NASDAQ:RKLB Rocket Lab USA Q1 2024 Earnings Report $19.74 -0.24 (-1.20%) Closing price 04/17/2025 04:00 PM EasternExtended Trading$19.76 +0.02 (+0.08%) As of 04/17/2025 06:24 PM Eastern Extended trading is trading that happens on electronic markets outside of regular trading hours. This is a fair market value extended hours price provided by Polygon.io. Learn more. Earnings HistoryForecast Rocket Lab USA EPS ResultsActual EPS-$0.09Consensus EPS -$0.11Beat/MissBeat by +$0.02One Year Ago EPS-$0.10Rocket Lab USA Revenue ResultsActual Revenue$92.80 millionExpected Revenue$94.98 millionBeat/MissMissed by -$2.18 millionYoY Revenue Growth+69.00%Rocket Lab USA Announcement DetailsQuarterQ1 2024Date5/6/2024TimeAfter Market ClosesConference Call DateMonday, May 6, 2024Conference Call Time5:00PM ETUpcoming EarningsRocket Lab USA's Q1 2025 earnings is scheduled for Thursday, May 8, 2025, with a conference call scheduled at 5:00 PM ET. Check back for transcripts, audio, and key financial metrics as they become available.Q1 2025 Earnings ReportConference Call ResourcesConference Call AudioConference Call TranscriptSlide DeckPress Release (8-K)Quarterly Report (10-Q)Earnings HistoryCompany ProfileSlide DeckFull Screen Slide DeckPowered by Rocket Lab USA Q1 2024 Earnings Call TranscriptProvided by QuartrMay 6, 2024 ShareLink copied to clipboard.There are 10 speakers on the call. Operator00:00:00Good day, everyone, and welcome to the Rocket Labs First Quarter 2024 Financial Results Update and Conference Call. At this time, I would like to hand the call over to Muriel Baker, Communications Manager at Rocket Lab. Please go ahead, Speaker 100:00:15ma'am. Thank you. Hello, everyone. We're glad to have you join us for today's conference call to discuss Rocket Lab's Q1 2024 Financial Results. Before we begin the call, I'd like to remind you that our remarks may contain forward looking statements that relate to the future performance of the company, and these statements are intended to qualify for the Safe Harbor protection from liability established by the Private Securities Litigation Reform Act. Speaker 100:00:41Any such statements are not guarantees of future performance and factors that could influence our results are highlighted in today's press release and others are contained in our filings with the Securities and Exchange Commission. Such statements are based upon information available to the company as of the date hereof and are subject to change for future developments. Except as required by law, the company does not undertake any obligation to update these statements. Our remarks 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. Speaker 100:01:28This call is also being webcast with a supporting presentation and a replay and copy of the presentation will be available on our website. Our presenters today are Rocket Lab's Founder and Chief Executive, Peter Beck and Chief Financial Officer, Adam Slice. After our prepared comments, we will take questions. And now let me turn the call over to Mr. Beck. Speaker 200:01:54Thank you, Marielle, and thank you everybody for joining us today. We've got a lot of great achievements and milestones to share on our start to the year, not the least of which is executing a record number of launches and space systems growth that delivered a record total revenue of $93,000,000 in the quarter, up 55% quarter over quarter and 69% year over year. Adam will talk through the rest of the details of our financial results for the Q1 before covering the financial outlook for Q2, 2024. After that, we'll take some questions and finish today's call with the near term conferences we'll be attending. All right, on to what we achieved in the Q1 of the year, starting with Elektron. Speaker 200:02:37We had a great series of launches in Q1 with 4 successful missions, 3 of them for commercial customers from Launch Complex 1 in New Zealand and a national security mission for the NRO out of our second site in Virginia. We had to launch we had a launch turnaround of just 8 days between our flight for the Japanese customers' inspector and the NRO launch, which was no small task from 2 launch sites across the world. In fact, we remain the only company with the capability of orbital launch from both hemispheres. It really demonstrates the capability of the team to turnaround launches so quickly and sets us up well to execute against our PAC manifest for 2024. We completed our 5th launch of the year less than 2 weeks ago, a commercial mission for Institute of South Korea along with a landmark scientific mission for NASA to test our solar sailing technology also on board. Speaker 200:03:32No two rideshare missions are the same and this launch in particular was a tricky and complex one that played into our unique strengths. For large launch rideshare, normally you have a bunch of satellites that are heading to the exact same orbit and you deploy them into one location. If the orbit isn't ideal from your spacecraft then you kind of tough luck. But for Caiced and NASA, we had 2 satellites going to 2 completely different orbits to each other. First, 1 to 5 20 kilometers and then all the way up to 1,000 kilometers and lower towards the other. Speaker 200:04:09Those kinds of conflicting mission requirements would normally require 2 separate launches, but with our unique kick stage capabilities, we're able to drop cost off at 520 and NASA up to 1,000 and then complete another series of engine burns to bring the kick stage back closer to earth for faster disposal and atomizability. It's this kind of precision and flexibility that makes us a really attractive launch service for our customers, which is also inherent in the next two missions we have scheduled to fly in Q2. So coming up in Q2, we have 2 back to back missions scheduled for NASA to deliver their pre fire mission to space or missions to space. The mission is focused on understanding how much of Earth's heat loss is lost into space from the Antarctic, Antarctic, which will help improve climate change models and provide better predictions on sea level rise and weather changes in the future. We're sending up 2 satellites for NASA, 1 on each launch, that will crisscross the poles to gather accurate readings across the 2 orbits from one mission. Speaker 200:05:13Once Prefire is in space, Prefire 2 must be placed there within 3 weeks' time, which again plays to our strengths as a responsive launch provider hitting precise orbital deployments. We actually demonstrated a similar capability with the 2 Tropics missions launched last year, so it's great to see NASA take up capability once again. After that, we are set to launch the first of 5 missions for a new customer, Canis, a French company backed by our private and public investors, including the French government space agency. We'll be deploying their entire satellite constellation into low orbit, some 25 satellites across 5 electron launches. There is also a nonforecasted but potential 5th launch for a commercial constellation customer we're tracking for Q2. Speaker 200:05:59Operationally, we'll be ready to launch this mission when the customer is ready and if there's a chance of that happening before the end of Q2. But like I said, there's also a chance of it slipping out of the quarter, so it's not forecast in the financials for the current quarter. Onto the rest of the year and we remain on track for another record number of electron launches. Across the 22 missions sold for 2024, we are seeing some movement in the manifest as expected due to customers being late with their spacecraft or asking to shift later in the year or sometimes even into 2025. This kind of manifest whack a mole as we call it is nothing new to any launch provider and it's something we've become very familiar with after 7 years of launching Electron. Speaker 200:06:40We see the opportunity of those gaps to fill them with to fill the manifest with new customers who need an urgent ride, sometimes within months or existing ones who want to move to the left rather than wait for their booked slot. For customers who also ask for a new launch date later in the schedule, we have typically invoiced it and collected the majority of the launch contract value up to that point and then we recognize the revenue once they've flown. It's why launch revenue forecasting can be so lumpy, but like I said, while we might not get all 2022 flights off this year, based on customer movement, we're on track for a record year for Electron. And from where we sit today, 2025 is shaping up to be another record year also. One of the really exciting missions for 2025 was one we booked early in Q1 early in Q2, the $32,000,000 Victus Hayes mission for the U. Speaker 200:07:33S. Space Force. This one is really a full end to end mission solution that will really show off the success of our vertical integration strategy. We'll be designing, building, launching and operating the spacecraft to demonstrate tactively responsive space for the Department of Defense. The spacecraft will come with all of our own components including propulsion systems, solar cells, direction, we'll start track as flight ground software space, on and on and on it goes. Speaker 200:08:02Then we will fly it on Electron and once it's in space, we'll be operating it to demonstrate Rondeau with another spacecraft in orbit which is a highly sought after capability for the DoD. And I should mention that our task is to launch the spacecraft within 24 hours notice from the Space Force. It's the first time we've sold a complete end to end mission solution and to a prestigious customer as well. It's a super exciting mission that showcases our ability to meet the DoD's growing need for rapid and responsive orbital capability. It will also be a fantastic demonstration of what we can do as a full end to end mission services provider. Speaker 200:08:48We'll be taking care of absolutely everything the DoD needs for assured access to space, which is an important capability for the nation. Another new launch contract we've been awarded post Q1 is the 2nd mission from the U. S. Space Force, this time for the space test program. It's a $14,500,000 launch that will fly out of Launch Complex 2 in Virginia within the next 24 months to carry out research experiments and technology demonstrations for the DoD in space. Speaker 200:09:16We've proven ourselves as a trusted and dedicated partner to the DoD across multiple missions now on Electron. In fact, our first mission for the STP program was all the way back in 2019 when Electron launches were still in single digits. And we're looking forward to continued execution with the STP-thirty mission. Finally, to round out Electron, we've got an existing an exciting post quarter update on our recovery program. For the first time, we have returned an Electron stage back to the production line in preparation for reflying. Speaker 200:09:49This tank is the one that came back to earth during the recovery mission we launched in January, and it came back in such good condition that we're bringing it back into the production fold. Already it's passed a barrage of qualification tests, but having gone through those additional checks, it's now undergoing its final fit out and another round of the same acceptance testing that will take any brand new tank through that runs off the line. The results of that campaign will determine its suitability for reflight, The pool looks good. We could be looking to reflight later in the year. That's just a quick overview of some of the key highlights across Q1 to date for Electron. Speaker 200:10:27Now on to some of the exciting progress and achievements for Space Systems. We moved quickly this quarter in executing against our largest Space Systems contract to date, debut as a prime spacecraft contractor to the industry with a $515,000,000 constellation of 18 spacecraft we're developing for the Space Development Agency. All of these spacecraft for the agency's tranche to transport layer will be designed, built and managed by us and includes a full suite of Airspace Systems products. We officially kicked off the beginning of the program with the SDA in Q1 as well as completed preliminary studies for the spacecraft's design. The contract marks the beginning of our expansion of being a prime contractor, a role we've moved into swiftly and comfortably by handpicking a team of experienced subcontractors to support the program across payloads, sensor supply and ground systems. Speaker 200:11:20Another fantastic trick for the Space Systems group in the quarter was a successful completion of our mission with BARDA, which returned to Earth the world's 1st space manufacturing mission conducted outside of the International Space Station. This was a mission where we took VARTA's manufacturing capsule that makes pharmaceutical crystals and put it on top of one of their spacecraft, which supplied the capsule everything it needed to do its work, like power supply, positioning and management in space. The last one is a really important capability we demonstrated on this mission as spacecraft and operations team were tasked with setting the capsule on its path back to earth, so it could land safely in a tiny area in the middle of the Utah desert. I like in this to like throwing a ball from low earth orbit while aiming to hit a bull's eye. The Rocket Lab team pulled off a really incredible feat to just absolutely nail the capsules reentry on target. Speaker 200:12:15This skill set makes us now one of only 2 commercial launch companies with spacecraft reentry capabilities, a rare and valuable thing in the market. And we'll be demonstrating this again soon with our 2nd spacecraft for the next already well ahead of production and on track for its expected launch date. The added bonus of the added bonus is everything we've learned in these reentry missions is we're able to directly apply to future capsule launches on Neutron as well. Another of our big satellite programs, the 17 spacecraft build for NDA Globalstar has also progressed nicely through Q1. The first of 2 flight frames for these spacecraft were completed, shipped out of Long Beach and delivered to NDA for the next phase of the program. Speaker 200:13:00Once Globalstar's payloads arrive to NDA, we'll great progress great progress towards that deadline. Next is our escapade program, which is the mission to Mars for NASA with our 2 spacecraft. The first fully assembled spacecraft is currently being put through the ringer in the vacuum chamber, testing, pushing the spacecraft to its limits so we can know with confidence it can survive the journey from Earth to Mars. The 2nd satellite will go into the vacuum chamber as soon as the first one comes out and it's right now undergoing similar checks to ensure it's ready for the load that we'll see when it's launched later this year. And finally to wrap up Space Systems, we have a new long term supply agreement for our space solar solutions with a large space prime worth up to $150,000,000 This one is a multiyear agreement that will see our solar technology support critical missions across civil, defense and national security. Speaker 200:14:00And March 31 ending backlog reflects the initial orders against this long term agreement. Demand for solar power and space continues to grow as the world moves towards mega constellations and proliferated linear architecture. We're now one of the largest suppliers of space grade solar cells globally. Space solar power is already one of the most constrained areas in the industrial supply chain, which is why we've invested in expanding, modernizing our space manufacturing capability, including automated processes and assembly. These are just some of the steps we've taken to ensure the resiliency of the space solar supply chain beyond current and future missions. Speaker 200:14:41And it's the latest contract this latest contract has strong recognition of that. Overall, some great work and progress across our Space Systems business to date. Now it's time to share how development with Neutron's going. So onto a huge milestone for Neutron that I'm really excited to share. We've completed our first Archimedes engine. Speaker 200:15:01The engine you see here is already shipped out the door of our engine development complex in Long Beach and is fitted to the test stand at NASA Stennis. What we're taking to the stand is a very close to a flight like engine and with all of the production infrastructure stood up alongside the engines development. We believe the team is in the optimum position to be able to make quicker duration to Archimedes based on what we learned through testing. Archimedes is a really unique engine given its thrust class engine cycle and propellant combination. It's an oxidizer rich stage combustion cycle powered by liquid oxygen and methane. Speaker 200:15:37One of these engines equals the same amount of thrust as roughly 3 electron rockets. On top of that, we've designed Archimedes to stand up to a target maximum reusability of 20 flights per engine. Each Archimedes is designed for £165,000 of thrust for a combined liftoff on the first stage of £1,450,000 thrust. Motogo Pump has an 18,000 shaft horse power and we picked an operating point that is optimized for reusability over maximum performance, which will allow us to operate this engine at a much lower stress level as compared to others. And like I said, that positions us well for rapid development and for a rapid development and qualification testing campaign. Speaker 200:16:33Integrated within Archimedes 2, all new three d printed parts that come off their factory floor at Long Beach, like its turbo pump, preburner and main combustion chamber components, valve housings and engine structure components. All of these are the same parts that continue to be printed as we build out more engines to this one in parallel. We've got about 4 sets of engines on the go right now. Perhaps the biggest point I want to make here too is that we haven't taken any huge concessions just to make fire for the sake of it. We've been very intentional and methodical with Archimedes making sure to find its design so that now we're at a point that we've got an engine that can be readily productionized ized long term. Speaker 200:17:18A test ready Archimedes is really the inflection point for Neutron's development. Now that Archimedes is on the stand, the real fun begins and we've started the test campaign in earnest. Having a complete engine, we've gone through some of the biggest unknowns in the development program and can update the schedule for its first flight accordingly, which we've adjusted to first launch no earlier than mid-twenty 25. We run highly aggressive schedules at Rocket Lab. We always have and all of our programs have been working with all of our programs and that's why we've been able to deliver new capability to the market like Haste, Electron, Capstone and more industry leading timeframes. Speaker 200:17:55Getting Neutron to the pad this year was an ambitious green light schedule that we had a path to closing if every single aspect went exactly according plan. But as we've always said, this is a rocket development program and it is always filled with gremlins, some in new control and some not. In this case, we've made the call to take additional time not only to just bring a minimum viable product engine to the stand, but to be very intentional and methodical about setting Archimedes up for success in the long term. This means rigorous component level testing before the first hot fire and refining a design that can be productionized long term. We've also taken the time to scale up the manufacturing and test facilities to support full scale production and built a knowledgeable and experienced team ready to build, test and fly our committees at the pace the customers are demanding once we bring Neutron to market. Speaker 200:18:45All of this takes time to get ultimately right, so that drove a schedule which now closes mid next year. We have a proven track record of delivering technology and capability to market on rapid and often record breaking timelines and Neutron is still coming to market faster than just about any other rocket program that I know. We believe Neutron will be a category defining launch vehicle serving critical market needs and we're excited to move into the final phase of development. While the propulsion team has made loops and bounds in Archimedes, the structural team a test team is also putting together big wins on the board as well. We got some of the rocket's largest composite panels and tech sections collecting across all of our composite facilities. Speaker 200:19:28We've completed the 1st Neutron's fairing panels with a set of 4 panels coming off the composites coming out of composites clearing and expected to be assembled together in the coming weeks. These are large, almost 8 meter long sections that mount Neutron's canards and how's the payloads inside the rocket. So they're really significant pieces of Neutron's build. The internal tank structures on Neutron's 2nd stage also come together, having completed an assembly test run earlier in the quarter. This is a second stage 2 that we built for Neutron after the development stage we built and tested last year. Speaker 200:20:02Putting the pieces together putting all the pieces of Neutron together is not the same as assembling Electron, which the team obviously regularly does by hand. So completing the assembly test run for Neutron and now moving on to final assembly, elimination and integration of the pieces into flight configuration marks a major progress in the vehicle's development. Besides and the scale of the structure and the pieces we're working with here, it's important to show. So here are some more images of the carbon composite tank builds taking place across our various facilities. And it's fair to say some amazing work from the team here pushing hard to get this all together. Speaker 200:20:41Speaking of launch, Launch Complex 3 up in Virginia is really starting to take shape. Concrete works for Neutron's launch mount have been completed and the concrete foundations for the site's liquid propellant and gas storage tanks have gone in. Long lead propellant tanks are soon to be delivered to site and we'll see our propellant farms stood up in the coming months. I also installed the 278 foot water tower. Visually, we've changed the skyline of Wallops waterfront forever, so it's an exciting new feature for LC3. Speaker 200:21:11We have made good progress on all other Neutron facilities in the area as well, including Neutron's assembly and integration test complex just outside the Wallops Gate. Another set of concrete foundations have gone down and we've got the skeleton structure up for an ex building on-site. Construction is really moving nicely along in Virginia, which is great to see. So that wraps up the business highlights for 2024 so far. So from here, I'll hand it over to Adam to take us through the financial updates. Speaker 300:21:40Great. Thanks, Pete. Q1 2024 revenue was $92,800,000 which was towards the low end of our prior guidance range, reflecting significant year on year growth of 69% and sequential growth of 55% driven by strong contribution from both business segments. Our Launch Services segment delivered revenue of 30 $2,700,000 in the quarter from 4 launches, in line with guidance of $32,000,000 to $33,000,000 representing sequential growth of 2.87 percent, driven by a return to normal launch operations after Q4 was impacted by our September anomaly. The average selling price per launch was $8,200,000 well above our target average selling price of $7,500,000 the result of a favorable mix of government and complex commercial missions. Speaker 300:22:31Our current backlog continues to support our target average revenue per launch with some variability tied to volume purchase commitments, launch location and mission assurance requirements. Our Space Systems segment delivered just over $60,000,000 in the quarter, which was towards the low end of our prior guidance range of $60,000,000 to $65,000,000 but reflecting sequential growth of 17%, driven primarily by growth in our MDA contract revenue albeit slightly less than was expected. Now turning to gross margin. GAAP gross margin for the Q1 was 26.1 percent slightly above the high end of our prior guidance range of 24% to 26%. Non GAAP gross margin for the Q1 was 31.7%, which was also above our prior guidance range of 29% to 31%. Speaker 300:23:21GAAP and non GAAP gross margin improvements relative to our guidance reflect continued efficiencies in both our launch and satellite manufacturing businesses. We ended Q1 with production related headcount of 872, up 20 from the prior quarter. Turning to backlog. We ended Q1 2024 with $1,020,000,000 of total backlog with launch backlog of $215,600,000 and Space Systems backlog of $799,700,000 Relative to Q4 2023, total backlog was down only 3% sequentially or $31,000,000 despite a $93,000,000 quarter of revenue. Strong bookings continued in our Space Systems business highlighted by initial orders related to the long term supply agreement with a Tier 1 prime contractor that Pete alluded to earlier and a follow on booking for reaction wheels supporting a mega constellation. Speaker 300:24:18For launch, backlog was down 13% sequentially or $32,700,000 as we drew backlog down against a record number of launches in the quarter. We continue to cultivate a healthy pipeline, including multi launch deals that can be lumpy given the size and complexities of these opportunities. We expect approximately 42% of current backlog to be recognized as revenue within 12 months. Turning to operating expenses. GAAP operating expenses for the Q1 of 2024 were $67,300,000 below the low end of our guidance range of $73,000,000 to $75,000,000 Non GAAP operating expenses for the Q1 were $56,400,000 which is below the low end of our guidance range of $62,000,000 to $64,000,000 The increases in both GAAP and non GAAP operating expenses versus the Q4 of 2023 were primarily driven by continued growth in headcount and prototype spending to support our Neutron development program and related infrastructure to support Neutron and our 18 satellite SDA contract, partially offset by shifting R and D resource to production support for Space Systems. Speaker 300:25:31In SG and A, GAAP expenses increased $2,900,000 quarter on quarter largely due to a 1 point $6,000,000 increase in stock based compensation along with increase in outside services partially offset by a decrease in the change in contingent consideration related to our PSC acquisition due to a lower average stock price in the quarter. Non GAAP SG and A expenses increased by $1,900,000 primarily due to the increase in outside services included in year end audit expenses, legal fees and corporate IT and security spending that further enable efficient scaling of the business. Q1 ending SG and A headcount was 263 representing an increase of 16 from the prior quarter. In R and D specifically, GAAP expenses were up $1,000,000 quarter on quarter due to Neutron prototyping, materials and headcount increases. Meanwhile, we have shifted certain non Neutron R and D resources to support the execution of our MDA contract production ramp. Speaker 300:26:31Non GAAP expenses were up $900,000 quarter on quarter driven similarly to GAAP expenses. Q1 ending R and D headcount was 625 represent an increase of 40 from the prior quarter. In summary, total first quarter headcount was 1760, up 76 heads from the prior quarter. Turning to cash, purchases of property, equipment and capitalized software licenses was $19,200,000 in the Q1 of 2024, an increase of $8,800,000 from $10,400,000 in the Q4 of 2023. This sequential increase was due to our continued investment in Neutron Research, testing and production infrastructure projects along with the expansion of our satellite production and space solar solutions capacity. Speaker 300:27:19Cash consumed from operations was $2,600,000 in the Q1 of 2024 compared to $42,200,000 in the Q4 of 2023. The sequential improvement of almost $40,000,000 was driven by a lesser net income loss and working capital improvements owing to the ramp up of production in our MDA Globalstar program and a step up in launch cadence as well as strong cash collections including initial milestone payments related to our space systems programs. Overall, non GAAP free cash flow defined as GAAP operating cash flow reduced by purchase of property, equipment and capitalized software in the Q1 of 2024 was a use of $21,800,000 compared to $52,600,000 in the Q4 of 2023. The ending balance of cash, cash equivalents, restricted cash and marketable securities was $564,900,000 as of the end of the Q1 of 2024. As discussed on our February earnings call, we generated $355,000,000 in a convertible senior notes offering, which was coupled with 2 deployments of $43,200,000 supporting our convertible cap call and equipment facility loan repayments, as well as $11,200,000 in debt issuance cost yielding $257,400,000 of net financing. Speaker 300:28:41We exit Q1 with a strong position to exercise inorganic options to further vertically integrate our supply chain with the critical capabilities consistent with what we've done successfully in the past. Our 4th quarter profitability trend demonstrates progress towards adjusted EBITDA breakeven and attaining our long term financial model. We expect Elektron's gross margins to continue to improve over time due to increased scale and production efficiencies and satellite manufacturing contributions to improve due to increased scale and leverage of growing IP capabilities and infrastructure. With our strong launch manifest and increasing scale driven by Space Systems contract execution in 2024, we are well positioned to continue our progression to adjusted EBITDA breakeven following our Neutron investment cycle. And with that, let's turn to our guidance for the Q2 of 2024. Speaker 300:29:33We expect revenue in the Q2 to range between $105,000,000 $110,000,000 This range reflects 77 $1,000,000 to $81,000,000 of contribution from Space Systems and $28,000,000 to $29,000,000 from Launch Services, which assumes 4 launches. As Pete noted, we do have a 5th launch slated for late June, but are taking a cautious approach in terms of guidance setting given the end of quarter timing risk. We expect 2nd quarter GAAP gross margin to range between 24% to 26% and non GAAP gross margin to range between 30% to 32%. These forecasted GAAP and non GAAP gross margins reflect mix shifts in our Space Systems segment towards the larger and lower margin satellite manufacturing program revenue contribution versus certain of our higher gross margin component offerings as well as a weaker mix within our components businesses. We expect 2nd quarter GAAP operating expenses to range between $74,000,000 $76,000,000 and non GAAP operating expenses to range between $62,000,000 $64,000,000 The quarter on quarter increases are driven primarily by increased Neutron investment, including staff costs, prototyping and materials as well as our annual merit increases effective April 1st. Speaker 300:30:50We expect 2nd quarter GAAP and non GAAP net interest expense to be $1,000,000 We expect 2nd quarter adjusted EBITDA loss to range between $23,000,000 $25,000,000 and basic shares outstanding to be approximately 494,000,000 shares. And with that, we'll hand the call over to the operator for questions. Operator00:31:11Thank And we'll go first to Eric Rasmussen, Stifel. Speaker 400:31:28Yes. Thanks for taking the questions. Maybe just on Neutron, you obviously made a lot of significant progress and has the number of milestones and the Archimedes being the latest, I guess, major one. But you're pushing that out by at least 6 months. Is it mostly on the engine side, sort of the conservatism there? Speaker 400:31:53And sort of what can pull that timeline in or even push that out further? Speaker 200:32:01Yes. Hi, Eric. So the engine is always a long pole in the tent with any launch vehicle development. So and look, we learned a lot building that engine and getting it to the stand. And we'll continue to learn more as we go through the engine qualification and hot fire programs. Speaker 200:32:26But the engine is really the primary driver for the move. And rocket programs are notoriously difficult to kind of plan. Because I think a lot of people see the rocket, but they don't see all of the tremendous amount of infrastructure around it that it takes to bring a rocket to fruition. So there's a lot going on in the program as you saw in some of the materials. But really the engine is always in certainly for us the driver for the program. Speaker 400:33:10Okay. And then what would you say then sort of the first call it silic, we'll call it a test mission, right, or an R and D mission. Could there be if you do get it in the middle of the year, could you actually then what do you think the timeline would be for you to start to and assuming that's a successful launch, what do you think the timeline could be sort of matching what you previously said of maybe 3 following that R and D the following year and then 5 the other year. Is that still the right way of thinking about new tariffs? Yes, yes, yes, yes, Speaker 200:33:48yes, totally it is. We played this game before and sort of the 135 is the right way to think about it. And I think that certainly as we're building capability and in some cases, stock, that's exactly how we're planning it still. Speaker 400:34:09Okay. And staying with launch but going back to Electron, you had 22, it sounds like there's some changes in customers in the manifest and that obviously is maybe impacting even this quarter. But we would have thought that if you'd hit that 22, you would have had to do 6 in Q2 for each quarter for the remainder of the year given you did 4. Where do you think that number could wind up and could you actually even hit 22 for the year still? Speaker 200:34:43Yes. Look, I mean, we had the solid 22 missions booked this year. And as I mentioned on the call that it's literally a game of manifest at whack a mole and people move out. Very rarely people move to the left, but that does occasionally happen. We have a bunch of folks that come in at the last minute. Speaker 200:35:06The biggest challenge for launch time lines is not so much vehicles. It's often licensing and sometimes mission design and payload structure development. So although we're in May, we're certainly not waving the right flag, but we as more time goes on, it gets more and more difficult to be able to do that and bring those missions in or add new missions to the manifest. So we're just making sure that we're being transparent here that it's going to be difficult to get those 22 missions off purely to some of those reasons. So where we actually end up at the end of the year is kind of in the hands of our customers in a lot of respects. Speaker 200:35:57But I'll make the point that this is just the reality of launch. And one of these missions go away, they just sort of move around and some will move into other quarters and some will move into next year. Speaker 400:36:14Thanks. Great. Well, and then maybe just last on the MDA contract, seems like this program and revenue recognition is kicking in. Maybe just help us understand the revenue trajectory and contribution or maybe the weighting as we sort of progress through this year? Speaker 300:36:32Yes. I can take that one Pete. So Eric, yes, to your point we are in now the meat of the rev rec underneath program. And we expect to recognize the majority of the remaining contract value in 2024. And it will be, I would say, kind of you think about it kind of peaking probably in the kind of in the Q3 period, maybe shifts to Q4. Speaker 300:36:56And then we'll also start to see more meaningful contribution from the FDA contract that we announced early this year. So I think we've kind of managed to have things land in such a way where you don't have kind of a risk of a big drop off as the MDA contract kind of comes to conclusion because we've got a contract that's more than 3 times larger kind of following it in the wings if you will. So I think that again our plan is to still see that almost all of the remaining contract value recognized in the 2024 time period. And there is an operating contract, the SOC that goes along with this MDA Globalstar agreement, but that's relatively small in the grand scheme of things with regards to the total contract value of roughly $150,000,000 Speaker 400:37:47Great. Thanks. I'll jump back into the queue. Speaker 300:37:50Thanks, Eric. Operator00:37:52And next up is Andre Sheppard, Cantor Fitzgerald. Speaker 500:37:58Hey, guys. Good afternoon. Congratulations on the quarter and thanks for taking our questions. Just a quick one for Pete. Obviously, congratulations on the Arkinus engine build. Speaker 500:38:13You're now targeting the hot fire test, which will be a big important milestone there. With now targeting first launch no earlier than middle of 2025, can you just maybe help us just remind us what are the other big milestones between the Hot Fire engine and the launch? Thank you. Speaker 200:38:36Yes. Sure. Thanks, Andre. So we've always said look for concrete on the ground at Wallops and in the test sites, look for large stage tanks and things like that and look for fire. And those things remain kind of the same things that I'd be looking for. Speaker 200:39:00So yes, getting something getting a pad built is a huge program in its own right. Getting the engine test facility built is a huge program that's done. And then like I said, now it's just working through the Archimedes final development and iteration. And then I think the other thing I'd be tracking is like making sure that we continue to build components for other launches. So not a one and done kind of a thing. Speaker 200:39:36It's like making sure that there a bunch of other engines coming off the production line and more tanks and structures and things like that. So that's certainly something that we're focused on is making sure we keep the machine primed with all the components needed to not just get one launch away, but stand up a commercial service. Speaker 500:39:58Got it. Okay. That's super helpful. I appreciate all that color. And maybe just a quick follow-up for Adam. Speaker 500:40:06Adam, just on the liquidity, sorry if I didn't hear this correctly, but does the $560,000,000 let's call it $565,000,000 does that include the net proceeds of the recent capital raise? And separately Speaker 600:40:22Yes, it does. Speaker 500:40:22Just remind us okay, the thoughts. Okay, great. And then just remind us, so with that liquidity on hand, what is the run rate expected? Or how are you thinking about that? Thank you. Speaker 300:40:36With a run rate or runway, I think that the we raised a significant amount of capital obviously in this most recent transaction. And as stated, it was really all about providing inorganic growth optionality for us. And we do continue to see significant opportunities out there. I would say the deal pipeline that we're managing at this point is probably as full as it's been in really the last couple of years as far as potential actionable targets for us. So I think the timing on raising that, the funds are was probably pretty ideal. Speaker 300:41:11If you look at the capital required to complete Neutron, we didn't raise the money for that. We had liquidity for that. Given where we're at in the program, we feel like we're still very much on track to the $250,000,000 to $300,000,000 total spend to get Neutron to the pad. And fortunately for us, not all of that spend has landed on our backs. We've had some support from various partners that have brought capital to the table as well. Speaker 300:41:39So I think that, again, we feel very good about our ability to scale our Space Systems business, continue to scale Electron, get Neutron to the pad with the capital we had pre convertible. And we continue to look for options to deploy that convertible proceeds to inorganic means. So and I think that right now we feel really good about where we're at from a liquidity perspective. And we really don't see the need right now to think about anything beyond that. Speaker 500:42:06Got it. That makes sense. So it sounds though that you are potentially interested in continuing to grow inorganically and to that point maybe remain active in the M and A market. But with that liquidity on hand, that's certainly feasible at least so far. So, okay, that's helpful. Speaker 500:42:24Congrats on the quarter. I'll pass it on. Thank you. Speaker 600:42:27Thank you. Operator00:42:29Next question comes from Jason Gerske, Citi. Speaker 600:42:34Hey, good afternoon guys. Hey, Pete, quick question for you on the engine development. What exactly caused you to need to push by 6 plus months? You mentioned you had some learnings there. I mean maybe you'd kind of share some of Speaker 300:42:51those details with us or at least characterize, Speaker 600:42:55whether they were issues with the design, issues with the manufacturer ability, just kind of give us a flavor of what went wrong here? Speaker 200:43:04So no like major issue. We didn't run up against a wall and had to solve something majorly technically. But I mean kind of as I mentioned on the call like the point here is not to just make fire. The point here is to roll into production. And there are a number of kind of new processes and actually even new materials that we developed for Archimedes. Speaker 200:43:32And those are all intended to support production. In a different time, we go into much more detail about some of the manufacturing methods we've used for combustion chambers and things like that. But really similar to Rutherford when we were the very first 3 d printer chamber there. That was a new technology that hadn't been done before and we spent a lot of time because we thought that that was going to be a big payoff. So not dissimilar to that. Speaker 200:44:06There's some manufacturing techniques that we've employed on Archimedes that in the long term are going to pay off handsomely. So a lot of time is spent in that. And then just quite frankly just the time that it takes to stand up the factory and the machine that builds the machine is probably the biggest learning as we've look, we've done this enough. We know that that is difficult and time consuming. But an engine on the scale is certainly as an extra element to that. Speaker 200:44:40I mean you can't just pick up a pump volume and bolt on the engine, you have to get a crane to put pump volume on. So it everything is just such a larger scale that it makes it more difficult. So yes, not like one big staggering thing, just a whole bunch of stuff that just sort of adds up. Speaker 600:45:04Yes. Okay, that makes good sense. And then do you have a sense of like you build buffer or contingency into the planning. So now you've got this mid-twenty 25 date out there. How much kind of buffer or contingency do you have in that? Speaker 200:45:20Well, as I mentioned before, we run green light schedules at Rocket Lab. So in an engineering program, especially one of that scale, it's almost impossible to build sensible engineering buffering because you never really know the elements that are going to cause you problem. You've got some inklings and you've had some areas. But if you walk into a room full of engineers and ask them to add buffer in their schedule, then come back in 2,040. It's that's just kind of the way it rolls. Speaker 200:45:54So we always run green light schedules. So our schedules are always ambitious and that's worked really well for us. I mean if you look across the execution history, the time that it took us to put Electron on the pad was extraordinary. I mean, we started that program in 2014, at our first launch in 2017 and that was from absolutely 0. So there are some challenges with the vehicle of the scale, but and I always caution everybody all the time that at the end of the day this is a rocket program. Speaker 200:46:28And it's a very difficult thing to execute. That's why there's only a few of us in the world that have pulled it off. But the way we run our schedules are informed by experience and what we've learned in the past, but we always run them very aggressively and very ambitiously. Speaker 600:46:49Okay. And then maybe just a quick update on the demand for Neutron and you talked earlier on the call about this 135 schedule from a launch cadence perspective. But maybe you can just kind of give us an update on over the last 3 months, what you've been hearing from potential customers there, and whether 135 is just going to be scratching the surface or give us an update on what your view of the market is there? Speaker 200:47:22Yes, sure. Of all the things that I stay awake at night, not tossing and turning about, demand for electron for neutron, sorry, it's just it's not one of them. And we continue to have really good robust discussions with our customers. But I think as I've mentioned before, it's kind of you show me yours and I'll show you mine. And we maintain the fact that what we want to do is bring a launch vehicle to market that is that's ready to go and into a market that is in great need rather than do a whole bunch of early adopter pricing and deals that don't have any teeth. Speaker 200:48:03So it's fair to say that the interactions with customers over the last quarter have certainly strengthened and we maintain that we're happy to entertain normal kind of deals where it's 10% down non refundable and normal kind of LSAs. But the reality is that people want to see a real rocket before they make such large commitments. And the same goes for us. We want to if we sell a whole bunch of launch, because most customers aren't looking to buy 1, they're looking to buy many that we don't commit to a customer that ultimately doesn't turn up in the pad because with Electron you can see the challenges that also causes is the reality of the space business. So we're looking at them and they're looking at us. Speaker 600:49:04Right. Yes. No, that makes good sense. I appreciate that. And Adam, just one quick one for you. Speaker 600:49:09The comment that you made on backlog burn over the next 12 months, 42%, I Speaker 300:49:14think was the number that you threw out there. Was that a reference to all of Speaker 600:49:16the backlog or was that just to the launch business? And then as maybe just a quick follow on to this backlog question. What are your guys' expectations or goals here as far as book to bill is concerned for 2024 and kind of going forward in any given year? I know these awards can be pretty lumpy and you've just built up some nice backlog here, but investors are certainly going to be focused on book to bill going forward. So just kind of update us on what the overall pipeline looks like and whether we can year in, year out, off this new base that you've got here have book to bills that exceed 1? Speaker 600:49:55Thanks. Speaker 300:49:57Yes, yes. Sorry, Jason. So yes, I should have been more clear. So the 42% applies to all the backlog. So it's not specific to launch or Space Systems. Speaker 300:50:05So it's a total business. And as far as the book to bill target, no, you're right. Of course, everybody we need to see a book to bill greater than 1 just given kind of what our growth aspirations are. I think that when you see that we've got backlog over $1,000,000,000 against a Street consensus number that's obviously significantly lower than that. We've got quite a bit of ability to grow significantly based off of just the backlog that we have in place. Speaker 300:50:33But we continue to chase big deals. I think that's the one thing that's really evolved over the course of the last 12 months. And I think largely not I would say not disconnected at all from what we've seen like for example landing that large SDA contract is that kind of as we start to get more and more of these super sophisticated programs, 1, we seem to attract more of those kind of opportunities as well. So I think you'll continue to see us chasing big deals on the space system side. I mean the component business continues to grow nicely and that's great because of the margin profile that some of those businesses have by selling components into the merchant market. Speaker 300:51:11But I think that what we see are large program opportunities to continue to build the backlog, not too dissimilar to what was happened with the SDA beta contract. But also, as Neutron becomes closer and closer to its first launch, that's where that's a very chunky opportunity as we sign LSAs for that vehicle. Those are all needle moving, given the average selling price that we expect to realize from a Neutron launch. So I think you'll see and we talked about this last year as we progressed through 2023 is that when people kind of looked and said, hey, it looks like your backlog growth has stalled a bit and what does that mean for future growth? We said, look, you have to be patient because the kind of opportunities that we're chasing are just of such a scale and complexity that they don't come together on a predictable kind of programmatic way. Speaker 300:51:59They come in fits and starts. And I think we saw that again late last year with the SDA contract coming into focus. And then I believe you'll see similar things as far as program size and then again across not only Space Systems but also including Neutron. So I think that you're right. It's right for people to expect a book to bill greater than 1. Speaker 300:52:18I have no concerns similar to Pete that that's of the things that I stay up at night worrying about, that's also not one of them. Speaker 600:52:27Awesome. Thanks, Kevin. I appreciate it. Operator00:52:31The next question is from Matt Akers, Wells Fargo. Speaker 400:52:35Hey, guys. Good afternoon. Thanks for the question. Thanks for I guess you talked a little bit about reusability and putting the rocket back into the process. Just curious how you think about that ramping up. Speaker 400:52:49If that launch is successful, how fast you could start to see some of the cost benefits of doing that on a wider scale? Speaker 200:52:58Yes. Thanks, Matt. So I mean, our focus this year has just been on production. And although the reusability programs for Electron has made good kind of strides and milestones, really just rolling the vehicles off the end of the production line has been our focus. Reusable vehicles, they're still have developments in aspects to them that make them kind of distracting to production. Speaker 200:53:25But like I say, the vehicle looks great and this is really the first one that's rolling back into production. If this goes well, then it becomes a much more of a standardized thing. We can kind of roll this into being a much more usual part of what you see with electron launches. Speaker 400:53:52Okay, great. Thanks. And I guess just one more, just thoughts on latest on Solero margins and how you're making progress on I think, the 30% margin target there? Speaker 300:54:10Yes, I can take that. Speaker 500:54:10Adam, thank you for that. Yes, yes. Speaker 300:54:13Yes. So Matt on the Solero Margins, again that's something that we continue to work through the challenges of some pre acquisition well, really one pre acquisition, onerous contract, which still has a bit of a ways to go on that. So kind of what we look to is if you kind of exclude that thing, which unfortunately we weren't able to affect, we had to kind of absorb that upon adoption of the company. The bookings that are coming in now are very strong. So if we look at additions to backlog for the Solero business, it would I'd have to strain my memory to think of one that was coming in recently that was below our target. Speaker 300:54:53Most of the business that we're booking for that is above that 30% gross margin target. And part of that is enabled by the fact that again we've been a little bit more, I would say, a little bit more hard nose on customer negotiations and holding price. I think when I mean the other things that factor into it is some of the investments that we're making in the business as far as putting new reactors in place in Albuquerque that are more that are delivering better production efficiency. I think the business has always been very good at controlling their overhead costs. And it's a very tightly run business. Speaker 300:55:27So it's really all about kind of building the backlog in such a way where we have confidence we can deliver that kind of at the margins. I think there's probably more upside than downside to that longer term target of 30% gross margin. Speaker 200:55:39It just takes a little while Speaker 300:55:40to get there. When we acquired the business, we said within about 2 years of acquisitions when we expected to kind of be able to have line of sight to those gross margin targets of north of 30%. And I think what we underestimated was just the challenge in kind of getting that one owner's contract behind us. And we still have a bit of that water to carry. But again, I think I feel very good about kind of everything else that we've been booking and where the backlog stands right now. Speaker 300:56:09I think it's probably going to be we've got at least through the end of 2024 and probably a little bit beyond that to get that out of the mix. That's helpful. Thank you. Operator00:56:25The next question comes from Michael Leshock, KeyBanc Capital Markets. Speaker 700:56:30Hey, good afternoon. I wanted to follow-up on the backlog question, very strong right now and just wondering how high you can take your backlog before maybe having to walk away from business Or in the same vein, do you expect to get more pricing power on future contract wins as your backlog grows? Speaker 300:56:54Yes. I mean first Speaker 600:56:56Okay, Betsy. Sorry. Speaker 200:56:58You go, Adam. I'll Okay. I Speaker 300:57:03say I don't think that it doesn't feel like we're in a position where we necessarily have got a problem because we have kind of too much backlog relative to our ability to produce to that backlog. I think we are seeing some natural pricing support come on the Elektron side just because of the fact that a lot of the competition that were really aspirational have not materialized. And so I think that that's certainly helping on the pricing front because I think now there's more rationalization going on with you can have more rational discussions because again you don't have people who don't know how to run a rocket business going on trying to sell rockets and putting kind of phantom pressure on pricing. So that has really started to evaporate. I think that when you look at some of the things that we're doing, you have to put more capacity in place with places like Solero, I think that's helping us kind of remove any of those kind of head kind of ceilings, if you will, on how big the business can grow to. Speaker 300:58:03So I feel pretty good about that. And I think all that is supportive of, again, margin expansion, gross margin expansion as we move forward. We've seen that in the business over the course of last year. But we do have some interesting mixes mix challenges when it comes to kind of just the overall gross margin profile when you have some lower margin overall kind of call it photon or satellite manufacturing skewing. So for example, we have more of the mix coming from that lower margin space systems manufacturing part of the business. Speaker 300:58:33But what's helpful about that business though is even though it may not have the same gross margin profile as the higher gross margin component merchant component businesses, they can have a lot of operating leverage to them because we're able to basically reuse a lot of the IP that we've created on prior missions. And so we now have a pretty fulsome portfolio of IP and we've invested in the manufacturing capabilities to the point now where incremental programs that may not have the greatest gross margin perspective can drop quite a bit to the bottom line because of what we've already put in place from an investment perspective. So that's kind of how I look at kind of the overall kind of margin shaping over the course of the next year or so. But I'll maybe Pete you can jump in. Speaker 500:59:15Yes. I think you said Speaker 200:59:16it well Adam. The only thing I'd add there is that we are Rocket Lab's known and our reputation is execution. So we're always kind of, as Adam pointed out, balancing our growth with our ability to execute because the last thing we want to do is fall behind on that. So when we look at programs and opportunities, we are selective and kind of as I mentioned before is the kind of programs we're looking for and spending our time on are very large ones. So we have to be kind of always diligent to make sure we don't take on programs that absorb a lot of resource, but don't have a lot of scale. Speaker 200:59:54So we're continually juggling those opportunities against how we want to grow the business. Speaker 301:00:02Yes. And Michael, I would further add that a little bit saying like Pete and I were talking the other day about the fact that it feels like the demand signal is stronger now than any time I could really remember it in the business. You think that it maybe would start to moderate a bit because we've now got a $1,000,000,000 plus backlog and the business is kind of hitting a new scale with our Q2 guiding guide above $100,000,000 per quarter. But it feels like to a great extent, it feels like we're drinking from a fire hydrant here. And there's a lot of opportunities that we're having to kind of sift through. Speaker 301:00:33But there's a very strong demand signal out there as far as the kind of programs that we're being asked to look at. Speaker 701:00:43Yes, absolutely. I appreciate that. And then on the launch side, specifically for haste launches, just wondering if you see opportunities there for more pricing. I think if you look at the customers' alternatives, they could be significantly higher costs versus Rocket Lab's offering. So is there a strategy there to increase pricing or keep it stable where it's at today? Speaker 701:01:08Any update on the haste side would be great. Thank you. Speaker 201:01:13Yes. I mean, we see haste as a really fantastic opportunity for Electron, not only just on price, but also on scale. And I guess the biggest opportunity for us there from a revenue perspective is the additional services from the launch vehicle as well. So yes, as point out, Michael, the alternatives are significantly higher. But the reason why there's so few launches and so little advancement is because of that. Speaker 201:01:48So by coming into the market with a disruptively low price point, we're seeing just such a growth in kind of revitalization of that market that I think ultimately that's the best approach for the creating the most amount of value out of it is to stimulate it rather than suffocate it. Speaker 701:02:15Got it. Thank you, guys. Speaker 601:02:18Thank you. Operator01:02:20And the next question is from Suji Desilva, ROTH MKM. Speaker 801:02:25Hi, Peter. Hi, Adam. Just a little bit maybe following the last question. The Victus Hayes missions, you talked about being end to end service. I'm trying to understand if there's incremental products or services you're offering there that can be productized and offered more broadly if there's a financial uplift of those incremental elements you're characterizing as part of the end to end service offering? Speaker 201:02:47Yes, yes, for sure. I guess the biggest one is rendezvous and proximity operations. I mean that is very rare capability and something you need to dock spacecraft with ISS for example. So kind of aligned with our strategy of only taking on work that we think is strategic to us that is certainly a good example of that. But as an end to end service with a spacecraft, we're leveraging the foundation designs one of our spacecraft already. Speaker 201:03:24It certainly does make it possible to be more productized. And we see this is the direction that not just the U. S. Government, but the world is heading towards, right? On demand rapid call up and whoever has the best solution there is in a good position because often responsive launch is talked about. Speaker 201:03:48Well, I mean that's useless unless you've got something to stick on top of it. So this is really the first demonstration of responsive space where it's all combined right down to the data handling and operations of the spacecraft. Speaker 301:04:04Yes. I think Suji I think along that line I think one of the we talked about the financial benefits to the model. I think when you're able to couple the launch with the spacecraft manufacturer, I mean you're increasing your odds of or your P win for these type of programs when you can go with a turnkey solution. Because I think right now what we're seeing is that the customer probably fears the most, it's not necessarily they fear like higher pricing or whatever. They fear delay, right? Speaker 301:04:34Because I think there's just the supply chain within the space market, particularly new space, has not yet gotten to the point where it could deliver scalable solutions on time. So I think that when we can go with the turnkey say, look, we have the launch capacity. We have the ability to design a spacecraft and manufacture spacecraft at a predictable time line because we're so vertically integrated. I mean, it just kind of pushes the narrative forward and ultimately allows you to have just a higher overall market share and market kind of share capture approach. So I think this is really kind of a more of a sign of things to come. Speaker 301:05:10This is where we really wanted to take the business was being able to do these end to end to end solutions for the customers. And ultimately with that will come just better scaling and more predictable scaling of the business across both segments. So we think this is a huge kind of validation of that strategy being realized now. And of course with an incredibly sophisticated customer as well. Speaker 801:05:30Sure. Great. Okay. And then my second question is, you listed out the subcontractors on the FDA contract in the press release. Just trying to understand now, I know you've been targeting M and A to in source. Speaker 801:05:41But is there sort of an equilibrium balancing point where as a prime contractor, you'll leverage external subcontracting and components versus wanting to keep bringing things in house? How do you balance that going forward as you grow? Speaker 201:05:56Yes, it's really 2 elements. I mean, we don't vertically integrate because we think it's some kind of religion. We do it for either 1 or 2 reasons. 1, we think we can create more value for the company or 2, we need to control it because suppliers just can't deliver it either the scale or the timelines that we require. So as we kind of execute on a prime then as a prime then the subcontractors that deliver on schedule on budget. Speaker 201:06:26This kind of to your point there's no need to kind of religiously suck their capabilities in. It's just that seems to be a relatively rare thing in the space industry. So we end up more often than not having to own it than rely on those parties. Speaker 801:06:44Okay. Appreciate the balanced answer. Thanks. Operator01:06:49Next up, we'll hear from Cai Van Rumer, TD Cowen. Speaker 901:06:54Yes. Thanks so much. So it looks like feels like your schedule has definitely slipped. And I mean, you talk of a manifest of 'twenty two, but you have the comment in there that you look for a record year in launches. I mean you only did 10 last year that would say 11 would get you home. Speaker 901:07:13Can you give us your best guess as to a realistic range of number of electron launches we could see this year? Speaker 201:07:23Yes. I think if we launched 11 that would be that would not be a record year in our minds that would be a massive disappointment. And look, it's just we can provide a number, but it's just super hard to kind of predict given that as the customers move around. But I think it's fairly fair to say that at this point, we'll struggle to achieve 2022, but we have line of sight for probably a couple of less than that. Speaker 301:07:59Yes. And Kai, I would add something to that. I mean, one of the benefits of diversification that we've been driving so hard towards and now getting more than 70% of our revenue coming from space systems is that we no longer it's no longer like a push out of a launch threatens our entire kind of year's annual operating plan, right? So we believe that we've got strength in other parts of the business, particularly on the space systems side where if we can't deliver those 22 launches, it doesn't really put at risk our ability to deliver a very solid year that's still on target with our internal plan for what we think we can deliver as far as revenue and growth. As much as again, we are very, very, very reluctant to wave the white flag on anything here. Speaker 301:08:45But to the extent that things move outside of our control, we do believe that we've got strength in the business more broadly that would make up for any potential shortfall that we'd see from a launch or 2 that move out. Got it. Speaker 901:08:59Great. Got it. So if you look at the rest of your competitors, I mean, particularly in the satellite side, RTX basically said they're throwing in the towel on being a space prime. LHX is there. They bought satellites from Mo. Speaker 901:09:13They basically have been late with problems. Taran is basically on ultra life support. It sounds like your competitors are really not doing particularly well. Any thoughts about, A, it sounds like things are actually a little bit more chaotic than they've been, maybe that's an over read. Do you see that happening? Speaker 901:09:39And is there any opportunity to just take a radically different approach and basically raise your prices 25% because the problem I can see of getting your backlog is you don't have the opportunity to kind of do a more profitable launch for someone who might be willing to pay for it. Speaker 201:10:04Well, Kai, I would say our business model and our strategy is working exactly to your point. The vertical integration and the power that brings to bring these platforms to market at a price point. And as Adam mentioned, the schedule is disruptive, and that's what you're seeing. And then from a launch perspective, I think as Adam pointed out, there has been a kind of a waning of who's real and who's not. And there's to be opportunities for us there, I'm sure. Speaker 901:10:47Great. And so, I mean, you talk about demand being better, but it doesn't really sound like pricing is a whole lot better. Is that a misread on my part? Speaker 201:11:01Well, I think it's a delicate I think Speaker 601:11:04Go ahead, Speaker 201:11:05Pete. I was just going to say, I think it's a delicate balance, Kai, because to the point about the haste missions before is you want to stimulate the market. And if you just go and just all of a sudden whack a big price increase there, then you can potentially damage those markets that you're trying to grow because some of them are new and some of them are fragile. So I think you have to be very balanced and careful about how you do those sorts of things. Speaker 301:11:38Yes. And Speaker 901:11:40thank you very much. Speaker 301:11:41I would add to that too, Cai, on the pricing side of things. If we look at what's happened with electron pricing, it's gone nothing but up for us in the last several years, right? So if you recall, back a few years ago, we were talking about launch prices in the 6.5 to 7, now 7 to 7.5 and now in this most recent quarter is 8,200,000. And I think you're going to continue to see that type of trajectory on pricing as competition again as kind of people fail to execute and we bring an increasingly scarce product to market. And the mix of that Electron business as was I think was being asked earlier with regards to the impact of things like haste on the overall mix. Speaker 301:12:25But I also think that when you look at our Photon pricing, if you look at the contracts that we're competing on, the contracts that we're winning, we're not winning on the lowest price. It's quite the opposite. Like we can oftentimes price at a premium to our competition, again, because of the fact that we're bringing that level of vertical integration, which translates into schedule certainty and performance certainty, right? So I think that's really what is kind of playing into the strategy side. I think we're absolutely seeing pricing benefits that are accruing to us as a result of the strategy not only for diversification, but actually the fact that we're executing, that we're vertically integrated, that we represent strangely enough a lower risk option for customers despite the fact that we're a very new generation NewSpace company versus some of the legacy players that you mentioned earlier in your commentary. Speaker 901:13:15Thank you very much. Operator01:13:19Next up is Edison Yu, Deutsche Bank. Speaker 201:13:23Hey, thanks for squeezing in. Just a couple of quick ones. Speaker 401:13:27First on Neutron, did the Baltimore bridge incident impact the infrastructure timeline at all? Speaker 201:13:37Not that we can see at this point in time, no. Speaker 501:13:42Okay. Then on the financials, Speaker 401:13:46I think the R and D was a bit low in the Q1. Is that just a timing thing? Should we expect that to really step up in 2Q? Speaker 301:13:58Yes, Edison. Yes, absolutely. It's a timing issue. I think like it seems like all things in our business there's elements of lumpiness and certainly spend timing is one of those things. So the nature of particularly on Neutron with how things do come and kind of fits and starts. Speaker 301:14:17We have large, for example, prototyping expenses that you may they may end up slipping out a little bit relative to maybe where you thought they're going to be. But there will be volatility. And I think you would absolutely expect that over the next few quarters, we'll continue to see a march up in R and D, primarily driven by if not entirely driven by Neutron in kind of first flight. Speaker 401:14:40Understood. And just last one on the, I guess, the FDA contribution, do we have any sense, what that could be this year, next year? I know you said you would get some small amount, but just wondering if there's anything a bit more discrete you can maybe provide on that curve, on the launch curve? Speaker 301:15:00Yes. So we're continuing to do our work. I mean the program is certainly progressing and with that progression and we talked about identifying subcontractors to work with us on that program. As we kind of brought more people formally under intent, we've gotten more color as far as kind of their timing and their ability to deliver against their milestones. So we definitely are starting to bake some of that into our operating plan for the remainder of this year. Speaker 301:15:28Earlier we said that we couldn't we weren't in a position to really say. So at the say the amount that was in the Q1 results was actually very, very small. I would call that immaterial. It's starting to become more material in the numbers that you're seeing in Q2 that we guided towards and you'll continue to see kind of building on that as we progress through 2024. And I would say that and part of and that is also allowing us to overcome I'd say a little bit of the earlier weakness that we talked about as far as progress being made against the MDA contract with regards to rev rec. Speaker 301:16:07Some of that MDA revrec is being made up for from initial contributions from the FDA contract. But I think when Eric asked the question earlier about kind of what the timing of rev rec looked like for the remainder of the MDA Globalstar contract. Again, that is given just given the delivery schedules that will again continue to build momentum, probably peak sometime in the Q3 time period, maybe it's Q4. But ultimately as that's kind of peaking out, we've got this building of SDA coming in behind it to prevent a real kind of drop off, if you will, when that program comes to conclusion. So I don't think we're quite ready yet to give kind of full year contribution from the SDA program because again it's pretty early in its life. Speaker 301:16:53But it's again part of the reason why we're confident that even if there was a launch or 2 that moves out of 2024 from that 'twenty two launch manifest, that we have the ability to not really feel that from an overall top line growth perspective. So we hope to be able to give you more color in a little bit, but right now a little too early to provide a lot of color on SDA contribution. Speaker 201:17:17Great. Thank you. Operator01:17:20And at this time, there are no further questions. I'll hand things back to our speakers for any additional or closing remarks. Speaker 201:17:32Okay. I think that wraps up today's presentation. Thank you everyone for joining us on the call. Rocket Lab will be participating in these up and coming conferences and look forward to the opportunity to share more exciting news and updates with you then. So thanks again. Operator01:17:48Once again everyone that does conclude today's conference. Thank you all for your participation. You may now disconnect.Read morePowered by Conference Call Audio Live Call not available Earnings Conference CallRocket Lab USA Q1 202400:00 / 00:00Speed:1x1.25x1.5x2x Earnings DocumentsSlide DeckPress Release(8-K)Quarterly report(10-Q) Rocket Lab USA Earnings HeadlinesIs Rocket Lab USA, Inc. (RKLB) the Best Space Exploration Stock to Invest In?April 18 at 8:22 PM | msn.comRKLB INVESTOR ALERT: Bronstein, Gewirtz & Grossman LLC Announces that Rocket Lab USA, Inc. Investors with Substantial Losses Have Opportunity to Lead Class Action LawsuitApril 18 at 4:00 PM | globenewswire.comTrump Orders 'National Digital Asset Stockpile'Trump's Tariff Pause Creates Crypto Gold Rush This opportunity could eclipse them all…April 18, 2025 | Crypto 101 Media (Ad)Lowey Dannenberg Investigates Consumer Profiling by Data Brokers – Three Lawsuits Filed Against Adobe, Yahoo & Trade DeskApril 18 at 12:48 PM | globenewswire.comLowey Dannenberg Notifies Rocket Lab USA, Inc. (“Rocket Lab” or the “Company”) (NASDAQ: RKLB) Investors of Securities Class Action Lawsuit and Encourages Investors with more than $100,000 in Losses to Contact the FirmApril 18 at 12:47 PM | globenewswire.comRocket Lab USA, Inc. (RKLB) Investors Who Lost Money Have Opportunity to Lead Securities Fraud LawsuitApril 18 at 12:00 PM | prnewswire.comSee More Rocket Lab USA Headlines Get Earnings Announcements in your inboxWant to stay updated on the latest earnings announcements and upcoming reports for companies like Rocket Lab USA? Sign up for Earnings360's daily newsletter to receive timely earnings updates on Rocket Lab USA and other key companies, straight to your email. Email Address About Rocket Lab USARocket Lab USA (NASDAQ:RKLB), a space company, provides launch services and space systems solutions for the space and defense industries. The company provides launch services, spacecraft design services, spacecraft components, spacecraft manufacturing, and other spacecraft and on-orbit management solutions; and constellation management services, as well as designs and manufactures small and medium-class rockets. It also designs, manufactures, and sells Electron, a reusable orbital-class small rocket; and the Photon satellite platforms, as well as developing the Neutron 8-ton payload class launch vehicle; conducts remote launch activities; and designs and manufactures a range of components and subsystems for the Photon family of spacecraft and broader merchant spacecraft components. The company serves commercial, aerospace prime contractors, and government customers. 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There are 10 speakers on the call. Operator00:00:00Good day, everyone, and welcome to the Rocket Labs First Quarter 2024 Financial Results Update and Conference Call. At this time, I would like to hand the call over to Muriel Baker, Communications Manager at Rocket Lab. Please go ahead, Speaker 100:00:15ma'am. Thank you. Hello, everyone. We're glad to have you join us for today's conference call to discuss Rocket Lab's Q1 2024 Financial Results. Before we begin the call, I'd like to remind you that our remarks may contain forward looking statements that relate to the future performance of the company, and these statements are intended to qualify for the Safe Harbor protection from liability established by the Private Securities Litigation Reform Act. Speaker 100:00:41Any such statements are not guarantees of future performance and factors that could influence our results are highlighted in today's press release and others are contained in our filings with the Securities and Exchange Commission. Such statements are based upon information available to the company as of the date hereof and are subject to change for future developments. Except as required by law, the company does not undertake any obligation to update these statements. Our remarks 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. Speaker 100:01:28This call is also being webcast with a supporting presentation and a replay and copy of the presentation will be available on our website. Our presenters today are Rocket Lab's Founder and Chief Executive, Peter Beck and Chief Financial Officer, Adam Slice. After our prepared comments, we will take questions. And now let me turn the call over to Mr. Beck. Speaker 200:01:54Thank you, Marielle, and thank you everybody for joining us today. We've got a lot of great achievements and milestones to share on our start to the year, not the least of which is executing a record number of launches and space systems growth that delivered a record total revenue of $93,000,000 in the quarter, up 55% quarter over quarter and 69% year over year. Adam will talk through the rest of the details of our financial results for the Q1 before covering the financial outlook for Q2, 2024. After that, we'll take some questions and finish today's call with the near term conferences we'll be attending. All right, on to what we achieved in the Q1 of the year, starting with Elektron. Speaker 200:02:37We had a great series of launches in Q1 with 4 successful missions, 3 of them for commercial customers from Launch Complex 1 in New Zealand and a national security mission for the NRO out of our second site in Virginia. We had to launch we had a launch turnaround of just 8 days between our flight for the Japanese customers' inspector and the NRO launch, which was no small task from 2 launch sites across the world. In fact, we remain the only company with the capability of orbital launch from both hemispheres. It really demonstrates the capability of the team to turnaround launches so quickly and sets us up well to execute against our PAC manifest for 2024. We completed our 5th launch of the year less than 2 weeks ago, a commercial mission for Institute of South Korea along with a landmark scientific mission for NASA to test our solar sailing technology also on board. Speaker 200:03:32No two rideshare missions are the same and this launch in particular was a tricky and complex one that played into our unique strengths. For large launch rideshare, normally you have a bunch of satellites that are heading to the exact same orbit and you deploy them into one location. If the orbit isn't ideal from your spacecraft then you kind of tough luck. But for Caiced and NASA, we had 2 satellites going to 2 completely different orbits to each other. First, 1 to 5 20 kilometers and then all the way up to 1,000 kilometers and lower towards the other. Speaker 200:04:09Those kinds of conflicting mission requirements would normally require 2 separate launches, but with our unique kick stage capabilities, we're able to drop cost off at 520 and NASA up to 1,000 and then complete another series of engine burns to bring the kick stage back closer to earth for faster disposal and atomizability. It's this kind of precision and flexibility that makes us a really attractive launch service for our customers, which is also inherent in the next two missions we have scheduled to fly in Q2. So coming up in Q2, we have 2 back to back missions scheduled for NASA to deliver their pre fire mission to space or missions to space. The mission is focused on understanding how much of Earth's heat loss is lost into space from the Antarctic, Antarctic, which will help improve climate change models and provide better predictions on sea level rise and weather changes in the future. We're sending up 2 satellites for NASA, 1 on each launch, that will crisscross the poles to gather accurate readings across the 2 orbits from one mission. Speaker 200:05:13Once Prefire is in space, Prefire 2 must be placed there within 3 weeks' time, which again plays to our strengths as a responsive launch provider hitting precise orbital deployments. We actually demonstrated a similar capability with the 2 Tropics missions launched last year, so it's great to see NASA take up capability once again. After that, we are set to launch the first of 5 missions for a new customer, Canis, a French company backed by our private and public investors, including the French government space agency. We'll be deploying their entire satellite constellation into low orbit, some 25 satellites across 5 electron launches. There is also a nonforecasted but potential 5th launch for a commercial constellation customer we're tracking for Q2. Speaker 200:05:59Operationally, we'll be ready to launch this mission when the customer is ready and if there's a chance of that happening before the end of Q2. But like I said, there's also a chance of it slipping out of the quarter, so it's not forecast in the financials for the current quarter. Onto the rest of the year and we remain on track for another record number of electron launches. Across the 22 missions sold for 2024, we are seeing some movement in the manifest as expected due to customers being late with their spacecraft or asking to shift later in the year or sometimes even into 2025. This kind of manifest whack a mole as we call it is nothing new to any launch provider and it's something we've become very familiar with after 7 years of launching Electron. Speaker 200:06:40We see the opportunity of those gaps to fill them with to fill the manifest with new customers who need an urgent ride, sometimes within months or existing ones who want to move to the left rather than wait for their booked slot. For customers who also ask for a new launch date later in the schedule, we have typically invoiced it and collected the majority of the launch contract value up to that point and then we recognize the revenue once they've flown. It's why launch revenue forecasting can be so lumpy, but like I said, while we might not get all 2022 flights off this year, based on customer movement, we're on track for a record year for Electron. And from where we sit today, 2025 is shaping up to be another record year also. One of the really exciting missions for 2025 was one we booked early in Q1 early in Q2, the $32,000,000 Victus Hayes mission for the U. Speaker 200:07:33S. Space Force. This one is really a full end to end mission solution that will really show off the success of our vertical integration strategy. We'll be designing, building, launching and operating the spacecraft to demonstrate tactively responsive space for the Department of Defense. The spacecraft will come with all of our own components including propulsion systems, solar cells, direction, we'll start track as flight ground software space, on and on and on it goes. Speaker 200:08:02Then we will fly it on Electron and once it's in space, we'll be operating it to demonstrate Rondeau with another spacecraft in orbit which is a highly sought after capability for the DoD. And I should mention that our task is to launch the spacecraft within 24 hours notice from the Space Force. It's the first time we've sold a complete end to end mission solution and to a prestigious customer as well. It's a super exciting mission that showcases our ability to meet the DoD's growing need for rapid and responsive orbital capability. It will also be a fantastic demonstration of what we can do as a full end to end mission services provider. Speaker 200:08:48We'll be taking care of absolutely everything the DoD needs for assured access to space, which is an important capability for the nation. Another new launch contract we've been awarded post Q1 is the 2nd mission from the U. S. Space Force, this time for the space test program. It's a $14,500,000 launch that will fly out of Launch Complex 2 in Virginia within the next 24 months to carry out research experiments and technology demonstrations for the DoD in space. Speaker 200:09:16We've proven ourselves as a trusted and dedicated partner to the DoD across multiple missions now on Electron. In fact, our first mission for the STP program was all the way back in 2019 when Electron launches were still in single digits. And we're looking forward to continued execution with the STP-thirty mission. Finally, to round out Electron, we've got an existing an exciting post quarter update on our recovery program. For the first time, we have returned an Electron stage back to the production line in preparation for reflying. Speaker 200:09:49This tank is the one that came back to earth during the recovery mission we launched in January, and it came back in such good condition that we're bringing it back into the production fold. Already it's passed a barrage of qualification tests, but having gone through those additional checks, it's now undergoing its final fit out and another round of the same acceptance testing that will take any brand new tank through that runs off the line. The results of that campaign will determine its suitability for reflight, The pool looks good. We could be looking to reflight later in the year. That's just a quick overview of some of the key highlights across Q1 to date for Electron. Speaker 200:10:27Now on to some of the exciting progress and achievements for Space Systems. We moved quickly this quarter in executing against our largest Space Systems contract to date, debut as a prime spacecraft contractor to the industry with a $515,000,000 constellation of 18 spacecraft we're developing for the Space Development Agency. All of these spacecraft for the agency's tranche to transport layer will be designed, built and managed by us and includes a full suite of Airspace Systems products. We officially kicked off the beginning of the program with the SDA in Q1 as well as completed preliminary studies for the spacecraft's design. The contract marks the beginning of our expansion of being a prime contractor, a role we've moved into swiftly and comfortably by handpicking a team of experienced subcontractors to support the program across payloads, sensor supply and ground systems. Speaker 200:11:20Another fantastic trick for the Space Systems group in the quarter was a successful completion of our mission with BARDA, which returned to Earth the world's 1st space manufacturing mission conducted outside of the International Space Station. This was a mission where we took VARTA's manufacturing capsule that makes pharmaceutical crystals and put it on top of one of their spacecraft, which supplied the capsule everything it needed to do its work, like power supply, positioning and management in space. The last one is a really important capability we demonstrated on this mission as spacecraft and operations team were tasked with setting the capsule on its path back to earth, so it could land safely in a tiny area in the middle of the Utah desert. I like in this to like throwing a ball from low earth orbit while aiming to hit a bull's eye. The Rocket Lab team pulled off a really incredible feat to just absolutely nail the capsules reentry on target. Speaker 200:12:15This skill set makes us now one of only 2 commercial launch companies with spacecraft reentry capabilities, a rare and valuable thing in the market. And we'll be demonstrating this again soon with our 2nd spacecraft for the next already well ahead of production and on track for its expected launch date. The added bonus of the added bonus is everything we've learned in these reentry missions is we're able to directly apply to future capsule launches on Neutron as well. Another of our big satellite programs, the 17 spacecraft build for NDA Globalstar has also progressed nicely through Q1. The first of 2 flight frames for these spacecraft were completed, shipped out of Long Beach and delivered to NDA for the next phase of the program. Speaker 200:13:00Once Globalstar's payloads arrive to NDA, we'll great progress great progress towards that deadline. Next is our escapade program, which is the mission to Mars for NASA with our 2 spacecraft. The first fully assembled spacecraft is currently being put through the ringer in the vacuum chamber, testing, pushing the spacecraft to its limits so we can know with confidence it can survive the journey from Earth to Mars. The 2nd satellite will go into the vacuum chamber as soon as the first one comes out and it's right now undergoing similar checks to ensure it's ready for the load that we'll see when it's launched later this year. And finally to wrap up Space Systems, we have a new long term supply agreement for our space solar solutions with a large space prime worth up to $150,000,000 This one is a multiyear agreement that will see our solar technology support critical missions across civil, defense and national security. Speaker 200:14:00And March 31 ending backlog reflects the initial orders against this long term agreement. Demand for solar power and space continues to grow as the world moves towards mega constellations and proliferated linear architecture. We're now one of the largest suppliers of space grade solar cells globally. Space solar power is already one of the most constrained areas in the industrial supply chain, which is why we've invested in expanding, modernizing our space manufacturing capability, including automated processes and assembly. These are just some of the steps we've taken to ensure the resiliency of the space solar supply chain beyond current and future missions. Speaker 200:14:41And it's the latest contract this latest contract has strong recognition of that. Overall, some great work and progress across our Space Systems business to date. Now it's time to share how development with Neutron's going. So onto a huge milestone for Neutron that I'm really excited to share. We've completed our first Archimedes engine. Speaker 200:15:01The engine you see here is already shipped out the door of our engine development complex in Long Beach and is fitted to the test stand at NASA Stennis. What we're taking to the stand is a very close to a flight like engine and with all of the production infrastructure stood up alongside the engines development. We believe the team is in the optimum position to be able to make quicker duration to Archimedes based on what we learned through testing. Archimedes is a really unique engine given its thrust class engine cycle and propellant combination. It's an oxidizer rich stage combustion cycle powered by liquid oxygen and methane. Speaker 200:15:37One of these engines equals the same amount of thrust as roughly 3 electron rockets. On top of that, we've designed Archimedes to stand up to a target maximum reusability of 20 flights per engine. Each Archimedes is designed for £165,000 of thrust for a combined liftoff on the first stage of £1,450,000 thrust. Motogo Pump has an 18,000 shaft horse power and we picked an operating point that is optimized for reusability over maximum performance, which will allow us to operate this engine at a much lower stress level as compared to others. And like I said, that positions us well for rapid development and for a rapid development and qualification testing campaign. Speaker 200:16:33Integrated within Archimedes 2, all new three d printed parts that come off their factory floor at Long Beach, like its turbo pump, preburner and main combustion chamber components, valve housings and engine structure components. All of these are the same parts that continue to be printed as we build out more engines to this one in parallel. We've got about 4 sets of engines on the go right now. Perhaps the biggest point I want to make here too is that we haven't taken any huge concessions just to make fire for the sake of it. We've been very intentional and methodical with Archimedes making sure to find its design so that now we're at a point that we've got an engine that can be readily productionized ized long term. Speaker 200:17:18A test ready Archimedes is really the inflection point for Neutron's development. Now that Archimedes is on the stand, the real fun begins and we've started the test campaign in earnest. Having a complete engine, we've gone through some of the biggest unknowns in the development program and can update the schedule for its first flight accordingly, which we've adjusted to first launch no earlier than mid-twenty 25. We run highly aggressive schedules at Rocket Lab. We always have and all of our programs have been working with all of our programs and that's why we've been able to deliver new capability to the market like Haste, Electron, Capstone and more industry leading timeframes. Speaker 200:17:55Getting Neutron to the pad this year was an ambitious green light schedule that we had a path to closing if every single aspect went exactly according plan. But as we've always said, this is a rocket development program and it is always filled with gremlins, some in new control and some not. In this case, we've made the call to take additional time not only to just bring a minimum viable product engine to the stand, but to be very intentional and methodical about setting Archimedes up for success in the long term. This means rigorous component level testing before the first hot fire and refining a design that can be productionized long term. We've also taken the time to scale up the manufacturing and test facilities to support full scale production and built a knowledgeable and experienced team ready to build, test and fly our committees at the pace the customers are demanding once we bring Neutron to market. Speaker 200:18:45All of this takes time to get ultimately right, so that drove a schedule which now closes mid next year. We have a proven track record of delivering technology and capability to market on rapid and often record breaking timelines and Neutron is still coming to market faster than just about any other rocket program that I know. We believe Neutron will be a category defining launch vehicle serving critical market needs and we're excited to move into the final phase of development. While the propulsion team has made loops and bounds in Archimedes, the structural team a test team is also putting together big wins on the board as well. We got some of the rocket's largest composite panels and tech sections collecting across all of our composite facilities. Speaker 200:19:28We've completed the 1st Neutron's fairing panels with a set of 4 panels coming off the composites coming out of composites clearing and expected to be assembled together in the coming weeks. These are large, almost 8 meter long sections that mount Neutron's canards and how's the payloads inside the rocket. So they're really significant pieces of Neutron's build. The internal tank structures on Neutron's 2nd stage also come together, having completed an assembly test run earlier in the quarter. This is a second stage 2 that we built for Neutron after the development stage we built and tested last year. Speaker 200:20:02Putting the pieces together putting all the pieces of Neutron together is not the same as assembling Electron, which the team obviously regularly does by hand. So completing the assembly test run for Neutron and now moving on to final assembly, elimination and integration of the pieces into flight configuration marks a major progress in the vehicle's development. Besides and the scale of the structure and the pieces we're working with here, it's important to show. So here are some more images of the carbon composite tank builds taking place across our various facilities. And it's fair to say some amazing work from the team here pushing hard to get this all together. Speaker 200:20:41Speaking of launch, Launch Complex 3 up in Virginia is really starting to take shape. Concrete works for Neutron's launch mount have been completed and the concrete foundations for the site's liquid propellant and gas storage tanks have gone in. Long lead propellant tanks are soon to be delivered to site and we'll see our propellant farms stood up in the coming months. I also installed the 278 foot water tower. Visually, we've changed the skyline of Wallops waterfront forever, so it's an exciting new feature for LC3. Speaker 200:21:11We have made good progress on all other Neutron facilities in the area as well, including Neutron's assembly and integration test complex just outside the Wallops Gate. Another set of concrete foundations have gone down and we've got the skeleton structure up for an ex building on-site. Construction is really moving nicely along in Virginia, which is great to see. So that wraps up the business highlights for 2024 so far. So from here, I'll hand it over to Adam to take us through the financial updates. Speaker 300:21:40Great. Thanks, Pete. Q1 2024 revenue was $92,800,000 which was towards the low end of our prior guidance range, reflecting significant year on year growth of 69% and sequential growth of 55% driven by strong contribution from both business segments. Our Launch Services segment delivered revenue of 30 $2,700,000 in the quarter from 4 launches, in line with guidance of $32,000,000 to $33,000,000 representing sequential growth of 2.87 percent, driven by a return to normal launch operations after Q4 was impacted by our September anomaly. The average selling price per launch was $8,200,000 well above our target average selling price of $7,500,000 the result of a favorable mix of government and complex commercial missions. Speaker 300:22:31Our current backlog continues to support our target average revenue per launch with some variability tied to volume purchase commitments, launch location and mission assurance requirements. Our Space Systems segment delivered just over $60,000,000 in the quarter, which was towards the low end of our prior guidance range of $60,000,000 to $65,000,000 but reflecting sequential growth of 17%, driven primarily by growth in our MDA contract revenue albeit slightly less than was expected. Now turning to gross margin. GAAP gross margin for the Q1 was 26.1 percent slightly above the high end of our prior guidance range of 24% to 26%. Non GAAP gross margin for the Q1 was 31.7%, which was also above our prior guidance range of 29% to 31%. Speaker 300:23:21GAAP and non GAAP gross margin improvements relative to our guidance reflect continued efficiencies in both our launch and satellite manufacturing businesses. We ended Q1 with production related headcount of 872, up 20 from the prior quarter. Turning to backlog. We ended Q1 2024 with $1,020,000,000 of total backlog with launch backlog of $215,600,000 and Space Systems backlog of $799,700,000 Relative to Q4 2023, total backlog was down only 3% sequentially or $31,000,000 despite a $93,000,000 quarter of revenue. Strong bookings continued in our Space Systems business highlighted by initial orders related to the long term supply agreement with a Tier 1 prime contractor that Pete alluded to earlier and a follow on booking for reaction wheels supporting a mega constellation. Speaker 300:24:18For launch, backlog was down 13% sequentially or $32,700,000 as we drew backlog down against a record number of launches in the quarter. We continue to cultivate a healthy pipeline, including multi launch deals that can be lumpy given the size and complexities of these opportunities. We expect approximately 42% of current backlog to be recognized as revenue within 12 months. Turning to operating expenses. GAAP operating expenses for the Q1 of 2024 were $67,300,000 below the low end of our guidance range of $73,000,000 to $75,000,000 Non GAAP operating expenses for the Q1 were $56,400,000 which is below the low end of our guidance range of $62,000,000 to $64,000,000 The increases in both GAAP and non GAAP operating expenses versus the Q4 of 2023 were primarily driven by continued growth in headcount and prototype spending to support our Neutron development program and related infrastructure to support Neutron and our 18 satellite SDA contract, partially offset by shifting R and D resource to production support for Space Systems. Speaker 300:25:31In SG and A, GAAP expenses increased $2,900,000 quarter on quarter largely due to a 1 point $6,000,000 increase in stock based compensation along with increase in outside services partially offset by a decrease in the change in contingent consideration related to our PSC acquisition due to a lower average stock price in the quarter. Non GAAP SG and A expenses increased by $1,900,000 primarily due to the increase in outside services included in year end audit expenses, legal fees and corporate IT and security spending that further enable efficient scaling of the business. Q1 ending SG and A headcount was 263 representing an increase of 16 from the prior quarter. In R and D specifically, GAAP expenses were up $1,000,000 quarter on quarter due to Neutron prototyping, materials and headcount increases. Meanwhile, we have shifted certain non Neutron R and D resources to support the execution of our MDA contract production ramp. Speaker 300:26:31Non GAAP expenses were up $900,000 quarter on quarter driven similarly to GAAP expenses. Q1 ending R and D headcount was 625 represent an increase of 40 from the prior quarter. In summary, total first quarter headcount was 1760, up 76 heads from the prior quarter. Turning to cash, purchases of property, equipment and capitalized software licenses was $19,200,000 in the Q1 of 2024, an increase of $8,800,000 from $10,400,000 in the Q4 of 2023. This sequential increase was due to our continued investment in Neutron Research, testing and production infrastructure projects along with the expansion of our satellite production and space solar solutions capacity. Speaker 300:27:19Cash consumed from operations was $2,600,000 in the Q1 of 2024 compared to $42,200,000 in the Q4 of 2023. The sequential improvement of almost $40,000,000 was driven by a lesser net income loss and working capital improvements owing to the ramp up of production in our MDA Globalstar program and a step up in launch cadence as well as strong cash collections including initial milestone payments related to our space systems programs. Overall, non GAAP free cash flow defined as GAAP operating cash flow reduced by purchase of property, equipment and capitalized software in the Q1 of 2024 was a use of $21,800,000 compared to $52,600,000 in the Q4 of 2023. The ending balance of cash, cash equivalents, restricted cash and marketable securities was $564,900,000 as of the end of the Q1 of 2024. As discussed on our February earnings call, we generated $355,000,000 in a convertible senior notes offering, which was coupled with 2 deployments of $43,200,000 supporting our convertible cap call and equipment facility loan repayments, as well as $11,200,000 in debt issuance cost yielding $257,400,000 of net financing. Speaker 300:28:41We exit Q1 with a strong position to exercise inorganic options to further vertically integrate our supply chain with the critical capabilities consistent with what we've done successfully in the past. Our 4th quarter profitability trend demonstrates progress towards adjusted EBITDA breakeven and attaining our long term financial model. We expect Elektron's gross margins to continue to improve over time due to increased scale and production efficiencies and satellite manufacturing contributions to improve due to increased scale and leverage of growing IP capabilities and infrastructure. With our strong launch manifest and increasing scale driven by Space Systems contract execution in 2024, we are well positioned to continue our progression to adjusted EBITDA breakeven following our Neutron investment cycle. And with that, let's turn to our guidance for the Q2 of 2024. Speaker 300:29:33We expect revenue in the Q2 to range between $105,000,000 $110,000,000 This range reflects 77 $1,000,000 to $81,000,000 of contribution from Space Systems and $28,000,000 to $29,000,000 from Launch Services, which assumes 4 launches. As Pete noted, we do have a 5th launch slated for late June, but are taking a cautious approach in terms of guidance setting given the end of quarter timing risk. We expect 2nd quarter GAAP gross margin to range between 24% to 26% and non GAAP gross margin to range between 30% to 32%. These forecasted GAAP and non GAAP gross margins reflect mix shifts in our Space Systems segment towards the larger and lower margin satellite manufacturing program revenue contribution versus certain of our higher gross margin component offerings as well as a weaker mix within our components businesses. We expect 2nd quarter GAAP operating expenses to range between $74,000,000 $76,000,000 and non GAAP operating expenses to range between $62,000,000 $64,000,000 The quarter on quarter increases are driven primarily by increased Neutron investment, including staff costs, prototyping and materials as well as our annual merit increases effective April 1st. Speaker 300:30:50We expect 2nd quarter GAAP and non GAAP net interest expense to be $1,000,000 We expect 2nd quarter adjusted EBITDA loss to range between $23,000,000 $25,000,000 and basic shares outstanding to be approximately 494,000,000 shares. And with that, we'll hand the call over to the operator for questions. Operator00:31:11Thank And we'll go first to Eric Rasmussen, Stifel. Speaker 400:31:28Yes. Thanks for taking the questions. Maybe just on Neutron, you obviously made a lot of significant progress and has the number of milestones and the Archimedes being the latest, I guess, major one. But you're pushing that out by at least 6 months. Is it mostly on the engine side, sort of the conservatism there? Speaker 400:31:53And sort of what can pull that timeline in or even push that out further? Speaker 200:32:01Yes. Hi, Eric. So the engine is always a long pole in the tent with any launch vehicle development. So and look, we learned a lot building that engine and getting it to the stand. And we'll continue to learn more as we go through the engine qualification and hot fire programs. Speaker 200:32:26But the engine is really the primary driver for the move. And rocket programs are notoriously difficult to kind of plan. Because I think a lot of people see the rocket, but they don't see all of the tremendous amount of infrastructure around it that it takes to bring a rocket to fruition. So there's a lot going on in the program as you saw in some of the materials. But really the engine is always in certainly for us the driver for the program. Speaker 400:33:10Okay. And then what would you say then sort of the first call it silic, we'll call it a test mission, right, or an R and D mission. Could there be if you do get it in the middle of the year, could you actually then what do you think the timeline would be for you to start to and assuming that's a successful launch, what do you think the timeline could be sort of matching what you previously said of maybe 3 following that R and D the following year and then 5 the other year. Is that still the right way of thinking about new tariffs? Yes, yes, yes, yes, Speaker 200:33:48yes, totally it is. We played this game before and sort of the 135 is the right way to think about it. And I think that certainly as we're building capability and in some cases, stock, that's exactly how we're planning it still. Speaker 400:34:09Okay. And staying with launch but going back to Electron, you had 22, it sounds like there's some changes in customers in the manifest and that obviously is maybe impacting even this quarter. But we would have thought that if you'd hit that 22, you would have had to do 6 in Q2 for each quarter for the remainder of the year given you did 4. Where do you think that number could wind up and could you actually even hit 22 for the year still? Speaker 200:34:43Yes. Look, I mean, we had the solid 22 missions booked this year. And as I mentioned on the call that it's literally a game of manifest at whack a mole and people move out. Very rarely people move to the left, but that does occasionally happen. We have a bunch of folks that come in at the last minute. Speaker 200:35:06The biggest challenge for launch time lines is not so much vehicles. It's often licensing and sometimes mission design and payload structure development. So although we're in May, we're certainly not waving the right flag, but we as more time goes on, it gets more and more difficult to be able to do that and bring those missions in or add new missions to the manifest. So we're just making sure that we're being transparent here that it's going to be difficult to get those 22 missions off purely to some of those reasons. So where we actually end up at the end of the year is kind of in the hands of our customers in a lot of respects. Speaker 200:35:57But I'll make the point that this is just the reality of launch. And one of these missions go away, they just sort of move around and some will move into other quarters and some will move into next year. Speaker 400:36:14Thanks. Great. Well, and then maybe just last on the MDA contract, seems like this program and revenue recognition is kicking in. Maybe just help us understand the revenue trajectory and contribution or maybe the weighting as we sort of progress through this year? Speaker 300:36:32Yes. I can take that one Pete. So Eric, yes, to your point we are in now the meat of the rev rec underneath program. And we expect to recognize the majority of the remaining contract value in 2024. And it will be, I would say, kind of you think about it kind of peaking probably in the kind of in the Q3 period, maybe shifts to Q4. Speaker 300:36:56And then we'll also start to see more meaningful contribution from the FDA contract that we announced early this year. So I think we've kind of managed to have things land in such a way where you don't have kind of a risk of a big drop off as the MDA contract kind of comes to conclusion because we've got a contract that's more than 3 times larger kind of following it in the wings if you will. So I think that again our plan is to still see that almost all of the remaining contract value recognized in the 2024 time period. And there is an operating contract, the SOC that goes along with this MDA Globalstar agreement, but that's relatively small in the grand scheme of things with regards to the total contract value of roughly $150,000,000 Speaker 400:37:47Great. Thanks. I'll jump back into the queue. Speaker 300:37:50Thanks, Eric. Operator00:37:52And next up is Andre Sheppard, Cantor Fitzgerald. Speaker 500:37:58Hey, guys. Good afternoon. Congratulations on the quarter and thanks for taking our questions. Just a quick one for Pete. Obviously, congratulations on the Arkinus engine build. Speaker 500:38:13You're now targeting the hot fire test, which will be a big important milestone there. With now targeting first launch no earlier than middle of 2025, can you just maybe help us just remind us what are the other big milestones between the Hot Fire engine and the launch? Thank you. Speaker 200:38:36Yes. Sure. Thanks, Andre. So we've always said look for concrete on the ground at Wallops and in the test sites, look for large stage tanks and things like that and look for fire. And those things remain kind of the same things that I'd be looking for. Speaker 200:39:00So yes, getting something getting a pad built is a huge program in its own right. Getting the engine test facility built is a huge program that's done. And then like I said, now it's just working through the Archimedes final development and iteration. And then I think the other thing I'd be tracking is like making sure that we continue to build components for other launches. So not a one and done kind of a thing. Speaker 200:39:36It's like making sure that there a bunch of other engines coming off the production line and more tanks and structures and things like that. So that's certainly something that we're focused on is making sure we keep the machine primed with all the components needed to not just get one launch away, but stand up a commercial service. Speaker 500:39:58Got it. Okay. That's super helpful. I appreciate all that color. And maybe just a quick follow-up for Adam. Speaker 500:40:06Adam, just on the liquidity, sorry if I didn't hear this correctly, but does the $560,000,000 let's call it $565,000,000 does that include the net proceeds of the recent capital raise? And separately Speaker 600:40:22Yes, it does. Speaker 500:40:22Just remind us okay, the thoughts. Okay, great. And then just remind us, so with that liquidity on hand, what is the run rate expected? Or how are you thinking about that? Thank you. Speaker 300:40:36With a run rate or runway, I think that the we raised a significant amount of capital obviously in this most recent transaction. And as stated, it was really all about providing inorganic growth optionality for us. And we do continue to see significant opportunities out there. I would say the deal pipeline that we're managing at this point is probably as full as it's been in really the last couple of years as far as potential actionable targets for us. So I think the timing on raising that, the funds are was probably pretty ideal. Speaker 300:41:11If you look at the capital required to complete Neutron, we didn't raise the money for that. We had liquidity for that. Given where we're at in the program, we feel like we're still very much on track to the $250,000,000 to $300,000,000 total spend to get Neutron to the pad. And fortunately for us, not all of that spend has landed on our backs. We've had some support from various partners that have brought capital to the table as well. Speaker 300:41:39So I think that, again, we feel very good about our ability to scale our Space Systems business, continue to scale Electron, get Neutron to the pad with the capital we had pre convertible. And we continue to look for options to deploy that convertible proceeds to inorganic means. So and I think that right now we feel really good about where we're at from a liquidity perspective. And we really don't see the need right now to think about anything beyond that. Speaker 500:42:06Got it. That makes sense. So it sounds though that you are potentially interested in continuing to grow inorganically and to that point maybe remain active in the M and A market. But with that liquidity on hand, that's certainly feasible at least so far. So, okay, that's helpful. Speaker 500:42:24Congrats on the quarter. I'll pass it on. Thank you. Speaker 600:42:27Thank you. Operator00:42:29Next question comes from Jason Gerske, Citi. Speaker 600:42:34Hey, good afternoon guys. Hey, Pete, quick question for you on the engine development. What exactly caused you to need to push by 6 plus months? You mentioned you had some learnings there. I mean maybe you'd kind of share some of Speaker 300:42:51those details with us or at least characterize, Speaker 600:42:55whether they were issues with the design, issues with the manufacturer ability, just kind of give us a flavor of what went wrong here? Speaker 200:43:04So no like major issue. We didn't run up against a wall and had to solve something majorly technically. But I mean kind of as I mentioned on the call like the point here is not to just make fire. The point here is to roll into production. And there are a number of kind of new processes and actually even new materials that we developed for Archimedes. Speaker 200:43:32And those are all intended to support production. In a different time, we go into much more detail about some of the manufacturing methods we've used for combustion chambers and things like that. But really similar to Rutherford when we were the very first 3 d printer chamber there. That was a new technology that hadn't been done before and we spent a lot of time because we thought that that was going to be a big payoff. So not dissimilar to that. Speaker 200:44:06There's some manufacturing techniques that we've employed on Archimedes that in the long term are going to pay off handsomely. So a lot of time is spent in that. And then just quite frankly just the time that it takes to stand up the factory and the machine that builds the machine is probably the biggest learning as we've look, we've done this enough. We know that that is difficult and time consuming. But an engine on the scale is certainly as an extra element to that. Speaker 200:44:40I mean you can't just pick up a pump volume and bolt on the engine, you have to get a crane to put pump volume on. So it everything is just such a larger scale that it makes it more difficult. So yes, not like one big staggering thing, just a whole bunch of stuff that just sort of adds up. Speaker 600:45:04Yes. Okay, that makes good sense. And then do you have a sense of like you build buffer or contingency into the planning. So now you've got this mid-twenty 25 date out there. How much kind of buffer or contingency do you have in that? Speaker 200:45:20Well, as I mentioned before, we run green light schedules at Rocket Lab. So in an engineering program, especially one of that scale, it's almost impossible to build sensible engineering buffering because you never really know the elements that are going to cause you problem. You've got some inklings and you've had some areas. But if you walk into a room full of engineers and ask them to add buffer in their schedule, then come back in 2,040. It's that's just kind of the way it rolls. Speaker 200:45:54So we always run green light schedules. So our schedules are always ambitious and that's worked really well for us. I mean if you look across the execution history, the time that it took us to put Electron on the pad was extraordinary. I mean, we started that program in 2014, at our first launch in 2017 and that was from absolutely 0. So there are some challenges with the vehicle of the scale, but and I always caution everybody all the time that at the end of the day this is a rocket program. Speaker 200:46:28And it's a very difficult thing to execute. That's why there's only a few of us in the world that have pulled it off. But the way we run our schedules are informed by experience and what we've learned in the past, but we always run them very aggressively and very ambitiously. Speaker 600:46:49Okay. And then maybe just a quick update on the demand for Neutron and you talked earlier on the call about this 135 schedule from a launch cadence perspective. But maybe you can just kind of give us an update on over the last 3 months, what you've been hearing from potential customers there, and whether 135 is just going to be scratching the surface or give us an update on what your view of the market is there? Speaker 200:47:22Yes, sure. Of all the things that I stay awake at night, not tossing and turning about, demand for electron for neutron, sorry, it's just it's not one of them. And we continue to have really good robust discussions with our customers. But I think as I've mentioned before, it's kind of you show me yours and I'll show you mine. And we maintain the fact that what we want to do is bring a launch vehicle to market that is that's ready to go and into a market that is in great need rather than do a whole bunch of early adopter pricing and deals that don't have any teeth. Speaker 200:48:03So it's fair to say that the interactions with customers over the last quarter have certainly strengthened and we maintain that we're happy to entertain normal kind of deals where it's 10% down non refundable and normal kind of LSAs. But the reality is that people want to see a real rocket before they make such large commitments. And the same goes for us. We want to if we sell a whole bunch of launch, because most customers aren't looking to buy 1, they're looking to buy many that we don't commit to a customer that ultimately doesn't turn up in the pad because with Electron you can see the challenges that also causes is the reality of the space business. So we're looking at them and they're looking at us. Speaker 600:49:04Right. Yes. No, that makes good sense. I appreciate that. And Adam, just one quick one for you. Speaker 600:49:09The comment that you made on backlog burn over the next 12 months, 42%, I Speaker 300:49:14think was the number that you threw out there. Was that a reference to all of Speaker 600:49:16the backlog or was that just to the launch business? And then as maybe just a quick follow on to this backlog question. What are your guys' expectations or goals here as far as book to bill is concerned for 2024 and kind of going forward in any given year? I know these awards can be pretty lumpy and you've just built up some nice backlog here, but investors are certainly going to be focused on book to bill going forward. So just kind of update us on what the overall pipeline looks like and whether we can year in, year out, off this new base that you've got here have book to bills that exceed 1? Speaker 600:49:55Thanks. Speaker 300:49:57Yes, yes. Sorry, Jason. So yes, I should have been more clear. So the 42% applies to all the backlog. So it's not specific to launch or Space Systems. Speaker 300:50:05So it's a total business. And as far as the book to bill target, no, you're right. Of course, everybody we need to see a book to bill greater than 1 just given kind of what our growth aspirations are. I think that when you see that we've got backlog over $1,000,000,000 against a Street consensus number that's obviously significantly lower than that. We've got quite a bit of ability to grow significantly based off of just the backlog that we have in place. Speaker 300:50:33But we continue to chase big deals. I think that's the one thing that's really evolved over the course of the last 12 months. And I think largely not I would say not disconnected at all from what we've seen like for example landing that large SDA contract is that kind of as we start to get more and more of these super sophisticated programs, 1, we seem to attract more of those kind of opportunities as well. So I think you'll continue to see us chasing big deals on the space system side. I mean the component business continues to grow nicely and that's great because of the margin profile that some of those businesses have by selling components into the merchant market. Speaker 300:51:11But I think that what we see are large program opportunities to continue to build the backlog, not too dissimilar to what was happened with the SDA beta contract. But also, as Neutron becomes closer and closer to its first launch, that's where that's a very chunky opportunity as we sign LSAs for that vehicle. Those are all needle moving, given the average selling price that we expect to realize from a Neutron launch. So I think you'll see and we talked about this last year as we progressed through 2023 is that when people kind of looked and said, hey, it looks like your backlog growth has stalled a bit and what does that mean for future growth? We said, look, you have to be patient because the kind of opportunities that we're chasing are just of such a scale and complexity that they don't come together on a predictable kind of programmatic way. Speaker 300:51:59They come in fits and starts. And I think we saw that again late last year with the SDA contract coming into focus. And then I believe you'll see similar things as far as program size and then again across not only Space Systems but also including Neutron. So I think that you're right. It's right for people to expect a book to bill greater than 1. Speaker 300:52:18I have no concerns similar to Pete that that's of the things that I stay up at night worrying about, that's also not one of them. Speaker 600:52:27Awesome. Thanks, Kevin. I appreciate it. Operator00:52:31The next question is from Matt Akers, Wells Fargo. Speaker 400:52:35Hey, guys. Good afternoon. Thanks for the question. Thanks for I guess you talked a little bit about reusability and putting the rocket back into the process. Just curious how you think about that ramping up. Speaker 400:52:49If that launch is successful, how fast you could start to see some of the cost benefits of doing that on a wider scale? Speaker 200:52:58Yes. Thanks, Matt. So I mean, our focus this year has just been on production. And although the reusability programs for Electron has made good kind of strides and milestones, really just rolling the vehicles off the end of the production line has been our focus. Reusable vehicles, they're still have developments in aspects to them that make them kind of distracting to production. Speaker 200:53:25But like I say, the vehicle looks great and this is really the first one that's rolling back into production. If this goes well, then it becomes a much more of a standardized thing. We can kind of roll this into being a much more usual part of what you see with electron launches. Speaker 400:53:52Okay, great. Thanks. And I guess just one more, just thoughts on latest on Solero margins and how you're making progress on I think, the 30% margin target there? Speaker 300:54:10Yes, I can take that. Speaker 500:54:10Adam, thank you for that. Yes, yes. Speaker 300:54:13Yes. So Matt on the Solero Margins, again that's something that we continue to work through the challenges of some pre acquisition well, really one pre acquisition, onerous contract, which still has a bit of a ways to go on that. So kind of what we look to is if you kind of exclude that thing, which unfortunately we weren't able to affect, we had to kind of absorb that upon adoption of the company. The bookings that are coming in now are very strong. So if we look at additions to backlog for the Solero business, it would I'd have to strain my memory to think of one that was coming in recently that was below our target. Speaker 300:54:53Most of the business that we're booking for that is above that 30% gross margin target. And part of that is enabled by the fact that again we've been a little bit more, I would say, a little bit more hard nose on customer negotiations and holding price. I think when I mean the other things that factor into it is some of the investments that we're making in the business as far as putting new reactors in place in Albuquerque that are more that are delivering better production efficiency. I think the business has always been very good at controlling their overhead costs. And it's a very tightly run business. Speaker 300:55:27So it's really all about kind of building the backlog in such a way where we have confidence we can deliver that kind of at the margins. I think there's probably more upside than downside to that longer term target of 30% gross margin. Speaker 200:55:39It just takes a little while Speaker 300:55:40to get there. When we acquired the business, we said within about 2 years of acquisitions when we expected to kind of be able to have line of sight to those gross margin targets of north of 30%. And I think what we underestimated was just the challenge in kind of getting that one owner's contract behind us. And we still have a bit of that water to carry. But again, I think I feel very good about kind of everything else that we've been booking and where the backlog stands right now. Speaker 300:56:09I think it's probably going to be we've got at least through the end of 2024 and probably a little bit beyond that to get that out of the mix. That's helpful. Thank you. Operator00:56:25The next question comes from Michael Leshock, KeyBanc Capital Markets. Speaker 700:56:30Hey, good afternoon. I wanted to follow-up on the backlog question, very strong right now and just wondering how high you can take your backlog before maybe having to walk away from business Or in the same vein, do you expect to get more pricing power on future contract wins as your backlog grows? Speaker 300:56:54Yes. I mean first Speaker 600:56:56Okay, Betsy. Sorry. Speaker 200:56:58You go, Adam. I'll Okay. I Speaker 300:57:03say I don't think that it doesn't feel like we're in a position where we necessarily have got a problem because we have kind of too much backlog relative to our ability to produce to that backlog. I think we are seeing some natural pricing support come on the Elektron side just because of the fact that a lot of the competition that were really aspirational have not materialized. And so I think that that's certainly helping on the pricing front because I think now there's more rationalization going on with you can have more rational discussions because again you don't have people who don't know how to run a rocket business going on trying to sell rockets and putting kind of phantom pressure on pricing. So that has really started to evaporate. I think that when you look at some of the things that we're doing, you have to put more capacity in place with places like Solero, I think that's helping us kind of remove any of those kind of head kind of ceilings, if you will, on how big the business can grow to. Speaker 300:58:03So I feel pretty good about that. And I think all that is supportive of, again, margin expansion, gross margin expansion as we move forward. We've seen that in the business over the course of last year. But we do have some interesting mixes mix challenges when it comes to kind of just the overall gross margin profile when you have some lower margin overall kind of call it photon or satellite manufacturing skewing. So for example, we have more of the mix coming from that lower margin space systems manufacturing part of the business. Speaker 300:58:33But what's helpful about that business though is even though it may not have the same gross margin profile as the higher gross margin component merchant component businesses, they can have a lot of operating leverage to them because we're able to basically reuse a lot of the IP that we've created on prior missions. And so we now have a pretty fulsome portfolio of IP and we've invested in the manufacturing capabilities to the point now where incremental programs that may not have the greatest gross margin perspective can drop quite a bit to the bottom line because of what we've already put in place from an investment perspective. So that's kind of how I look at kind of the overall kind of margin shaping over the course of the next year or so. But I'll maybe Pete you can jump in. Speaker 500:59:15Yes. I think you said Speaker 200:59:16it well Adam. The only thing I'd add there is that we are Rocket Lab's known and our reputation is execution. So we're always kind of, as Adam pointed out, balancing our growth with our ability to execute because the last thing we want to do is fall behind on that. So when we look at programs and opportunities, we are selective and kind of as I mentioned before is the kind of programs we're looking for and spending our time on are very large ones. So we have to be kind of always diligent to make sure we don't take on programs that absorb a lot of resource, but don't have a lot of scale. Speaker 200:59:54So we're continually juggling those opportunities against how we want to grow the business. Speaker 301:00:02Yes. And Michael, I would further add that a little bit saying like Pete and I were talking the other day about the fact that it feels like the demand signal is stronger now than any time I could really remember it in the business. You think that it maybe would start to moderate a bit because we've now got a $1,000,000,000 plus backlog and the business is kind of hitting a new scale with our Q2 guiding guide above $100,000,000 per quarter. But it feels like to a great extent, it feels like we're drinking from a fire hydrant here. And there's a lot of opportunities that we're having to kind of sift through. Speaker 301:00:33But there's a very strong demand signal out there as far as the kind of programs that we're being asked to look at. Speaker 701:00:43Yes, absolutely. I appreciate that. And then on the launch side, specifically for haste launches, just wondering if you see opportunities there for more pricing. I think if you look at the customers' alternatives, they could be significantly higher costs versus Rocket Lab's offering. So is there a strategy there to increase pricing or keep it stable where it's at today? Speaker 701:01:08Any update on the haste side would be great. Thank you. Speaker 201:01:13Yes. I mean, we see haste as a really fantastic opportunity for Electron, not only just on price, but also on scale. And I guess the biggest opportunity for us there from a revenue perspective is the additional services from the launch vehicle as well. So yes, as point out, Michael, the alternatives are significantly higher. But the reason why there's so few launches and so little advancement is because of that. Speaker 201:01:48So by coming into the market with a disruptively low price point, we're seeing just such a growth in kind of revitalization of that market that I think ultimately that's the best approach for the creating the most amount of value out of it is to stimulate it rather than suffocate it. Speaker 701:02:15Got it. Thank you, guys. Speaker 601:02:18Thank you. Operator01:02:20And the next question is from Suji Desilva, ROTH MKM. Speaker 801:02:25Hi, Peter. Hi, Adam. Just a little bit maybe following the last question. The Victus Hayes missions, you talked about being end to end service. I'm trying to understand if there's incremental products or services you're offering there that can be productized and offered more broadly if there's a financial uplift of those incremental elements you're characterizing as part of the end to end service offering? Speaker 201:02:47Yes, yes, for sure. I guess the biggest one is rendezvous and proximity operations. I mean that is very rare capability and something you need to dock spacecraft with ISS for example. So kind of aligned with our strategy of only taking on work that we think is strategic to us that is certainly a good example of that. But as an end to end service with a spacecraft, we're leveraging the foundation designs one of our spacecraft already. Speaker 201:03:24It certainly does make it possible to be more productized. And we see this is the direction that not just the U. S. Government, but the world is heading towards, right? On demand rapid call up and whoever has the best solution there is in a good position because often responsive launch is talked about. Speaker 201:03:48Well, I mean that's useless unless you've got something to stick on top of it. So this is really the first demonstration of responsive space where it's all combined right down to the data handling and operations of the spacecraft. Speaker 301:04:04Yes. I think Suji I think along that line I think one of the we talked about the financial benefits to the model. I think when you're able to couple the launch with the spacecraft manufacturer, I mean you're increasing your odds of or your P win for these type of programs when you can go with a turnkey solution. Because I think right now what we're seeing is that the customer probably fears the most, it's not necessarily they fear like higher pricing or whatever. They fear delay, right? Speaker 301:04:34Because I think there's just the supply chain within the space market, particularly new space, has not yet gotten to the point where it could deliver scalable solutions on time. So I think that when we can go with the turnkey say, look, we have the launch capacity. We have the ability to design a spacecraft and manufacture spacecraft at a predictable time line because we're so vertically integrated. I mean, it just kind of pushes the narrative forward and ultimately allows you to have just a higher overall market share and market kind of share capture approach. So I think this is really kind of a more of a sign of things to come. Speaker 301:05:10This is where we really wanted to take the business was being able to do these end to end to end solutions for the customers. And ultimately with that will come just better scaling and more predictable scaling of the business across both segments. So we think this is a huge kind of validation of that strategy being realized now. And of course with an incredibly sophisticated customer as well. Speaker 801:05:30Sure. Great. Okay. And then my second question is, you listed out the subcontractors on the FDA contract in the press release. Just trying to understand now, I know you've been targeting M and A to in source. Speaker 801:05:41But is there sort of an equilibrium balancing point where as a prime contractor, you'll leverage external subcontracting and components versus wanting to keep bringing things in house? How do you balance that going forward as you grow? Speaker 201:05:56Yes, it's really 2 elements. I mean, we don't vertically integrate because we think it's some kind of religion. We do it for either 1 or 2 reasons. 1, we think we can create more value for the company or 2, we need to control it because suppliers just can't deliver it either the scale or the timelines that we require. So as we kind of execute on a prime then as a prime then the subcontractors that deliver on schedule on budget. Speaker 201:06:26This kind of to your point there's no need to kind of religiously suck their capabilities in. It's just that seems to be a relatively rare thing in the space industry. So we end up more often than not having to own it than rely on those parties. Speaker 801:06:44Okay. Appreciate the balanced answer. Thanks. Operator01:06:49Next up, we'll hear from Cai Van Rumer, TD Cowen. Speaker 901:06:54Yes. Thanks so much. So it looks like feels like your schedule has definitely slipped. And I mean, you talk of a manifest of 'twenty two, but you have the comment in there that you look for a record year in launches. I mean you only did 10 last year that would say 11 would get you home. Speaker 901:07:13Can you give us your best guess as to a realistic range of number of electron launches we could see this year? Speaker 201:07:23Yes. I think if we launched 11 that would be that would not be a record year in our minds that would be a massive disappointment. And look, it's just we can provide a number, but it's just super hard to kind of predict given that as the customers move around. But I think it's fairly fair to say that at this point, we'll struggle to achieve 2022, but we have line of sight for probably a couple of less than that. Speaker 301:07:59Yes. And Kai, I would add something to that. I mean, one of the benefits of diversification that we've been driving so hard towards and now getting more than 70% of our revenue coming from space systems is that we no longer it's no longer like a push out of a launch threatens our entire kind of year's annual operating plan, right? So we believe that we've got strength in other parts of the business, particularly on the space systems side where if we can't deliver those 22 launches, it doesn't really put at risk our ability to deliver a very solid year that's still on target with our internal plan for what we think we can deliver as far as revenue and growth. As much as again, we are very, very, very reluctant to wave the white flag on anything here. Speaker 301:08:45But to the extent that things move outside of our control, we do believe that we've got strength in the business more broadly that would make up for any potential shortfall that we'd see from a launch or 2 that move out. Got it. Speaker 901:08:59Great. Got it. So if you look at the rest of your competitors, I mean, particularly in the satellite side, RTX basically said they're throwing in the towel on being a space prime. LHX is there. They bought satellites from Mo. Speaker 901:09:13They basically have been late with problems. Taran is basically on ultra life support. It sounds like your competitors are really not doing particularly well. Any thoughts about, A, it sounds like things are actually a little bit more chaotic than they've been, maybe that's an over read. Do you see that happening? Speaker 901:09:39And is there any opportunity to just take a radically different approach and basically raise your prices 25% because the problem I can see of getting your backlog is you don't have the opportunity to kind of do a more profitable launch for someone who might be willing to pay for it. Speaker 201:10:04Well, Kai, I would say our business model and our strategy is working exactly to your point. The vertical integration and the power that brings to bring these platforms to market at a price point. And as Adam mentioned, the schedule is disruptive, and that's what you're seeing. And then from a launch perspective, I think as Adam pointed out, there has been a kind of a waning of who's real and who's not. And there's to be opportunities for us there, I'm sure. Speaker 901:10:47Great. And so, I mean, you talk about demand being better, but it doesn't really sound like pricing is a whole lot better. Is that a misread on my part? Speaker 201:11:01Well, I think it's a delicate I think Speaker 601:11:04Go ahead, Speaker 201:11:05Pete. I was just going to say, I think it's a delicate balance, Kai, because to the point about the haste missions before is you want to stimulate the market. And if you just go and just all of a sudden whack a big price increase there, then you can potentially damage those markets that you're trying to grow because some of them are new and some of them are fragile. So I think you have to be very balanced and careful about how you do those sorts of things. Speaker 301:11:38Yes. And Speaker 901:11:40thank you very much. Speaker 301:11:41I would add to that too, Cai, on the pricing side of things. If we look at what's happened with electron pricing, it's gone nothing but up for us in the last several years, right? So if you recall, back a few years ago, we were talking about launch prices in the 6.5 to 7, now 7 to 7.5 and now in this most recent quarter is 8,200,000. And I think you're going to continue to see that type of trajectory on pricing as competition again as kind of people fail to execute and we bring an increasingly scarce product to market. And the mix of that Electron business as was I think was being asked earlier with regards to the impact of things like haste on the overall mix. Speaker 301:12:25But I also think that when you look at our Photon pricing, if you look at the contracts that we're competing on, the contracts that we're winning, we're not winning on the lowest price. It's quite the opposite. Like we can oftentimes price at a premium to our competition, again, because of the fact that we're bringing that level of vertical integration, which translates into schedule certainty and performance certainty, right? So I think that's really what is kind of playing into the strategy side. I think we're absolutely seeing pricing benefits that are accruing to us as a result of the strategy not only for diversification, but actually the fact that we're executing, that we're vertically integrated, that we represent strangely enough a lower risk option for customers despite the fact that we're a very new generation NewSpace company versus some of the legacy players that you mentioned earlier in your commentary. Speaker 901:13:15Thank you very much. Operator01:13:19Next up is Edison Yu, Deutsche Bank. Speaker 201:13:23Hey, thanks for squeezing in. Just a couple of quick ones. Speaker 401:13:27First on Neutron, did the Baltimore bridge incident impact the infrastructure timeline at all? Speaker 201:13:37Not that we can see at this point in time, no. Speaker 501:13:42Okay. Then on the financials, Speaker 401:13:46I think the R and D was a bit low in the Q1. Is that just a timing thing? Should we expect that to really step up in 2Q? Speaker 301:13:58Yes, Edison. Yes, absolutely. It's a timing issue. I think like it seems like all things in our business there's elements of lumpiness and certainly spend timing is one of those things. So the nature of particularly on Neutron with how things do come and kind of fits and starts. Speaker 301:14:17We have large, for example, prototyping expenses that you may they may end up slipping out a little bit relative to maybe where you thought they're going to be. But there will be volatility. And I think you would absolutely expect that over the next few quarters, we'll continue to see a march up in R and D, primarily driven by if not entirely driven by Neutron in kind of first flight. Speaker 401:14:40Understood. And just last one on the, I guess, the FDA contribution, do we have any sense, what that could be this year, next year? I know you said you would get some small amount, but just wondering if there's anything a bit more discrete you can maybe provide on that curve, on the launch curve? Speaker 301:15:00Yes. So we're continuing to do our work. I mean the program is certainly progressing and with that progression and we talked about identifying subcontractors to work with us on that program. As we kind of brought more people formally under intent, we've gotten more color as far as kind of their timing and their ability to deliver against their milestones. So we definitely are starting to bake some of that into our operating plan for the remainder of this year. Speaker 301:15:28Earlier we said that we couldn't we weren't in a position to really say. So at the say the amount that was in the Q1 results was actually very, very small. I would call that immaterial. It's starting to become more material in the numbers that you're seeing in Q2 that we guided towards and you'll continue to see kind of building on that as we progress through 2024. And I would say that and part of and that is also allowing us to overcome I'd say a little bit of the earlier weakness that we talked about as far as progress being made against the MDA contract with regards to rev rec. Speaker 301:16:07Some of that MDA revrec is being made up for from initial contributions from the FDA contract. But I think when Eric asked the question earlier about kind of what the timing of rev rec looked like for the remainder of the MDA Globalstar contract. Again, that is given just given the delivery schedules that will again continue to build momentum, probably peak sometime in the Q3 time period, maybe it's Q4. But ultimately as that's kind of peaking out, we've got this building of SDA coming in behind it to prevent a real kind of drop off, if you will, when that program comes to conclusion. So I don't think we're quite ready yet to give kind of full year contribution from the SDA program because again it's pretty early in its life. Speaker 301:16:53But it's again part of the reason why we're confident that even if there was a launch or 2 that moves out of 2024 from that 'twenty two launch manifest, that we have the ability to not really feel that from an overall top line growth perspective. So we hope to be able to give you more color in a little bit, but right now a little too early to provide a lot of color on SDA contribution. Speaker 201:17:17Great. Thank you. Operator01:17:20And at this time, there are no further questions. I'll hand things back to our speakers for any additional or closing remarks. Speaker 201:17:32Okay. I think that wraps up today's presentation. Thank you everyone for joining us on the call. Rocket Lab will be participating in these up and coming conferences and look forward to the opportunity to share more exciting news and updates with you then. So thanks again. Operator01:17:48Once again everyone that does conclude today's conference. Thank you all for your participation. 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