Rocket Lab Q2 2026 Earnings Report

Rocket Lab EPS Results

• Actual EPS: -$0.08
• Consensus EPS: -$0.06
• Beat/Miss: Missed by -$0.02
• One Year Ago EPS: N/A

Rocket Lab Revenue Results

• Actual Revenue: $234.07 million
• Expected Revenue: $231.62 million
• Beat/Miss: Beat by +$2.44 million
• YoY Revenue Growth: N/A

Rocket Lab Announcement Details

• Quarter: Q2 2026
• Date: 8/10/2026
• Time: After Market Closes
• Conference Call Date: Monday, August 10, 2026
• Conference Call Time: 5:00PM ET

Rocket Lab (NASDAQ:RKLB) is an aerospace company that provides launch services, spacecraft, and space systems for commercial and government customers. The company’s primary launch vehicle is Electron, a small-lift orbital rocket designed to deploy small satellites and rideshare payloads to low Earth orbit. Rocket Lab also develops and manufactures the Rutherford engine, noted for its electric-pump-fed design and additive-manufactured components, which powers Electron and supports the company’s propulsion capabilities. Beyond launch, Rocket Lab offers mission management and dedicated launch integration services to support rapid and responsive access to space.

In addition to rockets and engines, Rocket Lab produces the Photon spacecraft platform, a configurable satellite bus and kick stage used to deliver payloads to precise orbits and to support standalone satellite missions. The company has expanded into satellite manufacturing and space systems, delivering end-to-end solutions that combine vehicle integration, spacecraft bus development, and mission operations. Rocket Lab’s product and service set is aimed at serving constellation operators, scientific missions, and government and defense customers seeking tailored launch and mission solutions.

Founded in New Zealand in 2006 by Peter Beck, who remains the company’s chief executive, Rocket Lab has grown into a multinational operator with manufacturing and operations in the United States as well as launch facilities in New Zealand. The company maintains a presence in Long Beach, California, for U.S. operations and manufacturing and operates launch complexes that enable both hemispheric access and responsive launch cadence for a global customer base. Rocket Lab completed a public listing in 2021 and continues to pursue growth in commercial and national security markets.

Looking forward, Rocket Lab is developing larger and reusable launch systems to address medium-lift market needs and increase launch cadence, while continuing to build its satellite and spacecraft services business. The company positions itself as an integrated provider of launch and space infrastructure, emphasizing rapid deployment, vertical integration in manufacturing, and mission-tailored solutions for a diverse set of international customers.

Rocket Lab Q2 2026 Earnings Call Transcript

Key Takeaways

• Positive Sentiment: Rocket Lab reported record Q2 revenue of $234 million, up 62% year over year, with adjusted EBITDA loss of $8.8 million—better than guidance. Q3 revenue is forecast at $250 million-$265 million.
• Positive Sentiment: Demand remains strong, with more than $1 billion in launch and Space Systems contracts signed during Q2 and after quarter-end, including a $266 million Space Force HASTE contract and a $397 million Flatellite satellite program. Backlog reached a record $2.36 billion.
• Positive Sentiment: Neutron development is advancing toward delivery to the launch pad in Q4 2026, supported by more than 400 Archimedes engine hot fires and early production of flight engines. Management said customer demand is already high and indicated Neutron pricing could rise as launch capacity remains constrained.
• Positive Sentiment: The proposed acquisition of Iridium, expected to close in mid-2027 pending shareholder and regulatory approval, would add a 66-satellite communications constellation, more than 2.5 million subscribers, and roughly $870 million in annual revenue. Rocket Lab expects the combination to accelerate growth in IoT, positioning, defense, aviation, and other space applications.
• Negative Sentiment: Cash consumption is increasing as Rocket Lab funds Neutron development, infrastructure, and follow-on vehicle production; Q2 free cash flow was negative $110.1 million and operating cash flow was negative $84.1 million. Management expects elevated negative free cash flow to continue, with cash-flow positivity potentially arriving 18-24 months after Neutron’s first successful test flight.

Presentation

[Operator]

I would now like to hand the conference over to your speaker today, Muriel Baker.

[Muriel Baker, Director of Corporate and Launch Communications at Rocket Lab]

Hello, and welcome to today's conference call to discuss Rocket Lab's second quarter 2026 financial results, business highlights, and other updates. Before we begin the call, I would 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 of 1995. 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. Except as required by law, the company does not undertake any obligation to update these statements.

[Muriel Baker, Director of Corporate and Launch Communications at Rocket Lab]

Our remarks and press release today also contain non-GAAP financial measures within the meaning of Regulation G, enacted by the SEC, and 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 Founder and Chief Executive Officer, Peter Beck, as well as Chief Financial Officer, Adam Spice. They will be discussing key business highlights, including updates on our Launch Services and Space Systems programs, as well as our pending acquisition of Iridium Communications. We will discuss financial highlights and outlook before we finish by taking questions. With that, let me turn the call over to Peter.

[Peter Beck, Founder and CEO at Rocket Lab]

It has been another exceptional quarter for Rocket Lab with some great wins after the close. We achieved a record $234 million in Q2 revenue, up almost $90 million or 62% versus the same quarter last year. That is a $34 million increase over last quarter's record revenue. For Launch Services, demand is extreme. In Q2 and since the end of the quarter closed, we have signed more than $437 million in bookings for Electron, HASTE, and Neutron. This includes a record $266 million contract for up to 18 suborbital missions for the U.S. Space Force, our largest launch contract ever. Also, we have seen a massive surge in Space Systems contracts with more than $581 million signed in Q2 and post-quarter.

[Peter Beck, Founder and CEO at Rocket Lab]

We ended the quarter with $2.36 billion in backlog. Across Launch Services and Space Systems, we have signed more than $1 billion in new contracts across Q2 and the period since the quarter closed. It was also a milestone quarter for strategic acquisitions, having closed Mynaric and Motiv, and of course, announcing our intentions to acquire Iridium, which will accelerate our future in-space applications and evolve Rocket Lab into a fully integrated space powerhouse. So, with that, welcome to the beginning of our new space applications era. Our pending Iridium acquisition is a strategic move that will combine Rocket Lab's launch capability and satellite manufacturing with Iridium's global satellite communications network and rare spectrum. In short, Rocket Lab will become a self-launching tier 1 space power, delivering critical communications capability to millions of users worldwide. For years, we have talked about the space value chain in three key verticals.

[Peter Beck, Founder and CEO at Rocket Lab]

The first is access to space, and we have that with launch. The second is the hardware to do things in space once you are there. That is the satellites and their components, and we have this too. The third and final vertical is space applications, the entire reason for going to space in the first place. This is part of the space economy that provides data services to millions of people on Earth and delivers strong recurring revenue. With Iridium, Rocket Lab will have all three of these verticals. I have long since said that the most successful space companies will be the ones that have the keys to space, i.e., can build and launch their own satellites. Rocket Lab is one of only two companies capable of this now. By acquiring Iridium, we will accelerate our entrance into the space applications market.

[Peter Beck, Founder and CEO at Rocket Lab]

It will take a decade or more to build out a constellation from scratch. With Iridium, we are starting with a constellation of 66 satellites relied upon by more than 2.5 million subscribers and delivering more than $870 million in annual revenue this past year. That is an incredibly strong foundation on which we intend to build. We will not simply continue Iridium's network. We will expand upon it and scale it into untapped markets and pioneer new space-based services. Since the transaction is not yet closed, we are still only on the integration and growth planning stages. There are, however, some obvious areas to focus on, and these are aligned with the growth plans that Iridium has already shared. That includes expanding capabilities in IoT, direct to device, and advanced PNT, defense and national security, as well as aviation and marine safety.

[Peter Beck, Founder and CEO at Rocket Lab]

We can also introduce efficiencies and streamline the deployment of new infrastructure by building and launching our own spacecraft, limiting the costs and risks associated with third parties. We will fast-track our ability to deliver new and advanced capabilities. It is through these growth areas that Rocket Lab will put Iridium spectrum to more effective use, extracting substantially greater capacity and throughput from the same finite spectrum allocation. We are immensely excited at what the future holds once Iridium is part of the Rocket Lab family. For now, we are steadily working through the customary closing conditions, including approval of Iridium stockholders and all the regulatory review processes. The transaction is expected to be completed in mid-2027. To the extent that we are able, we look forward to sharing updates throughout that process. Okay, onto some Space Systems updates.

[Peter Beck, Founder and CEO at Rocket Lab]

Q2 and the weeks after saw us awarded significant contracts across Space Systems, including a $397 million contract to build and launch multiple Flatellite spacecraft for the Space Force Space-Based Airborne Moving Target Indicator program. This program is a high priority for the Department of Defense, and it seeks to establish a satellite network to track aircraft, missiles, and airborne threats globally. In another example of our end-to-end space strategy bearing fruit, Neutron will be launching this mission. Flatellite is our high-performance, low-profile spacecraft designed for rapid production and optimized for launch, enabling us to deploy large volumes from Neutron and from other launch vehicles. There has been significant interest in Flatellite from commercial and government customers since we first announced it last year, so it's exciting for it to make its debut with such an important program. On to the next contract win.

[Peter Beck, Founder and CEO at Rocket Lab]

We signed two deals totaling more than $160 million to build three geostationary satellites, including a prime contract with the Space Systems Command to build two GEO satellites for space domain awareness. What's more, they will incorporate our Heimdall payload from our recently acquired company, GEOST, once again highlighting the success of our vertical integration strategy. Rocket Lab is no stranger to building satellites for low Earth orbit and interplanetary missions, but these contracts are our first step into the government geostationary satellite market. It's an exciting expansion. We don't just win contracts; we execute on them. There's no better mission that demonstrates that than our record-breaking results for the VICTUS HAZE mission in Q2. The mission from Space Force was clear: launch an Electron to orbit in just 24 hours. We did this in 16 hours and 42 minutes, a new record.

[Peter Beck, Founder and CEO at Rocket Lab]

We also designed and built the satellite that it launched. The Space Force gave us 72 hours to commission that spacecraft on orbit. We did it in 38 hours. Then we had 84 hours to track, chase, and photograph a non-cooperative satellite. We did it in less than 59 hours. VICTUS HAZE was the first time that the Space Force had ever seen a single prime contractor deliver the rocket, the spacecraft, and the orbit operations for the same tactically responsive space mission. For Rocket Lab to deliver all three, and with record-breaking results, demonstrates the advanced capabilities that we're delivering to The Pentagon at a time when space is a key strategic priority. And finally, Rocket Lab is very clearly a space leader in the U.S., but recently we deepened our roots in Europe with the acquisition of Mynaric.

[Peter Beck, Founder and CEO at Rocket Lab]

Whenever Rocket Lab makes an acquisition, we don't just carry on running it. We streamline it, introduce efficiencies, scale production, and in many cases, introduce new capabilities. We're planning to do just that with the official establishment of Rocket Lab Germany. There's a real opportunity here for us to establish a regional hub for constellation class manufacturing as well as full-scale spacecraft assembly, integration, and test. This will enable Rocket Lab to serve commercial, civil, and defense space programs as a domestic European provider. A growing presence there also represents an opportunity to address Europe's launch deficit by bringing a domestic mission-tested launch partner to the region to eliminate space access bottlenecks. Europe faces glaring gaps across both launch and spacecraft manufacturing. Rocket Lab Germany aims to address these directly, providing the region with new domestic strength in a rapidly evolving new space era.

[Peter Beck, Founder and CEO at Rocket Lab]

That wraps up the Space Systems for the quarter. Let's move on to launch. There's been huge demand driving record numbers across new contracts and launch backlog, more than $437 million in Q2 and post-quarter, and 26 new launches that grew our backlog to 90+ launches after the quarter, our highest in history. Operationally, Electron and HASTE continue to lead the industry on small launch. We're at 13 launches this year with 100% mission success and on track to beat last year's launch tally too. NASA has signed on for three Electron launches across two missions next year. Commercial constellation customer iQPS has signed on for another three launches. This is the third time they've done a bulk buy in less than a year, taking their total number of launches with us to 18.

[Peter Beck, Founder and CEO at Rocket Lab]

We've had a confidential defense prime sign up for a pair of HASTE launches in 2027. HASTE rapid repeatable flight cadence was the clincher for that deal. A suborbital launch capability anchors our largest launch contracts to date, a $266 million contract from the Space Force for up to 18 missile defense launches. We bid out legacy defense primes for this contract, and it's our second multi-year, multi-launch Department of Defense deal for suborbital missions in five months. These launches will mostly fly out of our new launch location in Kodiak, Alaska, which opens up Pacific access for missile defense testing for our government partner. That's now six Rocket Lab launchpads across three launch sites, giving us unmatched geographical flexibility for all mission types. Speaking of our new launch location, it's time to introduce GHOST. We've mastered the art of building launch sites. Now we're making them deployable worldwide.

[Peter Beck, Founder and CEO at Rocket Lab]

Our two new pads in Alaska will be deployed using our GHOST containerized deployable launch site technology. Electron and HASTE revolutionized small orbital launch and hypersonic testing. Now we're making it easier to deploy them wherever they're needed most, whether that's for missile defense testing or sovereign orbital launch capability. With GHOST, we've delivered the rocket, launch infrastructure, ground support, and range control systems in shipping containers, establishing launch capability in new locations on rapid timelines. It's easy to promise mobile or deployed launch systems. It's quite another to have the proven rockets, launch sites, and contracts to back them up. Once again, Rocket Lab is not just talking about it. We're delivering the real capability for real missions. Now on to Neutron. It's been another really big quarter of testing and integration for Neutron. Every part of the vehicle has now seen significant testing.

[Peter Beck, Founder and CEO at Rocket Lab]

As with any complex development program, we've had to tweak a few things along the way, but we're moving now into final checkouts and assembly of all of our flight hardware before integrating them at the pad. First up, stage one. We've pulled the new barrels and domes off the AFP for the stage one tank and are moving those into assembly. For the interstage, new panels are also into the flight assembly after qualification load tests were completed recently. Production currently lines up with our target delivery of Neutron to the pad in Q4 2026. While the window for an end-of-year launch is narrowing, the work we're doing now is about risk trading, balancing the timing of our first launch against how quickly and seamlessly we can scale our 10th launch.

[Peter Beck, Founder and CEO at Rocket Lab]

Our focus is on the bigger picture and making sure that when Neutron flies, it enters service as a system ready for full-scale production and high cadence launch. For stage two, the team is completing the install of flight avionics and fluid systems before it is out the door to Launch Complex 3. Once it arrives in Virginia, we will be doing the integrated fluids testing and running the flight avionics suite to validate stage two's end-to-end performance before we add the Archimedes vacuum engine. That way, we de-risk some of the elements early and avoided added time to the schedule. The next section of the rocket at LC-3 will be Neutron's thrust module. The auxiliary tanks have been installed, and the fluid systems and avionics integration is finishing up now. Similar story here as well.

[Peter Beck, Founder and CEO at Rocket Lab]

After the install of the fluids and the avionics, we will be taking the thrust module through the integrated systems test on the pad. Because the module is the only physical interface between the launch vehicle and the launch mount, running these tests before we integrate the thrust module with stage one lets us de-risk how the full vehicle will interact with the pad once everything else arrives. Down at Stennis, we are heading off into the final stretch of Archimedes engine testing. We have completed more than 400 hot fires across both stage one engines and stage two vacuum engines. Where early testing was all about the fundamentals like power level, mixture ratio control, and achieving duration, now it is about durability and the stuff that really matters for a reusable engine.

[Peter Beck, Founder and CEO at Rocket Lab]

We have been intentionally running engines for extended time to prove its margins beyond what they need for a successful flight, as well as repeated cycles to understand how durable the engines are after multiple restarts and uses. With confidence in the engine, we are already into production with the full engine set for Neutron's first launch. Once we formally complete qualification, those flight engines will go straight into an acceptance test program at Stennis before they are sent up to LC-3 for integration with the thrust module. Now to Hungry Hippo. The team has been busy integrating control surfaces, avionics, and fluid systems, and its thermal protection system. Soon, we will be getting into pre-flight testing with the most innovative part of Neutron. Once that is done, Hungry Hippo is essentially finished and ready for launch.

[Peter Beck, Founder and CEO at Rocket Lab]

The next step will be to mate it to the interstage when it arrives, and then that will bring us one step closer to having a full vehicle at the launch pad. Out of development and into new contracts. As we race closer to first launch, we are seeing huge demand for Neutron's early flights. Like I have mentioned earlier, we have been newly awarded a dedicated Neutron launch contract for the Space Force for their Space-Based Airborne Moving Targets program. This mission is a strong indicator of the trust that the government has in Neutron to support the most critical national security programs. Then on the commercial side, today we announced a dedicated launch for Kepler Communications to deliver their next set of satellites to low Earth orbit. That mission will expand the capacity of their network with on-orbit compute, optical comms, and hosted payloads.

[Peter Beck, Founder and CEO at Rocket Lab]

It is the first time Kepler has booked an entire rocket for their constellation rather than rideshare. Again, another strong signal of the expectation for Neutron to become the industry's alternate ride to space for medium-lift missions. To understand the momentum behind Neutron, you have to look at the broader launch landscape today. Launch has never been so constrained. The Pentagon is accelerating procurement for its top priority programs, like we have seen with the NSSL Lane 1 tripling its ceiling from $5.6 billion-$17 billion. Military spending in Europe has increased, and sovereign launch remains a hot topic globally, too. The truth is that if you want to book a launch now, or especially after 2029, the options are extremely limited. Rocket Lab is uniquely positioned in this sense.

[Peter Beck, Founder and CEO at Rocket Lab]

We have a proven track record with Electron and HASTE, and customers know we develop and scale reliable launch vehicles, which is why they are coming to us now and locking in Neutron slots early. Neutron is going to help unblock the industry's bottleneck, giving operators a reliable capacity that they need for years to come. That wraps up the operational highlights. Now over to Adam for the financial overview and outlook.

[Adam Spice, CFO at Rocket Lab]

Thanks, Pete. Second quarter 2026 revenue was a record $234 million, which was within our prior guidance range and reflects significant year-over-year growth of 62% and 16.8% sequentially, driven by strong contribution from both business segments. Our Space Systems segment delivered $189.5 million in the quarter, reflecting a sequential increase of 38.6%. This growth was primarily driven by increased contribution from our satellite manufacturing business, along with initial contribution from our Mynaric acquisition, which closed within the quarter. Our Space Systems business continues to perform exceptionally well and provides comforting diversification alongside our robust, but at times lumpy launch business. Meanwhile, our Launch Services segment generated revenue of $44.6 million this quarter, representing a 30% decrease compared to the previous quarter, despite completing a similar number of launches. This decline is primarily attributable to a shift in the revenue mix between our point-in-time Electron business and our over-time HASTE business.

[Adam Spice, CFO at Rocket Lab]

This quarter was somewhat atypical for our launch operations as we launched HASTE missions for which a significant portion of revenue had already been recognized in prior periods under the over-time accounting method. In contrast, revenue from Electron missions is recognized at the point of time of launch. Now turning to gross margin. GAAP gross margin for the second quarter was 36.1%, above our prior guidance range of 33%-35%. Non-GAAP gross margin for the second quarter was 41.5%, which was also above our prior guidance range of 38%-40%. Key drivers to gross margin this quarter include a shift mix within our Space Systems business to our slightly lower gross margin satellite platforms business and initial contributions from our Mynaric acquisition, which, similar to prior acquisitions, will need some time to benefit from integration synergies and applying the Rocket Lab operating system and its related scale advantages.

[Adam Spice, CFO at Rocket Lab]

Additionally, we recorded a non-recurring benefit from tariff refunds, which was largely offset by an inventory reserve against our Neutron Flight 2 launch vehicle. Relatedly, we ended Q2 with production-related headcount of 1,688, up 240 from the prior quarter. Turning to backlog, we ended Q2 2026 with approximately $2.36 billion in total backlog, with launch backlog accounting for approximately 40% and Space Systems representing 60%. While bookings across Space Systems and launch can be inherently lumpy due to the timing of increasingly larger, high-impact program opportunities, backlog continues to hold at healthy levels despite the step-up in revenue run rate recognition over the past few quarters. We continue to see a strong pipeline that includes multi-launch agreements and large satellite manufacturing contracts across government and commercial programs.

[Adam Spice, CFO at Rocket Lab]

Notably, subsequent to the quarter-end, we signed a significant volume of contracts within Space Systems and launch across all vehicles, which will be reflected in our Q3 backlog and further strengthen our momentum across the business. Looking ahead, we expect approximately 45.5% of our current backlog to convert into revenue within the next 12 months. Additionally, we continue to benefit from relatively quick turns business across launch and Space Systems components businesses that drive incremental top-line contribution beyond the current 12-month backlog conversion. Turning to operating expenses. GAAP operating expenses for the second quarter of 2026 were $142.1 million, within our guidance range of $138 million-$144 million. Non-GAAP operating expenses for the second quarter were $115.7 million, which was below our guidance range of $120 million-$126 million. In R&D specifically, GAAP expenses increased $1.9 million quarter-over-quarter, while non-GAAP expenses rose $830,000.

[Adam Spice, CFO at Rocket Lab]

These increases were primarily due to incorporating Mynaric expenses as that acquisition closed within the quarter. Q2 ending R&D headcount was 1,087, representing an increase of 138 from the prior quarter. In SG&A, GAAP expenses increased $7.7 million quarter-over-quarter, while non-GAAP expenses increased $9.8 million quarter-over-quarter. The increase in SG&A was primarily due to incorporating Mynaric expenses, again, as that acquisition closed in the quarter. Q2 ending SG&A headcount was 442, representing an increase of 61 from the prior quarter. In summary, total headcount at the end of the second quarter was 3,217, up 439 heads from the prior quarter. Turning to cash. Purchases of property, equipment, and capitalized software licenses were $26 million in the second quarter of 2026, a decrease of $1 million from the $27.1 million in the first quarter.

[Adam Spice, CFO at Rocket Lab]

We continue to invest in Neutron, particularly for the return on investment recovery barge, as well as launch and test infrastructure investments. As we progress towards Neutron's first flight, we expect capital expenditures to remain elevated as we invest in testing, production scaling, and infrastructure expansion. GAAP EPS for the second quarter was a loss of $0.08 per share, compared to a loss of $0.07 per share in the first quarter. The sequential decline in GAAP EPS primarily reflects the inclusion of Mynaric's results after the acquisition closed, including amortization of intangible assets acquired. GAAP operating cash flow was a use of $84.1 million in the second quarter of 2026, compared to a use of $50.3 million in the first quarter.

[Adam Spice, CFO at Rocket Lab]

Similar to the capital expenditure dynamics mentioned earlier, cash consumption will remain elevated due to Neutron development and Neutron tail production as we scale the business beyond the initial test flight and as we procure longer-lead items for our SDA programs. Overall, non-GAAP free cash flow, defined as GAAP operating cash flow, less purchases of property, equipment, and capitalized software in the second quarter of 2026 was a use of $110.1 million, compared to a use of $77.4 million in the first quarter. The ending balance of cash equivalents, restricted cash, and marketable securities was roughly $2.4 billion at the end of the second quarter. The sequential increase in liquidity was driven by proceeds from sales of our common stock under our at-the-market equity offering program, which generated $1.08 billion during the quarter before it was subsequently terminated.

[Adam Spice, CFO at Rocket Lab]

These funds are intended to support acquisitions such as the recently announced Iridium acquisition, as well as other targets in a robust M&A pipeline, alongside general corporate expenditures and working capital. We exited Q2 in a strong position to execute on both organic and inorganic growth initiatives and to further vertically integrate our supply chain, expand strategic capabilities, and grow our addressable market, consistent with what we have done successfully in the past. Adjusted EBITDA loss for the second quarter of 2026 was $8.8 million, which was well below our guidance range of $20 million-$26 million loss. The sequential improvement of $2.9 million in adjusted EBITDA loss was largely driven by higher revenue and strong gross margin. With that, let's turn to our guidance for the third quarter of 2026.

[Adam Spice, CFO at Rocket Lab]

We expect revenue in the second quarter to range between $250 million and $265 million, representing 10% quarter-over-quarter revenue growth at the midpoint. We anticipate GAAP gross margin to range between 29%-31% and non-GAAP gross margin to range between 35%-37%. These forecasted GAAP and non-GAAP gross margins are accounting for a shift in mix within our Space Systems business, and we expect a beneficial remixing impact on gross margins as we look beyond Q3. We expect third quarter GAAP operating expenses to range between $143 million and $149 million, and non-GAAP operating expenses to range between $121 million and $127 million. The quarter-over-quarter increases are primarily driven by ongoing Neutron development and spending related to flight one, including staff costs, prototyping, and materials.

[Adam Spice, CFO at Rocket Lab]

However, we expect to see a shift in spending from R&D to flight to an inventory, which is an encouraging sign of progress as we move closer to Neutron's first flight. We expect third quarter net interest income to be $21 million, which is generally a function of higher cash balances. We expect third quarter adjusted EBITDA loss to range between $17 million and $23 million, and basic weighted average common shares outstanding to be approximately 641 million shares. Lastly, consistent with prior quarters, we expect negative non-GAAP free cash flow in the third quarter to remain at elevated levels, driven by ongoing investments in Neutron development and scaling production. This excludes any potential offsetting effects from any financing activities in the quarter. In summary, Q2 was another quarter of strong execution.

[Adam Spice, CFO at Rocket Lab]

We continue to see exceptional revenue growth across the business, all while maintaining robust liquidity to fund future growth initiatives. We expect this momentum to continue, guiding to strong revenue growth as our satellite platforms business scales exceptionally and Neutron progresses towards first flight. Last but not least, here are some of the upcoming investor events that we will be attending in the next few months. With that, we will hand the call over to the operator for questions.

[Operator]

Thank you. As a reminder, to ask a question, please press star one one your telephone and wait for your name to be announced. To withdraw your question, please press star one one again. One moment for questions. Our first question comes from Andres Sheppard with Cantor Fitzgerald. You may proceed.

[Andres Sheppard, Analyst at Cantor Fitzgerald]

Hey, everyone. Good afternoon. Congratulations on the quarter and all the great progress, and thanks for taking our questions. Maybe one on Neutron and one on Iridium. On Neutron, it is great to see all the recent progress. I guess I want to maybe move past the first launch and talk about scale. In the past, you have given us some cadence on Neutron first launches, but I guess my question there is how quickly do we think we could potentially get to 10 launches and additional scale? Is there a possibility to perhaps accelerate the ramp-up process? Then finally, with the space industry still significantly constrained on the launch side, how are you thinking about ASPs going forward? Is there an opportunity perhaps to increase ASPs both of Neutron and maybe Electron and HASTE as well? Thank you.

[Peter Beck, Founder and CEO at Rocket Lab]

Andres, good to chat to you. Thanks for the question. With respect to Neutron, I guess one of the questions that I think people should be asking us is, obviously the first flight is extremely important, but what about flight 10? Because that is probably, apart from first flight, the second most important thing, and how quickly we can scale into cadence is absolutely critical. I think as we are kind of working forward with the vehicle right now and the way we are thinking about things is it is not just to get to the pad quickly for flight one. Of course, we all want that one. No one more than I. But it is really about how do we get to flight 10 in the shortest time possible.

[Peter Beck, Founder and CEO at Rocket Lab]

For us, that's really all about reusability, and we're constantly trading the timelines and the qualification criteria for the various systems and subsystems to get to the pad for flight one but also making sure that when it comes to flight 10, that we don't have to go back and re-qualify things. There's a constant kind of assessment along that way. I think, our ramp that we've sort of explained to everyone is a 135 ramp, and that's been kind of educated from what we did with Electron. For Neutron, it really is all about reusability. The more robust we can fall into reusability, then the faster we can scale it. Clearly, you've seen the strain in the launch industry right now and the need, not just for new vehicles, but new vehicles at cadence.

[Peter Beck, Founder and CEO at Rocket Lab]

I guess that's how we're sort of balancing all those things. I'll let Adam comment on the ASP.

[Adam Spice, CFO at Rocket Lab]

Yeah. No, look, I think on the ASPs, it's really a function of what's going on in the broader kind of launch market. We brought Neutron to market with a $50 million-$55 million ASP with a commitment really not to do any significant discounting for early launches. We've stuck to that. We feel very good, though, about where the market is from a supply versus demand perspective. I think right now the view is that we see more upside to ASPs than certainly anything that are down or sideways. I think we feel good. I think it's left us room to move pricing as demand continues to firm up, and again, I think there's probably more upside in that mix than downside.

[Andres Sheppard, Analyst at Cantor Fitzgerald]

Excellent. Thank you both. Really appreciate all that color. Maybe just a quick one on Iridium. Peter, you touched on it a little bit in your prepared remarks, but just wondering if you could maybe elaborate a bit further on the overall combined strategy. What new opportunities does Iridium unlock, both through vertical integration and with their 60+ constellation? What new awards and opportunities can you now pursue? Maybe separately, how will you ultimately think about assigning Neutron launches to Iridium's new constellation and new customers? Thank you.

[Peter Beck, Founder and CEO at Rocket Lab]

Yeah, thanks. We're very excited about it. I think there's a lot of obvious synergies. I've always been very clear that the large space companies of the future are going to have the ability to launch their own satellites that they've built themselves on their own rocket. I think that's very clearly demonstrated as being superior. That's obviously really exciting. We've got a lot of areas that we think we can grow that business. If you look at what it costs Iridium to put up the initial constellation, and we sit here on the back of an envelope and what we could do it for now, it's pretty stark. In obviously a good way. We think there's lots of opportunities there. I think your point is right.

[Peter Beck, Founder and CEO at Rocket Lab]

We also, as we're thinking about Neutron's capacity, in this environment where demand is extreme, we need to obviously serve the commercial market. We need to make sure that we have some launches left for our government customer, as we've been onboarded onto the NSSL program. We also need to make sure we have capacity for ourselves, because ultimately, our intention here will be to improve that constellation. It's all a bit of a juggling act, for sure.

[Andres Sheppard, Analyst at Cantor Fitzgerald]

Wonderful. Thank you so much. Congrats again on the quarter. Looking forward to Neutron. We'll pass it on.

[Operator]

Thank you. Our next question comes from Jeff Henry with Craig-Hallum Capital Group. You may proceed.

[Jeff Henry, Analyst at Craig-Hallum Capital Group]

Great, thanks. Thanks for taking the question. Peter, on Iridium for a second. Just obviously, they come in, they bring some real nice profitability and a presence in the applications market, which you want. They bring slower growth, and I know you've been pretty impressive with previous acquisitions, particularly on margins. But here you're going to have to really try to re-accelerate or accelerate that top line. What are the lowest hanging fruits, so to speak, in terms of things that you can do over the shorter to intermediate term to accelerate their top line?

[Peter Beck, Founder and CEO at Rocket Lab]

Yeah. It's a great question. Firstly, it's a quintessential Rocket Lab deal in the fact that we're not buying a big hole in our P&L, as you point out. Right? They bring some nice profitability, and the constellation itself is good into 2035. You also point out correctly that it's a relatively slow-growing business. But for us, as we think about some of the initiatives that they've already embarked on to grow, I think we can supercharge those, especially in the area of PNT. With a relatively modest tweak to a constellation, add a whole bunch more capability. But I also think it puts us in a totally different position from the perspective of some of our government customers.

[Peter Beck, Founder and CEO at Rocket Lab]

Because previously we can go along to our government customer, and they give us full credit that we can design and build launch vehicles, and you jump on a Rocket Lab launch vehicle and you have no concern about getting to orbit. Also, the same goes for building spacecraft. I think we've demonstrated we can build anything from a low Earth orbit comms bird through to something that goes to Mars. But where it gets a little bit tricky for us is to put our hand on our heart and say, "Well, we can do a mission-critical, life-critical constellation and provide services and manage all that." Credibly, before an Iridium acquisition, we couldn't do that.

[Peter Beck, Founder and CEO at Rocket Lab]

So I think we turn up to a government customer and commercial customers to that sense, with just a whole new set of toolkits and capabilities that really sets us out from everybody else, really apart from one other provider in the market. So I think that in itself provides a lot of opportunity. But our focus is rightly so with the acquisition from day one will be growth, growth.

[Jeff Henry, Analyst at Craig-Hallum Capital Group]

Mm-hmm. Yep. Makes sense. One last for me on GHOST. Very interesting. Talk a bit more about that. What infrastructure is needed at the site? It sounds like you bring a lot. There are clearly going to be some things that have to be there. I am particularly interested in what business can or will this capture that you could not otherwise capture, and really, what was the genesis of the idea?

[Peter Beck, Founder and CEO at Rocket Lab]

Yeah, it was really a request from a customer. They have very important needs for the HASTE program, and to be able to service those needs, we need to be able to be a little bit more mobile than we are. It is not a maybe we will build it and someone will be interested in that capability. We are definitely directed to that capability. We do not need a lot. We have built three pads for Electron to date. The one thing I will say that with Neutron, what used to feel like big pieces of steel, on an Electron scale, feels like very small pieces of steel now. To move launch pad infrastructure around on Electron scale is really quite arbitrary for us at this point. Yep, fair enough. I will leave it there. Thanks so much.

[Operator]

Thank you. Our next question comes from Trevor Walsh with Citizens, you may proceed.

[Trevor Walsh, Analyst at Citizens]

Great. Hey, Peter and Adam. Thanks for taking the questions. Maybe just a follow-up or feedback on the GHOST question. Are there ways we should think about the price per launch or the revenue per launch, and then maybe the cost structure around those now GHOST-enabled launches as compared to an Electron launch or even a HASTE launch? I know, I think HASTE, you were able to charge more. Just curious if, as you do more of these GHOST capability launches, if that is going to change the financial profile a little bit of those.

[Adam Spice, CFO at Rocket Lab]

Yeah, look, I think obviously these are HASTE missions. They're just happening out of the West Coast. I think you should look at pricing to be pretty consistent with what we've been showing on HASTE. I think overall, again, as this type of mission becomes more strategic and important, particularly if certain elements of Golden Dome continue to proliferate the way many think that they will, there'll be more demand for these types of things. So it feels like we could be in the early phases of HASTE demand. I think certainly we've seen great demand and great backlog build in the last few quarters. But as that continues, again, we think we're in a very enviable spot with regard to unique capabilities to deliver these kind of missions for the government customer. We also think there's international opportunities as well.

[Adam Spice, CFO at Rocket Lab]

If HASTE behaves like other parts of the Electron portfolio where ASPs have gone up pretty significantly over the years, we could be looking at the same kind of opportunity for HASTE across both our Virginia pad, the new pads in Alaska, and then, of course, even opportunities from New Zealand.

[Trevor Walsh, Analyst at Citizens]

Great. Thanks. Perfect, Adam. Then maybe one quick follow-up, semi-related. For the new Kodiak site, is there going to be a step-up in CapEx kind of associated with that that's maybe not already accounted for? Or how should we think about that in terms of the comments that you've made around CapEx for the balance of the year? Thanks.

[Adam Spice, CFO at Rocket Lab]

Yeah, no, there's some CapEx required for that. But again, as Peter was mentioning, in the context of what we've been dealing with with Neutron, it's relatively in the noise. The contracts that we engage with have some CapEx funding in them. So yes, they'll show up in a CapEx increase, but they're funded under that agreement to a large part.

[Trevor Walsh, Analyst at Citizens]

Got it. Great. Thanks both. Appreciate the questions.

[Operator]

Thank you. Our next question comes from Edison Yu with Deutsche Bank. You may proceed.

[Edison Yu, Analyst at Deutsche Bank]

Hi, good afternoon, and thanks for taking our questions. Wanted to come back on Iridium, and I am curious. I know you mentioned it technically it cannot run till mid-2030s, but how are you thinking about the timing and sort of the potential synergies you might have with the next-gen constellation? Then obviously, the landscape is going to change a lot by 2035. Is the idea to actually deploy the next-gen constellation sooner?

[Peter Beck, Founder and CEO at Rocket Lab]

Yeah. Hey, Edison. You are right in the fact that the landscape for direct-to-mobile and to services from internet from space is going to change a lot. But one of the really nice things that we liked about the Iridium business model is these are L-band, so rain and weather penetrating, indoors penetrating spectrum, because not all spectrum is the same, as I am sure you are aware. Just the safety critical and stickiness of the current applications. I guess I am less concerned about. I am happy to let the larger players fight over some of those internet from space type markets. Meanwhile, we think what Iridium has, in particular with the L-band spectrum, is very important today, but actually going to be more important in the future. I guess the landscape for me does not look vastly different.

[Peter Beck, Founder and CEO at Rocket Lab]

I think it is also too early to pontificate about a new constellation now. Clearly, the whole point of this is that we are a self-launching machine now. There will be a constellation, but I do not think we are ready to talk about exactly what that is going to be just this early.

[Edison Yu, Analyst at Deutsche Bank]

Understood. A separate topic. You obviously won several pretty big satellite awards. You have Flatellite, you have the GEO award. Maybe it is for Adam. Any sense on the timing of the ramp of these contracts? Are these fairly linear, or are these going to be a bit more lumpy? Thank you.

[Adam Spice, CFO at Rocket Lab]

Yeah. No, I think our contracts, again, on the government side are pretty typical. These programs are ones that last for, call it, four years, and the kind of 10/40/40/10 kind of curve is still looking to be approximately right. Each program is a little bit different, but I think that is a good way to model it going forward.

[Edison Yu, Analyst at Deutsche Bank]

Great. Thank you.

[Operator]

Thank you. Our next question comes from Jan Engelbrecht with Baird. You may proceed.

[Jan Engelbrecht, Analyst at Baird]

Good afternoon, Peter and Adam. Congrats. Another set of great results. I think I'll start with the spacecraft component supply chain as a whole. Just obviously you guys benefit internally just given your vertical integration. But as other companies and customers of yours start to try and ramp up their satellite constellations and you just look at some of these components, reaction wheels, laser terminals, solar panels, thrusters. Where do you guys sort of see the biggest opportunity across those components? What's the capacity like looking at your factories today versus over the next couple of years as launch cadence picks up and as more satellites go into orbit? Thank you.

[Peter Beck, Founder and CEO at Rocket Lab]

Yeah, no, thanks for the question because I think people think of launch as a big moat. Yes, launch is a really, really big moat. But equally well, spacecraft components is a big moat because if you just turn up in the industry and say, "I want 1,000 reaction wheels," then your chances of getting them are almost zero. Unless you come to, perhaps, us. I think we've built a decent sense of scale within all of the components businesses. But I very much look at it as a moat. I think probably when some of the analysts that have been on with us here for a long time, when we first announced an old solar company in Albuquerque, were thinking, "What on earth has Pete on?" But you can see now that we've scaled that to being the largest space-grade solar manufacturer in the world.

[Peter Beck, Founder and CEO at Rocket Lab]

Every single satellite needs solar and tremendous amounts of it. I think the components element continues to grow year after year. As more constellations and more spacecraft come into production, that only continues to grow for us.

[Adam Spice, CFO at Rocket Lab]

Yeah. I would add to that being a components provider on a merchant level is interesting. It is a growing business for us. Most of those products have very nice margins associated with them. It is more strategic than that for us, because really what we do is, as you look at the strong backlog growth that we had on the program side of things, that is really enabled to a large part because we are able to eliminate margin stacking and just be that much more competitive in going after these large strategic programs. The ability to basically take advantage of the scale as a merchant provider and then further use that internally to be more competitive on these larger, bigger programs, as you have seen us be successful in closing on. That is really kind of where the magic all comes together.

[Adam Spice, CFO at Rocket Lab]

It is more than just kind of playing in a healthy merchant component market. It is really about kind of feeding and enabling this much more strategic capability-building part of our platforms business.

[Jan Engelbrecht, Analyst at Baird]

Perfect. Thanks, Peter. Thanks, Adam. A quick follow-up, if I may, just returning to the HASTE contract, the $266 million contract. Are you guys' sort of going to break out the cost between sort of launch and actually building the pad? Because I think if you just look at the 18 launches, then it implies sort of a $50 million sort of ASP, which I do not think is potentially correct. Maybe there is some launch infrastructure that is being funded as part of the contract, but maybe just on HASTE as a whole, on ASPs, and then just sort of what is the negotiations looking with commercial customers? Because I think in May, you guys booked your first contract with Anduril. But what is sort of the follow on? What is that look like on HASTE for commercial customers specifically? Thank you.

[Adam Spice, CFO at Rocket Lab]

Yeah. So you are absolutely right. There is a bunch of stuff that is mixed into that, the overall $266 million contract value. I mentioned earlier, I think when the question was asked, there is some funding in there for infrastructure. So obviously, these launches will come through when we recognize the revenue based on the standalone price for those launches. There will be separate revenue with regards to continuing operations and so forth. And of course, the infrastructure build-out will show up in incremental CapEx spend and then depreciation amortization. So I would say overall, nothing that you see in that contract will change the way that the margin profile of that HASTE business, which is actually coming along quite nicely if you look in the overall scheme of kind of Electron and HASTE. So yeah, I do not see any difference there.

[Adam Spice, CFO at Rocket Lab]

And on the commercial side of HASTE, maybe Pete you want to speak to that.

[Peter Beck, Founder and CEO at Rocket Lab]

Yeah. No, certainly seeing more interest. As some of these larger defense programs come to fruition, HASTE has really proven itself as the go-to solution there. So yeah, plenty of interest and conversations and stuff going on there.

[Jan Engelbrecht, Analyst at Baird]

Perfect. Thank you. I appreciate it.

[Operator]

Thank you. Our next question goes to Erik Rasmussen with Stifel. You may proceed.

[Erik Rasmussen, Analyst at Stifel]

Yeah, thanks. Maybe my first on Iridium. I know it is still early days. You outlined a few target markets. Initially, they are looking to go after the narrowband IoT services. At what point, or would it be an opportunity maybe to look at the broadband layer? If so, what would that entail if that is a road that you wanted to go down?

[Peter Beck, Founder and CEO at Rocket Lab]

Yeah, Erik, it is the wrong kind of spectrum for a broadband. The L-band spectrum has very unique advantages to it than some of the more broadband spectrum. I have learned to never say never. I think the two most wealthiest people in the world are going after that, and that is quite a challenge to go and compete. We see value in other places where you could have the most amount of S-band spectrum you want and the most amount of satellites you want. If you do not have an L-band spectrum, there is going to be certain things that you just cannot do.

[Erik Rasmussen, Analyst at Stifel]

Got you. Okay. Then maybe just, Adam, you talked about Mynaric gross margins being pressured initially. Where are the margins today in that business, and what is the target margin profile, and when do you think you might get to that framework, that timeframe to get to that target profile?

[Adam Spice, CFO at Rocket Lab]

Yeah, look, I think the gross margins for Mynaric coming out of the gate, they are always going to be a little bit lower. I think that as people know, that asset had some challenges, had some supply chain issues, went through an insolvency process, and so we are in the process of building that back up. I would say that if you think about where. I cannot really comment because it has been less than really a quarter that we have owned the business. So I do not want to go into too many details on where gross margins are falling out. We are still doing some work there. Going forward, we think this business will really kind of look in line with the rest of our Space Systems, kind of merchant business. May take us a few quarters to get there.

[Adam Spice, CFO at Rocket Lab]

I think you may recall, because you've been along on this journey for quite some time. When we acquired SolAero, the margins were quite challenged. Call it high single digits, and we were able to get that in line with our overall target for the business. This won't take nearly that long. This is one where we've been able to take relatively decisive action on understanding what needs to be done to get the margins up. We're also facing increased volumes in that business over the next several quarters. So we have a combination of revenue growth and some cost efficiencies that are really going to get the business into fighting shape relatively quickly.

[Erik Rasmussen, Analyst at Stifel]

Great. Thank you.

[Operator]

Thank you. Our next question comes from Alex Potter with Piper Sandler. You may proceed.

[Ben Johnson, Analyst at Piper Sandler]

Hi there. This is Ben Johnson on the line for Alex Potter. First question is, can you guys just kind of walk through the big milestones that you view as the highest risk to getting Neutron to the pad in 4Q?

[Peter Beck, Founder and CEO at Rocket Lab]

Yeah. Hey, Ben.

[Ben Johnson, Analyst at Piper Sandler]

Hey.

[Peter Beck, Founder and CEO at Rocket Lab]

Probably, the stage testing is always the thing that gets your adrenaline running because you have fully fueled vehicles on the pad, and you're igniting the engines for the first time. I think you can also see for another space company that when that doesn't go well, it really doesn't go well. I think that's always the last big milestone before flight. Then, depending on how much granular detail you want to go into, there's an ever-decreasing series of important milestones. But once you see some stuff rolling outside that looks completely finished and doing tests, I think those are good pointers.

[Ben Johnson, Analyst at Piper Sandler]

Great. Thank you. My second question is on. You previously talked about the benefits of establishing a footprint in Europe with the Mynaric deal. What are some of the initial green shoots you've seen? Can you elaborate on the interest you've seen from customers in Europe? Is that primarily on the satellite or launch side?

[Peter Beck, Founder and CEO at Rocket Lab]

Yeah. Europe is a really interesting market. It's typically been extremely sheltered. But with the recent geopolitical tensions, all of the European nations are looking for sovereignty. A good example more recently is Germany had put over $40 billion in place for a satellite missile warning system along with other things. Typically that would've been outsourced to other nations. Even in that alone, that's an area that Rocket Lab has tremendous experience in now and capability. The challenge of course being that Europe generally hasn't got a lot of these capabilities, so they need a lot of help to get there. Then on launch itself, we'll see, but clearly Europe really only has a couple of launch vehicles that are launching relatively infrequently.

[Peter Beck, Founder and CEO at Rocket Lab]

If you are trying to build whole constellations of systems, then you might need some help with launches also.

[Ben Johnson, Analyst at Piper Sandler]

Great. Thank you.

[Operator]

Thank you. Our next question comes from Kristine Liwag with Morgan Stanley. You may proceed.

[Kristine Liwag, Analyst at Morgan Stanley]

Good afternoon, everyone. I just wanted to follow up on free cash flow. Can you provide more color on the higher expected cash burn in the quarter? How much of this was driven by higher-than-expected Neutron development cost versus acceleration of inventory to support future launches?

[Adam Spice, CFO at Rocket Lab]

Yeah. You've pretty much hit the nail on the head, Kristine. A significant amount of the spend or cash flow consumption in the quarter was driven by building out these subsequent tails for Neutron. As you can imagine, and Pete talked earlier about the importance of getting to rate quickly. For the parts of the rocket that we think are at low risk to needing some kind of a change as a result of the first test launch later this year, hopefully, that really is kind of informing what we're building ahead on. I would say also in the Mynaric acquisition, I mentioned earlier it had some supply chain challenges and so forth. We basically had to replenish that supply chain, and that was part of the step-up in the quarter as well.

[Adam Spice, CFO at Rocket Lab]

We think we have that well in hand now, so that should be in a much more normal place. It's really a combination of the Neutron tail build-out plus getting Mynaric kind of tucked back into shape and firing on all cylinders.

[Kristine Liwag, Analyst at Morgan Stanley]

Great. Just following up on Neutron then, with the order that you're able to receive with the ASP that you are targeting, does this mean that we should expect more acceleration of Neutron orders, especially as you get closer to the test flight? Also, I just wanted to follow up on my free cash flow question earlier. How should we think about the cadence of free cash flow through the rest of the year? When is 2Q the peak in free cash outflow?

[Adam Spice, CFO at Rocket Lab]

Yeah. I'll let Pete talk to the Neutron question.

[Peter Beck, Founder and CEO at Rocket Lab]

Yeah. Hi, Kristine. I would say with Neutron, we are being very strategic and very thoughtful about our sales there. As we have discussed, we have a one-three-five cadence. Hopefully we will do a lot better than that. But we have commercial customers already signed. We have government customers. You saw NSSL nearly tripling their budget for NSSL launch. We need to make sure that we have got capacity for that customer. As I talked before, we have got our own aspirations and needs. I have personally never seen launch so constrained pretty much ever. Other launch providers are backing off and focusing on their own needs as well. The amount of launch that is left in the industry is really tight. For us, it is being very thoughtful about which customers we sign up to at this point on going forward.

[Adam Spice, CFO at Rocket Lab]

And then coming back to the free cash flow question. It is still very much a function of the timing of the first successful test launch of Neutron, right? We have been pretty consistent in pointing towards, that will be the real turning point where we go to adjusted EBITDA positivity in the quarter after that event happens. But then we have also been pretty clear that it is going to probably be 18-24 months after that pivot that we get to cash flow positivity, because we will have to continue to invest in a fleet of tails to build out for Neutron. So I would say those are kind of the two most driving factors. Now, of course, pending the closing of the Iridium acquisition, the table gets reset pretty significantly, right? As we have talked about, that business generates pretty significant free cash flow.

[Adam Spice, CFO at Rocket Lab]

I think we will have a lot of things to update folks on once we get closer to the timing of closing that deal. But on a standalone kind of Rocket Lab basis, it really is driven by the Neutron test timing.

[Kristine Liwag, Analyst at Morgan Stanley]

Great. Thank you, guys.

[Operator]

Thank you. Our next question comes from Ryan Koontz with Needham & Company. You may proceed.

[Ryan Koontz, Analyst at Needham & Company]

Great. Thanks. Question for you, Adam, on Space Systems in terms of any kind of color around product mix you have for us there in the June quarter, as well as kind of how we should think about Tranche 2 and Tranche 3 timing in the second half, and then maybe reflect on the gross margin mix up apart from Mynaric. That would be great. Thank you.

[Adam Spice, CFO at Rocket Lab]

Yeah, Jeff. Mix is always difficult to kind of predict too far in advance. We have turns businesses, plus we have these programmatic satellite platform businesses. I would say that there was a little bit less of the, I would say the more mature merchant products within the mix in kind of, I would say a little bit in Q2 and actually pointing towards some of the weakness in margin in Q3. We have a pretty wide range of margins in our Space Systems business. We have some component solutions, such as solar, that are always going to be more towards the lower end. Call that in the kind of the 30s. And then if you look towards some of the product areas, they can be more kind of north of 70 points of gross margin. So there is a pretty big spread there within the portfolio.

[Adam Spice, CFO at Rocket Lab]

And then again, towards the lower end in the mix, but greater in the magnitude of the composition is really the satellite platforms business. You mentioned the biggest pieces of our backlog today are for SDA Tranche 2 and Tranche 3. Again, those are more in kind of in the mid-30s, right? I think right now it is that each quarter is going to be driven really by kind of the mix of how much of that higher-end component portfolio ships versus how much we have in these programmatic programs. Those are relatively straightforward to model. But what you cannot model as much is, again, is the components part of the business.

[Ryan Koontz, Analyst at Needham & Company]

Really helpful, Adam. Thank you.

[Adam Spice, CFO at Rocket Lab]

Hmm.

[Operator]

Thank you. Our next question comes from Gautam Khanna with TD Securities. You may proceed.

[Gautam Khanna, Analyst at TD Securities]

Yes. Good afternoon. Thanks for taking my question. I was curious on the demand side for Neutron. Do you still expect a surge of orders once the first test flight goes successfully? I was curious, also, just given your large competitor is launching a much larger vehicle, does that give you any concern on industry capacity maybe three or four years from now and the demand for Neutron? If you could just comment on that. Thank you.

[Peter Beck, Founder and CEO at Rocket Lab]

Yeah, sure. Thanks very much. It's a good question. I think, pre-test flight, post-test flight, I would say Neutron demand is just not a concern. Now, naturally, I think everybody will be more comfortable with buying Neutrons post-test flight, but we've had absolutely zero issues in selling full price Neutrons pre-test flight. I don't see that making a huge difference. Now, with respect to launch capacity going forward, I don't want to sound too negative here, but I don't see that changing anytime soon either. Because even as new capacity comes on market from some competitors, a lot of that capacity is already spoken for their own internal programs. Whether it be internets or AI data centers or whatever. A fair chunk of that capacity is already spoken for. I see this constrained launch market persisting for quite some time.

[Gautam Khanna, Analyst at TD Securities]

Thank you.

[Operator]

Thank you. Our next question comes from Andre Madrid with BTIG. You may proceed.

[Ned Morgan, Analyst at BTIG]

Hey, thanks for taking the question. This is Ned Morgan on for Andre. I was just wondering, could we get an update on the Mars Telecommunications Orbiter program? Just wondering how well you guys are positioned to win there and how we should think about timing and contribution.

[Peter Beck, Founder and CEO at Rocket Lab]

Yeah, thanks, Ned. I'd like an update, too. We're waiting for NASA to go through their procurement process. Hopefully, it'd be great to hear this month, or thereabout. I think we're positioned well. There's very few folks that can demonstrate the level of capability and experience that we have. We feel strongly positioned. Yeah, we just have to unfortunately wait for NASA to work through their procurement process.

[Ned Morgan, Analyst at BTIG]

Got it. Thank you. And a follow-up. After the successful launch of Neutron, how soon should we expect to see the NSSL task orders come through? I saw the upsized contract.

[Peter Beck, Founder and CEO at Rocket Lab]

Yeah, that is out of our control as well. I would say that you have seen them add a whole bunch more resources into that contract vehicle. They have set periods where they release those contracts. I think the government, along with others, are hotly anticipating Neutron's arrival, for sure.

[Ned Morgan, Analyst at BTIG]

Thank you.

[Operator]

Thank you. Our next question comes from Michael Leshock with KeyBanc Capital Markets. You may proceed.

[Michael Leshock, Analyst at KeyBanc Capital Markets]

Hey, good afternoon. I wanted to ask maybe bigger picture. Are you in conversation with customers about potential orbital data center opportunities, whether that's as a merchant supplier or something else? I know higher efficiency solar panels are an important part of generating enough power for some of these plans that are out there, and you have that capacity already. Is data centers in space a real opportunity for Rocket Lab, or is it too early to tell?

[Peter Beck, Founder and CEO at Rocket Lab]

No, I think it's a real opportunity. I guess I'm still a little bit cautious on the scale in which they may be a thing. You've certainly seen us release new solar cells that are specifically targeted to that kind of application. So we're taking the opportunity seriously. And, obviously, there's a lot of folks that are looking at that fairly deeply. I think, if they turn out to be a real thing, I think we'll be pretty deeply entrenched and well-positioned to capitalize it. Is Rocket Lab going out and going to build a whole lot of orbital data centers? Well, I think not yet, that's for sure.

[Michael Leshock, Analyst at KeyBanc Capital Markets]

Okay, great. And then, just on M&A, do you still expect to be pretty active there going forward post Iridium? If so, are there any specific parts of the business you're targeting? Is that still Space Systems primarily or any updated thoughts on the M&A pipeline? Thank you.

[Peter Beck, Founder and CEO at Rocket Lab]

Yeah, I think it's likely that you'll see some tuck-ins from us. I think as the right things come along, we'll always be active. I would encourage everybody to think of Iridium as not the endpoint from an applications play. I think it's really the starting point. We don't want to be known as the L-band tricky communications company. Our intentions are much more grander than that. What it does do is it shows an ability for us to go and bite off a big piece and also use, in time, we'll be able to demonstrate using the full machine where we can build our own satellites and launch them and be a self-licking ice cream. I think, yeah, people should not assume that Iridium is a one and done.

[Michael Leshock, Analyst at KeyBanc Capital Markets]

Great. Thanks so much.

[Operator]

Thank you. Our next question comes from Suji Desilva with ROTH Capital. You may proceed.

[Suji Desilva, Analyst at Roth Capital]

Hi, Pete. Hi, Adam. Congrats on the progress. Sorry for any backwardness here. Just, Adam, at this point, or Pete, the Electron order customer base is very, very comfortable ordering. I am wondering when in the 135 Neutron sequence do you think customers get to that? I do not know if it is just with the first launch, but I think you clearly have customers that are ahead of that and pre-ordering, but when in the sequence does it start to feel more normal in terms of ordering and comfort, in your opinion?

[Peter Beck, Founder and CEO at Rocket Lab]

Hey, Suji. It almost feels like that now, to be honest with you. As I mentioned before, we have a very limited supply of Neutrons coming out the gate, and we have to be very, very careful with where we put those.

[Suji Desilva, Analyst at Roth Capital]

Yep.

[Peter Beck, Founder and CEO at Rocket Lab]

I think, the demand for the vehicle is already very high. I don't know. They might feel differently, but it doesn't feel like we're a million miles away from there already.

[Adam Spice, CFO at Rocket Lab]

No, actually, I'm actually pleasantly surprised where we are in the cycle right now. To have the kind of backlog that we have on Neutron for a vehicle that's not flown yet, I think that shows a pretty strong endorsement. Certainly, I think the market is saying, from the customer perspective, it's not saying if, it's more when. I think, Peter's been pretty clear, I think, through the communications today and earlier, that a significant portion of Neutron down the road is going to be used to service our own demand, right?

[Adam Spice, CFO at Rocket Lab]

I think we also are being very mindful that we don't want to sell all of the capacity out for many, many years forward, without taking into consideration what we need to do, not only for Iridium's needs, but as Peter said, this is the first step of many for us in the applications vein. So we need to make sure that we're really leveraging Neutron to its greatest strategic extent. Which, it's going to be a great vehicle for the market. It's going to be great for adding more capacity in a capacity-constrained market. But this is going to be an incredible strategic enabler for us, and so we want to make sure we don't squander that opportunity and give too much of that capacity way too early to other people.

[Suji Desilva, Analyst at Roth Capital]

Got it. Great. No, it makes sense customers have confidence in your execution given your history there. The other question, Peter, is on Flatellite. I'm just curious, can you remind us the unique features of Flatellite? And congrats on that government win. Are opportunities there outside of government commercial, or just how to think about Flatellite as a market opportunity group?

[Peter Beck, Founder and CEO at Rocket Lab]

Oh, thanks, Suji, for asking that question because that's actually. This last quarter, I think there's two kind of really big takeaways. One, we now also build GEO satellites. I know that the GEO market is not particularly an exciting market compared to what it used to be. But actually, it's a very, very unique capability. So to be able to build low Earth orbit satellites, Mars satellites, GEO satellites, and then have our first Flatellite order, I think shows a real breadth of skill and ability and capability. The Flatellite is designed as a high cadence, large number of satellites per launch vehicle, constellation builder. I'm just so thrilled that their first customer for that is actually a really important U.S. government program.

[Peter Beck, Founder and CEO at Rocket Lab]

It really speaks to the confidence that the customer has after doing the due diligence of everybody in that Flatellite product. That Flatellite product, once we start building them for that customer, that is a huge advantage for commercial customers as well who want that kind of thing. But candidly, for us as well. Most of the stuff that I could see in the future that Rocket Lab will do for itself will be built on the back of a Flatellite platform.

[Suji Desilva, Analyst at Roth Capital]

Excellent. That's helpful, Pete. Thanks.

[Operator]

Thank you. This concludes the conference. Thank you for your participation. You may now disconnect.

Participants

Executives

• Muriel Baker, Director of Corporate and Launch Communications
• Peter Beck, Founder and CEO
• Adam Spice, CFO

Analysts

• Andres Sheppard, Analyst at Cantor Fitzgerald
• Jeff Henry, Analyst at Craig-Hallum Capital Group
• Trevor Walsh, Analyst at Citizens
• Edison Yu, Analyst at Deutsche Bank
• Jan Engelbrecht, Analyst at Baird
• Erik Rasmussen, Analyst at Stifel
• Ben Johnson, Analyst at Piper Sandler
• Kristine Liwag, Analyst at Morgan Stanley
• Ryan Koontz, Analyst at Needham & Company
• Gautam Khanna, Analyst at TD Securities
• Ned Morgan, Analyst at BTIG
• Michael Leshock, Analyst at KeyBanc Capital Markets
• Suji Desilva, Analyst at Roth Capital