Rocket Lab USA, Inc. (NASDAQ:RKLB) Q1 2024 Earnings Call Transcript May 6, 2024
Rocket Lab USA, Inc. beats earnings expectations. Reported EPS is $-0.09033, expectations were $-0.11. Rocket Lab USA, Inc. isn’t one of the 30 most popular stocks among hedge funds at the end of the third quarter (see the details here).
Operator: Good day, everyone, and welcome to the Rocket Lab’s First Quarter 2024 Financial Results Update and Conference Call. At this time, I would like to hand the call over to Murielle Baker, Communications Manager at Rocket Lab. Please go ahead, ma’am.
Murielle Baker: Thank you. Hello, everyone. We’re glad to have you join us for today’s conference call to discuss Rocket Lab’s first quarter 2024 financial results. 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 are contained in our filings with the Security 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 and our supplemental materials are reconciliations of these historical non-GAAP financial measures to the comparable financial measures calculated in accordance with GAAP. This call is also being webcast with a supporting presentation, and a replay and copy of the presentation will be available on our website. Our presenters today are Rocket Lab’s Founder and Chief Executive, Peter Beck; and Chief Financial Officer, Adam Spice. After our prepared comments, we will take questions. And now, let me turn the call over to Mr. Beck.
Peter Beck: Thank you, Murielle, and thank you, everybody for joining us today. We’ve got a lot of great achievements and milestones to share on our start to the year, not the least of which is executing a record number of launches and space systems growth that delivered a record total revenue of $93 million in the quarter, up 55% quarter-over-quarter and 69% year-over-year. Adam will talk through the rest of the details of our financial results for the first quarter before covering the financial outlook for Q2 2024. After that, we’ll take some questions and finish today’s call with the near-term conferences we will be attending. All right. Onto what we achieved in the first quarter of the year, starting with Electron. We had a great series of launches in Q1 with four successful missions, three of them for commercial customers from Launch Complex 1 in New Zealand and a national security mission for the NRO out of our second site in Virginia.
We had to launch — we had a launch turnaround of just eight days between our flight for the Japanese customers inspective in the NRO launch, which was no small task from two launch sites across the world. In fact, we remain the only company with the capability of orbital launch from both hemispheres. It really demonstrates the capability of the team to turn around launches so quickly and sets us up well to execute against our pack manifest for 2024. We completed our fifth launch of the year less than two weeks ago, a commercial mission for KAIST Institute of South Korea, along with a landmark scientific mission for NASA to test our solar sailing technology also on board. Note here rideshared missions are the same, and this launch, in particular, was a tricky and complex one that played into our unique strengths.
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Q&A Session
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For large launch rideshare, normally you have a bunch of satellites that are heading to the exact same orbit, and you deploy them into one location. If the orbit isn’t ideal from your spacecraft, then you’re kind of tough luck. (ph) But for KAIST and NASA, we had two satellites going to two completely different orbits to each other, first one to 520 kilometers, and then all the way up to 1,000 kilometers in low Earth orbit for the other. Those kinds of conflicting mission requirements would normally require two separate launches. But with our unique kick stage capabilities, we’re able to drop KAIST off at 520, and NASA up to 1,000, and then complete another series of engine burns to bring the kick stage back closer to Earth for faster disposal and demisability.
It’s this kind of precision and flexibility that makes us a really attractive launch service for our customers, which is also inherent in the next two missions we have scheduled to fly in Q2. So coming up in Q2, we have two back-to-back missions scheduled for NASA to deliver their pre-fire mission to space or missions to space. The mission is focused on understanding how much of Earth’s heat loss is lost into space from the Antarctic, which will help improve climate change models and provide better predictions on sea level rise and weather changes in the future. We’re setting up two satellites for NASA, one on each launch that will crisscross the poles to gather accurate readings across the two orbits from one mission. One PREFIRE — once PREFIRE is in space, PREFIRE 2 must be placed there within three weeks’ time, which again plays to our strengths as a responsive launch provider, hitting precise orbital deployments.
We actually demonstrated a similar capability with the two tropics missions launched last year, so it’s great to see NASA take up this capability once again. After that, we are set to launch the first of five missions for a new customer, Kineis, a French company backed by private and public investors, including the French government space agency. We will be deploying their entire satellite constellation into low Earth orbit, some 25 satellites across five Electron launchers. There is also a non-forecasted but potential fifth launch for a commercial constellation customer we’re tracking for Q2. Operationally, we’ll be ready to launch this mission when the customer is ready, and if there’s a chance of that happening before the end of Q2. But like I said, there’s also a chance of it slipping out of the quarter.
So it’s not forecast in the financials for the current quarter. On to the rest of the year and we remain on track for another record number of Electron launches. Across the 22 missions sold for 2024, we are seeing some movement in the manifest, as expected, due to customers being late with their spacecraft or asking to shift later in the year, or sometimes even into 2025. This kind of manifest whack-a-mole, as we call it, is nothing new to any launch provider, and it’s something we’ve become very familiar with after seven years of launching Electron. We see the opportunity of those gaps to fill the manifest with new customers who need an urgent ride, sometimes within months, or existing ones who want to move to the left rather than wait for their booked slot.
For customers who also ask for a new launch date later in the schedule, we have typically invoiced it and collected the majority of the launch contract value up to that point and then we recognize the revenue once they’ve flown. It’s why launch revenue forecasting can be so lumpy. But like I said, while we might not get all 20 — 22 flights off this year, based on caste customer movement, we’re on track for a record year for Electron. And from where we sit today, 2025 is shaping up to be another record year also. One of the really exciting missions for 2025 was one we booked early in Q1 — early in Q2, the $32 million VICTUS HAZE mission for the U.S. Space Force. This one is really a full end-to-end mission solution that will really show off the success of a vertical integration strategy.
We’ll be designing, building, launching, and operating the spacecrafts to demonstrate technically responsive space for the Department of Defence. The spacecraft will come with all of their own components, including propulsion systems, solar cells, erection wheels, star trekkers, flight ground software, spacecraft on and on and on it goes. Then we will fly it on Electron, and once it’s in space, we’ll be operating it to demonstrate [Technical Difficulty] with another spacecraft in orbit, which is a highly sought-after capability for the DoD. And I should mention that our task is to launch the spacecraft within 24 hours’ notice from the Space Force. It’s the first-time we’ve sold a complete end-to-end mission solution and to a prestigious customer as well.
It’s a super exciting mission that showcases our ability to meet the DoD’s growing need for rapid and responsive orbital capability. It will also be a fantastic demonstration of what we can do as a full end-to-end mission services provider. We’ll be taking care of absolutely everything the DoD needs for assured access to space, which is an important capability for the nation. Another new launch contract we’ve been awarded post-Q1 is the second mission from the U.S. Space Force, this time for the space test program. It’s a $14.5 million launch that will fly out of Launch Complex 2 in Virginia within the next 24 months to carry out research, experiments and technology demonstrations for the DoD in space. We’ve proven ourselves as a trusted and dedicated partner to the DoD across multiple missions now on Electron.
In fact, our first mission for the STP program was all the way back in 2019, when Electron launches were still in single-digits, and we’re looking forward to continued execution with the STP 30 mission. Finally, to round out Electron, we’ve got an existing — an exciting post quarter update on our recovery program. For the first time, we’ve returned in Electron stage back to the production line in preparation for re-flying. This tank is the one that came back to Earth during the recovery mission we launched in January, and it came back in such good condition that we’re bringing it back into the production fold. Already it’s passed a barrage of qualification tests, but having gone through those additional checks, it’s now undergoing its final fit-out and another round of the same acceptance testing that will take any brand new tank through that runs front of the line.
The results of that campaign will determine its suitability for re-flight, but if all looks good, and we could be looking to re-flight later in the year. That’s just a quick overview of some of the key highlights across Q1 to date for Electron. Now on to some of the exciting progress and achievements for space systems. We moved quickly this quarter in executing against our larger space systems contract to date, our debut as a prime spacecraft contractor to the industry with a $515 million constellation of 18 spacecraft we’re developing for the Space Development Agency. All of these spacecraft for the agency’s Tranche 2 transport layer will be designed, built and managed by us, and includes a full suite of our space systems products. We officially kicked off the beginning of the program with the SDA in Q1, as well as completed preliminary studies for the spacecraft’s design.
The contract marks the beginning of our extension of being a prime contractor, a role we’ve moved into swiftly and comfortably by handpicking a team of experienced subcontractors to support the program across payload sensor supply and ground systems. Another fantastic trick for the space systems group in the quarter was the successful completion of our mission with Varda, which returned to Earth, the world’s first space manufacturing mission conducted outside of the International Space Station. This was a mission where we took Varda’s manufacturing capsule that makes pharmaceutical crystals and put it on top of one of our spacecraft, which supplied the capsule — everything it needed to do its work, like power supply, positioning and management in space.
The last one is a really important capability we demonstrated on this mission. Our spacecraft and operations team were tasked with setting the capsule on its path back to Earth so it could land safely in a tiny area in the middle of the Utah desert. I liken this to like throwing a ball from low Earth orbit while aiming to hit a bullseye. The Rocker Lab team pulled off a really incredible feat to just absolutely nail the capsule’s reentry on target. This skill set makes us now one of only two commercial launch companies with spacecraft reentry capabilities, a rare and valuable thing in the market. And we’ll be demonstrating this again soon with our second spacecraft for the next Varda demonstration already well ahead in production and on track for its expected launch date.
The added bonus of — the added bonus is everything we’ve learned in these reentry missions is we’re able to directly apply to future capsule launches on Neutron as well. Another of our big satellite programs, the 17 spacecraft build for MDA Globalstar has also progressed nicely through Q1. The first of two flight frames for these spacecraft were completed, shipped out of Long Beach, and delivered to MDA for the next phase of the program. Once Globalstar’s payloads arrive to MDA, we’ll begin the next step of integrating those into the spacecraft before the complete package enters the acceptance testing campaign. This constellation is slated for launch in 2025, so we’re making great progress towards that deadline. Next is our ESCAPADE program, which is the mission to Mars for NASA with our two spacecraft.
The first fully assembled spacecraft is currently being put through the ringer in the vacuum chamber testing, pushing the spacecraft to its limits so we can know with confidence it can survive the journey from Earth to Mars. The second satellite will go into the vacuum chamber as soon as the first one comes out, and it’s right now undergoing similar checks to ensure it’s ready for the load that we’ll see when it’s launched later this year. And finally, to wrap up space systems, we have a new long-term supply agreement for our space solar solutions with a large space client worth up to $150 million. This one is a multi-year agreement that will see our solar technology support critical missions across civil, defense and national security. And March 31, ending backlog reflects the initial orders against this long-term agreement.
Demand for solar power and space continues to grow as the world moves towards new constellations and proliferated new architecture. We’re now one of the largest suppliers of space-grade solar cells globally. And space solar power is already one of the most constrained areas in the industrial supply chain, which is why we’ve invested in expanding, modernizing our space manufacturing capability, including automated processes and assembly. These are just some of the steps we’ve taken to ensure the resiliency of the space solar supply chain beyond current and future missions. And it’s the latest contract — this latest contract is a strong recognition of that. Overall, some great work and progress across our space systems business to date. Now it’s time to share how development with Neutron go.
