Main Engine Cut Off - T+251: Finance and Business Strategy (Live from Space Symposium 2023)

Episode Date: May 4, 2023

Live from the Redwire booth at Space Symposium 2023! I discuss the business and finance side of spaceflight, with Caleb Henry (Quilty Space), Peter Beck (Rocket Lab), and Jonathan Baliff (CFO, Redwire).This episode of Main Engine Cut Off is brought to you by 36 executive producers—Pat, Fred, Robb, Steve, Dawn Aerospace, Matt, Theo and Violet, Bob, Benjamin, Tim Dodd (the Everyday Astronaut), Donald, Lee, Pat from KC, Warren, Tyler, David, Jan, Chris, Stealth Julian, The Astrogators at SEE, SmallSpark Space Systems, Kris, Ryan, Moritz, Russell, Harrison, Lars from Agile Space, Simon, Frank, Brad, Joel, Joonas—and 845 other supporters.TopicsFinance and Business Strategy - YouTubeCaleb Henry (@ChenrySpace) / TwitterQuilty Space (@QuiltySpace) / TwitterPeter Beck (@Peter_J_Beck) / TwitterThe ShowLike the show? Support the show!Email your thoughts, comments, and questions to [e-mail] @WeHaveMECOFollow @[e-mail] on MastodonListen to MECO HeadlinesJoin the Off-Nominal DiscordSubscribe on Apple Podcasts, Overcast, Pocket Casts, Spotify, Google Play, Stitcher, TuneIn or elsewhereSubscribe to the Main Engine Cut Off NewsletterMusic by Max JustusArtwork photo by SpaceXWork with me and my design and development agency: Pine Works

Hello, everybody. Welcome back to the last episode of Managing Cutoff I'm doing live here at Smey Symbosium. We got Off Nominal coming up next. I'm in the middle of a four-hour rock block, so I appreciate all of you hanging out. There's been a lot of Anthony over in this section, but it's been a lot of fun. So we've got an interesting mix of people here. I'm excited to talk about a whole range of topics, really. Honestly, whatever we get interested in talking about, we get down rabbit holes, but it'll be really cool. We've got a good cross-section. I brought a ringer, Caleb Henry, here, so that will be fun.

Peter Beck, of course, Rocket Lab fame. Jonathan Bailiff, CFO of Redwire, very interesting background from the biggest helicopter company and all sorts of other interesting things that I've heard about so what I'm interested in talking about is really the general kind of like business and

strategy, you know the shape of that right now in the industry because it's been pretty chaotic for a couple years there was a lot of doom and gloom of late about whether it's raising money or really, you know, closing down customers and figuring out everyone's kind of specializing into a different niche. Certainly a lot of news this week of Rocket Lab finding new niches to market to. Overall from, you know, start with Caleb, because you've got such a good insight on the industry from your position at Quilty.

What are really the big challenges right now that were post-COVID a couple of years? There's been a lot of churn in the industry between companies going out of business or startups that aren't quite raising as much money as they hoped, or SPACs going a little bit more redemption rate than they were hoping. So where are we at right now overall with that kind of stuff in the market? I will try to be succinct. I don't know if it's possible to cover the entire space industry. Tell me everything right now. How is space today?

I would say, and maybe this is a little bit of like a, I don't want to be doom and gloom, but I feel like the space industry has, people have been fearing a reckoning for some time. You look back at the beginning of the mega constellations, you had people saying, this is Iridium all over again. Investors are not going to trust the sector because it's going to fail and implode

and then they'll run away. And that didn't happen. And even though OneWeb went into chapter 11, it was masked by COVID, which hit the world and the industry. And so there was no reckoning. And then there was the issue of no exits for startups. There were all these startups that raised all this money,

no exits. You just had like Google and Skybox in like 2016 or something. So it was like very, very few examples to look at. And then you had the SPAC boom, something also that happened outside of the industry, but affected it. And all of a sudden you had a vehicle that allowed several investors to have their exit. Concurrent with that, you had this interesting phenomena of companies that were rolling up small to medium sized enterprises like Redwire. And they also contributed to this consolidation. You had Redwire, you had Voyager, you had Blue Halo, all doing this that took a lot of the industry's woes and fears and actually kind of wiped them away. So I would say that the industry has actually dodged two bullets in the past five years. And now we're in a third challenge, which is what happens to all of these newly founded or newly public companies?

You know, we saw the first collapse with Virgin very recently, and there are other companies that are in difficult financial positions. I'm watching them intensely to see how they diversify, how they execute, how they make sure that space is a business and not a tech hobby. You know, I think this industry, we've got so many smart people that there's often a risk of getting wrapped around the tech and trying to make a business plan later.

It really should be inverted. And those that fail to do that well are going to find themselves in trouble. I certainly have someone right next to you here, and Peter Beck, that, you know, Rocket Lab is a launch company, but you've taken the Rocket Lab logo as you've gotten more into the space services side.

And now you're public, so we see financials all the time and see how much that side of the business is generating in terms of revenue. And at the beginning, we talked when you were doing this series of acquisitions about the strategy behind it of acquiring the things that were essential to your business, but also finding a big customer base for that stuff. So in terms of focus from Rocket Lab, when you go out and you talk to people that don't know about Rocket Lab, what emphasis do you put on each side of that business? Is it a different story than you were telling five years ago? Or do you still fundamentally say,

you know, we're a launch company, we have all these other things that we do as well? Yeah, I think it's clear that we're bad at naming stuff because I should have never called Rocket Lab Rocket Lab because that was too short-sighted. But the reality is that the very second electron we flew had recesses in the kick stage for solar panels to turn it into a satellite.

So it was kind of always the plan to do that. And our view is that the very large space companies of the future, space companies that have applications, they actually do things on orbit that generate value, they build their own satellites and they launch it. Because when you have all of those things put together, it's a very powerful combination. And as everybody is witnessing with Starlink,

like a clear industry leader in that broadband rollout. And that's because you have access to space, you have the ability to build whatever spacecraft you need, and you can really conquer that application. So everybody thinks of this as the rocket company, but literally like, as you allude to, two thirds of our revenue comes from our space systems business. We've got 25 satellites and backlog ranging from stuff going to Mars through to the global star constellation. satellites and backlog ranging from stuff going to Mars through to the global star constellation.

But launch is always going to be a really, really key thing. And it is the discriminator and it is the enabler of a space company. You mentioned how there was this trend of kind of building these companies that were wrapping up a bunch of other companies. And that's what Redwire became, right? It's easy for all of us to kind of latch on to what Peter's doing because it's rockets and we all like watching rockets flying to the sky. It's harder to really understand some of the more niche kind of like component supplier sort of stuff that Redwire has been involved in lately. So in terms of strategy about the collection of companies that make up Redwire, right, in its current form, what was the strategy about the group and the mix there? And how does it work together today? Has it changed since acquiring all them and it's become more of a unified whole,

or is it still segments of a business? I mean, it's a good question. And coming from more an aerospace background where we've seen this already in the carnage of the post-1992-93, where you saw two things happen at the same time. You saw post-Gulf War, a drawdown in the American defense budgets. At the same time, oil went crazy in the commercial airline industry. It never happened like that before. And you saw a number of really strong companies come out of that. One is called Transdime, and I think people know Transdime. And the nature of Transdime, especially for a space systems business, is to, in essence, bring these third and second tier providers together operationally. And that's Redwire's differentiation. Redwire is not a holding company. We're an operationally

focused company, which means we're focused on revenue growth to meet customer demands, but we are very focused on creating a path to profitability, right? And that's the financial element of it, but really the guts of it is to either create a revenue synergy for these small companies to be able to bid on larger projects, right, which is key, because in essence, we provide to the primes, and then they do generally their job. We're not prime on all that much. So Redwire is a roll-up in the Transdime strategy of being able to get larger projects, higher margins. But here's the key. Serve that customer in a better way than a small company that doesn't have access to capital.

I think the second thing is there has to be a path to profitability. I don't care if it's Amazon. Back in 19, I'm older than many people here, but back in the 90s, there was a path to profitability for Amazon. Now, they decided to go for the beachfront property and spend a lot of investment. So really where the industry is right now is how do we balance the investments that we have to make to satisfy this demand? I don't know if everybody's around here. This place is heaving. This is my third one, and it's unbelievable. This is not happening

by accident. There is demand for Rocket Lab, Redwire services. The question is, how do we meet that demand in a way that satisfies the investors? And so for us, a business strategy was very simple. Operationally focused to meet customer demands in space systems, and then our differentiator, and that's another thing that Peter mentioned I really like, all of us have to differentiate for the investors, right? If we're all doing the same thing, we're going to get commoditized. But we are differentiating Redwire in that we're building the office park of the future and building and enabling those missions for habitation, satellites. But the second thing is we're going to also create the payloads for Habitat, for pharmaceuticals, for 3D printing in space.

So we'll fill the office part, too. That's our differentiator to have both of those. And then the third thing for us is we always knew we wanted to have a global business. So Redwire, as it was being founded, brought our Luxembourg entity in, and now we have just really expanded our European presence with SpaceNV. So number one, operationally focused. You can't just put a holding company together and think it's going to succeed in aerospace or space. Second, you have to have a path of profitability to meet customer demand. And third, this diversification of space systems for us, payloads, space industry, industrial work, and then finally a European

arm that really can provide those carriers what we need. That's our differentiation at Red Bar. On the Rocket Lab side, you've had all these announcements this week of new suborbital hypersonic focused mission, which is quite interesting. Caleb and I were at the launch at Wallops in January, February. I convinced him to road trip with me. So we got to experience that. So we've been aware of that in our backyard in the future. But when you are looking at a market like that, I guess to tap into like, where'd you get the idea? Obviously, it's an interesting market to tackle and it's very close to what you're providing already. You're putting a payload in a particular

time and space. Like, that's what it is. And it just, is it orbital or not, is a different question. So what's the motivation behind it and the strategy about the offering that you built out around it? Well, I mean, I love markets

where you almost need to do no work to be a player in. They're the best markets to go into. And it occurred to both us and our government customer that every sort of 20 days we're flying hypersonically. So obviously in the US there's been a massive deficit of those flight opportunities and with Electron you have all the depressed trajectories, any of the smart stuff you need you have at

your fingertips. all the depressed trajectories, any of the smart stuff you need, you have at your fingertips. So it requires almost no modification to the vehicle, but creates a really, really important solution and actually taps into a reasonably sized market. I mean, this whole startup company is purely focused on just providing hypersonic test flight opportunities. And we just do it every 20 days.

So we thought, well, that's an easy product. Certainly if you can keep fishing these first stages out of the ocean and just slapping a new one on top, that matters. You're also not off the hook from asking questions here. Why do you think I brought you here? You're a ringer. Come on. If you want. You take the guy out of journalism, all of a sudden he doesn't want to ask any questions.

I was going to say, I'm actually surprised that more companies haven't gotten into hypersonics, more space companies. Lower? Okay, there we go. Hold your hand a little lower. Cool, all right. Your actual hand. There you go. Okay. It was feedbacking a little.

Okay, all right, all right. So I was going to say, I'm surprised that more space companies have not gotten into hypersonics, because, like Peter was saying, it's so close, the applicability is right there. And I actually thought that more defense companies would have gotten in because they're building these missiles. And historically, you look at the industry, missile providers made the jump to being launch services providers. I don't have any questions right now. I know you

put me on the spot, but I'll just say, you know, defense is a big area. You know, maybe one, if I'm going to just off the cuff, I think the defense sector is often being looked at as a dependable anchor customer. I'm curious how you two approach that market. Peter, I think you've got a lot of commercial customers on the launch side, but what's your value proposition to DoD? And then for Redwire, you focused a lot on civil space, and now you've expanded into Europe, and your annual report, you highlight ESA's growing budget. Where do you see defense applications for Redwire, you know, you focused a lot on civil space, and now you've expanded into Europe, and your annual report,

you highlight ESA's growing budget. Where do you see defense applications for Redwire? So, I mean, our launch manifest is 50-50. So 50% commercial, 50% government. You know, we're one of three suppliers of launch to the NRO, so there's SpaceX, ULA, and us, launch for the NRO. So it's a real core part of our business. And then if we look at our customers,

a lot of our customers that fly on Electron are also servicing the US government in defense in one way or the other. And then on the space system side, obviously we have probably a lot more commercial with respect to constellation builds with the Global Star contract and VADA

and all the rest of it but we still also have some government stuff with the Mars missions but across our portfolio of systems and we do a lot in the defence sector and a lot in the government so we kind of like the 50-50 model, I think it's good

we kind of joke that our-50 model. I think it's good. We kind of joke that, you know, our government customers always pay their bills on time but never turn up on time. And, you know, commercial customers always turn up on time but never pay their bills on time. So it kind of all, you know, all evens itself out. So for Redwire, we actually don't talk that much about our national security customer base. It is last year the fastest growing customer base. It is a very, let's just call it warfighter domain that has a number of very high bars to entry. So if I look at what Redwire does and how we built it, we built it for the civil, commercial, and obviously that national security warfighter. For obvious reasons, we don't talk about the warfighter domain all that much. But

if you look at our financials, it is the fastest growing piece of our business. Because if you look at our enabling these space missions with power, with anything associated with communications, any deployable sensors, all of that is warfight war fighting domain the key to that high barrier to entry in the u.s is you have to have the facilities the people the systems in place to work for that very high national security standard um and again without getting too much into it because we generally don't this is a very high growth area for us given the uh in essence competition that we have with China, but also the same type of sensors. The thing I always want to mention about national security, having been

an Air Force aviator and somebody who worked a lot in electronic warfare, a lot of the same things you do for that national security customer, sensors can be used for climate change. The same thing that you can do for communications, you can also then bring over to the civilian and commercial side. We separate our business from a consumer standpoint to civilian, commercial, and then obviously national security. But that warfighting customer is a big part of the Redwire differentiation because many companies that have a European arm actually don't have the security infrastructure to serve that warfighter, and we do. In terms of investing in new projects, you're both public companies now, so I'm curious to hear if things have changed in that era, especially on the Rocket Lab side. You've got Neutron that you're developing quite a bit. There's the Venus Ambitions as well, and everything else that's

going on on the satellite bus side that you mentioned with Escapade, right, is a photon bus and all that. In terms of putting money towards these big projects, is it different now being public and deciding that that's an initiative that you want to take on and figuring out how to go about that? Not really for us. I mean, if you look at our history, we've always been extremely disciplined on capital allocation. And if you look at the amount of capital it took us to get like Electron to the

pad, it was, you know, a hundred and something million dollars to get Electron to the pad and the pad built. So we've always been very, very, you know, careful custodians of capital and we get a lot done on the dollar. So that ethos hasn't really changed. As a public company, it's the same, right? So we always had really, really strong financial discipline and the projects that we choose to invest in are ones that we're confident are going to drive real growth in the future and I mean, the biggest thing we're investing in is Neutron, right?

That is, you know, if we took Neutron out of the equation then Rocket Lab is a profitable company. You put it back in and then, you know, if we took Neutron out of the equation, then Rocket Lab is a profitable company. You put it back in and then, you know, rockets just suck down cash. But the flip side to that is that we believe that the opportunity and the growth that's going to come from that Neutron vehicle is well worth it.

And in these times, the companies that are going to be successful and survive are going to be the companies that are very disciplined with their capital. And we've come from a market in a time where, I'm old too, so I can, I'm old too. So I can remember stomping Silicon Valley trying to raise $5 million.

And $5 million was an extraordinary amount of money to put into a rocket company, that was crazy. And we ended up in a time that was just completely dislocated. We saw funding rounds in the billions, hundreds of millions, completely dislocated from reality. And as a result, not really good financial discipline across a lot of the sector, I would say. Lots of opportunities to do cool stuff, but but just huge amount of money spent for kind of I would say pretty average return on kind of development milestones and things.

And we're in a different time now and I don't mind it because we've always been really disciplined with our capital but for those who have not been disciplined with their capital this is the time that we sort out the real companies from the not so real companies and I think that's needed within the industry. Yeah and certainly that you know competitors in the range are all growing their sizes of their vehicles as well to different points so a thing I'm going to pick your brain about is that I've started to feel like Neutron is a little small and I'm curious how you're feeling about it these days size wise and beware

I'm going to make Caleb give me some numbers in a minute so start thinking this is a comment that I've had ever since we started Electron and all I will say is it's not the size of your rocket that counts it's like there is much much more to it than that. And when we first started with Electron, people would say the same thing.

But guess what? It's actually, it fills the market niche, you know, we would argue perfectly. And we think Neutron is a really interesting market size for the kinds of projects that we think we want to go after and the kinds of projects that we think are going to be profitable and valuable. Now, in saying that, it's an eight-meter diameter vehicle. There's plenty of room for growth.

And that's the whole thing, is that I mentioned this the other day, that knowing your history, even Electron had payload growth over its lifetime. So compared to the other competitors out there, I trust that you are able to grow the payload range of your vehicles more than the others have been able to hit

the actual promised payload range of their vehicles that are out there. So it is interesting. And then also the other aspect is like, it's not, Neutron is probably not the last vehicle you're ever going to build if everything goes well. So there's that to consider as well. I'm not going to promise anything like that.

Eat another hat. Yeah, no, I'm not going to do that. What are you eating this time? But I mean, you have to, in the kind of the spirit of being capital efficient, what I think a lot of people don't realise is the actual rocket, the building, the developing of the rocket

is the cheapest bit. Like if you look at the cost of a rocket programme, it's almost to the cubed, the cost of the money that you have to expend on infrastructure. So if you're going to spend $500 million developing a rocket, you've got to spend like billions for the time you build your VAB, your pad,

your integration facility, your factory, and all of those sorts of things. And this is what I think a lot of people don't realise, like the cost of a rocket development program is by far the cheapest piece. And it's the easiest piece. I mean, I think of Electron, the first rocket I thought was going to be the hardest. Well, it turns out rocket number 20 was the hardest.

Because by the time you're at rocket 20, you've got a complete factory, you're relying completely on ERP systems, MRP systems, and a technician with a set of work instructions. And it's got to work every time. So, you know, the expenditure in building a rocket program is not the rocket. It's all the other stuff that goes around it. On the payload side, though, and the constellations

is something that you called out early on of being a market for Neutron. How many constellations of thousands are there going to be? Because I kind of feel like at some point we're going to run out of companies having either the money or real estate to deploy thousands of satellites. And that's another aspect of this math is like, what are the constellation sizes that Neutron is going to be well targeted for in your mind?

Yeah. So right now we're tracking about eight different mega constellations. And for that threshold, I'm saying anything that's over about 100. So not thousands. Thousands, I don't do math math in public so I'm not going to try and even if it's simple I won't try to figure it out. But you know there's eight and I'd say the number keeps growing because of geopolitical interests. So you know there was a time when the question at conferences like this were how many mega constellations are going to make it? And everyone would say

oh the market can support two maybe three and it doesn't it doesn't actually matter well it does matter but like it's not that's not gonna think be the thing that decides it the military the Space Development Agency decided that they want one both of these companies are involved in that constellation SpaceX has theirs Bezos decided he wants one Russia has talked about one I don't know if it'll ever actually happen. It's kind of like Angara. It comes up every few years and then... But you're going to see lots of different systems that are going to come up. I think the interesting thing for both of these

companies is that the evolution of spacecraft is something that has changed very rapidly over the past few years to the point where launch vehicles have to keep evolving. If you look back at when GEO was king, companies, Aerion, Proton, even early Falcon, they all increased the size of their vehicle. This is not unique to small vehicles, and it's because they were trying to chase increasingly bigger geostationary satellites. Now we've seen the same thing with small spacecraft,

and who knows where the future trend is going to be because you've got digitization of payloads that has taken out a lot of the hardware. It's made the geos smaller again. I'm wondering if it'll make the leos smaller again at one point. It's really curious to watch these details. And maybe if I can piggyback off of that and then throw a question at these guys

for Peter, you're building the satellites for Global Star with MDA those are about 500 kilograms each this surprised me because that's too big to fit on electron, maybe you had neutron in mind already but what's the thought

process for you, not only in determining the size of a rocket, but how you go after spacecraft classes? Are you going to keep going up, down, CubeSat, Geo? And then for Redwire, you don't build full satellites, but you build all the inside,

if I have it right. Okay, that's wrong. Tell me about, how do you define? I mean, the truth is, we are the picks and shovels. We are the enabler of all these satellites and provide the critical components. However, with our Space Envy acquisition, we have the ProBus. So we actually now got into it.

But I would say it's not necessarily a mainline business yet, but we are seeing demand for that, especially given that we actually have a ton of infrastructure that can make that better. It's a synergy, right? But I don't want to overpromise. I mean, this industry is built on overpromising and overdelivering. I'd like it to be built on overpromising and overdelivering, right? But just to let Peter answer, I think, a more relevant question, for us, from our standpoint, we believe really what Electron and Neutron can do

is just get more of the low Earth orbit economy, whether it be the national security part of it, the commercialization part of it. It is so, look, again, people aren't walking around here, you know, just looking around, taking pictures. They are, there's business to be done, and that's what Peter's going to be able to enable. Then Redwire's space systems and our payloads then take it to the next level. But you don't have to create a satellite to get the business. And that's why I'm impressed by how people are now

gravitating towards a business model of space systems, which, again, Redwire, that's our foundation. Because, again, that's where a lot of the money needs to go to be able to make the space economy work. And I think I'd answer your question with, think a little bit bigger. So the endpoint for Rocket Lab is not a merchant launch provider.

It's not a satellite bus builder. The endpoint for Rocket Lab is something much bigger. So as we look at how we grow the company, and if you look at like our satellite systems acquisitions like solar, as you know, like longest lead time, really expensive, that bit needs to be solved so we went and acquired a solar company and then software and all the reaction wheels and all the kind of the the fundamentals then you take it up one level higher it's like well you know if if we're going to launch our own stuff one day obviously we have a thesis on what we think is going to be the ideal size to do that and we might be wrong we might be

right we'll we'll see we think the vehicle is is in a sweet spot for a lot of the commercial constellations um and you know the trouble is if you build a really big rocket that can do everything, then it doesn't do the middle class really well at all. So at some point you have to kind of split the hairs and saying, well, where's the peak in the bell curve? And when we look at the constellations that are out there and what's going on,

we think we've chosen the peak of the bell curve. And then if you want to think bigger, if you think about what we might want to do in the future, obviously that's driving to some of the decisions around launch vehicle class. But I reserve the right to be wrong at all times. For sure, yeah, as always. On the launch side, there's something interesting happening

which is this next round of the National Security Space Launch Program, And there's these two lanes now where Electron and Neutron fit really well in the new one that's more task order based, more like something like Eclipse program. I'd love to just hear your view on how that went.

And I know there were some things that you were hoping to see that maybe some of the missions from Lane 2 would make their way over to Lane 1 to give you more of an edge for Neutron there, but do you feel like that's settled out in a good spot, or is there still some tweaks that you'd like to see as you close in on that actual

contracting round? You know, we're really happy. I mean, this is what the solution that's been driven to here is what we thought was the best solution. I mean, the nation needs absolute assurity around launch. You need diversity in suppliers. So keeping that kind of lane two together

and in one piece, you have to do that no matter what. But the opportunity for the nation to use new capabilities and the opportunity for the industrial base to both grow at the same time, it's very symbiotic. But you have to create those opportunities and that lane one really, really does that. And Electron is not, you know, qualifiable because it's a 10-tonne, you know, sort of cut-off on that.

But, no, we're very, very happy with it. And I think, you know, NSSL have done a really good job at kind of threading the needle between assuring space access for the country but also stimulating and helping grow in the industrial base but also not lowering the bar so low that like you know PowerPoint companies

can get in there and run amok Which we've seen with clips to some extent I am interested to pick your brains on the lunar surface side of things. We talked a lot about launch, a lot about orbit. I'm looking at a picture of these arrays that are up on station, but I saw them in a mock-up on top of an astrobotic vehicle.

That is exactly right. Yeah, so you're extending some of the component work that you're doing down to the lunar surface. A lot of companies are looking at putting infrastructure to support Artemis or Clips or something like that. Solar arrays are are obvious one. Is there other areas of that business that you're looking at taking what you do now in orbit for satellites and looking at surface assets in that way? Oh, absolutely. I mean, when you look at a number of things that we're all trying to do in a space system environment, the key is how do you bring that to explore, live and work in space. For us, obviously, one of our primary is the roll-on, the ROSA, which rolls off or rolls up and rolls down on the lunar surface. And that's what you saw. You can roll

it anyway. But that is particularly important on the moon because you need to protect the actual solar panels. And this allows, you know, to have a more sustainable power source. And so that's a big part. But also there's antennas, other types of deployables, sensors for us, cameras. If you really look at what the moon has to do, and Bridenstine said it yesterday, the camera is the mission. Because in order for us to create the next kind of well after I'm gone, is people need to record what we're doing there to create that excitement. As Jim said, when he was a young guy, you had the Challenger.

That's what people remember. I want to get back to, you know, when I was a little kid, you know, when you basically could see us landing on the moon. That's what, so the camera piece of this, which is a big part of what Redwire does, not just with our sensors, is another area where we're on the lunar. We were on Artemis, as you know. We provide the eyes of Orion. Those are our cameras. But we plan on doing that on the lunar surface too, as part of a full kind of space system. And then we'll also put payloads because there's a lot of commercial activity that's going to happen on the moon. Exactly why I bring this up, because it's a different part of the market that

we can argue about, are there customers for Clips payloads? Is there going to be a business case that closes for spacesuits to walk on the moon? But from a component section, there's a lot of stuff going on on the moon, in orbit of the moon, on the moon. So as component suppliers, it's interesting to look at that. I don't know if there's anything from the space system side that you're looking at as a lunar surface asset, or obviously you have planetary ambitions generally,

but when it comes to surface stuff, I'd be curious. Not so much in the surface stuff other than perhaps in the solar business. I mean, I love nothing more than touring the Albuquerque factory and seeing the Mars solar panels that are specifically designed for the wavelengths on the Martian surface. Like, there's nothing cooler than that. But yeah, I think that kind of Cislunar economy is going to be interesting to see how it develops.

I think there's going to need to be a really robust capital market that's very buoyant on it for a while to kind of get it there. But yeah, it'll be interesting to see. Sorry, when you say capital market, what do you mean? To fund it or to actually be part of the economy?

See, I think when I look at an economy on the moon and the commodities that are there, there's got to be a capital market to be able to, for Regolith, I mean, I think you could do all kinds of very interesting economic activity on the moon, take it back terrestrially, and create, in essence, different business models. It doesn't have to all just be about exploration.

There's a lot of things that can happen on the moon that, frankly, could get sold on Earth. And we haven't really, until we're there, in a more permanent way, we're not going to know what that is. But there's whole industries in the ocean floor that are becoming, I mean, there's a lot of analogies of what we're doing on the ocean floor now that didn't exist 20, 30 years ago that now we can do on the moon also. It has to come down the cost curve, obviously. How much of that do you dig into? Because I know the kinds of stuff that you read, these investor decks, or you always get your hands on something interesting to look at from these companies' internals. But when you're looking at any given company and you see the way that we talked about,

even with the hypersonics, seeing what their current market is and finding that niche that's just slightly outside their bounds, when it comes to stuff out towards the moon, is this hitting your radar yet in terms of the quality space view of things? Are you still focused more on the closer to Earth kind of stuff? Still focused mainly on the closer to Earth stuff because that's where money is made, mainly. But we are paying more attention to it. Sometimes when I think about the moon, you're right, exploration is a driver.

There's been talk for eons of tourism as a driver. It hasn't really materialized intensely yet. It's starting. I kind of think of it in a couple of different buckets. There's the exploration one. There's commercial opportunities which we're really hopeful about in the future. And then there's the DOD

opportunity which frankly there's a lot of concern on the DOD level about, I would describe it as the opportunity cost of the moon. You know, we don't know what the future entails on the moon today. But it's kind of like, you know, if I said that there was a box at the end of the show floor, and it could have $10 in it, but it could have a million. Everybody is going to run there because the million dollars is really enticing. And so when you talk about what's the future for the moon,

we talk about regolith, we talk about water on the ice, water on the poles and all these things. But the truth is there's an opportunity cost there for getting to the moon. And so there's a desire to have U.S. industry there first so that when we actually realize what that is, that it comes to American businesses. So I'm watching it. I'm excited to see NASA kind of seeding the cislunar economy,

buying services from private industry and helping to facilitate that market. I'm glad that they're not just doing it entirely themselves. And I'm hopeful that there's an industry there. I'm hopeful that there's a future, but I don't quite know what it is yet. As does everybody. That's like the thing right now. We do know there's analogies to that. There are industries that have come up. I always look at the surface of the ocean. What we do on the surface of the ocean, which doesn't get a lot of play, there isn't the conference for the surface of the ocean. But when you look at what's happening in terms of just metals, mining, but also other areas of tourism, it's higher growth than you think. And they didn't even think of that 20 years ago. So I'm more optimistic that we'll figure it out. We just got to stay there a bit longer. First, we got to get there.

One thing I've seen talk of this week is that as companies are going to go up to raise some more funding for additional runway or whatever, they might have to take down rounds that bring their valuation down a bit. And thought being that if that happens, in some cases, we might see more acquisitions. You haven't bought anyone recently, but are you going shopping anytime soon? It's an interesting time because it's both a good time. I'm not sure what you found, but the private company valuations seem to stay high for really, they're starting to kind of realign.

But as public market valuations are dropping, the private stuff sort of just seemed to hold its ground. But I think, you know, the economic burn is kind of lasting long enough to see that. So it's kind of a great time to do stuff because there's lots of opportunities at a more affordable price. It's also a terrible time to do stuff because if you need to raise equity to go and do that,

then it's also, you know, a tough market to do it in. He's avoiding the shopping question. He's not talking about it. Who would he go shopping for? If he was going to go shopping, who would he go shopping for? I mean, there's a launch company on sale. There's a couple of them, I think. I said that purely for facial reactions.

It is a good market for hypersonics if you've got a plane already. I would agree with Peter. I'm always amazed. M&A generally doesn't sometimes follow the market. You'd think in a market where everybody's generally pricing themselves off the public comps or comparables, you'd think like great time to buy companies. It's really about CEO confidence, CEO and founder confidence. And right now, that confidence isn't very high. You've seen $26 billion lost, or at least come down in the companies that went public, all of us, all together, since the time we went public to today's trading value, $26 billion.

It's come up, too, in the last couple of months. And so if you're going to give equity as part of your security to buy a company, which was Redwire's mission is to keep these owner-founders as part of Redwire, to do that, there needs to be a level of confidence. And we're just going to have to get down the road a little bit between the two words I would stick with everybody in this room, stain power. Who has stain power?

Stain power is going to determine who's going to be acquired or partnered with, because we view it as a partnership, and who's just going to fall away. So I'll add, just from the finance perspective, I know that there are companies that are being looked at for, there are people that are shopping around, and it's because prices have gone so low, kind of like what Peter was saying, both private and public.

You can look at the Virgin Orbit bankruptcy. I was surprised that one of the things they said is as soon as their IPO was done, they almost immediately went to market to try and sell themselves. They were being proactive about it. There are others that are going to end up being reactive because people are going to look and say, hey, this is a price that is much, much lower, and they've got assets that they may not be able to fully exploit or utilize. And that creates M&A opportunities but it really comes down to

what is a company trying to accomplish through that M&A you kind of look at these two panelists and so for Rocket Lab they decided they wanted to be more of a space company or a full space company, Peters said it should have been Space Labs not Rocket Labs, he said that at some

point and Redwire you've consolidated a lot in the middle so you've become this kind of powerful integrator supplier company. Future M&A, I'd say it's hard to read the tea leaves as to what's going to actually happen. But you can look at companies. Are they trying to tap into new geographic markets? Are they trying to vertically integrate certain capabilities? Are they trying to achieve scale? These are the kinds of factors that precipitate M&A. And right now we are in a less risk-tolerant environment for both investment and M&A. But companies are shrewd.

They always want to be opportunistic about that. And so we've seen certainly a dip from the 2021 levels, at least at Quilty from what we're tracking. There's not as much M&A, but that was a pretty frenetic level. So I wouldn't describe it as something you're concerned about. It's more just people have chilled out a little bit and they're still shopping, but they're not shopping like they've won the lottery. It's not Black Friday. It's not Black Friday anymore. It isn't also, but everything in capital allocation is what's your alternative. And there's a lot of organic growth, a lot of organic growth. I don't know the specifics for Rocket Lab, but we've seen a doubling. We have almost half a billion of backlog and a lot of that's contracted, over half of it's

contracted. So we started last year well below that. So we actually have a lot of growth that we can execute in 23 and 24 just by getting up every day and execution excellence, right? Alright, well I think we're out of time here, so thank you all so much for hanging out with me. It's been fun to pick a brain and figure out if Neutron's the right size. It's been keeping me up, so

it's good to hash it out. I'm excited to see it. We drove by the tent when we were down there, so we're excited for that. Maybe to just finish up, what are, for each of you, the next big thing we should be watching for from Redwire, from Rocket Lab? I mean, so for us, we're really excited about a number of launches that have our payloads in the next number of months. So when we look at, and some of them we can't talk about,

but some we can talk about, especially in payloads that are, you know, bio, our bio facility. I've got our patch dealing with agriculture. We're going to get more seeds and more plants up there for sustainability. So when I look at what I'm excited about, I'm totally excited. I've got the guys here selling power units and components on sensors. But when I look at really improving life on Earth, I look at the type of payloads that we're launching in the next six months. I mean, the easy thing that everyone grapples on for us is neutron development.

And that's going well. And you'll see some milestones come through and all the usual stuff you'll expect to see. But I guess the wild card really within Rocket Lab is the space systems business. And if I'm an external person watching the company, neutrons are given. It's just going to happen.

We know how to build rockets. We're good at that. So that's going to happen. But I think the more interesting thing will be to follow the space systems group, because I think there's some really good stuff cooking there. I'll finish because that, for both of us, that's going to lead to better financial performance too. I mean, I'm CFO of the business, so I think we're going to see better financial performance out of our businesses.

And that's what I'll be watching for as a financial analyst. I'll be looking forward to that. Expect nothing less. Awesome. be looking forward to that. Speak nothing, Lise. Awesome. Thank you all so much. I do want to shout out Redwire for having us here at the booth. This is the last Miko show. I've got Off Nominal coming up.

The beer's coming out, I see, over there. So it's going to be awesome. Seven years ago tomorrow is the first episode of Miko that I put up. So it's cool to have a little birthday party for the podcast here with everybody on stage. So thanks, all of you, for showing up. Thank you guys for hanging out with me. So it's cool to have a little birthday party for the podcast here with everybody on stage. So thanks all of you for showing up. Thank you guys for hanging out with me

and it's been a blast. Thanks. Thanks again to Caleb, Peter and Jonathan for joining me up on stage. It was a really fun group. Jonathan, I'd never met before this, but the other two,

obviously I go a ways back with. Peter's been on the show. This is probably his fourth time on Miko or so uh caleb is similar range and in addition to hanging out in real life like we've done a bunch so uh really cool to be there live get to meet them in person uh and uh have a conversation that i thought was quite enlightening especially in terms of some of the stuff that peter was mentioning about rocket lab's plans with neutron overall so excited to follow along with that storyline. Not too far away from me is where that'll all be built and launching. Hopefully I'll get a chance to go down there and check some things out in the not too distant future once some of the hardware is there to be looked at.

So keep your eyes peeled for that. But this brings us to the end of the live shows that I did out at Space Symposium. Huge, huge, huge thank you again to Redwire for hosting me there, for putting me up on stage. And it was just a really awesome opportunity to do this kind of thing. So if you're out there and you want to send some thanks their way, hit them up on Twitter. I think they would appreciate hearing some of the comments of what you thought about it. So they are Redwire Space on twitter uh tweet at them tell them thanks for putting up uh miko at their at their booth there because maybe maybe we can convince them to uh do it again sometimes so um yeah i hope you enjoyed all these shows it was a really interesting set of

conversations i thought there was uh good topics overall and and interesting people to hear from so um really cool week one of my favorite stretches of days that I've had since I've been doing the show for over seven years now. So just an awesome way to spend a few days in the space community. And it's been a while since conference days, you know, it had been since IAC 2019, right before COVID. And, you know, reminded me how fun that is. So I'll definitely be making that more of a common thing that I do. So hopefully I will meet you at a conference in the not too distant future.

But until then, thank you all so much for listening. If you want to support the show, managingcutoff.com slash support is where to go to do that. Like the 881 of you supporting the show out there. This episode is produced by 36 executive producers. Thanks to Pat, Fred, Rob, Steve, Dawn Aerospace, Matt, Theo and Violet, Bob, Benjamin, Tim Dodd, The Everyday Astronaut,

Donald, Lee, Pat from KC, Warren, Tyler, David, Jan, Chris, Stealth Julian, The Astrogators at SCE, SmallSpark Space Systems, Chris, Ryan, Moritz, Russell, Harrison, Lars from Agile Space, Simon, Frank, Brad, Joel, Eunice, and four anonymous executive producers. Thank you all so much for the support, for making it possible to take this trip, like I've been saying time and time again, but it is so true. It literally is because of all of you supporting that I'm able to not only get these opportunities, but take advantage of them when they come my way. So thank you all so much for the support.

If you've got any thoughts, reach out. Anthony at managingcutoff.com. Hit me up on Twitter at wehavemiko uh or work with me over at pineworks if you've got something to work on with me and my agency that we design and develop apps and websites pineworks.co is where to go to do that but until next time thank you all so much for listening we'll be back with regular uh non-live show mikos but hopefully they will be just as fun as these have been. So thanks again, and I'll talk to you soon.