AST SpaceMobile, Inc. — Q2 2022 Form 10-Q
Reporting period: Three and six months ended June 30, 2022. Financial amounts below are in U.S. dollars; millions are rounded. The company is developing a low-Earth-orbit satellite network intended to connect standard mobile phones. Its SpaceMobile service was not yet operational and generated no revenue. Reported revenue came from its 51%-owned Nano satellite business.
Financial results and liquidity
| Metric | Q2 2022 | Q2 2021 | Six months 2022 | Six months 2021 |
|---|---|---|---|---|
| Revenue | $7.3m | $2.8m | $9.7m | $3.7m |
| Gross profit | $5.1m | $1.7m | $5.5m | $1.7m |
| Gross margin | 69.7% | 59.9% | 56.6% | 45.9% |
| Operating expenses | $35.4m | $25.1m | $68.1m | $37.2m |
| Net loss before noncontrolling interest | $8.1m | $65.2m | $46.0m | $77.3m |
| Net loss attributable to common stockholders | $2.9m | $20.0m | $13.6m | $31.6m |
| Basic and diluted loss per share | $0.06 | $0.39 | $0.26 | $0.39 |
Revenue rose 162% in Q2 and 159% for the first half, primarily as Nano completed customer-contract performance obligations. Higher engineering, G&A and R&D spending reflected staffing, satellite development and facility activity. The company remained loss-making; the smaller reported losses versus 2021 were substantially affected by warrant remeasurement gains in 2022, compared with large losses in 2021. These noncash fair-value changes were $23.0m gain in Q2 2022 and $17.6m gain for the first half of 2022.
- Cash and cash equivalents: $202.4m at June 30, down from $321.8m at December 31, 2021. Current assets were $232.9m and current liabilities $22.2m.
- Cash flow, first half: $88.5m used in operations, $33.6m used in investing and $0.3m provided by financing. Cash, cash equivalents and restricted cash declined $122.2m to $202.4m.
- Debt: $4.9m long-term debt, including the current portion, primarily a $5.0m property-secured term loan; Nano also had a small credit-facility balance. Warrant liabilities were $40.5m, down from $58.1m at year-end.
- Satellite investment and commitments: $86.6m capitalized for the BW3 test satellite. Third-party contractual commitments totaled $45.3m for R&D, capital improvements and satellite components.
Material changes and developments
- On July 2, 2022, after quarter-end, AST LLC agreed to sell its 51% stake in Nano at a stated minimum enterprise value of €65.0m. The filing estimated gross cash proceeds to the company of approximately €27.1m, subject to customary adjustments and closing conditions; closing was expected in Q3 2022. The sale was not yet complete as of the filing.
- Management expects no revenue after the Nano sale until SpaceMobile service launches. Thus, the reported revenue base was expected to end with the disposal of Nano, absent service launch.
- A May 2022 agreement gives the company discretion to sell up to $75m of Class A shares to B. Riley over 24 months at 97% of the specified VWAP. By August 5, 2022, it had issued 1.17m shares under the facility for $7.6m net proceeds, in addition to commitment shares.
Outlook, risks and other notable items
- Management said existing cash was sufficient for anticipated needs for at least 12 months from the filing date, while noting forecasts and assumptions could prove inaccurate and additional capital would be required.
- The estimated capital expenditure to design, assemble and launch the first 20 commercial satellites was $300m–$340m. Management said estimates had increased due to inflation, supply-chain disruption, design changes and higher component, equipment, launch and labor costs; actual costs could differ materially. Additional financing may be needed, with no assurance it will be available on favorable terms or at all.
- BW3 assembly and significant testing were complete; it was at the launch facility for integration. The company expected launch in early to mid-September 2022, subject to technical, vehicle-readiness and weather factors. The SpaceX framework covered launches through December 2024 and allowed delays subject to rebooking fees.
- The company planned to launch five first-generation BlueBird satellites in late 2023, then seek to begin limited, noncontinuous service in certain countries. This depends on development, launches, regulatory approvals and definitive mobile-network-operator agreements. Management described a longer-term plan for substantial global coverage with approximately 110 satellites and a 168-satellite constellation for MIMO capability.
- Risks include execution and launch delays or failures, manufacturing and supply-chain constraints, regulatory approvals, funding availability and potential shareholder dilution. The company stated that inflation and macroeconomic conditions could raise costs; it reported no material impact on development or operations to date. No material litigation or material risk-factor changes were reported. Disclosure controls were considered effective.
Investor verification points
- Confirm whether and when the Nano sale closed, final proceeds and adjustments, and the effect of disposing of the company’s only current revenue source.
- Track actual cash burn, financing needs and any equity issuance under the B. Riley facility; compare progress with the stated 12-month cash runway.
- Verify BW3 launch and test results, and the schedule, cost and financing for the first five BlueBird satellites and the first 20-satellite program.
- Assess the assumptions behind the $300m–$340m estimate and $45.3m commitments, including additional inflation, supply-chain, launch and regulatory exposure.
- Separate operating performance from noncash warrant remeasurement gains and losses when comparing reported net losses.