Terran Orbital under financial pressure
May 17, 2023
Florida-based Terran Orbital is having a tough time. Following on from its May 15th quarterly report its share price dropped by almost 18 per cent, not helped by concerns that a major client might also be suffering a cash squeeze. May 16th saw a modest recovery of 1.6 per cent in its share price.
Terran is building a new factory in Irvine, California, to help produce a 300-satellite order for US/Germany-based Rivada Space Networks. The contract is worth $2.4 billion, and there are options for a follow-on order of another 300 satellites for Rivada’s planned low Earth orbiting mega-constellation.
Terran’s May 15th core news was not at all gloom. It enjoyed a $28.2 million Q1 2023 revenue up 115 per cent y-o-y. Its contracted backlog of orders is impressive with more than $2.5 billion of orders (up 1,300 per cent since December 31st 2022) and with a record 360 satellites in backlog as at quarter-end. It reported another order worth an extra $87 million for another 16-satellite constellation. Terran said it was working on 20 separate space-related programmes. Its Net Loss for the quarter (of $54.4 million) was an improvement on the Net Loss of $71.4 million the year previously.
The dramatic fall in its share price came about because of concerns over Terran’s ability to raise its own cash demands for the coming year. At best Terran has enough cash-in-hand to last for some 5 months.
CFO Gary Hobart told analysts that he hoped to be raising cash from the Equity market. However, this move would likely affect existing investors (including Lockheed Martin) and a principal backer in the form of B Riley Principal Capital LLC. Also a complication is that B Riley has a stock-purchase agreement in place with Terran whereby Terran could sell to B Riley $100 million in equity or 27.5 million shares at a 3 per cent discount.
The Rivada order book also seemed to worry investors. Rivada has to fund around $3.2 billion for its initial 300 satellites (including launches on 12 SpaceX rockets) but is obliged to meet an extremely demanding timetable for their placement into orbit. Half of its constellation must be orbiting by September 2026. Tied into these plans is Rivada’s own need to fund the constellation and an initial $2.4 billion. Helping in this is Rivada’s Mark Rigolle as COO. Rigolle was CFO at SES and CEO at O3b at one stage and is well-placed to negotiate the funding demands.
Another senior hire at Rivada is Ann Vandenbroucke as Chief Regulatory Officer and who had until recently worked at Avanti Communications and was a former Senior Director at Inmarsat where she was responsible for global market access and spectrum issues.
They are working under Rivada founder and CEO Declan Ganley who is no slouch in managing businesses in the telecoms sector. Rivada wants to tap into demand for Internet of Things (IoT) connectivity for its fleet of Ka-band craft.
Rivada is already stumping up cash to Terran with Terran contracted to deliver four Rivada demo-satellites in 2024, then another 25 by early 2025, and the remaining 275 in late 2025/2026. These 4 demo craft are additional to the core 300 order.
Terran said: “The timing and execution of our new contract work with Rivada and our other new customer constellation are variables for our full year 2023 results but are the building blocks for a higher revenue base in 2024. Given our current view of our steep ramp ahead, we anticipate in excess of $250 million in revenue in 2023. Upside beyond this level is possible depending on our successful execution of our customer commitments. We expect gross margins to demonstrate year-over-year improvement, but the pace of improvement may be variable given timing impacts. Capex is expected to be less than $30 million”.
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