Q&A with Rocket Lab's Sir Peter Beck and Adam Spice!

No, our pleasure. No, it's great to—yeah, thanks for having us.

Yeah. Yeah. I mean, yeah. No, no, you got it. The only bit of color I'd add here is we just see tremendous demand for launch. Launch has always had 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 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.

Yes. So I guess as I 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, 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 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 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 kind of 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.

Co-invested. So we're both sharing the investment. So it's not all on 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.

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.

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 for the whole system.

Yeah. Well, I mean, I was surprised as you were at the quality of the AI because when the team showed me that I was like, oh, this looks good. This almost looks done. We must be done. 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, those sites will be Ghost sites, but it doesn't necessarily mean they'll ever go away either. 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 Miell will dot me over the head. But I think you can imagine it doesn't take us that long to get stuff done.

Yeah, I mean, we'll see I guess is the answer to that question. Clearly, Europe has a desperate need to build some infrastructure in orbit and we're well positioned to help with that. Often with 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. 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 just 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.

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 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.

How am I looking, Vince? Do I look fresh or a little bit secondhand?

Oh, good. Good to know. Yeah. No. Look, I think everybody's all in here. So I think look, it is what it is and we all work crazy hours anyway. So 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.

Always.

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 thrusters. 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 engines 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.

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 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 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, 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, ten 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—if you think about what it takes to operate a satellite constellation. 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 RF 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 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 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.

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 competition—you'll fight 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.

Yeah. And I think on the margins, the margin impacts—for something like Motive and for Minarch, it's really just as much about eliminating the margin stacking and bringing scale to the business and much needed capital. I mean, the Minarch business was in bankruptcy, right? So great technology. We'd selected that technology several years ago to be included on our platform. So we had already bet that piece of it, but they really ran the business quite poorly. To the point where a lot of the cash that we consumed in Q2 really went to replenish that supply chain. Vendors hadn't been paid on time and there had been some relationship issues that were created as a result of that. On top of that, we've got key metrics that we run our business by and we're applying those metrics to every acquisition that we do. Like, you got to grow your top line this much. This has to be your gross margin contribution. You got to supply our internal programs, all those kinds of things. So it's just a matter in many cases of just implementing some discipline and some guardrails. Like I think Solero is a great example of that where when we acquired that business, it was high single-digit gross margins. Well, you know what it really kind of took to get the gross margins from the high single digits into the 30s? It was a lot of Pete and I basically saying, nope, we're not going to take that contract. Go back. We're not going to take business that's going to fill the factory at low single digits. Go and increase your price. And guess what? They came back with better pricing. And now all the proposals that get put in front of us from that team are within the targets that we'd set for it. So some of it can just be having, with our scale now, we can afford to turn down bad business, right? We can set the terms for what we want to do. And I think we're starting to do that. And I think Minarch will be no different. But maybe even more importantly than that is the fact that we constantly get disappointed by third party vendors, right? And so having control of your supply chain, as much as it's a margin enhancement from limiting all that margin stacking and getting scale that you then get your customers to pay for that you then leverage when you're building your own stuff, which has always been our plan, it's really eliminating the program risk, right? You basically eliminate schedule delays and cost overruns and all those things that ultimately can kill a program. So for us, that's where we probably get the most amount of enjoyment is not only the margin expansion, but just controlling our own destiny that much more.

Yeah. No, it's a great question. So to start with, the canards are actually titanium. And they're the kind of extremity of the vehicle that gets the highest thermal load. So while in theory yes they could be carbon, the titanium actually just gives much more longevity for those particular appendages. Maybe I should have insisted that we paint them black. Maybe we'll do that because all the models are black. But yeah, they're always intended to be metallic just for the environment that they have to go through. But on the carbon stuff, I mean, look, we said at the very start of this project that we were going to build very robust and strong engines. And there's always a compromise in a launch vehicle. And if you have relatively boring engines, then you need relatively exciting structures. So the composite structures really solve a lot of engineering problems but they create their own engineering problems of course. I mean, it's the largest flying composite thing ever built. So there's definitely new challenges that we've had to overcome along the way. But in saying that, I've visited just about everybody's rocket factory. In fact, I visit everybody's rocket factory and when I see the processes where taking giant slabs of aluminum and milling them out into isogrid then rolling them and welding them and then I see our automotive automated fiber placement machine just stripping down carbon on an outside mold. Man, I know where I want to be at the end of the day. So it's a lot more work to get there. There's no argument about that. But once you're there, our ability to produce these structures at a cost and a rate is going to be vastly superior to any of the kind of more subtractive or the way metallic structures that I've seen to date. So, yep, they're challenging and we'll work through it. There's nothing fundamental there. It's just we're kind of tracing new ground in some of these areas.

No, I mean the materials are pretty well locked in, but maybe I should for the sake of clarity here just outline some of the materials. I mean, I noticed on your t-shirt there those canards are silver. So that would give you an indication that those are metallic. Actually, the bottom thrust structure that you would have seen in the earnings deck where all the engines and plumbing and everything sit—that's an aluminum structure. And there's composite components in there but that's largely an aluminum structure. And then there might even be a little bit of stainless steel on the bottom for some heat shielding. But you know, the vast majority of the structure is composite but there are some metallic things around. And look, it's not a religion. It's the best material for the job.

For the best job. So you know we're not religious about everything has to be black. It's the sensible places are carbon and the sensible places are metallic.