Hi Aaron.

Welcome to Rocket Lab.

I'm not going to touch anybody, I promise.

I'm too terrified to touch anything.

This is insane.

I want to hug it.

I'm speechless.

I don't know what to say.

I'm standing on a rocket launching platform.

So LC-2 is dedicated for Electron and Haste missions, but from what you've just shown me Aaron, it's way too small for Neutron.

So that baby's going to launch next door.

That's right.

At LC-3.

Can we go see it?

Let's go.

Before we left for the United States, we came here to Rocket Lab's Mission Control in Auckland, New Zealand, where I spoke to Sir Peter Beck about the readiness of Neutron and why some may be doubting him and his company's execution.

I think there's a lot of suspicion within our industry and we always, you know, my CFO always reminds me that we have the best house on the worst street.

This is the engine that will fire Rocket Lab's next rocket, Neutron.

The space company dropped this hot fire hype video last month, showing the Archimedes being tested at NASA's Stennis Space Center in Mississippi, calling down critics who suggested the company had complications hitting this critical development milestone.

Rocket Lab revealed its bold plan to build a bigger rocket in March 2021.

There's some things we said we'd never do, but we're going to build a big rocket.

It's called Neutron.

The 43 metre high medium lift launch vehicle will be twice the height of its existing Electron rocket and almost six times its diameter, allowing Neutron to carry 43 times more mass to low Earth orbit.

Both rockets are made of carbon composite, but the key difference between them is reusability.

While Rocket with the ability to re-enter Earth's atmosphere and land on its launch pad to be refuelled and reflown.

Parts are already under construction and a machine has been built to automate the production of its carbon fibre components in the United States, where Neutron will launch from.

But the big question is when?

Launching 2024.

That timeline has now slipped slightly with Sir Peter Beck announcing this year that Neutron will now launch in mid 2025.

On that agenda, Neutron would still be the fastest ever commercially developed medium lift rocket.

Because at Rocket Lab, when we say we're going to do something, we do it.

But some still have their doubts.

Short interest in Rocket Lab rose 5% in the past month, according to Marketbeat, taking total short interest in the company to 19.8% of its float.

With less than a year to go till launch, we visited Beck in Auckland to ask for a development update and how he thinks about investors' emotional ties to Neutron.

Sir Peter Beck, good to see you.

Good to be back.

Yeah, great to chat.

Thank you so much for doing this.

I really appreciate it.

This is all about Neutron readiness.

So let's go back to the beginning.

You announced Neutron and was it March 2021?

It would have been about then, yeah.

So that's now we're at the end of 2024.

It's roughly about four years ago.

You thought that you were going to be launching a rocket by now.

Obviously, we're not there yet.

How would you rate the pace of the Neutron program so far?

Yeah, well, I mean, it's a crazy pace.

And although, you know, we're, call it six months behind or slightly more, if you put that into context of a rocket program, you know, that's the way we roll.

But, you know, the progress of the team and the vehicle and the pad and the infrastructure and all the stuff that goes along with it has been pretty astounding.

We are going to talk about all of those details.

You mentioned an ambitious target.

Is 2025 ambitious or is that realistic at this stage?

Well, I mean, we always caveat everything we say with it's a rocket program, right?

And, you know, the program's on track for that launch date and everything's good.

But it only takes one small element to, you know, to reset those sorts of things.

But as it stands today, no, we're feeling and looking good for that.

But like I say, caveat, it's a rocket program.

Like a bad day at the office generally means you have no office anymore.

So, you know, some of those things can see you back.

So tell us everything that has been done so far.

You have tested Archimedes with the hot fire.

You've built the pad for LC3.

You've got the water tower up, changed the skyline at Wallops.

You're building the new ICF.

What's yet to be done?

A lot of people think of a rocket program and, you know, it's just the rocket.

But the rocket is actually a relatively small element.

And, you know, the pad infrastructure is just like we take all of the concrete in the larger region for days on end just to do one thing.

So these infrastructure projects are just massive.

And the amount of capital and time that goes into putting steel and concrete in the ground is enormous.

And then the factories itself, you know, we bought the Virgin Orbit factory and just converted that one large factory that used to make whole rockets.

It just makes engines now for Neutron and Archimedes.

So same with the engine test cells.

And there's just so much infrastructure that goes in and around actually putting something on the pad.

The actual rocket itself, you know, it's a relatively small element, the tanks and what's not a relatively small element.

So, you know, these projects are just massive infrastructure projects.

So if you look at everything that's still yet to be done until you can actually assemble all the parts for Neutron, what is the most difficult and the sort of most precarious?

Well, I'd say all of the really big, high risk items we've kind of bought down.

I mean, you can break a rocket program into kind of three things.

One is infrastructure, which we talked about.

One is propulsion and the other is structures or tanks.

And, you know, propulsion, we really, we took a relatively different, well, we took quite a different path with propulsion, for example.

Normally you develop elements of an engine and you put them on an engine test stand and you test like a thrust chamber or a combustion chamber.

Then you might test elements of a pump, elements of a valve.

And then, you know, years later you bring them together and then years later from that, you actually put it on a production line and produce it.

We didn't take that approach.

I mean, we built 500 and something engines, we kind of know what we're doing these days.

So we built the production line for that engine, everything that, you know, that first engine that went on the stand, there was just no flight, you know, no industrial articles on there.

It was all flight, whether it be, you know, wiring looms, engine controllers, valves, you know, everything pumps.

It was, you know, it was built on a production line by production technicians and that is the engine that we intend to fly.

And, you know, that is an approach, you know, it's a little bit risky in the fact that if that engine had a fundamental issue or performed very badly, you know, then the program would be behind.

But on the flip side to that, you know, now we're banging engines out of a production line.

So the program, at least on the propulsion side, is now ahead.

So, you know, it swings in roundabouts in that sense.

Everyone always talks about the timeline for Neutron, but time is obviously money.

How much money have you spent on Neutron and how much of the expected total initial cost?

Yep.

So when we first came public, we kind of said that, you know, Neutron was going to consume somewhere between 250 and 300 million USD.

And yeah, we're on target for that.

So, you know, as far as, you know, holding to budget is pretty impressive.

But once again, you always have to put this into context.

I mean, you know, Vulcan, the Vulcan launch vehicle from ULA, I think Tory recently publicized it was somewhere between 7 and 9 billion dollars to put that vehicle on the pad.

So, you know, a few hundred million dollars is crazy small to do what we're going to do.

And then, you know, there's still more expenditure after that, of course, as we scale, because that gets us a rocket on the pad at a particular rate.

But, you know, we hope to have a pretty decent clip on these vehicles.

So you need to continue to invest in the program as it goes through.

The reason I ask is because I was wondering if you might need to raise capital to finish it.

Yeah, no.

I mean, you saw us do that convertible note earlier in the year, and that was really to put some powder in the barrels for acquisitions.

As far as Neutron goes, we don't need to raise any capital for that project.

Bought and paid for.

Yeah, yeah.

I mean, and of course, you know, things start to get much more interesting when we start flying customers payloads because, you know, the balance sheet looks totally different because, you know, it's a $55 million launch at that point, whereas right now it's all R&D, so things change pretty quickly.

You mentioned at the very beginning of this conversation how rocket development timelines are typically measured in decades, not years, and delays of this scale or of even larger are not indifferent in this industry.

You only have to look at Blue Origin and then New Glenn, which has now impacted your NASA escapade mission, which you made some satellites for.

But how patient do you think investors, generally speaking, are in watching and waiting for developments in this industry?

Probably not as impatient as I am.

I mean, yeah, look, I think if you're investing in a rocket company and you've done your diligence, then these things should be part and course, really.

But at the end of the day, I mean, we're a commercial entity and we're trying to build a profitable company, so nobody is more motivated than us to get through that development and then through the scaling and all the rest of it.

But, you know, if you're an investor and, you know, I think anybody in the space industry has to be a little bit patient, for sure.

So why did you feel the need to drop in Archimedes engine hype video?

Oh, yeah, that was super funny.

Yeah.

Well, I mean, I think one could make a direct correlation between the increasing value of the company and the short interest and, you know, those kinds of things happen in this world.

So, look, generally, we just keep our heads down and do stuff.

And, you know, so we're not fixated on every hotfire, you know, posting and all the rest of it.

But when opportunities to have a little bit of fun come along, then we're not too.

Just to be clear, that first hotfire did or did not fail?

Of course it didn't fail.

Yeah.

No, no.

I mean, there was no catastrophic explosion or anything like that.

Not at all.

So we can dispel that Reddit rumor right now?

Well, I think we already have.

I mean, if you watch the videos, you can see serial number one engine running.

So I think, yeah, I think that's pretty straightforward.

Short interest, when I checked, was 18% of the total float, 11% of the total shares outstanding, if you'd prefer that figure.

What do you make of that increasing short interest in your company?

Well, I mean, when we did the convert, there's always more shorts that come along with the convert.

And it's not surprising at all.

In that low, given the amount of failure in the space industry, I mean, you don't need to look far to see just a large number of space companies, especially launch companies that really had no chance, promised the Earth and then just absolutely ran into a wall.

So I think there's a lot of suspicion within our industry.

And we always, you know, always, my CFO always reminds me that we have the best house on the worst street.

And along with that comes these kinds of things.

Does that figure then fuel you to want to prove them wrong?

I mean, no, I'm not, I don't wake up every morning and look at the short interest and think, oh my goodness, I wake up every morning thinking, right, we've got milestones to hit, how do we get here?

And, you know, I think, Neutron unlocks a number of things for the medium launch.

But the other thing it does for us is it gives us multi-tonne capability to deploy our own assets on orbit.

So, you know, that really opens up the third leg of the stool for, you know, for Rocket Lab.

So Neutron is important for two very different reasons.

I don't want to talk more about the opportunity, especially revenue-wise that Neutron brings to Rocket Lab, but just still on this investor thesis and mindset at the moment, it feels to me and seems to me like there's a bit of a divide among investors.

There's the doubters who you've just spoken about there, and then there's the loyal defenders.

When you first announced Neutron, you said, quote, when we say we're going to do something at Rocket Lab, we do it. Time and time again.

Yeah.

Why do you think now there seems to be increasing rumours and doubt that you and this company may not execute on what you say you're going to?

Wow.

I mean, look, I think there will always, you know, always be doubters, but I think, you know, the majority of people that we talk to and we interface with, and I think you can see that judged in the, you know, the increase in performance of the company is that, you know, we do do what we said we were going to do.

You know, we said we were going to build some Mars spacecraft and deliver them on time.

Guess what?

We did it.

And, you know, there's enough history there to go back.

So, look, I mean, if people want to underestimate us and, you know, whatever, that's their prerogative.

But, you know, a reputation, you know, stands on its own feet.

If we put a reality ruler over Neutron and what it means for this company and its future, two thirds of this business today, perhaps not in the future, we will talk about the how the revenue mix may change with Neutron, but today, two thirds of this business is space systems.

Makes up the majority of your revenue, right?