[[Home|🏠]] <span style="color: LightSlateGray">></span> [[Interviews]] <span style="color: LightSlateGray">></span> August 8 2024 **Insider**: [[Peter Beck]], [[Adam Spice]] **Source**: [Dave G Investing](https://www.youtube.com/watch?v=JEOcyOo77Po) **Date**: August 8 2024  🔗 Backup Link: https://www.youtube.com/watch?v=JEOcyOo77Po ## 🎙️ Transcript >[!hint] Transcript may contain errors or inaccuracies. **Dave:** Hey everybody, it's Dave. If you're new here, welcome. If you're not, thank you for continuing to watch. Today I'm excited to bring you the full interview that me and three fellow YouTubers had with Rocket Lab CEO Sir Peter Beck and CFO Adam Spice. The two of them were generous enough to take 45 minutes out of their busy schedule to talk with us about Rocket Lab and the space industry. Not many companies engage on this level with their retail shareholders, so it's very much appreciated. ### Neutron's Propulsive Landing Plans **Vince:** So we know that you're planning to land the first Neutron on a drone ship, and we know that generally you expect things once they're on the pad to work. But we are wondering what are the chances that you're going to be able to propulsively land on the first try, or how many tries do you think it will take before we have a reusable Neutron? **Peter Beck:** Well, you've kind of called out pretty much the only thing we haven't done before. So I think we should level set expectations there that there's undoubtedly some learnings there. The intent is to do a soft splash down actually on the first one, not try and hit the barge. That will be the intent, and I think it's just a safer way to learn a lot. When you put a bit of steel between you and the rocket, if you haven't got it quite right, it could be pretty damaging to that asset. So the plan for the first one is to do a soft splash down and learn what we need to learn there. But in simulation, the GNC team have been flying and landing Neutrons now for quite some time. It's always cool to go past the hardware-in-the-loop rig and see all the actuators actuating and doing its thing and landing. But it's probably one of the things that we've never demonstrated before, so we'll step our way into it. **Vince:** Do you have an idea of how many tries you think it will take? Like five launches or eight launches before you can propulsively land and reuse the rocket? **Peter Beck:** Well, look, we're hoping for one. That's the target. But it doesn't always work out that way in this game. But that's certainly the target. ### National Space Programs and Launch Sites **Vince:** There seems to be a trend that more and more countries are launching their own space programs. For example, Canada has recently announced their own, the EU is investing a lot in its Space Systems. But it seems like these countries are increasingly favoring their own launch providers even if they are way behind in development compared to Rocket Lab or other existing players. Do you see this as a headwind, or will you need to open up local launchpads like in the EU to be able to get those contracts? **Peter Beck:** Look, a lot of countries want sovereign launch capability. We've always said to countries, there's a minimum number of launches that you need to put a pad in to make it viable. We've had these discussions with lots of countries around the world who want to attract us in particular to create a sovereign launch capability. But the conversations generally taper off pretty quickly when you explain to them that they have to bring their own sovereign launch. Because there's no point in us going to, say, Europe and building a pad and then cannibalizing our manifest from other sites, or bringing our own customers along to fly out of that pad, because it's just another pad that you have to amortize the cost of. So if a sovereign nation wants sovereign launch, they have to bring sovereign payloads. That's generally where the conversations end, because most sovereign nations actually don't have a big pipeline of sovereign payloads. ### Growing Rocket Lab's Backlog **Vince:** You were on a conference last quarter and you got a question about the backlog, and you said that you manage to almost double the backlog every year, and the internal goal is to still double from 1 billion to 2 billion. However, at the end of Q2, the backlog was slightly going up, and we in the retail community are hoping that this is because there's a huge pipeline of very lumpy contracts that still might come in this year, which would balloon the backlog to 2 billion. Can you give a little color on how you see the backlog developing for Rocket Lab? **Adam Spice:** We have our oars in the water on big opportunities all the time—commercial, government, across Space Systems and across Launch. If you look at the types of deals that we're going after, it doesn't take a lot of squinting to see how you could double your backlog from a billion to two billion in a relatively short period of time. I think the difficult thing is trying to predict timing. I don't think it's a question of if, it's just a matter of when. And I think you don't stop at two billion—you go to four billion and keep going as you grow the company. The timing of these awards is very difficult to predict. On the Space System side, obviously there's been a lot of focus lately on the SDA opportunities, which has really created these new scaled platforms for new entrants like ourselves. The timing of those is really difficult to nail down. But when they come in, like this last one for SDA Beta was $550 million, so you just need one of those that kind of gets you halfway to your goal. As we start to unlock opportunities for Neutron now that we've gotten past some of these key proof points, especially with the hot fire test, those types of deals are not likely to be one or two launch deals, but much more volume deals to tie up capacity on Neutron for some period of time. To me, it's inevitable that we'll be able to build that kind of backlog. The question is: can it be done before the end of this year? I think that's kind of an artificial constraint that we probably don't really operate under internally. It's just more like we'll sign the deals when they're ready to be signed. Naturally, given the size of deals, this creates lumpiness to the growth in backlog, but I think we all feel incredibly comfortable that the backlog is going nowhere but up. ### The Future of Space Infrastructure **Vince:** I've been reading a lot of space articles, and it seems like having your own constellation used to be a very big thing, and it was like a few governments who could only have a few constellations. In the articles I was reading, I read that the Army and the Navy want to have their own communication constellation because they feel that it's too much administration to share it between them. Greece wants to have its own constellation to monitor the sea. There's more and more companies and governments that want this space infrastructure that we are all looking forward to in Rocket Lab's future. Could it be that it will be multiple constellations, and could it be that the Army pays you—they come to you and they say, "Look, we need you to fix this service, we want secret communication here, and we pay up front for the constellation, and you just operate it"? **Peter Beck:** There's all kinds of permutations of the model, as you point out, and there's a tremendous amount of growth from the government sector. We're obviously trying to push very hard this model of just procuring a service rather than procuring satellites or procuring launch. The recent Victus mission that we signed is a great example of that, where they didn't buy a satellite—the government didn't buy a satellite, they didn't buy a launch, they actually bought a piece of data from a satellite rendezvous. That's certainly where we're pushing things, and frankly, that's where I think it will all go, not just from a government perspective but from a commercial perspective as well. If you look across some of the large tech companies who now have a footprint in space, they're not natural owners of space assets. It's very difficult to own these assets in orbit and operate them—you have to become somewhat of experts to even procure a launch. So that's where it's all going to go, in our opinion, and we're just making sure that we are going to be the preferred provider of that by having the ability to build any kind of satellite at scale, and of course, Neutron is key to be able to launch it at scale as well. ### Medium-to-Heavy Launch Market **Dave:** In terms of my first question, I was wondering a little bit about how you see the sort of medium-to-heavy launch market shaping up. Right now, it looks like there's a lot of demand that needs to be addressed, but there's also several rockets all coming online or scheduled to come online around the same time. Do you think there's room for them all? Are there different niches? Is it like a winner-take-most scenario? How do you think about that? **Peter Beck:** I have the privilege or sin, depending on which way you want to look at it, of seeing this play out exactly once before. When we started small launch, it looked exactly like this. You had a sea of all kinds of folks—some further advanced, some behind, some with way more capital. The good thing about this game is that ultimately it doesn't really matter how many videos and presentations of stariness you have, or in fact how much capital you have. It's the ultimate leveler—physics doesn't care about any of that, engineering doesn't care about any of that. I think the biggest mistake a lot of companies make is they try and build a rocket and not build a business. Everybody has their own little niche, and as I cast my eye out across the competition and the emerging developments of medium launch, it looks very much like déjà vu. In some cases, it's the same players. I think this will shape up exactly like small launch, and a lot of competitors haven't really learned the lesson of building a company and not just building a rocket. You might get one to the pad, and then you're kind of one-and-done. But as we've always talked about, the hard thing here is not the first one or two or five or even 10 launches—it's how do you build a sustainable production system and a reliable vehicle that customers want to fly on? I think it'll shake down like it always does, and it'll end up in relatively small digit numbers of folks. **Dave:** Would you say one of the best differentiators for Neutron would be the production system and reliability, or are there other factors you think it has going for it? **Peter Beck:** There's a whole bunch. We've had the advantage of operating a vehicle and flying it at volume and achieving a cadence, and that fundamentally feeds into the design of the vehicle as well. There are so many lessons learned on Electron that we've rolled into Neutron—so many things on Electron that would just really suck, where we'd say, "Man, if we ever had a chance to do that again, we'd never do that." And we have a chance to do that again. The architecture of Neutron we think is really unique. Having that second stage kind of out of the load path, tucked away inside the fairing there, just makes that such an inexpensive, high-performance upper stage that we think is really important. Then there are the operational things—not throwing away fairings, and the geometry of the vehicle to reduce heating. Heating is your enemy with respect to reuse. There are just a million things that have gone in there, but it also rolls up in the back of all the production systems that we have in place and all of the launch learnings and infrastructure. If you're developing a new vehicle and you don't have that experience, I think that's a real tough learning on a big rocket. ### Small Launch Competition **Dave:** Turning to small launch, I'm kind of curious—it looks like a lot of rockets that are trying to be up-and-coming are looking more at like a one-ton payload kind of range. Would you consider that to be a direct competitor to Electron, or is that almost like a different market segment? **Peter Beck:** We spent a lot of time trying to figure out what the ideal payload lift was going to be with Electron and Neutron. With one ton, it's kind of a no-man's land. If you look at Electron, it has been incredibly successful. If you look at the payloads that we're lifting, they're all sort of in that 200 kg class. The whole reason someone comes to a dedicated rocket is because they want a dedicated rocket. So putting a 200 kg payload on a one-ton lift class, I just don't see how you can be economic to be able to compete with a smaller 300 kg lift class. Then the argument you can make is, "Well, okay, maybe it's a bit of a rideshare vehicle." But it's a terrible rideshare vehicle because now you're competing with a Falcon 9, and there's just no way you can compete with that. So we really think that's sort of in a bit of a no-man's land—it's too small to be a useful rideshare vehicle and too big to be a dedicated vehicle. It's not really in a class of its own; it's kind of out in the wilderness a bit, in our opinion. ### Solero and the Solar Panel Market **Dave:** In terms of Space Systems, I'm curious about the solar market. When I think of Solero, I think of very high-end, bespoke hardware, but then I look at some of these mega-constellations coming online, and they seem to be going for cheap stuff because it's not lasting as long in orbit. Are you interested in going after that kind of constellation market, or is that sort of different from what Solero would shoot for? **Peter Beck:** A lot of the mega-constellations run silicon cells—they're cheap and cheerful. There is a point at which that breaks because you have a power requirement, and they're so much less efficient, especially at end of life, that you end up with these really big wings or solar panels hanging out the side of your spacecraft. Of course, they create a lot of drag. To counter that drag, you need electric propulsion to keep in orbit, and electric propulsion requires electrical power. So you end up at some point in a spiral of doom where you just keep having to put bigger and bigger panels to counteract the drag. There is a point that it breaks, but the kind of solar that we do at Solero is significantly more expensive just by the nature of the raw materials. But outside of mega-constellations, just about every spacecraft uses the more space-hardened solar cells for a variety of reasons—not just having small wings, but orbital lifetime and the radiation tolerance of those cells. If you have a mega-constellation that you expect to survive on orbit for a few years and you're not too worried about the degradation of silicon, then it's always going to win. But almost everything else in the space industry will require the more traditional cells. ### Space Debris Concerns **Dave:** I just saw in the news recently there was a breaking up of a Chinese rocket, and I think there was an event recently with a Russian satellite breaking up as well. How concerned are you about space debris, and do you think there's a market there in the future for Rocket Lab? **Peter Beck:** Space debris is something we're always keen to talk about. We genuinely—as an entrepreneur, I'm not advocating for regulation, but this is an instance where I certainly do. I think it is something we're all going to have to tackle and challenge. There are going to be events like the one you just saw with the Chinese. There'll be accidents in orbit, and really, a global traffic management system is required. We're certainly a supporter of that. With respect to a business, you did see some stuff from Astroscale, as you point out, but I think it's a challenging business model to go up and pull stuff down. ### Neutron Launch Plans for Own Satellites **Dave:** On the Neutron front, once you eventually do start launching your own satellites, do you have any idea of what kind of breakdown there would be between launching your own stuff versus customers, or how that would ramp up? **Peter Beck:** It's too early to say. I've always said that 50% of the reason why we're building Neutron is to launch other people's stuff, and 50% is to launch our own. If you look at our friends over at SpaceX, I think somewhere between 80% and 90% of all their launches is for themselves. It really depends on the application and how many satellites are required, but either way, there still has to be an alternative to essentially one provider in the medium launch capacity for everybody else. ### Economics of Rocket Lab's Own Constellation **Matt:** For the Rocket Lab-owned constellation, can you guys give a little bit more color on the payback period or expected revenue you guys would receive from those launches? I'm just trying to think—obviously we're going to try to go to the market at $50-60 million for Neutron, maybe more, but at a cost of maybe $20-30 million once we're up and running, assuming a 50% margin or some gap margin. My thought process is, you guys have obviously given thought as to how profitable that constellation would be. How much and how long would it take to pay back? What kind of returns are you expecting? **Adam Spice:** That's a good question. There are different economics that start to come into play when you think about launching your own stuff. If you look at how a constellation operator addresses the cost of launch, they typically capitalize that with the cost of the satellite and amortize that over time or depreciate that over time. The same thing would apply for us as well. I think the satellite economics are going to have to stand on their own. The value that we would bring to the table is we'd have unfettered access to launch, and of course, if we chose to subsidize that for our own interests, we could certainly do that. But at the end of the day, we're going to optimize for the overall business. If somebody is willing to give us better margin to launch their stuff than to launch our own stuff, in the grand scheme of things with all the streams of income, we're going to value-optimize for what's best for the shareholder. Right now, we really can't tell you what that's going to be. We can look at the example right now with SpaceX. As Pete mentioned, they launch a tremendous amount of their own stuff, and that comes with a whole bunch of advantages. One of the challenges with operating a rocket company or a space company is the fact that there are very high fixed costs, and fixed cost absorption is a huge driver of profitability and your margin profiles. So even if you're not recognizing revenue from an internal launch, you're getting the benefit of that cadence that applies to the launches that you are charging for. Then you get the benefit also of having less capitalized cost that gets taken to the program over time against margin. Lots of goodness happens when you tie launch and constellation ownership together, and we've seen that in the way that SpaceX has rolled out their business. ### Human Spaceflight Potential **Matt:** Going back to the September 2022 investor day, there was not a capsule announcement, but a "we're looking into it." I want to ask: is there an opportunity for Neutron to be involved in the Artemis missions in the future? What is the conclusion of that "we're looking into it" part? Could the second stage of Neutron be used for astronaut transport? **Peter Beck:** The reason why we had that there was we're always asked, "Are you going to do human spaceflight?" and all the rest of it. Neutron is able to be certified for human spaceflight, and the reason why that's important is because you design the vehicle from day one differently—safety factors in tank pressure margins and stuff like that, which are very difficult to go back and change the safety factor of a tank. So we've designed it to be human-ratable, and we're certainly not ruling that out. But as of right now, our view is that there is not really a market—there's one destination, there's kind of one and a half suppliers already for that one destination, so there's just no business case to do it. Now, in the future, there could be other destinations and other customers, so we're kind of spring-loaded to be able to do it. But for right now, it just doesn't make sense. We wanted to make sure that people understood that we're thinking about it. ### LOXCAP and Future Missions **Matt:** The LOXCAP mission—that's potentially a technology where you're going to be able to potentially refuel in-orbit in the future. Is that going to be potentially used for the future Artemis missions, or what is NASA really thinking about that for? Do you see potential for you guys internally to potentially think about using that technology going into the future? **Peter Beck:** Our role in that mission is primarily one of launch and also kind of hosting. What NASA is trying to do there is understand long-term storage of cryogenic fluids in orbit, mainly for the Gateway program. If you're hanging out in a kind of pseudo-lunar orbit, stationing yourself there to go to Mars, you need to be able to hold these cryogenic propellants there for a long period of time. So eSpace has got a method of holding these cryogenic propellants for a long period of time, and we're providing the spacecraft and the launch and all of that to validate it. In a lot of respects, it's got a similar sort of flavor to it as the CAPSTONE mission, where they have a capsule, but we kind of do everything else. ### HASTE Missions **Matt:** We have several HASTE missions between now and the first quarter for multiple different clients. Do you see this being the next unlocker for the larger backlog for Electron and HASTE? I feel like we've had the one launch in June of '23, it's kind of gone silent, but we have multiple things incoming—three to four different clients that we're going to be looking at. I feel like that's going to be the next tranche of backlog that we're going to be adding for Electron and HASTE. **Peter Beck:** The HASTE missions are interesting because if you think about that market or capability, it's been completely stifled with extremely high-cost launch, really infrequent test opportunities, and wind tunnels that you book yourself years in advance to get into. So we turn up with a rocket that's just ready to go, and there's a whole bunch of programs and payloads. I would say that whole community is in a state of, "How do we take use of this opportunity as quickly as we can?" It's changing the perspective from "It takes me a year to test this thing" to "We can test this thing next week." That's a different paradigm for all those organizations and government departments to shift to. It's been a real enabler for that community. I think you'll see a lot more happening there in the near future. I think we've disclosed we have something like seven HASTE launches on backlog already. There's a bunch of them coming down the production line, and as you mentioned, it's not just one defense customer—it's multiple agencies that are taking advantage of these flight opportunities. **Matt:** What do you think the capacity could be for HASTE specifically? Is it going to be competing for Electron slots, or is it kind of independent of that? And could it be operated from other places around the world at different US bases, etc.? **Peter Beck:** It won't just be out of Wallops—it'll be out of other sites as well. We don't necessarily have a capacity problem—we'll just keep flexing the production line to keep building more. When we put the Electron production line in place, we put it in place to support a pretty high cadence. It's not like we have to buy any machines or infrastructure; it's just a few more people to flex production. I would never worry about that in that sense. From a capacity of the vehicle, it's basically unlimited because we're only using a small amount of the lift capability. When you take off the second stage or take away the requirement to go to orbit, Electron can loft anything that they can throw at us. ### Recently Announced Launches **Scott:** On the Q2 presentation, there were five launches that were previously unannounced—one being the HASTE launch and the other four being the confidential constellation customer. What's the expected time frame for these five launches? **Peter Beck:** Each of them are different. Typically, the HASTE launches have a pretty long lead on them because there's a lot of stuff that goes into one of those launches. As I mentioned, the typical customer is used to operating at a different cadence than we are. Then the four commercial launches, like any multi-launch deal, they spread over a period of time, depending on their deployment of constellation or when their business needs them to come online, which is generally the case. Even with that big deal, that's spread over a couple of years as they deploy the constellation. ### Space Systems Backlog **Scott:** It was mentioned that the Space Systems backlog as of June 30th is $773 million. How much of this backlog is related to merchant components, and what is the approximate revenue rate in Q2 for the merchant components? **Adam Spice:** Of that backlog, I would say about $150 million is on the subsystems and component side of the house. That's also running about $150 million a year, roughly. That business has been growing about 20% a year on a pretty consistent basis. We started that business organically where we developed our first Photon, but then very quickly we acquired Sinclair Interplanetary to get the reaction wheels and the star trackers and the sun sensors, and then quickly followed that up with ASI to get command and control software, and then the PSC separation systems business, and then with Solero. Those have all done really quite well under our ownership, grown pretty much on expectations that we counted on when we did the valuations and closed those deals. We're very happy with the merchant component part of the business. It's pretty predictable, higher margin, kind of stable part of the business. ### Component Manufacturing Capacity **Scott:** Following quarterly earnings, it was mentioned that Rocket Lab has one customer receiving north of 2,000 reaction wheels this year. Satellites generally require three to four reaction wheels each, so this shows that Rocket Lab has a capacity to provide reaction wheels for roughly 500 craft per year. If we were to look at the other satellite components that Rocket Lab provides, are they on par with how many craft per year can be provided for? Within the current manufacturing footprint, how many satellites are you capable of providing for and ultimately producing? **Peter Beck:** As you point out from a reaction wheel standpoint, we're golden for that particular class or size of reaction wheel. In other areas, we already have really high volume. Like solar—we produce many kilowatts of solar a year. Then there are other components like radios that are lower volume; we might do 20 or 30 of those a year. There are differing volumes, but I think the key takeaway here is that one of the things that always frustrated me with the space industry is that the majority of components are supplied by mom-and-pop shops, all at subscale. Frankly, that's why we started to buy a bunch of component businesses—because whenever we started to build something, the lead times were too long, and the cost was too expensive. As Adam just pointed out, we're very happy with the businesses that we bought. We bought them and didn't just sit on them—we scaled them. Really, what we're trying to do is position ourselves for our own stuff at scale. If we want to do something for ourselves at scale, then it's not a big lift. ### CHIPS Act Funding **Scott:** It was recently announced that Rocket Lab will receive $24 million from the CHIPS Act, then another $25 million from the state of New Mexico. How can we expect these grants to be recognized? Would it be similar to being recognized against R&D, for example? **Adam Spice:** It's a mix of things. It's a combination of loans, so you have low-interest loans, you've got grants, and you have tax credits. In some cases, we actually collect or get value for the cash even though we're in a net operating loss kind of situation right now with a deferred tax asset on the books. We get some real-time cash benefit from those tax credits and awards. It's really across the board. What we're doing there is enabling the cost to build out a new reactor fleet and all the facility stuff around that. So really, what it does is it offsets the capex to a great extent. From a P&L perspective, we're still going to have to take the—even though we got the capital in some cases for quote-unquote "free"—we still don't escape the accounting implications of having to depreciate those assets through the P&L. But that's a good problem to have. ### Neutron Development Costs **Scott:** Earlier this year, it was mentioned that we can expect Neutron spend of roughly $300 million throughout the rest of this year to get us to Neutron's first flight. Since then, Neutron has been pushed out about six months, give or take. Are we still looking at that same $300 million ballpark to get us to Neutron's first launch, and following Q2, how much of an investment is remaining to get us to that first launch? **Adam Spice:** The one thing that's been pretty remarkable about this program since we announced it back in 2021 is the fact that the budget really hasn't moved, and the timescale has moved out a bit. We had the six-month push that we experienced a few quarters ago. We're still very much in that $300 million range. We were kind of trending to be about $25 million under budget before the slip, and the result of the slip cost us about $20 million because we're carrying about two quarters of just the pure R&D headcount without any revenue cover. So the explicit cost of the delay was about $20 million, but we're still within that $300 million overall program goal. To date, there's been about—it gets a little bit muddy because we've had co-investment from other parties. We had obviously a $24 million co-investment in helping develop the upper stage as part of the SPEC OTAA program with the DoD, and we've also gotten some very helpful assistance from Virginia Space in building out the infrastructure at Wallops. If you take across what's been spent on Neutron to date, including by third parties, we're probably looking at a little over maybe $210 million of spend to date. So going forward, I don't think we're going to spend the full $300 million to get to first launch. I think we're going to be a little under that. As we go past the first test launch and into production, that's when we'll kind of hit that bogey of $300 million. Longer term, of course, we're going to have to continue to invest in the business to expand capacity and add more features and capabilities, not only to the rocket but also for the infrastructure. But long story short, we're in great shape, we're on target, and costs look very good at this point. **Scott:** As a follow-up to Neutron's first launch, what can we expect in terms of capex and R&D for Neutron going forward? Would it still be split roughly 50/50 between capex and R&D, similar to what we see currently? **Adam Spice:** No, I think you're going to see a trailing off of R&D spend. There'll still be some R&D spend, for sure, but it'll step down significantly once we get past that first launch and heading into the first paid launch. But capex is going to be probably more like 75% of the spend after we get past first launch, infrastructure-wise, and the other will be R&D. **Peter Beck:** That sounds about right to me. It'll look fairly similar to Electron, with the caveat of course that it's a new vehicle. We haven't had to spend a lot of money on Electron R&D since we got that vehicle to market. Certainly, we put some into reusability—that's been an area that consumed incremental R&D dollars. We've just released some new battery capabilities on the vehicle. I think between batteries and reusability, those are really the only two areas that required some kind of post-initial launch R&D commitment. The rest has really been about facilities—adding another launchpad at LC-1, adding the launch facility at Wallops. But for the most part, we kind of went on a bit of an R&D holiday post introducing that product to the market. ### Electron Battery Upgrade and Recovery Plans **Scott:** During the broadcast of the 51st Electron launch, it was mentioned that there was this new generation battery system on the second stage that allows for an increased payload capacity on Electron. With this upgrade in mind, what is the updated maximum payload capacity for the standard Electron, and similarly, what's the maximum payload capacity for a recovery Electron? Is there still a recovery plan for Electron this year? **Peter Beck:** The new battery was really a much more refined solution. During the anomaly, we basically encased all high-voltage electronics in a pressure vessel so that it was impossible for that to ever occur, and that added mass to the upper stage. So we went back and redesigned that in a much more elegant way. These new batteries had been in a development program ticking off to the side anyway. As far as a payload percentage increase, it's not like 10%—it's single-digit percentages. But I'd say it's also early days because this is a new battery, so we're certainly not stressing it in any sense. The biggest advantage with the change in the battery was actually not on the second stage; it was on the first stage. The first stage batteries, typically at the end of a used first stage burn, were not able to be reused. We basically turned those batteries inside out on the first stage. But with this new battery, we don't do that anymore. Part of the reason for the battery change was to enable us to reuse the first stage and just charge them back up and fly again. That goes back to your question about reusability. There is a vehicle core sitting in the production line right now that's been reused and is just working its way through. But one of the things we decided to do this year is put that to the back of the importance queue for two reasons. First, anytime you introduce change down on the production floor, it really messes with production. The team are just trying to double production so far in this half of this year, and anybody who does any production knows that if you tell them to double that, that is a meaningful thing to do. So we just didn't want to introduce another product and inconvenience down on the line. Cadence has a much bigger effect on margin than reusability, so it's much more important that we had cadence, particularly over reusability. Also, the reusability team is far better deployed right now working on Neutron. If you look at bang for the buck for the company, having those folks working on Neutron recovery and reusability is just far more important. So it's just a series of priority decisions really. But in time, that vehicle will go through, whether it's this year or next year, I think it's hard to say. But it's certainly not the highest priority for the business on Electron. ### Conclusion **Vince:** Thank you so much for speaking directly to retail investors. It's actually very few companies that do that, so we really appreciate you guys. We collectively think that you did a very good job on the last presentation. It was really going over things we feel are misunderstood about Rocket Lab. Congratulations on this quarter, and we're really looking forward to hearing great news from the company and the first Neutron launch. **Peter Beck:** We really appreciate the support. I've noticed that my camera has me looking like I'm ascending to heaven or some Divine spirit, so I apologize, and I will replace my camera for the next one. **Adam Spice:** I don't understand the white balance, but it only happens on days when the stock is up 133%. Then you look divine. **Dave:** Thank you so much guys for watching. I hope you did find it informative and interesting. If so, please do consider hitting that subscribe button as I said previously. I'm also interested to hear your comments on this one—which question and answer did you think was the most interesting? What did you learn the most about the company? I'll check out your responses down in the comments below. I hope you guys have a great day, a great rest of the week, and I'll see you in the next one. Bye for now.