Rocket Lab USA, Inc.

Good evening and thank you for standing by. My name is Kelvin and I'll be your conference operator today. At this time, I would like to welcome everyone to Rocket Labs' fourth quarter 2024 Financial Results Update and Conference Call. All lines have been placed on mute to prevent any background noise. After the speakers remarks, there will be a question and answer session. If you would like to ask a question during this time, simply press star followed by the number one on your telephone keypad. If you would like to withdraw your question, press the pound key or star two. Thank you. I would now like to turn the call over to Mariel Baker, your communications manager. Please go ahead.

Thank you. Hello and welcome to today's conference call to discuss Rocket Labs' full year and fourth quarter 2024 Financial Results. Now, 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 harbor 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 developments. Except as required by law, the company does not undertake any obligation to update these statements. Now, 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 and our supplemental materials are reconciliations of these historical non-GAAP financial measures to the comparable financial measures calculated in accordance with GAAP. This call is also being webcast with a supporting presentation and a replay and copy of the presentation will be available on our website. Our speakers today are Rocket Labs founder and chief executive officer Sir Peter Beck, as well as Chief Financial Officer Adam Spice. They'll be discussing key business developments and highlights, including updates on our launch and space systems programs. We will discuss financial highlights and outlook before we finish by taking questions. So with that, let me turn the call over to Sir Peter.

Thanks, Mary-Ellen. Thanks for everybody joining us today. Look, 2024 was their biggest revenue year ever, and I'm proud to share that we delivered very strong results for Q4 2024. And indeed for the full year, we achieved our highest annual revenue figure to date of $436 million. That's more than 78% increase on previous year's revenue, demonstrating that our strategy of delivering -to-end space services is paying off and delivering significant growth. From Q3 to Q4 last year, we saw growth of more than 26% and year on year Q4 growth was 121%. Something you hear me say often at Rocket Lab is we do what we say we're going to do. And in this case, that's delivering significant growth, 382% increase in Q4 revenue, to be precise, since our entry into the NASDAQ in 2021. On the launch side, these figures are driven by an increase of electron launch cadence and the introduction of hypersonic suborbital test launch capabilities. Space systems contribution has been continued strong execution across both spacecraft and constellation build and operation, as well as our merchant satellite component businesses. Now, let's dig into these areas in a little bit more detail in the following slides. Our accomplishments in 2024 really speak for those record numbers. On the launch front, we delivered a record number of 16 launches spanning Electron and Haste, all with 100% mission success. Once again, we have maintained our position as the leading small launch provider globally and the second most frequently launched US rocket annually. We signed more than $450 million in new contracts in 2024 across launch and space systems, further strengthening our backlog, which currently sits at just over a billion dollars. We also achieved a world first by successfully launching two missions within 24 hours from pads on either side of the planet. On the space systems front, there are too many achievements to distill into one slide, so here are just a couple of my favorites. We made significant progress on the design and build of the 40 plus spacecraft in our backlog, but I'm particularly proud of the team completing the manufacture and test of the twin spacecraft for NASA's escapade mission to Mars. They did this on an impressively short timeframe and an incredibly cost competitive for an interplanetary mission. While they get to launch, we are excited to see these birds on their way to the Red Planet soon. Our reentry for Vardar with another major milestone, successfully enabling the first in-space manufacturing mission outside the International Space Station.

Since

the first reentry early last year, we've delivered two more Pioneer spacecraft for Vardar, with the second successfully returning to Earth in South Australia. Another third Pioneer spacecraft for Vardar is just now days away from launch. That's just a tiny snapshot of our achievements in 2024, but before we dig deeper into the updates across electron neutron and space systems, I want to provide an overview of our strategic focus for this year. We're building a truly -to-end space company that means owning the full value chain of having the keys to unlock enormous potential from the rapidly growing space economy. The first two steps are well underway with launch in-space systems, meaning that we have our own ride to space and we can build and operate the satellites on orbit. The final remaining step is space applications or delivering data or services from space using our own constellation. In 2024, we made significant progress across all three and we're building on that again in 2025. On the launch front, this year is the year of neutron. We look forward to unlocking the medium launch bottleneck by bringing neutron to the pad to help launch and more than estimated 10,000 constellation spacecraft that need deployment in the coming decade. We continue to wrap up our small launch cadence with more than 20 missions in 2025 on the manifest across Electron and Haste. Of course, as usual, these missions only launch when our customers are ready. It's worth pointing out that as far as I'm aware, Rocket Lab is the only launch provider with missions scheduled this year across small launch, medium launch, hypersonic suborbital test launch. This demonstrates the breadth of our launch experience and capabilities and also positions us to take advantage of the time exposure across several different growing launch markets. On the space systems front, we have more than 40 spacecraft in various stages of production right now. By the end of this summer, we expect to have more than quadruple the number of Rocket Lab spacecraft on orbit, ready to launch or have completed their missions. I'm also excited to reveal a new addition to our spacecraft lineup, one that slots nicely into our vision for space applications. And I'll talk more about the satellite later in the call. But first, so now for some updates on Electron. 2024 was a fantastic year for Electron. Last year we increased our launch cadence 60% year on year and 2025 is shaping up to be even bigger. We've launched twice this year already, both times for satellite constellation operators and each with only 10 days of each other within 10 days of each other. Last year's trend was building out satellite constellations with Electron. In Q1 2025, this has continued with launches for constellation operators Black Sky and CNES. Both of whom have booked multiple missions on Electron to deploy or replenish their constellations. CNES in particular is worth calling out since we launched them for the first time in June last year as part of a five launch deal. We're now four launches in and on track to complete their fifth launch shortly, meaning that we will have deployed their full constellation of 25 satellites in less than a year. To put that into perspective, many constellation operators can wait for a year for their first launch with other providers. Last year we also signed a multi-launch deal with the Japanese Earth imaging company IQPS for four electrons. And then just this month they signed another agreement to double that and lock in eight electron launches for their constellation deployment over 2025 and 2026. In 2024, we built on our success in the small launch market with Electron's suborbital variant HACE. Last year's Pentagon budget request for hypersonic research was up 46% to $6.9 billion on the two years prior and we're ideally positioned to support this expanding market. We're the only commercial provider that's executed two launches in 21 days for the Department of Defense, MarkTB program, which we completed in Q4 and we have another five HACE missions locked in for the DoD and its contractors. In January, we also announced that we've been selected by Kratos to support the next phase of the March MarkTB program called MarkTB 2.0. It's a $1.45 billion five-year contract to expand hypersonic technology testing and with HACE we're uniquely suited to meet that challenge. I think it's also important to place all of that within the wider context of today's geopolitics and America's defense technology. Hypersonics have become increasingly urgent under the new administration. In the words of the President, within the executive order he issued in January to build the Iron Dome for America, the threat of hypersonic and other advanced aerial attacks is the most serious threat facing the United States today. Furthering peace of strength is critical to America's defense. Our capabilities with HACE, our affordability and our speed, all of which are the new administration's top priorities, makes it a great product fit to address these challenges. Right, moving on from small launch into neutron updates. Well, the title really hearses it all. This is the year of neutron, our monopoly breaker to unlock the bottleneck of medium launch. As I said before, there's more than 10,000 satellites that need launch in the next five years from commercial constellations alone. And then there's the growing demand from national security and defense missions as well as interplanetary exploration for the science community. And it goes on. The need is clear, so I won't labor on it other than to say that the industry is crying out for more launch options in this class. And neutron is coming to market in record time to deliver it. Neutron is also critical to us launching and operating our own future satellite constellation. So over the next few slides, I'll take you through the latest development milestones and achievements as we work to get neutron on the pad in the second half of this year. OK, so at LC3, all major hardware and infrastructure items have arrived and been installed and our civil works on the site are practically finished. Yes, and we even have water. Most recent updates include the flare stack, 165 tonnes steel circular launch mount structure that neutron will launch from, giant pair of LNG tanks, the ones you can see on the bottom left of the slides. Those are the heaviest objects to have ever crossed the Wallops Island Bridge and their installation marks the completion of all the long lead propellant storage for the launch site. What's left now is to complete the electrical and mechanical connections for a fully integrated system. But otherwise, we look forward to its grand opening in a few short months. Now on to the one of the most exciting and novel features of Neutron, its hungry hippo fearing. The massive reusable nose cone halves are now live and moving, fully integrated with their avionics and actuators and all of the mechanical systems. We're testing like we're flying, opening and closing the hungry hippo at full speed to understand exactly how they behave. And I was glad to say I was there in person for the first lot of testing and I can tell you that it's a wonderful sound to hear the hungry hippo in action. And I fully encourage you to go and check out the video we'll put out today of all of that testing in action. It's pretty cool. We have a few more run throughs as we add some hardware. Then they'll soon be making their way over to our assembly and integration facilities, ready to be fitted to Neutron's first stage for launch. Let me draw your attention to the picture on the top left. That's our stage one tank stacked and ready to ship out. Check out the person at the bottom of the frame for scale and you can see the size of that tank. All of the launch vehicle is currently in production with significant parts of it currently in test before being shipped out to launch site for integration. We've been moving past flight one with structures, including fearing halves, already in production for our second Neutron rocket. For flight one though, all of Neutron's largest pieces will soon be moving across the country and making their way to the East Coast. They'll be integrated with all the avionics and software and it'll go with the fit checks and AIT before going straight into full system qualification. So keep an eye out for pictures of tanks on barges to know where we're getting close to that next milestone. Now on to Archimedes. The engines qualification campaign continues at a cracking pace where we're hot firing every few days and the testing is going well. We've got engines consistently moving across the country between the production line in Long Beach and the engine test site in Mississippi. You also may have seen we shared a recent update that performance iterations on the production line have resulted more than a couple of hundred kg shared from the engine, which is always good. And also check out the size of that second stage novel expansion cone in the bottom left of the slide that were recently produced and on its way for testing. It's a cool thing. OK, so from engine testing, we're really doubling down on our test cadence to match with the increased production rate out of Long Beach. So we're running a really intensifying test campaign on multiple engines as we lead up to flight one. So in that case, the build of a second Archimedes engine test cell is nearly complete, and this enables us to concurrently test engines as our investments in production ramp up. So having having two cells is always good. Now we've provided plenty of updates on where neutron will lift off, but not much where it will land. Well, here she is. Meet return on investment. We named it specifically for Adam Spice. Neutron's 400 foot ocean landing platform. That's what we see on the screen there. The image of the bottom of the left also providing a great sense of scale how big this vessel actually is. Alongside shore based landing sites and the ocean platform gives us the flexibility to maximize the vehicle's performance by allowing us to dedicate less propellant to landing and more to lifting our customers payloads to diverse and complex orbits. With the vessel secured, work has now begun on modifying it. We're adding autonomous ground support equipment that secures neutron to the deck when it lands, heat shielding, propulsive systems and things to keep it on target for neutrons return. The landing platform is also a clear indication that we're scaling up and moving past, you know, first minimum viable product with neutron now with one launch set for 25. We're aiming to triple that in 26 and then the landing barge is obviously critical to that ramp up. Now recovery isn't planned on the barge for the first test flight. We'll be doing a soft splashdown, but we can expect return on investment to live up to its name in 26 when it enters service for all the future neutron flights. Now the road to launch. I'm often asked what should we look at to indicate neutrons progress to the pad because there's just so much going on. So we tried to create a little bit of a visual overview here of the big ticket items that we're running concurrently right now and what's left to go to get to the pad. We've always been really clear that we run aggressive schedules and that gets us to the pad quickly. And of course, you know, I want to get to the pad faster than anybody else. The important thing to point out here is all these tasks are not serial. We don't wait to finish one before starting the next. Everything has been worked concurrently and some of them are long lead pieces that come together literally days before the launch, for example, a launch license. And now, of course, this isn't our first rodeo and we're no strangers to bringing a new rocket to the pad. We run aggressive schedules and at the end of the day, as I always say, it's a rocket program. But right now we're planning for first launch in the second half of this year. I'm very happy with the progress and the development program. Neutron is going to be a really important vehicle for the industry, and we're excited to see to be the ones delivering that. So moving on from launch now and to provide some updates on their space systems businesses. I'm happy to share mission success for our latest spacecraft VARTA. In the early hours of this morning, and I mean early, our Pioneer spacecraft flawlessly executed an Earth reentry maneuver and deployed VARTA's capsule to land in South Australia. The mission was launched in January and had been operating on orbit for over a month, delivering critical mission functions for VARTA's capsule. We have a third Pioneer class satellite with its VARTA capsule ready and waiting for launch in the coming days, which is the second satellite ready for launch of this program within a month. For our space systems team, they're busy right now helping land a NASA lunar lander mission on the moon. After its 45 day journey through space, our very own space-grade solar cells have provided over 1,400 operational hours of power for this mission. While the space software team have been providing 24-7 support for the orbit control and engine burns that have gotten this far. They'll be continuing that support for the mission right through its most critical phases too, including landing on the moon itself. On the National Defence side, our team is really hitting their stride with two critical programs. We're now deep into the detailed design phase of our $500 million Prime contract with the Space Development Agency. Early last month, we cleared a critical step of the program, the first design review that ensures our satellites and how they operate all meet the rigorous mission requirements set down by the US Department of Defence. All 18 satellites use practically every one of their integrated subsystems and components, including solar panels, composite structures, star trackers, reaction wheels, radios, flight, ground software, avionics, launch dispensers, and so on and so forth. It's a high level control over our own products within our own Prime programs that gives us the ability to deliver world class national defence solutions with certainty on cost and schedule and of course quality. We also have our 24-hour notice responsive space mission coming up this year for the US Space Force. This is one of the $32 million Victor Hayes mission with a rocket lab satellite launching on a rocket lab electron on short notice to demonstrate that we can respond to threats on very short timelines. In the defence industry, that's called tactically responsive space. It's a hugely complex yet sought after capability that the Pentagon is eager to have on hand with trusted commercial partners. With their proven capabilities across space systems and launch, it's a position we're uniquely suited for. Now, most of those missions employ spacecraft from our lineup of standard vertically integrated satellites that we announced last year. But today I'm excited to share a big announcement. Please meet Flattolite, a low cost mass producible satellite tailored for large constellations. Now, we've developed Flattolite after many years of working closely with constellation operators and getting to deeply understand their needs of today and of course into the future. Flattolite is a scalable, resilient, high power satellite that can enable capabilities such as secure low latency, high speed connectivity and remote sensing for national security, defence and commercial markets. With Flattolite, we can do something few spacecraft manufacturers can. We can build it fast, cost effectively and in high volumes thanks to our experience in spacecraft production combined with deep vertical integration of our in-house components. This puts us in greater control of cost and schedule than others relying on constrained supply chains. What's more, once we've built them, we can launch the -ELVS-2. That's thanks to its low profile stackable design. With Flattolite, we can maximise the number of Flattolites launch permission, ensuring seamless integration with Neutron. The bottom far right render with Flattolite stacked inside Neutron's fairings gives you a bit of an idea of the sensor scale here. Now, Flattolite is more than just a new product development to serve our customers ever involving needs though. It's a bold strategic move towards completing the final step of Rocket Lab's ultimate vision of truly becoming an -to-end space company and operating its own constellation and delivering services from space. By having our own ride to space with Neutron and Electron and being able to build our own spacecraft in high volumes, we're at a distinct advantage when it comes to establishing constellations with speed and cost efficiency. That's about all we can share on Flattolite today, but I'm excited to be able to share more with you soon on this, so watch this space. So with that, I'll hand it over to Adam now to provide further commentary and to discuss our financial highlights and outlook.

Thanks, Pete. Fourth quarter 2024 revenue was $132 million, which is above the midpoint of our prior guidance range and reflects significant -over-year growth of 121 percent, driven by strong contribution from both business segments, but led by space systems. Fourth quarter revenue represented a sequential increase of 26.3 percent, primarily due to the increase in launches from 3 to 5, including two HAST missions during the quarter, which come at a higher ASP versus standard Electron missions. On a full year basis, 2024 revenue was $436 million, an impressive growth of approximately 78 percent -on-year. Our launch services segment delivered revenue of $42.4 million, and our current Electron and HAST backlog continues to support an increasing ASP, with some quarterly variability tied to volume purchase commitments, launch location, and mission assurance requirements. On a full year basis, launch delivered revenue of $125.4 million, which is an increase of roughly 74 percent -on-year. Our space system segment delivered $90 million in the quarter, reflecting sequential growth of over 7 percent, driven primarily by a strong quarter from satellite manufacturing and our attitude, direction, and control subsystems business. On a full year basis, space systems delivered revenue of $310.8 million, or an increase of 80 percent -on-year. Now, turning to gross margin. Gap gross margin for the fourth quarter was 27.8 percent, at the high end of our prior guidance range of 26 to 28 percent. Non-gap gross margin for the fourth quarter was 34 percent, which was also at the high end of our prior guidance range of 32 to 34 percent. On a full year basis, gap gross margin was 26.6 percent, while non-gap gross margin was 32 percent. Although gross margins in our launch business can be volatile quarter to quarter, dependent upon customer mix and mission type, In 2025, we expect continued margin expansion in both segments as electrons cadence continues to increase at higher ASPs and our space system business continues to scale. Relatedly, we ended Q4 with production-related headcount of 1,004 heads, up 40 from the prior quarter. Turning to backlog. We ended Q4 2024 with $1.07 billion of total backlog, with launch backlog of $386 million and space systems backlog of $681 million. While -on-year backlog growth was modest at approximately 2 percent, this should be put in the context of increasing lumpiness of backlog additions, given the timing of increasingly larger needle-moving deals and customer program opportunities. Sequentially, there was a slight remixing of our backlog as a result of particularly strong bookings in our launch segment, which we expect to continue as we convert our pipeline of neutron opportunities. At first glance, our backlog has roughly a 50-50 split between government and commercial, but as you dig deeper, many of our commercial customers ultimately cater to the needs of the U.S. government and other friendly nations. We view this as a significant advantage, especially in evolving political and budgetary environments, as government's focus on space and efficiency remains a high priority. We continue to cultivate a healthy pipeline, including multi-launch deals and large satellite manufacturing contracts that, as mentioned earlier, can create lumpiness in backlog growth, given the size and complexity of these opportunities. We expect approximately 50 percent of current backlog to be recognized as revenues within 12 months. Turning to operating expenses in the quarter, GAAP operating expenses for the fourth quarter of 2024 were $88.4 million, modestly above our guidance range of $84 to $86 million. Non-GAAP operating expenses for the fourth quarter were $74.5 million, just below our guidance range of $75 to $77 million. GAAP operating expenses grew 39 percent from the prior year fourth quarter, almost entirely related to a step up in neutron spending, particularly Archimedes testing, investments in composite structures development, and IT-related spending, including a step up in cybersecurity requirements related to our U.S. government programs. Non-GAAP operating expenses also grew 39 percent -on-year, largely due to the same reasons as our GAAP OPEX increases, less the effect of stock-based compensation expenses and non-recurring transaction costs. Now focusing on -over-quarter changes. The sequential increases in both GAAP and non-GAAP operating expenses were primarily driven by continued growth in headcount and prototype spending to support our Neutron development program and related IT infrastructure and IT support for both Neutron and our SDA satellite contract. In R&D specifically, GAAP expenses increased $532,000 -on-quarter due to Neutron prototyping materials and headcount growth. Non-GAAP R&D expenses were up $3.3 million -on-quarter, more than the GAAP increase, due to the fluctuations in non-cash stock-based compensation between R&D and cost of sales related to the EAC accounting of our space systems manufacturing programs. As such, the non-GAAP R&D increase of $3.3 million represents well the underlying trend in core R&D spend in the business, again, driven largely by investments in Neutron. Q4 ending R&D headcount was 828, representing an increase of 52 for the prior quarter. In SG&A, GAAP expenses increased $7.9 million -on-quarter, largely due to an increase in outside services related to IT, legal, and finance, with IT spend largely related to security and cybersecurity requirements under our SDA contract, legal spend supporting a range of corporate initiatives, including corporate development, and year-end audit activities, which are paired with an increase in staff costs. With that GAAP spend, we reported non-recurring transaction costs of $2.2 million in Q4, owing to a step up in corporate development activities, including advancing a robust pipeline of M&A opportunities. Non-GAAP SG&A expenses increased by $2.5 million, driven by the previously mentioned GAAP increases. Q4 ending SG&A headcount was 329, representing an increase of 29 for the prior quarter. In summary, total fourth quarter headcount was 2,161, up 121 heads from the prior quarter. Turning to cash. Purchases of property, equipment, and capitalized software licenses were $21.5 million in the fourth quarter of 2024, an increase of $10.5 million from the $11 million in the third quarter of 2024. As we continue to invest in neutron research, testing, and scaling production, we expect increased capital expenditures to continue for the next few quarters. Cash consumed from operations was $2.4 million in the fourth quarter of 2024, compared to $30.9 million in the third quarter of 2024. The sequential improvement of $28.5 million was driven primarily by the increased Space Systems Programs milestone receipts, which can be lumpy. Overall, non-GAAP free cash flow, defined as GAAP operating cash flow, less purchases of property, equipment, and capitalized software in the fourth quarter of 2024, was a use of $23.9 million, compared to $41.9 million in the third quarter of 2024. We do expect a pickup in cash consumption in Q1, owing to an expected increase in neutron spending ahead of our 2025 launch, and the lumpiness in large contract-driven Space Systems milestone collections, which are projected to be lower in Q1 off a strong Q4, combined with higher payment outflows to our SDA program subcons that we expect will ultimately be reflected in higher revenue recognition in the back half of 2025. The ending balance of cash, cash equivalents, restricted cash, and marketable securities was $484 million as of the end of the fourth quarter of 2024. We exited Q4 in a strong position to execute on our organic expansion initiatives, as well as inorganic options to further vertically integrate our supply chain with the critical capabilities and expand our adjustable market, consistent with what we have done successfully in the past. Adjusted EBITDA loss was $23.2 million in the fourth quarter of 2024, modestly above our guidance range of a -$29 million loss. The sequential improvement of $7.7 million was primarily driven by revenue growth and gross margin improvement across both segments. With that, let's turn to our guidance for the first quarter of 2025. We expect revenue in the first quarter to range between $117 and $123 million, representing approximately 29% -on-year revenue growth at the midpoint, and expect a return to sequential growth in Q2 driven by strength in our Space Systems business. We expect first quarter gap gross margin to range between 25% to 27% and non-gap gross margin to range between 30% to 32%. These forecasted gap and non-gap gross margins reflect less favorable mix within our Space Systems segment and a lower launch ASP driven by customer mix discussed earlier. We expect first quarter gap operating expenses to range between $93 million and $95 million, and non-gap operating expenses to range between $77 and $79 million. The -on-quarter increases are driven primarily by continued neutron investment into staff costs, prototyping, and materials. We expect first quarter gap and non-gap net interest expense to be $2.7 million. We expect first quarter adjusted EBITDA loss to range between $33 million and $35 million, and basic weighted average common shares outstanding to be approximately 458 million shares, which excludes convertible preferred shares of approximately 51 million. Lastly, given where we are in the final push to not only get neutron to the pad this year, but also make advanced production scaling capex investments, such as the recovery barge that Pete spoke about earlier, as well as investing in inventory for subsequent neutron tails beyond the test launch tail this year, cash consumption will increase and diverge more than it has normally from adjusted EBITDA. We continue to see the program investment in getting to neutron and minima viable product and infrastructure to be consistent with our initial estimates of approximately $250 million to $300 million, having spent approximately $200 million of gross gap op-ex and capex through the end of 2024 on this program. Specifically, over the last four quarters, total cash consumption has been running between approximately $20 million and $40 million per quarter, and we expect this number to increase in Q1 due to a combination of these neutron-related investments, as well as long-lead procurement items for our SDA program, and a lack of significant contractual milestone payments receivable across our MDA Global Star and SDA programs in the quarter. While we proactively manage the working capital elements of our business, this unique situation is likely to result in an increase in cash consumption to approximately double from this prior range of $20 million to $40 million in Q1. We expect this dynamic to moderate in coming quarters with the resumption of contractual milestone payment schedules under our large space systems programs, and as we get the minimum viable infrastructure in place to support the inaugural launch of neutron later this year. And with that, we'll hand the call over to the operator for questions.

Thank you. Ladies and gentlemen, we will now begin the question and answer session. At this time, I would like to remind everyone to ask a question. Press the start button, followed by the number one on your telephone keypad. If you would like to withdraw your question, please press the pound key or start two. One moment, please, for your first question. Your first question comes from the line of Edison, you have Deutsche Bank. Please go ahead.

Thanks for thanks for taking our questions. One, the first one on neutron and to check the language around the timing. I think in the past, it's been talked about as mid 2025. Now you're saying second half. Is this just kind of, you know, semantics, you know, it's a couple months, or are you trying to maybe put some sort of cushion or take more time with any of the processes?

Yeah, hey Edison. You know, we've sort of said in the past mid 2025. So yeah, we're taking, you know, giving ourselves a little bit more time to get it to the pad and get the launch. But I mean, you know, we're talking, you know, months here. It's not very material.

Understood, understood. And just in terms of the launch itself, what would you kind of define as success? And I frame it in the context of, you know, let's say it gets to orbit. Does that mean we're pretty confident in the three for next year? Just curious on the parameters for what you would define as a mission success.

Yeah, no, absolutely. Our intention is to go to orbit. We're not, you know, anything less than that is not where we want to be. So no, our intention is orbital on the first flight, which I think, you know, some people in the space industry who know it well realizes that that is difficult to do. But, you know, like I said, this is the second time around. So, you know, that's what we define as success for that mission.

Great. Thank you.

Your next question comes from the line of Andres Shepard of Canter Fitzgerald. Please go ahead.

Hey, everyone. Congratulations on the quarter and thanks for the very thorough updates. Congrats on all the progress as well. Peter, just maybe to follow up on the neutron question. Maybe another way to ask is, you know, how confident are you in launching this year? And as we look into 2026, how should we think about the revenue mix starting to shift between space systems and launch systems? Thank you.

Yeah, I'll ask the first part of the question, Andres, and then pass it off to Adam for the second half. But I mean, look, you know, we're not tracking any major events that would cause us to be concerned about trying to get this away this year. I always caveat anything with it's a rocket program. I mean, we have some major tests to complete. But, you know, at this stage, we are tracking pretty confidently to try and get this launch away.

Yeah, and I can take the second piece of that, Andres. So, yeah, you know, the mix in this business, I think, will be, you know, it's not going to be too unpredictable. So if we continue to see growth in our electron business, now that will become over time a smaller part. Of course, it's all of our launch revenue today. It'll become a piece of the launch business once neutron starts to fly in its revenue generating form. So, look, if you take, if you extend, you know, our launch business that we, you know, as Pete mentioned earlier, you know, north of 20 launches this year, as with the manifests, it would indicate continued growth off of that in the 26. So you've got some natural growth there. But then you start to introduce, you know, if you talk about three neutron launches at the prices that we've discussed previously in the 50 to 55 million dollar range, you know, you're looking at a, you know, potentially equaling in kind of that first year. Of revenue production for neutron to equal what what electron is in what it's like a pure production. So that kind of just indicates the other power that that neutron brings to the model. But we also expect significant growth in our space systems business to continue in 2026. So I would say that we will see a remixing and rebalancing and probably recently we've been about a 7030 mix of space systems to to launch. And I think you'll see launch become greater in that mix. I don't think it'll become, you know, necessarily more than 50% of the overall mix in the like if you look into 2026. But I think longer term, you know, you know, Pete and I've always talked about, we like having that kind of two third one third space system to launch mix just given the lumpiness that launched naturally has given customer readiness and so forth. So I think we're right now we're kind of in a sweet spot. I think we're going to probably over index a little bit to launch as neutron scales. And then I think over time, we'll kind of balance that back out to our ideal mix of kind of two thirds space system one third launch.

That's super helpful guys really appreciate that. Maybe just a quick follow up on space systems. Can you maybe just remind us, you know, what are some key awards or key catalysts that we can look for for this year, maybe things that are not necessarily reflected in the backlog. Thank you.

Yeah, we, you know, we, you know, Adam kind of mentioned in the in the call the kind of program that we chase, you know, little little programs. We know we chase fairly significant programs and as a result, it kind of creates a little bit of lumpiness and in the backlog. And, you know, obviously we have been we've been very competitive on the FDA mission, so we'll continue to bid on those. And, you know, there's a whole bunch of new missions that have been created relatively recently to do with the Iron Dome that we think we're well placed for as well. So, you know, we'll continue to do things and and bid on the things that that that makes sense. And it's fair to say, though, that there is also some some uncertainty in the in the industry under the new administration in the defense force about, you know, which programs are getting accelerated and which programs are getting getting getting slowed down. So we just sort of roll with that a little bit.

Wonderful. Super helpful again and congratulations on the quarter. I'll pass it on.

Your next question comes from the line of Suzy De Silva of Roth Capital. Please go ahead.

Hi, Peter. Hi, Adam. Congratulations on naming a boat, Adam. So the the neutron cost, I just want to understand if it's still your expectation as neutron takes its first launch at some of those stair steps down. And if so, would that be kind of concurrently with the first launch lag a little perhaps lead as it kind of the spend is ahead any color there be helpful.

Yeah, I can take I can take a pass at that that that first part of the peak and jump in. So when you think about neutron costs, obviously the first test launch is an R and D launch. There won't be any revenue associated that launch. And so is you look forward, of course, there's going to be as we get some production efficiencies as you move from the first tail to the second tail to the third tail. You know, that's always important. But I think the more meaningful thing, obviously, and the big focus item for us to really get the neutron economics to come into focus is really reusability. And so, you know, Pete introduced the barge earlier today and I like the name of that. Certainly your return on investment is exactly what that barge is intended to do. But it's really about how quickly can we stick that first landing right so again we're not going to attempt it on the first one. The questions when do we feel comfortable to to attempt it and then we when we do for successful putting that that booster into reuse and going just as kind of we've seen other that we've seen SpaceX do you know you you you hopefully you get the get to read it a few times and then maybe as you are you can ultimately reuse that booster as we designed it to use at least 20 times. And really, when you start to amortize the cost of that expensive booster over a significant number of launches, that's really where the margin expansion comes into. So the cost of a neutron launch is really going to be dictated far and away by more than anything else, reusability. And I hope Pete wants to add anything to that.

No, you said it exactly what I was going to say, that is a critical element. And the only bit to add is that the way that neutron is designed, of course, is to burden the most amount of costs into that first stage as possible of the vehicle because we are in fact reusing it. So that's been an important design element for the vehicle.

OK, great. Another question is on the new product, the Flatolite product. It seems like this is your entry into satellite constellation satellites. I'm wondering if there's a cost per satellite advantage you may have with the architecture versus what's currently in the marketplace or what's planned from competitors, competitive offerings, or how else we should think about the advantages of this product as constellations become, and constellation economics become a big part of putting this in space.

No, that's a great question. So generally the way the conversations go is how fast can you make it and then how cheap is it? That's generally the order of events. And being so vertically integrated, we really shine on how fast you can make it because basically over the years we've just slowly been integrating more and more stuff and building more and more things in house. So that gives us a huge edge. And then of course, because we're building rockets and large structures and equipment, we just have tremendous amount of capability, whether it be machine shops or composites, you name it, robotics. We just have a huge amount of capability to really execute on. And this is, I guess, where I think to really be a large competitive player in this industry, as I've always said, you have to have your ability to build satellites at scale. And you have to have the ability to launch at scale and launches getting done with Neutron. And I'd say we're very far down the path now with space systems. And the introduction of Flattolite is really a combination of a number of years work to get a product that can truly be very low cost and very high volume. OK,

thanks, Pete. Thanks, Aaron.

Your next question comes from the line of Trevor Walsh of Citizens to JMP. Please go ahead.

Great. Hey, Jen, thanks for taking the question. Just to piggyback off that Flattolite question, Peter, is there, I think the deck said there was flexibility around the payload and just in kind of looking at how you're going to have this sort of stacking mix there within Neutron. Are there any limitations around the payload or like type of payload? I'm thinking more kind of in the Earth sensing kind of the Earth observation type realm as far as cameras and such.

Yeah, that's a great question, Trevor. So, I mean, the flat structure doesn't lend itself to large optical apertures, that's for sure like big telescopes. But basically everything else, it's super ideal for. So, you know, we do the way that the structure is designed is we do have flexibility to grow the payload bay depth and array sizes pretty easily. You know, it's like a think of it like a ladder backpack onto those structures. So, you know, we can we can shrink and grow the various payloads pretty easily. So, you know, we've really given a lot of thought to, you know, not only what our customers are asking us now, but future proof in their design so that we can address a number of different applications with it.

Great, awesome. Appreciate the color. And then maybe Adam, one quick follow up for you. Around the R&D headcount increases and maybe more specific to Neutron, is the plan for those heads be to kind of stay within the Neutron family or would they be able to be tasked and used kind of broader around launch or even into space systems? I'm just trying to get a sense of kind of again around the cost question for Neutron. If headcount requirements kind of once the first launch goes abate a little bit and just how that kind of, you know, again, more headcount employee type base kind of cost around the build out kind of might flow.

Thanks. Yeah, I'd encourage you to think more of it in terms of kind of how does how does the P&L morph over time? And I think certainly as we get past the first launch, you'll see R&D begin to subside pretty significantly. Now, a lot of the heads, you know, if we kind of take our past experience and kind of, you know, kind of extrapolate that out, you know, we tend to hire very talented kind of athletes, if you will, at engineering functions, which can do lots of different things. And so you find people that are, you know, super effective doing R&D work and then they pivot over to production and they kind of work on, you know, production engineering, you know, ME type of support work. So I wouldn't think so much of kind of, you know, elimination as much as repurposing from R&D into production because as you're ramping a new vehicle, you know, it's, it's, there's still there's still R&D type of elements and kind of skills that are necessary to kind of bring that vehicle into its mature state. So that's the way I would encourage it. So certainly we expect to see me step down in R&D, but, you know, those heads just really kind of, or the expense related to those types of heads really move into cost of sales at that point. And I'll maybe let Pete speak to the mix if he has any different views. But certainly, you know, I think the one thing that's key is, aside from the heads, you know, certainly prototyping expenses will drop significantly. A lot of what we're spending our money on today for Neutron is prototyping expense, which is flowing through R&D.

Yeah, I think you said it well Adam, nothing to add there further.

Great. Thanks both. Appreciate the questions.

Your next question comes from the line of Michael Leshoff of KeyBank Capital Markets. Please go ahead.

Hey, good afternoon. Thanks for taking my question. I wanted to start on the Archimedes hot fires. You've, you know, you've significantly increased your testing cadence there and the fire looks very clean. So really good to see that. And just wondering if I could, if you could touch on any of the changes that you've made to the propulsion system since the initial hot fire last August and kind of where does Archimedes sit today in terms of readiness for the first launch and meeting or exceeding your performance requirements?

Yeah, hey Michael, good questions. So, yep, no, we're running the engines, you know, just all the time. A qualification program, you know, it covers a lot of different run conditions. And, you know, it's not like the engine just needs to start on the ground once and ascend. We have a whole bunch of other run conditions where the propellant needs to sit for a while and do the reentry and landing burns. And then of course the stage one engine is the same as stage two. So you've got a big coast periods and relights. So the qualification campaign is pretty, pretty big. I'm pretty happy with the engine to be fair. You know, the changes that we made, you know, to remove mass were in large, you know, large part to increase production ability. You know, whenever you design something and you put it in production, you inevitably find the things that you don't like. So, you know, being agile enough at this stage to change them, change the various things we want to is, you know, is the right time to do it. It gets harder once the engine's all qualified. And the team's just working through it. And, you know, we added that extra cell for, you know, for the very reason is just a tremendous amount of testing to get through and tweaking. And, yes, we just kind of hammering away at it.

Okay, great. And maybe shifting to Electron, if we look longer term at Electron's launch prospect, you know, if LC1 can provide 120 launch opportunities annually, and then maybe another 12 at LC2, is the strategy, are you looking to max out the launch capacity with maybe over 100 plus launches for a year? Or does the supply demand environment create a more attractive business model at maybe 30 or 40 Electrons per year? Just wondering where that sweet spot is for Electron launches as we look out three to five plus years down the road.

Yeah, good question. So, I mean, my answer is as many as possible, right? That's what we want to see. When we developed LC1 and we had to license that site, we obviously never wanted to be constrained by, you know, by the licensing on that site. So we just thought of the biggest number we could back in 2016. And that's that. So we have plenty of capacity there. And even the capacity, even though we've got 12 capacity out of LC2, that can be amended and improved. So, you know, that's not that much of a constraint either, but it's really just, you know, the market demand. And, you know, the good news is it continues to grow year on year. You know, every year we sell more electrons than the previous year, which is great. But that's really the driving factor behind it. And as we look out, you know, in the following years, you know, we've seen strong growth in Electron sales year on year.

Appreciate all the color and congrats on all the milestones in the quarter. Thanks, Michael.

Your next question comes from the line of Jason Gerski of CITI. Please go ahead.

Hey, good afternoon, everybody.

Hey, Peter,

recognizing that space is hard. You guys are running aggressive timelines to your own admission on the Neutron. Maybe you could just walk us through the things that have caused the delays at each point. So I think we had, you know, push from the fourth quarter, excuse me, second half of 24 into mid 25, now into the second half of 25. What do you see that is causing you to make those changes?

Yeah, thanks, Jason. Well, I mean, firstly, we stand back and look at the context of the timeline of a rocket program. This is still the crazy fast compared to just about any historic rocket program. So, you know, there is, you know, that was always good to anchor on that. But look, there's no one thing. It's not like, you know, we had a giant engine failure or tank failure or anything. There's no one thing. I would say probably the most frustrating thing is, you know, some of the large structures and, you know, third party providers. You know, we always end up having to pull stuff in house because we get let down by a number of providers. And I'd say that that's caused a bit of delay early in the program. It's fair to say that we had to deal with some kind of COVID issues, so we just couldn't get concrete and we couldn't get steel, couldn't buy CNC machines, those things that had really long lead times associated with them. Now, of course, that's not the case now, but that sort of got us off to a little bit of a slow start. But, you know, there's no like one big thing that's just sort of got in the road. You know, we continue to push hard and, like I say, there's no giant thing. And, you know, if something went put its leg well out of bed, then, of course, we would let everybody know. But at the moment, we're just sort of just eating away at it. Yeah.

And you mentioned suppliers. How much dependency do you have at this point to get this all wrapped up? Is this 90% under your control at this point? Do you still have some dependencies with suppliers?

Yeah, well, as we transition into rate production of the product, we have that much, much more under our roof. When you're building large steel structures and launch sites and things like that, you don't have that in-house capability to do those kinds of things. You know, the early prototypes were hand laid rather than being made on the AFP machine, which is now, of course, up and running in commission. So some of those things delay. But there's just some practicalities around doing things for one off. It doesn't make sense to build all that capability in-house. But I'd say as time goes on and as rate production starts to increase, we become far less reliant on those external contractors.

Right. OK. I've got just a few more quick ones, if you'll humor me. On the pipeline in space systems. Yeah, in space systems in the pipeline, I'm just kind of curious what you are seeing and what the shape of that business might look like in the future. And I'm thinking about a split between you being the OEM or the kind of the prime building the full spacecraft versus you being a supplier into others. What do you see out there? Are you guys going to end up being more of a components business, more of an OEM? Is it going to be a 50-50 split? I'm just kind of curious what you're seeing.

Well, I think, you know, our aspiration, Jason, is we want to provide the service. So, you know, a higher tier than certainly just building the satellite and a higher tier again, just providing the components. But the beauty of the way that we run the business is that, you know, we can fiercely bid on a program that we want to go after. And even if we don't win, we still end up kind of winning because, you know, But certainly, you know, there's a few things we're going after, right? One is, you know, very large US government programs, which we think we have some very discriminating technologies or capabilities. And then, of course, you know, other large commercial constellations and programs, which you've seen us execute against as well. And always, we like to have a NASA science mission on the books as well. So, you know, we've generally had a moon mission, a Mars mission or something on the books because we believe that's important to create technologies and for the company. So you'll see those consistent sort of programs going out. But, I mean, where we're really trying to get to is providing the service, not just providing components or subsystems or satellite buses.

Right. So, Adam, I'll get you involved here really quickly then. So your comment about two-thirds, one-third, two-third on the services and one-third on launch, does that include this like third leg that you are all planning to stand up at some point, the services part of the business? I'm trying to figure out whether you're going to be adding a new segment at some point or that services part where you're going to be operating constellations will be a part of the space systems business. And that two-thirds, one-third mix is kind of what you were, kind of gets encapsulated into that.

Yeah. Well, I think given the overall much larger size of the opportunity on the application side, I would expect that to fundamentally change that overall mix. Right. I think that just the, if we kind of look at, and we've talked to, we've articulated the total addressable market opportunity in each segment. Launch, we've articulated it's roughly a $10 billion TAM. Systems and subsystems around satellites are around a $30 billion TAM. And then the applications is perhaps an order of magnitude of that. So really, I think over time, the two-third, one-third was really a function of kind of the business as it exists today without that

third leg of the stool. Okay. Yeah. Okay. Yeah. I just wanted to make sure I confirmed that. Didn't want people to be hanging on that word. And then two last really quick ones. Tariffs next Tuesday could be a big day. Do you have any exposure to Canada or Mexico in particular? I'm thinking, you know, there's some guys up in Canada that make antennas. I don't know if you're reliant on them. I'm just kind of curious. You're performing against firm fixed price contracts where your, some of your inputs might be going up in price as a result of some tariffs that come into the fold next week.

Yeah, I mean, I can make some comment there and then. Oh, yeah, good. And then pass it. Yeah. So obviously we have Sinclair Interplanetary. So they're a Toronto based reaction wheels and Star Trekker business unit up there. So we do have some exposure. But maybe Adam, you're probably best placed on some of the financial questions.

Yeah, Jason, we don't we really don't have a lot of exposure. We certainly have our reaction wheels from Star Trekker and Sunsensor business that we acquired several years ago up in Toronto. But I would say that that doesn't really I would say we don't do mass volume production of those solutions, especially the reaction wheels in Canada. Those take place actually in New Zealand. And certainly with our MDA Global Star situation where we actually do the buses and then we ship the buses to Montreal for AIT. It's really going from the US to Canada. And there's, you know, there's a lot of intricacies around kind of how you value those systems. They go across that border. But right now, I would say, look, we don't we don't see tariffs as impacting us significantly at this point. I think we're we're pretty fortunate that the majority of our intensity within the company is really between the US and New Zealand. Right. OK, great. I'll leave it

there. I appreciate the time.

Your next question comes from the line of Eric Rasmussen of Stifo. Please go ahead.

Thanks, guys, for taking questions. Maybe just on the flat like the new the new satellite, low cost satellite. What is what is the throughput expectation for that? And you have sort of the infrastructure to, you know, to support your aspirations in that new opportunity.

Yeah, Eric. So, you know, the throughput of that is designed to be, you know, a couple of satellites a week up to a up to a satellite a day, depending on depending on the, you know, the customer or the the opportunity that we go after. You know, we've we've we've got, you know, some pretty you've been to some of the facilities, the headquarters building, which is which is now basically a satellite manufacturing facility has ample kind of space to be able to to execute that. And if you look across all the subsystems, you know, there's in many, many areas we've already scaled, whether it be solar or reaction wheel. So, you know, when some of those some of those systems we provide to some of some of the larger constellations already. So those those things already being produced at scale. But, you know, as far as final integration, I mean, you know, we stand up and bring down lines for spacecraft, you know, now relatively frequently depending on on what the customer needs. So, you know, I would say that the vast majority of the capability exists.

Great. And then maybe just on neutron, the push out. And it really, again, it doesn't sound like a whole big change. I mean, I think you were talking about the late, you know, last update was no earlier than mid 2025. And I think everyone was just so focused on on just mid 25. But here it's a second half. But what I guess how how achievable is this at this point? I mean, do you consider this more less of a stretch goal than sort of where we were the last time when you made the no earlier than 2025 estimate?

You know, it feels about the same, to be honest with you, Eric. I mean, in a few months here in the year here in the year, it's really in the noise, but we just we just want to be as transparent as we can where we see things. And but but yeah, look, I mean, you know, the what we're trying to bring here to market in this vehicle in in such a short time frame, it's like I say, it's kind of in the noise. But yeah, we've been transparent.

OK, maybe then on Electron, have you seen any changes in customer behavior or demand that maybe you suggest things are slower than what you expected? Because I think I recall for this year, we were maybe looking at around 26 launches, but it sounds like you're expecting around 20 or so launches for this year. Any sort of comments you can make on that?

Well, I think we're just being a little bit more cautious this year because we had a we had a big manifest last year and we launched everything that turned up. So, you know, and that's the kind of the reality of the Electron product. That's why people pay the premium is because they get to launch when they need to launch. So, you know, we have we have a really strong sales year last year and so far this year for Electron, as you saw, we added a bunch more this year alone and we continue to see growth in that product. So it certainly doesn't feel like it's slowing down from from our perspective. But, you know, I think it's certainly the sales cycles and sales aren't. But, you know, I think we're always a little bit cautious because we in promising how many launches we're going to do because it's it's just not in their control.

Yeah, and Eric, I'm focused on just the growth in the backlog. And I think the thing that that gives that gives us encouragement is the fact that we're seeing increasing size of the contracts that we're signing with customers as far as numbers of launches. It's in new areas as well. So that that Electron business is diversifying now particularly with haste. So we've got diversity increasing in the business, absolute increase in scale and with that increasing ASP's. And as we've talked about many times before across, you know, various conferences and venues, you know, this business is a it's a it's a scale business, right? You have to the more you can absorb those those standing costs across a greater number of units, your economics get much better. And that's actually what we're what we see playing out over the coming quarters is as we continue to scale the launch cadence, you know, the benefit the margins benefit significantly is just get to absorb those relatively static fixed costs over a greater number of units. So, yeah, I agree with Pete. I don't think there's nothing that I see when we have our demand assessment, you know, kind of reviews internally that would say this market's slowing down at all. In fact, I think kind of adding that haste leg to the to the stool, I think, is super helpful and encouraging because that's a very strategic need that's being met in a unique way by this vehicle. So, yeah, I think we're very encouraged by what we see.

Great. I just want to maybe bounce back to the to neutral real quick with this with this updated timeline. You still are you still within sort of the framework of being able to support NSSL. You know, maybe just talk about that timeline in relation to sort of your new update.

Yeah, sure. I mean, you know, we were working alongside the Space Force and have done for many years and it won't affect that ability to on ramp. I mean, the criteria is a credible path to launch by the end of the year and, you know, by absolutely by all measures of that, I think we're fine.

Great. Thank you.

Your next question comes from the line of Andre Madrid, BTIG. Please go ahead.

Hey, everyone. Good afternoon and thanks for the question. Yeah, I mean, you know, to touch back on space apps, I know this has always kind of been on in the background, even going back to when you guys first went public in 21. Given that you're comfortable unveiling the Flatline platform today, could you maybe walk us through how you'd expect this application to really contribute to the business through the years? Maybe, you know, when we could see a meaningful step up of any measure?

Yeah, Andre. Well, I mean, look, it's kind of difficult to talk about that. I mean, the most important thing really is Neutron because, you know, if we take our friends over at SpaceX, you know, and the Starlink constellation, you know, Starlink is a great satellite. But the real needle mover there was high frequency, low cost launch. That's why Neutron is so important. So, you know, we kind of methodically, step by step, creating all of the right ingredients to be able to build constellations at scale. But the really, really important element of that is Neutron. And while that's occurring in the background, we've just, like I say, just methodically building the capability to, you know, on the spacecraft side.

Yep. No, that's a good point. I appreciate you highlighting that. And then maybe if I may follow up, you know, looking at the true backlog mix. I know Adam touched on this before, but, you know, it's 50-50 commercial, defense, national security. But, I mean, given that, like you said, most of the, or a size, not most, sizeable portion of commercial is bound for defense and national security customers. What's the true mix, do you think?

It's probably, I would say probably more like 70-30. What do you think, Adam?

Yeah, maybe even higher than that. I think it's probably closer to north of 80% would be where the end, I'd say consumption of the data coming off the things that we launch get consumed in one way or other by a government, whether it's US government or other governments. If you look at like, you know, again, a lot of the electrons are really popular vehicle for remote sensing capabilities. And again, you know, a lot of those, it used to be people were saying that, you know, you know, counting cars in Walmart parking lots was going to be the killer app for Earth observation. That clearly wasn't the case. It ends up being selling much of what gets generated from these commercial constellations to the US government for, you know, national security, weather, you know, and other types of capability, other types of data. So, yeah, I think it's probably, I think it's probably north of 80% would be my guess, but it's just a guess.

Got it, got it. No, that's helpful, Caller. I'll leave it there. Thanks, Peter and Adam. Thank you.

Thanks. There are no further questions at this time. With that, I will now turn the call back over to Sir Peter Beck for final closing remarks. Please go ahead.

Yeah, thanks. Thanks very much. And before we close out today, there are some up and coming conferences that will be attending shown below. We look forward to sharing more exciting news and updates with you. Otherwise, thanks for joining us. That wraps up today's call and we look forward to speaking with you again about the exciting progress we made at Rocket Lab. Thanks very much.

Ladies and gentlemen, that concludes your conference call. We thank you for participating and ask that you please disconnect your lines.