Closing Bell - Manifest Space: Drones in Space’s Next “Golden Age” with Redwire CEO Peter Cannito 1/23/25

Episode Date: January 23, 2025

Redwire is expanding into the defense market with its acquisition of aerial drone maker Edge Autonomy. Redwire previously won a Pentagon contract  to build what is essentially an orbital drone...and that inspired a strategy to create a one-stop shop for "platform coverage" from the surface of the earth to the surface of the moon and beyond. Redwire CEO Peter Cannito joins Morgan Brennan to discuss the big bet on drones and what he expects from this next “Golden Age” of space. 

Redwire is expanding its reach in the defense market, news that sent the stock skyrocketing 50 percent. The space infrastructure company, which bioprints organs in orbit and supplies parts to satellites, announcing it will acquire aerial drone maker Edge Autonomy for $925 million. Redwire CEO Pete Conito says national security work is already the fastest growing business. But edge autonomy takes the company past the edge of space or really back down to Earth. This is Redwire leaning into that idea of being a multi-domain company of both space and autonomous airborne platforms. And if you think about what we did with our last acquisition of Hera, where we brought in these additional

autonomous space-based platform, now we're adding the autonomous aerial platforms. And the goal would be longer term for us to build systems where these autonomous spacecraft collaborate with autonomous airborne platforms in order to realize that vision of an all-domain warfighting concept. Redwire won a Pentagon contract last year to build what is essentially an orbital drone. And that inspired a strategy to create a one-stop shop for platform coverage, ranging from the surface of the Earth to the surface of the moon and beyond.

At a time when space talks have been soaring and startups like Voyager Technologies may now go public, I also asked Conito what navigating Wall Street has entailed. Well, so Elon Musk kind of helps us out with that. Obviously, he's very visible in the community. And so I think there's a lot of people in space right now. And that public knowledge is certainly a tailwind for Redwire, because I think that the public writ large is more aware of what's going on in space than ever before. But yeah, I mean, it's, I think it's just a consistently going out there quarter after quarter and educating people on what you're doing and then delivering on the things that you say you're going to do. And we believe that if we continue to do that, that people understand it over time. On this episode, Redwire's CEO and chairman breaks down the big bet on drones and what he expects from this, quote, next golden age of space.

I'm Morgan Brennan, and this is Manifest Space. So Redwire is already in defense tech, quite frankly. We do work for national security already in space. And it has been, in fact, in our most recent history, the fastest growing area of our business. So this is really just underscoring and leaning into that trend. So it takes you into another domain, I guess I should say. I always think of you as a space company, a space infrastructure company, but this expands your reach into drones and airborne systems. That's right. Yeah. So it's expanding into a new, really complimentary domain, right? So if you look at where our customer has been heading in terms of our national security customers, they're focused

on a joint all domain strategy, what they call JADC2, joint all domain command and control. And so what this does is this is Redwire leaning into that idea of being a multi-domain company of both space and autonomous airborne platforms. And if you think about what we did with our last acquisition of Hera, where we brought in these additional autonomous space-based platform, now we're adding the autonomous aerial platforms. And the goal would be longer term for us to build systems where these autonomous spacecraft collaborate with autonomous airborne platforms in order to realize that vision of an all-domain warfighting concept. How revolutionary is it to see that communication happening between domains? which outside of I think defense circles is one of those wonky acronyms that doesn't always fully break down or reflect perhaps the graveness or importance of this concept. Yeah, well, it's an incredibly important concept.

I mean, it's that technological edge that underpins the power of U.S. national security. And space has always been one of the critical pillars where the U.S. has really been at the forefront in terms of national security. Now expanding or expanding that dominance in space to be integrated with the other domains like air, sea, and ground really provides an incredible strategic advantage. For Redwire to have two of those domains vertically integrated in a highly agile middle market company like us, we believe is going to be really appealing to our customers and positions us, quite frankly, in a very unique way in the market. And what does that market look like? How does it evolve? Well, I think the way it evolves is as you start to be able to show that collaboration between autonomous platforms. The customer set looks to buy from those who can make that as seamless and as simple as possible.

And that will be really well positioned to take advantage of that trend over time. How did the deal come together? I'm curious about this because I know you've said you wanted to expand your reach within defense previously. Redwire is a company that was born out of AE Industrial and Edge Autonomy was born out of AE Industrial as well. So both, I guess, portfolio or former portfolio companies. Yeah, that's right. That's right. So which obviously we were aware of each other as

organizations and therefore have been able to watch each other develop and quite frankly, follow similar paths from a scaling perspective. So that always obviously makes a deal easier when you already have a pretty strong understanding of each other's teams, of each other's cultures, of each other's growth success. But it really started with Redwire's entry into the Very Low Earth Orbit or VLEO platform arena. So as we announced sometime last spring in 24, we won a program called DARPA Otter. That is the development of a platform that we call Sabersat, which is a VLEO spacecraft. And people started calling that spacecraft because of how low that it orbits, an orbital drone, which then kind of triggered in our head this idea that the difference between airborne assets and space-based autonomous

platforms is largely arbitrary from an employment perspective, right? And Sabersat is really kind of bridging that gap between space and airborne platforms. So we realized that by adding a unmanned aerial systems company like Edge, we could provide that platform coverage from the surface of the earth all the way to the surface of the moon and beyond. And that was really exciting to us

because I think we're just starting to scratch the surface of what's possible when you start to have a vertically integrated company that have both these kind of platforms all in the same. You and I actually had this conversation. We talked about that a little bit last year at the Space Symposium. But I mean, it's it's still, I think, a newer or at least it's seen as a newer concept. I think about the stratospheric spy balloon from China, which sort of shed a light on this sort of, you know, area between air and space, if you will, and what that looks like and what securing that looks like. So when we do talk about very low Earth orbit, and we talk about your role in that. What does that involve? Well, it involves basically getting closer to Earth for space assets, but while still far enough away to have strategic and tactical advantage, right? And that's the promise of VLEO is this idea that you can get closer, which means you can get higher resolution from a technological

perspective when you're doing Earth observation. You can receive stronger and have stronger signals. So that's what VLEO really is about, is extending the range of orbits that you're operating in. That, of course, also adds resiliency. We believe that in space will be a hybrid architecture involving multiple orbits from VLEO all the way through geo and into XGEO, such as Cislunar. So VLEO is adding a whole new technical capability to an already robust space market. So now with edge autonomy, what I think is fascinating is the fact that it already has drones and products that are deployed out in the marketplace, and not just with the US military, but with international buyers as well, perhaps most um in being used in ukraine on the battlefield that's right so where where does drone warfare go from here especially at a time where in

many cases ukraine has become this test bed of modern war fighting and where technology is taking us yes well so it's a that's an excellent question. It's going to continue to evolve and it's going to continue to advance. It's obviously going to be critical to a multi-domain or all domain warfighting environment. One of the things that we're really excited about where edge autonomy is currently positioned and how Redwire bringing space capabilities to edge autonomy will increase advantage is they have some really interesting intellectual property around their battery technology that gives them extended endurance and range. And in the UAS market, they have these groups from smallest to largest. It's group one through five. And Edge Autonomy operates in group two. The large ones tend to have really long range, a lot of capability like Predator, but they're also very expensive. And of course,

the smaller ones are cheaper, but are less capable. This extended endurance that Edge Autonomy's platform brings to the table allows it as a group to UAS provider to start taking on missions that have typically been reserved for the more advanced group three capabilities, but at a lower price point. But when you start looking at that additional endurance and range, you run into potentially extending beyond your direct communication link. And that's where space comes into play. So the combination of Redwire space-based assets and the group two extended range that Edge Autonomy has allows us to strategically position ourselves to compete from a mission perspective for missions that are currently done by much more expensive UAS technologies. And that, we believe, will give us stronger demand and a competitive advantage over time.

So now, if I take a step back, this adds a new capability to an already burgeoning portfolio at Redwire. Let's talk a little bit about some of the other businesses because I know you have this really fascinating biotech business where you send pillbox to Earth orbit and you've worked with companies like Eli Lilly to grow crystals to further medicine and drug development. You are very involved in space manufacturing and satellites in general. So I guess just walk me through the portfolio more broadly, what you're excited about in 2025 and

beyond. Yeah, well, no, it's a great question. So we have four primary growth principles that we call protecting the core, scaling production, moving up the value chain and venture optionality. And of course, protecting the core is about doing those fundamental things that Redwire has been successful doing for many decades. And that's selling these picks and shovels, if you will, for space. And we got to make sure we never take our eye off the ball in being able to service our existing customers. Scaling production is our principle as demand increases for space and now unmanned aerial systems. We have to be able to intelligently scale our production to meet that increasing demand. Moving up the value chain, which edge autonomy was a critical piece of that strategy, is

that idea of now having this portfolio of platforms, being more than just a merchant supplier but having the ability to be a prime contractor using this portfolio platforms, whether in space, whether as unmanned aerial systems or the combination of both. And then of course, we have our venture optionality, which is Ben, our in-space manufacturing, our microgravity development. And as you mentioned, that includes our biotech development as well.

We're really exciting because if you think about that portfolio effect of having a really strong fundamental business around picks and troubles as being a base that gives us strong financial stability and operational resiliency, you kind of move up to that scaling, including the platforms, all the way to having that venture optionality of having a breakup technology like the ability to print organs or the ability to do advanced drug manufacturing from space. You can see that in redwire when you invest in redwire you get a very stable company that has the positioning to really scale but also has a little bit of that venture uh aspect to it as well and i think that's um exciting to a lot of our investors. And you are publicly traded. You went public back in, what, 2021. Given the fact that we do talk about space, space is quote unquote hard. Some of these, you know, some projects when it comes to space have long lead times. So what is

it like to have to give quarterly earnings and be a publicly traded company and, you know, engage with investors when we are talking about some very technical, scientific, innovative products? Well, so Elon Musk kind of helps us out with that. Obviously, he's very visible in the community. And so I think there's a lot of people in space right now. And that public knowledge is certainly a tailwind for Redwire, because I think that the public writ large is more aware of what's going on in space than ever before. But yeah, I mean, it's, I think it's just a consistently going out there quarter after quarter and educating people on what you're doing and then delivering on the things that you say you're going to do. And we believe that if we continue to do that, that people understand it over time. It does seem like there is a lot of investor enthusiasm for space companies and specifically commercial space and defense, too. I just think there's a lot more enthusiasm than I've ever seen before. And I wonder what you make of that and what a new administration coming in and expectations around perhaps innovative policies

to continue to propel space exploration and find lower cost options, whether it is on the military side or the space side, what all of that means for this? Yeah, well, we believe and we have, regardless of the administration, that we're entering in the next golden age of space. There's just too many compelling use cases for space, for Earth. And there's also, I believe, an overwhelming interest in the exploration aspects of space as well, to include returning to the mood, to be what the nation and, quite frankly, the world is rallying around. And as that trend continues, that's very good for Redwire. of space for earth and, uh, also, uh, the vision of humanity's, uh, uh, drive to explore our, our universe. And, um, and, and those are, those are trends that, uh, uh, we support and, and we're really proud and honored to be participating in. So you just announced this acquisition of edge autonomy that's expected to close participating in. So you just announced this acquisition of Edge Autonomy. That's expected

to close sometime in the second quarter. What are the other milestones for the company this year? Well, this is pretty transformational for us. So we're going to put a lot of focus on this while continuing to execute against our four fundamental principles of growth. So I think you're going to see a lot more of the same that you saw in the last year in terms of well thought out, well valued, accretive acquisition. more advancements in our pillboxes and microgravity development that we've talked about during each of our earnings calls. You're going to see us continue to move up the value chain and maturing our platforms and going after and bidding much larger contracts focused on these platforms to include now trying to position for opportunities to bid a system-to-systems approach using the two domains of airborne and space working together. And of course, we'll never not focus on our existing customers and the foundational business of providing the picks and shovels that underpin this space trend.

So if you think about where we've positioned ourselves now with the addition of edge autonomy, I like to think about it in three fundamental areas, technical, financial, and operational. We've talked a little bit about the technical in the sense that moving towards this trend of multi-domain warfighting, the financial by doing this transaction and having a really robust, not only strong top line, but strong EBITDA projection, as well as we're forecasting that this transaction will make us free cash flow positive. That gives us a strong foundation, a financial foundation to ensure that we can execute our strategy over multi-years, getting into that mode of self-funding. And that's a really advantageous place to be as both a space company and a defense tech company. And then lastly, operational, we're going to be looking at all the new synergies that this acquisition has for us in terms of the geographic synergy of having a really strong critical mass

in Europe, since Edge Autonomy has a strong presence in Latvia and Redwire has a strong presence in Belgium and Luxembourg. We most recently opened an office in Poland. And the other operational aspects of the deal to include shared manufacturing space and things of that ilk. So we're just going to do what we've always done, and that is endeavor to follow up on the things that we've said we've been going to do in terms of these four growth pillars for the last year. Great. Final question for you. Are you still acquisitive? I guess looking out to the longer term, are there going to be other domains that you expand into beyond this? Well, in terms of whether we expand into other domains or not, I can't say. But what I can say is that this being our 11th acquisition, I think it would be a

surprise to nobody that M&A is a strategic core competency for Redwire. We think we've done it very successfully in the past, and it will be an important part of a broad strategy, but still an important part of our strategy going forward. Peter Canita, CEO of Redwire. That does it for this episode of Manifest Space. Make sure you never miss a launch by following us wherever you get your podcasts and by watching our coverage on Closing Bell Overtime. I'm Morgan Brennan.