Q4 2023 Redwire Corp Earnings Call

Participants

Jeff Zeunik; Senior Vice President of Financial Planning and Analysis and Investor Relations; Redwire Corp

Peter Cannito; Chief Executive Officer; Redwire Corp

Jonathan Baliff; Chief Financial Officer; Redwire Corp

Suji Desilva; Managing Director, Senior Research Analyst; Roth Capital Partners LLC

Griffin Boss; Analyst; B. Riley Securities

Presentation

Operator

Greetings, and welcome to the Redwire Space fourth quarter and full year 2023 earnings conference call. Time. All participants are in a listen-only mode. A question-and-answer session will follow the formal presentation. (Operator Instructions) As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Jeff Zeunik, Senior Vice President, Financial Planning and Analysis and Investor Relations. Thank you. You may begin.

Jeff Zeunik

Thank you, JP, and good morning, everyone. Welcome to Radwire's fourth quarter and full year 2023 earnings call. We hope that you've seen our earnings release which we issued yesterday afternoon. It has also been posted in the Investor Relations section of our website at redwirespace.com. Let me remind everyone that during the call Radware management may make forward-looking statements that reflect our beliefs, expectations, intentions are subject to risks and uncertainties that are described in more detail on Slide 2. Additionally, to the extent we discuss non-GAAP measures during the call. Please see Slide 3, our earnings release for the investor presentation on our website for the calculation of these measures and GAAP reconciliations. As previously mentioned, I am Jeff Zeunik, Redwire's Senior Vice President of Financial Planning and Analysis, 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. Pete?

Peter Cannito

During today's call, I will take you through a discussion of our key accomplishments in the fourth quarter and full year 2023, followed by a discussion of our outlook for 2024. And Jonathan, who will present the financial highlights for the same Fourth Quarter and Full Year 2023 periods, after which we will open the floor for Q&A.
Please turn to Slide 6. Fourth quarter of last year was another excellent quarter for Redwire during which we continued our positive momentum. We have now delivered four consecutive quarters of positive adjusted EBITDA and revenue growth. During the fourth quarter, we achieved $63.5 million in Q4 revenue, an 18.2% improvement over Q4 2022. We achieved positive adjusted EBITDA of $1.7 million in Q4, a $2.5 million increase on a year over year basis from the fourth quarter of 2022 to the fourth quarter of 2023.
We narrowed our net loss to $8.2 million, a $17.7 million year-over-year improvement from the fourth quarter of 2022, we achieved free cash flow of positive $12.6 million a year-over-year improvement of $18.1 million. We also achieved cash from operations of positive $15.7 million, a year-over-year improvement of $20.5 million. And finally, we achieved a book-to-bill ratio of 2.81 times during the quarter. It was a fantastic quarter for bookings.
Please move to slide 7. In addition to a strong fourth quarter, I am very pleased to report that 2023 was a record year for financial performance at Redwire. (technical difficulty) financial results for our shareholders. During 2023, we achieved record revenues of $243.8 million, which was at the top of our annual guidance range of between $220 million to $250 million. We achieved positive adjusted EBITDA of $15.3 million and positive cash from operations of $1.2 million. For the full year, we also received $300 million in contracts awarded during the year and had a full year book-to-bill ratio of 1.23 times our heritage plus innovation strategy it's working.
Please turn to slide 8. By focusing on the fundamental building blocks of space, we are meeting the expanding demand of our customers for Redwire's differentiated core offerings. For the full year of 2023, we grew revenue 51.9% from 2022 to 2023. We narrowed our net loss to $27.3 million, a $103.4 million improvement from 2022 to 2023. We improved adjusted EBITDA by $26.3 million from 2022 to 2023. And with disciplined cash management, we improved cash from operations year over year by $32.9 million and improved free cash flow year over year by $28.7 million in 2022 to 2023. It is important to note that we achieved these positive financial results by developing and delivering critical innovations for our customers throughout the year. We are not a maybe someday space company.
In 2023, 24 Redwire Solutions were deployed on 14 launches, whether deploying tenants for national security rolling out solar arrays for the International Space Station for meeting our milestones on full satellite solutions for the European Space Agency, our reliable technical performance for our customers throughout 2023, with the foundation of our positive financial results. These results are directly attributable to the commitment and expertise of our workforce. Thank you to all the employees of Redwire for a great year.
Next, we would like to focus forward and discuss our outlook for 2024. Please turn to slide 10. With a continuing trend and decreasing cost of launch. Deploying Space Infrastructure is more affordable than ever as a result, we continue to see signs of a massive expansion in demand for space infrastructure. It's depicted on this slide underscores the breadth of the opportunity space, infrastructure expansion, not only includes small satellite constellations and lower orbit, but also includes expanding investment in infrastructure for medium earth orbit, geostationary Earth orbit, SIS, Lunar lunar peak space and even very low earth orbit for Veolia to name a few as a provider of the fundamental building blocks of space infrastructure across all these areas, Redwire is participating in the growth of the tire space ecosystem from Helio to LUNAR and beyond.
From our perspective, the strong demand for space infrastructure is driven by three key developments. First, as we hear and read about routinely in the news space is increasingly a war fighter domain with peer and near-peer threats continuing to target US based superiority. Major investment is occurring across it's higher space domain. That is the growth in demand for lunar infrastructure. The US is heading back to the mean and this time we plan to say whether participating in groundbreaking programs like arguments for the recent intuitive machines commercial lunar landing where we provided critical components. Red wire will play a significant role. Third is the rapid expansion and proliferated LEO satellite constellations. Both government and commercial customers see tremendous value in a new proliferated architecture of small satellite constellations for a wide variety of applications such as communications and earth observation. This is resulting in increased spending for satellite systems subsystems and components. These factors and others are positive indicators of continuing demand for red wire space, infrastructure products and solutions for this foreseeable Peter.
With that, please turn to slide 11. In an effort to focus and optimize our go-to-market strategy for 2024 and clearly emphasize where we are delivering value. Red wire has grouped our products and solutions into six core offerings that we consider as the fundamental building blocks of space infrastructure. First is avionics and sensors. These are the spacecraft subsystems and components that are used for navigation control and energy imagery collection, then power generation. This includes solar arrays and power distribution systems that generate the necessary power for Space Systems to operate regardless of size or location, net Seat Structures & Mechanisms. These include a variety of Space Infrastructure that provide critical mass mechanical functionality for our Orbit operations from launch risk relief mechanisms and deployable booms to berthing and docking systems. Red light radio frequency systems are the systems and payloads that enables space to space and space or communication.
Next platform sales emissions. This includes both satellite systems such as the red wire prober satellite as well as our proprietary digital engineering and modeling and simulation solutions that enable spacecraft development and operations. And finally, micro revenue payloads, which includes next-generation biotech and material and Space manufacturing payloads. It utilizes the micro gravity environment to manufacture innovative new products that are difficult to manufacture on our these offerings can be thought of as the picks and shovels of space with broad utility to nearly all space markets and many space assets that are being developed by National Security Space customers, civil space agencies and commercial companies globally.
Please turn to slide 12 with a clear focus on our six core offerings, we are executing an optimized growth strategy for 2024. That is centered around four key principles, protecting the core scaling production, moving up the value chain and vendor optionality.
And then on the next few slides, I'll describe these principles and provide an example of a recent success that best represents these principles in action.
Turning to slide 13. Our first growth principle protecting the core means continuing to deliver on our strong foundation of existing private products with proven reliability and demonstrated flight heritage. It is about continuing the growth momentum of our success in 2023. An example, in December 2023, Red wire announced that our L-band 2016 incentive successfully demonstrated the transmission of Link 16 signal from space. This is a major milestone for the development of Warfighter COMMUNICATIONS. Red wired is delivered and tenants supporting more than 50 spacecraft for a national security Constellation being developed with the opening of our new manufacturing and testing facility in Longmont, Colorado announced in January red wire and anticipate being able to triple the amount of hardware throughput from the next few years, building on the successful heritage of our RF systems.
Please turn to slide 14. Our second growth principle scaling production means winning and delivering on increasingly larger orders by scaling our production to meet growing demand. As an example, I am proud to announce that during the fourth quarter of 2023 red wire won a $142 million contract award for our process power solutions from an undisclosed satellite manufacturer. This award is a testament to the differentiation, innovation and on-orbit success of our rollout solar array technology and demonstrates that our heritage is leading to increasingly larger orders.
This announcement comes on the heels of another announcement that we were selected as a strategic supplier for Blue origins, trailblazing blue rays space mobility platform, we were awarded a contract to develop and deliver for rotor wings as well as multiple Argus cameras and low-voltage distribution units. With these two awards, we have begun to scale our production capabilities while continuing to add to the heritage of our power generation offerings, which demonstrates we are being baselined on the growing systems as the systems we are baselined into such as blueprint and a new set of satellites using ROSA continue to sell and scale red wire will grow with our customers.
Please turn to slide 15. Our third growth principle moving up. The value chain means leveraging our proven capabilities in developing and deploying space subsystems and components into future success developing and deploying next-generation spacecraft and Integrated Mission payloads. As an example, I am also excited to announce that red wire has invested in the design of a very low earth orbit for feed, LEO, spacecraft known and Sabre set.
The LEO is a crucial domain for the future of defense and intelligence operations for the US and its allies with the same process design, we are offering customers an innovative approach to explore a leap ahead, Orbital platform that could meet future mission needs for a new breed of vehicles with the performance potential between that of an unmanned aerial system and a standard LEO satellites. This is just one example of how we are exploring opportunities to move up the value chain by designing and developing differentiated next-generation spacecraft that will fill identified gaps in the market for future space infrastructure.
Please turn to slide 16. Lastly, our fourth principle is to maintain venture optionality by continuing to pursue rates through development on high potential technologies that could create new markets with game changing potential.
Earlier this year, Redwire was pleased to announce the second mission of our InSpeed pharmaceutical development platform PIL-BOX, again, in partnership with Eli Lilly. The second PIL-BOX mission is focused on researching widespread chronic diseases, which have massive global demand for treatment. PIL-BOX 2 follows closely on the heels of the successful inaugural PIL-BOX 1 mission, which for 2023 for delivery to the customer.
Please turn to slide 17. Now turning to our bookings and backlog. Our bookings during the fourth quarter of 2023 were $178.2 million. Our book-to-bill ratio was 2.81 times for the fourth quarter of 2023. We continue to see lumpy bookings growth from quarter to quarter, but have consistently positive growth rates on an annual basis.
Finally, as you can see on the right-hand side of this slide, our contracted backlog has increased 19.1% since the end of 2022 to a contracted backlog of $372.8 million. The growth in contracted backlog is one of many factors that gives us confidence in our future growth and stability. We continue to have a healthy pipeline with an estimated $4.8 billion of identified opportunities, including approximately $944 million in proposals submitted during the full year of 2023.
Please turn to slide 18 for a brief discussion of the outlook for 2024 and why required management believes the performance momentum from 2023. We'll continue into this year and beyond our fourth quarter was a strong finish to 2023 with record revenues and positive adjusted EBITDA, positive cash from operations and positive free cash flow, plus sequential improvement in liquidity and contracted backlog. As a result, for 2024, we are forecasting full year revenue to be $300 million, which represents a 23% year-over-year growth rate through our excellence in execution initiatives. We continue to focus on improving our operating leverage and cost efficiency, and we expect to continue on our path to profitability in 2024.
Please turn to slide 19 for with that, I'd now like to turn the call over to Jonathan Baliff, Redwire's Chief Financial Officer. Jonathan?

Jonathan Baliff

Thank you, Pete. Before I turn to the financial results, I'd like to highlight the photo on this slide 19, which is that the RF testing chamber that Pete spoke about at our newly expanded Longmont, Colorado facility. This chamber is just one of the many investments we made during the year in support of future growth to serve the customer demand for Redwire Space Infrastructure.
Please turn to slide 20. Our fourth quarter 2023 saw continued positive momentum, driven by this customer demand and requires excellence in execution focus. We achieved record revenue of $63.5 million, while also achieving our fourth consecutive positive adjusted EBITDA quarter since becoming a public company and our second positive free cash flow quarter as a public company. As you can see on this chart, all of our critical financial metrics saw significant year-over-year improvement on a dollar amount and on a percentage basis year over year narrowing in our net loss to $8.2 million and a $2.5 million improvement in adjusted EBITDA to $1.7 million. This result is also attributable to the disciplined project program management and continued cost controls.
Fourth quarter 2023 also saw record positive free cash flow of $12.6 million, a year-over-year improvement of $18.1 million, and this is after investing over $4 million in growth CapEx and in research and development during the quarter.
Please turn to slide 21. As you can see on this page and similar to page 16, all of our critical financial metrics saw significant year-over-year improvement in the full year 2023 on a dollar amount and a percentage basis. Radwire's excellent execution yielded revenues of $243.8 million, 51.9% growth, while also achieving four consecutive quarters of positive adjusted EBITDA and our first full year of positive cash from operations. Record revenue also led to a $103.4 million year over year, narrowly in our net loss to $27.3 million and a $26.3 million improvement in adjusted EBITDA to $15.3 million.
But importantly, Redwire improved cash from operations year over year by over by $32.9 million leading to our fiscal year 2023 free cash from operations of a positive $1.2 million operating cash flow led to year-over-year improvement in full year free cash flow of $28.7 million to a use of cash of only $7.1 million. These impressive results are attributable to the capability and commitment of our global team members and were achieved by investing over $13 million in growth, CapEx and research and development for our future businesses.
Please turn to slide 22. Specifically for quarterly revenue, as you can see from the chart on the right, this quarter's record, $63.5 million represented an 18.2% increase on a year-over-year basis, an increase of 1.4% on a sequential basis. During the quarter, more than 85% of our revenue derived from funded government programs for from global marquee customers were delivering in the areas of national security satellite corporation and the expiration of space to name just a few.
Excluding the revenue contributed by Space NV, our fourth quarter revenues were $48.6 million, an excellent organic growth of 15.5% on a quarterly year-over-year basis through work on existing contracts and incremental revenues from bookings. Our bookings increase that Pete spoke about has resulted in a strong fourth quarter book-to-bill ratio at 2.81 times.
Please turn to slide 23. For the full year 2023, not only did we grow revenues by 51.9% on a US GAAP basis, and this is excluding revenue by Space NV, but revenue grew organically at 26.9% compared to 2022. Additionally, during 2023, 71% of our revenue by location of the customers were attributable to the US and 29% were to go to Europe and other geographic locations.
Finally, let's step back and look at Redwire's of growth since 2021, a period of significant change for the space sector significantly in interest rate increases and a slowing of the global economy and a very challenging capital market for small-cap companies. During the period from 2021 to 2023, the compounded annual growth rate of Redwire revenue on a US GAAP basis some 33.1%, while also achieving positive cash from operations in 2023.
Please turn to slide 24. We drove an improvement in adjusted EBITDA of $2.5 million year over year from the fourth quarter of 2022 to a positive $1.7 million in the fourth quarter of 2023. Once again, our year-over-year adjusted EBITDA improvement was primarily driven by our improvement in gross profit with fourth quarter gross profit growing 1.2 times higher from $8.6 million to $10.7 million on a year-over-year basis. This gross profit improvement was primarily driven by better contract mix and the maturing of our program management.
The sequential decline in adjusted EBITDA was primarily driven by discrete EAC adjustments on select projects, partially offset by higher revenues during the fourth quarter and just to note, on a year-over-year basis, Redwire saw a significant reduction in our net EAC adjustments compared to FY22, while also growing revenue by over 50%. Our adjusted EBITDA improvement was also supported by excellent cost control from Redwire's fourth quarter SG&A revenues that were 26% of revenue, a notable drop from the 30.8% in the fourth quarter of 2022.
On a year-over-year basis, we saw an improvement in adjusted EBITDA of $26.3 million. This was primarily driven by excellent increase in operating leverage year over year on both a percentage and an absolute basis. For the full year, SG&A margin decreased from 43.8% in 2022 to 28.1% in 2023, with a reduction in total absolute spend of almost $2 million from $70.3 million to $68.5 million.
Please turn to Slide 25. As we've mentioned several times that throughout last year, we made significant prudent strategic investments. During 2023, we made $8.3 million in capital expenditures to double 2022 CapEx of $4.2 million, plus $5 million in investments in research and development and $3.6 million in a variety of corporate investments in systems and infrastructure that flow through SG&A. So it will be continued to demonstrate our ability to perform and deliver now while also making investments in future growth and profitability, which we're beginning to sell.
Please turn to slide 26. Similar to last quarter, on the left-hand chart, we show free cash flow as a reminder, free cash flow provides a metric based on our US GAAP, cash from operations minus capital expenditures or CapEx. On a year-over-year basis, quarterly free cash flow improved by $18.1 million to a record positive $12.6 million for the fourth quarter due to a $20.5 million improvement in cash from operations.
Credit goes to the revenue growth and profitability improvements already discussed. But in addition, we had more efficient and effective working capital management over the fourth quarter, and this is helped by a diversity of core offerings, customers, new contracts, which cascades down to our cash flow from operations. Again, we continue to invest a significant amount of CapEx in research in CapEx and research and development. We saw improvement in year-over-year quarterly cash from operating activities while continuing to invest in the business and actually make other expenses associate with resiliency of redline. These expenditures are intended to grow, diversify our revenue, scale the operations and accelerate our path to profitability.
On the right-hand chart, we show our available liquidity as of December 31, 2023, which totaled $48.3 million, including $30.3 million in cash and cash equivalents. This quarter's liquidity is a significant sequential improvement as we continue on our path to profitability. I want to thank all of Redwire's team for this quarter's excellent results, a total global effort that we work to continue in 2024 and beyond.
Please turn to slide 27. I will now turn over the presentation to Pete to provide brief final remarks. Pete?

Peter Cannito

Thank you, Jonathan, for perfect clarity. I would like to go back and reemphasize through Slide 23 that the 51.9% growth on US GAAP will including Space NV and Redwire grew organically at 26.9% compared to 2022, excluding space and base. I do would also like to thank all the red wire professionals around the world for their hard work and excellent fourth quarter and full year 2023 and all our customers for trusting Redwire. We will now open the floor question.

Question and Answer Session

Operator

Thank you. Ladies and gentlemen, at this time we will be conducting our question-and-answer session. (Operator Instructions)
Suji Desilva, Roth MKM.

Suji Desilva

Good morning, Peter, good morning, Jonathan, congratulations on the revenue growth here and the profitability that's coming within really good execution here. So Tom Yanagi, so the $300 million guide for '24, can we just understand some sense of linearity there? Is there any back-end loading or is that fairly linear or first half to second half? And maybe talk about the backlog visibility you have into this next 12 months versus the overall backlog.

Peter Cannito

So the backlog visibility is really good for both the '24 and into '25. The $300 million, I would say from a how that's going to play out and like we've been saying, one of the reasons we don't give quarterly guidance is that our revenue tends to come in lumpy. This is because some of our programs have pretty significant material buys. So I would think about it as a distributed annually, but there's the opportunity for certain quarters to be a much higher lumpy than others that could be when you're looking at a big material buy in a particular quarter that could skew the numbers.
Does that answer your question?

Suji Desilva

Yes, it does, actually. And then perhaps without a question on the gross margin trend, I think in the fourth quarter was down a little bit. Just how should we think about gross margin going into 2024 what the right framework for that?

Jonathan Baliff

Yes. No. Look, you saw it always had more historical than future because we don't give a gross margin gross profit guidance. But what we saw a really nice steady increase in gross margin and gross profit through 2023.
On very similar to what Pete said, again, a lot of our revenue comes in that lumpy. I would say also that our contract mix is such that you're not going to see the level of increases that we saw in '23 and '24, right? I think that the nature of the significant increases. We've gotten a lot of tenants, and we'll continue to do better on project management and program management. But some of the contract mix, especially as we get larger products, um, again, I just I want to say that we don't expect that level of increase to happen. That being said, our EBITDA margin, remember, we see a lot better SG&A margin decreases as the operating leverage in the business it improves.
And so EBITDA margin, again for us is something we also look at because we're continuing to make investments which come on the SG&A line, but we're growing revenue a lot more than SG&A and therefore, EBITDA and see a lot more of it dropping to the bottom line. And so that's how I would kind of answer that question on a lot of these bigger projects, just not to be able to see the same level of growth from a contracting standpoint. It like growth the address.

Peter Cannito

I mean, I think it's product mix and the larger programs, sometimes the lower the gross margins, and it's a mix of material buys and also up. But the absolute value of the gross profit over the year. It will continue to be a positive for us.

Suji Desilva

Understood. And then one last question probably for Peter on just the very topical and the headlines about government funding trends in various space endeavors, particularly there was a specific headline, though. Sam, one I'm just curious on the implications for you guys. Maybe talk about national security as a growing opportunity for you and how that maybe is this mix shift?

Peter Cannito

Yes, that's a great question. So first and foremost, we had no exposure to the San Juan. We weren't involved in that program in any way. As a matter fact, we see and the winding down of OCM one is freeing up dollars in the NASA budget, but we certainly will be throwing off at the rating and engaging with the customer to see if that can free up some dollars for programs that were largely interested in. So no impact there. On national security, I love that question. So we actually doubled our national security revenue in Q4. So we're experienced pretty significant growth in national security.
We did put out a press release at about our new office in Chantilly that had some pretty sizable, not secure space associated with, as I think I've mentioned on previous calls. And I think Red wire hits above its weight class in terms of our clearances and our insights in the national security, I have a a high-level security clearance, and I've worked in national security for my entire career. And we have a number of contracts that have the associated documentation in there to allow us to operate at the high level of classification. So we're really bullish on the current trends going on in national security and requires ability to I participate in that growth.

Suji Desilva

Okay. Thanks, Peter.

Jonathan Baliff

Thanks, Suji.

Operator

Griffin Boss, B. Riley Securities.

Griffin Boss

Hi, Jonathan, thanks for taking my questions. So first off for me that the growth in pipeline and bids submitted is really impressive, especially given the strong backlog growth we saw in the quarter. Can you just give some more color on the breakdown of that pipeline? Just generally speaking, kind of what areas you're seeing with the most opportunity and, you know, tying it back to the six core offerings that you talked about?

Peter Cannito

Yes, we don't really break down the individual opportunities in the pipeline. But I will point you to our four growth principles for 2024 because I think that represents really what's going on in that the continued growth in our pipeline and the proposals under review. Again, as we continue to scale and as we continue to demonstrate on-orbit performance that is leading to us being baselined on larger and larger programs. I think we have in many of our products, a lot of customer confidence.
And so we're bidding on bigger programs as well as moving up the value chain like I mentioned and starting to take some bigger swings on our larger subsystems, fully integrated mission payloads any than a full satellite Mission Solutions. As you're probably aware in Europe, we provide full satellite missions with our proven satellite and have done so for many years, we're now starting to look at other opportunities to move into white space. Like I mentioned, indeed, LEO spacecraft as well. That will result, I think, in May a growing pipeline over time.
Got it.
Yes, thanks for. Thanks for that, Pete. Obviously, there are a lot of exciting developments in space right now.
I guess I'll just turn it over to I mean, you called out the growth in the LUNAR infrastructure and obviously there's been a lot of press about that with the recent lunar landing from intuitive and you guys are great on that. How big of an opportunity do you guys see NASA's clips program in general and are you working with any other clips authorities beyond intuitive.
So one of the great things about Red wire is we have, but we participate and across multiple opportunity in all of the different areas and some of the top of my head. I can't think about what we've announced in this area or not, but we were certainly proud to be part of the intuitive machines on bid. And I think that you'll find whenever red wire provides capability that is successful in a one mission where often we build the credibility that makes us a highly sought after partner in other missions as well.
But yes, LUNAR infrastructure was we're very proud to be a partner in and that mission was very successful for us.
We talked about, I think earlier last year, our nascent program that we won, where we're providing the technology and researching with our partners at NASA technology for building landing pads on the moon I think that if there was a landing pad on the moon and the probability of a smoother landing in the hinterland or at least we think would be higher. So maybe some of the early attempts and as for the potential benefit of that technology. But yes, we're very focused on the LUNAR infrastructure we talked about are also our view that partnership as well, we'll be providing some solar arrays for LUNAR infrastructure in future as well. So a nice trend for Red wire, and that's one of the reasons I chose to put up that slide trying to emphasize to everybody that Space Infrastructure just isn't about LEO satellites, although that's a really fast-growing, really important part of the market. We're not our TAM includes and going beyond just satellites to things like the rapid and exciting growth we're seeing in the future at the minutes.
Yes, excellent.
Really appreciate the detailed response, Pete. And then just one with one more, if I could, for Jonathan, just turning back to the EAC adjustments. Obviously, as you mentioned, they came down significantly year over year. And I mean it's becoming somewhat of a moot point given the size and scale of your revenue. But I'm can you just give some more color on where those were coming from in the fourth quarter was it one or two specific programs or more widespread on a smaller scale?
It definitely wasn't widespread. What I would say is yes, like 2022, generally, our EAC adjustments are in our, let's call it, lower TRL. We have very mature projects into a less mature products. We do the equivalent of some R & D as we create the next generation space, infrastructure failure, the ICs with those type that type of infrastructure. But again, I have to emphasize we cut it in half while doubling I'm sorry, while freeing up our GAAP US GAAP revenue by 50 points over 50%. So again, I think kudos goes to our operations group and our presidents for really making sure the program management is happening on time because the key to these EAC adjustments and net EAC adjustments is to on-time delivery, which we're very focused on as part of our excellence and execution.
Got it. Okay.
Thanks for taking my questions and great to see the progress.
Thank you.
Thank you. Our next question is coming from the line of Andrea Shepard with Cantor Fitzgerald. Please proceed with your question.
Good morning, everyone. Congratulations on the strong financial quarter and thanks for taking our questions. And I guess I was just wondering if you consider it considering you reported a positive free cash flow in Q4. I know I realize you're not guiding free cash flow throughout 2024, but just curious if you can maybe give us some color as to how we should continue to think about that for modeling purposes, should we expect a continued growth quarter-over-quarter? Or what's the best way to think about that? Thank you.
Well, I'll make you a bit of our cash flow generation in the fourth quarter with a large contract win, which we disclosed. And so some of the cash comes in and you see it on the balance sheet. That being said, we we've said in the past, and that's one of the nice things about four quarters that we're bidding on projects that are greater than our annual revenue, right? And those are projects that obviously are multiyear. But the bottom line is that we generally have in our COGS on a decent amount of cash coming in on the front end for materials subcontractors and just generally because we're running a much on a much tighter ship on our working capital. That being said, again, mimicking what Pete said it can be lumpy. But I will say we've we believe now we have a very nice liquidity profile and a cash flow from operations on this is a company that can fund a significant amount of its growth as not just witnessed in the fourth quarter. But also we generated positive operating cash flow, and that's in addition to a higher ad spend that was significantly higher in the fourth quarter and the full year 23 than we did in the previous year. So again, we don't give specific quarterly guidance on that but we continue our path to profitability. And we're again focused on making sure that we can we can we fund a lot of our own growth.
Got it.
That's super helpful. And I guess that's actually a great segue to my next question is regarding the recent $142 million contract to produce the solar arrays. I'm wondering you know, how should we be thinking about that translating into revenue in over what time period might you expect to recognize the majority of this contract?
Yes. No, great question.
So we'll be recognizing that over 24 and a little bit at 25, it's like any red wire contracted as Derek?
Well, I don't want to make a broad characterization, but many of our contracts are two year contracts and it's already kicked off and started. So we'll be seeing the impact of that and all through Q1 all the way through the rest of the year.
Got it. I see.
Okay.
So then I could assume that that's embedded in the revenue guidance for 2020 for, I guess, this direct book data.
Okay.
And maybe just one last question, if I may. And one for Jonathan. You know, how are you thinking about activity in the M&A market for for 24? You know, I know historically, you have grown inorganically as well as organically. So just curious if you're looking to.
Yes, remain active in this market?
Thank you.
The answer is yes, but we're very focused on our return on invested capital, cash flow and profitability. And I'll hand it over to Keith again from a CFO standpoint.
You know, we are we've obviously shown a ability to do successful M&A, both on a commercial, operational and financial basis. We continue to look at it, but we're pretty disciplined when it comes to two M&A, Pete?
Well, the good news is we know how to do it. We've done it nine times so far, I believe to the to that a really a viable tool in our toolkit. But we're constantly scanning the market for the best value out there. And yet we if we find something that makes a lot of sense, both strategically and has a really nice financial profile that meets our our overall objectives were certainly out there.
Yes.
Got it.
Very helpful.
Congratulations on the quarter again, and I'll pass it on.
Thank you.
Thank you.
Thank you. As a reminder, ladies and gentlemen, if you would like to ask a question at this time, please press star one on your telephone keypad. We do ask that you limit yourself to one question and one follow-up and then re-queue for any additional questions.
Our next question is coming from the line of Brian Kinstlinger with Alliance Global Partners. Please proceed with your question.
Great.
Thanks, so much solid bookings. And thanks for all the backlog and pipeline stats. As usual, you submitted more than 924 million in bids in 2023. Can you quantify the value of bids that have yet to be awarded? And then as we look at the $4.8 billion in pipeline, how much of that you expect to bid in 2024 will be more than 2023.
So and I'm not sure I totally understand the question, but if I don't answer it, just let me know. So in terms of characterizing and the proposals under review, and we don't give any specific data on that, but I'll say they all vary in size. And so we have a variety of larger programs as well as a really strong, like I like to say, protecting the core basis for repeat orders as well. And so that's it. That's how I would characterize what is under the bids that are under some submission right now, if that's what you were asking in terms of the product pipeline, again, I'll point everyone back to our core growth principles for 2024. And we see the pipeline continuing to expand as we move up the value chain and continue to scale production. I think obviously, it's really exciting to win a 142 million contract and suggest that the near term in 2024 impact of that in our financial projections is really exciting but it also underscores our ability to it compete for and win larger and larger programs.
So with that kind of success under our belt, I would anticipate that the intent is for when it comes to the pipeline that we're going to, we're going to continue to include a larger swings in that pipeline.
Did I answer your question?
I'm kind of I'm curious, do you expect to bid on more in 2024 than 2023?
And you do it the expected pipeline falls out how it does many times, but yet we're investing in our in our bidding proposal. And if we execute on our plan of bidding on larger programs and you should see that number go up, you've seen it go up, Brian in the last two quarters, both pipeline and bids.
And so that trend is, again missing two quarters have been increasing on that front. We expect again to continue bidding on larger projects. And like we said, we've announced obviously a win on that. But there's again, we don't set expectations based on pipeline.
But again, the last two quarters showed a good trend in the financials.
That's why I wanted to underscore what we see as the three demand drivers.
So I think that market could support us sitting warm and then one follow-up on the visibility question that when the analyst asked and I'm curious, is that looking to some other contractors discuss some guidance? I'm curious how much of your 300 million in revenue guidance, do you expect to come from the current backlog versus how much you do generate in awards or revenue from award there yet to be won in 2020?
Four to hit your 2024 goals.
So we don't break it down. But I think if you look at our backlog at the start of 2023 and how we rate what we ended up from a revenue point, I think it's but the trend continues. You could see that with our current backlog in comparison, which I don't have the exact number, I believe it's three Cs are running yet three, 72.8 is this.
We're entering the year with three 73.8 last year on an equivalent basis, I have to emphasize that contracted backlog last year it was 313.1 million. So you're talking about a very significant increase in backlog with. Remember, we had 200 almost 200, 44 million of revenue. So we are seeing an increase of the increase of uncontracted backlog on an apples to apples basis points. So getting to your question, we don't give that, but if you look at it again, we've always said that our contracts are around two years, no red or one. We talked about that profile you can you can see that we're getting good visibility into 24 and 25 with this level of backlog increase?
Yes, the numbers are 3,000 to 300 forecast is a reasonable amount of bandwidth and to support our forecast for the year.
Thank you.
Your next question is coming from Greg Konrad with Jefferies. Please proceed with your question.
Good morning. Have a great day.
And maybe just to ask the last question in a different way, you carried a range for revenue guidance throughout the year, even into the final quarter and this year, you're guiding to more of a point estimate.
But has anything changed in terms of how you guide or what you're seeing or risks that cause that variability that make you more comfortable this year to do you have a point estimate versus a range and our forecasting we believe is maturing.
So we are trying to tighten that range I think in this particular case, it was just about keeping it simple and a lot of times in last year, we found that if we gave a range, people just selected the midpoint. So we thought that it would be it more appropriate to just select where we think that things are going to come out and keep it simple throughout the year.
And then maybe just to follow up on on drivers. I mean, appreciate laying out the six core offerings and you probably could slice it that way regionally or even by customer but at least near term, thinking of those six core offerings, are there one or two areas that you drive more of the growth and then maybe longer term areas of those six that are lead to maybe more side?
Or how are you thinking about growth across those six areas?
So I think all of them have significant growth potential.
If you were to say currently, we don't break it down by specific numbers, but the solar array business has been really strong. There's been a really positive reception as to our rollout solar array technology is highly differentiated. It has a lot of great heritage. So I think certainly solar is a big part of it, moving up the value chain and looking at more platforms and full payloads, like I said in that segment has a lot of growth potential as well. I think one of the things that I find most exciting about Radware is the portfolio effect of our offerings. Again, we don't break it down this way, but we have some offerings that I would characterize as very high volume potential, but perhaps lower gross margin we have other offerings that I would characterize as having maybe more limited our total addressable market, but we tend to have better gross margins. So we can take that portfolio of back and manage our offerings and focus our growth dollars in a way that help us balance our revenue and profitability over the long term.
I'll leave it to.
Thank you.
Thank you very much, Greg and Greg, I did just to follow-up, go back into the archives and see that we announced that we are partnered with Firefly on the glucose at lunar lander. So in addition to two Intuit machines and Firefly, and we obviously know all the other ones as well.
Follow up on that.
Thank you.
We have reached the end of our question and answer session. So I'd like to turn the floor back over to management for any additional concluding remarks.
All right. Well, we appreciate the engagement as always. Thank you for participating in today's calls and the redline.
Thank you.
Ladies and gentlemen, this does conclude today's teleconference and webcast. We thank you for your participation. You may disconnect your lines at this time.

Operator

So.
Yes, no, no, yes. So minimum person, yes, mobile, no, no, no, yes.