Divergent Targets Faster, Cheaper Defense Production

The Pentagon wants weapons built faster, cheaper, and at far greater scale. Divergent's betting advanced manufacturing can help, and it's already working on it with Lockheed Martin Skunk Works. New ways to design and build aircraft is the case study. Divergent CEO, Lukas Czinger is with us. This has been a story for some time. Reindustrializing the defense industrial base, bringing more things back to America, including the supply chain. But you are doing the building bit, advanced manufacturing. Just explain in practice how that works. At Divergent, we're building the infrastructure layer. So we're thinking primes, product companies. Below that, there's a layer that has to have the actual capability and capacity to manufacture. So full stop, what we're building is that layer, that manufacturing layer. You talk about reshoring, you talk about manufacturing capacity. We care deeply about that. We agree we need more of it, but not only more, but also new capability. So at Divergent, what we're doing is building that next generation industrial base, not only capacity, but also capability and advanced capability. This is tricky. Right? You know, we keep saying a lot of what's around us here is classified, but you you also don't just work with Lockheed. Mhmm. You work with many of their peers and and competitors. How do you manage that? You know? Ourselves as a force multiplier. We never compete as a prime. So in that sense Right. You just manufacture. We manufacture, and we partner with these businesses, though, because we end up being their manufacturing partner, right, a supplier, but, yes, we are doing a critical part or an assembly, say, an airframe in the case of Lockheed Martin. Right. Now we wanna see all of these programs succeed because our warfighters, they need this hardware. Our country a national security perspective as well, there... You have to be very, very in control. Yes. Yes. So we never lock up any of our customers' IP. That stays with Lockheed. That stays with Raytheon. But what we do is engineer that airframe and make sure that we're supplying it on time at the right quality level and importantly at scale. And that's... Last one is really part of the missing factor. Right? How many of these units can you make per year for your customer? And that's where Divergent shines. How much of this is about speed? You know, if you think about the conclusions of of of Iran, there were everything ranging from munitions to fly to the types of technology. Mhmm. But the net result is, as I said, the Pentagon wants things faster and and cheaper. I think speed is the most important and speed with scale. So what is your time to market? You get a new set of requirements, new program. How quickly can you get in the air? Then when when can you field it? But also when you learn a lesson, how can you adapt to it? Right? How can you change that requirement or mission set and make a new piece of hardware? Does diversion react to things like that? Incredibly quickly. We can go from engineering inputs to flight ready vehicle in under three months. We can have a critical design in less than that, say, two or three weeks. And we've shown now with primes in the loop that we can go from start to full rate production in under a year. That's much, much faster than programs that we're taking five plus years to get to market. Has this administration taken any action that has actually allowed you to do that, to move faster, to scale, what they want? Right? This is something that they've shared as as a a goal too. Yes. Yes. They are completely mission aligned. And more than that, I'd say they've been a driving force top down. And where we really see it is we do advanced manufacturing, three d printing of metals. Yes. Right? This is a better way, in our opinion, to make a metal structure for most of these systems. How can we qualify these at a high pace? That's where the admin has said, we need to have the right process to bring in new technology, and we can't get burdened by too cautious of a risk posture. So we've seen the admin drive human issue, though, really, rather than... I mean, for example, what about sort of cutting red tape? You know? I'd say part of that red tape is in accepting new technologies because it is all about that demand signal. Right? If we get acceptance from the air force, the navy, the army, other services, then we will get demand signal in on programs. That demand signal will drive investment into new factories, and then we'll be producing at scale. So for us, that's probably the biggest area where the admin can help us. We've been showing some of what diversion does. Right? Take us inside your company. How have you grown? What are your capital needs right now? Yes. We've been around for over a decade now, and we started with a simple thesis, which was product agnostic manufacturing at low unit cost. So unpacking that, imagine a factory that's flexible, can go from making a car part to a defense part back to back. It's digitally driven, but it also has a low unit cost on both of those items. Right? That's never happened before. That was our thesis. We spent six years building that platform. We raised over $1,000,000,000 into the business, have great, American investors that are defense focused like Roche for management, have some blue chip PE investors like Haidi Sophia, have very strategic investors as all. And now for us, it's all about building more factories. Long Beach is our second factory that's coming online. There'll be 30,000 airframes of capacity per year. Long Beach? Yes. Decision to grow in California versus somewhere else in this country? Well, for us, we're gonna grow in multiple states. So, luckily, that's not just a decision we need to make once. But for Long Beach, that was customer location, that was engineering talent, and then actually the facility itself when we're doing these advanced processes, 400,000 square feet, we can make 30,000 airframes per year. So it worked very well for us. Lukas, what's the permanence of this shift? Like, you know, instead of you... The primes reacting to times of war Yes. You know, is just fundamentally a change of how the business works? Yes. I think this is a long lasting defense cycle. I think we've seen what modern warfare needs in terms of new systems. We've seen the price points that the department is asking for for those new systems. We've seen competition come in in terms of new players. So I think this is a cycle that's here to stay. I think you're gonna see more innovation. You're gonna see volumes go up, prices go down. And for us, we view resilience as flexibility. So being cross industry allows us to take a choppy demand signal, which at times defenses, especially in sustainment and maintenance, and make really good economics of it, which allows us to deliver at a steady volume and at a good cost.