Rocket Lab USA Q1 2025 Earnings Report

Rocket Lab USA EPS Results

• Actual EPS: -$0.12
• Consensus EPS: -$0.10
• Beat/Miss: Missed by -$0.02
• One Year Ago EPS: -$0.09

Rocket Lab USA Revenue Results

• Actual Revenue: $122.57 million
• Expected Revenue: $120.74 million
• Beat/Miss: Beat by +$1.83 million
• YoY Revenue Growth: +32.10%

Rocket Lab USA Announcement Details

• Quarter: Q1 2025
• Date: 5/8/2025
• Time: After Market Closes
• Conference Call Date: Thursday, May 8, 2025
• Conference Call Time: 5:00PM ET

Rocket 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. Rocket Lab USA, Inc. was founded in 2006 and is headquartered in Long Beach, California.

Rocket Lab USA Q1 2025 Earnings Call Transcript

Presentation

[Operator]

At this time, I would like to welcome everyone to Rocket Lab First Quarter twenty twenty five Financial Results Update and Conference Call. All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question and answer session. You. At this time, I would like to turn the call over to Muriel Baker, Senior Communications Manager.

[Operator]

Muriel, you may begin.

[Murielle Baker, Senior Communications Manager at Rocket Lab USA]

Thank you. Hello, and welcome to today's conference call to discuss Rocket Lab's first quarter twenty twenty five 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. Any such statements are not guarantees of future performance, and factors that could influence our results are highlighted in today's press release, and others are contained in our filings with the 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.

[Murielle Baker, Senior Communications Manager at Rocket Lab USA]

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. This call is also being webcast with a supporting presentation, and a replay and copy of the presentation will be available on our website. Our speakers today are Rocket Lab's Founder and Chief Executive Officer, Sir Peter Beck as well as Chief Financial Officer, Adam Spice.

[Murielle Baker, Senior Communications Manager at Rocket Lab USA]

They will be discussing key business highlights, including updates on our launch systems programs, and we will discuss financial highlights and outlook before we finish by taking questions. So with that, let me turn the call over to Sir Peter.

[Sir Peter Beck, Founder, President, CEO and Chair of the Board at Rocket Lab USA]

Thanks, Mariel, and thanks, everybody, for joining us today. While we had a very strong start for 2025 across the business, I want to provide a bit of an update as we build towards our future as a Constellation owner and operator. As we take you through our achievements for the quarter, keep us in mind how every milestone and every mission brings us closer to that more lucrative piece of the space value chain. We continue to launch and book more and more electron missions, proving we hold the keys to space with regular launch access. As neutron rate is closer to the pad, we also get closer to having a 13 ton reusable launch vehicle that can deploy our own satellites with speed and cost efficiency.

[Sir Peter Beck, Founder, President, CEO and Chair of the Board at Rocket Lab USA]

We're also generating revenue through the missions we'll fly for our national security and commercial customers. Having gone after the full space ecosystem with satellites, launch vehicles and everything in between, a deep vertical integration is one of our distinct competitive advantages. And while bringing us closer to our strategic end goal, this quarter, it also served us well against the backdrop of dynamic international trade environments, ensuring that we have the supply chain lock with secure and predominantly U. S.-based manufacturing. So with that, let me move on to some more specifics for the quarter.

[Sir Peter Beck, Founder, President, CEO and Chair of the Board at Rocket Lab USA]

We've posted a near record quarterly revenue of $122,600,000 nudging to the top end of our prior guidance and 32% up 32% compared to last year. We have another strong looking quarter on the horizon with the midpoint of our guidance range for Q2 pointed to another record setting quarter for the business, and I'll let Adam go into those details a little bit later. On the launch side, demand is soaring. We booked eight new Electron and HACE missions for Q1 and at the same time launched five missions with 100% mission success. Three of those took flight within just thirteen days of each other, and there is demand from our customers for more than 20 launches this year.

[Sir Peter Beck, Founder, President, CEO and Chair of the Board at Rocket Lab USA]

For Neutron, a selection to the DoD's high value launch contract NSSL program is really the headline for the quarter. I'll go into more detail about what this means and how we plan to deliver against it in the later slides. And in space systems, it only took fifteen days to bring back the second in space manufacturing mission for Vada before our third spacecraft was launched to space and began its operation. A real demonstration of the speed and capability we've developed to deliver consistently reliable space craft for our customers. So there's lots to get excited about this past quarter.

[Sir Peter Beck, Founder, President, CEO and Chair of the Board at Rocket Lab USA]

So without further ado, let's dig in. First up, turning to small launch. So Electron continues to prove why it's the global leader with five missions in the quarter all across only six and a half weeks, proving that when even when our customers are ready to go with their payloads, so are we. Looking ahead, next weekend's mission for the multi launch customer IQPS will be the first of six in a row that are flying back to back out of Launch Complex 1. Electron makes frequent and reliable launch look easy.

[Sir Peter Beck, Founder, President, CEO and Chair of the Board at Rocket Lab USA]

But if we take a look back over a past decade, it really shows that Electron has really cemented itself as the the preeminent small launch provider. Electron really has scaled to provide the majority of American commercial small launch. They're focused on execution, smart use of capital to scale launch cadence and production, and a solid and reliable product is what it takes to succeed. A few others have been able to achieve that in the same way we have with Electron. That really goes to show what an impact Electron has had and continues to have on the industry in delivering trusted and reliable access to space for small satellite operators.

[Sir Peter Beck, Founder, President, CEO and Chair of the Board at Rocket Lab USA]

And Neutron is set to do exactly the same, obviously. Moving on to HACE, and our hypersonic test vehicle continues to be a sought after capability both domestically and internationally. Both The US and The United Kingdom have picked haste to develop sovereign hypersonic technology for their multibillion dollar defense programs. We've been selected to participate within the US Air Force's EWAHC program, a $46,000,000,000 indefinite delivery, indefinite quantity program. The second program we've been on ramp to is a 1,300,000,000 framework by the United Kingdom's Ministry of Defense as it works to shore up its hypersonic capabilities.

[Sir Peter Beck, Founder, President, CEO and Chair of the Board at Rocket Lab USA]

This is HACE's first international call up and a proud moment for the team to be able to contribute to the collective security of The United States and its allies. We've also landed another HACE launch contract through Kratos for the Department of Defense, Mark TB program. So that's seven missions now with haste for Mark TB, making us one of the most prolific commercial launch providers on that flagship DoD program. Regular hypersonic flight tests are critical to developing the technology and infrastructure needed to keep countries safe, and Haste is right at the center of that effort. Now on to Neutron.

[Sir Peter Beck, Founder, President, CEO and Chair of the Board at Rocket Lab USA]

Momentum is building for Neutron on the back of a really significant progress we made in 2024. The big news item in this quarter has been on ramp to the Pentagon's high value launch contract national security space launch program. This is the most competitive launch program in the industry to fly the DoD's highest priority and most critical missions. Our selection to it is a huge vote of confidence by the Pentagon and Neutron and affirms us as one of the most capable American launch providers. We're also the only publicly traded company to either onboard to NSSL.

[Sir Peter Beck, Founder, President, CEO and Chair of the Board at Rocket Lab USA]

Once we're clear of Neutron's first launch, we'll be bidding for task orders under the Phase three Line one program, which has a total value of $5,600,000,000 and an ordering period through to June 2029. We've already completed the kickoff meeting with the full contingent of future mission partners, including the US Space Force Assured Access to Space, NRO Office of Space Launch and other stakeholders from across the government. This was part of a $5,000,000 task order for a mission assurance showcase that came with Neutron selection. Our entry into NSSL is the type of disruptive competition the US government and the industry has been asking for. Missions for defense and intelligence satellites used to be dominated by legacy launch providers and the DoD has been upfront about wanting new partners with innovative approaches that bring increased competition.

[Sir Peter Beck, Founder, President, CEO and Chair of the Board at Rocket Lab USA]

That's exactly what we set out to achieve with Neutron and I'm excited to deliver it once we start flying later this year. I'm also pleased to announce our latest contract for Neutron. We've been selected to fly a US Air Force research lab mission that supports point to point cargo transportation in a multi manifest mission. It's it's all part of a program by the AFRL to create rapid delivery systems for defense cargo using commercial launch vehicles in a multiyear effort. Since the mission is all about bringing things back to Earth, AFRL will fly on a return to Earth neutron no earlier than 2026.

[Sir Peter Beck, Founder, President, CEO and Chair of the Board at Rocket Lab USA]

We know reentry and rocket usability is is a critical advancement in space tech that the DOD is highly supportive of, which is why Neutron has been designed from the get go for reuse and frequency. And the latest contract is a show of confidence from the DOD and their ability to deliver that. Moving on to some technical updates. It's a big green tick for Neutron's second stage qualification campaign, proving out the stages design, operations, and readiness for launch later this year. We we ran launch like operations across its full combination of flight software, hardware, avionics, guidance navigation control systems, and we also proof tested it to more than a 25% of its design point.

[Sir Peter Beck, Founder, President, CEO and Chair of the Board at Rocket Lab USA]

Some of that including applying more than 1,300,000 pounds of force and tension across the carbon composite structure. Now the second stage is one of the more novel pieces of Neutron, so it was important that we retired that risk first. The added benefit of that, of course, is that the structure of stage two is largely similar to similar to stage one. So by completing this qualification campaign first, we brought down a lot of the same risks that we may have seen in stage one. Having passed with flying colors, Neutron stage two is now going through final assembly and will be shipped to the launch site in the next few months in preparation for stage testing with the engine.

[Sir Peter Beck, Founder, President, CEO and Chair of the Board at Rocket Lab USA]

Now Neutron's pointy end, the stage one upper module is also close to completion as well. This is obviously more than what you saw last quarter with just the hungry hippo fearing. This is the full module, and it includes all the major stage one elements like canards, end stage, along with all of its mechanical systems like actuators, locks, avionic systems, and and running all the flight software. The full assembly represents some of the most complex mechanical systems that exist on the vehicle, and they will perform seamlessly during testing. We're just a few small finishing touches away from another big tech on the road to launch for Neutron for that that whole section.

[Sir Peter Beck, Founder, President, CEO and Chair of the Board at Rocket Lab USA]

All of the rocket puzzle pieces are really starting to come together now. And look, if we if we can ship them around the country, we can also fly them, and I think everybody knows how much I like helicopters. But even at their size, Neutron's carbon composite material makes them light enough to move large pieces around by helicopter, which is what we did earlier this quarter to help bring Neutron Stage one hardware together and place it all at their facility in Baltimore. While the majority of the rocket is assembled here, given the size of, you know, the the rocket and the road has to travel on to Launch Complex 3, Neutron shipped in stages before it's fully integrated as an entire rocket. Over at Launch Complex 3 in Virginia, we're on schedule and close to finishing Neutron's launch pad.

[Sir Peter Beck, Founder, President, CEO and Chair of the Board at Rocket Lab USA]

With everything in its place, the team is working around the clock to complete all the integration and and activate the pad. One of those more recent campaigns was the water deluge test. Turns out there is water on Wallops Island because we pump thousands of gallons of it through our pipes. The flow rate was the equivalent to an Olympic sized swimming pool every forty seconds. And event planning is underway for the ribbon cutting there soon as well.

[Sir Peter Beck, Founder, President, CEO and Chair of the Board at Rocket Lab USA]

So because Launch Complex 3 really is an important new addition, not just for the state, but for the whole nation, with Neutron's on ramp in SSL, our rocket will be the first to fly after the program out of Virginia. And that really highlights the importance of the pad as a critical national security asset. At the engine test in Mississippi, the propulsion team is doubling down on Archimedes. We're hot firing flat out as you would expect with flight avionics and full software stacks, and the team is busy tuning the engine through a barrage of tests. We've also just completed the build of a second engine test cell that's now up and running to enable testing two engines at the same time.

[Sir Peter Beck, Founder, President, CEO and Chair of the Board at Rocket Lab USA]

So as you can see, we're steadily making our way along the path to the pad. We've ticked off some big wins recently, and every element of the vehicle has been worked simultaneously. Yes. It's an aggressive schedule. We have ahead of this, but that's how we've delivered new rockets to the pad before.

[Sir Peter Beck, Founder, President, CEO and Chair of the Board at Rocket Lab USA]

And a reminder that the schedule that you see here is not sequential. Actually, everything is happening at once and in parallel. For example, this is the launch license to fly. Now there's a strong possibility that the paperwork will only come in days before launch just like it did for our first electron flight from Virginia. But that doesn't mean we stop everything else from taking place that needs to be done before we get that.

[Sir Peter Beck, Founder, President, CEO and Chair of the Board at Rocket Lab USA]

So and with with no major issues, we're we're really still targeting the first launch by the second half of this year. Now let's turn to updates across space systems. Just before the quarter closed, we announced our intent to acquire Monaric, a German company specializing in laser based satellite communications. This intended acquisition still has to make its way through all the approvals, but otherwise is progressing well. And so I want to take this opportunity to get into the details behind why we decided to pursue this acquisition and its strategic importance to the growth of our business.

[Sir Peter Beck, Founder, President, CEO and Chair of the Board at Rocket Lab USA]

A key piece of any large constellation is the ability to communicate between spacecraft with high speed and secure connections. Often, that's laser based, and the technology that Manarika has developed is some of the best in the world. Beyond the technology, this deal also sees us sit down their first European footprint in Munich. With extensive production assets, intellectual property, product inventory and a committed backlog for future constellations, there's a clear line of sight to European growth opportunities in this deal. And we'd be looking to expand the existing team of talented engineers and staff to meet international demand.

[Sir Peter Beck, Founder, President, CEO and Chair of the Board at Rocket Lab USA]

Now by bringing them in house, terminals in house, we will add a new element to our spacecraft supply chain that improves their product line and strengthens their position in commercial, national security and defense contracts. Manaric terminals are already being supplied for a $05,000,000,000 contract with the Space Development Agency along with many other companies, making this even more of a logical integration. We've proven across all of our acquisitions to date that we can take a highly sought after product, scale it and make it available in high volume. It's our full intention to do the same here again by expanding into Europe and to bring Minaj Extremables to the world and potentially for our own Constellation too. So I'm excited about the potential of this deal, and we'll be sure to keep you updated on its progress.

[Sir Peter Beck, Founder, President, CEO and Chair of the Board at Rocket Lab USA]

Turning to our Varda missions, and very soon, we'll be bringing the third in space manufacturing capsule back to Earth with our Pioneer spacecraft. This mission launched in q one, just two weeks after the return of the second capsule. And since then, our spacecraft has been providing power, communications, propulsion, attitude control, and, you know, to keep that capsule in orbit. The process has now begun to position Pioneer and Varda for earth reentry over Australia. So keep an eye out for updates on the mission in the coming weeks.

[Sir Peter Beck, Founder, President, CEO and Chair of the Board at Rocket Lab USA]

Meanwhile, the team is working hard at wrapping up the integration and testing for a fourth and final Pioneer spacecraft in Nevada contract in Long Beach. Our suite of space systems components and mission software is constantly under development, us to consistently produce

[Operator]

Alright. Just wanting to remind folks, if you would like to ask a question, can do so by pressing star one on your telephone keypad. Are we ready to take questions now?

[Adam Spice, CFO at Rocket Lab USA]

No. This is this

[Adam Spice, CFO at Rocket Lab USA]

is Adam. I think we've had a, comms issue with Pete on it. Is that so much as he can

[Adam Spice, CFO at Rocket Lab USA]

I'll give him a minute to to

[Operator]

problem. While we're getting Pete back on the line again, if you would like to ask a question, go ahead and hit 1. We'll get those queued up while we get Pete reconnected. Thank you.

[Adam Spice, CFO at Rocket Lab USA]

Hey, operator. Until we can get Pete back on the line, I'll just pick up where he left off.

[Operator]

Okay. That would be great. Thank you so much.

[Adam Spice, CFO at Rocket Lab USA]

Great. Thanks everybody. Yes, this is Adam Spice, CFO at Rocket Lab. I'll pick up where Pete was discussing our product expansion. And our suite of space systems components and mission software is constantly under development, allowing us to consistently produce and release new products that really move the needle for the industry and for us.

[Adam Spice, CFO at Rocket Lab USA]

I'll quickly take you through a couple of our latest releases. With StarRay, we've introduced a line of modular solar arrays for satellites that are customizable to meet all their power needs. With multiple different panel dimensions that small satellite operators can choose from, it's a plug and play solution at a low cost that helps to speed up small satellite development for our customers. And we've got contracts already to supply these customizable wings to constellations under development right now. We've also expanded our suite of Frontier satellite radios that are compatible with the industry's most important global ground stations.

[Adam Spice, CFO at Rocket Lab USA]

And on the software side, we've introduced the next gen versions of our highly popular MAX software packages for satellite guidance and control. The software behind Intermission for ground data and space operations and Max Constellation for software control of satellite constellations is the same that helped land a commercial lunar lander on the moon earlier this year, supported NASA's Capstone mission, DARPA's Blackjack program and which commands our Pioneer spacecraft for our Varda missions. Next, we've also had an extremely active quarter pursuing new opportunities for space systems that further scales our vertical integration. We're pursuing several large government and commercial contracts that would see us building entire constellations of satellites, not just individual spacecraft. These are industry scaling and shaping constellation that would tap our full space systems value chain and realize significant value that reshapes our business.

[Adam Spice, CFO at Rocket Lab USA]

And on the M and A side, with the half dozen deals in the pipeline as we continue to expand our vertical integration. There's high potential in all of this, and we've expanded a lot as a company. With our eyes set on Europe and international expansion as well as the deepening national security work that we're taking on through space systems and launch, the time is right for a new company structure that makes it simpler and more efficient to manage the business and our growth, particularly when it comes to U. S. Government classified programs.

[Adam Spice, CFO at Rocket Lab USA]

Our new parent company, Rocket Lab Corporation, will replace Rocket Lab USA Inc. As the public company listed on the NASDAQ. Existing shares of Rocket Lab will automatically convert on a one for one basis into shares of common stock of Rocket Lab Corporation, which will keep the RKLB ticker symbol. Trading is expected to continue uninterrupted on the NASDAQ and there will be no impact to shareholders, ownership or rights. We should have the new company structure wrapped up by the end of the month.

[Adam Spice, CFO at Rocket Lab USA]

And with that, I'll transition over to the review of the financial highlights for the quarter. The first quarter twenty twenty five revenue was $122,600,000 which was at the high end of our prior guidance range and reflects significant year over year growth of 32.1% driven by strong contribution from both business segments led by Space Systems. First quarter revenue declined 7.4% sequentially, primarily due to the mix of lower priced electron missions in the quarter paired with an aggregate reduction in our components businesses with both of these headwinds expected to reverse and convert into tailwinds in Q2. Our Launch Services segment delivered revenue of $35,600,000 reflecting a slight step down in average selling price. However, our current backlog for Electron and Haste backlog continues to support an increasing ASP with some variability quarterly tied to volume purchase commitments, launch location and mission assurance requirements.

[Adam Spice, CFO at Rocket Lab USA]

Although variable quarter to quarter, we expect ASP for the calendar year 2025 to materially expand when compared to 2024 and with that continued gross margin expansion. Our Space Systems segment delivered $87,000,000 in the quarter, reflecting a sequential decline of 3.4% driven by our Attitude Determination and Control Systems and Separation Systems businesses. Now turning to gross margin. GAAP gross margin for the first quarter was 28.8% above our prior guidance range of 25% to 27%. Non GAAP gross margin for the first quarter was 33.4%, which was also above our prior guidance range of 30% to 32%.

[Adam Spice, CFO at Rocket Lab USA]

GAAP gross margin improved sequentially owing to an improved mix in Satellite Manufacturing, partially offset by a decline in Launch Margin segment primarily related primarily to lower average selling price. Non GAAP gross margin was down slightly sequentially due to a lower stock based compensation adjustment under our EAC program accounting. Relatedly, we ended Q1 with production related headcount of ten eighty eight, up 84 from the prior quarter. Turning to backlog. We ended Q1 twenty twenty five with $1,067,000,000 of total backlog, with launch backlog of 422,200,000 and Space Systems backlog of $644,800,000 While overall backlog growth has been modest, launch backlog nearly doubled year over year with strong underlying trends as we convert a very strong pipeline of Neutron, Electron and Haste opportunities.

[Adam Spice, CFO at Rocket Lab USA]

Space Systems bookings remain lumpy given the timing of increasingly larger needle moving customer program opportunities, but remain at a healthy level despite a step up in revenue run rate over the last few quarters. We continue to cultivate a healthy pipeline including multi launch deals and large satellite manufacturing contracts that as mentioned earlier can create lumpiness in backlog growth given the size and complexity of these opportunities. Relatedly in Pete's earlier comments, he referenced being on ramp recently to some very large and strategic procurement programs including the very large and exciting NSSL program in addition to a few multibillion dollar hypersonics programs domestically and abroad, which now set the stage for exciting backlog expanding task order bidding. Getting on ramp was the required milestone to unlock this potential, so we're very excited about what's to come. We expect approximately 56% of current backlog to be recognized as revenues within twelve months and we continue to get relatively quick turns business that drive top line growth beyond current twelve month backlog conversion.

[Adam Spice, CFO at Rocket Lab USA]

Turning to operating expenses. GAAP operating expenses for the first quarter of twenty twenty five were $94,400,000 within our guidance range of 93,000,000 to $95,000,000 Non GAAP operating expenses for the first quarter were $76,800,000 up $2,300,000 sequentially, which was just below our guidance range of $77,000,000 to $79,000,000 The sequential increases in both GAAP and non GAAP operating expenses were primarily driven by continued growth in prototype and headcount related spending to support our Neutron development program. Specifically, investment has increased to support Neutron propulsion as we continue to qualify our committees and mechanical and composite structures supporting the fairing and tank fabrication ahead of the first flight this year. In R and D specifically, GAAP expenses increased $6,900,000 quarter on quarter due to the ramping up of the Archimedes production paired with increased expenses related to mechanical systems and composites as just mentioned. Non GAAP R and D expenses were up $4,000,000 quarter on quarter driven similarly to the GAAP expenses.

[Adam Spice, CFO at Rocket Lab USA]

Q1 ending R and D headcount was $9.23, representing an increase of 95 from the prior quarter. In SG and A, GAAP expenses decreased $800,000 quarter on quarter due to a decrease in outside services. Within that GAAP spend, we reported non recurring transaction costs of $1,400,000 in Q1 due to continued corporate development activities including advancing a robust pipeline of M and A opportunities. Non GAAP SG and A expenses decreased modestly by $1,700,000 due primarily to a decrease in software licenses. Q1 ending SG and A headcount was $3.32, representing an increase of three from the prior quarter.

[Adam Spice, CFO at Rocket Lab USA]

In summary, total first quarter headcount was 2,343, up 182 heads from the prior quarter. Turning to cash. Purchases of property, equipment and capitalized software licenses were $28,700,000 in the first quarter of twenty twenty five, an increase of $7,200,000 from the twenty one point five million dollars in the fourth quarter of twenty twenty four as we accelerated our LC3 construction activities and expanded our additive manufacturing capacity to support Archimedes scaling. As we continue to invest in Neutron R and D, testing and scaling production, we expect increased capital expenditures to continue leading up to Neutron's first flight. GAAP operating cash flow was a negative $54,200,000 in the first quarter of twenty twenty five compared to a negative $2,400,000 in the fourth quarter of twenty twenty four.

[Adam Spice, CFO at Rocket Lab USA]

The sequential growth in negative GAAP operating cash flow of $51,800,000 was driven primarily by materially lumpy cash receipts from our largest satellite programs paired with continued Neutron investment and long lead procurement supporting SEA as well as subsequent Neutron vehicle bill of materials and related infrastructure, including the recovery landing barge to scale Neutron's cadence beyond its initial test flight. Overall, non GAAP free cash flow defined as GAAP operating cash flow less purchases of property equipment software in the first quarter of twenty twenty five was a use of $82,900,000 compared to a use of $23,900,000 in the fourth quarter of twenty twenty four, again driven by lumpy cash receipts and disbursements. The ending balance of cash, cash equivalents, restricted cash and marketable securities was $517,000,000 at the end of the first quarter of twenty twenty five. The sequential increase in liquidity is due to the aftermarket equity offering that we announced earlier in the quarter, which generated $92,800,000 in gross proceeds through quarter end, which is intended to fund growth including future acquisitions such as the Menarik acquisition along with general corporate purposes. As such, we exited Q1 in a strong position to execute on our organic expansion initiatives as well as inorganic options to further vertically integrate our supply chain with strategic capabilities and expand our addressable market consistent with what we have done successfully in the past.

[Adam Spice, CFO at Rocket Lab USA]

Adjusted EBITDA loss was $30,000,000 in the first quarter of twenty twenty five, better than our guidance range of $33,000,000 to $35,000,000 loss. Sequential increase of $6,800,000 of adjusted EBITDA loss was driven by a slight decline in revenue growth paired with an increase in Neutron R and D during the quarter. And with that, let's turn to our guidance for the second quarter of twenty twenty five. We expect revenue in the second quarter to range between 130,000,000 and $140,000,000 representing slightly greater than 10% quarter over quarter revenue growth at the midpoint. We expect meaningful expansion in both GAAP and non GAAP gross margins in the second quarter with GAAP gross margins to range between 30% to 32% and non GAAP gross margins to range between 34% to 36%.

[Adam Spice, CFO at Rocket Lab USA]

These forecasted GAAP and non GAAP gross margins reflect improvement in launch ASP and overhead absorption. We expect second quarter GAAP operating expenses to range between 96,000,000 and $98,000,000 and non GAAP operating expenses to range between 82,000,000 and $84,000,000 The quarter on quarter increase is to be driven primarily by continued Neutron investment across staff costs, prototyping and materials. We expect second quarter GAAP and non GAAP net interest expense to be $3,100,000 We expect second quarter adjusted EBITDA loss to range between $28,000,000 and $30,000,000 and basic weighted average common shares outstanding to be approximately $514,000,000 shares, which includes convertible preferred shares of approximately $51,000,000 Lastly, consistent with last quarter, we believe negative non GAAP free cash flow in the second quarter remain at an elevated level in the range of $40,000,000 to $80,000,000 excluding any potential offsetting effects of financing under our existing equipment lending facility. And with that, we'll hand the call over to the operator for questions.

[Operator]

Great. Thank you so much. And our first question comes from the line of Edison Yu with Deutsche Bank. Edison, your line is open.

[Edison Yu, Analyst at Deutsche Bank]

Hey, good afternoon, team. Thank you for taking our questions. First one, I want to ask about Vineric. It's a public company, so we've obviously seen some of the struggles that they've had. After you're doing your, you know, analysis of due diligence on it, what what do you think is the kind of the biggest issue they've had and the plan to to kind of address that so

[Edison Yu, Analyst at Deutsche Bank]

you can scale it up?

[Sir Peter Beck, Founder, President, CEO and Chair of the Board at Rocket Lab USA]

I can take that one, if you want, Adam. And Yep. At this point, I think it's appropriate to to to to make the statement that we can go to the moon but can't secure a a telephone line, so my apologies for that. But the the biggest issue there, Ethan, is is is just production. And that that's an area that that that, obviously, we're very, very strong in.

[Sir Peter Beck, Founder, President, CEO and Chair of the Board at Rocket Lab USA]

So, you know, as we as we as we look at them as a company, they've got a, you know, a great product. There's been a tremendous amount of capital invested in the business to scale, but there's just just a few fundamentals there that that that we really feel we can we can jump in and and fix.

[Edison Yu, Analyst at Deutsche Bank]

And and would you expect that ultimately ultimately to be a quite a high margin product or or at least similar to some of the the merchant business that you do now?

[Sir Peter Beck, Founder, President, CEO and Chair of the Board at Rocket Lab USA]

Adam, I would

[Adam Spice, CFO at Rocket Lab USA]

We Go ahead, Pete.

[Sir Peter Beck, Founder, President, CEO and Chair of the Board at Rocket Lab USA]

No. You got it, Adam. You better downstate.

[Adam Spice, CFO at Rocket Lab USA]

Yeah. No. I I think when we look at how it folds into our overall portfolio of subsystems, we think it's going to be very consistent. Probably, again, I would say that scale is important to that business too, the number of terminals that get made. So as we ramp up into these programs, the ability to absorb the overhead will improve.

[Adam Spice, CFO at Rocket Lab USA]

So I think probably starts kind of, you know, I would say, you know, kind of, I would say, more towards the average of our our of our program and probably, you know, get to be hopefully one of our better margin programs in the port, you know, product lines in the portfolio. But I don't see it being vastly different in totality. It's going be pretty consistent with our overall kind of blended margin for our components business.

[Edison Yu, Analyst at Deutsche Bank]

Got you. And then kind

[Edison Yu, Analyst at Deutsche Bank]

of in relation to that, you mentioned in slide deck in the remarks that you still have several, I think, a dozen potentially quite large opportunities in the pipeline. I'm wondering if you could maybe comment, are you considering looking at actual operator assets? So not just kind of tuck in for components, but but other operators out there given there are some, I would say, fairly distressed assets? And would you kind of consider working with them or or acquiring them in some in some way?

[Sir Peter Beck, Founder, President, CEO and Chair of the Board at Rocket Lab USA]

Yeah. Listen. I mean, we we we look at everything. Right? And, you know, some some things like Manarika nice little tuck ins to, you know, to to kind of bolster our in envision.

[Sir Peter Beck, Founder, President, CEO and Chair of the Board at Rocket Lab USA]

And and then, you know, we'll we'll look across, you know, a range of things including much more needle moving opportunities. Then I would say that, you know, to your point, the the, you know, the opportunities right now to do interesting things are quite high. There's there's there's quite a lot of, you know, opportunity out there. Hence, the reason why we've made sure we're in a strong position to act on some of those opportunities.

[Edison Yu, Analyst at Deutsche Bank]

Understood. And just quick housekeeping. The Space Systems margin was quite good in the first quarter. Is that a good run rate for going forward?

[Adam Spice, CFO at Rocket Lab USA]

Sorry, you broke up a little bit there, Esan. It was sorry, Esan, you say it was quite what? Sorry.

[Edison Yu, Analyst at Deutsche Bank]

It was quite high. It was quite good. It very strong performance in Space Systems margin in quarter, gross margin. Is that a

[Adam Spice, CFO at Rocket Lab USA]

think it is, right. I think we're kind of now getting to the point of scale in the business where we're starting to deliver those better gross margins. So we do expect to continually expand our gross margins for the business in its entirety as we progress through 2025, probably actually be more pronounced on the launch side than it will be on the Space Systems side, but it's almost certainly be more pronounced on the launch side because we just know that given the healthier mix on the ASP side along with an increase in cadence in the back half of the year sets that part of our business up quite well for significant margin expansion. And we think it'll pretty much we're on track to kind of get to where we've been talking about where we wanted to be for the last few years as we exit 2025. So good news on the margin front for sure across both Space Systems and launch.

[Edison Yu, Analyst at Deutsche Bank]

Fantastic. Thank you.

[Operator]

Your next question comes from the line of Gautam Khanna with TD Securities. Gautam, your line is now open.

[Gautam Khanna, Managing Director at TD Cowen]

Yes, thanks. Good afternoon, guys. I wondering, could you just elaborate on the launch margins in the quarter? What may have drove that variability down a little bit? If you could give us an update on your free cash expectations, the cadence through the year, that'd be very helpful.

[Gautam Khanna, Managing Director at TD Cowen]

Thank you.

[Adam Spice, CFO at Rocket Lab USA]

Yes. So yes, so the launch margins are we've said consistently that our experience in ramping this launch business is it's very there's a lot of fixed overhead and fixed expenses that go along with running this business. You have things like the standing cost of a launch range in New Zealand, which is incredibly strategic. But when it's underutilized, it burdens the business with a lot of fixed costs that have to be absorbed. So cadence really is everything.

[Adam Spice, CFO at Rocket Lab USA]

And even though the cadence is relatively consistent, for example, Q1 versus where we see the business in Q2, and we do see an uptick in cadence in the back half of the year, it's really a combination of cadence, which is the number one driving factor. And I'd say second factor would be the ASP. ASP can skew quite a bit. I mean, we've got volume launch deals that we price relatively aggressively because people are making long term volume commitments to the business. And once and there's actually some synergies and efficiencies when you're doing kind of a rinse and repeat for launches because a lot of the GNC work is kind of done and we can reuse things like adapter plates and so forth for the payloads.

[Adam Spice, CFO at Rocket Lab USA]

With so that's you get efficiency through scale and through cadence, but also the ASPs can be quite different. Some of these missions that require more mission assurance and data delivery and so forth after the launch garner a higher ASP. So really we're looking at the back half of the year to be a combination of both of those positive factors, more cadence, so more over absorption and significantly better ASP as a result of some of the higher mission deliverables that we have to perform. So it's all goodness on that front. And when it comes to kind of the cash flow dynamics as we progress through the year, again, it's all about getting the first launch of Neutron off.

[Adam Spice, CFO at Rocket Lab USA]

That's why that's such an important thing. It's got all hands to the pump internally to make sure that we hit our objective of getting that off in the second half. And then it's also paired with a lot of the cash flow dynamics are tied to getting that first launch off, but there's also some things that we're doing in parallel to getting the first launch off, which is kind of priming the business to be able to scale kind of efficiently and rapidly after that first launch, including things like investing in this return on investment barge. And then also kind of purchasing long lead inventory items for the subsequent Neutron vehicles. So some of those things you have to buy components twelve months or greater in advance.

[Adam Spice, CFO at Rocket Lab USA]

So we're leaning forward. We're purchasing those long lead items, so that we'll be ready to kind of scale production quickly. So I'd say that you should expect these elevated levels of kind of negative free cash flow that we posted in Q1 to kind of continue in Q2 and certainly in the second half of the year until we get that first launch off and then we expect things to moderate. We can provide more color on that as we get closer to that milestone.

[Gautam Khanna, Managing Director at TD Cowen]

I appreciate it. And one last one on tariffs. Can you size your exposure where you have the exposure if at all? How it impacts the business? Thank you.

[Adam Spice, CFO at Rocket Lab USA]

Yes, we can. I will say, of course, we're in a very dynamic situation. Who knows what the tariff environment is going to be like tomorrow or two weeks from now or two months from now. But based on what we see today, we're pretty fortunate in the fact that if you look at our electron launch business, much of the cost for that is really New Zealand born, right, and where the product is manufactured in New Zealand and launches out of New Zealand. Very few of our launches actually take place outside of New Zealand on Electron.

[Adam Spice, CFO at Rocket Lab USA]

And on our Space Systems business, we're pretty fortunate that, again, we're very, I'd say, domestically source intensive. So much of what we manufacture on the space system side are manufactured in The United States where they're not manufactured in The United States. They involve a high U. S. Content on the materials or bill of materials that go into those non U.

[Adam Spice, CFO at Rocket Lab USA]

S. Produced parts. You can think of things like our reaction wheels that come out of Toronto. When you actually look at those reaction wheels, there's a significant amount of U. S.

[Adam Spice, CFO at Rocket Lab USA]

Content in the electronics that go into those things like bearings and so forth. So I think overall, we're pretty fortunate in the fact that we've got our manufacturing intensity largely kind of lined up where we don't have a lot of exposure. But again, things could change. We don't I think we don't have a crystal ball as to where things are going to be in the future, but we think we're positioned better than most given the current environment.

[Gautam Khanna, Managing Director at TD Cowen]

I appreciate it guys. Thanks and good luck.

[Adam Spice, CFO at Rocket Lab USA]

Thank you.

[Operator]

Your next question comes from the line of Ryan Kuntz with Needham. Ryan, your line is open.

[Ryan Koontz, Senior Analyst at Needham & Company]

Great. Thanks. I want to ask a little bit about the new products and kind of the pipeline of opportunities for that, maybe starting with your new solar array products? Sounds like they're modular. Maybe you can expand on kind of target applications for for that those products.

[Sir Peter Beck, Founder, President, CEO and Chair of the Board at Rocket Lab USA]

Yeah. Hi, Ryan. Sure. So on the on the the Star Rise in particular, we had a lot of customers coming to us with, you know, quick turn opportunities where where they need to get on orbit super quick. And, you know, the Solero business had had built a, you know, a, you know, a very nice way of of building, you know, cells and and panels and, you know, produce high quality things.

[Sir Peter Beck, Founder, President, CEO and Chair of the Board at Rocket Lab USA]

But the the, like, super quick, here's a complete array, you know, it was it's not really a product that's that's readily available in in The US right now in the market. So we saw that as an opportunity, you know, given given kind of what customers are asking for. And, you know, it's it's very modular thing, so you can you can add multiple kind of, you know, panels to the array. And it just gets their customers on orbit much faster. The the the total the total opportunity for for for that product, we'll have to wait and see.

[Sir Peter Beck, Founder, President, CEO and Chair of the Board at Rocket Lab USA]

We can we can only go off on on on what we see customers asking for. But, you know, we're we're very commercial in these things. Like, we we need a a certain number of of, you know, evidence of of inquiry before we make make those investments. But it also, you know, enables the company as a complete array manufacturer. Typically, Celero or historically, Celero just made cells and some panels.

[Sir Peter Beck, Founder, President, CEO and Chair of the Board at Rocket Lab USA]

But, you know, since the integration with Rocket Lab, now we're able to add all of the other elements, you know, deployment mechanisms, hinges, and and whatnot to produce these these entire arrays.

[Ryan Koontz, Senior Analyst at Needham & Company]

Got it. That's really helpful. Peter, thank you. And you mentioned opportunities in Europe. Can you maybe summarize those at a high level?

[Ryan Koontz, Senior Analyst at Needham & Company]

I assume maybe there's some sovereign government programs and as well commercial as well. Maybe you can expand on Europe.

[Sir Peter Beck, Founder, President, CEO and Chair of the Board at Rocket Lab USA]

Yes. So Europe, we've been thinking about how we get into Europe for quite some time because Europe is a very protected market, especially with the government programs through through ESA. And, you know, you know, having having a business that's able to work in those programs and having a footprint on the ground really does not just open us up to be able to provide solutions of from of of the the satellite terminals, but communication terminals, but basically, you know, a lot of our products. So, you know, it it it's it's actually pretty exciting, you know, TAM expansion opportunity for us because it's like I said, it's it's typically very, very difficult to, you know, get involved with these large European programs, unless you have a, you know, a footprint there.

[Ryan Koontz, Senior Analyst at Needham & Company]

Peter, is that mostly from the space systems perspective or you're thinking launch as well?

[Sir Peter Beck, Founder, President, CEO and Chair of the Board at Rocket Lab USA]

Mostly space systems. I mean, yes, that's the prominent opportunity for us here.

[Ryan Koontz, Senior Analyst at Needham & Company]

Perfect. Thanks so much. Appreciate it. It's all I've got.

[Sir Peter Beck, Founder, President, CEO and Chair of the Board at Rocket Lab USA]

Cheers. Thanks.

[Operator]

And your next question comes from the line of Andre Madrid with BTIG. Andre, your line is now open.

[Andre Madrid, VP - Aerospace and Defense Analyst at BTIG]

Peter, Adam, thanks for the question. You know, real quick, touch on Solero. I understand, you know, maybe an update on the backlog there. How are things progressing in terms of working through some of that lower margin work that you guys still had? I know it was targeted to be done already and you guys are continuing to work towards that.

[Andre Madrid, VP - Aerospace and Defense Analyst at BTIG]

So maybe just a status update.

[Adam Spice, CFO at Rocket Lab USA]

Yeah. I hope I can take that one. So the, you know, the we actually have done really well in in driving the margin improvement in that business. When we acquired it, was it maybe two and a half years ago, it was about maybe almost three years ago now, time flies. It was about a high single digit gross margin business.

[Adam Spice, CFO at Rocket Lab USA]

And if you look at actually the results this quarter, we've gotten it to pretty much the model that we said we were going to get it to. So I think we've kind of maybe we were a couple of quarters later than we thought maybe two or three quarters later. But I think overall, we've gotten it to where we want it to be. And I think more importantly, it's been a very strategic addition to the portfolio and let us be much, much more competitive when bidding on these solutions to be a prime supplier into these growing Constellation opportunities. So yes, I'm very happy kind of where we've been able to kind of drop the gross margin progression on that business.

[Adam Spice, CFO at Rocket Lab USA]

And I think we've hopefully, we have more upside to come on that. But I think we can kind of check the box that we've gotten to into into that neighborhood that we had originally promised we would.

[Andre Madrid, VP - Aerospace and Defense Analyst at BTIG]

Yeah. Yeah. No. I'd agree. Glad to glad to hear that, you know, you guys have achieved that target.

[Andre Madrid, VP - Aerospace and Defense Analyst at BTIG]

On Minarc, maybe just touching

[Andre Madrid, VP - Aerospace and Defense Analyst at BTIG]

on supply chain. I think when you guys announced the acquisition, you mentioned that sourcing some key components due to shortages was somewhat difficult, you know, some semis and some semi impact there, And that was kind of barring your ability to get or their ability then to get product out of the door. Is that still an issue? You know? Or or or, you know, measures looking to be taken to, I guess, improve things on that front?

[Sir Peter Beck, Founder, President, CEO and Chair of the Board at Rocket Lab USA]

Yeah. I mean, I think some of the supply chain issue was obviously, you know, the the the company's distress. You know, if you're a supplier into into that, you know, that that's a that's kind of a, you know, challenging place to, you know, to to, you know, to supply into it and then make investments against. Obviously, that goes away with Rocket Lab's ownership. So, you know, at least some of those supply chain issues get resolved.

[Andre Madrid, VP - Aerospace and Defense Analyst at BTIG]

Got it. Got it. And then if I could just squeeze in one more. I mean, we you guys talked at length about, you know, new term reusability and the value of that, which was super helpful. But can we get another update maybe on electron reusability, some milestones to look forward to?

[Sir Peter Beck, Founder, President, CEO and Chair of the Board at Rocket Lab USA]

Yeah. So electron reusability is, you know, we we we've kind of paused that to to put all all efforts and all team on on Neutron. You know, we we we had a an extremely talented reusability team on Electron. And as we look across the business and where the priorities lie, it's really, really is we can get a much bigger bang for our buck with all of those engineers working Neutron and taking their experience over there. So it was just a a priority decision that we've made within the company.

[Sir Peter Beck, Founder, President, CEO and Chair of the Board at Rocket Lab USA]

It's, you know, obviously, a a Neutron sticker price is 55,000,000. So if you can get the majority of that back, it's it's it's a it's a much bigger impact than a, you know, rocket with a sticker price of of, you know, 8 and a half million. So, yeah, it was just it's just a priority call within the company that we'll we'll put that on pause until we get Neutron to the pad and flying. And as Adam said before, it's, you know, it's all hands to the pump.

[Andre Madrid, VP - Aerospace and Defense Analyst at BTIG]

Yeah. Yep. No. Definitely.

[Andre Madrid, VP - Aerospace and Defense Analyst at BTIG]

So so those those engineers were just moved over from one program to the other. No loss there, right, to on a head count basis?

[Sir Peter Beck, Founder, President, CEO and Chair of the Board at Rocket Lab USA]

Correct. Yeah.

[Sir Peter Beck, Founder, President, CEO and Chair of the Board at Rocket Lab USA]

Yeah. No. No. No.

[Andre Madrid, VP - Aerospace and Defense Analyst at BTIG]

Got it.

[Sir Peter Beck, Founder, President, CEO and Chair of the Board at Rocket Lab USA]

They've they've yeah.

[Andre Madrid, VP - Aerospace and Defense Analyst at BTIG]

Excellent. Excellent. Alright. I'll, I'll leave it there. Peter, Adam, thanks so much.

[Sir Peter Beck, Founder, President, CEO and Chair of the Board at Rocket Lab USA]

Thanks, Sanjay.

[Operator]

Alright. Your next, question comes from the line of Matt Akers with Wells Fargo. Matt, your line is now open.

[Matthew Akers, Aerospace & Defense Research Analyst at Wells Fargo]

Hey, guys. Good afternoon. Thanks for the question. I I I wanted to ask

[Matthew Akers, Aerospace & Defense Research Analyst at Wells Fargo]

a couple on the federal budget. I guess one, on Golden Dome, just if you guys are involved in some of the discussions there, is there may be an opportunity on kind of the space layer there? And then I guess the NASA budget was proposed to be cut pretty substantially. I don't think you

[Matthew Akers, Aerospace & Defense Research Analyst at Wells Fargo]

guys have a ton of kind of direct exposure there,

[Matthew Akers, Aerospace & Defense Research Analyst at Wells Fargo]

but just curious if that's a risk if that does end up going through to Congress.

[Sir Peter Beck, Founder, President, CEO and Chair of the Board at Rocket Lab USA]

Yes. Hi, Matt. Good question. So firstly, on the Golden Dome, yes, we intend to be a significant player in there. Mean, already established ourselves as prime contractor as a international security program.

[Sir Peter Beck, Founder, President, CEO and Chair of the Board at Rocket Lab USA]

And, you know, as Adam mentioned, part of the the reason to change the the the structure of the company into the corporation better enables us to address some of these, you know, very important national security programs. So so now I would think we feel feel very good about Golden Dome and the capabilities we have not just in space systems, but within launch and then across the full gambit of opportunities there for sure. And then on the NASA side, you kind of you called it right. We don't have a tremendous amount of NASA work. We always I personally have a bit of a soft spot for those interplanetary missions, so we always like to to go after those.

[Sir Peter Beck, Founder, President, CEO and Chair of the Board at Rocket Lab USA]

And, you know, we continue to be a trusted launch provider for NASA. But yeah. So, you know, NASA doesn't form a tremendous amount of our, pipeline nor our backlog.

[Matthew Akers, Aerospace & Defense Research Analyst at Wells Fargo]

Yes. Got it. All right. Thank you.

[Operator]

Your next question comes from the line of Suji Desilva with ROTH Capital. Suji, your line is now open.

[Suji Desilva, MD & Senior Research Analyst at Roth Capital Partners, LLC]

Hi, Peter. Hi, Adam. Adam, maybe on the financial maybe in the picking question, but the percent of backlog that's recognizable in the next twelve months seems to be trending up on a secular basis. I would have thought if you had more multiyear contracts that would trend down. Am I thinking about that correctly?

[Suji Desilva, MD & Senior Research Analyst at Roth Capital Partners, LLC]

Or maybe you could clarify something.

[Adam Spice, CFO at Rocket Lab USA]

Yes. Well, I mean, the backlog is a bit dynamic. I would say that you know, if you look at the duration of the program, like, take the big like, let's pick, you know, the SBA program, for example, and the the the Globalstar MBA program before that, they they typically have a call it a the meat of the revenue curve for around three years, a little bit of a tail, you know, kind of on the front and back end of that. But the bulk of the revenue recognition is within a three year window. And even more so if you kind of look where the area under the curve even more, you know, it's really concentrated about eighteen months.

[Adam Spice, CFO at Rocket Lab USA]

And this really comes down to, you know, you earn some revenue as you're doing the work to kind of finalize the the, you know, the platform design and and get through some of the early milestones of design reviews and so forth. But the real rev rec bulk comes when you're actually taking possession of materials, like bill of materials, because that's where the majority of the cost and under the the EAC methodology of rev rec, you know, that's really where we get the majority of the revenue recognition. So you'd think like, you know, it'd be like stretchy, a little more stretchy than it is, but it's it's really not. It's much more compressed than you think. So kind of when you think about where we are right now on, for example, SDA, where we announced that program at the, I believe, was the end of q four of of twenty twenty three, we're like, call it, almost six quarters into that.

[Adam Spice, CFO at Rocket Lab USA]

And now we're really kind of heading into the real meat of that rev rec cycle, right? So think of the majority of that revenue recognition is really going to happen now over the next six quarters at most. So you're really the next four quarters are going to be pretty heavy. And then they start to trend down, which is why, you know, we talked about a lot of focus on backlog, which is appropriate. And, you know, we have, all of our focus right now, we've talked the last few quarters about the importance of putting some the next big piece of backlog into

[Adam Spice, CFO at Rocket Lab USA]

that's

[Adam Spice, CFO at Rocket Lab USA]

what we're focused on. And there are several, as Pete mentioned, that we're chasing, including ones that are pretty well known like, obviously the next tranche of FDA is due for submission really, really soon. And we think we're well positioned for participating in that as well as some other programs, commercial and government. So we look, think we're in really good shape there on the Space Systems side. The components business is largely less it's not the really multiyear deals.

[Adam Spice, CFO at Rocket Lab USA]

It's much more kind of in the near term, say twelve to eighteen months. And when you look at the launch business, I mentioned earlier, getting through some of these kind of program on ramp, Gates was really the milestone or the prerequisite to really opening up some really big meaningful opportunities, particularly for Neutron, right? So I think you're going to start that we've kind of knocked down the all the barriers to start really kind of building the that backlog in a more meaningful way. I mean, billion dollars, nothing to be ashamed of, but we think that that has potential to grow significantly now as we've kind of gotten to the next phase of these big satellite programs that we think we're in good shape on and also being on ramp for neutron exposure. So, yeah, it's I think it requires a little bit of patience, but I think people when they look back over history have seen, we've been successful in converting opportunities into backlog and we think we're even more confident now than we've ever been

[Adam Spice, CFO at Rocket Lab USA]

on being able to do that.

[Suji Desilva, MD & Senior Research Analyst at Roth Capital Partners, LLC]

Okay. Adam, that's very helpful. And then, this question is maybe a little further out. Thinking about sort of Neutron and sort of the landing infrastructure strategy longer term, I wouldn't have thought about this for a few years, but it's this AFRL announcement you had today about being a global logistics provider for them. I'm curious, is it more than one ROI barge globally?

[Suji Desilva, MD & Senior Research Analyst at Roth Capital Partners, LLC]

Or what are the elements of kind of reentry and landing for Neutron that require investment, essentially?

[Sir Peter Beck, Founder, President, CEO and Chair of the Board at Rocket Lab USA]

Yeah. Yeah. Good question, Sujit. So it's, you know, it's primarily, you know, just just a barge. It it does have return to launch like capabilities as well.

[Sir Peter Beck, Founder, President, CEO and Chair of the Board at Rocket Lab USA]

And it's cadence increases, then there could be further assets, you know, needed to be deployed in the forms of of additional barges. The the the point to point cargo, you know, look, that program is is really at at the very beginning, you know, of of its development within within the US government. So I think we're very much in the in the experimental phase, and it'll be interesting to see if that turns into, you know, full requirement for an operational capability. But it's it's good to be on that program and and and, you know, working on it early.

[Suji Desilva, MD & Senior Research Analyst at Roth Capital Partners, LLC]

No. Fair enough. Appreciate that, Peter. Thanks.

[Sir Peter Beck, Founder, President, CEO and Chair of the Board at Rocket Lab USA]

Cheers.

[Operator]

Your next question comes from the line of Jason Gerstke with Citi. Jason, your line is now open.

[Jason Gursky, Equity Research Analyst at Citigroup]

Thanks. Hey, Peter, you mentioned in your comments about Minarig that they've got quite a bit of backlog and are struggling with getting shipments out. But what I thought was more interesting about your comments though was how you might utilize that technology in future constellations that you plan to build and operate on your own. So I'm just kind of curious, the strategic rationale behind purchasing Minorik. Was it more for that purpose in enabling your future constellation, or was it more to be a merchant supplier?

[Sir Peter Beck, Founder, President, CEO and Chair of the Board at Rocket Lab USA]

Yeah. Hi, Jason. To be honest, both. And you can see that being consistent across all of our components businesses, Solar, fraction wheels, you know, we we we build good merchant businesses profitable merchant businesses, and we're happy to supply to everybody in the world. But but also when it comes to building our own thing, we we need a reliable scale scaled supply of components for for our own aspirations.

[Sir Peter Beck, Founder, President, CEO and Chair of the Board at Rocket Lab USA]

So, you know, the space industry, as you will know, is is is full of, you know, subscale manufacturing shops in in for these space components. And it and, you know, as we see many of our customers struggle to to build, you know, volume and build quickly because of that. So we're we're really trying to solve two problems here. One is is provide be that merchant supplier at scale for the industry. And then as you point out, when it comes time for us to to build our own stuff, then we already have that capability at scale.

[Sir Peter Beck, Founder, President, CEO and Chair of the Board at Rocket Lab USA]

And and we're just methodically going through every element of the satellite that that we we're gonna need now and in the future. And and when opportunities present themselves, take advantage of that.

[Jason Gursky, Equity Research Analyst at Citigroup]

Okay. Yeah. Fair enough. Thank you. Another one for you, Peter.

[Jason Gursky, Equity Research Analyst at Citigroup]

I'm just kind of curious on transport. Maybe you could step back and provide some context for us all and what you think the unique features of the SDA transport layer kind of envisioned by your customer in the way that you understand it. What's unique about it relative to what, the customer there might be able to go and buy from the commercial market today. So you've got commercial communications providers out there today. Maybe just talk can you provide some context on why they need to continue on and go do SDA tranche you know, additional tranches on the transport layer versus just going and buying commercial?

[Sir Peter Beck, Founder, President, CEO and Chair of the Board at Rocket Lab USA]

Yeah. Yeah. Yeah. Good question. Good yeah.

[Sir Peter Beck, Founder, President, CEO and Chair of the Board at Rocket Lab USA]

Fair question. So you have to think about what SDA is trying to do as as a as a holistic thing. So as you point out, it's it's broken up into transport layers and track layers and custody layers and a whole whole bunch of different layers. But when you stand back and you go, okay. What what what is trying to be achieved here and what elements are critical and what elements are not?

[Sir Peter Beck, Founder, President, CEO and Chair of the Board at Rocket Lab USA]

So you have to think about it about it not just as, you know, a particular satellite, but as a system. And that system needs to be interoperable between all of the the current existing infrastructure and all of the future infrastructure. So look. It's it's a fair question to say, well, can can transport been done be be done commercially? But it but the thing is that it it has to be completely interoperative with all of the the the the, you know, the DOD standards and security, all of the spacecraft that are both on orbit now and plan to be on orbit in the future, and meet all the requirements of the the the entire program.

[Sir Peter Beck, Founder, President, CEO and Chair of the Board at Rocket Lab USA]

And, you know, often with with a lot of space technology, like, everything's a trade, so you end up, you know, having a pretty tight requirement set that you have to solve for. So it it's it's not an unreasonable to think that commercial providers may be able to provide, you know, a transport or some of the transport layer, and I think that's the question that that SDA and the Pentagon are are trying to answer right now. But the the the the the important thing is that it's one layer of many layers. So, you know, our focus here, although, you know, we have a transport layer and we'll continue to bid on transport layers, our real focus is on things like the track layers and and the other layers that that are, you know, out for out for Tinder right now because we, you know, we we think that, you know, those are well, certainly, those are are not, you know, been able to provide from from commercial assets. And, you know, there's there's a there's a lot more to the SDA program than than just that one transport layer.

[Jason Gursky, Equity Research Analyst at Citigroup]

Right. And that's that's a perfect segue into my final question, which was about the pipeline. As you look at your pipeline for Constellation builds, and I would consider this transport layer that you're working on now to be a Constellation build. Do you think you're more likely to see government constellation builds? Like the next announcement comes along, are we likely to see more government wins from you all?

[Jason Gursky, Equity Research Analyst at Citigroup]

Or are you trying to balance this out and we could very well see a commercial one? Just kind of curious how you're going to market at this point. Thanks.

[Sir Peter Beck, Founder, President, CEO and Chair of the Board at Rocket Lab USA]

Yeah. Yep. Yep. Well, I mean, so not to sound at all arrogant, but we have the luxury of picking and choosing the kind of work that that we want to go after and the things that we think are strategic for us as as we think about our future. And that is a mix of both government and and commercial, both in in kind of either smaller numbers of of of satellites or small small volume constellations that we think are strategic technologies or things that that we want to do, but also for the also large scale.

[Sir Peter Beck, Founder, President, CEO and Chair of the Board at Rocket Lab USA]

And I would say that the majority of the effort within within the BD team and and within the senior management team are really focused on, you know, these much, much larger constellations, partly because that's where we we want to go. But also, we've we've kind of reached the maturity and the scale now that that we we really can competitively go after those. You know, as as we've talked about on this call, we we we're very, very vertically integrated with a lot of the really pain point satellite components at scale. And we've demonstrated we can do really, really technically difficult missions, and we've demonstrated that we can be a prime for a net for financial security projects. So, you know, I'd say that that that that we've really kind of, you know, moved up a flight of stairs on on all of that.

[Sir Peter Beck, Founder, President, CEO and Chair of the Board at Rocket Lab USA]

And, you know, the opportunities that we're looking for are much more, you know, larger and and needle moving opportunities, but both across commercial and and government. So I hope that answers your question.

[Jason Gursky, Equity Research Analyst at Citigroup]

Great. That's helpful. Appreciate it.

[Operator]

Your next question comes from the line of Michael Leshock from KeyBanc Capital Markets. Michael, your line is now open.

[Michael Leshock, Vice President at KeyBanc Capital Markets]

Hey. Good afternoon, everyone. I want to stick with the satellite constellation topic, and you had mentioned the potential for government contracts that could be to build the entire satellite constellation. How do you think about prioritizing that type of work versus building your own constellation first?

[Sir Peter Beck, Founder, President, CEO and Chair of the Board at Rocket Lab USA]

Yeah. Well, I mean, that is a good that is a good question and something that that we talk about a lot. But, you know, the the most important thing for us is is to build a, you know, a large scalable profitable company. So, you know, we're we're we're not about to embark on on huge r and d projects that that that that kind of, you know, would would would, you know, make that a much more far out goal. So so the answer to the question is probably not a very good answer is is that we balance that.

[Sir Peter Beck, Founder, President, CEO and Chair of the Board at Rocket Lab USA]

Right? We we look at those opportunities and, you know, I can say that everything we've done to date, you know, leads us to that point. And, you know, when when we when we have a, you know, full conviction and thesis that we can talk about around what kind of constellation that that we intend to go after, you know, you you really have to have that that that extremely well backed because, you know, at at at that point, know, you're committing significant resource to, you know, to go after those kinds of things. So yes. I mean, like I say, the focus is on on on strengthening the company and and, you know, we we you know, we're moving as as rapidly as we can into into into constellations and where we think is important, but we're not gonna do that at the at the cost of, you know, the security of the business.

[Michael Leshock, Vice President at KeyBanc Capital Markets]

And then shifting to Archimedes, how long are you targeting that engine to burn for for a full launch? And and maybe what's the duration of the hot fires that you're doing today relative to that full burn expectation?

[Sir Peter Beck, Founder, President, CEO and Chair of the Board at Rocket Lab USA]

Yeah. So, I mean, a full duration second stage, you know, upper, you know, burn profile is is on the order of sort of five minutes. And, you know, we we were targeting the the the testing right now. It's it's it's really all about all of the startup and shutdown transients and all of those things. One once you reach thermal equilibrium, you know, when the engine is just running at thermal equilibrium, you you're not learning anything because everything is is in a steady state.

[Sir Peter Beck, Founder, President, CEO and Chair of the Board at Rocket Lab USA]

You're just burning propellant at that point. So our focus is is not been on big long durations. Our focus has been on all the operating conditions that we need to that we need to meet, especially on a reusable launch vehicle when when you come in for landing. One of the the more challenging things are, you know, your propellants are hot, and they're at different pressures. So that's a a far more challenging environment to to be able to reignite an engine than than, you know, a steady state, you know, burn.

[Sir Peter Beck, Founder, President, CEO and Chair of the Board at Rocket Lab USA]

So that that that's really been our focus.

[Michael Leshock, Vice President at KeyBanc Capital Markets]

All right. Thank you. I appreciate the color.

[Operator]

Your next question comes from the line of Erik Rasmussen with Stifel. Erik, your line is now open.

[Erik Rasmussen, Vice President at Stifel Financial Corp]

Yeah. Thank you for taking the questions. Maybe just circling back with mine, Eric. I remember in the press release or it seemed like, you know, the the deal was contingent on, I guess, acceptable terms to Rocket Lab. And it sounds like in your prepared remarks, seem a lot more comfortable on closing that transaction.

[Erik Rasmussen, Vice President at Stifel Financial Corp]

So what are there any sort

[Erik Rasmussen, Vice President at Stifel Financial Corp]

of sticking

[Erik Rasmussen, Vice President at Stifel Financial Corp]

points remaining to closing this deal at this point?

[Sir Peter Beck, Founder, President, CEO and Chair of the Board at Rocket Lab USA]

Yeah. Hey, Eric. I'll I'll make a few comments, Adam probably have better ones. But, you know, it there's it's have to go through a whole process in in Germany, and and, you know, that that that that process can can take some time. And, you know, that that that that's probably the, you know, the longer the longer pole in the in the tent, and it's it's not really a process that we have much much kind of control over.

[Sir Peter Beck, Founder, President, CEO and Chair of the Board at Rocket Lab USA]

The the bankruptcy laws and stuff are are are different in in Germany than than than The States. But I don't know, Adam, you might have a better comment.

[Adam Spice, CFO at Rocket Lab USA]

No. You're exactly right. It all comes down to regulatory, and there's a couple of regulatory processes that you got to get through. But the first one is really get through the bankruptcy the bankruptcy process over there in Germany, which there's a court date that's scheduled. And so things are progressing.

[Adam Spice, CFO at Rocket Lab USA]

I think we've always had, you know, confidence where kinda with our deal that we have with the, you know, with the the the primary lender here. And that's why we, you know, we have confidence to kind of in announcing the deal. So everything seems to be on track. Mean, I think the difficult thing now is trying to predict kind of how the regulatory process will the timeline for that. But we feel good about where we're at because our we have a committed plan to, as Pete mentioned earlier, to invest in that business in Germany.

[Adam Spice, CFO at Rocket Lab USA]

There's great technology. There's great intellectual property. We're going to continue to invest in it. We're going to have what we believe to be a thriving merchant business, supplying the broader ecosystem. So yes, we have no reason to be concerned at this point.

[Erik Rasmussen, Vice President at Stifel Financial Corp]

Great. And then maybe on the satellite, since winning since I guess announcing that spacecraft, what sort of feedback or interest have you received? And and then maybe any updates on progress thus far, you know, maybe timing of, you know, bringing that spacecraft to to market?

[Sir Peter Beck, Founder, President, CEO and Chair of the Board at Rocket Lab USA]

Yeah. I mean, we we we have, you know, strong interest from from commercial and and government constellation providers. And and the the, you know, the flight of light really is is the, you know, the the gold standard for, you know, high high volume, high cadence kind of deployments of of of constellations. Also useful for ourselves, of course. But, you know, that was that was really a a a product that was that was developed and driven by a set of customers.

[Erik Rasmussen, Vice President at Stifel Financial Corp]

Okay. And maybe switching gears on on the NSSL program. Obviously, you know, a big opportunity there. You received a $5,000,000 past quarter, but at what point I mean, I think you've gone through a pretty rigorous process just to be on ramp for that. But at what point can we expect to see or are you expecting to be able to book backlog for that?

[Erik Rasmussen, Vice President at Stifel Financial Corp]

Is it contingent on that first flight? Or or what are the milestones that, you know, we can potentially look for that maybe get more excited about that that program?

[Sir Peter Beck, Founder, President, CEO and Chair of the Board at Rocket Lab USA]

Yeah. Totally. So, you know, the the team now works with us for the next, you know, few years on on all of the the elements of mission assurance and everything that they need for these critical missions. And, yes, you know, we are eligible for task orders after the first flight. And but but between now and then, as you can see, there's already task orders that that that that occur for for, you know, various elements of of, you you know, getting mission assurance and mission ready to be able to to fly these kinds of payloads.

[Sir Peter Beck, Founder, President, CEO and Chair of the Board at Rocket Lab USA]

You know, truly, it's it's after first flight, we're eligible for the bid for those task orders. The phase three set of task orders go through to 2029.

[Erik Rasmussen, Vice President at Stifel Financial Corp]

Great. So really, they're getting to the pad is an OP milestone. And then maybe just finally on Electron. I think, Adam, you talked about higher ASPs. Q1 obviously was lower, but you expect to see an improved cadence.

[Erik Rasmussen, Vice President at Stifel Financial Corp]

Would you expect though the year to end at a much higher rate or just slowly pick up from here in terms of an ASP? So and obviously, there's some lumpiness that you've talked about with some of these volume deals.

[Adam Spice, CFO at Rocket Lab USA]

Yeah. Right now, the backlog would basically imply a step up in both cadence and ASP progressively as we move through the year. So I would expect a high watermark on ASP would be in the Q4 period. So we'll see a progression. It's better in Q2 than it was in Q1.

[Adam Spice, CFO at Rocket Lab USA]

It will be better again in Q3 and we'll be, you know, we'll kind of hit a high watermark in Q4. And I expect that to be both case for both the ASP and for Cadence. And that's really what kind of gets us to that target margin that we talked about. I mean, just to be clear, when we've talked over the past several years, like, well, when we get to a certain point where we're approaching a couple of launches per month or six per quarter, that's kind of our goal to get to our target margins in the 40s. And I think everything that we're seeing right now is consistently kind of playing getting us towards that.

[Adam Spice, CFO at Rocket Lab USA]

So I think we're pretty pleased with how things have progressed. It's pretty much almost exactly the plan.

[Erik Rasmussen, Vice President at Stifel Financial Corp]

Great. And that's still with the F2 20 plus launches for the year?

[Adam Spice, CFO at Rocket Lab USA]

Correct.

[Erik Rasmussen, Vice President at Stifel Financial Corp]

Okay. Thank you.

[Operator]

Your next question comes from the line of Andre Schroeder with Cantor Fitzgerald. Andre, your line is now open.

[Andres Sheppard, Analyst at Cantor Fitzgerald]

Hey, everyone. Good afternoon. This is Andre Shepherd. Sorry about that. Hey, Peter.

[Andres Sheppard, Analyst at Cantor Fitzgerald]

Hey, Adam. Congratulations on the quarter and all of the accomplishments. I think most of our questions have been asked by now. Wanted to maybe get your thoughts, with the international state budgets growing, how do you expect this can benefit Rocket Lab? Where do you see the most demand from international coming across launch satellites and components?

[Andres Sheppard, Analyst at Cantor Fitzgerald]

Thank you.

[Sir Peter Beck, Founder, President, CEO and Chair of the Board at Rocket Lab USA]

Hi, Andre. So primarily Europe and, you know, Electron has done incredibly well in Japan. So, you know, the Japanese market is like a second biggest market for for Electron. But as we think about larger opportunities and programs, I think it really sits with the allies in Europe.

[Andres Sheppard, Analyst at Cantor Fitzgerald]

Got it. Okay. That's helpful. And maybe just as a quick follow-up and again a lot of our questions have been asked. But and I realize I think we touched on this last quarter as well.

[Andres Sheppard, Analyst at Cantor Fitzgerald]

But as we're getting closer and closer to Neutron, do you have maybe a better sense now how you foresee your revenue mix shifting? As I look at the backlog, there seems to have been an increase in, Launch Systems over Space Systems from the last, reported backlog. As we're getting closer to Neutron, how quickly do you foresee that shifting towards launches over Space Systems? Or how long would that transition take, I guess, in your opinion? Thank you.

[Adam Spice, CFO at Rocket Lab USA]

Yes. I'll take a pass at that, Pete. I mean, if you look at our back, I mean, we're dealing with such large opportunities right now that it's going to be very volatile. I don't think you're going to be able to predict a smooth line or extrapolate a smooth line. One large constellation win will skew everything much more quickly and dramatically back to a balance of maybe more than two thirds of our revenue from Space Systems.

[Adam Spice, CFO at Rocket Lab USA]

But you'll also see if as we now been on ramp to some of these programs sell, every Neutron launch that we book, if you look at our target price for Neutron in the 50,000,000 to $55,000,000 ASP range, that's going to move the needle as well. And if you can get some bulk buys going on that, that could also skew things so that we could be more than 50% of our backlog could be launched at some period of time. So it really depends. It's so hard to predict. And the good thing is we've got, you know, multiple irons of the fire, and both launch and space systems have almost equal opportunity to kind of really move the needle.

[Adam Spice, CFO at Rocket Lab USA]

I think because right now space systems has become a dominant piece of the revenue mix because of the size of those programs we've been chasing and the breadth of that business versus today having Elektron, which is a phenomenal product, getting to our target margins. So that's really gone well. But at $8,000,000 8 point 5 million dollars 9 million dollars doesn't it take a lot more to kind of skew things in its in the launch's favor, but now Neutron resets that table. So I I think it's hard to hard to call. It's gonna be very volatile, but the good thing is, you know, we see that trying to trying to see which one's gonna grow faster and move the needle the most is a great problem to have because they both have strong tailwinds to them.

[Andres Sheppard, Analyst at Cantor Fitzgerald]

That's very helpful, Adam. Really, really appreciate that color and congrats again to

[Andres Sheppard, Analyst at Cantor Fitzgerald]

the team. I'll pass it on.

[Operator]

And your final question comes from the line of Ron Epstein with Bank of America. Ron, your line is now open.

[Alexander Preston, Equity Research Associate - Aerospace & Defense at Bank of America Merrill Lynch]

Hey, guys. This is Alex Preston on for Ron.

[Adam Spice, CFO at Rocket Lab USA]

Hey, Alex.

[Alexander Preston, Equity Research Associate - Aerospace & Defense at Bank of America Merrill Lynch]

Just one quick one for me to close this out. I'm thinking about the NSSL on ramp for Neutron. I'm curious if you think how you're thinking about potentially transitioning to lane two awards in the future, the more demanding launches? Is it a matter of just demonstrating flight heritage over a number of missions? Or do you incremental capabilities you'll need Neutron to demonstrate?

[Sir Peter Beck, Founder, President, CEO and Chair of the Board at Rocket Lab USA]

Yeah. Thanks for the question, Alex. I wish it was that easy. So, you know, the other line requires you to have a launch site at both Vandenberg and at The Cape. It's very explicit about that.

[Sir Peter Beck, Founder, President, CEO and Chair of the Board at Rocket Lab USA]

And be able to meet all of the mission requirements for all of the space launch, meaning that you have to have a vehicle that can lift, you know, sort of over 30 tons. So so the the, you know, cost of admission to get into that lane is extremely high, hence, the reasons why, historically, all of those programs have been, you know, quite heavily subsidized in r and d contracts and whatnot and sustaining contracts because you have to hold and maintain a tremendous amount of infrastructure, you know, two pads and and and a heavy lift vehicle. So unless the rules change, you know, I don't think I don't think we'll we'll we'll graduate up into there. But to be honest with you, that this is one of the reasons why you need you need to dial in space force created this extra lane is they saw that there there's a huge, you know, lost opportunity with some medium launch vehicles in development and wanting to, you know, make sure they take advantage of those. And and it'll be really interesting to see in time how many of those missions, you know, fall from from the various lanes, drop down into the lower lanes that that, you know, much faster and much more affordable to deliver.

[Alexander Preston, Equity Research Associate - Aerospace & Defense at Bank of America Merrill Lynch]

Got it. Thanks, guys. Really appreciate it.

[Sir Peter Beck, Founder, President, CEO and Chair of the Board at Rocket Lab USA]

Alright.

[Operator]

Thank you so much. This does conclude our Q and A section for today. With that, I will hand it back over to Peter Beck for our closing remarks.

[Sir Peter Beck, Founder, President, CEO and Chair of the Board at Rocket Lab USA]

Cheers. Thanks very much, everybody. And before we close out for today, here are some of upcoming events and conferences that the team will be attending. We look forward to sharing more exciting news and updates with you there. Otherwise, thanks very, much for joining us.

[Sir Peter Beck, Founder, President, CEO and Chair of the Board at Rocket Lab USA]

That wraps up today's call, and we look forward to speaking with you about the exciting project progress we're making at Rockaway again soon. Thanks. Bye.

[Operator]

Thank you so much for joining us today. This does conclude our conference call. You are now free to disconnect. Thank you.

Participants

Executives

• Murielle Baker, Senior Communications Manager
• Sir Peter Beck, Founder, President, CEO and Chair of the Board
• Adam Spice, CFO

Analysts

• Edison Yu, Analyst at Deutsche Bank
• Gautam Khanna, Managing Director at TD Cowen
• Ryan Koontz, Senior Analyst at Needham & Company
• Andre Madrid, VP - Aerospace and Defense Analyst at BTIG
• Matthew Akers, Aerospace & Defense Research Analyst at Wells Fargo
• Suji Desilva, MD & Senior Research Analyst at Roth Capital Partners, LLC
• Jason Gursky, Equity Research Analyst at Citigroup
• Michael Leshock, Vice President at KeyBanc Capital Markets
• Erik Rasmussen, Vice President at Stifel Financial Corp
• Andres Sheppard, Analyst at Cantor Fitzgerald
• Alexander Preston, Equity Research Associate - Aerospace & Defense at Bank of America Merrill Lynch