Palace intrigue (8/2/22)

Good morning. Eagle-eyed readers may have noticed that we omitted some earning reports taking place this week from the newsletter’s week ahead section yesterday. That’s because there are so many, and they need their own separate callout.

So here we go. *takes deep breath*...for the rest of the week, we have:

• Astra ($ASTR), Globalstar ($GSAT), Virgin Galactic ($SPCE), EchoStar ($SATS), and SES ($SESG) on Thursday, Aug. 4

• Telesat ($TSAT) and Trimble ($TRMB) on Friday, Aug. 5

Any we missed? Reply and let us know.

Today’s newsletter: 🔬 CHIPS + Science🎧 Pathfinder #0010🚀 Aerojet results🔃 On the move

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CHIPS and Science and More

Congress has spent the last few weeks hammering out next year’s authorizations and funding decisions.

1. On the policy side, CHIPS and Science passed in both the House and Senate last week.

2. On the funding side, policymakers have been reviewing and amending next year’s NDAA, which will provide funding for military space programs.

CHIPS and Science

The finalized Creating Helpful Incentives to Produce Semiconductors (CHIPS) and Science Act included an authorization bill for NASA—the first new authorization the agency has received in more than five years.

Authorization vs. budget: The authorization bill under the CHIPS act is a policy bill, meaning that it didn’t provide or recommend any new funding to the agency. NASA’s funding is determined through the President’s federal budget request, which was released in late March for FY23.

Instead, the authorization shows official federal support for a broad range of NASA programs and initiatives. The CHIPS and Science Act does allot $280B for semiconductor manufacturing and R&D, but none of that funding is earmarked for NASA.

Yes, please: The NASA authorization cements federal support for NASA’s marquee programs. That includes Artemis, with emphasis on Mars as the final destination for the next chapter of solar system exploration.

The bill also reaffirms the US government’s intention to extend ISS operations from 2024 to 2030. This has been NASA’s stance for a while, but in light of recent Roscosmos statements, the official federal support is an important signal.

“With strong support from the Biden-Harris Administration as well as this authorization, NASA will continue to advance scientific discoveries, enable sustainable aviation, address climate change, and much more,” NASA Administrator Bill Nelson said.

NDAA and Space

Next year’s National Defense Authorization Act (NDAA) is making its way through an in-depth review process. The Senate has not yet voted on the bill.

On Friday, the Senate appropriations defense subcommittee released their markup of the bill. This newest version would provide $792.1B for the Pentagon, or $63.6B more than the FY22 enacted level. Space is listed as a priority in the chairman’s summary, with $2.2B earmarked for boosting R&D of resilient space capabilities.

The top projects, broken down:

1. $400M for LEO missile-tracking and early warning systems

2. $300M for MEO missile-tracking constellation development, with a focus on the polar regions

3. $250M for USSF training infrastructure

4. $216M to procure two additional launches for the DoD’s missile-tracking system

5. $100M for tactically responsive launch efforts

+ While we’re here: On Friday, the Senate released a draft appropriations bill that would fund NASA at ~$26B, the full amount requested for FY23, but with slightly altered mission priorities. Funding for space technology was trimmed down while science and exploration missions received boosts. Call it JWST’s halo effect?

Share this with your favorite policy wonk:

Pathfinder #0010, ft. Jordan Noone

Today’s guest is Jordan Noone, the cofounder and founding CTO of Relativity Space. Noone now holds the same titles at Embedded Ventures, a self-described deeptech VC “skunkworks” that he runs with cofounder Jenna Bryant.

Embedded Ventures has partnered with the US Space Force on R&D, and backed early-stage startups like Slingshot Aerospace and Inversion. Jordan is also the cofounder and CEO of KittyCAD, which aims to reinvent how engineers and companies create hardware products.

Pathfinder is brought to you by SpiderOak Mission Systems, an industry leader in space cybersecurity.

A sneak peek at our discussion topics:

—Jordan’s rebellious streak as a student and his take on medieval history —Heading up USC’s Rocket Propulsion Lab, a finishing school for rocket junkies —Interning, then working full-time, at SpaceX —Meeting cofounder Tim Ellis (our guest on Pathfinder #0009)—Becoming the youngest person to get an FAA license to launch a rocket to space —Getting accepted into and graduating from Y Combinator (YC W16, to be exact) —The advantages of 3D printing combustion chambers, engines, and other rocket parts—Bringing the design and product ethos of Silicon Valley to dual-use technologies at Embedded—Market conditions and what Jordan’s seeing with pricing rounds, startup valuations, etc. —Conflicted cap tables and the geopolitical aspects of venture capital —His views on how space SPACs could affect future industry financing activity

Where to get Pathfinder #0010

🎧 Listen on Spotify💻 Watch on YouTube🍎 Tune in on Apple Podcasts

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Aerojet’s Q2

On Monday morning, El Segundo, CA-based Aerojet Rocketdyne ($AJRD) reported Q2 net income of $16.4M. Aerojet develops liquid- and solid-fueled propulsion products for major space players and missile makers.

The propulsion provider missed on top- and bottom-line expectations, with quarterly earnings coming in at $0.20 per share (vs. $0.47 est. and -66% YoY). The company posted Q2 revenues of $528.5M (-5.1% YoY). For the first six months of 2022, Aerojet reported $1.04B in sales (-1% YoY).

Net income dropped by ~64% YoY. Management attributed the decrease in net income to:

1. “Cost growth from supply chain disruptions” and technical/manufacturing tweaks to its standard missile program

2. “Favorable contract performance on the RS-68 program in the prior year”

3. $16M in costs incurred in Aerojet’s recent proxy battle (more on that in a moment)

The backstory: a scuttled deal and a house divided

A deal falls through: US antitrust cops nixed Lockheed’s attempted $4.4B acquisition of Aerojet Rocketdyne ($AJRD) in February. At the time, FTC staff alleged the merger would let Lockheed boost the cost of rocket engines for other defense contractors, or even lock out their access to the supplier, and endanger national security. The FTC may be revisiting the Northrop/Orbital ATK deal for the very same reason.

Palace intrigue…In the wake of the scuttled Lockheed deal, Warren Lichtenstein, Aerojet’s executive chairman, kicked off a proxy battle against CEO Eileen Drake and her boardroom allies. Lichtenstein instigated what Drake’s camp called a “boardroom coup” and said the CEO failed to plan for a future in which Aerojet remained independent. On June 30, shareholders backed Drake, ousted Lichtenstein, and elected a new slate of directors that includes the CEO.

Looking forward…“Our business remains strong, as robust orders contributed to our quarter-end backlog of $6.9 billion, just shy of our highest backlog recently recorded and equal to approximately three times our annual sales,” said CEO Eileen Drake. The backlog includes a ULA award for 116 R10s, which will fly on the Vulcan in support of the Amazon Kuiper megaconstellation’s deployment.

+ Apropos of nothing, fun trivia fact: Aerojet started as the General Tire & Rubber Company in 1915.

Share this with tire salespeople-turned-rocket engine makers:

In Other News

• NASA and space station developers reiterated confidence that commercial ISS replacements will be ready by 2030.

• The FAA extended Virgin Galactic’s ($SPCE) launch license by two years.

• Virgin also says it's secured land in New Mexico for a new astronaut campus and training facility.

• Rocket Lab ($RKLB) scrubbed its "Antipodean Adventure" launch for the NRO due to high winds. The next launch window opens Thursday.

• Polaris Dawn is targeting a December launch.