Running a rocket launch company is an expensive proposition. You need hundreds of employees, lots of expensive machines and tooling, plenty of hardware, and at least one launch site. To make matters worse, for a purely commercial launch firm like Rocket Lab, you typically only get paid when you deliver someone's satellite into orbit.
So it's perhaps no surprise that the US-based company, which launches from New Zealand and has about 600 employees, has been losing a lot of money. According to a new proxy statement, Rocket Lab experienced net losses of $30 million and $55 million in 2019 and 2020, respectively. Given the company's financial position, an independent auditor, according to the proxy statement, "expressed substantial doubt" about Rocket Lab's "ability to continue as a going concern."
These are the kinds of details we rarely see in the often financially opaque launch business, but as part of the process of merging with a publicly traded Special Purpose Acquisition Company, Rocket Lab had to make extensive financial disclosures. The full, 712-page document can be downloaded here.
Rocket Lab reported revenue of $48 million in 2019 and $35 million in 2020. The decrease last year was due in part to the COVID-19 pandemic, the company said. It has contracts for 15 additional Electron launches for this year and beyond, valued at $127 million in launch and space systems revenue.
As of March 31 of this year, Rocket Lab has $34.2 million of cash and cash equivalents on hand. In addition to this, the company said it has access to both a $35 million revolving line of credit and a $100 million secured loan with Hercules Capital that is not repayable until June 2024. Rocket Lab acknowledged that there may be a fairly long pathway to profitability.
"We expect to continue to incur net losses for the next several years and we may not achieve or maintain profitability in the future," the proxy statement says. "We believe there is a significant market opportunity for our business, and we intend to invest aggressively to capitalize on this opportunity."
These financial losses may not cool the ardor of investors in Vector Acquisition Corporation, which is seeking to merge with Rocket Lab later this summer. Shareholders in Vector are due to vote on the proposed merger at a meeting on August 20. This merger will provide Rocket Lab with about $500 million in cash.
One reason investors will probably still be interested in Rocket Lab is that, unlike a lot of the space companies that have recently gone the SPAC route to become publicly traded, the launch company has solid revenue, demonstrated hardware, and a path toward growing its business.
Rocket Lab is already working to expand beyond small launch, including building its own satellites, performing satellite servicing in orbit, and building a medium-lift rocket called Neutron with a reusable first stage. In the proxy statement, Rocket Lab noted that Neutron has a lift capacity of up to 8 metric tons to low-Earth orbit, 2 tons to the Moon, and 1.5 tons to Mars and Venus. Its first launch may occur as early as 2024.
Neutron, the company said, "will enable significantly higher revenue per launch with its capability to deploy larger spacecraft and greater numbers of spacecraft per launch as compared to our Electron launch vehicle and will also be capable of supporting crewed flight and cargo resupply to the International Space Station."
In terms of risks, the company cited the unexpected but potential loss of Peter Beck as its leader. Fiery, charismatic, and demanding of his employees, Beck has relentlessly promoted the Rocket Lab brand publicly and been a key driver of its technological innovation, the company said.
"We are highly dependent on the services of Peter Beck, our President, Chief Executive Officer and Chairman," the proxy statement said. "Mr. Beck is the source of many, if not most, of the ideas and execution driving our company. If Mr. Beck were to discontinue his service to us due to death, disability or any other reason, we would be significantly disadvantaged."
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