Redwire Corporation

Greetings, and welcome to the Red Wire Corporation Q1 2023 earnings call. At this time, all participants are in a listen-only mode, and the floor will be open for questions following the presentation. If you should require assistance throughout the conference, please press star zero to reach a live operator. As a reminder, this conference is being recorded. At this time, it is my pleasure to turn the call over to Jeff Zunich. Sir, the floor is yours.

Thank you, Karen, and good morning, everyone. Welcome to Redwire's first quarter 2023 earnings call. We hope that you've seen our earnings release, which we issued yesterday afternoon. It has also been posted in the investor relations section of our website at redwirespace.com. Let me remind everyone that during the call, Redwire management may make forward-looking statements that reflect our beliefs, expectations, intentions, or predictions of the future. Our forward-looking statements are subject to risks and uncertainties that are described in more detail on slide two. Additionally, to the extent we discuss non-GAAP measures during the call, please leave slide three of our earnings release or the investor presentation on our website for the calculation of these measures and non-GAAP reconciliations. I am Jeff Zunig, Redwire Senior Vice President of Financial Planning and Analysis. Joining me on today's call are Peter Conito, Chairman and Chief Executive Officer, and Jonathan Bailiff, Chief Financial Officer. With that, I would like to turn the call over to Pete. Pete?

Thank you, Jeff. During today's call, I will take you through a discussion of our key accomplishments in the first quarter of 2023, followed by Jonathan, who will present the financial highlights for the same period. We will also discuss our continuing outlook for the remainder of 2023, after which we will open the floor for Q&A. Please move to slide six. Before we get into the details, as I did last quarter, I'd like to start with an overview of Redwire's high-level positioning in the space industry. Redwire is an integrated pure-play space infrastructure company with mission solutions and payloads for civil, commercial, and national security space customers, and our mission is to accelerate humanity's expansion into space by delivering reliable, economical, and sustainable infrastructure for future generations. With decades of proven flight heritage combined with innovative products and culture, Redwire is uniquely positioned to assist our customers in solving the complex challenges of future space missions and industries. Redwire has three primary areas of focus that form our business. Number one. As the fully integrated mission enabler, Redwire is empowering space mission providers, such as government agencies and large prime contractors, with a broad portfolio of space infrastructure, systems, subsystems, and components that can be procured either as a single item or in a tailored bundle for maximum supply chain efficiency. In addition to efficiency, this scalable model is currently solving some of our customers most critical supply chain issues by providing resiliency and reliability. Number two. providing the infrastructure and technology needed for people to permanently explore, live, and work in space, increasing our understanding of the moon, Mars, and beyond, as well as developing breakthrough commercial technologies for the benefit of life on Earth that can only be produced in microgravity. This area is generating real revenue and gross profit today. And lastly... supporting multinational access to space for countries that recognize space as a unique opportunity to build national prestige and accelerate economic development. We continually demonstrate our commitment to and expertise in our three key areas, focus areas, in a variety of ways, such as by having Redwire products on two launches in Q1, having developed 20 research facilities for the ISS, with 10 currently operating on the ISS to deliver world-leading research, possessing well over 100 years of flight heritage across our various legacy businesses, and growing to over 700 employees at 10 facilities in both the United States and Europe. Please turn to slide 7. The first quarter of 2023 was another record quarter for Redwire. Our revenues of $57.6 million were the highest of any quarter to date. We achieved positive adjusted EBITDA of $4.3 million, an improvement of $5.1 million versus the fourth quarter of 2022, and improved our net loss to $7.3 million, a significant improvement from the same period last year. More on that in a moment. We ended the quarter with contracted backlog of 286.8 million. As an administrative note, starting with this quarter, we have switched from focusing on total backlog, which included both contracted and uncontracted backlog, to simply reporting contracted backlog. There was no change in our calculation of contracted backlog from previous reporting, and we made this change to simplify reporting and increase comparability of the company's performance metrics with industry peers. Notably, in this quarter, we also launched three solutions on two launches, continuing our proven track record of delivering real flight heritage. Please turn to slide eight. Beating our previous record in the last quarter of 2022, Redwire's revenue growth achieved a new record level of $57.6 million during the first quarter of 2023. Year over year, compared with the first quarter of 2022, Redwire's total revenue grew by 75.3%. And on a sequential basis, we grew Redwire's total revenue by 7.3% over our previous record revenue in fourth quarter of 2022. Notably, even if you exclude revenue contributions from our acquisition of SpaceMD, Redwire revenues grew by 37.9% year over year. which demonstrates strong performance from our baseline operations in the same quarter last year. Please turn to slide nine. Although strong revenue growth is very positive, we are not solely focused on top-line growth. We are also focused on profitable growth. As such, we are pleased to report we have achieved a year-over-year improvement of net income on the order of a $10 million positive move to the upside as our losses decreased from a 17.3 million net loss in the first quarter of 2022 to a 7.3 million net loss in the first quarter of 2023." Moving to adjusted EBITDA, I am very pleased to report that our adjusted EBITDA has increased by $9 million on a year-over-year basis. For this first quarter of 2023, we generated an adjusted EBITDA of positive $4.3 million versus a negative $4.7 million adjusted EBITDA for the first quarter of 2022. Achieving positive adjusted EBITDA for the first time as a public company is an important milestone and an outstanding accomplish on both an absolute and percentage growth basis and has given us significant financial momentum heading into the remainder of 2023. Please turn to slide 10. Now let's move beyond the numbers to continue to emphasize that this financial performance is driven by our proven ability to deliver differentiated solutions for our customers. Slide 10 to 15 share just a few examples of successes in the first quarter of 2023 that highlight the importance of our capabilities. For example, In Q1, the U.S. Space Force and SpaceX launched the GPS-3 SVO6 satellite from Cape Canaveral, Florida, with two complete red wire fine sun sensor systems aboard. Each sensor consisted of four fine sun sensor heads and two processor electronics. Redwire's sun sensors are key navigational tools that provide sun acquisition, solar array pointing, and fail-safe recovery options for GPS3SV06 as it orbits 12,550 miles above the surface of the Earth. Redwire has been a key supplier of critical sun sensors for more than 50 years, and this technology has enabled more than 70 NASA missions, a clear example of our incredible space heritage. Please turn to slide 11. During the first quarter of 2023, Redwire delivered two more ROSA wings, numbers five and six, to Boeing to be launched on an upcoming commercial resupply mission to the International Space Station. To date, four ROSA wings have been launched and installed and are operating efficiently and effectively. With the addition of Wings 5 and 6, the overall power-generating capability of the ISS will be improved by 20 to 30 percent, a substantial increase. ROSAs are not only used for the International Space Station. Redwire is also producing various modular versions of ROSA for many government and commercial spaceflight applications, including the power and propulsion element for NASA's Gateway program. Please turn to slide 12. As I mentioned at the beginning of this presentation, Redwire is a leader when it comes to developing breakthrough commercial intellectual property for the benefit of life on Earth that can only be produced in microgravity. As an example, we are currently managing research in microgravity to discover a new type of electronic system. During Q1, 20 days of on-orbit experiments were completed with the Red Wire Managed Pore Formation and Mobility Investigation Facility as part of the Asymmetric Sawtooth and Cavity Enhanced Nucleation Driven Transport Investigation, or PFMI, ascent. The findings of the PFMI Ascent Space Physics Study will help with the design of passive cooling systems for spacecraft electronics, which are often limited by available space and electric power, and for consumer electronics here on Earth. The five experiments that have been completed on orbit represent the first half of the PFMI Ascent investigation. Please turn to slide 13. As we enter a new era of space exploration and commercialization, Redwire is a leader in developing inspirational content with commercial thought leaders to inspire future generations. As an example, Redwire is collaborating with Microsoft to create a unique learning opportunity inspired by Marvel Studios' Guardians of the Galaxy Volume 3 to engage students in science, technology, engineering, the arts, and mathematics topics, including 3D printing for future space exploration and microgravity R&D and manufacturing for the benefit of humanity. In conjunction with Guardians of the Galaxy Volume 3, Redwire and Microsoft have produced an engaging educational video to motivate the next generation of astronauts, engineers, and scientists. In addition, through a sponsorship from the ISS National Laboratory, Redwire and Microsoft intend to 3D print a Microsoft Zune on the ISS using Redwire's additive manufacturing facility to illustrate space-based space-based manufacturing in an engaging way. Redwire has manufactured more than 200 parts in space and is the only company currently providing commercial 3D printing on the ISS. Redwire was the natural choice to 3D print Star-Lord's Zoon. On the right side of this slide, you can see our Guardians of the Galaxy STEM promotional patch featuring Cosmo and Rocket from the movie, as well as a highly visible digital cube display in Times Square in New York City promoting the Marvel, Microsoft, and Redwire team. It is important to note that this effort was not a paid promotion by Redwire, but rather we were a paid partner as part of Microsoft's plan to leverage the power of space in their branding. We believe this is an excellent template for future Redwire offerings to provide space-based branding content for other commercial partners. For more information on this effort, please visit Zune.net. Please turn to slide 14. Space is a multinational endeavor, and Redwire Space is a global leader in international space missions. In the first quarter of 2023, Redwire Space Europe fully integrated two European Space Agency PROBA-3 spacecraft that will perform the world's first precision formation flying mission. In the PROBA-3 mission, two small satellites will launch together and separate. and maintaining a specific distance and working as one unit as they orbit around the Earth. On this program, Redwire is building and integrating the satellites themselves to include developing the onboard computer and advanced avionics. This mission is important in proving orbital formation flying technologies and rendezvous experiments for future science, astronomy, and Earth observation missions that will require satellites to seamlessly cooperate on orbit. Please turn to slide 15. Next, I'd like to highlight a Redwire Space Europe project that kicked off during the first quarter of 2023, a 3D bioprinting system. We have discussed Redwire's NASA-funded biofabrication facility on previous earnings calls, but this is a completely different mission funded by the European Space Agency. Redwire Space NV was awarded a €14 million contract to design, develop, and qualify the 3D bioprinting system. The system will leverage the latest 3D bioprinting technologies to provide a modular, powerful, and unique system to sustain a large number of experiments. With the 3D bioprinting system, Redwire is expanding its leadership of in-space manufacturing and bioprinting on the International Space Station for exploration and improving life here on Earth. Please turn to slide 16. Turning back to the numbers, our bookings during the first quarter were $29.7 million. However, as a reminder, our contracted awards for the fourth quarter of 2022 totaled $91.2 million. It is important to note that Redwire's bookings are typically lumpy, and the first quarter historically is usually the lowest of the year. Using a longer period of measure to smooth out the lumpiness, as of Q1 2023, our last 12-month book-to-bill ratio was 1.6. I'd like to point out that during the first quarter of 2023, Redwire made two changes with respect to our key performance indicators. First, we changed to using contracted backlog only. Second, we changed the book-to-bill calculation to present this metric on a last 12 months or LTM basis, whereas prior period disclosures were presented on a year-to-date basis. We believe these presentation changes will provide meaningful insights into contract award trends and increase comparability of the company's performance metrics with industry peers. Finally, as you can see from the bar chart on the right-hand side of this slide, our contracted backlog has more than doubled since March 31st, 2022 of last year to a contracted backlog at the end of Q1, 2023 of 286.8 million. This 108.8% growth in contracted backlog is one factor that gives us confidence in our future growth and stability. With that, I'd now like to turn the call over to Jonathan Bayless, Redwire's Chief Financial Officer. Jonathan?