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With help from Lawrence Ukenye and Lara Seligman

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Now that you’ve read SUSAN GLASSER and PETER BAKER’s book excerpt on Gen. MARK MILLEY’s yearslong struggle with former President DONALD TRUMP, NatSec Daily wants to know: Is the Joint Chiefs chair a champion of civil-military relations or one of its greatest antagonists?

Col. DAVE BUTLER, Milley’s spokesperson in the Pentagon, told your host that, “Yes,” the chair sees himself as an upholder of civil-military relations. A senior defense official later assured that Milley was prepared to follow any lawful order from Trump, including the invocation of the Insurrection Act of 1807.

But when NatSec Daily asked some experts Monday about the piece, the reviews of Milley’s civ-mil performance were decidedly mixed.

“Gen. Milley faced as challenging an environment as any of his predecessors in the modern era. He should be evaluated the way we judge Olympic diving: by the difficulty of the dive. It is not surprising that he kicked up splash because circumstances were forcing him to attempt some exceedingly difficult dives," said Duke University’s PETER FEAVER, who is quoted in the article offering advice to Milley about what to do following the Lafayette Square photo op.

The American Enterprise Institute’s KORI SCHAKE said she plans to teach the article in class: “The exam question will be for students to identify the number of civil-military norms violated by Gen. Milley in the course of this story.” (She didn’t provide the answer, likely so her students couldn’t use NatSec Daily to cheat.)

The Glasser/Baker excerpt shows a chair working internally against Trump’s desires, namely to withdraw troops from Germany, send active-duty soldiers to quash domestic protests and counter Iran. But even if Milley deemed those orders awful, he must obey them as long as they were lawful.

If he doesn’t, “the military becomes an arbiter of the political fate of the country and that's undemocratic and inappropriate,” said LINDSAY COHN, a civil-military relations expert at the U.S. Naval War College (speaking for herself as an academic and not the institution or Navy).

But Cohn added there’s also a line that, “once crossed, means that civilian control as a value must be subordinated to some other value.” Upholding the Constitution by not participating in a forceful takeover of power by the sitting president following an election defeat could be such a moment. The problem, Cohn noted, is that “we have no consensus on where that line is.”

“I think reasonable people can disagree on whether he made the right choices,” she said of Milley, “but I also think it's important for all of us to ask ourselves where exactly we think that line is.”

The Inbox

$1B FOR UKRAINE: The Pentagon on Monday announced an additional $1 billion in military aid for Ukraine, the single largest such allocation from the presidential drawdown account since before Russia’s Feb. 24 invasion.

The latest tranche of aid includes for the first time munitions for the National Advanced Surface-to-Air Missile Systems, as well as additional ammunition for the High Mobility Artillery Rocket System (HIMARS), 1,000 more Javelin missiles, and more, according to acting press secretary TODD BREASSEALE.

On why the administration chose not to send more HIMARS, the Pentagon top policy official COLIN KAHL said during a Monday news briefing that “our assessment actually is that the Ukrainians are doing pretty well in terms of the numbers of systems and really the priority right now is making sure that they have a steady stream of these GMLRS.”

He also said Russia has suffered between 70,000 and 80,000 casualties and lost 3,000 to 4,000 armored vehicles since the invasion.

The U.S. has now provided Ukraine with $9.8 billion in security assistance since the start of the Biden administration.

ISRAEL-GAZA CEASEFIRE: An Egypt-brokered ceasefire between Israel and Palestinian Islamic Jihad (PIJ) in Gaza is still holding Monday following three days of violence that killed at least 44 Palestinians, the BBC reported.

“The latest violence began with attacks by Israel on sites in the Gaza Strip, which its military said was in response to threats from a militant group. It followed days of tensions after Israel arrested a senior PIJ member in the occupied West Bank,” per the BBC. “Israel, for its part, says it hit 170 PIJ targets during the operation, codenamed Breaking Dawn, killing several high-ranking PIJ members and destroying tunnels and weapon storage sites.”

The Israel Defense Forces say that militants inside Gaza launched 1,100 rockets during the fighting, with 200 landing inside the strip. There are no reports of any Israeli dead, though some were injured by debris from the rocket attacks.

Humanitarian aid is returning to Gaza now that the borders, closed during the violence, have reopened following the ceasefire.

In a statement, Biden said his “support for Israel’s security is long-standing and unwavering,” but that “reports of civilian casualties in Gaza are a tragedy.”

‘REAL CHANCE’ FOR IRAN DEAL RETURN: POLITICO’s STEPHANIE LIECHTENSTEIN reports that Western officials told her “they had finished negotiating technical questions that had remained open in the final draft text circulated by the European Union foreign policy chief Josep Borrell on July 21.”

On Monday, the EU will officially circulate the final draft document to participants and will ask the U.S. and Iran to agree on it. If there is agreement, foreign ministers are expected to return to Vienna to formally restore the 2015 nuclear accord.

“There is a real chance for an agreement but there are still a number of uncertainties as always,” one senior Western official told POLITICO.

However: An Iranian Foreign Ministry official told the official Iranian news agency IRNA on Monday that “given the continuation of discussions on some remaining important issues, we’re not yet at a stage to finalize the text.”

IT’S MONDAY: Thanks for tuning in to NatSec Daily. This space is reserved for the top U.S. and foreign officials, the lawmakers, the lobbyists, the experts and the people like you who care about how the natsec sausage gets made. Aim your tips and comments at [email protected], and follow me on Twitter at @alexbward.

While you’re at it, follow the rest of POLITICO’s national security team: @nahaltoosi, @woodruffbets, @politicoryan, @PhelimKine, @ChristopherJM, @BryanDBender, @laraseligman, @connorobrienNH, @paulmcleary, @leehudson, @AndrewDesiderio and @JGedeon1 — plus our summer interns, @Lawrence_Ukenye and @nicolle_liu.


THE BROKEN U.S.-CHINA HOTLINE: On Friday, your host and LARA SELIGMAN reported that top Chinese military officials didn’t respond to repeated calls from Defense Secretary LLOYD AUSTIN and Milley, the Joint Chiefs chair, during the live-fire exercises off the coast of Taiwan.

“[T]he last call Milley had with his Chinese counterpart, Chief of the Joint Staff Gen. LI ZUOCHENG, was on July 7, the Pentagon said. The two spoke by secure video teleconference about the need to maintain open lines of communication, as well as reducing risk, according to a readout from Milley’s office. Austin, meanwhile, met in person with Chinese Defense Minister Gen. WEI FENGHE in June on the sideline of the Shangri-La Dialogue in Singapore,” we wrote.

“The secretary has repeatedly emphasized the importance of fully open lines of communication with China’s defense leaders to ensure that we can avoid any miscalculations, and that remains true,” DOD spox Breasseale told us in an email.

The Wall Street Journal’s ALISTAIR GALE and NANCY YOUSSEF report that the four days of drills showed “the progress China has made coordinating different branches of its armed services, a hallmark of a modern military. China appeared to lack the military assets to impose a total blockade on Taiwan, they said, but Beijing showed it had enough maritime firepower to severely disrupt the island’s economy.”

Related:‘Spiral into crisis’: The U.S.-China military hotline is dangerously broken” by POLITICO’s PHELIM KINE.

RUSSIAN ATTACKS NEAR NUCLEAR SITES: The White House on Monday urged the Russian military to end operations near Ukrainian nuclear facilities, AFP reported.

The call comes as both Russia and Ukraine shifted blame during the weekend as shelling threatened the Zaporizhzhia nuclear complex. Kyiv has advocated for a demilitarized zone near nuclear facilities to limit the potential for catastrophe.

"What needs to be done is to remove occupying forces from the station and to create a demilitarized zone on the territory of the station," said PETRO KOTIN, a Ukrainian energy official.

Kyiv alleges that attacks near the complex, which is still operated by Ukrainian technicians, damaged the facility and led to two workers being hospitalized.


U.S. SANCTIONS TORNADO CASH: The Treasury Department on Monday sanctioned Tornado Cash, one of the largest so-called cryptocurrency mixers, for helping hackers in North Korea and elsewhere launder stolen money, our own ERIC GELLER reports (for Pros!).

Since its creation in 2019, Tornado Cash has helped cyber criminals and nation-state hackers launder more than $7 billion, a senior Treasury Department official told reporters, speaking on the condition of anonymity per standard government practice.

After a record-breaking $620 million cryptocurrency heist in March, the Lazarus Group, one of North Korea’s leading hacker gangs, used the service to launder over $455 million in Ethereum, according to the Treasury Department.

A senior administration official told reporters that the sanctions on Tornado Cash represented a key part of the Biden administration’s response to North Korea’s yearslong use of virtual currency thefts to finance its missile program. In May, the U.S. sanctioned, another virtual currency mixer.

“We will continue to aggressively pursue actions against currency mixers laundering virtual currency for criminals,” Secretary of State ANTONY BLINKEN said in a tweet.

The Complex

FIRST IN NATSEC DAILY — MILLEY TO CANADA: Joint Chiefs chair Milley is headed to St. John’s Newfoundland, Canada, on Monday to meet with the chiefs of defense from arctic nations, including Denmark, Finland, Iceland, Norway and Sweden, Col. Dave Butler told Seligman today.

The visit comes amid increasing concern among the West over Russian aggression, coming almost six months into Russian President Vladimir Putin’s grinding war with Ukraine. Canada and the U.S. conducted joint military exercises in March in the Arctic, where Moscow has stepped up its military presence in latest years.

The meeting “is an opportunity for like-minded Arctic nations to share lessons-learned from ongoing Arctic operations, coordinate enhanced cooperation between our nations, and re-affirm the shared commitment to the international rules-based order,” Butler said.

TOP 100: Defense News’ annual rankings of the world’s “Top 100” performing defense contractors was released Monday without many surprises. The top five, ranked in order of 2021 defense revenue, are all American: Lockheed Martin, Raytheon Technologies, Boeing, Northrop Grumman and General Dynamics.

On the Hill

2002 AUMF REPEAL IN NDAA?: The next National Defense Authorization Act may include a provision to repeal the 2002 authorization for the use of military force.

“I’ve talked with Senator [CHUCK] SCHUMER about it [and] he had promised a floor vote on this at some point,” Sen. TIM KAINE (D-Va.) told our own LAWRENCE UKENYE and CONNOR O’BRIEN. “He obviously wants to do it in a way that does not chew up the maximum amount of time, so we’re trying to figure that out.”

Kaine said tacking the repeal onto the defense policy bill or holding a standalone vote in connection with the 20th anniversary of the vote that preceded the U.S. invasion that toppled SADDAM HUSSEIN’s regime are possibilities. Finding time on the Senate floor, though, is a major obstacle.

“I’ve been reassured by Senator Kaine that we will likely have a vote between now and year’s end,” Sen. TODD YOUNG (R-Ind.), who’s spearheading the effort with Kaine, said in a brief interview. “I agree that the NDAA is the most logical vehicle, but frankly we’ll hitch a ride wherever we can catch it. It’s a busy calendar.”

FIGHT OVER TAIWAN POLICY ACT: Congress is working on a bill to strengthen America’s policy toward Taiwan. The White House is trying to water it down.

“The legislation, initially introduced by the Democratic chair of the Senate Foreign Relations Committee, represents the most dramatic shakeup of the U.S.-Taiwan relationship since the Taiwan Relations Act, which has guided U.S. policy on the subject since 1979. It authorizes $4.5 billion in security assistance for Taiwan and gives the island the distinction of being a ‘major non-NATO ally’ of the U.S., among other provisions,” our own ANDREW DESIDERIO reported.

The Biden administration isn’t necessarily against the bill, but it is trying to shape it. That’s normal –– a lawmaker from the president’s party typically gives the White House a chance to weigh in, especially if it contravenes a previous policy. The question is just how much input Sens. BOB MENENDEZ (D-N.J.) and LINDSEY GRAHAM (R-S.C.), who introduced the measure, are willing to accept.

As NatSec Daily will write a lot this August: We’ll see what happens after the recess.


PETRAEUS SLAMS AFGHANISTAN WITHDRAWAL: Retired Gen. DAVID PETRAEUS, who commanded forces in Afghanistan, targeted the Biden administration for taking troops out of the country a year ago and its predecessors for failing to win the 20-year war.

“The fact and manner of America’s departure also enabled our adversaries to claim that the United States is not a dependable partner and is instead a great power in decline,” he wrote for The Atlantic on Monday. “[W]e left behind hundreds of thousands of Afghans who shared risk and hardship with our soldiers, diplomats, and development workers, and whose lives are now endangered, along with those of their family members.”

“It did not have to turn out this way. I do not mean simply that there were reasonable alternatives to withdrawal that were not adequately considered, alternatives that would have led to better results than what we see today—though there were, and they would have.

“Rather, I mean that it did not have to be this way at all; that despite the selfless, courageous, and professional service of our military and civilian elements, and also of our coalition partners—as well as that of innumerable great Afghans—we underachieved in Afghanistan,” he said.

His main critique is that America didn’t have the commitment to win in Afghanistan, even if it spent two decades there. The U.S. didn’t follow a coherent strategy from administration to administration, he said, and the nation cared more about the fate of Iraqis. All told, the U.S. entered the war but never fully competed in it.


Our own DANIEL LIPPMAN sends in these two scoops:

FIRST IN NATSEC DAILY:VERONICA VALDEZ is now White House liaison at the Defense Department. She most recently was special assistant to the assistant secretary of defense for Indo-Pacific security affairs. LEO CRUZ is now deputy White House liaison at DoD. He most recently was special assistant to the under secretary of Navy and is also a Biden campaign alum.

FIRST IN NATSEC DAILY: ZEPPA KREAGER is now senior adviser to the U.S. Ambassador to Mexico KEN SALAZAR. She most recently was White House liaison at the U.S. Agency for International Development and is an alum of the Biden campaign and the Obama White House. JENNIFER SOSA replaced Kreager as White House liaison at USAID. She most recently was deputy White House liaison at DoD.

What to Read

WHITE HOUSE: “U.S. Strategy Toward Sub-Saharan Africa

CAITLIN DICKERSON, The Atlantic: “‘We need to take away children’

STEPHEN BIEGUN, ERIC EDELMAN, DANIEL FATA and DAVID KRAMER, The Bulwark: “With Enough Help, Ukraine Can Win

Tomorrow Today

The Carnegie Endowment for International Peace, 10 a.m.: "New Nuclear Troubles in Southern Asia?" 

The Association of the U.S. Army, 12 p.m.: "Degrade and Destroy: The Inside Story of the War Against the Islamic State, from Barack Obama to Donald Trump"

Washington Post Live, 5 p.m.: "U.S. economic and military ties to Japan and South Korea, and the threat posed by China”

White House, 8 p.m.: Biden delivers remarks on the Sergeant First Class Heath Robinson Honoring our Promises to Address Comprehensive Toxics Act of 2022.

Have a natsec-centric event coming up? Transitioning to a new defense-adjacent or foreign policy-focused gig? Shoot me an email at [email protected] to be featured in the next edition of the newsletter.

And thanks to my editor, Ben Pauker, who prefers cannonballs to Olympic diving.

Mon, 08 Aug 2022 07:52:00 -0500 en text/html
Killexams : The Rise of the Digital Procurement Officer

It’s fair to say that the past few years have not been kind for procurement and supply chains. From geopolitical challenges and Brexit to a global pandemic and rising costs, businesses have had to cope with several unique issues within the supply chain.

Once-in-a-generation black swan events have become a constant barrier of disruption, putting greater pressure on the role of Chief Procurement Officers (CPO) to ensure continuity and instill greater resilience.

Supply chain bottlenecks, disruption, and delays continue to threaten customer-supplier relationships. As a result, procurement leaders are re-evaluating how they use data to provide end-to-end supply chain visibility and become more responsive, giving rise to a new generation of digital CPOs.

Armed with real-time data, not only can supply chains become more efficient, but also more sustainable – another important aspect as ESG initiatives surge up the procurement priority list.

It’s time to adapt procurement strategies

With the one certainty for procurement teams being uncertainty – increasing attention has fallen at the door of the procurement teams to continue to provide the essential efficiencies businesses need to continue to trade, whilst managing supply chain disruptions, which now are commonplace and show little sign of dissipating.

The slick, if not risky strategies of ‘just-in-time’ and cost-dominated sourcing have mainly through necessity, been replaced, or at least augmented to ensure continuity and to increase the longevity of the procurement function.

The next logical step is for businesses to create and implement digital procurement strategies, which will help businesses deploy the resources needed to build much-needed agility into their procurement process, whilst ensuring efficient spending, and sustainability, all wrapped up in water-tight governance.

Sustainability in the supply chain has to be accounted for along every part of the procurement journey, ranging from selecting ethical suppliers, minimising waste through efficient supply and demand management.

By taking a much more holistic view of procurement, by adopting sustainable and socially responsible procurement practices, providing end-to-end visibility to digital Procurement Officers POs, that facilitates monitoring and compliance, and delivers continuous value to the business.

The collaborative future

The future of supply chains will be characterised by a dynamic outside-in approach to analysis and collaboration between all actors, from the purchaser to the supplier – this is where a new generation of digital Procurement Officers can make their mark and ensure that procurement strategies have robust flexibility needed to cope with the inevitable black, or perhaps with planning, just swan events!

A robust and sustainable procurement strategy will deliver a great deal to a business by helping it to minimise errors, identify efficiency opportunities, whilst supporting governance with policy compliance, whilst helping to eliminate maverick spend providing the most ethical and sustainable ways of sourcing and acquiring goods and services, ensuring that ESG initiatives are delivered upon.

Keeping digitally grounded

However, it is important to note that as much as there are a plethora of digital tools at the disposal of the digital CPO which can be used to drive better value for the procurement, the digital CPO must work across the business to ensure that the digital journey starts with identifying current business processes where technology can be used either to enhance the user experience and Boost both the efficiency and productivity of any given department.

With 75% of CPOs believing that they will deliver a digital procurement strategy in the next five years, there really is no turning back from the upward trajectory the digital procurement officer is on, but it’s all hands to the procurement pump when it comes to tackling ever-increasing costs.

Building resilience in the supply chain

Improved decision-making and efficiency that digital procurement solutions bring to a business are helping to drive more complex analysis, better supplier strategies, and intelligent procurement operations.

As black swan events become increasingly commonplace, supplier collaboration is mission critical for procurement teams, a view reflected by industry, with a latest survey showing that 66% of businesses believe better collaboration with suppliers was needed to increase supply chain resilience.

Supply chain disruptions cause financial loss due to the necessity to make alternative plans at the same time as everybody else – you only need to look at the semiconductor shortage which crippled the production of consumer electronics earlier this year, to see the very real impact these issues have.

Fresh perspective and increased visibility

As digital innovation becomes a reality for procurement teams, CMOs have a chance to gain fresh visibility across not just the entire supply chain, but across the entire business – with data insights, blended with sustainable best practice.

By digitalising procurement processes, organisations can Boost risk management and increase transparency in both operational and supplier relationships – whilst streamlining operations and driving cost savings. Enabling them to measure progress against key business priorities such as supply continuity, ESG performance, and innovation.

Ultimately, nobody knows how long the problems with supply chains will last, as new disruptions continue to challenge. Irrespective of current and potential future scenarios, the rise of the Digital Procurement Officer services to ensure accurate and meaningful data is gathered, analysed, and put to use in order to drive decisions making CMOs are better able to drive revenue for their organisations as well as Boost customer and supplier relationships.

Tue, 26 Jul 2022 21:15:00 -0500 en-US text/html
Killexams : 4 Stocks Warren Buffett Can't Stop Buying No result found, try new keyword!Since becoming Berkshire Hathaway CEO in 1965, Buffett has led his company's Class A shares (BRK.A) to a scorching average annual return of 20.1%. In latest quarters, Warren Buffett has been ... Sun, 07 Aug 2022 21:06:00 -0500 en-us text/html Killexams : In Praise of Doing Nothing

In the 1950s, scholars thinking that, thanks to technological innovations, Americans wouldn’t know what to do with all of their leisure time.

Yet today, as sociologist Juliet Schor notes, Americans are overworked, putting in more hours than at any time since the Depression and more than in any other in Western society.

It’s probably not unrelated to the fact that instant and constant access has become de rigueur, and our devices constantly expose us to a barrage of colliding and clamoring messages: “Urgent,” “Breaking News,” “For immediate release,” “Answer needed ASAP.”

It disturbs our leisure time, our family time – even our consciousness.

Over the past decade, I’ve tried to understand the social and psychological effects of our growing interactions with new information and communication technologies, a subject I examine in my book “The Terminal Self: Everyday Life in Hypermodern Times.”

In this 24/7, “always on” age, the prospect of doing nothing might sound unrealistic and unreasonable.

But it’s never been more important.

Acceleration for the sake of acceleration

In an age of incredible advancements that can enhance our human potential and planetary health, why does daily life seem so overwhelming and anxiety-inducing?

Why aren’t things easier?

It’s a complex question, but one way to explain this irrational state of affairs is something called the force of acceleration.

According to German critical theorist Hartmut Rosa, accelerated technological developments have driven the acceleration in the pace of change in social institutions.

We see this on factory floors, where “just-in-time” manufacturing demands maximum efficiency and the ability to nimbly respond to market forces, and in university classrooms, where computer software instructs teachers how to “move students quickly” through the material. Whether it’s in the grocery store or in the airport, procedures are implemented, for better or for worse, with one goal in mind: speed.

Noticeable acceleration began more than two centuries ago, during the Industrial Revolution. But this acceleration has itself … accelerated. Guided by neither logical objectives nor agreed-upon rationale, propelled by its own momentum, and encountering little resistance, acceleration seems to have begotten more acceleration, for the sake of acceleration.

To Rosa, this acceleration eerily mimics the criteria of a totalitarian power: 1) it exerts pressure on the wills and actions of subjects; 2) it is inescapable; 3) it is all-pervasive; and 4) it is hard or almost impossible to criticize and fight.

The oppression of speed

Unchecked acceleration has consequences.

At the environmental level, it extracts resources from nature faster than they can replenish themselves and produces waste faster than it can be processed.

At the personal level, it distorts how we experience time and space. It deteriorates how we approach our everyday activities, deforms how we relate to each other and erodes a stable sense of self. It leads to burnout at one end of the continuum and to depression at the other. Cognitively, it inhibits sustained focus and critical evaluation. Physiologically, it can stress our bodies and disrupt vital functions.

For example, research finds two to three times more self-reported health problems, from anxiety to sleeping issues, among workers who frequently work in high-speed environments compared with those who do not.

When our environment accelerates, we must pedal faster in order to keep up with the pace. Workers receive more emails than ever before – a number that’s only expected to grow. The more emails you receive, the more time you need to process them. It requires that you either accomplish this or another task in less time, that you perform several tasks at once, or that you take less time in between memorizing and responding to emails.

American workers’ productivity has increased dramatically since 1973. What has also increased sharply during that same period is the pay gap between productivity and pay. While productivity between 1973 and 2016 has increased by 73.7 percent, hourly pay has increased by only 12.5 percent. In other words, productivity has increased at about six times the rate of hourly pay.

Clearly, acceleration demands more work – and to what end? There are only so many hours in a day, and this additional expenditure of energy reduces individuals’ ability to engage in life’s essential activities: family, leisure, community, citizenship, spiritual yearnings and self-development.

It’s a vicious loop: Acceleration imposes more stress on individuals and curtails their ability to manage its effects, thereby worsening it.

Doing nothing and ‘being’

In a hypermodern society propelled by the twin engines of acceleration and excess, doing nothing is equated with waste, laziness, lack of ambition, boredom or “down” time.

But this betrays a rather instrumental grasp of human existence.

Much research – and many spiritual and philosophical systems – suggest that detaching from daily concerns and spending time in simple reflection and contemplation are essential to health, sanity and personal growth.

Similarly, to equate “doing nothing” with nonproductivity betrays a shortsighted understanding of productivity. In fact, psychological research suggests that doing nothing is essential for creativity and innovation, and a person’s seeming inactivity might actually cultivate new insights, inventions or melodies.

As legends go, Isaac Newton grasped the law of gravity sitting under an apple tree. Archimedes discovered the law of buoyancy relaxing in his bathtub, while Albert Einstein was well-known for staring for hours into space in his office.

The academic sabbatical is centered on the understanding that the mind needs to rest and be allowed to explore in order to germinate new ideas.

Doing nothing – or just being – is as important to human well-being as doing something.

The key is to balance the two.

Taking your foot off the pedal

Since it will probably be difficult to go cold turkey from an accelerated pace of existence to doing nothing, one first step consists in decelerating. One relatively easy way to do so is to simply turn off all the technological devices that connect us to the internet – at least for a while – and assess what happens to us when we do.

Danish researchers found that students who disconnected from Facebook for just one week reported notable increases in life satisfaction and positive emotions. In another experiment, neuroscientists who went on a nature trip reported enhanced cognitive performance.

Different social movements are addressing the problem of acceleration. The Slow Food movement, for example, is a grassroots campaign that advocates a form of deceleration by rejecting fast food and factory farming.

As we race along, it seems as though we’re not taking the time to seriously examine the rationale behind our frenetic lives – and mistakenly assume that those who are very busy must be involved in important projects.

Touted by the mass media and corporate culture, this credo of busyness contradicts both how most people in our society define “the good life” and the tenets of many Eastern philosophies that extol the virtue and power of stillness.

French philosopher Albert Camus perhaps put it best when he wrote, “Idleness is fatal only to the mediocre.”

This article is republished from The Conversation under a Creative Commons license. Read the original article here:

Wed, 27 Jul 2022 02:56:00 -0500 en-us text/html
Killexams : Could learning algebra in my 60s make me smarter?

I don’t see how it can harm me now to reveal that I only passed math in high school because I cheated. I could add and subtract and multiply and divide, but I entered the wilderness when words became equations. On test days I sat beside smart boys and girls whose handwriting I could read and divided my attention between his or her desk and the teacher’s eyes. To pass Algebra II, I copied a term paper and nearly got caught. By then I was going to a boys’ school, and it gives me pause to think that I might have been kicked out and had to begin a different life, knowing different people, having different experiences, and eventually erasing the person I am now.

When I read Memories, Dreams, Reflections, I felt a kinship with Carl Jung, who described math class as “sheer terror and torture”, since he was “amathematikos”, which means something like nonmathematical. I am by nature a self-improver. I have read Gibbon, I have read Proust. I read the Old and New Testaments and most of Shakespeare. I studied French. I have meditated. I jogged. I learned to draw, using the right side of my brain. A few years ago I decided to see if I could learn simple math, adolescent math, what in the 18th century was called pure mathematics: algebra, geometry and calculus. I didn’t understand why it had been so hard. Had I just fallen behind and never caught up? Was I not smart enough? Was I somehow unfitted to learn a logical, complex and systematised discipline? Or was the capacity to learn math like any other attribute, talent for music, say? Instead of tone deaf, was I math deaf? And if I wasn’t and could correct this deficiency, what might I be capable of at 65 that I hadn’t been capable of before? I pictured mathematics as a landscape and myself as if contemplating a journey from which I might return like Marco Polo, having seen strange sights and with undreamt-of memories.

I could have taken a class, but I had already failed math in a class. Also, I didn’t want to be subject to the anxiety of keeping up with a class or slowing one down because I had my hand in the air all the time. I didn’t want a class for older people, because I didn’t want to be talked down to – and more cheerfully than in usual life, the way nurses and flight attendants talk to you. I could have sat in a class of low-achievers, a remedial class, but they aren’t easy to find. I arranged to occupy a chair one afternoon in an algebra class at my old school, where 12-year-olds ran rings around me. The teacher assigned problems in groups of five, and by the time I had finished the first problem they had finished all of them correctly. They were polite about it, and winning in the pleasure they took in competing with one another, but it was startling to note how much faster they moved than I did. I felt as if we were two different species.

Having skipped me, the talent for math concentrated extravagantly in one of my nieces, Amie Wilkinson, a professor at the University of Chicago, and I figured she could teach me.

“How do you think this will go?” I asked Amie.

“If I had to guess, I would say you will probably overthink.”

“How so?”

“X is a useful thing. I can solve for it – I can manipulate it – and I can hear you say, ‘What does that mean?’”

“Do I whine like that,” I thought, then I said: “What does it mean?”

“It’s a symbol that stands for what you want it to stand for.”

“What if I don’t know what I want it to stand for?”

“See, this is what I’m talking about.”

“Well, wait, that’s…”

“Here is some advice,” she said firmly. “I get it that you try to put things into a framework that you can understand. That’s fine, but at first, until you become comfortable with the formal manipulation, you have to be like a child.”

Alec Wilkinson’s maths teacher, his niece Amie Wilkinson – professor of mathematics at the University of Chicago. Photograph: Jessica Wynne

To prepare for our meeting, Amie suggested that I read Algebra for Dummies, which I had hardly begun when it was borne in on me that it didn’t matter who it was for, it was still algebra. memorizing the book, I am surprised to find that I recall almost nothing of algebra. I had got lost so quickly that very little had made an impression. I can still recite the prologue to the Canterbury Tales in Middle English, which I was required to learn as a senior in high school. I remember “kingdom, phylum, class, order, family, genus, species”. And that in 585BC, Thales predicted an eclipse of the sun. With algebra, I come up empty.

When I thought I had read a sufficient amount, I went to Chicago to see Amie. I sat beside her on a couch in her living room. I held my pencil and notebook ready. My manner was like that of the novice on his first day in the monastery, poised to have the head monk reveal how to find God. She said: “I’m not sure where to start.” I had been expecting her to say something like:“There’s a train in Omaha heading for Dallas and leaving at three in the afternoon.” Instead, we sat silently. A dog barked. I smiled weakly.

There is a belief among certain academics that a subject is less efficiently learned from an adept than from someone who is studying it or has just finished studying it. The adept’s long acquaintance makes it difficult for him or her to see the subject in its simpler terms or to appreciate what it is like to approach the subject as a greenhorn. As I sat uneasily beside Amie, it dawned on me that I was asking a mathematician with a trophy case whose standing is international to teach me math that she had learned nearly half a century earlier as a precocious child and hadn’t used since. Furthermore, she had for the most part embraced it intuitively and then layered upon it many other practices, explorations and diversions. Her learning had a kind of family tree of associations, and all I had was what I had picked up piecemeal in a few weeks of study. What I might have said to her of the difficulty I was having was: “Pretend you were a child receiving this information for the first time. Can you remember how you heard it so that it was sensible to you?”

A further complication developed, which is that what is difficult for me had not been difficult for her, and I don’t think she could see why I had such trouble learning what she had found simple. “How do you think you would have thought about this if you hadn’t been able to think of it as you had,” is the kind of question I would have had to ask, and being philosophical more than practical, it isn’t a discussion that would have solved my difficulties. I might have learned something about her, but not likely anything about math. In On Proof and Progress in Mathematics, William Thurston writes: “The transfer of understanding from one person to another is not automatic. It is hard and tricky.” We had been working together in a halting way for several weeks when I realised that I was going to have to learn a lot of this on my own.

We don’t often encounter the limits of our intelligence, but the way I struggled with algebra sometimes made me wonder if I was finding my own. At such times I felt myself to be a poorly equipped version of human possibility, sort of a discard. I was also almost daily reminded of how some things needed to be learned more slowly. Meanwhile, I was harassed by my upbringing to believe that I had to work quickly; any half-smart person could work out a problem given sufficient time. I found these attitudes difficult to combine.

Sometimes I realised that I was talking to different parts of myself, and the exchange was not polite. Occasionally, I got good at operations that were hard at first. This happened with factoring, a process in algebra of simplifying expressions, and with expanding, which is the opposite of factoring. The axioms of arithmetic imply that when you expand (a + b)2, for example, you get a2 + 2ab + b2 in the following way: (a + b)2 is equal to (a + b)(a + b). Each term in one parentheses multiplies the terms in the other: a × a = a2 ; a × b = ab; b × a = ab; b × b = b2. Combining the terms, a2 + ab + ab + b2 = a2 + 2ab + b2. In a similar way, a2 – b2, a squared number subtracted from another squared number, called a difference of squares, becomes (a – b)(a + b), which becomes a2 + ab – ab – b2, which is a2 – b2. Simple, but I really liked it.

As the formulas became more complicated, there were more steps, each of which followed from the one before it, so that in addition to finding the answer, there was the pleasure of enacting a procedure properly, plus no textbook skipped the steps. Each time I turned a page and saw more factoring, I was pleased. It was like being good at spelling and wanting to be asked more words. Accompanying my pleasure, though, was a voice saying: “Listen, Slick, this is algebra for kids. We can throw problems at you, you won’t even know what they mean.”

Sometimes I dreamed that there were numbers falling from the sky into chasms I couldn’t see the bottom of.

As I progressed, my eye progressed, and more than solving algebra problems by grasping their design, I became more clever at memorizing questions. To do better, though, I had to become vigilant. For someone who thought that there were shortcuts and faster passageways to learning, this was unwelcome. I had never understood that learning needs to be done patiently. One can be impatient to learn or for learning in general, but that is a matter of temperament. I am having to learn how to learn. In school they expect you to learn, but they don’t teach you how to learn, at least they didn’t in my childhood.

I am accustomed to remembering what I hear and being able to draw on it. Learning algebra requires a secondary use of information, though, a sorting and referencing, a repetition of experience, so that it actually is experience. With algebra I’m not simply collecting information, I am having to classify and comprehend it. We do this naturally as children in classrooms, partly because the distant future seems as if it will never arrive, but it is a different matter to be older and feel that one’s capital of time is remorselessly diminishing. Such a consideration adds a complicating haste and impatience.

Quick Guide

How to reboot your interest in maths


The thought of getting back into maths probably seems like a slog. Fortunately, the days of endless exercises and red ink are behind us.

One good way to rekindle your interest in a subject is to listen to people talking enthusiastically about it. Among many excellent maths podcasts, Katie Steckles and Peter Rowlett’s Mathematical Objects stands out as accessible and engaging. YouTube channels such as Numberphile and 3Blue1Brown also break deep maths subjects down into understandable chunks; for learning in a more structured way, it’s hard to look past Khan Academy – its online courses progress from preschool to linear algebra.

If you’re interested in taking maths further, Vicky Neale’s book Why Study Mathematics? is an essential guide to where university maths goes. If you’re trying to keep up with what the youngsters are doing at school, Rob Eastaway’s Maths for Mums and Dads works equally well for parents and non-parents.

But the best way to get joy out of maths is to do it for fun. Find puzzles you enjoy. Or make it social by searching out your local MathsJam – monthly pub meet-ups for enthusiasts that take place in towns and cities around the UK. Colin Beveridge

Colin Beveridge is the author of several popular maths books, including Basic Maths for Dummies

Thank you for your feedback.

The ability to learn mathematics is thought to decline around 40, when the brain begins slowing its handling of procedural operations such as calculating. Older people learn and forget at roughly the same pace that younger people do, but calculating takes an older person twice as long. In the paper Acquiring Skill at Mental Calculation in Adulthood, Neil Charness and Jamie Campbell say that middle-aged people perform as older ones do, but if they practise, they perform more as younger people do. If speed is valued more than accuracy, the decline in ability is obvious. If accuracy is valued more than speed, the decline is less obvious and maybe not even very pronounced. Younger people tend to read faster than older people. Older people tend to remember more of what they’ve read.

From brain scans it appears that older people engage more of their faculties in solving a problem than young people do. The scaffolding theory of ageing and cognition says that brains respond to declines by recruiting assistance – that is, by replacing a response typically dedicated to a single area with a pattern of layered responses involving several areas. “Harold” is an acronym for “hemispheric asymmetry reduction in older adults”, a form of brain plasticity. I know about it from the research article Creativity and Ageing by Gene Cohen. Cohen says that the brains of older people may enlist areas that usually have one function to collaborate with another function, which is called bilateralisation. Cohen likens it to the brain’s moving, perhaps in a compensatory way, “to an all-wheel drive”.

Carol D Ryff at the University of Wisconsin’s Institute of Ageing told me about stereotype embodiment theory, which was proposed by the Yale psychologist Becca Levy. It says that the culture presents older people as moving slowly, being hard of hearing, talking too loud, and unable to read small print. These depictions are funny when we’re young; then we grow old and enact them, and they undermine a person’s sense of wellbeing. “There are certain fields where you get better with age, though,” Ryff told me. “You’re not going to have a 22-year-old wunderkind psychotherapist. Most of Freud’s brilliant theories didn’t arrive until his 50s.” I told Ryff that I was trying to learn math, and that I had a math allergy. “Someone with math anxiety, later in life, with a different perspective can really shine and discover something new,” she said. “It’s incredibly healthy for the brain as well.”

Dividing the fraction 7/2 by 2, I confused the properties of exponents, and thought that the product is 7, since 7 × 2 = 14 and 14/2 = 7, when in fact the answer is 7/4, since dividing a fraction by 2 is the same as multiplying by 1/2, but I got the answer wrong and got angry at math and called Amie, and she wouldn’t talk to me until I calmed down. She wasn’t always calm, either. Once I heard Benson, her husband, in the background say: “Why are you yelling at him?” When I had worn Amie’s patience too thin, I would call Deane Yang, my friend who is a mathematics professor at NYU.

“The way you remember procedures is you remember why,” he said.


“Because people learn math as a collection of procedures,” he said. “When things get difficult, they’re lost, and math becomes religion class. The teacher says what’s right and wrong, and for all you know math came out of the sky, and some prophet told you how to do it, and it’s just blind belief then. The goal is to take on questions that appear to be complicated, and to recognise that a complicated question can be broken down into simpler questions, some of which can be answered independently of one another.”

“With math you have to be very, very disciplined,” Deane said. “Normally with algebra, you’re trying to make something complicated simpler, but often, temporarily, you have to make it more complicated. The only way to be properly disciplined is to remember exactly what you’re allowed to do, and what you’re not allowed to do. You have to write everything down, line by line. Math is painstaking.” These remarks had an almost Zen-like forcefulness for me. They were both abstract and practical, they spoke to my distress, and for a while things got better.

I finished algebra plagued by the feeling that I had to get every problem right. I had started hopefully and been throttled. What I had wished for was to see algebra as rational and cohesive, and therefore benign, so that I could dispose of the mystery it had left me with. If I were able to do that, I would have made use of ways of thinking that challenged me to expand my intellect – my capacity for regarding problems whose solutions require the management of symbols, something I had never been good at.

The enlargement of one’s intellectual reach isn’t the kind of circumstance a person can identify empirically. One can only sense it about oneself. I felt I was beginning to change, to a degree, perhaps only in a cursory way, but I also felt, superstitiously, that to acknowledge it might be prideful, which might lead to it being revoked by whatever agency it is that lurks inside superstitious moral attitudes. Anyway, I finished algebra, I came to the end of the textbook. It had taken five months, not six weeks. I had learned things, though, I had some new skills, even if rudimentary ones. I could do things I hadn’t been able to do, and I was pleased. The accomplishment was not substantial, but it was my own, and I had worked for it. I raised a private glass to myself and said, “Well done,” in the middle of an afternoon – then I went on to geometry.

Sat, 06 Aug 2022 23:00:00 -0500 en text/html
Killexams : Maxar Technologies Inc. (MAXR) CEO Dan Jablonsky on Q2 2022 Results - Earnings Call Transcript

Maxar Technologies Inc. (NYSE:MAXR) Q2 2022 Earnings Conference Call August 9, 2022 5:00 PM ET

Company Participants

Jonny Bell - Investor Relations

Dan Jablonsky - Chief Executive Officer

Biggs Porter - Chief Financial Officer

Conference Call Participants

Peter Arment - Baird

Colin Canfield - Barclays

Thanos Moschopoulos - BMO Capital Markets

Ken Herbert - RBC Capital Markets

Robert Spingarn - Melius Research

Austin Moeller - Canaccord Genuity

Chris Quilty - Quilty Analytics

Noah Poponak - Goldman Sachs

Michael Ciarmoli - Truist Securities


Good day. My name is Dana and I will be your conference operator for today. At this time, I would like to welcome everyone to the Maxar Technologies’ Q2 2022 Conference Call and Webcast. Today’s call is being recorded. [Operator Instructions] Thank you. And I would now like to turn the conference over to Jonny Bell. Please go ahead.

Jonny Bell

Good afternoon and thanks operator. Welcome to Maxar’s second quarter 2022 earnings conference call. I am joined today by the company’s Chief Executive Officer, Dan Jablonsky and Chief Financial Officer, Biggs Porter. Both will make some opening remarks, after which, we are going to open up the line for your questions. We are shooting to wrap up the call in about an hour.

Before we get started, I’d like to refer listeners to the accompanying slides for today’s presentation, which can be found on the company’s website at Once there, please turn to Slide 2, where I’d like to remind you that part of today’s discussion, including responses to various questions, may contain forward-looking statements, which represent the company’s estimates, future plans, objectives and expected performance at today’s date. These statements are based on current assumptions that the company believes are reasonable, but are subject to a wide range of uncertainties and risks that could lead genuine results to differ materially from the forward-looking information. You can refer to the advisory regarding forward-looking statements contained in our quarterly earnings releases, earnings call slide decks and the company’s most latest MD&A section found in our Form 10-Q on the company’s website at

And with that, I will hand the discussion over to Dan. Dan, go ahead.

Dan Jablonsky

Thanks, Johnny. Good afternoon, everyone. Today, I am going to review the highlights of our performance in the quarter, go through our priorities and talk a bit about latest successes we have had with our strategic plan, provide an update on the Legion program, and provide some information on the environmental work that Maxar has been doing. Please look at a more detailed review of financial results and our latest refinancing activities.

Please turn to Slide 3. We had a solid quarter. In Earth Intelligence, we saw sequential growth in product revenues. While the revenue on the services side was a little light, which is a reminder is the lower margin business, due to challenges hiring cleared personnel and delays and awards. In Space Infrastructure, we posted solid margin performance at roughly 10%. Consolidated performance, as expected, reflected good growth from the first quarter. Total company book-to-bill this quarter was 4x driven in large part by the Electro-Optical Commercial Layer Program award announced in May. As a reminder, this award added $1.5 billion in backlog for the first 5 years of the contract and is a $3.2 billion contract that provides great revenue visibility for Maxar over the next decade.

Importantly, it also provides multiple paths for growth with the NRO, other U.S. government agencies and our diversified customer base moving forward. Beyond EOCL, the Earth Intelligence segment had a diversified set of bookings across the U.S. government, international allies and enterprise customers. Also, Maxar was recently awarded an Option Year 3 contract renewal with the NGA for the global EGD program. The annual contract value is approximately $44 million. This is the third of 3 option years for the contract, which has a total value of up to $176 million.

We continue to see strong support for this program and we expect to negotiate additional option years until the next iteration of this contract has recompeted. We have been providing some version of this capability for about a decade now. And with this award, Maxar will continue to provide more than 400,000 U.S. government users with unclassified, online and offline on-demand access to high resolution commercial imagery from Maxar in addition to geospatial data from other industry providers. I am pleased with the momentum we have in the Earth Intelligence business and expect latest bookings growth to drive continued revenue growth in the quarters ahead.

In Space infrastructure, similar to last quarter, the segment book-to-bill continues to be impacted by the large number of GEO Comsat awards received in 2020 related to the C-band transition, which are nearing completion. As a reminder, orders tend to be a bit variable and it’s hard to predict precise timing. We continue to expect to end the year with a book-to-bill greater than 1 in the Space segment. We have a good set of opportunities in front of us as we continue to perform in our legacy GEO Com business and pursue our strategy of customer and product diversification.

I will go into it a little – into a little more detail later. But two great examples of diversification have been our teaming with L3Harris as their subcontractor on the SDA T1 tracking layer program, where we are providing buses for their 14 satellites and our down-select on the GeoXO program with NASA to perform study phase work for next-gen weather satellites. We are also seeing good traction with our PLEO investments in the commercial sector.

On the balance sheet, our key priority has been to manage through near-term maturities and to provide longer term financial flexibility to pursue growth initiatives. We have done exactly that. As Biggs will address in more detail, we successfully refinanced our 2023 and 2024 maturities out to 2027 and 2029 and transitioned to a new $500 million revolving credit facility with a stronger and more supportive bank group. These transactions provide us ample runway to execute on our long-term plans for the business and along the way significantly reduce debt and leverage driven by growth in free cash flow and profitability.

Moving on to guidance, Biggs will provide more details on the full year in a few minutes, but the quick take is that we are not making any substantive changes to our outlook for revenue and adjusted EBITDA, although we are modifying cash flow guidance to reflect the higher interest rate environment.

Please turn to Slide 4 for a discussion on the Legion program. Last quarter, I described the test configuration anomaly on Legion that led to us delaying the first launch to September. Since then, we continue to make progress and have completed environmental testing on the first 2 Legion satellites and are in final closeouts. That means we are essentially hardware ready for the first launch. We have also completed integration of hardware and initial performance testing on the third of 6 Legion satellites and that spacecraft will be moving on to environmental testing in the next few weeks. The fourth satellite is in its final test phase prior to environmental testing. So we will be hardware-ready for the second launch in short order as well. The fifth and sixth satellites are progressing in logical sequence. So from the hardware side, we are on track.

Moving to software validation, our software is code complete. Unfortunately, it became apparent in July that we had delays in software validation and testing that could impact overall timelines. We have made significant progress against these challenges and now estimate a fourth quarter launch window instead of late third quarter. Once these software validation steps are complete, we will begin launch campaign activities including the shipment of the satellites to the launch facility down at the Cape, and lastly of course, on-orbit testing, commissioning and the beginning of revenue generation.

Back on the positive side of the ledger, we have been conducting launch and commissioning rehearsals and teams have been working to reduce the timeframe between launches. We now believe we can reduce the time period between the first and second launches to 2 months versus the 3 months we had previously estimated. Additionally, we have been working on reducing in-orbit commissioning time from our previously disclosed estimate of 60 to 90 days. These steps should allow us to pull forward revenue generation and recoup some of the schedule impacts. Additionally, we have increased our insurance coverage for our WorldView Legion satellite launches from $520 million to $620 million, with a heavier weighting toward the earlier launches. These policies cover the launches, including our additional third launch, plus the first year in-orbit. Following the first year in-orbit, we will seek to obtain in-orbit coverage similar to what we currently have on our existing satellites.

So to recap, hardware is essentially complete for the first launch. We are in a good position for our schedule on the second launch with closer center lines. We are progressing through software validation and are rehearsing to execute multiple launches and commissioning. And we have bumped up our insurance coverage. Along the way, we have also been making solid progress with our Legion pre-sales and DAF ground systems upgrades and remain confident in the long-term success of the program.

Let’s now turn to Slide 5 for a quick review of our 2022 priorities. At the top of the list are EOCL and Legion. As I just discussed, we have accomplished one and are making progress on the other. As far as investments in products and go-to-market strategies are concerned, these continue, particularly investments focused on our higher margin products, where we see a long runway for growth. As a reminder, I did a deep dive on our Earth Intelligence product business back on the third quarter 2021 earnings call. And I would encourage you to revisit the associated slides with that discussion for more details on our focused areas.

As far as other key priorities are concerned, this base infrastructure segment executed well this quarter, generating solid margin performance and the pipeline remains robust as we focus on capturing awards going forward. We have been investing in differentiated capabilities like proliferated low earth orbit, or PLEO satellites and continue to expand our partnerships with large defense companies as we develop efficient, commercially-oriented solutions for National Defense security and civil missions. For the SDA Tranche 1 tracking layer, L3Harris is the prime and Maxar will execute a subcontract for the design and production of 14 spacecraft platforms and associated support for the prototype constellation.

The Space Development Agency commissioned this program as part of the missile warning and tracking warfighting capability of the National Defense Space Architecture. The Tranche 1 tracking layer will provide limited global indications, warnings and tracking of conventional and advanced missile threats, including hypersonic missile systems. This is a big win and a validation of Maxar is expanding national security scope, where we plan to showcase our capabilities more going forward. These modular satellite platforms illustrate the company’s ability to adapt and leverage our deep experience, particularly with proliferated low earth orbit constellations. Also, 2 weeks ago, Maxar was selected by NASA as one of two companies to conduct the Geostationary Extended Observations, or GeoXO spacecraft Phase A study. It’s down to two teams.

Our space team will develop the concept for this next generation of weather monitoring spacecraft. This continues a legacy of work that started decades ago. Our space team built the first and second GOES satellites in the 1970s and 1990s, which operated well beyond their expected lifetimes. GeoXO was the follow-on to the GOES series. The Phase A work will establish the performance requirements for GeoXO and helped to find the spacecraft’s potential performance and development schedule.

Please turn to Slide 6. Couple of other items I’d like to briefly address. We have discussed in prior earnings calls how our News Bureau program is working with media outlets to increase global transparency and help combat the spread of disinformation in relation to the war in Ukraine. This current war more than any other in the past has helped the general public better understand what Maxar and the geospatial community does with satellite imagery and the importance of understanding what is happening where and when. Maxar has been releasing more than just satellite imagery, which is quite impactful itself. We have been showcasing our precision 3D capabilities that are particularly powerful and running change detection algorithms.

You can see a demo of that if you click the link on Slide 7. This is the high precision AI-enabled environment that allows users to make their way through massive amounts of information at scale. And we have also been using our Weather Desk solutions to monitor Ukraine’s agricultural industry. As you know, the country is one of the world’s top grain exporters and supplies many parts of the world that are already facing food insecurity. Weather Desk is our on demand product that transforms regularly changing weather data into actionable insights.

The team has been assessing Ukraine’s 2022 spring crop. Farmers planted less acreage this year as indicated in red on the map on Slide 8 and they will likely harvest up to 50% fewer crops if the conflict continues as its going. The Weather Desk team is also tracking Europe’s ongoing extreme heatwave. For more details on both the assessment and heat impacts, please review Slide 9.

We also published a blog post about the planting assessment and harvest prediction which you can read online. Maxar’s strengths in global high resolution imagery, multispectral capabilities for doing things like methane detection, analytics expertise, and upcoming Legion capacity provide a competitive advantage to be the trusted standard for environmental applications that require geospatial data. In 2021, our environmental-related offerings generated more than $50 million of revenue and we are on track to grow this business by roughly 20% this year. This is becoming a substantial and leveragable growth vector for us and we have to be the geospatial industry leader for future public sector and enterprise environment revenue opportunities.

And finally, this quarter we published our first Environmental, Social and Governance report and are pleased that our ESG scores from ISS have significantly improved in the last 2 years. Importantly, it provides details on our efforts to build upon good governance practices develop a more diverse workforce, invest in the communities, where Maxar and its customers do business, create more sustainable practices, and leverage our data to help customers and partners make a better world. That report is also available online.

So to summarize, we had a solid quarter. We have good wins with EOCL, T1 tracking our global EGD renewal, continued environmental capabilities growth, and we got the refinancing work done. We still have work to go on Legion and we are laser focused on that effort.

And with that, I am going to turn the call over to Biggs for a deeper discussion on our performance. Biggs?

Biggs Porter

Thanks, Dan. Please turn to Slide 10, where we present year-over-year comparisons for the second quarter. Net loss for Q2 is $30 million, inclusive of the $53 million loss on debt extinguishment as a result of the refinance. Net loss per share was $0.41. Revenue was down 7% year-over-year for the quarter revenue. Revenue was flat on Earth intelligence and Space Infrastructure was down 10% for the quarter as commercial and U.S. government backlog continues to mature. Adjusted EBITDA margins for the quarter are down roughly 70 basis points driven by tough comps at the segment level from a combination of mix and strong performance in the prior year Space Infrastructure and the planned increased investments we are making this year to drive future growth.

Our results for the quarter included increased expense related to our R&D and marketing efforts in Space Infrastructure, our product development strategy to Earth Intelligence and our ERP project, which is an important enhancement of the company’s government contracting capability. These aggregate to over $10 million in the quarter. On a year-to-date basis, total company revenues decreased 3% and adjusted EBITDA margins expanded 110 basis points. So, setting aside the comparison to a tough comp last year, this was a strong quarter that met our expectations and demonstrated good sequential growth.

Please turn to Slide 11. Earth Intelligence revenue was flat year-over-year in the quarter and adjusted EBITDA margins decreased 90 basis points, also our tough comp from last year. On a year-over-year basis, we experienced increases in product revenues from U.S. government programs. However, this underlying growth is masked by headwinds we are facing in our services business year-to-date due to the push out of awards and cleared workforce challenges. The net effect on margins from the federal mix shift was offset by increased expenses, including those related to our product development efforts. On a year-to-date basis, Earth Intelligence revenues are flat and adjusted EBITDA margins are down 200 basis points as we continue to invest in the build out of product efforts, which includes an uptick in labor-related expenses. Importantly, in the current year, revenues grew 13% sequentially quarter-over-quarter and margins expanded 600 basis points, which may continue this growth for second half of the year, primarily in the fourth quarter.

Please turn to Slide 12. Space Infrastructure revenue decreased 10% year-over-year in the second quarter as commercial and U.S. programs near completion and backlog matures. Adjusted EBITDA margins contracted 290 basis points due to program mix and strong performance compared to the same period of 2021, but remained healthy at 10.2%. On a year-to-date basis, revenues have increased 1% and adjusted EBITDA margins have expanded 630 basis points. Recall the first quarter of 2021 included $28 million negative impact on revenue and adjusted EBITDA and the charge related to Sirius XM-7. Normalizing for this, revenue was down slightly and adjust EBITDA margins are largely consistent. As a reminder, the increases seen in R&D primarily relate to PLEO efforts and were included in guidance for the year. This spend and our future ERP spend to Space Infrastructure will continue to create some pressure on margins in the segment or the rest of the year. But as evidenced by the T1 tracking award, these are already paying off.

Please turn to Slide 13. The company generated $90 million in operating cash flow from continuing operations in the second quarter and invested $87 million in CapEx. Cash flows were negatively impacted by $91 million in unfavorable working capital changes driven by timing and receipts and periodic payments. We expect this to reverse in the second half.

Please turn to Slide 14 for a recap of the refinancing activities completed in the second quarter and announced the 10-year EOCL award in May. As a reminder, we had bonds maturing in 2023. We also had a credit facility under which there was a revolver and a term loan that were approaching their maturities in 2023 and 2024 respectively. Because of the interrelationships of the different obligations and pending maturities, the holistic rather than a piecemeal approach, was optimal. Our main priority with this refinance is to remove all near-term maturities, protect ourselves continuing increases in interest rates, secure a new credit facility with a stronger and more supportive bank group, and remove a significant refinancing risk in an increasingly uncertain credit environment. The EOCL contract award provides a firm foundation for this effort.

Under the new capital structure, our latest maturity is now 2027 versus 2023 in the prior structure and the extension of 4 years. In addition, we have the ability to reprise our term loan B starting in December 2022 and we opted for a 5-year bond with a 2-year note all period to allow us the flexibility to refinance in June of 2024. Once WorldView Legion launches are underway combined with increased free cash flow generation and debt reduction, we expect an upgrade or credit rating will help drive better pricing in future refinancing transactions.

Please turn to Slide 15 for more detailed breakdown of interest changes resulting from the refinance. When we guided for the year, we projected cash interest of $103 million. This included projected interest rate savings of $10 million from our refinancing. Implicitly, absent of refi, our expected interest cost was $113 million in a steady market environment without any refinancing. This $113 million is for interest payments only and excludes any impact to paying the premium to retire in 2023 notes. Markets clearly moved away from us during the course of the year. Increases in base rates upwards of 2.5%, spreads and effective yields increased our cash interest costs from what would have happened in a steady rate environment with no refinancing.

We saved interest cost on the refinancing of the bonds with a coupon of 7.75% versus 9.75% on old bonds, but the term loans became more expensive by a combination of rising base rates and increasing spreads. The bottom line is that instead of a decrease in cash interest costs $10 million we had an increase of $27 million. Break down to $27 million, about $15 million comes from rising interest rates on our existing floating rate debt from increases in the base rate, $6 million is from the timing of final attrition payments on retired debt, and a $11 million is from increased spreads in our term loan B. This was partially offset by $5 million of savings on the new bonds. Following the $27 million increase in cash interest cost with anticipated savings, we ended up with a variance of approximately $40 million relative to our guidance expectation. The comparable variance for our expectations for 2023 is a negative effect of approximately $50 million before any significant mitigation. In recovered market and better credit rating, there is potential to mitigate the impact down to approximately $35 million, with an improved spread in SOFR rates. I say it this way, because our no call period on the $1.5 million term loan B expires at the end of this year. So there maybe an opportunity to bring down – this down with improved market conditions and improved credit.

Our 2023 targets originally contemplated $35 million of interest savings. At a minimum, those savings have been absorbed by the increase in base rates and spreads. I would reduce your expectations for 2023 free cash flow by $35 million to $50 million depending on what you believe about market conditions. I will comment more on this in a moment.

As a side note, industry financing did achieve better pricing on our revolving credit facility. It just doesn’t have a significant impact on the calculations I just went through. Although it’s been a tougher interest environment than we would have preferred, we did execute and are now in a sound capital structure position with opportunity for further improvement to repricing of the term loan B as early as December of this year and through the call the bonds as early as June 2024.

Please turn to Slide 16. We had roughly $340 million – $341 million of liquidity at the end of the quarter. Net debt increased $203 million this quarter driven by $90 million of borrowings and revolver to fund our refinancing as well as $56 million increase in term loan B associated with the refinancing. From this point forward, our bank leverage calculation is going to look different. Our adjusted EBITDA is being used as a denominator for a bank leverage calculation has changed as we move from IFRS to GAAP adjustments and removed the IFRS to GAAP adjustments and reset the covenants to match this as well. Going forward, we still anticipate the covenant calculation to benefit from additional as I expected stock-based compensation. However, the calculation will be closer to what can be derived from our financial statements. This new calculation is more aligned with how we internally viewed our leverage as well. Under this new calculation, our leverage is 4.7x levered compared to a covenant of 5.5x. Our interest coverage ratio is 4.1x versus a covenant of 2.5x.

Please turn to Slide 17. I want to take a couple of minutes to address questions related to our tax asset carry-forwards that came up during our refinancing activities. As we move forward to generation taxable income, the value of these tax assets is going to be more apparent. As of December 31 last year, we had thorough NOL carry-forwards of $523 million, interest deduction carry-forwards of $141 million, which are in addition to the NOLs, and federal R&D tax credit carry-forwards of $84 million. On a tax effective basis, these tax assets aggregate to approximately $225 million at today’s federal tax rate. We expect that these tax assets and our tax strategies will shield us from significant cash taxes at least until sometime in 2026. We also expect to continue generating R&D tax credits increasing annually to around $20 million by 2026. This should help everyone model future tax benefits and related cash flow.

Now, please turn to Slide 18 for an update on our 2022 guidance. Total company revenue and adjusted EBITDA guidance remain unchanged. At Earth Intelligence, the total revenue range consistent with the tightened ranges we presented in conjunction with the EOCL award announcement. Top line pressure on our lower margin services business creates some headwind. We have active prospects in our higher margin imagery business that should partially or fully offset this. The high-end of the range is also still within reach as we have been saying much depends on the timing of book-to-ship business.

We continue to expect to see growth in Earth Intelligence, primarily the fourth quarter driven byproduct growth across our government and enterprise businesses. This will be consistent with the fourth quarter trend in the prior year. We have a strong pipeline of opportunities in Earth Intelligence. Similar to what we said last quarter, this growth would come off a variety of sources, including precision 3D, increased government revenues, including from Ukraine and DAF customer upgrades. We have taken Legion revenues out of the guidance for this year. Guidance for Space Infrastructure is unchanged. And we see less risk there as we continue to execute on the work we have in backlog. We also see a robust set of opportunities in this segment.

Turning to adjusted EBITDA, at Earth Intelligence, the softness we are seeing in our services business presents less risk to adjusted EBITDA as this was lower margin work. The product growth we are forecasting is higher margin and will help drive adjusted EBITDA growth for the remainder of the year, primarily in Q4. At Space Infrastructure, we are tracking towards the higher end of our range, but this will not impact consolidated results materially, particularly as the intercompany work related to Legion is eliminated.

Capital expenditures are tracking towards the top-end of our guidance range driven by Legion. And I have already covered the $40 million change in current year operating cash flow expectations driven by the latest refinance. Generally, we don’t update all elements of our long range plans every quarter, so don’t quarterly reconfirm every element of longer term guidance. Having said that, we assumed constant rates from the forecast interest costs on existing debt and have therefore implicitly changed our line item guidance for cash interest savings in 2023 by $50 million. This assumes a fairly unchanged credit market, which hopefully is conservative.

I am sure everyone will ask about the effect on 2023 of delay in Legion launches from September to the fourth quarter. The effect of that delay and whether there are offsets to it or other factors to consider is too early to call. As a reference point, we have historically said the full year adjusted EBITDA run-rate for the first year of Legion was $80 million. We are tightening our timeline between launches and are focused on commissioning cycle time. As a result, there may be no meaningful delay in achieving the full deployment of all 6 satellites.

To summarize otherwise, we executed our refinancing in a tough market which carries increased costs affecting our near-term cash guidance that still de-risks and sets us up well for the future, with good sequential growth in the quarter and operating results. We have strong opportunity sets across both of our businesses and we are maintaining our outlook for revenue and adjusted EBITDA for the year.

With that, I’d like to hand the call back over to the operator to begin the Q&A.

Question-and-Answer Session


Thank you. [Operator Instructions] Our first question will come from Peter Arment with Baird. Please go ahead.

Peter Arment

Yes, thanks. Good afternoon, Dan, Biggs. Hey, Dan, maybe just to focus on Legion, I am sure you get a lot of questions on Legion, but maybe just to help level set. How long is the normal kind of software validation period? And then also, if you could just describe how long we should expect on the transportation of the satellites? Thanks.

Dan Jablonsky

Yes, thanks, Peter. Well, we thought we would be done with software validation by now and had some delays that were unexpected. And so that’s causing the shift from late Q3 into Q4. We got to get all the way through that software validation testing. But the fact that we are essentially hardware-ready has bought down a lot of risk in the program. And so, we are with a new program like this in the development program, we continue to knock off items on our list of deliverables before we take the satellites down to the range. We are on track to do that, but more than we wanted to see this particular cycle. Once we finish all of that and send the satellites downrange, in the current schedule, we are planning on ground shipment. We do still have opportunities to potentially send the Legion’s downrange by air. So, it’s anywhere from 10 to 14 days we go by ground to same day service with a day turnaround, loading and unloading if we do it by air otherwise, so got a little bit of slack in the schedule there depending on which route we take. And then, as we also mentioned on the call, we have been using the time wisely, I think while we have had this unfortunate delay to be able to reduce cycle times, focus on that focusing on commission and rehearsal activities and also we believe be able to shrink the time towards commissioning of the satellites. So, limiting the impact of any – for investors the impact of revenue generation and for our customers, the impact of not having the satellites on-orbit yet for their important mission needs.

Peter Arment

Appreciate that. I will leave it there. Thanks.

Dan Jablonsky

Thanks Peter.


And our next question will come from Colin Canfield with Barclays. Please go ahead.

Colin Canfield

Hi, good evening. Talking a little bit about Space Infrastructure, can you just discuss or maybe update us on kind of how you view the geostationary market? And kind of within that context, if you can supply a flat modestly of market, how do you think about the moving pieces between legacy Satcom and kind of incremental new tech demand or big tech demand?

Dan Jablonsky

Yes, thanks, Colin. So I am really pleased that we were able to announce the one down-select and also the T1TL award here. It’s been our announced strategy for quite some time to continue to service the market we are in, which is the GEO-KOMPSAT market. And we continue to expect off a lower base of than what that used to be, but pretty solid numbers of expected awards there that we will continue to maintain our market share. And those have been longstanding and really important customers for us. So we are excited to see continue serving them. And that’s a good base in our business, but we did realize that for more resiliency in the business as well as additional growth vectors that we would have to work on diversifying both our product set and our customer sets. And so we have been spending, as Biggs mentioned, good R&D money and capabilities in – new capabilities technologies like PLEO. And we have also been really working our capability efforts for national defense and security programs as well as NASA programs, which are huge market opportunities. If you look at the dollars being spent there as well as the strategic importance of space to not just for exploration and science like NASA, but National Defense Infrastructure and Intelligence as well. T1TL is a perfect example of that being down-selected on the GeoXO program, with NASA for eventual GEO-KOMPSAT weather satellites is another element of that. And so we are pushing forward on those fronts. We think we are building a much more resilient business, one that has better growth potential and one that will be able to better protect its margins and increasing cash flow going forward.

Colin Canfield

Got it. And just within that construct, could you just talk a little bit about what the LHX deal implies for the cash and margin trajectory of the business. I think the understanding that kind of going into transform that has been pretty competitive bid environment and obviously, you don’t want to disclose terms, because they are competitive. But as we think about how that flows through the business, is there a good way to frame it?

Dan Jablonsky

Yes. And I am glad to you said that, so I didn’t have to. Thanks, Colin. What I’d say is, the one really good thing about this program is we are picking an architectural design that is it’s not 100% across every different program we are looking at, but a PLEO architecture that is usable, not just for national defense missions or intel missions, but also for commercial missions. So with this award, we are buying down a lot of design and engineering and technology work upfront. So, even this is a little lower margin business to start with as it grows and as it ramps and if this becomes a much larger constellation, again, this is a 14-satellite infrastructure is sort of a prototype constellation. So if that grows, we will have already spent a lot of money on the front end here to build those capabilities. And then as we bring this type of capability for other defense and security missions as well as commercial missions, we should expect to see higher margin rates on the other side of that. And as we have said, we always wanted to run this business better than 10%, will be a little lumpy here and there depending on awards and investments we make, but we think we are well on the way to do that.

Colin Canfield

Got it. Thanks for the color.

Dan Jablonsky

You bet.


Our next question will come from Thanos Moschopoulos with BMO Capital Markets. Please go ahead.

Thanos Moschopoulos

Hi, good afternoon.

Dan Jablonsky

Hi, Thanos.

Thanos Moschopoulos

Just expanding – hey, guys. Just expanding on the services business with MBI and the weakness there, so I guess two issues part of the staffing part of the program delays, at this point, any visibility in terms of when some of those programs delays the results?

Dan Jablonsky

Yes, we – it’s been – we get more visibility throughout the course of the year. And that’s why we are as Biggs addressed, we are able to hold our revenue and EBITDA guidance even though some weakness there. And also as we backfill some of that with higher margin product business, but they seem to be resolving, it’s just taking a little bit longer than we originally thought it would go in into this at the beginning of the year. We continue to have a very robust. We kind of lump it together as the services business. But there is a lot of classified work in there, a lot of work related to cutting-edge technologies like artificial intelligence, machine learning, space situational awareness and other things that we are doing that matches really well into the rest of our Earth Intelligence product business. And so it’s very valuable business for us. Some of it is just moving a little bit slower than we would like right now. I think across the industry, the hiring challenges have been pretty well explained by lots of other companies as well. We continue to pour a lot of effort into that and we think we are turning the corner on it, but we just got to – we are always hiring on that side of the business, particularly for people with the right tech expertise, as well as the right security clearances.

Thanos Moschopoulos

Okay. And then just jump to the international [indiscernible] since that was down year-over-year, so again, really just a tough comp and I look forward to alluded to more DAF program upgrades and seeing ongoing growth in [indiscernible]?

Dan Jablonsky

Yes, I think probably the two things to call out. One, you mentioned the DAF upgrades. We have got several of those done, but we do have continued upgrades to get done throughout the course of the year. We are seeing several under contract now, but continued strong demand for Legion. So with the DAF upgrades and with the Legion capabilities, we have got built-in growth just with the existing customer base. And then we do have opportunities to add to our DAF number and location of customers throughout the world. And that’s going to help us more efficiently monetize the overall constellation, but especially in the high demand regions of the world as well as Legion comes online. The other thing I’d say is we are seeing better product adoption with our international customers as well. The tough comp we mentioned last year with some book shift business with a very large international defense customer. So we could see some of that going forward. And we are seeing strong adoption of the 3D technology as well. So that’s exciting for us, because the investments we have been making in that and that’s a high margin piece of the business really seem to be bearing some fruits with the diversified customer base, particularly the international defense intelligence customers.

Thanos Moschopoulos

Great. Excellent. Thank you.

Dan Jablonsky

Thanks, Thanos.


Our next question will come from Ken Herbert with RBC Capital Markets. Please go ahead.

Ken Herbert

Hey, good afternoon, Dan and Biggs.

Dan Jablonsky

Hey, Ken.

Ken Herbert

The fiscal ‘22 guide for Earth Intelligence implies a pretty significant ramp in the second half of the year on the top line. It sounds like this is more fourth quarter weighted. Can you just comment on maybe a little bit more specifics on the cadence you expect in that business as we go through the fourth quarter – I am sorry, the third to fourth quarter, but then also some of the key programs or other items that you have confidence in that will really get to the – get up into the guidance range for the segment?

Biggs Porter

So, it really is, if you recall last year and maybe before that fourth quarter had good step up and we expect to have that kind of good step up this year. The last year, you might recall, we increased our product revenues of Earth Intelligence by $100 million, there is a chance to do that again this year and much of that’s in front of us. The DAF upgrades that Dan spoke to, the adoption of 3D and the general interest that we see out there internationally and domestically, some of that driven by world events, all positions us well to have a good growth through the third and fourth quarter. I would say third quarter flattish to up some and then a sharper increase in the fourth is the pace we would expect.

Dan Jablonsky

Probably just a little bit of an overlay to add on that too, Ken is that, I think we have have had the opportunity to move a few of these deals quicker if we would have wanted to, but we are really holding pricing on the 3D product line. It’s a unique capability. It’s really valuable. And while the deals are taking a little bit longer, we do believe they are going to get done and that will build a more solid base for the business on pricing and revenue accretion and bottom line accretion going forward.

Ken Herbert

Okay, very helpful. And if I could just pivot over to the Legions, you have called out starting to do some development work on I think satellites 7 and 8, maybe some initial work, can you just remind us on the schedule for those satellites relative to the first six?

Dan Jablonsky

Yes. So just kind of to level set, we do believe we are getting better at the center lines on the current constellation, particularly between the first and the second launch. And as we have hardware in hand and finished the software program, so fourth quarter launches assume 60-day center line on the second launch and then we will keep working on the third launch there as well. 7 and 8, what we did was we bought long lead time parts and started the procurement process for that partially because we see continued demand out there, but even more so to build a little bit of resiliency just in case we had issues with any of the current launches are on over commissioning plans for the Legion constellation. So those are at least minimum 24 to 30 months out from today if we were to start thinking about ramping up an effort to put effort into getting those built in on-orbit. And we would want to see a strong customer demand for that kind of on back on the – we mentioned on the call, but it’s in the Q as well. We did enhance our insurance buy to also provide some more resiliency into the launch profile of the constellation. So just – we are just kind of building a better set of barrier around the business as we move forward, but that refinancing was part of that. And we are just in a much more solid position where we are today.

Dan Jablonsky

Yes, I would revamp the baseline assumption our Legions 7 and 8 is they really wouldn’t need to start spending and earnest on those until the latter part of ‘24. And to go back to an answer I gave to your first question on the ramp up in Earth Intelligence, I just say there is long prospect list, which supports our revenue assumptions and EBITDA assumptions for the remainder of the year. So we feel once again really good about the opportunity set in front of us largely just comes down to the exact timing and particularly as much as driven by book-ship type business.

Ken Herbert

Great. Appreciate all the details. Thank you.


[Operator Instructions] Our next question comes from the line of Robert Spingarn with Melius Research. Please go ahead.

Robert Spingarn

Hi, good afternoon.

Biggs Porter

Hey, there.

Dan Jablonsky

Hey, Rob.

Robert Spingarn

Dan, could you review where you are on the hardware for WVL beyond 1 and 2? Do you – did you receive the electro-optical instrument for number 4 and when should you get the hardware for 5 and 6?

Dan Jablonsky

Yes, thanks, Rob. So we do have all of the instruments for the first four satellites. As I said, satellite 1 and 2 are essentially hardware complete doing final closeouts. Satellites 3 and 4 have the hardware they need, particularly the instruments. One is going into environmental test in a couple of weeks and then the other will go into environmental reference testing shortly after that. So we will be essentially launch-ready from a hardware perspective with four satellites in pretty short order here. We do not have the instruments yet for 6, or 5 and 6. But we have been doing final closeouts on our checklist of items down with Raytheon on those and expect them and do order this fall to support the launch schedule – well within the launch schedule, we have got planned up for 5 and 6 right now.

Robert Spingarn

Okay. And could you supply a little more detail on the software issue you talked about? And then on the delay from September to Q4, is that a 1-month delay to October? Is it 3 months to December, how should we think about that?

Dan Jablonsky

Yes, we are not pinning it down. We are just saying Q4. So we went from late Q3, Q4. And the software delays were really were in the software validation and verification testing. And what happened was, we just had a lot more challenges getting through the final validation phase of lots and lots of different tests we run on the satellites in the software to be able to ensure that we will be able to conduct full mission operations and all of the anomaly events that we might expect during the life of the satellites are fully ticked and tied out. And it just kind of hit a roadblock and took a lot longer than we thought. We think we are past that now and things feel much better in hand. But we have got to complete that validation before we put the satellites up on-orbit.

Robert Spingarn

Okay. And just the last question on Legion but should we still expect 5 and 6 to launch 60 to 90 days after 3 and 4?

Dan Jablonsky

Yes, yes.

Robert Spingarn

Okay, excellent. Thank you.

Dan Jablonsky

You bet.


Our next question will come from Austin Moeller with Canaccord Genuity. Please go ahead.

Austin Moeller

Hi, good afternoon, Dan and Biggs.

Dan Jablonsky

Hey, Austin.

Biggs Porter

Good afternoon.

Austin Moeller

So just my first question here, as you continue to win more work using this 150 kilogram modulated LEO bus, like you did with tracking layer? Should we expect less lumpy revenue generation in Space Infrastructure and should we expect significantly faster assembly times relative to the GEO-KOMPSATs or NASA program spacecraft to try and compete with more of these small sat manufacturers?

Dan Jablonsky

Yes, I think on the – I will take them in reverse order and then Biggs can add color commentary, if he would like. We will definitely have to go a lot faster per unit satellite. So sometimes the overall course of a program, like 14 buses might take similar to what 1 Geo bus might take, but we are getting more, I don’t want to quite call it assembly line yet, but a lot more wrote in how we are doing these programs and how we are going to pump out satellites. And we are building the infrastructure to be able to do these on a very high cadence, particularly as we look at maybe larger expanded scope defense projects like this or else commercial satellite applications as well. So the investments we have been making upfront and Biggs brought up a good point, usually you make investments in a business you don’t see them pay off this quickly. We are really excited to see those investments translating this quickly into wins. So, that’s good for the business. On the lumpiness side depending on the size of these awards, and if we can layer them in and feather them in, hopefully, we don’t quite see something like the big slug you might see with one Geosat program coming in, but it’s a little too early to tell on that side of the business for us to probably predict that with full certainty at this point, but as we build out a more I think robust and diversified business, we should see, I don’t want to call it quite smoothness, because it’s still is a large spacecraft manufacturing endeavor, but a much more predictable sort of quarter to quarter first half second half year-to-year base of the business. Biggs, your thoughts?

Biggs Porter

I would just add, I mean the team has worked very hard to make the business more predictable. As Dan says, expanding the business base is a positive. All I caution it is still percent complete accounting. And so you are always going to have some degree of variability from quarter to quarter basis as a result of that, but presumably as the backlog grows, the business base diversifies. You should see more steadiness quarter to quarter on a top line basis absent any significant variations from EAC accounting.

Austin Moeller

Okay. That’s helpful. And then just a follow-up. Do you anticipate that the delays in the software testing and validation on the ground could potentially increase the schedule margin needed for the software or for the spacecraft validation and testing once it gets on orbit, in that 60-day to 90-day midpoint?

Dan Jablonsky

No, we are not expecting that. In fact, I think a lot of the work we have been able to do is driving that number towards the left for commissioning operations. So, we are seeing good results on the rehearsals that we have been doing there. And the additional – the ground teams – the commissioning teams have been taking the additional time to get more fluid and efficient on that part of the process. So, we are not expecting the delays in software validation on this end of the launch to impact commissioning. In fact, we are trying to drive it the other way.

Austin Moeller

Okay, Great. Thank you for all the details.

Dan Jablonsky

You bet. Thanks Austin.


Our next question will come from Chris Quilty with Quilty Analytics. Please go ahead.

Chris Quilty

Thank you. So, congrats on the tranche 1 award, I guess that knocks two things off your list of PLEO contract and a defense contract. But I got three follow-ups. First one is, is this a fixed price contract? Second part, when should we expect revenues on this to hit and given that SDA is doing 2-year spirals, presumably in the next quarter or two quarters? And then the third question, the [indiscernible] awards, all the busses for the tracking layer were 1,000 kilograms or north. So, can you scale up the Legion bus, scale down to 1,300 bus or something new?

Dan Jablonsky

Let me – just to make sure I got all those Chris. So, first off, yes, we are under a fixed price model here. And we are kind of excited about that. We have been used to living in that sort of model. So, with our long commercial heritage, and L3 Harris has been just a great partner working with us on definitzing contracts and getting, not just the capture phase, but also we are very excited about being able to work with them, and for them on this endeavor. On the – on when revenues hit, the starting gun has gone off. And so we are already working really hard, you should start to see revenue ramp, but it will start showing up in third quarter and fourth quarter as we start the very quick design and build cycle we have got here. In terms of sizes of buses, and capabilities of buses, a lot of those investments and where we have seen just a little bit of margin pressure on the space side of the business have been in those technology related investments that allow us to transition between different bus sizes. So, we have got the traditional 1,300. We spend a lot of money on the development of Allegiant 5319 capability. We have been developing other modular capabilities as well. And we have been developing what I am going to call sort of a workhorse PLEO capability along the way, here also. And so, depending on, we go through a prototype phase like this, what happens on orbit, what the capabilities look like, how you model it out, will be able to go up or down the stack with SDA, Space Force, NRO, other classified or unclassified programs and commercial programs as well, I think pretty, pretty adeptly. Not seamlessly, but I think pretty adeptly with the investments we have been making in the teams and the engineering focus there.

Chris Quilty

So, is that PLEO capability referring back to the Telesat Lightspeed work you did?

Dan Jablonsky

Yes. We did some there. But we have gone a long way past that. We brought in a lot of great talent. Our Chief Engineer down on that side of the business came out of the One Web. Not Chief Engineer, Chief Technology guy for the small set programs came out of One Web. We have been hiring really strong talent across the defense and industrial base, including engineering capabilities. And we have had some really good existing folks here as well. So, little bit tied back to Telesat, but not – we have gone way past that, I think. And I guess also, we have had other customers paying us for studies, as well as we continue to work on our technology. So, it hasn’t been 100% Maxar funded. We have had customers paying us to develop forward-looking technology there.

Chris Quilty

Fortunately, I don’t Telesat has gone way past. But that’s a different issue. A follow-up just on the earth intelligence, you mentioned that the margins down because of products up. When you were saying products, were you referring to genuine hardware like RGT, and DAP, or were you development of products like, EarthWatch and SecureWatch and whatnot?

Dan Jablonsky

Yes. When we refer to products there, we are talking more about the products like SecureWatch, development work going into things like global EGD, our 3D capabilities, our vivid base maps as well. And we have been seeing strong adoption. And really customers coming into that and say, this is great, let’s now – let’s take that to the next level. So, we have been working on not just those products, but also the environment that we host them in to make it more easily for our customers to consume, the data and the services we have got there.

Chris Quilty

Got it. And speaking of one of those products Vricon, I think you came up short in Q1, it doesn’t sound like there was much movement this quarter, and Q3 sort of flattish. So, it’s got to be a real big Q4 to hit, I think previously you had talked about getting a range of sort of 80 to 110. Is that still an achievable goal with a real big Q4?

Dan Jablonsky

Oh, yes, absolutely. We are seeing good adoption there. I think what you saw maybe a little slower ramp in Q1 was maybe some bleed over from Q4 into Q1. But then very strong performance, obviously in Q2 now, so the adoption rate, or the close rates have been picking back up. On the public sector side for the earth intelligence business, that’s dependent on how fast we close out programs and purchases, like with the One World Terrain program, the army program is a big source of that. On the commercial or enterprise side of our business, we are seeing good adoption rates there as well. And a long runway for growth out into the future with enterprise customers as we do. I think a lot more diversified enterprise like business with insurance companies, energy companies, gaming companies, metaverse companies, as well as much more than just our traditional geolocation services business there.

Chris Quilty

Got it. And speaking of insurance, have you secured the insurance for the launches, because the market has been hardening quite a bit recently?

Biggs Porter

Now, we have secured the insurance, and we actually did it at a lower cost than our existing insurance program was at. So, we are very pleased with that outcome. I think Dan mentioned it, not only that we cover the third launch costs, but we increase insurance otherwise, and that increase is weighted towards the first launch, which makes sense from the standpoint of, where risk and insurance should be distributed.

Chris Quilty

Good. I am not sure if GEICO is a good option for that, though. So, we will have to see. Final question Biggs, because I am lazy, can you supply us the book-to-bill on both segments?

Biggs Porter

It’s in the 10-Q, you can get certainly the underlying data. Just a second here and I will…

Chris Quilty

I have been lazy.

Biggs Porter

That’s fine. It’s very high because of the EOCL award, the firm portion of that, the $1.5 billion flows in for the quarter. We would like to look at this on a trailing 12-month basis, in which case, AI is 2.3 and SI is 0.9, so overall 1.8. If you look at it on a quarter only basis, it’s very exaggerated by EOCL. It’s 5.8 for earth intelligence, and 0.9 for space infrastructure, for 4.0 overall.

Chris Quilty

Great. Thank you.

Dan Jablonsky

Thanks Chris.


Our next question will come from Noah Poponak with Goldman Sachs. Please go ahead.

Noah Poponak

Hello everyone. Hey everyone.

Dan Jablonsky

Hey Noah.

Noah Poponak

Dan, can you can you just get more specific on what in this Legion software validation process has surprised you? I know you have said there have been roadblocks, but can you tell us what the roadblocks are, where on the process, what you have to do to get to the finish line, how close you are? It’s been pretty, pretty vague so far relative to something that is pretty important.

Dan Jablonsky

Yes. Hard to bring immense clarity to on an earnings call like this. I think what I would say is, as we run the software validation both in the various environments that we have, like our simulators, the hard environment on the satellite, as well as integrating into the hardware environment, there are certain ways, when your complete with the integrated software that you expect it to propagate to the system and then not hit trigger or hard stop points. And we just hit a lot more of those that precluded us from doing all of the other range of software validation tests that we want to do. So, there is some basic all encompassing ones upfront that we thought we had wired that we turned out not to have quite as wired as we thought we did. And they held up the rest of the validation and testing program. We believe we are substantially through that phase. And so as you look at a burn down curve now, and I am sure you are seen this before nowhere, you expect it to hit at a certain rate, and you get a certain number of resolutions per day and your defect rate what’s going up and starts going down. And you have got a good handle on it. Ours just sort of hit a flat line there, even though the teams are working on it very hard, and we weren’t seeing the burn-down rate we expected. We are seeing that now on the path that are much more level of – high-level of predictability. It’s not without risk as we continue to go through this. But as we look at a burn-down chart like that, as we look at full on system validation, and then things like a fault detection, telemetry triggers, and those kinds of things, we will be expecting to see much higher validation rates going through. So, we are about – it delayed us, yes. And so it delayed us several weeks and it just kind of wasn’t what we expected. But we learned a lot, and we worked our way through it, and we are better understanding the program at this point, programmatics.

Noah Poponak

Okay. That’s helpful. I appreciate that. Is it possible to make an estimate of what percentage out of 100%, you are now complete on the total software validation for Legion?

Dan Jablonsky

It’s a little hard to ascribe that exact percentage to it, just because some of these are very large, all systems ones. And then some are, like, did a particular check, heat light, kind of come on or not as we kind of total numbers. So, percentages are really hard, but we past a lot of the big integration ones now, and are now in the more discrete validation aspects of the program.

Noah Poponak

Okay. And then what remains after software validation?

Dan Jablonsky

After software validation, then it’s final close outs and moving the satellites downrange and doing launch based preparations.

Noah Poponak

Okay. So, we are…

Dan Jablonsky

Yes. It’s unfortunate as it has been, what I would say is, we did make a lot of progress. In last quarter, what we were most focused on was the hardware testing anomaly issue that we had. And we ran that to ground. We got the first satellites through all of their environmentals and are in final close-outs. And so we made a lot of great progress. This one, just kind of slowed down the overall aspects of the program. But we have continued to burn-down the risk and not knock off our checklist as we go along here.

Noah Poponak

Okay. Thank you.

Dan Jablonsky

Thanks Noah.


Our next question will come from Elizabeth Grunfeld [ph] with Bank of America. Please go ahead.

Unidentified Analyst

Hi, good evening. I had a couple questions. The first one is your EOCL contract dependent on Legion being operational?

Dan Jablonsky

It is not. Under the EOCL contract, Legion is backup capacity. If anything were to happen, any of our on orbit assets right now for the first several years, and then as we ramp out into the full tenure award, Legion does start picking up additional potential capacity for those moving from this step ups from $300 million to $340 million a year. But as we sit right now, yes, Legion is reserved capacity, which is also great because as Legion comes online, we will be able to monetize that above and beyond what the current EOCL awards are.

Unidentified Analyst

Okay. And then I mean I know you can extend the life of the satellites, you have in orbit. But many of those are approaching the end of their existing life, how much more life is in them, I mean how much no longer can they be extended to compensate for the delays? And then within that as well, within your new timeline, how much contingency is in when you say fourth quarter? Is that assuming a December launch? Is that early fourth quarter? How should we think about that?

Dan Jablonsky

Well, I am hesitant to say how much exact contingency is there, because well, I just don’t know until we are all the way through this. Our checklist is getting smaller and smaller. We are getting more and more predictive on the final on this. But we have had several delays. And I can’t, until we ship these downrange, I won’t say the satellites and the environment for them are fully buttoned up. On the question of constellation health, every year we go through a process. So, we have two different things we run internal simulations and make predictions about how long things last. But then we also do an engineering, useful life publication that we put in our 10-K. And we have extended the life of those based on those engineering simulations that are just used for accounting purposes. Several times now, we pushed out Geo1, WorldView 1 and Worldview 2, sometimes multiple times. We will be doing that analysis again in October, to determine whether we will be adding to the useful lives on the satellites. We continually monitor the health of all of our satellites. The current constellation is fully mission capable. And as we have said in the past, the longer satellites tend to last in space, the longer they will tend to last in space. And we are looking forward to starting that work again in October here.

Unidentified Analyst

Okay. And then just one more questions I get, what is the total cost of Legion one through six now, with this additional delay, what are you looking at for the total cost?

Biggs Porter

Yes. So, we reported last quarter, I think it was over $700 million is still in that territory. Additional time spent in the factory doesn’t draw, so additional cost. But it’s not changing our guidance for this year. And we will certainly, in the fourth quarter make our plans for next year and update if necessary the guidance for next year, but I would not deem this additional delay to be all that significant.

Unidentified Analyst

Okay. Great. Thank you very much.

Dan Jablonsky

Thanks Elizabeth


And our final question will come from Michael Ciarmoli with Truist Securities. Please go ahead.

Michael Ciarmoli

Hi. Good evening guys. Thanks for taking the questions. I guess just on guidance, both this year and next year, specifically, cash flow. I mean you have got a pretty big second half ramp for cash this year. And then just I mean how should we think about ‘23? I mean you just said you will make those decisions later. You have got that free cash flow target out there. It sounds like we should handicap that by $35 million to $50 million. Is there going to be any potential change? I know you just mentioned the cost of the satellites. But is there any change to CapEx next year, as things are sliding out? Just how should we think about cash, maybe, I guess?

Biggs Porter

Yes. I wasn’t trying to lead you to believe that there is a change coming. Just that we will look at every line item and the guidance later this year, when we do our plan and then obviously be more up-to-date with each line item and not to say anything will change other than interests that we know right now. So, that kind of leads you in one direction or another. Interest, yes, for next year, it would be $30 million to $50 million. From the standpoint of your analysis that you would take out of the $340 million that we guided to, I would say if you – we plan things on a constant market basis, and that would lead to taking up $50 million. But hopefully we can go and do some mitigation based upon the no-call expiring on the term loan the and bring some of that impact back down. Markets have improved. For this year, the change to our guidance was $40 million associated with interest. In terms of the full year cash flow and how you walk forward, I would think of it this way that second half EBITDA and cash generation from it before any working capital change will be $277 million. The interest payments for the second half, which are negative obviously is $79 million based upon the cash interest guidance that we gave. And then our working capital, we would expect to have $76 million in cash from working capital, which is roughly a reversal of the negative that we had here in the first half, which is the normal trend for us. There is a big burn-off in the front end and then improvement in the second half. But in this case, that improvement is exacerbated some by the fact that in the data, the second quarter here, we had a built up in receivables, billings to domestic and international customers that we know quickly converted to cash to bring that back down.

Michael Ciarmoli

Perfect. Alright. Great. Thanks guys. Appreciate it.

Dan Jablonsky

I think just as a general comment, too. We do have many paths still to achieving our 2023 targets. And we are very committed to getting the debt paid down to enhancing our credit ratings and to the CapEx holiday that you see in those cash flow numbers. So, interest rates moved against us, spreads moved against us. But we have got lots of other levers in the business to keep driving performance and are very, very committed to doing that. That’s healthy company performance now. Thanks. And operator, I think that’s it for us. We really appreciate it. Thanks, everybody for joining the call.


And now we will conclude today’s conference. Thank you for your participation and you may now disconnect.

Tue, 09 Aug 2022 15:05:00 -0500 en text/html
Killexams : ICU Medical, Inc. (ICUI) CEO Vivek Jain on Q2 2022 Results - Earnings Call Transcript

ICU Medical, Inc. (NASDAQ:ICUI) Q2 2022 Earnings Conference Call August 8, 2022 4:30 PM ET

Company Participants

John Mills - ICR

Vivek Jain - CEO & Chairman

Brian Bonnell - CFO & Treasurer

Conference Call Participants

Jayson Bedford - Raymond James & Associates

Matthew Mishan - KeyBanc

Lawrence Solow - CJS Securities


Good day, and welcome to the ICU Medical, Inc. Second Quarter 2022 Earnings Conference Call. [Operator Instructions]. Please note this event is be recorded. I would now like to turn the conference over to John Mills with ICR. Please go ahead.

John Mills

Good afternoon, everyone. Thank you for joining us to discuss ICU Medical's financial results for the second quarter of 2022. On the call today representing ICU Medical is Vivek Jain, Chief Executive Officer and Chairman; and Brian Bonnell, Chief Financial Officer. We wanted to let everyone know that we have a presentation accompanying today's prepared remarks.

To view the presentation, please go to our Investor page and click on Events Calendar, and it will be under the second quarter 2022 events. Before we start our prepared remarks, I want to touch upon any forward-looking statements made during the call, including beliefs and expectations about the company's future results.

Please be aware, they are based on the best available information to management and assumptions that are reasonable. Such statements are not intended to be a representation of future results and are subject to risks and uncertainties. Future results may differ materially from management's current expectations. We refer all of you to the company's SEC filings for more detailed information on the risks and uncertainties that have a direct bearing on operating results and financial position.

Please note that during today's call, we will also discuss non-GAAP financial measures, including results on an adjusted basis. We believe these financial measures can facilitate a more complete analysis and greater transparency into ICU Medical's ongoing results of operations, particularly when comparing underlying results from period to period.

We've also included a reconciliation of these non-GAAP measures in today's release and provided as much detail as possible on any addendums that are added back. And with that, it is my pleasure to turn the call over to Vivek.

Vivek Jain

Thanks, John. Good afternoon, everybody, and we hope you are well. It's been a quick 90-or-so days since the last call, and our legacy ICU business unit revenues are on track in 2022, and we have now seen weekly improvements over the last 8 to 10 weeks through today in our operational performance for the businesses that came with Smiths Medical. The external economic volatility in the supply chain around freight and fuel that we've been describing for a while, hit its highest peak in Q2 for any time our team has been in the industry.

However, the issues around raw material availability are narrowing, but still remain volatile. From a customer perspective, we felt hospital census was stable and underlying demand was good in all geographies. Like everyone in our industry, we want to first start by thanking all of our customers and their frontline workers for trusting us to serve you during these times.

While Q2 revenues were generally in line with our previous comments for legacy ICU Medical, our results for Smiths Medical were again different from our original expectations. So we wanted to use the time on the call today, too. First, comment on the year-over-year drivers of the 3 main legacy ICU businesses, supply an update of the current inflation in the market and how it has negatively impacted legacy ICU profits, which is really just about fuel, explain the Smiths Medical revenues we achieved in Q2 and bridge to how that fits with our comments on the last call, provide status update on the Smiths Medical businesses current challenges and opportunities in the 2 buckets we've highlighted on the last 2 calls, begin to talk about Smiths Medical revenues sequentially and describe what we think the next few quarters could look like in the individual segments to try to narrow the range of outcomes for the balance of this year. and lastly, to illustrate how we see revenue and profitability in the short and medium term, how we think about value.

Q2 2022 was our second quarter of joint reporting and given some of the challenges on the Smiths Medical businesses and the current environment, it continues to be a bit of a longer story. I'll quickly summarize the whole company results and then discuss each segment of the business. We finished the quarter with $547 million in adjusted revenues, adjusted EBITDA came to $85 million and adjusted EPS was $1.37.

We again had a heavy quarter of investment into the business with inventory builds, et cetera, that Brian will describe. It was a less clean quarter as we're spending at a very high rate to Boost the service levels of Smith medical, and we have restructuring integration costs, and we are focused on reducing those costs next year as they impact cash flow. The strong dollar in currency have also been a bit challenging. So let me start with legacy ICU Medical, which is a relatively straightforward story. The good story in Q2, legacy ICU had $324 million in revenue, which was growth of 6% on a constant currency basis and 4% reported.

We again had good year-over-year growth in our most differentiated businesses with negligible covet impact and as previously discussed, have been normalizing our operations on a more predictable basis. There's nothing dramatically different on underlying demand from previous comments on a macro level.

The public hospital companies validated our view on their latest calls that QE was decreasing in at least U.S. hospitals and electives were okay. Specifically, the legacy ICU businesses grew at 7% in the U.S. at 6% constant currency in international markets. So let's go to the business quickly and then come back to discuss the current environment.

Starting as usual with infusion consumables, which is our largest business, Infusion Consumables had revenues of $144 million, which was a 9% increase year-over-year on a constant currency basis and 6% reported. Growth was mostly driven specifically by core IV therapy and some specialty items in the U.S. again.

In oncology, we've been a bit constrained due to some of the remaining raw material challenges that should abate by the end of this year. We have talked in the previous calls about feeling positive in the U.S. market and our growth product is setting up well as the rest of the world open, which is what happened.

There's nothing new on our outlook here just to mention, the base in infusion consumables did materially step up in Q3 2021 due to pandemic ordering it is our largest IC OUS business, so currency impact is meaningful.

Moving to Infusion Systems, which is primarily our LVP pumps and associated dedicated steps. This segment is $87 million in adjusted revenue, which has increased 5% on a constant currency basis or 3% reported. We did have a decent level of installs in Q2 and do expect a better back half of installs globally than we had in the back half of last year.

It's still a bit bumpy on dedicated utilization that's been consistent, but we're focusing on selling a larger amount of hardware. I feel that the customer attention is back with bandwidth have real discussions and some of the fatigue from COVID is passing and the acceptance of inflation and future cost of nursing, et cetera, are being internalized.

We still believe relative to our size, there's solid competitive opportunity, and we're focused on commercial execution here as of no change to any previous commentary on the. Finishing the segment discussion with Infusion Solutions, we had $80 million in adjusted revenues or an increase of 3% on a year-over-year basis both constant currency and reported.

Capacity constraints here are easing. No additional comments on the revenue side here. The biggest issue for us is this segment has disproportionately absorbed the majority of inflation at legacy ICU, which dovetails with our comments on legacy ICU profits. The vast majority of unexpected inflation and earnings pressure relative to our view on 2022, legacy ICU profits is primarily about fuel and shipping costs and to a lesser degree, currency.

Labor has been much more consistent this year and we budgeted those items properly. Yes, there's been some raw material surge pricing. But as we highlighted in the last few calls, these items are not so much more inherently valuable over the long term, particularly with aggregate demand below historical levels.

We've talked about believing in the markets and with capacity increasing pricing -- when capacity increases, pricing should rationalize. So for us, it's about trying to run a stable and predictable operation in a normal environment to get price improvements where we can to try to illustrate to our customers and the need to have some of these cost index and to ultimately just ride it out, serve customers with a belief that supply and demand will balance over time.

But there is a longer-term tactical element to this in some of the businesses. We listened to the comments on price actions from the larger players in the industry, and we obviously support that. But we are also focused in the next round of contracting on how to separate the costing of some of these items. For example, our transportation and logistics costs should be separate items no different than airline seat and baggage fees or next day delivery.

Given the historical margin structure of the health care industry and its historical negligible inflation, suppliers have never had to think this space. Okay. Let me move to the Smith businesses. First, talking about aggregate revenues and then how that fits broadly with the 2 buckets of issues we had in the last call, which did lead to a wider range of outcomes and on even a monthly basis in the first 2 quarters, and that has to be incorporated into the full year now, and then I'll supply some updates on progress on the issues, et cetera.

Starting with revenues, the Smiths Medical businesses contributed $223 million, with vascular access at $77 million infusion systems at $78 million in Vital Care at $68 million. So to try to make sense of this, we need to go back and compare this to our comments on the previous call and then talk about each of the segments individually.

To make it extremely clear, while we did pick up a number of shipping days, we also had a number of setbacks in the first half of Q2, which caused us to have to make more distinct fulfillment choices based on customer need and availability.

Specifically, we had a number of down days due to reasons that are too detailed for this call, but at a generic level about the intersection of IT, product availability and operations. The net result of this was a fulfillment environment that was actually worse in the first half of Q2 versus even Q1. And so we did not get the full benefit of the additional days or claw back into the back orders.

As a result, we had to prioritize fulfillment on the most critical and clinical items, which are dedicated Pom sets, which explains the sequential improvement in Smiths Medical infusion systems, but in the earlier part of the quarter, it came at the expense of the other segments.

What obviously matters is where we are right now, and I'll get to that in a moment as it relates to the status of the challenges we've described with the short story being, it's better. We spend a lot of time -- we spent a lot of airtime on the last 2 calls, explaining these 2 buckets of issues, how we wound up here and how we're trying to solve them.

So we'd rather just cut to the status of each. The first bucket of issues are around production and fulfillment operations. With regard to production, with the exception of a few items related to silicone availability, it can generally be said that the entire Smiths production network is producing at acceptable demand levels. We continue to work on securing the base of supply and in-sourcing the key high-margin disposable components with proper factory staffing levels. The fulfillment process, while still challenging, and as we said on the last call, was quickly becoming our main focal point has made progress since mid-May with June better than May, July better than June, et cetera.

We still have bumps but on certain key IT systems issues, et cetera, it has been recently worse. From an expense perspective, we've been spending CarPlaunch to Boost customer service levels with an ICU mindset. And with factories only getting to scale recently, there continues to be a huge hit to gross margin in the short term.

There's plenty of demand. None of this really has to do with product features. This is about cleaning up the self-inflicted harm and the basics of blocking and tackling with a good focus on operations.

The second bucket of items we talked about were quality-related interruptions. And again, we previously described how we got here. Since the last call, we've made significant progress with communication to both customers and regulators on our view of a path forward and have made some significant decisions. Those decisions such as stopping sales for certain older generation products and committing to a deliberate and timely remediation plan have allowed us to begin supporting existing Med Fusion Syringe Pump customers in early Q3.

We've also made progress in addressing the root causes of the warning letter received in late 2021. This part feels very similar to Hospira and our previous experience, and we have the right people who have been to the exact same experiences and our team is now fully embedded into the operation.

As we said on the last call, the existence of a warning letter, while undesirable, is the regulatory agency trying to move the ball forward, and we talked about how these regulations supply us the right to participate. We're making progress in solidifying the foundation and hope to be in a position where we can demonstrate further progress as soon as possible.

Again, regardless of where it appears on the P&L, we are spending heavily, so making progress here is extremely important. So now having updated the main 2 issues, let me come back to the segments and tie this back to short-term and longer-term profits and value.

It's important to start describing the Smith segment sequentially as they will get folded into the legacy ICU segments in 2023. Given better production and fulfillment on Smiths dedicated pump sets and some of the other items, we can now see continued sequential growth for the foreseeable future in Smiths Infusion Systems segment.

Smith's Vascular Access is now getting more attention. And again, we would expect to see sequential growth here in the near term, but we need to commercially execute as Smith lost the focus on its market positions here. And lastly, material improvement in Smiths Vital Care probably will not be seen until Q4 after the other 2 segments.

Vital Care is the most international segment of Smiths on a percentage basis and probably it was the most neglected but there are some valuable subsegments in there, going back to our previous comments on the original portfolio construction. If we add up what we think the Smiths business will do over the second half of 2022 and combine those with legacy ICU, we believe we'll be very close to exiting 2022 at the original $2.4 billion annual revenue run rate after taking some large pressure on currency.

Operational performance is improving, but we're choosing to spend now in order to be healthier and more stable next year to Boost profits. We believe we can earn $180 million to $200 million in adjusted EBITDA over the back half of '22, and that probably is a bit more Q4 weighted.

Obviously, that implies a full year that is different than our original expectations, and that weighs heavily on us. But we did try to say after Q1 that the steeper ramp for the back half was tougher, there was a wider range of outcomes. And after what the situation was through mid-May, we knew we needed to be realistic. We also said that we are very focused on material sequential improvements for the year as each month goes by to make sure we have the right exit run rate heading into next year.

To talk about revenue and profitability in the medium term and to simplify the numbers a bit, if we said we could have around $600 million in revenues in Q4 and approaching $100 million of EBITDA, that is basically where we thought we would have been towards the end of Q1 or early 2Q this year. So we have gotten knocked down a few quarters, which has been tough to deal with, and everyone competes in the same environment.

But to that run rate, and to be clear, we're not making a call on exact timing of these items. We know that there are positives that exist. The biggest item is obviously revenue growth. But there are also spots, just like with the Hospira transaction, where we have negative margin situations and while not huge, they do make an impact.

In addition to those 2 items, which we control, there are other things we control like the operational performance leading to all this expedited fulfillment. We are realistically spending over $25 million in 2022 on expedited fulfillment above base fuel rate increases through the year, and we need to bring this number down.

And we control the remainder of our synergies, which don't come as quickly as the year on items, but we know we're out there. And while we don't technically control fuel costs, though we need to address the tactical item and how it should be incorporated to certain products over time, fuel increases in currency have probably been between $40 million to $50 million above our starting budget this year.

I'm sure there'll be offset dis-synergies and other negatives in the future that we'll find, but there is a large self-help list that as we get more stable, we can start to work down. We'll skip the bookends feature today, but a number of those items are independent of revenue growth. And to close with tying that desired income statement back to value a bit, we have not talked about the aggregate positioning of the combined portfolio and its relevance for customers and their reactions.

Yes, the situation is harder than we expected, but the customer logic continues to make sense. Like Hospira, we need to change the conversation from the historical perception to demonstrating our value through innovation and service. These portfolios make sense together, and we're working on how to integrate them either literally or economically when sensible.

And we do believe more doors are being opened as a result of having a broader set of items that are mandatory for care, and we get that this needs to show up on the P&L to prove that value. For legacy ICU, our most differentiated businesses will end 2022 larger than ever with appropriate profitability levels. The core premise of the Smiths transaction is to enhance the product offerings for these exact categories that drive our returns as well as add logical adjacencies predicated on the same characteristics of sticky categories, low-capital intensity single-use disposables, opportunities to innovate and participation in a logical industry structure.

Even though we're consumer base operations, we still believe this is to be the strategic case and the big opportunity over the long term is using the combined portfolio to Boost in existing markets and also move as value shifts in a new spaces. The construction of the Smiths portfolio was logical and frankly, why it's survived over the years. The other part of value is maximizing the opportunity with each piece of the portfolio. We believe as we clean up and stabilize the operations, we could be presented with more opportunities here.

But there's no change from the previous call and our near-term priorities are in their usual book and speech. While the pandemic introduced substantial volatility, strategically, we do think the weaknesses it has exposed and the health care supply chain add to the argument for all participants to be healthy and stable, which has been our commentary since we became a full-line supplier.

Smiths Medical also produces essential items that require significant clinical training, hold manufacturing barriers and in general, items that customers do not want to switch unless they have to. The market needs miss medical to be a reliable supplier and the combination positions us better. Our company has emerged stronger from all the events of the last few years.

We've gotten knocked down a bit, but we see the hill to run up again together with our new colleagues to drive value out of the combination. Thank you to all the customers, suppliers and frontline health care workers as we Boost each day. Our company appreciates the role each of us has had to play. And with that, I'll turn it over to Brian.

Brian Bonnell

Thanks, Vivek, and good afternoon, everyone. To begin, I'll first walk down the P&L and discuss our results for the second quarter and then move on to cash flow and the balance sheet. Along the way, I'll provide our updated outlook for the full year for each of these areas. So starting with the revenue line.

Our second quarter 2022 GAAP revenue was $561 million compared to $322 million last year, which is up 74% on a reported basis reflecting the impact of the Smiths Medical acquisition, along with growth in the legacy ICU business. For your reference, the 2021 and 2022 adjusted revenue figures by business unit can be found on Slide #3 of the presentation. For the legacy ICU business, our adjusted revenue for the quarter was $324 million compared to $311 million last year, which is up 6% on a constant currency basis and 4% reported.

Infusion Consumables was up 9% constant currency and 6% reported. Infusion Systems was up 6% constant currency and 3% reported and IV Solutions was up 3% on both a constant currency and reported basis.

Overall, we were pleased with the results of the legacy ICU businesses. The second quarter was the first full quarter of Smiths Medical under our ownership and the business contributed $223 million in revenue. As Vivek mentioned, this was less than we expected as the operational challenges we discussed on our last call have taken longer to address. However, over the course of the second quarter, revenue per billing day improved from April to May and May to June, and we expect this trend to continue for July as we finalize those results. The June revenues, when annualized, we're still not back to historical levels, but we have now seen multiple months of sequential improvement since the closing of the transaction.

As you can see from the GAAP to non-GAAP reconciliation in the press release, for the second quarter, our adjusted gross margin for the combined company was 36%. This was lower than we had expected due to the impact of several specific items, which fall into a few distinct categories.

The first category is operational inefficiencies being driven by the current supply chain environment. Here, we saw a 2 percentage point impact to gross margin from a combination of the continued effect of lower manufacturing absorption from reduced volumes plus additional expenses related to air freights and other forms of expedited shipping to customers.

Most of this expense relates to the legacy Smiths Medical operations. The second category is higher market prices for freight and diesel as well as certain categories of raw materials. The higher freight rates were disproportionately driven by the legacy ICU solutions business while the higher raw material prices were spread more broadly. These higher freight and raw material costs reduced adjusted gross margin by approximately 3 percentage points.

And the final category is foreign exchange, which had a 1 percentage point negative impact to adjusted gross margin for the quarter as a result of the strengthening U.S. dollar. As we consider the outlook for the remainder of the year, we believe we have the opportunity to Boost on the first category of operational items as we continue to increase manufacturing output and Boost customer fulfillment.

But given our willingness to expedite shipments to ensure product availability for customers, along with the lag between manufacturing improvements and the cost recognition in the P&L, we don't expect a meaningful improvement to adjusted gross margin this year. As it relates to the categories of freight and raw material cost increases as well as FX, the outlook we have assumes current levels for the remainder of the year.

Therefore, we expect second half as well as the full year adjusted gross margins to be in the range of 36% to 37%. Adjusted SG&A expense was $114 million in Q2, and adjusted R&D was $22 million. After adjusting the first quarter close timing of Smit Medical, total operating expenses in Q2 declined compared to Q1 by approximately $7 million from a combination of cost synergies and lower personnel costs.

Moving forward, we expect total adjusted operating expenses as a percentage of revenue to remain around Q2 levels for the remainder of the year. Restructuring, integration and strategic transaction expenses were $14 million in the second quarter and related primarily to integration of the Smiths Medical acquisition.

Going forward, we expect restructuring, integration and strategic transaction expenses in each of Q3 and Q4 to be around the same level as Q2. Adjusted diluted earnings per share for the second quarter was $1.37 compared to $1.88 last year. The prior year results were favorably impacted by a lower tax rate due mostly to excess benefits from equity compensation, which contributed approximately $0.10.

Basic and diluted shares outstanding for the quarter were $23.9 million. And finally, adjusted EBITDA for Q2 increased 27% to $85 million compared to $67 million last year. Now moving on to cash flow and the balance sheet. For the quarter, free cash flow was a net outflow of $86 million as there were a number of discrete items.

During our last 2 quarterly earnings calls, we said we would invest heavily this year into 3 key areas: the first was higher levels of inventory to bolster safety stock and allow for onboarding of new customers. Here, we invested $64 million in additional raw materials and finished goods inventory, most of which was related to the Smiths Medical product lines in order to protect our manufacturing operations from supply disruptions and to better serve customers.

The second area was the integration of the Smiths Medical business. And as previously mentioned, we spent $14 million on restructuring and integration. And the third was quality improvement initiatives for Smiths Medical. And during the quarter, we spent $17 million on quality systems and product-related remediation work. Additionally, we spent $24 million on CapEx for general maintenance and capacity expansion at our facilities as well as placement of revenue-generating infusion pumps with customers outside of the U.S.

And we continue to expect total CapEx spending in 2022 of approximately $100 million. In future quarters, we don't expect this same aggregate level of spending as inventory levels will stabilize. But we also don't anticipate meaningful cash flow generation for the remainder of 2022 as we will continue to invest in the Smiths Medical integration and quality system improvements.

And just to wrap up on the balance sheet, we finished the quarter with $1.7 billion of debt and $271 million of cash and investments. Given the results for the first half of the year, along with latest changes in the macro environment for freight expense, foreign exchange and interest rates, we are updating our full year guidance for adjusted EBITDA and adjusted EPS.

For full year adjusted EBITDA, we are updating our previous guidance range of $450 million to $500 million to a range of $350 million to $370 million. For full year adjusted EPS, we are revising our prior guidance range of $9 to $10.50 per share to $6.20 to $6.80 per share.

For modeling purposes, for the back half of the year, the adjusted EPS guidance assumes interest expense of $40 million, a non-GAAP tax rate of approximately 23% and diluted shares outstanding of .

In summary, addressing the operational challenges of the Smiths Medical business in the current operating environment have knocked us back a few quarters. However, for the operational challenges, we saw a meaningful improvement in the back half of the second quarter.

And as Vivek mentioned, this improvement gives us line of sight to exiting 2022 at a total company revenue run rate of close to $2.4 billion annually, which is consistent with our original pre-closing assumptions. The profitability of the business will remain constrained as we invest to repair the legacy Smiths Medical business and fulfillment to our customers and deal with the current macroeconomic pressures. But we remain convinced of the longer-term opportunity to Boost the financial performance of the combined organization with the list of items under our control.

Strategically, we have broadened our available markets and we're working to get all portions of the business on the same trajectory as legacy ICU. We look forward to providing updates on our progress during next quarter's earnings call. And with that, I'd like to turn the call over for any questions.

Question-and-Answer Session


[Operator Instructions]. And our first question comes from Jayson Bedford with Raymond James.

Jayson Bedford

I guess few questions here. Did the back order increase in 2Q versus 1Q?

Vivek Jain

It did. Jason, you were a little bit choppy in there, different answer for different regions. The U.S. backorder actually has started to come down now. It's been longer to get the products. OUS back orders went up a little bit. Net-net, probably holding in the same place.

Jayson Bedford

Okay. And I think you described it, but just can you -- can you walk through the sequential decline in Smiths sales, if just normalize for a full 1Q?

Vivek Jain

If I set it right, Smiths infusion systems went up Q2 over Q1. Vascular Access went down, I think, $2 million sequentially. And Brian, do you have the vital care memory -- Vital Care was down, I think

Brian Bonnell

About the same amount as those four.

Vivek Jain

About the same as those 4. 4. So up in infusion systems in the down in the other 2 -- minimally down in vascular access. I'm just waiting for Brian to confirm the final care number.

Jayson Bedford

And is that demand or supply related?

Vivek Jain

No, that was -- we didn't ship as much of -- we didn't ship as Vital Care was too also. We didn't ship as much, Jason, we were focused on getting the dedicated pump sets out for the infusion business in legacy Smith, the first kind of essentially 4 or 5 weeks of the quarter. And we paid the price on those 2 items.

And that's why I'm saying sequentially now with the things that have happened, we can see and it still feels early to us, but I think we could say it, I think we feel like we can show consistent growth sequentially for a while now in the Smiths Pump segment.

We could see that in kind of the medium-term avascular access, so we still got to execute better. And I think you won't see meaningful improvement in sequential on the third segment of Vital Care the end of this year, right? It sort of lasted bit less.

Jayson Bedford

And I think early on in the year, you talked about the potential contribution from the legacy business in the Smiths business. I'm just curious, within the $350 million to $370 million in the '22% EBITDA guide, what is the expected contribution from Smith?

Brian Bonnell

Jason, we can't -- it's hard -- now that we're almost 6 months into the integration, to really break that out between the 2 businesses on the earnings line. But clearly, the majority of that -- of the shortfall for the full year is related to the legacy Smith Medical business.

Vivek Jain

I mean I think Brian tried to directionally say, Jason, where you said there was 3 points on increased freight and raw material purchases and the majority of that -- not all, but the majority was on solutions. So you just took that percentage against the legacy ICU business, you can make some extrapolation. I don't want to paint a picture that's 100% all on it, right? Some of the inflation is in Transportation Solutions business.

Jayson Bedford

Okay. And then maybe last one, and then I'll supply someone else a shot. You mentioned Medfusion and kind of the reintroduction of that product. I think you also mentioned you're serving current customers. Are there any restrictions in terms of your ability to fulfill demand there?

Vivek Jain

No. I mean, I think, again, we've reached the point where we feel solid and reliable on the testing that we've done. It's sort of our choice how we bring things into the market. I think we feel like the vast majority of -- given the history of the product, a huge portion of the market is holding the product, plenty for us to keep ourselves busy with and where people have experience with the technology, et cetera, we can remediate some of the stuff that's out there. on a timely basis. I think it's more we're starting there than anything else.


Our next question comes from Matthew Mishan with KeyBanc.

Matthew Mishan

Just the first question is for me. To get you to like the low end of your guidance of parial improvement, was something need to happen that is beyond your control for you to get to the low end? Or is that something where you could -- or is that a real outcome from on current levels of manufacturing?

Vivek Jain

I don't actually think right now, Matt, it's the manufacturing piece so much for the back half. It's all about fulfillment costs. And I think we've gotten burned certainly from January 6, which is January 6 to mid-May. We felt like we really, really got burned and we don't want to overestimate any rate of improvement here, right?

Yes, it's great. We've had 10 weeks that have gotten a lot better. It's still expensive in 10 weeks doesn't make a long-term trend. So I think we're just trying to be mindful of the journey we've put everybody through ourselves.

Matthew Mishan

I think that makes sense. And then last quarter, you've bucketed the quality issues around like a quarter in revenue. What does it mean in relative to that $16 million to be back to supporting existing customers?

Vivek Jain

It means a portion of that 15%, I think we feel like we can participate in now. Not all of that was related to just the common Inmet Fusion. So range are some other products in Vital Care, some other self-inflicted European quality holds, et cetera. But there is a portion of it that comes back online, that's where we're going.

Matthew Mishan

And then just if things do continue to get better, is there a hangover from like manufacturing absorption of the inventory that still needs to be worked through the P&L or things continue on a trajectory and you can actually see a better sequential improvement.

Vivek Jain

I mean, I'll go first and let Brian go. I mean the pain we're feeling right now is, right, if you make the product today, and your factory is not as productive, you feel that pain later when you sell that product. Right now, we're feeling the pain of unproductive factories in Q1 and in part of Q2, and if to the extent product was moving even from the fall of last year. Those factories are much more productive today and those products are just starting to make their way into the market.

So we would -- minus whatever inflation labor, raw materials cost increases that have come through. We would certainly -- we're trying to be more efficient going forward, but I'll pause there and let Brian add.

Brian Bonnell

Yes. And Matt, maybe to your question, there is a little bit of a lag in -- between the genuine operational improvements from a manufacturing standpoint and when you see those benefits come through the P&L, and that's -- can be 1.5 quarters or so before you see it.

Matthew Mishan

And I asked the question last quarter, this is the last one around how -- have you lost any customers? Do you get a sense of like if they're now happier with the overall process of remediation and moving forward with ICU and SMEs?

Vivek Jain

I think to supply a very market-oriented answer would be where there was lots of multiple choice in the market, I think we do believe we've lost some share, and we need to turn that back very similar to some of the analogies we lived through in Hospira, where the products were maybe a little bit more limited into the market? Or were there were heavy capital outlays and people have equipment that's running fine where they just need a predictable disposal to shop, they've hung in there.

So it's a little bit of a different answer. If it's not related to a piece of capital equipment, it's truly a single-use disposable that has lots of choice in the market. at some point, brand matters less, if you can supply. There are spots where brand matters a lot, safety matters, quality matters a lot.

And if it's correlated to hardware, it's even more sticky. So I think that my story, my opinion on this stuff for all participants, these products last and are a lot longer than anybody expected and are stickier than a lot longer than anybody expects, right? We've seen that in multiple versions of the story.


[Operator Instructions]. And our next question comes from Larry Solow with CJS Securities.

Lawrence Solow

Just a couple of quick follow-up questions. Maybe I'll ask in different way. On the -- I know it's hard to break out the legacy from Smith, the sort of $45 million to $50 million incremental impact of inflation from the start of the year that you guys called out, that's across the company, I assume not just legacy. Is that correct?

Vivek Jain

Yes. That's across the company, Larry. Sorry. That's what I was trying to say it...

Lawrence Solow

And then that that's okay ...

Vivek Jain

It was all.

Lawrence Solow

And then that $25 million is right -- and that $25 million of expedited freight would mostly be Smiths, right? Is that correct?

Vivek Jain

That's what -- correct.

Lawrence Solow

And that $25 million -- the $45 million to $50 million could eventually come down inflation comes down, but that's a number that's -- we can talk about it in a second, but I have a follow-up question on that. But the $25 million inevitably, if you -- if your fulfillment and production is optimized, then that number should really go to 0 inevitably, right?

Brian Bonnell

There's always some. We always have. There's something happening somewhere, right?

Lawrence Solow

Right. A few million may be under $10 million, certainly, right?

Brian Bonnell

Even in legacy ICU, you have a little bit of of that here and there. So I don't want to say it doesn't happen. But none of us are very superset like this. So basically, just to be super blood, if stuff can get on the water, again, and the forward networks get fully replenished. We're spending money now to try to get the forward networks fully replenished, so stuff can stop going in the air and can go on both and on opening up as we speak.

Lawrence Solow

Right. Yes, absolutely. And then what about just -- I know you mentioned you think you can exit the year kind of getting back to that sort of run rate on revenue or close to ex currency. Obviously, the margins will be lower for one, just because of expedited freight costs and whatnot. And then -- what about -- do you feel like you taking a step back from when you bought Smith to today, anything has really -- the structural things that you didn't realize were there? Or is it just more going to take longer time. And obviously, as you're going to have this higher inflation, other costs that maybe -- which is impacting not just your legacy business and many others, too.

Brian Bonnell

Yes. I mean there's a lot in that statement, Larry...

Lawrence Solow

So yes, my question is has anything really changed significantly? Or is it just more blocking and tackling? Are there some -- are there broken tackles here? I'm just trying to figure out because it seems like you talked about the business moving. This is a business that moves kind of slow and whatnot, but you're cutting guidance pretty dramatically from when we spoke in mid-May, right? So I'm just trying to...

Brian Bonnell

I think one, as it relates to -- we look back on the transaction, yes, we think it starts with revenues. And so getting the revenues -- and that's after currency, which has been really rough. So if you don't have the revenues in order, you can't get the profits. We think the revenues are getting in order here at each day and each week is getting better.

And so we think we'll be at Q4 where we should have been revenue-wise, not out of the box, but soon they're up. And from a profit perspective, somewhere where we thought we'd be 3 or 4 months into this. So yes, we got knocked down 7 or 8 months in this thing.

But on the other hand, we have a much bigger book of business and many more synergy opportunities together across the network, where if we were stand-alone dealing with some of this inflation on ourselves, I think it would have been tough to find an equivalent amount of things to lay that off out of solutions to mitigate that. And so there are merits over time to being bigger here -- with [indiscernible] in the portfolio. And in terms of the guidance thing, again, back to the previous question, I think there's no reason to try to squeeze blood and marginally disappoint a customer here for the next 2 or 3 or 4 or 5 months, right? What we said is holding the share, serving people well and showing that we can fix this is more valuable than any, so that we can get the revenues there, serve the customers, run good factories, the costs, et cetera, will stabilize.

And we have a long list of self-help items that we try to schedule out there in a lot of detail that add up to a big number if we can get after all of them as long as the customers are...

Lawrence Solow

Absolutely, absolute. And just lastly, you never want to squeeze your customer and obviously, there are certain situations where you can't. But just in terms of pricing, and you you've touched on it for several calls. But a big question you see most -- many industries, companies large market shares or such as yours are able to get price.

I realize your businesses are mostly contracted, but so you spoke about contract talks and renegotiations for future contracts. Do you feel like you'll be able to get more price? And why can't you have some kind of a surcharge in there that covers fuel and other things like many other health care companies do that have contracted businesses that sort of helps you in periods like this?

Vivek Jain

I think I would say, Larry, we are exploring all options. There's no renegotiation of anything going on. I think we were trying to lay out at least our thinking about the way we believe the industry should maybe deconstruct value on some of these items because the historical way of doing business doesn't necessarily apply. And in the short term, certainly, we will -- we're paying attention to what the competitive set is out there, and we'll will follow the lead if given the opportunities.


This concludes our question-and-answer session. I would like to turn the conference back over to Vivek Jain for any closing remarks. Please go ahead.

Vivek Jain

Thanks, folks. It's obviously been an interesting 6 months. We really appreciate everybody's interest in ICU, your patience. The situation is improving, and we look forward to updating you on our next call.


Thank you for attending today's presentation. You may now disconnect.

Mon, 08 Aug 2022 13:15:00 -0500 en text/html
Killexams : The Untold Shadow War Between Israel and North Korea

The Democratic People’s Republic of Korea, more commonly known as North Korea, carried out a cyberattack on Israel on March 4, 2021, via the Lazarus hacker group — which is backed by Pyongyang. While Israel claims that the cyberattack was unsuccessful, ClearSky— an international cybersecurity firm has brought it to light that the attack was indeed successful, and the hackers did steal a substantial amount of classified data, though the precise details of the hack remain unclear. 

There’s a subtle fear that this data could be shared with Iran— a strong ally of North Korea and an archenemy of Israel. While the precise details of the attack are unclear, it is no news that North Korea and Israel have not been in each other’s good books, and one would wonder why. 

This silent feud dates as far back as 1966, when North Korea had a close relationship with the Palestine Liberation Organization (PLO). North Korea provided significant amounts of arms and military aid to the Palestine leftist factions and revolutionary movements, which on the surface, did seem like North Korea was indeed an ally of the PLO. 

North Korea reinforced Palestinian armed factions by providing them with renegade warfare training. Abu Jihad, one of the founders of the Fatah and Abu Daoud— leader of the Black September group that killed members of the Israeli Olympic team at the 1972 Munich Olympics, received heavy military training in the DPRK. Gradually, over 200 members of the Palestinians received military training in three locations near Pyongyang from 1970 to 1972, and the supply of weapons to Palestinian groups continued into the 2000s.

Yasser Arafat of the PLO and Kim Il Sung, then leader of North Korea. Photo credit: UPI news.

Although the conflict of Israel-Palestine had little to do with North Korea, then-leader Kim Jong II viewed Israel as an expansion of the US influence in a new region of the world. This, coupled with the fact that North Korea has geostrategic interests with Israel’s adversaries, most notably crucial economic trade with Iran, set forth the conditions for the present-day relationship.  

Now, North Korea’s involvement in the Palestinian-Israeli conflict has become pragmatic after the fall of the Soviet Union. The Palestinian cause was still much supported, and North Korea strongly condemned every Israeli action in the region. 

North Korea reinforced its involvement during the Gaza war in 2008-2009, and a foreign ministry spokesman harshly spoke against Israeli actions, denouncing the alleged killing of unarmed civilians as a crime against humanity and a threat to the Middle East Peace Progress. Sin Son-ho (North Korean permanent representative at the UN Assembly) mentioned that “North Korea fully supported Palestinians’ struggle to expel Israeli aggressors from their territory and restore their right to self-determination,”.

Sin Son-ho, North Korean Ambassador to the United Nations. Photo credit:

North Korea’s Less Known Involvement in the Yom Kippur War

During the  1973 Arab-Israeli War, also known as the Yom Kippur war, North Korea sent pilots and non-combat personnel to Egypt. The unit had about four to six encounters with the Israelis at some points during the war. 

As stated by Shlomo Aloni, the last aerial engagement on the Egyptian front on 6th December saw Israeli F-4s engage North Korean-piloted MiG-21s. The Israelis shot down one MiG, and another was shot down by friendly fire from Egyptian air defenses. Although it remains unclear what truly happened, we can align some facts together. In Hazardous Duty (the autobiography of the Chief of Staff of the United Nations Command in Korea), Major General John K. Singlaub stated that; in 1976, he was involved in negotiations with a North Korean official— General Han. 

North Korean People’s Army MiG-21 fighter jet. Photo credit: Flight Global.

Han was a military attache in Egypt during the Yom Kippur war and had organized North Korean pilots to fly Mig-21s against Israel. After all, Israel was a common enemy at that point. At the same time, the United States was a loyal ally to Israel and Israel had turned to the U.S. for a quick replacement of arms during the war.

Singlaub further stated that many of the North Korean pilots were shot down by US-supplied Sidewinder missiles, which denotes that; directly or indirectly, Israeli pilots did succeed in downing some of their North Korean rivals who allied with Egypt and Syria in the Yom Kippur war. The reason for a North Korean presence in that region was due to the forging of a warm relationship between the two countries in the 1970s when Egypt invited highly experienced Korean fighters to station and train in Egypt. 

A Friend of an Enemy is an Enemy- North Korea’s Unwavering Alliance With Iran and Syria

Since the onset of the civil war, North Korea has been a supportive ally to Iran and Syria. Since as early as the Iran-Iraq war, North Korea has been Iran’s foremost supplier of arms and ammunition. Iran, in turn, funds Hezbollah and Syria with technical know-how, arms, and militants on the ground. 

To a large extent, one can say that North Korea has gradually become Iran’s leading source of military technology. Looking at the ‘why’— there’s a purely beneficial relationship between the two countries. Iran has the money, and North Korea has the technology. It seems like what one country lacks is found in the other. Iran is of particular interest for multiple reasons. Firstly, due to its sheer proximity to North Korea. More importantly, Iran is seen as a more reliable partner to North Korea, in contrast to other wealthy neighboring countries. Given its hostility towards the US, it’s less likely to succumb to US-imposed sanctions and other pressures.

Iran’s most prominent proxy, Hezbollah, lives on Israel’s northern border and acts as her primary external threat. For over 30 years, Hezbollah caters to Iran’s foreign policy interests in exchange for dire financial support. Since Hezbollah’s 2006 war with Israel, Hezbollah has turned to Iran for precision-based missiles in preparation for a future war against the Jewish state. Such weaponry would grant the Shiah malia group a strong military edge and pose a serious threat to Israel, as an attack on a nuclear facility is a hypothetical Israel cannot afford to entertain. Hezbollah, and by proxy Iran, has gained a strong political footing and militaristic advancements since 2006 and is a threat the Jewish state takes with concern. 

North Korea’s Nuclear Program- A Lowkey Investment in Syria?

North Korea has been long accused of providing aid to Syria’s bootleg military and chemical weapons program. Although the depth of North Korea’s support is not entirely clear, some facts do align.

The Mossad— Israel’s intelligence agency, ran surveillance on Ibrahim Othman— the director-general of the Syrian Atomic Energy Commission. Via hacking Othman’s personal computer, the Mossad discovered photos of a cube-like building being constructed in Eastern Syria, along the Euphrates river. 

Ibrahim Othman, director-general of the Syrian Atomic Energy Commission. Photo credit: Times of Israel.

On the surface level, this confirmed the initial discovery of a mysterious building found during previous scans of Syria. And on a deeper level, the photos confirmed that the building was a doppelganger of North Korea’s Yongbyon nuclear reactor, which the U.S. and Israel had previously uncovered as a bomb-making factory. 

Aside from the fact that there was an uncanny resemblance between the cube-like building and North Korea’s nuclear reactor, the greater confirming link was the photo of Othman standing arm-in-arm with Chon Chibu— a North Korean nuclear scientist who worked at the Yongbyon facility.

It’s no secret North Korea supplied extensive nuclear know-how and boots on the ground to help build a nuclear reactor in al-Kibar, within the heart of Syria. 

Retaliation of Israel- Operation Outside the Box 

6th September 2007 is a day both Israel and Syria could never forget. Although considered one of Israel’s most successful operations, Operation Outside the Box was censored for over a decade. 

Just after midnight, and with the aid of Ten Israeli F-151 Ra’am and F-161 Sufa fighter jets, Israel carried out an airstrike on the suspected nuclear site. By feeding Syrian air defenses a false sky picture (so Syria couldn’t see Israel’s fighter jets in the sky), Israel could get its fighter jets across Syria, bomb the supposed nuclear facility, and evacuate. The facility was destroyed and left in shambles. By doing this, Israel was able to counter North Korea’s indirect attack through Syria. 

Now here’s the tricky part. Later in 2013, a former major in the Syrian air force— Abu Mohammed, recounted that air defenses in the region had been told to stand down as soon as they detected that Israeli planes were approaching the reactor. However, according to a WikiLeaks cable, the Syrian government put long-range missiles in place after the attack but did not retaliate. Perhaps, was the country fearful of a counterstrike? 

But much later, Syria denied ever having such a facility in the first place. As late as April 2008, Syrian President Bashar al-Assad provided his first remarks on the allegations, where he dismissed any attack by Israel on a nuclear facility. He claimed that it wasn’t logical for a nuclear site to have zero protection with the surface-to-air defenses. Indeed, it seems like Syria didn’t build fortifications around the facility to prevent drawing attention. Also, it was silently agreed by both sides; Israel won’t brag about destroying it, and Syria would pretend it never existed.

Before (left) and after (right) satellite images of the Syrian nuclear reactor which was reportedly struck by Israel in 2007. Photo credit: AP/DigitalGlobe.

Israel Against A North Korea-Iran-Syria Trio; What to Expect

After the Israeli president formed a three-member panel to investigate the supposed Syria nuclear site, Brigadier General Ya’akov Amidror (one of the panel’s members) discovered Iran was also working with North Korea on the nuclear facility. Iran had funneled $1 billion to the project and planned on using the facility to replace Iranian facilities should Iran fail to complete its uranium enrichment program.

Well, there’s no denying the fact that Syria could open doors for North Korea’s cooperation with Iran and its proxies, and even more unspeakable things. Using Yemen’s Houthi movement as an example, North Korea transferred ‘essential parts’ for Iran’s long-range missile development in 2020. The Houthis have Hwasong-6s ( North Korean-made scuds) in their military arsenal.

Israel is known not to take security threats with levity. Either direct threats or indirect ones. Furthermore, Israel has made it clear on multiple occasions that it makes no dissociation between a physical or cyber attack, most notably on the 5th of May 2021 when it responded with force to an attempted cyberattack by Hamas

Though North Korea has operated within the shadows in regards to its conflict with Israel, it does appear from the most latest cyberattack that it has come out of the darkness and played a more direct role in this escalating conflict. It’s hard to say where this current escalation can lead us, but such a tit-for-tat can potentially move the current shadow war between the two countries out into the open. 

Sat, 30 Jul 2022 18:59:00 -0500 en-US text/html
Killexams : Building a safe and efficient future for the Food & Drink Manufacturing Industry: The role of norelem’s Hygienic DESIGN standard components

In a post-pandemic world, we are as hygiene conscious as ever before. One of the industries championing hygiene is Food & Drink manufacturing and today it is more important than ever to uphold this renewed focus on hygiene. In this feature, Marcus Schneck, CEO of norelem, looks at how norelem’s range of Hygienic DESIGN products offer several benefits to Food & Drink manufacturers.

There has been a newly refreshed focus on people’s health over the past two years, with one result being a clamping down on regulations in the Food & Drink manufacturing industry. Due to these tighter regulations every element in Food & Drink manufacture is being looked at with a much closer lens, from everything including best practices in Health & Safety to the implementation of higher quality materials.  


While these regulations certainly make things safer for consumers, actually adapting to these regulations can be a challenge for manufacturers, from both an execution and cost perspective. For some having to replace many elements of a manufacturing system at once seems like a big hill to climb as bespoke components are expensive and can take a long time in the order and delivery process. This is where norelem’s Hygienic DESIGN standard components offer an advantageous solution.


The Benefits of Hygienic DESIGN standard components  


Being able to uphold the safety standards of the food and beverage manufacturing industry is imperative to its success. With a growing need for Food & Drink manufacture, being able to facilitate and drive innovation in the safety standards of this industry is one of the key benefits of the Hygienic DESIGN standard components.


norelem’s Hygienic DESIGN range of standard components, such as the A4 quality stainless steel products, can deliver the highest hygiene standards while increasing manufacturing efficiencies. The material’s used to make the components supply them a longer lifetime. In addition, the products are designed with special radii, transitions, bevels, and surfaces designed to prevent wetting – they are therefore easy to clean, if they need to be cleaned at all. Through the reductions in downtime and maintenance time that the products offer, the Food & Drink manufacturing industry will be able to operate more efficiently in the future.



In addition, the Hygienic DESIGN standard components ensure minimal contamination from harmful microorganisms that cause illness or degrade product quality, as well as allergens, across production lines – and now more than ever is it critical that safety standards are being met, especially with the increasing need for food production, as well as the world’s renewed focus on health and safety. These product specifications are all striving for reductions in maintenance time, and a cleaner, safer manufacturing space, ensuring a prolonged lifetime of the machinery overall.


In addition to the reduction in maintenance and down time, which makes for more economical products, the response to these regulations is in turn making the Food & Drink manufacturing industry safer. For example, through visually detectable plastics, contaminated food can be identified quicker. But also, the contamination of food can be prevented from occurring at the source.


Where and why should Hygienic DESIGN products be implemented?


The stricter guidelines for food manufacturing as well as the products innate benefits have made for an increased demand for Hygienic DESIGN products from manufacturers. As well as implementing classic standard components like clamping levers or indexing plungers, manufacturers are already implementing Hygienic DESIGN products like screws, nuts, and levelling feet, to connect machine parts together. As guidelines become stricter, changes to the technology are going to be required, which is why norelem are working continuously to expand the Hygienic DESIGN range over the coming years.


Why manufacturers love standard components


The benefits of using standard components rather than bespoke components in Food & Drink manufacturing are numerous. What will probably be most appealing to manufacturers is the reduction in costs and design time. A bespoke system is of course made to order and has a high cost associated with it, whereas standard components are high in stock and have short delivery times. In addition, standard components have guaranteed functions and a compiled number of special design properties such as radii and surfaces. But, arguably the most beneficial is that standard components can be quickly and easily exchanged in case of the need for repair, whereas a bespoke system would have to be reordered, and operations would have to be put on hold.


When it comes to designing and choosing Hygienic DESIGN products, engineers and manufacturers must take the current guidelines into consideration as well as any outside influences, such as contact with aggressive media, or the temperature range the products can withstand.


norelem’s Hygienic DESIGN standard components play an essential role in upholding the safety standards of the Food & Drink manufacturing industry. It is through the reductions in downtime and maintenance time that they make the industry more efficient and through the products extended lifetime, that they make it more sustainable. With more strain being put on manufacturing than ever before, pioneering and facilitating the future of the Food & Drink manufacturing industry through product innovation is one role that norelem are extremely proud to play.


The entire Hygienic DESIGN product range can be found in the 2022 edition of norelem’s THE BIG GREEN BOOK


If you would like to find out more about norelem’s Hygienic DESIGN standard components, please visit

About norelem

norelem is a world-leading manufacturer and supplier of flexible standard parts and components for mechanical engineering. The company supplies 70,000 standard products relating to standard machinery and operating elements, as well as automation components. Ninety-eight per cent of these parts are available from stock, and the business delivers on-site technical support for products. This high level of inventory enables norelem to provide fast and reliable delivery times.


THE BIG GREEN BOOK is both norelem’s ideas catalogue and a reference book and has become the norelem trademark. More than just a standard product catalogue, THE BIG GREEN BOOK represents everything norelem stands for, combining product information, specifications, and technical information, with best practice references, advice, and guidance.

THE BIG GREEN BOOK combines product information, specifications, and technical information in one single source. Created using a logical sequence of article numbers based on stages of production, it contains best practice references, advice, and guidance.

Sun, 07 Aug 2022 23:21:00 -0500 en text/html
Killexams : IFSEC Global Influencers in Security & Fire Selects Ray O’Hara as Top Security Executive No result found, try new keyword!Allied Universal, a global security and facility services company, is proud to announce that company pioneer, Ray O’Hara, CPP, EVP Executive Protection and Intelligence Services, ... Fri, 05 Aug 2022 00:20:00 -0500 text/html
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