0001819810-25-000215
SEC filingRedwire's Q2 2025 results deteriorated sharply, with revenue down 21% and net loss widening to $97.0 million, driven by Edge Autonomy acquisition costs and unfavorable EAC adjustments.
Redwire's second quarter of 2025 represented a significant deterioration versus the prior year. Revenue declined 21.2% to $61.8 million from $78.1 million in Q2 2024. The decrease was driven by $17.7 million of net unfavorable EAC adjustments (versus $3.1 million unfavorable in Q2 2024) and timing in the stage of production cycles for certain larger power generation contracts. These headwinds were partially offset by $13.0 million of incremental revenue from the Edge Autonomy and Hera Systems acquisitions, which closed in June 2025 and August 2024, respectively.
Gross profit swung to a loss of $19.1 million, down from a gain of $13.0 million. Gross margin collapsed to (31)% from 17%. The primary cause was the $25.2 million net unfavorable EAC adjustments, which included a $7.2 million contract loss reserve on a radio frequency systems program. Additionally, changes in contract mix—larger, lower-margin contracts and the completion of higher-margin programs—compressed the overall portfolio margin.
Operating loss widened to $91.9 million from $7.1 million. Selling, general and administrative expenses increased 201% to $54.5 million, representing 88% of revenue versus 23% a year ago. The surge was mainly due to $30.7 million higher equity-based compensation, including $29.6 million related to Edge Incentive Units, and $3.4 million of Edge Autonomy SG&A expenses. Transaction expenses of $16.6 million were incurred for the Edge Autonomy and Hera acquisitions, compared with $0.3 million in the prior year. Research and development costs were flat.
Net loss attributable to Redwire was $97.0 million, or $1.41 per share, versus a loss of $18.1 million, or $0.42 per share, in Q2 2024. The enlarged loss reflects the much weaker gross profit, higher SG&A, increased transaction costs, a $20.0 million interest charge related to early repayment of the Seller Note, and a $16.3 million loss on the remeasurement of the private warrant liability. Partially offsetting these items was a $32.6 million income tax benefit from the release of a portion of the valuation allowance following the Edge Autonomy acquisition.
Total assets more than quintupled to $1.51 billion at June 30, 2025 from $292.6 million at December 31, 2024, driven primarily by the Edge Autonomy acquisition. Goodwill increased by $709.5 million, and intangible assets rose to $396.1 million from $61.8 million. Inventories jumped to $58.8 million from $2.2 million due to Edge Autonomy's work-in-process and raw materials.
Total liabilities grew to $448.7 million from $344.5 million. Long-term debt, net, increased to $185.5 million from $124.5 million, as the company borrowed $90.0 million under the new JPMorgan term loan and drew $5.0 million on the Adams Street revolver, partially offset by $25.0 million in revolver repayments and repayment of the $100.0 million Seller Note. The convertible preferred stock was reduced from 108,649 shares to 103,855 shares due to the $61.5 million repurchase of shares from Bain Capital. Shareholders' equity swung to positive $907.6 million from a deficit of $(188.7) million, reflecting the $245.0 million equity offering, $862.6 million of equity issued in the Edge acquisition, and the conversion of preferred shares.
Liquidity improved: cash and cash equivalents totaled $76.5 million (excluding $2.1 million of restricted cash) at quarter end, up from $49.1 million at year-end, and the company had $35.0 million of unused revolver capacity. Management believes existing liquidity is sufficient for at least the next twelve months.
Net cash used in operating activities was $132.7 million in the first half of 2025 versus $6.7 million in the same period of 2024. The deterioration reflects the larger net loss, a $28.4 million reduction in deferred revenue, increases in accounts receivable and contract assets, and a $5.6 million decline in accounts payable. Non-cash items such as equity compensation ($35.6 million), depreciation and amortization ($8.1 million), and warrant losses ($2.7 million) only partially offset the cash drain.
Investing activities used $161.7 million, mainly for the Edge Autonomy acquisition (net of cash acquired, $151.8 million) and $4.8 million of property, plant, and equipment purchases. Financing activities provided $323.5 million, led by $328.7 million of proceeds from the common stock offering and warrant exercises, partially offset by $64.5 million of net debt repayments and $61.5 million for the preferred stock repurchase.
Free cash flow, defined as operating cash flow less capex, was negative $137.5 million for the six months, reflecting heavy acquisition-related cash outflows and working capital build. The company did not generate positive free cash flow during the period.
Management highlighted the completion of the Edge Autonomy acquisition and its strategic importance, emphasizing the expansion into uncrewed aircraft systems and the resulting scale in defense technology. The company also secured a Department of Defense Blue List listing for its Stalker UAS and won a contract with Aspera Biomedicines for space-based cancer research. The book-to-bill ratio for Q2 was 1.47, but the last-twelve-month ratio was only 0.87, reflecting slower organic order intake.
No explicit quantitative guidance was provided for the remainder of 2025 or beyond. Management expressed confidence in the long-term demand environment, citing potential tailwinds from NATO defense spending increases, the U.S. 'Golden Dome' missile defense initiative, and the EU's Readiness 2030 package. However, near-term risks include the integration of Edge Autonomy, potential declines in Ukraine-related sales (approximately 15% of Edge Autonomy's trailing twelve-month revenue), and the possibility of trade tariffs affecting supply chain costs.
The company also disclosed that it is evaluating the impact of the One Big Beautiful Bill Act, which may affect deferred tax balances. Management expects to complete remediation of material weaknesses in internal control over financial reporting for U.S. operations (excluding Edge Autonomy) by December 31, 2025, with Europe operations likely later.
Redwire operates as a single reportable segment: space and defense technology solutions. The Edge Autonomy acquisition significantly altered the revenue mix; however, segment-specific revenue is not disclosed separately. Geographically, U.S. revenue grew to $32.0 million in Q2 2025 from $31.3 million a year ago, while European revenue fell 38% to $29.0 million, reflecting program timing.
The company recognized a net unfavorable EAC adjustment of $25.2 million in Q2 2025, including the $7.2 million loss reserve. Backlog increased to $329.5 million at June 30, 2025 from $296.7 million at December 31, 2024, helped by $73.7 million of acquired Edge Autonomy backlog. Remaining performance obligations totaled $242.8 million, with approximately 78% expected to be recognized over the next twelve months.
Equity-based compensation expense was $32.7 million in Q2 2025, almost entirely from the Edge Incentive Unit modification. The company recognized a $29.6 million charge related to Tranche I vesting; compensation for Tranches II and III will be recognized over one to two years.
The private warrant liability was remeasured to $23.0 million at June 30, 2025 from $55.3 million at year-end, reflecting exercise of 5.1 million warrants and a loss of $16.3 million on remeasurement during the quarter. Convertible preferred stock PIK dividends added $33.3 million, and the company repurchased 11,195.81 shares for $61.5 million.
Overall, Redwire is in a period of significant transformation, absorbing a large acquisition while facing operational headwinds. The financial results reflect substantial acquisition-related costs and one-time charges, yet the company has strengthened its balance sheet with new equity and debt financing, positioning it for future growth if integration succeeds and end-market demand materializes.