Redwire Corp

Previous wording

Redwire’s primary business model is providing mission critical solutions based on core space infrastructure offerings for government and commercial customers through long-duration projects. These core offerings include leading technologies and production capability for avionics and sensors; power generation; structure and mechanisms; radio frequency (“RF”) systems; platforms, payloads and missions; and microgravity payloads. Our core offerings have been enabling space missions since the 1960s and have been flight-proven on over 200 spaceflight missions, including the National Aeronautics and Space Administration’s (“NASA”) Artemis program, New Horizons and Perseverance, the Space Forces’ GPS, and the European Space Agency’s (“ESA”) Project for On-Board Autonomy (“PROBA”) programs. We are also a provider of innovative technologies with the potential to help transform the economics of space and create new markets for its exploration and commercialization.

Current wording

Redwire’s primary business model is providing mission critical solutions based on core space infrastructure offerings for government and commercial customers through long-duration projects. Our core offerings have been enabling space missions since the 1960s and have been flight-proven on over 200 spaceflight missions, including the National Aeronautics and Space Administration’s (“NASA”) Artemis program, New Horizons and Perseverance, the Space Forces’ GPS, and the European Space Agency’s (“ESA”) Project for On-Board Autonomy (“PROBA”) programs. We are also a provider of innovative technologies with the potential to help transform the economics of space and create new markets for its exploration and commercialization.

Previous wording

•Selling, general and administrative expenses as a percentage of revenues decreased to 23% for the three months ended June 30, 2024 from 29% during the same period in 2023.

Current wording

•Selling, general and administrative expenses as a percentage of revenues decreased to 26% for the three months ended September 30, 2024 from 29% during the same period in 2023.

Previous wording

Revenues increased 30% to $78.1 million for the three months ended June 30, 2024, as compared to $60.1 million for the three months ended June 30, 2023. The year-over-year increase in revenues is primarily due to increases in average contract size and increased volume of production in power generation offerings. These increases were partially offset by $3.1 million of net EAC adjustments for the three months ended June 30, 2024. Please refer to Note K – Revenues of the accompanying notes to the condensed consolidated financial statements for additional information related to the Company’s net EAC adjustments.

Current wording

Revenues increased 10% to $68.6 million for the three months ended September 30, 2024, as compared to $62.6 million for the three months ended September 30, 2023. The year-over-year increase in revenues is primarily due to increases in average contract size and increased volume of production in power generation offerings. These increases were partially offset by $1.6 million of net unfavorable EAC adjustments for the three months ended September 30, 2024 as compared to $2.5 million net favorable EAC adjustments for the same period in 2023. Please refer to Note L – Revenues of the accompanying notes to the condensed consolidated financial statements for additional information related to the Company’s net EAC adjustments.

Previous wording

Cost of sales increased $20.9 million, or 47%, for the three months ended June 30, 2024, as compared to the three months ended June 30, 2023. The year-over-year increase in cost of sales was driven by increased labor, materials and subcontractor costs primarily associated with larger contracts in power generation offerings for which there were no related costs during the same period in 2023.

Current wording

Cost of sales increased $11.1 million, or 24%, for the three months ended September 30, 2024, as compared to the three months ended September 30, 2023. The year-over-year increase in cost of sales was driven by increased labor, materials and subcontractor costs primarily associated with larger contracts in power generation offerings for which there were no related costs during the same period in 2023.

Previous wording

Gross margin decreased $2.9 million, or 18%, for the three months ended June 30, 2024, as compared to the three months ended June 30, 2023. As a percentage of revenues, gross margin was 17% and 26% for the three months ended June 30, 2024 and 2023, respectively. The year-over-year decrease in gross margin was driven by changes in contract mix primarily due to larger contracts in power generation offerings with lower margins and the $3.1 million negative impact of net EAC adjustments for the three months ended June 30, 2024. Please refer to Note K – Revenues of the accompanying notes to the condensed consolidated financial statements for additional information related to the Company’s net EAC adjustments.

Current wording

Gross profit decreased $5.1 million, or 30%, for the three months ended September 30, 2024, as compared to the three months ended September 30, 2023. As a percentage of revenues, gross margin was 18% and 27% for the three months ended September 30, 2024 and 2023, respectively. The year-over-year decrease in gross margin was driven by changes in contract mix, including larger contracts with lower margins and completion of certain higher margin contracts, impacting the overall contract portfolio gross margin. The decrease is also partially due to the $1.6 million net unfavorable EAC adjustments for the three months ended September 30, 2024. Please refer to Note L – Revenues of the accompanying notes to the condensed consolidated financial statements for additional information related to the Company’s net EAC adjustments.

Previous wording

SG&A expenses increased $0.4 million, or 2%, for the three months ended June 30, 2024, as compared with the same period in 2023. The year-over-year increase in SG&A expenses was primarily driven by an increase in legal expenses of $1.5 million, partially offset by a decrease of $0.8 million in professional fees. This contributed to a year-over-year decrease of SG&A as a percentage of revenue to 23% for the three months ended June 30, 2024 from 29% for the same period in 2023. This decrease reflects the Company’s continued focus on cost discipline and streamlining corporate overhead costs to enhance operating leverage.

Current wording

SG&A expenses decreased $0.8 million, or 4%, for the three months ended September 30, 2024, as compared with the same period in 2023. The year-over-year decrease in SG&A expenses was primarily driven by a decrease of $1.5 million in professional fees, partially offset by an increase of $0.8 million in legal fees. This contributed to a year-over-year decrease of SG&A as a percentage of revenue to 26% for the three months ended September 30, 2024 from 29% for the same period in 2023. This decrease reflects the Company’s continued focus on cost discipline and streamlining corporate overhead costs to enhance operating leverage.

Previous wording

Interest expense, net increased $0.3 million, or 13%, for the three months ended June 30, 2024, as compared with the three months ended June 30, 2023. The increase was primarily related to an increase in our cost of capital due to unfavorable changes in variable interest rates on the Company’s debt obligations and increased borrowings on the revolving credit facility compared to the same period in 2023. Refer to Note F – Debt of the accompanying notes to the condensed consolidated financial statements for additional information related to the Company’s debt obligations.

Current wording

Interest expense, net increased $1.0 million, or 37%, for the three months ended September 30, 2024, as compared with the three months ended September 30, 2023. The increase was primarily related to an increase in our cost of capital due to unfavorable changes in variable interest rates on the Company’s debt obligations and increased borrowings on the revolving credit facility compared to the same period in 2023. Refer to Note G – Debt of the accompanying notes to the condensed consolidated financial statements for additional information related to the Company’s debt obligations.

Previous wording

Other (income) expense, net decreased from net other income to net other expense by $8.9 million, for the three months ended June 30, 2024, as compared to the three months ended June 30, 2023. The year-over-year decrease was primarily related to a loss of $9.0 million recognized as a result of changes in the fair value of the private warrant liability during the three months ended June 30, 2024 as compared to a gain of $0.8 million recognized during the same period of 2023. The change year-over-year is primarily due to an increase in the Company’s common stock price during the three months ended June 30, 2024 as compared to a slight decrease during the same period of 2023. This decrease was partially offset by a gain of $1.3 million recognized as a result of the sale of the Company’s joint ventures. Refer to Note C – Fair Value of Financial Instruments and Note O – Joint Venture of the accompanying notes to the condensed consolidated financial statements for additional information related to the private warrants and joint ventures, respectively.

Current wording

Other (income) expense, net increased by $4.1 million for the three months ended September 30, 2024, as compared to the three months ended September 30, 2023. The year-over-year increase was primarily due to an $8.0 million loss contingency recognized for a litigation matter, for which there was no comparable cost in the same period of 2023. The increase was partially offset by a gain of $1.9 million recognized as a result of changes in the fair value of the private warrant liability during the three months ended September 30, 2024 as compared to a loss of $0.5 million recognized during the same period of 2023. The increase was also partially offset by a more favorable impact from foreign currency transactions for the three months ended September 30, 2024 as compared to the same period in 2023. Refer to Note J – Commitments and Contingencies and Note D – Fair Value of Financial Instruments of the accompanying notes to the condensed consolidated financial statements for additional information related to litigation matters and private warrants, respectively.

Previous wording

The effective tax rate decreased to (0.1)% for thethree months ended June 30, 2024, as compared to 1.5% forthree months ended June 30, 2023, primarily due to an increase in the valuation allowance during 2024. Refer to Note H – Income Taxes of the accompanying notes to thecondensed consolidated financial statements for further discussion.

Current wording

The effective tax rate decreased to 2.2% for thethree months ended September 30, 2024, as compared to 3.8% forthree months ended September 30, 2023, primarily related to the Company’s mix in earnings between U.S. and foreign jurisdictions. Refer to Note I – Income Taxes of the accompanying notes to thecondensed consolidated financial statements for further discussion.

Previous wording

Results of operations for the six months ended June 30, 2024 compared to the six months ended June 30, 2023:

Current wording

Results of operations for the nine months ended September 30, 2024 compared to the nine months ended September 30, 2023:

Previous wording

Revenues increased by $48.2 million, or 41%, for the six months ended June 30, 2024, as compared to the six months ended June 30, 2023. The year-over-year increase in revenues was primarily related to increases in average contract size and increased volume of production in the power generation and structures and mechanisms space infrastructure offerings. These increases were partially offset by a $7.0 million negative impact of net EAC adjustments for the six months ended June 30, 2024. Please refer to Note K – Revenues of the accompanying notes to the condensed consolidated financial statements for additional information related to the Company’s net EAC adjustments.

Current wording

Revenues increased by $54.2 million, or 30%, for the nine months ended September 30, 2024, as compared to the nine months ended September 30, 2023. The year-over-year increase in revenues was primarily related to increases in average contract size and increased volume of production in the power generation, radio frequency and structures and mechanisms space infrastructure offerings. These increases were partially offset by $8.6 million of net unfavorable EAC adjustments for the nine months ended September 30, 2024 as compared to $0.8 million of net favorable EAC adjustments for the same period in 2023. Please refer to Note L – Revenues of the accompanying notes to the condensed consolidated financial statements for additional information related to the Company’s net EAC adjustments.

Previous wording

Cost of sales increased $50.5 million, or 58%, for the six months ended June 30, 2024, as compared to the six months ended June 30, 2023. The year-over-year increase in cost of sales was primarily driven by increased labor and subcontractor costs associated with larger contracts in power generation offerings for which there were no related costs during the same period in 2023.

Current wording

Cost of sales increased $61.6 million, or 46%, for the nine months ended September 30, 2024, as compared to the nine months ended September 30, 2023. The year-over-year increase in cost of sales was primarily driven by increased labor and subcontractor costs associated with larger contracts in power generation offerings for which there were no related costs during the same period in 2023.

Previous wording

Gross margin decreased $2.3 million, or 8%, for the six months ended June 30, 2024, as compared to the six months ended June 30, 2023. As a percentage of revenues, gross margin was 17% and 26% for the six months ended June 30, 2024 and 2023, respectively. The year-over-year decrease in gross margin as a percentage of revenues was driven by changes in contract mix primarily due to larger contracts in power generation offerings with lower margins and a $7.0 million negative impact of net EAC adjustments for the six months ended June 30, 2024. Please refer to Note K – Revenues of the accompanying notes to the condensed consolidated financial statements for additional information related to the Company’s net EAC adjustments.

Current wording

Gross profit decreased $7.4 million, or 16%, for the nine months ended September 30, 2024, as compared to the nine months ended September 30, 2023. As a percentage of revenues, gross margin was 17% and 26% for the nine months ended September 30, 2024 and 2023, respectively. The year-over-year decrease in gross margin as a percentage of revenues was driven by changes in contract mix, including larger contracts with lower margins and completion of certain higher margin contracts, impacting the overall contract portfolio gross margin. The decrease is also partially due to a $8.6 million negative impact of net EAC adjustments for the nine months ended September 30, 2024 as compared to $0.8 million of net favorable EAC adjustments for the same period in 2023. Please refer to Note L – Revenues of the accompanying notes to the condensed consolidated financial statements for additional information related to the Company’s net EAC adjustments.

Previous wording

SG&A expenses increased$1.7 million, or 5%, for the six months ended June 30, 2024, as compared to the six months ended June 30, 2023. The year-over-year increase in SG&A expenses was primarily driven by an increase in legal expenses of $2.2 million. SG&A expenses as a percentage of revenues decreased to 21%for the six months ended June 30, 2024 from 29%during the same period in 2023. This decrease reflects the Company’s continued focus on cost discipline and streamlining corporate overhead costs to enhance operating leverage.

Current wording

SG&A expenses increased$0.9 million, or 2%, for the nine months ended September 30, 2024, as compared to the nine months ended September 30, 2023. The year-over-year increase in SG&A expenses was primarily driven by an increase in legal expenses and share-based compensation of $3.0 million and $1.7 million, respectively. This increase was partially offset by a decrease in professional fees and insurance expense of $4.2 million. SG&A expenses as a percentage of revenues decreased to 23%for the nine months ended September 30, 2024 from 29%during the same period in 2023. This decrease reflects the Company’s continued focus on cost discipline and streamlining corporate overhead costs to enhance operating leverage.

Previous wording

Research and development expenses increased $0.3 million, or 13%, for the six months ended June 30, 2024 as compared to the six months ended June 30, 2023. The increase was primarily due to strategic decisions to invest in future developments related to microgravity payloads, radio frequency and power generation technologies.

Current wording

Research and development expenses increased $0.7 million, or 17%, for the nine months ended September 30, 2024 as compared to the nine months ended September 30, 2023. The increase was primarily due to strategic decisions to invest in future developments related to avionics and sensors, radio frequency, power generation technologies and microgravity payloads.

Previous wording

Interest expense, net increased $0.6 million, or 12%, for the six months ended June 30, 2024, as compared to the six months ended June 30, 2023. This increase was primarily related to an increase in our cost of capital due to unfavorable changes in variable interest rates on the Company’s debt obligations and increased borrowings on the revolving credit facility compared to the same period in 2023. Please refer to Note F – Debt of the accompanying notes to the condensed consolidated financial statements for additional information related to the Company’s debt obligations.

Current wording

Interest expense, net increased $1.6 million, or 20%, for the nine months ended September 30, 2024, as compared to the nine months ended September 30, 2023. This increase was primarily related to an increase in our cost of capital due to unfavorable changes in variable interest rates on the Company’s debt obligations and increased borrowings on the revolving credit facility compared to the same period in 2023. Please refer to Note G – Debt of the accompanying notes to the condensed consolidated financial statements for additional information related to the Company’s debt obligations.

Previous wording

Other (income) expense, net increased by $8.0 million, or 547%, for the six months ended June 30, 2024, as compared to the six months ended June 30, 2023. This year-over-year increase was primarily due to a $10.1 million loss as a result of an increase in the fair value of the Company’s private warrant liability for the six months ended June 30, 2024 as compared to a $2.0 million loss during the same period in 2023. The change year-over-year is primarily due to a larger increase in the Company’s common stock price during the six months ended June 30, 2024 as compared to the increase during the same period of 2023. The increase was partially offset by a gain of $1.3 million recognized as a result of the sale of the Company’s joint ventures. Please refer to Note C – Fair Value of Financial Instruments and Note O – Joint Venture of the accompanying notes to the condensed consolidated financial statements for additional information related to the private warrants and equity joint ventures, respectively. The increase was also partially due to less favorable impact from foreign currency transactions for the six months ended June 30, 2024 as compared to the same period in 2023.

Current wording

Other (income) expense, net increased by $12.0 million for the nine months ended September 30, 2024, as compared to the nine months ended September 30, 2023. This year-over-year increase was primarily due to a $8.1 million loss as a result of an increase in the fair value of the Company’s private warrant liability for the nine months ended September 30, 2024 as compared to a $2.5 million loss during the same period in 2023. The change year-over-year is primarily due to a larger increase in the Company’s common stock price during the nine months ended September 30, 2024 as compared to the increase during the same period of 2023. The increase was also due to an $8.0 million loss contingency recognized for a litigation matter, for which there was no comparable cost in the same period of 2023. The increase was partially offset by a gain of $1.3 million recognized as a result of the sale of the Company’s joint ventures. Please refer to Note J – Commitments and Contingencies, Note D – Fair Value of Financial Instruments and Note P – Joint Venture of the accompanying notes to the condensed consolidated financial statements for additional information related to litigation matters, private warrants and equity joint ventures, respectively.

Previous wording

The change in our effective tax rate for thesix months ended June 30, 2024, as compared to thesix months ended June 30, 2023 is primarily due to the change in the valuation allowance. Please refer to Note H – Income Taxes of the accompanying notes to thecondensed consolidated financial statements for additional information.

Current wording

The change in our effective tax rate for thenine months ended September 30, 2024, as compared to thenine months ended September 30, 2023 is primarily related to the Company’s mix in earnings between U.S. and foreign jurisdictions. Please refer to Note I – Income Taxes of the accompanying notes to thecondensed consolidated financial statements for additional information.

Previous wording

The net income (loss) attributable to noncontrolling interests for the six months ended June 30, 2024 and 2023 was de minimis. Please refer to Note O – Joint Venture of the accompanying notes to the condensed consolidated financial statements for additional information.

Current wording

The net income (loss) attributable to noncontrolling interests for the nine months ended September 30, 2024 and 2023 was de minimis. Please refer to Note P – Joint Venture of the accompanying notes to the condensed consolidated financial statements for additional information.

Previous wording

We use Adjusted EBITDA and Pro Forma Adjusted EBITDA to evaluate our operating performance, generate future operating plans, and make strategic decisions, including those relating to operating expenses and the allocation of internal resources which are not calculated in accordance with U.S. Generally Accepted Accounting Principles (“U.S. GAAP”) and are considered to be Non-GAAP financial performance measures. These Non-GAAP financial performance measures are used to supplement the financial information presented on a U.S. GAAP basis and should not be considered in isolation or as a substitute for the relevant U.S. GAAP measures and should be read in conjunction with information presented on a U.S. GAAP basis. Because not all companies use identical calculations, our presentation of Non-GAAP measures may not be comparable to other similarly titled measures of other companies.

Current wording

We use Adjusted EBITDA to evaluate our operating performance, generate future operating plans, and make strategic decisions, including those relating to operating expenses and the allocation of internal resources which are not calculated in accordance with U.S. Generally Accepted Accounting Principles (“U.S. GAAP”) and are considered to be Non-GAAP financial performance measures. These Non-GAAP financial performance measures are used to supplement the financial information presented on a U.S. GAAP basis and should not be considered in isolation or as a substitute for the relevant U.S. GAAP measures and should be read in conjunction with information presented on a U.S. GAAP basis. Because not all companies use identical calculations, our presentation of Non-GAAP measures may not be comparable to other similarly titled measures of other companies.

Previous wording

Adjusted EBITDA is defined as net income (loss) adjusted for interest expense, net, income tax expense (benefit), depreciation and amortization, impairment expense, acquisition deal costs, acquisition integration costs, acquisition earnout costs, purchase accounting fair value adjustment related to deferred revenue, severance costs, capital market and advisory fees, litigation-related expenses, write-off of long-lived assets, gains on sale of joint ventures, equity-based compensation, committed equity facility transaction costs, debt financing costs, and warrant liability change in fair value adjustments. Pro Forma Adjusted EBITDA is defined as Adjusted EBITDA further adjusted for the incremental Adjusted EBITDA that acquired businesses would have contributed for the periods presented if such acquisitions had occurred on January 1 of the year in which they occurred. Accordingly, historical financial information for the businesses acquired includes pro forma adjustments calculated in a manner consistent with the concepts of Article 8 of Regulation S-

Current wording

Adjusted EBITDA is defined as net income (loss) adjusted for interest expense, net, income tax expense (benefit), depreciation and amortization, impairment expense, acquisition deal costs, acquisition integration costs, acquisition earnout costs, purchase accounting fair value adjustment related to deferred revenue, severance costs, capital market and advisory fees, litigation-related expenses, write-off of long-lived assets, gains on sale of joint ventures, equity-based compensation, committed equity facility transaction costs, debt financing costs, and warrant liability change in fair value adjustments.

Previous wording

The table below presents a reconciliation of Adjusted EBITDA and Pro Forma Adjusted EBITDA to net income (loss), computed in accordance with U.S. GAAP for the following periods:

Current wording

The table below presents a reconciliation of Adjusted EBITDA to net income (loss), computed in accordance with U.S. GAAP for the following periods:

Previous wording

v. Redwire incurred expenses related to securities litigation as further described in Note I of the accompanying notes to the condensed consolidated financial statements.

Current wording

v. Redwire incurred expenses related to securities litigation, including a loss contingency of $8.0 million recognized in 2024. Refer to Note J of the accompanying notes to the condensed consolidated financial statements for additional information.

Previous wording

Our book-to-bill ratio was 1.47 for the three months ended June 30, 2024, as compared to 0.76 for the three months ended June 30, 2023. For the three months ended June 30, 2024 and 2023, none of the contracts awarded balance relates to acquired contract value.

Current wording

Our book-to-bill ratio was 0.65 for the three months ended September 30, 2024, as compared to 0.74 for the three months ended September 30, 2023. For the three months ended September 30, 2024, contracts awarded includes $21.9 million of acquired contract value from the Hera Systems acquisition. For the three months ended September 30, 2023, none of the contracts awarded balance relates to acquired contract value.

Previous wording

Our book-to-bill ratio was 1.28 for the LTM (“Last Twelve Months”) ended June 30, 2024, as compared to 1.49 for the LTM ended June 30, 2023. For the LTM ended June 30, 2024, none of the contracts awarded balance relates to acquired contract value. For the LTM ended June 30, 2023, contracts awarded includes $109.8 million of acquired contract value from the Space NV acquisition, which was completed in the fourth quarter of 2022.

Current wording

Our book-to-bill ratio was 1.25 for the LTM (“Last Twelve Months”) ended September 30, 2024, as compared to 1.38 for the LTM ended September 30, 2023. For the LTM ended September 30, 2024, contracts awarded includes $21.9 million of acquired contract value from the Hera Systems acquisition, which was completed in the third quarter of 2024. For the LTM ended September 30, 2023, contracts awarded includes $109.8 million of acquired contract value from the Space NV acquisition, which was completed in the fourth quarter of 2022.

Previous wording

The following table presents our contracted backlog as of June 30, 2024 and December 31, 2023, and related activity for the six months ended June 30, 2024 as compared to the year ended December 31, 2023.

Current wording

The following table presents our contracted backlog as of September 30, 2024 and December 31, 2023, and related activity for the nine months ended September 30, 2024 as compared to the year ended December 31, 2023.

Previous wording

We view growth in backlog as a key measure of our business growth. Contracted backlog represents the estimated dollar value of firm funded executed contracts for which work has not been performed (also known as the remaining performance obligations on a contract). Our contracted backlog includes $19.0 million and $19.3 million in remaining contract value from T&M contracts as of June 30, 2024 and as of December 31, 2023, respectively.

Current wording

We view growth in backlog as a key measure of our business growth. Contracted backlog represents the estimated dollar value of firm funded executed contracts for which work has not been performed (also known as the remaining performance obligations on a contract). Our contracted backlog includes $16.9 million and $19.3 million in remaining contract value from T&M contracts as of September 30, 2024 and as of December 31, 2023, respectively.

Previous wording

Organic contract value includes the remaining contract value as of January 1 not yet recognized as revenue and additional orders awarded during the period for those entities treated as organic. Acquisition-related contract value includes remaining contract value as of the acquisition date not yet recognized as revenue and additional orders awarded during the period for entities not treated as organic. Organic revenue includes revenue earned during the period presented for those entities treated as organic, while acquisition-related revenue includes the same for all other entities, excluding any pre-acquisition revenue earned during the period. There is no acquisition-related backlog activity presented in the table above as all acquired entities have completed four fiscal quarters post-acquisition.

Current wording

Organic contract value includes the remaining contract value as of January 1 not yet recognized as revenue and additional orders awarded during the period for those entities treated as organic. Acquisition-related contract value includes remaining contract value as of the acquisition date not yet recognized as revenue and additional orders awarded during the period for entities not treated as organic. Organic revenue includes revenue earned during the period presented for those entities treated as organic, while acquisition-related revenue includes the same for all other entities, excluding any pre-acquisition revenue earned during the period. The acquisition-related backlog activity presented in the table above is related to the Hera Systems acquisition completed during third quarter of 2024.

Previous wording

Although contracted backlog reflects business associated with contracts that are considered to be firm, terminations, amendments or contract cancellations may occur, which could result in a reduction in our total backlog. In addition, some of our multi-year contracts are subject to annual funding. Management expects all amounts reflected in contracted backlog to ultimately be fully funded. Contracted backlog from foreign operations in Luxembourg and Belgium was $94.5 million and $106.0 million as of June 30, 2024 and December 31, 2023, respectively. These amounts are subject to foreign exchange rate translations from euros to U.S. dollars that could cause the remaining backlog balance to fluctuate with the foreign exchange rate at the time of measurement.

Current wording

Although contracted backlog reflects business associated with contracts that are considered to be firm, terminations, amendments or contract cancellations may occur, which could result in a reduction in our total backlog. In addition, some of our multi-year contracts are subject to annual funding. Management expects all amounts reflected in contracted backlog to ultimately be fully funded. Contracted backlog from foreign operations in Luxembourg and Belgium was $93.2 million and $106.0 million as of September 30, 2024 and December 31, 2023, respectively. These amounts are subject to foreign exchange rate translations from euros to U.S. dollars that could cause the remaining backlog balance to fluctuate with the foreign exchange rate at the time of measurement.

Previous wording

Our operations are primarily funded with cash flows provided by operating activities and access to existing credit facilities. As of June 30, 2024, we had $30.8 million in cash and cash equivalents and $25.0 million in available borrowings from our existing credit facilities.

Current wording

Our operations are primarily funded with cash flows provided by operating activities and access to existing credit facilities. As of September 30, 2024, we had $27.8 million in cash and cash equivalents and $18.0 million in available borrowings from our existing credit facilities. Additionally, we had $15.3 million in restricted cash which includes $7.8 million of proceeds received from third-parties that is refundable except in certain limited circumstances. Restricted cash consists of a cash-collateralized standby letter of credit for a submitted proposal.

Previous wording

During the six months ended June 30, 2024, there were no material changes to the Company’s contractual obligations as presented in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2023, as filed with the SEC on March 20, 2024, that were outside the ordinary course of our business, except for certain significant future lease obligations as described in Note G – Leases.

Current wording

During the nine months ended September 30, 2024, there were no material changes to the Company’s contractual obligations as presented in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2023, as filed with the SEC on March 20, 2024, that were outside the ordinary course of our business, except for certain significant future lease obligations as described in Note H – Leases.

Previous wording

Net cash used by operating activities improved for the six months ended June 30, 2024 to $6.7 million as compared to $11.2 million during the same period in 2023. The change was primarily due to a decrease in cash used by working capital of $9.1 million and $8.8 million in the effects of non-cash adjustments partially offset by an increase of $13.5 million in cash used related to the Company’s net loss for the six months ended June 30, 2024 in comparison to the same period in 2023. The decrease in cash used by working capital is primarily related to an increase in accounts payable and accrued expenses of $4.8 million and a decrease in accounts receivable of $10.0 million, partially offset by a decrease in deferred revenue of $8.5 million and an increase in contract assets of $6.4 million. The changes in contract assets, accounts receivable and deferred revenue were primarily driven by the timing of billable milestones during the six months ended June 30, 2024 compared to the same period in 2023. The increase in accounts payable and accrued expenses is primarily a result of timing of payments and invoice receipt.

Current wording

Net cash used in operating activities increased for the nine months ended September 30, 2024 by $10.0 million as compared the same period in 2023. The change was primarily due to an increase of $28.1 million in cash used related to the Company’s net loss for the nine months ended September 30, 2024 in comparison to the same period in 2023, partially offset by a decrease in cash used by working capital of $11.6 million and increase of $6.6 million in the effects of non-cash adjustments. The decrease in cash used by working capital is primarily related to an increase in other liabilities of $10.6 million and a decrease in accounts receivable of $14.5 million partially offset by a decrease in accounts payable and accrued expenses of $5.0 million and deferred revenue of $7.4 million and an increase in contract assets of $8.8 million. The changes in contract assets, accounts receivable and deferred revenue were primarily driven by the timing of billable milestones during the nine months ended September 30, 2024 compared to the same period in 2023. The decrease in accounts payable and accrued expenses is primarily a result of timing of payments and invoice receipt and the increase in other liabilities is primarily related to the loss contingency recognized related to a litigation matter. Please refer to Note J – Commitments and Contingencies of the accompanying notes to the condensed consolidated financial statements for additional information related to litigation matters.

Previous wording

Net cash provided by investing activities for the six months ended June 30, 2024 was $0.5 million, as compared to net cash used of $2.5 million for the same period in 2023, resulting in a $3.1 million decrease in the use of cash year-over-year. The change was primarily due to net proceeds of $4.6 million received from the sale of the Company’s joint ventures, partially offset by an increase in capital expenditures related to licensed software for internal-use and property, plant and equipment.

Current wording

Net cash used in investing activities decreased by$2.2 millionfor the nine months ended September 30, 2024, as compared to the same period in 2023. The change was primarily due to net proceeds of $4.6 million received from the sale of the Company’s joint ventures, partially offset by an increase in capital expenditures related to licensed software for internal-use and property, plant and equipment and cash used, net of cash acquired related to the Hera Systems acquisition.

Previous wording

Net cash provided by financing activities was$6.9 million during thesix months ended June 30, 2024, as compared to net cash used in financing activities of $3.4 million during the same period in 2023, resulting in a $10.4 million decrease in the use of cash year-over-year. The change was primarily due to an increase in net proceeds received from debt of $7.0 million during the six months ended June 30, 2024, compared to net repayments of $2.2 million in the same period in 2023 and proceeds of $0.5 million received from the exercise of vested stock options and shares purchased through the ESPP for which there is no comparable activity in the same period in 2023. The increase in proceeds received from debt was driven primarily by increased draws from the Adams Street Revolving Credit Facility during the six months ended June 30, 2024, compared to the same period in 2023.

Current wording

Net cash provided by financing activities increased by$38.0 million during thenine months ended September 30, 2024, as compared to the same period in 2023. The change was primarily due to an increase in net proceeds received from debt of $34.8 million during the nine months ended September 30, 2024, compared to $3.8 million in the same period in 2023, advances from third-parties of $7.8 million and proceeds of $0.5 million received from issuance of common stock for the exercise of vested stock options and shares purchased through the ESPP, compared to $0.1 million in the same period in 2023. The increase in proceeds received from debt was driven primarily by increased draws from the Adams Street Revolving Credit Facility during the nine months ended September 30, 2024, compared to the same period in 2023.