Q2 2023 Momentus Inc Earnings Call

Speaker 1: Please stand by. We're about to begin.

Speaker 1: Good afternoon, ladies and gentlemen. Welcome to the second quarter of the 2023 earnings conference call. At this time, all participants are in listen-only mode and please be advised that this call is being recorded. After the speakers' prepared remarks, there will be a question and answer session. If you would like to ask a question during this time, simply press star 1 on your telephone.

Speaker 1: And if you would like to withdraw your question, simply press star one again. And now this time I would like to turn the call over to Mary Horne, investor relations for momentists. Please go ahead, Mary.

Speaker 1: Thank you and hello everyone.

Speaker 1: Welcome to Momentous' second quarter 2023 earnings conference call. With me here today are John Ruth, Chief Executive Officer of the company and Chairman of its Board of Directors, as well as Eric Williams, Chief Financial Officer.

Speaker 1: to the Ventress' second quarter, 2023, earnings conference call. With me here today, Arm John Ruth, chief executive officer of the company and chairman of the sport of directors, as well as Eric Williams, chief financial officer. Each will provide prepared remarks.

Speaker 1: Following these preferred remarks, we will take questions from analysts. Earlier today, we issued a press release and made a slide presentation available on our Invest Relations website, which provides an overview of our business and financial highlights for the quarter. We will take questions from the Invest Relations website, which provides an overview of our business and financial highlights for the quarter.

Speaker 2: You can download a copy of the release in presentation slides at investors.momentus.space.

Speaker 2: During today's call, we will make certain forward-looking statements within the meeting of Section 27A of the Securities Act of 1933 in Section 21E of the Exchange Act of 1934.

Speaker 2: Overlooking statements are predictions, projections, and other statements about future events that are based on current expectations and assumptions, and as a result, our subject risks and uncertainties.

Speaker 2: Many factors could cause actual future events to differ materially from the forward-looking statements in this communication.

Speaker 2: 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 the forward-looking statements we make.

Speaker 2: 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 company's filings with the security and exchange commission.

Speaker 2: 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.

Speaker 2: Please also note that we will refer to certain non-GAAP financial information on today's call.

Speaker 2: You can find reconciliation of the non- GAAP financial measures to the most comparable GAAP measures in our earnings press release.

Speaker 2: None of these non-GAF financial measures is a substitute for the more superior to measures of financial performance prepared in accordance with GAF.

Speaker 2: With that, I'd like to turn the call over to our chairman and chief executive officer, John Brude.

Speaker 3: Thank you, Mary. It's a pleasure to be here today to provide an update on the progress we've made at Momentus over the past quarter and our Q2 financial results.

Speaker 3: After I make my comments, our CFO Eric Williams will take you through the financial highlights and outlook.

Speaker 3: In the second quarter, Moments has made solid progress toward our goal of being one of the market leaders in providing satellite buses and in-space transportation and support services for US government and commercial customers.

Speaker 3: We are at the forefront of this expanding market and possess key competitive advantages.

Speaker 3: Notably, Q2 marks Momentus's first million-dollar revenue quarter, with Q2 earnings finishing at $1.7 million for the quarter.

Speaker 3: In my remarks today, I'll discuss the progress we have made in our long-term strategy for growth and profitability. terms of profitability.

Speaker 3: First, we continue to see growing interest from both government and commercial customers, which are expected to translate into contracts over the coming months, and I'm happy to have more details to share today on an important contract with the Space Development Agency.

Speaker 3: We've also signed a contract for a new hosted payload customer.

Speaker 3: I'll discuss these in further detail later.

Speaker 3: Second, we continue to operate two VIGRIVE Orbital Service Vehicles or OSVs in Lower Thoroughlyne, which are the second and third VIGRIVEs that we launched in January and April 2023 respectively.

Speaker 3: On our three missions conducted to date, we have successfully demonstrated our core technology which is operational in space.

Speaker 3: With three spacecraft on orbit, we've accrued significant flight heritage with about a year of in-space flying time.

Speaker 3: Third, we're evolving our business strategy to lean into significant markets where Momentus has clear advantages.

Speaker 3: For example, we recently announced our M1000 Satellite Plus offering.

Speaker 3: The M-1000 satellite bus is based on our successful Vigoride Orbital Service Vehicle and builds on its flight heritage to offer a low-cost, flexible, and capable bus for government and commercial customers.

Speaker 3: In fact, over the past quarter, we have submitted proposals to U.S. government customers like the Defense Department, Space Development Agency, and the commercial companies to produce satellites using this bus.

Speaker 3: Fourth, we are driving new innovation to maximize our competitive edge and plan to demonstrate the functionality and operability of this technology in space over the coming months.

Speaker 3: and the spacecraft remains in good health. During the Vigride 5 mission, Momentus deployed a customer satellite from Cosmosis in Singapore into low-Earth orbit and also carried a large hosted payload for Caltech. Since then, Momentus has been providing ongoing hosted payload services to Caltech's Space Solar Power Demonstrator, or SSPD, mission, and Caltech reported that its payload recently demonstrated its ability to wirelessly transmit power in space and beam power to Earth. Momentus will continue to provide hosted payload support to the SSPD.

Speaker 3: over the coming months as it continues its operations. Our contract calls for us to provide hosted payload support to the SSPD mission for at least six months and up to two years under a contract option.

Speaker 3: Hosted payload missions, like we are providing to Caltech, are more profitable than transportation missions, particularly for larger hosted payloads and longer duration missions.

Speaker 3: During the mission, the momentous team conducted inaugural testing of the microwave electro thermal thruster or MET used on the spacecraft that uses water as a propellant.

Speaker 3: This has included 35 firings of the thruster and a successful altitude raise of the Vigride orbital service vehicle by more than three kilometers.

Speaker 3: On the Vigor I-5 mission, we operated the MET successfully in space at full power across the range of durations for firing that we plan to use operationally to deliver satellites to precise custom orbits and to provide in-space infrastructure services like hosted payloads.

Speaker 3: Momentus is a pioneer in bringing this efficient and environmentally friendly propulsion technology to market. We are proud that the MET has shown its ability to operate as intended to perform these missions in space and we look forward to using it to support commercial and U.S. government customers.

Speaker 3: On Vigoride 6, which was launched in April 2023 and is ongoing.

Speaker 3: We have deployed all customer satellites, including the Ravella payload for ARCA Dynamics, the Vireo CubeSat for C3S LLC.

Speaker 3: the DISCO1 CubeSat for Our House University, and the Iris-C payload for an Asian customer booked through ISOLAUNCH.

Speaker 3: The culmination of the Vigride 6 commercial deployments contributed to Momentus recognizing revenue of $1.7 million in the second quarter.

Speaker 3: This is a significant milestone in our progress as a company and makes Q2 our first million dollar quarter.

Speaker 3: During the Vigride 6 mission, momentous also deployed two CubeSats into low Earth orbit as part of the NASA-Lighted LLITED or low latitude ionosphere, thermosphere enhancements in density mission.

Speaker 3: NASA has confirmed that two keepsats are functional and the team will be able to operate the science instruments aboard. Momentus conducted a thorough investigation and identified the root cause as human error in the mapping of a software command. The company has implemented corrective actions to prevent a recurrence. Vigoride 6 remains in good health and the team is working towards some of our mission milestones, like our solar array demonstration, which I'll speak about in more detail later in the presentation.

Speaker 3: We are proud of the performance of our Vigaride vehicle and see multiple use cases for it, particularly in support of more complex missions. We also have many customers whose mission requirements don't require the pedigree of a Vigaride. In those cases, we will use another mechanism.

Speaker 3: like a employer to deliver our customers to their intended orbits. This approach serves the needs of our customers who don't require Delta V and further improves the economics of Vigoride.

Speaker 3: For example, our next mission is planned for launch on the SpaceX Transporter 9 mission, targeted for no early Earth and November 2023 to low Earth orbit.

Speaker 3: Rather than using a Vigride OSV on this mission, we are carrying our customers on a deployer.

Speaker 3: The payloads we are flying on the November mission include a satellite from Sat Red and Poland called the Aman-1 Earth Observation Satellite.

Speaker 3: Satellite can be used for services such as land survey, precision agriculture, and data for weather, environmental and smart cities applications.

Speaker 3: The Genju SAAT-1 satellite will be deployed for contact company of the Republic of Korea.

Once an orbit, cameras mounted on the satellite will carry out a mission to take pictures of the Earth.

The Picacho satellite will be deployed for LunaSonde, a U.S. subsurface imaging company with the goal of making underground resources like water and minerals easier to find.

The Picacho CubeSat is a technology demonstration of lunison sensors.

It will measure the power spectral density of low frequency radio signals in the ionosphere, which will help inform designs for the company's future satellites.

On this mission, we will carry satellites that require orbital delivery services as well as hosted payloads for commercial customers. We also plan to carry a momentous hosted payload that we will use to conduct a rendezvous proximity operations demonstration. I am also pleased to see the operational progress that our talented engineering and operations team continues to make in increasing productivity, improving quality, and lowering unit costs.

For example, VIGRIG 6 assembly integration and test was 36% faster than VIGRIG 5 with a 51% decline in non-conformances. With VIGRIG 7, we plan for a fuller load of payloads and better admission economics, and we anticipate that VIGRIG 7

will generate more revenue than Vigoride 6. Turning to slide 7.

As I mentioned earlier, we've expanded our product offerings to include low-cost, flexible, and powerful satellite buses.

We are pleased to have recently announced our M1000 satellite bus, which is well positioned for a large and growing market.

For example, Allied Market Research reports that the global satellite bus market was valued at $11.9 billion in 2020 and is projected to reach $20.28 billion by 2030.

The M1000 satellite bus is based on our space proven VIGRIO SV. Its core technologies are the same as VIGRIO, and the newly branded M1000 satellite bus is tailored and enhanced as needed to meet the mission requirements of different customers.

in both the US government, such as the defense department, as well as for commercial customers. Our M1000 bus has attributes that we expect to make it highly competitive in the market. It has high power, a flexible configuration to support individual customer needs.

Can carry more payload than competing buses and can be produced to meet customer needs rapidly, all at low cost.

Turning to slide 8.

According to Space Foundation, which released its annual Space Report on July 25th, the Global Space Economy grew by 8% in 2022 to $546 billion.

Of note, Space Foundation also estimates the total space spending by the U.S. Defense Department, both classified and unclassified spending for all military branches and intelligence agencies.

Group to $42.9 billion in 2022, a 21% year-over-year increase.

The M1000 satellite bus is well positioned for these growing, attractive markets, and we're starting to see some traction. The M1000 satellite bus is well positioned for these growing, attractive markets, and we're starting to see some traction.

We were recently awarded a Small Business Innovation Research contract from the US Defense Department Space Development Agency or SDA.

And I'm pleased to share we've signed the contract for that work.

The first contract action is worth roughly $746,000, and includes an option for a contract modification at a later date to add an additional $1,196,000.

that we expect the SDA to exercise that will bring the total contract value to over $1.9 million.

The scope of this project involves making tailored modifications to the system underlining the M1000 satellite bus and vigoride orbital service vehicle so that it is even better positioned to be used for SDA's future needs.

Last month, we also submitted a bid to the SDA for the Trunch2 Transport Layer Alpha Program that involves building 50 satellites.

These 50 satellites will be part of a global constellation of communications satellites supporting the needs of the U.S. Defense Department and military services.

As a reference point, awards made by SDA for Tronch 1 of the Transport Layer satellites were about $700 million to Lockheed Martin, $692 million to Northrop Cremon, and $382 million to York Space Systems for a slightly smaller number of 42 satellites.

which gives you a rough sense of the size of the contracts expected under charge two. For our proposal for the charge two transport layer alpha program, momentous is the prime contractor on this effort and we've pulled together a team of traditional and non-traditional defense contractors that we are confident can deliver for the SDA.

We believe we are well positioned for this project due to the differentiated capabilities, low cost and strong team we've put forward to the SDA. We are fully positioned for this project due to the differentiated capabilities, low cost and strong team we've put forward to the SDA.

This proposal is now under evaluation by SDA, and we expect that agency to make contract awards in late September or early October to two teams to build 50 satellites each.

We've also included our M1000 bus, it's a feature product in other proposals that are undergoing reviews by both government and commercial customers. We've included our M1000 bus, it's a feature product in other proposals.

In addition to the M1000, we're continuing to offer orbital delivery and hosted payload services.

Momentous submitted proposal to the Defense Innovation Unit for D.I.U. for novel approaches to operationally responsive space.

This project requires precise point-to-point delivery of cargo in a cost-effective manner at scale.

Fairox once had a light in June 2023. We are pleased that FOSTA has selected momentous again to support its growing needs and innovation that they are bringing to the market. They are a valued repeat customer. Commercial and government customers have shared very positive feedback about our capabilities and competitive pricing. This gives us confidence that we're well positioned to succeed in this market.? Turning the slide 9.

The anticipated demand for our services is only expected to increase, especially as we're seeing heightened government and DOD interest. In addition, as we pivot towards expanding to the large and mature satellite bus market and continue to pursue launch aggregation as a potential revenue stream,

We are taking steps to ensure our launch schedule is optimized to meet this anticipated demand.

Momentus differentiates itself by reserving space on SpaceX launch vehicles used for rideshare transportation missions that we then make available to customers.

Other companies will take your reservation and then try to find a spot for your payload in a rapidly crowding, mulch vehicle manifest, introducing significant schedule risk to customers.

We've already got space dedicated and we're ready to help customers make the most of it.

First, we will be flying on the SpaceX Transport 9 mission, targeted for no earlier than November 2023 to low Earth orbit.

Momentus has also reserved ports on all the SpaceX transport emissions through the end of 2024, including Transporter 10, targeted for February 2024, the Transporter 11 mission targeted for June 2024, and the Transporter 12 mission targeted for October of 2024.

Turning slide 10.

The market opportunity for momentous is substantial and experiencing strong growth. For example, as I mentioned, the Space Foundation's annual space report released last month shows that in 2022, the global space economy grew 8% reaching $546 billion.

The commercial space market climbed nearly 8%, reaching over $427 billion.

And the US government spent $69.9 billion on space programs with the majority coming from the Department of Defense.

We are pleased about the interest and our capabilities from US government customers responsible for national security missions.

The flexibility, payload capacity, and power available on the VIGRIED Orbital Service Vehicle and M1000 satellite bus make them well positioned to support a range of national security missions like space situational awareness, surveillance, reconnaissance, and other missions. The VIGRIED Orbital Service Vehicle and M1000 satellite bus make them well positioned to support a range of national security missions.

The VIGRIED Orbital Service Vehicle can also deliver national security payloads to custom orbits to support their unique mission requirements.

Having large amounts of power available to support intensive, high-end national security payloads like sensors, communications equipment, and other electronics also distinguishes momentous from our competitors. Coupled with the ability to change orbital altitude and inclination, our capabilities are well suited to support the kind of maneuver in space that senior US officials like Space Force Chief of Staff, General Salisman, have discussed as a key need in the highly contested space environment. In addition,

Momentus has a highly experienced team of professionals and engineers with decades of national security experience that gives us an edge over other US companies and also over international competitors who are unable to meet the needs of these large defense department customers.

New regulations are also playing a role in expanding the opportunity for momentous.

With a number of satellite deployments growing rapidly, the problem debris in space is accelerating rapidly. The rule from the FCC acknowledges the problem and we expect will create a significant customer demand for satellite de-orbiting services. NASA and the US Defense Department have also been letting contracts for studies and demonstration missions for work on addressing the problem of growing orbital debris. I like the orbiting as a complex mission, but I'm proud to say that momentous anticipated and more active stance on debris removal from regulators and has been investing in developing this capability for several years.

It's not hard to envision a scenario in which thousands of satellites need to be de-orbited annually within the next decade, creating a multi-billion dollar addressable market. Turning to slide 11, momentous as well positioned to grow in the space market, thanks to our value proposition with differentiated capabilities. We have now delivered 15 satellites to orbit in our history while demonstrating the maturity and operational capabilities of our technology along with its functionality in space. We are continuing to develop new differentiated technology and are expanding our profit product offerings.

Adding expansion tanks, incorporating security features, and adding a precision pointing option to host sensitive and classified US government payloads. We expect to begin introducing some of these features in 2024. A great example of our innovation is our tape spring solar array or TASA, T-A-S-S-A, which has been in space since April on our Vigoride 6 mission. We expect to soon unfurl and demonstrate this technology in the coming weeks.

They keep their stiffness and strength due to their shape, only on a much larger scale. The orange mandrel is much smaller than those used in competing rollout solar arrays, providing weight savings. Once development is complete, we estimate that replacing vigorides third-party solar array with TASA could reduce the overall recurring production cost of vigorides by as much as 10%, while potentially reducing lead times by several months.

We've applied the patented technology behind TASET and we're seeing interest from commercial and government customers given the efficiency we expect to demonstrate for low-cost power in space.

RPO capability is key to our ability to expand the menu services that VIGRIED can provide to include in orbit maintenance and refueling of customer satellites, life extension, and de-orbitant of satellites at the end of their useful life. The RPO mission also supports another innovation focus of ours, which is to evolve towards a reusable version of VIGRIED or refueled.

Figure-ride will move to a lower degrading orbit and safely and responsibly burn up during reentry.

Visible Vigoride after completing its mission will rendezvous with and provide services to additional customer satellites thereby providing greater return on investment for each Vigoride launched. if

In summary, Momentus is well positioned for the future. We have a favorable demand outlook, demonstrated competitive advantages, attractiveness for growing US government and defense department programs, and significant potential for margin improvement.

In a moment, our CFO Eric Williams will walk us through the financials. But before he does that, I'll comment briefly on where we've come from and where we stand on our journey.

It is clear that we face some headwinds and the recent risk off environment in the market and seen our stock price reflect that.

Clearly we would have liked for the market to have given greater value to the achievements that have put us in position to achieve substantial growth as we look forward. I would just conclude by commenting that it's worth stepping back and remembering what momentous has achieved since becoming a public company just over two years ago.

In August of 2021, our relationship with the Defense Department was not good to put it terribly and some of the market did not believe we would be able to repair it.

That is most clearly not the case today as indicated by our recent contract award from the Defense Department's Space Development Agency and its positive comments to us about our capabilities. Thanks for joining us on Ohio State University live again this morning — you can watch

In August of 2021, we had yet to test our microwave electro-thermal thruster on the Vigorite Orbital Service Vehicle in space. And some data we ever would.

Today we have tested it successfully in space on Vigorite, and not once or twice, but dozens of times in space, the ultimate test.

In August of 2021, we had begun to contemplate the ability to expand into the satellite bus market.

Today, we have what is arguably the best value small SAT bus available based on comments by Defense Department of Visuals to us. And we have recently submitted a major proposal to join the Defense Department's proliferated low-earth orbit satellite constellation.

In August of 2021, we had a young workforce.

Today, this workforce, the foundation of our company's value, has matured to the point of having put three vigoride orbital service vehicles in space, deployed 15 customer satellites, and is at this very moment managing and controlling two of our vigorides simultaneously in orbit.

During our launch campaigns for the three Vigoride missions, what I'm here late at night and on weekends, I've been invigorated by walking around and seeing the passion of our employees part at work despite the day or hour.

I'm tremendously proud and could not be more appreciative of every single momentous employee and we're working hard to retain them.

Momentus is pushing ahead on our growth path. We are competing vigorously in the defense, government, and commercial markets.

And we are continuing to drive our technology forward in concert with a demand signal we are getting from customers. With that, I'll turn the microphone over to our CFO , Eric Williams. Thank you, John , for the introduction. I am pleased to present highlights of the financial results achieved by the Lentus team during our second quarter of 2023. Turning to slide 14. Our second quarter results reflect our ongoing progress and investments towards our future launches.

We have cumulative sign contracts for approximately $32 million in back-odd or potential revenue as of July 31st, 2023.

These contracts include firm orders as well as options.

These options gave our customers the flexibility to quickly opt into an available launch slot on short notice without requiring a separate agreement.

The breadth of these sign contracts spans across 18 companies and 14 countries.

Typically, our customers have the right to cancel flight reservation, and when doing so, we'll forego their deposits and mouse repayments.

Should a customer cancel a contract for their rescheduling needs or other reasons before all of its payments are made, the resulting revenue will be less than the full value of the backlog.

Momentus has historically included in backlog both 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.

We ended Q2 2023 with unrestricted cash and cash equivalents of $21.3 million and approximately $9 million in outstanding gross debt, consisting of a term loan that we began to repay in March of 2022.

Next, I would like to address a topic that will be mentioned in our 10Q to be filed with the SEC. Our 10Q will include language evaluating whether there are conditions and events that raise substantial doubt about our ability to continue as a going concern. This going concern determination was concluded as we prepared our financial

for the next 12 months.

When taking into account certain external factors, this analysis concluded that given our current cash balance, the company is unable to meet its obligations for the next 12 months.

Lamentis has taken and continues to take several proactive steps with respect to managing our burn rate and extending our cash runway while we continue exploring new business opportunities and working to raise additional capital. Towards the end of Q2 of 2023, we reduced our headcount consisting of both full-time employees and contractors by approximately 30% to substantially reduce our burn rate while retaining the talent we need to execute our key near-term initiatives. We expect to realize the full impact of those cost reductions during Q3 of 2023. In addition, the company has been working to raise additional capital while pursuing and evaluating strategic alternatives.

compared to $18.7 million in Q1, 2023 and $22.9 million in Q2, 2022.

Thank you, Ms. Wong. Ladies and gentlemen, at this time, if you have any questions, please press star one. And just a reminder, if you find your question has already been addressed, you can remove yourself from the queue by pressing star one again. And we'll pause for just a moment. We'll first start from you to Michael Matheson at Singular Research. Good afternoon, everyone. Congratulations on all that revenue.

Thanks, Mike. I appreciate it. I'm just kind of looking into the dynamic of the going concern issue versus revenue versus the burn rate. I'm sure that's an equation that you sit there solving every afternoon. If I'm sort of following it, it looks like you booked all the revenue that was available from the Vigoride 5 and 6 missions, having deployed all the satellites.

Looks to me like the next revenue opportunity would be the November mission, is that fair? We have not totally finished recognizing revenue on V5, but we have completed revenue associated with V6. We do have some residual revenue to be recognized relating to these ports.

of the Caltech mission, which we're hosting, currently still hosting. Our next, and as you know, that next revenue event would be the transporter nine mission in the round of the October timeframe. October 9th.

And just following up on that mission, he has all the capacity booked for that launch and how many deployments would full capacity represent.

In November , it's John Reed, Michael. Thank you for the question. In November , we will launch at least three satellites mentioned and potentially one additional one that we're working with the customer on.

The three satellites would be from SatRev in Poland. Also one from, called GenjuSat, one from contact in South Korea. And a third one from Lundassand, which is a US-based company.

And then as I say, there's a potential for a fourth satellite, but that has not yet been confirmed. Four no, perfect. Thank you for the information.

Thank you. And just a reminder, star one please for any more questions this afternoon. And nothing coming in at this time, but we'll give them one more opportunity to ask any questions, star one please.

We'll take a follow-up question from Michael Matheson.

Thanks, you guys. It looks like the way was clear for me to ask a follow-up. Again, just sort of solving that equation of Bern-Rate versus the cash on hand. You mentioned that you've taken a lot of steps to reduce the Bern-Rate.

Would you feel comfortable giving us any kind of a figure to work with or just lower as far as you wanted to go?

I'd say lower is probably about as far as we want to go. I think if you wanted to think about the subsequent border, definitely lower than our past quarter, right? We did that 30% reduction in head count, you know, and through the finitials, you can get a sense that it wouldn't be a full 30% across the board, you know, with respect to cash on the quarter, baby.

You can view it as, you know, we're pushing on a fairly hard to be able to get as much runaway as we can out of that. You can see it as, you know, we're pushing on a fairly hard to get as much runaway as we can out of that.

Okay, well thank you again for the information.

Thanks Michael.

Thank you. And gentlemen, it appears we have no further questions this afternoon, so that will bring us to the conclusion of the momentous second quarter earnings call. We'd like to thank you all so much for joining us today and wish you all a great evening. Good bye.