Thank you for standing by. My name is Janine, and I will be your conference operator for today. At this time, I would like to welcome everyone to the Redwire Space third quarter 2024 earnings call. All lines have been placed on mute to prevent any background noise. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star followed by the number one on your touch-tone phone. To withdraw your question, please press star followed by the number one again. I would now like to turn the conference over to Jeff Zunick. Please go ahead.

Thank you, Janine, and good morning, everyone. Welcome to Redwire's third quarter 2024 earnings call. We hope that you have 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 risks and uncertainties that are described in more detail on slide two. Additionally, to the extent we discuss non-GAAP measures during the call, please see slide three, our earnings release, or the investor presentation on our website for the calculations of these measures and their reconciliations to US GAAP measures. I am Jeff Zunick, Redwire Senior Vice President of Financial Planning and Analysis and Investor Relations. 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.

Thank you, Jeff. During today's call, I will take you through a discussion of our key accomplishments in the third quarter of 2024. Jonathan will then present the financial highlights for the same period, after which we will open the floor for Q&A. Please turn to slide six. During the third quarter, Redwire continued to effectively execute on our growth strategy for 2024, which is centered around four key principles: protecting the core, scaling production, moving up the value chain, and venture optionality. As I have done on previous calls, over the next few slides, I will discuss examples of successes in each of these key growth areas from the third quarter of 2024 to demonstrate our extraordinary progress against these objectives. Please turn to slide seven. M&A has always been a core strength of Redwire. With nine integrated acquisitions through the first half of 2024, our team has the demonstrated expertise and performance to effectively scale both through organic and inorganic strategies. This is a competitive advantage and enables us to rapidly scale as a public platform. In the most recent quarter, I am very pleased to introduce Redwire's tenth acquisition as part of our platform development strategy: Harith Systems. Harith Systems is an agile and differentiated spacecraft development company with expertise in specialized missions for national security space customers and unique technical achievements, with a path to transformative capabilities in the emerging area of dynamic space operations. The acquisition of Harith is right on strategy for Redwire. On the following slides, I will specifically highlight how the purchase of Harith accelerates our third growth principle, moving up the value chain. Please turn to slide eight. The Harith Systems acquisition complements our existing suite of national security space solutions and moves Redwire up the value chain as an integrated spacecraft platform provider. Harith Systems has developed a new class of high-performance spacecraft to support the evolving requirements for national security missions in contested space. Their acquisition broadens Redwire's product technology portfolio and extends our spacecraft platform capabilities with two additional spacecraft that we have recently rebranded as Mako and Thresher. Renderings of Mako and Thresher are shown on the right-hand side of this slide. Mako is a red, hard GEO and MEO platform that is currently under contract on the US Space Force's Tetra five program, while Thresher is a LEO spacecraft currently on contract with an undisclosed customer, designed and built in the United States for operating in contested environments. As the national security space architecture evolves, Mako and Thresher are bringing unique capabilities to the warfighter in LEO, MEO, and GEO with plans for autonomy, edge processing, and maneuverability that will enable emerging concepts in dynamic space operations and rendezvous and proximity operations. Turning to slide nine, the addition of Mako and Thresher through the acquisition of Harith significantly enhances Redwire's full platform spacecraft portfolio. As we now have five unique spacecraft platforms for missions in every orbit, from VLEO to LEO, GEO, and beyond. Redwire's advanced spacecraft designs incorporate cybersecurity communications, resilient power systems, highly accurate pointing, extensive maneuverability, and expanded onboard computing power that can support mission and payload-specific machine learning. On the next few slides, I will provide a detailed outline of our complementary spacecraft platforms to emphasize how well we are now positioned to scale. Please turn to slide ten. Hopefully, by now everyone is familiar with our two VLEO spacecraft, SABR Sat and Phantom. SABR Sat, depicted on the upper right, is a US-built platform designed for performance, endurance, and cost-effectiveness with a modular design and optional air-breathing engine. SABR Sat is currently being leveraged on DARPA's Otter flight program. This is a new market opportunity for spacecraft, and Redwire is well-positioned as a first mover in this emerging area of operations. In fact, from a VLEO perspective, we are not only well-positioned in the US national security market segment, but we are also a leader in European VLEO development with Phantom, depicted on the lower right. Phantom is a European VLEO platform that is designed to carry out a wide array of intelligence, earth science, and communications missions. Redwire is advancing Phantom's design and development through the European Space Agency's Skinsat mission. It is important to emphasize that both SABR Sat and Phantom are supporting funded contracts with premier customers and are on a path to flight operations. Turning to slide eleven. Now turning to low earth orbit or LEO. I am pleased to announce for the first time Redwire's rebranding of our European P200 LEO satellite platform that has been supporting generations of ESA probe missions as Hammerhead, shown on the upper right. Hammerhead is a European LEO platform developed at Redwire's facility in Belgium. Much like how Phantom is the Redwire platform that supports ESA's Skinsat, Hammerhead is the new name for our platform that has been supporting ESA probe missions for more than forty years in orbit without failure on ESA's Provo one, two, three, and five missions. As previously mentioned, with the acquisition of Harith, we have now added a US LEO platform called Thresher, depicted on the lower right of this slide. Thresher is a LEO platform designed and built in the US for US-centric missions and can support a wide variety of surveillance, space domain awareness, and tactically responsive space missions. Thresher is currently targeted for delivery in 2025 on a contract with an undisclosed customer. Please turn to slide twelve. Also added as part of our Harith acquisition, we now have a GEO and MEO spacecraft in our portfolio, Mako. Mako is a high agility red, hard platform designed for the harsh environments of GEO and MEO and built in the US for precision rendezvous and proximity operations. Mako is currently being developed on the US Space Force's Tetra five program with a targeted launch in 2025. On this inaugural mission, Mako is being developed to demonstrate the feasibility of on-orbit refueling. As with all of our products, flight heritage is key to Redwire's differentiation, and all these platforms are currently under contract with a customer and have a pathway to flight. Turning to slide thirteen. So why does this matter? What are we achieving by building out this differentiated portfolio of spacecraft and moving up the value chain? The answer is simple. By moving up the value chain, Redwire is able to access increasingly larger opportunities and supercharge our growth. This portfolio of platforms significantly increases our total addressable market in order to scale. We are seeing early signs of success with this strategy as evidenced by the substantial year-over-year increase in pipeline and year-to-date bids submitted. We are focused on satisfying market needs, scaling rapidly, and leveraging our classified and global reach, particularly in Europe. As Redwire moves forward, we will continue building on our heritage as a spacecraft platform provider with innovative solutions to meet the challenges of our customers around the globe. Please turn to slide fourteen. Of course, we continue protecting the core of our existing product portfolio in order to build on our successes. As an example, Redwire is proud to have provided the onboard computer for the European Space Agency's Hera mission. Not to be confused with Harith, the company, our most recent acquisition, Hera's mission is Europe's inaugural flagship planetary defense mission. On Hera, Redwire's advanced data and power management system leverages twenty-five years of flight heritage and is designed to meet the challenges of operating in deep space. The system will control all vital spacecraft operations, including power, navigation, and key mission milestones such as the deployment and monitoring of ESA's two deep space CubeSats. Onboard computers fall within our avionics and sensors core offering, which includes spacecraft subsystems and components that are used for navigation, control, and imagery collection. Also during the third quarter, Redwire's expertise was critical for Crossbow's latest launch, which took place on September twelfth, 2024. Redwire developed and delivered the launch vehicle structures and launcher interfaces for the flight test mission. This is the third in a series of Crossbow launches supported by Redwire technology in our Structures and Mechanisms core offering, which includes a variety of space infrastructure that provides critical mechanical functionality for on-orbit operations from launch release mechanisms and deployable booms to deorbiting and docking systems. Please turn to slide fifteen. Looking at our scaling production growth principle, during the quarter, Redwire announced that we have signed a strategic cooperation agreement with in-space propulsion leader Phase Four to build and deliver an advanced thruster technology called Valkyrie, which is designed for reliable, high-volume production to fill a gap in the supply chain. Redwire will leverage its scaled business operations, marketing resources, and extensive heritage as a trusted space system supplier to bring this in-space propulsion system to market. The Valkyrie thrusters are anticipated to go into full-rate production in 2025. These thrusters fall within our avionics and sensors core offering, which I mentioned earlier. Turning to the right-hand side of the slide, we have also recently shipped iROSA Wings seven and eight to Boeing. These wings are a follow-on to the six iROSA wings that have already been deployed on the International Space Station. Furthermore, as of September 2024, we had twenty-five iROSA wings contracted, a one hundred and seventy percent increase when compared to September of 2023. Roll-out solar arrays fall within our power generation core offering, which includes solar arrays and power distribution systems that generate the necessary power for space systems to operate regardless of size or location. Please turn to slide sixteen. Finally, turning to our venture optionality growth principle, I would like to take this opportunity to highlight the exciting progress we have made this year with our innovative space pharmaceutical platform, Pillbox. Redwire is proud of the launch cadence we have achieved for Pillbox since its first launch a year ago. At the beginning of this year, we stated that our goal was to launch six additional Pillbox systems to the ISS. I am very pleased to report that the twelve new Pillboxes launched earlier this week on SpaceX's thirty-one commercial resupply mission, bringing us to twenty-eight Pillboxes launched in total, clearly demonstrating the sustained operational tempo required to turn this into a viable business model. In addition, customer demand is building, and we are proud to have worked with a number of notable commercial partners, including Bristol Myers Squibb and Excesso Libro Pharma. We launched investigations this week on the CRS mission. The objective of our Pillbox strategy is to accelerate small molecule drug discovery to treat a variety of conditions and diseases on Earth. Since small molecule drugs comprise a majority of all marketed drugs, pharma companies are continually investigating the crystal structure of new and existing drugs to meet specific therapeutic goals. Pillbox is poised to be a game-changing innovation, and I am excited to report that in addition to our launch objectives, Redwire has achieved two critical milestones that further distinguish it as the premier space pharmaceutical development platform. As we have previously discussed, the first milestone is that Redwire has successfully and repeatedly demonstrated that small molecule drug crystals grown on orbit using our proprietary Pillbox system are larger and more highly ordered than terrestrially grown crystals. Today, I am excited to announce a second key milestone. In what we believe to be a first-of-its-kind achievement here on Earth, Redwire successfully replicated space-grown crystal forms using crystals returned from space as seeds or templates. Not only that, but we successfully replicated them through five generations of copies from copies. To detail this achievement, using Redwire's Pillbox system, we successfully formed two different small molecule drug crystals in space, preserved the space-flown crystal structures, and safely returned the crystals to Earth. The returned crystals retained their microgravity-induced attributes, and once on the ground, we used these seeds to grow new crystals with the same structure, successfully demonstrating that seed crystals formed in space can be used as a template to generate those same crystals on Earth. This pivotal step is required for future commercial expansion, and Redwire has now taken it. To our knowledge, this result is the first of its kind, and nothing close to it has been achieved previously. It is not only a technical achievement but also an important step towards taking one of our space-enhanced crystals to commercial production at scale on the ground. Please turn to slide seventeen. Going forward, we see two different avenues for our Pillbox platform. First, we will continue flying crystals on behalf of our partners as we have done this past year. Second, Redwire has developed a list of more than eighty promising small molecule targets for experimentation. Redwire will continue to fly experiments on our own behalf to generate a library of valuable space-developed crystal forms that will be protected as our own intellectual property. We have already seen interest in licensing this information from commercial customers and see this as a viable means to realizing a business model based on back-end royalty revenue in the future. Ultimately, pharmaceutical manufacturers want new and better crystal forms regardless of whether they are produced on Earth or in space, as these new forms can provide new properties and unique approaches towards the treatment of human diseases. We believe in the value that those created in space will provide, and through Pillbox, Redwire is proud of our efforts to harness the power of space to support human health here on Earth. Please turn to slide eighteen. Now turning to our contract awards and backlog. Our contract awards during the third quarter of 2024 were $44.5 million. The last twelve months' book-to-bill ratio was 1.25 times for the third quarter of 2024. As we continuously reinforce, we often see lumpy contract awards growth from quarter to quarter, but we are continuing to maintain a healthy growth rate on a last twelve-month basis. As you can see on the lower right-hand side of this slide, our contracted backlog has increased 30.2% year over year to a total of $330.1 million. The growth in contracted backlog is one of many factors that give us confidence in our growth as we look towards 2025 and beyond. Finally, as I mentioned earlier, we continue to expand our pipeline with an estimated $6.9 billion of identified opportunities, including year-to-date as of September 30th, 2024. This is a result of our moving up the value chain and scaling production growth principles leading to larger bids. As you can see on the upper right-hand side of this slide, this represents a significant increase of 306.2% over the corresponding year-to-date period ended September 30th, 2023. The growth in bids submitted is a result of our efforts to increase the average size of the individual opportunities we are pursuing. As previously mentioned, we are now bidding on individual programs in the $100 million plus award value on a more regular cadence. Of course, there is no guarantee we will win these opportunities, but we now have a pipeline of bids that could result in a substantial increase in backlog if we land some of these larger opportunities. We are able to pursue these opportunities because of the critical investments we have made in building the Redwire platform. The foundation we have laid is yielding results. Please turn to slide nineteen. With that, I would now like to turn the call over to Jonathan Baliff, Redwire's Chief Financial Officer. Jonathan?

Thank you, Pete. Before I turn to the financial results, I'd like to highlight the photo on this slide. It is of the four spacecraft for each mission that have been undergoing integration and testing at Redwire's state-of-the-art clean room facility in Antwerp, Belgium. Redwire is preparing to deliver two satellites for the European Space Agency's Proba-3 mission, which we talked about in the fourth quarter of 2024. As international customer demand increases, Redwire is proud to support critical innovation around the globe as part of our successful growth strategy. Please turn to slide twenty. Our third quarter and year-to-date results illustrate the positive momentum that Redwire has demonstrated during the last twelve months as of the third quarter of 2024. Revenues in the third quarter grew 9.6% year over year to $68.6 million as we once again achieved positive adjusted EBITDA of $2.4 million, a sequential increase over the second quarter of 2024. We will discuss the drivers of this quarter's revenue and adjusted EBITDA on subsequent slides. On this page, as you can see, we experienced a year-over-year growth in bids submitted, with $1 billion in total bids submitted during the third quarter of 2024 alone. This is an $800 million increase from the last time of the third quarter of 2023. Finally, as you can see, we had a use of cash from operations of $17.7 million during the third quarter, record levels of last twelve investments in these growth initiatives, many of which Pete already expanded upon. When viewed on the last twelve-month or LTM basis, as shown on the lower right-hand box, we actually improved our usage of cash from operations by $10.6 million on a year-over-year basis, achieving third quarter LTM use of cash from operations of $8.7 million. These bids that Pete spoke about and the investments and improvements in our third quarter results are attributable to the capability and commitment and demand from our clients that our global team is satisfying. The confidence in Redwire as we continue to satisfy this demand as our space infrastructure is in this third quarter and into 2025. Please turn to slide twenty-one. Specifically for quarterly revenue, as you can see from the chart on the right, this quarter's revenue was $68.6 million, again, a 9.6% increase on a year-over-year basis. On a year-to-date basis, 2024 revenue as of September 30th, 2024, represents a 30.1% increase over the corresponding period in 2023. Our excellent growth was driven by our 47.5% year-to-date growth in national security revenue and an 83.6% year-to-date growth in commercial revenue year over year. Finally, during the quarter and similar to past years, our backlog has a solid foundation, with more than 85% of our revenue derived from funded government programs or from global market customers. We are delivering in the areas of national security, commercial satellite proliferation, and the exploration of space and the moon, to name just a few areas. Please turn to slide twenty-two. On a quarterly basis, Redwire achieved positive quarterly adjusted EBITDA of $2.4 million in Q3 2024. That's a sequential increase of 50.2% and almost a $1 million increase over the second quarter of 2024. Gross profit was $12.0 million in the third quarter of 2024, with quarterly gross margins of 17.5%, an improvement over previous sequential quarters. These results were negatively impacted by a net $1.6 million EAC adjustment during this third quarter, 2.3% of third quarter revenue. Our team is very focused on reducing our net unfavorable EACs, and these third quarter results are the lowest in the last twelve months, almost 60% less than the average of the previous three quarters. Our quarterly adjusted EBITDA performance was also improved by excellent cost control, continued operating leverage being driven by the scale as Redwire's SG&A expenses were 25.5% of revenue, a year-over-year decrease from 29.2% in last year's third quarter. We continue to drive revenue increases without growth in SG&A on a quarterly year-over-year basis. That's the benefit of our operating leverage and scale improving, mostly from organic growth. Please turn to slide twenty-three. Throughout the third quarter, we made significant investments to drive the revenue growth we've seen in the last twelve months, while also funding industry-leading innovation and global business scale. During the year-to-date period through September 30th, 2024, we made $6.9 million in capital expenditures, including $2.8 million in capital expenditures in the third quarter alone, our highest quarterly CapEx spend in 2024. Plus, $4.7 million in investments in internal research and development, and $3.1 million in a variety of important core corporate investments through SG&A. We also obviously had an acquisition in Harith in the third quarter. We continue to demonstrate our ability to financially perform now while also making these significant investments for growth, risk reduction, and profitability in 2025 and beyond. Similar to previous quarters, on the left-hand chart, we show operating and free cash flow. As a reminder, free cash flow provides a metric based on our US GAAP cash from operations minus capital expenditures. For the third quarter of 2024, net cash used in operating activities was $17.7 million, and free cash flow was also a use of $20.5 million. These quarterly results were due to the deliberate organic and M&A investments we've made following quarters of free cash flow generation, as you can see on the left-hand chart. On a twelve-month basis, we've actually achieved a year-over-year improvement in cash from operations of $10.6 million. We do expect these investments to yield better revenue growth, scale, and returns on invested capital in FY 2025 and beyond. On the right-hand chart, you see our significant and record total liquidity for this year as of the end of the third quarter, of $61.1 million. That comprises $45.8 million in available liquidity and $15.3 million in restricted cash, which consists of a short-term cash-collateralized standby letter of credit for a large submitted proposal. Please turn to slide twenty-five. A brief discussion of the outlook for the remainder of 2024. We delivered another quarter of strong performance with significant investment. As a result, for 2024, we affirm full-year forecast revenue of $310 million, which represents a 27% year-over-year growth rate. On a year-to-date basis, we have achieved 76% of our $310 million annual revenue guidance forecast. Finally, through our excellence and execution initiatives, we continue to focus on improving our program management to reduce EAC volatility while also creating more operating leverage and cost efficiency to continue on our path to profitability. We enter the final quarter of 2024 and full year 2025 with great momentum. I will now turn the presentation back over to Pete to provide brief final remarks before Q&A.

Thank you, Jonathan. Please turn to slide twenty-six. And with that, I want to thank the entire Redwire team for their contribution to our results this quarter. A total global effort. We'll now open the floor for questions.

Ladies and gentlemen, we will now begin the question and answer session. I would like to remind everyone for one question, one follow-up. Should you have a question, you can press star followed by the number one on your touch-tone phone, and you will hear a prompt at your hand, hit raise. Should you wish to withdraw, kindly press the star followed by the number one again. If you are using a speakerphone, please lift the handset before pressing any key. Our first question comes from the line of Suji DeSilva from ROTH Capital. Please go ahead.

Hi, Pete. Hi, Jonathan. Congratulations on the progress here. Thank you very much. Start with. Sure. I want to start with a high-level question. Obviously, the elections are a red sweep here. Curious to your thoughts on the impact potentially on space spend and government national security launch and satellite broadband was featured prominently in victory speeches. So just curious about your thoughts there.

Yeah. No. I mean, interesting question. Certainly, we're watching. The interesting and exciting thing about space is that the infrastructure is so critical that I think regardless of any administration, there's going to be continued investment there. But we have usually, I don't try to comment or predict these things, but we do have four years of precedent from a previous Trump administration where they pushed the Artemis program and a number of, you know, created the Space Force and really invested heavily in space. So we're not making any predictions, certainly. But from what we're hearing and what I think, you know, everybody who's followed it, heard, and had seen since the last time this administration was in place that they are space investors.

Yep. Sounds right. And then you mentioned in the prepared remarks that you're seeing larger bid sizes, hundred-plus million bid programs. Can you talk about, as that competitive process narrows down, how many competitors you're seeing typically in the last round, and what do you think your win rate is at some of these as these become more prominent revenue opportunities?

Yeah. So it's highly variable. Right? In some areas, there is more competition than others in areas that are more emerging. Capability set. There's less competition. I don't think we're focused as much on the quantity of competition. Although, I will say that space being still a relatively new market, you have a lot of opportunity with fewer companies to perform. But regardless of whether the competition is higher or more moderated, we focus on our differentiation and, you know, that basically our go-to-market strategy is to leverage technical capability or unique infrastructure like our class infrastructure that we've invested heavily in to differentiate ourselves. In terms of win rate, I think on the hundred million dollar plus contracts, we have too small a sample size to give you any meaningful data there.

Okay, Pete. Appreciate that. And then last question, I'll pass along. Curious, in the microgravity Pillbox area, I heard maybe for the first time that I've heard of developing your own IP with molecules. I'm curious if you have the in-house assets to determine which molecules to experiment on or if that's a partnership or what you have in-house to support that?

Yeah. So good question. So we do have in-house scientists, very senior scientists, actually, PhDs that are part of the community. They are often out there publishing papers. We participate in the conferences. And through the experimentation phase of this, what we've been active on for many years now, we've made key relationships with the right people to help us identify those compounds. In fact, we have a little scientific group, if you will, of both internal and external partners that put that list together for us of the high-value opportunities. So, yeah, we definitely have the expertise in order to select the ones that we think have the most potential. Jonathan, did you want to add something?

You know, with CFO, we have been very explicit that we've invested, you know, over $65 million, both obviously client investment funds which we have deployed quite effectively in our own funds, but mostly client investment funds. So we've invested a significant amount of money to gain all of the relationships, the capability internally, and obviously, the results are starting to show. You don't go from, you know, an expectation that, you know, was pretty high dealing with sixteen Pillboxes to now twenty-eight. And beyond in these partnerships now, the new one with Bristol Myers, that doesn't happen by accident. And we're very measured when we talk about it, Suji, to you in the market because we are creating something that is both unique and can also significantly scale from a revenue and return on invested capital standpoint. We're very measured in how we talk about it, but we're very excited about the results, which were significantly higher than expectations. And I would go out to our social media sites, and you can see some talks and interviews given by Dr. Ken Sabin that I think could get a lot of additional data on that. But I think the part that we're particularly starting to emphasize now is that I think you mentioned we had previously talked heavily about was the fact that we are building our own IP here as we've spent a lot of time studying the drug development process. And leveraging our expertise to take a look at where we're gonna fit in and what are the opportunities for potential business models. And as we tried to articulate, it's developing the seed crystals in space that can operate as a seed that can then be replicated on Earth, so you don't have to do it all in space. You just bring down that critical intellectual property, that seed crystal down, which is very small. And because we've demonstrated that we can replicate it on Earth, we can now take those seed crystals as IP and partner with the next chain in the value chain of drug development. And that's where we're focused on taking this IP we're developing as part of flying the small molecules on our own is to have our own IP that we can partner with biopharma companies that are in the business of the full development life cycle, partner with them, providing this unique IP in exchange for some sort of royalty structure. Early days, no doubt, but this is super exciting to us because we get a lot of questions from people about where is all of this heading, and I think we have a clear path to a real potential business model here to leverage this now. Not a lot of more investment. I have to emphasize, not a lot more investment. Right? That's key. Right. It's really about now harvesting.

Great. Thank you very much. Bye. I'll pass the line.

Thank you. Our next question comes from the line of Greg Conrad from Jefferies. Please go ahead.

Good morning. Greg, maybe it's a little bit too early to talk about next year. But just thinking about the 2024 growth strategy that you've laid out, how do you think about the changes into next year? Just thinking about the weight of those four levers and how do you think about venture optionality levers playing into next year?

So for the first part of it, I believe and one of the reasons we focus on bids submitted in the pipeline in our presentation here is that is probably one of the best leading indicators for Redwire. Right? So that's how we think about it anyways. When we go to look at 2025, you know, we have to look at, you know, how many opportunities do we have in the pipeline. These things have a relatively longer, meaning not measured in weeks and days, but in months, sales cycle. So what's in the pipeline now or, you know, things have to in order to achieve bookings in 2025. You have to have a fair amount in the pipeline now. Based on that quantitative metric, I think we're really well positioned for 2025. Now we have to win, so win rate is the other, as you all have pointed out repeatedly, other side of that calculation. And although because of the size of the sample set, we don't really have a meaningful win rate to provide based on statistically significant track record of historicals here, we do win and we have demonstrated that we win over the last couple of years, and that's how we've achieved this remarkable growth that we've achieved today. So we're pretty confident in our ability to bid and win. So if you take that and you combine it with the fact that we have a lot of really good qualified opportunities in the pipeline, and we've invested in not only the capacity but also the production capacity, but also the ability to or the technologies like full spacecraft systems to go after bigger programs, I can expect that trend to continue into 2025, which is very positive.

And there's historical precedence for this, Greg. If you remember, we spoke two years ago about ROSAs. Because we were just starting to win a number of contracts. Seeing a hundred and twenty-seven percent increase in those ROSAs contracted compared to last year, that was much higher than what we thought two, three years ago. But it was based on pretty significant CapEx investments that we made in the twenty-one and twenty-two periods to increase their production capacity. Many of you have been out to that facility in Goleta, we're continuing to use that embedded capital for higher returns on capital and just growth, right, in those ROSAs. So that's a get you know, it gives us confidence that what we're doing now leads to fruition in twenty-five.

Okay. And then at the time of the Harith acquisition, I think you guys had disclosed that 2023 revenues were $15 million. Can you maybe clarify how much of that's included in this year's guidance? And then just you mentioned the acquisition in your cash comments, but it's a little bit unclear from the cash flow statement. Any color on the price of that deal?

So now that we've actually been able to put some disclosure out, if you look carefully at the cash flow statement in the earnings release and will be expounded upon in the ten Q, actually say this is a recycling of capital. We actually ended up doing a disposition that created cash of more than $4 million of which as you can see in the cash flow statement, there was a use of cash for acquisitions. Again, we haven't disclosed the full price. That's actually obviously net of cash that we receive in that acquisition also. But you can see it's an efficient use of that capital as we move forward. If you look also in the earnings release, you'll see how we actually acquired some pipeline, you know, with Harith because you can actually see we haven't done another acquisition in almost twenty months. You can see that revenue, you know, for the quarter, which was only one month of the third quarter, was about $1.8 million. We spoke about guidance and the increase in guidance quarter from three hundred to three hundred and ten million, we actually said that that increase was partially due to Harith. Also due to organic growth that we're seeing, and we're sticking to that disclosure.

Thank you. I'll leave it at that.

Our next question comes from the line of Brian Kinstlinger from Alliance Global Partners. Please go ahead.

Great. Thanks so much. Congrats on the Harith acquisition.

Thank you. Thanks, Brian.

As it relates to proposals outstanding, wondering if you can touch on the sales cycle. How long does it generally take for proposals to get adjudicated, especially on these larger deals? And then last year, Redwire bid on less than a billion dollars of contracts. This year, in each of the last two quarters, you've bid on more than a billion dollars or at least a billion dollars. Has anything changed in the market outside of management's focus on larger deal sizes?

I'll take the last part first. No. I don't think so. I think it's been us putting the systems and foundation and capability in place to go after larger and larger programs as part of our 2024 growth strategy. In terms of the first part? Sales cycle. What's that? Oh, sales cycle, it varies. You know, some of the smaller subsystems and components, especially if commercial, you can turn it around really quickly. We can just get an order in. They can ask for something that is really mature. On other ones that are large government procurements and particularly, they tend to take a little bit longer. There's a lot of information out there on how typically the average length of a large government procurement based on size tends to take. So I think the important aspect is because we do we have that portfolio effect of subsystems and components as well as now larger bids. Increasing the larger bids, we have a nice blend of revenues that can be achieved in fairly short order all the way up to some much larger opportunities that we chase that take months to play out.

Got it. The only thing I would add to Pete is, you know, again, these larger bids generally you can look up online or we, you know, we don't give specifics because we don't give specifics, but they do take as Pete said, measured in months and longer sales cycle. Right. The other thing I would say is that many of these bids, you know, are longer from a contractual standpoint. Like, they would extend, you know, we've always said our average life of a contract is about two years and that's been getting higher over time. Many of these bids would increase that also. So there are actually more multi-year contracts as opposed to a bit shorter term.

Great. Thanks. My second question, maybe one for Jonathan, and correct me if I'm wrong, the primary reason is there's a high percentage of low-margin hardware and material purchases for some of your large contracts that have begun. My question is, is it reasonable to assume that gross margin from last year is still achievable in the long term or medium term? And when do you expect if so, we begin to see a shift in the mix and therefore the margins begin to recover from the growth side?

Look. You're asking a direct question. I'm gonna give you a direct answer. We believe that the margins will increase. And we've shown that from the second quarter to the third quarter. It's marginally increased, you know, about ninety basis points, almost one hundred basis points from the two quarters. Some of this is mix. Right? Because we're actually investing, you know, as part of some of these programs. It's EACs, we've talked about that before with you, Brian, too. So don't forget that there is some EAC growth there, but it's also we're starting to manage that a bit better. But the answer is we are very focused on improving those margins and getting back up into the twenty-plus percent margins. We don't give specific guidance on that, but the answer is any business that's trying to achieve scale is also, you know, getting spec'd in on some of these programs should see increasing margins as we go forward. It's not gonna be linear. It's gonna take steps forward and steps back, but as we start to achieve scale, it's really the EBITDA margins also that really start to step up, which we're also quite focused on, which is why we mentioned operating leverage so much.

Yeah. Although it's early days, I thought we'll reverse it here and John, so you guys go first, I get to add. That's it. That's fine. It certainly did. You know, we in the last earnings call, if anybody was paying attention, I articulated a key concept that we rally around called strategic balance. I believe in that context, I was talking about balancing between profitability today and the investments it's required to achieve extraordinary growth over time. But strategic also comes into many of our conversations internally when we look at opportunities to say, alright. Are we focused on gross margin improvement here? Are we focused on the absolute value of free cash flow generation? And I think at this stage in our company as we look at achieving operating leverage, we will. We will bid higher programs with low margins that can have an outsized effect on our blended margin but create more absolute value from a free cash flow generation perspective. And that's just, I think, healthy for the company. So everything Jonathan has said is correct, but I do want to highlight so that I'm not back on this call later and we win a much larger opportunity that has a large material purchase associated with it, that dilutes our margins on a blended basis but generates a lot of additional free cash flow because we're getting all the operating leverage, and that's why Jonathan brought up EBITDA. But we will do that, and that is a possibility.

Great. That's helpful. Thank you.

Thank you. Again, if you have any questions, kindly press star one. Our next question comes from the line of Griffin Boss from B. Riley Securities. Yes. Go ahead.

Hi. Good morning. Thanks for taking my questions. So a lot of good progress here. I'll start with the ROSAs. Obviously, you mentioned the strong growth there year over year, but you didn't talk about the Thales contract program you're working on. I wonder if you could provide some more details on how that's progressing and any potential investments you're making to ramp up on that program?

Yeah. So it's progressing well, and we're making the investments that we envisioned at the beginning of the program. So I wouldn't take our not speaking on the topic because anything other than we had a lot of new other stuff to talk about. But, yeah, the program's progressing well and those investments are playing out.

And, you know, what I would say, Griffin, is, you know, take a look at that growth in the commercial revenue. Right? When we look at our year-over-year commercial growth, a lot of that is because now we've been able to disclose more about Thales and what those ROSAs are going on, and we're very excited about continuing to move forward with that. But really other clients, because of our differentiated power generation.

Great. Thanks for that color. And next for me, it does look like you paid quite a low multiple for Harith. So just if you could provide more details on sort of M&A going forward and what you're seeing in the marketplace in terms of options for M&A and maybe valuations you're seeing in the market as well?

Yeah. So the valuations have come down. Without getting too much into our strategy, because obviously, it's a competitive process for these, is we believe there are companies out there that have invested millions of dollars in capital in creating some extraordinary technological capabilities and just ran out of capital. And as a result, there are opportunities to find complementary opportunities where they can join the Redwire platform and we can take advantage of all the capital that went into the tech development part of their evolution. Right? So we're excited about that. I've said previously in earlier calls, although I'm not sure everybody had labeled us as one of those that come out the other side of this early stage of space, but the winners do get to and those that move forward and maintain fiscal discipline get the opportunity to strategically look at those companies that have some really great tech but need to be part of a longer-term deck, and so that's exciting to us. And more broadly, we do think that valuations have come down. And as a result, I think you'll see that we've well, we've never stopped being active. As I tried to highlight on this call, inorganic growth and M&A are a core competency of Redwire. We have a team here who has done it many times now and has I hope people look at where we are sitting today after our nine, now ten acquisitions and see that we have the ability to integrate and capitalize on that. So that's gonna be kind of part of our game plan going forward. It would be strange for it not to be. So I think as you see us going forward, we're highly selective. We don't like to overpay, and we look for technological differentiation. That's always the way we've been, and that's the way we're gonna be going forward.

Excellent. Very helpful. Thank you, Pete, and thank you, Jonathan.

Thank you. Appreciate it. Thank you, Griffin.

Thank you. That concludes our Q&A session. I would now like to turn the call over back to Jeff Zunick for closing comments.

Great. Thank you for your questions and for participating in today's call. We appreciate everyone taking the time to listen to us today and go Redwire.

That concludes our conference today. Thank you for joining us. You may now disconnect. Thank you, everyone.