Good afternoon. Thank you for attending today's Rocket Lab first quarter 2022 financial results conference call. My name is Nate, and I will be your moderator for today's call. All lines will be muted during the presentation portion of the call with an opportunity for questions and answers at the end. If you would like to ask a question, please press star one on your telephone keypad. I'd like to now pass the conference over to our host, Gideon Massey with Rocket Lab. Gideon, please go ahead.
Thank you, operator. Hello, everyone. It's good to have you join us on today's conference call to discuss Rocket Lab's first quarter 2022 financial results. Our presenters for today's call are Rocket Lab Founder and CEO, Peter Beck, and Chief Financial Officer, Adam Spice. After our prepared comments, we will take questions. Our comments today include forward-looking statements within the meaning of applicable securities laws, including statements relating to our guidance for the second quarter 2022, including revenue in our principal target markets, GAAP and non-GAAP gross margin, GAAP and non-GAAP operating expenses, interest expense income net, Adjusted EBITDA and basic shares outstanding. In addition, we will make forward-looking statements relating to trends, opportunities and certainties in various products and geographic markets, including, without limitation, statements concerning opportunities arising from our launch services and space systems markets and opportunities for improved revenue across our target markets.
These forward-looking statements involve substantial risk and uncertainty, including risk arising from competition, global trade, and export restrictions, the impact of the COVID-19 pandemic, our dependency on a limited number of customers, average selling price trends, and risks that our markets and growth opportunities may not develop as we currently expect, and that our assumptions concerning these opportunities may prove incorrect. More information on these and other factors or other risk factors that may affect the forward-looking statements as outlined in the Risk Factors section of our 2021 10-K filing, which was filed on March 24th, 2022, and the documents incorporated therein. Any forward-looking statements are made as of today, and Rocket Lab has no obligation to update or revise any forward-looking statements. The first quarter 2022 earnings release is available at the Investor Relations section of our website at rocketlabusa.com.
To supplement our unaudited consolidated financial statements presented on a basis consistent with GAAP, we disclose certain non-GAAP financial measures, including gross margin and operating expenses. These supplemental measures include the effects of stock-based compensation expense, amortization of purchased intangible assets, other non-recurring interest and other income expense net, non-cash income tax benefits and expenses, performance reserve escrow amortization, transaction costs related to mergers and acquisitions, and change in fair value of contingent considerations.
We also supplement our unaudited historical statements and forward-looking guidance with the measure of Adjusted EBITDA, where adjustments to EBITDA include share-based compensation, depreciation and amortization, warrant expense related to customers and partners, transaction costs related to mergers and acquisitions activity, foreign exchange gains or losses, income tax provisions, change in fair value of contingent considerations, performance reserve escrows, and other non-operating income and loss, excluding interest expense related to debt and other non-recurring gains or losses. We encourage investors to review the detailed reconciliation of our GAAP and non-GAAP presentations and our Q1 financial results media release available on our website. We do not provide a reconciliation of non-GAAP guidance for future periods because of the inherent uncertainty associated with our ability to project certain future charges, including stock-based compensation and its associated tax effects and the effects of warrant expense related to customers and partners.
Non-GAAP financial measures discussed today are not in accordance with and do not serve as an alternative for the presentation of Rocket Lab's GAAP financial results. We are providing this information to enable investors to perform more meaningful comparisons of our operating results in a manner similar to management's analysis of our business. We believe that these non-GAAP measures have limitations and that they do not reflect all the amounts associated with our GAAP results of operations. These non-GAAP measures should only be viewed in conjunction with corresponding GAAP measures. Lastly, this call is also being webcast with a supporting presentation, and a replay and copy of the presentation will be available on our website for two weeks. Now let me turn the call over to Peter Beck, Founder and CEO.
Thanks for that, Gideon, and welcome everybody, for today's review of Rocket Lab's business highlights and financial results for Q1 2022. Today's presentation includes our business accomplishments for the beginning of the year, as well as further achievements we've made in the days and the weeks after the end of Q1. Adam will then talk through our financial results for the same period and our financial outlook for the second quarter before we take Q&A from those listening in and finish today's call with the upcoming conferences we'll be attending. Let's first start with a review of our key accomplishments in Q1. We started off the year with the signing of our largest space systems contract Rocket Lab has secured to date.
This is our $143 million contract to design and manufacture 17 spacecraft buses for the Globalstar constellation, which I'll go into more detail shortly. This contract highlights the strength of our increasing levels of vertical integration across space systems, executing on our end-to-end space strategy. We kept up the momentum in space systems with our expansion in Colorado to meet growing consumer demand for our GNC and software services, and of course, our completed acquisition of SolAero Technologies in the first quarter. We immediately got to work building the team's industry-leading technology and into qualification of what we believe to be the world's highest efficiency space solar cells, which we aim to bring to the market later this year.
On the launch side of our business, our first launch of the year was a flawless mission for repeat commercial Japanese Earth imaging customer Synspective. That same mission also marked the first mission from Pad B at Launch Complex 1, the newest of three launch pads. As we continue to ramp- up our Electron launch cadence, this pad at LC-1 really shortens our turnaround time between launches and, with extensive facilities at the site already in place, we can now run two launch campaigns simultaneously from LC-1 to support back-to-back launches. Later in this presentation, I'll take you through our additional accomplishments post Q1. I'm excited to share what we have to date for our first Electron launch out of Launch Complex 2, scheduled in our manifest this year.
Electron was also recognized in selection by NASA as one of a handful of launchers to provide the agency launch services under its $300 million VADR launch program. Finally, we rounded out the first quarter by selecting Wallops Island, Virginia, as the home of Neutron's launch site production complex, with construction already underway in Q1. Let's now walk through some of these highlights in more detail. Backlog. Q1 2022 saw continued growth in our backlog from year-end 2021. At December 31st, 2021, our backlog stood at $241 million, and while we ended March 31st, 2022, at $546 million. Today, our backlog stands at $551 million, representing a $310 million increase in total backlog since year-end 2021.
We're seeing continued booking strength across every major product in the company, including Electron launch contracts, Photon satellites, and numerous Rocket Lab satellite components and software sales spanning a global customer base. These customers include the U.S., the U.S. government, foreign governments, universities, and commercial customers and constellation operators. We are in the early days of recognizing sales synergies from our vertical integration strategy, but the benefits of this strategy are already garnering significant financial benefits. Synspective. As I mentioned, we had a great first launch of the year of our Electron for our repeat customer, Synspective. We successfully delivered another StriX satellite to orbit as part of their growing Earth imaging constellation, having deployed one of their very first spacecraft to orbit back in December 2020. The mission is the first of a bulk buy of three missions signed by Synspective last year.
We signed that contract in December 2021 and successfully delivered the first payload to orbit on this mission fewer than three months later, which is a rapid and competitive turnaround time. Our ability to offer customers ultimate schedule control, flexibility, and absolute reliability from a long heritage of successful missions is often the driving reason behind why these mission bulk buys, which this particular mission was a great representation of. This Synspective mission was actually brought forward in the manifest, flying earlier than initially planned to meet mission requirements and launching on the first day of the launch period when it opened on February 28, backfilling another customer's launch slot who experienced a delay with their satellite. From a technical perspective, we also count this mission as the highest performing mission to date in terms of launch vehicle performance.
Electron and its upper stage delivered Synspective's payload to space with pinpoint accuracy within just 500 m of its target orbit. When you consider the speed that we're traveling to get there, more than 27,000 km/h , delivering the payload with that type of accuracy is just incredible. After payload deployment, we also successfully lowered the kick stage, which brought it back closer to Earth's atmosphere and guaranteed the stage was destroyed on its return to Earth in only nine days later, a mere fraction of the 25-year accepted standard for low Earth orbit by NASA. As the second most frequently launched U.S. rocket with that cadence only planned to increase, we are determined to be responsible space stewards, playing a leading role in responsibly managing and mitigating orbital debris.
Our second Electron launch of the year took place just 33 days later and was another successful mission, followed by a third launch of the year, again in Q2, just 31 days later. While we had anticipated our second Electron launch would fall in Q1, weather delays pushed the mission two days into the second quarter instead. At that time, this launch shift was announced on the 24th of March. We also updated our financial guidance for Q1 2022, and the revenue from the second launch will instead be reflected in our second quarter financial results. First Pad B launch. In the first quarter, we also conducted the first launch from our newest pad based at Launch Complex 1 in New Zealand.
This is our third pad for Electron, joining the existing pad at Launch Complex 1 and our pad at Launch Complex 2 in Virginia. By standing up an additional pad at Launch Complex 1, we immediately doubled our launch capacity from that site to meet anticipated future custom demand without having to double all the supporting range infrastructure or seek new regulatory approvals like you would have to when establishing an entirely new site. Moving into space systems now. In Q1, Rocket Lab was selected by MDA to design and manufacture 17 spacecraft buses for Globalstar, a leading provider of mobile satellite services. The contract is a direct reflection upon our highly vertically integrated space systems capabilities.
The spacecraft will feature components and subsystems developed organically within Rocket Lab and also produced by our recently acquired companies, including solar panels and structures from SolAero Technologies, software from ASI, and reaction wheels from Sinclair Interplanetary. All 17 of the 500 kg spacecraft will be designed and manufactured at our Long Beach production complex, where a new high-volume spacecraft manufacturing line is under construction to support the growing customer demand for Rocket Lab satellites. Keep in mind that these Globalstar spacecraft aren't really small satellites. They're big machines, half a ton each and roughly the size of a car with 9-m solar panel wings. These are complex spacecraft, and this contract was a result of a very detailed and highly competitive bid process that determined that Rocket Lab offered a compelling balance of performance, heritage, schedule reliability, and cost.
I look at it as this is a fruition of our deliberate strategy and growth in space systems as we expand beyond launch to offer complete end-to-end solutions for our customers. We're executing on this program already with programmatic planning successfully completed with MDA in Q1, and the review of the system's requirements for these spacecraft is scheduled to take place actually this week. It's really exciting to see this program off to a great start already. Now, of course, a contract like the MDA one is only possible thanks to the capabilities we've both developed and bought in-house. We closed 3 space systems related acquisitions over these past few months since coming public in August 2021, with SolAero Technologies being the latest closed deal, which was completed this past quarter.
Within the space industry, SolAero Technologies really needs no introduction. They are the best in the game with their space solar cell technology and run the world's largest production line of high-performing space solar cells and manufacturing solar cells, solar panels, and composite structural products. I'm proud that they're now part of the Rocket Lab family and continuing to offer premier capability and value across civil, space exploration, defense, and intelligence, science, and commercial space markets. Already, we're reaping the benefits of SolAero's innovative drive as we move forward with qualification of our next-generation solar cell technology. The IMM-β, once qualified, is expected to be the highest efficiency space solar cell of its kind in high volume production worldwide. The latest product is more than 40% lighter than typical space-grade solar cells.
We made this technology leap with Rocket Lab's resources and manufacturing capability to scale to meet the growing demand for these products. The qualification process is on track, and these new cells should be ready for commercial use later this year. Another fantastic product milestone to come out of our solar business this quarter was the completion of the solar panel production for one of the world's largest low Earth orbit satellite constellations, OneWeb. SolAero solar panels will power the majority of the planned constellation. With early investment in its facilities to vertically integrate solar cell, composite substrate, and final panel assembly in-house, creating the world's only one-stop shop for fully assembled solar panels. The successful completion of this contract sets up SolAero nicely for mass manufacturing on future projects and to capitalize on the growing small satellite constellation market.
Moving on to other areas of our space systems business, we began our expansion in Colorado with the new space systems complex. This new facility will support two mission operation centers and more space for team growth, with our Colorado headcount expected to more than double by early 2023 as demand for our flight software, mission simulation, and guidance, navigation, and control or GNC services continues to grow. To give some insight into the team's work, they're currently supporting more than 33 missions, including lunar landers and spacecraft, destined for Earth orbit, Mars, and beyond. Our satellite separation system business in Maryland also continues to go from strength to strength, having recently completed both the delivery of its 500th product into a commercial satellite operator and finished the build of its 1,000th motor assembly in Q1.
Much like our team in Colorado, our satellite separation systems team is also experiencing significant headcount growth and will soon begin the expansion of its facility, which I'll touch on later in this presentation. Within our Photon spacecraft line, we're also executing on the LOXSAT-1 mission concept to create a fueling depot gas station in orbit. Partnered with Eta Space, we're bringing together a launch plus satellite mission solution to conduct an innovative tech demonstration that supports NASA's mission to establish a sustainable presence on the Moon. The mission involves a Photon spacecraft to support the testing of cryogenic fluid management in space and the Electron rocket to get it to space in the first place. The team completed the mission's preliminary design review in Q1, unlocking the next step in the mission timeline. LOXSAT is exactly the kind of mission we set out to enable with Photon.
With their experience and capability across launch, satellite, and mission control, Eta Space can focus entirely and primarily on their mission without the worry of dedicating resource to the infrastructure to support it. Imagine if any time you wanted to create an app, you first had to build a phone and then the network that it lived on. This is a problem we set out to solve with Photon and Electron and our entire space systems ecosystem, and it's great to see our end-to-end solution being utilized for such innovative tasks like LOXSAT-1 mission for NASA. Speaking of NASA, if I can bring you back to launch for a moment, we were proud to be selected by the agency in Q1, along with others, to provide launch services to their program for Venture Class Acquisition of Dedicated and Rideshare Missions or VADR.
The program is a five-year, $300 million program, and the latest sign of confidence from the agency in Electron's ability to deliver the nation's science and technology payloads into space. Then onto Neutron. Finally, wrapping up our Q1 achievements, we selected the state of Virginia for our Neutron launch site and production complex and almost immediately began construction. The 250,000 sq ft Neutron production complex is being built on a 28-acre site adjacent to the NASA Wallops Flight Facility and Mid-Atlantic Regional Spaceport on Virginia's Eastern Shore.
The production of Neutron here includes up to $45 million in support from the state in infrastructure and operational improvements. We're excited to grow Rocket Lab's presence in Wallops, add up to 250 highly skilled jobs to the local economy, and bring resilient and assured access to space for the nation through Neutron in the years to come. The Neutron development program remains steadily on track. This first quarter, we also completed a systems requirements review for the launch vehicle with the U.S. Space Force Space Systems Command as part of the $24 million contract they awarded us late last year. The upper stage development contract with SSC's Launch Enterprise recognizes Neutron's design to maximize mass to orbit capability, orbital in-insertion accuracy, and responsive, dedicated launch for the U.S. government.
Key requirements for the launch providers of the highest priority national defense and security missions awarded through the National Security Space Launch, or NSSL, program. Existing NSSL launch providers include SpaceX and ULA, and the awarding of this contract recognizes Rocket Lab as a potential NSSL phase three launch provider from 2025. As you saw there, we've had a great start to the year with those business accomplishments in the first quarter. Now I'd like to take you through a few more exciting developments for the company since the quarter end. Two launches. Just two days into our second quarter, we had the successful launch of our dedicated mission for BlackSky, followed just 31 days later by our 26th Electron launch from LC One.
Combined, these missions bring the total count of satellites successfully deployed by Rocket Lab to up to 146. I'll take you through both these launches individually across the next few slides, starting with the most recent mission. First, I want to use this slide to draw your attention to our progress this year in increasing our Electron launch cadence. Frequent and reliable launch to space is critical for our customers, and with all three Electron missions this year launched within a nine-week period, Electron has reached an average launch cadence of one every 31 days. At the same time, all three launches have successfully deployed our customers' satellites to space on the first launch attempt.
We are well operationalized and resourced to maintain this momentum throughout the year with a responsive launch demonstration with the U.S. government customer on the horizon in the middle of this year. That will include 2 launches currently scheduled to launch within 2 weeks of each other. Now on to our most recent mission, 26th launch, which marked a major milestone in our program to make Electron the first reusable orbital small launch vehicle. The There and Back Again mission saw us complete a mid-air capture of the Electron booster with a helicopter for the first time. After launching to space, Electron's first stage returned to Earth under a parachute before our S-92 helicopter swooped in, flew along the returning stage, and used our hook on a long line to capture the parachute.
After the catch, the helicopter pilot offloaded the first stage as it was quickly recovered by our recovery engineers who were waiting on a nearby sea vessel. They brought it back on board the boat and returned it to land, and I'm happy to report that the first stage come back in really good condition. Our ultimate recovery goal is to return the booster directly to land versus a boat, and this was a huge step towards that goal, and I feel like we really are about 90% progress was made to that ultimate goal. Now, the whole point of pursuing reusability for us is to increase launch frequency and reduce production cost per vehicle.
With the majority of the cost of building Electron tied to the first stage and production overhead cost, any time we can reuse all or some of the parts, instead of starting from scratch, we'll minimize our production costs and maximize our production utilization, thus positively impacting our bottom line. Right now, our engineers are picking apart and inspecting the stage inch by inch to determine what can be reused and what can be reflown from this booster in the near future. Catching a returning booster on our very first attempt was an incredibly difficult task. Quite frankly, I would have been pretty happy if we'd only just sighted the stage coming back with a helicopter. To actually catch it on the first go was a tremendous feat.
I'm incredibly proud of the entire team, and it was really great to see, you know, them get all the kudos they deserve with worldwide media coverage across most major news outlets. Don't forget, too, that amongst the recovery noise for this mission, Electron successfully deployed 34 satellites into space. A mix of new and repeat customers across space junk removal technology demonstrations and Earth monitoring. This mission has brought our total count of satellites deployed up to 100. Now onto our BlackSky mission, our first for the second quarter. This is another mission I'm proud of, by the way. It showcases our responsive launch capability. Where others may have to launch many months apart, this launch I believe sets a new standard for speed and agility for our customers.
A month and a half before this launch, around the time conflict was escalating in Eastern Europe, BlackSky came to us with a late request to change the orbital inclination for this mission so they could better support their customers responding to the Ukraine crisis. This is not a trivial thing and requires all new trajectory, safety analysis, licensing, and mission planning. It's basically a new mission from scratch. Within 45 days, we not only made those changes for the customer, but also delivered their pair of satellites above the region successfully. This kind of capability is an important distinction in today's escalating geopolitical environment. Agility, flexibility, and reliability is paramount for responsive space.
This has always been a hot topic in national security circles, and the ability to provide responsive space solution continues to generate a huge amount of public and commercial interest. As a premier small launcher, Electron has always been well-positioned for future growth in this space, and as I said before, this launch is the real showcase of our services. Now, beyond launch on Electron, we also had a number of satellites integrated with Rocket Lab technology that are now successfully operating in space. We had motorized light bands on SpaceX's Transporter-2 mission that successfully separated the HawkEye 360 and D-Orbit satellites in space, as well as advanced light band separation system used on the same launch for the PlanetiQ satellite. Separately, our MAX flight software is being used to help operate two Earth-imaging satellites also launched in April.
In 2021, our technology could be found on 38% of all launches. Having the Rocket Lab logo on everything that goes to space is part of our long-term strategy, and these latest missions supported by Rocket Lab technology is an example of that strategy being executed well in early 2022. With the expanded products and services offerings now under the Rocket Lab umbrella, both from our acquisitions and all our own internal development, the reduced risk of supply chain disruption that we bring to our customers with our vertically integrated manufacturing capability and our reliability to execute is increasingly attractive to our customers with our end-to-end services for their satellite constellations.
From satellite build and components all the way through to launch and on-orbit operations, our technology is across most of the big low Earth orbit small satellite constellations today. We're involved in constellations across the public and private sectors because our customers can come to us knowing we can offer them schedule security and attractive pricing at scale, no matter the mission. The latest contract where our end-to-end solution strategy has borne fruit is the launch bulk buy from HawkEye 360, which we secured in early Q2. Three Electron launches will deliver 15 satellites to orbit for Virginia-based HawkEye 360, which is building out a constellation to deliver radio frequency geospatial analytics.
Included in this contract is the supply of our separation systems for the satellites as we and as we mentioned on the previous slide, we have significant other satellite componentry sold into the platform. Bulk buys. The HawkEye 360 bulk buy is just the latest of many multi-launch contracts we have on the books for Electron. Commercial constellation operators look to Rocket Lab and Electron to provide reliability and accuracy in placing their satellites in the right place on orbit, where precise placement is critical to the build-out of their constellations. Without missing a beat, launch for BlackSky, we successfully executed in Q2, included the fifth and sixth satellite Rocket Lab delivered to space for BlackSky across a series of missions within three months.
While that mission was due to be the final launch in that multi-launch series, an additional sixth launch for BlackSky on Electron was commissioned in Q2 of last year and will take place later this year. That dedicated mission will continue BlackSky's rapid business expansion by deploying another pair of Gen 2 Earth-imaging satellites to a precise location in low Earth orbit for its growing satellite constellation. Again, all but one of these multi-launch contracts, customers, satellites, platforms include Rocket Lab spacecraft hardware or flight software to support their mission. Now, excitingly, in the first of multiple HawkEye missions that has been selected to be a part of the rideshare launch from Launch Complex 2 at the end of this year.
We have been encouraged by NASA's progress in certifying its autonomous flight termination unit and software, which is needed to enable Electron launches from Virginia and so have secured this date with confidence, so we can complete the first launch from Launch Complex 2 before the end of the year. With that third pad online, we can offer even greater flexibility over schedule, launch frequency, and launch location for our global customers. Onto our launch to the Moon for the CAPSTONE mission, April and early May saw significant progress and milestones cleared on the pad to launch, on the path to launch.
Just this weekend, the CAPSTONE satellite itself arrived in New Zealand, ready to be integrated into our Photon lunar upper stage that will carry it out of the Earth's orbit and set it on its path to the Moon. Our launch readiness rehearsal with our Electron rocket was also completed over these past few days, further clearing the way ahead of us to launch this mission from LC-1 towards the end of the month. Speaking of spacecraft Rocket Lab is supporting to get to the Moon, the Blue Ghost lunar lander being developed by Firefly Aerospace, which will be operated by our MAX flight software, supported by our GNC engineers, and managed by our mission operations, completed a key readiness milestone last month called Integration Readiness Review.
Blue Ghost is part of NASA's Commercial Lunar Payload Services program, which contracts the private sector to deliver science experiments and other cargo to the Moon. With that, let me turn the call over to Adam Spice, our Chief Financial Officer.
All right. Thanks, Peter. I'll first review our first quarter 2022 results and then discuss our outlook for the second quarter. First quarter 2022 revenue was $40.7 million, slightly above our revised guidance of $40 million, which we issued on March 24th. The updated guidance reflected the delay of the BlackSky launch that was assumed in the original guidance range of $42 million-$47 million. In the quarter, launch contributed $6.6 million and space systems contributed $34.1 million, or 84% of revenue and grew 149%. Total revenue for the first quarter was up 48% quarter-over-quarter, despite the BlackSky launch slip from Q1 to Q2.
Meanwhile, GAAP and non-GAAP gross margins for the first quarter of 2022 were 9% and 24% respectively. This is below our original Q1 guidance on a GAAP and non-GAAP basis of 17% and 30% respectively, driven by the unforecasted purchase accounting impacts of SolAero that was still in process at the time we issued our guidance and the delayed launch and resulting in lower absorption of overhead and indirect production and launch costs. This compares to fourth quarter 2021 GAAP and non-GAAP gross margins of 24% and 36% respectively, which benefited from higher launch rate and a more favorable product mix. Launch Services GAAP and non-GAAP gross margins were negative 12% and positive 1% in the first quarter, respectively, versus a positive 1% and positive 6% in Q4 of 2021.
The decline in gross margins quarter-over-quarter was driven by the lower launch cadence in the first quarter of 2022. Space Systems GAAP and non-GAAP gross margins were 13% and 28% in the first quarter, respectively, versus 48% and 67% in Q4 2021. The decline in gross margins quarter-over-quarter was largely driven by a mix shift to lower margin SolAero revenues. Turning to operating expenses. GAAP operating expenses for the first quarter 2022 were $36.6 million, which was approximately $2.4 million lower than the midpoint of prior guidance. Non-GAAP operating expenses for the first quarter 2022 were $21 million, in line with the low end of guidance.
The quarter-on-quarter step up in GAAP operating expenses was primarily driven by a $2 million increase in R&D stock-based compensation and an incremental $700,000 of amortization of purchased intangibles stemming from recent acquisitions. While the decline in non-GAAP R&D was driven by higher R&D credits, which were offset by higher prototype and staff costs. Worth noting, GAAP R&D spending is up 13% quarter-on-quarter, and we anticipate this trend to continue throughout 2022 as we increase investment in the Neutron launch vehicle development. The quarter-over-quarter step up in GAAP SG&A of $4 million was driven by SolAero's partial spending contribution in the quarter. Higher stock-based compensation, combined with a change in the fair value of contingent consideration related to the PSC acquisition. These increases were offset by lower deal fees.
The uptick in non-GAAP SG&A expenses of $1.8 million were driven by higher staff costs and outside services. When we compare first quarter 2022 revenue on a year-over-year basis, total revenue was up 124%. Within the mix, Launch Services revenue declined 60% or $9.9 million, largely due to the aforementioned BlackSky global launch delay. Although Launch Services got off to a slow start in 2022, as Peter mentioned earlier, for a variety of reasons, including the easing of COVID restrictions in New Zealand and operational status of our second pad at LC-1, we've picked up the pace with a monthly launch cadence for the last three launches. Space Systems revenue was $34.1 million, reflecting an 18-fold increase over the prior year.
To provide further context, in the year-ago quarter, Space Systems revenue was $1.7 million, driven by two satellite programs, one of which was a study contract, and Sinclair component revenue contribution. As Peter covered in slides earlier, in our Space Systems business, we now have revenue contribution from almost every U.S. government defense and civil agency, the majority of large U.S. primes, and a diverse mix of global customers. This is allowing us richer and deeper customer engagement, which can be seen in our growing results, backlog, and guidance, which I'll get to shortly. Launch Services GAAP and non-GAAP gross margins in the year-ago quarter were positive 4% and positive 5% respectively. The decline in gross margins year-on-year was driven by the lower launch cadence in the first quarter of 2022.
Space Systems GAAP and non-GAAP gross margins the year-ago quarter were positive 47% and 50% respectively. The decline in gross margins year-on-year were largely driven by a mix shift to lower gross margin revenue from SolAero. Turning back to operating expenses. As you can see, both R&D and SG&A spend are up year-on-year as the company continues to invest heavily in broadening our Space Systems portfolio of products and services, Electron recovery, and Neutron development. The company is executing and achieving milestones on numerous ambitious projects, and we look forward to these investments generating shareholder value for many years to come. Year-on-year GAAP R&D was up $6.4 million, driven by a $4.6 million increase in stock-based compensation and an increase of $1.3 million in amortization of purchased intangibles related to recent acquisitions.
Non-GAAP R&D was up $500,000 , driven by a combination of higher prototyping and staff costs. GAAP SG&A was up $14 million year-on-year, driven by an increase in various public company costs, including initial D&O insurance of approximately $1.5 million, staff costs and outside services of $5.1 million, stock-based compensation of $3.2 million, and a $1.8 million expense related to an acquisition performance reserve escrow, and amortization of purchased intangibles of $800,000. Non-GAAP SG&A was up $8 million, driven by similar GAAP items referenced earlier. With that, let's turn to our guidance for Q2 2022. We currently expect revenue in the second quarter of 2022 to range between $51 million and $54 million, which includes three dedicated launches.
We are not including in our guidance, but note the potential for a fourth launch in the quarter for a government customer currently manifested with a launch window in the last week of June. Out of prudence, we are excluding this launch from our guidance ranges, but we wanted to note the potential for this upside in advance. We expect Q2 GAAP and non-GAAP gross margins to be between 11%-13% and 26%-28% respectively. GAAP gross margins improvements are anticipated to be driven by a favorable product mix, as well as improved absorption of production and launch indirect and overhead costs as compared to Q1 results. We expect Q2 GAAP operating expenses to range between $39 million and $41 million, and non-GAAP operating expenses to range between $23 million and $25 million.
This quarter-over-quarter step-up is driven by increased staff costs, prototype, and other professional fees related to the Electron recovery, R&D activities related to the broadening out of space systems products and service offerings, and the Neutron launch vehicle development program. We expect Q2 GAAP and non-GAAP interest expense to be $2.5 million. We expect Q2 Adjusted EBITDA loss to range between $3.5 million and $5.5 million, and basic shares outstanding of 464 million. With that, I'd like to open up the call for questions. Operator?
Absolutely. If you would like to ask a question, please press star followed by one on your telephone's pad. If for any reason you'd like to remove that question, please press star followed by two. Again, to ask a question, press star one. As a reminder, if you are using a speakerphone, please remember to pick up your handset before asking a question. We will pause here briefly as questions are registered. Our first question goes to Suji Desilva with Roth Capital Partners. Excuse me. Suji, your line is open. Please proceed.
Thanks. Hi, Peter. Hi, Adam. Congratulations on the progress here. The gross margins you've talked about, I understand the overhead absorption in Launch. On the space systems, around the 20%, what, Adam, should we think about as the target margin there for space systems? Is there opportunity for expansion, or will it be mix-driven quarter- to- quarter around this roughly this level?
Yeah. I think there's kind of a near term, medium term, and long term answer to that question. I think in the near term, you know, certainly kind of the laws of physics are kind of dictating that, you know, the SolAero impact is gonna drive margins, you know, kind of to be lower than obviously that they were before that acquisition. I think the margins you're seeing right now are probably, you know, I'd say reasonably indicative of where they're gonna be in the next several quarters. Certainly, I think as you kind of move a little bit further out in time, we see a lot of opportunities for improving the gross margins in that SolAero business. I'd say that the other portions of space systems remain pretty strong from a gross margin perspective.
I think it's really a focus on SolAero and getting, you know, some improvement there in that business. I think we're already starting to see as you know contracts turn over and so forth, that given kind of some of the tightness that we're seeing in the solar market, that you know we have a little bit more ability to kind of have better gross margins a little bit out in the future. Longer term, for the larger space systems initiatives, you know, we believe that the margin structure for that should be relatively similar to launch in targeting kind of the low- to mid-50%s. Now, again, given the size of SolAero's contribution, it's gonna take us you know some time to kind of get that back into focus.
Again, you know, we've talked a little bit before that we see the SolAero gross margins ultimately kind of being in the 30%+ range, which I think then becomes much less of a drag on the overall margin structure for that line of business. You know, we're very optimistic that we've got a path to improve the margins there, and then overall, we think, again, as the other parts of space systems grow in the mix, above and beyond SolAero, then I think, you know, things will come back into focus in that low- to mid-50%s gross margin.
Okay. Appreciate the detail in laying out the roadmap there, Adam. Switching over to the launch, the cadence, you seem to have settled into sort of a 1-a-month kind of cadence, roughly, which is kind of what you guys have talked about. What happens as maybe two launch pads come up in New Zealand or Virginia comes up into calendar 2023? How should we expect that cadence to evolve over the next 6 to 12 to 18 months?
Yeah. I mean, we certainly have invested in the capability there. The things that really drive launch cadence are always, for us, dominated by customer readiness. It's always a little bit difficult to, you know, predict and launch is always a little bit lumpy. Certainly we see an increasing launch manifest for next year and, you know, we've made sure we've made all the investments to take full advantage of that.
I think, Suji, one other piece of that. Certainly the addition of a pad in New Zealand and the bringing up of Wallops helps kind of increase the number of absolute launches that we can do. I think more importantly, it really kind of allows us a lot more resilience, right? You know, you have the ability to launch in quicker succession, right? You don't have to kind of reposition all your launch assets and so forth and, like, your tracking radars and so forth. I think that I wouldn't think so much of it as, like, is it offering a step increase in the amount of launches that you can do on an annual basis, but much more the kind of timing and sequencing of those.
That actually is pretty important for some customers and how they wanna basically get their constellations on orbit. Timing is very, very important.
Okay. Some more flexibility there. Thanks. Thanks, guys. I appreciate it. I'll pass it along.
Thank you, Suji. Our next question goes to Edison Yu with Deutsche Bank. Edison, your line is open. Please proceed.
Hey, guys. Thanks for taking the questions. First one on the guidance. Just curious, what are you sort of embedding in there for CAPSTONE? I think it was disclosed somewhere it was worth about $10 million. I assume you don't recognize all that into Q. Just yeah, if you clarify what's kind of being embedded.
Yeah. No, that's a good question, Edison. The CAPSTONE, you're correct, is around a $10 million mission. It's important to note that one of the missions in Q2, in fact, the recovery mission that went off earlier in the quarter, that was primarily an R&D platform. It had relatively small revenue contribution. We had some CubeSats on the platform, but, you know, it wasn't a regular launch at all. If you think about it, if you're trying to back into, hey, how does kind of the guide for the revenue for launch services kind of triangulate to three launches in our average selling price, it's because that recovery mission was a pretty de minimis revenue contribution, and you're absolutely correct on the CAPSTONE revenue estimation.
Understood.
Probably, you're right. It is point-
Oh.
Sorry, Edison, I didn't ask to kind of-
Oh, I'm done.
Finalize that one question, part of your question. Your question to revenue recognition, it is a point-in-time launch, so all of that, all the revenue from CAPSTONE does happen in Q2.
Gotcha. Thanks. Follow-up on space systems. I know you said you completed the OneWeb. How are we thinking about Gen 2? Obviously, that's supposed to be a much bigger one. Are we confident? Do we know when that will be kind of determined what kind of solar panel solar cells that we'll be using?
I think that program is, you know, it's going through its traditional bidding cycle. You know, we'll have to wait for the customer to make their final selections.
Okay. Thank you.
Thank you, Edison. Our next question goes to Erik Rasmussen with Stifel. Erik, your line is open. Please proceed.
Yeah, thanks for taking the question. Just maybe clarification, and it sounds like, you know, just trying to get a sense of what the value per launch is. Obviously, one of those was an R&D platform. But would you say it's similar to sort of what you had filed in your 10-K, which is a little bit over $8 million? And do you see that growing in terms of the value per launch? And then with that, because of these bulk buys, you know, any sort of constraints on the pricing versus maybe some of the one-offs?
I think that the I mean, the pricing environment for us has been relatively stable. You know, if you look back at our pricing back, let's say, three or four years ago, we were pricing Electron at roughly $5 million per launch, and now the average selling price obviously is much, much higher. You know, we at the current time, we're really not seeing any downward pricing pressure. You know, certainly when a customer comes in and commits to a larger bulk buy, and if it's it also depends on the type of bulk buy, right?
If you have a bulk buy where you're sending the same spacecraft and you're sending it to kind of a similar orbit and so forth, then it reduces the NRE for us significantly, and we'll pass some of those savings on to the customer. I would say that, you know, you know, if you really look across the range of our backlog, it really does kind of fit what we've always been talking about, right? If you think about $ 7.5 m illion roughly on average kind of being in the average selling price for the sticker price, that's still accurate, and there's exceptions to the high side and a little bit of exceptions to the low side as well.
Erik, the fundamental reason, you know, people come to us is reliability. I mean, they're entrusting. When you deploy someone's entire constellation, you're basically entrusted with their entire business. You know, reliability of launch vehicle accuracy and schedule is most important.
Great. Understand. Maybe just on the recapture attempt, obviously there's some successes there. You know, I think would have loved to have seen a fully successful recapture there. What about the setup that was sort of inconsistent with, you know, maybe what you were doing in the practice runs? When do you anticipate the next mid-air recapture?
Gee, you're a tough customer, Erik. That was an incredible feat to catch it. Yep. Ultimately, the pilot offloaded it because he didn't like the way it felt. We need more practice on the S-92, but I mean, to put it into context, like rendezvousing with a descending rocket stage from space 400 km out in the ocean and then catching it was better than I'd hoped for. We really have confirmed that that's a very, you know, completely viable technique. To get it on our first time is awesome. We'll make a few wee tweaks and get back out there in the not too distant future for another attempt.
You know, as far as we're concerned, we learned a tremendous amount and you know, the condition of that stage is really fantastic. I think, you know, if we held that on the hook and brought it home, you know, we'd be seriously thinking about putting that thing back on the pad. We're in super good shape.
Great. Maybe just last one on the flight termination software. That's obviously been a hold-up, but you know, what is the gating item at this point? Where does that stand? I know you know, you'll hopefully have a first launch there by December year-end. You know, maybe just help walk through what to expect there.
Yeah, sure. The gating item, as it's always been, is NASA's completion of their software that they can then provide to us to load onto the autonomous flight termination units and then go fly. They've had, you know, many delays, but, you know, the project has a very high priority within NASA currently and, you know, they seem to be meeting their milestones. We have more confidence than ever before that they'll, you know, deliver that software and, you know, enough confidence that we're able to actually schedule a launch, which is something we haven't been able to do for over a year.
Great. Thank you. Good luck.
Thank you, Erik. Our next question goes to Ron Epstein with Bank of America. Ron, your line is open. Please proceed.
Hey, yeah. Good afternoon, guys. It was nice seeing you last week. Just, maybe just a couple of quick ones. With the absence of the Russians in the space market now, with, you know, Soyuz effectively out, maybe never coming back, how should we think about what impact that's gonna have on you guys? Obviously, it's positive, but can you give us maybe another way to think about it with maybe a little more, you know, a little more color on it?
Yeah. I mean, the way we think about this, Ron, is that, you know, prior to the Ukraine and Russia crisis, there was quite a lot of commercial demand for the Neutron product. It was always intended to compete with both the Soyuz and the Falcon 9. Now, with the Soyuz kind of exit of the market, and, you know, that's not just Soyuz out of Russia, that's Soyuz out of French Guiana and Europe and also, you know, Proton gone, it really does create a big hole in the sort of the 2024-2027 timeframe. That's when, you know, a tremendous number of both government and commercial mega constellations come to market.
The conversations that we're having internally here now are about who do we partner with for that, for those first kind of bulk buy of Neutrons? You know, who's gonna be ready, and who's gonna actually turn up at the pad? It's certainly changed the conversations quite significantly.
Got it. On Neutron, ultimately, how's that proceeding so far? When we think about the economics of Neutron to the customer, how much will it reduce the cost to launch for the customer?
You know, I mean, building a rocket is an incredibly painful program. You know, we wouldn't even have started if we didn't think, you know, we could be very competitive from an economic standpoint. All the lessons that we're learning from the Electron reusability program are directly applied to the Neutron program. For us right now, it's, you know, we're not really seeing the need to do early capture pricing. We're certainly, you know, the vehicle is in strong demand. I think, you know, right out of the shoot, the economics of that vehicle are gonna be pretty good. You know, as reusability, you know, it's like, it's an evolution over a product's life cycle.
You know, as we fly it more and more, we'll see more and more advantage from the reusability, and the nature of that. Yeah, I think we're in good shape.
Maybe switching gears a little bit to something more kind of operational focused. We've heard from many companies in aerospace, outside of aerospace, manufacturing companies, of the issues they've had with the supply chain. How has supply chain issues impacted you, if at all? How are you addressing them, if indeed there is an impact?
I mean, it's certainly an advantage being highly vertically integrated where, you know, all that you need is raw material inputs. You know, we've been able to manage through our supply chain over the last couple of years and, you know, never had to delay a launch or a satellite or anything because of it. You know, we actively look after our supply chain incredibly well. If we carry safety stock if we think something's getting a little bit worrisome. You know, electrical components, electronic components have always been, you know, something we track very closely. So, you know, we haven't seen any kind of major disruptions to our production or ability to execute.
I think primarily that's because we're so vertically integrated and, you know, we've been doing this for a while, so we, you know, we manage our supply chain very carefully.
Got it. Maybe one last one from me. On the recapture of the Electron stage, did that change your thinking at all in terms of the economic impact of reusability? Is it turning out better than you thought, worse than you thought, or about the same as you thought now that you've got a little more data and some more experience with it?
Well, at the end of the day, you know, the proof will be in the pudding. You know, the condition that we recovered the stage, even though we you know recovered out of the ocean, which is less than ideal, was really extraordinarily good. You know, all of the kind of iterations that we'd been making over previous flights had all really paid huge dividends. You know, to give a sense of, you know, when it's recovered from a helicopter, you know, the helicopter costs around about $5,000 an hour to operate.
If you've got it out there for, you know, four hours or more, you know, it's an incredibly cost-effective way to go back and bring a stage which represents the vast majority of the cost of a launch vehicle. I mean, the economics are just awesome. Now, the true economics will be born out of, you know, how much of the refurbishment cycle does that cost. I mean, you know, for $20,000 worth of helicopter time, you know, to get back full engine sets and, you know, whole tanks, I mean, it's, yeah, it's really wonderful.
Got it. Thank you. Thank you, guys.
Thank you, Ron.
I've been told that there's a technical delay on the webcast side preventing attendees from watching and listening, but we will continue with the Q&A for the people that are on the call. Our next question goes to Austin Moeller with Canaccord. Austin, your line is open. Please proceed.
Good afternoon, Peter and Adam. My first question here, do you guys have any update on the recent reporting about the company considering having potentially three Neutrons ready by 2024 to try and capture some market share from the Proton and the Soyuz now that they're offline?
No, Austin, that's not a report I've seen.
As far as the next recapture attempt for the Electron, do you plan to do that on the next launch after Capstone, or you're still evaluating in terms of when might be a good time to try and catch another booster?
Yeah, we haven't announced, you know, the launch after CAPSTONE. Generally, that's our policy to announce, you know, within a certain timeframe of launch. You won't have to wait long, Austin, to see another attempt.
Okay. Well, that's good to hear. Then just finally, you Rocket Lab is extremely vertically integrated, so is there really any area in terms of hardware or software that you're looking at now, where you feel you might need to expand into in the future? Do you guys feel pretty good right now in terms of where you are in vertical integration, the product offering that you can offer customers?
I think we've made great progress, but there's still plenty more to go. You know, if you took a satellite or a spacecraft and you know, took it to bits on the table, you would see that we've garnered a number of really high value, you know, components or areas, whether it be from an economic standpoint or a scheduling and supply chain standpoint. But there's certainly more for us to go.
Okay, great. Thank you.
Thank you, Austin. Our next question goes to Cai von Rumohr with, excuse me, with Cowen. Cai, your line is open.
Yes. Thank you very much. Guys, to follow up on that, you know, you still have a substantial amount of cash, but we're in a much nastier equity environment. You know, what's your thinking in terms of cash deployment? Do you wanna kind of husband your resources now? And also you have that $100 million of borrowings. What's your thinking there?
Yeah, no, that's definitely a very kind of salient discussion that we have every day here at the company. I think the challenge right now is that we see this as a phenomenal opportunity to continue to add to the portfolio. You know, certainly we, you know, we need to be judicious with our capital, and I think we have been. We see a lot of opportunities still out there. In fact, the deal flow is relatively healthy. That said, you know, we don't have anything in our sights right now that we're anywhere kind of deep in progress on. I would say that, you know, we think for the right types of opportunities, you know, the capital will almost always be available.
you know, we also, yeah, absolutely appreciate the fact that it's a pretty nasty equity environment as you noted. you know, if you think about the kind of deals that we've done, we've acquired 4 companies, 3 since coming public. They all have a pretty similar vein to them, right? Where they're you know, these aren't really kind of cash consuming deals after the close of the acquisition. We have been able to use some stock in our deals, and we continue to like to do so to preserve cash. We're you know...
We do think that, you know, if people are believers in the longer term growth of this industry, you know, now is the time to be staking out strategic positions on the monopoly board. I think we've done that successfully, and I think there will be more opportunities to do that. Certainly, we'll do that with an eye towards capital preservation. I don't know if that answered your question exactly, but we're definitely not taking our foot off the gas and not looking at a lot of things because we do have the benefit of getting a lot of deal flow in front of us.
You know, usually when financial environments get more difficult, it takes a while for ask prices to change. Are you seeing that those prices are starting to change today? Or, you know, is this something where you think if you wait a little bit, and I understand you don't wanna wait too long, if the right opportunity comes up?
Yeah, no, you're absolutely right. I think it takes a while for private companies to realize that their valuations fluctuate, you know, just like public company valuations do. I would also say that we're not far enough down the path on any individual deal that we could really kind of provide any feedback on kind of how prices have moved or not in the last, say, several months. We've been really focused on integrating the deals that we've done. You know, we think we've got a lot of work to do still on some of the integration efforts, but we're making great progress. I think we also, you know, very cognizant too that we, you know. There's no such thing as a small deal, right?
You acquire these companies, they all require integration, they all require effort and management bandwidth. We're being very cognizant that we don't get, you know, too far over our skis, and kind of put the business at risk in that. That kind of applies to integration as well as kind of capital availability.
Right. Just a green eye shade question. Your backlog was $545 million. It looks like it went up a smidgen over $300 million, but obviously, that includes SolAero. What were your net orders in the quarter?
If you look at the addition of, for example, the MDA Globalstar deal plus SolAero, we added about, I think between those two deals, it was probably close to $300 million, right? A little under $300 million.
Okay.
Between those two, the MDA deal and SolAero. We also shipped, and of course, we generated revenue and kind of recognized some of that backlog in the quarter.
You know, you talked about the Ukraine impact on, you know, Neutron demand in 2024-2027. Are you seeing, you know, that that's yielded any benefits in terms of the pricing for Electron here over, you know, the slots that you still have available?
I mean, the payload capacity of a Soyuz is, you know, sort of 8 metric tons, whereas, you know, Electron is 250-300. The majority of the kind of spacecraft that would fly on a Soyuz aren't applicable to necessarily an Electron launch vehicle. I think, you know, the launch market has certainly tightened. I think it's probably a little bit early to see any direct customer flow onto Electron.
The one thing I would say, Cai, and it is related to the situation, is the fact that, you know, payloads that were always destined for Electron are basically getting firmed up, and they're coming at favorable pricing. I would say what it's done is it's put more emphasis on certain payloads to get up in orbit sooner. It's. I'd say from that perspective, you know, the conflict has been a kind of a tailwind to our business. Because things that maybe had a little bit more time leash to them or a little bit longer time to get to on orbit now have been wanting to be pulled in. We're actually looking at opportunities to compress the manifest. Again, squeezing in.
When you squeeze in launches into your already relatively full manifest, you know, you can basically charge a higher price for that due to the scarcity of launch slots.
Excellent. Super. Very helpful. Thank you, gentlemen.
Mm-hmm.
Thanks, Cai.
Thanks, Cai.
Thank you, Cai. Our next question goes to Kristine Liwag with Morgan Stanley. Kristine, your line is open. Please proceed.
Hey, this is Justine. I'm for Kristine Liwag. Following up on maybe some of the earlier discussion around helicopter recovery. Any sense you're standing here today of how long before Electron boosters are regularly recovered in this fashion? And is the plan to recover all Electron boosters in this way eventually, or does helicopter retrieval make sense only under certain conditions? Thanks.
Yeah, no, that's a great question. We sort of think around about 50% of Electron missions will be viable for recovery. That's not just from, you know, a helicopter standpoint, operationally, but it's also from a mission standpoint. One of the challenges with a small rocket is that, you know, there's very tight margins. Some missions require all of the performance of Electron, which don't really allow for, you know, the addition of extra mass for reusability hardware. I mean, we've got the burden down fairly low, sort of 10%-15% reduction in a payload, which is, you know, extraordinarily low. But nevertheless, you know, a number of missions require that extra performance.
We're sort of thinking around about 50% of missions will be eligible for being reusable and recovered.
Yeah, Justine, ideally too, you would basically use your reusability, you know, feature on missions, and then when the booster is ending its kind of its life, you'd kind of use that as the dispensable one, right? Or the disposable one. Again, hopefully, there's ways that we can move things around. We'll get as much use out of these boosters as we possibly can. There's lots of different ways to achieve that.
Okay. Helpful. Thank you.
Thank you, Justine. Our final question is a follow-up from Edison Yu with Deutsche Bank. Edison, your line is open. Please proceed.
Hey, thanks for squeezing me in. Just one quick follow-up on Neutron. What is the ability or what's kind of the how realistic is it to potentially speed up development of it? Is it a question of testing, capital? I know it's very complicated, but you know, I think the spirit of, I think, what's going on in industry, the near term or the medium-term demand is quite big. Just wondering if there's ways to speed it up. Thanks.
Yeah, I mean, look, we're looking at every which way Sunday to try and do that, Edison. It's you know it is you know it's an aggressive program as it is, so you know any opportunity we have, we'll take it. You know. There's no. Yeah. There is no like magic thing we can do to just all of a sudden accelerate it. It's one of those things, even if you double the amount of spend against it, you wouldn't really shave much time off. It's just you've got to go through that development of hardware, you know go through iterations and you know actually build the stuff.
One of the things that drives the timeline of Neutron is availability of production equipment. Although our supply chain is relatively intact, when you go and buy CNC mills and giant automated tape layers, those guys are suffering supply chain, you know, issues. There's no amount of money in the world that can accelerate some of that stuff.
Okay. Just thanks.
Thank you, Edison. One more time, just to remind everyone that there was a technical problem on the webcast side that prevented attendees from watching and listening for a little bit. There will be a full audio and video replay available after the call is wrapped up. With that in mind, I would like to turn the call back over to the management team for any closing remarks.
With that, thank you everyone for your interest in Rocket Lab and to those who participated in today's call. Adam and I will be speaking at these upcoming conferences and look forward to the opportunity to share more exciting news and updates at the Stifel Cross-Sector Insight Conference starting June seventh, and the Bloomberg Technology Summit on June 8th, and the Canaccord Genuity Growth Conference in August. Thanks again. We look forward to speaking with you all soon about the exciting progress being made in our business.
That concludes today's Rocket Lab first quarter 2022 financial results conference call. Thank you for your participation. You can now disconnect your line.