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. Go ahead.
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, which projects we don't take on. You know, 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, you know, on that side of the equation there's tremendous demand and then on the Electron side, you know, 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. So firstly, you know, the Wallops team and the Virginia Spaceport guys would like as many launches as we can do. So, you know, 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, you know, plucked a number and said, oh, about that. But make no mistake, like, you know, 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, you know, so Wallops will continue to see increased launch numbers as we go on and then, you know, from the government customer's 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, you know, where in particular the launch needs to come from. So, it's less about anything other than like we need to achieve a certain mission and where do those sites need to be to achieve that mission. But, you know, that'll... the two pads in Alaska, you know, that'll give us five Electron pads. That's plenty to, you know, to be able to serve everything we see in the kind of near future. And, you know, we built three of those pads now. So, it's really just a, you know, a print and release kind of a process. And obviously, we're making, you know, making some changes with the Ghost to make it more flexible, but, you know, a lot of that stuff is pretty same.
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, you know, building two pads doesn't cost twice as much. You know, there's you can share a lot of infrastructure and a lot of overhead. So, you know, as we see demand go up, it just sort of makes sense to, you know, make sure we have the capacity there.
And the one thing on that contract too is that, you know, we've gotten a few questions about the 266 million and should you 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, you know, there's actually 12 launches with six optional, you know, kind of add-ons to that. Plus, you've got some funding for infrastructure. So, it's actually a, you know, it's a very holistic kind of package that was put together to make sure that, you know, 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 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?
Oh, investment. So, we're both sharing the investment. So, it's not on all our dime. It's probably closer to, you know, probably closer to 50/50. You know, 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. It's, you know, there's a little bit more kind of regulatory kind of 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 the rough ratio for New Zealand versus US on almost most things is almost a 3 to 1 ratio and I think infrastructure is pretty consistent with that.
is very expensive. So moving on to Ghost, you know, I was really excited to hear about Ghost. The press release says that, you know, 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, you know, there's plenty of auxiliary infrastructure that packs away. You know, we need a concrete pad obviously and a concrete pad that's substantial, not a Walmart car park. We need proper concrete and, you know, 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, you know, there's payload processing stuff and jigs and fixtures and fueling carts and all that. So, you know, 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.
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 know, 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. You know, it 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 do me over the head. So, but I think, you know, 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 Minar 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. You know, clearly Europe have a desperate need to build some infrastructure in orbit and we're well positioned to help with that. Often with sovereign launch capabilities, you know, a sovereign would really love the idea of a launch, but they love the idea of, you know, 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, you know, historically, we've never really, you know, 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, you know, required the sovereign to bring new payloads, just, you know, 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, you know, 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?
If I just find it... 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 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.
Sweet. 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, you know, 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, you know, 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, yeah, Q2 was very strong. I think it was 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, you know, some tariff refunds that kind of hit up and affected, you know, COGS, so we had some benefit but, you know, 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 know, 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 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, you know, 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 MLS 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, you know, 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 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 pro... 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 it 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 like 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.
Very good. So yeah, 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 like just being a good partner. So, you know, space industry especially is full of kind of competition, you'll fight, you know, to the tooth and nail on a particular project and then work together on the same project a week later. But I think, you know, 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, you know, we're pretty transparent about all that sort of stuff. So, you know, 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. You know, having components on deep space missions and flagship missions and all of that is super, super fun and enjoyable. So, you know, 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. I think on the margins, I think the margin impacts look for something like Motive and for Minaric, it's really just as much about eliminating the margin stacking and bringing scale to the business and much needed capital. I mean, the Monarch 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, you know, 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 all these and, you know, there had been some relationship issues that were created as a result of that. On top of that, you know, 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 topline this much. This has to be your gross margin contribution. You got to supply your 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, you know, 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 Monarch will be no different. I think but maybe even more importantly than that is the fact that, you know, we constantly get disappointed by third party vendors, right? And so this 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 eliminate 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.
