Terran Orbital Corporation (NYSE:LLAP) Q3 2022 Earnings Conference Call November 9, 2022 11:00 AM ET
Company Participants
Jonathan Siegmann – Senior Vice President, Corporate Development
Marc Bell – Co-Founder, Chairman and Chief Executive Officer
Gary Hobart – Chief Financial Officer
Conference Call Participants
Elizabeth Grenfell – Bank of America
Austin Moeller – Canaccord Genuity
Erik Rasmussen – Stifel, Nicolaus & Company
Joshua Sullivan – The Benchmark Company
Gregory Konrad – Jefferies
Michael Crawford – B. Riley Securities
Robert Spingarn – Melius Research
Alex Owen – Fuel Venture Capital
Operator
Hello, and welcome to today’s Terran Orbital 3Q 2022 Earnings Call. My name is Elliot, and I’ll be coordinating your call today. [Operator Instructions]
I would now like to hand over to our host, Jonathan Siegmann, Senior Vice President of Corporate Development. The floor is yours, please go ahead.
Jonathan Siegmann
Thank you, Elliot. Good morning, everyone, and thank you for joining Terran Orbital’s Third Quarter 2022 Earnings Call. With me this morning from Terran Orbital are Marc Bell, Co-Founder, Chairman, Chief Executive Officer; and Gary Hobart, Chief Financial Officer. Marc will provide a business update and highlights for the 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, Jon, and good morning, and thank you to everyone for joining our third quarter 2022 earnings conference call. I am thrilled to update you on our results and our latest operational highlights from the quarter, the macro environment for our solutions and the exciting $100 million investment in new strategic cooperation agreement with our partner, Lockheed Martin. Then Gary will provide more detail on our financial results and strategic investment, and then we’ll be happy to take your questions.
For those of you who joined for the first time, Terran Orbital is a global leader in satellite products, primarily serving the United States and allied aerospace and defense industries. Our pioneering work helped revolutionize the space industry by developing highly efficient, innovative and cost-effective satellite solutions at a fraction of the cost and production time of the prior generations of satellites.
For the third quarter, we are pleased to report a record $27.8 million in revenue, a 100% increase year-over-year as we continue to execute on customer contracts. Our backlog was $198 million, and our pipeline consists of more than 140 identified opportunities, representing a value of approximately $15 billion of potential customer revenue as of September 30.
Our manufacturing execution continued to build efficiencies, and we remain on track to deliver all 10 SDA transport layer transfer satellites by the end of the year. SCA or space development agency, Terran Orbital has added over 140,000 square feet of manufacturing and office space at Irvine alone in the past 12 months, and we will continue to grow our head count to over 440 skilled personnel as of September 30. In addition, the further expansion of Terran Orbital’s advanced manufacturing capabilities, which was originally planned to be located on Florida Space Coast in partnership with Space Florida, has been accelerated and will now be in Irvine, California.
As we look at the macro environment, demand continues to strengthen. Now more than ever, satellite solutions are critical to U.S. and Allied Defense, which depends on space-based assets for communications, missile tracking and geospatial intelligence. As traditional large satellites have become vulnerable to the anti-satellite weapons of hostile powers, the U.S. has initiated the rapid transition to a resilient distributed network that will consist of thousands of small satellites. These satellites, which are Terran’s particular areas of expertise, can be quickly developed, deployed and replaced to maintain the most advanced capability developed.
The geopolitical situation is dynamic. Just 2 weeks ago, Russian President, Valdimir Putin escalated global tension by announcing that he considered U.S. satellite to be legitimate targets for Russian anti-satellite attacks. This threat highlights the urgency of the U.S.-covered new satellite consolidation initiative. Terran Orbital is proud to be working to deliver 52 satellites as part of the first 2 phases of the Space Development Agency transfer layer.
In Congress, there continues to be broad bipartisan support for National Defense Authorization Act. Both houses have advanced the bill proposing significant increases in the 2023 defense budget and prioritizing research and development and space programs. Funds are earmarked for development of resilient space capabilities, including low earth orbiting satellite systems, tactically responsive space programs and the integration of commercial space capabilities.
This brings me to our exciting announcement last week of an expanded partnership in collaboration with Lockheed Martin Corporation. We are thrilled to report that Lockheed Martin has invested $100 million in Terran Orbital and exchange for convertible notes and warrants, providing working capital, which enables us to dramatically ramp up our industrialized in-house production of cutting-edge satellite solutions and accelerate our path towards profitability. Specifically, we plan to use these funds to acquire additional satellite assembly space, increase module production capabilities and expand our advanced manufacturing ability. Through a new strategic cooperation agreement, which now will run through 2035, we will also pursue new opportunities with Lockheed Martin leveraging our increased manufacturing capacity and capabilities.
The investment and expanded partnership are game-changing developments for our customers and business. With surging market demand for turn orbital satellite solutions, we now have sufficient capital to meet the needs of our customers. We demand flight-proven satellites delivered at accelerated time lines and in greater quantity. Our investments in advanced manufacturing, vertical integration and expanded capacity are occurring at an optimal time to expand Terran Orbital’s leadership in its growing market.
Our expanded partnership with Lockheed Martin is anchored by a shared vision of the potential of our small satellites to improve costs, capabilities and resiliency of critical national security missions. We are humbled and honored by the trust Lockheed Martin, our nation’s largest defense contractor and a leader in space technologies, is demonstrating with this strategic investment.
As we look beyond the third quarter, we expect to deliver the 10 SDA transport layer transfer satellite to Lockheed Martin in the fourth quarter and to begin delivering Tranche 1 satellite in 2023. I commend our team who is working tirelessly to deliver the first 10 transport satellites on schedule. We anticipate our competitiveness and future awards to this critical defense cancellation will be enhanced by our expected on-time delivery this year.
Regarding PredaSAR, last week, we announced a shift in direction. Terran Orbital no longer plans to pursue an investment in its own constellation. That said, 10 orbital specialized selling technologies remain in high demand. And today, we are engaged in discussions with potential partners. Under discussion of options, which may provide radar and radio frequency solutions to commercial and U.S. government customers by building or sell to payloads as a product as opposed to a constellation. Turnover remains committed to our U.S. government customers and is in discussion with them determine the best way forward on existing creditor contracts. This strategic shift at PredaSAR will require much less capital investment, while still allowing us to continue to explore options to deliver unique radar and RF capabilities.
We also plan to expand product as service offerings to address growing and unmet need in adjacent markets to the company’s core offerings, including advanced satellite payloads, subassemblies and component offerings, mission operations and other defense-related products. We will continue to pursue vertical integration, automation and full in-house industrialization, production in our facilities, enabling us to decrease our reliance on outside suppliers and enhance turnouts path towards profitability.
Finally, we are more excited than ever about the growth opportunity before us, our competitiveness within the industry and with our partner Lockheed Martin, the resources are at our disposal to execute on our game plan. In sum, our results for the quarter demonstrate our strong progress, and I could not be more proud with our team. With that, I’ll now turn it over to Gary Hobart for an overview of our financials for the quarter. Gary?
Gary Hobart
Thank you, Marc, and good morning, everyone. I’m happy to report that we continue to execute on programs and build momentum in the third quarter, delivering an all-time record revenue of $27.8 million, a 171% increase over the $10.3 million in the same period last year. Adjusted gross profit for the quarter was $3.2 million. That’s up versus $2.1 million in the same period in the prior year as well as $2.1 million in the second quarter of this year.
EAC adjustments during the third quarter reduced adjusted gross profit by an estimated $2 million, which we believe considers all relevant and known information such as supply chains and related production challenges through September 30 of this year.
Adjusted EBITDA was $13.9 million loss for the quarter compared with an $8.7 million loss in the same period in the prior year and a $14.8 million loss in the second quarter of 2022. The decrease in adjusted EBITDA year-over-year was due to the increase in selling, general and administrative expenses related to salaries and wages, research and development, facility expenses and other operating costs as a result of our growth initiatives, partially offset by the increase in adjusted gross profit.
Finally, as announced last week, on October 31, we received a $100 million investment from Lockheed Martin Corporation in exchange for $100 million in convertible notes due 2027, plus 17.3 million warrants for turnover stock, where both the conversion price of the debt and the strike price on the warrants is $2.89, which is a 15% premium to market. Pro forma at September 30 and on an as converted basis for Lockheed’s investment in the company, Lockheed’s ownership of the company increases from 9.4% to 33.9%.
As for liquidity, as of September 30, we had $35.8 million of cash on hand and $202 million in gross debt obligations. Pro forma at September 30, we received $100 million of investment proceeds from Lockheed, less than estimated $3.3 million of transaction expenses, our pro forma cash was $132.5 million. We believe the company is well-positioned to meet near-term capital needs, including further expansion in Irvine.
We are now focused on continuing to deliver our products on time with high mission assurance with sufficient capital resources on hand and an increase in production capacity, we are well positioned to continue to convert contract awards and continue to gradually improve our profitability. I will now turn back over to Marc.
Marc Bell
Thank you, Gary, and thank you, everyone, on the call for your continued support of Tarren Orbital. I now look forward to taking your questions, and I’ll turn it over to the operator.
Question-and-Answer Session
Operator
[Operator Instructions] Our first question comes from Ron Epstein from Bank of America.
Elizabeth Grenfell
It’s Elizabeth on for Ron. Could you give us some sort of color behind how you’re thinking about the economics around the SAR satellites now? How many you think you could potentially be building, what the revenue associated with them would be with the margin profile of it would be?
Marc Bell
We have begun numerous conversations since announcing it. We’ve had new inquired before, but now we’re responding to people about what pricing looks like, and we are having discussions right now about that. So it’s a little too premature to talk about the margin profile and stuff. But by the next call, we should have a much, much clearer picture.
Elizabeth Grenfell
So do you still think that the market size would be around sort of 100 satellites that you would be building? Or do you think I mean, can we have any kind of color?
Marc Bell
I mean I think the margin is probably far greater than 100 satellites. The Ukraine conflict really put front and center the need for SAR imagery. As you know, Ukraine is the bread basket of Europe. And it’s either raining or it’s daytime and the EO just doesn’t work. And it showed that there is a true shortage of SAR that’s out there.
We’ve had numerous allies of the U.S. inquire after our satellites. People now want to own their own constellation. It’s a potential feeding frenzy. We are talking to Lockheed Martin about other solutions and other ways we can handle this. But we definitely see the market far beyond 96 satellites.
Operator
Our next question comes from Austin Moeller from Canaccord.
Austin Moeller
Marc and Gary, so question number one here. The Florida Gigafactory was expected to support 1,000 satellites a year. With the $100 million Lockheed investment and plans to keep expanding operations in Irvine, what do you project will be the throughput in California as you scale? I think previously you said the 2 Irvine facilities can put out around 250 satellites a year.
Marc Bell
Correct. So when the new facility comes online next quarter, that will bring us up to $250 million. We’ll have announcements later on next year about some other facilities here in Irvine that will be able to keep up with demand. It’s not just the capacity, it’s not just assembly space, but it’s also module production space and automation as we continue to vertically integrate.
So we’re spending a lot of money on robotics, advanced engineering, in order to make those components easier and faster to make and because that then we need more additional space for the assembly of these satellites. So we’ll easily get to the 1,000 number, but more importantly, it was 36 months from the time we would have broken ground in Florida through the time it would have been open. And we saw no path forward to breaking ground anytime soon.
We’re here in Irvine, we’re adding space, we’re adding facilities by taking over existing buildings, let’s call it, an 18-month cycle to get them up and running. So we save probably 1.5 years to 2 years. Lockheed Martin and the rest of the market really is showing that they need capacity faster. The state of Florida was great. We enjoyed working with them very much, but we determined that we just needed to move faster.
Austin Moeller
Okay. That makes sense. And just to follow up, I would assume we would put the SAR satellites within the Satellite Solutions bucket now as opposed to Earth Observation Solutions? And should we still think about for manufacturing EBITDA margin somewhere between like 25% and 35% long-term?
Marc Bell
I mean to answer the first part and Gary will answer the second part. But yes, it should be; going forward, it will be no segment. It will just be our core business. But Gary, do you want to address the margin?
Gary Hobart
Yes. So I agree with the way you look at the margins as well but where we’re going to is 25% to try to get to 35% on satellite solutions for adjusted gross profit.
Operator
Our next question comes from Erik Rasmussen from Stifel.
Erik Rasmussen
Maybe just a clarification. On the Irvine, you said you’ll be at capacity of 250 satellites in Q1 and then that’s sort of the new run rate?
Marc Bell
Well, okay. So it’s a little bit of a misnomer when people talk about capacity. So we can do 250 satellites a year, assuming all 250 are… You’re talking about 20 satellites a month that are spread out over the course of the year. Now as we’ve learned from SDA Tranche 0, that doesn’t happen, because the assembly really takes up most of our space for doing the satellite, it is all happening within 8 weeks.
So we are looking at larger amounts of space so we can do large amounts of satellites if we get done, if it’s hovering like now, to stable 20 a month, we can eventually go 50 a month and 100 a month all in one time. But that means our overall throughout the year will potentially be much larger, it really depends on scheduling. But we’re seeing that everybody wants it now. And so that’s kind of how we’re trying to redo our capacity planning on how we’re going to accommodate people for that now desire.
Erik Rasmussen
Okay. So there’s certain bottlenecks along the way, but that is sort of an annual run rate that you could hit depending on how you overcome some of those bottlenecks?
Marc Bell
Yes. We feel comfortable with that. It’s just at this point, a lot of it is just a real estate game because we are seeing demand for literally thousands of satellites out there that people have RFIs out at this point. And so when we bid on work, we also look at our schedule to what we can accommodate. But as we add more capacity both for component manufacturing and for testing, because we’re also bringing testing in-house across the board, which is a big change for us, and then assembly, it will enable us to do a higher throughput at a faster rate.
Erik Rasmussen
Okay. Great. And then maybe just back on the assumptions for the business overall, we’re sort of in a period where the model is a little bit of influx, but how should we be thinking about the long-term model in relation to beyond 2023, maybe for the next couple of years? Are those assumptions…? How should we be thinking about sort of the top line revenue? You gave us some sort of guidance on the margins, but how should we be thinking about the satellite solutions formally and then layering in sort of where the credits are, if you will, in terms of coming up with sort of an overall look at the business?
Gary Hobart
Yes. So we’re not providing quantitative guidance on that, but the way to think about it thematically is in 2 buckets. We’re going to dramatically decrease our capital spend by moving away from investing in our own constellation. So all being made one major update to the numbers you may have seen in the [spark] deck when we would use back process. I think the other major change will be with a singular focus on designing and building satellites in the Satellite Solutions division. You’re going to see that, that focus enables us to focus all of our energy and capacity on delivering against orders.
So I’d anticipate that relative to where we were looking before, a higher amount of unit count going through and more revenue on that side of our business. In the coming quarters, as we have more clarity on our execution and our conversion pipeline into backlog, Marc and I will start giving more details on our guidance in that regard. But those 2 things, I think, are going to be where we going forward with this announcement about where credits are.
Operator
We now turn to Josh Sullivan from The Benchmark Company.
Joshua Sullivan
We’ve seen some significant financial interest in your markets. You had the York investment, Lockheed is with you guys as well as others. Can you just talk about why maybe having the relationship with Lockheed as a prime is more advantageous than as a stand-alone?
Marc Bell
Sure. I mean the Lockheed relationship is spectacular across the board. Because imagine, we’re still a start-up to some aspects although we’ve been around for some years. But now we have access to over 100,000 engineers and scientists to sit at Lockheed Martin to assist us to whatever we want to do. So it’s like having a mentor that’s on a phone-a-friend that’s always available 24/7. And they have been absolutely spectacular in helping us and encouraging us and giving us advice as to what we should do right, what we’re doing wrong and how we can move faster and do it better and cheaper and provide more value. And the help they give us has just been invaluable in speeding our business plan along plus the opportunities that fit within. All throughout, Lockheed Martin is spectacular for us. So as we get bigger and our capabilities get larger, the opportunities we have within Lockheed Martin also get larger. Because remember that they sub out a lot of work that they do there. And by them having have a stake in us, it really works very well; it’s very mutually beneficial.
Joshua Sullivan
And then as far as PredaSAR, given you were set up to eventually operate your own constellation and that likely involved data analysis. Do you plan to still have a SAR data offering going forward?
Marc Bell
Absolutely, but not as a constellation. We have seen an immense amount of inbounds across the spectrum for people who want to buy SAR satellites. They wouldn’t buy SAR satellites if we owned our SAR constellation. And the SAR constellation being very capital intensive, we decided to be very smart, focused on our core business. It is working. And we Lockheed Martin expanding their relationship with us, there’s just much more opportunity for us. And our goal is to get to profitability as quickly as possible with the lowest risk profile as quickly as possible. And this is the best way for us to get there.
Operator
Our next question comes from Greg Konrad from Jefferies.
Gregory Konrad
Maybe just to start where you left off on the last question. I mean, how are you thinking about breakeven profit level? And are there drivers outside of just volume? And with that, how are you thinking about just inflation and supply chain in the current environment?
Gary Hobart
So as we’ve mentioned on prior calls, inflation matters to us, but it was less of an impact on us because in pricing our contracts, most of our contracts are really converting within 18 to 24 months. So it has more than a muted impact relative to defence clients that might have decades-long programs. In addition, we generally have inflation escalators in our contracts. And so that generally covers it.
On the supply chain, it’s not as much the pricing on the supply chain and inflation there. It’s really the impact of the overall, whether it’s the COVID hangover, labor shortages, just where we are in the industrial base in the United States. The supply chain generally comes up in terms of yields on boards and things of that nature. So I’m expecting products to come in this week and I might have 85% of them coming in this week and in a delay of a week or twp. And that just adds to schedule on the programs on both our module build and even on assembly. So that’s what we’ve been seeing throughout the year. It hasn’t been overly dramatic, but it has had an impact and moving things a little bit to the right on our scheduling.
As far as just the path to profitability, the way to think about it is our SG&A is starting to stabilize. If you look at it as a percentage of our revenue, each quarter throughout this year, it has gone down. We expect that trend to continue. And as we started the question point where our gross profit exceeds SG&A, obviously, that’s where to hit EBITDA positive. So we’re on the path to do that. While we’re not giving guidance specifically, we have in our covenants with our lenders, a clause that requires us to be EBITDA positive on an LTM basis by June of 2024. So I think the marketplace can look to that as a reference point on our comfort and where we’re steering the company as far as the path towards profitability.
Gregory Konrad
And then maybe just to follow up on the bidding strategy. I mean, it seems like a lot of things are going in the right direction. You talked about capacity coming online next quarter, you have the Lockheed agreement, and it seems like the transport deliveries have been going well. Does something change now that maybe you do have incremental capacity and things that you maybe haven’t been bidding on over the past year with the capacity you can kind of go at it just kind of thinking about outside the bid pipeline, just things that you’re actively pursuing?
Marc Bell
Yes, you’re correct. There are things we did not bid on over the past year because of capacity as we want to make sure that we can deliver what we’re accepting. So by next year, we have a lot more capacity, which allows us to bid on more programs. But the last thing we wanted to do was bid and bail. Lockheed had taught us: they’ve had 100% success rate deliveries on every program they’ve ever gotten. And we want to make sure that we have the same thing, 100% success rate delivery on every program. And so now with the new space, with our ability to vertically integrate and bringing more and more of our components in-house, we reduced the delay we could have on supply chain. And this helps us for our long-term strategy of your responsive space, which is to deliver satellites faster with more future sets at a price that’s reasonable for everybody.
Operator
We now turn to Mike Crawford from B. Riley.
Michael Crawford
Yes, Mike Crawford. So Marc, would you say Terran Orbital needs to win about $300 million of new contracts next year in order to hit that LTM positive EBITDA number in the summer of ’24?
Marc Bell
We feel confident on our pipeline and the stuff that we’re bidding on that we will easily add an additional $300 million over the next 12 months. We feel very confident about that.
Michael Crawford
Great. In that regard, the space development agency, RFI being out for Tranche 2 of the transport layer for a physician navigation and timing payloads, that RFI just being coming up in a couple of weeks, when do you think that actually turns into RFP and an award?
Marc Bell
We haven’t decided yet if we’re going to bid on that. There are other things coming down the pipe from the FDA, and we try to stick to our core competencies. We are building a payload group, so our being our first payload, and we’re going to be hitting other payloads at the end of the day. But we have a lot of other opportunities floating around, and we obviously are in constant contact with the FDA, but I want to make sure whatever we’re bidding on is the right fit for what we’re doing and things that we’re going to win.
Michael Crawford
Okay. And then just kind of regarding your past work, as this CAPSTONE satellite approaching the moon that’s had several directions. Can you talk about your role in helping to recover operational ability of that satellite?
Marc Bell
So CAPSTONE has from our perspective been a huge success. We are very excited about it. We’re the first small step going to the moon. And we are right now on target to be around the moon over the next week or so, and it’s pretty exciting. We did have some issues with two outside vendors, our propulsion system that was proving the outside and another piece of equipment provided from an outside vendor, which goes to our theme of why we should build everything ourselves. Because everything we’ve built on and has worked perfectly so far. So we are very pleased.
But we are excited. We are on track and on course, and you should see some big announcements in the next few weeks about it. So we’re very pleased for NASA has a program that was… We’re actually a subcontractor for Advanced Space, which got the contract from NASA, but we actually built the bus, and we’re actually the ones running the bus right now. So it’s been a very exciting program. And this is the beginning of what will be a permanent communication network for the moon, which will be both for the moon base and for the moon station that NASA plans to be building.
Michael Crawford
Okay. With your switching gears with your highway capacity coming online in a month or so in Irvine, then you look to expand these other module pods around, I guess, the nearby region in ’23. What is the anticipated capital investment to do that expansion in California in ’23?
Marc Bell
The high bay that we’re opening up in Q1 really isn’t for modules, it’s actually for satellite assembly. So there’s not a tremendous CapEx that goes into the building for that. We just need the ability to have cranes to lift the satellite as the satellites are very, very heavy. And so that’s what the high bay allows us to do is to hold them up in the air so we can then attach things like solar panels and payloads. Things that we now do at Lockheed Martin’s facilities, we’ll be able to do in-house. And I would just like to point out that that’s another advantage of the Lockheed arrangement as we do all of our high bay work now at Lockheed Martin, where if we didn’t have a partner like Lockheed, we couldn’t do that.
Michael Crawford
Right. But the question is that you also intend to then expand further out in Irvine ’23. So I’m asking what you expect that the CapEx will be in 2023?
Marc Bell
We get a lot of landlord TI. We haven’t — it’s clear, when we build the building because the next building that we’re going to be building really is just a big box. So think of it as Walmart. It’s got 4 walls of ceiling, and it’s just large, large open space. So the next building will be all for assembly. And so we’re basically going to set up production lines like an automotive company to get things out of the door. So there’s a lot of space. But there will be some CapEx, Gary, do you want to address the CapEx on this?
Gary Hobart
Yes. So we’re not providing guidance on the CapEx for the additional Irvine space per se. But think of it in terms of it being spread out over kind of an 18-month development process as well as netting out landlord TIs. As we have more precision on the timing and the actual capacity expansion, whether it’s one additional space or two, additional equipment. We’re going to highlight that and provide folks with guidance. But right now, coming out of the investment from Lockheed, we know we have the capital to pursue it, and now it’s a matter of really just scoping it. So without that scope, it’s hard for us, I think that pin ourselves down on CapEx.
What I can say about this year’s CapEx is we have guided to $15 million to $20 million, we’re at about $15 million of CapEx year-to-date. We should finish the year within our guidance close to about $20 million. Next year, the CapEx will be lower than that on a recurring basis, we’ll obviously be finishing up the existing expansion in Irvine in the first quarter as well as not pursuing the creditor build, self-funding build, if you will. But then that will be increased by the expansion we noted. And when we have more scope and timing on that, we can give the market more color on where that stands.
Michael Crawford
Okay. And then just on contracts that you’re bidding on, these 140 programs that you’re tracking, how many have you submitted bids for and what’s your win rate been?
Marc Bell
We pick and choose what we submit on. So the 140 programs we’re tracking is not necessarily stuff that we’re actually bidding on yet. It’s a program that we’re waiting for funding. We’re waiting for the customers to decide what they want to do. So we kind of bring that down to a subset of what we look at to the things that we’re actually bidding on and working on. And that gives us the total TAM for our bus business internally, and what programs that we know about that we are tracking. And when we eventually start bidding on stuff, we choose what we want to bid on. We work with the customers. You’ll see announcements over the next few months on contracts that we’ve been on. And Gary, if you want to comment on it?
Gary Hobart
So I was just going to say, just to give you a sense that in that $15 billion pipeline, another way to look at it is in 140 different opportunities. There’s about 4,000 satellites that’s made up in that. And the bidding process is not as linear as you might think. There’s certainly proposals where absolute proposals are out, but one way to think about it is at least 1,000 of those 4,000 satellites, we have active bids and proposals on. And the number is probably a little bit more than that, but that just gives you a sense of where we are in the process of converting the pipeline into awards.
Marc Bell
Yes. I mean we look at today as our capacity is a precious asset for us. If we have more money. We have a lot more capacity today. So we are using that capacity to get the highest value program or the programs that we believe have the most opportunity down the road for us.
Operator
[Operator Instructions] Our next question comes from Robert Springarn from Melius Research.
Robert Spingarn
So Gary, I wanted to touch on this CapEx discussion and maybe twist it around to cash burn and how you expect the cash burn trend to go from here? And is there a minimum amount of cash that you want to keep on the balance sheet?
Gary Hobart
Sure. At this point, I always want to keep at least $20 million to $25 million of cash. After the pro forma Lockheed investment, we started the quarter with over $130 million of cash. So I think we’re well positioned for the near term.
When we think about our path to profitability and covering our needs with our existing capitalization, the way to think about it is that we’re looking, generally speaking, at a path where we are anticipating and planning on revenue growth that could be anywhere from 100% to 200% year-over-year. Execution converting pipeline into backlog or part of that and is contingent on that. But at that type of growth pace and with the margin expansion that we also are expecting and the way we’re bidding things, the path we’re looking for is to get to about $300 million, maybe a little bit less of revenue, to be able to be EBITDA positive.
At that level, what I have to cover after that is CapEx, about $16 million a year of interest expense. And then I have got working capital that can be a plus or minus depending on where we are in the cycle for any one of the contracts. Generally speaking, new awards are fairly cash flow positive because on our satellite solution business as opposed to the PredaSAR business, for example, mostly awards will lead to upfront payments ahead of the spending of labor dollars and material costs. And so they tend to be working capital positive.
So Marc and I are not providing guidance per se and one of the main reasons for that is really to have a little more precision on our execution and on our conversion of pipeline into backlog. But hopefully, some of the data points and some of the reference points I’ve given you may to model out where we’re going.
Robert Spingarn
Okay. And then for Marc, we talked a little bit about the pipeline and the order environment. The bookings were a little light here in the third quarter, but I’m sure there’s a volatility to that, things come when they come. But were there some awards you targeted that maybe competitors took in the quarter?
Marc Bell
No. Usually what happens is that the government coming against budget on October 1, and then we set the talk, and we see a lot of award activity usually in Q1 of every year. So it’s very cyclical in terms of awards based on government budgets. So we have a lot of RFIs going out right now to a lot of people, which will turn into RFPs, which will start to award. But it’s cyclical in the award cycle. We’ve noticed that towards the end of every budget year, it gets very, very quiet. And then it becomes October 1, a mad dash.
Robert Spingarn
Okay. And then just last one, Marc. We’ve talked a bit about the transport layer. But on the tracking layer, there are some other companies involved there, Northrop and L3 come to mind for Tranche 1. And does your agreement with Lockheed permit you to support others in a similar vein? In other words, how do you feel about your opportunity on tracking layer Tranche 2, for example? And might you be able to support those other companies?
Marc Bell
So our agreement with Lockheed Martin does not restrict us from working with anybody. That would be antitrust as that works. So we work with everybody. We work with all the prime. That being said, we intentionally did not bid on tracking 1. What tracking 2 is not out yet, and we’ll make the decision when it comes. There are certain things that we have a strategy to how we do this. We have a very good relationship with the FDA. We also know we’re not going to win everything. So we try to pick and choose where we know what we will win and we can fit into our schedule.
And the fact that we’re delivering SDAs transport layer trans on time, and they are looking amazing, the testament to the hard work of everybody here. And our capabilities are in high demand by a lot of people. So we obviously want diversity in customers as well. And so I think we’re building a nice diverse book of business for the future, and we’ll a lot of our customer wins we won’t announce because our customers don’t allow us to announce wins. So you’ll see the backlog burns down as we book the revenue. What you will potentially see is that when we get new wins, the backlog will start to jump back up, and it will continue to be a seesaw as we get new revenue going and as we get new contracts going forward, but we only got a finite amount of capacity. So we try to be very careful for that.
Robert Spingarn
Okay. And then just beyond the Tranche 0 deliveries, is there any other catalysts that we should be looking for in the early part of next year? Any other milestone that we would focus on?
Marc Bell
I mean an increasing backlog by the end of Q1, I think it will be a big milestone. We have a lot of stuff in the pipeline, a lot of some in the works. And we feel very confident that we have a lot of things that will be signed and closed, and then it’s just up to the customer to announce. So we may not be able to announce who it is. We’re doing more and more classified work as we get bigger, but we will be able to announce the numbers. And I think for you guys, that’s the important part.
Operator
We now turn to Alex Owen from Fuel Venture Capital.
Alex Owen
First off, congratulations on another great quarter. It’d be great if you could touch on, given the impressive pipeline and moving forward with the completion of the Florida facility, you will have the ability to launch 1,000 satellites and the broader market in general is expected to have anywhere between 40,000 and 50,000 launched over the next 6 to 7 years. I’m curious to hear your thoughts on how well the sector can accommodate this type of growth with the availability of human capital or the skilled personnel in the ease of recruiting the proper talent in the market to fulfill this type of backlog.
Marc Bell
Yes, I mean the U.S. government has said there’s going to be about 50,000 satellites built over the next 10 years. Jay Raymond who retired from Space Force, before retiring said he expects like 300 launches per year over the next few years at a minimum. That’s in the U.S. world to about a global centric view. That’s a U.S.-centric view.
In Irvine, as we’re expanding here, we have access to an incredible talent pool. We are right near JPL and a lot of the other labs, you have Caltech up the road. We have a great labor pool here out in Orange County and also from L.A. County as well.
So we’re very comfortable with the amount of our ability to attract people. We’re working on programs to continuing to retain people. And it is obviously a competitive environment. But as you’re seeing out there, there are some companies that are going to be winners and some companies that aren’t and we are very confident in our ability to continue to win.
Lockheed Martin, the investment was a validator to our business plan, and it showed you wouldn’t invest the money if they didn’t expect us to keep winning. So we’re very bullish on our future, and we feel pretty good about it. I don’t know if that answers your question.
Operator
This concludes our Q&A and today’s conference call. We’d like to thank you for your participation. You may now disconnect your lines.
Marc Bell
Thank you very much. Thank you, everyone, for joining us.
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