AST SpaceMobile, Inc. — Q2 2023 Form 10-Q
Reporting period: Three and six months ended June 30, 2023. AST SpaceMobile is developing a low-Earth-orbit satellite network intended to provide cellular broadband directly to standard mobile phones through mobile network operator partners. The planned service has not launched, and the company reported no revenue in 2023. Revenue in the 2022 comparable periods came from NanoAvionika, which was sold in September 2022.
Financial performance and position
| Metric | Q2 2023 | Q2 2022 | First half 2023 | First half 2022 |
|---|---|---|---|---|
| Revenue | $0 | $7.3 million | $0 | $9.7 million |
| Operating expenses | $58.1 million | $35.4 million | $102.5 million | $68.1 million |
| Net loss before noncontrolling interest | $49.6 million | $8.1 million | $94.8 million | $46.0 million |
| Net loss attributable to common stockholders | $18.4 million | $2.9 million | $34.7 million | $13.6 million |
| Basic and diluted loss per Class A share | $0.24 | $0.06 | $0.47 | $0.26 |
Margins: No 2023 revenue means no current-period gross margin. The 2022 gross margins were approximately 69.7% for Q2 and 56.6% for the first half, both related to Nano.
- Q2 engineering services costs increased 90% to $22.8 million; research and development rose 19% to $10.9 million. Depreciation and amortization increased to $14.1 million, mainly because depreciation began on the BW3 test satellite.
- First-half operating cash use was $88.0 million, versus $88.5 million in 2022. Investing cash use was $23.0 million, versus $33.6 million. Financing provided $63.6 million, mainly from the June public stock offering and ATM sales.
- At June 30, cash and cash equivalents were $190.8 million, with $0.6 million restricted; total cash, cash equivalents and restricted cash were $191.5 million. Current assets were $221.6 million and current liabilities $30.7 million. Total liabilities were $72.6 million, including $4.6 million of long-term debt and $25.0 million of warrant liabilities.
- The company issued 12.5 million Class A shares in a June offering for $56.6 million net of transaction costs. The ATM program generated an additional $7.0 million net during the first half. Class A shares outstanding were 89.4 million at June 30, compared with 71.8 million at year-end 2022.
Material changes and unusual items
- The BW3 test satellite was deemed ready for intended use on April 25, 2023, reclassified from construction in progress, and began depreciation over an estimated remaining useful life of approximately 16 months. Its recorded in-orbit value was $92.5 million at quarter-end.
- Warrant remeasurement produced a non-cash gain of $6.5 million in Q2 and $14.0 million in the first half. Such gains reduced reported losses but do not represent operating cash generation.
- The company recorded a $10.0 million liability after missing Rakuten agreement milestones for Japan by June 2023. It reported that no payment had yet been made and expected to pay in cash, although the agreement allows conversion to an interest-bearing note if the amount cannot be paid.
- On March 14, 2023, the Delaware Court of Chancery validated the company’s amended charter and specified securities retroactively, resolving the Section 205 petition.
Outlook, funding and risks
- Management expected to launch five Block 1 BlueBird satellites in Q1 2024, subject to assembly, testing, launch availability and other factors. After launch and testing, it plans limited, noncontinuous service in targeted areas, subject to regulatory approvals and definitive mobile-network agreements. The company reported successful BW3 two-way calls and repeated 4G download speeds above 10 Mbps; further 5G and partner testing remained planned.
- Management estimated approximately $110 million in capital expenditures to design, assemble and launch the first five Block 1 satellites, and estimated an additional $550–650 million to fund operating costs and capital expenditures for 20 Block 2 satellites and operation of a 25-satellite constellation. These are estimates, not assured funding.
- At June 30, third-party contractual commitments totaled $111.7 million. Management expected $45–50 million of launch-related payments in Q3 2023 and said $20.3 million had been paid by the filing date.
- Management stated that available cash, equity programs and potential borrowing capacity were expected to cover working capital, planned operating expenses and capital expenditures for 12 months from the report date. It cautioned that additional capital is necessary and may not be available on acceptable terms; equity financing may dilute shareholders, while debt and commercial financing may impose restrictions or require concessions.
- Subsequent to quarter-end, the company borrowed $48.5 million under an Atlas facility at a stated fixed rate of 14.75%, with maturity in August 2026; up to another $51.5 million is conditional on equity raises and insurance coverage. Net proceeds were $37.3 million after specified fees, escrow and insurance costs. It also entered a $15.0 million Lone Star loan facility and deposited $15.0 million with the bank, subject to cash-balance conditions. These borrowings add financing but also costs, collateral and covenants.
- Other risks highlighted include execution and launch delays or failures, manufacturing and supply-chain constraints, regulatory approvals, market access, capital availability, inflation, interest rates and foreign-exchange movements. The company reported no material change to the risk factors in its 2022 Form 10-K, no material litigation, and effective disclosure controls as of June 30.
Investor facts to verify
- Whether the five-satellite launch and limited-service timetable remains achievable, and what approvals and commercial agreements remain outstanding.
- Cash burn, committed launch and satellite spending, and the actual availability and terms of further equity or debt funding.
- Repayment and covenant implications of the Atlas and Lone Star facilities, including the conditions attached to additional Atlas borrowing and the Lone Star cash deposit.
- Payment status and any subsequent developments concerning the $10.0 million Rakuten obligation.
- Share dilution from equity programs, the June offering and any future capital raises; also distinguish non-cash warrant gains from operating performance.