Louie DiPalma: Hi. Slide eight provided several backlog metrics and in the 10-Q you disclosed how the unfunded backlog includes a $235 million contract with a third-party that’s pending an export license approval. That’s obviously a very large, total contract value. Are you able to shed any light in terms of the probability of receiving that export license and the potential timing of that?
Wahid Nawabi: Sure, Louie. You are absolutely right that on our unfunded backlog, there is a — about a $235 million roughly contract for switchblades. It’s a DCS contract for a foreign country and military. And the reason for that is because that military needs them and is asked for them and requested them. The reason why it’s unfunded is because we were not sure in about the U.S. DoD’s willingness to allow for such a large contract value for switchblade to be initially DCS. That’s why you see more announcements from the U.S. Department of Defense on switchblade FMS sales. So, while that contract still exists in our unfunded backlog, I don’t really count on it as much because I am less confident about U.S. DoD giving approval for DCS sales for such a large contract for switchblade.
Now, whether or not that contract gets authorized for a DCS sale and approved through the State Department, I still believe that the demand is still there. The customer has already requested the same amount, if not more of them through FMS avenue and channels. And I expect that to actually convert to FMS sales or contract in the coming quarter. So, either way, I think it’s going to work itself out, but I’m less optimistic on DCS sales and far more optimistic on FMS sales, which we’re gaining more and more traction with the announcement that have occurred in the last couple quarters.
Louie DiPalma: Great. That detail was fantastic. And on another topic, has there been an increase in interest for your Sunglider aircraft in the wake of the Chinese balloon incident?
Wahid Nawabi: Louie, thank you again for a great question. The answer is absolutely yes. Even before the Chinese balloons on the U.S. airspace, there’s been significant discussions that we’ve had over the last year plus with the U.S. DoD on Sunglider for defense applications. The recent events of the Chinese balloon really elevated that to a whole different level. And it — what it’s done, it has increased its urgency. And I am — as I said on my remarks, I am more optimistic about the potential for securing a some small contract amount to get us going on Sunglider for U.S. DoD needs and applications. Obviously, it’ll be a longer term development and engagement and contract, but the initial one, I expect that to happen within the next quarter or so.
There’s a lot of interest in that capability. Sunglider has incredibly unique and powerful value proposition for stratospheric, ISR and other types of mission for defense. And the events with China as well as the conflict in Ukraine and Russia and what’s going on around the globe has really elevated the importance of this and the urgency of it has also elevated quite dramatically.
Louie DiPalma: Great. Thanks Wahid. Thanks Kevin and Jonah.
Wahid Nawabi: Thank you.
Jonah Teeter-Balin: Thank you, Louie.
Operator: Thank you. And one moment for our next question. Our next question comes from the line of Ken Herbert with RBC Capital Markets. Your line is open. Please go ahead.
Ken Herbert: Yeah. Hi. Good afternoon everybody.
Wahid Nawabi: Good afternoon.
Kevin McDonnell: Good afternoon.
Ken Herbert: Hey, Wahid, maybe or Kevin, just to start off, I wanted to see if you could provide a little more detail on the MUAS segment and specifically, gross profit. I know you’re investing significantly in this business. How do we think about maybe profitability in this business through the remainder of this fiscal year and in the next year? And maybe at what point, or maybe at what revenue point should we start to see gross margins really inflect positively in this segment?
