Rocket Lab Corporation

Good afternoon. Thank you for attending today's Rocket Lab fourth quarter 2021 financial results conference call. My name is Tamia and I will be your moderator for today's call. Our lines will be muted during the presentation portion of the call with an opportunity for questions and answers at the end. If you would like to ask a question, please press star one on your telephone keypad. I would now like to pass the conference over to our host, Gideon Massey, financial planning and analyst 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 fourth quarter and full year 2021 financial results. Today's call is being hosted by our founder and CEO, Peter Beck, and our chief financial officer, Adam Spice. 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 the first quarter of 2022, including revenue in our principal target markets, GAAP and non-GAAP gross margins, 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 services and space systems markets, and opportunities for improved revenue across our target markets. These forward-looking statements involve substantial risk and uncertainty, including risk arising from competition, global trade, and expert restrictions, the impact of the COVID-19 pandemic, our dependence on limited number of customers, average selling price trends, and risks that our markets and growth opportunities may not develop as we currently expect and 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 2021 10-K filing, which will be filed on or before March 31, 2022, and the documents incorporated therein. Any forward-looking statements are made as of today, and Rocket Lab has no obligation to update or revise any forward-looking statements. The fourth quarter and full year 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 consistent with GAAP, we disclosed certain non-GAAP financial measures, including gross margin and operating expenses. These supplement measures exclude the effects of stock-based compensation expense, amortization of purchase intangible assets and other non-recurring interest and other income expenses, net attributable to acquisitions, non-cash income tax benefits and expenses, and performance reserve escrow amortization. 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, warrant expense related to customers and partners, third-party expenses related to mergers and acquisition activities, foreign exchange gains or losses, performance reserve escrows, and other non-operating income and loss, excluding interest expense related to debt and other non-preoccurring gains or losses. We encourage investors to review the detailed reconciliation of our GAAP and non-GAAP presentations in our investors' updated 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 effects and the effects of worn 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're providing this information to enable investors to perform more meaningful comparisons of our operating results in a manner similar to the management's analysis of our business. We believe that these non-GAAP measures have limitations in 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 replay and copy of the presentation will be available on our website for two weeks. And now let me turn the call over to Peter Beck, founder and CEO.

Thanks very much, Gideon. And before I get going here, I just want to confirm that Flight 24, which we launched earlier today, has deployed its payload and the mission is successful. So today's presenters are joining me to review Rocket Lab's business highlights and final financial results for the fourth quarter and 2021 year. Joining me on today's call is Chief Financial Officer Adam Spice. So the agenda today, today I'll be taking you through our key business accomplishments for the fourth quarter and full year 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 junior time for some Q&A. So firstly, let's start with a bit of a review of our key accomplishments in 2021. I think this slide speaks for itself, but I will touch on a key point. Despite all the challenges created by the ongoing pandemic, including stringent border restrictions impacting our operations at our New Zealand launch site in particular, we still managed to launch six Electron missions in 2021. As such, Electron retained the title of the second most frequently launched US rocket. Beyond launch, the breadth and scope of our achievements across geographic region, space application, and customers is very encouraging to me, and there's so much more to come. So Q4 highlights. In Q4, I'm very pleased that we're able to welcome Advanced Solutions Inc., or ASI, and Planetary Space Corporation, or PSC, into the Rocket Lab family and portfolio of solutions and amount the intent to inquire for their technologies, which ultimately closed in Q1 2022. Not only do these teams provide decades of industry experience and industrial-leading technology, culturally these companies have great leadership teams that will provide value to Rocket Lab for years to come. While all of this was happening, we still had a business to run and were able to launch several rockets, complete our third ocean recovery of an electron booster, inching closer to full reusable electron launch, and signing some significant contracts and achieving some pretty good project milestones. Backlog. This is the best slide. So in 2021, saw a significant uptick in our backlog. And that has continued into 2022. At December 31st, 2020, our backlog stood at 82 million. And we ended December 31st, 2021, at 241 million. And today, our backlog stands at over half a billion at 545 million, representing a $463 million increase in our total backlog since the end of 2020. And, you know, backlog to us confirmed customers and contract signs. We've seen bookings strengthen across every major product in the company, including electron launch contracts, government study contracts, interplanetary photon satellites, orbital debris removal programs, NASA demonstration missions that include photon satellites, and numerous Rocket Lab satellite components and software sales, being a global customer base. These customers include the US government, foreign governments, universities and commercial customers, and constellation operators. I do want to take a moment to state how incredibly proud I am to see 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. I had a vision for Rocket Lab many years ago that it would become an end-to-end space company, delivering best-in-class technology and services spanning the entire space economy. While Rocket Lab is still in the early stages of this strategy, it's very exciting to see that strategy start to bear fruit. As I mentioned in the prior slide, 2-4-2021 saw two successful electron launches. Sorry. As mentioned in the prior slide, 2021 saw successful electron launches, bringing our total to six launches for 2021. Rocket Lab has now deployed 109 satellites across 23 electrons launched, and if you want to include today as well, that's 110 and 24. So we stated that part of our strategy after entering the public markets would be to further expand our vertical integration into space systems, manufacturing and greater space systems supply chain ecosystem. We've executed on that strategy as evidenced by the acquisition of ASI, PSC and Solero. With a quick refresher, ASI is based in Littleton, Colorado, the nation's second largest aerospace economy. and they develop industry-leading off-the-shelf flight software and guidance navigation and control systems. ASI's MAX flight software has been operating across more than 45 spacecraft for a cumulative 135 years in space. ASI's customers include leading aerospace prime contractors, the U.S. Air Force, U.S. DOD organizations, NASA, and commercial spacecraft developers. In Q4, we also acquired PSE, a Maryland-based provider of mechanical separation systems and satellite sensors with 100% mission success heritage to date across more than 100 missions. Moving on to Solero Technologies based in Albuquerque, New Mexico. Solero is a premier supplier of space solar power products and precision aerospace structures for the global aerospace market. Aquarium Solero brought the world's largest production line of high-performing space solar cells into the rocket lab business. Solero's solar cells, solar panels, and composite structural products have supported more than 1,000 successful space missions with, once again, 100% reliability and mission success to date. Over the past two decades, Solero's products have played key roles in some of the industry's most ambitious space missions. including supplier power to NASA's Parker Solar Probe and Mars InSight Lander, the largest solar array ever to be deployed on the surface of Mars, and several Cygnus cargo resupply missions to the International Space Station to mention just a few. These three strategic acquisitions joined Sinclair Interplanetary, which we acquired in April 2020. Later in the presentation, I'll spend some time discussing the positive impact of these acquisitions and the capabilities that we have now bought in-house. So acquisition strategy, I love this slide as it highlights the breadth of Rocket Lab's capabilities and that we've rapidly developed over the past few years, spanning nearly the entire space ecosystem. and proving that Rocket Lab is a leading provider of end-to-end space solutions. Investments both organically and inorganically allow Rocket Lab to capture value from almost every active mission in whatever phase the mission is in. We're seeing this in our internal business development meetings as it can be seen in the backlog growth we have experienced in 2021 and that has continued into 2022. From the James Webb telescope to ISS resupply missions, mega constellations, or cutting-edge defense industry satellites, Rocket Lab's products and services can be seen almost everywhere. In 2021, our technology was included in 38% of all launches in 2021. And we have over 220 missions in development through the launch and spacecraft programs across almost every sector of the rapidly growing space economy. These missions include NASA, European Space Agency, Japan Aerospace Exploration Agency, or JAXA, Department of Defense, commercial constellation operators, and prime contractors. In addition to Rocket Lab's expanding products and services and technologies, Rocket Lab's footprint is also expanded. With the recent acquisitions closed, Rocket Lab now has locations across five different states in the United States, as well as three locations in New Zealand and one location in Toronto, Canada. This expanded footprint has enabled Rocket Lab to attract and recruit some of the smartest people in the space industry to help guide and shape our programs, and I see this as a really strategic long-term differentiator from our peers. It seems like years ago that Rocket Lab completed the successful D-SPAC merger with our partner, Vector Acquisition Corporation, but it was such a watershed moment in Rocket Lab's history and will continue to enable considerable growth into the future for Rocket Lab. We could not be happier to work with Vector and who really turned out to be the perfect partner for Rocket Lab. This has unlocked considerable amounts of opportunities for Rocket Lab and we continue to do so And I could not be happier with really how things have gone in the last six months. We've also signed and continue to sign a large number of multi-launch agreements. So Electron really continues to distinguish itself in the industry, leading small launch vehicles with multiple multi-launch deals signed across commercial constellation operators. Customers are choosing Electron as a reliable, dedicated launch solution that will place their assets on orbit where and when they need them to ensure the highest long-term value and quickest path to revenue for their world-changing technology. In the midst of everything else Rocket Lab accomplished in 2021, the Neutron program remains on track. Rocket Lab remains committed to becoming a launch provider for the National Security Space Launch, or NSSL, program. which launches the US's most critical missions, as well as becoming the constellation building workhorse across a broader government and commercial sectors and operators. With two Electron first stage recoveries successfully completed in 2021, the foundation has been laid for the first mid-year launch recovery attempt, which will occur very soon in 2022. Full stage one recovery is important to enabling greater launch cadence and also lowering electrons cost per mission. In August 2021, our ESCAPADE program passed the key NASA mission review, moving the mission into the next phase with a target launch readiness date of October 2024. This mission is in partnership with UC Berkeley's Space Science Laboratory, and it will put two photon spacecraft into the atmosphere of Mars to study its magnetosphere. The mission will leverage Sinclair, PSC, ASI, Solero, and Rocket Lab organic products and services, helping provide a really low-cost solution with considerably less supply chain risk than traditional programs. Lastly, for 2021 accomplishments, it's important to highlight the diverse and high-quality new and repeat customer base that Rocket Lab is establishing and supporting across our equally diverse set of products and service offerings. So now I'd just like to discuss a few additional accomplishments that Rocket Lab has achieved post the end of the fiscal year 2021. Well, this week we announced in collaboration with NDA and Global Star a $143 million contract to design and manufacture 17 satellites for Global Star with the option for nine more. This contract reflects a deliberate and well-resourced strategy to grow Rocket Lab's space systems business and deepen our value proposition beyond launch and into complete end-to-end space mission solutions. Rocket Lab was awarded this contract over established Tier 1 prime contractors in a highly competitive bid process. It's important to say these are not CubeSats, these are large, complex 500kg spacecraft. Meeting the stringent customer requirements for designing and building this constellation required demonstrating that Rocket Lab has the expansive facilities, expertise and embedded supply chain capabilities to deliver on such a complex mission. To deliver these spacecraft and establish long-term capabilities for spacecraft manufacturing at scale, we are building out state-of-the-art spacecraft manufacturing facilities at our Long Beach headquarters and production complex. Feeding into this are the components and subsystems created by Rocket Lab's recently acquired company. This deep level of vertical integration offers our customers central security and really attractive pricing. When we first announced plans to become a public company, we underpinned our space system strategy with one simple aspiration. Everything that goes to space should have a Rocket Lab logo on it. Today, we've made great progress on that strategy with our organically developed technology and Avira acquisitions. Rocket Lab now delivers multiple parts of the launch and satellite supply chain, enabling us to offer schedules, security, and attractive pricing. We operate state-of-the-art facilities, have 1,200 strong global team and a robust supply chain now in place to deliver spacecraft and component manufacturing at scale to meet growing demand. The NDA contract is just one example of the strategy now in play. Since the end of the fiscal year 2021, Rocket Lab has also been selected by NASA to be part of the beta program, which unlocks up to $300 million in potential launch services and revenue across 12 different launch providers of which Rocket Lab is one of them. We began the development of a new space systems complex. Last month, we announced a dramatic expansion with a new space systems complex in Littleton, Colorado, to support the growing customer demand for flight software, mission simulation, and guidance and navigation and control services. When we made the decision to acquire ASI, the Littleton, Colorado location was viewed as a strategic geographical location, and this investment signifies our views. Last week, we announced bringing on our third launch pad to operational status, and today we well and truly christened that, representing the second launch pad at our Launch Complex 1. This essentially doubles our launch capacity and allows us to meet the growing demand for Electron launch services. After a considerable deliberation, we're excited to have chosen the state of Virginia for our Neutron launch site and production complex. The Commonwealth of Virginia came forward with a very attractive offer that we could turn down, and with considerable investment incentives, both in infrastructure and an operational system improvement at the Mid-Atlantic Regional Spaceport to enable neutron launch and production needs. So neutron is officially basing itself at Wallops Island, Virginia. So with that, I'll hand over the call to Adam Spice, our Chief Financial Officer. Adam, over to you.