And again, hopefully we’re getting closer to that. But I would say that again, we’re seeing some pretty interesting things out there that we think are actionable, that fit well within our portfolio, that help us to continue vertically integrating our business. And again, I think the reason for the timing of the convert raise was really to enable us to capitalize on those opportunities. So a combination of kind of sellers getting maybe a little bit more realistic, combined with having the dry powder on the balance sheet, we think positions us well to take advantage of deals in the coming periods.
Matt Akers: Great. That note, very helpful for the Color. Thank you.
Operator: Question comes from Suji DeSilva from Roth MKM. Your line is now open.
Suji DeSilva: Hi, Peter. Hi, Adam. I think you said on the call that the number of deals in calendar [2022] (ph), if I heard right, was 25. I’m wondering what the comparable number was for 2022. And I know that number includes space systems deals, but for the launch deals, just talk about what you’re seeing in terms of incremental deal size and terms versus the prior year and how that’s helping visibility.
Peter Beck: Yeah. Hey, Suji, I don’t have the number off the top of my head, but I mean, we saw a pretty marked step up in contract signing last year, and that’s due to a number of things. I think Electron clearly cemented its position in the industry, and there was a lot of customers that were sort of holding out for new entrants and a lot of customers that were really burnt by new entrants. So I think it became obvious that Electron is kind of the rocket in this sector also, I would say that we added new capabilities like HASTE, which completely new service, using the same launch vehicle, which is a big tam-expansion. That certainly helped things. And then I would say that the number of customers, what we find is they fly on a transporter mission, a SpaceX transporter mission to get early kind of orbit experience and shake down their spacecraft.
But when it comes time to actually delivering a spacecraft to a particular operational cadence, they need very bespoken and specific orbits and the cost trade you know pretty admirably to be able to do that. So you know, we see some of that defection off the transporter and onto Electron in that sense.
Adam Spice: Yeah. And Suji, just to come back on that, we were able to pull that number. So we booked seven Electron launches in 2022. So pretty big step up, 2022 to 2023.
Suji DeSilva: And then I know we talked about this early in the year, Peter, but just kind of revisit your being the prime contractor on the SBA. I just want to understand some of the reasons there in terms of if that’s a one-off or that’s a trend for the future. You guys have the integrated spaceport, rocket launch, spacecraft similar to SpaceX and Starlinks, perhaps, and just help us understand the competitive framework for these wins, that maybe this can be a continuing trend for you.
Peter Beck: Yeah, sure. I mean, look, you want to be the prime contractor. We’ve been a major sub on another program, and it’s very difficult if you’re just the metal bender in a program. So prime is where we want to be. And as we look forward into future programs, that’s certainly where we’re positioning ourselves going forward. And I think we’ve kind of reached a critical mass point where we can be a really effective prime as well. Like, we have enough capability in-house, enough experience in-house, enough satellite bus standards in-house that we can really effectively prime these missions. And it feels like a long time to get here, but I think I mentioned in the commentary it’s literally like four years from going from zero to priming a major mission. So, yeah, we’ll look to continue down this path for sure.
Suji DeSilva: Okay. All right, thanks, guys.
Operator: Next question comes from Mariana Perez Mora from BofA. Your line is now open.
Mariana Perez Mora: Good afternoon, everyone. So my first question is a follow-up on this step up and the bookings that you had on Electron launches. How should we think about pricing opportunities and cash profitability of this strategy? Kind of like, how many open slots do you have in the near future that you could actually price opportunistically?
Peter Beck: Yeah, we’ve always been pretty consistent. We’ve always been pretty consistent in what we kind of modeled for the cadence of Electron. I think it tapped out recruitment from wrong Adams. In sort of the mid to high 30s. Certainly, we have production capabilities to support up to 52 launches a year. That’s what we designed all the launch pads and factories around. So we certainly have the infrastructure, to keep increasing that cadence. But it’s pretty much in line with where we modeled, we would be.
Mariana Perez Mora: Okay. Thank you. And then on Neutron, what are the next milestones that we should look at? For example, when do you expect to do the hot-fire test on Archimedes?
Peter Beck: Yeah sure. So the things to be watching out for. Are you pouring concrete on the pad? Which we are, because it requires really quite a matured design, not just on the launch vehicle, but all of the systems to be able to be putting concrete in the ground. All your vehicle interfaces and systems have to be very mature to be able to put concrete in the ground. So that’s one to watch for it. I’m pleased to see that it’s happening. The other one to watch for is stage one tanks and tank testing. So all the fairing components, all of that coming together, there’s a million other things along the road that we could detail. And then Archimedes, the engine test cell, will be ready to accept an engine in March. So we’ll continue to push to get an engine out to that cell in March, and then there’s a whole bunch of conditioning and testing that goes on before we go and actually make fire, but subsequent engines are right in behind that.
So you won’t have to wait long to see some fire, hopefully.
Mariana Perez Mora: Okay. And then my last question is on Neutron as well. But what is out of your control? And for example, this morning there was news regarding the RFP that the Virginia Spaceport Authority put for the Wallops launch equipment vault. And the anticipated completion date for that is like end of November. So what is out of your control in terms of actually being able to launch Neutron?
Peter Beck: Well I mean we try and we try and keep as much in that control as possible, that’s why we vertically integrate it so much. But I think it’s a good question. And there are some elements that are out of our control, but the way in which we develop a lot of this, a lot of this infrastructure is very highly managed and very hands-on. I wouldn’t put too much credence in particular RFPs that went out with respect to some of those dates. I think we’ll stand on our own record of developing launch pads in pretty short timeline. So, like I say, I wouldn’t put too much weight on anything like that. I would watch the concrete go down and watch us get us there. And then even on the equipment vaults. It’s nice to have the equipment in a vault, but it doesn’t necessarily need to be in a vault as an example.
Mariana Perez Mora: Okay, thank you very much.
Operator: Our next question comes from Jason Gursky from Citi. Your line is now open.
Jason Gursky: Great, thanks, and good afternoon, everybody. Maybe I might have missed this, so apologies if this is redundant and you can just tell me to go read the transcript, but I did want to just ask on Neutron and the timeline of that relative to National Security launch program and lane one and the timeline that’s behind all of that. Can you comment on how you’re tracking to your ability to bid on National Security launch and those lane one opportunities in front of us?
Peter Beck: Yeah, Jason. So obviously, we’re tracking that lane one pretty closely, and we spend a lot of time with the space force to advocate for that lane one. And hence the reason why we’re pushing so hard to get the vehicle in a launch for this year because that is a gating on ramp to lane one. Now, the good news is that those on-ramps will be every year, so it’s not like a one-off opportunity. But I think this is the reason why so many engineers are sleeping under their desks at the moment to just push so hard to try and get that vehicle to the pad.
Jason Gursky: Okay, well, to the extent that they’re listening to this, I’m rooting for you guys. Let’s see here on the other press release that you put out today on the bus portfolio. It sounds to me in reading this that what you’re kind of doing here is productizing custom buses that you’ve built for some customers over time, which seems like a reasonable thing to do. But the question here is to understand whether the go-to-market strategy with these buses is to continue to do what you’ve done with MDA on Global Star or is the go-to-market strategy. Hey, we’ve got these buses and we’d like you. We’re going to go out and sell them as a full spacecraft and we’ll integrate whatever payload you need on it because you mentioned in earlier part of the conversation that you want to be the prime, but now you’re out here with a product launch of a bunch of buses. So I just want to — help me square what you’re trying to do here.
Peter Beck: Yeah, so we’re certainly not trying to sell buses into a bus merchant market, as you said, we’ve very strategically chosen which projects that we want to undertake. And at the end of those undertakings, we’ve ended up with a series of buses that neatly fall into various categories, one being deep space interplanetary, one being high delta to be low with orbit, and one being like extreme kind of environment, long lifetime comms satellites. So if you take the MDA bus, for example, and the SDA bus, they’re both built on largely the same bus. So the payloads changed, but the bus didn’t change. What I will say is, it turns out we’re just not that good at naming things. And it just became intensely confusing for everybody when we see it’s a Photon bus, and all the buses were called Photon, but yet they are vastly different capabilities and do vastly different things.
So really, the bus portfolio naming was just clarifying and making it easier for people to understand that when we say it’s a lightning satellite, people understand that this is a large comms bus versus an explorer, which is a deep space interplanetary. So it’s not really about a marketing thing to try and sell a whole bunch of buses. It’s really about helping people understand the variety and the depth of the capabilities that we’ve built and then giving the products have sort of evolved to the point where they really deserve their own name.
Jason Gursky: Okay, great. And then last question for me. The comment that you made there on the call about skating to where the puck is going, trying to understand what the long-term financial model looks like, and you mentioned where you want to eventually be, is in the services business. So I wonder if you can maybe double-click on that a little bit more and help us understand what you mean by that. Exactly, because when I think of services, I think of you build, launch, and then operate a constellation of various satellites that have different capabilities on them, and that becomes a bit different capital intensity, I think, maybe relative to what you’re doing today. So maybe just help us kind of broadly understand what you’re trying to get done here.
Peter Beck: Yeah, of course. Look, this is something we’ve always talked about from day one. In part, the reason why we’re developing Neutron is so that we have our own keys to space for this particular profile of business. And if you look at the value in the space industry, like launches, call it a $10 billion, $15 billion tam space systems, $20 billion to $30 billion tam services in space, $320 billion tam. And if you read any of the reports where the space industry is, the value of the space industry going, whether it’s $1 trillion or a $2 trillion, pick your report. It’s always true that the vast majority of all of that TAM is going to reside in the services that you provide, not being the freight truck that gets it there or the car builder that builds the truck.
It’s actually the service. And what we’ve been very methodically going about doing is building all the infrastructure that we need to be able to ultimately provide a service. Now, the natural question that always comes after that is, well, what service are you going to provide? And I don’t think we’re ready to talk about any of that yet. But what I can say is that when we look to jump into that larger tam, we will have a very disruptive way of going in there and executing and providing that service, because we will be able to build whatever spacecraft we require using all of our own components, and it will fly in our own rocket. And I think you’ve seen one other real-life example of that with Starlink and with Internet from space. And it’s very, very difficult to compete with that unless you have your own ability to manufacture your satellites using your own components and your own ability to launch those you know said satellites.
So we’re just marching very methodically towards that step after step.
Jason Gursky: Right. Okay, but you’ve got Starlink, Kuiper, you know, OneWeb is out there on the comms side. It’s a pretty crowded market today. And then on the Earth observation side, plenty of competitors out there. Can you help us kind of dream big on what other buckets are out there?
Peter Beck: Well, I think there’s a lot of businesses, business plans that are kind of being put to the test right now. Is Internet from space really a large opportunity or not? But the one thing that I can say is absolutely clear is that if you want to be competitive in there, then you have to own your own rocket and build your own satellite. So, like I say, it’s way too early for us to be discussing what kind of service we think we can provide. But what I’m absolutely sure of is that when we decide to go into a particular area, we will be highly competitive because of those things. And the large space companies of the future, in my opinion, are not going to be just a satellite manufacturer or just a launch vehicle provider.
If you can do everything end to end, then you can optimize not only the launch, but also the spacecraft for the service end and all the other elements that go into the compromises that you have to make. And, yeah, that’s what we’re setting ourselves up to be.
Jason Gursky: Okay, great. Well, I look forward to having more conversations with you all about this over time as you make some decisions. Thanks.
Operator: Our next question comes from Edison Yu from Jewish bank. Your line is now open.
Edison Yu: Hey, thanks for taking the questions in and squeezing me in. Just one follow-up on the last topic on the constellation. I know you said it’s too early, but what kind of timeline do you think that’s on? Is that three, five, six years out from now? When would that kind of materialize, in your view?
Peter Beck: Look Edison I’ll say it’s even too early for that. We have to build the foundations of being able to effectively provide that. And really all focus is on Neutron. All efforts are on Neutron because Neutron is critical to execute that business model. But it’s also critical for other parts of the business. So really I’d say a strong focus is on getting Neutron to the pad. Because without Neutron on the pad, then it makes it difficult to be hugely disruptive in the services market.
Edison Yu: Understood. And then separately back to Neutron. I know you mentioned the ramp-up being to three and then to five. Is that going to be the kind of steady-state or do we think we can do more than that once we ramp up fully per year?
Peter Beck: Of course we’d love to do more, but I’ve ridden this donkey before and it’s a rough ride. And bringing a new vehicle to life is very difficult. Bringing it into production is even more difficult. Much more difficult. So it would be great to accelerate that. But if you look at the back, you look at the history of every rocket program, whether it be government or commercial, a cadence much larger than that has never been achieved. So Electron was the fastest to scale in time out of just about every rocket program. And that is a very difficult thing to do. So we just want to be realistic about what can be achieved.
Edison Yu: Got it. Thanks a lot.
Operator: Our next question comes from Michael Leshock from KeyBanc Capital Markets. Your line is now open.
Michael Leshock: Hey, good afternoon. I just had one more on Neutron spending. With the quarter a bit elevated on the spending side. And you mentioned this being the big spending year for Neutron. Is that going to be lumpy quarter to quarter? Going forward, as you have more visibility surrounding some of these milestones, are there pockets where you see more elevated spending in a particular quarter or should we think about it relatively linear?
Adam Spice: Yeah, so I’ll take that one. The spending is certainly going to be, I think you can expect it to be consistent only up into the right as we progress through 2024. And then again, once we get the first vehicle to the pad. That’ll be the cresting point. Now, we’ll continue to invest in the vehicle just like we’ve continued to invest, but on a much more modest level in Electron, for example. So I think that there’s no question that we’ll see a consistent kind of march up and to the right this year with Neutron spend. Now, from an overall impact on the PNL, we’ll have some growth in top line and some margin expansion that helps accommodate some of that. But as I mentioned earlier, really kind of growth on the top line and margin expansion gets consumed by kind of the size and magnitude, and timing of Neutron.
Michael Leshock: And then on the overall budget for Neutron, how do you view that versus your initial expectations there? And then maybe secondly, is there a portion of the $355 million converts that’s earmarked to support Neutron directly, or is that more inorganic capital deployment there? Thanks.
Adam Spice: Yeah. On the spend for Neutron related to the capital raise. So the convert that we just did is really capital that’s dedicated towards growing the business inorganically. So we have plenty of capital prior to the capital raise to do exactly what we said we were going to do, which was bring Neutron to the pad within a certain time period. And so when we came public about two and a half years ago, we said end of 2024, a budget of roughly $250 million to $300 million. And that was going to be apportioned across CapEx spend, plus R&D. Within R&D, it was going to be a mix, obviously, of people related, but also prototyping and so forth. So we are, I would say, remarkably intact on the estimates that were put in place at the time, both in, obviously, getting the vehicle to pad, but also the spend.
If you look at the amounts that we’ve spent so far for the Neutron program, it’s a combination of kind of what we’ve spent, plus we’ve had some partners help spend along the way, including, we’ve mentioned, the upper stage development partnership with Space Force. We’ve had you know strong partnerships from Virginia Space on the infrastructure side to help kind of accommodate some of those expenses. And so overall, we kind of pull all the cost in this year is a year where we’ll probably deploy, roughly call it $100 million towards the Neutron program again, across CapEx and R&D spend. And then there’ll be incremental dollars that are spent on our behalf. So I think ultimately, when you kind of pull it all together across what we’ve spent, what we’re going to spend this year, plus what our partners have put in play for us, it’s going to be remarkably close to $300 million.
And again, longer term, that gets what we call minimum viable product to the pad as far as the rocket, and then also minimum viable infrastructure, and infrastructure, meaning the pad plus the manufacturing. So one of the things, that we benefited from last year was the opportunity to acquire a bunch of scaling assets in the Virgin Orbit bankruptcy process, where we picked up roughly a $100 million worth of stuff for $0.16 on the dollar. And a lot of it that allowed us to kind of, I would say, kind of hold scheduled in a lot of important ways. And also just to kind of have the ability to scale production of the vehicle without having to put a lot more infrastructure in place is certainly from a propulsion and avionics perspective. So I think overall, I’m actually pretty pleased with kind of, again, the adherence to the timelines and the overall budgets, and nothing has really kind of stepped away from us at this point.
Knock on wood would be that way till we get the vehicle to the pad.
Michael Leshock: Okay, great. Thank you for taking my questions.
Operator: Closing the Q&A session. I’d now like to hand back over to the management for their final remark.
Colin Canfield: Brilliant. Okay, well, that wraps up today’s presentation. Thanks, everyone for joining us for the call. Rocket Lab will be participating in these up-and-coming conferences, and we look forward to the opportunity to share more and exciting news and updates with you then. Thanks very much.
Operator: Thank you for attending today’s session. We hope you have a wonderful day.
