Rocket Lab Corporation

Good afternoon, everyone, and welcome to the Rocket Lab Third Quarter 2021 Financial Results Call. My name is Emily, and I'll be coordinating the call today. There will be a Q&A session during today's presentation where you will have the opportunity to ask a question by pressing Start followed by 1 on your telephone keypads. I will now turn the call over to our host, Gideon Massey, Finance Planning and Analysis Manager. Please go ahead.

Thank you, Operator. Good afternoon, everyone, and thank you for joining us on today's conference call to discuss Rocket Lab's third quarter 2021 financial results. Today's call is being hosted by Peter Beck, founder and CEO, and Adam Spice, chief financial officer. After our prepared comments, we will take questions. Our comments today include forward-looking statements within the meaning of applicable security laws, including statements relating to our guidance for fourth quarter 2021 revenue, revenue growth expectations in our principal target markets, GAAP and non-GAAP gross margin, GAAP and non-GAAP operating expenses, interest and other expense, and adjusted EBITDA. In addition, we will make forward-looking statements relating to trends, opportunities, and uncertainties in various products and geographic markets, including, without limitation, statements concerning opportunities arising from our launch service and space systems markets, and opportunities for improved revenues across our target markets. These forward-looking statements involve substantial risk and uncertainties, including risk arising from competition, global trade, and export restrictions. The impact of the COVID-19 pandemic, our dependency on a limited number of customers, average selling price trends, and risk that our market and growth opportunities may not develop as we currently expect, and that our assumptions concerning these opportunities may prove incorrect. More information on these and other risks that may affect the forward-looking statements as outlined in the risk factors section of our third quarter 10Q filing, which will be filed today, and the documents incorporated therein. Any forward-looking statements are made as of today, and Rocket Lab has no obligations to update or revise any forward-looking statements. The third quarter 2021 earnings release is available in the investor relations section of our website at rocketlabusa.com. To supplement our unaudited, consolidated financial statements presented on a basis consisted with GAAP, we disclose certain non-GAAP financial measures, including gross margin and operating expenses. These supplemental measures exclude the effects of stock-based compensation expense, amortization of purchased intangible assets, other non-reoccurring interest and other income expenses, net attributable to acquisitions, and non-cash income tax benefits. and expenses. We also supplement our unaudited historical statements and forward-looking guidance with the measure of adjusted EBITDA, where adjustments to EBITDA include share-based compensation, one expense related to customers and partners, third-party expenses related to mergers and acquisition activity, foreign exchange gains or losses, other non-operating income and loss excluding interest expense related to debt, and other non-recurring gains or losses. We encourage investors to review the detailed reconciliation of our GAAP and non-GAAP presentations in our investor update presentation available on our website. We do not provide a reconciliation of non-GAAP guidance for future periods because of the inherent uncertainty associated with our ability to project certain future charges, including stock-based compensation and its associated tax effect and the effects of award expense related to customers and partners. Non-GAAP financial measures discussed today are not in accordance with and do not serve as an alternative for the presentation of Rocket Lab's GAAP financial results. We are providing this information to enable investors to perform more meaningful comparisons of our operating results in a manner similar to management's analysis of our business. We believe that these non-GAAP measures have limitations and that they do not reflect all the amounts associated with our GAAP results of operations. These non-GAAP measures should only be viewed in conjunction with corresponding GAAP measures. And lastly, this call is also being webcast with a supporting presentation and a replaying copy of the presentation will be available on our website for two weeks. Now let me turn the call over to Peter Beck, founder and CEO.

Thank you very much, Gideon, and thank you all for joining us here today as we review Rocket Lab's business highlights and financial results for the third quarter of 2021. As Gideon mentioned, joining me today is our CFO, Adam Spice, who you'll hear a little bit from later. Today I'll be talking you through our key business accomplishments for the third quarter of 2021. And Adam will be covering off our financial highlights and outlook, sharing our up-and-coming conference schedule, and of course, we'll have time for Q&A. Right, so since the end of the second quarter, we've seen significant growth in our backlog. At June 30, backlog was $141 million, and ending the September 30 quarter at $183 million. Today our backlog stands at 237 million, representing nearly 100 million in backlog growth since the end of the second quarter. We've seen bookings strengthen across every major product in the company, including new electron launch contracts, government study contracts, interplanetary photon satellites, orbital debris removal programs, NASA demonstrations that include satellites, Electron launch vehicle, Rocket Lab components and software and numerous component sales spanning a global customer base that includes government, foreign government, universities and commercial customers. I've never been more excited or proud of all of the use cases we're finding for our technology and high value missions we're enabling with our suite of products and services. Many of these programs will enable and provide transformative technological breakthroughs that will have a long-lasting impact on our planet, which we're very proud about. Proof of our many industry-leading technologies and strong mission heritage can be seen in our strong repeat customer bookings. Since the end of Q2 2021, we have seen over a dozen repeat customers book additional business with Rocket Lab, with nine of these customers listed on the slide. As we continue to broaden our portfolio of space-based products and services, our ability to cross-sell and integrate technologies will lead to even richer customer engagements and relationships. On September 27th, we announced an agreement with the US Space Force under the National Security Space Launch Program, or NSSL, worth $24 million to advance development of the neutron rocket's upper stage. This development will support national security and defence launch capabilities for scientific and experimental satellites to the world's most critical national security payloads. We are really honoured to be partnered with the US Space Force and view this as a vote of great confidence from the US government is another proof point in our ability to deliver low-cost, responsive, next-generation launch that will transform space access across constellation deployment. And this is a really big deal. If you look at the other players that also won contracts, you will see we're a very good company. In August, our previously announced ESCAPADE mission passed a NASA critical mission review following the mission to its next phase with a target launch reading this date of 2024. In September, we finalized the phase B of the contract and also completed a kickoff meeting in November. This mission, in partnership with UC Berkeley's Space Science Laboratory, will put two photon spacecraft into the orbit of Mars to study its magnetosphere. Could obviously not be more excited with the progress the team is making on this really complex, high-value, and crucial mission to explore other planets in our solar system. So that covers the key business highlights of our third quarter, but I'd also like to touch briefly on some of our key achievements since the third quarter. So we achieved a key program milestone with the NASA demonstration mission with our partner ETA Space. This mission is very, very unique in two different ways. LOCSTAT-1 is the first cryogenic oxygen fluid management demonstration mission for NASA in its history. This will prove out the usage of on-orbit fueling systems, the satellites on orbit, and thus developing critical technology that can keep our precious satellites monitoring gas emissions or still monitoring on orbit, extending their lives for a longer period. Secondly, this was the first mission where Rocket Lab won both the launch and the spacecraft design and build in a complete integrated solution, ensuring a faster, more cost-effective and seamless development program for this particular NASA demonstration. On October the 12th, we signed and completed acquisition of Advanced Solutions Inc., or ASI, an industry leader in mission-critical flight software and GNC for space vehicles. The ASI team brings with them over 20 years of flight heritage, more than 30,000 hours of on-orbit operation, and a growing team of 57 members located in Littleton, Colorado. The acquisition of ASI further positions Rocket Lab as an end-to-end space company, as we desire, and able to provide complete mission solutions to our customers. We're already integrating the MAX flight software into our photon space system solutions for our LEO and interplanetary space vehicle missions. With more than 137 cumulative years of mission operations and heritage and more than 45 missions on with the MAX flight software solutions, we believe that this provides a clear differentiator in the marketplace. Lastly, I'm excited to have a footprint in Colorado, the second largest aerospace economy in the United States, with a strong base of research institutes, universities to bolster Rocket Lab's workforce. And today's a big day. I'm very excited to announce the signing of a definitive agreement to acquire Planetary Systems Corporation, or PSC, an industry leader in spacecraft separation systems and quite frankly, a company I've worked with and admired for many, many years. Walt Holman and his team have built an extraordinary business based on best-in-class products that are reliable and have had 100% mission success on over 150 missions. These are viewed as the premier supplier for the U.S. government on small sat missions with their motorized light bands, advanced light bands, and canisterized satellite dispensers and separation systems. Adding PSC to the Rocket Lab team continues the execution of our stage strategy of expanding our product portfolio with best-in-class product offerings. We're excited about the cross-selling opportunities in combination of these leading spacecraft separation systems with our existing electron launch services and other spacecraft components, software and service offerings, and believe there are meaningful synergies that can be achieved post-acquisition in shortening lead time, scaling production, and driving costs to provide our customers with an even better service offering than they've had before. Looking forward into the rest of Q4, as we've already announced, we're planning to launch two Black Sky dedicated launches in this quarter, with the first launch scheduled for no sooner than November 17th UTC, so tomorrow. These missions are part of a five-launch agreement signed earlier this year with Spaceflight to deploy Black Sky's Gen 2 satellite constellation. We really appreciate Black Sky entrusting us with their satellites and look forward to these up-and-coming launches. As part of the up-and-coming Flight 22 with Black Sky Global, we'll be introducing helicopters into the operations of our recovery program for the very first time. We intend to station helicopter in the recovery zone and track and visually observe the descending stage. While we won't be attempting to catch up mid-air on this particular mission, this is really the last step in our program, we'll test all the communications and tracking for future electron launches and aerial captures. This is really a key milestone for the Electron Recovery Program and as we work to make Electron the very first reusable small launch vehicle. So with that, I'll turn it over to Adam Spice as CFO. Over to you, Adam.