Astra Space Inc. Q1 2023 Earnings Call

For the extra first quarter fiscal 2023 financial results conference call.

I would now like to turn the call over to Andrew Sheung, VP Strategic Finance and Capital Markets.

Please go ahead.

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 website and our investor relations website at investor.astra.com.

A supplemental presentation related to our results can also be found on the Investor Relations section of our website.

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 again, 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, and should not be used in this call.

project, and similar expressions as they relate to ASTR 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 filing with 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 everyone that this call will be recorded and will also be made available for replay via link available on the investor relations section of our website.

With that, I'll turn the call over to Chris Kemp, Astra's founder, chairman, and CEO . Chris? 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 Atique, our Chief Business Officer. During today's call, we'll be taking a look at the

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 an 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 tank for tank production.

Finally, we unveiled our Rocket 4 fit check vehicle, a combination of flight qualification and acceptance tested hardware, including a 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 four 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 on 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.

milestones ahead of deliveries later this year next year and conducted the first hotfire 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 will 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. Okay.

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 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 review our financials and guidance. Over you, Axel. 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 will discuss today are adjusted, unless we state them as a gap measure.

You will find a reconciliation from GAP to non-GAP results in today's press release. In Q1, our focus was on ensuring the final completion of our ASRA spacecraft engine manufacturing facility.

which was completed in late March and continue to make substantial progress on the development of launch system 2.

As we completed the transition into our new spacecraft and the facility in late March.

We did not deliver any units in Q1.

Now, let's review our Q1 2020-23 financial results.

Gap operating expenses total 46.5 million in Q1.

Compared to 50.3 million last quarter.

GAP operating expenses in Q1 reflect lower salary expenses, resulting from the 16% HECR reduction, executing Q4 2022.

Gap operating expenses in Q1 include the following.

R&D expenses of $31.1 million. Incomposing our continued investments in our core businesses.

which increase quarter to quarter mostly due to stack-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 DNA 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 game on changing fair value of contingent consideration.

Give and this

Our first quarter of net loss was $44.9 million.

On unknown gappaces, first quarter adjusted that loss was 42.3 million.

Q1 adjusted Iberda was a loss of 42.3 million.

Fourth 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 loan services, as our astrot space-cremhing engine facility is now complete as of March.

expect the majority of capital expenditures going forward to be related to loan services as our astrot space-grim engine facility is now complete as of March. We ended it quarter with cash.

cash equivalents and marketable securities of 62.7 million and no data standing. Next, I'll provide an outlook for a second quarter ending in June 30th.

and the successful first flight of Ryder 4.

In Q2, we streamline our G&A organization and related expenses and expect savings beginning 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.

focus on the development of launch system 2 and the delivery of ASRA spacecraft engines.

As a reminder, our second quarter guidance and all guidance is subject to various important cautionary factors, including the risks and uncertainties of fourth in our annual report on Form 10K.

and other securities filings. There is also risk 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 laws to be between $31 and $35 million.

Basic shares are standing to be between 271 and 273 million shares.

cash equivalents and marketable securities of $30 to $33 million, excluding potential financing activities.

Regarding a space products business, I wanted to give you an update on production in a show-nevil 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.

This based products team has done a tremendous amount of work standing on that facility.

Install in 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's spacecraft engines, as an integrated module, typically have a lead time of approximately 12 months.

and often require integration work with the customer. A space product requires extensive testing, qualification, and configuration before they can be delivered.

As a result, Q2 represents those first units moving through the process in Sonyebel. 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 and their into in 2022.

The takeaway is that the space product 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 delivering 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.

to reiterate, Astra Space Red 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 pillars via launch services in 2024.

are expected to be supportive of anticipated revenue growth in cash flow. When we are able to convert a pipeline prospect into a customer, we frequently benefit from off-road and milestone treatments ahead of actual customer deliveries and recognize 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 DNA expenses.

To ensure that we maintain the core team required to deliver on a near-term mission, we are 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 for equity capital.

and had finance over $125 million of equipment, machinery, visual improvements, and inventory, among other items. Directly using cash on our balance sheet. We believe this provides Astra with the flexibility to fully 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 the solution, 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-run rate is supported by expected revenue growth.

potential conversion of pipeline opportunities, careful management of expenses.

and thoughtful consideration of financing opportunities.

I will not turn the call back over to Chris. 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. The floor is now open for...

your questions. Ask a question this time. Please press star one in your telephone keypad. If at any point you'd like to withdraw from the queue, please press star one again.

We'll now take a moment to compile our roster.

The first question comes from the line of Edison U from Deutsche Bank. Please go ahead.

oh it was

First question, can you provide a little bit more granularity on the cadence of spacecraft engine deliveries as we move through the year?

Yeah, so Edison, as I think we talked about last quarter, the focus is 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 unit out of that facility to customers this quarter.

And, you know, 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. And still, thanks a lot. Welcome

If things don't go so well, would you consider kind of using that focus more on space propulsion? Just curious in terms of

how you're thinking about balancing those two in.

Big cash that you have right now. Well, I say, Edison, we believe in these businesses. And we've made a considerable investment in the spacecraft 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 brought the new rocket production line.

up this quarter as well. If you were Space Tech Day and had the opportunity to see these facilities, they're truly world-class facilities. We believe that because we've made these investments.

After a unique position, once we fly again, the scale production of launch vehicles like we're now in the process of scaling production of spacecraft engines.

So I think we're all in on these businesses and we think they're incredibly complimentary and you know it's I think in terms of the schedule. What's most important to us?

is the reliable products that we're building. So we've 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. Second 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 after delivering reliable products so that our customers buy more of them and That's that's kind of what we're focused on today and you heard actual comments on on how we're thinking about cash and in that context

I understand if I can 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...

You know, we've obviously put tremendous time and investment, but, you know, we clearly have a much more predictable and higher margin business.

We've obviously put tremendous time and investment, but we clearly have a much more predictable and higher margin business here going forward. Bevle.???EL

I appreciate you pushing on that, Edith. I mean, 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.

I appreciate you pushing on that. I mean, 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. Then of course, quick!

Okay. And then on the cash current situation, I know you're bringing that obviously, which is encouraging. Is there more room to flex that? I don't know if I can't do it a bit. It's always unfortunate. But.

just given you know you probably have.

High-balling, probably two-quarters of liquidity, is there more room there to the flex harder?

So, yeah, so, yeah, this is actually 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 what you saw the reduction in cashment quarter, over quarter.

As you see from the guidance, we expect to continue reducing our cash burn into Q2. You know, we look to optimize different areas within GNA. So that's one of the updates we provided today. And you know, 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 kind of runway, you know, 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.

that happen even before delivery, which contributes to our overall cash position. You know, 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, you know, the last piece being the financing opportunities, as we mentioned in our remarks.

We receive interest from potential data equity financing providers. And so we are currently evaluating them. And keeping in mind that solutions, keeping in mind cost of capital.

in other considerations. And so from our perspective, if we get to a point where we sign any different agreements, we'll definitely share them with you. But overall, as we think that, you know, there's a lot of...

aspects of our business that serves us well from a cash in the liquidity perspective.

And we said.

Thank you very much. Our next question comes from a line of Andre Madrid from Bank of America. Please go ahead.

Hey everyone, thanks for taking my question. I think we touch base.

since the announcement was made, but could you just talk a bit more from the topic of financing opportunities about the logic behind the $100 million mixed security show and just, you know.

how that fits into your overall approach to, you know, showing up the quality of maintaining that run line. Yeah, it's just optionality. The other day, right, I think it's good housekeeping. If you look at every, you know, company that's public, this is part of all the options that they have available to them. We mentioned that in the past.

I would now like to turn the call over to Chris Kemp for closing remarks.

We appreciate the questions today and that 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.

Thank you ladies and gentlemen. This does conclude today's call. Thank you for your participation. You may now disconnect.

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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 Schum, VP Strategic Finance and Capital

to call over to Andrew Schung, VP Strategic Finance and Capital Markets. Please go ahead.

Thank you, operator. Good afternoon, everyone, and thank you for joining us for ASHA's first quarter 2023 results call. After the market closed, we released our financial results. The press release is available on the SEC's website and our investorrelations website at investor.ashtra.com.