Good afternoon. Thank you for attending today’s Rocket Lab Fourth Quarter 2021 Financial Results Conference Call. My name is Tanya, and I will be your moderator for today’s call. All lines will be muted during the presentation portion of the call with an opportunity for questions-and-answers at the end. [Operator Instructions] I would now like to pass the conference over to our host, Gideon Massey, Financial Planning and Analyst Manager. Please go ahead.

Thank you, Operator. Good afternoon, everyone. And thank you for joining us on today’s conference call to discuss Rocket Lab’s fourth quarter and full year 2021 financial results. Today’s call is being hosted by our Founder and CEO, Peter Beck; and our Chief Financial Officer, Adam Spice. After our prepared comments, we will take your questions. Our comments today include forward-looking statements within the meaning of applicable security laws, including statements relating to our guidance for first quarter 2022, including revenue in our principal target markets, GAAP and non-GAAP gross margin, GAAP and non-GAAP operating expenses, interest and other expense, and adjusted EBITDA. In addition, we will make forward-looking statements relating to trends, opportunities and uncertainties in various products and geographic markets, including without limitation, statements concerning opportunities arising from our Launch Services and Space systems markets and opportunities for improved revenues across our target markets. These forward-looking statements involve substantial risks and uncertainties, including risks arising from competition, global trade and export restrictions, the impact of the COVID-19 pandemic, our dependency on a limited number of customers, average selling price trends and risks that our markets and growth opportunities may not develop as we currently expect and that our assumptions concerning these opportunities may prove incorrect. More information on these and other risks may -- that may affect the forward-looking statements has outlined in the Risk Factors section of our 2021 10-K filing, which will be filed on or before March 31, 2022 today and the documents incorporated therein. Any forward-looking statements are made as of today and Rocket Lab has no obligations to update or revise any forward-looking statements. The fourth quarter and full year 2021 earnings release is available in the Investor Relations section of our website at rocketlabusa.com. To supplement our unaudited consolidated financial statements presented…

Thanks very much, Gideon. And before I get going here, just I want to confirm that Flight 24, which we launched earlier today, those deployed payload and permission is expected. So today’s presenters and joining me to review Rocket Lab’s business highlights and final -- financial results for the fourth quarter and 2021 year, joining me on today’s call is Chief Financial Officer, Adam Spice. So the agenda today, today I will be taking you through our key business accomplishments for the fourth quarter and full year 2021, and Adam will be covering off their financial highlights and outlook, during our up and coming conference schedule, and of course, we will have plenty of time for some Q&A. So, firstly, let’s start with a bit of a review of our key accomplishments in 2021. I think this slide speaks for itself, but I will touch on a key point. Despite all the challenges created by the ongoing pandemic, including stringent border restrictions and picking up operations at our New Zealand launch site in particular, we still managed to launch six electron missions in 2021. As such, electron retains the title of the second most frequently launched U.S. rocket. Beyond launch, the breadth and scope of our achievements across geographic regions, space application and customers is very encouraging to me and there’s so much more to come. So Q4 highlights. In Q4, I am very pleased that we are able to welcome Advanced Solutions and ASI and Planetary Systems Corporation, PSC, into the Rocket Lab’s family and portfolio of solutions, and amount the intent to acquire SolAero Technologies, which ultimately closed in Q1 2022. Not only do these teams provide decades of industry experience and industrial-leading technology. Culturally these companies have great leadership teams that will provide value to Rocket Lab…

Great. Thanks, Pete. I will first review our fourth quarter and full year 2021 results, and then discuss our outlook for Q1 2022. Fourth quarter 2021 revenue was $27.5 million, with $1.7 million of revenue contribution coming from a partial quarter of PSC, which was not included in the guidance for Q4. Net of this, revenue was $25.8 million, slightly above the high end of our prior guidance range. Revenue in the fourth quarter included 2 successful BlackSky Global launches, consistent with prior guidance. Space Systems saw strength across both service contracts and Sinclair components, as well as partial quarter contribution for ASI and the aforementioned PSC acquisition. Full year 2021 revenue was $62.2 million, with 63% or $39 million coming from Launch Services and 37% or $23.2 million coming from Space Systems. Overall, our revenue grew by 77% year-on-year with Launch Services growing 18% year-on-year and Space Systems growing 14-fold year-on-year. GAAP and non-GAAP gross margins for the fourth quarter of 2021 were 24% and 36%, respectively. This was better than the Q4 guidance on a GAAP and non-GAAP basis, driven by lower than expected launch costs, as well as by a positive revenue mix of higher profit Space Systems Products and Services. This compares to GAAP and non-GAAP gross margins of negative 236% and negative 84%, respectively, in the third quarter of 2021, which were significantly impacted by a one-time catch-up related to stock-based compensation charges triggered by the de-spac transaction, as well as COVID restrictions in New Zealand and the related impacts on our launch rate and overhead absorption in the prior Q3 2021 period. Gross margins for the full year 2021 were negative 3% and positive 16%, respectively. Launch Services GAAP and non-GAAP gross margins were 1% and 6% in the fourth quarter, respectively, versus a…

[Operator Instructions] The first question is from the line of Edison Yu with Deutsche Bank. Your line is open.

Hey. Thanks for taking my questions and congrats on the quarter. So two topics I wanted to ask about. First is considering the environment right now in space, obviously, a lot has happened within the last week. Have you thought about the potential implications, if so use get sanctioned or basic or saw particular spaces cannot fly for Europe? And I guess, is there any way to kind of speed up development of neutron to kind of compensate for that?

Yeah. Thank you, Edison. Yeah. Obviously, it’s a crazy time in the world right now and we are working on neutron as quick as we can. So I am not sure we can accelerate that much more than it already is. But needless to say that, if things continue in this direction, there will be a far more limited launch availability than what normally would have been.

Understood. And then second topic, clearly, the M&A strategy has been bearing quite a bit of fruit. You have all this content on some of the most important satellites. Is there anything you feel that’s out there left? Do you think you have kind of completed most of it or is there anything kind of strategic you still see out there potentially along lines of maybe integrated electric propulsion?

We keep a pretty active pipeline of companies and dealers that we want to do and I wouldn’t feel like say that we have finished about, I am not going to be answering in details about what particular technology we might be going for next.

Got it. If I could sneak in just 1 more. On the launch cadence, I know you have two kind of embedded in the first quarter. Without providing, I mean, a number per se, is there any kind of rough indication, assuming supply chain is fine on place, what could be kind of the run rate by the end of the year?

I will take the first part and then Adam may want to pick up the second part of that. I mean, we are always paced by our customers’ readiness. You have seen us accelerate one customer because another customer wasn’t quite ready on time. So the thing that drives our launch cadence the most is our customer’s readiness.

Yeah. And I will jump on to that and say, so I think that the, as Pete mentioned, like, we are not production constrained at the moment. I think our production resources have really delivered in the last quarter or so. So we are very much on pace to deliver the number of rockets that we are planning to for 2022. So our internal forecast for production this year was -- we comfortably came into the year with some rockets that we are in with and our plan is to build 15 rockets this year. We would love to be in a position where we could have some inventory of rockets on the shelf. Sounds funny to say that. But you look if we could have some rockets on the shelf that we could support turns opportunities, because every year, we see turns opportunities, where a customer comes in and they have got a very short lead time, because either they want to squat on some spectrum or they want to have to do it -- they then need to do a quick tech demo on orbit. So there’s no reason to believe that we can’t support those kinds of opportunities this year as we progress. So when you really think about where we want to be, we want to be exiting the year where we are launching at least monthly on a consistent basis and then progressing towards our goal when we get to, say, two rockets per month on a consistent basis. And I would say that there’s -- I think from a -- again from a production perspective, there’s nothing that would indicate that we can’t get there. I think there’s -- we are still in the process of the market demand kind of developing into what…

Okay. Thank you.

Thank you, Mr. Yu. The next question is from Kristine Liwag with Morgan Stanley. Your line is open.

Hey. Good afternoon, guys. Maybe on…

Good afternoon.

Hey. On -- you mentioned Rocket Lab capabilities now span the full space economy with your recent acquisitions and you have got integration, too. So does that mean you are comfortable with the portfolio as it stands today and we should expect M&A levels to kind of stop here or do you continue to see opportunity for bolt-ons?

Yeah. Pete, I can take it. Sorry, go ahead. Go ahead.

No. No. You go ahead. Yes. Yeah.

Yeah. Kristine, I think, from an appetite perspective, we still have plenty of appetite to go and further accelerate the growth of the business through inorganic means. We have been successful, as you have seen in doing four acquisitions in a relatively short period of time, three since going public in August and we continue to see interesting and compelling assets out there. So I would say that, I wouldn’t expect the pace to continue as it has been, because that was very, very quick to do three acquisitions in series as we have just done. But I still expect to -- that we will find opportunities that we can execute on. And that was, again, one of the big reasons for going public was to make sure that we had the capacity and the capital to go out there and do these kinds of TAM expanding deals. So we think our strategy so far is bearing great fruit and we continue to plan to push that. Although I would say just naturally speaking, doing three acquisitions in the first six months of the public companies like, isn’t something that is normal or I would necessarily predict would continue into 2022 on that same rate.

And I would just say…

And then…

… you can see kind of the strategy rolling out here with the win with MDA and Globalstar. I mean, having such a secure supply chain and scale really, really enabled us to beat out really established suppliers in that satellite manufacturing field.

Thanks. And then also can you provide any updates on the planned testing around the first stage retrieval via helicopter? And if you can’t provide any specifics around timing, of the upcoming tests, can you speak to the testing regime overall and milestones to enable the regular recovery of boosters using a helicopter. I think you guys have said about 50% is eventually where you want to be?

Yeah. Absolutely. So the helicopter that’s been selected to do this work has had all the modifications completed and it’s currently on route to New Zealand. We have completed all of the last of the drop test last week. So the team has been out there dropping rockets flat out. And the last revest that we did in last year really validated the final piece. We actually had helicopters on route and rendezvous don’t not catch, but rendezvous at this stage, which was really the last big piece. So this next launch coming up, we will have the helicopter set it out ready to go and we will, in fact, attempt to attach, and you won’t have to wait long today.

Great. And if I could sneak a third one, the $143 million contract win that you got from MDA is a fairly meaningful win and you get to showcase this portfolio that you have built with SolAero, Sinclair, APL. So when you think about delivering on this contract, are there additional CapEx that you have to do in order to be able to build a 17 500-kilogram spacecraft or do you have the capacity already in place? And can you discuss potential execution risks around this contract?

Yeah. I mean, we have made significant investments and continue to make significant investments into the Space Systems division. I think, we mentioned in the slides here, the continued expansion of the satellite manufacturing facility. You have seen us also grow ASI and increase our footprint in Colorado. There’s still some extension required from a facility standpoint, but these were already all planned before we actually won the contract and just have swinging as has been for quite some time. I mean, I think, with respect to execution, these are complicated spacecraft, for sure. But we have assembled a team of industry experts that, as you can see by some of the acquisitions to have executed on these programs in the past, been many times and we are feeling very confident in the core team’s ability. If you look at some of the other missions, we have also been awarded missions to NASA, missions to Mars from NASA and a large mission to the moon. These are very, very deeply complete mission and that’s really where our engineering team excels is these complicated programs. And just to make sure, in your previous question, Kristine, I just want to make sure I correct myself, the launch is coming soon. They haven’t defined a date for the full recovery.

Yeah. Thank you, Peter. Thanks Adam

Thank you, Liwag. The next question is from the line of Erik Rasmussen with Stifel. Your line is open.

Yeah. Thanks for taking the question and congratulations. It’s a busy year for you guys. Maybe just a clarification on the launch and the cadence and everything else, two in the upcoming quarter or this quarter, Q1, and then exiting the year at least one per month. Just wanted to -- and reconciling that with 15 builds for the year, is that builds or launches, are those two coincide with one another?

Yeah. No. Those are -- the 15 are incremental builds in 2015 -- 2022. So it’s not launches. So we have talked about kind of a range of launch or missions that would go off this year in 2022. And it’s -- I’d say that, right now, again, we think we are very comfortable kind of where we are at right now and being able to support a manifest that launches on that rate that I was talking about exiting 2022. We don’t want to provide full year guidance at this point, so we are kind of just providing kind of next quarter. But again, I think, we feel very comfortable where we are at, our ability to support kind of the launch manifest that we have discussed previously.

Okay. Great. And then maybe just the outlook for Q1, what’s behind that, maybe you just unpack the revenue outlook, what’s the organic piece versus what’s coming from recent acquisitions? And then I have another question.

Sure, Erik. Yeah. We are not going to go to the details of kind of what kind of comprises space systems in particular at this point, because it’s becoming a very kind of diverse and intertwined set of businesses. When you think about components ranging from components that we have developed organically, ones that we built in partnerships like, for example, radios with Johns Hopkins, with the various elements from Sinclair and then the software from ASI and the solar panels and so forth and cells from SolAero. It’s just -- there’s a lot of interdependencies and it’s kind of hard to really kind of attribute what’s, at this point, kind of driven by organic versus inorganic. So at this point, we just kind of, again, point to the -- we provide the level of detail as far as which components like as far as Launch versus Space Systems. But I think going below Space Systems is probably not going to be kind of productive and really be all that meaningful.

Got you. I understand. And then maybe just the last on -- to follow-up on the MDA subcontract award, by the way, congrats on that. What sort of milestones should we be looking out for and then it also seemed that there is an opportunity for Rocket Lab to provide additional services and up to nine additional spacecraft? What could that mean in terms of revenue above the $143 million initial contract? And then the last thing on that is, they did talk about Globalstar is going to be looking to have a contract after launch of those satellites separately, is that something that you can also win? Thanks.

Yeah. Pete, I want you to take the opportunities kind of around the satellite builds beyond the $17 million.

Yeah. Absolutely. Yeah. So there is -- as everybody clearly there is options to build further and there are a number of other options around other pieces of technology. The launch -- the scheduled launch date for these satellites coincided nicely with neutron’s operational readiness, and we will certainly be bidding on launch for this spacecraft, which, if successful, would really round out the strategy and show the power of both being able to build satellites and also being able to launch.

Yeah. Erik, I would say that around like the milestones, so forth, I mean, from a revenue perspective, this is -- for the most part of back-end loaded contract from a revenue perspective. So you can think about, obviously, we have done a lot of work up at this point on designs, doing the design work. But then that’s really kind of just to get the award. Now it’s all that kind of really kind of doing the next level of NRE work, and then, ultimately, at the beginning of shipping the systems to the customer. So I think as far as milestones, you probably won’t hear a lot as far as -- this is not like neutron where you will do an engine test, for example, or kind of implement some infrastructure that’s visible. So this is one of those contracts that where it’s going to become of that final execution where we have a very detailed set of milestones internally to execute towards, but nothing that’s really going to be visible again to investors until you start to see revenue come off of the contract, which again is really more back-end loaded. So you really shouldn’t expect, I would say, material revenue contribution in 2022 from this contract. This is really more 2023 and beyond.

Got it.

And as far as the -- the upside to the -- if we were to deliver the incremental nine options on the contract, again, we don’t want to speak to that at this point, because, again, I think, we have -- part of this is to make sure that people’s expectations don’t get out of whack. So for us, we just want to speak to what’s committed and what’s committed as the 17. That’s what went in the backlog. And to the extent that we get notification from the customer that they want to exercise, some of those incremental options. We will be sure to kind of let folks know about that.

Thanks. Good luck everybody.

Thank you, Mr. Rasmussen. Your next question is from the line of Suji Desilva with ROTH Capital.

Hi, Peter. Hi, Adam. Congratulations on the strong finish for 2021. Adam, I don’t want you to break the earnings up, but I just want to clarify, did you say that SolAero in 1Q 2022 was minimal because of the accounting for the merger, is that…

No.

… what you said?

No, no, no. No. So basically, we will get most of the quarter’s impact from SolAero in Q1, because the deal closed on January 17th. So there’s going to be a lot of purchase price accounting related impacts to our GAAP results in Q1. But no, we will we will get full -- not full, but nearly full operational contribution from SolAero in Q1. And we mentioned previously when we announced that acquisition is that they were kind of roughly on a $20 million per quarter, $80 million per year revenue run rate and so you should be thinking along those lines of kind of a prorated amount assuming that the deal closed on January 17th, just for rough math.

Okay. And then the backlog, clearly a very strong spike, congratulations on that. Is there any way to understand how much of the backlog is attributable to Launch versus Spacecraft versus Space Agency components? Does that break out kind of helpful or just -- if not that, just qualitatively what drove the significant spike since the end of 2021?

Yeah. Well, obviously, the biggest contributor to post year-end backlog growth came from the MDA contract, right?

Yeah.

… at $143 million. But we did have continued growth in our backlog across our spacecraft components business, software, all the pieces of space systems are really operating well right now, and all contribute to that growth in the backlog number. And we continue to sign up new launch customers as well. So it’s almost -- it’s like there’s not necessarily a weak spot in the business. There’s not. I would say, the disproportionate contribution in the post year was certainly on the space systems side, specifically to this MDA contract. But I wouldn’t want that to kind of obscure the fact, there’s been a lot of other activity across the portfolio of Space Systems and across Launch as well. So we are very encouraged by the backlog growth. I mean, that’s one thing we have always been trying to message to investors is, people can talk about pipeline all day long, but it’s really all about backlog. Backlog shows the committed resources behind the platforms, whether it be launch or Space Systems. So, yeah, we take a lot of comfort in that backlog growth that we have seen, not only in 2021, but as we have progressed so far through 2022.

Great. No. The MDA contract is certainly a good one, congrats on that. Just one last quick question, if you do the factory envelope math, it comes out about $8.5 million per spacecraft. I am just wondering if that a good number to use for going forward spacecraft opportunities? Is it proportional to the size or complexity of the spacecraft? Any color there would be helpful.

Yeah. I wish it was that easy. Unfortunately, each spacecraft is so unique. There’s really no kind of metric that really fits at all, either mass nor type of platform, they are all very, very different. And you can also think about the fact that the spacecraft that we designed in this case here, there’s quite a bit of NRE and that’s all kind of taken in aggregate when you look at the totality of the contract. So you kind of have -- also hard to fortune how much of it is like bomb and assembly and AIT versus NRE. So, again, we will get to the extent that we get further constellation, volume upticks, we will be to share those metrics as it become available.

Thanks, Adam. That’s it.

Thank you, Mr. Desilva. The next question is from the line of Austin Muller with Canaccord. Your line is open.

Hi. Good afternoon, everyone. My first question here is for Peter. Do we have any update on the rain software that you are supposed to get from NASA to operate to Launch that?

Yeah. Hi, Austin. So they have released an initial version to us and we are going through our own internal review. There’s probably some slight tweaks here that needs to be made. But that is progressing. NASA have delivered some software products to us, which is very, very promising and giving us much more confidence to be able to schedule something to launch out of 2022.

Okay. That’s helpful. And then just on the neutron facility that’s being built in Virginia. Do we have any timing on how long you think it will take to get that facility set up and start putting out rockets there and will early neutrons all come from there or will some come from New Zealand or California?

Yeah. No. Sorry. All neutrons will come from that facility. The land is already been acquired by NASA, the Midland Space Port. And we will be digging holes in the ground very, very shortly. It’s -- the program kind of enables us to have a more relaxed approach to building that infrastructure. There are certain things we need immediately, and obviously, you don’t need to launch that until you really launch. So the whole construction part of that is phased quite eloquently across the submission development time lines.

Got it. And then how comfortable are you guys with the supply chain right now? Are you seeing any potential issues on the horizon or are you still very confident in this environment?

I don’t think anybody is confident in this environment. I mean, I will say that it’s great to have a large part of the supply chain, because you can really manage things. But like everybody, we are continuing to manage the shortages and all those kinds of things. However, we took an approach of early of carrying a large amount of work. So we haven’t seen any programs delayed as a result of any supply chain issues.

Excellent. Thanks for filling me in.

Thank you, Mr. Muller. The last question is from Cai von Rumohr with Cowen. Your line is open.

So, as you know, Layer 1 was awarded, I think, yesterday. And Lockheed with Terran basically, I guess, got one of the spots 42 satellites. They claim they are putting up this huge facility in Florida and are basically going to have volume production. So they will have cost totally unmatched by everyone else and it looks like your MDA satellite is kind of in the same size range. So do they represent a serious competitor to you, because it looks like they are going predominantly after DoD and your -- it looks like you are going after more commercial civil. So what sort of a threat do they pose, if any?

Yeah. That’s a great question, Cai. I guess, we are a little bit different in the respect that if you look at the supply chain of critical components, whether it be solar or reaction wheel, StarTrack, all of those things. We have taken an approach of making sure that we have those for us and also for holders of scale. So really, I think, we are in a different kind of place. We are not just focused on commercial. We are happy to do defense work as well. But, I mean, I think, if you look at our acquisition strategy and what was kind of rolled up and I would have to guess that either way we will be a participant in those same bureaus at a component level.

Sure.

Thank you, Mr. von Rumohr. I will now pass the conference over to Adam Spice for any closing remarks.

Thanks, Operator. Before we wrap up the call, I’d like to thank everyone who participated in today’s call and we look forward to having the opportunity to provide further updates on our business, including through our participation at the ROTH Conference on March 13th through 15th, the Deutsche Bank 30th Annual Media, Internet and Telecom Conference on March 14th, and the Bank of America Space Transport, Aviation and Auto Research Summit, or STARS conference March 20th through 22nd. And again, thanks again, and we look forward to speaking with you again about exciting progress that we are making in our business. Thank you, Operator.

That concludes the Rocket Lab fourth quarter 2021 financial results conference call. Thank you for your participation. You may now disconnect your lines.