Terran Orbital Corporation

Hello, everyone, and welcome to the Terran Orbital Q3 2023 earnings call. My name is Emily, and I'll be coordinating your call today. After the prepared remarks, there will be the opportunity for any questions, which you can ask by pressing start, followed by the number one on your telephone keypads. I'll now turn the call over to our host, Jonathan Sigmund. Please go ahead, Jonathan.

Thank you, Emily. Good morning, everyone, and thank you for joining Terran Orbital's third quarter 2023 earnings. With me this morning are Mark Bell, co-founder, chairman, and chief executive officer of Terran Orbital Corporation, and Matt Riffle, acting chief financial officer, corporate controller of Terran Orbital Corporation. Mark will provide a business update and highlights for the past quarter, and then Matt will review the quarterly results. Terran Orbital'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 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's filings with the Securities and Exchange Commission, each of which can be found on our website, www.terranorbital.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 statement that may be discussed during this call. Please also note that we will refer to certain non-GAAP financial information on today's call. You can find reconciliations of the non-GAAP financial measures with the most comparable GAAP measures in our earnings press release. With that, I will turn it over to Mark.

Well, thank you, John. Thank you, everyone, for joining our third quarter 2023 earnings conference call. I also want to thank those of you who attended our virtual town hall event on October 26th, which is part of our effort to increase investor engagement. During our town hall, we were pleased to highlight the team's recently announced contract wins across three separate programs and two continents, our active engagement on 80 opportunities relating to more than 2,800 satellites for 40 different customers, collectively valued at over $2.7 billion, and our current expectation that we will have sufficient cash to cover capital investments and operations. until becoming cash flow positive, which is expected in 2024. We had an excellent quarter with year-over-year revenue growth of 58%, increasing revenue to $43.9 million from $27.8 million. Our third quarter adjusted gross profit increased over 270% from $12 million to $12 million from $3.2 million in the comparable period. our team successfully executing on converting our pipeline into signed contracts, resulting in a new record-breaking backlog inclusive of our $160 million surge of orders announced in October. We are starting to see the benefits of our investments in capacity, equipment, and automation with improvements in operating efficiency. These investments are intended to lay the foundation and position us for growth for the years to come. To establish us as the leading supplier of satellite buses globally, we recently announced two important strategic initiatives. First is the introduction of our new lineup of seven standard satellite bus platforms. These standard platforms feature flexible architecture using our common components, which have extensive flight heritage and modular design. This design methodology allows us for minimal levels of customization, depending on our customers' needs, and enables us to deliver satellites at mass scale with speed, quality, and pricing that our customers desire. Second, we launched our responsive space initiative, which represents Terran Orbital's objective to be able to deliver to customers a satellite bus within just 30 days and to complete payload integration within 60 days. By maintaining a stock of standard and interchangeable components, we will be able to deliver in days, not years, the satellites required by both government and commercial customers for critical missions. We plan to have the initiative fully operational by Q4 of 2024. Now turning to our overall performance and quarterly updates. I'm happy to update you on our team's progress in support of the Space Development Agency programs. We are pleased to announce in October our selection by our partner Lockheed Martin to build 36 satellite buses for the Beta Ward of Tranche 2 of the Transfer Layer. This brings us to a total of 88 satellites we are providing in support of SDS Transfer Layer, of which 10 were launched in September. Meanwhile, on the production side, our team is hard at work at manufacturing 42 satellites in support of Tranche 1 of the Transfer Layer. We are on track to begin delivering the first of these satellites during the fourth quarter and the balance by the end of the second quarter of 2024. To enhance the security of our supply chain of critical components to this program, we made the strategic decision to commit to a new propulsion supplier, one of the very few components we don't currently produce in-house. We are proud of the decade-long track record of not missing the satellite launch, and we took this action now to protect the program schedule. We believe that our experience and track record with T0 and Tranche 1 with Trans Zero and Trans One in the transfer layer, and in a partnership with Lock and Modern, helped differentiate us and position us well for SDA's awards outside of the transfer layer. I am pleased to report our margin performance has significantly improved. Our increase in gross profit and adjusted gross profit primarily represents the fact that we are working on larger programs and that our mix of contracts have better margins. Our year-to-date adjusted gross profit margin of 16.5% is double last year's gross margin of 8.2% for the comparable period, and is now in line with our previously disclosed year-end targets. As we move to become EBITDA positive by next year, this is an important metric and shows great progress. We continue to improve control of our supply chain. I believe that if we control your supply chain, we control our destiny. We now produce over 85% and growing of all our components in-house, which lowers our costs and speeds up our delivery. Some companies lay off employees. We lay off vendors. We have bought in-house now CNC machining, printed circuit board assembly, wire harnessing, torque rod assembly, vibe testing, and full bus TVAC. We will be adding other components, modules, subsystems, and AIT in the coming months. Any vendor who is not price competitive or cannot keep up with our schedule will be removed, and that product or skill will be bought in-house. We live in a world of firm fixed price programs. The days of cost plus are long gone and we are ready to meet the challenge. I'd like to provide a quick update on the company's contract with Rivada space networks as disclosed late last month. And at our first investor town hall meeting, since our last earnings call, we have not received it. We have not received expected further milestone payments and do not yet have a definitive schedule. And when further receipts may be received as a result of this delay, We have removed the expected revenue contribution related to Rvada for our full year 2023 outlook, hence the change in guidance. We remain engaged with Rvada on a regular basis and have been reassured as recently as today by Rvada that we should expect to receive our contractual milestone payments this year. Accordingly, we continue to believe our Revata contract will provide significant future revenue and cash flows, the timing of which is uncertain, and we want to be conservative in our guidance going forward. Overall, I am proud of what we've accomplished and where we are heading. Now let me take the opportunity to introduce Matt Riefel, who is joining us in the earnings call for the first time. Matt has been Terran Orbital's corporate controller for the past last two years and has done an amazing job. And we couldn't ask for anyone more prepared to serve as our acting chief financial officer. With that, I'll hand the call over to Matt to review our financial performance in the quarter and provide a financial outlook for the full year. Over to you, Matt.