[[Home|🏠]] <span style="color: LightSlateGray">></span> [[Interviews]] <span style="color: LightSlateGray">></span> December 5 2024 **Insider**: [[Adam Spice]] **Source**: [UBS Global Industrials and Transportation Conference 2024](https://www.youtube.com/watch?v=7_JGmNRKuY8) **Date**: December 5 2024  🔗 Backup Link: https://www.youtube.com/watch?v=7_JGmNRKuY8 ## 🎙️ Transcript >[!hint] Transcript may contain errors or inaccuracies. **Interviewer:** [0:01] Great. Thanks everybody for joining us on the last day of the UBS Industrials Conference. Happy to have Adam Spice, CFO of Rocket Lab with us. Thanks Adam. **Adam Spice:** Thanks for having me. **Interviewer:** Would love if you just maybe gave a couple remarks and let us know the Rocket Lab story. **Adam Spice:** [0:21] Yeah, you bet. I'm the CFO at Rocket Lab, been with the company for going on seven years now. Prior to that, I spent about 25 years in the semiconductor industry. Rocket Lab is interesting - a lot of people, when they think about Rocket Lab, as its name would imply, think it's a rocket company, and that's where we got our start. But today, Rocket Lab actually generates 70% of its revenue from the space systems side of the business versus the launch side of the business. Launch will always be the thing that gets headlines. People love to watch the fiery stick go up in the air, and I think it's very cool. It's a very strategic capability that we'll talk a little bit later about. But we are a much more diversified business. So again, 30% of our revenue comes from launch. Today, it's off our Electron launch vehicle, which is the second most frequently launched vehicle in the US behind the Falcon 9. We've had 55 launches of that vehicle, 14 of those year to date. And we're bringing a new launch vehicle called Neutron to market in the middle of next year, which is a medium launch carrier. The Electron can deliver 300 kg payload to low Earth orbit. Neutron is capable of delivering 13 tons to orbit, so it's a much bigger vehicle, much more kind of a direct head-to-head competitor to Falcon 9. In our space systems business, we generate about half of our space systems business from merchant subsystems - a line of business where we sell things like solar solutions, reaction wheels, star trackers, and all kinds of other subsystems that other people use to build their satellites. Customers include people like Lockheed and Northrop and Airbus and so forth. And then we also sell full satellite turnkey solutions. Most recently, our biggest contract award to date was from the US government through its SDA program - a $515 million contract to deliver 18 satellites into the Tranche 2 part of that ecosystem. So it's a rapidly growing, pretty diversified business that's come a long way in a very short period of time. ### Customer Base and Long-Term Opportunities **Interviewer:** [2:29] Great. And you'd mentioned that's a picks and shovels business. Who are the biggest customers? You mentioned some of the defense primes there, you mentioned the government. What's kind of the longer-term opportunity aside from launch? **Adam Spice:** [2:41] On the picks and shovels piece of the business, on the subsystems, it's really the most diversified piece of our business. But when you peel the onion back a few layers with any one of our businesses - whether it's on the Electron launch side or the subsystems business - it really ends up being the US government as a huge end consumer of what we ultimately produce. I think that's going to be consistent. We really like that exposure because, as much as we all like the hockey stick that commercial opportunities present, the government is that tried and true big spender. We're in a nice position of coming into a large existing market but in a disruptive way. So we have a small share in a large market that, fortunately for us, in the sub-sector that we're dealing with, is growing very rapidly. The new space small satellite LEO market or low Earth orbit proliferated architecture is not only taking hold on the commercial side, but it's very much taking hold on the government side. When you think about the last few decades that preceded us, the typical architecture was a large, exquisite satellite that would go up in geosynchronous orbit, and there'd be a handful of those, and they'd last for decades. Now you're going to this LEO architecture where you're putting up dozens, hundreds, or even thousands of satellites. They last for a much shorter period of time, and so there's this replenishment cycle, which is really helpful for both selling the picks and shovels (because you're selling those more frequently and at a higher volume) and also on the launch side - you're just feeding your launch business as well. This whole LEO proliferation is really what is underpinning our business, and it's happening not only on the commercial side but on the government side. The driver on the government side is really because this proliferation provides resiliency. You don't have that one-off exposure that can be taken out in wartime. There's no way that your adversaries can take down dozens or hundreds or thousands of your satellites at one time, so it's a much more resilient architecture. On the commercial side, the reason for that is when you put satellites up in LEO, you've got lower latency for communications because the satellites are much closer to the Earth. They're also much closer to the Earth, so you get much better resolution for imaging for intelligence purposes. At the end of the day, I'd say government, US government in particular, probably represents north of 70% of all of our consumption, because even our commercial customers - their largest customer in almost every case is the US government or some other sovereign. **Interviewer:** [5:31] Is that the long-term opportunity, 70-30, or is government more of the pipeline? **Adam Spice:** [5:36] I think 70-30 is where we like it. I think that's kind of where Pete and I were trying to architect the business several years ago. I think the mix of that 70% is going to change. Ultimately, the goal for us is very much like you've seen with SpaceX, where it's all about getting that recurring revenue off of assets that you own in orbit and operate. For us, that's really kind of the third leg of the stool in our space systems business. So the first two legs are: - The subsystems merchant market, picks and shovels business - The full turnkey satellites that we sell to people like the US government and NASA And then the third leg is really that constellation business where you're selling information - you're selling bits to customers and you're getting that on a recurring basis, like Starlink is doing. **Interviewer:** [6:31] How much does Neutron unlock that for you? **Adam Spice:** [6:36] Neutron is the unlocker. We really can't do that in a meaningful way without Neutron because Electron is a phenomenal vehicle. It serves a very important role in the ecosystem for small dedicated launch. But in order to really participate in the largest parts of the space ecosystem, you have to put up a large number of satellites. In order to do that, you've got to do it in a very cost-effective and timely way. If you look at what SpaceX is accomplishing with Starlink, it's really enabled by having a reusable launch vehicle in the form of the Falcon 9. Neutron is that same thing for us. We'll be able to put up much greater amounts of assets on orbit once we have Neutron because it's a 40 times more capable rocket versus Electron. ### Addressable Market and End-to-End Strategy **Interviewer:** [7:26] Is there any way you can put numbers around the addressable market, what you have for Electron, and then Neutron obviously opens up a broader launch market but also everything else you just articulated? Is there a way to kind of quantify how big of an unlock that is? **Adam Spice:** [7:40] If you think about the launch TAM, it's around 10-20 billion dollars per year across small, medium, and heavy launch - that's a global number. If you look at the space systems manufacturing business - all the subsystems including payload and so forth - that's about a $30 billion a year TAM. But the actual application side of the market is about $300 billion. That's where the brass ring is that we're shooting for. In the past, it was comprised of secure comms in the enterprise market, satphones, and earth imaging that you'd be able to monetize. A lot of that volume was coming from pay TV services like DirecTV, which is now being replaced by things like Starlink doing broadband services from orbit. That $300 billion TAM is the brass ring that we're shooting for. We've taken the strategy that in order to really exploit that opportunity, you've got to have all the pieces. You have to be an end-to-end player where you can: 1. Design satellites 2. Manufacture them at scale efficiently with your own vertically integrated supply of key subsystems (so you don't become supply chain blocked) 3. Launch them at a pace and at a cost that is necessary 4. Operate those constellations on orbit We can do essentially all of those things now. We're just missing that last customer piece. Having Neutron will enable and unlock that last piece and also help us gain the capability on the payload side to be able to tap those applications, because each application is very unique with its payload requirements. The payload for a communications satellite is very different from an earth imaging one. And even within earth imaging or remote sensing, there are various ways to do that - you can use RF sensors, you can use electro-optical like cameras/telescopes. The thing about space is there's lots of different verticals that you can go after, so it's a target-rich opportunity for sure, especially for a new player like us that's bringing new capabilities to the market. ### Government Efficiency and Vertical Integration **Interviewer:** [10:00] Near-term, I'm sure you can answer the SpaceX competition question on autopilot, but on the Department of Government efficiency, like NASA and maybe some others could be in the crosshairs. How do you think about the threat or maybe even the opportunity there given your low cost? **Adam Spice:** [10:23] I think we're a bit more of a concern for other people than they are for us. Specifically, the older, more traditional government primes are really struggling with the firm fixed price model that the government customer really wants to move to. They like their 6% cost-plus models. For us, we actually love firm fixed price. We don't want a cost-plus model. We don't want to get pinned into a single-digit or low double-digit margin structure. If you look at our satellite systems part of our business, historically margins for that have been in the high single-digit, low double-digit range on a gross margin basis. Our gross margins in that business are more like 30 points. The reason for that is because we're so vertically integrated. We're not buying reaction wheels from Honeywell. We're not buying all these other subsystems from others. We're not buying solar solutions from Boeing. We actually have it pretty much all in-house, so we eliminate all of that margin stacking and essentially keep that margin to ourselves at a program level. The margin enhancement is super important to the business model, but even more importantly, what's allowing us to win some of these contracts is the fact that, oddly enough, a new supplier like Rocket Lab is in many ways lower risk because we control our own destiny. We don't have as much dependency on these critical subsystems. The one thing that we've learned since entering this market is that in "old space," there are always delays. It's an industry that's comprised of lots of different mom-and-pop shops, none of them at scale, so you get bit by the various pieces of the supply chain, which cause overall program delays. When you have it all under one roof, you can really control that, and the customer really likes that. When they're evaluating our proposal versus somebody else, they'll say, "Well, Rocket Lab doesn't have to procure this, they don't have to procure that. It's all under one roof - we can feel more comfortable that they're going to meet cost and schedule." There have been examples in the not-too-distant past where things like electric propulsion for the SDA programs has been a real visible problem where suppliers weren't delivering, and that was causing overall program delays. There are very public issues now with optical terminals where providers are not delivering to their commitments. To the extent that you can eliminate those points of failure by having them under your control, you're a much more viable supplier. That's where we see the future - if you're not an end-to-end player, we think you're going to be increasingly squeezed out of opportunities. When we say "end-to-end," it goes all the way from designing your spacecraft to launching the spacecraft and operating on orbit. We've just methodically been putting all the pieces together to be able to do that. Of all those pieces, launch is the most difficult. Building satellites and satellite systems is difficult because it's space, but there is nothing that can equate to the technical challenge of launching a rocket. It's basically a series of controlled explosions with 66,000 parts. At the end of the day, it all depends on your quality systems and your testing. It's a very challenging part of the business, but it's a hugely differentiated one. Again, it all comes back to why SpaceX has been as successful as they have with Starlink - it's because they've got the world's best launch platform. **Interviewer:** [14:07] NASA suggested some pretty big cost reductions possible on Mars sample return... **Adam Spice:** [14:14] I think when the initial proposal was put out there, I believe it was like $11 billion and wouldn't be done until 2040. Our proposal would be done on a significantly reduced budget and a much more compressed timeline. That's again a function of having so many capabilities under one roof. We actually have the launch capability. We have the satellite design and manufacturing capabilities. We've already sent payloads to the Moon, so we've got interplanetary experience. All of those come together to allow you to do things where, if you're the more traditional prime that would go after this, you're more of an integrator - you're taking other people's technology elements and stitching them together to try to put a whole solution together, versus one person owning all of that and having a much more orchestrated approach. The Mars sample return is a great example of how, if you rewind the clock 10 years ago, you would never have seen a company like Rocket Lab in serious consideration for an opportunity like that. It would just never be the case, and nor would it have been the case where the first piece of the Artemis program, to put a lunar payload in place, would have been done by us. But it was - we actually built the spacecraft and launched it on our own Electron launch vehicle. The market is changing so quickly that it creates opportunities for people that can move quickly. You also have to have access to capital, which is again one of the reasons why we took the company public in the way that we did back in 2021. It's definitely proved that capital is as much of a weapon as engineering capabilities. ### Pricing Strategy and Margins **Interviewer:** [16:08] The cost reduction point is a really interesting one, as you've been able to also increase your Electron launch pricing. So it seems you can offer lower price yet also you've been able to increase your own price. What's enabled that? What's the relative order of magnitude that you think you can increase Electron to, and where Neutron could settle out? **Adam Spice:** [16:29] The small dedicated launch market is kind of a unique one because when you're talking about average selling prices of less than $10 million per launch, that's kind of an unheard-of zone that's been created through Electron. Other people have tried - we saw the very public failures of Virgin Orbit, Astra, and less public failures of others that have not been able to get there. When you look at what small dedicated launch has brought to the market - if you previously needed to put a refrigerator-size payload on orbit before Electron, you'd have to basically put it on a big rocket. So you'd have a very small payload in a big, expensive rocket. Now we've been able to put a small payload in a small fairing at a very low price. The engineering required to get Electron to work - I almost think about the complexities of a small rocket as like building a Formula 1 car versus a Chevy Nova. It's a very tough environment to build this high-performance vehicle in a small form factor with the narrow margins you have for fuel and so forth. What we've been able to do is offer that sub-$10 million price with high frequency now, having launched 14 times this year, which has created more opportunities for customers. This has allowed programs to be deployed on much tighter budgets. A good example of that is what we're doing with the US government on hypersonics. The cost of a hypersonics launch program - a single launch was probably measured at about $100 million per test campaign, and of that, probably $40-50 million was launch cost. We've been able to take like 80% of that launch element cost out by providing Electron into that market. That's a great example of how when you bring a new cost point into a market, you can hopefully drive greater volume and allow more innovation to take place. Part of what allows you to do that - if you look at the cost structure of a rocket, less than half of the cost of goods sold is actually in bill of materials and direct labor. More than half of it, at least in our cost structure, is really around overheads. Running a rocket company is a very high fixed-cost environment because you have all the production overhead, range overhead, health and safety, regulatory, and all these different things. You've got a standing army of engineers to do cost reductions, performance improvements, and risk reductions. So it's all about cadence. Today we're launching roughly a rocket per month, and our non-GAAP gross margins on that are about 30%. As we scale from one rocket per month to two rockets per month, that gets us to our target margins in the mid-40s on a non-GAAP gross margin basis, and it's all about overhead absorption. You're now leveraging that infrastructure over a greater number of launches, and it has a significant impact on the profitability of the business. When you look at Neutron, it's coming into the market with an average selling price of $50-55 million. If you compare that to a Falcon 9 at around $67 million, it gives you an idea of where we're entering the market. Our long-term margin model for Neutron is very similar, if not a little bit better, than where Electron is today and where we're going with that model - so think about roughly 50% gross margin range. That's a function of not only getting to rate but also the reusability of that vehicle, because it's designed from day one to be reusable, where about 70-80% of the overall cost of the rocket is in that reusable first stage booster. So getting to reusability is a huge enabler of our business model coming into focus. ### Neutron Development Progress **Interviewer:** [20:48] You've laid out the milestones pretty clearly on Neutron, but is there a single long pole in the tent? **Adam Spice:** [20:55] The long pole in the tent in rocket programs is historically propulsion. I think we got a lot of encouraging validation when we got our hot fire tests from that engine in August. That was an important milestone for us to get through, and that engine program continues to progress now that we know that the engine works. We're testing it in every configuration to make sure that we understand it in every condition. So that's really scaling - it's going from R&D now into production mode, and we're always going to be continuing to test and improve and iterate the engine. But that's the long pole, and we've pretty much got that behind us. Now the rest of it is infrastructure. If you spend enough time looking at all the online forums, you'll see people are publishing new pictures of our infrastructure almost on a daily basis - how the steel is coming together at Wallops Island, Virginia, and how our factory outside of Baltimore is spooling up to produce all the larger scale composites. We were very fortunate that we were able to take advantage of Virgin Orbit's bankruptcy and pick up their rocket factory in Long Beach, which is two blocks down the road from our headquarters. We were able to pick that up for 16 cents on the dollar due to their bankruptcy. So I think all the things have come into focus. I don't think there's any one long pole right now that would say that's really a big risk factor for hitting that mid-next year initial launch. That's super important for us. The way I think about that program is: get that first test launch off middle of next year, and that does one thing for me as the CFO - you get that heavy R&D spend behind you because at that point you've got minimum viable product and minimum viable infrastructure. At that point, everything else becomes more discretionary as you target rate. Then the next big milestone will really be how quickly can we put a Neutron back on the pad that's flown. Reusability unlocks a tremendous amount of things. Number one, it allows you to uncap your rate increase because then you don't have to build a booster for every mission. Now you have a fleet model where you get to refly, just like the Falcon 9 is doing. At one point, I think SpaceX was building like 20 boosters a year, and then they got down to the point where they were only building like four boosters a year because they were reflying them at least once a quarter. Now they've got to the point where I think they're flying each booster every 30 days. So landing that first booster - sticking the landing on the barge - is going to be a massive unlocker for us. There's a series of things: 1. Getting the engine hot fire tests behind us was huge 2. Getting the first test launch off middle of next year is huge 3. Sticking the landing for reusability is kind of that last major achievement that you need to unlock that huge Neutron potential **Interviewer:** [24:00] That's also a 2025 target? **Adam Spice:** The first launch of Neutron will be a test launch, and right now the plan is to do just a soft controlled splashdown of that booster. Then we'll bring it back to the shore and get a lot of learnings from that. The question would be: is it tail number two that we try to land on the barge, or is it tail number three? It'll really depend on how well that first test goes. If we come back and it's a very nice controlled splashdown and we think, "Oh, we actually could have probably landed that on a barge if we'd wanted to or were willing to take that risk," then we'll feel confident about number two. If it's a little messy, then we've got some more calls to make. ### Pipeline and Future Opportunities **Interviewer:** [24:35] How's the pipeline building up? I think you already have a couple orders. Are you qualified for national security space launch competition right now? **Adam Spice:** [24:46] Right now we're working towards getting onramped into the NSSL program in 2025. If we're successful in doing that, that starts to make us eligible for awards beyond 2025. Typically, you would expect that it would take at least a couple years once you've gotten onboarded to be qualified for your first NSSL missions, but I think we could hopefully truncate that because the market there is such a dearth of capacity right now. If you really look at today, you've got SpaceX, who's obviously the dominant player, and you've got SpaceX and ULA. And then you've got Blue Origin that's been onramped but has not yet flown. So there's a tremendous opportunity within NSSL - it's just a matter of getting onboarded and onramped, and then getting that flight cadence up so we can fully exploit that opportunity. That's going to be a big one. **Interviewer:** [25:43] And I guess another potential big one that you mentioned earlier is the Transport Layer. You guys have the opportunity to do more than 18 on Tranche 2, or is the more opportunity after Tranche 2? **Adam Spice:** [25:54] Right now we're focused on Tranche 2. There might be more on Tranche 2, but there's definitely opportunities on Tranche 3. There are multiple platforms that we're going to be bidding on for Tranche 3 awards, and those are coming into focus as far as being awarded sometime in the middle of 2025. One of the nice things about our business is we do have very good visibility. On the rocket side, exiting Q3, we had 39 Electrons in backlog with an ASP of about $8.3 million, so we know very well where that business is going. On the Neutron side, as you mentioned, we've signed our first two launches with a customer, and I think that pipeline is going to start to build quite nicely now that we've got that first customer domino to fall. On the space system side, we benefit on that picks and shovels merchant subsystem business from the fact that we're selling into a growing ecosystem in the small satellite market with a variety of different solutions. As that rising tide raises all ships in that market, we also are very comfortable with the full solutions business like the SDA program. We know where our revenue is coming from for that - it's very programmatic over 2024, 2025, 2026, 2027. Now, in order to avoid an air pocket in 2029, we've got to get that next major piece of the puzzle into the backlog. That's really where our focus is right now - securing that incremental backlog in the first half of 2025 to de-risk the out years. Sitting in my seat, I take a lot of comfort in the fact that I don't have to rely on every quarter being a crapshoot like in the semiconductor business. In this business, I have the benefit of looking out two or three years and saying, "Okay, I know where I'm going to get my revenue and how I'm going to pay the bills." The challenge is that it's like an ocean liner - you have to anticipate where you need to be, and you have to constantly be building that pipeline and nurturing it, making sure that you don't ever get caught in a situation where you miss a turn and now you're going to have a problem three years from now that you really can't recover from. So it's kind of a bit of a blessing and a curse to have the backlog visibility. **Interviewer:** [28:20] What's the importance then of the 10-week turnaround contract to launch? If you have a good amount of visibility, presumably there's not a ton of short-term turnaround opportunity, but what's the significance of that? **Adam Spice:** [28:32] In the launch business, one of the things is that we've never had a customer waiting on a rocket, but we've often had rockets waiting on customers because of the nature of their product. If you're a satellite operator, you'll contract for a launch 12-18-24 months from now, assuming everything in your program goes well. Let's say you've got an issue with a subsystem vendor where somebody doesn't show up with an electric propulsion thruster, or 3 months before launch, your satellite is in final testing and something doesn't go well. You have to remediate that issue, put it back through test, and that can throw you off by 3-6 months, maybe more in some cases. You've got the ability to know what you have on your manifest, but your customer has to show up in order for you to fulfill that manifest. Fortunately for us, we're collecting the cash along the way, so we don't actually have to wait to launch them before we collect the money. We recognize revenue when we press the ignition button on the rocket, but we're collecting cash along the way leading up to that. It does create opportunities when new customers come in and need a quick-turn launch, and they actually have a satellite that works. You can basically take advantage of a rocket you have sitting there for a customer that slipped. So it doesn't necessarily mean that quick-turns represent upside to your forecast - it just means it provides you some cushion that you may not miss your forecast if your customer doesn't show up when they were supposed to. A new customer can slide in and be the backstop. **Interviewer:** [30:07] That's impressive turnaround time. **Adam Spice:** [30:12] That 10 weeks is a record. But you also saw two weekends ago, we did two launches within 24 hours in two different hemispheres. That's the benefit of having multiple launch pads in New Zealand and a pad in Virginia. It shows the resiliency of having that scale of operations, but it's taken a long time to build out. We've been at this for a while now. We certainly have aspirational people driving us. We look at what SpaceX is doing - launching up to 150 Falcon 9s this year. It's pretty impressive, and we have similar ambitions longer term for Neutron. It's a good rabbit to chase. ### Margins and Financial Outlook **Interviewer:** [30:56] Coming back to margins that you were talking about earlier - you're pretty steadily improving your gross margin. Did I hear you correctly that Neutron comes in at an accretive margin? **Adam Spice:** [31:07] No, Neutron initially will be negative margin. Until you get to the reusability of the booster, you're basically still in a quasi-R&D mode, just like Electron came out at negative margin. A lot of it is just about cadence - you have to get that overhead absorption. It's a combination of getting your efficiencies up and your rate up to absorb your standing cost. So initially, Neutron will be dilutive to margins, but once it gets to the rate and the cost targets that we've modeled relatively early in its life, it should become accretive overall to the launch business and overall accretive to the business. It should be the higher, if not highest, margin part of our business in the medium to longer term. **Interviewer:** [31:52] That was a target. And then I guess in terms of the two segments - similar margins today - how do those trend over time and how do those mix? **Adam Spice:** [32:04] The margins are very similar today, in the low 30s on a non-GAAP gross margin basis, but those are going to start to spread. If you look at the merchant subsystem part of our business, that's already got low 40s gross margins. What's bringing the overall margin down is the full systems business, which is more in the high 20s to 30% range. Over time, that mix will shift to probably more of that lower margin but larger magnitude systems business. So if you look at the overall space system, it's probably a 35-point gross margin business - maybe you could stretch to see that go towards 40%. But the launch business is the one which we think has the bias towards 45-50 points of margin. So launch will be the highest part of the gross margin story of the business. Space systems will be larger in absolute terms but lower gross margin. Overall, we think on a blended basis we should be able to get the business to close to 40 points of non-GAAP gross margin, and we model at mid-20s kind of operating margins. **Interviewer:** [33:24] And then in terms of conversion to cash flow, I guess some of that may depend on how strong the growth opportunity is, but what do you think about cash flow positive? **Adam Spice:** [33:37] It's going to depend on how much more fuel we need to put on the fire for enabling the scaling of Neutron. Right now, Neutron is consuming all of the cash burn of the company. If you look at Electron and our space systems business, they're providing cash to fund that Neutron burn. Once that Neutron burn gets extinguished, which happens once we get into revenue on it in 2026, that's when the model really flips and has the potential to turn more sustainably cash flow positive. Now you're right - we could get to sometime in 2025 or 2026, and a large customer could come to us and say, "Hey, we understand you've talked about a launch cadence for Neutron of a test launch in 2025, three launches in 2026, five launches in 2027... What would it take for those five launches in 2027 to be a much bigger number? Or to go from five in 2027 to a much bigger number in 2028? How much incremental capital would be required?" That could require building out another launchpad or building more vehicle tails, which consume more working capital. That's a good problem to have. And oftentimes with those larger strategic customers, they can also be providers of that growth capital. Sometimes they pay for that scaling capital. So I think there's a lot of things yet to come. All eyes are on that first test launch - how well does that go? If it goes really well, then yeah, we could have some really good tough decisions to make about how much capital we want to put in to scale the business faster. **Interviewer:** [35:24] You get installment payments for the launch? **Adam Spice:** [35:30] Typically, by the time we start actually bolting a rocket together, we've collected 60% of the mission value. So from that perspective, it's a good cash flow cycle. ### Capital Position and Strategy **Interviewer:** [35:55] You mentioned access to capital earlier. I think you've got maybe $500 million of cash on the balance sheet. You mentioned some customers may also help prefund growth if you were to accelerate that. Do you anticipate needing to go back for capital at any point? **Adam Spice:** [36:13] The one thing that Peter and I are very focused on is you never want to run a rocket company too low on cash because you could have bad days, and a bad day in the rocket business basically means you could have something happen on the pad that could take out some of your infrastructure that would have to be rebuilt. Our model will be sensitive to how quickly or how long it takes for us to get to reusability on Neutron - sticking that first landing. Each booster in expendable mode is, as I mentioned, kind of a negative margin prospect initially. For us, we've set some internal comfort levels around $300 million of cash. If we were ever to get close to that line, we'd probably think about topping up the coffers a bit. We did a convert earlier this year - we raised $355 million back in February. That was really to fund inorganic growth stuff, which we haven't actually got any deals across the line to consume any of that capital yet. But if we were successful in doing that, then that might make us think about again making sure that we had sufficient dry powder. But I think right now we feel very comfortable where we're at. We don't have any immediate clear need to put more cash on the balance sheet. ### Concluding Remarks **Interviewer:** [37:37] Great. Maybe any final remarks you wanted to leave us with? **Adam Spice:** [37:37] I think the one thing that really has been resonating with investors is the fact that we are really the pure play space publicly traded option right now. There's been a lot of speculation about whether SpaceX will come public in the next few years - TBD. I mean, obviously they set a very attractive valuation comp out there. The most recent number I saw this morning, they're talking about a $355 billion valuation for an employee tender. I've seen some analysts talk about IPO target prices of $750 billion or greater. So I think there's clearly appetite for investors to have exposure to the space market, and we are the only scaled pure play space option, particularly with launch, out there. We think launch is the most difficult piece, and once you have launch, it very rarely leads to others working their way into launch. Launch is kind of the foundational cornerstone. If you come in with that, the rest of it looks relatively easy to pick off. We've kind of seen Elon do that - he's incrementally taking whatever he wants because the launch piece is what has proven to be the most difficult barrier to entry in the space market. There are very few providers because it's so difficult to do. If you can do that, your aperture becomes very large as far as opportunities you can pursue. We're very close to Neutron. We came public three years ago and said Neutron is the reason why we're coming public, and here's what we're going to do. We've systematically just done what we said we were going to do, and we're super close to ultimately checking that last box of getting Neutron off the pad. So it's very exciting. **Interviewer:** [39:43] Stick the launch and stick the landing. **Adam Spice:** Stick the launch and stick the landing. Absolutely. **Interviewer:** [39:48] Thanks Adam. All right, thank you very much.