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 Cannito, Redwire’s Chairman and CEO; Andrew Rush, Redwire’s President and COO; and Bill Read, 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 replaying 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 Cannito.

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 are focused on continuously improving and scaling our products and solutions for our customers. Redwire 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 U.S. 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 Redwire 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 7 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 Roll-Out Solar Arrays or…

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’d 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’re delivering multiple products and services for national security and commercial satellite constellation, as well as multiyear, multi-ships at missions. Penetration of these constellations and larger missions provides growth and long-term upside for us. Solar arrays and deployable solutions are 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…

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 un-contracted backlog grew from $272 million at the end of ‘21 to $274 million as of March 31, 2022. Contracted backlog at the end of the period was $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…

As you can see, we expect to continue our strong momentum throughout 2022, and Redwire’s building a solid foundation as a key mission enabler and 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.

[Operator Instructions] Our first question is from Greg Konrad with Jefferies. Please proceed with your question.

Maybe just to start. I appreciate the near-term headwinds around supply chain, the budget, COVID, 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 in takes towards the lower end of revenue guidance versus maybe what needs to happen or accelerate to get closer towards the upper end?

Yes. Hey Greg, how are you? Thank you for your question. This is Pete. Yes. 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 awards 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.

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

And then just thinking on the expense side, you called inflation, higher bid and proposal, and internal R&D, and at least on the latter two I would say, 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 you just think about profitability going forward?

It’s a great question and it’s one that we pay a lot of attention to, because we are bidding on multiyear 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 when 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 end of that, we have several different types of contracts where we’re -- our CDFF contracts, inflationary pressures or costs are passed along to our ultimate customer, where as Bill mentioned we’ve had pricing locked in for some time that reduces our exposure to inflationary pressures. However, you don’t typically lock in every single price at the beginning of a program. So, we do experience some impacts due to inflation. And then, from a forward-looking perspective, as I mentioned earlier, that’s something that we are 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, just appreciating those emerging commercial space, I mean, that was helpful how you kind of bucketed some of those opportunities? I mean, I think we appreciate the significant growth potential and acceleration. And any way to think about what that’s 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 forecast, but any real examples or at least thinking about this year’s guidance? I mean, have those -- some of those programs been pushed out or is that just thinking about the timing of when some of these future opportunities materialize?

Yes. 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 then end up revising down their forecasts, as a result that can have an impact on our forecasts, 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 are 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 deliveries 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, how important is that of a product category for total finances? Or just any more color you can give on that would be helpful.

Yes, absolutely. So, for us, our solar array product lines, our other kind of deployable solutions, antennas and deployable structures for instance is a fast-moving, fast-growth area for us. ROSA, our Roll-Out Solar Array technology became operational last year on orbit. And we are seeing a lot of customers now baseline that as -- for future opportunities and for active programs. And the really awesome thing about that is it becomes very sticky. 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 on line for smaller satellites for LEO, for low-orbit as the class oriented satellites that are optimized for constellations that are optimized for multi-shipset systems. And there’s strong sales there, strong interest from customers there. And these are also significant and that it enables us to sell multiple component, multiple products shipsets to customers. So, that provides a buoying effect for us that we’re seeing in our bids and seeing in our opportunities in other components, whether it be cameras or navigation components. So, looking forward, this is an area that is a significant driver for us in post -- we do expect to continue -- to continue to see growth here, both in customer uptake, as well as more so -- more satellite design missions coming on line driving sales for us.

Yes. I’d like to jump in on that. Because right now Redwire is the only company out there that has a Roll-Out 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. We got -- we wanted to deploy it on the International Space Station. And that success and the success of the DART program that gives the customer confidence in using a ROSA for the Lunar Gateway, which then has also sparked 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.

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

I 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 project trajectory for us. First of all, has anything changed on that? Has it gotten bigger? Has it -- you’ve become more worried about that? And 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 or five years?

Yes. 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 specked in on a particular program, early on, that led to very sticky revenue in the long-term, because a once a national security program has specked, 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 a announcement of our providing some capability to PlanetiQ. 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 constellation -- national security constellation. As that constellation grows and other communications constellations, like it grow will grow along with it. So, what you’re really seeing is in kind of the early days us planning a lot of seeds and getting specked in on these really large programs that have just tremendous production details associated with them.

Excellent. Another question, you said you have -- I forgot the exact number, $550 million of I guess bids out there, that’s roughly the number.

Yes, $547 million.

What’s the historical win rate that you would get from that? I’m not holding you to anything, but what’s normal for us historically?

Yes. Well, it’s difficult to predict, specifically to that $547 million, so. 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 the $273 million in backlog and the $547 million in bid 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.

Going back to the question before, you had in that initial slide deck, I guess, nine months ago or so, you kind of had a great trajectory over the next five or six years. Is there anything that’s changed to that? Granted, we can push it. 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 $1 billion in revenues in five, six years, or in your mind has any changes to 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 are a supplier to change their forecast 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 the 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, if the commercial space segment does not deliver on their forecasts, in line with the projections that were pervasive this time last year, that adds uncertainty to our forecasts 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 million -- the numbers are so huge for -- you to say, take a company that we have a $200 million market cap now. It’s not my point, it’s not that far off, nothing’s changed that dramatically that -- I was like saying if you can even get to $800 million in five or six years, that’s great, right? So nothing has changed that dramatically.

Yes. And I think -- yes, and 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 and the demand the ISAM, there is a national strategy, and as long as that policy drives large acquisitions and large procurements through the system overall, Redwire 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 headwinds and alike, their own supply chain issues as well. But overall, the demand signal for space is really strong and still very -- is exciting as it was before.

Excellent. One last question -- and this isn’t anything specific here. Amazon is building out this whole internet satellites project, is it Kuiper? I forgot what it was called exactly. But there is a lot of stuff out there, like going 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 are bidding on?

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

I’m saying it in general. Yes.

Yes, yes, yes. 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 base-lined. And then from -- with a number of different technologies, one of the interesting things about Redwire is we are -- 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 that for every constellation, because we can offer different 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.

And then, last item, this is just a kind of a statement is that we’ve been buying stock all the way down here. I know you guys have had been at blackout period for a long time. I would hope that we’re at $3.70 at close today. Is 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 $200 million valuation. So, that’s the opportunity that I see out there. And these hiccups happen. This has been a tough market for everybody. So, hopefully, we’ve seen the bottom here.

Yes. We definitely believe in the long-term value of our stock that I think.

Our next question is from Griffin Boss with B. Riley Securities. Please proceed with your question.

Hi. Thanks for taking my question. Yes, most of them have been answered already, but I do have a couple of 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?

Yes. Thanks, Griffin. I appreciate the question. So, that’s an IDIQ contract and indefinite delivery and indefinite quantity contract, which is really an opportunity to bid on past quarters as they come out. Redwire is -- had 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 -- the space national security architecture and the JADC program in general is to bring a 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 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 FDA and that. Whereas Redwire, because we do have those capabilities can take advantage of contracts like the ABMS IDIQ. In terms of who are 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.

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 you -- 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 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 layering in that $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 or Pete may have some more color on the 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 multiyear contracts. And so, it can vary substantially depending upon the nature of the contract. So, there’s 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 -- on the bid question, I think it’s similar to the to the backlog question. It’s a variety of programs, and they’re -- the variety of links. And so, it’s very difficult to kind of say, what number is going to turn into revenue over this given period of time.

In terms of your question of the pipeline portion, 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, the closest to closed one. And that’s a subset of a broader pipeline that is measured in the billions of dollars. We expect as Pete was talking about, we -- our historic win rates are in family for the sector. And so, we expect 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.

We have reached the end of the question-and-answer session. And I’ll now turn the call over to Peter Cannito 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.