Rocket Lab Corp Q2 FY2021 Earnings Call

Greetings and welcome to the Rocket Lab First Half 2021 Earnings Conference Call. This conference call is being recorded. It is now my pleasure to introduce your host, Gideon Massey, Finance Planning and Analyst Manager. Thank you, sir. You may begin.

Thank you, operator. Good afternoon, everyone. And thank you for joining us on today's conference call to discuss Rocket Lab's first half 2021 financial results. Today's call is being hosted by Peter Beck, Founder and CEO; and Adam Spice, Chief Financial Officer. After our prepared comments, we will take questions. Our comments today include forward-looking statements within the meaning of applicable security laws, including statements relating to our guidance for the third and fourth quarter 2021 revenue. Revenue growth expectations in our principal target markets, GAAP and non-GAAP gross margin, GAAP and non-GAAP operating expenses, tax expenses, and effective tax rate and interest and other expense. In addition, we will make forward-looking statements related to trend opportunities and uncertainties in various products and geographic markets, including, without limitation, statements concerning opportunities arising from our launch service and space systems market and opportunities for improved revenue across our target markets. These forward-looking statements include substantial risks and uncertainty which arise from competition, global trade and export restrictions, the impact of the COVID-19 pandemic, our dependence on a limited number of customers, average selling price trends, and risks that our market and growth opportunities may not develop as we currently expect and that our assumptions concerning these opportunities may prove incorrect. More information on these and other risks may affect the forward-looking statements is outlined in the Risk Factors section of our recent SEC filings, including our Form 8-K filed on August 25, 2021, and the documents incorporated therein. Any forward-looking statements are made as of today, and Rocket Lab has no obligation to update or revise any forward-looking statements. The first half 2021 earnings release is available in the Investor Relations section of our website at rocketlabusa.com. To supplement our unaudited consolidated financial statements presented on a basis consistent with GAAP, we disclose certain non-GAAP financial measures, including gross margin and operating expenses. These supplemental measures exclude the effects of stock-based compensation expense, amortization of purchased intangible assets, other nonrecurring interest and other income and expense, net attributable to acquisitions and noncash income tax benefits and expenses. We also supplement our unaudited historical statements and forward-looking guidance with the measure of adjusted EBITDA. Investments to EBITDA include share-based compensation, warrant expense related to customers and partners, foreign exchange gains or losses, other nonoperating income and loss, excluding interest expense related to debt and other nonrecurring gains or losses. We encourage investors to review the detailed reconciliation of our GAAP and non-GAAP presentations in our investor updated presentation available on our website. We do not provide a reconciliation of non-GAAP guidance for future periods because of the inherent uncertainty associated with our ability to project certain future charges, including stock-based compensation and its associated tax effects and the effects of warrant expense related to customers and partners. Non-GAAP financial measures discussed today are not in accordance with and do not serve as an alternative for the presentation of Rocket Labs' GAAP financial results. We are providing this information to enable investors to perform more meaningful comparisons of our operating results in a manner similar to management's analysis of our business. We believe that these non-GAAP measures have location and that they do not reflect all of the amounts associated with our GAAP results of operation. These non-GAAP measures should only be viewed in conjunction with corresponding GAAP measures. Lastly, this call is being webcast with a supporting presentation, and a replay and copy of the presentation will be available on our website for 2 weeks. Now let me turn the call over to Peter Beck, Founder and CEO.

Thank you very much, Gideon, and thank you all for joining us today as we review Rocket Lab business highlights and financial results for the first half of 2021. I founded Rocket Lab in 2006 with a vision to unlock the potential of space, and it's a pleasure to be joining you today and sharing details on exactly how we're doing that. I'm joined by our Chief Financial Officer, Adam Spice. Adam has served as our CFO since May 2018. Prior to joining the Rocket Lab team, Adam was the Vice President and Chief Financial Officer at MaxLinear and brings a wealth of experience to the team. Today, we'll be talking you through a brief introduction of the Rocket Lab business, followed by our key accomplishments in the first half of 2021. We'll be covering our financial highlights and outlook, sharing our up-and-coming conference schedule, and of course, we'll leave time for questions and answers. So let me first open with a quick overview of Rocket Lab. We're a vertically integrated end-to-end space company spanning launch services and space manufacturing with a vision to move into space applications, perhaps better known as providing data services for orbit. We design, manufacture, and launch the Electron rocket, which has been flying since 2017. We've now launched 21 times and delivered 105 satellites to orbit for a range of commercial and government customers. This has made us the second most frequently launched U.S. rocket for the past 2 years, behind only SpaceX's Falcon 9. We have 3 launch pads, including 1 operational pad and another nearing completion in New Zealand. The third in Virginia is scheduled to be operational in the coming months pending NASA certification. Beyond launch, we design, manufacture and operate spacecraft, two of which have been launched and are currently operating in orbit. Our Photon spacecraft has been selected by NASA for missions to the moon and Mars and has been chosen by commercial satellite operators for missions in low Earth orbit. Operating as a launch provider and spacecraft manufacturer, we have a unique insight into the industry, particularly across supply chains. Something that became quickly apparent to us was that while the small satellite industry was growing, it was constrained by satellite component supply as these products are typically produced in small quantities, are expensive, and require ordering sometimes years in advance. So we set out to change that by producing what we consider best-in-class space components at scale. Our capability was strengthened with the acquisition of Sinclair Planetary in 2020. So with that brief overview of the Rocket Lab story today, let me take you through some of the achievements for the first half of this year. We started off strong with 3 Electron launches in the first half, which saw us hit our milestone 20th Electron launch to date. We managed to launch twice in the same period last year. So we've increased our launch cadence by 50% for the first half of 2021. Across these missions, we reached another key milestone deploying our 100th satellite to orbit. We've actually now exceeded that and are sitting at 105 satellites deployed to orbit for customers across government and commercial markets, plus 2 of our own Photon spacecraft as well. It was on this 20th launch that we successfully recovered Electron's first stage off the coast of New Zealand after launch. This is our second successful recovery of the first stage and marked a significant step forward in our reuse program, which aims to make Electron the first reusable rocket dedicated to small satellites. The first half of this year also registered significant growth in backlog with a June 30, 2021 backlog of $141 million compared to a June 30, 2020 backlog of $59.9 million. This is underpinned by several significant new Electron launch contracts, including a 5-launch deal with BlackSky Global to support their constellation growth, as well as a new launch contract with General Atomics. We continue to see strong growth from government customers too with a new launch contract awarded for a dedicated launch for the U.S. government. For commercial sensitivities and security reasons, several of our commercial and government customers wish to remain undisclosed at this point. We also saw strong growth on the Space Systems side. We were awarded a contract to design and build 3 Photon spacecraft for Varda Space Industries, an in-space manufacturing company. We were awarded a study to develop 2 Photon spacecraft for NASA's Escapade mission to Mars. In addition to Photon contracts, we secured new deals for satellite components across a number of large undisclosed customers. Of course, in the first half of 2021, we had a big milestone by entering into a merger agreement with Vector Acquisition Corporation, beginning our journey to become a publicly-traded company listed on the NASDAQ. In anticipation of our public listing, we also welcomed new Board Members, including Merline, Jon, and Alex. We're proud and excited to have them on the team as we embark on this new chapter. On the R&D side, we announced plans to develop a new 8-ton payload class rocket called Neutron. While Electron serves the challenge of dedicated responsive launch for small satellites, Neutron will provide a right-sized solution for launching the constellations of the future. Since announcing plans in March, we've continued to make great progress, and I look forward to sharing a detailed development update in the coming months. So that's a brief snapshot of the highlights in the first half, but I'd also like to touch briefly on some of our key achievements since June 30 this year. On July 29, we successfully launched our 21st Electron mission, a dedicated launch for the United States Space Force. This is our second mission under the space test program, the first taking place in May 2019. We're proud to have delivered mission success for our government customers once again. As is often the case with our government customers, pinpoint accuracy in orbital deployment is highly valued, and this mission delivered the payload with precision, thanks to our Electron kick stage. With more government missions coming up, we look forward to delivering this reliability again and again. Beyond launch activity, from June 30 to August 31, we continued to grow our backlog to $174 million. This is underpinned by launch contracts with commercial satellite operators including Aurora Propulsion Technologies, Alba Orbital as well as a number of undisclosed commercial and government customers across launch and space systems. Contributing to this is another multi-launch deal. Just today, we announced that Rocket Lab has been awarded a 5-launch contract with Kinéis to deliver 25 satellites to orbit, with the Electron from 2023. This represents Kinéis' entire constellation and really demonstrates Electron's value proposition of putting our customers in control of their missions by launching on Electron. Kinéis has much more control over their launch schedule, orbital parameters, as well as that pinpoint deployment accuracy that is provided by the kick stage. On the Space Systems side, we've recently announced that construction is underway on a new production line for reaction wheels, a key component for small satellites. As mentioned earlier, satellite components have typically been produced in small numbers, which has really limited the speed and scale of constellation development. The line has been built to solve that, enabling production at scale to meet the growing needs of our customers and the industry at large. And of course, one of the key achievements of the year so far has been the successful closure of our merger with Vector Acquisition Corporation. As of August 25, Rocket Lab is a publicly-traded company on the NASDAQ. The transaction saw Rocket Lab receive $777 million in gross proceeds. We also saw a tremendously low redemption rate of just 3% on publicly-traded VACQ shares. This activity has taken place against a backdrop of COVID-19. Our launch cadence and operations have been and continue to be affected by COVID-19 restrictions in the U.S., New Zealand, and Canada. New Zealand operations have experienced disruptions due to some of the strictest COVID-19 measures, including our current stay-at-home orders, which have postponed launch operations. In addition, New Zealand's strict international border restrictions have created delays. However, we have been successful in securing our customers into New Zealand so far. Indications are that the current lockdown restrictions may ease by the end of September, with Delta cases dropping in New Zealand. But this, of course, is subject to change. So with that, I'll turn the call over to Adam Spice, our Chief Financial Officer.

Thanks, Peter. I will first review our first half 2021 results and then further discuss our outlook for Q3 and provide guidance for our Q4 2021 revenue outlook. Our first half 2021 results highlight revenues of $29.5 million, representing a year-on-year growth of 237%, and GAAP and non-GAAP gross margins of 13% and 23%, respectively. Specifically, launch services revenue grew 185% and stood at $24.1 million or 82% of total revenue and Space Systems contributed $5.4 million or 18% of total revenue. Space Systems grew dramatically from a small base year-on-year to $5.4 million from approximately $300,000 as the period benefited from the combination of full period contributions from the acquisition of Sinclair Planetary that closed in April 2020, as well as overall strong growth in shipments for reaction wheels and star trackers and contributions from our broader space initiatives, including spacecraft, engineering, and design services. As referenced earlier, GAAP and non-GAAP gross margins for the first half of 2021 were approximately 13% and 16% of revenue, respectively. This compares to GAAP and non-GAAP gross margins of negative 67% and negative 59%, respectively, in the first half of 2020. Expansion in both GAAP and non-GAAP gross margins was largely the result of increases in Electron build rate and launch cadence as well as the related effects on launch and production overhead cost absorption and the mix effect of greater relative contribution of Space Systems. The delta between GAAP and non-GAAP gross margins in the first half of 2021 is primarily driven by $600,000 of stock-based compensation and $100,000 of acquisition-related intangible asset amortization. GAAP operating expenses for the first half of 2021 were $29.3 million, up $11.9 million versus the first half of 2020, with 80% of the OpEx increase attributable to R&D targeted at further developing and expanding technical capabilities. GAAP R&D expenses of $15.6 million included stock-based compensation of $1 million and amortization of purchased intangibles of approximately $100,000, yielding $13.9 million of non-GAAP operating expenses for the first half of 2021. The previously mentioned targeted investments in R&D spend stepped up $9.5 million and were driven largely by increased staffing and Photon expenses related to our systems products and the initial spend on our recently announced Neutron launch vehicle. GAAP SG&A expense of $13.7 million included stock-based compensation of $800,000 and amortization of purchased intangibles of approximately $50,000, yielding $12.8 million of non-GAAP SG&A expense for the first half of 2021. The year-on-year increase of $2.4 million in SG&A was primarily due to increased headcount and related labor expenses, software licenses and subscriptions, and professional services and audit expenses related to the preparation for our capital markets transaction, partially offset by reductions in facilities and other related overhead expenses. Our cash flow consumed from operating activities in the first half of 2021 was $30.6 million, which reflects an increase in cash consumed of $24.5 million versus the first half of 2020. This increase was largely driven by a $9.1 million larger net loss, combined with a $13.8 million increase in accounts receivable due to the lengthening of payment terms extended to a strategic customer undergoing a protracted financing process that is now nearing conclusion, and an increase in inventory of $5.3 million, offset somewhat by $5.5 million in noncash expense associated with preferred stock warrants. Cash flow consumed from operating activities was $5.7 million in the first half of 2021 compared to cash consumed of $27.8 million in the first half of 2020, with year-on-year reduction in cash consumed driven by several large capital projects that were consuming cash in the first half of 2020 being largely completed. Included investments are our new Long Beach headquarters and production facility, investments in LC1B, our second launch pad in New Zealand, and our newly consolidated propulsion test complex in Auckland, as well as a nonrecurring $12.12 million cash outflow related to the acquisition of Sinclair Planetary in April 2020. The combination of cash consumed from operating and investing activities was more than offset by the $97.4 million net cash generated from financing activities in the period, resulting in $109 million in cash and cash equivalents and restricted cash as of June 30, 2021, an increase of $30.9 million versus the prior ending period on June 30, 2020. Subsequent to the June 30, 2021 period, we completed the transaction with Vector Acquisition Corporation on August 25, resulting in $777 million in gross proceeds from a combination of a $467 million private investment in public equity (PIPE) and $310 million from Vector Acquisition Corporation's cash and trust. We believe the liquidity resources of the company enable the execution of our strategic development roadmap, including the development of our Neutron launch vehicle and continued investments targeted at expanding our total addressable market for strategic Space Systems Solutions. With that, let's turn to our guidance for Q3 2021. We currently expect revenue in the third quarter of 2021 to be approximately $4 million to $5 million, which has been significantly impacted by the COVID Level 4 alert and lockdown in New Zealand, resulting in no further launch activity planned in the quarter. Q3 2021 GAAP and non-GAAP gross margins are projected to be negative 221% and negative 52%, respectively. These negative gross margins are a product of the significantly lower production launch volumes forecasted in the quarter and related unabsorbed production and launch period costs resulting from the New Zealand COVID Level 4 restrictions referenced earlier on the call. We believe our high degree of vertical integration is very strategic and a key factor enabling future operating leverage. However, in periods such as this, vertical integration can have the opposite effect. As production launch activities resume, we expect gross margins to recover accordingly. We expect Q3 2021 GAAP operating expenses of $41 million to $43 million and non-GAAP operating expenses of $18 million to $20 million as we continue to fund strategic development programs targeted at delivering strong top-line growth in 2021 and beyond across launch and Space Systems while aiming for operational leverage in the business. We expect Q3 2021 GAAP and non-GAAP interest expenses to be $3.4 million. Given the requirement to fair market value of the Vector Acquisition Corp. public and private warrants and Rocket Lab customer and partner awards based on the end stock price, we cannot estimate these below-the-line GAAP other income and expense items at this time, nor are we able to forecast foreign exchange gains or losses. We expect Q3 2021 adjusted EBITDA loss to range between $17 million and $20 million. Our manifest for the remainder of the year remains strong, supporting demand for more than $40 million in revenue in the fourth quarter. Given the uncertainty of COVID restrictions in New Zealand, however, we are judging our fourth quarter revenue forecast to range between $17 million and $20 million. This assumes the COVID-19 restrictions ease prior to the end of September, allowing our launch services to resume. This revenue guidance of $4 million to $5 million for Q3 and $17 million to $20 million for Q4, when combined with our first half results, would result in fiscal year 2021 revenue of $50 million to $54 million. We are taking what we believe to be a prudently conservative approach to forecasting in a very uncertain time with regards to COVID restrictions in New Zealand. To this end, the estimate for fourth quarter revenue assumes modest sequential growth in Space Systems and contribution from only 2 launches in the quarter versus 5 launches currently manifested. It is also important to consider that our backlog has been growing despite the current COVID operating restrictions in New Zealand, and these contracts are not perishable, but rather just the timing of execution against these binding contractual launch services agreements. So in closing, despite near-term challenges presented by COVID restrictions primarily affecting our launch services business, we're very encouraged by the progress made against key strategic programs and expansion initiatives, and particularly by continued expansion in our backlog. And with that, I'd like to open the call for questions.

The first question is from Edison Yu with Deutsche Bank.

Congratulations on the first quarter out. Just had a couple of things I wanted to ask. One, your near-term kind of further out. I realize that you're being a bit conservative on the launch cadence due to COVID. Could you maybe go over what's the potential to maybe make that up in the first half of 2022, given you clearly have the capacity to? Is it still possible to kind of get those launches and maybe in the first quarter of 2022? Curious about that. And then the second thing, a bit more longer-term. It seems like the pace of announcements of wins has accelerated, I would say, in the last few months. Could you maybe go over again the pipeline that you've outlined in the past? Is that also expanding across the various verticals that you're playing in? I'm just curious; it just seems the pace of wins has really accelerated.

I can kick off a couple of these and add any color that you wish to it. With respect to can we make up the manifest? We obviously have the capability; we can produce launch vehicles and push those out to the pad pretty quickly. Operating our own private range gives us a huge amount of flexibility to manage the manifest. We're not subject to any other launch vehicle scheduling constraints, so that puts us in a good position to make those up and control that. With respect to the pipeline extending, the pipeline does continue to expand, and we continue to see growth in the opportunities therein.

I'll jump in, and I think when it comes to the catch up, sorry, go ahead.

Go ahead and ask your follow-up, and then I'll answer. Yes, I was going to say is, I guess, I assume 4Q doesn't include any launches out of walls, right? I was just going to make sure.

Okay. I'll take that. So yes, currently, right now, we don't have any launches scheduled on the manifest for Q4 out of walls. As we've discussed in the past, we're really awaiting the final certification of our automated flight termination system. We're waiting on NASA's software to be certified on our hardware. So until that happens, we're unable to launch at a wall. So we've also got a targeted date of having that operational by the end of the year, but whether we could get a launch off towards the very end of the year is in question. Peter, do you want to add?

That's a factor right in. The launch plan is complete, and it's commissioned. We're just waiting on that final piece of work on the software, which, as Adam said, is scheduled to be completed by the end of the year.

And then I'll jump back on to the question as far as catching up in Q1. I would say that we're certainly not throwing in the towel on Q4 and supporting as many of the launches that we have on the manifest. It was just really out of, I would say, being prudent and conservative with regards to forecasting for the financial community, what we're willing to sign up for, and commit to. This is not at all an indication that we are changing our manifest or not doing everything we can to execute that. I think it was just prudently cautious of us to put a lower financial commitment out there. But again, I want to make sure that people don't confuse that with what exists on the manifest and what ultimately the bogey would be. And then I would follow up on the other question as far as the pipeline pace and so forth. I would agree. I think we're seeing a lot of diversity in the pipeline across launch, across government, across commercial. And then I think more specifically probably on the Space Systems side, where we're seeing a tremendous amount of strength and where we're getting a lot of diversity building in the business. To me, that's probably the most encouraging because I think having that diversity of the business allows us to deal with some of the lumpiness of natural in the launch business, right? Launches can be affected by weather. They can be affected by a lot of things, whereas this diversified portfolio of Space Systems business across components, satellite build, design services on-orbit operational management contracts and so forth really does provide a nice kind of diversified and stable base on which to build your business. So we're very, very excited about that particular part of the growth in our pipeline.

Great. That's great color. If I could just sneak one more in. Any sort of updates on Neutron? I know you said that you'll give more details in the coming months. Curious what's maybe some reactions from potential customers? The progress is everything kind of on track timing-wise, just anything there?

Yes, sure. Neutron continues to develop really well. We're spending a significant amount of time getting through a tremendous amount of work. And holding our cards a little bit close to our chest. Look, Neutron is a vehicle that will set a new standard within the space industry in our view. So we're going to make a really significant announcement about it here in the coming months, where we'll expose a lot more of its details. But at the moment, we’d like to keep our heads down, working hard, and getting through a large portion of the vehicle design and operations. I don't think anybody will be disappointed with the results when we reveal more information.

The next question is from the line of Cai von Rumohr with Cowen.

Yes. So we raised a lot of money. It looks like you need it for Neutron and until you reach cash breakeven. I think you've talked about inorganic growth. Can you give us a little bit of color on what the M&A pipeline looks like? What are you looking for in terms of size of deals, and when might we see a transaction?

Sure. I mean, your point is exactly correct. We've ensured that we have sufficient dry powder to really expand the total addressable market (TAM). I would say the types of acquisitions we're looking for and have been pursuing are ones that really grow our position very strategically. So obviously, you've seen the value of the Sinclair acquisition in what we can provide there. But we're looking for more opportunities along those lines that create new technologies and allow us to compete more aggressively in the marketplace. I think it's a little early to announce anything here. But perhaps, Adam, you want to provide any more updates.

Sure. Yes. No, I think what's interesting about this market right now is it does feel ripe for consolidation. And not consolidation in the sense of large companies getting together necessarily, but because the investment climate for space is a relatively new phenomenon. For quite some time, it was very difficult to raise private capital in this market. So there are a lot of mom-and-pop or bootstrap companies where their founder controlled really nice businesses. These businesses are reasonably integratable and digestible from that perspective. Also, they tend to have had a focus on profitability. So we're seeing quite a bit of opportunity. We have our pipeline filled with a half dozen or so deals that we're actively investigating or trying to progress. So I think the outlook looks good for us landing transactions. As Peter mentioned earlier, the Sinclair acquisition has really emboldened us to lean forward and look at opportunities. Fortunately, we're also finding that when we have discussions with companies, they seem to really want to be part of this platform, right? In my experience, acquiring engineering-oriented companies, engineers are drawn to other great engineers. That's one thing we have to offer here at Rocket Lab, a great platform with great engineers. When you have those engineer-to-engineer conversations, you create a mind meld, and you sense that people want to be part of a company that is truly operational with a leading platform to get their products to market.

And as a follow-on, pricing—I think you've mentioned you have a couple of planet launches that you signed up for in 2015 that basically have prices. What is the recent trend in pricing, both with respect to what you're able to get now that you're more proven, and what you're seeing from competition given those competitors have yet to prove themselves?

At the end of the day, our customers value a couple of things above all else: reliability, not just in the launch vehicle, but also reliability in the launch schedule and service. We haven't seen pricing eroded, and customers understand the value of a reliable, dedicated small launch. So we haven't really seen any kind of issues there.

I'll add a little more color there.

Have you seen...

Sorry, go ahead, Cai.

No, I was just saying, have you seen any improvement in pricing now that you've done more satellites?

I would say we've seen stability in our pricing certainly, since I joined in May of 2018. The pricing we were discussing at that point in time was lower than it is today. So pricing has actually gone up for us. A lot of people might have predicted that not to be the case, but it certainly has developed into that. What's helping that stability is we're bringing more to the table than just launch. I don't want to minimize launch; launch is incredibly complex, and it's key for us. But Photon has really been a huge complement to our launch business. When you can offer a customer a complete turnkey solution where all they need to focus on is the data, which is what they want from the asset in orbit, coming to them with a combined launch and Photon solution is incredibly powerful. That allows us to have more control over pricing because we're not dealing with other competitors that have that same suite of offerings. So that's been very helpful to provide support for pricing.

And of course, what we're seeing is that multi-launch deals have also come forward. We talked about the Kinéis deal earlier today. You're really starting to see—evidence that the new space low Earth orbit market has taken off, and you are starting to see these multi-launch commitments. That's something that's really encouraging and has become more prevalent in the last 6 to 12 months, leading to more multi-launch rather than one-off bespoke launch agreements.

And I think satellite operators also understand the value of dedicated launch on a reliable platform, whereas prior it was less obvious. As more customers fly with us and see the value, that certainly helps as well.

The next question is from the line of Suji Silva with ROTH Capital.

Team, congratulations on the progress here. I want to dig into your comments on the component strategy and how gross margin can be negatively impacted during times like this and then rebound. Is that a strategic difference for you folks versus competitors? And help us understand which components you try to bring in-house and which ones you don't. How do you draw that line?

Yes. The launch business is always a fairly lumpy business because, at the end of the day, as a launch provider, you're always subject to spacecraft readiness and customer readiness. Our decision to move into space systems wasn't something that we did consciously recently; it has been a foundational aspect of our plan from day 1. If you look at the very second rocket that we launched, the kick stage that we put in orbit had resets for solar panels right back on launch 2. Our view on providing end-to-end space capability has been essential to our strategy since the beginning. When you're aspiring to be that integrated space company, components actually form a fundamental layer and an important differentiator between you and others. We've found out that when we started to order satellite components, lead times were just too long. We don't have 9 to 12 months to wait for a reaction wheel. Having experienced that in our satellite program made us understand the whole industry and market. The satellite industry is constrained by small shops producing at low volumes. When you ask a satellite component manufacturer for something like a few thousand units, it’s hugely challenging for them. If the space industry and satellite constellations are going to scale, this problem has to be solved. We're really good at producing complete things in volume, so our strategy is to provide components into our own platforms but also into others, which helps support the growth of satellite constellations as a whole. You can see this with the Sinclair deal, where we're supplying not hundreds, but thousands of reaction wheels to various platforms.

Okay. And then on the launch cadence and the push-outs here, I'm wondering if that impacts the timing of when you expect Space Services revenue to come in. I presume you have some learnings and testing there before you monetize that. Does the launch push out in New Zealand push that back? Or is it already on track to hit your targets for that flowing into revenue in a few years?

No, I mean, this impact wouldn't affect those future plans. The launch manifest gets moved around all of the time. We're always subject to spacecraft and customer readiness, as well as global pandemics. Our ability to manage the manifest is enhanced by owning our own private launch range, which allows us to move things around effectively. So everything is still on track, and I'm very optimistic about the revenue flow from our Space Services.

The next question is from the line of Austin Moeller with Canaccord.

Just to go ahead with my first question here. If we think about the Space Systems segment, where do you foresee in terms of revenue mix the ultimate breakout being in the next few years in terms of the sales of the Photon satellite bus versus the sales of the components?

Go ahead, Adam.

Yes. So Austin, if you look at the breakout right now, certainly, components are a little bit larger because they had a bit of a running start from the acquisition of Sinclair. When we look at our overall revenue contribution in 2021, I expect it to be pretty balanced by the time we get out into this Q4 period. I would say that they both have opportunities to scale, although my guess would be that components will outstrip the design services and satellite bus and other related functions in Space Systems for probably the next 12 to perhaps 18 months. However, the opportunities on the broader side of Space Systems outside of components, both at the satellite bus level and services, are expected to scale much more greatly in the longer term, once we get out past that 18- to 20-month period. And with that, I'll let Peter add if you’d like to provide additional thoughts.

No, you’ve said exactly what I was going to say.

There are no additional questions waiting at this time. I would like to pass it back to Peter Beck for any additional remarks.

Thank you very much. Before we wrap up the call, I would like to thank everybody who participated in today's call, and we look forward to providing further updates on our business, including through our participation at Deutsche Bank's Virtual Technology Conference on September 10, TechCrunch Disrupt 2021 on September 22, and the UBS CEO Disruptive CEO Conference on October 19. Once again, thanks to everyone on the call, and have a great rest of your day.

That concludes the Rocket Lab First Half 2021 Conference Call. I hope you all enjoy the rest of your day.