Good morning, everybody. Next up, we have Redwire. My name is Suji Desilva. I'm the semiconductor analyst at Roth and Intelligent Systems. I cover the space sector and a part of that Redwire. CFO Jonathan Baliff is here from Redwire. Jonathan, thanks for coming to the conference. We appreciate it.
Thank you, Suji.
Yeah, of course. We're going to do a Q&A format here. Start off with just talking maybe about the end market, Jonathan. The space economy, given there's a new administration in place, we've been a couple of months now. We can kind of see some maybe patterns there. Any thoughts on perhaps any changes or are things unchanged relative to previously?
You know, for Redwire, just to introduce myself, Jonathan Baliff, I am Chief Financial Officer and also a board member. You know, Redwire, in many ways, how we say we're the picks and shovels of space. We make a lot of the components, equipment, infrastructure. Most of our programs, especially with the government, government is roughly 85% of our revenue, either directly or through some of the larger primes. We provide most of the critical components for space infrastructure. What we've seen in the previous administration change in 2021 is usually, whether it be Republican- Democrat, Democrat- Democrat, there's usually a bit of a delay that happens as the administrations change, at least from what we saw in 2021. We are not a seasonal company, right? Getting space infrastructure is not based on weather.
What we do see is that the sales cycles have a tendency to be longer. We have seen a lot of our sales more in the second half of the year than the front half of the year. I think that is what we are going to see. We said that on our fourth quarter call. That is what we are going to see this year also. That being said, our backlog is funded. Historically, we have never seen our backlog canceled, even with government shutdowns threatened. Obviously, we are on a continual resolution. For us, you know, we are a fairly conservatively managed company financially. We have lots of liquidity. We were able to, you know, get through these. Again, we bid on over $4 billion worth of projects last year.
Where it might have an impact is just a delay in awarding of those projects or the adjudication of those projects.
Okay, now that sounds fairly stable, which is good. Maybe on the national security side, maybe you can talk about how Rocket Lab is addressing that market. That's very much in the news these days in terms of, you know, warfare and so forth. Maybe you can address Redwire's opportunity there.
Okay, good. I mean, for Redwire and the national security, that is, we say the national security or defense is the fastest swim lane or one of the fastest swim lanes in space because civil space, especially the NASA budgets, you know, have been a little less growth, but defense has been the growth engine of a lot of space infrastructure. Obviously, Redwire has a lot of national security clients. We also have infrastructure that allows us to do national security. You have to have classified facilities, classified executives and team members who can work on the projects. We have that for a size company of Redwire. I mean, we're not a small company, but we actually have a sizable proportion of our square footage devoted to national security.
Most importantly, or as importantly, I would say, actually as importantly, when you look at the picture behind me, and obviously this is being webcast, so this is the picture of our fourth quarter call. This in many ways describes the acquisition that we announced. It has not closed. The acquisition of Edge Autonomy will close in the second quarter. This picture kind of describes that national security customer base that we are serving. You have the warfighter in the center, and then you obviously have the UAS systems, Airborne, which is part of the acquisition. Then obviously our orbital drones or satellites, including the Mako, the Thresher, and the Hammerhead.
Here this is meant to show those seamlessly being a system of systems, which is where the national security defense customer, whether it be European or U.S. or international or U.S., is really wearing what we want this and we need this to go to a place where it's a system of systems seamless. Redwire will play a part in that with our new acquisition. Even independently, we will help others with our picks and shovels serve this integrated warfighter model.
I've read more and more about this airborne to LEO to MEO-GEO coordination. I think there's a term for it, but I'm wondering if you'll.
Nice to feed that one in there. It's called JADC2 or BMC3, but JADC2 is Joint All-Domain Command and Control. We talked about this when we announced the acquisition that this puts us at a scaled all-domain space and defense tech company that's very differentiated from the space-only public companies, and it differentiates us from a number of the defense tech companies that are not public yet or not public at all. We are one of the few companies that has the differentiated technology, but we are large enough to be trusted. Being a public company actually helps. We are very transparent. That actually helps as part of our growth strategy.
I had the heritage and the clearance as well. No, I think this term all-domain is going to come up more and more. Is there a software play for Redwire on top of the hardware or?
You know, absolutely. I mean, we already do software as part of our space base. We have digital engineering, and obviously we're looking to develop that capability more and also get it out to our clients. Here you see the warfighter using, in essence, the Edge Autonomy or a platform, which looks like basically a portable computer. That's why it's called Edge Autonomy. The flight software is very bespoke, very unique to the UAS systems. UAS stands for Uncrewed Aerial Systems because it's a whole system, not just the aircraft and the sensor, but also what this warfighter is holding. She is using this to, in essence, set the parameters for the UAS system, which is above her, but also in the future will set the satellite or at least will talk to a UAS that is talking to her strategic, in essence, command and control through the satellites.
One of the problems, obviously, with UAS, especially this type of UAS, is it does get into line of sight issues, but if it's talking and communicating digitally with a satellite, it allows for seamless communication across the globe.
Maybe you can talk about one of the altitudes that's lesser discussed, which is VLEO. You seem to have a particularly differentiated offering there and some products as well. Maybe you can talk about that kind of in between Airborne and LEO.
That's right. Very low Earth orbit, which is close to the Kármán line. The Kármán line is 100 km, 70 mi, which, you know, is a bit artificial, but it kind of defines space or what is space, and then high altitude, ionosphere. The bottom line is that area has not been exploited as much and does not have as many airborne or really orbital platforms. It operates in an orbital format, i.e., it is in space, but we are now creating, we have contracts. One is called Otter with our SabreSat, or we call it an orbital drone. It is a maneuverable drone that is meant to work in the VLEO format, i.e., be in orbit, but also dip down, maybe grab a little bit of fuel, i.e., air, then get back up into orbit.
We're doing that with DARPA and have a current contract and we'll be flying in the next few years. We actually have another platform called Phantom in Europe. Many of our platforms and missions are divided between the U.S. and Europe, but have similar capabilities. Again, we're on a program with ESA called Skimsat, and that's meant to work in very low Earth orbit. Why do you work in very low Earth orbit? I would just say simply and maybe oversimply, two reasons. One, if LEO, which is low Earth orbit, is denied either due to an adversary or for other reasons, you can actually get the same capability in very low Earth orbit, observation, sensors, other things like that. The other reason in very low Earth orbit is that you can do certain types of reconnaissance and EO/IR and other things in a different format.
It provides resiliency to your VLEO, MEO, and GEO proliferated infrastructure.
Yeah, that's going to become an increasingly important topic. Maybe we talk about your picks and shovels aspect of your business components, right? So you've done maybe through acquisitions and organically some key components. I think ROSA solar arrays is one of the most prominent ones. Maybe you talk about the power, the space-based power aspect of your offering, which I think has gotten very strong traction.
That's right. Important to note that the company is made up of now with the new acquisition, 11 acquisitions. Again, have to emphasize, we have not closed the 11th, but the first 10 acquisitions were space-based, really middle market players who had great technologies, but space because of mostly launch costs coming down by orders of magnitude. Suji and I have talked about that. Companies like Rocket Lab and others who are both clients of ours and enabling technologies, we want that cost to go down as low as it can get down because our six products or what we call core offerings are just that many more that can go into space. All of our core offerings have their equivalent on terrestrial Earth. Suji is mentioning our power systems. These are mostly solar assemblies that currently, for example, are powering the ISS. We have six wings.
They look like big solar panels, but our technology, in essence, unfurls as opposed to folding out because a lot of times you need to fit it into the nose cone of a rocket and then it has to fold out. We roll out as opposed to fold out and it has a lot of advantages, especially surface area. Our ROSA platform, which is our technology, currently powers the ISS, but it also powers large GEO satellites. We just put them on the O3b mPOWER satellite. Obviously we've announced contracts with Thales Alenia Space on their Inspire. For our products to be specked in means that as those products grow, we grow. That's the whole idea of the picks and shovels. That's power. Think of that as like a generation plant on Earth. We have avionics and sensors.
Those are like the toll roads because those help satellites and spacecraft orient themselves and stay in space in a predictable way, like on a road. We have structures and mechanisms. Those are like buildings. We make structures and mechanisms like robot arms and boarding and docking. We make radio antennas. That is like cell towers, right? Everything we do in space has its equivalent terrestrial. We are doing missions and platforms, which means that we are actually putting these together into various bespoke platforms. Finally, we have this really interesting technology that is pharmaceutical development, which is a small cassette that can actually produce protein crystals in space that has, for lack of a better word, taken flight, right? We did one protein crystal demonstration in 2023, and in 2024 we have done 27. I always have to make sure I get the right number on.
These are with companies like Eli Lilly, Bristol Myers Squibb. Why are they in essence paying to do this work in microgravity? Protein crystals are more difficult to create on Earth that are tuned to specific therapies. We think this business, which already makes revenue, we publicly said it's less than 15% of our standalone revenue, but it is already profitable, you know, from the standpoint of EBITDA, but it really can be a really interesting uncorrelated part of our business. We got it as part of one of our acquisitions, but it's really done quite well in the last few years.
Yeah, if people dig into Redwire, they'll see there's multiple interesting areas that can grow together. You kind of created a portfolio of these, which is a very nice sort of investment vehicle into the space.
All of it has a terrestrial element to it. And that's why, you know, space isn't just for space. Look, we do a lot in exploration in the moon. We had our cameras on both the Intuitive Machines successful lander, and then also the lander from Firefly. Our cameras are on both. We are very agnostic in that we want when space wins, Redwire wins. We want our customers to be successful as part of the growing space economy.
Yeah, and the terrestrial aspect with the acquisition is proving out as well. That's a good set of markets. Can you talk about maybe the kind of the U.S. domestic demand versus Europe or international, how those two vary? Are those two equally sized buckets? Is international far larger because of all the different sovereigns? How should we think about the two opportunities?
I would direct people to our website where we've had, we publicly disclosed the different budgets both for defense and civil space, both in the U.S. and in Europe. Europe, you know, by their own admission, has a lot of catching up to do both in defense and in space. The ESA budgets were 17% growers. That was approved two years ago. The next budget for ESA, which is the NASA equivalent in Europe, is about to be increased. They have a particular focus on Artemis and lunar, you know, type exploration. The U.S. NASA budgets, you know, continue to provide revenue to Redwire, especially Gateway, which, you know, continues to show for us. Again, we have to see how the new administration wants to fund space.
We were involved in Mars, and we see that Mars exploration is something that Redwire has already been a part of and had equipment, and we expect to have that in the future too. It really is about the defense budgets that's driving space. Space is the fastest swim lane in the defense budgets, and we're in the fastest part of those defense space swim lanes in many of the products I just talked about. We're particularly excited about VLEO. We're particularly excited about the interaction between our orbital drones and our Airborne UAS platforms. For us, those appear to be, you know, funded and continuing to see some growth. In Europe, I mean, when we announced the acquisition two, three months ago, we knew that the European budgets were going to be increasing.
We did tell people that in 2023, there was over 50% of Edge Autonomy, the company that we're acquiring, had European-based revenue. We expect that to continue to grow, but it's very important to note that Edge Autonomy has also doubled their U.S.-based revenue in the last year. For us, it's super important that people understand that, you know, we announced some revenue numbers on a third quarter LTM basis. U.S. has been a big part of their growth as ours also.
Yeah, no, it seems like a product.
We have both. Yeah, we're one of the few companies of our size that actually can benefit from both markets.
Makes sense. That's great. Maybe you can talk a little bit about this trend that I caught up with the Rocket Lab CEO yesterday about nimble, New Space, Space Tech companies, as I call them, having a different posture than the traditional contractors and that you're now winning larger business and you're winning prime contracting positions. Maybe you can talk about that trend and how that's come about and if that continues in some meaningful way.
I mean, again, I think some people have a tendency to denigrate the large primes and the clients. They have great technologies. They have great, you know, facilities and management in many ways in space and have led the way for decades. One of the things that we are seeing that's important to note, one, the space infrastructure to create on Earth construction of space equipment is very stressed right now. There just isn't a lot of facility space to create space-based infrastructure. Their facilities aren't full tilt. You know, our facilities, although have some capacity, you know, are maxing out, you know, to be able to serve the space economy. Everybody has a lot of the same issues, both in terms of space and in terms of labor.
The bottom line is, we are winning and growing at 15%-25% over the last number of years because of our technologies and our people, right? In the end, that's what it comes down to. We have very unique technologies that a lot of our clients, whether they be the primes or direct to our government customer, are demanding. The ROSAs are a good example of that. On the flip side or very similar, we have the people, right? We're one of the few companies. We have almost 800 employees committed to space and space engineering and production. Obviously, Edge Autonomy has not quite that amount, but a sizable amount, especially in Europe. These are unique companies and are actually fairly large for what we do in this very nascent industry.
You know, I could put it to a lot of things, but it really is the innovation plus the heritage and combat-proven nature of our equipment and our team members that really make the differentiation.
Yeah, it sounds like everybody's getting pushed hard in this, which is.
The innovation and technologies are a really important piece to new tech. That seems to be a big differentiator for us and a number of our competitors and peers, which we consider Rocket Lab one.
Understood. Now that helps to understand that. Maybe two last topics and we'll throw it open to the audience for questions. The bookings patterns you have have a lumpiness to them. Maybe you can help the audience to kind of understand where those ebbs and flows come from. Are they just timing of programs or what elements are behind that as you kind of talk about a smooth out four quarter, eight quarter level that's growing for you?
Yeah, I mean, so for us, we've always said when we've had, you know, very large booking quarters, I mean, I think in 2023, that quarterly booking to revenue, book- to- bill is what we call it, was 2.81. It was quite high. In this quarter, fourth quarter next year, it was lower, right? For us, we have a tendency to look at the trends over multi-years because the individual quarters themselves are pretty lumpy. It just is a timing. When do you want to snap the chalk, you know, for a level of, for a level of bookings? We did bid on a record number of programs. Many of them are still in process. Last in 2023, we bid on almost a billion dollars worth of programs, $944 million. In 2024, we bid on more than $4 billion.
You know, a lot of it has been pushed and pushed to the right. That being said, you know, we look at the long-term trends. We're very conservatively capitalized. We have very good liquidity. We're in it for the long term. Again, our products and the amount of bidding that we're doing is also indicative. You know, again, the revenue and bookings have a tendency to be quarterly lumpy, but, you know, over time they smooth out to a nice level of growth.
Yeah, and you've demonstrated growth over the longer term. Last question for me then we'll throw to the audience. Can you give us an update on the Edge Autonomy acquisition? It's been, I guess, about a month since you announced it. Maybe any update there, kind of funding considerations, those elements will be helpful.
Sure. I mean, you know, we announced our fourth quarter earnings last week and we said we're very much on track. We did talk about the acquisition closing in the second quarter. We're still on track for that. There are a number of approvals, including HSR, a few ministries of defense. We view those as ministerial, but we're on track to getting those approvals on time. I would say that the other is just being able to get our financials as a pro forma company out for the proxy, which is the shareholder vote, which should again be coming out measured in weeks. You know, one, it'll be good disclosure for everybody to see, but on top of it, it starts the process by which the proxy is put out. The shareholder vote happens. Like we said, we should close in the second quarter comfortably.
Great. I'll throw it open to the audience. Any questions from the audience?
Ron.
The ability you guys demonstrated to be the prime to create the software-based or software-based, or is it just managed? How sustainable is that?
Yeah, so I'm going to repeat the question for the webcast. Basically, it's a question of how do we beat the primes to achieve a level of growth? Just by the way, it's been 15%-25% organic growth over the past few years is what we've said really since we've gone public. The question is, how do we beat them? You know, is it sustainable to be able to continue this revenue growth? Look, I think I'll answer the question in two ways. One, you know, for us with the primes in space, everybody is a collaborator, everybody is a client, and everybody is a competitor, right? One day you're competing against, you know, a company and the next day you're actually their sub and helping them win business. I think there needs to be a collaborative approach to space from Redwire.
We do not really throw rocks at anybody. If somebody, you know, achieves their objectives, we are celebrating. We want to be able to see when space wins, we win. That being said, I think we have been able to get on the second thing, a nice share of growth because of the technologies, right? I am not saying that, you know, we are any, that we are faster, but we definitely have a decision process that allows us to move quickly, both in terms of human capital, financial capital, and then obviously getting that married up with our technologies. The technologies have been the differentiator. If you look at, you know, for example, our ROSAs, I will go back to the Roll-Out Solar Array, very unique technology that we started with AFRL, the Air Force Research Labs, to create.
We actually then have now commercialized that technology outside of just a military or defense use. That is what the US government wants us to do because it brings down the cost of power in space for everybody. I think that collaborative, unique innovation, plus, and this is really important, it works. Our stuff works in space, right? All of the ROSAs that are on the ISS unfurled correctly, appropriately, and then are now providing the power the ISS needs. For us, Ron, it really is about a classic case of innovation. You know, we are a young company, but we have been around decades. We have had equipment on Apollo. This is not a company that just started.
We have great reputation for heritage in space, but we definitely combine it with that innovation, which both has innovation in terms of technologies for our customers, but also innovation internally where we can apply capital, both human and financial, fairly quickly.
Thanks. Another question, Ron?
Sure. We do not disclose that from a product standpoint. I would say to every single product that I talked about that is infrastructure involves a certain level of software that either we are integrating with our customer's software or we are doing it ourselves. Obviously, our newest acquisition or combination with Edge Autonomy, they have very unique flight software and AI-enabled capabilities. We do not really divide between the revenues. It is really an enabler. I cannot leave this out either. We are looking to do more, you know, in that software, computer design and other areas of digital engineering. We are looking to do more of that. It is an area that we are applying a lot of, you know, human resources to, so.
With that, I do think we're out of time. Thank you, Jonathan, for your time. It's a very exciting time for you.