Hello and welcome to the Rocket Lab’s Second Quarter 2022 Earnings Conference Call. At this time, all participants are in a listen-only mode. [Operator Instructions] As a reminder, this conference is being recorded. It is now my pleasure to introduce your host Arjun Kampani, Senior Vice President, General Counsel and Corporate Secretary. Thank you, sir. You may begin.

Thank you. Hello, everyone. We’re glad to have you join us for today’s conference call to discuss Rocket Lab's second quarter 2022 financial results. Our presenters are Rocket Lab Founder and CEO, Peter Beck; and Chief Financial Officer, Adam Spice. After our prepared comments, we will take questions. Before we begin the call, I’d like to remind you that our remarks may contain forward-looking statements that relate to the future performance of the company, and these statements are intended to qualify for the Safe Harbor protection from liability established by the Private Securities Litigation Reform Act. Any such statements are not guarantees of future performance and factors that could influence our results are highlighted in today's press release and others contained in our filings with the Securities and Exchange Commission. Such statements are based upon information available to the company as of the date hereof and are subject to change for future developments. Except as required by law, the company does not undertake any obligation to update these statements. Our remarks and press release today also contain non-GAAP financial measures within the meaning of Regulation G enacted by the SEC. Included in such release is a reconciliation of these non-GAAP financial measures to the comparable financial measures calculated in accordance with GAAP. Lastly, this call is also being webcast with a supporting presentation and a replay and a copy of the presentation will be available on our website for two weeks. And now, let me turn the call over to Peter Beck, our Founder and CEO.

Okay. Thanks, Arjun, and welcome everybody to today's review of Rocket Lab’s business highlights and financial results for Q2 2022 presented by myself and our Chief Financial Officer, Adam Spice. So, today's agenda, the presentation outlines our business accomplishments for the second quarter, and it also highlights further achievements we've made since the end of the quarter. Adam will then talk through the financial – through our financial results for the second quarter and our financial outlook for Q3. After that, we'll look forward to taking questions from the sell-side and then we'll finish today’s call with a reminder of upcoming conferences we will be participating. A [clear compliment]. So, today – so with that snapshot of where the company is today, let's look at the specific achievements for this year's second quarter. We won a strong quarter for the company with the successful launch of some really significant, as well as continued progress across our space systems business. We'll go into each of these achievements in more detail in the coming slides, but here is a quick snapshot. We launched three successful Electron missions, more than all other small launch providers combined for the entire year. One of those missions were their most complex and high performance missions to date, the CAPSTONE mission to the to the Moon for NASA. We continue to see strong demand for Electron launches and secured another multi-launch deal. This deal will see us launch 15 spacecraft for commercial constellation operator HawkEye 360. We carried out the first mid-air capture of an Electron booster with a helicopter, advancing our rocket reusability program. We also made significant progress towards the development of our Neutron launch vehicle breaking ground on our major production complex in Virginia. Turning our attention to space systems, we are also selected…

Great. Thanks, Pete. I'll first review our second quarter 2022 results and then discuss our outlook for the third quarter. Second quarter 2022 revenue was $55.5 million, exceeding the high-end of our guidance range of $51 million to $54 million, representing 36% sequential growth over the prior quarter. Our record revenue performance in the quarter was the result of three successful launches as we guided and outperformance in our Space Systems segment led by our SolAero product line. Launch services contributed $19.1 million or 191% quarter-on-quarter growth, representing 34% of total revenue in the quarter. Space systems contributed $36.4 million yielding [70%] [ph] quarter-on-quarter growth, representing 66% of total revenue. Now, turning to gross margin. GAAP and non-GAAP gross margin for the second quarter of 2022 were 9% and 22%, respectively. This was outside the low-end of our guidance on a GAAP and non-GAAP basis of 11% and 26%, respectively. The lower gross margin versus guidance was a result of two primary factors. An unfavorable product mix within the space systems segment and lower overhead absorption in the Launch Services segment. Compared to the first quarter 2022 where GAAP and non-GAAP gross margin were 9% and 24% respectively, second quarter gross margin trended slightly lower based on a mix shift to lower margin launch services revenue. In the Launch Services segment, specifically, GAAP gross margin was negative 12% in the second quarter, flat with the prior quarter. In the Space Systems segment, GAAP gross margin was 20% in the second quarter versus 13% in the prior quarter. The expansion of gross margin quarter-on-quarter was driven by a favorable mix of higher margin products delivered in the quarter versus the prior quarter, despite the second quarter being negatively impacted by the introduction of stock-based compensation into SolAero production costs, resulting from…

Absolutely. [Operator Instructions] The first question is from the line of Suji Desilva with ROTH Capital. You may proceed.

Hi, Peter. Hi, Adam. Congratulations on all the progress here. Can you talk about maybe the Responsive Space Program. It sounds like with the lead times there, you may be able to, kind of exceed your launch guidance in a given quarter, just want to understand if that's the case, kind of, you know, Adam's, the terms, kind of concept [indiscernible], or whether, you know, if that's unrealistic and you're able to kind of guide these will be visible, kind of quarter-on-quarter?

Yeah. Hi, Suji, I’ll take that and then Adam will want to pile on. I mean, it's kind of mentioned, you know, the thing that drives that launch cadence is customer readiness. So, that's a single biggest influencer. And the responsive sales program is, kind of those two things for us. One, it enables us to work with a customer even more closely to better judge their customer – their impact readiness. And then the second part of it is, there's a growing focus on Responsive Space. And although we've had all these capabilities, we've never really advertised as such. So that was, kind of the rationale here. And within the quarter, it's completely feasible that there can be a pop-up launch that – We have the Rockets to support that. We would like to carry some inventory there. So, you could easily expect, you know, a pop-up launch within the quarter.

Sure. Okay.

Yes, I think great. Suji, I’ll add a little bit to that. I think that it doesn't really change the way that we're forecasting the business right now, but I think what the rapid responses is really – we know that there's budget that's being added for programs to support this. So, that's helpful as far as a tailwind. I think also as we get a little bit more experience with these types of programs., we'll be able to model, kind of what that looks like going forward. Obviously, the more frequent launch, the better it is across our business and I think that these programs do nothing, but help that, but we just don't have a tremendous amount of visibility as to kind of when they're going to start to pop-up in a meaningful way, but as Pete said, we're doing everything that can to be ready to support those. And I think with these most recent launches, particularly for the NRO, I think we've shown that we've got an ability to call up launch very quickly and we could have done it much faster. We're not for some delays that we were not in control of. So, again, I think it's a great opportunity. I think it's going to be a big focus for us going forward and we're very excited about it.

Yeah. And it sounds highly differentiated too. And also, the second question, I feel compelled to ask is even though, I mean, the backlog came down, but I know that you should read much into that, but I'm just curious with the broader economic and macro concerns right now. If perhaps some of the newer companies trying to put [consolations] [ph] up or maybe being a little more cautious or pushing our plans or if you think your pipeline is more really, kind of not as exposed to that phenomenon, curious what you're seeing there? Thanks.

I mean, I would say that the quality of our pipeline is extremely high. And so far, we haven't seen any impacts from a broader economic standpoint. The typical Rocket Lab customer is – it's a mix, but like I said, the backlog and customer contract quality is really, really high.

Yes, I would just – I would basically add to that. Suji, if you look at the types of customers that we have too, even though we have roughly a 50/50 split between government and commercial, even within our commercial customers, there's – a vast majority of those are – have government support contracts, right. So, we have very little in our backlog say that is – that's pure commercial for where there's a government that's not ultimately, kind of standing behind providing demand for that content. So, I think for the most part, the government spending is much more predictable. Once it's been at, kind of provided or allocated in a budget. So, I think we feel in this environment, yes, I can understand how there's going to be some companies that are going to get to be a little nervous about the ability of some of their customers to continue to finance themselves where I don't think we necessarily have that same risk because quite a few of our customers actually went through going public process last year, which, again, not the greatest conditions, compared to where we were a year ago, but so much better than being in the private markets. And I think the ones that are private actually do have a lot of strategic engagement with U.S. and other government customers, which gives it a little bit more stability as far as kind of being able to raise financing to keep the businesses moving forward.

Okay. That's reassuring color there. Thanks, Peter. Thanks, Adam.

No worries. And just adding on that, I think Adam touch in the presentation that a lot of these programs, [amongst the years] [ph] in information and these contracts are always fairly lumpy. So, it takes a significant amount of work, but what we really didn't show is the pipeline of opportunities, which we think are very, very strong. So, we're not concerned about that.

Okay. Thanks, guys.

Thank you. The next question is from the line of Erik Rasmussen with Stifel. You may proceed.

Yes. Thanks for taking the questions. Wanted to sort of stay on launch, it looks like the pace has obviously picked up, but I appreciate the commentary around the customer readiness, it seems to be a limiting factor. You'll have one more launch for this quarter, how should we be thinking about, sort of the year and maybe the target number of launches and is there anything that could be done or what are some of the things you're doing to, sort of pick up that cadence?

Sure. I think we've previously guided. sort of 12 launches in the year. And we’re really working more closely with our customer is – and we kind of joke it, it feels like [indiscernible] is a game of [whack a mole] [ph]. And, you know, what we had done slightly differently is be a little bit more aggressive with, you know, the booking of the launch slot. So, historically, if someone books a launch slot, then we just carve that slot out and say, well, nothing happens in that slot. So, we are a little bit more aggressive now for the slot there to have two people within that same slot. And we're getting to know which kind of programs or customers seem to move around, so we can manage the benefits more accurately and just communicating with their customers that, you know, to make sure that they don't wait for the last minute to tell us if the spacecraft is going to be delayed, which, you know, is kind of typical within the industry.

Yes. And Erik, I would add then – sorry, Erik, I guess just put a little more color on that one too. I think that as far as adding more launches to the manifest whether it's a little bit later this year or as we head into 2023, I think some of the pretty clear failures and pretty significant delays from our aspirational launch competitors on the small home side are really creating opportunities for payloads to come our way, right? So, I think that we've witnessed a bit of a – we've seen scenarios where the customers are trying to play almost a game of chicken where they're wanting to take advantage of some lower launch prices being off to them based on some either desperation or people who are just really early in the game and trying to build commitments to their platform, but when they don't execute either because the rockets fail or their programs continue to have push outs, and the customer will get nervous about keeping their payloads manifest on those rockets, those will start coming our way I believe. So, I think that as time, you know we've always said that at the end of the day, you actually have to deliver a working product and we've been able to do that while many others have faltered. And so, as that faltering becomes more evident, I think it just pushes these kind of payloads that we're kind of hoping to take advantage of bargain basement, kind of introductory pricing to a more reliable platform such as ours. So, I think it's, kind of hard for when we'll see kind of a more meaningful, kind of effect from that, but I think it's likely.

Great. That's helpful. And then, so it sounds like maybe then there could be some upward pressure in pricing that you could expect from this, sort of dynamic that's playing out given that, you sort of see some separation between yourselves and others who’ve not been successful?

Well, I think we've been pretty steadfast in holding what we think is attractive pricing, but certainly we're not immune to people putting sticker prices out there that are just unrealistic because they don't really understand what it takes or what it costs to run our rocket business. We understand what those costs are. So, we haven't just, kind of thrown in the towel and chased kind of ridiculous pricing down the rabbit hole, but I do think that as options winnow and demand continues to build, I think those that are positioned to supply the market with the quality product are going to benefit from higher prices. So, I think you're exactly right. I would expect that trend to become evident in the future.

Great. And then maybe just last one. This will be for you, Adam. On the margins, obviously, some pressure in Q2, we're seeing a little bit of lift in Q3, but how should we be thinking about margins as we, sort of exit the year and what's a good trend that we should be, sort of modeling?

Yes. I think we're going to stick to our quarter-by-quarter guidance. I think, when we look at margin, there are a few factors that obviously heavily influenced that. And it's becoming a diverse set of factors because of the diversity of our business, but on the launch side, it's really all about – it's about launch cadence, so we've definitely picked up our build rate. So, we pretty much hit our marks on how many vehicles we wanted to build in 2022, which is great. That's an important requirement, but also as Pete mentioned earlier, it's customer readiness, making sure we get those launches off. And really, we talked before about, we hit our target model for Electron from margin perspective when we get to two or more launches per month. So, we're about halfway there. And again, where we see demand in the marketplace, we're confident we're going to get there. And we think it's roughly on the same timelines that we've been communicating all along. So, we feel very good about it. Also, what Pete mentioned earlier, he gave an update on the booster recovery for the Electron. That's going to be a meaningful enabler of seeing some of those rapid improvements in the margin profile of the business because you go from building – every vehicle building being expendable to having a fleet of vehicles that you refurbish and reuse. So, I think from that perspective that's always been part of our plan. And again, the success that we saw in actually [indiscernible] and capturing that rocket was an important step forward improving that that could become reality. So again, I think we feel very confident in the margin profiles that we previously communicated and we – again, we're making progress against those.

Right. And on the space system what will be some of the things that we will see [indiscernible] there, is it really dependent on mix?

Yes, it's really dependent on mix. There's so many different things going on in that space systems business from our design services contracts to the manufacturing of satellite buses themselves, which are just really getting underway. The component businesses that we've developed internally and also the ones we've acquired actually, kind of come out of the [chute] [ph] with attractive gross margins to begin with. So, it's not really a scaling challenge with those businesses. I think the real important focus item for us to achieving and maintaining healthy gross margins in space systems is really around implementing some of the things that we know that we need to do on the SolAero side of the business because that brought with it meaningful revenue run rate that we stated when we acquired the company was in the high single digit gross margins. And we have a path and a target to get to 30 points of gross margin for that business. And when we achieved that, balancing that with the other higher existing higher gross margin, it will land us exactly where we want to be. So, I think we know what we need to do. It's just a matter of time. And when we did the SolAero acquisition, we said it was about 24-month path to get from, kind of where they were to where we want to go. And again, nothing is really pushing off of that view. We remain encouraged by the fact that the new business that we sign up, kind of continues to come in at higher gross margins than what existed in the existing backlog. We closed the deal in January. So, all the indicators are pointing in the right direction that we can achieve the margin targets that we're looking for in space systems and in the Launch side.

Great. Thanks so much.

Thank you. The next question comes from the line of Ronald Epstein with Bank of America. Please go ahead.

Hey, good afternoon, wherever you might be in the world. Just maybe a couple of quick ones. This week we saw an announcement, Northrop has cut a deal with Firefly to get some engines, when we think about Neutron and some of the launch that we might be seeing out of the defense community with some of the big primes there, are there opportunities for you all with the bigger rocket, with bigger payloads, with the big defense front?

Yes. For sure, Ron. If you look at Neutron already, I mean, we really [indiscernible] contract, which – if you look at who is one [indiscernible] contract, it's basically [GLA] [ph] who are large enough. So, we already had very, very strong customer engagement. There's no more negative validation when your customer, actually, you know, investing in the development of the vehicle from the U.S. Government side. And we have a strong relationship with the clients across a wide range of business unit, but we see Neutron as, kind of a fairly, fairly disruptive vehicle within the market. And I'm sure the [clients] [ph] will take advantage of it, but we have no need to partner with the prime to be able to develop that vehicle and bring them to market.

Got it, got it. And then maybe on the M&A front, are you all looking at more potential M&A in the systems business?

Yes, I mean, we like to keep kind of half a dozen to a dozen companies in the [chute] [ph]. What I will say is that we haven't seen the valuation of those private companies come in line with probably the public market. It seems to be a bit of historical there. So, we're not seeing them in a – we're going to pay over the odds for anything there. But, you know, we continue a very active M&A strategy. There's a few things that we would like to add to the quiver, but we've been very disciplined about data in the current market.

Got it, got it. And then maybe just one last quick question. With the Russians out of the market seemingly permanently now, if we look out say three or four years from now, and I know, I mean if you can't answer it, don't obviously, but where could the launch cadence go, now that big provider is effectively out?

I mean, for, you know, it's only gotten one way. You know, there is enough launch demand as it was for, I think we've talked about this in that, sort of 2024 to 2027 timeframe, you have a tremendous number of mega constellations coming to market all requiring launch and there's a massive launch [difference] [ph] in that period of time. And remove, I think Russia was either the second or the third largest launch provided by volume from the market. And all that launch has got to go somewhere. We're also seeing launch becoming acquired pretty rapidly, programs like Amazon public programs that have consumed basically all the remaining launch capacity on a number of vehicles. It's really the – it presents a tremendous opportunity for us and Neutron. And we're being very, very selective with respect to who we partner with on that one because a number of customers aren't looking for one or two launches. They're looking to acquire years of Neutron’s launch abilities. And we're just being very conservative about who we who we provide that to who's going to be at the pad in the right time and who's going to be real. Those are kind of the considerations that we're making as we [indiscernible] with those customers.

Great. Thank you very much.

Thank you. The next question is from the line of Matt Akers with Wells Fargo. You may proceed.

Hi, thanks. Good afternoon. Thanks for the question. Can you talk about, kind of margins and profitability on the responsive launches? And I know you talked about how that will sort of benefit your overhead absorption, but I guess you're the only providers who have demonstrated that capability, is that something you're going to be able to charge, kind of a premium for launch for? And then on the other side, I guess, are there additional costs that need to come with that or is that sort of something you can do mostly out of capacity that you already have online?

Yeah. Hi, Matt. That's a good question. So, I mean, I think it's universally understood that an on demand service demands a premium. And certainly that's been our experience to date when we've had both government and commercial customers come to us with the short-term work. So, those certainly come at a premium because if you have a nice production cadence and flow and launch flow, and then something jumps in the middle of it, then there's certainly additional value that you've provided. And with respect to costs, I mean, Adam will provide you a more fulsome financial answer, but my kind of put here, you know, you're not flexing with a whole bunch of staff to, you know, to meet these. So, you know, your staff cost is relatively flexed. We like to carry inventory anyway. It's just kind of reprioritization of staff and projects to allow the [flex] [ph]. And there will be some additional staff carried in a small number to enable certain things, but generally it's a reprioritization.

Yes, yes. And Matt, I think following on Pete’s point there, on the revenue side, what we've seen is, every year we seem to have customers that come with short-term launch needs. And it's a little bit different with this U.S. government responsive launch because that's much more planned and coordinated, but if you kind of take the range of, kind of a mix of, kind of commercial and government customers who either have planned responsive launch requirements or commercial customers that show up with a very defined short-term launch window, but they need to [indiscernible]. Prices have been on average probably 15% to 30% higher than our sticker price. So, that kind of gives you a bit of an example of what the premium kind of looks like for this kind of responsive type of capability. And our sticker price again being call it $7.5 million is kind of what we advertise the baseline Electron launch to be. On the cost side of things, as Pete mentioned, one of the valuable characteristics of being so vertically integrated and in fact owning our launch facility in New Zealand is the fact that most of what we do is fixed, right? Fixed costs, so the incremental cost of doing a responsive launch is really nothing different than a well-planned-out manifested launch that's out 6, 12 months from now. So, I think it's really all beneficial to margin because you're seeing a significant uptick in average selling price and your cost of goods sold, including your near-term, kind of launch period costs are not really affected by it. So, it's all goodness.

Great. Thanks. That's helpful. And I guess just one more. I just want to ask about labor and just a lot of companies having issues finding people at this point. Is that something that you've seen or you expect to be a bottleneck in the near future or feel like you're already pretty well staffed for this year?

Yes, I mean, talent is always, is always a challenge. I would say that we made some pretty significant changes to the way that we were doing recruiting in the last – the last sort of six months. And those have formed really great results. Also, we are, kind of seeing that engineers want to work on projects that actually launch and within successful companies though. As kind of other folks, kind of [failed] [ph] to execute or had very, very long-term ambitious plans that also, kind of failed to execute on, we don't get an effective cap with the price, we tend to attract the engineers that are really excited to work on real projects and deliver real hardware and the bar to getting into Rocket Lab is extraordinarily high, and people kind of know and respect that. Just kind of a long winded bias thing, I think every company is facing kind of talent issues, but we've been much more successful in the last quarter or so in feeding the machine than we ever had before.

Got it. That's helpful. Thank you.

Thank you. The next question is from the line of Edison Yu with Deutsche Bank. You may proceed.

Thanks and congrats on CAPSTONE, that's quite extraordinary. Wanted to come back to the topic on Neutron and sort of the environment for [May] [ph] constellations. In the context of everything that's sort of going on, obviously, you have one web merging, there's some rumors about some other constellations out there, how are you thinking about the timing of when to decide who the first customers are for launch? And I guess, what could possibly influence that?

What I'd say there, you know, from us, like, typically, we don't sign contracts that are kind of [sloppy] [ph]. So, if someone wants, for example, to secure an Electron launch, it's a 10% nonrefundable deposit down before we'll engage. So, it's kind of – there's kind of two sides to this [question] [ph] is that, you know we need to determine who is going to be this partner, especially when we're consuming – looking to consume the tremendous amount of launch from us. And the customer also has to be willing to make that investment and to launch. And the more real the customer is, the more real they expect the launch vehicle to look. And the less real launch vehicle is the less real a contractor [and looks] [ph], there's no formal commitment, there's no cash paid. So, our focus is really on working with all of those customers, determining which one is going to actually be at the pad, and those customers in turn are looking at us and looking to see development milestones and they're asking us the same question, was this vehicle going to be at the Pad when you say, it's going to be. And all the rubber hit the road when [money exchanges] [ph] came to that point.

Yes. And Edison, I would add a little bit more to the fact that that would become a much more diversified company and everyone views us as a launch company, which certainly that's the core, but we're really looking to put more deals together that are multifaceted, right? So, it may not be the first customer that we announced for Neutron is probably going to involve more than just launch, right? We have a lot of things that we bring to market and we're looking for much broader end-to-end customer relationships. So, I think that that's one of the values of having, kind of the breadth that we have now is that, it's rarely becoming just a launch contract. It's usually launch contract, plus other things, kind of in partnership with that, whether it's components for [people satellite] [ph], whether it involves design services, on orbit management and so forth. So, again, we're looking to create much more holistic relationships and package deals. So, it's a little more complex and it also kind of winnows down the field of who kind of you want to [indiscernible] as well. It becomes that much more important that who you're partnering with is going to ultimately deliver their constellation and you're not going to be, kind of left with a kind of vaporware type of contract.

Understood. And just one follow-up. Kind of related, there's certainly a lot of competing or new competition coming to the market and particularly in, sort of call it 1.0 ton to 1.5 ton payload, what's your – I think we discussed this before, but just curious if you could refresh out, what's your sort of view on that kind of sizing versus, kind of a small-end with Electron and then you have Neutron coming, how do you view that segment of size for the market?

Yes. So, there's been emerging competition coming for, as long as we've been flying Electron. And as of yet, it just hasn't materialized. I think it's easy to, kind of talk about disruptive technologies. It's actually super hard to do it and even harder to, you know, to do it reliably and consistently. Not being as arrogant to say that there's not going to be competition at some point arrive, it's just – it's been arriving for in the last decade, but it's not finally got there yet. And with respect to the 1.0 ton class, I mean, we were very, very deliberate in the size of launch vehicle for a small dedicated launch vehicle that we developed. And we really think we've hit the sweet spot. Now, with respect to the, kind of the 1.0 ton class launch vehicles, our view has always been and the fundamental reason why we didn't develop one is you're in a complete no man's land with a 1.0 ton vehicle. So, if you've got a dedicated small satellite that you need launched, Electron and Electrons price point is absolutely ideal. Nobody charges you less for half [indiscernible] rocket. Like if you want to buy a dedicated rocket, then you buy a dedicated rocket. And if you've only got 100 kg or 200 kg or 300 kg payload, then you've just bought a very – much more expensive rocket when you needed. And then on the flip side, from a larger perspective, you're competing directly with a [indiscernible] mine transport emissions. So, it's just the worst of all worlds. It's too small to be an effective rideshare vehicle and too big to be a cost competitive dedicated launch vehicle. And I think as Adam mentioned previously, there's a lot of new entrant pricing out there, a lot of folks really don't have the experience to know what it actually costs to build and operate a launch vehicle and a lot of captured pricing going on that will be completely unsustainable in the future. And so, if without the one-time sweet spot, then we would have built a vehicle, you know, through that and we could certainly, you know, pivot to building one very, very quickly, but we'd honestly think that is the rest of all worlds.

Right. Thanks for that [insight] [ph].

Thank you. The next question is from the line of Austin Muller with Canaccord. You may proceed.

Hi. Good afternoon, Peter and Adam. So, my first question here, earlier this week, Maxar announced that they're moving, sort of up or they're moving into a – the small set mark if you will, with a proliferated LEO bus that's sort of scalable to a 150 kilograms to 500 kilograms. So, are you sort of seeing the same kind of trends right now within the manufacturing market where a lot of companies are, sort of moving their constellations from what had been CubeSats up to slightly more capable systems in that, sort of 150 kilogram to 600 kilogram range that are not quite an exquisite 5,000 kilogram satellite, but do you have, you know, the capacity for bigger batteries, bigger solar panels, and more capability.

Yes, absolutely. Austin, this has been a trend that we haven't seen over many years. And we would – if you roll back a couple of years, we would fly a CubeSats customer and they would do a mission demonstration. They would enable them to raise capital or prove [indiscernible] and then they would move into a more cable platform. And we see this across the board. And this is why we think you know, going back to Edison’s questions, why the class of Electron launched vehicle, and I think this suits this market very, very well. But yes, that is what we continue to see as we, kind of [indiscernible] CubeSat graduate into a more fulsome platform. And then ultimately, typically how it rolls is you're – even on your larger platform as you look for a rideshare cheap launch, you'll get it on orbit, prove out the capability of spacecraft, and then when you actually need to put the spacecraft into the desired orbits to be commercial, that's when we often see those customers coming back again and buying bulk buyers of electrons to deploy their constellation to the exact orbit. And I think you can look across a number of those bulk buyers that we’ve signed and see that evolution is consistently across all of them.

Great. That's very interesting. I just wanted to comment, congratulations on the achievement with the CAPSTONE mission, and now that you've, sort of demonstrated more Interplanetary mission capability, I know the company's talked about doing a mission, a Venus mission soon, is the intent there to monetize some of that data collected from the Venus mission and be able to sell that?

Yes. I mean, the Venus mission is a [indiscernible] and we can do the [old cold hardware] [ph] kind of a mission. And the science team working on that is – they funded themselves, and anybody who wants to be a part of that program has to bring their own funding. But undoubtedly, the data will be of huge scientific value, and there could be opportunities to monetize that. But what I would say is, where the real focus is now that we've proven that we can build and operate a spacecraft that's capable of Interplanetary flight is actually taking that investment we've made in that Lunar Photon platform and the proof points that we now have and developing missions with our end customers, which is the most exciting thing about that whole mission really. I mean, you sit down with the planetary scientists from NASA, and in their entire career, they've expected to do maybe two missions to a planet in their entire professional career. And generally, these missions are measured in decades and billions or hundreds of millions, and just sitting down with the planetary scientists now saying well for some tens of millions of dollars in a few months' time, we can go to Mars or we can go to this asteroid, it's really, really changed the game and changed the way that everybody's thinking about actually having, you know, how you do interplanetary science and what is the out of the possible now. So, we see that platform has been really, really disruptive. And, you know, we're looking forward to doing some really exciting missions in the future [indiscernible].

That sounds super exciting. Just one more if I may. This might be a question for Adam. If you haven't already, can you just, sort of delineate what's specifically in the quarter caused the – within the mix of space system caused the lower gross margin there?

Yes. So, if you look in the mix, it's really – everything that we're doing in space systems right now is influenced by SolAero, because it came with so much revenue relative to everything else. So, it's really more than anticipated SolAero contributions in the quarter was the primary one. Everything else is, kind of on the margin. I think the other parts of our space systems business have reasonably good margins. They were good when we acquired the assets. I think the stuff that we developed internally has generated good margins. So, it's really just the mix. And I think again, we mentioned, we knew that there were some improvements that we needed to do SolAero where we love the strategic nature of the SolAero business. It proved itself to be incredibly strategic in the MDA Globalstar constellation win. It's proven to be very strategic and others, projects that we're pursuing. So, love the business, tremendous amount of opportunity there. We're relatively early in that process of finding those opportunities and bringing not only, kind of our broad manufacturing capabilities to bear on it, but also capital, right? I think there's – it was a business that wasn't, I would say, fed particularly well by the prior owners. And I think we were looking for ways to put more capital in that business and do things a little bit differently, but yes, it's really that that was – the skewing of the margins in the quarter.

Okay. And so, I guess after we sort of get through that 24-month timeline for transformation in that business and you can get it above the objective 30% gross margin. Then we can think about space systems being back in the 50% to 60% range?

Yes, I think we've always been consistent in talking about, kind of the low to mid-50s. So, there are certainly elements of that business that are 60 points plus, but really when you look at it on a consolidated space systems basis, low to mid-50s is where we kind of set the bar.

Okay. Great. Thanks for all the insights there.

Thank you. The next question is from the line of Cai von Rumohr with Cowen. You may proceed.

Yes. Thank you very much. I know it's been a long call, maybe you could comment on supply chain inflation and FX basically, what impact they're having on your business? I know it's a complex question, so maybe just hit the high points.

Yes. Hi, Cai von. So, from a supply chain perspective, because we're so vertically integrated unless the raw material start flying then we don't see to the [indiscernible] huge impact. No, not saying we haven't had a supply chain challenges, I think we've got a great supply chain team that manages things very, very well, we keep quite a lot of inventory and width and long-lead item, but, you know, you know, we've been able to manage our way through that phase of date. You know, we haven't delayed a launch or a spacecraft delivery or anything that I'm aware of with respect to challenging [supply chain] [ph]. I run it through the biggest thing that we – supply chain challenge that we face is [boring] [ph] stuff like steel and concrete for building Neutron stuff, and CNC machines for the Neutron program. Like that stuff is – the [boring] [ph] stuff is just not available or is it available as it used to be. And then from you’re an inflation and foreign exchange perspective, [indiscernible] comment on some of those [indiscernible] we're all about appealing the impacts of inflation, your costs are going up and you saw that in some of the commentary here in these earnings with more additional costs in stock. And the foreign exchange exposures we have between New Zealand and the U.S. are generally favorable because the New Zealand dollar has performed very, very poorly against the U.S. But Adam, you probably better to answer those most markets.

No, I think you've done a great job. I think really the foreign exchange is real from a P&L perspective has helped us because the cost of New Zealand relatively speaking have gone down and we do have a significant employee base there. I think the point that Pete mentioned earlier that we're very vertically integrated, so, we're less exposed I think in general than most other companies. Again, the exception being wage inflation, which we're all seeing, right. So, I think it for the most part, it doesn't keep me up at night right now, kind of inflation, impacting every part of our business, but a significant portion of our costs are related to human capital and those costs. continue to go up.

And the last one strategically, when you think about taking orders for Neutron, obviously, the longer you wait, the better your visibility of the cost, the visibility of the quality of the clients, but maybe you want to lock up some early on. So, how do you think about that? At what point, are you going to be more aggressive about trying to actually sign those orders?

Yeah. It's a great question. And, you know, there's two elements to that as one is when is the company is looking to acquire the launch, you know ready to commit to significant financial outlay to do so. Look, we can find as many email use and non-financial transactional contracts for Neutron as you wish, but it's kind of not the way we operate. Any contract that you see with Rocket Lab like it's a real contract and there's money down. So, with the press release and [fluffy] [ph] contracts, but that's not really our style or being real. And part of it comes down to as when is the customer willing to commit capital to secure it. And also, as I mentioned before, it's like who's going to actually be on the pad, and I'm not too worried at the moment, Cai von, about that, I mean, we've got [indiscernible] to deliver the vehicle and our customers have got working [indiscernible] to keep their constellations on track and on schedule. And the one thing as an absolute fact is the launch of an [indiscernible] officially around the time that the Neutron comes to market as an absolutely rarity. So, we can afford to be fussy and others have lots of aspirations and lots of much execution history. We're very much of the opinion that we will execute and we watch our customers execute and then the people that execute will come together and that will be there.

Terrific. Thank you very much.

Thank you. The next question is from the line of [Justin Lane] with Morgan Stanley. You may proceed.

Hi, thanks. Maybe just one quick one on the booster you covered, the helicopter back in May, has there been any surprises at this point? Now you had some time to assess the extent of refurbishment required? Thanks.

Yes, hi Justin. I won't tell you any surprises. I mean, we've been happy with the condition that it was even though we don't do [indiscernible]. All of the areas that typically see the most amount of load and work and the areas that we've been iterating on look pretty successful. And we had a battery program, which is just about wrapped up, which will enable 10 recharges of the batteries, which is the largest single element that we were going to have to replace from the launch vehicle. So that program is just ramping up. So, it's all kind of coming together nicely. I think what was – not so much surprising, but very gratifying was that the first time we attempt to actually do this with a helicopter with a brand new helicopter and a brand new process, we pulled it off. And [indiscernible] middle of the Pacific Ocean with something that's been traveling at 7x the speed of sound on a ballistic trajectory and [indiscernible] and doing all that was very gratifying to see that, all that analysis work and if it's paid off. And this is going to be really a viable system for us. So that was a great point to reach.

Great. Thanks.

Thank you. [Operator Instructions] There are no additional questions at this time. I will pass back to the management team for closing remarks.

Thanks very much. And with that, thank you everyone for your interest in Rocket Lab and for those who participated in today's call. Adam and I will be speaking at these upcoming conferences and look forward to the opportunity to share more exciting news and updates at The RBC Global Industrials Conference in Vegas on the 13th of September; The Morgan Stanley Laguna Conference on September 14; The ACG Aerospace & Defense MiddleMarket Conference in Los Angeles, September 15; and The BofA Global Industrial Innovation Summit at Washington DC on September 23. And last but not least, we look forward to welcoming you our invitation only Investor Day and Neutron Development Update to be held on the 21 of September at the Intrepid Museum in New York City. At this event, I'll be joined by Adam and other members of our senior leadership team to host a series of presentations really focused on the company's progress since [indiscernible] in August 2021, as well as pull some updates on the development of the Neutron launch vehicle. Thanks again, and we look forward to speaking with you again about the [indiscernible] progress that we've been providing that business. Thank you.

That concludes today's conference call. Thank you. You may now disconnect your lines.