When it comes to space, SpaceX gets all the headlines. So if you want to get some attention in the space game, it makes sense to cast yourself as "the next SpaceX."
To an extent, that's how a lot of people think of New Zealand-based Rocket Lab (RKLB 2.51%) -- as a publicly-traded SpaceX, albeit with smaller rockets and earlier in its evolution.
For example, in 2021, SpaceX launched rockets to space 31 times; Rocket Lab launched only six times. With this year half over, Rocket Lab's not launching much faster this year than last -- just three times so far. And given the launch rate, it's no huge surprise that when Rocket Lab reported Q1 earnings Monday night, it didn't show a lot of growth in its launch services business. One single Q1 launch brought in just $6.5 million in revenue.
But Rocket Lab has a secret weapon.
Rocket Lab Photon interplanetary spacecraft. Image source: Rocket Lab.
As it turns out, total revenues at Rocket Lab surged 124% year over year to $40.7 million in Q1. And the reason for that is that Rocket Lab's new "space systems" business, which builds spacecraft for its customers, absolutely exploded in size, growing 1,873% year over year to account for 84% of company revenues at $34.2 million.
As CEO Peter Beck explained, Rocket Lab has implemented a "rapid succession of space systems acquisitions," employing its IPO cash to transform itself into an "end-to-end space company delivering complete spacecraft design and manufacturing, satellite components, flight software, and launch services." As a result, the company won a $143 million contract in Q1 to build 17 spacecraft buses for Canadian space company MDA and its client Globalstar.
This was Rocket Lab's biggest-ever contract win -- and it never would have happened if Rocket Lab had confined its business to just building rockets.
What comes next
Looking ahead to Q2, Rocket Lab forecasts that it will grow revenues at least 25% sequentially (and according to data from S&P Global Market Intelligence, 180% year over year), to somewhere between $51 million and $54 million. Launch revenue is expected to be about $19 million, suggesting the company will launch once more this quarter (it's already launched twice in Q2). Space systems revenues should range from $32 million to $35 million -- roughly equivalent to Q1 revenues.
With gross profit margins of 11% to 13% ($6 million gross profit), operating costs of $39 million to $41 million, and $2.5 million in interest on its debt, there's zero chance of Rocket Lab turning profitable in Q2. Then again, most analysts don't forecast profitability before 2025, so that's no huge surprise.
For now, revenue growth is the name of the game, and the good news is that Rocket Lab is growing just fine.
