Q2 2023 Terran Orbital Corp Earnings Call

Participants

Gary A. Hobart; CFO & Executive VP; Terran Orbital Corporation

Jonathan Siegmann; SVP of Corporate Development; Terran Orbital Corporation

Marc H. Bell; Co-Founder, Chairman & CEO; Terran Orbital Corporation

Erik Peter Rasmussen; Analyst; Stifel, Nicolaus & Company, Incorporated, Research Division

Gregory Arnold Konrad; Equity Analyst; Jefferies LLC, Research Division

Robert Michael Spingarn; MD; Melius Research LLC

Scott Christian Buck; MD & Senior Technology Analyst; H.C. Wainwright & Co, LLC, Research Division

Unidentified Analyst

Presentation

Operator

Ladies and gentlemen, welcome to the Terran Orbital Q2 2023 Earnings Call. My name is Grant, and I'll be the operator for today's call. (Operator Instructions)
I will now hand you over to your host, Jonathan Siegmann, Senior Vice President of Corporate Development to begin. Jonathan?

Jonathan Siegmann

And thank you for joining Terran Orbital's Second Quarter 2023 earnings. With me this morning are Marc Bell, Co-Founder, 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 Gary will review the quarterly results, and Marc will finish with closing remarks. Terran Orbital's executive team will then be available to answer your questions.
During today's call, we may make forward certain 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 a reconciliation 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 H. Bell

Great. Thank you, Jon, and thank you to everyone for joining our second quarter 2023 earnings call. Let's start with an update on our largest program. The $2.4 billion contract with Rivada Space Networks. I am pleased to report we are steadily ramping up the program. Our team is currently executing on the design phase of the program, which represents $460 million of the $2.4 billion contract. This portion of the contracts kicked off in earnest in July with our successful completion of the first milestone, the system requirements review. The system requirements review defines the design and system requirements for the space and ground elements.
Then the next significant milestone, the preliminary design review, or PDR, is planned for the fourth quarter. In regards to payments from Rivada, Rivada remains current on all payments to Terran Orbital. Material milestone payments are expected in the second half of this year as the design phase of the program continues to ramp up. In addition, to payments related to preparing and delivering the PDR, payments are expected for the sourcing of long lead materials and critical vendors.
Overall, we are anticipating invoicing and collecting approximately $180 million from Rivada in the second half of 2023. Please note that our June cash balance and receivables do not include material amounts from the Rivada program as more meaningful activity only started in July.
I would also like to publicly congratulate Rivada on the successful conclusion of their previously announced regulatory process. Last month, as expected, Rivada Space Networks announced that the ITU's Radio Regulations Board approved their waiver request, which is a major regulatory milestone.
I am excited with our increased backlog year-to-date. As of June 30, our backlog is $2.6 billion, representing orders for over 370 satellites, including the 300-satellite order from Rivada, which we believe is our single largest commercial constellation award ever, and the company's third largest award ever, a previously announced $87 million 16-satellite order with a new customer we signed in May.
Additionally, we received a contract extension from our fourth largest active space program, a confidential mission in the national security space. For this program, we are not just supplying the satellite bus but also integrating our own internally developed payload. Our combined awards with the current total order book to over 30 programs. We estimate that approximately 80% of our $2.6 billion backlog will be converted to revenue by the end of 2025.
We believe this increase in backlog will drive revenue growth this year and beyond. Operationally, we are also delivering on our commitments to our customers. We demonstrated this with our successful on-time delivery last year of our 10 Transport Layer Tranche 0 satellite buses to our partner, Lockheed Martin, for the Space Development Agency. We look forward to the extended launch of the completed Tranche 0 satellites in the coming weeks.
In addition, we are on track to begin developing -- delivering the first batch of the SDA's Transport Layer Tranche 1 satellite in 2023. The balance of the 42 satellites will be delivered by the end of 2024, which will bring in approximately $65 million of additional cash. Additionally, I am pleased to announce that our RUNNER-1 satellite launched successfully on June 12 on a SpaceX Falcon 9 rocket from Vandenberg Air Force Base (sic) [Vandenberg Space Force Base] in California. This multipurpose, remote sensing satellite, Terran Orbital's first microsatellite was jointly developed with ImageSat International.
We have successfully completed the spacecraft bus commissioning on July 31. Our next upcoming step is payload commissioning. Congratulations to the ImageSat team for the great progress so far for commissioning this newest satellite.
As of June, our identified pipeline represents over $20 billion of opportunities. The expansion of our pipeline is due in part to increase in commercial engagements following the Rivada award announcement earlier this year. We are also harvesting benefits from our investments and broadened product offerings, expanded capacity and strengthen business development team. To support our backlog and pipeline opportunities, we are continuing to increase production capacity with our continuing investments in our design and manufacturing capabilities.
We are investing in a world-class production system to support the execution of over 330 satellites in backlog and over 5,000 satellites identified in our pipeline. Our new 50 Tech facility in Irvine, California is now open, adding [60,000] square feet of floor space, bringing our manufacturing capacity from 10 satellites to 20 satellites per month, a 100% increase.
Critically, this includes additional testing equipment, our new printed circuit board assembly lines and automation that we expect will vastly improve throughput, quality and speed.
Since the spring, we've been moving employees at equipment and have -- now have our certificate of occupancy for all floors. We expect our now operational 50 Tech facility will be a key facilitator and completing the majority of the planned work for the 42 Tranche 1 buses. In addition, we are progressing and developing another 94,000 square foot facility in Irvine, which we expect to increase our capacity to multiples of our current capacity after commissioning in 2024. Importantly, this new capacity includes 36-foot high bay for assembly and (inaudible) of larger satellites.
To help successfully manage the steep ramp in sales, we hired Tony Gingiss, an aerospace and defense industry veteran as the company's new Chief Operating Officer. Tony is based in Irvine, California and brings more than 30 years of aerospace and defense experience and design production, operations and leadership to Terran Orbital. We are thrilled to have Tony on board. He brings an innovative and experienced mind to Terran Orbital as we expand our facilities and execute on customer programs.
Also in the second quarter, Terran Orbital and Safran Electronics & Defense announced the signing of a memorandum of agreement to study and validate the prerequisites for the production of a new generation of election propulsion systems for satellites in the United States. This system will be based on Safran's PPSX00 plasma thruster. We believe this agreement reflects Safran's Electronics & Defense space and the value of Terran Orbital's industry-leading products and innovative personnel while adding to our strategic investments to create more scalable, automated vertically integrated production systems.
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 A. Hobart

Thank you, Marc, and good morning, everyone. I'm happy to report that we are on a clear path to increase revenue and improve profitability. In the second quarter of 2023, we achieved record revenue of $32.2 million, a 51% increase over the same period in the prior year. We recognized revenue on most of our programs on a percentage of completion basis and adjustments and changes to our contract values and estimated cost at completion or EACs, have a cumulative impact in the period in which we make the adjustment. In the second quarter, adjustments to our estimated completion or EACs decreased revenue by an estimated $1.2 million.
Gross profit was approximately $0.8 million for the second quarter compared to a loss of $3.7 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 second quarter was $2.8 million, compared to adjusted gross profit of $2.1 million in the same quarter in 2022. EAC adjustments negatively impacted adjusted gross profit by an estimated $2.5 million during the second quarter of 2023.
Selling, general and administrative expenses were $28.7 million in the second quarter of 2023 compared to $29.4 million for the same quarter in 2022. SG&A expenses remained virtually flat compared to the same quarter in 2022. The decrease was primarily driven by decreases in share-based compensation expense and legal and other professional fees, partially offset by higher labor and benefits, research and development expense and other costs as a result of our growth initiatives.
Although down year-over-year, share-based compensation still represented approximately $3.6 million of our second quarter expenses with approximately $2.8 million of that running through our GAAP SG&A expense line and the $800,000 balance reflected in our cost of sales. Subject to future equity program activity, we currently expect share-based expenses to be below $5 million per quarter through the balance of this year.
Adjusted EBITDA was negative $21.4 million for the quarter compared with negative $14.8 million in the same period of the prior year. The decrease in adjusted EBITDA was primarily due to an increase in selling, general and administrative expenses 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 -- adjusted EBITDA is largely a function of our ramping capabilities across the company to serve our multibillion dollar backlog 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 of our signed order book. Capital expenditures for the quarter were $9.2 million.
As of June 30, we had approximately $48.6 million in cash on hand and approximately $311.4 million in gross debt obligations.
Turning to our outlook. We have over $2.6 billion of backlog as of June 30, 2023, and estimate approximately 80% to be recognized as revenue by December 31, 2025. We expect a steep ramp in revenue ahead and confirm our expectation of generating in excess of $250 million in revenue in fiscal year 2023.
Additionally, we expect gross margins to demonstrate quarter-over-quarter improvements but the pace and size of improvements may vary depending on the program mix and execution. Overall, our capital expenditures for year 2023 are expected to be less than $30 million.
I will now turn it back over to Marc.

Marc H. Bell

Great. Thank you, Gary. In closing, I'd like to add the appetite for satellite constellations is significantly growing with new commercial applications and geopolitical tensions as the primary drivers of demand. We have been very busy. We have 11 proposals currently outstanding within total value of $1.6 billion today. In addition, we have 27 RFIs or ROMs active valued over $900 million of additional potential revenue.
Terran Orbital today is showcasing its ability to win and execute contracts with Lockheed Martin, Rivada and other marquee customers. We have a strong customer base consisting of the U.S. Defense Department, NASA, European Space Agency and a strong long-term strategic partner in Lockheed Martin.
Lockheed Martin has shown commitment and confidence in Terran Orbital not only becoming a long-term strategic partner, but also as the shareholder.
Thank you for everybody on the call for your continued support of Terran 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 Greg Konrad from Jefferies.

Gregory Arnold Konrad

Maybe just to start on the backlog disclosure. You said 30 programs across 370 satellites. And if we strip out Rivada and SDA Tranche 1, it seems like maybe there's 28 programs at an average of 1 satellite per program. Can you maybe talk about what's in that pipeline, how much of that follow-on opportunities and how you think about some of those other programs is maybe seed corns for larger future awards?

Marc H. Bell

Sure. So we have a lot of programs, and we call it the crawl-walk-run approach. People Start with 1 satellite, and they go to 3 to 10, then they look at 100. So for example, we have a program in-house now that we're building 3 satellites for. Upon successful demonstration, they could be placing an order for 300 satellites. So you have a lot of programs that are feeder programs. And then also in that, you have a few things that are studies that don't actually have a satellite attached to it, but they are the studies that lead up to a satellite. So it's a little misleading how it breaks out. I apologize for that.

Gregory Arnold Konrad

And then maybe just on free cash flow. You raised some money in the quarter, but I appreciated the disclosure around the money that you expect from Rivada and also SDA Tranche 1 next year. I mean when you think about those moving pieces, are you expecting to be free cash flow positive for the second half of the year? And how are you kind of thinking about free cash flow generation in general, given working capital needs?

Gary A. Hobart

Sure, Greg, it's Gary. We have a backlog from invoicing and performance and our expectations from our EACs, which are basically our budgets for our program. Sufficient capital to be free cash flow positive on a run rate basis by the beginning or during 2024. It will be plus or minus in the second half year of the year. So the cash flow we generate from our programs and invoicing and collection and invoicing should cover our needs going forward, and we'll start seeing that ramp up even more so going into 2024.

Gregory Arnold Konrad

And then maybe just 1 last one. You gave the disclosure 80% conversion of backlog through the end of 2025, and we can kind of see what the implied revenues are in H2 based on guidance. You're kind of at close to run rate if you just split in 2024 and 2025 at nearly $1 billion each year. How are you thinking about the capacity in place to kind of meet backlog today and maybe just kind of the path to supporting that level of revenues in the next 2 years.

Marc H. Bell

Yes. I mean, we feel very confident of our capacity with the opening of 50 Tech. That gets us the ability to do 20 buses a month. With the opening of our new facility beginning of 2024 that will bring us up to almost 96 buses a month. But more importantly, that lets us to do about 42 complete satellites per month in the new facility, including solar panel assembly, payload assembly and everything under one roof.
So the new facility is a game changer because what we'll do is the (inaudible), our original facility and 50 Tech, our new facility will be dedicated exclusively to modules when what we call (inaudible) and riverside will be 100% assembly and final satellite testing.
So it's a game changer on how we do things. But we are more than prepared for not only the Rivadas of the world, to handle multiple Rivada-sized contracts under the existing infrastructure we've built or are building now.

Operator

Our next question comes from Scott Buck from H.C. Wainwright.

Scott Christian Buck

First of all, I was hoping you could give us a little bit of color on why you're so confident in being able to monetize that $180 million from Rivada in the second half of the year? I know there's some investor hesitation around the contract. So just how do you kind of derisk that over time?

Marc H. Bell

Yes. That's why we brought it up at the very beginning of the call. We are extremely confident we're going to PDR. We have world-class engineers for design services. That's the bulk of what we're doing with PDR and then we're also focusing on long lead items. So we are very confident in our ability to deliver the PDR on time and on time, which will trigger the payment. So we are very confident in our abilities as we've done many, many PDRs over the past decade. So we have tons of experience doing this.

Scott Christian Buck

Marc, I guess I'm more asking about their ability to execute their end of the contract. I mean what due diligence have you done on Rivada at this point that makes you feel comfortable that they are capable of making a payment like that?

Marc H. Bell

We've done extreme due diligence on their financials, both with ourselves and our attorneys. We feel confident of whether -- we can't disclose what we have -- information we know, but we are very much aware of who their funding is and how much it's for and where it's coming from. So Rivada has asked that any questions about their funding be directed to them, but we can tell you that we are confident about their ability to fund.

Scott Christian Buck

Okay. I appreciate that, and second one you mentioned...

Marc H. Bell

Let me add one more to this, Scott, I don't mean to interrupt. So one thing that has -- was the ITU vote, I don't want to play down with a very, very big hurdle because now their spectrum that they have is all valid. And as you know, spectrum is worth a lot of money. And so once they got into early July, that ITU vote was incredibly significant for Rivada because that made their spectrum money good. And SpaceX has also been a big supporter of them. As Peter Thiel, one of the original investors in SpaceX is also one of the original investors in Rivada. And so SpaceX has also been very supportive of the Rivada program with the ITU.

Scott Christian Buck

Great. I appreciate that added color. And my second question, you mentioned previously that you have the capacity or you will have the capacity to handle multiple contracts of this size, I'm just curious, where do you see the market today? How many of those opportunities are actually out there over the next 3 to 5 years?

Marc H. Bell

Michael -- Congressman Michael Waltz said about 2 months ago when he was -- they had a committee hearing with Saltzman, who runs Space Force testifying and he let the cat out of the bag. He said that the STC, which is the U.S. entities for licensing has applications for 60,000 satellites and that's just for the U.S. So globally, the number has got to be staggering with the ITU. I mean every country we talk to is trying to build their own constellation. Every military is trying to build their own transfer layer.
Everybody is trying to do their own ISR for imaging surveillance and reconnaissance. I mean we -- just like I said at the end of my presentation before I mean we are just being inundated with tons of opportunities from around the globe. And just keeping up, we're literally just trying to keep up now with the volume of inquiries that we're getting. So we have a very high degree of confidence of not only filling the space that we have now with programs, but at some point, needing additional space will be growing so fast.
And the pipeline today is twice the size of what we had before on the commercial front. I mean, the commercial side is also growing dramatically fast. I mean you think about every -- in the press, every big company is launching whether it's Internet of Things, 5G from space. Also it's a crazy amounts of commercial opportunities around the world.

Operator

We Have our next question comes from Erik Rasmussen from Stifel.

Erik Peter Rasmussen

So we saw you did reaffirm your guidance of over $250 million, but how should we think about the revenues layering in the second half? Any more color you can provide given we're already in August?

Marc H. Bell

Yes. I mean -- so the way it works with the space development agencies Transfer Layer Tranche 1, we basically -- it's all back ended. So as we deliver buses, we get paid big chunks of money and that's all Q4 and then Rivada PDR as well is a Q4 item. So it is a very, very heavy Q4.

Erik Peter Rasmussen

So would you say that before -- I think you were talking about Q4 being 4x of what Q1 was, but it sounds like that's a much higher number? And could Q3 be higher than Q2? Or is everything really keep falling into Q4?

Marc H. Bell

Q4 is the bulk of it because that's what we're delivering. A lot of it depends on third-party suppliers like (inaudible) for engine and [Interflight] for our radios. If they -- we could potentially speed up the delivery of all the buses into Q4, if our third-party suppliers could keep up with us. But right now, we're still sticking to the original April 2024 time line, but it is possible, we are moving faster than we've ever moved before. And so it's just a matter of having -- like I said last quarter, we are trying very hard to vertically integrate and you control your supply chain, you control your destiny. And the 2 things not on my supply chain currently are radios and propulsion. And those are the 2 things that are slowing us down. But as far as Q3 goes, I'll turn it over to Gary, if he want to add any more color.

Gary A. Hobart

No, I think that what we said about the fourth quarter still holds, generally speaking, you'll see a ramp of the third quarter over the second and then a bigger fourth quarter is our expectation.

Erik Peter Rasmussen

Okay. Great. And then maybe just on the margins...

Marc H. Bell

But we're sticking with the $250 million number. If it ends up being more, that's great. But we feel very comfortable with $250 million.

Erik Peter Rasmussen

Great. And then maybe on margins, you expect to grow sequentially, but there's obviously some variability within that on pace and size. But maybe help us understand the components of that variability. When do you see gross margins? Where do you see them settling for the year? And then maybe sort of any update you can share for next year?

Gary A. Hobart

Sure. As we said last quarter during Q&A, the bulk of what we're expecting for the back half of this year will be in the mid- to high teens. Going forward, we expect kind of mid-20% margins, and that's just based on looking at what we have in our backlog and our expectation based on budgets in our backlog.

Erik Peter Rasmussen

Okay. Great. So no update there. And then maybe on the competitive landscape, have you seen any changes, anything in the last 90 days since our last update. There's been a lot of consolidation in the space and maybe just your thoughts on sort of staying independent.

Marc H. Bell

We've seen -- we watch what happened with the (inaudible) first satellite. They launched [brick-into-space]. It's not too easy as we keep trying to tell people. It's an art form. We are -- we like being independent and it gives us -- we believe it works for us. We are ever expanding our ability to work with many more and more customers, both around the globe. And we're very happy with where we are right now.

Erik Peter Rasmussen

Great. And then any other color you can give on the new award, the 16 satellites? Any time line maybe when these satellites would be delivered?

Marc H. Bell

At the customer request, we're not giving out any information, sorry.

Operator

Next question comes from Robert Spingarn from Melius Research.

Robert Michael Spingarn

Gary, just could you dig into the second half revenue cadence, maybe a little bit more in terms of -- is it all in the fourth quarter? I guess, Marc, you were suggesting it's really hockey stick at the end of the year. But on percentage of completion accounting, shouldn't we see sales ramp to some extent here in Q3. So how do we think about Q3 and Q4? That's the first question.

Gary A. Hobart

Sure, Rob. I think my comments a couple of minutes ago, I think are most I'm going to dig into on that. Look at $250 million for the full year, with third quarter being bigger than second and fourth bigger than third. I really don't want to provide more details on that there. Any changes in particular with third-party deliveries and third-party performances can have a significant move from one week to the next or one month to the next. And so we're going to limit ourselves in terms of just giving more glossy discussions about how the $250 million plays out, which would be more than $190 million for the second half.

Robert Michael Spingarn

Right. So what's the right way to think about this implied kind of $190 million in revenue in the second half, how much of that is Rivada's? How much of it is SDA? It sounds like SDA delivers next year. So just how do we think about the allocation of that revenue across the programs.

Gary A. Hobart

Sure. I don't think we're going to break it down precisely, but I think you can back into our $2.6 billion of backlog as being roughly $2.4 million from Rivada, a little under $100 million from Lockheed Martin, including the SDA program that we're working on and we'll expect to finish by the end of this year or April of next year. And then the other $100 million are other programs. The -- I would say that we haven't really broken down the mix. It comes up to that $190 million number. But if you think about the ramp we're showing in Rivada and what we started the year with, it's probably close to a little under half from Rivada and the balance from other backlog.

Robert Michael Spingarn

Okay. And then just to clarify, I think you said, Gary, that from a free cash perspective, it's kind of plus or minus for the second half. Did I hear that right? In other words, about breakeven?

Gary A. Hobart

It could be about breakeven.

Robert Michael Spingarn

Okay. And then you'd become cash flow positive at some point in '24. Just want to make sure I got all this.

Gary A. Hobart

That's correct. That's correct.

Robert Michael Spingarn

Okay. And so what is the capital plan at this point going forward, either for you or for Marc, how do you think about raising cash to the extent that you need to?

Marc H. Bell

It's really just about timing of payments at this point. Right now, the last thing any of us want to do is raise additional cash. I don't want the dilution. (inaudible) shareholders, I could say that. Last thing I wanted any dilution. So it's really just about timing of payments. If things work out as planned, we will be in pretty good shape. So right now, everything is lining up well for us.

Operator

(Operator Instructions) With our next question comes from (inaudible) from B. Riley Securities.

Unidentified Analyst

I want to jump back to the competitive landscape and margins. So LeoStella recently talked about a bigger bus to focus on SDA contracts. Maxar is making a bigger push into small sats, then you have York and Millennium sort of ramping up capacity alongside yourselves. Obviously, that highlights the demand, Marc, that you were talking about earlier, but how is this translating into the bid and proposal process? Is it having any effect on your prior expectations regarding how you think about gross margins when you're bidding for contracts? Or said differently, is your ability to grow margins as quickly as you might have thought in the past changed at all?

Marc H. Bell

It's just like launch. There is an incredible shortage of launch and there is an incredible shortage of capacity to build satellites. I mean think about it, 60,000 satellites are on file with the SEC right now. If you add up all the capacity in the United States, it doesn't even come anywhere near close to that. It's a fraction of that. So we see continued margin expansion as we continue to grow. It's also as we add payloads into the mix, we're adding more value into the mix, which also allows us to grow margins.
And our margins, obviously, were very small when we started off on this and they're becoming now more appropriate for the size of business and what we're doing for the customer.

Unidentified Analyst

Okay. So I guess related to that, how are the gross margins -- or how are you looking at gross margins for Rivada. And how does that stack up to the guide that Gary gave earlier in terms of going to sort of mid- to high-teens, mid-20%?

Marc H. Bell

We don't bring our customer margins for obvious reasons on our call. But that said, we're very comfortable with our overall blended gross margin and where it's going.

Unidentified Analyst

Sure thing. And then just in terms of the EAC adjustments, any expectation on when those are going to begin to abate?

Gary A. Hobart

I think we're seeing them level off right now. A lot of it really comes down to (inaudible) as we're doing ramping up module production and really commissioning out all of our lines. It's really hard to tell. The numbers have kind of leveled off the last couple of quarters, but I would expect them to stay low and hopefully get down to something we're not even to the point of reporting.
But right now, I feel like they seem bigger just because we're dealing with smaller numbers. But relative to our backlog, I would expect them to be de minimis going forward, but that's going to be part of how we execute and commission our overall offering.

Unidentified Analyst

Okay. All right. Great. And then just last one for me, I wanted to shift gears, talk about Lockheed. They opened up a new 20,000 square foot low bay facility earlier this month for satellite inauguration and testing. Can you just comment on how this fits into yours and Lockheed's overall small satellite supply chain and just your overall ability to continue service and growing defense demand?

Marc H. Bell

It's actually -- it's perfect for what we do with Lockheed. So there, we're using a GPS III facility to do the assembly and test for the SDA Transfer Layer. It really required its own facility. So we build the buses for them at our facility. We shipped the buses to their new facility to do the solar panel integration and payload integration and final testing. So it's very complementary to what we're doing.
It's similar to our version of a Goodyear that we're going to be doing for us. They have their own Goodyear for them. which is (inaudible). So it's a very complementary facility for us to work with.

Operator

We have a follow-up question from Erik Rasmussen from Stifel.

Erik Peter Rasmussen

Just a real -- here's just a clarification. You mentioned the Tech 50 facility is opened in Irvine. Are you now at the 20 satellite per month capacity run rate? Or is there still some work to do to get to that run rate?

Marc H. Bell

We are there.

Operator

Thank you. We have no further questions on the line. I will now hand back to the management team for closing remarks.

Marc H. Bell

Great. Well, I just want to thank everybody for joining us today. We appreciate everyone's participation and being patient with us as we grow as a company. We are very mindful of our cash flow, mindful of we don't want dilution. We are very mindful that we are -- we have a lot coming up in Q4. Q4 is a very big quarter for us. And then that ramp will continue on next year, which is pretty exciting. So -- and we look forward to anybody who wishes to come to visit the facility. We always encourage that to see the new 50 Tech at operation and see what we do. And with that, I will turn it back over to the operator. Thank you.

Operator

Thank you. Ladies and gentlemen, this concludes today's call. Thank you for joining. You may now disconnect your lines.

Marc H. Bell

Operator, thank you.