Q2 2021 Rocket Lab USA Inc Earnings Call
Yeah.
[music].
Greetings and welcome to the rocket lab first half 2021 earnings conference call. At this time, all participants are in a listen only mode.
Brief question and answer session will follow the formal presentation. If you would like to ask a question at that time. Please press star followed by one on your telephone keypad. As a reminder, this conference call is being recorded it is now my pleasure to introduce your host Gideon Massey Finance planning an analyst manager.
Thank you Sir you may begin.
Thank you operator, good afternoon, everyone and thank you for joining us on today's conference call to discuss rocket labs first half 2021 financial results.
Today's call is being hosted by Peter Burke, founder and CEO, and Adam Spice Chief Financial Officer.
After our prepared comments, we will take questions.
Our comments today include forward looking statements within the meaning of applicable security laws, including statements relating to our guidance for third and fourth quarter 2021 revenue.
Revenue growth expectations in our principal target markets.
GAAP and non-GAAP gross margin.
GAAP and non-GAAP operating expenses tax expenses, and effective tax rate and interest and other expense.
In addition, we will make forward looking statements related to trend opportunities and uncertainties in various products and geographic markets, including without limitation.
Statements concerning opportunities arising from our loss of service and space systems market and opportunities for improved revenue across our target markets.
These forward looking statements include substantial risks and uncertainty, including risks arising from competition global trade and export restrictions.
The impact of the COVID-19 pandemic.
Our dependence on a limited number of customers average selling price trends and risks that are market and growth opportunities may not develop as we currently expect and that our assumptions concerning these opportunities may prove incorrect.
More information on these and other risk may affect the forward looking statements.
As outlined in the risk factors section of our recent SEC filings, including our form 8-K filed on August 25, 2021, and the documents incorporated there in.
Any forward looking statements are made as of to date and rocket lab has no obligation to update or revise any forward looking statements.
The first half 2021 earnings release is available in the Investor Relations section of our website at rocket lab USA Dot com.
To supplement our unaudited consolidated financial statements presented on a basis consistent with GAAP, we disclose certain non-GAAP financial measures, including gross margin and operating expenses.
These supplemental measures exclude the effects of stock based compensation expense hammered.
Amortization of purchased intangible assets other non reoccurring interest and other income expense.
Net attributable to acquisitions and noncash income tax benefits and expenses.
We also supplement our unaudited historical statements and forward looking guidance with a measure of adjusted EBITDA were adjustments to EBITDA include share based compensation warrant expense related to customers and partners foreign exchange gains or losses, other non operating income and loss excludes.
Interest expense related to debt and other non reoccurring gains or losses were.
We encourage investors to review the detailed reconciliation of our GAAP and non-GAAP presentations in our investor updated presentation available on our website.
We do not provide a reconciliation of non-GAAP guidance for future periods because of the inherent uncertainty associated with our ability to project certain future charges, including stock based compensation and its associated tax effects.
And the effects of the warrant expense related to customers and partners.
Non-GAAP financial measures discussed today are not in accordance with and do not serve as an alternative for the presentation of rocket labs GAAP financial results.
We are providing this information to enable investors to perform more meaningful comparisons of our operating results in a manner similar to management's analysis of our business we.
We believe that these non-GAAP measures have limitations and that they do not reflect all of the amounts associated with our GAAP results of operation.
These non-GAAP measures should only be viewed in conjunction with corresponding GAAP measures.
Lastly, this call is also being webcast with a supporting presentation and a replay and copy of the presentation will be available on our website for two weeks.
Now, let me turn the call over to Peter back founder and CEO.
Yes.
Thank you very much and thank you George.
Joining us today as we review broken lamps business highlights and financial results for the first half of 2020.
The Roc lab in 2006 with a vision to unlock the potential of space and it's a pleasure to be joining you today and sharing details on just exactly how we're doing that.
<unk> <unk>, Chief Financial Officer, Adam spots Adam.
As CFO since May 2019 prior to joining the rocket led team at them with the Vice President and Chief Financial Officer at Max linear and.
Of experience to the team.
Did I will be talking you through a brief introduction of the rocket life business, followed by our key accomplishments for the first half of 2021 will be covering our financial highlights and outlook sharing upcoming conference schedule and of course, we'll leave time for questions and answers.
So let me first opened with a quick overview of rocket labs.
Our vertically integrated into <unk> space company spending on services and spacecraft manufacturing with a vision to move into space applications, perhaps better known as providing data and citizens for mobile we design manufacture and launch the elektron rocket, which has been flying since 2017.
We've now launched 21 tons and delivered 105 satellites to orbit for a range of commercial and government customers. This has made us the <unk>.
Most frequently launched U S rocket for the past two years behind the earnings basics as Falcon nine.
We have three launch beds, including one operational paired and another nearing completion in New Zealand.
Third Virginia.
Third in Virginia is scheduled to be operational in the coming months pending necessary application.
Beyond launch, we design manufacture and operate spacecraft two of which have been launched and operating in all but right now at 501 space craft has been inflicted by NASA mission to the Moon to Mars and has been selected by commercial satellite operators.
<unk> in low Earth orbit.
Operating as a launch provider space craft manufacturer, we have unique insight into the industry, particularly across supply chain something that became quickly apparent to us was that while small satellite industry was growing it was constrained by satellite component supply.
Its typically these products are being produced in small quantity and a hugely expensive and require ordering sometimes using advanced.
So we've set out to change that by producing what we consider best in class by Scott components at scale capability was strengthened with the acquisition of Sinclair Interplanetary in 2020.
So with that brief overview of the rocket led story to date, let me take you through some of the achievements for the first half of this year.
This year, we started off strong with three electron launches in the first half which saw us hit a milestone in 20th electron launched Tonight diminished launch twice in the same period last year. So we've increased our launch cadence by 50% for the first half of 2021.
Of course these missions, we reached another key milestone deploying 100 satellite to orbit, we've actually now exceeded that and sitting at 105 satellites deployed to orbit for customers across government and commercial markets plus two of their own spectrum.
Dawn spacecraft as well.
It was almost 20 of fluids that we successfully recovered electrons per stage boost of our ocean splashdown. After launch. This is our second successful recovery of the first stage and marked a significant step forward in our Reusability program, which aims to make elektron. The first reusable rocket dedicated to small satellites.
The first half of this year also registered significant growth in backlog with June 32021 backlog of $141 million since.
At June 32020 backlog of $68.0 million.
This is underpinned by several significant new elektron launch contracts, including a five launch deal with flex called global to support the constellation growth as well.
As a new launch contract with general Atomics.
We continue to see strong growth from government customers to with new launch contract awarded for a dedicated launch for the U S government for commercial sensitivity and security reasons several of our commercial and government customers do wish to remain undisclosed at this point.
We also saw strong growth on the spy system side, we were awarded a contract to design and build three photon spacecraft, Nevada space Industries, and then space manufacturing company. We are awarded a study to develop <unk> social and spacecraft for niches Escapade mission to Mars. In addition to <unk> contracts, we secured new deals for satellite component.
Across a number of large undisclosed customers.
Excuse me and of course in the first half of 2021, we hit a big milestone by entering into the merger agreement with Victor acquisition Corporation being a journey to become a publicly traded company listed on the NASDAQ.
In anticipation to a public listing we also welcomed new board members believe John and Alex.
We are proud and excited to have them on the team as we embark on a new chapter.
On the R&D side, we announced plans to develop a new eight ton pilot class rocket called neutral.
We're electron solve the challenge of dedicated responsible response responsive launch for small satellites neutral and we'll provide a rock solid solution for launching the constellations of the future since announcing claims in March we've continued to make great progress and I look forward to sharing a detailed development update in the coming months.
So that provides a brief snapshot of the highlights of the first half, but I'd like to also touch briefly on some of their key achievements since June 30 of this year.
On July 29th we successfully launched at 21st to make transmission a dedicated launch for the United States by schools. This is our second mission under the Spice Tea program. The first taking place in May 2019. So we're proud to have delivered a mission success for our government customers once again.
It is often the case with government customers pinpoint accuracy and overall deployment is is highly valued in this mission delivered the payload with precision thinks two electrons kick stage with more government missions coming up we look forward to delivering this reliability again and again.
Beyond launch activity from June 30 to August 31st we continued to grow our backlog to $174 million. This is underpinned by a launch contracts with commercial satellite operators, including Aurora propulsion technologies, although overall as well as a number of undisclosed commercial and government customers.
Across launch and space systems.
Contributing to this is another multi launch deal just today, we announced that rocket lab has been awarded a five launch contract with <unk> to deliver 25 satellites to orbit with the electron from 2023.
This represents <unk> entire constellation and really cements electrons value proposition of putting our customers and control of the emissions by launching an electron can you just has much more control over the launch schedule orbital parameters as well as that pinpoint deployment accuracy that is provided by the <unk> stage.
On the spy systems side, we recently announced the construction is underway on the new production line for reaction yields a key component for small cell lunch as mentioned earlier, our satellite components are typically being produced in small numbers, which is really limited the speed and scale of constellation development. The line has been built to solve it enabling production at scale to meet the.
Growing needs of the customers and the industry at large.
And of course, one of the key achievements of the year. So far has been the successful closure of our merger with Victor acquisition Corporation as of 20, <unk> August rocket lab as a publicly traded company on the NASDAQ the transaction so rocket labor saved $777 million in gross proceeds we also.
So a tremendously low redemption rate of just 3%.
Publicly traded VA CQ shares.
This activity has taken place against a backdrop of COVID-19, and launch cadence and operations have been continued to be affected by COVID-19 restrictions in the U S and Canada.
<unk> operations have experienced disruptions due to some of the most restrictive COVID-19 measures globally, including our current stay at home orders, which convenient launch operations from taking place.
In addition, New Zealand. In addition, New Zealand strict international border restrictions have created delays that way, but we have been successful in securing a customer's entry into New Zealand so far.
Patients out of the current lockdown restrictions may ease by the end of September with the Delta cases.
Dropping in New Zealand.
Of course is subject to change.
So with that let me turn call over to Adam Spice, Our Chief Financial Officer.
Yes.
Thanks, Pete I will first review our first half 2021 results and then further discuss our outlook for Q3.
Color around our Q4 2021 revenue outlook.
Our first half 2021 results highlight revenues of $34.0 million.
Representing year on year growth of 237% and GAAP and non-GAAP gross margins of 13% and 23% respectively.
Specifically large services revenue grew 185% and stood at $225.0 million or <unk>, 82% of total revenue and.
In space systems contributed $9.0 million or 18% of total revenue.
Space systems grew dramatically off a small base year on year to $9.0 million from approximately $300000 as the period benefited from the combination of full period contribution from the acquisition of Sinclair airplane Terry that closed in April 2020.
Overall strong growth in shipments for reaction will star trackers as well as contribution from our broader space systems initiatives, including spacecraft engineering and design services.
As referenced earlier GAAP and non-GAAP gross margins for the first half of 2021 or approximately 13% and 16% of revenue respectively.
This compares to GAAP and non-GAAP gross margins of negative, 67% and negative 59% respectively. In the first half of 2020.
Expansion, both GAAP and non-GAAP gross margins were largely the result of increases in elektron build rate and launch cadence and the related effects on launch and production overhead cost to cost absorption as well as the mix effect, a greater relative contribution of space systems.
The delta between GAAP and non-GAAP gross margins in the first half of 2021 is primarily driven by $600000 stock based compensation and $100000 of acquisition related intangible asset amortization.
GAAP operating expenses for the first half of 2021 were $32.0 million up $20.0 million versus the first half of 2020 with 80% of the Opex increase spending attributable to R&D targeted at further developing Tam expanding technical capabilities.
GAAP R&D expenses of $21.0 million included stock based compensation of $1 million in amortization of purchased intangibles of approximately $700000.
Yielding $22.0 million non-GAAP operating expense for the first half of 2021.
The previously referenced targeted investments in R&D spend that stepped up $14.0 million were driven largely by increased staffing and prototype expenses related to our space systems products launched.
<unk> launched vehicle automated flight termination system development efforts and initial spend on our recently announced Neutrolin launch vehicle.
GAAP SG&A expense of $20.0 million included stock based compensation of $800000 in amortization of purchased intangibles of approximately $50000, yielding $20.0 million of non-GAAP SG&A expense for the first half of 2021.
The year on year step up of $6.0 million in SG&A was primarily due to increased head count related labor expenses software licenses and subscriptions and software professional services and audit expenses related to the preparation for a capital markets transaction, partially offset by reductions in facilities and other related overhead expenses.
Our cash flow consumed from operating activities in the first half of 2021 was $42.0 billion.
Which reflects an increase of cash consumed of $29.0 million versus the first half of 2020.
This increase was largely driven by a $10.0 million larger net loss combined with a $21.0 million increase in accounts receivable due to the lengthening payment terms extended to a strategic customer undergoing a protracted financing process, which is now nearing its conclusion.
And an increase in inventory of $8.0 million offset somewhat by $10.0 million in noncash expense associated with preferred stock warrants.
Cash flow consumed from operating activities was $12.0 million in the first half of 2021 compared to cash consumed of $35.0 million in the first half of 2020 with year on year period reduction in cash consumed driven by several large capital projects that were consuming cash in the first half of 2020 being largely completed in 2020.
Which included investments in our new long Beach headquarters and production facility investments and <unk>, Our second launch pad at market, New Zealand and our newly consolidated propulsion test complex in Auckland, as well as nonrecurring $24.0 million cash outflow related to the acquisition of Sinclair Interplanetary in April 2020.
The combination of cash consumed from operating and investing activities was more than offset by the $101.0 million net cash generated from our financing activities in the period, resulting in a $190 million in cash and cash equivalents and restricted cash as of June 32021.
An increase of $39 million.
Versus the prior ending period June 32020.
Subsequent to the June 32021 period, we completed the <unk> transaction vector acquisition Corporation on August 25th resulting in $777 million in gross proceeds from a combination of a $467 million pipe at $310 million from vector acquisition Corp's cash at trust.
We believe the liquidity resources of the company enable the execution of our strategic development roadmap, including the development of our neutral and launch vehicle and continued investments targeted at expanding our total addressable market for strategic space systems solutions.
With that let's turn to our guidance for Q3 of 2021.
We currently expect revenue in the third quarter of 2021 to be approximately 4 million to $5 million, which has been significantly impacted by the COVID-19 level <unk> in lockdown in New Zealand after a delta of various outbreak, resulting in no further launch activity planned in the quarter.
We expect Q3, 2021, GAAP and non-GAAP gross margins of negative, 221% and negative 52% respectively.
These negative gross margins are a product of the significantly lower production launch volumes forecasted in the quarter and related Unabsorbed production and launch period costs, resulting from New Zealand cohort cohort level four restrictions referenced earlier on the call.
We believe our high degree of vertical integration is very strategic and a key factor, enabling future operating leverage however in periods such as this vertical integration can have the opposite effect.
As production and launch activities resume we expect gross margins to recover accordingly.
We expect Q3, 2021, GAAP operating expenses of $41 million to $43 million and non-GAAP operating expenses of 18 million to $20 million as we continue to fund strategic development programs targeted at delivering strong top line growth in 2021 and beyond across large and space systems and our goal.
Delivering operating leverage in the business.
We expect Q3, 2021, GAAP and non-GAAP interest expense to be $7.0 million.
Given the requirement to fair market value of the Victor acquisition Corp, public and private warrants and rocket lab customer and partner awards based on the end of quarter stock price. We cannot estimate these below the line GAAP other income and expense items. At this time, nor are we able to forecast foreign exchange gains or losses.
We expect Q3 2021, adjusted EBITDA loss to range between $17 million at $20 billion.
Our manifest for the remainder of the year remained strong which supports demand for more than $40 million of revenue in the fourth quarter.
Given the uncertainty of Covid restrictions New Zealand. However, we're judging our fourth quarter revenue forecast to range between $17 million and $20 million.
This assumes the COVID-19 restrictions ease prior to the end of September, allowing our launch services to resume.
This revenue guidance of four to 5 million for Q$20 million to $20 million for Q4, when combined with our first half and the books would result in fiscal year 2021 revenue of $50 million to $54 million.
We are taking what we believe to be a prudently conservative approach to forecasting in a very uncertain time with regards to COVID-19 restrictions in New Zealand.
To this end the estimate for fourth quarter revenue assumes modest sequential growth in space systems and contribution from only two launches in the quarter versus five launches currently manifested.
It is also important to consider that our backlog has been growing despite the current COVID-19 operating restrictions in New Zealand and these contracts are not perishable, but rather just the timing of execution against these binding contractual launch services agreements.
So in closing despite near term challenges presented by Covid restrictions, primarily affecting our launch services business. We are very encouraged by the progress made against key strategic programs and expansion initiatives at particularly by continued expansion in our backlog.
And with that I'd like to open up the call for questions.
Second lien.
If you would like to ask a question. Please press star followed by one.
Thank you Pat.
If you would like to withdraw your question. Please press star followed by <unk>.
And preparing to ask your question sure. Thank you Ron you did thoughtfully, we will pause briefly to allow questions to generate EQ.
The first question is from the line of Edison Chu with Deutsche Bank You May proceed.
Thanks for taking the questions and congratulations on the first quarter out.
Is that a couple of things I want to add one more near term another thing kind of farther out.
Realize that youre being a bit conservative on the launch cadence due to COVID-19.
Could you maybe go over what's the potential to maybe make that up in like the first half of 2022.
You clearly have the capacity to.
Is it still possible to kind of get those launches and maybe in the first quarter of.
2022 curious about that.
And then the second thing a bit more longer term.
It seems like the pace of of announcements of wins has really accelerated I would say in the last few months.
Could you maybe go over again the pipeline that you've outlined the pad is that also expanding across the various verticals that youre playing in I'm. Just curious if <unk> seen the pace of wins has really accelerated.
Adam I can I can take.
Kick up a couple of these in at any <unk>, who wish to with.
With respect to can we can can we make up the manifest.
Obviously, we have.
Provided we can produce launch vehicles.
In.
We can push those out to the pair pretty quickly.
Operating around pivot over to launch range gives us a huge amount of flexibility to.
To manage the manifest.
Subject to any other launch vehicles.
<unk> and constraints so.
That puts us in a good position to.
To make those up and control that.
Can you speak to the pipeline expanding.
The pipeline.
<unk> continued to expand and we continue to see growth in the pipeline and the opportunities.
Their own.
Yes.
Yes, I'll jump in Edison and I think when it comes to the catch up sorry go ahead.
Go ahead Scott.
I had a follow up.
No go ahead ask your follow up.
Phil joined inaccurate.
Yes, yes, I was hoping I'd say is.
I assume <unk> doesn't include any launches out of out of wall ups right I was just going to make sure.
Okay I'll take that so yes currently right now we don't have.
Any launches scheduled on the manifest for for Q4 out of our wallets.
As we've discussed in the past, we're really waiting the final certification of our automated flight termination system. We are waiting on NASA software too too to be certified on our hardware. So until that happens we weren't able to launch out of.
It will also though we've also.
The targeted date of having that operational by the end of the year, but whether we could get a launch off within that.
Towards the very end of the year as a question Pete you want on premise.
Victor.
The launch pad is complete and.
It's commissioned we just waiting on this of the complete that final piece of work on the software which is that it is scheduled by the end of the year.
And that is and I'll jump back onto the question as far as catching up Q1, I would say that we're certainly not throwing in the towel.
Q4, and supporting as many of the launch of those five launches that we have on the manifest. It was just really out of I would say being prudent and conservative with regards to forecasting for the financial community. We are willing to sign up for commit to.
This is not at all an indication that we are changing our manifest.
We're not kind of still doing everything we can to execute to that but I think it was just.
Prudently cautious of us to put a lower financial commitment out there, but again.
I want to make sure that people don't confuse that with what actually exists on the manifest and what ultimately the bogey would be.
And then and then I would.
Following the other question as far as the pipeline pays and so forth I would agree I think we're seeing a lot of a lot of diversity in the pipeline across launch.
Across government.
Across commercial and then I think even specifically more specifically probably on the space systems side is where we're seeing a tremendous amount of strength and where we're getting a lot of diversity building in the business.
To me, that's probably the most encouraging because I think having that diversity.
The business allows us to to.
To deal with some of the Lumpiness Thats natural in a launch business right launches can be affected by whether they can be affected by a lot of things, whereas you get this diversified portfolio of space systems business across components satellite build design services on orbit operational management contracts and so forth.
Does provide a nice kind of diversified stable base on which you can build your business. So we're very very excited about that particular part of the growth in our pipeline.
Great that's great color, if I could just sneak one more in.
Any any sort of updates on our neutron I know you said, you'll give more details in the coming months curious whats maybe some reactions from potential customers.
Progress is everything kind of on track timing wise, yes, just anything there.
Yes sure.
New neutral and continues to develop them really well and.
We just we are spending a ton.
Getting getting through.
It's a tremendous amount of work and holding it caused a little bit close to achieved.
Neutrolin is a vehicle that.
Is that kind of an increment on an electron it is it is something that really sets a new standard within the space industry and FDA.
So we're going to we're going to do.
Really significant announcement about that here in the coming months.
Bill.
Expose a lot more of it of its details but at the moment.
I'd like to just keep a hit down in.
And working Super hard and getting.
Through a large portion of the vehicle design and economy, but.
I don't think anybody will be.
Be disappointed with.
When we reveal more information.
Often forget it.
Thank you Mr Yu.
The next question from the line of Cai von <unk> with Cowen You May proceed.
Okay.
Yes, thank you very much so.
You raised a lot of money.
Looks like more than you need for new trauma until you reach cash breakeven and I think you've talked of sort of in organic growth can you give us a little bit of color on what the M&A pipeline looks like and.
What are you looking for in terms of size of deals in.
When might we see a transaction thanks so much.
Sure.
Your point is exactly correct.
We ensured that we have sufficient dry powder to.
To really expand the team.
<unk>.
I would say that the kind of acquisitions, we were looking for and have been pursuing are ones that.
That's really good.
We're positioned very strategically so obviously you've seen the value of the Sinclair acquisition.
And what we can provide there.
More more things along those lines.
That really create an ability.
To create new technologies and.
We compete in the marketplace.
<unk>.
More aggressively.
These are things we're after.
I think it's a little bit early too.
Announcing anything here.
Perhaps Adam you want to provide any extra color that you think is appropriate.
Sure Yeah, no I think that.
It's interesting about this market right now as it does really feel like it's ripe for consolidation and not consolidation in the sense of large companies necessarily getting together for the fact that.
Invest ability of space is a relatively new phenomenon for quite some time is very difficult to raise raise private capital in this market. So there's a lot of mom and pop or bootstrap companies, where their founder controlled really nice businesses, though businesses that are that are.
Recently integrated <unk>.
Digestible from from that perspective also they tend to have had a focus on profitability. So you are not picking up but what are typically kind of adventure found venture funded cash burning operation. So we're actually seeing quite a bit of opportunity and we always have a pipeline of half dozen or so deals that we're actively investigating or trying to progress.
So I definitely think that.
The outlook looks good for four for US landing transactions I think as Pete mentioned earlier, the Sinclair acquisition has really emboldened us to lean forward and look at opportunities and Fortunately. We're also finding that when we have discussions with companies. They seem to really want to be part of it of this platform right. So I think thats in my experience in <unk>.
Engineering oriented companies.
Engineers are drawn to other great engineers and Thats one thing that we really have to offer here at rocket lab is a great platform with great engineers and kind of when you have those engineered engineered engineered conversations you really start to get a mind meld and get a sense that people would really want to be part of a true operating company and one that has got a leading platform that they can ultimately get their products to market. So.
Yes, I think that we're not seeing and we're really not looking at we would consider to be large deals we're really looking more for tuck ins.
And they really do range across the breadth of the market, but primarily in our space systems side obviously.
That's where the majority of the opportunity is because we believe we've got launch pretty well in hand, obviously with with elektron, the NAV neutral and there might be some technologies that we kind of at the portfolio on that side of the house as well, but the focus is really disproportionately on the space system side and building out that debt.
Print in that ecosystem.
And in a prudent way, but also in a way that I think just fits the model and we will kind of deliver the type of business profile that we've been articulate to investors thus far.
Thank you very much and as a follow on.
Pricing I think you had mentioned that you have a couple of planet launches that you signed up for in 2015 that basically have lowered prices. What is the recent trend and pricing both with respect to what you are able to get now that you are kind of more proven and what you are.
Seeing from competition, given those guys basically have yet to prove themselves, but obviously they'd like to have business.
Yes.
So at the end of the date.
Customers value a couple of things more than anything else the value reliability and not just not just reliability of the launch vehicle, but reliability.
The schedule.
And.
And just.
<unk> service.
So we we havent seen.
Pricing eroded.
And.
And customers understand the value that.
A reliable dedicated small launch provide.
So.
We really haven't seen can really.
In any kind of issues there.
Yes.
Have you seen anything.
Oh, sorry.
Go ahead Scott.
No I would just say have you seen any improvement in pricing now that you've kind of done more satellites.
I wouldn't say that we've seen stability in our pricing.
Certainly since I joined I joined in May of 2018, and the pricing that we were talking about at that point in time was considerably lower than it is today, so pricing has actually gone up for us.
And I think a lot of people, perhaps would have predicted that not to be the case, but certainly has developed to be that.
I think what we're seeing with what's helping that stability in pricing and the fact that we're bringing more to the table than just just just launched I don't want to minimize loss launch is incredibly complex and we believe the keys to playing in the space overall, but.
<unk> has really been a huge I would say complement to our launch business right, where when you can offer a customer a complete turnkey solution, where all they can involve we need really to focus on is the data which is really what they want from from the asset on orbit coming to them with a combined launch plus photon solution is incredibly powerful and then allows us to have.
Again, a lot more I would say control over pricing because we're really not dealing with other competitors out there that have that same suite of offerings. So yes.
Yes, Thats really been helpful to provide support for pricing.
And for this not to really.
Get too affected by us by others and of course, depending on pricing too is a lot of people can be out there talking about about launches, but we're one of the few that's actually putting putting assets on orbit unpredictable and frequent basis. So that helps as well and then also what we're seeing I think developed is.
Is that multi launch deals have come forward. So we talked about connect dealer today I think if you really are starting to see I think proof that the new space Leo market is really starting to take off and you start to see these multi launch commitments and thats something thats really I'd say kind of evidenced itself the last I'd say.
Six months to 12 months.
Again, starting to see more and more kind of momentum along those lines. So less of the kind of one off bespoke.
<unk> agreements and more for multi launch, which is which is very encouraging.
And then to that even very much I think.
I think that will settle out.
Operator, all sorry.
I understand the value of a small dedicated launch on a reliable platform, whereas.
This obvious but as more and more customers are flowing with us and they see the value then I think that certainly help with that as well.
Yes, I think I think one of the things that really helps too on the pricing stability is heritage right. So as Pete mentioned, having having hit the milestones we have as far as the number of launches 21 launches that significant right. That's differentiated in the marketplace and I think people now as they get really serious about putting their assets and orbitz. They want to go with.
He has proven they can they can do it and they can do it reliably repeatedly so all of those things that kind of factored in to provide what we see is a pretty pretty stable environment for pricing.
Thank you.
Thank you Mr <unk> remarks.
The next question is from the line of Sandy.
Silva with Roth capital you May proceed.
Hi, Peter Hi, Adam Congratulations on the progress here.
I wanted to dig into your comments on the component strategy and the gross margin that it can be negatively impacted during times like this and then rebound is that a strategic difference for you guys versus competitors and financially and help us understand which components you try to bring <unk> in house, and which ones you don't.
You kind of draw that line.
Sure.
Yes.
The lunch business is a way that feeling lumpy business because at the end of the day at lunch.
Provider, you're always subject to spice.
Spacecraft readiness and customer readiness.
Launches are always.
Lumpy business.
And.
Ill add decision to move into spy system.
It wasn't something that we did.
Consciously recently it was something that was baked into the plan from day one.
If you look at the various <unk> rocket that we launched the kick stage that we put in orbit head <unk> for solar panels.
We brought back on March two.
Our view on on.
We're really providing an <unk> based company.
As being foundational from day one.
And when youre going to be that into insights company.
<unk> or satellite components actually.
Boom really fundamental layer and.
An important differentiator between you and others.
Because as we found out very quickly when we started to order satellite component lead times were just too long like.
We don't have nine to 12 months to light per reaction so.
After kind of experiencing that in our own satellite program, we can kind of understood. The rest of the industry at risk in the market and.
The satellite industry is kind of bounded by the fact that you have mentioned a number of small shops producing at relatively small volumes.
And when you turn up too.
Like component manufacturer and say you want a couple of thousand of something everybody's head just explode.
So.
If the space industry and.
Satellite constellations that kind of scale at the right that everybody predicts.
This problem has to be solved.
The one thing that with Super good at as a company is producing really complete things that volume.
In space components of volume.
So.
Our strategy here is obviously to provide components into our own platforms, but also into others.
<unk> really help.
Support and Joliet alone the growth of the satellite and the large constellations.
General and he can kind of thing that with an example of that obviously with the Sinclair with deal where we're now supplying.
Not hundreds but.
Up to thousands of reaction builds into a variety of platforms.
Okay.
And then on the.
The launch cadence and the push outs here I am wondering if that has any impact on the timing of when you expect.
Reis services, if you would revenue.
To come in I presume you have some learnings in testing there before you monetize that.
Does the launch which adds a new Zealand push that back or is a lot of that already in place to hit your targets for.
That flowing into revenue in a few years.
Yes.
This doesn't pick one Brent.
Yes.
Future plans I mean.
Lunch benefits manifest gets moved around.
All of the time, it's very like I said, we are always subject to something whether it be with our customers' readiness.
Of the spacecraft customer delivery of this spacecraft.
And of course global pandemic, so that'll get thrown in there and like I say the biggest.
The biggest.
What we have is actually earning around <unk> and being able to.
Maybe those manifest and manage that benefit so that everybody gets off in the shortest timeframe.
Okay.
Again, congratulations on the progress thanks.
Thanks.
Thank you Mr de Silva.
The next question is from the line of Austin.
With Canaccord Genuity you May proceed.
Hi, good afternoon.
Just to go ahead with my first question here.
If we think about the space systems segment, where do you foresee in terms of revenue mix the ultimate breakout being in the in the next few years in terms of the sales of the photon satellite baas versus the sales of the components.
Yes, I can provide a little bit of color.
Got it.
Yeah go ahead go ahead.
Yes, so so Austin if you look at the at the breakout right now certainly components is a little bit larger because it had a bit of a I would say a little bit more of a running start from the acquisition of Sinclair.
But when we look at our overall contribution in 2021 is it gets to be pretty balanced by the time, we are getting out into the into the into this Q4 period. So.
I would say that.
They both have the opportunity to scale, although my my guess would be the components will will outstrip the design services and satellite bus and other related functions.
Functions within space systems for probably the next 12 to perhaps 18 months.
But then the opportunities on the broader side of space systems outside of components. Both at the satellite bus level and services get to be pretty pretty large.
I would say that there was a question earlier about our pipeline we have some very very large opportunities that we're pursuing in our pipeline that are that are very needle moving so.
Right now I'd say the default.
Components will will be a little bit larger because those those kind of opportunities are a little bit further developed and maybe a little bit easier quantified, but I think things outside of components more of the full systems side of things the satellite bus and services side I think overall they have not been at scale.
More greatly in the longer term getting once you get out past the kind of 18 to 24 month period.
And with that I'll, let Pete if you view it any differently.
No.
Exactly what I can say.
Okay.
Yes.
Okay great.
If we think about potential future acquisitions, along the same line of Sinclair.
<unk>.
Are you guys.
Targeting.
Companies that are more within that larger space system, either satellite buses services sort of severe or more components.
Build out this business.
Well I mean, I would say, we have we have to be a little bit careful.
Not showing too much of a hand competitively but.
But I would say, it's a little bit of.
It's been a little bit of both.
Okay, great. Thank you for the color I appreciate it.
Okay.
Thanks, Austin, Thank you Mr Mueller.
There are no additional questions waiting at this time I would like to pass it back to you.
Peter Burke for any additional remarks.
Okay. Thank you very much and before before we wrap up the call I would like to thank everybody who participated in today's call and we look forward to having the opportunity to provide further updates on our business, including drip participation at Deutsche Banks Virtual Technology Conference in September.
TIK Crunch disrupt 2021 on September 22nd and <unk> disruptive C Conference on October 19.
Once again thanks.
If everybody on the call.
Have a great rest of your day.
That concludes for rocket lab or first half 2021 and conference call I Hope you all enjoy the rest of your day.