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Terran Orbital Corp (LLAP)·Q4 2023 Earnings Summary

Executive Summary

  • Q4 2023 revenue was $31.6M, flat year-over-year (-0.9%) and down sequentially from Q3’s record $43.9M; quarterly gross loss narrowed to $(0.5)M while full-year gross profit improved materially to $8.6M .
  • Full-year 2023 revenue grew 44% to $135.9M; adjusted gross profit rose to $19.4M (from $(2.2)M in 2022) and adjusted EBITDA was $(77.4)M .
  • Guidance reset in November: FY2023 revenue “in excess of $130M” vs August’s “in excess of $250M,” driven by delayed Rivada milestone payments and program timing; capex remained “< $30M” and came in at $23.1M .
  • Backlog expanded to $2.7B (including $2.4B Rivada); cash ended 2023 at $71.7M; the company canceled its Q4 call citing an ongoing strategic review—near-term stock narrative is tied to Rivada cash collection and SDAs deliveries cadence .

What Went Well and What Went Wrong

What Went Well

  • Record annual revenue ($135.9M, +44% YoY) and material improvement in full-year gross profit ($8.6M) and adjusted gross profit ($19.4M) signal operating progress and scale benefits .
  • Backlog rose to $2.7B (vs $170.8M at 2022 YE), supported by major awards including 300 satellites for Rivada and 36 buses for Lockheed’s SDA Tranche 2 Beta; manufacturing 78 satellites for Lockheed across SDA programs .
  • Capability expansion: commissioned the 50 Tech facility, launched “Responsive Space” (standard bus in 30 days, integrated payload in 60 days), broadened standard bus portfolio—management emphasized vertical integration to “control our destiny” .

What Went Wrong

  • Q4 revenue fell sequentially to $31.6M from Q3’s $43.9M; quarterly net loss widened to $(42.8)M vs Q3 $(26.4)M and Q4 2022 $(33.0)M, reflecting higher interest expense and fair value changes .
  • FY2023 results were negatively impacted by EAC adjustments: revenue down an estimated $6.1M and gross profit down $4.0M due to cost-at-completion changes on firm fixed price programs .
  • November guidance cut and cancellation of the Q4 earnings call amid strategic review created uncertainty; Rivada milestone timing remained a key swing factor for near-term forecasting .

Financial Results

MetricQ4 2022Q2 2023Q3 2023Q4 2023
Revenue ($USD Millions)$31.9 $32.2 $43.9 $31.6
Gross Profit ($USD Millions)$(10.8) $0.8 $9.7 $(0.5)
Adjusted Gross Profit ($USD Millions)$(7.3) $2.8 $12.0 $2.2
Net Loss ($USD Millions)$(33.0) $(28.1) $(26.4) $(42.8)
Net Loss per Share – Basic ($)$(0.23) $(0.18) $(0.15) $(0.21)
Net Loss per Share – Diluted ($)$(0.34) $(0.23) $(0.15) $(0.21)
Adjusted EBITDA ($USD Millions)$(26.1) $(21.4) $(13.0) $(20.6)

Margins

MetricQ3 2022Q3 2023
Gross Margin %0.1% 22.1%

KPIs and Balance Sheet

MetricQ4 2022Q2 2023Q3 2023Q4 2023
Backlog ($USD Billions)$0.171 >$2.6 $2.6 (pro forma ~$2.75 with Oct awards) $2.7 (incl. $2.4 Rivada)
Cash & Equivalents ($USD Millions)$93.6 $48.6 $38.7 (>$70 as of Oct 31) $71.7
Gross Debt ($USD Millions)~$274.1 total liabilities; debt $150.4 (LT+current) ~$311.4 gross debt obligations ~$313.0 gross debt obligations ~$313.8 gross debt obligations
Capex ($USD Millions, quarter)N/A$9.2 $6.1 N/A (FY2023 $23.1)
EAC Impact (FY 2023)N/AN/AN/ARevenue: $(6.1)M; Gross Profit: $(4.0)M

Notes: “Gross debt obligations” are management’s textual disclosures; balance sheet debt line items in tables differ from this aggregate framing .

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
RevenueFY2023“In excess of $250M” (Aug 14, 2023) “In excess of $130M” (Nov 14, 2023) Lowered
Gross Margin / Adj GP MarginFY2023H2 gross margin mid-to-high teens (Q2 call) YTD adjusted gross profit margin 16.5% “in line with year-end targets” (Q3) Maintained trajectory
CapexFY2023< $30M (Q2) < $30M (Q3) ; Actual $23.1M (FY) Maintained; actual below
Backlog ConversionThrough 2025~80% recognized by YE 2025 (Q2) Timing uncertainty due to Rivada removal from 2023 forecast (Q3) Timing risk increased

Earnings Call Themes & Trends

TopicQ2 2023 (Previous Mentions)Q3 2023 (Previous Mentions)Q4 2023 (Current Period)Trend
Rivada contract & paymentsDesign phase ramp; Rivada current; ~$180M invoicing expected in 2H23 Delayed milestone payments; removed Rivada revenue from FY2023; reassured payments expected No call; YE backlog includes $2.4B Rivada; Jan 2, 2024 press release: Rivada payment received, “current on all invoices” Uncertain → improving post period
Supply chain & propulsionVertical integration; expanding capacity Switched propulsion supplier; hedged Astra risk; deliveries spread into Q4–Q2’24 Continued manufacturing progress; capacity additions (50 Tech, Goodyear) De-risking execution
Responsive Space initiativeN/ALaunch plan: standard bus in 30 days, payload in 60 days; revenue conversion expected in 2024 Program highlighted in Q4 materials Scaling
Margins outlookH2 mid-to-high-teens; mid-20s longer term YTD adjusted GP margin 16.5% achieved; mix-dependent Full-year GP improved; Q4 gross near breakeven Structural improvement; near-term mixed
Capacity expansion50 Tech opened; capacity to 20 buses/month Planning new 94k sf facility; aims for rapid assembly Commissioned 50 Tech; broke ground on Goodyear expansion Increasing
Strategic review / call cadenceN/AN/AQ4 earnings call canceled due to strategic review Uncertainty introduced

Management Commentary

  • “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…” .
  • “Responsive Space… deliver to customers a bus within just 30 days and complete payload integration within 60 days…” .
  • On Rivada delays: “We have been reassured… we should expect to receive our contractual milestone payments this year… the timing… is uncertain” .
  • Cash flow outlook: “Plan is to be cash flow positive during 2024” (earliest Q1, latest Q4) .
  • Q4 call: “In light of the Company’s ongoing strategic review, management has decided to cancel its previously scheduled fourth quarter and full-year 2023 earnings call.” .

Q&A Highlights

  • Margins trajectory: backlog mix supports low-to-mid 20s gross margins longer term; H2 2023 mid-to-high teens .
  • Propulsion switch: hedged Astra risk by engaging alternative suppliers; tranche deliveries paced through Q4–Q2’24 .
  • Rivada contribution: ~$5M revenue in Q3; company remains confident on payments; expects milestone collections (context from Q3 call) .
  • Capacity ramp: 50 Tech enables 20 buses/month; new facility envisioned to scale up to ~96 buses/month and ~42 complete satellites/month after commissioning .
  • Guidance stance: FY2023 revenue “> $130M,” with Q4 conservative due to program challenges and mix; emphasis on avoiding overpromising .

Estimates Context

  • S&P Global consensus estimates for LLAP Q4 2023 were unavailable in our system due to missing CIQ mapping; we cannot provide a definitive Street comparison. Note: Values normally retrieved from S&P Global.

Key Takeaways for Investors

  • FY2023 demonstrated scale: 44% revenue growth and materially improved full-year gross and adjusted gross profit; however, Q4 sequential softness and widened net loss highlight near-term execution and financing sensitivity .
  • Backlog at $2.7B (incl. $2.4B Rivada) underpins medium-term visibility; 78 satellites in production for SDA programs with Lockheed support program momentum .
  • Narrative hinges on Rivada cash collections and SDA delivery cadence; the Jan 2 payment update post quarter is a positive data point, but timing risk persists .
  • Vertical integration and capacity expansion (50 Tech; Goodyear) are strategic levers to improve margins and schedule control; management targets cash flow positivity in 2024 .
  • EAC adjustments and program mix can swing quarterly results; investors should expect margin variability until the portfolio skews further to standardized buses and integrated payloads .
  • With the Q4 call canceled amid strategic review, disclosure cadence may be irregular; monitor subsequent 8-Ks and customer milestones (SDA deliveries, Rivada) as stock catalysts .
  • Near-term trading: stock likely reacts to contract execution updates and cash balance changes; medium-term thesis rests on backlog conversion, margin expansion, and successful Responsive Space commercialization .

Appendix: Additional Q4-Adjacent Press Releases

  • Jan 2, 2024: “Terran Orbital Reports an Excess of $70 Million Year-End Cash Balance,” and “Terran Orbital Receives Payment from Rivada… Rivada is current on all outstanding invoices” .