to your previous internal expectations and then maybe touch on the overall budgetary environment in the U S.
Speaker Change: Procurement cycle for the Red wire business.
Speaker Change: Yeah.
Speaker Change: Yeah, Hey, Brian how are you.
Speaker Change: Good question as usual.
Speaker Change: So talking about the Ukraine first first and foremost we took a very conservative position on forecasting the Ukraine portion of the.
Speaker Change: Edges future revenue and if you go back to the presentation that we did.
Speaker Change: And I believe we 8-K some information on this as well.
Speaker Change: We put out some detail on our conservative approach.
Speaker Change: I would like to highlight whether we all hope for peace in the Ukraine, and but whether the piece happens tomorrow or.
Speaker Change: Or not.
Speaker Change: Still see real opportunity.
Speaker Change: Because any piece in the Ukraine will likely based on the current discussions that we're tracking a result in some sort of demilitarization zone or peacekeeping effort.
Speaker Change: And the way you were going to we believe that that is going to be executed is using drones as a surveillance capability to.
Speaker Change: To monitor the piece or two potentially monitor a persistent.
Speaker Change: Really indefinite deemed military at least for the near future Demilitarization zone.
Speaker Change: So.
Speaker Change: Again, regardless of what happens in the Ukraine, we feel we're protected.
Speaker Change: To the downside because we took a very conservative approach in forecasting.
Speaker Change: Edges revenue and like I said, there's more details out there that we put out but we also see piece in Ukraine is not being <unk>.
Speaker Change: Standstill or a total stop.
Speaker Change: Possibly even.
Speaker Change: An opportunity for peacekeeping.
Speaker Change: Peacekeeping drone technology as well.
Speaker Change: In terms of the.
Speaker Change: Continuing resolution.
Speaker Change: Everything is going on in the government. This is actually not unknown territory for companies like Red wire.
Speaker Change: Those of US who have been around for many years doing this actually lived through sequestration.
Speaker Change: And the fact of the matter is is that.
Speaker Change: Because of the large <unk>.
Speaker Change: Oftentimes multiyear contracts.
Speaker Change: That we.
Speaker Change: We have.
Speaker Change: Typically companies like Red wire defense contractors in general or federal contractors in general.
Speaker Change: <unk>.
Speaker Change: Our weather short term.
Speaker Change: Even government shutdowns, if hopefully it doesn't come to that but because we continue to work on our contracts.
Speaker Change: And as far as delays as far as what we've heard from the government we haven't heard about any delays on our procurements.
Speaker Change: Any of our major procurements, yet in many cases, where a supplier.
Speaker Change: And the orders continue as.
Speaker Change: Prime contractors continue to execute but I think it's too early to say right now based on where the political process is for.
Speaker Change: For us to make any predictions about the long term impact on that.
Speaker Change: Financially, Brian we're very protective we've got record liquidity.
Speaker Change: Obviously, we spent some money obviously in 2024, but had it more than covered.
Speaker Change: And again, we have some discretion over our spending but we feel.
Speaker Change: In a really good position.
Speaker Change: Great and my follow up is.
Speaker Change: You talked about larger programs $100 million plus total contract value does the competitive landscape change.
Speaker Change: Who you're competing with essentially on these larger programs and then just a quick numbers question with the warrant redemption that you mentioned can you update us on the share count. Thanks, so much.
Speaker Change: Sure.
Speaker Change: Yes, the competitors can change although in Europe, we've already been functioning as a prime.
Speaker Change: In many cases.
Speaker Change: So.
Speaker Change: I think over in Europe, our competitive landscape won't shift materially, but but yes.
Speaker Change: When we choose to prime.
Speaker Change: I will say that our prime strategy is very selective.
Speaker Change: Okay.
Speaker Change: Being a merchant supplier in many of the existing architectures is already foundational to red wire.
Speaker Change: Our prime strategy is to look at areas, where there is white space, where there is no clear leader already.
Speaker Change: And where we can offer a future technology through our platforms that isn't currently being done in the example, I'll give is N V Leo.
Speaker Change: Rather than.
Speaker Change: Attacking the proliferated Leo market.
Speaker Change: We're trying to do a leap ahead into what we think is the future of hybrid orbit architectures to.
Speaker Change: To include <unk> and in that particular case because of our technological differentiation.
Speaker Change: The competitive landscape is.
Speaker Change: Really a small handful of people that are trying to build that market.
Speaker Change: In terms of the share count Jonathan do you have that so as of Friday concerning the redemptions.
Speaker Change: Total share count as of Friday, which will disclose in our 10-K $75 million 573294 shares.
Speaker Change: Thank you so much.
Speaker Change: Thank you our next questions come from the line of Griffin boss with B Riley's Securities. Please proceed with your questions.
Griffin Boss: Hi, good morning, and thanks for taking my question. So I just wanted to start out on bookings I understand obviously your bookings are lumpy, but this is the first time I believe that I recall since going public that LTM book to Bill fell below one so just given the magnitude of your bids submitted the $1 2 billion.
Speaker Change: In the quarter of $4 $1 billion on the year.
Speaker Change: Can you talk about how many of those bids maybe are still outstanding today are you seeing longer contract award cycles are you, losing more beds than historically.
Speaker Change: Any context around that.
Speaker Change: Helpful.
Speaker Change: This pipeline and backlog are this constant back and forth depending on winter whenever you snap the chalk at Red wire right. So.
Speaker Change: <unk>.
Speaker Change: We're obviously constantly trying to move.
Speaker Change: Things from pipeline.
Speaker Change: Into backlog.
Speaker Change: But something can move from pipeline into backlog pretty quickly, especially from the bid submitted.
Speaker Change: Number so.
Speaker Change:
Speaker Change: I think we are we kind of look at them as a combined.
Speaker Change: Factors to look at when we do our revenue forecasting to substantiate it and right now although you are correct that our current book to Bill is.
Speaker Change: Hello.
Speaker Change: Can see that on the pipeline side.
Speaker Change: It's fairly large so I think the what we'd like to see occur in the next quarter is for more of those bids to move out of submitted.
Speaker Change: But into and into backlog, but I don't think it's.
Speaker Change: Sure.
Speaker Change: We have enough data to say that that is anything other than a timing.
Speaker Change: Perspective.
Speaker Change: I wouldn't I wouldn't lean forward and say that we see any changes in terms of government.
Speaker Change: Procurement and timelines.
Speaker Change: As of yet.
Speaker Change: It seems to be where each of these different bids are in.
Speaker Change: In the process certainly.
Speaker Change: Some people point to the holidays as being a slow period, but again, that's just speculation I don't know Jonathan do you want to just say Griffin the wide range that we used $5 35 to six months if I take some of this into account because again, it's a longer sales cycle for the current bids outstanding and there are no doubt that theyre larger bids too.
Speaker Change: But but.
Speaker Change: That's that's kind of how we will disclose it at right now and we'll give you updates.
Okay fair enough thanks for that.
Second one for me given that where we're just a few weeks away from the end of the first quarter is there any sort of <unk>.
Directional guidance you gave for the first quarter, obviously, I know you didn't provide it but.
Directionally it could be helpful. I think for us to understand kind of the cadence looking looking end of the year in other words almost through the first quarter.
Speaker Change: Well no obviously, we don't give quarterly guidance and I think if you look at.
Speaker Change: What we're doing right now we're hyper focused on closing on edge autonomy, which will which will materially change.
Speaker Change: The.
Speaker Change: Overall profile, so I think standby and once once we close we will have some additional information.
Speaker Change: On the remainder of the year that.
Speaker Change: That Jonathan referenced earlier.
Neal: Okay, Alright, thanks Neal.
Neal: Thank you.
Speaker Change: Thank you. Our next question is coming from the line of Sushi to Silva with Roth Capital Partners. Please proceed with your questions.
Speaker Change: Hi, Pete Hi, Jonathan So just to understand the combined yes, I guess just.
Speaker Change: And the combined company guidance for the full year you said, it's conservative I'm just wondering if maybe there is a percent of backlog coverage, you're using this year going into 'twenty five versus what you've done with red wire guidance full year guidance and the passengers that might be helpful to understand how much higher backlog coverage is maybe this year is a element of conservatism.
Speaker Change: Well, let me take that well, let me try to give you some additional color on how we come up with these forecasts, we do basically a line by line look at each opportunity in the pipeline while also taking a look at.
Speaker Change: The backlog and of course, the pipeline is weighted based on.
Speaker Change: Peak, what we call Pico probability that the procurement is going to go forward and Pete win which is our probability of a win so we go line by line on that and we look at the different.
Speaker Change: Probabilities and.
Speaker Change: We bring in a number of different experts to give us additional insights and it is really a bottoms up build up and then we look at macro factors like saying okay.
Speaker Change: What if the.
Speaker Change: The war in Ukraine ends or how much do we want to really lean into.
Speaker Change: War related revenues, which as I stated.
Speaker Change: Not a lot we wanted to make sure that we were conservative there and.
Speaker Change: And that's how we come up with these forecasts. We also take a look at a little bit on our burn rates and we try to make a forecast based on looking at where we are in terms of.
Speaker Change: Each one of the projects, we're at and that and that can kind of give you a good idea of how much your revenue is going to.
Speaker Change: Come from backlog, but it's not as simple as having like a heuristic like percentage of pipeline and backlog that moves and we actually get into the nitty gritty of looking at well. This one is expected to be awarded in March and it's this size and it has a.
Speaker Change: Probability of this.
Speaker Change: This probability of occurring in us winning and that would give us certain runtime and we build out.
Speaker Change: Number of spreadsheets on that so I cant give as a result of that kind of detailed bottoms up approach to forecasting I can't give you a <unk>.
Speaker Change: High level heuristic number to use for what I think youre looking for I don't know Jonathan DMA, we have given an ability for.
Speaker Change: Investors.
Speaker Change: And analysts to look at our average contract length, which in red wire that is very.
Speaker Change: Known and Knowable that we're two and a half years two plus two years. So then you can kind of use that as a way to look at also at least are disclosed backlog when we.
Speaker Change: Get closer to closing and then other information concerning edge autonomy will give how to look at them and then as a combined basis for PK of really good overview there.
Speaker Change: Okay, Great I appreciate the discussion of those probability weighted approach to pipeline there and also on the lunar interplanetary mission opportunity I think that cadence is going to pick up here. We already saw two missions. This month.
Speaker Change: What is the opportunity for acquire to expand its content there. It seems like cameras in your primary opportunity are we missing there is other elements or there can be in the future any color there would be helpful. Thanks.
Speaker Change: Yeah, Great question. So we've talked about Mason in the past, which is a program where we're building our technology to build.
Speaker Change: Landing pads on the Moon. So that's an example of our lunar technology obviously, we're.
Speaker Change: We're highlighting in this call light ship our country. Our study for <unk> chips. So we're really excited about the fact that we are.
Speaker Change: Well positioned and got.
Speaker Change: The confidence of <unk> to be one of the study members on looking at <unk>.
Speaker Change: Building a spacecraft to go to Mars.
Speaker Change: That's really from an organization like <unk> to select a company like red wire and their confidence in our hammerhead platform I think underscores the way we're thought of it.
Speaker Change: In terms of.
Speaker Change: A a competitive participant in future Mars exploration and vehicles for future Mars exploration of course, we have the cameras that you mentioned.
Speaker Change: As well so.
Speaker Change: And many of our vehicles.
Speaker Change: Particularly mako.
Speaker Change: Such that they have the wherewithal to be able to operate insist leaner.
Speaker Change: The other aspect of it that I'll point to is in terms of we've talked about our micro gravity manufacturing in the past.
Speaker Change: We like to say make it don't take it. So we believe that there's a real opportunity for microgravity manufacturing when you start looking at <unk>.
Speaker Change: Building out.
Speaker Change: Permanent lunar infrastructure as well as quite frankly adventure to Mars.
Speaker Change: They're going to be very limited on the amount of.
Speaker Change: Material that there'll be able to bring so having red wire like manufacturing capabilities onboard could be.
Speaker Change: Something that could be mission essential so we're looking at those kind of things as part of the.
Speaker Change: Our participation in our active participation in that community.
Speaker Change: Alright, great. Thanks, great rundown very exciting thanks, guys.
Speaker Change: Thank you.
Speaker Change: Thank you we have reached the end of our question and answer session I would now like to turn the floor back over to Jonathan Baler for any closing remarks.
Jonathan Baler: So first I want to thank all the institutional analysts sell side analysts for your questions, but before we conclude today's call we'd like to actually read wire introducing new initiatives in which we will draw a question or two today it'll be one drawn from a retail investor community and so today's question comes from.
Speaker Change: Our red at community.
Speaker Change: And this will be for both of us, but it's really for Pete what percentage of Red wires business is based in Europe enabled service the European space and defense efforts, which we've been hearing a lot about these past number of weeks.
Speaker Change: Thank you Jonathan clearly based on the questions received from the analysts the retail investor is thinking along the same lines I'm really excited first of all about this initiative and the ability to incorporate the voice of the retail investor into our earnings call.
Speaker Change: So from a technological standpoint, both red wire and edge autonomy have platforms, specifically focused on.
Speaker Change: The overseas market, particularly the European market with Phantom and Hammerhead satellites for Red wire, obviously were.
Speaker Change: The platform for the Isa skin sat which is the Premier V. Leo.
Graeme over an Isa, which has both civil as well as potential defense application and edge autonomy has very notably the Penguin series of UAS.
Speaker Change: That is.
Speaker Change: <unk>.
Speaker Change: Currently a combat proven platform operating in Ukraine as we've discussed.
Speaker Change: From an operational viewpoint, both red wire and edge autonomy have significant physical footprints in in Europe to serve our European and international customers Red wire has a large engineering facility in Belgium, we have our engineering facility in Luxembourg and recently.
Speaker Change: Announced our expansion in Poland and edge autonomy has facilities in Latvia.
Speaker Change: And as of January 2025, a very small facility in the Ukraine. So given that our products are produced for European customers in Europe, we don't have any anticipated tariff risks.
Speaker Change: <unk>.
Speaker Change: The products that are built for the European market are produced.
Speaker Change: In our European facility, so that we're well positioned to take advantage of any trends that may emerge in Europe. As a result from a financial perspective for full year 2024, we had $153 $8 million or <unk> 56.
Speaker Change: 6% of <unk> revenue based on that.
Speaker Change: The location of where a customer came from so even if it was produced in the U S.
Speaker Change: The customer was in Europe, which represented $117, 1% increase over 2023 revenues of.
Speaker Change: $70.8 million and as we previously disclosed for FY2023.
Speaker Change: Which is the most recent.
Speaker Change: Recent audited numbers we have.
Speaker Change: Approximately 57% of edge economies revenue was derived.
Speaker Change: From International Defense customers. So obviously edge autonomy is very well positioned with their manufacturing facility.
Speaker Change: In Latvia as well.
Speaker Change: And finally as has been widely discussed why is this important European defense budgets are slated to ramp up and given the factors discussed above we believe red wire as well positioned as we move into 2025.
Speaker Change: And beyond in those market. So great question from our friends on read it and we look forward to continued engagement with our retail investor community.
Speaker Change: So with that we appreciate everyone, taking the time to listen today and go Red wire.
Speaker Change: Thank you. This does conclude today's teleconference. We appreciate your participation you may disconnect. Your lines at this time enjoy the rest of your day.
Speaker Change: Okay.
Speaker Change: <unk>.
Speaker Change: [music].
Speaker Change: Yeah.