- Expanding collaboration and commitment from Lockheed Martin,
awarded a new contract for 18 space vehicles for the Space
Development Agency (SDA)
- Second quarter 2024 awards exceed $100 million to-date
- As of March 31, 2024, backlog was $2.7 billion; and, as of
today, is estimated to be over $2.8 billion, inclusive of $400
million of non-Rivada programs
- Review of strategic alternatives still ongoing
Terran Orbital Corporation (NYSE: LLAP) ("Terran Orbital" or the
"Company"), a leading manufacturer of satellite products primarily
serving the aerospace and defense industries, today announced
financial results and operational highlights for the three months
ended March 31, 2024.
Marc Bell, Co-Founder, Chairman, and Chief Executive Officer of
Terran Orbital prefaced the release by saying, “Our team was
selected by Lockheed Martin to build 18 space vehicles for the
SDA’s Tranche 2 Tracking Layer. We value Lockheed Martin’s
partnership and look forward to continued collaboration under our
Strategic Cooperation Agreement, which runs through 2035. We remain
committed to exceeding customer expectations and delivering
cutting-edge satellite solutions while our strategic review is
still ongoing. This process includes a range of options, including
staying independent.”
Results for the First Quarter of 2024
Revenue for the first quarter of 2024 was $27.2 million, down 3%
compared to $28.2 million for the same quarter in 2023. The
decrease in revenue was driven by unfavorable
Estimate-at-Completion (EAC) adjustments, primarily on a single
program due to challenges with a subcontractor, and was partially
offset by an increase in revenue due to the continued and increased
level of progress made in satisfying our customer contracts. During
the three months ended March 31, 2024 and 2023, revenue included an
estimated $13.1 million negative impact and $0.8 million positive
impact, respectively, related to EAC adjustments on our firm fixed
price contracts. EAC adjustments represent net impacts during the
period related to changes in our aggregate program contract values,
estimated costs at completion, and other program estimates,
including the impacts of cost overruns and recognition of loss
reserves.
Commenting on the first quarter, Mr. Bell said, “We expect the
delayed revenue from this single program to be recognized by the
end of the third quarter of 2024. This supply chain disruption
underscores the importance of our vertical integration strategy. By
bringing more aspects of the manufacturing process in-house, we can
become less reliant on external factors and ensure on-time delivery
for our valued customers.”
Cost of sales for the quarter was $33.4 million compared to
$29.6 million for the same period in the prior year. The increase
in cost of sales was primarily due to an increase of $2.9 million
in labor, materials, third-party services, overhead, launch costs,
other direct costs, $1.4 million related to reserves for
anticipated losses on contracts period over period, and $1.3
million in depreciation and amortization, partially offset by a
decrease of $2.3 million in share-based compensation expense.
During the three months ended March 31, 2024 and 2023, cost of
sales included an estimated $0.5 million negative impact and a $0.8
million positive impact, respectively, related to EAC adjustments
on our firm fixed price contracts.
Gross loss for the first quarter of 2024 was $6.2 million
compared to a loss of $1.4 million for the same period in the prior
year. Excluding share-based compensation and depreciation and
amortization included in cost of sales, Adjusted Gross (Loss)
Profit(1) was $(3.4) million for the first quarter compared to $2.3
million for the same period in 2023. EAC adjustments negatively
impacted gross loss and Adjusted Gross Loss by an estimated $13.6
million during the period compared to a positive impact of $1.5
million for the same period in the prior year.
Selling, general, and administrative expenses were $28.3 million
in the first quarter of 2024, compared to $32.5 million for the
same period in the prior year. The decrease in selling, general,
and administrative expenses was primarily due to a decrease of $4.0
million in share-based compensation expense, as certain awards
granted in connection with becoming a public company were fully
expensed during the first quarter of 2023, and a decrease of $3.6
million in research and development activities, exclusive of
allocated share-based compensation and depreciation. These
decreases were partially offset by an increase of $3.0 million in
administrative labor and benefits, net of allocated overhead, due
to the increase in headcount on a comparative basis.
Net loss was $53.2 million in the first quarter of 2024,
compared to a net loss of $54.4 million for the same period in the
prior year. The improvement in net loss was driven by items
discussed above and lower losses from changes in the fair values of
warrant and derivative liabilities, partially offset by higher
interest expense.
Adjusted EBITDA(1) was $(28.2) million for the first quarter of
2024, compared to $(22.6) million for the same quarter in 2023. The
increase in negative Adjusted EBITDA was primarily due to a
decrease in Adjusted Gross (Loss) Profit.
Capital expenditures totaled $2.5 million in the first
quarter.
Balance Sheet and Liquidity
As of March 31, 2024, Terran Orbital had $43.7 million of cash
on hand and approximately $316.7 million in gross debt obligations.
The Company’s debt includes $15.0 million in connection with an
obligation under one of its PIPE investment subscription
agreements, which is payable in cash or equity at the Company’s
option, subject to certain limitations.
Backlog
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. The unfunded
portion of enforceable contracts is accounted for as variable
consideration and is reported at our estimate of the most likely
amount to which the Company is expected to be entitled. Although
backlog reflects business associated with contracts considered to
be firm, terminations, amendments or contract cancellations may
occur, which could result in a reduction in our total backlog.
As of March 31, 2024, backlog was $2.7 billion, of which $2.4
billion was related to our contract with Rivada and $300 million
was related to non-Rivada programs. As of May 14, 2024, backlog is
estimated to be over $2.8 billion, inclusive of $400 million of
non-Rivada programs.
Ongoing Review of Strategic Alternatives
As previously announced, a special committee of Terran Orbital’s
board of directors composed solely of independent and disinterested
directors, consistent with its fiduciary duties and in consultation
with its financial and legal advisors, has engaged in an ongoing
proactive process to evaluate strategic opportunities that are or
may be available to the Company, including maintaining the status
quo and continuing to operate as a standalone, independent publicly
traded company, to determine the course of action that it believes
will maximize value for the company’s stockholders.
Regarding the previously announced and subsequently withdrawn
non-binding proposal from Lockheed Martin to acquire, in a merger
transaction, all of the outstanding shares of the Company’s common
stock not owned by it for a price of $1.00 per share (the “Lockheed
Proposal”), independent director and special committee chair James
LaChance stated: “We appreciate Lockheed Martin’s interest and
engagement. In our discussions with Lockheed Martin regarding their
proposal, including at an in-person meeting on April 16, 2024, we
shared that the Company values its strategic relationship with
Lockheed Martin, both as a security holder and as a key customer,
and, as the strategic review process continues, we are committed to
maximizing stockholder value and remain open to further exploring
if there is value to be created for our stockholders through future
commercial and strategic arrangements or transactions with Lockheed
Martin.”
The special committee does not intend to provide any updates
regarding the company’s ongoing strategic review process, unless
and until it deems further disclosure is appropriate. There can be
no assurance that the strategic review process will result in any
transaction or strategic alternative, or any assurance regarding
its outcome or timing.
Conference Call Information
Terran Orbital’s first quarter earnings call is scheduled for
11:00 a.m. ET today. The live webcast will be accessible on the
Terran Orbital Investor Relations website at
investors.terranorbital.com. The call can also be accessed by
dialing 833-470-1428 within the U.S. and by dialing 404-975-4839
outside of the U.S. The passcode for both is 291823. A replay will
be available by accessing the same link as listed above.
(1) 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 measures are included
below.
About Terran Orbital
Terran Orbital Corporation is a leading manufacturer of
satellite products primarily serving the aerospace and defense
industries. Terran Orbital provides end-to-end satellite solutions
by combining satellite design, production, launch planning, mission
operations, and on-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 expected future financial
results, including the timing of revenue recognition, our business
strategy and future operations, strategic review and potential
resulting transactions, our results of operations and its impact on
our shareholders, our ability to execute, expectations regarding
key customer contracts, and other expectations, plans and
objectives of management 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: Rivada’s ability to obtain
additional funding to continue to finance its operations and fund
future installments of our manufacturing contract; the status of
Rivada’s regulatory approvals for its constellation and business
operations and continuing ability to receive and maintain required
regulatory approvals to conduct its business; Rivada’s right to
terminate our contract for convenience or default; our ability to
scale-up our manufacturing processes and facilities in order to
meet the demands of the Rivada program and other programs; our
ability to maintain compliance with the listing standards of the
New York Stock Exchange; our ability to operate as a going concern;
our ability to execute on programs and collect from customers in a
timely manner; our ability to finance our operations, the ability
to implement business plans, forecasts, and other expectations, and
to identify and realize additional opportunities; anticipated
timing, cost, financing and development of our satellite
manufacturing capabilities; limited access, or access on
unfavorable terms, to equity and debt capital markets and other
funding sources that will be needed to fund operations and make
investments; and the other risks disclosed in our Annual Report on
Form 10-K filed with the SEC on April 1, 2024 and the prospectus
supplement dated September 18, 2023 related to our Registration
Statement on Form S-3, as amended (File No. 333-271093), which was
declared effective by the SEC on April 18, 2023.
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, and
we do not intend 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, 2024
December 31, 2023
Assets:
Cash and cash equivalents
$
43,701
$
71,663
Accounts receivable, net
1,642
14,735
Contract assets, net
26,370
21,390
Inventory
34,680
33,348
Prepaid expenses and other current
assets
22,129
14,843
Total current assets
128,522
155,979
Property, plant, and equipment, net
48,356
46,449
Other assets
16,020
17,885
Total assets
$
192,898
$
220,313
Liabilities and shareholders'
deficit:
Current portion of long-term debt
$
12,839
$
11,740
Accounts payable
24,791
22,850
Contract liabilities
111,549
103,924
Reserve for anticipated losses on
contracts
620
977
Accrued expenses and other current
liabilities
35,719
14,408
Total current liabilities
185,518
153,899
Long-term debt
179,421
171,033
Warrant and derivative liabilities
17,283
34,462
Other liabilities
17,756
18,555
Total liabilities
399,978
377,949
Shareholders' deficit:
Preferred stock
-
-
Common stock
20
20
Additional paid-in capital
358,981
355,144
Accumulated deficit
(566,255
)
(513,011
)
Accumulated other comprehensive income
174
211
Total shareholders' deficit
(207,080
)
(157,636
)
Total liabilities and shareholders'
deficit
$
192,898
$
220,313
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,
2024
2023
Revenue
$
27,235
$
28,198
Cost of sales
33,391
29,597
Gross loss
(6,156
)
(1,399
)
Selling, general, and administrative
expenses
28,308
32,530
Loss from operations
(34,464
)
(33,929
)
Interest expense, net
13,696
10,934
Change in fair value of warrant and
derivative liabilities
5,043
9,455
Other (income) expense
(11
)
109
Loss before income taxes
(53,192
)
(54,427
)
Provision for income taxes
52
18
Net loss
(53,244
)
(54,445
)
Other comprehensive (loss) income, net of
tax:
Foreign currency translation
adjustments
(37
)
20
Total comprehensive loss
$
(53,281
)
$
(54,425
)
Weighted-average shares
outstanding
Basic and diluted
201,442,209
144,062,103
Net loss per share
Basic and diluted
$
(0.26
)
$
(0.38
)
TERRAN ORBITAL
CORPORATION
Condensed Consolidated
Statements of Cash Flows (Unaudited)
(In thousands)
Three Months Ended March
31,
2024
2023
Cash flows from operating
activities:
Net loss
$
(53,244
)
$
(54,445
)
Adjustments to reconcile net loss to net
cash used in operating activities:
Depreciation and amortization
2,391
919
Non-cash interest expense
9,581
7,053
Share-based compensation expense
3,816
10,166
Provision for losses on receivables and
inventory
511
3
Change in fair value of warrant and
derivative liabilities
5,043
9,455
Amortization of operating right-of-use
assets
378
279
Other non-cash, net
77
-
Changes in operating assets and
liabilities:
Accounts receivable, net
13,072
1,992
Contract assets
(5,017
)
1,423
Inventory
(1,309
)
(3,990
)
Accounts payable
2,844
1,009
Contract liabilities
7,676
(8,021
)
Reserve for anticipated losses on
contracts
(357
)
(1,723
)
Accrued interest
(49
)
(88
)
Other, net
(8,228
)
3,145
Net cash used in operating activities
(22,815
)
(32,823
)
Cash flows from investing
activities:
Purchases of property, plant, and
equipment
(2,498
)
(3,162
)
Net cash used in investing activities
(2,498
)
(3,162
)
Cash flows from financing
activities:
Repayment of long-term debt
(2,551
)
(518
)
Payment of issuance costs
(44
)
-
Proceeds from exercise of stock
options
21
339
Net cash used by financing activities
(2,574
)
(179
)
Effect of exchange rate fluctuations on
cash and cash equivalents
(75
)
30
Net decrease in cash and cash
equivalents
(27,962
)
(36,134
)
Cash and cash equivalents at beginning of
period
71,663
93,561
Cash and cash equivalents at end of
period
$
43,701
$
57,427
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
the non-GAAP financial measures Adjusted Gross Profit and Adjusted
EBITDA. 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 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.
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.
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,
2024
2023
Gross loss
$
(6,156
)
$
(1,399
)
Share-based compensation expense
941
3,245
Depreciation and amortization
1,791
466
Adjusted gross (loss) profit
$
(3,424
)
$
2,312
TERRAN ORBITAL CORPORATION
Reconciliations of GAAP to Non-GAAP Measures (Unaudited)
(In thousands)
Adjusted EBITDA
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.
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.
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,
2024
2023
Net loss
$
(53,244
)
$
(54,445
)
Interest expense, net
13,696
10,934
Provision for income taxes
52
18
Depreciation and amortization
2,391
919
Share-based compensation expense
3,816
10,166
Change in fair value of warrant and
derivative liabilities
5,043
9,455
Other, net(a)
11
401
Adjusted EBITDA
$
(28,235
)
$
(22,552
)
(a) - Represents other expense and other charges and items.
Non-recurring legal and accounting fees related to our financing
transactions are included herein.
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version on businesswire.com: https://www.businesswire.com/news/home/20240514904938/en/
ir@terranorbital.com 949-202-8476
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