Good afternoon. Thank you for attending today's Rocket Lab First Quarter 2022 Financial Results Conference Call. My name is Nathen, I will be your moderator for today's call. All lines will be muted during the presentation portion of the call with an opportunity for questions-and-answers at the end. [Operator Instructions] I would like to now pass the conference over to our host, Gideon Massey with Rocket Lab. Gideon, please go ahead.

Thank you, operator. Hello, everyone. It's good to have you join us on today's conference call to discuss Rocket Lab's first quarter 2022 financial results. Our presenters for today's call are Rocket Lab Founder and CEO, Peter Beck; and Chief Financial Officer, Adam Spice. 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 the second quarter 2022, including revenue in our principal target markets, GAAP to non-GAAP gross margin, GAAP to non-GAAP operating expenses, interest expenses income net, adjusted EBITDA and basic shares outstanding. 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 factors, or other risk factors that may affect the forward-looking statements has outlined in the Risk Factors section of our 2021 10-K filing, which was filed on March 24th, 2022 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 first quarter 2022 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…

Thanks for that, Gideon. And welcome everybody today's -- for today's review of Rocket Labs business highlights and financial results for Q1, 2022. Today's presentation includes our business accomplishments for the beginning of the year, as well as further achievements we've made in the days and the weeks after the end of Q1. Adam will then talk through our financial results for the same period and a financial outlook for the second quarter before we take Q&A from those listening in and finish today's call with the upcoming conferences we'll be attending. So let's first start with a review of our key accomplishments in Q1. We started off the year with a strong -- with the signing of our largest Space Systems contract Rocket Lab has secured to date. This is a $143 million contract to design and manufacture 17 spacecraft buses for the Globalstar constellation, which I'll go into more detail shortly. This contract highlights the strength of our increasing levels of vertical integration across space systems executing on an end-to-end space strategy. We'll keep up the momentum in Space Systems with our expansion in Colorado to meet growing consumer demand for a GNC and software services and, of course, completed acquisition of SolAero Technologies in the first quarter. We immediately got to work, building the team's industry-leading technology and into qualification of what we believe to be the world's highest efficiency space solar cells, which we aim to bring to the market later this year. On the launch side of our business, our first launch of the year was a flawless mission for repeat commercial Japanese Earth Imaging Customers Synspective. That same mission also marked the first mission from Pad B at Launch Complex 1, the newest of three launch pads as we continue to ramp up our…

Thanks, Peter. I'll first review our first quarter 2022 results and then discuss our outlook for the second quarter. First quarter 2022 revenue was $40.7 million, slightly above our revised guidance of $40 million, which we issued on March 24th. The updated guidance reflected the delay at the BlackSky global launch that was assumed in the original guidance range of $42 million to $47 million. In the quarter, Launch contributed $6.6 million and Space Systems contributed $34.1 million or 84% of revenue and grew 149%. Total revenue for the first quarter was up 48% quarter-over-quarter despite the BlackSky Launch lift from Q1 to Q2. Meanwhile, GAAP and non-GAAP gross margins for the first quarter of 2022 were 9% and 24% respectively. This is below our original Q1 guidance on a GAAP and non-GAAP basis of 17% and 30% respectively, driven by the un-forecasted purchase accounting impacts of SolAero that was still in process at the time we issued our guidance and the delayed launch and resulting lower -- resulting in lower absorption of overhead and indirect production and launch costs. This compares to fourth quarter 2021 GAAP and non-GAAP gross margins of 24% and 36% respectively, which benefited from higher launch rate and a more favorable product mix. Launch Services GAAP and non-GAAP gross margins were negative 12% and positive 1% in the first quarter, respectively versus a positive 1% and positive 6% in Q4 of 2021. The decline in gross margins quarter-on-quarter were driven by the lower launch cadence in the first quarter of 2022. Space systems GAAP and non-GAAP gross margins were 13% and 28% in the first quarter, respectively, versus 48% and 67% in Q4 2021. The decline in gross margins quarter-on-quarter were largely driven by a mix shift to lower margin SolAero revenues. Turning to operating…

Our first question is from Suji Desilva with ROTH Capital. Suji, your line is open. Please proceed.

Thanks. Hi, Peter. Hi, Adam. Congratulations of the progress here. So the gross margins you've talked about, I understand the overhead absorption and launch. On the space systems around the 20%, what item should we think about as the target margin there for space systems? Is there opportunity for expansion or will it be mixed driven quarter to quarter around this -- roughly this level?

Yes, I think it’s kind of a near term, medium term and long term answer to that question. I think in the near term, certainly kind of the laws of physics are kind of dictating that. The SolAero impact is going to drive margins kind of to be lower than obviously that they were before that acquisition. So I think the margins you're seeing right now are probably, I'd say, reasonably indicative of where they're going to be in the next several quarters. Certainly, I think as you kind of move a little bit further out in time, we see a lot of opportunities for improving the gross margins in that SolAero business. I say that, the other portions of space systems remain pretty strong from a gross margin perspective. So I think it's really a focus on SolAero and getting some improvement there in that business. I think we're already starting to see as contracts turnover and so forth and given kind of some of the tightness that we're seeing in the solar market that we have a little bit more ability to kind of have better gross margins out -- a little bit our in the future. Longer term for the larger space systems initiatives, we believe that the margin structure for that should be relatively similar to launch in targeting kind of the low to mid fifties. Now, again, given the size of SolAero’s contribution, it's going to take us some time to kind of get that back into focus. But again, we've talked a little bit before that we see the SolAero growth margins ultimately kind of being in the 30% plus range, which I think then becomes much less of a drag on the overall margin structure for that line of business. So we're very optimistic that we've got a path to improve the margins there. And then overall, we think again as the other parts of space systems grow in the mix above and beyond SolAero, then I think things will come back into focus in that low to mid 50s gross margin.

Appreciate the detail and laying out the roadmap there, Adam. And then switching over to the launch, the cadence, you seem to have settled into sort of a one a month kind of cadence roughly which is kind of what you guys had I talked about. What happens as maybe two launch pads come up in New Zealand or Virginia comes up into calendar ‘23? How should we expect that cadence to evolve over the next six to 12 to 18 months?

Yes. I mean we certainly have invested in the capability there. The things that really drive launch cadence are always for us dominated by customer readiness. So it's a little bit difficult to predict and launch is always a little bit lumpy, but certainly we see an increase in launch manifest for next year and we’ve made sure we've made all the all investments to take full advantage of that.

I think Suju, I think one other piece of that. So certainly the addition of the pad in New Zealand and the bringing up of Wallops helps kind of increase the number of absolute launches that we can do. But I think more importantly, it really kind of allows us a lot more resilience, right? So you have the ability to launch and quicker succession, right? So you don't have to kind of reposition all your launch assets and so forth and like you're tracking radars and so forth. So I think that -- I wouldn't think so much of it is like is it -- a step increase in the amount of launches that you can do on annual basis, but much more the kind of the timing and sequencing of those. That actually is pretty important for some customers and how they want to basically get their constellation on orbit. Timing is very, very important.

Okay. It’s more flexibility there. Thanks guys. Appreciate. I’ll pass along.

Thanks, Suji. Our next question goes to Edison Yu with Deutsche Bank. Edison, your line is open, please proceed.

Hi, guys. Thanks for taking questions. First one on the guidance. Just curious what are you sort of embedding in there for CAPSTONE? I think it was disclosed somewhere, it worth about $10 million. I see we don't recognize all that into Q, just if you can clarify what's kind of being embedded?

Yes, I’d say that's a good question Edison. So the CAPSTONE, you're correct, is around a $10 million mission. It's important to note that the -- one of the missions in Q2, in fact the recovery mission that went off earlier in the quarter that was primarily an R& D platform. It had relatively small revenue contribution. We had some cubes sets on the platform. But it wasn't the regular launch at all. So if you think about -- if you trying to back into, hey, how does kind of the guide for the revenue for launch services kind of triangulate to three launch and our average selling price. It's because of that recovery mission was a pretty de minimis revenue contribution and you're absolutely correct on the CAPSTONE revenue estimation.

Understood. --

And probably you're right. [Multiple Speakers] Sorry, Edison, I didn't ask kind of analyze that one question -- part of your question. You're question to revenue recognition, it is a point in time launch, so all the revenue from CAPSTONE does happen in Q2.

Got you. Thanks. And there's -- and then follow on space systems. For -- I know you said you completed the OneWeb. How are we thinking about Gen2? Obviously that's supposed to be a much bigger one. Are we confident -- do we know when that will be kind of determined? What kind of solar panel, solar cells that will be using?

I mean that program is going through its traditional bidding cycle. So we'll have to wait for the customer to make their final selections.

Okay. Thank you. Operator Thank you, Edison. Our next question goes to Erik Rasmussen with Stifel. Erik, your line is open, please proceed.

Yes, thanks for taking the questions. Just maybe clarification and it sounds like -- just trying to get a sense of what the value per launch is. Obviously, one of those was an R&D platform. But would you say it's similar to sort of what you had filed in your 10-K, which is a little bit over $8 million and you see that growing in terms of the value per launch? And then with that, because of these bulk-buys, any sort of constraints on the pricing versus maybe similar of the one offs?

Yes. Eric I think that the -- I mean the pricing environment for us has been relatively stable. If you look back at our pricing back, let's say, three or four years ago, we were pricing electron at roughly $5 million per launch. And now the average selling price obviously is much, much higher. At the current time, we're really not seeing any downward pricing pressure. Certainly when a customer comes in and commits to a larger bulk-buy and if it's -- and he also depends on the type of bulk buy, right? If you have a bulk-buy where you're sending the same spacecraft and you're sending it to kind of similar orbit and so forth then it reduces the NRE for us, significantly we'll pass some those savings on to the customer. But I would say that if you really look across the range of our backlog, it really does kind of fit what we've always been talking about right? So if you think about $7.5 million roughly on average kind of being in the average selling price for kind of an -- kind of the sticker price. That's still accurate and there's exceptions to the high side and a little bit of exception to the low side as well.

Erik and the fundamental reason people come to us is reliability. I mean, they're entrusting – when you deploy someone's entire constellation, you're basically entrusted with their entire business. So reliability of launch vehicle, accuracy and schedule was most important.

Understand. And maybe just on the recapture attempt, obviously, there's some successes there. I think would have loved to seen fully successful recapture there. But what about the setup that was sort of inconsistent with maybe what you were doing in the practice runs? And then when do you anticipate the next recapture?

You're a tough customer, Erik. That was an incredible feat to catch it. Ultimately the pilot off loaded it because he didn't like way it felt. We need more practice on the S92. But I mean to put it into context, like rendezvous with descending rocket stage from space 400 kilometers out in the ocean and then catching it was better than I was hoping for. So we really have confirmed that that's a very completely viable technique to get it on that first time is awesome. We'll make a few tweaks and get back out there, not in the not too distant future for another attempt. But as far as we are concerned, we learned a tremendous amount and the condition of that stage is really fantastic. And I think if we held that on the hook and bought it home, we would be seriously thinking about putting that thing back on the pad. So we're in super good shape.

Great. Maybe just last one on the flight termination software. That's obviously been a hold up, but where -- what is the gating item at this point? Where does that stand? And I know you're going to be – you are hopefully to have a first launch there by December year end, but maybe just help walk through what to expect there?

Yes, sure. So the gating item as it's always been is NASA's completion of their software that they can then provide to us to load on the autonomous flight termination units and then go fly. They've had many, many delays, but the project has a very, very high priority with the NASA currently and they seem to be meeting the milestones. We have more confidence than even before that that will deliver that software and enough confidence that we're able to actually schedule a launch, which is something we haven't been able to do for over a year.

Great. Thank you. Good luck.

Thank you, Erik. Our next question goes to Ron Epstein with Bank of America. Ron, your line is open, please proceed.

Hey, good afternoon guys. It was nice seeing last week. Maybe just a couple of quick ones. With the absence of the Russians in the space market now [indiscernible] effectively out and maybe never come back. How does -- how should we think about what impact that's gonna have on guys? Obviously it's positive, but can you give us maybe another way to think about it with -- give a little more – give a little more color on it?

Yes, I mean the way we think about this Ron is that, prior to the Ukraine and Russia crisis there was quite a lot of commercial demand for the Neutron product. It was always intended to compete with both the Soyuz and the Falcon 9. Now with the Soyuz kind of exited the market and that's not just SolAero is out of Russia that’s still out of [indiscernible] and Europe. And also Proton gone, it really does create a big hole in the sort of 2024 to 2027 timeframe frame that's when tremendous number of both government and commercial media constellation come to market. So the conversations that we are having internally here now are about who do we -- who partnered with for that -- for those first kind of bulk-buy Neutrons. Who's going to be ready and who's going to actually turn up at the pad. So it certainly changed the conversations quite significantly.

Got it. And on Neutron, ultimately, how's that proceeding so far and when we think about the economics of Neutron, the customer, how much it will reduce the cost to launch for the customer?

I mean, building a Rocket is an incredibly painful program. So we wouldn't even start if we didn't think we could be very competitive from an economic standpoint. And all the listeners that that were learning from the Electron reusability program directly applied to the Neutron program. For us right now, it's -- we're not really seeing the need to do early catch up pricing. We're certainly -- the vehicle was in strong demand. But I think right out of the street the economic to that vehicle are going to be pretty good. As reusability -- it's like a -- it's an evolution over a products life cycle. So as we find more and more, we'll see more and more advantage from the reusability and the nature of that. So yes, I think we're in good shape.

And then maybe switching gears a little bit to something more kind of operational focused. We've heard from many, many, many companies in aerospace outside of aerospace manufacturing company of the issues they've had with the supply chain. How that supply chain issues impacted you, if at all? And how are you addressing is if in deed there is an impact?

I mean, it's certainly an advantage to be being highly vertically integrated, all that you needed is raw material and puts. We've been able to manage through our supply chain over the last couple of years and never had to delay a launch or satellite or anything because of it. We actively look after our supply chain incredibly well if we carry safety stock if we think something is getting a little bit worrisome, electrical components, electrical component is always been something we track very, very closely. So we haven't seen any kind of major disruptions to our production or ability to execute. And I think primarily because we're so vertically integrated and we've been doing this for a while, so we manage our supply chain very carefully.

Got it. And then maybe one last one for me. On the recapture of the electronic stage, did that change your thinking at all in terms of the economic impact of the usability. Is it turning out better than you thought, worse than you thought or about the same as you thought? Now that you've got a little more data and some more experience with it.

Well, at the end of the day, the proof will be in the pudding and the condition that we recovered the stage even though we recovered over of the ocean, which is less than ideal was really extraordinarily good. All of the kind of iterations that we've been making over previous slights at all here really huge dividends. And to give the sense of when it's recovered from a helicopter, the helicopter costs around about $5,000 an hour to top, if you've got it out there is four hours or more, it's an incredibly cost effective way to go back and bring a stage, which represents the vast majority of the cost of a launch vehicle. I mean, the economics are just awesome. Now the true economics will be borne out of how much of the refurbishment cycle does that cost about. But I mean $20,000 worth of helicopter time to get back full engine sets and whole tanks. I mean, it really is really wonderful.

Got it. Thank you guys.

Thank you, Ron, I've been told that there's a technical delay on the webcast side preventing attendees from watching and listening, but we will continue with the Q&A to the people that are on the call. Our next question goes to Austin Mo with Canaccord. Austin, your line is open. Please proceed.

Good afternoon, Peter and Adam. So my first question here, do you guys have any update on the recent reporting about the company considering having potentially three Neutrons ready by 2024 to try and capture some market share from the Proton and the Soyuz now that they're offline.

No, that's not a report I’d say.

Okay. And then as far as the next recapture attempt for the Electron, do you plan to do that on the next launch after CAPSTONE or you're still evaluating in terms of when one might be a good time to try and catch another booster?

Yes, we haven't announced the launch after CAPSTONE, generally that’s our policy is to announce within a certain timeframe of launch. But you wanted to wait opportunity to see another attempt.

Okay. Well, that's good to hear. And then just finally, can you -- Rocket Lab is extremely vertically integrated. So is there really any area in terms of hardware or software that you're looking at now, where you feel you might need to expand into the future? Do you guys feel pretty good right now in terms of where you are in vertical integration and the product offering that you can offer to customers?

I think we've made great progress, but there's still plenty more to go. So if you took a satellite or a spacecraft and took it to bits on the table, you would see that we've gotten a number of really high value components or areas whether it be from an economic standpoint or scheduling and supply chain standpoint, but there is certainly more for us to go.

Okay. Great. Thank you.

Thank you, Austin. Our next question goes to Cai von Rumohr with -- excuse me, with Cowen. Cai, your line is opne, please proceed.

Yes. Thank you very much. So guys just to follow up on that, you still have a substantial amount of cash, but we're in a much nastier equity environment. So what's your thinking in terms of cash deployment? Do you want to kind of husband your resources now? And also you have that $100 million of borrowing, what's your thinking there?

Yes. No, that's definitely a very kind of salient discussion that we have every day here at the company. So I think the challenge right now is that, we see this as a phenomenal opportunity to continue to add to the portfolio. Certainly we need to be judicious with our capital and I think we have been. We see a lot of opportunities still out there, in fact the deal flow is relatively healthy. But that said, we don't have anything in our sites right now that we're anywhere kind of deep in progress on. I would say that we think for the right types of opportunities the capital will almost always be available. But we also -- absolutely appreciate the fact that it's a pretty nasty equity environment as you noted. But if you think about the kind of deals that we've done, we've acquired four companies, three is becoming coming public. They all have a pretty similar vein to them right where these aren't really kind of cash consuming deals after they close the acquisition. We have been able to use some stock in our deals and we continue to like to do so to preserve cash. So we're -- but we do think that if people are believers in the longer term growth of this industry, we really have to -- now is the time to be staking out strategic positions on the monopoly board. And I think we've done that successfully and I think there will be more opportunities to do that. But certainly we'll do that with an eye towards capital preservation. I hope that answer your question exactly, but we're definitely not taking our foot off the gas and not looking at a lot of things. As we do, we do have the benefit of getting a lot of deal flow in front of us.

So usually when financial environments get more difficult, it takes a while for ask prices to change. Are you seeing that those prices are starting to change today or is this something where you think if you wait a little bit and I understand you don't want to wait too long if the right opportunity comes up?

Yes. No, you're absolutely right. I think it takes a while for private companies to realize that their valuation fluctuate just like public company valuations do. But I would also say that we're not far enough down the path on an individual deal that we could really kind of provide any feedback on kind of how prices have moved or not in the last say several months. We've been really focused on integrating the deals that we've done. We think we've got a lot of work to do still on some of the integration efforts, but we're making great progress. But I think we also are very cognizant too that we -- there's no such things as a small deal, right? You acquired these companies, they all require integration, they all require effort and management bandwidth. And so we're being very cognizant that we don't get too far over our skis and kind of put the business at dead risk and that kind of applies to integration as well as kind of capital availability.

Right. And then -- so just a green eyeshade question, your backlog was five $545 million, it looks like it went up as smidge over $300 million, but obviously that includes SolAero. So what were your net orders in the quarter?

So if you look at the addition of, for example, the MDA Global Star deal plus SolAero, we added about, I think between those two deals, it was probably close to $300 million, right? A little under $300 million between those the MDA deal and SolAero? So we [Multiple Speakers] And, of course we generated revenue and kind of recognized some of that backlog in the quarter.

Okay. And then you talked about the Ukraine impact on Neutron demand in 2024 to 2027, but are you seeing that that yielded any benefits in terms of the pricing for Electron here over the slots that you still have available?

I mean the payload capacity of a Soyuz is sort of eight tons, where -- eight metric tons, whereas Electron is 250 to 300. So the majority of the kind of spacecraft that would fly on a Soyuz is applicable to necessarily an Electron launch vehicle. But I think launch the launch market has certainly tightened, but I think it's probably a little bit early to see any direct customer flow on for Electron. So the one thing I would say Cai and is related to the situation is the fact that payloads that were always destined for Electron are basically are getting firm up and they're coming at favorable pricing. So I would say what it's done is, it put more emphasis on certain payloads to get up in orbit sooner. And so Cai, I'd say from that perspective, the conflict has been us kind of a I'd would say a tailwind to our business. Because things that maybe had a little bit more time leash to them a little bit longer time to get to on orbit now have been want to be pulled in. So we're actually looking at opportunities to compress the manifest and again squeezing in, we squeeze in launches into your already relatively full manifest. You can basically charge a higher price that due to the scarcity of launch slots.

Excellent. Super. Very helpful. Thank you gentlemen.

Thank you, Cai. Our next question goes to Kristine Liwag with Morgan Stanley. Kristine, your line is open. Please proceed.

This is Justin on for Kristine. Following up on maybe some of the earlier discussion around helicopter recovery. Any sense you are standing here today of how long before Electron boosters are regularly recovered in this fashion? And is the plan to recover all Electron boosters in this way eventually or does helicopter retrieval make sense only under certain conditions? Thanks.

Yes, it's a great question. So we sort of think around about 50% of Electron missions will be viable for recovery and that's not just from a helicopter standpoint operationally, but it's also from a mission standpoint. So one of the challenges with the small rocket is that, there is very tight margins. So some missions require all of the performance of Electron, which don't really allow for the addition of extra math for usability hardware. I mean, we've got the burden down fairly low sort of 10% to 15% reduction in a payload, which is extraordinarily low. But nevertheless number of missions require that extra performance. So we sort of thinking around about 50% of missions will be eligible for being reusable and recovered.

Yes, Justin ideally too, you would basically use your usability feature on missions and then when the booster is ending, it's kind of its life, you’d kind of use that as indispensable one, right, or disposable one. So again, hopefully there's ways that we can move things around and get as much -- we'll get as much use of these boosters as we possibly can. There's lots of different ways to achieve that.

Okay. That’s helpful. Thank you.

Thank you, Justin. Our final question is a follow ups from Edison Yu with Deutsche Bank. Edison, your is open, please proceed.

Hey, thanks for squeezing me in . Just one quick follow on Neutron. What is the ability or what's kind of the -- how realistic is it to potentially speed up development of it. Is it a question of testing capital? I know it's very complicated, but I think the spirit of I think what's going on in industry, the near term or the medium demand is quite big. So just wondering is there ways to speed it up? Thanks.

Yes, I mean, look, we're looking at every which way a Sunday to try and do that. It is -- it's an aggressive program as it is. So any opportunity we have, we'll take it, but there's -- there is no like magic thing we can do to just all of a sudden accelerated even -- one of those things even if you double the amount of spend against it, you wouldn't really save much time off. It's just you've got to go through that development of hardware calling -- go through iterations and actually build the stuff and one of the things that drives the timeline of Neutron is the availability of production equipment. So although our supply chain is relatively intact when you go and buy CNC mills and giant automated tape layers, those guys are suffering supply chain issues. So there's no amount of money in the world that can accelerate some of that stuff.

Got you. Thanks.

Thank you, Edison. Just to remind everyone that there was a technical problem on the webcast side that prevented attendees from watching and listening for a little bit. So there will be a full audio and video replay available after the whole is wrapped up. With that in mind, I would like to turn the call back over to the management team for any closing remarks.

Thank you everyone for your interest in Rocket Lab and to those who participated in today's call. Adam and I will be speaking of these up at upcoming conferences and look forward to the opportunity to share more exciting news and updates at the Stifil Cross Sector Insight Conference starting June 7 and the Bloomberg Technology Summit on June 8 and the Canaccord growth conference in August. Thanks again. We look forward to speaking with you all soon about the exciting progress being made in our business.

That concludes today's Rocket Lab first quarter 2022 financial results conference call. Thank for your participation. You can now disconnect your lines.