Redwire Corporation (NYSE:RDW) is a global leader in mission critical space solutions and high-reliability space infrastructure for the next generation space economy. The company's "Heritage plus Innovation" strategy enables it to combine decades of flight heritage with an agile and innovative culture, creating new, innovative technologies that are the building blocks of space infrastructure for government and commercial customers.
Business Overview
Redwire's primary business model is providing mission critical solutions based on core space infrastructure offerings for government and commercial customers through long-duration projects. These core offerings include leading technologies and production capability for avionics and sensors; power generation; structure and mechanisms; radio frequency systems; platforms, payloads and missions; and microgravity payloads. The company's core offerings have been enabling space missions since the 1960s and have been flight-proven on over 200 spaceflight missions.
Financials
In the latest quarter, Redwire reported impressive financial results, with revenue increasing 52.4% year-over-year to $87.8 million. However, the company reported a net loss of $8.1 million for the quarter. For the full year 2023, Redwire reported annual revenue of $243.8 million and a net loss of $27.3 million. The company's annual operating cash flow was $1.8 million, while annual free cash flow was -$6.5 million.
Despite the net losses, Redwire has seen strong momentum in its business, with a last twelve months book-to-bill ratio of 1.11x as of the latest quarter. The company's contracted backlog has also increased 10.9% year-over-year to $318 million. Redwire has a healthy pipeline of $6.3 billion in identified opportunities, including $610 million in proposals submitted year-to-date as of March 31, 2024, representing a 177.3% increase over the prior year period.
Geographically, Redwire generates the majority of its revenue from Europe, with 63% of revenue coming from Europe in the latest quarter. The United States accounted for 37% of revenue, while other regions made up a small portion. The company's revenue is diversified across its three main business segments - Civil Space (26% of Q1 2024 revenue), National Security (16%), and Commercial and Other (58%).
Looking at the revenue breakdown, the strong 52.4% year-over-year growth in Q1 2024 was primarily driven by increases in average contract size and increased volume of production in the power generation and structures and mechanisms space infrastructure offerings. These increases were partially offset by the impact of net EAC (Estimate at Completion) adjustments during the quarter.
Redwire's adjusted EBITDA remained flat year-over-year at $4.3 million in Q1 2024, despite the strong revenue growth. Gross margin declined to 16.9% in the quarter, down from 24.7% in the prior year period, primarily due to the impact of the net EAC adjustments. The company's selling, general and administrative expenses as a percentage of revenue decreased to 20% from 28% in the prior year quarter, reflecting Redwire's focus on cost discipline and operating leverage.
Liquidity
In terms of liquidity, Redwire ended the latest quarter with $32.6 million in cash and cash equivalents, and $15.0 million in available borrowings from its existing credit facilities, providing $47.6 million in total available liquidity. The company generated positive cash from operations of $2.8 million and positive free cash flow of $0.4 million in Q1 2024, a significant improvement from the prior year period.
Outlook
Looking ahead, Redwire has affirmed its full year 2024 revenue guidance of $300 million, which represents 23% year-over-year growth. The company is focused on improving its program management to reduce EAC volatility, while also creating more operating leverage and cost efficiency to continue on its path to profitability.
Redwire's growth strategy for 2024 is centered around four key principles: protecting the core, scaling production, moving up the value chain, and venture optionality. The company has highlighted several successes in each of these areas during the latest quarter.
In protecting the core, Redwire's cameras were onboard the Intuitive Machines IM-1 Lunar Landing mission, and the company's deployment mechanisms and 100-foot booms for NASA's solar sail cleared a key technology milestone.
On scaling production, Redwire announced a contract with Rocket Lab for 18 ship sets of antennas and radio frequency hardware, and the company began executing on a $142 million contract award for power solutions to an undisclosed satellite manufacturer.
Redwire's efforts to move up the value chain include the development of its U.S. VLEO (Very Low Earth Orbit) platform, SabreSat, and the announcement of its European VLEO platform, Phantom, which is being developed for the European Space Agency's Skimsat program.
Finally, in the area of venture optionality, Redwire highlighted its in-space pharmaceutical development capabilities, including the successful inaugural PIL-BOX mission and the 16 additional PIL-BOX missions manifested for 2024. The company believes this technology has significant potential, with the drug discovery market size estimated to grow from $80 billion in 2023 to $180 billion by 2032.
Conclusion
Overall, Redwire's strong financial performance, growing backlog, and strategic initiatives across its four key growth principles suggest the company could be significantly undervalued at current levels. With a focus on delivering reliable critical innovations for its customers, Redwire appears well-positioned to capitalize on the growing demand for space infrastructure and services.