Release Date: May 14, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Terran Orbital Corp reported a significant backlog of $400 million, indicating strong future revenues primarily from Lockheed Martin over the next 18-24 months.
- The company has successfully delivered 10 satellites for the Transport Layer Tranche 0 to Lockheed Martin and the Space Development Agency in just 26 months from contract award, showcasing improved production speed.
- Terran Orbital Corp is expanding its manufacturing capabilities, with a new 94,000 square foot facility expected to open by Q1 2025, enhancing their capacity to meet growing demand.
- The company has over $25 billion of identified pipeline across 140 programs, demonstrating potential for substantial growth and diversification in customer base and market segments.
- Terran Orbital Corp has strengthened its vertical integration, controlling more of its supply chain, which is crucial for maintaining schedule and cost efficiencies in satellite manufacturing.
Negative Points
- Revenue for Q1 2024 was down 3% year-over-year, primarily due to unfavorable EAC adjustments on a single program caused by subcontractor challenges.
- The company reported a gross loss of $6.2 million for Q1 2024, compared to a gross loss of $1.4 million in the previous year, with adjusted gross loss worsening due to subcontractor issues.
- Terran Orbital Corp is experiencing delays in some programs, which could impact short-term revenue recognition and cash flow.
- The strategic review process initiated due to an acquisition proposal from Lockheed Martin is still ongoing, creating uncertainty about the company's future direction.
- Despite efforts to become EBITDA positive, the company faced a negative adjusted EBITDA of $28.2 million in Q1 2024, indicating ongoing profitability challenges.
Q & A Highlights
Q: Can you provide details on the value per satellite in the new contract with Lockheed compared to the previous awards?
A: Marc Bell, CEO of Terran Orbital, explained that the tracking layer satellites in the new contract are more sophisticated than those in the previous transport layer, justifying a higher price per satellite due to the increased complexity and stability required for their payloads.
Q: What is the expected revenue ramp for this year, especially with the backlog and upcoming deliveries?
A: Marc Bell mentioned that with nearly 50 space vehicles being delivered this year, significant revenue ramp-up is expected particularly in Q3 and Q4 as deliveries continue throughout the year.
Q: How are you progressing towards profitability, especially considering the ramp-up in the second half of the year?
A: Marc Bell indicated a potential for achieving quarterly profitability by Q4, depending on the execution of incoming programs. He highlighted that increased automation and internal production are improving yield and reducing dependency on subcontractors, which supports the drive towards EBITDA positivity.
Q: Can you discuss the cash flow conversion of the $400 million non-robotic backlog over the next 18 to 24 months?
A: Marc Bell clarified that cash flow from the backlog is milestone-based and varies significantly between programs, with some having front-loaded and others back-loaded cash flows.
Q: What are the implications of the EAC adjustments and delayed revenue recognized this quarter?
A: Mathieu Riffel, Acting CFO, explained that the negative EAC adjustments are mainly timing issues within their accounting model. He assured that the total contract value remains fixed and the revenue will be recognized in future periods.
Q: Given the upcoming election year, are there any concerns about the impact on Terran Orbital’s government contracts?
A: Marc Bell expressed confidence in the stability of their core DoD work, noting that these programs are essential and cost-effective compared to other available options, thereby likely to be less affected by potential political shifts.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
