Rocket Lab cuts guidance after failed flight

Rocket Lab has cut its third-quarter revenue from US$73-$77 million to a US$66-$68m range following its failed flight on September 19.

The Nasdaq-listed firm also reduced its gross margin guidance from 21-23 per cent to 18-20 per cent.

The company said it did not expect any material incremental expenses to be recognised in Q3 2023 as a result of the “anomaly” - the “anomaly” being the Kiwi-American company’s term for the fault that caused the failure of the September 19 “We Will Never Desert You” mission.

Rocket Lab’s next launch, scheduled before the end of the third quarter, has been postponed - on an open-ended basis - while investigations into the September 19 failure continue.

Rocket Lab also offered non-GAAP gross margin guidance that was revised down from 28-30 per cent to 26-28 per cent.

The firm said in an SEC filing: “We have not provided a reconciliation for the forward-looking non-GAAP gross margin and operating expenses expectations for Q3 because we are unable to predict with reasonable certainty the amount and timing of adjustments that are used to calculate these non-GAAP financial measures, particularly related to stock-based compensation and its related tax effects. Stock-based compensation is currently expected to range from US$13m to US$14m in Q3.”

The revised downgrade was released after the market closed.

Rocket Lab shares - held by tens of thousands of Kiwis through sites like Sharesies and Stake - had fallen 2.53 per cent to US$4.24 in regular trading (for a market cap of US$2.05 billion).

In post-market trading, they fell as low as US$4.05.

Rocket Lab listed at US$10.00 a share in August 2021. It briefly rocketed to just under US$20 before settling into a low orbit below US$5.00.

It reached a 2023 high of US$7.93 in July before more recently coming under pressure - particularly after the September 19 failure.

Founder and CEO Peter Beck sold 3.6m shares for US$5.62 each earlier this month, realising around US$20.23m ($34.25m) as he reduced his take from 11.3 per cent to 10.5 per cent.

Customer picks up the insurance tab

Two minutes and 30 seconds into the September 19 flight, the live stream appeared to show the second stage of Rocket Lab’s Electron rocket failing to properly ignite

“The launch vehicle and payload would have entered the Pacific Ocean several hundred kilometres southeast of the launch site [at Māhia],” Rocket Lab communications director Morgan Bailey told the Herald.

The payload was an Earth observation satellite for US firm Capella Space - the second in a planned sequence of four launches.

Rocket Lab did not offer any details on the cause of the failure, other than that it was working with the FCC. Today, it offered only that an update will follow “in due course”.

Bailey would not comment on specific arrangements for “We Will Never Desert You”, but said “typically, launch customers will carry insurance for their spacecraft”.

Higher stakes

The September 19 failure was Rocket Lab’s fourth in 41 flights, and followed a run of 20 successful launches.

The stakes are about to get a lot higher.

The Kiwi-American firm currently charges around US$7.5m per flight.

It will charge customers US$50-55 million per flight for its much larger Neutron rocket, still on track for its first launch next year.

And while Electron’s payload tops out around 300 kilograms, the Neutron will be able to carry up to 15 tonnes of satellites to orbit - meaning a much more valuable cargo.

Chris Keall is an Auckland-based member of the Herald’s business team. He joined the Herald in 2018 and is the technology editor and a senior business writer.