Rocket Lab: "Are you building molds or not?"

Rocket Lab is an end-to-end space company with an established track record of mission success. We deliver reliable launch services, spacecraft design services, spacecraft components, spacecraft manufacturing and other spacecraft and on-orbit management solutions that make it faster, easier and more affordable to access space. We believe that space has defined some of humanity’s greatest achievements and it continues to shape our future. We are motivated by the impact we can have on Earth by making it easier to get to space and to use it as a platform for innovation, exploration and infrastructure.

Customers

Launch Services. As of December 31, 2021, we have launched and deployed 109 spacecraft for our customers, which includes government customers, such as the DoD, NASA and other U.S. government agencies. We also provide launch service to major domestic and international commercial spacecraft operators. Our launch services have been used by more than 20 organizations.

Space Systems. As of December 31, 2021, we have flight hardware and spacecraft that have flown on over 600 missions, including legacy missions enabled by Sinclair Interplanetary (acquired April 2020), Advanced Space Solutions, Inc (acquired October 2021) and Planetary Space Corporation (acquired November 2021). In addition, the acquisition of SolAero Technologies closed in the first quarter of 2022. Our Space systems solutions have been used by a diverse mix of commercial, aerospace prime contractors and government customers.

We lifted at 320 kgs with the vehicle. In full honesty, the vehicle was ultimately designed for 300, and so we even squeaked a bit more out of it than we thought was possible. But I think that is a super important thing -- distinction to make. Because at the end of the day, why this matters is that it's all revenue, right? If your rocket only lift 20 kilos or something like that, you can only sell 20 kilos. So this is actually a really important business metric to make sure you've got right. Because if your rocket doesn't lift what it says it's going to lift, then you don't have a business fundamentally. And it's really hard to explain how hard it is to build a rocket, how hard it is to launch it reliably, how hard it is to do it regularly, but also hard it is to actually hit the numbers. Especially on a small launch vehicle like the mass of a sticker matters, the mass of the ice on the outside matters. So it's a really, really difficult thing to pull off. Our fastest turnaround was 15 days. It would have been 10, but we had a customer that had a small issue with their payload and need another 5 days to correct that. But that was our fastest turnaround mission to date. And once again, if you turn a mission around of 15 days, you've got 2 rockets on the pad, you've got 3 cleanrooms in operation. You've got 2 sets of customers. You've got 2 sets of flight analysis and safety and on and on it goes. So to turn a mission around in 15 days is really, really difficult. And once again, it's all about maturity

Where are we at for reusability of Electron right now? It's like we're just cranking a handle. We've really operationalized it. Standardized reusable vehicles come down the production line right now. And we really feel like we've demonstrated that this is a doable thing, and we're off. We have teams working on refurbishment and working through all of the systems that it requires to get product back into the groove and get it reflown again. So -- there will be recovery emission coming up soon. You may have seen a reusable vehicle on the pad for the NRO mission that could have been reused. For various customer reasons, that wasn't a reusable flight. But this is just pretty much standard pace for us now as there's reasonable vehicles coming through, and we'll just start hitting them. We expect about 50% of our flights to be reusable. So not 100%. Catching a rocket with a helicopter is nontrivial. Doing it at night in the clouds is just not possible. So there's a number -- and also a number of operational reasons why we won't recover all vehicles. But I guess the key point for this one is that there is no way we could have taken on the Neutron project with as much speed and confidence as we are without doing this. We learned so much on reentering Electron's and going through the process of reusability that if we had -- if we had just gone straight to Neutron as a reasonable vehicle without learning all of those super tough lessons, it would have been ugly. So these are reflex systems and muscles that you create within the organization, which is just super important.

One of the best ways to kind of determine or defer understand progress is like, are you building molds or not? Because if you're building molds, that means that the design is mature enough that you're actually investing in the tooling because building a composite rockets a little bit different to building a metallic rocket. Building metallic rocket, you basically need no tolling. You can get started and you can start banging bits of metal together and iterating and iterating and following that path. Composite rocket, it's like you build the tools. Once you to it, once you've got the tools, then you're banging them out. So for us to be at this point where we're building tools should give everybody a pretty high degree of confidence that where we are in the program. So lots of tolls and lots of parts coming off tools. And it's really the toughest bit is building is kind of getting through the design phase to the confidence level that you can build tools, go build tools and start banging out parts. And -- and that's where we are today on that. So the first Neutron tanks here, you'll see come to life by the end of the year, which is super important, and it's actually a really quite big milestone. And I guess the other point here is like we're building it. There's real hardware coming off real machines. And I think one of the things that it's kind of like turkey stuffing, is like we had to order the machines a year ago or more. Machines -- kind of machines that we're building this on aren't you go to Lowe's and pick it up. These are bespoke machines, some of which there's only 1 or 2 of them in the world. Very, very large 3D printers. Rocket Lab has its history in additive manufacturing. We were the first company to ever additively manufacture or 3D print a rocket engine and put it into orbit. We've put over 300 engines into space now. So we really know this technology well.

Obviously, super important is that we continue to grow our exposure in the market. So it is a large market today. If you look kind of where we were last year, we were playing in a relatively small part of the market, really focused on small dedicated launch and then a small subsystems of space components. We were just getting in the spacecraft design services business. And when you look at this chart, what you'll see is in 2024, a pretty big step-up. And that step-up is aligned with the anticipated launch of Neutron. So it allows us to move up the food chain, moves it to the mass scale as far as payloads. And we've matched our market assessment about where we can play not only from actually launching other people's spacecraft, but also the components that go into those larger spacecraft. So this is really an encouraging set of addressable market expansions. And just as a note, Pete talked about the fact that we haven't yet announced our applications ambitions. So this is just launch in Space Systems. This does not address any space data applications. Again, so we've done a lot in 2022, and you can see the expansion there, again, through organic and inorganic means. Going forward, it's all about opening more TAM. Neutron, as I mentioned before, we're building to address a bunch of needs, not just launching satellites, but the potential for human space flight as well and then ISS resupply. And then we're constantly looking for ways to continue to grow the TAM for us. It is give us more TAM or give us depth. We really have to keep growing this business and growing the way that we -- different things that we can attack with the technology and the team.

The real leverage comes from spreading over that large fixed cost base over a larger number of units. On the R&D side, we are very focused. Our primary focus right now is delivering the Neutron launch vehicle on schedule and performance. But, of course, we're also putting more investments in our space systems group, as well, but we're very focused on investments that expand our TAM. We want to keep growing our market and being very disciplined about where we put the money. The one thing I can say is I've worked at quite a few successful companies over my 30-year career, and I've never seen an organization that is as disciplined and as, I would say, cheap might not be the best word, but it's a very scrappy organization that does a lot of things with a very small team. If you look at what some of our peers took a $1 billion to get to a first launch, we did with about $150 million. It's an amazing ability for this organization to pivot and do a lot with a relatively constrained resource.

When you look at our path forward, really, you can see we've made progress, and this chart represents spending as a percentage of revenue. Again, you can see the trend going in the right direction, particularly as we progress from where we were in 2020 to the first half of 2022. Again, you can see where we're heading as far as our target, we believe we can create a 50%-plus gross margin business with the operating margins in the mid- to upper twenties.

Lastly, I think for folks that have the opportunity to participate in other new space investor days, this is probably not a slide you'll see for many others, the fact that we don't have cash issues. We were very fortunate that we raised a lot of money through our de-SPAC process. We raised $775 million gross proceeds. We have deployed a significant amount of that to the strategic acquisitions. The great thing is these acquisitions don't really require a lot of cash, they're actually generating cash. We did put about $180 million of the money raised towards those assets, and, again, super pleased about what those are delivering and enabling as far as high-end constellation wins and moving up the food channel.

We feel like we're in a phenomenal position, having almost $550 million of cash on the balance sheet exiting on our last quarter, and so really the takeaway here is, we have all the necessary capital resources to do whatever we need to do to execute on our vision and our plan. This is not something where we're wondering about how we're going to pay the bills to finish Neutron.

We really overcapitalized ourselves when we came public, and that was really one of the advantages that came along with the de-SPAC process, was just the quantum of cash that could raise to really make sure that we could go with full conviction to deliver what we needed to and not have to worry about, well, will the markets be opened and so forth, and as we see right now, that ended up being a pretty prescient thing to go out and raise that much money when we could.