Terran Orbital Corporation (NYSE: LLAP) ("Terran Orbital" or the
"Company"), a leading small satellite manufacturer primarily
serving the United States aerospace and defense industry, today
announced financial results and operational highlights for its
first fiscal quarter ending March 31, 2022.
First Quarter 2022 Highlights
- Generated $13.1 million of revenues, a 25% increase from first
quarter of 2021
- Signed record $162 million of new contracts during the
quarter
- Record backlog of $222 million as of March 31, 2022, up 200%
since December 31, 2021
- Awarded 42 satellites for US Space Development Agency’s (“SDA”)
Tranche 1 Transport Layer
- Increased manufacturing and office space to over 250,000 sf and
headcount to more than 330
- Built pipeline to 140 opportunities representing over $12
billion in value as of March 31, 2022
- Completed merger with Tailwind Two Acquisition Corp. (the
“Tailwind Two Merger”) and related private equity and debt
transactions; began trading on NYSE: LLAP
- Net loss of $71.4 million or ($0.85) per share
- Adjusted EBITDA(1) loss of $14.7 million
- Ended quarter with $76.7 million of cash
Marc Bell, Co-Founder, Chairman & CEO, said, “We had a
record quarter of contract wins and grew our backlog to more than
$220 million by quarter end. We are focused on delivering
satellites and expanding our production capacity to satisfy our
growing customer demand. Market demand signals for small satellites
have been increasing rapidly in 2022 as evidenced by the growth in
defense budgets. We continue to see tremendous demand for our
satellite manufacturing business going into 2022 and have built our
pipeline to over $12 billion of opportunities.”
Results for the First Quarter of 2022
Total revenue for the first quarter of 2022 was $13.1 million,
up 25% compared to $10.5 million in the same period in the prior
year. During the quarter we executed on a growing mix of missions
for defense, civil, and commercial customers. In the face of supply
chain pressures widely reported across the industry, we
successfully delivered multiple satellites to customers. We did,
however, adjust our estimate-at-completion (“EAC”) on certain firm
fixed price contracts. EAC adjustments reduced revenues by
approximately $3 million in the first quarter of 2022.
Cost of sales for the quarter was $16.0 million compared to $9.7
million in the same period in the prior year. The increase in cost
of sales was primarily due to an increase of $4 million in direct
costs incurred in satisfying customer contracts. Cost of sales
included $2.1 million of non-recurring share-based compensation
expense and approximately $0.7 million of contract loss reserves
due to EAC adjustments.
Gross profit was $(2.8) million, compared to $0.8 million in the
same period in the prior year. Excluding share-based compensation
and depreciation and amortization included in cost of sales,
Adjusted Gross Profit(1) was $(0.2) million, compared to $1.2
million in the same period in the prior year. EAC adjustments
reduced gross profit and Adjusted Gross Profit by approximately
$3.7 million, including approximately $3 million from revenue
adjustments and $0.7 million of contract loss reserves.
Selling, general and administrative expenses were $30.2 million
in the first quarter of 2022, compared to $6.7 million in the same
period in the prior year. The increase was primarily due to $15.1
million of non-recurring share-based compensation expense as a
result of the Tailwind Two Merger, increases in corporate salaries
and wages and facility costs related to capacity expansions, as
well as accounting, legal and other professional fees connected to
the company’s efforts to become a public company.
Our net loss for the quarter was $71.4 million compared to a net
loss of $77.5 million for the same period in the prior year. In
addition to the items discussed above, net loss decreased as a
result of a reduction in loss on extinguishment of debt due to the
timing and impact from recent financing transactions, partially
offset by an increase in change in fair value of warrant and
derivative liabilities as a result of the Tailwind Two Merger and
higher interest expense as a result of recent financing
transactions.
Adjusted EBITDA was $(14.7) million, compared to $(3.6) million
in the same period in the prior year. The decrease in Adjusted
EBITDA was primarily due to a decrease in gross profit and
increases in salaries and wages, facility expenses, and
professional fees.
Backlog
The Company views growth in backlog as a key measure of its
business growth. Backlog represents the estimated dollar value of
executed contracts, including both funded (firm orders for which
funding is authorized and appropriated) and unfunded portions of
such contracts, for which work has not been performed.
As of March 31, 2022, the Company’s backlog totaled
approximately $222 million, a 200% increase since December 31,
2021, driven primarily by the Company’s contract awards during the
quarter including an award to build 42 satellites for the SDA
Tranche 1 Transport Layer.
Balance Sheet and Liquidity
As of March 31, 2022, Terran Orbital had $76.7 million of cash
on hand and approximately $204.5 million in gross debt obligations.
The Company’s debt includes $28.1 million in connection with an
obligation under one of the PIPE investment subscription
agreements, of which $5.6 million is payable in cash with the
remaining $22.5 million payable in cash or equity at the Company’s
option, subject to certain requirements.
2022 Outlook
The Company’s near-term focus is on the successful execution of
its existing contracts and obligations as well as winning new
contracts to continue to expand our backlog. Accordingly, the
Company plans to contribute significant resources to continue to
expand its manufacturing capacity, vertically integrate, and
continue to expand our ever-growing exceptional pool of talent.
Capital expenditures for fiscal year 2022 are currently expected to
be approximately $15 million to $20 million.
(1) This is a non-GAAP financial measure. Definitions of the
non-GAAP financial measures used in this press release and
reconciliations of such measures to their nearest GAAP equivalents
are included below.
Conference Call Information
As previously announced, Terran Orbital’s first quarter 2022
conference call is scheduled for 8:30 a.m. ET today. The live
webcast will be accessible on the Terran Orbital Investor Relations
website at investors.terranorbital.com. The event can also be
accessed by dialing 844-200-6205 within the U.S. and by dialing
929-526-1599 outside of the U.S. The passcode for both is 260413. A
replay will be available until June 6, 2022, by accessing the same
link as listed above.
About Terran Orbital
Terran Orbital Corporation is
a leading manufacturer of small satellites primarily serving the
United States aerospace and defense industry. Terran Orbital
provides end-to-end satellite solutions by combining satellite
design, production, launch planning, mission operations, and
in-orbit support to meet the needs of the most demanding military,
civil, and commercial customers. Learn more at
www.terranorbital.com.
Forward-Looking Statements
This press release contains, and the Company’s officers and
representatives may from time to time make other public written and
verbal announcements that contain, “forward-looking statements” for
purposes of the federal securities laws. We intend such
forward-looking statements to be covered by the safe harbor
provisions for forward-looking statements contained in the Private
Securities Litigation Reform Act of 1995, Section 27A of the
Securities Act of 1933, as amended, and Section 21E of the
Securities and Exchange Act of 1934, as amended. All statements,
other than statements of present or historical facts, contained in
this press release, regarding our future financial performance as
well as statements regarding our business strategy, future
operations, future financial position, estimated revenues and
losses, projected costs, earnings outlooks, prospects,
expectations, plans and objectives of management, including without
limitation our 2022 outlook, are forward-looking statements.
Forward-looking statements are typically identified by such words
as “plan,” “believe,” “expect,” “anticipate,” “intend,” “outlook,
“estimate,” “forecast,” “project,” “continue,” “could,” “may,”
“might,” “possible,” “potential,” “predict,” “will,” “should,”
“would” and “could” and other similar words and expressions, but
the absence of these words does not mean that a statement is not
forward-looking. These forward-looking statements involve a number
of risks, uncertainties (many of which are beyond our control), or
other assumptions that may cause actual results or performance to
be materially different from those expressed or implied by the
forward-looking statements contained in this press release,
including, but not limited to: expectations regarding our
strategies and future financial performance, including our future
business plans or objectives, anticipated cost, timing and level of
deployment of satellites, prospective performance and commercial
opportunities and competitors, the timing of obtaining regulatory
approvals, the ability to finance our operations, research and
development activities and capital expenditures, reliance on
government contracts and a strategic cooperation agreement with a
significant customer, retention and expansion of our customer base,
product and service offerings, pricing, marketing plans, operating
expenses, market trends, revenues, margins, liquidity, cash flows
and uses of cash, capital expenditures, and our ability to invest
in growth initiatives; the ability to implement business plans,
forecasts, and other expectations, and to identify and realize
additional opportunities; anticipated timing, cost and performance
of our Earth Observation Solutions’ planned satellite constellation
and our ability to successfully finance, deploy and commercialize
its business; anticipated timing, cost, financing and development
of our satellite manufacturing capabilities, including our proposed
new campus of approximately 660,000 square foot satellite
manufacturing facility (the “Space Florida Facility”); prospective
performance and commercial opportunities and competitors; our
ability to finance our operations, research and development
activities and capital expenditures; our success in retaining or
recruiting, or changes required in, our officers, key employees or
directors; our expansion plans and opportunities; our ability to
comply with domestic and foreign regulatory regimes and the timing
of obtaining regulatory approvals; our ability to finance and
invest in growth initiatives; our ability to deal appropriately
with conflicts of interest in the ordinary course of our business;
the outcome of any legal proceedings that may be instituted against
us; the ability to maintain the listing of our common stock and the
public warrants on the NYSE and the possibility of limited
liquidity and trading of such securities; geopolitical risk and
changes in applicable laws or regulations; the possibility that we
may be adversely affected by other economic, business, and/or
competitive factors; that we have identified material weaknesses in
our internal control over financial reporting which, if not
corrected, could affect the reliability of our consolidated
financial statements; the possibility that the COVID-19 pandemic,
or another major disease, disrupts our business; supply chain
disruptions, including delays, increased costs and supplier quality
control challenges; the ability to attract and retain qualified
labor and professionals and our reliance on a highly skilled
workforce, including technicians, engineers and other
professionals; we do not expect to become profitable in the near
future and may never achieve our profitability expectations, plus
we expect to generate negative cash flow from operations and
investments for the foreseeable future; our leverage and our
ability to service cash debt payments and comply with debt
maintenance covenants, including meeting minimum liquidity and
operating profit covenants; limited access to equity and debt
capital markets and other funding sources that will be needed to
fund operations and make investments, including investments in our
NextGen Earth Observation constellation and the Space Florida
Facility; delays and costs associated with developing our NextGen
Earth Observation constellation, Space Florida Facility and other
initiatives whether due to changes in demand, lack of funding,
design changes or other conditions or circumstances; litigation and
regulatory enforcement risks, including the diversion of management
time and attention and the additional costs and demands on our
resources; and the other risk factors disclosed in our filings with
the Securities and Exchange Commission (the “SEC”) from time to
time, including our Registration Statement on Form S-1 (File No.
333-264447), which was filed with the SEC on April 22, 2022 and our
Form 10-Q for the quarterly period ended March 31, 2022.
These forward-looking statements are based on management’s
current expectations, plans, forecasts, assumptions and beliefs
concerning future developments and their potential effects. There
can be no assurance that the future developments affecting us will
be those that we have anticipated and we may not actually achieve
the plans, intentions or expectations disclosed in our
forward-looking statements, and you should not place undue reliance
on our forward-looking statements. New risk factors and
uncertainties may emerge from time to time and it is not possible
to predict all risks, nor can we assess the impact of all factors
on our business or the extent to which any factor, or combination
of factors, may cause actual results to differ materially from
those contained in any forward-looking statements we may make. You
should read this press release with the understanding that our
actual future results may be materially different from the
expectations disclosed in the forward-looking statements we make.
All forward-looking statements we make are qualified in their
entirety by this cautionary statement. The forward-looking
statements contained in this press release are made as of the date
of this press release, and we do not assume any obligation to
update any forward-looking statements to reflect events or
circumstances after the date they were made, whether as a result of
new information, future events or otherwise, except as required by
law.
TERRAN ORBITAL
CORPORATION
Condensed Consolidated Balance
Sheets (Unaudited)
(In thousands)
March 31, 2022 December 31, 2021
Assets: Cash and cash equivalents
$
76,654
$
27,325
Accounts receivable, net
18,626
3,723
Contract assets, net
3,609
2,757
Inventory
9,191
7,783
Prepaid expenses and other current assets
6,258
57,639
Total current assets
114,338
99,227
Property, plant and equipment, net
38,334
35,530
Other assets
17,316
639
Total assets
$
169,988
$
135,396
Liabilities, mezzanine equity and shareholders' deficit:
Current portion of long-term debt
$
7,515
$
14
Accounts payable
10,833
9,366
Contract liabilities
24,204
17,558
Reserve for anticipated losses on contracts
965
886
Accrued expenses and other current liabilities
13,082
76,136
Total current liabilities
56,599
103,960
Long-term debt
94,929
115,134
Warrant liabilities
35,616
5,631
Other liabilities
16,995
2,028
Total liabilities
204,139
226,753
Commitments and contingencies
Mezzanine equity: Redeemable
convertible preferred stock
-
8,000
Shareholders' deficit: Preferred stock
-
-
Common stock
14
8
Additional paid-in capital
234,384
97,737
Accumulated deficit
(268,560
)
(197,066
)
Accumulated other comprehensive income (loss)
11
(36
)
Total shareholders' deficit
(34,151
)
(99,357
)
Total liabilities, mezzanine equity and shareholders'
deficit
$
169,988
$
135,396
TERRAN ORBITAL
CORPORATION
Condensed Consolidated
Statements of Operations and Comprehensive Loss (Unaudited)
(In thousands, except share
and per share amounts)
Three Months Ended March 31,
2022
2021
Revenue
$
13,120
$
10,494
Cost of sales
15,953
9,734
Gross (loss) profit
(2,833
)
760
Selling, general, and administrative expenses
30,217
6,673
Loss from operations
(33,050
)
(5,913
)
Interest expense, net
2,923
907
Loss on extinguishment of debt
23,141
70,667
Change in fair value of warrant and derivative liabilities
11,853
(34
)
Other expense
403
15
Loss before income taxes
(71,370
)
(77,468
)
Provision for income taxes
2
28
Net loss
(71,372
)
(77,496
)
Other comprehensive income (loss), net of tax: Foreign currency
translation adjustments
47
(58
)
Total comprehensive loss
$
(71,325
)
$
(77,554
)
Weighted-average shares outstanding - basic and diluted
83,643,940
71,431,259
Net loss per share - basic and diluted
$
(0.85
)
$
(1.08
)
TERRAN ORBITAL
CORPORATION
Condensed Consolidated
Statements of Cash Flows (Unaudited)
(In thousands)
Three Months Ended March 31,
2022
2021
Cash flows from operating activities: Net loss
$
(71,372
)
$
(77,496
)
Adjustments to reconcile net loss to net cash used in operating
activities: Depreciation and amortization
846
671
Non-cash interest expense
1,215
889
Share-based compensation expense
17,335
168
Provision for losses on receivables and inventory
169
444
Loss on extinguishment of debt
23,141
70,667
Change in fair value of warrant and derivative liabilities
11,853
(34
)
Amortization of operating right-of-use assets
305
—
Changes in operating assets and liabilities: Accounts receivable,
net
(15,002
)
(226
)
Contract assets
(928
)
(785
)
Inventory
(1,550
)
998
Prepaid expenses and other current assets
(1,384
)
216
Accounts payable
2,134
2,202
Contract liabilities
6,708
728
Reserve for anticipated losses on contracts
79
(52
)
Accrued expenses and other current liabilities
4,032
1,047
Accrued interest
(4,803
)
-
Other, net
(2,078
)
15
Net cash used in operating activities
(29,300
)
(548
)
Cash flows from investing activities: Purchases of property,
plant and equipment
(4,030
)
(2,422
)
Net cash used in investing activities
(4,030
)
(2,422
)
Cash flows from financing activities: Proceeds from
long-term debt
35,942
47,481
Proceeds from warrants and derivatives
42,247
2,519
Proceeds from Tailwind Two Merger
29,779
-
Proceeds from PIPE Investment
28,645
-
Proceeds from issuance of common stock
14,791
-
Repayment of long-term debt
(27,171
)
(4
)
Payment of issuance costs
(41,681
)
(5,667
)
Proceeds from exercise of stock options
135
19
Net cash provided by financing activities
82,687
44,348
Effect of exchange rate fluctuations on cash and cash
equivalents
(28
)
(66
)
Net increase in cash and cash equivalents
49,329
41,312
Cash and cash equivalents at beginning of period
27,325
12,336
Cash and cash equivalents at end of period
$
76,654
$
53,648
TERRAN ORBITAL CORPORATION Non-GAAP
Measures
To provide investors with additional information in connection
with our results as determined in accordance with GAAP, we disclose
non-GAAP financial measures, such as Adjusted Gross Profit and
Adjusted EBITDA, that have not been prepared in accordance with
GAAP. These non-GAAP measures may be different from non-GAAP
measures made by other companies. These measures may exclude items
that are significant in understanding and assessing our financial
results. Therefore, these measures should not be considered in
isolation or as an alternative to net income or other measures of
financial performance or liquidity under GAAP.
TERRAN ORBITAL CORPORATION
Reconciliations of GAAP to Non-GAAP Measures (Unaudited)
(In thousands)
Adjusted Gross Profit
We believe that the presentation of Adjusted Gross Profit is
appropriate to provide additional information to investors about
our gross profit adjusted for certain non-cash items. Further, we
believe Adjusted Gross Profit provides a meaningful measure of
operating profitability because we use it for evaluating our
business performance, making budgeting decisions, and comparing our
performance against that of other peer companies using similar
measures.
We define Adjusted Gross Profit as gross profit or loss adjusted
for (i) share-based compensation expense included in cost of sales
and (ii) depreciation and amortization included in cost of
sales.
There are material limitations to using Adjusted Gross Profit.
Adjusted Gross Profit does not take into account all items which
directly affect our gross profit or loss. These limitations are
best addressed by considering the economic effects of the excluded
items independently and by considering Adjusted Gross Profit in
conjunction with gross profit or loss as calculated in accordance
with GAAP.
Three Months Ended March 31,
2022
2021
Gross (loss) profit
$
(2,833
)
$
760
Share-based compensation expense
2,113
14
Depreciation and amortization
513
453
Adjusted gross (loss) profit
$
(207
)
$
1,227
Adjusted EBITDA
We believe that the presentation of Adjusted EBITDA is
appropriate to provide additional information to investors about
our operating profitability adjusted for certain non-cash items,
non-routine items that we do not expect to continue at the same
level in the future, as well as other items that are not core to
our operations. Further, we believe Adjusted EBITDA provides a
meaningful measure of operating profitability because we use it for
evaluating our business performance, making budgeting decisions,
and comparing our performance against that of other peer companies
using similar measures.
We define Adjusted EBITDA as net income or loss adjusted for (i)
interest, (ii) taxes, (iii) depreciation and amortization, (iv)
share-based compensation expense, (v) loss on extinguishment of
debt, (vi) change in fair value of warrant and derivative
liabilities, and (vii) other non-recurring and/or non-cash
items.
There are material limitations to using Adjusted EBITDA.
Adjusted EBITDA does not take into account certain significant
items, including depreciation and amortization, interest, taxes,
and other adjustments which directly affect our net income or loss.
These limitations are best addressed by considering the economic
effects of the excluded items independently and by considering
Adjusted EBITDA in conjunction with net income or loss as
calculated in accordance with GAAP.
Three Months Ended March 31,
2022
2021
Net loss
$
(71,372
)
$
(77,496
)
Interest expense, net
2,923
907
Provisions for income taxes
2
28
Depreciation and amortization
846
671
Share-based compensation expense
17,335
168
Loss on extinguishment of debt
23,141
70,667
Change in fair value of warrant and derivative liabilities
11,853
(34
)
Other, net(a)
555
1,452
Adjusted EBITDA
$
(14,717
)
$
(3,637
)
(a) - Represents other expense and other charges and items.
Non-recurring legal and accounting fees related to our transition
to a public company are included herein.
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