Rocket Lab USA, Inc. Price & Performance (RKLB)

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 SEC. Securities and Exchange Commission. Such statements are based upon information available to the company as of the date hereof and are subject to change for future developments. Except as required by law, the company does not undertake any obligation to update these statements. Now 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. This call is also being webcast with a supporting presentation and a replay and copy of the presentation will be available on our website. Our speakers today are Rocketlab's Founder and Chief Executive Officer Sir Peter Beck as well as Chief Financial Officer, Adam Spife.

Will be discussing key business developments and highlights, including updates on our launch in space systems programs. 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.

Thanks, Marielle, and thanks for everybody joining us [indiscernible] Look, 2024 was our biggest revenue year ever, and I'm proud to share that we delivered very strong results for Q4 twenty twenty four. And indeed, for the full year, we achieved dollars That's more than 78% increase on previous year's revenue. Demonstrating that our strategy of delivering end to end space services is paying off and delivering significant growth. From Q3 to Q4 last year, we saw growth of more than 26% and year on year Q4 growth was 121%. 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% increase in Q4 revenue to be precise, since our entry into the NASDAQ in 2021. On the launch side, these figures are driven by an increase of Electron launch cadence and the introduction of hypersonic suborbital test launch capabilities. Space Systems contribution has been continued strong execution across both spacecraft and constellation build and operation. As well as our merchant satellite component businesses. Now let's dig into these areas and a little more detail in the following slides.

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 with 100% mission success. Once again, we have maintained our position as the leading small launch provider globally and the second most frequently launched U. S. Rocket annually. We signed more than $450,000,000 in new contracts in 2024, across launch and space systems, further strengthening our backlog with currently sits at just over $1,000,000,000 We also achieved our world first by successfully launching two mission within twenty four hours from pads on either side of the planet. On the space systems front, there are too many achievements to distill and one slide. So here are just a couple of my favorites. 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.

They did this on an impressively short timeframe and an incredibly cost competitive for an interplanetary mission. While they get to launch, we are excited to see these birds on their way to the red planet soon. Our reentry Nevada was another major milestone successfully enabling the first in space manufacturing mission outside the International Space Station. [indiscernible] first reentry early last year, we've delivered two more Pioneer spacecraft for Vada with the returning to Earth in South Australia. Another third pioneer spacecraft for Vada is just now days away from launch.

Just a tiny snapshot of our achievements in 2024. But before we dig deeper into the up I want to provide an overview of our strategic focus for this year. 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. The first two steps are well underway with launch in space systems, meaning that we have our own ride to space and we can build and operate the satellites on orbit. The final remaining step is space applications or delivering data or services from space using our own constellation. 2024, we made significant progress across all three and we're building on that again in 2025.

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 and more than estimated 10,000 constellation spacecraft that need deployment in the coming decade. We continue to wrap up our small launch cadence with more than 20 missions in 2025 on the manifest across Electron and Haist.

We 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 mission scheduled this year across small launch, medium launch, hypersonic suborbital test launch. 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.

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 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 the missions. I'm also excited to reveal new addition to our spacecraft lineup one that slots nicely into our vision for space applications, And I'll talk more about this satellite later in the call. But first, so now for some updates on Electron. 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 ten days of each other within ten days of each other.

Last year's trend was building out satellite constellations with Electron. In Q1 twenty twenty five, this has continued with launches for both of whom have booked multiple missions on Electron deploy or replenish their constellations. Canis in particular is worth calling out since we launched them for the first time in June as part of a five launch deal. 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. Last year, we also signed a multi launch deal with a Japanese earth imaging company, IQ, 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 In 2024, we built on our success in the small launch market with electrons suborbital variant, Haste.

Year's Pentagon budget request for hypersonic research was up 46% to $6,900,000,000 on the two years prior and we're ideally positioned to support this expanding market. We're the only commercial provider that's executed two launches in twenty one days for the Department of Defense Mark TB program, which we completed in Q4. And we have another five HACE missions locked in for the DoD and its contractors. In January, we also announced that we've been selected by Kratos to support the next phase of the March mark TV program called Mark TV two point zero. It's a $1,450,000,000 five year contract to expand hypersonic technology testing and we haste we're uniquely suited to meet that challenge. I think it's also important to place all of that within the wider context of today's geopolitics and America's defense technology. 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 threat facing The United States today.

Furthering peace of strength is critical to America's defense. 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. Well, the title really hearses it all. This is the year of Neutron. 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. From commercial constellations alone. And then there's the growing demand from national security and defense missions as well as interplanetary exploration for the science community and it goes on. The need is clear, so I won't labor on it other than to say that the industry is crying out for more launch options in the class and Neutron is coming to market in record time to deliver it. Neutron is also critical to us launching and operating our own future satellite constellation. So over the next few slides, I'll take you through the latest development milestones and achievements as we work in the second half of this year. Okay. So at LC3, all major hardware and Yes, and we even have water.

Most recent updates include the flare stack, 165 tonne steel circular launch mount structure that Neutron will launch from. 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. The launch site. [indiscernible] its grand opening in a few short months. Now on to the one of the most exciting and novel features of Neutron, its hungry hippo fearing. The massive reusable nose cone halves are now live and moving fully integrated with their avionics and actuators and all of the mechanical systems. We're testing like we're flying, opening and closing the Hungry Hippo at full speed to understand exactly how they behave. And it's fair to say I was there in person for the first And I fully encourage you to go and check out the video we'll put out today of all of that testing in pretty cool.

We have a few more run throughs. As we had 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. Let me draw your attention to the picture on the top left. That's our Stage one tank stacked and ready to ship out. Check out the person at the bottom of the frame at the scale and you can see the size of that tank. 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 one with structures including Fearing halves, already in production for a second neutron rocket. For Flight one 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 [indiscernible] Checks and AIT before going straight into full system qualification. So keep an eye out for pictures of tanks and barges to know where we're getting closer to the next milestone. Now on to Archimedes. The engines qualification campaign continues at a cracking pace. We We're hot firing every few days and the testing is going well.

We've got engines consistently moving across the country, the production line in Long Beach and the engine test side in Mississippi. You also may have seen we shared a recent update that performance iterations on the production line have resulted more than a couple of 100 KG shed from the engine, which is is always good. And also, to get the size of that second stage nozzle expansion cone in the bottom left of the slide. That we recently produced and on its way for testing. It's a cool thing. 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 one. So in that case, we the build of a second Archimedes engine test cell nearly complete. And this enables us to concurrently test engines as our investments in production ramp up. So having two cells is always good. 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 it specifically for Adam Spice.

Nutrien's 400 foot ocean land platform 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. Alongside shore based landing sites and the ocean platform gives us flexibility to maximize 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. With the vessel secured, work has now begun on modifying it. We're adding autonomous ground support equipment that's secures Neutron to the deck when it lands, heat shielding, propulsive systems and things to keep it on target for Neutron's return. The landing platform is also a clear indication that we're scaling up and moving past first minimum viable product with Neutron now. With one launch set 25, 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 splash down but we can expect return on investment to live up to its name in '20 when it into service for all the future Neutron flights.

Now the road to launch, I'm often asked what should we look at to indicate Neutron's progress to the pack 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. We've always been clear that we run aggressive schedules and that gets us to the pad on a rapid timeframe. But of course, nobody wants to get the rocket faster to pad than 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. 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 license. This is an Air Force radio, as everyone knows. We know strangers to bringing in a new Rocket to Rocket. We're running aggressive schedules as we always do. At the end of the day, as I've always said, it's [indiscernible] Ladies and gentlemen, this the operator. I apologize that there will be a slight delay in today's conference.

Thank you for your patience. [indiscernible] 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. So I'm often asked what we should look for and to indicate Neutron's progress to the pad. So we Rocket 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. We've always been really clear that we run aggressive schedules and that gets us to the pad quick 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. Everything has been worked is being worked concurrently and some of them long lead pieces that come together literally days before the launch. For example, a launch license. 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 always say, it's a rocket program. But right now we're planning for first launch in the second half of this year. I'm very happy with the progress and 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.

So moving on from launch now and to provide some updates on the Space Systems businesses.

I'm happy to share our mission success for our latest spacecraft data in the early hours of this morning and I mean early, our Pioneer Space craft flawlessly executed an earth reentry maneuver and deployed Vada's capsule to land in South The mission was launched in January and had been operating on orbit for over a month delivering critical mission functions for Vardis capsule. We have our third pioneer class satellite with its beta caps already and waiting for launch in the coming days. Which is the second satellite ready for launch of this program within a month. For our Space Systems team, they're busy right now helping land a NASA lunar lander mission on the moon. After its forty five day journey through space, our very own space grade solar cells have provided over fourteen hundred operational hours of power for this mission. While the space software team have been providing 20 fourseven support for the orbit control and engine burns that have gotten this apart. They'll be continuing that support for the mission right through its most critical phases too, including landing on the moon itself.

On the national defense side, our team is really hitting their stride with two critical programs. We're now deep into the detailed design phase of our $500,000,000 prime contract with Space Development Agency.

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. Department of Defense. All 18 satellites use practically every one of our integrated subsystems and components including solar panels, composite structures, star trackers, reaction wheels, radio, flight, ground software, avionics, launch dispensers and so on and so forth. 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 defense solutions with certainty on cost and schedule and of course quality. We also have our twenty four hour notice responsive space mission coming up this year for the U. S. Space Force.

This is one of the $32,000,000 Victor Hayes mission with a Rocket Lab satellite launching on a Rocketlab Rocket on short notice to demonstrate that we can respond to threats on very short timelines. In the defense industry, that's called tactically responsible responsive space. It's a hugely complex yet sought after capability that the Pentagon the With their proven capabilities across space systems and launch, it's a position we're uniquely suited Now most of those missions employ spacecraft from our lineup of standard vertically integrated satellites that we announced last year. But today, I'm excited to share a big announcement. Please meet Flasilite, a low cost mass producible satellite tailored for large constellations.

Now we've developed FLATELIGHT after many years of work closely with Constellation operators and getting to deeply understand their needs of today and of course into the future.

Flatlite 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, defense and commercial markets. With Flat A Lot, we can do something few spacecraft manufacturers can. 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. This puts us in greater control of cost and schedule than others relying on constrained supply chains. What's more, once we've built them, we can launch the ensuring seamless integration with Neutron. The bottom far right render with FlaterLites stacked inside Neutron's fairings gives you a bit of an idea of the center scale here.

Now the satellite is more than just a new product development to serve our customers. Ever evolving needs though.

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 better own spacecraft in high volumes, we're at a distinct advantage when it comes to establishing constellations with speed and cost efficiency. That's about all we can share on Flatilite today, but I'm excited to be able to share more with you on this, so watch this space.

So with that, I'll hand it over to Adam now to provide further commentary and to discuss our financial highlights and outlook. Thanks, Pete. Fourth quarter twenty twenty four revenue was $132,000,000 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. Fourth quarter revenue represented a sequential increase of 26.3%, primarily due to the increase in launches from three to five including two haste missions during the quarter, which come at a higher ASP versus standard [indiscernible] On a full year basis, 2024 revenue $436,000,000 impressive growth of approximately 78% year on year. Our Launch Services segment delivered revenue of $42,400,000 and our current Electron and HACE backlog continues to support an increasing ASP with some quarterly variability tied volume purchase commitments, launch location and mission assurance requirements. On a full year basis, launch delivered revenue of $125,400,000 which is an increase of roughly 74% year on year. Our Space Systems segment delivered $90,000,000 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.

On a full year basis, Space Systems delivered revenue Turning to gross margin. GAAP gross margin for the fourth quarter was 27.8%, at the high end of our prior guidance range of 26% to 28%, Non GAAP gross margin for the fourth quarter was 34%, which was also at the hand of our prior year guidance range of 32% to 34%. On a full year basis, GAAP gross margin was 26% while non GAAP gross margin was 32%. 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 Electron's cadence continues to increase at higher ASPs and our Space Systems business continues to scale. Relatedly, we ended Q4 with production related headcount of 1,004 heads. Up 40 from the prior quarter. Turning to backlog. We ended Q4 twenty twenty four with $1,070,000,000 of total backlog. With launch backlog of $386,000,000 and space systems backlog $681,000,000 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.

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. At first glance, our backlog has roughly has roughly a fifty-fifty split between government and commercial. We As you dig deeper, many of our commercial customers ultimately cater to the needs of U. S. Government and other friendly nations We view this as a significant advantage, especially evolving political and budgetary environments as governments focus on space, and efficiency remains a high priority. We continue to cultivate a healthy pipeline including multi that as mentioned earlier can create lumpiness in backlog growth in given the size and complexity of these opportunities. We expect approximately 50% of current backlog to be recognized as revenues within twelve months. Turning to operating expenses in the quarter. GAAP operating expenses for the fourth quarter of twenty twenty four were $88,400,000 modestly above our guidance range of $84,000,000 to $86,000,000 Non GAAP operating expenses for the fourth quarter $74,500,000 just below our guidance range of $75,000,000 to $77,000,000 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 U. S. Government programs.

Non GAAP operating expenses also grew 39% 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. The sequential increases in both GAAP and non GAAP operating expenses were 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. In R and D specifically, GAAP expenses increased $532,000 quarter on quarter due to Neutron prototyping materials and headcount growth. Non GAAP R and D expenses were up $3,300,000 quarter more than the GAAP increase. Due to fluctuations in non cash stock based compensation, between R and D and cost of sales, related to the EAC accounting of our Space Systems manufacturing programs. As such, the non GAAP R and D increase of $3,300,000 represents well the underlying trend in core R and D spend in the business. Again, driven largely by investments in Neutron. Q4 ending R and D headcount was eight twenty eight, representing an increase of 52 for the prior quarter. In SG and A, GAAP expenses increased $7,900,000 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. 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. With that GAAP spend, we reported non recurring transaction costs of $2,200,000 in Q4 Owing to a step up in corporate development activities, including advancing a robust pipeline of M and A opportunities. Non GAAP SG and A expenses increased by $2,500,000,000 driven by the previously mentioned GAAP increases. Q4 ending SG and A headcount three twenty nine, representing an increase of 29 from the prior quarter. In summary, total fourth quarter headcount was 2,161, up 121 heads from the prior quarter. Turning to cash. Purchases of Rocket, equipment and capitalized software licenses [indiscernible] $21,500,000 in the fourth quarter of twenty twenty four. An increase of $10,500,000 or from the $11,000,000 in the third quarter of twenty twenty four. As we continue to invest in Neutron research testing and scaling production, expect increased capital expenditures to continue for the next few quarters. Cash consumed from operations was $2,400,000 in the fourth quarter of twenty twenty four.

Compared to $30,900,000 in the third quarter of twenty twenty four. The sequential improvement of $28,500,000 was driven primarily by the increased Space Systems programs milestone receipts. Which can be lumpy. Overall, non GAAP free cash flow defined as GAAP operating cash flow less purchases of property, equipment and capitalized software in the core fourth quarter of twenty twenty four was a use of $23,900,000 compared to $41,900,000 in the third quarter of twenty twenty four. 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. Are projected to be lower in Q1 off a strong Q4. Combined with higher payment outflows to our SEA program subcons that we expect will ultimately be reflected in higher revenue recognition in the back half of twenty twenty five. The ending balance of cash, cash equivalents, restricted cash and marketable securities was $484,000,000 as of the end of the fourth quarter of twenty twenty four. 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 addressable market consistent with what we have done successfully in the past.

Adjusted EBITDA loss was $23,200,000 in the fourth quarter twenty four, modestly above our guidance range of a $27,000,000 to $29,000,000 loss. The sequential improvement of $7,700,000 primarily driven by revenue growth and gross margin improvement across both segments. With that, let's turn to our guidance for the first quarter of twenty twenty five. We expect revenue in the first quarter range between $117,000,000 and $123,000,000 representing approximately 29% year on year growth revenue growth at the midpoint and expect a return to sequential growth in Q2 by strength in our Space Systems business. We expect first quarter GAAP gross margin to range and non GAAP gross margin to range between 30% to 32%. These forecasted GAAP and non GAAP gross margins reflect less favorable mix within Space Systems segment and a lower launch ASP driven by customer mix discussed earlier. We expect first quarter GAAP operating expenses to range between $93,000,000 and $95,000,000 and non GAAP operating expenses to range between $77,000,000 and $79,000,000 The quarter on quarter increases are driven primarily by continued Neutron investment in the staff costs, prototyping, [indiscernible] We expect first quarter GAAP and non GAAP net interest expense to be $2,700,000 We expect first quarter adjusted EBITDA loss to range between $33,000,000 and $35,000,000 and basic weighted average common shares outstanding to be approximately four fifty eight shares excludes convertible preferred shares of approximately $51,000,000 Lastly, given where we are in the final push 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 adjusted EBITDA.

Continue to see the program investment in getting to Neutron a minimum viable product and to be consistent with our initial estimates of approximately $250,000,000 to $300,000,000 Having spent approximately $200,000,000 of gross GAAP OpEx and CapEx, through the end of twenty twenty four on this program. Specifically, over the last four quarters, total cash consumption has been running between approximately $20,000,000 and $40,000,000 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, and a lack of significant contractual milestone payments receivable across our MDA Globalstar and SDA programs in the quarter. 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 $20,000,000 to $40,000,000 in Q1. We expect this dynamic to moderate in coming quarters with the resumption of contractual milestone payment schedules under our large space systems programs as we get the minimum viable infrastructure in place to support the inaugural launch of Neutron later this year. And with that, hand the call over to the operator for questions.

Thank you. Your first question comes from the line of Edison Yu of Deutsche Bank. Please go ahead. Thanks for taking our questions. One of the first one on Neutron, and to check the language around the timing.

I think in the past it's been talked about as mid-twenty twenty five now you're saying second half, is this just kind of semantics, it's a couple of months or are you trying to maybe put some cushion or take more time with any of the processes? Yes. Hi, Edison. We've sort of said in the past mid-twenty twenty five. So yes, we're taking a a giving ourselves a little bit more time to get it to the pad and get the launch. But I mean, we're We're talking months here, it's not very material.

Understood. Understood. And just in terms of the launch itself, what would you kind of define as success I bring it in the context of let's say, it gets to orbit, does that mean we're pretty confident in the three for next year? Just curious on the parameters for what you would define as [indiscernible] Yes, no, absolutely. Our intention is is to go to orbit. We're not anything less than that is not where we want to be. So no our intention is orbital on the first flight. Which I think some people in the space and just your who not well realizes that that is difficult to do. But like I said, this is their second time around. So that's that's what we define as success for that mission. Great. Your next question comes from the line of Andres Sheppard of Cantor Fitzgerald.

Please go ahead. Hey, everyone. Congratulations on the quarter and Peter, just maybe to follow-up on the Neutron question, maybe another way to ask is, how confident 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? Yes, I'll ask them the first part of the question, Andre, and then pass it off to Adam.

For the second half. But I mean, look, we're not tracking any any major events that would cause us to be concerned about trying to get this business away this year. Always caveat anything, but it's a rocket program. I mean, we have some major tests to complete. But at this stage, [indiscernible] tracking Yes. And I can take the second piece of that, Andre. So [indiscernible] The mix in this business, I think, will be it's not going to be too unpredictable. So if 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 will become a piece of the launch business once Neutron starts to fly in its revenue generating form. So look, if you take you extend our launch business that we at as Pete mentioned earlier, north of 20 launches this year, with the manifests, it would indicate continued growth off of that in the '26 you've got some natural growth there, but then you start to introduce if you talk about three Neutron launches at the prices that we've discussed previously, in the $50,000,000 to $55,000,000 range, You're looking at a potentially equaling in kind of that first year of revenue production for Neutron to equal what what electron is in what it's like APR production.

So that kind of just indicates the power that Neutron brings to the model. We also expect significant growth in our Space Systems business to continue in 2026. So I would say that we will see a remixing and rebalancing and probably Recently, we've been about a seventy-thirty mix of space systems to launch. And I think you'll see launch become greater in that mix. I don't think it will become necessarily more than 50% of the overall mix. Like if you look into 2026, But I think longer term, Pete and I always talked about, we like having that two third, one third space system to launch mix just given the lumpiness that launch naturally has given customer readiness and so forth. 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 balance that back out to our ideal mix of kind of two thirds space system, one third launch.

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 what are some Key awards or key catalysts that we can look forward for this year or maybe things that are not necessarily reflected in the backlog? Thank you. [indiscernible] as Adam kind of alluded mentioned in the call, the kind of programs that we chase are not little programs. We know We chase fairly significant programs and as a result, it kind of creates a little bit of lumpiness in the backlog. And obviously, SDA mission, so we'll continue bid on those. And there's a whole bunch of new missions that have been created relatively recently to do with the Iron Dome that we think we're well placed for as well. So we'll continue to do things bet on the things that make sense. And it's fair to say though that there is also some some uncertainty in the industry under the new administration in the defense force about which programs are getting accelerated and which programs are getting getting slowed down. So we just sort of roll with that a little bit.

Wonderful.

Super helpful again and congratulations I'll pass it on. Your next question comes from the line of Suji Desilva of ROTH Capital. Hi, Peter. Hi, Adam. Congratulations on naming the 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 step down. And if so, would that be kind of concurrently with the first launch lag a little perhaps lead as it the spend is ahead, any color there would be helpful.

Yes, I can take a pass at that first part of it. Pete can jump in. When you think about Neutron costs, obviously, this first test launch is an R and D launch.

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 second tail to the third tail. That's always I think the more meaningful thing, obviously, and the big focus item for us to really get the Neutron economics to come into focus is really reusability. And so Pete introduced the barge earlier today and I like the name of that. Certainly, you're your return on investment is exactly what that barge is intended to do.

But it's really about how quickly can we stick that first landing, right? So again, we're not going to attempt it on the first one. The question is, when do we feel comfortable to attempt it? Then when we do for successful putting that booster into reuse, going just as kind of we've seen other or we've seen SpaceX do, you hopefully get the hit to use 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.

And really, when you start to amortize the cost of that expensive booster over 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. And if Pete wants to add anything to that.

No, you said it exactly what I was going to say is 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 that's been an important design element for the vehicle.

Okay, great. And then my other questions on the new product, the Flat Olight product. Seems like this is your entry into satellite constellation satellites. Wondering if there's a cost per satellite advantage you may have with the architecture versus what's currently in the marketplace or what's planned?

From competitors competitive offerings or how else we should think about the advantages of this product as Constellation become and Constellation economics? Become a big part of putting this in the space. No, that's a great question. So generally the way the conversations go is how fast can you make it and then how cheap is it. Those that's generally the order of events. And being so vertically integrated, we really shine on how fast you can make it because basically over the years, we've just slowly been integrating more and more stuff and building more and more things in house. So that gives us a huge edge. And then of course, because we're building rockets and large structures and equipment, we just have tremendous amount of capability, whether it be machine shops or composites and you name it, robotics. We just have a huge amount of capability to really execute on. And this is, I guess, where I think to really be a large competitive player in industry, as I've always said, you have to have your ability to build satellites at scale and you have to have the ability to launch at scale. And launches getting done with Neutron and I'd say we've we're very far down the path now with Space Systems and the introduction of FlatAlight is really a combination of of a number of years where to get a product that can truly be very low cost and very high volume.

Okay.

Thanks, Steve. Thanks a lot. Your next question comes from the line of Treval Trevor Walsh of Citizens JMP. Please go ahead.

Great. Hi, Jen. Thanks for taking the question. Just to [indiscernible] Peter, is there I think the deck said there was flexibility around the payload and just in kind of looking how you're going to have the sort of stacking mix there within Neutron. Are there any limitations around payload or like type of payload? I'm thinking more kind of in the earth sensing kind of the earth observation type realm as far as cameras and such.

Yes, that's a great question, Trevor. So I mean, the flat structure doesn't lend itself to large optical apertures that's for sure like big telescopes. But basically everything else, it's super ideal for So we do the way that the the structure is designed is we do have flexibility to grow the payload bay depth and array sizes pretty easily. It's like a think of it like a leather backpack on onto those structures. So we can shrink and grow various payloads pretty easily. So we've really given a lot of thought to not only what our customers are asking us now, but future proof in their design so that we can address a number of different applications with it.

Great, awesome. Appreciate the color. And then maybe Adam, one quick follow-up for you.

Around the R and D headcount increases and maybe more specific to Neutron, is the would the plan for those kind of heads be to kind of stay within the Neutron family or would they be able to be tasked and used kind of broader around launch or even in space systems? Just trying to get a sense of kind of again around the cost question for Neutron, if if headcount requirements kind of once the first launch goes abate a little bit and just how that kind of get more headcount employee type base kind of costs around the build out kind of might flow?

Yes. I'd encourage you to think more of it in terms of kind of how does the the P and L morph over time. And I think certainly as we get past the first launch, you'll see R and D begin to subside pretty significantly. Now a lot of the heads if we kind of take our past experience and kind of extrapolate that out, Yes, we tend to hire very talented athletes, if you will, at engineering functions, which can do lots of different things. And so you find people that are super effective doing R and D work and then they pivot over to production and they kind of work on production engineering ME type of support work. So I wouldn't think so much of kind of elimination as much as repurposing from R and D into production because as you're ramping a new vehicle, it's there's still R and D type of elements and kind of skills that are necessary kind of bring that vehicle into its mature state. So that's the way I would encourage it. So certainly we expect assuming a step down in R and D, but those heads just really kind of expense related to those types of heads really move into cost of sales at that point.

And I'll maybe let Pete speak to the mix, if he has any different views. But certainly, I think the one thing that's key is aside from the head, 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 and D. Yes, I think you said it well, Adam. Nothing to add there further.

Great. Thanks, Paul. Appreciate the questions. Your next question comes from the line of Michael Leshoff of KeyBanc Capital Markets.

Please go ahead.

Hey, good afternoon. Thanks for taking my question. I wanted to start on the Archimedes hot fires you've significantly increased your testing cadence there and the fire 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 since the initial hot fire last August kind of where does Archimedes sit today in terms of readiness for the first launch meeting or exceeding your performance requirements.

Yes. Hi, Michael. Good questions. So yes, no, we're running the engines just all the time. A qualification program, it it covers a lot of different run conditions. And it's not like the engine just needs to start on the ground once and ascend. We have a whole bunch of other run conditions where the propellant needs to sit for a while and do the reentry and landing burns. And of course, the stage one engine is the same as stage two. So you've got a big coast periods and relights. So the qualification campaign is pretty big. I'm pretty happy with the engine to be fair. The changes that we made to remove mass were in large part to increase productionability. Whenever you design something and you put it in production, you inevitably find the things that you don't like. So being agile enough at this stage to change them, change the things we want to is the right time to do it. It gets harder once the engine is all qualified. And the team is just working through it. And we added that extra cell for the very reason is just a tremendous amount of testing to get through and tweaking.

And yes, we just hammering away Okay, great. And maybe shifting to Electron, if we look longer term at Electron's launch prospects, if LC1 can provide 120 launch opportunities annually, and then maybe another 12 at LC2 Is the 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 at maybe 30 or 40 electrons per year? Just wondering where that sweet spot is for electron launches as we look out three to five plus years down the road?

Yes, good question. So I mean, mean my answer is as many as possible, right? That's what we want to see. When we developed LC1 and we had to license that site, we obviously never wanted to be constrained by by the licensing on that site. So we just thought 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've 12 capacity out of LC2s, that can be amended and improved. So that's 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 great. But that's really the driving factor behind it. And as we look out in the following years, we've seen strong growth in electron sales year on year.

Appreciate all the color and congrats on all the milestones in the quarter. Thanks, Michael. Your next question comes from the line of Jason Gersky of Citi. Hey, good afternoon, everybody.

Peter, recognizing that space is hard, you guys are running aggressive timelines to your own admission on the Neutron the things that have caused the delays at each point. So I think we had pushed from the fourth quarter, excuse me, second half of 'twenty four into mid-twenty five now into the second half of 'twenty five. What are you seeing that is causing you to make those changes?

Yes, thanks, Jason. Well, I mean, firstly, if we stand back and look at the context of the timeline of a Rocket program. This is still the crazy fast compared to just about any historic rocket program. So there is [indiscernible] good to anchor on that. But look, there's no one thing. It's not like we had a giant engine failure or tank failure or anything. There's no one thing. I would say probably the most frustrating thing is some of the large structures and third party providers, we always end up having to pull stuff in house because we get let down by a number of providers. And I'd say that that's caused a bit of delay. Early in the program, it's fair to say that we had to deal with some some kind of COVID issues. So we just couldn't get concrete and we couldn't get steel. Couldn't buy CNC machines. Those things had really long lead times associated with them. Now of course, that's not the case now, but that sort of got us off to a little bit of little bit of a slow start. But there's no like one big thing that's just sort of got on the road.

We continue to push hard and like I say, there's no giant thing. And if something we its league well out of bid, then of course we would let everybody know. But at the moment, we're just sort of just eating a lighter.

Yes. And you mentioned suppliers. How much dependency do you have at this point to get this all wrapped up? Is this 90% under your control at this point? Do you still have some dependencies with suppliers?

Yes. Well, as we traditionally as we transition into rate production of the product, We have that much, much more under our roof. When you're building large steel structures and launch sites and things like that, you don't have that in house capability. To do those kinds of things. We The early prototypes were hand laid rather than being made on the AFP machine, which is now of course up and running and commissioned. So So some of those things delay. But there's just some practicalities around doing things for one off. It doesn't make sense to build all that capability in house. But I'd say as time goes on and as rate production starts to increase, we become far less reliant on those external contractors.

Right.

Okay. I've got just a few more quick ones. If you'll humor me. On the pipeline in space systems, Yes, in Space Systems and the pipeline, I'm just kind of curious what you are seeing and what the shape of that business might look like in the future. And I'm thinking about it split between you being the OEM or the kind of the prime building the full spacecraft versus you being a supplier into others.

How what do you see out there? Are you guys going to end up being more of a component more of an OEM? Is it going to be a fifty-fifty split? I'm just kind of curious what you're seeing Well, I think our aspiration, Jason, is we want to to provide the service. So a higher tier than than certainly just building the satellite and the higher tier again just providing the components. But the beauty of the way that we run the business is that we can fiercely bid on a 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 are we'll have some content and components in many of those larger programs. But certainly, there's a few things we're going after.

Right? One is very large U. S. Government programs, which we think we have some very discriminating technologies or capabilities. And then of course, other large commercial constellations and programs, which you've seen us execute against as well. And always, we like to have a NASA science mission on on the books as well. So we've generally had a moon mission a Mars mission or something on the books because we believe that's important to create technologies and and for the company. So you'll see those consistent sort of programs going out. But I mean, where we're really trying to get to is providing the service. Not just providing components or subsystems or satellite buses.

Right. So Adam, I'll get you involved here really quickly, Vin. So you're comment about two thirds, one third, two third on the services and one third on launch.

Does that include this like third leg that you are all planning to stand up at some point, the [indiscernible] part of the business? I just I'm trying to figure out whether you're going to be adding segment at some point or if that services part 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 getting encapsulated into that.

Yes. Well, I think given the overall much larger size the Op I would expect that to fundamentally change that overall mix, right? I think that just the if we kind of look and we've talked to we've articulated the total address market opportunity in each segment, Launch we articulated is roughly a $10,000,000,000 TAM.

Systems and subsystems around satellites are around a $30,000,000,000 TAM. And then the applications is perhaps an order of magnitude of that. So really, I think over time, the two third one third was really a function of kind of the business as as it exists today without that without that third leg of stool.

Okay. Yes, I just wanted to make sure I confirm that. Didn't want people to be hanging on that word. And then two last really quick ones, tariffs next Tuesday could be a big day.

You have any exposure to Canada or Mexico an antennas. I don't know if you're reliant on them. I'm just kind of curious you're performing against some fixed price contracts where your some of your inputs might be going up in price as a result of some tariffs that come in to into the fold next week.

I mean, I can make some comment there and then Yes, go ahead. And then [indiscernible] Toronto based Rraction Wheels and Star Rocket business unit up there. So we do have some exposure. But maybe, Adam, you're probably best placed on some of the financial questions.

Yes, Jason, we don't we really don't have a lot of exposure. We certainly have our reaction wheels from StarTracker and Sunset's are business that we acquired several years ago up in Toronto.

But I would say that that doesn't really I would say we don't do mass volume production of those solutions, especially the reaction wheels in Canada. Those take place in New Zealand, [indiscernible] MDA Globalstar situation where we actually do the buses and we ship the buses to Montreal for AIT, it's really going from The U. S. To Canada. And there's I'm sure there's a lot of intricacies around kind of how you the value of those systems they go across that border.

But right now, it's a look, we don't see tariffs as impacting us significantly at this point. I think we're pretty fortunate that the majority of our I'd say, intensity within the company is really between The U. S. And New Zealand.

Right.

Okay, great. I'll leave it there. I appreciate the time guys.

Your next question comes from the line of Eric Rasmussen of Stifel. Thanks guys for taking the questions. Maybe just on the Slide o'Lite the new new satellite low cost satellite. What is the throughput, the expectation for that And do you have sort of the infrastructure to support your S aspirations in that new opportunity? [indiscernible] Eric. So the throughput of that is designed to be couple of satellites a week up to a satellite a day depending on depending on the customer or the We've We've got some pretty you've been to some of the facilities. The Headquarters Building, which is now basically a satellite manufacturing facility has ample kind of space to be able to execute that. And if you look across all the subsystems, there's in many, many areas we've already scaled, whether it be solar or a reaction wheel. So So when some of those systems we provide to some of the larger constellations already. So those things are already being produced at scale. But as far as final integration, we stand up and bring down lines for spacecraft now relatively frequently depending on what the customer needs. So I would say that the vast majority of the capability exists Great.

And then maybe just on Neutron, the the push out, and it really again, it doesn't sound like a whole big change. I mean I think you were talking about the late last update was no earlier than mid twenty twenty five and I think everyone was just so focused on just mid twenty twenty five But here it's second half But what I guess how achievable is this at this point? I mean, do you consider this more less of a stretch goal than sort of where we were the last time when you made the no earlier than 2025 estimate.

Yes, about feels about the same to be honest with you, Eric. I mean, in a few months here and there, it's really in the noise. But we just want to be as transparent can where we see things and but yes, look, I mean, the what we're trying to bring here to market in this vehicle in such a short timeframe, it's it's like I say, it's kind of in the noise. But yes, we just made me be transparent.

Okay. Maybe then on Electron, have you seen any changes in customer behavior or demand that maybe suggest things are slower than what you expected? I think I recall for this year, we were maybe looking at around 26 launches, but it's sounds like you're expecting around 20 or so launches for this year.

Any sort of comments you can make on that?

Well, I think we're just being a little bit more cautious this year because we had a big manifest last year and we launched everything that So and that's the kind of the reality of the product. That's why people pay the premium is because they get to launch when they need to launch. So we have a really strong sales year last year and 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 our perspective, but I think it's certainly the sales cycles and sales aren't, but I think we're always a little bit cautious because we in promising how many launches we're going to do because it's just not in our control.

Yes. And Eric, I would focus on just the growth in the backlog. And I think the thing that gives us encouragement is the fact that we're seeing increasing size of the contracts that we're signing with customers as large numbers of launches. It's in new areas as well. So that that electron business is diversifying now, particularly with HAST. So we've got diversity increasing in the business, absolute increase in scale and with that increasing ASPs.

And as we've talked about many times before across various conferences and venues, this business is a a it's a scale business, right? You have to the more you can absorb those those standing costs across a greater number of units, your economics get much better. And that's actually what we're we see playing out over the coming quarters is as we continue to scale the launch cadence, the margins benefit significantly as you get to absorb those relatively static fixed costs over a greater number of units. So yes, I agree, Pete, I don't think there's nothing that I see when we have our demand assessment kind of reviews internally that would say this market is slowing down at all. In fact, I think kind of adding that haste to the stool, I think, is super helpful and encouraging because that's a very strategic need that's being met in a unique way by this vehicle. So yes, I think we're very encouraged by what we see.

Great. I just want to maybe bounce back to neutral real quick.

With this updated timeline, do you still are you still within sort of the framework of being able to support NSSL Maybe just talk about that timeline in relation to sort of your new update Yes, sure. I mean, we were working long alongside the Space Force and have done for many years. And And no, it won't affect that the ability to on ramp. I mean, the criteria is a a credible path to launch by the end of the year and by absolutely me by all measures of that, I think we're fine.

Great. Thank you.

Your next question comes from the line of Andre Madrid BTIG. Please go ahead.

Hey, everyone.

Good afternoon and thanks for the question.

Yes, I mean, to touch back on space apps, I know this has always kind of been on in the background, even going back to when you guys first went public in 2021. Given that you're comfortable unveiling the Flatlight platform, [indiscernible] Could you maybe walk us through how you'd expect this application to materially contribute to the business through the years, maybe when we could see a meaningful step up of any measure?

Hi, Andre. Well, I mean, look, it's kind of difficult to talk about that. I mean, the most important thing really is is Neutron because if we take our friends over SpaceX and the Starling constellation, Starlink has a great satellite, but the real needle mover there was high frequency, low cost launch. That's why Neutron is so important. So we kind of methodically step by step creating all of the right ingredients to be able to build constellations at scale. But really, really important element of that is Neutron And while that's occurring in the background, we've just like I said, just methodically building the capability to on the spacecraft side.

Yes. No, that's a good point. I appreciate you highlighting that. And then maybe if I may follow-up, looking at the true backlog mix, I know Adam touched on this before, but it's fifty-fifty commercial defense slash financial security. But I mean, given that like you said most of the or aside not most, sizable portion of commercial is bound for defense and national security customers.

What's the true mix do you think It's probably I would say probably more like seventy-thirty. What do you think, Adam?

Yes, maybe even higher than that. I think it's probably closer to north of 80% where the end I'd say consumption of the data coming off the things that we launch get consumed in one way or other by by a government, whether it's U. S. Government or other governments. If you look at like again, a lot of the electrons are really popular vehicle for remote sensing capabilities. And again, a lot of those customers, used to be people were saying that counting cars in Walmart parking lots was 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 constellations to the U. S. Government for national security, [indiscernible] and other types of capability other types of data.

So I think it's probably north of 80% would be my guess, but It's just a guess.

Got it. Got it. That's helpful color. I'll leave it there.

Thank you.

Thanks.

There are no further questions at this time. With that, I will now turn the call back over to Sir Peter Beck for final closing remarks. Please go ahead.

Yes.

Thanks, very much. And before we close out today, there are some up and coming conference that we'll be attending, shown below. We look forward to sharing more exciting news and updates with you. Otherwise, thanks for joining us. That wraps up today's call and we look forward to speaking with you again about the exciting progress we've made at Rocket.

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