Q3 2021 Astra Space Inc Earnings Call
Okay.
Today's conference is scheduled to begin shortly please continue to standby and thank you for your patience.
[music].
Good afternoon, and welcome to Astra's third quarter 2021 earnings Conference call.
Joining us for today's call Astra's, founder Chairman and CEO Christian.
CFO Kevin Brandon.
Vice President of compliance and Deputy General Counsel, Michael picture. After the Speakers' remarks, there'll be a question and answer session to ask a question. During the session you will need to press star one on your telephone. Please be advised that today's conference is being recorded if you require any further assistance. Please press star zero.
Now like the hand to turn the call over to Michael for introductory remarks.
Please go ahead.
Thank you operator.
Afternoon, everyone and thank you for joining us for Astra's <unk> third quarter 2021 earnings call. After the market closed we released our financial results. The earnings release is available on the SEC website, and our Investor Relations website at Investor that Astro Dot 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 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 a reconciliation of our non-GAAP financial measures to their most comparable GAAP financial measures can be found in our earnings release today.
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 wil.
Should project and similar expressions as they relate to Astro 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 and 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 a commercial orbital launch we mean a launch conducted under an FAA commercial launch license.
Additionally, each of our launch vehicles as denoted by an asset title with the abbreviation of Lv standing in for launch vehicle followed by the serial number for.
For instance, our current launch vehicle as referenced at LD 0007.
Finally, I would like to remind everyone that this call will be recorded and will be made available for replay via a link available on the Investor Relations section of our website.
With that I would now like to turn the call over to Chris can astra's, founder Chairman and CEO Chris.
Thank you Michael and good afternoon, and thank you for joining us today for our third quarter earnings call.
As we speak today are small five person launch operations team in Kodiak, Alaska with L. B zero zero.
Seven.
Bearing for another orbital test launch with the United States for Us.
Our team is working to complete prelaunch test and we expect this launch to occur in the next week or so.
I'm incredibly proud of our teams partnership with the FAA as we rapidly identify and resolve the issues we encountered in our last that's like multi incredibly proud that we were able to incorporate deep learning into design changes and ship Lv 0007.
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 the most capital efficient path to success.
So back at our headquarters in Alameda, California, our manufacturing team is nearing completion of our next launch vehicle L. D 0008.
And I'm pleased with the increasing manufacturing efficiency with which we're bringing these vehicles together the production of this vehicle will be the fastest in our history.
And in addition, the production of L. B 0009, as well as L. D 0010 is already underway.
Last week, you might have read that we submitted an application with the Federal Communications Commission for deep and spectrum assets.
<unk> focus is delivering our first commercial payload and scaling production in launch cadence of our launch services business.
Our long term strategy that we outlined when 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.
Our constellation designed from the ground up to power, our customers' application networks sensors and other asset.
In spades greatly reduce the cost and time required to deploy new capabilities in space.
Constellation that we described in our FCC application is the space segment of the Astra State platform and the services that we will provide to our customers with this platform, we're calling space services too.
To reiterate our current focus is concentrated on becoming the global launch service provider.
The most frequent flexible and lowest cost dedicated launches.
As we achieve our launch services goals will begin to introduce higher margin speed services, and we believe that we're not too distant future. The demand for spectrum access will significantly outstripped supply. If you a spectrum. This spectrum is what motivated us to file the V band spectrum application to prepare Astra.
Bruce.
Stage of growth.
Yes.
These days I'm also pleased to report that we had a very successful test and first edition of our ink based propulsion system.
Which we acquired from Apollo fusion this summer.
Our electric spacecraft engine with tested on a spaceflight Sherpa, which was launched in the lowered orbit Spacex Falcon nine in June 30th.
After a successful deployment space like commissioned our engine to perform a series of maneuvers in states.
Scented Astra's first attempted firing this new engine in orbit and we're really proud to deliver for spaceflight and look forward to playing a continued role in their success.
We view, our east based propulsion products, just providing a critical solution for our future constellation customers and partners.
Last quarter, we started construction to increase the size of our headquarters in main manufacturing facility by over 100000 square feet.
Our facilities team overcame lead time labor disruption due to Covid and kept things 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 product and program management talent is a very high priority for Astro.
We added 70, new employees in the third quarter.
And I personally interviewed most of your candidates before we extend it offers.
Frankly, I'm an odd the caliber of the talent that joined us.
Past quarter, we're truly building a world class team that are inspired by our mission.
Our leadership team is truly succeeding in creating a unique and effective culture that has helped us attract and retain some of the best talent I've experienced in my career.
And we currently have more than 100 open positions for engineers technician.
After architects product and program managers to help us achieve our mission of improving life on Earth from space.
So sunrise.
Proud of the asset team for their tenacity and commitment to achieving this next milestone of placing our first commercial payload in orbit.
And I'm also thankful for all of our customers and shareholders partners for supporting US in our mission, we look forward to sharing the results of our upcoming test launch and.
All the details on the upcoming mission and the progress lumps in the years ahead, so I'd like to turn it over to Kevin.
We'll discuss our third quarter financial results before we begin Q&A.
Thank you, Chris and good afternoon, everyone. As you heard from Chris we accomplished a number of product and strategic goals in the past three months as well as completed preparations for our latest test launch in the coming days operationally, we continued to successfully recruit and hire talented people for key operational and leadership.
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 32021.
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 roadmap 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 liability inherited from our merger with publicity.
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 and $44 million.
Depreciation and amortization between $2 2 million and $2 5 million stock based compensation to be between $20 million and $22 million cash.
Cash taxes are forecasted to be zero 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 initiative looking.
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 Astro.
And with that Jason can you. Please open up the call for questions.
And thank you and as a reminder to ask a question you will need to press star one on your telephone.
John Your question press the pound key please standby, we compile the Q&A roster.
And our first question comes from Edison <unk> from Deutsche Bank. Your line is now open.
Thank you. Thank you for taking my questions I have three of them.
Can we get an update I guess on the third scheduled launch is that still expect it 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 were trying to do with that I think based on some of the filings it talks about.
A pretty high number of satellites.
To put up would that require you know a tremendous amount more capital or is that all kind of factor into our planning.
And then last question.
Theres been some press reports about the Firefly relationship could.
Could you maybe shed a little bit more.
On that where you play could maybe do in terms of the on the engine.
He thinks that it's been 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 euros through your eight.
Our 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 that is currently the plan we have the inventory.
And everything's in place to do that.
The second question was regarding the FCC licenses.
Yes that was a that was something that.
Came as a result of the FCC putting out.
That opportunity that we needed to respond to spec.
Spectrum is incredibly.
Hard to get.
Valuable and opportunities to secure it especially.
Critical spectrum as we think about the constellation that will power astra's based platform in the space services that we've talked extensively about as.
We took the company public this summer requires spectrum and so this this outlines our plan.
That really unfolds in three phases.
This is in the FCC license, if you study it carefully where our first.
First.
Days of the constellation appointment only requires 20 to 40 satellites and we anticipate being able to launch several of these satellites on Astro rocket. So it's just a couple of launches anastrozole rockets.
And that provides a service that we believe.
It has real value to customers in phase one and so just as everything we've done at Astro. We iterate, we go from working and working them, we ship something that works and then we make it better.
This license really itchy study shows a similar strategy, where with the capital we have and.
With the with the team that we have we can deploy.
Our basic service that will allow us to learn and iterate and then as we further extend the constellation phase two involves between 500000 satellites and then phase three is where we get up to the.
Five to 6000 up potentially 13000 satellite.
This is ware.
We will begin generating revenue from this based platform and we can do.
Deploy that constellation frankly as.
As we start to see traction with those based services.
So there's no requirement that we deployed at 13000 satellites, but in the license we have to contemplate the full deployment of the entire population.
So then finally the question on <unk>.
On the supplier and he got there.
Where some articles online speculating.
As a leading supplier and you know I think I've discussed before we don't discuss.
How we manufacture beings 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 licensed or developed by Astro and.
Anything you've read is not inconsistent with this with this strategy so.
I think.
I think that.
That's all I can say about that at this point.
Great. Thank you.
Thank you.
And our next question comes from Ron Epstein from Bank of America. Your line is now open.
Hey, good evening, guys or good afternoon.
Yes, thanks for the question.
Maybe a couple of a couple of things.
So with the satellite thing and then the electric engine thing.
I'm a launch business when do you worry about spreading yourself too thin right I mean, all this destination stuff, that's all I'm 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.
Well, thanks, Rob It's a great question I think as I was explaining earlier.
Our focus right now is on <unk>.
Delivery of satellite in orbit.
We can begin to deliver for our customers and the launch services contract that we have.
And to begin recognizing revenue in our services business, but as you know there are long lead times on these things and our strategy is to develop a spacecraft that leverages the Apollo fusion technology, our existing avionics on a rocket and frankly isn't new.
Thank you.
It will extend and be vertically integrated into a 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 spacecraft's means not only we will ask you would be able to deliver our customer payloads and its 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 in spacecraft.
That ebay's propulsion technology, and having a spacecraft effort means we can not only provide the kinds of services that you can only provided a small rebate.
Where you can provide direct access to a particular orbit on a very precise schedule, but it means we can put a bunch of these spacecrafts on larger rocket like Falcon nine or a starship and benefit from the economics associated with waiting for a year or waiting for many months for that lower cost cargo mission. If you will.
And so 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 youre going to see.
This vertically integrated strategy really begin to pay dividends.
With this strategy.
Hopefully that that'll make sense.
Got it.
And then maybe just a quick.
A financial question for Colin and in the quarter, there was $25 million of other income what was that.
So the other income that kind of benefit if that was the.
The marketing of the warranties that we the warrants that we got and the merger with holistic.
Got it and also the PPP loan.
Was forgiven also and that was a little under 5 million.
Got it.
Okay.
Got it and then how should we think about the cash burn.
Right, because if I look at the cash burn in the quarter in terms of just kind of free cash burn operating cash less capex are.
Recruiting capex in the quarter.
Looks like you could burn through your cash balances I don't know six or seven quarters, I mean, how should we think about that as read.
Think about modeling as we go out over a year or two.
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 million to $20 million for the Apollo acquisition work.
We're comfortable that the cash rehab gets us to rocket four or the next generation rocket and beyond a monthly launch cadence in 2023.
And during this time.
And as anyone we're going to keep an eye on you know tapping into the capital markets, if there if needed or or as there's a there's an opportunity.
Got it okay. Thank you guys.
Thing. Thank you and our next question comes from Austin <unk> from Canaccord. Your line is now open.
Hi, guys. Good evening, just a similar point on the on the $379 million in cash balance do you anticipate that that is enough to cover our completion of the current launch vehicle program as a vision.
Envision and build out space system or do you think you'll need additional capital to do both.
You know, we feel very comfortable that we have the cash in a 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 were seeing 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 a eye out on the capital markets and whether or not there's opportunity to put additional cash on the balance sheet.
Okay, Great and then as we think about one sites do you have any near term plans for additional launch sites in different latitudes beyond the Kodiak facility.
So I think the question a little bit Martin of teachers running our spaceport in real estate portfolio.
Comment on that I know, they're they're busy over there.
Yes, absolutely.
So we're always driven by where customer demand is and I think we've disclosed that we have a global.
Space CT.
<unk>, where we want to have long sites across the globe and that reaches different orbits for different customer requirements and so we are in the work on a number of states sports, but allow us to get to a minimum.
Medicalization orbit as you mentioned as well as regulatory orbits.
Yes.
Okay fantastic. Thank you for the color.
Thank you.
And if you have a question that is star one again, if you'd like to ask a question that is star one and our next question comes from Colin Canfield from Barclays. Your.
Your line is now open.
Hey, Chris Kevin Thanks for the question.
Digging a little bit further into your constellation plans can you give us maybe a comparable masks that we should be thinking about for your satellite bus or.
From a financial metric perspective, maybe walk us through with it what you think the unit economics will look like.
Payback period margins and stuff like that.
Yeah, maybe I can frame some things, but I think that what I didn't want to do is go too deep into things that.
We're working through right now, but as a.
As a framework for you the services that you can offer.
When you first launched the constellation.
Are not the same services as you continue to build a constellation out and so you can think of this.
The same way as Amazon Web services started building out infrastructure.
In the very early days they had a cooling surveys they had a simple storage service 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 constellation's have historically done is they've put it is the big numbers in satellite that in front of the FCC and the service that they're providing in that and the services they need billions of dollars to build out that entire population.
And 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 of them or many of on our rockets and so if you think about our crude.
Rocket four capacity around her 50 kilograms, they've got there's your number.
We will ensure that the next version of our rocket.
It was 4.0 will fly one point now satellite.
The one point in spacecraft.
And maybe it'll apply to maybe it looks like three and what im challenging the teams to work on right now.
Give me the best technology.
To make sure as many of our spacecraft can fly on one of our Rockies as possible now paid big dividends, because if we do start using other launch vehicles to deploy this spacecraft in large numbers and we'll even get more of them 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 one point out maybe two of them.
And the variable there is you know how much we challenged the team and how quickly do we want to begin deploying these burst capabilities and I think we've already shared before.
We prefer an approach where we can get things in phases as possible. We just tested the engine last month and it works.
And that gives us I believe that gives astra and one of the highest performance propulsion systems and space well now we've got to go and build the other pieces and get them in space. So that we can we can iterate and build the constellation out in phases.
Does that does that help John we'd like to further prove that.
So thats 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 mix for you guys.
Yes. The first was we are going to answer your question about the bench of talent, we have on the in space propulsion, which.
I'm pretty sure the team members that have been working on that engine.
They made it work literally the first time it was tested had been.
Amongst amongst that team responsible for.
The other.
Other in space propulsion systems and space today.
I think the propulsion team has never been stronger we brought in Mike <unk>, who was Ah.
Over at Blue origin for a number of years and Spacex before that you were done be 345 in a very blue origin engines, and Merlin 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 in our booth liquid and our electric propulsion technology.
And so I think if you look at you know.
Chris Thompson background at Spacex was on the structural engineering side of the things that he really didn't work on engines I think Tommy Lewis.
It was largely focused on engines.
Right.
Yeah.
Got it I appreciate that and then last question for me.
But if you can maybe talk a little bit about kind of the levers that you have for cost out on your vehicle and where you're thinking you're where you're weighing your decisions in terms of material design or vehicle design and kind of you know aside from scale. The best ways that you can bring down the cost for a launch.
Hum.
Still havent bought a three D printing and.
There are no composite parts of the vehicle.
And if 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 of 24 hours a day just by beating metal aluminum.
In this machine and we come in the 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 roles of aluminum and unroll and world.
And one.
One step in our factory.
And that we're going to have over 100000 square feet of space. This quarter to begin building that new production by now so when we go from rocket three series rocket four series the.
The rockets and roughly stay the same size, but we're gonna be introducing a lot of new production techniques from.
Examples are taking some of that.
We have around putting a cork covering on the rocket, which is cut and glued to the rocket. There's now a robotic arm that would be spring that on the vehicle, which will remove it.
Probably 100 hours of labor so.
You looks at how to optimize economics, we look at three areas, we look at what duty parts costs.
What does the labor that puts the parts together costs and then once you have all these working rocket 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 reduce the number of people that are in.
Emission control.
You're going to see us producing or people out in the field.
Youre going to see the investments, we're making in a factory reduce the amount of labor that we need in order to build the rockets.
Great about that is we've got incredible talented astro and so it allows us to take these folks.
And turn them into people that are programming CNC machines and programming robots and writing automation, which are you know it's better.
It's better to have robots doing repetitive tasks and people and so I love the investments, we're making here because the level of our people and it helps them play more strategic role in delivering better economics to our customers.
Yeah.
Perfect. Thanks for the color.
Thank you.
I would now like to turn the call back over to Kris King CEO for closing remarks.
Okay.
Excellent well I really appreciate everyone joining us today and at work.
Get back to work up and Kodiak.
And.
As we wrap up our operations up there and testing, we're going to lunch L. B 0007, and we'll be getting information out.
As soon as we can as to the.
The performance of that flight and what that means for our launch schedule coming up and.
We're really appreciative of that.
Your patience and support as investors. This is a long term journey.
What the team is doing and Astra is not easy.
Never been easy.
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've built can be operating anywhere in the world.
And as we start to demonstrate an orbital slot.
That is 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 start launching them from all over the world. The launch services business becomes very exciting and very complementary to what Facebook is doing starship and other competitors in the market and that we're going to stay focused on that and until we get that working don't worry about us getting too distracted on the state services business. The whole team is focused on getting the orbit.
Because we think its orbit, we can't get our spacecraft or with it so.
That's.
That's where we're all focused and really appreciate all.
All the questions today.
Thank you. This concludes today's conference call. Thank you for participating you may now disconnect.
Okay.
[music].
Yes.
Yes.
Yes.
[music].
[music].
[music].