Rocket Lab Corporation (RKLB +1.14%) won a $397 million contract from the U.S. Space Force to build, launch, and operate a new class of military satellite, the company announced this week.
It’s the largest in a run of defense awards the company has collected this year, and puts Rocket Lab hardware inside one of the Pentagon's flagship tracking programs. Rocket Lab's work covers every part of the chain: designing and building the satellites, launching them, and running them once they are up.
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Key Data Points
What the $397 million Space Force contract covers
The contract falls under the Space-Based Airborne Moving Target Indicator (SB-AMTI) program, a Space Force effort to track moving aircraft and missiles from orbit instead of from crewed radar planes. Space Systems Command will split $615 million across three companies, with Rocket Lab taking the lion’s share. STR LLC and the third unnamed company round out the trio.
The spacecraft are what the company calls Flatellites, a flat-panel design meant to be flown in large numbers, carrying sensors and fast data links back to the ground. They are slated to ride Neutron, the medium-lift rocket Rocket Lab has been developing for years, so critical to its future success. The contract also carries an option for additional satellites.
The award is a firm-fixed-price other transaction authority (OTA) agreement, a contracting format the Pentagon uses to move faster than standard federal procurement rules allow. Fixed price means any cost overruns come out of Rocket Lab's pocket rather than the government's.
Rocket Lab joins SpaceX on a flagship Pentagon program
Rocket Lab is not the program’s first contractor. The Space Force handed Space Exploration Technologies Corp a $4.16 billion contract in May to build the initial constellation. Space Systems Command has said Rocket Lab’s task order is meant to bring in additional technical approaches and cut the program's reliance on any single supplier.
Rocket Lab closed the first quarter with a backlog -- contracted work it has not yet delivered -- of about $2.2 billion, and it has kept adding since, including a $266 million Space Force deal in late July for a dozen suborbital test launches. Management says there are more than pointed to a manifest of more tha 70 missions planned at this point.
Why Neutron is the key to Rocket Lab's future
Rocket Lab is now doing work on top national-security programs alongside SpaceX. There has been a whole lot of progress in the last few years. The company could be at a serious inflection point.
That being said, nearly all of it rides on Neutron, and Neutron has had some trouble in its development. The first launch is scheduled for the fourth quarter, but if the timeline gets pushed, it wouldn’t be the first time. Neutron has already been delayed multiple times. And because the contract is fixed-price, serious delays or failures overruns could cost Rocket Lab dearly.
Rocket Lab has been steadily growing revenue and managed to shrink its net loss last quarter, so it is headed in the right direction, but profitability is still a way off. Successfully getting the Nuetron program off the ground will do a lot for the company in that regard, opening a new scale of contract and hopefully improving margins.
