Momentus Inc.

Good day and welcome to the Momentous, Inc. second quarter 2022 earnings conference call. All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question and answer session. If you'd like to ask a question during that time, please press star one. If you'd like to remove yourself from the queue, you may press star one again. I will now hand today's call over to Mr. Daryl Genovese, Vice President of Investor Relations. Please go ahead.

Thank you, Tamika, and good morning, everyone. Welcome to Momentus' second quarter 2020-22 earnings conference call. With me here today are John Rood, Chief Executive Officer of the company and Chairman of its Board of Directors, as well as Jikon Kim, Chief Financial Officer. Each will provide prepared remarks. Following these prepared remarks, we'll 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 press release and presentation slides at investors.momentus.space. During today's call, we will make certain forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Exchange Act of 1934. 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 the forward-looking statements that 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 company's 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 is a substitute for or superior to measures of financial performance in accordance with GAAP. With that, I'd like to turn the call over to our Chairman and Chief Executive Officer, John Root.

Thank you, Daryl. Good afternoon. I'm delighted to be here today to talk to you about the progress that we made during the second quarter and our plans for the future. This was an eventful quarter for Momentus as we put our historical regulatory difficulties behind us and launched our first Vigoride into space. I'd like to extend a heartfelt thank you to the Momentus team, which continues to drive progress towards our goal of providing the backbone infrastructure services to support the emerging space economy. I'll provide some high-level comments on our activities during the second quarter. Then I'll spend some time discussing our plan for the second half of the year in 2023 with some emphasis on the planned cost reductions that we are implementing to conserve cash and extend our runway through the end of 2023. After I make my comments, our CFO, Jikon Kim, will take you through the Q2 financial highlights and financial outlook. Turning to slide three, The company made a lot of progress since our last earnings call. Highlights included retiring regulatory issues that we previously experienced in obtaining U.S. government licenses, completing assembly and ground testing of the Vigoride III orbital transfer vehicle, conducting the first launch of the Vigoride orbital transfer vehicle, Deploying two customer satellites from Vigoride 3 during the second quarter and four more in the third quarter for a total of six customer satellites deployed from Vigoride 3 so far. Deploying an additional momentous customer satellite from a third-party deployment system, which brings to a total of seven momentous customer satellites placed in low Earth orbit thus far from Vigoride and the third-party system combined. analyzing the results of our Vigoride 3 mission and identifying the root cause of each of the anomalies experienced during the mission, and completing an in-depth review by an independent review team of experts. And finally, making solid progress on the preparation, assembly, and testing of our next Vigoride orbital transfer vehicle that we plan to launch on the SpaceX Transporter 6 mission targeted for November of 2022. Corrective actions to address all of the anomalies experienced on Vigoride 3 will be implemented on the Vigoride 5 vehicle that is targeted for launch in November, and we are on track to complete these modifications before the launch. We're pleased, as I said, to have retired regulatory issues that we previously experienced. and I'll talk about that. In particular, we continued to effectively implement our national security agreement overseen by the Department of Defense and Department of the Treasury. We secured all necessary government licenses and approvals to launch our first orbital transfer vehicle, Vigoride 3, to space, including a second license update from the National Oceanic and Atmospheric Administration, or NOAA, authorizing Vigoride 3 to operate a camera in space, which we received on April 27. A license from the Federal Communications Commission, or FCC, authorizing Momentus to use radio frequencies to communicate with Vigoride, which we received on April 28. Momentus also received special temporary authorization, or STA, licenses from the FCC on June 9 and a 30-day extension on July 13 And finally, a favorable payload determination from the Federal Aviation Administration, or FAA, which we received on May 4. As we look forward to our future missions, Momentus will no longer need to apply for a separate FAA payload determination. In the future, Momentus will be treated the same as the other payloads being launched to orbit by launch service providers such as SpaceX, who typically obtain such licenses from the FAA for their launch missions and the payloads they carry. Momentis will not need to reapply for NOAA licenses either, unless we make changes to Vigoride's cameras. And that's because our existing NOAA license permits such activities. Like others in the space industry, we will need to apply to the FCC for radio spectrum licensing. In fact, we have already submitted our application for such a license from the FCC for the next launch of our Vigoride orbital transfer vehicle, targeted for November. The changes I just described to our licensing requirements speaks to 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 we're glad to have put our historical regulatory difficulties behind us so we can focus on developing our technology. Let me talk now about our progress on technology development. Momentus has made substantial progress on technology development during the second quarter, achieving some major milestones, such as conducting our first launch of our Vigoride orbital transfer vehicle. We completed remaining ground testing on our first spacecraft, Vigoride 3. We then integrated customer payloads and shipped the spacecraft to the launch site at Cape Canaveral, Florida. We also completed work on our mission control facility at our headquarters in San Jose, California. On May 25, we sent Vigoride 3 to low Earth orbit onboard the SpaceX Transporter 5 mission, which utilizes the Falcon 9 launch vehicle. Recall from our last conference call that the primary objective of our inaugural demonstration mission was to test Vigoride on orbit, learn as much as possible from any issues encountered, and incorporate lessons learned into future Vigoride vehicles as we work to eventually certify a design for production. Experience is the best teacher. With that in mind, we have learned a lot from the Vigoride 3 mission so far and are busy implementing the lessons learned in our future spacecraft. While the primary objective of our first demonstration mission was to learn as much as possible, we also carried nine satellites onboard Vigoride 3 and another payload for testing in space for a total of three customers. We deployed two of these customer satellites during the second quarter from Vigoride, and then Vigoride deployed four more customer satellites during the third quarter for a total of six satellites deployed from the Vigoride 3 vehicle thus far, with three more satellites remaining on board. As we reported in our June 13 mission update, and as can be expected on a first flight, we experienced some issues during the mission. After being launched to low Earth orbit aboard the SpaceX Falcon 9 launch vehicle, the Vigoride 3 vehicle successfully separated from the launch vehicle. We subsequently established two-way communications with Vigoride 3 from our Mission Control Center. We discovered that Vigoride 3 had experienced anomalies after its launch, primarily related to its deployable solar arrays. This placed the spacecraft in a low-power situation. Since that time, we've been working to address these anomalies and deploy our customers' satellites. While we established two-way communications with Vigoride 3 on May 26 and confirmed on May 28 that we had successfully commanded it to deploy two customer satellites, we've not been able to continue two-way communication with a spacecraft since that time, given its low power state, although we have continued to broadcast commands to the vehicle from ground stations. As disclosed on June 13, we've determined that Vigoride 3's deployable solar arrays, which are produced by a third party and are folded and stowed during launch, did not operate as intended once in orbit. The body-mounted solar panels on Vigoride 3 that are fixed work normally, providing some power to the spacecraft. This resulted in low power and communications issues with the vehicle. We have been working closely with the producer of the solar arrays and have identified the root cause of the deployable solar arrays not operating as intended, which was a mechanical issue with a hold-down bracket and a connector pin that did not release as intended. We also believe we've identified the root cause of the other anomalies that we experienced during this low-power state with other spacecraft systems. We had an independent review team of highly experienced space experts in the relevant areas examine the data, and they concurred with the findings on root causes and corrective actions of the momentous engineering team. We purposely designed redundancy into the Vigoride 3 spacecraft to create a more robust design, including by equipping the spacecraft with a mechanism to autonomously deploy customer satellites should the spacecraft lose communications with ground stations. Subsequent to the close of the quarter, Vigoride 3 deployed four additional customer satellites, including two on July 17 and two more on July 29. Again, in total, the Vigoride spacecraft has now deployed six of its nine customer satellites. The company is continuing efforts to deploy the remaining three customer satellites. Many systems and processes need to come together for a spacecraft to operate. While we can simulate some of this on the ground, there's simply no substitute for the knowledge gained by flying the vehicle on orbit. In the history of spaceflight, it's common to experience issues, particularly on early missions. Our primary objective here was to learn, and learn we did, about many improvement areas that many important areas, I should say, that either performed as intended or needed improvement, from structures to software, avionics, thermal and on-orbit dynamics, to name just a few. Again, we did not have issues in all of these areas. When things perform as intended, you also learn from that experience. In the cases where we experienced anomalies, we quickly identified root causes of all of the anomalies and are implementing corrective actions ahead of our next missions. Turning to slide four, recall from our last conference call that we had two ports on the May Transporter 5 mission. We used our first port for Vigoride 3, as I described. On our second port, we used deployer hardware from one of our business partners to deploy customer payloads directly from the SpaceX rocket. That third-party deployer system, which is shown in the picture, deployed five satellites for four different customers, including one Momentous customer satellite and four of our partners' customer satellites. With the deployment of one Momentous customer satellite from this third-party deployer system, we have now deployed a total of seven customer satellites. That is six satellites from Vigoride 3 thus far and one satellite from this third-party deployer system. As I said on our last earnings call, this third-party deployer system cannot provide last-mile transportation service to precise custom orbits like Vigoride is designed to do. However, it meets the needs of some of our customers and potential customers, particularly those who don't need to get to a precise orbit and have less complex requirements and are looking for a lower cost way to reach low Earth orbit. This represents an effort to explore other market segments that are adjacent to our current addressable market with Vigoride. Offering a lower cost option alongside Vigoride allows us to address the market broadly in multiple ways and serve the diverse needs of our customers more economically than we could if we fly every one of them on a more capable Vigoride vehicle. We are happy with how this system performs and are evaluating the business case for expansion into this adjacent market segment. Turning slide five, we continue to build out and improve our executive leadership team, adding high-caliber individuals that bring the type of experience and skill sets we need to grow our business. On our last call, I introduced the new leaders of our engineering, manufacturing, and supply chain teams, Charles Chase, our Vice President of Engineering, Nick Zello, our VP of Manufacturing and Operations, and Gary Bartman, our VP of Supply Chain, all joined full-time in the second quarter, and all three are already making significant contributions to our efforts to develop, manufacture, and test our Vigoride vehicles. Krishnan Anand is the latest addition to this superb group we've assembled to lead our technical team. Krishnan joined in late July as our Vice President of Program Management. Krishnan will be responsible for overseeing daily program management activities to meet cost, schedule, and performance requirements on our spacecraft. Krishnan brings a successful track record, scaling up program management at Kitty Hawk, a Silicon Valley startup that is developing electric airplanes, as well as a long career as an engineer and program manager at Lockheed Martin Space Systems Company. Consistent with the strategy that we discussed on our prior call, we have also been adding engineering talent below the executive level. As we look forward, we will continue to opportunistically populate our company with talented individuals and develop them to position the company for a bright future. Turning to slide six. As I previewed in my introduction, we have developed and are now implementing a plan to reduce our operating costs. With these reductions, we now estimate that the cash on our balance sheet should carry us through the end of 2023. While we plan to be opportunistic about raising capital when we can, we believe it's prudent to plan to extend our existing cash runway, given the state of the capital markets. We plan to fly our second VigRide vehicle to low Earth orbit on the SpaceX Transporter 6 mission, which is currently targeted for November of 2022. We have also reserved space for Vigoride vehicles on Transporter 7, which SpaceX is currently targeting for February 2023, followed by Transporter 8, which is currently targeted for May of 2023, and Transporter 9, which is currently targeted for October of 2023. Over the next three months, our priority will be to apply all that we learned from our inaugural mission to ensure that our second mission is productive and puts us on a path to establish minimum product viability with Vigoride and to do so as efficiently and affordably as we can. Turning to slide seven, we plan to achieve some of the cost reductions that we're announcing today by exploiting operational efficiencies and cutting overhead spend. Another portion of our reductions relates to delaying R&D projects that we previously planned for the second half of 2022 and 2023 and reducing spending on our efforts to develop a reusable version of our Vigoride vehicle. We continue to believe it is important for us to eventually develop a reusable Vigoride vehicle as this has the potential to reduce our two largest cost items, manufacturing costs, and launch costs, while also allowing us to add new revenue streams such as in-orbit refueling, maintenance, and de-orbiting. However, in the current capital markets environment, we think it makes sense to reduce company-funded spending on R&D projects like this with longer timeframes to produce results in order to conserve cash and extend our runway. Doing so allows us to focus our near-term resources on our primary goal, which again is to incorporate lessons learned from our inaugural mission to ensure that our upcoming VIGRI demonstration missions are productive. We are 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 and technology development while supporting these critically important missions of our government. Before I hand the call over to our CFO Jikon Kim for comments on the Q2 financials, I just want to reiterate my excitement for the progress the company is making. While spacecraft development is challenging and we've been forced to make some tough decisions recently, I'm pleased that we were able to put our historical regulatory difficulties behind us and launch our first spacecraft into orbit. We've now deployed seven of our customer satellites, including six from Vigoride, and we're hopeful that we'll be able to deploy the last three customer satellites in the coming weeks. Furthermore, for the initial technical challenges that we encountered, we were able to quickly get to root cause and put ourselves on track to implement corrective actions before our first follow-on mission as we seek to continue to mature our technology and service offerings. We're also implementing a cash reduction plan to provide us runway to conduct more demonstration missions and place additional customer satellites in orbit with the cash on our balance sheet. The future is bright for Momentus, particularly compared to where we sat just a year ago. I'd like to thank our dedicated team for getting us here, and would also like to thank our customers and investors for their patience during this period. I'll now hand the mic off to our CFO, Jikon Kim, and then we'll take your questions.