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AST SpaceMobile Q2 2024 Earnings Call · AST SpaceMobile Podcast

0:00
Good day and thank you for standing by.
0:01
Welcome to the ASP Space Mobile First Quarter 2024 Business
0:05
Update Call. Please be advised that today's
0:07
conference is being recorded. I would not like to hand the
0:09
conference over to you. Host today.
0:11
Scott Wisniewski, chief strategy officer of ASP Space Mobile.
0:15
Please go ahead. Thank.
0:16
You and good afternoon everyone. Let me refer you to slide two of
0:19
the presentation which contains our Safe Harbor disclaimer.
0:22
During today's call, we may make certain forward-looking
0:24
statements. These statements are based on
0:27
current expectations and assumptions and as a result are
0:29
subject to risks and uncertainties.
0:31
Many factors could cause actual events to differ materially from
0:34
the forward-looking statements on this call.
0:36
For more information about these risks and uncertainties, please
0:38
refer to the Risk Factors section of AFT Space Mobile's
0:41
annual report on 10K for the year that ended December 31st,
0:44
2023 with the Securities and Exchange Commission and other
0:48
documents filed by AFT Space Mobile with the SEC.
0:50
From time to time, also after our initial remarks, we will
0:54
begin the Q&A section with questions submitted by our
0:58
shareholders. Welcome everyone.
1:00
For those of you who may be new to our company in Mission, there
1:02
are over 5 billion mobile phones in use today around the world,
1:05
but many of us still experience gaps in coverage as we live,
1:08
work and travel. There are also still billions of
1:10
people without cellular broadband and who remain
1:13
unconnected. The global economy, the markets
1:15
we are pursuing are massive and the problem we are solving is
1:18
important and touches nearly all of us.
1:19
In this backdrop, AFC Space Mobile is building the first and
1:23
only global cellular broadband network in space to operate
1:26
directly with everyday mobile phones, supported by our
1:29
extensive IP and patent portfolio.
1:31
It is now my pleasure to pass it over to Chairman and CEO Abel
1:34
Pavilion. Send just called good day to
1:36
everyone. The hard work of the past few
1:38
years is culminating in a period of tremendous activity and
1:42
excitement for AFT space model. We have moved past a primary
1:45
focus on proving our technology, on funding our growth into the
1:50
next phase of executing our vision and operationalizing our
1:54
business. We are chief team from R&D to
1:57
full scale production and commercialization of our best
2:01
based cellular broadband network.
2:02
Our technology is proven, patented and validated.
2:06
Our commercial ecosystem is in place and growing.
2:09
We're funded to achieve our near term goals and reach initial
2:13
revenue. Our business is now accelerated.
2:15
Just last week our first five commercial satellite called
2:18
Bluebirds arrived in Cape Canaveral, FL after completing
2:23
final assembly at our manufacturing facilities in
2:25
Texas. The satellites are now
2:28
undergoing final preparation for integration with Falcon 9 launch
2:32
vehicle for a for a dedicated mission.
2:34
We have 7 day contracted orbital launch window in the first half
2:38
of September. Our current expectation is that
2:40
we will launch in the first half of September.
2:43
So this is an ultimately based on a variety of factors outside
2:46
our control including the weather conditions.
2:49
As the target date is finalized, we will we will communicate this
2:52
with the pool to put our first commercial silence into orbit.
2:56
Really it's a culmination of significant progress to the day.
2:59
I am incredibly proud of our team.
3:02
We have spent over 7 years and over 1 billion investment
3:05
dollars to get to this point along the way generating over
3:09
3400 patent and patent pending trains, seating the assembly,
3:14
testing and other logistics to ensure that our Blue Bird were
3:17
ready to transport to Florida and we're ready to launch.
3:20
It's a major milestone for our company and mission.
3:23
These Blue Birds will each be the largest communications array
3:28
ever to be deployed commercially into loaded orbit.
3:31
These are regular wide strong signal that can reach standard
3:34
smartphone directly to provide cellular broadband service and
3:38
all non communication government applications.
3:41
With these initial commercial satellites, we are targeting
3:43
nearly 100% geographical coverage for the continental
3:47
United States using premium 850 megahertz low band spectrum,
3:52
which offers superior signal penetration in the low band
3:56
spectrum range. Low band frequency travel longer
3:58
distances and penetrate differ into buildings and through
4:02
foliage compared to higher frequencies.
4:05
This first 5 salmon will provide non continuous cellular
4:08
broadband service nationwide across the United States.
4:12
After a few months of in orbit service activation, this initial
4:16
service for AT&T and Verizon data test user will start with
4:19
5600 sales across the country. This progress was made possible
4:24
in large part due to the continue and growing support of
4:27
our strategic partners. During the second quarter, we
4:30
secured another major strategic financing partner and customer
4:34
in Verizon to a top tier group that also include AT&T, but a
4:40
phone, Google, American Tower, Rakuten, Bell Canada and others.
4:44
This 100 million commitment from Verizon including 65 million of
4:47
commercial prepayments and 35 million convertible notes just a
4:52
few months after strategic financing with AT&T, Google and
4:55
Vodafone. It's another powerful validation
4:58
of our technology and our business model.
5:00
This investment closely follow the definitive of the commercial
5:04
agreement announced with AT&T in May Bringing on board two major
5:08
US mobile operators in the most valuable wireless market in the
5:11
world was a transformational, transformational commercial
5:15
milestone for us. During the last few months, we
5:17
shifted our manufacturing focus to increase block two production
5:22
incorporating the lesson learned from manufacturing of the first
5:25
five commercial satellites. We'll continue planning an
5:28
initial production for the 1st 17 Block 2 satellite to be built
5:32
in phases within the initial launch in Q1 of 2025.
5:36
These satellites when equipped with our ASIC will be
5:39
approximate 2400 square feet in size and are expected to support
5:44
up to tenfold improvement of processing bandwidth per
5:47
satellite compared to Block 1 satellite that we are launching.
5:50
This September. We expect to start using our
5:53
ASIC on our six Block 2 satellite and we can use
5:57
existing PA configuration for our loan and is required along
6:00
alongside this activity, we have no lost sight of our technology
6:04
road map. We can now report that we have
6:06
completed the ASIC chip tape out with the SNC.
6:10
This technology is the cornerstone of our Bluebird
6:13
block two programs. The FT-5000 ASIC is a novel
6:17
constant low power architecture developed enable up to a tenfold
6:20
improvement in processing bandwidth on each satellite.
6:24
Unlock an opportunity for seamless space based cellular
6:27
broadband services worldwide with the three bits per Hertz
6:30
that we have demonstrated using Blue Walker 3 on our planet.
6:33
Commercial satellite capacity of up to 40 megahertz per beam
6:37
didn't translate into performance of up to 120 megabit
6:40
peak data rates. The completion of the tape out
6:43
is a milestone that marked the culmination of five years of
6:46
dedicated research, development and engineering expertise with
6:50
approximately 45,000,000 all developed.
6:52
In summary, we want to change the world.
6:55
We're seeking to connect the billions of people who are not
6:58
connected, improving public safety, enabling global commerce
7:02
and for the average user who can see fewer drop calls,
7:06
frustrating that zones and missing connections, they have
7:10
not been easy. We enter a new phase for our
7:14
company and deeply proud of the team we had assembled and be
7:19
confident in the plan ahead of us.
7:21
I will now pass to Scott to provide more details on our
7:24
commercial and regulatory process.
7:26
Thank you, Adele. As we accelerate the
7:29
commercialization of our network, I wanted to spend a few
7:31
moments to go through the commercial and regulatory
7:33
progress during the quarter including some early winds for
7:36
the first five commercial satellites.
7:38
Earlier this month, we received an initial license for space
7:41
based operations in the US from the SEC.
7:44
This initial license authorizes AFC Space Mobile to operate
7:47
using VS and UHF frequencies to support our gateway feeder link
7:52
and telemetry tracking control operations for the first five
7:55
commercial Bluebird satellites. This license will serve as our
7:58
primary license for operations in the US over the life of the
8:01
Constellation. So it was a big deal for the
8:03
company and our commercialization both in the US
8:07
and at the Blueprint globally. Going forward, we continue to
8:10
work with the FCC as well as our partners AT&T and Verizon to
8:14
apply for upgrades and modifications to this license to
8:17
facilitate full scale commercial operations on wireless
8:20
frequencies and to expand the license to support our
8:22
operations over time. This FCC authorization followed
8:26
the March 2024 update of our Constellation filings with the
8:29
International Telecommunication Union and related filings with
8:32
the FCC that placed our planned commercial satellites under the
8:36
jurisdiction of the United States.
8:37
This initiative represented a closer strategic alignment of
8:40
our network build out and future network operations with the
8:43
United States and it's a key piece of our overall regulatory
8:46
strategy. In addition to the progress of
8:47
Bell reported with AT&T and Verizon, we continue to believe
8:50
our patented technology including our large phase array
8:54
antenna technology in space create significant opportunities
8:57
for new mission critical capabilities in the government
9:00
sector. We are moving forward with these
9:02
dual use capabilities on our constellation and expect to
9:05
generate revenue from both commercial and government
9:08
applications. To this effect, earlier this
9:10
year we announced that ASP States Mobile had been awarded a
9:13
new contract from a prime contractor working with the
9:15
United States government. This initial phase contract
9:18
which covers the use of Blue Walker 3 as well as the first
9:21
five commercial satellites is well underway and during the
9:24
second quarter we completed successful in orbit and ground
9:27
tests resulting in completed contractual milestones and top
9:31
line revenue. This government sector strategy
9:33
continues to show additional early signs of strength with two
9:37
new US government contract awards in recent months to one
9:40
of our prime contractors. Like the February contract,
9:43
these awards represent relatively small revenue by
9:45
themselves but seek to evaluate potential for full scale multi
9:49
year contracted services in the future.
9:51
As is customary, contracts for these two new opportunities are
9:54
still being finalized and we will provide detail if and when
9:57
it becomes available. Our primary commercialization
10:00
strategy is to position for significant revenue
10:02
opportunities as we scale the constellation, but its initial
10:05
progress is encouraging and we believe the progress represents
10:08
an upgraded outlook for additional and larger signed
10:12
contract awards over time. With that, I will now pass it to
10:15
Andy Johnson, our new Chief Financial Officer to take you
10:18
through the financial. Update.
10:20
Thanks, Scott and good afternoon everyone.
10:22
I joined AST this past May because I believe wholeheartedly
10:25
in the company's mission to close the digital divide by
10:29
connecting Young Connected and was convinced that this was a
10:32
once in a lifetime opportunity after visiting the manufacturing
10:36
facilities in Midland, Texas. There I saw first hand the
10:39
sophistication of the company's technology and most importantly
10:43
the incredible commitment of our team led by a Bell and producing
10:46
the world's first space based cellular broadband service
10:51
satellites. This is a Seminole moment in the
10:53
history of AST Space Mobile and I want to personally thank all
10:57
of my teammates for their dedication to our mission and
11:00
delivering our first five commercial Bluebird satellites
11:03
for launch in just a few short weeks.
11:06
I also want to thank Shawn Wallace, our former CFO, who
11:09
continues to consult for us for his leadership, service to the
11:13
company and partnership in making my transition seamless.
11:17
It's a fantastic time to be a part of the AST Space Mobile
11:20
ecosystem, which includes our shareholders are talented
11:23
employees across the globe and our mobile network operator
11:27
partners. We are at the forefront of our
11:29
commercial constellation deployment and I deeply
11:32
appreciate those of you who are on this life changing journey
11:35
with us. Let's review the key operating
11:38
metrics for the second quarter that are displayed on slide 10.
11:41
On the first chart we see for the second quarter of 2024 we
11:45
had non GAAP adjusted cash operating expenses of $34.6
11:50
million versus 31.1 million in the first quarter non GAAP
11:54
adjusted operating expenses. Excludes.
11:57
Certain non cash operating costs including depreciation and
12:01
amortization and stock based compensation.
12:04
These expenses are up slightly from the first quarter due to
12:07
final block one expenses as we neared the finish line of
12:10
producing 5 of the largest satellites ever to be deployed
12:14
in low Earth orbit, including required travel expenses to the
12:18
production site in Texas. Expedited hiring of engineering
12:22
talent in connection with our Block 2 mechanical work as we
12:25
ramp up production of our next satellites and the impact of an
12:29
approximately 11 time GNA expense reversal in Q1 that
12:35
affects the quarter over quarter comparison.
12:37
Turning towards the second chart on this page, our capital
12:40
expenditures for the second quarter were 21.2 million versus
12:44
26.6 million for the first quarter.
12:47
The figure was made-up of capitalized direct materials and
12:50
labor for Block 1 and Block 2 satellites and additional
12:54
facility and production equipment for our 185,000 1000
12:58
square foot assembly, integration and test facilities
13:02
in Midland. As expected, capital
13:04
expenditures. Trended down in.
13:06
Connection with the completion of the Block 1 satellites ahead
13:10
of ramping Block Two production by the end of the second
13:13
quarter, we incurred and paid all amounts for the five Block 1
13:16
satellites. Total spend for those satellites
13:19
did not materially exceed our prior estimate of 115,000,000.
13:24
The design, integration, testing and launch of satellites and
13:27
related ground infrastructure is capital intensive.
13:30
We do expect our experience completing Block One will allow
13:34
us to leverage our learnings to improve and optimize
13:37
manufacturing costs for our Block 2 satellites.
13:41
And on the final chart on this slide, we ended the second
13:43
quarter with $287.6 million in cash, up from 212.4 million at
13:51
the end of the first quarter. This increase includes 55
13:54
million of previously announced investment from our valued M&O
13:58
partner Verizon, inclusive of a $20 million prepayment for
14:02
future cellular broadband service.
14:05
Our strength and cash position at.
14:06
The end of Q. Two also reflects our
14:09
disciplined and effective use of our now completed at the market
14:13
or ATM equity facility from which we raised approximately 80
14:17
million dollars during the quarter at increasing market
14:21
prices for our common stock. As of the end of July, we
14:24
completed the two year use of the existing ATM facility and
14:29
the existing common stock purchase facility with $164
14:34
million of total raise to support operating expenses and
14:38
preserve our capital for building the constellation.
14:41
During this two year period, we were prudent in our timing and
14:44
use of these facilities consuming less than 75% of the
14:48
combined facilities capacity and raising capital at more than a
14:52
50% premium to our stocks volume weighted average price.
14:57
We continue to consider using the balance of our senior credit
15:00
facility which has a gross amount available to us a $51.5
15:04
million today. However, our efforts around
15:07
raising strategic capital including non dilutive
15:10
prepayments from our M&L partners as we ready for service
15:13
are taking precedence over the senior credit facility, which in
15:17
turn continues to reduce negative carry we would have
15:20
incurred if we had access to facility earlier.
15:23
Our ability to access this facility remains subject to
15:26
certain conditions and approvals.
15:28
I'd like to reiterate that we currently have no plans for the
15:31
remainder of this year to pursue an underwritten public equity
15:35
offering. We previously provided guidance
15:37
on our expected operating expense levels.
15:40
We have been supporting the development and production
15:42
efforts of our two critical satellite designs.
15:45
Block 1 and Block 2 are ASIC chip design and the five Block 1
15:49
satellites. The completion of this Block one
15:52
work and a significant portion of the Block 2 development and
15:55
ASIC tape out completion is expected to result in a
15:58
reduction in our adjusted operating expenses and capital
16:01
expenditures in future periods. Consistent with the first and
16:05
second quarters of 2024, we continue to project that are
16:08
adjusted cash operating expenses for the remainder of the year
16:12
will come in within a range of 30 to 35, $1,000,000 per
16:16
quarter. Based on business conditions and
16:18
speed of Constellation deployment.
16:20
And as the block to design approaches completion and our
16:23
focus turns to scale production, we believe efforts to optimize
16:27
our OpEx will result in the run rate at the low end of that
16:31
range. These figures will vary
16:32
depending upon manufacturing activity in each period.
16:35
This guidance does not include the expected costs of
16:38
approximately $15 million related to the tape out and
16:43
initial production of our ASIC Chin.
16:45
These ASIC related costs will be recognized as an R&D expense and
16:49
subsequent quarters in 2024 as milestones are completed, timing
16:55
of the changes in our adjusted operating expenditures and
16:58
capital expenditures as I've just described.
17:00
Could be. Delayed or may not be really
17:02
realized due to a variety of factors.
17:05
Finally, we continue to work on developing A financing package
17:08
from export credit agencies to source cost effective long term
17:12
debt funding of large projects. We will keep you.
17:15
Abreast of our progress, it's been a fantastic first 90 days.
17:19
I look forward in the future to getting know many of you and
17:22
working hard to drive value for our shareholders as we position
17:25
AST for full scale commercial operations.
17:29
And with that, this completes the presentation component of
17:31
our earnings call and I pass it back to Scott.
17:34
Thank you, Andy. Before we go to the queue of
17:36
analyst questions, we'd like to address a few of the questions
17:39
submitted by our investors. Operator, could you please start
17:42
us off with the first question? Tanner asks.
17:44
Will you wait until the 1st BB block 2 is launched and unfolded
17:48
before working on additional? BBS, Thanks, Anna for the
17:51
question. No, the answer is no.
17:52
We're already working on on the next build of the subsequent
17:58
satellites. We're actually in the process of
18:00
building parts for the next 17 satellites.
18:02
The main mechanical system is yeah, changes an upgrade, but
18:07
it's basically the same on the Walker 3 and Block 1.
18:10
We will not wait for that deployment to continue building
18:14
when the process of building actually started a few months
18:17
back. Our next our next satellites
18:22
built, you know with the next satellite we will have a
18:25
satellite that will be equipped with the FPGA and a satellite
18:29
that will be equipped with the A sixty.
18:32
The first launch of four will be based on FPGA and the subsequent
18:37
satellites will be locked to 1st 4 block block to and the
18:41
subsequent of after that would be all based on X and AC, which
18:44
is a tenfold improvement compared to the FDA.
18:48
You know, we're fully focused on in, in, in, in building our next
18:51
batch of satellites and to get in on the air from the post
18:54
which. Matt asked, you mentioned that
18:56
full US coverage is the first priority.
18:59
What regions will you look to fulfill next and in what time
19:02
frame? Hey, man, thank you for the
19:03
question. Yes, I work.
19:04
Obviously, the US market is the largest, a more developed
19:10
wireless market. In this market we have AT&T and
19:13
Verizon and get who will be prioritizing the deployment for
19:16
the US market. Then we will prioritize
19:18
investors and Mnos that are paying prepaid revenue that
19:22
include Vodafone, markets that include Rakuten in Japan and
19:27
then new Mnos that are going to be prepaid.
19:30
For initialization of the service as a priority, we are
19:33
launching on a 50° of inclination.
19:35
So basically, we can cover all the latitudes from 59° N to 59°
19:40
S So we have the benefit of being able to select the regions
19:44
that we prioritize according to prepayments priorities set by
19:49
the new investors. Cody asked what concerns that
19:52
the company have, being that we are currently in a solar
19:55
maximum, How susceptible are your satellites to solar storms?
19:59
Thank you, Cody, for the question.
20:00
Well, first of all, before I answer the question, let me
20:02
remind everybody about how we design these satellites.
20:05
Well, these are like, you know, they're big.
20:07
They're built out of identical modules that we call microns
20:11
that make the satellite system very resilient, and it's built
20:15
out of a distributed system. That no one single part can make
20:19
the satellite to fail and that make it very resilient to the
20:23
space weather, including solar storms and other conditions.
20:26
We had all the data that we had collected over 2 years operating
20:29
Blue Walker Three. We really of course we have
20:33
needed a time to to react to, to solar activities, but never
20:38
having a failure caused by it. So, so we are very confident on
20:42
on our satellite resilience is where need to be as it relate to
20:46
weather conditions. Tanner asked after the first BB
20:49
Block 2 how many at a time will be launched.
20:52
OK. Well we have decided thank you
20:54
Tanner for the question. But we have decided the the the
20:57
the system to be launched agnostic.
21:00
So we basically. And below our.
21:03
Our profile. That we're able to support
21:06
basically every large or medium launch service provider launch
21:11
systems. And depending on the size of the
21:13
launch, I mean on, on block one, we're launching 5 satellites in,
21:17
in, in a Falcon 9. And depending on the launch
21:20
configuration and the launch vehicle, it will be any any
21:24
anywhere between 4 per launch for the new larger block tools
21:29
or 8 per launch depending on the launch papers.
21:32
And with that, I'd like to thank our shareholders for submitting
21:34
these questions. Operator, let's open the call to
21:37
analyst questions. Now, thank you.
21:38
We will now be conducting a question and answer session.
21:41
If you would like to ask the question, please press *1 on
21:44
your telephone keypad. A confirmation tone will
21:46
indicate a line is in the question queue.
21:48
You may press * to if you want to remove yourself from the
21:51
queue. For participants using speaker
21:53
equipment, it may be necessary to pick up your handset before
21:56
pressing the star key. One moment please as we pull for
21:59
question. And our first question comes
22:01
from the line of Griffin Boss with B Riley Securities.
22:04
Please proceed with your question.
22:05
Hi, good afternoon. Thanks for taking my questions.
22:08
So first for me, the 17 satellites under construction is
22:12
certainly more than what we expected.
22:15
How would you characterize your current production capacity?
22:19
I know in the past you've discussed expectations to reach
22:22
something I think equivalent to 6 satellite per month cadence.
22:26
Have you? Have you?
22:27
Reached that are you are you tracking better?
22:29
Any any more color would be helpful.
22:30
Yeah. I mean when we, when we say 17
22:33
satellites that referred to the system that we are producing,
22:38
they don't need to be all produced at the same time.
22:41
So we actually time them. So we start with the long lead
22:44
items, we start them first. The parts that take more time to
22:48
get out of this factory, they are being produced for, for, for
22:52
17 units for that. We buy parts in advance.
22:55
We, we start manufacturing them way in advance and as we need
22:59
it. So we, we, we, we keep ordering
23:02
the, the, the, the different parts for, for the system.
23:05
Yeah, we're ramping up. We we are, we are accelerating
23:08
our producer production cadence going through the fight first
23:12
commercial that we're launching now in September has helped us
23:15
to to expand on our production capacity.
23:19
Also going forward we have work on vertically integrating around
23:26
95% of the systems. So we either control the IP
23:30
manufactured by ourselves and control the manufacturing
23:33
process for around 95% of the all these satellites are are on
23:37
build going forward. Great.
23:38
Thanks of all for that color. I appreciate it.
23:40
And and in terms of the initial Block 2 satellite launch, are
23:44
you still tracking for the late 4 Q early 2025 kind of launch
23:48
window there? Are there any delays or or
23:51
issues you're seeing with the with the launch provider?
23:53
No. We we're still tracking for for
23:55
Q12025. Great.
23:57
Great. Glad to hear it.
23:58
And then, so Scott, there was sort of a informal interview
24:02
with you recently on a financial blog where you started some ARPU
24:05
assumptions for the USI. I can't recall hearing the
24:08
company formally mentioned potential ARPU in the past.
24:11
So I would love it if, if there are any assumptions or
24:14
expectations for ARPU you can share today, especially now that
24:17
you've, you know, got 2 definitive agreements under your
24:19
belt. Hey, Griffin, how you doing?
24:21
No, we've been making a lot of progress with commercial
24:23
agreements and alongside that been advancing or go to market
24:26
strategies as you would expect. And we don't have any pricing or
24:30
go to market strategies to report at this time.
24:31
And I think that article was misquoted, but you know, we're
24:34
very excited about the revenue share model that we've been been
24:38
pushing for a long time and we're very excited about the
24:41
adoption rates and, and and the ability to command good wallet
24:45
on these service. So no, no pricing guidance at
24:48
this time, but I would say the go to market planning has has
24:51
has definitely accelerated. Okay, got it.
24:55
Understood. Thanks Scott.
24:56
And last for me very quickly, I'll pass it off.
24:58
I just want to confirm that this new contract liabilities line
25:01
out and we're seeing in the statement of cash flows, is that
25:04
reflect reflecting the the Verizon revenue commitment or is
25:07
that something else? This is this is Andy Griffin.
25:10
I do think it's. It's the.
25:12
Revenue commitments against the the prepayments and so forth.
25:16
So none of that's none of that's revenue at this point yet until
25:19
the services are are initiated. Got it.
25:21
OK. Thanks, Andy, and welcome to the
25:23
company and thanks for taking my questions everyone.
25:25
Thank you. Our next questions come from the
25:27
line of Benjamin Soft with Deutsche Bank.
25:29
Please proceed with your question.
25:31
Yeah. Hey, guys.
25:32
Thanks for taking the question. Cladding quarter with a lot of
25:35
interesting development. I was wondering, now that the
25:38
satellites are on site in Florida, can you walk us through
25:41
the timeline and key milestones between launching in early
25:45
September until you get to commercial service?
25:47
Yeah. We, we actually hi Ben, how are
25:49
you? So we actually indicate now we
25:52
were on final preparation for launch.
25:58
The the plan is to launch early September, the first half of
26:01
September, we anticipate few months to basically activate
26:06
service on those perfect satellites.
26:09
We have two type of users already booked on them.
26:12
One is Gorman user and then we have our M and OS.
26:20
We are prioritizing US Vodafone and our investors and people
26:25
that have an M and OS are paying or are going to prepay for
26:29
services. So in demo timeline is we
26:31
launched few months to activate services and then we we already
26:36
preparing and have prepared the all the ground infrastructure to
26:39
start connecting to to the spacecraft.
26:42
So we will, we will have some early usage immediately after
26:46
for the government in parallel with the with the MNLS.
26:49
OK, great. And then just going back to the
26:52
the 17 Block 2 satellites, do you have any updated thoughts on
26:55
the cost per satellite and the timing to launch?
26:58
Those yeah, we we are maintaining our guidance on
27:00
cost. Actually we continue to to look
27:03
for ways to continue to improve our cost basis as we are getting
27:08
to close to 95% vertically integration, but the guidance
27:11
per satellite remain the same. And as I said, we're starting a
27:15
launch campaign starting in Q1 and and then following up with
27:20
with additional launches. These satellites are ready and
27:24
the and the launches are available.
27:27
OK, great. Thanks guys.
27:28
Thank you. Our next question comes from the
27:30
line of Chris Scholl with UBS. Please proceed with your
27:34
question. Great.
27:35
Thank you. We've seen a number of
27:37
regulatory milestones here in recent months.
27:39
Can you help us think through your remaining approval process
27:41
here in the US and the likely timeline for that?
27:44
And I think there was general optimism previously that other
27:47
countries could follow suit with similar rulemaking to the US.
27:50
Have you seen any evidence of that?
27:52
Today. Hey, Chris, it's Scott here.
27:54
Yeah. So clearly we're we're happy
27:56
with the progress this year on the regulatory front as we
27:59
mentioned in our remarks and and the FCC does truly play a
28:03
leadership role globally with other countries.
28:05
So in our initial markets, we're working with our close partners
28:09
on moving all the regulatory processes forward.
28:11
But you know, we've been relatively pleased with how
28:14
that's progressed on with no show stoppers really.
28:17
You know, we really do it as a process that we go through
28:19
diligently and and that the FCC has demonstrated a lot of
28:22
leadership this year with developing new rules for
28:24
supplemental coverage from space and things like that.
28:27
So for us, I think initial markets are trending positively
28:31
in the US. Next milestones to look for
28:33
there'll be there'll be a lot of filings going forward.
28:36
I think you know part of commercial service is just
28:38
there's there's a lot of regular filings that come.
28:40
So there'll be filings about gateways on the ground, there'll
28:43
be filings about test campaigns on when we first start getting
28:47
Block 1 going. And then that the big one is SES
28:50
rights in the US with the FCC. So that is that's something that
28:54
will be they'll start seeing filings on that with us and with
28:58
our two partners in the US. OK, great.
28:59
And if I can just fit in one more, I think you mentioned no
29:02
public equity offering this year.
29:04
But as you look toward Block 2 and beyond, can you just help us
29:07
think through the timing of additional funding requirements
29:09
and how do you think about the trade-offs for different capital
29:12
sources and going forward? Thank you.
29:14
Sure this is. Andy, Chris, thanks for the the
29:17
question. So as we noted, I think our
29:20
priority right now is to continue our current operating
29:23
model of working on prepayment, our relationships with our M&O
29:27
partners. That's been a very effective way
29:30
to raise required capital and we have a number of MNL partners
29:35
that we're making progress with and and in that respect so non
29:39
dilutive. Approach.
29:40
Is, is, is sort of how we're viewing our near term
29:43
opportunity. We also have.
29:45
In that same vein, we have the opportunity to realize certain
29:49
milestones in connection with the launch with respect to our
29:52
existing MNL partners among Vodafone and AT&T and Verizon,
29:57
which could be meaningful capital.
29:58
And we'll continue to. Analyze what's available to us.
30:01
We're, we're very cognizant of different capital structures,
30:04
debt, equity opportunities, but we wanted to reiterate the fact
30:09
that we are focused on being good custodians and weighing the
30:14
capital needs that are inherent to a satellite business that's
30:18
as capital intensive as we are with the fact that our
30:21
shareholders expect us to be responsible as it relates to
30:24
dilution. So I I.
30:26
Reiterated. Our point from last quarter that
30:28
we have no current plans to do a public security equities
30:32
offering and that's our plan for the end of 24.
30:34
And that we think we have a lot of opportunity to continue to
30:38
make progress on cash as we optimize some of our expenses
30:42
and turn toward a real focus on Block 2 for the remaining four
30:47
or five months of the year. Great.
30:48
Thank you very much. Thank you.
30:50
Our next question comes from the line of Chris Quilty with
30:53
Quilty. Analytics.
30:54
Please proceed with your question.
30:56
Thank you. So I noted that in the press
30:59
release you mentioned that there is an outlook for larger size
31:04
government contract awards. I mean, are we talking kind of
31:07
like zippers Phase 3 or some OTAs or you know budget line
31:13
item in terms of the types of programs that you you might be
31:18
able to participate? In hey, Chris, you got here, I
31:21
think all of the above are on the table, Chris over time,
31:24
right? The contracts that that we
31:27
announced that earlier in the year and then the awards we
31:29
referenced on this call, these are all like I said, early
31:32
opportunities, small revenue kind of the the silver or phase
31:36
one type of stuff that you referred to.
31:38
But as you know, the intent of programs like that is, is not
31:43
into a science project, but rather to build out a
31:45
capability. And so that's that's what we
31:47
were referring to in our remarks that initial tests are going
31:50
well. Other initial contracts awards
31:53
have been made through our prime contractor partners and and the
31:57
outlook for those has improved. Gotcha.
31:59
And mentioning your prime contractors, you know some of
32:03
those are involved in the P Leo contract.
32:06
Is it fair to assume that that that you know, could be a
32:09
potential vehicle for funding or.
32:12
We don't want to comment on specific, specific programs at
32:16
this time, Chris. Also just back to the ASIC, I
32:19
mean, you know, is it fair to assume that the ASIC production
32:23
or you know, delivery into production is sort of the gating
32:27
factor for, you know, scaling up to the full block to satellite?
32:32
No degrees. I mean the the the size of the
32:35
satellite, the 2400 square feet, the largest size for block
32:40
tools, it's independent if they are equipped with FPEA or ASIC.
32:44
We have completed the ASIC FPA tape out.
32:51
The first launches will be still on an FPGA a configuration we
32:56
can, we can keep launching on FPGA for as long as it's needed.
33:00
So there's no upper requisite for for launches.
33:02
But of course we we want to incorporate the asicus that is
33:06
A10 time increase in capacity per satellite.
33:09
We're very happy to conclude the the tape out.
33:12
We, we, we received the the first die several weeks back and
33:16
we're cooperating into our micro design.
33:19
We continue to build the next batch of satellites.
33:24
Great. Thanks for all the details.
33:26
Thank you. At this time, I'm showing no
33:28
further questions. I would like to turn the call
33:30
back over to management for closing.
33:32
Remarks, Thank you operator. You know, we're building a space
33:35
based cellular broadband network design for the use of the phone
33:38
in your pocket today and other government applications.
33:41
How we want to thank all of our shareholders and research
33:44
analysts for joining the call and everyone's continued strong
33:46
support of our mission and we look forward to the upcoming
33:50
launch. Thank you.
33:51
And this concludes today's conference and you may
33:52
disconnect your lines at this time.
33:54
Thank you for your participation.