Redwire Corporation

Good day, ladies and gentlemen, and welcome to Redwire's first quarter 2022 earnings conference call. My name is Kyle, and I'll be your operator for today. As a reminder, this call is being recorded. I would now like to introduce your host for today's conference call, Michael Shannon, Treasurer and Head of Investor Relations. Mr. Shannon, you may begin your conference.

Thank you, and welcome to Redwire's first quarter 2022 earnings conference call. I'm here today with Peter Conito, Redwire's Chairman and CEO, Andrew Rush, Redwire's President and COO, and Bill Reed, Redwire's CFO. I will begin by referring you to the Safe Harbor disclaimer in our earnings press release, which is posted to the investor relations section of the website. During today's call, we will make certain forward-looking statements. These statements are based on current expectations and assumptions, and as a result, are subject to risks and uncertainties. Many factors could cause actual events to differ materially from the forward-looking statements made on this call. For more information about these risks and uncertainties, please refer to the press release issued today. Readers are cautioned not to put undue reliance on forward-looking statements, and Redwire specifically disclaims any obligation to update or revise any forward-looking statements that may be discussed during this call. During this call, we will also refer to both GAAP and non-GAAP financial measures. You could find definitions and reconciliations of our GAAP to non-GAAP measures included in our press release. And lastly, this call is also being webcast with a supporting presentation, and a replay and copy of the presentation will be available on our website for two weeks. With that, I'd like to turn the call over to Peter Conito.

Thanks, Mike, and thank you, everyone, for joining the call today. Today we will be discussing our key business accomplishments for the first quarter of 2022. Before moving to the slides, I wanted to highlight that our goal here at Redwire is to deliver the foundational technologies for the present and future of space infrastructure. To do this, we're focused on continuously improving and scaling our products and solutions for our customers. Redwire's solutions range from innovative payloads to digital engineering, solar arrays, key navigation and communications components, and in-space servicing, assembly, and manufacturing. Our technology is enabling new space missions that support partners like NASA, the US Space Force, the intelligence community, and commercial customers. I would also like to flag for everyone on the call that we posted our glossy annual report wrap with many projects we are proud to have accomplished in the last year. Many of the images you will see in the annual report and throughout this presentation are actual images of real red wire capability deployed today. Please take some time to read the letter and look through the report. We have a bold vision, but this is not science fiction. Many of these programs are being executed in the present day. As I highlight our results, please follow along starting on slide seven of the presentation that we have posted with our earnings release today. In the first quarter, we continued to execute on our long-term strategy with some critical business and technical milestones. There are strong demand signals coming from customers in key areas where Redwire is an industry leader, such as in-space servicing, assembly, and manufacturing, also known as ISAM. More on that in a few moments. We are also seeing strong continuing demand for our patented rollout solar arrays, or ROSAs, which as we've already highlighted, the first pair was installed on the ISS last June. This is an example of how a critical win and proven performance with a breakthrough technology like ROSA can lead to much larger opportunities. As such, we recently delivered ROSA Wing 3 and 4 to the customer and anticipate growing orders for ROSA from current and new customers in the future. Another example of how proven performance on a key opportunity can lead to larger orders is our Link-16 antenna developed for national security missions. Building on our recent success demonstrating our Link-16 antennas, Redwire has been contracted to deliver multiple high-gain antenna systems for a national security space LEO satellite constellation. Proven performance on orbit is leading to larger opportunities as new constellations and other large programs move into full-rate production. This is how we will scale. To meet the anticipated demand, we are leaning forward and have increased investment in business development, R&D, and corporate infrastructure to build a strong foundation for near-term growth and profitability. Of course, this has a cost impact as well. but it is critical to growing revenue and market share, and that is where we are focused. The first quarter performance was slightly below our expectations due to delays in contract awards and supply chain issues impacting subcontractor order fulfillment, and we have experienced some volatility associated with orders from emerging commercial space contracts. However, our revenue profile is such that a shift of a key milestone Large new order or sizable subcontract delivery can materially change the timing of our revenue throughout the year. Despite near-term shifts and delays that impacted the size of this year's first quarter revenue, we have confidence in our 2022 forecast range and expect sales to be more heavily weighted toward the back half of the year. We saw this same pattern in last year's revenue profile as well. Moving on to slide eight. As I previously mentioned, the demand signals for the space market remain strong. The national security sector is seeing strong demand driven by 26% growth in the Space Force budget. The tragic Russian invasion of Ukraine has highlighted the criticality of space assets during conflict and underscores the need for a resilient space architecture. Many red wire capabilities are critical for tactical communications, remote sensing, tactically responsive space, modeling, simulation, and training and other national security priorities. We are continuing to invest in growing our national security capabilities and have unique security infrastructure and contracts that will enable us to effectively support this customer. Moving to civil space. Despite delays caused by the continuing resolution, this segment is very stable and growing. The approved NASA budget has grown 8%, and we are now seeing increased investment in the Artemis program, including the recent announcement of a second human landing system. Civil space is an important component of Redwire's revenue. Our legacy of delivering for NASA provides us a stable foundation and the staying power to deliver for exciting new space missions, regardless of economic conditions. For example, We recently delivered the camera controller, wireless antennas, and cable harnesses for the Artemis III Orion camera system and an array of inspection and navigation cameras developed for NASA's Orion spacecraft. This is a segment which is foundational to our pipeline throughout FY 2022 and FY 2023, and this past Tuesday we were pleased to host a visit from NASA Administrator Bill Nelson at our headquarters in Jacksonville, Florida. Lastly, the emerging commercial space segment has tremendous growth potential over the next five to ten years that could far outpace the other segments in annual growth rates. However, recent development in the macro environment has created near-term volatility and some companies are having difficulty raising the capital required to support their growth objectives. Since Redwire provides foundational technologies to many of these commercial providers, Changes in their forecast or deliveries can have a direct impact on our forecast as well. Regardless, we still see incredible potential from this segment over the long term, and as the other two segments rely heavily on a vibrant commercial space sector. The long-term growth trajectory for this segment is easier to predict than the timing. Slide nine. I'd like to take a moment to focus on a specific demand signal in the government segment that is very positive for Redwire. The White House has recently released an interagency in-space servicing, assembly, and manufacturing national strategy. This ISAM national strategy is very exciting news for Redwire. As you all know, Redwire is uniquely positioned as a first mover and technical leader in the area of in-space servicing, assembly, and manufacturing, and this provides additional validation and momentum to our business plans. One key change is that this area used to be referred to by our customers in the industry as OSAM, or on-orbit servicing assembly and manufacturing. But this strategy broadens the focus from on-orbit to in space to underscore that the opportunity is much greater than just in Earth orbit, but rather extends into all areas of space, such as cislunar, lunar, and interplanetary space. The White House ISAM strategy provides strategic goals for the agencies under the executive branch to advance ISAM capability development discussed in the United States Space Priorities Framework. It underscores the nation's commitment to the critical ISAM technologies that Redwire has been developing, like 3D printing in space and our ISAM program, Arcanon, which will demonstrate the first satellite to use ISAM to manufacture and assemble key components once on orbit. as well as our Lunar Regulus 3D printer that won a 2021 Popular Science Award for Innovation and is critical to developing a sustained human presence on the moon. This is a very positive development for Redwire, as this strategy should increase the number of acquisitions for ISAM capability. Moving to slide 10. As I mentioned in the intro, a critical win and proven performance with a breakthrough technology can lead to much larger opportunities. This is how Redwire will scale. We saw numerous examples of this starting to bear fruit in the first quarter. I already mentioned how the success of our ROSA wings on the ISS has led to more orders and the success of our LINK-16 antenna led to a procurement for many more on a national security constellation, but there are other examples across the company as well to include large orders of our navigation components and digital engineering software that could lead to longer term large-scale procurement. As a critical supplier to the space industry across all three segments, we are planting the seeds of future growth by having our solutions baselined on programs with significant growth potential and large production tails. This ties right into slide 11. In order to capitalize on these growth opportunities, we are leaning forward on our investments in business development, R&D, and capital expenditures. We have increased our spending over 70% in each category to ensure we have the business development resources to capture new opportunities and the facilities and production capabilities needed to scale with our customers. Although these numbers have a cost impact in the near term, they will normalize with scale when the subsequent growth from these investments will result in better operating leverage. And as you can see on slide 12, Business development and R&D activity is essential in order for Redwire to compete effectively and support the number of bids in our pipeline. Our backlog was $274 million as of March 31, 2022, consistent with the previous quarter, but we are now seeing several high-probability bids that should lead to contract wins, which will be highlighted in future quarters. There are over $546 million in bids that Redwire has submitted to our customers that are awaiting decisions. A few examples of the size and types of bids we have submitted are highlighted on this slide. Moving on to slide 13, the final slide in my section, I'd like to highlight Redwire's current positioning as we continue to execute on our plan for the remainder of 2022. As I just highlighted, Redwire has increased our investments to fuel growth and to achieve higher revenue and higher profitability as we gain operating leverage. The demand signals are strong in all three segments of the market, and we are leaning forward to prioritize revenue growth. As Bill will cover in more detail in his section, we currently have access to sufficient capital to execute on our growth plans. This is critical as we are starting to see some potential for rocky roads ahead for the larger economy. We believe that when you combine our access to sufficient capital with our already existing strong backlog of business and long-term history with stable government customers like NASA, the DoD, and intelligence customers, we have the staying power and financial resilience to endure uncertain macroeconomic conditions should they occur. In fact, this may lead to new opportunities as we anticipate an increase in potential accretive M&A as smaller companies see the benefit of joining a larger, more diversified platform. Regardless of the impact of the broader U.S. and global economy, however, we still see significant demand for the space industry. Expanding government investments from NASA and the defense and intelligence community are key elements in our growth strategy. Penetration on large multi-year programs with production potential should lead to more rapid scaling in later phases, and we look forward to providing our customers innovative solutions for these and other important missions. We continue to have confidence in our forecast for 2022 and expect sales to be more heavily weighted toward the back half of the year as key procurements work their way through the acquisition systems. With that, I will now turn the call over to Andrew to outline some of our specific technical achievements and key programs.

Thanks, Pete. I'd like to walk through some of our many operational highlights and give you updates on successes in quarter one. Looking at slide 14, I like to think of this chart as our today and tomorrow slide. As you look at both missions that we are flying today and the future of space commercialization. You can see many missions that Redwire has enabled with our 50 plus years of flight heritage and over 200 space flight missions. This slide also highlights the industrialization and commercialization of space. Specifically, next generation observatories, remote sensing systems, human habitats around and on the moon, permanent outposts on Mars, and more. Just as Redwire supports the missions of today, we also are working to enable the missions of tomorrow. and deliver on the future of space commercialization. Our strategic focus areas of in-space servicing, assembly, and manufacturing, low-Earth orbit commercialization, advanced sensors and components, space domain awareness, and digitally engineered spacecraft support national security, commercial, and exploration missions today and provide capabilities that will enable this second golden age of space that you see here. Now to get into the details of the progress that we've made this quarter, let's turn to slide 15. Here are highlights of several updates I'll get into in detail in a moment. As Pete alluded to, we are delivering multiple products and services for national security and commercial satellite constellations, as well as multi-year, multi-ship set missions. Penetration of these constellations and larger missions provides growth and long-term upside for us. Solar arrays and deployable solutions are a very important part of our company. We're excited to report that we've delivered the third and fourth wings for installation on the International Space Station and are set to dramatically increase the number of solar array wings that we deliver this year. Redwire products and services continue to be successfully deployed at a high cadence. Thus far, our hardware has been deployed on four missions this year. and continues to operate on the International Space Station. We also recently were selected as a provider on the Air Force's $950 million Advanced Battle Management System, IDIQ. This builds on work we're doing for other customers, which I'll get into in a moment. If you look at the middle of the page of that satellite on-con, I'm proud to provide updates on our progress with our Arconaut-1 mission, which recently carried out its mission CDR, a major milestone on the way to demonstration and adoption of our in-space manufacturing and assembly of satellites technology. Finally, Redwire has leaned forward and made investments necessary to increase production capacity for many of our high growth potential product lines, including solar arrays, robotic capabilities, and RF antenna production. Turning to slide 16, we'll first talk about our solar array product lines. As you know, We are building six wings to ultimately be installed on the International Space Station and augment its power generation capability. The first pair of those wings, wings one and two, were installed last year and are performing at or above their performance targets. I'm pleased to report that in the first quarter of 2022, we delivered wings three and four. And Wing 4 was actually delivered ahead of its baseline schedule, a major operational win for us at Redwire. We're now in production on Wings 5 and 6 and on track for an on-time delivery against our baseline schedule. Successful operation of our rollout solar array technology on the International Space Station and on other missions like DART and improved scheduled performance validates Redwire's commitment to excellence and gives our customers the confidence to have us do their power generation for their assets. Turning to slide 17, let's talk about the outlook for our solar array product line. We anticipate our solar array wing deliveries tripling in 2022, based on our backlog and our pursuits, which include multiple consolation orders and range from small satellites to extremely large solar arrays. In quarter one, We have faced some challenges with subcontractor performance, which have impacted our Q1 financial results. These include subcontractor delays as well as delays in definitization of contracts with subcontractors. We anticipate resolving subcontractor start delays in quarter two and quarter three and maintaining our delivery targets in the calendar year. We are also proactively seeking to strengthen our supply chain by expanding our vendor base and building strategic partnerships with trusted vendors. Our solar array product line is strong despite these near-term performance impacts. Turning to slide 18, we've had many successful deployments in the first quarter, including four separate satellite launches on GOES-T, a commercial satellite that was taken to space on SpaceX's Transporter 4, and hardware that went to the International Space Station on both NG-17 and Crew-4. Redwire hardware and services will continue to be deployed throughout 2022 and beyond. Now let's turn to slide 19 and discuss the expansion of our modeling and simulation capabilities and services. We're awarded a position on the $950 million IDIQ contract to support the US Air Force's advanced battle management system. We're expanding our ability to support the national security mission via utilization of our cutting edge modeling and simulation capabilities and our systems engineering. The work that we would provide on this IDIQ is similar to work that we are currently providing for other customers in the government and commercial spaces. Turning to slide 20, I'll provide an update on our in-space manufacturing and assembly of satellites technology demonstration mission, which is known as Arcanaut 1 or OSAM 2. This technology will be the first demonstration of the ability for a satellite to manufacture and assemble itself, which is truly a paradigm shift in the way that we can do satellite design, manufacture, and operation, and disruptive to the $20 billion satellite manufacturing market. We recently completed our major critical design review on our OSAM2 mission, which clears the way for us to do construction, test, and deployment of this mission. In quarter one, We did experience subcontractor delays on this program and rework, which did impact the schedule for this program. These delays are in family for a first-of-its-kind technology demonstration such as OSAM 2. Validating Redwire's leadership and the long-term potential of in-space manufacturing and assembly of satellites was the White House's announcement of a national ICM strategy to encourage the adoption of this technology, but really provides a major tailwind for adoption. We're seeing increased uptake and interest in this technology, which validates its long-term potential in spite of delays and impacts that we've had in quarter one. Turning now to slide 21, Let's talk about the investment that we have made in infrastructure to support production capacity at Redwire. We're building out an additional 70,000 square feet of design, development, and production space to enable us to deliver on our existing backlog and pipeline. We're focusing on the future by making this investment, by heavily investing in our facilities to support building more solar arrays, a wider range of solar arrays, increased robotic capabilities, and increased RF antenna production. Of note in this build-out is a production facility that has a 35-foot high bay, which will enable us to build the largest solar arrays that have yet been deployed on the NASA Gateway Power and Propulsion Element Program. This production capacity also sets us up for success in production and delivery for major multi-shipset, multi-year programs, and satellite constellations. With those updates, I'd like to turn it over to Bill Reed, our CFO. Thank you.

Thank you, Andrew. As Pete and Andrew noted, we started 2022 off with several important customer deliveries and key program wins. Our backlog is healthy, and our pipeline of new business continues to be very strong. Our total backlog, including both contracted and uncontracted backlog, grew from $272 million at the end of 2021 to $274 million as of March 31, 2022. Contracted backlog at the end of the period is $137 million, and our selected backlog, along with add-ons to existing contracts, also stands at $137 million. Contracted backlog represents firm contract commitments we have received and the remaining backlog includes contracts in the process of award as well as contract extensions that have been verbally awarded, priced, fully scoped, and are expected to be executed. As we indicated in our previous update, the long delay in the approval of the U.S. federal government's budget and the resulting continuing resolutions negatively impacted both the timing of contract awards and the length of time required to get programs under contract. Additionally, The continuing impact of COVID, including the Omicron variant, in the fourth quarter of 2021 and continuing into Q1 impacted contract awards, negatively impacted supply chains, and caused subcontractor performance delays. As a result, revenues from several programs moved to later in the year. GAAP revenue for the first quarter was $32.9 million, an increase of $1.2 million, or 4% from the prior year, driven by 3.7 million in revenue contributed by our 2021 acquisitions and the timing of product deliveries in our deployables and engineering services businesses. On a pro forma basis, revenues are down 5.2 million, or 14%, due to several large subcontract activities in Q1 of 21 that were not repeated in this quarter, and macroeconomic challenges, including inflation and supply chain pressures, We see significant variability in the timing of revenue on many of our programs based on the relevant activity on the program from one period to the next. Because of this inherent variability in the nature of our programs, we expect to see long-term growth over time while not necessarily expecting continuous quarter-to-quarter growth. Cost of sales for the quarter increased $3.7 million to $27.7 million. As mentioned, We experienced significant delays in getting programs under contract, which created labor inefficiencies in several of our facilities. In addition, we experienced supply chain challenges, inflationary pressure, increased material and subcontractor costs, and delays in subcontractor performance. Cost of sales as a percentage of net revenue was 84%, compared with 76% for the same period in the prior year. Gross margin declined 2.3 million to 5.2 million in the first quarter. The decline in margin is driven by the previously mentioned cost impacts, as well as increases in program estimates, especially in our in-space servicing and manufacturing-related programs. Several of our programs are one-of-a-kind development activities. Therefore, it is not unusual to have adjustments to program estimates over time as the related engineering challenges are better understood. SG&A expenses for the year increased $9.7 million to $20.9 million for the quarter. The increase versus Q1 of 21 is due to several new costs associated with being a public company and some one-time expenses. SG&A for Q1 of 22 as compared to Q1 of 21 includes one-time costs related to the recently concluded independent investigation of $2.3 million, higher business development spending of $1.5 million, new non-cash charges for stock-based compensation expense of $4.4 million, increases in the insurance cost of $1 million, investments in our new ERP system rollout, and higher fees and expenses related to being a public company. In Q1, we started a global conversion to a single ERP solution for all of our sites. The conversion is expected to take approximately two years to complete and is expected to drive synergies across sites and help create significant efficiency gains. Interest expense for the quarter was $1.5 million, which is comparable to the same period last year. For the first quarter of 2022, gap net loss was $17.3 million. When taking into consideration unusual costs associated with investigation costs, noncash stock-based compensation, noncash changes in warrant liabilities, capital market fees, ERP conversion-related expenses, and other costs related to becoming public, Adjusted EBITDA was a loss of $4.7 million compared to a gain in the first quarter of 2021 of $1 million. We are reaffirming our guidance for full-year revenue in adjusted EBITDA. As Pete mentioned, revenue in the first quarter was lower than revenue expected in future quarters and relative to the full year. We have confidence in our forecast range and expect sales to be more heavily weighted towards the back half of the year. The combination of our existing backlog and a strong near-term pipeline gives us confidence in an increasing revenue profile for the remaining quarter of the year. As mentioned, this higher volume is expected to generate significant operational efficiencies and leverage increasing profits and return Redwire to positive operating cash flows. As a result, management is reaffirming previous guidance for full-year 2022 revenue of between $165 million and $195 million and full-year adjusted EBITDA to be between $8 million and $15 million. To reiterate, Redwire has seen very strong market demand for our products and services across all of our market segments. We have invested and are continuing to invest heavily in public company infrastructure, business development, and R&D to drive growth and position us to drive operational efficiencies and leverage profitability as our revenue grows. With recently executed actions, we are confident that the company has sufficient resources to execute on our initiatives and fuel ongoing growth. We ended the quarter with $30.9 million in available liquidity comprised of $5.9 million of cash and cash equivalents and $25 million in available borrowings on existing credit facilities. Recently, Redwire secured an increase to our revolving credit facility with Adams Street Partners from $5 million to $25 million. With this increase in revolver capacity and our strong backlog of business, we believe our existing sources of liquidity are sufficient to meet our operational and working capital needs for the foreseeable future. In April, the company entered into a committed equity facility with B-Rally Financial, which provides the company the opportunity, but not the obligation, to sell up to $80 million in equity to fuel future accretive growth. And now I'd like to hand it back over to Pete for his closing comments before our Q&A session.

As you can see, we expect to continue our strong momentum throughout 2022, and Redwire is building a solid foundation as a key mission enabler of pure play space company with scale. Thank you all for your time today. I will now turn the call back over to our operator to open it up for Q&A.

At this time, we'll be conducting a question and answer session. If you'd like to ask a question, please press star 1 on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press star 2 if you'd like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. One moment, please, while we pull for questions. Our first question is from Greg Conrad with Jefferies. Please proceed with your question.

Good evening. Maybe just to start, you know, appreciate the near-term headwinds around supply chain, the budget, COVID, you know, and the second half-weighted outlook, but can you maybe just talk about what was contemplated when you initially gave the 22 outlook and confidence in those headwinds lifting, and then maybe puts and takes towards the lower end of revenue guidance versus maybe what needs to happen or accelerate to get closer towards the upper end.

Yeah. Hey, Greg, how are you? Thank you for your question. This is Pete. Yeah, no, I think when you look at our backlog, I'm going to take the second half of your question first. When you look at our backlog plus the number of bids we have submitted. What's really going to drive the second half is executing on that backlog and then, of course, the win rate and size of the bids that we convert to backlog. So with $547 million in bids out there, many of which have been submitted for a while and have been under review for a while, the timing and award's of those bids will drive us either to the lower or upper end of our forecast. In terms of some of the supply chain headwinds, I'm going to turn it over to Andrew Rush, our president and COO, and he can talk about some of that. Yeah, thanks for the question, Greg.

As we discussed in the prepared portion of the call, we have faced some contractor performance issues that we did not anticipate going into Q1 in addition to delays in definitization of contracts with subcontractors. You know, we have seen our subcontractors, you know, watching inflation like everybody else and, you know, pushing for higher prices in response to those concerns. We anticipate in the latter portions of this year resolving these subcontractor delays, resolving the definitization issues while, you know, while striving to maintain our gross margins in light of the inflationary pressures that we're experiencing.

And then just thinking on the expense side, I mean, you called out inflation, higher bid and proposal and internal R&D, and at least on the The latter two, I would think that's maybe a little bit more predictable or at least within plan. Just as it relates to inflation, how do you think about the pricing or ability to offset or maybe just contract structure and kind of the impact when we just think about profitability going forward?

That's a great question, and it's one that we pay a lot of attention to because we are bidding on multi-year programs here, and it's something we have to think about constantly and look ahead of. I think it just reemphasizes for us the importance of making sure that we've got those good relationships with our subcontractors and we lock in their pricing at the time of the bid and proposal so we're not getting squeezed in between later in the program.

To add to that, you know, we have a, you know, we have several different types of contracts where we're, you know, our CPFF contracts, you know, inflationary pressures or, you know, costs are passed along to our ultimate customer, whereas Bill mentioned we've had pricing locked in for some time that, you know, that reduces our exposure to inflationary pressures. You don't typically lock in every single price at the beginning of a program. So it is, you know, so we do experience some, you know, some impacts due to inflation. And then, you know, from a forward-looking perspective, as I mentioned earlier, that's something that we are, you know, we're doing. We're negotiating aggressively to keep our cost growth low so we can provide great value to our customers and to our shareholders.

And then... You know, just appreciating the emerging commercial space. I mean, that was helpful. You kind of bucketed some of those opportunities. You know, I mean, I think we appreciate the significant growth potential and acceleration. And, you know, any way to think about what that meant for Redwire so far, just thinking about the opportunity captured versus how much is out in front. And then, I mean, you kind of called out that it can disrupt Redwire's forecasts. But any real examples or at least thinking about this year's guidance? I mean, have some of those programs been pushed out or is that just thinking about the timing of when some of these future opportunities materialize?

Yeah, I think the point really was just to highlight the difficulty in predicting the timing. So one of the interesting things about Redwire and one of the key benefits that we have is, as demand is strong across the industry, as a key mission partner and a supplier, we benefit from that. But in a sector like the commercial space part of the market, if, for instance, they don't get the amount of funding that they anticipated and that and then end up revising down their forecast as a result, that can have an impact on our forecast. Or if they run into regulatory issues and that slows down the timing of their forecast, us as a critical supplier to many of these commercial space companies, that can affect the timing. So I think overall the point that we're just trying to highlight is the potential is tremendous and we see the demand signals as really strong, but it's very easy for a key order to move from one quarter to the next based on some sort of unanticipated change in the forecast of some of our commercial customers.

And then just last one for me, I mean, one area that maybe you were a little bit more definitive in, I mean, You called out solar array delivery expected to triple in 2022. I mean, can you maybe talk about this product area a little bit? And what does that mean for revenues? I mean, are revenues tripling? You know, how important is that of a product category for total finances or just any more color you can give on that would be helpful.

Yeah, absolutely. So for us, our solar array product lines and our other kind of deployable products solutions and antennas and deployable structures, for instance, is a fast-moving, fast-growth area for us. Our rollout solar array technology became operational last year on orbit, and we're seeing a lot of customers now baseline that for future opportunities and for active programs. And the really awesome thing about that is it becomes very sticky. You know, when your solar array is baseline, for instance, on a satellite bus that gets used for many, many different missions, that's a very sticky relationship. We also have some solar arrays coming online for smaller satellites, for low Earth orbit, ESPA class oriented satellites that are optimized for constellations, that are optimized for multi-ship set systems. And there's strong sales there, strong interest from customers there. And these are also significant in that it enables us to sell multiple component, multiple product shift sets to customers. So that provides a booing effect for us that we're seeing in our bids and seeing in our opportunities in other components, whether they be cameras or navigation components. So looking forward, this is an area that... you know, is a significant driver for us in post, you know, we do expect to continue to see growth here, both in customer uptake as well as, you know, more satellite missions coming online driving sales for us.

Yeah, I'd like to jump in on that because right now, Redwire is the only company out there that has a rollout solar array with flight heritage. And for that reason, you can see that the successful deployment of that has led to more orders. And that's really critical to understanding how we're going to scale Redwire. We had Wing 1 and 2 deployed on the International Space Station, and that success and the success of the DART program gives the customer confidence in using ROSA for the Lunar Gateway, which then has also sparked success. additional interest from a number of different customers who want to take advantage of that unique capability of which it is the only demonstrated version of that unique capability that has any flight heritage with it. So that gives us the ability to scale as there's more and more demand for that product line, and that product line in particular is a very high-end, high-revenue-driving product for us. Thank you.

Our next question is from Mike Vermouth with Newland Capital. Please proceed with your question.

Hi, guys. How are you doing? Hey, Mike. Got a couple of questions here for you. I guess the first one is I guess when we first went public, the initial slide decks gave a long-term trajectory for us. First of all, has anything changed on that? Has it gotten bigger? Has it become more worried about that? The way I've always looked at it, if we come even close to any of those numbers, this is going to be a phenomenal company. But on that, can you discuss the national security opportunity out there? I know this is developing and it's moving really quick and the size and scope of that has grown dramatically. and also some of your larger constellation programs, the size of this, and how the tails work on these. Once we land these contracts, how that gives you confidence in growing into those kind of original goals that you set for us over the next two, three, four, five years.

Right. Yeah, no, that's an excellent question. It's particularly on the national security side because there is tremendous amount of growth in the national security budgets. And with the tragic occurrences that are going on with the Russian invasion of Ukraine, I think it's really underscored how important space is to our national security. And that's why you see these budgets going up. So Redwire is in a position to be able to execute on those budgets first and foremost. And that's really important because not all space-based suppliers have the contracts, the clearances, and the security infrastructure to do national security work. So we do. So that's really important in terms of being able to execute against those growing budgets. So we continue to see that as a fast-growing part of the market, and we have the capacity to participate in that sector. In terms of how we scale What we're doing is we're planting a lot of seeds. And to use another national security analogy, it used to be when you got specced in on a particular program early on, that led to very sticky revenue in the long term because once a national security program has its spec, they rarely change. Well, that actually is true across all of the different sectors we have. So one of the things that we're excited about is the diversity of our pipeline where we're planting a lot of seeds in emerging constellations. I believe we recently, in the past six months or so, put out an announcement of providing some capability to Planet IQ. That's an example. As their constellation scales, we'll scale with it. We mentioned the success of the Link-16 antenna and how that capability now having flight heritage and being demonstrated led to a procurement for a larger national security constellation. As that constellation grows and other tactical communication constellations like it grow, we'll grow along with it. So what you're really seeing is in kind of the early days, us planting a lot of seeds and getting spec'd in on these really large programs that have just tremendous production tails associated with them.

Excellent. Another question. You said you have, I forget the exact number, 550 million of, I guess, bids out there. That's roughly the number.

Yeah, 547.

What's a historical win rate that you would, you know, that you would, guess. I'm not holding you to anything, but what's normal for us historically?

Yeah, well, it's difficult to predict specifically to that 547 million. And unfortunately, because of the way that Redwire came together, we don't have good historical data, so I wouldn't hazard a guess. But when you look at of the $273 million in backlog and the $547 million in bids submitted, you could run some sensitivity analysis against that and at different potential win rates and see where that kind of shakes out in terms of against our overall forecast. Male Speaker 3 Excellent.

Going back to the question before, you know, you had in that initial slide deck, I guess, nine months ago or so, you kind of had, you know, a great trajectory over the next five or six years. Is there anything that's changed to that? You know, granted, you know, we can push it, you know, this is, it's very common what happened to you guys in this first quarter. So in the longer run, is there anything that says, Oh, you can't get to a billion in revenues in five, six years, or, In your mind, has anything changed? Has it become greater, the opportunity out there, less, more uncertain? Can you just go into that?

I think that with the rapidly changing economic conditions, the uncertainty has gone up. We're not actually tracking too far off relative for the market that we're in. comparatively. So I think if we were to say that anything has changed, it's a little bit of uncertainty about the timing, like I talked about, as a lot of the commercial space companies in our sector that we're a supplier to change their forecasts over time. I mean, you have to kind of think in some regards of Redwire as being a reflection of the combination of the growth rate and the national security, civil and commercial markets. We see national security as being a really high growth area for us, and we see a lot of stability regardless of the future economic conditions. we see that as very predictable coming from NASA and slightly up. But the fact of the matter is, is if the commercial space segment does not deliver on their forecast in line with the projections that were pervasive this time last year, that adds uncertainty to our forecast over the next five years as well.

Got it. But we're not talking about, okay, I guess the number out there was, 1.2 billion so if it goes to 800 the numbers are so huge for you know you just say take a company that you know we have a 200 million dollar market cap now it's not my point is it's not that far off nothing's changed that dramatically that you know it i was saying if you can even get to 800 million in five or six years that's great right so nothing's changed that dramatically yeah and i think

Yeah, no, I appreciate what you're saying, Mike. I think what I would point to is we put a lot of thought into highlighting at the beginning the incredible demand signals that are out there. So when you look at what's going on in demand for ISAM, there is a national strategy, and as long as that policy drives large acquisitions and large procurements through the system overall, a red wire will see great opportunity. And as long as national security budgets continue to grow, we'll continue to drive opportunity. The commercial sector is a little bit more vulnerable to changes in economic conditions and capital markets and the ability for a lot of the new space companies to execute on their plans up against regulatory constraints. headwinds and the like, their own supply chain issues as well. But overall, the demand signal for space is really strong and still as exciting as it was before.

Excellent. One last question, and this isn't anything specific here. You know, Amazon is building out this whole, you know, Internet satellite project. Is it Quipper? I forget what it was called exactly. But there's a lot of stuff out there like on that. And I'm not saying this one in, yes, this one in particular, but are we going to be involved in areas such as this? And I'm not saying this one specifically because I know you haven't announced anything yet or have or haven't, and you probably can't, but are there things like this out there that we're bidding on?

Yes, so I can't comment, obviously, on the specifics of any one bid or program.

I'm not saying in general, yeah.

Yeah, yeah, yeah. I was just doing my upfront disclaimer. But what I will tell you is that every time a constellation comes out, that's an opportunity for Redwire. So every constellation that is out there is an opportunity for Redwire. And we are actively discussing and partnering and planting seeds to get baselined With a number of different technologies, one of the interesting things about Redwire is we have a lot of heritage across a diverse range of products. So even if one individual product line doesn't penetrate a particular constellation, we get multiple at-bats for every constellation because we can offer different products. products and services for each one. And we are on commercial and national security constellations now. So that kind of heritage underscores our ability to deliver, and that's valuable to people who are putting constellations up.

Excellent. And then last slide, this is just kind of a statement, is that we've been buying in stock all the way down here. I know you guys have been at blackout periods for a long time. I would hope that we're at $3.70 to close today, that management, the board, and possibly our backers would all make a significant statement and purchase stock when the window opens. I hope that you guys look at it, and it's not me saying it, that this is probably the best thing you could do with your money right now at a $200 million valuation. Yeah. that's the opportunity that I see out there and these hiccups, you know, happen, you know, this has been a tough market for everybody. So hopefully we've seen the bottom here.

Yeah, we definitely believe in the longterm value of our stock. No doubt, Mike.

Right. Thanks guys. I appreciate it. Yep. Thank you. Thanks Mike.

Our next question is from Griffin boss with B Riley securities. Please proceed with your question.

Hi, thanks for taking my question. Yeah, most of them have been answered already, but I do have a couple quick ones here. Just regarding the, you guys mentioned the $950 million IDIQ for the Air Force ABMS. I was just curious what role Redwire has on that contract and who it was you were or are competing against for that.

Yeah, so thanks, Griffin. I appreciate the question. So that's an IDIQ contract, an indefinite, delivery and definite quantity contract, which is really an opportunity to bid on task orders as they come out. Redwire has some really great technology that's very relevant to JADC2 and the ABMS opportunities out there in the sense that we have a digital engineering enterprise software package that can, in high fidelity, model and simulate constellations at scale. This is really important as the JADC2 architecture comes together because when they look at all of the different command and control architectures, they can use our software to simulate the space environment in a realistic way. So obviously, the goal of the Space National Security Architecture and the JADC2 program in general is to bring different disparate data sources together to achieve better situational awareness. And by being able to be a key provider of software that can simulate how space plays into those different concepts of operation and different scenarios, that's a really great opportunity for Redwire. And, you know, that contract represents just one of actually a couple of contracts that Redwire can use to access the national security customer. And that's why I tried to underscore that, I think, in one of the earlier questions that a startup just can't come off the street tomorrow and start doing work in the national security sector. So if you're not already positioned to be doing national security growth with the right contracts, with the right security infrastructure, with the right personnel, with clearances, then you can't take advantage of that double-digit budget growth that we talked about for the U.S. Space Force and organizations like the SDA and that, whereas Redwire, because we do have those capabilities, can take advantage of contracts like the ABMS IDIQ. In terms of who we're competing, that's actually a pretty broad contract. I don't know the exact number of awards that were made on it, but like many IDIQs, it is multiple award. But our software that we have is unique, and we feel that it's differentiated, so that gives us great opportunity.

Got it. That's really helpful. Thanks for all the detail there. And then just Last one for me. I was just curious, jumping back to the backlog, how much of that current $274 million that you guys expect to recognize as revenue in the remainder of 2022? And then I know we sort of talked about this earlier, and you noted in order to get to the high end of your revenue guidance in the year, that obviously comes down to the timing and awards of the $547 million bids that you guys have in place. But I was curious, sort of what the general duration is of your backlog historically, and then sort of, you know, layering in that the $547 million bid and proposal pipeline, just the general duration maybe we can expect there, if you guys have any insight into that.

Okay, well, I'll take the first backlog question, and Andrew and Pete may have a some more color on the bid piece. But generally, for the backlog that we have today, we're expecting about another $100 million of it to turn into revenue this year. And our backlog is typically made up of multi-year contracts, and so it can vary pretty substantially depending upon the nature of the contract. So it's not kind of a clean answer that says it's always going to burn out over this period of time. But that's now on the on the bid on the bid question I think it's similar to the to the backlog question It's it's a variety of programs and they're the variety of links and so it's very difficult to say What number is going to turn into revenue over this given period of time?

It in terms of your your question on the pipeline portion is You know, that $547 million in submitted bids that Pete was talking about, I just want to highlight that that is only a portion of our sales pipeline. That's the part that's, like, you know, the closest to closed one. And that's a subset of a broader pipeline that, you know, is measured in the billions of dollars. We, you know, we expect, as Pete was talking about, our historic win rates, are in family for the sector, and so we expect just a meaningful portion of those submitted bids to turn into wins. We've been seeing some nice sales here in Q2, and we expect to see that continue to pick up going forward. And as well as things that are not yet bid, convert to backlog in the future as just ASMRs.

Got it. Okay, great. Again, yeah, thanks for all the detail. I really appreciate it. Thanks, Griffin.

Thanks, Griffin. We have reached the end of the question and answer session, and I'll now turn the call over to Peter Conito for closing remarks.

I'd just like to thank everybody for joining us tonight, and have a good evening.

This concludes today's conference, and you may disconnect your lines at this time. Thank you for your participation.