Q1 2024 Rocket Lab USA Inc Earnings Call
Operator: Good day, everyone, and welcome to Rocket Lab's first quarter 2024 financial results update and conference call. At this time, I would like to hand the call over to Muriel Baker, Communications Manager at Rocket Lab. Please go ahead, Muriel. Thank you.
Well good day, everyone and welcome to the rocket Labs first quarter 'twenty 'twenty four a financial results update and conference call. At this time I would like to hand, the call over to material Baker Communications manager at Rocket Lab. Please go ahead ma'am.
Yeah.
Muriel Baker: We're glad to have you join us for today's conference call to discuss Rocket Lab's first quarter 2024 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 liability established by the 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.
Material Baker: Thank you Hello, everyone. We're glad to have you join us for today's conference call to discuss rocket labs first quarter 2020 full financial results.
Muriel Baker: Such statements are based upon information available to the company as of the day hereof and are subject to change due to future developments. Except as required by law, the company does not undertake any obligation to update these statements.
Before we begin the call I'd like to remind you that all 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 liability established by the private Securities Litigation Reform Act.
Any such statements are not guarantees of future performance.
Material Baker: Cause that could influence our results are highlighted in today's press release and others are contained in our filings with the security 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 of them.
Material Baker: Okay sure to update these statements.
Muriel Baker: Our remarks and press release today also contain non-GAAPS financial measures within the meaning of Regulation G enacted by the SEC. Included in such release and our supplemental materials are reconciliations of these historical non-GAAPS financial measures to comparable financial measures calculated in accordance with GAAPS. This call is also being webcast with a supporting presentation, and a replay and copy of the presentation will be available on our website. Our presenters today are Rocket Lab founder and Chief Executive Peter Beck and Chief Financial Officer Adam Spice. After our prepared comments, we will take questions, and now, let me turn the call over to Mr. Beck.
Our remarks and the press release today also contains non-GAAP financial measures within the meaning of regulation G and acted by the ACC included in such release and our supplemental materials reconciliations of these historical non-GAAP financial measures to the comparable financial measures calculated in accordance with GAAP. This call.
Material Baker: It is also being webcast with a supporting presentation and a replay and a copy of the presentation will be available on our website.
Material Baker: Okay.
Material Baker: Our presenters today are rocket lab's, founder and Chief Executive Peter Beck, and Chief Financial Officer, Adam Spice. After our prepared comments, we will take questions and now let me turn the call over to Mr. <unk>.
Peter Beck: Thank you, Marielle, and thank you, everybody, for joining us today. We've got a lot of great achievements and milestones to share about our start to the year, not the least of which is executing a record number of launches and space systems growth that delivered a record total revenue of $93 million in the quarter, up 55% quarter-over-quarter and 69% year-over-year. Adam will talk through the rest of the details of our financial results for the first quarter before covering the financial outlook for Q2 2024. After that, we'll take some questions and finish today's call with the near-term conferences we'll be attending.
Peter Beck: Thank you Mario and thank you everybody for joining US today, we've got a lot of great achievements and marshawn milestones. This year on our start to the year not the least of which is executing a record number of launches and space systems growth that delivered a record total revenue of <unk>.
Peter Beck: $93 million in the quarter.
55% quarter over quarter, and 69% year over year.
Peter Beck: Adam will talk through the rest of the details of our financial results for the first quarter before covering the financial outlook for Q2 2024.
Adam C. Spice: After that we'll take some questions and finish today's call with the near term conferences will be attending.
Peter Beck: Alright, on to what we achieved in the first quarter of the year, starting with Electron. We had a great series of launches in Q1, with four successful missions, three of them for commercial customers from Launch Complex 1 in New Zealand and a national security mission for the NRO out of our second site in Virginia. We had a launch turnaround of just eight days between our flight for the Japanese Customs Inspector and the NRO launch, which was no small task from two launch sites across the world. In fact, we remain the only company with the capability of orbital launch from both hemispheres.
Adam C. Spice: Right onto what we achieved in the first quarter of the year starting with electrical.
Adam C. Spice: We had a great series of launches in Q1 with four successful machines three of them for commercial customers from large complex one in New Zealand and a national security mission for the <unk>.
Adam C. Spice: Our chicken thought in Virginia, we had to launch we had a turnaround of just eight days between that flight for the Japanese customers and speak to them in a row launch, which was no small task from two launch sites across the world. In fact, we remain the only company with the capability of orbital launch from both hemispheres. It really demonstrates the capability of the.
Peter Beck: It really demonstrates the capability of the team to turnaround launches so quickly and sets us up well to execute against our packed manifest for 2024. We completed our fifth launch of the year less than two weeks ago, a commercial mission for CASE, the Institute of South Korea, along with a landmark scientific mission for NASA to test our solar sailing technology, also on board. No two ride-sharing missions are the same, and this launch, in particular, was a tricky and complex one that played into our unique mission.
Adam C. Spice: Team to turn around quickly.
Quickly and sets us up well to execute against epic benefits manifest for 2024.
Adam C. Spice: We completed our fifth launch of the year listen two weeks ago, our commercial mission for Cased Institute of South Korea, along with landmark scientific mission for NASA to test our solar styling technology once theyre on board.
Speaker Change: Hey, Roger admissions of assign and this launch in particular was a tricky and complex one that played into our unique strengths.
Peter Beck: For large launch rideshare, normally, you have a bunch of satellites that are heading to the exact same orbit, and you deploy them into one location. If the orbit isn't ideal from your spacecraft, then you're kind of in luck.
Speaker Change: For large launch Raj here normally you have a bunch of satellites that are hitting to the exact same orbit and you deploy them into one location.
Speaker Change: If the oil, but as an ideal from your spacecraft and you're kind of tough tough luck.
Peter Beck: But for CASE and NASA, we had two satellites going to two completely different orbits around each other. First, one to 520km, and then all the way up to 1000km and low-Earth orbit for the other. Those kinds of conflicting mission requirements would normally require two separate launches, but with our unique kick-stage capabilities, we're able to drop Kistoff at 520 and NASA up to 1000, and then complete another series of engine burns to bring the kick-stage back closer to Earth for faster disposal and demise validation.
Speaker Change: But for <unk> and <unk>.
Speaker Change: We had to set a lot's going to two completely different orbits to each other.
Speaker Change: First one to 520 kilometers and then all the way up to 1000 kilometers and Lara go over to the other.
Those kinds of conflicting mission requirements with Goldman to require two separate benches, but with a unique kick stage capabilities, we're able to drop cost off at 520, and NASA up to 1000, and then complete another series of engine Burns to bring the kick stage back closer to Earth for faster.
Speaker Change: <unk> and <unk>.
Speaker Change: <unk> ability.
Peter Beck: It's this kind of precision and flexibility that makes us a really attractive launch service for our customers, which is also inherent in the next two missions we have scheduled to fly in Q2. So coming up in Q2, we have two back-to-back missions scheduled for NASA to deliver their pre-fire mission to space. [inaudible] We're sending up two satellites for NASA, one on each launch, that will crisscross the poles to gather accurate readings across the two orbits from one mission.
Speaker Change: It's this kind of precision and flexibility that makes us really attractive launch service for our customers, which is also inherent in the nextgen missions, we have scheduled to Florida in Q2.
Speaker Change: So coming up in Q2, we have two back to back missions scheduled Vanessa to deliver the <unk> mission to space.
Speaker Change: Commissions to space. The mission is focused on understanding how much of a seat loss has lasted the spice from the Antarctic at Okta.
Speaker Change: It will help improve climate change models and provide data predictions on sea level rise and with the changes in the future.
Speaker Change: We're sending up to said lots of NASA one on each launch.
Speaker Change: That will crisscross, the poles together accurate ratings across the tool, but someone mission.
Speaker Change: One pre fall once <unk> and space pre far too must be please stay within three weeks time, which again plays to our strengths as a responsive once provider hitting precise overall deployments.
Peter Beck: Once pre-fire is in space, pre-fire two must be placed there within three weeks' time, which again plays to our strengths as a responsive launch provider hitting precise orbital deployment. We actually demonstrated a similar capability with the two Tropics missions launched last year, so it's great to see NASA take up this capability once again. After that, we are set to launch the first of five missions for a new customer, CNES, a French company backed by private and public investors, including the French government space agency.
Speaker Change: We actually demonstrated a similar capability with the two tropics missions launched last year. So it's great to see nessa takeout this capability once again.
Speaker Change: After that we are set to launch the first of fog machines for new customer today's French company backed by a private and public of business, including the free French government space agency will be deploying their entire satellite constellation in July with Orbitz sub 25 satellites across <unk> electron launches there as well.
Peter Beck: We'll be deploying their entire satellite constellation into low-Earth orbit, some 25 satellites across five electron launches. There is also a non-forecasted but potential fifth launch for a commercial Constellation customer we're tracking for Q2. Operationally, we'll be ready to launch this mission when the customer is ready, and if there's a chance of that happening before the end of Q2. But, like I said, there's also a chance of it slipping out of the quarter, so it's not forecast in the financials for the current quarter. On to the rest of the year, and we remain on track for another record number of elections.
Speaker Change: Non forecasted but potential theft launch for commercial constellation customer were tracking for Q2.
Speaker Change: Operationally, we'll be ready to launch this mission when the customer's ready and if there's a chance of that happening before the end of Q2.
But like I said, there's also a chance of it slipping out of the quarter. So it's not forecast in the financials for the current quarter.
Speaker Change: Yeah.
Speaker Change: Onto the rest of the year and we remain on track for another record number of electron launches across the 22 mission. So for 'twenty to 'twenty four we are seeing some movement in the manifest as expected due to customers being light with the space craft, we're asking to shift later in the year or sometimes even into 2025. This kind of manifest whack a mole as we call. It is nothing new TV launch.
Peter Beck: Across the 22 missions sold for 2024, we are seeing some movement in the manifest, as expected due to customers being late with their spacecraft or asking to shift later in the year or sometimes even into 2025. This kind of manifest whack-a-mole, as we call it, is nothing new to any launch provider, and it's something we've become very familiar with after seven years of launching. We seize the opportunity of those gaps to fill the manifest with new customers who need an urgent ride, sometimes within months, or existing ones who want to move to the left rather than wait for their booking slot.
Speaker Change: And that's something we've become very familiar with after seven years of launching electron we.
We seize the opportunity of those gaps to fill them with Asheville to manifest with new customers, who need an urgent rod sometimes within months or existing ones, who want to move to the lift rather than wait for the book slot.
Peter Beck: For customers who also ask for a new launch date later in the schedule, we have typically invoiced for it and collected the majority of the launch contract value up to that point, and then we recognize the revenue once they're flown.
Speaker Change: <unk>, who also ask for a new launch date.
Speaker Change: And the schedule, we have took place invoiced and collected the majority of the launch contract value up to that point and then we recognize the revenue once they've flown it's one launch revenue forecasting can be so lumpy, but like I said, while we might not get all 2022 thoughts off this year based on cost customer movement. We're on track for a record year for.
Peter Beck: It's why launch revenue forecasting can be so lumpy, but like I said, while we might not get all 2022 flights off this year, based on customer movement, we're on track for a record year for Electron, and from where we sit today, 2025 is shaping up to be another record year. One of the really exciting missions for 2025 was one we booked early in Q2, the $32 million Victor Hayes mission for the US Space Force.
Speaker Change: Elektron and from where we sit today 2025 is shaping up to be another record year.
Speaker Change: One of the really exciting missions for 2025 was one we booked early in Q1 early in Q2.
Speaker Change: The 32 million Victor <unk> mission for the U S Space Force. This one is a is really a full end to end mission solution that will really show the success of our vertical integration strategy.
Peter Beck: This one is really a full end-to-end mission solution that will really show off the success of a vertical integration strategy. We will be designing, building, launching, and operating the spacecraft to demonstrate tactically responsive space for the Department of Discovery. The spacecraft will come with all of our own components, including propulsion systems, solar cells, reaction wheels, star trackers, flight ground software, spacecraft structure, on and on and on it goes.
Speaker Change: We will be designing building launching and operate in this space crops to demonstrate <unk> response and space for the department of defense.
Speaker Change: The spacecraft will come with all of our <unk> components, including propulsion system solar sales direction will start flight ground software by spectrum on and on and on the Gardner Denver.
Peter Beck: Then we will fly it on Electron, and once it's in space, we'll be operating it, too, to demonstrate rendezvous with another spacecraft in orbit, which is a highly sought-after capability for the DoD. Oh, and I should mention that our task is to launch the spacecraft within 24 hours' notice from the spacecraft. It's the first time we've sold a complete end-to-end mission solution, and to a prestigious customer as well. It's a super exciting mission that showcases our ability to meet the DoD's growing need for rapid and responsive orbital capability.
Speaker Change: And then we will fly it on elektron and once it's in space will be operating at.
Speaker Change: To demonstrate rhonda.
Speaker Change: With another spacecraft in orbit, which is our highly sought after capability for the Doj.
Speaker Change: And I should mention that our task is to launch the spacecraft within 24 as notice from the space Force.
Speaker Change: It's the first time with soda complete into Ian mission solution into a prestigious customer as well, it's a super exciting mission that showcases our ability to meet the dod's growing need for rapid and responsive overall capability. It will also be a fantastic demonstration of what we can do as a full integrated Michel said.
Peter Beck: It will also be a fantastic demonstration of what we can do as a full end-to-end mission services provider. We'll be taking care of absolutely everything the DOD needs for assured access to space, which is an important capability for the nation. Another new launch contract we've been awarded post Q1 is the second mission from the U.S. Space Force, this time for the Space Test Program. It's a $14.5 million launch that will fly out of Launch Complex 2 in Virginia within the next 24 months to carry out research experiments and technology demonstrations for the DoD in space.
Speaker Change: Mission services provider will be taken care of absolutely everything to do need the needs for assured access to space, which is an important capability for the nation.
Speaker Change: Another new launch contract we've been awarded post Q1 is sick and mission from the U S Space Force. This time for the Spice Tea program, it's $14 5 million launch that will fly out of large complex two in Virginia within the next 24 months to carry out research experiments and.
Speaker Change: Technology demonstrations to the Dod and space.
Peter Beck: We've proven ourselves as a trusted and dedicated partner to the DoD across multiple missions now on Electron. In fact, our first mission for the STP program was all the way back in 2019 when Electron launches were still in single digits.
Speaker Change: We've proven ourselves as a trusted and dedicated partner to the Doj across multiple machines now and I think Sean in fact, our first mission for the STP program was all the way back in 2019, when electron launches we're still in the single digits and we're looking forward to continually continued execution with the ECP 30 mission.
Peter Beck: And we're looking forward to continued execution with the STP-13. Finally, to round out Electron, we've got an exciting post-quarter update on our recovery program. For the first time, we've returned the Electron stage back to the production line in preparation for reflying. This tank is the one that came back to Earth during the recovery mission we launched in January, and it came back in such good condition that we're bringing it back into the production fold.
Speaker Change: Finally to round out electron we've got an existing is an exciting quarter update on our recovery program for the <unk>.
Speaker Change: This time, we have returned an electron stage back to the production line in preparation for <unk>.
Speaker Change: <unk> is the one that came back to Earth. During the recovery mentioned, we launched in January and it came back in such good condition that we are bringing it back into the production forward.
Peter Beck: Already, it's passed a barrage of qualification tests, but having gone through those additional checks, it's now undergoing its final fit-out and another round of the same acceptance testing that will take any brand new tank through that runs off the line. The results of that campaign will determine its suitability for reflight, but if all looks good, we could be looking to refit later.
Speaker Change: Or do you it's passed a barrage of qualification tests, but havent gone through those additional checks is now undergoing its final fit out another round of the same acceptance testing that will take any brand new tanks for that.
<unk> runs off the line the results of that campaign, we will determine at Super Bowl suitability for reflect pool looks good we could be looking to reflect later in the year.
Peter Beck: That's just a quick overview of some of the key highlights across Q1 to date for Electron. Now on to some of the exciting progress and achievements for Space Systems. We move quickly this quarter in executing against our largest space systems contract to date, our debut as a prime spacecraft contractor to the industry with a $515 million constellation of 18 spacecraft we're developing for the Space Development Agency. All of these spacecrafts are the agency's tranche to transport layer will be designed, built, and managed by us and include the full suite of our space systems products. We officially kicked off the beginning of the program with the SDA in Q1, as well as completed preliminary studies for the spacecraft's design.
Speaker Change: That's just a quick overview of some of the key highlights across Q1 to date for Elektron now on to some of the exciting progress and achievements for spy systems.
Speaker Change: We moved quickly this quarter in executing against their largest space systems contract Tonight debut as a prime spacecraft contracted to the industry with a $515 million constellation of 18 spacecraft, we are developing for the space development agency.
Speaker Change: All of the spacecraft to the agency's tranche to transport layer will be designed built and managed by US and includes the full suite of S spy systems products.
Speaker Change: We officially kicked off at the beginning of the program with the FDA in Q1 as well as completed.
Speaker Change: Preliminary studies for the spacecraft design the contract marks the beginning of our extension of being a prime contractor role, we've moved into swiftly and comfortably by hand picking a team of experienced sub contractors to support the program across pilot seems to supply and ground systems.
Peter Beck: The contract marks the beginning of our expansion into being a prime contractor, a role we've moved into swiftly and comfortably by hand-picking a team of experienced subcontractors to support the program across payload, sensor supply, and ground. Another fantastic trick for Space Systems Group in the quarter was their successful completion of our mission with BARDA, which returned to Earth the world's first space manufacturing mission conducted outside of the International Space Station.
Speaker Change: Another fantastic for the space systems group in the quarter was the successful completion of emissions with BARDA, which returned.
Speaker Change: The world's first space manufacturing mission conducted outside of the international space station.
Peter Beck: This was a mission where we took Vardar's manufacturing capsule that makes pharmaceutical crystals and put it on top of one of our spacecraft, which supplied the capsule with everything it needed to do its work, like power, supply, positioning, and management in space. The last one is a really important capability we demonstrated on this mission. Our spacecraft and operations team were tasked with setting the capsule on its path back to Earth so it could land safely in a tiny area in the middle of the Utah desert. I liken this to throwing a ball from low earth orbit while aiming to hit a bullseye.
Speaker Change: This was a mission, where we took that as manufacturing capsule that makes pharmaceutical crystals and put it on top of Monovisc, Vice craft, which supplied to capture everything that needed to do its work.
Speaker Change: Supply and positioning and management and size.
Speaker Change: The last one is a really important capability. We demonstrated on this mission as vice craft and operations team were tasked with sitting the capsule on its path back to Earth. So it could land safely in a tiny area in the middle of the Utah Desert.
Speaker Change: Unlike in the select throwing a ball from low with a little bit while aiming to hit a bull's eye.
Peter Beck: The Rocket Lab team pulled off a really incredible feat to absolutely nail the capsule's re-entry on target. This skill set makes Rocket Lab now one of only two commercial launch companies with spacecraft re-entry capabilities, a rare and valuable thing in the market. And we'll be demonstrating this again soon with our second spacecraft for the next data demonstration, already well ahead of production and on track for its expected launch date. The added bonus is everything we've learned in these reentry missions is we're able to directly apply to future capsule launches on Neutron as well.
Speaker Change: Colette team pulled off a really incredible faith to just absolutely nailed the capsules reentry on target.
This gives it makes US now one of only two commercial launch companies with space craft reentry capabilities, our Ria and valuable thing in the market and we will be demonstrating this again soon with a second spacecraft for the Knicks not a demonstration already well ahead of production and on track for its expected launch date.
Speaker Change: The added bonus of <unk>.
Speaker Change: Bonuses everything we've learned in these range emissions is we're able to directly apply to future catch your launches on neutral as well.
Peter Beck: Another of our big satellite programs, the 17 spacecraft built for NDA Globalstar, has also progressed nicely through Q1. The first of two flight frames for these spacecraft were completed, shipped out of Long Beach, and delivered to NDA for the next phase of the program. Once GlobalSars payloads arrive at MDA, we'll begin the next step of integrating those into the spacecraft before the complete package enters the acceptance testing campaign.
Speaker Change: Another of our big satellite programs, the 17 space craft built India Globalstar.
Speaker Change: <unk> has also progressed nicely through Q1, the first of two frames for the space craft for completed shipped out long beach and delivered to NDA for the next phase of the program.
Speaker Change: Once global stars payloads arrive to MDA will begin the next step of integrating those into the space craft before the complete package into the acceptance testing campaign.
Peter Beck: This constellation is slated for launch in 2025, so we're making great progress towards it. Next is our Escapade program, which is the mission to Mars for NASA with our two spacecraft. The first fully assembled spacecraft is currently being put through the ringer in the vacuum chamber testing, pushing the spacecraft to its limits so we can know with confidence it can survive the journey from Earth to Mars. The second satellite will go into the vacuum chamber as soon as the first one comes out, and it's right now undergoing similar checks to ensure it's ready for the load that it'll see when it's launched later this year.
Speaker Change: This constellation of slated for launch in 2025, so we're making great progress towards that deadline.
Speaker Change: Next is the East Copay program, which is the mission to Mars Vanessa with their two spacecraft. The first fully assembled spacecraft is currently being put through the ringer in the vacuum chamber testing pushing the spacecraft to its limit. So we can know with confidence that can survive the journey from Earth to Mars.
Speaker Change: <unk> will go into the vacuum chamber as soon as the first one comes out and it's right now undergoing similar checks to ensure its pretty after the load that we will see when it's more inside of this year.
Peter Beck: And finally, to wrap up space systems, we have a new long-term supply agreement for our space-solar solutions with a large space prime worth up to $150 million. This one is a multi-year agreement that will see our solar technology support critical missions across civil, defense, and national security. A March 31 ending backlog reflects the initial orders against this long-term agreement. Demand for solar power in space continues to grow as the world moves towards new constellations and proliferated Leo architecture.
Speaker Change: And finally to wrap up space systems, we have a new long term supply agreement for ASP by solid solutions with a large space, Brian with up to $150 million. This one is a multi year agreement that we'll see a solid technology support critical missions across civil defense and National security.
Speaker Change: How much do you want ending backlog reflects the initial orders against this long term agreement.
Speaker Change: Demand for solar parents base continues to grow as the world moves towards Navy constellations and Melissa Melissa Leo architecture.
Peter Beck: We're now one of the largest suppliers of space-grade solar cells globally. Space solar power is already one of the most constrained areas in the industrial supply chain, which is why we've invested in expanding and modernizing our space manufacturing capability, including automated processes and assembly. These are just some of the steps we've taken to ensure the resiliency of the space solar supply chain beyond current and future missions, and this latest contract is a strong recognition of that. Overall, some great work and progress across our space systems business to date. Now it's time to share how development with Neutrons is going.
One of the largest suppliers of Spice Gregg Sulzberger solar sales globally.
Speaker Change: All of us.
Speaker Change: Solar power is already one of the most constrained areas in the industrial supply chain, which is why we've invested in expanding modernizing space manufacturing.
Speaker Change: Ability, including automated processes and a ceiling.
Speaker Change: And it seems like these are just some of the steps we've taken to ensure the resiliency of the spice solar supply chain beyond current and future missions and its the latest contract besides contracted strong recognition of that.
Speaker Change: Overall, some great work and progress across our spy systems business Tonight now, it's time to see how development with neutral and Scott.
Peter Beck: So on to a huge milestone for Neutron that I'm really excited to share. We've completed our first Archimedes engine. The engine you see here is already shipped out the door of our engine development complex in Long Beach, and it's fitted to the test stand at NASA Stennis. What we're taking to the stand is very close to a flight-like engine, and with all of the production infrastructure stood up alongside the engine's development
Speaker Change: So onto a huge milestone for neutrolin that I'm really excited to share we've completed our first Archimedes engine.
Speaker Change: The engine you see here is already shipped out the door of Air engine development complex in long Beach and extended to the two stand at NES as Dennis.
Speaker Change: What we're taking to sustained is a very close to our flight Lucky and Jim.
Speaker Change: And with all of the production infrastructure stood up alongside the engines to engine development. We believe the team is in the optimal position to be able to make quicker durations document is based on what we learned through testing.
Peter Beck: We believe the team is in the optimum position to be able to make quick iterations to our committees based on what we learn through testing. Archimedes is a really unique engine, given its thrust class, engine cycle, and propellant combination. It's an oxidizer-rich stage combustion cycle powered by liquid oxygen and methane.
Speaker Change: <unk> is a really unique engine given up stress clash class engine cycle and propellant combination.
Speaker Change: It's an oxidizer rich stage combustion cycle powered by liquid oxygen and leasing.
Peter Beck: One of these engines equals the same amount of thrust as roughly three electron rockets. On top of that, we've designed Archimedes to stand up to a target maximum reusability of 20 flights per engine. Each Archimedes is designed for 165,000 pounds of thrust for a combined liftoff on the first stage of 1,450,000 pounds of thrust.
Speaker Change: One of these engines equals the same amount of thrust is roughly three electron rockets on top of that we have designed <unk> sustained up to a target.
Speaker Change: Mexican reusability.
Yeah.
Speaker Change: <unk> 20 slots per engine.
Speaker Change: Hey, Chuck committees is designed for 165000 pounds of thrust for a combined lift off on the first stage of 1.450 million pounds Trust.
Peter Beck: The turbopump has 18,000 shaft horsepower, and we picked an operating point that is optimized for reusability over maximum performance, which will allow us to operate this engine at a much lower stress level as compared to others. And, like I said, it positions us well for a rapid development and qualification testing campaign integrated within our committees. Integrated within Archimedes II are all new 3D printed parts that come off their factory floor at Long Beach. For example, its turbo pump, pre-burner and main combustion chamber components, valve housings, and engine structural components.
Speaker Change: Tom has an 18000 shaft horsepower and we picked an operating point.
Speaker Change: That is optimized for Reusability, either Mexico performance, which will allow us to operate this engine at a much lower stress level as compared to others and like I said that.
Speaker Change: It positions us well for rapid development and qualify for a rapid development and qualification testing campaign.
Speaker Change: Yeah.
Speaker Change: Integrated within committees.
Speaker Change: Integrated integrated within our committees to all <unk>, all new <unk> printed parts come off the factory floor at long Beach.
Speaker Change: Pre bearing in mind combustion chamber components felt housings and engine structural components.
Peter Beck: All of these are the same parts that continue to be printed as we build out more engines to this one in parallel. We've got about four sets of engines on the go right now. Perhaps the biggest point I want to make here too is that we haven't taken any huge concessions just to make fire for the sake of it. We've been very intentional and methodical with Archimedes, making sure to refine its design so that now we're at a point where we've got an engine that can be readily productionized long term. Test Ready Archimedes is really the inflection point for Neutron's development.
These are the same parts that.
Speaker Change: You need to be printed as we build out more engines to this one in parallel we've got about four states of engines on the Guy right now.
Perhaps the biggest point I want to make here too is that we haven't taken any huge concessions just to make sure for the sake of it we've been very intentional and methodical with our committees, making sure to refine is designed so that now we're at a point that we've got an engine that can be readily production is long term.
Speaker Change: <unk> is really the inflection point the neutrons development now that <unk> is on the stand the real fun begins and we started the <unk> campaign in earnest.
Peter Beck: Now that Archimedes is on the stand, the real fun begins, and we've started the test campaign in earnest. Having a complete engine, we've gone through some of the biggest unknowns in the development program and can update the schedule for its first flight accordingly, which we've adjusted to first launch no earlier than mid-25. We run highly aggressive schedules at Rocket Lab, we always have, and all of our programs run on all of our programs, and that's why we've been able to deliver new capability to the market like Haste, Electron, Capstone, and more in industry-leading timeframes.
Speaker Change: Being a complete engine with.
Speaker Change: We've gone through some of the biggest unknowns in the development program and can update the schedule for its first flight accordingly, which we've adjusted to first launch no earlier than mid 'twenty five.
Speaker Change: Well run highly aggressive schedules that rocket lab, we always have and all of their programs.
Speaker Change: And that's why we've been able to deliver new capability to the market like highest electron capstone and more industry leading timeframes.
Peter Beck: Getting Neutron to the pad this year was an ambitious, green-light schedule that we had a path to closing if every single aspect went exactly according to plan. But, as we've always said, this is a rocket development program and is always filled with gremlins, some in new control and some not. In this case, we've made the call to take additional time, not only to just bring a minimum viable product engine to the stand, but to be very intentional and methodical about setting Archimedes up for success in the long term. This means rigorous component-level testing before the first hot fire and refining a design that can be productionized long term.
Speaker Change: Getting neutrolin to the pad. This year was an ambitious greenlight schedule that we had a path to closing if every single aspect went exactly according to plan, but as we've always said this is a rocket development program and Theres always filled with great months, some new control and some not.
Speaker Change: We've made the call to take additional time, not only to just bring a minimum viable product engine to the stained but to be very intentional and methodical about shooting archimedes up for success in the long term.
Speaker Change: It means rigorous component level testing completed before the first half.
Speaker Change: And refining a design that can prove production as long term. We've also taken the time to scale up the manufacturing facilities to support full scale production and built and knowledgeable and experienced team ready to build test and fly out committees at the pace that customers are demanding once we bring neutrolin to market.
Peter Beck: We've also taken the time to scale up the manufacturing and test facilities to support full-scale production and built a knowledgeable and experienced team ready to build, test, and fly Archimedes at the pace that customers are demanding once we bring Neutron to market. All of this takes time to get ultimately right, so that drove a schedule which now closes mid-next year. We have a proven track record of delivering technology and capabilities to market on rapid and often record-breaking timelines, and neutrons still come into the market faster than just about any other rocket program that I know of.
Speaker Change: This takes time to get ultimately decided that drive schedule, which now closes mid next year.
Speaker Change: We have a proven track record of delivering technology and capabilities to market on rapid and often record breaking timelines and neutral in Stoke coming to still come into market faster than just about any other market program in Illinois.
Peter Beck: We believe Neutron will be a category-defining launch vehicle, serving critical market needs, and we're excited to move into the final phase of development. While the propulsion team has made leaps and bounds on Archimedes, the structural test team is also putting together big wins on the board as well. We've got some of the rocket's largest composite panels and TACS sections collecting across all of our composite facilities. We've completed the first neutron fairing panels, with a set of full panels coming out of composite securing and expected to be assembled together in the coming weeks. These are large, almost 8-meter-long sections that mount neutron canards and house the payloads inside the rocket, so they're really significant pieces of neutrons built.
Speaker Change: We believe neutrolin will be a category defining launch vehicle saving critical market needs and we're excited to move into the final phase of development.
Speaker Change: On propulsion propulsion team has made leaps and bounds on our Canadian structural team. This team is also putting together big.
Speaker Change: <unk> on the board as well, we've got some of the rockets largest composite panels and take sections activate data across all of their facilities.
Speaker Change: The first neutrons.
Speaker Change: Hearing panels with a state of full panels coming off the conference that's coming out of conferences caring and expects it to be assembled together in the coming weeks.
These are large almost eight meter long sections that Mount neutrons, Ken ads and how some highlights and saw the rocket so they're really significant pieces of neutrons build.
Peter Beck: The internal tank structures on Neutron's second stage also come together, having completed an assembly test run earlier in the quarter. This is the second stage that we built for Neutron after the development stage we built and tested last year. Putting the pieces together, putting all the pieces of Neutron together is not the same as assembling Electron, which the team obviously regularly does by hand. So completing the assembly test run for Neutron and now moving on to final assembly, lamination, and integration of the pieces into flight configuration marks a major progress in the vehicle's development. The size and the scale of the structure and the pieces we're working with here are important to show. So here are some more images of the carbon composite tank builds taking place across our various facilities.
Speaker Change: The internal tank structures on neutral in the second stage also come together, having completed and it seems like just around earlier in the quarter. This is the second stage tell you that we've built for neutral after the development stage of built in Houston last year.
Speaker Change: Putting the pieces together, putting all the pieces of neutron together is not the same as it is assembling electron.
Speaker Change: The team obviously regularly does behind.
Speaker Change: Completing the assembly test runs for neutral and now moving onto the final assembly elimination and integration of the pieces into flight configuration, Max major progress in that acreage development.
Speaker Change: The size and the scale of the structure and the pieces. We are working with with here is important to show. So here's some more on that just the cabin comes to tank goads, taking place across our various facilities.
Peter Beck: And it's fair to say some amazing work from the team here pushing hard to get this all together. Speaking of launch, Launch Complex 3 up in Virginia is really starting to take shape. Concrete works for Neutron's launch mount have been completed, and the concrete foundations for the site's liquid propellant and gas storage tanks have gone in. Long-lead propellant tanks are soon to be delivered to site, and we'll see our propellant farm stand up in the coming months. I also installed a 278-foot water tower.
Speaker Change: And it's fair to say some some amazing work from the team here pushing hard to get this all together.
Speaker Change: Speaking of launch lunch complex three up in Virginia is really starting to take shape.
Speaker Change: Works for Neutrolin launch mountain have been completed and the concrete foundations for the slides liquid propellant and gas towards tanks of Conan long lead propellant tanks assumed to be delivered to site and we will see a propellant stood up in the coming months.
We also installed the.
Speaker Change: 278 foot water visually with change of Scotland develops waterfront grievous of its an exciting new feature for <unk> III we.
Peter Beck: Visually, we've changed the skyline of Wallops waterfront forever, so it's an exciting new feature for LC3. We've made good progress on all other Neutron facilities in the area as well, including Neutron's assembly and integration test complex just outside the Wallops gate. Another set of concrete foundations have gone down, and we've got the skeleton structure up for our next building on the site. Construction is really moving along in Virginia, which is great to see.
Speaker Change: We have made good progress on all of their neutral and facilities in the area as well, including neutrons Assembly and integration takes complex just outside the Wattup Scott another set of concrete foundations have gone down and we've got a skeleton structure up for an exploding on the site construction is really moving nicely along in Virginia, which is great to see.
Peter Beck: So that wraps up the business highlights for 2024 so far. So from here, I'll hand it over to Adam to take us through the financial updates. Great. Thanks, Pete.
Speaker Change: That wraps up the <unk>.
Speaker Change: Highlights for 2024 sites so from here I'll hand, it over to Adam to take us through the financial updates.
Adam C. Spice: First quarter 2024 revenue was $92.8 million, which was towards the low end of our prior guidance range, reflecting significant year-on-year growth of 69% and sequential growth of 55% driven by strong contribution from both business segments. Our launch service segment delivered revenue of $32.7 million in the quarter from four launches in line with guidance of $32 million to $33 million, representing sequential growth of 287%, driven by a return to normal launch operations as before was impacted by our September anomaly. The average selling price per launch was $8.2 million, well above our target average selling price of $7.5 million. The result of a favorable mix of government and complex commercial missions.
Great. Thanks Pete.
Adam C. Spice: First quarter 2024 revenue was $92 8 million, which was towards the low end of our prior guidance range.
Adam C. Spice: Electing significant year on year growth of 69% it's a.
Adam C. Spice: Sequential growth of 55% driven by strong contribution from both business segments.
Adam C. Spice: Our launch services segment delivered revenue of $32 7 million in the quarter from four launches in line with guidance of $32 million to $33 million.
Adam C. Spice: Representing sequential growth of 287% driven by a return to normal launch operations Q4 was impacted by our September anomaly.
The average selling price per launch was $8 2 million well above our targeted average selling price of $7 5 million. The result of a favorable mix of government and complex commercial missions.
Adam C. Spice: Our current backlog continues to support our target average revenue per launch with some variability tied to volume purchase commitments, launch location, and mission assurance requirements. Our space system segment delivered just over $60 million in the quarter, which was towards the low end of our prior guidance range of $60 million to $65 million but reflecting sequential growth of 17%, driven primarily by growth in our MDA contract revenue, albeit slightly less than was expected.
Adam C. Spice: Our current backlog continues to support our target average revenue per launch with some variability tied to volume purchase commitments lots location and mission assurance requirements.
Our space systems segment delivered just over $60 million in the quarter, which was towards the low end of our prior guidance range of $60 million to $65 million.
Adam C. Spice: But reflecting sequential growth of 17% driven primarily by growth in our MDA contract revenue, albeit slightly less than was expected.
Adam C. Spice: Now turn to Gross Margin. GAPGRO's gross margin for the first quarter was 26.1%, slightly above the high end of our prior guidance range of 24 to 26%. Non-GAAP gross margin for the first quarter was 31.7%, which was also above our prior guidance range of 29 to 31%.
Adam C. Spice: Now turning to gross margin.
Adam C. Spice: GAAP gross margin for the first quarter was 26, 1% slightly above the high end of our prior guidance range of 24% to 26%.
Adam C. Spice: non-GAAP gross margin for the first quarter was 31, 7%, which was also above our prior guidance range of 29% to 31%.
Adam C. Spice: Gap and non-gap gross margin improvements, relative to our guidance, reflect continued efficiencies in both our launch and satellite manufacturing businesses. We ended Q1 with a production-related headcount of 872, an increase of 20 from the prior quarter. Turn to backlog.
Adam C. Spice: GAAP and non-GAAP gross margin improvements relative to our guidance reflects continued efficiencies in both our launch and satellite manufacturing businesses.
Adam C. Spice: We ended Q1 with production related head count of 872 up <unk> 20 for the prior quarter.
Adam C. Spice: Turning to backlog.
Adam C. Spice: We ended Q1 2024 with $1.02 billion of total backlog, with launch backlog of $215.6 million and space systems backlog of $799.7 million. Relative to Q4 2023, total backlog was down only 3% sequentially, or $31 million, despite a $93 million quarter of revenue. Strong bookings continued in our space systems business, highlighted by initial orders related to the long-term supply agreement with a Tier 1 prime contractor that Pete alluded to earlier, and a follow-on booking for reaction wheels supporting a megaconstellation.
We ended Q1 2024 with $1 $202 billion of total backlog with large backlog of $215 $6 million and space systems backlog of $799 7 million.
Relative to Q4, 2023, total backlog was down only 3% sequentially or $31 million, despite a $93 million a quarter of revenue.
Adam C. Spice: Strong bookings continued in our space systems business highlighted by initial orders related to the long term supply agreement with a tier one prime contractor that Pete alluded to earlier at a follow on booking for reaction wheel supporting a mega constellations.
Adam C. Spice: For launch, backlog was down 13% sequentially, or $32.7 million, as we drew backlog down against a record number of launches in the quarter. We continue to cultivate a healthy pipeline, including multi-launch deals that can be lumpy, given the size and complexities of these opportunities. We expect approximately 42% of current backlog to be recognized as revenue within 12 months. Trinity Operating Expenses GAAP operating expenses for the first quarter of 2024 were $67.3 million, below the low end of our guidance range of $73 million to $75 million. Non-GAAP operating expenses for the first quarter were $56.4 million, which was below the low end of our guidance range of $62 million to $64 million.
For launch backlog was down 13% sequentially or $32 $7 million as we drew backlog down against a record number of launches in the quarter.
Adam C. Spice: We continue to cultivate a healthy pipeline, including multiple large deals that can be lumpy given the size and complexities of these opportunities.
Adam C. Spice: We expect approximately 42% of current backlog to be recognized as revenue within 12 months.
Turning to operating expenses GAAP operating expenses for the first quarter of 2024 were $67 $3 million below the low end of our guidance range of $73 million to $75 million.
Adam C. Spice: non-GAAP operating expenses for the first quarter were $56 $4 million, which was below the low end of our guidance range of 62 million to $64 million.
Adam C. Spice: The increases in both GAAP and non-GAAP operating expenses versus the fourth quarter of 2023 were primarily driven by continued growth in headcount and prototype spending to support our Neutron development program and related infrastructure to support Neutron and our 18-satellite SDA contract, partially offset by shifting R&D resources to production support for space systems. In SG&A, GAAP expenses increased $2.9 million quarter-on-quarter, largely due to a $1.6 million increase in stock-based compensation, along with an increase in outside services.
The increases in both GAAP and non-GAAP operating expenses versus the fourth quarter of 2023 were primarily driven by continued growth in head count in prototype spending to support our neutral and development program and related infrastructure to support Neutrolin and our 18th satellite SBA contract, partially offset by shifting R&D resource to production support.
Adam C. Spice: For space systems.
Adam C. Spice: In SG&A GAAP expenses increased $2 $9 million quarter on quarter, largely due to a $1 $6 million increase in stock based compensation along with increase in outside services, partially offset by a decrease in the change in contingent consideration related to our PSC acquisition due to a lower average stock price in the.
Adam C. Spice: Partially upset by a decrease in the change in contingent consideration related to our PSC acquisition due to a lower average stock price in the quarter. Non-GAAP SG&A expenses increased by $1.9 million primarily due to the increase in outside services included in year-on-year out of expenses, legal fees, and corporate IT and security spending that further enable efficient scaling of the business.
Adam C. Spice: <unk>.
Adam C. Spice: non-GAAP SG&A expenses increased by $1 9 million, primarily due to the increase in outside services included in <unk> expenses legal fees and corporate <unk> and security spending that further enable efficient scaling of the business.
Adam C. Spice: Q1 ending SG&A headcount was 263, representing an increase of 16 from the prior quarter. In R&D specifically, GAP expenses were up $1 million quarter-on-quarter due to neutron prototyping, materials, and headcount. Meanwhile, we have shifted certain non-neutron R&D resources to support the execution of our MDA contract production. Non-GAAP expenses were up $900,000 quarter-on-quarter, driven similarly to GAAP expenses.
Adam C. Spice: Q1, ending SG&A head count was 263, representing an increase of <unk> 16 from the prior quarter.
Adam C. Spice: Yeah.
Adam C. Spice: In R&D, specifically GAAP expenses were up $1 million quarter over quarter due to neutral on prototyping materials and head count increases.
Adam C. Spice: Meanwhile, we have shifted certain non neutral in R&D resources to support the execution of our MDA contract production ramp.
Adam C. Spice: non-GAAP expenses were up $900000 quarter on quarter, driven similarly to GAAP expenses.
Adam C. Spice: Q1 ending R&D headcount was 625, representing an increase of 40 from the prior quarter. In summary, total first quarter headcount was 1,760, up 76 heads from the prior quarter. Turn to cash.
Adam C. Spice: Q1, ending R&D head count was 625 million represent an increase of 40% from the prior quarter.
Adam C. Spice: In summary, total first quarter head count was $1760 up 76 heads from the prior quarter.
Adam C. Spice: Purchases of property, equipment, and capitalized software licenses were $19.2 million in the first quarter of 2024, an increase of $8.8 million from $10.4 million in the fourth quarter of 2023. This sequential increase was due to our continued investment in neutron research, testing, and production infrastructure projects, along with the expansion of our satellite production and space solar solutions capacity. Cash consumed from operations was $2.6 million in the first quarter of 2024 compared to $42.2 million in the fourth quarter of 2023.
Adam C. Spice: Turning to cash purchases of property equipment and capitalized software licenses was $19 2 million in the first quarter of 2024, an increase of $8 8 million.
Adam C. Spice: $10 4 million in the fourth quarter of 2023.
Adam C. Spice: The sequential increase was due to our continued investment in neutral and research testing and production infrastructure projects, along with the expansion of our satellite production in space Solar solutions capacity.
Adam C. Spice: Cash consumed from operations was $2 6 million in the first quarter of 2024 compared to $42 $2 million in the fourth quarter of 2023.
Adam C. Spice: The sequential improvement of almost $40 million was driven by a lesser net income loss and working capital improvements owing to the ramp-up of production in our MDA Global Star Program and a step-up in launch cadence, as well as strong cash collections, including initial milestone payments related to our Space Systems Program. Overall, non-GAAP free cash flow, defined as GAAP operating cash flow reduced by purchases of property, equipment, and capitalized software in the first quarter of 2024, was a use of $21.8 million, compared to $52.6 million in the fourth quarter of 2023.
Adam C. Spice: The sequential improvement of almost $40 million was driven by a lesser net income loss and working capital improvements owing to the ramp up of production in our MDA Globalstar program and a step up in launch cadence as well as strong cash collections, including initial milestone payments related to our space systems programs.
Adam C. Spice: Overall, non-GAAP free cash flow defined as GAAP operating cash flow reduced by purchases of property equipment and capitalized software in the first quarter of 2024 was a use of $21 8 million compared.
Adam C. Spice: Compared to $52 $6 million in the fourth quarter of 2023.
Adam C. Spice: The ending balance of cash, cash equivalents, restricted cash and marketable securities was $564.9 million as of the end of the first quarter of 2024. As discussed in our February earnings call, we generated $355 million in a convertible senior notes offering which was coupled with two deployments of $43.2 million supporting our convertible cap call and equipment facility loan repayments, as well as $11.2 million in debt issuance costs, yielding $257.4 million of net finance, We exit Q1 with a strong position to exercise inorganic options to further vertically integrate our supply chain with the critical capabilities, consistent with what we've done successfully in the past.
Adam C. Spice: The ending balance of cash cash equivalents restricted cash and marketable securities was $564 9 million.
Adam C. Spice: As of the end of the first quarter of 2024.
Adam C. Spice: As discussed on our February earnings call, we generated $355 million in a convertible senior note offering which was coupled with two deployments of $43 $2 million supporting our convertible cap call.
Adam C. Spice: And equipment facility loan repayments as well as $11 2 million and debt issuance cost, yielding $257 4 million of net financing.
Adam C. Spice: We exit Q1, with a strong position to exercise inorganic options to further vertically integrate our supply chain with a critical capabilities consistent with what we've done successfully in the past.
Adam C. Spice: Okay.
Adam C. Spice: Our four-quarter profitability trend demonstrates progress towards adjusted EBITDA break-even and attaining our long-term financial model. We expect Electron's gross margins to continue to improve over time due to increased scale and production efficiency, and satellite manufacturing contributions to improve due to increased scale and leverage of growing IP capabilities and infrastructure. With our strong launch manifest and increasing scale driven by space systems contract execution in 2024, we are well positioned to continue our progression to adjusted EBITDA breakeven following our neutron investment cycle. And with that, let's turn to our guidance for the second quarter of 2024. We expect revenue in the second quarter to range between $105 and $110 million.
Adam C. Spice: Our fourth quarter profitability trend demonstrates progress towards adjusted EBITDA breakeven.
Adam C. Spice: In attaining our long term financial model.
Adam C. Spice: We expect electrons gross margins to continue to improve overtime due to increased scale and production efficiencies at satellite manufacturing contributions to improve due to increased scale and leverage of growing IP capabilities and infrastructure.
Adam C. Spice: With our strong launch manifest and increasing scale driven by space systems contract execution. In 2024, we are well positioned to continue our progression to adjusted EBITDA breakeven following our neutral on investment cycle.
Adam C. Spice: This range reflects $77 million to $81 million of contribution from Space Systems and $28 million to $29 million from Launch Services, which assumes four launches. As Pete noted, we do have a fifth launch slated for late June, but are taking a cautious approach in terms of guidance setting, given the end-of-quarter timing. We expect second quarter GAAP gross margins to range between 24% to 26% and non-GAAP gross margins to range between 30% to 32%.
Speaker Change: And with that let's turn to our guidance for the second quarter of 2024.
Speaker Change: We expect revenue in the second quarter to range between $105 and $110 million.
Speaker Change: This range reflects a $77 million to $81 million of contribution from space systems, and 28% to $29 million from launch services, which assumes four launches.
Speaker Change: As Pete noted, we do have a fifth launch slated for late June but are taking a cautious approach in terms of guidance setting given your end of quarter timing risk.
Speaker Change: We expect second quarter GAAP gross margin to range between 24% to 26% and non-GAAP gross margin to range between 30% to 32%. These.
Adam C. Spice: These forecasted gap and non-gap gross margins reflect mixed shifts in our space system segment towards the larger and lower margin satellite manufacturing program revenue contribution versus certain of our higher gross margin component offerings, as well as a weaker mix within our components. We expect second quarter GAAP operating expenses to range between $74 million and $76 million, and non-GAAP operating expenses to range between $62 million and $64 million. The quarter-on-quarter increases are driven primarily by increased Neutron investment, including staff costs, prototyping, and materials, as well as our annual merit increases effective April 1st.
Speaker Change: These forecasted GAAP and non-GAAP gross margins reflect mix shifts in our space systems segment towards the larger and lower margin satellite manufacturing program revenue contribution.
Speaker Change: Certain of our higher gross margin component offerings as well as a weaker mix within our components businesses.
Speaker Change: We expect second quarter, GAAP operating expenses to range between $74 million and $76 million and non-GAAP operating expenses to range between $62 million of $64 million.
Speaker Change: Quarter on quarter increases are driven primarily by increased neutral on investment, including staff cost prototyping and materials as well as our annual merit increases effective April one.
Adam C. Spice: We expect second-quarter GAAP and non-GAAP net interest expense to be $1 million. We expect second-quarter adjusted EBITDA losses to range between $23 million and $25 million, and basic shares outstanding to be approximately 494 million.
Speaker Change: We expect second quarter, GAAP, and non-GAAP net interest expense to be $1 million.
Speaker Change: We expect second quarter, adjusted EBITDA loss to range between $23 million and $25 million.
Speaker Change: Basic shares outstanding to be approximately 494 million shares.
Operator: And with that, we'll hand the call over to the operator for questions. Thank you. And everyone, it is star number one. If you would like to ask a question, if you're using a speakerphone, please make sure your mute button is turned off to allow your signal to reach our equipment. Again, that's star number one to ask a question. And we'll go first to Erik Rasmussen, Suji
Speaker Change: And with that we'll hand, the call over to the operator for questions.
Speaker Change: Thank you and everyone. It is star one if you would like to ask a question.
Speaker Change: Speaker phone. Please make sure your mute button turned off to allow your signal to reach our equipment.
Speaker Change: So I wanted to ask a question we will go first to aircrafts with Paul.
Erik Peter Rasmussen: Yeah, thanks for taking the questions. Maybe just on Neutron, you obviously made a lot of significant progress and passed a number of milestones, and the Archimedes being the latest, I guess, major one, but you are pushing that out by at least six months. Is it mostly on the engine side, sort of the conservatism there, and sort of what can pull that timeline in or even push that out further? Yeah, hey Erik.
Paul: Yes, thanks for taking the questions maybe just on Neutrolin.
Obviously it would be.
Paul: A lot of.
Significant progress.
Paul: The number of milestones in the Archimedes being the latest major.
Paul: A major one but.
Paul: You're pushing that out by at least six months.
Paul: Is it mostly on the engine side sort of the the <unk>.
Paul: Service isn't there.
Paul: It would pull that timeline in where you can push that out further.
Peter Beck: So the engine is always a long pole in the tent, you know, with any launch vehicle development. So, you know, and, You look, um... We learned a lot building that engine and getting it to the stand and we'll continue to learn more as we go through the engine qualification, and Hotfire Programs, but the engine is really the primary driver for the move, and you know, Rocket programs are notoriously difficult to, you know, to kind of plan, because I think a lot of people see the rocket, but they don't see all of the tremendous amount of infrastructure, you know, around it, that it takes to bring a, you know, a rocket to fruition.
Speaker Change: Yes, Hi, Eric.
Eric: So the engine is always the long pole in the teens.
Eric: With any launch vehicle development.
Eric: So.
Eric: And.
Eric: Yes look.
Eric: We learned a lot fortinet engine and getting it to sustained and we'll continue to learn more.
Eric: As we go through that.
Eric: <unk> qualification and hopeful programs.
Eric: But that the engine is really that the.
Eric: The primary drivers to the move and.
Eric: Welcome programs.
Eric: So obviously difficult to do.
Eric: To kind of plan.
Eric: Because I think a lot of people see the rocket.
Eric: But don't see all of the tremendous amount of infrastructure.
Eric: Round it.
Eric: Types to bring it.
Eric: Rocket two to fruition.
Peter Beck: So, you know, there's a lot going on in the program, as you saw in some of the materials there, but really, the engine is always, you know, and certainly for us, the driver for the program. Okay, and then, what would you say then, so the first, you know, we'll call it a test mission, right, or an R&D mission, could there be, if you do get it in the middle of the year, could you actually then, what do you think the timeline would be for you to start, and assuming that's a successful launch, what do you think the timeline could be, sort of, matching what you previously said Yeah, totally it is. We've played this game before, and the 1-3-5 is the right way to think about it.
Eric: There's a lot going on in the program as you saw in some of the.
Eric: Materials.
Eric: The engine is always.
Eric: And.
Eric: And certainly for US the driver for the program.
Speaker Change: Okay and then what.
Speaker Change: What would you say then because it was the first coal still at we'll call it a miss.
Speaker Change: <unk> right or an R&D mission.
Speaker Change: Could there be if you do get into the middle of the year could you actually then what do you think the timeline would be for you to start to assuming that a successful launch.
Speaker Change: What do you think the timeline could be sort of <unk>.
Speaker Change: Matching what you've previously said it maybe three following that R&D. The following year and then the.
Speaker Change: The other year is that still the right way of thinking about.
Speaker Change: Yes, yes totally it is.
Speaker Change: No.
Speaker Change: We played this game before and.
Speaker Change: The 135 is the right way to think of that and I think that certainly.
We're building capability and.
Speaker Change: And in some cases stock that's.
Speaker Change: That's exactly how we're planning it still.
Peter Beck: As we're building capability and, in some cases, stock, that's exactly how we're planning it still. Okay. And staying with Launch, but going back to Electron, you know, you had 22. It sounds like there are some changes in customers in the manifest, and that obviously is maybe impacting even this quarter. But we would have thought that if you had hit that 22, you would have had to do six in Q2, and, you know, for each quarter for the remainder of the year, given you did four, where do you think that number could wind up, and could you actually even hit 22, you know, for the year still?
Speaker Change: Okay, and staying with launch but going back to elektron.
Speaker Change: You had 22 it sounds like there's some changes in customers in the manifest in.
Speaker Change: And that obviously, maybe impacting even this quarter, but we would have thought that if you to hit that 22, you would have had to do six.
Speaker Change: In Q2.
Speaker Change: For each quarter for the remainder of the year given you did for <unk>.
Speaker Change: Where do you think that number could wind up and could you actually.
Speaker Change: 22 for the year still.
Peter Beck: Yeah, look, I mean, we had 22 missions booked this year, and as I mentioned on the call, that it's literally a game of manifests, whack-a-mole, and people move out. Very rarely do people move to the left, but that does occasionally happen.
Speaker Change: Yes look I mean, we had we had a solid 22 missions book this year and as I mentioned on the on.
Speaker Change: On the call that.
Speaker Change: It's literally a game of benefits with Ebola and people move out.
Speaker Change: Very really as people move it may move to the lift that that does occasionally happen. We have we have a bunch of folks that come in at the last minute.
Peter Beck: We have a bunch of, you know, folks that come in at the last minute. The biggest challenge for launch timelines is not so much vehicles. It's often licensing, and, you know, sometimes, you know, mission design and payload structure development. So, you know, although we're in May, certainly not waving the white flag, but we, you know, it is more as more time goes on. It gets more and more difficult to be able to do that and bring those missions in or add new missions to the list.
Speaker Change: The biggest challenge for the launch timelines is not so much vehicles.
Speaker Change: It's often licensing and sometimes.
Speaker Change: Mission design and pilot structure development so.
Speaker Change: Although we're in we're in May.
Speaker Change: Waving the white flag that.
Speaker Change: It is more and more time goes on it gets more and more difficult to be able to do that in and bring those missions and will add new emissions to the to the NFL.
Peter Beck: So, you know, we're just making sure that we're being transparent here, that, you know, it's going to be difficult to get those 22 missions off, purely for some of those reasons. So, where we actually end up at the end of the year is kind of in the hands of our customers in a lot of respects, but, you know, I'll make the point that, you know, this is just the reality of launch, and, you know, none of these missions go away.
So.
We are just making sure that we're being transparent to you that debt.
That it's going to be difficult.
Speaker Change: To get those 23 missions off.
Speaker Change: Purely punitive to some of those reasons. So we actually end up at the end of the year is kind of in the hands of their customers and lottery Stakes.
Speaker Change: But.
Speaker Change: I'll make the point that.
Speaker Change: This is just the reality of launch and.
Speaker Change: None of these missions go away as I, just sort of move around and some will move into other quarters and some will move into next year.
Peter Beck: They just sort of, you know, move around, and some will move into other quarters, and some will move into next year. Well, maybe just last, on the MDA contract, it seems like this program and revenue recognition is kicking in, maybe just helping us understand the revenue trajectory and contribution or maybe the weighting as we sort of progress through this year. Yeah, I can take that one, Pete.
Speaker Change: Okay great.
Speaker Change: Great.
And then maybe just lastly on the NBA contract. It seems like this program and revenue recognition is kicking in.
Speaker Change: Maybe just help us understand the revenue trajectory and contribution or maybe the weighting.
Speaker Change: As we sort of progress through this year.
Speaker Change: Okay.
Yes, I can take that one Pete.
Adam C. Spice: So, Erik, to your point, we are now in the meat of the REVREC underneath this program, and we expect to recognize the majority of the remaining contract value in 2024. And it will be, I would say, if you think about it, kind of peaking probably in the Q3 period, maybe shifts to Q4, and then we'll also start to see more meaningful contribution from the SDA contract that we announced early this year.
Pete: Yes to your point, we are in now the meat of the Rev. Rec underneath this program and we expect to recognize the majority of the remaining contract value in 2024.
Pete: It will be I would say kind of you think about it kind of peaking probably in the kind of been the Q3 period, maybe shifts to Q4 and then we'll also start to see more meaningful contribution from the SBA contract that we announced early this year. So I think we've kind of managed to two.
Adam C. Spice: So, I think we've kind of managed to have things land in such a way where you don't have kind of a risk of a big drop-off as the MDA contract kind of comes to conclusion, because we've got a contract that's more than three times larger kind of following it in the wings, if you will. So, I think that, again, our plan is to still see almost all of the remaining contract value recognized in the 2024 time period.
Pete: To have things land in such a way, where you don't have kind of a risk of a big drop off as the MDA contract. When it comes to conclusion, because we've got a contract that's more than three times larger kind of following it in the wings. If you will so I think.
Pete: I think that again, our plan is to still see the almost all of the remaining contract value.
Pete: <unk> recognized in the in the in the 2024 time period and there is a there is a an operating contract with stock that goes along with this NDA globalstar.
Adam C. Spice: I mean, there is an operating contract, a SOC, that goes along with this MDA Global Star agreement, but that's relatively small in the grand scheme of things with regard to the total contract value of roughly $150 million. Great, thanks. I'll jump back into the queue.
Pete: Agreement, but that's relatively small in the Grand scheme of things with regards to the total contract value of roughly $150 million.
Speaker Change: Great. Thanks, I'll jump back in the queue.
Speaker Change: Thanks, Eric.
Erik Peter Rasmussen: Thanks, Erik. And next up is Andres Sheppard, of Cantor Fitzgerald. Hey guys, good afternoon. Congratulations on the quarter and thanks for taking our questions. Just a quick one for Pete.
Speaker Change: And next step is Andre Shepherd Cantor Fitzgerald.
Andres Juan Sheppard: Hey, guys. Good afternoon, congratulations on the quarter and thanks for taking our questions.
Andres Juan Sheppard: A quick one for Pete.
Andres Juan Sheppard: You know, obviously, congratulations on the Arkenis engine build. You're now targeting the hot fire test, which will be a big, important milestone there. With now targeting the first launch no earlier than the middle of 2025, can you maybe help us, just remind us what the other big milestones between the hot-fire engine and the launch? Thank you, at wallops and in the test sites. Look for, you know, large stage tanks and things like that, and look for fire.
Andres Juan Sheppard: Obviously, congratulations on the on the <unk>.
Andres Juan Sheppard: Engine builds youre now targeting the hot fire tests, which will be a big important milestone there.
Andres Juan Sheppard: Now targeting first launch no earlier than the middle of 2025 can you just maybe help us just remind us what are the other big milestones between the heart of our engine.
Speaker Change: And the launch thank you.
Peter Beck: And those things remain kind of, you know, the same things that I'd be looking for. So, yeah, getting something, getting a pad built, you know, is a huge, huge program in its own right. Getting the engine test facility built is a huge program that's, you know, that's done. And then, like I said, now it's just working through the final development and iteration of Archimedes. And then I think the other thing I'd be tracking is making sure that, you know, we continue to build components for other launches. So, you know, not a one and done kind of a thing.
Speaker Change: Yes, sure things Andre so.
Speaker Change: We've always said look for look for concrete on the ground.
Speaker Change: At Wallops in the teeth thoughts.
Speaker Change: Look.
Speaker Change: Large stage tanks and things like that and.
Speaker Change: It looks it looks so far and those things those things remain remained kind of.
The same things that.
Speaker Change: I'll be looking for.
Speaker Change: Im sorry.
Speaker Change: Yes.
Speaker Change: Getting something getting getting a pad built.
Speaker Change: It is a huge huge program and the tie rod.
Speaker Change: He didn't ancient teeth facility built huge program.
Speaker Change: And then like I said now it's just working through the <unk>.
Speaker Change: The Archimedes funnel development and the duration.
Speaker Change: And then also.
Speaker Change: The other thing I'd be tracking is like.
Speaker Change: Making sure that we continue to build components.
Speaker Change: The launches.
Speaker Change: No not a one and done kind of a thing it's like making sure that there's a bunch of other engines coming off the production line and more tank construction things like that.
Peter Beck: It's like making sure that there are a bunch of other engines coming off the production line and more tanks and structures and things like that. So, you know, that's certainly something that we're focused on, making sure we keep the machine primed with all the components needed to not just get one launch away but stand up a commercial service. Got it. Okay, that's super helpful.
Speaker Change: Sooner or something that we have.
Speaker Change: We focused on is making sure we keep the keep fishing pond with all the components needed to not just get one launch way, but stand up a commercial service.
Speaker Change: Got it Okay. That's super helpful. I appreciate all that color and maybe just a quick follow up for Adam.
Andres Juan Sheppard: I appreciate all that color and maybe just a quick follow-up for Adam. Adam, just on the liquidity, sorry if I didn't hear this correctly, but does the 560, let's call it 565 million, include the net proceeds of the recent capital raise and separately for miners? Okay, thoughts. Okay, great. And then just remind us. So with that liquidity on hand, what is the run rate expected? How are you?
Speaker Change: And then just on the liquidity sorry, if I didn't hear this correctly, but.
Speaker Change: Does the 560, let's call it $5 $65 million.
Adam C. Spice: Does that include the net proceeds of the.
Adam C. Spice: The recent capital raise and separately if it does remind us.
Adam C. Spice: Okay. The thoughts okay, great and then just remind us so with liquidity on hand.
Adam C. Spice: What is the run rate expected or how are you thinking about that thank you.
Adam C. Spice: With a run rate or run way, I think that we raised a significant amount of capital, obviously, in this most recent transaction. And as we've stated, it was really all about, you know, providing inorganic growth optionality for us. And we do continue to see significant opportunities out there. I would say, you know, the deal pipeline that we're managing at this point is probably as full as it's been in the last couple of years, as far as potential actionable targets for us.
With a run run rate runway I think that the.
Adam C. Spice: We raised a significant amount of capital obviously in this most recent transaction and as we've stated it was really all about providing inorganic growth optionality for us.
Adam C. Spice: And we do continue to see significant opportunities out there I would say the the.
Adam C. Spice: The deal pipeline that we're that we're managing at this point is probably as full as it's been really the last couple of years as far as potential actionable targets for us. So I think the timing on raising that the funds.
Adam C. Spice: So I think the timing of raising that, you know, the funds was probably pretty ideal. You know, if you look at the capital required to complete Neutron, we didn't raise the money for that; we had liquidity for that.
Adam C. Spice: With pretty ideal.
Adam C. Spice: If you look at the the capital required to complete neutron we didnt, we didnt raise the money for that we have plenty of liquidity for that.
We're given where we're at in the program we feel like we are still very much on track.
Adam C. Spice: To the $250 million to $300 million total spend to get neutrolin to the pad and Fortunately for us not all of that spend has landed on our backs. We've had some some support from various partners that are brought capital to the table as well. So I think that again, we feel very good about our ability to scale our space systems business continues to scale electron.
Adam C. Spice: You know, given where we're at in the program, we feel like we're still very much on track to the 250 to $300 million total spend to get Neutron to the pad. And, fortunately for us, not all of that spend has landed on our backs; we've had some support from various partners that have brought capital to the table as well. So I think that, again, we feel very good about our ability to scale our space systems business, continue to scale Electron, and get Neutron to the pad with the capital we had pre-convertible.
Adam C. Spice: Neutral to the pad with the capital we had pre pre convertible.
Adam C. Spice: And we continue to look for options to deploy that convertible proceeds to inorganic means so yes I.
Adam C. Spice: I think that right now we feel really good about where we're at from a liquidity perspective, and we really don't see the need right now to think about.
Adam C. Spice: Anything beyond that.
Adam C. Spice: And we continue to look for options to deploy that convertible proceeds to inorganic means. So yeah, and I think that right now, we feel really good about where we are from a liquidity perspective. And we really don't see the need right now to think about, you know, anything beyond that.
Speaker Change: Got it that makes sense. So it sounds though that you are potentially interested in and continuing to grow inorganically and to that point, maybe you remain active in the M&A market.
Speaker Change: But with the liquidity on hand, that's certainly feasible at least so far so okay. That's helpful. Thanks again, guys. Congrats on the quarter I will pass it on thank you.
Andres Juan Sheppard: That makes sense. So it sounds like you are potentially interested in continuing to grow inorganically and, to that point, maybe remain active in the M&A market. But with that liquidity on hand, that's certainly feasible, so far. Thanks again, guys. Congratulations on the quarter. I'll pass it on.
Operator: Thank you. Thank you. The next question comes from Jason Gursky, Citi. Hey, good afternoon, guys. Hey, Pete, quick question for you on the engine development. What exactly caused you to need to push by six plus months?
Speaker Change: Next question.
Speaker Change: <unk> comes from Jason Gursky Citi.
Speaker Change: Sure.
Jason Michael Gursky: Hey, good afternoon guys.
Jason Michael Gursky: Quick question for you on the on the engine development.
Jason Michael Gursky: You mentioned you had some learnings there. Kind of share some of those details with us, or at least, you know, characterize, you know, whether they were issues with the design or manufacturability, just kind of give us a flavor of what went wrong. So, no major issues; we didn't run up against a wall and had to solve something majorly technical. But I mean, you know, kind of, as I mentioned on the call, the point here is not to just make fire.
Jason Michael Gursky: What exactly caused you to need to push by six plus months.
Jason Michael Gursky: You mentioned you had some learnings there maybe.
Jason Michael Gursky: Kind of share some of those details with us or at least characterize.
Jason Michael Gursky: Whether they were issues with the design issues with the manufacturer ability to just kind of give us a flavor of what.
Jason Michael Gursky: What went wrong here.
Speaker Change: So no no like major issue.
Speaker Change: We didn't run up against.
A wall and had to sell something major late technically.
Speaker Change: But I mean.
Speaker Change: Kind of as I mentioned on the call look the point here is not to just make the point here is to roll into production and.
Jason Michael Gursky: The point here is to, you know, roll into production, and, you know, there's a number of new processes and actually new materials that we developed for Archimedes, and you know, those were all intended to, you know, support production. At another time, we go into much more detail about some of the manufacturing methods we've used for, you know, combustion chambers and things like that, but really, you know, similar to Rutherford when we were the very first to 3D print a chamber there.
Speaker Change: The number of kind of new processes, and actually even new materials that we developed.
Speaker Change: For <unk> and.
Speaker Change: Those were all in.
Speaker Change: To support production.
Speaker Change: It is.
Speaker Change: Different time, we go into much more detail about some of the manufacturing methods we used for.
Speaker Change: Combustion chambers and things like that that really.
Similar to the other.
Speaker Change: The very first <unk> printer, China there.
Peter Beck: That was new technology that hadn't been done before, and we spent a lot of time because we thought that that was going to be a big payoff. So, not dissimilar to that, there are some manufacturing techniques that we've employed on Archimedes that, in the long term, are going to pay off. I mean, you know, you can't just pick up a pump volute and bolt it on the engine; you have to get a crane to put the pump volute on.
That was a new technology that hadn't been done before and it's been a lot of time, because we thought that that was going to be a big payoff. So not dissimilar to that there's some manufacturing techniques that we have employed on.
Speaker Change: <unk> and.
Speaker Change: In the long term again are going to pay off.
Speaker Change: Handsomely so.
Speaker Change: So a lot of time has been the net and then just quite frankly.
Speaker Change: They just the tons that are tight sustained up the factory in the machine that builds the machine.
Speaker Change: As probably.
Speaker Change: The biggest learning is we look we've done this enough. We now know that that is that is difficult and time consuming but an engine on the scale is.
Speaker Change: Certainly.
Speaker Change: An extra element to that.
Speaker Change: You can just pick up the.
Speaker Change: Our pump volume and bolt on the engineers to get a trying to put the portfolio at all.
Peter Beck: So, you know, it, you know, everything is just such a, such a larger scale that it makes it more difficult. So, yeah, not, not, not like one big staggering thing, just, just a whole bunch of stuff that just sort of adds up. Yeah, okay, that makes good sense. And then do you have a sense of, like, you build a buffer or contingency into it? The planning. So now you've got this, you know, mid-25 date out there.
Speaker Change: Everything is just is such a such a larger scale.
Speaker Change: It makes it more difficult so yes, no no.
Speaker Change: Not like one big staggering thing just just a whole bunch of stuff.
Speaker Change: That just sort of heads up.
Speaker Change: Okay that makes good sense.
Speaker Change: Do you have a sense of like you build buffer contingency into.
Speaker Change: The planning now you've got this mid 'twenty five date out there how much kind of contingency do you have in that.
Peter Beck: How much kind of contingency do you have? Well, as I mentioned before, we run, you know, green light schedules at Rocket Lab. So, in an engineering program, especially one of that scale, it's almost impossible to build sensible engineering buffering because you never really know, you know, the elements that are going to cause you problems. You've got some inklings, and you'll pad some areas, but, you know, if you walk into a room full of engineers and ask them to add buffer time to their schedule, then, you know, come back in 2040, that' So, we always run green light schedules.
Speaker Change: Well as I mentioned before is we run greenlight schedules that rocket labs.
Speaker Change: And an engineering program, especially one of that scale.
Speaker Change: It's almost impossible to build seasonable engineering buffer because you never really know.
Speaker Change: The elements and again of course your problem, you've got you've got some inklings and youll pay in some areas.
Speaker Change: If you walk into a room full of engineers and us to buffer any scheduled in.
Speaker Change: I'll come back in 2040.
Speaker Change: It's just kind of the way it rose so we always run greenlight schedules.
Peter Beck: So, you know, our schedules are always ambitious, and that's worked really well for us. I mean, if you look across the execution history, the time that it took us to put an electron on the pad was extraordinary. I mean, we started that program in 2014, had our first launch in 2017, and that was absolutely zero. So, you know, there are some challenges with a vehicle of this scale, but, you know, and I always caution everybody.
Our schedules are always ambitious.
Speaker Change: And.
Speaker Change: That's worked really well for us I mean, if you look across execution history. The time that it took us to put to put electron on the pad was extraordinary I mean, we started that program in 2014 that first launch in 2017 that woods from absolutely zero.
Speaker Change: So there are some challenges with the vehicles of the scale.
Speaker Change: And I always caution everybody.
Speaker Change: Over time that at the end of the day. This is a rocket program.
Speaker Change: And it's a very difficult thing to execute that's why there's only a few of us in the world that are pulled it off.
Speaker Change: Bob.
Speaker Change: The way we work.
Speaker Change: Why do we run as scheduled.
Speaker Change: Informed by experience and.
Speaker Change: What we've learned in the past but.
Speaker Change: We always.
Speaker Change: <unk> run them very aggressively and very ambitiously.
Speaker Change: Okay and then.
Peter Beck: And then maybe just a quick update on the demand for Neutron. And you talked earlier in the call about this 135 schedule from a launch cadence perspective. But maybe you can just kind of give us an update on, you know, over the last three months, what you've been hearing from potential customers there and whether, you know, 135 is just going to be scratching the surface or not. Give us an update on what your view of them is. Yeah, sure. Of all the things that I stay awake at night not tossing and turning about, the demand for electrons and neutrons, sorry, it's just, it's not one of them.
Speaker Change: Maybe just a quick update on the demand.
Speaker Change: For Neutrolin and you talked earlier on the call about this 135 schedule.
Speaker Change: From a from a.
Speaker Change: Launch cadence perspective.
Speaker Change: You can just kind of give us an update on over the last three months, what you've been hearing from potential customers there.
Speaker Change: Weather.
Speaker Change: 135 is just going to be scratching the surface or.
Speaker Change: Could you give us an update on what your view of the market is there.
Speaker Change: Yeah sure like of all the things that I stay awake at night, not tossing and turning about demand for electronics neutral I'm sorry, just.
Speaker Change: Not one of them.
Peter Beck: And, you know, we continue to have really good, robust discussions with our customers. But I think, as I've mentioned before, it's kind of, you show me yours, and I'll show you mine. And we maintain the fact that what we want to do is bring a launch vehicle to market that is ready to go and into a market that is in great need rather than, you know, do a whole bunch of early adopter pricing and, you know, and deals that don't have any teeth.
Speaker Change: And we continue to have really good robust discussions with their customers, but I think as I've mentioned before it's kind of you show me yours.
Speaker Change: I'll show you mind.
Speaker Change: And we maintain the fact that.
Speaker Change: What we want to do is bring a launch vehicle to market that is.
Speaker Change: That's ready to go into a market that is in great need.
Speaker Change: Rather than.
Speaker Change: The whole bunch of early adopter the pricing and.
Speaker Change: And deals that don't have any tape side.
Peter Beck: So it's fair to say that, you know, the interactions with customers over the last quarter have certainly strengthened, and, you know, we maintain that we're happy to entertain, you know, the normal kind of deals where it's 10% down, non-refundable, and, you know, the normal kind of LSAs. But the reality is that, you know, people want to see a real rocket before they make such, you know, large commitments. And the same goes for us.
Speaker Change: It's fair to say that.
The interactions with customers over the last quarter have certainly.
Speaker Change: Strengthened and.
Speaker Change: We maintain that hip to hip to entertain.
Speaker Change: Normal normal kind of deals.
Speaker Change: 10% down nonrefundable.
Speaker Change: In a normal kind of early size, but the reality is that.
Speaker Change: People want to see.
Speaker Change: <unk>.
Speaker Change: Our real rocker before they make such large commitments and.
Peter Beck: We want, you know, if we sell a whole bunch of launches because most customers aren't looking to buy one, they're looking to buy many, that we don't commit to a customer that ultimately doesn't turn up on the pad because, you know, with Electron, you can see the challenges that are also the reality of the space business. So we're looking at them, and they're looking at us. Right. Yeah, no. That makes good sense. I appreciate that. Then, Adam, just one quick one for you.
Speaker Change: Same goes for US we want to we want.
Speaker Change: We sell a whole bunch of launch.
Speaker Change: Because most customers looking to buy one they are looking to buy many that we don't we don't commit to a customer that some that ultimately doesn't turn out for them to pay it because with electron you can see the challenges that also causes.
Speaker Change: As a reality of the Spice business.
Speaker Change: So we're looking we're looking at them and they're looking at us.
Speaker Change: Right Yeah, no that makes good sense I appreciate that and then Adam just one quick one for you.
Jason Michael Gursky: The comment that you made on backlog burn over the next 12 months, 42.., and Michael R. C. R. B. R. E. C. H. E. A. O. S. D. O. S. J. H. E. O. S. J. H. E. O. S. J. H. E. O. S. J. H. And then, as maybe just a quick follow-on to this backlog question, what are your guys' expectations or goals here as far as book-to-bill is concerned? 24, and kind of going forward in any given year.
Speaker Change: The comment that you made on backlog burn over the next 12 months, 42% I think was the number that you threw out there was that a reference to all of the backlog or was that just.
Adam C. Spice: So the launch business and then maybe.
Speaker Change: Maybe just a quick follow on.
This backlog question what are your guys expectations our goal here as far as book to Bill is concerned.
Speaker Change: For 2024, and kind of going forward in any given year I know these awards can be pretty lumpy.
Adam C. Spice: I know these words can be pretty lumpy, and you've built up some nice backlog here, but investors are certainly going to be focused on book-to-bill going forward. So just kind of update us on what the overall pipeline looks like and whether we can, year in, year out, off this new base that you've got here at book-to-bill. Yeah, yeah, Jason.
Speaker Change: Built up some nice backlog here, but.
Speaker Change: Investors are certainly going to be focused on book to bill going forward. So just kind of update us on what the overall pipeline looks like and whether we can year in year out.
Speaker Change: Off this new base that you've got here at book to bills that exceed one thanks.
Adam C. Spice: So yeah, I should have been more clear. So the 42% applies to all the backlog, so it's not specific to launch or space systems. So it's a total business. And as far as the book to bill target, no, you're right, of course, you know, everybody, we need to see a book to bill greater than one, just given kind of what our growth aspirations are. I think that, you know, when you see that we've got, you know, backlog, you know, over a billion dollars against, you know, a street, you know, consensus number, that's obviously significantly lower than that, we have, we have quite a bit of ability to grow significantly based off of just the backlog that we have in place. But we continue to chase big deals.
Speaker Change: Yes, yes, sorry, Jason So, yes, I should've been more clear so the 42% if once all the backlog so it's not specific to launch.
Speaker Change: For space systems, It's a total business and as far as the book to Bill target. You are right of course, you know everybody we need to see a book to bill greater than one just given kind of what our growth aspirations are I think that when you when you see that we've got.
Speaker Change: Backlog over $1 billion against the street consensus number that's obviously significantly lower than that.
Adam C. Spice: I think that's the one thing that's really evolved over the course of the last 12 months, I think, you know, largely, you know, not not, I would say not disconnected at all from what we've seen, like, for example, landing that large SDA contract is that, kind of, as we start to get more and more of these, you know, super sophisticated programs, one, we seem to attract more of those kind of opportunities as well So I think, you know, you'll continue to see us chasing big deals on the space system side.
Speaker Change: Got.
Speaker Change: A bit of ability to grow significantly based off of just the backlog that we have in place.
Speaker Change: We continue to chase Big deals I think thats. The one thing that has really evolved over the course of the last 12 months, but I think largely.
Speaker Change: Not not.
Speaker Change: No I would say not disconnect at all from what we've seen like for example lending that that large SBA contract is that kind of as we start to get more and more of these super sophisticated programs. One we seem to attract more of those kind of opportunities as well. So I think we will.
Speaker Change: Youll continue to see us chasing big deals in the space systems side, I mean, the component business continues to grow nicely and thats, great because of the margin profile that some of those businesses have by selling components into the merchant market.
Adam C. Spice: I mean, the component business continues to grow nicely. And that's great because of the margin profile that some of those businesses have by selling components into the merchant market. But I think that what we see are large program opportunities to continue to build the backlog, not too dissimilar to what happened with the SDA beta contract. But also, as Neutron becomes closer and closer to its first launch, that's a very big opportunity.
Speaker Change: But I think that what we what we see are large program opportunities to continue to build the backlog not too dissimilar to what.
Speaker Change: It happened with the SBA beta contract, but also as neutron becomes closer and closer to its first launch, but that's where you know thats a very chunky opportunity as we kind of as we sign msas for that vehicle. Those are all needle moving given the average selling price that we expect to realize from from a neutral launch so I think the.
Adam C. Spice: As we sign LSAs for that vehicle, those are all needle moving, given the average selling price that we expect to realize from a Neutron launch. So I think you'll see, and we talked about this last year as we progressed through 2023, that when people kind of looked and said, hey, it looks like your backlog growth has stalled a bit. And what does that mean for future growth? We said, look, you have to be patient because the kind of opportunities that we're chasing are just of such scale and complexity that they don't come together in a predictable kind of programmatic way. They come in fits and starts.
Speaker Change: You will see and we talked about this last year as we progress through 2023 is that when people kind of looked and said Hey, you know it looks like your backlog growth has stalled a bit and what does that mean for future growth. We said look you have to be patient because the kinds of opportunities that we're chasing are just of such scale and complexity that they don't come together on a predictable kind of.
Speaker Change: Programmatic way they've become in fits and starts and I think we saw that again late last year with the SBA contract coming into focus and then I believe youll see similar things as far as program size, and then again across not only space systems, but also including Neutrolin.
Adam C. Spice: And I think we saw that again late last year with the SDA contract coming into focus. And then I believe you'll see similar things as far as program size and then, again, across not only space systems but also including Neutron. So I think that you're right. You know, it's right for people to expect a book to build on more than one. I have no concern, similar to Pete, that of the things that I stay up at night worrying about, that's also not one of them.
Speaker Change: I think that Youre right.
Speaker Change: It is right for people to expect the book to Bill greater than one I have no no concern similar to Pete.
Speaker Change: <unk> of the things that I stay up at night worrying about that's also not one of them.
Adam C. Spice: Awesome. Thanks, Kevin. I appreciate it. The next question is from Matt Akers, Wells Fargo. Hey, guys, good afternoon.
Speaker Change: Awesome, Thanks, Kevin I appreciate it.
Yeah.
Speaker Change: The next question is from Matt Akers Wells Fargo.
Matthew Carl Akers: Thanks for the question. Thanks for I guess you talked a little bit about reusability and putting the rocket back into the process. Just curious how you think about that ramping up if that launch is successful, how fast? Costs, and benefits of doing that on a wider scale.
Matthew Carl Akers: Hey, guys good afternoon, and thanks for the question.
Matthew Carl Akers: Thanks for I guess, you talked a little bit about.
Matthew Carl Akers: Reusability and putting the.
Matthew Carl Akers: The rocket back into the process just curious how you think about that ramping up if that launch is successful how fast you could start to see some of the cost.
Benefits of doing that.
Matthew Carl Akers: Wider scale.
Peter Beck: Yeah, thanks, Matt. So, I mean, our focus this year has just been on production, and although the reusability program for Electron has made some good strides and milestones, really, you know, just rolling the vehicles off the end of the production line has been our focus. Reusable vehicles, you know, they're still, you know, developing aspects of them that make them kind of distracting to production. But, you know, like I say, the vehicle looks great, and, you know, this is really the first one that's rolling back into production.
Speaker Change: Yeah. Thanks, Matt So I mean, our focus this year has just been on production and although the reusability programs for for Elektron is make good good construction milestones really just just rolling the vehicles off the production line that's been in cycles.
Speaker Change: Reasonable vehicles.
Speaker Change: So.
Speaker Change: Have have developments in the <unk>.
Speaker Change: Speaks to them to make some kind of distracting to production.
Yes.
Speaker Change: Like I say, the vehicle looks looks great and.
Speaker Change: This is really the first one the rolling back into production.
Peter Beck: If this goes well, then, you know, it becomes much more of a standardized thing. We can kind of roll this into being, you know, a much more usual part of what you see with Electron. Okay, great. Thanks. And I guess just one more, just thoughts on the latest on Solero margins and how you're making progress on, I think, the 30% margin target. I can take that one.
Speaker Change: It goes well then.
Speaker Change: It becomes a much more of a standardized thing we can we can kind of roll this into being a much more much more usual part of.
Speaker Change: What you see with electron launches.
Speaker Change: Okay, great. Thanks.
Speaker Change: I guess, just one more just thoughts on latest unsold narrow margins and how you're making progress on I think in the 30% margin target there.
Speaker Change: Yes, I can take that so far that yeah, yeah, yeah, So Matt on the Solera margins again, that's something that.
Adam C. Spice: I'll go for that. Yeah, yeah, yeah. Yep. Yeah. So, Matt, on the Solera margins, again, that's something that, you know, we continue to work through the challenges of some pre-acquisition, well, really one pre-acquisition onerous contract, which still has a bit of a ways to go on that. So, kind of what we look at is if you kind of exclude that thing, which, you know, unfortunately, we weren't able to affect; we had to kind of The bookings that are coming in now are very strong.
Speaker Change: We continue to work through the challenges of some pre acquisition well really one pre acquisition.
Speaker Change: Onerous contract.
Matthew Carl Akers: Which still has a bit of a ways to go on that so kind of what we look to is if you kind of exclude that thing, which unfortunately, we weren't able to effect.
Matthew Carl Akers: Kind of absorbed that upon adoption of the company.
Matthew Carl Akers: The bookings that are coming in now are very strong. So if we look at additions to backlog for the <unk> business.
Adam C. Spice: So if we look at additions to backlog for the Solero business, it would – I'd have to strain my memory to think of one that was coming in recently that was below our target. Most of the business that we're booking for that is above that 30% gross margin target. And, you know, part of that is enabled by the fact that, again, we've been a little bit more, I would say, a little bit more hard-nosed on customer negotiations and holding prices.
Matthew Carl Akers: It would have to strained my memory to think of one that was coming in recently that was below our target in most of the business that we're that we're booking for that is above that 30% gross margin target and part of that is enabled by the fact that again, we've been a little bit.
Matthew Carl Akers: More I would say a little bit more hard nosed on customer negotiations and holdings holding price.
Adam C. Spice: I think when the other things that factor into it are some of the investments that we're making in the business as far as putting new reactors in place in Albuquerque that are more efficient and that are delivering, you know, better production efficiency. I think the business has always been very good at controlling, you know, their overhead costs and, you know, it's a very tightly run business.
Matthew Carl Akers: I think when.
Matthew Carl Akers: The other things that factor into some of the investments that we're making in the business as far as putting new reactors in place in Albuquerque that are more that are delivering better production efficiency.
Matthew Carl Akers: I think the business has always been very good at controlling our overhead costs.
Matthew Carl Akers: It's a very tightly run business. So it's really all about kind of building the backlog in such a way where we have confidence we can deliver that kind of at the margins. I think there is theres, probably more upside than downside to that longer term target of 30% gross margin.
Adam C. Spice: So it's really all about kind of building the backlog in such a way that we have confidence we can deliver that kind of margin. I think there's probably more upside than downside to that longer-term target of 30% gross margin. It just takes a little while to get there.
Matthew Carl Akers: It just takes a little while to get there when we acquired the business. We said within about two years of acquisition as when we expected to kind of be able to.
Adam C. Spice: You know, when we acquired the business, we said within about two years of acquisition when we expected to kind of be able to have a line of sight to those gross margin targets of no more than 30%. And I think what we underestimated was just the challenge of kind of getting that one at least through the end of 2024 and probably a little bit beyond that to get that out of the mix. DeSilva, Thank you.
Have line of sight to those those gross margin targets of north of 30% and I think what we underestimated was just the challenge in kind of getting that one onerous contract behind us and we still have a bit of that.
Matthew Carl Akers: That water to carry.
But again I think I feel very good about kind of everything else that we've been booking and where the backlog stands right now I think it's probably going to be.
Matthew Carl Akers: Got.
Matthew Carl Akers: At least through the end of 2024, and probably a little bit beyond that to get that out of the mix.
Matthew Carl Akers: Yes.
Speaker Change: That's helpful. Thank you.
Speaker Change: Okay.
Michael David Leshock: The next question comes from Michael Leshock, KeyBank Capital Market. Hey, good afternoon. I wanted to follow up on the backlog question. Very strong right now. Just wondering how high you can take your backlog before, you know, maybe having to walk away from it. Or, in the same vein, do you expect to get more pricing power on future contract wins as compared to your backlog? Yeah, I'll take a look at the first one. OK
The next question comes from Michael Lasalle Keybanc capital market.
Michael David Leshock: Hey, good afternoon, I wanted to follow up on the backlog question.
Michael David Leshock: Strong right now.
Michael David Leshock: Just wondering how high you can take your backlog before maybe having to walk away from business.
Michael David Leshock: Or in the same vein do you expect to get more pricing power on future contract wins as your backlog grows.
Speaker Change: Yeah, Okay sorry.
Peter Beck: Oh, you go, Adam. I'll follow up. I was going to say, I don't think that, you know, we're in a position where we necessarily have a problem because we have, you know, kind of too much backlog relative to our ability to produce that backlog. I think we are seeing some natural pricing support come on the Electron side just because of the fact that, you know, a lot of the competition that was really aspirational has not materialized.
Speaker Change: You go ahead.
Speaker Change: Okay.
All right.
I was going to say I don't think that.
Speaker Change: It doesn't feel like we're in a we're in a position where we we necessarily have got a problem because we have.
Speaker Change: Kind of too much backlog relative to our ability to produce to that to that backlog.
Speaker Change: I think we are seeing some natural pricing support come on the Elektron side, just because of the fact that there are a lot of the competition that were really aspirational have not materialized.
Peter Beck: And so I think that, you know, that's certainly helping on the pricing front because I think now there's more rationalization going on with, you can have more rational discussions because, again, you don't have people who don't know how to run a rocket business going out and trying to sell rockets and putting kind of phantom pressure on pricing. So that has really started to evaporate. I think that when you look at some of the things that we're doing, you know, to put more capacity in place with places like Solero, I think that's helping us kind of remove any kind of ceiling, if you will, and how big the business can grow to. So I feel pretty good about that.
Speaker Change: I think that.
Speaker Change: That's certainly helping on the pricing front, because I think now there's more rationalization going on with you could have more rational discussions because again you don't have people, who don't know how to run a rocket business going im trying to sell rockets and putting kind of phantom pressure on pricing. So that has really started to evaporate.
Speaker Change: I think that.
Speaker Change: That when you look at some of the things that we're doing to put more capacity in place with places like Valero I think thats, helping us kind of remove any of those kind of head.
Speaker Change: Feelings if you will on how big that business can grow too so I feel pretty good about that and I think all of that is supportive of again margin expansion gross margin expansion as we move forward, we've seen that in the business over the course of the last year.
Adam C. Spice: And I think all that is supportive of, again, margin expansion, gross margin expansion as we move forward. We've seen that in the business over the course of the last year. But we do have some interesting mixes, you know, mixed challenges when it comes to kind of just the overall gross margin profile when you have, you know, some lower margin overall, kind of call it photon or satellite manufacturing skewing.
Speaker Change: But we do have some interesting mixes mixed challenges when it comes to kind of just the overall gross margin profile. When you have some lower margin overall call. It photon our satellite manufacturing.
Adam C. Spice: So, for example, you know, we have more of a mix coming from that lower margin space systems manufacturing part of the business. But what's helpful about that business, though, is even though it may not have the same gross margin profile as the higher gross margin component, merchant component businesses, they can have a lot of operating leverage because we're able to basically reuse a lot of the IP that we've created on prior missions. And so we now have a pretty fullsome portfolio of IP.
Speaker Change: Skewing. So for example, we have more of the mix coming from that lower margin space systems manufacturing.
Speaker Change: Part of the business, but what's helpful about that business, though is even though it may not have the same gross margin profile as the higher gross margin component merchant component businesses.
Speaker Change: Can I have a lot of operating leverage to them, because we're able to basically reuse a lot of the IP that we've created on prior missions and so we now have a pretty a pretty fulsome portfolio of IP and we've invested in the manufacturing capabilities at the point now where incremental programs that may not have the greatest growth gross margin perspective can dropped quite a bit to the bottom line.
Adam C. Spice: And we've invested in the manufacturing capabilities to the point now where incremental programs that may not have, you know, the greatest gross margins can drop quite a bit to the bottom line because of what we've already put in place from an investment perspective. So that's kind of how I look at, kind of, the overall, kind of, margin shaping over the course of the next year or so. You know, I think I think you said it well, Adam.
Speaker Change: Because of what we've already put in place from an investment perspective, So that's kind of how I look at kind of the overall kind of margin shaping over the course of the next year or so, but maybe you can jump in.
Peter Beck: The only thing I'd add is that we are, you know, Rocket Lab is known for, and our reputation is execution. So we're always kind of, as Adam pointed out, balancing our growth with our ability to execute, because the last thing we want to do is fall behind on that. So, you know, when we look at programs and opportunities, we are selective. And because, as Adam mentioned before, the kind of programs we're looking for and spending our time on are very large ones.
Speaker Change: I think you said it well Adam the only thing I'd add there is that we are.
Speaker Change: Rocket labs, now and our reputation is execution.
Speaker Change: We're always kind of as Adam pointed out balancing.
Speaker Change: With our ability to execute because the last thing we want to do is fully behind on that so when we look at programs and opportunities we are selective and because as I mentioned before is the key.
Speaker Change: Honda programs are looking for.
Speaker Change: It's being a time on a very large ones.
Peter Beck: So, you know, we have to be, we have to be kind of always diligent to make sure we don't take on programs that absorb a lot of resources but, you know, don't have a lot of scale.
Speaker Change: We have to be we have to be kind of diligent to make sure. We don't take on programs that absorb a lot of resource but.
Speaker Change: Don't have a lot of scale, so we continually Jack.
Speaker Change: <unk> checking those those opportunities against how we want to grow the business.
Adam C. Spice: So we're continually, you know, juggling, juggling those opportunities and how we want to grow the business. Yeah, and Michael, I would further add that a little bit by saying, you know, Pete and I were talking the other day about the fact that it feels like, you know, the demand signal is stronger now than anytime I can really remember it in the business. You'd think that it maybe would start to moderate a bit because we now have a billion dollar plus backlog and the business is kind of hitting a new scale with, you know, with our Q2 guiding, you know, guidance above $100 billion per quarter.
Speaker Change: Yeah, and Michael I would further add to that a little bit Saint Pete and I were talking the other day a effect that it feels like the demand signal is stronger now than any time I can really remember it in the business.
Speaker Change: I think that it may be would start to moderate a bit because we've now got a $1 billion plus backlog in that business as kind of hitting a new scale with no with our Q2 guidance guide above a $100 billion per quarter, but it feels like to a great extent it feels like we're drinking from a fire hydrant here and Theres a lot of opportunities that we're having to kind of sift through.
Adam C. Spice: But it feels like, you know, to a great extent, it feels like we're drinking from a fire hydrant here, and there are a lot of opportunities that we're having to kind of sift through, but there is a very strong demand signal out there as far as the kind of programs that we're being asked to look at. Yeah, absolutely. I appreciate that.
Speaker Change: But there is there's a very strong demand signal out there as far as the kind of programs that were being <unk>.
Speaker Change: We're being asked to look at.
Speaker Change: Okay.
Michael David Leshock: And then on the launch side, specifically for Haste launches, just wondering if you see opportunities there for more pricing? I think if you look at the customers' alternatives, they could be significantly higher costs versus Rocket Lab's offering. So is there a strategy there to increase pricing or keep it stable where it's at today? Any update on the Haste side would be great.
Yes, absolutely I appreciate that.
And then on the launch side, specifically for haste launches just wondering if you see opportunities there for more pricing I think if you look at.
Speaker Change: Customers alternatives, they could be significantly higher costs versus rocket last offering.
Is there a strategy there to increase pricing or keep it stable where it's at today any update on the he side would be great. Thank you.
Peter Beck: Yeah, I mean, we see Haste as a really fantastic opportunity for Electron, not only just on price but also on scale. And I guess the biggest opportunity for us there from a revenue perspective is the additional services from the launch vehicle as well. So, yep, as you point out, Michael, the alternatives are significantly higher, but the reason why there's so few launches and so little advancement is because of that. So by coming into the market with a disruptively low price point, we're seeing just such growth and kind of revitalization of that market that I think, ultimately, that's the best approach for creating the most amount of value out of it, is to stimulate it rather than Thank you, guys. And the next question is from Suji DeSilva of MKM. Hi Peter. Hi Adam.
Speaker Change: Yes, I mean, we see highest does is it really fantastic opportunity for for Elektron.
Speaker Change: Not only just on.
Speaker Change: Prospect, but also on scale.
And.
Speaker Change: The biggest opportunity for us.
Speaker Change: From a revenue perspective is the additional services from the old vehicles as well so yes.
Speaker Change: Yes.
Speaker Change: As you as you point out Michael that the alternatives are significantly higher but.
Speaker Change: The reason why there's so few.
Speaker Change: So a few launches and so I'd say its a little advancement is because of that sorry by coming into the market with a disruptive price point.
Speaker Change: We are seeing just such a.
Speaker Change: Our growth in kind of rebound to finalization of that market.
Speaker Change: <unk>.
Speaker Change: I think ultimately.
Speaker Change: So based approach for the creating the most amount of value out of it.
Speaker Change: To stimulate it rather than South Dakota.
Speaker Change: Got it thank you guys.
Speaker Change: Thank you.
Speaker Change: And the next question is from <unk> Silva.
Robin can.
Suji DeSilva: Just a little bit, maybe following the last question, the Victus Hayes missions. You talked about an end-to-end service. I'm trying to understand if there are incremental products or services you're offering there that can be productized and offered more broadly, if there's a financial uplift from those incremental elements you're characterizing as part of the end-to-end service. Yeah, yeah, for sure. I guess the biggest one is, you know, rendezvous and proximity operations. I mean, that is a very rare capability and, you know, something you need to dock spacecraft with the ISS, for example.
Robin Silva: Hi, Peter Hi, Adam.
Silva: A little bit maybe following the last question the Victor phase.
Silva: Emissions.
Silva: Talked about being end to end service I'm trying to understand if there is incremental products or services, you're offering there that it can be product ties and offered more broadly if there is a financial uplift of those incremental elements youre characterizing it as part of the end to end service offerings.
Speaker Change: Yes, yes.
Speaker Change: Sure.
Speaker Change: I guess the biggest one is rendezvous and proximity operations I mean that is.
Speaker Change: That is very Ria capability and something you.
Speaker Change: Need to dock space craft with IOC for example.
Speaker Change: Kind of along with that strategy of any taking on work that we think is strategic to us that that is that's certainly a good example of that.
Speaker Change: Right.
Speaker Change: Is it between service.
Speaker Change: A spacecraft leveraging the foundation designs one of their space craft already.
Speaker Change: It certainly does and it does make it.
Speaker Change: Possible to be more product ties and.
We see we see this is the direction that.
Speaker Change: Not just the U S government, but the world is heading towards right.
Peter Beck: So, you know, kind of aligned with our strategy of only taking on work that we think is strategic to us. That is certainly a good example of that. You know, on-demand, rapid call-up, and whoever has the best solution there is in a good position because often, you know, responsive launch is talked about. Well, I mean, that's useless unless you've got something to stick on top of it.
Speaker Change: On demand rapid call up.
Speaker Change: <unk>.
Speaker Change: The best solution there is.
Speaker Change: As in a good position because often.
Speaker Change: Responsive launches talked about well I mean, that's useless unless you've got something to stick on top of it. So this is the.
Speaker Change: This is really the first demonstration of responsive space, where it's all combined right down to the data handling and operations of the spacecraft.
Adam C. Spice: So this is really the, you know, the first demonstration of responsive space where, you know, it's all combined, you know, right down to the data handling and operations. Yeah, I think, Suji, I think along that line, I think one of the, we talked about the financial benefits to the model, I think, you know, when you're able to couple the launch with the spacecraft manufacturer, you're increasing your odds of, or your P win, you know, for these type of programs when you can go with a turnkey solution.
Speaker Change: Yes, I think and I think <unk> I think I think along that line I think one of the if you're talking about.
Speaker Change: The benefits to the model I think when Youre able to couple the launch with the space spacecraft manufacturer I mean, you just youre, increasing your odds of or your P win for for these type of programs. When you can go with a turnkey solution because.
Adam C. Spice: Because I think right now what we're seeing is that what the customer probably fears the most, it's not necessarily that they fear, you know, higher pricing or whatever; they fear delay, right? Because I think the supply chain within, you know, the space market, particularly new space, has not yet gotten to the point where it can deliver, you know, scalable solutions, you know, on time. So I think that, you know, when we can go with a turnkey, say, look, you know, we have the launch capacity, we have the ability to design and manufacture spacecraft on a predictable, you know, timeline, because we're so vertically integrated, it just kind of pushes the narrative forward and ultimately allows you to have just a higher overall market share and market, you know, kind of share capture approach.
Speaker Change: Because I think right now what we're seeing is that the customer probably fears the most it's not necessarily they fear like.
Speaker Change: Higher pricing or wherever they fear delay right because I think theres just the supply chain within the space, Mark, particularly new space has not yet gotten to the point, where we could deliver.
Speaker Change: Scalable solutions on on time, so I think that when we can go with a turnkey say look we have we have the launch capacity, we have the ability to design a spacecraft manufacture spacecraft get a predictable timeline because we're so vertically integrated.
Speaker Change: Just kind of pushes the narrative forward and ultimately allows you to have just a higher overall market share and market share capture.
Adam C. Spice: So I think this is really kind of a sign of things to come. This is where we really wanted to take the business, being able to do these end-to-end solutions for the customers.
Speaker Change: So I think this is really kind of a more.
Speaker Change: More of a sign of things to come this is where we really wanted to take the business was being able to do these end to end solutions for the customers and ultimately with that will come just better scaling and more predictable scaling of the business across both segments.
Suji DeSilva: And ultimately, with that, will come just better scaling and more predictable scaling of the business across both segments. So we think this is a huge kind of validation of that strategy being realized now. And, of course, with an incredibly sophisticated customer as well.
Speaker Change: We think this is a huge kind of validation of that strategy being realized now and of course with an incredibly sophisticated customer as well.
Peter Beck: Great. Okay, then my second question is, you listed out the subcontractors on the FDA contract in the press release. Just trying to understand now. You know, I know you've been targeting M&A to outsource. But is there sort of an equilibrium balancing point where, as a prime contractor, you'll leverage external subcontracting and components versus wanting to keep bringing things in house? How do you balance that going forward? I'm Aggie Grove.
Speaker Change: Sure Great. Okay, and then my second question is you listed out the subcontractors on the FDA contract in the press release I'm, just trying to understand now I know you've been targeting M&A to in source.
Speaker Change: But is there sort of an equilibrium balancing point, whereas a prime contractor you will leverage external subcontracting and components versus wanting to keep bringing things in house, how do you how do you balance that going forward as you grow.
Adam C. Spice: Yeah, it's really two elements. I mean, we don't vertically integrate because we think it's some kind of religion. We do it for either one or two reasons. First, we think we can create more value for the company. Or two, we need to control it because suppliers just can't deliver it, either at the scale or the timelines that we require. So, you know, as we kind of execute as a prime, then as a Prime, then the subcontractors that deliver on schedule, you know, on budget, there's kind of, to your point, there's no need to kind of religiously suck the capabilities in.
Speaker Change: Yes, it's really it's really two elements I mean, we don't vertically integrate because we think it's some kind of religion, we do it for you the one or two reasons. One we think we can create more value for the company or two.
Speaker Change: We need to control because suppliers just can't deliver at either the sky or the timelines that we.
Speaker Change: You require.
Speaker Change: As we as we kind of execute on our prime as a prime than the subcontractors that deliver on schedule.
On budget.
Speaker Change: This kind of to your point there is no need to condos religiously.
Speaker Change: <unk> capabilities in.
Speaker Change: It's just.
Speaker Change: It seems to be a relatively reiterating in the space industry.
Speaker Change: We ended up more often than not having to having.
Speaker Change: Moving to Orange, then then rely on those parties.
Adam C. Spice: It's just that that seems to be a relatively rare thing in the space industry, so we end up more often than not having to, you know, having to own it rather than rely on those parties. Appreciate the balance dams. Next up, we'll hear from Kaivan Rumor, T.D. Cowling.
Speaker Change: Okay I appreciate the balanced answer thanks.
Kevin: Next up we'll hear from Kevin rumor TD Cowen.
Cai von Rumohr: Yes, thanks so much. It looks like, feels like your schedule has definitely slipped. And I mean, you talk of a manifest of 22, but you have the comment in there that you look for a record year in launches. I mean, you only did 10 last year. That would say 11 would get you home.
Yes, thanks, so much so.
Kevin Cowen: It looks like feels like your schedule is definitely slipped in your talk of a manifest of 'twenty two but.
Kevin Cowen: You have the comment in there that you look for a record year and launches I mean, they only did 10 last year that would say 11 would get you home can you give us your best guess as to a realistic range of number of electron launches we could see this year.
Peter Beck: Can you give us, you know, your best guess as to a realistic range of the number of electron launches we could see this year? I think if we launched 11, that would not be a record year in our minds; that would be a massive disappointment. And look, we can provide a number, but it's just super hard to kind of predict given, you know, as the customers move around. But, you know, I think it's fairly fair to say that at this point, you know, we've struggled to achieve 22, but, you know, but we have a line of sight for, you know, probably a couple less than that. Yeah, okay, and Cai, I would...
Kevin Cowen: Well I think I think if we launched to live in that would be that would not be a record year in our mindset.
Speaker Change: That's a disappointment.
And look.
Speaker Change: Look it's just we can with provided number but it is just super hard to kind of.
Speaker Change: Given given.
Speaker Change: Customers move around.
Speaker Change: But I think it's fairly fair to say that at this point will.
Speaker Change: Struggled to achieve 22.
Speaker Change:
Speaker Change: We have we have line of sight for probably a couple of less than that.
Speaker Change: Yes, okay.
Adam C. Spice: I would add something to that. One of the benefits of diversification that we've been driving so hard towards, and now getting, you know, more than 70% of our revenue coming from space systems, is that, you know, we no longer, it's no longer like a push out of a launch threatens our entire kind of year's annual operating plan, right? So we believe that we've got strength in other parts of the business, particularly on the space system side, where, you know, if we can't deliver those 22 launches, it doesn't really put at risk our ability to deliver a very solid year that's still on target with our internal plan for what we think we can deliver as far as revenue and growth are concerned.
Speaker Change: Yes.
I think I would add something to that I mean, one of the one of the benefits of diversification that we've been driving so hard towards and now getting more than 70% of our revenue coming from space systems is that we no longer it's no longer like a push out of a launch threatens our entire kind of years annual operating plan right. So we believe that we've got.
Speaker Change: Strength in other parts of the business, particularly on the space systems side, where if we can't deliver those 22 launches it doesn't really put at risk our ability to deliver a very solid year, that's still on target with our internal plan for what we think we can we can deliver as far as revenue and growth. So.
Adam C. Spice: So, you know, as much as we are very, very, very reluctant to wave the white flag on anything here, but to the extent that things move outside of our control, we do believe that we've got strength in the business more broadly that would make up for any potential shortfall that we'd see from a launch or two that move out. So if you look at the rest of your competitors, I mean, particularly on the satellite side, RTX basically said they were throwing in the towel on being a space prime. LHX is there.
Speaker Change: As you know we are very very very reluctant to wave the white flag on anything here, but to the extent that things move outside of our control. We do we do believe that we've got strength in the business more broadly that would make up for any potential shortfall that we would see from a launch or two that move out.
Speaker Change: Got it got it so if you look at the rest of your competitors I mean, particularly on the satellite side.
Speaker Change: <unk> basically said, they're throwing in the towel on being a space Prime La checks is there they bought satellites from Mo They basically have been late with problems.
Cai von Rumohr: They bought satellites from Moog, but they have basically been late with problems. Terran is basically on ultra-life support.
Peter Beck: It sounds like your competitors are really not doing particularly well. Any thoughts about, you know, A, you know, it sounds like things are actually a little bit more chaotic than they've been. Maybe that's an overread. Do you see that happening?
Speaker Change: <unk> is basically.
Speaker Change: Altra life support.
Speaker Change: It sounds like your competitors are really not doing particularly well.
Any thoughts about.
Speaker Change: A.
Speaker Change: Sounds like things are actually a little bit more chaotic and they've been maybe thats an over read it.
Cai von Rumohr: And is there any opportunity to just take a radically different approach and basically raise your prices 25%? Because the problem I can see with getting your backlog is you don't have the opportunity to kind of do a more profitable launch for someone who might be willing to pay for it. Well, Cai, I would say our business model and our strategy is working exactly to your point. You know, the vertical integration and the power that brings to bring these platforms to market at a price point, and, as Adam mentioned, the schedule is disruptive, and that's what you're seeing.
Speaker Change: Do you see that happening.
Speaker Change: Is there any opportunity to just take a.
Speaker Change: Radically different approach and basically.
Speaker Change: Raise your prices, 25% because the problem I can see getting your backlog is you don't have the opportunity to kind of do a more profitable launch for someone who might be willing to pay for it.
Okay.
Speaker Change: Well I would I.
Speaker Change: I would say our business model and our strategy is working exactly to your point.
The vertical integration and the power that it brings.
Speaker Change: To bring these platforms to market at a price point and.
Speaker Change: And as I had mentioned that schedule is disruptive and Thats, what youre, saying and then.
Cai von Rumohr: And then, you know, from a launch perspective, I think, as Adam pointed out, there has been a kind of a weaning of who's real and who's not. And, you know, there'll be opportunities for us there, I'm sure. Great. And so, I mean, you talk about demand being better, but it doesn't really sound like pricing is a whole lot better. Is that a misread on my part? Well, I think it's delicate.
Speaker Change: From from.
Speaker Change: Our launch perspective.
Speaker Change: I think as Adam pointed out there has been.
Speaker Change: I kind of waning.
Speaker Change: Waning of.
Speaker Change: Who is real and who is not.
Speaker Change: And to be opportunities for us there I'm sure.
Great and so I mean.
Speaker Change: Can you talk about demand being better, but it doesn't really sound like pricing is a whole lot better is that I misread on my part.
Speaker Change: Well I think like a delicate.
Speaker Change: Gotcha.
Peter Beck: I was just going to say, I think it's a delicate balance, Cai, because, you know, the point about the Haste missions before is you want to stimulate the market. And you know, if you just go in and all of a sudden whack a big price increase there, then, you know, you can potentially damage those markets that you're trying to grow. Because some of them are new, and some of them are fragile.
Oh I was just kind of said I think it's a delicate balance cod because.
Speaker Change: So to the point about the highest missions before as you wanted to stimulate the market.
Speaker Change: And.
If you just go in and.
Speaker Change: And just all of a sudden whack a big price increase there.
Speaker Change: You could potentially damage of those markets that you are trying to we're trying to grow it because some of them are new.
Speaker Change: And some of them are fragile. So I think you have to be very very balanced and careful about how your ddos sorts of things.
Cai von Rumohr: So I think you have to be very, very balanced and careful about how you do those things. Thank you very much. I would add to that too, Cai, on the pricing side of things. If we look at what's happened with electron pricing, you know, it's, it's, it's gone nothing but up for us in the last several years, right? So, if you recall, back a few years ago, we were talking about launch prices in the six and a half to seven, now seven to seven and a half, and now this most recent quarter is 8.2 million.
Yes, thank you very much.
Cai von Rumohr: And I think you're going to continue to see, you know, that type of that type of trajectory on on pricing, as competition again, as kind of people fail to execute, and we bring an increasingly scarce, you know, product to market. And the mix of that, of that electron businesses, as was, you know, I think was being asked earlier regards to the impact of things like Haste on the overall mix. But I also think that, that when you look at our photon pricing, if you look at the contracts that we're competing on the contracts that we're winning, we're not we're not winning on the lowest price, it's quite the opposite, like we can oftentimes, you know, price at a premium to our competition, again, because of the fact that we're bringing that level of vertical integration, which translates into schedule certainty, and performance certainty, right.
Speaker Change: I would add to that too on the pricing side of things. If we look at what's happened with electron pricing.
It's got nothing but up for us in the last several years right. So if you recall back a few years ago, we were talking about launch prices in the six five to seven announced seven to seven five and now in this most recent quarter was $8 2 million and I think youre going to continue to see that type of.
Speaker Change: That type of trajectory on pricing as competition again is kind of people fail to execute and we bring an increasingly scarce.
Speaker Change: Product to market.
Speaker Change: And the mix of that of that Elektron business as was I think it was being asked earlier with regards to the impact of things like haste.
Speaker Change: On the overall mix, but I also think that when you look at our photon pricing. If you look at the contracts that we're competing on the contracts that we're winning we're not we're not winning on the lowest price. It's quite the opposite like we can oftentimes priced at a premium to our competition again because of the fact that we're bringing that level of vertical integration.
Cai von Rumohr: So I think that's really what is kind of playing into the strategy. So I think we're absolutely seeing pricing benefits that are accruing to us as a result of the strategy, not only for diversification but actually the fact that we're executing, that we're vertically integrated, that we represent, strangely enough, a lower risk option for customers, despite the fact that we're a very new generation, new space company versus some of the legacy players that you mentioned earlier in your commentary. Thank you very much.
Speaker Change: Which translates into schedule certainty and performance certainty right. So I think that's really what we're just kind of playing into the strategy. So I think we're absolutely seeing.
Speaker Change: Pricing benefits that are accruing to us as a result of the strategy not only for of diversification, but actually the fact that we're executing that we're vertically integrated that we represent strangely enough a lower risk option for customers. Despite the fact that we're a very new generation new space company versus some of the legacy players that you mentioned earlier in your commentary.
Speaker Change: Okay.
Speaker Change: Thank you very much.
Xin Yu: Next up is Edison U, Deutsche Bank. Hey, thanks for squeezing in. Just a couple of quick ones.
Speaker Change: The next step is Edison <unk> Deutsche Bank.
Speaker Change: Hey, Thanks for squeezing me in just a couple of quick ones first on a neutron did the Baltimore bridge incident impact the infrastructure timeline at all.
Peter Beck: First, on Neutron, did the Baltimore Bridge incident impact the infrastructure timeline at all? Uh, not, not, not that we can see at this point in time. Okay. Then on the financials, I think the R&D was a bit low in the first quarter. Is that just a timing thing?
Speaker Change: Yes.
Speaker Change: No not not that we can say at this point in time.
Xin Yu: Should we expect that to really step up in 2Q? Yeah, absolutely. It's a timing issue.
Okay.
Speaker Change: On the on the financials I think the R&D was was a bit low in the first quarter.
Speaker Change: Is that just a timing thing should we expect that to really step up in.
Speaker Change: Thank you.
Adam C. Spice: I think like, you know, it seems like all things in our business have elements of lumpiness, and certainly spend timing is one of those things. So, you know, the nature of, particularly, Neutron with how, you know, things do come in kind of, you know, fits and starts; we have large, you know, for example, prototyping expenses that you may, you know, they may end up slipping out a little bit relative to maybe where you thought they were going to be, but there will be volatility.
Speaker Change: Yes, and yes, absolutely, it's a timing issue I think like.
Speaker Change: It seems like all things in.
Speaker Change: Our business there is elements of Lumpiness and certainly spend timing is one of those things so.
Speaker Change: The nature of particularly on neutron with how.
Adam C. Spice: And I think you would absolutely expect that, you know, over the next few quarters, we'll continue to see a march up in R&D, primarily driven by, if not entirely driven by, neutrons, kind of first flight. And just last one, on the FDA contribution, do we have any sense of what that could be?
Speaker Change: With how things do come in kind of fits and starts we have large for example, prototyping expenses that you that you may.
Speaker Change: Slipping out a little bit relative to maybe where you thought they're going to be but there will be volatility and I think you would absolutely expect that over the next few quarters will continue to see a march up in R&D, primarily driven by.
Speaker Change: Not entirely driven by neutron.
Speaker Change: Can you kind of first flight.
Speaker Change: Understood.
Speaker Change: And just last one on the I guess, the SDA contribution do we have any sense what that could be.
Xin Yu: This year, next year, I know you said you would get some small amount, but just wondering if there's anything a bit more discreet you can maybe provide on that on that curve, on the launch curve. Yeah, so we're, you know, we're continuing to do our work. I mean, the program is certainly progressing. And with that progress, and, you know, we talked about identifying, you know, subcontractors to work with us on that program. As we kind of brought on more people, you know, we've gotten more color as far as kind of their timing and their ability to deliver against, you know, their milestones.
Speaker Change: This year next year I know you said you would get some small amount, but just wondering if theres anything a bit more.
Speaker Change: <unk> you can maybe provide on that on that curve on the launch curve.
Speaker Change: Yeah.
Adam C. Spice: So we definitely, you know, are starting to bake some of that into our operating plan for the remainder of this year. You know, earlier, we said that we couldn't, we weren't in a position to really say, so the amount that was in the Q1 results was actually very, very small. I would call that immaterial.
Speaker Change: Yes so.
Speaker Change: We're continuing to do our work and the program is certainly progressing and what that progression.
Speaker Change: We talked about identifying subcontractors to work with us on that program as we kind of brought more people formula under the tent, we've got more color as far as kind of their timing and their ability to deliver against their milestones. So we definitely are starting to bake some of that into our operating plan for the remainder of this year.
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Speaker Change: Earlier, we said that we Couldnt, we were in a position to really say so.
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Speaker Change: <unk>.
Speaker Change: Let's say the implant that was in the Q1 results was actually relatively very very small I would call that immaterial.
Xin Yu: It's starting to become more material in the numbers that you're seeing in Q2 that we guided towards, and you'll continue to see kind of building on that as we progress through 2024. And I would say that, in part, and that is also allowing us to kind of overcome, I'd say, a little bit of the earlier weakness that we talked about as far as progress being made against the MDA contract with regard to REVRAC. Some of that MDA REVRAC is being made up for from initial contributions from the FDA contract. But I think when Erik asked the question earlier about,
Speaker Change: It is starting to become more material in the numbers that youre seeing in Q2 that we guided towards and Youll continue to see kind of building on that as we progress through 2024.
Speaker Change: And I would say that.
Speaker Change: And part of that is also allowing us to kind of.
Speaker Change: <unk> I would say a little bit of the earlier weakness that we talked about as far as progress being made against the MDA contract with regards to Rev. Rec some of that.
Speaker Change: MDA Rev Rec.
Speaker Change: Being made up four from initial contributions from the SBA contract.
Speaker Change: But I think Eric asked the question earlier about.
Adam C. Spice: Kind of what the timing of REVREC looked like for the remainder of the MDA Global Star contract. And that is, you know, just given the delivery schedules, that will, again, continue to build momentum, probably peak sometime in the Q3 time period, maybe it's Q4. But ultimately, as that's kind of peaking out, we've got this building of SDA coming in behind it to prevent a real kind of drop-off, if you will, when that program comes to a conclusion.
Kind of what the timing of Rev Rec and looked like for the remainder of the MDA Globalstar contract and that is given just given the delivery schedules that will again continue to build momentum probably peak sometime in the Q3 time period, maybe maybe it's Q4.
Speaker Change: But ultimately as that is kind of peaking out we've got this building of SBA coming in behind it to prevent a real kind of drop off if you will when that program comes to conclusion.
Adam C. Spice: So I don't think we're quite ready yet to give kind of a full-year contribution from the SDA program because, again, it's pretty early in its life. But it's, again, part of the reason why we're confident that even if there was, you know, a launch or two that moves out of 2024 from that 22-launch manifest, we have the ability to not really feel that from an overall top-line growth
Speaker Change: I don't think were quite ready yet to give kind of full year contribution from the SBA program because again, it's pretty early in its life.
Speaker Change: But again part of the reason why we're confident that even if there was.
Speaker Change: Launch or two that moves out of 2024 from that 22 launch manifest that we have the ability to do not really feel that from an overall top line growth perspective.
Xin Yu: So we hope to be able to give you more color in a little bit, but right now, it's a little too early to provide a lot of color on SDA's contribution. Great, thank you. And at this time, there are no further questions. I'll hand things back to our speakers for any additional or closing remarks. Okay, I think that wraps up today's presentation. Thank you everyone for joining us on the call. Rocket Lab will be participating in these up-and-coming conferences and look forward to the opportunity to share more exciting news and updates with you again. So, thanks again. Once again, everyone, that does conclude today's conference. Thank you all for your participation. You may now disconnect.
Speaker Change: We hope to be able to give you more color and a little bit but right now we just it's a little too early to provide a lot of color on FCA contribution.
Speaker Change: Sure.
Speaker Change: Great. Thank you.
Speaker Change: And at this time there are no further questions I'll hand things back to our speakers for any additional or closing remarks.
Speaker Change: Yes.
Speaker Change: Yes, I think that wraps up todays presentation. Thank you everyone for joining us on the call rocket level, we participating in these up and coming conferences and look forward to the opportunity to share more exciting news and updates.
Speaker Change: So thanks again.
Speaker Change: Once again, everyone that does conclude today's conference. Thank you all for your participation you may now disconnect.
Speaker Change: Yes.