Redwire Corporation Q3 FY2025 earnings call

Transformation and Vision

• Redwire is undergoing a major transformation, with the combination of Redwire Space and Edge Autonomy. The updated vision is to be an integrated space and defense tech company pioneering next-generation space and defense technologies.

Third Quarter Highlights

• Adjusted gross margin increased to 27.1%, adjusted EBITDA improved sequentially, and revenue grew significantly. Book-to-bill ratio was 1.25, backlog was $355.6 million. However, U.S. government shutdown caused delays in some awards.

Five Value-Driving Product Areas

• Next-gen spacecraft: Reached agreement with Thales Alenia Space for ESA's Skimsat mission, signed MoU with Honeywell for QK-VSAT. Targeting opportunities in intelligence community, AFRL, etc.
• Large space infrastructure: Awarded contract to develop rollout solar arrays for Axiom's Commercial Space Station. Pursuing follow-on opportunities.
• Microgravity development: Launched 14 PIL-BOXes, with potential in pharmaceutical development using microgravity.
• Combat-proven UAS: Awarded and delivered Stalkers for U.S. Army's LRR program, shipped to multiple end customers. European defense spending growth is a driver.
• Sensors and payloads: Partnership with Red Cat for integrating Black Widow Small UAS, MoU with UXV Technologies. UAS EO/IR sensor market growth is an opportunity.

In the third quarter of 2025, Redwire's revenues increased by 50.7% year-over-year to a record $103.4 million, with Edge Autonomy contributing $49.5 million. Adjusted gross margin was 27.1%, and adjusted EBITDA improved sequentially from a negative $27.4 million in the second quarter to a negative $2.6 million in the third quarter. Revenue growth was 67.5% sequentially and 57% year-over-year. Book-to-bill ratio was 1.25, resulting in backlog of $355.6 million as of September 30, 2025.

• For the 12 months ending December 31, 2025, including Edge Autonomy from the close date, revenue guidance is adjusted to a narrower range of $320 million to $340 million due to U.S. government shutdown pushing some awards into 2026.
• Anticipates strong 2026 as government returns to full strength after shutdown.

• U.S. government shutdown has led to delays in key awards such as the U.S. Army's LRR program and slow start to Golden Dome. This has pushed some anticipated awards out of the fourth quarter into 2026.

Q: Starting with the revised guidance, what does that mean for the business looking toward 2026?

A: These are not lost awards, just timing issues due to government shutdown. Awards will start to flow once shutdown ends, setting up strong 2026.

Q: Which of the 5 areas are the larger emphasis of the pipeline and bidding activity?

A: All 5 areas have extraordinary potential. UAS orders are a major priority, VLEO orbit also has strong growth potential, and microgravity, sensors/payloads, and large space infrastructure also have significant opportunities.

Q: How do you think about the right level of gross margins as the business comes back?

A: 30% should be the forward runway. 27% adjusted gross margin was due to purchase accounting element. 30% is the stated goal for gross margins going forward, with potential to do better than 30% as move out of development.