Astrotech Corporation — Q2 FY2012 Form 10-Q
Reporting period: Quarter and six months ended December 31, 2011. Unaudited; dollar amounts below are in millions unless stated otherwise. Astrotech provides spacecraft processing and related services through Astrotech Space Operations (ASO), alongside early-stage technology and biotechnology initiatives in Spacetech. ASO generated 99% of revenue for the six-month period.
Financial performance
| Metric | Q2 FY2012 | Q2 FY2011 | Six months FY2012 | Six months FY2011 |
|---|---|---|---|---|
| Revenue | $3.676 | $4.641 | $8.516 | $9.947 |
| Gross profit / margin | $0.568 / 15% | $1.203 / 26% | $2.482 / 29% | $3.023 / 30% |
| Operating expenses | $2.454 | $3.002 | $5.141 | $6.132 |
| Loss from operations | $(1.886) | $(1.799) | $(2.659) | $(3.109) |
| Consolidated net loss | $(1.952) | $(1.839) | $(2.804) | $(3.258) |
| Net loss attributable to Astrotech | $(1.786) | $(1.562) | $(2.452) | $(2.724) |
| Basic and diluted loss per share | $(0.10) | $(0.09) | $(0.13) | $(0.15) |
Quarterly revenue fell about 21% year over year, primarily due to a reduced launch schedule. Gross profit declined as revenue fell while near-term costs were generally fixed; gross margin dropped to 15% from 26%. Six-month revenue declined about 14%, while the consolidated net loss narrowed. Lower selling, general and administrative costs and lower research and development expenses partly offset weaker gross profit. Management attributed lower research and development spending overall to shifting investment from Astrogenetix toward 1st Detect.
Cash, liquidity and debt
- Cash and cash equivalents were $14.452 million at December 31, 2011, down $0.542 million from June 30, 2011. Reported working capital was approximately $5.9 million.
- Six-month operating cash flow was negative $1.012 million, compared with positive $0.920 million a year earlier. Investing cash outflow was $0.253 million; financing cash inflow was $0.723 million, including the second $0.9 million Texas Emerging Technology Fund installment.
- Term-loan balance was $6.593 million; no revolving-credit borrowings were outstanding. The $3.0 million revolving facility expires in October 2012. The term loan matures in October 2015, is secured by ASO assets, and carries interest at prime plus 0.25%, subject to a 4% floor. The company reported covenant compliance.
- Current assets were $20.268 million and current liabilities $14.333 million. Deferred revenue totaled $13.231 million, including current and long-term balances.
Changes, outlook and notable items
- ASO segment revenue for the six months was $8.418 million, down from $9.860 million; its pretax loss was $0.350 million versus pretax income of $0.233 million. Spacetech revenue was $0.098 million and its pretax loss was $2.442 million.
- The company recorded a noncash $0.2 million impairment on two historic SPACEHAB modules, citing shuttle-program retirement and no identified alternative use expected to generate cash flow. Management said it did not anticipate further impairments.
- The Texas award provided 1st Detect a total of $1.8 million, restricted to development of its Miniature Chemical Detector. The installments were recorded as equity contributions based on management’s assessment of repayment and default conditions; the equity-conversion deadline was extended to March 31, 2012.
- Management provided no specific financial guidance in the supplied filing text. It described risks involving launch schedules, government funding and customer concentration, contract execution and cost control, access to space, product acceptance, technology milestones, and access to sufficient capital. About 63% of six-month revenue came from U.S. Government contracts.
- The company reported no material pending legal proceedings, no material changes to previously disclosed risk factors, and no significant off-balance-sheet arrangements. Disclosure controls were concluded effective; no material internal-control changes were reported.
Important facts for investors to verify
- Whether launch activity and customer schedules recover, given the revenue decline and ASO’s concentration in total sales.
- Whether ASO can sustain margins under fixed-price contracts and whether the recent margin contraction persists.
- Cash burn, working-capital needs, and the company’s ability to fund operations and Spacetech development without additional capital.
- Repayment, conversion, and use restrictions associated with the Texas funding, and the October 2012 revolving-facility renewal or replacement.
- Commercial progress and funding needs for 1st Detect and Astrogenetix, including development milestones and potential dilution from equity awards and subsidiary ownership interests.
- Outcome of the IRS examination for fiscal 2008–2010 and the remaining $0.2 million ARES receivable, which is subject to completion of government audits.