Kratos Defense & Security Solutions, Inc. (KTOS) Earnings Call Transcript & Summary

Okay. Good afternoon, everybody. It's Noah Poponak from the Goldman Sachs Aerospace and Defense Equity Research team. Very happy to have with us for our next presentation out of my sector, Kratos Defense & Security Solutions. With us from the company, Eric DeMarco, the CEO; and Deanna Lund, the CFO. Eric and Deanna, thanks so much for spending some time with us today.

Thank you very much for having us. We appreciate it.

Excellent. Eric, why don't we start a high level on the geopolitical environment and the budget backdrop, and then we'll dive into all of your programs and company specifics. I'm curious for your take on what you thought the 5-year CAGR in DoD authorization was going to be before Russia, Ukraine? And what do you think it is now?

Yes. My thinking, it was going to be 5 years, 2% to 3% before Ukraine and before inflation. And I think that this has only turned it on its head. And my opinion now is I think it's going to be somewhere -- I'm going to say, for the next 3 years, at least 5% to 7%. I could see it being as high as 10%, depending on how things over in Europe evolve.

Okay. And does Kratos have opportunities in Europe specifically, where it seems like even though those would be fairly robust rates of growth in the US, most of the European countries working off a pretty low base, many below the 2% NATO commitment. So there's just mathematically more room to grow. What kind of exposure does your business have to the region?

Yes. Our exposure is more mid to long term, primarily with our target drones where the allies, the NATO allies and the European allies are buying surface air missile systems, Shore Rad systems and other types of systems. And Germany, for example, the F-35, they're going to need to be exercised to get state-of-the-art systems. And our target drone demand, which has been increasing, we expect it to continue to increase now in Europe.

Do you guys have off-hand percentage of revenue that's international and percentage that's Europe?

We have international -- Deanna, what's roughly our international sort of...

Yes. Just even if ballparking. Deanna, you're muted.

It's -- international is roughly 20%, 21%. I don't have it broken out by Europe or other regions, but that's our total.

Got it.

International piece.

Okay. Great. Okay. Let's move into tactical unmanned. Eric, what are the next steps for demand markers for the Valkyrie?

Yes. So as we talked about on the call last week, the RDT&E budgets that we're exposed to and specifically the Valkyrie and 22 budgets about $160 million and then the $23 million request is over $200 million. And those are related to continuing the Skyborg program; continuing a program under LCAD, LCASD with the AFRL; continuing the program with OBSS; and there's another one that I don't think is public yet. So those are going to continue and the Valkyrie is directly related to those, and those are all except one Air Force programs. And as I mentioned on the call, in the 2022 budget, it's funding for a new customer, a new service, so the Air Force being a service. So it would be Army, Navy or Marine. We can't get ahead of them. We expect to be under contract that is specifically related to Valkyrie. By the end of the year, and we expect, based on what we've seen before the 2023 budget will have approximately double the funds for this customer for the Valkyrie. So that's the lay of the land right now we have clarity on.

When will you next sell Valkyrie or deliver Valkyrie units?

We are delivering -- we are delivering Valkyrie units to the customers as we speak. And I don't want to get ahead of certain things that are happening that may become public from the customer standpoint in the near term.

How many Valkyrie's -- how many Valkyrie deliveries have you rolled up into your 2022 guidance?

In the 2022 guidance, it's somewhere -- and I want to come back to the lease model that we're talking about with these new customers. It's somewhere around 7.

Okay.

Okay. But in the model in our guidance, we've assumed sales because that's what we've been doing. We've been selling them. This new customer is talking about leasing because they have a significant amount of funds and strategically, this is very important to us. They want to get as many aircraft void to start developing concept of operations with us possible and under a lease arrangement, they could get more than they could acquire through a purchase.

Okay. So you outlined the budget dollars sort of '21, '22, '23 for -- I guess that's just for the broad category of loyal wingman programs. How do I square those dollar amounts, which are pretty sizable, especially relative to the cost of one Valkyrie unit. Like where is that -- where are those dollars going? Those doesn't seem like those dollars are buying Valkyries. What is actually happening with that funding and especially specific to Kratos?

Yes. So specific to Kratos, in those numbers, "there is either going to be additional purchases of Valkyries or leases of Valkyries, that is specifically in those funding primarily related to this new customer, fights, additional Skyborg flights, which the customer has talked about. They're going to continue to develop the Skyborg Artificial intelligence, which the Secretary has said several times, that program is going to be a feeder into 2 new programs that are classified, the Secretary has announced. And developing concepts of operations, developing communications all of which -- I don't want to say all of which, significant amount of which requires additional flight time.

So are those -- are those -- is it those dollar figures, annual budget dollar figures that you've referred to, those are authorization, and they have not actually yet really flowed to any contractual order activity to anybody for the most part.

Some of the '22 funding is starting to flow right now under contractual obligations. The '23, of course, is the request, and I would expect those once we have the '23 budget definitized, that's when those will start to flow. The takeaway from this, the momentum, not production, but in development concept of operations, et cetera, is increasing, the funding is increasing, the narrative is increasing. You may have seen in the last couple of days, the Navy has now come out and they've said they are going to have loyal wingmen drones for their next-generation air dominant sixth-generation fighter. The Marines have come out. They've had some dialogue around what they're looking for. So the momentum is definitely continuing here, but we remain frustrated that we had expected to be delivering quantities of Valkyries by now, and it just hasn't happened, and we're going to hang in there.

Yes. I mean, it is strange insofar as multiple constituents within your customer set are pretty clearly, publicly exceeding, they want little wingmen, they want attributable, affordable, large scale of units, drones. You have a product. You've had a product. It's hard to square why they won't just buy your product. And then it's also hard to -- it's also -- I also can't square where those -- where that funding is going.

The funding, back to the $160 million, over $200 in the narrative and the funding lines, it sells out pretty much what I just talked about it spells it out in there. On the first part of your question, the customer is taking their time making the decision. And -- that's all I can say.

How do we think about these 2 new programs and what the Air Force has discussed wanting to do there? How much extension of timeline does that create? I mean, on the one hand, they've talked about Loyal Wingman, Loyal Wingman aircraft alongside of existing generation of assets in their fleet. On the other hand, they've talked about them alongside of the bomber and NGAD and things that are not yet in the fleet. So does that extend the timeline or not? And then does it -- does it keep the whole process open to more competition than it otherwise would?

Right. So my opinion is that the path -- the 2 paths, the existing path with the existing drones are going to continue to move forward. And those might not be loyal wingman type of drones. They might be drones that are deployed on an island, for example. They might be drones that are deployed in Europe, for example, that it will have a tactical, won't be a loyal women. As you alluded to, putting aside the B-21 and NGAD as recently as last week, the Air Force came out and they said they are now going to look at a specific loyal wingman drone for the F-35, okay? So that's moving forward. So -- and then there's, of course, the 2 that you mentioned, where the secretary has said that he is looking for those to cost at least half as much as the B-21 and the NGAT. And so it appears and this is very good for us that there is going to be an entire suite or family of jet drones. -- lower cost attributable ones up to -- this is my word now more exquisite types or like the B-21 and the NGAD. And as you know, our competitive advantage and differentiator is affordability and quantities. And that's our sweet spot, and that's where we are going to stay focused. Interesting.

So we could end up seeing a family or multiple variants with different specifications to them of different types of loyal wingman drones, depending on what is flying alongside of.

Depending on what it's flying alongside of or if it's flying not a lot alongside someone like our AirWolf drone. I just use that as an example. The AirWolf drones have substantially completed their series of flights, including the final flight, I'll call it a terminal flight or a kinetic flight, which was very, very successful. This is not an Air Force customer, okay, not an Air Force customer. I think that's very important, because we have multiple paths going here. And I'm looking for in the second half of this year, assuming the funding lines up like we're hoping it does for our customers that we're going to start getting additional traction in deploying AirWolf and the primary focus there is the European dealer.

Okay. Where does OBSS fit into this? I mean that -- you had described that as a pretty significant win at the time -- does that pull in Valkyrie -- or does that create a new -- completely new aircraft? How does that progress from here?

Yes. So OBSS is -- and there's very little out there publicly on it. It's a complete new aircraft, a complete different mission set than the Valkyrie. We are in Phase 1. It was all the usual suspects bid on this. General Atomics and Kratos were fortunate to win Phase 1. It's going to be down-selected to Phase 2. Right now, the plan is for one of us later this year. If we are successful with that, OBSS will be a significant contributor to our tactical revenue in 2023. And then as it moves on to the next phase in 2024. So OBSS is now is just the most recent example I can talk about publicly where Kratos, our win record on these programs, we are virtually undefeated so far. And I believe it's our affordability and our demonstrated ability to go from a white piece of paper to a flying aircraft in 2.5 years.

Yes. Yes. I mean, what you guys have built is incredible and your products are very impressive and what the customer says about them, corroborates that. And it's -- but is undefeated, I guess, the right word? I mean, undefeated in that there hasn't been a loss, but then a lot of these are not selecting their final winner, right, like these -- like whatever loyal wingman programs we end up with over time hasn't been decided yet. OBSS still has to pick one out of 2. So it's undefeated, but still waiting to figure out how many wins in the wind column. Is that fair?

I'd say we're undefeated in RDT&E and S&T and we go now to your point, which is a very valid point. And we have 2 handfuls of systems in the valley of death, where incredible products are demonstrated with the service. They are trying to transition from the research agency or from a development or prototype to a production unit, and we are in the DoD value of death.

Is it -- I mean, is it -- is it a fair categorization that it takes you time to build out a product into technology. It takes the customer time to define what they want. We're talking about a government customer. There can be some bureaucracy and some hurdles in that process. And as much as the customer is clearly emphasizing the importance of these categories of product, they're also not talking about having them out in the active domain tomorrow. And so just the timeline that this is on maybe just doesn't jive with the timeline of me or my model or investors who are looking at it every day. And is that -- it seems to me like that's actually just some part of the disconnect.

That's definitely, what you just said has definitely occurred in specifically over the past year, where the customer set certain things. Skyborg will be a program of record here. I believe one of an airports official a couple of years ago said we're going to buy 20 or 30 Valkyrie now. There have been some very profound statements made by the customers. And for whatever reason, those have not come to fruition in the way of my second-guessing at all. We are going to stay focused on what we can control, and we're going to continue to win everything. As I know you know, we're the only company that has any jet drones flying in this class today. We have at least a 2 or 3-year lead over anybody else. And if they were to catch up, our affordability is orders of magnitude less than theirs, they can't touch us. And the reason is we're building 150 years of jet drones a year right now is a full target and tactical. We have active production lines and the suppliers for the target drones, composites, avionics, command control, expansion is virtually the same for tactical. So we can lever off of our target drone infrastructure and quantities to drive the cost down on tactical, which there's no one else that will ever have that opportunity.

Right. Okay. A few more in here. I mean you talk about Ghost Works working on a completely new tactical drone. Is that right? Is that just a totally new different aircraft? Or is that -- or does that tie into Valkyrie?

Totally no. It's totally different. And we're doing it in conjunction with the government agency.

Okay. What's the status of Gremlins?

Well, so as you know, we're not deploying, so I have to be careful on this. But the most recent that I've seen publicly by Dynetics and Leidos is that they are right now actively looking for a transition partner with the funding to transition Gremlins from DARPA to a service. That is what's happening there.

Okay. So that is still moving along. As I said, the most recent publicly available information is exactly what I have said is that they're looking to a partner. And then Thanatos and F had been programs you've highlighted before, I think it sounded like on the call, you were saying that you would expect those to sort of roll up into the broader new program effort that the Air Force has described. Is that -- or what happens with those programs?

They -- as I tried to talk about when we reported Q4, there's only so much funding out there for everything the customers want to do. And so I see consolidation of these programs happening and -- or delays because of funding. And then with that, Secretary saying virtually every drone program out there is going to be a feeder into the technology, et cetera, into these 2 new ones. So that is why -- that's the primary reason why at least for the near term, I don't think I'll be talking much about Thanatos, that could change, but it ties into that thesis.

Okay. Does the 2022 guidance still embed the $250 million number that you guys had talked about for total unmanned.

I don't know. Deanna will know that.

Yes, it does.

All right. Okay. It's $245 to $255 and have you quantified the split of tactical in that?

We had -- we quantified it at the beginning of the year in the initial guidance. As we move along this year, one may be a little higher than the other, just depending on when -- instead of the CRA, the 6-month CRA, when customers contracting officers get us the contracts. The total we're still comfortable with, the pieces may move around not materially slightly, just depending on contract flows. Is that fair, Deanna?

That's correct. Yes.

Yes. I forgot the numbers up here now. So it was tactical, $55 million last year, goes to $70 million this year. So just -- I mean, we've got a lot of things moving around. A lot of things playing out differently than maybe we thought at one point, but those numbers have held up or close to have held up. I guess, is there a way to think about a growth rate in tactical unmanned when you put all these programs together on a multi-year basis? Or is it too -- it could be so much larger than it is today that the growth rate would be kind of wonky and then depending on which programs and which year it's too hard to pin that down.

It's exactly as you just said. And in addition to that, because things haven't worked out as some of the customer indices have led us to think. We're going to be very cautious on this going forward.

Is tactical unmanned revenue higher next year?

Phase 2 of OBSS is going to be very important, all right? And here's another one, the timing of the '23 budget. If we get the '23 budget, we don't have a 6-month continuing resolution, let's say we only have a 3-month, which is kind of sort of normal. It should be because of Phase 2 of OBSS and the new customer for Valkyrie.

Okay. Okay. Great. Let's maybe move over to the target side in unmanned. Maybe just on the call, you talked about, I think, $100 million order, although I couldn't quite follow the full detail of that. And then I think you mentioned 3 new opportunities. So maybe give us the details on those and just the broader level set of what drives the next leg of growth in that business?

Yes. We are on -- we've been informed that we have been selected and we will be receiving a $100 million approximate, $100 million sole-source customer, sole-source contract from a US government customer in the next few months, right? So we expect that. And then...

Is that a new customer, a new revenue stream? Or is that a renewal of an existing revenue stream?

This would be new.

Okay.

Okay.

Got it.

Our customers, as you know, the big ones are Army, Navy, Air Force. This falls into there. But it's a new, entirely...

It's a new line item. Yes.

Yes. It's not like AFSAT or FSAT exactly. It's new. On the 3, there are 3 opportunities that are out there right now. One of them is 5GAT has now come out again, fifth generation aerial target, all right? We're pursuing that. We are extremely well-positioned on that. NGAT next-generation aerial target is expected to come out in the future. We believe we're very well positioned on that. Then there's the third one. I haven't mentioned it publicly. I'm not going to mention it now for competitive reasons. I'm not. We are -- we believe we're very well positioned on that. So those are the 3 total new ones that we're in pursuit of.

If I take the $250 million of total unmanned, I assume the tactical hits the $70 million, I know you said it, it could be -- it's in the zone. That implies target is up, I think, about 15% this year. Should I -- should we be thinking of that as holding nicely into the double-digit type of growth rate for several more years given those new opportunities?

Yes. So our, yes -- so yes, so our trajectory right now is continuing to go up because of the SSAT program, which recently transitioned from LRIP to full rate production. Now the full rate production awards are starting to increase with the Navy. So we expect SSAT to continue to go up. What the Air Force is talking about on AFSAT, that program, I think we're introduction year 18 right now, and we're working on the next 5 years sole source. It appears -- and my opinion based on what's going on in the world, that looks like it's going to increase. We have a classified one, that -- it's in there somewhere that is moving forward that we expect to expand going forward. And then in addition to those are the 3 new ones I mentioned. So we are very comfortable with what we have and with what we hope to win that our target drone trajectory will continue to go up. And Noah, let me add this on, adverse air or red air drones used for adverse air or red air, there is now funding for that in the '23 budget, right? That -- we have not decided yet if we're going to handle that as a tactical or a target because it's time to sort of both will -- and that evolves and hopefully we're successful, we'll keep you in the loop on what we do with that.

Okay. And so there's nothing rolling off out of target unmanned. There's nothing that's an existing significant contributor that's starting to sunset.

Deanna, I can't think of anything.

No.

No. They're all -- they're flat or going up.

We're starting a new. Okay. Let's move into KGS. Where are you in this GBSD ramp-up?

We are in the 9-inning baseball game. First batter is up in the first inning.

Okay.

This is just beginning. And obviously, Northrop is our partner. We are a very key partner of theirs. We are in development, just like they are in development. Our development contract is approximately $200 million. It's just getting started. We expect it to increase by a few tens of billions of dollars in revenue in the second half over the first half. And then we expect it to increase from there next year in '23, because maintaining schedule for Northrop is critical, and we are committed to holding the schedule for our partner, which will -- which is going to be a significant growth driver for us.

When will that program move into the full rate production mode for the prime contractor and then that flow through to you?

I don't know if -- I don't recall, if Northrop has announced when LRIP is supposed to begin. So I'm going to say it's in a few years. But I just don't want to say the date. I just don't know if they've said it, and I don't want to get ahead of them.

And what's the multiple -- the run rate then goes up 3 or 4x for you?

Yes. So putting GBSD aside, put it aside, I'm not talking about GBSD on programs like this, we have a development piece and you have a production piece. The production piece can typically be -- is typically 3 to 5x of the development piece.

Okay. And this will be -- so the -- it's $100 million -- I think you said it's $180 million to $200 million over 6 years, is the initial.

Yes. 5 or 6, right?

Okay. Space. You've been highlighting space as one of your faster-growing businesses. On the call, you detailed many seemingly new opportunities in space. Was that correct? Or had I just missed some of those previously? And how much more opportunity is there for -- to sustain a really high growth rate in that business?

No, sir, you didn't miss anything.

Okay.

We have not talked about it. We have a lot of things going on. We don't talk -- we're not talking about it until we win. So the reason we made -- Deanna and I made the comments, we made last week is, we have just recently been awarded a new -- this is not OneWeb. To put OneWeb aside, that's a very important customer that we announced very recently. In addition to OneWeb, there were 3 others. One, we have received the contract on. The other 2, we are -- we've won, we've been formed, you have won. We are in contract, documentation. We expect to have that completed by the end of June. These 3 contracts, programs are several hundreds of millions of dollars for Kratos, several hundreds back of their typical government contract 3, 5, 7 years. They're all in there. Okay? We've won these primarily because of our new virtualized software ground control product, OpenSpace. So these programs have large for Kratos software content which is why we are very confident that starting in Q3, when they start to go, we are -- our company is going to see an incredible ramp in our space business, Q3, Q4, Q1 of '23, Q2 of '23. So this is phenomenal than we want and we have a handful of other piece, where we think we're going to win, because we are first to market with the software-based virtualized ground architecture.

And you're saying it's a few $100 million of cumulative wins so far over 4 or 5 years.

They say 5, just take an average of 5.

So we can be conservatively adding $50 million, $60 million of revenue per year from this.

Yes. I think we should just -- we're going to -- similar to the drone business, we're going to wait now until we print Q3, print Q4, and that's going to give everyone the idea of what -- and with the margins, what we're doing here.

These are better margins?

Yes, sir, which is one of the reasons why the second half of this year, our margins, we're projecting them to be -- Deanna, it's significantly higher, correct?

That's correct. Yes.

Okay. All right. That sounds good. And then you have the training business that had a piece rollout, and it's now pretty small, but just does that -- what happens to that going forward?

So Deanna, from a financial standpoint, what happens with that last piece. That rolled off last year, right? And now we're almost behind us.

Yes. So after Q2 of this year, the apples-to-apples will be out. So it contributed $8 million Q1 of '21 and about $5 million in Q2 of '21. So once we pass Q2, that will be completely out.

Okay. And then next year and forward, is that business just flat? Or does it have more recompetes that roll off? Or can it actually grow?

So that the pieces that we lost, we had no product content. It was a low price technically acceptable branding services contract that we had for 5 years. And if you recall, when it came up for bid, we were underbid by 40%. So good luck to the winter. Have fun. We have been -- and I'm not going to get too much into this similar to -- we didn't talk about what we were doing in space. We've been developing some very interesting virtualization products for training. We are in source selection right now on a $100 million program, it's down to 2 of us.

Okay.

Let's see the second half...

You're investing in that business and could grow that business in different offerings than what you've done in the past?

Yes. And we've got to win. And so I'm not getting ahead of ourselves, but we think we've got -- we've come up with a new product that the national security customers are going to like, very similar to what we did on the space side with the virtualized software.

Okay. Interesting. Your engine business, how big is that at this point and walk us through your opportunity set there?

Deanna, how big roughly is the engine business?

It's about $50 million to $60 million.

So it's about $50 million to $60 million. We are expecting in the next couple of months to receive a $50 million rather than that ballpark sole source contract for development of next-generation engines. We were designed in now on 5 platforms. We are -- for example, we're in Lockheed Martin Speed Racer program. We are designed in on Northrop's Gray Wolf program. The other 3 are not public yet. I will wait for the primes to announce what we've been designed in on. And we are moving towards, hopefully, initial production in '24.

Okay. Excellent. Let's -- Deanna, let's talk margins and cash flow. The margins for the company have moved lower in recent periods. Maybe just walk us through the drivers of that? And you've had markers out there for each of the segments' margins and what they can be over time. Have those changed? Or how can we think about that?

Sure. So the margins this first quarter and what we expect for the second quarter are lower than where we've been in the recent past. That's primarily due to the mix of revenues. As Eric had mentioned, the second half, we're expecting a more favorable mix with more software content. So that's part of the drivers there as well as the leverage that we expect to achieve on the fixed manufacturing overhead, G&A and R&D infrastructure. R&D is higher than it's been in the past, especially in the most recent quarter. That's primarily of our R&D, about 80% of that, 85% of that is in our space and satellite business. As these new awards are expected to come online in the second half. A lot of that -- the development staff will then transition to working direct, if you will, on some of these projects. So that will also improve the operating leverage on that infrastructure cost.

Okay. Got it. And then similarly, with cash flow conversion, that has moved lower in recent periods. Can you detail the drivers of that and how that can improve going forward?

Sure. So the first quarter, it was the use of cash from an operating standpoint. The biggest piece of it was related to bolstering our inventory level. So we -- that was about a use of $15 million since due to these supply chain issues, we're trying to lean forward and to procure advanced stock, if you will, to hopefully alleviate some of the supply chain disruption issues. So that's more of a near-term issue that we expect to see kind of resolving itself by the end of the year. We're leaning forward on a number of inventory purchases, both the first quarter and second quarter. to be able to make those deliveries that we anticipate in the second half.

How much excess inventory and/or total working capital are you strategically going to hold?

So -- and I would say it's not hold. It's to really -- because we don't buy stock just for stock. So it's -- they are 4 projects, so we're just buying ahead of where we normally would. So the first quarter was about $15 million in the second quarter is -- will be less than that, but it will still be ahead of schedule than what was originally anticipated.

Now will you then -- so you're buying ahead, but then you'll sell it through a product.

Correct.

But then will you keep buying ahead until for something else until supply chain is soft?

That is the current plan at this point, depending how the supply chain issues roll out through the rest of the year. It's not what we would want to do, but if we need to do it, we will do it.

Does that negatively impact your working capital turns or have a -- will that consistently have an impact on your cash flow for a while? Or will it just make the quarters lumpier, because you buy a little bit ahead and then you sell it pretty quickly.

It would definitely make the quarters lumpier. It may impact us from a longer term, especially as we fund our growth, there is -- there are going to be inventory buys as well as like I said, long lead engines that the long lead times have expanded. So we're leaning forward a little bit on that as well because of -- to be able to meet the supply chain delivery schedules.

Okay. Where are you seeing the largest supply chain hurdles? And is there any visibility into when they -- when and how they can improve?

Yes. So from a magnitude perspective, we're seeing the most in our commercial satellite and international satellite business as well as in our C5ISR business. And then smaller dollars as far as volume in our microwave products, but those have more of a margin impact because that's a higher margin business. So that's about the magnitude from the highest to lowest volume impact in those 3 businesses.

And Noah, it's solid-state power amplifiers and microelectronics in both the space business and in the microwave business.

Any idea when these can be resolved?

We...

That sounds like -- I know.

No. So for -- my business? We have taken out of our forecast anything that we don't think we can get this year, and we've redirected our resources to other projects, programs where we could get -- or we have the inventory. And even if we're being too conservative and we get some of that stuff in the second half of the year, we won't be able to convert it because we moved the teams to other programs.

Okay. On the capital plan, you have the $50 million to $60 million this year, that's double where you were 2 or 3 years ago. Remind me why and what does that do going forward?

Sure. Yes. So the -- what I consider the normal maintenance CapEx, it's about $25 million to $30 million, so that's more of a normal range. Some of the items that are included that are in addition to that normal maintenance stream is the capital Valkyries that we're building. So of the 12 lots that we're building, those that are not directly on contract yet are considered in capital. And then there's about a $10 million to $15 million build-out for certain secured facilities in both our unmanned business and in our space and satellite business due to direct customer and contract requirements. Those are the big pieces that are I don't want to say aberrations, but in addition to our normal maintenance.

And what's going on with those pieces next year?

So next year, I think there are some GBSD-related CapEx requirements and big machinery that we were planning on investing in this year, but that looks like it's going to be next year, that's about $5 million. So some of that $50 million to $60 million, $5 million of it is moving into 2023 because of supply chain delays and getting the machinery. So on a normal basis, I would expect that $25 million to $30 million and then there might be $5 million or so of $5 million to $10 million of additional CapEx in '23 at this point looking ahead.

Okay. Okay. I've gotten through all my questions, and we're just about out of time. I have one question e-mailed in from the viewers and that is, do you have medium-term financial targets for the company?

We have a -- we do an annual operating plan, and we do a 5-year strategic plan. We do it every year. And we mapped that into the fight up. We map that into the next year budget request. But the answer is yes, and those are 2 of the most important building blocks that we use -- that we map into our waterfall, our opportunity pipeline and then our projected revenue and profit. So yes.

Okay. Excellent. Okay. We've gone past the allotted time here, so I'll end the session here. Eric and Deanna, thanks so much for being with us today. We really appreciate it.

Thank you, Noah.

Great seeing you buddy. Thank you.

Take care.

Yes.