Rocket Lab Corporation

Ladies and gentlemen, thank you for your patience and welcome to today's Rocket Lab third quarter 2022 financial results conference call. My name is Amber and I will be your moderator for today's call. All 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, Mariel Baker, Communications Manager with Rocket Lab. Mariel, please proceed.

Thank you. Hello, everyone. We're glad to have you join us for today's conference call to discuss Rocket Lab's third quarter 2022 financial results. Our presenters are Rocket Lab founder and CEO Peter Beck and Chief Financial Officer Adam Spice. After our prepared comments, we will take questions. Before we begin the call, I'd like to remind you that our remarks may contain forward-looking statements that relate to the future performance of the company and these statements are intended to qualify for the safe harbour protection from liability established by the Private Securities Litigation Reform Act. Any such statements are not guarantees of future performance and factors that could influence our results are highlighted in today's press release and others are contained in our filings with the Security 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 development. Except as required by law, the company does not undertake any obligation to update these statements. Our remarks and press release today also contain non-GAAP financial measures within the meaning of Regulation G enacted by the SEC. Included in such release is a reconciliation of these non-GAAP financial measures to the comparable financial measures calculated in accordance with GAAP. Lastly, this call is also being webcast with a supporting presentation, and the replay and copy of the presentation will be available on our website. Now let me turn the call over to Peter Beck, founder and CEO.

Thank you, Muriel, and welcome everybody to today's review of Rocket Lab's Business Highlights and Financial Results for Q3 2022, presented by myself and our Chief Financial Officer, Adam Sparks. Today's presentation, we will go over business accomplishments for the third quarter and further achievements we've made since the end of the quarter. We'll also include commentary on our market position across launch and space systems and discuss some of the big contracts we have underway. Adam will then talk through our financial results for the third quarter and our financial outlook for Q4. After that, we'll take some questions from those listening and finish off today's call with upcoming conferences we'll be attending. All right, on to what the company has achieved this quarter. The quarter ended strongly for Rocket Lab on the launch side of the business as we equaled our record for the number of successful launches to orbit per year, quickly surpassing it within the first few days of the fourth quarter. We completed two flawless national security launches, one after the other, for the U.S. government's National Reconnaissance Office. The NRO are a prime customer in the launch business with stringent mission requirements, and so it's both an honor and a show of our strength as a launch leader that they continue to return to us to deliver their national security missions to orbit. Our third mission was the second of a bulk buy of dedicated launches for Japanese Constellation Builder Suspectus. Electron again performed perfectly to deliver Suspectus payload to the exact position required to support their Constellation growth. Flying Dedicated offers multiple benefits for small satellite constellation operators. These include control over their own launch schedule and ability to reach specific LTANs that aren't achievable if they fly on a large mission. These reasons, along with Electron's reliability, are why customers are coming to us and booking up multiple launches at once. Transpector's bulk buy of launches will continue into 2023, with another launch scheduled for then, along with group launches for French constellation operator Canest, and another set for U.S. operator Hawkeye 360, expected to launch in the first half of next year. Sticking with Electron, we successfully fired a Rutherford engine that had been returned from the ocean during one of this year's earlier recovery missions. With that is a massive technical achievement on the path to rocket reusability. Electron, Proton and Neutron are in the scope of the U.S. Transcom research contract awarded to Rocket Lab, this past quarter to examine their potential use for cargo transport and point-to-point travel. Speaking of Neutron, the program achieved some key wins in engineering milestones this quarter, including the selection of a new site for Rocket Lab to develop Neutron's Archimedes engines and the production of full-scale hardware, including Neutron tank structures and Archimedes engine prototypes. I'll take you through those achievements in more detail later in this presentation. On the space system side, Some of our earlier investments to grow the production capability of each of these space systems streams really started paying off. In particular, we announced today that our separation systems division has secured the largest bulk order ever, totaling over $14 million. Those 80-plus separation systems will support the Department of Defense Space Development Agency mission to build a constellation that will serve the future national defense and space architecture. As missions like these continue to come in to the fore, our short-up production capacity across vertical space system streams means that we're ready and able to service these types of large contracts now and into the future. Alongside this segregation systems win, we also completed the high-volume manufacturing line for our satellite reaction wheels that will service an undisclosed mega constellation customer. This production line is capable of manufacturing up to 2,000 units per year, and produced its first engineering unit this quarter, which keeps us on track to start producing flight-ready wheels early in 2023. Rounding out our Q3 highlights for Space Systems, we also were awarded a contract to provide solar power technology for three Lockheed Martin-built satellites for the US Space Force. Okay, so three launches. As I mentioned at the top of this call, we had a strong quarter of launches with three successful orbital missions for Electron, Two of these were for the NRO office, and the third was for a Japanese Constellation operators' inspector. Both repeat customers for dedicated Electron launches. Since April, we've maintained a launch cadence of once a month with 100% mission success, and we're on track to maintain that tempo for the rest of the year, including our first launch from our launch site in Virginia, Wallops Island. With our suspected mission, we equaled our previous annual record of seven launches a year, only to beat it in the first week of June 4 with our eighth, successful orbital mission, and again with our ninth mission just five days ago to deliver a total of 152 satellites to space. Even without these four-quarter launches, our missions in Q3 cemented our position as the launch provider of choice for small satellite operators and further stretched our lead as the most frequently flown and reliable small launcher. I know I said I would go over rocket reusability program later in the call, but first I want to point out a key technical milestone we achieved in a third quarter for that program. For the first time, we successfully fired an engine with reused parts from the previous Electron mission that was recovered from the ocean. This particular Rutherford engine was previously successfully launched to space and returned to Earth during our recovery mission there and back again in May. The refurbished Rutherford engine passed all of the same rigorous acceptance tests we put in every flight engine through. It fired for an accumulated 200 seconds. you know, restarted multiple times, produced the same amount of thrust and performance as a new-to-built engine, so good of new. This is very exciting because the fact that we achieved such a high level of performance from an engine, you know, when we dredged it out of the sea, makes me excited and optimistic about what we can do with the recovered dry engines and further validates that we're on exactly the right path for bringing reusability to small launch vehicles. Onto our responsive space program. In Q3, we opened up our responsive space program to on-ramp commercial and government satellite operators to rapid call-up launch capability and streamline satellite build and operations options. There's been a lot of talk in the industry and a number of line items and government budgets about responsive space. It's a capability that's been sought for decades to enable satellite operators to rapidly call up a launch service, get it to space in a short timeframe. But the reality is, responsive space, at least for us, already exists for small satellites, and it exists with electrons. There's a lot of talk about it, but we've actually demonstrated it. Our fastest launch turnaround time this year was a sum total of just 15 days, which comes down to the maturity of our rocket, our infrastructure, and our team. We introduced this program to formalize what we already offer to the market, and we're seeing strong interest already from repeat and future customers. Onto Neutron. Excuse me. So as I've described, a good quarter for Electron, but Q3 also saw strong progress for our large rocket, Neutron, and I'll take you through some of those key achievements now. To start with, Neutron has a new home, or at least Archimedes' engines do, at NASA's historic Stennis Space Center in Mississippi. In late September, we selected Stennis as the location of the engine test facility for our reusable rocket engine, Archimedes, which will power the Neutron rocket. And just last week, we cut the ribbon on Stennis along with the Mississippi senators and other senior figures in attendance, there too, to show a strong local and federal support that we have for Neutron. The Archimedes test complex will be located within the larger A test complex at Stennis Space Center across a one million square foot area. The site itself already comes with all manner of critical infrastructure like cryogenic systems, tanks, test systems, instrumentation bays, buildings, and a whole lot more that we can quickly adapt to support our engine test operations. We can also leverage the wider Stena Center's infrastructure for power systems, transportation networks, commodities, and supply chains, all the little things that make our test site run and tick quickly. That allows us to get set up quickly and get testing faster than if we had to build an engine test site from scratch. The state of Mississippi has really gotten behind us to bring Neutron to the area too, with the state putting forward some significant capital investment for us to develop the facilities for Archimedes and Neutron. Building in Stennis really fast-tracks development for Neutron, and already the team on the ground are getting to work to modify some of the systems and get the site ready for the very first Archimedes engine hot fire. Speaking of Archimedes, this past quarter saw progress on the development of our new reusable rocket engines. we made a change in the cycle of the engine from a gas generator to an oxidizer rich closed cycle to really optimize the performance of the engine not not to increase the the level of isp or performance as you as you might think but to maintain a power balance right in the middle that brings the temperatures and change the pressures down for a really a super reliable engine because that's what you want an engine for a reusable rocket an engine that can be used over and over again and which has a scope for increased performance if we need to or throw it up or throw it down for any re-entry and landing at Azure PaaDS. So with that, all of the major design elements of the engine are complete. This quarter we moved into producing some early prototype parts, 3D printing components including pump parts like oxidizer volumes and others. With Stennis secured and engine development ready and accelerating now, we're on the right track with Archimedes and well positioned to maintain our targets to see a hot fire engine soon. Continuing on the Neutron theme, Neutron is a unique rocket not only in its design but in the materials we use to construct it. It's expected to be the world's first carbon composite large launch vehicle made up of new specially formulated carbon composite materials, obviously lightweight and very, very strong. But the new element of being able to withstand the heat and forces of repeated reentry and launch. Now, we use carbon composites for Electron. In fact, we were the first in the world to build an all-carbon composite orbital rocket. So we understand these materials and these technologies really, really well. Now, with carbon composite rocket, one of the best ways to determine the program's progress is whether the structural mold for the rocket are complete or not. Because if molds are built, that means that the rocket's design is mature enough to invest in the capital and the tooling. And that's where we are today with Neutron. In Q3, we completed the molds for its tanks and have started to develop full-scale prototype hardware so parts can be made quickly to speed up Neutron's timeline. This type of advancement in the program might not seem too flashy, but it's highly important for Neutron's early development. We're expecting the first Neutron tank to come to life by the end of the year for this prototype tank. Now, to build Neutron's carbon composite tanks and structures quickly, the best way to do that is by automation. And this is another area this quarter that we've completed early investment into in the tooling and the machinery by using rocket building robots. The process is called automated tape laying. It's quite a mature process where meters of carbon fiber are laid down every minute to build the structural material for Neutron's structures. It's an advanced composite manufacturing technique that's really optimized for performance, speed, and cost. Carbon composite on a strength-to-mass ratio is at least four times lighter than metallics like steel, meaning that a quarter of the amount of the material actually needs to be used for the same specific strength. And using our rocket-building robots, we can really maintain and minimize labor and still manufacture completed tanks in a very short time frame, an order of days. out to the east coast now to virginia and we continue to make really good progress on the neutron factory there the 28 acre area was literally uh excuse me literally greenfield when we started and uh has now been graded uh concrete poured in the first fillings up within just seven months from groundbreaking in april this year we're expecting our first stage one neutron tank to complete it on the site too which has been kicked off in this current quarter The site here for our production complex for Neutron that will support its production and assembly and integrated launch. It's where we build the rocket, but it's also where we will do some of our tests and some of our system infrastructure will be there as well. The thing about the site and the advantage we gain from its location is how close it is to the Neutron launch pad. In fact, just two miles up the road. This allows us to unlock all of the constraints that a typical rocket program otherwise faces. There's a reason why most modern rockets are about three, just a little bit over three meters in diameter, and that's because they have to go through some kind of tunnel or bridge somewhere on the way from their production site to the launch site. That's not going to be the case for Neutron. It's a unique proposition that we have with the launch site and pad production code complex of Neutron's major functions being so closely located. where we can build the rocket but also test it in very close succession to really help accelerate Neutron's development timeline. Once Neutron is up and flying too, it will mean slick and streamlined operations in a place where we're not handling the rocket multiple times and transporting it through various parts of the country to get it to the pad. Right, on to space systems. So moving into space systems now and some of our accomplishments here in the quarter. The ethos of our entire space systems line has been to enable easier and faster access to space on proven and affordable hardware that is available at scale. Our satellite separation system by PSC have been a key offering of our vertically integrated space systems business, having come to the table with 100% mission success heritage across more than 100 missions launched across most major US and international rockets. Being acquired by Rocket Lab meant PSC could continue their commercial hardware trade, but by tapping into Rocket Lab's resources and manufacturing capability, grow the business. And so it's fantastic to share today that under a year since the acquisition, we recently brought in our highest value mission for separation systems to date. Two orders totaling $14 million. And I'll take you through that deal in more detail in the next slide. The $14 million win is made up of two contracts to supply more than 80 of our light bands to Lockheed Martin and another underscores customer who are both building satellites for what's called Trunch One tracking layer, which has been developed by the US Department of Defense Space Development Agency. These 80 plus light bands represent the majority of the separation systems required to deploy the entire Trunch One tracking layer constellation. an early warning global system to detect missiles and protect US national security. This is a critical capability that relies on the satellites and the constellations being accurately deployed to the precise location. So the fact that not one but two organizations have entrusted us to build these devices that place the satellites in orbit tells you just how well regarded our separation systems are in the market. Further to the US government side of the business, in our solar power division, we secured another win with an award to deliver the solar cell assemblies for three Lockheed Martin-built satellites for the United States Space Force. These three large spacecraft are part of the latest evolution of the USS Epps Missile Warning System and recently passed the critical design review to become certified for space, set to launch in 2025. Deep expertise in space solar power, reliability of the tech, and extensive manufacturing capability are some of the reasons behind the latest award, which supports satellites production on a really aggressive schedule. On to Mandrake. Over in our mission software department, our team and technology have been helping progress a major US government program called Blackjack. This program is being managed by DARPA and the government's space development agency to create a global low latency, high volume data communications constellation using optically interconnected satellites. An early test of that network was carried out in June with the success of the Mandrake 2 mission, which successfully demonstrated a functioning optical communications link between two satellites. We played a leading role in the success of the Mandrake mission with our software and our mission simulation, and testing solutions have been a part of the mission from the very beginning of the program. We also run mission operations for Mandrake, where the team is responsible for daily spacecraft health and status monitoring, payload tasking, and trajectory control between the two spacecraft to support the optical cross-link testing. And while we're counting this mission as a win for our space systems business, it's also an example of a vertical integration strategy and space systems paying off across the board. We supplied the star trackers and reaction wheels to the Mandrake spacecraft, which enable it, with the high precision control it needs to achieve the optical communications link, and our separation systems were also used to deploy these satellites to space. Another showcase this quarter of the strength of our end-to-end mission solutions was the award of a new research and development agreement with the United States Transportation Command, or US STRATCOM. US STRATCOM are responsible for all global logistics for the US military. It's DOD's future thinkers, and they're looking forward to a rocket cargo transport and point-to-point travel for its operations in the years to come and see an opportunity across both our space systems and launch offerings. In Photon, our research agreement will explore the use of a spacecraft to establish on-orbit cargo depots and deliver reentry capabilities. While Neutron and Electron have been examined for their ability to transport cargo point-to-point around the world. And then coming on to our Q3 highlights, we've completed the construction of a high-volume space systems production line to produce reaction wheels at scale. Our first prototypes for one of our mega-constellation customers has rolled off the line and is completing its testing before we begin delivering the final products early next year. This production line is capable of producing up to 2,000 units a year, which is an enormous increase in the availability of these critical products to the market. Where components like reaction wheels have been individually built by specialized engineers over long wait times, for this production, we've incorporated advanced metal machining centers optimized for unattended operation, automated production tools, and automated environmental testing and workstations. This production line coming online means we're meeting the bottleneck of demand for these products, the satellite constellation builders, head on. where we see significant growth opportunity in our space systems division. First quarter accomplishments. So as you saw there, another really good quarter from those business accomplishments in Q3. Now I'd like to take you through a few more exciting developments for the company since the quarter end. So business launch year. So starting with Electron, we've had a business launch year. Just a week into the fourth quarter, we successfully launched our eighth mission. Five days ago, we launched our ninth mission. and uh of the year and you know surpassing our record for the calendar year uh we said we would open up access to space with electron with an increased launch cadence and we we have um with a successful orbital mission every month this year since since april in fact electron has launched successfully more times this year alone than every other commercial small launch vehicle vehicle uh combined across all of their launches to date and we're still not finished So Electron and our team have had a stellar year picking up the pace while also delivering some of our most demanding missions ever. Arguably, our hardest mission was the Capstone mission, sending a satellite to the moon on Electron and one of our Proton spacecraft. It was the heaviest mission we'd ever lifted, the most technically demanding on the rocket. And then only 15 days later, our team turned around and for a flawless launch of one of our highest level national security customers there is, and that being the National Reconnaissance Office. We've had the success because we've advanced the technology, built the infrastructure up front, set up three launch pads and three operation centers, developed a world-class team of engineers. Victron has really hit its stride this year and is well set to continue an increase in cadence in 2023. Before that, though, we have another electron mission to fly, our 10th for 2022. this time flying from Rocket Lab Launch Complex 2 in Wallops Island, Virginia. Launching from this pad is going to open up a new era in launch for small satellite customers. We've been providing reliable and responsive access to space for more than four and a half years now and are excited to build on that strong heritage by unlocking a new path to orbit from Virginia's Eastern Shore. Across these three pads, both of our launch sites, we can support more than 130 launch opportunities every year. to deliver unmatched flexibility in the market for government and commercial satellite operators. On the AFTS front with NASA, we've been encouraged by their recent progress and their expression of confidence that they will be ready to go by December. Electron arrived in Virginia last month and is deep into processing and already on the ground by the team. Launch rehearsals and integration of the Hawkeye 360 payload to the rocket will be taking place in the next few weeks before rollout to the pad at LC2 for a launch. I'm personally very much looking forward to seeing this Electron fly out of Virginia, as you might imagine. Finally, I'm also excited to announce today that we have our second launch lined up from LC2 for an undisclosed commercial Constellation customer on an Electron in January, meaning that we'll have two back-to-pack missions from Virginia in just a matter of weeks. Even in its early days of flying from LC2, Electron is set to change the game and set the standard for responsive and reliable small launch from U.S. soil, with these two missions expected to be the fastest launch turnaround by any operational small launcher. Electron is already the most frequently launched small orbital rocket globally, and with both these complexes combined, the pace is really expected to pick up. This launch in January from LC2 will be Rocket Lab's first Electron launch in 2023, as part of a busy launch manifest. Other launches already announced for 2023 include the first of five dedicated missions for Internet of Things connectivity provider Kines, the launch of a mission to demonstrate space debris removal technology by Astroscale in Japan, and the continuation of a multi-launch contract with Hawkeye 360 and Suspective. This is not an exclusive list of all of our manifests for 2023, but it's just some of the customers that we've already announced this year. Moving on to space systems now, and our contract to NDA for Global Star has been expanded to include us developing a new global satellite operations control center, what we call the SOC, for the constellation. We'll not be disclosing the terms of this contract, but I can tell you it does represent an extension to the $143 million contract already in place. The foundational mission software for the SOC will be based off our existing MAX system, the same one used to manage the DARPA blackjack program that I spoke about earlier. The combination of our software and deep expertise in operating demanding and complex missions alongside our existing partnership where we are the driving forces behind the NDA choosing to extend this opportunity to us. By designing and manufacturing GlobalStars spacecraft buses, delivering the flight and ground software solutions, and developing and supporting the spacecraft operation centers, We're once again demonstrating that our strategy of going beyond launch and delivering complete space mission solutions basically end-to-end. A big part of our growth and acquisition strategy has been the vertical integration of supply chains to mitigate constraints, the strategically important components needed to build out a functioning satellite as part of the constellation. The companies we've acquired over the years, we believe, are the best in the business in their own right. But more importantly, combining them has provided us with inorganic and organically developed solutions that cover the complete mission end-to-end to deliver an operational platform that's going to be used globally. And this NDA contract is a perfect example of that. We're building all 17 of the Constellation's new spacecraft buses. The SOX Global Star mission will use our software. The satellites themselves will be powered by our solar panels. They'll communicate using our frontier sea satellite radios. They'll maintain their position in space using our reaction wheel. Each satellite will be operated by our software, and they'll have power distribution systems internally built by Rocket Lab. The customer also has the option within this contract to launch these satellites with us. Additionally, there's an option for us to support the ground operations for Global Star as well. the strength of our competitive advantage and vertical integration really shines with this contract it helps to reduce the cost of our own systems but also allows us to monetize it and the diversity of the revenue that you're seeing uh from from us is a combination of that basically speaking of revenue generation and space systems early in the fourth quarter we signed a contract with nasa's uh jet propulsion laboratory to provide solar panels for shoebox-sized mobile robots as part of the agency's CADRE program. The CADRE acronym stands for Cooperative Autonomous Distributed Robot Explorers, much easier to just say CADRE, which NASA's next generation of planet explorers that will work as a group to collect data from hard-to-reach places on the Moon, Mars, and elsewhere. We're going to be powered by our IMN solar cells, a superior type of space-grade solar cell we provide for the most innovative and far-reaching customer's mission. The latest contract with JPL extends a long history through Celera of powering NASA's satellites and spacecraft, including NASA's Ingenuity helicopter. We'll be using the same solar cells on Cadre as we did for the Ingenuity helicopter. Mars helicopter with the higher efficiency and lower mass combination in those cells being deemed a critical factor for enabling the mission's success. So with that, let me turn it over to Adam Spice, our Chief Financial Officer.