Rocket Lab at Bank of America Conference: Strategic Expansion Unveiled

On Tuesday, 18 March 2025, Rocket Lab USA (NASDAQ: RKLB) presented its strategic vision at the Bank of America Global Industrials Conference 2025. The company outlined its ambitious plans for the Neutron and Electron launch vehicles, space systems business, and future growth strategies. While challenges remain, Rocket Lab is optimistic about its competitive positioning and strategic acquisitions aimed at enhancing its component portfolio and addressing supply chain constraints.

Key Takeaways

• Rocket Lab is targeting the second half of 2025 for Neutron’s first launch, with a focus on vertical integration and strategic acquisitions.
• The Electron launch vehicle has a backlog of nearly $400 million, with stable and increasing pricing trends.
• The company is expanding its space systems business, emphasizing high-value components and new satellite capabilities.
• Rocket Lab is actively pursuing government contracts, including the Mars sample return mission.
• The company aims to maintain gross margins of 45% to 50% for both Neutron and Electron.

Operational Updates

Neutron Development:

• The Neutron launch vehicle is being developed as a direct competitor to SpaceX’s Falcon 9, with a targeted launch in the second half of 2025.
• Key workstreams include the Archimedes engine, composite structures, and infrastructure development.
• The first launch will simulate a commercial flight with reentry and a soft splashdown, aiming for vehicle recovery on subsequent launches.

Electron Performance:

• Electron’s backlog is nearly $400 million, with half of the launches planned for the next year.
• The company targets 24 launches per year to achieve its margin goals.
• Customers value Electron’s dedicated launch capabilities, paying a premium for its flexibility compared to rideshare options.

Space Systems Business

Component Portfolio:

• Rocket Lab is focusing on vertically integrating high-value components, such as reaction wheels and solar panel technology.
• Strategic acquisitions, including Sinclair Interplanetary and the potential acquisition of Menarik, are aimed at enhancing the component portfolio.

Satellite Manufacturing:

• The company is introducing new capabilities rather than focusing on low-margin manufacturing.
• The Flatilite satellite form factor is designed to reduce launch costs per satellite.

Future Outlook

Government Opportunities and Strategy:

• The current administration’s pro-space stance presents potential opportunities, including the Mars sample return mission.
• Rocket Lab has submitted a competitive bid for the Mars mission, aiming for sample returns in the early 2030s.

M&A Strategy:

• The company is continuously seeking opportunities to vertically integrate its supply chain, focusing on high-value components.
• Rocket Lab is also exploring opportunities on the payload side of the satellite business.

Conclusion

For a detailed understanding of Rocket Lab’s strategic direction, refer to the full transcript below.

Full transcript - Bank of America Global Industrials Conference 2025:

Unidentified speaker: And I don’t see perfect. Welcome, everyone. I’m here with Stephen Ananias, VP of Finance at Rocket Lab. Thank you so much for joining us today.

Stephen Ananias, VP of Finance, Rocket Lab: Thank you. Thank you for having us.

Unidentified speaker: Of course. We always want to talk space. So I’m going to start with Neutron. Can you please describe and give us some details about the milestones that you have with Neutron and Archimedes and how you are going forward to what it’s like second half of the year at first launch?

Stephen Ananias, VP of Finance, Rocket Lab: Sure. When when we think about the schedule for Neutron, we’re really tracking three separate work streams. The the first is the the engine, our Archimedes engine. The second is, you know, the composite structures, that make up really the body of the of Neutron. And then lastly, it’s the infrastructure that’s required.

So I’ll start with the engine. So ParkMDs has been in a test campaign since August time frame of last year, and and that test campaign continues. So really what we’re we’re doing in this campaign is we’re we’re testing the the operational, you know, kind of environment of of the of the engine. So we’re we’re testing the different power levels of the engine, you know, different propellant, mix ratios, control schemes, all these are required to qualify the engine. And what we announced actually during our earnings call last, our most recent earnings call is we’ve we’re actually in the process of building a second second test stand, there at our test facility in Stennis, Mississippi, which will now give us twice the capacity to test.

So so that’s obviously a very important part of getting Neutron to the pad, in the second half of this year. On the on the composite structure side of things, again, making tremendous progress on on the structures. This is an area where, you know, leading up till now, this is the one area that we’ve relied more on outsourced third parties to deliver, for the first rocket. And and that’s really one of the main factors that led to us updating our schedule to the second half of this year. And, you know, a lot of trade offs are made when when you’re when you’re getting to this point in in the development of of Neutron.

And, normally, you know, we you know, and and, ultimately, we will be very vertically integrated with Neutron just as we are with Elektron. But when you’re when you’re first starting out, you have to make that trade off between out the schedule, how quickly do you wanna get things in, versus vertical integration. You know, a lot of the equipment that’s required to build the composite structures, the lead time on this equipment is a year to two years long. So we can’t wait until the equipment comes in to get the prototyping started, and and and waiting for delivery. Or we would never you know, we can be much later than than, than the schedule that we’re on.

The other the other consideration is we in many cases, we want to see technology, like demos of our design, so we can make sure that the design is working as expected before we make the significant investment in capital equipment. The downside to that is you’re relying on third parties to hit their schedules, and so we’re susceptible to any slips that they have. It it works into our schedule. And so the engineers are constantly working on ways to to mitigate those risks to bring the if the schedule is pushing out, let’s bring the schedule figure out ways to bring the schedule back in. In some cases, we’ve actually we’ve actually moved some of that composite structure from outside third parties already in internally, to our to the equipment that has been delivered, that was not expected to be used until, like, the second flight.

So so we’re already making those those decisions now. But then and then lastly, the infrastructure. So, you know, the the building a launchpad, there there’s a tremendous amount of work that goes in into this, and it’s a lot like building a house where you spend 80% of the time building everything that you can’t see. And then as you get towards the end, then you start building everything above the ground. And that and that’s exactly the way it’s working with with, with the launch complex, Launch Complex 3, which is where Neutron will launch, out of Wallops, Virginia.

So, in fact, things are progressing very, very well on that front. We are going to be having our, like, grand opening of the launch facility in May, June time frame. So again, we’re constantly tracking the engine, composites, and the infrastructure, and that’s what’s informing us, in terms of our updated schedule to the second half of twenty twenty five.

Unidentified speaker: From a composites perspective, how much is a technical challenge and how much is like your third party providers actually prioritizing other things before the volume that that they have to do with you.

Stephen Ananias, VP of Finance, Rocket Lab: I think it’s largely scaling in in in the in the just meeting the schedules that they’ve committed to versus a technical, challenge. And and and, again, this is this is the advantage that Rocket Lab has not only in launch, but, you know, across the business is that we we have made the decision to vertically integrate whatever we can. And so that’s so we have more control over our schedule. And in the challenge of of scaling, you know, our businesses, whether it be, you know, the Electron, launch vehicle, you know, as we get to the first launch with Neutron and then eventually scaling Neutron, our space systems business, all the component businesses, you know, it it’s a very, you know, concerted effort to vertically integrate so that we can have control over those schedules.

Unidentified speaker: And then on the engine piece, how would you measure, like, are you, like, 70% to where you’d you’d like to be for the first flight or

Stephen Ananias, VP of Finance, Rocket Lab: Well, I’m not the rocket scientist, so it’s hard for me to to put an actual percentage on that. But I think based on where we’re at, it’s what gives Pete and the the team confidence that we will achieve that second half twenty twenty five launch.

Unidentified speaker: Perfect. So is it fair to think that the composite piece is probably the one that like keeps you up at night? And then on the other ones, you could actually start like

Stephen Ananias, VP of Finance, Rocket Lab: Well

Unidentified speaker: managing that on your side most.

Stephen Ananias, VP of Finance, Rocket Lab: I think that is that’s the piece that’s given us the most challenge to date. I think the challenge with any rocket program is you don’t know something’s gonna go wrong until it happens. Right? And and so right now, based on I mean, everything is is progressing the way it should, and and we’re and we’re confident until we’re not. Right?

And and if something happens, then then we’ll have to deal with that when when when we get there. But but really, it’s you know, we’re confident on all three work streams, and, you know, we’re putting on the composites work stream. We’re putting the risk mitigation, you know, you know, analysis, you know, together and that’s what’s informing us with our schedule.

Unidentified speaker: Perfect. And then when you think about orders taken and pricing the Neutron launches, on the Electron example, you did some early orders that were not as profitable as they would have been whenever the program was actually working and scheduled. How much of your future launch capacity are you selling today, and how much you’re keeping until you can actually have a stronger pricing position?

Stephen Ananias, VP of Finance, Rocket Lab: No. That’s a great question. So, you know, Pete often talks about how he will never do that again. Right? And and you’re and you’re right.

When when you have an untested vehicle, customers automatically expect there to be a pretty significant discount. And our view is that we have a tremendous amount of heritage that we’re pulling from the electron rocket. We know what we’re doing. So we’re not looking to to provide discounts, to, you know, to sell our our capacity. Right?

And, I mean, by the way, the other the other consideration is, you know, our stated cadence, you know, that we expect is the first pest launch here in the second half of this year, ramping to three commercial launches in ’26 and then five in ’27. So there there’s not a ton of capacity, you know, over the next few years. And so we have to be very careful on what customers that we’re partnering with because they may not show up at the pad. Right? And so, you know, both sides are kinda staring at each other, you know, and saying, okay.

Are you gonna be ready? Are you gonna be ready? And so, yeah. So it’s it’s a very,

Unidentified speaker: you know Plastic weather.

Stephen Ananias, VP of Finance, Rocket Lab: Yeah. It it it’s it’s it’s a very important decision that we make and who we’re partnering with. But, yeah, we feel like the market, the demand is going to be there. And so we don’t feel any need to discount our pricing.

Unidentified speaker: And then switching gears to Electron. How large is the backlog? How the pricing of that backlog looks compared to the ones that you have been recognizing so far? And how should we expect the cadence of Electron launches in the next couple of years?

Stephen Ananias, VP of Finance, Rocket Lab: So the backlog for Electron is over or or nearly nearly $400,000,000. So it’s a pretty healthy backlog, of launches. You know, about half of that is over the next twelve months, and then the other half, obviously, is beyond twelve months. The the pricing has been, very very stable and increasing in time with time. And right now, our backlog average average launch in the backlog right now is over $8,000,000 a launch.

So so again, very healthy. And and customers really value what Electron brings to the table. Right? It’s a it’s a small, class launch vehicle that’s really suited for dedicated launch. Right?

So when a customer has a very specific mission requirement, whether it be, you know, when it’s when it’s launching, you know, the orbital insertion, you know, they they can come up with their own mission parameters that that we can meet. And a good good example is, Kinase, which we had a launch successful launch earlier today. This is our sixty second launch. It was the fifth launch for CNES. They had done a bulk buy of five launches, so this is the fifth launch.

And and and in total, we deployed over 25 satellites that completed their Internet of Things, constellation. So we deployed their entire constellation in one year. This is unheard of. Right? And that allows the customer to now turn on their service and start generating revenue, where this this would have taken years in in other you know, with other providers.

Right? So so we provide a real value that people are willing to pay for.

Unidentified speaker: So are people less sensitive about pricing when they this actually allows them to accomplish the mission?

Stephen Ananias, VP of Finance, Rocket Lab: Oh, absolutely. I mean, people don’t, you know, people that choose to fly on Electron, fly on electron because that is the best option for them for their situation. Right? So SpaceX obviously has their transporter rideshare missions that economically are much cheaper to launch a a similar satellite. So if if you’re okay riding on a transporter mission, which, you know, our analogy is that similar to a city bus.

Right? It it will take off at the same plate or same time. It’ll drop you off at the same place. Hey. If that works for you, that’s that’s probably the best option for you.

But our customers are looking for something more suited for their mission requirements. We’re the Uber. Right? And and so for that for that service, they are willing to pay a premium.

Unidentified speaker: So when you think about alternatives or this competition between Electron and SpaceX, right, like the Falcon nine, you probably don’t have much of an overlap on a customer perspective. But how do you think about Neutron versus SpaceX offerings?

Stephen Ananias, VP of Finance, Rocket Lab: Neutron is being has been developed to be a direct competitor to Falcon nine. So there will be almost entire overlap. And and honestly, the you know, I we we believe the customers are looking for an alternative to SpaceX. I mean, but if if you step back and you look at SpaceX and and the the volume of launches they’ve done, the overwhelming majority of those launches are Starlink launches. Right?

And so if you if you take those out of the equation, then the remaining kind of government and or commercial launches, those are those are really the launches that we would be competing for. And and again, I I think we’ll have a very competitive offering.

Unidentified speaker: So when you think about the new administration and the role that Elon Musk plays there, are you concerned at all about your competitive positioning when Milton is out?

Stephen Ananias, VP of Finance, Rocket Lab: I mean, it’s still very early days in the administration, but they they certainly appear to be pro space, pro defense, and pro efficiency. Right? Each one of those played to the strengths of Rocket Lab. Right? So just take, for example, you know, the Golden Dome initiative, that this administration is talking about, the NSSL on ramp of new providers, even within NASA in the Mars sample return, right?

These are all initiatives that really play into the technology and capabilities stack of Rocket Lab. So so I think, you know, I I think there are many opportunities that will present themselves.

Unidentified speaker: Perfect. And how strong is your presence on The Hill?

Stephen Ananias, VP of Finance, Rocket Lab: So we have a small yet very effective team in DC that engages with with, Capitol Hill and other parts of the federal government. On The Hill specifically, you know, we have great relationships with, you know, some key committees, such as the Appropriations Committee, and, the, like, armed services, you know, and and we also have a a tremendous amount of support from our congressional members. So Rocket Lab is based in six states, throughout the country, and so we have a tremendous amount of support from our our, you know, congressional members. And to be honest, it it goes beyond our own, you know, congressional members within the states. I mean, other congressional members and their their staff, they’re all very, supportive of adding more competition to to the launch, and and just space in general.

So so again, it’s it’s very positive for Rocket Lab.

Unidentified speaker: So when you think about government opportunities, right, it’s not only through launch, but you also support the hypersonics testing with HACE, and you do support the SDA tracking layer.

Stephen Ananias, VP of Finance, Rocket Lab: Yep.

Unidentified speaker: Where else do you think that Rocket Lab can add value or see opportunities on this, like, space?

Stephen Ananias, VP of Finance, Rocket Lab: Well, I mentioned the the Mars sample return. So this is an example of just well, I I’m not sure what the basis for the l you know, the some of the original projections were, like, $11,000,000,000 and not getting samples returned until the early twenty forties. Rocket Lab has submitted a bid that is sub $4,000,000,000 and getting return you know, sample returns back in the early twenty thirties. Right? So just completely different.

So that’s just a good example of where Rocket Lab is that, you know, kinda that supplier that can be very efficient and and bring innovative solutions at a much more effective cost point.

Unidentified speaker: And when you think about these opportunities, like, how much you wanna do on your own, and when do you look for partnerships to actually approach this government opportunities?

Stephen Ananias, VP of Finance, Rocket Lab: What type of partnerships?

Unidentified speaker: Well, like the one you have done with hypersonics. Right? Like, you are subbed to someone and

Unidentified speaker: or is

Unidentified speaker: that, like, what type of partners you you’ll be open for?

Stephen Ananias, VP of Finance, Rocket Lab: Sure. I I think I think it depends on the situation. Right? So in the case of of Hypersonics, you know, Kratos was just awarded a $1,450,000,000 award. And and, you know, we, you know, we hope to, you know, benefit from that.

But in other cases, like on the on the satellite manufacturing side, like, we we want to be the prime, right? And we want to have more control over over the, you know, the the program, the mission, and again, deliver on schedules and price points that the government is not used to seeing. And that that’s really the value that we bring.

Unidentified speaker: So on space systems, right, and like the satellites, how do you think about, like, developing organically versus acquiring capabilities?

Stephen Ananias, VP of Finance, Rocket Lab: So on the when we think of our space systems business, we really look at it as really two subsegments, right? So we have our components portfolio and then we have our satellite manufacturing. So the component piece of the business has largely come from acquisition, right? And it’s been a very conscious effort to vertically integrate these supply constrained subscale components, so that we can bring them in and have more control over the schedule and ultimately drive more scale in the production. So a good example is in fact, it was our very first acquisition, Sinclair Interplanetary.

So when we acquired them, they were producing about a hundred reaction wheels a year. And the space economy does not become the trillion dollar industry that we all hope it becomes if you’re constrained to a hundred wheels a year. Right? Or that’s just a small example. But what we’ve been able to do is now take that technology and scale it to where now we’re building over over a thousand 2,000 wheels a year.

So that’s just an example of of what we can do. And so so that same approach is what we’re we’re doing across the you know, when we look at all the different components that go into a satellite bus, you know, we, you know, we focus on, again, those the supply constrained parts, but also the high value parts that go into a satellite. So we’ve acquired solar, you know, solar panel technology through the Solero acquisition, flight software through ASI, separation systems through PSC, other than than command or attitude termination control systems from Sinclair. And then most recently, earlier, I think it was last week, we we announced that we have signed a nonbinding term sheet to acquire Menarik, which is which is also very exciting. And if we’re able to, you know, progress that through a definitive agreement and get through, you know, regulatory approvals to ultimately close, this will be, again, another example of where we’re bringing a very important component into the portfolio where we’ll be able to, you know, bring our manufacturing know how and help scale that that business.

Unidentified speaker: The component business has been highly profitable. When you look at these opportunities, you look at this criticality in the supply chain, you look at the value they add, like, how much of a role pricing or, like, margins play in that decision making? Or how much of that margins are actually because you are able to scale up the volumes?

Stephen Ananias, VP of Finance, Rocket Lab: I think it depends on the component that you’re talking about. The margin profile of our component businesses really ranges quite significantly. In the solar component is a lower margin business. We’re working very hard to continue to scale that. But that is one of the businesses that is a little bit on the lower end of our kind of margin profile where we have got other businesses within that component portfolio that is well north of 50% gross margin.

So I think it is scale, and being able to, you know, absorb some of that fixed overhead. And so that helps, you know, scale the margins. But also having the right product and having, you know, heritage is super important in this industry. Right? Having products that have actually flown, and and work, you know, people are willing to pay a premium for that.

Unidentified speaker: And then on the satellite business, how do you balance the opportunity to work in new capabilities and technologies versus just going after volume? What is the right place for rocket up there?

Stephen Ananias, VP of Finance, Rocket Lab: I would say that we are almost entirely focused on bringing in new capabilities. Right? We are not interested in in low margin, you know, kind of, you know, and repeat type of of just simply satellite manufacturing. So every opportunity that we pursue is something that is bringing something into the company, Some new capability, a new technology, or allowing us to put more investment into our factories that, you know, going from, you know, for instance, some of the earlier contracts that we that we had won were for one off satellites or two satellites or four satellites. And then when we won our, contract with MDA was to build 17 satellites.

That’s a completely different production environment. And and that helps us then win the SDA tranche two contract, which is 18 satellites. Right? So we’re and and we’re able to leverage a lot of the technology and know how and capabilities as we progress. Right?

So it’s really we win one to enable us to win the next and and and keep moving in that direction.

Unidentified speaker: Perfect. And now one step further, you announced Flatilite not so long ago. Like, would you mind explaining to everyone what is Flatilite about and what do you wanna do with that?

Stephen Ananias, VP of Finance, Rocket Lab: Sure. So Flatilite is a new, satellite form factor within our portfolio of of satellites within the company. And so the big, difference between our other satellite designs and Flatlight is it is a think of it like a pancake type of form factor where you can stack many more satellites in the fairing of a rocket versus, you know, a more traditional, you know, satellite design. And one of the one of the more important decisions that a satellite operator is going to make in choosing, like, a launch provider is what is the cost to launch per satellite. And so you might have a satellite that is not all that mass constrained, but it’s volume constrained.

So you can imagine, you know, if if if you have a, you know, a a rocket that can fit seven satellites in the fairing versus now with this new architecture, you can fit 20 satellites in the fairing. Well, your cost per satellite has come or, you know, for launch has come down significantly. Right? And so that’s that is really what this is intended to do is to bring the cost of the the launch per satellite down significantly. And it’s really I mean, anyone can benefit from this.

And so we will, you know, we’ll we’ll market this to, you know, commercial customers, government customers. But what it really benefits are customers that are gonna have, you know, constellations of some size. Right? Because they’re only deploying two, well, then you’re not really gonna get the benefit of reduced cost for launch, right, per satellite. But if you’re launching twenty, forty, a hundred, that’s where the benefit comes in.

Unidentified speaker: And then what kind of capabilities you can add in these flat satellites compared to the traditional satellite? And were there constraints there, if any?

Stephen Ananias, VP of Finance, Rocket Lab: I think it’s it’s definitely more tailored to more TOMS types of applications. When you get into Earth observation, then, you know, the, you know, the the telescope and and or other, you know, cameras, they may defeat the purpose of having that form factor because now you’re taking up more volume. But within a communications kind of application, it’s probably best suited for for those.

Unidentified speaker: Perfect. And when you think about space end to end, right, as you go through from, like, launch to components to the satellites to the apps or the services, When and where do you think that Rocket Lab could play a role?

Stephen Ananias, VP of Finance, Rocket Lab: We don’t know yet. There’s there’s a tremendous amount of work being done at the company to see where we will have the the best, you know, kind of value, in in creating value for the shareholders. You know, at the end of the day, we feel like the the it’s having it’s having each part of that end to end is really what is discriminating. Right? So having a launch vehicle like Neutron, not only does it expand our addressable market within launch quite significantly, but it it enables this end to end, you know, vision.

And then having the the capability to build your own satellites and to be as vertically integrated as we are to where we can control the schedules and and we can come up with more innovative designs. And we have the a cost advantage. Right? When you take when you take these, you know, these capabilities, ultimately, it doesn’t really matter what end application we go into. We feel like we’re gonna have a huge advantage over the competition, you know, once we decide where we’re gonna go.

And we don’t have to be, you know, we don’t have to be the I guess, we might call it, like, the first mover, because I think, again, we’re gonna have such an advantage if we see that, hey, that is the application that makes the most sense and where and we can create the most value, that’s where we’re gonna go.

Unidentified speaker: Perfect. Yeah. Peter once told me about, like, two years ago probably, I haven’t found the killer app yet. Right.

Stephen Ananias, VP of Finance, Rocket Lab: That’s right.

Unidentified speaker: So he’s still working on and getting ready for Yeah. For whenever he finds it out.

Stephen Ananias, VP of Finance, Rocket Lab: I think things are I think things are definitely coming more into focus. When you when you just think about the the applications that are out there today, you know, some present bigger opportunities than the others. Some fit, you know, flat light or, you know, you know, some other, you know, advantages that that Rocket Lab may have. And and so but, yeah, we’re still in that, you know, we haven’t made that decision quite yet.

Unidentified speaker: Perfect. And then we’ll open up for questions. If someone has a question, please raise your hand. I see someone there.

Unidentified speaker: Can you hear me? Just wanted to ask on the reusability of the rockets. So firstly, Neutron, I imagine the reusability won’t be tested on the first launch. Sort of how can we think in terms of the timeline of when that will come in? And also on Electron, if I understand correctly, that’s also being baked into the program.

And just I know you don’t give long term guidance, but how should we think about this in terms of pricing and margins if these milestones are achieved?

Stephen Ananias, VP of Finance, Rocket Lab: So so the first launch of Neutron is is going to be an r and d test flight. However, the the mission of that first flight will be to simulate a a commercial flight. So we’re gonna launch, we’re gonna get to orbit, and we’re gonna reenter, and we’ll glide the vehicle back, to Earth, and then we’ll refire the engines, and then we will do a soft splashdown in the ocean at a very specific point as if we are landing on a barge. So everything short of actually landing on the barge. Right?

If that is successful, then we will attempt to recover the next launch. In terms of profitability or, you know, target, you know, kind of target margins, so for for Neutron, it really is a function of reuse, you know, recoverability and reuse. So once, you know, once we have gotten to the point to where we’re able to recover and reuse these vehicles, then we think, you know, the the targeted margin for Neutron is is the same as Electron, which is somewhere between 4550% gross margin. And and we think with the recoverability in reuse, we we have a we definitely have a path to get there. On Electron, so we we do have a recovery and and reuse, initiative for Electron as well.

In fact, we’ve recovered 10 vehicles now, and there’s actually an Electron that has been recovered sitting on the factory floor in New Zealand, but we just have deprioritized that at the moment while we focus on getting Neutron to the pad. But that that’s also an important initiative. But even without that, Electron is is, I would say, even more about cadence. And so, you know, in any rocket business, you know, there’s a there’s a significant amount of fixed overhead that is required to operate the business. And, you know, whether it’s, you know we have, you know, multiple launch complexes.

We have the, you know, all the the resources that are required to operate those those, facilities. And so what we have said is we believe that once we get to two launches a month, so let’s call it 24 launches a year, that’s where we get to our targeted margins. And again, between forty five and fifty points of gross margin.

Unidentified speaker: Perfect. Any other questions?

Unidentified speaker: Stephen, you mentioned about becoming a defense prime contractor for government eventually. Once you have Neutron in a regular launch cadence, is there anything else you’re missing as part of that space system end to end service to prevent you becoming a prime contractor?

Stephen Ananias, VP of Finance, Rocket Lab: Well, we are a prime contractor today. So with the SDA contract, we are the prime contractor. So so we we are there, and and that’s it’s a really important, responsibility that that that we take. I think with having Neutron, I think the, you know, the opportunity there is to on ramp eventually on into the NSSL, and that opens up a new market opportunity for Neutron.

Unidentified speaker: And we did have another question here.

Unidentified speaker: Hi, thank you. Could you talk to any sort of any execution because I think Neutron, the design is quite different to the Electron, if I’m not mistaken. Anything we should think about in terms of the execution risks or anything like that that one should be cognizant of? It’s not a simple scale up of a previous engine or design. It’s completely different.

So anything there that you would talk to?

Stephen Ananias, VP of Finance, Rocket Lab: Well, there’s actually a lot of overlap between Electron and Neutron. The avionics are essentially the same. A lot of the GNC work is is also similar. The Hittel, tests are are similar. What what is unique is the engine.

So the engine is is is a completely different architecture. And and as I said, that that’s what’s going through this rigorous test campaign right now. But but I I think we’re actually able to it’s it’s it’s because we are leveraging so much from Electron that allows us to be so confident to to have this aggressive schedule that we have. There there’s there’s just, you know, a tremendous amount of know how that we can that we can bring into the Neutron development. Another example we talked about were, you know, recover recoverability, you know, couple questions ago.

That’s another example of where it was the it was initially with the recoverability of electron that we were able to perfect that and and understand, you know, what, you know, the the kind of the science behind that reentry that we can now leverage into Neutron. Right? So again, there there’s a tremendous amount of of, you know, knowledge and, even, you know, design that that we can leverage from or Electron into Neutron.

Unidentified speaker: So when you think about profitability in general, when do you think you can become cash profitable, and how much of a role Neutron plays there?

Stephen Ananias, VP of Finance, Rocket Lab: Well, I would say Neutron plays all of the role there. So when you look at the, you know, the the individual businesses, with without Neutron, we’re we’re a profitable company. And so there you know, the the investment in Neutron is is significant. Obviously, the opportunity is significant. But but to answer your question, I I think it ultimately depends on how quickly we ramp Neutron and and how successful we are getting to, you know, to our cadence of one three five.

I think the one thing that you’ll see almost immediately is once Neutron successfully launches, then once you move into production with with Neutron, you see a a pretty significant kind of flip in the in the income statement because, you know, a lot of that r and d intensity starts to reduce. You know, a lot of the prototyping that we’ve been doing leading up to the first flight, that doesn’t go completely away, but it comes down quite significantly. I mean, they’ll they’ll continue to be investments in in block upgrades of the vehicle over the first, you know, couple of years, you know, get, you know, the first few flights essentially. But kinda once you get through that, once you get the first flight off and you move into production, now now all of that it’s more of accounting, but all of that cost to build Neutron now moves from r and d up into cost of goods sold. Right?

And and so now you’re you’re moving that expense now with timing with when you’re actually now selling a Neutron for $50,000,000 to $55,000,000 right? So I mean, again, you see a huge benefit on the P and L, pretty quickly after you get that first launch off. From a cash flow perspective, again, you’re going to continue seeing investments in Neutron as we continue to scale the business. But again, as you start to get to that 1.35 cadence, that’s when you’re really going to start to see the benefit of on the on the cash flow as

Unidentified speaker: well. And in terms of M and A, what are key areas that you are looking for in terms of technologies that you think will be really good to have?

Stephen Ananias, VP of Finance, Rocket Lab: So the pipeline is full. It’s always been full. So we’re just constantly looking for opportunities to, you know, vertically integrate on the supply chain side. Again, supply constrained, high value components are kind of bullseye. And again, Monarch is is a good example of that.

The other area that, you know, one that we have, you know, we continue to kind of research is on the payload side. So again, we are today, we’re focused on the satellite bus and all the components that that are used for the satellite bus. But, you know, it’s it’s very important to have the payload as well. And so that’s something that, you know, we’ll we continue to look at.

Unidentified speaker: Perfect. Well, thank you very much, and we’ll see you around.

Stephen Ananias, VP of Finance, Rocket Lab: Alright. Thank you.

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