Rocket Lab (RKLB) Q3 2026 Earnings Call Transcript

Operator00:00

Good day and thank you for standing by. Welcome to the Rocket Lab Corporation 3rd quarter earnings call. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question and answer session. and answer session. To ask a question during the session, you'll need to press *11 on your telephone. You will then hear an automated message advising your hand is raised. To withdraw your question, please press star 1-1 again. Please be advised that today's conference is being recorded. I'd now like to hand the conference over to Muriel Baker, Director of Corporate and Launch Communications. Please go ahead.

Murielle Baker00:58

Hello and welcome to today's conference call to discuss Rocket Lab's 3rd quarter 2026 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 Act. 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 and included in

Murielle Baker01:56

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 officer 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 and our pending acquisition of Iridium Communications, followed by financial highlights and outlook. We will then open the call for questions. So with that, let me turn the call over to Sir Peter. Thanks, Murielle. It's been an outstanding quarter with new records across the business. Revenue came in at $168 million, 73% higher than the same quarter last year at $34 million more than Q2. That's the 6th time in a row for record revenue quarters.

Prepared remarks

Peter Beck02:55

Our Q3 ending backlog hit a new high of $3.57 billion across 117 launches and more than 55 spacecraft. And since the quarter closed, we've added even more launch and space systems As we head into the final months of the year, I wanted to do a bit of a wrap-up of our achievements for 2026. To put our growth into perspective, only 6 years ago we were making less than 4% of our annual revenue We're expected to bring in this year, from $35.2 million in 2020 to our near billion-dollar 2026 full-year guide. Our gross margins have also seen dramatic improvement from near territory in 2020 to a projected 2026 GAAP gross margin in the 35% range. On a non-GAAP basis, we project margins in the 40s, an increase of over 69 percentage points since 2020. In an industry where execution and reliability are non-negotiable, Rocket Lab has consistently delivered for our customers, and we're scaling rapidly and setting new benchmarks every year.

Peter Beck03:16

I want to dig deeper into the numbers across the business, starting with some highlights from Space Systems. For the year to date, we've signed $688 million in new contracts, up 319% from 2021. Today, Space Systems sits at $1.7 billion in backlog, representing 48% of the total company's backlog.

Peter Beck03:28

$470 million in new space system contracts was signed in this past quarter alone, a 512% increase from the same period last year. Incredibly strong growth here.

Peter Beck04:00

Operationally, the team has been executing at a high level with 12 Rocket Lab-built satellites launched in the past 12 months, including missions for NASA, the Space Force, and large constellation operators. Our cleanroom and factories are busier than ever, with more than 55 spacecraft in development and build. On the satellite component front, almost every team has exceeded their annual targets and increased production. We're delivering more critical hardware and subsystems than ever before for our customers' science, national security, and commercial missions.

Peter Beck04:52

Like the title says, demand for launch has been exceptional this year. The 2 biggest commercial and defence bulk orders in our history landed in Q3. 18 HASTE launches for the Space Force's Systems Command, and 20 launches on Electron for our longtime commercial customer Synspective. Q3 has also been the biggest quarter yet for Neutron. 8 launches signed for a total of roughly $515 million, including multiple missions on a new escalated base price of $70 million. The demand is a function of both a tightening global launch supply and our customers' confidence that Rocket Lab is the right partner to break the world's launch bottleneck. It's also been a record year for strategic acquisitions, with new capabilities and technology added to our portfolio, including laser communications, robotics, payloads, and machining capability.

Peter Beck05:08

Iridium will go further still, evolving Rocket Lab into a true end-to-end space company that not only builds and launches spacecraft but also owns and operates its own constellation with recurring revenue and growth opportunities for future space services.

Peter Beck05:46

Now speaking of space services, I've historically referred to operating our own constellation as space applications, but going forward we've updated the terminology to better reflect the integrated end-to-end services we'll be providing our customers. customers once Iridium is part of Rocket Lab. We've made great progress this quarter towards closing the Iridium acquisition. The deal is now fully financed with the ATM completed in Q3, and we've secured a ready Iridium's credit facility for after the acquisition closes. This puts us in a great place where we do not need to raise extra capital to close the deal. Another key milestone was checked off when the Iridium shareholders voted overwhelmingly in favour of the transaction.

Peter Beck06:12

Now we're moving into the final phases, securing the necessary regulatory approvals. This process is advancing well, and we're actively pursuing a timely close. The FCC's recent swift approval of other acquisitions This demonstrates the Commission's proactive, decisive approach and its commitment to supporting the rapid pace of innovation required in the space sector. We're enthusiastic about collaborating with the Commission as we guide to a generational space company in an exciting new era.

Peter Beck06:47

Now on to Space Systems operational achievements. In the past 12 months, a dozen Rocket Lab-built spacecraft have launched and are now operating in space, spanning missions across national security, interplanetary science, science and commercial constellations. And there's more to come, with more than 55 spacecraft in various stages of development and production. These include spacecraft for the Space Development Agency's PWSA, multiple mission for NASA and the Space Force, and programs for commercial constellation operators. Our cleanrooms have never been busier, and with more opportunities on the horizon, we expect that momentum to continue.

Peter Beck06:49

Now on to launch for the quarter.

Peter Beck07:37

What a fantastic slide. At the top of the call, I talked about the record growth we've seen this year, but the 3rd quarter has truly been exceptional. More than $1 billion in launch contracts in this quarter alone. No other commercial small rocket flies more than Electron and Haste, and customers keep booking with us because they know that Rocket Lab has the track record, the technology, and the team to deliver their missions. And they know that's what we'll be bringing with Neutron too. We've got the production capacity to back up that flight rate also. Our experience, production facilities, and streamlined processes mean we're rolling a rocket off the production floor now at an average of 1 every 8 workdays. This level of production means we can meet surges in customer demand like we've seen in Q3 and delivers on tight timelines to support rapid response missions and maintain the launch cadence that our customers have come to rely on.

Peter Beck08:12

Electron is closing in on its 100th launch, which we expect within the next week or so. As the graph shows, that puts Rocket Lab on track to reach 100 launches faster than any other commercially developed rocket in history. It's a precedent milestone for a commercial small-lift orbital rocket and a threshold rarely crossed in modern spaceflight. But what matters most to us and our customers is that we have achieved a 96% reliability rate across 19 launches. That is a powerful combination few others can match, and that's the experience we're carrying on into Neutron. Speaking of which, here's the latest on Neutron for the quarter.

Peter Beck08:38

Since our update about Neutron Stage 1, we shifted our first launch timeline to 2027 after voids were found in the propellant tank's forward dome. The team has really surged to manufacture a replacement part. The AFP machine has laminated a new forward dome, the structure has completed its cure cycle, and the results show we've got a nice clean forward dome to move into assembly with the rest of Stage 1's tank. It's nice to have that problem behind us now.

Peter Beck09:38

We've already stacked the mid-assembly of the Stage 1 tank, which includes a giant barrel section and common dome inside it that separates the liquid oxygen from the fuel tank. Our focus now moves on to completing the forward assembly and the aft assembly. which comprises of domes stacked inside barrels similar to the mid assembly. Once that's done, these 3 assemblies complete the Stage 1 tank. The team's focus is on completing that work as soon as possible before we run the tank through a round of hydrostatic tests at the Neutron factory. After that, we'll ship it to Launch Complex 3, run a cryogenic qual campaign, and then integrate it with the vehicle's other major assemblies already in Virginia. Neutron Stage 2, the suspended stage that hangs in Stage 1, was delivered to Launch Complex 3 recently and has completed a number of pre-test activities before it heads into cryogenic proof tests. After that, we'll move Stage 2 We're also about to put Stage 2 into wet dress rehearsals without an engine to test the stage early in its flight configuration. We'll bring Stage 2 up to flight-like propellant levels and cycle through valve checks to make sure the stage is fully functional, as well as test how

Peter Beck09:49

We transition from ground control to the stage autonomous flight computer during terminal count. Then we will add the engines and we'll integrate them and run through more tests before moving into static fires.

Peter Beck09:55

The first piece of flight hardware on the LC-3 launch mount itself is Neutron's thrust module.

Peter Beck10:39

From the Neutron factory to Wallops Island to the launch mount within 48 hours. That's the beauty of proximity with our facilities in Maryland and Virginia. Like Stage 2, we'll be running Neutron's thrust module through some very important tests Early tests without its engines. By design, Neutron operates without a strong back on the launch mount, so the thrust module is the rocket's only physical interface to the pad. We'll be checking things like launch pad mount hold down. and release systems, quick disconnect operations, and then conduct some pressure tests and propellant tests to confirm all the interfaces work with the pad. It's a great example of our parallel path development approach, systematically de-risking the pad and ground systems now to ensure a direct and efficient path to an integrated testing with the entire vehicle when it's complete.

Peter Beck11:26

Turning to the Archimedes engine, we continue to make significant progress to finalize the engine, including recent cold box testing with the Archimedes vacuum variant for Stage 2. This is where we expose the engine to the same extreme cryogenic temperatures it will experience during Stage 1 flight to make sure its valves, seals, igniter, and turbo machinery don't freeze or leak. Successfully clearing these tests moves the qual campaign closer to the finish line and gives us a high confidence for the AVAC engine and its multiple restart reliability for Flight 1. That technical maturity is also feeding directly into the build of the Flight 1 engine set and the engines thereafter for Flight 2. 2 and Flight 3 and so on. At the same time, we're also exploring opportunities to ramp Archimedes production to a faster scale post-Flight 1 and meet the high cadence demand for launches that we're seeing.

Peter Beck12:16

The massive surge in Neutron bookings this quarter is the strongest signal yet of where the launch market is headed. We signed 8 missions for roughly $515 million, with multiple flights sold at an elevated base price. price of $70 million per launch. Neutron's first 16 launches are booked and the next available slots are in the 2030s alongside the capacity that we're holding for our own future space services missions. Launch is extremely constrained, and that is exactly the situation we predicted. We saw a pent-up launch market on the horizon, and rather than provide early discounted launches, we set out to deliver a rocket into an environment with extreme demand. demand at full price or higher. A full manifest before Flight 1 shows you exactly how that's played out. Even with the extra time we're taking to get to first flight, our customers trust Rocket Lab to deliver, and Neutron is the vehicle of choice.

Adam Spice12:29

That wraps up the operational highlights. Now over to Adam for the financial overview and outlook. Thanks, Pete. 3rd quarter 2026 revenue was a record $267.8 million.

Adam Spice13:30

Coming in above our prior guidance range of $250 to $265 million and representing year-over-year growth of 73%. Revenue increased by 14.4% sequentially, driven by strong contribution from both business segments, highlighting continued momentum across the business. Our Space Systems segment delivered $214.8 million in revenue for the quarter, reflecting a sequential increase of 13.3%. This growth was primarily driven by continued scaling of our satellite platform business, along with full quarter contribution from our laser communications and robotics acquisitions. We also delivered sequential organic growth across our other component and software businesses. Our space systems business continues to perform exceptionally well well and provides diversification alongside our robust but at times lumpy launch business. Meanwhile, our Launch Services segment generated $53.1 million in revenue,

Adam Spice13:40

Representing a 19% quarter-over-quarter increase driven by a 2-launch increase in point-in-time Electron missions where the full value of the launch is reflected at launch.

Adam Spice13:43

Now turning to gross margin.

Adam Spice14:02

GAAP gross margin for the 3rd quarter was 33.6%, above our prior guidance range of 29% to 31%. Non-GAAP gross margin for the 3rd quarter was 38%, 38.4%, which was above our prior guidance range of 35% to 37%.

Adam Spice14:38

Consistent with our Q3 guidance, margins declined sequentially, primarily driven by the first full quarter contribution from our recent acquisition, Mynaric, which brings laser communications capabilities to our portfolio. portfolio, as well as the lack of tariff refunds that benefited Q2 margins. The decline was smaller than we anticipated, however, due to upside in our component businesses' profitability led by solar and our GEOST acquisition's optical systems, as well as launch favorability driven by reduced production spend and favorable absorption due to a step-up in Electron launch and build cadence.

Adam Spice15:03

As previously mentioned, Mynaric will take a few quarters to reach target margins as we align the cost structure, scale production, and implement the Rocket Lab operating system. Additionally, we recorded We ordered a forward loss reserve against our Neutron Flight 2 launch vehicle to reflect the nascent stage of the vehicle and related early launch capability and potential impacts to that specific flight's profitability or lack thereof.

Adam Spice15:11

Relatedly, we ended Q3 with production-related headcount of 1,728, up 40 from the prior quarter.

Adam Spice15:33

Turning to backlog, we ended Q3 2026 with approximately $3.6 billion in total backlog, up 52% sequentially from approximately $2.4 billion at the end of Q2, with launch backlog accounting for approximately 52% and space systems representing 48%.

Adam Spice15:48

We signed a significant volume of contracts across launch and space systems in the 3rd quarter, bringing our backlog to 117 launches and over 55 spacecraft and making 2026 an incredible year of backlog growth thus far.

Adam Spice16:03

As Pete mentioned, we signed 54 launches in the quarter, 8 of which were for Neutron, with multiple contracts at a new escalated base price of $70 million, underscoring the growing demand and scarcity for medium-lift launch capacity.

Adam Spice16:17

While bookings across launch and space systems remain inherently lumpy due to the timing of larger high-impact program opportunities, backlog has grown even as we recognize revenue at a meaningfully higher run rate.

Adam Spice16:27

We continue to pursue additional needle-moving contract opportunities that we expect will enable us to sustain healthy backlog levels as revenue continues to scale.

Adam Spice16:47

Looking ahead, we expect approximately 32.9% of our current backlog to convert into revenue within the next 12 months. Additionally, we continue to benefit from relatively quick turns business across launch and space systems components businesses that drive incremental top-line contribution beyond the current 12-month backlog conversion.

Adam Spice17:00

Turning to operating expenses, GAAP operating expenses for the 3rd quarter were $169.3 million, above our guidance range of $143 to $149 million.

Adam Spice17:47

Non-GAAP operating expenses for the 3rd quarter were $130.2 million, which was modestly above our guidance range of $121 to $127 million. The increase in GAAP operating expenses relative to our prior guidance was primarily driven by transaction costs associated with the pending acquisition of Iridium, including a $9.4 million expense associated with the change of control of Iridium's existing Term Loan B facility, which was completed during the quarter, but neither the success nor cost could be estimated or predicted at the time we provided our Q3 guidance. In R&D specifically, GAAP expenses increased $16 million quarter over quarter, while non-GAAP expenses rose $17.2 million.

Adam Spice18:06

These increases were primarily driven by Neutron Flight 1 development and production activity, particularly engine production and carbon composite structures as we progress towards launch. Q3 ending R&D headcount was 1,084, representing a decrease of 3 from the prior quarter.

Adam Spice18:39

In SG&A, GAAP expenses increased $11.2 million quarter over quarter, while non-GAAP expenses decreased $2.8 million. The increase in GAAP SG&A was primarily This increase was primarily due to transaction fees associated with the pending Iridium acquisition I referenced earlier. The decline in non-GAAP SG&A was primarily driven by early progress in realizing cost synergies from our Minarik acquisition. Q3 ending SG&A headcount was 447, representing an increase of 5 from the prior quarter.

Adam Spice18:48

In summary, total headcount at the end of the 3rd quarter was 3,259, up 42 heads from the prior quarter.

Adam Spice18:52

Turning to cash.

Adam Spice19:25

Purchases of property, equipment, and capitalized software licenses were $31.1 million in the 3rd quarter of 2026, an increase of $5 million from the $26 million in the 2nd quarter. This increase reflects continued investment in Neutron, including the return on investment recovery barge and launch and testing infrastructure. As we progress towards Neutron's first flight and Into production, we expect capital expenditures to remain elevated as we invest in testing, production scaling, and infrastructure expansion.

Adam Spice19:32

GAAP EPS for the 3rd quarter was a loss of $0.12 per share compared to a loss of $0.08 per share in the 2nd quarter.

Adam Spice19:59

The sequential increase in GAAP loss per share was primarily driven by transaction costs in SG&A and other income, mostly due to the termination of the bridge loan commitment related to the pending Iridium acquisition referenced earlier. Spend also rose on Neutron engine prototyping and composites for the Flight 1 engine set and Stage 1 tank rebuild. We expect Neutron spend to remain elevated through first launch.

Adam Spice20:26

Driven by engine materials and the team's labor run rate as costs shift towards subassembly test campaigns and vehicle integration. GAAP operating cash flow was a positive $7.2 million in the 3rd quarter. quarter of 2026 compared to a use of $84.1 million in the 2nd quarter. This increase is primarily due to a step-up in milestone payments on satellite programs, which are lumpy and increasing in magnitude.

Adam Spice21:26

Similar to the capital expenditure dynamics mentioned earlier, cash consumption will remain elevated due to Neutron development and Neutron tail production as we scale the business and as we procure longer lead items for our SG&A programs. Overall, non-GAAP free cash flow, defined as GAAP operating cash flow less purchases of property, equipment, and capitalized software, in the 3rd quarter of 2026 Was a use of $23.9 million compared to a use of $110.1 million in the 2nd quarter. The ending balance of cash, cash equivalents, restricted cash, and marketable securities was roughly $4.7 billion at the end of the 3rd quarter. The sequential increase in liquidity was driven by proceeds from sales of our common stock under our at-the-market equity offering programs, which generated approximately $2.4 billion in gross proceeds through the issuance of 36.8 million shares, and we completed this program in September. Together with Iridium

Adam Spice22:26

Iridium's amended term loan facility and our available liquidity, these proceeds fully fund the cash consideration and other funds necessary for our pending acquisition of Iridium, which allowed us to terminate our $3.6 billion-dollar bridge facility commitment. We exited Q3 in a strong position to execute on both organic and inorganic growth initiatives, including further vertically integrating our supply chain, expanding our strategic capabilities, and growing our addressable market consistent with what we have done successfully in the past. Adjusted EBITDA loss for the 3rd quarter of 2026 was $18 million, which was towards the low end of our guidance. guidance range of a $17 to $23 million loss. The sequential $9.2 million increase in adjusted EBITDA loss was primarily driven by elevated R&D spending due to Neutron. With that, let's turn to our guidance for the 4th quarter of 2026. We expect revenue in the 4th quarter to range between $270 million and $290 million,

Adam Spice22:35

Representing 4.5% quarter-over-quarter revenue growth at the midpoint and growth of 55.9% from the year-ago quarter.

Adam Spice23:28

We expect strong growth in launch revenue with a pickup in both point-in-time and overtime revenues, partially offset by a decline in space systems. Within space systems, solar Satellite platforms are expected to decline coming off of very strong Q3 performances, while the rest of space systems businesses should be up. We expect GAAP gross margin to range between 34%. to 36% and non-GAAP gross margin to range between 39% to 41%. Margins are expected to improve sequentially due to improved mix between launch and space systems and within space systems. We expect 4th quarter GAAP operating expenses to range between $162 million and $168 million and non-GAAP operating expenses to range between $136 million and $142 million.

Adam Spice23:59

The quarter-on-quarter increases are primarily driven by Neutron development, testing, and readiness activities ahead of Flight 1. We continue to expect a shift in spending from R&D to Flight 2 and subsequent Neutron production inventory, which is an encouraging sign of progress as we move closer to Neutron's first flight and supports our path towards meaningful operating leverage and positive cash flow in the future. We expect 4th quarter Net interest income to be $45 million, which is generally a function of our elevated cash balance.

Adam Spice24:11

We expect 4th quarter adjusted EBITDA loss to range between $14 million and $20 million and basic weighted average common shares outstanding to be approximately 681 million shares.

Adam Spice24:24

Lastly, consistent with prior quarters, we expect negative non-GAAP free cash flow in the 4th quarter to remain at elevated levels, driven by ongoing investments in Neutron development and scaling production.

Adam Spice25:01

In summary, Q3 was another quarter of strong execution. We exceeded guidance for revenue and gross margins, grew backlog to a record $3.6 billion, And continue to maintain robust liquidity to fund future growth initiatives. We expect this momentum to continue, guiding to increased revenue growth as our satellite platforms business scales and new Neutron progresses towards its first flight. We continue to execute across all metrics and are positioned to create significant value ahead. Last but not least, here are some of the upcoming investor events that we'll be attending in the next few months.

Adam Spice25:05

And with that, we'll hand the call over to the operator for questions.

Questions and answers

Operator25:19

As a reminder, if you'd like to ask a question at this time, please press star 1-1 on your telephone and wait for your name to be announced. To withdraw your question, please press star 1-1 again.

Operator25:25

Our first question comes from Andres Sheppard with Cantor Fitzgerald.

Andres Sheppard26:25

Hey everyone, good afternoon. Congratulations on the quarter and the backlog. And as always, thanks for taking our questions. Pete, I wanted to maybe start with Neutron. So last quarter, I think we asked, what does the path to 10 Neutron launches look like as we look beyond the first one? So I guess after the slight shift in Neutron's first launch How are you thinking about the path to 10 Neutron launches now, and what's the quickest that we might be able to get there? Thank you. Yeah, hey, Andre, great to chat to you. Yeah, I mean, obviously we're always trying to revisit that 1-3-5. And I think there's an intense scrutiny on that at the moment. And a lot of the things that we've been doing in the background during this period of some of these delays has been to strengthen our ability to increase that rate. So I think we're looking to improve on that rate.

Peter Beck26:43

And you can see we've got a huge backlog to start chewing through. So I don't think we're ready to revise those numbers yet, but there's been a tremendous amount of work going into the background as to how we We can increase that rate to get to flight 10 faster.

Adam Spice27:44

Excellent. That's very helpful. Appreciate that. And maybe just a quick one for Adam. So on the backlog, you know, again, very exciting to see the material increase here. I think we can probably call This year, the year of the backlog. My question is actually more around ASPs for launch. So if I heard you correctly, I think you disclosed that future Neutron ASPs will increase to about $70 million, which is exciting. So I guess my question there is, how should we think about maybe Electron and Haze launches for next year and beyond? And is there an opportunity to perhaps increase ASPs here Given how launch constrained the industry still is, thank you. Yeah, no, it's a good question, Andre. So I would say just to be clear too that the you know the neutron pricing isn't going to seventy; it's at seventy. Right? So we've already put some in backlog at that price. I think from here, the price is, you know, I would say logically going up from that new baseline. When it comes to Electron and Haste, I think, you

Adam Spice28:37

Know, some of the same dynamics are in play when, you know, Pete mentioned in his prepared remarks about how demand has never been stronger and how, you know, we're the leading launch provider, you know, in that small dedicated launch segment. I mean, that's just becoming, you know, just more and more the fact. I think when, you know, if I look at now where we are and where the demand is coming from Electron, I don't think I necessarily would have predicted to be kind of in this new growth wave. It seems like were growing very nicely, and then there's been another leg up in demand. And with that, you should expect pricing will go up as well. And we're also starting to see that reflect in the backlog. So I think you're going to see price increases across Electron and Haste. And Haste now is represented representing a bigger and bigger piece of our backlog, which naturally comes at higher ASPs. So I think the combination of, you know, kind of lifting the prices across all of our launch services are going to start to be more evident in the model going forward. So I feel very good about where we're at. Excellent. Thank you again. Congrats on the quarter. We'll pass it on.

Operator28:44

Our next question comes from Edison Yu with Deutsche Bank.

Edison Yu29:22

Hi, thank you for taking our questions. I wanted to ask about orbital data centers. I think in the past we've probably been— I think you guys have been a little bit more skeptical than certainly one company out there. And you had this midterm election in the US, which I think many people suspect could slow down the terrestrial buildout. What are your latest I guess, on, you know, what you could potentially do on the space systems side for Orbital? And would you expect, you know, kind of the interest to increase going forward, just given what happened last week?

Peter Beck30:23

Yeah, hey Edison. So, you know, we've always, you know, like you say, retained a healthy level of kind of skepticism Um, but I would say that, you know, we've always been bullish certainly on defense-based orbital data centers. And also, uh, clearly I've been wrong plenty of times. Um, so We certainly weren't going to cut off any opportunities for ourselves, hence the reasons why we developed and brought to market the new silicon cell for orbital data centers. Obviously, we have an orbital data center customer for a Neutron vehicle. And I would say that like everybody else, we are doing our fair share of work around that opportunity. So, you know, we certainly haven't written it off. And, you know, we are monitoring, you know, all of the, you know, all of the events and

Peter Beck30:34

Like I say, doing our work to make sure that if we, if we are able to gain conviction, then we're in a really good place to be able to capitalize on that.

Edison Yu30:55

Understood. And just a follow-up to that, as you kind of think about the architectures for orbital data center out there, what do you view as the kind of biggest engineering or technical bottlenecks, or is it more of a kind of economics thing?

Peter Beck31:45

Yeah, for me, it's economics. You know, there's a number of kind of key things that have to happen for those economics to close. And those key things are extremely difficult. So yeah, I think, I think there needs to be some major technological advances to unlock the economics. I think if you want to put you know, smaller data centers or data centers of a smaller scale in orbit. I think that's all completely doable. Hence the reasons why we are very bullish on orbital data centers for secure, comms or defense purposes, I think that's, that's, that, that it will definitely happen. Um, but the moving all data centers off Earth into space, um, I think there's, there's a few challenges to solve there.

Edison Yu31:48

Thank you.

Operator32:23

Our next question comes from John Godden with Citigroup. Hey guys, thanks for taking my question. Congratulations on being fastest to 100 launches on the Electron even faster than the Falcon 9. Of course, years later, the Falcon 9 is doing 170 launches or so a year. So I thought it's just a good opportunity to revisit the multi-year outlook for Electron. Electron launches? And if you could also just talk a bit about how the outlook for Electron growth evolves eventually alongside Neutron.

Peter Beck33:23

Yeah. Hey, John. Well, we're not done yet. Give us a chance. But, you know, Electron obviously is, is, is not a reusable vehicle. So the big unlock For huge cadence, of course, is reusability. Although, you know, as you can see with the factory and the production rate that we have currently, you know, we can, we can produce a fair bit of those. But But, you know, next year will be a big year for Electron. We have a huge manifest lined up for Electron and we don't see that subsiding, especially in this, in this market with the likes of other providers of rideshare going away, then the next logical alternative is, of course, an Electron. So we see tremendous traction there. So, but the nice thing about Electron, it was at least it was designed to be produced. So as you can see, you know, we're producing one every 8 days. There's no technological feat required to double, triple,

Peter Beck33:54

Whatever that. It's at this point, it's just duplicating and additional factory lines and that kind of thing. You can see with our pads, you know, we have multiple pads around the world. So we're well-endowed in that side of it. So, you know, I think there's not too many limiters, you know, on Electron, and there hasn't been ever really. It's how fast the market will grow and evolve to whatever cadence that it ultimately ends up at.

Unidentified speaker34:15

That's great. Appreciate it. And if I could just sort of ask a little bit of a different question just on supply chain, you know, huge amount of satellites in development and build, obviously launch cadence also growing. Just a temperature check on the space supply chain, anything kind of emerging as, as an issue that should be a watch item?

Peter Beck35:04

Yeah, I mean, not so much for us because we're so vertically integrated. We control so much of our own supply chain. So, you know, for us, probably The things that we worry about are different things than other people who are building satellites and procuring components from us and others worry about. And for us, it's, you know, because we are transforming raw materials into finished items. It's, it's more, um, you know, raw materials. There's some, you know, critical minerals and, and whatnot that, you know, continue to be a challenge for a number of industries. But I think, um, you know, look across, you know, our supply chain, it really devolves all the way down to just raw materials rather than, you know, any particular items. Thanks for the color. Appreciate it.

Operator35:12

Our next question comes from Jan Engelbrecht with Baird.

Jan Engelbrecht35:54

Good afternoon, Peter, Adam, and Muriel. Thanks for taking our questions. Perhaps a high-level question, but we've obviously read a lot about the tightening launch availability later this decade. But I wanted to— from your side, what What are customers seeing in Neutron that gives them confidence to commit to these launches before first flight? I know we can talk about mission fit, the technical due diligence, and obviously the $96 mission success rate. But perhaps are there things that they obviously have access to, information and access to you guys that we just can't see in the public domain that you can just speak to more That obviously very impressive to see 16 Neutrons in backlog. Anything you can share there? Thank you.

Peter Beck36:47

Yeah. Hey, Alan. Well, I mean, I think it comes down to fundamentally there has been 2 commercial companies that have developed a vehicle, brought it to market and scaled, and that has been SpaceX and Rocket Lab. So When folks walk around, and they do, like nobody buys a rocket off a brochure. They come and see us and they walk through the factories and walk out to the launch pad. And You know, we're very transparent with the, the, um, you know, our development process and, and the state thereof. So, um, you know, uh, customers are able to, to, to get, to get confidence through their own eyes. And, you know, I think this industry is littered with poor execution. And, you know, we've worked hard to make sure that we have a reputation of not that.

Adam Spice37:47

Got it. Thanks, Peter. Helpful. And then if I may, just to follow up, just for 2027, I know you guys aren't guiding that yet, but is 20% growth from a launch perspective for, for And commercial electron still sort of the right way to think about it. And obviously you guys were, you know, a third of the backlog of the prior quarter was HASTE, which is obviously very attractive from a revenue recognition perspective. And then maybe just a comment on still tied to launch, but and hey specifically, it looks like most of you know Mark TB and that program is is placed in the base budget. So who we assume very little reconciliation risk for HASTE? Thank you. Yeah, I guess I can take the first part of that. So I think on the launch CAGR, I don't think there's any reason to think that, that 20%, you know, is really at risk. I think that, you know, we're seeing demand, as we talked about earlier, continuing to grow. So I think the, you know, the growth, you know, in my view, should be better in many ways

Adam Spice38:47

Next year than we even saw from '25 to '26. So all the demand dynamics are in place, the pricing dynamics are in place. Now it's just a matter of execution. But, you know, we also have to remind people that execution really has, you know, 2 angles to it, right? We have to have the rockets ready, of course, but also, you know, our customers need to be ready with their payloads. And oftentimes in the past, you know, when if there's been a bit of a hiccup on launch cadence in any given quarter, it's really not been because of the rockets not being ready. It's because the customers will have, you know, understandable, they'll have issues at the last moment. They put their spacecraft through the final set of tests and something may not come out all to their expectations. So they have to put it back through test and that can cause some delays. So I think what helps us mitigate that is having such a strong backlog of missions that we can, you know, in many, many, we have the luxury sometimes of being able to do a little bit of, you know, swapping around of missions still keep our cadence going. But it's really 2 pieces. And again, I feel very comfortable that I'll, you know, it's not gonna be a demand challenge. You know, hopefully our customers don't create delivery challenges. And I believe our production teams will

Adam Spice38:51

Be able to deliver the vehicles next year to grow even faster than this year.

Adam Spice39:09

Great. Yeah. And then on the HASTE and MarkTB stuff, you know, we don't see any reconciliation kind of risks here. These programs are pretty bipartisan. And longstanding. So I think that's low risk.

Jan Engelbrecht39:12

Great. Thanks, guys. Appreciate it.

Operator39:20

Our next question comes from Ronald Epstein with Bank of America Merrill Lynch.

Unidentified speaker39:26

Hi, Peter and Adam. This is Andrew Steiner on for Ron. Thank you for taking my question.

Unidentified speaker39:59

I just wanted to touch on launch capacity again. You know, I think Q3 backlog and rising Neutron launch prices did a good job telling the story of tightening capacity. But, you know, with the satellite operator declaring it's going to build a rocket. It seems worse than many may have thought, or at least myself. Is that a fair takeaway from AST's announcement last week? And I guess You know, how do you guys think about, you know, a new unproven launch provider entering the market as a potentially viable competitor?

Peter Beck40:55

Yeah, hi, Andrew. I was hoping someone wasn't going to ask that question. So the launch capacity is incredibly constrained. constrained and as constrained as you, as you kind of see. And, you know, in many respects, we're rooting for everybody because, you know, even when we bring Neutron to market, it's not going to satisfy the demand that's required. So, you know, and also 50% of Neutron is for everybody else and 50% is for us. So I think, you know, we've always, you know, followed the thesis that, you know, the large space companies of the future are going to have their ability to launch their own stuff. And I think this is, this is, this is kind of playing out.

Adam Spice41:56

Gotcha. And I guess just in a different direction here, you know, it was nice to see the operating cash flow in Q3. You know, how should we be thinking about cash generation Going forward, X Iridium, just given you know higher launch prices, you know, and what does you know the ultimate cash generation? Profile look like once iridium is integrated into the business fully? Thanks. Yeah, so look, I think that the rising prices for electron are certainly helping. I think getting the The deposits in for Neutron launches are helping, but nothing is really going to, I'd say, permanently kind of reverse the cash flow negativity until Neutron is really into production. Right? So I think that's why, you know, at least all eyes are on Neutron, getting that to the launch pad and successfully through its first test flight and then scaling into production. I think that's really— we've long said that, you know, we turn, you know,

Adam Spice42:46

Cash flow positive probably about 6 months or so after Neutron's first flight, right? Because that's when things have really pivoted into production. Now, obviously, that changes pretty dramatically, you know, upon the closure the Iridium acquisition because they already come with strong cash flow. And we've got lots of interesting ideas to improve on that, obviously. But I think that, you know, again, what we're focused on right now is like, how do we scale our business and turn it into a cash flow positive one. And really all, all of it hinges right now on, on Neutron. There's, there's not quite yet enough scale in Space Systems, although that business is scaling very, very nicely to offset, you know, a pretty significant lift And for Neutron, and that's just the nature of bringing a new product like Neutron to market. It's, you know, but again, as Pete mentioned earlier in his remarks, we're making great progress there. And, you know, we're looking forward to that date sooner rather than later.

Unidentified speaker42:49

Gotcha. Thanks.

Operator42:57

Our next question comes from Trevor Walsh with Citizens.

Trevor Walsh43:57

Great. Hey, gents, thanks for taking the question. Peter, if I could start with you, I think when you all made the announcements about the slipping of Neutron into next year, you alluded some changes or I guess maybe your ability to do some other work given the delayed timing, similar to when you had the previous delay around the tank. Could you maybe just provide a little bit more color about what that extra activity is and how kind of with that extra time that you're given and how that might influence either follow-on launches and kind of, I think, some to your comments around the 1-3-5 cadence or just reusability, or just give us a little bit more perspective on kind of what else you're allowed to do now given the extended timeframe. Yeah. Hey, Trevor, good question. I mean, it has been all around You know, how do we increase the launch cadence faster? Because that's obviously the critical thing. So that's primarily where the work has gone.

Peter Beck44:57

Around engine production, engine acceptance test, and then also, you know, composite structures production and acceptance test and moving all of those things faster. So we haven't been kind of You know, acting in a serial fashion. A lot of these things are happening in parallel. So while the tank area is, is, is experiencing delays, you know, avionics and fluid systems and all of that, Have not stopped scaling. And, you know, we see— I've been pretty resolute about the 1-3-5. You know, I would say the pressure at this point to increase that is is overwhelming and we're looking at every lever we can pull and, you know, to increase that flight cadence. And I think we've got some really good options there. And, you know, we can talk about that a little bit later once those are solidified. But it's fair to say that, you know, we're certainly, you know, the headspace is obviously flight 1 is important,

Peter Beck45:05

But there's a lot more big brains thinking about really, really how do we increase scaling faster right now.

Trevor Walsh45:44

Awesome. Perfect. Thanks for the color, Peter. Adam, maybe switching over to you, kind of along the same lines, just given the uptick in R&D expense, which I know is, you know, what we've been talking about for a while, is very much tied to Neutron. How should we think about that line? And maybe just more broadly, you had some good comments around cash flow previous questions, so maybe a bit more about EBITDA and just general profitability. Just given, again, given the delay of Neutron and how should we think about that? I know you're not giving '27 guide yet, but just how should we maybe think about that R&D line specifically kind of heading into next year if things have changed or moved around a bit?

Adam Spice46:44

Yeah, well, I think, you know, fortunately the, our space systems segment, which is now by far the largest part of our business, you know, isn't, I wouldn't consider that overly R&D intensive. So I think that, you know, we'll continue to invest there at a pace that continues to drive the top line expectations that we have for, you know, a longer-term CAGR, you know, which we've long said is, you know, kind of 20% or so is kind of where we set the bar for that. The launch is going to faster than that because when we start introducing, you know, Neutron into the mix. I want to clarify too that I think I may have misstated the cash flow positivity is a little bit delayed later than the 6 quarters after the first launch. That's really when adjusted EBITDA turns. Cash flow is really more of a function too of where we are in investing in the fleet of neutrons, and that's going to take a little bit longer. And that goes back to kind of the question that we, you know, that Pete addressed, which is, you know, how can we look to scale the business faster? And there might be some things in there that are capital intensive in order for us to kind of really get that rate even higher than what we've already talked about.

Adam Spice47:44

So I think that, you know, right now, again, all hands on deck as far as getting Neutron to the pad, getting that first flight off. And I think, you know, the financial model benefits tremendously from when that happens. And again, First reflected in adjusted EBITDA, which will turn positive, you know, within 6 months of that first successful test flight. And then cash flow is going to follow that. Again, pending some decisions that we make on how much of an accelerated we want to put on growing the fleet. Because the beautiful thing about Neutron as a reusable vehicle is that, you know, you're going to build the greatest number of vehicles in all likelihood at the beginning of the program, right? And then once you get those established, then The power of reuse really starts to influence the model. That's when margins expand dramatically, and that's when cash flow really starts to gain momentum. So hopefully that answers your question. I think, again, R&D, we don't see any big R&D needle movers aside from Neutron. And then of course, you know, once we've gotten Iridium across the line, then of course, you know, we're always looking at ways to accelerate growth. And, you know, some of that might require a little more R&D

Adam Spice47:55

Than maybe has been historically in that model. But we feel very good also about some of the growth vectors that they've kind of been investing in for the last few years that are just on the precipice of starting to kick in a major way.

Trevor Walsh47:58

Great. Thanks both. Appreciate the questions.

Operator48:05

Our next question comes from Christine Liwag with Morgan Stanley.

Kristine Liwag49:05

Hey, good afternoon everyone, and thank you for taking my questions. So maybe one on Neutron Economics. On Neutron, now you have more production reps under your belt and you've You've now changed your manufacturing process for some of the products. How is the bill of materials tracking against your original steady-state model? And when you think about the efficiency gains from the automated composite layup and Archimedes production? Are there areas where things are costing less than you expected? And then pairing that with a $70 million base launch price, which is a very— and by the way, congratulations on that significant step-up in pricing. How should we think about margins going forward? I mean, I would anticipate that with a significant $15 million pricing than your initial thought, thought you can get to that gross margin 30% to 40% sooner, but then also have a higher steady-state gross margin. So any thoughts on long-term gross margin at Neutron would be helpful.

Adam Spice49:12

Yeah, I'll just hit the top-level stuff and then Pete can dive into some of the engineering pieces of that.

Adam Spice50:12

I would say certainly, yeah, the step up in ASP is certainly going to help us get there faster. I think we've always had conviction that this is a 50% plus gross margin business on a non-GAAP basis. I think that there have been some speculations about what a comparable reusable vehicle's margins are at scale. I think we've seen some of that with SpaceX coming public, But I think that, you know, just as we've seen a pretty significant expansion in Electron's gross margins, largely a function— I mean, some of it's come down to BOM cost reductions, but that's really not what moves the needle in the launch business. It's really about absorbing those fixed costs over a greater number of launches, right? So, um, you know, I think if you think about normal BOM reductions in the, call it 6 to 10% range on annualized basis, it certainly helps, but it doesn't move the needle nearly as much as adding, you know, doubling your launch cadence when you go from 3 launches a year to 5 launches a year to 10 launches a year. And that's really what's going to drive the economics in Neutron.

Adam Spice50:23

But again, I think certainly where ASPs are trending is very, very helpful. And I personally don't think that we're yet at the end of the pricing curve for Neutron. It's very early days.

Peter Beck50:28

Yeah, I think you covered it well, Adam. I mean,

Peter Beck50:51

Yeah, BOM is a relatively small expense. It's all the facilities and the headcount and the overhead that really drive a lot of the costs in a vehicle. You have to maintain factories, launch sites, and all those kinds of things. larges. So the BOM is not out of bed for sure, but it's probably the lower influence to margins.

Kristine Liwag51:27

Great. Super helpful. And if I could pivot to spectrum, there's a lot more industry focus right now on spectrum value. And Iridium gives you the globally coordinated L-band. But, you know, when you think about how L-band is naturally bandwidth constrained, as you map out where you want Rocket Lab to be in the next 5 to 10 years, do you feel like Iridium spectrum is sufficient for your constellation ambitions, or do you think you'll need to acquire a partner for higher throughput spectrum like Ku and Ka-band and execute your vision as a full space-as-a-service company?

Peter Beck52:13

That's a very tricky way to ask us, Kristine, what future constellations might be. But right now, I think we're very happy with our band. I really like the power of L-band given its ability to penetrate bad weather and environments and that safety-critical, defense-critical part of the industry, I think, is really interesting and poised for a lot of growth. So at the moment, you know, the L-band's fine. Of course, we're always looking at spectrum. You know, we are in the comms business now. So spectrum is relevant to us, but certainly no imminent acquisitions of additional spectrum.

Kristine Liwag52:16

Great. Thank you very much. Take care.

Operator52:27

Our next question comes from Gautam Khanna with TD Securities. Yeah, thanks. Good afternoon, guys.

Gautam Khanna52:39

I was wondering if you could talk a little bit more about demand for Neutron given, as you mentioned, you know, industry capacity for launch is sold out a number of years.

Gautam Khanna53:11

Maybe if you could just talk about— I mean, that would suggest there's urgency for customers to place orders, you know, before Neutron is proven successful at first launch. So maybe if you could just talk about the number of launch opportunities you're pursuing and what we might expect for launch bookings in Q4, Q1. You know, like, Is the pipeline pretty full so we could see quarters similar to what we just experienced in Q3?

Peter Beck54:11

Yeah, Gautam, it'll be interesting to see how it all shakes out. Certainly, you know, there's tremendous demand for, you know, the soonest launch slots available and, you know, which has pushed us, into the next available slots now in the 2030s. And, you know, all the work that's going on in the background to increase cadence. So, you know, I think, We've seen, like I say, extreme demand and customers that we've had long relationships with and have worked with us a long time, literally solidify their kind of intentions extremely quickly. And that's been consistent. And then, you know, going forward, the important thing to remember also is As I said prior, like 50% of Neutron's capacity is for everybody else and 50% is for us. So we always have to make sure that we retain enough capacity for our own aspirations. Yeah.

Peter Beck54:52

Sell out all the capacity now at these prices even.

Gautam Khanna54:55

Makes sense. Thank you very much.

Operator55:08

Our next question comes from Andre Madrid with BTIG. Yep, thanks for taking my question. Good afternoon.

Andre Madrid55:39

I wanted to touch on— well, it seems I got beaten to it. I was going to ask if you had been having conversations with the Office of Strategic Capital about potentially supporting Neutron development. And then literally just a couple of minutes ago, an announcement came out just on that. So maybe a bit more, $150 million, maybe the terms of that loan commitment. exactly how the funds are expected to be allocated? Any color there would be greatly appreciated.

Adam Spice56:28

Sorry. Yeah. So, look, I think we're pretty fortunate to be in a position to take advantage of this type of non-dilutive financing. You always take it where you can get it. I think it's on very attractive terms. I believe it's like SOFR plus 100 basis points. So it gives us additional capital to scale key parts of our business, Neutron in particular. I think we're very fortunate that we've had the ability to, you know, since, you know, since I joined the company almost 9 years ago, to make sure that financing the business wasn't a constraint on growth. And this continues to be the case. Um, but I think it also just underscores the importance of how launch capacity is very much in the focus of the administration. And they're putting, you know, kind of some real meat behind trying to alleviate the problem.

Adam Spice56:44

And I think this certainly does help. So I think this is, this is a helpful indicator, a very positive indicator about where everyone sees the demand constraint and how it can be unlocked. And, you know, capital is certainly a part of that. So, yeah, this is, this is just certainly helpful to our cause to help scale Neutron even faster.

Andre Madrid57:45

That's very helpful. And then maybe, you know, kind of staying on the, you know, the, you know, government support. I mean, given that we're under a continuing resolution right now, Um, I mean, are you expecting this to have any, you know, depending on the length of the, of the CR, uh, a more, you know, aggressive impact or not? Or maybe just tell me a bit more about how you guys you're thinking about it within your own internal models, how should we be thinking about the length of a CR and its potential impact on the business heading into '27? You know, it's very difficult to predict. You how government fundings are going to go. I mean, I think that for us, I think Pete mentioned earlier, you know, the programs, a lot of the programs that we're in are already funded. I think they're very strategic. We don't really see I don't see a lot of risk to our programs in particular. But certainly having more clarity on where the budget is going to come from and where it's going from here would certainly be helpful. But, you know, I don't know, Pete, if you got any views on that.

Peter Beck57:49

No, I agree with you, Adam. I mean, I think, I think it's relatively low risk for us.

Andre Madrid57:53

Got it. Appreciate the color. Thanks, team.

Operator58:00

Our next question comes from Jeff Van Rhee with Craig-Hallum.

Unidentified speaker59:01

Hey, Peter, Adam, this is Daniel on for Jeff. Congrats on the quarter. On the next 12 months backlog, so that in particular is one of the metrics we follow the most. It's up 47% sequentially. I think that Might be the strongest quarter for that ever. Just maybe a little bit more commentary on the next 12-month backlog in particular, wondering what drove that. And I say that in particular because I assume obviously this huge launch backlog growth, but a lot of that's the out years and isn't in the next 12 months. And then when I look at space systems backlog, that's up 22%. So this is up even more than space systems. Maybe certain businesses is coming in or pulling in faster than you expected, where maybe some of the durations are pulling in? Just any commentary on the strength there. Yeah, no, look, it's clearly, you know, electron haste are the, are huge benefactors Right now, Pete mentioned what some of those drivers are. I actually think that you know Electron Haste again are coming into kind of a again a new leg of growth, and I think it's driven by the fact that I think people are just.

Adam Spice1:00:01

Just now starting to realize that you know on this on the non-haste side of that equation, that you know the future lack of transporter and bandwagon is like everyone's concerned about is going to have to. go somewhere, right? And when you look at what the next best alternative is, it really is electron, right? So I think that we may not even yet be seeing the real impact of that, maybe just the very early kind of canaries in the coal mine. So that bodes very well for that business. But, you know, as we've talked about in other periods, the space systems business has grown to be a very, very large piece of the business, right, approaching 80%. And While that will rebalance when Neutron starts to launch and also as Electron and Haste continue to grow, that business is a bit more lumpy. We've got a pretty nice mix, I would say, between our components business And our platforms business, but those particularly on the platform side, those come in kind of lumpy kind of awards. They're getting increasingly large. They take longer to close, but.

Adam Spice1:00:39

You know, they're they really do move the needle when they happen, and that also provides some longer term de-risking where you don't you know you're less likely to hit an air pocket if you've got a lot of that kind of in backlog obviously. So I think. I think overall in the near term, to your 12-month question, it really is Electron Haste because we put some pretty, pretty nice programs in a backlog in the most recent quarter. And I would say that that is probably going to continue. And I, again, I think, you know, this is probably one of the quarters where we didn't have, I would say, a really large space systems platforms program that got put into backlog. And those, again, these take longer, but we've, we're very comfortable with how we position that business. There'll be more of those to come.

Unidentified speaker1:01:07

Yeah, and maybe on that note, that's a natural segue to space systems in terms of— we haven't talked about that too much high level in terms of what's coming next. You know, should we be thinking about some of the key opportunities being some of the more obvious ones like Tranche 4 tracking down the road, or maybe expanded work on moving target indicators, space-based interceptors? I mean, obviously there's a lot going on at the Space Force right now, and also on the commercial side. Just maybe some thoughts on where you see some of the emerging or strongest opportunities coming from.

Peter Beck1:02:08

Yeah, I'll take that one, Adam. I think, Daniel, it's across all of them, right? And kind of back to your previous question, I would say that, you know, space systems has reached a level of maturity and cadence that it's just humming right now. And, you know, it's taken us a while. You know, obviously we invested a lot in components and And in, you know, making sure we have the elements. So, you know, when a customer comes to us now, they can expect, you know, best value and certainly the best timeline But also, you know, high, high, 100% confidence that the spacecraft that they're going to get built and delivered works and, you know, meets their requirements. So whether it's, you know, going to Mars and we just did a couple of those trans-Mars injection burns over the last 24 hours, 48 hours, or commercial constellations for comms,

Adam Spice1:03:08

You know, we have all the bits sitting on the shelf that we can put together quickly. We have all the designs that we can reuse. And, you know, the execution is trusted and we build reliable platforms. And I know that that just sounds like table stakes, but, um, it's not as common as you think in the space industry for all of those things to occur. So, you know, I would, I would say that, um, you know, a lot of recurring returning customers and, and, you know, creating more and more opportunities for us and, and, you know, continuing to kind of feed itself in many respects. Yeah, and I would add just a little bit that. I think we haven't yet really started to see the influence of like other sovereigns' investments in space, right? I think that's kind of probably the next demand signal to really start to emerge because you know, if you look at our backlog today, the vast majority of it is US-derived on the space systems platform side, particularly around SDA Tranche 2 and SDA Tranche 3 and AMTI and so forth. But I think

Adam Spice1:03:29

That, you know, the benefit that we— or the position we find ourselves in is that the industrial base doesn't really exist in a lot of these places that are realizing they need these capabilities. And so it'll be a very helpful thing to people like us that have all those capabilities, as Pete said, that are on the shelf to pull things together relatively quickly. And again, I don't think that that has really started to be reflected in the model yet.

Unidentified speaker1:03:32

Thanks, Peter. Thanks, Adam.

Operator1:03:39

Our next question comes from Michael Leshock with KeyBanc Capital Markets.

Michael Leshock1:04:17

Hey, good afternoon. I wanted to ask on Neutron and your expectations of about 50% of the launches there to be internal for yourself. When do you expect that first internal Neutron launch? And is that something that comes after you get through your entire existing backlog, or could an internal launch come before then? And then I guess in the same vein, is that Does that look like an Iridium-related launch to update the constellation in the mid-2030s, or are you expecting the internal neutrons to be primarily used for a separate Rocket Lab initiative in the future?

Peter Beck1:05:18

Yeah, hey Michael, a number of different reasons. One, you know, having your own platform enables you to retire a whole bunch of risk in new technologies and new ideas, and the marginal cost for us to do so is really, really low. You know, Iridium's constellation will need replaced at some point. So certainly Neutron is a key enabler for that. And, you know, When I say 50% for us and 50% for everybody else, that's not out of the chute, obviously. You know, we'll burn down a whole bunch of contracted launch, so that number will skew to our customers really heavily for quite a while. quite some time. But I would say that the long-term view and the long-term kind of expectation, at least for me, is the 50/50. So certainly not imminent, But in the longer term, we expect to have not just one service or application on orbit. We expect to have many out, not just Iridium, but other things. So reserving that capacity now is

Peter Beck1:05:21

Is just prudent.

Michael Leshock1:05:43

And then I wanted to ask on the Alaska pad, what's the latest update on the build-out there in Alaska? And should we expect the first launch in, in '27, early '27? or otherwise? And how many HASTE launches will that pad be able to handle annually? Thank you.

Peter Beck1:06:09

Yeah, that's a great question. So there's actually 2 pads there, not one pad. There's 2 pads side by side. So, you know, its capacity is pretty high because, you know, we can turn a launch, as people have seen in 16 hours, 42 minutes. So, so I think, you know, we have plenty, plenty capacity there. And, you know, we remain on track for 2027 launch out of those pads and multiple thereof.

Michael Leshock1:06:13

Great, thank you.

Operator1:06:20

Our next question comes from Erik Rasmussen with Stifel.

Erik Rasmussen1:06:46

Yeah, thanks and congrats on the backlog growth and Neutron bookings. Maybe just a lot of questions have been sort of answered here, but on Iridium, Maybe which opportunities could maybe accelerate Iridium's growth within the first 2 years that you think once you close the acquisition, you know, maybe we'll start there.

Peter Beck1:07:16

Yeah, hey Erik. Look, they've got some really exciting things, as Adam alluded to, that they've been working over the last couple of years. So, you know, some of those around P&T and terrestrial direct-to-device, um, they've been, you know, they've been working on. I think, uh, under a Rocket Lab umbrella, I think there's a bit more freedom to, to push harder and faster. So, um, uh, so I think, you know, those, those will be bought to the fore and, you know, hopefully in short succession.

Erik Rasmussen1:07:43

Great. And then maybe you've obviously talked a lot about Electron and HASTE and the strength there. And I think Adam touched upon sort of a 20% or plus cadence for next yearbook. What does that mix look like for next year in terms of if we are at a 20-plus percent CAGR next year? What is that mix between standard electrons versus HASTE? Thanks.

Peter Beck1:08:23

I'm always hesitant to answer those ones because it's 100% determined on customers' programs and their ability to execute and deliver on time. I think, you know, nominally, uh, there's, um, uh, something like 15 HASTE missions. But, um, you know, those HASTE missions are highly dependent on customers' programs and turning up on time. So it's kind of hard to say with any certainty because it can move around pretty wildly just from quarter to quarter.

Peter Beck1:08:43

Yeah, Erica, I think a little more specifically, I think that right now, you know, we're, again, we're not giving guidance for 2027, but roughly around 25% of, of the total small dedicated launches could be HASTE next year. Could be a little bit more, could be a little bit— but in that range.

Erik Rasmussen1:08:47

Great, that's helpful. Appreciate it.

Operator1:08:55

Our next question comes from Anthony Valentini with Barclays.

Unidentified speaker1:09:07

Hey guys, thanks for taking the question. What quarter or month are you guys marching towards internally for Neutron in 2027?

Peter Beck1:09:43

Well, we haven't provided guidance on that just yet because we need to get through the Stage 1 tank. And, you know, I think if I provide a date clearly, I've been wrong. So what the approach we took instead is to provide, you know, sort of weekly or even some cases bi-daily updates on the progress, you know, of that tank. And, you know, really until that tank is through the gauntlet of all of its testing, it's— I just, I think it's— I just don't want to be continually wrong.

Unidentified speaker1:10:43

Totally valid. It makes sense. I know that you guys are focused on Neutron here, but it seems like the industry is going larger and more reusable. And for some of these future aspirational things like orbital data centers, it seems like you need larger rockets. And so I guess I'm curious from your perspective, Pete, Are any of the things that you guys have aspirations to build out dependent on having a larger rocket? And do you guys think that you will have a new product after Neutron and once you guys are launching at Cadence? Oh man, I don't want to build another rocket. I think 2 is, 2 is enough for any person. But in all seriousness, if you look at the average mass that Falcon Falcon 9 has lifted in its commercial sense, you know, ignoring Starlink, it's about 5 tons. And, you know, some of the sizing designs that we worked through with Neutron

Peter Beck1:11:43

was— I mean, the reason why we landed on 13 tons was to enable human spaceflight. That was, that was basically what pushed it, pushed it up to that 13-ton class. Now, when you're deploying constellations, means the way you need to look about it, think about it, is not cost per kilo on your rocket. It's actually cost per satellite delivered in orbit. That's a metric that— the only metric that matters. And you can achieve that with large rocket launching, you know, infrequently or a smaller rocket launching more frequently. But certainly as we look out into, you know, our future and the things that we want to go and deliver. Neutron is perfectly sized. I think your point is valid if you wanted to put up data centers, which is just a tonnage equation. then a large vehicle makes perfect sense. But, you know, I think, you know, to date, the most successful rocket in history is sized around where Neutron sits. And although, you know,

Peter Beck1:11:55

You know, the future might, might change. I think, like I say, for any of the aspirations we currently have and any of the, you know, the large TAMs that we want to play in, Neutron is plenty big enough.

Unidentified speaker1:12:10

Okay, great. Great answer, Pete. I appreciate it. But just, just in saying that, I did have to eat a hat because I once said I was never going to build a bigger rocket. So never say never. Yeah. Yeah. Yep. So never say never. Understood. Thank you.

Operator1:12:17

Our next question comes from Suji Da Silva with Roth Capital.

Suji Desilva1:12:31

Hi, Pete. Hi, Adam. I appreciate on Neutron you're trying to hold the line on premium pricing here, Adam. But how would you think about how you temper forward bookings, how far you're willing to go in terms of units booked if you were able to get that price?

Peter Beck1:13:07

It's a tricky question, right? I mean, you kind of know the deal you want when it's put in front of you. And I think that, you know, a deal hasn't been put in front of us that would— that was enough to take, you know, that much capacity off of our roadmap. So I think we're testing where the elasticity of the market is right now. And I think it's changed a lot in the last 6 months for obvious reasons. It could continue to change. change more in the next 6 months, right? So I think we're just trying to be judicious and not, you know, keep some dry powder so that we can continue to drive those ASP increases if the market conditions continue to trend as they are.

Adam Spice1:14:07

Yeah, it is an unusual problem to have that many— that much demand. My other question really is, since Neutron's trending longer term toward half being used for in-house, Pete, how should I think about the spacecraft manufacturing footprint when you have— I kind of think of it as kind of a custom shop now, but is there— would it be a trend toward a more volume shop over time, or is it already configured the right way? Just curious how that would play out. Yeah, no, it's a fair call. I mean, Look, a tremendous number of the business units within the space systems are a volume shop. I mean, we're the largest space-grade solar manufacturer in the world in that sense. So there are a lot of The component-level pieces already there. And, you know, but going forward, you've seen obviously our satellite and also our US government contract for those satellites as a vendor B for the, you know, for the Starshield programs. So, so yeah, I mean, we see definitely in our future, you know, high volume

Peter Beck1:14:15

Satellite manufacturing, hence the reasons why, you know, we developed the components at high volume and also that flatellite platform.

Suji Desilva1:14:17

Helpful color, Pete. Thanks.

Operator1:14:25

Our next question comes from Ryan Koontz with Needham.

Ryan Koontz1:15:26

Great. Thanks for the question. Maybe just a quick one here on the great book that you had in the quarter, specifically around Neutron and the timing uncertainty. I mean, how should we think about, you know, kind of the contract terms and the Neutron uncertainty in terms of, you know, customers' ability to cancel, find new vendors? I mean, what's the general framework? investors should think about there relative to Neutron bookings right now, given the uncertainty? Thank you. Yeah, no, great, great question, Ryan. I mean, none of these contracts are janky contracts where, you know, they've got silly things in them. And obviously, you know, our customers do a lot of due diligence with us. We have long relationships with them and we're very transparent in where we're at. I think, you know, all of the early customers of Neutron know that we're bringing a vehicle to market and we're developing a new one and we're moving as quickly as we can.

Peter Beck1:15:55

So we will, you know, if there is any change, we'll of course, you know, keep them well, you know, well aware of anything. But, you know, that's kind of, you know, the deal. And, you know, even with that, you know, our customers obviously have a lot of faith in us and, you know, believe that, That we're the best option for their, for their future launch needs.

Adam Spice1:16:34

Yeah. And Ryan, I would say, as you know, there's, there's, there's been a bunch of shenanigans in the past in this industry about people putting, you know, putting forward, you know, their backlog as true backlog when it's really options, you know, There's no deposits. That's not the case here. These are, these are, you know, if you could expect them to look a lot like, if not exactly like our standard LSA that we've experienced with Electron, where people put down real deposits, they're not options. There's cancellation fees and all kinds of— so I, you know, we, we've always, you know, put a lot of focus on making sure that we have very, very solid backlog and that we don't fall into the trap that maybe some other folks have. So I think we feel very good about the state of the backlog.

Ryan Koontz1:16:36

That's great. Appreciate the call there.

Operator1:16:46

That concludes today's question and answer session. I'd like to turn the call back to Sir Peter Beck for closing remarks.

Peter Beck1:16:58

Great. And thanks very much for joining all the call and the great questions. And we, we're very pleased with the quarter and we'll look forward to the next one. So thanks very much.

Closing

Operator1:17:01

This concludes today's conference call.

Operator1:17:04

Thank you for participating. You may now disconnect.