[[Home|🏠]] <span style="color: LightSlateGray">></span> [[Interviews]] <span style="color: LightSlateGray">></span> April 19 2023 **Insider**: [[Peter Beck]] **Source**: [Main Engine Cut Off Podcast](https://www.youtube.com/watch?v=wmmNuU8-Tr8) **Date**: April 19 2023  🔗 Backup Link: https://www.youtube.com/watch?v=wmmNuU8-Tr8 ## 🎙️ Transcript >[!hint] Transcript may contain errors or inaccuracies. **Moderator:** Hello everybody, welcome back to the last episode of Managing Cutoff. I'm doing live here at Space Museum. We got Off Nominal coming up next. I'm in the middle of a four-hour rock block, so I appreciate all of you hanging out. We've got an interesting mix of people here. I'm excited to talk about a whole range of topics, really honestly whatever we get interested in talking about. We got a good cross-section - I brought a ringer, Caleb Henry here, so that will be fun. Peter Beck of course of Rocket Lab fame, Jonathan Baliff, CFO of Redwire, very interesting background from the biggest helicopter company and all sorts of other interesting things. What I'm interested in talking about is really the general kind of business and strategy, the shape of that right now in the industry, because it's been pretty chaotic for a couple years. There was a lot of doom and gloom of late about whether it's raising money or closing down customers and figuring out everyone's kind of specializing into a different niche. Certainly a lot of news this week of Rocket Lab finding new niches to market to. ### Current State of the Space Industry **Moderator:** Overall, I'll start with Caleb because you've got such a good insight on the industry from your position at Quilty. What are the really big challenges right now? We're post-COVID a couple years, there's been a lot of churn in the industry between companies going out of business or startups that aren't quite raising as much money as they hoped, or SPACs going a little more redemption rate than they were hoping. So where are we at right now overall with that kind of stuff in the market? **Caleb Henry:** I will try to be succinct. I don't know if it's possible to cover the entire space industry - "How is space today?" I would say, and maybe this is a little bit of doom and gloom, but I feel like the space industry has had people fearing a reckoning for some time. You look back at the beginning of the mega constellations - you had people saying this is Iridium all over again, investors are not going to trust the sector because it's going to fail and implode, and then they'll run away. That didn't happen, and even though one went into Chapter 11, it was masked by COVID which hit the world and the industry, so there was no reckoning. Then there was the issue of no exits for startups. There were all these startups that raised all this money, no exits. You just had like Google and Skybox in like 2016 or something, so there were very few examples to look at. Then you had this SPAC boom, something that happened outside of the industry but affected it, and all of a sudden you had a vehicle that allowed several investors to have their exit. Concurrent with that, you had this interesting phenomena of companies that were rolling up small to medium-sized enterprises like Redwire, and they also contributed to this consolidation. You had Redwire, you had Voyager, you had Blue Halo all doing this, and that took a lot of the industry's woes and fears and actually kind of wiped them away. So I would say that the industry has actually dodged two bullets in the past five years, and now we're in a third challenge, which is: what happens to all of these newly founded or newly public companies? We saw the first collapse with Virgin very recently, and there are other companies that are in difficult financial positions. I'm watching them intensely to see how they diversify, how they execute, how they make sure that space is a business and not a tech hobby. I think in this industry we've got so many smart people that there's often a risk of getting wrapped around the tech and trying to make a business plan later. It really should be inverted, and those that fail to do that well are going to find themselves in trouble. ### Rocket Lab's Evolution and Strategy **Moderator:** We certainly have someone right next to you here in Peter Beck that - Rocket Lab's a launch company, but you've taken the rocket logo as you've gotten more into the space services side. We now see you're public, so we see financials all the time and see how much that side of the business is generating in terms of revenue. At the beginning we talked, when you were doing this series of acquisitions, about the strategy behind it of acquiring the things that were essential to your business but also finding a big customer base for that stuff. In terms of focus from Rocket Lab, when you go out and you talk to people that don't know about Rocket Lab, what emphasis do you put on each side of that business? Is it a different story than you were telling five years ago, or do you still fundamentally say "We're a launch company, we have all these other things that we do as well"? **Peter Beck:** I think it's clear that we're bad at naming stuff because I should have never called Rocket Lab "Rocket Lab." That was too short-sighted. But the reality is that the very second Electron we flew had recesses in the kick stage for solar panels to turn it into a satellite, so it was kind of always the plan to do that. Our view is that the very large space companies of the future - space companies that have applications, they actually do things on orbit that generate value - they build their own satellites and they launch it. When you have all of those things put together, it's a very powerful combination. As everybody is witnessing with Starlink - clear industry leader in that broadband rollout - that's because you have access to space, you have the ability to build whatever spacecraft you need, and you can really conquer that application. Everybody thinks that this is the rocket company, but literally, as you allude to, two-thirds of our revenue comes from our Space Systems business. We've got 25 satellites in backlog, ranging from stuff going to Mars through to the GlobalStar constellation. But launch is always going to be a really key thing, and it is the discriminator and the enabler of a space company. ### Redwire's Business Model **Moderator:** You mentioned how there was this trend of building these companies that were wrapping up a bunch of other companies, and that's what Redwire became. It's easy for all of us to kind of latch on to what Peter's doing because it's rockets, so we all like watching rockets fly into the sky. It's harder to really understand some of the more niche component supplier sort of stuff that Redwire's been involved in lately. In terms of strategy about the collection of companies that make up Redwire in this current form, what was the strategy about the group and the mix there? And how does it work together today? Has it changed since acquiring all of them and becoming more of a unified whole, or is it still segments of a business? **Jonathan Baliff:** It's a good question. Coming from more an aerospace background where we've seen this already in the carnage of the post 1992-93, where you saw two things happen at the same time - you saw a post-Gulf War drawdown in the American defense budgets at the same time oil went crazy in the commercial airline industry. It never happened like that before, and you saw a number of really strong companies come out of that. One is called TransDigm. I think people know TransDigm. The nature of TransDigm, especially for a Space Systems business, is to in essence bring these third and second tier providers together operationally, and that's Redwire's differentiation. Redwire is not a holding company, we're an operationally focused company, which means we're focused on revenue growth to meet customer demands, but we are very focused on creating a path to profitability. That's the financial element of it. But really the guts of it is to either create a revenue synergy for these small companies to be able to bid on larger projects, which is key because in essence we provide to the primes and then they do generally their job. We're not prime on all that much. So Redwire is a roll-up in the TransDigm strategy of being able to get larger projects, higher margins, but here's the key - serve that customer in a better way than a small company that doesn't have access to capital. I think the second thing is there has to be a path to profitability. I don't care if it's Amazon back in the '90s - I'm older than many people here - but back in the '90s there was a path to profitability for Amazon. Now they decided to go for the beachfront property and spend a lot of investment. So really where the industry is right now is how do we balance the investments that we have to make to satisfy this demand? I don't know if everybody's around here, this place is evening - I've been, this is my third one, and it's unbelievable. This is not happening by accident. There is demand for Rocket Lab, Redwire services. The question is: how do we meet that demand in a way that satisfies the investors? For us, a business strategy was very simple - operationally focused to meet customer demands in Space Systems. Then our differentiator - and that's another thing that Peter mentioned I really liked - all of us have to differentiate for the investors. If we're all doing the same thing, we're going to get commoditized. Redwire is differentiated in that we're building the office park of the future and enabling those missions for habitation satellites. But the second thing is we're going to also create the payloads for habitat, for pharmaceuticals, for 3D printing in space. So we'll fill the office park too. That's our differentiator - to have both of those. Then the third thing for us is we always knew we wanted to have a global business. So Redwire, as it was being founded, brought our Luxembourg entity in, and now we have just really expanded our European presence with Space NV. So number one: operationally focused. You can't just put a holding company together and think it's going to succeed in aerospace or space. Second, you have a path to profitability to meet customer demand. Third is this differentiation, this diversification of Space Systems - for us, payload space industry, industrial work, and then finally a European arm that really can provide those carriers what we need. That's our differentiation at Redwire. ### Rocket Lab's Hypersonic Initiative **Moderator:** On the Rocket Lab side, you've had all these announcements this week of new suborbital hypersonic-focused mission, which is quite interesting. Caleb and I were at the launch at Wallops in January/February - I convinced him to road trip with me, so we got to experience that. So there's more of that in our backyard in the future. When you are looking at the market like that, I guess to tap into - where did you get the idea? Obviously it's an interesting market to tackle, and it's very close to what you're providing already. You're putting a payload in a particular time and space, and it just is - is it orbital or not is a different question. So what's the motivation behind it and the strategy about the offering that you built out around it? **Peter Beck:** I love markets where you almost need to do no work to be a player, and they're the best markets to go into. It occurred to both us and our government customer that, you know, every sort of 20 days we're flying hypersonically. Obviously, in the US there's been a massive deficit of those flight opportunities. With Electron, you have all the depressed trajectories, any of the smart stuff you need, you have at your fingertips. So it requires almost no modification to the vehicle, but it creates a really important solution and actually taps into a reasonably sized market. I mean, there's whole startup companies purely focused on just providing hypersonic test flight opportunities, and we just do it every 20 days. So we thought, well, that's an easy product. **Moderator:** Certainly if you can keep fishing these first stages out of the ocean and just slapping a new one on top, that matters. ### Defense Market Opportunities **Caleb Henry:** I'm actually surprised that more companies haven't gotten into hypersonics, more space companies. It's so close, the applicability is right there. I thought that more defense companies would have gotten in because they're building these missiles, and historically, missile providers made the jump to being launch services providers. I think the defense sector is often being looked at as a dependable anchor customer. I'm curious how you two approach that market. Peter, I think you've got a lot of commercial customers on the launch side, but what's your value proposition to DOD? And then for Redwire, you focused a lot on civil space and now you've expanded into Europe, and your annual report highlights ESA's growing budget. Where do you see defense applications for Redwire? **Peter Beck:** Our manifest is 50/50 - 50% commercial, 50% government. We're one of three suppliers of launch to the NRO, so there's SpaceX, ULA, and us for NRO launch. So it's a real core part of our business. If we look at our customers, a lot of our customers that fly on Electron are also servicing the US government in defense in one way or the other. Then on the space system side, obviously we have probably a lot more commercial with respect to constellation builds with the GlobalStar contract and Varda and all the rest of it, but we still also have some government stuff with the Mars missions. Across our portfolio of systems, we do a lot in the defense sector and a lot in the government. We kind of like the 50/50 model. I think it's good. We kind of joke that our government customers always pay their bills on time but never turn up on time, and commercial customers always turn up on time but never pay their bills on time. So it all evens itself out. **Jonathan Baliff:** For Redwire, we actually don't talk that much about our national security customer base. It is last year the fastest growing customer base. It is a very - let's just call it warfighter domain that has a number of very high bars to entry. If I look at what Redwire does and how we built it, we built it for the civil, commercial, and obviously that national security warfighter. For obvious reasons, we don't talk about the warfighter domain all that much, but if you look at our financials, it is the fastest growing piece of our business. When you look at our enabling these space missions with power, with anything associated with communications, any deployable sensors - all of that is warfighting domain. The key to that high barrier to entry in the U.S. is you have to have the facilities, the people, the systems in place to work for that very high national security standard. This is a very high growth area for us given the competition that we have with China, but also the same type of sensors - the thing I always want to mention with national security, having been an Air Force aviator and somebody who worked a lot in electronic warfare - a lot of the same things you do for that national security customer, sensors, can be used for climate change. The same thing that you can do for communications, you can also then bring over to the civilian and commercial side. We separate our business from a customer standpoint to civil and commercial, and then obviously national security, but that warfighting customer is a big part of the Redwire differentiation because many companies that have a European arm actually don't have the security infrastructure to serve that warfighter, and we do. ### Capital Allocation Strategies **Moderator:** In terms of investing in new projects, you know, both public companies now, so I'm curious to hear if things have changed in that era, especially on the Rocket Lab side. You've got Neutron that you're developing quite a bit, there's the Venus ambitions as well, and everything else that's going on on the satellite bus side that you mentioned with ESCAPADE as a Photon bus and all that. In terms of putting money towards these big projects, is it different now being public and deciding that that's an initiative that you want to take on and figuring out how to go about that? **Peter Beck:** Not really for us. I mean, if you look at our history, we've always been extremely disciplined on capital allocation. If you look at the amount of capital it took us to get Electron to the pad, it was $100-something million to get Electron to the pad and the pad built. So we've always been very careful custodians of capital, and we get a lot done on the dollar. That ethos hasn't really changed as a public company. It's the same. We always had really strong financial discipline, and the projects that we choose to invest in are ones that we're confident are going to drive real growth in the future. The biggest thing we're investing in is Neutron. That is, you know, if we took Neutron out of the equation, then Rocket Lab is a profitable company. You put it back in, and rockets just suck down cash. But the flip side to that is that we believe that the opportunity and the growth that's going to come from that Neutron vehicle is well worth it. In these times, the companies that are going to be successful and survive are going to be the companies that are very disciplined with their capital. We've come from a market in a time where - I'm old too, so I can remember stomping Silicon Valley trying to raise five million dollars, and five million dollars was an extraordinary amount of money to put into a rocket company. That was crazy. We ended up in a time that was just completely dislocated. We saw funding rounds in the billions or hundreds of millions, completely dislocated from reality. As a result, there's not really good financial discipline across a lot of the sector, I would say, with lots of opportunities to do cool stuff, but just a huge amount of money spent for pretty average return on development milestones and things. We're in a different time now, and I don't mind it because we've always been really disciplined with our capital. But for those who have not been disciplined with their capital, this is the time that we sort out the real companies from the not-so-real companies, and I think that's needed within the industry. ### Neutron and Vehicle Sizing Strategy **Moderator:** Competitors in the range are all growing their sizes of their vehicles as well to different points. I think what I'm going to pick your brain about is - I've started to feel like Neutron is a little small, and I'm curious how you're feeling about it these days, size-wise. **Peter Beck:** This is a comment that I've had ever since we started Electron, and I'll say: it's not the size of your rocket that counts. There is much more to it than that. When we first started with Electron, people said the same thing, but guess what? It actually fills the market niche, we would argue, perfectly. We think Neutron is a really interesting market size for the kinds of projects that we think we want to go after and the kinds of projects that we think are going to be profitable and valuable. Now, in saying that, it's an eight-meter diameter vehicle, there's plenty of room for growth. I mentioned this the other day that, knowing your history, even Electron had payload growth over its lifetime. So compared to the other competitors out there, I trust that you are able to grow the payload range of your vehicles more than the others have been able to hit the actual promise payload range of their vehicles that are out there. **Moderator:** It is interesting. Then also the other aspect is like, Neutron is probably not the last vehicle you're ever going to build if everything goes well. **Peter Beck:** I'm not going to promise anything like that - eat another hat? But in the spirit of being capital efficient, what I think a lot of people don't realize is the actual rocket, the building, the developing of the rocket is the cheapest bit. If you look at the cost of a rocket program, it's almost to the cubed the cost of the money that you have to expend on infrastructure. If you're gonna spend 500 million dollars developing a rocket, you've got to spend like billions by the time you build your VAB, your pad, your integration facility, your factory, and all of those sorts of things. This is what I think a lot of people don't realize: the cost of a rocket development program is by far the cheapest piece, and it's the easiest piece. I think of Electron - the first rocket I thought was going to be the hardest. Well, it turns out rocket number 20 was the hardest because by the time you're at rocket 20, you've got a complete factory, you're relying completely on ERP systems, MRP systems, and a technician with a set of work instructions, and it's got to work every time. So the expenditure in building a rocket program is not the rocket, it's all the other stuff that goes around it. ### Constellations and Market Outlook **Moderator:** On the payload side though, and the constellations, that's something that you called out early on as being a market for Neutron. How many constellations of thousands are there going to be? Because I kind of feel like at some point we're going to run out of companies having either the money or real estate to deploy thousands of satellites. What are the constellation sizes that Neutron is going to be well-targeted for in your mind? **Caleb Henry:** Right now we're tracking about eight different mega constellations, and for that threshold I'm saying anything that's over about a hundred, so not thousands and thousands. I don't do math in public so I'm not going to try and figure it out, but there's eight. Let's say the number keeps growing because of geopolitical interests. There was a time when the question at conferences like this was "How many mega constellations are going to make it?" and everybody would say, "Oh, the market can support two, maybe three." But it doesn't actually matter. The military, the Space Development Agency decided that they want one. Both of these companies are involved in that constellation. SpaceX has theirs, Bezos decided he wants one, Russia has talked about one - I don't know if that'll ever actually happen, it's kind of like Angara, it comes up every few years. But you're gonna see lots of different systems that are going to come up. I think the interesting thing for both of these companies is that the evolution of spacecraft is something that has changed very rapidly over the past few years to the point where launch vehicles have to keep evolving. If you look back at when GEO was king, companies like Ariane, Proton, even early Falcon, they all increased the size of their vehicle. This is not unique to small vehicles, and it's because they were trying to chase increasingly bigger geostationary satellites. Now we've seen the same thing with small spacecraft. Who knows where the future trend is going to be, because you've got digitization of payloads that has taken out a lot of the hardware, it's made the GEO smaller again. I'm wondering if it'll make the LEOs smaller again at one point. It's really curious to watch these details. For Peter, you're building the satellites for GlobalStar with MDA. Those are about 500 kilograms each, which surprised me because that's too big to fit on Electron. Maybe you have Neutron in mind already, but what's the thought process for you not only in determining the size of a rocket but how you go after spacecraft classes? Are you going to keep going up - cubesat, GEO? And for Redwire, you don't build full satellites but you build all the inside parts, if I have it right. **Jonathan Baliff:** The truth is, we are the picks and shovels. We are the enabler of all these satellites and provide the critical components. However, with our Space NV acquisition, we have the ProBus, so we actually now got into it. But I would say it's not necessarily a mainline business yet, but we are seeing demand for that, especially given that we actually have a ton of infrastructure that can make that better. It's a synergy, but I don't want to overprime. I mean, this industry is built on over-promising and under-delivering. I'd like it to be built on over-promising and over-delivering. But I think a more relevant question for us from our standpoint - we believe really what Electron and Neutron can do is just get more of the low Earth orbit economy, whether it be the national security part of it, the commercialization part of it. People aren't walking around here just looking around taking pictures - they are there's business to be done, and that's what Peter's going to be able to enable. Then Redwire Space Systems and our payloads then take it to the next level. But you don't have to create a satellite to get the business, and that's why I'm impressed by how people are now gravitating towards a business model of Space Systems, which again, that's Redwire's foundation. That's where a lot of the money needs to go to be able to make the space economy work. **Peter Beck:** I think I'd answer your question with: think a little bit bigger. The endpoint for Rocket Lab is not a merchant launch provider, it's not a satellite bus builder. The endpoint for Rocket Lab is something much bigger. As we look at how we grow the company, and if you look at our satellite systems acquisitions like SolAero - longest lead time, really expensive - that bit needs to be solved, so we went and acquired a solar company. And then you have software and all the fundamentals - reaction wheels and star trackers. Then you take it up one level higher - well, if we're going to launch our own stuff one day, obviously we have a thesis on what we think is going to be the ideal size to do that. We might be wrong, we might be right, we'll see. We think the vehicle is in a sweet spot for a lot of the commercial constellations. The trouble is, if you build a really big rocket that can do everything, then it doesn't do the middle class really well at all. So at some point you have to kind of split the hairs and say, "Well, where is the peak in the bell curve?" When we look at the constellations out there and what's going on, we think we've chosen the peak of the bell curve. If you want to think bigger, if you think about what we might want to do in the future, obviously that's driving to some of the decisions around launch vehicle class. But I reserve the right to be wrong at all times, for sure. ### National Security Space Launch Program **Moderator:** On the launch side, there's something interesting happening, which is this next round of the National Security Space Launch program. There's these two lanes now where Electron and Neutron fit really well in the new one that's more task order based, more like something like the ECLIPSE program. I'd love to just hear your view on how that went. I know there were some things that you were hoping to see, that maybe some of the missions from Lane Two would make their way over to Lane One to give you more of an edge for Neutron there. Do you feel like that's settled out in a good spot, or are there still some tweaks that you'd like to see as they make as you close in on that actual contracting round? **Peter Beck:** We're really happy. The solution that's been driven to here is what we thought was the best solution. The nation needs absolute assurance around launch, you need diversity in suppliers, so keeping that Lane Two together and in one piece - you have to do that no matter what. But the opportunity for the nation to use new capabilities and the opportunity for the industrial base to both grow at the same time - it's very symbiotic, but you have to create those opportunities, and that Lane One really does that. Electron is not qualifiable because it's a 10-ton sort of cutoff on that. But we're very happy, and I think Space Force has done a really good job at threading the needle between assuring space access for the country but also stimulating and helping grow the industrial base, but also not lowering the bar so low that PowerPoint companies can get in there and run amok, which we've seen with ECLIPSE to some extent. ### Lunar Surface Opportunities **Moderator:** I am interested to pick your brains on the lunar surface side of things. We talked a lot about launch, a lot about orbit. I'm looking at a picture of these arrays that are up on station, but I saw them in a mock-up on top of an Astrobotic vehicle. You're extending some of the component work that you're doing down to the lunar surface. A lot of companies are looking at putting infrastructure to support Artemis or ECLIPSE or something like that. Solar arrays are an obvious one - are there other areas of that business that you're looking at, taking what you do now in orbit for satellites and looking at surface assets in that way? **Jonathan Baliff:** Absolutely. When you look at a number of things that we're all trying to do in a space system environment, the key is how do you bring that to explore, live, and work in space? For us, obviously one of our primaries is the ROSA, which rolls up or rolls down on the lunar surface, and that's what you saw. You can roll it anyway, but that's particularly important on the moon because you need to protect the actual solar panels, and this allows you to have a more sustainable power source. But also there's antennas, other types of deployables, sensors - for us, cameras. If you really look at what the moon has to do, Bridenstine said it yesterday: the camera is the mission. Because in order for us to create the next - well after I'm gone - people need to record what we're doing there to create that excitement. As Jim said, when he was a young guy, he had the Challenger - that's what people remember. I want to get back to when I was a little kid, when you could see us landing on the moon. The camera piece of this, which is a big part of what Redwire does, not just with our sensors, is another area where we're on the lunar surface. We were on Artemis, as you know - we provide the eyes of Orion, those are our cameras, but we plan on doing that on the lunar surface too as part of a full space system. And then we'll also put payloads because there's a lot of commercial activity that's going to happen on the moon. **Moderator:** That's exactly why I bring it up, because it's a different part of the market. We can argue about whether there are customers for ECLIPSE payloads, is there going to be a business case that closes for spacesuits to walk on the moon, but from a component section, there's a lot of stuff going on on the moon, in orbit of the moon, on the moon. So it's as component suppliers, it's interesting to look at that. I don't know if there's anything from the space system side that you're looking at as a lunar surface asset, or obviously you have planetary ambitions generally, but any lunar stuff? **Peter Beck:** When it comes to surface stuff, not so much on the surface stuff other than perhaps in the solar business. I love nothing more than touring the Albuquerque factory and seeing the Mars solar panels that are specifically designed for the wavelengths on the Martian surface - there's nothing cooler than that. But I think that kind of system economy is going to be interesting to see how it develops. I think there's going to need to be a really robust capital market that's very buoyant on it for a while to kind of get it there, but it'll be interesting to see. **Moderator:** When you say capital market, what do you mean - to fund it or to actually be part of the economy? **Jonathan Baliff:** I think when I look at a capital market for an economy on the moon and the commodities that are there, there's got to be a capital market to be able to, for regolith - I think you could do all kinds of very interesting economic activity on the moon, take it back terrestrially, and create different business models. It doesn't have to all just be about exploration. There's a lot of things that can happen on the moon that frankly could get sold on Earth. Until we're there in a more permanent way, we're not going to know what that is. But there's whole industries in the ocean floor that have become - there's a lot of analogies of what we're doing on the ocean floor now that didn't exist 20-30 years ago that now we can do on the moon. Also has to come down the cost curve, obviously. **Moderator:** How much of that do you dig into? When you're looking at any given company and you see the way we talked about even with the hypersonics, seeing what their current market is and finding that niche that's just slightly outside their bounds - when it comes to stuff out towards the Moon, is this hitting your radar yet in terms of the Quilty Space view of things, or are you still focused more on the closer to Earth kind of stuff? **Caleb Henry:** Still focused mainly on the closer to Earth stuff because that's where money is made mainly, but we are paying more attention to it. Sometimes when I think about the moon, exploration is a driver, there's been talk for eons of tourism as a driver - it hasn't really materialized intensely yet, it's starting. I kind of think of it in a couple of different buckets: there's the exploration one, there's commercial opportunities which we're really hopeful about in the future, and then there's the DOD opportunity. Frankly, there's a lot of concern on the DOD level about the opportunity cost of the Moon. We don't know what the future entails on the moon today, but it's kind of like if I said that there was a box at the end of the show floor and it could have ten dollars in it but it could have a million, I think everybody is going to run there because the million dollars is really enticing. When you talk about what's the future for the moon, we talk about regolith, we talk about water on the poles, and all these things, but the truth is there's an opportunity cost there for getting to the moon. So there's a desire to have U.S. industry there first so that when we actually realize what that is, it comes to American businesses. I'm watching it. I'm excited to see NASA kind of seeding the cislunar economy, buying services from private industry and helping to facilitate that market. I'm glad that they're not just doing it entirely themselves, and I'm hopeful that there's an industry there, hopeful that there's a future, but I don't quite know what it is yet. **Jonathan Baliff:** As does everybody, that's like the thing right now. But we do know there's analogies to that. When there are industries that have come up, I always look at the surface of the ocean - what we do on the surface of the ocean, which doesn't get a lot of play. There isn't the conference for the surface of the ocean, but when you look at what's happening in terms of just metals mining but also other areas of tourism, it's higher growth than you think. They didn't even think of that 20 years ago. So I'm more optimistic that we'll figure it out. We just got to stay there a bit longer first. We got to get there. ### M&A and Industry Consolidation **Moderator:** One thing I've seen talk of this week is that as companies are going to go up to raise some more funding for additional runway or whatever, they might take down rounds that bring their valuation down a bit. The thought being that if that happens in some cases, we might see more acquisitions. You haven't bought anyone recently, but are you going shopping anytime soon? **Peter Beck:** It's an interesting time because it's both a good time - I'm not sure what you found, but the private company valuations seem to stay high for a really long time. They're starting to kind of realign, but as public market valuations are dropping, the private stuff sort of just seemed to hold its ground. But I think the economic burn is kind of lasting long enough to see that. So it's kind of a great time to do stuff because there's lots of opportunities at a more affordable price. It's also a terrible time to do stuff because if you need to raise equity to go and do that, then that's also a tough market to do it in. **Moderator:** He's avoiding the shopping question. He's not talking about it. So who would you go shopping for if you were going to go shopping? **Peter Beck:** Nobody. Go shopping for a launch company on sale. **Jonathan Baliff:** I would agree with Peter. I'm always amazed - M&A generally doesn't sometimes follow the market. You think in a market where everybody's generally pricing themselves off the public comps or comparables, you'd think, "Great time to buy companies." It's really about CEO confidence, CEO and founder confidence, and right now that confidence isn't very high. You've seen 26 billion dollars lost or at least come down in the companies that went public, all of us all together, since the time we went public to today's trading value - 26 billion. It's come up too in the last couple of months. If you're going to give equity as part of your security to buy a company, which was Redwire's mission - to keep these owner-founders as part of Redwire - you know, to do that there needs to be a level of confidence. We're just gonna have to get down the road a little bit. Between the two words I would stick with everybody in this room - staying power. Who has staying power? Staying power is going to determine who's going to be acquired or partnered with, because we view it as a partnership, and who's just going to fall away. **Caleb Henry:** I'll add just from the finance perspective, I know that there are companies that are being looked at. There are people that are shopping around, and it's because prices have gone so low, kind of like what Peter's saying, both private and public. We can look at the Virgin Orbit bankruptcy. I was surprised that one of the things they said is, as soon as their IPO was done, they almost immediately went to market to try and sell themselves. They were being proactive about it. There are others that are going to end up being reactive because people are going to look and say, "Hey, this is a price that is much, much lower, and they've got assets that they may not be able to fully exploit or utilize," and that creates M&A opportunities. But it really comes down to what is a company trying to accomplish through that M&A. You kind of look at these two panelists - for Rocket Lab, they decided they wanted to be more of a space company or a full space company. Peter said it should have been Space Labs, not Rocket Labs. Then Redwire, you consolidated a lot in the middle, so you've become this kind of powerful integrator supplier company. Future M&A - I'd say it's hard to read the tea leaves as to what's going to actually happen, but you can look at companies. Are they trying to tap into new geographic markets? Are they trying to vertically integrate certain capabilities? Are they trying to achieve scale? These are the kinds of factors that precipitate M&A. Right now, we are in a less risk-tolerant environment for both investment and M&A, but companies are true - they always want to be opportunistic about that. We've seen certainly a dip from the 2021 levels, at least at Quilty from what we're tracking. There's not as much M&A, but that was a pretty frenetic level, so I wouldn't describe it as something to be concerned about. It's more just people have chilled out a little bit, and they're shopping, but they're not shopping like they've won the lottery. It's not Black Friday anymore. **Jonathan Baliff:** It isn't. Also, everything in capital allocation is what's your alternative, and there's a lot of organic growth. A lot of organic growth - I don't know the specifics for Rocket Lab, but we've seen a doubling. We have almost half a billion of backlog, and over half of it's contracted. So we started last year well below that, so we actually have a lot of growth that we can execute in '23 and '24 just by getting up every day and execution excellence. ### Closing Thoughts **Moderator:** All right, well I think we're out of time here, so thank you all so much for hanging out with me. It's been fun to pick your brain and figure out if Neutron's the right size - that's been keeping me up, so it's good to hash it out. I'm excited to see it. We drove by the tent when we were down there, so we're excited for that. Maybe to just finish up - what are, for each of you, the next big thing we should be watching for from Redwire and from Rocket Lab? **Jonathan Baliff:** For us, we're really excited about a number of launches that have our payloads in the next number of months. Some of them we can't talk about, but some we can talk about, especially in payloads that are our bio facility. We've got our patch dealing with agriculture - we're gonna get more seeds and more plants up there for sustainability. When I look at what I'm excited about, I'm totally excited - I've got the guys here selling power units and components on sensors, but when I look at really improving life on Earth, I look at the type of payloads that we're launching in the next six months. **Peter Beck:** The easy thing that everyone grapples on for us is Neutron development, and that's going well, and you'll see some milestones come through and all the usual stuff you'll expect to see. But I guess the wild card really within Rocket Lab is the Space Systems business. If I'm an external person watching the company, Neutron's a given - it's just going to happen. We know how to build rockets; we're good at that. So that's going to happen. But I think the more interesting thing will be to follow the Space Systems group because I think there's some really good stuff cooking there. **Jonathan Baliff:** I'll finish for both of us - that's going to lead to better financial performance too. I mean, as CFO of the business, I think we're going to see better financial performance out of our businesses, and that's what I'll be watching for as a financial analyst. **Moderator:** Looking forward to that. Speak nothing less. Awesome, thank you all so much. I do want to shout out Redwire for having us here at the booth. This is the last MICO show. I've got Off Nominal coming up, beers coming out. I see over there so it's gonna be awesome. You know, seven years ago tomorrow is the first episode of MICO that I put up, so it's cool to have a little birthday party for the podcast here with everybody on stage. So thanks all of you for showing up, thank you guys for hanging out with me, and it's been a blast. Thanks.