Rocket Lab USA, Inc. (RKLB) Q3 2026 Earnings Call Transcript

Operator: Good day, and thank you for standing by. Welcome to the Rocket Lab Corporation Third Quarter Earnings Call. [Operator Instructions] Please be advised that today's conference is being recorded. I'd now like to hand the conference over to Murielle Baker, Director of Corporate and Launch Communications. Please go ahead.

Murielle Baker: Hello, and welcome to today's conference call to discuss Rocket Lab's Third Quarter 2026 financial results, business highlights and other updates. Before we begin the call, I'd like to remind you that our remarks may contain forward-looking statements that relate to the future performance of the company, and these statements are intended to qualify for the safe harbor protection from liability established by the Private Securities Litigation Reform Act. Any such statements are not guarantees of future performance, and factors that could influence our results are highlighted in today's press release, and others are contained in our filings with the Securities and Exchange Commission. Such statements are based upon information available to the company as of the date hereof and are subject to change for future developments. Except as required by law, the company does not undertake any obligation to update these statements. Our remarks and press release today also contain non-GAAP financial measures within the meaning of Regulation G enacted by the SEC. And included in such release and our supplemental materials are reconciliations of these historical non-GAAP financial measures to the comparable financial measures calculated in accordance with GAAP. This call is also being webcast with a supporting presentation and the replay and copy of the presentation will be available on our website. Our speakers today are Rocket Lab Founder and Chief Executive Officer, Sir Peter Beck as well as Chief Financial Officer, Adam Spice. They will be discussing key business highlights, including updates on our launch and Space Systems programs and our pending acquisition of Iridium Communications, followed by financial highlights and outlook. We will then open the call for questions. So with that, let me turn the call over to Sir Peter.

Peter Beck: Thanks, Murielle. It's been an outstanding quarter with new records across the business. Revenue came in at $268 million, 73% higher than the same quarter last year and $34 million, more than Q2. That's the sixth time in a row for record revenue quarters. Our Q3 ending backlog hit a new high of $3.57 billion across 117 launches and more than 55 spacecraft. And since the quarter closed, we've added even more launch and Space Systems contracts. As we head into the final months of the year, I wanted to do a bit of a wrap-up of our achievements for 2026 to put our growth into perspective. Only 6 years ago, we were making less than 4% of our annual revenue we're expected to bring in this year. From $35.2 million in 2020 to our near $1 billion 2026 full year guide. Our gross margins have also seen dramatic improvement from negative territory in 2020 to a projected 2026 GAAP gross margin in the 35% range. On a non-GAAP basis, we project margins in the 40s, an increase of over 69 percentage points since 2020. In an industry where execution and reliability are nonnegotiable, Rocket Lab has consistently delivered for our customers, and we're scaling rapidly and setting new benchmarks every year. I want to dig deeper into the numbers across the business, starting with some highlights from Space Systems. For the year-to-date, we've signed $688 million in new contracts, up 319% from 2025. Today, Space Systems sits at $1.7 billion in backlog, representing 48% of the total company's backlog. $470 million in new space system contracts was signed in this past quarter alone, a 512% increase from the same period last year, incredibly strong growth here. Operationally, the team has been executing at a high level with 12 Rocket Lab built satellites launched in the past 12 months, including missions for NASA, the Space Force and large constellation operators. Our clean room and factories are busier than ever with more than 55 spacecraft in development and build. On the satellite component front, almost every team has exceeded their annual targets and increased production. We're delivering more critical hardware and subsystems than ever before for our customers' science, national security and commercial missions. Like the title says, demand for launch has been exceptional this year. The 2 biggest commercial and defense bulk orders in our history landed in Q3, 18 HASTE launches for the Space Force Systems Command and 20 launches on Electron for our long-time commercial customer, Synspective. Q3 has also been the biggest quarter yet for Neutron. Eight launches signed for a total of roughly $515 million, including multiple missions on a new escalated base price of $70 million. The demand is a function of both a tightening global launch supply and our customers' confidence that Rocket Lab is the right partner to break the world's launch bottleneck. It's also been a record year for strategic acquisitions with new capabilities and technology added to our portfolio, including laser communications, robotics, payloads and machining capability. Iridium will go further still evolving Rocket Lab into a true end-to-end space company that not only builds and launches spacecraft, but also owns and operates its own constellation with recurring revenue and growth opportunities for future space services. Now speaking of Space Services, I've historically referred to operating our own constellation as space applications. But going forward, we've updated the terminology to better reflect the integrated end-to-end services we'll be providing our customers once Iridium is part of Rocket Lab. We've made great progress this quarter towards closing the Iridium acquisition. The deal is now fully financed with the ATM completed in Q3, and we've secured Iridium's credit facility for after the acquisition closes. This puts us in a great place where we do not need to raise extra capital to close the deal. Another key milestone was checked off when the Iridium shareholders voted overwhelmingly in favor of the transaction. Now we're moving into the final phases, securing the necessary regulatory approvals. This process is advancing well, and we're actively pursuing a timely close. The FCC's recent swift approval of other acquisitions demonstrates the commission's proactive, decisive approach and its commitment to supporting the rapid pace of innovation required in the space sector. We're enthusiastic about collaborating with the commission as we guide to a generational space company in an exciting new era. Now on to Space Systems operational achievements. In the past 12 months, a dozen Rocket Lab built spacecraft have launched and are now operating in space, spanning missions across national security, interplanetary science and commercial constellations. And there's more to come with more than 55 spacecraft in various stages of development and production. These include spacecraft for the Space Development Agency's PWSA, multiple missions for NASA and the Space Force and programs for commercial constellation operators. Our clean rooms have never been busier, and with more opportunities on the horizon, we expect that momentum to continue. Now on to launch for the quarter. What a fantastic slide. At the top of the call, I talked about the record growth we've seen this year, but the third quarter has truly been exceptional. More than $1 billion in launch contracts in this quarter alone. No other commercial small rocket flies more than Electron and HASTE and customers keep booking with us because they know that Rocket Lab has a track record, the technology and the team to deliver their missions. And they know that's what we'll be bringing with Neutron too. We've got the production capacity to back up that flight rate also. Our experienced production facilities and streamlined processes mean we're rolling a rocket off the production floor now at an average of 1 every 8 work days. This level of production means we can meet surges in customer demand like we've seen in Q3 and deliver on tight time lines to support rapid response missions and maintain the launch cadence that our customers have come to rely on. Electron is closing in on its 100th launch, which we expect within the next week or so. As the graph shows, that puts Rocket Lab on track to reach 100 launches faster than any other commercially developed rocket in history. It's an unprecedented milestone for a commercial small lift orbital rocket and a threshold rarely crossed in modern space flight. But what matters most to us and our customers is that we have achieved a 96% reliability rate across 99 launches. That is a powerful combination that few others can match, and that's the experience we're carrying on into Neutron. Speaking of which, here's the latest on Neutron for the quarter. Since our update about Neutron Stage 1, we shifted our first launch time line to 2027 after voids were found in the propellant tank's forward dome. The team has really surged to manufacture a replacement part. The AFP machine has laminated a new forward dome. The structure has completed its cure cycle and the results show we've got a nice clean forward dome to move into assembly with the rest of Stage 1's tank. It's nice to have that problem behind us now. We've already stacked the mid assembly of the Stage 1 tank, which includes a giant barrel section and common dome inside it that separates liquid oxygen from the fuel tank. Our focus now moves on to completing the forward assembly and the aft assembly, which comprises of domes stacked inside barrels similar to the mid-assembly. Once that's done, these 3 assemblies complete the Stage 1 tank. The team's focus is on completing that work as soon as possible before we run the tank through a round of hydrostatic tests at the Neutron factory. After that, we'll ship it to Launch Complex 3, run a cryogenic qual campaign and then integrate it with the vehicle's other major assemblies already in Virginia. Neutron Stage 2, the suspended stage that hangs in Stage 1 was delivered to Launch Complex 3 recently and has completed a number of pretest activities before it heads into cryogenic proof tests. After that, we'll move Stage 2 into wet dress rehearsals without an engine to test the stage early in its flight configuration. We'll bring Stage 2 up to flight-like propellant levels and cycle through valve checks to make sure the stage is fully functional as well as test how we transition from ground control to the stage autonomous flight computer during terminal count. Then we will add the engines and we'll integrate them and run through more tests before moving into static fires. The first piece of flight hardware on the LC3 launch mount itself is Neutron's thrust module. From the Neutron factory to Wallops Island to the launch mount within 48 hours. That's the beauty of proximity with our facilities in Maryland and Virginia. Like Stage 2, we'll be running Neutron thrust module through some very important early tests without its engines. By design, Neutron operates without a strong back on the launch mount. So the thrust module is the rocket's only physical interface to the pad. We'll be checking things like Launchpad Mount holddowns and release systems, quick disconnect operations and then conduct some pressure tests on propellants to confirm all the interfaces work with the pad. It's a great example of our parallel path development approach systematically derisking the pad and ground systems now to ensure a direct and efficient path to an integrated testing with the entire vehicle when it's complete. Turning to the Archimedes engine. We continue to make significant progress to finalize the engine, including recent cold box testing with the Archimedes vacuum variant for Stage 2. This is where we exposed the engine to the same extreme cryogenic temperatures it will experience during Stage 1 flight to make sure its valves, seals igniter and turbomachinery don't freeze or leak. Successfully clearing these tests moves the qual campaign closer to the finish line and gives us a high confidence for the AVac engine and its multiple restart reliability for Flight 1. That technical maturity is also feeding directly into the build of the Flight 1 engine set and the engines thereafter for Flight 2 and Flight 3 and so on. At the same time, we're also exploring opportunities to ramp Archimedes production to a faster scale post Flight 1 and meet the high cadence demand for launches that we're seeing. The massive surge in Neutron bookings this quarter is the strongest signal yet of where the launch market is headed. We signed 8 missions for roughly $515 million with multiple flights sold at an elevated base price of $70 million per launch. Neutron's first 16 launches are booked and the next available slots are in the 2030s, alongside the capacity that we're holding for our own future space services missions. Launch is extremely constrained and that is exactly the situation we predicted. We saw our pent-up launch market on the horizon. And rather than provide early discounted launches, we set out to deliver a rocket into an environment with extreme demand at full price or higher. Our full manifest before Flight 1 shows you exactly how that's played out. Even with the extra time we're taking to get to first flight, our customers trust Rocket Lab to deliver and Neutron is the vehicle of choice. That wraps up the operational highlights. Now over to Adam for the financial overview and outlook.

Adam Spice: Thanks, Pete. Third quarter 2026 revenue was a record $267.8 million, coming in above our prior guidance range of $250 million to $265 million and representing year-over-year growth of 73%. Revenue increased by 14.4% sequentially driven by strong contribution from both business segments, highlighting continued momentum across the business. Our Space Systems segment delivered $214.8 million in revenue for the quarter, reflecting a sequential increase of 13.3%. This growth was primarily driven by continued scaling of our satellite platform business along with full quarter contributions from our laser communications and our robotics acquisitions. We also delivered sequential organic growth across our other component and software businesses. Our Space Systems business continues to perform exceptionally well and provides diversification alongside our robust but at times lumpy launch business. Meanwhile, our Launch Services segment generated $53.1 million in revenue, representing a 19% quarter-over-quarter increase, driven by a 2 launch increase in point-in-time Electron missions where the full value of the launch is reflected at launch. Now turning to gross margin. GAAP gross margin for the third quarter was 33.6%, above our prior guidance range of 29% to 31%. Non-GAAP gross margin for the third quarter was 38.4%, which was above our prior guidance range of 35% to 37%. Consistent with our Q3 guidance, margins declined sequentially, primarily driven by the first full quarter contribution from our recent acquisition, Mynaric, which brings laser communications capabilities to our portfolio as well as the lack of tariff refunds that benefited Q2 margins. The decline was smaller than we anticipated, however, due to upside in our component businesses profitability led by solar and our Geost acquisitions optical systems, as well as launch favorability driven by reduced production spend and favorable absorption due to a step-up in Electron launch and build cadence. As previously mentioned, Mynaric will take a few quarters to reach target margins as we align the cost structure, scale production and implement the Rocket Lab operating system. Additionally, we recorded a forward loss reserve against our Neutron Flight 2 launch vehicle to reflect a nascent stage of the vehicle and related early launch capability and potential impact to that specific flight's profitability or lack thereof. Relatedly, we ended Q3 with production-related headcount of 1,728, up 40% from the prior quarter. Turning to backlog. We ended Q3 2026 with approximately $3.6 billion in total backlog, up 52% sequentially from approximately $2.4 billion at the end of Q2 with launch backlog accounting for approximately 52% and Space Systems representing 48%. We signed a significant volume of contracts across launch and Space Systems in the third quarter, bringing our backlog to 117 launches and over 55 spacecraft and making 2026 an incredible year of backlog growth thus far. As Pete mentioned, we signed 54 launches in the quarter, 8 of which were for Neutron with multiple contracts at a new escalated base price of $70 million. Underscoring the growing demand and scarcity for medium-lift launch capacity. While bookings across launch and Space Systems remain inherently lumpy due to the timing of larger high-impact program opportunities, backlog has grown even as we recognize revenue at a meaningfully higher run rate. We continue to pursue additional needle-moving contract opportunities that we expect will enable us to sustain healthy backlog levels as revenue continues to scale. Looking ahead, we expect approximately 32.9% of our current backlog to convert into revenue within the next 12 months. Additionally, we continue to benefit from relatively quick-turn business across launch and Space Systems components businesses that drive incremental top line contribution beyond the current 12-month backlog conversion. Turning to operating expenses. GAAP operating expenses for the third quarter were $169.3 million, above our guidance range of $143 million to $149 million. Non-GAAP operating expenses for the third quarter were $130.2 million, which was modestly above our guidance range of $121 million to $127 million. The increase in GAAP operating expenses relative to our prior guidance was primarily driven by transaction costs associated with the pending acquisition of Iridium, including a $9.4 million expense associated with the change of control of Iridium's existing Term Loan B facility, which was completed during the quarter. But neither the success nor cost could be estimated or predicted at the time we provided our Q3 guidance. In R&D specifically, GAAP expenses increased $16 million quarter-over-quarter, while non-GAAP expenses rose $17.2 million. These increases were primarily driven by Neutron Flight 1 development and production activity, particularly engine production and carbon composite structures as we progress towards launch. Q3 ending R&D headcount was 1,084 representing a decrease of 3% from the prior quarter. In SG&A, GAAP expenses increased $11.2 million quarter-over-quarter, while non-GAAP expenses decreased $2.8 million. The increase in GAAP SG&A was primarily due to transaction fees associated with the pending Iridium acquisition that I referenced earlier. The decline in non-GAAP SG&A was primarily driven by early progress in realizing cost synergies from our Mynaric acquisition. Q3 ending SG&A headcount was 447 representing an increase of 5% from the prior quarter. In summary, total headcount at the end of the third quarter was 3,259, up 42 heads from the prior quarter. Turning to cash. Purchases of property, equipment and capitalized software licenses were $31.1 million in the third quarter of 2026, an increase of $5 million from the $26 million in the second quarter. This increase reflects continued investment in Neutron, including the Return On Investment recovery barge and launch and testing infrastructure. As we progress towards Neutron's first flight and into production, we expect capital expenditures to remain elevated as we invest in testing, production scaling and infrastructure expansion. GAAP EPS for the third quarter was a loss of $0.12 per share compared to a loss of $0.08 per share in the second quarter. The sequential increase in GAAP loss per share was primarily driven by transaction costs in SG&A and other income, mostly due to the termination of the bridge loan commitment related to the pending Iridium acquisition referenced earlier. Spend also rose on Neutron engine prototyping and composites for the Flight 1 engine set and Stage 1 tank rebuild. We expect Neutron spend to remain elevated through first launch driven by engine materials and the team's labor run rate as costs shift towards subassembly test campaigns and vehicle integration. GAAP operating cash flow was a positive $7.2 million in the third quarter of 2026 compared to a use of $84.1 million in the second quarter. This increase is primarily due to a step-up in milestone payments on satellite programs, which are lumpy and increasing in magnitude. Similar to the capital expenditure dynamics mentioned earlier, cash consumption will remain elevated due to Neutron development and Neutron qual production as we scale the business and as we procure longer lead items for our SDA programs. Overall, non-GAAP free cash flow, defined as GAAP operating cash flow less purchases of property, equipment and capitalized software in the third quarter of 2026 was a use of $23.9 million, compared to a use of $110.1 million in the second quarter. The ending balance of cash, cash equivalents, restricted cash and marketable securities was roughly $4.7 billion at the end of the third quarter. The sequential increase in liquidity was driven by proceeds from sales of our common stock under our at-the-market equity offering programs, which generated approximately $2.4 billion in gross proceeds through the issuance of 36.8 million shares, and we completed this program in September. Together with Iridium's amended term loan facility and our available liquidity, these proceeds fully fund the cash consideration and other funds necessary for our pending acquisition of Iridium, which allowed us to terminate our $3.6 billion bridge facility commitment. We exited Q3 in a strong position to execute on both organic and inorganic growth initiatives, including further vertically integrating our supply chain, expanding our strategic capabilities and growing our addressable market, consistent with what we've done successfully in the past. Adjusted EBITDA loss for the third quarter of 2026 was $18 million, which was towards the low end of our guidance range of $17 million to $23 million loss. The sequential $9.2 million increase in adjusted EBITDA loss was primarily driven by elevated R&D spending due to Neutron. With that, let's turn to our guidance for the fourth quarter of 2026. We expect revenue in the fourth quarter to range between $270 million and $290 million, representing 4.5% quarter-over-quarter revenue growth at the midpoint and growth of 55.9% from the year ago quarter. We expect strong growth in launch revenue with a pickup in both point in time and overtime revenues, partially offset by a decline in Space Systems. Within Space Systems, solar and satellite platforms are expected to decline coming off a very strong Q3 performance, while the rest of Space Systems businesses should be up. We expect GAAP gross margin to range between 34% to 36% and non-GAAP gross margin to range between 39% to 41%. Margins are expected to improve sequentially due to improved mix between launch and Space Systems and within Space Systems. We expect fourth quarter GAAP operating expenses to range between $162 million and $168 million and non-GAAP operating expenses to range between $136 million and $142 million. The quarter-on-quarter increases are primarily driven by Neutron development, testing and readiness activities ahead of Flight 1. We continue to expect a shift in spending from R&D to Flight 2 and subsequent Neutron production inventory which is an encouraging sign of progress as we move closer to Neutron's first flight and supports our path towards meaningful operating leverage and positive cash flow in the future. We expect fourth quarter net interest income to be $45 million, which is generally a function of our elevated cash balance. We expect fourth quarter adjusted EBITDA loss to range between $14 million and $20 million and basic weighted average common shares outstanding to be approximately 681 million shares. Lastly, consistent with prior quarters, we expect negative non-GAAP free cash flow in the fourth quarter to remain at elevated levels driven by ongoing investments in Neutron development and scaling production. In summary, Q3 was another quarter of strong execution. We exceeded guidance for revenue and gross margins, grew backlog to a record $3.6 billion and continue to maintain robust liquidity to fund future growth initiatives. We expect this momentum to continue, guiding to increased revenue growth as our satellite platforms business scales and Neutron progresses towards its first flight. We continue to execute across all metrics and are positioned to create significant value ahead. Last but not least, here are some of the upcoming investor events that we'll be attending in the next few months. And with that, we'll hand the call over to the operator for questions.

Operator: [Operator Instructions] Our first question comes from Andres Sheppard with Cantor Fitzgerald.

Andres Sheppard-Slinger: Congratulations on the quarter and the backlog. Pete, I wanted to maybe start with Neutron. So last quarter, I think we asked what does the path to 10 Neutron launches look like as we look beyond the first one? So I guess after the slight shift in Neutron's first launch, how are you thinking about the path to 10 Neutron launches now? And what's the quickest that we might be able to get there?

Peter Beck: Andres, great to chat with you. Yes, I mean, obviously, we're always trying to revisit that 1,3,5. And I think there's an intense scrutiny on that at the moment. And a lot of the things that we've been doing in the background during this period of some of these delays has been to strengthen our ability to increase that rate. So I think we're looking to improve on that rate. And you can see we've got a huge backlog to start showing through. So I don't think we're ready to revise those numbers yet, but there's been a tremendous amount of work going to the background as to how we can increase that rate to get to Flight 10 faster.

Andres Sheppard-Slinger: Excellent. That's very helpful. I appreciate that. And maybe just a quick one for Adam. So on the backlog, again, very exciting to see the material increase here. I think we can probably call this year the year of the backlog. My question is actually more around ASPs for launch. So if I heard you correctly, I think you disclosed that future Neutron ASPs will increase to about $70 million, which is exciting. So I guess my question there is how should we think about maybe Electron and HASTE launches for next year and beyond? And is there an opportunity to perhaps increase ASPs here given how launch constrained the industry still is?

Adam Spice: Yes. No, it's a good question, Andres. So I would say, just to be clear, too, the Neutron pricing isn't going to $70 million, it's at $70 million, right? So we've already put some in backlog at that price. So I think the -- from here, the price is, I would say, logically going up from that new -- kind of the new baseline. When it comes to Electron and HASTE, I think some of the same dynamics are in play when Pete mentioned in his prepared remarks, about how demand has never been stronger and now we're the leading launch provider in that small dedicated launch segment. I mean that's just becoming just more and more of the fact. I think when -- if I look at now where we are and where the demand is coming from Electron, I don't think I necessarily would have predicted to be kind of in this new growth wave. It seems like things were growing very nicely, and then there's been another leg up in demand. And with that, you should expect pricing will go up as well. And we're also starting to see that reflect in the backlog. So, I think you're going to see price increases across Electron and HASTE. And HASTE now is representing a bigger piece of our backlog, which naturally comes at higher ASPs. So, I think the combination of kind of lifting the prices across all of our launch services are going to start to be more evident in the model going forward. So, I feel very good about where we're at.

Operator: Our next question comes from Edison Yu with Deutsche Bank.

Xin Yu: I wanted to ask about orbital data centers. I think in the past, we've probably been -- I think you guys have been a little bit more skeptical than certainly 1 company out there. And you had this midterm election in the U.S., which I think many people suspect could slow down the terrestrial build-out. What are your latest thinking, I guess, on what you could potentially do on the Space Systems side for orbital? And would you expect kind of interest to increase going forward just given what happened last week?

Peter Beck: Yes, Edison. So we've always, like you say, retained a healthy level of kind of skepticism, but I would say that we've always been bullish certainly on defense-based orbital data centers. And also, clearly, I've been wrong plenty of times. So, we certainly weren't going to cut off any opportunities for ourselves, hence, the reasons why we developed and brought to market the new silicon cell for orbital data centers. Obviously, we have an orbital data center customer for a Neutron vehicle. And I would say that, like everybody else, we are doing our fair share of work around that opportunity. So we certainly haven't written it off, and we are monitoring all of the events. And like I said, doing our work to make sure that if we are able to gain conviction, then we're in a really good place to be able to capitalize on that.

Xin Yu: Understood. And just a follow-up to that. As you kind of think about the architectures for orbital data center out there, what do you view as the kind of biggest engineering or technical bottlenecks? Or is it more of a kind of economic thing?

Peter Beck: Yes. For me, it's economics. There's a number of kind of key things that have to happen for those economics to close and those key things are extremely difficult. So yes, I think there needs to be some major technological advances to unlock the economics. I think if you want to put smaller data centers or data centers of a small scale in orbit, I think that's all completely doable. Hence, the reasons why we are very bullish on orbital data centers for secure comms or defense purposes. I think that it will definitely happen. But the moving all data centers off Earth into space, I think there's a few challenges to solve there.

Operator: Our next question comes from John Godyn with Citigroup.

John Godyn: Congratulations on being fastest to 100 launches on the Electron even faster than the Falcon 9. Of course, years later, the Falcon 9 is doing 170 launches or so a year. So I thought it's just a good opportunity to revisit the multiyear outlook for Electron launches. And if you could also just talk a bit about how the outlook for Electron growth evolves eventually alongside Neutron.

Peter Beck: Yes, John. Well, we're not done yet. Give us a chance. But Electron obviously, is not a reusable vehicle. So the big unlock for huge cadence, of course, is reusability. Although as you can see with the factory and the production rate that we have currently, we can produce a fair bit of those. But next year will be a big year for Electron. We have a huge manifest lined up for Electron and we don't see that subsiding especially in this market with the likes of other providers of rideshare going away, then the next logical alternative is, of course, an Electron. So we see tremendous traction there. So -- but the nice thing about Electron was it was designed to be produced. So, as you can see, we're producing 1 every 8 days. There's no technological feat required to double, triple whatever that -- at this point, it's just duplicating an additional factory lines and that kind of thing. You can see with our pads, we have multiple pads around the world, so we're well endowed in that side of it. So I think there's not too many limiters on Electron and there hasn't been ever really, it's how fast the market will grow and evolve to whatever cadence that it ultimately ends up at.

John Godyn: That's great. Appreciate it. And if I could just sort of ask a little bit of a different question just on supply chain. A huge amount of satellites in development and build. Obviously, launch cadence is also growing. Just a temperature check on the space supply chain, anything kind of emerging as an issue that should be a watch item.

Peter Beck: Yes. I mean not so much for us because we are so vertically integrated. We control so much of our own supply chain. So for us, probably the things that we worry about are different things than other people who are building satellites and procuring components from us and others worry about. And for us, it's because we are transforming raw materials into finished items, it's more raw materials. There's some critical minerals and whatnot that continue to be a challenge for a number of industries. But I think as we look across our supply chain, it really evolves all the way down to just raw materials rather than any particular items.

Operator: Our next question comes from Jan Engelbrecht with Baird.

Jan-Frans Engelbrecht: Perhaps, a high-level question, but we've obviously read a lot about the tightening launch availability later this decade. But I wanted to -- from your side, what are customers seeing in Neutron that gives them confidence to commit to these launches before first flight. I know we can talk about mission fit, the technical due diligence. And obviously, the 96% mission success rate, but perhaps are there things that they obviously have access to information and access to you guys that we just can't see in the public domain that you can just speak to more that obviously, very impressive to see 16 Neutrons in backlog. Anything you could share there?

Peter Beck: Yes, Jan. Well, I mean, I think it comes down to, fundamentally, there has been 2 commercial companies that have developed a vehicle, brought it to market and scaled. And that has been SpaceX and Rocket Lab. So when folks walk around and they do, like nobody buys the rocket off a brochure. They come and see us and they walk through the factories and walk out to the launch pad and we're very transparent with our development process and the state thereof. So, customers are able to get confidence through their own eyes. And I think this industry is littered with poor execution, and we've worked hard to make sure that we have a reputation of not that.

Jan-Frans Engelbrecht: Helpful. And then if I may, just a follow-up, for 2027, I know you guys aren't guiding that yet, but is 20% growth from a launch perspective for HASTE and commercial Electron stil sort of the right way to think about it? And obviously, you guys were -- 1/3 of the backlog at the prior quarter was HASTE, which is obviously very attractive from a revenue recognition perspective. And then maybe just a comment on suborbital launch, and HASTE, specifically, it looks like most of MACH-TB and that program is placed in the base budget. So could we assume very little cancellation risk for HASTE?

Adam Spice: Yes. I guess, I can take the first part of that. So I think on the launch CAGR, I don't think there's any reason to think that 20% continue is really at risk. I think that we're seeing demand, as we talked about earlier, continue to grow. So I think the growth, in my view, should be better in many ways, next year than we even saw it from '25 to '26. So, all the demand dynamics are in place, the pricing dynamics are in place, now just a matter of execution, but we also have to remind people that execution really has 2 angles to it, right? We have to have the rockets ready, of course, but also our customers need to be ready with their payloads. And oftentimes in the past, if there's been a bit of a hiccup on launch cadence in any given quarter, it's really not been because of the rocket not being ready, it's because the customers will have -- understandable they'll have issues at the last moment. They put their spacecraft through the final set of tests and something may not come out to their expectations, so they have to put it back through test and that can cause delays. So I think what helps us mitigate that is having such a strong backlog of missions that we can -- and we have the luxury at sometimes of being able to do a little bit of swapping around of missions and still keep our cadence going. But it's really 2 pieces. And again, I feel very comfortable that all -- it's not going to be a demand challenge. Hopefully, our customers don't create delivery challenges. And I believe our production teams will be able to deliver the vehicles next year to grow even faster than this year.

Peter Beck: Yes. And then on the HASTE on MACH-TB stuff, we don't see any cancellation kind of risks here. These programs are pretty bipartisan and long-standing. So I think there's low risk.

Operator: Our next question comes from Ronald Epstein with Bank of America Merrill Lynch.

Andrew Steinhardt: This is Andrew Steinhardt on for Ron. I just wanted to touch on launch capacity again. I think Q3 backlog and rising Neutron launch prices did a good job telling the story of tightening capacity. But with the satellite operator declaring it's going to build a rocket, it seems worse than we may have thought or at least myself. Is that a fair takeaway from AST's announcement last week? And I guess, how do you guys think about a new unproven launch provider entering the market as a potentially viable competitor?

Peter Beck: Yes, Andrew, I was hoping someone wasn't going to ask that question. So the -- look, launch capacity is incredibly as constrained as you kind of see. And in many respects, we're rooting for everybody because even when we bring Neutrons to market, it's not going to satisfy the demand that's required. So -- and also 50% of Neutron is for everybody else and 50% is for us. So I think we've always followed the thesis that the large space companies of the future are going to have their ability to launch their own stuff. And I think this is kind of playing out.

Andrew Steinhardt: Got you. And I guess, just in a different direction here. It was nice to see operating cash flow in Q3. How should we be thinking about cash generation going forward ex Iridium, just given higher launch prices? And what does the ultimate cash generation profile look like once Iridium is integrated into the business fully?

Adam Spice: Yes. So look, I think that the rising prices for Electron are certainly helping. I think getting the deposits in for Neutron launches are helping. But nothing is really going to I'd say, permanently kind of reverse the cash flow negativity until Neutron is really into production, right? So I think that's why eyes are on Neutron getting that to the launch pad and successfully through its first test flight. And then scaling into production. I think that's really -- we've long said that we turned cash flow positive probably about 6 months or so after Neutrons for flight, right? Because that's when things have really pivoted into production. Now obviously, that changes pretty dramatically upon the closure of the Iridium acquisition because they already come with strong cash flow. And we've got lots of interesting ideas to improve on that, obviously. But I think that, again, what we're focused on right now is like how do we scale our business and turn it to a cash flow positive one and really all of it hinges right now on Neutron. There's not quite yet enough scale in Space Systems, although the business is scaling very, very nicely, to offset a pretty significant lift for Neutron. And that's just the nature of bringing a new product like Neutron to market. Again, as Pete mentioned earlier in his remarks, we're making great progress there and we're looking forward to that date sooner rather than later.

Operator: Our next question comes from Trevor Walsh with Citizens.

Trevor Walsh: Peter, if I could start with you. I think when you made the announcement about the slipping of Neutron into next year, you alluded to some changes or, I guess, maybe your ability to do some other work given the delayed timing, similar to when you had the previous delay around the tank. Could you maybe just provide a little bit more color about what that extra activity is and how kind of with that extra time that you've given and how that might influence either follow-on launches and kind of I think some -- to your comments around the 1,3,5 cadence or just reusability or just give us a little bit more perspective on kind of what else you're allowed to do now given the extended time frame.

Peter Beck: Yes, Trevor, good question. I mean it has been all around how do we increase the launch cadence faster because that's obviously the critical thing. So that's primarily where the work has gone around engine, production engine, acceptance test and then also composite structures, production and acceptance tests and moving all of those things faster. So we haven't been kind of acting in a serial fashion. A lot of these things are happening in parallel. So while the tank area has experienced some delays, avionics and fluid systems and all of that have not stopped scaling. And we see -- I've been pretty resolute about the 1,3,5. I would say the pressure at this point to increase that is overwhelming, and we are looking at every lever we can pull. And to increase that flight cadence. And I think we've got some really good options there. And we can talk about that a little bit later once those are solidified. But it's fair to say that we're certainly -- the head space is obviously Flight 1 is important, but there's a lot more big brains thinking about really, really how do we increase scaling faster right now.

Trevor Walsh: Awesome. Perfect. Adam, maybe switching over to you kind of along the same lines, just given the uptick in R&D expense, as I know we've been talking about for a while is very much tied to Neutron, how should we think about that line? And maybe just more broadly, you had some good comments around cash flow previous questions, so maybe a bit more about EBITDA and just general profitability, just given -- again, given the delay of Neutron and how should we think about that? I know you're not giving '27 guide yet, but just how should we maybe think about that R&D line specifically kind of heading into next year if the things have changed or moved around a bit?

Adam Spice: Yes. I think fortunately, the -- our Space Systems segment, which is now by far the largest part of our business isn't -- I wouldn't consider that overly R&D-intensive. So I think that we'll continue to invest there at a pace that continues to drive the top line expectations that we have for a longer-term CAGR, which we've long said is kind of 20% or so is kind of where we set the bar for that. Launch is going to grow faster than that because when we start introducing Neutron into the mix. I want to clarify too that. I think I may have missed it. The cash flow positive is a little bit delayed later than the 6 quarters after the first launch. That's really when adjusted EBITDA turns. Cash flow is really more of a function too of where we are in investing in the fleet of Neutrons and that's going to take a little bit longer. And that goes back to kind of the question that Pete addressed, which is how can we look to scale the business faster. And there might be some things in there that are capital intensive in order for us to kind of really get that rate even higher than what we've already talked about. So I think that right now, again, all hands on deck as far as getting Neutron to the pad getting that first flight off. And I think the financial model benefits tremendously from when that happens. And again, first reflected in adjusted EBITDA, which will turn positive within 6 months of that first successful test flight and then cash flow is going to follow that. Again, pending kind of some decisions that we make on how much of an accelerator we want to put on growing the fleet because the beautiful thing about Neutron as a reusable vehicle is that you're going to build the greatest number of vehicles in all likelihood at the beginning of the program, right? And then once you get those established, then the power of reuse really starts to influence the model, that's when margins expand dramatically, and that's when cash flow really starts to gain momentum. So hopefully, that answers your question. I think, again, R&D, we don't see any big R&D needle movers aside from Neutron. And then, of course, once we've gotten Iridium across the line, then, of course, we're always looking at ways to accelerate growth. And some of that might require a little more R&D than maybe it's been historically in that model, but we feel very good also about some of the growth vectors that they've kind of been investing in for the last few years that are just on the precipice of starting to kick in, in a major way.

Operator: Our next question comes from Kristine Liwag with Morgan Stanley.

Kristine Liwag: So maybe one on unit economics on Neutron. Now you have more production reps under your belt, and you've now changed your manufacturing process for some of the products. How is the bill of materials tracking against your original steady-state model. And when you think about the efficiency gains from the automated composite layup and Archimedes production, are there areas where things are costing less than you expected? And then pairing that with a $70 million base launch price, which is a very -- and by the way congratulations on that significant step-up in pricing. How should we think about margins going forward? I mean, I would anticipate that with a significant $15 million pricing than your initial thoughts, you can get to that gross margin 30% to 40% sooner but then also have a higher steady-state gross margin. So any thoughts on long-term gross margin and Neutron would be helpful.

Adam Spice: Yes, I'll just hit the top level off stuff and Pete can dive into some of the engineering pieces of that. But I would say, certainly, the step up in ASP is certainly going to help us get there faster. I think we've always had conviction that this is a 50% plus gross margin business on a non-GAAP basis. I think that there have been some speculations about what comparable reasonable vehicles margins are at scale. I think we've seen some of that with SpaceX coming public. But I think that just as we've seen a pretty significant expansion in Electron's gross margins largely a function. I mean some of it has come down to BOM cost reductions, but that's really not what moves the needle in the launch business. It's really about absorbing those fixed costs over a greater number of launches, right? So I think if you think about normal BOM reductions in the, call it, 6% to 10% range on an annualized basis, it certainly helps, but it doesn't need -- move the needle nearly as much as adding doubling your launch cadence when you go from 3 launches a year to 5 launches a year to 10 launches a year. And that's really what's going to drive the economics in Neutron. But again, I think certainly where ASPs are trending is very, very helpful. And I personally don't think that we're yet at the end of the pricing curve for Neutron. It's very early days.

Peter Beck: Yes, I think you covered it well, Adam. I mean, yes. BOM is a relatively small expenses. It's all the facilities and the headcount and overhead that really drive a lot of the costs in a vehicle, you have to maintain factories, launch sites and all those kinds of things, barges. So the BOM is not out of bed for sure, but it's probably the lower influence to margins.

Kristine Liwag: Great. Super helpful. And if I could pivot to spectrum, there's a lot more industry focus right now on spectrum value, and Iridium gives you the globally coordinated L-band. But when you think about how L-band is naturally bandwidth constraints, as you map out where you want Rocket Lab to be in the next 5 to 10 years, do you feel like Iridium spectrum is sufficient for your constellation ambitions? Or do you think you'll need to acquire a partner for higher throughput spectrum like Ku-band and Ka-band and execute your vision as a space as a Service company.

Peter Beck: It's a very tricky way to ask us, Kristine, what future constellations might be. But right now, I think we're very happy with the L-band. I really like the power of L-band given its ability to penetrate bad weather and environments and that safety critical, defense critical part of the industry, I think, is really interesting and poised for a lot of growth. So at the moment, the L-band is fine. Of course, we're always looking at spectrum. We are in the comms business now. So spectrum is relevant to us. But certainly, no imminent acquisitions of additional spectrum.

Operator: Our next question comes from Gautam Khanna with TD Securities.

Gautam Khanna: I was wondering if you could talk a little bit more about demand for Neutron given, as you mentioned, industry capacity for launch sold out a number of years. Maybe if you could just talk about -- I mean, that would suggest there's urgency for customers to place orders before Neutron has proven successful at first launch. So maybe if you could just talk about the number of launch opportunities you're pursuing and what we might expect for launch bookings in Q4 or Q1? Like is the pipeline pretty full, so we could see quarters similar to what we just experienced in Q3.

Peter Beck: Yes, Gautam, it will be interesting to see how it all shakes out. Certainly, there's tremendous demand for the soonest launch slots available and which has pushed us into the next available slots now in the 2030s and all the work that's going on in the background to increase cadence. So, I think, we've seen, like, I say, extreme demand and customers that we've had long relationships with and have worked with us a long time, literally solidify their, kind of, intentions extremely quickly. And that's been consistent. And then going forward, the important thing to remember also is, as I said prior, like 50% of Neutron capacity is for everybody else and 50% is for us. So we always have to make sure that we retain enough capacity for our own aspirations.

Adam Spice: Yes. I would say also to add one more bit of context, a little bit of inside baseball. So we could have actually booked more launches in Q3 for Neutron than we did, but we actually chose to go for higher ASP and lower volumes. So there were customers that wanted to book more launches, but at a slightly lower price. And we kind of, again, stuck to the philosophy that Pete mentioned earlier, where we're not looking to kind of sell launches at a discount price. We want to make sure that we're maximizing the value and so we're choosing to be very discriminating about which business we take and how much we take now because, again, I think our bias is we think prices are going to continue to go up. So why sell out all the capacity now at these prices even.

Operator: Our next question comes from Andre Madrid with BTIG.

Andre Madrid: I wanted to touch on -- Well, it seems like I got beaten to it. I was going to ask if you had been having conversations with the Office of Strategic Capital about potentially supporting Neutron development. And then literally just a couple of minutes ago, an announcement came out just on that. So maybe a bit more, $150 million, maybe the terms of that loan commitment exactly how the funds are expected to be allocated? Any color there would be greatly appreciated.

Adam Spice: Sorry. Yes. So Look, I think we're pretty fortunate to be in a position to take advantage of this type of non-dilutive financing. We always take it we can get it. I think it's on very attractive terms that we like SOFR plus 100 basis points. So it gives us additional capital to scale key parts of our business, Neutron in particular. I think we've we're very fortunate that we've had the ability to -- since I joined the company almost 9 years ago to make sure that financing the business wasn't a constraint on growth, and this continues to be the case. I think it also just underscores the importance of how launch capacity is very much in the focus of the administration and they're putting kind of some real meat behind trying to alleviate the problem and I think this certainly does help. So I think this is a helpful indicator, a very positive indicator about where everyone sees the demand constraint and how it can be unlocked and capital is certainly a part of that. So yes, this is just certainly helpful to our cause to help scale Neutron even faster.

Andre Madrid: That's very helpful. And then maybe kind of staying on the government support. I mean, given that we're under a continuing resolution right now, I mean, are you expecting this to have any -- depending on the length of the CR a more aggressive impact or not? Or maybe just tell me a bit more about how you guys are thinking about it within your own internal models. How should we be thinking about the length of the CR and its potential impact on the business heading into '27?

Adam Spice: It's very difficult to predict how government fundings are going to go. I mean, I think that for us, I think Pete mentioned earlier, the programs, a lot of the programs that we're in are already funded I think they're very strategic. We don't really see a lot of risk to our programs in particular. But certainly, having more clarity on where the budget is going to come from and where it's going from here, it certainly be helpful. But I don't know, Pete, if you got any views on that.

Peter Beck: No, I agree with you, Adam. I mean, I think it's relatively low risk for us.

Operator: Our next question comes from Jeff Van Rhee with Craig Hallum.

Daniel Hibshman: Peter, Adam, this is Daniel on for Jeff. Congrats on the quarter. On the next 12 months backlog, so that, in particular, is 1 of the metrics we follow the most. It's up 47% sequentially. I think that might be the strongest quarter for that ever. Just maybe a little bit more commentary on the next 12-month backlog, in particular, wondering what drove that. And I said that in particular because I assume, obviously, there's huge launch backlog growth, but a lot of that's the out years. And is it in the next 12 months and then when I look at Space Systems backlog, that's up 22%. So this is up even more than Space Systems, maybe certain businesses is coming in or pulling in faster than you expected, where maybe some of the durations are pulling in. Just any commentary on the strength there?

Adam Spice: Yes. No. Look, it's clearly Electron and HASTE are huge benefactors right now. Pete mentioned what some of those drivers are. I actually think that Electron and HASTE, again, are coming into kind of again, a new leg of growth. And I think it's driven by the fact that I think people are just now starting to realize that on the non-HASTE side of that equation, the future lack of transporter and bandwagon like everyone's concerned about, is going to have to go somewhere, right? And when you look at what the next best alternative is, it really is Electron, right? So I think that we may not even yet be seeing the real impact of that, maybe just the very early kind of canaries in the coal mine. So that bodes very well for that business. But as we've talked about in other periods, the Space Systems business has grown to be a very, very large piece of the business, right, approaching 80%. And while that will rebalance when Neutron starts to launch and also as Electron and HASTE continue to grow, that business is a bit more lumpy. We've got a pretty nice mix, I would say, between our components business and our platforms business. But those -- particularly on the platform side, those come in kind of lumpy kind of awards. They're getting increasingly large. They take longer to close, but they really do move the needle when they happen, and that also provides some longer-term derisking where you don't -- you're less likely to hit an air pocket, if you've got a lot of that kind of in backlog, obviously. So I think overall, in the near term, to your 12-month question, it really is Electron and HASTE because we put some pretty nice programs in the backlog in the most recent quarter. And I would say that, that is probably going to continue. And then, again, I think this is probably one of the quarters where we didn't have, I would say, a really large space systems platforms program that got put into backlog. And those -- again, they should take longer, but we're very comfortable with how we position that business. There'll be more of those to come.

Daniel Hibshman: Yes. And maybe on that note, that's a natural segue to Space Systems in terms of -- we haven't talked about that too much high level. in terms of what's coming next. Should we be thinking about some of the key opportunities being some of the more obvious ones, like Tranche 4 Tracking down the road? Or maybe expanded work on moving target indicators, space-based intercepts. I mean, obviously, there's a lot going on in the safe force right now and also on the commercial side. Just maybe some thoughts on where you see some of the emerging or strongest opportunities coming from.

Peter Beck: Yes, I'll take that one, Adam. I think, Daniel, it's across all of them, right? And kind of back to your previous question, I would say that Space Systems has reached a level of maturity and cadence that is just humming right now. And it's taken us a while, obviously, we invested a lot in components and in making sure we have the elements. So when a customer comes to us now, they can expect best value and certainly the best time line, but also high -- 100% confidence that the spacecraft that they're going to get built and delivered works and meets their requirements. So whether it's going to Mars and we just did a couple of those trends, Mars injection burns over the last 24 hours, 48 hours, or commercial constellations for comms. We have all the best sitting on the shelf that we can put together quickly. We have all the designs that we can reuse. And the execution is trusted and we build reliable platforms. And I know that, that just sounds like table stakes, but it's not as common as you think in the space industry for all of those things to occur. So I would say that a lot of recurring returning customers and creating more and more opportunities for us and continuing to kind of feed itself in many respects.

Adam Spice: Yes. And I would add just a little bit to that. I think we haven't yet really started to see the influence of like other sovereigns investments in space, right? I think that's kind of probably the next demand signal to really start to emerge because if you look at our backlog today, the vast majority is U.S. derived on the Space Systems platform side, particularly around SDA Tranche 2 and SDA Tranche 3 and AMTI and so forth. But I think that the benefit that we -- or the position we find ourselves in is that the industrial base doesn't really exist in a lot of these places that are realizing they need these capabilities. And so it will be a very helpful thing to people like us that have all those capabilities, as Pete said, they are on the shelf to pull things together relatively quickly. And again, I don't think that, that has really started to be reflected in the model yet.

Operator: Our next question comes from Michael Leshock with KeyBanc Capital Markets.

Michael Leshock: I wanted to ask on Neutron and your expectations of about 50% of the launches there to be internal for yourself. When do you expect that first internal Neutron launch? And is that something that comes after you get through your entire existing backlog or could an internal launch come before then. And then I guess in the same vein, is that -- does that look like an Iridium related launch to update the Constellation in the mid-2030s or are you expecting the internal new trends to be primarily used for a separate Rocket Lab initiative in the future?

Peter Beck: Yes, Michael, a number of different reasons. One, having your own platform enables you to retire a whole bunch of risks and new technologies and new ideas. And the marginal cost for us to do so is really, really low. Iridium's constellation will need replaced at some point. So certainly, Neutron is a key enabler for that. And when I say 50% for us and 50% for everybody else, that's not out of the chute, obviously, will burn down a whole bunch of contracted launch. So that number will skew to our customers really heavily for quite some time. But I would say that the long-term view in the long term kind of expectation that at least for me, is the 50-50. So certainly not imminent. But in the longer term, we expect to have not just 1 service or application on all, but we expect to have many not just Iridium but other things. So reserving that capacity now is just prudent.

Michael Leshock: And then I wanted to ask on the Alaska pad. What's the latest update on the build-out there in Alaska? And should we expect the first launch in '27 -- early '27 or otherwise? And how many haste launches will that pad be able to handle annually?

Peter Beck: Yes, that's a great question. So there's actually 2 pads there, not one pad. There's 2 pads side by side. So its capacity is pretty high because we can turn the launch as people have seen 15 hours 42 minutes. So I think we have plenty of capacity there and we remain on track for 2027 launch out of those pads and multiple thereof.

Operator: Our next question comes from Erik Rasmussen with Stifel.

Erik Rasmussen: Congrats on the backlog growth in Neutron bookings. Maybe just a lot of questions have been sort of answered here. But on Iridium, maybe which opportunities to maybe accelerate Iridium's growth within the first 2 years that you think once you close the acquisition, maybe we'll start there.

Peter Beck: Yes, Erik. Look, they've got some really exciting things, as Adam alluded to, that they've been over the last couple of years. So some of those around P&T and director device, they've been working on. I think under a Rocket Lab umbrella, I think there's a bit more freedom to push harder and faster. So I think those will be brought to the fore and hopefully, in short succession.

Erik Rasmussen: Great. And maybe you've obviously talked a lot about Electron and HASTE and the strength there. And I think Adam touched upon sort of a 20% or plus cadence for next year book. What does that mix look like for next year in terms of -- if we are at a 20-plus percent CAGR next year, what is that mix between standard Electron versus HASTE?

Peter Beck: I'm always hesitant to answer those ones because it's 100% determined on customers' programs and their ability to execute and deliver on time. I think nominally, there's something like 15 HASTE missions. But those HASTE missions are highly dependent on customers' programs and turning up on time. So it's kind of hard to say with any certainty because it can move around pretty wildly just from quarter-to-quarter.

Adam Spice: Yes, Erik, I think a little more specifically, I think that right now, again, we're not giving guidance for 2027. But roughly around 25% of the total small dedicated launches could be HASTE next year, could be a little bit more, it could be but in that range.

Operator: Our next question comes from Anthony Valentini with Barclays.

Anthony Valentini: What quarter or months are you guys marching towards internally for Neutron in 2027?

Peter Beck: Well, we haven't provided guidance on that just yet because we need to get through the Stage 1 tank. And I think if I provide a date, clearly, I've been wrong. So what -- the approach we took instead is to provide sort of weekly or even in some cases, by daily updates and the progress of that tank. And really until that tankers through the gauntlet of all of its testing, it's -- I just -- I think it's -- I just don't want to be continually wrong.

Anthony Valentini: Totally valid. It makes sense. I know you guys are focused on Neutron here, but it seems like the industry is going larger and more usable and for some of these future aspirational things like orbital data centers, it seems like you need larger rockets. And so I guess I'm curious, from your perspective, Pete, are any of the things that you guys have aspirations to build out dependent on having a larger rocket. And do you guys think that you will have a new product after Neutron once you guys are launching a cadence?

Peter Beck: Man, I don't want to build another rocket. I think 2 is enough for any person. But in all seriousness, if you look at the average mass that Falcon 9 has lifted in its commercial sense ignoring Starlink, it's about 5 tonnes. And some of the sizing designs that we work through with Neutron was I mean the reason why we landed on 13 tonnes was to enable humans space light. That was basically what pushed it up to that 13 tonne class. Now when you're deploying Constellations, the way you need to look about it, look, think about it as not cost per kilo in your rocket. It's actually cost per satellite delivered an orbit. That's a metric that the only metric that matters and you can achieve that with a large rocket launching infrequently or a smaller rocket launching more frequently. But certainly, as we look out into our future and the things that we want to go and deliver, Neutron is perfectly sized. I think your point is valid, if you wanted to put up data centers, which is just a tonnage equation than a large vehicle makes perfect sense. But I think to date, the most successful Rocket in history is sized around where new transits. And although the future might change, I think, like I say, for any of the aspirations we currently have and any of the large teams that we want to play in, you're trying is plenty big enough. But just in saying that, I did have to eat a hat because I won't say I was never going to build a bigger rocket.

Anthony Valentini: Never say never.

Peter Beck: Yes, so, never say never.

Operator: Our next question comes from Suji Desilva with ROTH Capital.

Sujeeva De Silva: I appreciate on Neutron, you're trying to hold the line on a premium pricing here, Adam. But how would you think about how you temper forward bookings, how far are you willing to go in terms of units booked if you were able to get that price?

Adam Spice: It's a tricky question, right? I mean you kind of build the deal you want when it's put in front of you. And I think that a deal hasn't put in front of us that was enough to take that much capacity off of our road map. So I think we're testing where the elasticity of market is right now. And I think it's changed a lot in the last 6 months for obvious reasons. It could continue to change more in the next 6 months, right? So I think we're just trying to be judicious and not keep some dry powder so that we can continue to drive those ASP increases if the market conditions continue to trend as they are.

Sujeeva De Silva: Yes. It is an unusual problem to have so much demand. My other question really is since Neutron is trending longer term towards half being used for in-house, Pete, how should I think about the space cap manufacturing footprint you have? I kind of think of it as kind of a custom shop now, but is there -- would it be a trend toward a more volume shop over time? Or is it already configured the right way? Just curious how that would play out.

Peter Beck: Yes. No, it's [indiscernible]. I mean, look, a tremendous number of the business units within the Space Systems are volume shop. I mean, we're the largest space grade solar manufacturer in the world in that sense. So there are a lot of the component level pieces already there. But going forward, you've seen, obviously, our satellites and also our U.S. government contract for those satellites as a vendor B for the Star Shield programs. So yes, I mean, we see it definitely in our future high-volume satellite manufacturing, hence, the reasons why we developed the components at high volume also that satellite platform.

Operator: Our next question comes from Ryan Koontz with Needham.

Ryan Koontz: Maybe just a quick one here on the gray book that you had in the quarter. Specifically around Neutron and the timing uncertainty. I mean how should we think about kind of the contract terms and the new trend uncertainty in terms of customers' ability to cancel, find new vendors? I mean what's the general framework investors should think about there relative to new Trump bookings right now given the uncertainty.

Peter Beck: Yes. Great question, Ryan. I mean, none of these contracts are Janke contracts where they've got silly things in them. Obviously, our customers do a lot of due diligence with us. We have long relationships with them, and we're very transparent in where we're at. I think all of the early customers of Neutron know that it's -- we're bringing a vehicle to market, and we're developing a new one and we're moving as quickly as we can. So we will -- if there is any change, we'll, of course, keep them well aware of anything but that's kind of the deal and even with that, our customers obviously have a lot of faith in us and believe that we are the best option for their future launch needs.

Adam Spice: And Ryan, I would say as you know there's been a bunch of shenanigans in the past in this industry about putting forward their backlog as true backlog when it's really options. There's no deposits. That's not the case here. These are if you could expect the look a lot like, if not exactly like our standard LSA that we have experienced with Electron, where people put down real deposits. They're not options, there's cancellation fees and all kinds of -- we've always put a lot of focus on making sure that we have a very, very solid backlog and that we don't fall into the trap that they me some other folks have. So I think we feel very good about state of the backlog.

Operator: That concludes today's question-and-answer session. I'd like to turn the call back to Sir Peter Beck for closing remarks.

Peter Beck: Great. And thanks very much for joining all the call and the great questions. And we're very pleased with the quarter, and we look forward to the next one. So thanks very much.

Operator: This concludes today's conference call. Thank you for participating. You may now disconnect.