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Terran Orbital is downplaying a $2.4 billion order from startup Rivada Space.
The story Terran Orbital has been selling to investors for years is: “Yes, we are losing money, but revenue is growing quickly, and it is only a matter of time before we become profitable.”
That story broke down in the first quarter of 2024, when the satellite bus manufacturer saw its revenue drop. Terran’s revenue fell 3% to $27.2 million for the three-month period that ended on March 31, the company stated in a May 14 financial filing with the Securities and Exchange Commission.
- The company dodged New York Stock Exchange delisting but faces new problems
- Ongoing search for “strategic alternatives” includes a possible sale to Lockheed Martin
At the same time, the company lost $53.2 million in the quarter, about 2.3% less than in the first quarter of 2023; cash on hand decreased 39% to $43.7 million.
Terran Orbital is a critical supplier of satellite buses to Lockheed Martin, which uses the platforms for the Space Development Agency’s Proliferated Warfighter Space Architecture, a high-priority military satellite constellation for the U.S. Defense Department.
To diversify its business into the commercial realm, Terran Orbital won a $2.4 billion order from Rivada Space Networks in 2023 to build 300 satellites for a communications megaconstellation. However, Terran is now downplaying that development because the startup Rivada Space has yet to raise money from investors to pay for its order, and doubts are growing about whether the funds will be forthcoming.
Terran Orbital, which deferred most questions about the order to Rivada Space during its earnings call on May 14, expects preliminary design review of the satellites to be finished by the end of the second quarter but otherwise is receiving only small milestone payments from Rivada Space.
To calm possible investor concerns, CEO Marc Bell emphasized the importance of going “off script” at the beginning of the company’s first-quarter earnings call to point to $400 million in its order backlog that Terran says is backed by solid commitments.
“People aren’t realizing that we have $400 million of signed backlog, which becomes revenue over the course of the next 18-24 months,” he said. “That’s money we’ll bill. The bulk of it is from Lockheed Martin, and we are very appreciative of our relationship with Lockheed Martin.”
Terran has a strategic relationship with Lockheed Martin, one of its largest investors. The prime manufacturer tried to buy the company earlier this year for $1 per share, but Terran rejected the offer as too cheap, noting it was 6.5% less than the closing price of the stock that day.
For much of the past six months, Terran Orbital’s stock was trading below $1, and the company was at risk of being delisted from the New York Stock Exchange until it got the share price above $1 for 30 trading days by the beginning of April. After reporting its first-quarter revenue on May 14, the satellite manufacturer’s shares have been trading for less than $1 again.
Bell said Terran is still exploring all options in its strategic review. “There is no guarantee, however, this will result in any transaction or a strategic alternative,” he said.
Much of Terran Orbital’s spending has focused on vertical integration of its operations by building new factories and buying production equipment to make components in-house. The company says it makes 85% of its products in-house.
One product Terran chose not to make in-house was satellite propulsion. Revenue took a hit in the first quarter due to a “negative estimate at completion adjustments” of $13.6 million caused by a single propulsion supplier’s inability to deliver, the company said.
Some financial analysts questioned whether Terran—facing dwindling cash and $192 million in debt—could meet all its obligations, including certain debt covenants that require the company to have $20 million in cash on hand and to achieve positive Ebitda (earnings before interest, tax, depreciation and amortization) results by year-end. Earlier this year, the company was also notified that some investors planned to redeem their warrants for $25 million in cash on March 25, 2025.
Terran is considering getting waivers or extensions for its debt covenants. Bell said the company will be Ebitda positive before year-end.
Terran is “trying to thread a needle,” wrote Melius Research, a stock analysis firm, in a recent report.
“In the near term, Terran must navigate through a challenging funding environment,” the report continued. “Since the [Federal Reserve] began raising interest rates in early 2022, investors are less willing to fund new space companies that have yet to achieve profitability. Terran ended [the first quarter] with $44 million of cash on hand, which gives it less than two quarters of runway based on its [first-quarter] burn rate.”
Terran Orbital said it was suspending financial guidance for the year due to uncertainty about when it will receive payment for its contracts as well as its ongoing strategic review.
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