Redwire reported sharply higher first-quarter revenue on Monday while the company’s net loss shrunk to less than the amount for the same period last year.
Redwire’s $57.6 million in revenue was a 75.3 percent increase over the first three months of 2022. Revenue was 7.3 percent higher than for the fourth quarter of last year.
The company’s net loss shrunk from $17.3 million in the first quarter of last year to $7.3 million during the first three months of 2023. Adjusted EBITDA was $4.3 million for the quarter compared to a loss of $4.7 million last year.
“We have started 2023 off with both record revenue and positive Adjusted EBITDA,” stated Chairman and CEO Peter Cannito. “Our strategy of providing proven space heritage products in the present combined with technical innovation for the future is on track for achieving profitability and delivering significant momentum as we continue to execute our 2023 plan.”
Redwire had an organic backlog of $184.9 million as of March 31, 2023. The company said that it expects revenues of $220 million to $250 million for 2023. Redwire reported revenue of $160.6 million in 2022.
Redwire’s Earnings
Redwire’s first-quarter financials, as well as excerpted disclaimers from the company’s press release, are below.
REDWIRE CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
Unaudited
(In thousands of U.S. dollars, except share data)
| March 31, 2023 | December 31, 2022 | ||||
| Assets | |||||
| Current assets: | |||||
| Cash and cash equivalents | $ | 11,273 | $ | 28,316 | |
| Accounts receivable, net | 23,481 | 26,726 | |||
| Contract assets | 40,741 | 31,041 | |||
| Inventory | 1,452 | 1,469 | |||
| Income tax receivable | 688 | 688 | |||
| Prepaid insurance | 1,413 | 2,240 | |||
| Prepaid expenses and other current assets | 5,704 | 5,687 | |||
| Total current assets | 84,752 | 96,167 | |||
| Property, plant and equipment, net | 12,915 | 12,761 | |||
| Right-of-use assets | 12,956 | 13,103 | |||
| Intangible assets, net | 65,333 | 66,871 | |||
| Goodwill | 64,910 | 64,618 | |||
| Equity method investments | 3,259 | 3,269 | |||
| Other non-current assets | 953 | 909 | |||
| Total assets | $ | 245,078 | $ | 257,698 | |
| Liabilities, Convertible Preferred Stock and Equity (Deficit) | |||||
| Current liabilities: | |||||
| Accounts payable | $ | 14,063 | $ | 17,584 | |
| Notes payable to sellers | — | 1,000 | |||
| Short-term debt, including current portion of long-term debt | 1,679 | 2,578 | |||
| Short-term operating lease liabilities | 3,345 | 3,214 | |||
| Short-term finance lease liabilities | 356 | 299 | |||
| Accrued expenses | 36,275 | 36,581 | |||
| Deferred revenue | 24,999 | 29,817 | |||
| Other current liabilities | 3,506 | 3,666 | |||
| Total current liabilities | 84,223 | 94,739 | |||
| Long-term debt | 75,019 | 74,745 | |||
| Long-term operating lease liabilities | 12,415 | 12,670 | |||
| Long-term finance lease liabilities | 759 | 579 | |||
| Warrant liabilities | 4,098 | 1,314 | |||
| Deferred tax liabilities | 3,172 | 3,255 | |||
| Other non-current liabilities | 384 | 506 | |||
| Total liabilities | 180,070 | 187,808 | |||
| Convertible preferred stock, $0.0001 par value, 88,000 shares authorized; 81,250 and 81,250 issued and outstanding as of March 31, 2023 and December 31, 2022, respectively. Liquidation preference of $162,500 and $162,500 as of March 31, 2023 and December 31, 2022, respectively. | 76,365 | 76,365 | |||
| Shareholders’ Equity (Deficit): | |||||
| Preferred stock, $0.0001 par value, 99,912,000 shares authorized; none issued and outstanding as of March 31, 2023 and December 31, 2022, respectively | — | — | |||
| Common stock, $0.0001 par value, 500,000,000 shares authorized; 64,280,631 and 64,280,631 issued and outstanding as of March 31, 2023 and December 31, 2022, respectively | 6 | 6 | |||
| Treasury stock, 141,811 and 141,811 shares, at cost, as of March 31, 2023 and December 31, 2022, respectively | (381) | (381) | |||
| Additional paid-in capital | 200,084 | 198,126 | |||
| Accumulated deficit | (213,786) | (206,528) | |||
| Accumulated other comprehensive income (loss) | 2,492 | 2,076 | |||
| Total shareholders’ equity (deficit) | (11,585) | (6,701) | |||
| Noncontrolling interests | 228 | 226 | |||
| Total equity (deficit) | (11,357) | (6,475) | |||
| Total liabilities, convertible preferred stock and equity (deficit) | $ | 245,078 | $ | 257,698 |
REDWIRE CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (LOSS)
Unaudited
(In thousands of U.S. dollars, except share and per share data)
| Three Months Ended March 31, 2023 | Three Months Ended March 31, 2022 | ||||
| Revenues | $ | 57,605 | $ | 32,867 | |
| Cost of sales | 43,388 | 27,696 | |||
| Gross margin | 14,217 | 5,171 | |||
| Operating expenses: | |||||
| Selling, general and administrative expenses | 16,038 | 20,951 | |||
| Transaction expenses | 9 | 46 | |||
| Research and development | 388 | 1,724 | |||
| Operating income (loss) | (2,218) | (17,550) | |||
| Interest expense, net | 2,644 | 1,452 | |||
| Other (income) expense, net | 2,427 | 1,180 | |||
| Income (loss) before income taxes | (7,289) | (20,182) | |||
| Income tax expense (benefit) | (31) | (2,889) | |||
| Net income (loss) | $ | (7,258) | $ | (17,293) | |
| Net income (loss) attributable to noncontrolling interests | — | — | |||
| Net income (loss) attributable to Redwire Corporation | $ | (7,258) | $ | (17,293) | |
| Net income (loss) per common share: | |||||
| Basic and diluted | $ | (0.18) | $ | (0.28) | |
| Comprehensive income (loss): | |||||
| Net income (loss) attributable to Redwire Corporation | $ | (7,258) | $ | (17,293) | |
| Foreign currency translation gain (loss), net of tax | 418 | (128) | |||
| Total other comprehensive income (loss), net of tax | 418 | (128) | |||
| Total comprehensive income (loss) | $ | (6,840) | $ | (17,421) |
REDWIRE CORPORATION
Supplemental Non-GAAP Information
Unaudited
Adjusted EBITDA and Pro Forma Adjusted EBITDA
The following table presents the reconciliations of Adjusted EBITDA and Pro Forma Adjusted EBITDA to net income (loss), computed in accordance with U.S. GAAP.
| (in thousands) | Three Months Ended March 31, 2023 | Three Months Ended March 31, 2022 | ||||
| Net income (loss) | $ | (7,258) | $ | (17,293) | ||
| Interest expense, net | 2,644 | 1,452 | ||||
| Income tax expense (benefit) | (31) | (2,889) | ||||
| Depreciation and amortization | 2,466 | 3,658 | ||||
| Acquisition deal costs (i) | 9 | 46 | ||||
| Acquisition integration costs (i) | 306 | 458 | ||||
| Purchase accounting fair value adjustment related to deferred revenue (ii) | 15 | 26 | ||||
| Severance costs (iii) | 144 | — | ||||
| Capital market and advisory fees (iv) | 1,388 | 1,958 | ||||
| Litigation-related expenses (v) | 25 | 2,266 | ||||
| Equity-based compensation (vi) | 1,958 | 4,411 | ||||
| Committed equity facility transaction costs (vii) | (106) | — | ||||
| Warrant liability change in fair value adjustment (viii) | 2,784 | 1,238 | ||||
| Adjusted EBITDA | 4,344 | (4,669) | ||||
| Pro forma impact on Adjusted EBITDA (ix) | — | 994 | ||||
| Pro Forma Adjusted EBITDA | $ | 4,344 | $ | (3,675) |
| i. | Redwire incurred acquisition costs including due diligence, integration costs and additional expenses related to pre-acquisition activity. | |
| ii. | Redwire incurred purchase accounting fair value adjustments to unwind deferred revenue for MIS. | |
| iii. | Redwire incurred severance costs related to separation agreements entered into with former employees. | |
| iv. | Redwire incurred capital market and advisory fees related to advisors assisting with transitional costs associated with becoming a public company and the internalization of corporate services. | |
| v. | Redwire incurred expenses related to the Audit Committee investigation and securities litigation. | |
| vi. | Redwire incurred expenses related to equity-based compensation under Redwire’s equity-based compensation plan. | |
| vii. | Redwire adjusted the fair value of the associated derivative asset with changes in fair value recognized as a gain or loss during the respective periods. | |
| viii. | Redwire adjusted the fair value of the private warrant liability with changes in fair value recognized as a gain or loss during the respective periods. | |
| ix. | Pro forma impact is computed in a manner consistent with the concepts of Article 8 of Regulation S-X and represents the incremental results of a full period of operations assuming the entities acquired during the periods presented were acquired from January 1 of the year in which they occurred. For the three months ended March 31, 2022, the pro forma impact included the results of Space NV. |
Free Cash Flow
The following table presents the reconciliation of Free Cash Flow to Net cash provided by (used in) operating activities, computed in accordance with U.S. GAAP.
| (in thousands) | Three Months Ended March 31, 2023 | Three Months Ended March 31, 2022 | ||||
| Net cash provided by (used in) operating activities | $ | (14,048) | $ | (11,446) | ||
| Less: Capital expenditures | (799) | (1,014) | ||||
| Free Cash Flow | $ | (14,847) | $ | (12,460) |
Free cash flow was impacted by a working capital increase supporting growth and the timing of milestone collections, including an increase in contract assets of $9.4 million and a decrease in deferred revenue of $4.8 million during the three months ended March 31, 2023.
Comparable Revenues
The following table presents the reconciliation of Comparable Revenues to Revenues, computed in accordance with U.S. GAAP.
| (in thousands) | Three Months Ended March 31, 2023 | Three Months Ended March 31, 2022 | $ Change from prior year | % Change from prior year | |||||
| Revenues | 57,605 | 32,867 | 24,738 | 75% | |||||
| Acquisition-related revenues: | |||||||||
| Space NV | (12,268) | — | 12,268 | 100% | |||||
| Comparable Revenues | 45,337 | 32,867 | 12,470 | 38% |
REDWIRE CORPORATION
KEY PERFORMANCE INDICATORS
Unaudited
Book-to-Bill
Our book-to-bill ratio was as follows for the periods presented:
| (in thousands, except ratio) | Three Months Ended March 31, 2023 | Three Months Ended March 31, 2022 | Last Twelve Months March 31, 2023 | Last Twelve Months March 31, 2022 | |||||||
| Contracts awarded | $ | 29,665 | $ | 30,426 | $ | 296,638 | $ | 118,262 | |||
| Revenues | 57,605 | 32,867 | 185,287 | 138,770 | |||||||
| Book-to-bill ratio | 0.51 | 0.93 | 1.60 | 0.85 |
Book-to-bill is the ratio of total contract awarded to revenues recorded in the same period. The contracts awarded balance includes firm contract orders including time and material contracts which were awarded during the period and does not include unexercised contract options or potential orders under indefinite delivery/indefinite quantity contracts. Although the contracts awarded balance reflects firm contract orders, terminations, amendments, or contract cancellations may occur which could result in a reduction to the contracts awarded balance.
We view book-to-bill as an indicator of future revenue growth potential. To drive future revenue growth, our goal is for the level of contracts awarded in a given period to exceed the revenue recorded, thus yielding a book-to-bill ratio greater than 1.0.
Our book-to-bill ratio was 1.60 for the LTM ended March 31, 2023, as compared to 0.85 for the LTM ended March 31, 2022. For the LTM ended March 31, 2023 and March 31, 2022, contracts awarded includes additions from Space NV and Techshot, which were acquired in the fourth quarters of 2022 and 2021, respectively.
Backlog
The following table presents our contracted backlog as of March 31, 2023 and December 31, 2022, and related activity for the three months ended March 31, 2023 as compared to the year ended December 31, 2022.
| (in thousands) | March 31, 2023 | December 31, 2022 | |||
| Organic backlog, beginning balance | $ | 184,912 | $ | 139,742 | |
| Organic additions during the period | 23,465 | 194,539 | |||
| Organic revenue recognized during the period | (45,337) | (148,891) | |||
| Foreign currency translation | 13 | (478) | |||
| Organic backlog, ending balance | 163,053 | 184,912 | |||
| Acquisition-related contract value, beginning balance | 128,145 | — | |||
| Acquisition-related contract value acquired during the period | — | 109,765 | |||
| Acquisition-related additions during the period | 6,200 | 22,731 | |||
| Acquisition-related revenue recognized during the period | (12,268) | (11,658) | |||
| Foreign currency translation | 1,620 | 7,307 | |||
| Acquisition-related backlog, ending balance | 123,697 | 128,145 | |||
| Contracted backlog, ending balance | $ | 286,750 | $ | 313,057 |
We view growth in backlog as a key measure of our business growth. Contracted backlog represents the estimated dollar value of firm funded executed contracts for which work has not been performed (also known as the remaining performance obligations on a contract). Our contracted backlog includes $20.0 million and $37.4 million in remaining contract value from time and materials contracts as of March 31, 2023 and as of December 31, 2022, respectively.
Organic contracted backlog change excludes backlog activity from acquisitions for the first four full quarters since the entities’ acquisition date. Contracted backlog activity for the first four full quarters since the entities’ acquisition date is included in acquisition-related contracted backlog change. After the completion of four fiscal quarters, acquired entities are treated as organic for current and comparable historical periods.
Organic contract value includes the remaining contract value as of January 1 not yet recognized as revenue and additional orders awarded during the period for those entities treated as organic. Acquisition-related contract value includes remaining contract value as of the acquisition date not yet recognized as revenue and additional orders awarded during the period for entities not treated as organic. The acquisition-related contract backlog activity presented in the table above includes only the contracted backlog of Space NV. Similarly, organic revenue includes revenue earned during the period presented for those entities treated as organic, while acquisition-related revenue includes the same for all other entities, excluding any pre-acquisition revenue earned during the period.
Although contracted backlog reflects business associated with contracts that are considered to be firm, terminations, amendments or contract cancellations may occur, which could result in a reduction in our total backlog. In addition, some of our multi-year contracts are subject to annual funding. Management expects all amounts reflected in contracted backlog to ultimately be fully funded. Contracted backlog from foreign operations in Luxembourg and Belgium was $124.7 million and $129.9 million as of March 31, 2023 and December 31, 2022, respectively. These amounts are subject to foreign exchange rate translations from euros to U.S. dollars that could cause the remaining backlog balance to fluctuate with the foreign exchange rate at the time of measurement.
