LLAP - Terran Orbital Corporation (LLAP) Q1 2023 Earnings Call Transcript
2023-05-15 21:45:27 ET
Terran Orbital Corporation (LLAP)
Q1 2023 Earnings Conference Call
May 15, 2023 11:00 AM ET
Company Participants
Jonathan Siegmann - Senior Vice President of Corporate Development
Marc Bell - Co-Founder, Chairman and Chief Executive Officer
Gary Hobart - Chief Financial Officer
Conference Call Participants
Andre Madrid - Bank of America
Mike Crawford - B. Riley Securities
Greg Konrad - Jefferies
Erik Rasmussen - Stifel
Robert Spingarn - Melius Research
Gene Inger - Inger & Company
James Byron - Ostrowski Investment Management
Presentation
Operator
Hello, and welcome to the Terran Orbital First Quarter 2023 Earnings Call. My name is Elliott and I'll be coordinating your call today. [Operator Instructions]
I'd now like to hand over to Jonathan Siegmann, Senior Vice President of Corporate Development. The floor is yours, please go ahead.
Jonathan Siegmann
Thank you, Elliott. Good morning, everyone, thank you for joining Terran Orbital's first quarter 2023 earnings call. With me this morning are Marc Bell, Co-Founder and Chairman and Chief Executive Officer of Terran Orbital Corporation; and Gary Hobart, Chief Financial Officer of Terran Orbital Corporation. Marc will provide a business update and highlights for the past quarter, and then Gary 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 risks 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 statements 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 Marc.
Marc Bell
Thank you, John. And thank you everyone for joining our first quarter 2023 earnings conference call. I am excited with our year-to-date performance especially our order flow. A new, even broader mix of customers are increasingly looking to Terran Orbital with the design and manufacturing other satellite constellation and new space based projects.
Customers are choosing us because of our 10-year plus track record of success, our state-of-the-art design and mission breadth, our rapid pace increased manufacturing speed, and our world-class quality. We added a $2.4 billion, 300 satellite order from Rivada Space Networks in February, which we believe is the largest single constellation award -- commercial constellation award ever. This has driven our March quarter end backlog to over $2.5 billion.
In addition, we are pleased to announce today that we have signed a new $87 million, 16 satellite order with yet another new customer. This award combined with several other awards we recently signed brings our total order book to over 30 programs. More to say on this, but our pipeline to order conversion year-to-date is a standout highlight.
Now turning to our overall performance and quarterly updates. First, I am happy to announce that our team's positive momentum continues across our Space Development Agency contracts. After our successful delivery last year of our 10 Transport Layer Tranche 0 satellite to our partner, Lockheed Martin, we are very much looking forward to their launch next month. These Tranche 0 satellites will demonstrate the low-latency communication links to support the warfighter with a resilient network of integrated capabilities from low earth orbit.
As a reminder, the SDA's transportation layer is a mesh communication network that will use 100s of low-earth orbiting satellite to connect with other satellite layers plus critical ground, air and sea-based systems. As such, the transport layer is foundational to the SDA-based architecture for this decade and beyond. We are pleased to contribute it’s critical National Security mission through the work on the first award to this layer, known as Tranche 0 and Tranche 1.
Our team is hard at work manufacturing SDA's Transport Layer Tranche 1, their 42 satellite order, and we are pleased to confirm that we are on track to begin delivery of the first batch of these satellites during 2023, and the balance by the end of the first quarter of 2024. Tranche 1 will be the first operational generation of the proliferated warfighter space architecture and it's schedule for deployment by the SDA in late-2024. The Space Development Agency strategy for construction of this advanced base architecture, which will consist of 100s of satellites, has been to rapidly acquire and deploy lower orbit satellite [confronted] (ph) every two years. The SDA recently issued a solicitation with Tranche 2 satellite, and we expect this award to be announced later this year.
We believe our experience and track record with Tranche 0 and Tranche 1 in partnership with Lockheed Martin, differentiate us and position us well for additional awards for the Space Development Agency. Many of you are familiar with our relationship with Lockheed Martin. This seven-plus year strategic partnership was recently extended through 2035, and we continue leveraging the full spectrum of our combined capabilities to support the Space Development Agency. Tranche 2 is a transport layer, along with the space development layer opportunity remain key pursuits for our team over the next 12 months.
Second, we are very pleased to update you on the company's record $2.4 billion contract, design, manufacture, integrate and test 300 satellites for Rivada Space Network. As we announced last month, we have received a further milestone payment along with completion of the screening of our industrial partner. This vision will consist in satellites orbiting a low-earth orbit on multiple planes using laser communication terminal. Our initial $2.4 billion contract covers only the first 300 satellites.
The contract includes an option for Rivada to purchase an additional 300 satellites at an additional cost. The contract is broadly grouped into a design phase and a build phase. We are currently executing on the design phase, which includes a -- demonstrate emission that will support the verification of gateway less transmission from one user to another, routed within a small network of four satellites in space Mission operations for the on-orbit demonstration satellites will be conducted from Terran Orbital's new state-of-the-art satellite -- new state-of-the-art satellite operations control center, which is currently under construction in Irvine, California.
An additional 25 satellites will be built and commissioned as part of this phase. The build phase which is delivering the balance of the 300 sellers in late 2025 and the first-half of 2026. We are still ramping this program and recently received a milestone payment, Rivada revenues are projected to steadily ramp up in the coming months.
Third, we are thrilled to announce today an $87 million award from a new customer for 16 low-earth orbit satellites. We are pleased to be partnering with this new customer, who has a long history of advancing space technology. We see ourselves not just as a pioneer, but as an industry leader and a supplier of choice, which is validated by our most recent constellation contract awards. Our backlog and pipeline both remained robust and as of March 31, our backlog stood at $2.5 billion, representing orders for over 360 satellites and our pipeline has $11.8 billion. These March 31 metrics includes a successful conversion of the Rivada Space contract from pipeline to backlog, but exclude today's announced award.
In addition to the programs we noted, we have other active programs, many of which are precursor to larger constellation both for the existing customers and as well as new and other customers will remain, who value our deep mission experience and track record. These missions and others we are pursuing are diverse across customers, channel and mission. Including today is the prototyping and development of satellite and supporting a larger potential constellation. While many of these programs are undisclosed today, they serve the seed -- as a seed corn for a larger potential constellation awards tomorrow.
Our announced Lockheed Martin LINUSS mission success of two Terran Orbital geosynchronous satellite completing the Rendezvous and Proximity operation demonstration is just one example of the revolutionary program our team is currently working on. Another is our record-setting NASA Pathfinder technology demonstrated three satellites, which enabled a record 200 gigabits per second space to ground optical link. Low-latency, secured communication, proliferated systems, speed to orbit, technology innovation, each of these are customer demands for which we are delivering advances [Technical Difficulty].
Supporting all of these orders and opportunities is our vertically-integrated scale design and manufacturing capability. We are investing in world-class production system to support execution of our 360 satellites backlog and over 2,600 satellites identified in our pipeline. Our new facility, which we call 50 Tech in Irvine, California adds a 60,000 square feet of workspace and brings our manufacturing capacity of approximately 20 satellites per month, once the facility is fully commissioned, later this year.
Critically, this includes testing equipment, printed circuit board assembly equipment, and robotic and automated assembly lines to vastly improve throughput, quality and speed. And we are pleased to announce we are progressing with the development of our recently announced 90,000 square foot facility also in Irvine, which we expect to increase our capacity to multiples of our current capacity after commissioning in late 2024. Importantly, this new capacity includes 36-foot highway for assembly and integration of significantly larger satellites.
In summary, Terran Orbital has established itself as a leading supplier of the enabling satellite infrastructure of the new space page. Constellations of smaller, low-earth orbiting satellites are the preferred architecture of the future. What used to cost billions and take a decade to launch, Terran Orbital is building at a fraction of the cost in months. Our investments in scale, vertical integration and automation leverages our 10-year legacy. Our production system is designed to deliver satellites at a mass scale and at a speed and quantity our customers desire, at a price point to stimulate new markets and at margins to reward our shareholders. We are thrilled our strategy was recognized by the two new franchise contract awards in recent months.
Now let me turn it over to Gary to review our financial performance in the quarter and provide a financial outlook for the full-year. Gary?
Gary Hobart
Thank you, Marc, and good morning, everyone. I'm happy to report that in the first quarter, we achieved multiple milestones in satellite production, resulting in a record first quarter revenue of $28.2 million for the first quarter of 2023. This is a 115% increase over the same period of the prior year.
As a reminder, we recognize revenue on most of our programs on a percentage of completion basis, and adjustments and changes to our contract values and estimated cost of completions or EACs have a cumulative impact in the period in which we make the adjustment. In the first quarter, adjustments to EACs increased revenues by an estimated $800,000. Gross loss was $1.4 million for the first quarter, compared to $2.8 million in the same quarter in 2022.
Excluding share-based compensation and depreciation and amortization included in cost of sales, adjusted gross profit in the first quarter was $2.3 million, compared to adjusted gross loss of $0.2 million in the same quarter in 2022. EAC adjustments positively impacted adjusted gross profit by an estimated $1.5 million during the first quarter of 2023.
Selling, general and administrative expenses were $32.5 million in the first quarter of 2023, compared to $30.2 million for the same quarter in 2022. The increase was primarily driven by higher research and development activities, labor and benefits, and other costs as a result of our growth initiatives, offset by a decrease in share-based compensation expense. We continue to increase our staff to meet upcoming demand. Share-based compensation is an important part of acquiring and retaining employees.
Although down year-over-year, share-based compensation still represented over $10.2 million of our first quarter expenses with approximately $6.9 million running through our GAAP SG&A expenses and $3.2 million balance, reflected in our cost of sales. Subject to future equity program activity, we currently expect share-based expenses could be being below $7 million per quarter through the balance of this year.
Adjusted EBITDA was negative $22.6 million for the quarter, compared with negative $14.7 million in the same period in the prior year. The decrease in adjusted EBITDA was primarily due to an increase in selling, general and administrative expenses related to higher research and development activities, labor and benefits and other costs as a result of our growth initiatives, partially offset by an increase in adjusted gross profit.
Overall, adjusted EBITDA loss is largely a function of our ramping capabilities across the company to serve our multibillion dollar backlog and pipeline in the coming quarters and years. This is part of an overall investment in our capabilities that supports our path to profitability, for which we are well positioned, particularly given the strength in our signed order book.
Our backlog at the end of the quarter was $2.5 billion. Capital expenditures for the quarter were $3.2 million. Finally, as of March 31, we had approximately $57.4 million of cash on hand, and approximately $305.3 million in gross debt obligations.
Now for outlook. We are very excited about our outlook for the coming year. The efficient and successful execution of our new and existing contracts remains the number one priority for our team. The exact timing of execution on our new contract work is the primary variable affecting our projected full-year 2023 results. But these contracts are the building blocks for what we believe will be a substantially higher sales base in 2024.
Given our current view of our seat ramp ahead, we anticipate in excess of $250 million in sales in 2023. Upside beyond this level is possible depending on a successful execution of our customer commitments, just as our ability to achieve this target will be impacted by such execution. The timing of our new capacity commissioning and our anticipated scheduled contract milestones with LIBOR revenues to be weighted towards the second-half of this year, particularly in the fourth quarter.
We expect gross margins to demonstrate year-over-year improvement, but pace in improvements may be variable given the timing impacts. Finally, we note that our CapEx for the year is expected to be less than $30 million.
I will now turn the call back over to, Marc.
Marc Bell
Thank you, Gary, and thank you, everyone, on the call for your continued support of Terran Orbital. I will now look forward to taking your questions, and I'll turn it over to the operator.
Question-and-Answer Session
Operator
Thank you. [Operator Instructions] First question comes from Ron Epstein from Bank of America. Your line is open.
Andre Madrid
Hey, actually you got Andre on for Ron today. Thanks for taking my question. So I wanted to note the CapEx expected spend for the year, along with where the cash balance is at now? How are you guys finding the financing environment largely? Could you give a little more context around that?
Gary Hobart
Sure. This is Gary. The financial environment is, we do a little bit of our equipment expenditures on a financing basis, and there are multiple providers of that, so I feel very comfortable and confident with that. Generally speaking from a finance perspective, we look at the company punch into the market in terms of the equity markets. And as you know, we have a little under $100 million e-lock in place with B. Riley. We have not tapped into it for the last couple of quarters. That is the primary area where we wish we look into the market to add additional capital. But overall, this is a tough financial environment, and we're very mindful of that.
Andre Madrid
Perfect. I will keep it at that one. Yes, go ahead. Go ahead.
Gary Hobart
No we [Indiscernible] there was a follow-on question. Oh yes, and CapEx for the year, if you can just repeat your question?
Andre Madrid
No, yes, it's all, I was just looking at where your cash balance is at now and then where CapEx is looking to be just obviously, and given the comment in your release about continuing to look at perspective financing beyond this point. I just kind of wanted more color as to how you are finding that and how you're planning to go about it.
Gary Hobart
Yes. I think, look, the way we're financing our business is we have substantial growth. As we mentioned, the back half of the year is going to be a significantly higher revenue uptick versus the last several quarters. And so the way, Marc and I and the Board are looking at our finances is really bridging from this point through our profitability. We have a fair amount of working capital needs and obviously, growth needs, and you've seen that in the last several quarters, including the first quarter. So we're matching up our financing with our needs. Overall, we're building to a path of profitability both on an EBITDA basis and a free cash flow basis during 2024. So anything we're doing as far as capital is really looking at bridging between now and that period.
Marc Bell
And we've been very sorry. We've been very lucky in terms of -- because of the type of contracts that we're getting and the size that we are, and how we are a stand out in a new space, we understand a lot of people in our back -- always back that went out, the majority of them are data subscribers. We're a pure brand manufacturer, so we're in a different kind of business. And so we have been seeing a lot of attention from a number of generic financing sources should we choose to go that route. So, we are -- we feel pretty comfortable about our liquidity, pretty comfortable about our options out there, and so -- because of our customer base.
Andre Madrid
Perfect. That's great color. Thanks guys. I’ll hope back in…
Operator
We now turn to Mike Crawford with B. Riley Securities. Your line is open.
Mike Crawford
Thank you. Can you give us some more color on the timing and magnitude of the received milestone payments from Rivada. I think, one may have been before the March 31, balance sheet snapshot?
A - Marc Bell
Yes. So unfortunately, we can't disclose how much they paid for each of the two payments they made to us. We have an NDA with them, and we have to respect that. They want to be in control of a lot of different things, including their capital source.
Mike Crawford
Okay. And in that regard, it's understood that their capital sources have been disclosed to the ITU, but that public has not been made -- that filing has not been made public, yet, that should be the case at or before this upcoming meeting at the end of June. Is that still your current understanding?
Marc Bell
Yes. I think the meeting is July 2, and when I talked to Rivada, they feel they are a private company. They don't have to disclose to the public where their money is coming from. All I can say you, that it's public as Declan Ganley's partner, and starting with Peter Thiel.
Mike Crawford
Okay, Marc. And then regarding 50 T, so I think we walked through that facility 11 months ago, and it was near online, and I think on your last conference call, you talked about it being online April 1. And now you're talking about full commissioning. So am I correct to understand that there are some satellites that are being assembled in that facility as we speak?
Marc Bell
Everything is currently still being done at the Barranca facility. The local electric company has taken their time in getting our power turned on, and that's why we're not upgraded to the building. And so, we're at their mercy to some extent. A lot of the equipment has been delivered. The PCBA lines have been delivered, but it can be powered up yet. We're hoping to power everything up starting next month, and then go through some testing over the summer. So we are -- but that being said, that building -- the first big constellation that will be built in that building is SDA's Transport Layer Tranche 1. Everything else is being done in the existing facility.
Mike Crawford
And when you talked about.
Marc Bell
So by -- so let me give more clarity. So by August of 2023, we expect that building to be in-use, 100% in-use.
Mike Crawford
And at that time, when you're talking about the capacity of 20 satellites per month, are you talking about Tranche 1 Transport Layer size buses?
Marc Bell
Correct.
Mike Crawford
Or could you do more.
Marc Bell
That is our -- not huge sets. You're 100% correct. This is going to be all 450 kilograms, 500 kilogram type size buses, that will be done there.
Mike Crawford
Okay, alright. Thank you very much.
Marc Bell
Well, thank you for coming.
Operator
Our next question comes from Greg Konrad with Jefferies. Your line is open.
Greg Konrad
Good morning.
Marc Bell
Good morning.
Greg Konrad
Maybe just to start. I mean, you mentioned screening of industrial partners for Rivada. Can you maybe talk about that a little bit? Supply chain readiness and just given that you manufacture a lot in-house, just kind of how you're thinking about that screening that you mentioned in the script?
Marc Bell
Sure. So we manufacture 85% of the components today that go inside of a bus, and we are working diligently to get to 100% by the end of the year, with the exception of solar panels, which are manufactured by Lockheed Martin. So when we're see screening industrial partners, we're specifically talking about the payload. So the only payloads we manufacture in-house today as Synthetic Aperture Radar and certain kinds of RF radio. And for payloads we go to the outside. So we have been screening and choosing with Rivada Network, all the different payload partners who will be part of the constellations, and then reviewing their supply chain to ensure that they can get things done on time.
And on the supply chain issue, I'm going to mention, one of the -- a lot of conversations we're having now with partners who are having a supply chain issue, the number one supply chain issue everybody is having comes with printed circuit board. Printed Circuit Board Assembly has been the whole bet of -- has been the biggest problem. And so us having two state-of-the-art printed circuit board assembly line operational by this summer will provide our own supply chain, where we -- as we will be manufacturing components for our supply chain in order for our own satellites and possibly for some of their other customers as well. So this is a huge difference in how we do business with our vendors.
Greg Konrad
And then maybe just more of an accounting question, but you mentioned the ramp around systems engineering for Rivada. You had some positive EACs in the quarter. And I think you mentioned most revenues are under percentage of completion. When you think about a large program such as Rivada, is there a difference in profitability between the engineering and when you get to manufacturing? Or is that all one program from an accounting profitability perspective?
Gary Hobart
Yes. So we haven't given the precise accounting on it, but Greg, some of the accounting on a program that large will have a mix of margins in them based on the type of cost.
Greg Konrad
Thank you…
Marc Bell
I mean, obviously, as you do the largest scale assembly, you have milestones to hit, your more gross profit dollars will hit. So we are cognizant that we -- our path to getting to EBITDA positive, next year. And so, as the assembly and the delivery of these new satellites gets completed, that will have a dramatic impact on our bottom line.
Greg Konrad
And then maybe just one last one. I mean, thinking about the pipeline and the contracts you've announced recently, whether Rivada or the new one that you announced in the quarter, I mean, are you seeing a drift higher around ASPs per satellite versus some of those initial awards and kind of what's driving that?
Marc Bell
So we see on -- it's interesting. So customers are willing to pay more money for faster delivery. So we had a time period maybe two years ago, where is all that price, priced right. And now, we see customers are a little less focused on price. They are becoming much more focused on quality. You've had a lot of people launch what we call bricks in space across the industry, which only benefits us to deal. Everybody thinks it's easy to build a satellite. It's not that easy.
And our 10-year plus heritage has helped us a lot. So we're seeing people focusing on the quality, on the speed of delivery and slightly less on price. They're obviously all price conscious and they want -- we try to plan deal it's about value. And you can always buy it cheaper, but not everybody wants to drive ugly car. You can always find it. You can always buy a UGO, and drive a cheap car, it doesn't mean you want it.
Gary Hobart
I think Greg, the other thing I'd say overall is we are entering the phase of the last 12, 24 months of really getting to serial builds of constellation versus the prior decade of our existence, where there was a lot of prototyping co-development. And so, what we're seeing is a price point on a serial build base is we're able to deliver to the customer a very consistent price point, even with inflation in the overall marketplace. And we're starting to lap in getting to the other side of some of the more upfront costs, whether it be non-recurring engineering, first article costs, and we're really starting to see that flow through. That will manifest itself on our income statement and our cash flows in the coming quarters.
And I'll be pleased to show that, that demonstrates that. So generally speaking, when we're building this big contracts, we're able to deliver to the customer a pretty consistent value point for the overall serial build of the constellation.
Greg Konrad
Thank you.
Operator
[Operator Instructions] We'll now turn to Erik Rasmussen with Stifel. Your line is open.
Erik Rasmussen
Yes, thanks for taking the questions. Maybe back to the outlook on the revenue. I know, you had mentioned a strong second-half ramp, but how would you sort of weight the first-half versus the second-half, realizing that Q4 is probably the big point of the year.
Marc Bell
Well, Q4 is definitely the big point of the year. I mean, I've told you all, unlike companies that are like your mobile -- your AT& T Mobile is something where you have monthly recurring revenue to go on, our revenues tends to be fairly lumpy mustered around module, building and the assembly of the satellite. And so, we are -- as we are growing at such a rapid rate, we still find lumpiness in our quarters, but the goal at the end of the day, we look for the total revenue for the year, I wish to say. But I'll turn over to Gary, if you want to add some color?
Gary Hobart
Yes. So we've guided to over $250 million for the year. I would -- just to give you a rough guidance point, I look at fourth quarter being 4 times our first quarter.
Erik Rasmussen
Okay. That's helpful. And then, maybe just you mentioned possible upside. What are the factors that could contribute to that upside? And then, you mentioned some gating items probably around execution or timing?
Gary Hobart
Yes. Well, we recognize revenue generally by best adding value into programs and value of the programs is everything from direct labor and overhead, our internal modules, and then third-party parts and services. As we're able to execute on all three of those that adds value to the programs, which better generates both cost on the programs, but also generates most of our revenue. So if we have programs in the ramp we have, a weak acceleration or a week delay has a big impact on the month and in the overall quarter.
So what I'm trying to articulate is, with the type of lift we have in overall execution, you can have variability up and down throughout the months and quarters to come. And that's maybe the best glossy way of describing timing on what it means. And that's why, we've guided to $250 million and indicated that it could be substantially higher, but also hitting $250 has execution challenges, and it has mostly to do with how we deliver those three categories into overall value of the program there.
Marc Bell
And we're seeing -- we've dramatically expanded our business development group over the past year. We went from a few people to over 30 people in the group. And we're seeing that turning into RFIs and RFPs, where you would only have a few added any given point in time, we are seeing -- and again, we are seeing ourselves now with an enormous number of RFIs and RFPs that we've issued in the past few months. And we will expect those numbers will turn into new contracts over the next few months. So in addition, we will be bidding on almost all of the SDA work that's coming out, going forward. So as a transport layer, alpha, beta, and gamma, we'll be bidding on all three of those. We are looking at bidding on the tracking layer. We are doing this with our partner, Lockheed Martin, and we're thrilled to be doing it with them.
And so, we have the May 11 solicitation for our 100 alpha satellite, and that follows the early request to 72 satellites for their beta liquidation. They are breaking the transport layer into different pieces now. And so, we feel that we have performed fabulously so far. And then, once the FDA said “those who deliver are those who keep winning". We have delivered. We delivered first Tranche 0 ahead of schedule, and we delivered them gift wrapped [Indiscernible] this morning we've seen the need out there.
And we will continue to -- but more importantly, our business development group is expanding, and we are setting up more and more RFPs. And as we expand our manufacturing footprint, we're getting more and more interest from people to build larger and larger constellations and larger and larger satellites. So this will give them all this positive data points metrics in the development of our business, and where we feel pretty confident so far.
Erik Rasmussen
Great. And then maybe just on the margins, you expect sort of improvement. Would you expect both GAAP and adjusted gross margin to be positive in Q2? And then obviously, for the year, you'll see that trend throughout. And just remind us what the targets are for maybe gross and operating margin?
Marc Bell
When we see margins continuing to improve. What's happening here is since we're so small as we hire, we hire a bulk of people for Rivada, for this new customer and others that we believe that we will be getting. It has -- does have a negative impact on our financials group has to hire people from six months ahead of program to get them up to speed and you're building facilities almost 18 months ahead of program. So eventually, things will start to level off.
But I'll let Gary give you some more color.
Gary Hobart
Yes. We generally see ourselves ramping to the high-teens throughout this year, mid-20s in the prior year and then just less than 25 to 30 in outer years. And part of that’s going to be -- a part of that is going to be the mix of the programs that we're working on. A lot of the programs that we're working on now and old backlog have a lower margin base, and the newer programs have a slightly higher base.
Erik Rasmussen
Great. Maybe just my last one. On the new award, the 16 satellites, maybe any additional color on this award. The deal suggests and I think we have talked a little bit about ASPs earlier, but it's about $5.5 million per satellite. That's sort of in between the Rivada and the SDA. And then, maybe just comment on the timing of when these satellites will be delivered. Thanks.
Marc Bell
As we deal with some customers who have more confidentiality than others. At the customers request, we would not like to give any more information other than that.
Erik Rasmussen
Okay, great. Thank you.
Operator
We now turn to Robert Spingarn with Melius Research. Your line is open.
Robert Spingarn
Hey, everybody.
Marc Bell
Hey, there.
Robert Spingarn
Marc or Gary, as you build out this $250 million plus in revenue this year, what program should we think are driving that? I assume, Tranche 1 is a big piece of that. It's not clear if Rivada is or not or any of this other stuff. So how do we think about the $250 million from a program support perspective?
Marc Bell
I mean, Tranche 1 is a big part of it. Then you have Rivada right after that, and you have this new customer, and there is some other things coming down the pipe. But Tranche 1 is by far the largest part of that component, we're going to deliver, call it, two-third of Tranche 1 in calendar year 2023.
Gary Hobart
Yes, in the overall backlog is -- we're like 30 programs. And so, while there might be some 1s and 2s in there, there are some other programs that we are confidential, we haven't mentioned, but they contribute in aggregate to the overall numbers. So I can hear what Marc is saying, but there is a mix of deliveries this year. Keep in mind, that most of the orders we get for turning around in two years. Rivada is a little bit of an outlier albeit it's greater satellite call it over three years.
Robert Spingarn
Okay. And then I just wanted to think about the backlog a little bit. I mean, the backlog is obviously highly weighted towards the Rivada order. So you got $2.5 billion in backlog, $2.4 billion of that is Rivada. So it kind of suggests that the 60 non-Rivada satellites are $100 million in backlog, but I'm not sure that reconciles with Tranche -- with that Tracking 1, and the other stuff you're doing. So is there a better way to think about this?
Gary Hobart
I think, with what we've disclosed is we started the year about $170 million backlog before we included Rivada, and we did for roughly $29 million to $28 million in the first quarter. So that might help you get to kind of a pro forma of the January 1 backlog. I think, that will help you to kind of scoot around on that.
Robert Spingarn
Right and the $87 million?
Marc Bell
And just regards to -- sorry, we're not doing Tracking 1. So you said tracking one, we actually didn't bid on Tracking 1, so we have strategically chosen not to.
Robert Spingarn
I'm sorry, Tranche 1.
Marc Bell
Fine. Okay. Just to make sure you hear that right too.
Robert Spingarn
Tranche 1?
Marc Bell
Got it.
Robert Spingarn
Yes, right. But you understood what I was getting at, is the $87 million in there? Or is that post March 31?
Gary Hobart
That's not in there. So all the numbers we've given include the conversion of Rivada into backlog as of March 31, but the newly announced deal today is not in the numbers.
Robert Spingarn
Okay. And then, the other thing I wanted to ask you, Marc, as we think about future opportunities beyond what we've already talked about today, where are some of the other opportunities outside of these two or three contracts that we focused on today?
Marc Bell
Some of these opportunities are SDA. They've got -- they have got seven new bids going out. But the three -- starting with the three new transport layer bids we're bidding on, we're going to bid on Tracking, and possibly some others. So that's just one small part of a very, very big pie.
Gary Hobart
The other thing I'll add is the cost. It is -- overall there is -- there's a lot of positive feedback loop in the marketplace. As we add and complete the existing programs and add more programs, there is a feedback loop within the marketplace where other customers are looking to us to leverage off of that experience and that track record to produce programs for them. And so, in the last six months in particular, but maybe even 18 months, our track record is really allowing us to get in and have good purchase with new constellations, both on the civil -- on the government side as well on the commercial side.
Robert Spingarn
Okay. And the only other thing I was going to ask, Marc, is as you get through your capacity ramp, I wanted to clarify when the most significant milestones are? Is it at the end of ‘24, would you have most of your capacity in place? And what's the revenue capacity at whatever that milestone is?
Marc Bell
Capacity is a never ending thing, I'm hoping. I'm being an optimist, what we say it's never, but you know it will always add capacity. We are looking at -- we have 20 buses here in 50 Tech as we call it. We are with the new facility that -- perhaps is on good year like for a good year. That allows us to get into the $1 billion revenue category. But more importantly, that new facility not only allows us to build buses, but build full satellite, so we can do the payload, where we do the solar panel assembly, we can do everything under one roof, which is a big game changer for us. We do payloads on small satellites, like 12Us and stuff like that. But we couldn't do the payload, for example, on a T-0 and the existing Barranca facility. So the new add facility really takes us to the next level. So we will build Rivada in that facility. So that will only take up about one-third of the facility. So we have two-thirds available for other customers who we're talking to today.
Robert Spingarn
Right. Is there a good rule of thumb for what the ASP, [LASP] (ph) changes when you add in payloads?
Marc Bell
Yes. It ultimately is a satellite. You can build a -- I mean, I agree with the satellites over these satellites for $300,000 with a very high failure rate, but test. Everybody is -- every customer is different, because we have been selling, I think, our largest we have right now is 800 kilogram that we're building. The way we viewed it as long as it fits on an ESPA Ring or ESPA Grande we'll build it, that's kind of what we are -- the satellites are getting larger and larger. They wanted -- we went over time people want it smaller, they want it cheaper, we were starting with a CubeSat. CubeSat changed at all. And then, when we took a CubeSat, we started making it bigger, you know we'll be able to take three CubeSats and put them together, what we call the 3U, and it was a 6U, when six put them together. They started getting bigger.
And what's happened is, they went from demonstrator to people who really wanting more power, they need more batteries. They want larger solar arrays. So now you went from trying with 0 kilograms to 350 kilograms, to try and fly 450 kilograms, and now we see new ones coming in the 500 kilograms to 600 kilograms range. People want more power. Well, it should be they're seeing it no longer as demonstrated, but fully functioning replacement with geosynchronous satellites that can be built and launched through current technology. And yes, there is a replacement cycle to the recurring revenue business. So every satellite we built now for constellation has to be replaced every five years, but that's still phenomenally cheaper than building it in geosynchronous orbit, and it allows them to continue to upgrade their technology, just like the SDA does with each tranche, they continues to update the technology on each satellite. So the art business becomes a recurring revenue business down the road. But you're talking out, but that's only that's a few years out.
Robert Spingarn
Right, right. Thanks for all the help.
Marc Bell
Thank you.
Operator
We now turn to Gene Inger from Inger & Company. Your line is open.
Gene Inger
This is my first time on one of your calls. We just recently initiated coverage as a buy in this price range for Terran. So obviously, we see superb prospects and congratulate you on what you've achieved so far. I do have a question speaking of business development. As to cross-ownership in the small world of space, between AE Industrial, Bain Capital, and whether or not you expect some of this to come together over time, whether it would be the Australian program, the Crescent and so on -- or that Lockheed, or whether or not you're going to be involved with constellations and space management, such as BigBear.ai is doing or anything like that. Could you expand a little bit more on whether or not you're going to be limited to manufacturing?
Marc Bell
We are not limited to anything. We can do anything that we want to do, anything that our customers want. So we do see a lot of -- we will, we do insist we have continued consolidation in the space. You saw Millennium got acquired by Boeing. Blue Canyon got acquired by Raytheon, AE got acquired -- I'm sorry, but York got acquired by AE. So we'll continue to see consolidation in the space, but we could if we chose to expand beyond satellites. And do other space-based initiatives or ground-based initiatives for that matter as we do own a ground-based network. And we do, do mission operations and you know, we couldn’t even get day out, you know, that is something we have been talking about a lot here. We'll have more on that later on this year.
Gene Inger
Well, I'm glad I brought that up. Thank you, Marc. And also, my only other question because so many have been asked is many of the older shareholders come back from the stack days or from beach point or from what they call, Tyvak, the original CubeSat designers, and they still have a lot of shares. How do you work through? Or could you and/or Lockheed eliminate that concern among shareholders, and therefore, eliminate overhead supply in one fell swoop?
Marc Bell
Well, the reality is you have, I mean, as you're talking about the original investor, the people like myself who aren't going anywhere, you have guys like myself, you have Marco Villa to myself, Marco Villa, Lockheed Martin and maybe a handful of others, we're 50% of company -- so there are not. So we don't see any -- one or two former employees to own a few million shares, but they could do the -- those who have made the mistake have chosen themselves, that's their choice, and we all believe in the company, and we're sticking around.
Gene Inger
Great. I appreciate it, and I really like the Lockheed association. And given the suppressed share price, I'm hopeful that they do not acquire you, I think they won't for competitive monopolistic purposes anyway. But I should ask whether or not that allows you to maintain adequate profit margins or they have a leverage in negotiating that makes it hard for you to make money on the 11 or 12 programs you have going on with Lockheed?
Marc Bell
Lockheed has been an incredible partner, and they, more than anybody else would like us to become profitable as soon as possible and they've made that very clear. So we are working as quickly as possible. So they are aligned with the shareholders being a large shareholder, they want us to see profitability and they wanted it's stock go to where it needs to go and happy where it's at now. So they have been a big supporter of us to get to profitability as soon as possible.
Gene Inger
Great, I'm looking forward to that as well. congratulations, and will see you another time.
Marc Bell
Thank you very much.
Operator
Our next question comes from James Byron from Ostrowski Investment Management. Your line is open.
James Byron
Questions were -- answers, well I was in the queue. My only, I guess, comment is that I was a bit alarmed that your sales doubled year-over-year, and you weren't able to leverage any of your fixed costs, so that -- into the operating margin line. I know, you're doing a lot of hiring ahead of time, but what -- like I said, what I get concerned about is I look at the statement of cash flow. And if I do a very quick analysis, you're going to run into a cash crunch in about six months.
And the other thing going back to the cost of sales, what it tells me is that, since you could -- it didn't look like you were able to leverage any of your fixed costs, your variable costs are growing faster than your sales are, which does worry me a bit. It's just a comment because I've been through a number of startups before, and I've seen this kind of thing happened in. Right now, your stock in the market is about -- down about 8.5%, 9%.
So I think, other people are concerned about this, too. I'm not asking you to -- I mean, I heard a lot of the commentary, I just hope that this can turn quickly so that if you're going to burn through cash, you've got to get it from somewhere, and it's going to be really hard to raise it in the open market given your -- where your stock price is, right now. So I'm just -- I'm in a different camp of a few other people, I heard on there. I'm just -- I'm a little concerned about what I see. That's all.
Marc Bell
No. I mean, we are an experienced management team. I mean, this is my partner, to my Dan and I, this is the 17th company we've taken public. We've raised over $20 billion of equity and $100 million of debt over the course of our careers combined. So we understand the capital market. We understand how to grow our business from scratch. This will hopefully be between the two of us, [Indiscernible]. So we are very much aligned with you. We understand -- unfortunately, sitting where I sit, I see things differently. All together we have a lot of information of where we're going, how we're getting there. So we've had to go ahead and make sure we had be started as a very young for years. We were a tiny little company that built CubeSat.
And I took over as CEO a little over 2.5 years ago. And we decided at that point to partner with Lockheed Martin, and we are growing it around the space. So yes, we are spending money. We have $100 million e-lock, as Gary mentioned, in place with B. Riley. And we have lots of options in the capital market, but we're going to be smart as we move forward. The last thing we want to do is we're trying to be smart as we raise capital, as we do lease our equipment out. But eventually, you'll see very quickly as these new facilities come online and these new programs start filling, that things turn very quickly in terms of revenues, in terms of profitability, and in terms of cash. And Gary, do you want add more?
Gary Hobart
No, I'd say if you think about what we're looking out with the $2.5 billion backlog, the facilities, the labor, the process, the automation, all that's built in to feed into that. And it's hard to describe the difference between the lines in our income statement that are fixed and variable. A lot of the labor, a lot of the SG&A you're seeing is the precursor to be able to deliver in value to the programs. And so, you'll see numbers that show up in SG&A moving into the COG line, as new labor prudence comes online and has been here, if you have a new hire that's been here for one or two months, they're not going to be contributing to the program side of things for at least six months.
So you'll see things moving up the income statement into the COG line, and then from the COG line into revenue and then ultimately on margin. So, think of it in terms of building a business that's looking to generate $1 billion a year of revenue. And that will kind of give you a perspective on how we're trying to stand up the company as far as cost now versus performance later.
James Byron
Yes. I understand everything you're telling me. And I mean I've been a part of 3 start-ups, Unfortunately, all them of them went bankrupt. I have also been a part of a number of smaller companies that have gone through exactly what you're going through, and it's -- they were in different businesses, so it could be different. But we try to make sure as we ramped up, I mean, if we had sales double year-over-year, we are trying to make sure we leverage some of the fixed costs as we went along. So I don't -- I haven't done 17, but I've certainly done a number of companies, and I've seen some work and some not. So I just -- like I said, when I saw this income statement, I was a little bit concerned. But anyway, I heard what you said it, so I'll just -- we'll just keep watching, so. Thank you.
Marc Bell
Thank you for coming.
Operator
We have a follow-up question from Mike Crawford with B. Riley Securities. Your line is open.
Mike Crawford
Thank you, a little follow-up towards your comment about integrating full payloads and solar panels in addition to buses in the new facility. And that -- in that regard, can you remind us like how proprietary you think your own potential Synthetic Aperture Radar payload solutions might be versus others? And if you could comment on likelihood or a number of conversations of any of these resonating with potential customers that contract with you to build something like that for them?
Marc Bell
So I'll start on -- star panels specifically are incredibly exquisite. They were built originally for the Missile Defense Agency, what was a classified program, it got declassified by Georgia Tech Research Institute. It was paid for by the tax-payer dollars, we thank you for that. And it is an absolutely exquisite antenna. But we are -- but that being said, most of the customers we are talking to about that are a lot of government customers. And so, I can't go into the detail of who we're talking to about it, but it is a very unique American made, which is an important program, and I'm going to leave it there.
Mike Crawford
Alright. Thank you, Marc.
Operator
Our next question comes from [Ari Santillo] (ph) from Orange Consulting. Your line is open.
Unidentified Analyst
Hi, thank you for taking my question. I was wondering about Rivada's waiver that's coming up for your September 2023 delivery?
Marc Bell
You have extra -- I mean, we know everything you know about the IT. We have no information other than what is publicly filed.
Unidentified Analyst
Fair enough. Thank you.
Marc Bell
Thank you.
Operator
Our final question comes from Christopher Frost, a Private Investor. Your line is open.
Unidentified Analyst
This question is for Marc. I have -- you stated that you have to replace -- satellites get replaced every five years. And I'm wondering with the current amount of satellites you produce, can you keep that flow going?
Marc Bell
That is the reason. Well, it's a good question, and that is the reason why we announced that new facility. So the one is under construction right now will help us, so we can continue to build to keep with that demand.
Unidentified Analyst
Now, my other question is, this Merritt Island. Is that still a go?
Marc Bell
That was killed by a bald eagle almost over a year ago, exactly.
Unidentified Analyst
Okay, thank you.
Operator
Ladies and gentlemen, today's call has now concluded. We'd like to thank you for your participation. You may now disconnect your lines.
For further details see:
Terran Orbital Corporation (LLAP) Q1 2023 Earnings Call Transcript