Redwire (RDW) - 2021 Q3 - Quarterly Report

Business Performance - In Q3 2021, the company experienced strong order volume and secured significant new business mandates, despite facing delays due to U.S. government funding uncertainties and COVID-19 impacts [201]. - Revenues increased 162% to $32.7 million for Q3 2021 compared to$12.5 million for Q3 2020, with acquisitions contributing $16.9 million, representing 135$(31.1) million, compared to $(2.9) million in Q3 2020, reflecting a 987$(24.3) million, a 938% increase compared to $(2.3) million in Q3 2020 [223]. - Revenues for the nine months ended September 30, 2021 increased 447$96.5 million compared to $17.7 million for the same period in 2020, driven by acquisitions contributing$49.9 million [235]. Cost and Expenses - Cost of sales as a percentage of net revenues decreased to 82% in Q3 2021 from 84% in Q3 2020, with a 154% increase in cost of sales attributed to acquisitions [225]. - SG&A expenses as a percentage of revenues rose to 105% in Q3 2021 from 28% in Q3 2020, with a significant portion due to equity-based compensation and public company readiness expenses [226]. - Research and development expenses as a percentage of revenues decreased to 5% in Q3 2021 from 6% in Q3 2020, focusing on next-generation technologies [229]. - Interest expense, net increased to 5% of revenues in Q3 2021 from 1% in Q3 2020, primarily due to outstanding debt [230]. - Income tax expense as a percentage of revenues was 17% in Q3 2021, up from 5% in Q3 2020, influenced by nondeductible transaction costs [232]. Acquisitions and Partnerships - The company completed the merger with Genesis Park Acquisition Corp. and began trading on the NYSE on September 3, 2021 [203]. - The company acquired Techshot, Inc. for cash and stock, enhancing its capabilities in microgravity bioprinting and on-orbit manufacturing [213]. - The company has partnered with leading space companies on the Orbital Reef project, a proposed commercial ecosystem in low Earth orbit [203]. - The company has been integrating several acquisitions from a fragmented landscape of space-focused technology companies to enhance its innovative capabilities [199]. Contracts and Backlog - Contracted backlog as of September 30, 2021, totaled $121.4 million, a slight decrease from$122.3 million as of December 31, 2020 [261]. - Organic backlog at the end of the period was $32.6 million, down from$52.6 million at the beginning of the period, reflecting higher organic revenue recognized [261]. - Acquisition-related backlog increased to $88.8 million as of September 30, 2021, compared to$69.7 million at the end of the previous period [261]. - Total backlog, including both contracted and uncontracted backlog, reached $284.6 million as of September 30, 2021, with uncontracted backlog at$163.3 million [264]. Financial Position and Liquidity - Available liquidity as of September 30, 2021, was $32.3 million, consisting of$27.3 million in cash and cash equivalents, and $5.0 million in available borrowings [270]. - Total debt as of September 30, 2021, was$80.5 million, an increase from $78.6 million as of December 31, 2020 [271]. - The company incurred net losses and negative operating cash flow since inception, impacting its cash management strategy [266]. - The Adams Street Credit Agreement has a maturity date of October 28, 2026, and requires compliance with customary covenants [274]. - As of September 30, 2021, total contractual obligations amounted to$98.2 million, with long-term debt maturities contributing $80.5 million and future minimum lease payments totaling$17.7 million [285]. Cash Flow Activities - For the Successor 2021 Period, net cash used in operating activities was $34.3 million, primarily due to a net loss of$18.5 million and an unfavorable change in net working capital of $15.8 million [287]. - Net cash used in investing activities for the Successor 2021 Period was$36.1 million, mainly for the acquisitions of Oakman and DPSS, totaling $38.7 million [290]. - Net cash provided by financing activities for the Successor 2021 Period was$75.5 million, driven by proceeds from debt of $49.0 million and merger proceeds of$110.6 million [292]. - The net increase in cash and cash equivalents for the Successor 2021 Period was $5.2 million, resulting in cash and cash equivalents of$27.3 million at the end of the period [286]. Operational Challenges - The company continues to monitor the impacts of COVID-19 on operations, with uncertainties regarding program execution and supply chain stress [220]. - The unfavorable change in net working capital during the Successor 2021 Period was largely driven by increases in accounts receivable ($1.2 million) and contract assets ($3.5 million) [287]. Accounting and Estimates - The company regularly evaluates critical accounting estimates, which can significantly impact net revenues and expenses, based on historical experience and reasonable assumptions [295].