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In this weeks Space Economy podcast my special guest is Marc Bell, CEO of Terran Orbital. Of note, Terran Orbital is going public through a SPAC merger with Tailwind Two Acquisition and is valued at $1.8B.
Bell is not you typical space CEO. Through Marc Bell Capital he and his partners have invested in lifestyle companies, tech companies and even other space companies. Oh, and he’s won a Tony Award and Grammy Award for as a producer of the popular Jersey Boys.
Listen in and read the transcript below:
Marc Bell, Terran Orbital in conversation transcript
Marc Boucher – Let’s get started. A lot of people don’t know about turn orbital, even though you’ve been in the news a lot in the last year, why don’t you just give us a short history of how the company grew from an idea to where it is today?
Marc Bell – Thank you. So back in 2013, I was out in LA at the Milken conference, I had a chance to go on a tour of SpaceX, this facilities down in Southern California. And I was just marveling at these massive rockets. And I’ve always been a space nut and a sci fi nut. And they were showing me how they can launch something the size of school bus into outer space. And, and then I was thinking to myself, Why would anybody build something the size of a school bus? I mean, you know, my iPhone having more computing power than the space shuttle? Why would anybody build something that big anymore? And I kind of had idea like, you know, how can we make satellites smaller? So when I googled it went online, and found this thing called the CubeSat that was invented by Dr. Jordi Puig-Suari, Swami and Bob Twiggs. Jordy was up in Cal Poly San Luis Obispo as a college professor, Bob was up at Stanford, I was in LA. Jordy was a shorter flight, so I went there first, and met with him and asked him if he wanted a job. And he said yes. And he said, he’s got a small parts company called Tyvak. That would have to come along with him. So we acquired Tyvak, merged it into Terran Orbital, and that was the beginning of my journey.
Marc Boucher – Not too many people will go out there and say, Well, you know, CubeSats, I’m going to go out and get the the guys who created this stuff and build a new company. So that’s that’s something. Now, I suppose you’ve answered my second question already, which was, you know, what? And when was the trigger that made you realize mass manufacturing of small satellites, was a viable business. So I suppose you answered part of it.
Marc Bell – You know, we this originally started off with just an idea, they were selling parts. They weren’t really they were just starting satellites. We stopped, we stopped selling parts, and focused on satellites, and really trying to focus on you know, what else we could do from space, it was all about solving problems from space. We got on a number of NASA programs, then we started looking towards the DOD for one of the work we could do there. And things started snowballing more and more orders for more and more satellites. And it was it’s exciting. It’s a very exciting time for us.
Marc Boucher – Yeah, and SmallSats, especially in the last, what are we 2022. So I’d say at least the last seven to eight years are really started to explode, if you will, in terms of market growth. So you took Tyvak, which I’m sure people are aware of. And then in 2019, you acquired predecessor, which I totally understand because of the technology. But maybe you could explain to the audience, what prompted you to make that acquisition.
Marc Bell – So a little bit self-serving, because I also founded PredaSar. And so we decided we were going to try to go public. And I would bring my two biggest holdings and space together, being PredaSar and Tyvak, both under the Terran roof. So Tyvak was going to be building the satellites for practice AR. And we felt as a as a public company all together, it made more sense. Alright,
Marc Boucher – Your company is going public on the New York Stock Exchange soon under the symbol LLAP. You’re going public vs Special Purpose Acquisition Company, specifically the Tailwind Two Acquisition Corp, which is obviously already listed, and you know, started off as a $10 price. And it’s been basically there up until today. So SPAC’s have become popular, and they’ve been become very popular with space companies. So I’m wondering why did and I put this this way? Why did you decide to go the SAPC route as opposed to the traditional IPO? And I say it that way, because from what I can see from what your company’s done, you know, you have more revenue coming in than a lot of these sparks do when they when they get announced. So why go this way and not the traditional IPO way?
Marc Bell – So it’s a great question. So what a SPAC does is it gives us certainty of close, versus a traditional IPO. Higher certainty of close. So for example, if we tried to go public on February 24 of this year, we would have had what’s called a market out even anytime in the past couple of weeks, almost no IPOs have gone out the door, because the market is too volatile. And it’s very difficult once you once you have a market out, it’s hard to go back with a SPAC, you have lots of avenues because it’s already a public company that you’re merging with. And we needed a we needed a we need capital, and we wanted higher certainty of clothes. And even though we get a discount for going into a spec, we know we will make up that discount with future revenue and programs that we have, And we’ll be getting.
Marc Boucher – Alright. And then I sort of a related question, why pick the New York Stock Exchange over say the NASDAQ.
Marc Bell – You know, we I’ve listed companies on both New York Stock Exchange and NASDAQ. I think between Dan Sid and I, this is the 17th company we’ve been involved with, it’s gone public. It’s our fifth unicorn. You know, New York Stock Exchange, we think it’s still globally recognized. And we just had a bit of feel about it. I mean, they’re both great exchanges. But we decided this this company needed to be on the New York Stock Exchange.
Marc Boucher – Okay. All right. So let’s go back to my earlier question on some of the technology. When you folded PredaSar into Terran Orbital, with tie back, one of the things that you announced along the way was that you’re going to build a constellation of 96 Synthetic Aperture Radar (SAR) satellites. You know, I’ve seen, I’m familiar with, you know, legacy players like MDA, which don’t build a lot of SAR, satellites, Iceye, which is definitely building a lot of SAR satellites, but 96 is a lot. So why such a large Synthetic Aperture Radar constellation.
Marc Bell – You know, it’s about revisit rate. So, you know, we want to be able to deliver our customer a three to seven minute revisit rate, and in any place that they want to image. And, you know, we’re also we also look at our satellites, I think, I think MDA has two RadarSat for SAR. But we’re looking for the provide real time, near real time data back to the DoD in the IT community. So this is a military grade constellation. You know, the folks that Iceye, which is owned by the Finnish government, you know, that is a much smaller satellite, very low power, the our satellites are going to be much larger and much higher power, so they can image and transmit back to the earth in near real time.
Marc Boucher – Yeah, so that was gonna be one of my questions is, you know, you mentioned Iceye, you know, the, they’re trying to, you know, put synthetic aperture radar in a smaller satellite platform, which of course comes with trade offs, right? You need power for synthetic aperture radar. So how much bigger Can you tell me? Do you know what the size of your satellites are? The SAR satellites?
Marc Bell – We’ve told you right now that 350 kilograms, right, which I think is what is that? Two or three times larger than I sighs it’s a dramatic difference, I believe,
Marc Boucher – But still smaller than what they used to be traditional satellite.
Marc Bell – Well, everything, what used to cost a $1B to build cost 10 million today. What used to take eight to 10 years to build now takes you 12 to 24 months. I mean, everything’s changed. And everybody used to just focus on you know, GEO, MEO, very little on LEO. Now you’ve got tons of people going into LEO. And LEO’s got pluses and minuses. You know, LEO is circumnavigating the globe, at six kilometres a second, you’ve always on the move, versus a stent versus standing still. But and you have but you only end but you’re the cost came down because you’re not building them radiation hardened, meaning all that radiation from the sun burns out your battery cells. And so they have about a five year lifespan, but you’re trading lifespan for costs. And by having it but the benefit of having to refresh every five years is you always have the newest technology in orbit.
Marc Boucher – Have you publicly said what a one of these one of your satellites costs?
Marc Bell – What we say is it’ll cost us $20 million to build, launch and operate a satellite over a five year period. And we expect to get about $100 million of revenue per satellite over that same five year period
Marc Boucher – $20 million in thinking back 10 years ago or five years ago, even that’s cheap,
Marc Bell – Inexpensive.
Marc Boucher – Inexpensive, wrong choice of words. And when we can get satellite launch costs down even further Hey. So when when’s the first satellite expected to go up for the constellation or first batch of satellites because nobody launches just one these days of these sizes. They’re usually done in batches right?
Marc Bell – Right, well, it’s just because you want to build this as an a cadence. Yes, cost effective. We’re looking right now, Q4 this year, and just start putting them up. And we are excited to get the whole constellation up as soon as possible.
Marc Boucher – All right, but no numbers on how many are going up Q4.
Marc Bell – Right now we’re targeting two satellites to Q4.
Marc Boucher – Sorry, how many?
Marc Bell – We’re targeting two for Q4.
Marc Boucher – Okay. And have you announced a launch provider?
Marc Bell – We have not, but it was likely we SpaceX is our preferred ride across the board.
Marc Boucher – Okay. And they’re busy these days, and they’re gonna get busier. So, I don’t know if this is a fair question. But what differentiates prints are the printer star constellation from its competitors, if there are any competitors that are going to provide that kind of coverage.
Marc Bell – No PredaSar is unique. If you think about the and a couple aspects. So PredaSar are from a competitive standpoint, we are. It’s a it’s a both a Earth observation, and synthetic aperture radar packet satellite in a single package. So we can take pictures, imagery, and do SAR innocent in the same pass, we are able to integrate those pictures together those images together, we are if you add up all the you know, all the new space, EO constellations and add up all the new space are constantly just being built, you have all those cell lines combined on pure maths spaces were larger than almost everybody combined. And it’s a big satellite. And that big satellite is able to produce big results. And you know, we’re not building a satellite for commercial purposes. When I say commercial, we’re not, you know, selling them for agriculture or things like that we can don’t get me wrong, but our focus is on the DOD and the IC market. And they need you know, they need data quickly. And they need data at a high resolution, and they need it now. And you need a bigger satellite to do that.
Marc Boucher – Alright, so that might answer my next question. Is that your are you going to be going after any of the foreign market? Or are you just sticking to DOD?
Marc Bell – Right now right now we’re gonna stick to the US marketplace. And then we’ll see where that takes us. But there’s a lot there’s a lot of demand. You see in the Ukraine right now, there’s a lot of demand for imagery, especially Tsar because you know, the Ukraine being the breadbasket of Europe. You know, I think 40% of all we didn’t barley are grown, and for Europe in the Ukraine, Ukraine has traditionally not the greatest weather, because the being the breadbasket, it’s always raining. And it’s always cloudy. And that doesn’t make for good. That makes sorry, even more valuable, because we could start to see at night, they can see through clouds. So you can have true 24/7 ISR that you can’t get in traditional and tropical satellites.
Marc Boucher – So going back to the merger with tailwinds with respect to the actual tailwinds portion of your roadshow. How’s that been going? And considering what current global conditions are? Have you had to change your presentations at all? Or are you just people are just really interested?
Marc Bell – You know, we are who we are. And you know, the good news is we have a very creative arrangement with Francisco Partners, Beach Point and Lockheed to support the SPAC process, which gives us access to significant amounts of capital. And so we are you know, markets are definitely rough out there. Don’t get me wrong, but we will have a net we will have enough cash on clothes to continue forward with our plan.
Marc Boucher – Right. Yeah. And I have noticed that you compared to a lot of SPAC’s recent SPAC’s, you have a lot more contracts under your belt, and some cash that you’ll be able to tap into. So in terms of manufacturing, manufacturing, you’ve primarily been manufacturing in California. Now, you’re going to upgrade those facilities in California. But you’ve also got this huge facility that you’re now planning in Florida. How is how is the Florida facility coming along? When I’m afraid? I haven’t. I don’t know if you’ve actually even broken ground yet.
Marc Bell – No, we haven’t broken ground and the plan isn’t to break ground until after we do SPAC. So Florida’s funding doesn’t go into place until a couple of months after we get back.
Marc Boucher – So tell me a little bit about that facility. I mean, how was it? How does it compare to the one in California they two different types of facilities or are they complementary?
Marc Bell – It’s 660,000 square feet, its able to produce 1000 SmallSats a year. It’s a big facility and and we do everything under one roof, we build our components. We build, we do our assembly, we do everything under one roof. It’s really a give me an amazing, amazing complex.
Marc Boucher – So like you said, the facility is capable of ramping up to produce 1000 satellites a year. When do you expect the facility to open?
Marc Bell – We’re hoping about 36 months after we break ground, that it really depends on how fast contractors move and stuff. You know, it could be sooner could be later. It all depends on the construction market at that point.
Marc Boucher – And 36 months, so basically, three years from sometime later this year. Right. Right. All right. In the meantime, you’re upgrading your California facilities. But how many satellites can you produce in the California facilities right now?
Marc Bell – We’re looking to be able to produce with the new building, over 200 satellites a year out of that facility?
Marc Boucher – How many can you produce now on a monthly basis.
Marc Bell – We were able to meet all of our everything that we have on contract now we’re able to meet the existing facilities. So but and but we are able we’re building for the future. So we will continue to get more we continue to get more and more programs. And we want to bring in printed circuit board and manufacturing and printed circuit board assembly we want to bring in so we are very busily bringing things in.
Marc Boucher – So between the Tailwinds merger and your previous investments, including from Lockheed Martin, the last figure I had was that you were expecting to raise about $395 million. Is that still correct?
Marc Bell – That yeah, yes, four is, you know, the cash in trust is 345. We have a pipe for a little bit more than 50. But you don’t know redemptions are gonna be. And that’s where that we’ll find out that number next week.
Marc Boucher – Okay. So aside from the new manufacturing facility in Florida, and the upgrade in California, what else do you anticipate spending the money on? If anything? And do your plans include any additional acquisitions post merger with tellings? Yes, absolutely.
Marc Bell – We are very actively looking at other companies to acquire finding other strategic things we can do. So we’re very, very busily talking to people as we speak.
Marc Boucher – And in terms of what else you’re going to spend money on anything else,
Marc Bell – You know, we spending on its growth, we mostly spend it on people. I mean, you know, it’s people, it’s facilities, and, you know, innovation will continue to innovate and build new build new products and build new components, we make 85% of our components in house right now. We want to get as close as we can to 100% of the next 36 months. And we want to continue to innovate the components that we have as well, to make them better to make them more sophisticated. You know, it’s like upgrading your iPhone, we want to upgrade our components.
Marc Boucher – In terms of acquisitions, do you think now, based on the current economy based on current global events, now is the time we’re going to see more consolidation? More, you know, especially from companies like yourselves acquiring a lot of these startups? I mean, there’s a lot of startups out there.
Marc Bell – We know my industry. You know, we’re the largest manufacturer of SmallSats in the US that’s independent. Currently, all my compatriots have already been acquired. Raytheo bought Canyon Canyon, Boeing purchased Millennium, were the last guys left. I mean, there really isn’t anybody else kicking around, as far as you know. So we through the end, we see on the constellation side, you see a lot of people that one trick ponies, they are people rolled into SPAC, that probably shouldn’t have shouldn’t have been, you know, they don’t have they don’t have a business plan. They don’t have customers, they don’t have a path to profitability. And and they’re building satellites that, you know, we’re all trying to do the exact same thing in space. And, you know, it’s definitely going to see consolidation one way or the other over the next year.
Marc Boucher – Now, in terms of your current budget, what percentage do you actually spend on r&d? And are there any technologies or new technologies that you’re exploring that you think are exciting?
Marc Bell – Well, we don’t discuss our budget is not in the s four. So forgive me and but we can with hopefully post the spec, I’ll have a lot more freedom to actually talk about things as it same goes with new technologies. We have some very, very cool things that I would love to talk to you when I come back and, and have a give you a preview of some of the cool things we’re working on. Just the SEC says I can’t do it right now.
Marc Boucher – All right. Well, it’s an excuse for another podcast
Marc Bell – Exactly. But it’s a good as a great question. I’m dying to answer it. Because we are already on some very cool things.
Marc Boucher – But yeah, I’m always on the lookout for, you know what people are exploring a new technology. So we’ll we’ll put that one aside. So I think it was just the two days ago or something like that. You got awarded the space development agencies tranche one transport layer, at least you got a contract in support of that from Lockheed Martin. That contract will see your subsidiary Tyvak Nanosatellite Systems build 42 satellites, York Space, Northrop Grumman, they’re each getting 42 as well. Do you see yourself having any advantages over York or Northrop for future SDA opportunities?
Marc Bell – Sure. I mean, York is great. You should Google working in York satellites in space and Google French war victories at the same time, and you’ll get the same. Sorry, couldn’t resist. So York is getting lots of contracts, but we don’t see any satellites being launched. And we’re all waiting. And we hope we hope that we hope they’re going to be successful because we believe rising tide raises all ships. But right now they have the right now we haven’t seen anything come out of them. And it’s making us all worried.
Marc Boucher – Yeah, but you can’t back it up with a launch and getting something in orbit. And that’s, that’s not good for anybody.
Marc Bell – Well, anyway, because, you know, people, people look at us as a sector, not just as a company. So they always talk about, you know, all these new space companies. And now we’re a defense company. And, you know, we’re aerospace and defense, we’re not new space. And but it’s all but we get, we get, unfortunately, put in this new space basket that we don’t want to be, because it’s new space companies are all missing their numbers. They’re, you know, they report to the street and they miss a month later. They are there regulatory issues with the SEC. And you know, we don’t want to be part of that community. These are, these are companies that never should have gone public.
Marc Boucher – Wow. Which is what I do, which is interesting, because, you know, you don’t consider yourself what I would call or what you call a new space company. Maybe its semantics. But I would categorize you as a new, you know, not one word, new space, but new space company. Because you’re relatively new. And you’re, you’re, you’re in this small set area, but I understand where you’re coming from. And, you know, and taking into account, you know, like you said, you know, people don’t know, in our pre interview, people don’t know what what your your stock symbol is going to be at this point, because it’s not out there.
Marc Bell – Actually, it is out there. We just haven’t publicized it. Right, right.
Marc Boucher – You just haven’t publicized it. But you know, I track all the new sparks, right, which have a lot of new space companies in it. And you know, not doing so well,
Marc Bell – Because they’re all one trick ponies. See, we we are a manufacturer. So we build 5g Internet of Things, imaging, radar, anything you can do from space, we do it all most of these companies have gone public, they do one single thing, they’ll try to do electro optical imaging just take pictures of the Earth. And that’s it. And they’re building satellites, that based on designs that we did 10 years ago. And you know, and you know, they’re, they’re a decade behind technology wise, and they are all falling into the trap that just because it’s cheap. And just because it’s small, it’s better. And that’s not the way it works. It’s only better if it produces a higher quality image than anything else that can be done in that form factor. So we look at ourselves as who the mark and we were, we don’t operate constellations, we build satellites for everybody. We are going to build a constellation predecessor that we’re going to own. But that came out of a program for a customer that they were going to build one and we decided we’ll build it and sell them data. But you know, there is an incredible there are incredible opportunities here. For people like us, because we’re payload agnostic, everybody, all these public companies, they’ve got one payload and this is what they’re doing. And most of them are doing the same thing, and they’re not doing very well. And they’re all going after that same pool of money. And you know, they really don’t realize that they the government doesn’t want to be supporting these companies and most constellations historically have gone bankrupt. You have to think about it. You had already Iridium, MRSAt and all these companies all go bust. And the DoD doesn’t want to have to keep bailing people out but they want the images so they’re put into a situation that they have to give these company companies money to keep them going. And in our case, yeah, we have access to lots of customers that we can do we do do commercial work. So we will sell it to EchoStar. For example, we build their last three satellites. Yes, it will be it will build satellites, you know, for large corporates, and, but we’re not doing it. We don’t build a lot of sites for startups. It’s we want someone to be fully funded is gonna be around any year, who also has a business plan that we feel. And as a venture investor, I feel that they can they have a sustainable business plan. They’re not just, they’re not trying to mine asteroids, and bring it back to the earth that actually had something that’s gonna make money today.
Marc Boucher – So here’s a question for you that that’s more personal, in that he, like you said, at one point in our conversation you’ve been part of, I think he said, 17 companies going public for that have become unicorns? Are you planning? Obviously, you’re planning now but I mean, you know, you said you’re a space guy. Is this is this a company that you’re going to stay with for? Quite a bit, you know, foreseeable future.
Marc Bell – That is my goal, this is my last stop. I’m getting old. And I realized this. This is a young man’s game. And I’m realizing this that I signed up for five years, I took my partner spot, and I agreed to stick on board for five years. So they have me for five years. And after that, I said, when I turned 60, I think I think I’m going to be like Logan’s Run and just age out. I’m going to get a Carousel and I’m going to be done. And I appreciate the fact that you get the joke, because nobody’s gotten it so far.
Marc Boucher –Yeah, anybody under what 40 won’t get the joke.
Marc Bell – It’s a sad, sad world we live in.
Marc Boucher – Classic movie, classic movie.
Marc Bell – So I’m a little older (unintelligible). I’ll be 60 But you know, it’s good enough. I’m here. I’m here. I’m here to I’m 60. And after that, everyones on their own.
Marc Boucher – Alright. Thank you Marc for your time. I know you’re really busy getting this merger done. I’m going to be keeping a close eye on it, because you know, fascinating company.
Marc Bell – Thank you for your time.
