Redwire Corporation (RDW) Bundle
Understanding Redwire Corporation (RDW) Revenue Streams
Understanding Redwire Corporation’s Revenue Streams
Revenue Growth: For the three months ended September 30, 2024, revenues increased by 10% to $68.6 million, compared to $62.6 million for the same period in 2023. For the nine months ended September 30, 2024, revenues totaled $234.5 million, representing a 30% increase from $180.3 million in the previous year.
Breakdown of Primary Revenue Sources
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By Customer Grouping:
Customer Group Three Months Ended September 30, 2024 Three Months Ended September 30, 2023 Nine Months Ended September 30, 2024 Nine Months Ended September 30, 2023 Civil Space $21,359 $29,336 $69,337 $82,831 National Security $26,097 $13,393 $56,266 $38,153 Commercial and Other $21,182 $19,883 $108,938 $59,331 Total Revenues $68,638 $62,612 $234,541 $180,315 -
By Geographic Location:
Geographic Location Three Months Ended September 30, 2024 Three Months Ended September 30, 2023 Nine Months Ended September 30, 2024 Nine Months Ended September 30, 2023 U.S. $41,290 $47,138 $105,131 $135,574 Europe $27,334 $15,468 $129,325 $44,658 Other $14 $6 $85 $83 Total Revenues $68,638 $62,612 $234,541 $180,315
Year-over-Year Revenue Growth Rate
For the three months ended September 30, 2024, the revenue growth rate was 10%. For the nine months ended September 30, 2024, the revenue growth rate was 30%.
Contribution of Different Business Segments to Overall Revenue
The contribution of various segments indicates a strong performance in national security and commercial sectors, with national security showing a significant increase from $13.4 million in Q3 2023 to $26.1 million in Q3 2024.
Analysis of Significant Changes in Revenue Streams
In the nine months ended September 30, 2024, there were net unfavorable EAC adjustments of $8.6 million, compared to favorable adjustments of $0.8 million in the same period of 2023. This shift reflects increased costs related to larger contracts, impacting overall profitability despite revenue growth.
Overall, the revenue performance for the period showcases a robust growth trajectory, driven by strategic increases in contract sizes and enhanced production volumes in key offerings.
A Deep Dive into Redwire Corporation (RDW) Profitability
Profitability Metrics
In analyzing the profitability metrics for the specified company, we can observe the following key figures for the third quarter ending September 30, 2024:
| Metric | Q3 2024 | Q3 2023 | Change (%) |
|---|---|---|---|
| Revenues | $68,638,000 | $62,612,000 | 10% |
| Cost of Sales | $56,615,000 | $45,495,000 | 24% |
| Gross Profit | $12,023,000 | $17,117,000 | -30% |
| Gross Margin (%) | 18% | 27% | -9% |
| Operating Expenses | $24,513,000 | $19,834,000 | 23% |
| Operating Income (Loss) | $(12,512,000) | $(2,717,000) | -361% |
| Net Income (Loss) | $(20,959,000) | $(6,325,000) | -231% |
The gross profit decreased by $5.1 million, or 30%, for the three months ended September 30, 2024, compared to the same period in 2023. This resulted in a gross margin of 18% in Q3 2024, down from 27% in Q3 2023.
Operating expenses, which include selling, general, and administrative (SG&A) costs, totaled $24.5 million for the third quarter of 2024, marking an increase of 23% compared to the prior year. SG&A expenses as a percentage of revenue improved to 26% in Q3 2024 from 29% in Q3 2023, reflecting a focus on cost discipline.
Net loss for the three months ended September 30, 2024, was $20.96 million, compared to a net loss of $6.33 million for the same period in 2023.
In terms of year-to-date performance for the nine months ended September 30, 2024, the company reported:
| Metric | 9M 2024 | 9M 2023 | Change (%) |
|---|---|---|---|
| Revenues | $234,541,000 | $180,315,000 | 30% |
| Cost of Sales | $194,709,000 | $133,077,000 | 46% |
| Gross Profit | $39,832,000 | $47,238,000 | -16% |
| Gross Margin (%) | 17% | 26% | -9% |
| Operating Income (Loss) | $(23,219,000) | $(8,791,000) | -164% |
| Net Income (Loss) | $(47,142,000) | $(19,048,000) | -147% |
The nine-month revenue increase of 30% is attributed to higher average contract sizes and increased production volume in various offerings. However, gross profit fell by $7.4 million, resulting in a gross margin of 17% for the nine months ended September 30, 2024.
Overall, the company has faced challenges in maintaining profitability, with significant losses reported in both quarterly and year-to-date results. The increase in operating expenses and cost of sales has further pressured profitability margins.
Debt vs. Equity: How Redwire Corporation (RDW) Finances Its Growth
Debt vs. Equity: How Redwire Corporation Finances Its Growth
Overview of Debt Levels
As of September 30, 2024, total debt stood at $124.264 million, with long-term debt netting at $121.553 million after accounting for short-term obligations of $1.751 million . The breakdown of this debt includes:
| Debt Type | Amount (in millions) | Effective Interest Rate |
|---|---|---|
| Adams Street Term Loan | $30.289 | 12.14% |
| Adams Street Revolving Credit Facility | $47.000 | 14.10% |
| Adams Street Delayed Draw Term Loan | $14.656 | 12.13% |
| Adams Street Incremental Term Loan | $31.348 | 11.90% |
| D&O Financing Loans | $0.971 | 2.21% |
Debt-to-Equity Ratio
The debt-to-equity ratio as of September 30, 2024, is approximately -1.29, reflecting a negative equity position of -$96.420 million against the total liabilities of $289.945 million . This is significantly higher than the industry average, which typically ranges from 0.5 to 1.0.
Recent Debt Issuances and Activity
In the past year, the company has engaged in multiple debt issuances under the Adams Street Credit Agreement, borrowing $27.0 million in the third quarter of 2024, with a total of $42.0 million borrowed during the nine-month period . As of September 30, 2024, the company had $18.0 million remaining capacity under its revolving credit facility . The current credit rating remains stable, with no downgrades reported in recent assessments.
Balancing Debt Financing and Equity Funding
Redwire Corporation has increasingly relied on debt financing to support its growth initiatives, particularly in the space and defense sectors. The company has issued common stock under its committed equity facility, raising $546,000 in September 2024 . This strategy illustrates a balanced approach between leveraging debt and maintaining equity funding to finance ongoing operations and expansion efforts.
Key Financial Metrics
| Metric | Value |
|---|---|
| Total Debt | $124.264 million |
| Long-Term Debt | $121.553 million |
| Debt-to-Equity Ratio | -1.29 |
| Equity Position | -$96.420 million |
| Cash and Cash Equivalents | $27.8 million |
| Available Borrowings | $18.0 million |
Assessing Redwire Corporation (RDW) Liquidity
Assessing Redwire Corporation's Liquidity
Current Ratio: As of September 30, 2024, the current ratio is approximately 1.24, calculated by dividing current assets of $53.7 million by current liabilities of $43.4 million.
Quick Ratio: The quick ratio stands at 0.93, derived from liquid assets (cash and receivables) of $43.1 million divided by current liabilities of $43.4 million.
Working Capital Trends
As of September 30, 2024, working capital is reported at $10.3 million, reflecting an increase from $8.2 million at December 31, 2023. This trend indicates improved liquidity management over the nine months.
Cash Flow Statements Overview
| Cash Flow Type | Nine Months Ended September 30, 2024 | Nine Months Ended September 30, 2023 |
|---|---|---|
| Net Cash Provided by (Used in) Operating Activities | ($24.4 million) | ($14.5 million) |
| Net Cash Provided by (Used in) Investing Activities | ($3.0 million) | ($5.2 million) |
| Net Cash Provided by (Used in) Financing Activities | $40.3 million | $2.3 million |
| Cash, Cash Equivalents, and Restricted Cash at End of Period | $43.1 million | $10.9 million |
Potential Liquidity Concerns or Strengths
The company holds $27.8 million in cash and cash equivalents and $18.0 million available from existing credit facilities as of September 30, 2024. Additionally, it has $15.3 million in restricted cash, suggesting a solid liquidity position despite negative cash flow from operations.
However, the net cash used in operating activities has increased significantly, leading to concerns about sustainability in generating positive cash flow. The company’s debt stands at $124.3 million, which includes term loans and credit facilities, indicating a reliance on financing to support operations and growth initiatives.
Is Redwire Corporation (RDW) Overvalued or Undervalued?
Valuation Analysis
To evaluate whether the company is overvalued or undervalued, we will analyze key valuation metrics including price-to-earnings (P/E), price-to-book (P/B), and enterprise value-to-EBITDA (EV/EBITDA) ratios.
Price-to-Earnings (P/E) Ratio
The company reported a net loss attributable to common shareholders of $(24,342) thousand for the three months ended September 30, 2024, leading to a basic and diluted net income (loss) per common share of $(0.37). As the company is currently experiencing losses, the P/E ratio is not applicable.
Price-to-Book (P/B) Ratio
As of September 30, 2024, the total shareholders’ equity (deficit) was $(96,420) thousand, with total assets amounting to $289,945 thousand. Given the current stock price of approximately $6.87, the book value per share is calculated as:
- Book Value per Share = Total Equity / Total Shares Outstanding
- Total Shares Outstanding = 66,540,871
- Book Value per Share = $(96,420) / 66,540,871 ≈ $(1.45)
Thus, the P/B ratio is also not applicable as it reflects a negative book value.
Enterprise Value-to-EBITDA (EV/EBITDA) Ratio
As of September 30, 2024, the enterprise value can be calculated as follows:
- Market Capitalization = Stock Price × Total Shares Outstanding = $6.87 × 66,540,871 ≈ $457,395,000
- Total Debt = $289,945,000 (as per total liabilities)
- Cash and Cash Equivalents = $0 (assumed for simplification)
- Enterprise Value = Market Capitalization + Total Debt - Cash = $457,395,000 + $289,945,000 = $747,340,000
The EBITDA for the last twelve months (LTM) was reported at $(23,219) thousand. Therefore, the EV/EBITDA ratio is:
- EV/EBITDA = Enterprise Value / EBITDA = $747,340,000 / $(23,219,000) = N/A
Stock Price Trends
Over the last 12 months, the stock price has fluctuated significantly, with a 52-week high of $9.99 and a low of $1.77. The current stock price is $6.87, indicating a moderate recovery from the lows.
Dividend Yield and Payout Ratios
The company currently does not pay dividends, and therefore the dividend yield and payout ratios are 0%.
Analyst Consensus
Analysts have a mixed outlook on the stock, with some rating it as a Hold due to the ongoing losses and uncertainty in profitability.
| Metric | Value |
|---|---|
| Price-to-Earnings (P/E) Ratio | N/A (Net Loss) |
| Price-to-Book (P/B) Ratio | N/A (Negative Book Value) |
| Enterprise Value | $747,340,000 |
| EBITDA (LTM) | $(23,219,000) |
| EV/EBITDA Ratio | N/A |
| Current Stock Price | $6.87 |
| Dividend Yield | 0% |
| Analyst Consensus | Hold |
Key Risks Facing Redwire Corporation (RDW)
Key Risks Facing Redwire Corporation
The financial health of Redwire Corporation is influenced by various internal and external risk factors that can impact its operations and profitability.
Industry Competition
Redwire operates in a highly competitive environment with numerous players in the aerospace and defense sector. The company faces pressure from established competitors and new entrants, which could lead to pricing pressures and reduced market share. For instance, the company reported a 10% increase in revenues to $68.6 million for the three months ended September 30, 2024, compared to $62.6 million in the same period of 2023. However, it also experienced a decrease in gross profit margin from 27% to 18% during the same period.
Regulatory Changes
Changes in government regulations and policies, particularly those affecting the aerospace and defense sectors, pose a significant risk. Compliance with these regulations can result in increased operational costs and may limit the company's ability to compete effectively. The company has had to navigate various compliance requirements, which can strain resources and impact profitability.
Market Conditions
The overall market conditions, including fluctuations in demand for aerospace services, can significantly affect Redwire's financial performance. The company reported an increase in costs of sales by $11.1 million, or 24%, for the three months ended September 30, 2024, primarily driven by increased labor, materials, and subcontractor costs. Such cost increases can pressure profit margins if not managed effectively.
Operational Risks
Operational risks include project execution challenges, particularly related to larger contracts with lower margins. The company reported $1.6 million in net unfavorable estimated at completion (EAC) adjustments for the three months ended September 30, 2024, compared to $2.5 million in favorable adjustments during the same period in 2023. These adjustments reflect the complexities and uncertainties inherent in contract performance that can lead to financial losses.
Financial Risks
Financial risks are heightened by the company's significant interest expenses, which increased by $1.0 million, or 37%, for the three months ended September 30, 2024. The growing debt burden can strain cash flows and limit financial flexibility. Additionally, the company's net income loss attributable to Redwire Corporation was $20.96 million for the three months ended September 30, 2024, up from $6.25 million in the same period in 2023.
Strategic Risks
Strategic risks arise from the company's decisions regarding mergers, acquisitions, and partnerships. Redwire's acquisition of Hera Systems, Inc. involved significant transaction expenses of $5.1 million, representing a 100% increase compared to the previous year. Such strategic moves carry risks of integration challenges and may not yield expected synergies.
Mitigation Strategies
To mitigate these risks, Redwire has focused on enhancing operational efficiencies and cost management strategies. The company has streamlined its SG&A expenses, which decreased by $0.8 million, or 4%, for the three months ended September 30, 2024. Additionally, maintaining a diversified customer base can help reduce dependency on any single revenue stream and improve resilience against market fluctuations.
| Risk Factor | Description | Impact |
|---|---|---|
| Industry Competition | Pressure from established and new competitors | Potential pricing pressures, reduced market share |
| Regulatory Changes | Compliance with evolving government regulations | Increased operational costs |
| Market Conditions | Fluctuations in demand for aerospace services | Pressure on profit margins due to rising costs |
| Operational Risks | Challenges in executing larger contracts | Financial losses from unfavorable EAC adjustments |
| Financial Risks | High interest expenses and net income losses | Strained cash flows, limited financial flexibility |
| Strategic Risks | Risks associated with mergers and acquisitions | Integration challenges, uncertain synergies |
Future Growth Prospects for Redwire Corporation (RDW)
Growth Opportunities
The future growth prospects for Redwire Corporation are influenced by several key growth drivers, strategic initiatives, and competitive advantages that position the company favorably in the market.
Key Growth Drivers
- Product Innovations: Redwire has been focusing on advancements in power generation and space infrastructure technologies, which have resulted in a year-over-year revenue increase of 30% for the nine months ended September 30, 2024, reaching $234.5 million compared to $180.3 million in the same period in 2023.
- Market Expansions: The company has expanded its market presence, particularly in Europe, where revenues increased to $129.3 million for the nine months ended September 30, 2024, up from $44.7 million in 2023.
- Acquisitions: The recent acquisition of Hera Systems contributed $21.9 million in contract value, enhancing the company's service offerings and broadening its client base.
Future Revenue Growth Projections and Earnings Estimates
Analysts forecast that Redwire's revenue growth will continue as the company capitalizes on its backlog of contracts. The contracted backlog as of September 30, 2024, stood at $330.1 million, down from $372.8 million at the end of 2023, indicating a need for new contracts to replenish this backlog. The company's book-to-bill ratio was 0.65 for the three months ended September 30, 2024, suggesting that the level of contracts awarded is currently less than the revenue recorded.
Strategic Initiatives and Partnerships
Redwire's strategic partnerships, particularly in civil space and national security sectors, are expected to drive future growth. For the three months ended September 30, 2024, revenues from national security contracts increased to $26.1 million from $13.4 million in the previous year. This shift reflects the company's focus on high-demand sectors that promise sustainable revenue streams.
Competitive Advantages
Redwire's competitive advantages include:
- Technological Expertise: The company's focus on research and development, which increased by 24% to $4.7 million for the nine months ended September 30, 2024, positions it well to innovate and meet market demands.
- Diverse Customer Base: The company serves a wide range of customers, including government and commercial entities, which mitigates risk and enhances revenue stability.
- Strong Backlog Management: The ability to manage and grow its backlog is critical; organic backlog additions were $172.1 million during the nine months ended September 30, 2024.
| Financial Metrics | Q3 2024 | Q3 2023 | Change |
|---|---|---|---|
| Revenues | $68.6 million | $62.6 million | +10% |
| Net Income (Loss) | ($20.96 million) | ($6.32 million) | -231% |
| Gross Margin | 18% | 27% | -9% |
| SG&A Expenses | $17.5 million | $18.3 million | -4% |
| Research and Development | $1.9 million | $1.5 million | +24% |
These factors collectively illustrate the growth potential for Redwire Corporation as it navigates the evolving landscape of the space industry and related sectors.
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Updated on 16 Nov 2024
Resources:
- Redwire Corporation (RDW) Financial Statements – Access the full quarterly financial statements for Q3 2024 to get an in-depth view of Redwire Corporation (RDW)' financial performance, including balance sheets, income statements, and cash flow statements.
- SEC Filings – View Redwire Corporation (RDW)' latest filings with the U.S. Securities and Exchange Commission (SEC) for regulatory reports, annual and quarterly filings, and other essential disclosures.