Q3 2022 Terran Orbital Corp Earnings Call

Speaker 1: Ladies and gentlemen, thank you for your patience. This call is due to start in a couple minutes time.

Speaker 2: The Mar F that ST pro F.

Speaker 1: Hello and welcome to today's Teran Orbital 3 Q2 022 earnings call. My name is Elliot and I'll be coordinating your call today.

Speaker 1: If you would like to register a question during a presentation, you may do so by pressing star followed by one on your telephone keypad.

Speaker 1: I would now like to hand over to our host, Jonathan Seidwin, Senior Vice President of Corporate Development. The floor is yours. Let's go ahead.

Speaker 3: Thank you, Elliot. Good morning, everyone. And thank you for joining Terron Orville's third quarter 2022 earnings call.

Speaker 3: With me this morning from Terren orbital are Mark Bell, co-founder, chairman, chief executive officer, and Gary Hobart, chief financial officer.

Speaker 3: Mark will provide a business update and highlights for the quarter, and then Gary will review the quarterly results. Taron Orgel's executive team will then be available to answer your questions.

Speaker 3: During today's call, we may make certain forward-looking statements. These statements are based on our current expectations and assumptions, and, as a result, are subject to risk and uncertainties.

Speaker 3: Many factors could cause actual events to differ materially from forward-looking statements made on this call. For more information about these risks and uncertainties, please refer to the company's filings with the Securities and Exchange Commission, each of which can be found on our website www.TerrinOrbital.com. Readers are cautioned not to put any undue reliance on forward-looking statements, and the company specifically disclaims any obligation to update the forward-looking statements that may be discussed.

Speaker 4: We'll update you on our results and our latest operational highlights from the quarter, the macro environment for our solution, and the exciting $100 million investment and new strategic cooperation agreement with our partner Lockheed Martin. Then Guy will provide more detail on our financial results and strategic investment and then And then we'll be happy to take your questions.

Speaker 4: For those of you joining for the first time, Turnorbital is a global leader in satellite products, primarily serving the United States and allied aerospace and defense industries.

Speaker 4: Our pioneering work helped revolutionize the space industry by developing highly efficient, innovative and cost-effective satellite solutions at a fraction of the cost and production time of the prior generations of satellites.

Speaker 4: For the third quarter, we are pleased to report a record $27.8 million in revenue, a 100% year-over-year, as we continue to execute on customer contracts.

Speaker 4: Our backlog was $198 million, and our pipeline consists of more than 140 identified opportunities, representing a value of approximately $15 billion of potential customer revenues as of September 30. joining us here next.

Speaker 4: Our manufacturing execution continued to build efficiencies and we remain on track to deliver all 10 SDA transport layer trans-zero satellites by the end of the year.

Speaker 4: SDA or Space Development Agency, Turn Orbital has added over 140,000 square feet of manufacturing and office space at Irvine alone in the past 12 months. And we will continue to grow our headcounts to over 440 skilled personnel as of September 30th.

Speaker 4: In addition, the further expansion of Terran Orbital's advanced manufacturing capabilities, which was originally planned to be located on Florida's Space Coast in partnership with Space Florida, has been accelerated and will now be in Irvine, California.

Speaker 4: As we look at the macro environment, demand continues to strengthen. Now more than ever satellite solutions are critical to US and allied defense, which depends on space-based assets for communications, missile tracking, and geospatial intelligence.

Speaker 4: As traditional large satellites have become vulnerable to the anti-satellite weapons of hostile powers, the U.S. has initiated the rapid transition to resilient distributed networks that will consist of thousands of small satellites.

Speaker 4: These satellites, which are Terran Orgles' particular areas of expertise, can be quickly developed, deployed, and replaced to maintain the most advanced capability developed.

Speaker 4: The geopolitical situation is dynamic and just two weeks ago Russian President Vladimir Putin escalated global tensions by announcing that he considered US satellites to be legitimate targets for Russian anti-satellite attacks.

Speaker 4: This threat highlights the urgency of the U.S. government's new Satellite Constellation Initiative. Tandon Orbital is proud to be working to deliver 52 satellites as part of the first two phases of the Space Development Agency Transfer Layer.

Speaker 4: In Congress, there continues to be broad bipartisan support for the National Defense Organization Act. Both houses have advanced the bill proposing significant increases in the 2023 defense budget and prioritizing research and development for space programs.

Speaker 4: Funds are earmarked for development of resilient space capabilities, including low Earth orbiting satellite systems, tactically responsive space programs, and the integration of commercial space capabilities.

Speaker 4: This brings me to our exciting announcement last week of an expanded partnership in collaboration with Lockheed Martin Corporation.

Speaker 4: We are thrilled to report that Lockheed Martin has invested $100 million in deterrent orbitals in exchange for convertible notes and warrants, providing working capital which enables us to dramatically ramp up our industrialized in-house production of cutting-edge satellite solutions and accelerate our path towards profitability.

Speaker 4: Specifically, we plan to use these funds to acquire additional satellite assembly space, module production capabilities, and expand our advanced manufacturing abilities.

Speaker 4: Through a new strategic cooperation agreement, which now will run through 2035, we will also pursue new opportunities to lock in Martin, leveraging our increased manufacturing capacity and capability. For more information, visit Martin.org

Speaker 4: The investment and extended partnership are game-changing developments for our customers and business.

Speaker 4: With surging market demand for Terran Orbital Satellite Solutions, we now have sufficient capital to meet the needs of our customers. We demand life proven satellites delivered at accelerated timelines and in greater quantities.

Speaker 4: Our investments in advanced manufacturing, vertical integration, and expanded capacity are occurring at an optimal time to expand Terran Orbital's leadership in the scoring market.

Speaker 4: Our expanded partnership with Lockheed Martin is anchored by a shared vision of the potential of our small satellites to improve cost, capabilities, and resiliency of critical national security mission.

Speaker 4: We are humbled and honored by the Trust Logimodern, our nation's largest defense contractor and our leader in space technology is demonstrating with this strategic investment.

Speaker 4: As we look beyond the third quarter, we expect to deliver the 10 SDA transport-layer Tron Zero satellites to Lockheed Martin in the fourth quarter and to begin delivering Tron 1 satellites in 2023. I commend our team who is working tirelessly to deliver the first 10 Tron Zero satellites on schedule. We anticipate our competitiveness with future awards to this critical defense calculation will be enhanced by our expected on-time delivery this year.

Speaker 4: Regarding Predisar, last week we announced a shift in direction.

Speaker 4: Terran Orbital no longer plans to pursue an investment in its own constellation. That said, Terran Orbital's specialized star-cell light technologies remain in high demand, and today we are engaged in discussions with potential partners.

Speaker 4: Under discussion are options which may provide radar and radio frequency solutions to commercial and U.S. government customers by building star satellites and payloads as a product as opposed to a constellation.

Speaker 4: Terrenova remains committed to our US government customers and is in discussion with them to determine the best way forward on existing predecessor contracts. This strategic shift in predecessor will require much less capital investment while still allowing us to continue to explore options to deliver unique radar and RF capabilities.

Speaker 4: We also plan to expand product and service offerings to address growing and unmet needs in adjacent markets through the company's core offerings, including advanced satellite payloads, sub-assemblies and component offerings, mission operations, and other defense-related products.

Speaker 4: We will continue to pursue vertical integration, automation, and full in-house industrialization production in our facilities, enabling us to decrease our reliance on outside suppliers and enhance the turn of those paths toward profitability.

Speaker 4: Finally, we are more excited than ever about the growth opportunity before us, our competitiveness within the industry and with our partner, Lockheed Martin, the resources at our disposal to execute on our game plan. In sum, our results for the quarter demonstrate our strong progress and I could not be more proud of it with our team.

Speaker 4: With that, I now turn it over to Gary Hobart for an overview of our financials for the quarter. Hello and welcome to the sheets for the quarter.

Speaker 3: Thank you, Mark. Good morning, everyone. I'm happy to report that we continue to execute on programs and build momentum in the third quarter, delivering an all-time record revenue of $27.8 million, a 171% increase over the $10.3 million in the same period last year.

Speaker 3: The JESSE door's profit per reporter was $3.2 million.

Speaker 5: versus 2.1 million in the same period in the prior year, as well as 2.1 million in the second quarter of this year.

Speaker 5: EAC adjustments during the third quarter reduced adjusted gross profit by an estimated $2 million, which we believe considers all relevant and known information, such as supply chains and related production challenges through September 30th of this year.

Speaker 5: Adjusted debit DAW was a $13.9 million loss for the quarter compared with an $8.7 million loss in the same period in the prior year and a $14.8 million loss in the second quarter of 2022.

Speaker 5: The decrease in adjusted EBITDA year over year was due to the 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.

Speaker 5: partially offset by the increase in adjusted gross profit.

Speaker 5: Finally, as announced last week, on October 31st, we received a $100 million investment from Lockheed Martin Corporation in exchange for $100 million in convertible notes due to 2027 plus 17.3 million warrants for Terren orbital stock, where both the conversion price of the debt and the strike price of the warrants is $2.898, which is a 15% premium to market.

Speaker 5: Proforma at September 30th and on an as-converted basis for Lockheed's investment in the company, Lockheed's ownership of the company increases from 9.4% to 33.9%.

Speaker 5: As for liquidity, as of September 30th, we had $35.8 million of cash on hand and $202 million in gross debt obligations.

Speaker 5: Proforma at September 30th received $100 million investment proceeds from Lockheed, less than estimated $3.3 million in transaction expenses. Our proforma cash was $132.5 million.

Speaker 5: We believe the company is well positioned to meet its near-term capital needs, including further expansion in Irvine.

Speaker 5: We are now focused on continuing to deliver our products on time with Thai Mission Assurance.

Speaker 5: With sufficient capital resources on hand and an increase in production capacity, we are well positioned to continue to convert contract rewards and continue to gradually improve our profitability. I will now turn it back over to Mark.

Speaker 4: Thank you guys and thank you everyone on the call for your continued support of Terran Orbital. I now look forward to taking your questions and I'll turn it over to the operator.

Speaker 1: Thank you. If you would like to ask a question, please press star followed by one on your telephone keypad now. If you change your mind, please press star followed by two.

Speaker 1: When preparing to ask your question, please ensure your device is unmuted locally.

Speaker 1: Our first question comes from Ron Epstein from Bank of America. Your line is open.

Speaker 6: Hi, good morning. It's Elizabeth.

Speaker 6: Good morning. Could you give us some sort of color behind how you're thinking about the economics around the SAR satellites now? What you think, how many you think could potentially be building, what the revenue associated with them would be, what the margin profile of it would be?

Speaker 4: We have begun numerous conversations, you know, since announcing it. We've had some people inquire before, but now we're responding to people about what we're, you know, what pricing looks like and we are having discussions right now about that. It's a little too premature to talk about the margin profile and stuff, but by the next call we should have a much, much clearer picture.

Speaker 6: Do you still think that the market size would be around sort of 100 satellites that you would be building? Do you still think that the market size would be around 100 satellites that you would be

Speaker 6: I mean, can we get, can we have a city kind of color?

Speaker 4: I mean, I think the market's probably far greater than 100 satellites. The Ukraine conflicts really put front and center the need for SAR imagery. As you know, Ukraine is the breadbasket of Europe , and it's mostly, it's either raining or it's nighttime, and where EO just doesn't work. And it showed that there is a true shortage of SAR that's out there. We've had numerous allies in the US inquire about SAR satellites. People now want to own their own constellation. This year, many loopers'IVs secured an entire provocation information source Ohio's

Speaker 4: It's really a potential feeding frenzy. We are talking to Lockheed Martin about other solutions and other ways we can handle this, but we see the market far beyond 96 satellites.

Speaker 7: Okay, thank you very much.

Speaker 1: Our next question comes from Austin Moller from Canaccord. Your line is open.

Speaker 8: Hi, Mark and Gary. Good morning.

Speaker 4: Good morning, Austin.

Speaker 5: So, question number one here. The Florida Gigafactory was expected to support 1,000 satellites a year. With the $100 million Lockheed investment and plans to keep expanding operations in Irvine, what do you project will be the throughput in California's use scale? I think previously you said the two Irvine facilities can put out around 250 satellites a year.

Speaker 4: Correct. So when the new facility comes online next quarter, that'll be up to 250. We plan on adding, we'll have announcements later on next year about some other facilities here in Irvine that will get, that will be able to keep up with demand. It's not just the capacity, it's not just assembly space, but it's also module production space and automation as we continue to vertically integrate. So we're spending a lot of money on robotics, advanced engineering in order to make the components easier and faster to make.

Speaker 4: and then we need more and then adding additional space for the assembly of these satellites. So we'll easily get to the 1,000 number, but more importantly, it was 36 months from the time we would have broken ground in Florida to the time it would have been open, and we saw no path forward to breaking ground anytime soon, where here in Irvine, we're adding space, we're adding facilities, and by taking over existing buildings, it's called an 18-month cycle to get them up and running. So we save...

Speaker 4: probably a year and a half to two years. The Lockheed Martin and the rest of the market really is showing that they need capacity faster. It wasn't, you know, space Florida was great. We enjoyed working with them very much, but we determined that we just needed to move faster.

Speaker 5: Okay, that makes sense. And just to follow up,

Speaker 5: I would assume we would put the star satellites within the satellite solutions bucket now as opposed to Earth observation solutions. And should we still think about for manufacturing EBITDA margin somewhere between like 25 and 35 percent long term?

Speaker 4: I'm going to answer the first part on Gary's, the second part, but yes, it should be, events going forward will be just there will be no segments. It'll just be our core, our business. But Gary, do you want to address the margin?

Speaker 5: Yeah, so I agree with the way you look at the margins as well, that where we're going to is 25% and you're trying to get to 35% on satellite solutions for just a gross profit.

Speaker 5: Okay, great. Thanks for the details.

Speaker 1: Our next question comes from Eric Rasuman from Stiefel. Your line is open.

Speaker 9: Yeah, thanks for taking the questions. Maybe just a clarification. On the Irvine, you said you'll be at capacity of 250 satellites in Q1, and then that's sort of the new runway?

Speaker 4: Well, okay, so it's a little bit of a misnomer when people talk about capacity. So we could do 250 satellites a year, assuming all 250 are, you're talking about 20 satellites a month that are spread out over the course of the year. Now, as we've learned from SDH-RAR 0, that doesn't happen. All the assembly, because assembly is really the most space, takes up the most amount of space for doing the satellite, is all happening within, you know, eight weeks.

Speaker 4: So we are looking at larger amounts of space so we can do larger amounts of satellites if it's happening right now. So instead of building 20 a month, we can eventually go to 50 a month and 100 a month all in one time. But that increases our overall throughout the year, which will potentially be much larger. It really depends on scheduling. But we're seeing people want – everybody wants it now. And so that's kind of how we're trying to redo it, our capacity planning on how we're going to accommodate people.

Speaker 4: thousands of satellites out there that people have RFIs out at this point. And so when we bid on work, we also look at our schedule to what we can accommodate. But as we add more capacity both for component manufacturing and for testing, because we're also bringing testing in-house across the board, which is a big change for us, and then assembly, it will enable us to do a higher throughput at a faster rate. Thank you.

Speaker 9: Okay, great. And then maybe just back on, you know, the assumptions for the business overall, you know, we're sort of in a period where the model is, you know, a little bit of influx, but how should we be thinking about the long term model, you know, in relation to, you know, beyond, you know, 2023, you know, maybe for the next couple of years, those assumptions.

Speaker 9: you know that You know how should we be thinking about sort of the top-line revenue? You gave us some sort of guidance on the margins but how should we be thinking about the satellite solutions formally and then layering in sort of the Predisor if you will You know in terms of coming up with sort of an overall look at the business

Speaker 9: Yeah, so we're not providing quantitative guidance on that, but the way to think about it thematically is in two buckets. We're going to dramatically decrease our capital spend by moving away from investing in our own constellation. So that'll be one major update to the numbers you may have seen in the SPAC deck when we went through the SPAC process. I think the other major change will be with a singular focus on designing and building satellites and satellite solutions to dig in.

Speaker 9: you're going to see that that focus enables us to focus all of our energy and capacity on delivering against orders. So I'd anticipate that relative to where we were looking before, a higher amount of unit count going through and more revenue on that side of our business. In the coming quarters, as we have more clarity on our execution and our conversion pipeline into backlog, Mark and I will start having a bit more details on our guidance in that regard.

Speaker 8: with you guys as well as others. Can you just talk about why maybe having a relationship with Lockheed as a prime is more advantageous than is a standalone?

Speaker 4: Sure, I mean the Lockheed Martin relationship is spectacular across the board. Because imagine, we're relatively, we're still a startup for some aspects, either we've been around for 10 years, but now we have access to over 100,000 engineers and scientists that sit at Lockheed Martin to assist us in whatever we want to do. So it's like having a mentor that's on a phone a friend that's always available 24-7. And that they have been absolutely spectacular in helping us and encouraging us.

Speaker 4: and giving us advice as to what we should do right, what we're doing wrong, and how we can move faster and do it better and cheaper and provide more value. And the help they give us is just invaluable in speeding our business plan along, plus the opportunities that fit within all throughout Lockheed Martin is spectacular for us. So there are tons, as we get bigger and our capabilities get larger, the opportunities we have within Lockheed Martin also get larger.

Speaker 4: Because remember that they sub out a lot of work that they do there and by them having a stake in us You know it really works very well to it's very mutually beneficial

Speaker 8: And then as far as PREDISAR, given you were set up to eventually operate your own constellation and that likely involved data analysis, do you plan to still have a SAR data offering going forward?

Speaker 4: Absolutely, but not as a constellation. We have seen, we've had an immense amount of inbound across the spectrum for people who want to buy SART satellites. They wouldn't buy SART satellites if we owned our SART constellation. And the SART constellation being very capital intensive, we decided to be very smart, focused on our core business. It is working and Logitech now is expanding their relationship with us. There is just much more opportunity for us.

Speaker 4: And our goal is to get to profitability as quickly as possible with the lowest risk profile as quickly as possible. And this is the best way for us to get there.

Speaker 10: Thank you for the time.

Speaker 1: Our next question comes from Greg Conrad from Jefferies. The line is open.

Speaker 11: Good morning.

Speaker 12: Good morning, sir.

Speaker 11: Maybe just to start where you left off on the last question, how are you thinking about breakeven profit level and are there drivers outside of just volume and with that, how are you thinking about just inflation and supply chain in the current environment?

Speaker 9: Sure. Hi Greg. So as we mentioned on prior calls, inflation matters to us but it's less of an impact on us because in pricing our contracts, most of our contracts are really converting within 18 to 24 months. So it has more of a muted impact relative to defense clients that might have decades long programs. In addition, we generally have inflation escalators in our contracts and so that generally covers it.

Speaker 9: On a supply chain, it's not as much the pricing on the supply chain and inflation there. It's really the impact of the overall, whether it's the COVID hangover, labor shortages, this is where we are in the industrial base in the United States. The supply chain generally comes up in terms of yields on boards and things of that nature. So it'll be, I'm expecting products to come in this week and I might have 85% of them coming in this week and in a delay of a week or two. And that just adds to schedule on the programs on both our module build and even on assembly. So that's what we've been seeing throughout the year.

Speaker 9: that's when it hit EBITDA positive. So we're on the path to do that. While we're not giving guidance specifically, we have in our covenants with our lenders a clause that requires us to be EBITDA positive on an LTM basis by June of 2024. So I think marketplace can look to that as a reference point on our comfort and where we're steering the company as far as the path towards profitability.

Speaker 11: And then maybe just to follow up on the bidding strategy, I mean, it seems like a lot of things are going in the right direction. You talked about capacity coming online next quarter. You have the Lockheed agreement, and it seems like the transport deliveries have been going well. Does something change now that maybe you do have incremental capacity and things that you maybe haven't been bidding on over the past year, you know, with the capacity you can kind of go at it? You're kind of thinking about outside the business.

Speaker 4: delivering on every program they've ever gotten. And we want to make sure that we have the same thing, 100% success rate delivering on every program. And so now with the new space, with our ability to vertically integrate and bringing more and more of our components in-house, we reduced the delay we could have on supply chain. And this helps us for our long-term strategy of your responsive space, which is deliver your satellites faster, and work with more feature sets.

Speaker 4: at a price that's reasonable for everybody.

Speaker 4: if it's reasonable for everybody. Thank you.

Speaker 1: We now turn to Max Crawford from B Riley. Your line is open.

Speaker 13: Yeah, Mike Crawford. Hello, Mark.

Speaker 13: Would you say Terra and Orbital needs to win about 300 million of new contracts next year in order to hit that LTM positive EBITDA number in the summer of 24?

Speaker 4: Yeah, I do feel confident on our pipeline and the stuff that we're bidding on that we will easily hit, you know, add an additional $300 million over the next 12 months. We feel very confident about that.

Speaker 13: In that regard, there's the Space Development Agency RFI out for Tranche 2 of the transport layer for a position navigation and timing payload. That RFI just coming up in a couple weeks. When do you think that actually turns into RFP and an award?

Speaker 4: We haven't decided yet if we're going to bid on that. You know, there are other things coming down the pipe from the SBA, and we try to stick to our core competencies. We are building a payload group, so our being our first payload, and we're going to be getting other payloads at the end of the day. But we have a lot of other opportunities floating around, and we obviously are in constant contact with the SBA, but I want to make sure whatever we're bidding on is the right fit for what we're doing and things that we're going to win. For more information, click on the link in the video description.

Speaker 13: Okay, and then just kind of regarding your password

Speaker 13: There's this capstone satellite approaching the moon that's had several corrections. Can you talk about your role in helping to recover operational ability of that satellite? You can talk about your role in helping to recover operational ability of that satellite.

Speaker 4: So Capstone has from our perspective has been a huge success. We are very excited about it. We're the first small staff going to the moon and we are on we are we are right now on target for the around the moon and over the next week or so. And it's pretty exciting. We did have some issues with two outside vendors, our repulsion system that was running outside and another piece of equipment provided from an outside vendor, which goes to our theorem of why we should build everything ourselves. And then we ramped it and added a specific from the

Speaker 4: because everything we've built on it has worked perfectly so far. So we are very pleased. But we are excited. We are on track and on course. And you should see some big announcements in the next few weeks about it. So we're very pleased. So this is a program that was in, we're actually a subcontractor for Advanced Space, which got the contract from NASA. But we actually built the bus and we're actually the ones running the bus right now. So it's a very exciting program. And this is the beginning of what will be a permanent communications network.

Speaker 13: the nearby region in 23. What is the anticipated

Speaker 4: capital investment to do that expansion in California in 23? Well, the highway that we're opening up Q1 really isn't for modules. It's actually for satellite assembly. So there's not a tremendous capex that goes into the building for that. We just need the ability to have cranes to lift the satellite as the satellites are very, very heavy. And so that's what the highway allows us to do is to hold them up in the air so we can then attach things like solar panels and payloads.

Speaker 4: things that we now do at Lockheed Martin's facilities, we'll be able to do in-house.

Speaker 4: And it was another point out, it's another advantage of the Lockheed arrangement as we do all of our high bay work now at Lockheed Martin, where we didn't have a partner like Lockheed who couldn't do that.

Speaker 13: Right, but the question is that you also intend to then expand further out in Irvine in 2023, so I'm asking what you expect the CAPEX will be in 2023.

Speaker 4: We get a lot of landlord TI. We haven't as clear when we build a building, because the next building that we're going to be building really is just a big box. So think of it as a Walmart. It's got four walls, a ceiling, and it's just a large, large open space.

Speaker 4: The next building will be all for assembly.

Speaker 4: And so we're going to run, we're basically going to set up production lines like an automotive company to get things out the door. So it's a lot of space. There will be some capex, Gary, do you want to address the capex on this?

Speaker 9: Yeah, so we're not providing guidance on the capex for the additional air blind space per se, but think of it in terms of it being spread out over an 18 month development process as well as netting out landward PIs. As we have more precision on the timing and the actual capacity expansion, whether it's one additional space or two additional equipment, we're going to highlight that and provide folks with guidance.

Speaker 9: basis will obviously be finishing up the existing expansion in Irvine in the first quarter as well as not pursuing the predecessor of BUILD, self-funding BUILD if you will. But then that will be increased by the expansionally noted. And when we have more scope and timing on that, we can get the market more color on where that stands.

Speaker 13: Okay, thank you. And then just on – Okay, thank you.

Speaker 13: Contracts that you're bidding on these hundred and forty programs that you're you're tracking how many? Have you submitted bids for and what's your win rate been?

Speaker 4: You know, we pick and choose what we submit on. So the 140 programs we're tracking, is that actually stuff that we're actually bidding on yet? It's programs that we're waiting for funding, we're waiting for the customers to decide what they wanna do. So we kind of bring that down to a subset of what we look at, you know, things that we're actually bidding on and working on. And, you know, but that gives us the total with our TAM for our budget internally, what program that we know about that we are tracking.

So and then we eventually can we then as we start bidding on stuff We can choose what we want to bid on we work with the customers I hope the announcements over the next few months on contracts that we've been on and And and one guy if you want to comment on it

So I was just going to say, just to give you a sense that in that $15 billion pipeline, another way to look at it is in 140 different opportunities. There's about 4,000 satellites that's made up in that. And the bidding process is not as linear as you might think. There's certainly proposals where absolute proposals are out, but one way to think about it is at least 1,000 of those 4,000 satellites, we have active bids and proposals on. And the number is probably a little bit more than that, but that just gives you a sense of who we are.

As a reminder to ask any further questions, please press star 1 on your telephone keypad now.

Our next question comes from Robert Spingarn from Melias Research. Your line is open.

Hey guys.

Hey there, good morning. So Gary, I wanted to touch on this CapEx discussion and maybe twist it around to cash burn and how you expect the cash burn trend to go from here. But is there a minimum amount of cash that you want to keep on the balance sheet?

Sure, at this point I always want to keep at least $20-25 million of cash. After the pro forma to the Lockheed investment, we start the quarter with over $130 million of cash. So I think we're well positioned for the near term. When we think about our path to profitability and covering our needs with our existing capitalization, the way to think about it is that we're looking, generally speaking, at the

at a path where we are anticipating and planning on revenue growth that could be anywhere from 100 to 200% year over year. Execution, converting pipeline into backlog are part of that and contingent on that. But at that type of growth pace and with the margin expansion that we also are expecting and the way we are bidding things, the path we are looking for is to get to...

about $300 million, maybe a little bit less of revenue, to be able to be EBITDA positive. At that level, what I have to cover after that is CapEx, about $16 million a year of interest expense, and then I've got working capital that can be a plus or minus depending on where we are in the cycle for any one of the contracts. Generally speaking, new awards are fairly cash flow positive because on our SaaS solution business as opposed to the predecessor business, for example, mostly awards would lead to upfront payments ahead of the spending of labor dollars and material costs.

line and the older environment. The bookings were a little light here in the third quarter, but I'm sure there's a volatility to that. Things come when they come. But were there some awards you targeted that maybe competitors took in the quarter?

Usually what happens is the government, you come and get this budget on January , on October 1st and then we start the talk and then we see a lot of award activity usually in Q1 of every year. So it's cyclical in terms of awards based on government budgets.

So we see we have a lot of RFIs going out right now to a lot of people which will turn into RFPs which will turn into awards But that is it's cyclical in the award cycle We've noticed that the earth towards the end of every budget year It gets very very quiet and then it then it becomes October 1st a mad dash

Okay, and then just the last one, Mark, we've talked a bit about the transport layer, but on the tracking layer, there's some other companies involved there. Northrop and L3 come to mind for Tronch 1. And does your agreement with Lockheed permit you to support others in a similar vein? In other words, how do you feel about your opportunity on tracking layer Tronch 2, for example, and might you be able to support those other companies?

So our agreement with Lockheed Martin does not restrict us from working with anybody. That would be antitrust at that worth. So we work with everybody. We work with all the prime. That being said, we intentionally did not bid on tracking one. Tracking two is not out yet and we'll make the decision when it comes. There are certain things that we have a strategy to how we do this. We have a very good relationship with the SGA. We also know we're not going to win everything.

So we try to pick and choose what we know we will win and we just fit into our schedule. And the thing, the fact that we're delivering SDA's transport layer, charge zero, on time and they are looking amazing is a testament to the hard work of everybody here. And our capabilities are in high demand by a lot of people. So we obviously want diversity in customers as well. And so I think we're building a nice diverse book of business for the future.

And we'll announce a lot of the customer wins we won't announce because customers don't allow us to announce wins. So you'll see the backlog burns down as we book the revenue. But then you'll see as we get new wins, the backlog will start to jump back up. And it'll continue to be a seesaw as we get new revenue going forward, as we get new contracts going forward, but we only go find out amount of capacity. So try to be very careful for that. And again, if there were a round of correct answers, we'd have a Bra allocations at the blond. Again, like this one we did find in the Russians market, and we found that claim. So sometimes you're gonna pitch this one down to people in the US or they just not be on account, especially just to the US, then the price is intently higher than by the US. And you might assume that they areOOV.

Okay, and then just beyond the Tronch Zero deliveries, is there any other catalyst that we should be looking for in the early part of next year?

Any other milestones that we would focus on?

I mean, you know, increasing backlogs by the end of Q1, I think will be a big milestone. You know, we have a lot of stuff in the pipeline, a lot of stuff in the works, and we feel very confident that we have a lot of things that will be signed and closed, and then it's just up to the customer to announce. So we may not be able to announce who it is. We're doing more and more classified work as we get bigger, but we will be able to announce the numbers. And I think for you guys, that's the important part.

Great, thanks so much.

We now turn to Alex Owen from Fuel Venture Capital. Your line is open.

Hi, first off, congratulations on another great quarter.

It'd be great if you could touch on, you know, given the impressive pipeline and moving forward with the completion of the Florida facility, you know, you will have the ability to launch over a thousand satellites and, you know, the broader market in general is expected to have, you know, anywhere between 40 and 50,000 launched over the next six to seven years. I'm curious to hear your thoughts on how well, you know, the sector can accommodate this type of growth with, you know, the availability of human capital or, you know, the skilled personnel.

That's just in the US world, think about a global centric view. That's a US centric view. We are, you know, at Irvine as we're expanding here, we have access to an incredible talent pool. We are right near JPL and a lot of the other labs, you have Caltech up the road. We have a great labor pool here out in Orange County and also from LA County as well. So we're very comfortable with the amount of our ability to attract people.

We're working on programs to continue to retain people, and it is obviously a competitive environment. But you're seeing out there, there are some companies that are going to be winners and some companies that aren't, and we are very confident in our ability to continue to win. Lockheed Martin, the investment was a validator to our business plan, and it'd show you Lockheed wouldn't invest the money if they didn't expect us to keep winning. So we're very bullish on our future, and we feel pretty good about it. I hope that answers your question.

Yeah, no, definitely. Thank you.

This concludes our Q&A and today's conference call. We'd like to thank you for your participation. You may now disconnect your lines.

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Thank you. you