American launch vehicle company Astra Space (NASDAQ: ASTR) reported its Q1 earnings results yesterday evening. EBITDA was in line with guidance at a loss of $47.5m, and comments made on the earnings call paint a bright future ahead. With plenty of launches coming up and the development of its other offerings that include space products and space services, I think the Astra Space share price could be set for lift off.
Cheap rockets, cheap valuations
Since Astra IPO’d last year, its share price has taken a beating. It’s down 70%, as is the case with many growth and tech stocks. Nonetheless, given the success of its most recent payload delivery, I believe the company has a bright future ahead of it. Astra’s USP is its ability to manufacture the cheapest rockets on the market, on scale. It also aims to provide weekly launches by 2024 and daily launches by 2025. This is something its competitors are yet to offer.
As the first batch of revenue came in, Astra managed to secure $3.9m for its two launches (One failed, one successful). Although the cost of revenue is almost three times of that, the team expects this to reduce with higher margins as the service scales. Alongside that, it also secured orders for 61 Astra Spacecraft Engines from a number of customers. The company expects the order pipeline to grow given the industry’s high demand for satellites.
Hot Tropics
When CEO Chris Kemp was quizzed about the status of the upcoming Tropics launches on the earnings call, he noted that rockets were on standby and awaiting license confirmation. While he doesn’t expect all six rockets to launch by the end of Q2, he mentioned Astra’s intention to launch all of them before Q3 concludes. If the team from Alameda can pull all these launches off successfully, I think that the share price will start to pick up some momentum.
Could fuel burn out?
A business like this one needs cash to keep going. I was worried when I saw Astra’s cash and equivalents come in at a mere $162m. This is significantly down from $325m in the last quarter as the Nasdaq-listed company burned cash at its fastest rate. With that spend, Astra has completed the expansion of its facility. Additionally, it has installed most of the equipment for high-scale rocket manufacturing.
| Quarter | Cash Burn |
|---|---|
| Q3 2021 | $69m |
| Q4 2021 | $54m |
| Q1 2022 | $163m |
CFO Kelyn Brannon mentioned on the earnings call that capex and opex should taper off substantially in the coming quarters. However, Q2 is still expected to weigh heavily on the balance sheet. As such, I am wary of the firm’s potential need to raise capital in the near future.
Nevertheless, a balance sheet with no outstanding debt leaves Astra in a healthy position to grow and expand. Another launch from the Department of Defense was also added to the $160m launch backlog, showing that demand for Astra’s services is increasing. With Rocket 4 set to be showcased at next week’s Spacetech Day, these are exciting times for firm and for me as a shareholder. So, with the Astra share price currently at historic lows, I’ll be buying more shares before take off!