Rocket lab reveals wider loss, fatter pipeline, cost of Covid delays

Rocket Lab has reported a wider net loss for first half 2021, losing US$32.5 million for the six months to June 30, versus its US$23.5m loss for the same period last year.

But revenue grew from US$8.8m in the first half of 2020 to US$29.5m.

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With another heavy loss expected amid a pandemic-crimped launch schedule, and Rocket Lab’s broader guidance for several years in the red, investors’ had a keen eye on the Kiwi-American company’s pipeline.

Here, there was good news. Rocket Lab said forward-bookings had increased 136 per cent from the year-ago US59.9m to US$141m (which was also an advance a pre-IPO presentation that put forward bookings at US$127m)

Today’s announcement came after Rocket Lab’s shares, which listed on the Nasdaq on August 25 at $11.50 then sunk as low as US$9.50, enjoy four straight sessions of gains. The stock closed today up 4.07 per cent to a post-listing closing high of US$15.09 for a US$6.8b market cap.

Stake CEO Matt Leibowitz said the stock was up 4 per cent in post-close trading – a signal that investors had reacted positively to today’s report.

The increased pipeline was in part because Rocket Lab is signing more business – and today the company added to that with the announcement it had signed a contract to launch 25 satellites for Kinéi​s, a French company that is building a network of satellites for global wildlife, fisheries, climate, and environment monitoring.

But it also reflected New Zealand’s renewed lockdowns, which have pushed out Rocket Lab’s current slate of launches. With Rocket Lab’s assembly plant and Mission Control in Auckland under level 4 lockdown, launches can’t take place from Launch Complex 1 at Mahia – and Rocket Lab’s new Launch Complex 2 at Nasa’s Wallops Island facility in Virginia is still awaiting final sign-off from the US space agency.

On a conference call, CFO Adam Spice told US analysts that while it was unknown how long NZ’s level 4 restrictions would last, the forward-bookings were “non-perishable.”

Spice also highlighted that increasing diversity of revenue with space systems (satellites and Rocket Lab’s Photon spacecraft) contributing 18 per cent of total revenue in the period, compared to 3 per cent in the first half of 2020.

In an investor presentation, Rocket Lab guided to softer second-half revenue, saying: “Despite our manifest supporting up to five launches and US$40m in revenue, we are forecasting Q4 revenue to be US$17 million to $US20m assuming New Zealand Covid-19 restrictions ease prior to the end of September. “

Full-year revenue is expected to be in the range of US$50m to US$54m, “with an estimated New Zealand Covid-19 shutdown impact of US$10m to US$15m.”

Asked on the conference call if the revenue guidance was on the conservative side, Spice again pointed to the open timeframe of pandemic restrictions in Auckland.

The CFO reiterated founder Peter Beck’s earlier comments to the Herald that as well the larger, crew-capable Neutron rocket, some of the US$750m raised from the Nasdaq listing would go to expanding the company’s space systems division – possibly by acquisition.

The space systems segment is forecast to account for around 40 per cent of Rocket Lab’s revenue by FY2027 – a point by which the company says it will be making operating earnings of US$505m on US$1.57b turnover.

Rocket Lab bought Canadian satellite component maker Sinclair Interplanetary for an undisclosed sum last year for an undisclosed sum.

“The Sinclair acquisition has really emboldened us to lean forward and look at other opportunities, Spice said on the call today.

Rocket Lab was assessing up to two dozen potential acquisitions.

“The investability of space is a relatively new phenomenon,” the CFO said. “For quite some time, it was very difficult to raise private capital in this market. So there’s a lot of mom-and-pop or bootstrap companies, where they’re founder controlled – really nice businesses, though, that are reasonably integratable and digestible.”

While the plethora of small players made for good acquisition targets, Beck said on today’s call that they could be challenging to work with.

Rocket Lab was constructing its own facility in Auckland to make reaction wheels – a key satellite component – because it could take a six to eight-month lead time for his company to source such specialised hardware in a fragmented supplier market of many capable but small-scale players

“When you turn up to a satellite component manufacturer and you want a couple of thousand of something, everybody’s head just explodes,” Beck told analysts this morning.

He wanted Rocket Lab to continue to become more vertically-integrated and self-sufficient. Its new plant in Auckland would be able to turn out 2000 reaction wheels annually.

“They will own more of the value chain,” Lunman said.

“It’s also about speed and scale, given they’re in a space race situation with the likes of Elon Musk and others.”

'Relatively positive'

“Our first glimpse of Rocket Lab has been relatively positive, with revenue for the period up 237 per cent up year on year, combined with a health bump to gross margins from a negative position to 13,” Hatch co-founder Kristen Lunman told the Herald.

“Interestingly, there aren’t a lot of analysts covering Rocket Lab yet, but investors are pleased with a good backlog of launches – more than doubled over the same period last year), and new customers like Kinéis who are launching satellites to connect IoT devices. Also appears that the development of the game-changing Neutron launch vehicle is tracking to plan.”

Asked on the conference call about progress on the Neutron, Beck said Rocket Lab was currently playing its cards close to its chest, promised a substantial update “in a few months.”

More Kiwis investing

There were around 6000 New Zealanders invested in Rocket Lab (at that time via its SPAC partner Vector) going into the IPO across Hatch, Sharesies and Stake.

Hatch has since seen at least 1000 more invest.

And Sharesies CEO Leighton Roberts updated the Herald this morning that, “There are currently just under 11,000 Sharesies investing, with $12m in holdings for Rocket Lab.”

Roberts added, “We have seen a shift where investors have increased their holdings, which we can put down to share prices increases, which were up by 50 per cent last week.

“Rocket Lab appears to be doubling on growthAnd although we cannot predict the profitability, their revenue is clearly showing that it has trebled, when we look at the previous quarter.”

Stake’s Leibowitz said, “Rocket Lab has had a stellar week on the Nasdaq, with shares up more than 50 per cent on the listing day opening price. That kind of growth is turning investors’ heads, and we’re seeing increased interest on the stock from investors on Stake across the board. Rocket Lab had its second-biggest day on Stake in the last session, trading over $770,000.

“The market is less interested in loss figures than growth, and Rocket Lab has provided encouraging signs on that front,” Leibowitz said.

“Today’s earnings show a company positioned for more growth, with revenues tripling on the previous year, and doubling its pipeline of planned launches. Covid has thrown a spanner in the works, but early signs look good, and investors are continuing to pick up on that, the stock was up over 4 per cent in post-market trading.”

Top of the listed space company heap

After four straight sessions of gains now has a market cap of US$6.8 billion.

Founder Peter Beck’s54.53 million shares are now worth some US$839m ($1.2 billion).

Its recent bull run has also seen Rocket Lab become the most valuable publicly-listed pure-play space transportation company, passing Virgin Galactic – whose shares have fallen by a third to US$6.3b over the past month.Elon Musk’s privately-held SpaceX – with a private equity valuation of some US$74b – is still the top dog overall by some margin.

And it hasn’t hurt Rocket Lab’s prospects that Nasdaq-listed rival suffered its third test launch failure last week – with a spectacular clip of its sideways hopping rocket going viral.

Astra’s failure – and a second very public fail around the same time by another rival, Firefly with is Alpha – underlined that while there are dozens of space transportation startups, only SpaceX and Rocket Lab have managed to get a commercial private launch service off the ground (Virgin Orbit is the small satellite-focused sister company of Virgin Galactic. It has so far staged two test flight, releasing a smaller craft taking to high altitude by a 747).

Shares in Astra fell another 9 per cent today, taking its market cap down to US$2.3b.

WSJ: 'Rocket Lab the safest bet'

Rocket Lab’s move into space stock pole position has also been helped by the Wall Street Journal. Last week, the paper told readers to look past the glamour of space tourism to satellite launchers, concluding “Rocket Lab is probably the safest bet” – both because of its proven performance launching more than 100 satellites, and its attractive Ebitda to enterprise value multiple.

The latest surge is potentially good news for Sir Stephen Tindall’s K1W1, ACC’s investment arm and early Rocket Lab backer Mark Rocket, all of whom had holdings somewhere below the 5 per cent threshold as Rocket Lab listed on the Nasdaq (none have so far commented on whether they have sold any of their stock).

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And it’s also a boon for more than 100 past and present Rocket Lab staff who had been granted share bonuses worth more than $1m at last Thursday’s listing price (which the stock is now above), and more than 180 granted stock now worth more than $500,000.

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