Rocket Lab’s CEO on End-to-End Space Solutions

[MUSIC] >> Hello and welcome to Tech Disruptors Podcast hosted by Bloomberg Intelligence. In this podcast, we speak with C-Suite company executives and management teams about their views on disruption and how it is driving their decision making strategy. Bloomberg Intelligence is Bloomberg's research arm which covers roughly 2,000 companies globally and across multiple asset classes backed by Bloomberg and third party data, which is supported by almost 500 research professionals. My name is Wayne Sanders and the Senior Defense Weapons Analyst at Bloomberg Intelligence. And today I'm honored to have with me the Rocket Lab CEO, Sir Peter Beck. Sir Peter, welcome to the show. Thanks very much Wayne, it's great to be here. >> Now Rocket Lab is an end-to-end space company delivering reliable launch services, spacecraft design services, spacecraft components, spacecraft manufacturing, and other on-orbit management solutions. And obviously from my lens, I really started leaning in on research on Rocket Lab due to their entrance into the defense sector and supporting government launches and services. Sir Peter Beck has led Rocket Lab as the company's founder and CEO while filling multiple other roles within the company for many years, and currently holds a title of founder, CEO, president, and chairman of the board. So at this time, I'd like to actually hand it over to you for a minute to, because you're obviously going to do a better job of introducing yourself than I did, and I'd love for you to fill in the gaps. >> Oh, no, that sounds pretty good to me. But the most important role I have in the company is chief engineer. That's the one I like the most. Everything else is times a burden. But, you know, thanks very much. I mean, I think you introduced the company well. I mean, what we're really focused on here is building an end-to-end space company. And what that ultimately translates into is that somebody has a capability they want on orbit, or somebody has an asset they want on orbit, and instead of kind of waiting through the normal procurement of approach where you contract certain folks for a payload and certain folks to build your spacecraft, and then certain folks to launch your spacecraft. And as we all know, space is just a giant engineering kind of compromise all the way through. You can just come to one company that has all of the equipment at scale, and just say, look, I need this capability on orbit, and we just pull all the things we need to pull off the shelf, put it together, put a spacecraft together, and then go and launch it, and can even operate it for customers. So it's really just taking it to the extreme of, instead of, you know, space industry has been incredibly kind of fragile and fractionized where, you know, everybody is experts at one little thing, which is great, but at the end of the day, it's really quite difficult sometimes to weave all those one little things together into a cost effective and timely platform. Absolutely. I couldn't agree more. I come from a defense background, and I remember having to do a lot of that and finding out that there are about 15 different players just to be able to set that up. So, yeah, that's amazing. Yeah. So the question everybody's been asking me, especially after seeing the plans for a large complex three at Wall of Thailand, how close are the timelines for a 2025 launch for your neutron rocket? Yeah, yeah, no, I asked the question of myself and the team every day, so this, well, look, I mean, the opening of the launch complex was a huge milestone for the program. I think most people think when you build a rocket, the majority of the capital goes to the, you know, the big shiny tube that looks like a rocket, but actually it's all of the concrete and steel in the ground. That's where the majority of the cappex and the time actually ends up going. So it was a huge achievement for the program to get to LC3 open and operational and ready to start to receive rockets. So that was a good one. As we've always said, look, we run a green light schedule in rocket lab, and it means is that, you know, we don't build fat into any time, everything has to go perfect for us to achieve the goal, but it provides the right level of pressure and also ambition for the team. And, you know, we are working incredibly hard to bring neutron to the pad by the end of the year and get one away. But, you know, at the end of the day, I always caveat that with it is a rocket program. And we're right in the meat of the really big kind of integration test right now. And, you know, big tank integration tests and engine integration tests. And, you know, if something doesn't go well, then of course, then there's no way. But at the moment, you know, things are going well. But like I say, it's a rocket program. We're right in the meat of those kind of high-risk tests. So if something doesn't go the way we want it, then, you know, that'll do us for the year. But I always think it's important to remember that, you know, the product lifespan is 20 years plus. So a few months here or there is kind of a relevant in the big scheme of, you know, in the big scheme of a program of this magnitude. But either way, it'll come together in one of the shortest timelines in history and certainly, you know, one of the most affordable medium-lift programs ever. So we're very excited. So given the amount of R&D investment into Neutron to get it into the medium-lift large, how much will this help bring your cost to per kilogram down? Yeah, well, I'll start off by debunking a cost per kilogram metric because it's a very convenient metric that everybody can use to compare the relative costs between each rocket. But the reality is that nobody's ever bought a rocket on a per kilogram basis. Like if you come and buy an electron and you'll payload as 150 kgs and it can lift 300, you don't pay half the price of the rocket. You still have to buy the whole rocket. So although cost per kilogram is kind of an easy metric to understand, any time I get the opportunity to debunk the cost per kilogram metric, I will take it. But the reality is, of course, Neutron is on a cost per kilogram basis is very competitive with any other medium launch vehicle that's currently operating and all ones that may intend to operate in the future. So yep, no, the cost per kilogram metric looks great, but I think what's more interesting there, if you've got a medium-class lift payload, I think the current price for a Falcon 9 is something like $80 million. Neutron is a $55 million price. So that's the reality of how someone will buy a rocket, not on a cost per kilogram basis. No, that makes sense. I think it's just easy for an analyst, right, such as myself, because I can pull that into a chart and then start selling. Yeah, and it's like, of course, the larger capacity you have, the lower the cost per kilogram, but it doesn't actually translate into real world. Is Neutron the break-even plan to recoup the early R&D investments? You mentioned infrastructure and everything else as well? Yeah, unlike other space companies, we're into end-to-end space companies. So launch represents about one-third of our total revenue of the business and space systems being two-thirds of our revenue. Neutron is, by far, the giant sucking sound of all capital and resources in the company right now, that's a fact. But it's a great investment. We've said that this program is going to be four years there about $350 million program, development program, which is insanely cheap. And at a $55 million price tag per launch, you can see it doesn't take very long to pay back a $350 million development program at all. But it certainly opens up a really important revenue stream for us going forward. Absolutely. So the geek in me wants to ask the next question, which is, one of your leading industry innovations is your 3D printed electrode turbo pump rocket engines. Well, Neutron, continue that path or will it switch to a gas turbine engine? Or is there something else in the works? Yeah, so Archimedes is the engine on Neutron and it's an OX rich stage combustion cycle. So locks in methane. And yes, unsurprisingly, we've pioneered a number of 3D printing techniques in that engine as well. And it's really cool because generally 3D printing is very difficult to scale. But some of these processes that we've developed are really, really cool. And there's a large number of parts that have been combined all into one print that I can't go into too much detail. But I think the geek in you would get very excited about because we've done some stuff in there that we haven't seen done before. So that's an absolute fact. But a very different engine cycle. The approach with the Archimedes engine is one that's, we basically took the highest performing cycle being a stage combustion cycle and dialed it back with relatively modest expectations or requirements on ISP. So what that gives you is it gives you a very, very kind of reliable and robust engine. It's like take the highest performing cycle, but I operated it is the lowest in most benign operating point. And the way I kind of like to think about this is like, you know, if you're sitting in a in a GD aircraft and you look out at the turbine on your on the wing there, you don't want to know that that turbine is sitting at like 90% of what it can be. can possibly do. You wanna know this pinion margin there. And that's exactly the approach we took on the Archimedes engine. - So you've suggested that there are, there may be larger rockets in Rocket Labs' future in other discussions. Are there any plans behind neutron for Rocket Labs? - Well, so I should clarify that. I mean, we have no intentions to build larger rockets. I just, maybe how that's been construed is that, I always once said that I was only gonna build a little rocket. And I had to gum through a very horrible tasting hat to be able to justify building neutron. So at this point in time, I never say never anymore. So I'm never gonna say that we're not gonna build a big rocket, but also in the same breath, we have no intentions. We think that the medium class is the one that needs the most amount of disruption right now. And it's the most interesting market for us to go after. - Got it, it makes sense. - So you brought up a little rocket. So, electrons responsive launch. What's my plans? Real call up timeline for tasking to left off for a tactfully responsive mission. And what do you see as a bottlenecks that limit the days, not months? - Yeah, yeah, this is quite funny. So we see a lot of chat in the industry about rapid call ups and I think someone demonstrated a 24 hour call up. The reality is we'll wake up in the morning and look at the sky and go, "Yeah, it's quite a nice day. We'll roll the rocket out and launch that day." So responsive access to space or that kind of stuff is just normal for us. So if somebody really needed to launch quickly, it's quite elementary. In fact, there's always plenty of rockets. I mean, there's one rocket coming out of the factory at the moment, every 11 days. So if you wanna talk about responsive launch, it doesn't just stop at the pad. It goes right back to the factory and how quickly can you produce the rocket? So I think that's super important. But it's fair to say, what would normally be considered an industry as responsive launch? We just do every day. It's just a standard part of our operating process. Now, the limiting fact here is not what you think. It's not the rockets, it's not integrating spacecraft, it's not rolling it out to the pad or anything like that. It's 100% regulatory. That is what really governs the ability to do responsive launches. So if you have all your license in hand and all your no-tams and everything in place, then literally give me a couple of hours and we'll have the rocket fueled on the pad ready to go. But it's the licensing that really drives all of those timelines. - Yeah, I spent a lot of time covering some space force, US space comm from looking at their tactical responsive space initiatives as well as some of their space strategy. And you see it kind of going in both ways. They are looking for keeping it at the things that the military specifically can do and they'll like commercial handle the others. But then the other ones do come up and it is that tactical responsive piece. So thank you so much for that. 'Cause I think that does help provide people with a lot of scope that they don't quite understand when it comes to that. - Well, I think not to believe at the point on this one, but the reality is that we need to be retaking responsive space, not responsive launch. 'Cause responsive launch exists everywhere. Like our friends over at SpaceX could do the same that we can do a pop-a-rock it on the pad out of the factory on the pad and launch it in no time flat. But actually what matters is responsive space. Because if you need a responsive launch, then chances are there's a sensor or there's a spacecraft that you need to either replace or go and do a task with. So when we talk responsive launch, I mean, we always pull it back and say, well, it's actually responsive space. And I think a good example of that is, we have a Victus mission here coming up. We designed and we built the spacecraft using our own equipment and launches on a electron. So it's a really talk about into in space. Like the customer came to us and said, look, we have this thing we want to do on orbit. We don't care what your spacecraft looks like. We don't care what your rocket looks like, but we just want this thing done on orbit quick. And we have the unique ability to just, like I said before, go to the shelves, pick off the reaction wheels of solar panels and flight computers, propulsion systems and bundle it all together, put it on an electron and go. So responsive launch is kind of irrelevant. It's like, it's responsive space. How quickly can you get a sensor on orbit to do a thing? - No, that's very helpful. So I definitely appreciate that. Then comparing electron to neutron for defense, we are talking on that subject right now. How do you see emission allocation between electron and neutron for national security payloads going? - So yes, it's typically been with electron sort of 50/50. So 50% commercial 50% government and government kind of splits off into like defense and several, but the vast vast majority is of course as defense. And electron has created a real nice sort of niche for itself. There I mean, we were the first to fly in aeropaylodes from non-US soil, so which creates a really interesting opportunity to launch national security payloads outside of the US. So there was a really interesting program and we're flying for the space force and all of the agencies that you can imagine really. So we're well versed in that world. Obviously, neutron has been on boarded to the NSSL program so the National Security Launch Program on lane one. So it will have a big role to play in national security missions for sure. But we kind of like keeping it sort of 50% commercial 50% government, that's work well for us to date. I always joke, our government customers never turn up on time but always pay the bill on time and a commercial customers always turn up on time but never pay their bill on time. So it always kind of evens out. >> Yeah, you got a good balance there, that works out well. So end-to-end space systems with spacecraft buses, solar panels, in house, avionics. How far can rocket lab go on true bus to orbit ops delivery for government customers? And where do you still prefer your partners? >> Yeah, well, I mean, we're seeing missions now. We're commercial customers and government customers just come to us with a thing to do. We want you to do this thing in space. And the Victus Hayes mission is a great example that we're talking about before. For the space force, it's exactly that. Complete spacecraft design build using all of our own components and launched on a rocket lab rocket. And the customer just wants a thing done. So we go all the way. And more recently, we just acquired our first sensor company. So now we actually have payloads as well, which is the one thing that we had missing before. We had all of the bus and all the bus components, but didn't actually have the payloads. So with our first acquisition, and GOST was our first payload acquisition. So we really, really now are complete in the total full wing to end. >> So based off of that then, with the full gambit of everything that you guys can do, if you're looking at proliferated Leo in rapid reconstitution, as we could kind of talk about a little bit, where does rocket lab fit into missile warning tracking constellations in rapid replace in kind strategies? >> Yeah, well, of course, that's a very strong area for us, an area of a lot of focus. We were awarded as a prime contractor in SDA project. So it was like a half a billion dollar project there for the SDA. So this is an area that we're very focused on. We think things like gold and dome really, really suit not only technical capabilities, but also the way the administration wants to roll the stuff out. We're a great proponent of kind of firm fixed price models and things like that. So this is an area that I think we really can shine. And with the recent acquisition of electric optical payloads, we think we're really well positioned for sure. >> So what's the smallest piece that somebody could bring to you to recastitute that you guys would accept and push up in this space? >> Oh, right. Oh, well, anything. No jobs too big, no jobs too small. >> You brought up earlier a little bit about accreditation because of the regulatory requirements. So when looking at facilities and accreditation, what investments have you made or still need to make to secure integration spaces to include IT, ComSAC, communications security for those who don't know. And cleared workforce to expand classified throughput for the US, New Zealand and allied sites. >> Yeah, great question. Well, it never stops, doesn't. Like if you think it stops, then you're going to get, you're going to be very sorry. So it's just a continual investment. You know, over the years, obviously our national security work has become deeper and deeper and we do more and more of it. So it is just a continual push within the organization. We're always adding secure facilities. We're always adding more cleared personnel. We're always adding more cyber security. And I think if you're not doing that, then you're going to get left behind. >> So really quick on from a large perspective when President Trump put out the executive order to reduce some of those regulatory requirements, how does that fit into your strategy? >> Yeah, well, a lot of those were around environmental and things like that. And of course, you know, we're welcoming you. Like we're at the end of the day, we're on, you know, it's right. So any reduction in government bureaucracy, is always very welcome. But today it hasn't caused us significant issues, but I think generally less bureaucracy is better. - Yeah, I've spent some time with some Space Force people who referred to ITAR as that four letter word, looking at international trafficking and arms regulations. On contracting sites, for contracting models, I've noticed Space Force spends a lot of time, they actually kind of lead the way in terms of using more firm fixed and OTAs. You've seen a lot across Secretary Hague Seth's, pushing for whatever faster acquisition process is allowed through the system to be able to get things to market faster and be able to support the warfighters. So, based off of that, what contracting models best unlock speed for you guys? - Well, look, we love Fairfax Pryst, because I think it just aligns all incentives. You know, the cost plus model, it's like what incentives are there to get it done faster and cheaper, there's just none. And while I get some research projects in particular that it's practically impossible to cost, that's where that contracting mechanism should be used. But I think the larger historical primes have done such a good job at convincing the government that everything is unpriceable, that it just became proliferated. Fairfax Pryst, we love having our skin in the game. We think that's only right. So that is our preferred model. In fact, I can't think of any cost plus contracts we've ever done or have. And generally, if there's a cost plus kind of requirement, we won't bid on it unless it gets changed to Fairfax Pryst. - No, that's good. I definitely see that going that way. So that's awesome. - For allies, I brought up ITA. And then from an allies and ethical guardrail perspective, how do you balance growth in allied markets with export controls and used ethics? Where do you kind of draw the line for customer missions, rocket lab won't support? - Yeah, yeah, it's a good question. So I mean, look at the end of the day, we only work with the countries that we all deem friendly. So we don't certainly not look into to strife in any kind of weird directions there. And look, the world is becoming a more complicated place. Defense and national security has always been a big part of our business. But I think you'll see that our kind of viewpoint and morals, if you wish, are aligned with the greater, greater world. And at the end of the day, look, we go to space to improve life on earth. And as long as it affects within that matrix, we're very happy. - Very nice. So now we're now going back to a couple of my favorite topics, hypersonics is one of them going back to the geeks out of the house. - Geeks. - So hypersonic and suborbital test support, how is your suborbital and high cadence launch capability shaping US hypersonic test schedules, telemetry needs and cost intensidad, test adapt? - Yeah, so this is great. Look, we were actually called into it a meeting with a group of folks. And it wasn't a notice that we had this launch vehicle that was launching really, really frequently at a really affordable price. And we go hypersonic every few weeks. In fact, we go mark 27 to get to orbit. So if someone calls us up and say, hey, can you go mark eight? We're like, okay. Do we have to take the second stage off? 'Cause we're only, we're only, we're only just not even stretching the vehicle's legs. At that point. So, and the US has a, you know, had a real issue with hypersonic research and just getting things out of the test tunnels and in the sky. And it went through a period where, you know, the launch vehicles to get them into the sky weren't particularly reliable. And that's the bit that you don't want to innovate on, right? Like if you've got a complicated hypersonic payload, you don't want to cross your fingers at the rocket work. So like that should just be a given. And, you know, some of these flights were tens of millions of dollars are crack. So that's just not scalable. And if we look at our adversaries and the advancements that are being made in hypersonics there, it's not because they've got better engineers and scientists as just their flying heaps. So, you know, we came along with Electron and converted it into a suborbital kind of vehicle. And it's just a game changer because we have so much energy and we have so much control over that energy that whatever trajectory or test regime you want to run, piece of cake, like I said, like normally you want to sort of a market window, well, take you all the way. Like this is piece of cake. So it really expands the aperture for what can be done. And of course, as I mentioned before, there's one rocket rolling off the production line every 11 days. So whatever test cadence the payloads can provide, we can support. So I think, I'm very excited about this. I think this will finally move the US right into the forefront and the lead in hypersonics where it needs to be. And just get a bulk amount of flight time for these missions. - No, I appreciate that. I spent quite a bit of time with the Test Resource Management Center at the Pentagon and dealing with launch cadence and test cadence for hypersonic sense of being one of those limited factors and being able to bring things forward. So I really appreciate the work that you guys are doing for that. On a separate geek note as well, for my cyber stuff is cyber and supply chain assurance, excuse me, cyber and supply chain assurance. What is your approach to hardening launch and space craft software and verifying and trust the supply chain at scale for the classified program? - Yeah, I mean, it's much like the previous answer. It's like you're just never stopping. It's just a continuous stream of activity and just adding and adding and adding. And we've matured these capabilities really, really quickly, alongside the growth of our national security portfolio. But with like anything here, it's like we've got multi-multipested approach like SQL but designs, there are trust and so on. Embedded in our flight software and all of our ground systems as well, it's really, really significant cyber security as you would imagine and threat management there. And along with our supply chain as well, now the one little bit different thing with us is that we're so vertically integrated. If you take an electron rocket, for example, I think we're something like 90% plus of everything on that rocket is designed built and manufactured in a rocket lab site. So we're very, very vertically integrated. We don't have to have a massive web of key suppliers. Which you bring up a really great point because there's no point in having all the controls around your own cyber security and around drawings and your components only to send them off to a machine shop and you're drawing of your singers left on a bench in the machine shop while the guy's machining it. And he goes home at night and there's a drawing on the bench like. So you have to take it to such extreme levels to ensure that security that being so vertically integrated as an advantage. - So I know we talked about tactically responsive space, as opposed to tactically responsive launch. - Yeah. - What did your most time critical government missions teach you about pre-integration, mission assurance, launch on demand playbooks, the Panagar Ken institutionalized? - Yeah. So I think it's just about, this sounds kind of corny, but just communication. That's where the majority of the stuff succeeds or fails. And just being organized, really understanding what are the true long poles and not getting surprised at the last minute with some no-tam notification that needed to happen or something like that or a tracking station booking. And like it's in my experience, it's never like, you know, is the payload sensor fully qualified and chilled? It's like, no, somebody forgot to book a ground station. So it's making sure that all the little details are well kind of constructed. And I think that's, you know, we've launched 70 times now. So you kind of able to form a really good playbook about these things and get into a rhythm and a routine. So they become, you know, at least likely to occur. - Yeah, I would probably say that from a quick to learn perspective, I think across the Pentagon, I think that's, I think the space domain is probably one of the quickest that they have learned because they've had to. They've had to keep up with commercial, they've had to be able to manage that they are not the industry leader and a lot of those, right? They've identified where commercial companies and industry is actually leading the way from the technology that's being used as well as manufacturing capabilities. And that put all those pieces together, rely on them for that, which means that you have to communicate. And I know in the past, you know, we've had that issue before where what ends up happening is, hey, we really want this, but the requirements aren't clearly defined. They don't know how to talk to industry about building what it is they want. And then so when the industry comes back, you may not have it. And I think I've seen a lot better that was you agree with that? I had a great day with that 100% and And this is why the Victus mission, I think, is so great, is because this is the really the first mission that there is no requirements for the spacecraft other than the task it needs to do. So how it looks and how it operates is completely up to us. And I think that's a real step forward, because I think not that long ago we would have got a requirements document that somebody else had designed the spacecraft around a particular mission and there was very little opportunity for industry to innovate. And that mission is public. It's like a $30 million launch and spacecraft and operations mission. And it's not a simple mission. So normally $30 million would buy you the launch if that. So to do a whole mission for that is it just shows the power of being able to do that. And then the only other thing I would say is around mission assurance, because that's one thing I guess that we kind of as the first sort of on ramp to NSL lane one is supposed to be a, you know, there is a lower level of mission assurance in that on ramp. And you know, a lower level of mission assurance in our view doesn't mean the approval to fail. And I think that what we always impress upon our government customers especially is I can guarantee you there is nobody in the world that wants to fail less than us. You know, we are a publicly traded NASDAQ listed company. If we have a failed mission, that is a very bad day for us. So, you know, when it comes to mission assurance, you know, we like I said, nobody wants to fail less than us. So if you look at kind of traditional mission assurance, it can add sometimes two or three times the cost of the actual rocket for example. So, you know, it can add tremendous cost to a mission. And yes, I mean, appreciate that you know, it becomes diminishing returns really quickly when you're trying to mitigate, you know, 0.02% of a risk of something. And you can spend a tremendous amount of resources on that. So, you know, finding that right balance I think is really important. And I think the government trusting that at least for us as a commercial company, but I think it's fair to say all commercial companies man, they want to fail less than the customer. No, I would agree with that. I would agree with that definitely. So, I normally try to wrap up any of these that I do with allowing their gas speaker a chance to if you were royalty for a day and I am dealing with surreptitored back, that if you were royalty for a day, what would you like to see happen in the next couple of years? Man, that's a big question. With respect to any particular thing or just in general. It could be on government regulation, you know, partnering with the Department of Defense or, you know, science that would actually unlock or unleash some type of technical advantage that you're looking to achieve. Yeah, well, I have a number of kind of, you know, I guess interests. And, you know, I think we've covered off some of the regulatory stuff fairly well. So, maybe I'll take this in a slightly slightly different direction. If we're really serious about proliferating assolar system, I'm just talking about, you know, Leo, I'm talking about assolar system. And even, you know, going out and exploring the solar system, man, we need to find a way better system of propulsion because burning those dinosaurs to get to orbit is just not going to get us there. You know, we kind of maxed out specific impulse in the late 50s. There has been no increase in specific impulse since then, simply because we've reached like 98% combustion efficiency of those chemicals. And unless you're going to start mixing kind of boron and flurine and they kind of stuff together, which, which are, you know, environment disasters like this. And even when you do that, there's only sort of like tens of seconds of ISP to be gained. What we really need is a revolution in propulsion, something that is in the thousands of seconds of ISP that will truly make us multplanetary, that will truly get us out exploring the solar system. While we've got, you know, just burning chemicals that we're able to or that whole chemical combustion, then we're pretty limited. Like, you know, if gravity was just a little bit more, we would get nothing off this planet. So we need a big advancement in propulsion, I think that that is the, that would be my dream. I like it. I like it. I think it's definitely doable. The direction that science is going. So definitely appreciate your time. Sir Peter Beck, thank you so much for joining us. And thank you, everybody, for being on here for this podcast for Texas Strupters for Bloomberg Intelligence. I'm Wayne Sanders, Senior Defense Analyst. Thank you guys so much for joining us. Have a great day.