Redwire Corporation Annual report pursuant to Section 13 and 15(d)

Annual report pursuant to Section 13 and 15(d)

Business Combinations

Business Combinations

12 Months Ended

Dec. 31, 2022

Business Combination and Asset Acquisition [Abstract]

Business Combinations

Note C – Business Combinations

Oakman Acquisition

On January 15, 2021, the Company acquired 100% of the equity interest of Oakman for cash and 1,000,000 units of Holdings’ equity. This acquisition supports the Company’s growth in its offering of engineering solutions.

The following table summarizes the fair value of the consideration transferred and the estimated fair values of the major classes of assets acquired and liabilities assumed as of the acquisition date.


	January 15, 2021
Cash paid	$	12,142
Equity issued	2,110
Purchase consideration	$	14,252
Assets:
Accounts receivable	$	1,279
Contract assets	121
Inventory	40
Prepaid expenses and other current assets	50
Property, plant and equipment	493
Intangible assets	7,980
Total Assets	$	9,963

Liabilities:
Accounts payable	$	46
Accrued expenses	2,022
Deferred revenue	253
Other current liabilities	45
Deferred tax liabilities	2,128
Total Liabilities	$	4,494
Fair value of net identifiable assets acquired	5,469
Goodwill	$	8,783

The following table summarizes the intangible assets acquired by class:


	January 15, 2021		Weighted average useful life in years
Trademark	$	80	1
Technology	4,400		15
Customer relationships	3,500		20
Total intangible assets	$	7,980

The fair value of the acquired trademark and technology was estimated using the relief from royalty (“RFR”) method. The fair value of the acquired customer relationships was estimated using the excess earnings method.

The acquisition was accounted for as a business combination, whereby the excess of the consideration paid over the fair value of identifiable net assets was allocated to goodwill. The goodwill reflects the potential synergies and expansion of the Company’s offerings across product lines and markets complementary to its existing products and markets.

During the year ended December 31, 2021, there was a measurement period adjustment to goodwill of $1.9 million, increasing the balance to $8.8 million. Please refer to Note I for additional information.

The results of operations of Oakman for the period from January 15, 2021 to December 31, 2021 have been included in the results of operations for the year-ended December 31, 2021. The table below presents the post-acquisition revenues, net income (loss), and acquisition-related costs (included in transaction expenses) of Oakman included in the consolidated statements of operations and comprehensive income (loss) for the following period:


	Year Ended
	December 31, 2021
Post-acquisition revenues	$	4,531

Net income (loss)	$	(1,762)

Transaction expenses	$	657

DPSS Acquisition

On February 17, 2021, the Company acquired 100% of the equity interest of DPSS in exchange for cash. The acquisition supports the Company’s growth in its offering of deployable technology.


	February 17, 2021
Cash paid	$	27,305
Purchase consideration	$	27,305
Assets:
Cash	$	711
Accounts receivable	1,270
Contract assets	1,534
Inventory	3
Prepaid expenses and other current assets	53
Property, plant and equipment	734
Intangible assets	24,370
Other non-current assets	48
Total assets	$	28,723

Liabilities:
Accounts payable	$	1,186
Accrued expenses	1,282
Other current liabilities	63
Deferred revenue	4,003
Deferred tax liabilities	6,138
Total liabilities	$	12,672
Fair value of net identifiable assets acquired	16,051
Goodwill	$	11,254

The following table summarizes the intangible assets acquired by class:


	February 17, 2021		Weighted average useful life in years
Trademark	$	170	1
Technology	11,900		20
Customer relationships	12,300		20
Total intangible assets	$	24,370

The fair value of the acquired trademark was determined using the RFR method. The fair value of the acquired customer relationships was determined using the excess earnings method.

The acquisition was accounted for as a business combination, whereby the excess of the purchase consideration over the fair value of identifiable net assets was allocated to goodwill. The goodwill reflects the potential synergies and expansion of the Company’s offerings across product lines and markets complementary to its existing products and markets. For tax purposes, the goodwill is not deductible.

During the year ended December 31, 2021, there was a measurement period adjustment to goodwill of $0.4 million , increasing the balance to $11.3 million. Please refer to Note I for additional information.

The results of operations of DPSS for the period from February 17, 2021 to December 31, 2021 have been included in the results of operations for the year ended December 31, 2021. The table below presents the post-acquisition revenues, net income (loss), and acquisition-related costs (included in transaction expenses) of DPSS included in the consolidated statements of operations and comprehensive income (loss) for the following period:


	Year Ended
	December 31, 2021
Post-acquisition revenues	$	26,678

Net income (loss)	$	(554)

Transaction expenses	$	1,605

Techshot Acquisition

On November 1, 2021, the Company acquired 100% of the equity interest of Techshot in exchange for cash and 3,029,596 shares of common stock. The acquisition supports the Company’s growth in its offering of mission solutions.


	November 1, 2021
Cash paid	$	2,228
Common stock issued	38,493
Purchase consideration	$	40,721
Assets:
Cash	$	406
Accounts receivable and other receivable	287
Contract assets	926
Inventory	120
Prepaid expenses and other current assets	86
Property, plant and equipment	14,818
Intangible assets	4,120

Total assets	20,763

Liabilities:


	November 1, 2021
Accounts payable	39
Accrued expenses	293
Deferred revenue	675
Other current liabilities	35
Deferred tax liabilities	5,521
Total liabilities	6,563
Fair value of net identifiable assets acquired	14,200
Goodwill	$	26,521

The following table summarizes the intangible assets acquired by class:


	November 1, 2021		Weighted average useful life in years
Trademark	$	240	3
Technology	1,800		10
Customer relationships	1,400		9
IPR&D	680
Total intangible assets	$	4,120

The fair value of the acquired trademark, technology, and IPR&D was estimated using the RFR method. The fair value of the acquired customer relationships was estimated using the excess earnings method.

The results of operations of Techshot for the period from November 1, 2021 to December 31, 2021 have been included in the results of operations for the year ended December 31, 2021. The table below presents the post-acquisition revenues, net income (loss), and acquisition-related costs (included in transaction expenses) of Techshot included in the consolidated statements of operations and comprehensive income (loss) for the following period:


	Year Ended
	December 31, 2021
Post-acquisition revenues	$	1,563

Net income (loss)	$	(392)

Transaction expenses	$	1,620

QinetiQ Space NV Acquisition

On October 31, 2022, the Company acquired 100% of the equity interests in QinetiQ Space NV (“Space NV”) for $36.9 million (€37 million) in cash. The acquisition supports the Company’s growth in its offering of satellite technologies, berthing and docking equipment, space instruments and advanced payloads, as well as expanding its global footprint.


	October 31, 2022
Cash paid	$	36,930
Less: Note receivable from seller	501
Purchase consideration	$	36,429


	October 31, 2022
Assets:
Cash	$	3,700
Accounts receivable and other receivable	3,556
Contract assets	18,830

Prepaid expenses and other current assets	3,140
Property, plant and equipment	5,656
Right-of-use assets	1,166
Intangible assets	13,935
Equity method investments	3,000
Total assets	52,983

Liabilities:
Accounts payable	4,110
Short-term operating lease liabilities	199
Short-term finance lease liabilities	279
Accrued expenses	18,646
Deferred revenue	5,513
Other current liabilities	426
Long-term operating lease liabilities	908
Long-term finance lease liabilities	563
Deferred tax liabilities	2,727
Other non-current liabilities	281
Total liabilities	33,652
Fair value of net identifiable assets acquired	19,331
Less: Fair value of noncontrolling interests in ROS	215
Goodwill	$	17,313

The following table summarizes the intangible assets acquired by class:


	October 31, 2022		Weighted average useful life in years

Technology	$	4,700	7
Customer relationships	7,400		30
Software	235		2
IPR&D	1,600
Total intangible assets	$	13,935

The amounts above represent the current preliminary fair value estimates but the measurement period is still open and subject to further adjustments as additional information becomes available and as additional analyses and final allocations are completed.

The fair value of the acquired technology and IPR&D was estimated using the RFR method. The fair value of the acquired customer relationships was estimated using the excess earnings method. The fair value of the acquired noncontrolling interests in RSS was estimated using the guideline public company method.

The results of operations of Space NV for the period from October 31, 2022 to December 31, 2022 have been included in the results of operations for the 2022 Period. The table below presents the post-acquisition revenues, net income (loss), and acquisition-related costs (included in transaction expenses) of Space NV included in the consolidated statements of operations and comprehensive income (loss) for the following period:


	December 31, 2022
Post-acquisition revenues	$	11,658

Net income (loss) attributable to Redwire Corporation	$	(294)

Transaction expenses	$	3,112

Pro Forma Financial Data (Unaudited)

The table below presents the pro forma combined results of operations for the business combinations for the year ended December 31, 2022 and 2021 as though the acquisitions of Oakman, DPSS, and Techshot (the “2021 Acquisitions”) had been completed as of January 1, 2020, and the acquisition of Space NV had been completed as of January 1, 2021.


	Year Ended
	December 31, 2022		December 31, 2021
Revenues	$	207,761	$	206,204
Net income (loss) attributable to Redwire Corporation	(129,645)		(57,407)

The amounts included in the pro forma information are based on the historical results and do not necessarily represent what would have occurred if the Space NV acquisition had taken place as of January 1, 2021 and the 2021 Acquisitions had taken place as of January 1, 2020, nor do they represent the results that may occur in the future. Accordingly, the pro forma financial information should not be relied upon as being indicative of the results that would have been realized had the business combination occurred as of the date indicated or that may be achieved in the future.

The Company incurred $3.2 million and $5.0 million of costs related to completed acquisitions during the year ended December 31, 2022 and December 31, 2021, respectively. Costs related to completed acquisitions in 2022 were primarily attributable to the Techshot and Space NV acquisitions, while such costs in 2021 were attributable to the 2021 Acquisitions. These expenses are included in transaction expenses on the consolidated statements of operations and comprehensive income (loss) and are also reflected in the pro forma results for the periods presented in the table above.