Chapter 1: What is Redwire and why was it created?
In the last five or so years since Redwire has formed, we believe we have entered into a second golden age of space that's primarily driven by commercial companies, quite frankly, as opposed to just governments. And that was the core thesis behind Redwire, and that's why we exist today.
That was Redwire Chairman and CEO Peter Conito. I'm Motley Fool producer Matt Greer. Redwire is a space technology company building infrastructure for the space economy. Motley Fool contributor Lou Whiteman recently talked to Conito about that space economy and about the growing business of Redwire. Greetings, Fools.
I'm Lou Whiteman, Senior Analyst here at The Motley Fool. My guest today is Peter Canito, Chairman and CEO of space and defense infrastructure company Redwire. Now, Redwire has been, you know, in business since I think 2020, formed by a couple acquisitions and public since 2021.
Chapter 2: How has the space economy evolved in recent years?
Peter, welcome to The Motley Fool. Thanks for being here. Yeah. Thank you for having me. All right. Let's start out. I kind of like getting out it over what you do. But what is Redwire? Let's talk about kind of what is Redwire do and kind of let's make this fun. You know, the moment you needed to exist, like why does the world need Redwire?
Chapter 3: What role does Redwire play in the commercial space industry?
That's that's how I want you to explain the company.
Yeah, no, that's a great way to put it. So I think if we can hit on that, then the rest of the messaging is clear. So Redwire was formed initially by a private equity company who realized that we were entering into a second golden age of space, that the first golden age of space was around the Apollo program back in the 60s and early 70s. And since then, there had been just incremental progress.
And some might even say concerning the moon program, some level of regression. But in the last five or so years since Redwire has formed, we believe we have entered into a second golden age of space that's primarily driven by commercial companies, quite frankly, as opposed to just governments. And that was the core thesis behind Redwire. And that's why we exist today.
Yeah.
Chapter 4: What are the implications of Redwire's acquisition of Edge Autonomy?
And to put numbers on it, and I always cringe when I hear numbers like this, but it's the Morgan Stanley report, $1 trillion global space industry by 2040. You know what? I'm enough of a cynic. I'll take the under there, but I think it is getting much bigger. And yeah. So what I've pitched this internally.
The two things I fall back on with Redwire is, and I know this, I'm curious if you like this or you're going to cringe with this, but sort of the Transdime for space. Transdime, of course, is an aerospace company that makes all of the essential parts that make all of this possible.
And it feels like that Redwire, that that was the opportunity that you were kind of seeing that like, you know, a lot of things have to go into these massive missions. It's great to be the prime, too.
Chapter 5: How does Redwire's business model differ from traditional aerospace companies?
And we can get into that. There's opportunities there. But kind of just the nuts and bolts that makes it all possible if we are going to get to that $1 trillion number or whatever it is. Is that fair or am I missing it?
Yeah, yeah. No, so that in the initial thesis of Redwire for going public and where we've been really up until the last year and a half, the transdome of space was a very accurate approach. We like to say that we provide the fundamental building blocks of space, those core subsystems and components that every space mission needs, whether it's commercial, civil or national security.
But in the last about year and a half, we've been executing on a strategy called moving up the value chain, where we've started to become not only a critical provider of subsystems and components, but a platform provider. And through a combination of organic investment and acquisition, we now have seven platforms, five spacecraft and two uncrewed air systems that
and aircraft systems or drones, as people like to call them.
Chapter 6: What are the potential challenges facing the space industry?
So we've been moving up the value chain. So I like to say we're a little bit more, we started out TransDymer, a little more L3 now, where L3 made a pivot a number of years ago to become that sixth prime, as they've talked about. We're kind of that non-traditional equivalent of that as part of this kind of new second golden age of space and now drones.
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Let's take a deep dive into one of those acquisitions, a big one from this year, Edge Autonomy, which I think I'm curious here for you, but it really expanded what you're capable of doing. And also, I think it's a pretty good cash engine as far as just, you know, good going from here. But talk a little bit about that deal, how it came together and how that changes RedWire.
Chapter 7: How is Redwire preparing for future growth in the space sector?
I think that's a big part of this evolution you've talked about. Fair?
Yeah.
Yeah, that's right. So, you know, because in many ways we're rooted in private equity, we understand the portfolio effect for long-term value creation, right? And one of the challenges that I think the space industry has gone through over the last five years is not
If there is going to be this tremendous growth in space, as you articulated, many experts out there like Morgan Stanley and others have put out really big numbers. We don't have to reach those numbers for Redwire to be extraordinarily successful. Whether it's a trillion or hundreds of millions, we're fine either way. But yeah, I think everybody agrees on the opportunity.
Chapter 8: What is Peter Cannito's vision for Redwire in the next decade?
The timing is a little bit more of an issue. So what we wanted to do with Edge Autonomy is we looked at the complementary nature of drones, our tagline is build above, drones in the airborne domain as being more mature, both from the perspective of products and from an industry wide. And therefore, you're able to achieve better gross margins because you're really in the production phase.
The demand for drones, the technology is much further along than in space. So you get that complementary financial profile that you articulated while we're still spending a lot of investment in internal research and development in CapEx to reach the full potential of space. And that's where we're headed.
It was transformational in terms of providing scale and that portfolio effect of a broader technology readiness or maturation of our products. But it's also very complementary on the strategic side, because on the national security side in particular, our customers are moving towards a multi-domain approach to modern warfare.
And to have space and drones in the same portfolio is complementary and positions us for larger opportunities as well. So there was a lot that went into it, and it also doubled the size of Redwire so we can get operating leverage associated with scale. And so we're really excited about where we're headed.
Correct me if I'm wrong, but kind of the simpleton picture in my head is you were already in, I guess what they call it, velo or very low space. Like if you think of space is sort of like different. There's a big difference between going to Mars and going to the edge of the atmosphere. And so this is. Yeah.
Literally complimentary as in like edge autonomy is doing high altitude drones kind of at the edge of space. You're at the other side of that edge of space. So it really is kind of building and, you know, and all these things will blend in the technologies crossover. So it really is kind of both an extension of what you're already doing and a new business at the same time.
Is that overstating or is that?
No, 100%. You're right on. One of the kind of triggers was as we started to become a leader in very low Earth orbit, where you're operating kind of below the ISS, you're starting to enter into the ionosphere. There is actually atmosphere in very low Earth orbit. So that's one of the challenges. We have a prime contract that we won with DARPA,
based on a platform that we invested in that we call Sabersat. As we started introducing this new concept, people referred to it as an orbital drone. The light bulb went off that the separation between airborne and space-based platforms is largely arbitrary.
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