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spk02: 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.
spk00: 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.
spk08: 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.
spk12: Thank you, Mark. And good morning, everyone. I'm happy to be here today and to help support the company at this exciting point in its journey. As we plan our 2024 budget, it's the breadth and magnitude of our pipeline opportunities, as well as the additional capabilities which we have added, which I find most compelling about our company. While often difficult to forecast and model these discrete opportunities, it's a privilege to help steer the company's efforts to execute and deliver on these attractive opportunities. Now onto the financial results for the quarter. I am pleased with our continued growth in revenue, which was $43.9 million for the third quarter of 2023. a 58% increase over the same period in the prior year. The increase in revenue is primarily due to the work performed on our SDA programs on a comparative basis, as well as additional contribution from Revata. Gross profit was $9.7 million for the third quarter, compared to $37,000 in the same quarter of 2022. Excluding share-based compensation and depreciation and amortization included in cost of sales, adjusted gross profit in the third quarter was $12 million compared to adjusted gross cost of $3.2 million in the same quarter in 2022. Our gross profit and adjusted gross profit benefited from EAC adjustments and certain non-recurring changes in estimates related to our inventory during the third quarter of 2023. Selling general and administrative expenses were $29 million in the third quarter of 2023 compared to $24.7 million for the same quarter in 2022. The increase was primarily driven by higher cost of labor and benefits sales and marketing expenses, and business development activities due to our growth initiatives, offset by a decrease in our share-based compensation. Adjusted EBITDA was negative 13 million for the quarter compared to negative 13.9 million in the same period in the prior year. The increase in adjusted EBITDA was primarily due to an increase in adjusted gross profit, partially offset by an increase in selling general and administrative expenses. Overall, adjusted EBITDA loss is largely a function of increased expenses related to the ramping of our business development capabilities and back office across the company to serve as the foundation of supporting our multi-billion dollar backlog and pipeline in the coming quarters and years. This is part of an overall investment to vision ourselves for future growth. Our backlog at the end of the quarter was $2.6 billion, of which $2.4 billion is related to our contract with Roboto. Capital expenditures for the quarter were $6.1 million, and primarily related to our investments in capacity and capabilities. Finally, as of September 30th, we had approximately $38.7 million of cash on hand, which was aided by our $32.5 million equity offering in September, and approximately $313 million of gross debt obligation. As of October 31st, we had over $70 million of cash on hand. We remain excited about finishing the full year on a strong note and hope we can announce new awards heading into 2024. Efficient and successful execution on new and existing contracts remain the number one priority for our team. As highlighted in our previous calls, the exact timing of execution on our new contracts is an important variable impacting our near-term results. As a reminder, for revenue recognition under accounting policies, revenue is not recognized in our results until we perform work on the contract. That is, cash receipts do not drive the recognition of revenue. We now expect our 2023 full-year revenue to be greater than $130 million, or at least a 38% increase year-over-year compared to 2022. The decrease in revenue guidance is primarily related to the removal of revata, the delayed start and awarding of certain larger programs, and the potential for challenges we're working through on other programs. Our year-to-date adjusted gross profit margin of $16.5 million is now in line with our previously disclosed year-end targets, and we expect gradual improvement in future periods. The pace and magnitude of margin improvement may vary depending on program mix and execution. Finally, we know our capex for the year is expected to be less than $30 million. I'll now turn the call back over to Mark.
spk08: Thank you, Matt. Today we're going to do, and thank you, everybody, for your support. We're going to do questions that answer a little differently this time around. We're going to start with institutions who cover us, and then we're going to open it up to anybody who asks. Some people have emailed us questions. Feel free to add yourself to the queue. And we're going to take, unlike the town hall where we did all reading off questions, here all questions will be asked live and answered live. And anybody can ask a question. With that, we're going to turn over to our first, if you have questions, turn over back to the operator, I guess, right? Operator. Operator, it's all yours.
spk02: Thank you. As a reminder, if you would like to ask a question today, you can do so now by pressing star followed by the number one on your telephone keypad. If you change your mind or you feel like your question has already been answered, you can remove your question by pressing star and then two. We'll now go to our first question, which comes from Greg Conrad with Jefferies. Greg, please go ahead. Your line is open.
spk09: Hi, Mark, Matt. This is Sam Gatzos from Jefferies, dialing in for Greg Conrad. Just firstly, thanks for the time, and congratulations on winning a role in the third tranche of the transport layer. With that order in the backlog, how should we think about where economics can go from here relative to the two prior tranches? And sort of how should we think about the economics on this tranche compared to tranches zero and one?
spk12: Thanks, Greg. I'll take an answer at that one. So for this particular, as a reminder, this award wasn't our backlog as of September 30th. It was an October award. The economics of which, it is a larger award. And with our larger awards, we generally expect it to be, a little bit lower margin, but we think it's going to be in the mid to high teens as we go forward. And that's relatively comparable with some of our other SGA programs.
spk08: And we're seeing as we go, as time goes on, margins will continue to improve as we bring more and more components and modules in-house.
spk09: Got it. Thank you. That's helpful. And I guess just, you know, maybe as a quick follow-up, you know, you highlighted the responsive space initiative and, you know, some of the new products that you've been working on to enable that mission set. What should we think about in terms of timing for that to convert into revenue? And then could you, you know, maybe size the sort of the TAM on that and why you guys think you're in a good spot to compete in that space?
spk08: Can you repeat the very beginning of that again?
spk09: Yeah, you've been highlighting the responsive space initiative and some of the new products that you're working on to enable that and just trying to understand sort of what that looks like, you know, in terms of revenue conversion and then, you know, what that does to your TAM and how you think about that opportunity set from here.
spk08: You know, so it all started – I'll give you a little background here. In 2005, Colonel Jay Raymond at the time wrote a paper called Tactically Responsive Space – Nobody really paid a lot of attention to it. And then we became, two years ago, at a national space symposium, I was at dinner with him, and he became the four-star general who started Space Force. And he was talking at that dinner about, you know, his dream was to order a satellite on the first of the month and get it delivered on the 30th of the month. And we're making that dream come true, as he just recently came down and visited the facility where we're going to be doing this. You know, it's all about, you know, the days of, you know, it used to take a decade and cost billions to build a satellite. They need things faster. They need it now. The world stage is very fluid. Ukraine, Israel have shown us how quickly things could change overnight. And they want the ability to get assets, to put them into space. The government has always talked about only 46% of all their ISRs currently being met from space. There's just incredible demands and not enough supply, and it was taking too long. Space Development Agency has helped shorten that cycle up, but only down to two years for a program. And the goal is for ISR, they want to get it down to days, not years. And so we see the TAM just incredibly large, not just for the U.S., but globally for any country who has been able to do it. But we're going to start slow. We just bid on three different programs. where it's a six to eight-month turnaround for the satellites. We'll know by the end of this year if we've won, and that will be the first shot of us doing it. Once we have all our components and modules in stock at the end of next year in our new facility, which we'll call Goodyear for now, we've been calling Goodyear, That will allow us to really assemble things robotically very quickly. We currently assemble modules. A third of our modules are assembled robotically. By next year, all of our modules will be robotically assembled, and the satellite buses as well will be robotically assembled. So, you know, think of any time a conflict zone pops up, that country could order satellites from us and get them, you know, in orbit within 60 days. It's a big difference.
spk09: Does that help? Yeah. Thank you, Mark. That's very helpful. I appreciate it. Sure.
spk05: Any other questions?
spk02: Our next question comes from Eric Rasmussen with . Please go ahead, Eric. Your line is open.
spk06: Yeah. Thanks. Great. Thanks. Yeah. Thanks for taking the questions. I just wanted to ask about the progress with the SDA programs to date and in the context of what we've learned from various sources on future programs so far. It seems that the team has executed well, but if we think about what has been awarded thus far, it seems that TARIT is sort of under-indexing what others have been awarded. What are your expectations for additional SDA awards? And what could your share be? And were you surprised on how the Alpha Award played out?
spk08: So many questions there. So as far as SDA goes, we never want to make assumptions of what we could and couldn't win in the future. On the Alpha Award, we knew we can't win everything. And there are other players out there. And the SDA, Derek has made it very clear, he wants a diversity of manufacturing base. So, you know, we went three in a row. We didn't expect to win four in a row. So that was, you know, and it's not us winning. It's Lockheed's the prime, and we're Lockheed's sub. So it was not a big surprise at the end of the day for us that we weren't winning. But now we're looking at other SDA programs because we've never been on tracking before. We haven't been on most of the other types of programs that they've done, twos and what have you. So we are, and we're talking to other primes as well about partnering with them on their SDA bids, because Lockheed does not bid on everything with the SDA. And also we want to, you know, our buses are becoming more popular. And, you know, now that we have 10 in orbit for Tron Zero, and we've been very pleased with their performance, you know, we have a lot more street cred than we had before. So we're feeling pretty good about other SDA programs in the future. But we never really want to guess as to what they think, as they're probably listening to this. But we appreciate their business very much.
spk06: Yeah, gotcha. Great. And then maybe your backlog is at $2.6 billion at the end of the quarter. I know it's higher with those new awards. Are you still expecting to convert 80% of this by 2025, which reflects the Rivada portion? And then with that, how should we think about the split between 2024 and 2025?
spk08: You know, it's definitely heavily weighted towards 25 because that's when you get into real assembly mode. 24 is a lot of manufacturing and the production of modules. But you're talking about, you know, as things get pushed to the right, you know, things get up, revenue gets pushed out to the right as well, which is what happened here with Revata this year. The important part is that the revenue happens at all at the end of the day.
spk05: Great.
spk06: But the timeline, though, hasn't moved for Ravada in terms of having those satellites up by Q2 or Q3 of 2025.
spk08: According to the ITU, Ravada has to have their satellites in orbit by two specific dates. So at the end of the day, it's just going to cost them more in order to get there because we're going to have to spend more money to get there. But we have $187 million of non-ravada backlog that will be recognized at the end of 2025. And you think about it, we've still 42 buses for T1 and 36 for T2 we've got to deliver. And that doesn't include all the other things we've bid on that we're waiting to hear. We have just recently stood up a business development organization. And we are now seeing, we relied on Lockheed Martin for the first couple of years. we are now expanding our wings to lots of different primes i think there are 10 primes uh the 10 largest primes in the world six of them we're in dialogue with uh three of them are chinese we don't talk to and there's only one left and so we've been very busily talking to all the other major primes on how we can work together it's a big planet that's it great thanks for taking thanks for taking questions yeah and i'll make one more point We've been spending a lot more time on commercial. So we are spending a lot of not just DOD and IC in the U.S., but commercial is making up a larger and larger part of our future revenue base we're seeing in the future. So we're pushing very hard for revenue diversity across the board. There are many Ravadas kicking around the planet.
spk05: Thanks. Good luck. Thank you.
spk02: Our next question comes from Griffin, boss of B. Riley Securities. Please go ahead. Your line is open. Hi.
spk10: Thanks for taking my... Thank you, operator. Appreciate it. So just first off on the gross margin, I understand going forward it's dependent on program mix quarter to quarter, but generally speaking, are you now at a point where your remaining backlog mix represents programs in call at the high teens to 20% gross margin? So I guess... In other words, are you expecting to be able to expand that pro forma gross margin in 24 beyond the 16.5% target you have for this year?
spk12: Yeah, thanks for the question, Griffin. So we're optimistic that our 16.5% is really the starting point for our future margin expectations. What we have in backlog right now, you know, in the... low to mid-20s, and so just bleeding out our backlog, tacking on new programs at higher margins than what we've seen on some of our legacy programs, we feel pretty good about our margin profile going forward.
spk10: Okay, sure. Thanks for the color. Then jumping over to tranche one, so you're still expecting deliveries in the fourth quarter. That's good to see, but Just given the switch in propulsion suppliers away from Astra, has that pushed out the number of deliveries that you initially expected to complete in the fourth quarter? So is that at all contributing to the lower revenue guide, pushing more of that Toronto revenue into 24?
spk08: I mean, we had a dream originally, just like we do with T-Zero, to deliver way ahead of schedule and deliver the whole thing by the end of this year. But the reality is, you know, propulsion has been, with Astra, has been quite a challenge. We do expect to see engines from Astra, according to them. But we're hedging our bets. And moving forward, BUSIC we'll use on Tron Zero. And, you know, that way we'll have two different providers. We're not dependent on Astra. So if Astra delivers, great. If they don't deliver, we'll still have all our engines. And it just means we'll have extra engines for the next program. They both deliver. Okay.
spk10: All right. Thanks, Mark. And then, so shifting gears to your enterprise bus, you had the new disclosure last week on the three configurations for that. It was interesting to see the third configuration, configuration C, for MEO and GEO applications. So just curious if you could give any more color. Are you currently building any MEO or GEO buses, or are you bidding on RFPs for those applications?
spk08: We are bidding on RFPs for lots of MEOs and lots of micro-GEOs. And it is, so that's what we decided, you know, we're getting a lot of demand for that, so we decided to expand the enterprise bus lines to do that. That's why you see three different configurations. that are out there because people, this is what people are asking for. And so we were trying to focus our NRE on certain bus sizes for what customers are demanding today.
spk10: Okay, great. And then just last one for me. You talked about the 2,800 satellites valued at $2.7 billion across the whatever it was, 80 opportunities, 40 customers. So that, I mean, just a quick math on that implies sort of around $1 million per satellite, which, I mean, I think historically you guys have talked about, you know, maybe $3 to $5 million per satellite is sort of a sweet spot. So can you just help us understand sort of the disconnect there?
spk08: I'm sorry. I don't understand. You have a lot of static on your line. Can you repeat that question?
spk10: Yeah, sure. So you talked about the 2,800 satellites valued at $2.7 billion. So just a quick math on that implies under $1 million per satellite. I think historically you've talked about $3 to $5 million per satellite. So I just wondered if you could give some color on the disconnect.
spk08: It's all over the place. So you have some for $1 million, you have some for $10 million. Okay. you know, use some for $15 million. It's really just, you know, you have a very wide disparity. You know, depending on what people are building, things in micro, geo, or MEO are much more expensive than things in LEO or VLEO. So, you know, everybody is going out and looking at different size satellites to fit. Not all sizes fit all needs, which is why we keep expanding the bus lines.
spk10: Okay. All right, great. Thanks for the call, Mark. Appreciate it. Thank you.
spk02: Our next question comes from Scott Buck with HC Wainwright. Scott, please go ahead. Your line is open.
spk07: Hi. Good morning, guys. Thanks for taking my questions. Mark, just to kind of follow up on your comments regarding the commercial space, curious what kind of demand you're seeing from potential commercial partners and whether or not, you know, kind of general macro uncertainty has dampened maybe some of that demand in the near term.
spk08: You know, the demand we're seeing from commercial partners around the world is just astronomical. I mean, it's far greater than, you know, it's funny, I was very hyper-focused on the DOD and the IC when I first started, but the demand for commercial far exceeds that. You know, we don't see anything slowing down. You know, there's lots of spectrum out there. People want to utilize the spectrum, everything from Internet of Things to 5G from space to direct-to-handset technology. to there's tons of applications that people are looking at and that are requiring very large, very robust constellations. So it's interesting. It's also interesting to note the size of our, you know, we think 500 kilograms is like the sweet spot right now for buses. You know, we used to think it was a little bit smaller, but we're seeing people, you know, things are getting bigger and people want bigger, but the dollars they're willing to spend is more, but, you know, there's more money to make in space than there ever has been before. So, you know, we're seeing a big push into commercial. Then there are refreshes for Leo, Mio, and Geo. Because remember, we're in the recurring revenue business. Everything we build, we've got to replace. But we're seeing, you know, huge quantities in Leo that people are looking at. It's very exciting.
spk07: Great. One thing to point out. Matt, can you talk?
spk08: Let me just add one thing. One thing to point out is as we start building these quantities, the costs start to go down significantly. So, you know, as we start to replicate these things over and over again, the recurring costs go down dramatically. So there is a lot of, as with volume, comes better pricing across the board for everybody.
spk07: Sure. No, that makes sense. And, Mark, are you actively bidding on programs now, or are you still in kind of the discovery phase or research phase there?
spk08: Oh, no, we were quite actively bidding. So we have, you know, Matt Gann and his team have done a great job, and they are very actively running around the world bidding on things at a very rapid pace. So we have gotten in front of a lot of people, and people are coming to us. It's great that, you know, the customers are now finding us. They're seeing what we're doing. You know, the technologies and the abilities for mass production of small specs is invigorating the marketplace. You know, people, proliferatedly, it was not just for government. It's for everybody. But, you know, we're getting it from all, every country has somebody who wants to build their own constellation. Every country wants to have their own transfer layer, tracking layer from the DOD side, the military side of the country. But commercial, they want to have their own 5G networks. They want to have their own Internet of Things. You know, they don't want to just have it be the Americans. It's amazing.
spk07: Yep, that makes sense and very helpful. Matt, can you tell us what contribution from Revata was in the quarter in terms of revenue?
spk12: Yeah, Revata's revenue was about, it was around $6.7 million on a year-to-date basis and around like $5 million for the quarter.
spk07: Perfect. Thanks. That's it for me, guys. I appreciate the time. Thank you. Thank you.
spk02: Our next question comes from the line of Mark Stone, who is a private investor. Mark, please go ahead. Your line is open.
spk13: Yes. First, my comment was I think a previous question a couple back may have made a math error, and that comes out to $8 million a satellite, not $1 million a satellite on Ravada. But anyhow, my question is, presuming Bahrain never gets a single additional cent from Ravada, do you have enough cash to make it through to cash flow positives.
spk05: Yes, we do.
spk04: Thanks.
spk02: We have no further questions on the line, so I'll turn the call back to the management team.
spk08: Listen, I know there's still people left on the call. If anybody wants to ask a question, we are more than happy to take anybody's questions. If not, we're going to thank everybody for coming today and appreciate your time and your support. And, you know, we're excited. Everyone here at Terran Orbital is very excited going into the year end. And 2024 is going to be an amazing year for us. Hold on. I think we have a question. Bear with me. I think it's there. Is there a question? There is a question. Operator?
spk02: Of course. We have a question from Jordan Klein with Corporate Thunder Aviation. Jordan, please go ahead.
spk03: Hey, guys. Good morning, and thanks for taking the call. In regards to the cash flow positive with or without Roboto, what is the earliest prediction
spk12: possible quarter you see becoming cash flow positive and worst case scenario what's the latest down the road you see it happening yeah thanks jordan um we're still currently going through our 2024 budget and forecast cycle um so don't know so earliest would be q1 latest would be q4 but um the the the plan is to be cash flow positive during 2024.
spk08: A lot of that is just based on timing of programs. I understand. I understand.
spk03: Thanks, guys. Sure.
spk08: You're welcome. Anytime. All right. As we have... Also, we got one more just popped up. Operator? Operator?
spk02: The next question comes from with Sofus Investments. Please go ahead.
spk11: Yes, hello. Can you please discuss opportunities within your pipeline where you just expect decisions within the next three months and just maybe quantify what you expect within the pipeline to be announced within the next three months? Thank you.
spk08: Well, we don't go through details on bids that haven't closed yet. We just talk about the pipeline in general, but we try not to give away specifics so we don't help our competitors figure out what we're working on.
spk11: But within the pipeline, that's got to be spread out probably over the next year or more, but is there any color that you can shed on maybe more near-term size without getting into specific programs? as to what you're looking for over the next few months?
spk08: We expect to have, you know, we expect to have over the next six months some significant announcements to make. We're seeing more and more large opportunities from both commercial and government entities from around the world. And so, you know, we will have more color on that as they get announced. There's some competitive processes that we are bidding on now. We just don't want to go into detail over the phone.
spk11: And then with regard to commercial opportunities, what other commercial opportunities besides Rivada have you won or are optimistic about?
spk08: We have many we're optimistic about, but back to the same answer, I'm not trying to be argumentative here. We don't want to go into details on things that haven't been closed yet. So we are doing very well in the bidding process with a number of opportunities. And as they close, we will publicly disclose them.
spk11: And then just two more. Just one is with regard to return on invested capital. Does the company utilize a specific return on invested capital hurdle rate when allocating capital? And if so, can you just discuss the rate that you use?
spk08: I mean, we look at things that we purchase, whether it be robots or test equipment and such, as we try to get a 12-month ROI or better. So, for example, on virtually all of our robotics, 12-month ROI. On a harnessing shop, it was less than 12 months. It is on a shaker table, less than 12 months. So we look at all the big capex that we spend, and we want to get our money back in 12 months or less. And that's kind of how we've been viewing it. And so we want very quick returns because we've been outsourcing a lot of these things. And by bringing them in-house, the returns tend to be very, very fast. So we're very capital efficient as far as the CapEx that we spent. I mean, we predicted only $30 million of CapEx this year, and we expect to come in below that.
spk11: Thank you. And then just a final thing. So this morning there was a tweet out, Declan Ganley, talking about they fully expect a payment to Terran Orbital by the end of this year and that the events of October 7th have slowed things down, but they're confident that they're getting back on track and that the program remains on schedule. Have you spoken directly with Revata about this, and can you just maybe talk about that this morning? It looks like you retweeted that. Just wondering if you can just shed any more light on that.
spk08: Yeah, I did speak to Declan this morning, and we obviously are aware of who their funding source is, and we personally know who their funding source is, so we have confidence in their funding source. That said, yeah, I did retweet it because I like to tweet. Feel free to retweet it yourself. It's always a good thing. But that said, other than that, I don't want to comment other than he's very frustrated that they haven't closed yet, but they are making progress.
spk11: Appreciate you taking the questions. Thank you.
spk08: Good luck. Thank you for calling. We have one more? Two more. Two more. This is great. Keep them coming. Operator?
spk02: Our next question comes from Peter Singh, who is a private investor. Peter, please go ahead.
spk14: Thank you, Mark, and thank you, everyone, for hosting this call and for taking this format. I appreciate that. I know it's not easy, given how the show is performing currently.
spk08: Yeah, we want to hear from everybody. I think this is great.
spk14: Just a quick question regarding Q4 performance. I know you mentioned that the Crunch 1 deliveries are delayed now into Q1 and potentially Q2.
spk08: It's not delayed. The original schedule went out to Q2. We were trying to beat the schedule. There's a difference. So we're on schedule. We were trying to beat it. Making schedules easy, but I like to beat schedules. I don't like to just make them.
spk14: Fair enough. So what is the expected revenue now for Q4? I mean, if I'm going off of the 130 target for 2023 and where we are currently, it looks like about 26, 27 million for Q4. Is that correct?
spk12: That would be on the low side. As we had mentioned earlier, we're providing conservative guidance and the reason for that 130 number, which would imply a lower risk Q4 revenue, is the fact that there's certain challenges on certain programs and the ultimate resolution of those challenges aren't known at this time.
spk08: And I never, ever, ever want to get caught again with having to go out to raise my revenue targets and then have to lower them again. So we're going back to the way we used to do it. And, you know, for 20 years, we've never missed the revenue target. And this is a first. So we never want to make that a mistake again. So we're back to being conservative.
spk14: Okay, fair enough. Yeah, I guess lesson learned from the 250 target, huh?
spk08: Yeah, we were a lot. Go ahead. Go ahead, sorry.
spk14: During the Q2 call, you had mentioned about the extreme due diligence done around Rivada funding and payment. Did the research not consider the potential delays that we are experiencing right now? And does Terrain not require any alternative funding from Rivada?
spk08: No, we knew their funding source very well. I met with them personally a long time ago. I had extreme confidence and saw no reason why they wouldn't have been funded. So this was just a – it was quite the surprise both to us and to Rovada. But, yes, we did – lots of diligence was done on all sides, and we had extreme confidence on their ability to fund. And we still expect them to get funded. There are some external circumstances that have popped up that have delayed things. But, you know, it is a large sovereign, and we expect them to come through at the end of the day.
spk05: Okay.
spk14: All right. Thank you. I appreciate it. Thank you.
spk02: Our next question comes from Mark Stone, who is a private investor. Mark, please go ahead.
spk13: The previous mention of Twitter reminded me of a comment slash question I have. As of a few weeks ago, the Terran Orbital Twitter site posts are protected. And I actually submitted and still have pending a request from about two or three weeks ago to have them unprotected. So why are they protected? Was that some kind of mistake by Terran Orbital or on purpose?
spk08: I have a guy with social media shaking his head looking at me saying he has no clue what you're talking about, but we will go check it out. So obviously it wasn't intentional. I believe you. I don't know. Like I said, he's shaking his head. He's going to look into it. So sorry. I don't post to the Terran Roboto account, but the guy who does is going to find out.
spk13: Thank you.
spk08: You're welcome.
spk05: Thanks for pointing that out to us.
spk15: Next, we have a follow-up question from Peter Singh. Again, he was a private investor.
spk14: Thank you, Mark. Just one more question here regarding the proposal from the co-founders and their recent um letter after the fact you know when you're announced they reduced the revenue guidance any thoughts there and how should the shareholders consider the pipeline that they're proposing and how does it align with the pipeline that you have minus rebuttal i don't understand the question
spk05: Can you try again?
spk14: So the co-founders are proposing a $1.7 billion pipeline.
spk08: First of all, they're not co-founders. The three founders of Terran Orbital are Mark Bell, Dan Staden, and Anthony Previtt, who is deceased. Those are the three founders. So you've got to get your facts straight, please. You know, second, you know, they said they were able to, they proposed, well, they said they could close $1.7 billion, which is great. We have not seen, you know, we have lots of things that we're bidding on, but we don't disclose what we're working on. Could it be the same things? It cannot be the same things. You know, if they wanted to be helpful shareholders, they could give us the information. They choose not to, and that's their decision.
spk04: Thank you. You're welcome.
spk15: Those are all the questions we have. So I'll turn the call back to the management team.
spk08: Okay. Well, thank you very much for attending, everybody. We really appreciated it. We appreciated all the feedback and inviting everyone else to have questions. And I want everyone to – I guess the next time we'll speak to you will be after the holidays. Everybody enjoy your Thanksgiving, and thank you very much for joining us.
spk02: Thank you everyone for joining us today. This concludes our call and you may now disconnect your lines.
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