Erik Rasmussen: Great. Thanks. I’ll jump back into the queue.
Adam Spice: Thanks, Erik.
Operator: And next up is Andres Sheppard, Cantor Fitzgerald.
Andres Sheppard: Hey, guys. Good afternoon. Congratulations on the quarter, and thanks for taking our questions. Just a quick one for Pete. Obviously, congratulations on the Archimedes engine build. You’re now targeting the hot fire test, which will be a big important milestone there. With now targeting first launch no earlier than middle of 2025, can you just maybe help us — just remind us what are the other big milestones between the hot fire engine and the launch. Thank you.
Peter Beck: Yeah. Sure. Thanks, Andre. So we’ve always said, look for concrete on the ground at Wallops and in the test sites, look for large stage tanks and things like that, and look for fire. And those things remain kind of the same things that I’d be looking for. So, yeah, getting something — getting a pad built is a huge program in its own right. Getting the engine test facility built is a huge program that’s done, and then, like I said, now it’s just working through the Archimedes final development and iteration. And then I think the other thing I’d be tracking is like making sure that we continue to build components for other launches. So not a one-and-done kind of a thing. It’s like making sure that there’s a bunch of other engines coming off the production line and more tanks and structures and things like that.
So that is certainly something that we’re focused on is making sure we keep the machine primed with all the components needed to not just get one launch away, but stand up a commercial service.
Andres Sheppard: Got it. Okay. That’s super helpful. I appreciate all that color. And maybe just a quick follow-up for Adam. Adam, just on the liquidity sorry, if I didn’t hear this correctly, but does the 560, let’s call it $565 million, does that include the net proceeds of the recent capital raise? And separately, just remind us…
Adam Spice: Yes, it does.
Andres Sheppard: Okay. Okay. Great. And then just remind us. So with that liquidity on hand, what is the run rate expected? How are you thinking about that? Thank you.
Adam Spice: Let’s say run rate or runway, I think that the — we raised a significant amount of capital, obviously, in this most recent transaction. And as we’ve stated, it was really all about providing inorganic growth optionality for us. And we do continue to see significant opportunities out there. I would say, the deal pipeline that we’re managing at this point is probably as full as it’s been in really the last couple of years as far as potential actionable targets for us. So I think the timing on raising that the funds was probably pretty ideal. If you look at the capital required to complete Neutron, we didn’t raise the money for that. We had liquidity for that. Given where we’re at in the program, we feel like we’re still very much on track to the $250 million to $300 million total spend to get Neutron to the pad.
And fortunately for us, not all of that spend has landed on our backs. We’ve had some support from various partners that have brought capital to the table as well. So I think that, again, we feel very good about our ability to scale our space systems business, continue to scale Electron, get Neutron to the pad with the capital that we had pre-convertible. And we continue to look for options to deploy that convertible proceeds to inorganic means. So yeah, and I think that right now, we feel really good about where we’re at from a liquidity perspective, and we really don’t see the need right now to think about anything beyond that.
Andres Sheppard: Got it. That makes sense. So it sounds, though, like you are potentially interested in continuing to grow inorganically and to that point, maybe remain active in the M&A market. But with that liquidity on hand, that’s certainly feasible, at least so far. So okay, that’s helpful.
Adam Spice: Yeah.
Andres Sheppard: Thanks again, guys. Congrats on the quarter. I’ll pass it on. Thank you.
Peter Beck: Thank you.
Operator: The next question comes from Jason Gursky, Citi.
Jason Gursky: Hey. Good afternoon, guys. Hey, Pete. Quick question for you on the engine development. What exactly caused you to need to push by six plus months? You mentioned you had some learnings there. Hoping maybe you’d kind of share some of those details with us, or at least characterize whether they were issues with the design, issues with the manufacturability. Just kind of give us a flavor of what went wrong here.
Peter Beck: So, no, like, major issue. We didn’t run up against a wall and had to solve something majorly, technically. But I mean, kind of, as I mentioned on the call, like, the point here is not to just make fire. The point here is to roll into production. And there’s a number of kind of new processes and actually even new materials that we developed for Archimedes. And those were all intended to support production. At a different time, we go into much more detail about some of the manufacturing methods we’ve used for the combustion chambers and things like that. But really, similar to Rutherford, when we build the very first to 3D printer — a chamber there, that was a new technology that hadn’t been done before, and we spent a lot of time because we thought that that was going to be a big payoff.
So, not dissimilar to that. There’s some manufacturing techniques that we’ve employed on Archimedes that in the long term are going to pay off handsomely. So a lot of time we spend on that. And then just — quite frankly, just the time that it takes to stand up the factory and the machine that builds the machine is probably the biggest learning. Look, we’ve done this enough. We know that is difficult and time-consuming, but an engine on the scale certainly adds an extra element to that. You can’t just pick up a pump volute and bolt it on the engine. You have to get a crane to put the pump volute on. So everything is just such a larger scale that it makes it more difficult. So, yeah, not like one big staggering thing, just a whole bunch of stuff that just sort of adds up.
Jason Gursky: Yeah. Okay. That makes good sense. And then, do you think you build buffer or contingency into the planning? So now you’ve got this mid-’25 date out there, how much contingency do you have in that?
Peter Beck: Well, as I mentioned before, we run green light schedules at Rocket Lab. So in an engineering program, especially one of that scale, it’s almost impossible to build a sensible engineering buffer in because you never really know the elements that are going to cause your problem. You’ve got some inklings and you’ll pad some areas. But if you walk into a room full of engineers and ask them to add buffer in their schedule, then come back in 2040, that’s just kind of the way it rolls. So we always run green light schedules. So our schedules are always ambitious, and that’s worked really well for us. I mean, if you look across the execution history, the time that it took us to put Electron on the pad was extraordinary.
I mean, we started that program in 2014, had our first launch in 2017, and that was from absolutely zero. So there are some challenges with a vehicle of this scale. But — and I always caution everybody all the time that at the end of the day, this is a rocket program and it’s a very difficult thing to execute. That’s why there’s only a few of us in the world that have pulled it off. But the way we run our schedules are informed by experience and what we’ve learned in the past, but we always run them very aggressively and very ambitiously.
Jason Gursky: Okay. And then maybe just a quick update on the demand for Neutron. And you talked earlier on the call about this 135 schedule from a launch cadence perspective. But maybe you can just kind of give us an update on over the last three months, which we’ve been hearing from potential customers there, and whether 135 is just going to be scratching the surface, or kind of give us an update on what your view of the market is there.
Peter Beck: Yeah. Sure. Of all the things that I stay awake at night not tossing and turning about demand for Electron — for Neutron, sorry, is just — it’s not one of them. And we continue to have really good robust discussions with our customers. But I think, as I’ve mentioned before, it’s kind of, you show me yours and I’ll show you mine. And we maintain the fact that what we want to do is bring a launch vehicle to market that is — that’s ready to go and into a market that is in great need, rather than do a whole bunch of early adopter pricing and deals that don’t have any teeth. So it’s fair to say that the interactions with customers over the last quarter have certainly strengthened and we maintain that. We’re happy to entertain normal kind of deals where it’s 10% down, non-refundable and normal kind of LSAs. But the reality is that people want to see a real rocket before they make such large commitments.
