Astrotech Corporation — Form 10-Q Summary
Reporting period: Fiscal first quarter ended September 30, 2011; filed November 14, 2011. Financial statements are unaudited. Astrotech provides spacecraft payload processing and related services through Astrotech Space Operations (ASO), and develops commercial technologies through Spacetech, including 1st Detect and Astrogenetix.
Financial performance
Amounts below are in millions of dollars except per-share data. Results compare the three months ended September 30, 2011 with the same period in 2010.
| Metric | 2011 | 2010 |
|---|---|---|
| Revenue | $4.840 | $5.306 |
| Gross profit / margin | $1.914 / 40% | $1.820 / 34% |
| Operating expenses | $2.687 | $3.130 |
| Loss from operations | $(0.773) | $(1.310) |
| Consolidated net loss | $(0.852) | $(1.419) |
| Net loss attributable to Astrotech | $(0.666) | $(1.163) |
| Basic and diluted loss per share | $(0.04) | $(0.07) |
| Cash provided by operating activities | $0.708 | $1.626 |
Revenue declined about 9%, primarily because more missions launched before quarter-end in 2011, shortening the period satellites occupied ASO facilities. Gross profit rose despite lower revenue, as prior-year costs included higher variable mission expenses. Selling, general and administrative expense fell to $1.929 million from $2.307 million, primarily due to lower consulting costs and reduced headcount; research and development expense was $0.758 million versus $0.823 million.
ASO generated $4.781 million of revenue and $0.410 million of pretax income; Spacetech generated $0.059 million of revenue and a $1.257 million pretax loss. Approximately 99% of consolidated revenue came from ASO.
Cash, liquidity and debt
- Cash and cash equivalents were $16.386 million at September 30, 2011, up from $14.994 million at June 30, 2011. Management reported working capital of approximately $5.8 million.
- Operating cash flow was $0.708 million; investing cash outflow was $0.128 million, primarily capital expenditures; financing cash inflow was $0.812 million. The financing inflow included the second $0.9 million installment from the Texas Emerging Technology Fund, partly offset by term-loan payments.
- Total assets were $57.647 million and total liabilities were $19.697 million. Current liabilities included $11.044 million of deferred revenue; an additional $0.274 million was noncurrent deferred revenue.
- Term-loan balance was $6.682 million; no amount was drawn on the $3.0 million revolving facility. The term loan is secured by ASO assets, matures in October 2015, and bears interest at prime plus 0.25%, subject to a 4% floor. The revolver expires in October 2012. The company reported compliance with all debt covenants.
Outlook, risks and notable items
- The filing provides no specific financial guidance or quantified forecast. Management says quarterly results are not necessarily indicative of full-year results.
- Key risks identified include reliance on government contracts and funding, launch timing and access to space, competition, contract delays and fixed-price cost control, raising sufficient capital, and successfully developing and commercializing Spacetech products. U.S. Government contracts accounted for approximately 68% of quarterly revenue; 77% of accounts receivable was attributable to the government.
- The $1.8 million Texas Emerging Technology Fund award is restricted to 1st Detect development. It was recorded as an equity contribution based on management’s view that repayment or default was remote; the state also holds a stock purchase right tied to a qualifying financing or change-of-control event. Management requested a six-month extension to the equity-conversion deadline.
- The IRS was examining fiscal years 2008–2010. The company reported a $60,000 liability for unrecognized tax benefits and a full valuation allowance against net deferred tax assets.
- Management reported no material pending legal proceedings and no material changes to previously disclosed risk factors. Disclosure controls were considered effective, with no material change in internal control over financial reporting reported for the quarter.
Important facts for investors to verify
- Whether launch schedules and satellite occupancy periods support future ASO revenue, and how concentrated revenue remains in government contracts.
- ASO fixed-price contract margins, capital needs, and compliance with the secured loan’s covenants and repayment terms.
- 1st Detect’s development milestones, commercial demand, and the restrictions and conversion terms associated with Texas funding.
- Spacetech’s continuing losses and the timing, cost, and prospects of commercializing its detector and biotechnology programs.
- The outcome of the IRS examination and the status of the remaining $0.2 million ARES receivable, payable upon completion of specified government audits.