Astrotech Corp (ASTC) - 10-Q Summary
Business Context and Reporting Period
This is a Quarterly Report on Form 10-Q for Astrotech Corporation (formerly SPACEHAB, Incorporated) for the period ended March 31, 2009. The company changed its name in February 2009 to reflect its focus on spacecraft pre-launch processing facilities and services following the mandated end of the U.S. space shuttle program. The company operates four primary segments: Ground Operations, Engineering Services, Space Operations, and SPACETECH (commercial space technology incubator).
Key Financial Metrics
| Metric | Three Months Ended Mar 31, 2009 | Nine Months Ended Mar 31, 2009 | Nine Months Ended Mar 31, 2008 |
|---|---|---|---|
| Revenue | $11.8 million | $21.6 million | $19.5 million |
| Net Income (Loss) | $3.6 million | $2.1 million | ($34.5 million) |
| Diluted EPS | $0.21 | $0.12 | ($4.92) |
| Gross Margin | 59% | 46% | 23% |
| Cash & Cash Equivalents | $1.3 million | $1.3 million | $2.0 million |
| Restricted Cash | $3.2 million | $3.2 million | $6.5 million |
| Total Debt | $4.2 million | $4.2 million | $10.8 million |
| Working Capital | $3.3 million | $3.3 million | N/A |
Note: Total Debt includes $3.6 million term note and $0.6 million revolving credit facility. Senior Convertible Notes of $5.1 million are also outstanding.
Material Changes vs. Prior Period
- Profitability Turnaround: The company reported a net profit of $2.1 million for the nine months ended March 31, 2009, a significant improvement from a net loss of $34.5 million in the same period in 2008. The 2008 loss was heavily impacted by a $30.2 million non-cash debt conversion expense.
- Revenue Growth: Revenue increased 11% year-over-year for the nine-month period, driven primarily by the Ground Operations segment, which saw an 89% increase due to processing ten missions compared to five in the prior year.
- Segment Shifts: Engineering Services revenue dropped 93% due to the termination of the NASA PI&C contract in June 2008. Space Operations revenue dropped 100% as shuttle missions concluded, though a new contract with RSC Energia was signed in April 2009.
- Debt Reduction: Total debt decreased by approximately 14% year-over-year due to the repurchase of $1.75 million in Senior Convertible Notes in October 2008.
Guidance, Outlook, and Risks
Management Commentary: Management believes it has sufficient liquidity and backlog to fund operations for at least the next fiscal year. The company is focusing on new business initiatives in space-based life sciences (Astrogenetix) and commercialization of space technologies (SPACETECH, 1st Detect, AirWard).
Risks and Contingencies:
- Construction Penalty: A $36.2 million facility modification contract has a completion deadline of September 30, 2009. Failure to meet this date could result in penalties up to $3.0 million.
- Liquidity: While working capital is positive ($3.3 million), cash flow from operations was flat ($0.0 million) for the nine-month period. Restricted cash ($3.2 million) is tied to government contracts and bank covenants.
- Customer Concentration: 57% of revenue for the nine months ended March 31, 2009, was derived from U.S. Government contracts (primarily NASA), making the company dependent on government appropriations.
- Delisting Risk: The company received a NASDAQ deficiency letter regarding the $1.00 minimum bid price rule in 2008. Compliance was extended through July 19, 2009.
Investor Verification Checklist
- Verify the status of the $36.2 million Vandenberg facility construction contract and the risk of the $3.0 million penalty.
- Confirm the sustainability of the Ground Operations revenue stream given the end of the Space Shuttle program and reliance on commercial launches.
- Review the details of the new $1.8 million contract with RSC Energia for the MRM1 module to assess future Space Operations revenue.
- Monitor the company's ability to maintain the $1.00 minimum bid price to avoid NASDAQ delisting.
- Assess the progress and commercial viability of new initiatives (1st Detect, AirWard, Astrogenetix) which currently generate no revenue.