Today we have a very special Shared Lunch episode. I'm literally at NASA and a very hot Virginia Wallops Islands. Behind me, there's Complex three, the brand new launch pad for the Neutron rocket that is expected to go to space by the end of this year. Today we're catching up with Sir Peter Beck on Rocket Labs progress.
I'm a conservative engineer, where you know, when you know when Rocketlabs says we're going to do something, it's going to happen.
As well as Rocket Labs CFO Adam Spice and.
I love growth's That's kind of what attracted me to Rocket Lab is like, there's no question that the growth opportunity here are saggering.
And then also Shawn de Mallow hit of the Neutron program.
You have to be in this constant sense of baranoia and your constant have to be on edge, very complex machine, you know, and it doesn't take much for it to go wrong before.
We get started. Here's some important information.
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This is the furthest we've ever traveled for an episode. Rocket Lamb very kindly invited Cheersys along with a select group of NASA officials, senators, and even the Governor of Virginia.
The most vibrant space industry complex in America. That is what we are building.
To Wallops Island to give investors an inside look at the LC three launch pad. After fifteen hours in the air and four hours on the road.
The day badged, we.
Made it just in time for the official opening.
Welcome everybody to LC three today.
Mark's an extraordinary mastone not just for Rocket Lamb, but for the future of space access in America.
Three two.
With the opening of Pluche Complex three, we take a major step board in ensuring resilient and insured space access for the nation.
Wow.
And what better place to chat to Serit Peter Beck than from the top of the pad that neutron will launch. Let's start with the location, because it's you know, sort of difficult place to get to yep, but well not the MESA site. So what makes this a great site for the neutron launch pad in America?
You've got really two launch sites on the East Coach.
You've got Cape Canaveral, which everybody is aware of, a super famous place, and then you have what opside in Virginia where we are now. You know, the Cape is an incredible launch site, but it's very busy and you know, we're trying to stand up a high cadence launch vehicle, so it's much more difficult to come here because as you can see, we've had to build so much infrastructure,
whereas a Cape there's so much existing infrastructure there. But the advantage with that is that we're at and you know, we're you know, we're really you know, pushing for a high cadence, so we don't have to wait in line for anybody.
And we're pretty close to Washington d C. Here is that important? Has it been close to the Pentagon and that sort of thing.
So it certainly helps.
I mean, you have great access to to the Senators, you know, all of all of the folkes that you know help help the wheels go round.
Can you talk us through some of what goes into developing our launch site?
Like I said, it's a huge infrastructure program.
You can see the diameters and the size of the tanks and the pipes and everything.
It's you know, it's just huge scale.
And when we're pouring all the foundations for this, we had all the concrete trucks in the wider region just lined up all down the freeway, just delivering load after load after load after load for a couple of days. So you know, there's a tremendous kind of you know scale projects.
Launch pairs. They are expensive, clearly massive projects. Presumably you don't want a whole lot of them. Is he more in the pipeline or not?
For now?
I mean, the one upside is really cool because it gives us all that sort of mid inclination stuff.
We can do a dog leg, which is a maneuver to do a sunynchronous launch.
But you know, at some point in time, you know that we'll need to expand into other inclinations. But you know, right now we can serve as a tremendous portion of the market out of this pad.
One of the things that was announced by the governor was that we're expecting a launch by Christmas.
Before the end of this year. We will all gather and we will watch the first Neutron rocket lift off from Pad zero D right here together.
And the governments. I think you said that he would bring the Christmas breath if it was on Christmas Day. How are you feeling about that?
Yeah, look, I mean we've we're pushing to get one down and out by the end of the year. You know, that's that's been the goal. You know, it's a green light program schedule and doing a try as hard as we can, but you know, the end of the day, we always caveat It's a rocket program, right, So we've got a couple of really big tests to go. If they go well, then we will be in good shape. If they don't, then it will be less good shape.
But the reality is, like for a thirty forty year launch vehicle program, a few months here and there is totally irrelevant.
So you know, we're obviously we're all.
Shooting for a date, but but if it's you know, we're not going to put something on the pad that's not perfect, and we're not going to put something on the pad that's not ready to fly for some arbitrary date. The life cycle of the program, it's irrelevant.
And the pace of delivery so far has been on the right.
It's insane. It's totally insane.
I mean, if you look at the most recent rocket developed, it was seven billion dollars in like ten years.
Or something like that.
Yeah, and you know, the whole program for Neutron, including all this launch side, is three and fifty million dollars and we're four years so it's crazy.
We'll head back to Sir Peter to talk Mars plans shortly, but first VP of Neutron, sewan To Mellow, tells us about the time frame and how he wound up leading Neutron.
I've been with the company for a while, started around eleven years ago. I was working on the previous program, which is called Electron, and was really responsible for standing up that whole launch organization, right from selecting the early launch sites, building those, building the teams that operate the launches, and then really yeah, got Electron running from an operational
and testin mission operation standpoint. In the last three years, got asked by Pete to lead the Neutron development program. Another opportunity to go build a rocket taking all the lessons learned from the past, so I couldn't pass that up.
Right from the start, the hype around this project's been very, very large. The ambition for the timeline probably equally as large, like like what's what's your true feeling on that, Like when do you get confident that this is actually going into space or and how far away do you think that is from? Like sort of being quite solid on that timeline.
Yeah, I think the confidence building for a rocket program is just continuous.
There's never one specific thing and then you're you.
Know, at least from my point of view, there isn't just one thing you do when you say it's going to be good. You have to be in this constant sense of paranoia and you constant have to be on edge to just keep building confidence, retiring risk. Very complex machine, you know, and it doesn't take much for it to
go wrong. So every part of the way, every test we do, every integration activity, just raise that conference and you just have to constantly keep doing that till you're flying, till the second you're flying, and then once you start flying too, this conference built in flying over and over again. There are some things you can never detect on the ground as much as you try to test. So it's equally important that once we're flying, we're learning from every flight and moving that board as well.
How many neutrons are there in progress at the moment.
So right now we're already building flight two, so build number two is started and in some cases we even have parts on the floor for the third neutron be built. You know, our goal is to build three next year, so we're going from one this year, three next year, five the year after that.
So it's a you know, pretty steep steep curve.
But we've invested in all the production infrastructure we need, so they'll just keep producing. And you know, while the first one is being built, I expect the second one to be halfway built.
And if you were an in Vista in rocket Lab, how would you be thinking about this opportunity?
Immense potential, right I think we're we're just about to get started. So we've seen a lot of growth already and then we're about to embark on this really you know next pick phase the company with this multitne rocket capable to go to atbit our own space applications.
There's a lot of you know, exciting future ahead of.
Us, even while the rockets are taken off and the business has to stay grounded so to go over the number we have talking to rocket lamps see if anem sprue.
Ultimately, you know, even if you go back seven or eight years ago, wh Pete and I were talking, I mean, our our goal was to have a mix of thirty percent from launch, seventy percent from space systems, and of course space systems is representative of selling subsystems, full platforms, software, ultimately having our own applications down the road. So I think if we can, if we can kind of maintain the cur mix, we're out. I think that's a comfortable
spot because launch is great. It's very enabling, it's very sexy. People love launch, but it's volatile, it's it's lumpy, and you know, unlike like space systems, where we can largely control our own destiny, because we're so vertically integrated. At the end of the day, we can't launch a rocket until somebody shows up with a payload. Yeah, so you do all this great work, have a rocket ready on the pad, it's frosty, ready to go, and then all of a sudden, the customer might say, oh, we got
a problem with our radio. We gotta dmate, you gotta do so, and we don't get to recognize revenue and launch for the most part. And two you actually hit the button right. So launch is great, but it's it's less pres fickle exactly.
It's a great, great term yea.
And we know business has left these recurring revenues and that's it's very very exciting. Hey, we just touched earlier on like different growth and obviously these growth and these core business is still but one thing you mentioned was an acquisition in Munich, so I'd love to hear a little bit more about that, and also how much you expect acquisition to make up part of the growth story going forward.
Yeah, So in general, you know, Pete and I, you can never count on acquisitions to drive your growth because acquisitions are just a culmination of really fortunate events coming together and you can't plan for that. So we just we're always looking, well, we know we want this capability or this functionality or this exposure to a market, and so your baseline plan is always just do it yourself. And very fortunately, you know, because Pete is such an engineer, like he's an engineer's engineer.
We don't have to buy stuff.
Yeah, so it becomes a much more liberating thing and you can be much more choosy when you basically say, hey, you know Okay, well we need the technology, but you know there's probably it'll take us maybe six months longer and me be take ten million more of P and L Burned to do it organically. But then we don't have to spend two hundred million dollars and give it to a bunch of vcs and founders. So we tend
to kind of do a mix. If you look at space systems, some of the initial pieces were in organic thre acquisitions, but we've grown those in a lot of organic ways as well, Like we've added you know, radios for example, and batteries and all these composite A lot of these different things were developed in house. The whole satellite manufacturing business was grown in house. We didn't buy a company to do that. So I think we find that balance. So i'd say will M and A be
a continuing focus for us? Absolutely. I think when you talk about recent deal, so geost is a deal that we just closed. In fact, we were there earlier this week meeting with a team, great team, and then we're hoping to close you know, by the end of the year. Before then the year this minoric acquisition which does optical terminals to allow Constellation satellites to communicate with each other
on orbit. And that's a team of around three hundred people in Munich will give us a really really helpful footprint.
In your up.
Would it be the fifth European business, first European business for us, which actually opens up a lot of opportunities because if you don't have a European kind of development and min manufacturing presence, you get boxed out of a lot of EASA program opportunities. In fact, if they have
any choice, they're going to use European content. So now we're considered European to a certain extment because of that footprint there, which will and that means we can not only sell the minoric stuff, but all the other rocket labs sweet of stuff as quasi European.
Revenues growing at a pretty incredible pace again at thirty six percent this year, I think yep. So when when do you expect to clear profit?
In the conversations now, well, there's there's profit and then there's cash flow. Yep, And I think in our case, they're they're kind of detached at least for now.
Neutron.
Getting Neutron's first launch off is really key to driving to getting to adjusted depit a positive, so people kind of look at as P and L positivity.
It's going to take a little bit.
Long because after because we've been having this huge bubble of R and D spend that's been pushing us in a lost position for the last several years because of neutron. Once it goes into production, you've then it becomes cost to say there's revenue associated with it, So your P and L looks much much better. Cash Flow will be a little bit different because we continue to invest in Like right now as we speak, we're ordering the long
lead parts for Tales two three. Right we're building out the barge which isn't required for the first flight yep. So that scaling infrastructure is going to continue to be a demand on cash through twenty twenty six. So I'd expect cash flow positivity no early than I would say early twenty seven. Right, But then that's when P and L cash flows start to merge more together because you will have passed that investment.
It's a infrastructure investment bubble.
At the moment, I've got Spacic sort of quite publicly burning billions. I think in cash to a chief dominance, you seem to be taking a different approach, moving towards this profitable path fastest certainly on the times you've just given me here with small small losses. Is this like, how intentional is this? And do you think it's something that will set yourselves apart? Hopefully it's very intentional.
Right.
We don't have the luxury of having access to the kind of money that Elon can bring to the table, obviously, so we have to have a model that gets us to profitability and cash flow positivity. I mean, we're we're a living, breathing organism that needs to become self sustaining, right, so we're kind of moving from that kind of child, kind of youngster phase to now kind of becoming a
self sustaining entity. That's one of the commitments that you make when you go public is that you're going to make returns for your shareholders, not just on you know, and of course share prices can move based on macro conditions, speculation, all kinds of waves, but ultimately to build an enduring, solid kind of financial base, you've got to become profitable. But we're also making sure that we make the right kind of initial investments so that we're teed up for
that long term growth. Yet you endure some relatively intense short term pain for the long term gain. And I think we've endured quite a bit of pain, you know over the last you know, certainly four years as being a public company to make sure that we are.
Positioned to grow.
One thing that so pay to see it in twenty twenty four was the one thing that has always been a throddle on this business is talent. We can navigate enough engineers, so it's just interested in what you're thinking about staff growth, also for out doing the specific anything like Australasian this UIs well.
Actually New Zealand has been a bit of a secret weapon for US because unlike in the US, if you, if you know, to work on US programs like Neutron, you've got to be a US person right right, whereas because of itar but New Zealand's not bound by I TAR. So actually in New Zealand we can bring talented engineers from Canada, from the UK, all over Europe and the rest of the world, most of the rest of the world that we.
Can't do that here in the US.
So actually New Zealand it's been a been actually a blessing for us in a lot of ways. I mean, obviously, to be able to launch as frequent as you can have this this ability to kind of lure talent from the rest of the world hugely positive for us. So I think that, but talent is always going to be, you know, kind of a challenge. I mean, we went from competing with the likes of you know, Virgin and Astra and Relativity and abl and those all got wiped out.
So that's become less of a thing.
And now you've got some other disruptive defense tech companies like Anderil for example, are super hot, and so you know there's a constant and tug of war for talent.
But so far, you know, we're growing very fast.
I mean, just to put in context, when I joined in May of twenty eighteen, I think there were twenty five employees in Huntington Beach. Now we have over eight hundred Long Beach. I think we had about one hundred people in New Zealand. Now we have about nine hundred people in New Zealand. So I don't think talent acquisitions are our biggest challenge.
So you're moving into the satellite constellations, you know, this is another place you'll be competing with space, so you know, how much room do you think there is for that?
So constellations it's a broad umbrella, right, So it's basically we think of it an application. So what are the functions that are going to be done from space that you know delivering services and data? So you can think it'll range from things that are very well known, like if, for example, you know you've got things like startling out delivering broadband to consumers. Right, you have direct to mobile right where people now directly connecting their cell phones to
the from space based constellation assets. You have Earth observation, like taking images for various purposes, whether that's for weather or for national security, or for commercial applications. So there are many, many, many dozens of these vertical applications from space, and so you know, competing with SpaceX, the question would be, well, are we really going to develop a consolation to do
fixed broadband to the consumer masses? I don't know, hard to say, right, I think we're we're not going to get into an application where we're going to be at such a huge capital disadvantage. And if you look at right now like that that fixed broadband is really you've got you've got Elon, and you've got Kuyper coming in, right, So you've got Starlink and Kuiper. So we've got to be careful, Like we've always been very careful about how
we attack a market. And you know, do you want to go head on with somebody who's got unlimited capital? And you know, sometimes you do if you really think your technology is that differentiated. But you got there's a whole bunch of factors that go in. So will we have an application? I believe we'll have an application, you know, in focus in the not too distant future. But we're
gonna have to be very cognitive. What's real practical? Because back to your point of profitability, right, Like I and I'm Pete and I always had this little bit of a tug of war from time to time about you know, healthy ten Yeah, healthy tension about like leaning forward to invest for the future versus how do we get to profitability sooner?
Right?
And so clearly embarking on an application unless you acquire somebody who's already got that momentum. If you do it organically, that's a that can be a fairly expensive proposition.
What was your background before either the spice background.
Or is this I come from a semi conductor background.
It sounds like you've had some good choice of the industry.
Growth is not yeah, not been lacking growth and I love growth. That's that's kind of what attracted me to rocket Lab is like, there's no question that this the
growth opportunity here are as saggering. I mean when I think about, like again, having been at you know, Intel when the Internet was just taking off, Broadcom when that was proliferating, and all the different connectivity technologies, I have never been in a company with more opportunities coming like the it's a target rich environment like you, Yeah, I mean some of the places you're hunting for, Hey, where can we go to find that next little bit of growth?
That's not our problem. We have opportunities coming in everyweth.
Lots of opportunity means lots of keen investors watching closely. As a public company, the Rocket Lab faces constant scrutiny from shareholders and the market. We asked Sir Peter, what that pressure feels like behind the scenes.
Look that the pressure is real.
I mean, you know, there's there's there's so many people that own the stock and and I know both Adam and I feel a deep sense of responsibility to you know, to do right by the shareholders and create value.
And you'll be lucky to date to create some value.
And you know, people are just so nice, but it
all comes down to execution. And you know, every person in this company understands that, you know, a lot of the company of stockholders themselves, so you know, we all feel it and we will push and work super had Funny enough, and it wasn't that hard for us to to to move from being a private company to a public company because you'll notice that a lot of space companies are extremely aspirational and they make, you know, really wild and outlandish claims.
Maybe it's the kind of the key we are.
We've always been very kind of reserved and we're you know, I'm a conservative engineer where you know conservative people, so you know, when you know, when Rocket Labs says we're going to do something, it's going to happen.
So we don't don't get out in front of our skis.
And I think that's where a lot of public companies can get in trouble writers is make these forward looking statements that they have that are aspirational rather than realistic.
Once you have rockets any customers. So you've got some customers lined up and what's like a customer profile for a rocket of the size of like.
Oh, so tremendous different type of customer profile.
So we have, you know, customers that are looking to put up constellations. Obviously Neutron as an ideal vehicle for national security. This year we're onboarded onto the NSSL program, that's the National Space Launch Program. That program is exquisite in the fact that there's only five launch providers onboarded onto that and they launch the most important national security missions for the government. So it's a real feather in your cap to be to be on boarded onto that.
So we have a good range of both commercial and government customers for the product.
So just touch on the fence sector a little bit. I mean, you know, you'd have to have completely in the sand to not appreciate that that's a very growing and active part of the market.
Yeah, it's always been. You know, about half half of our business.
Always makes that question how much it makes up roughly.
Off, Yeah, so about some on the launch side, it's about fifty percent commercial, fifty percent government, and then of that government, it's about thirty percent defense and twenty percent civil civil being like NASA and those kind of organizations.
So yeah, the government is a big part of our.
And if some of the talk going on at the moment is about Golden Dome, Golden Dome, I was just wondering, like, is Rocke lay I've got a front seat in this?
Yeah?
Absolutely.
I mean, so the Golden Dome is a missile defense system, So if another country launches a missile attack, this is supposed to detect it and eliminate the threat.
So you know, that's a very difficult thing to do.
If you've got a missile, you know, being launed from the other side of the world and coming in, it's a very difficult thing to try and press detect and then then you know, neutralize. So and a lot of that, a lot of that's that that came ability, you know, especially the sensing capability is in space. So so yeah, we we think we're well positioned to be a really good contractor and provider to that.
And there's a new John likely be a big part of that as well.
Yeah, I mean there's there's a lot of launch that needs a lot of spacecraft and satellites that need to be launched, so so Neutron to be a part of that. We have our Hayes launch vehicle that's doing hypersonic so sub orbital tests.
So I think we heard Mars about five times today. We heard Venus. I think you touched on it. Yeah, it came up another couple of times. But with regards to Mars, firstly, their ambition so interesting, like you know, how you feel about that and how realistic of that is and what's the time frame. But the other thing that came up was the idea of people in this rocket and that's something that I don't think has been hugely on Rocket Labs radar, but like how you feel about that.
At the moment.
Yeah, well, you know, so Mars is obviously the planet of destination, and you know there's a number of really really important missions.
You know the Mars Sample return mission previously.
Now there's the Mars tele Telecommunications all Bitter program.
And look, we're great at building Martians spacecraft.
We've got two Escapade spacecraft that are about to go to Mars here shortly, so we really know Mars well and we were able to build things that operate in Mars and no problems at all.
Just about everything on the surface of.
Mars right now has some rocket Lab technology on it, So Mars is a friendly place to us, and you know, the administration and the President is made as aspirations clear that we go into Mars and Neutron is a perfect
vehicle to go and do that. And then on the human spaceflight element, you know, we've always intended to be for Neutron to be human spaceflight rateable, so when you fly humans, you have to have different safety factors on tanks and different kind of levels of redundancy in the vehicle,
and we designed that in from day one. Now we don't have any human spaceflight programs currently or anything like that, but if the opportunity arose that was required that you know, there was an additional capabilities or service is required for human spaceflight, then we weren't going to build a vehicle that wasn't able to do it.
So we baked it in from day one.
You know, for the.
Future, rocket Lab has no shortage of big goals, but the multi billion dollar question now, will Neutron make it to the pad before the end of twenty twenty five. We put that to Shaun to Mallow, how did you feel about the December deadline that the government it's.
A deadline, all right, but no, it's it's good. We're aggressively marching towards it. And if there's anything that can do it, it's Rocket Labs.
So I'll get it done.
And that's us from Virginia.
Thanks to Sir Peter Beck, Adam Spice, Shawn to Mallow, and the Rocket Lab team for having us. You can watch Shared Lunch on YouTube or follow the podcast on Apple, Spotify, or wherever you get your podcasts. Thanks for tuning in.