Greetings, and welcome to Redwire's Corporation Q1 2023 Earnings Call. At this time, all participants are in a listen-only mode and the floor will be open for questions following the presentation. As a reminder, this conference is being recorded. At this time, it is my pleasure to turn the call over to Jeff Zeunik. Sir, the floor is yours.

Thank you, Karen, and good morning everyone. Welcome to Redwire's first quarter 2023 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 of the future. Our forward-looking statements are subject to risk and uncertainties that are described in more detail on slide two. Additionally, to the extent we discussed non-GAAP measures during the call, please refer to slide three, our earnings release, or the investor presentation on our website for the calculation of these measures and non-GAAP reconciliations. I am Jeff Zeunik, Redwire's Senior Vice President of Financial Planning and Analysis. 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?

Thank you, Jeff. During today's call, I will take you through a discussion of our key accomplishments in the first quarter of 2023, followed by Jonathan who will present the financial highlights for the same period. We will also discuss our continuing outlook for the remainder of 2023, after which we will open the floor for Q&A. Please move to slide six. Before we get into the details, as I did last quarter, I'd like to start with an overview of Redwire's high-level positioning in the Space industry. Redwire is an integrated pure-play Space infrastructure company with mission solutions and payloads for civil, commercial, and national security Space customers, and our mission is to accelerate humanity's expansion into Space by delivering reliable, economical, and sustainable infrastructure for future generations. With decades of proven flight heritage combined with innovative products and culture, Redwire is uniquely positioned to assist our customers in solving the complex challenges of future Space missions and industries. Redwire has three primary areas of focus that form our business: number one, as the fully integrated mission enabler, Redwire is empowering Space mission providers such as government agencies and large prime contractors with a broad portfolio of Space infrastructure systems, subsystems, and components that can be procured either as a single item or in a tailored bundle for maximum supply chain efficiency. In addition to efficiency, this scalable model is currently solving some of our customers' most critical supply chain issues by providing resiliency and reliability. Number two, providing the infrastructure and technology needed for people to permanently explore, live, and work in Space, increasing our understanding of the Moon, Mars, and beyond, as well as developing breakthrough commercial technologies for the benefit of life on Earth that can only be produced in microgravity. This area is generating real revenue and gross profit today. Lastly, supporting multinational access to Space for countries that recognize Space as a unique opportunity to build national prestige and accelerate economic development. We continually demonstrate our commitment to and expertise in our three key focus areas in a variety of ways, such as by having Redwire products on two launches in Q1, having developed 20 research facilities for the ISS with 10 currently operating on the ISS to deliver world-leading research. Possessing well over a hundred years of flight heritage across our various legacy businesses and growing to over 700 employees at 10 facilities in both the United States and Europe. Please turn to slide seven. The first quarter of 2023 was another record quarter for Redwire. Our revenues of $57.6 million were the highest of any quarter to date. We achieved positive adjusted EBITDA of $4.3 million, an improvement of $5.1 million versus the fourth quarter of 2022 and improved our net loss to $7.3 million, a significant improvement from the same period last year. More on that in a moment. We entered the quarter with contracted backlog of $286.8 million as an administrative note. Starting with this quarter, we have switched from focusing on total backlog, which included both contracted and uncontracted backlog, to simply reporting contracted backlog. There was no change in our calculation of contracted backlog from previous reporting, and we made this change to simplify reporting and increase comparability of the company's performance metrics with industry peers. Notably, in this quarter, we also launched three solutions on two launches, continuing our proven track record of delivering real flight heritage. Please turn to slide eight. Beating our previous record in the last quarter of 2022, Redwire's revenue growth achieved a new record level of $57.6 million during the first quarter of 2023. Year-over-year, compared with the first quarter of 2022, Redwire's total revenue grew by 75.3% and on a sequential basis, we grew Redwire's total revenue by 7.3% over our previous record revenue in the fourth quarter of 2022. Notably, even if you exclude revenue contributions from our acquisition of Space NV, Redwire revenues grew by 37.9% year-over-year, which demonstrates strong performance from our baseline operations in the same quarter last year. Please turn to slide nine. Although strong revenue growth is very positive, we are not solely focused on top-line growth. We are also focused on profitable growth. As such, we are pleased to report we have achieved a year-over-year improvement of net income on the order of a $10 million positive move to the upside as our losses decreased from a $17.3 million net loss in the first quarter of 2022 to a $7.3 million net loss in the first quarter of 2023. Moving to adjusted EBITDA, I am very pleased to report that our adjusted EBITDA has increased by $9 million on a year-over-year basis. In the first quarter of 2023, we generated an adjusted EBITDA of positive $4.3 million versus a negative $4.7 million adjusted EBITDA for the first quarter of 2022. Achieving positive adjusted EBITDA for the first time as a public company is an important milestone and an outstanding accomplishment on both an absolute and percentage growth basis and has given us significant financial momentum heading into the remainder of 2023. Please turn to slide 10 now. Let's move beyond the numbers to continue to emphasize that this financial performance is driven by our proven ability to deliver differentiated solutions for our customers. Slides 10 to 15 share just a few examples of successes in the first quarter of 2023 that highlight the importance of our capabilities. For example, in Q1, the U.S. Space Force and SpaceX launched the GPS II SV-06 satellite from Cape Canaveral, Florida, with two complete Redwire fine sun sensor systems, where each sensor consisted of four fine sun sensor heads and two processor electronics. Redwire sun sensors are key navigational tools that provide sun acquisition, solar array pointing, and fail-safe recovery options for GPS II SV-06 as it orbits 12,550 miles above the surface of the Earth. Redwire has been a key supplier of critical sun sensors for more than 50 years, and this technology has enabled more than 70 NASA missions, a clear example of our incredible Space heritage. Please turn to slide 11. During the first quarter of 2023, Redwire delivered two more ROSA wings, numbers five and six, to Boeing to be launched on an upcoming commercial resupply mission to the International Space Station. Today, four ROSA Wings have been launched and installed and are operating efficiently and effectively. With the addition of Wings five and six, the overall power generating capability of the ISS will be improved by 20 to 30%, a substantial increase. ROSAs are not only used for the International Space Station; Redwire is also producing various modular versions of ROSA for many government and commercial Space flight applications, including the power and propulsion element for NASA's Gateway program. Please turn to slide 12. As I mentioned at the beginning of this presentation, Redwire is a leader in developing breakthrough commercial intellectual property for the benefit of life on Earth that can only be produced in microgravity. As an example, we are currently managing research and microgravity to discover a new type of electronic system. During Q1, 20 days of on-orbit experiments were completed with the Redwire managed PFM I formation and mobility investigation facility as part of the asymmetric sawtooth and cavity enhanced nucleation-driven transport investigation or PFMI ascent. The findings of the PFMI Ascent Space Physics study will help with the design of passive cooling systems for Spacecraft electronics, which are often limited by available Space and electric power, and for consumer electronics here on Earth. The five experiments that have been completed on orbit represent the first half of the PFMI Ascent investigation. Please turn to slide 13. As we enter a new era of Space exploration and commercialization, Redwire is a leader in developing inspirational content with commercial thought leaders to inspire future generations. For example, Redwire is collaborating with Microsoft to create a unique learning opportunity inspired by Marvel's Studios Guardians of the Galaxy Volume three, to engage students in science, technology, engineering, the arts, and mathematics topics, including 3D printing for future Space exploration and microgravity R&D and manufacturing for the benefit of humanity. In conjunction with Guardians of the Galaxy Volume three, Redwire and Microsoft have produced an engaging educational video to motivate the next generation of astronauts, engineers, and scientists. Additionally, through a sponsorship from the ISS National Laboratory, Redwire and Microsoft intend to 3D print a Microsoft Zoom on the ISS using Redwire's additive manufacturing facility to illustrate Space-based manufacturing in an engaging way. Redwire has manufactured more than 200 parts in Space and is the only company currently providing commercial 3D printing on the ISS. Redwire was the natural choice to 3D print the Star Wars Zoom. On the right side of this slide, you can see our Guardians of the Galaxy STEM promotional patch featuring Cosmo and Rocket from the movie, as well as a highly visible digital cube display in Times Square in New York City promoting the Marvel, Microsoft, and Redwire team. It is important to note that this effort was not a paid promotion by Redwire, but rather we were a paid partner as part of Microsoft's plan to leverage the power of Space in their branding. We believe this is an excellent template for future Redwire offerings to provide Space-based branding content for other commercial partners. For more information on this effort, please visit zoom.net. Please turn to slide 14. Space is a multinational endeavor, and Redwire Space is a global leader in international Space missions. In the first quarter of 2023, Redwire Space Europe fully integrated two European Space Agency Proba-3 Spacecraft that will perform the world's first precision formation flying mission. In the Proba-3 mission, two small satellites will launch together and separate, maintaining a specific distance and working as one unit as they orbit around the Earth. On this program, Redwire is building and integrating the satellites themselves, including developing the onboard computer and advanced avionics. This mission is important for improving orbital formation flying technologies and rendezvous experiments for future science, astronomy, and Earth observation missions that will require satellites to seamlessly cooperate on orbit. Please turn to slide 15. Next, I'd like to highlight a Redwire Space Europe project that kicked off during the first quarter of 2023, a 3D bioprinting system. We have discussed Redwire's NASA-funded biofabrication facility on previous earnings calls, but this is a completely different mission funded by the European Space Agency. Redwire Space NV was awarded a EUR 14 million contract to design, develop, and qualify the 3D bioprinting system. The system will leverage the latest 3D bioprinting technologies to provide a modular, powerful, and unique system to sustain a large number of experiments. With the 3D bioprinting system, Redwire is expanding its leadership in in-space manufacturing and bioprinting on the International Space Station for exploration and improving life here on Earth. Please turn to slide 16. Turning back to the numbers, our bookings during the first quarter were $29.7 million. However, as a reminder, our contracted awards for the fourth quarter of 2022 totaled $91.2 million. It is important to note that Redwire's bookings are typically lumpy, and the first quarter historically is usually the lowest of the year. Using a longer period of measurement to smooth out the lumpiness, as of Q1 2023, our last 12 months book-to-bill ratio was 1.6. I'd like to point out that during the first quarter of 2023, Redwire made two changes with respect to our key performance indicators. First, we changed to using contracted backlog only. Second, we changed the book-to-bill calculation to present this metric on a last 12 months or LTM basis, whereas prior period disclosures were presented on a year-to-date basis. We believe these presentation changes will provide meaningful insights into contract award trends and increased comparability of the company's performance metrics with industry peers. Finally, as you can see from the bar chart on the right side of this slide, our contracted backlog has more than doubled since March 31, 2022, to a contracted backlog at the end of Q1 2023 of $286.8 million. This 108.8% growth in contracted backlog is one factor that gives us confidence in our future growth and stability. With that, I'd now like to turn the call over to Jonathan Baliff, Redwire's Chief Financial Officer. Jonathan?

Thank you. Please turn to slide 17. Before we begin the financial section, I'd like to highlight the picture shown on slide 17. This is the Redwire managed plant habitat zero three experiment on the ISS. The ability to grow fresh crops in Space will be critical for exploring, living, and working in Space. One of the three focus areas for Redwire that Pete talked about. Redwire is doing critical work now, earning revenue and gross profit to support Space industries, including the agricultural industry in orbit. Please turn to slide 18. Similar to last quarter, I will help quantify and expand on a number of first quarter 2023 themes that Pete discussed, including key financial takeaways, starting with quarterly revenue here on the right-hand chart, and then continuing with other quarterly financial information and a brief update on our financial outlook for the remainder of the year. Key points to reiterate in detail for this quarter's financials: one, Redwire's excellence in execution initiatives continue to deliver on our promise and path to profitability. As we scale our business with record revenues and record gross profit, we are providing our government and marquee customers with critical proven and differentiated Space infrastructure and payloads from the ROSA Wings, the GPS II SV-06 sun sensors to the PFMI Ascent and 3D bioprinting facility. These and other solutions, digital engineering, and payloads created in our over 300,000 square feet of facilities by our outstanding team members across the globe drove this first quarter 2023 revenue and gross profit growth. Two, first quarter 2023 saw our first positive adjusted EBITDA quarter since becoming a public company and record positive adjusted EBITDA overall. In the first quarter of 2023, Redwire has continued to win and deliver on more profitable contracts, more than doubling gross profit. We are also doing this more efficiently as we drove more operating leverage into the business with absolute and percentage reductions in operating expenses and SG&A this quarter. Turning to revenue, as you can see from the chart on the right, we had $57.6 million for the first quarter of 2023 versus $53.7 million for the fourth quarter of 2022, representing an increase of 7.3% on a sequential basis. On a year-over-year basis, this represents a 75.3% increase over revenues of $32.9 million in the first quarter of 2022. On a last 12 months basis, we also grew at a rate of over 33%. Importantly, excluding the revenue contributed by Space NV, our first quarter revenues were $45.3 million, a comparable 37.9% increase over Q1 2022 revenues. Almost 40% growth is an important milestone, as historically the first quarter has generally been a lower revenue growth quarter. We were able to achieve this in the legacy U.S. businesses due to the significant growth in backlog, not just due to the excellent partnership and acquisition of Space NV, as you'll see on the next slide, but also as our government business expanded. Over 85% of our revenue is derived from government-funded programs or from global marquee customers who are delivering in the National Security, LEO Commercialization, and Habitation and Exploration of the Space Domain. Please turn to slide 19, continuing with revenue. This is our year-to-date revenue slide for fiscal year 2023, so given it is our first quarter, the growth is identical to the previous slide, but let's discuss the makeup of that growth. First, Redwire saw year-over-year revenue growth across all the three primary focus areas, whether it be Space systems as an integrated Space mission enabler, or payloads to explore, live, and work in Space, or with Redwire Europe. With our multinational Space leadership, all focus areas saw growth year-over-year from a customer's perspective. Again, all customer types, national security, civil, and commercial grew on a year-over-year basis. To remind you of these types: civil customers are with civilian Space agencies like NASA, ESA, or the Luxembourg Space Agency. National Security revenue is derived from U.S. and allied countries' defense or security departments and ministries like Space Force, SDA, and Air Force Research Labs. Finally, commercial revenue is derived predominantly from large marquee global prime aerospace systems and service providers, and it's important to note that this commercial type of revenue is mostly derived from funded government programs that ultimately face a national security or civil Space entity. Of note for this quarter, our commercial revenues have seen the largest percentage increase, more than 129% year-over-year, so our customer diversity is balanced, especially now that our customer types include a larger portion globally. Please turn to slide 20. Revenue and Redwire's path to profitability continued successfully in this quarter, as you can see from the progress made on the chart on the right, with a steady march of quarterly financial improvement in 2022 now continuing in 2023 with growth. We discussed on the previous slides leading to more profitable growth over the past year. Under U.S. GAAP, we had a significant improvement, a $10 million improvement from a net loss of $17.3 million a year ago to a net loss of $7.3 million during the first quarter of 2023, and sequentially we improved even more compared to the fourth quarter of 2022. We also saw our quarterly adjusted EBITDA improve by $9 million year-over-year to a positive $4.3 million, an improvement of 193% and sequentially this positive $4.3 million was an improvement of $5.1 million over the fourth quarter of 2022. This adjusted EBITDA improvement was primarily driven by our improvement in Redwire gross profit. Our excellence in execution initiatives, the roll-off of lower margin contracts, better labor utilization, better program management, and cost control increased our year-over-year gross margin from 15.7% to 24.7%, with our year-over-year gross profit nearly three times higher from $5.2 million to $14.2 million. The adjusted EBITDA improvement was also supported by being more efficient with our indirect operating expenses. The first quarter Redwire SG&A year-over-year improvement occurred on both an absolute and percentage of revenue basis. Absolute SG&A declined 23.4% from $21 million in the first quarter of 2022 to $16 million in the first quarter of 2023 and now stands at 27.8% of revenue. This represents a significant drop from Redwire's first quarter of 2022 SG&A margins. Please turn to slide 21. Similar to our fourth quarter, on the left-hand chart, we show free cash flow. As a reminder, free cash flow provides a perspective based on our operating cash flow and CapEx unadjusted for one-time items. As you can see, during the first quarter of 2023, free cash flow consumption increased to a use of cash of $14.8 million compared with the fourth quarter of 2022's $5.5 million. Although we saw a significant improvement in our profit and loss statement, the sequential increase in free cash flow consumption was driven by historic increases in networking capital driven by our top-line growth and given the significant backlog growth going into 2023. And this quarter's consumption was very different from last year's as the cash consumption was attributable last year to losses due to a significantly lower gross profit and much higher SG&A. This quarter's networking capital build was the primary result of growth in our contracted assets and decrease in our deferred revenue, and since the end of March, we are seeing much less cash consumption with a notable reduction in networking capital. Redwire's management remains very focused on improvement trends in our free cash flow as we execute on the revenue growth conversion of our $287 million of contracted backlog. On the right-hand chart, we show our available liquidity as of March 31, 2023, which totaled $36.3 million. This quarter's liquidity is much improved from a year ago as we continue our path to profitability. And again, since the end of Q1, we are seeing much less cash consumption with a notable reduction in networking capital. Finally, given our improved financial position, especially our improvement in gross profit and adjusted EBITDA, effective May 1, the company met the requirements to end the incremental 2% pick interest required under our credit facility with Adams Street Partners. This achievement saves significant expense and is a direct result of the global Redwire team's commercial and operational successes, leading to an excellent start to the year that Pete and I have been discussing throughout this call. I will now turn the presentation back over to Pete to provide a brief outlook for the remainder of 2023. Please turn to slide 22.

Thank you, Jonathan. Please turn to slide 23 for a brief reminder of the outlook for the remainder of 2023. Our most recent first quarter was a strong start to the year. As a result, for 2023, we affirm that we expect our full year revenue to be between $220 million and $250 million, which represents 46% year-over-year growth at the midpoint of the range. With that, I'd like to thank all of the Redwire employees for an excellent first quarter. Thank you for all the hard work you do across the world every day to accelerate humanity's expansion into Space. Go Redwire. Thank you, and we will now open the floor for questions.

Thank you. We'll take our first question from Mike Crawford from B. Riley. Please go ahead, Mike.

Thank you. Just to start off where we left off, I was hoping we could go a little bit further into your outlook where you're talking about better program management, cost control, and increased gross margin. You expect gross margin improvement during the year, but do you expect, I know there's a big range of products with like star sensor, sun sensors on the lower side, and ROSA on the higher side, but what more can you tell us about gross margin percentages that you're targeting directionally for the rest of this year? Maybe we could start with that.

Hey, Mike, how are you? Thanks for your question. So that was a lot. I'll just go to the gross margin part because I think that was the sense of it. Yes, as you can see, we're significantly improving our gross margin over time. Some of the reason for this is if you think about the history of Redwire, one of the built-in systemic efficiencies that we're able to achieve is to take a lot of the companies that were previously small businesses and inject more programmatic discipline, better systems through things like ERP implementations, and taking a hard look at the gross margins and the pricing power that we can achieve by going to market in integrated bundles as a much larger company. So all of those different improvements are what you see happening in gross margins to date, and the improvements that you see there. We expect to continue to improve on those gross margins as we move into the future. I'll tell you that some of the really unique technologies that we have that are highly differentiated, like you mentioned, ROSA, have increasing pricing power in the marketplace and are gaining much wider adoption now that we have so many wings on the ISS. Jonathan, anything you want to add to that?

I would just say, we improved our gross margin from $15.7 to $24.7. I would say that level of improvement is aspirational. Mike, I know you want a specific number, but we believe we can start moving this gross margin, not just from the mid-twenties but higher than that. Just from a timing standpoint, being able to do that in three, four months takes a number of months to do it, but we have intent. The performance improvement represents a 65% improvement over gross margin even last quarter. I just want to warn you that getting that level of improvement on a quarter-over-quarter basis is more aspirational. I do believe we can get there; I just wouldn't want to put it all in 2023.

And I do know there's a wide variant in margin on different products that you're delivering, so it's not necessarily going to be a straight line, is that correct?

That's right, Mike. When we look at it, it's a bit of a product mix, but I would say across all of our focus areas, whether it be enabling Space missions and Space industries with the payloads or Redwire Europe, we're improving margins across the board because of the excellence in execution that Pete talked about. In certain areas, you're seeing multiple 400 to 500 basis points of margin improvement. As we see the roll-off of older contracts that Pete talked about, you just start to see that positive impact create a kind of virtuous cycle.

Okay. And just one more on this if you don't mind. I think you mentioned 300,000 square feet of space, a lot of that manufacturing. How much room does Redwire have to grow before you have to have significant CapEx, which was 100 million dollars in the quarter?

Yeah, no, great question. I think that there's a healthy amount of growth in that space that's already out there. A lot of our facilities, not necessarily our facilities, but our capabilities would otherwise be CapEx paid for by customers in many cases. Because we've acquired a lot of significant in-place capabilities, I think we have what we need to achieve the goals we've outlined for 2023.

Oh, okay.

One of the reasons we're seeing margin improvement is we're efficiently using these facilities.

And again, I reference the question with, I know there's a mixed issue on revenue, so you can't answer specifically regarding EBITDA, but I would think it's fair to assume a steady walk higher on SG&A now as opposed to those not going down further from here?

So the SG&A, there's still opportunities to continue to improve SG&A as a percentage of revenue. In an absolute basis, as revenue grows, of course, SG&A will grow as well, but we're very focused on maintaining SG&A at a level commensurate with our revenue that achieves our overall profit objectives. The broader idea would be within SG&A the swing in internal research and development and how much we spend on that will be more variable based on the number of opportunities that present themselves throughout the year.

Thank you. We'll take our next question from Greg Konrad from Jeffries. Please go ahead, Greg.

Good morning and congratulations on a great quarter. Maybe not to continue the last set of questions, but obviously, EBITDA was very strong in the quarter. I mean, you talked about some of the drivers you had, the EACs last year, some mix. How are you thinking about just sustainability on an EBITDA perspective just given tailwinds and headwinds through the year? Should we expect to remain positive on an EBITDA perspective for the rest of the year?

So again, just to kind of expand a little bit more on the last question. There's a fair amount of efficiency that we can continue to pull out just through excellence in execution. That is our broad nomenclature for this idea of enhancing our delivery systems through a more disciplined approach than perhaps some of the legacy organizations and some of the legacy projects that comprised Redwire as we came together over the last couple of years. There's an amount of profitability that we can pull out of that, and that is typically tied to the EACs. However, there's also what we are doing from a strategic perspective. When you look at our growth rates, 30% plus growth rates mean there's a lot of demand out there in the marketplace that we don't want to miss out on if it requires some sort of IRAD investment. So the swing factor in EBITDA for us is going to be steady increases in efficiencies, but throttling up or down IRAD based on the opportunities that are presented throughout the year. Does that make sense?

Yeah. I mean, so there's some variability when you think about the plan based on internal actions, which are gonna be a little bit harder to forecast. Just thinking about the revenue, and obviously, the last couple of years have been weird, but typically there's some sequential build through the year. If I just look at the midpoint of your revenue outlook, it kind of implies that revenues are kind of flat sequentially through the year, obviously on a good Q1. Are there any puts or takes there? Can you talk about the dynamics there, just thinking about how you built up the year's outlook?

Yeah, no, it's interesting. One of the things we're very focused on is making sure that we look at the right time period and we don't react to things. This is especially important for a company like Redwire because we have programs and products that can materially move the needle on any given quarter, right? For example, we mentioned, and Mike mentioned, we have everything from the fine sun sensors all the way to the ROSAs. We have opportunities in the pipeline that are really big, and depending on when those hit, it can be difficult to predict both in the government and the commercial sector based on their spending profiles. So quarter to quarter it's a lot more difficult to predict than year-over-year. Our focus is really on having that 30 to 40% revenue growth year-over-year. When it actually occurs can be more challenging to predict.

Maybe just lastly, you talked about some of the two changes around your KPIs. It looked like the pipeline, you know, still healthy but stepped down quite a bit sequentially. What accounted for that, whether it was submitted bids or just evolution of programs moving in and out, and just how you're thinking about the pipeline more broadly?

Jonathan?

Yeah, it's just mathematics. Right now we have a pipeline that's roughly five years, so we're coming into 2023. Now we extended out a year. There are going to be a filling of that pipeline as we go through the year. The same thing happened last year. You'll start to see the pipeline begin to turn. It's just mathematics; we're shifting it out a year. A lot of what you see in this company, which is pretty special, is that you can see the pipeline turn into contracts that we're bidding on, turn into backlog, turn into revenue. Now you're seeing we have a path to profitability with this gross margin moving up. We continue, again, there was a focus on the last analyst on gross margin. That's the place to look. That's where we're trying to really move the needle from the mid-twenties, get that higher with the idea that we're taking this larger pipeline, turning it into backlog revenue, and obviously on our path to profitability to free cash flow too. Makes sense?

I'll throw in one more quick one. Can you maybe just talk about that EUR 14 million contract announced under ESA for the 3D biosystems? I know you mentioned Space NV, but I know you also have quite a bit of 3D printing technology before that. Can you maybe just talk about the legacy position and kind of cross-sell opportunities that you're seeing with that business?

Yeah, absolutely. It's a good point about taking a capability and moving beyond just the U.S. to a much larger total addressable market worldwide. Redwire was already previously the leader in biomanufacturing on orbit with our biofabrication facility. This creates expands our leadership to more of a global presence. The most critical factor is when you see Redwire transitioning from being about flying single experiments to actually building a business. That's what you're seeing here in biomanufacturing specifically, as many of these technologies started in startups. It’s an important part of the ecosystem, but those typically fly single experiments to prove a technology. What’s exciting about the 3D bioprinting coming out of the ISS when added to the biofabrication facility already funded by NASA, is that this is shifting from single experiment offerings to a full offering within Redwire with multiple customers. It’s really about scaling and building technical momentum in an area, and that's what I think is probably most exciting to us about when you see us combining these technologies and leveraging the broader Redwire expertise in this area to grow that segment as not just an area for pushing technology but a business offering that generates real revenue and profitability. I will officially leave it at that. Thank you.

Our next question comes from Suji DeSilva from ROTH MKM. Please go ahead.

Hi Peter. Hi John, and congratulations on EBITDA positive, great accomplishment there. Looking at the revenue lines, just trying to understand this, I know this is gonna be a hard question to answer, but you cited metrics for the number of launches and the systems in there, and also some of the sun sensor systems and the ROSA systems. I'm just curious, is there a way to think about an ASP, quote unquote, kind of a revenue per year as you start to do more of these systems and provide those kind of unit metrics at least? Or is it just all over the map and hard to really trace out that way?

Good Genesis. So Suji, first of all, I appreciate the question, and we do have, obviously the unit economics. We have a very good idea of it. We generally don't present those because of competitive reasons. We can say that we are bidding and winning larger contracts, as you’re seeing directly in the improvement of margin to 24.7% in the first quarter. But we don't provide unit economics yet due to competitive reasons. However, we will be moving towards what I call a Redwire 101 in being able to talk to the investment community concerning unit economics based on our enabling space missions, explore live and work in space, and then obviously our European but really global business with multinationals. So we will be able to do that in the future, but right now we don't give the specifics on different product areas for competitive reasons, which is common in the aerospace industry.

Appreciate the sensitivity there. And then my other questions, on a longer-term business model perhaps, you've had this payload business and the ESA contract the first milestone, 14 million euros. Is there an opportunity for that business model to evolve longer term into a type of revenue share, or per unit type of, or some sort of business like that versus staying a contract business with milestone payments?

Yeah, I think that's right. As the market evolves, you're gonna see a lot more activity in commercial space which is going to generate a lot of different new ways of providing value. Right now, typically a lot of these things, like a bio printer for instance, is funded through a government organization as a project, like the 14 million euro we're having out of ESA. But that's not the ultimate goal either for Redwire or ESA for that matter. What they're trying to do is stimulate that economy in space where commercial organizations like Redwire can have major breakthroughs on things like being able to print organoids that are really important to the pharmaceutical industry or cell manufacturing, or on the in-space manufacturing side. Some of the work that we've done with forming crystals for pharmaceuticals. Ultimately, Redwire gets two bites of the apple: we get paid to develop these technologies as the government pushes the key technologies necessary for future space exploration and microgravity research, but we also maintain this critical intellectual property to look at commercial opportunities associated with what are the different products that could be manufactured at scale in space and sold on a per-unit basis to industries like, I mentioned, pharmaceuticals. It's important to note that we're getting there and the margins on this business could be quite high. If we look at the ability, again, on going back to gross margin, we talk about the ability to generate higher gross margin this quarter versus the first quarter of 2022, much of that was due to that explore live and work in space business model being driven by the traditional business model of being paid by government customers.

As a reminder, star one if you do have a question or comment, and there are no further questions at this time. I'd like to turn the floor back over to management for closing remarks.

Yes. Again, I'd like to thank everybody for joining the call and reiterate just how proud Redwire is of our employees for delivering a great first quarter and looking forward to the remainder of 2023. Thank you, and have a good day.