Well, Sir Peter Beck, Adam Spice, thank you again for joining us after another smashing quarter. I think we were all very pleased with the results and we're very grateful that you're continuing to make the time to meet with us and answer questions from the retail community. So, thank you for that.
No, our pleasure. No, it's great to... Yeah, thanks for having us.
I wanted to kick things off with a question regarding the absurd number of launches booked between the start of Q2 and the time earnings were reported August 10th. So there was a mention of 26 new launches booked in the Q2 deck and if my math is correct there are 18 out of Kodiak, two Haste for the defense prime, three for IQPS, three for NASA bringing us to 26 total there and I just wanted to confirm the two Neutron are on top of that 26. Is that the right way to look at that?
Yeah. Yeah. I mean, yeah.
The only bit of color... Go ahead.
You got the only bit of color I'd add here is, you know, we just see tremendous demand for launch. Launch has always been like quite a lot of demand but I think the market has never been so constrained and especially around Neutron we have to be extra kind of selective about which projects we take on and which projects we don't take on. We saw a tripling of the NSSL budget, there's a tremendous demand from the commercial side and then now with Iridium we need to reserve some launch for ourselves. So on that side of the equation there's tremendous demand and then on the Electron side, yeah, I think you'll see the value that the Haste product and also Electron as an orbital vehicle is providing.
So, if we were to take the 28 that were just signed and zoom out and also include Q1, so far through 2026, Rocket Lab has launched Electron 13 times, three of which are Haste and then signed, I guess, seven Neutron and 57 Electron, 40 of those being Haste. So before we touch on LC4 and the greater Ghost platform, I wanted to first ask about the existing sites LC1 and LC2. So LC2 has hosted every Haste launch to date and looks to be receiving an increase in capacity based on a SpaceNews article that was published last week. So folding two questions into one, what is the expected capacity at Wallops following this recent upgrade? And if need be, could any of the Haste missions that are in backlog, like thinking of Department of War, Space Systems Command, for example, could those depart from New Zealand soil if need be? Or are there security limitations or restrictions on these government defense launches?
Yes. So I guess I'll answer the question in two parts. Firstly, the Wallops team and the Virginia Spaceport guys would like as many launches as we can do. So there's kind of some arbitrary numbers that were put in there when we first turned up and it's like well how many should we budget for? And we just sort of plucked a number and said oh about that. But make no mistake, everybody wants the most amount of launches possible and there's no legal or regulatory reason why we can't increase the launch rates there really significantly. So Wallops will continue to see increased launch numbers as we go on and then from the government customers perspective, I mean they have particular tasks that they want to achieve and some of those tasks will determine just like an orbital launch about where in particular the launch needs to come from. So it's less about anything other than we need to achieve a certain mission and where do those sites need to be to achieve that mission. But the two pads in Alaska, that'll give us five Electron pads. That's plenty to be able to serve everything we see in the kind of near future. And we built three of those pads now. So it's really just a print and release kind of a process. And obviously, we're making some changes with the Ghost to make it more flexible, but a lot of that stuff is pretty similar.
And Dave, I'll pass it to you. You had a question about those two Kodiak pads, right?
Yeah. I was just a little surprised to see there's actually two Electron pads in Kodiak and not just one like there is at Wallops. Is this kind of a sign that you're seeing a lot of demand for launch from that site?
Yeah, I mean building two pads doesn't cost twice as much. There's you can share a lot of infrastructure and a lot of overhead. So as we see demand go up it just sort of makes sense to make sure we have the capacity there.
And the one thing on that contract too is that we've gotten a few questions about the 266 million and should just take 266 million divided by 18. It's actually a pretty complicated agreement where there's some built-in funding for some of the infrastructure as well. So, there's actually 12 launches with six optional add-ons to that. Plus, you've got some funding for infrastructure. So it's actually a very holistic kind of package that was put together to make sure that we're going to be able to bring the customer what they ultimately need. And that required some investment. And I think it's just a healthy sign that the customer is willing to kind of co-invest with us there to kind of make that happen. We didn't have to go all Rocket Lab dime.
Well, that's good. I mean, I think we're talking now really about the Ghost product and I have a question about that, but you know, piggybacking on or following up on what Adam just said. So, it sounds like the initial contract price does in fact pay for the infrastructure or the Ghost product that you guys are deploying in Alaska. Is that correct?
Co-invested. So we're both sharing the investment. So it's not all our dime. It's probably closer to 50/50. The one thing that we found is we can build infrastructure really cheaply in New Zealand. It's not quite as easy in the US. There's a little bit more kind of regulatory hoops you got to jump through and just kind of even raw materials and labor and everything's quite a bit more expensive in the US than it is in New Zealand. So I think a rough ratio for New Zealand versus US on almost most things is almost a 3 to 1 ratio and infrastructure is pretty consistent with that.
It's very expensive. So moving on to Ghost, I was really excited to hear about Ghost. The press release says that Ghost is packaged entirely within standard shipping containers. How many containers does a full system entail like the site and the rocket? What does the destination actually need to have in place in order for it to be able to be deployed and how quickly can you go from containers to launch?
So there's kind of four major containerized systems and then there's plenty of auxiliary infrastructure that packs away. We need a concrete pad obviously and a concrete pad that's substantial, not a Walmart car park. We need proper concrete and that system integrates pretty simply from there. I mean it's not intended to be roll in one day launch and then roll out. But it is intended to be moved around various sites.
So, how many containers do you think the whole package entails?
Oh, I'm not exactly sure. I mean, like I said, there's four major pieces of infrastructure that are containerized and then there's always other stuff, there's payload processing stuff and jigs and fixtures and fueling carts and all that. So there'd be, I don't know, half a dozen or something like that. Somewhere between a dozen and half a dozen containers.
No. For the whole system. Yeah.
We have seen some pretty striking photos of the Alaska site. It was striking enough that it was hard to tell if it was AI or real, including one that looked like an Electron standing on the pad. And we've also noticed Alaska written on the containers in some of the Ghost videos. So we are wondering if the Alaska site is partially a Ghost container site or is it like two normal launch pads and how far along are these pads and when do you think they will complete?
Yeah. Well, I mean I was surprised as you were convinced at the quality of the AI because when the team showed me that I was like oh this looks good. This looks like we can, you know, this almost looks done. We must be done. So but no, they're rendered images. I think AI has just got to the point now that you can create things that look pretty professional, but yeah, and those sites will be Ghost sites, but it doesn't necessarily mean they'll ever go away either. It's just because it's using the Ghost system doesn't mean that we intend to pack up and remove them out of there. There's still some fixed infrastructure and I better not get too ahead of the team about talking about progress otherwise Miel will dot me over the head. But I think you can imagine it doesn't take us that long to get stuff done.
I'll jump in again with another kind of unrelated question but then we'll circle back to Ghost. With the announcement of Rocket Lab Germany it is safe to assume that we'll see more than just Minarch coming out of Europe. Will the focus in Germany be primarily on spacecraft production in what we can assume to become the greater EU or should we also expect to see manufacturing of launch components there as well?
Yeah, I mean it's we'll see I guess is the answer to that question. Clearly Europe have a desperate need to build some infrastructure in orbit and we're well positioned to help with that. Often with the sovereign launch capabilities, sovereign really loves the idea of a launch, but they love the idea of you coming with a launch vehicle and your own launch manifest and backlog even better. So, because they don't have to do everything, they can just claim sovereign launch capability without doing anything. And historically, we've never really, if a sovereign wants us to create a launch capability for them as a sovereign, they need to come with sovereign payloads as well. We're not just going to cannibalize our launch manifest and add overhead to come and launch out of someone's country. And I think historically that's where others have gone wrong where they've tried to create the sovereign capability and not actually require the sovereign to bring new payloads because it doesn't make any financial sense.
So we'll see if the demand turns out to be real. But I mean given the constraint in launch just even within America let alone the rest of the world, I think there's a reasonable probability that there's going to have to be some pretty significant sovereign investment into solving some of those problems.
Okay. And then with the modularity of the Ghost platform in mind, how long until we see you guys flying out of a European site like Norway's Andøya complex for example?
Same answer as I've just given. We're not going to just turn up to fly the same payloads from a different site with the additional overhead. There needs to be a sovereign justification for us to come to someone else's country or facility.
Coming back to your question Vince on the timing, I believe that the first of those 18 potential launches out of Kodiak I think is scheduled for 2027. So, that kind of tells you this is not a two or three year kind of build that will come. It's like we've got kind of demand driving getting launches coming out of Kodiak within relatively near future.
That's awesome. I don't know who's up because I think we jumped.
Do you have another question regarding Europe that would kind of tie in nice.
Do you want to hit that one now?
There's a question about Pete's sleep schedule.
Exactly. Because we had an interview with you Pete when you said it was a few, I think it was a year ago now or two years ago when you said we hope we don't do anything in Europe because then I would never get any sleep.
And now Europe seems to be like a main focus of the company so we are wondering how you're managing everything and still get some sleep.
How am I looking, Vince? Do I look fresh or a little bit secondhand?
Look, I'm always biased because 100% of my portfolio is with you. So, whenever I see you, you're beautiful, you know. But I'm biased.
Well, if I can say, you were looking a little tired this morning, Pete, and then I think in a meeting a couple hours ago, I was like, man, he looks like he could use a little bit more rest, but you look, you rebounded a bit, so.
Oh, good. Good to know. Yeah. No. Look, I think everybody's all in here and yeah. So, I think look, it is what it is and we all work crazy hours anyway. So, yeah, we'll just have to manage it. But now I have a reason to go to Europe, which is good. That's on the plus side.
That's awesome. If you're ever in the neighborhood, you're welcome here. Always.
So, you guys debuted the Gaus engine last earnings call and mentioned you could produce up to 200 per year with room to scale if further demand justified it. And how has demand been since the release and can you share your current production numbers?
Yeah, I mean the team put together the facility to do 200 because that was our demand plus a small amount of extra and since that time you've also seen us sign a contract that requires a whole lot of flat lights. So our own internal program just continues to ramp our own internal demand for the product. It was actually cool. I was at the Long Beach facility a few days ago and was able to walk past a bunch of spacecraft that have all the Gaus now completely integrated onto them and looking really good. So I'd say we're definitely our biggest customer and we continue to scale that product to meet our own demand and I guess external demand as well.
Good. So you guys really grew revenue very nicely and came into the close to the midpoint of the guidance but the bigger surprise to me was adjusted EBITDA where you guided for a loss to between 20 to 26 million and only lost 8.8 million which is nearly break even at the numbers that you're doing. We know Iridium is going to change the profitability picture completely once it closes. But is there, but that's still several quarters away. In the meantime, is there a realistic path for the core business Electron, Haste, Space Systems to reach positive adjusted EBITDA on its own even before Iridium is in the picture and roughly what do you think would be needed for this?
I can take that. Look, I think Q2 was very strong. I think we had some really positive things happen in the quarter. Margins, obviously, gross margins were higher than we'd expected as well. Part of that was driven by we had some one-offs in the quarter that were beneficial. We had some tariff refunds that kind of hit up and affected COGS. So we had some benefit, but the kind of where the business is now in the state, we always have those kind of one-offs. Sometimes they're kind of helpful and they all line up on one side of the ledger and sometimes they line up on the other side. And I think this quarter they happened to line up on the positive side. But I think the path to positive EBITDA is very clear and it's been very consistent. It's really getting that first Neutron launch off. So and we've been pretty consistent saying like the quarter after we have our successful test launch of Neutron we should flip meaningfully just even positive. So that's completely independent of Iridium. I think to your point I think Iridium completely reshapes the financial profile of the business and I don't think that the investors have really clued into that quite yet. I think they don't quite understand the leverage that business is going to bring to us. I mean, essentially, if you took those two businesses today, you're doubling the size of the company, generating hundreds of millions of dollars of free cash flow. You're lifting up the gross margin profile for the entire business in a meaningful way. So, and I think it's just ultimately showing what the power of the business is going to be. You don't have to wait five 10 years for that to develop. You'll get it immediately and then we're just going to grow upon that, right? Because I think the other thing that people don't quite appreciate is one of the more strategic things that we get from that deal is yes, we get this great financial profile that we're building on, but our ability to take that foundation of you think about what it takes to operate a satellite constellation. Yeah, you got to put hardware on orbit. So, you have to be able to manufacture the satellites in a cost-effective way. You got to be able to launch them, which of course, we can address. But there's a lot of IP and trade secrets involved in managing a constellation, tasking the satellites, making sure you've got all the ground stations configured properly, all the NLS links to the ground stations. It's all the on-orbit kind of software tasking and there's all the policies and procedures and automation that go around to managing a fairly complex involved constellation. And Pete and I were in Virginia last week meeting with the Iridium team and got tours of all of the facilities that we hadn't yet seen. And it's an impressive amount of infrastructure and just know-how. And I think we can take that foundation and yes today it's currently applied at L-band opportunities which we think are great and they'll grow but I mean that just gives us really we come out of the blocks with the ability to address any constellation need you can imagine because now we have the ground stations all the parts of that business figured out that would have taken us a long time to kind of develop that muscle kind of organically. So I think the biggest strategic thing that Iridium brings for us is the ability to kind of spring into lots of other applications opportunities without having to reinvent the wheel which again would be very costly and take a lot of time.
Yeah. I mean I couldn't have said it better than Adam just did and moreover it's not just how to operate a constellation. These are safety critical devices and the military significant and safety critical. So they can never go down. Like you can't have just an outage. So it's not just doing it, it's doing it at such a high performance and such a high level of precision and reliability that very very few if any constellations have managed to date.
That's awesome. Yeah, I'm very excited about the acquisition. And Scott, I don't know if you guys follow our tweets, he started like posting the financials like including Iridium because I also think that like people don't get it like they look ah Rocket Lab looks expensive but I'm like yeah but you're looking not at the whole company.
Yeah. So very good. So as Space Systems continues to scale its platform assembly revenues which carry high gross margins as we've kind of been able to see that growing over the past few years. How are you guys managing the strategic channel friction with the other aerospace primes that are purchasing your merchant components but then at the same time competing against those guys in the platform bids themselves and how quickly do you guys kind of expect internal subsystem costs from Motive to lift overall platform gross margins closer to corporate targets without eroding high margin component sales to the third party primes.
Well, I'll take the first part of the question. Adam, you can grab the second. And I think Matt, the answer is really just being a good partner. So, space industry especially is full of kind of competition, you'll fight to the tooth and nail on a particular project and then work together on the same project a week later. But I think we've always been really good partners and really transparent with all the component supply and work with everybody else so that they know that they can rely on us. We're not going to do anything shifty or silly or anything like that. And we're pretty transparent about all that sort of stuff. So we are a merchant provider. We love being a merchant provider. It gets us exposure in just such a wide range of projects which is great for the financial profile of the business but also for us as engineers. Having components on deep space missions and flagship missions and all of that is super super fun and enjoyable. So I think we'll continue to just operate the way we operate is just being a good decent honest and transparent partner for all of those competitors.
