Cai von Rumohr: Yeah. Okay.
Adam Spice: Look, I would add something to that. I mean, one of the benefits of diversification that we’ve been driving so hard towards and now getting more than 70% of our revenue coming from Space Systems is that we no longer — it’s no longer like a push out of a launch threatens our entire kind of year’s annual operating plan, right? So, we believe that we’ve got strength in other parts of the business, particularly on the Space Systems side, where if we can’t deliver those 22 launches, it doesn’t really put at risk our ability to deliver a very solid year that’s still on target with our internal plan for what we think we can deliver as far as revenue and growth. So, as much as we are very, very, very reluctant to wave the white flag on anything here, but to the extent that things move outside of our control, we do believe that we’ve got strength in the business more broadly that would make up for any potential shortfall that we’d see from a launch or two that move out.
Cai von Rumohr: Got it. Great color. So, if you look at the rest of your competitors, I mean, particularly in the satellite side, RTX basically said they’re throwing in the towel on being a space prime. LHX is there, they bought satellites from MO, they basically have been laid with problems. Terran is basically on ultra-life support. It sounds like your competitors are really not doing particularly well. Any thoughts about, A, it sounds like things are actually a little bit more chaotic than they’ve been, maybe that’s an overread. Do you see that happening? And is there any opportunity to just take a radically different approach and basically raise your prices 25%? Because the problem I can see of getting your backlog is, you don’t have the opportunity to kind of do a more profitable launch for someone who might be willing to pay for it.
Peter Beck: Well, Cai, I would say, our business model and our strategy is working exactly to your point. The vertical integration and the power that brings to bring these platforms to market at a price point, and as Adam mentioned, the schedule is disruptive and that’s what you’re seeing. And then from a launch perspective, I think there’s — as Adam pointed out, there has been a kind of a waning of who’s real and who’s not. And there’ll be opportunities for us there, I’m sure.
Cai von Rumohr: Great. And so, I mean, you talk about demand being better, but it doesn’t really sound like pricing is a whole lot better. Is that a misread on my part?
Peter Beck: Well, I think it’s a delicate…
Adam Spice: Go ahead, Pete.
Peter Beck: I was just going to say, I think it’s a delicate balance, Cai, because to the point about the Haze missions before is, you want to stimulate the market. And if you just go and just all of a sudden whack a big price increase there, then you can potentially damage those markets that you’re trying to grow. Because some of them are new and some of them are fragile. So, I think you have to be very, very balanced and careful about how you do those sorts of things.
Cai von Rumohr: Thank you very much.
Adam Spice: Yeah. And Cai — I would add to that too, Cai, on the pricing side of things. If we look at what’s happened with Electron pricing, it’s gone nothing but up for us in the last several years, right? So, if you recall back a few years ago, we were talking about launch prices in the $6.5 million to $7 million, now $7 million to $7.5 million, and now in this most recent quarter is $8.2 million. And I think you’re going to continue to see that type of trajectory on pricing as competition, again, as kind of people fail to execute and we bring an increasingly scarce product to market and the mix of that Electron businesses, as was I think was being asked earlier with regards to the impact of things like Haze on the overall mix.
But I also think that when you look at our Photon pricing, if you look at the contracts that we’re competing on, the contracts that we’re winning, we’re not winning on the lowest price, it’s quite the opposite. Like, we can oftentimes price at a premium to our competition, again, because of the fact that we’re bringing that level of vertical integration, which translates into schedule certainty and performance certainty, right? So I think that’s really what is kind of playing into the strategy. So, I think we’re absolutely seeing pricing benefits that are accruing to us as a result of the strategy, not only for diversification, but actually the fact that we’re executing, that we’re vertically integrated, and that we represent, strangely enough, a lower risk option for customers, despite the fact that we’re a very new generation, new space company versus some of the legacy players that you mentioned earlier in your commentary.
Cai von Rumohr: Thank you very much.
Operator: Next up is Edison Yu, Deutsche Bank.
Edison Yu: Hey, thanks for squeezing me in. Just had a couple of quick ones. First on Neutron, did the Baltimore Bridge incident impact the infrastructure timeline at all?
Peter Beck: Not that we can see at this point in time, no.
Edison Yu: Okay. Then on the financials, I think the R&D was a bit low in the first quarter. Is that just a timing thing? Should we expect that to really step up in 2Q?
Adam Spice: Yes, Edison. Yes, absolutely. It’s a timing issue, I think. Like, it seems like all things in our business, there’s elements of lumpiness and certainly spend timing is one of those things. So, the nature of a particular Neutron with how things come and kind of fits and starts, we have large, for example, prototyping expenses that may — they may end up slipping out a little bit relative to maybe where you thought they’re going to be. But there will be volatility and I think you would absolutely expect that over the next few quarters, we’ll continue to see a march up in R&D, primarily driven by, if not entirely driven by Neutron, in kind of first flight.
Edison Yu: Understood. And just last one, on the, I guess the FDA contribution, do we have any sense what that could be this year, next year? I know you said you would get some small amount, but just wondering if there’s anything a bit more discreet that you can maybe provide on that curve, on the launch curve.
Adam Spice: Yes. So, we’re continuing to do our work. I mean, the program is certainly progressing and with that progression, and we talked about identifying subcontractors to work with us on that program. As we kind of brought more people formally under intent, we’ve gotten more color as far as kind of their timing and their ability to deliver against their milestones. So we definitely are starting to bake some of that into our operating plan for the remainder of this year. Earlier, we said that we couldn’t — we weren’t in a position to really say, so the — say the end amount that was in the Q1 results was actually relatively, very, very small. I would call that immaterial. It’s starting to become more material in the numbers that you’re seeing in Q2 that we guided towards, and you’ll continue to see kind of building on that as we progress through 2024.
And I would say that, and part of — and that is also allowing us to kind of overcome, I’d say a little bit of the earlier weakness that we talked about as far as progress being made against the MDA contract with regards to RevRec. Some of that MDA RevRec is being made up for from initial contributions from the FDA contract. But I think when Erik asked the question earlier about kind of what the timing of RevRec look like for the remainder of the MDA Globalstar contract. Again, that is given — just given the delivery schedules, that will, again, continue to build momentum, probably peak sometime in the Q3 time period, maybe it’s Q4. But ultimately, as that’s kind of peaking out, we’ve got this building of FDA coming in behind it to prevent a real kind of drop-off, if you will, when that program comes to conclusion.
So, I don’t think we’re quite ready yet to give kind of full year contribution from the FDA program, because again, it’s pretty early in its life. But it’s, again, part of the reason why we’re confident that even if there was a launch or two that moves out of 2024 from that 22-launch manifest, that we have the ability to not really feel that from an overall top-line growth perspective. So, we hope to be able to give you more color in a little bit, but right now, we just– it’s a little too early to provide a lot of color on FDA contribution.
