Expansion of Space Systems and National Security Focus
Rocket Lab's Space Systems segment delivered $97.9 million in revenue, a 12.5% sequential increase, driven by satellite component contributions.
The company is expanding its prime contractor status, with imminent acquisition of Geost, a maker of missile tracking satellites for national security missions.
The Geost acquisition, cleared through antitrust review, will add missile warning sensors and manufacturing facilities, securing the supply chain for next-generation missile defense initiatives like Golden Dome and SDA.
Rocket Lab emphasizes its vertical integration, enabling rapid build and deployment of satellite systems, positioning as a trusted disruptor in national security space programs.
The Vector Hays mission demonstrates Rocket Lab’s full-stack capability, including satellite design, manufacturing, launch, and on-orbit operations, with a 24-hour call-up requirement for response space.
Cash, cash equivalents, restricted cash, and marketable securities totaled $754 million at quarter end, boosted by a $303.8 million at-the-market equity offering.
GAAP gross margin was 32.1%, above guidance range of 30%-32%, and non-GAAP gross margin was 36.9%, above guidance of 34%-36%.
GAAP operating cash flow was negative $23.2 million, improved from negative $54.2 million in Q1, driven by increased cash receipts from SDA satellite program.
Launch Services segment revenue was $6.6 million, up 31.1% quarter-on-quarter.
Non-GAAP free cash flow was negative $55.3 million, improved from negative $82.9 million in Q1.
Operating expenses were higher than guidance, with GAAP operating expenses at $106 million and non-GAAP at $86.9 million, driven by increased R&D and headcount for Neutron development.
Rocket Lab reported record Q2 2025 revenue of $144.5 million, up 36% year-over-year and 17.9% sequentially, exceeding the high end of prior guidance.
Space Systems segment revenue was $97.9 million, up 12.5% sequentially, driven by satellite components businesses.
Total headcount increased 85% sequentially to 2,420 employees.
Adjusted EBITDA for Q2 2025 was $28.3 million, above the forecasted range of $21 million to $25 million, despite increased contractor and material costs in Unmanned Systems and a less favorable mix in Space, Training and Cyber.
Cash flow used in operations was $10.6 million, reflecting working capital needs from revenue growth, increased inventory, and investments in development initiatives.
Contract mix for Q2 was 65% fixed price, 31% cost plus, and 4% time and material, with 71% of revenues from U.S. government contracts.
Days sales outstanding (DSO) improved slightly from 104 to 103 days quarter-over-quarter.
Free cash flow used was $31.1 million after $20.5 million in capital expenditures, primarily for expanding manufacturing and production facilities.
KGS segment revenue increased by $64 million year-over-year with organic growth of 27.1%, excluding the impact of the Norden Millimeter acquisition.
Second quarter 2025 revenues were $351.5 million, exceeding the estimated range of $300 million to $310 million, with notable growth in defense rocket support and C5ISR businesses.
Unmanned Systems revenue declined by $12.6 million year-over-year due to prior year international target drone shipments, partially offset by increased tactical drone revenues.
Defense Business Growth and Missile Franchise Expansion
Ducommun's defense segment grew 16% in Q2, driven by missile and radar systems, with missile business up 39%.
The missile backlog increased 30% year-over-year, supporting future growth prospects.
The company supports over a dozen missile programs, including AMRAAM, MIR, PAC-3, and Tomahawk, positioning it well for inventory replenishment.
Key missile programs like Apache blades, Tomahawk cables, and TOW missile cases are scheduled for back-to-start in H2 2025 and into 2026, pending approvals.
Ducommun is actively negotiating record levels of SM3 missile orders, aligning with U.S. defense priorities and inventory replenishment needs.
The radar franchise, including SPY-6, LTAMDS, TPY-2, and G/ATOR, is positioned for growth, supporting U.S. and NATO defense priorities.
Strategic Impact of Essco Acquisition on Growth and Market Position
Essco was acquired on August 5, 2026, after a 10-year negotiation process, emphasizing its strategic importance.
Essco is a high-end electronics calibration lab serving regulated industries like aerospace and life sciences, with significant investment in advanced capabilities.
Management highlighted Essco's potential to be a 'home run' similar to Martin, with expected sales and cost synergies from integration.
Essco's focus on high-quality, specialized calibration differentiates it from other acquisitions and enhances Transcat's competitive edge.
The acquisition expands Transcat's geographic footprint and technical expertise, particularly in high-margin, regulated markets.
Essco's business is primarily calibration services with minimal rental or distribution components, aligning with Transcat's core focus.
The integration is expected to be swift, leveraging combined strengths to accelerate growth and operational excellence.
Dafinchi