Q1 2024 Terran Orbital Corp Earnings Call

Unknown Attendee: Thank you for your patience, everyone. The Tailwind Orbital Q1 2024 earnings call will begin shortly. During the presentation, you can register to ask a question by pressing star followed by 1 on your telephone keypad. [inaudible] Unknown Attendee Unknown Attendee Unknown Attendee Unknown Attendee Unknown Attendee Unknown Attendee Unknown Attendee Unknown Attendee Unknown Attendee Unknown Attendee Unknown Attendee Unknown Attendee Unknown Attendee Unknown Attendee Unknown Attendee Unknown Attendee Unknown Attendee Unknown Attendee Unknown Attendee, ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? Thank you for your patience, everyone.

Thank you for your patience, everyone be tailwind or be till Q1, 'twenty 'twenty four earnings call will begin shortly during the presentation. You can register to ask a question about pricing star followed by one on your telephone keypad.

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Carla: The Terran Orbital Q1 2024 earnings call will begin shortly. During the presentation, you will have the opportunity to ask questions by pressing a star followed by one on the telephone keypad. [inaudible] My name is Carla, and I will be coordinating your call today. During the presentation, you can register to ask a question by pressing the star followed by 1 on your telephone keypad.

Thank you for your patience, everyone deterrent orbital Q1, 'twenty 'twenty four earnings call will begin shortly during the presentation you will have the opportunity to ask questions about price and star followed by one on your telephone keypad.

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Carla: If you change your mind, please press star followed by 2. I would now like to turn the call over to John Siegmann, Senior Vice President of Corporate Development of Terran Orbital, to begin. Please go ahead. Thank you, Carla. Good morning, everyone, and thank you for joining Terran Orbital's first quarter 2024 earnings call. With me this morning are Marc Bell, co founder, chairman, and chief executive officer of Terran Orbital Corporation, and Matt Riffel, acting chief financial officer and corporate controller at Terran Orbital. Marc will provide a business update.

Carla: Welcome to deter an orbital Q1 2024 earnings call. My name is Carla and I will be coordinating your today. During the presentation. You can watch just to ask a question about breaking score followed by one on your telephone keypad.

Carla: If you change your mind. Please press star followed bite you I would not like to.

Carla: Turn the call over to John Stegeman, Senior Vice President of corporate development and <unk>.

John Stegeman: Oh parent orbitals to begin please go ahead.

Carla: Thank you, Carla. Good morning, everyone.

Unknown Attendee: And thank you for joining Taran Orville's first quarter of 2024 earnings call. With me this morning are Marc Bell, co founder, chairman, and chief executive officer of Terran Orbital Corporation, and Matt Riffel, acting chief financial officer and corporate controller at Terran Orbital. Marc will provide a business update and highlights for the past quarter, and then Matt will review the quarterly results. Karen Orville and the DECA team will then be available to answer your questions.

John Stegeman: Okay.

John Stegeman: Thank you Karla good morning, everyone and thank you for joining John orbitals first quarter of 2024 earnings call.

John Stegeman: With me. This morning are Mark Bell co founder Chairman and Chief Executive Officer of General Orbital Corporation, and Matt Russell acting Chief Financial Officer, Corporate controller orbital Mark will provide a business update and highlights of the past quarter and then Matt will review the quarterly results Karen Oracle's Executive team will then be available to answer your question.

Unknown Attendee: During today's call, we will 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. Many factors could cause actual events to differ materially from forward looking statements made on, For more information about these risks and uncertainties, please refer to the company filings with the securities and exchange each of which can be found on our website www.taronorville.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 during this.

Matt Russell: During today's call we will make certain forward looking statements. These statements are based on our current expectations and assumptions and as a result are subject to risks and uncertainties. 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: Company's filings with the Securities and Exchange Commission, each of which can be found on our website www dot paranormal dotcom.

Speaker Change: Orders 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 during this call.

Unknown Attendee: Please also note that we will refer to certain non-GAAP financial information on today's call. You can find reconciliations of these non-GAAP financial measures with the most comparable GAAP measures in our earnings press release. With that, I will turn it over to Marc.

Speaker Change: Please also note that we will refer to certain non-GAAP financial information on today's call you can find reconciliations of these non-GAAP financial measures with the most comparable GAAP measures in our earnings press release with that I will turn it over to Mark.

Marc H. Bell: Alright, just realized there's a thing called the mute button, so I'm going to start from scratch again apologies. Thank you John and welcome and thank you everyone.

Marc H. Bell: I just realized there's a thing called a mute button, so I'm going to start totally from scratch again. Apologies. Thank you, John, and welcome and thank you, everyone, to our first quarter 2024 earnings call. In light of the company's strategic review, management decided to cancel the previously scheduled fourth quarter and full year 2023 earnings conference call. Although the strategic review is still ongoing, we are hosting today's conference call to keep our stakeholders up to date on recent events and first quarter results. I'm going to go a little off script here for a minute, if you don't mind.

Marc H. Bell: <unk> first quarter 2024 earnings call.

Matt Russell: In light of the Companys strategic review management decided to cancel the previously scheduled fourth quarter and full year 'twenty earnings conference call. Although the strategic review is still ongoing we are hosting today's conference call to keep our stakeholders up to date on recent events and first quarter results.

Speaker Change: Im going to go a little off script here for a minute. If you don't mind I don't think pillar. Realizing we have robots, which is just amazing program that we won last year, but people are realizing we have $400 million of.

Marc H. Bell: You know, I don't think people are realizing we have Robata, which is this amazing program that we won last year, but people aren't realizing we have $400 million of signed backlog, which will become revenue, and it will become revenue over the course of the next 18 to 24 months. So that's money that we'll bill. The bulk of it is from Lockheed Martin, and we're very appreciative of our relationship with Lockheed Martin, and it continues to grow stronger every day.

Matt Russell: Signed backlog, which becomes revenue and it becomes revenue over the course of the next 18 months to 24 months. So that's the money that we'll bill are the bulk of it is from Lockheed Martin and we're very appreciative of our relationship with Lockheed Martin and it continues to grow stronger.

Lockheed Martin: Every day, we are rapidly you were changing our workforce here a little bit and said we've gone from 675% to 695 G boy, yet our throughput has gone up dramatically and we're able to produce and our workforce is changing it now just under 20% of our workforce is now cleared as we're going to be moving more and more into <unk>.

Marc H. Bell: We are rapidly changing our workforce here a little bit, and so we've gone from only 675 to 695 people, yet our throughput has gone up dramatically, and we're able to produce. And our workforce is changing. It's now just under 20% of our workforce is now cleared, as we're going to be moving more and more in to do more classified work, more and more work for the government and the DOD.

Speaker Change: Do more classified work on more work for the government and the D. O D and I think these are important metrics to see how that $400 million becomes revenue and I don't think people are quite grasp that we realize and it looks like revenues were down this quarter, but we have.

Marc H. Bell: And I think these are important metrics to see how that $400 million becomes revenue. And I don't think people are quite grasping that, because we realize revenues were down this quarter, but we have just under 50 space vehicles that will be delivered in 2024 alone. With that, I'm going to get back to the basics, but I just want to make some quick points up front to hopefully give people some context for the rest of the conversation.

Speaker Change: Just under 50 space vehicles that will be delivered in 'twenty 'twenty four alone with that I'm going to get back to the scratch base will make two quick points upfront. So I hope. It gives you some context to the rest of the conversation.

Marc H. Bell: Let me remind you that the critical mission of Tarantino is pursuing historically space with domain, which we all know of in a few nation states, with the capital and time to build bespoke billion-dollar satellites that took five to 10 years to manufacture. Today, TerraNoble is strategically investing in manufacturing capacity to enable production at a mass scale with efficiencies and a significant improvement in speed. And that efficiency comes without significant headcount expansion, so we could dramatically increase the amount we can manufacture with only increasing our headcount by just 20 people over the course of the past three months.

Churn Team: Let me remind you that the critical mission of churn team is pursuing historically space with domain of which we all know in June nation States with the catalog time to build bespoke 1 billion satellites.

Speaker Change: Five to 10 years to manufacture today turn level of strategic investing in manufacturing capacity to enable production at a mass scale with the efficiencies and a significant improvement in speed and efficiency coms without significant headcount expansion. So we could dramatically increase the amount we can manufacture.

Churn Team: With only increasing our head count just only just 20 people over the course of the past three months.

Marc H. Bell: We are utilizing modular design, automation, and component standardization to drive synchronized improvements in speed, cost, and quality. Our automation is expanding beyond satellite components to satellite assembly and integration. We are realizing both cost savings and quality improvement from our recent investments in production capacity and automation. A proof of our success was clearly our early delivery of the 10 satellites for transport layer trans-zero to our customer and partner Lockheed Martin and support of the Space Development Agency. It took only 26 months from contract award to delivery of our space vehicles from our facility in California.

Speaker Change: We are utilizing modular design automation component standardization to drive synchronized improvement in speed cost and quality out of automation is expanding beyond satellite components to satellite Assembly and integration. We are realizing both cost savings and quality improvement from our recent investments in production capacity and automation.

Churn Team: Uh huh.

Speaker Change: A proof of our success was clearly our early delivery of the 10 satellites for transport layer trying to euro to our customer and partner Lockheed Martin and supported a space development agency.

Speaker Change: Only 26 months from contract award to delivery of our speeds vehicles from our facility in California, while 26 months.

Marc H. Bell: While 26 months is a significant improvement relative to the years it traditionally would take to complete a new satellite program, we're not stopping here. We have plans to further reduce manufacturing time to just weeks and have announced plans to be able to accommodate 30-day lead times for standard space vehicles. The successful collaboration between Terran Orbital and Lockheed Martin has blossomed into a significant relationship. We are proud to announce additional contracts following our initial success, including the award contract we announced last night.

Lockheed Martin: Improvement relative to the year that traditionally would take to complete a new satellite program, whereas not stopping here.

Lockheed Martin: We have plans to further reduce manufacturing time to just weeks and have announced plans to be able to accommodate.

Speaker Change: 30 day lead times for standards based vehicles.

Speaker Change: The successful collaboration between turnover and a Lockheed Martin has blossomed into significant relationship. We are proud to announce additional contracts. Following our initial success, including the award contract we announced last night. This is just the beginning as you see a vast opportunity set as it burned event increasingly relies on commercial stage companies for National Security mission.

Marc H. Bell: This is just the beginning, as we see a vast opportunity set as the Department of Defense increasingly relies on commercial space companies for national security missions. As of March 31st, we have over $25 billion in identified pipeline, over 140 programs across a globally diverse customer set. End-use markets include defense, intelligence, remote sensing, broadband communications, 5G, direct-to-handset, and span orbits from LEO, GEO, to lunar and beyond.

Lockheed Martin: As of March 31st we have over $25 billion identified pipeline over 140 programs across a globally diverse customer set end use markets include defense intelligence and remote sensing broadband communications five G.

Li: Direct to handset and spanned orbitz from Li <unk>.

Speaker Change: Lunar and beyond our current capacity, we are positioned to execute on multiple mega constellations space vehicles, such as the SBA and Roberto and many others and maintain the ability to flex our resources to rapidly match customer demand.

Marc H. Bell: With our current capacity, we are positioned to execute on multiple mega constellations of space vehicles, such as the SVA and Rovata and many others, and maintain the ability to flex our resources to rapidly match customer demand. Equally important, our design and matching capabilities uniquely position Terran Orbital to deliver highly engineered space vehicles in high volumes within compressed timeframes to meet each other's mission needs, and we do this at a fraction of historical cost. Disrupting an industry has its challenges.

Speaker Change: Imported our designer nitrogen capability uniquely position <unk> to deliver highly engineered space vehicles and high volume within compressed timeframes to meet each other.

Michigan needs: Michigan needs and we do this at a fraction of historical costs.

Speaker Change: Thrusting and industry has its challenges a key pillar of our strategic vision has been vertical integration as I've always said if you control your supply chain you control your destiny the benefits of vertical integration.

Marc H. Bell: A key pillar of our strategic vision has been vertical integration. As I've always said, if you control your supply chain, you control your destiny. The benefits of vertical integration are best evidenced by our recent replacement of a propulsion subcontractor to protect the program's schedule. I am proud of our team's proactive decision to pivot to an alternative propulsion solution. Matt will provide further detail on the accounting impact of the first quarter, but I want none of our valued shareholders to doubt the long-term consequences of this decision.

Speaker Change: Our best evidenced by our recent replacement of a propulsion subcontractor to protective program schedule.

Speaker Change: I am proud of our team's proactive decision to pivot to alternative propulsion solution Nab will provide further detail on the accounting impact of the first quarter, but I want none of them provide shareholders the doubt our long term consequences.

Marc H. Bell: At the end of the day, our goal is to deliver customers' missions on time and on budget. And unfortunately, with the supply chain as it is today, 85% of our supply chain we manufacture in-house. 85% of the modules are manufactured in-house. We have our own CNC shops, printed board circuit assembly facilities, our own testing facilities, shaker tables, and TVACs. We have our own torque rod assembly, our own harnessing shop. But the reality is, anything we have to outsource, we're at the mercy of subcontractors. And that is, unfortunately, getting more and more difficult in this environment, which is why we continue to bring things in-house.

Nab: At the end of the day, our goal is to deliver customers' mission.

Nab: Mission on time and on budget and unfortunately, with the supply chain today, 85% of our supply chain, we manufacture in house.

Nab: In terms of all the modules are manufactured in house, we don't have a <unk> printed circuit assembly facilities around testing facilities Shaker tables D that.

Speaker Change: Whenever I talk about assembly are harnessing shop, but the reality to anything we have the outside we're at the mercy of subcontractors.

Speaker Change: And that unfortunately is getting more and more difficult in this environment, which is why we continue to bring things in house, we realized over the past few years, we've invested hundreds of millions of dollars in building and designing our own components and modules bring things in house, but the future over the next $400 million of orders that were delivering and beyond the impact.

Marc H. Bell: We realize that over the past few years, we've invested hundreds of millions of dollars in building and designing our own components and modules, bringing things in-house. But the future of the next $400 million of orders that we're delivering and beyond, the impact of that will be significant on our financial statements as we drive to become even more positive. But other challenges have been the timing of orders in fickle capital markets, which have constrained available capital for our customers.

Speaker Change: That will be significant on our financial statements as we drive to become EBITDA positive, but other challenges have been the timing of orders and physical capital markets, which have constrained available capital.

Speaker Change: Customers constellation brands.

Marc H. Bell: You know, our customers have to raise money in the commercial space, not the DOD space. And we're very cognizant of that. We share our shareholders' frustration with some delays our company and industry have experienced. Despite that, we are steadfast in our confidence in long-term prospects for the industry and our company's position. As a result of these delays, our team responsibly swelled back capital expenditures and tightened discretionary expenditures

Constellation Brands: We will have to raise money on the commercial today is not the Dod's base and we're very cognizant of that we share our shareholder's frustration with some delays on company and industry have experience with that we are steadfast in our confidence in long term prospects of the industry and our company positioning.

Constellation Brands: As a result of these delays our team responsibly, while back capital expenditures tightened discretionary expenditures the intent with the flex appropriately to the delays while preserving the option to ramp capacity as demand pending Mega constellations may acquire.

Marc H. Bell: The intent was to flex appropriately to the delays while preserving the option to ramp capacity as demands of these pending megaconstellations may increase. We'd like to talk about some specific operational highlights. We have made substantial investments in our design and manufacturing capabilities over the past few years. All right, we just completed a 60,000 square foot addition to our original manufacturing facility. As we speak, we have well over 40 space vehicles in the final stages of assembly on the manufacturing floor, and we expect to launch just under 50 space vehicles this year. That is a record for us.

Constellation Brands: What I like to talk about the specific operational highlights.

Constellation Brands: Did make substantial investments in our design of measuring manufacturing capabilities over the past few years alright.

Speaker Change: Alright, we just completed our 50000 square foot addition to our original manufacturing facility.

Constellation Brands: As we speak we have a well over 40 states vehicles in the final stages of assembly and manufacturing floor, and we expect to launch jump into 58 vehicles this year that.

Speaker Change: That would be regarded as a record for US late last year, we opened our advanced printed Circuit Board Assembly lines. We now have the capacity to assemble over 5000 printed circuit boards per month yields have exceeded our original optimistic expectations and we were thrilled with the progress we're making.

Marc H. Bell: Late last year, we opened our advanced printed circuit board assembly lines. We now have the capacity to assemble over 5,000 printed circuit boards per month. Yields have exceeded our original optimistic expectations, and we are thrilled with the progress we are making. We are seeing an estimated 30% reduction in certain elements of our standard satellite bus costs, and PCBA lines alone are yielding almost 100% every time. Our next capacity addition, which we've previously announced, is our new 94,000 square foot facility here in Irvine, which we expect to be handed over to us in the coming months as physical construction is nearly complete. The facility offers us the ability to scale and add capacity at the frequency of magnitude of new customer awards.

Speaker Change: We are seeing an estimated 30% reduction just certain elements of our standard satellite bus costs and PCB Airlines alone are yielding almost 100% every time.

Speaker Change: Our next capacity addition would you truly announced is our new 94000 square foot facility here in Irvine.

Speaker Change: We expect to be handed over to us.

Speaker Change: Coming months as physical construction is nearly complete.

Speaker Change: Facility offers us the ability to scale and added capacity on the frequency and magnitude of new customer awards. We are actively pursuing other constellation opportunity that would depend on this capacity and we expect to open. This facility no later than Q1 2025.

Marc H. Bell: We are actively pursuing other constellation opportunities that would depend on this capacity, and we expect to open this facility no later than Q1 2025. I am proud of the progress Terranorbital has made in building the infrastructure to supply space vehicles at mass scale with the speed, quality, and pricing that our customers desire. I'm also happy to update you on progress in support of the Space Development Agency programs. Yesterday, we announced our selection by our partner Lockheed Martin to build 18 space vehicles for transport layer tranche 2 of the, tracking layer tranche 2 of the SLA proliferated warfighter architectures tracking layer. Sixteen of these satellites are planned to be wide field of view missile warning and missile tracking space vehicles with infrared sensors, and the remaining two space vehicles will carry missile defense infrared sensors.

Speaker Change: I'm proud of the progress <unk> has made in building the infrastructure to supply these vehicles at mass scale with the speed quality and pricing that our customers desire I'm.

Speaker Change: Also happy to update you the progress that supported a space development agency programs yesterday, we announced our selection by our partner Lockheed Martin to build 18th space vehicles for.

Lockheed Martin: Our transport layer tranche two of the tracking later charged to escalate proliferated Warfighter architraves triangle here I'm sorry.

Lockheed Martin: <unk> satellites are planned to be wide field of view missile warning missile tracking space vehicles with infrared sensors and the remaining two vehicles will carry missile defense infrared sensors. This award expands our participation to an entirely new layer of the Fda's mission architecture art.

Marc H. Bell: This award expands our participation to an entirely new layer of the SLA's mission architecture. Our team's near-term priority is to complete the 14 space vehicles of the tranche 1 transport layer, which aims to deliver as many eight vehicles this month than 10 vehicles per month thereafter. I am proud of our nimble supply chain management to protect our customer schedule by being able to pivot quickly to replace contractors who are unable to deliver.

Jim: Jim our team near term priority is completing the Portuguese based vehicles of the tranche, one transport layer, which aims to deliver as many vehicles. This month then he intend vehicles per month thereafter, I am proud of our nimble supply chain management to protect our customer schedule by being able to pivot quickly to replace contractors who are unable to.

Marc H. Bell: Regarding the company's program with Rivada, we continue to execute on the program. Although it was a modest contribution to our first quarter revenue, we have agreed in principle on a payment schedule that we believe will keep the program on track and meet the launch timetable. For further information, please contact Rivada directly at the customer's request.

Constellation Brands: Deliver.

Jim Smith: Regarding the company's program with Nevada, we continue to execute on the program. Although it was a modest contributor to our first quarter revenue. We have agreed in principle on a payment schedule that we will believe will keep the program on track and make their launch timetable for further information.

Robotic: Please contact robotic directly at the customer's request.

Marc H. Bell: Now I'd like to provide an update on our strategic review process. On March 1st, we received an all-cash proposal from Lockheed Martin, one of our largest stakeholders and partners. Lockheed already owns or has the right to acquire approximately 27.7 percent of Terran shares, and it proposed buying all Terran shares at a price of $1 a share, which represented a 6.5 percent discount to the then-current market price of $1.07. In response, Terran Orbital adopted a shareholder rights plan.

Robotic: Now I'd like to provide an update on our strategic review process on March 1st we received an all cash proposal from Lockheed Martin one of our largest stakeholders and partners Lockheed who already owns.

Marc H. Bell: The shareholder rights plan was intended to encourage anyone seeking to acquire the company, including Lockheed Martin, to negotiate with the board prior to attempting to oppose a transaction that is not in the best interest of stakeholders. A special committee of the board was diligently evaluating the Lockheed Martin proposal as part of the company's ongoing strategic review alternatives, and strategic partner. I look forward to continued our collaboration under our strategic cooperation agreement, which runs through 2035.

Lockheed Martin: <unk> owns or has the right to acquire approximately 27, 7% of current shares proposed buying all to ensure that the pricing.

Lockheed Martin: $1, a share which represented a six 5% discount to the then current market price of $1 seven and response turn orbital adopted a shareholder rights plan. The shareholders' rights plan was intended to encourage anyone seeking to acquire the company, including Lockheed Martin to negotiating the board, but prior to attempting to oppose it.

Lockheed Martin: Action is not in the best interest of our stakeholders.

Speaker Change: A special committee of the board.

Lockheed Martin: With diligently evaluating the Lockheed Martin a proposal as part of the company's ongoing strategic review of alternatives.

Lockheed Martin: Including direct engagement with Lockheed Martin on April 30th Lock you wanted withdrew the proposal. However are the strategic review is still ongoing and allows us to explore all options. There is no guarantee. However, this will result in any transaction or strategic alternative with special Committee did not provide does not intend to provide any update on the <unk>.

Lockheed Martin: Unless and until it deems further disclosure is appropriate.

Lockheed Martin: You a lot very Lockheed Martin as a customer at investor and strategic partner.

Lockheed Martin: And I look forward to continued cooperate continued art collaboration under our strategic cooperation agreement.

Marc H. Bell: I believe this continuing partnership was reinforced by this week's Tranche Two Tracking Award, which shows that we are still working together on programs across the board. Overall, I am proud of what we've accomplished and where we're heading. With that, I'll hand the call over to Matt to review our financial performance for the quarter and the year-end.

Lockheed Martin: Which ones do 2035.

Matt Russell: We believe this continuing partnership with reinforced by this week's tranche two tracking award, which shows that we are still working together programs across the board overall I am proud of what we've accomplished and where we're heading with that I'll hand, the call over to Matt to review, our financial performance in the quarter and the year and Matt.

Mathieu Riffel: Thank you, Marc, and good morning, everyone. Now on to the financial results for the quarter. Revenue for the first quarter of 2024 was $27.2 million, down 3% relative to the same quarter in 2023. The decrease in revenue was primarily driven by unfavorable EAC adjustments on a single program due to challenges with a subcontractor, partially offset by an increase in revenue due to the continued and increased level of progress made in satisfying our customer contract.

Matt Russell: Thank you Mark and good morning, everyone.

Matt Russell: Now onto the financial results for the quarter revenue for the first quarter of 2024, it was $27 2 million down 3% relative to the same quarter in 2023. The decrease in revenue was primarily driven by unfavorable EAC adjustments on a single program due to challenges with a subcontractor, partially offset by an <unk>.

Speaker Change: <unk> revenue due to the continued and increased level of progress made in satisfying our customer contracts.

Mathieu Riffel: As a reminder, EEC adjustments represent net changes during the period in our aggregate program contract values, estimated cost at completion, program estimates, and changes, and include cost overruns and recognition of loss. As disclosed in our third quarter 2023 earnings call, our team made a strategic decision to arrange for an alternative subcontractor as a contingency plan. Unfortunately, our intuition proved correct, as evidenced by ongoing challenges by the subcontractor in 2024.

Speaker Change: As a reminder, E C adjustments represent net changes during the period and our aggregate program contract values estimated cost that completion program estimates and changes and include the cost overruns and recognition of loss reserves.

Our team: As disclosed in our third quarter 2023 earnings call. Our team made a strategic decision to arrange for an alternative subcontractor as a contingency plan. Unfortunately, our intuition proved correct as evidenced by ongoing challenges by the subcontractor and 2020 for.

Mathieu Riffel: The majority of our $13.1 million negative EAC adjustments to the first quarter revenue reflects our complete pivot away from the initial subcontract. This event ultimately added a significant amount of estimated cost to the program, negatively impacting our cumulative revenue recognized on a percent completion basis for the program, though this revenue will be recognized in future reporting periods. While we are disappointed with the negative impact on this quarter's results, the proactive decision last year has at least helped mitigate this program schedule and financial impact from being worse.

Our team: The majority of our $13 1 million negative EAC adjustments for the first quarter revenue reflects our complete pivot away from the initial subcontractors. This event ultimately added a significant amount of estimated cost to the program negatively impacting our cumulative revenue recognized on a percent completion basis to the pro.

Speaker Change: Though this revenue will be recognized in future reporting periods.

Speaker Change: While we are disappointed with the negative impact on this quarter's result, the proactive decision last year has at least help to mitigate this program schedule and financial impact from being worse.

Mathieu Riffel: Gross loss for the first quarter of 24 was $6.2 million compared to $1.4 million in the prior year. Excluding share-based compensation and depreciation and amortization included in cost of sales, adjusted gross loss was $3.4 million for the first quarter compared to adjusted gross profit of $2.3 million in the same period in 2020. EAC adjustments, primarily related to the subcontractor discussed earlier, negatively impacted gross loss and adjusted gross profit by an estimated $13.6 million during the period.

Speaker Change: Gross loss for the first quarter of 'twenty, four was $6 2 million compared to $1 4 million in the prior year exclude.

Speaker Change: Excluding share based compensation and depreciation and amortization included in cost of sales adjusted gross loss was $3 4 million for the first quarter compared to adjusted gross profit of $2 3 million in the same period in 2023.

Subcontractor: EAC adjustments primarily related to the subcontractor discussed earlier negatively impacted gross loss in adjusted gross profit by an estimated $13 $6 million during the period.

Mathieu Riffel: Selling general and administrative expenses were $28.3 million in the first quarter of 2024 compared to $32.5 million in the same period of the prior year. The decrease in selling general and administrative expenses was primarily due to a decrease in share-based compensation expense and a decrease in research and development activity. However, these decreases were partially offset by an increase in administrative labor and benefits due to an increase in headcount on a comparative basis.

Speaker Change: Selling general and administrative expenses were $28 3 million in the first quarter of 2024 compared to $32 5 million in the same period in the prior year.

Speaker Change: The decrease in selling general and administrative expenses was primarily due to a decrease in share based compensation expense and a decrease in research and development activities. These decreases were partially offset by an increase in administrative labor and benefits due to the increase in head count on a comparative basis.

Mathieu Riffel: Overall, we're at a point where our selling general and administrative expenses should be materially stabilized compared to our historical growth. Adjusted EBITDA was negative $28.2 million for the first quarter of 2024 compared to $22.6 million in the same quarter of 2023. The decrease in adjusted EBITDA was primarily due to a decrease in our adjusted gross profit.

Speaker Change: Overall, we're at a point, where our selling general and administrative expenses should be materially stabilized compared to our historical growth trends.

Speaker Change: Adjusted EBITDA was negative $28 2 million for the first quarter of 2024 compared to $22 6 million in the same quarter of 2023. The decrease in adjusted EBITDA was primarily due to a decrease in our adjusted gross profit.

Mathieu Riffel: Our backlog at the end of the quarter was $2.7 billion, of which $2.4 billion was related to our contract with Rivada, and approximately $300 million was related to non-Rivada programs. As of today, FACLOG is estimated to be over $2.8 billion, inclusive of approximately $400 million in non-Rivada programs due to our second quarter awards, which have exceeded 100 million so far. Our programs generally take 18 to 24 months to complete, and our backlog is expected to be fully recognized as revenue by the end of 2020.

Speaker Change: Our backlog at the end of the quarter was $2 7 billion of which $2 4 billion was related to our contract with BARDA and approximately $300 million was related to non robotic programs.

Speaker Change: As of today backlog is estimated to be over $2 8 billion inclusive of approximately $400 million of non robotic programs due to our second quarter awards, which have exceeded $100 million so far.

Speaker Change: Our programs generally take 18 to 24 months to complete and our backlog is expected to be fully recognized as revenue by the end of 2026.

Mathieu Riffel: Capital expenditures were slightly down during the first quarter of 2024 and primarily related to our finishing touches on 50 tech. Our capital expenditures going forward will largely be related to our new facility, and the timing and extent of our capital expenditures are flexible in relation to the addition of new awards that require the level of increased capacity that our new facility can offer. Finally, as of March 31st, we had approximately $43.7 million of cash on hand and approximately $316.7 million of gross debt obligations.

Speaker Change: Capital expenditures were slightly down during the first quarter of 2024, and primarily relate to our finishing touches on 50 Tech our capital expenditures going forward will largely be related to our new facility and the timing and extent of our capital expenditures is flexible in relation to the addition of new awards that requires a level of income.

unknown: <unk> capacity that facility can offer.

Speaker Change: Finally as of March 31, we had approximately $43 $7 million of cash on hand, and approximately $316 7 million of gross debt obligations.

Mathieu Riffel: We remain excited about building on our success from 2023 into a strong 2024, as we have numerous large opportunities we are actively working on or waiting to hear back from. Efficient and successful execution of our new and existing contracts and becoming even more positive in 2024 are our top priorities for our team. As highlighted in our previous calls, the exact timing of execution of our new contracts is an important variable impacting near-term results. Given this timing uncertainty, as well as our ongoing strategic review, we are withholding from providing guidance for the current. I'll now turn the call back over to Marc for his concluding remarks.

unknown: We remain excited about building on our success from 2023 into a strong 2024 as we have numerous large opportunities. We are actively working on or waiting to hear back on.

Speaker Change: Efficient and successful execution of our new and existing contracts and becoming adjusted EBITDA positive in 2024 are our top priorities for our team.

Speaker Change: As highlighted in our previous calls the exact timing of execution of our new contracts is an important variable impacting near term results.

Speaker Change: Given this timing uncertainty as well as our ongoing strategic review, we are withholding from providing guidance for the current year.

Mark: I'll now turn the call back over to Mark for his concluding remarks.

Marc H. Bell: Thank you. Thank you, Matt.

Mark: Thank you. Thank you, Matt and thank you everyone on the call for your continued support of Turner orbital the futures space and it's responsive and Taryn orbital is at the forefront we're not just driving growth, where we plan on shaping the future of this space economy, we are committed to becoming the undisputed leader in responsive speed solution.

Marc H. Bell: And thank you, everyone, on the call for your continued support of Terran Orbital. The future of space is responsive, and Terran Orbital is at the forefront. We are not just driving growth. We plan on shaping the future of the space economy. We are committed to becoming the undisputed leader in responsive space solutions. I now look forward to taking your questions, and I'll turn it over to the operator.

Operator: I now look forward to taking your questions and I'll turn it over to the operator.

Operator: Thank you. If you'd like to ask a question, please press star followed by 1 on your telephone keypad. If you change your mind, please press star followed by 2. When preparing to ask your questions, please ensure your device is unmuted locally. Our first question comes from Eric Rasmussen from STIFO. Your line is now open.

Operator: Thank you.

Operator: To ask a question. Please press star followed by one on your telephone keypad.

Operator: Your mind. Please press star followed by Jay with a branch ask your questions. Please make sure your devices on mute locally.

Operator: Our first question comes from Erik Rasmussen from Stifel. Your line is now open.

Erik Peter Rasmussen: Yeah, thanks for the questions, and good to see the step up in the backlog. Um, maybe on the award, uh, the new... Sure, maybe on the new contract that you signed with Lockheed for the 18 satellites. The value per satellite for Lockheed, when we looked at it, was almost three times what it was awarded per satellite for the transport layer. How should we think about your value on this latest award, given you were at roughly $3.5 million per satellite on the previous awards?

Erik Peter Rasmussen: Yes, thanks for taking the questions and see.

Speaker Change: Step up in the backlog.

Speaker Change: Maybe on the record.

Erik Peter Rasmussen: Sure maybe on the new contract with.

Erik Peter Rasmussen: The east side with Lockheed for the 18th satellites.

Erik Peter Rasmussen: The value per satellite Lockheed.

Lockheed Martin: When we looked at it was almost three times what it was awarded per satellite through the.

Lockheed Martin: The transport layer, how should we think about your value on this.

Speaker Change: Latest award given your roughly $3 five 9% on the previous awards.

Unknown Attendee: So, the tracking layer is a far more sophisticated solution than what you would see on the transfer layer. There are different kinds of satellites. The buses that we provide have some similar components and some unique components on that. So we're not allowed to go into the details on price for each bus.

Speaker Change: So that's how you landed at the transplant the tracking the trading layers are far more sophisticated solution.

Speaker Change: And then what you would see on the transfer.

Speaker Change: The satellite.

Speaker Change: The buses that we provide at some similar coupon at some unique components all of that.

Speaker Change: So we're not allowed to go into the detail on price for buses that were selling it for.

Unknown Attendee: Okay, but you'd say it would be higher than what we've shown previously, just because of the content and the data being more sophisticated. It's higher, it's more sophisticated as you have more stability needed for the payloads that are on board for them to do their mission.

Speaker Change: Okay, but you would say it would be higher than than what we've said previously just because of the content and the debt.

Speaker Change: It's higher that is more sophisticated as you have more stability needed for the payloads that are onboard right now to do their mission.

Speaker Change: Okay.

Unknown Attendee: And I appreciate the difficulty in complexity around robotics and given sort of guidance, but is there any color you can provide to help sort of structure the revenue ramp this year? We know the backlog was 2.7 billion. I think the disclosures in the queue suggest 80% realized by the end of next year and then the remainder in 2026, but I'm not really sure how this will layer into sort of this year and next. So if any, you know, any sort of commentary you could give would be helpful. Well, the thing about it is that we Americans...

Speaker Change: And I appreciate it.

Speaker Change: Difficulty complexity around we bought it and given sort of guidance, but.

Speaker Change: Is there any color you can provide to help sort of structure. The revenue ramp. This year. We know the backlog was $2 7 billion I think the disclosures in the Q suggests 80% realized by the end of next year.

Penny: And then the remainder in 2026, but not really sure. How this will layer into sort of this year and next so penny.

Penny: Any sort of commentary you could give would be helpful.

Unknown Attendee: Well, the thing about it is that we have just under 50 space vehicles being delivered this year alone. So you'll probably see the revenue ramp, Q2 you'll see a little bit, but really Q3 and Q4 especially are when you'll see the big revenue ramp start to hit, because we're delivering this college through the end of the year.

Speaker Change: Well think about it we have what we have.

Penny: We have just under 50 space vehicles being delivered this year alone.

Penny: I see the revenue ramp.

Penny: Q2 is it going to Youll see a little bit, but really Q3, and Q4, especially as we see the big revenue ramp will start to head.

Speaker Change: Because we are delivering to tell it towards the end of the year.

Speaker Change: Okay.

Unknown Attendee: And part of that is also the T1 that's sort of been pushed out. If you were to think about, you know, the delays you talked about.

Speaker Change: And part of that is also the T. One it's sort of been pushed out.

Speaker Change: If you were to think about the <unk>.

Speaker Change: Delays you talked about.

Unknown Attendee: We expect all of T1 to be delivered by August of this year, the absolute latest. If we can make some contracts move faster, we'll move faster. But by August, and that's 42 space vehicles right there alone.

Speaker Change: We expect all of T. One to be delivered by August of this year the absolute latest.

Speaker Change: If we can if we can make we can make subcontract faster will move faster, but the August and Thats 42 space vehicles right there alone.

Speaker Change: Okay.

Unknown Attendee: Great. And then maybe just on Robata, you've received several milestone payments, I think smaller amounts thus far. Are you still in the PDR stage? And then, you know, maybe what's holding things up for Robata and Terran at this point? And then maybe just with that, what sort of payment would you need from Robata to begin the next steps? And what is that next step? Is it the beginning of the design phase?

Speaker Change: Great and then maybe just on robotics.

Speaker Change: <unk> received several milestone payments I think smaller amounts. Thus far are you still in the PDR stage and then maybe what's holding things up for robotic <unk> at this point and then maybe just with that what sort of payment would you need from Nevada begin the next steps in.

Speaker Change: And what is the next step is at the beginning the design phase.

Unknown Attendee: For PERS and Form 03, the finished PDR, we're still in the PDR stage, and once we complete PDR, then that will trigger the next payment. We expect PDR to be done by the end of this quarter. Unknown Attendee, Jonathan Siegmann, Mathieu Riffel, Gregory Konrad, Marc Bell, Gary Hobart

Speaker Change: Preparing for the policy the finished PDR.

Speaker Change: Still in the PDR space.

Speaker Change: And once we complete PDR than that then that will trigger the next payment.

Speaker Change: We think PD ought to be done by the end of this quarter.

Speaker Change: Okay.

I: And I remember they've got great I'll jump in for payments made over time in order to make sure they keep schedule.

Unknown Attendee: Okay, I'll jump back into the queue.

Speaker Change: Okay I'll jump back in the queue.

Speaker Change: Thank you.

Scott Christian Buck: Our next question comes from Scott Buck from HS Wayright. Your line is now open.

Speaker Change: Our next question comes from Scott Buck from Hs Wainwright. Your line is now open.

Scott Christian Buck: Hey, good morning, guys. Thanks for taking my question. Marc, since it's been a minute or two since we've had a call like this, I was hoping you might be able to kind of update us on your thoughts around the path to profitability. It sounds like with the ramp in the second half, you know, maybe even by Q4, we could see something on a quarterly basis.

Scott Christian Buck: Hey, good morning, guys. Thanks for taking my question, Mark and Thats been a minute or two since we've had a call like this I was hoping you might be able to kind of update us on your thoughts around path to profitability. It sounds like with the ramp in the second half.

Unknown Attendee: Is that fair?

Unknown Attendee: I think it's fair. We're thinking of Q4. We're looking at maybe a little bit beyond that. It all depends on when these other programs are coming in. But the goal is for Q4 to be there. You're seeing as our headcount ramp has slowed dramatically, but our yield is increasing dramatically. And this has to do with all the automation. But we still have to deal with some subcontractor issues, as we talked about earlier. But as we bring new subcontractors on board and we bring some more components and modules in-house, we see no reason why we wouldn't achieve the goal to get EBITDA positive before the end of the year. That is the target.

Mark: Maybe even by Q4, we could see something on a quarterly basis is that fair.

Mark: I think it's fair I think it will get go shoot we're thinking of Q4, we're looking at maybe a little bit beyond it all depends on when these other programs coming in but the goal is Q4 to be there.

Speaker Change: <unk> is our head count ramp has slowed dramatically.

Speaker Change: But our yield is increasing dramatically and this has to do with all the automation, we still have to deal with some subcontract issues as we talked about earlier, but once the but as we bring new still contract with our board and we bring some more components modules in house.

Speaker Change: See no reason why we wouldn't be the goal to get EBITDA positive before the end of the year that is the goal.

Unknown Attendee: Great, I appreciate that. And then I just want to double check, the delayed revenue. You're expecting to receive 100% of that, right? There's not any, any kind of loss there? Correct.

Interviewer: Great I appreciate that and then I just wanted to double check.

Speaker Change: The delayed revenue you are expecting to receive a 100% of that right. There is not any any kind of locked there.

Unknown Attendee: Correct. The $400 million of backlog, excluding Nevada, is fully funded backlog that is almost all Lockheed Martin or DoD work.

Speaker Change: Correct.

Interviewer: The $400 million.

Interviewer: <unk> is fully funded backlog that is almost all Lockheed Martin or <unk> work.

Unknown Attendee: I was referencing the EAC adjustments that took place this quarter that you're expected to kind of recoup here in the third quarter.

Speaker Change: I wish I was referencing.

Lockheed Martin: EAC adjustments that took place this quarter that you expected to kind of recoup here in the third quarter.

Unknown Attendee: No, Matt, Matt, do you want to tackle that?

Matt Russell: No Matt you want to tackle that.

Mathieu Riffel: Yeah, sure. So, um, yeah, it's just a timing issue. Since our accounting model, it's effectively a percentage completion. And so the percentage just changed because we now have additional costs of the program. So we just had to have a clawback of revenue, which will be recognized in future periods. But fortunately, the total contract value that we're getting paid on is fixed. So we will eventually re recognize that revenue.

Matt: Yes, sure so yes.

Matt: Yes, it's just a timing issues in our accounting model, it's effectively percentage completion.

Unknown Attendee: Okay, perfect. And then last one for me.

Matt: So the percent is just change because where we now have additional cost of the program. So we just had to have a clawback of revenue, which will be recognized in future periods, but fortunately the total contract value that we are getting paid on is fixed. So we will eventually re recognize that revenue.

Unknown Attendee: Given it's an election year, I'm sure you guys have kind of handicapped potential outcomes. Any programs you're working on or bidding on that could potentially be at risk? Unknown Attendee, Jonathan Siegmann, Marc Bell, Gregory Konrad,

Matt: Okay, Perfect and then last one for me.

Speaker Change #104: Given it's an election year I'm sure you guys have kind of handicap the potential outcome any programs youre working on or bidding on that could potentially be at risk.

Matt: Given given the election outcome.

Unknown Attendee: You know, we're lucky to be in space, you know. NASA, of course, is always, always at risk. They're spending a lot of money on very few things. They put a lot of their eggs in one basket, and we have been on a number of NASA programs. But our core DOD work, we think is pretty solid and safe. This stuff is necessary, and it's very low cost compared to other programs that are out there.

Matt: We're lucky to be in that space.

Speaker Change: I mean, I mean that of course is always always at risk.

Speaker Change: Spending a lot of money on very few things.

Matt Russell: What are the exit one basket and.

Speaker Change #110: And we have bid on a number of NASA programs.

NASA: But our core Dod work, we think it's pretty solid and safe.

Speaker Change #101: This is necessary and its very low cost compared to.

Dod: Other programs that are out there so the diverse proliferated warfighter architecture is something that <unk> committed to.

Unknown Attendee: You know, the proliferated water pipeline architecture is something the DOD is committed to. We are working on ways to diversify our pipeline going forward. We have a very diverse pipeline, and we historically have done it, but now we're reorganizing ourselves to help that pipeline convert into revenue. We haven't done a very good job historically of converting pipeline into revenue, and we are making some adjustments internally to ensure that that pipeline starts to convert into revenue.

Speaker Change: We are working on ways to diversify our pipeline going forward, we have a very diverse pipeline that we historically have done it.

Speaker Change: But now with what we were reorganizing ourselves through that pipeline convert into revenue we haven't done it very good job historically of converting pipeline into revenue.

We: We're making some adjustments internally to ensure that that pipeline to convert into revenue.

We: Okay.

Unknown Attendee: Great. I appreciate the color, guys. Thank you. Thank you.

We: Great I appreciate the color guys. Thank you.

We: Thank you.

Josh Sullivan: And our next question comes from Josh Sullivan from Benchmark.

We: And our next question comes from Josh Sullivan with Benchmark. Your line is now open.

Josh Sullivan: Hey, good morning.

Josh Sullivan: Just to follow up on that $400 million of non-revenues. Just on that $400 million of non-Rivada backlog to convert over the next 18 to 24 months, what do you think the cash flow conversion of that looks like?

Josh Sullivan: Just just to follow me. Thank you guys.

Josh Sullivan: $100 million of nonrecourse.

Josh Sullivan: Yes, just a bit on that $400 million of non robotic backlog to convert over the next 18 to 24 months. What do you think the cash flow conversion of that looks like.

Unknown Attendee: You know, it's all milestone-based, so it is very lumpy as cash converts on these programs. Some programs are front-loaded, some are back-loaded. For example, Transfer Layer Tronch One is a very back-loaded program, really upon delivery, actually 30 days net after delivery, versus other programs that have a lot of cash up front. So it's lumpy per program, depending on the type of satellite that we're building

Speaker Change #102: It's <unk>.

Speaker Change #109: I thought it's all milestone based.

Speaker Change: It is very lumpy as cash converts on these programs <unk> programs are front loaded back loaded for example.

Speaker Change: Transfer later tranche, one is a very back loaded program.

Speaker Change: Really upon delivery actually 30 days net after delivery.

Speaker Change #103: Other programs are very much are have a lot of cash upfront. So its lumpy per program, depending on the type of that satellite but that we're building.

Unknown Attendee: And then just a question on headcount, you know, you mentioned some progress on the cleared personnel. Do you have enough clear personnel to execute on that 400 million nonravada backlog at this point? Or is there a number you still need to get?

Speaker Change: And then just a question on head Count you mentioned some progress on the cleared personnel do you have enough cleared personnel to execute on that $400 million of non robotic backlog at this point or is there is there a number you still need to get to.

Unknown Attendee: Well, if you ask my guys, we never have enough. That said, we have more than enough to complete those programs. It's the work that we're going after now. We're going after more and more classified programs. We feel we can be hyper-competitive in the classified marketplace.

Speaker Change: Well.

My guys: If you ask my guys, we never have enough.

Speaker Change: That said we are.

Speaker Change #107: We are we have enough more than enough to complete those programs.

Speaker Change #114: That we're going after now as we're going after more and more clear.

Speaker Change #108: Cleared more and more classified programs we.

Speaker Change #112: We feel we cannot we feel it can be hyper competitive and the classified marketplace.

Unknown Attendee: Got it. Thank you for the time.

Speaker Change #108: Got it thank you for the time.

Speaker Change: Thank you.

Robert Michael Spingarn: Our next question comes from Robert Spingarn from Milius Research.

Speaker Change: Our next question comes from Robert Spingarn.

Speaker Change: Research.

Robert Michael Spingarn: Hey, good morning, everybody. I don't know, Marc, if this is for you or for Matt, but it's sort of a follow-on to the prior question on free cash cadence, you know, and I understand why it was asked before. We don't know. We don't have a lot of visibility into Rivada. So, ex-Rivada, what should be the free cash flow cadence as we look out, maybe over the rest of this year and into next year?

Robert Michael Spingarn: Hey, good morning, everybody.

Speaker Change: Okay.

Robert Michael Spingarn: I don't know Mark if this is for you or for Matt, but it's sort of a follow on to the prior question on free cash cadence.

Robert Michael Spingarn: And I understand why it was asked before we don't know we don't have a lot of visibility into robotics. So ex revolve what should be the free cash flow cadence as we look out maybe over the rest of this year and into next year.

Unknown Attendee: I'm going to turn it over to Matt. How's that?

Matt: I'm going to turn it over to Matt How's that.

Unknown Attendee: Fair enough. Yeah, no, no fair question.

Matt: Fair enough.

Unknown Attendee: Um, yeah, so our liquidity and cash flow are really dependent on customer programs, us managing our expenses, and then to the extent necessary to make up the difference, we have capital transactions. So our path to profitability and free cash flow is dependent on having these larger programs coming online. So that's the best way to think about it.

Matt: Question.

Matt: Yes, so our liquidity and cash flow, it's really dependent on customer programs.

Matt: US managing our expenses and then to the extent necessary to make up the difference week capital transactions.

Matt: No.

Speaker Change: Our path to profitability and free cash flow is dependent on <unk>.

Speaker Change #118: These larger programs coming online.

Speaker Change: So.

Speaker Change: That's the best way to think about it.

Speaker Change #111: Okay. So.

Speaker Change: Yes.

Unknown Attendee: Okay, so, you know, moving away from that. But related, you've got a debt covenant that requires you to be positive on an LTM basis by the end of this year. But if that doesn't happen, it sounds like you might inflate at the end of the year. So how do you deal with that particular covenant? Can you get a waiver?

unknown: Moving moving away from that but related you've got a debt covenant that requires you to be EBITDA positive on an LTM basis by the end of this year.

Speaker Change #119: But if that doesn't happen it sounds like you might inflect in the at the end of the year. So how do you deal with that particular covenant can you get a waiver.

Unknown Attendee: Yeah, so in our disclosures in our SEC filings, there's a couple of mechanisms that we could explore to either get waivers or extend the deadline for when we have to be even positive. Unfortunately, we can't make any guarantees that any of those solutions are achievable. But we do have several options.

Speaker Change: Yes so.

Speaker Change: As disclosed in our SEC filings there is a couple of mechanisms that we could explore too.

Speaker Change #116: They get waivers or extended deadline for when we have to be EBITDA positive. Unfortunately, we can't make any guarantees that any of those solutions are achievable.

Speaker Change: But we do have several options.

Unknown Attendee: Okay, and then just going back to this program, the fixed price program, the one that's delayed, is that strictly due to just changing the propulsion supplier, or, you know, are there any other issues, kind of asked before, but are there any other issues popping up during testing that might have contributed to the delay? Unknown Attendee

Speaker Change: Okay and then.

Speaker Change: Just going back to this program the fixed price program that the one that's delayed.

Speaker Change: That strictly due to just changing the propulsion supplier or.

Speaker Change #106: Are there any other issues kind of asked before but are there any other issues popping up during testing that might have contributed to the delay.

Unknown Attendee: Now propulsion has been the number one problem child here. It's been a, fortunately, we picked a propulsion manufacturer who was unable to deliver the product. That caused us to do some redesign to accommodate a new propulsion manufacturer, and we are well on our way. So we'll receive the first eight units by the end of this month, and then we should have steady cadence from them going forward. We obviously are pushing them to move faster as we will be done with our space vehicles long before the propulsion guys are done. But there was no issue with the testing of the vehicle. Okay, great.

Speaker Change #106: The proposal has been the number one problem Charles here.

Charles: Unfortunately, we picked the propulsion manufacturer who was unable.

Charles: Unable to deliver the product.

Charles: That caused us to do some redesign to accommodate a new propulsion manufacturer.

Charles: And we are well on our way so we will receive in the first.

Speaker Change #117: <unk> units by the end of this month and then we should have a steady cadence on them going forward.

unknown: They are pushing them to move faster.

propulsion guys: We will be done with our vehicles long before the propulsion guys of that.

propulsion guys: But there is no assurance testing thanks Nicols.

Unknown Attendee: Okay, great. Thank you, Marc and Matt.

Matt: Okay, great. Thank you Mark and Matt.

Tasers Rikichainers: And our next question comes from Tasers Rikichainers from Sophie's Investments, LLC.

Speaker Change #124: Our next question comes from pesos to Ciena is from Sophie investments LLC.

propulsion guys: Okay.

Tasers Rikichainers: Yes, good morning. Congratulations on the Transtu tracking layer contract. Just wondering, in the past, when you announced some of these contracts, sometimes they come with down payments of cash or maybe an upfront cash payment. Just wondering if you believe that will come with an upfront cash payment, and perhaps if you could talk about maybe what your cash levels are as of today or anticipated around this time this week.

Speaker Change #121: Yes. Good morning, congratulations on the track tranche do tracking layer contract just wondering in the past when you announce some of these contracts, sometimes they come with down payments of cash or maybe an upfront cash payment just wondering.

Speaker Change #113: If you believe that will come with an upfront cash payment and perhaps if you can.

Speaker Change #113: Talk about maybe what your cash levels are as of today or anticipated at around this time this week.

Unknown Attendee: I mean, we don't normally disclose payments, but every program comes with what's called an ATP, Authorization to Proceed, and usually, we get an ATP payment within the first 30 days of getting a contract. And then those payments can vary dramatically depending on the program and the long-lead items that we purchase for the program versus things that we manufacture in-house.

Speaker Change #113: We don't normally disclose payments that every program comes with what's called an ATP authorization to proceed and usually we get an ATP payment within the first 30 days of getting a contract.

Speaker Change #113: Those payments can vary dramatically depending on the program.

Speaker Change #113: And long lead items that had to be purchased by the prior numbers and things that we manufacture in house.

Unknown Attendee: So, in terms of you looking at your cash balances at the end of the quarter and then maybe doing some math on what they might be around now, it would be safe to assume that you're comfortable with your liquidity position, in part due to the ATP.

Speaker Change #113: So in terms of looking at your cash balances at the end of the quarter and then maybe doing some math on what they might be around now.

Speaker Change #113: In be safe to assume that youre comfortable with your liquidity position in part due to the ETP.

Unknown Attendee: Yeah, we feel very comfortable with all the acquittances as they stand today.

Speaker Change #120: Yes, we feel very comfortable with our liquidity position as it stands today.

Unknown Attendee: And then just a question on Rivada. So understanding that there's a small number of satellites that Rivada needs to launch by the end of this year to kind of stay on track with their program. Just wondering if you're actively working on those, or if there's any chance that Rivada would do those without Terran, or if everything's on track.

Speaker Change #131: And then just a question on <unk> understanding that there is a small number of satellites that robot needs to launch by the end of this year to kind of stay on track on their program just wondering if you're.

Speaker Change #129: If you are actively working on those or if there is that <unk> would do those without taryn.

Speaker Change #129: Everything's on track with that.

Unknown Attendee: Unknown Attendee, Jonathan Siegmann, Michael Crawford, Gregory Konrad,

Speaker Change #120: As of right now everything is on track, where we were able to acclimate precursors satellites with Nevada. They are asset all detailed questions robotic go to them.

Speaker Change #138: They want to be able to control their own narrative on it.

Speaker Change #120: Now we are right now with what we're tracking based on the schedule we have.

Unknown Attendee: And then, with regard to the pipeline and commercial customers, is there anything that you can share with regard to any visibility or near-term opportunities that you're working on?

Speaker Change #123: And then with regard to the pipeline and commercial customers.

Speaker Change #133: Is there anything that you can share with regard to any visibility any near term opportunities that youre working on.

Unknown Attendee: I will say that we have a number of commercial customers who have made it to the final round. Commercial customers are not like DoD customers where DoD gets its budget every year. Commercial customers tend to move much slower, believe it or not, if that's even possible, than the DoD. But that said, when they start to move, there's a lot of inertia.

Speaker Change #123: On the call so I can say.

Speaker Change #135: We'll say that we have a number of commercial customers.

Speaker Change #132: We've made it to the final round.

Speaker Change #132: So.

Speaker Change #141: They're not like <unk>, where do you get the budget every year.

Speaker Change #134: Customers tend to move much slower believe it or not.

Speaker Change #120: Level.

Vod: Then the Vod, but that said deal when they move when they start to move there is a lot of inertia.

Unknown Attendee: We have a number of commercial programs we've been working on for over a year, starting with RFIs and RFPs, and then we go to co-engineering phases, which we're in now with some, which means we're in the final round. And we continue to aggressively work on those customers to get them from co-engineering to a contract. And it is a competitive marketplace on a global basis, but we feel we are very price competitive, and we're very schedule competitive, which are two very big deals nowadays.

Speaker Change #136: We have a number of commercial programs, we've been working on for over a year, starting when the arb with RFID Rfps and then we go to co engineering phases right now with.

Speaker Change #136: Which means we're in the final round.

Speaker Change #120: And we continue to aggressively.

Speaker Change #125: Work on those customers to get them from engineering to a contract and it is a competitive marketplace on a global basis, but we feel we are very much price competitive and we're very much scheduled competitive which are two very big deal about it.

Unknown Attendee: Especially all these people who are looking at 5G, you know, direct-to-handset, internet things. You know, there are a lot of companies around. We're talking to – our customer base is getting geographically immensely diverse in terms of foreign telephone companies, foreign internet providers, everybody – people used to buy geos from other people are now talking to us. We have one customer, for example, who's been buying their entire time buying satellites from China are now looking to pivot to the United States to buy satellites for a small set of geo offerings.

Speaker Change #125: People were looking at.

Speaker Change #127: Five G direct a handset internet of things, there's a lot of companies we're talking to.

Speaker Change #126: Our customer base of getting geographically immensely diverse.

Speaker Change #128: In terms of foreign telephone company foreign Internet providers.

unknown: Everybody everybody people used to buy Geos from other people are not talking to US we have one customer for example, we've been buying the entire time buying satellites from China are now looking to pivot to the United States by satellites for a small set geo offering. So we're very we know we have the right product at the right time and people are finally, I think come over to her.

Unknown Attendee: So we're very – we know we have the right products at the right time. And people are finally – as they come over to Irvine to see what we're doing, they develop a huge amount of comfort in what we've built here and our manufacturing capabilities, which hopefully will lead to contracts later this year and beyond. The final question, so I appreciate all that color. Thank you.

Speaker Change #144: We're doing that he developed a huge amount of comfort.

Speaker Change #130: And what we built here in our manufacturing capabilities, which ultimately will lead to contract later this year and beyond.

Unknown Attendee: Just the final question would be, so if Lockheed Martin offered a dollar share, the company essentially rejected that offer, based on presumably its belief that intrinsic value is higher than the offer that was made. And just kind of wondering if you could talk a little bit about your views on intrinsic value or the value of the company, because clearly, you didn't believe the dollar properly reflected the value of the company.

Speaker Change #130: Final question so.

Speaker Change #130: Appreciate all that color. Thank you.

Speaker Change #130: The final question would be so Lockheed Martin offered a dollar a share the company essentially rejected that offer based on presumably its belief that intrinsic value is higher than the offer that was made and just kind of wondering if you could talk a little bit about your views on intrinsic value of <unk>.

Speaker Change #128: <unk> of the company is.

Lockheed Martin: Clearly you didn't believe that dollar properly reflected the value of the company. So just kind of wondering where the board believes.

Unknown Attendee: So just kind of wondering where the board believes, Unknown Attendee, Jonathan Siegmann, Unknown Attendee, Jonathan Siegmann, Unknown Attendee. So, there's a special committee of the board that does this. It's a great question. You know, I am out of the process; myself and my partner have refused to participate in the process. So, the committee is made up only of independent directors in order to maximize shareholder value and make sure there's a fair decision being made.

Speaker Change #147: Fair value would reside.

Lockheed Martin: How about that.

Lockheed Martin: So.

Special Committee: There's a special committee of the board that does this it's a great question.

Speaker Change #148: I am out of the process I myself and my partner have recused themselves from the process.

The committee: The committee is made up only of independent directors in order to maximize shareholder value makes it isn't fair decision being made.

Unknown Attendee: That said, you know, we are looking, and in our comments we made earlier, we said, you know, the social committee is going to be the ones talking about it, and I have been told that the social committee is the only one who will talk about it. So, I have no comment, unfortunately, and whatever my personal opinion is, it's irrelevant; it's all about the social committee.

Speaker Change #140: That said.

Social Committee: You know we are looking at our comments you made earlier, we said you know the social committee is going to be the ones talking about it and I have been told and subsequently the only ones who will talk about it.

Social Committee: In fact, I have no comment unfortunately, and whatever my personal opinion. It is irrelevant, it's all about the special Committee.

Speaker Change #140: Alright, thank you.

Unknown Attendee: Thank you very much. I appreciate it. As a reminder, to ask a question, please press star followed by one on your telephone keypad.

Speaker Change #142: Well, thank you very much I appreciate it.

Speaker Change #142: Okay.

Speaker Change #142: As a reminder to ask a question. Please press star followed by Glenn on your telephone keypad.

Operator: And our next question is from Phil Boswell, a private investor. Yes, I have a question about the...

Speaker Change #142: And our last.

Speaker Change #142: Next question is from Phil Boswell, a private investor.

Phil Boswell: Yes, I have a question.

Phil Boswell: About the.

Phil Boswell: Recurring income was there any like SaaS type income or any other income that will that jewelry receiving as they each satellite has deployed over the next several years.

Phil Boswell: I mean, the only recurring income we get from satellites is if we do the mission operations for the satellite. We have six satellites currently in orbit that we do mission operations for.

Phil Boswell: I mean, the only recurring every time, we get from satellites. If we do the mission operations at a satellite we have six <unk> currently in orbit.

Speaker Change #150: That we did mention operations for but the real the real thing that people Miss than you actually with a great question here.

Unknown Attendee: But the real thing that people miss, and you actually raised a great question here, but the real thing that people miss is that we're in the recurring revenue business. So every satellite that we build and launch has to get replaced in approximately five years on average. That is a huge opportunity for us.

unknown: The real thing that people Miss is we're in a recurring revenue business. So every satellite that we build and launch has to get replaced in approximately five years on average that is a.

Unknown Attendee: So if we have, quote, $400 million of backlog today that we're fulfilling, five years from now, we're going to have that same $400 million, plus more coming from new customers. So everything we build gets replaced over and over again. So our revenues will continue to climb as the solids we build get replaced. Things and, you know, that's the beauty of low-Earth orbit is, on the one hand, they're very low cost, but they have a very short lifespan, but it means always current technology is being used versus the big geos that cost billions to build that will function obsolete the day they were launched and take 10 years to build.

Speaker Change #152: Huge opportunity for us so if we have $400 million of backlog today that we're fulfilling five years from now we're going to have that same $400 million plus more coming from new customers. So everything we build gets replaced over and over again. So our revenues will continue to climb as a solid rebuilds will get replace things and that's the beauty.

unknown: Lower orbit on one hand, they're very low cost.

unknown: But they have a very short lifespan, but it means always current.

Speaker Change #145: He is being used versus the big Geos billions to build that were functionally obsolete. The day. They were launched that take 10 years to build the last 25 years in space.

Unknown Attendee: The last 25 years in space, they were around when the rotary telephone was around, when they were built. So it is a, you know, it's a very, you know, the new FCC regs are talking about now every five years the de-orbit to low-Earth orbit. So we're in the recurring revenue business, and that's where we will get lots of recurring revenue down the road. But it's a great question. So as more satellites are put into orbit, the more revenue will increase as time goes on.

unknown: They were around when the rotary telephone was around it was when they were built so it is a.

Speaker Change #145: Yes.

Speaker Change #156: The new FCC regs are talking about now every five years, the deorbit to low Earth orbit. So we're in a recurring revenue business and that's where we will get lots of recurring revenue down the road. That's a great question. Thank you.

Speaker Change #155: So as more and more satellites are.

Speaker Change #145: Put in orbit the more of the revenue will increase as time goes on.

Unknown Attendee: That's right, sir. Fantastic. Thank you, Thank you, Phil. I appreciate it. Thank you for your coordination.

Speaker Change #157: That's right Sir.

Speaker Change #145: Fantastic. Thank you.

Speaker Change #145: Thank you Bill appreciate it thank you for your interest.

Sean Hollander: And our next question comes from Sean Hollander, a private investor.

Speaker Change #145: And our next question comes from Sean Hollander, a private investor.

Sean Hollander: Hi Marc, thanks for taking the call here. Congratulations on the performance for Q1. Can you throw some light on the required cash balance at the end of quarter two? That is part of the requirement under the SCA agreement.

Speaker Change #145: Hi, Mike Thanks for taking the call here.

Sean Hollander: Regulations on the performance for Q1.

Mike: Can you throw some light on the.

Sean Hollander: The required cash balance at the end of quarter two.

Sean Hollander: That is part of the <unk>.

Mike: Requirement under FCA agreement.

Sean Hollander: Matt.

Unknown Attendee: I'm sorry, what's the question again?

Matt: I'm sorry, what's the question again.

Unknown Attendee: Can you throw some light on the required minimum cash balance? Oh,

Matt: Can you throw some light on unusually wide minimum cash balance.

Unknown Attendee: Oh, minimum cash balance. That's not So we have financial covenants that require minimum cash balances from our debt arrangements, which is $20 million.

Matt: Oh minimum cash balance.

Matt: So we have financial covenants that require minimum cash balances from our debt arrangements, which is $20 million.

Matt: Effectively.

Speaker Change #159: As of quarter end.

Unknown Attendee: and do you think Terrain will be okay to meet that requirement?

Speaker Change #160: And you think it'll be OK can meet that requirement.

Unknown Attendee: We do not have any concerns about that covenant at this time.

Matt: We do not have any concerns about the covenant at this time.

Unknown Attendee: The answer is yes. We'll meet the requirements. We're well-positioned to meet them. Perfect. Awesome. That's good to know.

Speaker Change #162: And the answer is yes, we will meet that requirement.

Matt: Well yesterday.

Speaker Change #153: Perfect Awesome.

Speaker Change #153: Thank you for your time.

Robert Michael Spingarn: And our next question comes from Robert Minisman from Personal Wealth Management.

Speaker Change #153: And our next question comes from Robert Mcmahon from personal wealth management.

Robert Michael Spingarn: Good morning, everyone. This is a robotic question.

Robert Michael Spingarn: Good morning, everyone. This is a robotic question.

Robert Michael Spingarn: Yes.

Unknown Attendee: Evidently, they do not have all their financing in place to build the 600 satellite array that you will be constructing. That's what I understand. So therefore, are there concerns that this whole thing could fall apart and have a major impact on your business operations in the future? Because capital is not available to pay for the build-out of the satellites for which you've contracted. All right, so there are really two different questions here.

Robert Michael Spingarn: Evidently they do not have all their financing in place to build 600 satellite array that will be constructing.

Robert Michael Spingarn: That's my understanding. So therefore are there concerns that this whole thing could fall apart.

Robert Michael Spingarn: Major impact on your business operations in the future because the capital is not available to pay for the build out of the satellite for which you have contract.

Unknown Attendee: So there are really two different questions there. As far as Rivada goes, you know, I can't comment on what they have and don't have. That's a question for Rivada, but I can comment on how it affects us. And no, it doesn't have any impact on us going forward. We have lots of other customers. As you can see this way, Rivada is building 300 space vehicles with us. Lockheed alone has already placed orders for over 100 space vehicles with us. So it's just an upside for us at the end of the day.

Robert Michael Spingarn: So there are really two different questions there as far as the provider go you know I can't comment on what they have it don't have that's a question for Nevada.

Speaker Change #163: But I can comment on does it affect.

Speaker Change #163: No it doesn't have any impact on us going forward.

US Lockheed: Wherever we have lots of other customers as you could think of it this way providers with a 300 space vehicles with US Lockheed alone has already placed orders for over 100 space vehicles with us.

US Lockheed: So it is it's just upside for us at the end of the day.

Unknown Attendee: Thank you. Thank you. Thank you very much. Unknown Attendee I think we don't have any other...

Robert Michael Spingarn: Thank you.

Robert Michael Spingarn: Yeah.

Speaker Change #165: Thank you. Thank you very much.

Speaker Change #154: I'd say, we don't have any other.

Speaker Change #154: Okay.

Mark: We currently there wasn't any further questions I will hand back over to Mark.

Marc H. Bell: We currently haven't got any further questions. I will hand back over to Marc Bell.

Mark: Great well I want to thank everybody for coming today I would like to thank some of the new people asking questions today I really appreciate it.

Marc H. Bell: I want to thank everybody coming today. I'd like to thank some of the new people asking questions today. I really appreciate the interaction. I encourage people on the call to ask as many questions as they'd like and participate. We think it is wonderful to have more participation, and we appreciate everybody's support, and we look forward to the quarter ahead. Thank you very much.

Mark: The interaction I encourage people on the call to ask as many questions as they like and participate.

Mark: We think it is wonderful, but I want more participation and we appreciate everybody's support and we look forward to the quarter ahead. Thank you very much.

Operator: And this concludes today's call. Thank you for joining us. You may now disconnect your line.

Speaker Change #164: And this concludes today's call. Thank you for joining you may now disconnect your lines.

Mark: Yeah.

Mark: [music].

Mark: Yeah.

Mark: Yeah.

Mark: Okay.

Mark: Yeah.

Mark: Okay.