AST SpaceMobile, Inc. — Q1 2023 Form 10-Q
Reporting period: Three months ended March 31, 2023. Unaudited consolidated financial statements. AST SpaceMobile is developing a low-Earth-orbit satellite network intended to provide broadband connectivity directly to standard mobile phones through mobile-network operators. The planned service had not launched and generated no revenue in the quarter.
Financial performance and position
| Metric | Q1 2023 | Q1 2022 / prior date |
|---|---|---|
| Revenue | $0 | $2.4 million |
| Gross profit | $0 | $0.4 million; approximately 17% gross margin |
| Operating expenses | $44.5 million | $32.7 million |
| Net loss before noncontrolling interest | $45.2 million | $37.9 million |
| Net loss attributable to common stockholders | $16.3 million; $0.23 per Class A share | $10.7 million; $0.21 per share |
| Cash used in operating activities | $37.7 million | $47.5 million |
| Cash used in investing activities | $15.4 million | $21.6 million |
| Cash, cash equivalents and restricted cash | $185.7 million | $239.3 million at December 31, 2022 |
| Total assets | $400.7 million | $438.4 million at December 31, 2022 |
| Total liabilities | $83.8 million | $78.5 million at December 31, 2022 |
| Long-term debt | $4.7 million | $4.8 million at December 31, 2022 |
| Warrant liabilities | $31.4 million | $38.9 million at December 31, 2022 |
Cash and cash equivalents were $185.0 million; restricted cash was $0.7 million. The company reported total stockholders’ equity of $316.9 million. Cash declined by $53.6 million during the quarter. The filing reports no meaningful current-period revenue or gross margin because the prior-year revenue was generated by Nano, a former subsidiary sold in September 2022.
Material changes versus prior period
- Revenue and cost of sales fell to zero after the sale of Nano; its Q1 2022 revenue was the company’s only revenue at that time.
- Operating expenses rose 36% to $44.5 million. Engineering services increased 40% to $16.5 million, and research and development nearly doubled to $16.4 million, principally reflecting staffing, facilities, satellite subsystems, radio-frequency programs and ASIC development. General and administrative costs declined 15% to $9.9 million, partly because Nano was no longer consolidated.
- Consolidated net loss increased to $45.2 million from $37.9 million. The Class A common-stockholder loss increased to $16.3 million from $10.7 million. Results included a $7.5 million noncash gain from remeasurement of warrants, versus a $5.5 million loss in Q1 2022.
- Operating cash use improved by $9.8 million year over year, partly due to launch deposits paid in Q1 2022; investing cash use declined as BlueWalker 3 spending eased, offset by higher property, equipment and satellite-material purchases.
Outlook, liquidity and risks
- Management said existing cash and access to equity programs were expected to cover working capital, planned operating expenses and capital expenditures for 12 months from the filing date. This is a forward-looking estimate and depends on assumptions and continued access to financing.
- The company expects to launch five Block 1 BlueBird satellites in Q1 2024, subject to completion of assembly and testing, launch availability and other factors. It plans limited, noncontinuous service after launch and testing; regulatory approvals and definitive mobile-network-operator agreements are required before service begins. The company estimates $100–110 million in capital expenditures for the first five satellites and approximately $550–650 million to fund the program and operate a 25-satellite constellation.
- As of March 31, 2023, contractual commitments to third parties totaled $101.0 million for research and development, capital improvements, launches and satellite components. New lease arrangements during the quarter increased required minimum lease payments by $9.9 million.
- After quarter-end, the company announced successful two-way voice calls to standard unmodified phones using BlueWalker 3 and determined the test satellite was ready for intended use as of April 25, 2023. It expects additional depreciation of about $5.6 million per month over the satellite’s estimated remaining useful life of approximately 16 months.
- The company said it did not expect to meet certain Rakuten contractual milestones by June 2023 and recognized a $10.0 million liability payable June 30, 2023. If unpaid, the amount converts to a note bearing 8% interest, payable in quarterly installments over three years.
- Key execution and funding risks include launch or satellite failure and delays, manufacturing and supply-chain constraints, cost inflation, regulatory approvals, obtaining definitive MNO agreements, and raising capital on acceptable terms. Additional equity financing could dilute shareholders. The filing states that no material risk-factor changes had occurred since the 2022 Form 10-K.
- The Delaware Court of Chancery validated the company’s charter and specified securities retroactively in March 2023, resolving the disclosed uncertainty regarding the 2021 charter vote. The company reported no other material litigation.
Important facts for investors to verify
- Progress against the Q1 2024 target for launching five Block 1 satellites, including assembly, testing, launch arrangements and cost estimates.
- Availability and terms of additional funding, including actual use and remaining capacity of the equity line and at-the-market program; neither program was used during Q1 2023.
- Payment or financing of the $10.0 million Rakuten obligation and progress against the agreement’s milestones.
- Regulatory approvals and definitive MNO agreements needed to begin commercial service, along with the timing and economics of partner arrangements.
- Cash burn, the $101.0 million in third-party commitments, and the impact of BlueWalker 3 depreciation on reported losses.
- Potential dilution and voting control: the company has Class A, B and C shares, and Class C shares carry specified super-voting rights.