Astra Space, Inc. (ASTR) on Q3 2021 Results - Earnings Call Transcript
Operator: Good afternoon and welcome to Astra's Third Quarter 2021 Earnings Conference Call. Joining us for today's call, Astra's Founder, Chair, and CEO, Chris Kemp, CFO, Kelyn Brannon, and Vice President of Compliance and Deputy General Counsel, Michael Stitcher. After the speakers remarks, there will be a question and answer session. Please be advised that today's conference is being recorded. I would now like to hand -- to turn the call over to Michael for introductory remarks. And please go ahead. Michael Stitcher : Thank you, Operator. Good afternoon, everyone. And thank you for joining us for Astra third quarter 2021 earnings call. After the market closed, we released our financial results. The earnings release is available on the SEC 's website and our Investor Relations website at investor. astra.com. This teleconference is also being broadcast over the internet and will be archived and available on our Investor Relations website. During our call today, we will reference non-GAAP financial measures, which we believe to be useful to investors as our management team uses these non-GAAP financial measures to plan, monitor, and evaluate our financial performance. These non-GAAP financial measures exclude certain items and should not be considered as substitute for comparable GAAP financial measures. Astra's methods of computing these non-GAAP financial measures may differ from similar non-GAAP financial measures used by other companies. A description of these items along with a reconciliation of our non-GAAP financial measures to their most comparable GAAP financial measures can be found in our earnings release. Today's call will also contain forward-looking statements that refer to future events, including Astra's future financial outlook. When used in this call, the words anticipate, could, enable, estimate, intend, expect, believe, potential, will, should, project, and similar expressions as they relate to Astra are, as such, a forward-looking statement. These forward-looking statements are subject to a number of risks and uncertainties. And as result, Astra's actual future results and performance may differ materially from those discussed in this call. We encourage you to review our filings with the SEC in which we describe the factors that could cause actual results to differ materially from our current expectations. We also refer to commercial launches in this conference call. When we use the phrases commercial launch, commercial revenue launch, commercial orbital launch, we mean a launch conducted under an FAA commercial launch license. Additionally, each of our launch vehicles is denoted by an asset title with the abbreviation of LV standing in for launch vehicle, followed by the serial number. For instance, our current launch vehicle is referenced at LV0007. Finally, I would like to remind everyone that this call will be recorded and will be made available for replay via link available on the Investor Relations section of our website. With that, I would now like to turn the call over to Chris Kemp, Astra's Founder, Chairman and CEO. Chris? Chris Kemp : Thank you, Michael, and good afternoon, and thank you for joining us today for our third quarter earnings call. As we speak today our small 5-person launch operations team is in Kodiak, Alaska with LV0007 preparing for another orbital test launch with the U.S. Space Force. Our team is working to complete pre -launch test and we expect this launch to occur in the next week or so. I'm Incredibly proud of our team's partnership with the FAA as we rapidly identified end results to the issues we encountered in our last test flight. We're also incredibly proud that we were able to incorporate these learning into design changes and shift LV0007 in less than 60 days. Developing an Orbital launch system is incredibly difficult. And I admire the grit and determination of our team. And while we can't guarantee that the current test flight will be successful, we strongly believe that launching again with the changes that we just made is the fastest and most capital efficient path to success. Back at our headquarters, at Alameda, California, our manufacturing team is nearing completion of our next launch vehicle, LV0008 and I'm pleased with the increasing manufacturing efficiencies with which we're bringing the vehicles together. The production of this vehicle will be the fastest in our history. And in addition, the production of LV0009, as well as LV0010 is already underway. Last week, you might have read that we submitted an application with the Federal Communications Commission for V-band Spectrum Access. While today's focus is delivering our first commercial payload and scaling production and launch cadence of our launch services business, our long-term strategy that we outlined where we took Astra public earlier this year was to leverage this launch capability to build and operate a high-margin space services platform. And this strategy requires that we secure spectrum and other assets required to execute on this plan now. The Constellation, designed from the ground up to power our customers' applications, networks, sensors, and other assets in space, will greatly reduce the cost and time required to deploy new capabilities in space. The Constellation that we described in our FCC application is the space segment of the Astra Space platform. And the services that we will provide to our customers with this platform we're calling Space Services. To reiterate, our current focus is concentrated on becoming the global launch service provider providing less frequent, flexible, and lowest cost dedicated launches. As we achieve our launch services goals will begin to introduce higher-margin space services. And we believe they are not too distant future, the demand for spectrum access will significantly outstrips supply. This V of spectrum is what motivated us to file the V-band spectrum application to prepare Astra for its next stage of growth. This day, I'm also pleased to report that we had a very successful test, and first ignition of our in-space propulsion system, which we acquired from Apollo Fusion this summer. Our electric spacecraft engine was tested on a spaceflight Sherpa, which was launched in the low Earth orbit on a SpaceX on June 30th. After successful deployment, Spaceflight commissioned our engine to perform a series of maneuvers in space, which represented Astra's first attempt in firing this new engine and orbit. And we're really proud to deliver for Spaceflight and look forward to playing a continued role in our success. We view our in-space propulsion products as providing a critical solution for our future constellation customers and partners. Last quarter, we started construction to increase the size of our headquarters and main manufacturing facility by over a 100,000 square feet. Our facilities team overcame lead times and labor disruption due to COVID and kept staying on schedule. We expect to complete construction later this quarter and begin using the expanded facility before the end of this year. Recruiting world-class engineering, manufacturing, products, and program management talent is a very high priority for Astra. We added 70 new employees in the third quarter and I personally interviewed most of these candidates before the extended offers and frankly, I'm in awe at the caliber of the talent that have joined us this past quarter were truly building a world-class team that are inspired by our mission. Our leadership team is truly succeeding at creating a unique and effective culture that's helped us attract and retain some of the best talent I've experienced in my career. And we currently have more than a 100 open positions for engineers, technicians, software architects, product and program managers to help us achieve our mission of improving life on earth from space. To summarize, I'm proud of the Astra team for their tenacity and commitment to achieving this next milestone of placing our first commercial payload and orbit. And I'm also thankful for all of our customers and shareholders partners for supporting us and our mission. And look forward to sharing the results of our upcoming test launch and all the details on the upcoming missions and the progress in the months and years ahead. So I'd like to turn it over to Kelyn, who will discuss our third quarter financial results before we begin Q&A. Kelyn? Kelyn Brannon : Thank you, Chris, and good afternoon, everyone. As you heard from Chris, we accomplished a number of products and strategic goals in the past 3 months, as well as completed preparations for our latest test launch in the coming days. Operationally, we continue to successfully recruit and hire talented people for key operational and leadership positions. At the same time, we are executing on the expansion of our Alameda manufacturing facility. Effective recruiting, onboarding, and completion of Alameda are all key enablers to expand our product roadmap, and enhance program execution and increase our production capacity. As a reminder, all non-revenue financial figures I will discuss today are adjusted unless I state them as a GAAP measure. You will find a reconciliation from GAAP to non-GAAP results in today's press release. Now, let's review our financial results for the third quarter ended September 30th, 2021. Third quarter adjusted Net loss was 34.5 million adjusted EBITDA was a loss of 32.9 million, and within our third quarter guidance range. During the quarter, operating expenses were up 38% sequentially, primarily due to investments in our workforce. The majority of these hires were in our R&D and manufacturing organization, as we look to execute on our product road map and prepare for increased operations next year. On a GAAP basis, our third quarter Net loss was $16.2 million. The sequential decrease in Net loss was primarily related to a benefit of $20.5 million from the revaluation of warrant liabilities inherited from our merger with Holicity. Third quarter capital expenditures were $9.9 million primarily related to the expansion of our Alameda Manufacturing Facility. We ended the quarter with cash and cash equivalents of $378.7 million. Next I'll provide an outlook for our fourth quarter ending December 31, 2021. We currently expect adjusted EBITDA loss to be between $40 million and $44 million. Depreciation amortization between $2.2 million and $2.5 million. Stock-based compensation to be between $20 million and $22 million. Cash taxes are forecasted to be $0.00. Basic shares outstanding to be between 258 million and 260 million shares. Capital expenditures to be between $15 and $20 million. During Q4, we expect incremental OpEx to be driven primarily by R&D as we focus the continued development of our next-generation rocket and space services initiatives. Looking into 2022, we expect the pace of operating expense growth to moderate from Q3 and our forecast for Q4 as we leverage the investments we've made in 2021 and scale operations and increase efficiency. Before I turn the call back to Chris, I want to thank our team for their hard work and dedication to Astra. And with that, Jason, can you please open up the call for questions. Operator: And thank you. Please standby while we compile the Q&A roster. And our first question comes from Edison Yu from Deutsche Bank. Your line is now open. Edison Yu: Thank you for taking our questions. I have three of them. 1. Can we get an update, I guess on the third scheduled launch? Is that still expected to happen before year-end? I know you have one coming up, but I believe the anticipation is that there should be one more after that before year-end? Second question on spectrum, could you maybe provide a little bit more insight on what you plan to do with that? I think based on some of the filings it talks about a pretty high number of satellites that you want to put up. Would that require a tremendous amount more of capital or is that all kind of factor into your planning? And then last question, there has been some press reports about the Firefly relationship. Could you maybe shed a little bit more light on that where you plan to maybe do in terms of the engine. Thanks. Chris Kemp : I appreciate all those questions. So I'll tackle them in order. Regarding this next launch, our current plan of record is to -- after we wrap up this next launch, take a look at the results and we still have Launched Vehicles 0008 and a plan to launch that vehicle before the end of the year. And obviously the outcome of this next launch could change that plan. But that is currently the plan. We have the inventory and everything is in place to do that. The second question was regarding the FCC licenses. That was something that came as a result of the FCC putting out that opportunity that we needed to respond to. Spectrum is incredibly hard to get. It's incredibly valuable and opportunities to secure it, especially critical Spectrum as we think about the constellation that will power Astra's space platform and the space services that we talked extensively about as we took the Company public this summer requires spectrum. And so this outlines of plan that really unfolds in 3 phases. And all this is in the FCC license if you study it carefully where our first phase of the constellation deployment only requires 20 to 40 satellites, and we anticipate being able to launch several of the satellites on Astra rockets. So it's just a couple of launches on Astra's own rockets. And that provides a service that we believe has real value to customers in phase one. And so just as everything we've done at Astra, we reiterate, we go from working and working, we shipped something that works and then we make it better. This license really, if you study it, shows a similar strategy where the capital we have and with the team that we have, we can deploy a basic service that will allow us to learn and iterate. And then as we further extend the constellation, phase II involves between 500,000 satellites and then Phase III is where we get up to the 5,000 - 6,000 up to potentially 13,000 satellites. And this is where we would begin generating revenue from the Space platform and we can deploy that constellation frankly, as we start to see traction with those Space Services. So there's no requirement that we deploy the 13,000 satellites. But in the license, we have to contemplate the full deployment of the entire constellation. So then finally, the question on the supplier, I think there were some articles online speculating supplier. And I think I've discussed before, we don't discuss how we manufacture things or our suppliers publicly, but what I can tell you and I will reiterate here, is that all intellectual property required to produce all of our technology will be owned, license, or developed by Astra and anything you've read, it is not inconsistent with this strategy. So I think that as I can say about that at this point. Edison Yu: Great, thank you. Operator: Thank you. And our next question comes from Ron Epstein from Bank of America. Your line is now open. Ron Epstein: Hi, good evening, guys or good afternoon. And thanks for the question. Maybe a couple of things, so with the satellite thing and then the electric engine thing and the launch business, when do you worry about spreading yourself too thin. I mean, all this stuff, mason's stuff I know it's going to take a lot of work. When do you worry about being spread too thin and not being able to focus on any one of them? Chris Kemp : Thanks, Ron. That's a great question. I think as I was explaining earlier, our focus right now is on delivering a satellite into orbit so that we can begin to deliver for our customers and the launch services contracts that we have and to begin recognizing revenue in our launch services business. But as you know, there are long lead times on these things. Our strategy is to develop a spacecraft that leverages the Apollo Fusion technology, our existing avionics on our rocket, and frankly, isn't a new thing. It will extend and be vertically integrated into our rocket system and our launch system. In a way that eliminates redundancy and allows us to further reduce the cost of the rocket. Putting all the technology and all the investments into the spacecrafts means not only will ask you to be able to deliver our customer payloads and the services using Astra's rocket. But we could use other rockets as well. And as we start to think about deploying larger numbers of customers and spacecrafts, having that in-space propulsion technology and having a spacecraft effort means we can not only provide the kinds of services that you can only provide a small rocket where you can provide direct access to a particular orbit on a very precise schedule. But it means we could put a bunch of these space crafts on a larger rocket, like a Falcon 9 or Starship and benefit from the economics associated with waiting for a year or waiting for many months for that lower costs cargo mission, if you will, up to space. I think it dramatically de -risks the strategy in a lot of ways. It leverages the investments we're making in the technology that we're developing, and you're going to see this vertically integrated strategy really begin to pay dividends with this strategy. Hopefully that will make sense. Ron Epstein: Got it. Then maybe just a financial question for Kelyn. In the quarter there was $25 million of other income. What was that? Kelyn Brannon : The other income that kind of benefit to that was the remarking of the warranties that we -- the warrants that we got and the merger with Holicity. Ron Epstein: Got it. Kelyn Brannon : And also, the PPP loan was forgiven also, and that was over the under $5 million. That is the bulk of it. Ron Epstein: And then how should we think about the cash burn? Because if I look at the cash burn in the quarter in terms of just free cash burn, operating cashless, capex -- including capex in the quarter, it looks like you can burn through your cash balances, I don't know, in 6 or 7 quarters. How should we think about that as we think about modeling as we go out over a year or two? Kelyn Brannon : Okay. That's a great question. Thank you. So I will tell you that managing our spend is a top of mind for myself and the rest of the Astra management team. So we have a laser focus on that. And I do, given your first question, Q3 did include a one-time item which was primarily the $19 to $20 million for the Apollo acquisition. We're comfortable that the cash we have gets us to Rocket 4 or the next-generation rockets and beyond, a monthly launch cadence in 2023. And during this time, as anyone, we're going to keep an eye on tapping into the capital markets, if there's -- if needed or as there is an opportunity. Ron Epstein: Got it. Okay. Thank you guys. Operator: Thank you. And our next question comes from Austin Moeller from Canaccord. Your line is now open. Austin Nathan Moeller: Hi, guys. Good evening. Just a similar point on $379 million in cash balance. Do you anticipate that that is enough to cover completion of the current launch vehicle program as envisioned and build out space systems or do you think you'll need additional capital to do both? Kelyn Brannon : We feel very comfortable that we have the cash in position to not only get to our next-generation of rocket, but also to be able to deliver satellites at the end of 2022 or beginning of 2023. So we're comfortable with that, but again as we look out and we see traction of our products getting out into market, we're always looking at an opportunity to accelerate. And so I will and the Management team will keep an eye out on the capital markets and whether or not there's opportunity to put additional cash on the balance sheet. Austin Nathan Moeller: Okay. Great. And then as we think about launch sites, do you have any near-term plans for additional launch sites and different latitudes beyond the Kodiak facility? Chris Kemp : I think the question -- I'm going to let Martin Attiq whose running our Spaceport and real estate portfolio comment on that. I know they're busy over there. Martin Attiq: Absolutely. So we're always driven by where customer demand is. And I think we've disclosed that we have a global Spaceport strategy where we want to have launch sites across the globe that reaches different orbits for different customer requirements. So we are in the work on a number of Spaceports that allow us to get to mid-inclination orbit as you mentioned, as well as equatorial orbits. Austin Nathan Moeller: Okay. Fantastic. Thank you for the color. Operator: Thank you. And our next question comes from Colin Canfield from Barclays. Your line is now open. Colin Canfield: Hey, Chris, Colin. Thanks for the question. Digging a little bit further in your constellation plans. Can you give us maybe a comparable mass that we should be thinking about for your satellite or from like a financial metric perspective, maybe to walk us through what you think the unit economics look like payback period margins, stuff like that. Chris Kemp : Maybe I can bring some things, but I think that what I don't want to do is go too deep into things that we're looking through right now. But as a framework for you, the services that you can offer when you first launch the constellation are not the same services as you continue to build the constellation out. And so you can think of it -- this the same way as Amazon Web Services started building out infrastructure. In the very early days, they had a queuing service, they had a simple storage service, and then they had a compute service. What Astra is doing right now is we're looking for with the smallest number of satellites using our existing rocket technology, what are the highest value services that we can provide to customers in the market to bootstrap this business? I think what a lot of constellations have historically done is they put the big numbers of satellite from the and the service that they're providing at that end of service, and so they need billions of dollars to build out that entire constellation. I think this isn't Astra's -- has never been Astra's approach and it will not be our approach in this business either. I think the other big framework to share is that this spacecraft will -- that comprises the constellation, will be something that we can launch one or many of, on our rockets. If you think about our current rocket for capacity, around 150 kilograms the others remember, I mean, we will ensure that the next version of our rocket, which is 4.0, will fly 1.0 satellite, the 1.0 spacecraft. And maybe it will fly 2, maybe will fly 3. And what I'm challenging the teams to work on right now is give me the best technology to make sure as many of our spacecrafts can fly on one of our rockets as possible. It all pay big dividends, because if we do start using other launch vehicles to deploy this space raft in larger numbers and we will even get more of them when the economics get better. But as a lower boundary, think about a vertically integrated Space System where the next version of our Rocket 4.0 will fly the first version of our Spacecraft 1.0, maybe 2 of them. The variable there is how much we challenge the team and how quickly do we want to begin deploying these vast capabilities. And I think we've already shared before, we prefer an approach where we can get in phases as soon as possible. We just tested the engine last month and it works. And that gives us -- I believe that gives Astra one of the highest performance propulsion systems in space. But now we got to go and build the other pieces and get them in space so that we can iterate and build the constellation out in phases. Did that help you or would you like to further prove that? Colin Canfield: That's good for now. I think shifting to the propulsion side, can you just talk a little bit about, your bench of talent, and the propulsion team, and what Chris Thompson leaving the Phantom means for you guys? Chris Kemp : To answer your question about the adventure talent we have on the In-space propulsion, which I'm pretty sure the team members that have been working on that engine that made it work literally the first time that we tested had been amongst that team responsible for thousands of other In-space propulsion systems and space today. I think that the propulsion team has never been stronger. We brought in Mike , who was Blue Origin for a number of years and SpaceX before that. He worked on BE345, and Blue Origin engines in Maryland and SpaceX. We are actively recruiting talent everywhere across the Company, but Mike is working hard to bring in engineers from across the country to work on investing in our liquid and our electric propulsion technology and so I think if you look at Chris background, it's based on the structural engineering side of things. He really -- he did the work on engines. I think Tom Mueller was largely focused on engines over at SpaceX. Colin Canfield: Got it. Appreciate that. And then last question from me. If you can maybe talk a little bit about leverage that you have for cost out on your vehicle and where you're thinking or where you're weighing your decisions in terms of material design or vehicle design and aside from scale, the best ways you can bring down the cost for launch? Chris Kemp : Well we still haven't bought a 3D printer and there are no composite parts in the vehicle. And you look at the investments that we just talked about making in our factory. We got a really large robotic machining center so we can now make parts 24-hours a day just by feeding metal aluminum into this machine and we come into next morning and there's a whole bunch of rocket parts in it. We're going to be investing in a new machine that will allow us to take rolls of aluminum and unroll and weld in one step in our factories. And that we're going to have over a 100,000 square feet of space this quarter to begin building that new production line out. So when we go from Rocket 3-series to Rocket 4-series, the rocket going to roughly stay the same size but we're going to be introducing a lot of new production techniques from examples, taking some of the processes we have around putting a quirks covering on the rocket, which is cut and glued to the rocket. There's now a robotic arm that will be spraying that on the vehicle, which will remove probably a hundred hours of labor. As Astra looks at how to optimize economics, we look at three areas. We look at what duty parts costs, what did the labor that puts the parts together costs. And then once you have all these working rockets and launchers and you've deployed them out in the field, how much labor goes into running our launch operation. And you're going to start to see our investments in software and automation and reduce the number of people that are emission control. you're going to see it reduce the people out in the field, and you're going to see the investments we're making in the factory reduce the amount of labor that we need in order to build the rockets. What looks great about that is we've got incredible talent at Astra. And so it allows us to take these folks and turn them into people that are programming CNC machines, they're programming robots, and writing automation which are -- it's better to have robots doing repetitive tasks than people. And so I love the investments we're making here because of the levels of our people, and it helps them play more strategic role in delivering better economics to our customers. Colin Canfield: Perfect, thanks for the color. Operator: Thank you. I would now like to turn the call back over to Chris Kemp, CEO for closing remarks. Chris Kemp : Well, I really appreciate everyone joining us today. We're going to get back to work up in Kodiak and we're -- as we wrap up our operations up there and testing we're going to launch LV0007, and we'll be getting information out as soon as we can, as to the performance of that flight and what that means for our launch schedule coming up. We're really appreciative of your patience and support as investors. This is a long-term journey what the team is doing in Astra is not easy. It has never been easy. No Company or country that has ever attempted this has had an easy time building this, but once we build this capability, the rocket that we're building will have a fraction of the cost of any of our competitors. And the launch system that we built can be operated anywhere in the world. And as we start to demonstrate an orbital light that its successful, we will be able to scale much more quickly. And I think that's the thing to stay focused on. If you look at the economics of the business, once we start making rockets and once we started launching them from all over the world, the launch services business becomes very exciting and very complementary to what basically doing Starship and other competitors will market. And we're going to stay focused on that. And until we get that working, don't worry about us getting too distracted on the Space services business because our team is focused on getting to orbit because if we can't get to orbit, we can get our spacecraft to orbit. So that's we're all focused and really appreciate all the questions today. Operator: Thank you. This concludes today's conference call. Thank you for participating. You may now disconnect.ASTR Ratings Summary
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Astra Space’s Review Following CFO Meeting
Analysts at Deutsche Bank provided their views on Astra Space, Inc. (NASDAQ:ASTR) following their meeting with CFO Kelyn Brannon.
The analysts believe the company has clearly made progress on several fronts this year including successfully delivering its first commercial payload and winning its first major electric propulsion award with LeoStella.
Looking ahead, the analysts think the next two important developments will be the company's ability to carry out the NASA TROPICS missions (3 launches) and then transition to the bigger next-gen Rocket 4 vehicle.
The analysts lowered their price target on the company’s shares to $6 from $7 reflecting slightly lower forecasts, while maintaining their buy rating. Tactically, the analysts believe investors are not willing to give credit to the company for recent achievements given the current market backdrop and the true threshold for a re-rate of the stock is now super high, requiring demonstration of not only consistent execution but also market viability for its small launch approach.
Astra Space trading 20% lower after Failed Rocket Launch
Astra Space, Inc. (NASDAQ:ASTR) stock opened more than 20% lower today as a result of the failed launch of its LV0006 vehicle. The company attempted to make its first commercial launch on Saturday, however, the rocket was unsuccessful in reaching orbit. It lost one of its five engines immediately after liftoff, hovering sideways as it was not able to amass enough power to go vertical. Eventually, the rocket was able to correct itself for two and a half minutes, but a command of engine shutdown was initiated as the trajectory was too far off course. The rocket reached an altitude of 50km and fell down into the ocean.
The company has opened an investigation and is working closely with the Federal Aviation Administration to understand the reasons for the failure. The company’s founder, chairman, and CEO Chris Kemp mentioned that they have learned a lot from this unsuccessful launch and having enough data now to start a review process and use all these relevant findings for serial 7, which is currently in production and is expected to fly soon.
