Q3 2022 Momentus Inc Earnings Call

November 8, 2022

[music].

Good afternoon. My name is Abby and I will be your conference operator today at this time I would like to welcome everyone to the momentous incorporated third quarter 2022 earnings Conference call.

All lines have been placed on mute to prevent any background noise.

After the Speakers' remarks, there will be a question and answer session.

I would like to ask a question. During this time simply press star one on your telephone keypad.

If you would like to withdraw your question again press Star one on your telephone keypad.

Mr. Darryl Genovesi, Vice President of Investor Relations you May begin your conference.

Yes.

Thank you Abby Hello, everyone welcome to momentous as third quarter 2022 earnings Conference call with me here today are John <unk>, Chief Executive Officer of the company and chairman of its board of directors as well as <unk>, Kim Chief Financial Officer, each will provide prepared remarks. Following these prepared remarks, we will take questions from.

In the interest of time, we would ask that you limit yourself to one question and one brief follow up.

Earlier today, we issued a press release and made a slide presentation available on our Investor Relations website, which provides an overview of our business and financial highlights for the quarter you can download a copy of the release and presentation slides at investors that momentous database.

During today's call, we will make certain forward looking statements within the meaning of section 27 of the Securities Act of 1933 and section 21 E of the Exchange Act of 1034.

Forward looking statements are predictions projections or other statements about future events that are based on current expectations and assumptions and as a result are subject to risks and uncertainties.

Many factors could cause actual future events to differ materially from the forward looking statements in this communication.

You should listen to today's call with yesterday evening that our actual results may be materially different from the plans intentions and expectations disclosed in our forward looking statements we make.

For more information about factors that may cause actual results to materially differ from forward looking statements. Please refer to the earnings press release, we issued today as well as the Companys filings with the Securities and Exchange Commission.

Readers are cautioned not to put undue reliance on forward looking statements and the company specifically disclaims any obligation to update the forward looking statements that may be discussed during this call.

Please also note that we will refer to certain non-GAAP financial information on today's call you can find reconciliations of the non-GAAP financial measures to the most comparable GAAP measures in our earnings press release, none of these non-GAAP financial measures as a substitute for or superior to measures of financial performance prepared in accordance with GAAP.

With that I'd like to turn the call over to our chairman and Chief Executive Officer, John Rood.

Thank you Daryl I'm delighted to talk to you about the progress we made during the third quarter and our plans for the future I will provide some comments on our activities during the third quarter and the subsequent period, leading up to today's conference call and then I'll spend some time discussing our plans for the remainder of the year in 2023.

After I make my comments, our CFO Kim will take you through the Q3 financial highlights and our financial outlook.

So turning to slide three.

I'd like to reflect on the substantial progress that momentous has made over the past 15 months since our D spak and emergence as a public company listed on the NASDAQ exchange.

As a result of hard work and determination we are a much stronger company today than we were back then.

We've strengthened engineering and operations capabilities, we put in place a truly impressive group of leaders from our technology development Engineering program management manufacturing and operations and supply chain operations composed of industry veterans with decades of experience at companies that are leaders in the space.

Aerospace industries.

We have also recruited outstanding talent below the top of the organization chart down to the individual contributor in our engineering ranks with.

We streamlined our engineering and development organizational structure to support more rapid development of our spacecraft with greater rigor.

We've made substantial progress putting in place more mature documented engineering processes to develop assemble and test our space craft and its components, including resolving issues in a disciplined and repeatable manner.

The result of the improvements that we've made are evident as we compare our current experience with the next space craft that we plan to fly called figure out five to our recent past experience with the last space craft that we launched called vigorous three.

I'll speak to the specifics of our vigorous five ground test program in just a minute, but I can summarize by saying we encountered far fewer issues during the assembly and testing a bigger out five than we did during the production invigorate three and we're resolving the issues that we do encounter faster.

We've increased our confidence in the reliability of the vigorous orbital service vehicle.

We learned a lot during the first vigor admission in may both from things that weren't as expected and from areas that didn't operate as planned.

And while the environment in space as harsh and unforgiving and operating there is notoriously difficult based on lessons learned from our first mission enhancements made to our integration and testing processes and improvements made to the vehicle itself, we have higher confidence going into our second mission than we had ahead of our first mission.

We are pleased with how customer interest has been trending since our first mission. We're currently.

Negotiating contracts for follow on missions with two of the customers who flew satellites with us on our first mission in May and want to establish long term relationships with them.

We've also received interest from new customers.

Since that first mission, just a few months ago, where were negotiating contracts as well.

As I mentioned on our last earnings call momentous has begun bidding on contracts with the U S government departments and agencies, which wasn't realistic until we put our historical regulatory difficulties behind us.

We reached baseline compliance with our National Security agreement. This spring and received all necessary licenses and regulatory approvals to flight space, which we did for the first time in may of 2022.

Going forward, our licensing processes should be more streamlined compared to our first mission.

Momentous will no longer need to apply for a separate FAA payload determination before it can flex space.

Momentous also will not need to reapply for Noah licenses, unless we make changes to vigorous cameras. Our planned operations for several more flights, which we don't currently intend to do.

The only application that we needed to submit for our next flight was to the FCC for radio spectrum licensing.

The simplicity of our regulatory process relative to last time is a reminder of the progress we've made improving the company's relationship with the U S. Government. It took an enormous amount of effort to get here and so we're glad to put our historical regulatory difficulties behind us. So we can focus on developing our technology.

We have improved our systems tools and processes for better cyber security and a better user experience that should improve workforce productivity.

We've also improved our finance and accounting tools and processes with.

And with these improvements in more like them, we believe that momentous now sturdier sounder company than it was at the time of our <unk> and we think the improvements, we're making should boost investor confidence over time.

To become a stronger space infrastructure company that we are today, we first had to take a focused approach to creating a disciplined processes within two creating disciplined processes within momentous as we went from a startup to a public company in a short period of time.

I'll now turning to slide four I'll now discuss operational highlights from the quarter.

We conducted our inaugural mission on May 25th utilizing two ports on Spacex. So is transported five mission that used to Falcon nine launch vehicle.

One of these two ports, we flew our vigorous III orbital service vehicle, which you can see in the picture just prior to its separation from the launch vehicle.

On the second part we flew a third party deploy our system from a partner.

Recall that at the end of the second quarter momentous had deployed three customer satellites, including two from vigorous three in one satellite from a third party system.

During the third quarter, we deployed five more customer satellites for <unk> III and recognized a small amount of revenue related to these deployments.

Invigorate III is now deployed seven of the nine customer satellites have carried the space.

When combined with the one satellite deployed from the third party system Momentous has now deployed a total of eight customers satellites so far.

The vigorous three mission is still underway, while we continue efforts to deploy the last two satellites of nine that were on board, but we are realistic about the prospects given the low power situation on <unk> III.

As I stated on previous conference calls, while we carried some customer satellites to space a primary objective of our inaugural demonstration mission was to test vigor I'd on orbit learn as much as possible from any issues encountered and incorporate lessons learned into future vigor ice vehicles.

Turning to slide five.

Our engineers and technicians have been busy applying lessons learned from <unk> III to our next generation <unk> five vehicle and preparation for our planned second launch and a little over a month for.

For instance, during the third quarter the momentous team work closely with the producer of our solar arrays to conduct an expanded testing campaign on the array that will power vigor out five.

Recall that during our inaugural demonstration mission and May vigorous threes deployable solar arrays did not operate as intended and then we quickly identified a mechanical issue with a hold down bracket and connector pin is the root cause of the anomaly.

The enhanced test campaign that the team conducted during the third quarter was aimed at avoiding similar issues in the future.

In a minute will play a video of the simulated zero gravity solar array deployment testing that's team conducted this quarter.

In addition to the solar array issue. We've also identified the root causes of the other issues experienced during our inaugural mission and we have made changes to address these issues ahead of our next mission.

Figure out five is a next generation vehicle from our block two two configuration, while invigorate three was part of the prior block 2.0 configuration.

The block $2 two configuration was designed to be much more capable compared to block two zero and includes improvements such as our modular payload Bay that allows us to swap customer payload capability for additional propellant to enable longer duration missions.

A more efficient structural design and enhanced payload hosting capabilities and our next generation microwave electrothermal thruster or MVP, which is designed to be more capable than its predecessor that flew on <unk> III.

The latest generation <unk> microwave electrothermal thruster has been through a substantial ground test campaign.

For example in October we completed a ground hot fire test of the next generation MCT propulsion module that will fly on cigarette file.

On the right side of this chart is a photograph of the MDT firing during this test.

We're looking forward to testing the mid teen space, while we have incorporated many upgrades into vigorous blocked to point to one thing that hasnt changed is that we continue to use water melon, which makes our vehicles safer and more environmentally friendly than competitors that use volatile and hazardous chemical for pellets.

During the third quarter. We also completed ground vibration testing of the full vigor had five vehicle, which stimulated the environment that it will encounter on the Spacex Falcon nine launch vehicle than a couple of weeks ago, we completed thermal vacuum testing, which simulates the environment in space and concluded our.

Our robust.

The vigorous five environmental testing campaign.

Customer satellites have been integrated onto the growth, 5% and we conducted our flight readiness review about a week ago.

Overall I am pleased to report we are on track for our next Big REIT launch on the Spacex transport of six mission targeted for December .

We plan to shift the vehicle to its launch site in Cape Canaveral, Florida in the coming days.

We're excited to see figure out five traveled the space next month and our.

Eager for the opportunity to test its performance on orbit.

Turning to slide six.

Here's a quick video of the simulated zero gravity solar array deployment testing that the momentous team conducted this quarter in partnership with our solar array vendor.

It's quite difficult to stimulate a zero gravity environment here on Earth and require specialized test equipment to carefully adjust for gravitational forces.

Since we experienced issues with deployment of a solar rays in may on our initial day, Greg mission. We added an enhanced test campaign for follow on mission and installed new sophisticated test equipment at our headquarters in Silicon Valley and collaboration with our solar array vendor.

In the video taken in the clean room of momentous headquarters you can see the solar array that will fly on our next mission attached to the vigorous five spacecraft.

In collaboration with our vendor we use the new test apparatus to successfully perform this test with the aim of ensuring that the issue that we experienced invigorate three with the hold down mechanism does not repeat on invigorate at five.

During the test you can see that the array opens cleanly.

This is one of several additional test that we added to our enhanced ground test campaign for <unk>, five which increases our confidence that the solar array will function properly on orbit.

Under the principle of testing Nike fly we conducted this test with the vigor I'd vehicle and solar array that will be launched on our next mission.

I would also point out the vigorous five and subsequent vehicles in our block $2 two configuration incorporate a different holddown mechanism than was used on invigorate three.

So the part that was primarily responsible for the low power situation of invigorate three is not part of our future plans.

Turning to slide seven.

This slide has some great pictures that illustrate the progress we've made in preparing the vigorous five spacecraft for its operation space.

The picture at the top left shows the space craft in our clean room in San Jose, California.

When we were just beginning to assemble at.

The other photos traces journey through stages of testing in preparation for launch.

Customer payloads have been integrated on to the <unk> five which you can see in the top center picture and in the two pictures on the far right.

These include a three <unk> set from Costello, Sis that evokes the spirit of innovation from Nasa's Voyager mission to explore the solar system as well as a hosted payload for Cal Tech with a cutting edge experiment on energy transmission, which can be seen on the upper deck.

This hosted payload mission will allow us to demonstrate our capability and potentially grow our hosted payload business with other customers.

Turning to slide eight.

This slide provides an overview of our plan for our second big or a demonstration mission the.

The mission plan calls for vigorous five to travel to low Earth orbit on the Spacex transporter six launch where it will be ejected into our son's synchronous orbit at a little over 500 kilometers altitude.

Just over 300 miles above the Earth.

After separating from the launch vehicle vigorous five is slightly to go through a disciplined sequence of startup procedures, including powering up deploying its solar panels and establishing communications with the ground stations, we will use to control the vehicle from the momentous mission Operation Center in San Jose.

While we plan to deploy Cosmos. This is satellite after a vigorous completed startup sequence vigorous five we'll host Caltech payload for the entirety of its mission.

We plan to operate vigorous five in space through powered flight and test its ability to maneuver to different orbits.

Over the course of the mission, we plan to operate and monitor the performance of the spacecraft and its sub systems to inform future design iterations.

Of note. During this mission, we plan to fully test our microwave electrothermal thruster propulsion system that uses water as a propellant and space.

At the conclusion of the mission, we plan to put vigorous five into a low orbit. So that it re enters much more rapidly than it naturally would and burns up on reentry.

We aim to do our part to slow the accumulation of orbital debris, which as I will discuss as a significant threat to space sustainability that is finally, beginning to receive some welcome attention from government regulators.

As was the case with our inaugural mission. Our intention is not just to perform the plant flight demonstration mission and meet our objectives, but also to find issues that we can correct on future flights.

We plan to learn from any anomalies, we experienced during the mission and apply the lessons learned to improve our technology going forward.

We remain mindful of the fact that your test not just to confirm your expectations, but equally to find opportunities to improve your design.

Turning to slide nine.

As I mentioned.

<unk> five will feature a hosted payload with cutting edge experiments on energy transmission from Caltech space based solar power project.

Through this project the team of researchers is working to deploy a constellation of modular space craft that collect sunlight transform it into electricity then wirelessly transmit the electricity to wherever it's needed on our including to places that currently have no access to reliable power.

Once operational the Caltech team's vision is to revolutionize the nature of energy. So that you can send it wherever you need it.

The Cal Tech demo mission, one to be hosted aboard the garage will feature three foundational experience for this program to test and validate.

Solar cell performance deploy.

The deployment mechanism performance and thirdly being focusing in steering.

In the rendering on this slide you can see where each is positioned on the vigorous five upper deck.

We're proud to fly these payloads for Cal Tech and supported their space based solar power project.

So turning to slide 10.

This slide provides an overview of where we stand in production of our early vehicles with the completion of vigor out five we've now produced for complete vigor I've vehicles vigor I'd. One invigorate two are fully built and tested and remain in storage will invigorate three is in space.

I already discussed the status of vigor at five but this chart provides a nice visual of its comprehensive ground testing campaign.

We continue to stress the importance of using ground testing not only to validate our designs and engineering progress, but also is a critical part of a disciplined approach to put us in the best position possible for success on orbit.

Beyond vigor out five we plan to launch invigorate six on Spacex as transporter seven mission currently targeted for February 2023, although the schedule is tight.

We have also signed launch service agreements with Spacex to reserve space for <unk> seven on transporter eight which is currently targeted for May 2023, and <unk> eight on transporter nine which is currently targeted for October 2023, and all we plan to be on every space.

<unk> Rideshare mission between now and the end of 2023.

Turning to slide 11.

This slide shows a few commercial highlights from the third quarter.

<unk> space is a Luxembourg based subsidiary of Chairman satellite manufacturer co H B.

Momentous plans to provide payload hosting services to the luck space Triton ex small satellite with vigor and 2023.

Luck space has satellites in orbit today and this contract represents a share gain for momentous.

We also signed a contract modification during the third quarter with Nasa's Kennedy Space Center under this contract momentous plants to transport to one five you NASA satellites to accustom orbit for its lighting.

<unk> space, whether research mission in 2023.

We're thrilled to support this important scientific mission for NASA.

Signing this contract marks a big milestone in our effort to grow into the government services business more broadly.

As we stated on our last earnings call.

We are ramping up our effort to win more government business now that our historical regulatory issues are behind us and we view this NASA contract as an important step along that path.

We are fully committed to validating nast has confidence in us on this upcoming mission.

Finally, we signed a memorandum of understanding with situs space this quarter under which we plan to provide transportation and payload hosting services.

We continue to believe that space infrastructure is a growing exciting market and we're a leading player in it with a lot of opportunities still ahead.

Turning to slide 12.

While our early missions are focused on transporting new satellites and hosting them on orbit. We are continuing to invest in R&D to give figure out the capability to rendezvous with satellites that are already in space and to repair refuel <unk> de orbit them.

We view in orbit satellite servicing as a substantial opportunity for us and we're starting to see real signs of this market's emergence.

For instance, about six weeks ago, the FCC adopted a new rule that will require satellite operators to remove their satellites from low Earth orbit within five years following mission conclusion.

Prior to this the FCC did not have a rule requiring satellite operators to de orbit satellites. Although it had previously issued a guideline they do so within 25 years following mission conclusion.

Okay.

Momentous applauds the FCC for taking a proactive approach to resolving the short and long term challenges of orbital debris and we hope that other global regulators will follow suit as orbital debris has a large and growing threat to space access and space sustainability.

For instance, the European Space Agency tracks, approximately 26000 pieces of space debris, which includes about 2000 discarded rocket engines, three defunct satellites and approximately 21000 tons.

Identify debris objects and fragments equating to nearly 9000 metric tons or 20 million pounds of manmade debris and this is just what's explicitly tracked.

There are far more debris objects and fragments that are not explicitly tract, including 34000 that are roughly the size of a teapot nearly $1 million at a roughly the size of a baseball and over 100 million that are roughly the size of a coin.

Any one of these could seriously damage of satellite in a collision as they are traveling many kilometers per second in our collision could create thousands of additional pieces of debris in orbit.

With a number of satellite deployments growing rapidly. This debris problem is expected to get worse.

The new rule from the FCC acknowledges the problem and we expect will create significant customer demand for satellite orbiting services.

NASA and the U S Defense Department have also been letting contracts for studies and demonstration missions for work on addressing the problem of growing orbital debris.

Satellite orbiting is a complex mission, but I am proud to say that momentous anticipated a more active stance on debris removal from regulators and has been investing in developing this capability for several years.

We think our early investments provide us with a competitive advantage over others, who are just beginning to think about this problem. Now indeed, we are already receiving incoming requests for proposals from potential customers on <unk> or beating of satellites are potentially entire constellation's each with hundreds of satellites.

It's too early for us to quantify the opportunity with much precision, but if you consider that about 2000 satellites will be deployed this year and that annual deployments are forecasted to roughly triple by 2028, Accordingly, Deutsche Bank, it's not hard to envision a scenario in which thousands of satellites needed to be.

Orbited annually within the next decade, creating a multibillion dollar addressable market again, we cant forecast this with much precision, but we view it as a substantial opportunity for momentous.

Turning to slide 13.

As I said in our prior earnings call.

We have developed and are currently implementing a plan to reduce our operating costs in order to provide us runway to conduct more demonstration missions and place additional customer satellites in orbit with the cash on our balance sheet.

We continue to estimate that with the reductions we're making the cash on our balance sheet should carry us through the end of 2023, which should allow us to perform at least three more missions with vigor right before we need to access the capital markets.

We plan to be opportunistic about raising capital between now and then including potential issuances under the $50 million ATM program that we established in September .

We believe it's prudent to plan to extend our existing cash runway given the difficult state of the capital markets.

We are focusing our internal R&D spending most particularly on the foundational building blocks of our long term success to stretch our balance sheet cash. We're also increasing our focus on bidding for government programs at NASA and defense Department organizations.

We see significant opportunities to gain government funding for our R&D efforts in technology development, while supported these critically important missions of our government.

Turning to slide 14.

I would like to conclude my prepared remarks with a few points on why momentous as an attractive investment.

First the market that we serve as an attractive one.

Access to space is improving because the cost to put a good given capability on orbit is declining driven by economies of scale from our two launch vehicles increased price competition between large providers that is forcing them to become more efficient through various means including reusability and satellite miniaturization.

As a result of progressively lower cost the number of satellite deployments is growing and these satellites need additional services once they get to space.

Both the private sector and the public sector recognize this year, which should drive investment by by both in space infrastructure and services and we are already.

Seeing that start to play out.

Yes.

In addition, the regulatory environment appears increasingly favorable with new FCC with the new FCC de orbiting Roy mentioned being an important example.

The space Foundation estimates the size of the space economy at about $469 billion today, and Morgan Stanley space team expects the market to more than double to over one trillion by 2040.

Bank of Americas, Aerospace and defense to forecast even faster growth.

Overall, we view the market for the space economy in our segment of it as attractive.

Second momentous is well positioned to capture a portion of this growing market.

Investors, sometimes suggest that there is a lot of competition within in space transportation.

But only a few companies have built and launched orbital service vehicles Osv's well.

While others have aspirations, we are already flight testing, our vigorous OSV and have already deployed seven customer satellites from it.

Beyond our in space Transportation service, we offer payload hosting services and next month, we have a substantial customer Cal tech on that mission.

We believe our power generation capabilities and size and flexibility of our configuration give momentous a competitive advantage in this segment.

Meanwhile, we continue to build on our service offering and plan to introduce in orbit services, such as satellite maintenance and refueling and orbital debris debris removal later this decade.

Our relationships with large companies such as Spacex our strong. Moreover, vigorous launch vehicle agnostic. So we should benefit from increasing launch capacity and associated price competition amongst launch providers over time.

When you add it all up I think momentum is well positioned among competitors.

In addition, when you think about who our competitors are most of them are privately held meaning there arent many ways for public equity investors to invest in space infrastructure.

Third.

We remain confident that this can be a very profitable business once we get to scale.

Cost exceed revenue today as we're still early on the learning curve and are producing in flying bigger rights at a low frequency.

Furthermore, because we're still demonstrating our capabilities, we are only able to fly a few customers on each vigor I admission.

Once we prove the vehicle is reliable.

We expect capacity utilization and revenue generation per vigor admission to increase at the same time, we expect to be able to produce vigorous more efficiently as a result of learning and economies of scale.

As a result, we think profitability should improve as revenue grows. Additionally, we expect the discrete margin boost once we introduce reusable pick right and start to save on manufacturing costs.

And finally driving all of this is our highly experienced and capable leadership team that I believe to be the most credible among the space companies.

Overall, the combination of a growing and innovative space economy favorable demand outlook for the services, we provide competitive advantages relative to other in space transportation and infrastructure providers, most of which are privately held.

And potential for margin improvement with learning and scale make momentous an attractive investment.

The future's bright for momentous, particularly compared to where we sat just 15 months ago at the time of our <unk>.

Driving this business forward based on the strategy that was put in place about a year ago as is evidenced by my comments today on hiring to improve our capabilities and better focusing our R&D spending on that which is most critical to our success.

I am pleased with what we were able to accomplish this quarter, including the deployment of five additional customer satellites implementation of vigorous III lessons learned on <unk> five our progress towards conducting the vigorous five launch next month, our customer contract with NASA and the initial implementation of our cost.

<unk> plan.

I'd like to thank our dedicated team for getting US here I would also like to thank our customers and investors for their continued support.

I'll now hand, the mic off to our CFO <unk>, Kim and then we'll take your questions.

Thank you John before I discuss the third quarter financials I'd like to take this opportunity to thank the momentous team for their hard work and dedication.

Turning to slide 15.

Our third quarter results reflect our ongoing progress and investments to further our technology and business model.

Cumulatively signed contracts for approximately $43 million in backlog or potential revenue as of October 31 2022.

The breadth of the signed contracts spanned across 19 companies in 14 different countries in general our customers have the right to cancel their contracts with the understanding that could forgo their deposits and milestone payments.

If a customer cancels the contract before all of the payments are made the resulting revenue will be less than the full value to backlog.

Recall that our reported backlog includes firm orders as well as options. These options give our customers the flexibility to opt into an available launch slot without requiring a separate agreement with <unk>.

Total backlog declined by 12 million relative to the $55 million, we reported in Q2.

This decline was primarily due to the exploration of options and options that we expect to expire unexercised. In contrast are firm orders backlog held steady this quarter.

We ended Q3 with non restricted cash and cash equivalent of 82 million, which we continue to believe should carry us through to the end of 2023 as John described.

We invested approximately $28 million in cash during Q3, approximately $3 million higher compared to our Q2 cash flow.

But in line with our announced cost reduction plans.

Q3 cash investments included $3 million in debt Amortizations as well as the final $5 million payment to settle a legal matter with the SEC.

We ended the quarter with approximately $18 million in outstanding gross debt.

During Q3, we recognized a 129000 of revenues and $115000 in gross profits primarily related to the B III as it continued to deploy customer satellites fulfilling performance obligations to our customers.

I would remind you that majority of our invigorate manufacturing costs and launch costs are accounted for as R&D given that the bigger either is still under development.

We expect gross margins to decline once you figure out deployment.

<unk> is complete.

We enter into production phase.

In the third quarter, we generated approximately $22 million in losses from operations.

On a non-GAAP basis, our adjusted EBITDA was a negative $16 million, which was approximately $2 million better sequentially from Q2.

Please refer to the earnings press release issued today for the reconciliation of adjusted EBITDA to GAAP net income.

non-GAAP SG&A expenses for the third quarter totaled approximately $7 million approximately $1 million lower than the prior quarter.

non-GAAP R&D expenses for the third quarter totaled approximately $10 million.

Also approximately $1 million lower sequentially.

We ended Q3 with approximately 84 million shares outstanding.

I will now hand, the call back today.

Thank you Gee caught in a moment.

We will move on to the question and answer portion of our call.

I would like to remind participants that all disclaimers outlined at the onset of this call extend to the question and answer session.

This includes our disclaimers relating to non-GAAP financial information forward looking statements and the technology underlying our planned service offerings.

Operator would you please remind participants how to enter the queue.

At this time I would like to remind everyone in order to ask a question Press Star then the number one on your telephone keypad.

We'll pause for just a moment to compile the question and answer roster.

Yes.

Your first question comes from the line of.

Thank you from Deutsche Bank. Your line is open.

Hey, everyone. Thanks for taking the questions just had two on my end.

Curious I know you talked a lot about during the presentation on the FCC rule.

Can you just talk about kind of what kind of capabilities that you can offer maybe give.

Brief illustration of how that might look and I know youre, not really quantifying the market opportunity, but it seems like a pretty big trend.

Thanks for the question Edison.

I agree with you the new FCC rule that requires operators of satellites to remove those satellites from lower orbit within five years falling mission conclusion is a major opportunity for us.

Prior to this as I mentioned, there was no rule the FCC have a guideline that operators deorbit. Their satellites are 25 within two five years. After admission conclusion, but it was just a guideline was not.

Binding rules that the FCC.

Planning to enforce the new FCC rule creates a significant demand for satellite orbiting.

Satellite orbiting is a complex mission, but I am proud to say that momentous anticipated debt increased regulation and we've been investing in that capability for several years the type of capabilities that you need.

Should be able to do what is called.

Rendezvous with proximity operations, meaning come up very closely to another satellite rendezvous very carefully and then in our case our plan right now we've been investing in the capability to do broadening with proximity operations. We also intend to.

Add a robotic arm to vigor, which will enable us after coming up very carefully alongside a satellite than to grab a hold of it or to attach to it either to service the satellite and the intent is to do something like we feel it or repair it but for the what we were just.

Discussing the FCC rule, it would be to de orbited and really that would involve <unk>.

Grappling grabbing hold satellite and proceeding to target to a lower altitude where it could.

Reenter burnt up upon reentry.

Now.

As I mentioned it is early for us to precisely quantify the opportunity really with any precision, but if you consider under Deutsche bank's projections.

Projections about 2000 and satellites will be deployed this year alone and if according to Deutsche Bank. The annual deployments are forecasted to triple by 2028. So you can see a scenario with that volume of satellites that need to be D. Orbited. During the next decade, I think as a minimum we expect thats going.

To be a multibillion dollar addressable market. That's created so thank you again for the question Edison and we certainly think that momentum is very well positioned to take advantage of this regulatory change.

Understood.

Second question.

Topic, there has been some changes on the Spacex transporter pricing.

You have any kind of initial thoughts related to that what kind of impact they may have.

Yes, Spacex is introducing a new interface for rideshare emissions in 2024, and you are right that there is also a new pricing structure that will go along with it.

For us it momentous in the very near term as I mentioned in the call. We signed a large services agreements for the next.

Few Spacex transport emissions. The one that will go it's targeted for December 2022, and then three that are targeted for February may and October of 2023 now since we have signed agreements for those are pricing won't immediately be affected by the changes in the Spacex pricing structure.

For a momentous that would begin in 2024.

Under those changes, though there are some.

Some changes that we're still assessing with respect to the interface, but we're in very close dialogue with Spacex and are working with them to better understand some of the technical interfaces that have to be adjusted but.

We do think that while there will be some higher costs that Spacex is charging that again for us will begin to affect us in 2024.

Unfortunately, there has been a lot of cost inflation in today's macroeconomic environment and so we don't we don't think this is unique to space transportation companies or momentous.

Once we start to experience those higher launch cost we will attempt to pass along those higher launch costs to our customers to the degree possible.

Importantly, our competitors will feel the same upward cost pressure that we do.

With respect to flying on things like the Spacex transport emissions on Falcon nine rocket as we look a little further out to the starship introduction by Spacex, we would expect our launch costs to begin to decline again.

I would say also another dynamic that I'm sure you're tracking is that there are other providers of space launch services.

ABL relativity Gilmore space.

Et cetera, and these other.

Space launch companies and a whole host of new insurance are going to increase competition and that increased availability and competitive pressure. We think is going to keep launch costs low.

And therefore since we are launch vehicle agnostic at momentous it will give us other options for how we can fly our customers to space.

I appreciate the color.

Your next question comes from the line of James Ratcliffe from Evercore.

Your line is open.

Thanks.

Regarding the competitive environment.

Can you talk about what youre seeing in terms of.

Customer.

Sponsors or views of this small rocket segments since it seems like a number of providers they're struggling.

And just generally.

You talked about launch costs and the like how important to the longer term business case is the success of starship. Thanks.

Thanks.

Thanks for the question I appreciate it.

I would say that the the launch vehicle market right now of course, Spacex as the as the largest player in the rideshare market or that market targeting very small launch vehicles I think.

The customer views of satellite.

Producers' views of the small launch providers that we're seeing.

They are number one what I hear is.

From these customers, they're looking for some more flight heritage from some of them or they're looking with expectation at the plans that new launch providers.

Our half but.

Do you want to see those those missions become.

More routine C. A little more flight heritage developed in many cases I.

I do think there is an important.

Dynamic that's going on in the launch vehicle market because of all that competition and then it is reducing launch costs.

You saw Mckinsey put out a study at the World Economic Forum in Summertime.

If memory serves according to Mckinsey launch vehicle cost have come down by over 95% in the last 20 years.

We're seeing a projected costs go down and today are our estimates are for a dedicated small rocket if youre a small satellite company that for a dedicated small rocket launch to a final orbit it would be over $70000 per kilogram on average.

With a rideshare on a large rocket using the momentous orbital service vehicle.

We can be under $15000 per kilogram and so that gives a substantial cost advantage to rideshare and rideshare with a momentous tug our orbital service vehicle that can take you to your final destination.

But thank you again for the question.

Thank you.

Yes.

Your next question comes from the line of Chris.

Becky from singular research your line is open.

Yes, hi.

Let's see.

It looks like you experienced some issues in the early <unk> mission.

What did you learn from that.

Well thank you for the question.

The environment in space is notoriously harsh and unforgiving as I mentioned in operating there is just playing hard.

But understanding that environment, we a momentous knew it was important to have a robust space craft that can survive and complete its mission, even an off nominal conditions.

Invigorate, three which we launched in May we experienced a mechanical issue with the bracket and a pin mechanism. They kept our solar arrays from deploying.

This created a low power situation on board.

Initially we were able to establish two way communication with the spacecraft, but the low power situation prevented us from maintaining that two way communication between the spacecraft and the ground stations. However.

However, because we understood the unforgiving environment and space, we had designed redundancy and resiliency features into the bigger I've spacecraft, which ultimately allowed us to deploy seven of the non customer satellites. The vigorous through his caring in spite of the low power situation and lack of two way communications with.

Our ground stations.

We are continuing efforts to deploy the remaining two customer satellites.

For vigorous Fi the vehicle we plan to fly next month, we're even more focused on implementing resiliency and redundancy features and testing them on the ground, including an off nominal conditions.

Incorporated system robustness and a number of ways.

Features like an autonomous deployment feature that enables us to deploy satellites should we lose communications with the vehicle.

We have a redundancy between two sides of the vehicle that we call side of this IP. So major sub systems have a backup system onboard.

We've incorporated for our next flight a new feature with a beacon to facilitate finding the vehicle faster on establishing communications more rapidly or should there be an interruption in communications reestablishing those communications.

And we've added this enhanced testing regimen, including the solar array deployment testing we've shown in the video with.

On the actual space craft with the actual panels that will fly on the spacecraft were also doing what we call day in the life testing, which is experiencing a typical day in the life of the spacecraft and putting it nominal and off nominal situations in recovering the vehicle and we're doing more testing of system performance overall.

So.

As I mentioned prior to importantly, prior to our last mission in May.

We fully anticipated that our first mission that we would experience some issues in the primary goal of that mission was to learn from how the spacecraft performed in space and to make adjustments to improve its performance and we've implemented those.

Performance improvements in advance of our next launch, which we're really looking forward to with a lot of eager expectation here to.

To see figure out five go to space in December thanks.

Thanks again for the question.

Okay. Thanks for your answer.

Again, if you would like to ask a question press star one on your telephone keypad.

Your next question comes from the line of Austin Moeller from Canaccord. Your line is open.

Hi, Thanks for taking my question.

So what primary endpoint objectives are you looking to accomplish on the bigger I'd five mentioned now that you've completed the previous mentioned and address the issues there.

And so what what prime yet Mary endpoint objectives, do you want to accomplish on that that will enable.

Quick quick turnaround to the big ride six and so on missions and what's considered more of a secondary objective.

Thanks for the question Alton.

The vigorous five mission will be our second demonstration mission and so the primary objective of this upcoming mission is to test the vehicle learn from any issues, we encountered and address those issues on subsequent vigor out vehicles as we work toward freezing of design for production.

Alright, three taught us many lessons as I mentioned that by debit growth five and we're more confident this time around in the performance of vigorous five as a result.

Spect, our assistance our confidence in the system is going to increase with each additional demonstration mission we fly.

<unk> five is from our block two two configuration and Thats a significant block upgrade from <unk>, three which was from our block 2.0 configuration and so one of the other primary objectives of the flight is too.

Test vigorous five and the new blocks to two configuration, which is designed to be much more capable and a more reliable vehicle invigorate three.

Meti thruster, which were eager to see perform in space.

<unk> has been upgraded for vigor at five and its designed to be more capable than its predecessor.

We've taken steps towards modularity in this design as well to allow payload to be traded for propellant.

Which will allow us to tailor our capabilities for the needs of the customers and then this improvement that we've made to allow for the start of payload hosting capabilities is also significant and we're looking forward to having our first.

A significant I should say hosted payload customer on the vigorous five mission and.

And testing and demonstrating some of the Differentiators that we think allow our vigorous hosted payload capability to be better than competitors.

In their ability to host payloads, the flexibility that configuration, which will demonstrate with the Caltech payload, which is a complex and large deployable payload is mounted to our upper deck and also the amount of power that we can supply we have a large solar array and can deliver up to one kilowatt and home.

Power to our customers.

Cigarette solar arrays and factor modular so in some configurations that can produce two kilowatts of power, which is enough to power. The James Webb telescope, which is 6000 kilograms or 200000 standard led light bulbs.

In this configuration, we would allocate about half of our available power invigorate.

In reserve and the other half for our hosted payload customers, which is again a major advantage for us over competitors that can provide less power. So those are some of the things that were eager to demonstrate on the next flight that then will give us more flight heritage because we think we've got differentiated capabilities now.

If the mission is fully successful we will have demonstrated those differentiated capabilities in space, which should improve our ability to attract customers.

So thanks again for the question.

Excellent. Thanks for all the color on that.

There are no further questions at this time.

This concludes today's conference call you may now disconnect.

Okay.

[music].

Okay.

[music].

Thanks.

[music].

Okay.

[music].

Sure.

[music].

Yeah.

[music].

Yes.

Yeah.

Yes.

Okay.

Yes.

Okay.

Yes.

[music].

Okay.

Yes.

[music].

Okay.

Steve.

[music].

Okay.

[music].

Yes.

Thank you.

Okay.

Great.

Okay.

[music].

Yes.

[music].

Okay.

[music].

Hum.

[music].

Yes.

[music].

<unk>.

[music].

Sure.

[music].

Yes.

Okay.

Yeah.

Okay.

[music].

Okay.

Yes.

[music].

Okay.

[music].

Yeah.

[music].

Okay.

Yes.

[music].

Sure.

Yes.

Okay.

Right.

Sure.

[music].

Sure.

Yes.

[music].

Thanks.

Yes.

Sure.

Yes.

Okay.

[music].

Yes.

Okay.

[music].

Yes.

Sure.

Okay.

[music].

Yes.

Sure.

Yes.

Okay.

[music].

Okay.

[music].

Hum.

[music].

Okay.

Yes.

Okay.

[music].

Okay.

[music].

Okay.

[music].

Okay.

[music].

Okay.

Great.

Sure.

Yes.

Okay.

Yes.

Thank you.

Yes.

Okay.

[music].

Yes.

Okay.

[music].

Sure.

Okay.

[music].

Yes.

Sure.

Okay.

Yes.

Yeah.

Okay.

[music].

Okay.

Yes.

Okay.

Yes.

Okay.

Yes.

[music].

Sure.

Yeah.

Okay.

[music].

Yes.

Hum.

Sure.

Good afternoon my name is <unk>.

And I will be your conference operator today at this time I would like to welcome everyone to the momentous incorporated third quarter 2022 earnings Conference call.

All lines have been placed on mute to prevent any background noise.

After the Speakers' remarks, there will be a question and answer session. Thank you would like to ask a question. During this time simply press star one on your telephone keypad.

I'd like to withdraw your question again.

One on your telephone keypad.

Thank you Mr. Darryl Genovesi, Vice President Investor Relations you May begin your conference.

Yeah.

Following these prepared remarks, we will take questions from analysts in the interest of time, we would ask that you limit yourself to one question and one brief follow up earlier today, we issued a press release and made a slide presentation available on our Investor Relations website, which provides an overview of our business and financial highlights for the quarter you can download a copy of the release and prep.

<unk> slides at investors Dot momentous does space.

During today's call, we will make certain forward looking statements within the meaning of section 27, a of the Securities Act of $19 33, and section 21 E of the Exchange Act of 1034.

Forward looking statements are predictions projections and other statements about future events that are based on current expectations and assumptions and as a result are subject to risks and uncertainties.

Many factors could cause actual future events to differ materially from the forward looking statements in this communication.

You should listen to today's call with the understanding that our actual results may be materially different from the plans intentions and expectations disclosed in our forward looking statements we make.

With that I'd like to turn the call over to our chairman and Chief Executive Officer, John Rood.

After I make my comments, our CFO , Don Kim will take you through the Q3 financial highlights and our financial outlook.

So turning to slide three.

I'd like to reflect on the substantial progress that momentous has made over the past 15 months since our dis back and emergence as a public company listed on the NASDAQ exchange.

As a result of hard work and determination we are a much stronger company today than we were back then.

Aerospace industries.

We've also recruited outstanding talent below the top of the organization chart down to the individual contributor in our engineering ranks.

We streamlined our engineering and development organizational structure to support more rapid development of our spacecraft with greater rigor.

I'll speak to the specifics of our vigorous five ground test program in just a minute, but I can summarize by saying we encountered far fewer issues during the assembly and testing of <unk> five than we did during the production of invigorate three and we're resolving the issues that we do encounter faster.

We've increased our confidence in the reliability of the vigorous orbital service vehicle.

We learned a lot during the first vigor admission in may both from things that weren't as expected and from areas that didn't operate as planned.

While the environment in space as harsh and unforgiving and operating there is notoriously difficult based on lessons learned from our first mission enhancements made to our integration and testing processes and improvements made to the vehicle itself, we have higher confidence going into our second mission than we had ahead of our first mission.

We are pleased with how customer interest has been trending since our first mission.

We're currently negotiating contracts for follow on missions with two of the customers who flew satellites with us on our first mission in May and want to establish long term relationships with them.

We've also received interest from new customers.

Since that first mission, just a few months ago, where were negotiating contracts as well.

Going forward, our licensing processes should be more streamlined compared to our first mission.

Momentous will no longer need to apply for a separate FAA payload determination before it can flex space.

Momentous also will not need to reapply for Noah licenses, unless we make changes to bigger IP cameras, our planned operations for several more flights, which we don't currently intend to do.

The only application that we needed to submit for our next flight was to the FCC for radio spectrum licensing.

The simplicity of our regulatory process relative to last time is a reminder of the progress we've made improving the company's relationship with the U S government It took an.

This amount of effort to get here and so we're glad to put our historical regulatory difficulties behind us. So we can focus on developing our technology.

We have improved our systems tools and processes for better cyber security and a better user experience that should improve workforce productivity.

We've also improved our finance and accounting tools and processes with.

With these improvements in more like them, we believe that momentous now sturdier sounder company than it was at the time of our dis back and we think the improvements, we're making should boost investor confidence over time.

To become a stronger space infrastructure company that we are today, we first had to take a focused approach to creating a disciplined processes within them to creating disciplined processes within momentous as we went from a startup to a public company in a short period of time.

I'll now turning to slide four I'll now discuss operational highlights from the quarter.

We conducted our inaugural mission on May 25th utilizing two ports on Spacex since transported five mission that used to Falcon nine launch vehicle.

On one of these two ports, we flew our vigorous III orbital service vehicle, which you can see in the picture just prior to its separation from the launch vehicle.

On the second part we flew a third party deploy our system from a partner.

Recall that at the end of the second quarter momentous had deployed three customer satellites, including two from vigorous three in one satellite from a third party system.

During the third quarter, we deployed five more customer satellites for invigorate III and recognized a small amount of revenue related to these deployments.

Invigorate III is now deployed seven of the nine customer satellites. It carried the space when combined with the one satellite deployed from a third party system momentous is now deployed a total of eight customers satellite so far.

As I stated on previous conference calls, while we carried some customer satellites to space a primary objective of our inaugural demonstration mission was to test bigger I'd on orbit learn as much as possible from any issues encountered and incorporate lessons learned into future vigorous vehicles.

Turning to slide five.

Our engineers and technicians have been busy applying lessons learned from vigorous III to our next generation vigorous five vehicle and preparation for our planned second launch and a little over a month.

For instance, during the third quarter the momentous team work closely with the producer of our solar arrays to conduct an expanded testing campaign on the array that will power vigor out five.

Recall that during our inaugural demonstration mission and May vigorous <unk> deployable solar arrays did not operate as intended and then we quickly identified a mechanical issue with the holdout bracket and connector pin is the root cause of the anomaly.

The enhanced test campaign that the team conducted during the third quarter was aimed at avoiding similar issues in the future.

In a minute will play a video of the simulated zero gravity solar array deployment testing that's team conducted this quarter.

Figure out five is a next generation vehicle from our block two two configuration, while invigorate three was part of the prior block two zero configuration.

The block two two configuration was designed to be much more capable compared to block two zero and includes improvements such as our modular payload Bay that allows us to swap customer payload capability for additional propellant to enable longer duration missions.

A more efficient structural design and enhanced payload hosting capabilities.

Our next generation microwave electrothermal thruster, or MVP, which is designed to be more capable than its predecessor that flew on <unk> III.

The latest generation <unk> microwave electrothermal thruster has been through a substantial ground test campaign.

For example in October we completed a ground hot fire test of the next generation MCT propulsion module that will fly invigorate file.

On the right side of this chart is a photograph of the MDT firing during this test.

We're looking forward to testing the mid teen space, while we have incorporated many upgrades into vigor I've blocked to point to one thing that Hasnt changed is that we continue to use water pellet, which makes our vehicles safer and more environmentally friendly than competitors that use volatile and hazardous chemical for pellets.

During the third quarter. We also completed ground vibration testing of the full of the garage five vehicle, which simulated the environment that it will encounter on the Spacex Falcon nine launch vehicle than a couple of weeks ago, we completed thermal vacuum testing, which simulates the environment space and concluded.

Our robust.

Vigorous five environmental testing campaign.

Customer satellites have been integrated onto the <unk> five and we conducted our flight readiness review about a week ago.

Overall I am pleased to report we are on track for our next Big REIT launch on the Spacex transport of six mission targeted for December .

We plan to shift the vehicle to its launch site in Cape Canaveral, Florida in the coming days.

We're excited to see <unk> five travelled space next month and our.

Eager for the opportunity to test its performance on orbit.

Turning to slide six.

Here's a quick video of the simulated zero gravity solar array deployment testing that the momentous team conducted this quarter in partnership with our solar array vendor.

It's quite difficult to stimulate a zero gravity environment here on Earth and require specialized test equipment to carefully adjust for gravitational forces.

Since we experienced issues with deployment of the solar arrays in may on our initial vigor admission we added an enhanced test campaign for follow on missions and installed new sophisticated test equipment at our headquarters in Silicon Valley and collaboration with our solar array vendor.

In the video taken in the clean room of momentous headquarters you can see the solar array that will fly on our next mission attached to the vigorous five spacecraft.

In collaboration with our vendor we use the new test apparatus to successfully perform this test with the aim of ensuring that the issue that we experienced invigorate three with the whole down mechanism does not repeat on invigorate at 5%.

During the test you can see that the array opens cleanly.

This is one of several additional tests that we added to our enhanced ground test campaign for bigger I've, five which increases our confidence that the solar array will function properly on orbit.

Under the principle of testing Nike fly we conducted this test with the vigor I'd vehicle and solar array that will be launched on our next mission.

I would also point out that vigorously five and subsequent vehicles in our block two two configuration incorporate a different holddown mechanism than was used on invigorate three so the part that was primarily responsible for the low power situation a vigorous three is not part of our future plans.

Turning to slide seven.

This slide has some great pictures that illustrate the progress we've made in preparing the vigorous five spacecraft for its operation space.

The picture at the top left shows the spacecraft in our clean room in San Jose, California.

When we were just beginning to assemble at the <unk>.

Other photos traces journey through stages of testing in preparation for launch.

Customer payloads have been integrated onto the cry five which you can see in the top center picture and in the two pictures on the far right.

These include a three you cube set from Cosmos. This that evokes the spirit of innovation from Nasa's Voyager mission to explore the solar system as well as the hosted payload for Cal Tech with a cutting edge experiment on energy transmission, which can be seen on the upper deck.

This hosted payload mission will allow us to demonstrate our capability and potentially grow our hosted payload business with other customers.

Turning to slide eight.

This slide provides an overview of our plans for our second vigorous demonstration mission the.

The mission plan calls for vigorous five to travel to low Earth orbit, Spacex transporter, six launch where it will be injected into a sun synchronous orbit at a little over 500 kilometers altitude.

Just over 300 miles above the Earth.

After separating from the launch vehicle vigor at five is slated to go through a disciplined sequence of startup procedures, including powering up deploying its solar panels and establishing communications with the ground stations, we will use to control the vehicle from a momentous mission operation Center in San Jose.

While we plan to deploy Cosmos. This is satellite after a vigorous complete startup sequence vigorous five we'll host Kalle <unk> payload for the entirety of its mission.

We plan to operate <unk> five in space through powered flight and test its ability to maneuver to different orbits.

For the course of the mission, we plan to operate and monitor the performance of the spacecraft and its sub systems to inform future design iterations.

Of note. During this mission, we plan to fully test our microwave electrothermal thruster propulsion system that uses water as a propellant and space.

At the conclusion of the mission, we plan to put vigorous five into a low orbit. So that it re enters much more rapidly than it naturally would and burns up on reentry.

We aim to do our part to slow the accumulation of orbital debris, which as I will discuss is a significant threat to space sustainability that is finally, beginning to receive some welcome attention from government regulators.

As was the case with our inaugural mission. Our intention is not just to perform the planned flight demonstration mission and meet our objectives, but also to find issues that we can correct on future flights.

We plan to learn from any anomalies, we experienced during the mission and apply the lessons learned to improve our technology going forward.

We remain mindful of the fact that your test not just to confirm your expectations, but equally to find opportunities to improve your design.

Turning to slide nine.

As I mentioned.

<unk> five will feature a hosted payload with cutting edge experiments on energy transmission from Caltech space based solar power project.

Once operational the Caltech team's vision is to revolutionize the nature of energy. So that you can send it wherever you need it.

The Caltech demo mission one to be hosted aboard the garage will feature three foundational experience for this program to test and validate.

Solar cell performance.

Deployment mechanism performance and thirdly being focusing in steering.

In the rendering on this slide you can see where each is positioned on the vigorous five upper deck.

We're proud to fly these payloads for Cal Tech in support of their space based <unk>.

<unk> power project so.

Turning to slide 10.

This slide provides an overview of where we stand the production of our early vehicles.

With the completion of vigor out five we've now produced for complete vigor I've vehicles.

I had one invigorate two are fully built and tested and remain in storage while invigorate three is in space.

I already discussed the status of vigorous five but this chart provides a nice visual of its comprehensive ground testing campaign.

Beyond vigor out five we plan to launch invigorate six on Spacex as transporter seven mission currently targeted for February 2023, although the schedule is tight.

We have also signed launch service agreements with Spacex to reserve space for Big right seven on transporter eight which is currently targeted for May 2023, and <unk> eight on transporter nine which is currently targeted for October 2023.

We plan to be on every Spacex rideshare mission between now and the end of 2023.

Turning to slide 11.

This slide shows a few commercial highlights from the third quarter.

<unk> space is a Luxembourg based subsidiary of Chairman satellite manufacturer co HB.

Momentous plants to provide payload hosting services to the luck space Triton ex small satellite with vigor and 2023.

<unk> space has satellites in orbit today and this contract represents a share gain for momentous.

We also signed a contract modification during the third quarter with Nasa's Kennedy Space Center under this contract momentous plans to transport to one five you NASA satellites to accustom orbit for its lighting or <unk>.

<unk> space, whether research mission in 2023.

We're thrilled to support this important scientific mission for NASA.

This contract marks a big milestone in our effort to grow into the government services business more broadly.

As we stated on our last earnings call.

We are ramping up our effort to win more government business now that our historical regulatory issues are behind us and we view this NASA contract as an important step along that path.

We are fully committed to validating nast has confidence in us on this upcoming mission.

Finally, we signed a memorandum of understanding with situs space this quarter under which we plan to provide transportation and payload hosting services.

We continue to believe that space infrastructure is a growing exciting market and we are a leading player in it with a lot of opportunity still ahead.

Turning to slide 12.

While our early missions are focused on transporting new satellites and hosting them on orbit. We are continuing to invest in R&D to give vigor is the capability to rendezvous with satellites that are already in space and to repair refuel <unk> de orbit them.

We view in orbit satellite servicing as a substantial opportunity for us and we're starting to see real signs of this market's emergence.

Instance, about six weeks ago, the FCC adopted a new rule that will require satellite operators to remove their satellites from low Earth orbit within five years following mission conclusion.

Prior to this the FCC did not have a rule requiring satellite operators to de orbit satellites. Although it had previously issued a guideline they do so within 25 years following mission conclusion.

For instance, the European Space Agency tracks, approximately 26000 pieces of space debris, which includes about 2000 discard it rocket engines three to four satellites and approximately 21000.

Unidentified debris objects and fragments.

Waiting to nearly 9000 metric tons or 20 million pounds of manmade debris and this is just what's explicitly tracked.

There are far more debris objects and fragments that are not explicitly tract, including 34000 that are roughly the size of a teapot nearly $1 million that are roughly the size of a baseball and over 100 million that are roughly the size of a coin.

Any one of these could seriously damage of satellite in a collision as they are traveling many kilometers per second in our collision could create thousands of additional pieces of debris in orbit.

With a number of satellite deployments growing rapidly. This debris problem is expected to get worse, the new rule from the FCC acknowledges the problem and we expect will create significant customer demand for satellite the orbiting services.

NASA and the U S Defense Department have also been letting contracts for studies and demonstration missions for work on addressing the problem of growing orbital debris.

We think our early investments provide us with a competitive advantage over others, who are just beginning to think about this problem. Now indeed, we are already receiving incoming requests for proposals from potential customers on GE orbiting satellites are potentially entire constellation's each with hundreds of satellites.

It's too early for us to quantify the opportunity with much precision, but if you consider that about two satellites will be deployed this year and that annual deployments are forecasted to roughly triple by 2028, Accordingly, Deutsche Bank, it's not hard to envision a scenario in which thousands of satellites you need to be.

Orbited annually within the next decade, creating a multibillion dollar addressable market.

We cant forecast this with much precision, but we view it as a substantial opportunity for a momentous.

Turning to slide 13.

As I said in our prior earnings call.

We plan to be opportunistic about raising capital between now and then including potential issuances under the $50 million ATM program that we established in September .

We believe it's prudent to plan to extend our existing cash runway given the difficult state of the capital markets.

While we are focusing our internal R&D spending most particularly on the foundational building blocks of our long term success to stretch our balance sheet cash. We're also increasing our focus on bidding for government programs at NASA and defense Department organizations.

We see significant opportunities to gain government funding for our R&D efforts in technology development, while supporting these critically important missions of our government.

Turning to slide 14.

I would like to conclude my prepared remarks with a few points on why momentous as an attractive investment.

First the market that we serve as an attractive one.

Access to space is improving because the cost to put a good given capability on orbit is declining driven by economies of scale from Arthur launched vehicles increased price competition between large providers that is forcing them to become more efficient through various means including reusability.

In satellite miniaturization.

As a result of progressively lower cost the number of satellite deployments is growing and these satellites need additional services once they get to space.

Both the private sector and the public sector recognize this.

Which should drive investment by by both in space infrastructure and services and we are already.

Seeing that start to play out.

Okay.

In addition, the regulatory environment appears increasingly favorable with new FCC with the new FCC de orbiting Roy mentioned being an important example.

The space Foundation estimates the size of the space economy at about 469 billion today and Morgan Stanley space team expects the market to more than double to over one trillion by 2040.

Bank of Americas, Aerospace and defense team forecast, even faster growth.

Overall, we view the market for the space economy in our segment of it as attractive.

Secondly, momentous is well positioned to capture a portion of this growing market.

Investors, sometimes suggests that there is a lot of competition within in space transportation.

But only a few companies have built and launched orbital service vehicles Osv's.

While others have aspirations, we are already flight testing, our invigorate OSV and have already deployed seven customer satellites from it.

Beyond our in space Transportation service, we offer payload hosting services and next month, we have a substantial customer Cal tech on that mission.

We believe our power generation capabilities and size and flexibility of our configuration give momentous a competitive advantage in this segment.

Meanwhile, we continue to build on our service offering and plan to introduce in orbit services, such as satellite maintenance and refueling and orbital debris debris removal later this decade.

When you add it all up I think momentum is well positioned among competitors.

In addition, when you think about who our competitors are most of them are privately held meaning there arent many ways for public equity investors to invest in space infrastructure.

Third.

We remain confident that this can be a very profitable business once we get to scale.

Our costs exceed revenue today as we're still early on the learning curve and are producing in flying bigger rights at a low frequency.

Furthermore, because we're still demonstrating our capabilities, we are only able to fly a few customers on each vigor I admission.

Once we prove the vehicle is reliable.

We expect capacity utilization and revenue generation per vigor admission to increase.

At the same time, we expect to be able to produce vigorous more efficiently as a result of learning and economies of scale.

As a result, we think profitability should improve as revenue grows.

<unk>, we expect the discrete margin boost once we introduce reusable pick right and start to save on manufacturing costs.

And finally driving all of this is our highly experienced and capable leadership team that I believe to be the most credible among new space companies.

<unk>.

The future's bright for momentous, particularly compared to where we set just 15 months ago at the time of our dis back.

We're driving this business forward based on the strategy that was put in place about a year ago as is evidenced by my comments today on hiring to improve our capabilities and better focusing our R&D spending on that which is most critical to our success.

I am pleased with what we were able to accomplish this quarter, including the deployment of five additional customer satellites implementation of invigorate three lessons learned on <unk> five our progress towards conducting the vigorous five launch next month, our customer contract with NASA and the initial implementation of our cost.

<unk> plan.

I'd like to thank our dedicated team for getting US here I would also like to thank our customers and investors for their continued support.

I'll now hand, the mic off to our CFO <unk>, Kim and then we'll take your questions.

Thank you John before I discuss the third quarter financials I'd like to take this opportunity to thank the momentous team for their hard work and dedication.

Turning to slide 15.

Our third quarter results reflect our ongoing progress and investments to further our technology and business model.

You have cumulatively signed contracts for approximately $43 million in backlog or potential revenue as of October 31 2022.

So if a customer cancels the contract before all of the payments are made the resulting revenue will be less than the full value of the backlog.

Total backlog declined by $12 million relative to the 55 million we reported in Q2.

This decline was primarily due to the exploration of options and options that we expect to expire unexercised. In contrast are firm orders backlog held steady this quarter.

We ended Q3 with non restricted cash and cash equivalents of $82 million, which we continue to believe should carry us through to the end of 'twenty two 'twenty three as John described.

We invested approximately $28 million in cash during Q3, approximately $3 million higher compared to our Q2 cash flow but.

But in line with our announced cost reduction plans.

Q3 cash investments included $3 million in debt Amortizations.

Well as the final $5 million payment to settle a legal matter with the SEC.

We ended the quarter with approximately $18 million in outstanding gross debt.

I would remind you that majority of our invigorate manufacturing costs and launch costs are accounted for as R&D given that the bigger either is still under development.

We expect gross margins to decline once you figure out deployment.

<unk> is complete.

We enter into production phase.

In the third quarter, we generated approximately $22 million in losses from operations.

On a non-GAAP basis, our adjusted EBITDA was a negative $16 million, which was approximately $2 million better sequentially from Q2.

Please refer to the earnings press release issued today for a reconciliation of adjusted EBITDA to GAAP net income.

non-GAAP SG&A expenses for the third quarter totaled approximately 7 million.

Approximately $1 million lower than the prior quarter.

non-GAAP R&D expenses for the third quarter totaled approximately 10 million also approximately $1 million lower sequentially.

We ended Q3 with approximately 84 million shares outstanding.

I will now hand, the call back to that.

Thank you John in.

In a moment, we will move on to the question and answer portion of our call.

I'd like to remind participants that all disclaimers outlined at the onset of this call extend to the question and answer session.

This includes our disclaimers relating to non-GAAP financial information forward looking statements and the technology underlying our planned service offerings.

Operator would you please remind participants how to enter the queue.

At this time I would like to remind everyone in order to ask a question Press Star then the number one on your telephone keypad.

Pause for just a moment to compile the question and answer roster.

Okay.

Your first question comes from the line of.

Thank you from Deutsche Bank. Your line is open.

Hey, everyone. Thanks for taking the questions just had two.

<unk> and.

Curious I know you talked a lot about during the presentation on the FCC rule.

Can you just talk about kind of what kind of capabilities that you can offer maybe give kind of a brief illustration of how that might look and I know you are not really quantifying the market opportunity, but it seems like a pretty big trend.

Thanks for the question Edison.

I agree with you the new FCC rule that requires operators of satellites to remove those satellites from lower orbit within five years falling mission conclusion is a major opportunity for us.

Prior to this as I mentioned, there was no rule the FCC have a guideline that operators deorbit. Their satellites are 25 within 25 years. After mission conclusion, but it was just a guideline was not.

Binding rule that the FCC.

Planning to enforce the new FCC rule creates significant demand for satellite orbiting.

Satellite de orbiting is a complex mission, but I am proud to say that momentous anticipated debt increased regulation and we've been investing in that capability for several years the type of capability that you need.

Should be able to do what is called.

Discussing the FCC rule, it would be to de orbited and really that would involve <unk>.

Grappling grabbing hold satellite and proceeding to target to a lower altitude where it could.

Reenter Rick burnt up upon reentry.

Now.

As I mentioned it is early for us to precisely quantify the opportunity really with any precision, but if you consider under Deutsche bank's projections.

Projections about 2000 and satellites will be deployed this year alone and if according to Deutsche Bank. The annual deployments are forecasted to triple by 2028. So you can see a scenario with that volume of satellites that need to be few orbited. During the next decade, I think as a minimum we expect thats going.

To be a multibillion dollar addressable market. That's created so thank you again for the question Edison and we certainly think that momentous is very well positioned to take advantage of this regulatory change.

Understood.

Second question.

Topic, there's been some changes on the Spacex transporter pricing.

Do you have any kind of initial thoughts related to that what kind of impact they may have.

Yes, Spacex is introducing a new interface for rideshare emissions in 2024, and you are right that there is also a new pricing structure that will go along with it.

For us it momentous in the very near term as I mentioned in the call. We signed a launch services agreements for the next.

Few Spacex transport admissions, but one that will go that is targeted for December of 2022, and then three that are targeted for February may and October of 2023 now since we have signed agreements for those are pricing.

Mediately be affected by the changes in the Spacex pricing structure for a momentous that would begin in 2024.

Under those changes, though there are some.

We do think that while there will be some higher costs that Spacex is charging that again for us would begin to affect us in 2024. Unfortunately theres been a lot of cost inflation in today's macroeconomic environment and so we don't we don't think this is unique to space transportation companies or momentous.

Once we start to experience those higher launch cost we will attempt to pass along those higher launch cost to our customers to the degree possible and importantly, our competitors will feel the same upward cost pressure that we do with respect to flying on things like the Spacex transport admissions on Falcon nine.

Market as we look a little further out though to star ship introduction by Spacex, We would expect our launch cost to begin to decline again.

This I would say also another dynamic that I'm sure you're tracking is that there are other providers of space launch services.

L relativity Gilmore space.

Et cetera, and these other.

Space launch companies and a whole host of new insurance are going to increase competition and that increased availability and competitive pressure. We think is going to keep launch costs low.

And therefore.

Since we are launch vehicle agnostic at momentous it will give us other options for how we can fly our customers to space.

Appreciate the color.

Your next question comes from the line.

James Ratcliffe from Evercore.

Your line is open.

Thanks.

Regarding the terms of the competitive environment.

Can you talk about what youre seeing in terms of.

Customer.

Sponsors or views of this small rocket segments since it seems like a number of providers they're struggling.

And just generally.

Talked about launch costs and the like how important to the longer term business case is the success of starship. Thanks.

Thanks for the question I appreciate it.

I would say that the the launch vehicle market right now of course, Spacex as the as the largest player in the rideshare market or that market targeting very small launch vehicles I think.

The customer views of satellite.

<unk> views of the small launch providers that we're seeing.

They are number one what I hear is.

From these customers, they're looking for some more flight heritage from some of them or they're looking with expectation at the plans that new launch providers.

Our half, but they do want to see those those missions to become <unk>.

More routine and see a little more flight heritage developed in many cases.

I do think there is an important.

Dynamic that's going on in the launch vehicle market because of all that competition and then it is reducing launch costs.

You saw Mckinsey put out a study at the World Economic Forum in Summertime.

If memory serves according to Mckinsey launch vehicle costs have come down by over 95% in the last 20 years.

We're seeing a projected costs go down and today are our estimates are for a dedicated small rocket. If you are a small satellite company that for a dedicated small rocket launch to a final orbit it would be over $70000 per kilogram on average.

With a rideshare on a large rocket using the momentous orbital service vehicle.

But thank you again for the question.

Thank you.

Yes.

Your next question comes from the line of Chris <unk> from singular research. Your line is open.

Yes, hi.

Let's see.

It looks like you experienced some issues in the early <unk> mission.

What did you learn from that.

Well thank you for the question.

The environment in space is notoriously harsh and unforgiving as I mentioned in operating there is just playing hard.

But understanding that environment, we a momentous knew it was important to have a robust space craft that can survive and complete its mission, even an off nominal conditions.

Invigorate, three which we launched in May we experienced a mechanical issue with the bracket and a pin mechanism. They kept our solar arrays from deploying.

This created a low power situation on board and initially we were able to establish two way communication with the spacecraft, but the low power situation prevented us from maintaining that two way communication between the spacecraft and the ground stations.

However, because we understood the unforgiving environment space, we had designed redundancy and resiliency features into the vigorous spacecraft, which ultimately allowed us to deploy seven of the non customer satellites. The vigorous through as carry in spite of the low power situation and lack of two way communications.

With our ground stations.

We are continuing efforts to deploy the remaining two customer satellites for vigorous Fi the vehicle we plan to fly next month, we're even more focused on implementing resiliency and redundancy features and testing them on the ground, including an off nominal conditions.

<unk> incorporated system robustness and a number of ways feature.

Features like an autonomous deployment feature that enables us to deploy satellites should we lose communications with the vehicle.

We have a redundancy between two sides of the vehicle that we call side of its IP. So major sub systems have a backup system onboard.

We've incorporated for our next flight a new feature with a beacon to facilitate finding the vehicle faster and establishing communications more rapidly or should there be an interruption in communications reestablishing those communications.

And we've added this enhanced testing regimen, including the solar array deployment testing, we shown in the video with.

<unk>.

No.

As I mentioned prior to importantly, prior to our last mission in May.

Performance improvements in advance of our next launch, which we're really looking forward to with a lot of eager expectation here to.

To see figure out five go to space in December thanks.

Thanks again for the questions.

Okay. Thanks for your answer.

Again, if you would like to ask a question press star one on your telephone keypad.

Your next question comes from the line of Austin Moeller from Canaccord. Your line is open.

Hi, Thanks for taking my question.

So what primary endpoint objectives are you looking to accomplish on the bigger I'd five mention now that you've completed the previous mentioned and address the issues there.

And so what what prime yet Mary endpoint objectives, do you want to accomplish on that that will enable.

Quick quick turnaround to the big ride six and so on missions and what's considered more of a secondary objective.

Thanks for the question Alton.

The figure out five mission will be our second demonstration mission and so the primary objective of this upcoming mission is to test the vehicle learns from any issues, we encountered and address those issues out subsequent figure out vehicles as we work toward freezing of design for production.

Alright, three taught us many lessons as I mentioned that by debit Greg five and we're more confident this time around in the performance of vigor at 5% as a result.

Expect our assistance our confidence in the system is going to increase with each additional demonstration mission we fly.

<unk> five is from our block two two configuration and Thats a significant block upgrade from vigorous three which was from our block 2.0 configuration and so one of the other primary objectives of the flight is too.

Test vigorous five and the new blocks to two configuration, which is designed to be much more capable and a more reliable vehicle invigorate three.

Meti thruster, which were eager to see perform in space.

<unk> has been upgraded for bigger at five and its designed to be more capable than its predecessor.

We've taken steps towards modularity in this design as well to allow payload to be traded for propel.

Which will allow us to tailor our capabilities for the needs of the customers and then this improvement that we've made to allow for the start of payload hosting capabilities is also a significant and we're looking forward to having our first.

A significant I should say hosted payload customer on the vigorous five mission and.

And testing and demonstrating some of the Differentiators that we think allow our vigorous hosted payload capability to be better than competitors.

Power to our customers.

Vigorous solar arrays and factor modular so some configurations that can produce two kilowatts of power, which is enough to power. The James Webb telescope, which is 6000 kilograms or 200000 standard led light bulbs.

And this configuration, we would allocate about half of our available power invigorate.

And reserve and the other half for our hosted payload customers, which is again a major advantage for us over competitors that can provide less power. So those are some of the things that were eager to demonstrate on the next flight that then will give us more flight heritage because we think we've got differentiated capabilities now.

It's the mission is fully successful we will have demonstrated those differentiated capabilities in space, which should improve our ability to attract customers.

So thanks again for the question.

Excellent. Thanks for all the color on that.

There are no further questions at this time.

This concludes today's conference call you may now disconnect.

Q3 2022 Momentus Inc Earnings Call

Request a DemoDemo

MNTS

Momentus

Earnings