Good day and welcome to the Momentus, Inc. Second Quarter 2012 Earnings Conference Call. All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question-and-answer session. [Operator Instructions] I will now hand today's call over to Mr. Darryl Genovesi, Vice President of Investor Relations. Please go ahead.

Thank you, Tamika, and good morning everyone. Welcome to Momentus’s second quarter 2022 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 Jikun Kim, 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. 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 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 Rood.

Thank you, Darryl. 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 in this 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're implementing to conserve cash and extend our runway through the end of 2023. After I make my comments, our CFO Jikun 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 and obtaining US government licenses, completing assembly and ground testing of the Vigoride 3 orbital transfer vehicles, 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 Momentus customer satellite from a third party deployment system, which brings to a total of seven Momentus customer satellites placed in lower orbit thus far of 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…

Thank you, John. And before I discuss the second-quarter financials I would like to take this opportunity to thank the Momentus team for their hard work and dedication. Turning to slide eight. Our second quarter results reflect our ongoing progress in investments toward our future launches. We have cumulatively signed contracts for approximately $55 million in backlog or potential revenue as of July 31, 2022. The reduction from the $69 million backlog that we reported a quarter ago was driven primarily by a contract cancellation by one of our customers. This customer recently underwent a change in ownership, restructured business model which reduces needs for satellite transportation services. Recall that our reported backlog includes firm orders as well as option. These options give our customers the flexibility to opt into an available launch slot without requiring a separate agreement. The breadth of these signed contracts spans across 22 companies in 16 countries. In general, our customers have the right to cancel their contracts with the understanding that they will forfeit their deposits and milestone payments. If a customer cancels a contract before all the payments are made, the resulting revenue will be less than the full value of the backlog. We ended Q2 with non-restricted cash and cash equivalents of $109 million, which we believe should carry us through to the end of 2023 as John described. We ended the quarter with approximately $21 million in outstanding gross debt. We paid down approximately $3 million in debt during the quarter. We invested approximately $23 million in operations during Q2, in line with our Q1 burn rate. We recognized $50,000 in revenue and $38,000 in gross profits as our inaugural mission fulfilled a portion of our performance obligations to our customers. In the quarter, we generated approximately $24 million in losses from operations. On a non-GAAP basis, our adjusted EBITDA was a negative $18 million, which is approximately $1 million lower sequentially from Q1. Please refer to the earnings press release issued today for the reconciliation of adjusted EBITDA to GAAP net income. Non-GAAP SG&A expenses for the second quarter totaled approximately $8 million, approximately in line with the prior quarter. Non-GAAP R&D expenses for the second quarter totaled approximately $10 million, approximately $1 million higher from the prior quarter. We ended Q2 with approximately 83.3 million shares outstanding. I will now hand the call back to Darryl Genovesi.

Thank you. In a moment, we'll move on to the question-and-answer portion of our call. I would like to remind participants that all disclaimers outlined at the onset of this call extends to the question-and-answer session. This includes our disclaimer relating to non-GAAP financial information, forward-looking statements and the technology underlying -- underlying our planned service offering. Operator, would you please remind participants how to enter the queue.

[Operator Instructions] Our first question comes from the line of Karl Oehlschlaeger with Vertical Research.

Hi, John. Can you talk a little bit about how you're tracking schedule rides for November? If there's any -- is there cushion in the schedule? Or are there any risk items?

Thank you for the question. As we get closer to the November launch, obviously, let me start again and say, right now, we are on track to launch in November on the targeted time for the SpaceX Transporter-6 mission. It is -- we are -- we do have a tight schedule to prepare the Vigoride vehicle for that purpose. We're continuing to do the assembly work and the ground testing on Vigoride 5, which is the next one that we'll launch. As I mentioned, we're manifested and signed launch services agreements with SpaceX, not only for the Transporter-6 mission currently targeted for November, but for other missions throughout 2023. Similar to where we were with Vigoride 3 a few months ago, again, our schedule to prepare for the next Vigoride vehicle for launch in November is similarly tight. We were working very hard to meet the planned schedule. Our inaugural mission was a learning experience and we want to learn, use what we learned during that Vigoride 3 mission for our first follow on mission. We've also had some other hurdles to overcome, including supply chain delays, COVID, which has been problematic for our team this way and other factors. I do want to add, if we were to experience an issue that caused us to miss a launch, we would seek to fly again shortly thereafter with the additional agreements we've signed with SpaceX through the end of 2023 which are targeted again for February of 2023, May of 2023 and October of 2023. So all in all, I think the main challenge we face is simply a tight schedule and completing the remaining activities on that schedule. And two, the performance specifications that we have in mind, we are implementing some enhanced ground testing on the Vigoride vehicle and its components to provide some even additional testing beyond the rigorous testing we did for Vigoride 3 to incorporate the lessons learned and to make sure that the corrective actions we've implemented to address the anomalies we experienced at Vigoride 3 are accomplished. So we're in the process of executing that. Again, I'm optimistic that we're going to make the launch, but it's a tight schedule.

Okay. Thank you very much.

Your next question is from the line of with Evercore ISI.

Hi. Thanks for taking the question. Two if I could. First of all, can you give us any color about the extended cash runway, if there are any revenue assumptions incorporated that's from these upcoming launches? And also if there's -- you're expecting to continue to pay down the term loan as part of that? And second, John, you mentioned government contracts as a source -- potential source of funding for other promising technology efforts that you may be sort of back burner right now in order to extend the runway. Can you give us some color on what those would look like or what sort of programs you're talking about? Thanks.

Thank you for the good questions. I really appreciate it. First, with respect to the cost reduction plan that we've developed, as I mentioned during the call, we have developed and we're already implementing a plan to reduce our operating costs. Again, with those reductions, our estimate is that the cash currently on our balance sheet should carry us through the end of 2023. We plan to achieve some of these cost reductions by exploiting operational efficiencies, cutting overhead spending, consultant spending and other types of spending that don't immediately contribute to our coming Vigoride demonstration missions. Another portion of our plan to conserve cash and extend our runway, as I mentioned, involves delaying some R&D projects that we previously planned. While our efforts to develop a reusable version of Vigoride will be delayed from our previous plans, we do plan to continue to fund key aspects to keep the project moving even at a lower burn rate. This is one area where government funding could be very helpful. You asked about our plans with respect to government funding. We have recently focused efforts to begin pursuing that business in earnest. We have submitted some proposals, which are being evaluated by government agencies. And we're identifying other opportunities and we'll be looking for more of those, because we think the capabilities that we bring to the market are a good match for that market as well. And now that we have implemented our national security agreement successfully and accomplished retiring our historical regulatory issues, we do believe it's important now to start pursuing this type of business with the government. We continue to believe it's important on the issue of the Vigoride vehicle, we do continue to believe it's important to develop a reusable version of the Vigoride as this…

Yes, James, you asked I think about debt repayments and those expenditures include the continued repayment of our public financial obligations and debt.

Just to make sure I understand, so essentially you’re looking at the current cash balance lasting until the end of 2023, including debt pay down, but it sounds like not assuming any material revenue over that time period.

Yes. Well, the revenues are -- we do have a forecasted revenue based on our backlog, but we are not assuming any milestone payments from the result of those revenues.

Got it. Thank you.

Sure.

Your next question is from the line of Edison Yee with Deutsche Bank.

Hey, a couple of follow ups. So on the solar panel issue from the way you described it, it seems it was very mechanical. How comfortable are you, I guess, not only in the issue itself, but I guess the process behind checking things, because it seems like a relatively simple issue with the supplier that sort of derailed the mission. And I'm just curious to know, do we need to like revise any processes to make sure this doesn't happen again.

Well, thank you for the good question, Edison. As is common with first flights and new systems in space, we learned a lot during the initial demonstration mission of the Vigoride vehicle, including about the solar panels and their deployment mechanisms. We gathered important insights. We also gathered valuable data from space, both about the things that worked as expected and some other things that did not operate as planned. The solar panels and the associated mechanisms used to deploy or unfurl the deployable solar arrays are made by a third party supplier as I mentioned. We're pleased that the body mounted solar panels that use the same solar cells as the deployable solar arrays operated normally. The solar cells on the outside panels of the deployable solar panels that were exposed to sunlight also operated normally. The solar panels in the deployable arrays on Vigoride 3, including their deployment mechanisms, I want to point out, were tested on the ground dozens of times before the launch. Through close collaboration though with the solar panel provider analysis and additional verification ground testing, we believe we've identified the root cause of the issues we experienced with those deployable solar arrays during the Vigoride 3 mission and we've replicated those issues during ground tests. We had an independent review team of space experts analyze the findings of the Momentus engineers, both on this issue with respect to the deployable solar arrays and the entire mission and they concurred with the findings of our engineering team. I really want to thank that independent team by the way for the rigorous review that they did and the thoroughness of it. Unfortunately, as you mentioned in your question, there was one component in the mechanisms used to deploy the solar arrays that had an unknown design flaw and it differed from the test equipment that perform the ground tests on the deployable solar arrays used on Vigoride 3. So this has what led to the mechanical issue experienced in space that prevented the deployable solar panels from operating as intended. We believe the specific root cause of that issue with the deployable solar arrays has been addressed and that specific component has been replaced in the mechanisms on the deployable solar arrays that are being prepared for our next Vigoride mission in November of this year. In addition, as you've asked about, we have developed a set of enhanced test procedures. We've installed a sophisticated new test structure -- test structures at Momentus headquarters and are working closely with the supplier of those deployable solar arrays to implement even more extensive ground test campaign for the solar arrays that are going to be used on our future Vigoride missions. So this is just another area where we're going to implement the lessons learned. And with this idea of continuous improvement to be an even more effective space company.

Appreciate the color. Separately, I want to follow-up on the government contract comments. Are there any specific programs either from NASA or DoD that could be leveraged here? I know some of the launch companies, the launch startups go after these venture class kind of missions. Is there anything you could kind of point us toward that already could be a potential source of funding?

Well, we have been looking at opportunities both at NASA and the Defense Department Organizations because we do think our technology would support these important missions to our government customers. And in particular, NASA has a series of different solicitations. You mentioned one of them, venture class. But as an example, we submitted a bid for the NASA tipping point proposals. The philosophy behind the NASA tipping point proposals is to bidders are encouraged to come forward to NASA with ideas that could both have an application for NASA and are something that could be commercialized. And so that's one that we've submitted a proposal for and it's under evaluation. We've also submitted other bids for NASA contracts under something called the VADR contract vehicle, VADR, with a partner company. We're also pursuing some DoD and space development agency opportunities and we're looking at other opportunities across the defense department and plan to in the future begin bidding those as well. As you know, these solicitations and opportunities take some time to develop. And so we're beginning to put those into our cycle and our system to pursue those. Because again, I think that given the progress we've made implementing our national security agreement and retiring our historical regulatory issues. I think we're now in a position to pursue this sort of opportunity set in earnest and are eager to do so because for our technology development, we think there's a nice overlap between our aims in the commercial world and supporting the needs of these government customers.

Understood. Last one for me, just a look at housekeeping. On the revenue I guess for the remaining satellites, any sort of rough guidance you can give there? I know it's not necessarily material amount, but just how to think about the remaining satellites? And then on the overhead reduction, the cost reductions, should we think about that coming basically from OpEx?

So on the revenue recognition, so again, we don't guide, but it's not unrealistic to think about a couple of hundred thousand next quarter. And then from a cost reduction standpoint, yes, it’s -- we will see it on SG&A as well as R&D expenditure. But again, our focus is on maintaining our ability to fly the five, six and seven. And then -- so the cost won't immediately decline today, but shortly thereafter we're expecting a reduction.

Great. Thanks a lot.

Sure.

[Operator Instructions] Your next question is from the line of Colin Canfield with Barclays.

Hey, good afternoon. Can you update us on what level of issued cadence or asset utilization you need to see before you can generate cash?

Sure. Thank you for the good question. Our plans right now as Jikun, our CFO mentioned, I wanted to answer part of the last question and years with the same portion, which is our cost reduction activity is preserve fully our ability to produce assemble tests, ship to the launch base and add enhanced test procedures for Vigoride number five, six and seven. And that's why you'll begin seeing additional cost reductions following those long launches. Now you asked about the launch cadence. So those three launches are targeted to occur on SpaceX Transporter rideshare missions, the next one, Transporter-6 is in November. That's the target date from SpaceX. The next one after that is targeted for February of 2023. The following one after that is targeted for May of 2023. And then there's another one that we have signed a launch services agreement or contract for to reserve space for October 2023. So we have signed contracts, launch service agreements with SpaceX for these next four transporter missions that occur on roughly three to four month cycles, as I mentioned. Consistent with our strategy, our focus has been to bring Vigoride to market as early as possible with the features and reliability we know our customers need. We're pleased with the success that this deliberate and disciplined approach has brought us. We plan on continuing with it to make progress both operationally and financially. Again, we estimate that based on the planned cost reductions that we're implementing using the cash currently on our balance sheet, we should be able to extend the runway through the end of 2023, which will fund the cadence that I described for you. We've sized our cost reductions so that our next three missions can be fully funded with the cash on our balance sheet, meaning, Vigoride-5 this fall followed by Vigoride-6 and Vigoride-7 in early 2023. So getting these three missions right over the next 10 months is the highest priority for our company within the framework of our available cash. We do expect customer order activity to pick up once we establish flight heritage, but there will be some lag between when we receive those orders to recognizing revenues and ultimately profits of course.

Got it. And with this level of commercial and new company starts that you're tracking that can kind of point to like -- Obviously, we know where government budgets are at and sort of the level of launch contract, money available, and mission contract money is available. But maybe if you could just talk about how rising rates and kind of the space funding environment is interacting with some of the more smaller satellite constellations that come from commercial users?

Well, we're continuing to see a pretty robust number of players in the small satellite market. As a matter of fact, when you visit the number of these industry conferences or begin to see the diversity of ideas in ways that these innovative companies are thinking about, not only doing new things in space in different ways, but also how -- because of kind of a confluence of a couple of major events, which is the decline in launch costs, which used to be a huge barrier to entry for most players. And then the ability to make very small satellites, very capable in ways that the technology didn't allow for it before. So because it's much less expensive per kilogram to put your satellite in orbit and you can do much more with a much smaller satellite. It's very interesting to see. And so for example, there's a large small set conference underway as we speak in Utah where we are seeing a lot of customer activity there. So I do think that even in this -- in a tougher market, we're still seeing quite a few entrants and a robust amount of activity. You asked about [Multiple Speakers] Please go ahead. Sorry.

If you can just quantify that with the number of new starts you're seeing or new constellations you're seeing. And you mentioned it's a troubled environment, so I just wanted to make sure we kind of have a good sense.

We look at a number of these industry forecasts to do that. And I'd say we continue to see customer opportunities in the commercial space, as well as government that we're bidding on. And we do think our service offering aligns very well with these customers' plans in the new space economy. In terms of the quantification, in our 10-K you can see there's a number of third party market forecasts that indicate the total addressable market for space transportation is growing and we'll continue to do so. We don't perform independent market analysis like that. We have been using several of the ones that are available. There was a recent report for example by the National Space Foundation that gave an analysis of the upcoming markets. There was an excellent one I read, as well from McKinsey at the World Economic Forum. Northern Sky Research is another company that we've looked at and there are more. But we don't independently generate these broad market analyses, we're utilizing third parties for that service.

Got it. Thanks for the color.

At this time, there are no further questions. I'll hand the call back over to the presenters for any closing remarks.

Thank you for your participation. Have a nice day.

This concludes today's call. You may now disconnect your lines.