Astra Space Q4 2022 Earnings Call Transcript

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Provided by Quartr
March 30, 2023

There are 9 speakers on the call.

Operator

And welcome to the Asterisk 4th Quarter Fiscal 2022 Financial Results Conference Call. Today's call is being recorded. I would now like to turn the conference over to Andrew Sheung, VP of Strategic Finance Capital Markets.

Speaker 1

Thank you, operator. Good afternoon, everyone, and thank you for joining us for Astra's Quarter and fiscal year 2022 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.

Speaker 1

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 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. ASTRO's methods of computing these non GAAP financial measures may differ from similar non GAAP financial measures used by other companies.

Speaker 1

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.

Speaker 1

And as a result, Astra's actual future Shiong. We encourage you to review our filing 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 ks. 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?

Speaker 2

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 Atiq, our Chief Business Officer. During today's call, We will review our operational and financial results for the Q4, discuss our key accomplishments during 2022, review guidance for Q1 and provide an update on our Launch Services and Space Products businesses. First, I'd like to recap our key accomplishments in 2022 for our 2 core businesses, Launch Services and Space Products.

Speaker 2

2022 was a productive year for our Launch Services business. We successfully deployed 22 satellites into earth orbit in March of 2022 for 3 different customers. This success followed Astra becoming the fastest privately funded U. S. Company to place a satellite into orbit in November of 2021, just 5 years after we were founded in 2016.

Speaker 2

Astra also became the 1st company to launch under the Part 450 FAA License Framework. Astra's manufacturing facilities achieved a ROCCAT 3 production rate of approximately 1 ROCCAT per month from January through July of 2022 and we conducted 2 Rocket 3 launches within 33 days. After the TROPICS-one mission mishap, NASA agreed to modify its contract with Astra to launch future payloads on our new Rocket 4 vehicle. Based on customer and market feedback, we stopped launching ROCCAT 3s and focused on accelerating the introduction of a higher capacity 600 kilogram version of ROCCAT 4 It can be mass produced on our new Rocket 4 production line that we expect will be capable of producing up to 1 rocket per day. We continue to anticipate commencing test flights for Rocket 4 later this year.

Speaker 2

Perhaps the highlight of 2022 was significant customer traction of our Space Products business. We announced 278 committed orders as of today, March 30, including Customer contracts with Airbus OneWeb Satellites, AstraScale, Maxar Technologies and Leastella among others, Presenting approximately $77,000,000 of contract value, the majority of which is expected to be delivered in 2023 2024. We successfully delivered on 3 customer programs of the Astra Spacecraft engine. We took important steps to Gale the production of Astra Spacecraft Engines with the build out of a new dedicated production facility in Silicon Valley, and we expect the facility We'll eventually support production of up to 500 units per year with our production ramp beginning in Q2 of 2023. Since our inception, we have taken a long term view on the growth of the commercial space industry.

Speaker 2

In 2022, we saw the number of Shiong. Satellites launched increased by 31%, global launch rate increased 27% and the overall space economy grow by 8% to 464,000,000,000 Each of those benchmarks validates the trajectory of the industry that we anticipated and which have guided our strategy, product roadmaps and investments. Our strategy to become the leading provider of launch services and space products required long term investments in our rocket and space product production lines in 2022. And in 2022 early 2023, in spite of the challenges, we stayed the course and completed the build out of our new Rocket 4 and Spacecraft engine production lines and invested heavily in the people and equipment needed to increase the quality and reliability of our products and services. Our team is laser focused on 2 key goals.

Speaker 2

In launch services demonstrating a reliable and scalable launch capability, Astra is one of only 5 privately funded U. S. Companies that has conducted successful orbital launches and successfully delivered satellites into Low Earth Orbit. Based on the data and experience gathered from our missions in 2022, by investing in mass produced rockets Via automation of key manufacturing and launch operations processes, we plan to lead the market in lowest cost launch. We have designed our Launch System 2 with the expectation that it could service up to 80% of the addressable satellite market.

Speaker 2

2, Space Products, scale production. We've moved into a new 60,000 square foot Astra Spacecraft Engine Facility in Silicon Valley toward the end of March. With the expected annual capacity of almost 500 units, this facility is designed to allow us to service our customers' current needs as well as future demand. Astra's mission of improving life on earth from space has never been more relevant than it is today. We continue to believe that frequent, reliable, dedicated launches and scaled production of space products are the keys to accelerating the growth of the space economy.

Speaker 2

In 2022, Astra launched its first customer satellites and sold spacecraft engines that will power a number of new constellations of small satellites in low earth orbit. We are proud of the team for accomplishing these milestones. We are also humbled by our failures, and we've learned a tremendous amount from them. I look forward to providing you with frequent updates as we progress towards our first flight of Rocket 4 later this year and begin to ramp up production of our spacecraft engines in Q2. Now I'd like to provide an update on the progress we've made on the development of Launch System 2.

Speaker 2

Our Launch Services customers include satellite operators, manufacturers and government agencies. Rocket 4 is now targeting deliveries of up to 600 kilograms to mid inclination low earth orbit. As indicated previously, we continue to expect test flights for ROCKET 4 to begin in the latter part of 2023 and continue to remain on track with our Chung. Since the last earnings call, we've completed the qualification of our new upper stage engine, Completed a full flight duration run of our new first stage engine, completed the qualification of key manufacturing processes for the new Rocket 4 propellant tanks, including completing tank burst tests. Finally, we released our payload user's guide for ROCCAT 4, which allows our customers to better understand the capabilities of our system and the features of our launch service.

Speaker 2

We've made substantial progress towards completion of the ROCCAT 4 production line. In the past few months, we've also provided details around our quality control lab and our Hsiung, 1st Stage engine duty cycle, among other updates. After over 6 months of rigorous testing and analysis, we received a formal closure letter from the FAA concluding our TROPICS Shiong. You can find additional details on Astra's website. ROCCAT 4 incorporates key architectural decisions that we believe address the causes of the TROPICS 1 mishap, While building on the heritage of flight proven elements of the Rocket 3 series.

Speaker 2

I'll now provide an update on our Space Products business. As I mentioned earlier, we finalized the build out of our new dedicated spacecraft engine manufacturing facility this month. We believe the facility And our earlier investments in our production capabilities will allow us to eventually deliver up to 500 spacecraft engines per year. Specifically, as it relates to updates on our Space Products business, we announced 278 cumulative orders of the Astra Spacecraft Engine. As of March 30, 2023, this includes 264 new orders Since we closed the Apollo Fusion acquisition on July 1, 2021, as we previously discussed, orders are typically delivered to customers approximately 1 year from the contract signing.

Speaker 2

However, actual schedules may vary from customer to customer. This brings our total contracted value to approximately $77,000,000 the majority of which is expected to be delivered 2023 2024, we delivered on the 3rd full customer program of the Astra Spacecraft engine in Q4 of 2022. We believe that the Astra spacecraft engine is the leading electric satellite propulsion offering in the market today. We thank our existing customers customers and we believe we'll continue to see increasing demand for this product. Finally, given the feedback we've received from our customers and shareholders, I want to specifically outline how we've responded to deliver reliable products and services to our customers.

Speaker 2

Specifically, we've made the following investments, Process changes and organizational changes to maximize the reliability of both our Launch Services and our Space Products businesses. We appointed Doug Kunsman, the former launch and test lead for Blue Origin's successful New Shepard First Flight to lead launch and test operations. We set a new tone at the top on the criticality of reliability, added reliability as a core Astra value, revised and implemented more rigorous Astra development processes It includes explicit requirements for failure mode analysis, design reviews and Test Like You Fly reviews. We've established a new top level mission assurance organization led by Andrew Griggs As a member of the Astra management team that includes distinct teams focused on reliability, quality engineering, safety, quality control and supplier quality. And finally, we've invested in state of the art equipment that give our engineers new tools to measure quality during our engineering and manufacturing processes, Including a Nikon CT scanner, Nordstrom 2 d x-ray scanners, a Renishaw Direct Computer Controlled Coordinate Measuring Machine or CMM, a Brown and Sharp manual CMM, Miteoyu Vision measuring system and FLIR thermal imaging cameras, AferoArm and many other new tools.

Speaker 2

With that, I'd like to turn it over to Axel to review our financials and guidance for the year. Axel?

Speaker 3

Thank you, Chris, and good afternoon, everyone. I will now review our results for the Q4 of 2022. As a reminder, all non revenue financial figures we will 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 Q4 of 2022, We delivered on one new customer program for the Astra Spacecraft engine.

Speaker 3

The program was a legacy contract from Apollo Fusion. The value of the contract was $3,500,000,000 and after significant analysis, we concluded that it should be recognized as other income rather than revenue And its related expenses to be included in R and D expenses. For that reason, we did not recognize any revenue during the quarter. Nevertheless, the full benefit of this contract is recognized in our income statement in Q4 as other income. If we were to sign this contract today, We would recognize $3,500,000 of revenue and $1,800,000 of cost of goods sold, leading to a gross margin of approximately 49 GAAP operating expenses totaled $50,300,000 in Q4 compared to $201,400,000 last quarter.

Speaker 3

As a reminder, $133,400,000 of GAAP operating expenses in Q3 were attributed to one time items. GAAP operating expenses in Q4 included the following: R and D expenses of $29,100,000 encompassing our continued investments in our core businesses, Plus costs related to our spacecraft engine customer delivery. Sales and marketing expenses of 3,900,000 Reflecting investments in ongoing sales efforts for launch services and our ASRAS spacecraft engine And G and A expenses of $24,500,000 including ongoing investments in key systems and technologies among others. Our G and A expenses in Q4 contained stock based compensation related to the purchase of certain executives during the quarter. Excluding stock based compensation, G and A expenses will have decreased quarter over quarter, primarily resulting from a reduction in consultant and legal spend.

Speaker 3

Now let's talk about all of the one time items during Q4 2022. During the Q4, we recorded $5,300,000 of one time adjustments, including $3,800,000 of severance costs related to the reduction in force Implemented in November 2022. Given these one time items, on a GAAP basis, our 3rd quarter net loss was $44,300,000 On a non GAAP basis, 4th quarter adjusted net loss was $37,300,000 Q4 adjusted EBITDA Was a loss of $36,600,000 a $4,800,000 improvement compared to last quarter. 4th quarter capital expenditures were $7,600,000 And primarily related to the continued investments in the development of Launch System 2.0 and the delivery of our Astra spacecraft engines. We expect the majority of capital expenditures related to our Space Products business to be completed in Q1, 2023.

Speaker 3

We ended the quarter with cash, cash equivalents and marketable securities of 102,800,000 And no debt outstanding. In addition, we also continue to evaluate various sources of capital as we carefully manage our financial runway. Now regarding our NASDAQ listing status. We published a piece on the Astra website on March 16. As noted, on March 13, ASTRA submitted an application to NASDAQ for an additional 180 day period to comply with the $1 minimum bid price requirement.

Speaker 3

Based on our discussion with representatives of NASDAQ, we expect to hear back from NASDAQ on or around April 5, And we're not aware of any reason why our application will not be approved. We continue to actively monitor our listing status And I'm prepared to take the actions that are reasonably necessary to preserve our listing. Next, I'll provide an outlook for our Q1 ending March 31. As previously mentioned, we continue to focus our operating plan on the delivery of Astra spacecraft engines And the successful first flight of RAK3. In Q4, we made decisions to optimize our operating plan to increase our financial runway amidst market volatility.

Speaker 3

Going forward, our goal is to reduce G and A expenses, including consultants, IT system and other administrative spend to focus all of our resources on our top two priorities, launch services and Space Products. As a reminder, our Q1 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 ks, as well as the decision to discontinue the production of launch vehicles supported by Launch System 1.0. There is also risk associated with macroeconomic factors, a dynamic share across many companies and industries. Now we will provide future guidance. In the Q1 of 2023, we currently expect Adjusted EBITDA loss to be between $37,000,000 $41,000,000 Basic shares outstanding to be between 269 Sheng.

Speaker 3

271,000,000 shares. Capital expenditures to be between $6,000,000 $8,000,000 On the spacecraft engine, You should expect a gradual ramp up in shipments beginning Q2 of this year. As we have just finalized this month The build out of our dedicated spacecraft engine production facility. As of today, we have 278 Chong. We continue to see strong customer demand for our spacecraft engines.

Speaker 3

We are very excited by the momentum we are experiencing in the development of our new launch system and the continued commercial success of our Spacecraft engine business. We believe that 2023 will be a transformative year for Astra and we look forward to sharing our progress throughout the year. I will now turn the call back over to Chris.

Speaker 2

Thanks, Axel. Astra is well positioned to deliver Astra's spacecraft engines for our customers and I look forward to sharing details of our first flight of Rocket 4, which we expect later this year. Also please join us for the live stream of Astra's 2nd Annual Space Tech Day. On Tuesday, April 25, 2023, We'll share updates on Launch System 2, the Astra spacecraft engine and more at astra.com/livestream. And with that, operator, please open the call for questions.

Operator

Sheung. We'll take our first question from Mariana Perez Mora with Bank of America.

Speaker 4

Good afternoon, everyone. So in the prepared remarks, you mentioned the current Environment, right? Last year has been really tough from a valuation perspective for the space industry in general. And some companies have recently announced they are actually struggling to get the financing to continue the development efforts. How are you thinking about the $100 plus 1,000,000 you have on cash in the balance sheet and this kind of like Free cash flow that you're burning at about like $40,000,000 plus every quarter.

Speaker 4

How should we think about the CapEx coming down or free cash flow usage trends from here and financing options.

Speaker 5

Hi, Mariana. This is Axel Martinez, the

Speaker 6

CFO of your Astra. Yes, so of course, look, we always Continue to evaluate financing options and are actively always discussing with different providers. Hsiang. We don't have anything to report right now. From our perspective as we mentioned in our opening remarks, There's a focus on our part both to make sure we continue to optimize our cost structure.

Speaker 6

Hsiung. We're going to be focusing on our administrative expenses because we want to make sure that we allocate As much of our capital to our 2 core priorities, the launch services business and our space products business. We're very excited about the momentum we have right now. We think there's a great traction with our spacecraft Customers has great traction with our development. And so we think that the market will reflect that.

Speaker 6

And We agree with you that it's been a tough environment, but the focus that we took at the end of last year, we're seeing it pay off. We're seeing great momentum as you heard from Chris earlier about all the different things we've been doing. And so we're excited about what 2023 looks like for Astra.

Speaker 4

Thank you. And when you think about you mentioned in the prepared remarks that the investment on space products for CapEx related to that should be over after Q1. How should we think about the CapEx cadence CapEx cadence for the launch business.

Speaker 6

Yes. So as you know, we provided guidance for CapEx For Q1 and we'll continue to do so on a quarterly basis. And you are correct that for our spacecraft engine business, Our CapEx investments are now coming to an end because we moved into our new facility and we're very excited about it. And going forward, we'll continue to provide guidance on CapEx.

Speaker 4

Thank you. And probably last one from my end. How should we think about timing on the ramp to the 500 Units per year that you expect to produce in the new facility for the engines?

Speaker 7

Yes, it's a great question. We're not providing guidance on the future deliveries. We have noted that we've sold about 278 engines as of today and the Majority of those engines will be delivered this year and next year. And typically engines are delivered about a year from when we sign the contracts. And Hsiung.

Speaker 7

A lot of those contracts as we have as we've indicated previously came in, in the last half of last year. And I think that's all we've shared publicly. And I think the investments that we've made in CapEx both in the rocket production line and in the spacecraft engine production facility We're critical for meeting these customer contracts that we have and bringing the cost of these products Down to where we can compete in the market where we want to compete, which is kind of with a scaled launch services product And at the scale that we've indicated, we want to produce the rock the spacecraft engines.

Speaker 4

Great. Thank you very much.

Operator

We'll take our next question from Edison Yu with Deutsche Bank.

Speaker 8

Hey, thanks. Good afternoon, guys. I wanted to ask on launch first. I know you used to targeting the first flight for Rocket 4 latest year. Assuming that goes well, How should we think about the phasing of launches after that?

Speaker 8

Do you have a plan to kind of start completing the manifest? Do you need to do a couple more successful tests? What's that cadence sort of look like?

Speaker 7

Yes. Thanks, Edison. I appreciate it. I think that the way we're thinking about the first flight is We would certainly love to be the 1st company to ever fly a rocket and have it be flawless the first time. And we're also we've been humbled by The challenges that both Astra and organizations across the world have faced over the last year with new rocket programs.

Speaker 7

So we We are planning on building an Alpha and a Bravo test flight and learning as much as we can from those. And then As we have a number of customers that we have launch contracts with, we obviously want to get back to servicing those launch services contracts as soon as we can. And Hsiung. We think that demonstrating reliability will unlock a lot of potential given the new 600 kilogram Hsiung. To ensure that we can scale production and we can ensure the reliability of this New Rocket 4 and Launch System 2 has received the right amount of attention and the right amount of investment Given the cost of capital, both now and in the future, we've been as thoughtful as we can be as a management team at Striking that balance and giving the team enough time to build the best possible product and achieve success as quickly as possible.

Speaker 1

Understood.

Speaker 8

On the Space Engine side, on the Propulsion side, Very decently sized backlog order book. I'm wondering what's the latest on Getting into some of these mega constellations and mainly alluding to OneWebGen 2. Obviously, you had that relationship With NGL ready, any updates there, any timing that we should be on the lookout for if you can get some

Speaker 5

Hsiung. Hey, Addison, this is Martin. Sheng. As you know, we've worked with a number of customers and Constellations and we have signed up a number of them and we continue to work With our existing customers who have larger programs that they have in mind to execute against those programs and execute contracts against those programs, We don't have anything to announce today. And believe me, like when we do something to announce, we'll let you know.

Speaker 5

But we are very excited by, as Chris and Axel alluded to not only the strength of the backlog, but also the strength of the pipeline that's behind it and the Hsiung. Customer discussions we're having that we're trying to convert to contracts is also very exciting. But we don't have anything to announce in any of the mega constellations that are out there.

Speaker 8

And in terms of the capacity that you're planning for, do you need a mega constellation to run full capacity? Or do you Hsiung. I think you could fill that up with the I guess without hitting a bigger one.

Speaker 5

Certainly, Omega Constellation would be great and I think we'd be delighted to support those programs. We don't need those programs in order to support the capacity that we're trying to build out in Sunnyvale given the pipeline that we have.

Speaker 3

All right.

Speaker 7

Yes, maybe if you're asking about go ahead.

Speaker 8

Yes. You go ahead.

Speaker 7

If you're asking about launch services, I think that we see the demand and the number of launches continue to increase. And also the companies that are out trying to build new capabilities like Astra has Recognize this is a challenging thing to get going. And we believe that 600 kilograms is a sweet spot, because It will allow us as we said earlier to address at least 80% of the overall addressable market for satellites. And We have a lot of visibility into that market because we see the satellites that folks are building with Astra spacecraft engines. We want to be able to service those customers not only Shiong.

Speaker 7

From our Space Products business, but from our Launch Services business in the future. And what all those customers tell us is that price is really important. And we need to get the price per launch down and we need to get the price per kilogram down as much Sheung. It's possible given the low price per launch. And that is why we have made the investments that we've made in the new Rocket four production line.

Speaker 7

And I hope you're all able to come out Shiong. And see us at Space Tech Day on April 25th. You'll see that you'll see the Rocket four production line and you'll see the investments we've made to scale production of the launch vehicle. And 600 kilograms when you look at it Sheng. If you look at the even a rocket launch every single day would be about 4 Falcon 9s with the rideshare missions and we're seeing SpaceX increase the number of rideshare missions year over year because of the increasing demand for Access to Low Earth Orbit.

Speaker 7

And we've always believed in Low Earth Orbit. We've always believed in A vibrant space economy that has a large both U. S. And international set of capabilities being deployed And that continues year over year to prove itself out. The market just continues to get bigger.

Speaker 7

So we're working really hard because we have customers To deliver for and a large market to serve.

Speaker 8

Great. Last one for me. I'm curious if you entertained any thoughts or thought about Hsiung. Monetizing or separating out the propulsion, the Space Engine business, obviously, is a much different profile. You just mentioned, there were almost 50% gross margin even at these low volumes.

Speaker 8

Do we have any appetite to try to separate that out

Speaker 7

We think it's a great business and we continue to leverage The investments we've made at Astra to deliver parts from the machine shop that we built to make rocket parts, I think There's a lot of complementary opportunities in the market. A lot of the customers who are buying spacecraft engines are interested in buying launches from us or have bought launches from us. And we remain fully committed to that business.

Speaker 8

Okay. Thank you.

Operator

And there are no further questions at this time. I would like to turn the call back over to Chris Kemp, Founder, Chairman and CEO for closing remarks.

Speaker 7

Yes. I really want to thank everyone for joining today. And again, I want to invite everyone who's listening to this To tune in to Space Tech Day. We have a lot of hard work that our team is excited to share with you all on April 25. And if you're interested in coming out in person, please reach out to us.

Speaker 7

If we can accommodate you, we'll do our best. Otherwise, we'll have a live stream at And we look forward to coming back and chatting with you again at the end of Q1. Thank you.

Operator

And that concludes today's presentation. Thank you for your participation and you may now disconnect.

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Key Takeaways

  • In 2022 Astra deployed 22 satellites with Rocket 3, became the fastest private U.S. company to reach orbit, and has pivoted to Rocket 4—targeting test flights later this year and a production line capable of one vehicle per day for up to 600 kg payloads.
  • The Space Products business has amassed 278 engine orders worth ~$77 million, completed a new Silicon Valley facility for electric spacecraft engines, and plans to ramp to 500 units per year starting in Q2 2023.
  • Q4 2022 non‐GAAP net loss was $37.3 million, with $102.8 million in cash, no debt, and Q1 2023 adjusted EBITDA loss guidance of $37–41 million alongside expected CapEx of $6–8 million.
  • Astra secured FAA closure on the TROPICS mishap investigation, implemented design changes in Rocket 4, released a payload user’s guide, and aims to achieve low-cost, high-reliability launches to capture up to 80% of the small-satellite market.
  • To boost product reliability and quality, Astra formed a mission assurance organization led by industry veterans and invested in advanced testing and inspection equipment, including CT scanners, CMMs, and thermal imaging systems.
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Earnings Conference Call
Astra Space Q4 2022
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