Rocket Lab (RKLB) Q4 2025 Earnings Call Transcript

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Date

Thursday, Feb. 26, 2026 at 5:00 p.m. ET

Call participants

• Founder & Chief Executive — Sir Peter Beck
• Chief Financial Officer — Adam Spice

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Risks

• CFO Spice stated, "We anticipate a slight step down in both GAAP and non-GAAP gross margins in the first quarter, with GAAP gross margin to range between 34% to 36% and non-GAAP gross margin to range between 39% to 41%, with a modest sequential decline driven by a greater mix of space systems versus higher-margin launch, and a weaker margin mix within our space systems segment."
• Elevated negative cash flow is expected as Adam Spice detailed, "we expect negative non-GAAP free cash flow in the first quarter to remain at elevated levels, driven by ongoing investments in Neutron development and scaling production."
• Neutron’s first launch was delayed to the fourth quarter of 2026 due to an unexpected Stage 1 tank failure related to a manufacturing defect introduced by a third-party hand layup process, requiring a shift to automated production and additional design modifications.

Takeaways

• Annual revenue -- $602 million, representing 38% growth year over year and setting a new company record.
• Quarterly revenue -- $180 million, up 36% from the prior year's quarter and 16% sequentially from the third quarter of 2025.
• Backlog -- $1.85 billion at quarter-end, up 73% year over year and 69% sequentially from the third quarter of 2025, with 37% of current backlog expected to convert to revenue within the next 12 months.
• Gross margin -- GAAP gross margin of 38% and non-GAAP gross margin of 44% for the quarter, representing increases of 100 and 240 basis points sequentially, respectively.
• Gross margin (full year) -- GAAP gross margin was 34.4%, improving 780 basis points; non-GAAP gross margin was 39.7%, up 770 basis points year over year.
• Launch activity -- 21 Electron and HASTE launches for the year, a new record; seven launches executed in the quarter.
• Largest contract award -- $816 million contract from the Space Development Agency for 18 advanced spacecraft, the largest in company history, with total potential capture value near $1 billion including subsystems.
• Segment revenue -- Space systems generated $103.8 million in the fourth quarter of 2025, down 9.1% sequentially; launch services produced $75.9 million, up 85% quarter over quarter driven by increased launches.
• Operating expenses -- GAAP operating expenses for the quarter were $119.3 million, below guidance; non-GAAP operating expenses were $104.5 million, also below guidance, driven primarily by Neutron development spending.
• Capital expenditures -- $49.7 million in the fourth quarter of 2025, reflecting investment in Neutron development, facility expansion, and infrastructure for first flight; up $3.8 million from the third quarter of 2025.
• Cash & liquidity -- $1.1 billion cash and equivalents at quarter-end, driven by $280.6 million in proceeds from the at-the-market equity program.
• Adjusted EBITDA -- Fourth quarter of 2025 adjusted EBITDA loss of $17.4 million, below guidance range, decreasing by $8.9 million sequentially due to revenue and margin improvements.
• Free cash flow -- Non-GAAP free cash flow usage was $114.2 million, compared to $69.4 million in the third quarter, primarily due to employee equity-related tax timing and continued Neutron development investment.
• Neutron launch timeline -- First launch now targeted for the fourth quarter of 2026 following a Stage 1 tank manufacturing defect and resulting design modifications.
• Acquisitions -- Completion of Optical Support Inc. and Precision Components Limited in the first quarter of 2026, augmenting vertical integration, with Precision Components transaction closing on the day of the call.
• Headcount -- Production-related headcount at quarter-end was 1,244, up 46 sequentially; R&D headcount was 1,012, down seven; SG&A headcount was 389, up four; total headcount at quarter-end was 2,645, up 43 from the previous quarter.
• 2026 first quarter revenue guidance -- Company projects first quarter 2026 revenue of $185 million to $200 million, a midpoint increase of 7% sequentially and 57% over the prior year quarter.
• Margin guidance -- First quarter 2026 GAAP gross margin expected between 34%-36%, non-GAAP 39%-41%, with management indicating a shift to a greater mix of space systems revenue at lower margin than launch.
• SDA revenue recognition -- "We expect approximately 37% of our current backlog to convert into revenue within the next 12 months, which includes preliminary Tranche 3 revenue recognition estimates which we believe will prove to be conservative," according to CFO Spice.

Summary

The earnings call highlighted a record backlog and significant annual revenue growth, primarily driven by the Space Development Agency award and expanding launch cadence. Rocket Lab Corporation (NASDAQ:RKLB) expanded its manufacturing capabilities through targeted acquisitions, supporting further vertical integration. Management signaled a shift in product mix impacting near-term margins and guided for continued elevated investment and negative free cash flow as Neutron development intensifies ahead of its anticipated launch.

• CFO Spice called attention to the shift in space systems and launch segment mix, stating, "space systems segment delivered $103.8 million in revenue in the quarter, reflecting a sequential decrease of 9.1%. This decline."
• Multiple bulk and multi-launch contracts were signed in the quarter, including four new BlackSky launches and new national security agreements, expanding both volume and customer diversity.
• Recent acquisitions, including GEOST and Optical Support Inc., directly contributed to new prime contract wins and enhanced Rocket Lab Corporation's vertical integration in payload and optical subsystems.
• Discussion of Neutron's schedule reaffirmed management’s focus on reliability despite delays; CEO Beck said, "The priority will always be to bring a reliable rocket to market, even if it means taking a few extra months."
• Backlog is expected to support predictable multi-year revenue conversion, with management emphasizing control through vertical integration and pipeline strength across government and commercial programs.

Industry glossary

• HASTE: Hypersonic Accelerator Suborbital Test Electron, a Rocket Lab Corporation variant of Electron used for hypersonics payload testing.
• SDA: Space Development Agency, a U.S. government entity awarding satellite and missile detection/tracking contracts.
• AFP: Automated Fiber Placement, a technology for automated composite component manufacturing in rocket tanks.
• Tranche: A program segment or phase within SDA procurement, e.g., Tranche 2 or Tranche 3 representing successive cycles of satellite contract awards.
• PWSA: Proliferated Warfighter Space Architecture, the overarching SDA network including Transport and Tracking Layers.
• LC-3: Launch Complex 3, Rocket Lab Corporation’s U.S. launch site for Neutron vehicle integration and testing.
• Archimedes: Rocket Lab Corporation’s next-generation rocket engine being developed for the Neutron launch vehicle.
• Golden Dome: Referenced government missile defense program related to hypersonics and tracking-layer satellites.
• ESCAPADE: A Mars mission for NASA and UC Berkeley involving twin satellites built and launched by Rocket Lab Corporation.

Full Conference Call Transcript

Morgan Content: Thank you. Hello, and welcome to today's conference call to discuss Rocket Lab USA, Inc.'s fourth quarter and full year 2025 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 and 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 copy of the presentation will be available on our website.

Our speakers today are Rocket Lab USA, Inc. founder and Chief Executive, Sir Peter Beck, as well as Chief Financial Officer, Adam Spice. They will be discussing key business highlights, including updates on our launch and space systems programs. We will discuss financial highlights and outlook before we finish by taking questions. So with that, let me turn the call over to Sir Peter. Thanks very much, Morgan.

Peter Beck: I am going to start today by stealing some of Adam's thunder and sharing some of the financial highlights upfront. We had a new annual revenue record in 2025, coming in at $602,000,000, which represents 38% growth year on year compared with 2024. We also had a record quarter in Q4 with revenue coming in at $180,000,000, which was up 36% from Q4 last year. At the end of Q4, our backlog sat at a record $1,850,000,000, which is up 73% from the same time in 2024. Finally, we also achieved record gross margins in Q4 at 38% GAAP and 44% non-GAAP.

We intend to say on launch day that it is greens all across the board and a great result. It comes down to one thing, and it is simply relentless execution from the Rocket Lab USA, Inc. team across our launch and space systems programs. Here are some highlights from that execution. I will not labor on these now, as we will go into more detail in the upcoming slides. Ultimately, we launched and signed a record number of Electron missions and led the way on hypersonics testing with HASTE, and achieved some significant qualification and development milestones on Neutron.

On the space systems front, we were awarded the largest contract in Rocket Lab USA, Inc.'s history, successfully delivered the ESCAPADE mission to Mars for NASA, and we had record growth across all of our space systems component businesses. On acquisitions, we welcomed GEOST in 2025, which officially marks our entrance into payloads, and followed this up in Q1 2026 with the acquisition of Optical Support Inc., which further strengthened our optical systems offering. We also expanded our machining and manufacturing footprint with the acquisition of Precision Components Limited, which actually just closed today, and will ultimately support continued scaling of the components manufacturer for both launch and space systems. More on these in the slides ahead.

Peter Beck: So onto some quick highlights for Electron and HASTE. Rocket Lab USA, Inc. remains the small launch leader globally as the only rocket delivering reliable and high cadence launch opportunities for smallsat. We launched 21 missions across Electron and HASTE in 2025, which was a new company record. We also launched seven missions in Q4, our highest number of launches in a single quarter to date. Meanwhile, there were no successful orbital launches of a new U.S. or European small launch vehicle in 2025 at all. It is very clear when smallsat operators need a dedicated ride, they come to Rocket Lab USA, Inc.

We are proud to hold this title and look forward to expanding the record again even further this year. The U.S. government has made no secret of the fact that faster and more frequent hypersonic testing is an urgent need and a national priority. Rocket Lab USA, Inc. is the only credible provider that has demonstrated the ability to deliver this capability right now, not years into the future. In 2025, we conducted three successful HASTE missions, and the next one is on the pad in Virginia now, just days away from March. This kind of cadence and reliability positions us well for programs like Golden Dome.

With more HASTE missions on the books this year, we will be rapidly building that moat even further. It was a record year for launching missions, but also for signing them. We added more than 30 new launches to the manifest across Electron and HASTE. These came from a nicely diversified customer base spanning the U.S. and defense, commercial constellations, and international organizations. We had many returning customers sign new contracts, often for bulk buys and multiple launches, but also added new names too, which demonstrates that our small launch customer base continues to expand.

In Q4 alone, we signed a new multi-launch deal with BlackSky for four new launches, which brings the total number of missions they booked with us to 17. We also signed a contract with a new confidential customer in support of national security. As always, our pipeline for Electron and HASTE remains strong, and we are excited to continue signing new and novel missions as well as standard repeat mission profiles in 2026.

Peter Beck: On to space systems. Rocket Lab USA, Inc. is not new to being a prime contractor, but in Q4, we made an announcement that highlights our substantial growth in the satellite market and further cements our position as a preferred disruptive prime. The Space Development Agency, or SDA, awarded us an $816,000,000 contract to build an advanced constellation of 18 spacecraft equipped with advanced missile warning, tracking, and defense sensors to provide global and persistent detection and tracking of emerging missile threats, the largest single contract in Rocket Lab USA, Inc.'s history.

What is more, as a leading merchant supplier into the other Tranche 3 prime contractors, there are additional subsystem opportunities that could add the total capture value to approximately $1,000,000,000 for supplying payloads, solar power, reaction wheels, star trackers, software, and other solutions from our broad portfolio of capabilities. It is important to point out that the acquisition of GEOST played a significant role in securing this award. Rocket Lab USA, Inc. is the only commercial provider producing both the spacecraft and payloads in-house for SDA and for the Tracking Layer Tranche 3, supporting the government's goals for speed, resilience, and affordability in space-based missile defense.

This award follows on from a previous prime contract award for SDA Transport Layer Beta Tranche 2 program. With the two programs combined, we now have more than $1,300,000,000 in contracts signed with the SDA. I think an important takeaway from this announcement is not just that we won a significant contract; it is that Rocket Lab USA, Inc. is repeatedly winning large awards that have historically been the exclusive domain of the legacy aerospace primes. We are seeing a new world order established in the defense world with the rise of companies like Anduril and Palantir playing leading roles in disrupting slow, bloated traditional players.

Rocket Lab USA, Inc. is clearly doing this in space and unseating the old guard.

Peter Beck: Okay. Onto Mars. In Q4, the ESCAPADE mission launched and the twin satellites we built for NASA and UC Berkeley are now well on their way to the red planet. With ESCAPADE, we have proved that it is possible to deliver decadal-class missions on a drastically shortened timeline and for significantly smaller budgets than typical interplanetary missions. We made this possible through vertical integration, maintaining strict control over schedule and budget. With both spacecraft now successfully commissioned and in a loiter trajectory near L2—that is a Lagrange point—around 1,500,000 kilometers from Earth, Rocket Lab USA, Inc.'s primary role in the mission will soon be complete when we hand it over to the team at UC Berkeley next month.

Even once control has been transferred, we will be cheering blue and gold along as they arrive in Mars orbit in September next year. Our role in ESCAPADE might have reached mission success, but we are not quite finished with Mars yet. We have made no secret of the fact that we think Rocket Lab USA, Inc. is the strongest contender to deliver NASA's Mars Telecommunications Orbiter program. An MTO will be fundamental to everything else on Mars, enabling science now and human exploration in the future. We will make it possible with a rare combination of proven spacecraft deep space mission experience, reliable rockets, and end-to-end space systems capability, as a vertically integrated mission provider.

Our hardware and our software have enabled some of the most ambitious and successful Mars missions in history, including the Mars InSight lander, Perseverance rover, and Ingenuity helicopter. Mars is in our DNA, and Rocket Lab USA, Inc. has more hardware on and orbiting Mars than just about any other company today.

Peter Beck: Okay. Onto programs. We hit a key milestone for LOXSAT, which is a launch plus spacecraft mission to build and deploy an on-orbit cryogenic fuel depot for NASA. This spacecraft is now complete and will be marching steadily towards launch later this year. Okay. We also have an exciting development to share from our space solar business. It requires some background on the state of the art of space solar power—bear with me a little bit on this one. The satellite industry is rapidly expanding and projected to grow seven times by 2035. Those satellites will all need solar power.

Rocket Lab USA, Inc. is the world leader in space solar power, so it should come as no surprise that we are the best positioned to serve this growing market. In addition, ambitious opportunities are on the horizon from space-based data centers. As AI and compute demand soar and data centers on Earth reach their limits, companies are beginning to seriously explore moving data centers to orbit, where they can take advantage of the cool conditions and infinite solar energy. But rapid market growth of this size, both for typical constellations and futuristic projects like space-based data centers, will be hampered if traditional solar cells are the only option.

So it is against this backdrop that I am proud to announce that Rocket Lab USA, Inc. is introducing space-optimized silicon solar arrays. While silicon is not new in space, it has always suffered from low radiation tolerance and very low life expectancy with poor performance. Our team are the experts in space solar, having developed some of the most complex cells for flagship missions to the sun and most of the missions on Mars today. The team has produced a silicon array that is a game changer. By harnessing silicon, we are able to deliver a really low cost per watt at industrial scale, enabling gigawatt-class power generation in space at kilometer-size scale using mass-manufacturable, lightweight, and modular systems.

We have also taken the additional step of developing a hybrid solar array that incorporates both high-efficiency cells and silicon cells, an approach that leverages the benefits of both technologies. When size, weight, and power or performance are at a premium, traditional high-efficiency cells are enabling. When cost, schedule, or constellation scale are required, silicon cells can meet that demand. When these factors must be traded off and balanced, hybrid arrays enable a combination of the two to deliver an optimum performance at a compelling value.

Peter Beck: So for new products, we move into new acquisitions. On the topic of acquisitions, no doubt everybody is interested in an update on Mynaric. The German government is still working methodically through the regulatory review process, so there is not much to add at this stage while that runs its course as expected. We look forward to providing an update once that is concluded. There are a few stories floating around in the media with different theories on how the transaction is progressing. All that I would say there is do not believe everything you read in the media and online. Otherwise, this month we have welcomed Optical Support Inc. to the Rocket Lab USA, Inc. team.

OSI is a Tucson-based leader in the design and manufacture of custom high-precision optical and electro-optical mechanical instruments. OSI's technology is a key enabler for national security and commercial satellites. They are a key subsystem in Rocket Lab USA, Inc.'s payloads for space protection, space domain awareness, missile warning, and tracking and defense. The vertical integration opportunities here are clear, and we look forward to scaling production and capabilities to serve our customers and our own programs, as we have done with many of our other successful acquisitions. And last but not least, we have also acquired Precision Components Limited in New Zealand, again a known and trusted supplier to us that is now part of the family.

With this acquisition, we have established a new precision machining complex that enables a huge increase in machining capacity. I think it is worth spending just a quick moment here on the strategic importance of our recent optical-focused acquisitions. Vertically integrated high-performance RF and optical payload technologies unlock high-value opportunities for national security and commercial customers. They are key to unlocking programs like Golden Dome and other proliferated mission architectures. Owning the payload chain enables discriminating performance plus greater control over schedule and cost, especially for high-volume constellations. We have already seen the strategy in action with the SDA Tranche 3 award, and we expect it to deliver more value and opportunities to us this year and beyond.

We received another strong vote of confidence in our ability to deliver on critical national security and defense programs, when we were recently selected by the MDA for SHIELD. In short, we are now onboarded to the program, which has contract values up to $151,000,000, giving us the opportunity to compete for future launch and space systems contracts that deliver these capabilities to the warfighter with increased agility. All of the above ultimately points to one thing: Rocket Lab USA, Inc. is a disruptive leader in building the future for space and defense. This was driven home by a recent visit to our facilities in Long Beach by the Secretary of War Pete Heska during the Arsenal of Freedom tour.

The visit highlighted the critical support we already deliver to the warfighter today, and showcased our capability to meet ever-evolving needs in the future. And last but not least, before Adam digs into the financials, here is the latest on Neutron. We have lots of progress to share across Neutron, but I will start off with the topic on everyone's mind, I am sure, which is the Stage 1 tank update.

Peter Beck: In January, we shared that Neutron's Stage 1 tank had ruptured during a hydrostatic pressure test at Space Systems Complex in Middle River. Now, failures are not uncommon during the qualification phase of any rocket development program, but I do want to point out that this was unexpected, and ultimately we had anticipated that this tank would pass qualification. The tank did meet its anticipated flight loads, but as we prepared to open up the test bounds and push the pressures and loads beyond this to understand the margins in the structure, the tank let go earlier than we expected.

The post-test review process identified that a manufacturing defect introduced a reduction in the strength at a critical joint in the structure, specifically around the tank closeout, which is an autoclave-produced part that interfaces with the bulk composite laminate of the tank and the dome. The review of the hardware and test data suggested that the tank otherwise performed as expected. The first tank was hand-laid by a third-party contractor while we were getting the automated fiber placement machine up and running, and it is in this handmade process that a defect was introduced.

The decision to work with the third-party contractor was ultimately driven by schedule, as it would allow us to produce the first tank rapidly while simultaneously commissioning the AFP machine for future tank production. It is not uncommon for us to run parallel development paths like this to accelerate schedules, as it can be a cost-effective way to iterate prototypes and first articles while standing up long-term production capability to enable fast scaling down the track. The next tank is already in production. This time, it is being built on the AFP machine, completely eliminating the possibility of this hand defect reoccurring. It is worth pointing out that Neutron's second stage was produced entirely internally and passed qualification comfortably.

Worth pointing out that Neutron's second stage was produced entirely internally and passed qualification comfortably.

Peter Beck: Beyond changing the manufacturing process, we are also making some minor design changes to the first stage tank to introduce more margin and improve manufacturability. To be clear, we are happy with the overall tank design, but since we are making a new one, we thought we would take the opportunity to tweak things a little bit and optimize. Once completed, the new tank will undergo an extensive test and qualification campaign to verify flight readiness, and we are going to take our time with that process. The priority will always be to bring a reliable rocket to market, even if it means taking a few extra months.

Ultimately, the combination of the new tank, the production design tweaks, and the test and qualification campaign will adjust Neutron's timeframe a little bit. As such, Neutron's first launch is now targeted for Q4 2026. Neutron is still scheduled to come to market in an incredibly aggressive timeframe, and what is more, we will be bringing a robust and thoroughly tested vehicle to the pad. We look forward to sharing more development progress as we run through the final development phases this year.

Peter Beck: Okay. So on to some milestones in the Neutron program over the past quarter. You will see over the next few slides why I am dubbing this the quarter of qualification. We have taken massive strides in Q4, as well as Q1 so far, successfully qualifying critical flight hardware from large through to component-level systems. In Q4, the Hungry Hippo fairing successfully passed, and then on into Q1 it made its way to Wallops. It is an exciting time in Virginia as Neutron flight hardware starts arriving, and we can get into the final assembly, integration, and test phase. The Hungry Hippo specifically will see fluid systems and installation, canards and thermal protection systems, and then, of course, engineering testing.

We will work through that in preparation for the first flight, and we have the second Hungry Hippo in production for the next Neutron launch vehicle as well. Another successful qualification on the board is Neutron's thrust structure. This is a really complex part of Neutron. It must be able to withstand 2,100,000 pounds of thrust, which is more than 44 Electrons simultaneously lifting off, to give everybody a sense there. The structure is now officially onto final integration, which is the final hurdle before we get into integrated system checkouts, cryogenic proof tests, vehicle hot fires, wet dress, and then, of course, launch. It will go through avionics and fluids and subcomponent integration before shipping out to LC-3.

Meanwhile, at Middle River, Neutron's interstage is undergoing its own qualification campaign before being shipped to LC-3. Neutron's second stage is hung inside this during flight. It then passes through the mouth of the Hungry Hippo and is carried to orbit. Like the Hungry Hippo, the interstage remains attached to the first stage and reused, so it needs to undergo a robust testing program so we can ensure that it can withstand the forces of launch and landing multiple times. Stage 2 is in its final integration and getting ready for debut on the test stand at LC-3.

This is a specially built rig on the top of the LC-3 launch mount, where we will conduct a barrage of integrated tests before ultimately moving into hot fires on the stand. That will be LC-3's first taste of what an Archimedes engine is like, and a huge milestone for the development program. So we look forward to testing that soon.

Peter Beck: Which brings me to last but not least, Archimedes. Right now, the engines are in boot camp. We have not been nice to them at all. It is all well and good to test engines to expected bounds, but through experience I have learned that spaceflight has a way of throwing things at you that are not expected. Rocket engines do not tend to fail when everything is boring and when you can rely on analysis and simulation to bound and truly understand performance. Ultimately, engine reliability is gained via testing. There is just no substitute.

That is what we are doing, and we are really pushing them through the edge cases, backing right off the inlet pressure, inducing cavitation, and generally doing really nasty stuff to them. Ultimately, you want to know how the engines are going to perform in a really wide range of scenarios on the ground before you put them in the air and find out in flight. Many rocket companies have not done this, and it typically does not end well. This is the same kind of process we undertook when developing Rutherford, the engine on Electron, and right now we have flown more than 800 of those engines successfully to space.

We will be bringing the same level of reliability and rigor to Archimedes. Beyond the Stage 1 tank, we have had a really positive quarter for Neutron progress, and this gives you a snapshot of just how much progress we have made on the path to first launch. Major structures and subsystems are passing qualification, and for the first time, we have hardware in final integration. These are the final steps before we go into integrated testing on the pad with hot fires, stage tests, and then wet dress and then, of course, launch. Beyond the vehicle itself, we have established all the supporting infrastructure to enable first launch and beyond.

LC-3 is obviously stood up, plus production and test facilities are all humming, while the regulatory work is all tracking along as we expect. The things to look out for over the next few months to know that we are marching steadily towards launch include more hardware making its way to the launch site. We will be conducting extensive testing of flight hardware, and then, obviously, that will lead up to Neutron's first flight. That wraps up the operational highlights, so I will hand over to Adam for the financial overview and outlook. Thanks, Pete.

Adam Spice: Fourth quarter 2025 revenue was a record $180,000,000, coming in at the high end of our prior guidance range and representing an impressive year-over-year growth of 36%. This strong performance was driven by significant contributions from both of our business segments. Sequentially, revenue increased by 16%, underscoring the continued momentum across the business. Our space systems segment delivered $103,800,000 in revenue in the quarter, reflecting a sequential decrease of 9.1%. This decline was primarily stemmed from our satellite platforms business and our solar businesses, both of which continue to perform exceptionally well despite the time-to-time programmatic nonlinearity of revenue recognition under ASC 606 and related subcontractor progress.

We are fortunate that the growing diversification across space systems and launch can often provide more predictable top-line growth despite underlying volatility at the individual product line level. This was one of those quarters where strength in launch services more than offset the declines in space systems, generating $75,900,000 in revenue, representing an 85% quarter-over-quarter increase due to the increase from four to seven launches during the period, including one HASTE mission. On a full-year basis, 2025 revenue was $602,000,000, an impressive 38% growth year on year.

Adam Spice: Now turning to gross margin. GAAP gross margin for the fourth quarter was 38%, at the center of our prior guidance range of 37% to 39%, and an increase of 100 basis points quarter over quarter. Non-GAAP gross margin for the fourth quarter was 44.3%, which was also in line with our prior guidance range of 43% to 45% and an increase of 240 basis points quarter over quarter. The sequential improvement in gross margins was primarily driven by an increase in Electron fixed cost absorption due to the increased launch cadence within the quarter, paired with increased contribution from our higher-margin space systems components.

On a full-year basis, GAAP gross margin was 34.4%, an increase of 780 basis points year over year, while non-GAAP gross margin was 39.7%, an increase of 770 basis points year over year. Relatedly, we ended Q4 with production-related headcount of 1,244, up 46 from the prior quarter.

Adam Spice: Before moving on to backlog, I want to take a moment and zoom out and provide perspective on the progress we have made towards our long-term financial model since our Nasdaq listing in 2021. Revenue has grown nearly 10x, achieving a compound annual growth rate exceeding 76%. Gross margins have increased each year, more than doubling the contribution from each dollar of revenue. This expansion highlights our strong and disruptive competitive position in the industry, as well as our highly valued and differentiated products and services across the business. The combination of this revenue growth and margin expansion has put the company on a solid foundation and path towards achieving meaningful operating leverage and long-term cash flow generation.

Lastly, I thought it important to call out our SG&A spending as a percentage of revenue, as I am encouraged to see this continue to trend downward as we scale the business. We are constantly driving the business to be fiercely efficient, and I believe that we are positioned to drive even more growth efficiency in 2026 and beyond.

Adam Spice: Now turning to backlog. We ended Q4 2025 with approximately $1,850,000,000 in total backlog, an impressive 69% growth sequentially, primarily due to our recent SDA Tranche 3 Tracking Layer contract award which we announced last December. As we have mentioned before, space systems backlog in particular can be lumpy given the timing of these increasingly larger needle-moving program opportunities. But once awarded, they can significantly derisk revenue growth for several years. We continue to cultivate a strong pipeline that includes multi-launch agreements across Electron, HASTE, and Neutron, as well as large satellite platform contracts across government and commercial programs. Currently, launch backlog accounts for 26%, while space systems represents approximately 74%.

Looking ahead, we expect approximately 37% of our current backlog to convert into revenue within the next 12 months, which includes preliminary Tranche 3 revenue recognition estimates which we believe will prove to be conservative, which, in addition to the healthy sales pipeline, are expected to drive incremental top-line contribution beyond the current 12-month backlog conversion.

Adam Spice: Turning to operating expenses. GAAP operating expenses for the fourth quarter were $119,300,000, below our guidance range of $122,000,000 to $128,000,000. Non-GAAP operating expenses for the fourth quarter, $104,500,000, were also below our guidance range of $107,000,000 to $113,000,000. The sequential increase in both GAAP and non-GAAP operating expenses were primarily driven by continued growth in prototype and headcount-related spending to support our Neutron development program. Specifically, investments ramped up in propulsion as we continue to test Archimedes engines, as well as test and integration of mechanical and composite structures at our facility in Middle River, Maryland. In R&D specifically, GAAP expenses increased $8,100,000 quarter over quarter, while non-GAAP expenses rose $7,700,000.

These increases were driven by the ramp-up of Archimedes production and testing, along with higher expenditures related to composite structures and fluids, as just mentioned. Q4 ending R&D headcount was 1,012, representing a decrease of seven from the prior quarter. In SG&A, GAAP expenses decreased $5,100,000 quarter over quarter, while non-GAAP expenses declined $1,300,000 quarter over quarter. These decreases were primarily due to a reduction in transaction-related legal and other professional services fees related to M&A and capital markets transactions, paired with a slight reduction in marketing expenses. Q4 ending SG&A headcount was 389, representing an increase of four from the prior quarter.

In summary, total headcount at the end of the fourth quarter was 2,645, up 43 heads from the prior quarter.

Adam Spice: Turning to cash. Purchases of property, equipment, and capitalized software licenses were $49,700,000 in the fourth quarter of 2025, an increase of $3,800,000 from the $45,900,000 in the third quarter. This increase reflects ongoing investments in Neutron development as we continue testing and integrating across the pad at LC-3 in Wallops, Virginia and Middle River, Maryland, expanding capabilities at our engine development complex in Long Beach, California, and build-out of the return-on-investment recovery barge in Louisiana. As we progress towards Neutron's first flight, we expect capital expenditures to remain elevated as we invest in testing, production scaling, and infrastructure expansion.

GAAP EPS for the fourth quarter was a loss of $0.09 per share, compared to a loss of $0.03 per share in the third quarter. The sequential increase to GAAP EPS loss is mostly attributable to the $41,000,000 tax benefit we recorded during the third quarter, which was due to the partial release of the valuation allowance against our corporate deferred tax assets as a result of acquiring an equal amount of deferred tax liabilities emanating from the GEOST acquisition purchase price accounting. GAAP operating cash flow was a use of $64,500,000 in the fourth quarter of 2025, compared to $23,500,000 in the third quarter.

The sequential increased use of $41,000,000 was almost entirely due to the timing of employee equity program-related tax payments. Similar to the capital expenditure dynamics mentioned earlier, cash consumption will remain elevated due to Neutron development, long-lead procurement for SDA, investments in subsequent Neutron tail production, and infrastructure expansion to scale the business beyond the initial test flight. Overall, non-GAAP free cash flow, defined as GAAP operating cash flow less purchases of property, equipment, and capitalized software, in the fourth quarter of 2025 was a use of $114,200,000 compared to a use of $69,400,000 in the third quarter. The ending balance of cash, cash equivalents, restricted cash, and marketable securities was approximately $1,100,000,000 at the end of the fourth 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 $280,600,000 during the quarter. These funds are primarily intended to support acquisitions, such as the announced pending Mynaric acquisition, the recently consummated acquisitions of Optical Support Inc. and Precision Components Limited, as well as other targets in our robust M&A pipeline, along with general corporate expenditures and working capital. We exited Q4 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 the fourth quarter of 2025 was $17,400,000, which was below our guidance range of $23,000,000 to $29,000,000 loss. The sequential decrease of $8,900,000 in adjusted EBITDA loss was driven by significant revenue and gross margin improvement, partially offset by increased operating expenses related to Neutron development.

Adam Spice: With that, let us turn to our guidance for 2026. We expect revenue in the first quarter to range between $185,000,000 and $200,000,000, representing 7% quarter-on-quarter revenue growth at the midpoint and growth of 57% from the year-ago quarter. We anticipate a slight step down in both GAAP and non-GAAP gross margins in the first quarter, with GAAP gross margin to range between 34% to 36% and non-GAAP gross margin to range between 39% to 41%, with a modest sequential decline driven by a greater mix of space systems versus higher-margin launch, and a weaker margin mix within our space systems segment.

We expect first quarter GAAP operating expenses to range between $120,000,000 and $126,000,000 and non-GAAP operating expenses to range between $106,000,000 and $112,000,000. The quarter-over-quarter increases are primarily driven by ongoing Neutron development spending related to Flight 1, including staff costs, prototyping, and materials. However, we expect to see a shift in spending from R&D and into Flight 2 inventory throughout 2026, which is an encouraging sign of progress as we move closer toward Neutron's first flight and adjusted EBITDA positivity as a result. We are optimistic that, with the impressive strides we have made towards this milestone, we currently expect Q1 to mark peak Neutron R&D spending.

We expect first quarter GAAP and non-GAAP net interest income to be $8,000,000, which is a function of higher cash balances as well as conversion of approximately $117,000,000 of convertible notes since December 31. We expect first quarter adjusted EBITDA loss to range between $21,000,000 and $27,000,000 and basic weighted average common shares outstanding to be approximately 605,000,000, which includes convertible preferred shares of approximately 46,000,000 and reflects the conversion of approximately 23,000,000 shares from our outstanding convertible notes thus far in Q1. There remain only 7,500,000 shares, or 11% of the original $355,000,000 issuance, outstanding. When taken into the context of the retirement of the Trinity equipment line in Q4, we have substantially eliminated indebtedness from the business.

Lastly, consistent with prior quarters, we expect negative non-GAAP free cash flow in the first quarter to remain at elevated levels, driven by ongoing investments in Neutron development and scaling production. This excludes any potential offsetting effects from financing activities. Last but not least, here are some of the upcoming investor events that we will be attending in the next few months. With that, we will hand the call over to the operator for questions.

Operator: Thank you. If you would like to ask a question, please press 1-1. If your question has been answered and you would like to remove yourself from the queue, please press 1-1 again. Our first question comes from Andrea Shepherd with Cantor Fitzgerald. Your line is open. Hey, everyone. Good afternoon.

Andres Sheppard: Thanks so much for taking our questions, and congrats on all the great progress, and thanks for the update on Neutron. Adam, maybe you want to start with the backlog. I am wondering if you can maybe help us drill a bit deeper in it and maybe remind us what is included in here. Does this include the 40% of revenue from SDA Tranche 2, 10% of maybe the Tranche 3, and what are you including from Neutron and Electron here? Thank you.

Adam Spice: I am sorry. The mic went off. I do not know how much you caught of that. So, all of the SDA contracts were added to backlog. What remains for SDA Tranche 2 Transport Layer is still in the backlog. Obviously, what has been recognized as revenue is no longer there. Through Q4, we had not recognized any of the Tranche 3 contract awards, so all of that value is currently in backlog, and that will start to convert into revenue and come out of backlog, obviously, in that process.

As far as Neutron is concerned, I think we have spoken before that we do have several flights that are representative in our launch backlog that is reflected in our filings. Hopefully, that answers your question on backlog composition.

Andres Sheppard: Yes, that is helpful. Thank you. And maybe just as a follow-up, on Neutron, with the shift to Q4 now with the first launch, how should we think about cadence? Will you still target maybe three launches within the first 12 months after the first one? How confident are we in the development of the second tank? I am wondering if maybe we should expect any step-up in CapEx now with the second tank in production. Thank you.

Peter Beck: Adam, I can answer a couple of those, and maybe you can as well. Andre, with respect to the tank, I think it is well understood what needs to be done there, and we have built a lot of the second stage tank on the AFP machine. That really solves that problem. The way to think about follow-on flights is it is not quite as dire as moving all of the follow-on flights 12 months later to the first flight, because as you have seen in the presentation, we are already building flat out additional Neutron tail numbers.

It will probably be slightly faster convergence into subsequent flights because none of the other hardware that is qualified is being halted, obviously. It is just that tank. The AFP machine enables us to build a tank much more rapidly than with a hand lay process. I think we will be in better shape there.

Adam Spice: Yes, and Andre, with regards to your question as far as CapEx and so forth related to the second tank that is replacing the first one that ruptured, the benefit now, as Pete said, of being on the AFP is not only can we produce it faster, but the actual cost to produce that second tank is quite low. The first tank was very expensive because, as Pete mentioned earlier, it was a hand-laid-up tank. It took a long time. This will be much quicker. Also, since we have now commissioned AFP, we are really just talking about variable costs related to the tank materials more than anything else, because the existing labor is already in the model.

So there will not be any increased CapEx, and the impact to R&D as a result of the tank failure is actually not that significant.

Andres Sheppard: Got it. That is super helpful. Thanks so much for all the detail, and congrats again on the quarter. I will pass it on.

Operator: Thank you. Our next question comes from Edison Yu with Deutsche Bank. Your line is open.

Edison Yu: Thank you, and great quarter as always. I want to ask a question on space data centers. I think you had alluded to a lot of interest. I think it has obviously become a hot topic in the industry. Can you give us a sense on how these early discussions are going with potential customers interested in doing this, and is it realistic to see some type of Rocket Lab USA, Inc. content in a space data center, let us say, within the next two or three years?

Peter Beck: Edison, thanks for the question. I think we are early with data centers. If you look at some of the models, there are a number of things that have to come into focus before they become the logical choice versus terrestrial. But we never want to miss an opportunity, and we have been developing the silicon arrays and power solutions for a while now, focusing on mega-constellations and these high-volume power applications. If you stand back objectively and think about what are all the challenges with putting data centers in orbit, it boils down to three things. One is cost and cadence of launch to be able to make the model close. Two is heat rejection through various means.

Three is just sheer power. These are gigawatts of electrical power. Solar arrays of multi-kilometers in scale are what is needed. We wanted to make sure that, whether they leave this Earth or not, there will be Rocket Lab USA, Inc. logos all over that stuff. As far as I am aware, there is nobody else who has a silicon solution quite like we have developed.

Edison Yu: And to your point on heat rejection, I guess the radiator—is that a capability you have in-house that you need to develop over time, or is that something inorganic? Just curious on what needs to be technically done there.

Peter Beck: All of our spacecraft have radiators. You generate heat; you have to reject it. There are various ways of doing that, piping heat around the spacecraft to radiate it. I do not see that as a huge technical challenge. It is just the scale that is required that has not been achieved before. That is the challenge there. To be clear, I do not foresee us building massive AI data centers anytime soon, but for those who are at least experimenting with it and looking to go down that path, I think we have a lot of compelling solutions.

Edison Yu: Gotcha. If I could just sneak one quick one in. In terms of the discussions, can you give us a sense of the flavor of customers? Are these new customers, nontraditional customers, kind of exploring this idea with you?

Adam Spice: Yes. I mean, we have to be a little bit careful here, but I would say that there is certainly more nontraditional looking at this kind of solution than traditional players.

Edison Yu: Great. Thank you so much.

Operator: Thank you. Our next question comes from Ronald Jay Epstein with Bank of America. Your line is open.

Alex Preston: Hey. This is Alex Preston on for Ron. Can you guys hear me alright?

Peter Beck: Yes. We can hear.

Alex Preston: Perfect. So I know you talked a little bit about progress on the Mynaric acquisition. I was a little more interested maybe broadly in the environment in Europe more generally. It seems like there is a growing appetite for indigenous launch and national security space capabilities, and I am interested if you see this trend yourselves or how you see this developing. I know Pete mentioned no other small launch provider has really succeeded in the last year, but it is still, I think, a focus for a lot of people.

Peter Beck: Hey, Alex. It is a great question. One of the reasons why we like Mynaric and why we think it is important in Europe more in general is exactly that point. There are a lot of space nations there that have very little capability with giant aspirations and really short timeframes. It is always everybody's desire to build domestic capabilities, but the reality is, if you want to stand up these kinds of capabilities really, really quickly, you do not have the decades that it takes to build often these sovereign capabilities. They are very specialist equipment and facilities and also intellectual property and knowledge.

We see Europe as a great opportunity for us and a real expansion beachhead where we can provide solutions at the component level. We can provide solutions at the complete system with respect to a satellite. We can provide launch, and you have seen even European space agencies procure launch from us now. Once we have a footprint in Europe proper, being eligible for participating in European programs becomes possible. I think it is a great opportunity. There are literally billions and billions of dollars of well-funded government programs underway right now, and the timelines associated with those are, I would say, not conducive necessarily to creating sovereign capability.

Alex Preston: Got it. It would sound like the attitude is still broadly constructive from what you said versus maybe Europe starting to get a little more distant from U.S.-based providers.

Peter Beck: No. I think it is very constructive. Naturally, Europe is looking to create sovereign capability, but I think they are also, in the conversations we have had, very pragmatic and realistic that the capability they are looking to create takes a long time. Working with, for example, Rocket Lab Europe, is a great way to move forward.

Alex Preston: And just real quick, would you characterize the same on launch as you would on space systems, where I think there is a bit more existing indigenous capability in Europe already?

Peter Beck: Yes. They are certainly giving it a good college try but not having tremendous success, I would say. That is just how difficult launch is. But I think launch is just so strategically important. You can build all the satellites you want, but if you cannot get them in orbit, it is kind of pointless. This is the reason why you have the European Union and ESA's launch vehicles that, on the face of it, are not that commercially competitive, but they will never go away because the nations need access to orbit. I would expect to see that persist for some time and continued investments made into launch for Europe.

But in saying that, everyone is pragmatic, and if you need to get stuff to orbit, then pick up the phone.

Alex Preston: Got it. Thanks for the color.

Operator: Thank you. Our next question comes from Erik Rasmussen with Stifel. Your line is open.

Erik Rasmussen: Yes. Thank you for taking the questions. Maybe just back on Neutron. I appreciate the update on cadence, and it sounds like with the pushout, naturally, you continue to build out some of those capabilities and just the infrastructure around Neutron. But post test flight, and if we think that is Q4—and if it is late Q4, I do not know the timing—what do you think then that first revenue flight timing could be? Also, when considering that probably needs to have a higher level of reliability. And then with that, are you still targeting this as a recovery mission?

Peter Beck: Hi, Erik. Thanks for the question. The timing of Flight 2 will always depend on the results of Flight 1. If Flight 1 goes swimmingly, then the time to get the second vehicle on the pad, we will endeavor to make as short as possible. If there are things to fix, then there are things to fix. Nominally, the timing remains consistent with what we have talked about. The vehicle will be outfitted with all of its requirements for Flight 1. Even for a downrange landing, we will do the reentry and landing burn and space it down. Once again, if all that goes well, then the next one we would intend to slip a barge under.

If we pole-drive it into the ocean, then we will probably go to a Flight 2 and get that soft landing right before we put infrastructure on that could be costly if we damaged it.

Erik Rasmussen: Great. And maybe just on Electron, you had a nice launch campaign in 2025, 21 successful launches. What does the manifest and internal planning suggest for this year, and then maybe the mix between your standard Electron missions and HASTE?

Peter Beck: I am not sure how much we have disclosed about that, but certainly, this year we are looking for more launches than last year. As you saw, the bookings in the manifest are bulging, and we are banging Electrons out every 11 to 13 days now. That is going extremely well. I will pass over to Adam if he wants to comment on the launch schedule for the year.

Adam Spice: Yes, Erik. Consistent with prior discussions, we see good growth opportunities in Electron, and when I say Electron, I mean Electron and HASTE. I think you would expect an increase in both standard Electron launches plus growth in the HASTE side of the business. We have normally pointed people towards kind of 20% growth, which I think is a reasonable estimate for where we see this business growing over the near and intermediate to maybe the long term. We have certainly given the production team direction to produce significantly more rockets in 2026 than in 2025. Pete mentioned on the call earlier, we booked over 30 Electron launches in 2025, and we always get turns orders.

If you nominally assume a 20% growth in the launch business, excluding Neutron, I think that is probably a pretty good place to be.

Erik Rasmussen: That is helpful. Thanks.

Operator: Thank you. Our next question comes from Trevor Walsh with Citizens. Your line is open.

Trevor Walsh: Great. Hey, team. Thanks for taking the questions. Peter, maybe first for you. Some of your prepared remarks around the OSI acquisition made it sound like that was even further enabling you with the customer as far as just attractiveness for your services, your capabilities, even though it sounded like from the announcement that OSI was actually already in the chain of suppliers with GEOST. Is the customer that focused really then, can we assume, on just the vertical integration aspect, or is there also capabilities—functionality, features—of that acquisition from a perspective that are also attractive? Just trying to gauge how you think customers are really looking at this—that makes sense.

Peter Beck: Yes. That is a great question, Trevor. To be fair, the customers probably do not care that much, other than the fact that what they really care about is does their sensor arrive on time, at a cost and a performance capability that they have never seen before? That is what we are delivering. In order for us to be able to guarantee we deliver that, the most critical element of many of these optical systems are, in fact, the optics. Bringing and owning that optics in-house really drives certainty for us around cost and schedule and innovation. Yes, they were a supplier to GEOST, that is for sure.

When we acquired the GEOST business, the first thing we sat down with the leadership team there and said was, right, where are the critical supply chain elements that might trip us up in being able to deliver really disruptive and affordable parts or programs for our customers? This was the number one thing. This makes us very unique amongst the other suppliers of payloads who are outsourcing optics. It is the most expensive, the longest lead item in any of these exquisite optical payloads, so it was important to own it.

Trevor Walsh: Terrific. Thank you. Super helpful. Adam, maybe just a quick one for you. In your prepared remarks around the backlog and how Tranche 3 is going to—sounds like it is maybe conservative in terms of what is going to be recognized in that first 12-month period. Can you walk us through a little bit of the puts and takes of what is influencing that Tranche 3 rev rec? Is it just customer timing of when they want deliverables? Give us maybe one level deeper. That would be terrific.

Adam Spice: I think we have articulated previously that typically when you win one of these programs, you can recognize revenue like 10% in the first 12 months after award, then 40% in the second 12 months, 40% in the third 12 months, and the last 12 months it is about another 10%. You have a pretty normal bell curve. What I would say is that what really gates our ability to move faster is really our subcontractor deliveries. What really either helps us accelerate and get through these gates and milestones and rev rec quicker is our subs' ability to deliver on time. That all goes back to what Pete was talking about earlier and the importance of vertical integration.

To the extent that we can own more of the platform, we have greater control, and that allows us to have more predictability to time revenue recognition and so forth. A big job for us in 2026 is to, across our engineering and production teams, really make sure we stay on top of what parts are still coming from third parties and make sure they stay on their deliverables so we can get the program accelerated as much as possible and get more of that revenue recognized. We go into it pretty conservative.

If you look at the pure conversion—that 37% that was mentioned earlier of backlog converting—obviously a portion of that is launch, but the portion related to space systems, some of that is coming from the components and subsystems completely unrelated to SDA Tranche 2 and Tranche 3. What is in there for Tranche 3 is, again, assuming some pretty conservative delivery dates from our subs that hopefully we can work with them to do better.

Operator: Thank you. Our next question comes from Ned Morgan with BTIG. Your line is open.

Andre Madrid: Hey. You actually got Andre on. I do not know what happened there, but all good. I wanted to ask about space systems. Seems like it came in a little bit weaker than what consensus might have expected at first. I wanted to know the puts and takes there. I know you explained it, but why might consensus have gotten a little bit ahead here in the quarter?

Adam Spice: I do not know that consensus does a great job in breaking out the various pieces of the business, even differentiating much between launch and space systems. Certainly within space systems, I am not sure they really look at between our platforms business versus the subsystems business. One of the things—I mentioned this in my prepared remarks—is that it is difficult to control the execution for your rev rec requirements under ASC 606. It just depends on how well your subs are executing, and how tightly you are working with them to make sure they stay on track.

To your best efforts, I think we have all seen in some fairly public venues customers of these programs talking about how there has been some snag in the supply chain, including from those, for example, like the optical terminal providers. If you look at what we do, we continually look for ways, as Pete mentioned, to reduce any dependency on third parties as much as we can. That is why if you look at Electron—how vertically integrated that vehicle is—Neutron will be very similar. We are getting that way more and more with our space systems platform offerings, where very little is still outsourced to third parties.

It is really just a function of, again, you work with them and get them to deliver as aggressively as you possibly can while not sacrificing quality or cost where you can. I would not read too much into the granularity that people may have expected from our space systems business because one of the benefits we have now from having such a diversified business is we really just look at the top line—how can we deliver that sequential growth of the business?

Sometimes more of it is going to come from launch, and other quarters it is going to come from space systems, and within space systems, platforms can have a great quarter and components can be weak and vice versa. That will just get that much better, and we will have that many more tools at our disposal when we have Neutron coming online, which is why, obviously, getting that first flight off is so important and why we are all looking so forward to that.

Andre Madrid: Yes. That is super helpful. Thanks, Adam. I guess to stick with you around the two acquisitions that were just announced, are there any financials that you can give, any kind of color as to what they were doing on a performance basis, and how much cost we might be able to see taken out as a result of them being brought in-house?

Adam Spice: Our pipeline is always kind of interesting. It has a mix of more needle-moving deals from a financial perspective as far as revenue contribution and so forth. These particular deals are really much more strategic around, again, vertical integration and reducing risk versus providing big access to large external third-party TAMs, if you will, or adjacent markets. These are really more about reducing some margin stacking and also just taking greater control over the programs. I would not say there is a material amount of revenue contribution that is going to move the needle from the deals that we just announced.

Clearly, Mynaric would be a different story if and when that deal gets approved, because that would come with significant backlog and revenue opportunity. Again, our pipeline also has lots of other deals that have a mixture of elimination of margin stacking and, in some cases, also meaningful revenue contribution. But for these two, I do not think you need to change your models at all for the impact from these two relatively small deals.

Operator: Thank you. Our next question comes from Gautam Khanna with TD Cowen. Your line is open.

Gautam Khanna: Yes, thanks. Good afternoon, guys. I was wondering on the Neutron tank failure. Are you high certainty that it was that manual layup process and, therefore, the new process is not going to have the same anomaly, or is the study still ongoing of what happened?

Peter Beck: We undertook a complete failure tree analysis, and we were able to find the piece of tank that caused the initiation of the failure. We were able to reproduce the results through analysis and then also through coupon testing as well. We are very, very confident we understand that failure extremely well.

Gautam Khanna: Okay. That is great to hear. Then you mentioned some areas where you would like to take more in-house vertical integration. Can you describe some of those product areas that might be of interest?

Peter Beck: If you look across a spacecraft these days, the areas that we still do not have 100% control of are starting to get smaller and smaller. We have a great RF team, but I think that is an area that we will look to bolster and seek opportunities to add scale where possible. This is just going to be bread and butter for us to constantly make sure that we do not get stung with suppliers that are not able to deliver for us, and continue to vertically integrate.

As Adam pointed out, our M&A pipeline is pretty full, and there is a range of opportunities there from these kinds of things that, while important, do not add huge revenue to bottom lines, but they guarantee revenue because we are not going to miss milestones, through to some real needle movers that are much more transformational. As Adam also pointed out, we are always making sure that we have plenty of capital reserves to go and do those more meaningful acquisitions.

Operator: Thank you. Our next question comes from Ryan Koontz with Needham & Company. Your line is open.

Ryan Koontz: Great. Thanks for squeezing me in. I guess that backlog, Adam, your commentary there, and you think about the opportunities ahead over the next, say, 12 to 18 months, obviously the SDA has been very, very active. How do you think about the composition of your backlog relative to DoD versus commercial just in terms of the next 12 to 18 months?

Adam Spice: I think we are in a really fortunate spot where traditionally government business has not really been ever viewed as a hockey stick. For us, since we are coming in such a disruptive way, and we are disruptive but also the whole architecture where you have gone from GEO to LEO and the number of satellites that are required to support that architecture has just been so strong, we have so many things that are pushing us in the back as far as where the opportunities are. Overall, we have really big commercial opportunities that we continue to chase.

For me, if I was given the choice of chasing a government hockey stick or a commercial hockey stick, I would take the government hockey stick because, even though they may not be as dynamic in some cases at a program level as commercial, they always pay their bills. They are pretty clear-cut in how you work with them, and in that government market, we are competing with people that seem to be fighting with their hands tied behind their backs. We move much more quickly. We have a lot more tools at our disposal because of our vertical integration. I love the mix as it is trending towards government.

I do think it is also very comforting to have this big commercial hockey stick opportunity out there as well. The pipeline—when you look at the pipeline of business opportunities, forget the M&A side—it is a pretty balanced set of opportunities between commercial and government. I will let Pete provide his view, but it seems like we do not have to take one fork or the other in the road. We can try to think about how do we take both of those things. I think we have done a pretty good job, but maybe Pete wants to speak about that.

Peter Beck: You have said it perfectly, Adam. I cannot add anything better than that.

Ryan Koontz: Great. Maybe just a quick follow-up. As you think about Golden Dome and timing and PWSA fitting into that architecture, any updated thoughts on your role there or opportunities, and when you think that emerges as a truly viable business opportunity for you?

Peter Beck: Golden Dome is quite a complex one. Obviously, it is a huge program, but a lot of it is also classified, so it is very difficult to discuss too much. I would say that, on multiple fronts, we are well positioned to have a good chunk at this, whether it be launch or satellites, optical terminals, a lot of the optical payloads. The SDA win—the Tranche 3 SDA win—is a clear missile track payload, which is a very complicated payload, obviously, and critical for the Golden Dome. As that program formulates and continues to grow, I think we are a pretty key piece of that foundation.

Operator: Thank you. Our next question comes from Michael Leshock with KeyBanc Capital Markets. Your line is open.

Michael Leshock: Hey, good afternoon. I wanted to ask longer-term on a potential future Rocket Lab USA, Inc. satellite constellation, just given some of the recent announcements across the industry, and as you mentioned in the presentation, the significant growth in satellites that is expected over the next decade. Have there been any changes to your approach on a future constellation of your own or what potential applications you may target, or is this still a longer-term growth opportunity that really will not be a priority until Neutron is launching consistently?

Peter Beck: Thanks for the question, Michael. What is kind of cool here is that you have all heard me say that space is going to get blurry. It is going to be difficult to determine what is a space company and what is something else company. That thesis really continues to firm now that you look at data centers and all these other opportunities that are growing in space. The large successful companies are going to be blurry. Are they going to be a space company? Are they a telecommunications company? Are they a data services company? Your point is really accurate.

Until Neutron is online and we have multi-tonne reusable launch capability, that is the time that we can really lean into deploying infrastructure. In saying that, we are not sitting back and sitting on our hands thinking about what we could do. I think you can see, in just about every avenue, we at least have knowledge or components or exposure—when I say every avenue, every kind of opportunity that is potentially being thought about or used in space today. It is still too early, Michael, but there is not a day that goes by where there is not an internal discussion about it.

Michael Leshock: Great. Maybe on the Stage 1 tank rupture—I do not know if I missed it—but how fast can you produce the second tank now with the new AFP machine? Will that get even faster as you repeat this process over time?

Peter Beck: Yes. It is ridiculous. The AFP machine is just totally ridiculous. I cannot remember the exact timeline to lay up a dome, but we measure a dome manufacture on the AFP in days. The longer pole in the tent for a tank manufacture is not actually laying up and curing the components. It is the joining of the various domes and barrels together, and all of the tabs and details for baffles and all those kinds of things actually take the time. A new tank—we are talking months here and not a year for a complete tank. From actual manufacturing of the wall components, it is ridiculously fast.

Also, to Adam's point, now that it is all automated, really the only cost is the raw material that is going in there.

Michael Leshock: Great. Appreciate all the detail.

Operator: Thank you. Our next question comes from Jan Engelbrecht with Baird. Your line is open.

Jan Engelbrecht: Good afternoon, Peter, Adam, Morgan. Thanks for taking our questions. I would like to go back on PWSA and just get your high-level thoughts about that program. It does seem like your focus will shift more towards the Tracking Layer given this really impressive win and the GEOST acquisition—just how you are thinking about the future of that for Rocket Lab USA, Inc. We have heard a lot of government reports being issued on the Transport Layer piece. How difficult would it be for a commercial variant, like Starshield with MOLNET, to act as the transporter?

It seems like there are a lot of things that would stand in the way of that because a commercial Starshield orbits at much lower altitudes than the Transport and Tracking Layers; there would be a lot of redesign work. I will stop there and just get your overall thoughts there.

Peter Beck: We could geek out about this for days, Jan. Yes, it was intentional for us to move up the value chain, if you will. Not that the Transport Layer is elementary—by no means is it elementary—but it is an order of magnitude more difficult and more valuable to be able to do the tracking stuff. The tracking stuff is critical as things develop for Golden Dome and other programs. That is the high-value stuff where you want to be, that there are really only a few people in the nation that can successfully execute on. With respect to the Transport Layer going away, we have not heard or seen any evidence to that.

Obviously, there is a lot of discussion about other providers. The SDA program is all of the spacecraft integrated very closely with each other, even though they are from other providers. There is a set of requirements that we all must meet for interoperability. Your point is a good one. It becomes more difficult to have interoperability when you have something that is quite different. It will be interesting to see how it all shakes out, but I think for the tasks that SDA is trying to achieve, to me at least, it makes more sense to have a dedicated Transport Layer and then the other layers, of course, Tracking and then Custody and so on top of it.

Jan Engelbrecht: Thanks, Peter. Very helpful. Just a quick follow-up, if I may. I want to be respectful of the Mynaric deal—let that play out as it will—but on optical terminals, at which point, and again hoping that it works out well here, but at which point do you potentially look at maybe an alternative supplier of OCTs, or does GEOST or the new acquisition OSI have any capability that you could look towards developing these optical terminals over time?

Peter Beck: GEOST has developed some optical terminals, and obviously we have the optics now in-house as well. It is incredibly difficult to do. As we looked across the landscape of all of these optical terminal suppliers—of which there are really only three—Mynaric just stood out as the absolute best with respect to technology. They are not as strong at other things like running their business, but they make the best terminals. To go out and develop your own terminal is totally feasible. It is just a time thing. It would just take longer to do that than it would to acquire.

Jan Engelbrecht: Perfect. Thank you. Very helpful. I will jump back in the queue.

Operator: Thank you. Our next question comes from Jeffrey Van Rhee with Craig-Hallum Capital Group.

Daniel Hibschman: Hey, this is Daniel Hibschman on for Jeff Van Rhee. Congrats on the quarter and the SDA win in particular. Mars Telecommunications Orbiter—the $700,000,000 to $750,000,000 thereabouts. It looks like earlier this week, NASA put out an RFP for Mars Telecommunications Network, so a little bit of a name change there. Sounds like that might be a multi-satellite architecture where previously they were just looking at that one single orbiter. What can you tell us about how the competition and Rocket Lab USA, Inc.'s positioning for that has been evolving?

Peter Beck: Thanks, Jeff. Great question. The MTO, as you pointed out, there is a slight change there to “Network.” As more infrastructure is built on Mars, then, of course, a network will need to be created. The MTO was always intended to be the first of more to come. Obviously, we think we are well positioned here. We have the experience. We have a lot of the capabilities and a lot of the demonstrated capabilities. We will put our best foot forward there, and of course others think they can do the job too. That is the great thing about competition, and we will see who wins.

Daniel Hibschman: And then, Adam, one for you just on the gross margins, which obviously are growing tremendously—I think, what, eight points up in 2025—and then the guide for Q1 2026 has stepping back down a few hundred bps. You called out the space systems mix shift. Is there anything persistent about that mix shift either in terms of new business coming online—and potentially with the SDA Transport Layer—that is going to have some persistent margin pressure? Or should we be assuming in our models that we will be getting right back to that more normal cadence of a few hundred bps of expansion as we get back into the later half of the year?

Adam Spice: Gross margin has a lot of things that are going on underneath the surface. As we continue to grow—there was a question earlier from Erik about the Electron launch cadence. I mentioned a 20% launch cadence growth. To the extent that we can do better than that, which I think there are opportunities to grow faster in 2026, then that is going to be a positive upward bias to margin.

These larger longer-term programs like SDA Tranche 2 and Tranche 3 typically come in at the low end of our gross margin mix, but they have really good operating margin characteristics to them, or contribution margin, because there is not a tremendous amount of incremental R&D that is outside of the programs. In a quarter where you have a lot more contribution from the big programs like Tranche 2 and Tranche 3, that will put downward pressure, hopefully offset by growth from the increase in the Electron contributions. The components business has a quite interesting range of margins.

You have some products in there that are more towards, say, 30 points of non-GAAP gross margin, and other ones that are north of 70 points of non-GAAP gross margin. There is a widespread, and mix is hard to predict that far out in the year. I do think there will be a supportive trend towards gross margin. It is difficult to truly get a lot of granularity much more than one or two quarters out. Overall, as we continue to grow that components mix of the business and have more Electron in the mix, it is all going to be positive.

One caveat to that is as we bring Neutron into production, it will have a margin expansion curve probably not too dissimilar to what we have experienced on Electron, which has been a great margin expansion story. When you bring a new product like a rocket to market, you do things like block upgrades, and that all helps bring down cost and increase performance so you can sell out more capacity on the rocket, which is helpful to ASP and so forth. The most important thing in the launch business is rate. It is all about absorbing your fixed overhead or fixed cost related to that program or product.

You are going to see what we will start to do—our plan is to give you as much clarity as we can on the breakout between Electron and Neutron as Neutron comes into production, so you can see that continued expansion in the Electron business operating model and then the trends as Neutron ramps towards target model as well. Hopefully, it is a bit quicker to get to target model margins on Neutron because it is a reusable launch vehicle. It will still take several years.

You will start off with fairly low to even maybe negative gross margin for some of the early flights, but then you will see—just like Electron—it pop back up and become pretty positive pretty quickly and get to target model. It is a long-winded answer. I know. I do think the trends are supportive of gross margin expansion, but it could be a little bit volatile and hard to predict quarter to quarter when you get more than one or two quarters out.

Daniel Hibschman: Thanks, Adam. Thanks, Peter.

Operator: Our next question comes from Suji Desilva with Roth Capital. Your line is open.

Suji Desilva: Hi, Pete. Hi, Adam. Congratulations on the progress here. Just real quick on the Electron launches. Are there any ASP trends to note, Adam—any tailwinds in the second half, or are they fairly steady the next couple of quarters?

Adam Spice: I think we are going to continue to see a march towards higher ASP. As we increase more of the mix towards HASTE, that is helpful to the ASP. I think margins are relatively consistent, because even though HASTE launches are priced higher, there is a lot more mission assurance and other things that go along with them. Absolute dollars are higher. The gross margin percentage is relatively consistent across HASTE and Electron. Overall, we have seen a very nice expansion in ASP over the last several years because of the increased mix from HASTE, and I do not see that changing. In fact, we continue to grow that subsegment of the business quite nicely.

Given the things that Pete was talking about earlier with regards to Golden Dome and the importance of the hypersonics test capabilities, that is a really strong area of growth for us going forward. Overall, positive bias towards higher ASP per launch, just as we have seen over the last several years.

Suji Desilva: The follow-up question maybe is for Pete. Pete, maybe you can reflect on versus a few years ago. To get to the launch cadence, the customers' payload readiness was something that was variable. Has that changed? Has the nature of the customers changed where you can feel more comfortable that you can hit an 11- to 13-day cadence? Is it just a higher number of customers coming in that you can load them off, or what? Any color would be helpful.

Peter Beck: Thanks, Suji. I would just say that we have probably got better at looking like a duck, where it is on a glassy pond and it looks normal, and there are legs flat out underneath it. A higher cadence gives us the ability to move customers around. That is just the reality. In the launch business, payloads are ready until they are not. I think we have just got way better at managing those customers, having more WIP, having more rockets integrated and ready to go, and managing that. It is great to hear that it looks smoother, but behind the scenes, everyone is flat out mixing and matching and making sure that it all looks smooth from the outside.

Suji Desilva: Helpful color. Thanks, Pete. Thanks, guys.

Operator: Thank you. Our next question comes from Kristine T. Liwag with Morgan Stanley. Your line is open.

Justin Lang: This is Justin Lang on for Christine. Thanks for taking the questions. Pete, curious—just back on the Neutron timeline. Had you not run into the Stage 1 tank issue, would the program have met the earlier goal of getting to the pad here in Q1? It sounded like from your earlier comments, there is a good volume of qualification work completed in the quarter, so just trying to assess whether there are other factors at play in this new timeline, or is it really isolated to the Stage 1 tank issue.

Peter Beck: Thanks, Justin. It is kind of hard to say, because when the tank let go, the reverberation went through the test stand and the entire business. The moment that happened, everybody just stopped what they were doing and got a sense to get onto the tank to figure out what went wrong. We moved a lot of resources around from lots of parts of the business. I would have to go back and have a look and see—if we played everything forward—what that timeline would have looked like. It is hard at this point because we had an anomaly.

Justin Lang: Okay. That makes sense.

Adam Spice: I would add one more thing to that. If there is a silver lining to the tank anomaly, it is the fact that because of what happened, it has given the other subsystem teams the opportunity to fully exercise all the demons, if you will, much more than they could have under the compressed time schedule that we were working towards. In some ways, the tank letting go will create a lower-risk test flight when that happens later this year. Nobody is ever happy when you have an anomaly.

Something was not planned and certainly was not anticipated, but I think it does help us bring down the overall risk stance of the program as we move towards that first test launch.

Justin Lang: Got it. That makes sense and is helpful. Thanks. Adam, actually just one for you. Back on the SDA award—curious if you could speak a little bit more to the cash profile in particular and how that lines up against the revenue bell curve that you sketched out earlier. Thanks.

Adam Spice: It is actually kind of interesting with these types of programs because of the way that you do the accounting and the rev rec. Under ASC 606, we model these things so you always have to be in a positive cash position. When you work out your milestones and how you are flowing out dollars to your subs and spending money in the program internally, you always need to be in a position of positive cash in order to be able to recognize revenue along the way. This program is consistent with that. We have gotten some questions as to whether or not the partial government shutdown has impacted our customer—in this case—their ability to pay. The answer is no.

In fact, we got a very large payment earlier this week from that customer. The money is still flowing, and everything seems to be green lights right now.

Operator: Thank you. There are no further questions at this time. This does conclude the program, and you may now disconnect. Everyone, enjoy the rest of your day.

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