Rocket Lab Secures $141M Backlog with Kinéis Launch Deal

Rocket Lab Reports First Half 2021 Earnings and Future Outlook

The first six months of 2021 proved to be a period of significant activity for Rocket Lab, a U.S.-New Zealand aerospace company. Financial results for this period were released on Wednesday, marking the first earnings report since the company’s initial public offering last month.

Financial Performance and Order Backlog

Rocket Lab’s revenues for the six-month period reached $29.5 million. Furthermore, the company’s order backlog experienced substantial growth, totaling $141.4 million as of June 30th. This represents a 136% increase compared to the $59.9 million backlog reported during the same timeframe last year.

Impact of COVID-19 Restrictions

Despite the positive trajectory, company executives highlighted ongoing challenges stemming from COVID-19 restrictions in New Zealand, a key location for Rocket Lab’s launch operations. Chief Financial Officer Adam Spice indicated that the third quarter has already been affected by the pandemic.

New Zealand’s implementation of stringent lockdown measures in response to a Delta variant outbreak involving 855 individuals has resulted in the postponement of all planned launch activities for the quarter. This is projected to cause a $10-15 million reduction in revenue for the year.

Revenue Projections and Operating Expenses

Even with these disruptions, executives maintain an anticipated yearly revenue of $50-54 million. However, GAAP operating expenses increased to $29.3 million for the first half of the year, a rise from $11.9 million during the same period last year.

This increase in expenses was largely attributed to investments in research and development, specifically the development of an automated flight termination system and the Neutron launch vehicle, as noted by CFO Spice.

Expansion Beyond Launch Services

Founded in 2006, Rocket Lab has evolved from a launch provider into a comprehensive space solutions company. The company now positions itself as an end-to-end provider, offering launch services alongside the design, manufacturing, and operation of spacecraft.

Growth of the Space Systems Division

Over the past 18 months, Rocket Lab has strategically expanded its space systems business. Recent achievements include an agreement to develop three Photon spacecraft for Varda Space Industries and plans to deploy two Photons to Mars on an upcoming mission.

This growth is reflected in the financial results, with the space systems division contributing $5.4 million to revenue for the six-month period, a significant increase from $300,000 during the same quarter last year.

Scaling Satellite Component Manufacturing

Rocket Lab intends to begin large-scale manufacturing of satellite components by the end of the year, starting with reaction wheels – essential components for attitude and stability control. A new facility will be capable of producing up to 2,000 reaction wheels annually.

This represents a substantial increase in production capacity compared to current industry standards. CEO Peter Beck explained during an investor call that this production line is designed to address the limitations of small-scale component manufacturing, which has historically hindered the rapid development of satellite constellations.

Strategic Acquisitions and Consolidation Opportunities

The acquisition of Sinclair Interplanetary, a major satellite hardware manufacturer, significantly bolstered Rocket Lab’s space systems division. Executives suggest further acquisitions are likely, with approximately half a dozen potential deals currently under investigation.

CFO Spice noted that the space industry is currently experiencing conditions conducive to consolidation, driven by increased investment and a growing market. He clarified that this consolidation is not necessarily about large companies merging, but rather about opportunities to acquire and integrate specialized businesses.

Neutron Rocket Development and Future Launches

Updates on the Neutron rocket were limited, with CEO Beck stating that development is “progressing well” and that more detailed information will be provided in the coming months. He emphasized that the Neutron rocket represents a significant advancement beyond the capabilities of the Electron vehicle.

“Neutron is a vehicle that is not an increment on Electron,” Beck stated. “It is something that really sets a new standard within the space industry.”

Multi-Launch Contracts and Stock Performance

Rocket Lab announced a multi-launch agreement with Kinéis, a French provider of connectivity solutions for Internet of Things devices, to deploy its satellite constellation using five Electron missions. Kinéis’ investors include the French space agency and a French space company.

This constellation will comprise 25 satellites, adding to the over 100 satellites already launched by Rocket Lab on its Electron rocket. The launches are scheduled to commence in the second quarter of 2023.

This latest contract follows other recent multi-launch deals, including one with BlackSky for five launches.

Rocket Lab’s stock price has continued to climb, closing Wednesday at $15.09, representing a nearly 50% increase since its public debut at the end of August.