Marc Bell: So many questions there. So as far as SDA goes, we never want to make assumptions of what we could and couldn’t win in the future. On the Alpha award, we knew we can’t win everything, and there are other players out there. And the FDA, Derek has made it very clear, he wants a diversity of manufacturing base. So, we went three in a row. We do — we didn’t expect to win in a row. So that was — and it’s not us winning. It’s Lockheeds’, the prime and were Lockheed up. So, it was not a big surprise at the end of the day for us that we weren’t winning. But now we’re looking at other SDA programs because we never been on tracking before. We haven’t been on most of the other types of programs that they’ve done to and what have you.
So, we are — and we’re talking to other primes as well about partnering with them on their SDA bids because Lockheed does not on everything with the FDA. And also, we want to — our buses are becoming more popular. And now that we have 10 in orbit for Tranche 0 and we’ve been very pleased with their performance, we have a lot more street cred than we had before. So, we’re feeling pretty good about other SDA programs in the future. We never really want to guess as to what they think as they’re probably listening to this, but we appreciate their business very much.
Erik Rasmussen : Yes. Got you. Great. And then maybe on your backlog is at $2.6 billion at the end of the quarter. I know it’s higher with those new awards. Are you still expecting to convert 80% of this by 2025, which reflects the Rivada portion? And then with that, how should we think about the split between 2024 and 2025?
Marc Bell: It’s definitely heavily weighted towards ’25 because that’s when you get into real assembly mode, ’24 is a lot of manufacturing and the production of modules. But you’re talking about your — as things get pushed to the right, revenue gets pushed out to the right as well, which is what happened here. We’re with Rivada this year. The important part is if the revenue happens at all at the end of the day.
Erik Rasmussen : Great. So, but the time line though is — hasn’t moved for Rivada in terms of having those satellites up by Q2 or Q3 of ’25.
Marc Bell: Rivada has — according to the ITU, Rivada has to have their satellites in orbit by a specific date — two specific dates. So, at the end of the day, it’s just going to cost them more in order to get there because we have to spend more money to get there. But it is — but we have $187 million of non-Rivada backlog that will be recognized through the end of 2025, and if you think about it, we still 42 buses for T1 and 36 for T2, we got to deliver. And that does include all the other things we’ve bid on that we’re waiting to hear. We have just recently stood up a business development organization, and we are now seeing — we relied on Lockheed Martin for the first couple of years. We are now expanding our wings to lots of different primes.
I think there are 10 primes — the 10 largest primes in the world, six of them we’re in dialogue with. Three of them are Chinese, we don’t talk to, and there’s only one left. And so, we’ve been very busily talking to all the other major primes on how we can work together. It’s a big planet.
Erik Rasmussen : Got you. Great.
Marc Bell: Yes. And I’ll make one more point. We’ve been spending a lot more time on commercial. So, we are spending a lot of not just DoD and IC in the U.S., but commercial is making up a larger and larger part of our future revenue base we’re seeing in the future. So, we’re going — we’re pushing very hard for revenue diversity across the board. There are many Rivada’s kicking around the planet.
Operator: Our next question comes from Griffin Boss from B. Riley Securities. Please go ahead. Your line is open.
Griffin Boss : So — just first off on the gross margin. I understand going forward, it’s dependent on program mix quarter-to-quarter. But generally speaking, are you now — are you now at a point where your remaining backlog mix represents the programs in, call it, the high teens, 20% gross margin? So, I guess, in other words, are you expecting to be able to expand that pro forma gross margin in ’24 beyond the 16.5% target you have for this year?
Marc Bell: Yes. Thanks for the question, Gavin. So, we’re optimistic that our 16.5% is really the [indiscernible] point for our future margin expectations. What we have in backlog right now is in the low to mid-20s. And so just leading out our backlog, tacking on new programs, higher margins than what we’ve seen on some of our legacy program. We feel pretty good margin profile going forward.
