Q3 2023 Rocket Lab USA Inc Earnings Call
Thank you for standing by my name is Eric and I will be your conference operator today.
At this time I would like to welcome everyone to the rocket Lab Q3 2023 earnings call.
All lines have been placed on mute to prevent any background noise.
After the Speakers' remarks, there will be a question and answer session. If you would like to ask a question. During this time simply press star followed by the number one on your telephone keypad. If you would like to withdraw your question Press Star one again.
I would now like to turn the call over to Colin Canfield head of Investor Relations. Please go ahead.
Thank you Eric Hello, everyone. We're glad to have new join US for today's conference call to discuss rocket last third quarter 2023 financial results before we begin the call I'd like to remind you that our remarks may contain forward looking statements that relate to the future performance of the company and.
These statements are intended to qualify for the Safe Harbor protection from widely established by private Securities Litigation Reform Act.
Any such statements are not guarantees of future performance and factors that could influence. Our results are highlighted in today's press release and others are contained in our filings with the Securities and Exchange Commission.
Such statements are based upon information available to the company as of the date hereof and are subject to change for future developments, except as required by law. The company does not undertake any obligation to update these statements. Our remarks in press release today also contain non-GAAP financial measures within the meaning of regulation G enacted by the SEC included in our.
As such release and our supplemental materials, a reconciliations of these historical non-GAAP financial measures to the company's comparable financial measures calculated in accordance with <unk>.
This call is also being webcast the supporting presentation and a replay a copy of the presentation.
I'll be available on our website.
Presenters today are rocket left Saundra, Chief Executive Officer, Peter back and Chief Financial Officer, Adam Spice. After our prepared comments, we will take questions and now let me turn the call over to Mr. Burton.
Thanks, Kevin and welcome everybody for joining us today's presentation, we will guide the key business accomplishments for the third quarter of 2023 as well as further achievements we've made since the end of the quarter.
Adam will then talk through our financial results for the third quarter before covering the financial outlook for Q4 2023.
After that we'll take questions and finish today's call with the near term conferences, we'll be attending.
Alright onto what we achieved excuse me in the third quarter for the year.
Studying starting with electron.
In July we launched emission with civil satellites for NASA, and others, which was the first of two back to back Reusability focused mission.
After successfully deploying the first Michele Stevens spacecraft electrons first stage was bought back to Earth and recovered from the ocean.
And then we followed that up with their 40th electron launch and even more recovery milestones, including a return for stage and a first Kristen launch a refund on our rubber between Jim previously flown on at 26 mission they're investigating.
The engine performed flawlessly.
Completely validating our suite of Reusability for Elektron and setting us up.
Well to reflect an entire agency. It is our next major reuse of the Gulf.
Next I'll provide a bit of an update for elektron.
Following those two successful flights as you know, we unfortunately experienced an anomaly on at 41st mission.
It's important to remember that up until this launch we have had 37 successful overdue machines to place 171 satellites in orbit and the past two years have been flawless with a record of 26 years old machines one after the other.
The flight 41 as soon as the issue occurred at team jumped into action and the week since the team has been scaring through thousands of channels of flight data and manufacturing data to determine what was the probable root cause I will take you through their investigation in detail over the next couple of slides.
Working in parallel with the FAA DPA has conducted its own review of the mission safety processes planes and procedures, which concluded that they all worked as they should to keep the public safe and I'm pleased to confirm that the FAA has since given us approval to resume launching from launch complex one.
With their investigation in its final stages and a launch license remaining active we are fully anticipating to return to flight within the next few weeks.
Following updates and changes to our testing and manufacturing processes will be returning to the paired with an even more reliable vehicle to meet a busy launch manifest for the remainder of 'twenty three and into 'twenty four.
Now, let me take you through what happened and what we've learned.
So he is a slide on the anomaly timeline the anomaly that ended the mission happened incredibly quickly from the first action in the China, Vince when electron cut off its data relay. The team already had 1.6 seconds of a nominally slot data to work with this was the way it's going to be a highly complex issue to figure out that with deep diligence and analysis. He has what we have.
Been able to determine.
And if 45th mission launched September 19th from L. C. One.
They completed all the usual launch milestones through liftoff, <unk> stage separations and at a 151 seconds. The second stage engine tried took not which is confirmed by flight telemetry that showed the ignite appreciate is building and the locks and kerosene pumps speed rising.
Pumper pellets into the combustion chamber the voltage levels from the battery packs that pad engine and the motor controllers are nominal at this point.
And normally at that point of ignition, but within milliseconds in fact under 51 point Stephen chickens.
We get our first indication of the anomaly.
The systems high level voltage levels take a sudden death and rise of about 100 volts within 30 seconds, indicating an EOG escape from the system that then lead to a full loss of power to the second stage, Laura avionics cutting off telemetry and communication with the <unk> Seacom stage.
And with that it was all either.
So move on to the issue so.
You have to bear with me on this was a little bit to talk about here, but with good to visual evidence with the onboard cameras in the 12000 channels of data.
This high level timeline to draw from the investigation narrowed in on the issue more than 200, Southern dislocations were launched to rolled out to rollout Hot hot political causes of the anomaly.
After more than seven weeks of extensive analysis of the missions manufacturing <unk> slot data the findings of the rocket life investigation team overwhelm overwhelmingly indicate an unexpected electrical aka Curt within the pass system.
Shown on the image on the top right. The team did some tricky optical triangulation and image processing of a small shadow on the engine Bell who is by the attack from that they're able to pinpoint and retry and give out the failure points origin to an area, where the two better battery packs connect now and too.
One is the fixed packed to supply the high voltage power.
So now we're going to take a little listen and passion Moore and passion kits.
Passion law describes how and partial pressure environments, the likelihood of an ocular changes and high voltage systems, depending on the environmental composition.
An approximate guide.
And then be applied across the different situations called the passion Cook.
Which uses the relationship between voltage pressure motor part by distance to indicate what the range of danger is for an active form through various gas gases like helium argon gotcha gotcha etcetera.
So the graph on the bottom right.
Now it is a highly simplified passion codes.
So basically the easiest way to think about this is if you have a positive and a negative terminal or a battery at 500 volts down here on Earth you could place those two terminals of the battery about 0.03 millimeters or one third of the thickness of a human here beside each other and they would not credit.
<unk> or jump of stock between them now.
I'll take the same 500 volt battery and terminals and put them in the worst part of the passion curves, which just happens to be just off decides stage separation in stage two ignition of electrons and the same 500 volt battery and terminals will now act to each other when that nearly one meter of Pos.
Different gases [noise] different pressures affect assistance and there's also other things like icy ripple that can have a huge negative fix but for now let's just keep it simple.
For electron with its high voltage 500 volt power supply.
We have to ensure that every connection is essentially hermetically sealed a tiny pinprick or installation failure will result in nox given that that they can travel over large distances and the passion curve.
All of this is in flux and very transient because as we have seen higher during the second stage burden and go into the high vacuum of space. The walking distance goes back the other way and it becomes hard to Aki game, It's really just at stage separation with things that the worst and we bought them out the passion codes.
As you can imagine this is extremely difficult to test for down on Earth. We actually currently put the whole rearranging the seat that you're in a vacuum chamber pull it down and inject gases like argon to try and aggravate that phenomenon, but even the smallest installation compromise can otherwise be detected, especially when you compile that with other <unk>.
As like icy ripple and trace gases.
Excuse me.
So I know that everybody understands passion curves during the second stage ignition we were at the worst part of the curve and we had a small concentration of helium in the vicinity of the Atkins stage, which is normal.
And our high voltage IC ripple that lie with the spark Tricia would even more.
And a tiny undetectable halt in the HB movements selection.
All of which excuse me all of which combined.
[noise] allowed for not to briefly occur if any of these things were not present in the failure would not have occurred all forehead to be there and to be honest with all the testing. We debuted people thought you would also have to be incredibly lucky to have the installation file a point Oh, sorry lineup within electrical path to be able to okta chassis.
And I generally believe in luck as an engineer, but this but in this instance, I would say that so many things have to line up that most people would say that this.
The probability of this occurring would be largely in <unk>.
Probable.
So with that now that we kind of understand and we've explained the.
Failure.
What are we going to do to get back to flat so the.
The failure was obviously highly complete set of conditions that are extremely difficult to predict.
Our teams top priority through the investigation has been to find a way to make sure that this never happens again and as a result, there is a couple of key corrective measures.
The first is to increase the fidelity of our stage legal vacuum testing, we now have a much more sensitive instruments are implemented in the pre flight tests.
Both at the component level and the state level that can see partial discharge all the way down to a peak of Coulomb now.
This gives us much more confidence in the testing.
However, I was not happy to stop there and so we've implemented a rather brute force solution.
We've done is seal up the battery frame that contains all the high voltage connections and equipment and then pressurize it to about point Barbara <unk>.
I'll draw your attention to the graph on the top right surprise deposits another portion to.
That shows that by Pressurizing, the high voltage area, we shift the passion curves to the lift out of the Red zone into the green side, meaning basically I went back to what it's like on Earth, where it's not really possible for big hockey distances to occur.
Now this has been a lot of work to implement by the attainment as a fairly extreme solution, but really I thought it was there any way we could put the passional well back in its box.
The best way to solve a problem in my opinion as the ways to eliminate that problem and that's what we've done.
Getting to the bottom of the issue and back to the pad for our customers. This has been the team's number one priority it's been incredible to witness the perseverance dedication.
Over these past few weeks.
Not only on the anomaly investigation, but in the work that they've completed a parallel to make sure that we are good to go as soon as we get back to the pet.
The launch window for a return to flight mission will open on November 28, and extend introducing.
The data just dedicated mission will be for Q P is a Japanese based Earth imaging company with the rockets for that mission going through prelaunch testing on the pad at large complex right now.
So move onto electron won't you benefit.
So in 2024, we have a really big year he'd have us.
Even with a pause in operations Elektron remains the world's most frequently launch small overall rocket.
Dedicated missions to small satellites continue to experience strong demand, which we've seen in multiple bulk buys by returning customers and constellation operators in fact with booked out electron launches.
Just yet completely booked we see the market for the electron product being very strong and the minutes. This manifest validates that.
Frequent mulch opportunities flexibility of us schedule and control over their disappointment what are customers looking for and that's what electron has been providing and we will continue to provide and the new year.
And all of that Oh, we have to do really in with that 2020 form manifest is execute.
As this is an with with anything in the space industry.
Ramping electron production and keeping on top of demand with recent acquisitions as well as continuous improvement and automation across our manufacturing processes. We look to continue improving on our already impressive performance in manufacturing.
We also know that the scaling is coming with improved gross margins in Q3, 2023, we achieved a 27% GAAP gross margin, which should look to enable to progress our profitability targets for electron as we drive scale and efficiency into the business.
And I want to take you through and highlight some of their accomplishments in so far in Q4.
So neutral instructions will start with a neutron update earlier this quarter, we reached a major milestone and had frosty had a possibly a second stage take up on the stay in structural and cryogenic testing, which is really a key marker for it and neutral on program development.
<unk> program the.
The team's job was to push the tank to its absolute limits by loading it up with cryogenic fluids and tier two destruction something about 96000 liters of liquid nitrogen was used for this test campaign and an exploit a tank in this instance is very much a good thing and what we wanted to achieve.
The team took the tank past me up or mixing them expected operating pressure at more than seven times spread pressure.
What they've learned and the campaign has been applied to the next stage two tank and currently under production.
Really to bake in structural reliability early as we get closer to that date with the launch pad.
Speaking of banking this is quite literally walk a Catholic conferences team has been up to.
Within exposed gallon neutron structures and components.
The images on this slide here shows you the scale of some of the <unk>.
Tank devices being produced more than seven feet in diameter for those particular talent management devices.
The stage two done being eliminated and the bottom section amongst for neutrons fixed bearing sections are coming together nicely and of course, we have another <unk> type return tanks being built.
For NXT stand.
And our next to stand in the first half of 'twenty four.
And then over to neutral and Vac committees Xinjian. Another test we're celebrating was a critical no question test that.
But the team achieved with neutrons Archimedes engine.
There's a plenty of benefits to be sharing methane locks for pellets, but it does come with some of its own challenges.
The critical piece really and one of the challenges was in it.
Methane and liquid oxygen for our communities is getting the pre bear and adopt it.
We are generally you want a few extra ratio in a chamber of something like three to one oxygen fuel, we're running an oxygen rich pre bonus cycle when our committees that forces to fly all of air oxygen through the combustion to us therefore.
Therefore, our ideal mix of something between 60 to 100 100 to one which is a challenging thing to achieve without all the exist oxygen extinguishing combustion.
<unk> also has an extremely benign operating point, making it great for reliability and reusability, but it does mean that the pressures of low and ironically harder for the pre bid.
I'm happy to say that we met all the operating points. So we wanted to have nice piece that was a great accomplishment by the team.
At the same time the <unk>.
And his team had been producing and testing posco, how do we like valves <unk> controls and assemblies and preparation for development in propulsion Ts, making for Iridium <unk> and all the pieces come together like you see in the photo on the slide as well.
I have a neutron infrastructure supporting infrastructure. The new Chubb has also scout quickly over the past few months groundwork being completed in Virginia, we're neutral on pet will be.
<unk> facilities in support services will be based there as well and we're ready for construction to begin adding lunch slot located close to their key government customers, which will enjoy the benefits of at least congested roads thought then obviously the Kate.
In Q4, we opened a new engine development center in long Beach that will support the development and production of the Archimedes engine.
And once <unk> completed that ADC, though go.
You guys are testing at a stand it necessary in a space, where the nutrient team has been busy with slight improvements.
To exit the engine for Havas.
And then finally neutral timeline.
All of these achievements across Q3, and Q4 that I've mentioned and several others have shown here have.
It's been great to tick off along with the ammonia Trump timeline with.
We've completed seeking surge tank testing printed kyat communities ancient parts and components had success with our combustion testing devices.
Completed qualification testing of their conference that I've read pressured batesville run through separation locked deployment testing and stage pushes system testing completed actuate a better control of testing.
Finished just on our power management module compared neutrons engine and stage controller functions. It should completed avionics control of testing successfully tested the vehicles thermal protection system stood up a test rig for epic and your incoming incoming neutron cannot and cannot system Tuesday.
The team is obviously working hard to keep their ambition ambitious schedule for the rest of the year and into 'twenty four with the same.
With some of the Nexium milestones to look out for including Chris <unk> qualification tank is.
It's completed.
<unk> engine.
<unk> campaign, and the first simulated flight tool, but with the hardware connected to a slot computers now.
We will continue to provide updates on how neutral and it's tracking outside at quarterly reviews.
Yeah.
If youre on the Elektron and neutron hypersonic test vehicle hoist has seen significant significant amounts of interest from new and returning government customers looking to further develop the nation pop it's an existing capability.
We've actually booked Stephen which contracts in the six months since our highest program was introduced including our latest mission announced today, our highest launch from Virginia from the U S Department of Defense Innovation unit.
<unk>, we will demonstrate to hoist directed.
Direct inject capability by deploying its payload during a scene.
I'll still within the Earth's atmosphere, along sort out the capability for the nation's strategic themes and simple needs at a fraction of the cost of the current Pope Scout tests.
Onto spy systems, now and we have a new space craft order on the books were accompanied show constellation customer that builds on our strong demand for I said a lot of products. This particular space craft will include a full suite of ore and satellite components and subsystems, including Star Trek is reaction, we have solar panels, you spend radio spot software and so on that side.
Yeah.
This contract in particular speaks to the popularity and configure ability on the spacecraft bus that the confidence also in asset light components in the market and our ability to grow between mission Grub is an end to end mission partner for the space industry. Now importantly, we'll also be managing the mission operations and a further demonstration of that.
<unk> business model of building and operating satellites that we build for our customers.
Continuing with Bae systems to our largest spy system contract now the $143 million contract, we have with MDI globalstar.
We're getting close to the delivery of their first of 17 space craft for the program by the end of Q1 next year.
Included significant milestones in the contract in the past few months the spacecraft critical design review and delivery of our structural thermal model.
Estimate.
We expect to recognize revenue from those invoice payments to NDA in the fourth quarter of 2023. This sets the stage for more meaningful revenue contribution from this contract as we enter 2024.
We continue to pursue increasingly complex and financially needle moving spy system opportunities and are encouraged by progress being made in this part of that business and we believe that these pursuits position us to continue scaling as an <unk> Sky solutions leader.
Lastly in spy systems updates, we are proud to have directly supported.
The success of National's groundbreaking psyche mission launched in October with their solar panels pairing. This spacecraft on its six year journey into deep space. The solar panels, we provided to the mission hold the record for being the largest solar panels installed on a NASA JPL satellite, which women slate proud off.
And then finally into post quarter achievements I'm thrilled to welcome retired U S space force to tune in general.
Nina on ammonia rocket two rocket labs board of directors Lieutenant General ammonia.
Served more than 35 years in leadership positions across the U S space Force and U S space Force, including U S Air Force annually by schools, including being the first Lieutenant General Officer appointed two and director of staff for the space Force with XI.
Established Americas first new military branch in 72 years.
She has had an accomplished and distinguished career in the military and will be an invaluable asset to the board.
And now over to Adam for the third quarter financial highlights.
Thanks Pete.
Third quarter 2023 revenue was $67 7 million, which was near the high end of our prior revised guidance of $6 6 million to $68 million.
Third quarter 2023 revenue reflects sequential growth of 9%. The result of three launches and continued growth in our space systems business.
Our large services segment delivered revenue of $21 $3 million in the quarter from three launches and is in line with post normally revised guidance of $22 million with slight underage due to timing of revenue under a large study contract.
The resulting average revenue per launch came in at $7 $1 million below our target average selling price of $7 5 million for 2023, and the result of less favorable mix in the quarter.
Our current backlog continues to reflect our target average revenue per launch with variability tied to LSA volume commitments Lodge location and unique mission assurance requirements.
Our space systems segment delivered $46 $3 million in the quarter, which was up 17% sequentially and modestly above the high end of our prior revised guidance range of 44 million to $46 million.
Driven by a step up in our NBA contract revenue offset somewhat by a reduction in our components business, which is poised to rebound in the fourth quarter guide, but will discuss later.
Now turning to gross margins GAAP gross margin for the third quarter was 22, 1% above the high end of our revised guidance range of 18% to 20%.
non-GAAP gross margin for the third quarter was 29, 5%, which was also above our prior revised guidance range of 26% to 28%.
GAAP and non-GAAP gross margin improvements relative to our revised Q3 2023 guidance.
Continued efficiencies in both our launch and satellite manufacturing businesses.
We ended Q3 with production related head count of 816 up 49 from the prior quarter.
We also note that non-GAAP gross margins reflect a 430 basis point improvement versus Q2 2023, when adjusting for Q2's, one time $1 1 million released velocities are related to a legacy loss contracts.
We're encouraged by the trend in gross margin improvement and expect this trend to continue into 2024, as we return to launch and resumed growth electrons launch cadence against our strong and growing a large backlog.
Turning to backlog, we ended Q3 2023 with $582 $4 million of total backlog with large backlog of $250 7 million at space systems backlog of $331 $7 million.
Relative to Q2, 2023, total backlog was up 9% sequentially or $48 1 billion. Thanks to healthy bookings in our watch business, partially offset by declines in space systems.
Specifically backlog was up 55% sequentially or $88 8 million.
As electron continues to benefit from a turn orders of both commercial and as customers.
For space systems backlog was down 11% sequentially or $40 $7 million as we continue to work through our larger satellite manufacturing contracts and the timing of additions to space systems backlog or lumpy to the increasingly increasing complexity and magnitude of these contract opportunities.
We expect approximately 57% of current backlog can be recognized as revenues within 12 months I expect continued meaningful growth in our backlog as we exit 2023 progressed through 2024. Thanks to continued demand for our electronic platform as well as anticipated orders for significant satellite manufacturing opportunities, we are aggressive even considering over.
Last year or so.
Turning to operating expenses GAAP operating expenses for the third quarter of 2023 were $53 8 million modestly above the high end of our original and unrevised guidance range of $51 million to $53 million.
non-GAAP operating expenses for the third quarter were $39 8 million, which.
Which was at the high end of our original and unrevised guidance range of $38 million to $40 million.
The decreases in both GAAP and non-GAAP operating expenses versus the second quarter of 2023 were primarily driven by Contra R&D credits related to neutral upper stage development from our U S government partners, partially offset by higher neutron development spending increases in head count and higher depreciation and amortization expenses.
And SG&A GAAP expenses decreased $1 $5 million quarter over quarter due to a change in contingent consideration related to our <unk> acquisition due to a lower average stock price in the quarter.
non-GAAP SG&A expenses increased by $700000, primarily due to increases in head count along with the step up in depreciation and amortization primarily related to additions to corporate it and security infrastructure to further enable efficient scaling of the business.
Q3, any SG&A head count was 236, representing an increase of 8% from the prior quarter.
In R&D, specifically GAAP expenses were down $4 4 million quarter on quarter due to increased Contra R&D credits related to the previously referenced neutral on upper stage development, partially offset by a step up in neutron development spending.
non-GAAP expenses were down $4 $3 million quarter on quarter, driven similarly to GAAP expenses by neutron related costs R&D credit and development spend.
Q3, ending R&D head count was 520, representing an increase of two from the prior quarter.
In summary, total second quarter total third quarter head Count was 1572 up 59 heads from prior quarter.
Purchase of property equipment and catalyst software licenses was 21 $121 million in the third quarter of 2023, an increase from $10 $6 million in the second quarter of 2023.
The sequential increase was due to our continued investment in new trials research testing and production infrastructure projects, along with the expansion of our satellite production space solar solutions capacity.
Cash consumed from operations was $25 $2 million in the third quarter of 2023 compared to $6 1 million in the second quarter of 2023.
The sequential increase of $19 $1 million was driven primarily by timing of receipts and payments associated with our satellite production programs, which for some of our larger programs have significant periods between milestone achievement invoicing and ultimately collections, which at the end of the day are purely timing related.
More specifically Q.
Q2 was a quarter that benefited from a working capital dynamic where we collected on material milestone invoices that were invoiced in the prior quarter, where payment terms are more lengthy that our target 30% to 45 days.
Cash consumed by asset acquisition and business combinations was $800000 in third quarter of 2023, a decrease from $16 1 million in the second quarter of 2023.
The sequential decrease of $15 $3 million was driven by the majority of our Virgin orbit select asset acquisitions is being realized in the second quarter.
Overall, non-GAAP free cash flow defined as GAAP operating cash flow reduced by purchases of property equipment and capitalized software in the third quarter of 2023 was a use of $47 million compared to $16 $7 million in the second quarter of 2023.
A more apples to apples comparison of $32 $8 million when including the impact of our acquisition of select Virgin orbit assets, most of which were classified as PP&E.
The material step up in negative noncash negative free cash flow was as noted Mike Rose GAAP operating cash flow commentary was the result of lumpy timing of payments and receipts associated with our space systems manufacturing operations and we expect a reversal of this negative working capital cycle in early 2024.
The ending balance of cash cash equivalents restricted cash and marketable securities was $374 million at the end of the third quarter of 2023.
Reflecting on the past four quarters, we have made meaningful progress towards our long term financial model.
We have delivered consistent revenue growth and when adjusting for the one time release of a loss reserve in Q2 gross margin expansion and shrieking adjusted EBITDA losses each quarter.
With our strong launch manifest in greater contribution from space systems contract execution in 2024, we expect this trend to continue.
Overall, we expect gross margin trends will continue to improve over time. Thanks to the same factors that have helped drive improvement we've seen this year.
In terms of when we can get to adjusted EBITDA breakeven, while neutron investment, especially R&D spend continues to be the pacing item to achieving this critical milestone. Although we view that rocket lab has demonstrated that its existing businesses are on a trajectory to offset the weight of this neutral on investment spend.
Okay.
With that let's turn to our guidance for the fourth quarter of 2023.
We expect revenue in the fourth quarter to range between 65 at $69 million, which reflects 48, 5% to $52 $5 million of contribution from space systems, and $16 $5 million from warrant services, which assumes two launches.
As referenced earlier based on our manifest as launch backlog. We now expect 11 launches in 2023 and 22 launches in 2024 with expectation that our average selling price that continues to trend towards our target of $7 $5 million through the remainder of 2023 and into 2024.
We expect fourth quarter GAAP gross margin to range between 24% to 26% and non-GAAP gross margin to range between 30% to 32%. These forecasted GAAP and non-GAAP gross margin improvements reflect a favorable mix between launch and space systems, along with a favorable mix within space systems.
We expect fourth quarter GAAP operating expenses to range between 61, and $63 million and non-GAAP operating expenses to range between 50 and $52 million.
The quarter on quarter increases are driven primarily by having recognized the substantial amount of contra R&D credit related to our neutral on upper stage development agreement with U S space Force and the prior quarter, along with increases in staff cost prototyping and material spend as we continue ramping our neutron development program.
We expect fourth quarter, GAAP and non-GAAP net interest expense to be $2 million.
We expect fourth quarter, adjusted EBITDA loss to range between 23, and $27 million and basic shares outstanding to be approximately 487 million shares.
Additionally, the unique situation created by the anomaly and related pent up impacts the launch manifest as we prepare to return to flight and head into 2024, combined with better visibility on space systems program execution and revenue recognition as we prepare to ship the first spacecraft against the MDA Globalstar program in the middle of the first half of 2000.
Before provides us with a visit with little visibility and confidence to estimate Q1 2020 for revenue to range between $95 million at $105 million, putting insight, our first $100 million revenue quarter.
This forecast would be the result of four to five launches in the quarter, yielding between 30 and $37 million of lost revenue and 65% to $68 million of contribution from space systems.
This would represent a significant milestone for the company.
And we believe a strong endorsement of the end to end space solutions business model, we're delivering on.
And with that we'll hand, the call over the operator for questions.
Thank you.
At this time I would like to remind everyone in order to ask a question. Please press Star then the number one on your telephone keypad.
Your first question comes from the line of Edison <unk> with Deutsche Bank. Please go ahead.
Thanks for taking our questions and I appreciate that.
Provided that would be on the investigation.
First question on the manifest for for next year.
Can you give us a sense of your confidence level on the under 22 is that sort of.
<unk> case or in other words, the ranges for 'twenty to 'twenty four at the midpoint would be 'twenty, two or do you need kind of everything to go right at that too.
'twenty two.
Right.
Hi, Allison.
As with any launch contract right.
We are always.
Somewhat susceptible to affect.
Effect of that.
Controlling customer readiness is always a big one the customers need to turn up with the satellites on time.
We there and of course as I mentioned in my commentary we have to execute.
From a manufacturing standpoint, but I think the key takeaway there is is.
No no.
We have a completely sold out manifest for next year.
At a number that.
As is.
Really solid.
So.
I would say that we have to execute and theres always some.
Some.
Uncertainty from some things that we don't control that.
That's certainly what we're targeting.
Yeah.
Understood.
And then just a follow up to that can you give us a sense or maybe a bridge on the on the margin and launch you had a very very good quarter actually and in <unk>.
Does that margin trajectory look.
Get to that 22 launch cadence.
Yes, I'll take I'll take it past that Pete.
Yes.
We've long stated that when we get to our target model for for non-GAAP gross margins of around 50% that requires launching 24 times a year.
So we're.
We're going to make significant progress towards that as we launched as we kind of striking that 'twenty two number next year.
Oh.
If you look at any given quarter, if we have again six launches in the quarter that should be.
At or very close to our long term.
50% non-GAAP gross margin target.
Got it and if I can just sneak one more in a neutral.
Neutral.
Congrats on all the milestones do we do we feel comfortable with the timeline should we interpret that as you guys feeling comfortable with the timeline on next year.
Well, there's still a lot of work to go and the year is not finished yet.
We're pushing hard but at this stage, we're not making any adjustments.
To have predicted timeline, but.
I'll just highlight there are still some really significant piece too.
To be completed but right now, we're not making any major changes.
Got it thank you very much.
Thank you. Your next question comes from the line of Matt Akers with Wells Fargo. Please go ahead.
Yeah, Hey, guys. Good afternoon. Thanks for the question I wanted to ask on neutron.
After the first launch what sort of rate do you envision doing neutral launches and what rate are you kind of capacity to support now at what point would you need to sort of add.
Capacity.
Yeah, Hey, Matt. It's good question. So we're not trying to do anything herculean on on neutron we've lived through the pain of of creating a launch vehicle and standing it up and bring it in to production. So it follows a pretty pretty similar guidance profile too.
To what we were able to achieve with electron.
We do have two slot or a couple of two slots and then move into sort of.
Three or four year, and then continue to strengthen and grow that.
And really probably the same model that we followed with electron where we launched a little bit.
We generate some revenue and we make improvements to the vehicle and we make improvements to the infrastructure.
And we found that to be by far the most cost effective way rather than going out and building a giant victory to do huge volumes from day one.
And just consume a tremendous amount of capital we've kind of always bootstrap their way along.
<unk> increased.
Increased flight right in guidance.
Along with that and facilities along with it.
Got it. Thanks, that's helpful and then if I could ask on I guess free cash flow.
Hum.
How much sort of additional expense whether they're around.
Kind of the investigation in Q3 and maybe into Q4.
How are you thinking about free cash.
Into 2024.
Yes.
No we didn't see a tremendous amount of.
I would say resource conversion a lot of these kind of anomaly investigations take you know.
<unk> group of very capable people to dive in and do the analysis and investigation or there's not a lot of capital spend associated with it.
We continue to keep.
Keep our foot on the gas when it came to production of electron.
The anomaly Thats gets yourself really won't have any kind of noticeable material effect on cash flow in the fourth quarter.
I think the biggest thing for us for cash flow is really around timing for the big space systems contracts I mean, if you if you look at R.
Our launch business people.
Typical model as you get people to pay a 10% deposit at contract signing and then Theres milestone payments along the way and typically when there is only 10% left to collect at the time that we are.
We actually watch the mission. So that's always been a good cash flow model.
It's all about that getting to.
The scale, which again, we're making great strides in being able to do.
When it comes to space systems, they're large contracts I mentioned lumpy a few times in the prepared commentary and Thats really really true because you can have the achievement you have some delays of achievement of critical design milestones you've got to get through those gates before you can turn that over into the phase of the program are you doing the assembly.
The original test side of it and so you're going to have periods, depending what your payment terms are with your customers.
Our largest space systems contracts, we're dealing with pretty sophisticated organizations that.
Had pretty tough terms. It was we were chasing our first large and meaningful space systems contracts. So we weren't necessarily in the best position to negotiate those types of tours to our advantage, but it leads to some you have some I would say some little bit of interim too to near term pain on that side and we've experienced that in 2023, we expect that got it.
Dynamic from the operating parts of our business to turn around and be a much stronger from a cash flow perspective in 2020 for now we'll continue to see <unk>.
Consumption when it comes to neutral and particularly around prototyping.
And particularly around infrastructure, because we still have the infrastructure investments that you need to continue to make to prepare for that first launching at the end of 'twenty 'twenty four.
That's great. Thanks for the color.
Thank you. Your next question comes from the line of Cai von <unk> with TD Cowen. Please go ahead.
Yes.
Thanks, so much so.
First quarter. It looks like you have a target price of $7 5 million.
Is that the price likely to be for the entire year or given the vigor and demand are.
Are you guys increasing prices as we move forward and if so by how much.
Yes, it's a good question Cai so.
<unk>.
The manifest that we showed in the deck I mean that is confirmed backlog pricing is is not in question right. So that does drive to our long term pricing model in 2024.
So and that's all contracts of course that we've been continuing to add to the.
The backlog.
As we move forward, we certainly are seeing an environment that allows us to drive for firmer pricing.
As being one of the few truly operational launch providers. We do have we do see pricing power coming in our direction and so we expect that longer term, we will see upward movement to the ASP.
For Elektron launches.
But I would say again, there's really no volatility are the ones that we showed on the manifest because they're all booked in their firm price.
Great.
I guess not to beat a horse but.
With Virgin orbit basic basically gone.
How come you don't increase prices and when you talk about the longer term at what point do you know.
What would cause you to raise the price I mean will you then raise it they're all going to go from seven five to eight or how should I think about how that that works.
How does it take into account inflation.
I'll, let Pete weigh in on this one.
Yes, I mean, we.
We have we kind of have a standard.
Escalation for Fortinet.
To deal with inflation year on year.
And.
Certain missions.
No no no emissions at the same kind of two to Adam's point is when we do.
Some of the very complicated government and hard to stomach missions.
They they.
They come out at a much higher.
<unk> and then our mission we are.
Flying someone's six rockets for missing my flying the same set of <unk>.
Right.
So does this kind of variability and I would tell you that we.
We test the market pretty fairly.
On that on that pricing range, but it's still try to provide.
The right price for the product and services.
They are expecting from us.
Thank you I just have one last one so out of the 22 launches how many are from Virginia.
Yeah.
Yeah.
Whoa.
I believe right now it's I think there are sold the highest commission to yes.
Yes, there is at least two years, maybe three launches currently manifested.
For Virginia.
Got it thank you.
Okay.
Thank you. Your next question comes from the line of Sujit de Silva with Roth <unk>. Please go ahead.
Hi, Peter Hi, Adam My questions around the space systems, and thanks for the <unk> guidance there the increase in <unk> versus <unk> is that primarily the <unk> M. D. A program ramping up or is that the second customer contributing any color. There on the increased guided for <unk> will be helpful.
Yes, there's a few things contributing to that obviously the higher launch cadence.
We kind of get back to the pad as Pete said on November 28.
So it's really coming across the board, we've got strength in elektron, that's coming through and contributing on a space system side Theres. A few things that are that are going on there, but the biggest element is really as.
The NGA globalstar vehicles again start coming off the production line, we have a much clearer line of sight to the revenue recognition as.
The bill of materials are pulled to the production floor to assemble the spacecraft the testing and so forth. So it's yes, there was a bit of uncertainty as we progress through 2023, because you have milestones for when you get in get through key program reviews, like <unk> and <unk> and you really can't progressive. So obviously you can get through those once you have that and it's a <unk>.
Much more nothing is easy in this business, but there's a much more kind of predictable formulaic you've got almost a day for day schedule of how you can kind of start to assemble based on the labor that you have in Obama you've received are ordered and when it's scheduled to arrive.
It's much easier to predict once you get past those keep focus then you move into <unk>.
So I would say that the.
The majority of the step up in.
The biggest piece I would say maybe not the majority of the biggest piece of the step up in Q1 is coming from Michael will start in the contract, but there is contribution from our other satellite programs as well.
Okay, Great and then my other questions on.
The satellite part of manufacturing partners spaces as well.
The MTA contract with the 17th at the satellites and then the second customer coming on I'm wondering what framework. We should think about you just think about the capacity per quarter of the number of satellites you can make if that's the right way to think about how that business can grow over time.
Yes, I mean.
I wouldn't I wouldn't necessarily just think about capacity because the kind of space craft projects, we take on.
Hi.
They're not just sort of.
And cheerful easy middle bending kind of jobs.
Going to Mars and we've got.
The MDI Globalstar is a great example was very deeply complicated, Michigan, a horrible radiation environment. So.
I wouldn't be necessarily tracking just the volume of space craft, but more so the complexity of the missions because ultimately that that drives a lot of value.
And do you know given the latest our latest mission.
We announced here today as I Might've Spacecrafts, you know that is not a.
That's not.
An easy easy build sorry.
We tend to be very successful in and do very well and create a lot of value in <unk>.
This is much high fidelity much much tricky emissions to do so I wouldn't just use of volume kind of metric to.
Kind of measure us.
Okay understood. Thanks, guys.
Thanks, a J.
Thank you. Your next question comes from the line of Jason Gursky with Citi. Please go ahead.
Yes.
Afternoon, everybody.
And really quickly on the balance sheet.
What are the current thoughts or expectations around.
$100 million Thats gone current here or are we looking to refi that or we're going to be taken some cash off the balance sheet to address that just want to figure that out from modeling perspective.
Yes, no we're actively in the process of looking to refinance that and we've got several options, where we're pretty far down the path with a few different providers.
And they range from doing.
Equipment lines to got it.
Similar structures to term loans that the Hercules loan represented.
But yes, we.
We'll look to refinance that I think we're hopeful that we'll get that done.
Hopefully the next few weeks.
I will certainly before the end of the year.
Okay, Great and then.
I want to make sure that I fully understand the comments on elektron for next year.
Are you at this point fully sold out or if you had a couple of customers that wanted a quick turn mission would you have the.
The launch vehicles available to do that or are you just kind of telling customers. Okay. We're sold out for 24 Gotta look to 'twenty five.
Well look we'll always look for opportunity.
Opportunistic opportunities I mean, it's fair to say that production will be at.
At near full capacity.
Next year as we as we.
We deliver on those but also.
As you guys see and we experience.
Some customers slip out and it's very easy for a customer to have an issue.
The <unk> cycle and shipped out six months, which would create an open opportunity.
We never say no to customers.
And although the manifest is essentially full.
It doesn't mean that there's not going to be an opportunity.
Open through.
Through the year so yeah.
We always we always keep that in in our discretion.
Right, Okay, and then last one for me just on <unk>.
Neutron can you just spend a few minutes talking about your current views on the demand outlook for that vehicle.
Win win in its development cycle with would you expect.
Maybe to get your first order or two is kind of proving out the concept of what youre doing here and then.
Demand is as good as you think it might be I'm, just trying to balance that against the comment that we're going to bootstrap capacity there why why aren't we.
Running out and trying to fulfill as much demand as possible. So I'm just kind of general view of the current demand environment for neutron when we might expect orders and what kind of levers can you pull to more quickly come in and pull in some of that to me is if you think it's really strong.
Yeah, Yeah, no that's a great question, Jason so.
Look on the on the order side.
Until a vehicle has kind of proven and flying any any launch contract that you can sign is basically worthless.
We can go and sign a large contract tomorrow with a number of customers that will be like.
You know some thousand dollars down in cancer, Blini time, but that really doesn't mean anything and the one thing that you always get from us is like.
Real backlogs in real numbers so.
It's almost so much.
It's almost pointless trying to time something like that now and then even if you do we saw this with electron rot and unproven vehicle you just take a message hiccup.
So you have to do really large introductory pricing.
And with electron we carried that some of that introductory pricing on <unk> and <unk>.
We managed to flush it out this year, but for.
Yes, we had some two really.
Admissions.
So I just don't Wanna go down that route again, but rather.
When you have a flight proven product.
And in a launch constrained market then.
It becomes very valuable so I'm.
Not sure either arrived to the market with something that works that's.
Commands a premium then so my manifest up with whole bunch of low value launches now and.
Frankly the.
The customers that we talk to.
Looking to buy one or two launches they are looking to buy quite a bit of capacity.
The constellation of all their other needs.
So we also need to see them delivering and being on time.
At the pad because if you commit to them.
Yeah.
Customer and commit a whole lot to manifest in the light.
And that's one of the happy situation either so.
When when when we have kind of reached a point.
Of critical maturity such that that you know.
Somebody is willing to pay real deposits in wrought rail contracts.
<unk> been doing that.
That's a good time.
And you'll see those kind of announcements from us, but until then I just don't want to put us in a position where we've just got a whole bunch of rubbish rubbish.
And I'm kind of.
Solidified room trying to on a manifest that might look good on a slide but actually isn't that real.
And then.
The kind of the boot strapping why not go out and.
And just just prepare for a mess of.
Our.
Volume look I think I'd love to do that that'd be awesome, but the reality is that the.
Big launch vehicles, they're easy to build in a small launch vehicle, but the challenges I just consume a huge amounts of capital.
And we have to we have to be diligent and the fact to use the capital we have wisely.
And and kind of use it.
Methodically to make sure that we actually put a vehicle on the pad and we're able to scale it.
And in a really siphon methodical scenes.
If you had no constraints on capital then of course, you got the big factories in Peds and why you would go but.
It's not really what's already an option and nor is it really a style.
We like to put one on the pad.
We worked through the block upgrades and improvements that inevitably will happen and then slightly ramp production over the coming coming years too.
Demand.
That's great. Thanks, Peter I appreciate it.
Alright.
Thank you. Your next question comes from the line of Kristine <unk> with Morgan Stanley. Please go ahead.
Good evening guys.
Peter you know following up on Jason's question, there on the neutron order. So it sounds like you don't anticipate.
Orders to occur until after neutron has its first flight is that Paris.
Hi, Christy I know that they could occur earlier, but I guess, what I'm, saying is is that.
The two things need to be true that we need to be have confidence that the space craft will be delivered in 90 to have confidence in us and at this stage of the development program.
As I mentioned before this to a number of critical milestones to go through.
So I.
I wouldn't expect anybody to put huge deposits down on a vehicle that in this in this kind of stage of development and I think.
Yes.
That's just the reality.
Yeah. So I guess, it's another way to think about it as it sounds like you guys are prioritizing.
Better pricing in the long term at the expense of building a backlog now in providing significant discounts, which could take years to offset here.
You're confident in your product just wait till after having just a little better pricing.
Okay great.
Color Yeah, I'm sorry go ahead.
I lived that through I lived through that with electron Rotten and those contracts can just be really painful.
Flushing out of the system and there is no no no argument that theres going to be huge demand and there is huge demand zero argument about that so as I mentioned before like the.
That's the smart thing to do is arrived with a flight proven product and not have to do kind of crazy.
Crazy things with with pricing in and.
And yes, and destroy the business model ever.
Great. That's helpful color and maybe moving to a space that sounds it sounds like you're globalstar contract.
Hum.
MDA as a subcontractor has been progressing well.
<unk> recently won a $2 billion tell us that Leo contract how much of an opportunity is there for you to be a subcontractor to that program or similar programs of that size is it pretty meaningful constellation side.
Yeah look I can't really comment on that program in particular, but what I will say is we actively out pursuing them.
These many of these large programs.
Both as subcontractors and also as primes so.
Yes, I mean these this is a real opportunity for us.
There obviously is a large volume, but also the constraint on some of those critical components like.
Solar is a huge constraint within the space industry right now and we obviously on one of three suppliers of that particular technology in the world. So yes, we see we see a lot of opportunity there and we're actively and aggressively pursuing them.
These large constellations is like I say as a supplier and as a prime.
Great if I could ask one last one.
You mentioned Valero with Valero, where our margin is trending in the quarter and can you provide any update on your tracking towards the 30% gross margin target for that business.
Yeah. Thank you Adam.
Yes.
So we've made very good progress towards our gross margin goals for that business and we we said that.
Two years post acquisition, we wanted to be at 30 points of non-GAAP gross margin.
I think we're you know we're gonna trail that buy.
Maybe a couple of quarters.
But the progression has been pretty pretty clear and pretty steady.
And what we can definitely we've made improvements to get better margin on the existing backlog thats in place when we acquired the company, but I would say in the course of the last.
Year in particular, we've got a pretty stringent process for approving new customer deals.
And.
I don't believe that we've really seen I.
I can't recall, the last time that we approved a deal that was below that 30% gross margin target. The fact, we're kind of talking with how to start pushing that target a little bit further north in that long term thats not our goal to be at 30 point, we view that as having a great opportunity for really healthy long term margins, but great progress towards a 30 points I think we're going to hit that at some point in <unk>.
24.
And again all of our kind of building backlog is 100% supportive of that.
Great. Thank you very much guys.
Okay.
Thank you. Your next question comes from the line of Ronald Epstein with Bank of America. Please go ahead.
Hey, guys good afternoon, and good evening.
A lot's been asked on the last Guy so I'll be quick because I guess the run over on time.
But here's a question for you I mean, a lot of the space startup companies.
Having difficulty.
You guys were able to pick up some interesting assets from.
Virgin orbit.
When you look at the space systems business.
Is there a talent you can pick up and the satellite.
World in terms of engineers and other things.
Some of the small satellite companies or their stocks are trading below the equity is trading below $1 per share.
I would imagine it must be a pretty.
Good environment to recruit talent and I don't know if you can speak to that but as you try to grow that business or are you able to pick up some talent.
Hey, Ron.
Absolutely.
That is true and great talent attracts great talent as well and the team that we've built there is oh, it's simply awesome.
So that's been true.
What I will say, though is I think we've mentioned before the bar to get into rocket lab is extraordinarily high I mean, it's twice as had been the matrix and it's twice as hard to get into rocket lab than it is to get into habit. So we very very fussy about.
The folks that we bring on board, but.
Certainly there's opportunities.
The four four for new folks.
As some of those out of the business is fine.
And then and then maybe just following up on Neutrolin. Because this came up a couple of times on some of your other questions. What are some of the milestones we should be looking for as we look out into next year as kind of outsiders not inside the company.
What boxes can be checked and say hey, yeah, it's tracking right along.
So feel good about where the program is going.
I presume you're talking about.
Neutral on Heron.
Excuse me net neutral yes.
Yep Yep Yep.
Yes.
We've kind of laid out a few I mean, obviously <unk> a ways a long pole in the teens so.
It looks at Havas and kind of.
Completions are call programs and things like that.
Probably.
It's understated.
<unk> stage tank test was a huge milestone because without just kind of looks like.
Black thing that we we felt and my trust in and blow it up the reality is that that validated like Simon and material properties. So many manufacturing processes.
So much of the kind of core underlying.
Materials and technology and designs real validated by that test and by that.
That milestone.
It's sometimes it's kind of a little bit difficult and then I tried this earnings to give some color about some of the other tests that are going on.
And.
There's just heaps and heaps going on in semi test and milestones made every day that it's it's kind of hard to get them all on pipe.
I mean, the key ones is.
Fire and the fire reliably.
Out of out of <unk> and <unk>.
Continued neutron structures keep looking for things that get frosty.
Because that's.
It's important milestones and then I would say next.
Next year is start to look for stuff coming out of the ground stop start to watch us pour concrete and things like that.
Because the vehicle drives the ground infrastructure enormously so if the vehicle was mature.
In the ground infrastructure can start to be built.
Yes.
Hand in hand, and when when when leads the other so if we're starting to pour concrete then I would feel good.
And stuff like that.
Great cool, thank you very much.
Thanks, Ron.
Thank you.
<unk> Cogs or your next question comes from the line of Andreas Shepard with Cantor Fitzgerald. Please go ahead.
Hey, good afternoon, everyone. Thanks for taking my question I. Appreciate you guys getting a scene and congratulations on the quarter.
Most of our questions have been asked so maybe just one two part question.
First with the roughly $400 million in cash and equivalents would you mind just reminding us what is the expected run rate there and then.
Lee is you provided the revenue guidance for Q1 as well as your updated backlog.
With 57% of that backlog being recognized in the first 12 months can you give us any sort of <unk>.
It is a direction and how we should be thinking about that backlog being recognize in terms of seasonality or second half first half any color. There that you might be able to give us. Thank you very much.
Sure I'll take that.
I'll take the.
The first one.
What kind of played out in the cycle, but.
Yes, the cash.
We talked about the fact that.
2024 from our space systems business should be a much more cash positive story for us.
The nature of the biggest program, which was going to be a globalstar had a bunch of them.
<unk> and <unk>.
Honestly onerous terms when it came to timing of us getting paid.
We've now cut across the river on that one if you will on the better side of that as we now move into the AIP phase.
So we believe we've got we've got sufficient liquidity to do exactly what we said we were going to do when we came public which is that we wanted to broaden out our space systems business, we've acquired three businesses since coming public.
We've also.
<unk> committed to getting having enough capital to get to the.
Fraud product with pad, that's also well within the scope of what we called out but what I would say is.
We still have a significant amount of capital to consume in getting neutral to the pad by the end of next year.
Now again, we're well funded to do that or the timing of that is a little difficult to predict because it's kind of gone through some of the milestones programs. They can be they can move around a bit you know there's different ways to kind of get there or what kind of the there's a make versus buy decisions that take place that can affect how much cash goes out the door. So.
I would say that.
It's difficult to predict and also going to be dependent upon other business that we close as we progress through the remainder of 2023 and 24 and what those cash flows look like but right now I would say that our Q3 cash consumption number was kind of a high point that we've seen thus far.
That could hover around in that range for a quarter or so, but then we start to see that significantly trend down as we get past these key milestones and neutron gets closer and closer and closer to the pad. The biggest factor right. Now in 2024 is really going to be progress towards those neutral and milestones for develop perspective, but also from the infrastructure perspective is b bench.
But again, we don't we don't have any concerns right now.
We don't have the runway to get to where we need to go.
As far as the backlog and how that's going to be realized and seasonality and so forth.
We don't really have a lot of new on seasonality, we havent seen kind of true seasonality of our business. We've seen a lot of volatility which has really been more a function of what we can tell from some of our smaller customers as the access to funding either through their government partner programs, whether it's through VC cycles and kind of.
The successful raising funds and so forth. So we really see more effect on revenue as our customers kind of go through the air kind of cash kind of rich in cash core cycles.
But again I think what Youll see is having gone through an elevated quarter.
We have another couple of elevated quarters before it starts to get much better.
Start.
Again.
I'd say not consume as much cash as we have again function of programs, where we are in their lifecycle with interest rate neutral developments.
Got it. Thank you that's super helpful and Super insightful, Thanks, again, and congratulations on the quarter I'll pass it on thanks.
Okay.
Thanks, Andrew.
Thank you. Your next question comes from the line of aircrafts Knudsen with Stifel.
Go ahead.
Yeah, Thanks for taking the questions.
Maybe just on the haste rocket.
You said you secured.
Seven mission.
Six months.
Does this change the number of missions that you had previously thought you'd do I mean.
See things accelerating.
Okay.
Yes, I mean, we always knew that.
That was <unk>.
<unk> for this product, but I would tell you that we're pleasantly surprised.
To see the demand growth the way it's growing.
First of all it was an important one to demonstrate the capability.
There's a bit of.
I would say history system and the way government customers moved to new new kind of products like this.
And that was that was all kind of resolved with a very successful slot. So we're kind of reaping the benefits of that in and the vehicle was just able to do a bunch of stuff that has been inaccessible before being liquid throttleable vehicle.
So it really opens the aperture for what can be done and you know development of systems that debt.
But you're really in someplace to do some respects company developed anywhere else in the world. So it's it's.
So we were pleasantly surprised to see the pick up on on the program.
Okay.
Great and maybe just.
You made an announcement you opened up the engine development Center.
In the former Virgin orbit assets facility, what sort of production capacity can you expect to achieve once operational and what is the timeline maybe hit that.
Maybe you call it an annual run rate.
Yeah look whether the original facility was a bit of a boon really because.
There is more equipment and capacity. There. Then then then we can see in the future.
Furniture facility.
It's it's it's you know it's gold plated so.
Yeah, I mean, there's no numbers that were working with at the moment that would see that EDC facility reached capacity.
Okay.
Great. Thank you.
Okay.
Thank you.
Ladies and gentlemen, there are no further questions at this time I will now turn the call back over to Peter Burke for closing remarks. Please go ahead.
Okay.
Yeah.
Yeah.
Okay Yeah.
Nice presentation and thank you everyone for joining us for the call rocket life will be participating in upcoming.
Conferences, despite on the shaped there and look forward to the opportunity to share more exciting news and updates with you then.
Thanks, again, and we look forward to speaking to you soon.
Ladies and gentlemen that concludes today's call. Thank you all for joining and you may now disconnect your lines.
Yeah.
Yeah.
Yeah.