Executive Summary

Q1 revenue was $27.2M, down 3% YoY, driven by a $13.1M negative EAC adjustment on a single fixed-price program due to a propulsion subcontractor issue; management expects the delayed revenue to be recognized by the end of Q3 2024 . Gross loss widened to $6.2M and Adjusted EBITDA declined to $(28.2)M as EACs compressed margins .
Backlog stood at $2.7B as of March 31 (including $2.4B Rivada), and is “over $2.8B” as of May 14 with non‑Rivada programs rising to ~$400M; Q2 awards exceed $100M to date .
Strategic update: Lockheed Martin selected Terran to build 18 space vehicles for SDA’s Tranche 2 Tracking Layer, expanding collaboration; special committee’s strategic review remains ongoing after Lockheed withdrew a $1.00/share proposal .
Guidance withheld for FY24 amid timing uncertainty and ongoing strategic review; management targets Adjusted EBITDA positive in 2024 (potentially Q4) and sees a 2H revenue ramp as ~50 satellites are delivered in 2024, incl. T1 deliveries by August .

What Went Well and What Went Wrong

What Went Well

Lockheed Martin expansion: Award for 18 space vehicles for SDA’s Tranche 2 Tracking Layer, broadening relationship under the Strategic Cooperation Agreement through 2035 . CEO: “We value Lockheed Martin’s partnership and look forward to continued collaboration...” .
Backlog momentum and awards: Q2 awards exceed $100M, backlog moved from $2.7B at 3/31 to “over $2.8B” by 5/14 as non‑Rivada backlog increased to ~$400M .
Vertical integration/throughput: Management highlighted proactive pivot from a problematic propulsion supplier and continued push to bring manufacturing in‑house to reduce reliance on subcontractors; ~50 satellites expected to be delivered in 2024 .

What Went Wrong

Negative EAC impact: $13.1M negative EAC adjustment reduced revenue and margins in Q1; gross loss increased to $6.2M and Adjusted EBITDA fell to $(28.2)M, with EACs negatively impacting gross loss and Adjusted Gross Loss by ~$13.6M .
Subcontractor disruption: A propulsion supplier’s inability to deliver forced a redesign and supplier switch, delaying revenue into later quarters; first eight propulsion units expected by end of May with cadence thereafter .
Guidance withheld and covenant risk: FY24 outlook withheld given timing uncertainty/strategic review; debt covenants require LTM EBITDA positive by YE24 absent waivers—management notes options but no guarantees .

Financial Results

P&L vs prior quarters

Metric	Q3 2023	Q4 2023	Q1 2024
Revenue ($M)	43.885	31.600	27.235
Gross Profit ($M)	9.691	(0.534)	(6.156)
Gross Margin (%)	22.1%	(1.7%) (calc from )	(22.6%) (calc from )
Loss from Operations ($M)	(19.312)	(27.727)	(34.464)
Operating Margin (%)	(44.0%) (calc from )	(87.8%) (calc from )	(126.6%) (calc from )
Net Loss ($M)	(26.429)	(42.839)	(53.244)
Diluted EPS ($)	(0.15)	(0.21)	(0.26)
Adjusted EBITDA ($M)	(12.982)	(20.561)	(28.235)

Notes: Margins for Q4 2023 and Q1 2024 are calculated from reported revenue and gross profit/loss or operating loss figures with cited sources.

Q1 YoY comparison

Metric	Q1 2023	Q1 2024
Revenue ($M)	28.198	27.235
Gross Profit ($M)	(1.399)	(6.156)
Net Loss ($M)	(54.445)	(53.244)
Diluted EPS ($)	(0.38)	(0.26)
Adjusted EBITDA ($M)	(22.552)	(28.235)

Actual vs estimates (S&P Global)

Metric	Q1 2024 Actual	S&P Global Consensus	Beat/Miss
Revenue ($M)	27.235	N/A (unavailable via S&P Global feed)	N/A
Diluted EPS ($)	(0.26)	N/A (unavailable via S&P Global feed)	N/A

Consensus unavailable via S&P Global for LLAP at time of analysis.

Backlog composition and awards

Date/Period	Total Backlog ($B)	Rivada ($B)	Non‑Rivada ($B)	Awards Commentary
9/30/2023	2.6	2.4	~0.2 (calc from )	—
12/31/2023	2.7	2.4	~0.3 (calc from )	—
3/31/2024	2.7	2.4	0.3	—
5/14/2024 (update)	>2.8	—	0.4	Q2 awards >$100M to-date

Liquidity and capex KPIs

Metric	Q3 2023	Q4 2023	Q1 2024
Cash ($M)	38.676	71.663	43.701
Gross Debt ($M)	~313.0	313.8	316.7
Capex ($M)	6.1 (quarter)	23.1 (FY)	2.5 (quarter)

Guidance Changes

Metric	Period	Previous Guidance	Current Guidance	Change
FY24 Outlook (Revenue/Margins)	FY 2024	Not provided	Withheld due to timing uncertainty and strategic review	Withheld
Adjusted EBITDA	FY 2024	Not provided	Targeting Adjusted EBITDA positive in 2024; potentially Q4	New qualitative target
Delayed Program Revenue Timing	Through Q3 2024	Not provided	Expect delayed revenue recognized by end of Q3 2024	New qualitative timing
SDA Tranche 1 Deliveries	2024	Not provided	Expect all T-1 delivered by August 2024 (~42 vehicles)	New operational timing
Backlog Revenue Timing	Through 2026	Not provided	Backlog generally expected to be fully recognized by end of 2026	Disclosure of timing

Earnings Call Themes & Trends

Topic	Previous Mentions (Q3’23, Q4’23)	Current Period (Q1’24)	Trend
Supply chain & vertical integration	Emphasized supply chain investments; responsive space initiative	Pivoted off propulsion supplier; reinforced in‑house manufacturing to reduce reliance	Strengthening integration
SDA programs with Lockheed	T2 Transport Layer Beta award; momentum	Awarded 18 vehicles for T2 Tracking Layer; collaboration through 2035	Expanding DoD content
Rivada program	2023 forecast removed; timing uncertainty	Modest Q1 revenue; PDR expected by end of Q2; agreed in principle on payment schedule	Schedule clarity improving; funding risk remains
Profitability path	Adj. EBITDA $(13.0)M	Adj. EBITDA $(28.2)M; target EBITDA+ in 2024, possibly Q4	Near-term pressure; 2H ramp/target
Capacity & automation	New standard buses; ramping capability	~50 vehicles to deliver in 2024; PCB lines, facility expansion on track	Scaling production
Strategic review/LM	—	Review ongoing; LM $1.00 offer withdrawn; partnership intact	Ongoing
Liquidity/covenants	Cash >$70M as of 10/31/23	Cash $43.7M; min cash covenant $20M; comfortable liquidity; EBITDA covenant has options	Mixed: cash down QoQ; covenants manageable per mgmt

Management Commentary

“We expect the delayed revenue from this single program to be recognized by the end of the third quarter of 2024. This supply chain disruption underscores the importance of our vertical integration strategy.” — Marc Bell, CEO .
“As of today, backlog is estimated to be over $2.8 billion, inclusive of approximately $400 million of non-Rivada programs due to our second quarter awards, which have exceeded $100 million so far.” — Mathieu Riffel, Acting CFO .
“We value Lockheed Martin’s partnership and look forward to continued collaboration under our Strategic Cooperation Agreement, which runs through 2035.” — Marc Bell .
“Efficient and successful execution of our new and existing contracts and becoming adjusted EBITDA positive in 2024 are our top priorities.” — Mathieu Riffel .

Q&A Highlights

Revenue cadence and delivery timing: Management expects a back‑half ramp with T1 deliveries completed by August and ~50 total vehicles delivered in 2024; Q3–Q4 should see the “big revenue ramp” .
EAC and revenue timing: The $13.1M negative EAC is a timing effect under percentage‑of‑completion; revenue “will be recognized in future periods” as work progresses .
Path to profitability and covenants: Targeting Adjusted EBITDA positive by Q4 2024 or shortly after; LTM EBITDA covenant has potential mechanisms/waivers, but no guarantees .
Rivada status: PDR expected by end of Q2; payment schedule agreed in principle; program remains on track per current schedule, but Rivada prefers to handle detailed updates .
Pricing/mix: Tracking Layer buses are “more sophisticated” and priced higher than prior Transport Layer buses, reflecting content and stability requirements .
Liquidity and ATPs: Typical programs include ATP payments within ~30 days; management “comfortable” with liquidity .
Minimum cash: Debt agreements require ~$20M minimum cash at quarter‑end; management indicates no concerns .

Estimates Context

Wall Street consensus (S&P Global) for LLAP’s Q1 2024 revenue and EPS was unavailable via our S&P Global feed at the time of analysis; as a result, we cannot assess formal beat/miss vs consensus. Actuals reported: Revenue $27.235M; Diluted EPS $(0.26) .

Key Takeaways for Investors

Near-term margin pressure stems from a one‑off supply chain disruption and associated EACs; management expects related revenue to be recognized by Q3, setting up a back-half revenue/margin rebound as deliveries accelerate .
DoD exposure is broadening with the new Lockheed SDA Tracking Layer award; non‑Rivada backlog increased to ~$400M, diversifying away from a single commercial anchor .
Execution catalysts in 2H: completion of SDA T1 deliveries by August and cadence thereafter; additional awards in the pipeline could further support the ramp .
Strategic optionality persists: the formal review continues post Lockheed’s withdrawn bid; continued collaboration under the 2035 agreement limits strategic relationship risk while options remain open .
Liquidity is adequate near‑term with $43.7M cash and covenant headroom indicated by management; nonetheless, investors should monitor covenant compliance, cash burn, and milestone receipts closely .
Medium-term thesis: Scaling vertical integration and automation to reduce cost and supplier risk, plus large identifiable pipeline across defense and commercial, position LLAP for operating leverage as backlog converts through 2026 .

Terran Orbital Corp (LLAP)·Q1 2024 Earnings Summary