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spk06: Welcome, everyone, to Moneric's 2022 Analyst and Investor Day conference call and webcast. We released our 2021 Letter to Shareholders on Form 6-K, including preliminary fiscal year 2021 results. The letter is also available for download on the Investor Relations section of Moneric.com. Before we begin today's presentation, I must remind you that this presentation and oral statements regarding the subjects of this presentation are include forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 as amended. All statements other than statements of historical or current facts contained in this presentation are forward-looking statements. These forward-looking statements involve known and unknown risks, uncertainties, and assumptions that are difficult to predict or are beyond our control, and actual results may differ materially from those expected or implied as forward-looking statements. The forward-looking statements included in this presentation are made only as of the date hereof. Neither we nor any other person undertake any obligation to update any forward-looking statement to reflect events or circumstances after the date of this presentation or otherwise. We have not yet completed preparation of our financial statement for the year ended December 31, 2021. The information presented herein is preliminary in nature and is subject to change. including as a result of any normal adjustments resulting from completion of procedures in relation to the financial statements for the financial year 2021. There could be no assurance that the final results for these periods will not differ from these preliminary results, and any such differences could be material. Financial results for the fiscal year 2021 will be included in the annual report on Form 20F to be filed with the Securities and Exchange Commission. With that out of the way, we have a great agenda for you today, including a deep dive into our vision and strategy, our ability to produce at scale, many customer success highlights, as well as a discussion of our preliminary 2021 financial results and our outlook for 2022. With that, let me turn it over to Bulent for his opening remarks. Bulent?
spk08: Thank you, Tom, for leading us in, and thank you, everyone, for joining our analyst and business update call. I'm Bulent Alsan. I'm the CEO of Mineric, and With me today, I will have some exciting speakers from the company. Amongst others, we will have Joachim Horvath, our CTO and founder of Minerik. We will have Tina Gator, who is our Chief Commercial Officer, and Stefan Bertolt Bülow, who is our Chief Financial Officer, and we will present in that order our presentation for today about what has happened and what we are looking forward to. Some of you may be new to Mineric. Some of you I'm sure we have met or at least talked to in the last couple of years. But for the people who may be new to the company, I would like to start with our vision and strategy and maybe talk a little bit about what really makes Mineric, what drives us, why we exist. If you could go to that slide. To talk about why Mineric exists today, we are all here in Mineric with the vision that we share for our company, which is to eliminate the barriers of connectivity. Under barriers of connectivity, we understand that we need to connect everyone and everything, and that is the vision that Mineric enables us. enables for everyone. And we do that with the purpose of ensuring secure and unrestricted flow of information for everyone. May it be for personal use, for governmental use, for military use, defense use. May it be for devices that need to be connected everywhere. We are in the age of industrial Internet of Things, regular Internet of Things. We are in the age of needing information everywhere we live, travel, or may exist. And we want to ensure that it can happen in the most secure and unrestricted way. And the technologies we develop in Miner really allow our customers to deploy systems that really get communication into every nook and cranny of the world. With that, what we want to do is close the digital divide that exists today between places that have communication and between places that do not, and people who have it and people who have not. Today, we live in a world where 4 billion people are still either unconnected or underconnected, and our technologies and our customers that deploy these technologies really move us towards that. Our markets are diverse. We've served both government, military purposes, as well as commercial, and we're going to talk about how that is developing over the next couple of slides. To look into the addressable market set that Minerix serves, as I have said, we have both a governmental and a military side of it and a commercial side to it. The commercial side comes from telecom services, and the government and the commercial side combined represent a $4 trillion-plus end market that we serve. Then you look into the segments that we enable within that market, which can be served by optical communication, by laser communication, and then look into what those segments actually spend in air and space communications equipment alone. Today, we have a total addressable market of $20 billion plus. That is in itself going towards the optical communication side. As optical communication penetrates that total addressable market, what we are seeing today and that's represented on the left side is that the early adopters of this technology are coming in government, and you're going to see that with the way our backlog has been building over the last year. It is coming from the government where Minert is capable and has been able to represent what the company can do in deploying early adopter systems and really winning contracts. From then on, we are seeing that the commercial players that exist in the world that are deploying either mega constellations or art observation constellations, broadband constellations, that they are betting on the same people that the government is also putting their seal of approval on. And after those markets, after the broadband markets, we're seeing a very diversified set of customers now forming that even go beyond just the air and space and ground station segment. And we're seeing even all other mobility devices looking into optical communications for their needs. Then unpacking maybe a little bit the space market and its growth in that and how these optical communication constellations are really representing for Minerik a very fast growing opportunity. We have to look into the way that satellites have been deployed until very recently and how that has changed in a very short amount of time. We may look back in just A little over two years ago, we see a picture of space where there were only 1,900 active satellites in orbit. A very short amount of that were active communication constellation satellites. In just two-fourth years, that number has increased to almost 5,000, a growth for the constellation side, I think, of more than 10x. And those constellation satellites have mostly come from broadband communications constellations, which are in itself the natural customer for optical communication technologies that need high bandwidth and secure communication between multiple different satellites. And this is just a tip of the iceberg. Then you look into the current filings in the ITU, FCC, and any other organization, you see a tremendous growth happening over the next decade. And we know that the communications constellations are going another 10x from here, and the projected About 100K or even more satellites are mostly our communication constellations. Again, with a large need for optical communications constellations. And this is what Minerik has been preparing itself to. And this is what we're going to talk about today. This is the start of the momentum that is building itself over these last year and also in 2022 that is getting Minerik the market to address. and the opportunities to place its products. I think one of the words you're going to hear today very often is momentum building and momentum. If you look into the history of Minark, we are a 12-year-old company that have been preparing technology, IP, and a company that can really deliver it for a time where we know that this technology was going to be needed. We knew that constellations were coming. We knew that optical communications is going to be the backbone of world's communication capabilities, especially when it's developed from aerospace, and we were getting ready for primetime. And what we will show you today is that that primetime has arrived. where we were just talking about singular customers until 2021. Since 2021, since the beginning of 2021, we have steadily have grown our backlog. What started with our Telesat DARPA involvement in the U.S. now has borne fruit, and over the last year and a few months, we have been able to sign prestigious customers such as the Space Development Agency, Spacelink, Capella Space, Northrop Grumman multiple times, DARPA multiple times, and the European Space Agency, building up a backlog both in commercial and in governmental applications, really showing the fact that optical communication, when it arrives, is coming in a very large wave. How has the company prepared itself for the sudden arrival of customers? What we have done is we have prepared a company that can do serial production in scale. When you think about the space industry, serial production has really not been a focus of it in the past. What that meant is for Minerik to be successful in addressing a market that needs tens of thousands, if not hundreds of thousands of terminals in the future per year, we need to start thinking new. That meant building new building facilities ahead of time for a market that will need products in mass manufacturers. That meant investing our assets into building the world's first dedicated serial production facility for laser communication. This facility just built outside of Munich was a facility we built up really quickly and now is ready for customers to come in, which they are coming in right now, and is ready to be built more than 2000 terminals a year to be able to meet that backlog with a certainty of execution. This facility is not just there to meet the backlog. It is also a way to show to our customers that Mineric is dedicated to support their mission with certainty, that we have made the investment, that we are ahead of the demand curve, and that we can deliver the products they need on time. And very often, it's the customer's visits that enter this production facility that convinces them of Mineric's strength and capabilities to deliver what they need. What it also meant is increasing our footprint where our main customers are, and that was, for us, the United States. Being a German company, having a large U.S. presence was very important to do the business development and the support that our customers need and be able to close the major contracts that we have been able to close. The company today has more than 35 people working in the U.S., And we have that started in Los was first only in Los Angeles as an office now also is represented since February 2021 in Washington, DC, there we do our government and government outreach and government support. We also have expanded the U.S. team quite significantly last year. That number that is more than 35 people used to be about 10 at the beginning of 2021. And we can see that we are really working on hiring top talent in the U.S. to make sure that we are matching the needs of our customer and the questions of our customer with that top talent and a top team that can support them from the U.S. What that U.S. location also gets us is participation in different events and making sure that we are in the talk at all times. And that ensures that we are part of the conversation. We can participate in things like standard setting, such as the one that the Space Development Agency is doing, to make sure that we are performing and seen as a key player, not just in Europe, also in the U.S. Another event from last year, which I think is a highlight, is our initial public offering from NASDAQ. We were already a publicly traded company in the German Stock Exchange, but knowing the familiarity with NASDAQ, uh, with, uh, with the space sector and the, uh, and the access to, um, access to capital that the, uh, that the U S markets offer. We have decided that being listed in NASDAQ is advantageous for, uh, minor, and we have as such decided to do an IPO in NASDAQ. And now we are at rule listed company that the, uh, tickers and, and they're lying minor. And we are quite excited about that to have done this on the end of last year with a gross proceeds of $75.9 million, which we are once again investing into our R&D, but mostly also into our production and scale-up capabilities as well as our business development team. Miner strategy from the start has always been very clear. We want to have serially produced terminals. We want mass production, not 1Z, 2Z things that do very few things in space that are scientific in nature. We want serially produced products in the hands of our customers that want to connect the world, and because of that, they need it in the thousands. This is a telecom play more than a space play or an aviation play. We focus on scalability throughout the product lifecycle, and we build capabilities before they are needed. For us, affordability is a very big target, and one we have been always able to achieve. We do that by the cost reduction as our core activity, starting from engineering, really focusing on the technology that allows a cost reduction that can be mass produced and that allows our customers that look beyond a few terminals into the thousands of terminals for their purposes to be able to afford our products. For us, reliability and simplicity is another thing. We are constantly iterating on our products always making it more compact, more reliable, more simpler to use. And we do that also as Joachim will talk in just a second about our technology. We do that with testing, testing and more testing, and then deploying out onto the field. And the last column that we build on is standardization. We work on our terminals. We work on our terminals as much as we build on standards that allow us to communicate. So any system out there, you see interoperability between terminals from multiple different operators as a key, and we enable that interoperability by being one of the main architects of standards that exist out there for optical communication terminals. And we also utilize maximum flexibility in our terminals By making our terminals very flexible, we ensure that our customers can do their use case regardless of what it is from our main commercial off-the-shelf product without us having to re-engineer anything. With that, I would like to close out our strategy and vision session, and I would like to hand the word over to our CTO, Joachim Horvath, who's going to do more of a deep dive into these columns that I've just talked. Thank you very much. Joachim?
spk03: Yeah, the market for free space optical communication is here now. The numbers will only increase. So that is why optical communication is being addressed by multiple companies today. But only Mineric has a scalable and mass-producible solution and the mass production capabilities to match it with, because we have put over a decade's worth of investment in research and development. You can see the shop floor with logistics, quality assurance, warehouse, electronics, integration facility. We have an area where we do the subsystems like fine steel mirror and coarse pointing assemblies. We have our optics production I'm going to talk about soon. And we have our final assembly in the middle with the acceptance test where we do that. The optical telescope for our terminal is the most important building block when it comes to cost efficiency because of the high quality we need because we couple into the fiber. So what did we do? So first we identified the right material. So we evaluated everything what was out there like glass and ceramics and concluded that metal optics out of aluminum is the best solution for this application. This is a cheap material that allows wavelength-independent high-quality operation over a large temperature range. It's isothermal because the holding structure is out of the same material, and it's fully demisable, which is very important for space, since after the lifetime, when the satellites come down, they need to be demisable. Second, we looked then after we have chosen the material for potential manufacturing partners, and there was no cost-efficient solution with the required capacity out there that would produce thousands of telescopes per year. That is why insourcing of the metal telescope production was key to the affordability and scalability effort and gives us, on top of that, a better handle on quality and reaction to market demands. The next important pillar for affordability is the electronics. Traditionally, in space, radiation-hardened electronics was used, and that is very expensive, and sometimes not the latest technologies available with the highest speed, what we need for our very high data rates. Therefore, we qualify commercial electronics for space. That is very important because not all electronics works in space, and quite some electronics fails, which is even batch or dye revision dependent. That is why we do a lot of tests. We start with total ionizing dose tests, where we look how the electronics work on the gamma rays. We do proton tests at quite high fluxes, up to 200 mega electron volts, to see if there are any destructive or non-destructive latch ups. Last but not least, heavy ion testing, where we can even deposit more energy into the electronic parts and see if there is any issues or if they break. And that makes the solution very, very cost efficient. But it's an effort to do, but we are committed to do so. Affordability. We are a mass production-oriented company. We are mass production oriented through iterations of technology and through economy of scale. And we have been able to already reduce the unit costs by 80% from going from Condor Mark 1 to Condor Mark 3 and now the serial production ready Condor Mark 3 terminal. Further mass production and vertical integration should bring it even to half of that. Reliability for our products is key. To have the highest reliability and also the capability to innovate on our products, we need to have subsystems and targeted testing and full system test. On the lower right hand, you see the optical metrology where we test every mirror and the final telescope. On top of that is our thermal vacuum chamber, how we simulate space and see that the terminals work out through the whole thermal range. Left to that is our Hexapod test platform with the Hawk aviation terminal, where we simulate base motion disturbance of aircraft and whatnot. Right below, we have vibration tables with our terminals on it, where we simulate rocket launches and rough aircraft rides. And, of course, also thermal chambers where we can see that the whole temperature range is okay with our products. For aviation wings, we go with our systems into the real scenario. We have different aircraft available. We have partners with L3 mission systems with the G520 aircraft that can go up to the stratosphere where we can test the whole range of our products. Whenever we improve something on the system, we go back and test and test. We always say we do not want to ship new products to customers if we have not done everything to or with or to the products that the customer might do with or to the products. For space, we have a very special piece of equipment where we can test the terminals like in space. This is called the link testbed. And we are a company that simulates space better than anybody else. So we can put the terminals in this testbed. They see the same microfibrations like on the satellites. They rotate. That simulates the orbit motion and the satellite maneuvers. And we have a sophisticated optical system that simulates the 8,000 to 35,000 kilometers. And that really guarantees that everything works in the target scenario. Let me now hand over to my colleague Tina. She will talk about customer success highlights. Tina, please.
spk01: Thank you, Joachim. Hello, everyone. I'd like to walk you all briefly through our sales and BD activities, starting with the typical timeline from targeting opportunities to booking deals and finally the delivery of our products. As Bulent mentioned earlier, we have truly been building momentum across a number of fronts. As you can see in this slide, working to close a deal on a space program can have a prolonged period. This varies depending on if we're engaged with a commercial customer or a government program. Commercial opportunities tend to have a more fluid, shorter timeline from when we engaged in an opportunity to closing a deal. The typical request for information or request for proposal is sometimes bypassed or less formal. On government opportunities, we often see a lead up of engagement with customers to make sure we receive the request for information, typically a six-month engagement. Once our initial proposals are submitted, our confidence in receiving the request for proposal increases. The more engaged we remain with these customers on Q&A, showcasing our capabilities beyond our product, scalable manufacturing, for example, the better chance we have. In many cases, we work through leading aerospace primes, So this process can be a longer process. Our terms for our contracts are defined upfront during the proposal process. So on average, we're able to secure about 50% of the contract value or cash in from award through to the integration phase of the program. The remainder of the contract value comes at product delivery to the customer, after which we're able to recognize the revenue. I wanted to share some of the highlights of our customer engagement in 2021 and to date with some of the contracts that we have executed. 2021 was a crucial year for us to engage with key stakeholders in the adoption of optical communication products. As Bill had mentioned earlier, the Space Development Agency here in the U.S. is really leading this effort in adopting this capability for their planned large constellations. Our teams have been engaged closely with the SDA to establish the standard by which the optical communications from different vendors communicate with one another. Binaric was one of the first to prove out our product complied with this standard when we completed the required tests at the Naval Research Lab. This was a great achievement for us. Our engagement with the Telesat Government Systems team continued in 2021 for the DARPA Blackjack program. This program for us is a stepping stone to engage further on advanced capabilities on optical communications. And we continue to build close working relationships with the Telesight Government Systems Team and other players involved in this program. We have been delivering product during earlier milestones and final flight models will be delivered soon for an anticipated launch later this year. 2021 was also a year to engage with commercial customers planning various constellations. Our success in the market with the Space Development Agency standard and securing the DARPA program gave confidence to commercial players like Spacelink who are planning a data relay service using the medium Earth orbit to connect with their customer satellite in the lower Earth orbit. Customer satellites can be Earth observation communication satellites. In 2021, we secured a contract with Spacelink to deliver medium Earth orbit terminals as well as our Condo Mark III product for their lower Earth orbit customers. With the introduction of the Condo Mark III product in summer 2021 and the full thrust efforts to engage with customers, communities, both government and commercial, we're excited to have secured Capella Space as our launch customer for Condo Mark III Our delivery to this customer is planned for the end of this year. We're excited to broaden our customer base and also a diverse set of applications that will benefit from adopting optical communication terminals within the networks. Throughout 2021, our engagement with prime contractors continued and our relationship with Northrop is a key highlight. The team at Northrop dug deep into our technical capability our ability to execute programs at the scale needed, and most importantly, our agility and innovation. This led us to a strategic partnership we announced around the space domain. We secured contracts with Northrop for Condor Mark III and know we will continue to work on a variety of pursuits together during this five-year term of our strategic partnership. As mentioned previously, the DARPA Blackjack program was a stepping stone to our engagement with the DARPA team. Our most recent engagement is a selection of Mineric as a key supplier for the space bacon program. This program is focused on the development of a universally interoperable product with aggressive price points. The initial phase zero program is a study to work on the architecture design of the next gen terminal. Our wins continued this year with the award of a European Space Agency program where we're looking at terabit per second communication capabilities. The first step in this program is to design, build, and test the laboratory model of this terminal, continuing on our capabilities of innovating in this technology. The significant efforts of our team over the course of 18 plus months paid off recently with the award of the Space Development Agency Tranche 1 Transport Layer Program. Northrop Grumman was selected by the SDA and we're part of this winning team and have secured the largest contract to date for MINARIC. Very excited to be part of this program as it offers capabilities around larger constellations and subsequent tranches. Industry recognition is always key to the success of any company. 2021 and 2022 so far has had us recognized by EuroConsult as well as via Satellite, leading organizations of our industry, recognizing myNARIC and our team's capabilities in really moving technology into products, into networks of the future. And now I'd like to hand over to Stefan, Chico, about financials.
spk10: Thank you, Tina, and good afternoon to the audience. Let's turn to our preliminary results for the fiscal year 2021. We released our preliminary results for the fiscal year 2021 earlier this evening. We anticipate filing for Form 20F beginning of next week. I want to highlight a couple of items in our preliminary results that we believe best represent the customer and program momentum Bulent and Jutina spoke to in the terms of our financial results. First, total revenue increased by more than 240% in 2021 compared to 2020. We are still at a very early stage of revenue recognition as we look to expand sellable product shipments this year and the coming years. Again, strong momentum that we believe positions us very well for further gains in revenue in 2022 and beyond. Second, cash in from customer contracts increased by 109% in 2021 compared to the previous year. This is the cash we receive from our customers as we achieve specific contractual milestones as we moved from contract awards to production and to product delivery over a multi-year period, as Tina walked you through earlier. For comparison, two years ago, we had virtually no cash in from customer contracts. So we are showing a very strong momentum as we continue to execute for our customers. So We go to the key figures in the income statement, looking at a few other preliminary figures. We continue to invest at a strong pace in product development. This includes both enhancement to existing products and investment in next-generation products. The cost of purchased material increased by 72% in 2021, compared to 2020. As product levels increased and also we are producing more terminals for internal testing purposes along with units for customer demonstration. Personal costs increased 39% in 2021 compared to 2020. As we continue to add talent to our team, we've expected our capability across the divisions of the company in 2021 and will continue to do so in 2022. Overall, the company reports an operating loss in 2021 that more than doubled compared to 2020 due to the higher investment we made in people, equipment, and systems in preparation for strong growth in 2022 and the start of the production of laser communication terminals. Key figures from the balance sheet. Now let's turn to a few key balance sheet highlights. Property, plant, and equipment at the end of 2021 was approximately 70 million euros, up from 10 million euros in 2020. As we continue to invest in capacity and capability ahead of the expected significant ramp up in optical communication terminal production in the coming years. Inventories were 8.5 million euros up from 5.2 million euros in 2020. As we continue to invest in component inventory ahead of the expected significant ramp in communication terminal products in the coming years. Our cash balance at the end of 2021 was more than 48 million euros, up from 43 million euros at the end of 2020, and up from 80 million euros at the half of the year 2021. In November, we raised, as Dylan mentioned, close 76 million US dollars, or 71 million euros, with our NASDAQ IPO, and we are now a dual listed company in Germany and in the US. We welcome many new shareholders with their IPO. In 2022, we remain in investment mode and as a pre-break-even company, we expect our cash balance to decline in 2022. Now to the outlook. Let's turn to the two key business metrics we are focused on for 2022 that we believe will continue to demonstrate the momentum we are seeing in the business. First, cash in from customer contracts. This is a key forward-looking predictor of revenue as the cash is only received as we need contractual milestones. As Tina walked you through earlier, there is typically a link between cash received from customer contracts and shipments. This varies depending on the contract terms. Second, optical communication terminal backlog in units. We believe this is the most important forward-looking metric for our business. We saw incredible growth in this metric in 2021 compared to 2020. And we've already seen this momentum continue up through today. Cash-in from customer contract. We saw great growth here over greater than 100% in 2021 compared with 2020 as cash payments were received from the numbers of customers in 2021. These are contractual payments received when certain milestones are met, but full delivery and acceptance has not been reached. In essence, this is pretty revenue cash received and we believe a very significant indicator of the future revenue of the company. We expect cash-in from customer contracts reaching more than 20 million euros in 2022, up from less than 4 million euros we reported for 2021. Again, very strong momentum in the business, demonstrated by our ability to achieve contractual milestones. Backlog. We reported a more than tenfold increase in backlog of optical communication terminals to 40 at the end of 2021 compared to 2020. Furthermore, we can announce that until today, we could already achieve a fivefold increase of our terminal backlog to 211 units in the last four months. I really want to highlight that, that we were able in the last four months to increase the number from 40 units to 211 units. This was driven by a strong focus by our team and execution and same key development and test milestone reached over the course of 2021. We now have a strong pipeline customers, prospective customers for our terminal products And as Doolan showed earlier during his opening remarks, we believe the momentum into 2022 continues at a very strong pace and we expect this matrix will continue on a very strong trajectory throughout the remaining of 2022 as we continue to win new business from new customers and as existing customers give us follow on the road. So strong momentum once again, and with that, I give it back to Bulent for the brief closing remarks. Thank you.
spk08: Well, thank you, Stefan, for those remarks and the presentation. So as we wrap up, what have we shown you today? What are the key takeaways? In short, today was all about growth and momentum. When we talk about growth and momentum, we're not merely speaking in terms of double-digit or even triple-digit growth like you may see reported in other growth companies. But rather, we are talking about growth that is four times, five times in very short order. Look at our order backlog as one example of this. As many of you listening today know, I've been in the space industry for two decades. I've seen what growth of this magnitude looks like and, more importantly, what it takes to capitalize on that growth. Mineric is the only company with the ability to do that, to do what we do at scale. That gives us a huge advantage and one that we intend to leverage to the fullest and have been able to do so. In order to do that, you must have a great team and we've put together a great leadership team that is driving execution in order to capitalize on the multi-decades of opportunity ahead of us as we enable the internet above the cloud. As you heard from Joachim, Tina, and Stefan in their presentations, We built a strong foundation in 2021. We demonstrated our ability to scale production, our customer success highlights, and our significant order backlog. Now is the time to capitalize on the opportunity ahead of us, and we are making the right investments ahead of growth so we can accelerate our momentum. And we are only getting started. With that, operator, would you please provide the instructions maybe for the question and answer session, and we can maybe go on to Q&A and take some questions and answer them as a team here. Operator?
spk00: This is the conference operator. We will now begin the question and answer session. Anyone who wishes to ask a question may press star and 1 on their touchtone telephone. To remove yourself from the question queue, please press star and 2. Please pick up the receiver when asking questions. Anyone who has a question may press star and 1 at this time. The first question is from Scott Deutschel with Credit Suisse. Please go ahead.
spk04: Hey, everyone. Thanks for taking the questions. We want maybe a few for you to start, and then I have a few for Stefan as well. But I guess just, you know, many users of optical links, they've been vertically integrated in that capability. Starlink and Spire are obvious examples of that. I guess, do you think they've done that because that's been the best or optimal solution for them? Or was it just because that was the only option they had at the time? And now as you guys scale production, maybe that trend starts to reverse. Just how do you, big picture, how do you think about that trend?
spk08: Sorry, I had a little bit of a delay there. To be frank, we do not see too many operators undertaking an in-house solution. Yes, you have definitely pointed out some of the constellations there and some big ones there, absolutely. But overall, I think we still see in the market a tendency to rather go out to the market for optical communication payloads. I think maybe the mega constellations in certain cases may want to look into optical as an in-house development capability, but even in those examples, I think the ones that have undertaken that have shown that it is a very lengthy process. Mineric with its really long history has been building up IP, building up technology, and brings that to the table. All of that has to be built for an in-house solution, and no one has done it in a short amount of time. for most mega constellation optical comms is a merchant supplier. Um, at the end of the day, constellations are businesses which need to turn a profit, and this will be driven by the cost of the hardware to be deployed and the business that can be generating using that. I think as my network is already, quite price competitive supplier, it's going to come down to the specifications and interoperability. I think you're going to see most people going with a merchant supplier because you need to get to the economies of scale. That's exactly what Minert is supplying. I think when you look into the opportunities that may be with the in-house solution drivers, such as SpaceX, you mentioned, and others, I think binary can be at least a fantastic backup solution as they eliminate single points of failure because we have built a terminal that is highly interoperable. We support pretty much any standard out there. We have done all our modem design and whatnot in a really programmable fashion. We've done our hardware configurable. I think that is going to lead everyone to look into where we end up in spec and cost down the line, and I think that is going to result in these companies looking into eliminating single-point failures, looking into companies also to augment their in-house capabilities. But as I said, I think VC vertical integration is not a big trend in the mega constellation.
spk04: Got it. That makes complete sense. I guess just to follow up on the Northrop contract, I think I read there's some exclusivity there. I'm just curious, is that contract exclusive for all defense work you'd want to do with the U.S. government? Does it have to go through Northrop, or is it just exclusive with respect to the SDA contract? Trump's zero or whatever that one is.
spk08: I want to be cognizant about the business relationship we have in Norco and the certain amount of secrets they want to, non-disclosures they want to have. What I can tell you is Minerk is perfectly fine selling commercial or standard terminals to anyone who wants to have them for any purpose, including space, air, whether it be commercial or government or defense. So the exclusivity is in a much more narrower definition when it comes to really custom products.
spk04: Got it. And this one maybe is more for Tina, but I'm just curious, you know, if you're selling a Condor Mark III to the government customer versus a commercial customer, is there any difference in pricing that we should be aware of just given the incremental costs of working with the U.S. government? I'm just basically trying to think about as I model out units, you know, is there going to be a difference in average revenue per unit? depending on the mix of customers in the given year. Thanks.
spk01: Thank you for the question. Our pricing is really consistent. We base it on any kind of volumes as well. So it really is volume dependent, but we have a consistent set of pricing for our customer community. As you know, depending on certain government contracts, you cannot under cut them, but really is contract specific and volume specific. We're looking at the larger volume business and where we can afford to pass on any savings based on our terminal pricing. We can certainly look into that. We operate on a COTS methodology. As Berlint mentioned, you know, we are very much focused on a price point based on volume pricing that we see based on the different sizes of the constellations across both government and commercial.
spk04: Understood. And then just for Stefan, the gross margin progression in 2022, how should we think about that relative to 2021? I guess, would you be willing to put a line in the sand, say, if gross margins would be positive or negative, and any kind of guidance from a margin perspective? Thanks.
spk10: So in 2022, so we don't give a guidance, but 2022 will still have a strong investment here in every sector. So I expect... that the gross margin is getting better because we are scaling up the production, but not as high as at the end. So we will not break even in 2022. This will come in 30 years. Got it. Thanks, everyone. Appreciate the time. Thank you very much.
spk00: The next question is from Austin Muller with Canaccord Genuity. Please go ahead.
spk05: Good afternoon, everyone. My first question here, I remember from your investor deck, you had mentioned that there was an undisclosed U.S. defense contractor that had an agreement with you potentially to procure Hawk air terminals for drones. And I was wondering if you had any incremental details you could share about that yet.
spk08: I'll jump in and quickly answer that question. That engagement is still going on. We have actually collected quite a bit of experience over the course of the year. We're learning a lot into the application and how we can really penetrate a very large market with that partner. I'm not at the liberty to say who that customer is, but I can tell you that they are an integrator that really looks into putting this as a key technology on many platforms out there, both theirs and others. And I think... That experience is going to come in twofold. I think we're going to see our current hawk really being a big demo product for everything they do, and we're going to look into opportunities to evolve our product as well for future opportunities beyond just the immediate market that the current version can serve. But that's about the status I can give on that.
spk05: Okay, that's pretty helpful. And then just on the north of contract that you have, the five-year agreement, does that include the opportunity for them to procure Hawk air terminals as well, or is it strictly limited to the Condor and any Hawk contract would be awarded separately?
spk08: I will answer that as... As I said earlier, we are a merchant supplier, and we are open to all companies procuring our products. And Northrop and anyone else, of course, is able to purchase that. The business development agreement doesn't have any provisions for a hawk per se because it's about rather the joint work space, but that doesn't preclude us working with Northrop Grumman or any other entity for hawk opportunities.
spk05: Okay, great. And then just one last question. Looking at the presentation you guys put out today, it shows that you've sort of got 211 terminals year-to-date in the backlog, and sort of the pale line there would seem to imply that you're somewhere expecting around like 300 terminals in the backlog by the end of the year. Is that correct to think that?
spk08: I'll let Tina comment on our outlook, but I can tell you my biggest answer is, of course, very bullish, but Tina can put it in much better words.
spk01: Thanks, Bulent. So we're just in the first quarter of this year, so you can see the backlog is what we have right now, but we are engaged across both product lines, the Hawk and the Condor product lines, as well as market segments, commercial and government. And we're already forecasting PGOs and PWINs across the various programs that we hope to close this year. So the number that you're looking at is, you know, forward-looking, reflective of some of the opportunities we're actively engaged in at the moment.
spk05: Okay, that's helpful. Thank you, guys.
spk00: I would like to turn it back to Mr. Dinges as we have some questions received from the web.
spk06: Thank you, operator. Yes, we have a number of questions that have come in. I'll throw the first one at you, and you can decide who on the team is best to answer. The first question is, what are the main constraints on growth both in the U.S. and internationally as Moneric ramps up its operations?
spk08: I'll jump in on this one and then we'll see across the questions to see who is best suited in our team to answer them. But for this question, I would say that we are in the midst of a rapid expansion of our operation capabilities in the U.S. and in Germany. In Germany, we are outfitting our recently built and open production facility with additional machinery, For higher capacity output for terminals, vertically integrating key capabilities like precision CNC for optics. We are putting in a coding facility to decrease our reliance on external capacities and whatever their fluctuations may be. We are bringing in-house a full electronic board assembly capability, which is already in-house pretty much 75% with state-of-the-art automation, process control, quality and data integration and quick turnaround capabilities. Once again, eliminating costly and slow processes where in the past we had to rely solely on external companies. We are keeping these external suppliers activated and certified for us, so our in-house capabilities just really ensure seamless operation, but we can definitely go, we don't just have to rely on in-house or out-of-house, but by having the capabilities available in-house, we really make sure that we have a We have attack time and we have execution that is reliable. And we've already seen all the benefits that happens from vertical integration in the current supply chain issues that the world is facing. In the U.S. production side, we have increased our Los Angeles footprint to twice the size it has been. We have put in clean rooms, assembly stations, environmental testing capabilities, some logistics and supply chain management capabilities. This was done to a certain extent in response to our customers' wishes, especially in security-sensitive domains, to have the hardware that touches their data to be supplied out of our U.S. facilities and to be in 100% U.S. custody. So now we are almost done with that task as well, and we are ready to execute on such orders. And this was really, as we have also said in our IPO process, this was really where we wanted to invest that capital and really bring up that scalability. To look into the potential issues so far, we have been able to really execute these steps quite rapidly. Just as an example, we decided on which PCB, so electronics production line we want to build, and we identified the line. And within two months, we had the machines in-house. We were able to hire an expert team and place it here at our well underway into certifying. One of the advantages that we are enjoying today is not just the sourcing of machines, but also Minerk enjoys a certain benefit by being a really strong growth company today during the times of COVID where people are looking on on companies that are hiring and there are certain amounts of definitely downturn in other industries that allow us to look for the best talent and really bring them in. Once again, for that printed circuit board line, we looked worldwide. We found a fantastic expert. We were able to bring him from U.S. to Germany, and put them in there and offer them with a team that supports it. So I think we've been able to really use the current time to really pull in the machinery and the talent in place, and we haven't really had too many stumbles along the way to execute our scalability.
spk06: Okay, we've got one more that's come in as well. Manerik currently has 100 job openings on your website. How do you plan to, one, recruit and fill those positions? Two, is your current production reduced at all due to having that many open positions? Thanks, Tom.
spk08: Maybe I'll lob them over to Joachim.
spk03: Yeah, thank you, Biland. Manerik has been an always expanding company, and I must say, growing companies need more helping hands, of course. When we did our switch from a project company to a product company in mid-2018 or so, we were less than 40 people. Now the company employs more than 250 people across three offices, and our recent accolades are putting the spotlight on us for top talent, of course. Coupled with our ambitious goals and our communication around the vision and our investments into our infrastructure, we are getting a very healthy influx of applications to fulfill these positions, and we are expanding our HR and talent team to source and onboard all these top candidates out of this influx. So I must say so far we have done a great job in that, and now we are reaping the benefits, and we will keep on doing so. As far as the impact to the production rate, the impact of the current open position is not significant, and in many cases, none. So we have a current production capacity that can fulfill the backlog of the company. And the open positions, in many cases, are for the new capabilities we are bringing in-house. And Bulent mentioned the coating facility for the optics production. So previously outsourced processes, of course, with new machines, they demand operators for this machinery, and therefore the acquisition of such machines go in parallel with the hiring of the supporting team, of course. So we at Maneric, that's a bit of philosophy. We believe in leading the market, being ready for and demand while it is forming rather than waiting around for the fixed orders. to build the capacity then, we always say we will put the capacity in place and then the customers will come, not like the competition that wait until they have the contract and then they act on that. So the open positions exactly reflect that and our recent success came on the back of such a philosophy and therefore we think that 100 open positions is a rather healthy number.
spk00: The next question from the conference call is from Juergen Wagner from Stifel. Please go ahead.
spk07: Yeah, hi. Thank you for taking my question. You mentioned the 20 million cash in from customer contracts. How much of that will turn into revenues in 2022? And a follow-up question on the previous pricing topic. What pricing curve should we in general model as volumes ramp, let's say, over the next five years. Thank you.
spk08: I would like to answer that question if you don't mind. Sorry, Willem? Stefan, I just wanted to ask you as our CFO to talk about the cash-in turning into revenue in 22 random years.
spk09: Yeah, I wanted to talk about the cash-in. So we expect more than $20 million cash-in by customer this year. But as Tina already explained, the contracts are over a period of one or two years.
spk10: So a part of that will be turned into the revenue in 2022, but there is still further revenue seen at the company. And what is important to mention here is we do revenue recognition under IFRS. This means the revenue could only be recognized as revenue when the product is delivered. So we go more for the cash-in by customer because this reflects more our capability to deliver products or increase the work in the company. And yeah, for that, And the second one was how we see the decrease of the cost with the further production. Joachim also referred on that. We will see significant decrease on the, especially on the material cost with increasing of the production because we insource the main components of the optics
spk09: and then we are able to produce cheaper.
spk10: I think at the moment we are producing double digits, but when we are going now to the triple digits, then we could already achieve this goal.
spk07: So if prices go down by 10%, your cost position will match that. Basically, the gross margin shouldn't be impacted. Is that what you mean, right?
spk08: I think maybe I'll give kind of that section of the answer to Tina, who is doing a lot of our proposal pricing and whatnot, and she'll talk a little bit about the pricing sensitivity and how we price. Tina?
spk01: Thanks, Bill, and thanks, Tasha. So on the pricing side of things, you know, both our commercial and government customers are being price sensitive. And on the government side, the Space Development Agency is is in general setting targets for their satellites, which then translate down to various subsystems of which we are a part. So commercially, always customers have been sensitive in terms of incorporating a communication payload of which we are a part onto this. The way we look at things is, we've insourced capability, we're in it to deploy large-scale products into these constellations. We evaluate each opportunity with respect to the probability of when. We have healthy margins because we have insourced a significant capability. As a point of reference, I have spoken about the DARPA space bacon program, which has publicly set a target for a very capable next generation terminal of about 100K US dollars per terminal. So if you're considering modeling for the future, those are the numbers that folks like ourselves and others have to match for volume production on a very capable terminal of the future that is interoperable, has a higher throughput capability. So our price targets really are based on the throughput, the volume, and pretty much what we can do to get the product deployed into the market fast. And the 100K, you know, basically price target is when the capability of this interoperability across various technological aspects of the terminal has been achieved. So it's sort of far into the future, not immediate this year by any means. But that's where we have to all head in that direction.
spk07: Okay. That's helpful. Thank you. And a follow-up question. On your competitors, who do you see as your closest competitor? We've seen some entrants lately outside TASERP.
spk01: Thank you. So, Bill, I'm happy to take that. From a competition standpoint, there have been those that have been well established in the industry working on one-off missions that take multiple years to execute. but may or may not have the scalability that we've been investing in over a period of time. Some of the new entrants, you know, can readily pull off maybe a one terminal mission. But the key to this is what we've learned and, you know, Joachim and team and bulletin team have really learned over well over a decade of experience is Being able to scale, you know, design products that take industrial design into consideration, so manufacturing of multiple terminals a day can be achieved. So this is basically, you know, we have a handful of competitors in the market. We're always in the top three, so not too concerned there in terms of winning competition. programs, some of the new entrants will keep us on our toes. But as we continue to invest our own monies into innovation, into our not only technology, but our manufacturing capability, increasing our margins, I think we have a pretty large head start against our competition.
spk07: Okay. Thank you very much.
spk00: I would like to turn it back to Mr. Dinges as we have some additional questions received from the web.
spk06: Thank you, operator. The next question that we have is, do you think constellations will replace fiber over long distances in the medium term?
spk08: Sorry. This is a question that I think I would, once again, give over to Tina. I think she's been studying exactly our market quite closely. So, Tina, go ahead.
spk01: Thanks, Ben. Happy to take that. The age-old question of satellites and fiber communication. So, here's how I look at it. We believe that constellations are a parallel capability to terrestrial networks. Just like optical communication is a complementary technology to the traditional radio frequency communication. Constellations are the right solutions where the ivory density area and the digging of trenches and cables becomes prohibitively expensive. Here we see a role for constellations connected and the under-connected, which, as Willem mentioned earlier, is a population of over 4 billion today. Beyond that, we believe that populations will also be the next key in unlocking connectivity for mobility applications, may it be on the roads or in the sea, in the air. In all of these domains, there is an exponential growing demand for additional bandwidth in every geographical area that we've come across. And we believe that especially with events like the arrival of the self-driving cars, this demand will grow even more rapidly. As we become more and more a passenger in our cars and less a driver, we will be driven to consume more bandwidth and consolation in this use case will play a critical role. You know, here, patching the not to bridge. And this will, you know, continue across various other mobility applications, whether, you know, airborne or maritime.
spk06: Christina, we have one more bullet that's come in. How has Moneric stress tested its terminal?
spk08: I think this is a great question for Joachim to talk about the link test and many other capabilities he has built in the company. So, Joachim, I think this is one for you to shine. Go ahead.
spk10: Joachim, are you there?
spk03: Sorry. Yeah, sure. I've shared a little bit in the presentation, and I can just say that Maneric, here at Maneric, takes a very regimented and thorough approach to stress testing. We are proud to say that we have built even more higher fidelity emulation capabilities in our company to mimic the environment and the life our terminals will be going through. So we know of no other company, in fact, or institution that can mimic the environment as close as we can do. Governmental institutions we work together with, they even want to learn from us how we do it or come to us to test their terminals or the competitor terminals at our facilities. And these capabilities, which we call the link testbed, and we have a copy both in Germany and in the U.S., is in addition to the whole slew of testing capabilities that are common to the aerospace industry. We follow the standard aerospace guidelines, of course, for the qualification of our terminals very closely, and then add the layer of Ensuring that every potential issue can be identified and everything that our customers may do to our terminal, as I have mentioned before, we want to do to the terminals, we want to do ourselves to the terminals to really know that stress really happens and that we know that it works in the customer's application. For our air terminals, I've shared that we additionally test them with multiple aircraft in the air. Our partnership with A3 Mission Systems and their G520 aircraft gets us the real stress test for our aircraft. further test that in space to test more scenarios, of course. More on this mission will be coming out shortly.
spk06: Thank you, Jochen. We have one more question that we've got in from the web. Can you please update us on development progress you've made on ground station optical terminals, or what are your plans for re-ramping development work there? Will the satellite terminals you're producing today be able to communicate with a future ground station product, or will they only be suitable for inter-satellite links?
spk08: Carmen, if you don't mind, I'll take this myself. Yeah, over the last year, there's been quite an increased interest in the development of optical ground station terminals. I think this is a sign of the industry's confidence in optical communication technology and its adoption. We are, I think, in a phase of market opportunity sizing. We are doing some amount of effort estimation, what it would take to do a revamp of our existing Rhinos ground station, some ground station we have already have done and even delivered in the past. We believe there is a good size market here justifying a design refresh for enabling a much better engagement by Miner into this market segment. I believe we will finish these assessments very soon, and I expect a favorable outcome that we will go into this segment. This could very well result in us, first of all, selling quite a bit of ground stations. But beyond that, I think this would also enable us to sell more space terminals because of the fact that I think customers are looking for a turnkey solution across different domains from ground to air to space. To answer the second part of the question, all our space terminals we build until now and we will keep on building in the future will be capable of doing not just optical inter-satellite links, but also ground links. As I mentioned earlier, both in hardware and in software, we have built configurable, adaptable, flexible, interoperable terminals, and that is a key to be able to deliver these terminals to multiple different customers without having to constantly build a new version of the hardware. What that also does is this terminal, once we want to do a ground station, can adapt itself to the uniqueness of ground station links. Of course, you're going to the atmosphere, there's different disturbances. It has to adapt itself, but very quickly it can reconfigure itself and do a ground station link. So both use cases are possible with the terminal they're delivering today. I think really this engagement will once again show Mineric's commitment in all the domains doing optical comp, and you're going to see Mineric doing space, air, and ground. And I want to say that the air terminal really is an atmospheric terminal that goes beyond just air and does pretty much all mobility. Well, thank you for that question.
spk00: So we have reached the end of the question and answer session. I will now turn the call back over to Mr. Dingus for closing remarks.
spk06: Thank you, Operator, and thank you, everyone, for joining us today for our first Analyst and Investor Day. We thank you for your interest in Moneric. We will speak with you all again when we release first half 2022 financial results. Goodbye for now.
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