Rocket Lab Corp Q3 FY2021 Earnings Call

Good afternoon, everyone, and welcome to Rocket Lab's Third Quarter 2021 Financial Results Call. My name is Emily, and I will be coordinating the call today. I will now hand it over to our host, Gideon Massey, Financial Planning and Analyst Manager. Please proceed.

Thank you, operator. Good afternoon, everyone, and thank you for joining us on today's conference call to discuss Rocket Lab's third quarter 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 fourth quarter 2021 revenue, revenue growth expectations in our principal target markets, GAAP and non-GAAP gross margin, GAAP and non-GAAP operating expenses, interest and other expense, and adjusted EBITDA. In addition, we will make forward-looking statements relating to trends, opportunities and uncertainties in various products and geographic markets, including without limitation, statements concerning opportunities arising from our Launch Services and Space systems markets and opportunities for improved revenues across our target markets. These forward-looking statements involve substantial risks and uncertainties, including risks arising from competition, global trade and export restrictions. The impact of the COVID-19 pandemic, our dependency on a limited number of customers, average selling price trends and risks that our markets and growth opportunities may not develop as we currently expect and that our assumptions concerning these opportunities may prove incorrect. More information on these and other risks that may affect the forward-looking statements has outlined in the Risk Factors section of our third quarter 10-Q filing, which will be filed today and the documents incorporated therein. Any forward-looking statements are made as of today and Rocket Lab has no obligations to update or revise any forward-looking statements. The third quarter 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. The supplemental measures exclude the effects of stock-based compensation expense; amortization of purchased intangible assets; other non-recurring interest and other income expenses, net attributable to acquisitions; and non-cash income tax benefits and expenses. We also supplement our unaudited historical statements and forward-looking guidance with the measure of adjusted EBITDA, where adjustments to EBITDA include share-based compensation, warrant expense related to customers and partners, third-party expenses related to mergers and acquisition activity, foreign exchange gains or losses, other non-operating income and loss, excluding interest expense related to debt and other non-recurring gains or losses. We encourage investors to review the detailed reconciliation of our GAAP and non-GAAP presentations in our investor update presentation available on our website. We do not provide a reconciliation of non-GAAP guidance for future periods due to 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 relating 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 Lab's 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 limitations and that they do not reflect all the amounts associated with our GAAP results of operations. These non-GAAP measures should only be viewed in conjunction with corresponding GAAP measures. And lastly, this call is also being webcast with a supporting presentation. A replay and a copy of the presentation will be available on our website for two 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 here today as we review Rocket Lab's business highlights and financial results for the third quarter of 2021. As Gideon mentioned, joining me today is our CFO, Adam Spice, who you'll hear a little bit from later. Today I'll be talking you through our key business accomplishments for the third quarter of 2021; and Adam will be covering off our financial highlights and outlook, sharing our upcoming conference schedule, and of course, we have time for Q&A. Since the end of the second quarter, we've seen significant growth in our backlog. On June 30, our backlog was $141 million and ended the September 30 quarter at $183 million. Today, our backlog stands at $237 million, representing nearly $100 million in backlog growth since the end of the second quarter. We've seen bookings strengthen across every major product in the company, including new electron launch contracts, government study contracts, interplanetary photon satellites, and overall debris removal programs, NASA demonstration missions that include the processing of the light electron launch vehicle, Rocket Lab components and software, and numerous components expanding our global customer base that includes governments, foreign governments, universities, and commercial customers. I've never been more excited or proud of all of the use cases we're finding for our technology and the high-value missions we're enabling with our suite of products and services. Many of these programs will enable and provide transformative technological breakthroughs that will have a long-lasting impact on our planet which we're very proud of. Proof of our many industry-leading technologies and strong mission heritage can be seen in our strong repeat customer bookings. Since the end of Q2 2021, we have seen over a dozen repeat customers book additional business with Rocket Lab with none of these customers being listed on the slide. As we continue to broaden our portfolio of space-based products and services, our ability to cross-sell and integrate technologies will lead to even richer customer engagements and relationships. On September 27, we announced an agreement with the U.S. Space Force under the National Security Space Launch program or NSSL with a contract worth $24 million to advance the development of the neutron rockets upper stage. This development will support national security and defense launch capabilities, providing scientific and experimental satellites to the world's most critical national security payloads. We are really honored to be partnered with the U.S. Space Force and view this as a vote of great confidence from the U.S. government, proving our ability to deliver low-cost responsive next-generation launch that will transform space access and constellation deployments. In August, we announced the EscaPADE mission passed NASA's critical mission review, moving the mission into its next phase with a target launch readiness date of 2024. In September, we finalized Phase B of the contract and completed the kick-off meeting in November. This mission, in partnership with UC Berkeley's Space Sciences Laboratory, will put two Photon spacecraft into the orbit of Mars to study its magnetosphere. I could not be more excited with the progress the team is making on these complex, high-value, and crucial missions to explore the planets in our solar system. Now, covering the key business highlights of our third quarter, I'd also like to touch briefly on some of our key achievements since the third quarter. We achieved a key program milestone with the NASA Demonstration Missions with our partner Eta Space. This mission is very unique in two different ways. LOXSAT 1 is the first cryogenic oxygen fluid management demonstration mission for NASA in its history. This will prove the usage of over-fueling systems that satellites require, developing critical technology that can keep our precious satellites monitoring gas emissions and extending their operational lives. Secondly, this was the first mission where Rocket Lab won both the launch and the spacecraft design and build in a complete integrated solution, ensuring a faster, more cost-effective, and seamless development process for this particular NASA demonstration. On October 12, we signed and completed the acquisition of Advanced Solutions Inc or ASI, an industry leader in mission-critical flight software and GNC for space vehicles. The ASI team brings with them over 20 years of flight heritage, more than 30,000 hours of valuable operation, and a growing team of 57 members located in Littleton, Colorado. The acquisition of ASI further positions Rocket Lab as an interim space company, enabling us to provide complete mission solutions to our customers. We are already integrating the next flight software into our Photon Space Systems Solutions for LEO and Interplanetary space vehicle missions with more than 137 cumulative years of mission operations and heritage, and more than 45 missions using the next flight software solutions. We believe that this provides a clear differentiator in the marketplace. Lastly, I'm excited to have a footprint in Colorado, the second-largest aerospace economy in the United States, with a strong base of research institutes and universities to bolster Rocket Lab's workforce. And that's a big day; I’m excited to announce the signing of a definitive agreement to acquire Planetary Systems Corporation or PSC, an industry leader in spacecraft separation systems, a company I've worked with and admired for many years. Walt Holemans and his team have built an extraordinary business based on best-in-class products that are reliable, with a 100% mission success rate on over 150 missions. PSC is viewed as the premier supplier for the U.S. government on small satellite missions with motorized lightband systems, advanced lightband systems, and canisterized satellite dispenser separation systems. Adding PSC to the Rocket Lab team continues the execution of our strategy of expanding our product portfolio with best-in-class offerings. We are excited about the cross-selling opportunities and combination of these leading spacecraft separation systems with our existing electron launch services and other spacecraft components, our software and service offerings, and we believe there are meaningful synergies that can be achieved post-acquisition, shortening lead times, scaling production, and driving costs to provide our customers with even better service offerings than they've had before. Looking forward into the rest of Q4, as we've already announced, we are planning to launch two BlackSky dedicated launches this quarter, with the first launch scheduled for no sooner than tomorrow, November 17. This mission is part of a five-launch agreement signed earlier this year with Spaceflight to deploy BlackSky into their satellite constellation. We appreciate BlackSky entrusting us with their satellites for these upcoming launches. As part of the upcoming flight 22 with Blacksky Global, we will be introducing helicopters into the operations of our recovery program for the very first time. We intend to station a helicopter in the recovery zone to track and visually observe the descending stage. While we won't be attempting to catch the media on this particular mission, this is the last step in our program, and we will test all the communications and tracking for future electron launches in the aerial capture process. This is a key milestone for the electron recovery program as we work to make Electron the very first reusable small launch vehicle. So with that, I'll turn it over to Adam Spice, our CFO. Over to you, Adam.

Thanks, Pete. I'll first review our third quarter 2021 results and then further discuss our outlook for Q4 2021. Our third quarter 2021 revenue of $5.3 million was slightly above the guided range of $4 million to $5 million. With COVID impacting our ability to launch in the latter parts of Q3, revenue was largely driven by space systems which contributed 79% of Q3 revenue and has grown by 698% year-on-year for the nine months ended September 30, 2021. Our launch revenue was impacted by both COVID restrictions and legacy over time revenue recognition policy for the successful Space Force launch that occurred on July 29. This was the last launch contract for which revenue was being recognized over time. Going forward, all launch contracts are expected to be recognized as point in time at the time of launch. Revenue for the nine months ended September 30, 2021 is up 79% year-on-year, with growth being contributed across both Launch and broadening of our Space Systems products and services. Our GAAP and non-GAAP gross margins for the third quarter of 2021 were negative 236% and negative 84% of revenue, respectively. This compares to GAAP and non-GAAP gross margins of negative 18% and negative 14%, respectively, in the third quarter of 2020. GAAP and non-GAAP gross margins were significantly impacted by non-recurring deSPAC-related stock-based compensation charges and New Zealand COVID restrictions that impacted production, launch operations, overhead cost absorption, and launch cadence. We view all of these as non-recurring events and as such are indicating a significant upswing in profitability in the Q4 guidance which we'll get to shortly. GAAP operating expenses for the third quarter of 2021 were $39.9 million, significantly impacted by non-recurring deSPAC-related stock-based compensation charges hitting both R&D and SG&A. In addition, Q3 2021 saw a meaningful step up in non-recurring acquisition-related deal expenses and in public company costs when compared to the prior year results. Net of the stock-based compensation charges, the growth rate in R&D investment has nearly doubled the growth rate of SG&A year-on-year, representing continued aggressive prioritized investments into TAM-expanding opportunities. Q3 2021 adjusted EBITDA loss was $17.5 million at the low end of the guidance range of $17 million to $20 million loss. Q3 saw several unique one-time charges related to deSPAC with Vector Acquisition Corporation which included the mark-to-market warrant expense of $34.5 million related to the outstanding publicly and privately held warrants, stock-based compensation expense of $31.5 million, the first full quarter impact of our Hercules loan interest expense of $3 million, depreciation and amortization expense of $2.6 million, and acquisition costs of $700,000 offset slightly by an income tax provision benefit of $1.7 million. GAAP R&D expense was $14.2 million for the third quarter, which included stock-based compensation of $6 million and amortization of purchased intangibles of approximately $400,000, yielding $7.9 million of non-GAAP R&D expense for the third quarter of 2021. As previously referenced, the growth rate in R&D investments year-on-year is outpacing the growth rate in SG&A expense by more than 2x and has been largely driven by increased staffing and prototype expenses related to our Space Systems products and services, neutron development and continued spending on our launch vehicle automated flight termination system development efforts. GAAP SG&A expense was $25.7 million for the third quarter, which included stock-based compensation of $17.6 million and acquisition costs of $700,000, yielding approximately $7.4 million of non-GAAP SG&A expense for the third quarter of 2021. The year-on-year step up of $1.9 million in SG&A was primarily due to increased headcount and related labor expenses, directors and officers insurance, and other new public company costs. Our cash flow consumed from operating activities was $13.3 million for the third quarter of 2021 versus an operating loss in the quarter of $88 million, reflecting an increase in cash consumed of $4 million versus the third quarter of 2020. This increase in cash consumption was driven by a $6.9 million increase in inventory and a $4.7 million increase in prepaids and other current assets. These were offset somewhat by non-cash expense add-backs of $56.4 million, largely driven by the aforementioned stock-based compensation, warrant expense and depreciation and amortization charges, as well as $9 million of cash generation from accounts receivable and $220 million of cash generation from deferred revenue. Cash consumed from investing activities was $5.7 million in the third quarter of 2021 compared to cash consumed of $2.2 million in the third quarter of 2020, with this year-on-year period increase in cash consumed driven by several large capital projects, including investments in our expanding lab facilities at our Long Beach headquarters, investments in our second launch pad at Launch Complex-1 and our new consolidated propulsion test complex in New Zealand. The combination of cash consumed from operating activities and investing activities was more than offset by the $704.4 million net cash generated from the financing activities in the period, resulting in $793.8 million in cash and cash equivalents and restricted cash as of September 30, 2021. This cash generation was driven by $730.5 million in proceeds from the leaseback with Vector Acquisition Corporation and the related PIPE financing. In addition to collecting $2 million in proceeds from the exercise of employee stock options and $2.3 million related to the deferred transaction costs, which were somewhat offset by $30.4 million in repurchases of shares and options from management. We believe liquidity resources of the company will 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 system solutions. With that, let's turn to our guidance for Q4 2021. We currently expect revenue in the fourth quarter of 2021 to range between $23 million and $25 million, which includes two dedicated launches and partial quarter contribution from ASI. This revenue guidance does not include any partial quarter contribution from PSC, which was announced earlier today and is expected to close during the month of November. We expect Q4 2021 GAAP and non-GAAP gross margins of 13% and 27%, respectively. The anticipated increase in GAAP gross margin is driven by a favorable mix of higher margin Space Systems revenue, increased absorption of manufacturing overhead with increased launch cadence, and a step down in stock-based compensation after the non-recurring Q3 catch-up related to the deSPAC transaction and related accounting treatment of restricted stock units. We expect Q4 2021 GAAP operating expenses to range between $24 million and $26 million, and non-GAAP operating expenses to range between $19 million and $20 million as we continue to fund strategic development programs targeted at delivering strong topline growth in '21 and beyond, across launch in space systems, and our goal of delivering operating leverage within the business. Please note that this guidance does not include impacts from the purchase price accounting of ASI or any impact of stock-based compensation related to the employee stock purchase plan that we rolled out for the first time later this month. We expect Q4 2021 GAAP and non-GAAP interest expense to be $2.8 million. Given the requirement to fair value the publicly and privately held warrants assumed in the Vector Acquisition Corp merger, which is based on the end-of-quarter stock price, we cannot estimate these below-the-line GAAP, other income and expenses items at this time, nor are we able to forecast foreign exchange gains or losses. We expect Q4 2021 adjusted EBITDA loss to range between $9 million and $11 million. With that, I'd like to open up the call to questions. Operator?

Our first question today comes from Erik Rasmussen from Stifel. Erik, your line is open.

Yes, thanks for taking the questions, and congratulations on the progress in the quarter. Maybe just in relation to your acquisition of ASI, what sort of revenue contribution comes from them? Could you maybe - and then maybe could you just comment on the strategic rationale? And maybe just how we should think about the types of acquisitions you just announced Planetary Systems, but the types of acquisitions you are targeting as you look to expand the business?

Yes, Erik. Thanks for the question. This is Adam. So on the revenue side, there was a revenue run rate of approximately $10 million per year at the point of acquisition. So I'll let Pete speak to the strategic nature of the deal and future deals.

Yes, just a moment. The kind of acquisitions we're looking to make here are those technologies that we use and trust and know super well, and that are best-in-class; that's kind of fundamental. As we think about how we're going to build our business out in the future and how we're going to deliver on ultimately building our own infrastructure, what we're looking to do here is compile all of the pieces that are best-in-class to really form a cabinet of capabilities that we can deploy, not just in our own systems but in others as well. This is really important for the ultimate longer-term gain of the business and providing installations and styles.

Okay, thanks. And then maybe just in relation to the BlackSky and the two launches that are upcoming, obviously, we saw that that got pushed from November and looks like that's on track for the 17th. But any other sort of impacts that could potentially have as we think about the remaining part of the year? And then you - I think you'd mentioned, there was an opportunity for further missions, you know it may be even December - for the final one in December because that’s still be possible.

Yes. So the play here is to launch those two BlackSky missions in this quarter. Both of those missions and the vehicles are at the launch site. We moved the launch a few days ago for a couple of reasons. One, we saw a sensor reading on the ground that we just didn't like; we subsequently repeated as we expected it was nothing and then we also gain more time to prepare for the helicopter intercept. But at this point in time, those are the two missions that we're planning in this quarter, and we'll be unlikely to push a third mission in this quarter.

Okay. And then maybe just on the outlook for Q4, $23 million to $25 million, it looks like your overall for the year increased by $5 million, how much is that from ASI and acquisitions versus just business outperformance?

Yes, Erik, there was some contribution in the quarter from ASI, but we have not included anything from PSC in our guidance. If you consider a low-single-digit million contribution from ASI, the majority comes from our core organic business. The launches are increasing with two new launches this quarter compared to Q3. While the majority of the launch is stepping up, space systems are quickly closing the gap, largely due to the benefits from the Sinclair acquisition we made last year, which is yielding substantial returns and their business is performing very well.

Hi, Adam, Peter, thanks for the question. So what do you think about your helicopter intercept? Can you just talk a little bit about how that's impacting your cost recovery for Electron?

Yes, sure. The vast majority of the cost of an Electron launch vehicle resides in the first stage. There are obviously nine engines on the Stage 1 and the bulk of the systems. We have successfully fetched down multiple per stages now, and we've got that to a point where we can reach the stage through this atmosphere and have it descend into the ocean in good condition. The helicopter intercept really enables us to not splash that down in the water and obviously, rocket engines and rockets do not handle sea water well. So it enables us to capture that and then return it back to land for refurbishment, which reduces quite a large amount of work. And it's fair to say that to date we have been making any of that bonus we get from reusable systems to our numbers; it's just pure cream on top of the cake.

And then when we think about neutron reusability and kind of material and fuel preferences, can you just discuss how you're thinking about that if you ever preference in any way?

Yes, sure. We're wishing on we will make a neutron announcement here in due course. But it's fair to say that the experiences we've gained from re-entering Electron have been absolutely critical in informing us how to design and develop Neutron. Going into a reusable launch vehicle program without actually having successfully re-entered a rocket would be difficult. So all the aero data, aerothermal data and all of the procedures you need to bring that rocket through the atmosphere in one piece have been absolutely critical. This knowledge has been transferred directly to the Neutron program.

Got it. And then the last question for me, can you talk about pricing and capacity trends you are seeing in the small satellite launch market and to the extent that customers are fully utilizing Rocket Lab vehicle or something along the lines where it's a partial capacity utilization for your vehicles?

Yes, Colin, I'll take that question for now while Peter rejoins. So, you know, I think if you look at our missions, we really do have a pretty good mix of what we call just dedicated missions where you'd expect, for example, for U.S. government customers. It's primarily dedicated launches. For some of the commercial customers, we are seeing the opportunity to basically pull together what we call kind of a primary rideshare, where there is a primary microsat that anchors the launch, and then we fill the remaining capacity with CubeSats or other small spacecrafts. So I'd say right now it's probably a little bit more than half of the business that are pure kind of dedicated one satellite per launch or one single customer. For example, on the BlackSky missions, we put two BlackSky satellites per launch. So if you think about single customer launches, they're still probably a little bit more than half of the mix, and then where we do the primary rideshare and mix it with other payloads is a little bit less than half of that. I hope that helps. As far as the pricing trends, I would say that we're seeing relative stability in the pricing out there in the market. One thing that's probably the most encouraging kind of trend in our business is that we are getting multi-launch deals. So we are seeing earlier in the company's life we were seeing a lot of pathfinder kind of one-off missions. Now we're starting to see recurring missions. If we talked about it earlier in the conference call about how we're seeing recurring customers, well we're seeing those recurring customers also sign up for multi-launch agreements. So I think that's an encouraging sign that the market is continuing to build overall and that we're following through with repeat business from those customers.

Thanks for taking our questions. I'll start with the financial one while we try to get Peter back. Can you maybe go over the contribution from the Planetary deal just in terms of what you can provide there? And also on ASI, what was the - are you able to say anything about the margin?

Yes. So we're not providing any color right now on the margins for the various pieces within our Space Systems business. We kind of want to keep that more at a macro segment level where we talk about revenue and gross margin at that higher level. But the contribution from a revenue perspective on an annual run rate basis is about the same between ASI and PSC. Each business is roughly in that $10 million kind of run rate range. Overall, the margins across the businesses are pretty consistent as well; they have similar gross margin profiles. The growth rates are maybe a little bit different across the two businesses, and the ultimate margin contribution to the bottom line is a little different as well because one price is a little bit more investment than the other. But overall, I think they are somewhat similar. So again, if you think about the combination of the two on an annualized basis running around $20 million combined revenue contribution. The margins, again, are very - that we've talked about the margins in Space Systems are north of 60 points, and these businesses are consistent with that overall profile.

Okay. Second question about the launch cadence. Obviously, you had to push out some launches that I think you would have liked to have done in the fourth quarter. Can you maybe talk about if that sort of means you can launch more or recover some of that in the first quarter or in the first half? Kind of your ability to maybe launch more than you would have expected in the first half than before because of the COVID lockdowns pushing everything else. Is there an ability to do that?

Yes. So, I'll take the first part and Pete can add on. So I would say that it is a fair statement to say that we have a pretty healthy manifest going into the first half of 2022. The challenge for us is really going to be not on the demand side; it's really just we've got to continue to increase our production rates and support the manifest from that perspective. I would say there is certainly - we certainly expect our business to be on the launch side to increase its cadence as we progress into 2022. We're not giving specific guidance for 2022; all the indications and biases right now are certainly pointing to an increased launch cadence in 2022.

Yes. I would add that we currently have a lot of product that we need to move through. The COVID lockdown in New Zealand has improved our ability to deliver more this quarter. It's important to remember that in the launch business, we often depend on our customers’ readiness. I wanted to ensure our launch vehicle meets its targets; however, customer schedules can change as well. So, there's some coordination needed to keep everything on track. But we definitely have a lot of product that we will be pushing through.

Yes, and I would say that as customer requests are for launch sooner, the bias right now is to pull in launch dates. I think that's another indication of where we see the business going, and kind of to your point of could we see some of that pent-up demand kind of manifest itself in launches, and as we head into 2022, we certainly expect that would be the case.

I mean there is a relative subset of customers when you are considering human spaceflight; obviously, they are being biased. We always talk with our customers about multiple missions, nothing different including human spaceflight. Our focus, however, is to ensure that we have a vehicle that is human spaceflight-rated rather than focusing on those specific missions at this point in time. Our priority is getting a vehicle on the pad and making sure that it is ready to be certified.

Yes, thank you so much, and great quarter. A number of the other larger space companies and aerospace companies have mentioned supplier delays and the impact of the vaccine mandate. I know you launch from New Zealand, but I assume that could impact your domestic customers. Could you give us some color on that?

Definitely. I mean we're managing supply chain issues, but we do carry a lot of stock. Thus, we've been fairly successful in linking both. One of the challenges with New Zealand is the ability to get customers into the country through the managed isolation facility in New Zealand. They've been very successful in securing our stocks and customers by working directly to mitigate their share of supply chain issues.

Yes, sorry, you were breaking up a bit there, Pete. So I'll recap a little bit of what you were saying, Cai. So, so far we've been pretty fortunate that we haven't had any real, call it, significant supply chain constraints or issues. As Pete was indicating, we also carried a lot of inventory and raw materials inventory. So we've been able to absorb any impact that otherwise would have been an issue. The biggest issue has been getting people to New Zealand to support the launches. We were fortunate that the two BlackSky missions that are going off this quarter already had the spacecraft in the country; they were already integrated. So there's really no risk from a COVID-related spacecraft readiness from that perspective. Now as we get through, we're out of that level four alert in New Zealand, where we're able to have full production and launch cadence support. So I would say we've been very, very fortunate; we haven't had any issues. We're looking forward to making it much easier for our customers to support their spacecraft in New Zealand with the COVID restrictions easing. We're very anxious to get operational in our Wallops facility, where right now we've been waiting on the certification of our automated flight termination hardware on NASA's software. It's been quite delayed as it was expected some time ago. The current expectation is that it could be done as early as the end of the year, which would allow us to commence flight operations out of LC2 and Wallops in the first half of 2022. This will further mitigate the issues around restrictions on travel. As far as the overall vaccine mandate, we've seen some pushouts to those things from various elements of our supply chain, but we're not getting any indication right now from any of our supply chain partners that this will present an issue to supporting our manifest.

Good evening. Great quarter, guys. My first question is for Peter. Would you argue that pairing the Electron with Planetary Systems' lightweight satellite dispenser products makes the Electron even more competitive as a constellation launcher?

Yes, and I'll carry on it. In some respects, the Electron is ideal for very small constellations, but using it just for one-off or early development constellations. Certainly, having the portfolio of Planetary Systems' products in our organization gives us the ability to do very interesting things with cross-selling and bundling of products and services as well. It also gives us exposure to satellites that aren't launched on Electron; the PSC separation system is used across the industry, continuing to be adopted by other launch vehicles. I can confirm that the charter is activated and the launchpads LC1 and PDN1A have completed their launches. While today’s focus is quite specific, we are close to finishing this phase. This will provide us with enough launch capacity for our core operations, and any additional capacity needed to reach higher targets would require more hedging. However, with these three pads, we have a substantial amount of launch capacity, and we won't face any constraints for the time being.

Okay, that's very helpful and then like Russians - like the Russian government in particular has had plans to try and catch following rocket boosters with a helicopter in the past. So can you sort of talk about what makes your plan for booster recovery different from those prior plans and how you plan to achieve a high success rate there, just given the challenges of catching a rocket mid-air with a helicopter?

Yes, I think there's a misunderstanding here. Once the rocket has been acquired, catching it as it descends is actually not very challenging. We have conducted numerous drop system tests with a nearly 100% success rate. We will use two helicopters to drop a simulated vehicle, with one helicopter overseeing the operation and capturing it. While that might sound like the most difficult aspect, the greater challenge lies in the reentry and controlling its trajectory to ensure it remains intact. The most challenging parts are already behind us, and we do not anticipate a significantly difficult process moving forward.

Hi, Adam, Pete. Thanks for the follow-up question. From a high level, could you just talk a little bit about the cash flow walk and the cash that you're going to need for engine development and Neutron and your Constellation plans? Where do you expect the biggest contribution to come from split between organic, debt, and potentially equity?

What Pete talks to the technical kind of milestones and so forth to drive it, but we forecast all of this when we were going through our deSPAC process and related PIPEraise and so forth. We believe we over-capitalized ourselves to execute on Neutron in every aspect and raised enough capital as dry powder to execute on things like ASI and PSC and other opportunities. We believe propulsion is well within our wheelhouse. We put 200 Electron Rutherford engines on orbit. Whatever you're dealing with rocket science, nothing is ever trivial. But we think we're well scoped for the capital investment required. We don’t believe that for Neutron or anything else we have in our roadmap that we will have to turn back to the equity markets, debt markets, etc. We feel we've raised enough capital to execute what we need to do.

As we approach Neutron, we are being really smart and innovative. Propulsion is an area where if you want to renew the launch vehicle, you don't want an engine that's completely stressed to its limits; you want a propulsion system that's got lots of margin on that. So, everyone has been thinking about propulsion with Neutron. That's really been our focus. When it comes to innovation in the medium size and stretch, that’s not an area where we are carrying a lot of risk. These other areas where we're innovating have much bigger payoffs, but I feel like we're in a good position to execute the function program and the Neutron program.

Yes, thanks so much. So I might have missed it, but what did you pay for ASI? And also, as you know, RTX in addition to buying Blue Canyon bought the software company in Colorado. Did you look at that, and are they competition to you when you go out and look at acquisitions? I would guess not, but I'd love your perspective on that?

So I'll comment on the purchase price of ASI. ASI is a $45 million cash purchase. I can't speak to the other acquisition that you're referencing for Raytheon. We're familiar with the Blue Canyon acquisition, but I'm not familiar with the software company. In general, the environment for deals we find to be pretty receptive to Rocket Lab's platform. I think we're a very attractive place where entrepreneurial engineers want to call home. No knock to some of the larger potential acquirers, but it's a very different choice. You go to a large, well-established prime or to something smaller where you could have a greater impact through your efforts. This is a seller's market, no question. There’s competition for deals. I think we're being very selective. We have a healthy pipeline of opportunities that we're always evaluating in this case, executing on the latest acquisitions of ASI and PSC.

You can see Cai that of the acquisitions we make; it's very much a try-before-you-buy approach. We were using products from ASI prior to the acquisition. We have been using PSC for our satellite systems. These are companies that we know well and are always leaders in their areas. This is a strong growth to the acquisition.

You can also start to see the acquisition strategy play out, and the fact that if you look at some of our upcoming missions, you'll see we're providing launch services, and in many cases we're providing supply components in the form of reaction wheels and star trackers from Sinclair. In many cases, the satellites are using ASI software. You'll start to see that theme as we bring all the pieces together to offer a truly end-to-end solution that reduces costs and increases time to market. When you start to see the combination of these deals, it’s undeniable how all these pieces are coming together, leading to increased revenue from missions that we service. We're all excited about the combination of these deals.

Before I wrap up the call, I'd like to thank everyone who participated in today's call. We look forward to providing further updates on our business, including trades at our participation in the UBS Aerospace Investor Conference on November 19, our Truist Securities Investor Conference on December 7, and the Canaccord NewSpace Investor Conference on December 9. Thanks again, and we look forward to speaking to you again soon. Rather exciting progress on fine business today. Thank you very much.

This now concludes today's conference call, and you may now disconnect your lines. Thank you everyone for joining us today.