Rocket Lab USA, Inc. (RKLB) Q3 2021 Earnings Report, Transcript and Summary

Good afternoon, everyone, and welcome to Rocket Lab Third Quarter 2021 Financial Results Call. My name is Emily, and I'll be coordinating the call today. [Operator Instructions] I will now turn the call over to our host, Gideon Massey, Financial Planning and Analyst Manager. Please go ahead.

Thank you, operator. Good afternoon, everyone, and thank you for joining us on today's conference call to discuss Rocket Lab's third quarter 2021 financial results. Today's call is being hosted by Peter Beck, Founder and CEO; and Adam Spice, Chief Financial Officer. After our prepared comments, we will take questions. Our comments today include forward-looking statements within the meaning of applicable security laws, including statements relating to our guidance for fourth quarter 2021 revenue, revenue growth expectations in our principal target markets, GAAP and non-GAAP gross margin, GAAP and non-GAAP operating expenses, interest and other expense, and adjusted EBITDA. In addition, we will make forward-looking statements relating to trends, opportunities and uncertainties in various products and geographic markets, including without limitation, statements concerning opportunities arising from our Launch Services and Space systems markets and opportunities for improved revenues across our target markets. These forward-looking statements involve substantial risks and uncertainties, including risks arising from competition, global trade and export restrictions. The impact of the COVID-19 pandemic, our dependency on a limited number of customers, average selling price trends and risks that our markets and growth opportunities may not develop as we currently expect and that our assumptions concerning these opportunities may prove incorrect. More information on these and other risks that may affect the forward-looking statements has outlined in the Risk Factors section of our third quarter 10-Q filing, which will be filed today and the documents incorporated therein. Any forward-looking statements are made as of today and Rocket Lab has no obligations to update or revise any forward-looking statements. The third quarter 2021 earnings release is available in the Investor Relations section of our website at rocketlabusa.com. To supplement our unaudited consolidated financial statements presented on a basis consistent with GAAP, we disclose certain non-GAAP financial measures, including gross margin and operating expenses. The supplemental measures exclude the effects of stock-based compensation expense; amortization of purchased intangible assets; other non-recurring interest and other income expenses, net attributable to acquisitions; and non-cash income tax benefits and expenses. We also supplement our unaudited historical statements and forward-looking guidance with the measure of adjusted EBITDA, where adjustments to EBITDA include share-based compensation, warrant expense related to customers and partners, third-party expenses related to mergers and acquisition activity, foreign exchange gains or losses, other non-operating income and loss, excluding interest expense related to debt and other non-reoccurring gains or losses. We encourage investors to review the detailed reconciliation of our GAAP and non-GAAP presentations in our investor update presentation available on our website. We do not provide a reconciliation of non-GAAP guidance for future periods, because of the inherent uncertainty associated with our ability to project certain future charges including stock-based compensation and its associated tax effects and the effects of warrant expense relating to customers and partners. Non-GAAP financial measures discussed today are not in accordance with and do not serve as an alternative for the presentation of Rocket Lab's GAAP financial results. We are providing this information to enable investors to perform more meaningful comparisons of our operating results in a manner similar to management's analysis of our business. We believe that these non-GAAP measures have limitations and that they do not reflect all the amounts associated with our GAAP results of operations. These non-GAAP measures should only be viewed in conjunction with corresponding GAAP measures. And lastly, this call is also being webcast with a supporting presentation. And a replay and copy of the presentation will be available on our website for two weeks. Now, let me turn the call over to Peter Beck, Founder and CEO.

Thank you very much, Gideon, and thank you all for joining us here today as we Rocket Lab's business highlights and financial results for the third quarter of 2021. As Gideon mentioned, joining me today is our CFO, Adam Spice, who you'll hear a little bit from later. Today I'll be talking you through our key business accomplishments for the third quarter of 2021; and Adam will be covering off our financial highlights and outlook, sharing you upcoming conference schedule, and of course, we have time for Q&A. Right, so since the end of the second quarter, we've seen significant growth in our backlog. June 30, backlog was $141 million and ending the September 30 quarter at $183 million. Today, our backlog stands at $237 million, representing nearly $100 million in backlog growth since the end of the second quarter. We've seen bookings strengthen across every major products in the company, including new electron launch contracts, government study contracts, interplanetary photon satellites, overall debris removal programs, NASA demonstration mission that include processing light electron launch vehicle, Rocket Lab components and software and numerous components of expanding global customer base that includes government, foreign governments, universities and commercial customers. I've never been more excited or proud of all of the use cases we're finding for our technology and high value missions we're enabling with our suite of products and services. Many of these programs will enable and provide transformative technological breakthroughs that will have a long-lasting impact on our planet which we're very proud about. Proof of our many industry-leading technologies and strong mission heritage can be seen in our strong repeat customer bookings. Since the end of Q2 2021, we have seen over a dozen repeat customers book additional business with Rocket Lab with none of these customers listed on the slide. As we continue to broaden our portfolio of space-based products and services, our ability to cross-sell and integrate technologies will lead to even enrich their customer engagements and relationships. On September 27, we announced an agreement with the U.S. Space Force under the National Security Space Launch program or NSSL with $24 million to advance development of the neutron rockets upper stage. This development will support national security and defense launch capabilities, the scientific and experimental satellite to the world's most critical national security payloads. We are really honored to be partnered with the U.S. Space Force and view this as a vote of great confidence from the U.S. government as an another proof point in our ability to deliver low cost responsive next-generation launch that will transform space access constellation deployments. And this is a really big deal. If you look at the other players that also won contracts, you can see we are a very good company. In August, as previously announced EscaPADE mission passed NASA critical mission review following the mission to its next phase with a target launch readiness date of 2024. In September, we finalized the Phase B of the contract and also completed the kick-off meeting in November. Now this mission in partnership with UC Berkeley's Space Sciences Laboratory will put two Photon spacecraft into the orbit of Mars to study its magnetosphere. Could obviously not be more excited with the progress of the team is making on those really complex high value and crucial missions to explore the planets in our solar system. So that covers the key business highlights of our third quarter. But I'd also like to touch briefly on some of our key achievements since the third quarter. So we achieved a key program milestone with the NASA Demonstration Missions with their partner Eta Space. This mission is very, very unique in two different ways. LOXSAT 1 is the first cryogenic oxygen fluid management demonstration mission for NASA in its history. This will prove out the usage on over-fueling systems that satellites [indiscernible] invest developing critical technology that can keep our precious satellites' monitoring gas emissions are still monitoring all extending their lives for a longer period. Secondly, this was the first mission where Rocket Lab won both the launch and the spacecraft design and build in the complete integrated solution, ensuring a faster, more cost effective and seamless development programs for this particular NASA demonstration. On October the 12th, we signed and completed acquisition of Advanced Solutions Inc or ASI, an industry leader in mission-critical flight software and GNC for space vehicles. The ASI team brings with them over 20 years of flight heritage, more than 30,000 hours of vulnerable operation and a growing team of 57 members located in Littleton, Colorado. The acquisition of ASI further positions Rocket Lab as an interim space company as we desire and able to provide complete mission solutions to our customers. We are already integrating the next flight software into a Photon Space Systems Solutions for LEO and Interplanetary space vehicle mission with more than 137 cumulative years of mission operations and heritage and more than 45 missions on with the next flight software solutions, we believe that this provide a clear differentiator in the marketplace. Lastly, I'm excited to have a footprint in Colorado, the second largest aerospace economy in the United States with a strong base of research institutes, universities to bolster Rocket Lab's workforce. And that's a big day, I'm very excited to announce the signing of a definitive agreement to acquire Planetary Systems Corporation or PSC, an industry leader in spacecraft separation systems, and quite frankly, a company I've worked with and admired for many, many years. Walt Holemans and his team have built an extraordinary business based on best-in-class products that are reliable and that had a 100% mission success on over 150 mission. PSC viewed as the premier supplier for the U.S. government on small sat missions with motorized lightband, advanced lightband band in Canisterized Satellite Dispenser in separation systems. Adding PSC to the Rocket Lab team continues the execution of our stage strategy of expanding product portfolio with best-in-class product offerings. We are excited about the cross-selling opportunities and combination of these leading spacecraft separation systems with our existing electron launch services and other spacecraft components, our software and service offerings, and believe there are meaningful synergies that can be achieved post-acquisition, in shortening lead time, scaling production and driving cost to provide our customers with an even better service offering than they've had before. Looking forward into the rest of Q4, as we've already announced, we are planning to launch two BlackSky dedicated launches in this quarter with the first launch scheduled for no sooner than November 17 QTc, so tomorrow. This mission is part of a five-launch agreement signed earlier this year with Spaceflight to deploy BlackSky into satellite constellation. We really appreciate BlackSky entrusting us with their satellites to these upcoming launches. As part of the upcoming flight 22 with Blacksky Global, we will be introducing helicopters into the operations of our recovery program for the very first time. We intend to station helicopter in the recovery zone and track and visually observe the descending stage. While we won't be attempting to catch up media on this particular mission, this is really the last step in our program, and we will test all the communications and tracking to future electron launches in the aerial capture. This is really a key milestone for the electron recovery program and as we work to make electron the very first reusable small launch vehicle. So with that, I'll turn it over to Adam Spice, our CFO. Over to you, Adam.

Thanks, Pete. I'll first review our third quarter 2021 results and then further discuss our outlook for Q4 2021. Our third quarter 2021 revenue of $5.3 million was slightly above the guided range of $4 million to $5 million. With COVID impacting our ability to launch in the latter parts of Q3, revenue was largely driven by space systems which outpaced, which contributed 79% of Q3 revenue and has grown by 698% year-on-year for the nine months ended September 30, 2021. Our launch revenue was impacted by both COVID restrictions and legacy over time revenue recognition policy for the successful Space Force launch that occurred on July 29. This was the last launch contract for which revenue was being recognized over time. Going forward, all launch contracts are expected to be recognized as point in time at the time of launch. Revenue for the nine months ended September 30, 2021 is up 79% year-on-year with growth being contributed across both Launch and broadening of our Space Systems products and services. Our GAAP and non-GAAP gross margins for the third quarter of 2021 were negative 236% and a negative 84% of revenue, respectively. This compares to GAAP and non-GAAP gross margins of negative 18% and negative 14% respectively in the third quarter of 2020. GAAP and non-GAAP gross margins were significantly impacted by non-recurring deSPAC related stock-based compensation charges and New Zealand COVID restrictions that impacted production and launch operations, overhead cost absorption and launch cadence. We view all of these are non-recurring events and as such are indicating a significant upswing in profitability in the Q4 guidance which we'll get too shortly. GAAP operating expenses for the third quarter of 2021 were $39.9 million versus the third quarter of 2020 significantly impacted by non-recurring deSPAC related stock-based compensation charges hitting both R&D and SG&A. In addition, Q3 2021 saw a meaningful step up in non-recurring acquisition-related deal expenses and from the impacts of public company costs when compared to the prior year results. Net of the stock-based compensation charges, the growth rate in R&D investment has nearly doubled the growth rate of SG&A year-on-year representing continued aggressive prioritized investments into TAM expanding opportunities. Q3 2021 adjusted EBITDA loss was $17.5 million at the low end of the guidance range of $17 million to $20 million loss. Q3 saw several unique one-time charges related to deSPAC with Vector Acquisition Corporation which included the mark-to-market warrant expense of $34.5 million related to the outstanding publicly and privately held warrants, stock-based compensation expense of $31.5 million, the first full quarter impact of our Hercules loan interest expense of $3 million, depreciation and amortization expense of $2.6 million, and acquisition costs of $700,000 offset slightly by an income tax provision benefit of $1.7 million. GAAP R&D expense was $14.2 million for the third quarter, which included stock-based compensation of $6 million and amortization of purchased intangibles of approximately $400,000 yielding $7.9 million of non-GAAP R&D expense for the third quarter of 2021. As previously referenced, the growth rate in R&D investments year-on-year is outpacing the growth rate in SG&A expense by more than 2x and has driven largely by increased staffing and prototype expenses related to our Space Systems products and services, neutron development and continued spend on our launch vehicle automated flight termination systems development efforts. GAAP SG&A expense was $25.7 million for the third quarter, which included stock-based compensation of $17.6 million and acquisition cost of $700,000, yielding approximately $7.4 million of non-GAAP SG&A expense for the third quarter of 2021. The year-on-year step up of $1.9 million in SG&A was primarily due to increased headcount and related labor expenses, directors and officers insurance and other new public company costs. Our cash flow consumed from operating activities was $13.3 million for the third quarter of 2021 versus an operating loss in the quarter of $88 million, which reflects an increase in cash consumed a $4 million versus the third quarter of 2020. This increase in cash consumption was driven by a $6.9 million increase in inventory and a $4.7 million increase in prepaids and other current assets. These were offset somewhat by non-cash expense add backs of $56.4 million, largely driven by the aforementioned stock-based compensation, warrant expense and depreciation and amortization charges, as well as $9 million of cash generation from accounts receivable and $220 million of cash generation from deferred revenue. Cash consumed from investing activities was $5.7 million in the third quarter of 2021 compared to cash consumed of $2.2 million in the third quarter of 2020, with this year-on-year period increase in cash consumed driven by several large capital projects, including investments in our expanding our lab facilities at our Long Beach headquarters, investments in our second launch pad at Launch Complex-1 and our new consolidated propulsion test complex in New Zealand. The combination of cash consumed from operating activities and investing activities was more than offset by the $704.4 million net cash generated from the financing activities in the period, resulting in $793.8 million in cash and cash equivalents and restricted cash as of September 30, 2021. This cash generation was driven by $730.5 million in proceeds from the leaseback with Vector Acquisition Corporation and the related pipe financing. In addition to collecting $2 million in proceeds from the exercise of employee stock options and $2.3 million related to the deferred transaction costs, which were somewhat offset by $30.4 million repurchases of shares and options from management. We believe liquidity resources of the company, enable the execution of our strategic development roadmap, including the development of our neutron launch vehicle and continued investments, targeted expanding our total addressable market for strategic space system solutions. With that, let's turn to our guidance to Q4 2021. We currently expect revenue in the fourth quarter of 2021 to range between $23 million and $25 million, which includes two dedicated launches and partial quarter contribution from ASI. This revenue guidance does not include any partial quarter contribution from PSC, which was announced earlier today and is expected to close during the month of November. We expect Q4 2021 GAAP and non-GAAP gross margins of 13% and 27% respectively. The 249% anticipated increase in GAAP gross margin is driven by a favorable mix of higher margin Space Systems revenue, increased absorption of manufacturing overhead with increased launch cadence and a step down in stock-based compensation after the non-recurring Q3 catch-up related to the deSPAC transaction and related to accounting treatment of restricted stock units. We expect Q4 2021 GAAP operating expenses to range between $24 million and $26 million, and non-GAAP operating expenses to range between $19 million and $20 million as we continue to fund strategic development programs targeted at delivering strong topline growth in '21 and beyond, across launch in space systems, and our goal of delivering operating leverage within the business. Please note that this guidance does not include impacts from the purchase price accounting of ASI, any impact of stock-based compensation related to employee stock purchase plan that we rolled out for the first time later this month, and again, does not include any contributions or purchase price accounting impacts from the pending acquisition of PSC announced earlier today. We expect Q4 2021 GAAP and non-GAAP interest expense to be $2.8 million. Given the requirement to fair value, the publicly and privately held warrants assumed in the Vector Acquisition Corp merger, which is based on the end of quarter stock price, we cannot estimate these below the line GAAP, other income and expenses items at this time, nor are we able to forecast foreign exchange gains or losses. We expect Q4 2021 adjusted EBITDA loss to range between $9 million and $11 million. And with that, I'd like to open up the call to questions. Operator?

[Operator Instructions] Our first question today comes from Erik Rasmussen from Stifel. Erik, your line is open.

Yes, thanks for taking the questions, and congratulations on the progress in the quarter. Maybe just in relation to your acquisition of ASI, what sort of revenue contribution comes from them? Could you maybe - and then maybe could you just comment on the strategic rationale? And maybe just how we should think about the types of acquisitions you just announced Planetary Systems, but the types of acquisitions you are targeting as you look to expand the business?

Yes, Erik. Thanks for the question. This is Adam. So on the revenue side, there was a revenue run rate of approximately $10 million per year at point of acquisition. So I'll let Pete speak to the strategic nature of the deal and future deals.

Yes. Just a moment. So the kind of acquisitions we're looking to make here are ones that technologies that we use and we trust and we know super well, and that are best-in-class that's kind of fundamental. And then as we think about how we're going to build our business out in the future and how we're going to deliver on ultimately building our own infrastructure and all, but what we're looking to do here is compile all of the pieces and bits and pieces that are best-in-class to really form if you kind of think of it like a cabinet of capabilities that we can deploy, not just in our own systems but on others as well. So this is really important for the ultimate longer-term gain of the business and providing into installations and style.

Okay, thanks. And then so - and then maybe just in relation to the BlackSky and the two launches that are upcoming, obviously we saw that that got pushed from November and looks like that's on track for the 17th. But any other sort of impacts that could potentially have as we think about the remaining part of the year. And then you - I think you'd mentioned, there was an opportunity for further missions, you know it may be even December - for the final one in December because that's still be possible.

Yes. So the play here is to launch those two BlackSky missions in this quarter around again here, and both of those missions and the vehicles are at the launch site of driver spacecraft. We move the launch a few days, a couple of days ago for a couple of reasons. One, that we saw a sensor reading on the ground that we just - we didn't like, we subsequently repeated as we expected. Nothing and then we also get us more time to prepare for the helicopter intercept. But at this point in time, those are the two mission that we're planning in this quarter, and we'll be unlikely to push a third mission in this quarter.

Okay. And then maybe just on the outlook for Q4, $23 million to $25 million, it looks like your overall for the year increased by $5 million, how much is that from ASI and acquisitions versus just business outperformance?

Yes, you know, Eric, it's really kind of a - there is some contribution in the quarter, some partial contribution in the quarter from ASI. We have not taken anything in for PSC, and for the guidance that we provided. So if you think about maybe kind of low-single digit millions contribution from ASI and the rest really is coming from the core organic business. I'd say, obviously launch is stepping up with the two launches in the quarter obviously versus Q3. So if you [technical difficulty] majority launch but space systems is quickly kind of closing that gap. And no small part because of contributions from the Sinclair acquisition that we did last year that's really paying off big dividends and their business is looking very, very strong.

Our next question comes from Colin Canfield from Barclays. Colin, your line is open.

Hi, Adam, Peter, thanks for the question. So what you think about your helicopter intercept? Can you just talk a little bit about how that's impacting your cost recovery for electron?

Yes, sure. So the vast majority of the cost of an electron launch vehicle resides in the first stage. There is obviously nine engines on the Stage 1 and the bulk majority of the systems. So we successfully fetched down multiple per stages now and we've got that to a point where we can reach the stage through this atmosphere and received it down in the ocean in good condition. The helicopter intercept really enables us to not splash that down in the water and obviously rocket engines and rockets really don't sea water. So it enables us to capture that, and then return that back to land for refurbishment. And that obviously reduces quite a large amount of work, and there is going to be some rework of course, but reduces a large amount of work. And it's fair to say that to date we have been making any of that bonus we get from reusable systems to any of their numbers, it's just pure cream on the top of the cake.

And then we think about neutron reusability and kind of material and fuel preferences that you're taking for your next stage of your vehicle. Can you just discuss kind of how you're thinking about that if you ever preference in anyway?

Yes, sure. We're wishing on we will make a neutron announcement here in due course. But it's fair to say that the experiences that gained from reentering electron and it's just been absolutely critical in informing us how to design and develop neutron. Going into a reasonable launch vehicle program without actually having successfully reentered a rocket, it would be difficult. So all the aero data, aerothermal data and all of the procedures, you can actually bring that rocket through the wall of the atmosphere in one piece is just being absolutely critical. So those lessened the knowledge had been transferred directly to the neutral program, in fact, more than that.

Got it. And then the last question for me, but maybe if you could talk a little bit about pricing and capacity trends that you're seeing in the small sat launch market and to the extent that customers are fully utilizing Rocket Lab vehicle or something on the lines where it's a partial capacity utilization for your vehicles?

Apologies, everyone. It appears we have lost connection to Peter Beck, please bear with us while we regained connection.

Yes, Colin, I'll take that question interim, while Peter rejoins. So you know, I think if you look at our missions, we really do have a pretty good mix of what we call just a dedicated mission where you'd expect for example for U.S. government customers, it's primarily dedicated launch. For some of the commercial customers, we are seeing the opportunity to basically pull together what we call kind of a primary rideshare, where there is a primary microsat that anchors the launch and then we fill the remaining capacity with the CubeSats or other small spacecrafts. So I'd say right now, it's probably about - I'd say, it's probably a little bit more than half of the business are pure kind of dedicated one satellite per launch or one single customer, if you will. For example on the BlackSky missions, we put two BlackSky satellites per launch. So if you think about single customer launches are still probably a little bit more than half of the mix and then where we do the primary rideshare and mix it with other payloads is a little bit less than half of that. Hope that helps. I mean as far as the pricing trends, I would say that we're seeing relative stability in the pricing out there in the market. One thing that's probably the most encouraging kind of trend in our business, and you've probably seen that coming through some our announcements is the fact that we are getting multi-launch deals. So we are seeing kind of early - earlier in the company's life, we were seeing a lot of pathfinder kind of one-off missions. Now we're starting to see recurring missions. If we talked about it earlier in the conference call about how we're seeing recurring customers, well we're seeing those recurring customers also sign up for multi-launch agreements. So I think that's an encouraging sign that the market is continuing to build overall and that we're continuing to kind of follow through with repeat business from those customers. So I think all of that is very supportive to this kind of the pricing and kind of volume trends right now that we're seeing.

Apologies, we are still trying to regain connection to Peter's line. Our next question comes from Edison Yu from Deutsche Bank.

Thanks for taking our questions. I'll start with the kind of financial one, while we try to get Peter back. Can you maybe go over the contribution on the Planetary deal just in terms of what you can provide there? And also on the ASI, what was the - are you able to say anything about the margin?

Yes. So we're not providing any color right now on the margins for the various pieces within our Space Systems business. We kind of want to keep that more at that macro segment level where we talk about revenue and gross margin at that higher level. But the contribution from a revenue perspective on an annual run rate basis are about the same between ASI and PSC. So each business kind of roughly in that $10 million kind of run rate range. And I would also say that overall, the margins across the businesses are pretty consistent as well. So they're about the same size, they have similar gross margin profiles. I would say that the growth rates are maybe a little bit different across the two businesses and the ultimate kind of, I would say, margin contribution of the bottom line is a little different as well because, one, price is a little bit more investment than the other. But, overall, I think they are somewhat similar. So again if you think about the combination of the two on an annualized basis running around $20 million combined of revenue contribution. And the margins again are very - that we've talked about the margins in Space Systems are the north of 60 points and these businesses are kind of consistent with that overall profile.

Okay.

My phone dropped so really helps prevent.

Second question about the - I guess the launch cadence, obviously, you had to push out some launches I think you would have liked to have done in the fourth quarter. Can you maybe talk about if that sort of means you can launch more or recover some of that in the first quarter or in the first half kind of your ability to maybe launch more than you would have expected in the first half than before because of the kind of the COVID lockdowns kind of push everything else. Is there ability to do that?

Yes. So, I'll take the first part and Pete can add on. So I would say that it is a fair statement to say that we have a pretty healthy manifest going into the first half of 2022. So I think the challenge for us is really going to be not on the demand side, it's really just - we've got to continue to increase our production rates and support the manifest from that perspective. But I would say there is certainly - we certainly expect our business to be on the launch side that cadence to increase as we progress into 2022. So again, we're not giving specific guidance for 2022, all of the indications and bias right now are to - certainly to an increased launch cadence in 2022.

Yes. I mean that's [indiscernible] I would add, there's a lot of product on the floor right now that we need to move through. And the New Zealand COVID lockdown certainly improved our ability to deliver more in this quarter. One thing to always remember of course is in the launch business we sometimes more often than not are subject to our customers' readiness. So just wanted to have a launch vehicle inspection, meeting its targets, but of course, quite often and maybe fund that customers often quickly move around too. So that's worth a little bit of manifest down to get everything along. But certainly, there is a lot of product on the floor that we will be pushing through.

Yes. And I would say also that, as the customer requests are for launch sooner, the bias right now is the pull in launch dates. So I think that's another kind of indication of where we see the business going, and kind of to your point of could we see some of that pent-up demand kind of manifest itself in launches and as we head into 2022, we certainly expect that would be the case.

Great. Last question for me, longer-term one on neutron. Could you maybe discuss the potential or if you've had discussions about human missions? What could that kind of look like or what have you may be discussed with customers? Any color there?

I mean, there is a relative subset of customers when you are taking to human spaceflight, obviously they are being biased. And we always talk with our customer at multiple missions and nothing different, including human spaceflight. Our focus is to ensure that we have a vehicle that is human spaceflight rather than at this point in time focusing on those to particular missions. Perhaps priority is getting a vehicle on the pad and making sure that it is ready to be certified and ratable.

Okay, great. Thanks.

Our next question comes from Cai von Rumohr from Cowen. Cai, please go ahead.

Yes, thank you so much, and good quarter. So a number of the other larger space companies and aerospace companies have mentioned supplier delays and the impact of the vax mandate, and while I know you'd launch from New Zealand, I assume that could have some impact on your domestic customers. So give us some color on that if you might?

Definitely. I mean we're managing supply chain issues, but we do carry a lot of stock. And so thus we've been fairly successful in linking both. One of the challenges with New Zealand is the ability to get customers into the country through the managed isolation facility in New Zealand. They've been very successful in securing our stocks, our customers through working directly through that experiencing their share of supply chain. Adam, perhaps you can comment about the vaccination mandate and the impact in U.S.

Yes. Sorry, you were breaking up a bit there, Pete. So I'll recap a little bit of what he was saying, Cai. So, so far we've been pretty fortunate that we haven't had any real, call it, like significant supply chain constraints or issues, you know, as Pete was indicating that we also carried a lot of inventory, lot of raw materials inventory. So, kind of, we've been able to absorb any impact that otherwise would have been an impact. Yes, and probably the biggest issue is really been as people saying, is getting people into New Zealand, right, to support the launches. So we were fortunate that the two BlackSky missions that are going off this quarter already had the spacecraft in country. They were already integrated. So there's really no risk from a COVID-related, if you will, kind of spacecraft readiness from that perspective. And now as we get through kind of - we're out of that level four alert in New Zealand where we're able to have full production and launch cadence support there. So I would say, we've been very, very fortunate. We haven't had any of those issues, I would say that you were - but we're very much looking forward to making it much easier for our customers to come support their spacecraft in New Zealand with the COVID restrictions easing. And as a backstop that as well, of course, we're very anxious to get operational in - out of our wallets facility, where right now we've been waiting on certification of our automated flight termination hardware on NASA's software. It's been quite delayed, it was expected some time ago. The current expectation is that it could be done as early as the end of the year, which would allow us to commence flight operations out of LC2 and Wallops in the first half of 2022 and that's what our current expectations are. So that will be kind of able us further mitigate the issues around kind of restrictions on travel and so forth. Now as far as the overall vaccine mandate, again, we've seen some push outs to those things from - to various elements of our supply chain but again we're not getting any indication right now from any of our supply chain partners, that's going to present an issue to supporting our manifest.

Our next question comes from Austin Muller from Canaccord. Austin, your line is open.

Good evening. Great quarter guys. My first question is for Peter. Would you argue that pairing the Electron with planetary systems, lightweight satellite dispenser products make the Electron even more competitive as a constellation launcher?

Sorry, go head. Go ahead, Peter.

Yes, and I'll carry on it. In some respects, the Electron is ideal for very small constellations, but it's using just a one-off or early development of Constellations, certainly having the portfolio of planetary systems products in our - in our organization gives us the ability to do very interesting things with cross-selling and in bundling of products and services as well. And also it gives us exposure to satellites that aren't launched on Electron, the PSC separation system is, you don't, we will launch vehicle across the industry, and continue to buy that across the industry.

Okay, good. And then how much additional capital do you envision having to invest in the three launch sites, the two in New Zealand and the one in Virginia to sort of get those to a capacity where they could support the 132 launches that you've discussed in the past. Is it pretty much close to that now, or is there a lot of additional capital still to be invested?

So, I mean, I'll see - I mean that charter is activated and the LC1, PDN1A launchpads had the launch - today is obviously completely niche but it's nearing completion. And that will give us sufficient launch capacity in our core, all of our launches in [indiscernible]. Any additional capacity to bring it up to that really high number, there would be additional hedge required. But those three pads really gives us a tremendous amount of launch capacity and that we won't be constraining a little while.

Okay.

Yes, Austin, we're almost complete on all the investments in - at for those launch pads here. I think you're probably looking at capital to go less than a couple of million dollars. So it's really quite small in the grand scheme of things, and that's really to finalize the operational of the LC1 B pad in Mahia, but the Virginia pad is up and ready to go. It's been ready for over a year, again just awaiting the software certification with NASA. So yes, we've got all that launch infrastructure in place that we need to support that capacity.

Okay, that's very helpful and then like Russians - like the Russian government in particular has had plans in try and catch following rocket boosters with a helicopter in the past. So can you sort of talk about what makes your plan for booster recovery different from those prior plans for a helicopter used to recovery and how you plan to achieve a high success rate there just given the challenges of catching a rocket in mid-year with a helicopter?

Yes, absolutely. And I think that this is somewhat of a misconception. Actually catching the rocket as is descending, once you've acquired it is - well, we haven't got the product, in this time, but it's not that difficult in fact. We've done a lot of drop system and the success rate on the drop system have been nearly 100%. This is where we are going out with two helicopters, drop a simulated vehicle, then the other helicopter checking it down and captures it. So that - I know that sounds like the hardest part, but actually the hardest part is re-entering it through the -- controlling its trajectory and making sure it stays at one piece. So this - the last part of the program here is which is on debut, provided we can - when they're agreeing which we leave, should be my problem. Then, we're not expecting a tremendously difficult run after that. I think - we think the hardest parts is actually behind us.

Okay, great, thank you for all the color.

Next we have a follow-up question from Colin Canfield from Barclays. Colin, your line is open.

Hi, Adam, Pete. Thanks for the follow-up question. From a high level, could you just talk a little bit of about the cash flow walk and the cash that you're going to need for engine development and Neutron and your Constellation plans? Kind of where do you expect the biggest contribution to come from split between organic, debt and potentially equity?

So, I can - what Pete talk to the technical kind of milestones and so forth to drive it, but we forecast all of this when we are going through our deSPAC process and related PIPEraise and so forth. And we believe we over - we overcapitalized ourselves to execute on Neutron in every aspect and really also raised enough capital as dry powder to go execute on things like ASI and PSC and other opportunities. So as you can imagine, propulsion is well within our wheelhouse. I mean we put, we put 200 Electron Rutherford engines on orbit. So it's - whatever you're dealing with rocket science, obviously nothing is ever trivial. But we think we're well scoped to the capital investment required. So we don't believe that for Neutron or anything else we have in our roadmap that would require us to go back to the equity - equity markets, debt markets or whatever have you. So again, we think we're fully funded to execute what we need to do and then I'll let - I'll let Pete kind of jump in and talk maybe a little bit more about timing.

Yes, and I think - so the way we're approaching Neutron is being really smart, being innovate. And propulsion is an area that if you want to renew the launch vehicle, you don't want an engine that - that's completely in our stress to its limits, you want a propulsion system that's gotten lots of margin on that. So everybody have been thinking about the propulsion with Neutron, that's really been our focus. And as a result, I think when it comes to innovation in the medium cycles and stretch as a means in it, that's not an area where we were carrying a lot of risk. These other areas where we're innovating that has a much, much bigger payoff, but - and then see if you feel like we're are in a good position to execute the function program but also that the Neutron program using it.

Got it. And then if you could just talk about the investments that you're making today for your future calculation plans, whether you guys are betting on spectrum kind of a bench of talent you've put in place there or other intellectual property assets that you're going after?

Yes, I mean, look, we want to - we want to build infrastructure in all that and the product they are putting in place all of the elements required to be able to do that in the very speculative way. And I would say at this point, we're not prepared to make a bet on the particular application that we may go after in picture and to go after any particular application - will obviously letting of interest on this one, [indiscernible] is doing and like I said, the most important thing right now is to methodically build all of those - some of these and we get to contribute into our other people's logically being in constellations, by being a supplier and we will continue to work on what we think is a disruptive opportunity in the future.

And finally, we have another follow-up question from Cai von Rumohr from Cowen. Cai, your line is open.

Yes, thanks so much. So I might have missed it but what did you pay for ASI? And also, as you know, RTX in addition to buying Blue Canyon bought the software company in Colorado. Did you look at that, and are they competition to you when you go out and look at acquisitions? I would guess not, but love your perspective on that?

So I'll comment on the purchase price of ASI. ASI is $45 million cash purchase. And then I can't speak to the other acquisition that you're referencing for Raytheon. Obviously, we're familiar with the Blue Canyon acquisition, but I'm not familiar with the software company. I would say that, in general, the environment for deals we're finding to be pretty receptive to the Rocket Lab's platform. And I think that's really what is coming down to its the only - we find that we're a very attractive place where entrepreneurial engineers want to call home. I think there are no knock on some of the larger potential acquirers out there. But it's a very different choice, right, you to go to a large, well established prime or you want to be part of something that's little bit smaller and perhaps you could have a greater impact through your efforts. So I think it's kind of an apples and oranges choice for sellers. And this is a seller's market, there's no question about it. And there is competition for deals. I think that we're being very selective. I think we do have a healthy pipeline of opportunities that we're always evaluating, in this case executing on the last, but the most recent acquisitions of ASI and PSC. But again I think that we don't really - we don't really see. It seems like we're both looking at different types of assets. I would say that we don't necessarily see head-on competition in a lot of stuff we're looking at, but there is certainly more broadly speaking competition for the assets that we're bringing into the family.

Thanks very much.

I think you can see Cai that of the acquisitions that we make, it's very much a try before you buy. We were using simply as we're actually moving that projects and products. We were ASI software, we were using - we've been using PSC [indiscernible]. So these are companies that we know well and are always the leaders in the areas. So that's otherwise a strong growth to the acquisition.

Yes. And I think taking that. Yes, and Cai, I think you can also start to see the acquisition strategy really start to play out, and the fact that, if you look at some of our upcoming missions, you'll see - obviously we're providing launch services, and in many cases we're providing the supply components in the form of reaction wheel and star trackers from Sinclair. In many cases, the satellites are using ASI software, in many cases, the satellites are deploying - are being deployed on a PSC separation system. And you'll start to see again that theme start to continue to play out, where we're starting to get more and more content. And we really view this as a platform. It's not one-off launch services or one-off. It's really is how we bring all the pieces together and offer a truly end-to-end solutions that bring down the cost, increase sort of the time to market. And again, I think, when you start to put all the pieces together, when you see from the missions that we're executing on, it's kind of undeniable kind of how this - how all the pieces are coming together and how that leads just increase the amount of revenue permissions that we service. So I think we're all very, very excited about kind of what the combination of these deals represents, and how it is providing a lot of revenue diversity to our model and some margin uplift as well. And it gives us the scaling of the business. So I think it's an exciting part of our roadmap right now.

As we currently have no further questions, I will now hand back to Peter for any closing comments.

Thanks very much. Before I wrap up the call, I'd like to thank everyone who participated in today's call. We look forward to having the opportunity to provide further updates on our business, including trades, our participation in UBS Aerospace Investor Conference in November 19, our Truist Securities Investor Conference and [technical difficulty] December 7, and the Canaccord NewSpace Investor Conference in December 9. So thanks again and we look forward to speaking to you again soon. Rather exciting progress on fine business today. Thank you very much.

This now concludes today's conference call and you may now disconnect your lines. Thank you everyone for joining us today.