Quarter 1
Q4 2025 Earnings Call — February 26, 2026
Analyst (Alliance Global Partners): Great, thanks, and congrats on the improving capital structure. My question is, how is management adjusting its pricing model in response to the abnormally low gross margin throughout 2025? Have you contemplated higher fixed price quoting in space, a more safer contracting vehicle such as cost plus or time and materials? especially for new products like ELSA.
Management: Thanks, Brian. I appreciate your question. So there's a couple of dynamic things there. So I'll address two parts of this question, starting with the easiest and the last part first. You know, we basically have to, like all defense contractors, we have to meet our customer where they are in terms of the kind of contracting that they do. The Department of War has very openly discussed that they are moving away from cost plus in time and materials and looking for contractors that are willing to take on firm fixed price development. It's for that reason that we really took the time and effort at the beginning of this call to understand the portfolio effect, that if you want to get market share in this market, you have to be willing to do some investment, whether it be through IRAD, if you want to bear the full cost, or through additional development risk if you're willing to take on risk but take on payments from customers at the same time. You have to be willing to do that in order to get through the development phase to get to production, which leads me to the first part of your question, where in terms of the pricing model, it's not so much – trying to pad our pricing and ultimately losing when we're bidding against more aggressive competitors on the development phase of contract. But it's actually having that balanced portfolio I talk about where you may be taking on a more balanced set of development contracts with higher EAC risks, maybe lower margins as you buy yourself into the baseline in pursuit of a production tail. But now Redwire is in this position where we're taking on less of that as a percentage of the total portfolio. Now, less of it doesn't mean we're bidding less. We're still aggressively going after those development programs in order to increase our market share and penetrate the – particularly on the space side of the market where the winners haven't really been determined yet. But with the transformational acquisition of edge autonomy, our portfolio, as you can see from that slide seven – It's now much more balanced. We have a production level of programs that are supporting that. And it's because of that production tail, as the defense tech side of the business starts to scale, as we anticipate it will in 2026, we expect to see the gross margin improvements that you're looking for. Thanks very much.
Analyst (B. Reilly Securities): Hi, good morning. Thanks for taking my question. So I guess for my one question, I will – yeah, ask about edge. So the 100-plus aircraft to seven countries post-close, that's good to see, but do you have any insight on how many aircraft Standalone Edge did in 2024? And then along these same lines, you mentioned that included in that 100 plus number were deliveries to the U.S. Army via LRR. Does that mean you've received production orders at this stage, or is that referring to the stocker deliveries for the training purposes?
Management: Hey, Griffin, thanks for your question. Chris, you want to take the count one? Yeah, so 100 aircraft since we closed the acquisition. They delivered about 200 aircraft this year, which is relatively consistent to where they were in the past year. We really lean forward even prior to the acquisition to build capacity to be able to handle the demand curve as the demand curve comes online. So for the production here in the second half of the year, about 100 aircraft, that is right in the middle of their production curve. But with scaled capacity, as we see the growth continue to come in with the order book, as we talked about earlier, we'll have the ability to produce those aircraft as we go into 26 and beyond. A good example of that is the investment we made in the 85,000 square foot for our fuel cell production in Ann Arbor that we'll be able to see increase aircraft full rate production in 26. Got it. Okay. And then just the second part of that was regarding LRR and whether those are production orders or referring to the testing. Yeah, that was part of the testing. So we're still anticipating the full production order here to come later this year. ==One of the things that we're excited about in terms of our ability to accelerate growth in Q4 was,
as a reminder, that was still without a fully passed budget.
== So some of the things that we talked about in our last earnings call that we were expecting to come online, one of them being orders for the LRR program, was not included in that 1.52 book to bill. So that's still upside we anticipate in 2026. Got it. Thank you, Pete. Thank you, Chris. Thank you. Thank you.
Analyst (HC Wainwright): Hi. Good morning, guys. Apologies if I missed this during the prepared remarks, but how much of the backlog is expected to be executed on over the next 12 months or should I say calendar for 2026? And then are there any large concentrations within that backlog that would drive a materially outsized revenue results in any given quarter or potentially risk slipping into 2027?
Management: Yeah, hey, appreciate it, Scott. So from a backlog standpoint, we've got about 50% or so of the guide in backlog. And as we look at the risk profile across that backlog, there are no single orders that are binary that would meaningfully move, you know, our view one way or the other. Pretty balanced across, you know, the order book, you know, both with geography, diversification across the U.S. and Europe, as well as across our various value drivers. So about 50% or so of backlog for the guide. Yeah, one thing I'll add to that is although we don't have anything necessarily in our forecast that we're looking at as a big material size value driver in our pipeline, not necessarily backlog. We do have, especially on the space ties, we do continue to have opportunities like consolation size orders that could materially change our profile. We're just discounting those things in order to make sure that we are focusing on achieving our growth through what's already on the books. Perfect. I appreciate that added color, guys. Thank you very much.
Analyst (Jefferies): Hi, guys. This is Kira on for Greg. Thank you for taking my question. So I guess sticking with backlog, what are you seeing in the broader order environment given some pickup in the three months, the 1.52 booked bill in Q4? How different are the order cycles between space and defense tech? And what are the expectations for book to bill in 2026 reporting growth there?
Management: Yeah, so thank you for your question. And so in terms of in the backlog, in that 1.52, what it shows is as we start to close, so last year we talked a lot about moving up the value chain. And as we start to close bigger orders like Otter, which was a $44 million opportunity, I mentioned VLEO spacecraft order, you can see that the size of our orders are growing over time as part of that moving up the value chain strategy that we executed. In addition to that, you see another element with the eight-figure IBDM order that contributed to that 1.52 backlog that we closed in the fourth quarter, where we actually got two IBDM orders as we start to move into more of a production phase, low rate, but still a production phase, for the IBDM. So that was really the characteristic of the fourth quarter backlog build. And, you know, those are long programs, year-long or more programs that will be, that gives us confidence in our revenue build over 2026. In terms of the order cycles between space and defense tech, that's a very interesting question.
The order cycles, and this is why it's not really apples to apples when you look at backlog between defense tech and space. Space will have a really stronger backlog because it'll be a multi-year backlog in many cases, where the conversion cycle for defense tech is really fast, especially on orders where we have some level of inventory already on the balance sheet. So an existing customer that already has a fleet of Stalker or Penguin aircraft can decide that they want to scale their fleet, very quickly submit a purchase order. And if we have that available in inventory, or even if we have aircraft coming off the production line, we can fill that order quickly. And so the conversion for defense tech is a lot faster than on space. Chris, you want to add anything to that? I was just going to point out, you know, from a book-to-bill standpoint, in the fourth quarter, we were just over a 2x on the space side, as Pete talked about, and just out of one on the defense tag, which, you know, just highlights that point. Thank you so much.
Analyst (Roth Capital Partners): Hi, Pete. Hi, Chris. Congratulations on the bookings improvement. So just quick questions on the mix of space versus defense. Just some clarification on defense. Is there a material part of defense that's not the edge autonomy acquisition? And what is the growth expectation in 26 roughly across space versus defense?
Management: So let me address the first part. So yes, the defense tech not only includes the legacy edge autonomy capability, but it also includes our portfolio of space optics, other payloads and our space RF systems. You know, the reason for that is because when you go back and you look at part of our early discussion about the synergies that we expected by being multi-domain in space, a lot of the things like optics or antennas or RF payloads are very similar across both UASs and satellites or spacecraft. So by putting them in the defense tech segment, we're able to achieve those synergies and truly be a multi-domain in the way we go to market in those technologies. So yes, the material portion of defense tech came from part of the legacy Redwire space. Chris, did you want to talk about the latter part of the question? Yeah, I mean, so, Sushi, we were pretty balanced across the segment in our fourth quarter. We do see the FinTech probably driving a little more contribution as we go through 26. Just line of sight and where they are, the growth rate on the DT side probably outperforms the space side, maybe closer to 20% for line of sight.
But as Pete said, on the space side, what's in the order book is what we're managing to. But there are some really big and interesting opportunities in the pipeline. That could really accelerate the growth on the space side, but again, what we're looking at right now, pretty balanced currently, and we do expect the DT side to start to take a little larger share as we get in the back part of 26. All right. Helpful color. Thanks, Pete. Thanks, Chris.
Management: Thanks, Suji. Thank you. Thank you, and we have reached the end of the question and answer session, so I'll now hand the floor to Peter Canito for closing remarks.
Management: Great. Well, thank you all for the excellent questions. With that, we appreciate everyone taking the time to listen today, and go Red Wire. Thank you. This concludes today's conference. All parties may disconnect.
Quarter 2
Q3 2025 Earnings Call — November 6, 2025
Analyst Suji Da Silva (Roth Capital Partners): Good morning, everyone. And Jonathan, best of luck with the transition. And Chris, congrats and good luck in the new role here. So starting with the revised guidance, appreciating that you did revise it down, what does that mean for the business looking toward 2026, given what you've seen happening during the second half of 2025?
Executive Name (Title): Yeah, hey, Suji, thank you. So, you know, I think as Chris emphasized there in the paragraph on the guidance, these are not lost awards. These are just timing issues, particularly, as I mentioned, with the LRR program. The Army announced publicly right after the award of our prototyping contract that they would be awarding production capability towards the end of this year, and that has not occurred. And we believe the reason that that hasn't occurred is because of the ongoing government shutdown. So we do expect those awards, once the government shutdown ends, to start to flow. But unfortunately, we only have approximately seven weeks or so of production time left in the quarter. And that includes two holiday weeks with Thanksgiving and Christmas. So once the government reopens and we believe the Army will start placing orders for the production element of LRR, we'll start producing those. And that would lead you to believe that, and we also believe that, that is setting us up for a strong 2026. Chris, anything you want to add?
Executive Name (Title): No, I think, you know, this is the first quarter. We've got the combined results, and I think that's a stepping-off point as the baseline as we start to go forward, right? So as we think about, you know, stepping from today forward and as the government reopens with our jurisdiction and geography, you know, we are looking at, you know, 2026 to be obviously a marked improvement on where we are, and I think we can start to see those trend lines as we're moving out.
Analyst: And just to understand that, was the EAC in the quarter, was that related to the government shutdown pushouts primarily?
Executive Name (Title): No, the EAC was, again, a market improvement quarter over quarter. As we continue to sharpen our execution, we put a lot of effort into that, but there remain a few space programs that we're right-sizing in terms of our delivery.
Analyst: Okay, great. And my other question here is on the pipeline and bidding activity numbers you provided. And thanks, Pete, for the five areas and clarifying kind of the focuses going forward. Which of those five areas would you say maybe are the larger emphasis of the pipeline and bidding activity that you have in place today on a relative basis?
Executive Name (Title): Yeah, well, it's a good question and we are trying to, I appreciate you acknowledging that because we're really trying to point out where the value is being driven at Redwire so people have more clarity on that. The good news is all five of them are areas with extraordinary potential. Now, as we just talked about, the UAS orders, this is something that is a major priority for the Army. And quite frankly, the Department of Defense in general, our existing customers, the Marine Corps and U.S. SOCOM, also have strong needs for UAS. So in terms of, ironically, even though this is where we saw UAS, a push out in the fourth quarter into 2026. That still remains to be an area that has strong growth potential. But there's been a bit of a slow start to Golden Dome as well, and we think the VLEO orbit in particular will have a role to play in that defense architecture. So we're really excited about that as well. Those can be sizable orders when you order a large VLEO spacecraft.
We believe with the nomination of Jared Isaacman, who has shown in the past a strong disposition for commercial LEO destinations or commercial space stations that funding may ramp up for the commercial – for the CLD program for those space stations. And you can see that Axiom is leaning forward. We're obviously in talks with all the commercial stationation providers because of our heritage on the ISS. We think that's really exciting as well. And over the longer term, we're just getting started. We continue to have a strong drumbeat in microgravity. It's not our largest revenue driver, but in terms of the potential, for some of the pharmaceutical molecules that we've been working on. We see a lot of growth there. And even in sensors and payloads, that's a tried and true element of both the space and airborne market. And because we sell our payloads and not only use them on our own platforms, but sell them to other OEMs, we see strong growth there as not only coming from us selling more stalkers and penguins for UASs, but other people selling UASs in different categories that leverage our Octopus EOIR sensors.
So I guess it's kind of a long answer to your question, but the nice thing about it is we have many paths to victory here. You know, it's just a matter of timing for us.
Analyst: It's good to hear the diversity. Thanks, Pete, for the detailed color. Thank you.
Analyst Greg Conrad (Jefferies): Good morning. Maybe just sticking to one question, I think you had called out the gross margin improvement, which was noted, but you still had some level of EACs. I mean, how do you think about the right level of gross margins as the business comes back and then just to reiterate, the fair value purchase adjustment, so that's gone going forward. That is just a one-quarter adjustment?
Executive Name (Title): That's correct. So starting with the last part first, 27% to 30% gross margins should be our forward runway. The only reason it wasn't reflected to that and why we call it an adjusted gross margin is because of that purchase accounting element. 30% is where we have in the past said is our stated goal for gross margins and where we think the business should be run rate forward inclusive of any EAC adjustments. Now, having said that, we are hyper-focused on sharpening our execution. So should we be able to continue to reduce the number of EACs we see on some of these space development programs? And as we move out of development and more of our revenue comes from production contracts on the space side, we could do better than 30%, but I think 30% is the right number forecasting run rate for us. Chris, I don't know if there's anything you want to add there.
Executive Name (Title): Yeah, I think you hit it right. As we're looking at the balance of our product mix, we'll continue to make investments where we see expansion in this gross margin. But based on where we are, as Pete said, with the repeat orders like we've seen recently with the announcement of the rollout solar rates with Axiom, again, repeat product line, we'll continue to see that gross margin profile continue to land around that 30% margin, Greg.
Analyst: Cool. I'll keep it at one. Thank you.
Analyst Scott Buck (HC Wainwright): Hi. Good morning, guys. Thanks for taking my question. I just want to ask about the commentary around the cost cutting. Have you completed that cost cutting process? And if so, what is the annual cost savings target?
Executive Name (Title): Well, I'll answer the first part, and then I'll turn it over to Chris here. The short answer is no, we have not completed it. Whenever you do a major acquisition, it's an opportunity to completely review your overall structure. One of the core principles of our acquisition is that we're able to scale to get operating leverage, particularly around SG&A on a much larger platform. So we're going to continue to look at that. And quite frankly, we have a lean culture that we've been implementing and we've been moving a lot of our engineering and development operations towards lean principles, and so that'll be a part of who we are going forward. In turning up size and scope, Chris, do you have any comments on that?
Executive Name (Title): Yeah, playing off of the lean culture, we've gone through, continue to evaluate all of our processes across the company, and really the cost control is kind of balanced across all the various elements of the P&L. We are stepping off and making a commitment to a 10 million run rate savings here across the portfolio. We are seeing, obviously, investments where it makes sense, but being smart about where we can be more efficient in getting operating leverage as we continue to grow the top end of our P&L, we will continue to run the lean program that we've invested in. We do see additional cost savings, again, from production efficiencies as we continue to grow the top end. But, no, we're happy where we are. We see margin expansions, as we've said on the last comment, and we'll continue to see operating leverage with our G&A as we go.
Executive Name (Title): Yeah, Scott, I have to mention cash as I retire from the company. This will have what Chris has said will also benefit our cash and cash from operations as we look into the future, too. We saw, obviously, sequential improvement in cash from ops and free cash flow, but all of the things that Pete and Chris are talking about are really meant to, you know, obviously decrease the cash burden and eventually become free cash flow positive.
Analyst: Great. Well, I appreciate all the added color, guys. Thanks a lot.
Executive Name (Title): Thank you.
Executive Name (Title): And we have reached the end of the question and answer session. I will now turn the call over to Chris Edmonds for closing remarks.
Executive Name (Title): Well, thank you all for your questions. Before concluding today's Q&A, as we've done the last quarters, we'd like to ask a select question from our retail community. Government contractors have been inconsistent as to whether they have been impacted by the government shutdown in 2025. Why do you expect to be impacted? Pete?
Executive Name (Title): Thanks, Chris. As usual, a very poignant and observant question from our astute retail investor base. It's a good one. It's interesting. Like the question states, we've seen a lot of different feedback on the government shutdown. Quite frankly, I'm a little bit surprised that it hasn't impacted everybody in the government contracting sector. But for us specifically, I think it really comes down to the impact on the LRR program. As I stated earlier, the Army had put out an article that they expected production to occur in the latter part of this year for LRR, and that hasn't occurred because the government hasn't passed a budget. So those were not 2025 funds that they were playing off of. I also think that in many of our programs, it just happened to line up that we were expecting contract awards to happen in the fourth quarter, and those contracts didn't come for some key programs. For the large defense contractor, maybe I should say for each defense and government contractor, it probably has to do with where you are in your contract cycle. So maybe some folks that are burning off backlog don't see quite the impact. But we invested a lot in being ready for production for the fourth quarter to meet the operational demands for the drone initiatives that were out there, and I'm confident they're coming. But that didn't materialize in the fourth quarter, and with only seven weeks left for production, we think it's prudent
at this time to revise down for ourselves.
So thank you for that question and, of course, all the engagement we get. With that, we appreciate everyone taking the time to listen today, and go Red Wire. Thank you.
Executive Name (Title): And that concludes today's call. I'll pardon my disconnect. Have a good day.