Astrotech Corporation — Form 10-Q Summary
Reporting period: The filing covers the quarter and nine months ended March 31, 2012 (Astrotech’s fiscal third quarter of 2012), not 2011 as indicated in the request metadata. Amounts below are in millions of dollars unless stated otherwise.
Business context
Astrotech provides spacecraft payload processing and related services through Astrotech Space Operations (ASO), and develops commercial applications of space technologies through Spacetech, including 1st Detect and Astrogenetix. ASO generated approximately 99% of consolidated revenue for the nine-month period. The company noted that about 65% of nine-month revenue came from U.S. Government contracts, compared with 72% in the prior-year period.
Financial performance
| Metric | Three months ended March 31, 2012 | Three months ended March 31, 2011 | Nine months ended March 31, 2012 | Nine months ended March 31, 2011 |
|---|---|---|---|---|
| Revenue | $10.013 | $5.720 | $18.529 | $15.667 |
| Gross profit / margin | $3.243 / 32% | $2.578 / 45% | $5.725 / 31% | $5.601 / 36% |
| Operating income (loss) | $0.954 | $(0.619) | $(1.705) | $(3.728) |
| Consolidated net income (loss) | $0.880 | $(0.694) | $(1.924) | $(3.952) |
| Net income (loss) attributable to Astrotech | $1.014 | $(0.446) | $(1.438) | $(3.171) |
| Basic and diluted EPS | $0.05 | $(0.02) | $(0.08) | $(0.18) |
Quarterly revenue rose primarily from U.S. Government ground support equipment (GSE) fabrication. Revenue growth also lifted gross profit, but gross margin fell as cost of revenue increased. Operating expenses declined: lower legal and consulting costs reduced SG&A, while R&D fell amid a shift in investment toward 1st Detect and lease income from evaluation units. For the nine months, lower operating expenses helped narrow the operating and net losses despite weaker gross margin.
Cash, liquidity and debt
- Cash and cash equivalents were $15.840 at March 31, 2012, up $0.846 since June 30, 2011. Working capital was approximately $7.4.
- Nine-month operating cash flow was $0.598, versus $1.488 in the prior-year period; investing cash use was $0.385, and financing provided $0.633.
- Cash from operations declined mainly due to payment timing for accounts payable and lower deferred-revenue collections, partly offset by accounts-receivable collections.
- Total term debt was approximately $6.503, with $0.368 current and $6.135 long-term. There was no outstanding balance on the $3.0 revolving facility. The term loan is secured by ASO assets, bears interest at prime plus 0.25% subject to a 4% floor, and matures in October 2015. The company reported compliance with loan covenants.
- Current assets were $19.299 and current liabilities $11.940. Deferred revenue totaled $7.423 across current and long-term liabilities.
Outlook, risks and unusual items
- The filing gives no quantified revenue or earnings guidance. Management says interim results are not necessarily indicative of full-year results.
- Management cited risks involving government funding and customer demand, launch and space-access availability, contract timing and cost control, product acceptance, technology development, competition, and the ability to raise sufficient capital.
- Astrotech recorded a non-cash $0.2 impairment on two historical SPACEHAB modules after the shuttle program’s retirement and assessment that the modules had no viable alternative use.
- 1st Detect received the second $0.9 installment of a $1.8 Texas Emerging Technology Fund award. The proceeds are restricted to detector development; the award also involves a stock purchase right and a note with 8% interest, with repayment generally contingent on specified events. Management treated the installments as equity contributions and reported no default.
- NASDAQ granted an additional 180-day period, through August 27, 2012, to regain the $1 minimum bid-price requirement; the company stated it intended to cure the deficiency, including by reverse split if necessary.
- The company was under IRS examination for fiscal years 2008–2010 and reported a $0.060 liability for unrecognized tax benefits. It reported no material pending legal proceedings and no significant off-balance-sheet arrangements.
Important facts for investors to verify
- Whether the GSE-related revenue increase and improved quarterly profitability are repeatable, and how contract mix affects gross margin.
- ASO contract pipeline and the company’s reliance on government customers, launch schedules, and timely contract performance.
- Cash generation, working-capital needs, deferred-revenue trends, debt-service capacity, and the status or renewal of the revolving credit facility expiring in October 2012.
- 1st Detect’s commercial progress, development funding restrictions, Texas award terms, and any potential equity dilution from the stock purchase right.
- NASDAQ bid-price compliance actions and any resulting shareholder dilution or reverse-stock-split effects.