And items. Perfect. Welcome, everyone. And items. Perfect. Welcome, everyone. And items. Perfect. Welcome, everyone. And items. Perfect. Welcome, everyone. I'm here with Stephen Ananias, VP of Finance at Rocket Lab. Thank you so much for joining us today. Thank you. Thank you for having us. Of course. We always want to talk Space. I'm going to start with Neutron. Can you please describe and give us some details about the milestones that you have with Neutron and Archimedes and how you are going forward to what is like the second half of the year, first launch? Sure. When we think about the schedule for Neutron, we're really tracking three separate work streams. The first is the engine, our Archimedes engine. The second is the composite structures that make up really the body of Neutron. Lastly, it's the infrastructure that's required. I'll start with the engine. Archimedes has been in a test campaign since August time frame of last year. That test campaign continues. What we're doing in this campaign is we're testing the operational kind of environment of the engine. We're testing the different power levels of the engine, different propellant mix ratios, control schemes. All these are required to qualify the engine. What we announced actually during our earnings call, our most recent earnings call, is we're actually in the process of building a second test stand there at our test facility in Stennis, Mississippi, which will now give us twice the capacity to test. That is obviously a very important part of getting Neutron to the pad in the second half of this year. On the composite structure side of things, again, making tremendous progress on the structures. This is an area where leading up till now, this is the one area that we've relied more on outsourced third parties to deliver for the first rocket. That is really one of the main factors that led to us updating our schedule to the second half of this year. A lot of trade-offs are made when you're getting to this point in the development of Neutron. Normally, and ultimately, we will be very vertically integrated with Neutron, just as we are with Electron. When you're first starting out, you have to make that trade-off between the schedule, how quickly do you want to get things in, versus vertical integration. A lot of the equipment that's required to build the composite structures, the lead time on this equipment is a year to two years long. We can't wait until the equipment comes in to get the prototyping started and waiting for delivery o r we would never be much later than the schedule that we're on. The other consideration is, in many cases, we want to see technology demos of our design so we can make sure that the design is working as expected before we make the significant investment in capital equipment. The downside to that is you're relying on third parties to hit their schedules. You're susceptible to any slips that they have. It works into our schedule. The engineers are constantly working on ways to mitigate those risks, to bring the schedule's pushing out, let's bring the schedule, figure out ways to bring the schedule back in. In some cases, we've actually moved some of that composite structure from outside third parties already internally to the equipment that has been delivered that was not expected to be used until the second flight. We're already making those decisions now. Lastly, the infrastructure. Building a launch pad, there's a tremendous amount of work that goes into this. It's a lot like building a house where you spend 80% of the time building everything that you can't see. As you get towards the end, then you start building everything above the ground. That's exactly the way it's working with the launch complex, Launch Complex 3, which is where Neutron will launch out of Wallops, Virginia. In fact, things are progressing very well on that front. We are going to be having our grand opening of the launch facility in the May, June time frame. Again, we're constantly tracking the engine, composites, and the infrastructure. That's what's informing us in terms of our updated schedule to the second half of 2025. From a composites perspective, how much is a technical challenge and how much is your third-party providers actually prioritizing other things before the volume that they have to do with you? I think it's largely scaling and just meeting the schedules that they've committed to versus a technical challenge. This is the advantage that Rocket Lab has not only in launch, but across the business, that we have made the decision to vertically integrate whatever we can. That is so we have more control over our schedule. In the challenge of scaling our businesses, whether it be the Electron Launch Vehicle as we get to the first launch with Neutron and then eventually scaling Neutron, our Space Systems business, all the Component businesses, it's a very concerted effort to vertically integrate so that we can have control over those schedules. On the engine piece, how would you measure? Are you like 70% to where you would like to be for the first flight or? I'm not the rocket scientist, so it's hard for me to put an actual percentage on that. But I think based on where we're at, it's what gives Pete and the team confidence that we will achieve that second half 2025 launch. Perfect. Is it fair to think that the composite piece is probably the one that keeps you up at night? Then on the other ones, you could actually start managing that on your side most? I think that's the piece that's given us the most challenge to date. I think the challenge with any rocket program is you don't know something's going to go wrong until it happens. Right now, based on, I mean, everything is progressing the way it should, and we're confident until we're not. If something happens, then we'll have to deal with that when we get there. Really, we're confident on all three work streams. We're putting on the composites work stream, we're putting the risk mitigation analysis together. That's what's informing us with our schedule. Perfect. When you think about orders taking and pricing the Neutron launches, on the Electron example, you did some early orders that were not as profitable as they could have been whenever the program was actually working and scheduled. How much of your future launch capacity are you selling today and how much are you keeping until you can actually have a stronger pricing position? No, that's a great question. Pete often talks about how he will never do that again. You're right. When you have an untested vehicle, customers automatically expect there to be a pretty significant discount. Our view is that we have a tremendous amount of heritage that we're pulling from the Electron rocket. We know what we're doing. We're not looking to provide discounts to sell our capacity. By the way, the other consideration is that our stated cadence that we expect is the first test launch here in the second half of this year, ramping to three commercial launches in 2026 and then five in 2027. There's not a ton of capacity over the next few years. We have to be very careful on what customers that we're partnering with because they may not show up at the pad. Both sides are kind of staring at each other and saying, "Okay, are you going to be ready? Are you going to be ready?" Yeah, it's a very. Bless the weather. Yeah. It's a very important decision that we make and who we're partnering with. Yeah, we feel like the market, the demand is going to be there. We don't feel any need to discount our pricing. Switching gears to Electron, how large is the backlog? How does the pricing of that backlog look compared to the ones that you have been recognizing so far? How should we expect the cadence of Electron launches in the next couple of years? The backlog for Electron is over or nearly $400 million. It is a pretty healthy backlog of launches. About half of that is over the next 12 months. The other half, obviously, is beyond 12 months. The pricing has been very stable and increasing with time. Right now, our backlog average launch in the backlog right now is over $8 million a launch. Again, very healthy. Customers really value what Electron brings to the table. It is a small class launch vehicle that is really suited for dedicated launch. When a customer has a very specific mission requirement, whether it be when it is launching, the orbital insertion, they can come up with their own mission parameters that we can meet. A good example is Kinéis, which we had a successful launch earlier today. This was our 62nd launch. It was the fifth launch for Kinéis. They had done a bulk buy of five launches. This was the fifth launch. In total, we deployed over 25 satellites that completed their Internet of Things constellation. We deployed their entire constellation in one year. This isn't unheard of. That allows the customer to now turn on their service and start generating revenue, where this would have taken years with other providers. We provide a real value that people are willing to pay for. Are people less sensitive about pricing when this actually allows them to accomplish the mission? Oh, absolutely. I mean, people that choose to fly on Electron fly on Electron because that is the best option for them for their situation. SpaceX obviously has their transporter rideshare missions that economically are much cheaper to launch a similar satellite. If you're okay riding on a transporter mission, which our analogy is that's similar to a city bus, it will take off at the same place, same time. It'll drop you off at the same place. Hey, if that works for you, that's probably the best option for you. Our customers are looking for something more suited for their mission requirements. We're the Uber. For that service, they are willing to pay a premium. When you think about alternatives or this competition between Electron and SpaceX, like the Falcon 9, you probably don't have much of an overlap on the customer perspective. How do you think about Neutron versus the SpaceX offerings? Neutron has been developed to be a direct competitor to Falcon 9. There will be almost entire overlap. I mean, we believe the customers are looking for an alternative to SpaceX. If you step back and you look at SpaceX and the volume of launches they've done, the overwhelming majority of those launches are Starlink launches. If you take those out of the equation, the remaining kind of government and/or commercial launches, those are really the launches that we would be competing for. I think we'll have a very competitive offering. When you think about the new administration and the role that Elon Musk plays there, are you concerned at all about your competitive positioning when Neutron is out? I mean, it's still very early days in the administration, but they certainly appear to be pro-space, pro-defense, and pro-efficiency. Each one of those plays to the strengths of Rocket Lab. Just take, for example, the Golden Dome initiative that this administration is talking about, the NSSL on-ramp of new providers, even within NASA in the Mars Sample Return. These are all initiatives that really play into the technology and capability stack of Rocket Lab. I think there are many opportunities that will present themselves. Perfect. How strong is your presence on the Hill? We have a small, yet very effective team in DC that engages with Capitol Hill and other parts of the federal government. On the Hill, specifically, we have great relationships with some key committees, such as the Appropriations Committee and the Armed Services. We also have a tremendous amount of support from our congressional members. Rocket Lab is based in six states throughout the country. We have a tremendous amount of support from our Congressional members. To be honest, it goes beyond our own Congressional members within the states. I mean, other Congressional members and their staff, they're all very supportive of adding more competition to the launch and just space in general. Again, it's very positive for Rocket Lab. When you think about government opportunities, it's not only through launch, but you also support the hypersonics testing with HASTE, and you do support the SDA Tracking layer. Where else do you think that Rocket Lab can add value or see opportunities on this space? I mentioned the Mars Sample Return. This is an example of just I'm not sure what the base is for. Some of the original projections were like $11 billion and not getting samples returned until the early 2040s. Rocket Lab has submitted a bid that is sub $4 billion and getting sample returns back in the early 2030s. Just completely different. That is a good example of where Rocket Lab is that kind of supplier that can be very efficient and bring innovative solutions at a much more effective cost point. When you think about these opportunities, how much you wanted to on your own, and when do you look for partnerships to actually approach these government opportunities? What type of partnerships? Like the one you have done with hypersonics, right? You're a sub to someone, and yeah, what type of partnerships you'll be open to? Sure. Sure. I think it depends on the situation. In the case of hypersonics, Kratos was just awarded a $1.45 billion award. We hope to benefit from that. In other cases, like on the satellite manufacturing side, we want to be the prime. We want to have more control over the program, the mission, and again, deliver on schedules and price points that the government is not used to seeing. That's really the value that we bring. On space systems, right, and the satellites, how do you think about developing organically versus acquiring capabilities? When we think of our Space Systems business, we really look at it as really two subsegments. We have our components portfolio, and then we have our satellite manufacturing. The component piece of the business has largely come from acquisition. It's been a very conscious effort to vertically integrate these supply-constrained subscale components so that we can bring them in and have more control over the schedule and ultimately drive more scale in the production. A good example is, in fact, it was our very first acquisition, Sinclair Interplanetary. When we acquired them, they were producing about 100 reaction wheels a year. The space economy did not become the trillion-dollar industry that we all hope it becomes if you're constrained to 100 wheels a year. That's just a small example. What we've been able to do is now take that technology and scale it to now we're building over 1,000, 2,000 wheels a year. That's just an example of what we can do. That same approach is what we're doing across the when we look at all the different components that go into a satellite bus, we focus on, again, those supply-constrained parts, but also the high-value parts that go into a satellite. We've acquired solar panel technology through the SolAero acquisition, flight software through ASI, separation systems through PSC, then attitude termination control systems from Sinclair. Most recently, earlier, I think it was last week, we announced that we have signed a non-binding term sheet to acquire Mynaric, which is also very exciting. If we're able to progress that through a definitive agreement and get through regulatory approvals to ultimately close, this will be, again, another example of where we're bringing a very important component into the portfolio where we'll be able to bring our manufacturing know-how and help scale that business. The component business has been highly profitable. When you look at these opportunities, you look at this criticality in the supply chain, you look at the value they add, how much of a role pricing or margins play in that decision-making, or how much of that margins are actually because you are able to scale up the volumes? I think it depends on the component that you're talking about. The margin profile of our component businesses really ranges quite significantly. In the solar component, it is a lower margin business. We're working very hard to continue to scale that. That is one of the businesses that's a little bit on the lower end of our kind of margin profile, where we've got other businesses within that component portfolio that is well north of 50% gross margin. I think it is scale and being able to absorb some of that fixed overhead. That helps scale the margins. Also, having the right product and having heritage is super important in this industry. Having products that have actually flown and work, people are willing to pay a premium for that. On the Satellite business, how do you balance the opportunity to work in new capabilities and technologies versus just going after volume? What is the right place for Rocket Lab there? I would say that we are almost entirely focused on bringing in new capabilities. We are not interested in low-margin kind of print and repeat type of just simply satellite manufacturing. Every opportunity that we pursue is something that is bringing something into the company, some new capability, a new technology, or allowing us to put more investment into our factories. Going from, for instance, some of the earlier contracts that we had won were for one-off satellites or two satellites or four satellites. When we won our contract with MDA, it was to build 17 satellites. That is a completely different production environment. That helps us then win the SDA Tranche 2 contract, which is 18 satellites. We are able to leverage a lot of the technology and know-how and capabilities as we progress. It's really we win one to enable us to win the next and keep moving in that direction. Perfect. One step further, you announced Flatellite not so long ago. Would you mind explaining to everyone what is Flatellite about and what do you want to do with it? Sure. Flatellite is a new satellite form factor within our portfolio of satellites within the company. The big difference between our other satellite designs and Flatellite is it is a, think of like a pancake type of form factor where you can stack many more satellites in the fairing of a rocket versus a more traditional satellite design. One of the more important decisions that a satellite operator is going to make in choosing a launch provider is what is the cost to launch per satellite. You might have a satellite that is not all that mass constrained, but it is volume constrained. You can imagine if you have a rocket that can fit seven satellites in the fairing versus now with this new architecture, you can fit 20 satellites in the fairing. Your cost per satellite to launch has come down significantly. That is really what this is intended to do, to bring the cost of the launch per satellite down significantly. I mean, anyone can benefit from this. We will market this to commercial customers, government customers. What it really benefits are customers that are going to have constellations of some size. If you are only deploying two, you are not really going to get the benefit of a reduced cost for launch per satellite. If you are launching 20, 40, 100, that is where the benefit comes in. What kind of capabilities can you add in these satellites compared to the traditional satellite? What are the constraints there, if any? I think it's definitely more tailored to more comms types of applications. When you get into Earth observation, then the telescope or other cameras, they may defeat the purpose of having that form factor because now you're taking up more volume. Within a communications kind of application, it's probably best suited for those. Perfect. When you think about space end- to- end, as you go through from launch to components to the satellites to the apps or the services, when and where do you think that Rocket Lab could play a role? We don't know yet. There's a tremendous amount of work being done at the company to see where we will have the best kind of value in creating value for the shareholders. At the end of the day, we feel like it's having each part of that end- to- end is really what is discriminating. Having a launch vehicle like Neutron, not only does it expand our addressable market within launch quite significantly, but it enables this end- to- end vision. Having the capability to build your own satellites and to be as vertically integrated as we are to where we can control the schedules and we can come up with more innovative designs. We have a cost advantage. When you take these capabilities, ultimately, it doesn't really matter what end application we go into. We feel like we're going to have a huge advantage over the competition once we decide where we're going to go. We don't have to be, I guess we might call it, the first mover because I think, again, we're going to have such an advantage. If we see that, hey, that is the application that makes the most sense and where we can create the most value, that's where we're going to go. Perfect. Yeah, Peter once told me about like two years ago, probably. I haven't found the killer app yet. Right. That's right. He's still working on getting ready for whenever he finds it out. I think things are definitely coming more into focus. When you just think about the applications that are out there today, some present bigger opportunities than the others. Some fit Flatellite or some other advantages that Rocket Lab may have. Yeah, we're still in that we haven't made that decision quite yet. Perfect. Then we'll open up for questions. If someone has a question, please raise your hand. I see some there. Can you hear me? Just wanted to ask on the reusability of the rockets. Firstly, Neutron, I imagine the reusability will not be tested on the first launch. How can we think in terms of the timeline of when that will come in? Also, on Electron, if I understand correctly, that is also being baked into the program. I know you do not give long-term guidance, but how should we think about this in terms of pricing and margins if these milestones are achieved? The first launch of Neutron is going to be an R&D test flight. However, the mission of that first flight will be to simulate a commercial flight. We're going to launch, we're going to get to orbit, then we're going to reenter, and we'll glide the vehicle back to Earth, and then we'll refire the engines, and then we will do a soft splashdown in the ocean at a very specific point as if we are landing on a barge. Everything short of actually landing on the barge. If that is successful, we will attempt to recover the next launch. In terms of profitability or kind of target margins, for Neutron, it really is a function of reuse, recoverability, and reuse. Once we have gotten to the point where we're able to recover and reuse these vehicles, we think that the targeted margin for Neutron is the same as Electron, which is somewhere between 45%-50% gross margin. We think with the recoverability and reuse, we definitely have a path to get there. On Electron, we do have a recovery and reuse initiative for Electron as well. In fact, we've recovered 10 vehicles now. There's actually an Electron that has been recovered sitting on the factory floor in New Zealand, but we have deprioritized that at the moment while we focus on getting Neutron to the pad. That's also an important initiative. Even without that, Electron is, I'd say, even more about cadence. In any rocket business, there is a significant amount of fixed overhead that is required to operate the business. Whether it is we have multiple launch complexes, we have all the resources that are required to operate those facilities. What we have said is we believe that once we get to two launches a month, so call it 24 launches a year, that is where we get to our targeted margins. Again, between 45% and 50% of gross margin. Perfect. Any other questions? Stephen, you mentioned about becoming a defense prime contractor for the government eventually. Once you have Neutron in a regular launch cadence, is there anything else you're missing as part of that space system end-to-end service to prevent you becoming a prime contractor? We are a prime contractor today. With the SDA contract, we are the prime contractor. We are there, and that's a really important responsibility that we take. I think with having Neutron, I think the opportunity there is to on-ramp eventually into the NSSL. That opens up a new market opportunity for Neutron. We did have another question here. Hi, thank you. Could you talk to any sort of execution because I think Neutron, the design is quite different to the Electron, if I'm not mistaken. Anything we should think about in terms of the execution risks or anything like that that one should be cognizant of? It's not a simple scale-up of a previous engine or design. It's completely different. Anything there that you would talk to? There's actually a lot of overlap between Electron and Neutron. The avionics are essentially the same. A lot of the GNC work is also similar. The HASTE tests are similar. What is unique is the engine. The engine is a completely different architecture. As I said, that's what's going through this rigorous test campaign right now. I think we're actually able to, it's because we are leveraging so much from Electron that allows us to be so confident to have this aggressive schedule that we have. There's just a tremendous amount of know-how that we can bring into the Neutron development. Another example, we talked about recoverability a couple of questions ago. That's another example of where it was initially with the recoverability of Electron that we were able to perfect that and understand what the kind of the science behind that reentry that we can now leverage into Neutron. There is a tremendous amount of knowledge and even design that we can leverage from Electron into Neutron. When you think about profitability in general, when do you think you can become cash profitable and how much of a role Neutron plays there? I would say Neutron plays all of the role there. So when you look at the individual businesses, without Neutron, we're a profitable company. The investment in Neutron is significant. Obviously, the opportunity is significant. To answer your question, I think it ultimately depends on how quickly we ramp Neutron and how successful we are getting to our cadence of 1, 3, 5. I think the one thing that you'll see almost immediately is once Neutron successfully launches, then once you move into production with Neutron, you see a pretty significant kind of flip in the income statement because a lot of that R&D intensity starts to reduce. A lot of the prototyping that we've been doing leading up to the first flight, that doesn't go completely away, but it comes down quite significantly. I mean, there'll continue to be investments in block upgrades of the vehicle over the first couple of years, the first few flights, essentially. But kind of once you get through that, once you get the first flight off and you move into production, now all of that's more of accounting, but all of that cost to build Neutron now moves from R&D up into cost of goods sold. Now you're moving that expense now with timing it with when you're actually now selling a Neutron for $50 million-$55 million. I mean, again, you see a huge benefit on the P&L pretty quickly after you get that first launch off. From a cash flow perspective, again, you're going to continue seeing investments in Neutron as we continue to scale the business. As you start to get to that 1, 3, 5 cadence, that's when you're really going to start seeing the benefit on the cash flow as well. In terms of M&A, what are key areas that you are looking for in terms of technologies that you think will be really good to have? The pipeline is full. It's always been full. We're just constantly looking for opportunities to vertically integrate on the supply chain side. Again, supply-constrained, high-value components are kind of bullseye. Mynaric is a good example of that. The other area that we continue to kind of research is on the payload side. Today, we're focused on the satellite bus and all the components that are used for the satellite bus. It's very important to have the payload as well. That's something that we continue to look at. Perfect. Thank you very much. We'll see you around. All right. Thank you.