Momentus Inc (MNTS) 2021 Q4 法說會逐字稿

Thank you for standing by and welcome to the Momentus Fourth Quarter 2021 Earnings Call. (Operator Instructions). As a reminder, today's program maybe recorded.

I would now like to introduce your host for today's program, Darryl Genovesi. Please go ahead.

Thank you, Jonathan and good morning everyone. Welcome to Momentus' Fourth Quarter 2021 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 fourth quarter. You can download a copy of the release and presentation slides at investors.momentus.space.

During today's call we will make certain forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Exchange Act of 1934. Forward-looking statements are predictions, projections and other statements about future events that are based on current expectations and assumptions, and as a result are subject to risks and uncertainties.

Many factors could cause actual future events to differ materially from the forward-looking statements in this communication. You should listen to today's call with the understanding that your actual results maybe 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 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 maybe 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.

The technology underlying our anticipated service offerings is still in the process of being developed and has not been fully tested or validated in space. Our ability to execute on our business plan is dependent on the successful development and commercialization of our technologies. Development of space technologies is extremely complex, time consuming and expenses, and there can be no assurance that our predicted theoretical and ground-based results will translate into operational space vehicles that operate within the parameters we expect or at all.

With that, I would like to turn the call over to our Chairman and Chief Executive Officer, John Rood.

Thank you, Darryl. Good afternoon. I am delighted to be here with you today to talk about our fourth quarter and the progress that we made since our last earnings call in early November. I would like to start by thanking the team at Momentus which continues to drive progress toward our objective of providing the backbone infrastructure services to support the emerging space economy that continues to experience impressive growth.

I will provide some high level comments on our progress since our last earnings call and then turn to our current areas of focus and discuss our outlook for 2022 and beyond. After I make my comments, our CFO, Jikun Kim, will take you through the Q4 financial highlights.

Turning to slide three, to begin, I would like to highlight some new developments from the past few months. Overall, we continue to make significant progress on our technology which will be the foundation of our success as a company. First, we have continued work to bring the Vigoride orbital transfer vehicle to market.

We completed assembly and initial system level functional testing on the Vigoride 3 vehicle that we planned to fly on a demonstration mission later this year. Subsequent to the close of the fourth quarter, we completed system level thermal vacuum testing on Vigoride 3 which is late-stage environmental testing that simulates the environment in space.

Our testing sequence is designed to uncover issues on the ground where we can deal with them more readily and effectively than we could in space. Over the next few weeks, the team will be addressing issues that were uncovered during thermal vacuum testing. We continue to believe our Vigoride 3 is on path to complete ground tests and time for inaugural launch plan for June, although the schedule is tight.

Last October, we signed a launch services agreement that reserves two ports for Momentus on SpaceX's Transporter 5 mission, which is targeted for June of 2022. We plan to use one of these two ports for the inaugural mission of our Vigoride vehicle using Vigoride 3 which is designed to take our customer satellites to custom orbits. We plan to use our second port on the Transporter 5 mission to aggregate ride share demand from customers that do not require a custom orbit.

On this port, we plan to use a deployer system from a third party to place customer satellites in orbit and I will talk about this approach more in just a few minutes. More recently, in February and early March, we signed launch services agreements reserving space for Vigoride on four additional SpaceX missions, including the Transporter 6 mission which is targeted for October 2022, Transporter 7 which is targeted for January 2023, Transporter 8 which is targeted for April 2023 and Transporter 9 which is targeted for October of 2023.

As we stated on our last earnings call, our launch plans are subject to the receipt of licenses and other government approvals and successful completion of our current efforts to get Vigoride and other space hardware ready for flight. We also established a Strategic Advisory Group comprised of five leaders and technology experts to advise company leadership on programmatic, technical and operational matters.

These five individuals bring world-class expertise and more than 150 years of combined experience in creating, implementing and managing aerospace business and technology programs for industry-leading companies and educational institutions. They are already challenging our thinking, mentoring and helping us apply many hard learned lessons and insights from their distinguished careers.

Beyond our efforts to mature and expand our product offering, we continue to build out and improve our executive leadership team, adding high caliber individuals that bring the type of experience and skill sets that we need to grow our business and implement our National Security Agreement or NSA with the US Government. In February, we welcome Jason Garkey as our new Security Officer.

Jason reports to Security Director Vic Mercado who continues to lead our security function and implementation of our NSA which is overseen by the Department of Defense and Department of Treasury. Since our last earnings call, we have made significant progress further implementing the compliance tasks required under the NSA.

In our last earnings call in November, I mentioned that one of the parts of NSA implementation that was a heavy lift was our effort to upgrade and improve the security of our enterprise information systems. I'm pleased to say that we've made good progress since then, having now completed the bulk of this IT modernization plan. While the NSA related IT work will soon be complete, we will never stop upgrading and safeguarding the infrastructure we need for both business and mission success.

Turning slide four, our core business objective is to become an industry leader, providing the transportation and in space infrastructure services for the burgeoning new space economy. Achieving this objective requires a well-defined strategy with near term progress points. I want to remind you of the five key elements of this strategy and point out how recent developments contribute to its implementation.

Recall that the first element of our strategy is to bring our initial orbital transfer vehicle, Vigoride, to market as early as possible with the features and reliability we know our customers need. We continue to plan for an inaugural mission with Vigoride as early as June, 2022. If we are unable to fly Vigoride in June, then we plan to do so shortly thereafter.

As I mentioned, we have now signed agreements reports on the October, 2022, January, 2023, April, 2023 and October, 2023 SpaceX Transporter Missions, which can function as backup options if we need them or alternatively as follow-on missions, subject of course to the caveats that I mentioned earlier. We also completed the critical design review on our next generation Vigoride design called Block 2.2 which I will discuss in a few minutes.

We see a bright future for our Vigoride vehicle and we are investing now to prove out its capabilities and position it to provide the services that our customers will expect from us in the near future. The second element of our strategy is to broaden our service offerings with Vigoride beyond the hub-and-spoke transportation mission.

As an initial step in that direction, we are now planning on carrying our first hosted payload customer in 2022. This will allow us to demonstrate our hosted payload capability and grow our hosted payload business with other potential customers. We also plan to bring the market a reusable version of Vigoride toward the middle of the decade.

We expect this will allow us to provide more economical transportation services relative to our early vehicles. This will also further expand the menu of services we are able to offer our customers to include in orbit maintenance, refueling and deorbiting of debris and satellites at the end of their useful life as well as other satellite services.

We have been continuing work ourselves and with partners on the technologies to enable provision of these services such as a robotic arm for Vigoride. We are also examining ways that we might broaden our service offering into adjacencies.

While some may think of this opportunity set as requiring a larger, more capable vehicle that can take larger payloads beyond low earth orbit, we also think opportunistically about segmenting the market demand within low earth orbit and addressing each segment in whatever way is the most effective in terms of customer satisfaction, price and profitability

For some market segments, we may not require an orbital transfer vehicle at all. To this end, we are planning to use one of two ports that we purchased for the SpaceX Transport 5 Mission targeted for June to deploy a Vigoride vehicle. On the second port, we plan to launch a third party product from a trusted partner that is designed to deploy customer satellites directly from the launch vehicle.

While this system cannot provide the last mile transportation service that Vigoride can, it is less expensive and it meets the needs of some of the customers in our backlog, particularly those that do not need to get to a precise orbit. This approach allows us to address the market in multiple ways and serves the needs of our customers more economically than we could if we were to fly every one of them on a more capable Vigoride vehicle. It is demonstration of our core belief that we best serve our customers by tailoring our offerings as much as possible to what they need.

The fourth element of our strategy encompasses technology development and continued innovation. I mentioned development work on the robotic arm already but the team is also working on two additional prerequisites to reusability, including a sensor package to enable rendezvous and proximity operations and a fluid transfer system, so that Vigoride can replenish its propellant tanks in space.

The team also continues to mature our propulsion and power system designs in preparation for the Vigoride block upgrades as well as larger vehicles that we plan to produce in the future. Finally, the last element of our strategy is to attract, develop and retain a highly skilled and motivated workforce to give us a competitive advantage in the industry.

I continue to view the team and our ability to nurture it as foundational to our success. I mentioned the addition of Jason Garkey as our New Security Officer reporting to our Security Director, Vic Mercado. Jason and I have worked together in the past and he has the right skills and experience that the company needs to maintain a trusted relationship with the government and is already making a big difference in our effort to implement our NSA.

We are also building out our engineering staff, restructuring the organizational design and making sure that our people have the resources they need to succeed including access to technical experts, such as those comprising our new teaching advisory group. As we look forward, we will continue to opportunistically populate our company with talented individuals and develop them to help us simultaneously serve our customers and shareholders.

Turning to slide five, this slide provides an overview of where we stand in production of our first vehicles. So far, we have produced two complete Vigorides with four more in various stages of production. Vigoride 1, our first vehicle, which has a 30-watt thruster is fully built and ground tested.

Vigoride 2 and beyond are much larger than Vigoride 1. Vigoride 2 is also fully built and has completed most of its ground testing program. As we've said in the past, we've learned a significant amount from production of these early vehicles that we plan to retain at storage and potentially uses ground test articles in support of future Vigoride development.

Vigoride 3 has now completed assembly and initial system level functional testing and just recently completed system level thermal vacuum testing which simulates the environment that it will encounter while in space. Over the next few weeks, the team will work to address the issues that were uncovered during thermal vacuum testing. This will be closely followed by final vibration testing, which simulates the environment that Vigoride will encounter on the launch vehicle and other ground tests.

The team continues to progress the vehicles in its many subsystems through the testing process, correcting issues as they emerge. I continue to stress the importance of using ground testing, not just to validate our designs and engineering progress but also as a critical part of a discipline process to put us in the best position possible for success on orbit. We're planning for Vigoride 3, to be qualified in time to ship to the launch base for our planned initial inaugural launch in June, although, as I said, the schedule is tight.

This inaugural launch is intended to be a demonstration mission. We plan to also take some customer payloads to orbit and to generate a small amount of revenue from this mission. However, the primary goals of the mission, as I said on our last earnings call, are to test Vigoride on orbit, learn from any issues that we encounter and take important steps toward establishing the viability of our initial market offering.

While we obviously love for our on orbit demonstration mission to go flawlessly, as people with experience in the space industry know all too well, in the history of space life, it is not uncommon for issues to arise on early missions. We plan to learn from any anomalies we experienced during our inaugural flight and apply the lessons learned to improve our technology going forward.

After our inaugural mission with Vigoride 3, we plan to begin operating vehicles from our improved Block 2.2 Vigoride configuration. We recently completed our Block 2.2 critical design review to incorporate design changes relative to the prior configuration. These changes include a new modular tank system that allows us to swap propellant for payload, depending on mission requirements as well as a more efficient structural design and improved payload hosting capabilities.

We now have three Block 2.2 vehicles in early stages of production. Before I hand the call over to our CFO, Jikun Kim, for comments on the Q4 financials, I just want to reiterate my excitement for progress and the dedicated team that we have at Momentus as well as the bright future that I see ahead for commercial space and Momentus.

And so with that, I will hand the mic off to our CFO, Jikun Kim, and then we will take your questions.

Thank you, John. Before I discuss the fourth quarter financials, I would like to take this opportunity to thank the Momentus team for their hard work and dedication. Turning to slide 6, our fourth quarter results reflect our ongoing progress in investment toward our inaugural launch.

We have cumulatively signed contracts for approximately $67 million in backlog or potential revenue as of January 31, 2022. These contracts include firm orders as well as options. These options give our customers the flexibility to quickly opt in to an available launch slot on short notice without requiring a separate agreement.

The breadth of these signed contracts span across 24 companies in 15 different countries. In general, our customers have the right to cancel their contracts with the understanding that they will forgo 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 of the backlog.

We ended 2021 with non-restricted cash and cash equivalent of $160 million and approximately $25 million in outstanding gross debt. We started making principle payments on this loan in March. We invested approximately $19 million in cash during Q4. We expect our quarterly cash investment rate to increase in 2022, driven by higher operational tempo, increased launch vehicle milestone payments as well as continued investments in NSA implementation and public company infrastructure.

We did not recognize any revenue in the fourth quarter. We will start to recognize revenue once we begin flying our customers to space and fulfill our performance obligations. In the fourth quarter, we generated approximately $25 million in losses from operations. On a non-GAAP basis, the adjusted EBITDA was a negative $16.4 million in the fourth quarter which was approximately $2 million lower than Q3 results.

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 fourth quarter total $7.3 million, approximately $1.4 million higher than the prior quarter. These increases were driven by continued investments at NSA implementation and public company infrastructure investments.

As a reminder, we became public in the middle of Q3 and Q4 investments reflect the full quarter of being a public company. Non-GAAP R&D expenses for the fourth quarter totaled $9.4 million, approximately $0.4 million higher than the prior quarters. We ended 2021 with approximately 81.2 million shares outstanding. Darryl?

In a moment, we will move to the question and answer portion of our call. However, I would first like to remind participants that all disclaimers outlined at the outset of this call also pertain to the question-and-answer session. This includes our disclaimers relating to non-GAAP financial information, forward-looking statements and the technology underlying our service offerings.

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

Certainly. (Operator Instructions). Our first question comes from the line of Edison Yu from Deutsche Bank, your question, please?

Hey, thanks. I have about three topics I wanted to cover. First, I think what most people are interested in is the progress on the NSA implementation. Is this something that could literally happen in the next few weeks? What can you tell us about the potential timing of that?

Well, thank you Edison for the question. We are continuing to make significant progress on the regulatory front, and we are closer to completing the NSA implementation and getting the necessary government licenses and approvals than we were on the last earnings call. Our NSA implementation has made significant progress. We are in regular contact with the Defense Department and the Treasury Department who oversee our NSA.

IT modernization is a particular focus for the, for these departments. As I mention on the last earnings call, the IT modernization plan is a heavy lift for the company but we have implemented the bulk of this modernization plan. Now after we finished implementing the plan shortly, we will continue to update our IT security to keep pace with the evolving threat however.

But, we have also submitted an FCC application since the last earnings call and we are in dialogue with the FCC. The FCC licensing process, I would add, includes an interagency review similar to the one that the FAA conducts. With the FAA, we are in conversations with them as well, and we intend to get an FAA payloads review later this year. So all in all, we are making good progress on NSA implementation and other regulatory issues.

Thanks. Any way to sort of determine kind of by what time would you need to get this approved if you want to launch in June, is there any way to drill down that time period a little bit more in detail?

Sure. The limiting factors, if you will, for our launch in June is first we got to complete the work ahead of us to prepare our vehicle for flight. And then on the regulatory side, we will need licenses from the FCC, FAA. We are going to apply for an FAA license called a payload review and then there is a slight modification to our NOAA, N-O-A-A, license that we need to perform.

So, we currently plan to fly our inaugural mission with Vigoride in June of 2022 subject to the receipt of these licenses and government approvals and the completion of the work to get the system ready for flight. And so the submission of our application to the FCC last year started that process, and again, we are in conversations with them.

And then with the FAA, we have begun that dialogue as well and hope to obtain a payload review from them a little bit later this year. The NSA implementation is, while not directly part of those per processes is of course one of the considerations that those other regulatory bodies take into effect.

And, so we are making good progress on NSA implementation. And our expectation is over the coming weeks that we are going to get to a much more advanced level of maturity, even though we have come a long distance in the implementation of that agreement thus far.

Understood, understood. Separate topic, you booked several SpaceX transporter missions, [launch] ports. And I am wondering if you could maybe provide some more detail or some more context on the various incremental capacity that you got. I understand part of that is a little bit of redundancy in case the June launch does not work but is this -- are these ports, can you satisfy, can you execute on all these ports with the backlog or do you need to win new business to fill it up?

Well, have signed launch services agreements for ports on SpaceX transporter missions which are rideshare missions as you know for the remainder of 2022 and for the presently targeted SpaceX transporter missions in 2023. So, really for the rest of this year and next year, we have reserved ports. And we have a production schedule for Vigoride vehicles, obviously that is intended to match that cadence of the launch services agreements.

The initial inaugural mission of Vigoride 3 later this year is meant to be a demonstration mission. As I mentioned, we do plan to take customers on that mission and generate a small amount of revenue but its principle objective is to demonstrate our technology and to learn from the experience and any issues we might encounter.

We do have a follow-on port and follow-on plans for the October transporter mission. And so depending on where we stand after our first mission, we will, if necessary, adjust our plans but otherwise we have follow-on vehicles as I mentioned that are in earlier stages of production.

Vigoride 5, which we would plan to fly in the fall and then additional Block 2.2 vehicles that are planned for next year. And we do think our initial mission will provide an additional boost to our efforts to win follow-on business and gather more customers. And that is one of the things that will help us in that regard.

And so, we are looking forward to the future and again continue to put in the calories and the hard work to get our vehicles ready for flight and to address the regulatory matters. So, that we can continue to make good progress on that front.

Last one for me, something that is more high level. Obviously a lot going on in the space industry as it pertains to Russia, Ukraine. Have you seen any sort of impact either on the manifest and supply chain or just any sort of impact on your end?

No, I haven't seen an impact from the Ukraine situation on our progress or our manifest or the business. You know, a couple points to add to that. The Russian founders of Momentus have been divested and have not been part of the company for a long time. Momentus has continued to make good progress in implementing our National Security Agreement.

The tragic events unfolding in Ukraine are not related to the implementation of the NSA or obviously our business. I would add though that on a personal note, that during my government and past industry career, I visited Ukraine including Kyiv and Crimea. I met with Ukrainian National Security Officials.

And while at the Defense Department, I oversaw the U.S Security Assistance Program for Ukraine. It is just heart-breaking to see this Russian aggression play out and I am glad to see my government and allies around the world opposing this Russian aggression and assisting Ukrainians.

Great. Thank you.

Thank you. Our next question comes from the line of James Ratcliffe from Evercore ISI, your question, please?

Thanks for taking the question. Couple, first of all, can you just give us an update on the status of the thruster development in particular and how the test process is going and what version of the thruster you plan to launch should you go up in June?

We have continued to make good progress on our technology for Vigoride to include our microwave electrothermal thruster or MET. The -- our plan for the inaugural launch of Vigoride, of Vigoride 3 targeted for June, there we will use a current generation of our microwave electrothermal thruster. We have put that system, along with the rest of the spacecraft through extensive ground testing, including completing the initial assembly and integration and system level integrated testing of that vehicle.

As part of that, we fired the MET or microwave electrothermal thruster that we planned to fly on Vigoride 3 for 10 minutes of duration. We have additional work on a next generation thruster that we have been doing in the past that has progressed some distance but that will -- that will be incorporated on future designs.

Got it.

Thank you for the question, James.

Sure. Secondly, can you talk a little bit about the economics of the second port you are taking? So -- it sounds like you are essentially being a wholesaler there, buying a port and then splitting up among smaller customers. And you talked about what sort of -- what the economics of that and how significant you think that business can be going forward.

Sure. The approach of using rideshare aggregation at lower cost is something that we are exploring for future missions. And as mentioned, that is what we intend to use, the second port on the Transporter 5 mission targeted for June to do. This is an opportunity for us to explore how we can meet the various needs of our customers and whether this could be an attractive component of our service offering going forward. Some of our customers need to be taken to precise orbits.

And we plan to offer the last mile transportation services with our Vigoride vehicle that's specifically designed for that. But in other cases, some customers don't need last mile delivery to a precise orbit. They just want to be dropped off in the launch vehicle's orbit because their mission does not require a precision orbit plus it is cheaper.

In this case Vigoride has more capability than what is needed in these simple drop-off missions. So we're exploring other ways to serve this market segment at lower costs. We think there's a potential to expand our total addressable market, perhaps quite meaningfully by partnering with one of our suppliers that has the requisite hardware. We are not certain whether this approach will be part of our long-term plans and what we are doing does not require any upfront investment to develop the hardware or introduce the service.

So we have considered this approach since our customers often discuss this simpler service with us as well as more complex precision orbit insertions that would require Vigoride. As we go forward, we will determine whether this is part -- this part of the market provides sufficient growth and profitability opportunities for us to include it on a more permanent basis in our [many] of services.

Great. And third, as you think quantification for the pick up in cash or essentially through the year and like what sort of magnitude we should be looking at for that?

Sure, let me ask Jikun Kim, our CFO, to address that question.

Sure. So, I think in general we stated last time on the earnings call that we should have sufficient cash through to the earlier part of 2023, that is still the case. You can see from our earnings release that we burned roughly about $7.5 million in a month last year. We do expect that to increase in 2022. A lot of the -- a couple of the key drivers are the operational tempo that we are increasing. Meaning that we are increasing the number of vehicles that we are building, the material costs and we are actually increasing our staffing.

And then, we do have, you can see that we have booked basically launches going out to 2023 and we will have increased SpaceX [maximum] payments for that. And then, we do need to continue with the NSA implementation as well as other Public Company infrastructure costs.

And then lastly, we have started paying down our principle on our debt and so those are [enhanced]. And so I think based on the data point where we ended up and how much runway we have, we should be able to -- back into a number there from an absolute burn rate standpoint.

Great, thank you.

Sure.

Thank you. Our next question comes in the line of Colin Canfield from Barclays, your question, please?

Hey guys, thanks to question. Can you just update us on what your expectations are for free cash flow positivity? I think in this back [side] it was 2023 was the timeframe but if you could just provide us an update on that front?

Yes. So, we stopped giving long-term guidance here but you can see that we are a little nascent and early to make those kind of long-term projections, so I will leave that at that.

Got it. And then if we think about the Starship pricing update this last month, I think Elon Musk said hundreds of dollars per kilogram versus the original $10 per kilogram cost contemplated in your [backslides]. So with that in mind, can we just talk about what customer appetite looks like for -- in Vigoride last mile services versus maybe a dedicated small set launcher?

Well, the Starship pricing and the advent of larger launch vehicles like SpaceX and Starship means you are going to be carrying a much larger capacity to orbit. I mean, stepping back, recall there are two mega trends affecting the industry that are -- that are fueling among the things that are fueling this real growth in the new space economy.

[Thing] one, you do have launch vehicle costs continuing to decline, and the number of providers growing. Secondly, you have another mega trend which is satellites getting smaller and increasingly capable. So, the two things together mean you are going to have very large vehicles taking larger volumes of smaller satellites to a single destination.

But as you well know, the customers for that, the satellite companies and particularly if they have constellations, do not all want to be in a single drop off location. The alternative to an orbital transfer vehicle, like what we intend to provide here at Momentus, is to build in propulsions systems per satellite.

If you have very small satellites and you are using a fair amount of your mass and value content for that, we think a space tug, if you will, an orbital transfer vehicle or space truck, as some people call it, is going to be much more economical for that purpose. Dedicated smaller rockets that go to single orbits that are much smaller than Starship, we think also are not as competitive as the ability for an orbital transfer vehicle to work symbiotically with a large system like Starship that is reducing the cost per kilogram to go to orbit.

And therefore is likely to generate a higher volume of smaller satellites going to orbit, then our system for Vigoride and orbital transfer vehicle works very symbiotically with such a system. Now looking a little further forward, our initial plans are an expendable version of Vigoride.

Later, around the middle of the decade, we plan to bring online a reusable version of Vigoride that makes the unit economics even more attractive because we would meet these cargo shipments in space, have the ability to reuse the system over time and refuel it with fuel that is carried back up to space to meet the space vehicle. And that will make it even more attractive to provide this sort of last mile delivery or in space infrastructure services that we envisioned providing.

Got it. Thanks for the color.

Thank you. (Operator Instructions). Our next question comes to the line of Mike Maugeri from Wolfe Research, your question, please?

Everyone, thanks for the time. So, it looks like your backlog came up by about $2 million sequentially during the quarter. So given that, can you talk a little bit about the order activity that you saw during the quarter?

Sure. So, basically we recognized the 2 million increase quarter over quarter and backlog. This is really tied to a reversal of an impairment that we took last quarter. We had early indications of a customer who potentially was interested in canceling one of their contracts and so we adjusted our backlog down by $2 million in Q3.

During Q4 our business development team turned this customer around and was able to maintain that contract and actually increase our backlog activity slightly, and so it came back up by $2 million. All in all, we are able to retain a key customer and incrementally added business. Now having said that, we are looking at a lot of opportunities. We are continuing to bid on a lot of opportunities and so in general, the LEO market appears to be very active and very strong.

Got it. And then I mean, just following on that, can you sort of get a little bit more specific about the sales pipeline that you are seeing and then to that once you are able to launch Vigoride for the first time, what sort of -- what sort of pickup do you expect to see in order activity once you are able to launch that?

On the pipeline, we continue to see customer opportunities that we are bidding on. We continue to feel good about how our service offering is aligning with our customers plans to go to market in this new space economy. In our 10-K, you will see there are a number of third party market forecast that indicate the total addressable market for space transportation is growing rapidly and will continue to do so.

We do think that once we have the opportunity to Vigoride on orbit and demonstrate our capabilities, we would expect to convert more of this customer interest to firm orders and backlog. Establishing flight heritage is something that we know is very attractive to potential customers and something we hear from customers and so we do think that demonstrating our capabilities on orbit will lead to a pickup in new orders.

Great. Thanks a lot, guys.

Thank you. This does conclude the question-and-answer session as well as today's program. Thank you, ladies and gentlemen for participation. You may now disconnect. Good day.