Momentus Inc.

Ladies and gentlemen, thank you for standing by and welcome to the Momentous Inc. Fourth Quarter 2022 Earnings Conference Call. I would now like to turn the call over to Daryl Genovese, Vice President of Investor Relations. Please go ahead.

Fourth Quarter 2022 and Fiscal Year 2022 Earnings Conference Call.

With me here today are John Rude, Chief Executive Officer of the company and Chairman of its Board of Directors, as well as Dennis Mahoney, interim chief financial officer. Each will provide prepared remarks. 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 and the year. You can download a copy of the 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 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 prepared in accordance with GAAP. With that, I'd like to turn the call over to our chairman and chief executive officer, John Ruth. Well, thank you, Daryl.

I'm delighted to give you an overview of the company's progress in 2022 and so far in 2023, as well as our plans for the future. I'm also pleased to have Dennis Mahoney here for his first earnings call as our interim CFO. After I make my comments, Dennis will take you through the financial highlights. Turning to slide four. Momentus took great strides in 2022 and so far in 2023 toward our goal of being one of the market leaders in in-space transportation and infrastructure services. We are one of a small number of companies that have launched orbital service vehicles into space to serve this market. We have made significant progress on our technology development, conducting the first launch of our Vigoride orbital service vehicle, called Vigoride 3 in May of 2022. Vigoride 3 was launched from Cape Canaveral, Florida into low Earth orbit on the SpaceX Transporter 5 mission. In addition to launching Vigoride 3 on the Transporter 5 mission, Momentus used a second port on the launch vehicle for a deployer made by a third party. Using Vigoride 3 in this deployer, Momentus placed eight satellites into orbit. These eight satellites were from Fossa Systems, Orbit NTNU, and California State Polytechnic University at Pomona. We also carry the payload from a fourth customer who prefers not to be publicly named. Our inaugural launch of Vigoride 3 was followed by a second Vigoride launch in early January of this year with our Vigoride 5 vehicle, which is the lead ship in our new Block 2.2 configuration that incorporated lessons learned and improvements from the Vigoride 3 mission. Vigoride 5 is now in low Earth orbit where it is in good health and is undergoing a deliberate commissioning process as we prepare to fire its microwave electrothermal thruster in the coming weeks. Maneuver the spacecraft in orbit, place a customer satellite in orbit, and continue to support a cutting-edge hosted payload from Caltech that aims to demonstrate the ability to collect solar energy in space and transmit electricity wirelessly in space and back to Earth. During the first two months of 2023, we conducted the assembly, ground testing, and flight readiness review of the next spacecraft we intend to launch, Vigoride 6. We then shipped Vigoride 6 to its launch site at Vandenberg Space Force Base in California, where it has been integrated onto a SpaceX launch vehicle. I'm pleased to report that we are on track to launch Vigoride 6 on the SpaceX Transporter 7 mission targeted for next month. We've really strengthened our engineering and operations capabilities over the past year. We assembled an impressive group of leaders for our technology development, engineering, program management, manufacturing and operations, and supply chain functions composed of industry veterans with decades of experience at leading companies in space and defense industries. We've also recruited outstanding talent below the level of the organization chart, below the top of the organization chart, down to the individual contributor. Momentus combines the strength of a highly experienced team with the agility of people trained in early stage enterprises, and the interplay between these backgrounds has produced a stronger engineering and innovation culture. We believe our highly experienced team gives us a competitive advantage over our peers. We streamlined our engineering and development organizational structure to support more rapid development of our spacecraft and enable more mature documented engineering processes to develop, assemble, and test our spacecraft and its components. The results are evident as we encountered far fewer issues during the assembly and testing of Vigoride 6 than we did during the production of Vigoride 5, which already represented a big improvement relative to what we experienced on the earlier vehicle, Vigoride 3. To be specific, our engineers and technicians reported 45% fewer non-conformances on Vigoride 6 relative to Vigoride 5. And not only are we seeing progressively fewer issues as our assembly and test processes mature, we're also resolving the issues that we do encounter more rapidly. All of this gives us increased confidence in the reliability of our Vigoride orbital service vehicles. productivity has similarly improved. We completed the assembly and testing of Vigoride 6 faster, with substantially fewer labor hours than Vigoride 5, and we expect to see continued productivity gains during the production of our next vehicle, Vigoride 7, that is already underway. We're pleased with how customer interest has been trending. We recently secured follow-on orders from two of our Vigoride 3 customers as well as contracts with several additional customers, including NASA, LuxSpace, Quava, and Contech. Momentous also signed a Memorandum of Understanding with Citus Space during 2022 to explore launching its LISISAT satellites onboard Vigoride and to generally foster collaboration between our two companies. As I mentioned on our last earnings call, Momentus has started to focus on growing our business with U.S. government departments and agencies like the Defense Department and NASA. We think these customers can ultimately grow to represent a major part of our business. To lead this effort, we've hired Chris Kinman as our new Chief Commercial Officer. Chris comes to us from Northrop Grumman Space Systems, where he led the business development team in their capture of satellite and payload opportunities for the Defense Department and intelligence community. Chris brings more than three decades of experience driving growth in the defense and civil government and commercial space sectors, and he is already making a big difference for us. During 2022, we improved our IT systems, tools, and processes for better cybersecurity and a better user experience that should improve workforce productivity. We've also improved our finance and accounting tools and processes and hired a new interim CFO, Dennis Mahoney, who is here with us today. Dennis has been the CFO or senior financial executive of six publicly traded companies. He has negotiated and closed four acquisitions and one company sale. He comes to Momentus with deep experience in defining financial strategy, scaling operations, and driving profitable growth at technology companies. We're really happy to have Dennis on board. You'll hear from him in just a minute about our Q4 financials. Over just the last few weeks, we've made progress in retiring some legacy obligations from before the company was public, including settling a class action lawsuit. We also successfully raised roughly $10 million in gross proceeds from an institutional investor. Momentus has a share repurchase agreement, or SRA, for a final payment of $10 million to the two founders of the company. The former founders were divested from the company in January 2021 due to U.S. government foreign ownership concerns and the company previously paid $40 million for this purpose. The $10 million investment, which is equivalent to the total specified in the SRA, provided capital to the company to meet the obligations in the SRA. Retirement of these issues clears the way for Momentus to move forward with its vision to provide backbone infrastructure services for the growing space economy. Turning to slide five, in early January of this year, we launched our second Vigoride mission with our Vigoride 5 spacecraft. Recall that Vigoride 5 is a next generation vehicle from our Block 2.2 configuration which is much more capable compared to our previous vehicles. Improvements include a modular payload bay that allows us to swap customer payloads for additional propellant, our next generation microwave electrothermal thruster, or MET, which is designed to be more capable than its predecessor, and enhanced payload hosting capabilities that allow us to host multiple experiments from Caltech onboard Vigoride 5. Turning to slide six, Launch and separation of Vigoride 5 from the launch vehicle has been completed. Vigoride 5 is now in low Earth orbit undergoing commissioning. As commissioning operations advance, Vigoride 5 remains in good health, and the vehicle's power and thermal systems continue to be within nominal ranges. The solar arrays are fully deployed and generating power. Generating power nominally, I might add. Both uplink and downlink communications with the vehicle are healthy. Recent activities have included commissioning the attitude determination system and completing the pressurization of the vehicle's propulsion system. As part of the commissioning campaign, a spacecraft camera has now been activated and has been returning images of the spacecraft, which Momentus uses for engineering evaluation. One of the images we've collected is displayed now. In the coming weeks, Momentous will prioritize testing the vehicle's innovative microwave electro-thermal thruster, or MET. Momentous is a pioneer in commercializing this technology. The MET is designed to use water as a propellant and produce thrust by expelling extremely hot gases through a rocket nozzle. Unlike a conventional rocket engine, which creates thrust through a chemical reaction, the MET is designed to create a plasma and thrust using microwave energy. Using the MET, Momentus aims to offer cost-effective, efficient, safe, and environmentally friendly propulsion to meet the demands for in-space transportation and infrastructure services. We plan to operate Vigoride in space through powered flight and test its ability to maneuver to different orbits using the MET. While we plan to deploy Cosmosis' satellite in its desired orbit, Vigorad 5 will host Caltech's payload for the entirety of its mission. As was the case for our inaugural mission, our intention is to perform the planned flight mission, test our technology in space, meet our obligations to our customers, and apply the lessons learned during the mission to improve our technology. This is hard-earned knowledge that can only be gained through flight experience. Turning to slide seven, Beyond VigRide 5, we plan to launch VigRide 6 on SpaceX's Transporter 7 mission, targeted for next month. The VigRide 6 manifest includes two satellites for NASA, payloads for several commercial customers, as well as a prototype of the momentous Deep Spring Solar Array, or TASA. We're delighted that NASA contracted with us to fly two satellites for their lighted, LLITED or low latitude ionosphere thermosphere enhancements and density mission. We recently completed VigRide 6 assembly and a rigorous ground testing campaign including vibration and thermal testing. Those things simulate those tests simulate the environment that VigRide 6 will encounter in the launch vehicle and in space. This slide that we're showing now illustrates the progress we've made in preparing VigRide 6. The picture at the top left shows the spacecraft in our clean room when we were just beginning to assemble it, and the other photos trace its journey through various stages of testing and launch preparation. Customer satellites have been integrated onto VigRide 6, and we conducted our flight readiness review about a week ago. Then on February 28th, we shipped Vigoride 6 to its launch site at Vandenberg Space Force Base in California, where it has been integrated with the launch vehicle. We're on track to launch Vigoride 6 on the SpaceX Transporter 7 mission targeted for next month. Turning to slide 8, one of the key objectives of the Vigoride 6 mission was to test the Tate Spring Solar Array, or TASA, on orbit. Our team, led by our CTO, Rob Schwartz, has been working on the TASA concept for several years as a potential means of reducing Vigoride unit manufacturing costs and lead times. We've applied the patent to technology behind TASA. You can see the TASA fully unfurled on the left. It's about 11 meters or roughly 36 feet long. To build TASA, the team bonded large sheets of flexible solar cells to taste breaks. The 4-inch mandrel is much smaller than those used in competing rollout solar arrays, which provides weight savings. Once development is complete, we estimate that replacing Vigoride's third-party solar array with TASA could reduce the overall recurring production cost of Vigoride by as much as about 10%, while potentially reducing lead time by several months. These are important improvements as we continue to transition from Vigoride development to production at lower unit costs. We're also seeing interest from commercial and government customers in TASA. Vigoride 6 will be equipped with its standard fold-up solar arrays, so TASA will not be its main power source. Rather, TASA will fly as a hosted payload on the upper deck of Vigoride 6. On the bottom right corner of the chart, you can see TASA in its stowed position on the Vigoride 6 upper deck. Turning to slide 9. We have another technology demonstration planned for our next mission with Vigoride 7 scheduled to be launched on the SpaceX Transporter 9 mission targeted for October 2023. On Vigoride 7, We intend to test and demonstrate Vigoride's ability to rendezvous with other objects in space and maintain close proximity. Vigoride 7 will deploy a satellite and then attempt to maneuver closer and farther away, as well as maintain relative distance to it in space using a sensor suite designed for rendezvous and proximity operations, or RPO. Recall that the current version of Vigoride, Block 2.2, is expendable. After completing its mission, it moves to a decaying orbit and burns up during reentry. A reusable VigRide, after completing its mission, would rendezvous with and provide services to additional customer satellites. To be clear, what we mean by reusable VigRide is one that would stay in space and be refueled and therefore reused on later missions. This would allow Momentus to serve customers at lower cost than it can by building and launching an additional Vigoride. We think transitioning from an expendable to a reusable Vigoride vehicle offers the potential to deeply reduce our manufacturing and launch costs, and part of that process is the need to upgrade Vigoride with a few key technologies, including RPO. RPO capability is also key to our ability to expand the menu of services that Vigoride can provide to include in-orbit maintenance and refueling of customer satellites, life extension, and de-orbiting of satellites at the end of their useful life. Turning to slide 10, this slide shows a few commercial highlights from the fourth quarter and early part of 2023. Contech is a Korean company that is a new customer. Momentus plans to provide transportation services for the JinjuSat-1 CubeSat in 2023 in support of a Korean national space project. We've also signed two spring contracts with the Australian Research Council Training Center for CubeSats, Uncrewed Aerial Vehicles and Their Applications, or QAVA. Our contracts are for the transportation of two QAVA CubeSats to low Earth orbit. QAVA is a new customer. We also signed contracts with Fossus Systems in Spain for the transportation of two satellites and one pocket pod deployer carrying eight satellites. As I mentioned, FOSA is a previous Momentus customer who participated in our Vigoride 3 mission. We deployed six satellites on that mission from a FOSA deployer. And then finally, we signed a contract with another repeat customer who would prefer not to be named publicly. Turning to slide 11. We're excited about the potential growth of the markets we serve. This chart estimates market segment sizes for last mile transportation and deorbiting services, where we expect growth to accelerate given recent regulatory changes from the Federal Communications Commission, or FCC, that we covered in detail in our last earnings call. That will require operators to deorbit their satellites within five years after mission conclusion, as well as the potential for harmonization from other global regulatory bodies to closely resemble the new FCC rules. Defense and civil government space budgets are growing. As you can see, they're measured in the billions of dollars. We believe Momentus has the right team and experience to appeal to these customers with decades of experience in the aerospace and defense industry and at the Department of Defense in senior positions. That's where we're focusing our business development efforts. Turning to slide 12, I would like to conclude my prepared remarks with a summary of the key reasons why Momentus is well positioned in the space market. First, the markets that we serve are rapidly developing. As a result of progressively lower costs, 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 need, and the regulatory environment is trending favorably, with new FCC de-orbiting rules being an important example. The Space Foundation estimates the size of the space economy at about $469 billion today, and Morgan Stanley's space team expects the market to more than double to over $1 trillion by 2040. Bank of America and other groups forecast even faster growth. Second, Momentus is well positioned to capture a portion of this growing market. Momentus has now launched two Vigoride vehicles to space and is well on its way to launching a third. While others have aspirations, we are one of just a select group of companies already flying in space, and we've deployed eight customer satellites. Beyond our in-space transportation service, We offer payload hosting services and are currently flying a substantial hosted payload for Caltech. We believe our power generation capabilities and the size and flexibility of our configuration give us a competitive advantage in this segment. We continue to build on our service offering and plan to introduce in-orbit services such as satellite maintenance and refueling and orbital debris removal. Our planned 2023 RPO demonstration should aid us in this effort. Our relationships with launch companies such as SpaceX are strong. Moreover, Vigoride is launch vehicle agnostic, so we should benefit from increasing launch capacity and associated price competition amongst launch providers over time. Third, we were encouraged by our improvements in reliability and in efficiency. we're confident that we're on a path to be a profitable business once we get to scale. Our costs exceed revenue today as we're still early on the learning curve and are producing and flying Vigorides at a low frequency. As we increase vehicle reliability, we expect capacity utilization and revenue generation per Vigoride mission to increase. At the same time, we expect to be able to produce Vigorides more efficiently and as a result of learning, economies of scale, design for manufacturing, and targeted cost reduction efforts like our TASA. As a result, as revenue grows, we plan to achieve profitability and expand margins in the future. Additionally, we expect a discrete margin boost once we introduce reusable diggerite 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 as evidenced by all the progress the company has made in these last 18 months. Overall, I believe the combination of a growing space economy, favorable demand for the services we provide, competitive advantages relative to other in-space transportation providers, and potential for margin improvement position Moments as well for the future. I'm pleased with what we were able to accomplish in 2022 and so far in 2023, including the launch of two orbital service vehicles, the deployment of eight customer satellites, our progress towards conducting the Vigoride 6 launch next month, recent customer contracts, further progress on our cost reduction plan, and the retirement of legacy matters through the settlements of the class action lawsuit and raising capital to cover expenses of the share repurchase agreement with our former founders. As I look back over the last 18 months since we've gone public, I'm proud of how many consequential strides Momentus has taken from being a startup to the disciplined public company we are today. This has not been easy, not by any means, but seeing what we've done successfully over these 18 months is what gives me great optimism for our future success. Perhaps most of all, adding new talent at all levels of the company has resulted in a culture that is focused, relentless, and refuses to quit. I'd like to thank our dedicated team for getting us here, and would also like to thank our customers and investors for their continued support. I'll now hand the mic off to our interim CFO, Dennis Mahoney, and then we'll take your questions. Thank you, John.

I am pleased to present highlights of the financial results achieved by the momentous team during our fourth quarter, and fiscal year 2022 with comparisons to prior corresponding periods. Turning to slide 14, our fourth quarter and fiscal year 2022 results reflect our ongoing progress and investments toward our future launches. We currently have contracts for approximately $33 million in backlog, representing potential revenue as of December 31st 2022 compared to $43 million at the end of Q3 2022 and to $67 million at 2021 fiscal year end. The $33 million in contracts have been entered into with 18 companies in 12 countries, similar totals to the prior periods. The decline in total backlog at fiscal year end 2022 compared to Q3 2022 and fiscal 2021 is due to the combination of fulfillment of prior contracts, cancellations, and the expiration of option agreements entered into for a fee to participate in momentous flights at future dates. Typically, our customers have the right to cancel a flight reservation, and when doing so, forego their deposits and milestone payments. Should a customer cancel a contract for the 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. The decline in backlog from prior periods to $33 million at Q4 2022 was due to a combination of these factors, including the expiration of options. Of particular note, our firm contracted order backlog is consistent with levels reported at the end of Q3 2022. We ended Q4 2022 with non-restricted cash, and cash equivalents of $61 million, which compares to ending cash balances of $160 million at Q4 2021 and to $82 million at Q3 2022. We believe the company has sufficient liquidity to meet its needs for the next 12 months. We ended the year and fourth quarter of 2022 with approximately $15 million in outstanding gross debt consisting of a term loan that we began to repay in March versus $25 million at the year ended 2021. We invested approximately $88 million in operations in 2022 compared to $87 million in 2021. 2022 investments of $88 million include $17 million in Q4 2022, a like amount compared to Q4 2021 and in line with our plan. We recognized $299,000 in revenue in 2022 compared to $330,000 in 2021. During Q4 2022, We recognized $120,000 in revenue, which included customer deposits forfeited upon the expiration of options. Other 2022 revenue related to Vigoride 3 as it continued to deploy customer satellites, fulfilling performance obligations to our customers. The majority of our Vigoride manufacturing costs and launch costs are accounted for as research and development expense. because the Vigoride platform is still under development. We expect gross margins to decline once Vigoride development is completed, and we enter the production phase when costs will be accounted for as costs of revenue and not research and development expenses. In the fourth quarter of 2022, we generated approximately $21 million in losses from operations. On a non-GAAP basis, our adjusted EBITDA was negative $15.5 million, which represents an improvement of approximately $500,000 versus Q3 2022. Please refer to the earnings press release issued today for the reconciliation of EBITDA to GAAP net income. Non-GAAP SG&A expenses for the fourth quarter of 2022 totaled approximately $6 million, approximately $1 million lower than Q3 2022. Non-GAAP R&D expenses for the fourth quarter 2022 total approximately $10 million in line with Q3 2022. We ended Q4 2022 with approximately 84 million shares outstanding. I will now hand the call back to Daryl.

Thank you, Dennis. 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 outset of this call extend to the question and answer session. This includes our disclaimers relating to non-GAAP financial measures and forward-looking statements. Mandeep, would you please remind participants how to enter the queue?

The floor is now open for your questions. To ask a question in this time, please press star 1 on your telephone keypad. If at any point you'd like to withdraw from the queue, please press star one again. You'll be provided the opportunity to ask one question and one further follow-up question. We'll take a moment to render our roster. Our first question comes from Eric Ramison from Stiefel. Please proceed.

Yes, thanks for taking the questions. Maybe just starting with the VigoRide 5, given the success you've seen so far and the achievement of certain milestones around, I think you mentioned the solar arrays deployment, the vehicle's power and communications, has this changed or improved your timeframe maybe for being able to do precise orbits and transportation services?

Well, thanks for the question, Eric. The Vigoride 5 mission, of course, is the second mission that we've conducted, first one being last year in May of 2022. The spacecraft, the Vigoride 5 spacecraft right now is in low Earth orbit. Again, the spacecraft is in good health. Its solar arrays are fully deployed and generating power nominally. We're able to charge and discharge the batteries normally. The telemetry we're getting back through regular communications and the uplinks are in good health. The key performance requirements that we're going to aim to meet coming up soon is that we, as I mentioned, attitude determination has been enabled and our pressurization of the fuel system essentially allows you to move the water propellant around on the spacecraft. So we've tested our ability to do that. The things that are coming soon, will be completion of commissioning of the reaction control system first. And the reaction control system uses the same water in the same propellant tank as the microwave electrothermal thruster. And so with that RCS, we will not only reorient and adjust our attitude as necessary, but it's one of the redundancy features that we have in Vigoride that if for some reason the microwave electrothermal thruster should not perform, we can maneuver the vehicle using the water-based reaction control system to different altitudes and adjust our position in space that way. Now, we do plan to test the microwave electrothermal thruster soon. In just the coming weeks, we expect to, we plan to test that system. We've tested it, of course, you know, dozens and dozens of times on the Earth in conditions that simulate space. But now we're looking forward to this latest, the next generation, I should say, of our microwave electrothermal thruster operating in space. And those are the keys to space transportation, as you mentioned. Having the ability to maneuver and deliver customers to precise custom orbits, either through space transportation services or through the kind of hosted payload service that we're providing to a customer like Caltech. And we do think that our technology provides a competitive advantage in our ability to service those needs, particularly hosted payloads. And there's more opportunity in hosted payloads for differentiation and margin expansion.

Great. So it seems like, you know, this is just an ongoing process, and we'll find out more in the coming weeks. And then obviously with the VigoRide 6 coming up in April, But maybe just my follow-up question, you know, you've settled the class action lawsuit. That was a material drag on the business. As you continue to scale the business and drive efficiencies, how should we be thinking about the quarterly cash burn rate and your timeframe for achieving break-even? Thank you.

Sure. Maybe I'll mention a couple things and turn over to our CFO, Dennis, on that matter. Certainly, it's something that we're paying close attention to as we begin to scale the business. You mentioned the settlement, the class action lawsuit. We're very pleased to have that behind us. It's been pending for a while, and while the settlement provides a near-term cash outflow, it does allow us to reduce our ongoing legal spending now that that issue is behind us. So why don't I turn to Dennis to cover some of the things on the cash outlook.

Well, thank you, John and Eric. It's very nice to meet you on this call. While, of course, we do not give forward-looking guidance, Eric, perhaps I can clarify for you more about our results that we've achieved and progress we've made in this year just ended. Also, we are absolutely focused on resource utilization. and putting our wood behind all the right arrows and managing our cash appropriately. We also of course watch markets and watch opportunities and we will continue to act opportunistically and we believe we can say with good judgment going forward. When we look at our cash burn this last year, we also see a trend and while we can't predict what that trend might be in the future, we're certainly well-focused on the goal. And our monthly cash burn for the fourth quarter of this year was $6.8 million. That compares to cash burns in the first half of the year that were between $8 and $9 million. So we had a very good trend as we completed fiscal year 2022. Cash is king. We'll continue to watch it and manage our business tightly. those were monthly figures that Dennis provided.

Understood. Great. Thanks for the update. Good luck.

Thank you, Eric.

Our next question comes from the line of David Strauss from Barclays. Please proceed.

Hi. Good afternoon. This is Josh Korn on for David. Just wanted to ask, how does the forward sales pipeline look? Thanks.

Sure. One of the things that we're very pleased about is as we generate more flight heritage and as we get further in our development cycle, we're seeing growing interest from commercial customers as well as government customers. On the pipeline, we continue to see customer opportunities we're bidding about. We feel good about the way our service offering aligns with our customers' plans to go to market. As we mentioned earlier, we recently announced some customer orders from repeat customers like Fossus Systems, as well as new customers like Contech and Quava. Where we're seeing significant opportunities to grow our business and that we're actively pursuing is with the Defense Department and NASA. The feedback we're receiving is very encouraging about the capabilities of our big ride orbital service vehicle and its ability to support a range of military, intelligence, scientific needs and things of that nature at the Defense Department and NASA. Some of the discriminators or the things that we think set us apart in that market is that the Vigoride orbital service vehicle has a lot of power relative to our competitors, and power is one of the coins of the realm that allow you to support instruments, payloads, the operations of the systems on board a spacecraft and have a hosted payload. and to do different missions with them. Secondly, our configuration is very flexible compared to our competitors. Right now we're flying the Caltech payload on Vigoride 5. I would say a number of our other competitors are not able to fly a payload of that type because of the size and configuration of it. And so that's a second advantage that Vigoride provides. A third would be the payload hosting capacity. The fourth would be our speed to market. One of the feedback pieces we're getting, particularly from government customers, is the speed at which we can produce vehicles. We just produced our third one in under a year, and it was a real joy for us all to be outside our headquarters here cheering the truck as it pulled away to go to the launch site with them. Those are some special moments in the space industry. And then a last discriminator or differentiator that I'll mention is We intend to be very competitive on cost and to compete aggressively in that area. So for all those reasons, I think we're very optimistic about the future. And then lastly, I'd say there's an external change that government regulators have brought. This new FCC rule requiring the de-orbited satellites after five years at the end of their useful life is a real change in the environment. Just to give you a sense of the scale of that, according to the Government Accountability Office, or GAO, today about 5,500 satellites are in orbit. The GAO estimates by 2030, over 55,000 will be in orbit. That's a roughly tenfold expansion over the next seven years. And so as we begin to think about the need to de-orbit those satellites consistent with the new FCC rule and rules that their government counterparts in places like Europe are going to implement. That's going to provide another significant opportunity for a flexible orbital service vehicle like Vigoride.

Our next question comes from the line of Edison Yu from Deutsche Bank. Please proceed.

Hey, thanks for taking our questions. First, I understand that you're going to test the MET properly in the next few weeks. Do you have some parameters in mind in how you would define success or various levels of success? Curious how you're thinking about that.

Well, thanks for the question, Edison. The microwave electrothermal thruster onboard Vigoride 5 is something that we intend to test here in the coming weeks, as you mentioned. Some of the things that we'll evaluate is the water on board Vigoride 5, once it is moved to the thrust chamber, if you will, first it's vaporized, and then there's a startup sequence that we will monitor and evaluate carefully because once that startup sequence begins, we can control the burn and the duration of it and modify the position of Vigoride 5 using the NUT. And so we'll evaluate its performance. We'll look very carefully and deliberately at the telemetry we're receiving, and we'll look at any refinements that we want to offer in the performance of it and assess its performance. That's the plan. Now, once the MET begins operation, we do intend to change the altitude and inclination of Vigoride. That's one of the benefits of an orbital service vehicle is your ability to take satellites to different altitudes from the drop-off location, so your customers receive a custom orbit. They're not just going to the general location of being about 500 kilometers up in space, but they're going specifically to where they want to go. It's a lot like a container ship being the equivalent of the launch vehicle on Earth that takes a series of cargo payloads to the port, but that cargo needs to be redistributed elsewhere, and that's the role we intend to play. and are playing. Then secondly, on the inclination change, that allows you to modify the orbit so that you can go to a more precise location that is optimized for a customer's needs, depending on whether it's a communications mission or a remote sensing mission or whatever the particular customer requirements are. So we'll do those things using the, that's our plan anyways, to do those things with the MET in the coming weeks.

Understood. Separately, on the Vigoride 7, the reusable one, how comfortable are you with the tech upgrades that are needed to do this? And also, you mentioned significant savings. Do you have a sense of how much we're talking about here in terms of the cost?

Well, Vigoride 7 is currently being assembled in our clean room here where we're doing this call from in San Jose, California. Vigoride 7 will be assembled over the coming weeks and we'll complete the testing of it. Vigoride, just to clarify, Edison, Vigoride 7 is a block 2.2 vehicle, which is the same configuration. which is expendable as Vigoride 5 in orbit now and Vigoride 6 that is integrated for launch next month. Now, a reusable Vigoride is part of our feature product roadmap. And the first demonstration of some of those key technologies needed for a reusable version will be on Vigoride 7 with the remote proximity operations or RPO projects. We do think it's very important to eventually develop a reusable Vigoride vehicle, as this has the potential to reduce our two largest cost items, which are manufacturing costs and launch costs, while also allowing us to add new revenue streams, such as in-orbit refueling, maintenance, and deorbiting. In terms of, you know, rule of thumb to assess the magnitude of the cost reduction, the intent is for the reusable, or you might call it refuelable Vigoride, to stay in space. So it would go to space on the launch vehicle, deliver its customers or support hosted payloads or do in-space servicing, and then stay there. And on a subsequent launch vehicle, replenishment fuel or additional payloads would be delivered, and Vigoride, the reusable version in the future, could then refuel itself, take the payloads, and continue onward And the plan is to do this a few times. And so if you think about the cost to produce one Vigoride and one launch being useful to support one set of missions, if you can do that for two, three, four, five missions, you can see the commensurate reduction in launch costs. It's not exactly a 100% reduction because after all you have to send up new fuel and payloads, but you're being much, much more efficient by not launching the mass of the vehicle itself, but rather just the fuel and the additional payloads.

Thanks. I could just sneak one more in. I think on the last earnings call, you had mentioned you're bidding or going after some government contracts, defense contracts. Do we have any updates on the prospects of those?

Yes, thanks for the good question. We are focusing on government business, particularly with the Defense Department that we are pursuing. The interest that we're receiving has been very rewarding. These government organizations are actively engaging with us. They are commenting about a number of the ways that they see our platform, our capabilities being differentiated. And they like the flexibility of the platform that we have, the power that's available, the speed at which we can produce the vehicles, and the cost. So we're in active dialogue with Defense Department organizations like the Space Force, SDA, DARPA, and we're also talking to NASA to pursue additional business. We're optimistic about those. As you know, these are a long cycle business with the government, and so we don't have any contracts to announce today. However, we're optimistic about the future in that area.

Thank you.

Our next question comes from the line of James Ratcliffe from Evercore ISI. Please proceed.

All right, thanks for taking the question. I noticed that SpaceX recently raised their rideshare prices, and what does that mean for you directly, particularly in regards to the aggregation business, and how protected, if at all, are you against those increases? And in regards to the bigger picture, what's your view on overall trends in cost to orbit now versus the way things were looking, say, a year ago? Thanks.

Well, thanks for the question, James. We currently have a launch service agreement signed with SpaceX that will cover our launches planned in 2023 and the first one planned in 2024, which is currently targeted for January of 2024. And so on those missions where we already have a signed launch services agreement contract, our prices there will not be affected by the increase in prices that SpaceX recently announced. After those contracts, though, we would, like others in the market, be subject to the increased pricing that SpaceX has introduced. That new pricing structure, which is really meant to also come with a new interface for ride-sharing missions, is designed to provide increased flexibility to SpaceX customers. We maintain a very close dialogue with SpaceX. And I will say, once those new costs come into play, our cost per mission will be higher under that new framework. However, that won't be unique to us. It'll also affect our competitors who are also flying on SpaceX. And certainly, once Starship is introduced to the market by SpaceX, and of course they're saying that they're planning to launch Starship this year, That's a much larger rocket, British understatement there. It's substantially larger, of course. That will significantly reduce the per pound or per kilogram cost to place things in orbit. The other thing I'd say is we're seeing other competitors to SpaceX begin to mature their rockets. Relativity, for instance, is talking about conducting or is planning to conduct their first launch here shortly. And we have seen other new systems be tested. You know, it reminds us all of the difficulty in doing that. You probably saw the news about Japan, the Japanese space agency, and the unfortunate failure of the H3 launch here in the last 24 hours from Tanegashima. And, you know, we've seen other examples of that with Ariane's bus and their recent Vega failure, KBL. in virgin orbit. So there are, it just reminds us of how difficult space can be. But as those new systems come online and we see more competition and more capacity, including from Starship, we think we're going to see launch costs begin to, you know, have price positively affected to come down. So, you know, this is one of the things that there's a lot of demand for existing launch vehicle capacity in the industry. And so I think as there are more opportunities to go to space, our customers will also benefit.

Thank you. Thanks for the question.

Our final question comes from the line of Michael Massison from Singular Research. Please proceed.

Good evening, gentlemen. Just coming back to some of the financial figures that we work with, You mentioned that your order backlog stands at $33 million as of quarter end, and the committed portion of that is consistent with prior periods, but I didn't hear a figure. Do you disclose a figure for the committed amount?

No, we have not been disclosing that breakdown.

OK.

Michael, the backlog at the year end, December 31st, was $33 million. And the key takeaway would be that our fixed component of that, because $33 million includes firm orders as well as options, and the firm component of that has remained steady from previous quarters when we've announced that. The decline in recent backlog was due to the expiration of some options. The way we sign contracts with our customers is we allow them to sign options in some cases if they wish to for future contracts. And obviously that's an advantage for us to potentially gain future new business. And so a number of those options had expired this last quarter.

Very good. Thanks for clarifying. So just for modeling revenue going through this year anyway, Do we have committed payloads for the October launch?

We have some committed payloads for the October 2023 launch that are presently in backlog, and obviously our salespeople are out trying to get more, and I, for one, am hoping they get more.

So are we all. Well, thank you very much for taking the questions, and thank you for a good quarter.

Thank you, Michael.

thank you ladies and gentlemen this does conclude today's call thank you for your participation you may now disconnect