Terran Orbital Corporation (NYSE: LLAP) ("Terran Orbital" or the
"Company"), a leading manufacturer of small satellites primarily
serving the United States aerospace and defense industry, today
announced financial results and operational highlights for the
three and nine months ended September 30, 2022.
Post 3rd Quarter Closing Highlights
- Announced a $100 million investment from strategic partner
Lockheed Martin
- Signed a new Strategic Cooperation Agreement (SCA) with
Lockheed Martin extended into 2035
- On track to deliver Space Development Agency’s (“SDA”)
Transport Layer Tranche 0 satellites by end of Q4
Third Quarter 2022 Highlights
- Generated record revenue of $27.8 million, a 171% increase
compared to the third quarter of 2021
- Backlog of $198.0 million as of September 30, 2022, up 168%
since December 31, 2021
- Increased headcount to greater than 440, up approximately 78%
since the beginning of the year
- Net loss of $27.4 million improved from the net loss of $32.3
million for the second quarter of 2022
Marc Bell, Co-Founder, Chairman & CEO, said, “We are
thrilled with the performance of our team this quarter as our
strong execution drove another quarterly revenue record. We are
especially gratified by the vote of confidence from our strategic
partner Lockheed Martin as demonstrated by their $100 million
investment and new thirteen-year Strategic Cooperation Agreement.
This investment from the nation’s largest defense contractor
validates that Terran Orbital is today focused on the right
markets. Furthermore, it satisfies the Company’s near-term capital
requirements to deliver on our business plan.”
Results for the Third Quarter of 2022
Total revenue for the third quarter of 2022 was $27.8 million,
up 171% compared to $10.3 million in the same period in the prior
year. The increase in revenue was primarily due to the continued
and increased level of progress made in satisfying our customer
contracts.
Cost of sales for the quarter was $27.8 million compared to $8.8
million in the same period in the prior year. The increase in cost
of sales was primarily due to an increase of $15 million in direct
costs incurred in satisfying customer contracts, an increase in
share-based compensation expense following the Tailwind Two merger,
and an increase of $584 thousand related to reserves for
anticipated losses on contracts. Cost of sales included an
estimated $1.9 million negative impact due to EAC adjustments.
Gross profit was $37 thousand, compared to $1.5 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 $3.2 million, compared to $2.1 million
in the same period in the prior year. EAC adjustments negatively
impacted gross profit and Adjusted Gross Profit by an estimated $2
million, including approximately $100 thousand from revenue and
$1.9 million from cost of sales.
Selling, general and administrative expenses were $24.7 million
in the third quarter of 2022, compared to $11.4 million in the same
period in the prior year. The increase was primarily due to an
increase in share-based compensation expense as a result of the
Tailwind Two merger, an increase in research and development
expense, increases in salaries and wages, facility costs related to
capacity expansions, and other operating costs, partially offset by
a decrease in accounting and legal fees.
Our net loss for the quarter was $27.4 million compared to a net
loss of $12.4 million for the same period in the prior year. In
addition to the items discussed above, net loss increased as a
result of higher interest expense and financing costs related to
financing transactions, offset by a decrease in fair value of
warrant and derivative liabilities following the Tailwind Two
Merger.
Adjusted EBITDA(1) was $(13.9) million compared to $(8.7)
million in the same period in the prior year. The decrease in
Adjusted EBITDA was primarily due to an increase in selling,
general, and administrative expenses related to salaries and wages,
research and development, facility expenses, and other operating
costs as a result of our growth initiatives, partially offset by an
increase in Adjusted Gross Profit.
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.
As of September 30, 2022, the Company’s backlog totaled
approximately $198 million, a 168% increase since December 31,
2021, driven primarily by the Company’s major contract awards
during the year including an award to build 42 satellites for the
SDA Tranche 1 Transport Layer.
Balance Sheet and Liquidity
As of September 30, 2022, Terran Orbital had $35.8 million of
cash on hand and approximately $202 million in gross debt
obligations. The Company’s debt includes $24.4 million in
connection with an obligation under one of the PIPE investment
subscription agreements, of which $1.9 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.
In July 2022, the Company entered into a common stock purchase
agreement with an affiliate of B. Riley Securities, Inc., pursuant
to which the Company has the right, but not the obligation, subject
to certain conditions, to sell to B. Riley over a 24-month period
up to the lesser of (i) $100 million of newly issued shares of the
Company’s common stock and (ii) 27,500,000 shares of the Company’s
common stock. During the quarter, the Company sold approximately
423 thousand shares for proceeds of $1.8 million under the B. Riley
committed equity facility.
Subsequent Events
On October 31, 2022, the Company received a $100 million
investment from Lockheed Martin in exchange for convertible notes
and warrants issued by Terran Orbital. In connection with the
investment, Terran Orbital and Lockheed Martin also entered into a
new Strategic Cooperation Agreement (SCA). The new SCA runs through
2035 and allows Terran Orbital to pursue a wider variety of
opportunities with Lockheed Martin. Terran Orbital intends to use
the funds to acquire additional satellite assembly space, increase
module production, and satisfy working capital needs while
expanding advanced manufacturing capabilities. The investment and
expanded partnership underpin plans to accelerate the expansion of
both capacity and breadth of the Company’s satellite solutions.
Following the Lockheed Martin investment and the allocation of
production capacity to fulfill existing customer programs, the
Company no longer plans to pursue investment in its own synthetic
aperture radar (SAR) constellation. The Company is currently
evaluating options to offer SAR satellites and payloads as a
product to its customers. This plan for PredaSAR is expected to
require a much smaller investment than previously planned.
Terran Orbital’s disruptive technologies provide customers with
innovative and cost-effective solutions. The SCA with Lockheed
Martin creates further opportunities for both organizations to
share their expertise and relationships to advance emerging
technology across military, commercial, and civil customers. This
will be achieved by focusing on:
- Mission assurance at both the satellite and constellation
architecture level;
- Speed and schedule to deliver timely solutions for the most
demanding and mission-critical customers; and
- Affordability through innovation with an industrial approach,
combined with capacity and facility enhancement to deliver and
share an unprecedented value proposition.
Terran Orbital believes there are growing unmet needs in
adjacent markets to the company’s core satellite offerings. To
address these needs, Terran Orbital plans to expand product and
service offerings to include:
- Payloads including synthetic aperture radar (SAR),
electro-optical, hyperspectral, infrared, and secure
communication;
- High-reliability satellite subassemblies and component
offerings, including, but not limited to, star trackers, flight
computers, reaction wheels, battery solutions, and guidance,
navigation and control solutions;
- Mission operations for satellites using Terran Orbital and
partner ground networks; and
- Other defense-related products.
The terms and conditions of the Lockheed Martin investment
transaction, including the note and warrant purchase agreement and
the new SCA, are more fully described in the Company’s Current
Report on Form 8-K, filed with the Securities and Exchange
Commission on October 31, 2022.
Outlook
The Company continues to focus on the successful execution of
its existing contracts and delivery of satellites on schedule while
also winning new contracts to expand its backlog. Accordingly, the
Company reiterates its expectation to deliver all ten buses in 2022
to Lockheed Martin in support of the SDA Transport Layer Tranche 0
and has commenced work on the next forty-two satellites for Tranche
1, which we expect to begin delivering in 2023.
To support the continuing expansion of manufacturing capacity,
the Company expects to open its new Irvine, California
manufacturing facility in the first quarter of 2023.
(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 third quarter 2022
conference 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 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 962878. A
replay will be available 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, financing and
development of our satellite manufacturing capabilities;
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; 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, as amended
(File No. 333-264447), which was declared effective by the SEC on
June 23, 2022, and our Forms 10-Q for the quarterly periods ended
March 31, 2022, June 30, 2022, and September 30, 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)
September 30, 2022
December 31, 2021
Assets:
Cash and cash equivalents
$
35,823
$
27,325
Accounts receivable, net
5,039
3,723
Contract assets, net
15,013
2,757
Inventory
16,958
7,783
Prepaid expenses and other current
assets
8,675
57,639
Total current assets
81,508
99,227
Property, plant, and equipment, net
48,864
35,530
Other assets
20,149
639
Total assets
$
150,521
$
135,396
Liabilities, mezzanine equity and
shareholders' deficit:
Current portion of long-term debt
$
7,735
$
14
Accounts payable
19,970
9,366
Contract liabilities
34,460
17,558
Reserve for anticipated losses on
contracts
1,456
886
Accrued expenses and other current
liabilities
14,053
76,136
Total current liabilities
77,674
103,960
Long-term debt
99,337
115,134
Warrant liabilities
21,438
5,631
Other liabilities
19,676
2,028
Total liabilities
218,125
226,753
Mezzanine equity:
Redeemable convertible preferred stock
-
8,000
Shareholders' deficit:
Preferred stock
-
-
Common stock
14
8
Additional paid-in capital
260,280
97,737
Accumulated deficit
(328,189
)
(197,066
)
Accumulated other comprehensive income
(loss)
291
(36
)
Total shareholders' deficit
(67,604
)
(99,357
)
Total liabilities, mezzanine equity and
shareholders' deficit
$
150,521
$
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 September
30,
Nine Months Ended September
30,
2022
2021
2022
2021
Revenue
$
27,830
$
10,255
$
62,314
$
30,158
Cost of sales
27,793
8,768
68,784
23,905
Gross profit (loss)
37
1,487
(6,470
)
6,253
Selling, general, and administrative
expenses
24,696
11,432
84,283
30,580
Loss from operations
(24,659
)
(9,945
)
(90,753
)
(24,327
)
Interest expense, net
7,147
2,630
17,007
6,174
Loss on extinguishment of debt
-
-
23,141
68,102
Change in fair value of warrant and
derivative liabilities
(6,001
)
(205
)
(2,325
)
76
Other expense (income)
1,496
(5
)
2,367
28
Loss before income taxes
(27,301
)
(12,365
)
(130,943
)
(98,707
)
Provision for income taxes
54
-
58
22
Net loss
(27,355
)
(12,365
)
(131,001
)
(98,729
)
Other comprehensive income, net of
tax:
Foreign currency translation
adjustments
138
76
327
162
Total comprehensive loss
$
(27,217
)
$
(12,289
)
$
(130,674
)
$
(98,567
)
Weighted-average shares outstanding -
basic and diluted
143,276,708
78,420,818
123,317,997
76,099,905
Net loss per share - basic and
diluted
$
(0.19
)
$
(0.16
)
$
(1.06
)
$
(1.30
)
TERRAN ORBITAL
CORPORATION
Condensed Consolidated
Statements of Cash Flows (Unaudited)
(In thousands)
Nine Months Ended September
30,
2022
2021
Cash flows from operating
activities:
Net loss
(131,001
)
(98,729
)
Adjustments to reconcile net loss to net
cash used in operating activities:
Depreciation and amortization
2,612
2,217
Non-cash interest expense
8,581
6,149
Share-based compensation expense
40,354
531
Provision for losses on receivables and
inventory
295
570
Loss on extinguishment of debt
23,141
67,954
Change in fair value of warrant and
derivative liabilities
(2,325
)
76
Amortization of operating right-of-use
assets
1,003
-
Other non-cash, net
1,000
-
Changes in operating assets and
liabilities:
-
Accounts receivable, net
(1,565
)
(3,471
)
Contract assets
(12,370
)
(1,740
)
Inventory
(9,338
)
(4,117
)
Prepaid expenses and other current
assets
707
(363
)
Accounts payable
11,532
2,595
Contract liabilities
17,156
(133
)
Reserve for anticipated losses on
contracts
572
(1,337
)
Accrued expenses and other current
liabilities
(690
)
2,060
Accrued interest
(2,289
)
-
Other, net
(1,508
)
(148
)
Net cash used in operating activities
(54,133
)
(27,886
)
Cash flows from investing
activities:
Purchases of property, plant, and
equipment
(15,013
)
(10,523
)
Net cash used in investing activities
(15,013
)
(10,523
)
Cash flows from financing
activities:
Proceeds from long-term debt
36,856
47,481
Proceeds from warrants and derivatives
42,247
2,519
Proceeds from Tailwind Two Merger and PIPE
Investment
58,424
-
Proceeds from issuance of common stock
14,791
-
Proceeds from issuance of common stock
under the Committed Equity Facility
1,795
-
Repayment of long-term debt
(30,958
)
(13
)
Payment of issuance costs
(45,746
)
(6,356
)
Proceeds from exercise of stock
options
269
98
Net cash provided by financing
activities
77,678
43,729
Effect of exchange rate fluctuations on
cash and cash equivalents
(34
)
(126
)
Net increase in cash and cash
equivalents
8,498
5,194
Cash and cash equivalents at beginning of
period
27,325
12,336
Cash and cash equivalents at end of
period
$
35,823
$
17,530
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 September
30,
Nine Months Ended September
30,
2022
2021
2022
2021
Gross profit (loss)
$
37
$
1,487
$
(6,470
)
$
6,253
Share-based compensation expense
2,715
68
10,057
102
Depreciation and amortization
486
518
1,529
1,415
Adjusted gross profit
$
3,238
$
2,073
$
5,116
$
7,770
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 September
30,
Nine Months Ended September
30,
2022
2021
2022
2021
Net loss
$
(27,355
)
$
(12,365
)
$
(131,001
)
$
(98,729
)
Interest expense, net
7,147
2,630
17,007
6,174
Provision for income taxes
54
-
58
22
Depreciation and amortization
911
885
2,612
2,217
Share-based compensation expense
9,204
177
40,354
531
Loss on extinguishment of debt
-
-
23,141
68,102
Change in fair value of warrant and
derivative liabilities
(6,001
)
(205
)
(2,325
)
76
Other, net(a)
2,134
200
6,755
6,754
Adjusted EBITDA
$
(13,906
)
$
(8,678
)
$
(43,399
)
$
(14,853
)
(a) - Represents other expense and other
charges and items. Non-recurring legal and accounting fees related
to our transition to a public company and financing transactions
are included herein.
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Terran Orbital (NYSE:LLAP)
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Terran Orbital (NYSE:LLAP)
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