AST SpaceMobile, Inc. — Q1 2024 Form 10-Q
Reporting period: Three months ended March 31, 2024. AST SpaceMobile is developing a low-Earth-orbit satellite network intended to deliver cellular broadband directly to ordinary mobile phones through mobile network operator partners. Its SpaceMobile service had not launched and had generated no service revenue during the quarter.
Financial performance and position
| Metric | Q1 2024 | Q1 2023 / comparison |
|---|---|---|
| Revenue | $0.5 million | None; Q1 2024 revenue was from a U.S. government contract, not SpaceMobile service |
| Operating expenses | $56.0 million | $44.5 million, up 26% |
| Net loss before noncontrolling interest | $39.8 million | $45.2 million |
| Net loss attributable to common stockholders | $19.7 million; $0.16 per share | $16.3 million; $0.23 per share |
| Operating cash used | $48.1 million | $37.7 million |
| Investing cash used | $39.6 million | $15.4 million |
| Cash, cash equivalents and restricted cash | $212.4 million at March 31 | $88.1 million at December 31, 2023 |
| Total debt | $181.7 million gross; $160.8 million net of issuance costs | $71.8 million gross at December 31, 2023 |
Q1 financing provided $212.2 million, primarily from $107.7 million net proceeds from a January share offering and $104.8 million net proceeds from $110 million of convertible notes. Cash and cash equivalents excluding restricted cash were $210.0 million. Current assets were $239.5 million versus current liabilities of $31.9 million. The company reported no meaningful operating margin given minimal revenue and continuing development costs.
Material changes versus the prior year
- Revenue began in Q1, totaling $0.5 million from completed U.S. government contract obligations; the company had no revenue in Q1 2023.
- Operating expenses rose 26%. Engineering costs increased 18%, general and administrative costs increased 25%, and depreciation and amortization rose to $19.9 million from $1.7 million, primarily because depreciation of the BW3 test satellite began in April 2023. Research and development costs fell 74% to $4.3 million as certain design work was completed.
- Net loss before noncontrolling interest narrowed to $39.8 million from $45.2 million, but common-stockholder loss increased to $19.7 million from $16.3 million, reflecting changes in the allocation of losses to noncontrolling interests.
- Cash used in operations and investing increased by $10.4 million and $24.2 million, respectively. The company’s cash position increased mainly due to the equity offering and convertible-note financing.
- Debt increased after issuance of $110 million in convertible notes. A $18.2 million noncash gain from warrant remeasurement benefited reported results, compared with a $7.5 million gain a year earlier. Q1 2023 also included a nonrecurring $10 million expense related to Rakuten performance milestones.
Outlook, commentary and risks
- Management said available cash and access to the at-the-market equity program should cover working capital, planned operating expenses and capital expenditures for 12 months from the filing date. It also estimated that an additional $350 million to $400 million would be needed to design, assemble and launch 20 Block 2 satellites and operate a 25-satellite constellation. Future financing is not assured and could dilute shareholders or impose restrictive terms.
- The company expected to transport five Block 1 satellites to the launch site between July and August 2024, with launch planned shortly thereafter. Timing depends on completion of testing, regulatory approvals, launch-provider scheduling, logistics, weather and other factors. Management estimated total capital expenditure for the five satellites at approximately $115 million and said more than 95% had been paid as of the report date.
- Management expected to continue recognizing U.S. government contract revenue through 2024 and anticipated revenue from gateway equipment resale and associated services. A limited, noncontinuous service in selected areas was planned after the five-satellite launch, subject to regulatory approvals and commercial agreements.
- The first Block 2 satellite had a launch window of December 15, 2024 to March 31, 2025. The company reported $94.6 million of contractual commitments, primarily for satellite components, research and development, capital improvements and launch payments.
- On May 10, 2024, after quarter-end, AST SpaceMobile and AT&T Services signed a commercial agreement covering service in the continental United States, Hawaii and Puerto Rico. AT&T is to pay a share of gross monthly revenue and make a nonrefundable commercial payment after successful initial operation of the five Block 1 satellites.
- The $110 million convertible notes bear 5.50% interest, have a ten-year term unless converted, and are initially convertible at $5.75 per share from January 16, 2025, subject to terms. Management stated it intended to pay interest in kind. The company said it was in compliance with debt covenants at March 31.
- Key execution risks include satellite production, launch and in-orbit performance, regulatory approvals, supplier and supply-chain constraints, access to capital, and the timing of commercial agreements and service rollout. Management cited inflation, interest rates, market volatility and geopolitical conflicts as potential pressures, though it said these had not materially affected operations to date.
- Two Delaware stockholder class actions concerning the de-SPAC merger were consolidated; plaintiffs were to file an amended complaint. A separate federal securities class action filed in April 2024 alleges materially misleading statements regarding satellite production status and timing. The company reported that management did not consider a material loss probable, but litigation outcomes are uncertain.
Investor verification priorities
- Track completion, launch timing and operational performance of the five Block 1 satellites, along with regulatory approvals and readiness for limited service.
- Verify cash burn, remaining launch and satellite costs, the additional $350–$400 million funding estimate, and access to equity, debt or commercial financing.
- Monitor progress toward Block 2 design, ASIC qualification and production, and the first Block 2 launch window.
- Assess whether the AT&T agreement and other partner arrangements translate into service availability, revenue and cash receipts on expected terms.
- Review debt costs and covenants, potential dilution from financing or conversion, the $94.6 million commitments, and developments in the disclosed litigation.