Good day, and thank you for standing by. Welcome to The Kratos Defense & Security Solutions First Quarter 2023 Earnings Conference Call. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question-and-answer session. To ask a question during the session, you'll need to press star one one on your telephone. You will then hear an automated message advising your hand is raised. To withdraw your question, please press star one one again. Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker today, Marie Mendoza, Senior Vice President and General Counsel. Thank you. Good afternoon, everyone, and thank you for joining us for the Kratos Defense & Security Solutions first quarter 2023 conference call. With me today is Eric DeMarco, Kratos's President and Chief Executive Officer, and Deanna Lund, Kratos's Executive Vice President and Chief Financial Officer. Before we begin the substance of today's call, I'd like everyone to please take note of the safe harbor paragraph that is included at the end of today's press release. This paragraph emphasizes the major uncertainties and risks inherent in the forward-looking statements we will make this afternoon. Please keep these uncertainties and risks in mind as we discuss future strategic initiatives, potential market opportunities, operational outlook, and financial guidance during today's call. Today's call will also include a discussion of non-GAAP financial measures, as that term is defined in Regulation G. Non-GAAP financial measures should not be considered in isolation from or as a substitute for financial information presented in compliance with GAAP. Accordingly, at the end of today's press release, we have provided a reconciliation of these non-GAAP financial measures to the company's financial results prepared in accordance with GAAP. With that, I will now turn the call over to Eric DeMarco. Thank you, Marie. Kratos completed Q1 on track for 2023 as a transition year to expect its sustained future year-over-year organic growth, increasing profit margins and cash flow as our company realizes the benefits of the investments we have made and we transition from development to production and delivery in certain areas. Kratos is also on track for increased margins and cash flow in Q3 and Q4 of this year as our revenue mix continues transitioning from older firm fixed price contracts, where we were unable to pass on significant inflation and increased costs to newer, more recent contract award-related revenues, where we negotiated higher rates and costs with our customers, as included in our Q1 and last twelve-month 1.1 to 1 book-to-bill ratio. Though the supply chain still has challenges, we have begun to see some stabilization and reduction in lead times and pricing, which is also providing confidence in our future forecast. Highlights since our last report to you include the 2024 DoD budget request was released along importantly with the Future Years Defense Program, or FYDP, or also referred to as the five-year defense spend plan, both which include new or increased funding and growth, including in the space of satellite, hypersonic, missile system and defense, strategic deterrence, microwave electronics, and drone areas. In the drone area, the USAF has requested approximately $6 billion over the FYDP period, reflecting an increased prioritization, with it being reported that the Air Force is looking to ultimately procure up to 2,000 drone systems. That Secretary Kendall commented that drones or uncrewed aircraft are now considered essential to the Air Force's future. It was also reported that the Air Force stated that the expected drone cost would be a fraction of the cost of an F-35, or approximately $20 million per missionized system. It was reported that an affordable mass concept is a key element behind the Air Force's advanced drone initiative. We believe the Kratos tactical jet drones flying today are recognized as the most capable and affordable in their class, with the key reason being that we lever off of the same supply chain partners, vendors, and teammates which support the production of approximately 150 made-in-America Kratos jet drone aircraft annually, which also reduces risk to our tactical drone customers. Kratos' disclosed price points for our tactical jet drone systems range from approximately $450,000 for Tactical Firejet or Air Wolf to approximately $6.5 million for a Valkyrie at low quantities. We also believe that Kratos' Ghost Works is the recognized leader in the rapid development and delivery of low-cost tactical jet drones, including Kratos' Valkyrie, where Ghost Works went from a clean sheet of paper to successful first flight in 30 months and additional new systems that Kratos Ghost Works is currently working on. Accordingly, we believe that if a competitor elected to enter this class of affordable tactical jet drones, they're at least three to four years away from first flight and who knows what cost to the customer. Since our last report to you, both the U.S. Navy and the Marine Corps have indicated their increased prioritization for high-performance jet drones, including with the Navy reportedly stating that they envision up to 60% of the future Navy air wing being comprised of drones. It's now clear that the Pentagon is planning a future that includes significant numbers of affordable high-performance jet aircraft or systems, and the funding is now being requested to achieve this vision, as reflected in the 24 budget request and the FYDP. Since our last report to you, Kratos has received additional tactical drone contract awards, including as related to Kratos Valkyrie, and we are in negotiations for additional contract awards, which we expect to receive in the coming months. Since our last report, it was reported that one mission the Marine Corps Valkyries are focusing on include electronic warfare effects in conjunction with the F-35 and certain assault support platforms, all under the Penetrating Affordable Autonomous Collaborative Killer program. Kratos has also recently received an additional USMC Valkyrie contract award related to sensor payloads, mission system, and subsystem integration. Kratos is also now under customer-funded contract related to the Valkyrie for the development and testing of autonomy and pilot vehicle interfaces, ground and flight operations, and additional Valkyrie test flight related events. Since our last report to you, Kratos has continued to have successful tactical drone flights as we evolve the system with our customers. Over the balance of this year, Kratos jet drones are scheduled to perform numerous under contract, customer-funded flights. Kratos is the only company with affordable, high-performance, American-made jet drones flying today, and we are focused on continuing to increase and expand our first to market leadership position with our customers. While other companies and potential competitors are imagining things with PowerPoints, renditions, models, and surrogates, Kratos is currently flying and has been flying for several years under U.S. government-funded contracts here in the United States. At the Oklahoma Burns Flat Range Facility, Kratos' unmanned systems and our Ghost Works can fly our drones and exercise systems, including new yet to be disclosed systems that Kratos' Ghost Works is focused on and that the competition or others know nothing about. Just this week, Kratos had a very successful test event at the Burns Flat Test Range with a new system which I am confident that neither our competition or adversaries are aware of in any way. We are completing the first serial production run of 12 block one Valkyries in Oklahoma City. We have begun the second production run of 12 additional block two Valkyries, it now looks like at least half of the block twos will be block two Bs, incorporating a new additional capability based on very recent specific customer input. Since our last report to you, Kratos' Unmanned Systems was awarded a shared $400 million ceiling IDIQ contract for research and development for the Advanced Aerospace Systems Technology Research Program. This contract has multiple awardees with the primary objective of the program to conduct research toward the development, demonstration, integration, and transition of new aerospace vehicle technologies, designs, and integrated systems that will provide advanced capabilities to the Department of the Air Force. The Advanced Aerospace Systems Technology Program contract award is yet another example of Kratos and our Ghost Works continuing to have success competing for and winning certain of the most advanced capability opportunities for U.S. national security. Based on information included in the 2024 DoD funding documents in the FYDP, statements made by the government customer representatives, additional information we have received, and the progress we've continued to make, we remain confident in the future success of Kratos' tactical drone business. Kratos' target drone business is performing well, driven by Kratos' producing and delivering what we consider to be the highest performance threat representative jet drone systems in the world with our primary customers including the United States Navy, Air Force, and Army. The global recapitalization of strategic weapon systems and the requirement to test and train on these weapon systems is providing a strong macro level catalyst for Kratos' target drone business. Kratos' space, satellite, and cyber business, our company's largest, continues to receive new program awards, including with Kratos' first to market virtualized and software-based OpenSpace family of satellite ground communication systems. I encourage you to review today's release on recent milestones and progress Kratos' satellite business and our OpenSpace product and system family has achieved, including as disclosed at the recent National Space Symposium. Since our last report to you, Kratos' satellite business, as a key team member to our prime partner, was notified that the team has been successful on a large new multi-billion dollar satellite constellation program, which includes Kratos' OpenSpace, which program could ultimately be worth several hundred million dollars to Kratos. We believe that this is another representative example of Kratos' disruptive technology-based first to market strategy success and our leadership position with our OpenSpace system. The days of the ground satellite segment trailing space capabilities are ending with a new wave of ground system advances, including Kratos' OpenSpace, that can support multi-orbit constellations and the specifications that both 5G and the new generation of high bandwidth satellites require, and also the interoperability needed for the new breed of flexible low Earth orbit constellations to achieve scale and broad market growth. The ground system segment ecosystem, including electronically steerable antenna and modem companies to integrators and network providers, are all leaving legacy siloed standalone ground systems and transitioning to software-defined and based virtualized architectures. Exactly where Kratos' first to market OpenSpace systems are positioned and why we are so excited about Kratos' space and satellite business going forward. There are thousands of satellites planned to be placed into orbit into the future, and this is expected to be a key macro and industry catalyst for Kratos' space and satellite business, along with our OpenSpace software suite. In Kratos' C5ISR business, the Sentinel program, with Kratos' key strategic partner, Northrop Grumman, is expected to be one of Kratos' largest, fastest-growing, and most important programs for the foreseeable future. Additional well-funded priority programs in Kratos' C5ISR business include SCAR with the Space Control Network, Patriot, HIMARS, THAAD, IBCS, which has now received full rate production, SHORAD, Enduring Shield, TITAN, certain other space and satellite programs, and counter-UAS programs and systems, which are very relevant in what's going on in the world today. Kratos' turbine technologies continued its outstanding performance in Q1, with KTT being one of Kratos' fastest-growing and most profitable businesses, with the multibillion-dollar B-52 re-engine program being one of our most important. Additional current growth areas for KTT include supersonic and hypersonic propulsion systems and space and launch-related propulsion systems. The significant increased funding in the FY 24 budget request and FYDP for drones and also missiles and powered munitions, we expect to be a macro industry growth opportunity and driver for KTT and our engine business. Kratos' rocket systems business is also expecting future growth, including as related to our products, technologies, and systems for hypersonic, missile defense, target, test, and evaluation systems. For example, our rocket system business customer-funded launch manifest and schedule for the next 24 months is at its strongest in our history and is representative of Kratos' trusted, disruptive position as a go-to rapid critical launch and other related system provider. Kratos' internally funded and soon-to-be first-to-market Zeus propulsion and Erinyes hypersonic systems remain on schedule. We are far enough along now to disclose to you an additional Kratos vehicle, Dark Fury, now also scheduled for flight next year. Kratos' microwave electronics business, which supports space, missile defense, radar, communication, and other systems, also started off 2023 well, continues to have record, near-record backlogs, and is forecasting future growth and increasing margins. We believe our strategy of making internal investments in technologies, products, and systems to be first to market with relevant offerings that address real needs and requirements now and today for our customers is demonstrating success. As I said before, Kratos doesn't sell renditions, pictures, or hoped-for, maybe someday products at who knows what cost, like certain of our competitors with a demonstrated history of doing this, then failing in future execution. Kratos brings real products that actually work with actual costs and pricing to the customer. We believe this strategy is a winner. At Kratos, affordability is a technology. Better at some later day, if ever, is the enemy of good enough now. We believe that we are at the beginning of a sustained year-over-year up and to the right revenue growth trajectory, with increasing profit margins and operating cash flow. With the number of large new programs we have received, additional programs we expect to receive, our backlog and near-record opportunity pipeline at approximately $10 billion, we are focused internally on operations and execution. Accordingly, we do not anticipate making any acquisitions of size for the foreseeable future. Our ability to hire, obtain, and retain qualified engineering, technical, manufacturing, and other personnel remains absolutely key to Kratos achieving our objectives and future financial forecast. We are laser-focused on this and successful execution. With that, I'll turn it over to Deanna. Thank you, Eric. Good afternoon. As we have included a detailed summary of the first quarter financial performance, as well as the second quarter and full-year 2023 financial guidance in the press release we published earlier today, I will focus on the highlights in my remarks today. Revenues for the first quarter were $231.8 million, up from $196.2 million in the first quarter of 2022, reflecting an 18.1% increase. Excluding the impact of the SRE acquisition, which contributed $12 million in revenues in the first quarter of 2022, Kratos' consolidated revenue grew organically 12%, including a 22.5% organic revenue growth rate in our space, satellite, and cyber business. Programmatic ramps in production have also resulted in organic revenue growth realized in our C5ISR, Turbine Technologies, and microwave product businesses. Included in cash flows used in operating activities for the first quarter of 2023 are working capital requirements to support the revenue growth, as well as continued advanced purchases of inventory in an effort to mitigate supply chain disruptions and delays. Also included in our working capital uses are continued internal investments of approximately $4 million related to non-recurring engineering costs to complete new rocket systems and hypersonic and related products, including for Kratos' Zeus and Erinyes systems, and continued development of certain software products supporting our OpenSpace platform. Our contract mix for the first quarter was 71% from fixed price contracts, 23% from cost plus contracts, and 6% on time and material contracts. Revenues generated from contracts with the U.S. Federal Government during the quarter were approximately 69%, which includes Revenues generated with the DoD, non-DoD, federal government agencies, and FMS contracts. In the first quarter of 2023, we generated 11% of revenues from commercial customers and 20% from foreign customers. We continue to make progress in our hiring and retention of skilled technical labor, with a notable net increase in headcount of 19+, an additional 17 clearing the pre-hire process since the end of 2022 in our C5ISR business, and a total increase in consolidated headcount of 58 from 3,645 at year-end to 3,703 at the end of the first quarter. Moving on to financial guidance. Our second quarter and full year 2023 financial guidance we provided today includes our current forecasted business mix and our assumptions related to the expected continued impact of challenges related to obtaining and retaining qualified personnel, supply chain disruptions, inflation, and related expected cost and price increases that are currently and expected to continue impacting both the industry and Kratos. Throughout 2022 and in the first quarter of 2023, Kratos has experienced continued impacts, although at a more stabilized rate from supply chain disruptions, including cost increases for materials, supplies, transportation, and utilities, and fulfillment delays causing increased costs and inefficiencies related to manufacturing, including in our indirect manufacturing rates. As our contract mix is predominantly firm fixed price, we are required to absorb these additional costs until the period of performance is completed on existing backlog and new contracts are negotiated with current pricing. Accordingly, as we transition to new contracts over 2023, we expect margin rates to continue to be lower in the first half of the year as the period of performance on existing backlogs is executed, with an expectation of margin improvement in the second half of the year as a mix of the newer recently priced contracts are expected to increase. Our revenue guidance for the second quarter of 2023 reflects an approximate 3% to 7% increase over the second quarter of 2022. Based upon funding, production, delivery, and execution schedules, second half 2023 revenues are expected to ramp and be sequentially greater than the first half of 2023, with margins expected to expand in the second half of the year on increased revenue volumes and based on the expected mix of revenues, including new fixed-price contracts, which include more recent cost estimates. Estimated incremental ramps in production in the second half of 2023 are expected to be driven by a handful of key programs in our space satellite and training C5ISR, unmanned systems, and defense rocket businesses, many of which Eric highlighted previously. Operating cash flows are expected to be stronger in the second half of the year as well, driven by the expected expansion in margins and the expected conversion of inventory builds from FY 2022 and for the first half of 2023 and based upon estimated milestone payment schedules. Eric? Thank you, Deanna. With that, we'll turn it over to the moderator for any questions. Thank you. As a reminder to ask a question, please press star one one on your telephone and wait for your name to be announced. To withdraw your question, please press star one one again. Our first question comes from Michael Ciarmoli with Truist Securities. You may proceed. Hey, good evening, guys. Thanks for taking the questions. Eric or Deanna, just on the guidance, the significant increase in operating income, I think raised the midpoint by 38%. You know, there are some other moving parts in there, but, I mean, is that all tied to kind of what you just talked about repricing some of the contracts? Or... Cause I noticed there were some other changes with stock comp and the net of it is we still have the same EBITDA, but can you walk me through that? Yes. Michael, it's predominantly the estimated amortization, depreciation, and stock comp that when we first came into 2023. That those changes have been flowed through in our current guidance. The EBITDA remains intact with where we were before. Those non-cash items impact those three categories and then therefore impact the operating income just the way it calls out through the income statement. Okay. Okay. Then Eric, you know, obviously a lot of commentary helpful there. I mean, I guess we have the Air Force making the ultimate decisions here with NGAD. It sounds like your customer activity is moving a bit faster than sort of the highest level and what Secretary Kendall's thinking. I mean, what's the ultimate goal of these customer flights? I mean, how do we think about programs of record? Does everything sort of roll up under NGAD? Or just how should we think about the landscape right now? I think the way to consider the landscape is budgetary and future amount of budgets going forward and our services having to have enough aircraft to address multiple global threats that are either near peer or they're already peer threats like Russia and China. I believe the Pentagon has determined, as reflected by the 24 budget request and more importantly, the fight of, and then commentary I tried to give some examples of, that the way to do this is with high-performance jet drones. In addition to addressing the quantity issue, the weapon systems that the adversaries have are increasing lethality. The drones keep our pilots, because we value human life, some of our adversaries do not keep them out of harm's way, et cetera. The way that I think about it is, and the way I personally think about it is, there is a macro shift happening to a brand-new system. High-performance jet drones with augmented autonomy, or if you will, artificial intelligence that can carry weapons, that can do SEAD, they can do DEAD, they can do DA, all types of missions. I think the funding, the multiple billions in the FYDP are representative of that. I think that's the best way to think of it, that this is finally happening. It's happening in a big way, and it's happening across every service branch. Okay. Last one, just kind of on that topic, and I'll jump back in the queue. I mean, you threw out kind of the $20 million price point, you know, that Secretary Kendall mentioned a couple weeks back. I mean, are you thinking about going at this market as a prime contractor, or would you be better served being a sub to a larger entity in providing an airframe and letting someone else missionize it and take on, you know, all those associated risks? Right. It... Michael, it very well may turn out to be both. Got it. Let me give you an example. For example, we are a prime with the United States Marine Corps right now. We're a prime. All right? We're a prime with another customer we haven't talked about. We're a prime. If the best business answer for Kratos and all of our stakeholders is for us to partner with someone and not be the prime, but be in a partner, we will absolutely consider doing that. Okay. Got it. All right, I'll jump back in the queue. Thanks, guys. Okay, thank you. Thank you. Our next question comes from Mike Crawford with B. Riley Securities. You may proceed. Thanks. It's nice to see the uptick in bookings in unmanned systems that I believe is related not just to the Valkyries you sold, but also Targets, including a plus-up for the Navy SSAT. Could you ready set what amount of revenue you expect to get from Targets in coming years? Related to that would be the annual cadence of SSAT drones, which I think, if we go back like five years ago or so, we thought it might be a little higher than it is now, even with this most recent plus-up. Mike, it's consistent with what we guided to when we provided 2023 initial guidance. Approximately a flat full year consolidated unmanned systems with approximately $40 million-$45 million related to tactical drones, primarily Valkyrie related, with the balance of that to Target drones. Right. Beyond this year, just like in general, where you see, say, targets going, you know, several years from now. Over the next two years, as reflected by the book to bill ratio, the 1.9 to 1.0, which as you pointed out, Mike, correctly, was substantially Target drones. We expect to see Target drone growth now. It is being driven primarily what's going on over in Europe and the Ukraine, and with additional countries joining NATO, surface air weapon systems coming back into vogue to defeat drones. Our Target drones are great representative drones of the bad guys. Our Target drone business, we think is going to grow very nicely because of what's going on with world events. I'm going to remain extremely cautious on the tactical side, as I have for the last couple of quarters. We're literally we're gonna report it as it factually happens, not as we're told or it may be stated by others. Okay. Thank you. Just switching topics a little bit. There's this, the $400 million IDIQ from the Air Force Research Laboratory you mentioned, General Atomics, Lockheed, Northrop, Aurora won along with you. Do you expect, like, all of those funds to be deployed on that kind of shopping list? Do you have an expectation for, you know, what percent of that you're gonna fight to get whatever you can, but that you might get? Yep. I obviously I'm the CEO, I drink the Kool-Aid, but I look at this as very similar to the Skyborg program. Skyborg program came out, and there were like 12 or 15 awardees. In the end, there were three of us that mattered, and one of them was Kratos. I see the exact same thing happening here, and I think that's reflected by we've already received funding under the $400 million, and we're moving forward. I think we're gonna do just great, very similar to how we've done, for example, with Skyborg. Okay, thank you. One last one, just switching to space. Of all this revenue, how much would you characterize as, say, OpenSpace software revenue? Kind of related to that, let's just take, like, the BlueHalo contract where you're, I think, gonna recognize $160 million of revenue over eight years, whether that's something that's more of a straight line or based on milestones or anything you can tell us regarding those points. Right. The second one I'll go first. Most of the programs we're on, including the one you mentioned, is like a bell curve. It starts out on the bell curve going up, and let's use, I think, seven or eight years, we'll use the example you gave. For the first couple of years, it kept going on slow, in the next couple of years, it ramps up quickly to the top of the bell curve. Once the majority of the systems are deployed and you start maintaining and sustaining them, you start coming down the bell curve. That's very similar to what we're what I believe we're gonna see, for example, with Sentinel, with Northrop. We're gonna see an incredible ramp in the next couple, three years. Incredible, which is gonna be one of our biggest revenue drivers. We're gonna go up the ramp. This is the development phase or EMD. After that couple, three years, then it's gonna start coming down the curve. I can say now, because it's been announced, LRIP, which is the next phase on Sentinel, for example, is supposed to be awarded in 2026. That bell curve, which will be bigger, will start going up, very similar to what's going on in our space business. We're getting layers of these bell curves going, which is what we wanna do and which is why we're confident in the year-over-year for the next several years organic growth trajectory, 'cause we're now layering these bell curve trajectories of these programs on top of each other. On the first part of your question, Mike, it's let me just say it right up front. We would not be winning any of these large programs in the space sector without OpenSpace. We wouldn't be. We are now either the system provider or a major subsystem provider versus a component provider. All right? Where we're the system provider or the subsystem provider, we're providing in addition to OpenSpace and the software. We're of course, continuing to have to provide some of the legacy hardware because that's what the customers are comfortable with, especially in very specialized or unique situations, but also the antennas. The antenna business we acquired several years ago has turned out to be a grand slam home run. It's embedded within it. I think the part of the point where you were going, are we going to start seeing margin increase? The answer to that is yes. We're starting to see that now. We're seeing it. You're going to see it more and more as this year goes on because the software content, and we're actually licensing the OpenSpace as part of these programs, is becoming more significant as we win more of them. The margins are going to lift with that licensing increase on OpenSpace. Okay. Excellent. Thank you very much. Okey-dokey. Thank you. Our next question comes from Seth Seifman with JP Morgan. You may proceed. Thanks very much. Good afternoon. Why don't we start off asking about unmanned and just, you know, thinking about the trajectory for the year, obviously, there's a lot of growth to come. You know, we can see it in the backlog. You know, it started off down in the first quarter. Just is it kind of a, you know, a gradual walk higher through the year in unmanned? Is it that, you know, before certain work gets done, it's gonna take, you know, into the back half? Yeah, Seth, it's a gradual walk from Q1 to Q2 sequentially, and then we'll see a more notable increase into Q3 and Q4. Right. Okay. That's based, yeah, based upon the execution and the programmatics involved with the backlog that we have. Great. Okay. Cool. You know, similar question about cadence, maybe, just in terms of cash. I mean, the, the one really notable item that stood out was just the receivables in the quarter, and I assume those, you know, those get collected, through the year. Just is there, you know, if you help us out a little bit on the cash trajectory. Sure. I, as I have mentioned previously, the first half we see as less of a cash flow generation, and that stepping up into the second half, that's going to be based upon funding from a working capital perspective, some of the growth, some of those receivables. It's as we've seen 12% organic growth, that's being funded through that receivable line. Based on the milestone schedules and payment schedules, we expect to see some of that coming back through in the second half, as well as from an inventory perspective, since we are continuing to build inventory across all of our business units. Okay. Okay, great. Maybe if I could just sneak in a last one a little bit more qualitatively. On the supply chain situation, you know, it sounds like, you know, better, but and maybe a little bit more stable, but not quite there yet. I guess in terms of, you know, what inning you think that we're in and where you feel like maybe we'll end the year in terms of these, you know, the various supply chain/inflationary and labor challenges that are out there? Overall, I think we're in the sixth or seventh inning. Okay. By the end of this year, I think the game will be over. That's assuming that, you know, that we don't blow the government up, and we don't fund the treasury and everything. I'm assuming that the children come to resolution. I think we're in the sixth or seventh inning. I think that we'll be out of the game by the end of the year. In the specialty metals area, the composites, the resins, et cetera, we've seen definite stabilization, definite normalization, definite price stabilization. In some pockets of the electronics and processing areas, it's still terrible. Okay? Mm-hmm. Seth, I think as I said on the last call, it's stabilized at terrible, so we can deal with a stable situation even if it's terrible because it's stabilized. Yeah. Excellent. That's very helpful. Thank you. Yep. Thank you. Our next question comes from Sheila Kahyaoglu with Jefferies. You may proceed. Good afternoon. Hey, Eric, Deanna, how are you? Hi, Sheila. Good. Hi. I wanted to follow up on Seth's question actually on the decline in KUS. Kind of what was that due to? Was that OBSS? When you think about the programmatic ramp in 2023 and 2024 with the funding profile, Eric, how does that kind of, you know, how do we see that skyline shape out? Right. On the first part of the question, Sheila, nothing has been announced by any customer yet on the step down. As we said on last quarter's call, we said that we were on a tactical drone program. We expected to receive additional funding for 2023, but the customer did not have that funding, and so we did not move forward. Until additional information is put out by a customer, I just can't say any more. I don't wanna get ahead of anybody. You know what I mean? Sure. Okay. Sheila, what was the second part of the question? Just on, like, the 2023, 2024 ramp, what programs should we see, you know, kind of the biggest growth drivers? If you could update on the Skyborg program. Oh, yeah. The biggest growth drivers are gonna be GBSD Sentinel. That's gonna be one. In the target drone area, it's gonna be FSAT. There's another program we have that we don't talk about, and I cannot talk about, that is going into full rate production now. In the space area, SCAR, the Space Control Network program. What we're doing with Intelsat on their stuff. In our engine area, in KTT, we are on a program on propulsion systems, including supersonic engines. That program is right now is a very strong growth driver in addition to the B-52 re-engine program. As we head into next year, those are all 23s. As we head into next year, in addition to each of those, and this was the layering on I was talking about, I expect IFPC, Enduring Freedom, where we're doing all the ground equipment to be a step function growth driver. We expect to receive LRIP on that later this year. You may have seen Northrop Grumman has now received full rate production on IBCS. That's our program. We expect that one, that's a multi-billion dollar program, as been reported. That is going to be a significant growth driver next year. Mayhem is expected to be a significant growth driver for Kratos next year. MACH- TB, which we've won, is expected to be a significant growth driver for Kratos next year. Those are the main ones that we have. We're under contract. They're programs of record, and they are gonna be the next step function 2024 over 2023. Thank you very much. Okey-dokey. Thank you. Our next question comes from Ken Herbert with RBC. You may proceed. Yes. Hey, good afternoon, Eric and Deanna. Afternoon. Hi, Ken. Hey, I wanted to ask, Deanna, maybe about the margin guidance, adjusted EBITDA. It looks like it steps down a little bit or flattish it down slightly in the second quarter, but then consistent with your comments, you know, a nice step up into the back half of the year. Is that all as a result of mix from, you know, better priced contracts? I guess my question is really, are there other levers you can maybe pull? If any of these newer contracts or programs face any delays, does that put the full year, you know, margin and EBITDA outlook potentially at risk? It's two things, Ken. It's mix related to the fixed price contracts, the newer fixed price contracts coming on, and then mix as far as the mix of what the end product of what we're delivering. If it's more software content or licensing, that would then drive margins as well. It's twofold with both those pieces. Okay. assuming, you know, assuming the mix holds the same from a product standpoint, I guess that can be a nice tailwind even if there are m aybe delays on the ramp of some of the fixed price side. That's correct. Yes. Okay. Then as I think about the space business, I mean, you obviously called out nice growth, I think a little better growth than what we heard from a number of the primes. How does that business in general move through the second quarter into the back half of the year? Are you expecting to see similar growth through the rest of the year that you saw in the first quarter? Yes, we are, with substantially increased margins. It ties into your question and the question earlier on soft that Mike Crawford asked on the software, that these contracts that we've won, that have been awarded, that we're executing on, they are ramping. We're going up the bell curve. As we go up the bell curve, as Deanna mentioned, scheduled in the deliveries in the second half of the year are license fees for software and software products, which will be increases in margin embedded in those programs for us. Perfect. I'll stop there and pass it back. Thanks, Eric. Thanks, Deanna. Thank you. Thank you. Thank you. Our next question comes from Pete Skibitski with Alembic Global. You may proceed. Good afternoon, guys. Eric, talking to Sheila about your growth programs in 2024, you mentioned Mayhem and MACH- TB, which just I just wanted to run a few things by you. Correct me if I'm wrong, but those are in DRSS, I think. Could you maybe level set us? You know, how big a revenue unit was DRSS last year and with Mayhem and MACH- TB, and I don't know if Dark Fury is in there too or not, how big is that gonna be, you know, 2024, 2025? Right. Right. Last year in 2022, think of our rocket business as somewhere around $90 million in the ballpark. We're expecting that over the next couple years to get to $150 million-$160 million. That's quite a ramp, yeah. The two you mentioned, mayhem and MACH- TB, are the drivers there predominantly? They're not actually. They're two big ones for next year. We are on some. You know, it ties into what I said about our launch manifest. Our launch manifest this year and next year, Kratos rocket systems, multiple one stage, multiple stage with all different types of payloads for all different types of missions is incredible. That is the number onA growth driver for RSS that we see right now. Those are in the back, if you will. Okay? On top of those is the test bed, the Mach test bed program you mentioned, and the Mayhem system program you mentioned. another aspect of it, a way to think about it is literally every hypersonic program that's out there we are on relative to the materials, coatings, fluid dynamics, and things like that. If we're not on every one, we're on substantially every hypersonic program there is. This is kind of what, Southern Research brought you along with some of your organic capabilities, is that right? That's right. That's right. Southern Research is, it's not a home run, it's a grand slam home run. This is truly one plus one equals three. Okay. Did I say that right? Dark Fury, is that gonna be another kind of, you know, test launch vehicle for you to test missile defense systems? Is that... Did I get that wrong? No, it's not that. It's the cousin of [audio distorted], and that's all I can say. Okay. Okay. Last one for me. You touched on it real early, you know, should we worry about 2023 guidance in the context of the debt ceiling or a full year CR, or do we worry more about 2024 with those type of events? I haven't. I'm being very sincere here, I'm not being flippant. I haven't been through a government default, so if that were to happen and a debt ceiling thing were to happen, my tummy tells me that would be yucky poo-poo for this year. That's what I'm saying. Okay? A continuing resolution, okay, you know, it just depends on how things fall. Right now, if there was a three-month continuing resolution, October 1st, 2023 to December 31st, 2023, I don't see that impacting us significantly in 2024 at all. Okay. Okay. Okay. Thank you. Appreciate it. Okay. Thank you. Our next question comes from Peter Arment with Baird. You may proceed. Yeah, thanks. good afternoon, Eric and Deanna. Hey, Peter. Good afternoon. Hey, Eric, maybe just a capacity question. There were some comments, you know, this or last month on kind of the tripling of the workforce in Oklahoma City. You know, could you give us kind of an update of kind of the capacity that's in place there? Ultimately, I know you mentioned some comments about, you know, the tactical drones, you know, with the next block. How are you framing the active kind of production lines with the target and the tactical there? Yep. So, I'm glad you asked this question, by the way, Peter. Resourcing and the people side, at last quarter's call, I said it was improving. It's significantly improved since last quarter. It continues to improve. The number of qualified people, qualified in the engineering, the technical, the manufacturing, including those that can get high-level security clearances, has been increasing. All right? A big, a big part of that, okay, I believe, based on, you know, we stay on top of this, is one of the big primes out there had a major layoff of several hundred people, almost 1,000. One of our big drone competitors, they had a massive layoff, hundreds of people in the past 60 days. One of our big drone competitors, which is providing us an incredible opportunity to help, especially for individuals that want to hypothetically move out of California and go to Oklahoma. The backdrop has improved precipitously for us over the past six months, including the last three months. Now to your question in Oklahoma. In Oklahoma, we are producing three systems. two of them I can talk about, Valkyrie and Tactical Firejet. All right? The way we set the facility up is there was a base facility and then two adjacent facilities of almost equal size, think about 100,000 square feet each, where we had options or first right of refusal to expand in those as the business expanded. We have been exercising those options, and we have been moving into them. The next step for us, and I think I didn't mention it last call, but a couple of calls ago, is the long lead item for us to go to the next step is gonna be on an autoclave, an additional autoclave. If things come together the way I believe they're gonna come together, late this year or early next year, I'll be communicating to you that we have placed the order. I think it's a nine-month long lead. The next autoclave is the next step up at the Oklahoma facility. That's helpful. Thanks. Thanks, Eric. Just, Deanna, just a quick one. On the, you know, working capital is pretty negative this quarter. I know you kind of said it builds throughout the year. Can you just give us a little bit of what you, how you see the working capital profile, you know, for the balance of the year? Thanks. Sure. I see that use of working capital continuing in the second quarter and then to start improving in the third quarter and improving significantly in the fourth quarter. That's helpful. Thanks so much. Thanks, sure. Thank you. As a reminder, to ask a question, please press star one one on your telephone. Our next question comes from Joe Gomes with Noble Capital. You may proceed. Good afternoon, thanks for taking my questions. Hey, Joe. Hi. Just real quick. I apologize if I missed this. You know, last quarter, Deanna, you talked a little about, you know, the continuing resolution that was from last year, was gonna negatively impact the first quarter. Just wondering what was the size of that impact in the quarter? Yeah. That reflects what some of the awards were that were delayed. That then impacted what our revenue guidance was for the quarter. I don't have a specific value for what that impact was since we looked at that a while ago. It probably, if my recollection is correct, it was probably in the $15 million-$25 million range on the top-line side. Okay. Thank you for that. Eric, obviously, a lot of the stuff you talk about today in the unmanned, the satellite, the space, obviously those are gonna be the big drivers here. You do have some other, commercial, pardon me, types of products that you had talked in the past about, those self-driving trucks for the agricultural system and the truck mounted attenuators. We don't hear a whole lot about them. I'm just wondering, what's the status of some of those programs? Similar to the other question, Joe, I'm glad you asked that. Our unmanned ground vehicle business, both militarily and commercially, continues to gain momentum. A matter of fact, I think I'm probably gonna put something out. It's like we put out a summary today on OpenSpace and what happened at the Space Symposium. I'm thinking in the next month, I'm gonna put out something that'll talk, walk through the number of states that we're in now. We're on the road in states with the ATMA trucks under contract with the states. We're also now in the fields with sugar beets and with other produce. We're targeting, as I said before, we're targeting to continue the pro... This is the shortage of truckers and reduction in insurance costs, where you can have a manned truck and then follow the leader robotic Kratos trucks behind them, which we're doing. They go out in the fields. Robotically, they're loaded up with the produce. They automatically go to the processing centers, and then they distribute the product for processing. We're also right now taking a look at the mineral area. We're in stealth mode. The business is millions of dollars out in revenue. It's gonna be several millions of dollars, I think, by the end of this year. It's gonna do a step function from 2023 into 2024 based on a couple of these ones I just mentioned to you that we're under contract or under agreement with them. I'm gonna put out, I'm glad you brought it up. I'm gonna do an update on that probably at the next quarter. Thank you. We'll look forward to it, Eric. Thank you. Thanks again for taking the questions. All right. Thank you, sir. Thank you. Our next question comes from Ellen Page with Jefferies. You may proceed. If your line is on mute, please unmute. I'm not showing any further questions at this time. I'd now like to turn the call back over to Eric DeMarco for any closing remarks. Great. Thank you, sir. Thank you for joining us this afternoon. We'll be circling up with you at the end of the second quarter. Thank you. Thank you. This concludes today's conference call. Thank you for participating. You may now disconnect.