Rocket Lab Corp: Form 10-Q for the period ended Sep 30, 2024
Filed with the SEC on Nov 12, 2024 and accepted by EDGAR at Nov 12, 2024, 16:30 ET.
Management's discussion and analysis
As filed, 39,761 characters, with its headings, lists and tables. Extracted from the main document; charts and exhibits are in the original on sec.gov.
The following discussion and analysis provides information that management believes is relevant to an assessment and understanding of our condensed consolidated results of operations and financial condition. You should read this discussion and analysis in conjunction with the unaudited condensed consolidated financial statements and notes thereto included elsewhere in this Quarterly Report on Form 10-Q. For additional context with which to understand our financial condition and results of operations, see the audited consolidated financial statements and accompanying notes contained therein as of December 31, 2023 and 2022 and related notes in the Company’s Annual Report on Form 10-K for the year ended December 31, 2023 as filed with the SEC on February 28, 2024. Certain amounts may not foot due to rounding. Certain information in this discussion and analysis or set forth elsewhere in this Quarterly Report on Form 10-Q contains forward-looking statements that involve numerous risks and uncertainties, including, but not limited to, those described under the sections entitled “Cautionary Note Regarding Forward-Looking Statements” and Part II, Item 1A. “Risk Factors” included in this Quarterly Report on Form 10-Q and under the heading “Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2023 as filed with the SEC on February 28, 2024. We assume no obligation to update any of these forward-looking statements. Actual results may differ materially from those contained in any forward-looking statements.
Overview
Rocket Lab is an end-to-end space company with an established track record of mission success. We deliver reliable launch services, spacecraft design services, spacecraft components, spacecraft manufacturing and other spacecraft and on-orbit management solutions that make it faster, easier and more affordable to access space.
While our business has historically been centered on the development of small-class launch vehicles and the related sale of launch services, we are currently innovating in the areas of medium-class launch vehicles and launch services, space systems design and manufacturing, on-orbit management solutions, and space data applications. Each of these initiatives addresses a critical component of the end-to-end solution and our value proposition for the space economy:
- Launch Services is the design, manufacture, and launch of orbital rockets to deploy payloads to various Earth orbits and interplanetary destinations.
- Space Systems is the design and manufacture of spacecraft components and spacecraft program management services, space data applications and mission operations.
Electron is our orbital small launch vehicle that was designed from the ground up to accommodate a high launch rate business model to meet the growing and dynamic needs of our customers for small launch services. Since its maiden launch in 2017, Electron has become the leading small spacecraft launch vehicle delivering 197 spacecraft to orbit for government and commercial customers across 49 successful missions through September 30, 2024. In 2023, Electron was the second most frequently orbital launched rocket by companies operating in the United States and maintained Rocket Lab as the fourth most frequent orbital launcher globally. Our launch services program has seen us develop many industry-leading innovations, including 3D printed electric turbo-pump rocket engines, fully carbon composite first stage fuel tanks, a private orbital launch complex, a rocket stage that can be configured to convert into a highly capable spacecraft on orbit, and the potential ability to successfully recover a stage from space, providing a path to reusability.
In March 2021, we announced plans to develop our reusable-ready medium-capacity Neutron launch vehicle which will increase the payload capacity of our space launch vehicles to approximately 15,000 kg for expendable launches to low Earth orbit and lighter payloads for reusable configurations and into higher orbits. Neutron will be tailored for commercial and U.S. government constellation launches and ultimately configurable for and capable of human space flight, enabling us to provide crew and cargo resupply to the International Space Station. Neutron will also provide a dedicated service to orbit for larger civil, defense and commercial payloads that need a high level of schedule control and high-flight cadence. Neutron is expected to have the capability of launching nearly all of the spacecraft configurations that we expect to be launched through 2029 and we expect to be able to leverage Electron’s flight heritage across various vehicle subsystems designs, launch complexes and ground station infrastructure.
Our space systems initiatives are supported by the design and manufacture of our family of advanced configurable spacecraft along with a range of components, software and services for spacecraft, including reaction wheels, star trackers, radios, separation systems, solar solutions, command and control spacecraft software, high voltage space grade battery solutions, and additional products in development to serve a wide variety of sub-system functions. We entered this market with our acquisition of leading spacecraft components manufacturer Sinclair Interplanetary, and have since expanded our market participation with the acquisitions of Planetary Systems Corporation, SolAero Holdings, Inc. and aerospace software firm Advanced Solutions, Inc. Each of these strategic acquisitions brought incremental vertically-integrated capabilities for our own family of advanced configurable spacecraft and also enabled Rocket Lab to deliver high-volume manufacturing of critical spacecraft components and software solutions at scale prices to the broader spacecraft merchant market. The family of advanced configurable spacecraft, which are configurable for a range of low Earth orbit, medium Earth orbit, geosynchronous orbit and interplanetary missions enable us to offer an end-to-end mission solution encompassing launch, full spacecraft manufacturing, ground services and mission operations to provide customers with streamlined access to orbit with Rocket Lab as a single mission partner.
Recent Developments
Neutron Update
We have made significant progress across Neutron’s structures and infrastructure, including the completion of construction on the rocket’s Assembly, Integration, and Test (A.I.T.) facility in Virginia. We have doubled engine testing cadence for Archimedes over the quarter at Rocket Lab’s engine test site in Mississippi, alongside strong production execution at our Engine Development Complex in California which included multiple engines manufactured, assembled, and shipped for engine testing. We signed a launch service agreement for two dedicated Neutron launches with a confidential commercial satellite constellation customer.
Key Metrics and Select Financial Data
We monitor the following key financial and operational metrics that assist us in evaluating our business, measuring our performance, identifying trends and making strategic decisions.
Launch Vehicle Build-Rate and Launch Cadence
We built approximately eight launch vehicles 2021, approximately 12 launch vehicles in 2022 and approximately 11 launch vehicles in 2023. We built approximately 10 launch vehicles through the nine months ended September 30, 2024. We launched six vehicles in 2021, nine vehicles in 2022 and ten vehicles in 2023. We have launched 11 vehicles through the nine months ended September 30, 2024 and launched 12 vehicles through November 12, 2024. Growth rates between launches and total launch service revenue are not perfectly correlated because our total revenue is affected by other variables, such as the revenue per launch, which can vary considerably based on factors such as unique orbit and insertion requirements, payload handling needs, launch location, time sensitivity of mission completion and other factors. We believe that the growth in our build rate and launch rate is a positive indicator of our ability to scale our launch operations.
Revenue Growth
Three Months Ended September 30, 2024 and 2023
We generated $104.8 million and $67.7 million in revenue for the three months ended September 30, 2024 and 2023, respectively, representing a year-on-year increase in revenue of approximately 55%. This year-on-year increase primarily resulted from space systems revenue growth of $37.5 million, offset by a decrease in launch revenue of $0.4 million due to a lower revenue per launch.
Nine Months Ended September 30, 2024 and 2023
We generated $303.8 million and $184.6 million in revenue for the nine months ended September 30, 2024 and 2023, respectively, representing a year-on-year increase in revenue of approximately 65%. This year-on-year increase primarily resulted from space systems revenue growth of $99.6 million and launch revenue growth of $19.6 million due to a higher launch cadence with 11 launch missions completed in the nine months ended September 30, 2024, versus nine launch missions completed in the nine months ended September 30, 2023 and higher revenue value per launch.
Revenue and Cost Value Per Launch
Revenue and cost value per launch represents the average revenue and cost per launch contract attributable to launches that occurred during a period. Revenue and cost value per launch can be a useful metric to provide insight into general competitiveness and price sensitivity in the marketplace. Revenue and cost value per launch can vary considerably, based on factors such as unique orbit and insertion requirements, payload handling needs, launch location, time sensitivity of mission completion and other factors, and as such may not provide absolute clarity with regards to pricing and competitive dynamics in the marketplace.
Three Months Ended September 30, 2024 and 2023
In the three months ended September 30, 2024 and 2023, our revenue value per launch was $7.0 million and $7.1 million, respectively. Meanwhile, cost per launch for the three months ended September 30, 2024 and 2023 was $5.0 million and $5.2 million, respectively.
Nine Months Ended September 30, 2024 and 2023
In the nine months ended September 30, 2024 and 2023, our revenue value per launch was $7.5 million and $7.0 million, respectively. Meanwhile, cost per launch was $5.5 million and $6.6 million for the nine months ended September 30, 2024 and 2023, respectively, excluding a $2.1 million benefit from non-recurring employee retention credit to Launch Services cost of revenue and a $4.1 million benefit from non-recurring reversal of provision made for contract losses that were credited to Launch Services cost of revenue in the in the nine months ended September 30, 2023.
Backlog
Backlog represents future revenues that we would recognize in connection with the completion of all contracts and purchase orders that have been entered into by our customers but have not yet been fulfilled, excluding any customer options for future products or services that have not yet been exercised. Contracts for launch services and spacecraft builds typically include termination rights that may be exercised by customers upon advanced notice and payment of a specified termination fee. Our backlog increased from $1,046.1 million as of December 31, 2023 to $1,047.6 million as of September 30, 2024, of which $326.4 million is related to Launch Services and $721.2 million is related to Space Systems. The increase was primarily a result of bookings during the period, partially offset by recognizing revenue on contracts during the period.
Key Factors Affecting Our Performance
Ability to sell additional launch services, space systems service and spacecraft components to new and existing customers
Our results will be impacted by our ability to sell our launch services, space systems services, and spacecraft components to new and existing customers. We have successfully launched Electron 49 times delivering 197 spacecraft to orbit, including one suborbital launch, through September 30, 2024. We have flight hardware and spacecraft that have flown on over 1,700 missions, including legacy missions enabled by Sinclair Interplanetary (acquired April 2020), Advanced Space Solutions, Inc (acquired October 2021), Planetary Space Corporation (acquired November 2021) and SolAero Technologies (acquired January 2022). Our growth opportunity is dependent on our ability to expand our addressable launch services market with larger volumetric and higher mass payload capabilities of our in-development medium-capacity Neutron launch vehicle, which will address large commercial and government constellation launch opportunities. Our growth opportunity is also dependent on our ability to win spacecraft constellation missions and expand our portfolio of strategic spacecraft components. Our ability to sell additional products to existing customers is a key part of our success, as follow-on purchases indicate customer satisfaction and decrease the likelihood of competitive substitution. To sell additional products and services to new and existing customers, we will need to continue to invest significant resources in our products and services.
Ability to improve profit margins and scale our business
We intend to continue to invest in initiatives to improve our operating leverage and significantly ramp production. We believe continued reduction in costs and an increase in production volumes will enable the cost of launch vehicles to decline and improve our gross margins. Our ability to achieve our production-efficiency objectives could be negatively impacted by a variety of factors including, among other things, lower-than-expected facility utilization rates, manufacturing and production cost overruns, increased purchased material costs and unexpected supply-chain quality issues or interruptions.
Government expenditures and private enterprise investment into the space economy
Government expenditures and private enterprise investment has fueled the growth in our target markets. We expect the continued availability of government expenditures and private investment for our customers to help fund purchases of our products and services will remain. This is an important factor in our company’s growth prospects.
Components of Results of Operations
Revenue
Our revenues are derived from a combination of long-term fixed price contracts for launch services and spacecraft builds, and purchase order based spacecraft components sales. Revenues from long-term contracts are recognized using either the “point-in-time” or “over-time” method of revenue recognition. Point-in-time revenue recognition results in cash payments being initially accrued to the balance sheet as deferred revenue as contractual milestones are accomplished and then recognized as revenue once the final contractual obligation is completed. Over-time revenue recognition is based on an input measure of progress based on costs incurred compared to estimated total costs at completion. Each project has a contractual revenue value and an estimated cost. The over-time revenue is recognized based on the percentage of the total project cost that has been realized.
Estimating future revenues and associated costs and profit is a process requiring a high degree of management judgment, including management’s assumptions regarding our future operational performance as well as general economic conditions. Frequently, the period of performance of a contract extends over a long period of time and, as such, revenue recognition and our profitability from a particular contract may be affected to the extent that estimated costs to complete are revised, delivery schedules are delayed, performance-based milestones are not achieved or progress under a contract is otherwise impeded. Accordingly, our recorded revenues and operating profit from period to period can fluctuate significantly depending on when the point-in-time or over-time contractual obligations are achieved. In the event cost estimates indicate a loss on a contract, the total amount of such loss is recorded in the period in which the loss is first estimated.
Cost of Revenues
Cost of revenues consists primarily of direct material and labor costs, manufacturing overhead, other personnel-related expenses, which include salaries, bonuses, benefits and stock-based compensation expense, reserves for estimated warranty costs, freight expense and depreciation expense. Cost of revenues also includes charges to write-down the carrying value of inventory when it exceeds its estimated net realizable value, including on-hand inventory that is either obsolete or in excess of forecasted demand. We expect our cost of revenues to increase in absolute dollars in future periods as we sell more launch services and space systems solutions. As we grow into our current capacity and execute on cost-reduction initiatives, we expect our cost of revenues as a percentage of revenue to decrease over time.
Because direct labor costs and manufacturing overhead comprise a significant portion of cost of revenues, increasing our production rate resulting in greater absorption of these costs is our most critical cost reduction initiative. Increasing our production rate is a cross-functional effort involving sales and business development, manufacturing, engineering, supply chain and finance.
Operating Expenses
Our operating expenses consist of research and development and selling, general and administrative expenses.
Research and Development, net
Research and development expense consists primarily of personnel-related expenses, consulting and contractor expenses, design software licenses, validation and testing expense, prototype parts and materials, facilities and depreciation expense. We intend to continue to make significant investments in developing new products and enhancing existing products, including but not limited to our medium capacity Neutron launch vehicle, Electron’s first stage recovery, and family of advanced configurable spacecraft features and capabilities, as well as expanding our portfolio of spacecraft components and subsystems. Research and development expense will be variable relative to the number of products that are in development, validation or testing. However, we expect it to decline as a percentage of total revenue over time.
Selling, General and Administrative
Selling, general and administrative expenses consist primarily of personnel-related expenses for our sales, marketing, supply chain, finance, legal, human resources and administrative personnel, as well as the costs of customer service, information technology, risk management and related insurance, travel, allocated overhead and other marketing, communications and administrative expenses. We also expect to further invest in our corporate infrastructure and incur additional expenses associated with operating as a public company, including increased legal and accounting costs and compliance costs. As a result, we expect that selling, general and administrative expenses will increase in absolute dollars in future periods but decline as a percentage of total revenue over time.
Interest Income (Expense), Net
Interest income (expense), net consists primarily of interest expense incurred on debt and interest income earned on our cash and cash equivalents, short-term investments balances and marketable securities.
Gain (Loss) on Foreign Exchange
Gain (loss) on foreign exchange relates to currency fluctuations that generate foreign exchange gains or losses on invoices denominated in currencies other than the United States (“U.S.”) Dollar.
Results of Operations
Comparison of the Three Months Ended September 30, 2024 and 2023
The following table sets forth our consolidated statements of operations information and data as a percentage of revenue for the three months ended September 30, 2024 and 2023 (in thousands, except percentages):
| Three Months Ended September 30, 2024 $% | 2023 $% | |||
|---|---|---|---|---|
| Revenues | $104,808 | 100.0% | $67,661 | 100.0% |
| Cost of revenues | 76,812 | 73.3% | 52,694 | 77.9% |
| Gross profit | 27,996 | 26.7% | 14,967 | 22.1% |
| Operating expenses: | ||||
| Research and development, net | 47,723 | 45.5% | 26,626 | 39.4% |
| Selling, general and administrative | 32,172 | 30.7% | 27,200 | 40.2% |
| Total operating expenses | 79,895 | 76.2% | 53,826 | 79.6% |
| Operating loss | (51,899) | (49.5)% | (38,859) | (57.5)% |
| Other income (expense): | ||||
| Interest expense, net | (454) | (0.4)% | (1,413) | (2.1)% |
| Loss on foreign exchange | (490) | (0.5)% | (120) | (0.2)% |
| Other income, net | 1,848 | 1.8% | 1,176 | 1.7% |
| Total other income (expense), net | 904 | 0.9% | (357) | (0.6)% |
| Loss before income taxes | (50,995) | (48.6)% | (39,216) | (58.1)% |
| Provision for income taxes | (944) | (0.9)% | (1,352) | (2.0)% |
| Net loss | $(51,939) | (49.5)% | $(40,568) | (60.1)% |
Revenues
(in thousands, except percentages)
| Three Months Ended September 30, 2024 | 2023 | $ Change | % Change | |
|---|---|---|---|---|
| Revenues | $104,808 | $67,661 | $37,147 | 55% |
Revenue increased by $37.1 million, or 55%, for the three months ended September 30, 2024 as compared to the three months ended September 30, 2023. Space systems revenue was $83.9 million for the three months ended September 30, 2024, an increase of $37.5 million, or 81%, primarily due to spacecraft manufacturing growth. Launch Services revenue was $21.0 million for the three months ended September 30, 2024, a decrease of $0.4 million, or 2%, primarily due to a lower revenue per launch in the three months ended September 30, 2024 versus the three months ended September 30, 2023.
Cost of Revenues
(in thousands, except percentages)
| Three Months Ended September 30, 2024 | 2023 | $ Change | % Change | |
|---|---|---|---|---|
| Cost of revenues | $76,812 | $52,694 | $24,118 | 46% |
Cost of revenues increased by $24.1 million, or 46%, for the three months ended September 30, 2024 as compared to the three months ended September 30, 2023. Space systems cost of revenue was $61.8 million in the three months ended September 30, 2024, an increase of $24.7 million, or 66%, primarily due to spacecraft manufacturing growth. Launch Services cost of revenues was $15.0 million in the three months ended September 30, 2024, a decrease of $0.5 million, or 3%, primarily due to a lower cost per launch.
Research and Development, Net
(in thousands, except percentages)
| Three Months Ended September 30, 2024 | 2023 | $ Change | % Change | |
|---|---|---|---|---|
| Research and development, net | $47,723 | $26,626 | $21,097 | 79% |
Research and development expense increased by $21.1 million, or 79%, for the three months ended September 30, 2024 as compared to the three months ended September 30, 2023, primarily due to Neutron development progress, increased staff cost as a result of hiring and prototype spend focused on expanding our spacecraft and spacecraft components product portfolio.
Selling, General and Administrative
(in thousands, except percentages)
| Three Months Ended September 30, 2024 | 2023 | $ Change | % Change | |
|---|---|---|---|---|
| Selling, general and administrative | $32,172 | $27,200 | $4,972 | 18% |
Selling, general and administrative expense increased by $5.0 million, or 18%, for the three months ended September 30, 2024 as compared to the three months ended September 30, 2023, primarily due to increased staff and staff related expenses to support revenue growth.
Interest Expense, Net
(in thousands, except percentages)
| Three Months Ended September 30, 2024 | 2023 | $ Change | % Change | |
|---|---|---|---|---|
| Interest expense, net | $(454) | $(1,413) | $959 | (68)% |
Interest expense, net of interest income decreased by $1.0 million, or 68%, for the three months ended September 30, 2024 as compared to the three months ended September 30, 2023, primarily due to an increase of interest income from increased money market account balances and decreased interest expense on secured borrowings, partially offset by interest expense incurred on senior convertible notes.
Loss on Foreign Exchange
(in thousands, except percentages)
| Three Months Ended September 30, 2024 | 2023 | $ Change | % Change | |
|---|---|---|---|---|
| Loss on foreign exchange | $(490) | $(120) | $(370) | 308% |
Loss on foreign exchange increased by $0.4 million, or 308%, for the three months ended September 30, 2024 as compared to the three months ended September 30, 2023, primarily due to fluctuations on the foreign exchange rates of the New Zealand Dollar and Canadian Dollar as compared to the U.S. Dollar.
Other Income, Net
(in thousands, except percentages)
| Three Months Ended September 30, 2024 | 2023 | $ Change | % Change | |
|---|---|---|---|---|
| Other income, net | $1,848 | $1,176 | $672 | 57% |
Other income increased by $0.7 million, or 57%, for the three months ended September 30, 2024 as compared to the three months ended September 30, 2023, primarily due to a $1.2 million gain on disposal of assets.
Provision for Income Taxes
(in thousands, except percentages)
| Three Months Ended September 30, 2024 | 2023 | $ Change | % Change | |
|---|---|---|---|---|
| Provision for income taxes | $(944) | $(1,352) | $408 | (30)% |
We recorded income tax expense of $0.9 million for the three months ended September 30, 2024 and income tax expense of $1.4 million for the three months ended September 30, 2023. The effective tax rate was (1.9)% for the three months ended September 30, 2024, compared to (3.4)% for the three months ended September 30, 2023. The effective tax rate differs from the federal statutory rate due primarily to a full valuation allowance against our U.S. deferred tax assets, as well as the impact of discrete items that may occur in any given year but which are not consistent from year-to-year.
Comparison of the Nine Months Ended September 30, 2024 and 2023
The following table sets forth our consolidated statements of operations information and data as a percentage of revenue for the nine months ended September 30, 2024 and 2023 (in thousands, except percentages):
| Nine Months Ended September 30, 2024 $% | 2023 $% | |||
|---|---|---|---|---|
| Revenues | $303,826 | 100.0% | $184,601 | 100.0% |
| Cost of revenues | 224,494 | 73.9% | 148,684 | 80.5% |
| Gross profit | 79,332 | 26.1% | 35,917 | 19.5% |
| Operating expenses: | ||||
| Research and development, net | 126,139 | 41.5% | 81,566 | 44.2% |
| Selling, general and administrative | 91,445 | 30.1% | 84,386 | 45.7% |
| Total operating expenses | 217,584 | 71.6% | 165,952 | 89.9% |
| Operating loss | (138,252) | (45.5)% | (130,035) | (70.4)% |
| Other income (expense): | ||||
| Interest expense, net | (2,176) | (0.7)% | (2,843) | (1.5)% |
| Loss on foreign exchange | (465) | (0.2)% | (76) | 0.0% |
| Other income, net | 3,152 | 1.0% | 3,519 | 1.9% |
| Total other income, net | 511 | 0.1% | 600 | 0.4% |
| Loss before income taxes | (137,741) | (45.4)% | (129,435) | (70.0)% |
| Provision for income taxes | (89) | — | (2,639) | (1.4)% |
| Net loss | $(137,830) | (45.4)% | $(132,074) | (71.4)% |
Revenues
(in thousands, except percentages)
| Nine Months Ended September 30, 2024 | 2023 | $ Change | % Change | |
|---|---|---|---|---|
| Revenues | $303,826 | $184,601 | $119,225 | 65% |
Revenue increased by $119.2 million, or 65%, for the nine months ended September 30, 2024 as compared to the nine months ended September 30, 2023. Space systems revenue was $220.8 million for the nine months ended September 30, 2024, an increase of $99.6 million, or 82%, primarily due to spacecraft manufacturing growth. Launch Services revenue was $83.0 million for the nine months ended September 30, 2024, an increase of $19.6 million, or 31%, primarily due to a higher launch cadence with 11 launch missions completed in the nine months ended September 30, 2024, versus nine launch missions completed in the nine months ended September 30, 2023 and higher revenue value per launch.
Cost of Revenues
(in thousands, except percentages)
| Nine Months Ended September 30, 2024 | 2023 | $ Change | % Change | |
|---|---|---|---|---|
| Cost of revenues | $224,494 | $148,684 | $75,810 | 51% |
Cost of revenues increased by $75.8 million, or 51%, for the nine months ended September 30, 2024 as compared to the nine months ended September 30, 2023. Space systems cost of revenue was $163.6 million for the nine months ended September 30, 2024, an increase of $68.3 million, or 72%, primarily due to spacecraft manufacturing growth. Launch Services cost of revenues was $60.9 million for the nine months ended September 30, 2024, an increase of $7.5 million, or 14%, primarily due to the higher launch cadence referenced above. Cost of revenues for the nine months ended September 30, 2024 decreased to 74% of total revenue as compared to 81% during the nine months ended September 30, 2023.
Research and Development, Net
(in thousands, except percentages)
| Nine Months Ended September 30, 2024 | 2023 | $ Change | % Change | |
|---|---|---|---|---|
| Research and development, net | $126,139 | $81,566 | $44,573 | 55% |
Research and development expense increased by $44.6 million, or 55%, for the nine months ended September 30, 2024 as compared to the nine months ended September 30, 2023, primarily due to Neutron development progress, increased staff cost as a result of hiring and prototype spend focused on expanding our spacecraft and spacecraft components product portfolio.
Selling, General and Administrative
(in thousands, except percentages)
| Nine Months Ended September 30, 2024 | 2023 | $ Change | % Change | |
|---|---|---|---|---|
| Selling, general and administrative | $91,445 | $84,386 | $7,059 | 8% |
Selling, general and administrative expense increased by $7.1 million, or 8%, for the nine months ended September 30, 2024 as compared to the nine months ended September 30, 2023, primarily due to increased staff and staff related expenses to support revenue growth.
Interest Expense, Net
(in thousands, except percentages)
| Nine Months Ended September 30, 2024 | 2023 | $ Change | % Change | |
|---|---|---|---|---|
| Interest expense, net | $(2,176) | $(2,843) | $667 | (23)% |
Interest expense, net of interest income decreased by $0.7 million, or 23%, for the nine months ended September 30, 2024 as compared to the nine months ended September 30, 2023, primarily due to an increase of interest income from increased money market account balances and decreased interest expense on secured borrowings, partially offset by interest expense incurred on senior convertible notes.
Loss on Foreign Exchange
(in thousands, except percentages)
| Nine Months Ended September 30, 2024 | 2023 | $ Change | % Change | |
|---|---|---|---|---|
| Loss on foreign exchange | $(465) | $(76) | $(389) | 512% |
Loss on foreign exchange increased by $0.4 million, or 512%, for the nine months ended September 30, 2024 as compared to the nine months ended September 30, 2023, primarily due to fluctuations on the foreign exchange rates of the New Zealand Dollar and Canadian Dollar as compared to the U.S. Dollar.
Other Income, Net
(in thousands, except percentages)
| Nine Months Ended September 30, 2024 | 2023 | $ Change | % Change | |
|---|---|---|---|---|
| Other income, net | $3,152 | $3,519 | $(367) | (10)% |
Other income decreased by $0.4 million, or 10%, for the nine months ended September 30, 2024 as compared to the nine months ended September 30, 2023, primarily due to a loss on extinguishment of $1.3 million and a decrease in accretion of marketable securities purchased at a discount, partially offset by a $2.4 million gain on disposal of assets.
Provision for Income Taxes
(in thousands, except percentages)
| Nine Months Ended September 30, 2024 | 2023 | $ Change | % Change | |
|---|---|---|---|---|
| Provision for income taxes | $(89) | $(2,639) | $2,550 | (97)% |
We recorded income tax expense of $0.1 million for the nine months ended September 30, 2024 and income tax expense of $2.6 million for the nine months ended September 30, 2023. The effective tax rate was (0.1)% for the nine months ended September 30, 2024, compared to (2.0)% for the nine months ended September 30, 2023. The effective tax rate differs from the federal statutory rate due primarily to a full valuation allowance against our U.S. deferred tax assets, as well as the impact of discrete items that may occur in any given year but which are not consistent from year-to-year.
Liquidity and Capital Resources
Since inception, we have funded our operations with proceeds from sales of our capital stock, convertible senior notes, term note debt, research and development grant proceeds, and cash flows from the sale of our products and services. As of September 30, 2024, we had $292.5 million of cash and cash equivalents and $211.2 million of marketable securities. Our primary requirements for liquidity and capital are for investment in new products and technologies, the expansion of existing manufacturing facilities, working capital, debt service, acquisitions of complementary businesses, products or technologies and general corporate needs.
We believe that our existing cash and cash equivalents and payments from customers will be sufficient to meet our working capital and capital expenditure needs for at least the next twelve months, although we may choose to take advantage of opportunistic capital raising or refinancing transactions at any time. We will continue to invest in increasing production and expanding our product offerings through acquisitions.
Material Cash Requirements
As of September 30, 2024, we had outstanding $416.2 million in aggregate principal amount of indebtedness under our convertible senior notes and equipment financing agreement, of which $11.8 million was scheduled to become due in the following twelve months. As of September 30, 2024, our total minimum lease payments was $103.0 million, of which $10.6 million is due in the following twelve months. For details regarding our indebtedness and lease obligations at September 30, 2024, refer to Note 11, Loan Agreements, and Note 14, Leases, to our consolidated financial statements included elsewhere in this Quarterly Report on Form 10-Q.
Our capital expenditures for the nine months ended September 30, 2024 were $45.5 million. Our future capital requirements will depend on many factors, including our launch cadence, traction in the market with our space systems offerings, the expansion of sales and marketing activities, the timing and extent of spending to support product development efforts, the introduction of new and enhanced products, the continuing market adoption of our products, the timing and extent of additional capital expenditures to invest in existing and new office spaces and the number of acquisitions of complementary businesses, products or technologies we pursue, if any. We may be required to seek additional equity or debt financing. In the event that we require additional financing, we may not be able to raise such financing on terms acceptable to us or at all. If we are unable to raise additional capital or generate cash flows necessary to expand our operations and invest in continued product innovation, we may not be able to compete successfully, which would harm our business, operations and financial condition.
Additionally, we expect our capital and operating expenditures will increase significantly in connection with ongoing activities as we:
- increase our investment in marketing, sales and distribution infrastructure for our existing and future products and services;
- develop additional new products and enhancements to existing products;
- obtain, maintain and improve our operational, financial and management performance;
- hire additional personnel;
- obtain, maintain, expand and protect our intellectual property portfolio; and
- continue to operate as a public company.
Indebtedness
As of September 30, 2024, there was $355.0 million outstanding under our 4.250% Convertible Senior Notes due 2029, before unamortized discount and debt issuance costs of $10.1 million. In addition, as of September 30, 2024, there was $61.2 million outstanding under the Trinity Loan Agreement, before unamortized discount and debt issuance costs of $2.5 million.
See Note 11 of Item 1 for additional information on our outstanding loan agreements.
Cash Flows
The following table summarizes our cash flows for the periods presented:
(in thousands)
| Net cash provided by (used in): | Nine Months Ended September 30, 2024 | 2023 |
|---|---|---|
| Operating activities | $(46,503) | $(56,650) |
| Investing activities | (80,401) | (49,153) |
| Financing activities | 256,499 | 4,863 |
| Effect of exchange rate changes | 763 | (439) |
| Net increase (decrease) in cash, cash equivalents, and restricted cash | $130,358 | $(101,379) |
Cash Flows from Operating Activities
Net cash used in operating activities was $46.5 million for the nine months ended September 30, 2024 and consisted of $137.8 million in net loss, $70.0 million in non-cash activities and $21.4 million in cash provided by operating assets and liabilities. Included in the non-cash activities are $39.9 million in stock-based compensation expense and $24.5 million in depreciation and amortization. Included in the cash provided by operating assets and liabilities are $27.8 million in contract liabilities, $13.9 million in trade payables, $12.9 million in accounts receivable, net, offset by cash used in operating assets and liabilities including $36.5 million in contract assets and $7.1 million in inventories.
Cash Flows from Investing Activities
Cash used in investing activities for the nine months ended September 30, 2024 of $80.4 million was primarily driven by $46.6 million of net cash used in investing activities related to purchases and maturities of marketable securities and $45.5 million of capital equipment and infrastructure investments, partially offset by $11.8 million of proceeds on disposal of assets, net primarily related to the sale of a helicopter.
Cash Flows from Financing Activities
Cash provided by financing activities for the nine months ended September 30, 2024 of $256.5 million was primarily related to $355.0 million of proceeds from the issuance of convertible senior notes, partially offset by $48.9 million of repayments on Trinity Loan Agreement, $43.2 million purchase of capped calls related to the issuance of convertible senior notes and $12.2 million of debt issuance costs.
Critical Accounting Policies and Estimates
There have been no material changes to our critical accounting policies and estimates as disclosed in our audited financial statements included in our Form 10-K for the year ended December 31, 2023, as filed with the SEC on February 28, 2024.
Off-Balance Sheet Arrangements
We did not have during the periods presented, and we do not currently have, any off-balance sheet arrangements, as defined under applicable SEC rules.
Market risk
As filed, 2,607 characters, with its headings, lists and tables. Extracted from the main document; charts and exhibits are in the original on sec.gov.
We are exposed to market risks in the ordinary course of our business. Market risk represents the risk of loss that may impact our financial position due to adverse changes in financial market prices and rates. Our market risk exposure is primarily the result of fluctuations in foreign currency exchange rates, interest rates and inflation.
Foreign Currency Exchange Risk
Our reporting currency is the U.S. dollar, and the functional currency of each of our subsidiaries is either its local currency or the U.S. dollar. The assets and liabilities of each of our subsidiaries are translated into U.S. dollars at exchange rates in effect at each balance sheet date and operations accounts are translated using the average exchange rate for the relevant period. Increases or decreases in the relative value of the U.S. dollar to other currencies may positively or negatively affect revenue and other operating results as expressed in U.S. dollars. Foreign currency translation adjustments are accounted for as a component of accumulated other comprehensive income (loss) within stockholders’ equity. Gains or losses due to transactions in foreign currencies are reflected in the condensed consolidated statements of operations under the line item “Loss on foreign exchange.” Materially all of our revenues are denominated in U.S. dollars and we have not engaged in the hedging of foreign currency risk to date, although we may choose to do so in the future. As such, a 10% or greater move in exchange rates versus the U.S. dollar could have a material impact on our financial results and position.
Interest Rate Risk
As of September 30, 2024, we had cash and cash equivalents of $292.5 million, comprised primarily of operating accounts and money market instruments and $211.2 million invested in marketable securities, comprised of commercial paper, corporate debt securities, bank certificates of deposit, U.S. Treasury bills and notes and asset backed securities. We do not enter into investments for trading or speculative purposes and have not used any derivative financial instruments to manage our interest rate risk exposure.
Impact of Inflation
We do not believe that inflation has had a material effect on our business, results of operations, or financial condition. Nonetheless, if our costs were to become subject to significant inflationary pressures it could diminish our margin thereby limiting our profits, especially if we are not able to fully offset such higher costs. Our inability or failure to do so could harm our business, financial condition, and results of operations.
Controls and procedures
As filed, 1,555 characters, with its headings, lists and tables. Extracted from the main document; charts and exhibits are in the original on sec.gov.
Evaluation of Disclosure Controls and Procedures
We maintain “disclosure controls and procedures,” as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act that are designed to ensure that information required to be disclosed in the reports that we file or submit under the Exchange Act is (1) recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms and (2) accumulated and communicated to our management, including our principal executive and principal financial officer, as appropriate to allow timely decisions regarding required disclosure.
As required by paragraph (b) of Rules 13a-15 and 15d-15 under the Exchange Act, our management, with the participation of our principal executive officer and principal financial officer, evaluated the effectiveness of our disclosure controls and procedures as of the end of the period covered by this Quarterly Report on Form 10-Q. Based upon such evaluation, our principal executive officer and principal financial officer have concluded that our disclosure controls and procedures were effective as of September 30, 2024.
Changes in Internal Control over Financial Reporting
During the period covered by this Quarterly Report on Form 10-Q, there were no changes in the our internal control over financial reporting (“ICFR”) identified in connection with the evaluation required by paragraph (d) of Rules 13a-15 or 15d-15 of the Exchange Act that has materially affected, or is reasonably likely to materially affect, the Company’s ICFR.
Risk factors
As filed, 213 characters, with its headings, lists and tables. Extracted from the main document; charts and exhibits are in the original on sec.gov.
There have been no material changes from the risk factors previously disclosed in Part I, Item 1A of our Annual Report on Form 10-K for the year ended December 31, 2023, as filed with the SEC on February 28, 2024.
Figures reported in this filing
Standardized line items from the XBRL in this filing, for the period ended 2024-09-30. Comparative periods it repeats are left out.
| Line item | Period | Value | XBRL concept |
|---|---|---|---|
| Revenue | 3 months2024-07-01 to 2024-09-30 | $104.8m | us-gaap:RevenueFromContractWithCustomerExcludingAssessedTax |
| Revenue | 9 months2024-01-01 to 2024-09-30 | $303.8m | us-gaap:RevenueFromContractWithCustomerExcludingAssessedTax |
| Cost of revenue | 3 months2024-07-01 to 2024-09-30 | $76.8m | us-gaap:CostOfRevenue |
| Cost of revenue | 9 months2024-01-01 to 2024-09-30 | $224.5m | us-gaap:CostOfRevenue |
| Gross profit | 3 months2024-07-01 to 2024-09-30 | $28.0m | us-gaap:GrossProfit |
| Gross profit | 9 months2024-01-01 to 2024-09-30 | $79.3m | us-gaap:GrossProfit |
| Research and development | 3 months2024-07-01 to 2024-09-30 | $47.7m | us-gaap:ResearchAndDevelopmentExpense |
| Research and development | 9 months2024-01-01 to 2024-09-30 | $126.1m | us-gaap:ResearchAndDevelopmentExpense |
| Selling, general and administrative | 3 months2024-07-01 to 2024-09-30 | $32.2m | us-gaap:SellingGeneralAndAdministrativeExpense |
| Selling, general and administrative | 9 months2024-01-01 to 2024-09-30 | $91.4m | us-gaap:SellingGeneralAndAdministrativeExpense |
| Operating income | 3 months2024-07-01 to 2024-09-30 | −$51.9m | us-gaap:OperatingIncomeLoss |
| Operating income | 9 months2024-01-01 to 2024-09-30 | −$138.3m | us-gaap:OperatingIncomeLoss |
| Income tax | 3 months2024-07-01 to 2024-09-30 | $944.0k | us-gaap:IncomeTaxExpenseBenefit |
| Income tax | 9 months2024-01-01 to 2024-09-30 | $89.0k | us-gaap:IncomeTaxExpenseBenefit |
| Net income | 3 months2024-07-01 to 2024-09-30 | −$51.9m | us-gaap:NetIncomeLoss |
| Net income | 9 months2024-01-01 to 2024-09-30 | −$137.8m | us-gaap:NetIncomeLoss |
| Diluted EPS | 3 months2024-07-01 to 2024-09-30 | −$0.10 | us-gaap:EarningsPerShareDiluted |
| Diluted EPS | 9 months2024-01-01 to 2024-09-30 | −$0.28 | us-gaap:EarningsPerShareDiluted |
| Basic EPS | 3 months2024-07-01 to 2024-09-30 | −$0.10 | us-gaap:EarningsPerShareBasic |
| Basic EPS | 9 months2024-01-01 to 2024-09-30 | −$0.28 | us-gaap:EarningsPerShareBasic |
| Diluted shares (weighted) | 3 months2024-07-01 to 2024-09-30 | 497,701,715 shares | us-gaap:WeightedAverageNumberOfDilutedSharesOutstanding |
| Diluted shares (weighted) | 9 months2024-01-01 to 2024-09-30 | 493,976,025 shares | us-gaap:WeightedAverageNumberOfDilutedSharesOutstanding |
| Operating cash flow | 9 months2024-01-01 to 2024-09-30 | −$46.5m | us-gaap:NetCashProvidedByUsedInOperatingActivities |
| Capital expenditure | 9 months2024-01-01 to 2024-09-30 | $45.5m | us-gaap:PaymentsToAcquirePropertyPlantAndEquipment |
| Cash and equivalents | At period end2024-09-30 | $292.5m | us-gaap:CashAndCashEquivalentsAtCarryingValue |
| Current assets | At period end2024-09-30 | $695.5m | us-gaap:AssetsCurrent |
| Total assets | At period end2024-09-30 | $1.15bn | us-gaap:Assets |
| Current liabilities | At period end2024-09-30 | $269.2m | us-gaap:LiabilitiesCurrent |
| Total liabilities | At period end2024-09-30 | $733.2m | us-gaap:Liabilities |
| Long-term debt | At period end2024-09-30 | $46.9m | us-gaap:LongTermDebtNoncurrent |
| Current portion of debt | At period end2024-09-30 | $11.8m | us-gaap:LongTermDebtCurrent |
| Shareholders' equity | At period end2024-09-30 | $419.8m | us-gaap:StockholdersEquity |
Source: SEC EDGAR, the filing index for accession 0000950170-24-125529. Last ingested by Listed: Nov 2, 2026, 18:48 ET. Listed shows no prices and gives no investment advice.