Rocket Lab Corporation (RKLB) Earnings Call Transcript & Summary

Okay. I think we are officially counting down and are back on the stage. Is this the final presentation slot of the day? Okay. Good. So we're batting cleanup here. I have the pleasure of welcoming to the stage the team from Rocket Lab, CFO, Adam Spice; and Colin Canfield in the Investor Relations team. I think -- Colin, why don't you open it up with the regulatory stuff to keep everybody [indiscernible]?

Sure. Today's discussion may contain forward-looking statements. All statements are based on Rocket Lab's current expectations and beliefs and may involve risks and uncertainties which are beyond Rocket Lab's control. Actual results may differ from those expressed by today's statements. Factors could cause actual future events to differ materially from the forward-looking statements in today's presentation.

I was just reminded of back when I was a kid. I don't know if this guy is still doing it, but there was this really deep baritone voice that comes over and does the voiceovers on movie trailers. You sounded exactly like that. I don't think they do that anymore, right? They show you pretty much the entire movie now, right? Yes, my wife and I always joke that we've stopped watching the trailer halfway through because we don't want to see the end of the movie by then, right? Anyway, I digress. Adam, thanks for joining us.

Thanks for having us.

Look, right out of the gate, I want to congratulate you and the team for couple of big milestones here for the company in the last, I don't know, 6, 8 weeks, maybe we go back 8 or 9 weeks now. So you announced there at the end of the year a pretty large contract with the U.S. government, and offers up a really nice positive proof point for customer adoption, the things that you all are doing. And I want to get into that in a little bit. And as well you did a financing that I think provides plenty of runway for the company. It's going to let you kind of accomplish what you all have set out to do here, which is pull together a couple of really interesting businesses inside or underneath the hood of Rocket Lab.

So why don't we start with -- maybe start with the financing and kind of what do you think that, that really enables the company -- well, you know what, actually let's step back. Why don't you talk to us a little bit about what are the problems you're trying to solve for the world, how you're approaching solving for those things, and then talk a little bit about how this recent financing is going to enable you to do that? How about we frame it that way?

Sure. Yes. That's good. So I would say that what we're really trying to solve for is providing an end-to-end one-stop solution for space services to the economy. And the way we do that is we've taken an initial beachhead position in small dedicated launch, and as many people probably can appreciate, launch is the hardest part of the ecosystem. Nothing is easy in space. Building satellites are not easy, operating orbits not easy, capturing images or transferring data is not easy, but launch is definitely, we view, as the hardest part of participating in the space ecosystem. But now that we done that, we've had 44 launches of our Electron launch vehicle, which is by far and away, the dominant small dedicated launch vehicle in the market. We then kind of took an eye towards, well, what are all the pieces that have to come together to enable a true end-to-end space play that really doesn't exist today? And we've gotten very consistent feedback from our customers, particularly government customers, that are saying, "Hey, look, we want to have a partner that can really service our needs from concept to orbit." And so that's resonated with us. And Pete's initial vision for the business was never to be just a launch company. In fact, he designed Electron in such a way where it would be leveraged in a way where you can actually put a payload on orbit after you delivered a payload for a customer. So the size of the rocket, its architecture and everything around it but designed to kind of kill 2 birds in one stone. But now we're in that further. And we've gone out and said, "Okay, well, when you step back and look, what are you going to need to be that full end-end provider?" Launch, we have solved, at least on the small side. We're working on the medium launch with Neutron. But as we were developing our Photon family of spacecraft, we realized that there were certain elements of the supply chain that were going to gate our ability to really create a scaled business. And so we basically took a strategic review of a satellite and literally kind of looked, broke it apart and okay, what are the key subsystems that we really need to own? And that included things like added 2-direction control components like reaction wheels and star trackers and sun sensors that had a 1 year or longer wait time to get your parts, and then the software that basically does all the coordination of command and control components that do the overall tasking of the satellites for pointing and stabilization and so forth. And then we realized you can build a great rocket and have a great satellite, but if it doesn't separate properly from your rocket, then all is lost. So we bought a company that does the separation systems. And then after that, we looked and said, well, what's the next most expensive part of a satellite offering aside from payload, and it's the solar. We bought a solar company called SolAero, which was one of 3 major space-grade solar providers in the world. And so all of that kind of goes together to provide the ability to build exquisite things in-house. So we then said, okay, well, not only do you have to build stuff, but you have to -- there's a lot of IP that needs to be generated to be able to do really sophisticated things on orbit. And so we started choosing satellite design opportunities or contracts that would teach us something, and our customers would pay for us to learn. So that's essentially what we've done is we've gone out and we've acquired a bunch of key subsystems. We've developed other key subsystems in-house. We've executed on some pretty big programs that allow us to prove that we can build things that can operate in really harsh environments under stringent conditions. And really, all that's missing now from the grand scheme of things is kind of fleshing out some more of those key subsystems and -- on the bus, also puts in payload kind of capabilities in play, but then also develop that end market application. So I would say it feels like we're several innings into this game, and what this capital raise really allowed us to do was to go exercise some of those gaps in our portfolio and capabilities. We're pretty aggressive in the fact that we've acquired 4 companies, which is a lot for a young company after just coming public. But there are some other tuck-ins that we need to go address. And so this raise really allows us to do that. This capital raise was never focused on supporting the existing business of scaling Electron and getting Neutron to the pad and executing on the space of some contracts we have. It was all about bringing new capabilities. And we had to make sure that we could execute on that commitment that we made in coming public to get Neutron to the pad, and so we were reluctant to go out and kind of continue to exercise some of these inorganic things that would accelerate our ability to kind of flesh out the portfolio. So this really frees us up people to do that.

Okay. Great. And the gaps that you're talking about and the tuck-ins that you'd like to do are going to be more on the spacecraft side of things?

Yes. So I think it's really going to be more on -- there's a couple of key subsystems in the bus that we still work with third parties on that we would like to have a little bit more control over. And then, of course, we currently don't have any payload capabilities. So payload is going to be one of those. It's more of a greenfield opportunity for us to really start building some capabilities there to when we either are a sub for the bus to have as many pieces for that or the prime where we put it all together. Again, we're just looking to extinguish or retire any risks to these pinch points where either time or cost are going to be very important to delivering the program.

And payload is a pretty vague word to use, I guess, right? Because that can mean a lot of different things. Are there any particular kind of mission sets that you think where you're seeing a lot of demand where you want to make sure you're well positioned?

Well, I think that it's true. In every space vertical, there's kind of multiple branches to those, right? So you think about the fact that with earth observation, you've got optics, you've got SAR, you've got [ SIG ], you've got lots of different ways to play those various markets. In the comm side, you've got probably even more different flavors or pads you can go down, whether it's direct to mobile, broadband communications, backhaul for government and enterprise customers. So it's a very broad area. So we haven't nailed that down yet as to exactly what subvertical that we're going to focus on. Right now, we've got our hands full executing on the big programs that we have in-house today, which include the MDA Globalstar contract that's addressed -- it's supporting direct to mobile, and then this new SDA beta program, which brings a different level of functionality, which we're dealing with other folks to provide the payload on that.

Okay. Great. So as we think about the next couple of years after this refinancing, what comes -- not refinancing, with this financing exercise, what we -- what investors are likely to see and what they should expect then are a few M&A announcements over time to add some capabilities into that. Will -- they're immediately following those kinds of things? Will we see some more contracts following new awards, that kind of thing? Or is this kind of enabling you to go execute on what you currently have on your plate?

I think it just gives us more confidence and kind of self-determinism when it comes to executing on contracts that we could probably get anyways. But it really allows us to get a bigger share of wallet as well, right? So you can -- one thing that we found is it's been very effective for us as we've acquired these capabilities where you eliminate margin stacking in the model, right? And so you can bring forward a much more cost-competitive solution. And also just, as you're aware because you spent time in the industry as well, it's like it's a -- there's a lot of things that have to line up, a lot of stars that have to align, no pun intended, on a program, and they're all incredibly complex. And if you have as much -- the more you have under one roof, the better chance you have of everything coming together at the right time and in the right way. So it's really all about control. And control is really a function of, again, giving your customer comfort that they're going to get what they contracted for on time and on cost with the performance that you committed to. So it's really all about risk elimination. And with that risk elimination, we think market share is going to accrue to us because there aren't that many people -- there aren't any that I'm really aware of in the new space arena that have the capabilities that we have today, never mind what we're going to have once we've exercised some of this war chest. The biggest piece of that is really launch. Again, launch, again, we view as the hardest piece to get right. And I think that the days of funding kind of new launch start-ups is largely behind us. I mean we still see some financings kind of that get disclosed, but we scratch our heads like, what are they -- do they really think there's still a window for that? Because we think that the launch game, it's so competitive and it's so capital intensive and heritage -- like everything in space is super important. So we think that, that window for kind of new entrants into launch is, for the most part, probably closed, at least for now.

Maybe I'll put a finer point on my question, if you don't mind. Just -- do you need to go out [ and do ] some acquisitions here to be able to execute on some of the contracts that you've already signed up?

No. Absolutely not. We've got everything that we need to execute on contracts that we have. Could we execute perhaps, again, better? Yes, we could. And then there are still opportunities, given the long duration of these contracts that we sign up for, where we can still intercept some of those opportunities with some of the acquisitions that we see out there as doable.

Right. And maybe to double click on this contract that you just signed with the SDA. Is it fair to characterize it as kind of a firm fixed price program?

It is a firm fixed price program.

And how much development work, kind of new stuff you're doing on this program is there at this point? Because as you're probably increasingly becoming aware, the investment community is -- they're becoming less constructive on firm fixed price development programs. So just kind of walk us through what the risk profile looks like on this one.

Yes. Fortunately, for this, if you look at the backlog of spacecraft that we have and the contracts that we've been executing on over the last several years, they're not trivial programs I mean there's pretty sophisticated ones, including there's a couple of satellites that we're executing on for NASA that are going to map the magnetic pull of Mars, right? We've done some pretty sophisticated developments for the MDA constellation needs there. And so we're able to leverage a lot of the IP that we've developed for these other programs towards this SDA contract. There certainly is more R&D to come, but I would say it's not as heavy in R&D lift as pretty much anything that's come before it. So we've now actually got our IP portfolio and kind of inventory of capabilities and subsystems to the point where a lot of that work has been done. Because some things were really complicated to do, like, for example, when you look at the Globalstar MDA program, that required us to develop some IP that could survive in some pretty harsh radiation environments, have longer lives on orbit than a typical small satellite constellation. So those things have really kind of allowed us now to kind of take those technologies and leverage them across things like SDA. So I think we'll benefit a lot from the legacy R&D that we've done over the last 2 years, but there will be still a not trivial amount of R&D for new capabilities, because this is a different platform for us than we've done before. And I think that what this program does, and we try to be very strategic in only taking on work that ultimately leads us to a point where we can put it to work for our own benefit, for our own infrastructure on orbit down the road where we want to own applications. And so this program is no different. But again, it will carry forward a lot of kind of R&D value or leverage that we've done in prior programs.

And you mentioned that you will be [ airing ] the payload from somebody else. Have you named a partner yet on that?

I don't believe we named the [indiscernible].

Do they have to go out and develop something newer? Is this something that they've already done before?

I believe there is some R&D that's got to be brought across the line on that program as well, but it's one where from our engagement, both with the end customer plus the subsystem vendor, we're very comfortable that there's a high level of commitment from the government customer to get that technology across the line. It's very strategic.

Okay. And do you know off the top of your head, PDR and CDR, what the dates are on that?

We won't release all of that data, but essentially, if you think about 2024 as really kind of closing out the remaining R&D elements and then we start to kind of go more into the actual kind of the manufacturing side of things in kind of, I would say, the second half of 2025 with payloads being launched in 2027. And that will be bid out separately under the NSSL program. And of course, we'll put our hat in the ring on that with Neutron. So the timing actually might work out pretty well for that.

Right, right. Yes, I want to get to the timing on some of this in a moment. So talking about, if you're willing and able at this point to talk about kind of the rev rec, I think this program in particular is going to be a [ percent complete versus ], right? So we start out probably slow, and then we go up and then we plateau for a while and then we come down. Is that kind of the right way to think about it?

Yes. No, that's exactly right. So Rocket Lab has a mix of different revenue recognition models. So we have some products that if they would launch, it's a point in time. So we don't recognize any revenue until we hit the intentional emission on the launch. For some of our spacecraft components that we sell into the merchant market, those are ship and bill. And then our larger programs like in MDA Globalstar, now the SDA program, those are cost completion, as you mentioned. And yes, they typically start off pretty modest on the front end and then move much more kind of into sizable revenue recognition when you actually start receiving subsystems from your vendors and start assembling things together. So you would expect some, I would say, some minor revenue contribution from, for example, the SDA beta contract in 2024, but not -- I wouldn't be -- that too interesting [indiscernible] in '24. They're billed in much more in ''25 and '26. And then we, not unlike the other programs that we've secured, we actually have the [ on-orbit ] management contract that will go on for a period of time after that, but on a much smaller scale.

Yes. Yes. And not that there's a peak for one particular quarter, but I suspect the way it will go, it goes up, and then plateaus for a little while. But do you have a sense of half year when we get up to that higher level of revenue? Just trying to figure out how we model this program.

I think we'll get much more clarity on that as we progress through the design phase and get a few of those CDR, PDR kind of phases. But I would suspect that we'll have -- as we exit 2024, we'll have a pretty granular view of kind of what the quarterized kind of rev ramps look like in '25, '26 and '27.

Okay. Yes. Great. Yes. Because we're going to screw the modeling up unless you kind of help us out on that one. I took a stab at it, but I have no idea if I'm anywhere in the ballpark.

Well, what's helpful for us is the fact that we do have that diversity of rev rec in our model overall and the fact that we've built a fairly diversified business now between launch at roughly 1/3 of our revenue, which in and of itself is a pretty lumpy business because -- by the definition, it's event-driven business. And in that business, we're very much at the mercy of our customers showing up with their payloads on time because you can have a whole raft of rockets lined up and if the customer fails in TVAC, then things push out. So we've experienced some of that over the years. But as you get a more fulsome backlog or manifest, that starts to kind of...

Hopefully you don't see it as much, right?

Yes. And then on the 2/3 of the business, it is space systems, again, we've got a nice mix of component business into the merchant market, and then we have these more programmatic things that you can really start to get confidence in as long as you're confident in your execution and you've got a good control over what your subsystem vendors are doing. Because under that cost to complete, you're also at the mercy of their ability to deliver to you on time. So this is one of those things where there's lots of reasons not to sleep so well at night as the CFO of a rocket company or a space company. That just adds to the many, many reasons why.

Right. Okay. Yes. But to be clear, I mean, this is a big contract for you all. They have essentially doubled your backlog in that business. We're going to see it in the numbers.

Absolutely. Yes.

Okay. So Colin, you just to keep us all honest on our models.

Sure.

So let's just step back for a second. So you have -- what we've accomplished here this afternoon is understanding what this financing is going to go toward. It sounds like it's largely going to be focused on M&A to fill out some capability gaps that you think you'd like to have -- allows you to have great control over your own destiny. Don't need it to execute on current programs, but it would be nice to have in maybe some cases to execute on your current programs. I suspect that you'll want to go buy things that you think are going to allow you to go win new business, right? So you probably have a nice pipeline there. So why don't we just -- okay, that all sounds great. Let's maybe talk a little bit about then the launch business kind of where we are with Electron. We had a failure last year, you're back up and running in a pretty short period of time. You got some learnings out of that. Maybe for those that are a little less familiar, maybe kind of really quickly walk us through what happened, what did you learn on Electron? And then I think as you answer, spent 2 seconds on that and then really just kind of go right into then what the manifest looks like here in '24 and the visibility that you have out in '25 and in '26? I know you're kind of capacitizing to maybe do as many as 25, 30 launches a year. How long can we operate at 25 to 30 launches on that Electron product?

Sure. Yes. So every anomaly is tough. You hope to never experience one. I've been around for 43 launches now of Electron and experienced 3 anomalies. This one was just a really bad set of things that shouldn't happen but did happen together. We were able to mitigate -- well, first of all, we identified the root cause relatively quickly. The FAA gave us a return to flight authorization relatively quickly, and then we took a little bit of a little more time to make sure that we had the mitigation to the point where we had high confidence in those. And now we've been back to the pad successfully and feel comfortable with what we've done there. So really when you think about the Electron kind of road map over the next several years, it's all about just kind of increasing the cadence. Because cadence is Electron's best friend when it comes to margin expansion. There's really a few things that will drive margin expansion there and get us towards our longer-term target of roughly 50% non-GAAP gross margin, and cadence is the most important because it's all about fixed cost absorption. And when you operate things like launch sites that you control, those are costs that continue whether you're launching 1, 2, 5, 6 times in a quarter. So cadence is super important. Reusability is important as well. So we've returned, I believe, 7 boosters now from space. Every time we do that, we've learned a tremendous amount. I don't know if folks have seen some of the pictures and videos from the most recent recovery mission, but the booster looked incredibly good. So that actually is -- represents the -- what we think and hope is the final block upgrade for reusability for Electron. And I think, again, what came back from space is pretty -- it confirms that we think we've done what we needed to do to get the vehicle back in really great shape, so now it's just a matter of kind of testing the vehicle. There's a lot of things, you test the engines, you do hydrostatic tests on the tanks to make sure everything is ready to fly again. So that's going to be probably over the course of the next few months, it's going to get a lot of focus. But of course, once you have a reusable booster, it can bring pretty significant benefits to your margin expansion as well because no longer -- like this year, we have a manifest of 22 launches, so we're building 22 rockets. But I think if you flash forward to the next couple of years where you've got confidence in reusability, then you're building a much smaller set of those, and you can either kind of redeploy or kind of reduce your resources accordingly. I think given the kind of resources that we have, it just will happen to coincide with the ramp-up of Neutron, which is also a reusable vehicle, but we'll need a lot of resources to kind of get that production rate where we need to be over the next years. So we've actually sized the business and the infrastructure for Electron to be able to launch up to 50 times per year, so one vehicle per week. Since we control our own range in New Zealand, we've got plenty of capacity there. There's very little traffic to clear, so -- and then with our Wallops pad, we've got now redundancy across continents and we can support our government customers much more conveniently out of Wallops, Virginia. So we think that business has a kind of significant headroom as far as growth is concerned. We think that -- we've never designed our business plan to need to launch weekly. We've modeled out over the next several years where we think that can get into kind of the mid-30s type of launches per year. We think the market is plenty robust to support that kind, particularly as we've seen competition just pretty much evaporate. We had competition like the Astras and the Virgin Orbits and the Relativitys of the world and ABLs and Fireflys. It's -- I think what it's shown is how difficult it is to do. I mean people think that a small rocket might be easier than a large rocket, and in a lot of ways, what we found is actually small rockets are harder to do than large rockets because they're less forgiving, particularly when you think about recovery and reentering without using propulsive landing, it's -- we don't have that benefit, right? You have to do things very differently. And also when you're talking about a business where you have roughly an $8 million average selling price, it doesn't necessarily mean that you need fewer safety people just because the rocket is smaller, right, or fewer GNC people, because the modeling for flight doesn't really care if the rocket is a 15-ton rocket or a 300 kg rocket. So you've got to find clever ways to eke out margins on a much smaller ASP. So we think where that's really going to shine and come through is with Neutron, because we're going to be able to take all of those learnings and all those clever efficiencies that we figured out how to do on Electron and apply those to a much higher average selling price for Neutron, much like a Falcon 9, and deliver much more attractive margins than people have seen in the past.

So as we think about the next couple of years, 22 on the manifest, this year, you're thinking mid-30s, potentially...

Over the next several years.

Yes, I'm not going to nail you down on a particular year. But -- so Neutron starts to feather in. What does that -- do we begin to cannibalize some of the demand for Electron as Neutron feathers in? And do you care?

No, it's a good question. I think that they're very different vehicles. So if you think of what Electron is really great at, it's doing kind of bespoke -- really, you need custom -- very precise insertion for your payloads. And really, if you think about -- yes, you can look at a transporter or bandwagon type of offering where they're putting hundreds of satellites on a larger launch vehicle. That, we've just heard back from our customers, is really not -- I mean, they'll -- if it can be utilized, they'll utilize it. And what really -- if you compare -- Neutron is really a constellation deployer at the end of the day, right? And Electron is not that. So Electron will still be there for these small exquisite kind of dedicated launch needs, and Neutron is going to come in and basically provide that constellation deployment capability, which is also important because right now, we're building these constellations and then they're launching on SpaceX, right? So we don't like that. So we want to keep it kind of all in the family, if you will. So that's really what Neutron brings to the table. Of course, it also has other capabilities. It's longer term, the potential for doing things like ISS resupply and even human flight and so forth. So I think there's a lot of places that we can take that vehicle. And if you think about it, it's been a pretty audacious program. When we came public 2.5 years ago and told people we were going to build a 13-ton reusable launch vehicle within 3 years for at or around $300 million, they were like, well, that's never been done before. You can't do that. As it turns out, that's exactly what we're doing. And we're kind of knocking down the milestones along the way to get there. We still have the target of getting Neutron to the pad by the end of this year, which, again, if we can do that, it will be an unbelievable accomplishment compared to what other vehicles have taken to get to that point.

Right, right. First flight, fourth quarter this year. That will be done out of New Zealand?

Get it to the pad at Wallops.

Oh, get into the pad. Okay. Yes, so you're emphasizing getting it to the pad, so I'm like, what is about?

Getting it to the pad could be getting to the pad and launching, or getting to the pad and then launching shortly thereafter. It's all ballpark. I mean with a rocket program, like you can have one day that can either confirm that you're absolutely on track and maybe even ahead of schedule or it could be disastrous and can set you back quite a ways. That's all, again, part of the excitement that allows you to not sleep well.

Right, right. So we think about SDA doing a lot of these constellations, right? We've got Globalstar, we've got Telesat, OneWeb. Well, I guess OneWeb's done.

Kuiper.

Yes, Kuiper, exactly. A lot's going to get launched in the second half of the year -- second half of the decade. So it seems like this Neutron rocket is really well-timed to potentially meet all of that demand.

We think so. And we've built relatively kind of, I would say, modest ramps into the cadence of Neutron. And part of that is because it's informed by our history, right? So we have the benefit of having done this a lot of times with the vehicle, developing a new program and doing the block upgrades to get increased performance. So if you look at like just an example of Kuiper, for example, at their first batch of launch procurement is like, I think, 85 launches across 3 different providers. And in our model, we assume we launch end of this year and then next year, we launch maybe 3 times, and then maybe the next year, we launch 8 times. So it's not like we're planning some explosive, like we're going to be launching this thing like 50 times within a year 3 or something like that. But we think there's -- there could be dramatic upside to the kind of the opportunity set which, again, we'd have to evaluate kind of the incremental investment to support that much more significant [ things ].

Right. Yes. So -- okay, so you're doing 30-some-odd Electrons. You are fully ramped on your SDA contract roughly in this time period that we're talking about, right? Are we becoming self-financing so that you could -- if you -- the demand is there, can you -- do you have the cash flow available to go feed that CapEx to ramp up those Neutron launches?

I think for the most part. I think that it depends if you get a demand signal back from, for example, your government customer or a large commercial constellation, "I know you're planning on launching 80 times in 2027. We'd like to take 12 launches ourselves." That might cause us to go put some more capital to another pad at Wallops, for example. Or to put a little bit more productive capacity in the ground around the manufacturing side of things. But I will say, much like Electron, where we have the ability to build 50 plus vehicles per year with our existing footprint and existing equipment, we were very fortunate in the timing last year when we acquired the Virgin Orbit assets out of bankruptcy. And so we have a lot of capacity for engines and avionics out of Long Beach. So one of our buildings in Long Beach builds avionics and propulsion for both Electron and for Neutron with a tremendous ability to scale. So we don't need any more space for propulsion or avionics. We just took a lease not that long ago in a large facility in Middle River, Maryland, to make the large-scale composites. So the first couple of Neutrons are being hand laid up in both the U.S. and in New Zealand, but going forward, we have the high capacity automated fiber placement machine and all those capabilities at Middle River. So I think we've got good footprints pretty much where the only thing again that might need more capability would be more investment in final integration facilities at Wallops and perhaps a second pad of Wallops. But if you put a second pad there, hopefully, we can leverage a lot of the infrastructure that we're building for the first pad, like deluge and the tank farm, all the kind of stuff.

Just a few cement trucks.

Few cement trucks, yes. But yes, I think that we always kind of think forward and say, okay, well, let's -- what if the demand signal is much stronger than we've kind of built into our base case? Will we be able to basically flex and go address that? And I think for the most part, yes. I mean with beta in full swing and so forth, we should be able to hopefully self-finance that. But if [indiscernible] is big enough, then we could go back to the -- to investors and ask for more kind of expansion capital.

Yes. Or if you're getting debt financing at that point would be back in the picture here, get some cash flows going, right? Okay. So let's talk a little bit about sources of demand across both businesses for the next 5 years, right? I mean to go out and [indiscernible] that I think is an exercise in futility from a predictability perspective, right? But I think over the next 5 years, we have a pretty good line of sight, particularly in this long cycle kind of business that we're in. So you've got a mix of business today between government work and commercial work. What's the next 5 years look like? We changing much in that mix?

I think it's going to look pretty similar, but just scaled up. I mean I think -- we always like to see a healthy mix of government business there because of the predictability of it. And Colin can speak to some of the government budget dynamics. He's much more familiar with that than I am. But if you look at the predictability of that matched with the hockey stick opportunity on the commercial side, that's really kind of what we want to keep. You don't want to kind of put all your eggs in the commercial hockey stick basket, but at the same time, you kind of want to, again, have some balance, if you have some predictability, so you don't go through these boom/bust cycles. But I think now that we've established ourselves as a U.S. government prime, we think the size of opportunities continues to get larger in front of us. So we have a pipeline of very attractive opportunities both commercially and on the government side, and with on the government side, more and more high-value, important, classified strategic types of programs. So we think we're going to see more and more of that work coming our way over time. But those things typically take longer to germinate and they're a little bit different in nature, and the terms are quite different sometimes than a commercial contract. But right now, we think we've struck the right balance. If you really kind of look at our business today, we have quite a bit of "commercial" in the mix, but if you kind of peel that onion back, those commercial customers are ultimately selling to the U.S. government. So if you think about the Capellas and the BlackSkys and the HawkEye 360s, a lot of that is really backed by government programs. So I think that it will be a while before you get true commercial opportunities that become kind of a real significant piece of the mix, right?

Yes. That makes sense. Very good to hear, because I think -- my thesis on investing in space is that you've got to go find people that are supplying to the government, because those are the guys with the budgets and the enduring mission need for these kinds of spacecraft emissions, just generally speaking. Yes. So it's good to hear -- maybe just a quick follow-up on that then. So I think there's a press release out today talking an NRO mission that you're going to be doing here shortly. Can you talk a little bit about on the launch side in particular, start there, kind of where you are in this journey in becoming kind of a national security launch provider?

Yes. So from the very beginning with Neutron, we knew that it was going to be important for that to have a lot of government support because we don't subscribe to the kind of the build and they will come approach, right? So along those lines, we secured a $24 million development contract with strategic space command to help build the upper stage of Neutron. So we very much went into this with the customer helping define what their requirements are, and I think we're also kind of at a unique point in the supply on the launch side where you've got one company, SpaceX is such a dominant kind of force in that market, and now it's encouraging that you see ULA's Vulcan vehicles flown, which is great, and so we think that there's going to be room for multiple providers, and actually by law, there has to be multiple providers. So we think we're about to come in and really offer something different. But if you look at across SpaceX, ULA, Blue, their ownership structures and kind of their motivations are like that, they're very different than what we bring. And none of them bring, we think, is that end-to-end solution for that government customer. And we actually had the government customer say, look, we want somebody who can take our program from soup to nuts, right? So from concept, design the satellite, build the satellite, launch the satellite, operate the satellite, right? That's really what we want. And we're really now the first company that's really in a position to exploit that, right, in a meaningful way. So I think that's really -- gives us confidence that we're building the right product at the right time, and it's got the customers' requirements well kind of embedded in its design.

I think -- I do wonder, though, whether -- if SpaceX decided that they wanted to, I mean, they're making space [indiscernible], right? I know that they're not making bespoke product for government customers. They're doing it for themselves, but I would think that they have got that capability set, maybe?

Yes, never underestimate SpaceX. I think that we don't. When that's your primary competitor, again, it makes for a few sleepless nights. But right now, it seems like their focus is Starlink, right? That's really their path, and I think if -- yes, if they were to decide or they get that well in hand and they've got the cycles to go dedicate resource elsewhere, I suspect that if it's not after Starlink, it might be Mars or something else, right, rather than doing other...

That's the ultimate goal there, I think.

We all try to figure that out.

Yes. So going back to the national security launch. So you're doing -- is this NRO thing considered national security launch, that you're about to do? What would you consider that?

Well, I think these smaller launches for the NRO, I don't think they're necessarily considered under the NSSL program. But yes, obviously, we're very, very kind of dialed into kind of what it's going to be -- what it's going to take to succeed in bidding for those NSSL programs, and we've got a lot of effort behind it. So we've been fortunate that we -- this is our -- I believe it's our fifth mission for NRO, and we've flown for NASA and we've flown for Space Force, so all of those customers that we've done outside of NSSL really gives us that relationship kind of point with those customers. I think trust is super important with those customers, right? And so they've had nothing but incredibly positive experiences with us launching their solutions. So I mean everything that we see is a very eager customer to get us to -- into the fray, and they've been kind of helping us do that.

Yes. And I think you've done NRO from New Zealand as well.

We've done NRO from New Zealand as well, yes. So we were the, I believe, the first ones to launch national security payloads outside of or not on U.S. soil. So a lot of that was enabled by the treaty that was put in place between New Zealand and the U.S., that whole [indiscernible]. Actually, we're seeing now that our New Zealand -- even though we have no plans to launch Neutron out of New Zealand, all the launches right now are planned out of the U.S. and particularly Wallops, having that strategic launch capacity in like the South Pacific is actually a very, very kind of interesting and strategic asset for the U.S. government customer. I think it's kind of a happy coincidence that Pete is Kiwi and decided to try to do this or that, but for -- the ability to be able to launch from these 2 different regions of the world, it's incredibly important, very differentiated.

Yes. So let me ask you a little bit about -- we do it on time, but we're already at the end of time. I had so many things I wanted to do with you all, but we'll do it a different day. I mean maybe last question, because I think this is -- help people kind of dream about potential here with the company. Because very clear that you guys are garnering some success here with the most important customer in the world, which is the U.S. government. Those are the ones that have got the biggest budgets. You're launching successfully here with Electron. Hopefully, we get some Neutron launches for U.S. government missions as well. But it begs the question about, you've attached yourself to the most important customer, but does that limit your range of mobility to go to other places? Like I don't think we've got a European launch provider today that I'm aware of. It's [indiscernible], right? And we've got a organization called NATO over there that seems like they're going to be ratcheting up their spending, if for no other reason than they're worried about how reliable we are going to be as a provider in that relationship. So talk to us a little bit about the potential to penetrate that market and begin doing some launches for some European customers.

Well, we have launched for quite a few European customers. We think there's an opportunity there. I think the hopes are for them, for their domestic needs, are that Ariane 6 comes up to speed and works and everything else, but we think the Neutron has got a great opportunity for Europe. When they have an option to launch on a European launcher, they're going to do it. But as we've seen, there's a lot of plans that go by the wayside and people just -- execution is incredibly rare in this industry. right? And so I think there's a lot of paper tigers out there who say they're going to be launching at certain dates and have certain capabilities, and they just don't show up. So as we've done in this domestic market, we're going to take advantage of other people's lack of execution. And so we think there'll be plenty of those opportunities in Europe as well.

Yes. Okay. Well, we're going to leave it with that. I want to thank you both for your time today. It was really helpful.

I appreciate it.

I thank here in the room, those on the webcast as well, and look forward to doing it again soon.

Absolutely. Thanks so much, Jason.

Yes. No worries.