Astra Space, Inc. (ASTR) on Q1 2023 Results - Earnings Call Transcript
Operator: Ladies and gentlemen, thank you for standing by and welcome to the Astra's First Quarter Fiscal 2023 Financial Results Conference Call. I would now like to turn the call over to Andrew Hsiung, VP of Strategic Finance and Capital Markets. Please go ahead. Andrew Hsiung: Thank you, operator. Good afternoon, everyone, and thank you for joining us for Astra's first quarter 2023 results call. After the market closed, we released our financial results. The press release is available on the SEC's Web site and our Investor Relations Web site at investor.astra.com. A supplemental presentation related to our results can also be found on the Investor Relations section of our Web site. This teleconference is also being broadcast over the Internet and will be archived and available on our Investor Relations Web site. 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 a 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 the reconciliation of our non-GAAP financial measures to the most comparable GAAP financial measures can be found in our results release. Today's call will also contain forward-looking statements. These forward-looking statements 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 a 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, including those updated risk factors included in our annual report on Form 10-K. Finally, I would like to remind everybody that this call will be recorded and will also be made available for replay via link available on the Investor Relations section of our Web site. With that, I'll turn the call over to Chris Kemp, Astra's Founder, Chairman and CEO. Chris? Chris Kemp: Thanks, Andrew. Good afternoon, everyone, and thank you for joining us. Joining me on the call today are Axel Martinez, our Chief Financial Officer; and Martin Attiq, our Chief Business Officer. During today's call, we will review our operational and financial results during the first quarter, review guidance for Q2 and provide an update on our launch services and space products businesses. I'll first go through key highlights this quarter in launch services. We secured a launch contract with the United States Space Force for an order valued at 11.45 million for a launch of an ESPA-class satellite and additional cubesats through the Orbital Services Program. We completed the installation of and unveiled our new Rocket Production Line designed to eventually produce up to one rocket per day out of our rocket factory in Alameda, California. We completed our Upper Stage Engine qualification campaign. We completed additional qualification of our First Stage Engine and we completed the Factory Acceptance Testing for tank production. Finally, we unveiled our Rocket 4 fit check vehicle, a combination of flight qualification and acceptance tested hardware, including qualification article First Stage tank, two First Stage qualification engines, in addition to an Upper Stage Engine that has been acceptance tested for flight. As we continue to make progress on Rocket 4 development, in addition to securing the contract I just mentioned, we're seeing an increase in pipeline opportunities for our launch services business. Now, I'll go through some of the highlights in our space products business during the first quarter. Our primary focus in Q1 was ensuring a seamless transition into our new spacecraft engine production facility in Silicon Valley. We finalized the build out of this new 60,000 square foot facility in Sunnyvale, California dedicated to the production of Astra Spacecraft Engines and fully moved in, in March of 2023. This facility is designed to eventually produce up to 500 units per year. We've completed various major customer milestones ahead of deliveries later this year next year, and conducted the first hot fire of our new vacuum chamber and commissioned other equipment used in the production and testing of the spacecraft engine at our new facility. Our team is now working side by side with our customers to integrate the Astra Spacecraft Engine into their satellites. And we'll start to ship the first few units out of our new production facility in Sunnyvale this quarter. This quarter, we also announced a new product, the Astra Spacecraft Propulsion Kit, which disaggregates the four key subsystems of the Astra Spacecraft Engine module; the thruster, the power processing unit, the feed system, and the tank. This enables satellite builders to take advantage of shorter lead times to access key components of their propulsion system that they can customize for their unique missions. Astra is adopting the way development kits have transformed the software industry and applying it to hardware by providing the tools and support to accelerate spacecraft development at scale. We announced a new contract with Apex Technology to initially provide five Spacecraft Propulsion Kits for Apex's satellite bus platform to be delivered this year. We also are delighted to confirm that eight additional Astra Spacecraft Engines, which were delivered in Q4 of 2022, have successfully fired in space, further demonstrating the growing flight heritage of our engines. Lastly, we continue to believe that the Astra Spacecraft Engine is the leading electric satellite propulsion system in the market and continue to see strong demand from customers in our pipeline. Over time, we anticipate both adding to this pipeline via existing and new customers and converting a portion of the pipeline we have today into new customer contracts. Finally, before handing the call over to Axel, I want to touch on cash as we continue to work to bolster our financial position through a variety of efforts. We generate cash as we secure new orders and deliver on customer milestones in both our spacecraft engine and launch services businesses and as we ship Astra Spacecraft Engines. Given the criticality of liquidity to delivering on our commitments to our customers and shareholders, we have decided to guide cash for the next quarter. Execution, continued market penetration and discipline cash management, combined with a thoughtful approach to financing, will continue to be our priorities as we work towards generating free cash flow. I'll now turn the call over to Axel to provide additional detail on these priorities and to review our financials and guidance. Over you to, Axel. Axel Martinez: Thank you, Chris, and good afternoon, everyone. I will now review our results for the first quarter of 2023. As a reminder, all non-revenue financial figures we'll discuss today are adjusted, unless we state them as a GAAP measure. You will find a reconciliation from GAAP to non-GAAP results in today's press release. In Q1, our focus was on ensuring the final completion of our Astra Spacecraft Engine manufacturing facility, which was completed in late March and continuing to make substantial progress on the development of Launch System 2. As we completed the transition into our new spacecraft engine facility in late March, we did not deliver any units in Q1. Now, let's review our Q1 2023 financial results. GAAP operating expenses totaled 46.5 million in Q1 compared to 50.3 million last quarter. GAAP operating expenses in Q1 reflect lower salary expenses resulting from the 16% headcount reduction executed in Q4 2022. GAAP operating expenses in Q1 included the following. R&D expenses of 31.1 million encompassing our continued investment in our core businesses, which increased quarter-over-quarter mostly due to stock-based compensation; sales and marketing expenses of 2.5 million reflecting investments in ongoing sales efforts for launch services and our Astra Spacecraft Engine. And G&A expenses of 15.7 million, reflecting reductions in IT spend, insurance expense, and offset by higher legal and public company expenses during the quarter. Now, let's talk about the one-time items during Q1 of 2023. During the first quarter, we recorded a $2.8 million gain on change in fair value of contingent consideration. Given these one-time items on a GAAP basis, our first quarter net loss was 44.9 million. On a non-GAAP basis, first quarter adjusted net loss was 42.3 million. Q1 adjusted EBITDA was a loss of 42.3 million. First quarter capital expenditures were 5 million and primarily related to the continued investment in the development of Launch System 2 and the build out of our Astra Spacecraft Engine factory. We expect the majority of capital expenditures going forward to be related to launch services, as our Astra Spacecraft Engine facility is now complete as of March. We ended the quarter with cash, cash equivalents and marketable securities of 62.7 million and no debt outstanding. Next, I'll provide an outlook for our second quarter ending June 30. As previously mentioned, we continue to focus our operating plan on scaling deliveries of Astra Spacecraft Engines throughout 2023 and the successful first flight of Rocket 4. In Q2, we streamlined our G&A organization and related expenses, and expect savings beginning in Q3 2023. As of today, we have about 320 employees compared to over 440 in early Q4 of 2022, with the majority of this workforce focused on the development of Launch System 2 and the delivery of Astra Spacecraft Engines. As a reminder, our second quarter guidance and all guidance is subject to various important cautionary factors, including the risks and uncertainties set forth in our annual report on Form 10-K and other securities filings. There's also risks associated with macroeconomic factors, a dynamic share across many companies and industries. Now, we will provide future guidance. In the second quarter of 2023, we currently expect adjusted EBITDA loss to be between $31 million and $35 million, basic shares outstanding to be between 271 million and 273 million shares, capital expenditures to be between $3 million and $5 million and cash, cash equivalents and marketable securities of $30 million to $33 million, excluding potential financing activities. Regarding our space products business, I wanted to give you an update on production in our Sunnyvale facility. As you may recall, we announced that we had moved into a new spacecraft engine production facility at the end of the first quarter. The space products team has done a tremendous amount of work standing of that facility, installing the equipment and commencing production activities. At this time, we expect final product deliveries to begin towards the end of Q2, although a variety of factors may cause those deliveries to slip into early Q3. To put this into context, I want to remind everyone that Astra Spacecraft Engines as an integrated module typically have a lead time of approximately 12 months and often require integration work with the customer. Space products require extensive testing, qualification and configuration before they can be delivered. As a result, Q2 represents those first units moving through the process in Sunnyvale. And of course, there's the inevitable troubleshooting of a new production line. From a financial standpoint, we do not recognize revenue until final delivery, even though milestone payments are received from customers along the way as we complete the work towards delivery. As of today, we have completed approximately two-thirds of all non-delivery customer milestones for contracts entered into in 2022. The takeaway is that the space products team is working hard and making great progress on our customer programs. While we expect final product deliveries to begin towards the end of Q2, we do not expect to recognize significant revenue from spacecraft engines delivered in Q2. I will now discuss Astra's liquidity profile, cash position, and strategic plan to provide our team with the resources required to deliver to our customers at scale. We're carefully managing our cash runway and expect cash burn to continue to decline throughout this year. As we have discussed on today's call and previous calls, we expect spacecraft engine deliveries from our new factory to begin in Q2. To reiterate, Astra Spacecraft Engines typically have approximately a 50% gross margin and as such, deliveries are expected to provide free cash flow to the business. Current delivery of spacecraft engines and launching of customer payloads via launch services in 2024 are expected to be supportive of anticipated revenue growth in cash flow. When we're able to convert a pipeline prospect into a customer, we frequently benefit from milestone payments ahead of actual customer deliveries and recognized revenue, which are expected to provide additional liquidity to our business. On the expense side, we continue to focus on refining operating expenses, and in particular G&A expenses, to ensure that we maintain the core team required to deliver on our near-term mission, while also preserving cash where it is prudent and possible. Regarding financing, we are evaluating various financing options in the debt and equity capital markets. Since Astra became a public company in mid 2021, we have yet to raise any debt or equity capital and have financed over $125 million of equipment, machinery, leasehold improvements, and inventory, among other items, directly using cash on our balance sheet. We believe this provides Astra with the flexibility to thoughtfully consider financing options, which are supportive of Astra, our shareholders and our customers. To date, we have received various indications of interest from potential debt and equity financing providers. We are currently evaluating several options, taking into consideration dilution, cost of capital, and other considerations. We will provide an update if we enter into definitive agreements for any new financing. Given the volatility in current capital markets, the consummation of any of these transactions is not guaranteed. In summary, we believe our cash runway is supported by expected revenue growth, potential conversion of pipeline opportunities, careful management of expenses, and thoughtful consideration of financing opportunities. I will now turn the call back over to Chris. Chris Kemp: Thanks, Axel. We look forward to building on our momentum thus far in 2023 continuing to deliver for our growing roster of spacecraft engine clients, and working towards our first flight of Rocket 4. With that, operator, would you please open the call for questions? Thank you. Operator: The floor is now open for your questions. [Operator Instructions]. Our first question comes from the line of Edison Yu from Deutsche Bank. Please go ahead. Edison Yu: Hi, guys. First question, could you provide a little bit more granularity on the cadence of spacecraft engine deliveries as we move through the year? Chris Kemp: Yes, Edison. As I think we talked about last quarter, the focus this quarter has been on getting into the new spacecraft engine production facility in Q1, which we did. And the team now is in the process of shipping the first units out of that facility to customers this quarter. And we talked a lot about the number of units that we have under contract. The ramp will begin this quarter. It will likely begin with just a few units that will quickly grow in Q3 and Q4 and well into 2024 as we continue to burn down that backlog. Edison Yu: Understood. On the launch side, I know you're sort of targeting back half of this year. Could you maybe provide a couple of different scenarios on what you expect to happen? Obviously, given the capital situation, if things don't go so well, would you consider kind of exerting that focus more on space propulsion? Just curious in terms of how you're thinking about balancing those two and the cash that you have right now? Chris Kemp: Well, Edison, we believe in these businesses and we've made a considerable investment in the spacecraft's production facility because we have quite a backlog of orders for our customers for that product. We've also made a considerable investment in our rocket production facility and we bought the new Rocket Production Line this quarter as well. And if you were at Spacetech Day and had the opportunity to see these facilities, they're truly world class facilities. And we believe that because we've made these investments, Astra is in a unique position once we fly again to scale production in launch vehicles, like we're now in the process of scaling production in spacecraft engines. So I think we're all in on these businesses. And we think they're incredibly complementary. So I think in terms of the schedule, what's most important to us is the reliable products that we're building. So we put shipping spacecraft engines that work every time for our customers at the top of the stack. Second, we put the success of the new vehicles we're developing back on the stack. These things all come ahead of schedule because at the end of the day, what our customers and our shareholders care about is Astra delivering reliable products so that our customers buy more of them. And that's kind of what we're focused on today. And you heard Axel's comments on how we're thinking about cash in that context. Edison Yu: Understood. If I could maybe rephrase that a little bit, is there any point I guess where you would start to almost triage a little bit just thinking about how much backlog, right, there is in the space engine side? And given the uncertainty, let's say, about launch, is there sort of like a breaking point that you would say, okay, this is -- we've obviously put tremendous time and investment, but we clearly have a much more predictable and higher margin business here going forward? Chris Kemp: I appreciate your push on that, Edison. I want to reiterate. We believe in both of these businesses. And if there is a triage happening, it's a triage that is focused on delivering for the customers that have contracts first, the most reliable products we can deliver, full stop. Edison Yu: Okay. And then on the cash burn situation, I know you're burning [ph] obviously which is encouraging. Is there more room to flex that? I don't know if you ever count a bit [ph], it's always unfortunate, but just given you probably have eyeballing probably two quarters of liquidity. Is there more room there to flex harder? Axel Martinez: Yes, this is Axel. I'm happy to answer that. So look, we're encouraged by the work the team has done in terms of managing our capital effectively. This is where you saw the reduction in cash burn quarter-over-quarter. As you see from the guidance, we expect to continue reducing our cash burn into Q2. We look to optimize different areas within G&A, so that's one of the updates we provided today. And the truth is, from our perspective, we think that there's definitely opportunities to continue to become more efficient and effective as we scale the business. Now as it relates to the overall runway, as we mentioned, the unique thing about this business is that it has several levers that we think help us continue to improve our cash runway. One, of course, is just revenue growth and delivering for our customers. Two is the conversion of our pipeline into actual contracts, because as we mentioned in the past, there are significant milestone prepayments that happen even before delivery, which contributes to our overall cash position. Third, we just talked about, right, which is the reduction in our overall expenses and being very thoughtful about how we manage our capital. And then the last piece being the financing opportunities, as we mentioned in our remarks, we received interest from potential debt and equity financing providers. And so we are currently evaluating them and keeping in mind dilution, keeping in mind cost of capital and other considerations. And so, from our perspective, if we get to a point where we sign any definitive agreements, we'll definitely share them with you. But overall, we think that there's a lot of aspects of our business that serves us well from a cash and liquidity perspective. Edison Yu: Understood. Thank you very much. Operator: Our next question comes from the line of Andre Madrid from Bank of America. Please go ahead. Andre Madrid: Hi, everyone. Thanks for taking my question. I think we touched since the announcement was made, but could you just talk a bit more on the topic of financing opportunities about the logic behind the 100 million mixed securities shelf and just how that fits into your overall approach to shoring up liquidity and maintaining that runway? Chris Kemp: Yes, it's just optionality. At the end of the day, right, I think it's good housekeeping if you look at every company that's public, this is part of the options that they have available to them. We mentioned that in the past that we're going to take advantage of all other tools that are available to us. And this is just one step. Andre Madrid: Got you. I'll leave it there. I'll hop back in the queue. Operator: I would now like to turn the call over to Chris Kemp for closing remarks. Chris Kemp: We appreciate the questions today. And we appreciate the support of all the shareholders out there. And we look forward to continuing to provide updates as we continue to execute this quarter. And we look forward to talking to you again next quarter. Thank you. Operator: Thank you. Ladies and gentlemen, this does conclude today's call. Thank you for your participation. 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.
