Rocket Lab Corporation (RKLB) Earnings Call Transcript & Summary

All right. We have our final panel of the day. And I don't think it will disappoint, let's talk about rockets. Our house view is that demand will continue to far outstrip supply through at least the middle of the decade, driven by deployment of large connectivity constellations and also geopolitical tensions, leading to strong pricing to those who can reliably scale up. We estimate the TAM to be about $8 billion last year, that will grow to $13 billion by 2025. That being said, launch is clearly a very tough business to figure out with several companies that would be on a panel that have actually faced extremely challenging conditions and gone out of business. And we also see many multiyear delays with some of the traditional launch companies such as ULA and Orion who can emerge to capture this large opportunity and properly challenge SpaceX going forward? Let's find out. It's my pleasure to be joined by my 4 guests, Bill Weber, CEO, Firefly; David Kownator, CFO of Isar Aerospace; Muhammad Shahzad, CFO of Relativity Space; and Adam Spice, CFO of Rocket Lab. Thank you, gentlemen, for joining. Before we dive in, can we have a quick background on your respective companies and why you decided to join. Bill?

Yes. So Firefly Aerospace, we would want you to know if we were telling the story, we would want you to know us as an end-to-end space transportation company. We launch, we land, we orbit. And we would want you to also know that we do those things right now under programs with customers. The vehicles are either flying or they will be flying very shortly on active contracts. You could come to visit us, and you could see all of those things that I just talked about there, put our hands on them and see production lines that are building them today. And I think that differentiates a lot of the companies, several that are up here with us versus a lot of the PowerPoint that is out in the market as all I need is a big bag of cash and I think I can go do this. And so we would say we would want to be judged against that standard. We are at the point now where the science project is over, and now it is time to get to rate production. So we've been -- Firefly has been in existence since about 2017 in this iteration, and we're making great strides in terms of, as I said, getting all of our vehicle platforms to rate production. So...

David.

Our Isar Aerospace is also very tangible, also real. We are building the next generation of rocket launchers out of Europe. We are fully vertically integrated, and we'll discuss that later, but that's what characterizes as one of the key things that was a choice of the founders of the company very early on, and that company was founded 5 years ago by a group of students out of Technical University of Munich, capitalizing on the knowledge they are capitalizing on a lot of industrial know-how in Germany, capitalizing also on some early input from people who have done a fair bit of a ride with SpaceX. And we're launching in the next few months. We have a manufacturing facility. We have a launch pad that's close to being operational, test facilities. We -- and a very solid pipeline for the next 5 years, at least. So yes, as Bill mentioned, not a science project anymore.

Great.

Thank you for having us, Edison. So Relativity Space, we're a launch company, as you would imagine, -- we launched our first vehicle Terran 1 space that was earlier this year. We're working on a large vehicle called Terran R that's a 20-ton reusable vehicle that will have the first launch in 2026. We have about 1,100 people based on Los Angeles. Bulk of the team is former space execs, certainly on the senior side, some of the original folks at SpaceX, have launch pads like Cape Canaveral, Vandenberg Air Force Base. Some have about 2/3 [indiscernible] center that we've read out the largest tenant out there do all the engine testing, and we'll do stage testing there as well. And on the personal front was the background of your question. I'm 4 years new to rockets. And I guess, what drew me was just inspiration from our founder, who is now 31 was 27% at the time. And I thought I could help in sort of retail story and help allocate resources and having been in this industry and a lot of you have far superior knowledge and experience here, but absolutely fascinated by the mission orientation and the kinds of people, our long-term ambitions are to make life and a planetary -- it attracts a very different kind of talent base. And so it's been a fascinating journey, and I feel like I'm learning constantly from peers and folks in the industry. So nice to be here.

I'm Adam Spice, the CFO of Rocket Lab. I think most people are familiar with Rocket Lab, given the success of our decade small launcher called Electron that's launched 41 times. We're the second most frequently launched vehicle in the U.S. behind SpaceX. But what a lot of people don't understand is the diversity of the business. So now we generate about 2/3 of our revenue from non-launch-related activities. So think about -- we call that Space Systems, which includes everything from designing and building full satellite bus solutions, but also selling merchant components for spacecraft into the market. We also do on-orbit management and longer-term have broader ambitions to enter into the applications market as well. So I would say that the reason why I joined the company was when I interviewed with Peter Beck about 6 years ago, it was a very small team, about 130 people. And just kind of getting the sense of mission that the team really had and the passion that was there was just a little bit too strong to resist. So that's just -- it's been a fascinating experience. And I think that there's -- it feels like we're in the very, very, very early phases of this industry. So I think there's a lot of growth to come. And I think there's a lot of -- certainly a lot of challenges. I think we've seen some of those. I mean, even after you've launched 40 times, you can have issues, we had an anomaly on our launch in September, which, again, is a severe challenge as a launch company, but it's all about how you -- kind of what you learn from those things and kind of put them to work to make your service more reliable for your customers and help continue to grow the market.

Thank you, everyone. Let's start with a few areas. I think most of you or all of you will agree with. And I'll direct this toward David and MO, where specifically are you seeing the most acute shortage in the launch market? Is it small, medium, heavy -- or is it multiple cycles?

Yes, sure. So I think where we are particularly focused is just on the telco constellation market. When we've heard actually over the course of today, a number of these trends around when you think about direct-to-sell, what's happening and our belief that the augmentation of terrestrial telco is happening with space in space real time, right? And StarLink inspired by SpaceX, long on SpaceX, I believe they will continue to run super hard and what StarLink has been able to do at the pace that they've been able to do it at with Amazon on Kuiper program, Apple, of course, has publicly so far announced the SOS feature. There's Qualcomm that's trying its hand, tried its hand of partnerships at the chip level. There's just a number of these dynamics that are underlying on the telco side that's driving constellation. So satellites in our minds and the customer dialogue we have converging to about 1 to 2 tons that need to be deployed in batches of anywhere from 15 to 25, somewhere in those ranges. And so that sort of brings us to a sweet spot, again, a 15 to 25 ton market if you subscribe to the telco constellations. And so not only do these satellites need to get deployed, they're 3- to 5-year life assets. And so they entirely need to get redeployed every 3 to 5 years. And so for someone like Amazon, with Kuiper, just to have a 3,300 or maybe a 7,000 satellite constellation that requires several billion dollars a year of launch of a vehicle that would be the size of a Terran R. And so that's where we see the bulk of the market. We actually think that there will continue to be a need for even the smaller rockets. We, in particular, just find the larger rocket as a larger opportunity. And so that's where we're focused and have decided to put all of our resources just given running a rocket company is nontrivial, running a multi-market company as especially not trivial. So that's our view.

I think at our end, we're seeing shortage across the board, quite frankly. I think we have a unique perspective there, at least on this panel because we're European. And we're seeing a lot of demand in Europe coming from as you mentioned, Edison, via delays in European programs, and that includes Orion [indiscernible], also includes, of course, the disappearance of sous from the market, which used to be 60% of the market in Europe. So there's a real need for European launch capacity. There's a need for sovereign European launch capacity because some applications, of course, Europeans will prefer to launch for the European company. We're also seeing shortages in like demand from other governments around the world, as someone mentioned on an earlier panel, there's real need from governments across the world who want to build their communications capabilities -- the communication capabilities, need some launch capacity for that. And I think more generally, we're seeing shortage in flexible launches. So if you want to fly in a right transmission that flies to a certain orbital position at a certain point in time, yes, you have a pretty good option. If you want to fly in a much more flexible way that's much more tailored to your needs and you want to fly a bunch of smaller satellites, then you don't have so many options that are -- that come at an agreeable pricing point. And so we're seeing a real need on that front.

I will direct next to Adam and Bill, why do governments want alternative to SpaceX. They seem to be doing very well. But I think from what we're hearing, there's a significant desire to diversify. Can you maybe talk about that?

I will give it a first run here. Monopolies aren't good for anybody holistically, whether an organization intended to be that or not, choices and flexibility, particularly around issues of national security are good for the nation. And they're good therefore for those aligned with our nation and the world geopolitical picture overall. And I don't think that makes any assessment whatsoever on the quality or the capability that, in this case, SpaceX provides far from it. I think we aspire to be able to be as predictable and dependable at great flight that they've achieved. And that's where the market needs to go. But I don't think we should ever mistake the current state, which is driven by what is available with the desired state, which is what sized appropriately. I don't believe -- we don't believe, as you can imagine at Firefly that a one-size-fits-all solution of all launch platforms is an economic driver any more than it is in any other modality of transportation. And I don't believe that's the way that space is going to shake out. The reason things fly on the platforms they do today is largely because of availability. So I think over the next 3 to 5 years, as the winners and losers shake out, you will see customers then migrate towards what makes the most sense from them from an availability and economic and an appropriate size perspective. And so the defense customer is very much driving that need. There are some things that fit well on a small rocket, a medium platform or a large platform. And when those are available, then the customers will make those choices appropriately.

Yes, I think I agree with that. I think I would add a few things. I mean, you kind of have to assume like SpaceX, we all know if you -- any space news that you see is dominated by SpaceX, right? They seem to suck all the oxygen out of the industry in a lot of ways. And I think that especially when you talk about NASA security, you've got to rely on the [ malevolence ] of Elon Musk, right? And I think that that's -- that might be a bit of a stretch in some situations. So I think the market -- as a nation, we need diversity of supply for launch. We absolutely have to have that. I think in the commercial markets, you also need diversity of launch because you can just imagine the anguished conversations that must be taking place right now with Constellation operators when they have to go to Elon and say, "Hey, I need you to launch my competing service? Like that's got to be a sole sucking experience. So I think that alone, I think, both on the National Security side and just for the commercial optionality that's necessary for a healthy ecosystem. I mean it feels very, very, very, very unhealthy right now. The market needs more options, particularly in the medium and larger class. We'd be perfectly fine if there were no other small dedicated launchers by way. But I think on the medium and large side, I think we need more competition. And we're going to hopefully do our part and bring a Neutron to market here at the end of next year, which is a 13-ton reusable platform.

One more in terms of what I think we can all agree on and this please rapid fire up because we've got a lot to get through in the next half an hour. Pricing, what are you seeing? Is it higher, lower? And if so, roughly by how much? Bill?

Look, I don't even think we've seen what the market's going to do price-wise because, again, availability is constrained. And so what I know for sure is we've not had to lower our prices on any of the platforms that we're selling. And I don't expect that we're going to need to do that for Alpha, for our Blue Ghost lander, for [ Electron ] orbiting spacecraft, and we certainly haven't seen that for our medium launch vehicle. I think a lot of this will then shake out over time. But again, this notion that it's a cost per kilogram game, and that's the only thing that matters. I think is a foolish proposition. It's not true in any other modality of transportation. It's not going to be true in space either. We don't have cost per kilo conversations at all, right? -- if you only fill up half a rocket, you're not getting a discount, right, for the lack of helos that you consume. So I think that we've actually seen pricing firm up. So as some of these as Bill said, kind of these slideware, vaporware companies have kind of gone away where they made a lot of bold predictions about launching hundreds of times per year or doing other crazy things. It just hasn't happened. As those kind of fall away, you're left with a few people that have actually executed and that's just naturally led to firmer pricing in at least in our markets.

Yes. I think we're seeing very solid pricing dynamics. And as people buy dedicated launches from us, our average price per kilo is actually way higher than our target. What -- we don't see that stopping anytime soon. But demand is solid enough that this will continue. And it's something that I think will have to be appreciated in each segment of the market, of course, as you are with -- if you buy a dedicated launch with a small, medium-sized launcher or if you go on a larger rocket, what may happen, of course, is that the given the mix between all of these segments, the average price in the market will go down. So it's going to costs you less to -- like as a market in general to bring satellites to space. But on a segment-by-segment basis, the dynamics are very, very solid.

I'll just add to that some real very quickly. So we've announced $1.8 billion in backlog across 9 customers. I don't know there's been some speculation on sort of the nature of these contracts, and we haven't announced pricing or terms, but I would say to you all these are launch services agreements of the form that you would sign for a Falcon 9 today, they -- we have -- are now charging 50%, 50 percent higher pricing than we were 2 years ago. There is material cash from customers coming as part of these contracts. And so we're super proud of the deliberate strategy there that we've taken on that. And I think it shows the confidence that customers have in timeline and execution capabilities on our side.

Let's shift to some areas potentially, there could be some different views. So I'll start with Adam. You have the most flight heritage on the stage, what are some of the key lessons that you've learned? And I think it's very difficult, obviously, to scale launch. Why do you think that is?

Well, I think if you take it kind of at the extreme, the first rocket that you launch, it's like it's the most lovingly cared for thing you can imagine, right? You've got PhDs and other really smart people like pouring over every nut and bolt and everything is fastened properly, and it's just exactly as it was designed to be. You get to your 40th rocket, you've got people with not -- they don't have PhDs. They're following work instructions, they're under time constraints to perform each part of their task because now you got to make money doing it once you've done it 40 times. So I think that you think it's going to get easier, and it just doesn't get easier. It gets harder. The challenges are different between building your first and building your 40th, but they're no less. I think the other thing is a lot of people that, again, haven't scaled a business like launch, they underestimate the intensity of the infrastructure needs, both on the manufacturing side and also just operating a launch pad. So we have 2 pads that we operate in New Zealand. We've got a pad that we operate in Wallops Island, Virginia. We're building another pad in Wallops for Neutron. And then you start thinking about all the things that go along with the Rocket Program. You've got health and safety teams to make sure that nobody gets hurt at the range. You've got the MRP systems and ERP's that you need to plan a product that you manufacture that has 66,000 parts, a lot of our lead time. You've got the ITAR constraints that go along with the challenges of diversifying your supply chain and bringing costs down. I mean, I spent 25 years in the semiconductor business before coming to the launch business. And I thought that was the hardest business you could possibly be in, I was so wrong. I mean, launch is way harder than the semiconductor business, way different set of complexities. Now I think the opportunities to create value are also much, much greater right? Because it's something like the people talk about the risk of commoditization in launch, I don't buy that for 1 second. I mean if you want to come spend a day doing a tour of our factory and going to witness a launch and everything it takes to pull a launch campaign off, I'd be happy to kind of show you that. And the -- I don't believe that it will ever commoditize. I think it's a tough, tough business. There's always ways to differentiate, create value and I think that's what people under -- kind of underestimated or don't appreciate is how hard it is to do just the everyday things of running an operating launch business.

So I'm going to ask Mo, David, Bill? Launch is very difficult and scale to launch is -- sounds also very difficult. What types of technology or innovation are you trying to leverage to avoid some of these past pitfalls? And can you maybe give us some examples in the design or the engine or some other aspect, which you think is helping in that.

I'm happy to kick it off. I think, look, I agree with everything Adam said, like rockets are a nontrivial problem. So the more you can do to limit the sort of science risk that you take along the way, the better off you're going to be. So like for us, I'll pick 1 example. So propulsion notoriously is, I don't know, 25% of the cost of a rocket, but probably 60% of the complexity of the rocket. And so the first rocket we built Terran 1 was a LOx -- methane or liquid oxygen methane architecture propulsion system, which, of course, is a fuel of choice for many of the newer vehicles being built for a variety of reasons. I think we were the first vehicle in the West to fly that engine and having kind of flight data for that was incredibly -- is just incredibly valuable. And so the architecture of our engines for Aeon R, which is the engine for the larger rocket as a LOx methane engine and also a lot of other similarities, gas generator, et cetera, et cetera where we feel really confident about our ability to deliver on that engine. We already have done, for example, more than 800 different tests on components and the like on Aeon R. We're doing dozens of tests a week at this point at Stennis. If all goes to plan, there'll be mission duty cycle test here in the next couple of months that would be the fastest development of a rocket engine in history. And I think it's those types of architectural decisions that ultimately are critical to making sure you can scale from what you may have done in the past or what you are looking to do next to.

We're doing an incredible amount of work on every component of the rocket. As I mentioned, we're fully vertically integrated. We've done a lot of work to have harmonized parts, components, policy, so -- and on Fluid Systems and Avionics really harmonizing each component to streamline manufacturing, make things cheaper, make things more efficient, make things simpler. Our engine is -- LOx propane actually, which hasn't been done very much. And that comes with a lot of advantages in terms of reducing emissions comes with also advantages in terms of density. And yes, that required a lot of work to accomplish, but that's done now, and our engine is fully qualified. So that's behind us. We also did a lot of work on materials. We're 3D printing, the whole engine -- virtually the whole engine. And we've done a lot of work on materials there also carbon fiber winding for the structures, which -- where we've really perfected all of the manufacturing processes to come to something that is super automated and cost efficient. So -- and as Mo mentioned, it's -- or sorry, as Adam mentioned, it's not just about the engine, it's about all of the components. It's about the test sites, which we fully developed internally. It's about the launch infrastructure. So really, I think the -- where we've invested a lot is in making sure that at every step of the process, we optimize costs we go as fast as possible. We optimize quality and we can develop in the most agile possible way.

So what I would say is what we do technologically that's different or unique or that we're particularly good at as we build incredibly strong light flexible structures out of carbon composite on the structure side. So we are fully committed to that. The Alpha Rocket is built that way. The Blue Ghost Lander is built that way. So as the Electron Spacecraft and the medium launch vehicle will be built that way on the same assembly line in the same production facility with the same engineers, technicians and machinists that build those technologies. On the propulsion side, we fly tap off cycle technology. It's incredibly efficient. It is simple from a supply chain perspective, and it scales extremely well. It is why Miranda, which is the engine platform that will fly the medium launch vehicle has moved so quickly through its development cycle. It is on the test and right now if you want to come to Austin, you can watch us hot fire it in the next several days, and that is record pace for an engine development program. And again, it's -- you can come see this. It's not just a press release. You can come and be there and watch what we're going to do. I think operationally, what we do that's different that is helping us move the industry. I don't know that it answers your question, Edison, about how do you avoid the pitfalls. But what we are doing, that we're particularly good at that I think the rest of the market will move towards is tactically responsive space, and that's the ability to do what has taken all of us weeks and months and in some cases, years to do the condition of payload get it ready to go and then go through a launch sequence in a rapid amount of time. We just completed on our third launch 2 months ago. We completed the payload conditioning timeframe in 57 hours that had never been done before. And then we turned the launch from literally the customer saying go to the rocket being ready to go within 24 hours, faster than that had ever been done before it was 21 days. We're going to stay in that cadence. We're back on the launch pad right now. We'll launch again in a month. And so we're in a once per quarter launch cadence with Alpha and we intend to be responsive every time we launch because I believe that for issues in national security, that's particularly relevant, but more importantly or just as importantly, that drives a significant amount of change in the commercial applications. And so satellite providers, for example, can say instead of sparing on orbit and keeping a significant amount of my capital in my business plan in orbit that may never get called into service. I can now think about sparing that on the ground and then when I do need to create a fix for loss of coverage or end of life or collision, I can do that within 24 hours and send the latest greatest hardware up that radically changes the way that we think about the build-out and the investments in the commercialization of space. We're the first to do it. We won't be the only one that will do it. Several of my panel mates can do that and will in their time as well. And I think that's where the market is going to move. And so we're leaning pretty heavily forward on that capability.

Shifting gears to the more business aspect. I think we've established is obviously a constrained market. Pricing is strong. But getting to a regular cadence is very difficult. And all of you are working on a new rocket of some sort. How do we think about the developmental cost? Has that been trending higher or lower over the past, let's say, a year?

Yes, I'll take a stab at this. What we chose to do with our new rocket is just build a larger version of the existing rocket. So if you come and look at the medium launch vehicle, it's a larger version of Alpha. It's very similar engineering structure to Alpha. The structure itself, 60% of the components are common between the 2 rockets. 100% of the engineering force works on both. The supply chain is identical for both, the propulsion system. If you look at Miranda right next to Reaver, which is the main stage 1 engine for both rockets, Miranda for the medium launch, Reaver for the Alpha. You'll see striking similarities because it is a larger version. It's not a new engine. Much of the engineering science and the data that we collect from Reaver went right into the development of Miranda. So have costs gone up? I don't know. They haven't invited me into their financial reviews. We've got our own that we conduct on a regular basis. But what I do know is that's allowed us to move faster and control cost significantly. And so that's been a great advantage for Firefly.

From our perspective, I think one key advantage that we have in developing is that we're building from Europe. And Europe has a much lower cost for engineers than anything you can see in this country. If you're talking a factor of probably 2, I would think. So that's something that's really great for us. We can also attract a lot of talent from around the world into Europe. And it's probably easier to get non-nationals to work for us than it is in the U.S. because of regulation. I think another factor that we have that keeps our development costs relatively low, I would say, is that we can build test, rebuild retest in a very agile way because we have that industrial capability at home, which is just a block away from our office. So our design teams, our engineering teams, our production teams are very, very closely integrated. And that allows us to develop fast and to develop at a very cost-efficient point.

I'll just add. So we have so far announced $1.3 billion to date that we have raised through a Series E. I would say Edison the bulk of that money is gone to Terran R development, and it will take more than that to develop a vehicle at the size that we're developing. That's just the reality of building a program of that magnitude. These are massive construction projects like just in share concrete and steel and what's needed for building launch pads or test capabilities. I will say our risk not there, though, is very much akin to those that may be familiar with like a Falcon 9 Block 5, like circa 2015, 2016 era for SpaceX, like enough hardware to learn and iterate and keep moving, but not trying to make a perfect rocket, and that comes with some amount of cost. So yes, and then your question on has it gone up? I will say -- and I have a ton of respect for my peers here on a CFO landscape, like being the CFO of a rocket company is like a really, really hard job. Like I am still waiting for someone to show up and be like, guess what, it's going to be cheaper, I'm going to do it faster, and it's going to be more performant than you thought, right? So it hasn't gone up because of supply chain dynamics. It's just like real life keeps coming at you. And I think the more we, collectively, as a community can gear the world to be a little bit more beaten raise oriented, the better of a reputation will have than maybe SpaceX, as I said, have tremendous respect for and what Elon has been able to do. And things wouldn't have been possible in the way he says them and then does them still in record time. It's amazing, but don't have a good reputation. And so maybe, Bill, I'd love to invite you to my financial reviews because [indiscernible] all you've done at Firefly.

I think I'm busy that day. Sorry.

I would say that -- so when we came public in August of 2021, we came through on the leaseback process. And for us, [ SPAC ] is actually not a 4-letter word. It was actually a great process for us because we just knew -- well, the only reason why we actually came public and did it through a leaseback was because we knew we would need a significant amount of capital to get Neutron pad. And so at the time, we said, "Look, it's going to take us 3 years, it's going to cost between $250 million and $300 million, and that would basically put us towards the end of 2024, which is currently the schedule that we're on for Neutron. And if and when we pull it off, I mean, that will be a pretty commendable deliverable just to be able to deliver a reusable 13-ton medium-class launch vehicle with all kinds of new technologies on it for that -- in that timeframe and that cost. And I would say the cost -- again, it's not materially different now than what we thought it was going to be 2 years ago. I would say that all the issues that we thought we would come across or we kind of have come across those because, again, having done it on Electron, we kind of knew the pitfalls that we were going to face. And again, I don't think there's been any real surprises. And unfortunately, recently, we've had some validation of some of those development milestones that are key to the program. around propulsion, around the composite structures and so forth. So everything is kind of teed up and kind of on schedule and looking like it's good to go. So -- but every rocket program is just 1 big series of risks. So we got a long way to go still, even though we're targeting end of next year.

I want to ask everyone about the unit economics and I understand time is we do running out of time a little bit. So maybe limit to maybe a little bit to the response a little here. To make the business case compelling, how many launches do you think you need? And a follow-up to that is how do you think about reusability impacting those economics?

I'll take the first path of that. So for Electron, we've been very clear it's 24 launches a year. It's 50% of those launches be reusable and having an average selling price of $7.5 million per vehicle. So that gets you to a non-GAAP gross margin of about 50%. And then that drops about kind of mid- to upper 20s operating margin from that. So those are the economics for Electron. I think we have pretty good confidence because again, we've just done it so many times, and it's becoming a relatively mature business as much as any rocket can be. . For Neutron, we think it will follow a relatively similar path. The difference between the 2 is that Neutron was designed from day 1 to be a reusable vehicle. And so all those reusable economics kind of come into play a little bit sooner. But we think the margin profile, because of the fact that the ASP is almost an order of magnitude higher for Neutron than for Electron, it kind of gets there a little bit quicker.

Yes. Pricing is the first variable. And so you got to have the right sort of product and product market fit. And I think from all of what we have all said around the supply-demand dynamics, we'll continue all to see tremendous pricing power as I think most of us have demonstrated here. And then reusability, like the dirty secret in rocket says, your bomb matters a lot less and reusability drives almost all of your economics. And so making sure that you can get to reusability at the right juncture or whatever you're trying to do, whether it's the first launch or the seventh launch or what have you, but you have to get to reusability to drive economics. And if you can do that, at least on the larger vehicles, it's a 50% -- circa 50% of free cash flow business that you can drive. And it's also a negative working capital business. And while you're growing on the rocket side, these are all prepaid arrangements. So those would be the 2 big drivers.

Yes. I think from our standpoint, we are -- our vehicle is a 1 ton payload vehicle. So reusability at that payroll point doesn't make such a huge difference because you need more propellant, you lose some payload. Yes, you save on some costs or if your first stage is reusable. But all in all, it balances itself. What makes a big difference for us is more -- and from a pricing perspective, I think compared to what Adam is mentioning were at a lower pricing, we're at $11 million pricing point for a onetime rocket. But what makes a real difference is the ability to really control the costs in terms of the supplier margins that we're eliminating and a lot of automation in the manufacturing, eliminating some of the human element and there being able to serial produce very efficiently. So that's what really makes a difference in our unique economics and makes them really, really sustainable.

So unit economics for Alpha, we're profitable somewhere in the 8 to 12 manifest per year. Good news for us, I think, is that the market says it needs more than that. capacity-wise out through 48 months, and we'll hit that cadence somewhere in the 2025 arena. Reusability does not come into play. The trade-offs of -- for the 1 metric ton rocket just don't drive the economic sense to be able to have a reusable rocket there yet. That might change. But we think through the next 48 months, there's no plan to do anything with that on the Alpha Rocket. Medium launch vehicle, that cadence is about 6% per year. And again, demand signature says we should hit that as quickly as we're able to fly it. And so it's not an issue of will the customers be there. It really is an issue of how fast do we push and our perspective on that is we will not push an unforced error. So that rocket will fly. We're going to deliver the first stage of that at the end of next year. It will fly as a fully stacked first and second stage in 2025 with a specific intent to qualify for NSSL Phase III and reusability there most definitely on the second stage. I think we're not yet convinced that the economics say so on a fully reusable second stage. We have the capability to do that, but I'm not sure that, that cost trade-off is worth what you get from the unit economics. And so we're going to judge that very closely. And it won't be a technological issue. I think we'll have choices there to go one direction or another. The market really defines that not Firefly.

All right, seems to have a little bit of disagreement there. But let's -- in the interest of time, let's move on to the question I actually asked the investment panel earlier. Obviously, there's been a lot of launch companies more than obviously the 4 on the stage right now, we also got some quasi-government entities. I'm just going to be a little bit more precise by wording in your view on the market going forward, let's say, in the next 3 to 5 years, how many launch companies excluding the SpaceX, I think you a bit launched from ground to orbit, do you think is a healthy amount for the market or the segments that you're in?

I think there'll be a half a dozen and no more than that.

Yes, I'd say 6 to 8, yes.

I agree with that. I think it's -- ultimately, there are going to be -- someone said this earlier, maybe on that panel that they're going to be differentiated across sort of capabilities and things they can do. So it's not going to be the same kind, like our own estimates by the way, for us, believe that SpaceX will continue to take up the dominant share of that, a majority share of the Up mass but they will be dedicated so much to StarLink that there's a market beyond that. And that's true just for telco Constellation back to the end market dynamics I was talking about earlier. I think if you start to subscribe to real things happening right now, like pharma manufacturing and privatization of the space station and even some of the countries talking about tourism and the like and hotels, and that may not be 3 to 4 years out, but over 20 years, it's going to add a lot of dynamics move Mars like you're going to need vehicles or different sizes, doing different things of different capabilities. And it's somewhere in that 6 to 10 range in the "West."

I think you have 6 in the U.S. and probably 3 in Europe.

It's actually not too different from the panel earlier. I think we had a couple of 6, 6 in a range. So actually not -- is actually pretty aligned.

I do think it's interesting that, that same question a year ago or 2 years ago would have yielded a much higher number from panels like this. But I think what you're seeing is, and that's why we do need to watch this play out. You're seeing the pack separate. There are winners and there are losers and nothing substitutes getting there and then learning from what you get the data you gather from 0 gravity. And once you have that, it gives you a decided advantage to move faster and further forward. And then investment dollars follow. And so I think what you're seeing is the market is responding to those who have demonstrated capability, and it's going to get harder and harder for new entrants to come up with a great idea and say you should fund me, too.

Last question, but before I get to that, want check with the audience. Anyone brave enough to ask anything in the last couple of minutes. We have one in the front.

[indiscernible] what level of runway are you guys generally comfortable with? And how do you think about increasing that runway from whether it be equity or debt, especially in this environment?

I can take a shot at that. I think the answer is you can never have enough cash, right to run a rocket company. You really can't because you have bad days in the launch business. And so you have to have the ability to absorb those bad days. So I think if you -- I mean, if you're running less than a couple of years of runway under kind of a worst-case scenario, I think that's where you will not be sleeping well at night.

I'll just say I don't sleep very well at night and I haven't since I've joined the rocket company period. I agree with what Adam's saying. I think the balance there is optimizing for runway and it's going to sound counterintuitive, certainly to a creditor is actually the wrong strategy on rockets, like there's a real risk nob here that you've got to dial in, and we've got examples in our industry of companies that have over optimized to make a perfect rocket or conserve cash. And oddly enough, you're actually introducing a ton more risk to the system. And so what that right or in that risk now is a super important part of like all of our jobs sitting here to figure out like how much hardware should you just blow up and park but don't try to save too much money, and that's not something a creditor wants to hear. But there'll be a time and place for doing that. It's not in the current journey for where I think all of us are on risk.

Yes. I think the way we think about it is we're constantly raising cash. And it's not like we're not saying, "Oh, we do this series and then we'll do another series, and we're like constantly talking to investors. If we have -- we need to have as much cash as we can. And if that's not to use this runway that can be used as acceleration because that business also has so many opportunities that there's many things we can accelerate if we have more cash flow. It's always -- it's a balance to be found. But yes, generally speaking, I think, to what Mo was saying, it's not -- you shouldn't have a Matusian way of thinking about this just think in terms of being on the safe side, but also being able to seize opportunities.

Yes. Nothing really new to add here other than to say I think it's the right approach, particularly in this market, to ask the individual companies because we all have different cost structures. Can you get to your next tangible milestone, whether that's liquidity event, whether that is a transaction of some sort. Can you -- do you have enough cash in order to do that. And so the answer to the question is, if you can raise capital, if you are an interesting investment, you should go do that right now because there are a lot of cases where there aren't investment-grade opportunities in space. So.

Awesome. And one very last 1 phone question for everybody. Starship, supposed to fly very soon. Quick yes or no, is it successful or not?

I hope it is. And I think anybody that hopes for them or any of us that get on the pad to fail, then I would ask, why are you in the sector. A failure in launch for any of us, it's a bad thing overall for the sector. I hope they're -- I hope they're dramatically successful when they go.

Yes, that rocket being successful would be a fabulous milestone also for all of humanity. It can bring tremendous progress in many, many things. So are they going to be successful? I mean it's -- what they're showing if they do launch very soon is that they can bring in a rocket to a pad after a failure very, very fast and that's really impressive. So I think that's a success in and of itself. And then even if the second 1 is -- it doesn't go to orbit, then how fast they're going to bring another one to the pad would be another thing to watch.

Yes. I totally agree with what these guys said, really, really wanted to succeed. I think if you put me and pin me down and said what happens on Friday or whenever it launches, I'd probably take the under. I think it happened real fast, and it's a monster vehicle. It's really, really, really hard what all of us are trying to do with, especially what they're trying to do. And so my gut says it's going to take another cycle or 2 or maybe 3 before it's successful. Now I want to see it, I want to see it up in air. I think it will be amazing for humanity. So.

Yes. I would say, I hope it's successful, and we've all learned, you probably don't want to bet against Elon.

Fair enough. Fair enough. On that note, thank you, gentlemen, for joining. This concludes our final panel [indiscernible] say so. Thank you for joining us, and I'll see you at the reception.