Closing Bell - Manifest Space: UPS for Space with Momentus CEO John Rood 5/2/23

Episode Date: June 1, 2023

Call it a Momentus occasion. Space services startup Momentus has logged a number of milestones since going public—but in that time, the stock has fallen below $1 and faces delisting risk. Morgan sits down with Momentus CEO John Rood to discuss the possibility of a cash crunch, tech and plans to reboost the Hubble telescope. For more Manifest Space, listen and follow here: https://link.chtbl.com/manifestspace

A momentous occasion. In-space transportation startup Momentus logging a series of milestones recently with two space tugs actively operating in orbit and successfully demonstrating their capabilities. CEO John Rood says the strategy is to essentially establish the UPS of space. We're essentially a satellite that delivers other satellites.

And so today it's become less expensive to get a ride to space if you're a small satellite maker. But that's not where most of the satellites want to go and they need to be distributed. And so in a lot of ways, we aspire to be like the UPS of space that can deliver parcels after they come to a destination, say like a port with container ships unloading, that then takes the cargo to where it really wants to go to. And if you're operating a constellation of, say, 100 internet of things satellites, you don't want them all clumped in one giant cloud in space. You need them distributed throughout the orbits and throughout the heavens. And so that's where we come in. But for all of the recent success in space, Momentus faces some challenges on the ground. The stock, which began trading in the summer of 2021, is now worth pennies, facing the threat of delisting from the Nasdaq, contributing to investor concern, the possibility of a cash crunch. On this episode, we discuss the tech, the financials, and Momentus' pitch to reboost Hubble. I'm Morgan Brennan, and this is Manifest Space.

Maybe the best place to start is the most recent news, which is the fact that you've just inked another deal with SpaceX. That's right. We signed an agreement with SpaceX where we're going to be flying on their rideshare missions to low Earth orbit through the end of 2024. So every rideshare mission that SpaceX has in 2024, as an example, we've booked a port on so that we can take our Vigoride vehicle and our customers to space. Great. And let's talk a little bit about your Vigoride vehicles, because you have two operational functioning spacecraft in orbit right now. What are they doing and what is this technology that they are demonstrating? What does it mean for the company?

As you mentioned, we've got two Vigoride vehicles operating space right now, Vigoride 5 and Vigoride 6. And those are the latest two. We launched one last year as well, which remains in orbit, but we finished the operation of it. And so the two spacecraft that we have in orbit now, one we launched in January and the other one in mid-April, they're principally demonstration missions to wring out the technology, to show what it can do, to put it through all its paces in space. But we've also taken some customer satellites with us and some customer missions. And so on the first satellite of Vigoride 5, we've deployed one satellite from it for a company from Singapore named Cosmosis. And on Vigoride 6, we'll soon start to deploy some other satellites from it for other customers. And later in the summer, we'll take two NASA satellites to a unique custom

orbit where they want to study essentially space weather and the density of the atmosphere and how it gets affected by space weather and therefore affects the reentry rates for satellites. So we'll do that later in the year. And then the other thing we're doing on both of them is demonstrating our technology. On the Vigoride 5, we recently demonstrated our pioneering propulsion system that uses water as a propellant and put it through its range of operational durations and the full power cycles that we expect it to go through. And then on Vigoride 6, we're going to test a new solar array that operates like a tape spring that you get from Home Depot or something to measure that rolls out and can roll back in. And so I think maybe I should take a step back because Momentus is a company that's focused on your space tug company.

So just in terms of what that actually means. Yes, and we're essentially a satellite that delivers other satellites. And so today, it's become less expensive to get a ride to space if you're a small satellite maker. But that's not where most of the satellites want to go, and they need to be distributed. And so in a lot of ways, we aspire to be like the UPS of space that can deliver parcels after they come to a destination, say like a port with container ships unloading, that then takes the cargo to where it really wants to go to. And if you're operating a constellation of, say, 100 Internet of Things satellites, you don't want them all clumped in one giant cloud in space. You need them distributed throughout the orbits and throughout the heavens. And so that's where we come in to deliver them in a transportation

mission. And there are others that they've developed their instrument, but they don't want to build the whole satellite. And we call that a hosted payload. And we would play the host the way of giving them power and station keeping communications capabilities operate them in space. So, for example, we're doing that right now for Caltech, where they have a large solar power demonstration where they're going to demonstrate the ability to collect solar energy in space and then transmit it wirelessly to Earth, which is kind of mind blowing to think about. Wow. In terms of these capabilities, in terms of these

services, you mentioned you're demonstrating the technology so far. I guess, what does your customer base look like and how quickly do you become operational and generate revenue, I guess, on a more regular basis? Well, our customer base is a lot of new space companies that are trying to take advantage of these two megatrends. One, the ability to make much smaller satellites, think the size of like a tennis ball can, or larger, you know, maybe the large ones, a small set, be like the size of, say, a microwave oven that folks have at home. But these smaller satellites pack the computing power and the capabilities that formerly found were much larger satellites. Because there's very low launch costs also, and McKinsey estimates the cost per kilogram to send something to orbit has come down by 95%

over the last 20 years. So you have what used to be a big barrier to entry, high launch costs, and it used to be a big barrier to entry. You need a very large satellite. Now you have lots of smaller ones. And so, for example, we have several Internet of Things companies that are our clients. One, FOSA from Spain, they've put up 13 satellites so far. They plan to put up several hundred. We've deployed several for them.

Another company is called SatRev in Poland. They're also an Internet of Things company, connecting things like, you know, we all buy things on Amazon and elsewhere, and we track where our shipment is. Well, Internet of Things connectivity allows for that and allows for many other applications. So there are another one. We have two more, one elsewhere in Europe, that have signed contracts with us to deploy their constellations or the start of their constellations.

And then there are other clients commercially who want to do things like remote sensing or test out their communications equipment, or as I mentioned, these novel approaches to collecting energy like Caltech. So we have those and then other government customers, NASA, that we're going to buy here probably will deliver their satellites in July to the appointed destination where they want to study things scientifically. We're really pivoting to do a lot more work for the Defense Department and to focus on national security missions because we have an orbital space tug that can be very flexible and support dynamic operations, but it can also serve as a satellite bus. And so we have an initial contract we've been given, a Notified of Award by the Space Development Agency of the DoD, and we're planning to do additional work

for the Defense Department in support of national security missions because of our capabilities. And of course, your former DoD, and everyone I speak to always says, you know, whatever, no matter what the macroeconomic backdrop and environment is, and even if you were to see with all of the D.C. drama going on around debt ceiling and future trajectory of defense spending and what that means for budget, that space is still an area, military space, national security space is still an area that is on a secular growth trajectory. Yes, aerospace and defense as a general matter has been pretty resistant to downturns and cycles, and in some ways it's counter-cyclical historically to where there are economic downturns. Space in particular has been something historically the government has driven much of that innovation.

In the national security space, you are seeing a big growth in that area because space has become a very contested domain. I know from my former work as Under Secretary of Defense for Policy, Russia, China, a number of countries that are potential adversaries are exploiting space to an extent that they haven't before and doing a number of things that make us very concerned about the potential for essentially warfare extending into space. So therefore, the Space Force was created.

The Defense Department and the intelligence agencies have substantially grown their spending there. It's about 15 to $20 billion per year right now in the modernization accounts to produce things and to do R&D. And I think that's going to grow just because of the trends in the security space. And we want to be a part of that. And we have this very flexible platform with a lot of power, good size, weight, reconfigurability, flexibility that

the DoD customers in particular have found very attractive, or at least that's the feedback they're giving us. And as I say, we've been notified of an initial award. Now we have to continue to sort of land and expand and build out from that initial beachhead. Got it. You also recently announced that you teamed up with Astroscale to offer a solution to boost the Hubble Space Telescope for NASA. So are you, it sounds like you're going after work with, in civil space as well, in a more meaningful way. Absolutely. And that was a fun one, Morgan. We have a counterpart company, Astroscale, that had done work like we have on the ability to dock with things, remote proximity operations and docking. And then using our vehicle, and they had some capabilities related to remote proximity operations and docking. And we combined those together and we offered this proposal to NASA where we could reboost the Hubble Space Telescope by about 50 kilometers, which will extend its life for a long period of time.

And then after reboosting the Hubble, we would go and collect up some of the debris in that area and get it out of the requisite orbit so that it didn't threaten the space telescope. And even though the Hubble is 33 years old, it still has a lot of life left in it. It's mostly because it's begun to decay in its orbit that there's a concern. And so we, with one of our vehicles, combined with Astroscale's capabilities, we proposed to NASA that we could reboost it. And the advantage of that versus what some other people are offering is to do with astronauts or put humans at risk is we could do it a lot less expensively and also do it in a way that doesn't put people at risk. There's no reason to do that

in our eyes. So that was definitely a fun one and fun for our engineers to get to work on a project like that. When do you find out if N to contract you for work out a request for informa a serious dialogue about to in fact move forward w now, nasa is saying that companies to offer to do

largely because Elon musk that with with a crude capsule. And so we decided, look, let's put our hat in the ring. Let's be part of that conversation. And so we did send in an RFI. Now it'll be up to NASA whether they go to the next phase and truly decide to put somebody under contract to do the service. But from our point of view, we have a lot of advantages. And so, in some ways we're trying to disrupt the disruptors here who have disrupted the space industry to say, look, we can come in and do it much less expensively

and without humans involved. Yeah, and of course that crewed mission, I think would also, it would be a commercial mission. And I think it would involve Jared Isaacman as well, who's already done one such space flight with SpaceX. As we're having this conversation about capabilities and technological milestones for the company, I mean, you did also just release earnings.

And there does seem to be a very genuine concern among investors about your cash burn and whether you're facing a cash crunch and i just want to get your thoughts on that because it does look like cash as of the end of march was just under 39 million dollars um you're not profitable yet because you're still demonstrating this technology so so can can you get there can you get across get across that finish line to to becoming self-sustaining? We're in the phase, just like a lot of other tech companies where we've started now to really show

what our technology can do. And we spent money, R&D funds to develop it and mature it and get it to this phase where it's now operating in space correctly. And prior to that, customers are interested, but they want to see perform. Before some satellite operators would tell me, their executives, I'd love to send my children to space with you, John, but I want to see you guys demonstrate the capability first.

And so now we're seeing that we can do that, and we're starting to see then the commensurate pickup in new business interests. So to answer your question directly, we do have cash on hand to continue our operations when combined with the ability to, we think, to raise revenue by to manage our cash, to really try to stretch it as far as it can go by being economical with the costs we incur and structuring our spending in a way that will reduce the burn rate. And then obviously we are out looking to raise capital as well. And so through a combination of those things, we think we've got sufficient liquidity for the next 12 months, but obviously this is the challenge. We are in this phase, like a lot of other tech companies, that we've got to bring in new revenue and bring in new sources of capital before we consume the available cash we've got on hand. 12 months. I think that's very notable.

You know, the other piece of this, of course, has been that investors have sold your stock. And we've seen that across the sector more broadly, but it's become a penny stock. There was a NASDAQ delisting warning issued to Momentus not that long ago as well. So how does that impact or complicate capital raise measures that you're embarking on? Well, it adds an additional challenge. And we think that we've got to stay focused on building the intrinsic value of the company to demonstrate through operational performance

and the performance of the technology that there's a real value there. And so we come to work every day, I mean, just determined to be able to bring that to a much higher level in terms of our stock price. New orders will help and new orders from people like the Defense Department, we think, is going to show the commercial viability of the technology that we've got. So that is our challenge. And it gives me some comfort, but not a lot, that we're not alone in this area. There's

a lot of other newer space companies and tech companies that are in a similar uh situation but we we've got to get to where um we're in a different situation we can raise the obviously the share price above a dollar we we have a path we think to do that i mean that's our plan both through you know growth and revenue continued demonstration of the technology, as well as some things to show that we have the requisite runway to make investors have the confidence that they need to invest in us. So that's a combination of showing what we can do and doing it in a near-term way is what we're just determined to accomplish. Yeah. Would M&A ever be on the table for you?

Oh, sure. I mean, that's the kind of thing that we've always been open to and willing to evaluate. And I think that that is certainly a very viable path for us. It's not the only path, but it's definitely one of them that is available to the company,. We would be open to that. Yeah. The last time you and I spoke was August of 2021.

You had just joined the company. The company had just gone through a big process, a settlement process, founders exiting, going public in the middle of all of this as well. I guess just to step back and reflect on what has been a little less than two years at the helm for a company that is very much been a turnaround story. Well, it's been quite a journey. And I remember that interview very well because I was brand new on the job. I think I was here less than a week when we sat down. And so I felt like I was studying for finals or something to get ready for, you know, interview with Morgan Brennan. But, but I came up to speed and, but it's been a very interesting journey because taking a young company like that, that the decision made before

I joined the helm to go public, but when you do go public and the sort of mountain of requirements that come with being a public company are there, that was a real challenge in the beginning. Today, we make that everyday reality, no problem. But at that time, you're learning all of the public company requirements. You're trying to make sure that the technology gets developed in a way that you can meet your milestones. And at that time, we just had schedules and charts showing what we could do. And as you're new in the company, really diving in to make sure in the midst of coming out of COVID and other things, do we really have the supply chain set up? Do we really have the engineering workforce with the right skill set? And we've made a lot of changes there to develop the capability we have now and recruiting

the right people. And what makes you successful as a more mature company are not the same thing. And so, you know, it's a lot like the maturation of a person. You've got to, in its infancy, and then you're growing to be, you know, a toddler and young adult and so on. And so that's a really interesting journey for me, but I've enjoyed it. And the space industry is so dynamic and exciting actually right now. That's actually what led me to come here. I'd worked for larger aerospace companies or worked, as you said, in the defense department, the national security space. But I was attracted to it. I wanted to be part of a different part of the ecosystem in the tech industry and new space industry and try to be at the helm of a company trying to do

things fundamentally differently in space to try out new ideas. And so not everything that we've tried has worked out exactly the plan to say the least. But I'm pretty happy with our batting average. I mean, all of the things that we said we would do by the time scale for our first launch and second launch and third launch, we met those production schedules. And while there have been some bumps along the way in our technology development, overall, we got over those hurdles. But I got to tell you, there are times, anyone will tell you, when you're developing new technology, everything's great one day, you come in the next day, what do the test reports show? Tell me more about that.

And you're digging in to nub down on the details to understand how do we get past that? How do we resolve that? How do we improve the reliability? And that's the fun of it and what makes it exciting. So we've talked a little bit about the near and even, I'd say, maybe gotten into the medium-term vision for Momentus. Longer term, what is your vision? And not just for the company,

but also for how this space economy continues to evolve and develop? I think over the longer run, what you're going to see is a real proliferation into much, much smaller numbers of satellites in space and a very, very large number. I mean, one of the leading edge examples of that is when I served in the Defense Department nearly 20 years ago as a Deputy Assistant Secretary, space fell under me. And when we looked at things like the GPS constellation or communications, we wanted at the time much less expensive satellites and that were more survivable by being more numerous.

But the technology didn't allow for it. Well, today, that revolution is underway. And Starlink's a good example where I'll admit the first time I heard about the SpaceX idea to essentially provide communications and Wi-Fi and other connectivity from low Earth orbit, I thought, well, you know, the terrestrial applications sell towers on Earth. Pretty inexpensive. I wonder if that's really going to be cost effective. And I was skeptical. Well, they're showing you can do that, where applications that formerly were done on earth are now being taken to space for effectiveness reasons, for cost reasons,

and that's resulting in thousands of very small satellites. But that's not the leading edge anymore. The leading edge is even dramatically smaller ones. And so I think you're going to see quite a bit of that. I think you're also going to see people increasingly living, visiting, operating in space and commercial applications. And here the use cases are not all obvious, but there's a lot of folks talking when the private space station

industry about some manufacturing operations in space. And that'll require a different set of technology to support it, like a space tug, like a very flexible orbital service vehicle, the UPS of space and the space infrastructure requirements. It's kind of like settling the West where I grew up. You didn't need the railroads at first, but then the railroads linked things together. They provided connectivity. And once Starship comes along, a very large rocket that SpaceX is developing, I think of it like a container ship carrier, these giant ships that come to port at the port of Los Angeles or port of Baltimore and unload thousands

of cargo containers, which are then redistributed throughout the country by trucks. Very similarly, you're going to have a need for space transportation. Now, that's in the civil area. I think in the military domain, in the early days of the aviation boom, militaries weren't really sure how to use the airplane effectively. But now it's the dominant weapon of war, if you will, that along with missiles. I think you'll see some similar trends emerge in space. And that's why understanding, being able to sense what's going on in your environment, have situational awareness, to be able to have flexibility to reposition, to maneuver within the space domain. That's what General Salzman and the Space Force leadership is talking about as a priority, just like you maneuver in the air or on land as a military force. And then a whole range of applications, I think, where you're going to

affect other people's space operations. I mean, ideally not physically, kinetically, but I think there'll be other ways that that just becomes commonplace. And not all of it is great, but I think that's going to be the reality of the situation in my view. So Momentus can play a big role there where we can also support military customers, transporting them, providing flexible capabilities for sensors, for other types of electronic communications and the like, and resupply to these various locations. So they talk about things akin to the highway patrol in space, and obviously we want to be a part of that, and also provide satellite buses, the kind of chassis that are used for

satellite communications, satellite sensing, and positioning, navigation, timing, things like that. It's fascinating. The comparison, the metaphor of UPS in space or of basically what a transportation logistics network looks like on Earth, on orbit, is really, it's a fascinating one. It kind of speaks to this ever-growing need for infrastructure as things like low Earth orbit continue to commercialize in the coming years. John, it's great to speak with you, as always. Appreciate the time. John Rudd of Momentous Space. Thanks very much, Morgan. Fantastic to be with you. That does it for this episode of Manifest Space.

Make sure you never miss a launch by following us wherever you get your podcasts and by watching our coverage on Closing Bell Overtime. I'm Morgan Brennan.