Good afternoon. My name is Abby and I will be your conference operator today. At this time I would like to welcome everyone to the Momentus, Inc. Third Quarter 2022 Earnings Conference Call. All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question-and-answer session.

[Operator Instructions] Mr. Darryl Genovesi, Vice President of Investor Relations, you may begin your conference..

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

After I make my comments, our CFO Jikun Kim will take you through the Q3 financial highlights and our financial outlook. So turning slide 3. I'd like to reflect on the substantial progress that Momentus has made over the past 15 months since our de-SPAC and emergence as a public company listed on the NASDAQ Exchange.

As a result of hard work and determination we're a much stronger company today than we were back then. We've strengthened engineering and operations capabilities.

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

We've also recruited outstanding talent below the top of the organization chart down to the individual contributor in our engineering ranks. We streamlined our engineering and development organizational structure to support more rapid development of our spacecraft with greater rigor.

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

The results of the improvements that we've made are evident as we compare our current experience with the next spacecraft that we plan to fly called Vigoride 5 to our recent past experience with the last spacecraft that we launched, called Vigoride 3.

I'll speak to the specifics of our Vigoride 5 ground test program in just a minute But I can summarize by saying we encountered far fewer issues during the assembly and testing of Vigoride 5 than we did during the production of Vigoride 3 and we're resolving the issues that we do encounter faster.

We've increased our confidence in the reliability of the Vigoride orbital service vehicle. We learned a lot during the first Vigoride admission in May, both from things that went as expected and from areas that didn't operate as planned.

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

We are pleased with how customer interest has been trending since our first mission. We're currently negotiating contracts for follow on missions with two of the customers who flew satellites with us on our first mission in May, and want to establish long term relationships with them.

We've also received interest from new customers since that first mission just a few months ago, where were negotiating contracts as well. As I mentioned on our last earnings call, Momentus has begun bidding on contracts with the U.S.

government departments and agencies, which wasn't realistic until we put our historical regulatory difficulties behind this. We reached baseline compliance with our national security agreement this spring, and received all necessary licenses and regulatory approvals to fly to space, which we did for the first time in May of 2022.

Going forward, our licensing processes should be more streamlined compared to our first mission. Momentus will no longer need to apply for a separate FAA payload determination before it can fly to space.

Momentus also will not need to reapply for NOAA licenses unless we make changes to Vigoride cameras or planned operations for several more flights, which we don't currently intend to do. The only application that we needed to submit for our next flight was to the FCC for radio spectrum licensing.

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

We've 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. With these improvements and more like them.

We believe that Momentus now sturdier sounder company than it was at the time of our de-SPAC. And we think the improvements we're making should boost investor confidence over time.

To become a stronger space infrastructure company that we are today, we first had to take a focused approach to creating a disciplined processes within Momentus as we went from a startup to a public company in a short period of time. Turning to slide 4. I'll now discuss operational highlights from the quarter.

We conducted our inaugural mission on May 25 utilizing two ports on SpaceX Transporter-5 mission that used a Falcon 9 launch vehicle. On one of these two ports, we flew our Vigoride 3 orbital service vehicle, which you can see in the picture just prior to its separation from the launch vehicle.

On the second port, we flew a third party deployer system from a partner. Recall that at the end of the second quarter Momentus had deployed 3 customer satellites, including two from Vigoride 3 and one satellite from the third party system.

During the third quarter, we deployed five more customer satellites for Vigoride 3 and recognize the small amount of revenue related to these deployments. Vigoride 3 has now deployed seven of the nine customer satellites it carried to space.

When combined with the one satellite deployed from the third party system Momentus has now deployed a total of eight customer satellites so far. The Vigoride 3 mission is still underway, while we continue efforts to deploy the last two satellites of nine that were on board.

But we're realistic about the prospects given the low power situation on Vigoride 3.

As I stated on previous conference calls, while we carried some customer satellites to space, a primary objective of our inaugural demonstration mission was to test Vigoride on orbit, learn as much as possible from any issues encountered and incorporate lessons learned in the future Vigoride vehicles. Turning to slide 5.

Our engineers and technicians have been Busy applying lessons learned from Vigoride 3 to our next generation Vigoride 5 vehicle in preparation for our plan second launch in a little over a month.

For instance, during the third quarter, the Momentus team worked closely with the producer of our solar arrays to conduct an expanded testing campaign on the array that will power Vigoride 5.

Recall that during our inaugural demonstration mission in May Vigoride 3's deployable solar arrays did not operate as intended, and that we quickly identified a mechanical issue with a hold down bracket and connector pin as the root cause of the anomaly.

The enhanced test campaign that the team conducted during the third quarter was aimed at avoiding similar issues in the future. In a minute, we'll play a video of the simulated zero gravity solar array deployment testing that the team conducted this quarter.

In addition to the solar array issue, we've also identified the root causes of the other issues experienced during our inaugural mission and we have made changes to address these issues ahead of our next mission. Vigoride 5 is a next generation vehicle from our block 2.2 configuration. While Vigoride 3 was part of the prior block 2.0 configuration.

The block 2.2 configuration was designed to be much more capable compared to block 2.0 and includes improvements such as a modular payload bay that allows us to swap customer payload capability for additional propellant to enable longer duration missions, a more efficient structural design and enhanced payload hosting capabilities and our next generation Microwave Electro thermal Thruster or MET which is designed to be more capable than its predecessor that flew on Vigoride 3.

The latest generation MET or Microwave Electro thermal Thruster has been through a substantial ground test campaign. For example, in October, we completed a ground hot fire test of the next generation MET propulsion module that will fly on Vigoride 5. On the right side of this chart is a photograph of the MET firing during this test.

We're looking forward to testing the MET in space. While we have incorporated many upgrades and Vigoride block 2.2 one thing that hasn't changed is that we continue to use waters, which makes our vehicles safer and more environmentally friendly than competitors that use volatile and hazardous chemical propellants.

During the third quarter, we also completed ground vibration testing of the full Vigoride 5 vehicle which simulated the environment that it will encounter on the SpaceX Falcon 9 launch vehicle.

Then a couple of weeks ago, we completed thermal vacuum testing, which simulates the environment in space and concluded our robust Vigoride 5 environmental testing campaign. Customer satellites have been integrated onto Vigoride 5 and we conducted our flight readiness review about a week ago.

Overall, I'm pleased to report we are on track for our next Vigoride on the SpaceX Transporter 6 mission targeted for December. We plan to ship the vehicle to its launch site in Cape Canaveral, Florida in the coming days. We're excited to see Vigoride 5 travel to space next month and are eager for the opportunity to test its performance on orbit.

Turning to slide 6. Here's a quick video of the simulated zero gravity solar array deployment testing that the Momentus team conducted this quarter in partnership with our solar array vendor. It's quite difficult to simulate a zero gravity environment here on Earth and require specialized test equipment to carefully adjust for gravitational forces.

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

In the video taken in the cleanroom of Momentus headquarters, you can see the solar array that will fly on our next mission attached to the Vigoride 5 spacecraft.

In collaboration with our vendor we use the new test apparatus to successfully perform this test with the aim of ensuring that the issue that we experienced on Vigoride 3 with the hold down mechanism does not repeat on Vigoride 5. During the test, you can see that the array opens cleanly.

This is one of several additional tests that we add into our enhanced ground test campaign for Vigoride 5 which increases our confidence that the solar array will function properly on orbit. Under the principle of testing likely fly, we conducted this test with the Vigoride vehicle and solar array that will be launched on our next mission.

I would also point out the Vigoride 5 and subsequent vehicles in our block 2.2 configuration incorporate a different hold down mechanism than was used on Vigoride 3. So the part that was primarily responsible for the low power situation on Vigoride 3 is not part of our future plans. Turning to slide 7.

This slide has some great pictures that illustrate the progress we've made in preparing the Vigoride 5 spacecraft for its operation space. The picture at the top left shows the spacecraft in our cleanroom in San Jose, California, when we were just beginning to assemble it.

The other photos trace its journey through stages of testing and preparation for launch. Customer payloads have been integrated on Vigoride 5 which you can see in the top center picture and in the two pictures on the far right.

These include a 3U cube set from Cosmosis that evokes the spirit of innovation from NASA's Voyager mission to explore the solar system, as well as a hosted payload for Caltech with a cutting edge experiment on energy transmission, which can be seen on the upper deck.

This hosted payload mission will allow us to demonstrate our capability and potentially grow our hosted payload business with other customers. Turning to slide 8. This slide provides an overview of our plan for our second Vigoride demonstration mission.

The mission called plan calls for Vigoride 5 to travel to low Earth orbit on the SpaceX transporter-6 launch, where it will be ejected into a sun synchronous orbit at a little over 500 kilometers altitude, or just over 300 miles above the Earth.

After separating from the launch vehicle, Vigoride 5 is slated to go through a disciplined sequence of startup procedures, including powering up, deploying its solar panels, and establishing communications with the ground stations, we will use to control the vehicle from the Momentus Mission Operations Center in San Jose.

While we plan to deploy Cosmosis satellite, after Vigoride completed startup sequence, Vigoride 5 will host Caltech's payload for the entirety of its mission. We plan to operate Vigoride 5 in space through powered flight and test its ability to maneuver to different orbits.

Over the course of the mission, we plan to operate and monitor the performance of the spacecraft and its subsystems to inform future design iterations. Of note, during this mission, we plan to fully test our microwave electro thermal thruster propulsion system that uses water as a propellant in space.

At the conclusion of the mission, we plan to put Vigoride 5 into a low orbit so that it re enters much more rapidly than it naturally would and burns up on reentry.

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

As was the case with our inaugural mission, our intention is not just to perform the planned flight demonstration mission and meet our objectives, but also to find issues that we can correct on future flights. We plan to learn from any anomalies we experienced during the mission and apply the lessons learned to improve our technology going forward.

We remain mindful the fact that you test not just to confirm your expectations, but equally to find opportunities to improve your design. Turning to slide 9. As I mentioned, Vigoride 5 will feature a hosted payload with cutting edge experiments on energy transmission from Caltech's space based solar power project.

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

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

The Caltech demo mission one to be hosted aboard Vigoride will feature three foundational experience for this program to test and validate; solar cell performance, deployment mechanism performance and thirdly, being focusing and steering. In the rendering on this slide, you can see where each is positioned on the Vigoride 5 upper deck.

We're proud to fly these payloads for Caltech in support of their space based solar power project. So turning to slide 10. This slide provides an overview of where we stand in production of our early vehicles.

With the completion of Vigoride 5 we've now produced four complete Vigoride vehicles, Vigoride 1 and Vigoride 2 are fully built and tested and remain in storage while Vigoride 3 is in space. I already discussed the status of Vigoride 5 but this chart provides a nice visual of its comprehensive ground testing campaign.

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

Beyond Vigoride 5 we plan to launch Vigoride 6 on SpaceX transporter-7 mission currently targeted for February 2023, although the schedule is tight, we have also signed launch service agreements with SpaceX to reserve space for Vigoride 7 on transporter-8 which is currently targeted for May 2023.

And for Vigoride 8 on transporter-9 which is currently targeted for October 2023. In all, we plan to be on every SpaceX rideshare mission between now and the end of 2023. Turning to slide 11. This slide shows a few commercial highlights from the third quarter. LuxSpace is a Luxembourg based subsidiary of German satellite manufacturer OHB.

Momentus plans to provide payload hosting services to the LuxSpace Triton-X small satellite with Vigoride in 2023. LuxSpace has satellites in orbit today, and this contract represents a share gain from Momentus. We also signed a contract modification during the third quarter with NASA's Kennedy Space Center.

Under this contract Momentus plans to transport two 1.5u NASA satellites to accustom orbit for its LLITED Space Weather research mission in 2023. We're thrilled to support this important scientific mission for NASA. Signing this contract marks a big milestone in our effort to grow into the government services business more broadly.

As we stated on our last earnings call, we are ramping up our effort to win more government business now that our historical regulatory issues are behind us. And we view this NASA contract as an important step along that path. We are fully committed to validating NASA's confidence in us in upcoming mission.

Finally, we signed a memorandum of understanding with Cyberspace this quarter, under which we plan to provide transportation and payload hosting services. We continue to believe that space infrastructure is a growing exciting market, and we're a leading player in it with a lot of opportunity still ahead. Turning to slide 12.

While our early missions are focused on transporting new satellites and hosting them on orbit, we are continuing to invest in R&D to give Vigoride the capability to rendezvous with satellites that are already in space and to repair, refuel and or deorbit them. We view in orbit satellite servicing as a substantial opportunity for us.

And we're starting to see real signs of this markets emergence. For instance, about six weeks ago, the FCC adopted a new rule that will require satellite operators to remove their satellites from low Earth orbit within five years following mission conclusion.

Prior to this, the FCC did not have a role requiring satellite operators to deorbit their satellites. Although it had previously issued a guideline that they do so within 25 years following mission conclusion.

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

For instance, the European Space Agency tracks approximately 26,000 pieces of space debris which includes about 2000 discarded rocket engines, 3000 defunct satellites, and approximately 21,000 unidentified debris objects and fragments, acquainting to nearly 9000 metric tons or 20 million pounds of manmade debris.

And this is just what's explicitly tracked. There are far more debris objects and fragments that are not explicitly tracked, including 34,000 that are roughly the size of a teapot, nearly 1 million that are roughly the size of a baseball, and over 100 million that are roughly the size of a coin.

Any one of these could seriously damage a satellite in a collision, as they are traveling many kilometers per second, and a collision could create 1000s of additional pieces of debris in orbit. With a number of satellite deployments growing rapidly, this debris problem is expected to get worse.

The new rule from the FCC acknowledges the problem, and we expect will create significant customer demand for satellite deorbiting services. NASA and the U.S. Defense Department have also been letting contracts for studies and demonstration missions for work on addressing the problem of growing orbital debris. Satellite deorbiting is a complex mission.

But I'm proud to say that Momentus anticipated a more active stance on debris removal from regulators, and has been investing in developing this capability for several years. We think our early investments provide us with a competitive advantage over others who are just beginning to think about this problem now.

And indeed, we are already receiving incoming requests for proposals from potential customers on deorbiting of satellites, or potentially entire constellations, each with hundreds of satellites. It's too early for us to quantify the opportunity with much precision.

But if you consider that about 2000 satellites will be deployed this year, and that annual deployments are forecasted to roughly triple by 2028 according to Deutsche Bank. It's not hard to envision a scenario in which 1000s of satellites need to be deorbited annually within the next decade creating a multibillion dollar addressable market.

Again, we can't forecast this with much precision, but we view it as a substantial opportunity for Momentus. Turning to slide 13.

As I said in our prior earnings call, we have developed and are currently implementing a plan to reduce our operating costs in order to provide us runway to conduct more demonstration missions, and place additional customer satellites in orbit with the cash on our balance sheet.

We continue to estimate that with the reductions we're making the cash on our balance sheet should carry us through the end of 2023, which should allow us to perform at least 3 more missions with Vigoride before we need to access the capital markets.

We plan to be opportunistic about raising capital between now and then including potential issuances under the $50 million ATM program that we established in September. We believe it's prudent to plan to extend our existing cash runway given the difficult state of the capital markets.

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

We see significant opportunities to gain government funding for our R&D efforts and technology development while supporting these critically important missions of our government. Turning to slide 14. I would like to conclude my prepared remarks with a few points on why Momentus is an attractive investment.

First, the market that we serve is an attractive one, access to space is improving because the cost for the given capability on orbit is declining, driven by economies of scale from larger launch vehicles, increased price competition between launch providers that is forcing them to become more efficient through various means including reusability and satellite miniaturization.

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, which should drive investment by both in space infrastructure and services and we're already seeing the start to play out.

In addition, the regulatory environment appears increasingly favorable with new FCC deorbiting [as I] mentioned being an important example. The Space Foundation estimates the size of the space economy at about $469 billion today and Morgan Stanley space team expects the market to more than double to over $1 trillion by 2040.

Bank of America's aerospace and defense team forecasts even faster growth. Overall, we view the market for the space economy and our segment of it as attractive. Second, Momentus is well-positioned to capture a portion of this growing market. Investors sometimes suggest that there is a lot of competition within in space transportation.

But only a few companies have built and launched orbital service vehicles or OSVs while others have aspirations, we are already flight testing our Vigoride OSV and have already deployed seven customer satellites from it.

Beyond our in space transportation service, we offer payload hosting services and next month, we have a substantial customer Caltech on that mission. We believe our power generation capabilities and size and flexibility of our configuration get Momentus a competitive advantage in this segment.

Meanwhile, we continue to build on our service offering and plan to introduce in orbit services such as satellite maintenance and refueling and orbital debris removal later this decade. Our relationships with launch companies such as SpaceX are strong.

Moreover, the Vigoride launched vehicle agnostic so we should benefit from increasing launch capacity and associated price competition amongst launch providers over time. When you add it all up, I think Momentus is well-positioned among competitors.

In addition, when you think about who our competitors are, most of them are privately held, meaning there aren't many ways for public equity investors to invest in space infrastructure. Third, we remain confident that this can be a very profitable business once we get to scale.

Our costs exceed revenue today's we're still early on the learning curve and are producing and flying bigger rides at a low frequency. Furthermore, because we're still demonstrating our capabilities, we're only able to fly a few customers on each Vigoride mission.

Once we prove the vehicle is reliable, we expect capacity utilization and revenue generation per Vigoride mission to increase. At the same time, we expect to be able to produce Vigoride more efficiently as a result of learning and economies of scale. As a result, we think profitability should improve as revenue grows.

Additionally, we expect a discrete margin boost once we introduce reusable Vigoride and start to save on manufacturing costs. And finally, driving all of this is our highly experienced and capable leadership team that I believe to be the most credible among the space companies.

Overall, the combination of a growing and innovative space economy, favorable demand outlook for the services we provide, competitive advantages relative to other in space transportation infrastructure providers, most of which are privately held, and potential for margin improvement with learning and scale make Momentus and attractive investment.

The future's bright for Momentus, particularly compared to where we sat just 15 months ago, at the time of our de-SPAC.

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

I am pleased with what we were able to accomplish this quarter, including the deployment of five additional customer satellites, implementation of Vigoride 3 lessons learned on the Vigoride 5, our progress towards conducting the Vigoride 5 launch next month, our customer contract with NASA and the initial implementation of our cost reduction plan.

I'd like to thank our dedicated team for getting us here. And we'd also like to thank our customers and investors for their continued support. I'll now hand the mic off to our CFO Jikun Kim and then we'll take your questions..

Thank you John. Before I discuss the third quarter financials, I'd like to take this opportunity to thank the Momentus team for their hard work and dedication. Turning to slide 15. Our third quarter results reflect our ongoing progress and investments to further our technology and business model.

We have cumulatively signed contracts for approximately $43 million in backlog or potential revenue as of October 31, 2022. The breadth of the signed contract spanned across 19 companies in 14 different countries.

In general, our customers have the right to cancel their contracts with the understanding that they could forego their deposits and milestone payments. If a customer cancels a contract before all of the payments are made, the resulting revenue will be less than the full value to backlog.

Recall that our reported backlog includes firm orders as well as options. These options give our customers the flexibility to opt into an available launch slot without requiring a separate agreement. Our total backlog declined by $12 million relative to the $55 million we reported in Q2.

This decline was primarily due to the exploration of options and options that we expect to expire unexercised in contrast or for motors backlog held steady this quarter. We ended Q3 with non restricted cash and cash equivalent of $82 million, which we continue to believe should carry us through to the end of 2023 as John described.

We invested approximately $28 million in cash during Q3, approximately $3 million higher compared to our Q2 cash flow but in line with our announced cost reduction plans. Q3 cash investments included $3 million in debt amortizations as well as the final $5 million payment to settle a legal matter with the SEC.

We ended the quarter with approximately $18 million in outstanding gross debt. During Q3, we recognize $129,000 of revenues and $115,000 in gross profits, primarily related to the V3 as it continued to deploy customer satellites, fulfilling performance obligations to our customers.

I would remind you that majority of Vigoride manufacturing costs and launch costs are accounted for as R&D given that the Vigoride is still under development. We expect gross margins to decline once Vigoride deployment is complete, and we enter into production phase.

In the third quarter, we generated approximately $22 million in losses from operations. On a non-GAAP basis our adjusted EBITDA was a negative $16 million, which is approximately $2 million better sequentially from Q2. Please refer to the earnings press release issued today for the reconciliation of adjusted EBITDA to GAAP net income.

Non-GAAP SG&A expenses for the third quarter totaled approximately $7 million, approximately $1 million lower than the prior quarter. Non-GAAP R&D expenses for the third quarter totaled approximately $10 million, also approximately $1 million lower sequentially. We ended Q3 with approximately 84 million shares outstanding.

I will now hand the call back to Darryl..

Thank you, Jikun. In a moment we will move on to the question and answer portion of our call. I would like to remind participants that all disclaimers outlined at the onset of this call extend to the question and answer session.

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

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

[Operator Instructions] Your first question comes from the line of Edison Yu from Deutsche Bank. Your line is open..

Hey, everyone. Thanks for taking the questions, I just had to on my end. Curious I know you talked a lot about during the presentation on the new FCC rule.

And can you just talk about kind of what kind of capabilities that you can offer and maybe give a kind of brief illustration of how that might look? And I know you're not really quantifying the market opportunity but it seems like operators of satellites to remove those satellites from low earth orbit within five years falling mission conclusion is a major opportunity for us..

Prior to this, as I mentioned, there was no rule the FCC had a guideline that operators deorbit their satellites within 25 years after mission conclusion, but it was just a guideline. It was not a binding rule that the FCC was planning to enforce. The new FCC rule creates a significant demand for satellite the orbiting.

Satellite deorbiting is a complex mission. But I'm proud to say that Momentus anticipated that increased regulation and we've been investing in that capability for several years.

The type of capability that you need is to be able to do what is called rendezvous and proximity operations meaning come up very closely to another satellite rendezvous very carefully.

And then in our case, our plan right now we've been investing in the capability to do rendezvous proximity operations, we also intend to add a robotic arm to Vigoride which will enable us after coming up very carefully alongside a satellite and to grab a hold of it or to attach to it either to service the satellite if the intent is to do something like refuel it, or repair it.

But for what we were just discussing the FCC rule, it would be to deorbit it. And really, that would involve grappling, or grabbing hold satellite and proceeding to tug it to a lower altitude, where it could reenter and burn up upon reentry. And now, as mentioned, it is early for us to precisely quantify the opportunity really, with any precision.

But if you consider under Deutsche Bank's projections, about 2000, satellites will be deployed this year alone. And if according to Deutsche Bank, the annual deployments are forecasted to triple by 2028.

So you can see a scenario with that volume of satellites that need to be deorbited during the next decade that, I think as a minimum, we expect that's going to be a multibillion dollar addressable market that's created.

So thank you again, for the question Edison and we certainly think that Momentus is very well-positioned to take advantage of this regulatory change..

Understood. Second question, it's different topic. There has been some changes on the SpaceX transporter pricing.

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

Yes. SpaceX is introducing a new interface for rideshare missions in 2024 and you're right there is also a new pricing structure that will go along with it.

For us at Momentus in the very near term as I mentioned in the call, we've signed launch services agreements for the next few SpaceX transport missions, the one that will go that's targeted for December of 2022, and then three, that are targeted for February, May and October of 2023.

Now, since we've signed agreements for those, our pricing won't immediately be affected by the changes in the SpaceX pricing structure. For Momentus that would begin in 2024.

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

But we do think that while there will be some higher costs that SpaceX is charging, that again, for us would begin to affect us in 2024. Unfortunate, there's been a lot of cost inflation in today's macroeconomic environment. And so we don't think this is unique to space transportation companies or Momentus.

Once we start to experience those higher launch costs, we will attempt to pass along those higher launch costs to our customers, to the degree possible. And importantly, our competitors will feel the same upward cost pressure that we do with respect to flying on things like the SpaceX transport missions on Falcon 9 rockets.

As we look a little further out, though, to the starship introduction by SpaceX, we would expect our launch costs to begin to decline again. This, I would say also, another dynamic that I'm sure you're tracking is that there are other providers of space launch services, ABL, relativity, Gilmore Space, et cetera.

And these other space launch companies and a whole host of new entrants are going to increase competition and that increased availability and competitive pressure we think is going to keep launch costs low. And therefore, since we are launch vehicle agnostic at Momentus, it will give us other options for how we can fly our customers to space..

Appreciate the color..

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

Thanks. [indiscernible] environment. Can you talk about what you're seeing in terms of customer responses or views of the small rocket segments as it seems like a number of providers there are struggling.

And just generally you have talked about launch costs and the like, how important to the longer term business case is the success of starship? Thanks..

Thanks for the question. I appreciate it. I'd say that the launch vehicle market, right now of course, SpaceX is the largest player in the rideshare market or the market targeting very small launch vehicles.

I think the customer views the satellite producers views of the small launch providers that we're seeing their number one, what I hear is, from these customers, they're looking for some more flight heritage from some of them, or they are looking with expectation at the plans that new launch providers are have.

But they do want to see those missions become more routine and see a little more flight heritage developed in many cases. I do think there is an important dynamic though, that's going on in the launch vehicle market, because of all that competition and that it's reducing launch costs.

You saw McKinsey put out a study at the World Economic Forum in the summertime that if memory serves, According to McKinsey launch vehicle costs have come down by over 95% in the last 20 years. We're seeing a projected costs go down and today are our estimates are for a dedicated small rocket.

If you're a small satellite company, that for dedicated small rocket launch to a final orbit that would be over $70,000 per kilogram, on average. With a ride share on a large rocket using the Momentus orbital service vehicle, we can be under $15,000 per kilogram.

And so that gives a substantial cost advantage to ride, share, and ride share with a Momentus tug or orbital service vehicle that can take you to your final destination. But thank you again for the question..

Thank you..

Your next question comes from the line of Chris Sakai from Singular Research. Your line is open..

Yes, hi. Let's see. It looks like you experienced some issues in the early Vigoride mission.

What did you learn from that?.

Well, thank you for the question. The environment in space is notoriously harsh and unforgiving as I mentioned, and operating there is just playing hard. But understanding that environment we at Momentus knew it was important to have a robust spacecraft that can survive and complete its mission, even in off nominal conditions.

On Vigoride 3 which we launched in May, we experienced a mechanical issue with a bracket and a pin mechanism that kept our solar arrays from deploying. This created a low power situation on board. And initially we were able to establish two way communication with the spacecraft.

But the low power situation prevented us from maintaining that two way communication between the spacecraft and the ground stations.

However, because we understood the unforgiving environment in space, we had designed redundancy and resiliency features into the Vigoride spacecraft, which ultimately allowed us to deploy seven of the nine customer satellites that Vigoride through its carrying in spite of the low power situation and lack of two way communications with our ground stations.

We are continuing efforts to deploy the remaining two customer satellites. For Vigoride 5 the vehicle we plan to fly next month, we're even more focused on implementing resiliency and redundancy features and testing them on the ground, including in off nominal conditions.

We've incorporated system robustness in a number of ways features like an autonomous deployment feature that enables us to deploy satellites, should we lose communications with the vehicle. We have redundancy between two sides of the vehicle that we call Side A and Side B. So major subsystems have a backup system onboard.

We've incorporated for our next flight, a new feature with a beacon to facilitate finding the vehicle faster and establishing communications more rapidly or should there be interruption in communications reestablishing those communications and we've added this enhanced testing regimen, including the solar array deployment testing we showed in the video with on the actual spacecraft with the actual panels that will fly on the spacecraft.

We're also doing what we call day in the life testing, which is experiencing a typical day in the life of the spacecraft and putting it nominal and off nominal situations and recovering the vehicle. And we're doing more testing of system performance overall.

So as I mentioned, prior to, importantly, prior to our last mission in May, we fully anticipated in our first mission that we would experience some issues and the primary goal of that mission was to learn from how the spacecraft performed in space, and to make adjustments to improve its performance.

And we've implemented those performance improvements in advance of our next launch which we're really looking forward to with a lot of eager expectation here to see Vigoride 5 go to space in December. Thanks again for the questions..

Okay, thanks for your answers..

[Operator Instructions] Your next question comes from the line of Austin Moeller from Canaccord. Your line is open..

Hi, thanks for taking my question.

So what primary endpoint objectives are you looking to accomplish on the Vigoride 5 mission now that you've completed the previous mission and address the issues there? And so what primary endpoint objectives do you want to accomplish on that that will little enable quick turnaround to the Vigoride 6 and so on missions and what's considered more of a secondary objective?.

Thanks for the question, Austin. The Vigoride 5 mission will be our second demonstration mission. And so the primary objective of this upcoming mission is to test the vehicle, learn from any issues we encounter, and address those issues on subsequent Vigoride vehicles as we work toward freezing a design for production.

Vigoride 3 taught us many lessons, as I mentioned that we abide to Vigoride 5 and we're more confident this time around in the performance of Vigoride 5 as a result, I expect our systems our confidence in the system is going to increase with each additional demonstration mission we fly. Vigoride 5 is from our block 2.2 configuration.

And that's a significant block upgrade from Vigoride 3 which was from our block 2.0 configuration. And so one of the other primary objectives of the flight is to test Vigoride 5 and the new block 2.2 configuration, which is designed to be much more capable, and a more reliable vehicle Vigoride 3.

The MET thruster, which we're eager to see perform in space has been upgraded for Vigoride 5 and it's designed to be more capable than its predecessor. We've taken steps towards modularity in this design as well to allow payload to be traded for propellant which will allow us to tailor capabilities for the needs of customers.

And then this improvement. And then this improvement that we have made to allow for the start of payload hosting capabilities is also significant.

And we're looking forward to having our first or a significant I should say, hosted payload customer on the Vigoride 5 mission and testing and demonstrating some of the differentiators that we think allow our Vigoride hosted payload capability to be better than competitors in their ability to host payloads.

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

Vigoride solar arrays, in fact, are modular, so in some configurations, they can produce two kilowatts of power, which is enough to power the James Webb Telescope, which is 6000 kilograms, or 200,000 standard LED light bulbs.

In this configuration, we would allocate about half our available power to Vigoride and reserve the other half for our hosted payload customers, which is again a major advantage for us over competitors that can provide less power.

So those are some of the things that we're eager to demonstrate on the next flight that will then will give us more flight heritage, because we think we've got differentiated capabilities.

Now that if the mission is fully successful, we will have demonstrated those differentiated capabilities and space which should improve our ability to attract customers. So thanks again for the question..

Excellent thanks for all the color on the quarter..

There are no further questions at this time. This concludes today's conference call. You may now disconnect..