AST SpaceMobile, Inc. — Q3 2022 Form 10-Q
Reporting period: Quarter and nine months ended September 30, 2022. Unaudited consolidated financial statements; amounts below are in U.S. dollars. AST SpaceMobile is developing a satellite network intended to provide cellular connectivity to standard mobile phones. Its SpaceMobile service had not launched and generated no revenue during the period.
Financial results and position
| Metric | Q3 2022 | Q3 2021 | Nine months 2022 | Nine months 2021 |
|---|---|---|---|---|
| Revenue | $4.2 million | $2.5 million | $13.8 million | $6.2 million |
| Gross profit / margin | $1.6 million / 39.4% | $0.3 million / 14.2% | $7.1 million / 51.4% | $2.1 million / 33.4% |
| Operating expenses | $42.1 million | $23.1 million | $110.3 million | $60.3 million |
| Net income (loss) attributable to common stockholders | $(9.8) million | $4.1 million | $(23.4) million | $(27.4) million |
| Net loss before noncontrolling-interest allocation | $(32.1) million | $16.8 million | $(78.0) million | $(60.5) million |
| Operating cash flow | Not provided for quarter | Not provided for quarter | $(121.4) million | $(58.6) million |
| Investing cash flow | Not provided for quarter | Not provided for quarter | $(19.8) million | $(40.5) million |
- At September 30, cash and cash equivalents were $198.9 million and restricted cash was $0.7 million. Current assets were $225.3 million and current liabilities $21.2 million.
- Long-term debt was $4.8 million, with $0.2 million classified as current. Separately, warrant liabilities were $56.4 million; they are fair-value liabilities, not borrowings.
- Total assets were $386.3 million and total stockholders’ equity was $296.7 million. Nine-month cash, cash equivalents and restricted cash declined by $125.0 million.
Material changes and unusual items
- Revenue came from former subsidiary NanoAvionika, which sold satellites, components and related services. AST SpaceMobile sold its 51% interest in Nano on September 6, 2022; revenue increased year over year before the sale, but management does not expect further revenue or associated cost of sales until SpaceMobile service launches.
- The Nano sale generated approximately $26.7 million of net proceeds and a $24.6 million accounting gain. The gain contributed materially to reported other income and is not recurring operating revenue.
- Operating expenses rose 82% year over year in Q3 and 83% for the nine-month period, reflecting higher engineering headcount and costs, satellite development, ASIC-program milestones, and administrative expenses. Nine-month R&D expense doubled to $31.0 million.
- Q3 results also included a $15.9 million loss from remeasurement of warrant liabilities, versus a $39.4 million gain in Q3 2021. For the nine months, warrant remeasurement produced a $1.7 million gain, compared with a $2.3 million loss in 2021.
- Nine-month operating cash use included $14.8 million of launch-provider deposits. Investing cash use included $20.7 million for property and equipment and $25.2 million for BW3 construction, partly offset by Nano-sale proceeds.
Outlook, liquidity and risks
- Management said cash on hand was expected to cover current working-capital needs, planned operating expenses and capital expenditures for at least 12 months from the filing date. The company nevertheless expects to need additional capital and said there is no assurance it will be available on favorable terms or at all.
- The company estimated $300 million to $340 million of capital expenditures to design, assemble and launch its first 20 commercial satellites. The estimate is preliminary and may change with inflation, supply-chain constraints, design changes, component and launch costs, and delays.
- Management planned to launch five first-generation BlueBird satellites in late 2023, then seek to begin limited, noncontinuous service in certain countries. The plan depends on satellite completion and testing, launch availability, regulatory approvals, and definitive mobile-network-operator agreements. The company described a longer-term plan for about 110 satellites for substantial global coverage and a 168-satellite constellation.
- BW3 launched September 10, 2022. The company announced on November 14, after quarter-end, that its communications array had been deployed in orbit and that testing was planned. Test outcomes are uncertain; the filing cites possible loss of connectivity, satellite destruction, or other communications failures.
- As of September 30, contractual commitments to third parties totaled $63.3 million for R&D, capital improvements and BlueBird components. The company also had common-stock financing arrangements: a discretionary B. Riley purchase agreement of up to $75 million and an at-the-market offering of up to $150 million. Shares had already been issued under both arrangements, creating potential dilution if further equity is sold.
- Other risks include the need for additional FCC and foreign regulatory authorizations, launch and manufacturing execution, financing access, and inflation and supply-chain conditions. The filing reported no material litigation, no material change to previously disclosed risk factors, and effective disclosure controls as of September 30.
Important facts for investors to verify
- Whether BW3 testing demonstrates reliable direct communication with unmodified phones, and whether results support the planned BlueBird design and schedule.
- Whether the late-2023 five-satellite launch plan, regulatory approvals, launch capacity and mobile-network-operator agreements remain achievable.
- Actual cash burn, remaining liquidity runway, and financing needs against the $300–$340 million first-20-satellite estimate and $63.3 million of disclosed commitments.
- How much additional equity is issued under the B. Riley and at-the-market programs, and the resulting dilution.
- The final Nano-sale working-capital and net-debt adjustments, and the extent to which reported results are affected by the nonrecurring sale gain and warrant fair-value changes.