Operator: And our next question comes from the line of a Brian Kinstlinger with Alliance Global Partners.
Brian Kinstlinger: You reported bids submitted this year-to-date were $714 million. I’m curious first if you could share the value of the total bids that are still awaiting adjudication? I take it those numbers are not the same. What is your average win rate over the last year or two? And then as you’ve discussed the various market dynamics, what are your plans from now through, say, the end of 2024 in terms of investments, people or dollars, needed in sales and marketing to continue to grow your proposal efforts?
Peter Cannito: Okay. That was a lot. So, let me take a couple of at a time. I’ll start with the last one. We are making investments in growing our bid and proposal efforts. We’re currently in the process as we are every year at around this time in building our budgets. So I don’t have the exact figures for you for 2024, but we will continue to invest in that area. On the rest of it, I think Jonathan…
Jonathan Baliff: Yes. Let me help you out, Brian. First of all, if you look at last quarter, the year-to-date submitted bids, it was roughly, let’s call it, half. I’m not going to give the specifics, but it’s publicly disclosed. A large increase in that are some of the bids that are pending. So, without — because then we don’t talk about what the future in the fourth quarter is doing, but you can get a sense of that from a number standpoint. Historically, the win ratio, which we have disclosed, we haven’t disclosed it this year, but in the past, we’ve disclosed about a 40% win ratio, but I do have to emphasize what Pete talked about. We are very selective in what we’re bidding to make sure that we are on that path to profitability of improved EBITDA, improved free cash flow, improved operating cash flow.
It then gets the idea of then CapEx and other investments. We believe that this path to profitability has to take into account those investments. The whole idea of Redwire as a differentiated investment in space is to be more — or as like any aerospace company to be able to fund a lot of our organic growth, if not most of it, through organic cash flow. And so that’s — we’re on that path, a lot of it, we have to scale the business to be able to enjoy that, but we are on that path as you can see on a year to year basis. We don’t give the specifics, but you look at the SG&A, a lot of that SG&A — even though it’s gone down significantly as percentage from 41% to less than 30%, a lot of that SG&A is for growth, right? We don’t distinguish it, but it is for growth and resiliency.
And so, you just need to understand that we have enough cash, we have enough liquidity to again continue with the growth rates that we talked about for 2023, but we’re not going to do anything differently because it’s working.
Peter Cannito: The only thing I’ll add real quickly is, so win rates change obviously a lot, right, depending on what you’re bidding, it can go up, it can go down based on any specific award, especially if you’re using total dollars or revenue awarded. So if the goal — or what your question is getting at is this idea of taking the number of bids under submitted, and trying to apply a win rate to it to project, I would say that because of the dynamic nature of the number of things that we’re bidding, the size, the outsize of some of the bids as well as just how fast things are changing in general, I wouldn’t use that as a straight thing if you want to really try to — if you’re trying to kind of come up with an algorithm for projecting future growth.
Brian Kinstlinger: Okay. Then I assume most of your contracts are fixed price, I’m not sure, may be you can share that. But in line with your strategy to grow profitably, how has your process for pricing of proposals changed over the last 12 to 18 months if at all?
Peter Cannito: So correct me if I’m wrong here, you have the exact percentages?
Jonathan Baliff: Yes, we generally say public disclosure, about 80% of our contracts are fixed price.
Peter Cannito: So, I mean, again, one of the things that Jonathan mentioned in his prepared remarks was this concept of excellence and execution. Excellence and execution is an internal initiative that we have, that really focuses on understanding the business in the details on how we bid and then how that bid translates into recognizing revenue and making sure that we have the programmatic discipline in place to hit our financial goals. So in that context, we spend a lot of time looking at pricing, and it has changed significantly. Especially as I mentioned, we’re not looking at growth at any cost. So for instance, when we look at our pricing, we’re looking at making sure that we’re pricing in a way that will give us the highest potential path to profitability.
So when you think about it from in that context, we are looking at all the different cost elements that go in, we’re making sure that we apply risk factors associated with our firm fixed price bids as is traditional in the market. So we have a number of internal processes in place now and are continuously implementing process improvement across the business to make sure that we stay disciplined.
Operator: And we have reached the end of the question-and-answer session. And I’ll now turn call back over to management for closing remarks.
Peter Cannito: No, I appreciate everybody’s questions. Once again, it was a really exciting quarter for us. We’re very pleased with the performance. And I just want to thank all of our employees and customers out there, that is really what Redwire is all about. At the end of the day, it’s our employees that delivered these numbers and it’s the trust our customers given us that enable us continue to drive our overall performance. So, we appreciate everyone’s time today. Thank you for listening and go Redwire.
Operator: And this concludes today’s conference, and you may disconnect your lines at this time. Thank you for your participation.
