Q1 2023 Terran Orbital Corporation Earnings Call
Ladies and gentlemen, thank you for your patience. This call will begin shortly.
Music
The.
My name is Elliot and I'll be coordinating your call today. If you would like to register a question during the presentation, please press star followed by one on your telephone keypad. I'd now like to hand over to Jonathan Sigmund, Senior Vice President of Corporate Development. The floor is yours. Please go ahead. Thank you, Elliot. Good morning, everyone.
Thank you for joining Aaron Orville's first quarter 2023 earnings call.
With me this morning are Mark Bell, co-founder and chairman and chief executive officer of Terra and Orville Corporation and Gary Hobart, chief financial officer of Terra and Orville Corporation.
Mark will provide a business update and highlights for the past quarter, and then Gary will review the quarterly results. Taryn Oberneault's executive team will then be available to answer your questions.
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 uncertainty. 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 its securities and exchange commission, each of which can be found on our website, www.tarenorbinal.com.
Readers are cautioned not to put any undue reliance on forward-looking states.
and the company specifically disclaims any obligation to update the forward looking statement that may be discussed during this call. Please also note that we will refer to certain non-GAAP financial information on today's debate.
You can find reconciliations of the non-GAAP financial measures with the most comparable GAAP measures in our earnings thresholds.
With that, I will turn it over to Mark.
Thank you, John . And thank you everyone for joining our first quarter 2023 earnings Tom and Paul. I am excited with our year to date performance, especially our order flow. A new even broader mix of customers are increasingly looking to turn orbital.
for the design and manufacturing of their satellite constellation and a new space-based project.
Customers are choosing us because of our 10-year plus track record of success, our state-of-the-art design and mission breadth, our rapid pace increased manufacturing speed, and our world-class quality.
We added a $2.4 billion, 300 satellite order from Roboto Space Network in February , which we believe is the largest commercial consolation award ever.
This has driven our March quarter-end backlog to over $2.5 billion. In addition, we are pleased to announce today that we have signed a new $87 million, 16 satellite order, with yet another new customer.
This award, combined with several other awards we recently signed, brings our total order book to over 30 programs. More to say on this, but our pipeline to order conversion year-to-date is a standout highlight.
Now, turning to our overall performance and quarterly updates.
First, I'm happy to announce that our team's positive momentum continues across our space of elimination through contracts.
After our successful delivery last year of our 10 transport layer trying to give a satellite to our partner Lockheed Martin, we are very much looking forward to their launch next month.
These Trich0 satellites will demonstrate the low latency communication length.
to support the warfighter with a resilient network of integrated capabilities from low-earth orbit.
As a reminder, the SDA Transportation Layer is a mesh communication network that will use hundreds of low earth orbiting satellites to connect with other satellite layers plus critical ground, air and sea-based systems.
As such, the transport layer is foundational to the SDA's space architecture for this decade of VR.
We are pleased to contribute this critical national security mission through work on the first two awards for this player, known as charge zero and charge one.
Our team is hard at work manufacturing FCH Translator TON1.
The 42-sellout order and we are pleased to confirm that we are on track to begin delivery of the first batch of these salads during 2023 and the balance by the end of the first quarter of 2024.
TRONX-1 will be the first operational generation of the Deliberated Warfighter Space Architecture and it's scheduled for deployment by the SBA in late 2024.
The Space Development Agency's strategy for construction of this advanced space architecture, which will consist of hundreds of satellites, has been to rapidly acquire and deploy low-earth orbit satellites in front of every three years.
The SDA recently issued a solicitation for Tronch II satellites and we expect this award to be announced later this year.
We believe our experience and track record with Prime Zero and Prime One in partnership with Lockheed Martin differentiate us and position us well for additional awards from the space of our agency.
Many of you are familiar with our relationship with Lockheed Martin.
This seven-plus year strategic partnership was recently extended through 2035, and we continue leveraging the full spectrum of our combined capabilities to support the space of our ministry.
Tranche 2 of the transfer layer, along with the base development layer opportunities, remain key pursuits for our team over the next 12 months.
Second, we are very pleased to update you on the company's regular $2.4 billion contract to design, manufacture, integrate and test 300 satellites for a robotic space network.
As we announced last month, we have received a further milestone payment along with completion of the screening of our industrial partners.
This mission will consist of satellites orbiting in low earth orbit and multiple planes using laser communication terminals.
Our initial $2.4 billion project covers only the first 300 satellites.
The contract includes an option for Rivada to purchase an additional 300-cellar at an additional cost.
The contract is broadly grouped into a design phase and a build phase. We are currently executing on the design phase, which includes a, quote, demonstrator mission that will support the verification of gateway lift transmission from one user to another routed within a small network of four satellites in space.
Mission operations for the on-orbit demonstration satellites will be conducted from TerraVogel's new state-of-the-art satellite operations control center, which is currently under construction in Irvine, California. An Additional
A digital 25 satellite will be built and commissioned as part of this phase. The build phase will be delivering the balance of 300 satellites in late 2025 and the first half of 2026. We are still ramping this program and recently received a milestone payment.
Revita revenue is projected to steadily ramp up in the coming months.
Third, we are thrilled to announce today an $87 million award from a new customer for 16 low-Earth orbit satellites. We are pleased to be partnering with this new customer who has a long history of advancing space technology. We have been able to utilize us to better access themaster have been developingRCS tumor Moore
We see ourselves not just as a pioneer.
but as an industry leader and a supplier of choice, which is validated by our most recent constellation contract awards.
Our backlog and pipeline both remain robust. As of March 31, our backlog is good at $2.5 billion, representing orders for over 360 satellites and our pipeline has $11.8 billion.
These March 31 metrics include the successful conversion of the Roboto space contract from pipeline to backlog, but exclude today's announced award.
In addition to the programs we noted, we have other active programs, many of which are pre-cures with the larger compilation, both for the existing customers and as well as new and other customers who remain, who value our deep mission experience and track record.
These missions and others we are pursuing are diverse across customer, channel, and mission.
Included today is the Prototyping and Development of Satellites in support of the larger potential constellation. While many of these programs are undisclosed today, they serve the seed as beef corn for a larger potential constellation award tomorrow.
Our announced Lockheed Martin LIDAS mission success of two Terran Orbital Geo-Sievert satellites completing the rendezvous and proximity operations demonstration is just one example of the revolutionary program our team is currently working on.
Another is our record-setting NASA Pathfinder technology demonstrator 3 satellite, which enabled a record 200 gigabits per second space-to-ground obstacle link.
low latency, secure communication, proliferated systems, speed to orbit, technology innovation. Each of these are customer demands for which we are delivering advances today.
Supporting all of these orders and opportunities is our vertically integrated scale design and manufacturing capability. We are investing in world-class production systems to support execution of our 360 satellites and diapods and over 2,600 satellites identified in our pipeline.
Our new facility, which we call 50 Tech in Irvine, California, adds 50,000 square feet of board space and brings a manufacturing capacity of approximately 20 satellites per month once the facility is fully commissioned later this year.
Critically, this includes testing equipment, printed circuit board assembly equipment, and robotic and automated assembly lines to vastly improve throughput, quality, and speed. And we are pleased to announce we are progressing with the development of our recently announced 90,000 square foot facility also in Irvine, which we expect to increase our capacity.
to multiples of our current capacity after commissioning in late 2024. Importantly, this new capacity includes 36-foot high bay for assembly and integration of significantly larger satellites.
In summary, Terran Orbital has established itself as the leading supplier of the enabling satellite infrastructure of the new space age.
Constellations of smaller, low-Earth orbiting satellites are the preferred architecture for the future.
What used to cost billions and take a decade to launch, Turnover is building at a fraction of the cost in months.
Our investments in scale, vertical integration, and automation leverages our 10-year legacy.
Our production system is designed to deliver satellites at a mass scale and at a speed and quantity our customers desire at a price point to stimulate new markets and at margins to reward our shareholders. We are thrilled our strategy was recognized by the two new franchise contract awards in recent months.
Now, let me turn it over to Gary to review our financial performance in the quarter and provide a financial outlook for the full year. Gary? Gary ice covers financial and energy diplomacy.
Thank you, Mark, and good morning, everyone. I'm happy to report that in the first quarter, we achieved multiple milestones in satellite production, resulting in a record first quarter revenue of $28.2 million for the first quarter of 2023. This is a 115% increase over the same period of the prior year.
As a reminder, we recognize revenue on most of our programs on a percentage of completion basis and adjustments and changes to our contract values and estimated costs at completion or EACs have a cumulative impact on the period in which we make the adjustment. In the first quarter, adjustments to EACs increased revenues by an estimated $800,000.
Gross loss was $1.4 million for the first quarter compared to $2.8 million in the same quarter in 2022. Excluding share-based compensation and depreciation amortization included in cost of sale, adjusted gross profit in the first quarter was $2.3 million compared to adjusted gross loss.
of $0.2 million in the same quarter in 2022. EAC adjustments positively impacted adjusted gross profit by an estimated $1.5 million during the first quarter of 2023.
Selling, general administrative expenses were $32.5 million in the first quarter of 2023, compared to $30.2 million for the same quarter in 2022. The increase was primarily driven by higher research and development activities, labor and benefits, and other costs as a result of our growth initiatives, often by decrease in share-based compensation expense.
We continue to increase our staff to meet upcoming demands. Share-based compensation is an important part of acquiring and retaining employees.
Although down year over year, share-based compensation still represented over $10.2 million of our first quarter expenses, with approximately $6.9 million running through our GAAP SG&A expenses and $3.2 million balance reflected in our cost of sales.
subject to future equity program activity, we currently expect share-based expenses to be below $7 million per quarter in the balance of this year. Adjusted debit dollar was negative $22.6 million for the quarter compared with negative $14.7 million in the same period in the prior year.
The decrease in adjusted evidence was primarily due to an increase in selling, general, and administrative expenses related to higher research and development activities, labor benefits, and other costs as a result of our growth initiatives, partially offset by an increase in adjusted gross profit.
Overall, adjusted everthought loss is largely a function of our ramping capabilities across the company to serve our multi-billion dollar backlog and pipelines in the coming quarters and years. This is part of an overall investment in our capabilities that supports our path to profitability in which we are well positioned, particularly given the strength in our signed order book.
Our backlog at the end of the quarter was $2.5 billion.
Capital expenditures for the quarter were $3.2 million. Finally, as of March 31st, we had approximately $57.4 million of cash on hand and approximately $305.3 million in gross debt obligations.
were $3.2 million. Finally, as of March 31st, we had approximately $57.4 million of cash on hand and approximately $305.3 million in gross debt obligations. Now for Outlook.
The exact timing of execution on our new contract work is a primary variable affecting our projected whole year 2023 results. But these contracts are the building blocks for what we believe will be a substantially higher sales base in 2024.
Given our current view of our steep ramp ahead, we anticipate in excess of $250 million in sales in 2023. Upside beyond this level is possible depending on our successful execution of our customer commitments, just as our ability to achieve this target would be impacted by such...
quarter. We expect gross margins to demonstrate year-over-year improvement, but pace improvements may be variable given timing impacts. Finally, we note that our CapEx for the year is expected to be less than $30 million. I'm going to now turn the call back over to Mark.
I will now look forward to taking your question and I'll turn it over to the operator. Thank you. If you would like to ask a question, please press star followed by one on your telephone keypad. If you would like to withdraw your question, please press star followed by two.
When preparing to ask your question, please ensure your device is unmuted locally.
The first question comes from Ron Epstein from Bank of America. Your line is open.
You got Andre on for Ron today.
Thanks for taking my question. I wanted to note the CapEx expected spend for the year along with where the cash balance is at now. How are you guys finding the financing environment largely? Could you give a little more context around that?
Sure, this is Gary. The financing environment is, we do a little bit of our equipment expenditures on a financing basis, and there are multiple providers of that. So I feel very comfortable and confident with that. Generally speaking, from a finance perspective, we look at the financing...
environment and we're very mindful of it.
It CA.
Perfect. Yeah, I'll keep it. I want. Oh, yeah, go ahead. Go ahead.
No, it wasn't sure if there was a ball on the way.
Oh yeah, and CapEx for the year, if you could just repeat your question. No, that's all, I was just looking at where your cash bonds are at now and then where CapEx is looking to be. Obviously, and given the comment in your release about continuing to...
look at prospective financing, you know, beyond this point. I just kind of wanted more color as to how you were finding that and you know, how you were planning to go about it. Yeah, so thanks. I think the way we're financing our business is we have substantial growth. As we mentioned, the back half of the year is gonna be
significantly higher revenue uptick versus the last several quarters. And so the way Mark and I and the board are looking at our finances is really bridging from this point through our profitability. We have a fair amount of working capital needs and obviously growth needs. And you've seen that in the last several quarters, including the first quarter.
So we're matching up our financing with our needs overall. We're building to a path of profitability, both on an EBITDA basis and a free cash flow basis during 2024. So anything we're doing as far as capital is really looking at bridging between now and that period. And we've been very sorry, we've been very lucky in terms of, you know.
because of the type of contract that we're getting, the size that we are, and how we are a standout in a new space. And we understand a lot of people are, all the facts that went out, the majority of them are data service. We're a purebred manufacturer.
So we're in a different kind of business. And so we have been seeing a lot of attention from a lot of a number of different financing sources should we choose to go that route. So we are, we feel pretty comfortable about our liquidity, pretty comfortable about our options out there. And so, and you know, pretty comfortable about our customer base. Perfect. That's great color. Thanks.
of the received milestone payments from Revada. I think one may have been before the March 31st Girl's she distortion.
Yes, so unfortunately we can't disclose how much they've paid for each of the two payments they've made to us. We have an NDA with them and we have to respect that. They want to be in control of a lot of different things including their capital sources.
Okay, and...
In that regard it's understood that
Their capital sources have been disclosed to the ITU, but that public has not been made public yet. That could be the case.
At or before this upcoming meeting at the end of June is that still your current understanding?
Yeah, I believe the media is July 2nd and when I spoke to Robata, they are a private company. They don't have to disclose to the public where their money is coming from. All I can tell you that it's public as Doug and Gail is a partner in starting this with Peter Thiel. Okay, Mark. We knew that mail flew.
And then regarding 50T, so.
I think we walked through that facility 11 months ago and it was near online and you know I think on your last conference call you talked about it being online April 1 and now you're talking about full commissioning so am I correct to understand that there are some satellites that are being
We're at their mercy to some extent. A lot of the equipment has been delivered. The PCBA lines have been delivered, but they can't be powered up yet. We're hoping to power everything up starting next month and then go through some testing over the summer. So we are, but that being said, that building, the first big constellation that will be built in that building is SDH Transport Layer Trunk One. Everything else is being done in the existing facility.
And when you talk to by August of 2023, we expect that building to be in use 100% in the next 24 hours quite a bit quantity
And at that time, when you're talking about the capacity of 20 satellites per month, are you talking about transport layer sized buses? Correct. Or could you do that? That is correct. Not huge steps. You are 100% correct. I think you are 100% correct.
This is going to be all 450 kg, 500 kg side process. That will be done there. Okay. All right. Thank you very much.
Well, thank you for coming.
Our next question comes from Greg Conrad with Jefferies. The line is open.
Good morning. Maybe just to start, I mean you mentioned screening of industrial partners for Rovada. Can you maybe talk about that a little bit? Supply chain readiness and just given that you manufacture a lot in-house just kind of how you're thinking about that.
Screening that you mentioned in the script
Sure. So we manufacture 85 percent of the components today that go inside of a bus. And we are working diligently to get to 100 percent by the end of the year. We have some solar panels which are manufactured by Lockheed Martin. So when we see the screening of industrial partners, we're specifically talking about the payload.
So the only payloads we manufacture in-house today is synthetic aperture radar and certain kinds of RF videos.
And for payloads, we go to the outside. So we have been screening and choosing with Roboto Network all the different payload partners who will be part of the constellation and then reviewing their supply chain to ensure that they can get things done on time. And on the supply chain issue, I'm going to mention.
One of the a lot of conversations we're having now with partners who are having supply chain issues, the number one supply chain issue everybody's having comes with printed circuit boards. Printed circuit board assembly has been the whole battle has been the biggest problem. And so by us having two state of the art printed circuit board assembly lines operational.
by the summer, we'll provide our own supply chain relief as we will be manufacturing components for our supply chain in order for our own satellites and possibly some of their other customers as well. So this is a huge difference in how we do business with our vendors.
And then maybe just more of an accounting question, but you mentioned the ramp around systems engineering for RAVADA. You had some positive EACs in the corridor, and I think you mentioned most revenues are under a percentage of completion. When you think about a large program such as RAVADA, is there a difference between the
in profitability between the engineering and when you get to manufacturing? Or is that all one program from an accounting profitability perspective?
Yeah, so we haven't given the precise accounting on it, but Greg, some of the accounting on the program that large will have a mix of margins in them based on the type of cost.
Thank you.
I mean, obviously, as you do the largest scale assembly, you have milestones to get more gross profit dollars will hit. So we are cognizant, and we are on our path to getting to EBITDA positive next year. And so as the assembly and the delivery of these new satellites gets completed, that will have a dramatic impact on our bottom line.
And then maybe just one last one. I mean, think about the pipeline and the contracts you've announced recently, whether, you know, Rovado or the new one that you announced in the quarter. I mean, are you seeing a drift higher around ASPs per satellite versus, you know, some of those initial awards and kind of what's driving that?
So we see on, you know, it's interesting. So customers are willing to pay more money for faster delivery. So we got we got we went we went we had a time period maybe two years ago where it's all about price, price, price. And now we see customers are a little less focused on price. They're becoming much more focused on quality.
You've had a lot of people launch what we call bricks in space across the industry, which only benefits us because everybody thinks it's easy to build a satellite. It's not that easy. And our 10-year plus heritage has helped us a lot. So we're seeing people focusing on the quality, on the speed of delivery, and slightly less on price. They're obviously all price conscious and they want the best. We try to...
of really getting into serial builds and constellation versus the prior decade of our existence where there was a lot of prototyping, co-development. And so what we're seeing is a price point on a serial build basis, we're able to deliver to the customer a very consistent price point, even with inflation in the overall marketplace. And we're starting to laugh and get on the other side of some of the more upfront costs, whether it be non-recurring engineering.
first article cost, and we're really starting to see that flow through. That'll manifest itself on our income statement in our cash flows in the coming quarters, and I'll be pleased to show that demonstrates that. Generally speaking, when we're building these big contracts, we're able to deliver to the customer a pretty consistent value point for the overall serial bill of the constellation.
Thank you. As a reminder, if you'd like to ask any further questions, please press star 1 on your telephone keypad now.
We now turn to Eric Rasmussen with Stifel. Your line is open.
Thanks for taking the questions. Maybe back to the outlook on the revenue, I know you mentioned a strong second half ramp, but how would you sort of weight the first half versus the second half, realizing that Q4 is probably the big point of the year?
Q4 is definitely the big point of the year. Unlike companies like AT&T Mobile, where you have monthly recurring revenues that go on, our revenues tend to be fairly lumpy, both molted around modules, buildings, and the assembly of the satellite.
And we are, as we are growing at such a rapid rate, we still find lumpiness in our quarters, but at the end of the day, we look for the total revenue for the year. How we look at things. I'll turn it over to Gary, if you want to add some thoughts. Oh yeah, so we've got into over 250 million for the year. I would, just to give you a rough guide point, I'd look at fourth quarter being four X our first quarter.
Okay, that's helpful. And then maybe just you mentioned possible upside. What are the factors that could contribute to that upside? And then you mentioned some gating items probably around execution or timing. So, let's talk about the factors that could contribute to that upside. So, let's talk about the factors that could contribute to that upside.
Yeah, well, we recognize revenue generally by adding value into programs and value of programs is everything from direct labor and overhead, our internal modules, and then third party parts and services.
As we're able to execute on all three of those, that adds value to the programs, which then generates both costs on the programs, but also generates most of our revenue. So if we have programs in the grant we have, a week acceleration or a week delay has a big impact on the month and in the overall quarter. So what I'm trying to articulate is...
with the type of lift we have in overall execution, you can have variability up and down throughout the months and quarters to come. And that's maybe the best, best glossy way of describing timing on what it means. And that's why we've got it to 250 and indicated it could be potentially higher, but also hitting 250 has execution challenges.
mostly to do with how we deliver those three categories into overall value of the program. And we're seeing, you know, we've dramatically expanded our business development group over the past year. We went from a few people to over 30 people in the group, and we're seeing that turning into RFIs and RFPs.
Whereas we would only have a few out at any given point in time, we are seeing ourselves now with an enormous number of R5 and RFPs that we've issued in the past few months. And we will expect a number of those to turn into new contracts over the next few months. So in addition, we will be bidding on almost all the SBA work that's coming out going forward.
the early request for 72 satellites for their data with the patient. The regular transfer layer into different pieces now. And so we feel that we have performed fabulously so far. And once the FDA has closed, those who deliver are those who keep winning, quote unquote. We have delivered. We delivered the first Tron0 ahead of schedule. And we delivered them gift-wrapped Christmas.
data points and metrics in the development of our business. And we feel pretty confident so far.
Great. And maybe just on the margins, you expect sort of improvements. Would you expect both GAAP and adjusted gross margin to be positive in Q2? And then obviously for the year you'll see that trend throughout. Just remind us what the targets are for maybe gross and operating margin.
But we see margins continuing to improve. What's happening here is that we're so small, as we hire a bulk of people for Rovada, for this new customer and others that we believe that we will be getting, it does have a negative impact on our financials. We have to hire people.
some 16, some six months ahead of program to get them up to speed and you're building facilities almost 18 months ahead of program. So eventually things will start to level off but I'll let Gary give you some more color. Yeah we've generally see ourselves ramping to the high teams throughout this year mid-20s the prior year and then as much as 25 to 30 in outer years.
you know, maybe any additional color on this award, the deal, you know, suggests, and I think we were talking a little bit about ASPs earlier, but it's about five and a half million per satellite. That's sort of in between the RAVADA and the SDA, and then maybe just, you know, comment on the timing of when these satellites will be delivered. Thanks.
We deal with some customers who have more confidentiality than others. As a customer's request, we're not allowed to give any more information other than that. Great. Thank you. We now turn to Robert Spingarn with
Should we think are driving that I assume Tronch one is a big piece of that. It's not clear if Rivada is or not or any of this other stuff. So how do we think about the 250 from a program support perspective? I mean, I mean, Tronch one is a big part of it. Then you have Rivada right after that and you have this new customer and
you know, and it's one of the things coming down the pipe, you know, but Tronch 1 is by far the largest part of that component. We're going to deliver, you know, call it two thirds of Tronch 1 in calendar year 2023. Yeah, and the overall backlog is that we're at like 30 programs. And so while there might be some Wednesdays and Tuesdays in there, there's some other programs that we are confidentially haven't mentioned, but they contribute in aggregate to the overall numbers.
And the backlog is obviously highly weighted toward the Rovada order. So you got $2.5 billion in backlog. $2.4 of that is Rovada. So it kind of suggests that the 60 non-Rovada satellites are $100 million in backlog. But I'm not sure that reconciles with the trans, you know, with that tracking one and the other stuff you're doing. So is there.
better way to think about this.
I think with what we've disclosed is we started the year about 170 million backlog before we included Robotta. We did roughly 29 to 28 million in the first quarter. So that might help you get to kind of a pro forma of the January 1 backlog. I think that will help you to kind of split around on that.
And just to try to get- And the 87 million? We'll have to go.
We're not doing tracking one. So I said tracking one, we actually didn't bid on tracking one. We strategically chose not to. I'm sorry. Could you fine tune my presentation?
Oh, fine. Okay. Just to make sure. Got it. Yeah, right. But you understood what I was getting at is the 87 in there or where or is that post March 31.
That's not in there. So all the numbers we've given include the conversion of Vrvada into backlog as of March 31, but the newly announced field today is not in the numbers.
Okay, and then the other thing I wanted to ask you, Mark, as we think about future opportunities, you know, beyond what we've already talked about today, where are some of the other opportunities outside of these two or three contracts that we focused on today?
We have some of these opportunities are your FDA, you know, they've got seven new bids going out. So, you know, the three starting with the new the three new transfer layer bids we're bidding on, we're going to put on tracking and possibly smothers. So, you know, that's just one small part of a very, very big pot.
The other thing I'll add is in an overall area is there's a lot of positive feedback loop in the marketplace. As we add and complete existing programs and add more programs, there's a feedback loop within the marketplace where other customers are looking to us to leverage off of that experience and that track record to produce programs for them.
And so the last six months in particular, but maybe even 18 months, our track record is really allowing us to get in and have good purchase with new constellations, both on the civil, on the government side as well on the commercial side.
The only other thing I was going to ask, Mark, is as you get through your capacity ramp, I wanted to clarify when the most significant milestones are. Is it the end of 24 when you have most of your capacity in place? And what is the revenue capacity at whatever that milestone is?
You know, capacity is a never-ending thing, I'm hoping. Being an optimist, we'll say it's never-ending, but always that capacity.
You know, we are looking at, you know, we have 20 buses here and 50 taxis, which we call it. We are with the new facility that is on Goodyear, for Goodyear, you know, that allows us to get into the billion dollar revenue category. But more importantly, that new facility not only allows us to go bus.
So the new facility really takes us to the next level. We will build a robot in that facility. That will only take up about a third of the facility. We have two thirds available for other customers who we're talking to today.
Right. Is there a good rule of thumb for what the ASP, ALI ASP changes when you add in payloads?
You know it all goes to satellite. You know you could build a you know we I mean He was a starlight filled with these satellites for three hundred thousand dollars You know with a very high failure rate, but testable everybody every customer is different That's weird blue sunlight. I think our largest we have right now is 800 kilograms That we're building the way we viewed it as long as it fits on an expert ring or as for grinding build it
That's kind of, you know, but we are the other, satellites are getting larger and larger. They wanted, we went in and we went over time. People wanted smaller, they wanted cheaper. You went, we started with the CubeSat. CubeSat changed it all. And then when we went and went to the CubeSat and we started making it bigger, show people we take three CubeSats and put them together, what we call the 3U, then it was a 6U, we'd fix them together. Then we started getting bigger.
they're seeing it no longer as demonstrators, but fully functioning replacements for geosynchronous satellites that can be built and launched with current technology. And yes, there's a replacement cycle to the recurring revenue business.
So every satellite we built now for a constellation has to be replaced every five years, but that's still phenomenally cheaper than building it in geosecurity minutes orbit. And it allows them to continue to upgrade their technology, just like the SDA does with each tranche, which means update the technology on each satellite. So our business becomes a recurring revenue business down the road.
who you're talking about, but that's only a few years out. Right, right. Thanks for all the help. Thank you. Now turn to Gene Inger from Inger & Company. The line is open.
Good morning gentlemen. This is my first time on one of your calls. We just recently initiated coverage at the buy in this price range for Torren. So obviously we see superb prospects and congratulate you on what you've achieved so far.
I do have a question speaking of business development as to cross ownership in the small world of space between AE industrial, Bain Capital, and whether or not you expect some of this to come together over time.
whether it be the Australian programs, Crescent and so on, or that's Lockheed, or whether or not you're gonna be involved with constellation space management, such as Big Bear AI is doing, or anything like that. Could you expand a little bit more on whether or not you're going to be limited to manufacturing? We are not limited to anything.
We can do anything that we want to do, anything our customers want. We do expect there will be a continued consolidation in the space. You saw Millennium got acquired by Boeing, Blue Canyon got acquired by Raytheon, York got acquired by
So we'll continue to see consolidation in the space, but we could, if we chose, could expand beyond satellites and do other space-based initiatives, or ground-based initiatives for that matter, as we do own a ground station network and we do do mission operations. And we see it again a day high.
SPAC days or from Beach Point or from what they call TeVac, the original CubeSat designers and they still have a lot of shares. How do you work through or could you and or Lockheed eliminate that concern among shareholders?
and therefore eliminate overhead supply in one fell swoop? Well, the reality is you have, you know, I mean, you know, as you're talking about the original investors, people like myself who aren't going anywhere, you know, I do like myself, you know, Mark Lavella, you see myself, Mark Lavella, Lonkey Martin, maybe a handful of others, we're 50% of company. So, you know, there are not, so we don't see any, you know.
You've one or two former employees who own a few million shares, but you know, they can do you know, the most people have those who have made the mistake or chose themselves. That's their choice. And you know, we all believe in the company and we're sticking around. Great. I appreciate it.
And I really like the Lockheed Association. And given the suppressed share price, I'm hopeful that they do not acquire you. I think they won't for competitive or monopolistic purposes anyway. But I should ask whether or not that allows you to maintain adequate profit margins.
or they have a leverage in negotiating that makes it hard for you to make money on the eleven or twelve programs you have going on with Lockheed.
Logie has been an incredible partner and they more than anybody else would like us to become profitable as soon as possible. And they made that very clear. So we are working as quickly as possible. So they are aligned with the shareholders. Being a large shareholder, they want to see profitability and they want to see the stock go to where it needs to go. Now I'm provided by APhot, my friend with n BitT UV Regional Products
and not be aware of that now. So they have been big supporters of us to get the probability as soon as possible. Great, I'm looking forward to that as well. Congratulations and we'll see you another time.
where is that now? So they have been a big supporter of us to get the profitability as soon as possible. Great, I'm looking forward to that as well. Congratulations and we'll see you another time. Thank you very much.
Our next question comes from James Byrne from Ostroski Investment Management. Your line is right.
While I was in the queue.
My only, I guess, comment is that I was a bit alarmed that your sales doubled year over year and you weren't able to leverage any of your fixed costs so that into the operating margin line.
I know you're doing a lot of hiring ahead of time, but what I get concerned about is, you know, look at the statement of cash flow. And if I do a very quick analysis, you're going to run into a cash crunch in about six months.
And the other thing going back to the cost of sales, what it tells me is that since it didn't look like you were able to leverage any of your fixed costs, your variable costs are growing faster than your sales are, which is a good thing.
does worry me a bit. It's just a comment, because I've been through a number of startups before, I've seen this kind of thing happen.
Right now your stock on the market is about down about eight and a half nine percent so I think other people are concerned about this too. I'm not asking you to I mean I heard a lot of the commentary I just I just hope that
this can turn quickly so that you know you if you're if you're going to burn through cash you've got to get it from somewhere and it's it's going to be really hard to raise it in the open market given your where your stock prices right now, so I'm just I'm I'm in a different camp than a few other people I heard on there I'm just uh
I'm a little concerned about what I see, that's all. No, I mean, we are an experienced management team. I mean, this is my, I'm between my partner Dan and I, this is the 17th company we've taken public. We've raised over 20 billion of equity and 100 billion of debt, of course, our careers combined. So we understand the capital market.
We understand how to grow a business from scratch. This will hopefully be between two of us, our seventh unicorn. So we are very much aligned with you. We understand, unfortunately, sitting where I sit, I see things differently. We have a lot of information of where we're going, how we're getting there. So we've had to go ahead and make sure, we had to be. And so that's what we're gonna do very soon. We just stay here, right with a these feds, and gain. We last but not least, always continue to use a machine to make our businesses safer again. Stay connected, be alone, and we'll be team.
started as a very, you know, for years we were a tiny little company that built tube sets and I took over CEO a little over two and a half two years ago and We decided at that point to partner with live hockey Martin and we were growing it a rabbit face So yes, we are spending money. We have a hundred million dollar e-log that Gary mentioned, please. There would be Riley
And we have lots of options in the capital market, but we're going to be smart as we move forward. The last thing we want to do is we're trying to be smart as we reach capital, as we do at least our equipment out. But eventually you'll see very quickly as these new facilities come online and these new programs start filling.
the things turn very quickly in terms of revenue, in terms of profitability, in terms of cash. You got to go ahead, Mark? Mark I'd say if you think about what we're looking at with the $2.5 billion backlog, the facilities, the labor, the process, the automation, all that's built in to feed into that. And it's hard to describe
the difference between the lines in our income statement that are fixed and variable. A lot of the labor, a lot of the SG&A you're seeing is the precursor to be able to deliver in value to the programs. And so you'll see numbers that show up in SG&A moving into the Cog line as new labor, for instance, comes online and has been here, if you have a new hire that's been here for one or two months, they're not going to be contributing to the program side of things for at least six months.
So you'll see things moving up the income statement into the Cogline and then from the Cogline into revenue and ultimately a margin. So think of it in terms of building a business that's looking to generate a billion a year of revenue and that'll kind of give you a perspective on how we're trying to set up stand up the company as far as cost now versus performance later. Yeah, I understand everything you're telling me and I've been a.
sure we leverage some of the fixed costs as we went along.
I haven't done 17, but I've certainly done a number of companies and I've seen some work and some not. So I just, like I said, when I saw this income statement, I was a little bit concerned. But anyway, I heard what you said, so I'll just keep watching.
Thank you. Thank you for coming. We have a follow-up question from Mike Crawford with B Riley Securities. Your line is open. Thank you. A little follow-up towards your comment about integrating full payloads and solar panels in addition to buses in the new facility.
In that regard, can you remind us like how proprietary you think your own...
potential synthetic aperture radar payload solutions might be versus others and if you could comment on likelihood or number of conversations of any of these
resonating with potential customers that contract with you to build something like that for them? So our SARS panels specifically are incredibly exquisite. They were built originally for the LISP of the Penn State University on what was the classified program that got declassified.
by Georgia Tech Research Institute. It was paid for by the year taxpayer dollars, so we thank you for that. And it is an absolute exquisite antenna. But we are, but that being said, most of the customers we are talking to about that.
are a lot of government customers. And so I can't go into the details of who we're talking to about it, but it is a very unique American made, which is important program. And I'm going to leave it there.
a lot of government customers, and so I can't go into the details of who we're talking to about it, but it is a very unique American-made, which is important, program, and I'm going to leave it there. All right, thank you, Mark.
Hi, thank you for taking my question. I was wondering about Rovada's waiver that's coming up for your September 2023 delivery.
I mean we know everything you know about the IT. We have no information other than what is publicly filed.
Fair enough. Thank you. Thank you. Our final question comes from Christopher Frost, a private investor. Your line is open.
This question is for Mark.
I have, you stated that you have to replace, satellites get replaced every five years.
And I'm wondering, with the current amount of satellites you produce, can you keep that flow gumping? That is the reason. It's a good question. And that is why we announced that new facility. So the one that's under construction right now will help us so we can continue to build and keep up with that demand. Now, my other question is, does Marist Island mm
Is that still a go? That was killed by a bald eagle almost over a year ago, exactly. Okay, thank you. Ladies and gentlemen, today's call is now completed. We'd like to thank you for your participation. Let me now disconnect your lines.