AST SpaceMobile, Inc. — Q2 2021 Form 10-Q
Reporting period: Three and six months ended June 30, 2021; filed August 16, 2021. Amounts below are in U.S. dollars. The company completed its business combination on April 6, 2021, so comparisons with 2020 reflect AST LLC’s historical results and are not fully like-for-like.
Business context
AST SpaceMobile is developing a low-Earth-orbit satellite network intended to provide broadband connectivity directly to standard mobile phones through mobile network operator partners. The company was assembling and testing the BlueWalker 3 (BW3) test satellite and designing its first commercial satellites. Reported revenue came entirely from its 51%-owned subsidiary NanoAvionika, which sells small satellites, components and related services; the planned SpaceMobile service was not yet generating revenue.
Financial performance and position
| Metric | Q2 2021 | Q2 2020 | Six months 2021 | Six months 2020 |
|---|---|---|---|---|
| Revenue | $2.8 million | $0.4 million | $3.7 million | $1.2 million |
| Gross profit (loss) | $1.7 million | $(0.4) million | $1.7 million | $(0.6) million |
| Operating expenses | $25.1 million | $5.6 million | $37.2 million | $10.1 million |
| Net loss | $(65.2) million | $(5.9) million | $(77.3) million | $(10.7) million |
| Net loss attributable to common shareholders | $(20.0) million | Not presented | $(31.6) million | Not presented |
Gross margin was approximately 60% in Q2 2021 and 46% for the first half, compared with negative gross margins in the corresponding 2020 periods. Higher revenue reflected Nano customer sales and contract milestones. Engineering, general and administrative, and research and development spending increased substantially as the company expanded satellite development and public-company operations.
Q2 and first-half net loss included a $41.7 million non-cash loss from remeasuring warrant liabilities. The company reported $115.5 million of warrant liabilities at June 30; these are accounting liabilities, not reported borrowings. Basic and diluted loss per share was $0.39 for the three- and six-month periods, based on 51.7 million weighted-average Class A shares. The filing says prior-period EPS was not meaningful; the 2021 EPS calculation reflects the post-combination period.
Cash flow: For the first half, operating activities used $38.4 million and investing activities used $18.6 million; financing activities provided $416.9 million, primarily from the business combination. Cash and cash equivalents increased to $402.6 million from $42.8 million at year-end 2020. The company reported $414.6 million in current assets and $15.6 million in current liabilities. Operating lease liabilities totaled $6.8 million; the filing reports no material outstanding borrowings.
Assets and equity: Total assets were $482.7 million and total liabilities $137.5 million at June 30, 2021. BW3 construction in progress was $38.7 million. The post-combination structure left the company with a 28.5% economic interest in AST LLC; the remaining 71.5% was reflected as noncontrolling interest.
Material changes and unusual items
- The April 6 business combination was accounted for as a reverse recapitalization. It generated approximately $416.9 million of net proceeds and materially increased cash and equity; reported results before closing are AST LLC’s historical results.
- First-half revenue increased $2.6 million year over year, while operating expenses rose $27.1 million to $37.2 million. The company attributed expense growth to staffing, professional and insurance costs, and commercial-constellation research and development.
- The $41.7 million warrant fair-value loss arose after the business combination and was non-cash. Warrant-liability remeasurement depends on fair-value estimates and market inputs.
- Three customers represented approximately 74% of first-half 2021 revenue. Nano generated all reported revenue.
Outlook, risks and contingencies
- Management stated that cash on hand was expected to fund working capital and capital expenditures for at least 18 months from the filing date. This is an estimate subject to execution, cost and timing risks; management also said additional capital would be needed to complete the planned constellation.
- Estimated capital investment for the first 20 commercial satellites was $260–$300 million. Estimated investment for the full planned 168-satellite constellation was $1.7–$1.9 billion through 2025. Estimates may change and actual costs could be materially higher.
- BW3 had incurred approximately $51.7 million of capitalized costs, with another $14–$16 million estimated to complete it. Its launch window was expected to begin in March 2022, contingent on completion and testing. Commercial launches were planned to begin in Q4 2022, subject to successful testing and other dependencies.
- Key execution risks include satellite design and manufacturing, launch availability or failure, supplier performance, regulatory approvals and access to mobile spectrum, commercial agreements with operators, competition, hiring, and the need to secure further financing. The company noted that it might need to delay, reduce or stop development if financing is unavailable.
- COVID-19 had not materially affected development or operations through the period, but future effects were uncertain. No material litigation or litigation reserves were reported. The company disclosed a potential $10 million penalty to Rakuten if specified launch-program KPIs are missed in the final phases or certain insolvency events occur.
- The company’s Tax Receivable Agreement generally requires payment of 85% of certain realized tax savings; no liability had been recorded because no qualifying unit exchanges had occurred. Early termination events could trigger a potentially material lump-sum payment.
- Management reported disclosure controls were effective at June 30, 2021. It also noted that a material weakness at the former acquisition company related to warrant accounting was believed remediated after the merger.
Important facts for investors to verify
- Whether BW3 construction, testing and launch timing—and subsequent commercial satellite milestones—remain on schedule and within the stated cost estimates.
- How the $260–$300 million first-phase and $1.7–$1.9 billion full-constellation estimates evolve, and when additional financing may be required.
- Progress on spectrum and regulatory approvals, definitive mobile-operator agreements, and launch-provider and supplier commitments.
- Revenue concentration in Nano and the extent to which reported revenue represents ancillary business rather than the planned SpaceMobile service.
- The impact of warrant-liability fair-value changes on reported earnings, and any future changes in warrants, ownership dilution or tax-receivable obligations.