Astrotech Corporation — Form 10-Q Summary
Reporting period: Three months ended September 30, 2015 (first quarter of fiscal 2016). The request metadata says 2014 Q1, but the filing itself covers September 30, 2015. Financial statements are unaudited.
Business context
Following the August 2014 sale of its Astrotech Space Operations business, Astrotech operates as a technology incubator focused on three opportunities: 1st Detect chemical analyzers, Astrogenetix vaccine research, and Astral Images film restoration and digital conversion. The company reported no revenue in the quarter. Astral was formed with Astrotech owning 72% and a noncontrolling interest holding the balance.
Financial performance and position
| Metric | Quarter ended September 30, 2015 | Prior-year quarter |
|---|---|---|
| Revenue | $0 | $0.320 million |
| Gross profit / margin | $0 / not meaningful | $0.043 million / 13% |
| Operating expenses | $3.550 million | $2.652 million |
| Loss from operations | $3.550 million | $2.609 million |
| Net loss attributable to Astrotech | $3.364 million; $0.16 per share | Net income of $23.283 million; $1.16 per share |
| Net cash used in operating activities | $4.338 million | $3.119 million |
SG&A increased 17% to $2.286 million, and research and development increased 83% to $1.264 million; management attributed both increases primarily to additional headcount. Interest and other expense, net, was $99,000.
At September 30, 2015, cash and cash equivalents were $1.356 million, short-term investments $21.193 million, and long-term investments $6.257 million. Working capital was approximately $28.5 million, including a $6.1 million indemnity holdback receivable. Total assets were $40.121 million, total liabilities $1.908 million, and stockholders’ equity $38.213 million. The company had no outstanding debt.
Cash used in continuing operations was $974,000 after $3.481 million of net investing cash inflows, principally from investment sales and maturities, and $117,000 of financing outflows for share repurchases. Cash and cash equivalents declined $974,000 during the quarter. Management reported cash, cash equivalents, and short-term investments of $22.5 million, down approximately $2.9 million from June 30, 2015.
Changes versus the prior comparable quarter
- Revenue fell to zero from $320,000. The prior-year revenue related to the first phase of a subcontract on the Next Generation Chemical Detector program; the company said research-based milestones in the current quarter were booked as offsets to R&D expense.
- Operating expenses rose $898,000, or 34%, while the operating loss increased from $2.609 million to $3.550 million.
- Astrotech recorded a $3.364 million attributable net loss, compared with $23.283 million of net income a year earlier. The prior-year result included $24.555 million of after-tax discontinued-operations income, including a gain on the sale of ASO; there was no discontinued-operations activity in the current quarter.
- Operating cash use from continuing operations increased from $1.749 million to $4.338 million. The prior-year total cash flows also included ASO sale proceeds and related discontinued-operation activity, so total cash flow comparisons are not directly indicative of ongoing operations.
Outlook, risks and unusual items
- Management said available liquidity should be sufficient to fund operating expenses, capital requirements, and other expected liquidity needs over the next fiscal year. No specific revenue or earnings guidance was provided.
- The $6.1 million ASO sale indemnity holdback was held in escrow for release around February 2016, subject to the purchase agreement’s conditions. The company said no claims had been asserted and believed it would fully realize the amount.
- Key stated risks include the ability to raise capital if needed, execute the business plan, achieve product development milestones, secure market acceptance and customers, compete for contracts, and manage dependence on government funding and support. Future capital needs may also depend on development, manufacturing, acquisitions, and intellectual-property costs.
- The company had a full valuation allowance against net deferred tax assets and reported an unrecognized tax benefit of $0.1 million. It disclosed no material pending legal proceedings expected to adversely affect its financial condition, results, or cash flows, and no off-balance-sheet arrangements.
- During the quarter, Astrotech repurchased 43,300 shares for $117,000. The filing reports approximately $4.508 million remained available under the repurchase program.
Important facts for investors to verify
- Whether 1st Detect, Astrogenetix, and Astral can convert development activity into commercial revenue, given the quarter’s zero revenue and continuing operating cash burn.
- Whether the $6.1 million indemnity holdback was ultimately released, and whether any claims reduced the amount received.
- How quickly cash and investments are used relative to management’s stated expectation that liquidity will cover the next fiscal year.
- Progress on the NGCD-related work, product integrations, and other customer or government programs, including any associated milestones and funding.
- The effects of increased staffing, share repurchases, and the noncontrolling interest in Astral on future expenses, liquidity, and per-share results.