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DATE

Thursday, May 7, 2026 at 5 p.m. ET

CALL PARTICIPANTS

  • Founder and Chief Executive Officer — Peter Beck
  • Chief Financial Officer — Adam Spice
  • Director, Communications — Murielle Baker

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TAKEAWAYS

  • Revenue -- $200.3 million, increasing 63.5% year over year and 12% sequentially from fiscal Q4 2025, reaching a record high for the company.
  • Gross margin -- 38.2% GAAP and 43% non-GAAP, both exceeding prior guidance ranges; GAAP margin was slightly up sequentially.
  • Cash and liquidity -- $1.48 billion in cash and cash equivalents at quarter-end; over $2 billion in total liquidity secured following additional equity offerings and convertible instruments.
  • Total backlog -- $2.2 billion, up 20% sequentially and 108% year over year; comprised of 41.5% launch and 58.5% space systems bookings.
  • Electron and HASTE launch orders -- 31 launches booked, setting a quarterly record; launch backlog now includes 70 Electron missions and a $190 million 20-launch order for HASTE.
  • Neutron bookings -- Largest contract in company history secured: five dedicated Neutron flights plus three Electrons through 2029 for a confidential customer, surpassing the previous HASTE record.
  • Operating expenses -- $132.5 million GAAP (above guidance due to one-time stock-based compensation) and $105 million non-GAAP (below guidance).
  • Adjusted EBITDA -- Loss of $11.8 million, materially improved from prior quarters and better than guided range of $21 million to $27 million loss.
  • Acquisition activity -- Announced acquisition of Motive Space Systems for robotics, and closed the Mynaric acquisition for optical communications, expanding vertical integration.
  • Capex and cash flow -- $27.1 million in fiscal Q1 capital expenditures, down from $49.7 million in fiscal Q4 2025; non-GAAP free cash flow use of $77.4 million, improved from $114.2 million use in fiscal Q4 2025.
  • Headcount -- Total employees reached 2,778 at quarter end, up 176 from prior quarter mainly due to M&A and production ramp.
  • Q2 2026 outlook -- Revenue guidance of $225 million to $240 million (midpoint implies 16% sequential growth); GAAP gross margin guidance 33%-35%, non-GAAP 38%-40% due to mix shift in Space Systems.
  • Key national security win -- Selected alongside Raytheon for a demonstration under the Golden Dome space-based interceptor program, reinforcing position in U.S. defense priorities.
  • Launch capacity -- Electron production line designed for up to 52 launches annually, with existing infrastructure supporting further cadence if needed, requiring only modest incremental investment.

SUMMARY

Rocket Lab USA (RKLB +34.08%) reported record-breaking financials and contract momentum, highlighted by strong revenue growth across both launch and space systems ledgers, underpinned by new large-scale defense and commercial contracts, and deepened vertical integration through technology acquisitions. This quarter marks a strategic inflection, as management quantified a significant mix-shift in future backlog realization and guided explicitly for continued top-line acceleration, while confirming substantial liquidity and operational investment are aligned to execute rapid production scale-up. Expanded coverage of key U.S. national security missions, new international market access via the Mynaric acquisition, and successful execution of high-value, multi-launch, and subsystem orders signal sustained customer trust and pipeline visibility for the company’s growing service scope—including hypersonics, medium-lift, and satellite platforms.

  • Peter Beck stated, “we are on track to beat last year's launch record too” and described Neutron's manifest as “filling up fast right through the end of the decade.”
  • Adam Spice detailed that 36% of the current $2.2 billion backlog is expected to convert into revenue over the upcoming 12 months, while the remaining is composed of multi-year, needle-moving contracts supporting longer-term scaling.
  • GAAP operating expenses for fiscal Q1 2026 were elevated above guidance due to a one-time stock-based compensation charge from the cancellation of Peter Beck’s RSUs.
  • Customer mix continues to evolve, as the HASTE program alone now comprises almost one third of the total launch backlog, reflecting a structurally higher portion of hypersonics and missile defense content in long-term order flow.
  • A new electric propulsion product line (“Gauss”) was launched with internal and merchant deliveries already underway, targeting relief of supply bottlenecks for high-volume satellite constellations.
  • Management confirmed European expansion as a strategic pillar, highlighting that the Mynaric acquisition provides “boots on the ground” to unlock sovereign space investment opportunities across the European Union, Germany, and the United Kingdom.

INDUSTRY GLOSSARY

  • Electron: Rocket Lab’s small orbital launch vehicle designed for delivering payloads to low Earth orbit, supporting high-frequency commercial and defense missions.
  • HASTE: Hypersonic Accelerator Suborbital Test Electron, a variant of Electron for Department of Defense suborbital hypersonic test launches.
  • Neutron: Medium-lift launch vehicle in development to serve constellation deployment, national security, and commercial missions, featuring a reusable architecture with unique fairing and stage separation technologies.
  • Golden Dome: U.S. Department of Defense space-based interceptor program for missile defense; Rocket Lab is providing technology and demonstration under this initiative.
  • SDA: Space Development Agency, a U.S. agency developing satellite constellations for missile warning, tracking, and data transport (e.g., Tranche 2, Tranche 3 programs).
  • PWSA: Proliferated Warfighter Space Architecture, a multi-layered national security satellite architecture led by the U.S. Space Development Agency.
  • AFP: Automated Fiber Placement, a manufacturing technology for composite rocket structures referenced in Neutron’s production automation.
  • RSU: Restricted Stock Unit, a form of non-cash compensation discussed in relation to one-time operating expense in fiscal Q1.

Full Conference Call Transcript

Murielle Baker: Hello, and welcome to today's conference call to discuss Rocket Lab USA, Inc.'s First Quarter 2026 Financial Results, Business Highlights, and Other Updates. Before we begin the call, I would like to remind you that our remarks may contain forward-looking statements that relate to the future performance of the company, and these statements are intended to qualify for the safe harbor protection from liability established by the Private Securities Litigation Reform Act. Any such statements are not guarantees of future performance, and factors that could influence our results are highlighted in today's press release and others are contained in our filings with the Securities and Exchange Commission.

Such statements are based upon information available to the company as of the date hereof and are subject to change for future developments. Except as required by law, the company does not undertake any obligation to update these statements. Our remarks and press release today also contain non-GAAP financial measures within the meaning of Regulation G enacted by the SEC. Included in such release and our supplemental materials are reconciliations of these historical non-GAAP financial measures to the comparable financial measures calculated in accordance with GAAP. This call is also being webcast with a supporting presentation, and a replay and a copy of the presentation will be available on our website.

Our speakers today are Rocket Lab USA, Inc. founder and chief executive officer, Peter Beck, as well as chief financial officer, Adam Spice. They will be discussing key business highlights, including on our launch and space systems programs, and we will discuss financial highlights and outlook before we finish by taking questions. I will now turn the call over to Peter.

Peter Beck: Thanks, Murielle. Before we dig into the quarter, I want to walk you through what sets Rocket Lab USA, Inc. apart as one of the only true end-to-end space companies on the planet. Ultimately, it is our technologies, capabilities, and our proven execution for the world's most demanding customers. First, technology. For launch, we have Electron, the world's leading small launcher, alongside HASTE, which is delivering critical hypersonic test launch capability to the Department of Defense, and Neutron, a medium-lift rocket tailored to constellation deployment and national security missions. But launch was just the start. In 2020, we launched Photon, our first in-house developed spacecraft.

That moment marked the beginning of our evolution from a pure-play launch provider to an end-to-end space company. In just six short years, we expanded our technology stack to include a full family of highly capable spacecraft available at constellation scale. Critically, we also manufacture the subsystems and payloads that go into these spacecraft. This vertical integration means we control quality, schedule, and cost in ways that our competitors simply cannot. These technologies have given us a huge suite of capabilities. We provide tactically responsive space launch and dedicated small satellite launch with unmatched flight heritage; suborbital hypersonic and missile defense testing for our defense customers; and national security launch on both Neutron and Electron.

Our rockets also deploy and replenish constellations, launch lunar and planetary missions, and more. On space systems, our satellite and subsystems enable communication and content connectivity infrastructure; missile warning and tracking; space reconnaissance and surveillance; space protection and space control; astrophysics and earth science missions; space manufacturing; and more. Execution is what matters most. Anyone can promise capabilities, but Rocket Lab USA, Inc. is actually delivering right now for demanding and complex programs. We are enabling SDA's proliferated Warfighter Space Architecture, delivering satellites with payloads on aggressive timelines. We are supporting the Department of Defense's MaRV TB hypersonic program and the Golden Dome space-based interceptor program.

We are onboarded as a National Security Space Launch provider, and we are executing missions for the NRO, Space Force, Missile Defense Agency, DIU, and DARPA. We are a trusted partner for the U.S. and international space agencies, including NASA, JAXA, and ESA. Rocket Lab USA, Inc. hardware is flying on Artemis missions. Our technology is on Mars rovers and orbiters. We support ISS resupply and other flagship NASA missions. Commercially, we are supporting direct-to-device constellations, earth observation constellations, lunar landers, orbiters, and reentry missions. This is execution. Real missions are on orbit now or in production and generating. When the world's most sophisticated space organizations need mission success, they choose Rocket Lab USA, Inc.

We built this technology and capability to serve our customers, but we have also built something more: the ability to deploy and operate our own space-based applications and services. We are one of the only companies on the planet with this capability. This is the next significant opportunity that lies ahead for us. With everyone up to speed, let us take a closer look at how we executed against this strategy in Q1. This quarter has been phenomenal, the strongest Q1 in Rocket Lab USA, Inc.'s history. We have blown through the ceilings across all of the most important metrics: record revenue, record GAAP gross margins, record backlog, record cash position, and record launch contracts across Electron, HASTE, and Neutron.

Revenue topped $200 million in the quarter for the first time, up more than 63% versus this time last year, and our forecast has revenue coming in even higher for Q2. Our gross margins are excellent, sitting strong at 38.2% GAAP and 43% non-GAAP. Our backlog jumped to more than £2 billion in contracted revenue across our national security, civil space, and commercial programs, 20% over the quarter and 108% year-over-year, again, the highest it has ever been. That is partly thanks to the record number of contracts we signed in Q1.

In fact, with the 31 Electron and HASTE launches and five Neutron contracts combined, we booked more launches in the first three months of 2026 than we did for all of last year. Overall, we exited the quarter with $1.48 billion in cash and cash equivalents, and currently have secured access to more than $2 billion in total liquidity, giving us financial flexibility and positioning for growth and further M&A. There are more highlights across launch and space systems than we could fit into one slide, so let us go over them in more detail. Starting off with small launch across Electron and HASTE. What a truly exceptional quarter it has been for Electron and HASTE.

We booked 31 missions, which is the most we have ever signed in a quarter. Demand for Electron has always been strong, but we are seeing an inflection now across both orbital and suborbital launch. Our customers know what they get when they book on Electron, and we have 70 launches in backlog now, which is a new record. With eight missions off the pad already this year, we are on track to beat last year's launch record too, as well as hit our 100th launch later this year, the fastest anyone in the industry will have ever done that.

It is another record on the books for a $190 million 20-launch order through Kratos and the Department of Defense for MaRV TB. This is the largest single order we have seen within the program and a very clear vote of confidence from the Pentagon in HASTE's ability to deliver the hypersonic test and missile defense capabilities that the nation needs. HASTE now makes up almost one third of all of our launch backlog today. What is particularly significant about HASTE is that along with being the category leader for hypersonics test missions, HASTE's strength has helped us position in the center of America's defense architecture for the next big wave of spending.

We are already ingrained with spacecraft components and full satellite build, and when you add HASTE hypersonic rockets to test missile tracking and defense, that is almost the entire spectrum of capabilities covered by Golden Dome. The new era of space primes has begun, injecting pace and innovation into national defense. Two companies at the forefront of this are Rocket Lab USA, Inc. and Anduril, and we are excited to confirm that we are teaming up. Anduril has booked three dedicated HASTE launches—missions that combine their rapid prototyping with our industry-leading flight cadence to accelerate tech development for the Department of Defense within months, not years. The first of these launches are scheduled no earlier than November this year.

That is commercial speed and tactical responsiveness in action. While we cannot talk program or mission specifics, the main takeaway from this partnership is that it brings together two of the defense industry's most innovative prime contractors to advance defense capabilities for the nation. It has been a fantastic quarter for launch, but there is plenty to talk about for space systems as I am thrilled to confirm that Rocket Lab USA, Inc. has been selected to enable one of the nation's top national security priorities, the space-based interceptor program under Golden Dome. Rocket Lab USA, Inc. and Raytheon have been selected to demonstrate advanced capabilities for the space-based program.

This program is an important step in strengthening national missile defense capabilities, and we are proud to be contributing proven expertise to advance the development of solutions for this urgent security need. Now everyone knows we always have a strategic acquisition opportunity up our sleeve, and I am excited to share the next one. We have entered into a definitive agreement to acquire Motive Space Systems, a California-based leader in space robotics, motion control systems, and spacecraft mechanisms. Their technology is featured on the CADRE lunar rover and NASA's Mars Perseverance rover. That includes the rover's entire robotic arm, which was the most capable ever deployed on Mars in terms of load capacity, precision, and sensing.

Motive also built the zoom and focus and filter wheels for the primary imager for the mission. Most pictures you will see from Mars come through that camera, and Motive’s zoom mechanism was the first ever deployed in a planetary surface mission. This acquisition positions us to play a critical role in future lunar and planetary exploration missions, such as future commercial Mars Sample Return missions, as well as expand into significant national security programs. It will also bring the design and manufacturing of critical spacecraft mechanisms like solar array drive assemblies, antenna and propulsion gimbals, filter wheels, focus mechanisms, and precision drive electronics in-house, completing a key element of our satellite manufacturing-at-scale strategy.

We unveiled our new electric propulsion thruster for satellites called Gauss at Space Symposium last month with a 200-unit production line already established and units delivered to ourselves for some of our own constellation programs. We have been inundated with inquiries from programs in need of hundreds of units each. We are ready to break the bottleneck on electric propulsion. Rocket Lab USA, Inc. is recognized as a world leader in propulsion, so an organic electric propulsion solution is a natural progression for us, and we are excited to bring manufacturing scale, reliability, and performance to electric propulsion for the first time in the industry.

The pace at which we rolled out new products this year has been relentless, whether it has been organic or inorganic. What unifies our acquisitions and our internal innovations is a powerful vision: complete vertical integration across the entire satellite value chain. Everything you see on this page—optics, solar, laser terminals, propulsion, and other components—is already being built into our own platforms or being supplied to others. That means a good chunk of upcoming missions across civil, commercial, and national security have a Rocket Lab USA, Inc. logo on them somewhere. We are the supplier of choice across the industry, and other prime contractors turn to us for mission-critical technology.

This quarter, we also closed our acquisition of Mynaric, but the real story here is more than just adding optical comm terminals to our national security capabilities. With Mynaric, we have established Rocket Lab USA, Inc.'s first European footprint to support the German and European space industry on a much larger scale. Expansion could not have come at a better time. The European space and defense market has been accelerating its investments in sovereign space capabilities, up to €109 billion by 2030 by some estimates across the European Union, Germany, and the United Kingdom.

Rocket Lab Europe gives us boots on the ground to capture that demand, whether it is optical comms, spacecraft build, international constellations, responsive launch, or supplying sought-after subsystems in high volumes. The door is now open to programs, partnerships, and revenue streams that were inaccessible before, and Rocket Lab Europe is about positioning the company for the next phase of growth in one of the world's most strategic markets. Moving on to Neutron. I am excited to announce a new multi-launch contract for Neutron that makes up the largest contract in Rocket Lab USA, Inc.'s history: five dedicated Neutron flights plus three Electrons between now and 2029 for a confidential customer.

It was only a few weeks ago that we announced our $190 million 20-launch deal for HASTE, which was the record at that time. Now we have exceeded that deal with an even larger one. It speaks volumes to the strong and growing demand for all of our launch capabilities, and this booking means Neutron's manifest is filling up fast right through the end of the decade. This market needs medium launch. The demand signal is clear. Equally clear from these continued bookings is that customers trust Rocket Lab USA, Inc. and Neutron to deliver this medium launch capability. We have introduced and scaled new vehicles to reliable high cadence before.

We are one of only two companies in history that has successfully done this with meaningful reliability. We are doing the same with Neutron. I hope that by now you know that my stance is not discounting flights just to fill up a manifest, so I can confirm that pricing for these Neutron and Electron launches are very much in family with their commercial rates. Now on to development updates across the program. The team has made tremendous strides on the stage one tank. Design refinements have improved both the tank strength margins and manufacturability and give us confidence in the structural performance.

It has only been two months since our last Neutron update, and already we have AFP-made components sitting on the production floor. That is the beauty of automated production with AFP, not just for flight one, but also for the fleet of vehicles that come thereafter. This will feed directly into the next round of testing and qualification for stage one’s tank as we drive towards Neutron's debut. As it stands, current progress is keeping our aggressive schedule towards the first launch later this year. Stage separation tests are also underway using stage two, its interstage, and fixed fairing test articles to test a condition as close to flight for how Neutron's first and second stages will separate during launch.

Stage two deployment is arguably Neutron's most novel capability. Unlike other rockets with stacked stages that separate, Neutron's second stage is hung inside the fairing before it is deployed along its interior rails and out the mouth of the hungry hippo fairing. This reusable architecture is one of Neutron's clever competitive advantages. It allows us to reuse fairings without having to deploy separate marine assets to capture them downrange or deal with refurbishment from splashing them in the ocean. We have cleared separation events at full flight loads on the second stage article and interstage deployment system, which is great news.

We are now testing the resilience of off-nominal separation events, so if you see something broken on the test stand from here on, know that is completely intentional. For the first stage, that is happening at Middle River right now as the team works on the structure qualification. It is up on the test stand and being subjected to the loads that we should expect during launch, reentry, and landing. It will head back inside the building to be fitted out with its full suite of flight avionics and fluid systems. After that, it will be shipped off to Wallops to join the hungry hippo fairing for further assembly.

Another part of Neutron's program that we do not talk about enough, but which is a critical part of its development, is the landing barge called Return on Investment. The photos do not do it justice because this thing is massive. It is practically a launch site of its own. We are talking huge amounts of power generation, 10 megawatts across four station-keeping thrusters, enough to power thousands of homes. By the time it is completed, it will be more than 11 million pounds, or 5,000 metric tonnes. Fitting out this landing platform is coming along nicely. Housings for the platform thrusters have been installed as well as the main cabin and the aft edge of the barge.

Its power generation systems and thrusters have arrived at the shipyard in Louisiana and are ready to go in next, and we are on track for sea trials to start later this year. It is one thing to say that you are going to be reusable; it is another to actually make the investments into the landing platforms that enable it. We are doing this now well ahead of time so that we can move swiftly into reusability with Neutron as early as flight two. Finally, to round out Neutron's development, here is a look at other significant progress across the program.

From the bottom of the vehicle to the top, we have the Archimedes engines continuing to undergo extensive testing at Stennis in their flight configurations. This is for both the stage one version of the engines and for the vacuum-optimized Archimedes that will power stage two. It is nonstop hotfires across both test stands as the team really stretches the performance of these engines while running them in the full range of gimbal angles. For the thrust structure, since completing qualification, the team has gotten stuck into fitting it out with all the flight set of avionics and fluid systems.

That is taking place at our Middle River facility before it is sent out to the launch site for integrated systems testing on the pad. Stage two continues to progress with the integration of fluid systems and avionics. We also qualified its payload support structure, a separate interface on the top of the stage that physically attaches a satellite to Neutron. This payload support structure is another carbon composite structure that is designed to be as lightweight as possible since every kilogram reduces payload capacity, and having cleared qualifications smoothly, it is just days away from shipping out to Launch Complex 3 as well.

Then, right at the top of the hungry hippo, our reusable fairing system has been covered in TPS, or Thermal Protection System. Once arriving in Virginia, integration of the avionics and fluid systems on this part of the vehicle continues as well. As you can see, there has been lots of Neutron activity lately. I will remind you that these comprehensive test campaigns are all being run in parallel, all timed to converge for the first launch at the end of this year. That means a lot more exciting updates to look forward to in the coming weeks and months before the vehicle comes together and goes onto the pad. That wraps up the operational highlights.

Now over to Adam for the financial overview and outlook. Thanks, Adam.

Adam Spice: First quarter 2026 revenue was a record $200.3 million, coming in just above the high end of our prior guidance range and representing an impressive year-over-year growth of 63.5% and quarterly sequential growth of almost 12%. This strong performance was driven by significant contributions from both of our business segments and underscores the continued momentum across the business. Our Space Systems segment delivered $136.6 million in revenue in the quarter, reflecting a year-over-year increase of 57.2% and a sequential increase of 31.7%. This growth was primarily driven by increased contribution from our satellite platforms business, which continues to perform exceptionally well and provides company diversification alongside a robust, but at times lumpy, launch business.

Meanwhile, our Launch Services segment generated $63.7 million in revenue, up an impressive 78.9% year-over-year, though down 16.1% sequentially due to fewer launches in the period. Now turning to gross margin. GAAP gross margin for the first quarter was 38.2%, up slightly sequentially and above our prior guidance range of 34% to 36%, with outperformance driven primarily by solar products and launch, owing to better-than-expected absorption and lower spend, respectively. Non-GAAP gross margin for the first quarter was 43%. While down slightly sequentially, it was also above our prior guidance range of 39% to 41%.

The sequential decline in non-GAAP gross margin, which was better than expected, was primarily driven by a mix shift towards Space Systems and a modest decline in launch margin based on mix and lower revenue. Relatedly, we ended Q1 with production-related headcount of 1,448, up 250 from the prior quarter, largely driven by a transition of dedicated R&D headcount from the first Neutron test flight to our production teams related to future revenue-generating missions, as well as headcount ramps related to our recent GEOST and PCL acquisitions. Turning to backlog. We ended Q1 2026 with approximately $2.2 billion in total backlog, with launch backlog accounting for approximately 41.5% and space systems representing 58.5%.

During the quarter, launch backlog continued to gain share, supported by strong underlying trends as we convert a robust pipeline of opportunities across Electron, HASTE, and Neutron. This includes the 20 HASTE block-buy missions signed within the quarter that Peter mentioned earlier, as well as five Neutron bookings with a confidential customer. We are actively cultivating a strong pipeline that includes multi-launch agreements, large satellite platform contracts, and an increasingly diverse set of satellite component and subsystem merchant opportunities across government and commercial programs. As noted earlier, these larger needle-moving opportunities can introduce lumpiness in backlog growth, but they are critical drivers of long-term value and scale for the business.

Looking ahead, we expect approximately 36% of our current backlog to convert into revenue within the next 12 months. Additionally, we continue to benefit from relatively quick-turn business, particularly in our space systems components and subsystems businesses, that drive incremental top-line contribution beyond the current 12-month backlog conversion. In addition, as we close and integrate our new acquisitions, such as GEOST, Optical Systems Inc., Mynaric, and Motive, they will be accretive to our served addressable market opportunity, backlog, and forward revenue growth rates and margins. Turning to operating expenses. GAAP operating expenses for Q1 2026 were $132.5 million, above our guidance range of $120 million to $126 million, driven by the stock-based compensation charge related to Peter Beck's RSU forfeiture.

Non-GAAP operating expenses for the first quarter were $105 million, which was below our guidance range of $106 million to $112 million. In R&D specifically, GAAP expenses increased $1.7 million quarter-over-quarter, while non-GAAP expenses rose $1.9 million. These increases were driven by continued investment within our Neutron program paired with a seasonal step up in payroll taxes. Q1 ending R&D headcount was 949, representing a decrease of 70 from the prior quarter. The decrease in dedicated R&D headcount is due to the transition of our production teams from R&D cost centers to production cost centers as we begin the transition from the first Neutron R&D test flight to future revenue-generating missions.

In SG&A, GAAP expenses increased $11.4 million quarter-over-quarter, while non-GAAP expenses declined $1.3 million quarter-over-quarter. The increase in GAAP SG&A was primarily due to the previously mentioned Peter Beck RSU cancellation resulting in a large one-time stock-based compensation expense. Meanwhile, the decline in non-GAAP SG&A was primarily due to a one-time adjustment of accruals related to our 2025 annual bonus plan, which were ultimately lower than previously anticipated due to certain executive officers foregoing bonus awards for 2025. Q1 ending SG&A headcount was 381, representing a decrease of four from the prior quarter. In summary, total headcount at the end of the first quarter was 2,778, up 176 heads from the prior quarter. Turning to cash.

Purchases of property, equipment, and capitalized software licenses were $27.1 million in Q1 2026, a decrease of $22.6 million from the $49.7 million in the fourth quarter. This decrease reflects less capital investment in Neutron development during the quarter, particularly for the Return on Investment recovery barge as well as the pad at LC-3 at Wallops, Virginia. As we progress towards Neutron's first flight, expect capital expenditures to remain elevated as we invest in testing, production scaling, and infrastructure expansion. GAAP EPS for the first quarter was a loss of $0.07 per share, compared to a loss of $0.09 per share in the fourth quarter.

The sequential improvement to GAAP EPS is primarily due to increased revenue contribution paired with increased gross profit. GAAP operating cash flow was a use of $50.3 million in Q1 2026, compared to a use of $64.5 million in the fourth quarter. Similar to the capital expenditure dynamics mentioned earlier, cash consumption will remain elevated due to Neutron development, longer-lead procurement for our SDA programs, and investments in subsequent Neutron tail inventory as we scale the business beyond its initial test flight.

Overall, non-GAAP free cash flow, defined as GAAP operating cash flow less purchases of property, equipment, and capitalized software, in Q1 2026 was a use of $77.4 million, compared to a use of $114.2 million in the fourth quarter. The ending balance of cash, cash equivalents, restricted cash, and marketable securities was roughly $1.48 billion at the end of the first quarter. The sequential increase in liquidity was driven by proceeds from sales of our common stock under our at-the-market equity offering program, which generated $450.4 million during the quarter. In April, we completed the ATM offering by raising another $24 million in cash as well as entering into a collared forward transaction with a floor price totaling $474 million.

We also have access to capped call proceeds related to our 2024 convertible notes offering, with a maximum aggregated payment of $201.9 million by final maturity in 2029. Putting this together with our cash on hand, we now have access to more than $2 billion in liquidity, resulting from a successful series of capital raises over the last several years conducted at increasingly higher equity prices. In February 2024, we raised a $355 million convertible bond offering, with an effective post-capped call price of $8.40 a share, and followed that with a series of three ATM facilities executed at average prices of $26.19, $47.85, and $70.47, respectively.

Additionally, under the most recent ATM, we entered into collared forward transactions with a floor price of $63.61 and a ceiling price of $86.11. These funds are intended to support acquisitions in a robust M&A pipeline alongside general corporate expenditures and working capital. We exited Q1 in a strong position to execute on both organic and inorganic growth initiatives and to further vertically integrate our supply chain, expand strategic capabilities, and grow our addressable market, consistent with what we have done successfully in the past. Adjusted EBITDA loss for Q1 2026 was $11.8 million, well below our guidance range of a $21 million to $27 million loss.

The sequential improvement of $5.6 million in adjusted EBITDA loss was driven by higher revenue and strong gross margin. With that, let us turn to our guidance for Q2 2026. We expect revenue in the second quarter to range between $225 million and $240 million, representing 16% quarter-over-quarter revenue growth at the midpoint. We anticipate GAAP gross margin to range between 33% to 35% and non-GAAP gross margin to range between 38% to 40%. These forecasted GAAP and non-GAAP gross margins account for a shift in mix within our Space Systems business. We expect second quarter GAAP operating expenses to range between $138 million and $144 million and non-GAAP operating expenses to range between $120 million and $126 million.

The quarter-over-quarter increases are primarily driven by the Mynaric acquisition and ongoing Neutron development and spending related to Flight 1, including staff costs, prototyping, and materials. However, we expect to see a shift in spending from R&D to Flight 2 and beyond inventory, which is an encouraging sign of progress as we move closer to Neutron's first flight. Please note that, due to the nascency of the closing of the Mynaric acquisition and the newly announced and yet to be closed Motive transaction, the GAAP guidance figures exclude any to-be-determined impact of purchase price allocation and stock-based compensation related to these deals.

We expect second quarter GAAP and non-GAAP net interest income to be $12.5 million, which is a function of higher cash balances as well as a significant reduction in our outstanding convertible notes. We expect second quarter adjusted EBITDA loss to range between $20 million and $26 million and basic weighted average common shares outstanding to be approximately 629 million shares, which includes convertible preferred shares of approximately 46 million. Lastly, consistent with prior quarters, we expect negative non-GAAP free cash flow to remain at elevated levels, driven by ongoing investments in Neutron development and scaling production. This excludes any potential offsetting effects from any financing activities. In summary, Q1 was another quarter of strong execution.

We exceeded guidance and expectations for revenue, gross margins, and EBITDA, all while maintaining robust liquidity to fund future growth initiatives. We expect this momentum to continue, guiding to strong revenue growth as our satellite platforms business continues to scale and Neutron progresses towards first flight. Here are some of the upcoming investor events that we will be attending in the next few months. We will now open the call for questions.

Operator: Thank you. If you wish to ask a question, you will need to press 11 on your telephone and wait for your name to be announced. To withdraw your question, please press 11. We will take our first question. Your first question comes from the line of Andres Sheppard-Slinger from Cantor Fitzgerald. Please go ahead. Your line is open.

Andres Sheppard-Slinger: Hey, everyone. Good afternoon. Thank you so much for taking our questions, and congratulations on the quarter and all the great progress. Maybe one on Neutron and one on Space Systems. So on Neutron, Peter, I know you talked a lot about this during the prepared remarks, but just to simplify it for us, what are the key items that are pending that investors and we should be tracking as we get closer to the first launch? And also, curious if you can give us some of the customer feedback that you have been getting on Neutron. Since you are contracting Neutron missions ahead of that first launch, just curious on that customer feedback and reception that you are getting.

Thank you.

Peter Beck: Hi, Andres. Nice to chat to you. The key things to be watching out for are the continued placing of items on test stands because those are the large pieces of work yet to come that have risk associated with them. As we put these large pieces of the vehicle on the test stand and take them to their limits and sometimes beyond, the completion of those pieces of work is probably the easiest and most visual thing to track. Of course, there is a tremendous amount going on in the background that is less visible, but for investors, that is probably the easiest thing to focus on.

With respect to customer feedback, you can see from our strategy of not discounting Neutron at really low prices. We have held our ground there. The customers that ultimately buy those vehicles know us well, we are very well trusted, and they have complete confidence in both Rocket Lab USA, Inc. and our ability to deliver Neutron. Needless to say, there are also a lot of customers waiting to see it fly, but the more aggressive customers are making sure that they do not miss out on opportunities to fly early.

Andres Sheppard-Slinger: Wonderful. That is great to hear. Maybe just as a quick follow-up for you, Adam. On the Space Systems and on the space-based interceptor program, just curious if you can quantify that a bit further for us or any granularity in terms of the structure or expectations there alongside Raytheon? Thank you.

Adam Spice: I will provide the color I can, and I will pass it back over to Peter as regards the relationship of the partnership with Raytheon. It really is a partnership. Everybody has had a lot of visibility to what is going on with various elements of Golden Dome. SBI is one of the more visible ones. There is a limited amount that we can really talk about for that program specifically, but we envision it to be a very large opportunity, though there are gates that we have to get through.

As you are aware, this is an interesting procurement process for the government where companies like ourselves and Raytheon and others that are in the mix have to put some of their own skin in the game to unlock potentially very large opportunity on the back end. The most important thing right now is: are we able to, like we have in the past, bring really quick, cost-advantaged solutions to the market because of our vertical integration capabilities? We will be able to do things in time frames and at cost points that we think few, if any, will be able to compete with. We think we are in a good spot.

Peter, do you want to provide any more commentary?

Peter Beck: I think you have colored it beautifully, Adam. I cannot really add more to that.

Andres Sheppard-Slinger: Thank you.

Andres Sheppard-Slinger: Congrats again on all the great progress. Looking forward to that Neutron first launch. I will pass it on.

Operator: Thank you. We will take our next question. Your next question comes from the line of Kristine T. Liwag from Morgan Stanley. Please go ahead. Your line is open.

Kristine T. Liwag: Hey, good afternoon, everyone. Peter, Adam, there were a lot of moving pieces that occurred in the quarter as you continue to broaden out your capabilities and increase vertical integration. First, when you look at your capabilities today, are there any areas you are interested in filling in more? Second, as you continue to broaden out your capabilities, how do you think about the expansion of your TAM, and how should we think about opportunities as you are able to provide more solutions as space-as-a-service? Thanks.

Peter Beck: Hey, Kristine. Great to talk to you. You have seen a methodical approach from us as we continue to expand our TAMs. I would say they are all expanding for a common reason and a common direction, and that is, as we have talked about, to ultimately be able to provide services of our own in orbit. At this point, there is a lot of capability that we have accumulated, both organic and inorganic. I think we are really at the point where if anybody comes to us and asks us to build any spacecraft or satellite, we would just shrug our shoulders and get to work.

We have brought in-house a tremendous amount of capability, and it drives towards those end goals.

Adam Spice: I would add one more point. A lot of other companies, when they are going to expand into new TAMs or expand into ones they are already in, default to acquiring their way in. This quarter is a great example of us being able to execute on both the organic and inorganic side. We announced a few weeks ago, as Peter mentioned, Gauss, our EP solution that we are bringing to market. That is one where we could have spent a few hundred million dollars acquiring a startup and gone through all the scaling challenges, and probably ultimately came out with a solution that we thought would be inferior.

Instead, we dedicated a portion of our engineering team and an order of magnitude less capital to get it done, and we ended up with what we think is the best solution for the market. When we look at how we expand into new markets, we are not just focused on spending shareholder capital to go get it from acquisition. We will be very efficient and go after it organically as well, which we think yields great benefits for our shareholders.

Kristine T. Liwag: Great. Thank you. And if I could follow up on Neutron: you talked about pricing for the recent deal aligning with your average selling price for the launches. With a smaller backlog for Neutron, can you level set how we should think about the pricing for that? Also, with the upcoming launch in the fourth quarter, what has been the customer reception? You have a very strong order this quarter, higher than last year, so I want to understand the demand environment for that launch as we get closer to 4Q for the first one.

Peter Beck: Thanks, Kristine. We have always been consistent about our pricing structure with Neutron, and that remains the same. We were burned pretty heavily with discounting Electrons and flushing them out of the manifest; it took years, so we are not going to go down that road again. Of all the things that I sit awake at night worrying about, Neutron demand is not one of them. With the backlog we have currently with Neutron, the backlog is super healthy for a number of years. At this point, we also need to make sure we have capacity for other customers as well.

Adam Spice: We can also look back historically at Electron pricing. When we brought that vehicle to market, pricing was $5 million to $6 million, and we now see backlog priced with average commercial backlog around $8.5 million, with some, like hypersonics, being higher. I suspect we will see that same kind of trend as we bring Neutron to market. We tend to be very conservative upfront. We understand the value proposition that Neutron brings relative to what is arguably very scarce competition in the market, primarily Falcon 9, and we think that we will compare very favorably there and hopefully experience an upward bias to ASP as we continue to gain cadence and credibility with the platform.

Kristine T. Liwag: Great. Thank you very much.

Operator: Thank you. We will take our next question. Your next question comes from the line of Erik Rasmussen from Stifel. Please go ahead. Your line is open.

Erik Rasmussen: Thanks for taking the questions. Congratulations on the Neutron bulk order. Just trying to understand—given your comments around being pragmatic and balanced and keeping an eye on your ASPs to make sure that you are not underselling that rocket ahead of schedule—are you at a point now where we could see an acceleration of the signings of Neutron launch contracts given the strong demand that we are seeing?

Peter Beck: Potentially, Erik. I think that will certainly occur after successful flights, for a number of reasons—not just customer confidence, but also insurance rates could go down, and all of those things factor into launch costs. We are always very careful with what we commit, given that it is a development program, and we do not want to let anybody down. Having customers that have some flexibility in the beginning is super helpful.

Erik Rasmussen: Great. And my follow-up: you spent a little time on the AFP machine. It seems like you are making a lot of progress there. What are your expectations for moving from a single development machine to more of a high-cadence production on that?

Peter Beck: The single AFP machine we have fits our production for far into the future. At the end of the day, stage ones will be a fleet model, no different to a fleet of airplanes. The only part that we reproduce are the stage twos, which we can produce on the AFP super quickly. At full cadence rate, we do not see the need to invest into much more AFP infrastructure. It is well scaled right out of the chute.

Operator: Thank you. We will take our next question. Your next question comes from the line of Trevor Walsh from Citizens. Please go ahead. Your line is open.

Trevor Walsh: Great. Hey, gents. Thanks for taking the questions. Peter, on the Motive acquisition, the prepared remarks focused a lot on planetary exploration—Mars missions, lunar missions, etc.—but there was a callout around on-orbit docking and spacecraft servicing. That seems like a really large opportunity. How much is Motive leaning into that right now? Can you unpack what that specific piece looks like and if that is something we should be paying attention to for that acquisition?

Peter Beck: Thanks, Trevor. Motive brings a really interesting and unique capability. Yes, we highlighted the Mars stuff because that is extremely unique and very cool, but any actuation and high-precision actuation needs—they are literally the world experts. That ranges from Mars booms and cameras through to, as you pointed out, on-orbit rendezvous—think of it as having our very own Rocket Lab Canada arm for that kind of stuff. Also, precision drive and drive electronics for things like solar panel rotators and array drives, which is something that typically we have bought that we are now able to bring in-house. It is a unique acquisition in that it exposes us to new opportunities and gives us new capabilities.

It also closes one of the last few subsystems that we currently buy externally, with respect to solar array drives. It does a number of things for us.

Trevor Walsh: Great. Appreciate that. Adam, a quick follow-up. With respect to the step down in non-GAAP gross margin, both in this quarter and what is implied for Q2, you said that was basically Space Systems mix entering in. Is that specifically the SDA tranches coming in? I think that was called out for Q1 as the main driver there, but is that also flowing into what is happening in Q2? Is there some other dynamic we should be thinking about?

Adam Spice: You have that right, Trevor. As the SDA tranche two and tranche three programs become more of the mix, they come in at lower gross margin but bring a lot of scale with them. If you look at what that does to overall operating margins, it will be accretive. We also have normal quarterly mix changes. In Q2, there is less higher-margin launch business than we had in Q1 and Q4, and launch margin is a bit difficult to predict because now we have a mix of point-in-time revenue recognition and over-time revenue recognition. It is much harder to add a lot of predictability to what that margin is going to be.

Overall, we see margins expanding in launch as we progress through the year, as we increase our cadence on Electron. When we have periods where we mix in more subsystems and components business, those typically come at higher gross margins than these large SDA contracts. We feel very good about where we are at margin-wise and think we have a lot of opportunities to continue to drive gross margin increases. The macro trend is supportive of solid gross margins going forward.

Operator: Thank you. We will take our next question. The next question comes from the line of Michael Leshock from KeyBanc Capital Markets. Please go ahead. Your line is open.

Michael Leshock: Hey, good afternoon. I wanted to follow up on the Motive acquisition, and you mentioned how it brings in-house a lot of the cost- and supply-constrained components. You called out solar array drive assemblies specifically. For things like that, did you previously buy them from Motive, or did you have multiple other suppliers for components like that?

Peter Beck: Hey, Michael. We bought them from multiple suppliers previously.

Michael Leshock: Okay, great. Thanks. Moving to Electron, assuming demand is there for more launches—and the impressive manifest clearly implies that it is—how many Electrons could you physically launch annually? Is there anything that could potentially lead to another step change in the launch cadence, or any potential bottlenecks that might be preventing even more of an increase in those launches? Thank you.

Peter Beck: When we set up the Electron factory, we designed it for 52 Electrons a year, so we have capacity to reach there. There would be some modest capital investments to reach that, but that is basically it. We have two pads already done at LC-1, so that is not a constraint, and we have the third pad in Wallops. We are set up for that increase in cadence. It would be very modest investments to realize that. If we went over 52 launches a year, we would need a bit more real estate and expand the factory, but it is all pretty trivial stuff.

Operator: Thank you. We will take our next question. Your next question comes from the line of Ronald Jay Epstein from Bank of America. Please go ahead. Your line is open.

Alexander Preston: Hey. Good afternoon. This is Alex Preston on for Ron. I wanted to ask on Space Systems. Are you seeing or thinking about opportunities in proliferated GEO and maybe other higher orbits? The trend has been towards LEO proliferation, but in recent weeks, we have seen some momentum on contracting activity, particularly on the Space Force side. Is this a space you are looking at? To what extent could you enter that market as a prime as well, given your current capability set?

Peter Beck: Hey, Alex. Certainly, we are interested in that. A lot of the spacecraft that we build already go to higher and lower earth orbits, which necessitates an incredibly hard radiation tolerance. Those environments are not dissimilar to GEO, so many of the challenges around rad-hard and those operating environments we are already very familiar with. Going to GEO for us is not scary at all. We are happy to go to Mars and operate in deep space environments. A lot of our tech stack is rad-hard or rad-tolerant already. We are watching the GEO activity, and that is an area we could easily move to.

Alexander Preston: Great. Thanks. A follow-up on the national security side: you have capabilities on launch, HASTE, providing satellites to SDA, and now adding SBI. Are there areas you could look to expand your capabilities specifically in national security that you cannot address currently that you would like to in the near term?

Peter Beck: One of the really interesting opportunities that the GEOST acquisition brought us is very bespoke, unique national security payloads. With that acquisition, we were introduced and exposed to a lot more programs and folks than we would have otherwise. It is a core drive and a core capability within the company, and in one way or another, whether as a component supplier or a prime, we have pretty deep exposure into the national security environment now, as you point out, both through launch and through spacecraft.

Operator: Thank you. We will take our next question. Your next question comes from the line of Analyst from Baird. Please go ahead. Your line is open.

Analyst: Good afternoon, Peter and Adam. Thanks for taking our questions. I will start with the Space Systems business. You have announced a lot of updates recently—seven different capabilities in the last four months—and then in-house development of key components like the Star Tracker in Toronto and the electric propulsion thruster in New Zealand, and then the Mynaric deal. Each of these updates points towards a strategy of expanding Rocket Lab USA, Inc.'s manufacturing footprint beyond the U.S., so more of a distributed manufacturing model. What is the thought there? Should we expect more of that in the future?

Did disruption of tariffs factor into that, or was it mostly a logical business decision of being able to serve customers globally in a much easier way?

Peter Beck: A bit of all of those things you said. Strategically, for example, Mynaric gave us a foothold in Europe, and Europe, outside the United States, is the second largest market and opportunity for us. It also depends where the technology is. The Mynaric laser terminals are widely regarded as the best in the business, so if it means we have to go there to get them, that is where we will go. That was convenient that it was also very strategic for us. We operate centers of excellence, and sometimes it makes sense to do things in New Zealand and other times in various facilities in the U.S. We look at that holistically.

Analyst: Thanks, Peter. Quick follow-up. As we think about the Tranche 3 tracking layer, in late December it was about $800 million, and the release said there is a potential for subcontracting opportunities to take it up to $1 billion. Any of the new components you have announced—developed in-house and then bringing Mynaric in—change your content for future tranches of the tracking layer? Even if you cannot share exact dollar values, is there a ballpark of incremental content and ability to serve other prime customers?

Peter Beck: For transport and track and the SDA work in particular, they are all optically linked together, so there is an opportunity there. They all have high power solar requirements—opportunities there. They all need electric propulsion—opportunities there. We can be widely distributed across things. I like to think of it as, even when we lose, we kind of win, because if we lose a project, then the next day there are purchase orders turning up for solar panels, reaction wheels, and so on. Even when we win, we also win twice, because the same thing happens—if there are multiple awards, there will be a bunch of purchase orders for components for other systems as well.

That is what you saw with Tranche 3: we won twice.

Operator: Thank you. We will take our next question. Your next question comes from Edison Yu from Deutsche Bank. Please go ahead. Your line is open.

Edison Yu: Hey, thank you for taking our questions. I wanted to ask something I brought up a couple calls ago. You laid out that you have the complete satellite component portfolio, a whole line of different types of satellites. You probably saw recently Amazon acquired Globalstar. There is spectrum and potential services markets in the future. Have your views changed over the last six to nine months? Are there certain services that look more attractive or less attractive? Has your view on spectrum changed at all?

Peter Beck: Hey, Edison. Great to talk to you. We have always been consistent that our end goal is to provide services from space. That is the largest TAM, and that is where, if you own your own rocket and have your own satellites, you can be most disruptive. That thesis has not changed, but I also think it is a little academic to be talking about us doing services when we still have Neutron in development and things like that.

At the right time, we will talk more about our thoughts there, but for right now, the focus is on completing Neutron and making sure that we have all the components and everything we need at scale to be able to ultimately deploy applications in orbit.

Edison Yu: Understood. I thought I would try. Maybe something more near term over the next couple of years. I think you said your HASTE manifest was like one third already. Do you envision a future where your launch mix becomes one third HASTE—for example, for every 30 launches, 10 of them are hypersonic testing? Is that a realistic scenario?

Peter Beck: It could be. Part of this will depend on the pace and scale of Golden Dome because a key element of Golden Dome is how you test it and simulate the threats. This is where we are seeing a lot of interest in the HASTE portfolio because we can do things that are very difficult to simulate. The scale of HASTE will somewhat depend on the scale of Golden Dome and the pace at which that takes place.

Adam Spice: I would add that the international opportunity is becoming much more clear and present. That also applies to hypersonics. The geopolitical environment is driving more sovereigns to need capabilities they used to rely upon the U.S. for primarily. When you think about long-term demand for HASTE-type solutions, you do not have to think of just the U.S. as the customer base. It is going to expand beyond that. Of course, everything we do requires U.S. State Department approval and cooperation, and we would work only with the most friendly partners to the United States, but there is a bigger market out there than just MaRV TB and U.S. government opportunities.

Operator: Thank you. We will take our next question. The question comes from the line of Analyst from TD Cowen. Please go ahead. Your line is open.

Analyst: Good afternoon. This is Anton on for Gautam. Can you share more details on Neutron timing? Based on the way things are trending now, is this more of an early Q4 story or late Q4 story? Depending on the timing of the first Neutron launch, is it possible we could see maybe three payload-carrying launches in 2027?

Adam Spice: Could you repeat the first question? We had a bit of a follow-up on the audio on our side.

Analyst: Sorry about that. Can you share more details on Neutron timing? Is this more of an early Q4 story or late Q4 story? Then, depending on the timing of that first launch, could we maybe see three payload-paying launches in 2027?

Peter Beck: I do not think we have enough visibility to nail it down to a couple of weeks in a quarter at this point in time. As we approach first launch, those timelines will become much tighter. We have always said the plan is one, three, five, and that is what we demonstrated with Electron, and we think that is the right cadence. That thought remains consistent.

Operator: Thank you. We will take our next question. Your next question comes from the line of Analyst from Wells Fargo. Please go ahead. Your line is open.

Analyst: Good afternoon. This is Ben Tomic on for David. Following up on that last question, when do you plan to incorporate reusability for Neutron, and how will that impact cadence from there?

Peter Beck: On flight one, we will be attempting to reenter into a soft splashdown for Neutron. That will test all of the reentry engine relights and downrange burns. This is the area that is most unknown and the hardest to test other than actual flight testing, hence the reason for the intentional soft splashdown where we splash down in the ocean. Provided that all goes well and we are happy with what we need to do there, then we will slip the Return on Investment barge under it and attempt a landing on flight two. If we do not get the result that we want on the reentry for flight one, then we will reevaluate.

I do not want to put the barge under the vehicle until we know that we are not going to punch a hole through it.

Analyst: Got it. Great. Thanks. Going back to PWSA, can you provide an update on your contracts there and how you are thinking about that program at a high level? Have you received all the funding for Tranche 2 Transport, and how are you thinking about the transport layer going forward with that shift to the space data network?

Adam Spice: I can speak to where we are with contracts. Everything is on track. We have been hitting our milestones and getting on-time payments from our government customers— in fact, a pretty sizable one earlier this week. Everything seems to be on track there. Funding is not an issue for the programs that we are executing against. As far as the long-term direction for transport layer, there has been plenty of press and discussions and a lot of speculation, but for us right now, our focus is on executing our Tranche 2 of transport and on the missile track/missile warning for Tranche 3. Peter, anything to add?

Peter Beck: Thanks, Adam. You covered it well. Transport is one layer, but the layer that is doing the work is track, hence the reason why we focused very intently on that for the T3 work.

Operator: Thank you. We will take our next question. The next question comes from the line of Suji Desilva from ROTH Capital. Please go ahead. Your line is open.

Suji Desilva: Hi, Peter. Hi, Adam. Congrats on the progress here. Adam, you talked about the Space Systems business coming in with the PWSA program, but can you talk about what the mix of launch and Space Systems may look like and how it may trend? There are a lot of moving parts, I know, but also the gross margin implications of that as you look out the next several quarters, one or two years maybe?

Adam Spice: We will have more mix in 2026 as we progress through the year coming from Space Systems, even though we are going to have significant growth coming from Electron and HASTE. It will not be dramatic. As the mix skews more towards Electron, that is helpful to the overall corporate margin because that product is coming into its own, getting very close to, if not at, the target margins that we set for that business several years ago. In our Space Systems business, these SDA contracts are large and bring a lot of absolute dollar scale with them but at a lower gross margin profile. Also note we just closed the Mynaric acquisition.

That will contribute roughly $15 million on a run-rate basis this quarter, and that comes at lower than the Space Systems overall gross margin because it is a brand-new business. There is work to do to get that business into fighting shape the way we view Rocket Lab USA, Inc. product lines. We are excited and confident we are going to get there, but there is some work to be done. Until we get a few more quarters under our belt and really “Rocket Lab-ize” that system, it is going to be a bit of a drag on margins, but nothing too significant.

Longer term, there is no reason why that business cannot be at or greater than our target margins for Space Systems. Once we start to get Neutron in the mix—really a 2027 story onward—that is going to do what Electron did through its maturation: start off with challenged gross margins, but then, because of reusability and our experience ramping a rocket business, we think it has as much, if not better, long-term gross margin potential as Electron is exhibiting. Overall, you should not expect a dramatic shift either quarter to quarter or even over several years. It will be more of the progression we have seen.

Our long-term model for the business is strong top-line growth with corporate-level gross margins around 50% or greater and mid- to upper-twenties operating margins. The key to unlocking that is Neutron. We have to get Neutron’s first flight off and pivot to production. When we do, there are a lot of very positive things that happen to the P&L, and then, lagging that by perhaps 18 to 24 months, strong cash flow generation after we build out the fleet of Neutrons. We have all the right levers in place; it is just a matter of executing. I do not think you should expect any sharp changes to our margin profile.

It should be relatively straightforward to model with no big surprises lurking.

Suji Desilva: Thanks, Adam. Very helpful color. Bigger picture for Peter—and it could be a bit of a reach because you are not the first company people think about for lunar missions—but are there any opportunities that Rocket Lab USA, Inc. intercepts with everything Jared Isaacman talked about with NASA and IM-PACT that we are not realizing but should, or is that something more for other companies than you?

Peter Beck: It is probably other companies than us in some areas. We are a provider of a lot of critical hardware for many of those companies. For lunar, we prefer to be the picks and shovels behind those missions rather than headline those missions. It is a tricky one because typically those programs have been a little wobbly—as in, we are going to the Moon, then not, then to Mars, then back to the Moon—and I do not want to get whipsawed and have big contracts in the mix getting whipsawed back and forth. For example, when Gateway got canceled and commercial space stations changed. Those are cool programs, but it is easy to get whipsawed.

We prefer to play a quieter role. That said, there are certainly some projects with respect to Mars that we are very vocal about. Mars Telecommunications Orbiter is one we have talked about a lot, and the Mars Sample Return missions. Where we see missions that have strong, proven funding and are relatively uncontentious from changes of administration, we will go after them. I am less keen to chase shiny things that can be less certain.

Operator: Thank you. We will take our next question. The question comes from the line of Ryan Koontz from Needham & Co. Please go ahead. Your line is open.

Ryan Koontz: Great. Just a quick question here. Thinking about your recent additions to the portfolio with Mynaric and the Gauss electric propulsion, how do you think that improves your competitive position in the broader landscape? Secondly, your ability to compete financially in the big-picture, multiyear strategic level?

Peter Beck: Thanks, Ryan. Some of these acquisitions are driven by pure pain. If we look back through some programs, the things that caused a lot of pain for us were things like electric propulsion that was constantly late, constantly expensive, and not great solutions. Mynaric was slightly different—great technology, but always struggled with respect to delivery. Some of these things are driven from pain. Owning those things means you can resolve the pain. That puts you in a much stronger competitive position, both from an on-time or faster timeline delivery and, of course, when they are vertically integrated, the cost structure is much more effective.

Being vertically integrated and owning these critical, unique key pieces of the space ecosystem naturally gives a competitive advantage.

Adam Spice: I would add a tangible example of the benefits. If you look at our Tranche 3 win for the $816 million, one of the main reasons we think we prevailed is because of our level of vertical integration. If you look at the margins we model for that—which are very much in line with our Space Systems platform business—they look quite different than those of people who won similar awards but are not as vertically integrated.

Not only does it position us to win because the customer can have more confidence that we will deliver on schedule with the performance we commit to, it also puts us in a much stronger position to win financially because we can turn what would otherwise be a lackluster financial profile into something quite strong. It is important on both levels: strategically enabling us to execute on programs, and delivering the kind of returns that we and our shareholders expect.

Operator: Thank you. We will take our next question. Your next question comes from the line of Analyst from BTIG. Please go ahead. Your line is open.

Analyst: Hey, this is Ned Morgan on for Andre this afternoon. Could you size up how much of Space Systems revenue is being consumed internally versus third parties this year, and how that could trend over time?

Adam Spice: I think you are asking what percentage of our production in key subsystems goes to internal programs versus merchant sales. It depends by product line. For our solar business, we do not yet consume a majority of our solar capacity for our internal programs. That is still very much a line of business where the majority of revenue is coming from other satellite manufacturers we sell to, like Lockheed and Airbus. For electric propulsion with Gauss, that is going to be disproportionately internally focused initially because we will prioritize for key strategic programs. Make no mistake, every product we develop is designed not only to meet our internal needs but also to serve the merchant market.

For reaction wheels, for example, the vast majority of our production goes to third parties versus internal supply. There is no holistic number that would be helpful; it is a case-by-case, product-by-product look.

Analyst: Thank you. One more trailing back to how big HASTE and hypersonics in general could be. What would make you decide to broaden your hypersonic offerings beyond just HASTE? There are other programs like MoC XL out there. Any interest?

Peter Beck: We have exposure across a wide field. HASTE is a very specific requirement, and we are also involved in SBI. We view opportunities where we can add the most value and that are strategic for us. As various programs rise, we take a look and make decisions based on those factors.

Adam Spice: If I could wave a magic wand and come up with the ideal mix, I would want HASTE to represent the base business for the Electron platform that gets us to our target margins—which we have talked about as about 24 launches a year. If we could have 24 launches a year be HASTE, that covers the nut for that business and gets us absorbing a lot of the overhead. Then everything else becomes gravy and additive to margin. Could it get there? There is a possibility. This year, if you look at the mix of HASTE launches out of our total manifest, it is a little over 20%–25%.

There would be work yet to get to a baseline of two HASTE launches a month, but as mentioned earlier, it does not just have to come from U.S. programs. There is a good chance demand will come from different places.

Operator: Thank you. We will take our next question. Your next question comes from the line of Analyst from Craig-Hallum Capital Group. Please go ahead. Your line is open.

Analyst: Hi, guys. This is Vijay on for Jeff. Thanks for taking the question. On subsystems, how are you tracking progress post acquisition? How much cost are you able to take out, how much can you increase margins, and how much can you scale production? What are you looking at there?

Peter Beck: It depends on the business, Vijay. Some require a lot more work than others. Historically, we have acquired very profitable little companies, and the “Rocket Lab-izing,” as Adam called it, is relatively limited to black wall snack machines and T-shirts versus complete financial restructure. Mynaric is one that will take a lot more work. Consistent with Adam’s comments around our financial model, we have very clear gross margin targets, and these business units are run almost as their own entities. I treat them like startups, so they have to come pitch to me for money, they are expected to grow every year, and whether they do that through selling more products or creating new products, that is their business.

We run them fast and hard like little startups, and that has worked out really well for us.

Operator: There are no further questions. I would like to hand back for closing remarks.

Peter Beck: Thanks very much, everybody, and thanks for joining us today. We look forward to sharing more exciting updates in the months ahead. Thanks very much.

Operator: This concludes today's conference call. Thank you for participating. You may now disconnect.