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Redwire Corp (RDW)·Q4 2024 Earnings Summary

Executive Summary

  • Q4 2024 revenue was $69.6M, up 9.6% year over year, but profitability deteriorated: gross margin fell to ~6.6% and adjusted EBITDA was $(9.2)M, driven by net unfavorable EACs and a $43.8M non-cash increase in private warrant liability .
  • Operating cash flow and FCF turned positive sequentially in Q4 2024 ($7.1M and $3.0M, respectively), a material improvement versus Q3’s cash use, while quarterly book-to-bill fell to 0.51 and contracted backlog ended the year at $296.7M .
  • Management reaffirmed a combined FY2025 forecast (assuming Edge Autonomy closed 1/1/2025) of $535–$605M revenue, $70–$105M adjusted EBITDA, and positive FCF; liquidity at year-end was $64.1M, and public warrant exercises added ~$65.5M to available liquidity in early 2025, supporting 2025 execution .
  • Stock reaction catalysts: lumpy awards/book-to-bill <1, warrant liability volatility’s impact on GAAP results, and narrative around pipeline scale ($4.1B submitted bids in 2024) and multi-domain platform strategy with Edge Autonomy .

What Went Well and What Went Wrong

What Went Well

  • Positive operating cash flow and FCF in Q4 ($7.1M and $3.0M), sequentially stronger than Q3 and reflecting working capital release; CFO: “Net cash provided by operations totaled a positive $7.1 million… a significant improvement sequentially” .
  • Strategy execution: robust revenue growth (+24.7% FY), expansion of spacecraft platforms (SabreSat, Phantom, Thresher, Hammerhead, Mako) and venture optionality (27 PIL-BOXes launched); CEO: “moving up the value chain… supported by accretive M&A” .
  • 2025 outlook reaffirmed for the combined company with positive FCF expectation and stronger balance sheet; management highlighting organic growth potential ~20% without synergies .

What Went Wrong

  • Profitability pressure: Q4 adjusted EBITDA $(9.2)M and gross margin ~6.6% versus 17.5% in Q3; Q4 net loss $(67.2)M, including a $43.8M non-cash warrant fair value loss and $9.1M net unfavorable EACs .
  • Demand signal softness in the quarter: book-to-bill 0.51 (vs. 2.81 in Q4 2023) and backlog down to $296.7M at year-end; management noted lumpiness in awards and timing effects .
  • Elevated litigation and transaction costs impacted FY results (e.g., 2024 litigation-related expenses including a $7.0M loss contingency; Q3 had $8.0M litigation contingency); adjusted EBITDA adds back these items but GAAP results reflect them .

Financial Results

MetricQ4 2023Q3 2024Q4 2024
Revenue ($USD Millions)$63.5 $68.6 $69.6
Gross Profit ($USD Millions)$10.7 $12.0 $4.6
Gross Margin (%)16.9% 17.5% 6.6%
Operating Income (Loss) ($USD Millions)$(6.8) $(12.5) $(19.0)
Net Income (Loss) ($USD Millions)$(8.2) $(21.0) $(67.2)
Diluted EPS ($USD)$(0.25) $(0.37) $(1.38)
Adjusted EBITDA ($USD Millions)$1.7 $2.4 $(9.2)
Cash from Operations ($USD Millions)$15.7 $(17.7) $7.1
Free Cash Flow ($USD Millions)$12.6 $(20.5) $3.0

KPIs and Contracting

KPIQ4 2023Q3 2024Q4 2024
Book-to-Bill (Quarter)2.81 0.65 0.51
Book-to-Bill (LTM)1.23 1.25 0.76
Contracted Backlog ($USD Millions)$372.8 (FY end 2023) $330.1 (9/30/24) $296.7 (FY end 2024)

Notes:

  • Gross margin percentages are calculated from cited gross profit and revenue; Q3 2024 gross margin was also disclosed explicitly on the call .
  • Q4 2024 net loss includes non-cash warrant liability fair value impact and net unfavorable EAC changes; see narrative above .

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
RevenueFY 2024$310M (affirmed Nov 2024) $304.1M actual Lower vs guidance
Revenue (Combined w/ Edge Autonomy)FY 2025$535–$605M (initial Jan; reaffirmed Mar) $535–$605M (reaffirmed) Maintained
Adjusted EBITDA (Combined)FY 2025$70–$105M $70–$105M Maintained
Free Cash Flow (Combined)FY 2025Positive Positive Maintained

Context: Management reaffirmed combined 2025 guide assuming transaction close 1/1/2025; numbers are conservative, exclude run-rate synergies, include integration costs .

Earnings Call Themes & Trends

TopicPrevious Mentions (Q2 2024, Q3 2024)Current Period (Q4 2024)Trend
EAC adjustments and margin impactQ2: $3.1M unfavorable EACs; margin 16.6%; focus on reducing volatility Q4: $9.1M unfavorable EACs; margin ~6.6%; aim to be neutral over time Pressure increased; focus on bid/process refinement
Bookings/book-to-billQ2 LTM book-to-bill 1.28; backlog $354.3M Q4 quarter book-to-bill 0.51; backlog $296.7M; timing/lumpiness cited Softer quarter; pipeline scale emphasized
Pipeline scale / bids submittedQ2: $1.9B YTD; $5.7B identified FY2024: $4.1B submitted; $7.1B identified opportunities Larger bid sizes; multi-domain strategy
Venture optionality (PIL-BOX, microgravity)Q2: bioprinted heart tissue; 4 investigations launched FY2024: 27 PIL-BOXes launched; venture optionality continues Cadence and client interest rising
Europe footprint / regional trendsQ3: Belgium facility, ESA missions; contracted backlog in EU ops Q4: expansion in Poland; 50.6% FY revenue from Europe (location of customer) Growing EU exposure and operations
Regulatory/legalQ3: $8.0M litigation contingency FY2024: $7.0M loss contingency; elevated litigation expenses Persistent headwind
M&A/platform strategy (Hera, Edge Autonomy)Q3: closed Hera; rebranded platforms Q4/Q1: announced Edge Autonomy acquisition; reaffirmed 2025 combined guide Multi-domain expansion progressing

Management Commentary

  • CEO (press release): “Redwire continues to execute against its core business while moving up the value chain, supported by accretive M&A… strong and sustainable foundation for success in 2025” .
  • CFO: “Revenue… $304.1 million, a 24.7% improvement year-over-year… positive $3.0 million of Free Cash Flow in the fourth quarter… $64.1 million in total liquidity” .
  • CFO (call): “Net cash provided by operations totaled a positive $7.1 million… a significant improvement sequentially… subsequent to year-end… $65.5 million collected associated with… redemption of our public warrants” .
  • CEO (call): “We are forecasted… combined revenue… $535 million to $605 million… combined adjusted EBITDA… $70 million to $105 million… numbers are conservative and do not include run‑rate synergies” .

Q&A Highlights

  • Combined 2025 guidance and organic growth: Management sees ~20% organic growth potential combined (without synergies), wide range due to space-side timing dynamics .
  • EACs trend and cash impact: Aim for neutrality over time with improved bid/process reserves; EACs do not directly impact cash in the recorded period .
  • Synergies with Edge Autonomy: Revenue synergies excluded from guidance; cross-selling to European MoD customers and consolidation opportunities identified .
  • Ukraine exposure and macro: Conservative approach to Edge’s Ukraine-related revenue; potential peacekeeping drone surveillance opportunity; resilient to CRs/shutdowns due to multiyear contracts .
  • Share count update post warrant redemption: 75,573,294 shares as of Friday before the call (to be disclosed in 10-K) .

Estimates Context

  • Wall Street consensus (S&P Global) for Q4 2024 revenue and EPS was unavailable at the time of query due to daily request limits; therefore, estimate comparisons are not provided. Expect estimate revisions to reflect: weaker Q4 margins/adjusted EBITDA, positive operating cash flow/FCF, and quarterly book-to-bill below 1 with a sizeable pipeline and reaffirmed FY2025 combined guidance .
  • Values that would have been retrieved from S&P Global for consensus are unavailable due to data limits; we explicitly note the absence.

Key Takeaways for Investors

  • Q4 print mixed: top-line modestly above Q3 but margins compressed and adjusted EBITDA negative; GAAP results volatile due to warrant liability fair value changes—focus on cash generation and non-GAAP trajectory for core health .
  • Contracting cadence lumpy: quarter book-to-bill 0.51 and backlog down; watch conversion of the $4.1B submitted bids and $7.1B identified opportunities into backlog in H1 2025 for stock sentiment .
  • Liquidity improved and further bolstered by early-2025 warrant cash inflow; supports near-term execution and integration of Edge Autonomy .
  • 2025 combined guide reaffirmed and conservative (no synergies included), with positive FCF expected—delivery against this framework likely drives multiple expansion if contracting momentum resumes .
  • Venture optionality building: increasing cadence in PIL-BOX and microgravity manufacturing; optionality value upside if IP licensing or commercial pathways crystallize .
  • Europe exposure and multi-domain strategy: expanding EU footprint and combined space/UAS platforms position RDW for European defense budget tailwinds; monitor EU program awards and TETRA-6/TETRA-5 milestones .
  • Near-term trading: sensitivity to book-to-bill updates, EAC trend improvements, and Edge Autonomy closing/timeline; positive cash flow optics are a support, but margin normalization remains a key watch item .