Latest / AST SpaceMobile Podcast / Scott Wisniewski at JP Morgan conference

Transcript

Scott Wisniewski at JP Morgan conference · AST SpaceMobile Podcast

0:07
is the AST Space Mobile podcast. Where we just basically come
0:12
your phone be seamless regardless of where you are.
0:16
We don't want the user even to know that it's connected by
0:18
satellite. Listen, the opportunity that we
0:23
have is very, very, very large. Good afternoon, everyone.
0:28
I'm Sebastiano Petty, and I cover the telecom, cable and
0:31
satellite space here at JP Morgan.
0:34
I'd like to welcome Scott Wisniewski, President and Chief
0:39
Strategy offer of ASTS Space Mobile.
0:41
Scott, thanks for joining us. Thank you for having me.
0:48
Think you're good? You're live.
0:49
Can you hear me All right? Thank you for having me.
0:52
Great. So Scott, just to start, let's
0:54
zoom out. As you sit here in mid 2026 with
0:58
Bluebirds launching, commercial service activation approaching
1:01
and the government pipeline accelerating, where are you
1:04
spending most of your time as President, Chief Strategy
1:06
Officer? And more broadly, what are your
1:09
two to three highest priority objectives over the next 18
1:12
months as you transition from what has primarily been in R&D
1:16
and manufacturing story into a scaled revenue generating
1:20
operating company? Thank you.
1:22
And you know, for those who don't know us that well, we were
1:26
founded about a decade ago around the direct device
1:28
opportunity. That's what we do.
1:30
That's our entire strategy. It's from space, of course, and
1:33
we build our own satellites and we'll be operating them and
1:36
selling capacity on them. But at its core, we are a
1:39
director device pureplay. And over the years, I met our
1:45
founder in January 2019. But over the years telling our
1:48
equity story, people always ask three questions.
1:51
It was, does it work? Can you fund it?
1:54
And how big will the market be or will there be a market?
1:57
And that's our traditional private company questions that
1:59
we still got even as a public company for a while.
2:02
And we really retired those risks in 2023-2024 and 2025.
2:07
And so this year, yeah, you're exactly right.
2:08
Traditional growth stuff, scaling stuff is where we are.
2:12
And for us, if I were to say 2 simple things, one is network
2:15
deployment. The vast majority of the folks
2:18
in the company are focused on exactly that network deployment
2:22
now for revenue in 2026 and 2027 and beyond.
2:27
And then the second one is I think building the market out in
2:30
the right way. This is a brand new service.
2:32
It's a service that is at the very heart of connectivity.
2:36
Remember we all know the trends in connectivity.
2:39
When I started my career in connectivity, there's a question
2:41
post.com bubble, you know, what inning are we in?
2:45
When is the expansion going to end?
2:46
And then of course, you know, AI comes along and there's always
2:49
something every couple of years. So for us, we're at the heart of
2:52
connectivity. We can do coverage better than
2:54
any terrestrial footprint by its very nature and making
2:57
connectivity work for our partners, the mobile network
3:00
operators and ultimately for the consumer mass market among other
3:04
markets is our focus. So building out that mark in the
3:07
and those are our second priority.
3:11
Great. And let's address the news from
3:13
last week. AT&T, Verizon and T-Mobile
3:16
announced A proposed joint venture to extend mobile
3:19
connectivity using satellite based D to D technologies.
3:25
You know, you guys put out in a statement commending the
3:27
announcement. You know, unpack this for us.
3:29
What does this mean for ASTS in practice?
3:32
Does does it change your commercial positioning with the
3:35
carriers? Does it accelerate or maybe even
3:37
complicate your path to service? So we really value the carrier
3:43
relationship. You know we we've organized the
3:45
business, the technology, the go to market strategy, everything
3:48
we do really is about making connectivity better for the
3:52
mobile network operators. And so you see that in where
3:55
we've prioritized the company over the years.
3:58
You see that in how we've built out the tech and even the
4:00
network stack is organized with the RAN on the ground, so the
4:03
operators control it. So that's really been our focus.
4:06
We share their spectrum, although we also have our own
4:08
spectrum now and that's always been the approach and that's
4:12
what's LED us to have partnerships with nearly 60
4:15
operators globally, approximately 3 billion
4:17
subscribers amongst them. We count many of them as
4:20
investors, 15% of our cap table is strategic investors like all
4:25
including AT&T, Verizon, Vodafone, Google, American
4:28
Tower, Bell Canada, Telus and Canada rackets in out of Japan.
4:33
So we've, we've prided ourselves on being the partner of choice
4:36
for this market as they develop it and develop it as a growth
4:39
area for them, not a, not a, not a vendor style cost center, but
4:44
a growth area. And so it was two years ago that
4:46
we were able to bring Verizon into our network in the United
4:49
States, putting them together with our historical partner
4:51
AT&T. And we see this new announcement
4:54
this week very much in the same vein.
4:55
That's how do the operators get organized in the United States
4:59
around what is a very important strategic and growth opportunity
5:04
and innovation opportunity for them and for us and for the
5:07
citizens of the United States. And so we see it in that vein.
5:10
And so yes, we're we're supportive.
5:13
It's a way to expand the market even further in the US and and
5:18
we're going to continue to push for that in a very meaningful
5:21
way. I mean, does it maybe think
5:24
about the other side of the coin, does it does it validate
5:27
the market and does it bring you closer and maybe help us think
5:31
about, I mean, does it diminish the Moat around, you know, your
5:35
controlled spectrum? Yeah.
5:38
So our strategy has always been to be carrier neutral.
5:42
We did develop some exclusivities over the years who
5:46
are early investors in US and that was helpful.
5:48
But for us in the long run, we were always going to be carrier
5:51
neutral. It's a great strategy.
5:52
You see it across the telecom sector, right.
5:54
And so that's always been our approach.
5:57
It's just happening a little sooner here in the US than
6:00
expected, which is a good thing. In terms of our Moat, I mean we
6:04
have, you know, when you think about Leo network deployment,
6:07
Leo satellites, Leo constellations, we're going to
6:11
be the second one to get to the finish line without going
6:13
bankrupt first. This is an impossible task.
6:16
We have developed over the last decade the the plan, the
6:20
technology, these are the largest satellites ever deployed
6:23
in low Earth orbit. We have the spectrum that backs
6:25
it up. We have the model, we have the
6:26
first mover advantage, we have the partnerships.
6:29
And so making ourselves relevant to our customer with great tech
6:32
and a great service and the solution is always what we had
6:35
to do when we got out of bed in the morning.
6:36
So there's really no difference there.
6:38
We always we're ready for the competition and so I think
6:44
they'll be a healthy market over time, but in the near and medium
6:47
term and maybe even the five to 10 year term, you know this is
6:50
going to be a very growth market oriented situation where we're
6:54
going to have a leadership role. I think Chairman CARB of the FCC
6:58
just put out something today about 3 right scale D to D
7:01
providers obviously with with Amazon's announced agreement to
7:05
purchase global Star. Has anything changed in terms
7:08
of, you know, we'll get into some of the commercial
7:09
agreements in a moment, but the tone of conversations changed at
7:12
all since that splashy announcement?
7:16
No, not really. I I don't think there's a a
7:19
network operator globally that doesn't want to work with us in
7:21
some way. Those conversations have
7:23
increased with depth and breadth every month since since I've
7:27
been around the company as we've de risked the the approach.
7:30
So we are we're partnered with many, many operators around the
7:34
world. Really very few are missing
7:37
other than outside of China and Russia.
7:39
And that's that's the same question, the same question they
7:43
have is how soon can ioffer service to my subscribers.
7:46
And so no, we haven't, haven't seen the tone of the
7:48
conversation change really. And and again, I just want to
7:52
highlight this is a very challenging problem to solve.
7:56
It'll, it'll take a long time for folks to ramp up.
7:58
I'm sure if big players with big scale want to go after the
8:02
opportunity, they can and they, they probably will, as you do
8:05
with this see with big opportunities.
8:07
But you know, importantly, we have a, we feel like we're the
8:10
partner of choice for operators. We're extremely well capitalized
8:14
to, to get after our initial opportunity here.
8:16
It's happening now and we have a great tech solution that is,
8:20
again, these are the largest phase arrays ever deployed in
8:22
low Earth orbit. This is not a trivial thing and
8:24
we've been at it for years and and that mode is feels good to
8:28
us. Good.
8:29
So that's a great segue and want to turn to the deployment.
8:33
So you're talk you're targeting approximately 45 satellites in
8:36
orbit by the end by year end through a combination of Blue
8:40
Origin, SpaceX with your next launch Bluebird 8-9 and 10 on
8:46
Falcon 9 expected in mid June. So with the, you know, with the
8:50
new Glen still grounded following the Bluebird 7 upper
8:53
stage anomaly, you know, maybe you know, how many launches do
8:57
you need now from now through December to hit that 45?
9:01
And I guess what's the margin of error if Blue Origins return to
9:05
the pad slips? Yeah.
9:06
And so to remind everybody, our 45 plus guidance on satellites
9:12
in orbit basically gets us to a full commercial service in the
9:15
initial markets that matter US and a few others.
9:18
And and that's always been our strategy.
9:21
We set our target for this year to do that.
9:25
We reiterated that target even after the loss of our satellite,
9:29
the one satellite on the prior launch.
9:31
But we feel really good about that.
9:33
And, and really as we think about business risk, the value
9:37
in Leo is its resiliency and the fact that we have production
9:41
through satellite 33 at our factory right now.
9:43
We just shipped 2 more satellites yesterday to the
9:46
Cape. And so there's a lot of
9:47
resiliency in it. And so yes, we lost the
9:49
satellite last month. We'll be back at the pad next
9:51
month in a 60 day turn around. So it's a tribute to our launch
9:56
provider agnostic strategy would be built these things so they
9:58
can go on any launch vehicle. We two years ago set up a pretty
10:03
resilient plan between Blue Origin, SpaceX and Israel to get
10:07
those 13 launches up and in order to meet our target this
10:10
year. It's pretty simple math.
10:11
We get about two to three times more satellites on Blue Origin
10:14
rocket. That's one of the reasons why we
10:16
signed them up as our biggest partner.
10:18
And we need about a handful of Blue Origin rockets and a
10:21
handful of Falcon 9 are equivalents.
10:23
And so we feel really good about that timeline.
10:26
And frankly, if it slips a month or two or three, you know, that
10:31
doesn't really impact the NPV of the of the of the company.
10:34
Importantly, it's very important to our customers and it's very
10:36
important to us and time is money.
10:38
But for us this is happening. There's an inevitability to it
10:42
and being vertically integrated with a with a couple of good
10:44
launch partners gives us that confidence.
10:46
And then I think we spent a little bit of time, you just
10:50
touched on it being launched vehicle agnostic, right?
10:52
You kind of talked about it on the call.
10:54
I mean how much of flexibility or how do you necessarily have
10:58
with Vulcan? I mean can they absorb more of
11:01
that capacity? Is that something that will take
11:03
time? Well, we have relationships with
11:09
all the heavy launch providers globally.
11:12
We've signed big contracts with Blue Origin, SpaceX.
11:17
We had a launch recently on Israel as well.
11:19
And we have referenced on our public analyst calls that we've
11:25
signed other agreements as well, not with firm launch dates yet,
11:27
but other agreements are in the works.
11:29
So I think for us it's important to have the flexibility and it
11:34
helps de risk the plan a little bit.
11:36
But we think the launches that we have contracted and and ones
11:40
that we'll we'll get for later in 2027 on top of what we've
11:44
already contracted, we feel really good about that and we
11:47
feel good about our partners. Like I said, we're going to be
11:49
going to be back at the launchpad in 30 days with SpaceX
11:52
and with Blue Origin. We're we're very optimistic
11:54
about the return of the pads soon and.
11:56
Then moving to the manufacturing side, you've disclosed phased
12:01
arrays through through Bluebird 28 and advanced assembly through
12:06
Bluebird 33. So it's six fully assemble
12:10
satellites per month roughly. Is the factory now, you know, is
12:14
the factory now the easy part of the equation or is there still a
12:16
yield testing, you know, composite structure challenges
12:20
that could create variability in the output quarter to quarter?
12:24
So one of the great things about being based in Texas is we
12:26
didn't need a five year plan. We just started building and
12:30
you, you, you get the, the consents later.
12:33
So, So what we, that's kind of what we've done is we've had
12:35
success raising capital the last three years.
12:37
We've built and built and built. And most recently we just opened
12:40
another 100,000 square foot dedicated payload facility.
12:44
So this is in Midland, it's about a mile down the road and
12:47
it just makes microns, which are the active payload on our
12:49
satellite and that's great. There's a video of it online.
12:53
It's got a great energy to it. It's very professional.
12:56
The yield is improved. There's still some improvements
12:58
to be had on production yield, but that's just time and money.
13:01
So I'd say our manufacturing has really grown up a lot in the
13:05
last 18 months and that's exciting to see.
13:08
And there's still some things to work out as we scale and in
13:12
particular as we try to jam as many satellites as possible onto
13:16
our our launch partners rockets. But, but we're in great shape
13:20
and it's really a question of, you know, you get, you know, one
13:23
additional satellite here, one additional satellite there.
13:25
It's not a threshold question. So getting to what we need for
13:28
the network we're there and, and the manufacturing supports it, I
13:31
don't know that I'd say it's easy.
13:33
It's still where a lot of the company is focused, but we're
13:35
getting it right. And you see that with the
13:37
satellites we've deployed over the last couple years.
13:39
We had 7 satellites deployed successfully in low Earth orbit
13:43
and deployed means opening up and these are the largest
13:46
satellites ever deployed in low Earth orbit for commercial use.
13:49
So it's a it's a big accomplishment.
13:51
We're 7 for seven and we hope to be continued success.
13:55
But I'd say manufacturing is is one of those things that's in
13:58
our four walls and in in good shape.
14:01
Going back to something you touched on earlier though, with
14:05
I think New Glen, the next New Glen launch will carry 4
14:08
satellites and then ramping towards 8.
14:11
And so I guess help us think about, you know, as you stack
14:14
these tuna cans in there, I think we've talked about in the
14:16
past, are there, you know, is there engineering or regulatory,
14:19
you know, gating factors or you know, I guess help us think
14:22
about the timeline to get to, you know, the quote, UN quote
14:24
fully stacked capacity. Yeah, We expect to do that over
14:28
the course of 2026. So for us, part of our strategy
14:34
for being a launch vehicle agnostic was having a flexible
14:37
design. So essentially what we do is we
14:38
we stack tuna cans. So you attach the bottom tuna
14:40
can to the second stage of the rocket, you stack them and if
14:44
you start to get too tall, you have to reinforce the ones on
14:47
the bottom. But otherwise, it's meant to be
14:49
pretty simple. You can put three in a Falcon 9.
14:51
You can put four growing to aid with a new Glen.
14:54
You can put 5 on a Vulcan, you can put 2 on Israel 3 and
14:58
Mitsubishi have industries and, and on and on down the list 5 on
15:01
an RN 6. So there's a lot of different
15:03
options we have and that's similar to how others have
15:06
pursued launch vehicle agnostic strategies.
15:08
And so how does that play over out over time?
15:10
There's a little bit of a matching game with with Blue as
15:13
they're growing into their their performance plan.
15:16
They've successfully now landed 2 boosters, which is an
15:19
incredible feat to being 2 for three on their three new Glen
15:22
launches, the two of the last ones being successfully landed.
15:25
And that'll support a pretty rapid cadence going into the end
15:30
of 2026 and into 2027, which is fantastic.
15:33
And beyond that, you know, it's about doing normal vehicle
15:36
upgrades and for us, you know, Titan air belt where necessary
15:39
in order to maximize the yield and performance on the on the
15:42
expensive rockets. Great.
15:44
Now let's shift back to the commercial ecosystem.
15:48
You mentioned you have nearly 60 MNO partners covering, you know
15:52
3 billion subscribers with definitive agreements, you know
15:56
announced AT&T, Verizon, STC, others.
15:59
As you sit across the table from operators today, I guess any has
16:02
the tenor of conversations changed now that you have FCC
16:06
authorizations, a fully funded balance sheet and demonstrating,
16:10
you know, 100 megabits from orbit?
16:14
Yes. So I'd say we've always had this
16:18
great relationship and it was started on the technology side,
16:20
frankly, which is a really great place to start because at the
16:23
end of the day, we're a great mousetrap for them.
16:25
We can deploy a digital tower anywhere in their network in any
16:28
frequency and up to four of them simultaneously.
16:31
You don't want to treat it like a trading floor, but you can do
16:33
network planning. And if they have frequencies
16:35
that they're not using in certain regions, you can deploy
16:37
them. And it's what a great mousetrap,
16:39
right? And and we translated that
16:43
similar closeness through the business side on the go to
16:47
market strategy to help them and have them bring them into the
16:50
tent to be investors with us to help us build this.
16:53
And so that's, that's been a successful dynamic.
16:55
And we're I'd say we've got good relationships both in the middle
16:59
of these organizations and at the top.
17:01
And you need that CEO and CC suite alignment for really
17:05
strategic stuff that's long dated, right, that doesn't have
17:08
a quarterly pay off. And so that's been really
17:11
important to our strategy. And yeah, de risking with
17:13
capital, de risking with spectrum, de risking with the
17:17
technology, the speeds, the partner first approach, those
17:21
are those are all great. And regulatory too.
17:23
We are flagged. We took the decision a couple
17:25
years ago to flag our network in the US, which it hadn't
17:28
previously been done, but based on steps the FCC took to warm up
17:33
to space and direct the device in particular, we re flagged and
17:36
that's played out really well for us.
17:37
And even Chairman Carr was speaking on CNBC today, you
17:40
know, pretty favorably about us. So we've had, we've had a good
17:43
relationship with the US regulatory environment.
17:46
It's only gotten better and better.
17:47
We just received our full commercial authorization from
17:50
the FCC a couple weeks ago, which is fantastic.
17:53
And and yeah, that has all kinds of good fall through network
17:57
effects for the rest of our partners.
17:59
And we're we're trying to get them services as soon as we can.
18:02
I think you mentioned expecting on the call, you mentioned
18:06
expecting additional MNO agreements with quote UN quote
18:09
increasing velocity through 2026.
18:13
I guess you probably some of the similar things you kind of just
18:16
touched on. But what's driving the
18:17
acceleration in the partner signings?
18:19
And as you think about this next wave of definitive agreements,
18:23
is this from conversation primarily from conversations
18:27
with existing MO use within your, you know, 50 plus partners
18:31
or is this, you know, new, entirely new relationships that
18:34
were outside your, you know, ecosystem previously?
18:37
Right. So we're, we're very proud of
18:39
the partnerships we have and the ecosystem we've built.
18:41
And even if we just develop that, that'll be an that'll be
18:45
an enormous win for the company, right.
18:46
So there are still some companies that we don't have
18:49
formal partnerships with that, you know, we, we hope to bring
18:53
to the, to the fore in, in the coming months and quarters.
18:57
But in general, we have this huge funnel of opportunities to
19:00
develop. And, and I sometimes joke that
19:02
I'm, I'm ruined for any sales job in the future because we
19:05
really just have an incredible vibe with the operators.
19:09
You know, we have something that's really good for them.
19:10
It's set up for them to succeed and it's innovative and it's new
19:15
tech and it's better for their customers.
19:17
And it, we even bring spectrum to the table now.
19:19
So I think the challenge is just, you know, getting going,
19:23
you know, we're scaling, we're a growth company.
19:25
We've really invested in our commercial and telecom
19:29
operations teams over the last 12 to 18 months on top of our
19:32
space organization. We're kind of like a
19:35
manufacturer and a telecom operator in in 1-2 different
19:39
companies almost. So we've been scaling that.
19:41
We've been continuing to develop our relationships and every day
19:44
we get closer to commercial service drives a different
19:46
dynamic. As M and OS are planning their
19:48
budget cycles, they're thinking about what 2027 is going to look
19:52
like. And and of course this is a very
19:55
topical piece in, in the telecom industry, in the wireless
19:59
industry in particular. So I'd say just continued the
20:02
momentum, continued drum beat commercial service on the
20:05
horizon and broadband cause of course we've seen some initial
20:10
commercial plays and indirect a device and they've been
20:14
emergency or text based. So the idea of bringing
20:17
broadband, which has always been our strategy, broadband first,
20:19
broadband only to be able to bring 100 megabits per second to
20:24
a phone. Is an incredible thing.
20:27
So it's really, you know, I, I joke sometimes that, you know,
20:31
texting versus broadband, it's not apples and oranges.
20:34
It's apples and aircraft carriers, you know, these are
20:36
very, very, very different things, you know, not even a
20:38
little close. So, so it's really exciting and
20:43
it's it's a big thing to bring forward and we just got to
20:45
execute. So turning to the revenue
20:48
trajectory, you reiterated you know 2026 guidance of 150 to
20:53
$200 million with the first quarter coming in at you know
20:57
just shy of 15,000,000 and you describe the 2027 opportunity as
21:01
approaching 1 billion, so pretty significant ramp bridge that gap
21:06
for us. How much of the 2027 target is
21:08
underpinned by existing contracts and a minimum
21:11
commitments versus you know or more dependent on commercial
21:15
service activate activation and subscriber uptake?
21:20
All right, so there's a lot there.
21:21
We, we were built as a commercial service for the
21:25
commercial market, for the consumer market.
21:28
And that was our story for a long time.
21:29
About 3-4 years ago, we started talking about the US government
21:33
opportunity and being able to deploy the largest architecture
21:36
in space today, amidst the spending on the government side
21:40
and the Golden Dome project is just perfect timing.
21:43
I don't know what to say. And it's a great backdrop.
21:46
And so for us, we now have a commercial story, we have AUS
21:49
government story, both are great stories, both are going to feed
21:53
into our revenue opportunity in the near term.
21:56
I'd say in the next one to three years, you know, we don't have
21:59
better guidance than we expected to be about half and half, but
22:02
either one could dramatically outperform.
22:05
And so those are both great opportunities for us to pursue.
22:09
So what you've seen from us last year hitting the high end of our
22:13
revenue guidance and then this year putting new revenue
22:15
guidance in place, it's kind of like practice.
22:20
I would say, you know, it's not our service revenue, it's
22:22
getting going with 10 different use cases on the US government
22:25
side, really only three contracts of some size so far.
22:29
And on the on the commercial side, we're deploying network,
22:32
we're getting them to build the ground infrastructure that'll
22:34
feed their service and allow them to control this in their
22:36
market. And so it's kind of practice
22:38
revenue, but it's good practice. And we did hit the high end of
22:42
our guidance last year. We expect to do well and are
22:44
confident in our guidance this year.
22:46
I would say we kind of expect to grow quarterly sequentially into
22:51
that 150 to 200 million guidance during 2026 and that's all pre
22:55
commercial service revenue. And then in 2027, yeah, I think
23:00
again another big kind of 5050 opportunity across government
23:05
and commercial with opportunities for upside against
23:09
both. And and you mentioned how is
23:11
this underpinned by existing contracts.
23:13
So our our guidance for this year, more than half of what's
23:16
left is already contracted in the backlog and and the rest is
23:20
spoken for several times over by our our pipeline.
23:26
And then next year we have signed up a couple of taker pay
23:32
style long term minimum revenue commitments.
23:35
So we have a total of 1.2 billion of cumulative minimum
23:39
revenue commitments that will likely this is formed the vast a
23:43
very small portion of our overall revenue opportunity over
23:45
the next couple years, but still nonetheless shows that operators
23:50
are are are putting their their contractual commitments behind
23:53
us and as long as the network gets in orbit that revenue it
23:57
comes in as a minimum. Yeah.
24:00
And so on that you talked about again the potential upside from
24:02
the commercial service revenue. And I mean, does that contribute
24:05
meaningfully in 2026 or should we think about that more as you
24:09
know, upside case in 2027? In terms of that backlog I
24:14
quoted, yeah, well that's that's over the life of our contracts.
24:17
So we've we've signed 2 year agreements, 5 year agreements, 6
24:20
year agreements and and it's 110 year agreement.
24:23
So it's not back end loaded or anything like that.
24:25
It's kind of pro rata across those various terms and tenors,
24:31
but but you can think of, you know over $100 million
24:34
contribution in each year's out of the gate for sure.
24:39
Got it. And then on the on the
24:41
government side, yeah, again, definitely a bigger part of the
24:43
narrative than a few years ago. But and you've described UK use
24:48
cases spanning from technical, tactical communications, non
24:52
communications capabilities, golden domes, you have Halo
24:55
Europa with billions of annual revenue potential in aggregate.
25:01
So I guess frame for this audience I guess.
25:03
I guess where are you in the contracting cycle?
25:06
Are you still primarily in the development and testing phase or
25:11
are you approaching the inflection into programs of
25:13
record with the multi year recurring revenue?
25:16
So we're doing testing in orbit today with the satellites in
25:21
orbit for multiple government opportunities, revenue producing
25:26
opportunities with the US government.
25:28
The way to think about U.S. government opportunities, they
25:30
kind of go through a cycle where they have a phase one, phase
25:33
two, phase three contract. And then ultimately, you know,
25:36
the pot of gold is usually a program of record.
25:38
That's a 5 to 10 year thing with, you know, pretty sizable
25:43
revenue opportunity per year. And so that is what we're
25:46
chasing across. What was said about 10 different
25:48
use cases between comms and non communications?
25:52
Non communications for satellites like ours mean a lot
25:57
of things. But it, you know, one of those
25:59
things we mentioned on our call is radar.
26:01
And, and these are, you know, we can do things with a big
26:04
satellite they can't do with a small satellite.
26:06
That's the core of it. And these are the biggest phased
26:09
arrays ever deployed in low Earth orbit.
26:13
And so if you put up 100 or 200 of them, you can do a lot of
26:15
incredible things. And so our network is dual use,
26:18
which means our commercial satellites can also support
26:21
government applications. We also have the ability to
26:24
build modified satellites that have government use only.
26:29
Of course, that's the way the US government wants to go.
26:32
So we see a lot of opportunity. And of course the backdrop here
26:37
is the the the biggest spending on space since the 60's.
26:42
The backdrop is incredible. The Space Force budget just
26:45
doubled to about 70 billion is what's in front of Congress now.
26:48
There's a number of opportunities related to what we
26:52
do that are are very sizable. And you know for for Golden
26:57
Dome, there's a lot of pressure on how to get something out in
27:00
this administration that's a value for our country.
27:05
And to do that on any short timeline like that, you had to
27:08
start five years ago. And fortunately we did and.
27:13
So let's pivot to spectrum, which is foundational to the
27:17
long term value of the business. You have 45 megahertz of L band
27:20
in North America, 60 megahertz of S band priority rights
27:24
outside of North America layered on top of, you know, is it 1100
27:28
megahertz of MNO shared spectrum globally.
27:30
So I guess walk us through the activation timeline for your
27:33
controlled bands, what regulatory approvals remain
27:36
outstanding? What's the capital required to
27:38
bring these live commercially? Spectrum is a is a real
27:43
fascinating investment asset because you know, that's scarce
27:48
on the one hand and on the other hand, once you buy it, you have
27:51
to pay money to get bring it into use, right.
27:53
And that's the trouble a lot of people run into is building a
27:55
network is very expensive. If you want to activate a new
27:59
band in the United States, for instance, that could be 5 to $10
28:01
billion of ground equipment to put in place.
28:04
So for us the key to our strategy both picking up the L
28:07
band about a year and a half ago and then also pursuing the S
28:11
band is that we were building the satellites anyways.
28:13
So the marginal cost for us was was relatively low on the build
28:17
outside. And so that allowed us to move
28:19
fast with L band before the direct to device market got
28:25
eager to to to buy those bands for direct to device.
28:29
And we moved and we now have a long term agreement 80 year
28:32
lease to 45 megahertz in the United States, which is the
28:36
majority of the L band, which is one of the two frequencies you
28:39
can use for direct to device. And we have it in the most
28:43
valuable market in the world. So that's a huge anchor position
28:46
for us, very similar to the one that SpaceX went and acquired
28:51
from Echostar. And so for us it's about 1
28:54
getting the deal done, which we did two, our last thing is
28:57
really regulatory approval with the FCC.
28:59
And on CNBC today, Chairman Carr said, you know, an AT&T AST
29:04
already has their spectrum. So he referenced the L band that
29:06
that we have acquired and and that's in in his hands for
29:10
approval. And so we have to build
29:13
satellites, Ford of course and that's our core strategy what
29:16
where a company can do. And then we need to get into
29:19
phones. So these bands are in phones a
29:21
little bit right now, but 2027 is when it starts getting into
29:25
bit in the in the most phones in a big way, new phones and then
29:28
it's got to work itself into the market.
29:30
So that's a couple of year life cycle.
29:32
So we'll be deploying network in 2027 and beyond that'll be in
29:36
phones starting in 2027 and beyond and we'll have the
29:40
ability to pair that new spectrum band and new spectrum
29:45
access with the spectrum that we have from the operators.
29:48
And so our core strategy from the beginning of the company was
29:51
to partner with the operators and have a revenue share on
29:53
their spectrum because we definitely couldn't afford it
29:55
when we started. So, so that's how we do it.
29:58
And so today we have, you mentioned 1100 megahertz, that's
30:01
low band and mid band. We have most of those
30:02
frequencies on our satellite network.
30:04
We'll be able to use those with operators permission, of course,
30:07
our partners through a revenue share.
30:10
And then we'll be able to bring to bear our owned and controlled
30:13
frequencies over time to bring more spectrum to bear better
30:16
services, more subscribers and really increase the value of the
30:21
direct device service opportunity.
30:23
So quick follow up, do you think the JV announced by the big
30:27
three carriers in the US helps the the proliferation of devices
30:32
in the ecosystem in the USI? Think we're already on that
30:35
track, you know that is that is what the device manufacturers
30:39
want to enable the frequencies that their M&O partners want to
30:43
enable that'll sell more phones. So I think there's a lot of
30:45
momentum there, but but the JV is doing enables a lot of things
30:49
that we were already helping enabling like device
30:52
availability, spectrum pooling, which was the key rationale for
30:55
how we brought AT&T and Verizon together two years ago.
30:58
So I think on the margin, but I think we're already in a good
31:00
place there. And do you?
31:03
Should we and should investors expect ASTS to remain
31:08
opportunistic about acquiring additional spectrum assets,
31:11
whether it be L band, S band, otherwise?
31:14
So we really like our spectrum position.
31:16
We are very fortunate to to get our MSS spectrum when we did and
31:21
we're going to continue to pursue S band opportunistically
31:25
around the world with various countries where it makes sense.
31:29
L band is pretty heavily utilized around the world.
31:31
That's why it was so great to get the piece of it that's
31:34
unused in the United States and Canada.
31:37
In terms of S band, it's not really used around the world.
31:42
Europe has allocated it the the, the license is coming up.
31:47
It hasn't been well used. Our partner in Saudi Arabia
31:49
actually purchased it themselves and we we hope to enable that in
31:53
the near future. And so it's a country by country
31:55
thing. It's a regulatory thing.
31:57
We're going to, we're going to make our case market by market.
31:59
But for us, we love our position in spectrum, but more spectrum
32:02
is better, Spect is better, right?
32:04
And so we want to bring the best amount of services we can and
32:07
we'll be opportunistic. But our approach is primarily to
32:09
partner. You're not going to see any
32:14
expensive acquisitions by us. So you talked about European S
32:17
band, you have a partnership with Vodafone or joint venture
32:20
satellite Connect Europe, I mean update us, I mean where, where
32:23
are we in that process, any update?
32:26
Sure. So we, Vodafone's one of our big
32:29
biggest partners, early investors, they've invested 3
32:31
times. They held over a billion of
32:33
stock in US now and we have a five year mutual exclusivity
32:37
with them in Europe and Africa. And we formed a joint venture in
32:42
Europe to help us build out the ground infrastructure in a
32:45
pooled way that brings access to more operators, manages the
32:49
close borders, which is a unique thing in Europe versus the US or
32:52
other markets and also make ourselves available for spectrum
32:57
allocations. And so we formed the joint
32:59
venture about a year ago. It's been staffed up to about 20
33:03
folks. It's very much European
33:07
operated, European run. Let's go to your team and I sit
33:11
on the board as does two of us from AST and two of us 2 from
33:14
Vodafone. And it's a, it's a really good
33:17
story. It's a, it's a European operated
33:20
solution for getting directed advice.
33:22
And, and they've had great success just at Mobile World
33:26
Congress two months ago, they signed up about 10 partners that
33:30
they're developing. So I think it's it's been a
33:32
good, good strategy for us and we got a good team there.
33:36
Let's close with the balance sheet and path to profitability.
33:39
You ended the first quarter with approximately 3.5 billion in
33:41
cash. You said that you're fully
33:45
funded for over 100 satellites and no plans for additional
33:48
convertible debt. At the current spend rate, how
33:51
should investors think about the glide path to free cash flow
33:53
break even? And does that require, yeah,
33:56
does that require to get to the $1 billion in revenue in 2027 to
33:59
be substantially achieved or can you get there maybe a little
34:02
different revenue trajectory? So we haven't talked much about
34:05
our operating model, but it's a really nice operating model, the
34:07
financial model. So the idea of building a
34:10
constellation has been a dream really since the 90s.
34:13
You know, it's a, it's a dream that's only been successfully
34:15
executed on once, but if you get the scale with a product that's
34:18
desired and the model is quite attractive, so you build your
34:23
network, you can continue to invest in it and refresh it
34:25
every over 7 to 10 years. It becomes a maintenance CapEx
34:27
stream. It's very high margin because
34:30
all the money is upfront and CapEx.
34:32
So the the satellite industry when it's been functioning well
34:35
and had growth, you see margins in excess of 80% on the EBITDA
34:39
line for wholesale stuff like what we do and that's that's how
34:44
we expect this to play out. We've got a fixed cost base of
34:47
call it 300 to $400 million of OpEx a year.
34:51
And on top of that you, you bring in the revenue and you and
34:53
you support your maintenance CapEx.
34:54
So that billion dollar numbers in no way tied to a need for
34:59
free cash flow break even or anything like that.
35:01
We'll be operating free cash flow positive well before that.
35:05
It's all and it's all about building the structure of the
35:09
market in the right way so that you're capturing the value that
35:13
you're delivering to the consumer or the US government or
35:15
wherever the customer is and ultimately managing CapEx on a
35:18
growth basis. So this is a, you know, NPV
35:20
positive growth CapEx decisions that we can make in the future
35:23
and we'll make those with better insight when we get there.
35:26
But at the moment we see a really attractive financial
35:29
model informed by how we've built the business and we're on
35:33
the cost of bringing that revenue and and you know we'll
35:36
be operating free cash flow positive well before we reach a
35:38
billion in revenue. Great.
35:40
I think that's right on time. So great place to end it.
35:43
Thanks, Scott for joining us. Thank you, Sebastian.
35:54
Thanks for listening to the AST Space Mobile podcast.
35:57
If you enjoyed this episode and you'd like to help support the
36:00
podcast, please share it with others, post about it on social
36:04
media, or leave a rating and review.
36:06
To catch all the latest news about AST Space Mobile, make
36:10
sure to subscribe. Thanks again and I'll see you
36:13
next time. We're doing something very, very
36:18
big and I think with this technology we can really affect
36:21
billion lives. ASP Space globally is the only
36:24
company that has good technology to deliver cellular broadband
36:29
connectivity directly from space To do everyday smartphone.
36:33
People will just basically turn their phone and be seamless,
36:37
regardless of where you are. We don't want the user even to
36:39
know that it's connected by satellite.
36:42
Our role is to bring this into reality, always in partnership
36:46
with the animal. Listen, Waffles.