Q4 2024 Rocket Lab USA Inc Earnings Call
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Thank you.
Kelvin: Good evening and thank you for standing by. My name is Kelvin and I will be your conference operator today. At this time, I would like to welcome everyone to Rocket Lab's 4th Quarter 2024 Financial Results Update and Conference Call.
Kelvin: All lines have been placed on mute to prevent any background noise.
Kelvin: After the speaker's remarks, there will be a question and answer session.
Speaker Change: If you would like to ask a question during this time, simply press star followed by the number 1 on your telephone keypad. If you would like to withdraw your question, press the pound key or star 2. Thank you. I would now like to turn the call over to Murielle Baker, Intercommunications Manager. Please go ahead.
Murielle Baker: Thank you. Hello and welcome to today's conference call to discuss Rocket Lab's full year and fourth quarter 2024 financial results.
Murielle Baker: 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 harbour protection from liability established by the Private Securities Litigation Reform Act.
Murielle 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.
Murielle Baker: Such statements are based upon information available to the company as of the date hereof and are subject to change for future developments. Except as required by law, the company does not undertake any obligation to update these statements.
Murielle Baker: Now our remarks and press release today also contain non-GAAP financial measures within the meaning of Regulation G enacted by the SEC.
Murielle Baker: Included in such release and our supplemental materials are reconciliations of these historical non-GAP financial measures to the comparable financial measures calculated in accordance with GAP.
Murielle 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.
Speaker Change: Our speakers today are Rocket Lab founder and Chief Executive Officer Sir Peter Beck, as well as Chief Financial Officer Adam Spice. They'll be discussing key business developments and highlights including updates on our launch and space systems programs.
Speaker Change: We will discuss financial highlights and outlook before we finish by taking questions. So with that, let me turn the call over to Sir Peter.
Thank you.
Thank you. Thank you.
Speaker Change: Thanks Murielle and thanks for everybody joining us today. Look, 2024 was our biggest revenue year ever and I'm proud to share that we delivered very strong results for Q4 2024.
Speaker Change: and indeed for the full year. We achieved our highest annual revenue figure to date of $436 million, that's more than a 78% increase on previous years revenue, demonstrating that our strategy of delivering end-to-end space services is paying off and delivering significant growth.
Speaker Change: From Q3 to Q4 last year we saw growth of more than 26% and year-on-year Q4 growth was 121%.
Speaker Change: Something you'll hear me say often at Rocket Lab is we do what we say we're going to do, and in this case that's delivering significant growth, 382 percent increase, and Q4 revenue to be precise, since our entry into the NASDAQ in 2021.
Speaker Change: Space Systems' contribution has been continued strong execution across both spacecraft and constellation build and operation, as well as our merchant satellite component businesses.
Speaker Change: Now, let's dig into these areas in a little bit more detail in the following slides.
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Speaker Change: Our accomplishments in 2024 really speak for those record numbers. On the launch front we delivered a record number of 16 launches spanning Electron and Haste, all with 100% mission success.
Speaker Change: Once again, we have maintained our position as the leading small launch provider globally and the second most frequently launched US rocket annually.
Speaker Change: We signed more than $450 million in new contracts in 2024 across launch and space systems, further strengthening our backlog which currently sits at just over $1 billion.
Speaker Change: We also achieved a world first by successfully launching two missions within 24 hours from pads on either side of the planet.
Speaker Change: On the Space Systems front, there are too many achievements to distill into one slide, so here are just a couple of my favourites. We made significant progress on the design and build of the 40-plus spacecraft in our backlog, but I'm particularly proud of the team completing the manufacture and test of the twin spacecraft for NASA's Escapade mission to Mars.
Speaker Change: They did this on an impressively short timeframe and incredibly cost competitive for an interplanetary mission. While they're yet to launch, we're excited to see these birds on their way to the Red Planet soon.
Speaker Change: Our re-entry for Vardar was another major milestone, successfully enabling the first in-space manufacturing mission outside the International Space Station. Since Earth's re-entry early last year, we've delivered two more Pioneer spacecraft for Vardar, with the second safely returning to Earth in South Australia.
Speaker Change: Another third Pioneer spacecraft, Fulvada, is just now days away from launch.
Speaker Change: That's just a tiny snapshot of our achievements in 2024, but before we dig deeper into the updates across Electron, Neutron and Space Systems, I want to provide an overview of our strategic focus for this year.
Speaker Change: We're building a truly end-to-end space company. That means owning the full value chain of having the keys to unlock enormous potential from the rapidly growing space economy.
Speaker Change: The first two steps are well underway with launch and space systems, meaning that we have our own ride to space and we can build and operate the satellites on orbit.
Speaker Change: The final remaining step is space applications or delivering data or services from space using our own constellation.
Speaker Change: In 2024 we made significant progress across all three countries and we're building on that again in 2025.
Speaker Change: On the launch front, this year is the year of Neutron. We look forward to unlocking the medium-launch bottleneck by bringing Neutron to the pad to help launch more than estimated 10,000 Constellation spacecraft that need deployment in the coming decade.
Speaker Change: We continue to wrap up our small launch cadence with more than 20 missions in 2025 on the manifest across Electron and Haste.
Speaker Change: Of course, as usual, these missions only launch when our customers are ready. It's worth pointing out that, as far as I'm aware, Rocket Lab is the only launch provider with missions scheduled this year across small launch, medium launch, hypersonic suborbital test launch.
Speaker Change: This demonstrates the breadth of our launch experience and capabilities and also positions us to take advantage of the TAM exposure across several different growing launch markets.
Speaker Change: On the space systems front, we have more than 40 spacecraft in various stages of production right now. By the end of this summer, we expect to have, well, by the end of summer this year, we expect to have more than quadrupled the number of Rocket Lab spacecraft on orbit, ready to launch, or have completed their missions.
Speaker Change: I'm also excited to reveal a new addition to our spacecraft line-up, one that slots nicely into our vision for space applications, and I'll talk more about this satellite later in the call.
But first, now for some updates on Electron.
Speaker Change: 2024 was a fantastic year for Electron. Last year we increased our launch cadence 60% year on year and 2025 is shaping up to be even bigger. We've launched twice this year already, both times for satellite constellation operators and each with only 10 days of each other, within 10 days of each other.
Speaker Change: Last year's trend was building out satellite constellations with electron. In Q1 2025 this has continued with launches for constellation operators Black Sky and CNES.
Speaker Change: both of whom have booked multiple missions on Electron to deploy or replenish their constellations.
Speaker Change: Kines in particular is worth calling out since we launched them for the first time in June last year as part of a five launch deal
Speaker Change: We're now four launches in and on track to complete their fifth launch shortly, meaning that we will have deployed their full constellation of 25 satellites in less than a year. Now to put that into perspective, many constellation operators can wait for a year for their first launch with other providers.
Speaker Change: Last year we also signed a multi-launch deal with the Japanese earth imaging company IQPS for four electrons and then just this month they signed another agreement to double that and lock in eight electron launches for their constellation deployment over 2025 and 2026.
Speaker Change: In 2024 we built on our success in the small launch market with Electron's suborbital variant, Haste.
Speaker Change: Last year's Pentagon budget request for hypersonic research was up 46% to $6.9 billion on the two years prior, and we're ideally positioned to support this expanding market.
Speaker Change: We're the only commercial provider that's executed two launches in 21 days for the Department of Defence Mark TB programme, which we completed in Q4, and we have another five HACE missions locked in for the DoD and its contractors.
Speaker Change: In January, we also announced that we've been selected by Kratos to support the next phase of the MarkTB program, called MarkTB 2.0. It's a $1.45 billion five-year contract to expand hypersonic technology testing and with HACE, we're uniquely suited to meet that challenge.
Speaker Change: I think it's also important to place all of that within the wider context of today's geopolitics and America's defence technology.
Speaker Change: Hypersonics have become increasingly urgent under the new administration. In the words of the President, within the executive order he issued in January to build the Iron Dome for America, the threat of hypersonic and other advanced aerial attacks is the most serious threat facing the United States today.
Speaker Change: Furthering peace through strength is critical to America's defence. Our capabilities with haste, our affordability and our speed, all of which are the new administration's top priorities, makes it a great product fit to address these challenges.
Right, moving on from small launch into Neutron updates.
Speaker Change: Well, the title really hearsays it all. This is the year of Neutron, our monopoly breaker to unlock the bottleneck of medium launch. As I said before, there's more than 10,000 satellites that need launch in the next five years.
Speaker Change: from Commercial Constellations alone and then there's the growing demand from national security and defence missions as well as interplanetary exploration for the science community and it goes on.
Speaker Change: The need is clear so I won't labour on it other than to say that the industry is crying out for more launch options in this class and Neutron is coming to market in record time to deliver it.
Speaker Change: Neutron is also critical to us launching and operating our own future satellite constellation.
Speaker Change: So over the next few slides I'll take you through the latest development milestones and achievements as we work to get Neutron on the pad in the second half of this year.
Speaker Change: Okay so at LC3 all major hardware and infrastructure items have arrived and been installed and our civil works on the site are practically finished.
Yes, and we even have water.
Speaker Change: Most recent updates include the FLIR stack, a 165 tonne steel circular launch mount structure that Neutron will launch from.
Speaker Change: A giant pair of LNG tanks, the ones you can see on the bottom left of the slides. Those are the heaviest objects to have ever crossed the Wallops Island Bridge, and their installation marks the completion of all the long-lead propellant storage for the launch site.
Speaker Change: What's left now is to complete the electrical and mechanical connections for a fully integrated system. But otherwise, we look forward to its grand opening in a few short months.
Speaker Change: Now, on to one of the most exciting and novel features of Neutron, its hungry hippo fairing. The massive reusable nose cone halves are now live and moving, fully integrated with their avionics and actuators and all of the mechanical systems.
Speaker Change: We're testing like we're flying, opening and closing the hungry hippo at full speed to understand exactly how they behave.
Speaker Change: It's great to say I was there in person for the first lot of testing and I can tell you that it's a wonderful sound to hear the hungry hippo in action. And I fully encourage you to go and check out the video we'll put out today of all of that testing in action. It's pretty cool.
Speaker Change: We have a few more run-throughs as we add some hardware, then they'll soon be making their way over to our assembly and integration facilities ready to be fitted to Neutron's first stage for launch.
Speaker Change: Let me draw your attention to the picture on the top left, that's our Stage 1 tank stacked and ready to ship out.
Speaker Change: Check out the person at the bottom of the frame, Pascale, and you can see the size of that tank.
Speaker Change: All of the launch vehicle is currently in production, with significant parts of it currently in test before being shipped out to the launch site for integration. We're even moving past Flight 1 with structures, including fairing halves, already in production for our second neutron rocket.
Speaker Change: For Flight 1 though, all of Neutron's largest pieces will soon be moving across the country and making their way to the East Coast. They'll be integrated with all the avionics and software, and it'll go through the fit checks and AIT before going straight into full system qualification.
Speaker Change: So, keep an eye out for pictures of tanks on barges to know where we're getting closer to that next milestone.
Speaker Change: Now on to Archimedes. The engines qualification campaign continues at a cracking pace. We're hot firing every few days and the testing is going well.
Speaker Change: We've got engines consistently moving across the country between the production line in Long Beach and the engine test site in Mississippi. You also may have seen we shared a recent update that performance iterations on the production line have resulted in more than a couple of hundred kg shed from the engine, which is always good.
Speaker Change: and also check out the slides of that second stage novel expansion code in the bottom left of the slide that were recently produced and on its way for testing.
It's a cool thing.
Speaker Change: Okay, so from engine testing, we're really doubling down on our test cadence to match with the increased production rate out of Long Beach, so we're running a really intensifying test campaign on multiple engines as we lead up to Flight 1.
Speaker Change: So in that case, the build of a second Archimedes engine test cell is nearly complete, and this enables us to concurrently test engines as our investments in production ramp up. So having two cells is always good.
Speaker Change: Now we've provided plenty of updates on where Neutron will lift off but not much where it will land. Well here she is, Meet Return on Investment. We named that specifically for Adam Spice.
Speaker Change: Neutron's 400 foot ocean landing platform that's that's what we see on the screen there. The image at the bottom of the left also providing a great sense of scale how big this vessel actually is.
Speaker Change: Alongside shore-based landing sites, the Ocean Platform gives us the flexibility to maximise the vehicle's performance by allowing us to dedicate less propellant to landing and more to lifting our customers' payloads to diverse and complex orbits.
Speaker Change: With the vessel secured, work has now begun on modifying it. We're adding autonomous ground support equipment that secures Neutron to the deck when it lands, heat shielding, propulsive systems and things to keep it on target for Neutron's return.
Speaker Change: The landing platform is also a clear indication that we're scaling up and moving past first minimum viable product with Neutron now.
Speaker Change: With one launch set for 2025, we're aiming to triple that in 2026, and then the landing barge is obviously critical to that ramp-up. Now recovery isn't planned on the barge for the first test flight. We'll be doing a soft splashdown, but we can expect return on investment to live up to its name in 2026 when it enters service for all the future Neutron flights.
Speaker Change: Now the road to launch. I'm often asked what should we look at to indicate Neutron's progress to the pad because there's just so much going on. So we tried to create a little bit of a visual overview here of the big ticket items that we're running concurrently right now and what's left to go to get to the pad.
Speaker Change: We've always been clear that we run aggressive schedules and that gets us to the pad on a rapid time frame. But of course nobody wants to get the rocket faster to the pad than I do. The important thing to point out here is that these tasks are not serial. We don't wait to finish one before starting the next.
Speaker Change: Everything has been worked on concurrently and some of them are long pieces, long lead pieces that might come together just days before the launch, for example a launch licence.
Speaker Change: This isn't our first rodeo, as everyone knows. We're no strangers to bringing in a new rocket to market. We're running aggressive schedules, as we always do. At the end of the day, as I've always said, it's...
Speaker Change: Ladies and gentlemen, this is the operator. I apologize, but there will be a slight delay in today's conference.
Speaker Change: Once again, ladies and gentlemen, this is the operator. There will be a slight delay in today's conference. Please hold, and the call will resume momentarily. Thank you for your patience.
Sorry about that everyone, I'm not sure why the...
Speaker Change: Sorry about that everyone, I'm not sure why the line dropped there. But I'll reiterate the previous slide just to make sure that everybody got it.
Speaker Change: So I'm often asked what we should look for to indicate Neutron's progress to the pad. So we've created a visual overview here of the big ticket items that we're running concurrently right now and what is left to go to get us to the pad and flight this year.
Speaker Change: We've always been really clear that we run aggressive schedules and that gets us to the pad quickly. And, of course, I want to get to the pad faster than anybody else. The important thing to point out here is all these tasks are not serial. We don't wait to finish one before starting the next.
Speaker Change: Everything has been worked concurrently and some of them are long lead pieces that come together literally days before the launch. For example, a launch license.
Speaker Change: And now, of course, this isn't our first rodeo, and we're no strangers to bringing a new rocket to the pad. We run aggressive schedules, and at the end of the day, as we always say, it's a rocket program. But right now, we're planning for first launch in the second half of this year.
Speaker Change: I'm very happy with the progress of the development program, Neutron is going to be a really important vehicle for the industry and we're excited to see, to be the ones delivering that.
Speaker Change: So moving on from launch now, and to provide some updates on our Space Systems businesses.
Speaker Change: I'm happy to share mission success for our latest spacecraft Vardar. In the early hours of this morning, and I mean early, our pioneer spacecraft flawlessly executed an Earth re-entry manoeuvre and deployed Vardar's capsule to land in South Australia.
Speaker Change: The mission was launched in January and had been operating on orbit for over a month, delivering critical mission functions for Vardar's capsule. We have our third Pioneer-class satellite with its Vardar capsule ready and waiting for launch in the coming days, which is the second satellite ready for launch of this programme within a month.
Speaker Change: For our Space Systems team, they're busy right now helping land a NASA lunar lander mission on the Moon. After its 45-day journey through space, our very own space-grade solar cells have provided over 1,400 operational hours of power for this mission.
Speaker Change: While the space software team have been providing 24-7 support for the orbit control and engine burns that have gotten this far. They'll be continuing that support for the mission right through its most critical phases too, including landing on the moon itself.
Speaker Change: On the National Defence side, our team is really hitting their stride with two critical programmes. We're now deep into the detailed design phase of our $500 million prime contract with the Space Development Agency.
Speaker Change: Early last month we cleared a critical step of the program, the first design review that ensures our satellites and how they operate all meet the rigorous mission requirements set down by the U.S. Department of Defense.
Speaker Change: All 18 satellites use practically every one of their integrated subsystems and components including solar panels, composite structures, star trackers, reaction wheels, radios, flight, ground software, avionics, launch dispensers and so on and so forth.
Speaker Change: It's a high level control over our own products within our own prime programs that gives us the ability to deliver world class national defence solutions with certainty on cost and schedule and of course quality.
Speaker Change: We also have our 24-hour notice responsive space mission coming up this year for the US Space Force. This one is our $32 million Victor's Haze mission with a Rocket Lab satellite launching on a Rocket Lab Electron on short notice to demonstrate that we can respond to threats on very short timelines.
Speaker Change: In the defence industry, that's called tactically responsive space. It's a hugely complex yet sought-after capability that the Pentagon is eager to have on hand with trusted commercial partners. With our proven capabilities across space systems and launch, it's a position we're uniquely suited for.
Speaker Change: Now, most of those missions employ spacecraft from our line-up of standard vertically integrated satellites that we announced last year. But today I'm excited to share a big announcement. Please meet FLATALITE, a low-cost, mass-producible satellite tailored for large constellations.
Speaker Change: Now, we've developed Flatalight after many years of working closely with constellation operators and getting to deeply understand their needs of today and, of course, into the future.
Speaker Change: Flatalite is a scalable, resilient, high-power satellite that can enable capabilities such as secure low-latency, high-speed connectivity and remote sensing for national security, defence and commercial markets.
Speaker Change: With Flatalight we can do something few spacecraft manufacturers can. We can build it fast, cost effectively, and in high volumes thanks to our experience in spacecraft production combined with deep vertical integration of our in-house components.
Speaker Change: This puts us in greater control of cost and schedule than others relying on constrained supply chains.
Speaker Change: What's more, once we've built them, we can launch them ourselves too. That's thanks to its low-profile stackable design, we can maximise the number of satellites launched per mission, ensuring seamless integration with Neutron.
Speaker Change: The bottom far right render with flared lights stacked inside Neutron's fairings gives you a bit of an idea of the sensor scale here.
Speaker Change: The Flatolite is more than just a new product development to serve our customers' ever-evolving needs though.
Speaker Change: It's a bold, strategic move towards completing the final step of Rocket Lab's ultimate vision of truly becoming an end-to-end space company and operating its own constellation and delivering services from space. By having our own ride to space with Neutron and Electron, and being able to build our own spacecraft in high volumes,
Speaker Change: We're at a distinct advantage when it comes to establishing constellations with speed and cost efficiency.
Speaker Change: That's about all we can share on Flatalight today, but I'm excited to be able to share more with you soon on this, so watch this space.
Speaker Change: So with that, I'll hand it over to Adam now to provide further commentary and to discuss our financial highlights and outlook.
Thank you. Bye. Bye.
Adam Spice: Thanks, Pete. Fourth quarter 2024 revenue was $132 million, which is above the midpoint of our prior guidance range and reflects significant year-over-year growth of 121%, driven by strong contribution from both business segments, but led by Space Systems.
Adam Spice: Fourth quarter revenue represented a sequential increase of 26.3 percent, primarily due to the increase in launches from 3 to 5, including two Haste missions during the quarter, which come at a higher ASP versus standard Electron missions.
Adam Spice: On a full year basis, 2024 revenue was $436 million, an impressive growth of approximately 78% year on year.
Adam Spice: Our Launch Services Segment delivered revenue of $42.4 million, and our current Electron and HASTE backlog continues to support an increasing ASP with some quarterly variability tied to volume purchase commitments, launch location, and mission assurance requirements.
Adam Spice: On a full year basis, Launch delivered revenue of $125.4 million, which is an increase of roughly 74% year-on-year.
Adam Spice: Our space system segment delivered $90 million in the quarter, reflecting sequential growth of over 7%, driven primarily by a strong quarter from satellite manufacturing and our attitude, direction, and control subsystems business.
Adam Spice: On a full year basis, Space Systems delivered revenue of $310.8 million, or an increase of 80% year-on-year.
Now, turning to gross margin.
Adam Spice: Gap gross margin for the fourth quarter was 27.8% at the high end of her prior guidance range of 26 to 28%.
Adam Spice: Non-GAP Gross Margin for the fourth quarter was 34%, which was also at the hand of a prior guidance range of 32 to 34%.
Adam Spice: On a full year basis, gap gross margin was 26.6%, while non-gap gross margin was 32%.
Adam Spice: Although gross margins in our launch business can be volatile quarter to quarter, dependent upon customer mix and mission type, in 2025 we expect continued margin expansion in both segments as electrons cadence continues to increase at higher ASPs and our space system business continues to scale.
Adam Spice: Relatedly, we ended Q4 with production-related headcount of 1,004 heads, up 40 from the prior quarter.
Adam Spice: Turning to backlog, we ended Q4 2024 with $1.07 billion of total backlog, with launch backlog of $386 million and space systems backlog of $681 million.
Adam Spice: While year-on-year backlog growth was modest at approximately 2%, this should be put in the context of increasing lumpiness of backlog additions, given the timing of increasingly larger needle-moving deals and customer program opportunities.
Adam Spice: Sequentially, there was a slight remixing of our backlog as a result of particularly strong bookings in our launch segment, which we expect to continue as we convert our pipeline of Neutron opportunities.
Adam Spice: At first glance, our backlog has roughly a 50-50 split between government and commercial. But as you dig deeper, many of our commercial customers ultimately cater to the needs of the U.S. government and other friendly nations.
Adam Spice: We view this as a significant advantage, especially in evolving political and budgetary environments, as government's focus on space and efficiency remains a high priority.
Adam Spice: We continue to cultivate a healthy pipeline, including multi-launch deals and large satellite manufacturing contracts that, as mentioned earlier, can create lumpiness and backlog growth given the size and complexity of these opportunities.
Adam Spice: We expect approximately 50% of current backlog to be recognized as revenues within 12 months.
Turning to operating expenses in the quarter.
Adam Spice: Gap operating expenses for the fourth quarter of 2024 were $88.4 million.
Adam Spice: modestly above our guidance range of 84 to 86 million dollars.
Adam Spice: Non-GAAP operating expenses for the fourth quarter were $74.5 million, just below our guidance range of $75 to $77 million.
Adam Spice: GAAP operating expenses grew 39% from the prior quarters, prior year fourth quarter, almost entirely related to a step up in Neutron spending, particularly Archimedes testing, investments in composite structures development, and IT related spending, including a step up in cybersecurity requirements related to our US government programs.
Adam Spice: Non-GAAP operating expenses also grew 39% year-on-year, largely due to the same reasons as our GAAP OPEX increases, less the effect of stock-based compensation expenses and non-recurring transaction costs.
Now focusing on quarter over quarter changes.
Adam Spice: 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, and related IT infrastructure and IT support for both Neutron and our SDA satellite contract.
Adam Spice: In R&D specifically, gap expenses increased $532,000 quarter-on-quarter due to Neutron prototyping materials and headcount growth.
Adam Spice: Non-GAAP R&D expenses were up $3.3 million quarter-on-quarter, more than the GAAP increase.
Adam Spice: Do the fluctuations in non-cash stock-based compensation between R&D and cost of sales related to the EAC accounting of our space systems manufacturing programs.
Adam Spice: As such, the non-gap R&D increase of $3.3 million represents well the underlying trend in core R&D spend in the business, again, driven largely by investments in Neutron.
Adam Spice: Q4 ending R&D headcount was 828, representing an increase of 52 from the prior quarter.
Adam Spice: In SG&A, GAAP expenses increased $7.9 million quarter-on-quarter, largely due to an increase in outside services related to IT, legal, and finance, with IT spend largely related to security and cybersecurity requirements under our SDA contract.
Adam Spice: Legal Spend, supporting a range of corporate initiatives including corporate development and year-end audit activities which are paired with an increase in staff costs.
Adam Spice: With that gap spend, we reported non-recurring transaction costs of $2.2 million in Q4, owing to a step up in corporate development activities, including advancing a robust pipeline of M&A opportunities.
Adam Spice: Non-GAAP SG&A expenses increased by $2.5 million, driven by the previously mentioned GAAP increases.
Adam Spice: Q4 ending SG&A headcount was 329, representing an increase of 29 from the prior quarter.
Adam Spice: In summary, total fourth quarter headcount was 2,161, up 121 heads from the prior quarter.
Turning to cash.
Adam Spice: Purchases of property, equipment, and capitalized software licenses were $21.5 million in the fourth quarter of 2024, an increase of $10.5 million from the $11 million in the third quarter of 2024.
Adam Spice: As we continue to invest in neutron research, testing, and scaling production, we expect increased capital expenditures to continue for the next few quarters.
Adam Spice: Cash consumed from operations was $2.4 million in the fourth quarter of 2024, compared to $30.9 million in the third quarter of 2024.
Adam Spice: The sequential improvement of $28.5 million was driven primarily by the increased Space Systems Program's milestone receipts, which can be lumpy.
Adam Spice: Overall, non-GAAP free cash flow, defined as GAAP operating cash flow, less purchases of property, equipment, and capitalized software, in the fourth quarter of 2024, was a use of $23.9 million, compared to $41.9 million in the third quarter of 2024.
Adam Spice: We do expect a pickup in cash consumption in Q1, owing to an expected increase in neutron spending ahead of our 2025 launch and the lumpiness in large contract-driven space systems milestone collections.
Adam Spice: which are projected to be lower in Q1 off a strong Q4 combined with higher payment outflows to our STA program sub cons that we expect will ultimately be reflected in higher revenue recognition in the back half of 2025.
Adam Spice: The ending balance of cash, cash equivalents, restricted cash, and marketable securities was $484 million, as of the end of the fourth quarter of 2024.
Adam Spice: We exited Q4 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 adjustable market, consistent with what we have done successfully in the past.
Adam Spice: adjusted EBITDA loss was 23.2 million dollars in the fourth quarter of 2024 modestly above our guidance range of a 27 to 29 million dollar loss
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Adam Spice: The sequential improvement of $7.7 million was primarily driven by revenue growth and gross margin improvement across both segments.
Thank you for watching!
Speaker Change: With that, let's turn to our guidance for the first quarter of 2025.
Speaker Change: We expect revenue in the first quarter to range between $117 million and $123 million, representing approximately 29 percent year-on-year revenue growth at the midpoint, and expect a return to sequential growth in Q2, driven primarily by strength in our space systems business.
Speaker Change: We expect first quarter gap gross margin to range between 25% to 27% and non-gap gross margin to range between 30% to 32%.
Speaker Change: These forecasted gap and non-gap gross margins reflect less favorable mix within our space system segment and a lower launch ASP driven by customer mix discussed earlier.
Speaker Change: We expect first quarter GAAP operating expenses to range between $93 million and $95 million, and non-GAAP operating expenses to range between $77 and $79 million.
Speaker Change: The quarter-on-quarter increases are driven primarily by continued neutron investment into staff costs, prototyping, and materials.
Speaker Change: We expect first quarter GAAP and non-GAAP net interest expense to be $2.7 million.
Speaker Change: We expect first quarter adjusted EBITDA loss to range between $33 million and $35 million, and basic weighted average common shares outstanding to be approximately 458 million shares, which excludes convertible preferred shares of approximately 51 million.
Speaker Change: Lastly, given where we are in the final push to not only get Neutron to the pad this year, but also make advanced production scaling CapEx investments such as the recovery barge that Pete spoke about earlier, as well as investing in inventory for subsequent Neutron tails beyond the test launch tail this year, cash consumption will increase and diverge more than it has normally from a just diva dot.
Speaker Change: We continue to see the program investment in getting Neutron a minimum viable product and infrastructure to be consistent with our initial estimates of approximately $250 million to $300 million.
Speaker Change: having spent approximately $200 million of gross GAAP, OPEX, and CapEx through the end of 2024 on this program.
Speaker Change: Specifically, over the last four quarters, total cash consumption has been running between approximately $20 million and $40 million per quarter, and we expect this number to increase in Q1 due to a combination of these Neutron-related investments, as well as long-lead procurement items for our SDA program.
Speaker Change: contractual milestone payments receivable across our MDA Global Star and SDA programs
Speaker Change: While we proactively manage the working capital elements of our business, this unique situation is likely to result in an increase in cash consumption to approximately double from this prior range of $20 million to $40 million in Q1.
Speaker Change: We expect this dynamic to moderate in coming quarters with the resumption of contractual milestone payment schedules under our large space systems programs and as we get the minimum viable infrastructure in place to support the inaugural launch of Neutron later this year.
Speaker Change: And with that, we'll hand the call over to the operator for questions.
Speaker Change: Thank you. Ladies and gentlemen, we will now begin the question and answer session. At this time, I would like to remind everyone to ask a question, press the start button, followed by the number one on your telephone keypad.
Speaker Change: If you would like to withdraw your question, please press the pound key or star 2. One moment please for your first question.
Speaker Change: Your first question comes from the line of Edison Yu of Deutsche Bank. Please go ahead.
Thanks for taking our questions.
Edison Yu: When the first one on Neutron and to check the the language around the timing I think in the past it's been talked about as mid 2025 now you're saying second half is this just kind of you know semantics you know it's a couple months or are you trying to maybe put some cushion or take more time with any of the processes?
Edison Yu: Yeah, hey Edison. You know, we've sort of said in the past, mid-2025, so yeah, we're taking, you know, giving ourselves a little bit more time to get it to the pad and get the launch, but I mean, you know, we're talking, you know, months here. It's not, you know...
It's just not very material.
Edison Yu: Understood, understood. And just in terms of the the launch itself...
Edison Yu: What would you kind of define as success? And I frame it in the context of, you know, let's say it gets to orbit. Does that mean we're pretty, pretty confident in the three for next year? Just curious on the parameters for what you would define as a mission success.
Edison Yu: Yeah, no, absolutely. Our intention is to go to orbit. We're not...
Edison Yu: You know, anything less than that is not where we want to be. So no, our intention is orbital on the first flight.
Edison Yu: which I think some people in the space industry who know it well realise that it's difficult to do but like I say, this is our second time around so that's what we define as success for that mission.
Great, thank you.
Speaker Change: Your next question comes from the line of Andrea Shepherd of Cancer Fitzgerald. Please go ahead.
Andrea Shepherd: Hey everyone, congratulations on the quarter and thanks for the very thorough updates. Congrats on all the progress as well.
Speaker Change: Peter, just maybe to follow up on the metron question, maybe another way to ask is, you know, how confident
Speaker Change: are you in launching this year? And as we look into 2026, how should we think about the revenue mix starting to shift between space systems and launch systems? Thank you.
Speaker Change: Yeah, I'll ask the first part of the question, Andre, and then pass it off to Adam for the second half.
Speaker Change: Look, you know, we're not tracking any major events that would cause us to be concerned about trying to get this away this year.
Speaker Change: I always caveat anything with it's a rocket program, I mean we have some major tests to complete, but at this stage we're tracking pretty confidently to try and get this launch away.
Andre: Yeah, and I can take the second piece to that, Andre.
Speaker Change: Yeah, you know the mix in this business I think will be you know, it's it's not going to be too unpredictable So if you know, we continue to see growth in our electron business now that will become Over time a smaller part, of course, it's all of our launch revenue today It'll become a piece of the launch business once neutron starts to fly in its revenue generating form
Speaker Change: So, look, if you take, if you extend, you know, our launch business that we, you know,
Pete: as Pete mentioned earlier, you know, north of 20 launches this year.
Pete: As with the manifest, it would indicate continued growth off of that in the 26, so you've got some natural growth there. But then you start to introduce...
Pete: You know, if you talk about three neutron launches at the prices that we've discussed previously in the $50 million to $55 million range.
Pete: You know, you're looking at a, you know, potentially equaling in kind of that first year of revenue production for Neutron to equal what Electron is in what it's like eighth year of production. So that kind of just indicates.
Pete: the power that Neutron brings to the model. But we also expect significant growth in our space systems business to continue in 2026.
Pete: So I would say that we will see a remixing and a rebalancing and probably, you know, recently we've been about a 70-30 mix of space systems to launch.
Pete: And I think you'll see launch become greater in that mix.
Pete: I don't think it will become necessarily more than 50% of the overall mix.
in the, like if you look into 2026.
Pete: But I think longer term, you know, Pete and I've always talked about, we like having that.
Pete: kind of two-thirds, one-third space system to launch mix just given the lumpiness that launch naturally has given customer readiness and so forth.
Pete: So, I think we're, right now, we're kind of in a sweet spot. I think we're going to probably over-index a little bit to launch as neutron scales, and then I think over time, we'll kind of balance that back out to our ideal mix of kind of two-thirds space system, one-third launch.
Speaker Change: Thank you for watching. Please Like, Comment, and Subscribe. This helps out my channel a lot. Also, I would love it if you could hit that Notification Bell, so you never miss a video.
Speaker Change: Got it. That's super helpful, guys. Really appreciate that. Maybe just a quick follow-up on space systems. Can you maybe just remind us, you know, what are some key awards or key catalysts that we can look for for this year or maybe, you know, things that are not necessarily reflected in the backlog? Thank you.
Speaker Change: Yeah, Andre, we, you know, we, you know, as Adam kind of alluded, you know, mentioned in the in the call
Speaker Change: The kind of programs that we chase are not little programs, we chase fairly significant programs and as a result it creates a little bit of lumpiness in the backlog.
Speaker Change: And, you know, obviously we have been very competitive on the FDA mission, so we'll continue to bid on those.
Speaker Change: and, you know, there's a whole bunch of new missions that have been...
Speaker Change: created relatively recently to do with the Iron Dome that we think we're well placed for as well.
Speaker Change: You know, we'll continue to do things and bet on the things that make sense.
Speaker Change: It's fair to say though that there is also some uncertainty in the industry under the new administration in the Defence Force about which programs are getting accelerated and which programs are getting slowed down so we just sort of have to roll with that a little bit.
Speaker Change: Wonderful, super helpful again and congratulations on the quarter. I'll pass it on.
Thank you for watching!
Speaker Change: Your next question comes from the line of Suji De Silva of Roth Capital. Please go ahead.
Speaker Change: Hi, Peter. Hi, Adam. Congratulations on naming a boat, Adam. So, the Neutron cost, I just want to understand if it's still your expectation as Neutron takes its first launch at some of those stair-steps down. And if so, would that be kind of concurrently with the first launch, lag a little, perhaps lead as it kind of...
The spend is ahead. Any color there would be helpful.
Thank you for watching. Bye.
Speaker Change: Yeah, I can take a pass at that first part and then Pete can jump in. So when you think about neutron costs, obviously this first test launch is an R&D launch.
Speaker Change: There won't be any revenue associated with that launch. And so as you look forward, of course, there's going to be, as we get some production efficiencies as you move from the first tail to the second tail to the third tail, that's always important. But I think the more meaningful thing, obviously, and the big...
Speaker Change: The focus item for us to really get the neutron economics to come into focus is really reusability.
Speaker Change: And so, you know, Pete introduced the barge earlier today, and I like the name of that.
Speaker Change: The return on investment is exactly what that barge is intended to do.
Speaker Change: But it's really about how quickly can we stick that first.
Speaker Change: landing, right? So again, we're not going to attempt it on the first one.
Speaker Change: The question is, you know, when do we feel comfortable to attempt it?
Speaker Change: And then when we do, if we're successful, putting that booster into reuse, and going just as we've seen SpaceX do, you hopefully get to reuse it a few times, and then maybe as you learn more, you can ultimately reuse that booster as we designed it to use at least 20 times.
Speaker Change: And really, when you start to amortize the cost of that expensive booster over, you know, a significant number of launches, that's really where the margin expansion comes into. So, the cost of a neutron launch is really going to be dictated far and away by more than anything else, reusability. And I don't know if Pete wants to add anything to that.
Thank you.
Speaker Change: No, you said it exactly as I was going to say, that is a critical element and the only bit to add is that the way that Neutron is designed of course is to burden the most amount of cost into that first stage as possible of the vehicle because we are in fact reusing it.
So, you know, that's been an important design element.
for the vehicle.
Okay.
Speaker Change: I have another question on the new product, the Flatalite product. It seems like, you know, this is your entry into satellite constellation satellites, wondering if there's a cost-per-satellite advantage you may have with the architecture versus
Speaker Change: What's currently in the marketplace or what's planned from competitors competitive offerings or you know What how else we should think about the advantages of this product as constellations become and a constellation economics Become a big part of putting yeah
Speaker Change: Mix there within neutron are there are there any limitations around the pillow or like type of payload im thinking more kind of in the Earth sensing.
Speaker Change: The.
Speaker Change: Observation type Brown, Sars cameras and such.
Yes, that's a great question <unk>, sorry, I mean, the flat structure doesn't lend itself to large optical apertures that tissue like big telescopes.
Speaker Change: But basically everything else at it Super ideal for I'm sorry.
Speaker Change: We do the way that they.
Speaker Change: This structure is designed is we do have flexibility to grow the pilot buy dips in <unk> it was pretty pretty easily.
Speaker Change: It's like a think of it like Atlanta backpack.
Speaker Change: Until those structures sorry.
Speaker Change: We can we can shrink and grow various pilots pretty pretty easily.
Speaker Change: So we've really given a lot of thought to.
Speaker Change: Not only what are customers asking us now, but but future proofing the Amazon so that we can.
Speaker Change: Address a number of different applications with that.
Speaker Change: Great Awesome I appreciate the color and then maybe Adam one quick follow up for you.
Around the R&D head count increases and maybe more specific to neutron.
Speaker Change: Is the plan for those heads.
Speaker Change: B to kind of stay within the neutron family work when would they be able to be passed and you just kind of broader around launch or even into space systems, just trying to get a sense of kind of again around the cost question for neutron yes, yes head count requirement just to kind of once the first launch goes abate a little bit and just.
Speaker Change: How that kind of again more head count employee type base cost around the build out kind of might flow.
Speaker Change: Yeah, I'd encourage you to think more of it in terms of kind of how does how does the P&L more over time and I think certainly as we get.
Speaker Change: Past the first launch Youll see R&D.
Speaker Change: Again to subside pretty significantly now.
Speaker Change: A lot of the head.
Speaker Change: Take our past experience and kind of.
Speaker Change: Kind of extrapolate that out.
Speaker Change: We tend to hire very talented kind of.
Speaker Change: Athletes, if you will and engineering functions, which can do lots of different things and so you find people that are super effective doing R&D work and they may pivot over to production and they kind of work on production engineering.
Speaker Change: Any type of support work. So I wouldn't think so much of kind of elimination as much as repurposing from R&D into production because as you're ramping a new vehicle.
Speaker Change: There is still there's still R&D type of elements and kind of skills that are necessary to kind of bring that vehicle into its mature state. So.
Speaker Change: That is.
Speaker Change: I would encourage it so certainly we expect assuming a step down in R&D, but those have just really kind of expense related to those types of heads really move into cost of sales of that point.
Speaker Change: And I'll, maybe let Pete speak to the mix. If you have any different views, but certainly I think the one thing. That's key is aside from the hedge is certainly prototyping expenses will drop significantly a lot of what we're spending our money on today for neutron is prototyping expense, which is flowing through R&D.
Speaker Change: Yeah.
Pete: Yes, I think you said, it well and I have nothing to add to that.
Speaker Change: Right.
Paul: Great. Thanks, Paul I appreciate the questions.
Okay.
Paul: Your next question comes from the line of Michael <unk> of Keybanc capital markets. Please go ahead.
Speaker Change: Hey, good afternoon.
Speaker Change: Afternoon. Thanks for taking my question I wanted to start on the Archimedes Hot fires you've used.
Speaker Change: Significantly increased your testing cadence there and the fire it looks very clean so really good to see that and just wondering if I could if you could touch on any of the changes that you've made to the propulsion system.
Speaker Change: The initial hot fire last August and kind of where does archimedes sit today in terms of readiness for the first launch and meeting or exceeding your performance requirements.
Speaker Change: Yeah, Michael good questions. So yes.
Speaker Change: We were running the engines.
Speaker Change: All the time.
Speaker Change: Quantification program.
Speaker Change: It covers a lot of different run conditions.
Speaker Change: And it's.
Speaker Change: It's not like the engine just needs to start on the Grand lunch. Once an assumed we have a whole bunch of other run conditions, we have the propel it needs to sit for a while into the reentry and landing Burns and of course the stage. One engine is the same as stage two so you've got a big cost periods and relaunched.
Speaker Change: The qualification campaign is pretty pretty big.
Speaker Change: I am pretty happy with the engine to be fear the changes that we made.
Speaker Change: To remove mass.
Speaker Change: And in large part to increased production ability.
Speaker Change: It does on something and you put it in production you're inevitably find the things that you don't like so.
Speaker Change: So you know.
Speaker Change: Being agile enough at this stage to change them change the various things we want to us.
Speaker Change: Is the right time to do it and it gets harder once the engines or qualified.
Speaker Change: And the team is just working through it and we added that extra sell.
Speaker Change: For <unk>, it's a.
Speaker Change: The very reason is just there's just a tremendous amount of testing to get through and tweaking and.
Speaker Change: Yes, I would just kind of hammering away at it.
Speaker Change: Okay, great and maybe shifting to electron if we look longer term at electrons launched prospect.
Speaker Change: Without the one can provide 120 launch opportunity annually and then maybe another 12 LP too is.
Speaker Change: Is this strategy are you looking to Max out the launch capacity with maybe over 100, plus launches per year or does the supply demand environment create a more attractive business model that maybe 30 or 40 electrons per year.
Speaker Change: Just wondering where that sweet spot is for elektron launches as we look out three to five plus years down the road.
Speaker Change: Yeah. Good question. So I mean, I mean, my answers as many as many as possible right.
Speaker Change: What we want to say when we developed a healthy one and we hit the license that saw it.
Speaker Change: We obviously never wanted to be constrained by.
Speaker Change: But by the licensing on that thought somebody just sort of the biggest number we could back in 2016, and that's that so we have plenty of capacity there and even the capacity, even though that we have.
Speaker Change: 12 capacity out of LC too that there can be I mean to them.
Speaker Change: And an improved so.
Speaker Change: That's not that much of a constraint either but it's really just the market demand and the good news is it continues to grow year on year every year, we sell more electrons in the previous year, which is which is great.
Speaker Change: But that's really the driving factor behind it.
Speaker Change: And as we look out.
Speaker Change: In the following years, we've seen strong growth in it.
Speaker Change: And sorry in Elektron sales year on year.
Speaker Change: I appreciate all the color and congrats on all the milestones in the quarter.
Speaker Change: Thanks, Michael.
Speaker Change: Your next question comes from the line of Jason Gursky with Citi. Please go ahead.
Jason Gursky: Hey, good afternoon everybody.
Speaker Change: Peter.
Speaker Change: Recognizing that space is hard you guys are running aggressive timelines to your own admission.
The neutron maybe you could just walk us through.
Speaker Change: The things that have caused.
Speaker Change: The delays at each point, so I think we had pushed from the fourth quarter excuse me second half of 'twenty four into mid 25 now into the second half of 'twenty five.
Speaker Change: What are you seeing that is causing you to make.
Speaker Change: Those changes.
Jason Gursky: Yeah, Yeah. Thanks, Jason.
Speaker Change: Firstly, if we stand back and look at the context of Av.
Speaker Change: The timeline of a rocket program. This is still the crazy fast compared to just about any historic rocket program.
Speaker Change: So.
Speaker Change: There is.
Speaker Change: Does that it was it was good to tanker on that.
Speaker Change: But look there's no one thing it's not like.
Speaker Change: We had a giant engine failure or a tank failure or anything that isn't it doesn't there's no. One thing I would tell you probably the most frustrating thing is as you know some of the the the large structures and a third.
Speaker Change: Third party providers.
Speaker Change: We always end up having to pull stuff in house, because we get laid down by a number of providers and I'll tell you that that that's caused a bit of July early in the program. It is fair to say that we had to deal with them some kind of a COVID-19.
Speaker Change: Covid issues, we just couldnt get concrete and we couldnt get steel couldn't buy CNC machines, those things had really long lead times associated with them and of course, that's not the case now but.
That sort of got us off to a little bit of a a little bit of a slow start, but but there's no. There's not like one big thing that's just sort of go down the road.
Speaker Change: We continue to see an eye to it.
Speaker Change: Push out and like I say, there's there's no.
Speaker Change: And things.
Speaker Change: And if something we put its league well out of B and then of course, we will let everybody know, but at the moment and we just sort of just eating a ladder.
Speaker Change: Yeah, and you mentioned suppliers how much dependency do you have at this point to get this all wrapped up.
Speaker Change: Is it.
Speaker Change: 90% under your control at this point do you still have some dependencies with suppliers.
Speaker Change: Yes.
Speaker Change: Tradition.
Speaker Change: As we transition into right production of the product.
Speaker Change: We have that much much more under our roof when.
Speaker Change: When you're building large steel structures and won't sorts and things like that that you know that.
Speaker Change: You don't have they didn't have the capability to do those kinds of things.
Speaker Change:
Speaker Change: The early early prototypes were handle I'd, rather than being made on the AFP machine, which is now of course up and running and commission side.
Speaker Change: So some of those things.
Speaker Change: But this is just some practicalities around doing things for one off it doesn't make sense to devote all of that capability in house, but I'd say as time goes on and as production starts to increase.
Speaker Change: We become far less reliant on external contractors.
Speaker Change: Right. Okay, I've got just a few more quick ones.
Adam Spice: Humour me on the pipeline John Space systems, Yes.
Adam Spice: These systems in the pipeline just kind of curious what you are seeing and what the shape of that business might look like in the future and I am thinking about it split between you being the OEM or the kind of the prime building the full spacecraft versus your being a supplier into others.
Adam Spice: What do you see out there are you guys going to end up being more of a components business is more of an OEM is it going to be a 50 50 split I'm just kind of curious what youre seeing.
Adam Spice: Well I think.
Jason Gursky: Our aspiration is Jason is we want to provide the service.
Adam Spice: So.
Adam Spice: Higher tier than certainly just building a satellite in the high teen again tier gains just providing the components, but the the the beauty of the way that we run the businesses that we can we can fiercely bid on a.
Adam Spice: On a program that we want to go after and even if we don't win we still end up kind of winning because chances I will have some content and components.
Adam Spice: And in many of those many of those larger programs.
Adam Spice: But but certainly there's a few things we're going have to write one one is.
Adam Spice: In a very very large.
Adam Spice: U S government programs, which we think we have some some very deep.
Adam Spice: Discriminating technologies or capabilities.
And then of course.
Adam Spice: Other large commercial constellations and programs, which you've seen us.
Adam Spice: Execute against Us as well.
Adam Spice: And always we like to have a unnecessarily mission on on.
Adam Spice: On the books as well so.
Adam Spice: We've generally had a moon mission to Mars mission or something.
Adam Spice: On the books, because we believe that's important to acknowledge.
Seasoned and.
Adam Spice: Consistent sort of sort of programs going out, but I mean, we always get to us.
Adam Spice: Providing a service not just providing components or.
Adam Spice: Or sub system is old satellite vessels.
Adam Spice: Right so.
Adam I'll get you involved here really quickly then so your comment about two thirds one third two third on the services and one third on launch.
Speaker Change: Does that include this third leg that you are all planning to stand up at some point the services part of the business I guess, what I'm trying to figure out what youre going to be adding a new segment at some point or if that services part where you're going to be operating constellations will be a part of the space systems business and that two thirds. One third mix is kind of what you were kind of.
Adam Spice: Calculated into that.
Adam Spice: Yeah, well I think given the overall much larger size of the opportunity on the application side I would expect that to fundamentally change that overall mix right I think that just the if we kind of look at and we've talked to have we've articulated the total addressable market opportunity in each segment launch we articulated is roughly a $10 billion Tam.
Adam Spice: Systems and subsystems around satellites around $30 billion Tam and then the applications is perhaps an order of magnitude of that so really I think overtime. We look the two third one third was really a function of kind of the business as it exists today without them.
Adam Spice: That third leg stool.
Adam Spice: Okay, Yes, I just wanted to make sure I confirmed didn't want people to be hanging on that one and then two really quick ones tariffs.
Adam Spice: Next Tuesday, it could be a big day.
Speaker Change: Do you have any exposure to Canada or Mexico in particular, I'm thinking there's some guys have been Canada that making tenants I don't know if you're reliant on them and just kind of curious.
Speaker Change: Are you performing against certain fixed price contracts, where your some of your inputs might be going up in price as a result, some tariffs coming into the fold next week.
Speaker Change: Yes, I can I can Mexico me Darrin.
Speaker Change: And then ill pass it. So obviously, we have Sinclair interplanetary say that Toronto based a rich when I was in Star Trek.
Speaker Change: Business unit up there so.
Speaker Change: So we do have some some some exposure.
Speaker Change: But maybe Adam you could probably best placed on some of the financial questions.
Adam Spice: Yes, Jason we don't we really don't have a lot of exposure.
We have our reaction Wilson star track or incentives or business that we acquired several years ago up in Toronto.
Adam Spice: But I would say that that doesn't really.
Adam Spice: I would say, we don't do mass volume production of those solutions strictly the reaction wheels in Canada, those those take place actually in New Zealand.
Adam Spice: And certainly with with our.
Adam Spice: NDA Globalstar situation, where we actually do the buses and then we ship with buses to Montreal for it.
Adam Spice: It is really going from the U S to Canada and theirs.
Adam Spice: There's a lot of intricacies around kind of how you the value of those systems. They go across that border, but right now I'd say look we don't we don't see tariffs is impacting us.
Adam Spice: Significantly at this point I think we're pretty fortunate that the majority of our I.
Adam Spice: I'd say intensity within the company is really between the U S and New Zealand.
Adam Spice: Alright, Okay, great I'll leave it there I appreciate the time guys.
Adam Spice: Yeah.
Speaker Change: Your next question comes from the lineup Erik Rasmussen of Stifel. Please go ahead.
Erik Rasmussen: Yes, thanks, guys for taking the questions maybe just on the flag of like new.
Speaker Change: The new satellite in low cost satellite.
Speaker Change: What is what is.
Speaker Change: Throughput expectations for that and.
Speaker Change: And do you have sort of the infrastructure.
Speaker Change: To support your aspirations.
Speaker Change: In that new opportunity.
Speaker Change: Yeah, Hey, Eric.
Speaker Change: So the throughput of that is designed to be.
Couple of satellites, a week up to or up to a satellite or die depending on depending on the <unk>.
Speaker Change: Customer with the opportunity that we go after.
Speaker Change: We've.
Speaker Change: We've got you know.
Some pretty well you've been to some of the facilities and the headquarters building, which is which is now basically our satellite manufacturing facility has ample kind of space.
Speaker Change: It's nice to be able to execute that.
Speaker Change: And.
Speaker Change: If you look across all the subsystems you know this in many many areas, we've already scaled where there'd be sold or reaction wheel side.
Speaker Change: Some of those some of those systems.
Systems, we provide to some of some of the logical installations already so those those things are already being produced at scale.
Speaker Change: Got.
Speaker Change: As far as final integration I mean.
Speaker Change: We stand up and bring down lines the spacecraft.
Speaker Change: Now relatively frequently depending on what the customer needs.
Speaker Change: I would tell you that the vast majority of the capability exists.
Speaker Change: Great and then maybe just a neutron.
Speaker Change: The push out and it really again it doesn't sound like a whole.
Speaker Change: Big change I mean, I think you were talking about.
Speaker Change: Last update was.
Speaker Change: No earlier than mid 2025, and I think everyone would just still focused on mid 'twenty five.
Speaker Change: But here it is.
Speaker Change: Second half.
Speaker Change: But what I can.
Speaker Change: Yes.
Speaker Change: How would cheesable is at this point I mean do you consider this more less of a stretch goal and sort of where we were the last time when we made the new.
Speaker Change: Early in 2025 estimate.
Speaker Change: Yeah about it feels about the same to be honest with you Eric I mean in a few months here in the year here and there. It's just it's really in the noise, but we just we just want to be as transparent as we can where.
Speaker Change: Where we see things and.
Speaker Change: But but yeah look I mean.
Speaker Change: The what we're trying to bring to market in this vehicle and.
Speaker Change: And in such a short time frame, it's it's like like I say, it's it's it's kind of in the noise, but yeah, we should maybe be transparent.
Speaker Change: Okay. Maybe then elektron have you seen any changes in customer behavior or demand that maybe suggest things are slower than what you expected.
Speaker Change: I recall.
Speaker Change: For this year.
Speaker Change: Maybe looking at around 26 launches, but it sounds like you're expecting around 20 or so launches this year.
Speaker Change: And then any sort of comments you can make on that.
Speaker Change: Well I think we're just being a little bit more cautious this year, because we had a we had a big benefits last year, and we launched everything that turned up.
Speaker Change: So.
Speaker Change: And that's the kind of the the reality of the electrum product. That's why people pay the premium is because they get to launch when they need to launch. So we have a we have a really strong as you know.
Speaker Change: I was here last year and so far this year for electron as you saw we added a bunch more this year alone and we continue to see growth in that product. So it certainly doesn't feel like it's slowing down from from that perspective, but.
Speaker Change: I think it's certainly the sales cycles and some aren't but.
Speaker Change: We realized a little bit cautious because we.
Speaker Change: Promising how many launches we going to do it because it's just not in our control.
Speaker Change: Yes, I'll focus on just the growth in the backlog and I think the thing that gives that gives us encouragement is the fact that we're seeing increasing.
Speaker Change: Size of the contracts that we're signing with customers large numbers of launches.
Speaker Change: It's a new areas as well so that the elektron business is diversifying ethically with haste. So we've got diversity increasing of the business absolute increase in scale and with that increasing asps.
Speaker Change: And as we've talked about many times before across various conferences and venues. This business is a it's a.
Speaker Change: It's a scale business right you have to the more you can absorb those standing costs across a greater number of units Youre economics get much better and that's actually what we're what we see playing out over the coming quarters as we continue to scale the launch cadence.
Speaker Change: The margins benefit significantly as you get to absorb those relatively static fixed costs over a greater number of units.
Speaker Change: Yeah, I repeat I don't think Theres nothing that I see when we have our demand assessment kind of reviews internally that would say this market slowing down at all in fact, I think kind of adding that haste leg to the stool I think it's been super helpful and encouraging because thats a very strategic.
Speaker Change: Need thats being met.
Speaker Change: In a unique way by this this vehicle. So yes, I think were very encourage by what we see.
Speaker Change: Yeah.
Great I, just wanted to maybe bounce back to neutral real quick.
Speaker Change: With this new with this updated timeline.
Speaker Change: You still are you still within sort of the framework of being able to support an SSL.
Speaker Change: Maybe just talk about that timeline and relationships.
Speaker Change: Yeah sure I mean, we were working alongside the space force and have done for many years and.
Speaker Change: No it wont affect epic that.
Speaker Change: The ability to on ramp I mean, the the criteria is a.
Speaker Change: Critical path to launch.
Speaker Change: By the end of the year and you know.
Speaker Change: But by absolutely mate.
Speaker Change: You said that its measures of that I think I think we're fine.
Speaker Change: Great. Thank you.
Speaker Change: Your next question comes from the lineup Andrea Andrea <unk>. Please go ahead.
Speaker Change: Yeah.
Andrea Shepherd: Hey, everyone.
Speaker Change: Afternoon, and thanks for the question.
Speaker Change: Yes, I mean.
Speaker Change: Touchback on space apps I know this is always kind of been on in the background, even going back to when you guys first went public in 'twenty, one given that you're comfortable unveiling a flatline platform today could you maybe walk us through how you would expect this application to materially contribute to the business through the years, maybe when we could see a meaningful step up of any measure.
Speaker Change: Yeah.
Speaker Change: Yeah, Hey, Andre well I mean look at it it's kind of difficult to talk about that I mean, the the most important thing really is neutral because.
Speaker Change: If we take your friends over at Spacex.
Speaker Change: And the Starlink constellation.
Speaker Change: Billing because of great satellite, but the real new needle mover there. It was hot high frequency low cost launch that's why <unk> is so important so.
Speaker Change: We are we kind of methodically.
Speaker Change: ZIP by step, creating all of the one of the right ingredients to be able to you know.
Speaker Change: The constellations that scale, but.
Speaker Change: But you know the the.
Speaker Change: That's really really important element of that is neutral.
Speaker Change: And while that's occurring in the background. We are just like I said, just methodically building the capability to you know on the spacecraft side.
Speaker Change: Yes, no that's a that's a good point.
Speaker Change: I appreciate you highlighting that.
Speaker Change: And then maybe if I if I may follow up looking at the true backlog mix.
Speaker Change: No Adam touched on this before but it's 50 50 commercial defense us National security, but I mean, given that you like you said most of the R side. Its not most sizeable portion of commercial is bound for defense and National security customers.
Speaker Change: What's the true mix do you think.
Speaker Change: Yeah.
Speaker Change: Okay.
Speaker Change: It's probably.
Speaker Change:
Speaker Change: I would say probably more like 70 30, what do you think Adam.
Adam Spice: Yes, maybe even higher than that I think it's probably closer to north of 80% would be where the.
Speaker Change: And.
Speaker Change: That's a consumption of the data coming off the things that we launch get consumed in one way or other by by our government, whether it's U S government or other government. If you look at like I get a lot of the.
Speaker Change: Elektron are really popular.
Speaker Change: Vehicle for remote sensing capabilities.
Speaker Change: And again, a lot of those customers it used to be people are saying that.
Counting cars and Walmart parking lots is going to be the killer app for Earth observation that clearly wasn't the case it ends up being selling much of what gets generated from these commercial constellation's to the U S government for.
Speaker Change: Now security whether and.
Speaker Change: And other types of capability.
Speaker Change: Types of.
Speaker Change: Data. So I think it's probably I think it's probably north of 80% would be my guess, but it's just a guess.
Speaker Change: Got it got it no. That's that's helpful color.
Adam Spice: I'll leave it there thanks, Peter Adam.
Speaker Change: Thank you.
Speaker Change: Thanks.
Speaker Change: There are no further questions at this time.
Sir Peter: Is that I will now turn the call back over to Sir Peter back for final closing remarks. Please go ahead.
Sir Peter: Yeah. Thanks, Thanks, very much and before we close out today there are some upcoming conferences that we'll be attending shown below we look forward to sharing more exciting news and updates with you otherwise.
Speaker Change: So joining us that wraps up today's call and we look forward to speaking with you again about the exciting progress being made at Rockaway, Thanks very much.
Speaker Change: Ladies and gentlemen that concludes your conference call. We thank you for participating and ask you. Please disconnect your lines.
Speaker Change: Yeah.
Speaker Change: Yeah.
Speaker Change:
Speaker Change: [noise].
Speaker Change: Sure.