As one of the largest aerospace companies in Long Beach, Rocket Lab Corp. has seen exponential growth since it expanded in 2013 into the U.S. from New Zealand.
Known for manufacturing the Electron rocket – the second most frequently launched rocket by the U.S., trailing behind only SpaceX’s Falcon 9 – Rocket Lab also develops satellites and components for space systems. It serves as a major contractor with NASA and the Pentagon, having completed the twin satellites for University of California Berkeley last month as part of NASA’s Mars exploration initiatives. Last Wednesday, it announced a $190 million contract with U.S. Department of War to develop 20 hypersonic test flights, increasing its contracted backlog to more than $2 billion. This represents its largest launch contract to date.
Originally starting out in Huntington Beach, the company moved its operations to Long Beach in 2020. It now has presence in about seven U.S. states, including New Mexico, Colorado and Maryland.
The publicly traded company is valued at $44.6 billion, and it closed out last year with a 38% revenue growth at $602 million.
As the corporation celebrates its 20th year in business, the Business Journal sat down with Chief Financial Officer Adam Spice to discuss industry outlook and how Rocket Lab plans to continue its success.
The aerospace industry is booming in Long Beach now with a lot of funding and investment. How does Rocket Lab view its position in this thriving industrial scene, given its longevity and its size?
We came in as a relatively small player. Over time, we’ve increased our relative position. We now have approximately 1,000 people located in Long Beach. When I joined back in 2018, we had about 25 people here in the Southern California area. We’ve had absolutely huge growth. And I think that, if you look at some of the other players who are now coming into the area, I think that we can probably get some credit for being a bit of a magnet. I think the biggest magnet of pulling talent in the area certainly was SpaceX. But then, we’ve also done our fair share of bringing talent to the region, creating a lot of really interesting jobs and opportunities for people, and I think that’s just going to continue.
Rocket Lab has expanded to multiple states and increased its workforce. How do you view your legacy throughout this expansion?
If you look at the concentration of really impressive high growth innovative companies, it really is amazing how many have now really flourished here in Southern California, particularly in this Long Beach and L.A. area.
I think that we can take credit for being one of the real upstarts that has survived a really tough period for a lot of other companies. We took over a building in Long Beach here that Virgin Orbit was the prior owner or tenant of. Where others have failed, we’ve come in and taken over those failed operational facilities and turned them into something really productive. We’re very proud of that.
(We are also) providing some really amazing career opportunities for young talent that come straight at a school or coming from other companies.
Rocket Lab closed a very successful year at 38% of revenue increase year-over-year. What are some strategies to keep this trend going? What are some areas that you will focus on this financial year?
We’re very fortunate that we’ve developed a pretty diversified business in the fact that we originally established ourselves as a launch company with our small launch vehicle, Electron (rocket), and that continues to grow very nicely. And it grows not because of just the overall opportunity of launching satellites for the small-set industries there, but we’ve also managed to morph that Electron vehicle into something that supports national security missions when it comes to HASTE, or hypersonics testing platforms.
We’ve got multiple things, pushing overall growth of small satellites, pushing the Electron business, the importance of hypersonics innovation, pushing our HASTE business. Of course, we’re going to have Neutron (rockets) coming into the model pretty quickly too, which will have a very big impact on our overall launch business.
And then again, that’s if you look at launch today, it only represents about 30% of our revenue. Seventy percent of our revenue comes from a completely different business that wasn’t even there five years ago. (We) really started space systems from scratch.
And then longer term, our ultimate ambition is to actually own our own assets in orbit.
Artificial intelligence and automation have become a big deal in aerospace. How will Rocket Lab in the near future incorporate these technologies into its fold and increase its competitiveness?
One of the more obvious areas for application of AI in aerospace defense is probably more on the application side. When I say application, if you’re collecting data from space – let’s say you’re doing remote sensing or Earth imaging – you generate that data and then you do analytics on it to do predictive things and really figure out how to use that information intelligently. We’re not in that part of the market yet.
Ultimately, we are going to have our own data that we gather from orbit, but as we exist today, we really use AI to just make our internal operations more efficient. For example, everybody knows that people are using AI to write code. We do that. We actually have AI writing code for some of our things, including things like when you build a rocket engine, there’s a lot of code that’s required to operate that piece of hardware. In the past, it’s taken large teams many, many months, if not longer, to develop all the software to control those engines. Now, we’ve been able to do that much, much faster with much smaller teams.
I think we’re already finding ways to have AI make us much more efficient on the R&D and on the production side. And of course, we’re applying it also to the administrative part of our business. We’re starting to find ways to apply it, more on the development side than on any kind of an application. But that will come also in time.
Rocket Lab made two acquisitions this year, Optical Support Inc. and Precision Components. What would those acquisitions mean to Rocket Lab, in terms of your operations, profit margin, competitiveness and technology?
We do different types of acquisitions. We do acquisitions that bring new capabilities into the company and interest into new markets, and then we do acquisitions that basically further vertically integrate our supply chain and de-risk execution. And sometimes alliances can be a little bit gray, but if you look at OSI and PCL, in particular, those fall into the category of ‘operational vertical integration,’ where OSI was a key supplier into Geost, who we acquired in August of last year.
In some respects, Geost was the acquisition that got us those new capabilities and a new market, and then OSI was a key supplier into that opportunity, and we wanted to de-risk the operational side of Geost, so we said, okay, well, let’s not have this very important subsystem supplier to Geost. Let’s just own that. That’s how that deal factored into our strategy.
And then when you look at PCL, we’re a tremendous consumer of machine shop capacity in New Zealand, where we may be one of the largest machine shop capacity consumers. That’s another example. Rather than have to rely on somebody else determining how important your business is to them, you basically just acquire that capability, and then you control those resources. And that’s really what we did there, and we’ve successfully done that in other instances.
What are some challenges for Rocket Lab ahead of the Neutron launch?
Relative to how long it takes other people to bring similar programs to market, we’re doing it much, much quicker and for much cheaper. We had a setback earlier this year on a tank test, a booster tank test that we’ve been in the process of remediating. We feel like we’re in a very good position to execute on our launch target of Q4 of this year.
Now, of course, for that to happen a lot of things have to go well. When we’re putting our schedules together, we pull together what’s called Green Light schedules, meaning that we don’t expect or model things to go horribly. We expect that things will go to plan.
What would you say is the business landscape of securing government funding and grants, and what does the regulatory landscape look like when you collaborate with the government?
We found our U.S. government customers to be incredibly collaborative, very supportive. I think that we’re at a unique point in time in our market where the government is trying to do things in a very different way. They’re trying to be much more commercial. And they have to because, in the prior era where everything was done in small batches and a few exquisite satellites in geosynchronous orbit, now that we’re moving to this proliferated architecture of many more satellites in low Earth orbit, they realize they have to do things differently. And I think the people that they relied on in the past, the legacy primes, aren’t in a position to really give them ultimately what they need to be successful. They’re looking to innovative, much more commercially oriented companies like ourselves, who bring innovation and scrappiness to the market to really help them achieve their goals. I think the partnership has actually been really good.
(In terms of regulation), you have to put infrastructure in place to meet your government customers’ requirements around security and cost reporting in some cases, but for the most part, they seem to be very clear about what it takes to win, and they’re looking to enable companies that can bring the best value to them for the spend and bring real, new capabilities, innovative capabilities, to their arsenal.
