Q3 2024 Rocket Lab USA Inc Earnings Call

[music].

Operator: Thank you for standing by.

Thank you for standing by my name is Barry and I'll be your conference operator today.

Bailey: My name is Bailey, and I will be your conference operator today.

Bailey: At this time, I would like to welcome everyone to the Rocket Lab 3rd Quarter 2024 Fiscal Results Update and Conference Call. All lines have been placed on mute to prevent any background noise.

At this time I would like to welcome everyone to the rocket lab third quarter 2024, physical results update and conference call.

All lines have been placed on mute to prevent any background noise.

Bailey: After the speaker's remarks, there will be a question and answer session. If you would like to ask a question during this time, simply press star followed by the number one on your telephone. If you would like to withdraw your question, again, press the star and 1.

After the Speakers' remarks, there'll be a question and answer session.

If you would like to ask a question. During this time simply press star followed by the number one on your telephone keypad.

If you would like to withdraw your question again press the star and one.

Murielle Baker: I would now like to turn the call over to Marielle Baker, Senior Communications Manager at Rocket Lab.

Speaker Change: I would now like to turn the call over to Mario Baker Senior Communications manager at Rocket Lab, you may begin.

Peter Beck: You may begin. Thank you. Hello, and welcome to today's conference call to discuss Rocket Lab's third quarter 2024 financial results.

Mario Baker: Thank you Hello, and welcome to today's conference call to discuss rocket Labs third quarter 2024 financial results.

Peter Beck: Now, 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 Security and Exchange Commission. Such statements are based upon information available to the company as of the day hereof and are subject to change for future developments.

Mario Baker: 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.

Mario Baker: 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 security and Exchange Commission.

Mario Baker: Statements are based upon information available to the company as of the date hereof and are subject to change for future developments.

Peter Beck: Except as required by law, the company does not undertake any obligation to update these statements.

Mario Baker: As required by law the company does not undertake any obligation to update these statements.

Peter Beck: Our remarks and press release today also contain non-GAAP 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-GAAP financial measures to the comparable financial measures calculated in accordance with GAAP.

Mario Baker: Our remarks and press release today also contains non-GAAP financial measures within the meaning of regulation G and acted by the SEC <unk>.

Mario Baker: Included in such release and supplemental materials, a reconciliations of these historical non-GAAP financial measures to the comparable financial measures calculated in accordance with GAAP.

Peter Beck: Now, this call is also being webcast with a supporting presentation and a replay and copy of the presentation will be available on our website.

Mario Baker: This call is also being webcast with a supporting presentation and a replay and copy of the presentation will be available on our website.

Peter Beck: Our speakers today are Rocket Lab founder and Chief Executive Officer Sir Peter Beck as well as Chief Financial Officer Adam Spice. They will be discussing key business highlights including updates on our launch and space systems programs. And we will discuss the financial highlights at Outlook before we finish by taking questions.

Speaker Change: All speakers today are real cut lab's, founder and Chief Executive Officer, Sue piece of it as well as Chief Financial Officer, Adam Spice that'll be discussing key business highlights, including updates on our launch and space systems programs, and we will discuss the financial highlights and outlook before we finish by taking questions. So with that let me.

Peter Beck: So with that, let me turn the call over to Sir Peter. Thanks Marielle, and thanks for everybody joining us today. Before we take you through the achievements of the quarter, I'd like to remind everybody what every launch, every development milestone, every spacecraft we build is working. Rocket Lab is an end-to-end space company. We provide the ride to space with our launch vehicles, and we build the spacecraft to do the work in orbit. This ultimately gives us the keys to space, unlocking the largest market of all space applications. With phase one and two, the rockets and the spacecraft now well-established, we're well positioned to create our own constellations to provide in-demand...

Speaker Change: Turn the call over to Peter.

Peter: Thanks, Mario and thanks for everybody joining us today before we take you through the achievements for the quarter I'd like to remind everybody. What every launch redevelopment mall star Nabers Vice craft rebuild is working towards.

Peter: Rocket lab is an easy to read and Spice company, we provide the rod the spice, where they launch vehicles and then we build the space craft to do the work in orbit.

Peter: This ultimately gives us the keys to spice unlocking the largest marketable space applications.

Peter: With excuse me with with Phase one and two the rockets in the space craft now well established where we're well positioned to greater uncle installations to provide in demand services and capabilities in the space.

Peter Beck: In Q3, we strengthened this position with a few key achievements, including the signing of a multi-launch deal for Neutron with a commercial Constellation operator. And we've been very considerate in the way that we've approached Neutron's first commercial contracts, and I look forward to sharing more on this later in the month. On the small rocket front, we successfully launched multiple electron missions in Q3 and signed $55 million in new electron rockets. A testament to strong and growing demand for dedicated small launch and acknowledgement of... As for space systems, I'll be sharing updates on various programs, but one key callout is the Mars...

Peter: Q3, we strengthened this position with a few key achievements, including the signing of a multi launch deal for neutral with the commercial constellation operator.

Peter: And we've been very considered in the way that we've approached neutral first commercial contracts and I'll look forward to sharing more on this later in the call.

Peter: On the small rocket front, we successfully launched multiple electron machines in Q3 and signed $55 million and you alone.

Speaker Change: Excuse me, new Elektron, which contracts.

Speaker Change: Excuse me.

Speaker Change: I went to a strong and growing demand for dedicated small launch an acknowledgment of electrons position as the spy systems I'll be sharing updates on various programs, but one key call out is the MA sample returned contract study anybody who is familiar with simple return understands NASA believes the current mission architecture to costs.

Peter Beck: Anybody who's familiar with Mars Sample Return understands NASA believes their current mission architecture is too costly, will take too long, so they've requested innovative new proposals to deliver samples sooner and bring the cost down. We are delighted to be selected by NASA to put forward a study into how Rocket Lab would achieve this. And I'm very excited to share in more details about our proposal. And of course, to deliver space systems at scale, you need to be able to pump out constellations of spacecraft quickly and efficiently. We're proud to share that our spacecraft production line in Long Beach is churning out spacecraft at a faster rate than ever, which builds underway for a backlog of...

Speaker Change: We'll take too long.

The requested innovative new proposals to deliver samples sooner and bring the costs down.

Speaker Change: We are delighted to be selected by NASA to put forth study into how rocket lab would achieve this and I'm very excited to share more details about our proposal to support the mission today end.

Speaker Change: And of course to deliver space systems at scale, you need to be able to pump out constellations of spacecraft quickly and cost effectively I'm proud to share that the spice crop production on in long Beach is joining us base craft at a faster rate than ever which builds with builds underway for a backlog of more than 40 specs grabbed.

Peter Beck: All of these achievements and capabilities feed into our final strategic pillar, being able to build and launch and operate.

Speaker Change: All of these achievements and capabilities feed into our final strategic pillar being able to build and own and operate our own constellations.

Peter Beck: I'll address it right up front, which is that we're not ready to reveal details on what this constellation or application may be, but I think it's important to understand the strong foundation we've built up across launch and space systems to enable us to do that.

Speaker Change: Is it right upfront that right up front, which is that we're not ready to reveal details on what this constellation of web application may be but.

Speaker Change: But I think it's important to understand the strong foundation, we've built up across lunch and spy systems to enable it in due course.

Peter Beck: Okay, on to some quick financial highlights for Q3. We delivered another really strong quarter with positive metrics across... Our third quarter revenue topped out at $105 million, within a million dollars of our record revenue achieved last quarter. That's a 55% revenue increase year-on-year, while our backlog has grown 80% year-on-year to sit at $1.05 billion. I'll let Adam dig into the numbers properly, but I think it's important to note up front that once again, we're delivering on the old... adage and mantra of, we do what we say we do. across both engineering and technical achievements, but as well as...

Speaker Change: Okay excuse me onto some quick financial highlights for Q3, we delivered another really strong quarter with positive metrics across the business.

Speaker Change: Third quarter revenue topped out at 105 million within $1 million of at record revenue achieved last quarter. That's a 55% revenue increase year on year, while our backlog has grown 8% year on year to sit at 1.5 billion at the end of September.

Speaker Change: Let him dig into the numbers properly, but I think it's important to note upfront that once again that we are delivering on the old.

Speaker Change: Our rocket engine meant venture of we do what we say we were gonna do across both engineering and technical achievements, but as well as financial goals.

Peter Beck: Okay, on to Electron Up. We've reached 12 missions for the year, and counting, setting a new annual launch record for Electron. Only two rockets globally launch more than Electron, that's the Falcon 9 and the China... making Electron one of the most globally significant rockets. Launch cadence is one thing, but doing so in a financially sustainable way is quite another. We've sold $55 million in new Electron launch contracts in Q3, but what's really important to note about is the significant increase in average sales price. This is now 60% higher than when Electron first started flying. We've brought a service to market that works, that customers love.

Speaker Change: Okay on to electron updates.

Speaker Change: We've reached 12 missions for the year and counting sitting in your annual infrequent for Elektron 92 rockets globally launched more than electron that's the Falcon nine in the Chinese low much making electron one of the most globally significant rock rockets flying today.

Speaker Change: <unk> guidance is one thing, but doing so in a financially sustainable way is quite another we've sold 55 million of new electoral mood contracts in Q3, but what's really important to note about about is the significant increase in average sales price. This is now 60% higher than when electron first started flying.

Speaker Change: We bought a service to market that works that customer's needs neat and we've proven we can scale. The cost just reflects how ria and sought after this capability is.

Peter Beck: need, and we've proven we can scale. The cost just reflects how rare and sought after. Just to help visualize it, here's a snapshot of the global launch cadence this year across all vehicles. The Electron is right up.

Speaker Change: Just to help visualize it here's a snapshot of the global launch cadence this year across all vehicles and you can see elektron was brought up in the top ranking and number three spot.

Peter Beck: Now, onto electron law. We had three missions for three separate commercial constellation operators. Each of the missions are part of a multi-launch contract. Electron provides a vital source of energy. installation operators who want to be in control of their orbits, launch schedule and in a way that's just not possible on large... We had another quick turnaround between Missions 2, launching electrons back to back from Launch Complex 1. Speaking of fast turnarounds, after Q3 we completed another launch and record. We launched a mission for a confidential constellation operator just 10 weeks after... This kind of speed is pretty well unheard of in the space industry, it's typical to take a year to go from contract to orbit, and of course that causes bottlenecks and limited launch opportunities for satellites.

Speaker Change: Now onto electron launches for the quarter, we had three missions for three separate commercial constellation operators. During Q3 each of the missions are part of multimodal contracts with returning customers electron provides a vital sought after service for small sat constellation operators, who want to be in control of their all but small unscheduled mentioned parameters in a way that's just not.

Speaker Change: On large raunchy ambitions.

We had another quick turnaround between missions to launching electrons back to back from launch completes one within just eight days of each other.

Speaker Change: Speaking of fast turnarounds. After Q3, we completed another record launch in record time, we launched emission for a confidential constellation operator, just 10 weeks after signing contract. This kind of speed is pretty well unheard of in this industry. It's typical to take a year to go from contract to all but of course that cause bottlenecks in limited launch opportunities set.

Speaker Change: Got a lot of operators.

Peter Beck: Electron has plugged this gap, getting a satellite operation on orbit faster so they can test sooner, begin generating revenue for constellations earlier, or collect urgent data from space on... discussed at length previously that launch is a lump It's common for customers to request delays and new launch dates, causing a constant manifest to shuffle. This results in an ever-changing, fluid launch schedule, but because we have a factory of rockets and three launch sites standing by to support, we can slot new customers in as these gaps are open. Now, I'm sure the software team will laugh at me for this, but in reference to ultimate flexibility, it's a feature and not a bug of the Electrolux.

Speaker Change: Elektron has plagued us GAAP getting a satellite operation on orbit faster so they can see.

Speaker Change: T C technologies sooner begin generating revenue for consternation constellation's earlier, all clicked urgent data from space on on demand.

Speaker Change: I've discussed at length previously that lunch is a lumpy business, it's common for customers to create delays in United States goes into a constant manifest shuffled.

Speaker Change: It wasn't causing constant constant manifests shuffles. This results in an ever changing and fluid won't scheduled but because we have a factory of rockets and three launch lot standing bought to support we can slot new customers and as these gaps open up quickly and I'm sure. The software team a laugh at me for this but in reference to ultimate flexibility. It's a feature not a bag.

Speaker Change: The Elektron business model, especially as we clicked up to 90% of the contract value for every mission before launch date with revenue recognized on launch.

Peter Beck: Especially as we collect up to 90% of the contract value for every mission. With revenue recognised on launch, so if a launch slips a month here or there, the overall impact...

Speaker Change: The launch slips a month here or there are the impact of the business is pretty well negligible.

Peter Beck: Right, moving on from Small Launch onto Neutron Upgrade. Okay, so we've signed a launch agreement with the Constellation Operator, which encompasses two very early launches. Thanks to our proven track record with Electron, the space industry has come to expect high-performing, reliable launch vehicles. Because of this, we have worked with a lot of different customers for Neutron. But we're in the fortunate position to be able to choose who flies first and have made a careful and considerate decision. We see this agreement as an important opportunity that signifies the beginning of a productive collaboration that could see Neutron deploy.

Speaker Change: Moving on from small launch onto neutron updates.

Speaker Change: Like I said, we've started to launch agreement with the constellation operetta, which encompasses two very early launches on neutral. Thanks.

Thanks to a proven track record with our elektron the space industry has come to expect high performing reliable launch vehicles from rocket lab because of this we have worked with a lot of different customers for neutral in the first few emissions, but where we are in the fortunate position to be able to choose who flies fast and have made a careful and considered considered strategic decisions around.

Speaker Change: And that we.

Speaker Change: We see this agreement as an important opportunity that signifies the beginning of a productive collaboration that could see neutral and deploy this particular customers and talk on installation.

Peter Beck: Customers and Talks. Most confident in these two launches will be the first of many. Now, we've really been methodical about when we open the bookings on...

Speaker Change: I'm confident in these two launches will be the first of many more to come from this particular customer.

Speaker Change: Now, we've really been methodical about when we opened the bookings on neutral to it's it's all too common in the space industry for aspiring launch providers Tucson, nonbinding agreements and sell missions at a loss to devote to fund to fund development.

Peter Beck: It's all too common in the space industry for aspiring launch providers to sign non-binding agreements and sell missions at a loss to funding. We know that it's better to bring a real rocket to the market first and to command a premium. As we draw closer to Neutron's debut next year, conversations with customers and demands for launch slots have started. As everyone will expect, I'm very happy to say that the contract value, this particular contract value is in family with our standards. One of the programs that Neutron has been ideally suited for from day one was, when we conceived the vehicle, was the U.S.'s Space Force National Security Space Launch Program.

Speaker Change: That its better to bring a real rocket to the market first and to command a premium price as we draw closer to neutral on its debut next year conversations with customers and demands from launch slots have started to mature as everyone would expect I'm very happy to say that the contract value. This particular contract values and family with their standard nutrient pricing.

Speaker Change: The launches.

Speaker Change: Oh, one of the programs that Neutrolin has been ideally suited for from day. One was when we can save the vehicle was the U S is spy sports National Security space launch program or any CSL.

Peter Beck: Space Force recently opened up the RFPs for the program, program's next Lane 1 on-ramp, which will see us compete to qualify for a share of up to $5.6 billion. There is an unnerving bottleneck in the medium-launch market currently, creating a risk for national... Bringing new launch capability to NSSL is critical to increasing the DoD's diversity of opportunities, assuring access to space for national security, and with our proven track record, market-leading design and established infrastructure, Neutron is a pretty key partner. We're well past the design phase, now moving into neutral build. Keeping our schedule for the first launch next year puts us inside the 2025 year-end time frame sought by the space...

Speaker Change: The space Force recently opened up the Rfps for the program programs Nicks LN, one on ramp which will see us compete to qualify for a share of up to $5 $6 billion of national security launches.

There isn't an unnerving bottleneck in the medium launch market currently creating a risk for national security, bringing new launch capability to Unisys L. As a critical to increasing the dod's diversity of opportunities assuring access.

Speaker Change: To Spice finished from security and with a proven track record market, leading design and established infrastructure. Each one is a pretty compelling choice.

Speaker Change: We're well past the design phase now moving into neutral to build and test campaigns keeping is scheduled for the first launch next year puts us inside the 2025 year aimed timeframe sort by the space forces for the next on ramp.

Peter Beck: We bought a new vehicle to market before with Electron, which is a reliably delivered national security payload. payloads to orbit. And with Electron, we reached 50 launches faster than any other commercially developed So, we know how to do this, and we know...

Speaker Change: We bought a new vehicle to market before with electron which has reliably delivered national security payloads.

Speaker Change: That's a little bit for several years and with the electron reached 50 launches faster than any other commercially developed rocket in history.

Speaker Change: We know how to do this and we know how to do this well.

Peter Beck: Common interest in Neutron's development is ramping up in other areas. This quarter we're awarded an $8 million study contract. Forces Research Lab to showcase our digital engineering prowess with... This contract has a tie-in with NSSL. program as well, where it includes the option to expand our digital engineering processes and further build. that built the digital engineering framework. Phase 3 Lane The contract is a bit of a win-win when it comes... It not only allows the U.S. Air Force to collaborate with industry leaders like the Archimedes to help develop and modernize the U.S. processes and capabilities, but it also supports smooth integration of new.

Government interest in neutral and the development is ramping up in other areas too. This quarter. We were awarded an $8 million study contract with the U S. Air Force's Research lab showcase digital digital engineering prowess with Archimedes.

Speaker Change: This contract has a tie in with any T cell with Uniti cell program as well, where it includes the option to expand their digital engineering processes and further build on it but build the digital engineering framework that you use yourself phase III LN one launch providers.

Speaker Change: This contract was a bit of a win win when it comes to defense industry partnerships that not only allows the U S Air force to collaborate with industry leaders like the Archimedes team to help develop and modernize the U S Air Force's engineering processes and capabilities, but it also supports the smooth integration of neutral and into the unit T cell program to more efficiently and quickly provide for some.

Peter Beck: Program, to more efficiently and quickly provide.

Speaker Change: One of the nation's most critical missions.

Peter Beck: Elsewhere across the DoD, the US Transcom has extended our 2022... that allows us to continue to explore point-to-point cargo. We've recently received confirmation from the U.S. Space Force's Space Systems Command that Neutron can now...

Speaker Change: Elsewhere across the D O D. U S trains Colm has extended their 2022 research agreement that allows us to continue to explore a point to point cargo delivery with neutral.

Speaker Change: We've recently received confirmation from the U S. Based forces spy systems command that Neutrolin can now compete for emissions under always before and the $1 billion independent deliberately delivery indefinite quantity contract that were on ramp to a few years back.

Operator: OSP4 and their billion-dollar indefinite delivery Thank you for watching.

Peter Beck: We'll see you next time. Alright, moving on now to Neutron's development progress and some of the technical milestones we've had. We're well past the design phase now and deep into the qualification. of a large scale. Starting with the reusable captive fairing for Neutron, or as we like to call it, the hungry hippo, these fairing halves remain attached to Neutron's first stage for the full flight, simply opening to release the payload in the second stage, before closing back and returning back to Earth with the rest of stage one. These faring halves will soon be going through their mechanical testing before assembly and integration onto the large scale.

Speaker Change: Alright, moving onto now to neutral and the development progress and some of the technical milestones we've hit this quarter.

Speaker Change: We're well past the design phase now and deep into the qualification and testing of a large scale flight hardware.

Speaker Change: Starting with the reusable kick kept are fearing for neutron, whereas we like to call. It the hungry hippos. These varying homes remain attached to neutral in the first stage for the first for the full flight simply opening to release, the payload and the second stage before closing back and returning back to Earth with the rest of stage one really for another flight.

Speaker Change: It's very hard to soon be going through the mechanical testing before assembly and integration onto the large scale composite panels and it's even made a walk barrels that make up the first stage.

Peter Beck: Anita Wad, Beryl Another big milestone was the recent successful test of... We conducted its first wet dress rehearsal in a flight configuration, going through the pressures, mechanical loads, processes and procedures that would be seen in flight operations. Part of the test campaign included on-board avionics taking command and control of the stage. Pressurization, Fill, Drain and Coal Flow Doc. This has been one of the biggest integrated milestones yet, proving out not only the flight hardware, but also the supporting infrastructure. We have flight hardware in production for all other neutron composite structures, including the barrels and domes for the vehicle's first stage propellant.

Speaker Change: Another big milestone was the recent successful test of the second stage, we conducted its first witness rehearsal and a flight configuration going through the pushes mechanical loads processes and procedures that would be seen in flight operations part of the test campaign included onboard avionics, taking command and control of the stage and demonstrating pressurized I shouldn't.

Speaker Change: Phil drawing and cold float off our operation.

Speaker Change: It has been one of the biggest integrated master G. It proving out not only the flight hardware, but also the supporting infrastructure to operate the vehicle.

Speaker Change: We have flight hardware and production for all other neutral and composite structures, including the barrels in dorms for the vehicles first stage propellant take all of the internal talent management devices. The avionics are on track for integration of the stage one tank before it goes through the same set of piston empties campaign as he can stages system.

Peter Beck: All of the internal propellant management devices, the avionics, are on track for integration to the Stage 1 tank before it goes through the same set of...

Peter Beck: Now on to Archimedes. We've talked about it before, our approach before with Archimedes and how we were strategic in taking... to bring a flight ready in. That means we could hit the ground running to qualify, rather than mess around with early prototypes needing lots of design tweaks and changes. and manufacturing that would alter. We've seen that strategy really pay off in these past few months, our engine test cadence We've doubled over the quarter and we've bought multiple... The thing to point out here too is that a rocket engine program is never a one-and-done scenario. Archimedes engines will go through short burst tests, full duration hot fires, and tweaks all the way up.

Speaker Change: Now onto Archimedes, we've talked about it before our approach before without committees and how we were strategic in taking a time to bring a flight ready engine to the test and that means we could hit the ground running to qualify it rather than miss around with early prototypes needing lots lots of design tweaks and changes and and and manufacturing that would ultimately.

Speaker Change: At least slowed the program down.

Speaker Change: The thing that strategy really pay off in these past few months our engine two's cadence in Mississippi has doubled over the quarter and we bought multiple agents to the Tis stand.

Speaker Change: I pointed out here too is that rocket engine program is never a one and done scenario acumen. These engines will go through short bursts tasteful duration havas and tweaks all the way out to neutral in the first flight.

Peter Beck: So far though, we have continued to see strong performance from the Archimedes and we're able to iterate updates rapidly, which is really, really what we want to be able to do. All that to say is that the cornerstone of any rocket program depends on how quickly and reliably you can scale engine production in parallel. I know I've said it before but it bears repeating because building your first rocket engine is hard, building it 10, 20, 50 times and at pace that can keep up with demand is difficult. With that in mind, we continue to scale production for our...

Speaker Change: Although we have continued to see strong performance from the Archimedes and we're able to iterate them updates rapidly, which is really we wouldn't be in this point and a point in time in the test campaign.

Speaker Change: All that to say is that the start of any rocket program depends on how quickly and reliably you can scale engine production in parallel.

I've said it before but it bears repeating because building. Your first rocket engine is hard building at 10, 2050 times and at pace that can keep up with demand is even harder with that in mind. We continue to scale production for Archimedes at the same time that we're testing it we've got the assembly line in California, humming with engine shipping out the door frequently to Mississippi.

Peter Beck: The same time that we were planning We've got the assembly line in California, Humming, with engines shipping out, the door frequency. setting us up well to get into a good launch cadence. A rocket program is much more than just a vehicle, of course, and its engines.

Speaker Change: A sitting us up well to get into a good launch cadence with neutron after first flight.

Speaker Change: Our rocket program is much more than just the vehicles of course, then its engines launched infrastructure is a critical component and one of the pieces that we had a bit of practice two things to having stood up three pads on the two hemispheres with electronics.

Peter Beck: Launch infrastructure is a critical component and one of the... We've had a bit of practice too, thanks to having stood up three pads on. Launch sites are a little bit like an iceberg, there's so much of the infrastructure that is underground or hidden in the development. With that now well-established, we're starting to put the finishing touches on the above ground of the structure, including a massive 165-ton steel structure launch mount that will hold down and hold down... It's from this structure that Neutron will lift off next year. The launch mount will be installed in LC3.

Speaker Change: One slide sorry, but a little bit like an iceberg. There's so much of the infrastructure that is underground and in the development phase with that now well established with starting to put the finishing touches on the above ground infrastructure, including a massive 165 ton deal structure mm launch Mount that will hold down and hold down mechanisms.

Speaker Change: It's from the structure that neutral to lift off next year. The launch mountain will be installed in LC three in the in the coming few weeks and from there the facts will start to shift to pet commissioning before flight one.

Peter Beck: Weeks. And from there, the focus will start to shift to pay. On the ground at Launch Complex 3 some really big, long lead items have made their way to the pad at Wallops Island, including two 90,000-gallon propellant tanks that were installed in Each of them is longer than one of our electron rockets, which really helps put into perspective the scale of the work. Just a few miles up the road from the launch pad, we've completed the construction of the assembly and integration and test building, where Neutron's vehicles will go through their final checks before they're taken on board.

Speaker Change: On the ground at launch conflict three some really big long lead items have made their way to the pad and we'll up the island, including 290000 gallon propellant tanks that were installed in Q3 each of them is longer than one of our elektron rockets, which really helps put into perspective. The scale of the works that are happening at Telsey three.

Speaker Change: Just a few miles up the road from the launch pad, we've completed the construction and assembly of the assembly and integration and tests building Weird neutrons vehicles will go through their final checks before they take them to the launch pad.

Peter Beck: Having this building only three miles from the launch pad is a real strategic advantage. Because we don't have to grapple with the slow and expensive, complex logistics of transporting a hulking rocket across the country.

Speaker Change: Having this building only three miles from the launch pad as a real strategic advantage for us because we don't have to grapple with the slow and expensive complex logistics, all transporting a hulking rabat, how can rocket across the country just to get to the launch pad.

Peter Beck: That wraps up the headline items on the launch front, so now moving into space. So, one of NASA's flagship missions is the Mars sample. which aims to bring scientifically selected samples back from Mars to Earth for the first time ever. But NASA has said that their current architecture is too costly at $11 billion and too slow, with the samples not expected to be into the hands of scientists. So the agency put out a call to industry for new proposals and I'm proud to confirm we were selected to conduct We're putting forward a highly compelling concept that will return Mars rocks faster and at a fraction of the cost.

That wraps that wraps up the headline items on the loan front, so now moving into spy systems.

Speaker Change: So one of Nasa's flakes. It flagship missions is the amount of sample return program, which aims to bring scientifically selected samples from Mars back from mouse to Earth for the first time in history.

Speaker Change: But NASA has said that the current architecture is too costly at $11 billion in two slides, but the sample is not expected to be into the haynesville scientists until 2040.

Speaker Change: So the agency put out a call to industry for new proposals and I'm proud to confirm we were selected to conduct. The study we are putting forward a highly compelling concept that will return Mas rocks faster and at a fraction of the cost of the current cost of the program.

Peter Beck: This mission is one of the biggest, most ambitious projects NASA has ever undertaken. It will completely change the way that we think about our society. to potentially answer whether life ever existed on Mars and help prepare for the first human explorer's mission. While it might not be obvious at first glance, it's a mission that we're actually unique to. Now, our fingerprints are already all over Mars. Our technology has been incorporated into missions like the Mars Insight Lander, the Ingenuity Helicopter, and even the cruise stage that brought Perseverance to Earth. Enabling the very rovers that are collecting the samples to be brought to Earth under the Martian atmosphere.

Speaker Change: This mission is one of the biggest most ambitious projects NASA NASA has ever undertaken it will completely change the way that we think about is total system potentially answer with a lot ever existed on Mars and help prepare for the first human explores on the Red planet.

Speaker Change: Well it might not be obvious at first glance, it's a mission that we actually uniquely suited to.

Speaker Change: Now our fingerprints are already already all either miles and technology has been incorporated into missions like the Mazda insight lander ingenuity helicopter and even the cruise stage that bought perseverance demands and I think the very robust that are collecting the samples to be bought to some puds booked to earth under the my simple return from what.

Peter Beck: From orbiters and rovers, landers, crew stages, we have experience in delivering mission success. Now everything we've put into place over the years, either through our own organic development or through... has been part of our methodical strategy to offer vertically integrated... complex missions. Mass Sample Returns requires an immense depth of experience and capability, the very kind that our team and technologies have delivered on. We have the expertise in building and launching small rockets from little planets. We have the innovative Mars-based... We have demonstrated re-entry capability. We've enabled rendezvous and proximity. We're leaders in guidance navigation control and our flight software is already on.

Speaker Change: It is an ROI, there's lenders crew stages, we have experienced in delivering mission success on the Red planet.

Speaker Change: Now everything we've put into place over the over the years either through organic development or through acquisitions of some of the industry's leading technology suppliers.

Speaker Change: Being part of them methodically strategy to offer a vertically integrated solutions for complex missions just like days.

Speaker Change: My sample returned requires an immense depth of experience and capability the very kinds of that team and technologies have delivered on before.

Speaker Change: We have the expertise in building and launching small rockets from little planet, we have the innovative mass space craft, we have demonstrated reentry capability, we've enabled rendezvous and proximity missions. We're leaders in garden's navigation control when they fly itself, where it was already on the Atlanta's and we know how to manage large and complicated missions, including once Vanessa bookshelf.

Peter Beck: and we know how to manage large and complicated missions. We've shown time and time again that we're disruptors in the industry who are able to conduct missions beyond Earth's orbit on a rapidly fast developing planet. we now decide...

Time, and time again that were disruptive in the industry, who are able to conduct emissions beyond earth orbit on a rapidly fast development timelines and we know that they can't do it we can do it at a fraction of the traditional cost.

Peter Beck: We look forward to delivering this once again for mass sample return should a proposal make it through the selection process later.

Speaker Change: We look forward to delivering this once a guy in the mouse ample return should I propose them make it through the selection process later this year.

Peter Beck: Now onto other updates across our space... Before I dive into more specific mission updates, I wanted to provide a quick snapshot of just some of the various programs under way. This is just the latest line-up of spacecraft we're building right now, or I've already Like our two escapade spacecraft for Mars, two completely different constellation spacecraft, one for cell connectivity for MDA Globalstar, the other for National Security and the Space Development Agency, and other individual technology test missions ranging from connectivity in space to cryogenic fuel cells. Beyond these missions and constellations, we continue to do strongly in our Merchant Space Systems business with mega constellations.

Speaker Change: Now on top of the updates across our space systems business before I dive into more specific mission updates I wanted to provide a quick snapshot of just some of the various programs underway. This one is just a this is just the latest lineup of spacecraft with building right now or have already completed but there are two escapade spacecraft mass.

Speaker Change: Two completely different constellation spacecraft, one for cell connectivity for India Global staff. The other financial security in a space development agency and other individual technologies teeth missions, ranging from connectivity and space two cryogenic fuels storage on hold it.

Speaker Change: Beyond these missions and constellations, we continue to do strongly and our merchants spy systems business with Mega constellations contracts too.

Peter Beck: Some of you will remember me talking about scaling up our satellite facilities. as we bring on new and bigger spaces. were part of the benefit for us taking over the previous Virgin Orbit building. for our new engine production site was that it allowed us to use that extra space in our headquarters to be converted to our satellite production. We're really starting to see that strategy pay dividends with production lines of our various spacecraft platforms now up. Without, all without a single shovel in the ground, we've avoided all the headaches of having to build new buildings and factories from scratch and save precious time and resources.

Speaker Change: Some of you will remember me talking about scaling up as satellite facilities in California as.

Speaker Change: As we bring on new and bigger space craft contracts, what part of the benefit for us taking over the previous Virgin orbit building for pennies on the dollar for a new engine production. So I wasn't allowed us to use that extra space in our headquarters to be converted to a satellite production facility.

Really starting to see that strategy paid dividends with production lines.

Speaker Change: Various space craft platforms, now up and running without or without a single shoveling. The ground. We've avoided all the headaches of having to build new buildings and factories from scratch and save precious time and resource and is scaling strategy.

Peter Beck: and the beauty of having all those space systems products co-located in one building. When one building, there are simple ease of integration for it. A technician can literally walk across the floor, hand over an avionics box to a spacecraft integration team, as opposed to waiting for months for a supplier to produce its ship. That's really the true beauty of vertebrate integration.

Speaker Change: And the beauty of having all that space systems products carloads hated in one building.

Speaker Change: When when one building there are simple ease of integration for our teams.

Speaker Change: A technician can literally walk across the floor handover and avionics box to a spacecraft integration team as opposed to waiting two months for supply to produce it ship. It and then deliver it it's really the true beauty of vertical integration for our business.

Peter Beck: Now on to some more specific program updates under the Space Systems umbrella. And if I can stick with Mars for just a little bit longer, in Q3 we completed and delivered the two spacecraft for the Escapade Science mission to Mars for NASA. It was a really monumental feat in itself given the three and a half year time span handed to us to deliver. Unfortunately, however, outside our control, the rocket, the satellites we're launching on, wasn't quite ready in time for that Mars transfer window, so the mission has been somewhat delayed. But the team is standing by and ready to support once the new launch is completed.

Speaker Change: Now on to some more specific program updates under the spy systems umbrella and if I can stick with not just the amount of saying if it's just a little bit longer.

Speaker Change: In Q3, we completed and delivered the two spacecraft the escapade science mission to Mars Vanessa.

Speaker Change: It was a really monumental feat in itself given the three and a half year tons per day and hand, it to us to deliver this mission and.

Fortunately however outside of our control the the rocket. These satellites were launched on wasn't quite ready in time for that mass transfer window to the mission has been somewhat delayed but the team is standing by and ready to support once the new launch date of the state.

Peter Beck: On to our $500 million prime contract with the Space Development Agency for their Tranche 2 transport layout. The team is hitting some great technical targets within the program, the preliminary design of the spacecraft complete, the work can begin pulling the hardware together in the clean This progress puts us in a strong position for the upcoming solicitation of 200 satellites under the tranche 3 of the SDA's programme.

Speaker Change: One two or three of them onto a 500 million dollar.

Speaker Change: Prime contract with a space development agency for their tranche two transport via constellation.

Speaker Change: The team is hitting some great technical targets within the program are the preliminary design of the spacecraft complete them. The work being poll. The work can begin pulling the hard way to get there.

Speaker Change: In the clean rooms at headquarters.

Speaker Change: This progress puts us in a strong position for the upcoming solicitations of 200 satellites under the tranche three of the SD EIS program that procurement is expected to begin in 2025.

Peter Beck: And finally, to wrap up, Space Systems and X-2 satellites for Vardar Space Industries have been completed and... Pioneer class-based satellites host stardust capsules and provide power, communications, propulsion and altitude control. It's our first spacecraft. Our first spacecraft for Avada helped bring the capsule back home from space, landing it in the Utah desert last year, with our next spacecraft set to do the same thing again, but this time over Australia, where both missions are set to re-enter the Earth's atmosphere and land in southern Australia. soon after launch next year. In the meantime, the team is already working on the fourth Pioneer spacecraft for the same value.

Speaker Change: And finally to wrap up a spy systems and two satellites without US based industries have been completed and are now ready for launch.

Speaker Change: And Pontiac class based set of lots of always thought as capture was and provide Pac communications propulsion and altitude attitude control to the mission.

Speaker Change: The first spacecraft at first spacecraft for Avaya to help bring the capsule bedtime since by spending it in the Utah Desert last year with a niche space crafts hit to do the same thing again, but this time, Ive, Australia, where both missions to reintroduce atmosphere and land in southern Australia.

Speaker Change: Even after a launch next year.

Speaker Change: And then in the meantime, the team is already working on the fourth pioneer spacecraft them for the same about our mission.

Peter Beck: And before I hand it over to Adam, I just wanted to wrap up with a couple of personnel changes at the board and... So Mike Griffin has finished up on the Rocket Lab board after a four year tenure. We're incredibly grateful for the experience and leadership helping guide Rocket Lab's growth from a private start-up to a global industry leader. and really want to thank him and wish him all the best as he retires.

Speaker Change: And before I hand, it over to Adam I, just wanted to wrap up with a couple of person I've got couple of personnel changes at the board and executive level for this past quarter.

Speaker Change: So Mark Griffin has finished up with a finished up on the rocket let board. After a four year tenure saving the company. We're incredibly grateful for his experience and leadership are helping guard Rockaway its growth from a private startup to a global industry leader in launching spy systems, and really want to think of them and give them wish him all the best as he retires from rocket led board.

Peter Beck: But as one chapter ends, another two begin at Rocket Lab across Borderland. This quarter we welcomed Frank Klein to the team as a new Chief Operations Officer. Frank joins us with 30 years of international manufacturing experience and leadership in the automotive industry at Daimler, the Sandy's Benz, and most recently a prominent... As a COO, Frank is leading our efforts to scale global manufacturing of our spacecraft, launch vehicles and spacecraft components. It's great to have a seasoned and experienced leader like Frank bring his wealth of knowledge in lean manufacturing and scaling.

Speaker Change: But as one check ins and other to begin at rocket Labor Cross Board and executive level.

Speaker Change: This quarter, we welcomed Frank climb to the team as our new Chief operations Officer.

Speaker Change: <unk> joins us with 30 years of international manufacturing experience and leadership in the automotive industry at Daimler, saying, he's beans, and most recently a prominent E V company.

Speaker Change: As a C O R. Frank is leading our efforts to scale global manufacturing of our Spacecrafts launch vehicles and spacecraft components and it's great to have a seasoned and experienced lately like Frank brings his wealth of knowledge and lean manufacturing and Scabbing to rocket lab.

Peter Beck: And Ken Possenride also joined us on the Board of Directors this past quarter. He joins Rocket Lab after a 35-year career at Lockheed Martin in financial leadership positions. including serving as the space prime. Ken's deep aerospace and defence industry experience combined with his financial leadership adds to even more horsepower on an already impressive board line-up and it's fantastic to have him.

Speaker Change: And that can pump and Rod also joined joined US on the board of directors. This past quarter. He joins rocket lab. After 30 after a 35 year career at Lockheed Martin and financial leadership leadership position positions, including serving as the space Prime's, Chief Financial Officer, Ken's deep aerospace and defense industry.

Speaker Change: <unk> combined with his financial leadership as to even more horsepower on an already impressive board lineup and it's fantastic to have them on board to help us shape the future.

Adam Spice: So with that, I'll hand it over to Adam now to provide further commentary and to discuss our final... Highlights, and Outlook.

Speaker Change: So with that I'll hand, it over to Adam now to provide further commentary and to discuss are fun I found out your financial highlights and outlook. After you hit them all.

Adam Spice: Over to you, Adam. Great. Thanks, Pete. All right, third quarter 2024 revenue was $105 million, which was at the high end of our prior guidance range and reflect significant year-on-year growth of 55%, driven by strong contribution from both business segments, but led by space systems. Our Launch Services segment delivered revenue of $21 million, in line with our prior guidance. Our current backlog continues to support our 2024 target average revenue per launch of $7.5 million, with some quarterly variability tied to volume purchase commitments, launch location, and mission assurance requirements. Our space system segment delivered $83.9 million in the quarter, near the high end of our prior guidance range of $79 million to $84 million, reflecting sequential growth of over 9%, driven primarily by a strong quarter from our space solar business.

Adam Spice: Great. Thanks Pete.

Adam Spice: Alright third quarter 2024 revenue was $105 million.

Adam Spice: At the high end of our prior guidance range and reflects significant year on year growth of 55% driven by strong contribution from both business segments led by space systems.

Adam Spice: Our launch services segment delivered revenue of $21 million in line with our prior guidance.

Adam Spice: Our current backlog continues to support our 2024 target average revenue per launch a $7 $5 million with some quarterly variability tied to volume purchase commitments launched location and mission assurance requirements.

Adam Spice: Our space systems segment delivered 89, sorry, $83 $9 million in the quarter near the high end of our prior guidance range of 79 million to $84 million, reflecting sequential.

Adam Spice: Sequential growth of over 9% driven primarily by a strong quarter from our space solar business.

Adam Spice: Now turn to gross margin. Gap gross margin for the third quarter was 26.7%, in line with our prior guidance range of 25 to 27%. Non-GAAP gross margin for the third quarter was 31.3 percent, which was also in line with our prior guidance range of 30 to 32 percent. Relatedly, we ended Q3 with production-related headcount of 964, up 50 from the prior quarter.

Now turning to gross margins GAAP gross margin for the third quarter was 26, 7% in line with our prior guidance range of 25% to 27%.

Adam Spice: non-GAAP gross margin for the third quarter was 31, 3%, which was also in line with our prior guidance range of 30% to 32% Relatedly. We ended Q3 with production related head count of 964 up 50 from the prior quarter.

Adam Spice: Now turn to backlog. We ended Q3 2024 with $1.05 billion of total backlog, with launch backlog of $326 million and space systems backlog of $721 million. Relative to Q3 of last year, total backlog increased 80% or $465 million, primarily due to our $515 million contract award to build 18 spacecraft for the FDA we won last year. Sequentially, there's a slight remixing of our backlog as a result of particularly strong bookings in our launch segment. We continue to cultivate a healthy pipeline, including multi-launch deals and large satellite manufacturing contracts that can create lumpiness in our backlog growth, given the size and complexities of these opportunities.

Now turning to backlog.

Adam Spice: We ended Q3 2024 with $1.15 billion of total backlog with launch backlog of $326 million and space systems backlog of $721 million.

Adam Spice: We're all into Q3 of last year total backlog increased 80% or $465 million, primarily due to our $515 million contract Awards 18 spacecraft for the FDA when we won last year.

Adam Spice: Sequentially, there was a slight remixing of our backlog as a result of particularly strong bookings in alarm segment.

Adam Spice: We continue to cultivate a healthy pipeline, including multi launch deals and large satellite manufacturing contracts that can create lumpiness in our backlog growth given the size and complexities of these opportunities.

Adam Spice: We expect approximately 50% of current backlog to be recognized as revenues within 12 months.

We expect approximately 50% of current backlog to be recognized as revenues within 12 months.

Adam Spice: Yeah.

Adam Spice: turned to operating expenses. Gap operating expenses for the third quarter 2024 were $79.9 million, up $9.5 million sequentially, which was at the low end of our guidance range of $80 million to $82 million. Non-GAAP operating expenses for the third quarter were $68.7 million, up $10.2 million sequentially, which was also at the low end of our guidance range of $69 million to $71 million. The sequential increases in both GAAP and non-GAAP operating expenses were primarily driven by continued growth in headcount and prototype spending to support our Neutron development program, related infrastructure IT support for Neutron, and our SDA satellite contract.

Speaker Change: Turning to operating expenses.

GAAP operating expenses for the third quarter of 2024 was $79 $9 million up $9 $5 million sequentially, which was at the low end of our guidance range of 80 million to $82 million.

non-GAAP operating expenses for the third quarter were $68 $7 million up $10 2 million sequentially, which was also at the low end of our guidance range of 69 million to $71 million.

Speaker Change: Yeah.

Speaker Change: The sequential increases in both GAAP and non-GAAP operating expenses were primarily driven by continued growth in head count and prototyping expense spending to support our neutral on development program.

Speaker Change: Related infrastructure support for Neutrolin, and our SDA satellite contract.

Adam Spice: In R&D specifically, gap expenses were up $7.8 million quarter on quarter due to neutron prototyping, materials, and headcount growth. Non-GAAP R&D expenses were up $8.1 million quarter-on-quarter, driven similarly to GAAP expenses. Q3 ending R&D headcount was 776, representing an increase of 103 from the prior quarter. In SG&A, GAAP expenses increased $1.7 million quarter on quarter, largely due to an increase in outside services related to legal and IT, with IT spend largely related to security and cyber requirements under our SBA contract, and legal spend driven by a range of corporate initiatives, including corporate development, as we continue to look to scale the business organically and inorganically.

Speaker Change: In R&D, specifically GAAP expenses were up $7 8 million quarter on quarter due to neutral on prototyping materials and head count growth.

Speaker Change: non-GAAP R&D expenses were up $8 $1 million quarter on quarter, driven similarly to GAAP expenses.

Speaker Change: Q3, ending R&D head count was 776, representing an increase of 103 from the prior quarter.

Speaker Change: And SG&A GAAP expenses increased $1 7 million quarter on quarter, largely due to an increase in outside services related to legal and I T.

Speaker Change: With it spend largely related to security and cyber requirements under our SBA contract and legal spend driven by a range of corporate initiatives, including corporate development as we continue to look to scale the business organically and Inorganically.

Adam Spice: These legal and IT increases are paired with an increase in staff costs. Non-GAAP SG&A expenses increased $2.1 million, driven similarly to the GAAP SG&A expenses. Q3 ending SG&A headcount was 300, representing an increase of 27 from the prior quarter. In summary, total third quarter headcount was 2,040, up 180 heads from the prior quarter.

Speaker Change: These legal and it increases our paired with an increase in staff costs.

Speaker Change: non-GAAP SG&A expenses increased $2 $1 million, driven but similar to the GAAP SG&A expenses.

Speaker Change: Q3, ending SG&A head count was 300, representing an increase of 27 from the prior quarter.

Speaker Change: In summary, total third quarter head count was 2040.

Speaker Change: 180 heads from the prior quarter.

Adam Spice: Now moving to non-GAAP free cash flow and adjusted EBITDA. With regards to cash, purchases of property, equipment, and capitalized software licenses was $11 million in the third quarter of 2024, a decrease of $4.3 million from the $15.3 million in the second quarter of 2024. We continue our investment in neutron research, testing, and production infrastructure projects, along with expansion of our satellite production and space solar solutions capacity. And we do expect our capital expenditures to increase over the next few quarters. Cash consumed from operations was $30.9 million in the third quarter of 2024, compared to $13 million in the second quarter of 2024.

Speaker Change: Now moving to non-GAAP free cash flow and adjusted EBITDA.

Speaker Change: With regards to cash purchases of property equipment and capitalized software licenses was $11 million in the third quarter of 2024, a decrease of $4 $3 million from the $15 $3 million in the second quarter of 'twenty 'twenty four.

Speaker Change: We continue our investment in neutral and research testing and production infrastructure projects, along with expansion of our satellite production in space solutions capacity and we do expect our capital expenditures to increase over the next few quarters.

Speaker Change: Yeah.

Speaker Change: Cash consumed from operations was $39 million in the third quarter 2024, compared to $13 million in the second quarter of 'twenty 'twenty four.

Adam Spice: The sequential increase of $17.9 million was driven primarily by increased neutron and space systems program spend and lumpiness in space systems program milestone receipts, partially offset by improved launch contract cash collection. Overall, non-GAAP free cash flow, defined as GAAP operating cash flow less purchases of property, equipment, and capitalized software, in the third quarter of 2024 was a use of $41.9 million, compared to $28.3 million in the second quarter of 2024. While we are doing better versus our targeted cash consumption run rate, we do expect to pick up in cash consumption in the next few quarters, owing to an increased expected increase in neutron spending ahead of our mid 2025 launch and lumpiness in large space systems milestone payment collection.

The sequential increase of $17 $9 million was driven primarily by increased neutral and space systems program spend and Lumpiness in space systems program milestone receipts, partially offset by improved launch contract cash collections.

Speaker Change: Overall, non-GAAP free cash flow defined as GAAP operating cash flow less purchases of property equipment and capitalized software in the third quarter of 2024 was a use of $41 $9 million compared to $28 $3 million in the second quarter of 2024.

Speaker Change: Well, we are doing better versus our targeted cash consumption run rate, we do expect to pick up in cash consumption in the next few quarters, owing to an increased our expected increase in nutrient spending ahead of our mid 2025 launch and Lumpiness and large space systems milestone payment collections.

Adam Spice: The ending balance of cash, cash equivalents, restricted cash, and marketable securities was $508 million as of the end of the third quarter of 2024. We exit Q3 in a strong position to execute on our organic expansion initiatives, as well as inorganic options to further vertically integrate our supply chain with the critical capabilities and expand our addressable market, consistent with what we've done successfully in the past. Adjusted EBITDA loss was $30.9 million in the third quarter of 2024 compared to a loss of $21.2 million in the second quarter of 2024. The sequential increase of $9.7 million was primarily driven by increased spending related to neutron development.

Speaker Change: The ending balance of cash cash equivalents restricted cash and marketable securities was $508 million as at the end of the third quarter of 2024.

Speaker Change: We exited Q3 in a strong position to execute on our organic expansion expansion initiatives as well as inorganic options to further vertically integrate our supply chain with a critical capabilities and expand our addressable market.

Speaker Change: With what we've done successfully in the past.

Speaker Change: Adjusted EBITDA loss was $39 million in the third quarter of 2024 compared to a loss of $21 $2 million in the second quarter of 2020 for.

Speaker Change: The sequential increase of $9 $7 million was primarily driven by increased spending related to neutral on development.

Adam Spice: And with that, let's turn to our guidance for the fourth quarter of 2024. We expect revenue in the fourth quarter to range between $125 and $135 million. This range reflects a step up in space systems and an increase in launch cadence consistent with our prior outlook. In the past, we've broken down guidance by launch and space system segments. However, we found it difficult at best to predict launch customer readiness within a quarter and believe that providing a single top line guidance number is more appropriate at this time, given the resilience we've witnessed as a result of the expanded diversification of our business.

Speaker Change: And with that let's turn to our guidance for the fourth quarter of 2024.

Speaker Change: We expect revenue in the fourth quarter to range between 125 and $135 billion.

Speaker Change: This range reflects a step up in space systems, and an increase in launch cadence is consistent with our prior outlook.

Speaker Change: In the past, we've broken down guidance by launch and space systems segments. However, we found it difficult at best to predict launch customer readiness within a quarter.

Speaker Change: And believe that providing a single topline guidance number is more appropriate at this time given the resilience we witnessed as a result of the expanded diversification of our business.

Adam Spice: That said, we'll continue to report actual revenues and related gross margins of launch and space systems as distinct segments. We expect fourth quarter GAAP gross margin to range between 26 to 28%, and non-GAAP gross margin to range between 32% to 34%. These forecasted gap and non-gap gross margins reflect improved mix within our space system segment, primarily within satellite manufacturing, as well as better overhead cost absorption in our launch business. We expect fourth-quarter GAAP operating expenses to range between $84 million and $86 million and non-GAAP operating expenses to range between $75 and $77 million. The quarter-on-quarter increases are driven primarily by continued neutron investment in the staff cost, prototyping, and material.

Speaker Change: That said well continue to report actual revenues and related gross margins launch and space systems is distinct segments.

Speaker Change: We expect fourth quarter GAAP gross margin to range between 26% to 28% and non-GAAP gross margin to range between 32% to 34%.

Speaker Change: These forecasted GAAP and non-GAAP gross margins reflect improved mix within our space systems segment, primarily within satellite manufacturing as well as better overhead cost absorption in our lunch business.

Speaker Change: We expect fourth quarter GAAP operating expenses to range between $84 million and $86 million and non-GAAP operating expenses to range between 75 and $77 million a quarter on quarter increases are driven primarily by continued neutral on investment in the staff cost prototyping and materials.

Adam Spice: We expect fourth quarter GAAP and non-GAAP net interest expense to be $1.5 million. And we expect fourth quarter adjusted EBITDA loss to range between $27 million and $29 million, and basic shares outstanding to be approximately 501 million shares.

Speaker Change: We expect fourth quarter, GAAP, and non-GAAP net interest expense to be $1 $5 million.

Speaker Change: We expect fourth quarter, adjusted EBITDA loss to range between 27 and $29 million.

Speaker Change: And basic shares outstanding to be approximately 501 million shares.

Andres Sheppard: And with that, we'll hand the call over to the operator for questions. At this time I would like to remind everyone in order to ask a question, press star and the number one on your telephone keypad. Your first question comes from the line of Andres Sheppard with Kantor Fitzgerald. Your line is open. Hey everyone. Good afternoon and congratulations on the quarter. Certainly a lot of developments, so well done. I guess first question, just on the Neutron, I just wanted to clarify. So it sounds like you're, you know, the target for the first launch is unchanged for mid-2025, but the multi-launch agreement that you just closed today, that targeted for, I believe, to start in middle of 2026.

Speaker Change: And with that we'll hand, the call over the operator for questions.

Speaker Change: At this time I would like to remind everyone in order to ask a question press star and the number one on your telephone keypad.

Speaker Change: Your first question comes from the line of Andre Shepard with Cantor Fitzgerald. Your line is open.

Speaker Change: Hey, everyone. Good afternoon, and congratulations on the quarter certainly a lot of development, so well done.

Speaker Change: I guess, a first question just on the neutron.

Speaker Change: I just wanted to clarify so it sounds like you're you know the target for the first launch is unchanged for 2025, but the multi <unk> ER launch agreement that you disclosed today, that's targeted for I believe the start in middle of 2026, So I guess, a just wanted to confirm that and b.

Peter Beck: So I guess, A, just wanted to confirm that, and B, you know, then if that's the case, why announce this contract today, just given where you still are on the Neutron development? Any color there would be helpful. Thank you. Yeah, hey Andre, happy to take that question. So I think, you know, we've been pretty clear about what we expect for neutrons. Launch Cadence to be. So, you know, obviously one test flight in the following year, three and then five. You know, that's following pretty much the same scaling. right as we saw that we could do with with with electron and quite frankly I mean if you look It's going to be difficult to see any examples of a scaling rate faster than this.

Speaker Change: And then if that's the case why announce this.

Speaker Change: Attract today, just given where you still are on the neutron developing any color there would be helpful. Thank you.

Speaker Change: Yeah, Yeah. Andre you have you have to take that question. So I think you know we've been pretty clear about what we expect for the neutrons mm launch cadence to be I'm, sorry, you know obviously, one test flight in the fall.

Speaker Change: Allowing year three and then five and then continues you know Steven and beyond and.

Speaker Change: It's following pretty much the same scaling them right.

Speaker Change: Right as we saw that we could do with with with electron and quite frankly, I mean, if you look back through history, it's pretty difficult to see any example of scaling right faster than that.

Peter Beck: So that kind of backs into real available slots. So, you know, as we're talking to customers, obviously they want to know when is their launch slot because they have certain mission objectives from their end. Of course, we want to know, you know, are their spacecraft going to be ready? I think we've talked about this in the past. So it's really just, you know, a careful marry-up of, you know, various, you know, customer requirements and also, you know, the launch slots that we've kind of made available. And as we say on the call, we're very selective about those early slots.

Speaker Change:

Speaker Change: So that that kind of backs into into real real available slots. So you know as we're talking to customers. Obviously, they want to know when they launch slot because they have a they have a certain mission objectives from there and of course, we want to know.

Speaker Change: Are these spacecrafts gonna be pretty I think we've talked about this in the past. So it's really just you know.

Speaker Change: Our careful marry up off of.

Speaker Change: You know various.

Customer requirements and Andrew sorry.

Speaker Change: Slots that we have we've kind of made them made available to customers and you know as we said on the call. We were very very selective about those those are the especially those early slots.

Peter Beck: We need to make sure that we're there on time, we need to make sure that they're on time, so, you know, we kind of... With respect to announcing it now when I think it's... It's fairly material that once we start signing a neutron contract, so I think it's been anticipated, so I think it was a material. Yeah, and I would add to that too, Andre, that, you know, we've talked about the fact that, you know, as you start to approach, you know, neutron readiness, you think about a timeframe of, you know, kind of 12-18 months where, you know, you want to have your customer lined up, because, you know, you, you got to, again, have this whole synchronization to make sure that, you know, the rocket's ready.

Speaker Change: You know we need to make sure that we there on time and we need to make sure that they're on time so.

Speaker Change: End of <unk>.

Speaker Change: Kind of eating into that kind of gently.

Speaker Change: With respect to announcing it now and I think it I think that's it.

Feeling material that debt when once we start signing a neutral and contracts I think it's it's been anticipated sorry, I think it was a material thing that we really would really is really would have to disclose.

Yes, I would.

Speaker Change: Andre.

Speaker Change: We've talked about the fact that as you start to approach neutral on readiness, you think about a timeframe of kind of 12 to 18 months, where you know you want to have your customer lined up because.

You've got a again it had this whole.

Speaker Change: Synchronization to make sure that you know the.

Adam Spice: There's a long time between signing a contract usually and getting the actual payload integrated and launched. So I think the timing roughly worked out to that. And then, you know, I also think it's important that, you know, what we've also said, and I think Pete's been very, very consistent in this, that, you know, we were, we're not, we're, we're not going to be selling, you know, heavily discounted neutron launches, just because it's a new vehicle. You know, we bring a lot of heritage to this market because of the 54 successful launches that we've had with Electron.

Speaker Change: The rockets ready there is a long time between signing contract usually and getting the actual payload integrated launched so I think the timing roughly worked out.

Speaker Change: To that and then I.

Speaker Change: Also think it's important that you know what we've also said and I think Pete has been very very consistent in this but we were we're not we're not going to be selling heavily discounted neutral on launches just because it's a new vehicle, where we bring a lot of heritage to this market because of the 54 successful launches that we've had with electron and so it's really did put us in a really good position to again not be out there kind of.

Andres Sheppard: And so it's really did put us in a really good position to, again, not be out there kind of, you know, having to do heavily discounted launches just to, to gain credibility. So I think this was a, definitely an important milestone for the company to reach. And we're, we're very happy to be able to announce that today. Thanks, guys. That's super helpful. I appreciate all that context. Maybe just a quick follow up, if I may. Can you maybe just remind us, you know, what are the outstanding maybe catalysts or milestones for the neutron development that you think investors should be aware of?

Speaker Change: Having to do heavily discounted launches just to gain credibility. So I think this is definitely an important milestone for the company to reach them, where we're very happy to be able to announce that today.

Speaker Change: Thanks, That's super helpful. I appreciate all that context, maybe just a quick follow up if I may.

Speaker Change: Can you maybe just remind US you know what are the outstanding AR, maybe catalysts or milestones for the neutron development that you think investors should be aware often and additionally.

Peter Beck: And additionally, maybe if you can give us a little more granularity on the hot fire test and the production of the additional engines there. Thank you. Yeah, sure, sure, Andre. The best way I like to explain it is, and we tried to do a little bit of that... And, you know, the things that everybody should be watching there is, you know... stuff being built, quite simply, you know, steel going in the ground, concrete being poured in. and things that look like a launch site. Now, thankfully, that's relatively easy to follow because... sitting on the coast and you know it's it's relative.

Speaker Change: Maybe if you can give us a little more granularity on the Hum.

Speaker Change: Hot fire tests in the production of the additional engines there. Thank you.

Speaker Change: Yeah sure sure Andre is that the best way I like to explain it as is and we tried to do a little bit of that in this in this presentation was you need to think of think of it as three kind of pillows. One you have launch infrastructure and that's actually where the majority of the capital flows into.

Speaker Change: And you know the things are the things that everybody should be watching there is.

Speaker Change: Stuff being built.

Speaker Change: Put simply steel going in the ground concrete being poured in and and things that looked like alongside now thankfully that's relatively easy to follow because it's sitting on the Carsten and you know it's it's it's relatively easy to get information on that and of course, we provide good update I'm sorry, So that you know as long as.

Peter Beck: to get information on that. provide good updates, so that, you know, as long as steel has been built and shipped and propellant lines are running and all the rest... And then the second pillar is kind of structures, so you've seen, you know, full stage 2 tanks and flight configurations running during wet dresses, fairings, first stage tanks. So, you know, as long as you keep seeing all those large structures, I think we'll be fine. and and they all come together relatively late in the process. And then with Archimedes, we're in a test and qualification campaign, so what we're doing with that engine is we're finding, it's called a run box basically, we're finding all of the operational...

Speaker Change: <unk> was being built and shipped and propellant lines are running and all the rest of it then you can feel pretty good about that and then the second pillar is kind of structures.

Speaker Change: So you've seen you know full stage two tanks in flight configurations running during waitresses fairings first stage tanks.

Speaker Change: Sorry.

Speaker Change: As you know as long as you keep seeing whereas large structures I think thank you can you can see that we're on track and are they all come together relatively late in the piece for printing to inwit trees for herself and then been with Archimedes wherein they ran a test and qualification campaign. So you know what we're doing with that engine is Ah is with refining its quota.

Speaker Change: <unk> basically as we're finding all of that all of the operational conditions.

Peter Beck: conditions of that engine, and defining what what they are. So we have a kind of a desired run box and then we'll have an action and what we're looking to do is... You know, changing various intake pressures of the propellant. various operating and Really Understanding. What kind of idiot... So, you know, the Hot Fire campaign reached a really important milestone, you know, last quarter where... full of all production components, valves, hardware. took a dive. throttle level so I think you know that that was a really important And working from that, it's just all about accumulating test time.

Speaker Change: Conditions that engine and in defining.

Speaker Change: What I am sorry, we have a kind of a desired run box and then we'll have an extra one box.

Speaker Change: And what we're looking to do is.

You know changing various intake pressures of the propellants and various operating points in and really understanding the engine and what kind of idiosyncrasies that it may or may not have.

Speaker Change: You know that the humpback campaign reached a really important milestone last quarter, where.

Speaker Change: We put a production engine that was full of oil production components valves hardware software and we took it to over 100% throttle level. So I think that was a really important milestone now working from that it's it's just all about accumulating peacetime I'm, putting the engine into a non conditions and continue to.

Andres Sheppard: putting the engine into, you know, unknown. continue to evolve. You know, I sort of made comments. you know, like an engine program. It's a long process. Yep, you can make fire. kind of preliminary target. You're always looking to improve either manufacturing or performance or reliability. So I think I think we're in a good spot, but. Those are the three. Wonderful. I really appreciate all that color. Congrats again on the quarter.

Speaker Change: Evolving engine and increase its performance over time and Oh.

Speaker Change: That's sort of my cummington in the debt.

Speaker Change: In the script here that.

Speaker Change: The engine program, it's a long process yet you can make far and you can you can achieve.

Preliminary targets and milestones but.

You're always looking to improve either manufacturing or performance or reliability of any engine I've had many many years. So I think I think we're in a good spot but.

Speaker Change: Those are the three things.

Speaker Change: To track.

Speaker Change: Wonderful I really appreciate all that color and congrats again on the quarter I'll pass it on.

Andres Sheppard: I'll pass it on.

Speaker Change: Thanks.

Edison Yu: Your next question comes from the line of Edison Yu with Deutsche Bank. Hey, thank you for taking our questions and also congrats. I know you're not saying too much on the Neutron award, but maybe I could kind of ask from a different perspective. Can you provide any context in terms of what you won relative to if the customer had already placed the launch with someone else and they switched you? Or do they have other kind of maybe like soft contracts out there with other launch providers? Just is this, I know you're saying you could launch a whole thing, just some context around currently what is the piece that you have?

Speaker Change: Your next question comes from the line of Edison Chu with Deutsche Bank. Your line is open.

Speaker Change: Hey, Thank you for taking our questions and also congrats.

Speaker Change: I know youre, not saying too much on the neutron award, but maybe I could kind of ask from a different perspective can you provide any context in terms of what you won relative to it.

Speaker Change: The customer had already placed the launch or someone else then they switched you or do they have other kind of maybe like source contracts out there with other launch providers. Just is it I know you say you can launch or just some context around it.

Speaker Change: Currently what is the piece that you that you have.

Peter Beck: Yeah, I mean, look, you know, we probably can't. But, you know, it's a customer that, you know, that we know and... As I mentioned, you know, we were very... about who he wants. all my fitness part. So, look, I mean, you know, it's not my business. But needless to say, you know, we were happy with that particular customer and it's a good customer for the stage and phase. And Edison, maybe you can add a little more context to that. So it is, you know, we've talked about in the past, you know, there's, there just are not that many companies in our space that have executed and are in position to launch with a level of confidence.

Speaker Change: Yeah, I mean look you know, we probably can't say too much but you know it's it's it's a customer that.

That we know and and.

Speaker Change: As I as I mentioned.

We were very strategic and in these especially these early launches.

Speaker Change: About who we want to what my essentially part with on these did these early contracts.

Speaker Change: Look I mean, I know, it's not my business to to them.

Speaker Change: To get in to the.

Speaker Change: Kind of business that but needless to say, we were happy with them.

Speaker Change: With that particular customer and it's a it's a good customer for the stage and phase of the program.

Speaker Change: And Edison, maybe you got a little more a little more context to that so.

Speaker Change: As we've talked about in the past yeah Theres. There just are not that many companies in our space that is executed and are in a position to launch with any level of confidence so.

Adam Spice: So, you know, you've got, you've got the added dynamic that, you know, there's a range of customers out there who, you know, also have payloads that compete with some of the other launch providers. And at this point, we feel probably more comfortable launching with somebody they don't necessarily compete with. So I think that plays into a lot of the discussions that we have. And, you know, I would say that, you know, the market remains pretty robust as far as demand is concerned. We, you know, when you look at the people that have capacity, a lot of that capacity has been spoken for.

Speaker Change: You've got you've got the other dynamic that there's a range of customers out there who.

Speaker Change: Also had payloads that compete with some of the other launch providers and at this point, we feel probably more comfortable launching with somebody they don't necessarily compete with so I think that that plays into a lot of the discussions that we have and.

Speaker Change: I would say that you know.

Speaker Change: The market remains pretty robust as far as demand is concerned we are when you look at the people that have capacity a lot of that capacity has been spoken for so well, we think neutral is coming to market. It.

Peter Beck: So we think Neutron is coming to market at a great time where, you know, we're really filling a new need for incremental capacity. And we're doing it in a way that's really non-competitive and non-threatening with those customers. So, you know, just a lot of the stars are starting to align on that point.

Speaker Change: At a great time, where we're really filling a new need for for incremental capacity and we're doing it in a way that's really non noncompetitive and non threatening with those customers. So.

Speaker Change: Yeah, just a lot of the stars are starting to align on that for us with regards to neutral.

Edison Yu: Thanks for joining us. Thanks for having me. As I said, the follow-up question, a bit longer term, obviously you've got Frank on board now, and he comes from the automotive industry, and I'm curious if you could maybe dimension the kind of scale you're looking for. Obviously, automotive is orders of magnitude higher scale than aerospace is, is frankly coming on board to kind of take you to that, you know, much, much, much higher level or more to kind of get the existing backlog up to, up to, up to. Yeah, look, a bit of both, Edison, and, you know, we have some components that are at low scale, like, you know, Mars spacecraft are never going to be produced at high scale, and then we have other things like reaction wheels, where we produce thousands and thousands a year of.

Speaker Change: Understood understood.

A follow up question a bit longer term, obviously, you've got Frank onboard now and it comes from the automotive industry and curious if you could maybe dive.

Speaker Change: I mentioned, the kind of scale, you're looking for obviously automotive is orders of magnitude higher scale than the aerospace.

Speaker Change: Is frankly coming on board to kind of tricky to that much much much higher level or more to kind of.

Speaker Change: The existing backlog.

Speaker Change: I'll get you up to speed.

Speaker Change: Yeah look a bit of a bit of both data center and we have some components that are at low sky I don't like my space craft and if you're going to be produced at Harsco and then we have other things like reaction windows, where we produced thousands and thousands of euro, but the one thing about production and I can attest that says is that it it all looks the same.

Peter Beck: But the one thing about production, and I can attest this, is that it all looks the same, whether you're building, you know, whether you're building a car or a spacecraft or a rocket, the production fundamentals are always the same. Now, yeah, of course, you know, the numbers that roll off the end of the production line, you know, differ, but all the manufacturing techniques and good practices remain the same, and, you know, we've done a great job here, and the team's done an amazing job here at scaling, but, you know, as we look to, you know, to move even further up that curve, you know, bringing someone on with just such deep experience, not just within production and production scaling, but within operations, it was just kind of, you know, the right time for the company to, you know, to create.

Speaker Change: With the building.

Speaker Change: I mean, you're building a car or a spacecraft or rocket the production fundamentals.

Speaker Change: Why is this time now of course that the numbers that that roll off the end of the production line.

Speaker Change: But all the manufacturing techniques and good practices remain the same and you know we've done we've done a great job I'm hearing that the team's done an amazing job at scaling, but it's as we look to them.

Speaker Change: To move even further update that curve.

Speaker Change: Having bringing someone on with such deep experience not just within production and production scanning, but with an operations. It was just kind of the right time for the company to try to create that position.

Edison Yu: And that's it.

Speaker Change: And that's it thank you.

Edison Yu: Thank you.

Speaker Change: Yeah.

Matt Akers: And your next question comes from the line of Matt Akers with Wells Fargo. Your line is open. Yeah, hey guys, good afternoon. Thanks for the question. I wanted to ask about space services. You guys kind of teased that on slide four. Just curious, I know you don't want to reveal what that could look like yet, but just curious what kind of timeframe you had in mind. It seems like, you know, kind of the phase one and two are in pretty good shape. So I guess the move to phase three, I mean, do we need to get neutron sort of at a higher production cadence?

Speaker Change: And your next question comes from the line of Matt Akers with Wells Fargo. Your line is open.

Matt Akers: Yeah, Hey, guys. Good afternoon. Thanks for the question.

Speaker Change: Wanted to ask about <unk>.

Speaker Change: <unk> services on slide four I'm, just curious I know you don't want to reveal what that could look like yet, but just curious what kind of timeframe you have in mind. It seems like kind of the phase one and two are in pretty good shape. So I guess that can move to phase III I mean, do we need to get neutron sort of at a higher production cadence are there yes.

Peter Beck: Are there, you know, maybe more parts of the portfolio to fill in? Just curious how you think of kind of the timing. Yeah.

Speaker Change: Maybe more parts of the portfolio to fill and just curious how you think of kind of the timing there.

Peter Beck: Yeah, thanks, Matt. So, look, everything is irrelevant without a reusable high-cadence... So, Neutron is really the key to unlocking that and, you know, if you look at Starlink as a good example, you know, it's a great spacecraft, but actually the thing that has really made that possible is a high-cadence, low-cost launch, and that, in turn, is made possible by a reusable launcher. So, you know, until Neutron is flying at some level of cadence, it's kind of, you know, academic to talk about, you know, deploying... Yeah, got it. Okay.

Yeah. Thanks, Matt sorry look if everything is irrelevant without a reusable high cadence launch so neutral and is really the key to unlocking that and.

Speaker Change: You look at our if.

Speaker Change: If you look at styling because it's a good example, you know it's a great space craft, but actually the thing that that has really made that possible is a high cadence like cost launch them in that and that in turn is made possible by a reusable launch vehicle.

Speaker Change: And told until neutron as flying at some level of guidance, it's kind of academic to talk about.

Speaker Change: Deploying constellations.

Speaker Change: Yeah got it okay.

Adam Spice: And just curious on this neutron deal, or maybe Neutron in general. Thoughts on kind of what the progress payment maybe looks like on that. It's curious, I guess, one, if there's maybe some lumpiness in cash flow around that just because those are pretty big, big dollar items. And also just how we should think about kind of the, you know, advanced payments versus kind of working capital aspect as that program ramps up.

Speaker Change: And just curious on that.

Speaker Change: This neutron deal or maybe just.

Speaker Change: The economy in general are above kind of what the progress payment maybe it looks like on that just curious I guess, one if there's maybe some lumpiness in cash flow around that just because those are pretty big big dollar items, but also how we should think about kind of the.

Speaker Change: Advanced payments versus kind of working capital aspect that program ramps up.

Adam Spice: I can take that one, Pete. So, you know, each, we have a fairly standard, you know, launch services agreement that we've obviously used many times with Electron, and we're leveraging most of that forward on Neutron. And you're right that, you know, building this, you know, this Neutron vehicle, it will be a challenging working capital cycle, at least initially, particularly when you think about the context here of reusability, right?

Speaker Change: Yes, I can take that one Dan Pete so.

Speaker Change: Each.

Speaker Change: It's fairly standard launch services agreement that we've obviously used many times with electron and we're leveraging most of that.

Speaker Change: On a neutron.

Speaker Change: Youre right that building this.

Speaker Change: Neutral on vehicles it will be.

Speaker Change: Chip the challenging working capital cycle at least initially, particularly when you think about the context here of Reusability right. So I think we've never said that we that we plan to basically have a fully reusable vehicle for that first launch so as we kind of work our way towards full reusability.

Adam Spice: So I, you know, we've never said that we plan to basically have a fully reusable vehicle for the first launch. So as we kind of work our way towards full reusability, you know, we'll be getting more kind of benefits from a working capital perspective as we do that. But, you know, the first few launches here are certainly going to be, you know, cash consuming. So you can think about the structure, you know, most of these LSAs have, you know, a deposit, and then there's milestone payments. And, you know, if you look at our Electron business, typically, we've collected about 60% of the contract value by the time we actually start building the rocket.

Speaker Change: We will be getting more kind of benefits from a working capital perspective, as we do that but you know the first first few launches here are certainly going to be you know cash consuming.

Speaker Change: So you can think about the structuring and most I will say is have a deposit and then theres milestone payments and if you look at our electron.

Elektron business typically we've collected about 60% of the contract value by the time, we actually start building a rocket.

Adam Spice: This might be a little bit different because, you know, we're at the very early stages of kind of coming, you know, transitioning from R&D into production. But you can think of Neutron, well, it should look very, very, very similar to what we've kind of disclosed and kind of produced in our results as we have with Electron. So nothing too unusual with this one, it's just, you know, it's the first few rockets out of the chute. So, you know, kind of we got to go through that transition period. And as we experienced also on Electron, you know, came out initially with, you know, with not kind of target margins, obviously, but as we kind of build towards that, you know, I think that there's a combination of, you know, the fact that, you know, we'll be collecting payments against, you know, milestones in the contracts, but also getting production efficiencies and ultimately reusability, which is real, is a real key to kind of getting Neutron to its target model, which we think will look very similar to the long-term model for Electron.

Speaker Change: This might be a little bit different because.

Speaker Change: We're at the very early stages of kind of coming transitioning from R&D into production, but you can think of neutron will should look very very very similar to what we've kind of disclosed in kind of producing our results without with electron so nothing nothing too unusual with this one as you can see it's the first the first few rockets out of the chute, so kind of we got it.

Speaker Change: Through that transition period, and as we experienced also on elektron the elektron.

Speaker Change: Came out initially with you know with with.

Speaker Change: But not kind of target margins, obviously, but as we kind of build towards that I think that there's a there's a combination of the fact that you know well be collecting payments against.

Speaker Change: Also in the contracts, but also getting production efficiencies and ultimately Reusability, which is real is a real keeps kind of getting a.

Speaker Change: Neutral to its target model, which we think will look very similar to the long term model for for.

Adam Spice: So hopefully that gives you a little bit of context. Yeah, that's very helpful.

Speaker Change: For Elektron.

Speaker Change: So hopefully that gives you a little bit of context.

Speaker Change: Yeah, that's very helpful. Thank you.

Erik Rasmussen: Thank you. Your next question comes from the line of Erik Rasmussen with Stiefel, your line is open. Yeah, thanks for taking the questions and congrats on the progress with Neutron.

Speaker Change: Yeah.

Speaker Change: Your next question comes from the line of Erik Rasmussen with Stifel. Your line is open.

Erik Rasmussen: Yes, thanks for taking the questions.

Erik Rasmussen: Congrats on the progress in that neutral.

Peter Beck: Maybe just on that subject, Neutron, I know it's not a lot you want to really share at this time, but are you replacing anyone or are you being brought on to sort of, you know, as another alternative, just because of, like Adam, you said there, you know, there's a number of medium rockets that are, you know, in the market or that will be potentially in the market in the coming years. But is this just sort of, do you think, a hedge because you guys are a lot closer than some of. Yeah, I think with respect to kind of commercial contracts, and in some cases, yeah, definitely replacing, I would say that, you know, Erik, in the in the NSSL world, bringing on new providers.

Erik Rasmussen: Maybe just on that subject neutron.

Speaker Change: I know, there's not a lot you want to really share at this time, but are you, replacing any one or are you being brought on.

Speaker Change: Sort of.

Speaker Change: Yes, that's another alternative just because of like Adam you said, there you know theres a number of medium rocket.

Speaker Change: Rocket Center.

Speaker Change: In the market or that will be potentially in the market in the coming years, but.

Speaker Change: Is this just sort of you think a hedge.

Speaker Change: Because you guys are a lot closer than some others.

Speaker Change: Yes, I think with respect to kind of commercial contracts and in some cases differently repricing I would tell you that you know Eric and the initial sell world. It's it's it's bringing on new providers I think if you look at the.

Peter Beck: I think if you look at the last NSSL lane one phase three award, 100% of that award went to one particular launch provider. So in some cases it's replacing and in some cases it's, you know, just being brought on as a replacement. Okay, and then you stated that the ASPs, you're going to be pretty, you know, firm on on pricing, is that the 50 to 55 million that were that you initially talked about? And that's sort of where things have settled, maybe for these two dedicated missions? And it says you starting in mid 26? Would both of those potentially happen in 26?

Speaker Change: The lost innocence L. A.

Speaker Change: Line, one phase III award of 100% of that Ward, 100% of that award winner too you know what.

Speaker Change: One particular launch provider because there was.

Speaker Change: Nobody else, sorry, and in some cases, it's replacing and in some cases, it's it's just being brought on as a new alternative.

Okay.

Speaker Change: You stated that the Asp's are you going to be pretty.

Speaker Change: You know for a moment on pricing is that $50 million to $55 million that you initially talked about necessarily where things have settled maybe for these two dedicated missions and it says he's starting in mid 'twenty six.

Speaker Change: Both of those potentially happening in 2006, or how should we think about sort of timing assuming you do meet the mid 2025.

Peter Beck: Or how should we think about sort of timing, assuming you do meet the mid 2025? For your first test launch? Yeah, I mean, the launch pricing, as we pointed out, that was a really important thing for us. You know, I think of it as I see a dog. I made, well I kind of had to, but with Electron, it took us years to flush out bad, bad kind of, um, uh, ... ... with respect to ASP. So no, you know, this contract is in line with, you know, with our previous contract. ASP for And then, you know, on the, you know, we're selling real slots with real launch windows.

Speaker Change: For your first test launch.

Speaker Change: Yeah, I mean, the the you know that.

The launch pricing as we as we pointed out is as you know that was a really important thing for us and.

Speaker Change: I think of as I've said I've.

Speaker Change: What kind of head to that with Elektron. It took as he used to flush out.

Speaker Change: Bad kind of.

Speaker Change: Yeah.

Speaker Change: Contracts with respect to pay sorry.

Speaker Change: With this.

Speaker Change: This contract is in line with some with that with.

Speaker Change: <unk> previously discussed.

I S pizza.

Speaker Change: For the neutron and then you know on.

You know what.

Speaker Change: We're selling real slots with with real launch Windows.

Peter Beck: So we kind of, you know, somewhat at the, at the, So, you know, so the 26 timeframes.

Speaker Change: Sorry, we kind of somewhat at the at the you know that.

Speaker Change: The request of the customer so you know so the 26 timeframe so those launches.

Peter Beck: you know how the I should maybe just stay with launch. You're sitting at 12 launches year to date. You previously gave a range of 15 to 18. You have another one slotted in the coming weeks, the earliest. You need sort of four in this quarter to get to the bottom of that range. But do you still feel like that's a viable range for you, the 15 to 18 where we sit today? I appreciate you not giving specific guidance on that, but I just want to get a sense of your confidence level on that prior guidance of 15 to 18.

Speaker Change: The other customers driven request.

Speaker Change: Got you.

Speaker Change: And maybe just staying with la launch.

Sitting at 12 launches year to date, you previously gave a range of 15 to 18.

You have another one slotted.

Speaker Change: In the coming weeks.

Speaker Change: The earliest.

Speaker Change: You would need sort of for.

Speaker Change: In this quarter to get to the bottom of that range, but do you still feel like that's a viable range for your 15 to 18, where we sit today I appreciate you're not giving specific.

Speaker Change: Guidance on that but I just wanted to get a sense of your confidence level on that prior guidance of 15 to 18.

Peter Beck: Well, I mean, if you recall, at the start of the year, we thought we were going to do 22, but, um, so I'm always a little bit gun-shy on this these days, but, um, but no, I think, you know, we've got a certainly a very busy... Okay.

Well I mean, if if if you recall at the start of the year, we thought we under 22, but.

Speaker Change: So I'm always the one was it a little bit gun shy on the theme these days, but but no I think.

Speaker Change: <unk> got a certainly a very busy.

Speaker Change: Busy fourth quarter.

Speaker Change: You know at this stage.

Speaker Change: The customers are looking good so I think we will be within that range.

Speaker Change: Okay.

Peter Beck: And then just on the NSSL, I just want to clarify, the RFPs have opened up pretty recently within the last two weeks. Does that mean you'll be available for this particular one, or it's the next cycle because of the timeframe of Neutron at the earliest of mid-25? Yeah, the way it works is that, you know, you have to, you have to demonstrate. 5 to be on-ramped, and then once you're on-ramped, then you'll bid for various task orders. So there'll be, you know, there's kind of the task order is... those task orders. I think, Erik, I think what we're saying that, you know, even though we'll be on ramping in 2025, we wouldn't be awarded any any contracts for launch in 2025.

Speaker Change: And then just on.

Speaker Change: <unk> SSL.

Speaker Change: Wanted to clarify the Rfps are opened up.

Speaker Change: Pretty recently within the last few weeks does.

Speaker Change: Does that mean, you'll be available for this particular, one or the next cycle because of the timeframe of neutral and that the earliest of mid 'twenty five.

Yeah the way the way. It works is that you have to you have to demonstrate a E. You can launch in 25 to be on ramp and then once you're on rent on ramped than you your bid for various task orders so there'll be a.

Speaker Change: This kind of that the task order has a separate from from the from the on ramping those task orders.

Speaker Change: That relates to it.

Speaker Change: And at the times that that he needs to sell all of the space Force decides to.

Speaker Change: I think Eric because I think what we're saying that even though we'll be on ramping in 2025, we wouldn't be awarded any any contracts for launch in 2025 and right now we're planning one test launch in 2025, we're talking about three launches in 2026, and then we've talked about five launches in 2027 and given kind of the.

Peter Beck: And right now we're planning, you know, one test launch in 2025. We're talking about three launches in 2026. And then we've talked about five launches in 2027. And given kind of the discussion that we've had, you know, previously about this, the first customer for Neutron that we announced today, you know, that's obviously consuming some of that capacity in 2026. So the most likely scenario is that could you see something in 2026 for NSSL? You know, it's a possibility, but it's probably not the most likely scenario. That probably looks more like it, you know, a 2027, but never say never.

Speaker Change: Discussion that we've had previously about.

Speaker Change: The first customer for neutral on that we announced today.

Speaker Change: Obviously consuming some of that capacity in 2026 so.

Speaker Change: The most likely scenarios that could could you see something in 2026 upper and SSL.

Speaker Change: It's a possibility, but it's probably not the most likely scenario that probably looks more like it.

Speaker Change: The 2027, but never say never.

Peter Beck: Right.

Speaker Change: Right.

Adam Spice: Okay, great. And then just one last thing on the backlog of clarification, the $326 million for launch, does that include this latest award win for the two for Neutron? No, it does not because that was a Q3 ending and this contract was signed post the end of Q3. Great. Okay. It'll show up in our Q4 backlog.

Speaker Change: Okay, Great and then just one last thing on the backlog of clarification B.

Speaker Change: The $326 million for launch does that include this latest award.

Speaker Change: The two for neutral.

Speaker Change: No. It does not because that was a Q3 ending in this contract was signed post the end of Q3.

Speaker Change: Great Okay.

Speaker Change: It'll show up in our Q4 backlog.

Speaker Change: Yeah.

Suji DeSilva: Great, thank you. Your next question comes from the line of Suji DeSilva with Roth Capital. Your line is. Hi, Pete. Hi, Adam.

Speaker Change: Great. Thank you.

Speaker Change: Your next question comes from the line of C. J, just sounds sounds like Roth capital. Your line is open.

Speaker Change: Hi, Pete Hi, Adam Congrats on the progress and and the neutron success here the gross.

Adam Spice: Congrats on the progress and the neutron success here. The gross margin improvement here, Adam, is that the relative contribution between launch and space systems sequentially in 3Q and 4Q relatively even? And can you give an update on the solar gross margin improvement? Is there tailwind still there? But so the gross margin percentages are actually pretty close across. I mean, they're pretty consistent across launch and space systems right now. That's the function of kind of again, where we are in the margin improvement path for for the launch part of the business. And then just current where we are on mix within space systems. So, you know, if you look at the mix of our business being roughly 70% space systems, you know, 30% launch.

Speaker Change: Gross margin improvement here, Adam is that the relative contribution between launch and space systems are sequentially and three Q4, Q relatively even and can you give an update on the solar gross margin improvement is there tailwind still there.

Speaker Change: But so the gross margin percentages are actually pretty close across I mean, they're pretty consistent across launch and space systems right now that just a function of kind of again, where we are and the margin improvement path for or the launch is part of the business and then just kind of where we are and mix within space systems.

Speaker Change: So if you look at the mix of our business being roughly 70% space systems.

Speaker Change: 30% launch.

Adam Spice: And as it kind of gives you, it's all proportional. So you just take the percentage of the business times the same work margin calculation and just apply it. And then on solar, Adam, does that remain a tailwind? So Solar has actually been progressing. It's a little bit slower than we thought. We talked about that on some prior calls where we expected to be at target margins within, which was we said about 30% non-gap gross margins of that business within two years of the acquisition. So we acquired that business in early 2022. So we're a bit behind, but we're making steady progress.

Speaker Change: I think kind of gives you that is all it's all proportional.

So you just take the percentage of the business lines. The same rough margin calculation is just apply it.

Speaker Change: Okay.

Speaker Change: And then on solar Adam is that remain a tailwind.

Adam Spice: Solar is solar has actually been progressing.

Adam Spice: Bit slower than we thought or we talked about that on some prior calls where we expect it to be at target margins within which was as you know we said about 30%.

Adam Spice: non-GAAP gross margins of that business within two years the acquisition.

Adam Spice: Yes, so we acquired that business in early 2022, so we're a bit behind but we're making steady progress I would say when we look at our backlog for that business. We are really not booking I can't remember the last time, maybe you can correct me I can't remember the last time that we've actually booked business lower than <unk>.

Adam Spice: I would say when we look at our backlog for that business, we're really not booking. I can't remember the last time, maybe Pete can correct me. I can't remember the last time that we've actually booked business lower than our target gross margins. So it's all about kind of replacing, flushing out some of that older, in fact, there's really just one bad contract in the mix that we inherited. Unfortunately, it was a large part of the, I think it was almost a hundred million dollars of the $150 million backlog at that deal closed that came along that was basically essentially a zero margin.

Adam Spice: Our target gross margin. So it's all about kind of replacing Flushing out some of that older. The fact, there's really just one one bad contract in the mix that we inherited unfortunate was a large part of the I think it was almost a $100 million of the $150 million backlog at that deal close that came along that was basically essentially at zero margin.

Adam Spice: So as we build the new business that target margins are better, that's starting to flow through now and we're seeing that come through in a little bit more profound way. And so I think that we all have actually probably more conviction now about getting to that 30% better target gross margin for that business. It's just taken us a little bit longer. And so I think it's also not too dissimilar to our launch business where it's a very kind of fixed cost oriented business. So when you have a good quarter where you're shipping a lot more product, you get the benefit of that overhead absorption.

Adam Spice: So as we build the new business at target margins are better that's starting to that's starting to flow through now we're seeing that come out come through in a little bit more profound way.

Adam Spice: And so I think that I think we all have actually probably more conviction now about getting to that 30% better target gross margin for that business. It's just taken us a little bit longer.

Adam Spice: And and so I think it's also not too dissimilar to our lunch business, where it's a very kind of fixed cost oriented business. So when you have a good quarter, where you're shipping a lot more product you get the benefit of that overhead absorption.

Adam Spice: And so, as we mentioned earlier, and we mentioned in our prepared remarks, the solar business is particularly strong in Q3.

And so as we mentioned earlier.

Adam Spice: In our prepared remarks that the solar business is particularly strong in Q3.

Speaker Change: Okay, Great and then my other question is on the lunch business I understand the neutrons can add to the backlog this quarter, but elektron growing $55 million I'm, just wondering what that how that compares to the last few quarters is that kind of in a range or is it accelerating and what the drivers. If it is accelerating or is it ASP trending up or any color there.

Adam Spice: Great.

Adam Spice: And then my other question is on the launch business. I understand that Neutron is going to add to the backlog this quarter, but Electron growing 55 million. I'm just wondering how that compares to the last few quarters. Is that kind of in a range or is it accelerating? And what the drivers, if it is accelerating, are? Is it ASP trending up or any color that would be helpful? Yeah, I'll have a crack at it in a minute. Yeah, go ahead, Pete. Yeah, I'll have a crack. as well. So launch is lumpy, like actually launching the rockets is lumpy, so is the you know, that we can go a quarter without signing anything.

Speaker Change: It would be helpful.

Speaker Change: Yeah.

I mean, yeah go ahead Pete.

Pete: I'll have a crack and maybe add a bit more color as well.

Pete: Launches lumpy like extra launching the rocket is lumpy so as that was the contracts and.

Pete:

We can go a quarter without finding anything so as far as historical kind of.

Adam Spice: So as far as historical... I mean, uh, certainly. for Electron, but it tends to be pretty. Yeah, and if you if you look at certainly we booked more launches. And again, as Pete said, it's lumpy, because we're chasing bigger multi launch agreements. But also the you know, the ASP has been very supportive. So I mentioned earlier that the average selling price for 2024 for Electron works out to be about seven and a half million per launch. And we've also talked on previous calls that our total backlog for Electron is priced at around $8.2 million ASP.

Pete: Look backs I mean, certainly this is a this is you know.

Pete: It's been a good quarter for.

Elektron, but it tends to be pretty lumpy.

Pete: Throughout.

Speaker Change: Yeah, and if you look at certainly we book more launches than again as Steve said, it's lumpy because we're chasing bigger multi launch agreements.

Speaker Change: But also the ASP has been very supportive as I mentioned earlier that the average selling price for 2024 for Elektron works out to be about seven 5 million per launch and we've also talked on previous calls that our total backlog for elektron.

Is price at around $8 $2 million Asps. So we're actually doing we're doing better on booking at higher prices. So that we're having a beneficial.

Adam Spice: So we're actually doing, we're doing better on on booking at higher prices so that that we're having a beneficial ASP mix effect. And that's that's obviously helping contribute to the to the backlog growth, but also to what we believe is kind of a nice steady progress towards our target, our target margins for that Electron business.

Speaker Change: ASP mix effect.

Speaker Change: That's obviously, helping contribute to the backlog growth, but also to what we believe is kind of a nice steady progress towards our targets our target margins for the elektron business.

Speaker Change: Okay very helpful. Thanks, guys.

Adam Spice: Very helpful. Thanks, guys.

Andre Madrid: Your next question comes from the line of Andre Madrid with BTIG. The line is open. Adam, Peter, thanks for the time. I know we kind of danced around it, but I wanted to just ask more specifically, how much was total neutron development cost in 3Q? I know previously, you said about 160 for the year, or about 40 mil a quarter. And also like, is that kind of still an appropriate target? Looking all in? Yeah, I'm just pulling up a number right now. Yeah, no, this in Q3, it was it was total net spend for neutron across OPEX and CAPEX it was just a hair under 44 million.

Speaker Change: Your next question comes from the line of Andrea James with <unk>. Your line is open.

Speaker Change: Yeah.

Speaker Change: Adam Peter Thanks for the time.

Speaker Change:

I know, we kind of danced around it but I wanted to just ask more specifically how much was total neutron development costs and <unk>.

Speaker Change: I know previously you said about $1 60 for the year or about 40 mill at quarter.

Speaker Change: And also like is that kind of still an appropriate target looking all in.

Speaker Change: Yes, Im just going to have a number right now yes in.

Speaker Change: In Q3 it was it was.

Speaker Change: Total able you have to split out between the different elements, but if you look at total net spend for neutrolin across Opex and Capex. It was just a hair under $44 million.

Adam Spice: Got it. Okay. And I think that's going to, you know, that's, that's going to, you know, step up as, as kind of, as we continue to kind of get towards the, the first launch. So that's why this first launch of Neutron is so important for us, because that really has such a tremendous impact on the P&L, right? Where we have all of this cost right now, just flow hitting, hitting R&D. Once you get past that first test launch and you carry the first paying customer, you know, everything flips over. You've got now R&D associated with it, cost of sales and so forth.

Speaker Change: Got it got it Okay, and then I think.

Yes.

Speaker Change: And that's going to that's going to.

Speaker Change: Step up is.

Speaker Change: Kind of as we continue to kind of get towards the first launch. So that's why this first launch of Neutrolin is so important for us.

Speaker Change: Because that really is such a tremendous impact on the P&L right, where we have all of this cost right now just flow hitting hitting R&D.

Speaker Change: Once you get past that first test launch and to carry the first paying customer everything's flips over you've got now R&D associated with the cost of sales and so forth. So it's.

Adam Spice: So it's a, you know, it's a super important thing for us to get that first launch off because it kind of caps that initial spend, because you'll have minimum viable product, both in the rocket and on the infrastructure side of the house. And so, and I think probably, you know, along with that, you know, we still feel very, very comfortable that we are, you know, we're within our target original budget for, for Neutron. And if you think about, you know, we, we, we talked, this is going back, you know, when we came, we came public, you know, three years ago now, a little over three years ago, we said it was going to take roughly three, four years and cost $250 to $300 million.

Speaker Change: It's a super important thing for us to get that first launch off because it kind of caps that initial spend because youll have minimum buyable product both in the rocket and on the infrastructure side of the house.

Speaker Change: And so I think probably.

Speaker Change: Along with that we still feel very very comfortable that we are you know.

Speaker Change: We're within our target at original budget for for neutron and if you think about we.

Speaker Change: We talked this is going back when we came we came public you know.

Speaker Change: Three years ago now little over three years ago, We said it was going to take roughly three or four years and costs $250 million to $300 million and we put that in pretty Stark contrast to what some other kind of medium and larger launch vehicles of cost and the many many billions of dollars and taken the better part of a decade to get to to first launch so.

Adam Spice: And, you know, we put that in pretty stark contrast to what some other kind of medium and larger launch vehicles would cost, you know, in the many, many billions of dollars and taken, you know, the better part of a decade to get to, to, to first launch. So we feel like we're, we're on track and we're going to kind of set a new benchmark for capital efficiency and timing of getting a new launch vehicle to the pad. Got it, got it.

Speaker Change: We feel like we're on track and we're going to kind of set a new benchmark for capital efficiency and timing of getting a new launch vehicle to the pad.

Speaker Change: Got it got it and if I could squeeze in one more could.

Adam Spice: And if I could squeeze in one more. Could you maybe highlight backlog at some of the non-photon space systems businesses like PSC, Sinclair? I mean, you know, how is expansion and acquiring more business progressed at that line? Yeah, you know, those businesses continue to grow at a pretty healthy clip. If you look at our, you know, our target growth for the components business within space systems is around 20%. And we feel very comfortable. We've been delivering considerably better than that in some parts of our business. I would say that of our components businesses, Sinclair's probably had experienced the most recent growth.

Speaker Change: Could you maybe highlight backlog at some of the non photon space systems businesses like PSC Sinclair I mean, how is how is expansion in acquiring more business progressed at that line of business.

Yes, those businesses continued to grow at a pretty healthy clip. If you look at our our target growth for the components business within space systems is around 20%.

Speaker Change: And we feel very comfortable we've been delivering better than that considerably better that in some parts of our business I would say that you know all of our components businesses Sinclair has probably had experienced the most recent growth and that's driven by the Mega constellations reaction, we'll contract that we've talked about in the past that you know.

Adam Spice: And that's driven by the mega-constellation reaction wheel contract that we've talked about in the past that has been starting to shift. But we've seen strength across all of that. If you take an aggregate, we kind of look at it across all of it. And when you look at our merchant business or the components business, there's really two pieces to that. There's the merchant components that we sell into other spacecraft manufacturers, and then there's the integrated or vertically integrated supply element where we're now supplying our own feed, if you will, into these spacecraft manufacturing projects that we've won like SDA and like the MDA Global Star.

Speaker Change: As Ben has been has been starting to ship.

Speaker Change: But we've seen strength across.

Speaker Change: Across all of that if you take it in aggregate and we kind of look at it across all of that and when you look at our merchant business are the components business is really two pieces to that there's the merchant component that we sell into other spacecraft manufacturers and then there is the the integrated or vertically integrated supply element, where we're now supplying our own feet. If you're willing to these spacecraft manufacturing projects that we've won.

SBA and like the MTA globalstar, so it's really it kind of the growth is fueled not only by overall macro growth in the broader merchant market, but also from our own two of our own internal consumption as well. So we feel really good about it.

Adam Spice: So it's really kind of the growth is fueled not only by overall macro growth in the broader merchant market, but also from our own internal consumption as well. So we feel really good about, you know, continuing a 20 percent CAGR for that business. I think, you know, some will be stronger than others, right? Like this year, I said we're having more strength in Sinclair and that probably continues through next year. And then, you know, as we look forward into 2025 and 26, based on a lot of these big programs, we're going to have very good years for our solar, too, because, you know, we're dedicating a significant amount of our capacity to internal programs. And overall, you know, it's actually has a very healthy kind of roadmap, I would say, for gross margin as well.

Speaker Change: Continuing a 20% CAGR for that business I think some will be strong in those rate like this year I said, we are having more strength and Sinclair and that probably continues through next year.

Speaker Change: Then as we look forward into 2025 and 26 based on a lot of these big programs. We had very good years for our solar too because we're dedicating a significant amount of our capacity to integral programs.

Speaker Change: And overall, it's actually has a very healthy.

Speaker Change: Roadmap is safer for gross margin as well if you look at the components or subsystems business, that's kind of in the already in the call. It low to mid forties non-GAAP gross margin.

Adam Spice: If you look at the components or subsistence business, that's kind of in the already in the low to mid 40s non-gap gross margin. And we think there's some upside to that. And then there's just the kind of a little bit of the offset where you have these bigger program gross margin models that are kind of more towards, call it 30 percent. So you've got that blending effect there. But we feel really good about all the elements of that subsistence business.

Speaker Change: And we think there's some upside to that and then there is just a kind of a little bit of the offset where you have these bigger program gross margin models that are kind of more towards call. It 30%. So you've got that blending effect there, but we.

Speaker Change: We feel really good about all the elements of that that sub system business.

Adam Spice: And since you brought it up. What's the mix between what goes in-house for components versus what's, you know, delivered as a merchant supplier? And do you guys have a target mix for space systems, I guess? Yeah, that's a good question. I don't have that data at the tip of my fingers. And I don't really want to try to guess on that. I mean, I think for some some of the businesses, we have a little bit more visibility. So I'd say, for example, I think in our, in our solar business, I think our internal capacity consumption right now is probably only about 10%.

Speaker Change: And since you brought it up.

Speaker Change: What's the mix between what's go what goes in house for components versus what's delivered as a merchant supplier and do you guys have a target mix for for space systems I guess.

Speaker Change: Yes, that's a good question I don't have that data at the tip of my fingers.

Speaker Change: And I don't really want it.

Try to guess on that I mean, I think for some some of them because we have a little bit more visibility. So I'd say for example, I think.

Speaker Change: In our solar business I think our internal capacity consumption right now is probably only about 10%. So 90% is going out to the merchant market to a lot of the.

Adam Spice: So 90% is going out to the merchant market to a lot of the people that sell into the national security market for these exquisite systems. When you look at our the separation systems business, for example, we sell a much more externally than we consume internally, just the fact because, you know, it's the it's it's one of those predominant separation systems that flies on basically all rockets. So really, there really is there really isn't a mix. And but that's a good question.

Speaker Change: People that sell into the security market for these exquisite systems.

Speaker Change: When you look at the.

Speaker Change: The separation systems business for example, we sell.

Speaker Change: Much more externally than we consume internally just effect because.

Speaker Change: It's one of those predominant separation systems it flies on basically all rockets.

So it really there really isn't there really isn't a mix.

Adam Spice: We can certainly follow up offline and see if we can we can get you more kind of concrete answer that. Yeah, definitely, I would appreciate that.

Speaker Change: But that's a good question, we can certainly follow up offline and see if we can we can get you more kind of concrete answer that.

Yeah definitely I would appreciate that Adam thanks, so much for the color really appreciate it.

Adam Spice: Adam, thanks so much for the call, I really appreciate it. Sure.

Speaker Change: Sure.

Jason Gursky: The next question comes from Jason Gursky with Citi, your line is open. Hey, good afternoon, everybody.

Next question comes from Jason Gursky with Citi. Your line is open.

Jason Gursky: Hey, good afternoon everybody.

Jason Gursky:

Yeah.

Peter Beck: Pete, I want to have you just walk us all through, if you don't mind, one more time, why it is that we have to do one, three, and five. And if there isn't an opportunity. to go a little faster here. You suggest that, you know, history would suggest, with others, you gotta do it that way, but why is that the case? And Adam, you talked about throwing catbacks. There's some more CAPEX coming into the mix here. Is this a... Something we could throw some capital at and speed things up a bit.

Speaker Change: If you don't want to have you just walk us all through if you don't mind, one more time.

Speaker Change: Why it is that we have to do one three and five.

Speaker Change: And if there isn't an opportunity.

Speaker Change: To go a little faster here you suggested here.

History would suggest with others you gotta do it that way, but why is that the case and then you talked about strong capex.

Speaker Change: Some more capex coming into the mix here is this is this.

Something we can throw some capital out in and speed things up a bit.

Peter Beck: Jason, you asked the question that Adam asked me every day. And there's some things that you can throw as much capital as you want, but until you fly, you can only learn a certain number of things. And look, 135 is a pretty. pretty good pretty good scaling rate at best and you know fundamentally you know you fly your first rocket and you know you'll you'll do you do the best job that you think you can there's there's a whole lot of stuff you can test on the ground and then there's a whole lot of stuff you can't And, you know, it's just, we'll obviously forward build as many of the components that we think in many of the systems and instructions.

Jason Gursky: Jason you asked the question that Adam asked me every day and there's some there's some things in there that you can throw as much kept what you want but until you fly.

Jason Gursky: You can only learn learn a certain number of things and look 135 is a is a pretty.

Jason Gursky: Pretty pretty good pretty good scattering right at best and fundamentally you fly you first rocket and.

Jason Gursky: Do you do the best job that you think you can there's a whole lot of stuff you can taste on the ground and then there's a whole lot of stuff you context on the ground.

Jason Gursky: And you know.

It's it's just we're obviously for build as many of the components that we think in many of the systems and structures as we can but you can find yourself just in a in a in a didi and pretty quickly but it also it just it just takes it just takes time to scale the production line.

Peter Beck: But you can find yourself just, you know, in a dead end pretty quickly. But it also, it just takes time to scale the production. And, you know, we've tried to front-end it as best we can, you know, with the engine production line. Generally, the engines are the longest pole in the tent from a production perspective. So, you know, we've really leaned into that, so hopefully we can do better. but it just it just takes time to put one on the pad and and commission it and learn it and learn from it and then roll those iterations into the next.

Jason Gursky: And we've tried to we've tried to fronting that is loaded as best we can you know with the engine production line generally the engines.

Jason Gursky: Are the longest pole in the team from a production perspective, so we've really really leaned into that so hopefully we can do better.

Jason Gursky: But it just it just takes time to put one on the pad and commission it and learn it and learn from it and then rollout of iterations into the next vehicle.

Peter Beck: And, you know, we're flying customers' payloads. So, you know, everything has to be very methodically thought through and every change is, you know, well qualified, you know, to reach that cadence. I guess it might be a slightly different story if you had no customers and you just threw everything at it and had a different risk posture. But, you know, we're looking to get into commercial operations as quickly as we can. And so when you're flying a customer, you can't just... You have to be fast and loose. You have to be very methodical in any of the changes that you roll.

Jason Gursky: And you know we were flying customers pilots so.

Everything has to be very methodically thought through in every changes well qualified.

Jason Gursky: <unk>.

Jason Gursky: To reach that guidance I guess it might be a slightly different story. If you heard in our customers and you just would just you just threw everything at it and had a different risk posture.

We're looking to get into commercial operations as quickly as we can so when you're flying a customer you can't just kind of.

Speaker Change: It does.

Speaker Change: It'd be fast and loose you have to be very methodical in any of the changes that you're that you Roland.

Peter Beck: So, and we just don't want to be unrealistic with what...

Speaker Change: And we just we just don't Wanna be unrealistic with with what what's being you know what can tangibly to be delivered.

Jason Gursky: you know what can tangibly But Jason, I'll be asking Pete that question every day going forward as well. Yeah, if you can do it on my behalf, I appreciate that.

Speaker Change: Hey, Jason.

Speaker Change: I'll be asking that question every day going forward as well.

Speaker Change: Yeah Yeah.

Speaker Change: I can do it on my behalf I appreciate that.

Peter Beck: And then, you know, Pete, look, 1, 3 and 5. Okay, so we've got six launches, one's a test. But as you look at the pipeline, I mean, over that time period, if you had more capacity, is there more demand out there? I just want to maybe strip out the national security launch just on the commercial side of things. I'm just trying to get a better gauge of supply and demand equilibrium. Yeah, well, I mean, that's the fundamental reason why you're asking this question, Adam asked this question, everybody asks this question, is how can we scale faster?

Speaker Change: And then Pete look.

Speaker Change: One three and five okay. So you've got six launches once the test.

Speaker Change: But as you look at the pipeline I mean over that time period, if you had more capacity.

Is there more demand out there I just want to.

Speaker Change: And maybe strip out the National security launch just on the commercial side of things I'm, just trying to get a better gauge of supply and demand equilibrium.

Speaker Change: Yeah, well I mean, that's the fundamental reason why you're asking this question that I'm asked the question everybody asks question is how can we scale faster.

Peter Beck: And indeed customers. But the worst thing you can do is, you know, promise a customer that, you know, you're going to be able to provide a whole bunch of launch. They make a big commitment to you, and then you don't deliver. Because that's just, it plays havoc with their business. So that's not good not due to their business or long long-term relationships or quite frankly a reputation. So, of all the things we worry about, and I think we've said before, demand's not one of them. We worry more about how fast can we scale the... rather than, you know, are their customers there to, you know, to fly.

Speaker Change: And indeed customers, but the worst thing you can do is is promising.

Speaker Change: Promise of customer that you're going to be able to provide a whole bunch of launch like they can make a big commitment to you and then you don't deliver because that that's just it plays havoc with your business.

Speaker Change: That's not good for you now.

Speaker Change: Good for their business or long term.

Speaker Change: Long term relationships or quite frankly that reputation.

Speaker Change: So I have all the things we worry about them and I think we've said before demand is not one of them. We worry more about how fast I can you know how fast can we can we scale the neutron.

Rather than others.

Speaker Change: All the customers that are you know to Florida for sure.

Peter Beck: Right.

Peter Beck: Okay, then last one for me.

Speaker Change: Right, Okay, and then last one for me.

Peter Beck: I'm just kind of curious, we've got a new administration coming to town. Let's see here, I guess, what policy statements have you heard today that, you know, either have you encouraged or are giving you a little bit of pause? And, you know, what would you suggest we hear on the outside kind of pay attention to here as this transition? happens. What are you going to be looking for and looking to hear from the new administration? Yeah, it's a really good question. So I think, you know, what I take out of it is that I don't think there's ever been such a focus on space from any administration.

Speaker Change: I'm just kind of curious you've got a new administration coming to town.

<unk>.

Speaker Change: Let's see here I guess.

Speaker Change: What what policy statements if you heard to date that.

Speaker Change: Either have you encouraged or.

Speaker Change: Or giving you a little bit of pause and you know what would you suggest we here on the outside kind of pay attention to here is this transition.

Happens what do you what are you going to be looking for looking to hear from the new administration.

Speaker Change: Yeah, It's a really good question.

So I think you know.

Speaker Change: What do I take out of it is that I don't think there's ever been such a focus on space from any administration.

Peter Beck: you know, perhaps. back in the Apollo era. But I mean, it's very clear that this administration has a very strong focus on space, which is good. And when space wins, rocket Also, you know, we see a very strong focus on national security, which is obviously a core part of our business. But I guess probably the thing I'm most excited about is there's a real focus on moving away from the kind of, you know, slow government contracting and really focusing on commercial providing much more of the, you know, traditional. which is really, when you think about it, there's only a few companies that are really well positioned to take advantage of those.

Speaker Change #100: Perhaps perhaps.

Back in the Apollo here about I mean, it's very clear that this administration has a very strong focus on space, which which is good and when spice wins rocket lab wins.

Speaker Change #100: So you know we see a very strong focus on national security.

Speaker Change #100: Which is obviously a core part of our business, but I guess, probably the thing I'm. Most excited about is is.

Speaker Change #100: There's a real focus on moving away from the kind of.

Speaker Change #100: Slow government contracting and really focusing on commercial providing much more of.

Speaker Change #100: The traditional space.

Adam Spice: Spice and government services, which is which is really when you think about it there's only a few companies that are really well positioned to.

Adam Spice: To take advantage of those commercial opportunities and us being one of them sorry.

Peter Beck: So, you know, look, I look out on the new administration. Right. Okay, great.

Adam Spice: Look I I look out on the new administration with.

Adam Spice: With with with a quite quite a quite a bullish outlook given that given the given those kind of three things.

Speaker Change #101: Right, Okay, Great I'll pass the line appreciate it.

Peter Beck: I'll pass the line. Appreciate it.

Michael LeShock: And your next question comes from the line of Michael Leshock with KeyBanks Capital Markets. Your line is open. Hey, thank you.

Speaker Change #102: And your next question comes from the line of Michael <unk> with Keybanc capital markets. Your line is open.

Speaker Change #103: Hey, Thank you I wanted to ask on space system, you've talked about both organic and inorganic ways to scale. The business was just hoping for an update there on the M&A pipeline, whether you see any new opportunities and then secondly, you also have those organic initiatives like additional clean room capacity that you already have.

Peter Beck: I wanted to ask on space systems, you've talked about both organic and inorganic ways to scale the business, was just hoping for an update there on the M&A pipeline, whether you see any new opportunities. And then secondly, you also have those organic initiatives, like additional clean room capacity that you already have the footprint for. Just wondering if you could provide some more details there. And how much is left, how much is left to go on those initiatives?

Speaker Change #103: Footprint for I'm, just wondering if you could provide some more details there and how much is left how much is left to go on those initiatives. Thanks.

Peter Beck: Thank I can take a swing at this, Adam, and maybe you... follow it up. On the kind of the, you know, organic stuff, you know, we always have a number of new products and things in development. Some of those are spinoffs from some of the programs that we're developing. Some of them are just areas that we think there's a market opportunity for. And, you know, the way we kind of talk about those is obviously... Product releases from us so that that will you know and when we have when we have something that and you know a pretty strong reputation that you know we really think we have done we don't we don't kind of talk about it until really it's done and you saw that with even reaction wheels or something like the haste missions, you know, we announced a haste mission and then...

Speaker Change #104: I can take a swing at this Adam maybe you can follow it up on the kind of the the.

Speaker Change #105: Organic stuff.

Speaker Change #106: We have we always have a number of new products and things in development. Some of those are spinoffs from some of the programs that we're developing some of them are just areas that we think the market opportunity for an end.

Speaker Change #106: The way, we kind of talk about those as obviously you know you've seen in the past product releases from us so that will and when we have when we have something that we think is.

Speaker Change #106: Is ready then we release it and I think we have in our.

Speaker Change #106: A pretty strong reputation that we released it when it's done we don't we don't kind of guide.

Speaker Change #106: Talk about it until really it's it's done and you saw that with some even reaction wheels or something like the highest emissions, we announced had its highest Michigan and then a number of weeks I wasn't launched one so that that that's kind of the way we roll with with with organic product development and then inorganic we always maintain a.

Peter Beck: a number of weeks later when we launched one. So that's kind of the way we roll with organic product development.

Adam Spice: And then inorganic, you know, we always maintain a pretty healthy pipeline and, you know, maybe, Adam, you can provide. Yeah, I'd say on the on the corporate development front, we continue to look at a lot of assets out there. I think that, you know, one thing is we're very selective, right? I think if you look at the assets that we've that we've acquired in the past, you know, the team is always at the center of it. If you look at the fact that, you know, you pick any one of the deals, they've always been leading products in their in their area, you pick, you know, from solar, where they've never had a single failure on orbit, you know, to bring new kind of innovative capabilities to the market through the software capabilities for command and control software for ASI, and separation systems from PSC, and so forth.

Speaker Change #106: Pretty healthy pipeline and maybe Adam you can provide some more comment on that.

Adam Spice: Yeah, I'd say on the on the corporate development front, we continue to look at a lot of assets out there I think that one thing is we're very selective right. So I think if you look at the assets that we've that we've acquired in the past. The team is always at the center of it. If you look at the fact that you can pick any one of the deals you've always been leading products in their in their area.

Solar where they've never had a single failure on orbit.

Adam Spice: Bringing new innovative capabilities to the market through the software capabilities for command and control software for ASI and separation systems from PSC and so forth. So it's really.

Peter Beck: So it's really, you know, I would say we continue to look at things. And what we've largely gotten the bus, the satellite bus, into a point where we have most of the capabilities there that we think that we need to be kind of that, to fulfill the end to end requirements there, there's still a few little things here and there that we're working on. And we're actually trying to address those and some of those organically as well, not just inorganically. But probably the biggest missing piece to space systems, from, you know, that's going to be filled likely through inorganic is going to be on the payload side.

Adam Spice: I would say we continue to look at things and we've largely gotten the bus the satellite bus into a point, where we have most of the capabilities. There that we think that we need to be kind of debt to fulfill the end to end requirements. There. There's still a few little things here and there that we're working on and we're actually trying to address those and some of those organically.

Adam Spice: Well, not just inorganically, but probably the biggest missing piece to space systems.

Adam Spice: From a.

Adam Spice: It's going to be filled likely through inorganic is going to be on the payload side. So we really kind of stop at that the payload right now and certainly as we we've talked many many times about our grander ambitions of having our own applications on orbit.

Peter Beck: So we really kind of stop at the payload right now. And, you know, certainly as we, you know, we've talked many, many times about our large, our grander ambitions of having our own applications on orbit, you know, that's going to be benefited by having our own internal capabilities around the payload side of the system. So, you know, there's, there's, fortunately for us, there's actually quite a few assets out there that are quite interesting that are kind of I'd say poised to be part of a, of a much bigger, you know, consolidated platform like we're building.

Adam Spice: Is gonna be benefited by having our own internal capabilities around the payload side.

Adam Spice: Of the system.

<unk>.

Adam Spice: Fortunately for US there is actually quite a few assets out there that are quite interesting that are kind of.

Adam Spice: I'd say poised to be part of a much bigger consolidated platform like we're building. So I think there's there's ample opportunities there, but we're very discipline has got to be the right team, it's going to be the right time, it's got to be right price and.

Peter Beck: So I think there's, there's ample opportunities there, but, you know, we're very disciplined. It's got to be the right team. It's got to be the right time. It's got to be the right price. And so far, we haven't gotten those three stars to align, but, you know, I'm pretty confident that we'll get some of those stars to align in the not too distant future. And I think that will also provide a bit of a breadcrumbing for folks to understand a little bit more specifically which applications we're targeting, because, you know, a lot of the payload is obviously very specific to the application.

Adam Spice: So far we havent gotten those three stars to align but I'm pretty confident that we will get some of those stars to align the not too distant future.

Adam Spice: And I think that will also provide a bit of a brand crumbing for Pope for boats to understand a little bit more specifically, which applications were targeting because you will love. The payload is obviously very specific to the application.

Peter Beck: And so having having kind of, you know, some insight into kind of the capabilities that we'd be acquiring would kind of give you some ideas about where we're going from applications perspective, which I know everyone's, you know, chomping at the bit to try to understand better.

Adam Spice: And so having having kind of some insight into kind of the capabilities that we'd be acquiring would kind of give you. Some ideas about where were going for applications perspective, I know everyone's you are chomping at the bit to try to understand better.

Peter Beck: Okay, great. I appreciate all that detail. I'll leave it there.

Speaker Change #107: Okay, Great I appreciate all that detail I'll leave it there thanks guys.

Peter Beck: Thanks, guys. Your next question comes from the line of Anthony Valentini with Goldman Sachs. Your line is open. Hey, guys, thanks for taking my question. You got Anthony on for NOAA tonight.

Speaker Change #107: Your next question comes from the line of Anthony Valentini with Goldman Sachs. Your line is open.

Anthony Valentini: Hey, guys. Thanks for taking my question you got Anthony on for <unk> Tonight.

Anthony Valentini: Sorry to beat this point to death here, but it's been pretty well publicized at this point that Amazon's Kuiper has to get, you know, over a thousand satellites into orbit, I think by mid-2026. And they have orders with some of your competitors for launch vehicles that either have not launched yet or in very limited cadence. So I guess my question is, you know, do you guys stand to benefit from that between now and 2026, where you guys can get a piece of that pie? Or is it, you know, to what Peter was talking to in an earlier answer, it's just not possible given capacity and how many slots you guys have available?

Anthony Valentini: Sorry to beat this point to death here, but.

Anthony Valentini: It's been pretty well publicized at this point that Amazon's Kuiper has to get over.

Anthony Valentini: Over 1000 satellites into orbit I think by mid 2026.

And they have orders with some of your competitors for launch vehicles that either.

Have not launched yet or in very limited cadence.

Speaker Change #109: So I guess my question is do you guys stand to benefit from that.

Speaker Change #109: Between now and 2026, where you guys can get a piece of that pie or is it too.

Speaker Change #110: Peter was talking to in an earlier answer it's just not possible given capacity.

Speaker Change #110: How many slots do you guys have available.

Adam Spice: Well, I'll put it this way, as we said, Anthony, that demand is not something that we worry about, and that kind of falls into that category.

Well I'll put it this way as we see it Anthony is that demand is not something that we worry about.

Speaker Change #110: Post foods and falls into that category.

Adam Spice: Okay, that's helpful.

Speaker Change #111: Okay. That's helpful and then.

Adam Spice: And then, Adam, for you, is the systems segment profitable today? Well, you know, we only report our segments down to the gross margin line. And that's because we have a lot of, you know, shared resources across, across the different areas of development and production, so forth. And also, you know, we have one key decision, you know, maker, which is Pete, who kind of provides the overall kind of investment decisions or mandates across both businesses. So we, you know, we, I would say from a From a technical accounting perspective, you know, we, we, we can't say that the space systems businesses is profitable on that level.

Adam Spice: Adam for you is the systems segment profitable today.

Adam Spice: Well.

Speaker Change #112: We only report our segments down to the gross margin line and that's because we have a lot of shared resources across.

Speaker Change #112: Across the different areas of development and production and so forth and also.

Speaker Change #112: We have one key decision maker.

Speaker Change #112: Maker, which as Pete who kind of provides the overall kind of investment decisions or mandates across both businesses. So we we.

Speaker Change #112: From a I would say from a.

From a technical accounting perspective.

Speaker Change #112: We can't say that the space systems businesses.

Speaker Change #112: Profitable on that level.

Adam Spice: But what we can tell you is that, you know, when we look at you know, kind of anecdotally across each of the lines of business, it would be it'd be it'd be safe to say that, you know, that the vast, vast majority, if not all of the cash consuming nature of this business is coming from Neutron. Right, so I think that's, again, that's one of the most important things about getting Neutron to a minimum viable product in the first launch up. Things will become a lot more clear at that point. And actually, at some level, it doesn't really matter, because then the overall profitability of the company starts to shine through.

Speaker Change #112: But what we can tell you is that you know.

Speaker Change #112: When we look at.

Speaker Change #112: Kind of anecdotally across each of our lines of business.

Speaker Change #112: It would be it would be it would be safe to say that the that the vast vast majority if not all of the cash consuming nature of this business is coming from neutral.

Speaker Change #113: Alright so.

I think that's again that's spoken of the most important things about getting neutron to at a minimum viable product in the first launch up things will become a lot a lot more clear at that point.

Speaker Change #113: And actually at some level doesn't really matter because in the overall profitability of the company starts to shine through.

Adam Spice: So, you know, again, I would say that we can't say, you know, technically, that space systems is profitable at this point, because we just don't account for the business at that level right now.

Speaker Change #113: So.

Speaker Change #113: Again, I would say that we can't we can't say technically the space systems is probably one because we just don't account for the business at that level right now that could change in the future, but that's not the current kind of approach we take to it.

Adam Spice: That could change in the future, but that's not the current kind of approach we take to it.

Adam Spice: Okay, yeah, that makes a ton of sense.

Speaker Change #114: Okay, Yes that makes a ton of sense last one from me here I just want to confirm the test flight on neutron in 2025, that's no revenue right.

Adam Spice: Last one for me here. I just want to confirm the test flight on Neutron at 2025, that's no revenue, right? Correct. Yeah, there won't be any revenue associated with that launch. But we are working on things that would allow us to have, you know, probably some contra revenue, sorry, contra R&D associated with that. So looking to do some creative things there where we can kind of buy down our cost of that test launch. And so that's, that's something that we're working pretty hard towards. And hopefully we can get we can get some of that to come into focus.

<unk>.

Speaker Change #115: Correct, yes, there wont be any revenue associated with that launch, but we are working on things that would allow us to have probably some contra revenue sorry, contra R&D associated with that so looking to do some creative things there, where we can kind of buy down our cost of that test launch.

Speaker Change #115: And so that's something that we're working pretty hard towards and hopefully you can get we can get some of that to come into focus.

Adam Spice: Awesome.

Adam Spice: Thank you guys so much. Appreciate the time.

Speaker Change #116: Awesome. Thank you guys. So much appreciate the time.

Yeah.

Speaker Change #116: Yeah.

Cai Von Romer: Your next question comes from the line of Cai Von Romer with T.D. Cohen. Your line is open. Super. Thanks so much. So Adam, your ASPs for Electron have gone down sequentially for three straight quarters, and yet your gross margin has improved. Now I know that costs are kind of specific to each mission, but what does that tell us about the underlying core profitability of Electron? Yeah, it's really a function of, so when you talk about, you know, ASP, the ASP is a function of customer timing, right? And so we have some customers that, you know, sign up for many launches, and as a result of signing up for these bulk buys, they naturally get a lower price.

Speaker Change #117: Your next question comes from the line of Cai von <unk> with TD Cowen Your line is open.

Speaker Change #118: Super Thanks, so much.

Speaker Change #119: So Adam your your your Asp's for Elektron have gone down sequentially for three straight quarters and yet your gross margin has improved now I know that.

Speaker Change #119: Costs are kind of specific to each mission, but.

Speaker Change #120: What does that tell us about the underlying core profitability of electronics.

Speaker Change #120: Yes, it's really a function of.

Speaker Change #120: So when you talk about Asps.

Speaker Change #120: Asps ESP as a function of customer timing right and so we have some customers that sign up for many launches and as a result of signing up for these bulk buys they do naturally get a lower price.

Adam Spice: And we get the benefit of having actually better margins on a lot of those flights, because a lot of the work doesn't have to get redone. All the, you know, the GNC work that you have to do for each individual flight, you know, you don't have to redo that. You get maybe the benefit of having payload adapter plates that are common, you know, across multi-launch deals. So a lot of what you're seeing, the ASP is, again, just a function of timing of where the customer wants to land. Again, we're very comfortable with the number that we set for the year at $7.5 million being the average.

Speaker Change #120: And we get the benefit of having actually better margins on a lot of those flights because a lot of the work is it doesn't have to get redone all the yes. The GNC work that you have to do for each individual.

Speaker Change #120: You don't have to redo that you get maybe the benefit of having payload adapter plate that are common across multi launch deals.

Speaker Change #120: So a lot of what you are seeing the ASP is it just a function of timing of where the customer while Atlanta, but we're again, we're very comfortable with the number that we slept for the year at $7 $5 million being the average and of course before our backlog total backlog is positive $8 $2 million per electron so that kind of shows you where it's going.

Adam Spice: And of course, as I mentioned before, our backlog, total backlog is priced at $8.2 million per electron. So that kind of shows you where it's going. And then the reason why the gross margin has gone up despite having the optics on the ASP is because we've been getting production efficiencies, right? So as we've gotten better at building these electrons, the cost is coming down, which has helped for us. So even as ASP may go down, gross margins go up. I think that's kind of the most salient points of kind of the gross margin trend analysis.

Speaker Change #120: And then the.

Speaker Change #120: The reason why the gross margin has gone up.

Speaker Change #120: Despite having the chat.

Speaker Change #120: The opex on the on the Asps because.

Speaker Change #120: We've been getting production efficiencies Bryan so as we've gotten better at building. These electrons the other cost is coming down which.

Speaker Change #120: Which has helped for us so even as Asps go down gross margin go up.

Speaker Change #120: I think that that's kind of the.

Speaker Change #120: The most salient points of kind of the gross margin trend analysis.

Peter Beck: Got it. And the second one is, um... You know, you started the year, Peter, you mentioned that 22 launches sort of scheduled or targeted, and we're going to probably end up at 15 to 18. Have you ever thought, I mean, and one of the big problems is that you commit to a certain price, and the customer commits to a certain date, but it's not a hard date. Have you ever thought of a kind of pricing so that if the customer misses, the price goes up? And I know that you have other competitors, but certainly, if you could get your number of launches up, you've made a big point of how high the fixed launch costs are.

Speaker Change #121: Got it and the second one is.

Speaker Change #121: You you know you started the year, Peter you mentioned that 22 launches sort of scheduled or targeted and we're going to probably end up at 15 to 18.

Speaker Change #121: Have you ever thought I mean, and one of the big problems is that you commit to a certain price and the customer commit to a certain date, but it's not a hard date have you ever thought of kind of.

Speaker Change #121: Pricing, so that if a customer misses the price goes up and I know that you have other competitors, but certainly if you could get your number of launches off you've made a big point of how high the the fixed launch costs Sars or any thought of kind of getting that that volume.

Peter Beck: Is there any thought of kind of getting that volume, you know, thinking of ways, creative ways of getting that volume up? Yeah, I mean, some launch contracts have provisions for penalties, but I mean, you know, if a customer has had a failure of something in a TVAC, and then you start loading penalties on them, you know, it's not great for long-term relationships, and I think the learnings here for us, and I think for everybody as well, is that the service that we provide is a bespoke, dedicated service for... And they pay the premium for that, you know, you compare an electron to a rideshare.

Speaker Change #121: Thinking of ways creative ways of getting that volume up.

Speaker Change #122: Yes, I mean, some some launch contracts have provisions for penalties.

Speaker Change #122: And but I mean.

Speaker Change #122: If a customer has had a failure of something and a T back and then then you start loading penalties on them.

Speaker Change #122: It's not it's not great for long term relationships and I think that the.

Speaker Change #122: <unk> is here for us and I think for everybody as well is that the service that we provide is is it for spark.

Speaker Change #123: Dedicated service.

Speaker Change #123: The customers tomorrow, and they pay the premium for that.

Speaker Change #123: Alright.

Speaker Change #123: Your computer and electron to a rideshare. It's it's it's many many times higher so they pay that that's what they pay a premium for.

Peter Beck: many, many times higher. So that's what they're paying the premium for. I guess, you know, the point that we try and make is that, you know, once a customer goes into backlog and we start collecting, you know, the cash from. I think that what's interesting from that custom area, these customers never go away, they just sort of shift around. It's just a peculiarity of the way that revenue is recognized online. So, no, I think, I think, you know, we, we, we've. We continue to play launch whack-a-mole, and wherever possible, like you see we did in the last quarter, we'll take quick turns business and fill some gaps, but it's kind of the...

Speaker Change #123: I guess the point that we try and make as that.

Speaker Change #123: Once a customer goes into backlog and we start clicking the cash from from.

Speaker Change #123: From that customer and these customers never go away. They just sort of shift around it's just a peculiarity of the way that you know.

Speaker Change #123: Revenue is recognized on launch.

Speaker Change #123: No I think I think you know.

We have.

Speaker Change #123: We continue to apply.

Speaker Change #123: <unk> launch launch work them all when we have a possible like you see we did in the last quarter, we'll take quick turns business in Folsom fill some gaps.

Speaker Change #123: It's kind of you know that.

Speaker Change #123: <unk>.

Speaker Change #123: Or really.

Peter Beck: That's really the reality of the service.

Speaker Change #123: The reality of the service that we provide.

Peter Beck: Terrific. Thank you so much.

Speaker Change #124: Terrific. Thank you so much.

Speaker Change #124: Yes.

Operator: And there are no further questions at this time.

Speaker Change #125: And there are no further questions at this time I will turn the call back over to Peter <unk> for closing remarks.

Peter Beck: I will turn the call back over to Peter Beck for closing remarks. Great, and thanks very much for everybody sticking around for the questions as well, much appreciated.

Great. Thanks, very much for everybody sticking around for the questions as well much appreciated but before we close out today I just wanted to draw your attention to some of the up and coming conferences will be attending.

Operator: But before we close out today, I just wanted to draw your attention to some of the up-and-coming conferences we'll be attending. We'll look forward to sharing more exciting news and updates with you there. But that wraps up today's call and thanks everybody for sticking around and listening to all the progress that's been made. The team is certainly very proud of this quarter. Thanks very much.

Speaker Change #125: We look forward to sharing more exciting news and updates with you there.

That wraps up today's call and thanks, everybody.

Speaker Change #125: For for sticking around and listen to them and with the progress. That's been made at the team is certainly very proud of this quarter and what we've achieved this year. So thanks very much.

Operator: This does conclude today's conference. You may now disconnect.

Speaker Change #126: This does conclude today's conference you may now disconnect.

Speaker Change #126: Yeah.

Speaker Change #126: Yeah.

Speaker Change #126: Hum.

Speaker Change #126: Yeah.

Speaker Change #126: Hum.

Speaker Change #126: Yeah.

Speaker Change #126: Yeah.

Speaker Change #126: Yeah.

Speaker Change #126: Yeah.

Speaker Change #126: Yeah.

Speaker Change #126: Yeah.

Speaker Change #126: Yeah.

Speaker Change #126: Yeah.

Speaker Change #126: Yeah.