AST SpaceMobile, Inc. — Form 10-Q Summary
Reporting period: Quarter ended September 30, 2021. Financial statements are unaudited. AST SpaceMobile is developing a low-Earth-orbit satellite network intended to connect standard mobile phones; it had not begun offering its planned SpaceMobile service. Current revenue came entirely from its 51%-owned Nano subsidiary, which sells satellite products and services. The April 6, 2021 business combination and resulting Up-C structure make some year-over-year comparisons less directly comparable.
Financial performance and position
| Metric | Q3 2021 | Q3 2020 | Nine months 2021 | Nine months 2020 |
|---|---|---|---|---|
| Revenue | $2.45 million | $2.09 million | $6.19 million | $3.27 million |
| Gross profit (margin) | $0.35 million (14%) | $1.26 million (60%) | $2.06 million (33%) | $0.63 million (19%) |
| Operating expenses | $23.11 million | $6.46 million | $60.33 million | $16.54 million |
| Net income (loss) before noncontrolling interest | $16.80 million | $(5.18) million | $(60.46) million | $(15.85) million |
| Net income (loss) attributable to common stockholders | $4.12 million | $(5.53) million | $(27.44) million | $(15.53) million |
| Operating cash flow | Not presented for quarter | Not presented for quarter | $(58.61) million | $(13.06) million |
Q3 2021 common-stockholder income included a $39.4 million non-cash gain from remeasuring warrant liabilities; the company recorded a $2.3 million warrant fair-value loss for the nine-month period. The reported Q3 profit therefore does not reflect operating profitability. Nine-month loss per Class A share was $0.31; the filing does not present comparable pre-business-combination EPS.
At September 30, 2021, cash and cash equivalents were $360.4 million, including $352.0 million in short-term money-market funds. Current assets were $370.6 million and current liabilities $15.4 million. Total liabilities were $97.9 million, including $76.1 million of warrant liabilities and $6.9 million of operating lease liabilities. The balance sheet reports no conventional borrowings. Stockholders’ equity was $363.1 million. Nine-month investing cash outflow was $40.5 million; financing cash inflow was $416.9 million, primarily from the business combination.
Changes versus prior comparable periods
- Nine-month revenue increased $2.9 million, principally from new Nano customers and contract milestones. The quarter’s revenue rose $0.4 million, while cost of sales increased $1.3 million; Q3 gross margin fell to about 14% from about 60%.
- Operating expenses rose sharply as the company expanded engineering, public-company, and satellite development activities. Nine-month research and development expense was $15.5 million versus $0.1 million a year earlier; engineering expense was $18.8 million versus $8.4 million, and general and administrative expense was $24.0 million versus $7.6 million.
- Nine-month operating cash use increased to $58.6 million from $13.1 million, while investing cash use increased to $40.5 million from $20.7 million. The business combination generated $416.9 million of net proceeds during 2021; 2020 financing included proceeds from Series B preferred stock.
Outlook, risks and notable items
- Management said existing cash was expected to fund working capital and capital expenditure needs for at least 18 months from the filing date. It estimated $260–$300 million in capital investment for the first 20-satellite BB1 phase and $1.7–$1.9 billion for the planned 168-satellite constellation. Management expects operating expenses to keep increasing through at least 2023 and said additional capital will be needed; future financing may be unavailable or dilutive.
- The BW3 test satellite had $56.7 million of capitalized costs at quarter-end, with another $10–$12 million estimated to complete it. SpaceX’s then-available launch window was March–April 2022, but management said it was likely to consider rebooking to allow more testing; any alternate timing depended on agreement with SpaceX.
- Management planned BB1 commercial launches beginning in Q4 2022 and continuing into 2023, targeting initial coverage of 49 equatorial countries. Subsequent launches were planned for 2023–2025, subject to manufacturing, launch-provider, regulatory, and other execution factors. These are plans, not assured milestones.
- Revenue depended on a small number of Nano customers: three customers represented about 36% of nine-month 2021 revenue. Nano accounted for all company revenue in the period. The filing also describes reliance on partners and suppliers, satellite manufacturing and launch risks, market-access approvals, and the need for substantial future funding.
- Existing agreements include proposed commercial arrangements with Vodafone and Rakuten. The Rakuten agreement includes a potential $10 million penalty if specified launch-program KPIs are not met in the final phases or in certain insolvency circumstances. The company reported no material litigation and no material changes to previously disclosed risk factors.
- After quarter-end, a subsidiary agreed to buy an industrial facility for $8.0 million for satellite assembly and testing, paying a $0.5 million deposit. COVID-19 had not materially affected development or operations through the reporting date, but future effects were uncertain.
Key investor verification points
- Track BW3 completion, testing, and actual launch timing, along with the cost to finish the satellite.
- Compare BB1 and full-constellation launch schedules and capital-cost estimates with subsequent filings and financing plans.
- Assess cash burn against the stated 18-month liquidity runway and the company’s substantial expected funding requirements.
- Separate operating performance from warrant fair-value movements; verify the effect of customer concentration and Nano’s contract margins.
- Review commercial-partner agreements, launch and regulatory dependencies, and any resulting penalties or obligations.
- Consider the Up-C ownership and voting structure, potential dilution, and the tax receivable agreement, which could require payments of 85% of certain realized tax savings; no TRA liability was recorded at quarter-end.