Rocket Lab Corporation

Hello and welcome to Rocket Lab's fourth quarter and full year 2025 earnings conference call. At this time, all participants are in a listen-only mode. A brief question and answer session will follow the formal presentation. Instructions will be given at that time. As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Morgan Connaughton, Vice President, Marketing and Communications at Rocket Lab. Thank you. You may begin.

Thank you. Hello and welcome to today's conference call to discuss Rocket Lab's fourth quarter and full year 2025 financial results, business highlights, and other updates. 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. 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 Lab founder and chief executive, Sir Peter Beck, as well as chief financial officer, Adam Spice. They will be discussing key business 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. Sir Peter.

Thanks very much, Morgan. So I'm going to start today by stealing some of Adam's thunder and sharing some of their financial highlights up front. We had a new annual revenue record in 2025 coming in at $602 million, which represents 38% growth year on year compared with 2024. We also had a record quarter in Q4 with revenue coming up at $180 million, which was up 36% from Q4 last year. At the end of Q4, our backlog sat at a record $1.85 billion, which is up 73% from the same time in 2024. And finally, we also achieved record gross margins in Q4 at 38% gap and 44% non-gap. As we tend to say on launch day, that's greens all across the board and a great result. It comes down to one thing, and it's simply relentless execution from the Rocket Lab team across our launch and space systems programs. Here are some highlights from that execution. I won't labour on these now as we'll go into more detail in the up and coming slides, but ultimately we launched and signed a record number of electron missions and led the way on hypersonics testing with haste and achieved some significant qualification and development milestones on neutron. On the space systems front, we were awarded the largest contract in Rocket Lab's history, successfully delivered the ESCAPADE mission to Mars for NASA, and we had record growth across all of our space systems component businesses. On acquisitions, we welcomed Geoston 2025, which officially marked our entrance into payloads, and followed this up in Q1 2026 with the acquisition of Optical Support Inc., which further strengthens our optical systems offering. We also expanded our machining and manufacturing footprint with the acquisition of Precision Components Limited, which actually just closed today, and will ultimately support continued scaling of the components manufacturer for both launch and space systems. More on these in the slides ahead. So on to some quick highlights for Electron and Haste. Rocket Lab remains the small launch leader globally as the only rocket delivering reliable and high-cadence launch opportunities for smallsats. We launched 21 missions across Electron and Haste in 2025, which was a new company record. We also launched seven missions in Q4, our highest number of launches in a single quarter to date. Meanwhile, there were no successful orbital launches of a new U.S. or European small launch vehicle in 2025 at all. And it's very clear when small set operators need a dedicated ride to orbit, they come to Rocket Lab. And we're proud to hold this title and look forward to expanding it again, the record again, even further this year. The U.S. government made no secret of the fact that faster and more frequent hypersonic testing is an urgent need and a national priority. Rocket Lab is the only credible provider that has demonstrated the ability to deliver this capability right now, not years into the future. In 2025, we conducted three successful HACE missions, and the next one is on the pad in Virginia, now just days away from launch. This kind of cadence and reliability positions us well for programs like Golden Dome. With more HACE missions on the books this year, we'll be rapidly building that moat even further. It was a record year for launching missions, but also for signing them. We added more than 30 new launches to the manifest across Electron and Haste. They came from a nicely diversified customer base spanning the US, NATSEC and Defence, commercial constellations and international organisations. We had many returning customers sign new contracts, often for bulk buys and multiple launches, but also added new names too, which demonstrates that our small launch customer base continues to expand. In QCOR alone, we signed a new multi-launch deal with Black Sky for four new launches, which brings the total number of missions they've booked with us to 17. We also signed a contract with a new confidential customer in support of national security. As always, our pipeline for Electron and HACE remains strong, and we're excited to continue signing new and novel missions, as well as a standard repeat and mission profiles in 2026. Now on to space systems. Rocket Lab is not new to being a prime contractor, but in Q4 we made an announcement that highlights our substantial growth in our satellite market and further cements our position as a preferred disruptive prime. The Space Development Agency, or SDA, awarded us an $816 million contract to build an advanced constellation of 18 spacecraft, equipped with advanced missile warning tracking and defense sensors to provide global and persistent detection and tracking of emerging missile threats. It's the largest single contract in Rocket Lab's history. What's more, as a leading merchant supplier into the other tranche, three prime contractors, there are additional subsystem opportunities that could add a total capture value to approximately $1 billion for supplying Payloads, solar power, reaction wheels and star trackers, software and other solutions from a broad portfolio of capabilities. It's important to point out that the acquisition of GEOS played a significant role in securing this award. Rocket Lab is the only commercial provider producing both the spacecraft and payloads in-house for SDA and for the tracking layer Tranche 3, supporting the government's goals for speed, resilience and affordability in space-based missile defence. This award follows on from our previous prime contract award for SDA's transport layer, Beta Tranche 2 program. With the two programs combined, we now have more than $1.3 billion in contracts signed with SDA. I think an important takeaway from this announcement is not just that we won a significant contract, it's that Rocket Lab is repeatedly winning large awards that have historically been exclusive to the legacy aerospace primes. We're seeing a new world order established in the defence world with the rise of companies like Andril and Palantir playing leading roles in disrupting slow, bloated traditional players. Rocket Lab is clearly doing this in space and unseating the old guard. Okay, on to Mars. In Q4, the Escapade mission launched and the twin satellites we built for NASA and UC Berkeley are now well on their way to the Red Planet. With ESCAPADE, we've proved that it's possible to deliver decadal-class missions on drastically shortened timelines and for significantly smaller budgets than typical interplanetary missions. We made this possible through vertical integration, maintaining strict control over schedule and budget. With both spacecraft now successfully commissioned and in a loiter trajectory near L2, that's a Lagrange point, around 1.5 million kilometres from Earth, Rocket Lab's primary role in the mission will soon be complete when we hand it over to the team at UC Berkeley next month. Even once control has been transferred, we'll be cheering blue and gold along as they arrive in Mars orbit in September next year. Our role in ESCAPADE might have reached mission success, but we're not quite finished yet with Mars yet. We've made no secret of the fact that we think Rocket Lab is the strongest contender to deliver NASA's Mars telecommunication orbiter program. An MTO will be fundamental to everything else on Mars, enabling science now and human exploration in the future. We'll make it possible with a rare combination of proven spacecraft, deep space mission experience, reliable rockets, and end-to-end space systems capability as a vertically integrated mission provider. Our hardware and our software has enabled some of the most ambitious and successful Mars missions in history, including the Mars InSight lander, Perseverance rover, Ingenuity helicopter, Mars is in our DNA and Rocket Lab has more hardware on and orbiting Mars than just about any other company today. Okay, on to programs. We had a key milestone for LOCSAC, which is a launch plus spacecraft mission to build and deploy an on-orbit cryogenic fuel depot for NASA. This spacecraft is now complete and will be marching steadily towards launch later this year. Okay, we also have an exciting development to share from our space solar business. It requires some background on kind of the state of the art of space solar power, so bear with me a little bit on this one. The satellite industry is rapidly expanding and projected to grow seven times by 2035. Those satellites will all need solar power. Rocket Lab is the world leader in solar space power, so it should come as no surprise that we're the best position to serve this growing market. In addition, ambitious opportunities are on the horizon from space-based data centres. As AI and compute demand soar and data centres on Earth reach their limits, companies are beginning to seriously explore moving data centres to orbit where they can take advantage of the cool conditions and infinite solar energy. But rapid market growth of this size, both for typical constellations and futuristic projects like space-based data centres, will be hampered if traditional solar cells are the only options. So it's against this backdrop that I'm proud to announce that Rocket Lab is introducing a space-optimized silicon solar arrays. While silicon is not new in space, it's always suffered from low radiation tolerance and very low life expectancy with poor performance. Our team of the experts in space solar, having developed some of the most complex cells for flagship missions to the sun and most of the missions on Mars today, the team has produced a silicon array that is a game-changer. By harnessing silicon, we're able to deliver a really low cost per watt at industrial scale, enabling gigawatt class power generation in space at kilometer size scale using mass-manufacturable lightweight and modular systems. We've also taken the additional step of developing a hybrid solar array solution that incorporates both high efficiency cells and silicon cells, an approach that leverages the benefits of both technology. When size, weight and power or performance are at a premium, traditional high efficiency cells are enabling. When cost, schedule or cost constellation scale are required, silicon cells can meet that demand. When these factors must be traded off and balanced, hybrid arrays enable a combination of the two to deliver an optimum performance at a compelling value. So for new products, we move into new acquisitions. On the top of the acquisitions, no doubt everybody is interested in an update on Monaric. The German government is still working methodically through the regulatory review process, so there's not much to add at this stage while that sort of runs its course as expected. But we look forward to providing an update once that's concluded. There are a few stories floating around in the media with different theories on how the transaction is progressing. All I'd say there is don't believe everything you read in the media and online. Otherwise, this month we have welcomed Optical Support Inc. to the Rocket Lab team. OSI is a Tucson-based leader in the design and manufacture of custom high-precision optical and electro-optical mechanical instruments. OSI's technology is a key enabler for national security and commercial satellites. They're a key subsystem in Rocket Lab's payloads for space protection, space domain awareness, missile warning, and tracking defence. The vertical integration opportunities here are clear, while we look forward to scaling production and capabilities to serve our customers and our own programs, as we've done with many of our other successful acquisitions. And last but not least, we've also acquired Precision Components Limited in New Zealand. Again, a known and trusted supplier to us that's now part of the family. With this acquisition, we've established a new precision machining complex that enables a huge increase in machining capacity. So I think it's worth spending just a quick moment here on the strategic importance of our recent optical-focused acquisitions. Vertically integrated high-performance RF and optical payload technologies unlock high-value opportunities for national security and commercial customers. They are key to unlocking programs like Golden Dome and other proliferated mission architectures. Owning the payload chain enables discriminating performance plus greater control over schedule, cost, and especially for high-volume constellations. We've already seen the strategy in action with SDA Tranche 3 award, and we expect to deliver more value and opportunities to us this year and beyond. We received another strong vote of confidence in our ability to deliver on critical national security and defence programs when we were recently selected by the MDA for SHIELD. In short, we're now onboarded to the program which has a contract values up to $151 billion, giving us the opportunity to compete for future launch and space assistance contracts that deliver these capabilities to the warfighter with increased agility. All of the above ultimately points to one thing. Rocket Lab is a disruptive leader in building the future for space and defense. This was driven home by a recent visit to our facilities in Long Beach by the Secretary of War, Pete Hesketh, during the Arsenal of Freedom tour. The visit highlighted the critical support we already delivered to the warfighter today and showcased our capability to meet ever-evolving needs in the future. And last but not least, before Adam digs into the financials, here's the latest on Neutron. We've got lots of progress to share across Neutron, but I'll start with a topic on everyone's mind, I'm sure, which is the Stage 1 tank update. In January, we shared that Neutron's Stage 1 tank had ruptured during a hydrostatic pressure test at Space Systems Complex in Middle River. Now, failures aren't uncommon during the qualification phase of any rocket development program, but I do want to point out that this was unexpected, and ultimately, we had anticipated that this tank would pass qualification. Now, the tank did meet its anticipated flight loads, but as we prepared to open up the test bounds and push the pressures and loads beyond this to understand the margins in the structure, the tank let go earlier than we expected. The post-test review process identified that a manufacturing defect introduced a reduction in the strength at a critical joint in the structure, specifically around the tank closeout, which is an autoclave-produced part that interfaces with the bulk composite laminate of the tank and the dome. The review of the hardware and test data suggested that the tank otherwise performed as expected. The first tank was hand-laid by a third-party contractor while we were getting the automated fibre placement machine up and running. And it's in this hand-laid process that a defect was introduced. Now, the decision to work with a third-party contractor was ultimately driven by schedule, as it would allow us to produce the first tank rapidly while simultaneously commissioning the AFP machine for future tank production. Now, it's not uncommon for us to run parallel development paths like this to accelerate schedules, as it can be a cost-effective way to iterate prototypes and first articles while also standing up long-term production capability to enable fast scaling down the track. Now, the next tank is already in production. This time, it's being built on the AFP machine, completely eliminating the possibility of this hand defect reoccurring. It's worth pointing out that Neutron's second stage was largely produced... Well, it was entirely internally passed and qualification... Sorry. It's worth pointing out that Neutron's second stage was produced entirely and internally and passed qualification comfortably. Beyond changing the manufacturing process, we're also making some minor design changes to the first stage tank to introduce more margin and improve manufacturability. To be clear, we're happy with the overall tank design, but since we're making a new one, we thought we'd always take the opportunity to tweak things a little bit and optimise it. Once completed, the new tank will undergo an extensive test and qualification campaign to verify flight readiness, and we're going to take our time with that process. The priority will always be to bringing a reliable rocket to market, even if it means taking a few extra months. Ultimately, the combination of the new tank and the production design tweaks and the test and qualification campaign will adjust Neutron's timeframe a little bit. As such, Neutron's first launch is now targeted for Q4 2026. Neutron is still scheduled to come to market in an incredibly aggressive timeframe, and what's more, we'll be bringing a robust and thoroughly tested vehicle to the pad. We look forward to sharing more development progress as we run through the final development phases this year. Okay, so onto some milestones in the Neutron program over the past quarter. You would have seen over the next few slides why I'm dubbing this the quarter of qualification. We've taken massive strides in Q4, as well as Q1, so far, successfully qualifying critical flight hardware from large structures through to component level systems. In Q4, the Hungry Hippo fairing successfully passed qualification and then on into Q1, it made its way to Wallops. It's an exciting time in Virginia as Neutron flight hardware starts arriving and we can get into the final assembly and integration and test phase. For the Hungry Hippo specifically, that looks like fluid systems and installation of canards and thermal protection systems and then, of course, end-to-end testing. While we work through that in preparation for the first flight, we have the second Hungry Hippo in production for the next Neutron launch vehicle as well. Another successful qualification on the board is Neutron thrust structure. This is a really complex part of Neutron. It must be able to withstand 2.1 million pounds of thrust, which is more than 44 electrons simultaneously lifting off, to give everybody kind of a sense there. The structure is now officially onto final integration, which is the final hurdle before we get into integrated system checkouts, cryogenic proof tests, vehicle hot fires, wet dress, and then, of course, launch. It'll go through avionics and fluids and subcomponent integration before shipping out to LC3. Meanwhile, at Middle River, Neutron's interstage is undergoing its own qualification campaign before being shipped to LC3. Neutron's second stage is hung inside this during flight. It then passes through the mouth of the Hungry Hippo and carried to orbit. Like the Hungry Hippo, the interstage remains attached to the first stage and reused, so it needs to undergo a robust testing program so we can ensure that it can withstand the forces of launch and landing multiple times. And then stage two is in its final integration and getting ready for its debut on the test stand at LC3. This is a specially built rig on the top of the LC3 launch mount where we'll go and conduct a barrage of integrated tests before ultimately moving into hot fires on the stand. That will be L3's first taste of an Archimedes engine and a huge milestone for the development program. So we look forward to testing that soon. Which brings me to the last but not least, Archimedes. Right now the engines are in boot camp. We have not been nice to them at all. It's all well and good to test engines to expected bounds. But through experience, I've learned that spaceflight has a way of throwing things at you that aren't expected. Rocket engines don't tend to fail when everything's boring and when you can rely on analysis and simulation to bound and then truly understand performance. Ultimately, engine reliability is gained via testing. There's just no substitute. So that's what we're doing and we're really pushing them through the edge cases, backing right off the inlet pressure, inducing cavitation and generally doing really nasty stuff to them. Ultimately, you want to know how the engines are going to perform in a really wide range of scenarios on the ground before you put them in the air and find out in flight. Too many rocket companies have not done this and it typically doesn't end well. This is the same kind of process we undertook when developing Rutherford, the engine on Electron. And right now, we've flown more than 800 of those engines successfully to space. So we'll be bringing the same level of reliability and rigor to Archimedes. Beyond the stage one tank, we've had a really positive quarter for neutron progress. And this gives you a snapshot of just how much progress we've seen and made on the path to first launch. Major structures and subsystems are passing qualification. And for the first time, we have hardware and final integrations. These are the final steps before we go into integrated testing on the pad with hot fires, stage tests, and then wet dress, and then of course launch. Beyond the vehicle itself, we have established all the supporting infrastructure to enable press launch and beyond. LC3 is obviously stood up, plus production and test facilities are all humming while the regulatory work is all tracking along as we expect. The things to look out for the next few months, to know that we're marching steadily towards launch, includes seeing more hardware making its way to the launch site. We will be conducting extensive testing of flight hardware, and then obviously that'll lead up to Neutron's first flight. So that wraps up the operational highlights, so I'll hand over to Adam for the financial overview and outlook.

Thanks, Pete. Fourth quarter 2025 revenue was a record $180 million, coming in at the high end of our prior guidance range and representing an impressive year-over-year growth of 36%. This strong performance was driven by significant contributions from both of our business segments. Sequentially, revenue increased by 16%, underscoring the continued momentum across the business. Our space system segment delivered $103.8 million in revenue in the quarter. reflecting a sequential decrease of 9.1%. This decline was primarily stemmed from our satellite platforms business and our solar businesses, both of which continue to perform exceptionally well despite the time-to-time programmatic non-linearity of revenue recognition under ASC 606 and related subcontractor progress. We're fortunate that the growing diversification across space systems and launch can often provide more predictable top line growth despite underlying volatility at the individual product line level. This was one of those quarters where strength and launch services more than offset the declines in space systems, generating $75.9 million in revenue, representing an 85% quarter-by-quarter increase due to the increase from four to seven launches during the period, including one HAST mission. On a full-year basis, 2025 revenue was $602 million, and impressive 38% growth year-on-year. Now turning to gross margin. GAAP gross margin for the fourth quarter was 38%, at the center of our prior guidance range of 37% to 39%, and an increase of 100 basis points quarter-by-quarter. Non-GAAP gross margin for the fourth quarter was 44.3%, which was also in line with our prior guidance range of 43% to 45%, and an increase of 240 basis points quarter-by-quarter. The sequential improvement in gross margins was primarily driven by an increase in electron fixed cost absorption due to the increased launch cadence within the quarter, paired with increased contribution from our higher margin space systems components businesses. On a full year basis, GAAP gross margin was 34.4%, an increase of 780 basis points year-over-year, while non-GAAP gross margin was 39.7%, an increase of 770 basis points year over year. Relatedly, we ended Q4 with production-related headcount of 1,244, up 46 from the prior quarter. Now, before moving on to backlog, I want to take a moment and zoom out and provide perspective on the progress we've made towards our long-term financial model since our NASDAQ listing in 2021. Revenue has grown nearly 10x, achieving a compound annual growth rate exceeding 76%. Gross margins have increased each year, more than doubling the contribution from each dollar of revenue. This expansion highlights our strong and disruptive competitive position in the industry, as well as our highly valued and differentiated products and services across the business. The combination of this revenue growth and margin expansion has put the company on a solid foundation and path towards achieving meaningful operating leverage and long-term cash flow generation. Lastly, I thought it important to call out our SG&A spending as a percentage of revenue, as I'm encouraged to see this continue to trend downward as we scale the business. We are constantly driving the business to be fiercely efficient, and I believe that we're positioned to drive even more growth in efficiency in 2026 and beyond. Now turning to backlog. We entered Q4 2025 with approximately $1.85 billion in total backlog. an impressive 69% growth sequentially, primarily due to our recent SDA Tronch 3 Tracking Layer Contract Award, which we announced last December. As we've mentioned before, space systems backlog in particular can be lumpy given the timing of these increasingly larger needle-moving program opportunities. But once awarded, they can significantly de-risk revenue growth for several years. We continue to cultivate a strong pipeline that includes multi-launch agreements across Electron, HAST, and Neutron, as well as large satellite platform contracts across government and commercial programs. Currently, launch backlog accounts for approximately 26%, while space systems represents approximately 74%. Looking ahead, we expect approximately 37% of our current backlog to convert into revenue within the next 12 months, which includes preliminary tranche three revenue recognition estimates, which we believe will prove to be conservative, which in addition to the healthy sales pipeline are expected to drive incremental top line contribution beyond the current 12 month backlog conversion. Turning to operation operating expenses, GAAP operating expenses for the fourth quarter of 2025 were $119.3 million below our guidance range of $122 to $128 million. Non-GAAP operating expenses for the fourth quarter were $104.5 million, which were also below our guidance range of $107 to $113 million. The sequential increase in both GAAP and non-GAAP operating expenses were primarily driven by continued growth in prototype and headcount-related spending to support our neutron development program. Specifically, investments ramped up in propulsion as we continued to test Archimedes engines, as well as test and integration of mechanical and composite structures at our facility in Middle River, Maryland. In R&D specifically, GAAP expenses increased $8.1 million quarter over quarter, while non-GAAP expenses rose $7.7 million. These increases were driven by the ramp up of Archimedes production and testing, along with higher expenditures related to composite structures and fluids, as just mentioned. Q4 ending R&D headcount was 1,012, representing a decrease of seven from the prior quarter. In SG&A, GAAP expenses decreased $5.1 million quarter over quarter, while non-GAAP expenses declined $1.3 million quarter over quarter. These decreases were primarily due to a reduction in transaction-related legal and other professional services fees related to M&A and capital markets transactions, paired with a slight reduction in marketing expenses. Q4 ending SG&A headcount was 389, representing an increase of four from the prior quarter. In summary, total headcount at the end of the fourth quarter was 2,645, up 43 heads from the prior quarter. Turning to cash, purchase of property, equipment, and capitalized software licenses were $49.7 million in the fourth quarter of 2025, an increase of $3.8 million from the $45.9 million in the third quarter. This increase reflects ongoing investments in Neutron development as we continue testing and integrating across the pad at LC3 in Walves, Virginia, and Middle River, Maryland, expanding capabilities at our engine development complex in Long Beach, California, and build out of the return on investment recovery barge in Louisiana. As we progress towards Neutron's first flight, we expect capital expenditures to remain elevated as we invest in testing, production scaling, and infrastructure expansion. GAAP EPS for the fourth quarter was a loss of $0.09 per share compared to a loss of $0.03 per share in the third quarter. The sequential increase to GAAP EPS loss is mostly attributable to the $41 million tax benefit we recorded during the third quarter, which was due to the partial release of the valuation allowance against our corporate deferred tax assets as a result of acquiring an equal amount of deferred tax liabilities emanating from the GOS acquisition purchase price accounting. GAAP operating cash flow was a use of $64.5 million in the fourth quarter of 2025, compared to $23.5 million in the third quarter. The sequential increased use of $41 million was almost entirely due to the timing of employee equity program related tax payments. Similar to the capital expenditure dynamics mentioned earlier, cash consumption will remain elevated due to neutron development, longer lead procurement for SDA, investments in subsequent neutron tail production, and infrastructure expansion to scale the business beyond the initial test flight. 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 2025 was a use of $114.2 million, compared to a use of $69.4 million in the third quarter. The ending balance of cash, cash equivalents, restricted cash, and marketable securities was approximately $1.1 billion at the end of the fourth quarter. The sequential increase in liquidity was driven by proceeds from sales of our common stock under our at-the-market equity offering program, which generated $280.6 million during the quarter. These funds are primarily intended to support acquisitions, such as the announced pending Monarch acquisition the recently consummated acquisitions of Optical Support Inc. and Precision Components Limited, as well as other targets in our robust M&A pipeline, along with general corporate expenditures and working capital. We exited Q4 in a strong position to execute on both organic and inorganic growth initiatives and to further vertically integrate our supply chain, expand strategic capabilities, and grow our addressable market, consistent with what we've done successfully in the past. Adjusted EBITDA loss for the fourth quarter of 2025 was $17.4 million, which was below our guidance range of $23 to $29 million loss. The sequential decrease of $8.9 million in adjusted EBITDA loss was driven by significant revenue and gross margin improvement, partially offset by increased operating expenses related to neutron development. With that, let's turn to our guidance for the first quarter of 2026. We expect revenue in the first quarter to range between $185 and $200 million, representing 7% quarter-on-quarter revenue growth at the midpoint and growth of 57% from the year-ago quarter. We anticipate slight slipdown in both GAAP and non-GAAP gross margins in the first quarter, with GAAP gross margin to range between 34% to 36% and non-GAAP gross margin to range between 39% to 41%. with a modest sequential decline driven by a greater mix of space systems versus higher margin launch and a weaker margin mix within our space system segment. We expect first quarter gap operating expenses to range between $120 and $126 million and non-gap operating expenses to range between $106 and $112 million. The quarter-over-quarter increases are primarily driven by ongoing neutron development and spending related to Flight 1, including staff costs, prototyping, and materials. However, we expect to see a shift in spending from R&D and into Flight 2 inventory throughout 2026, which is an encouraging sign of progress as we move closer toward Neutron's first flight and adjusted EBITDA positivity as a result. I'm optimistic that with the impressive strides we've made towards this milestone and currently expect Q1 to mark peak Neutron R&D spending. We expect first quarter GAAP and non-GAAP net interest income to be $8 million, which is a function of higher cash balances as well as conversion of approximately 117 million of convertible notes since December 31st. We expect first quarter adjusted EBITDA loss to range between 21 and $27 million and basic weighted average common shares outstanding to be approximately 605 million shares, which includes convertible preferred shares of approximately 46 million and reflects the conversion of approximately 23 million shares from our outstanding convertible notes thus far in Q1. There remains only 7.5 million shares or 11% of the original $355 million issuance outstanding. And when taken into the additional context of the retirement of the Trinity equipment line in Q4, we have substantially eliminated indebtedness from the business. Lastly, consistent with prior quarters, we expect negative non-GAAP free cash flow in the first quarter to remain at elevated levels, driven by ongoing investments in neutron development and scaling production. This excludes any potential offsetting effects from financing activities. Last but not least, here are some of the upcoming investor events that we'll be attending in the next few months. And with that, we'll hand the call over to the operator for questions.

Thank you. If you'd like to ask a question, please press star 1-1. If your question has been answered and you'd like to move yourself in the queue, please press star 11 again. Our first question comes from Andrea Shepherd with Cantor Fitzgerald. Your line is open.

Hey, everyone. Good afternoon. Thanks so much for taking our questions and congrats on all the great progress and thanks for the update on Neutron. Adam, maybe you want to start with the backlog. I'm wondering if you can maybe help us a drill a bit deeper in it and maybe remind us what is included in here. Does this include the 40% of revenue from SDA tranche two, 10% of maybe the tranche three, and what are you including from neutron and electron here? Thank you.

Hello?

I'm sorry. The mic went off. I don't know how much you caught of that. So all of the SDA contracts were added to backlog. So what remains for SDA tranche two transport layer is still in the backlog. Obviously, what's been recognized as revenue is no longer there. Through the end of Q4, we hadn't recognized any of the tranche three contract awards. So all of that value is currently in backlog, and that will start to convert into revenue and come out of backlog obviously in that process. As far as Neutron is concerned, I think we've spoken before that we have several flights that are representative in our launch backlog that's reflected in our filings. So hopefully that answers your question on backlog composition.

Yeah, that's helpful. Thank you. And maybe just as a follow-up, so, you know, on Neutron with the shift to Q4 now with the first launch, how should we think about cadence? You know, will you still target maybe three launches within the first 12 months after the first one? How confident are we in the development of the second tank? And wondering if maybe we should expect any step up in CapEx now with the second tank in production. Thank you.

Adam, I can answer a couple of those and maybe you and someone as well. So with respect to the tank, I think it's well understood what needs to be done there. And we had built a lot of the second stage tank on the ASP machine, so that really solved that problem. Yeah, the way to think about just sort of follow-on flights is it's not quite, you know, as dire as like moving all of the follow-on flights 12 months, you know, or to the first flight. Because as you've seen in the presentation, we're already building flat out additional neutron tail numbers. So it'll probably be a slightly faster convergence into subsequent flights because, you know, none of the other hardware that's qualified is being halted, obviously. It's just that tank. And the AFP machine enables us to build a tank just way more rapidly than with a hand-lay process. So, you know, I think we'll be in better shape there.

Yeah, and Andre, I guess with regards to your question as far as CapEx and so forth related to the second tank, that's replacing the first one that ruptured. I mean, the benefit now, as Pete said, of being on the AFP is not only can we produce it faster, but the actual cost to produce that second tank is quite low. The first tank was very expensive because, as Pete mentioned earlier, it was a hand-laid-up tank. It took a long time. This will be much quicker. And also, since we've now commissioned the AFP, we're really just talking about variable costs related to the tank materials more than anything else because the existing labor is already kind of in the model. So there won't be any increased capex and You know, the impact to R&D as a result of the tank failure is actually not – the tank itself is actually not that significant.

Got it. That's super helpful. Thanks so much for all the detail, and congrats again on the quarter. I'll pass it on.

Thank you. Our next question comes from Edison Yu with Deutsche Bank. Your line is open.

Thank you. And great quarter, as always. I want to ask a question on space data centers. And I think you had alluded to, you know, a lot of interest. I think it's obviously become a hot topic in the industry. Can you give us a sense on how these kind of early discussions are going with potential customers interested in doing this? And is it realistic to see some type of rocket lab content in a space data center, let's say, within the next two or three years?

Hey, Addison. Thanks for the question. So I think, look, we're early with data centres. If you look at some of the models, there's a number of things that sort of have to come into focus before they become the logical choice versus terrestrial. But, you know, we never want to miss an opportunity. And, you know, we've been developing the silicon arrays and power solutions for a while now, focusing on mega constellations and, you know, there's high volume power applications. But if you stand back objectively and you think about what are all the challenges with putting data centers in orbit, it boils down to really three things. One is cost and cadence of launch to be able to make the model close. And then two is heat rejection through various means. And three is just sheer power. Like these are gigawatts of electricity. So, you know, solar arrays of multi-kilometres in scale are what's needed. So, you know, we wanted to make sure that, you know, whether they leave this earth or not, there'll be Rocket Lab logos all over that stuff. So, you know, as far as I'm aware, nobody else has a silicon solution quite like we've developed.

Understood. And to your point on heat rejection, I guess the radiator, is that a capability you have in-house that you need to develop over time, or is that something, you know, inorganic? Just curious on what needs to be kind of technically done there.

Yeah, I mean, look, all of our spacecraft have radiators. I mean, you generate heat. You have to reject it. So, you know... There's various kind of ways of doing that, piping heat around the spacecraft to radiate it. So I don't see that as a huge technical challenge. It's just on the scale, the scale that's required hasn't been achieved before. So that's the challenge there. But to be clear, I don't foresee us building massive AI data centres anytime soon, but those who are at least experimenting with it and looking to go down that path, I think we have a lot of compelling solutions.

Gotcha. If I could just sneak one quick one in. In terms of just the discussion, can you give us a sense of like the flavor of customers? Are these kind of new customers, non-traditional customers kind of exploring this idea with you?

Yeah, I mean, we have to be a little bit careful here, but I would say that there is certainly more non-traditionals looking at this kind of solution than traditional players.

Great. Thank you so much.

Thank you. Our next question comes from Ronald Epstein with Bank of America. Your line is open.

Hey, this is Alex Preston on for Ron. Can you guys hear me all right?

Yeah, we hear you.

Perfect. So I know you talked a little bit about progress on the Monarch acquisition, but I was a little more interested maybe broadly in the environment in Europe and more generally, right? It seems like there's a growing appetite for call it indigenous launch and national security space capabilities. And I'm interested if you sort of see this trend yourselves or how you see this developing. I know, you know, Pete mentioned No other small launch provider has really succeeded in the last year, but it's still, I think, the focus for a lot of people.

Yeah, Alex, it's a great question. Look, one of the reasons why we like Monarch and why we think it's important, Europe more in general is exactly that point, is that there's a lot of space nations there that have very little capability with giant aspirations and really short timeframes. And I think it's always everybody's desire to build on. LC3 has obviously stood up, plus production and test facilities are all humming, while the regulatory work is all tracking along as we expect. The things to look out for the next few months, to know that we're marching steadily towards launch, includes seeing more hardware making its way to the launch site. We will be conducting extensive testing of flight hardware, and then obviously that'll lead up to Neutron's first flight. So that wraps up the operational highlights, so I'll hand over to Adam for the financial overview and outlook.

Thanks, Pete. Fourth quarter 2025 revenue was a record $180 million, coming in at the high end of our prior guidance range and representing an impressive year-over-year growth of 36%. This strong performance was driven by significant contributions from both of our business segments. Sequentially, revenue increased by 16%, underscoring the continued momentum across the business. Our space system segment delivered $103.8 million in revenue in the quarter, reflecting a sequential decrease of 9.1%. This decline was primarily stemmed from our satellite platforms business and our solar businesses, both of which continue to perform exceptionally well despite the time-to-time programmatic non-linearity of revenue recognition under ASC 606 and related subcontractor progress. We're fortunate that the growing diversification across space systems and launch can often provide more predictable top-line growth despite underlying volatility at the individual product line level. This was one of those quarters where strength in launch services more than offset the declines in space systems, generating $75.9 million in revenue, representing an 85% quarter-by-quarter increase due to the increase from four to seven launches during the period, including one haste mission. On a full-year basis, 2025 revenue was $602 million, an impressive 38% growth year-on-year. Now turning to gross margin. Gap gross margin for the fourth quarter was 38%, at the center of our prior guidance range of 37% to 39%, and an increase of 100 basis points quarter-by-quarter. Non-GAAP gross margin for the fourth quarter was 44.3%, which was also in line with our prior guidance range of 43 to 45%, and an increase of 240 basis points quarter over quarter. The sequential improvement in gross margins was primarily driven by an increase in electron fixed cost absorption due to the increased launch cadence within the quarter, paired with increased contribution from our higher margin space systems components businesses. On a full year basis, GAAP gross margin was 34.4%, an increase of 780 basis points year over year, while non-GAAP gross margin was 39.7%, an increase of 770 basis points year over year. Relatedly, we ended Q4 with production-related headcount of 1,244, up 46 from the prior quarter. before moving on to backlog i want to take a moment and zoom out and provide perspective on the progress we've made towards our long-term financial model since our nasdaq listing in 2021 revenue has grown nearly 10x achieving a compound annual growth rate exceeding 76 percent gross margins have increased each year more than doubling the contribution from each dollar of revenue this expansion highlights our strong and disruptive competitive position in the industry as well as our highly valued and differentiated products and services across the business. The combination of this revenue growth and margin expansion has put the company on a solid foundation and path towards achieving meaningful operating leverage and long-term cash flow generation. Lastly, I thought it important to call out our SG&A spending as a percentage of revenue, as I'm encouraged to see this continue to trend downward as we scale the business. We are constantly driving the business to be fiercely efficient, and I believe that we're positioned to drive even more growth in efficiency in 2026 and beyond. Now, turning to backlog. We ended Q4 2025 with approximately $1.85 billion in total backlog, an impressive 69% growth sequentially, primarily due to our recent SDA tranche three tracking their contract award, which we announced last December. As we've mentioned before, space systems backlog in particular can be lumpy given the timing of these increasingly larger needle-moving program opportunities. But once awarded, they can significantly de-risk revenue growth for several years. We continue to cultivate a strong pipeline that includes multi-launch agreements across Electron, HAST, and Neutron, as well as large satellite platform contracts across government and commercial programs. Currently, launch backlog accounts for approximately 26% while space systems represents approximately 74%. Looking ahead, we expect approximately 37% of our current backlog to convert into revenue within the next 12 months, which includes preliminary tranche three revenue recognition estimates, which we believe will prove to be conservative, which in addition to the healthy sales pipeline are expected to drive incremental top line contribution beyond the current 12 month backlog conversion. Turning to operating expenses, GAAP operating expenses for the fourth quarter of 2025 were $119.3 million, below our guidance range of $122 to $128 million. Non-GAAP operating expenses for the fourth quarter were $104.5 million, which were also below our guidance range of $107 to $113 million. The sequential increase in both GAAP and non-GAAP operating expenses were primarily driven by continued growth in prototype and headcount related spending to support our neutron development program. Specifically, investments ramped up in propulsion as we continue to test Archimedes engines, as well as test and integration of mechanical and composite structures at our facility in Middle River, Maryland. In R&D specifically, gap expenses increased $8.1 million quarter over quarter, while non-gap expenses rose $7.7 million. These increases were driven by the ramp-up of Archimedes' production and testing, along with higher expenditures related to composite structures and fluids, as just mentioned. Q4 ending R&D headcount was 1,012, representing a decrease of 7 from the prior quarter. In SG&A, gap expenses decreased $5.1 million quarter-over-quarter, while non-gap expenses declined $1.3 million quarter-over-quarter. These decreases were primarily due to a reduction in transaction-related legal and other professional services fees related to M&A and capital markets transactions, paired with a slight reduction in marketing expenses. Q4 ending SG&A headcount was 389, representing an increase of four from the prior quarter. In summary, total headcount at the end of the fourth quarter was 2,645, up 43 heads from the prior quarter. Turning to cash, purchase of property, equipment, and capitalized software licenses were $49.7 million in the fourth quarter of 2025, an increase of $3.8 million from the $45.9 million in the third quarter. This increase reflects ongoing investments in Neutron development as we continue testing and integrating across the pad at LC3 in Wallace, Virginia, and Middle River, Maryland, expanding capabilities at our engine development complex in Long Beach, California, and build out of the return on investment recovery barge in Louisiana. As we progress towards Neutron's first flight, we expect capital expenditures to remain elevated as we invest in testing, production scaling, and infrastructure expansion. GAAP EPS for the fourth quarter was a loss of 9 cents per share, compared to a loss of 3 cents per share in the third quarter. The sequential increase to GAAP EPS loss is mostly attributable to the $41 million tax benefit we recorded during the third quarter, which was due to the partial release of the valuation allowance against our corporate deferred tax assets, as a result of acquiring an equal amount of deferred tax liabilities emanating from the GOST acquisition purchase price accounting. GAAP operating cash flow was a use of $64.5 million in the fourth quarter of 2025, compared to $23.5 million in the third quarter. The sequential increased use of $41 million was almost entirely due to the timing of employee equity program-related tax payments. Similar to the capital expenditure dynamics mentioned earlier, cash consumption will remain elevated due to neutron development, longer lead procurement for SDA, investments in subsequent neutron tail production, and infrastructure expansion to scale the business beyond the initial test flight. 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 2025 was a use of $114.2 million compared to a use of $69.4 million in the third quarter. The ending balance of cash, cash equivalents, restricted cash, and marketable securities was approximately $1.1 billion at the end of the fourth quarter. The sequential increase in liquidity was driven by proceeds from sales of our common stock under our at-the-market equity offering program. which generated $280.6 million during the quarter. These funds are primarily intended to support acquisitions, such as the announced pending Moneric acquisition, the recently consummated acquisitions of Optical Support, Inc., and Precision Components Limited, as well as other targets in our robust M&A pipeline, along with general corporate expenditures and working capital. We exited Q4 in a strong position to execute on both organic and inorganic growth initiatives and to further vertically integrate our supply chain, expand strategic capabilities, and grow our addressable market, consistent with what we've done successfully in the past. Adjusted EBITDA loss for the fourth quarter of 2025 was $17.4 million, which was below our guidance range of $23 to $29 million loss. The sequential decrease of $8.9 million in adjusted EBITDA loss was driven by significant revenue and gross margin improvement, partially offset by increased operating expenses related to neutron development. With that, let's turn to our guidance for the first quarter of 2026. We expect revenue in the first quarter to range between $185 and $200 million, representing 7% quarter-on-quarter revenue growth at the midpoint. and growth of 57% from the year-ago quarter. We anticipate slight slipdown in both GAAP and non-GAAP gross margins in the first quarter, with GAAP gross margin to range between 34% to 36% and non-GAAP gross margin to range between 39% to 41%, with a modest sequential decline driven by a greater mix of space systems versus higher margin launch and a weaker margin mix within our space system segment. We expect first quarter gap operating expenses to range between $120 and $126 million, and non-gap operating expenses to range between $106 and $112 million. The quarter-over-quarter increases are primarily driven by ongoing Neutron development and spending related to Flight 1, including staff costs, prototyping, and materials. However, we expect to see a shift in spending from R&D and into Flight 2 inventory throughout 2026, which is an encouraging sign of progress as we move closer toward Neutron's first flight and adjusted EBITDA positivity as a result. I'm optimistic that with the impressive strides we've made towards this milestone and currently expect Q1 to mark peak Neutron R&D spending. We expect first quarter GAAP and non-GAAP net interest income to be $8 million, which is a function of higher cash balances as well as conversion of approximately $117 million of convertible notes since December 31st. We expect first quarter adjusted EBITDA loss to range between $21 and $27 million and basic weighted average common shares outstanding to be approximately 605 million shares, which includes convertible preferred shares of approximately 46 million and reflects the conversion of approximately 23 million shares from our outstanding convertible notes thus far in Q1. There remains only 7.5 million shares or 11% of the original $355 million issuance outstanding, And when taken into the additional context of the retirement of the Trinity equipment line in Q4, we have substantially eliminated indebtedness from the business. Lastly, consistent with prior quarters, we expect negative non-GAAP free cash flow in the first quarter to remain at elevated levels, driven by ongoing investments in neutron development and scaling production. This excludes any potential offsetting effects from financing activities. Last but not least, here are some of the upcoming investor events that we'll be attending in the next few months. And with that, we'll hand the call over to the operator for questions.

Thank you. If you'd like to ask a question, please press star 1-1. If your question has been answered and you'd like to remove yourself from the queue, please press star 1-1 again. Our first question comes from Andrea Shepard with Cantor Fitzgerald. Your line is open.

Hey, everyone. Good afternoon. Thanks so much for taking our questions, and congrats on all the great progress, and thanks for the update on Neutron. Adam, maybe you want to start with the backlog. I'm wondering if you can maybe help us drill a bit deeper in it and maybe remind us what is included in here. Does this include the 40% of revenue from SDA Tranche 2, 10% of maybe the Tranche 3, What are you including from Neutron and Electron here? Thank you.

Hello?

I'm sorry, the mic went off. I don't know how much you caught of that. So all of the SDA contracts were added to backlog. So what remains for SDA tranche two transport layer is still in the backlog. Obviously what's been recognized as revenue is no longer there. Through the end of Q4, we hadn't recognized any of the tranche three contract awards. So all of that value is currently in backlog and that will start to convert into revenue and come out of backlog obviously in that process. As far as Neutron's concerned, I think we've spoken before that We have several flights that are representative in our launch backlog that's reflected in our filings. So hopefully that answers your question on backlog composition.

Yeah, that's helpful. Thank you. And maybe just as a follow-up, so on Neutron with the shift to Q4 now with the first launch, how should we think about cadence? Will you still target maybe three launches within the first 12 months after the first one? how confident are we in the development of the second tank and wondering if maybe we should expect any step up in CapEx now with the second tank in production? Thank you.

Adam, I can answer a couple of those and maybe you and someone as well. Andres, so with respect to the tank, I think it's well understood what needs to be done there and you know, we had built a lot of the second stage tank on the AFP machine. So, you know, that really solved that problem. And yeah, the way to think about just sort of follow-on flights is it's not quite, you know, as dire as like moving all of the follow-on flights 12 months, you know, or to the, you know, to the first flight, because as you've seen in the presentation, we're already building flat out additional neutron tail numbers. So it'll probably be a slightly faster convergence into subsequent flights because none of the other hardware that's qualified is being halted, obviously. It's just that tank. And the AFP machine enables us to build a tank just way more rapidly than with a hand-lay process. So I think we'll be in better shape there.

And, Andre, I guess with regards to your question as far as CapEx and so forth related to the second tank that's replacing the first one that ruptured, I mean, the benefit now, as Pete said, of being on the AFP is not only can we produce it faster, but the actual cost to produce that second tank is quite low. The first tank was very expensive because, as Pete mentioned earlier, it was a hand-laid-up tank. It took a long time. This will be much quicker. And also, since we've now commissioned the AFP, we're really just talking about variable costs related to the tank materials more than anything else. because the existing labor is already kind of in the model. So there won't be any increased capex. And, you know, the impact to R&D as a result of the tank failure is actually not – that tank itself is actually not that significant.

Got it. That's super helpful. Thanks so much for all the detail, and congrats again on the quarter. I'll pass it on.

Thank you. Our next question comes from Edison Yu with Deutsche Bank. Your line is open.

Thank you. And great quarter, as always. I wanted to ask a question on space data centers. And I think you had alluded to, you know, a lot of interest. I think it's obviously become a hot topic in the industry. Can you give us a sense on how these kind of early discussions are going with potential customers interested in doing this and Is it realistic to see some type of rocket lab content in a space data center, let's say, within the next two or three years?

Hey, Addison. Thanks for the question. So I think, look, we're early with data centers. If you look at some of the models, there's a number of things that sort of have to come into focus before they become the logical choice versus terrestrial. But, you know, we never want to miss an opportunity. And, you know, we've been developing the silicon arrays and power solutions for a while now, focusing on mega constellations and, you know, these... high volume power applications. But if you stand back objectively and you think about what are all the challenges with putting data centers in orbit, it boils down to the really three things. One is cost and cadence of launch to be able to make the model close. And then two is heat rejection through various means. And three is just sheer power. Like these are gigawatts of electricity. electrical power. So, you know, solar arrays of multi-kilometers in scale are what's needed. So, you know, we wanted to make sure that, you know, whether they leave this earth or not, there'll be Rocket Lab logos all over that stuff. So, you know, as far as I'm aware, nobody else has a silicon solution quite like we've developed.

Understood. And to your point on heat rejection, I guess the radiator, is that a capability you have in-house that you need to develop over time? Or is that something inorganic? Just curious on what needs to be kind of technically done there.

Yeah, I mean, look, all of our spacecraft have radiators. I mean, you generate heat. You have to reject it. So, you know, yeah. there's various kind of ways of doing that, piping heat around the spacecraft to radiate it. So I don't see that as a huge technical challenge. It's just, you know, on the scale, the scale that's required is, you know, hasn't been achieved before. So that's, you know, that's the challenge there. But to be clear, I mean, I don't, you know, those who are at least experimenting with it and looking to go down that path, I think we have a lot of compelling solutions.

Gotcha. If I could just sneak one quick one in. In terms of just the discussions, can you give us a sense of like the flavor of customers? Are these kind of new customers, non-traditional customers kind of exploring this idea with you?

Yeah, I mean, we have to be a little bit careful here, but I would say that there is certainly more non-traditionals looking at this kind of solution than traditional players.

Great. Thank you so much.

Thank you. Our next question comes from Ronald Epstein with Bank of America. Your line is open.

Hey, this is Alex Preston on for Ron. Can you guys hear me all right?

Yeah, we can hear you.

Perfect. So I know you talked a little bit about progress on the Monarch acquisition, but I was a little more interested maybe broadly in the environment in Europe and more generally, right? It seems like there's a growing appetite for call it indigenous launch and national security space capabilities. And I'm interested if you sort of see this trend yourselves or how you see this developing. I know, you know, Pete mentioned No other small launch provider has really succeeded in the last year, but it's still, I think, focused for a lot of people.

Yeah, Alex, it's a great question. Look, one of the reasons why we like Monarch and why we think it's important, Europe more in general is exactly that point, is that there's a lot of space nations there that have very little capability with giant aspirations and really short timeframes. And I think it's always everybody's desire to build domestic capabilities. But the reality is, if you want to stand up these kind of capabilities really, really quickly, you don't have the decades that it takes to build often these sovereign capabilities. They're very specialist, often equipment and facilities and also intellectual property and knowledge. So we see Europe as a great opportunity for us and a real expansion beachhead where we can provide solutions at the component level. We can provide solutions at the complete system with respect to a satellite. We can provide launch. And you've seen even European space agencies procure launch from us now. And once we have a footprint in Europe proper, you know, being eligible for participating in European programs becomes possible. So I think it's a great opportunity. There's, you know, literally billions and billions of dollars of, you know, well-funded government programs underway right now. And, you know, the timelines associated with those are conducive, or I would say not conducive necessarily always to, you know, creating sovereign capability.

Got it. And then I guess it would sound like the attitude is still broadly constructive from what you said versus maybe Europe starting to get a little more distant from U.S.-based providers.

No, I think it's very constructive. I think, you know, naturally that Europe is looking to create sovereign capability, but I think that also, you know, the conversations we've had, they're very pragmatic and realistic that, you know, the capability they're looking to create takes a long time. So, you know, working with, for example, a rocket lab Europe is a great way to move forward.

And just real quick, would you characterize that the same on launch as you would on space systems? where I think there's a bit more existing indigenous capability in Europe already.

Yeah, they're certainly giving it a good college try, but not having tremendous success, I would say. But that is just how difficult launch is. But, you know, I think launch is just so strategically important. You can build all the satellites you want, but if you can't put them in orbit, it's kind of pointless. So this is the reason why, you know, you have the European Union and ESA's launch vehicles that, you know, on the face of it aren't that commercially competitive, but they'll never go away because, you know, the nations need access to orbit. So, you know, I would expect to see that persist for some time and, you know, continue investments made into launch for Europe. But in saying that, you know, everyone's pragmatic and if you need to get stuff to orbit, then, you know, pick up the phone.

Got it. Thank you very much for the call.

Thank you. Our next question comes from Eric Rasmussen with Stifel. Your line is open.

Yeah, thank you for taking the questions. Maybe just back on Neutron, I appreciate the update on Cadence, and it sounds like with the push-out, naturally you continue to sort of build out some of those more capabilities and just Neutron, the infrastructure around Neutron. But Neutron, Post sort of test flight, and we think that's sort of Q4, and if it's late Q4, I don't know the timing, but what do you think then that first revenue flight, when do you think the timing around that could be? Also, when considering that, you know, that probably needs to have a higher level of reliability. And then with that, are you still targeting this as a recovery mission?

Yeah, hey, Eric. Thanks for the question. So, you know, the timing of Flight 2 will always depend on the results of Flight 1. You know, if Flight 1 goes swimmingly, then... you know, the time to get the second vehicle on the pad, you know, we'll endeavor to make as short as possible. If there's things to fix, there's kind of things to fix. But, you know, nominally, the, you know, the timing remains consistent to what we've kind of talked about. And, you know, the vehicle will be outfitted with, you know, all of its kind of requirements for, you know, flight one even for a downrange landing. we'll attempt to do the reentry and landing burn and splash it down. Once again, if all that goes well, then the next one we would intend to slip a barge under. If we pole drive it into the ocean, then we'll probably go to a flight two and get that soft landing right before we go and put infrastructure under that could be costly if we're damaged.

Great. And maybe just on Electron, you had a nice launch campaign in 2025, 21 successful launches. What does the manifest and internal planning suggest for this year? And then maybe just a mix between your standard Electron missions and HAST.

Yeah, I mean, I'm not sure how much we've disclosed about that, but I mean, certainly this year we're looking for, you know, more launch than last year. You know, as you saw, the bookings in Manifest are bulging and, you know, we're banging electrons out every sort of 11 or 13 days now. So that's going fast. extremely well. But I'll pass over to Adam if he wants to comment on launch schedule for the year.

Yeah, Eric. So I think consistent with prior discussions, we see good growth opportunities in Electron. And when I say Electron, I mean Electron in haste. So I think you'd expect increase in both standard Electron launches plus growth in the haste side of the business. We've normally point people towards kind of 20% growth you know, I think is a pretty, you know, kind of, I would say, I would say reasonable estimate for where we see this business growing over the near and intermediate to maybe the long-term. So I would say, you know, we certainly have given the production team direction to produce, you know, significantly more rockets in 2026 than in 2025. And as Pete mentioned on the call earlier, we booked over 30 electron launches in 25 and we always get turns orders. So, Look, I think if you kind of nominally assume a 20% growth in kind of the launch business, excluding Neutron, of course, I think that's probably a pretty good place to be.

That's helpful. Thanks.

Thank you. Our next question comes from Trevor Walsh with Citizens. Your line is open.

Great. Hey, team. Thanks for taking the questions. Peter, maybe first for you, some of your prepared remarks around the OSI acquisition made it sound like that was even further enabling you with the customer as far as just attractiveness for your services, your capabilities, even though it sounded like from the announcement that OSI was actually already in the chain of suppliers with GEOS. So is the customer that focused really then, can we assume, on just the vertical integration aspect? Or is there also just capabilities, you know, functionality features of that acquisition from a systems perspective that are also attractive? Just trying to gauge kind of how you think customers really looking at this. Does that make sense?

Yes. Yeah, no, that's a great question, Trevor. And, you know, to be fair, the customers probably don't care that much other than the fact what they really care about is does their sensor arrive on time at a cost and a performance capability that they've never seen before? And that's what we're delivering. And in order for us to be able to guarantee we deliver that, the most critical element of many of these optical systems are in fact the optics. So in bringing and owning that optics in-house, you know really really drives uh you know certainty for us around cost and schedule and innovation um and it's yep that they they were a supplier to to geos that's for sure um and you know when we acquired the geost uh business the first thing we sat down with the leadership team there and said right where are the where are the critical supply chain elements that might trip us up and been able to deliver you know really disruptive um and um and affordable um you know parts and all programs for our customers. And this was the number one thing. I think this makes us very unique amongst the other suppliers of payloads who are outsourcing optics. And it is the most expensive, the most longest lead item in any of these explicit optical payloads. So it was important to own it.

Terrific. Thanks, Peter. Super helpful. Adam, maybe just a quick follow-up for you. For your prepared remark commentary around the backlog and how tranche three is going to, you know, sounds like it's maybe conservative in terms of what's going to be recognized in that first 12-month period, can you just maybe walk us through a little bit of the puts and takes of how – what's, I guess, influencing that tranche three rev rec? Is it just customer timing of when they want deliverables? What's the – just give us maybe one level deeper. That'd be terrific.

Yeah, so I think we've articulated previously that typically when you win one of these programs, you can recognize revenue kind of like, you know, 10% in the first 12 months after award, then 40% in the second 12 months, 40% in the third 12 months. In the last 12 months, it's about another 10%. So you got a pretty kind of normal bell curve. What I would say is that, you know, what really gates our ability to kind of move faster is really our subcon deliveries, right? So what really either kind of helps us accelerate and get through these gates and milestones and rev rec quicker is our sub cons ability to deliver on time. And so I think that, you know, that's all goes back to what Pete was talking about earlier and the importance of vertical integration. So to the extent that we can just own more of the platform, we have greater control and that allows us to have more predictability to, you know, how we, how we kind of, you know, time revenue recognition and so forth. So I would say that, you know, a big job for us in 2026 is to, you know, across our engineering and production, you know, teams is to really make sure we stay on top of what parts are still coming from third parties, make sure that they stay on their deliverables so we can kind of, you know, again, get the program accelerated as much as possible and get more of that revenue recognized. So, again, we go into it pretty conservative. I think, you know, if you look at the pure conversion, that 37%, I think that was mentioned earlier, of backlog converting, I mean, obviously a portion of that is launched, but the portion that's related in space systems, some of that is coming from the components and subsystems completely unrelated to, sda tranche 2 and tranche 3 but what is in there for tranche 3 is again assuming some pretty conservative delivery dates from our subcons that hopefully we can we can work with them to to do better great thanks both i'll leave it there thanks for the questions thank you our next question comes from ned morgan with btig your line is open

Hey, you actually got Andre on. I don't know what happened there, but all good. I wanted to ask about space systems. Seems like it came in a little bit weaker than what consensus might have expected at first. So just wanted to know the puts and takes there. I know you explained it, but why might have consensus gone a little bit ahead here in the quarter?

Yeah, I don't know that. that consensus does a great job in breaking out the various pieces of the business, even differentiating much between launch and space systems. And then certainly within space systems, I'm not sure they really look at between kind of our platforms business versus the subsystems business. So one of the things I mentioned this in my, in my prepared remarks is that it is difficult to, I would say, I mean, you can't, to say that you can control the, the execution for your RevRec requirements under ASC 606, it just depends on how well your subs are executing, right, and how tightly you're working with them to make sure they stay on track. And to your best efforts, you know, I think we've all seen in some fairly public venues customers, you know, of these programs talking about how there's been some snags in the supply chain, you know, including, you know, from those, for example, like from the optical terminal providers. And so if you look at what we do is we continually look for ways, as Pete mentioned, to just reduce any kind of dependency on third parties as much again. That's why if you look at Electron, how vertically integrated that vehicle is, Neutron will be very similar. We're getting that way more and more with our space systems platform offerings where very little is still, I would say, outsourced to third parties. So it's really just a function of, again, you work with them and get them to deliver as aggressively as you possibly can while not sacrificing quality or cost where you can. So, yeah, I wouldn't read too much into... the granularity that people may have expected from our space systems business. Because one of the benefits that we have now from being such, having such a diversified business is we really just look at the top line. How can we deliver that sequential growth of the business? And sometimes more of it's going to come from launch and sometimes more it's going to come from space systems and within space systems, you know, platforms can have a great quarter and components can be weak and vice versa. And then, you know, it just gets that much better and we'll have that many more tools at our disposal and when we have Neutron coming online, which is why obviously getting that first flight off is so important, why we're all looking so forward to that.

Yeah, no, it's super helpful. Thanks, Adam. I guess to stick with you, I mean, around the two acquisitions that were just announced, are there any financials that you can give any kind of color as to what they were doing on a performance basis? And I guess just how much cost we might be able to see taken out as a result of them being brought in-house?

Yeah. You know, our pipeline is always kind of interesting. It's got a mix of kind of more needle moving deals from a financial perspective as far as, you know, revenue contributions, so forth. These particular deals really much more strategically around, again, vertical integration, reducing risk versus, you know, I would say providing big access to large external third, you know, kind of TAMs, if you will, or adjacent markets. So these are really more, I would say, reducing some margin stacking, and also just taking greater control over the programs. So I wouldn't say there's not a, I would say, material amount of revenue contribution that's going to move the needle from the deals that we just announced. Clearly, you know, Monarch would be a different story if and when that deal gets approved because that would come with significant backlog and revenue opportunity. And again, our pipeline also has lots of other deals that have a mixture of just, you know, again, elimination of margin stacking and in some cases, you know, also pricing. more meaningful revenue contribution. But these two, I don't think you need to change your models at all for the impact for these two relatively small deals.

Got it. Got it. That's helpful. I'll leave it there. Thanks, Adam.

Thank you. Our next question comes from Guadamcana with TD Cowan. Your line is open.

Yeah, thanks. Good afternoon, guys. I was wondering on the neutron tank failure, have you guys – Are you of high certainty that it was that manual layup process and therefore the new process is not going to have the same anomaly? Or is the study still ongoing of what happened?

Yeah, no, we undertook a complete failure tree analysis and We're able to find the piece of tank that caused the initiation of the failure. We're able to reproduce the results through analysis and then also through coupon testing as well. So no, we're very, very confident. We understand that failure extremely well.

Okay, that's great to hear. And then You mentioned some areas where you'd like to take more in-house vertical integration. Can you describe some of those product areas that might be of interest?

Yeah, I think if you look across a spacecraft these days, the areas that we still don't have 100% control of are starting to get smaller and smaller. We have a great RF team, but I think that's an area that we will look to bolster. And we'll seek opportunities to add scale where possible. But I think um you know this is this is just going to be bread and butter for us to to you know to constantly make sure that um you know we don't we don't get stung with you know suppliers that aren't able to to deliver for us and and continue to vertically integrate but as adam pointed out you know our m&a pipeline is is is pretty full and um you know there's a range of opportunities there from from these kind of things that you know that important don't add huge revenue uh bottom lines but they