Redwire Corporation — FY2022 Form 10-K
Reporting period: Fiscal year ended December 31, 2022; comparison is with FY2021. This is an annual report, not a standalone fourth-quarter results report. Redwire provides space infrastructure, components, engineering, and in-space manufacturing and biotechnology solutions. Its results include the October 2022 acquisition of Space NV.
Financial performance and position
| Metric | FY2022 | FY2021 |
|---|---|---|
| Revenue | $160.5 million | $137.6 million |
| Gross profit / margin | $28.7 million / 18% | $29.4 million / 21% |
| Operating loss | $146.4 million | $70.2 million |
| Net loss attributable to Redwire | $130.6 million; $2.09 per share | $61.5 million; $1.36 per share |
| Adjusted EBITDA (non-GAAP) | $(11.0) million | $1.3 million |
| Pro forma Adjusted EBITDA (non-GAAP) | $(7.0) million | $3.2 million |
| Cash used in operating activities | $31.7 million | $37.4 million |
| Cash and cash equivalents at year-end | $28.3 million | $20.5 million |
| Total debt at year-end | $78.9 million | $79.2 million |
- Revenue rose 17%, driven in part by $11.7 million of post-acquisition Space NV revenue and $8.8 million from Techshot, alongside contract mix and delivery timing. Cost of sales increased 22%, outpacing revenue growth.
- Gross margin fell three percentage points, reflecting contract mix and higher production costs. Net loss widened substantially, primarily due to a $96.6 million non-cash impairment charge and continued operating losses.
- The impairment included $49.9 million of goodwill, $30.9 million of intangible assets, $13.1 million of property and equipment, and $2.7 million of right-of-use assets; it related to Mission Solutions. Management cited lower revenue forecasts, higher production costs, and subcontractor delays.
- Other income included a $17.8 million gain from the decrease in fair value of private warrant liabilities; this non-cash item partially offset reported losses.
- Year-end available liquidity was $53.3 million: $28.3 million cash and $25.0 million available revolving-credit capacity. Management said liquidity should cover working capital needs and covenant compliance for at least 12 months from issuance of the financial statements, while cautioning that longer-term needs may exceed available liquidity if cash outflows persist.
- Current liabilities were $94.7 million and current assets were $96.2 million. Shareholders’ equity was a deficit of $6.7 million; the $76.4 million carrying value of preferred stock is presented separately as temporary equity.
Business momentum and changes from the prior period
- Total backlog increased to $465.1 million from $271.6 million, including $313.1 million contracted and $152.1 million uncontracted. The filing cautions that backlog may be cancelled, delayed, or not fully funded. Approximately 62% of remaining performance obligations of $275.7 million were expected to be recognized as revenue within 12 months.
- Book-to-bill improved to 2.04 from 1.13. FY2022 contract awards were $327.0 million; $109.8 million of that amount reflected acquired Space NV contract value.
- National security revenue increased to $43.9 million from $29.8 million; civil space revenue was $63.0 million versus $60.1 million, and commercial and other revenue was $53.6 million versus $47.7 million.
- Space NV was acquired for approximately $36.9 million in cash, expanding Redwire’s European presence and product portfolio. Acquisition effects limit direct comparability of annual revenue and backlog with FY2021.
- Three customers accounted for approximately 13.5%, 12.5%, and 10.7% of FY2022 revenue, respectively; government contracts comprise the majority of revenue.
Outlook, risks, and unusual items
- No specific full-year 2023 revenue or earnings guidance is provided in the filing. Management said it planned to increase headcount by approximately 20% in 2023 to support contracted work and anticipated awards, and expects continued investment in facilities, technology, and research and development.
- Management attributed execution pressure to inflation, supply-chain constraints, labor shortages, and program delays. Unfavorable estimate-at-completion adjustments were $10.0 million in FY2022, compared with $1.8 million in FY2021, primarily associated with Mission Solutions.
- Debt covenants were amended and compliance testing was suspended through September 30, 2023, with testing resuming for the quarter ending December 31, 2023. The amended maximum net leverage ratio is 7.50x through September 2024 and 6.50x thereafter. Redwire reported compliance at year-end.
- In late 2022, Redwire issued $81.3 million of Series A convertible preferred stock. It is convertible at an initial $3.05 per common share, carries a 13% cash dividend or 15% payment-in-kind dividend, and had a $162.5 million liquidation preference at year-end. It is voting stock on an as-converted basis and may materially dilute common shareholders; AEI and Bain Capital hold significant influence.
- The company reported material weaknesses in financial reporting controls, including weaknesses in the control environment, accounting resources, risk assessment, contract-estimate and transaction controls, and IT general controls. Management said remediation was underway and likely to extend beyond December 31, 2023. The financial statement auditor gave an unqualified opinion on the statements but was not engaged to audit internal control effectiveness.
- Contingencies include a securities class action (motion to dismiss denied March 22, 2023), a stayed derivative action, and a January 2023 DOJ Civil Investigative Demand concerning potential antitrust issues. The company disputes the allegations and states that loss estimates cannot be made at this stage.
- Key risks include ongoing operating cash outflows, acquisition integration, contract cost overruns, reliance on government funding and a concentrated customer base, launch and supply-chain dependencies, uncertain commercialization of in-space manufacturing, and potential further impairments. The filing also notes that cash balances at some institutions exceed FDIC-insured limits.
Important facts for investors to verify
- Whether backlog converts to funded orders and revenue on schedule, particularly the uncontracted portion and Space NV-related work.
- Whether gross margins and operating cash flow improve, and whether the business can reduce recurring cash consumption without additional financing.
- Available liquidity, debt terms and covenant compliance as testing resumes, including the cost of variable-rate debt.
- The preferred stock’s dividend, conversion, voting, and liquidation terms and their potential dilution and effect on common shareholders.
- Progress and costs in remediating material weaknesses, and any developments in the class action, derivative litigation, or DOJ inquiry.
- Whether Mission Solutions performance stabilizes and whether further impairment charges are required.