Redwire Corporation (NYSE:RDW) Q1 2024 Earnings Call Transcript

Redwire Corporation (NYSE:RDW) Q1 2024 Earnings Call Transcript May 9, 2024

Redwire Corporation isn’t one of the 30 most popular stocks among hedge funds at the end of the third quarter (see the details here).

Operator: Greetings and welcome to the Redwire Space Corporation First Quarter 2024. [Operator Instructions]. I will now turn the conference over to your host, Jeff Zeunik, you may begin.

Jeff Zeunik: Thank you, Samali, and good morning, everyone. Welcome to Redwire’s first-quarter 2024 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 for the future. Our forward-looking statements are subject to risks and uncertainties that are described in more detail on slide 2. Additionally, to the extent that we discuss non-GAAP measures during the call, please see slide 3 of our earnings release or the investor presentation on our website for the calculation of these measures and their GAAP reconciliations.

I am Jeff Zeunik, Redwire, Senior Vice President of Financial Planning and Analysis and Investor Relations. Joining me on today’s call are Peter Cannito, Chairman and Chief Executive Officer, and Jonathan Baliff, Chief Financial Officer. With that, I would like to turn the call over to Pete. Pete?

Peter Cannito: Thank you, Jeff. During today’s call, I will take you through a discussion of our key accomplishments in the first quarter of 2024. Jonathan will then present the financial highlights for the same first quarter 2024 period, after which we will open the floor for Q&A. Please turn to slide 6. the first quarter of this year was another excellent quarter for Redwire, during which we continued our positive momentum from 2023. We have now delivered five consecutive quarters of positive adjusted EBITDA and revenue growth and two consecutive quarters of positive cash from operations. During the first quarter, we achieved $87.8 million in Q1 revenue, a 52.4% improvement over Q1 2023. It was a very strong quarter for revenue.

Positive adjusted EBITDA of $4.3 million and net loss of $8.1 million. Free cash flow of positive $0.4 million, a year-over-year improvement of $15.2 million. Cash from operations of positive $2.8 million, a year-over-year improvement of $16.8 million. And finally, we achieved a last 12 months or LTM book-to-bill ratio of one 1.11 times during the quarter. It’s important to note that we achieved these positive financial results by developing and delivering reliable critical innovations for our valued customers throughout the first quarter. These results are directly attributable to the commitment and expertise of our workforce. Please turn to slide 7. During our previous earnings call, I introduced Redwire’s growth strategy for 2024 that is centered around four key principles.

Protecting the core, which means continuing to deliver on our strong foundation of existing products with proven reliability and demonstrated flight heritage. It is about continuing the growth momentum of our successes in 2023. Scaling production, which means winning and delivering on increasingly larger orders by scaling our production to meet growing demand. Moving up the value chain, which means leveraging our proven capabilities in developing and deploying space subsystems and components into next-generation spacecraft and integrated mission payloads. And finally, venture optionality, which means continuing to pursue breakthrough developments on advanced technologies that could create new markets with game-changing potential. On the next few slides, I will discuss examples of successes in each of these key growth areas for the first quarter of 2024.

Please turn to slide 8. Starting with our protecting the core growth area. During the first quarter, Redwire’s cameras were on board Intuitive Machines’ IM-1 lunar landing mission. These cameras come from our avionics and sensors core offering, which includes spacecraft subsystems and components that are used for navigation, control, and imagery collection. Also during the first quarter, NASA’s Solar Sail, for which Redwire developed deployment mechanisms and 100-foot booms, cleared a key technology milestone with the successful deployment of one quadrant. Solar Sail falls into our structures & mechanisms core offering, which includes a variety of space infrastructure that provide critical mechanical functionality for on-orbit operations from launch release mechanisms and deployable booms to berthing and docking systems.

Please turn to slide 9. Looking at our scaling production growth principle, we are excited to announce that we are under contract with Rocket Lab for 18 ship sets of antennas and radio frequency hardware for the SDA Transport Layer Tranche 2 Beta variant satellites, the third in a series of spacecraft that will make up the Proliferated Warfighter Space Architecture. Our radio frequency systems core offerings includes the systems and payloads that enables space-to-space and space to earth communications. Also in Q1 two ROSA wings were successfully deployed on Ovzon 3, which represents the first integration of ROSA technology with a commercial satellite. In addition, Redwire began executing on our $142 million contract award for power solutions to an undisclosed satellite manufacturer.

These operations fall within our power generation offering, which includes solar arrays and power distribution systems that generate the necessary power for space systems to operate regardless of size or location. Please turn to Slide 10. Turning to our moving up the value chain growth principle, I’d like to highlight Redwire’s, US and European operations in very low earth orbit or VLEO. During the first quarter of 2024, Redwire was awarded a study related to our new US VLEO platform, SabreSat. This is a very exciting indicator that the market recognizes SabreSat’s potential as a critical capability. We are very encouraged with the reception SabreSat has received since our announcement and continue to pursue meaningful opportunities for this potentially groundbreaking VLEO spacecraft.

To continue to aggressively assert ourselves as a technology leader in VLEO, today, we are announcing Phantom, our VLEO platform for Europe and the international market. Phantom is currently being developed in our Belgian office for the European Space Agency Skimsat program and we will be marketing this platform to other potential customers as well. Thales Alenia Space is the prime contractor for Skimsat and Redwire EU is responsible for providing the VLEO’s spacecraft, which we are now calling Phantom. Skimsat is the mission, Phantom is our platform. The Skimsat mission is a VLEO satellite mission that aims at reducing the cost of earth observation and telecommunication satellites while increasing performance by operating at substantially lower altitudes.

The potential for this transformational program is extraordinary. Notably, SabreSat and Phantom do not share a common technological baseline. They are two different platforms with differing underlying technologies and performance parameters. This is important as missions in VLEO are as dynamic as all of the other earth orbits such as LEO and GEO. And different approaches, reduce risk and enable us to cover a broader set of customer requirements. As Redwire moves up the value chain, we are very excited that SabreSat and Phantom expand Redwire’s offering of full satellite system development and operations, that includes the Redwire international PROBA satellite, as well as our proprietary platform agnostic digital engineering and modeling and simulation solutions that enable rapid spacecraft development and deployment.

Please turn to slide 11. Lastly, I would like to spend some time providing a deeper look into our fourth principle, venture optionality, by focusing on Redwire’s in-space pharmaceutical development to benefit human health on earth. Pharmaceutical companies are constantly looking to deliver new optimized treatments for patients, and many of those treatments rely on crystals as their active ingredient. The form of the crystals will dictate a drug’s properties and as a result, precision matters. Historically, a significant proportion of drugs have not made it to the market as a result of crystal formation challenges. Growing crystals in microgravity could be transformative, potentially yielding a more uniform product with fewer imperfections and improving the drug discovery and development process.

As pharmaceutical companies look to deliver new optimized treatments to help patients on earth, microgravity could be a major differentiator. With the drug discovery market size having been estimated at approximately $80 billion in 2023, growing to approximately $180 billion by 2032, this represents a significant growth opportunity for Redwire. Redwire has already demonstrated the ability to develop crystals in space using our PIL-BOX facility on the International Space Station. Redwire’s proprietary PIL-BOX is a proven cutting edge in-space pharmaceutical manufacturing platform that builds on Redwire’s extensive heritage in microgravity and offers pharmaceutical companies and biomedical researchers novel and flexible services to study small batch crystal growth of proteins Redwire is at the forefront with our microgravity technology built on decades of in-space manufacturing success.

Our successful inaugural PIL-1 mission demonstrated that insulin crystals grown on the ISS using PIL-BOX were larger and more highly ordered than terrestrial crystals. Our next step is to execute a production level cadence of crystal manufacturing using a variety of compounds. Our second PIL-BOX mission has already returned, and the results are promising. We have currently manifested for 16 additional PIL-BOX missions this year. The economic potential for this technology is high and gaining momentum. Recent venture funding for related industry players has revealed a significant valuation premium for pharmaceutical microgravity development, validating that the venture optionality associated with this subset of Redwire’s business has real value.

Turning to slide 12. The inaugural PIL-BOX-01 mission launched in November 2023 and returned to earth in late December 2023 for delivery to Eli Lilly, our research partner. Following closely on the heels of the successful PIL-01 mission, PIL-02 again in partnership with Eli Lilly, and PIL-03 in partnership with Butler University launched to the International Space Station this past March, just three months later. The second PIL-BOX mission is focused on researching widespread chronic diseases, which have massive global demand for treatment. PIL-03 has now returned to earth in April 2024 and PIL-02 is anticipated to return in the coming months, demonstrating the rapid cadence Redwire can execute with this capability. This tempo is critical to demonstrate the industry model is viable for sustained development in orbit.

For the remainder of the year, we have 16 additional PIL-BOX submissions manifested and a robust pipeline of interest from commercial entities. As launch costs decrease and commercial space station availability increases, the opportunity for on-orbit development and manufacturing at scale will expand. And Redwire is delivering tangible and useful results, not someday, but now. Please turn to slide 13. Now turning to our contract awards and backlog. Our contract awards during the first quarter of 2024 were $35.1 million. Our last 12 months book-to-bill ratio was 1.11 times for the first quarter of 2024. As we continuously reinforce, we often see lumpy contract awards growth from quarter to quarter, but we are continuing to maintain a positive growth rate on an annual basis.

As you can see on the lower right-hand side of this slide, our contracted backlog has increased 10.9% year-over-year to a total of $318 million. The growth in contracted backlog is one of many factors that gives us confidence in our future growth. Finally, we continue to have a healthy pipeline with an estimated $6.3 billion of identified opportunities, including approximately $610 million in proposals submitted year-to-date as of March 31. As you can see on the upper right-hand side of this slide, this represents a 177.3% increase over the corresponding year-to-date period ended March 31, 2023. The momentum continues. Please turn to slide 14. With that, I’d now like to turn the call over to Jonathan Baliff, Redwire’s Chief Financial Officer.

Jonathan?

Jonathan Baliff: Thank you, Pete. Before I turn to the financial results I’d like to highlight the photo on this slide to the PROBA-3 satellite from Redwire’s Belgium facility, slated to launch later this year. The European Space Agency’s PROBA-3 mission is composed of two spacecraft acting as one element and is the world’s first precision formation flying mission in space. Turning to slide 15. Our first quarter 2024 was an excellent start to the year as Pete spoke about, as we saw continued positive momentum driven by customer demand. Quarterly revenue was a record $87.8 million. So we did see a slight decline in net loss for the same period year over year. Our adjusted EBITDA remained flat year-over-year at a positive $4.3 million.

We will discuss the drivers of our adjusted EBITDA on a subsequent slide. The first quarter of 2024 also saw positive cash from operations of $2.8 million and free cash flow of $0.4 million, a year-over-year improvement of $16.8 million and $15.2 million respectively. And this is after making significant investments in growth capital expenditures and internal research and development to advance our path to profitability. These impressive results were attributable to the capability and commitment of our global team members, satisfying our customers growing demand for space infrastructure. Please turn to slide 16. Specifically for quarterly revenue, as you can see from the chart on the right, this quarter’s record, $87.8 million represented a 52.4% increase on a year-over-year basis and an increase of 38.3% on a sequential basis.

During the quarter, more than 90% of our revenue derived from funded government programs or from global marquee customers for delivering in the areas of national security, satellite proliferation, and the exploration of space to name just a few. Finally, we’d like to note that after the completion of the full fiscal year post the Space NV acquisition, our fiscal year 2024 will no longer present year-over-year comparable revenues which excluded the results of Space NV. Please turn to slide 17. For quarterly adjusted EBITDA, Q1 2024 remained flat at positive $4.3 million compared to the first quarter of 2023, while increasing 151.2% on a sequential basis from the fourth quarter of 2023. Gross profit increased 4.3% from $14.2 million to $14.8 million.

Quarterly gross margins over the same period declined to 16.9%. These results were primarily impacted by EAC adjustments during the first quarter, exacerbated by our record revenues. The $3.9 million in EAC adjustments largely resulted from unplanned design and test cycles required to meet customer requirements as we neared completion on discrete projects during the quarter. Offsetting these gross margin declines, our sequential quarter adjusted EBITDA improvements was also supported by excellent cost control and the continued operating leverage being driven by scale as Redwire’s SG&A expenses are now below 20% of revenue, a notable drop from the 27.8% in the first quarter of 2023. We continue to drive tens of millions of dollars in revenue increases with single digit growth in yearly SG&A.

That’s the benefit of operating leverage and scale kicking in. Please turn to slide 18. As we have mentioned several times today, throughout the first quarter, we continue to make prudent investments to support growing customer demand also, industry leading innovation. We’re risk-reducing and we’re also achieving global business scale. During the first quarter of 2024, we made $2.4 million in capital expenditures, our highest first quarter capital investments since going public plus, we made $1.0 million in investments in internal research and development and $1.0 million in a variety of other corporate investments that mostly flow through the SG&A line. We continue to demonstrate our ability to financially perform now while also making investments for future growth, risk reduction, and profitability.

Please turn to slide 19. Similar to last quarter, on the left-hand chart, we show free cash flow. As a reminder, free cash flow provides a metric based on our US GAAP cash from operations minus capital expenditures. On a year-over-year basis, quarterly free cash flow improved by $15.2 million to a positive $0.4 million for the first quarter, due to a $16.8 million improvement in cash from operations. Credit goes to the revenue growth already discussed. But in addition, we had more efficient and effective working capital management over the first quarter while continuing to invest at record rates as our cash generation now funds our growth. This is due to improving returns on our invested capital as compared to our cost of capital, creating a virtuous cycle that differentiates us in a very capital-intensive industry.

On a last 12-month basis, we recorded both positive cash from operations of $18 million and for the last 12 months, positive free cash flow of $8.1 million, a significant first for Redwire. As you can see on the right-hand chart, this yields higher available cash and cash equivalents of $32.6 million as of March 31, 2024, with $47.6 million in total available liquidity. Please turn to slide 20 for a brief discussion on the outlook for the remainder of 2024. Our first quarter was a strong start to the year and as a result, for 2024, we affirm full year revenue at $300 million, which represents a 23% year-over-year growth rate. This quarter’s revenue achieved 29% of our $300 million annual revenue guidance forecast, and much of this outside quarterly revenue was due to the timing of long-lead items associated with large contract wins in 2023.

We are not currently forecasting similar large long-lead purchases during the remainder of 2024. Finally, through our excellence in execution initiatives, we continue to focus on improving our program management to reduce EAC volatility while we also create more operating leverage and cost efficiency to continue on our path to profitability. I will now turn the presentation back over to Pete, to provide brief final remarks. Pete?

Peter Cannito: Thank you, Jonathan, please turn to slide 21. I want to thank all of Redwire’s team for this quarter’s excellent results. A total global effort that we will work to continue in the second quarter of 2024 and beyond. We will now open the floor for questions.

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Q&A Session

Operator: [Operator Instructions]. Our first question comes from the line of Greg Konrad with Jefferies.

Greg Konrad: You have a good quarter and then people ask why isn’t the outlook better, which is kind of what I’m getting at, but I think you explained some of it on the long-lead items. But just thinking about the $610 million of submitted bids year-to-date. Can you maybe talk about the dynamics around what type of win rates you see and how do you think about typical conversion awards? And then just thinking about the walk for 2024 and the rest of the year, what’s kind of in backlog versus assumption of yet to win? And just thinking about potential upside for the year.

Peter Cannito: So that was like three questions in one. So congratulations on your efficiency…

Greg Konrad: I still get a follow-up.

Peter Cannito: Yeah, alright, good. So the contracted backlog is printed, right? You can see — the best way I would think about that is you can see what our contracted backlog was at the beginning of 2023. What our forecast was 2023 was for, what the contract backlog is at the start 2024 and then evaluate whether what you think of our forecast result of what’s in contracted backlog now. So that’s essentially how we think about contracted backlog and what that means to us. In terms of the bidding, you can see that bidding is accelerating and that’s a function of two dynamics. One is more aggressively going to market, but two, as part of the growth principles is bidding those higher-level production contracts for higher quantities as well as some larger contracts for — we’re the full systems integrator, right?

So that’s really the takeaway from, I think the key takeaway from the increase in the number of bids. In terms of win rate, we’re just dealing with too dynamic of a market and too smaller numbers, quite frankly, and such a variety of different bid sizes that the bid — the win rate tends to bounce around. So we don’t publish a win rate associated with that. But the key is that when you look on an annual basis, which I always like to emphasize is the best time scale to measure an emerging growth company like Redwire’s performance. When you look at that on an annual basis, you can see that there is — or you can make your own evaluation of whether it’s the backlog plus the bid, our rate and size is enough to sustain our current year forecast.

And we believe that it is and that’s how we came up with that number. In terms of the lumpiness, I think Jonathan did a pretty good job explaining. This lumpiness cuts two ways. You have a nice lumpy quarter; in the fourth quarter we have really strong contract awards and then the first quarter is lower. Same thing with like you can have a lower revenue a quarter and then due to the timing of critical subcontracts or long-lead items, that number can go up. And it’s just the first quarter, it’s early in the year. So we’re very pleased with the results for first quarter revenue. But at this point, we’re going to hold to our $300 million revenue forecast for the year as we see the remainder of these quarters play out. Did I get every part of your question, Greg, or did I mention —

Greg Konrad: Yeah, no, that was great and now for the follow up. EBITDA momentum, good SG&A rationalization, gross margins kind of bounced around. It was high 16% in the quarter, dating back to the first three quarters of last year. I think you were more in the mid-20s? You called out the EACs, which is probably one driver. But just a sense of any impact from mix and does the higher long lead items have anything to do with the gross margin or is that generally booked at a pretty consistent gross margin?

Peter Cannito: Yeah, no, I think you’re onto it, right? And so hopefully, obviously you’ve been following us for a while. So you’re really getting to know the company. That’s exactly right, right? Like EACs, they happen from quarter to quarter. The important thing is that we drive through our excellence in execution to get — have those puts and takes even out over the year. And also there’s going to be ups and downs in terms of the contract mix of the revenue that’s recognized by a quarter-by-quarter basis. So when you tend to have more material purchases or really large subcontract, they can have lower gross margins as opposed to where a lot of it’s being driven by maybe labor utilization or some other dynamic that all goes into the calculus.

It is also has to do with what are the products that are leading for that quarter. The really large-scale products have really high operating income on a absolute value basis, but might on a percentage basis be lower whereas and if those are the ones that are primarily driving revenue in a given quarter, that will bring it down and then in other quarters when we do maybe a delivery of a higher volume — or higher margin product set that can have an effect on a quarter-by-quarter basis. And that’s why it’s so critical that what we focus on as a management team is that overall annual balance in terms of either LTM looking backwards or what we look to be our future and that all goes into our forecast. But I do want to add, and I’ve said this and emphasized this in previous calls, that we’re constantly trying to balance between top line and bottom line.

And we have a goal or an objective to always be EBITDA positive and to drive towards profitability. But that doesn’t necessarily mean in certain instances where it’s really important that we go out and take market share that we may make decisions at times to go out and win large revenue projects that might have lower than average operating margins. So I think that’s — what I’m trying to articulate is in certain cases, we may optimize for the top line and the future growth because we know we’ll be able to squeeze the operating margins out longer term and that can have near term or short-term fluctuations that have an impact as well.

Operator: Our next question comes from the line of Griffin Boss with B. Riley Securities.

Griffin Boss: Hey, good morning. Thanks for taking my question. So I want to dig into the venture optionality. I’m glad you guys sort of honed in on it in this presentation. You cite this $80 billion to $180 billion drug discovery market size. In the past, you’ve talked about your specific internal projection for a five-year TAM of $5 billion to $10 billion for this explorer live and work in space. So I guess my question is, are you seeing maybe a bigger near-term TAM for Redwire, given that market size for drug discovery and what seems to be a rapidly growing interest in microgravity research?

Peter Cannito: Hey, Griffin. How are you? Thank you for that question. So yeah, we are trying to focus, I think each quarter we’ll focus on a different growth principle because obviously part of this call is to help educate investors on the Redwire operating model. And this is a critical part of our business that I think sometimes gets overlooked that has real tangible value, especially based on some of the things that are already going out on the marketplace there, right? We do have a lot of venture funding and venture investing activity happening in this space that gives interesting comps in terms of trying to put a valuation on this venture optionality. So we wanted to hone in to make sure that investors understand where we’re positioned in that context.

And where we’re positioned on this context is the TAMs are pretty much the TAMs that you just articulated. But what we want to do is start to educate investors just how far along we are in transitioning this from what I would call researcher experimentation into an actual production level business. And that’s why I tried to emphasize the cadence at which we’re starting to do this. Previously, you would spend a lot of time kind of researching and developing. It took quite frankly, many years to come up with the ability for PIL-BOX to work, quite frankly. And now it works. And we’re transitioning out of that period. That investment has been made. If you look at what we’re achieving in terms of the PIL-BOX and the cadence, and you compare that to the amount that we have to invest on the slides that Jonathan showed you on our CapEx, our IRAD.

We’re past the heavy investment phase in this capability. Now we have to produce, or we have to demonstrate that we can reach a production level cadence. And we have started to do that now by showing that we had a launch, and we were able to do in mere three months a turnaround another launch, and we have 16 additional launches for the remainder of the year manifested. One of the key questions we get around this technology is, can you get to the production level to really turn this into the business that would satisfy or help you get a large enough share of those TAMs. And that’s really what that venture optionality is all about. We didn’t deep dive too much into the tech, but just for some additional color, for these crystals, there’s two interesting things about the production model here.

For the crystals to be valuable to biopharma companies, you need a symbol size level of what are called seed crystals. So you’re not trying to develop in microgravity all of the crystals only for production. You’re delivering a seed crystal. It’s actually the same way it’s done on earth. They build that seed crystals on earth and then they use that in their production thing. And each one of these, what we call investigations, PIL-01, PIL-02, PIL-03 are looking at as high as — I think we’ve done as high as 36 compounds in a single investigation. So you’re looking at 36 different crystals that you can develop a seed crystal for. When you start taking that and you say, okay, we have two that have gone up and down, a third that’s still up there that should be back sometime this summer and then 16 additional manifested, you start to see that we can reach production level seed crystal development on the International Space Station, which has been a question for some, is this something that you have to do on a commercial space station in order to achieve the correct volumes or is this something that can be done on the ISS?

We believe we’re demonstrating that this is something that can be done now on the ISS and I believe our partnerships with Eli Lilly and Butler and everything like that, we’re optimistic that these are going to be proved out over time. So the TAMs are essentially the same. The critic — or what I think the critical milestones that we’re achieving is that we’re moving this from being a research project into actually developing these. We are getting smarter and we’re making the investments to really understand this industry, making seed crystals for biopharma is not anything new, doing it in space is what’s new. We envision a day someday where we’re in the marketplace and our customers don’t even ask about where it was developed. They just want the best possible crystal there is and the fact that it was developed in space is really irrelevant to the execution of the business model.

So but there has been some really interesting dynamics in the venture world that I think are worth noting in terms of when you start looking at what this venture optionality — how to value this venture optionality in Redwire that is critical to our longer-term growth plan. And in my mind, I think of venture optionality as something that’s still five years away. That’s how we differentiate between the space now that we deliver today that is generating revenue and EBITDA. I’ve talked about in the past, our heritage plus innovation strategy where we’re generating the cash flow generating and the profit generating capabilities now on our infrastructure side. But those give us the ability, the optionality, if you will, to again use that word, to look forward and really position for some of these game changing, yes, less defined, yes, still a few years out, but nevertheless very valuable breakthrough technologies in the future.

Griffin Boss: That was excellent color.

Jonathan Baliff: Yeah. I just want to put a financial element to what Pete just talked about. We gave your $5 billion to $10 billion TAM on that prior to PIL-BOX-02. Pete talked about the up tempo, to use the operational term. It’s getting faster than we thought when we did the $5 billion to $10 billion. We will update the $5 billion to $10 billion. We will talk about it maybe being brought forward or again stay the same, but we are more confident in that $5 billion to $10 billion, and we’ll be giving an update to that. The second thing, and this is actually really important to demonstration of value. We are seeing tens of millions of dollars raised in the market today at hundreds of millions of dollars of valuation for companies that are very interested in doing this.

And obviously, we’re a competitor, so we don’t give a lot of competitive information. But the bottom line is that the rapidity, the quickening of the pace here to development means that we can demonstrate value in this a number of different ways. But most importantly, it’s to do it for our customers, right? And Eli Lilly and is that customer with Butler University and that will accelerate.

Griffin Boss: Great. That was exactly what I was looking for. Appreciate all the color there. And then just for the quick follow-up, you talked about moving up the value chain. We’ve seen it, SabreSat, Phantom, great progress to see. Can you give some more color on this modified commercial earth imaging spacecraft that you’re developing? I think it’s a steady contract for NASA’s Mars exploration program?

Peter Cannito: So we don’t say which the study contract for the VLEO is oriented towards, right? Now, we did also win study for the Mars investigation. Those are two totally different things, right? So unrelated, I just want to be clear about that. So but to give a little additional color, I mean, what we’re looking at is when we look at moving up the value chain is not — is picking and choosing where we’re going to do the full systems integration and trying to avoid the mistake of being a follower and a me-too in terms of that marketplace for spacecraft. Of course, we already do full systems integration now in Europe with the PROBA satellite, and we’ve run a number of missions for decades doing that. But we see a leap ahead opportunity in VLEO and the potential of VLEO is really strong.

You get — there has been already a number of experimental missions that have been operated in VLEO, that show that being closer to earth can reduce your power requirements, it can give you higher fidelity imagery. It can give you higher levels of communication. So the VLEO moving up the value chain is not only about becoming a full systems integrator and expanding that part of our business, but also we see it as a leap ahead technology. And there’s a lot of — the nice thing about getting the study as well as wanting to emphasize that we’re already a performer as a subcontractor to Thales Alenia on the Skimsat program, the European VLEO program is that we’re pretty far ahead now in terms of relative to the overall industry development of spacecraft and VLEO.

And we’re really excited about that validation from the market, especially on the SabreSat side that this is something that customers are really interested in and specifically understanding more what the performance parameters are that we can achieve.

Griffin Boss: Got you. That’s helpful. I guess what I was trying to get at was specifically for that Mars exploration program and the earth imaging spacecraft. Is that a new capability for you? As in is that just another example of how you’re showcasing rapid spacecraft development and deployment and just moving up the value chain in general?

Peter Cannito: Yeah, no, it is. Well, anything that goes to margin is going to be new. But that particular study is based on our decades of heritage providing PROBA, which is our traditional LEO platform.

Operator: Our next question comes from the line of Brian Kinstlinger from Alliance Global Partners.

Brian Kinstlinger: Great. Thanks for taking my questions. Impressive submissions for the first quarter. As you look at the RFPs out available for bidding, the $6.3 billion pipeline in the commentary on bidding larger programs, should we expect to see proposal submissions to remain at this elevated level consistently on a quarterly basis? And then did I hear you accurately you’re bidding more as a prime than you have in the past?