Rocket Lab Corporation

Q4 2025 Earnings Call — February 26, 2026

Our first question comes from Andrea Shepherd with Cantor Fitzgerald. Your line is open. Hey, everyone. Good afternoon. Thanks so much for taking our questions and congrats on all the great progress and thanks for the update on Neutron. Adam, maybe you want to start with the backlog. I'm wondering if you can maybe help us a drill a bit deeper in it and maybe remind us what is included in here. Does this include the 40% of revenue from SDA tranche two, 10% of maybe the tranche three, and what are you including from neutron and electron here? Thank you. Hello? I'm sorry. The mic went off. I don't know how much you caught of that. So all of the SDA contracts were added to backlog. So what remains for SDA tranche two transport layer is still in the backlog. Obviously, what's been recognized as revenue is no longer there. Through the end of Q4, we hadn't recognized any of the tranche three contract awards. So all of that value is currently in backlog, and that will start to convert into revenue and come out of backlog obviously in that process.

As far as Neutron is concerned, I think we've spoken before that we have several flights that are representative in our launch backlog that's reflected in our filings. So hopefully that answers your question on backlog composition. Yeah, that's helpful. Thank you. And maybe just as a follow-up, so, you know, on Neutron with the shift to Q4 now with the first launch, how should we think about cadence? You know, will you still target maybe three launches within the first 12 months after the first one? How confident are we in the development of the second tank? And wondering if maybe we should expect any step up in CapEx now with the second tank in production. Thank you. Adam, I can answer a couple of those and maybe you and someone as well. So with respect to the tank, I think it's well understood what needs to be done there. And we had built a lot of the second stage tank on the ASP machine, so that really solved that problem. Yeah, the way to think about just sort of follow-on flights is it's not quite, you know, as dire as like moving all of the follow-on flights 12 months, you know, or to the first flight.

Because as you've seen in the presentation, we're already building flat out additional neutron tail numbers. So it'll probably be a slightly faster convergence into subsequent flights because, you know, none of the other hardware that's qualified is being halted, obviously. It's just that tank. And the AFP machine enables us to build a tank just way more rapidly than with a hand-lay process. So, you know, I think we'll be in better shape there. Yeah, and Andre, I guess with regards to your question as far as CapEx and so forth related to the second tank, that's replacing the first one that ruptured. I mean, the benefit now, as Pete said, of being on the AFP is not only can we produce it faster, but the actual cost to produce that second tank is quite low. The first tank was very expensive because, as Pete mentioned earlier, it was a hand-laid-up tank. It took a long time. This will be much quicker. And also, since we've now commissioned the AFP, we're really just talking about variable costs related to the tank materials more than anything else because the existing labor is already kind of in the model.

So there won't be any increased capex and You know, the impact to R&D as a result of the tank failure is actually not – the tank itself is actually not that significant. Got it. That's super helpful. Thanks so much for all the detail, and congrats again on the quarter. I'll pass it on.

Thank you.

Our next question comes from Edison Yu with Deutsche Bank. Your line is open. Thank you. And great quarter, as always. I want to ask a question on space data centers. And I think you had alluded to, you know, a lot of interest. I think it's obviously become a hot topic in the industry. Can you give us a sense on how these kind of early discussions are going with potential customers interested in doing this? And is it realistic to see some type of rocket lab content in a space data center, let's say, within the next two or three years? Hey, Addison. Thanks for the question. So I think, look, we're early with data centres. If you look at some of the models, there's a number of things that sort of have to come into focus before they become the logical choice versus terrestrial. But, you know, we never want to miss an opportunity. And, you know, we've been developing the silicon arrays and power solutions for a while now, focusing on mega constellations and, you know, there's high volume power applications. But if you stand back objectively and you think about what are all the challenges with putting data centers in orbit, it boils down to really three things.

One is cost and cadence of launch to be able to make the model close. And then two is heat rejection through various means. And three is just sheer power. Like these are gigawatts of electricity. So, you know, solar arrays of multi-kilometres in scale are what's needed. So, you know, we wanted to make sure that, you know, whether they leave this earth or not, there'll be Rocket Lab logos all over that stuff. So, you know, as far as I'm aware, nobody else has a silicon solution quite like we've developed. Understood. And to your point on heat rejection, I guess the radiator, is that a capability you have in-house that you need to develop over time, or is that something, you know, inorganic? Just curious on what needs to be kind of technically done there. Yeah, I mean, look, all of our spacecraft have radiators. I mean, you generate heat. You have to reject it. So, you know... There's various kind of ways of doing that, piping heat around the spacecraft to radiate it. So I don't see that as a huge technical challenge. It's just on the scale, the scale that's required hasn't been achieved before. So that's the challenge there.

But to be clear, I don't foresee us building massive AI data centres anytime soon, but those who are at least experimenting with it and looking to go down that path, I think we have a lot of compelling solutions. Gotcha. If I could just sneak one quick one in. In terms of just the discussion, can you give us a sense of like the flavor of customers? Are these kind of new customers, non-traditional customers kind of exploring this idea with you? Yeah, I mean, we have to be a little bit careful here, but I would say that there is certainly more non-traditionals looking at this kind of solution than traditional players. Great. Thank you so much.

Thank you.

Our next question comes from Ronald Epstein with Bank of America. Your line is open. Hey, this is Alex Preston on for Ron. Can you guys hear me all right? Yeah, we hear you. Perfect. So I know you talked a little bit about progress on the Monarch acquisition, but I was a little more interested maybe broadly in the environment in Europe and more generally, right? It seems like there's a growing appetite for call it indigenous launch and national security space capabilities. And I'm interested if you sort of see this trend yourselves or how you see this developing. I know, you know, Pete mentioned No other small launch provider has really succeeded in the last year, but it's still, I think, the focus for a lot of people. Yeah, Alex, it's a great question. Look, one of the reasons why we like Monarch and why we think it's important, Europe more in general is exactly that point, is that there's a lot of space nations there that have very little capability with giant aspirations and really short timeframes. And I think it's always everybody's desire to build on.

LC3 has obviously stood up, plus production and test facilities are all humming, while the regulatory work is all tracking along as we expect. The things to look out for the next few months, to know that we're marching steadily towards launch, includes seeing more hardware making its way to the launch site. We will be conducting extensive testing of flight hardware, and then obviously that'll lead up to Neutron's first flight. So that wraps up the operational highlights, so I'll hand over to Adam for the financial overview and outlook. Thanks, Pete. Fourth quarter 2025 revenue was a record $180 million, coming in at the high end of our prior guidance range and representing an impressive year-over-year growth of 36%. This strong performance was driven by significant contributions from both of our business segments. Sequentially, revenue increased by 16%, underscoring the continued momentum across the business. Our space system segment delivered $103.8 million in revenue in the quarter, reflecting a sequential decrease of 9.1%.

This decline was primarily stemmed from our satellite platforms business and our solar businesses, both of which continue to perform exceptionally well despite the time-to-time programmatic non-linearity of revenue recognition under ASC 606 and related subcontractor progress. We're fortunate that the growing diversification across space systems and launch can often provide more predictable top-line growth despite underlying volatility at the individual product line level. This was one of those quarters where strength in launch services more than offset the declines in space systems, generating $75.9 million in revenue, representing an 85% quarter-by-quarter increase due to the increase from four to seven launches during the period, including one haste mission. On a full-year basis, 2025 revenue was $602 million, an impressive 38% growth year-on-year. Now turning to gross margin. Gap gross margin for the fourth quarter was 38%, at the center of our prior guidance range of 37% to 39%, and an increase of 100 basis points quarter-by-quarter.

Non-GAAP gross margin for the fourth quarter was 44.3%, which was also in line with our prior guidance range of 43 to 45%, and an increase of 240 basis points quarter over quarter. The sequential improvement in gross margins was primarily driven by an increase in electron fixed cost absorption due to the increased launch cadence within the quarter, paired with increased contribution from our higher margin space systems components businesses. On a full year basis, GAAP gross margin was 34.4%, an increase of 780 basis points year over year, while non-GAAP gross margin was 39.7%, an increase of 770 basis points year over year.

Relatedly, we ended Q4 with production-related headcount of 1,244, up 46 from the prior quarter. before moving on to backlog i want to take a moment and zoom out and provide perspective on the progress we've made towards our long-term financial model since our nasdaq listing in 2021 revenue has grown nearly 10x achieving a compound annual growth rate exceeding 76 percent gross margins have increased each year more than doubling the contribution from each dollar of revenue this expansion highlights our strong and disruptive competitive position in the industry as well as our highly valued and differentiated products and services across the business. The combination of this revenue growth and margin expansion has put the company on a solid foundation and path towards achieving meaningful operating leverage and long-term cash flow generation. Lastly, I thought it important to call out our SG&A spending as a percentage of revenue, as I'm encouraged to see this continue to trend downward as we scale the business. We are constantly driving the business to be fiercely efficient, and I believe that we're positioned to drive even more growth in efficiency in 2026 and beyond.

Now, turning to backlog. We ended Q4 2025 with approximately $1.85 billion in total backlog, an impressive 69% growth sequentially, primarily due to our recent SDA tranche three tracking their contract award, which we announced last December. As we've mentioned before, space systems backlog in particular can be lumpy given the timing of these increasingly larger needle-moving program opportunities. But once awarded, they can significantly de-risk revenue growth for several years. We continue to cultivate a strong pipeline that includes multi-launch agreements across Electron, HAST, and Neutron, as well as large satellite platform contracts across government and commercial programs. Currently, launch backlog accounts for approximately 26% while space systems represents approximately 74%. Looking ahead, we expect approximately 37% of our current backlog to convert into revenue within the next 12 months, which includes preliminary tranche three revenue recognition estimates, which we believe will prove to be conservative, which in addition to the healthy sales pipeline are expected to drive incremental top line contribution beyond the current 12 month backlog conversion.

Turning to operating expenses, GAAP operating expenses for the fourth quarter of 2025 were $119.3 million, below our guidance range of $122 to $128 million. Non-GAAP operating expenses for the fourth quarter were $104.5 million, which were also below our guidance range of $107 to $113 million. The sequential increase in both GAAP and non-GAAP operating expenses were primarily driven by continued growth in prototype and headcount related spending to support our neutron development program. Specifically, investments ramped up in propulsion as we continue to test Archimedes engines, as well as test and integration of mechanical and composite structures at our facility in Middle River, Maryland. In R&D specifically, gap expenses increased $8.1 million quarter over quarter, while non-gap expenses rose $7.7 million. These increases were driven by the ramp-up of Archimedes' production and testing, along with higher expenditures related to composite structures and fluids, as just mentioned. Q4 ending R&D headcount was 1,012, representing a decrease of 7 from the prior quarter.

In SG&A, gap expenses decreased $5.1 million quarter-over-quarter, while non-gap expenses declined $1.3 million quarter-over-quarter. These decreases were primarily due to a reduction in transaction-related legal and other professional services fees related to M&A and capital markets transactions, paired with a slight reduction in marketing expenses. Q4 ending SG&A headcount was 389, representing an increase of four from the prior quarter. In summary, total headcount at the end of the fourth quarter was 2,645, up 43 heads from the prior quarter. Turning to cash, purchase of property, equipment, and capitalized software licenses were $49.7 million in the fourth quarter of 2025, an increase of $3.8 million from the $45.9 million in the third quarter. This increase reflects ongoing investments in Neutron development as we continue testing and integrating across the pad at LC3 in Wallace, Virginia, and Middle River, Maryland, expanding capabilities at our engine development complex in Long Beach, California, and build out of the return on investment recovery barge in Louisiana.

As we progress towards Neutron's first flight, we expect capital expenditures to remain elevated as we invest in testing, production scaling, and infrastructure expansion. GAAP EPS for the fourth quarter was a loss of 9 cents per share, compared to a loss of 3 cents per share in the third quarter. The sequential increase to GAAP EPS loss is mostly attributable to the $41 million tax benefit we recorded during the third quarter, which was due to the partial release of the valuation allowance against our corporate deferred tax assets, as a result of acquiring an equal amount of deferred tax liabilities emanating from the GOST acquisition purchase price accounting. GAAP operating cash flow was a use of $64.5 million in the fourth quarter of 2025, compared to $23.5 million in the third quarter. The sequential increased use of $41 million was almost entirely due to the timing of employee equity program-related tax payments.

Similar to the capital expenditure dynamics mentioned earlier, cash consumption will remain elevated due to neutron development, longer lead procurement for SDA, investments in subsequent neutron tail production, and infrastructure expansion to scale the business beyond the initial test flight. Overall, non-GAAP free cash flow, defined as GAAP operating cash flow, less purchases of property, equipment, and capitalized software in the fourth quarter of 2025 was a use of $114.2 million compared to a use of $69.4 million in the third quarter. The ending balance of cash, cash equivalents, restricted cash, and marketable securities was approximately $1.1 billion at the end of the fourth quarter. The sequential increase in liquidity was driven by proceeds from sales of our common stock under our at-the-market equity offering program. which generated $280.6 million during the quarter.

These funds are primarily intended to support acquisitions, such as the announced pending Moneric acquisition, the recently consummated acquisitions of Optical Support, Inc., and Precision Components Limited, as well as other targets in our robust M&A pipeline, along with general corporate expenditures and working capital. We exited Q4 in a strong position to execute on both organic and inorganic growth initiatives and to further vertically integrate our supply chain, expand strategic capabilities, and grow our addressable market, consistent with what we've done successfully in the past. Adjusted EBITDA loss for the fourth quarter of 2025 was $17.4 million, which was below our guidance range of $23 to $29 million loss. The sequential decrease of $8.9 million in adjusted EBITDA loss was driven by significant revenue and gross margin improvement, partially offset by increased operating expenses related to neutron development. With that, let's turn to our guidance for the first quarter of 2026. We expect revenue in the first quarter to range between $185 and $200 million, representing 7% quarter-on-quarter revenue growth at the midpoint. and growth of 57% from the year-ago quarter.

We anticipate slight slipdown in both GAAP and non-GAAP gross margins in the first quarter, with GAAP gross margin to range between 34% to 36% and non-GAAP gross margin to range between 39% to 41%, with a modest sequential decline driven by a greater mix of space systems versus higher margin launch and a weaker margin mix within our space system segment. We expect first quarter gap operating expenses to range between $120 and $126 million, and non-gap operating expenses to range between $106 and $112 million. The quarter-over-quarter increases are primarily driven by ongoing Neutron development and spending related to Flight 1, including staff costs, prototyping, and materials. However, we expect to see a shift in spending from R&D and into Flight 2 inventory throughout 2026, which is an encouraging sign of progress as we move closer toward Neutron's first flight and adjusted EBITDA positivity as a result. I'm optimistic that with the impressive strides we've made towards this milestone and currently expect Q1 to mark peak Neutron R&D spending.

We expect first quarter GAAP and non-GAAP net interest income to be $8 million, which is a function of higher cash balances as well as conversion of approximately $117 million of convertible notes since December 31st. We expect first quarter adjusted EBITDA loss to range between $21 and $27 million and basic weighted average common shares outstanding to be approximately 605 million shares, which includes convertible preferred shares of approximately 46 million and reflects the conversion of approximately 23 million shares from our outstanding convertible notes thus far in Q1. There remains only 7.5 million shares or 11% of the original $355 million issuance outstanding, And when taken into the additional context of the retirement of the Trinity equipment line in Q4, we have substantially eliminated indebtedness from the business. Lastly, consistent with prior quarters, we expect negative non-GAAP free cash flow in the first quarter to remain at elevated levels, driven by ongoing investments in neutron development and scaling production. This excludes any potential offsetting effects from financing activities.

Last but not least, here are some of the upcoming investor events that we'll be attending in the next few months. And with that, we'll hand the call over to the operator for questions. Thank you. If you'd like to ask a question, please press star 1-1. If your question has been answered and you'd like to remove yourself from the queue, please press star 1-1 again.

Our first question comes from Andrea Shepard with Cantor Fitzgerald. Your line is open. Hey, everyone. Good afternoon. Thanks so much for taking our questions, and congrats on all the great progress, and thanks for the update on Neutron. Adam, maybe you want to start with the backlog. I'm wondering if you can maybe help us drill a bit deeper in it and maybe remind us what is included in here. Does this include the 40% of revenue from SDA Tranche 2, 10% of maybe the Tranche 3, What are you including from Neutron and Electron here? Thank you. Hello? I'm sorry, the mic went off. I don't know how much you caught of that. So all of the SDA contracts were added to backlog. So what remains for SDA tranche two transport layer is still in the backlog. Obviously what's been recognized as revenue is no longer there. Through the end of Q4, we hadn't recognized any of the tranche three contract awards. So all of that value is currently in backlog and that will start to convert into revenue and come out of backlog obviously in that process.

As far as Neutron's concerned, I think we've spoken before that We have several flights that are representative in our launch backlog that's reflected in our filings. So hopefully that answers your question on backlog composition. Yeah, that's helpful. Thank you. And maybe just as a follow-up, so on Neutron with the shift to Q4 now with the first launch, how should we think about cadence? Will you still target maybe three launches within the first 12 months after the first one? how confident are we in the development of the second tank and wondering if maybe we should expect any step up in CapEx now with the second tank in production? Thank you. Adam, I can answer a couple of those and maybe you and someone as well. Andres, so with respect to the tank, I think it's well understood what needs to be done there and you know, we had built a lot of the second stage tank on the AFP machine. So, you know, that really solved that problem.

And yeah, the way to think about just sort of follow-on flights is it's not quite, you know, as dire as like moving all of the follow-on flights 12 months, you know, or to the, you know, to the first flight, because as you've seen in the presentation, we're already building flat out additional neutron tail numbers. So it'll probably be a slightly faster convergence into subsequent flights because none of the other hardware that's qualified is being halted, obviously. It's just that tank. And the AFP machine enables us to build a tank just way more rapidly than with a hand-lay process. So I think we'll be in better shape there. And, Andre, I guess with regards to your question as far as CapEx and so forth related to the second tank that's replacing the first one that ruptured, I mean, the benefit now, as Pete said, of being on the AFP is not only can we produce it faster, but the actual cost to produce that second tank is quite low. The first tank was very expensive because, as Pete mentioned earlier, it was a hand-laid-up tank. It took a long time. This will be much quicker.

And also, since we've now commissioned the AFP, we're really just talking about variable costs related to the tank materials more than anything else. because the existing labor is already kind of in the model. So there won't be any increased capex. And, you know, the impact to R&D as a result of the tank failure is actually not – that tank itself is actually not that significant. Got it. That's super helpful. Thanks so much for all the detail, and congrats again on the quarter. I'll pass it on.

Thank you.

Our next question comes from Edison Yu with Deutsche Bank. Your line is open. Thank you. And great quarter, as always. I wanted to ask a question on space data centers. And I think you had alluded to, you know, a lot of interest. I think it's obviously become a hot topic in the industry. Can you give us a sense on how these kind of early discussions are going with potential customers interested in doing this and Is it realistic to see some type of rocket lab content in a space data center, let's say, within the next two or three years? Hey, Addison. Thanks for the question. So I think, look, we're early with data centers. If you look at some of the models, there's a number of things that sort of have to come into focus before they become the logical choice versus terrestrial. But, you know, we never want to miss an opportunity. And, you know, we've been developing the silicon arrays and power solutions for a while now, focusing on mega constellations and, you know, these... high volume power applications. But if you stand back objectively and you think about what are all the challenges with putting data centers in orbit, it boils down to the really three things.

One is cost and cadence of launch to be able to make the model close. And then two is heat rejection through various means. And three is just sheer power. Like these are gigawatts of electricity. electrical power. So, you know, solar arrays of multi-kilometers in scale are what's needed. So, you know, we wanted to make sure that, you know, whether they leave this earth or not, there'll be Rocket Lab logos all over that stuff. So, you know, as far as I'm aware, nobody else has a silicon solution quite like we've developed. Understood. And to your point on heat rejection, I guess the radiator, is that a capability you have in-house that you need to develop over time? Or is that something inorganic? Just curious on what needs to be kind of technically done there. Yeah, I mean, look, all of our spacecraft have radiators. I mean, you generate heat. You have to reject it. So, you know, yeah. there's various kind of ways of doing that, piping heat around the spacecraft to radiate it. So I don't see that as a huge technical challenge. It's just, you know, on the scale, the scale that's required is, you know, hasn't been achieved before. So that's, you know, that's the challenge there.

But to be clear, I mean, I don't, you know, those who are at least experimenting with it and looking to go down that path, I think we have a lot of compelling solutions. Gotcha. If I could just sneak one quick one in. In terms of just the discussions, can you give us a sense of like the flavor of customers? Are these kind of new customers, non-traditional customers kind of exploring this idea with you? Yeah, I mean, we have to be a little bit careful here, but I would say that there is certainly more non-traditionals looking at this kind of solution than traditional players. Great. Thank you so much.

Thank you.

Our next question comes from Ronald Epstein with Bank of America. Your line is open. Hey, this is Alex Preston on for Ron. Can you guys hear me all right? Yeah, we can hear you. Perfect. So I know you talked a little bit about progress on the Monarch acquisition, but I was a little more interested maybe broadly in the environment in Europe and more generally, right? It seems like there's a growing appetite for call it indigenous launch and national security space capabilities. And I'm interested if you sort of see this trend yourselves or how you see this developing. I know, you know, Pete mentioned No other small launch provider has really succeeded in the last year, but it's still, I think, focused for a lot of people. Yeah, Alex, it's a great question. Look, one of the reasons why we like Monarch and why we think it's important, Europe more in general is exactly that point, is that there's a lot of space nations there that have very little capability with giant aspirations and really short timeframes. And I think it's always everybody's desire to build domestic capabilities.

But the reality is, if you want to stand up these kind of capabilities really, really quickly, you don't have the decades that it takes to build often these sovereign capabilities. They're very specialist, often equipment and facilities and also intellectual property and knowledge. So we see Europe as a great opportunity for us and a real expansion beachhead where we can provide solutions at the component level. We can provide solutions at the complete system with respect to a satellite. We can provide launch. And you've seen even European space agencies procure launch from us now. And once we have a footprint in Europe proper, you know, being eligible for participating in European programs becomes possible. So I think it's a great opportunity. There's, you know, literally billions and billions of dollars of, you know, well-funded government programs underway right now. And, you know, the timelines associated with those are conducive, or I would say not conducive necessarily always to, you know, creating sovereign capability. Got it.

And then I guess it would sound like the attitude is still broadly constructive from what you said versus maybe Europe starting to get a little more distant from U.S.-based providers. No, I think it's very constructive. I think, you know, naturally that Europe is looking to create sovereign capability, but I think that also, you know, the conversations we've had, they're very pragmatic and realistic that, you know, the capability they're looking to create takes a long time. So, you know, working with, for example, a rocket lab Europe is a great way to move forward. And just real quick, would you characterize that the same on launch as you would on space systems? where I think there's a bit more existing indigenous capability in Europe already. Yeah, th

Q3 2025 Earnings Call — November 10, 2025

Management: Yeah, so there was one contract closeout that was about, I think it was a little under $5 million was the value that we received when that cancellation occurred. And then there were some other things moving around with regards to the – well, there was a benefit to the gross margins as well because in Q3 – we recognized revenue with higher gross margin associated because when we made the change in Q2, we ended up actually taking a margin hit because we recognized revenue without having associated basically at zero margin because at that time, we didn't have the ability to estimate what the costs were going to be to complete the mission as we did this transition. So the path was essentially revenue in Q2 at no margin. Q3, we got, again, normal amount of revenue from that overtime contract, but that was at zero. now at margin, right? So I think those are really kind of the two prior things. But when you look forward into Q4, given the guidance that we've provided, even with those things not recurring in Q4, you still see our gross margins improving. So you can just see that, yes, that was kind of a unique dynamic in the transition from Q2 to Q3, but from Q3 to Q4, without those unique events, we still show gross margin strength and growth exponentially. Thanks very much, guys. Appreciate it.

Analyst Eric Rasmussen (Stifel): I wanted to, just on Neutron, I totally understand, Peter, and the team, how you guys operate. You're not looking at an iterative process and having things blow up. So that's great, and you've always operated that way. But I wanted to see, though, with this latest push-out, you know, what does that do from a timing perspective for things like the NSSL and some other things that you might have been looking at that Neutron obviously is geared towards?

Management: So, look, the NSSL team works shoulder to shoulder with us. They're on every review in the program and obviously I can't speak for them but I think they take at least the feedback we've had from them as they very much appreciate our approach of both transparency but also the diligence, the way we build vehicles. So the awards for the NSSL contracts have not been made yet and there's some time away for them to be made. We need to have a flight under our belt, a successful flight under our belt before they'll make those awards anyway. So, you know, largely speaking, it's pretty irrelevant. And, you know, we've been very careful and I think there's been a lot of conversation previously about, you know, booking Neutron and making sure that we can deliver for our customers. So, you know, long story short, we're not letting anybody down here, Eric, where, you know, we're in a good spot.

Analyst Eric Rasmussen (Stifel): And maybe just my follow-up question here. You know, you closed the GEOS acquisition. Mine, Eric, is soon to close, I would presume. But with GEOS, are you seeing, you know, traction in expanding the footprint in national security and defense? I mean, that was part of the reason, but what are you seeing now that you've closed the deal?

Management: Yeah, look, it's night and day to before. So obviously we had a good relationship with SDA and to the intelligence community, obviously, for launch and things like that. But I would just say we're in a totally different league now and working with totally different folks. And there's long, long relationships that have been built with the GEOS team. And now that they have the support of Rocket Lab, we're really able to expand and supercharge those. And also, those relationships expose them to the larger offering of Rocket Lab. Because it always surprises me, you know, sometimes, you know, people just think we're just this little launch company and don't have all this other capability. So, no, it's been incredibly important. And also just now being a payload provider is, you know, it just brings you up to a whole other level because you're having really detailed mission discussions rather than, just talking about how you can provide a bus or a component or something. We're really in mission formulation territory.

Analyst Michael Leshock (KeyBank Capital Markets): I wanted to ask on Archimedes, I know you're constantly testing and iterating the engine, but how close are you to having a finalized design that meets all the performance requirements and ready for first flight? And then secondly, given your production cadence, I think you previously said a new engine was coming off the line every 11 days or so. How quickly can you ramp production of the engine to have nine Archimedes for the first stage of Neutron's debut launch?

Management: The engine design is pretty stable at this point. And, you know, we've met all the performance criteria. What we're doing is, know obviously with ascent um there's one set of environments and with descent there's an entirely new set of environments um and uh much more challenging environments because your propellants are warm and and lower pressures and you've had knowledge mixing and all kinds of stuff um so you know going through all of those things is is has been really important and um you know i think the team i gotta you know check on the exact number but i mean the vast, vast majority of all of the components for Flight 1 engines are, you know, either complete or in some kind of form of build. So, you know, we're iterating on the engine for sure, but, you know, the production machine is stood up and ready to support. But, you know, with Archimedes... We want to make sure we're, you know, as we are sending on first flight, nobody is worried about an engine. And obviously it's the most complicated, you know, part of the vehicle. So, you know, there's just no substitute for putting, you know, hours and hours and hours on test articles.

And hence the reasons why, you know, we have two cells running now at Stennis, not just the one, as we think we talked about that last earnings. And it's just switching between engine and engine. And some of the more interesting tests, you know, just extra long durations to try and promote some fatigue in the engine. Because obviously we want to reuse this engine over and over again. So just doing really extended burns to try and promote fatigue and items is, you know, some of those kind of things. They just take time. Like there's just no substitute for just, you know, burning.

Analyst Michael Leshock (KeyBank Capital Markets): Sticking with Neutron, is that original budget for Neutron of $250 to $300 million, is that still intact given the updating timing of Neutron's first launch? And, you know, you'd said you're near peak Neutron spending. Just any way to frame, you know, how much you've spent so far or what's left to go?

Management: So, yeah, I mean, the program, as Pete mentioned, I mean, we've continued to make a lot of progress. The $250 million to $300 million kind of original estimate, I mean, we kind of got a little bit, I would say, behind us with the kind of with the push from launching middle of 25, the end of 25. And so now as we get into kind of a 2026 scenario, Right now, I'd say that we're estimating that we will have spent approximately $360 million exiting and cumulative across R&D and CapEx through the end of 2025. So we're above that. And as Pete mentioned, it's about a $15 million impact on the human capital side of things per quarter, just by extending. Obviously, prototyping, you're going to spend, we're going to spend. It's really not impacted by the timeframe. But when the program kind of delays, you end up obviously incurring an extension of that, the staffing-related expenses for the program. So right now, again, we're looking at around $360 million exiting 2025. So, again, as I mentioned, I do think we're approaching peak. Hopefully Q4 is the peak. And it all depends on kind of when the timing of that first launch occurs. And, of course, at the launch as well, of course.

Analyst Suji Da Silva (Ross Capital): On the electron launches, you gave some sense of pricing, but have you noticed a trend in the size of the number of launches? maybe if not now, into 26, or if you're trying to extend those, or is that fairly stable?

Management: You know, I think when we talk to customers, as you can see in the last quarter, it's generally not just sort of one launch. You know, we see folks locking in their launch capacity and buying lots of launches in one hit. You know, we never try and let a customer down or leave a customer on the pad, so we map production with... with launch demand very well, but, you know, and that hasn't been a problem to date, but no, we just continue to see just growth in the demand for the product.

Management: So we've seen these larger bulk buys over long periods of time occur more on the commercial side, and as we've talked about in the past, you know, it's kind of hard to differentiate sometimes commercial versus government because a lot of our commercial customers actually end up fulfilling government demand. So it's a quasi-commercial government. But also, you know, we've been growing our HACE business pretty significantly over the last couple of years. And those have come, I would say, more like Electron originally did, where kind of, you know, the onesie-twosie kind of size contracts. And I think that's hopefully the next kind of shoe to drop for us is the ability to start signing contracts larger haste deals that cover a long period of time and a greater number of launches, because that would give an even more, you know, certainty to the revenue ramp in that part of the business. I think that's, you know, again, that's something that we're looking forward to.

Analyst: Is there a sense maybe among the targets that consolidation is and being part of a larger company is increasingly important, maybe more willingness to come to the table? Are you seeing any of that trend now among M&A discussions?

Management: Yeah, I think you're seeing it in a few different places, both on the larger scale, but also I think we're seeing it also on some of the smaller scale stuff as well. I think it's a difficult environment to scale in and You know, there hasn't really been too many great companies that other companies want to join. And as I think I mentioned on the call, we're sort of becoming the de facto go-to guys if you want to, you know, really scale, you know, your products and, you know, the opportunities that you have in front of you.

Analyst Andre Madrid (BTIG): I think earlier today it was announced that the SDA was moving some funding earmarked for some of their programs over to troop payments. This was at more of a DOW level. Seeing that, and then you called it out, you know, decreased cash receipts in the slide deck, too, related to SDA sat work. I mean, if things don't get resolved this evening, which hopefully they do, I mean, when does the shutdown pose a significant risk to your internal 26 outlook and beyond?

Management: So far, the government shutdown, I wouldn't say, has really dramatically affected us. Yes, there have been slightly slower cash receipts, but, for example, we got a very large cash payment on Friday from SDA. So I would say that, you know, this ticket has not been shut off. I think it's just kind of – it's just been a little bit slower and flowing. So to me, that's very helpful. Even before the line of sight, the ending of the government shutdown, you know, we were still getting – and we received a very large payment at the end of last week. So right now it doesn't really, I don't think there's going to be any, obviously we factored in everything we believe is to be the most likely case in our key four guide that we described earlier. So it's hard, you know, the moment's got a crystal ball for kind of what happens, you know, with this, when they bring the government back and kind of where they reprioritize their dollars. But again, I think we've been very fortunate so far that we've really not felt any significant impact from the shutdown to date.

Management: The only thing I would add is the requirement for what the SDA is doing is not diminishing. It's expanding. So it's an important program. So as far as the need for the program, that's not getting smaller.

Analyst Jeff Van Reed (Craig Callum): On the margins and the gross margins for Q4 in the guide, it looks like maybe a couple hundred basis points of sequential improvement. Does that just kind of break it down maybe a little more? Which side of the business are you expecting that sequential increase, and then any sort of even inklings as to maybe revisions on what you think target gross margins might be for either of those two segments?

Management: The gross margin trend, you know, in the improvement sequentially Q3 to Q4, again, is driven really by a mix where as we get more scale into our Electron business, and we've always talked about cadence being super important for the margin profile for that business because there's so much fixed cost related to it. So as you scale cadence, and Pete kind of, you know, mentioned earlier in his comments that we're expecting – you know, hitting a new record for launches in the year. So obviously that's all good for overhead absorption. So think of it as there's a lot of good underlying dynamics going on within the launch business as far as, you know, size of the backlog, the ASP increasing within that backlog. We're getting greater overhead absorption benefits. So that's really kind of what's driving the strength in the launch business. And as it becomes a bigger piece of the mix in Q4, that's really the biggest factor. And I would say that within our space systems business, the trend of margins actually has been quite solid in that as well.

You know, we've talked in prior calls about how we've made very, very significant improvements in our gross margins from our Solero solar business. You know, we've kind of talked about a long-term target there of, you know, we get to 30 points of gross margin. That was kind of an aspirational target, and I think we're very comfortable that we're, you know, we're very close to that. I think we think about revisiting that one upward a bit, I think. But overall, we still believe that our launch business on Electron first has the potential to be a 45 to 50 point non-gap gross margin business. We think long-term Neutron has the ability to be at least as good as that, helped by the reusability nature of that vehicle. And then on the space system side, it's really two different elements that kind of have different margin characteristics. On the space systems components or subsystems business, that has a wide range with solar kind of being at the lowest end of that, and again, around 30 points. Hopefully, we can push that a little bit higher. And for some of our other components business, we have margins that are well north of 60, in some cases, 70 points of margin.

And I think overall, that kind of brings a gross margin profile for that subsystems business around, call it low to mid-40s. The satellite manufacturing business, because of the nature of those programs, you know, we're able to take what for many people is either high single digit or low double digit gross margins and have those more in the call it the, I'd say, 25 to 35 points, depending on the programs, because of the level of vertical operation that we bring, because those same components that we sell into the merchant market are very high margins. we basically obviously designed into our own platforms. So I think longer term, I think we still see, again, a gross margin business from launch that is in the, if you want to call it the 50% range and for space systems, probably in the, I'd say the 40, maybe low 40% gross margin range. So it puts it in a nice spot overall. But I think it's also helpful to note that in space systems, It's not as R&D intensive as the launch businesses when you're getting a new vehicle established.

So the operating margins or contribution margins for the space systems businesses, even the ones that aren't kind of in those high gross margin ranges, is still quite healthy. And then, again, I think the margins for launch speak for themselves.

Analyst: Can you talk about the pipeline? Obviously, Trunch 2, Trunch 3 are big needle movers, but what's the next layer beneath that look like? How many eight-figure, nine-figure deals? Just some semblance of what the distribution of deal sizes that are later stage in the pipeline would be helpful.

Management: So I think the intelligence community and the DoD is obviously big opportunities for us. And things like GEOS really provide us new kind of access and visibility to some things that aren't very visible at all. So on that side of the equation, I think there's really good opportunities for us there. But I would say also, if we think about the bids that we've got in play, there's also some extremely meaty commercial bids as well. So I would say it's fairly well distributed across, the opportunity is fairly well distributed across both commercial and defense. But there's always the big meaty programs, but I mean, all of the business units, we kind of run the business units like little startup companies as well.

and um you know they're expected to grow really healthily uh every year and you know you see new products coming on all the time because you know as they as they um you know reach saturation with their with their customers they these business units have to develop new products to continue to continue that growth so you know this year alone i think it's been a really really great year there's you know we set we set goals for those units And then there's kind of the PEAT stretch goal. And, you know, they've all met or exceeded the PEAT stretch goals this year. So, you know, it's not just about, I guess what I'm saying, it's not just about these big projects. You know, they're obviously important, needle moving, but, you know, just the underlying business and just continuing to drive that growth in all the business units and the underlying businesses equally as important.

Analyst Anthony Valentini (Goldman Sachs): Just a quick clarification question on the backlog and Neutron. Is there anything in the backlog today for Neutron, or is it zero?

Management: Yeah, Anthony. We have launches and backlog for Neutron. There are two fully priced missions in the backlog right now for Neutron. There's a third contract admission, which is right now anticipated to be a ride share. And we don't have that in backlog because we don't do that until we've actually added the payloads into the manifest. And, again, we've got a primary customer, but on that third launch, we've not put any of that in the backlog yet.

Analyst Anthony Valentini (Goldman Sachs): Is there a way to think through, you know, how that backlog for Neutron specifically ramps up? Like, does that happen once you guys do that first R&D launch? Or is it a certain number of successful launches, just historically and like what you guys know about the industry? Like, how does that start to flow through?

Management: It's like we don't want to ever let anybody down. And people, when they're looking to buy neutrons, aren't typically looking for one. They're looking for many. So a number of customers are looking to see that the vehicle does work and it scales. So, and, you know, we work very closely with those customers as we go along. And these are both commercial and government customers. So, you know, I think the unlocking point is certainly, you know, a successful flight in a number of these contracts. But also, you know, that, you know, we want to make sure we don't let customers down. And the last thing we want to do, and we've talked about this previously, is customers will be happy to book a bunch of Neutron at like half price, and we're just not going to do that.

Analyst: As I'm thinking through the opportunity set on the Tronch 3 transport layer and just looking back at the previous Tronches, there's competition from the defense primes and some of these new space tech companies, including yourself. I'm curious how you think through the differentiators for Rocket Lab and when you guys are presenting to the customer, what you think really separates you from the rest of the group.

Management: I think one of the big separators and one of the reasons why we won a prime spot on our first SDA contract is that we're so vertically integrated that if you look across all of these programs, they're typically plagued by delays. not so much cost overruns because it's a firm fixed price, but certainly delays. And when you control so much of your own supply chain, then if there's a delay in a component, you get to choose what resource you swell or push around to solve that problem. So I think that's a big element is just schedule certainty. Obviously, Adam talked about some of the margin and margin stacking, so price is a big element as well. But at the end of the day, all this stuff's gotta work. And this is where your reputation in this industry is just so critical and why we just never ever deviate from putting ourselves in a position where that can get compromised. When people buy a piece of Rocket Lab hardware, firstly it turns up and it looks great and it works. And in an industry where that seems to be challenging, I think that's an important element.

And also, finally, you know, there's a set of requirements and then there's how you go about solving those set of requirements, like, you know, with the technologies that you can bring to bear. And we just have such a war chest of technologies that we can bring to bear to provide, you know, solutions to meet everybody's requirements and then some that I think, you know, it puts us in a really strong position.

Analyst Christine Lewag (Morgan Stanley): From your commentary from our previous question, I mean, it sounds like you're not going to go out there and go by a spectrum. So first question, is that a fair assessment of your statement earlier? And also second to that, you know, with over a billion dollars in liquidity and, you know, with a broader and deeper capability set and space systems. What's your priority for M&A?

Management: So we look at a number of things, Christine. So, you know, I would say that there's always opportunities for tuck-ins and you've seen that with things like Monarch where, you know, that gives us a capability that we didn't have. So we'll always do those. But I think the GEOS acquisition is a really good example about, you acquiring a company that just brings us into a totally different customer set and a totally different capability and also puts us at a totally different level. If you think of the big traditional primes, the one thing that sets them apart from lots of little space companies is they own the payload. So we'll continue to look for opportunities there where we can own the payload and really drive the missions. And look, we're always looking at big needle moving stuff as well. And, you know, we always look for things that we think, you know, have a step change in either the scale or, you know, other elements of the company. So, you know, that's the way we look about, you know, that's the way we think about it.

Analyst: When you look at your portfolio today, I mean, it looks like you're kind of marching in a similar direction with your Flatterlight product set too, and now you've got, you know, these additional payloads. Where do you see your role in terms of that industry? You know, do you at some point want to own your own constellation and be able to sell more of that as a service? How do we think about where you are in this journey? And, you know, what does the end suite look like?

Management: So Neutron is a really important element of that. If you look at others, you know, access to space and low cost, rapid and reliable access to space is kind of the place you start. And Neutron gives us that multi-ton capability. And then, you know, as you point out, you look at the space systems growth, then really at this stage, I don't think there's any satellite we can't go and build. I mean, we've got two going to Mars here shortly. So if you want to talk about complexity of spacecraft. So I think from an engineering perspective and a component perspective, all of those kind of bases are loaded. And we'll be very strategic about how we think about the next step, which would be building our own constellation and whether we're providing services or infrastructure, I think, is yet to be determined.

Analyst Peter Arment (Baird): On Electron, more of the demand environment, I think you previously talked about the demand for around 30 Electron flights a year. I was wondering if that still kind of holds, just given the uplift that we've seen tied to kind of all the national security launches and kind of what's going to be expected with Golden Dome and additional testing, if there's upward bias to that.

Management: Depending on how quickly and what scale Golden Dome grows to, I think we're in a very strong position to provide critical services there. And, you know, we see nothing but upward trajectory in both government, paste, and commercial launches for that product.

Analyst: Thanks for the comments on the Archimedes, you know, the testing that you've been doing. Is Could you give us a little context? Is that much different in terms of the rate that you did originally with the Rutherfords around Electron?

Management: Yeah, it is. It is at a much, much higher intensity and rate because for the Rutherford, we only had to do half the job, meaning that we only had to go up. For Archimedes, we have to go up and down. So it's like twice the amount of environments, twice the amount of run box, and twice the amount of qualifications.

Management: Great. Thanks very much, and thanks for the thoughtful questions. So before we close out today, I would like to share that Matt Oko is finishing up his time on the Rocket Lab Board of Directors. Matt's tenure as a member of the board will end November 30th. Matt is a co-founder and managing partner at a deep tech venture capital firm, DCVC, and was one of Rocket Lab's earliest investors, serving as a member of the board since August 2021. And as a member of the legacy Rocket Lab board since January 2017. So, you know, since then, we've been incredibly grateful for his leadership and his guidance as we grew Rocket Lab together from a small startup to a publicly listed company, now one of the world's leading global space firms. And, look, I just personally also want to thank Matt for backing us from the beginning and wish him all the best in his continued work in deep tech as he transitions out of Rocket Lab. Otherwise, here are some upcoming events and conferences that the team will be attending. We look forward to sharing more exciting news and updates with you there. And thanks for joining us. That wraps up today's call, and we look forward to speaking with you again soon and sharing some more progress at Rocket Lab.