[[Home|🏠]] <span style="color: LightSlateGray">></span> [[Interviews]] <span style="color: LightSlateGray">></span> February 17 2025 **Insider**: [[Adam Spice]] **Source**: [Citi 2025 Global Industrial Tech and Mobility Conference](https://www.youtube.com/watch?v=jQrNLIRULkw) **Date**: February 17 2025  🔗 Backup Link: https://www.youtube.com/watch?v=jQrNLIRULkw ## 🎙️ Transcript >[!hint] Transcript may contain errors or inaccuracies. **Host [0:03]:** Here, welcome back after lunch. Hope you're well caffeinated and won't suffer from food coma as we get started here. I have the pleasure of hosting Rocket Lab here on the stage with me to kick off the afternoon session. Adam Spice is the CFO there. I'll let Adam tell us a little bit about his background and himself and how long he's been with the company as we kick off. And then Adam, maybe right after that, just in case somebody in the room has been living under a rock and isn't aware of what you guys do, why don't you give us a one or two minute overview of the company and the state of it these days? **Adam Spice [0:46]:** Sure, no, happy to do that and thanks for having me. So yeah, my background is a little bit unusual I guess for aerospace. I came out of a 25-year background in semiconductors, starting my career at Intel in the 90s and then Broadcom in the 2000s, and then Max Linear in the 2010s. And then met with Peter Beck in 2017 where he articulated a vision where he wants to create a true end-to-end space company, leveraging off of the first product which is Electron. I'll talk a little bit more about that, but ultimately with a goal of being able to put very cost-effectively and very quickly assets on orbit to create a recurring revenue kind of service model. So everything that we've done, at least in the almost seven years I've been with the company, has really been all about pushing that end goal of end-to-end space systems and space capabilities. We've acquired several companies along the way. But just to back up a little bit further, so yesterday we had our 60th launch of Electron. It's a small dedicated launcher. We fly that both out of New Zealand and also out of Wallops Island, Virginia. It's certainly by far and away the market-leading small dedicated launcher, which is an interesting market. It's one that I think you could safely describe as somewhat niche, but interesting and really kind of created the bigger opportunity that we're bringing to market later this year in the form of Neutron. Neutron is really the first, what we think, the first real competitive vehicle to be positioned against Falcon 9. So Neutron is a vehicle capable of 13 ton to low earth orbit, reusable vehicle, got some innovative design features that if you go to our website and take a look and see, it looks a little bit different than a Falcon 9, because it was designed from day one to be reusable. I think Falcon 9 is a phenomenal vehicle, really hard to find fault with that vehicle, but the recoverability or reusability of that rocket was an afterthought, and they cleverly found their way to do that. And that's really what's allowed them to scale. Most launch vehicles kind of tap out in the maybe high single-digit, slow double-digit launches. Last year Falcon I think launched 134 times. So we've certainly got a very capable competitor to go chase in the market. We really do see SpaceX as that primary target as a competitor. But what's a little bit different is they're further ahead in their evolution where they've taken that strong position in launch and leveraged that into a recurring revenue applications business in the form of Starlink. While we haven't announced what the ultimate end application for us is, our space systems business, which actually represents roughly 70% of our revenues, is really the incubator for the capabilities ultimately that we need to put those assets on orbit for ourselves down the road and create a much bigger, much more interesting business even than we have today. So hopefully that provides a little bit of context. ### Electron Launch Vehicle **Host [3:45]:** Great. So Electron, 60 launches. Do you know how many other companies other than SpaceX have gotten to 60 launches? **Adam Spice [3:54]:** I believe ULA's done about 170 launches. That's been across a much longer time horizon. But we are the second most frequently launched vehicle in the Western world. We launched 16 times last year. The prior year was 10, so we've gone from like 10 to 16. This year we've got a manifest that supports well over 20 launches. Our ability to deliver against that manifest hasn't been a function of production because we've been able to produce the vehicles. The nature of why people pay such a premium to be on a dedicated launcher like ourselves versus being on a rideshare is because of the flexibility that provides. If they have an issue in the late stages of testing on their spacecraft, they're not going to miss the bus. They're paying for that vehicle to kind of be there when they're ready and also to go to very unique orbital destinations. That's how we've carved out our position there. There really is no other kind of high-frequency launch provider in the US after SpaceX and us. **Host [4:56]:** You described Electron as being a bit niche. Why is that? **Adam Spice [5:02]:** If you think about what the vehicle's proven to be very effective at doing, what we call Pathfinder missions - that's where you're deploying some new technology in orbit, you want to see if it works. But when you really want to go into deployment for a large constellation, if Electron can deploy constellations of maybe up to a couple dozen satellites with individual either one or two satellites per launch, it's not timely or cost-effective to do like 30 launches for one constellation customer. So you want to batch those and put them on larger rockets. That's what Neutron comes in for. Neutron is really our constellation deployer. Electron will continue to be a very interesting kind of need-filling product, but again probably focusing more on the more bespoke markets. Earth observation is a big part of our overall customer demand for Electron, probably represents about 60% of our launches. Earth observation is popular because typically those constellations don't require hundreds or thousands of satellites - they require a handful, a couple handfuls of very capable and many times smaller spacecraft. **Host [6:09]:** I had Firefly on the stage this morning and they're talking about their Alpha rocket as having a payload capacity of about a ton. How does that compare to Electron? **Adam Spice [6:31]:** Electron can deliver 300 kilograms to lower Earth orbit. Think about that as roughly the size of a refrigerator when all the arrays are stowed away. That's where we've found the volume of the market to be, in that 300 kgs or smaller range. We haven't seen a real big volume of actual payloads that have launched in that range between 300 kg and a thousand kgs. That could change - the ecosystem is changing very rapidly around us. But we think right now Electron is still the right size for where the greatest market demand is. As the market continues to evolve and these things that we put up on orbit as Pathfinder missions transition to full constellation deployments, that's where it goes to a Neutron. Or today, it's been transitioning over to a Falcon 9. I think there's plenty of room for different types of vehicles in this market. You have the 300 kg Electron, you can have one ton on the smaller but larger side of small launch, then you've got Neutron at 13 ton, Falcon 9 at 16 and a half ton, Falcon Heavy much larger, New Glenn, Vulcan, and Starship on the very far end of that. ### Neutron Development **Host [7:48]:** Moving over to Neutron, you mentioned a launch this year. Maybe get everybody in the room up to speed on the development timeline, what you've announced thus far on customer count and missions, and the manifest and backlog for that vehicle. **Adam Spice [8:14]:** I was fortunate or unfortunate enough to join Rocket Lab after the first test launch of Electron, so I wasn't there during that whole bringing the vehicle together from concept to production. But I can tell you having been involved with Neutron, it is an amazing orchestration of different skill sets and demands on the organization. It's amazing that these things ever come together. When they do come together, they often come to market very late. If you look at the New Glenn launch that happened last month, that vehicle was originally supposed to launch in 2020, so it's about 5 years late. These things are incredibly complex, and that's without any capital constraints because Origin had the benefit of having obviously a lot of financial access. We've said that the goal is to launch no earlier than middle of the year. That's also our target date to get the vehicle to the pad. A lot of things have to go right in order for that schedule to work, and so far things have gone well, but it only takes one thing in a rocket program to set you off course. We saw last year when ULA was bringing Vulcan to market, they had an issue with their Centaur upper stage that blew up on the test stand, causing a six-month delay. So you just never know. You start every day hoping that you're not going to have a fire on your test stand, you're not going to blow up a tank, and so forth. But this is a rocket after all. Right now our schedules have us still sticking to the schedule that we've communicated. **Host [9:50]:** When you look at the demand environment? **Adam Spice [9:56]:** We worry about a lot of things including things blowing up, but we really don't worry about demand. There's such a scarcity in the market right now for that medium lift capability. There are a lot of customers who are in very uncomfortable positions. The US government doesn't have choice, and they need to have choice for national security reasons. If you're a constellation operator that competes with Starlink, you're very uncomfortable launching on your competitor's platform. The combination of the government and commercial markets all needing the capacity, and really no other viable competing medium class launch vehicles coming to market, creates a really unique opportunity for Neutron. The dance that you do is that it's just as dangerous for a constellation customer to sign up for a launch on a vehicle that doesn't exist yet as for the launch company to sign up for a customer whose satellites may not show up on time. So you both have to kind of look each other in the eye and do that kind of death stare and say, "Okay, are we going to jump off this cliff together?" Because that's really what you're doing. We were successful earlier this year or late last year of signing our first customer for Neutron. That won't fly on the first launch - the first launch is a test launch that won't be carrying any customer payloads. The goal for that is to really see how the vehicle's performing. We won't do a recovery on that one either. The plan right now is to do a soft splashdown - to re-enter the vehicle back into the atmosphere, hover over the water, and then just put it in the ocean. The reason for that is you don't want to damage your barge, which is a very expensive platform, and you also don't want to incur an FAA anomaly investigation. We will attempt a booster landing with Neutron as soon as we're comfortable, hopefully after seeing the results from the first test flight later this year. We have a lot of different customer engagements for Neutron across government and commercial markets. The demand scenario is very robust, but it's really that dance I mentioned. Once they see that you've had a successful flight, it's almost too late because then they got to get in line with everybody else. The people that are willing to lean forward the most, and of course we have to be leaning forward with them as well, that's where things come together. We've announced the cadence of first launch this year, three launches next year, and then five launches the year after that, which really mirrors our experience on bringing Electron to market and looking at other launch vehicles. Of course, the goal for us would be to scale much faster towards the tail end of that or in the years subsequent to that. If you look at the cadence that SpaceX was able to achieve with Falcon 9, it took them around 5 years to get to roughly 20 launches per year, which is on the fast end but not unheard of because we've done the same thing with Electron. But to scale to the 130 launches per year that SpaceX does - that really got triggered by reusability. Because then you go from making a booster for every single mission to now having a fleet, and that supercharges your financials. Your margins expand very quickly because now you're amortizing that biggest expense of the booster over multiple launches versus expending them. That's the current plan of record for us to bring this vehicle to market and hopefully get to reusability as soon as possible, because that also lessens the capital demands on the business. Every time you put a booster in the water, you'll hear me crying from Long Beach. Hopefully it only happens one time. We'll see. **Host [13:34]:** These will launch from Wallops, right? And the idea is to come back on a barge, not landing them back at the pad? **Adam Spice [13:46]:** Ultimately the plan is to return to pad, but that comes at a cost because you're using more fuel to direct it back to the pad. In a return to pad configuration, we're estimating about 8 tons of capacity versus 13 ton for downrange. The first incarnation will be landing on a barge several hundred kilometers downrange, much like a Falcon 9 does. If we want to put it into expendable format, it's about 15 tons of capacity. The plan right now is to do downrange landing, and then eventually do return to pad, which would create a much quicker turnaround time obviously and lowers a lot of your expenses for operating the barge and bringing the vehicle back. But that still requires more development. ### Customer Base and Mission Types **Host [14:34]:** Maybe we can talk about the customer side of things. In launch, you talked about the Pathfinder, bespoke missions. Maybe give us an example of a typical or well-known customer on that side, or a customer that's come back for multiple launches. Kind of describe what those missions look like, who the typical customer is there, and most importantly, dwell on why somebody would go with a dedicated launch versus a big rideshare. **Adam Spice [15:27]:** When I joined about seven years ago, it was a lot of just one-offs. Now what we're finding is we're signing constellation customers, again primarily in the earth observation space, because it works particularly well for Electron. For example, yesterday was Black Sky. I think that's approaching 10 launches for them. We signed a 10 launch deal with a company called Synspective, which is a Japanese earth observation company. We signed a large multi-launch deal with a company we've launched recently. These are typically satellites that are in the 150 to 200 kg size range, sometimes they're smaller. We could put multiple satellites on those. The current generation of the BSG3 that we launched yesterday is a single satellite. The prior generation BSG2 we could fit two on. It really depends on the application. For example, if you look at a synthetic aperture radar satellite, they have much larger arrays that require more volume, not necessarily mass but volume. So it just depends on the applications. More and more, we're signing multi-launch deals that span multiple years. Exiting Q3, and we'll have our earnings call next week where we talk more about backlog for Q4, but we exited Q3 with 39 Electron launches in backlog, and we've continued to sign up more customers. The demand environment for that product is very strong as well. Like I said, probably 60% of that is earth observation in one way, shape or form, whether it's SAR, electro optics, sigint - all different modalities of observation. **Host [17:15]:** That's 60%. What's the other 40%? **Adam Spice [17:15]:** The other 40% would be comms customers, and hypersonics test is probably the fastest growing part of that Electron family of small dedicated launch. That's where we work with our US government's prime suppliers to provide the launch capacity into those hypersonics tests. What we've been able to bring to that market was that previously they'd typically launch those on a Minuteman from Northrop. The cost would be three to four, maybe five times the cost that we charge for Electron, and their cadence was much lower. So the programs were infrequent and expensive. Now we've been able to offer that if the government customers want to launch monthly or greater for HASTE, we could certainly support that, which is kind of new to the market and at a cost point that's not been available before. I think everybody is pretty much in agreement that our national security would benefit from more hypersonics development faster. So we're addressing that pretty significant strategic need for national security, and it's growing very quickly. **Host [18:31]:** The tests that are being conducted, are they to test out offensive capabilities, defensive capabilities, both? **Adam Spice [18:31]:** We can't get into the details of those for lots of different reasons, but we're not developing offensive kinetic weaponry. ### Neutron Customer Base **Host [18:44]:** Let's do the same exercise on what your customer set is today for Neutron. Any disclosure you can make on who and what is going up would give us a flavor of how this is starting off. **Adam Spice [19:02]:** The biggest part of the space applications market, at least on the commercial side, is comms. So I think the majority of what we'd expect to launch on Neutron on the commercial side will be communications related. You can think about non-Starlink constellations that are being developed, with satellites being built as we speak. Those are known - things like Amazon Kuiper, you've got Telesat, you've got OneWeb, all kinds of different opportunities. On the government side, there's a lot going on. We're building SDA satellites right now for Tranche 2. SDA is building hundreds of satellites, ultimately probably thousands of satellites that are going to need launch. That will ultimately be procured under the NSSL launch procurement program, which we're getting onboarded this year for Neutron. I think Neutron's going to have a mix of commercial and government, very much like Electron has, but much more focused on the higher volume constellation customers and then the unique government needs for some of their larger spacecraft as well as some of these proliferated architectures that are coming forward from things like SDA and NRO. ### Space Systems Business **Host [20:14]:** This is a perfect segue now into the spacecraft business that you mentioned. Talk a little bit about the acquisitions that you've made, what kind of capabilities you have there today, what the backlog is as of the end of the third quarter, and what the pipeline looks like for the next several years. **Adam Spice [20:38]:** A lot of people are very familiar with our launch business because it's fun to watch a launch on YouTube - everyone enjoys that. But Space Systems represents about 70% of our total revenue, so it's the biggest part of our business. It's been growing pretty quickly and can really be viewed in two different towers. That 70% of revenue is comprised of roughly equally sized segments: a merchant subsystems business, where we sell subsystems whether it's solar panels, reaction wheels, star trackers, radios - you name it - into other people that build satellites; and then a platform business where we sell either satellite buses or full satellite solutions. An example where we sell satellite buses, which is a generic satellite without any payload capacity (the payload is being provided by somebody else), is Global Star. MDA is an example of where we've built a bus contract versus SDA where we're the prime and we provide everything. We don't develop the payloads - we basically procure those from third parties. For us, we believe vertical integration is basically the path to success. One of the areas that we get asked about a lot is how it all ties into our inorganic growth strategy at M&A. Certainly one of the greatest areas for deal activity is additional bus componentry. We've got a lot of that today through the acquisitions that we've done, including our first acquisition, a company called Sinclair Interplanetary, which made attitude direction and control for pointing and stabilizing of satellites. We then acquired a software company that actually controlled those attitude direction control components. Then we acquired a company called Planetary Systems Corp, which did the separation systems where you separate the satellite from the rocket. Those separation systems go on not only our vehicles but SpaceX, ULA, and others like Firefly. Then we bought a solar company called SolAero to make the solar panels, because solar panels end up being one of the more expensive subsystems on a satellite. All of those things have kind of breadcrumbed us to have a pretty vertically integrated platform, and we continue to see that as really the path going forward. If you look at those various businesses, our merchant component business grows with the overall ecosystem. We've got really good market share there because of our heritage. Think of that as roughly a 20% CAGR. The platform business has been growing from a smaller base and growing faster, now equal in size to the subsystem business and growing probably in the 25 to 30% CAGR range. You can track the growth of our launch business because we've gone from 10 launches to 16 launches. The big change there will come from Neutron, where we go from an $8 million launch with Electron to now a $50 to $55 million launch with Neutron. I think we've got all the right pieces in place to drive the future growth of business. To tie into your backlog question, we exited Q3 with over a billion dollars of backlog, pretty representative of the mix of the overall business but skewed a little bit more towards space systems because of that large SDA contract that we won about a year ago. I think once Neutron starts to gather its momentum, you'll see that skew back a little bit more towards launch, but we'll see growth in all the different sectors. It's turning out to be a pretty well-balanced portfolio. ### Profitability Path **Host [24:13]:** Let's talk maybe a little bit about the profitability of the business. I think we're not at EBITDA break-even yet. What is the path? What levers need to be pulled here to drive the company towards both EBITDA break-even and what the ultimate margin targets look like in a normalized environment? And throw in some of the assumptions like Neutron development. **Adam Spice [24:42]:** I think at the end of the day you can take a pretty complex financial model and distill it down to a fairly simple thing, which is Neutron. Neutron's consuming the vast majority of all of our R&D. It's consuming the vast majority of all of our capex as we drive towards this first launch, which gets you to a minimum viable product. The thing with a launch vehicle is you pretty much have to have almost all of the infrastructure in place necessary to support your first launch. Your pad's got to be done. Now, you'll increment your pad with bells and whistles as you grow, but your basic production plant infrastructure is there. The key for us from an EBITDA perspective is really getting past that R&D bubble that we're experiencing with Neutron. Once we get past this first launch, R&D drops pretty precipitously. It doesn't go away - it'll stick around for probably three years as you go through these annual block upgrades, but it'll be done at a vastly reduced R&D burn. Then a lot of those R&D resources actually pivot over into production where you've got air cover from revenue and all the goodness that comes with that. If you look at the margin profile of our launch business, Electron, when we're launching a little over one per month (which was last year), that gives you gross margins in the low-30s, with a path to mid-40s to maybe a little bit better than that when we're launching twice a month. I mentioned earlier we've got a manifest that supports well over 20 launches. You don't really get a lot of BOM cost reductions and labor reductions in a product where you're only making dozens per year, but what you do get is you get to amortize that pretty significant overhead across a greater number of units, and that's what drives your margin expansion. Neutron is going to look a lot like Electron. It's going to take a period of time to really just build cadence more than anything else. It's cadence just like it was in Electron, but it's also reusability. Sticking that early landing is super important because every time we put a Neutron in the water, it's tens of millions of dollars. We want to do that as few times as possible. Once we can get to roughly a launch per month of Neutron, we should be at our target of 50 points of margin on that business as well. There are opportunities to do better than that. We set ourselves some pretty high internal bars and we try to set the bar externally fairly low. On the space systems business, that's not a problem child when it comes to margins or poor profitability. We have a lot of fungible resources - people that can be working on a satellite in the morning and then working on Neutron in the afternoon, and then working on something else the next day. We don't break out profitability by segment, we just show revenue and gross margin. I think over time as we get more specialized and we mature some of these product lines, we'll probably get more focused on providing that visibility. ### Future Business Strategy **Host [27:59]:** Today you've got two primary sources, but I think the ultimate goal here is to have three. I know you haven't disclosed much about what you plan to do in the third leg of the stool on the services side of things, but you've got investors in the room here that might be around for the longer term. So today we're doing Electron, we're spending money on Neutron, we get up in cadence and R&D fades away, we get to profitability in those two businesses - but then do we go into a new investment cycle do you think? **Adam Spice [28:46]:** I think if you look at the cost to build a constellation business from scratch, it takes a long time and it's very expensive. We can only imagine what Elon is spending at SpaceX on Starlink - a lot of these people probably know because they're investors in SpaceX. I think it's more likely that we leverage our capabilities in launch and building spacecraft at scale in a very vertical way to partner or maybe even acquire our way into that constellation business initially. Pete's a pretty creative guy and he's always looking at building a better mousetrap and addressing markets in a different way, but I think longer term pure greenfield opportunities are tougher. There are constellation operators that have things that are difficult to acquire like spectrum - they've got customer relationships but they're completely being out-muscled by SpaceX's ownership of a vehicle and their ability to build spacecraft at scale, because they're now the world's largest spacecraft manufacturer as well as being the world's most dominant launch company. By bringing Neutron to market, we level that playing field. I think we have the ability to do very much what SpaceX is doing with Starlink, but do it in a slightly different way, probably not going after a market that requires 40,000 satellites because that requires raising capital that we probably can't do practically speaking. So we're going to be very careful and targeted about what we go after, leveraging what maybe other people bring to the table and what we can augment that with. I think if you look over the next three to five years, we're going to be taking on more and more customer programs that teach us how to build what we know we're going to need in the future. We've looked at all of our satellite engagements - whether it's a NASA program, the MDA Global Star, SDA, and other things that we've got in the works - those are things that we would have had to develop on our own. Rather than do a tremendous amount of R&D burn without any support, we have customers pay for that. They're basically teaching customers in a lot of ways. I don't anticipate that we would do another Neutron-like heavy capex and R&D crusade. It's going to be a little bit more evolutionary once we get Neutron to the pad versus revolutionary. ### Capital Structure **Host [31:11]:** Talk maybe a little bit about the capital structure today - everything will be as of the third quarter of course, but cash on the balance sheet, liquidity through revolvers, that kind of thing, and cash burn maybe over the trailing 12 months from the third quarter and what the burn looks like going forward. **Adam Spice [31:36]:** Our historic burn for the last couple of years as we've been bringing Neutron to market has been around $100 million from an adjusted perspective, and cash has been about the same - pretty close. We've been averaging between $20 and $40 million a quarter, again almost all of that Neutron related. The cash burn going forward is a function of how quickly and how much those other businesses contribute to offset Neutron as we get that scaled. We exited Q3 with over $500 million in liquidity. We feel good about that, but we also understand it's a rocket business. I think if we were to drop below some thresholds - and they're kind of arbitrary, a lot of it is based on our historical experience with customers when they start to get nervous about your financial viability - if we were to have line of sight to dropping below $300 million of liquidity, that's probably where we'd want to think about making sure that the coffers are well topped up. That can be a function not necessarily of P&L operating loss but also cash consumption for capex in a lot of cases, because we're building out launch pads and investing in working capital. Right now we're not only building the first tail for Neutron, we're starting tails two and three, and as mentioned, those are tens of millions of dollars apiece. So you go through periods where you're going to consume working capital, and then there'll be periods where you're releasing that. Right now, the thing that we're all looking forward to is getting that first Neutron off because that really is the most fundamental pivot or inversion in the model, where your P&L has the greatest chance to do a major blip from significant losses to hopefully profitability. ### Q&A From the Floor **Audience Question [33:49]:** What's your sense of the long-term business mix when you look at the TAMs for the different verticals you're playing for, ultimately with the payloads and the rockets? What would your vision be of the business mix? **Adam Spice [34:01]:** If you look at the launch TAM today, it's about a $10 billion TAM. If you look at the space systems manufacturing part, all the subsystems and delivering the platforms, that's about a $30 billion TAM. Then if you look at the applications, it's estimated to be closer to $300 billion, maybe more than that. People are forecasting now that you're looking at a trillion or maybe up to almost two trillion dollar TAM by the time you get out to 2040. A lot of that growth is really anticipated to come from the application side of things, which is that third leg of the stool that Jason was mentioning earlier. When we were trying to architect the model seven years ago, Pete and I both thought it'd be great if we could keep launch to maybe a third of the mix of the business for a couple reasons. Launch is a lumpy business - it's volatile by its definition. It's lumpy because you don't get to recognize revenue until you actually intentionally ignite the rocket. You're collecting cash along the way against milestones, but you don't get to recognize revenue until you actually launch the rocket. As I mentioned earlier, a lot of times the delivery of the spacecraft is the thing that drives our launch cadence and schedule. You can have a launch that's teed up for the last week of a quarter, but the customer can be late delivering a spacecraft for a variety of reasons - shipping or an issue in test that can push it to the following quarter. The good thing is the backlog never goes away - it's very sticky. We like that one-third, no more than one-third, of our revenue coming from launch across Electron and soon Neutron. On the space system side, I suspect that as we go forward, we've got nice growth rates for the merchant business, we've got nice growth on the platform business, but ultimately the real prize is the applications. Last year SpaceX generated maybe six or seven billion of revenue already from Starlink. We think the services model is really what's most attractive about why we're pulling this end-to-end platform together. If you look at a lot of the people excited about growth in space, it's going to come from new applications but also from existing applications that are better served from space. The current providers of those services are very unnatural, uncomfortable owners of space assets. They don't want to try to predict launch success, launch vehicle timing, on-orbit life cycles, conjunction analyses - they just want a service. What they own is a customer, and they know how to monetize that customer. We believe there's a huge opportunity for us to put infrastructure on orbit in a very cost-effective and timely way and basically provide those services, whether to a government customer or to a commercial customer, and just say "what do you want, we'll do that for you." We're in the best position of putting those assets in orbit and maintaining those. That's where I think the biggest part of the business is going to be. So if you look five years from now, I think the mix is going to be increasingly disproportionate towards that services side of the business, but everything is necessary to get there. A lot of people will try to say, "How much of SpaceX's $355 billion private market valuation is tied to the launch business versus Starlink?" I don't know, but if they didn't have a reusable rocket that nobody said could be achievable, then Starlink wouldn't be viable because the cost per bit wouldn't close to compete with terrestrial services. That's why you really have to step back and look at it from a very strategic long-term perspective and say what are all the pieces you need to have. Fortunately, the hardest piece is where we started - I don't think we've ever really seen a satellite company back their way into a rocket, but we've seen rocket companies work their way into satellites. Once you have that hardest piece of the puzzle solved, the world becomes a much bigger place for you to look for opportunities. ### Industry Innovations and Structural Changes **Host [38:12]:** We've got a standard question that we're asking all companies at the conference, not just A&D companies but across the broader industrials. We're asking everybody kind of an opinion on the top two or three innovations or structural changes that are going on in your industry and with the company, how you see that playing out over the next five years, and that might include maybe some trends that investors might currently be overlooking. **Adam Spice [38:40]:** We've talked a lot about Neutron. I think for us that's the big driving thing that enables so much and opens up the applications business. But I think overall, the thing that's creating a tremendous amount of opportunity for us is, and it's only heightened by this new administration, the fact that the old way of doing business in space is not working. The old primes that basically were not technology creators as much as they were technology integrators and program managers, and they slapped their cost-plus kind of regime on it - that's not working for the government customer in particular. It's the more nimble end-to-end, vertically integrated, willing to do firm fixed-price kind of deals - that's where we believe the opportunity is. We're starting from a small base and we're going to be just eating away at those larger incumbents over time and taking their pieces of the pie. On the commercial side of space, I think the big game changer is this proliferated LEO architecture, which also by definition says you can't do new space the way you did old space. You can't do things when you're building five of something over 10 years costing billions and billions of dollars. That's very different than having to create hundreds or thousands of things that have to be replenished every 3 to 5 years. That requires new technologies, new approaches to production, new approaches to capital efficiency. It's very different and opens up new applications. So I think it's a combination of the way that government customers are procuring solutions going forward, and in the commercial markets it's all about the proliferated LEO architecture driving real meaningful change as to how things are made and delivered to the market. ### Investment Case for Rocket Lab **Host [40:16]:** I'm gonna leave the last comment for you, kind of give you the opportunity to drop the mic as you walk off the stage. What's the 30-second elevator pitch to the investor base here - why invest in Rocket Lab today? Why are you excited? **Adam Spice [40:35]:** I think we've talked a lot about the unique growth areas. Maybe some folks in this room were lucky enough to invest in SpaceX early on - great investment. I think that we represent really that publicly traded pure-play space growth opportunity at a significant discount to SpaceX. There were a lot of things that catalyzed some of the stock price movement for us over the last few quarters. Part of it was just a kind of return of focus on space with the change in administration and so forth, but we also knocked down some very key technical milestones getting Neutron to the pad. I also think that people see a valuation of say $355 billion for SpaceX, and some people talking if it goes public at a much larger number, and then ask what should the real credible number two fast-chasing competitor to SpaceX be worth? If you step back and look over what we can accomplish over the next 10 years, how we can narrow that gap as we narrow the gap in capabilities, what does that relate to as far as closing the valuation gap as well? When we were trading for $2-3 billion and SpaceX was rumored to be trading for $355 billion, it was pretty much a no-brainer. But I think as they continue to expand and they show the value created in space, it just creates a very similar opportunity but much more actionable on our part than maybe some others. **Host [41:55]:** Perfect. Thank you Adam, really appreciate it. **Adam Spice:** Thanks Jason, thanks everybody for listening in.