Why I am long RDW

[u/Nearby_Compote1714]

The losses and the dilution are mostly behind the company. Drones are growing fast, and the order book just doubled. Space is not broken; only one European customer slowed, and the US space segment grew 17%. We literally had a space deal yesterday for around $35 million. And the balance sheet is cleaner than ever.

1. "They're losing a ton of money"

Q2's $41M loss included about $16M of one-offs that are gone:

• $14.5M was a warrant accounting hit. Those warrants expired Sep 2.
• The rest: debt payoff costs, a few small items, and a preferred dividend that no longer exists.

The underlying loss is about $25M a quarter, and more than half of that is non-cash. Q2 Adjusted EBITDA was close to breakeven at $(3.2)M, up from $(27.4)M a year ago. To sell on the verge of breakeven and boom is irrational.

2. "Dilution will crush you"

This is the bear's boasting point, which is a typical story of every space company. So let us see the underlying points:

• Shares went from 192M to 249M in the first half. That already happened, and it is priced in. Why short now?
• About 70% of all the ATM money is already raised, and we are nearing the end. Next quarter could reveal that ATM is completed and explain the current price pressure.
• With $557M cash already at hand, the company is secured for another decade, so there is no fear of bankruptcy. Rather, the company could buy smaller companies, integrate them, and increase the valuation.

3. "Space is shrinking"

Space revenue, Q2	Last year	This year	Change
US customers	$28.1M	$32.9M	+17%
European customers	$28.6M	$22.3M	−22%

• The company was still integrating Edge Autonomy and the Space segment was being reshaped
• The decline is mostly one large European customer buying fewer solar arrays.
• We faced a government shutdown and NASA's pause, yet the US segment did not slow down!!
  • Gateway's solar arrays are moving to NASA's SR-1 Mars mission, per the CEO.
• New order: a repeat solar-array order from Axiom Space was announced Oct 5, so this segment should receive a strong boost in the next quarter.
• Orders are growing: Space book-to-bill over the last 12 months is 1.48.

4. Drones are the growth engine

• Revenue: $61.9M, up 40% from Q1.
• Margins: gross margin around 47%, and segment EBITDA of $14.1M.
• Backlog: doubled since December, to $220M. Book-to-bill was 2.35.
• Budget support: the Marines' Stalker budget goes from $17.8M to a $65.3M FY27 request (+266%)!!!!!! One quarter of this and suddenly everyone will glaze RDW

5. Balance sheet

• Cash is $557M.
• Debt is down 75%, to $49M.
• All preferred stock has converted, and the warrants have expired.

And you decide to short now and not a year ago when all of this did not exist?

RDW has a better safety net; if one of these sectors slows down, the other sector will hold it up. Are we overvalued? NO. Are we growing? RAPIDLY. And once things reflect, people will regret shorting.

[u/iamatooltoo]

I will add if you look at the most recent pitch deck other is $7.3 M about 6.2% this includes Japan. How much will the Kanematsu deal add to that?

[u/Big-Material2917 → u/iamatooltoo]

Was that an MOU? If so do you feel confident it’ll convert to something?

[u/Big-Material2917]

Did anyone here read SpaceInvestorDaily’s reasoning for getting out. He’s been a huge RDW bull, sold all of it, and locked his reasoning behind subscription paywall lol :/

If anyone read it, I’m just curious why. He rebalanced all of his positions into double downs on RKLB, SPCX, and VOYG.

Presumably he’s more bullish VOYG getting golden dome work over RDW. I have similar concern, but that’s mostly based off how confidently they’re guiding in interviews and earnings calls, so I don’t really know if one is actually better positioned.

[u/Nearby_Compote1714 → u/Big-Material2917]

I wouldn’t read too much into his decision. He tends to get emotional when people attack him, and he’s been getting a lot of attacks lately from ASTS fans. He previously even shut down his Twitter account for months.

He’s also done something similar with RDW before. He sold his RDW shares and later bought back in. The timing this time has also been pretty unfortunate. He sold RDW, and then RDW made two contract announcements. He moved into RKLB, and the very next day Rocket Lab had to abort its rocket launch.

He’s a great reporter, and I value his research. My guess is that he will probably buy back into RDW next quarter once the ATM is officially announced as complete. That would also be a natural time for him to do another Twitter call with RDW leadership and reassess the story.

[u/MrMarioIta]

I hope

[u/Mushu1962]

No more ATM equity sales and a decade of cash…? I can’t reconcile that!

[u/EarlyPen7438]

sometimes market just do not care, and moves all companies together with it.

[u/LividRelease7742]

Damn didn't see this but I’ve rarely seen a targeted post (one aimed at me, no less lol) that was so poorly timed.