AST SpaceMobile, Inc. — Q3 2023 Form 10-Q
Reporting period: Three and nine months ended September 30, 2023. Financial statements are unaudited; amounts below are in U.S. dollars unless stated otherwise.
Business context
AST SpaceMobile is developing a low-Earth-orbit satellite network intended to connect directly with standard mobile phones through mobile network operators. Its SpaceMobile service had not launched and generated no revenue in the period. The company sold its former satellite-manufacturing subsidiary, Nano, in September 2022; Nano had generated all revenue reported in the 2022 comparison.
Key financial metrics
| Metric | Q3 2023 | Q3 2022 | Nine months 2023 | Nine months 2022 |
|---|---|---|---|---|
| Revenue | $0 | $4.2m | $0 | $13.8m |
| Operating expenses | $59.0m | $42.1m | $161.5m | $110.3m |
| Net loss before noncontrolling interest | $50.7m | $32.1m | $145.6m | $78.0m |
| Net loss attributable to common stockholders | $20.9m | $9.8m | $55.6m | $23.4m |
| Loss per Class A share | $0.23 | $0.18 | $0.70 | $0.45 |
Margins: No 2023 revenue or gross profit was reported, so operating and net margins are not meaningful. Prior-period revenue and gross profit were from Nano, not the planned SpaceMobile service.
Cash flow, nine months: Cash used in operations was $124.0m, cash used in investing was $96.5m, and financing provided $117.4m. Cash, cash equivalents and restricted cash ended at $135.7m, down from $239.3m at year-end 2022.
Liquidity and debt: September 30 cash and cash equivalents were $133.3m, plus $2.4m restricted cash. Total debt principal was $71.8m; reported long-term debt, net of issuance costs and current portion, was $58.5m. The company reported $287.2m of stockholders’ equity and $26.9m of current liabilities.
Material changes versus prior comparable periods
- Revenue fell to zero after Nano’s sale; the company remains pre-commercial for its satellite service.
- Nine-month operating expenses increased 46% to $161.5m. Engineering costs rose 54% to $58.8m, while depreciation and amortization rose to $34.9m, principally as depreciation began on the BW3 test satellite.
- Cash used in investing increased to $96.5m, reflecting satellite materials, equipment and launch-related spending.
- Class A shares issued and outstanding increased to 89.7m from 71.8m at December 31, 2022. The company raised $56.6m net in a June public offering and $7.0m net through its ATM program during the first nine months.
- The company recorded a $21.5m nine-month gain from remeasurement of warrant liabilities, a non-cash item that reduced reported losses.
Outlook, management commentary and risks
- Management expected to launch five first-generation Block 1 satellites in Q1 2024, subject to completion of assembly and testing, vendor deliveries, launch availability and other factors. After launch, it planned a limited, noncontinuous service in targeted areas, subject to regulatory approvals and definitive commercial agreements. Management expected to seek revenue in 2024, but there is no assurance these milestones or revenue will be achieved.
- The company estimated approximately $115m for materials and launch costs for the first five satellites and said about 85% had been paid by September 30. It estimated a further $550m–$650m would be needed to develop and launch 20 Block 2 satellites and operate a 25-satellite constellation.
- Management believed available cash and access to existing equity programs would cover expected needs for 12 months from the filing date. It also stated that additional capital is necessary; financing may be unavailable or dilutive. Failure to raise funds could require delaying, reducing or stopping development activities.
- In August, the company borrowed $48.5m under an Atlas facility at a fixed 14.75% interest rate, with maturity in August 2026. The facility permits another $51.5m only if the company raises additional equity and obtains sufficient insurance coverage. It is secured by substantially all assets, contains liquidity and other covenants, and was reported in covenant compliance at quarter-end.
- The company also borrowed $15.0m under a capital-equipment loan. A $15.0m bank money-market balance could become restricted if cash falls below specified thresholds. The filing does not clearly state whether this balance is included in the reported cash figure.
- Unusual items include a $10.0m expense related to missed Rakuten agreement performance indicators, recorded in Q1 and paid in Q3 2023, and $34.9m of nine-month depreciation, largely related to BW3’s estimated remaining useful life of approximately 16 months.
- Management cited potential supply-chain, inflation, interest-rate, launch, regulatory, technology and capital-raising risks. It reported no material legal proceedings, no material changes to previously disclosed risk factors, and no off-balance-sheet arrangements.
Important facts for investors to verify
- Whether the five Block 1 satellites complete testing and launch on the anticipated timetable, and whether required approvals and commercial agreements are secured.
- Actual cash runway, restricted-cash terms and remaining availability under the equity programs and debt facilities.
- Funding needs and likely dilution or financing terms for the planned Block 2 satellites and broader constellation.
- Atlas facility costs, collateral and covenants, and the conditions for accessing its undrawn commitment.
- Commercial economics and obligations under partner arrangements, including Vodafone, Rakuten and American Tower.
- Voting and ownership structure: Class B and Class C shares are non-economic voting shares, and Class C shares carry specified super-voting rights; assess potential dilution from equity issuance and unit exchanges.