[[Home|🏠]] <span style="color: LightSlateGray">></span> [[Interviews]] <span style="color: LightSlateGray">></span> March 18 2025 **Insider**: [[Stephen Ananias]] **Source**: [Global Industrials Conference 2025](https://bofa.veracast.com/webcasts/bofa/globalindustrialsuk2025/id080j24.cfm) **Date**: March 18 2025 ## 🎙️ Transcript ### Neutron Development Progress and Milestones (0:25) **Interviewer:** Could you please describe and give us some details about the milestones that you have with Neutron and Archimedes and how you are going forward to what is like second half of the year first launch? **Stephen Ananas:** When we think about the schedule for Neutron, we're really tracking three separate work streams. The first is the engine - our Archimedes engine. The second is the composite structures that make up really the body of Neutron, and then lastly it's the infrastructure that's required. So I'll start with the engine. Archimedes has been in a test campaign since August timeframe of last year and that test campaign continues. Really what we're doing in this campaign is we're testing the operational environment of the engine. So we're testing the different power levels of the engine, different propellant mix ratios, control schemes - all these are required to qualify the engine. And what we announced actually during our most recent earnings call is we're actually in the process of building a second test stand there at our test facility in Stennis Mississippi, which will now give twice the capacity to test. So that's obviously a very important part of getting Neutron to the pad in the second half of this year. ### Composite Structure Challenges (2:15) On the composite structure side of things, again making tremendous progress on the structures. This is an area where, leading up till now, this is the one area that we've relied more on outsourced third parties to deliver for the first rocket. And that's really one of the main factors that led to us updating our schedule to the second half of this year. A lot of trade-offs are made when you're getting to this point in the development of Neutron. And normally, and ultimately we will be very vertically integrated with Neutron just as we are with Electron. But when you're first starting out, you have to make that trade-off between schedule - how quickly do you want to get things - versus vertical integration. A lot of the equipment that's required to build the composite structures, the lead time on this equipment is a year to two years long. So we can't wait until the equipment comes in to get the prototyping started, or we would be much later than the schedule that we're on. **Interviewer:** From a composite perspective, how much is a technical challenge and how much is your third party providers actually prioritizing other things before the volume that they have to do with you? **Stephen Ananas:** I think it's largely scaling and just meeting the schedules that they've committed to versus a technical challenge. And again, this is the advantage that Rocket Lab has not only in launch but across the business - that we have made the decision to vertically integrate whatever we can so that we have more control over our schedule. ### Launch Infrastructure Development (4:35) **Stephen Ananas:** And then lastly, the infrastructure. Building a launchpad, there's a tremendous amount of work that goes into this and it's a lot like building a house where you spend 80% of the time building everything that you can't see, and then as you get towards the end then you start building everything above the ground. That's exactly the way it's working with launch complex 3, which is where Neutron will launch out of Wallops Virginia. In fact, things are progressing very well on that front. We are going to be having our grand opening of the launch facility in May-June timeframe. ### Neutron Pricing Strategy and Market Positioning (8:04) **Interviewer:** On the Electron example, you did some early orders that were not as profitable as they could have been. How much of your future launch capacity are you selling today and how much you're keeping until you can actually have a stronger pricing position? **Stephen Ananas:** Pete often talks about how he will never do that again. When you have an untested vehicle, customers automatically expect there to be a pretty significant discount. Our view is that we have a tremendous amount of heritage that we're pulling from the Electron rocket. We know what we're doing. So we're not looking to provide discounts to sell our capacity. By the way, the other consideration is our stated cadence that we expect is the first test launch here in the second half of this year, ramping to three commercial launches in '26 and then five in '27. So there's not a ton of capacity over the next few years. And so we have to be very careful on what customers that we're partnering with because they may not show up at the pad. ### Electron Backlog and Performance (10:17) **Interviewer:** How large is the backlog, how the pricing of that backlog looks compared to the ones that you have been recognizing so far? **Stephen Ananas:** The backlog for Electron is over or nearly $400 million. So it's a pretty healthy backlog of launches. About half of that is over the next 12 months and then the other half obviously is beyond 12 months. The pricing has been very stable and increasing with time, and right now our backlog average launch is over $8 million a launch. Customers really value what Electron brings to the table. It's a small class launch vehicle that's really suited for dedicated launch. When a customer has a very specific mission requirement, they can come up with their own mission parameters that we can meet. A good example is Capella, which we had a successful launch earlier today - this is our 62nd launch. It was the fifth launch for Capella. They had done a bulk buy of five launches, and in total we deployed over 25 satellites that completed their internet of things constellation. We deployed their entire constellation in one year, and that allows the customer to now turn on their service and start generating revenue. ### Competition with SpaceX (12:40) **Interviewer:** How do you think about Neutron versus the SpaceX offerings? **Stephen Ananas:** Neutron has been developed to be a direct competitor to Falcon 9. So there will be almost entire overlap. And honestly, we believe the customers are looking for an alternative to SpaceX. But if you step back and look at SpaceX and the volume of launches they've done, the overwhelming majority of those launches are Starlink launches. So if you take those out of the equation, then the remaining government and/or commercial launches - those are really the launches that we would be competing for. And again, I think we'll have a very competitive offering. ### Government Relations and New Administration (14:31) **Interviewer:** When you think about the new administration and the role that Elon Musk plays there, are you concerned at all about your competitive positioning when Neutron is out? **Stephen Ananas:** It's still very early days in the administration, but they certainly appear to be pro-space, pro-defense, and pro-efficiency - each one of those play to the strengths of Rocket Lab. Just take for example the Golden Dome initiative that this administration is talking about, the NSSL on-ramp of new providers, even within NASA in the Mars sample return - these are all initiatives that really play into the technology and capability stack of Rocket Lab. ### Space Systems and Acquisition Strategy (19:10) **Stephen Ananas:** When we think of our space systems business, we really look at it as two sub-segments. We have our components portfolio and then we have our satellite manufacturing. The component piece of the business has largely come from acquisition, and it's been a very conscious effort to vertically integrate these supply constrained, subscale components so that we can bring them in and have more control over the schedule and ultimately drive more scale in the production. A good example is our very first acquisition, Sinclair Interplanetary. When we acquired them, they were producing about a hundred reaction wheels a year, and the space economy does not become the trillion dollar industry that we all hope it becomes if you're constrained to a hundred wheels a year. What we've been able to do is now take that technology and scale it to now we're building over a thousand, 2,000 wheels a year. ### Flatellite Technology Introduction (25:02) **Interviewer:** You announced Flatellite not so long ago. Could you mind explaining to everyone what is Flatellite about and what you want to do with that? **Stephen Ananas:** So Flatellite is a new satellite form factor within our portfolio of satellites within the company. The big difference between our other satellite designs and Flatellite is it is a think of like a pancake type of form factor where you can stack many more satellites in the fairing of a rocket versus a more traditional satellite design. One of the more important decisions that a satellite operator is going to make in choosing like a launch provider is what is the cost to launch per satellite. So you might have a satellite that is not all that mass constrained but it's volume constrained. So you can imagine if you have a rocket that can fit seven satellites in the fairing versus now with this new architecture you can fit 20 satellites in the fairing - well your cost per satellite has come down significantly. ### Reusability Timeline and Margins (30:42) **Interviewer:** On the reusability of the rockets - firstly Neutron, I imagine the reusability won't be tested on the first launch. How can we think in terms of the timeline of when that will come in? **Stephen Ananas:** The first launch of Neutron is going to be an R&D test flight, however the mission of that first flight will be to simulate a commercial flight. So we're going to launch, we're going to get to orbit, then we're going to re-enter and we'll glide the vehicle back to Earth and then we'll refire the engines and then we will do a soft splash down in the ocean at a very specific point as if we are landing on a barge. Everything short of actually landing on the barge. If that is successful, then we will attempt to recover the next launch. In terms of profitability, for Neutron it really is a function of reuse - recoverability and reuse. Once we have gotten to the point to where we're able to recover and reuse these vehicles, then we think that the targeted margin for Neutron is the same as Electron, which is somewhere between 45 and 50% gross margin. ### Path to Profitability (37:00) **Interviewer:** When you think about profitability in general, when do you think you can become cash profitable and how much of a role Neutron plays there? **Stephen Ananas:** I would say Neutron plays all of the role there. When you look at the individual businesses without Neutron, we're a profitable company. So the investment in Neutron is significant. Obviously the opportunity is significant. But to answer your question, I think it ultimately depends on how quickly we ramp Neutron and how successful we are getting to our cadence of 1, 3, 5. The one thing that you'll see almost immediately is once Neutron successfully launches, then once you move into production with Neutron, you see a pretty significant flip in the income statement because a lot of that R&D intensity starts to reduce. A lot of the prototyping that we've been doing leading up to the first flight doesn't go completely away, but it comes down quite significantly. ### Future M&A Strategy (39:34) **Interviewer:** In terms of M&A, what are key areas that you're looking for in terms of technologies? **Stephen Ananas:** The pipeline is full. It's always been full. So we're just constantly looking for opportunities to vertically integrate on the supply chain side. Again, supply constrained, high-value components are kind of bullseye, and again Minaric is a good example of that. The other area that we continue to research is on the payload side. So again, today we're focused on the satellite bus and all the components that are used for the satellite bus, but it's very important to have the payload as well and so that's something that we continue to look at.