Rocket Lab Wins Big Government Contract
Taking a Look at Rocket Lab's (RKLB) U.S. Government Contract, Weekly Activity, & Portfolio Update.
I trust everyone enjoyed a wonderful Christmas break and found it to be time well spent. Reflecting on the past week, it was notably more tranquil than usual. We've now concluded the bulk of the earnings season and are on the cusp of welcoming the New Year. Despite this, there's some exciting news to share: Rocket Lab (RKLB) has made a significant announcement in one of their recent 8-K SEC filings. Although there wasn’t much color, I will highlight on everything we do know and what this means for the company. This is what I'm eager to dive into this week, so let's get to it.
More than Just a Launch Vendor
Rocket Lab USA Inc. has entered into a significant contract with a United States government customer (Undisclosed). Here are the key details of this new contract:
Contract Value: The total value of the contract is $515M. This includes a base amount of $489M, along with incentives and options totaling an additional $26M.
Scope of Work: The contract involves Rocket Lab National Security, a wholly owned subsidiary of Rocket Lab USA Inc., designing, manufacturing, delivering, and operating 18 space vehicles.
Timeline:
Start of Work: The work under the agreement will begin immediately.
Delivery Schedule: The delivery of the space vehicles for launch is slated for the year 2027.
Operational Period: The operation of the satellites is expected to continue through 2030, with an option to extend the operation through 2033.
Contract Provisions:
The agreement includes customary default and termination provisions.
Both parties retain the right to terminate the agreement for convenience at any time, subject to certain conditions outlined in the agreement.
This contract represents a substantial commitment for RKLB, both in terms of financial value and the duration of the project, extending potentially over a decade from the commencement of work through to the optional extended operational period. What caught my attention in RKLB's recent developments are the phrases "designing, manufacturing, delivering, and operating." This indicates that the company is not just reinforcing its confidence in future growth within key space economy sectors, but it's also evolving beyond being merely a launch provider. This evolution, I believe, is something that long-term investors of RKLB might have anticipated. However, it's only now that we're witnessing these changes unfold right before our eyes.
Yet, there remains a critical milestone that RKLB needs to achieve before I can confidently adjust my outlook on the company: the successful launch of the Neutron rocket. As I've mentioned in previous articles, my stance on augmenting my investment in RKLB hinges on the success of Neutron's launch. For more in-depth analysis, I refer you to my archived article on RKLB. In my view, the Neutron launch, expected in 2024, is a make-or-break event for the company's investment thesis. While we await this pivotal moment, the recent news is undeniably significant for RKLB's future and highlights its versatility in the space economy. However, I advise caution and suggest not getting overly excited until we see tangible progress with Neutron, their most crucial launch slated for 2024.
Weekly Activity (December 18th-22nd)
Nothing.