Latest / AST SpaceMobile Podcast / AST SpaceMobile Q4 2025 Earnings Call

Transcript

AST SpaceMobile Q4 2025 Earnings Call · AST SpaceMobile Podcast

0:00
Good day and thank you for standing by.
0:02
Welcome to AST Space Mobile's Fourth Quarter 2025 Business
0:05
Update. Please be advised that today's
0:08
call is being recorded. I will now turn the conference
0:11
over to Max Kolberg, Investor Relations Manager of AST Space
0:15
Mobile. Thank you.
0:16
You may begin. Thank you, and good afternoon,
0:19
everyone. Today I'm also joined by
0:21
Chairman and CEO of Bell Avalon, President Scott Wisniewski and
0:25
CFO and Chief Legal Officer, Andy Johnson.
0:28
Let me refer you to slide two of the presentation, which contains
0:32
our Safe Harbor disclaimer. During today's call, we may make
0:35
certain forward-looking statements.
0:37
These statements are based on current expectations and
0:39
assumptions and as a result are subject to risks and
0:42
uncertainties. Many factors could cause actual
0:45
events to differ materially from the forward-looking statements
0:48
on this call. For more information about these
0:50
risks and uncertainties, please refer to the Risk Factors
0:53
section of AST Space Mobile's Annual Report on Form 10K for
0:58
the year ended December 31, 2025 with the Securities and Exchange
1:02
Commission and other documents filed by AST Space Mobile with
1:06
the SEC from time to time. Also after our initial remarks,
1:10
we will be starting our Q&A section with questions submitted
1:13
in advance by our shareholders. For those of you who may be new
1:18
to our company in Mission, there are nearly 6 billion mobile
1:21
phones in use today around the world, but many of us still
1:23
experience gaps in coverage as we live, work and travel.
1:26
Additionally, there are billions of people without cellular
1:28
broadband and who remain unconnected to the global
1:31
economy. The markets we are pursuing at
1:33
AST Space Mobile are massive and the problem we are solving is
1:37
important and touches nearly all of us.
1:40
In this backdrop, AST Space Mobile is building the first and
1:43
only global cellular broadband network in space to operate
1:46
directly with everyday unmodified mobile devices
1:50
supported by our extensive IP and patent portfolio.
1:54
It is now my pleasure to pass this over to Chairman and CEO,
1:57
Abel Avalon, who will go through our activities since our last
2:00
public update. Thank you, Scott.
2:04
For the first time in 2025, ASTP Mobile became a revenue
2:08
generating business as it significantly advance all key
2:11
aspects of our operations including commercial,
2:14
government, manufacturing, spectrum rights, IP portfolio
2:18
and capital position. The combination of these efforts
2:22
resulted in this successful launch and unfolding of our next
2:26
generation Bluebird satellite. Bluebird 6, the largest ever
2:30
commercial communication array deployed load at orbit to enable
2:34
the first and only global space server broadband network for
2:37
government and commercial customers.
2:41
On the financial front, during 2025 we raised over 3.5 billion
2:46
in capital and reported revenue of over 70 million for the full
2:50
year and sign over 1 billion of minimum committed revenue.
2:56
Operationally, we plan to ramp our solid manufacturing efforts
3:00
and launch cadence this year. While we're rapidly accelerating
3:04
our government and commercial businesses, we entered 2026 with
3:09
a strong momentum and clear vision and we LED the space
3:14
based robot industry, a market that we invented. 2026 will be
3:19
the year we scale our space based direct to device
3:22
constellation from the initial commercial activation to start a
3:26
commercial service with mobile network operator partners in key
3:29
markets like United States, Europe, Japan, Saudi Arabia and
3:34
other key strategic markets like the US government.
3:38
In just over one year since the orbital launch of our first five
3:43
Blog One Bluebird satellites, we develop our Blog 2 Bluebird
3:47
program, which is roughly 3 1/2 times larger and 10 times the
3:54
capacity of Bluebird 1 to 5, breaking our previous record on
3:59
both size and capabilities. And then scale test launch and
4:05
successfully unfolded Bluebird 6, our next generation satellite
4:09
of approximately 2400 square feet.
4:13
Bluebird 7 identical to to Bluebird 6 is encapsulated and
4:18
ready to launch within the next New Glen launch vehicle at Cape
4:23
Canaveral and is awaiting orbital launch which is expected
4:28
in March. Our upcoming launch advances our
4:32
deployment goals of aboard New Glen with feature a 7M fairing
4:38
enabling twice the payload volume of the 5M class
4:42
commercial launch vehicles to support up to 8 of our largest
4:47
ever blog tube Bluebird satellites with respect to fully
4:50
utilized new gland favoring capacity.
4:53
As we progress through our orbital launch plans, we are
4:57
especially excited to share this milestone with many of you who
5:01
we hope will join us in Florida during our next launch.
5:06
Looking ahead, we're expecting 2026 to be very active year,
5:11
particular as we progress into second-half.
5:14
We remain on track to achieve our target of deploying 45 to 60
5:19
satellites into loaded orbit by the end of this year.
5:23
We current expectations closer to 60 satellites ready to chip
5:28
and 45 satellites in orbit. We continue to expect launches
5:33
planned every one to two months on average starting with our
5:37
first new Glen launch expected in March.
5:41
The new Glen launch vehicle is completing final readiness for
5:46
our fully encapsulated satellite, which was handed off
5:51
on February 18. Importantly, this launch will be
5:55
the first new Glen launch to use a previously flown first stage.
6:01
We support our launch cadence during 2026 and we expect the
6:05
new Glens booster to be reused every 30 days or less after our
6:11
oncoming launch. Our launch plans include a total
6:14
of 12 additional contracted launches across several launch
6:18
vehicles. Lastly, we're also recently
6:21
signed an additional agreement to integrate our satellite with
6:25
a new heavy launch vehicle to be on a standby indoor manifest.
6:31
We're laser focused on working tirelessly on delivering our
6:35
Micron face arrays and full satellite production goals.
6:39
On the manufacturing front, we continue to ramp our operations.
6:44
We exited 2025 having reached a production capacity to support
6:48
up to six satellites worth of Micron and face array per month
6:53
and we expect to achieve a a testing assembly and integration
6:57
cadence of 6 satellites per month in the first half of 2026.
7:02
Bluebird 8 to 29 are in various states of production and we are
7:07
scheduled to complete assembly of 40 satellites equivalent of
7:11
Micron by the first half of 2026, bringing us to Bluebird
7:15
46. A detailed cadence of our 25 and
7:19
26 deployment plan is shown in the company quarterly
7:23
presentation found on our IR website.
7:26
After Bluebird 7, our satellite will support a stackable
7:30
configuration of 346 and 8 satellites per launch, which
7:36
allow us to meet our 2026 deployment goals.
7:40
Additionally, we anticipate our novel AC chip will be integrated
7:44
into our Blog 2 Bluebird satellite during the first half
7:47
of 2026 to support 10 gigahertz of processing bandwidth per
7:52
satellite, which enable us to exceed the capabilities of up to
7:57
120 megabits per second on our in orbit Blog 1 Bluebird
8:03
satellites. These data rates are high enough
8:07
to achieve the native cellular capabilities that consumers now
8:10
respect everywhere from areas no served or no served good enough
8:16
by terrestrial connectivity. Another key enabler is producing
8:21
the largest ever commercial communications array at a scale
8:24
is our 95% vertical integrated manufacturing strategy.
8:28
Over the past several months, we had expanded our manufacturing
8:32
site both in Midland, Texas and Homestead, FL, including
8:36
acquiring a foresight in Midland for dedicated micro production,
8:40
the building block of our satellites.
8:42
We will soon be over half a million square feet of
8:47
manufacturing and operational space globally, providing us
8:50
with greater manufacturing and work capabilities with a tighter
8:54
control over the manufacturing process from end to end.
8:57
This rigorous effort strengths, but our skilled workforce
9:02
enabled us to proactively manage nearly every step in the
9:06
process, including securing lonely materials well in advance
9:10
of satellite assembly while keeping our materials and
9:13
components cost low. Simply put, we are the first
9:17
company in history of commercial satellite manufacturing to
9:21
produce satellites of our site and power out of scale.
9:26
Together. Our key technology
9:28
differentiation in the size of our satellite spectrum
9:31
availability and custom AC that support today's capability to
9:36
sell broadband from space supported by our extensive
9:39
portfolio of over 3800 patent and patent pending claims. 2026,
9:45
the year of we scale commercial operations.
9:48
We're the only company capable of delivering 4G and 5G and in
9:53
the future 6G broadband speed sufficient for voice calls,
9:59
voice over LTE, live video calls, extreme and full Internet
10:05
access directly to modify devices.
10:07
Our technology is anchored by our ability to manufacture the
10:11
largest commercial communications array ever placed
10:14
into loaded orbits, creating a durable technology advantage.
10:20
Our satellites enabled digital beamforming and are capable of
10:24
multi carrier aggregation in multiple frequencies supporting
10:27
simultaneous uses per beam, behaving like a terrestrial cell
10:31
tower from the space. When combined with our
10:34
integrated ground space gateway architecture and growing
10:37
commercial ecosystem with over 50 leading global mobile network
10:41
operator partners who collectively recover nearly 3
10:45
billion subscribers. As Scott will discuss in more
10:50
detail, we continue to span our commercial ecosystem.
10:53
In the fourth quarter of 2025. We're now on the Affinity
10:56
commercial agreement with Verizon in United States and STC
11:00
Group in Saudi Arabia and other key markets across the Middle
11:03
East and Africa. A part of our 10 year agreement
11:06
with STC Group will receive a prepayment of 175,000,000 in
11:10
2025, indicative of the ambition we both share in bringing
11:14
connectivity gaps and delivering cellular brand directly to
11:17
devices. Recently we announced
11:20
partnership with Orange Telefonica, CK Hutchison, Taiwan
11:25
Mobile and progress in initiative with Vodafone to
11:29
bring our direct to device cellular broadband service to
11:32
their markets who are now part of our commercial ecosystem.
11:35
With over 50 leading global mobile network operator partners
11:40
who collected recovered nearly 3 billion subscribers to the date,
11:44
our commercial advancement has positioned us to secure over 1
11:48
billion in total contracted revenue commitment from our
11:51
commercial partners. As a reminder, our comprehensive
11:56
spectrum strategy is defined by our by our access to
12:00
approximately 1150 megahertz or low band and mid band tunable
12:05
MNO spectrum globally, which includes 45 megahertz of MSS
12:10
lower mid band spectrum access in North America and 60
12:14
megahertz of licensed S band spectrum priority right outside
12:18
North America. Our low band spectrum strategy
12:21
is centered around the use of premium multi operator 850
12:24
megahertz cellular spectrum. We have important
12:27
characteristics like longer reach, better penetration and
12:32
compatibility with existing three GBP standards and devices.
12:37
We have further strength disadvantage through strategic
12:40
MSS and cellular spectrum including both premium lower
12:45
band, mid band, L band and S band spectrum priority rights
12:51
positioning us to reliably deliver cellular broadband
12:55
service at a global scale. We also made significant
12:58
progress in our government business as our satellite
13:01
technology continue to be used by the United States government
13:04
for dual use and dedicated applications.
13:07
National security is a key priority for the United States
13:10
and we continue to see willingness to rapidly adopt
13:13
innovate forward-looking technologies like ours.
13:18
Taking together this accomplishment and the
13:21
competitive advantages we have built give us a significant
13:24
momentum and we progress to 2026 as the partner of choice or for
13:29
the global mobile network operators and unique non
13:33
communication capability for the UA government.
13:36
And with that, I will turn the call back to Scott.
13:40
Thank you, Abel. I want to take this time to
13:43
reflect on our business accomplishments in 2025 and how
13:46
we see the business evolving over 2026 and 2027.
13:51
Last year, 2025 was the year we activated our revenue engine
13:54
with record revenue of over $70 million achieving the upper end
13:59
of our revenue guidance. We are no longer a pre revenue
14:02
company. During the year, revenue was
14:05
primarily driven by commercial gateway deliveries and
14:08
milestones completed from our government contracts.
14:12
We delivered 15 commercial gateways to M&O partners in the
14:15
second-half of 2025. Importantly, these sales are a
14:19
leading indicator that our M&O partners are preparing for space
14:23
mobile commercial service and making investments ahead of that
14:26
roll out. This was also a well diversified
14:29
set of initial gateway deliveries across 9 different
14:31
customers across 5 continents, which starts to paint the
14:35
picture of our initial commercial markets in the US,
14:37
Canada, Europe, Japan, the Middle East and Africa.
14:43
In terms of signing contracts, the major customer deals for
14:45
2025 were definitive commercial agreements with Verizon and STC
14:49
Group joining AT&T and Vodafone. We continue to see heavy
14:54
engagement from M and OS, resulting in good progress
14:57
deepening and growing our partner ecosystem, taking
15:00
advantage of our base of over 50 global M and OS with nearly 3
15:03
billion subscribers. We and our mobile network
15:07
partners also recently announced additional specific initiatives
15:10
with Vodafone, Orange, Telefonica, CK Hutchinson,
15:15
Taiwan Mobile, among others, while formally unveiling
15:19
Satellite Connect Europe and its leadership team as our European
15:22
distribution joint venture with Vodafone.
15:25
In 2026, we expect more M and OS to join the AST Space mobile
15:29
network and we expect to harvest our pipeline for many additional
15:33
definitive commercial agreements as the contractual relationships
15:36
mature with our existing partners.
15:38
Beyond the investor MNO's, the US government was also a
15:43
significant contributor to 2025 revenue.
15:46
During the year, we executed against our existing 10
15:49
contracts across an expanding list of interested agencies
15:52
developing and testing additional capabilities using
15:55
our in orbit infrastructure capabilities critical to US
15:59
National Security, including the Golden Dome project.
16:03
The revenue derived from U.S. government is not dependent on
16:06
full constellation deployment but is more scalable by
16:09
satellite count, which makes it an early reliable contributor to
16:12
revenue. As a reminder, the goal of these
16:16
contracts is to develop capabilities that could grow
16:18
into programs of record with billions of annual revenue
16:21
potential in aggregate for missions incredibly important to
16:25
US National Security. We also recently announced our
16:29
status as a prime contractor to the US government and received a
16:32
30 million contract award from the United States Space
16:35
Development Agency for the Europa Track 2 Commercial
16:38
Solutions program. This contract focuses on
16:41
developing immediate, resilient and low latency tactical
16:44
satellite communications directly between government and
16:47
devices. The award demonstrates how
16:49
commercial space innovation can be rapidly integrated into
16:52
national security missions. The award further validates the
16:55
dual use nature of our technology for both commercial
16:58
and national security applications.
17:02
Regarding the Golden Dome project, we continue to execute
17:04
against our current contract with the Space Development
17:07
Agency and we were recently awarded an IDIQ contract under
17:10
the United States Missile Defense Agency's SHIELD program.
17:14
These awards position us to compete for a wide range of
17:17
future activities to support one of the largest and most
17:20
significant United States defense programs in history.
17:24
As we turn the page into 2026, we see this year as an
17:28
inflection point as we enter commercial service with our
17:30
initial M&O partners, while also continuing to generate revenue
17:34
from the commercial gateway and government strategies before the
17:37
impact of commercial service revenue later in the year, we
17:40
expect revenue to at least double versus 2025.
17:43
In fact, our 2026 expectations are further de risked given our
17:47
contracted pipeline which provides upside with additional
17:50
government contract wins. Looking ahead to 2027 with a
17:56
large scale constellation in orbit, we see a really, really
18:00
strong outlook for both commercial and government
18:02
service revenue. 2027 will be the first full year impact of
18:06
commercial service revenue as the AST Space mobile cellular
18:09
broadband service becomes available in some of the best
18:12
markets worldwide to hundreds of millions of subscribers via a
18:15
low friction service offering provided when the subscriber
18:18
needs it most. We also expect government
18:22
revenue to continue to multiply in 2027 with significant upside
18:26
depending on certain contract outcomes.
18:29
We see the opportunity in 2027 approaching a billion dollars in
18:33
annual revenue, importantly comprised of revenue both long
18:37
term, contracted or highly recurring in nature, subject to
18:40
achievement of commercial and government service objectives.
18:45
Going into the end of the decade, we see further multiples
18:48
of revenue upside driven by greater subscriber uptake and
18:51
market extension. All told, we are confident that
18:56
our business strategy has strong competitive differentiation and
18:59
is supported by a growing list of industry tailwinds.
19:02
We enter 2026 with the assurance and conviction needed to win in
19:05
an ever expanding Tam. I'm now happy to pass the call
19:10
over to Andy to walk through our financial update.
19:13
Thanks, Scott and good afternoon everyone.
19:16
During the fourth quarter of 2025, we continued to execute on
19:20
our commercial objectives while expanding manufacturing and
19:23
importantly significantly strengthening our financial
19:26
position to support our core objectives.
19:29
IN2000262025 was best described as the year of scaling.
19:34
At ASD Space Mobile, we began the year focused on building out
19:38
manufacturing to support our targeted launch schedule through
19:42
2026 and we ended the year with the launch of our first Block 2
19:46
Bluebird satellite, BB6A Seminole moment in the history
19:50
of our company. As we speak with you today, we
19:53
have 29 Block 2 Bluebird satellites in various states of
19:56
production and are on target to complete the assembly of 40
20:00
satellites equivalent of microns during the first half of 2026.
20:07
For 20/26, AST Space Mobile's global workforce is intensely
20:11
focused on completing our black tube Bluebird satellites to
20:14
support the orbital launch of 45 to 60 total satellites during
20:18
the year as we work towards commercial service activation in
20:23
the second-half. As Scott described, our focus on
20:26
launch cadence and commercial service activation in 2026 is
20:31
complemented by our increasing revenue opportunities both from
20:36
commercial and U.S. government partners.
20:38
We are now a revenue generating company and we will work hard to
20:43
achieve profitability from our growing revenue initiatives that
20:47
are intrinsically linked to the increasing number of Block 2
20:51
Bluebird satellites that we put into low Earth orbit.
20:55
Our rapid growth is supported by a fortified balance sheet.
20:59
Not only do we now have the cash to support the full build out
21:03
and launch of a constellation of over 100 satellites to provide
21:07
worldwide space mobile service. Our most recent financing
21:12
activities position us to accelerate the deployment of our
21:16
controlled spectrum bands on a global basis, monetize the
21:20
capabilities of our proprietary technology to capture the
21:23
evolving commercial opportunities related to
21:26
artificial intelligence, enhance investment in government space
21:31
opportunities in the United States, reduce our higher
21:34
interest debt and pursue opportunistic investments to
21:38
accelerate our space mobile services and capabilities.
21:43
All the while, we continue to balance a prudent approach to
21:46
our spending while moving quickly to protect and
21:49
capitalize on our first mover advantage of bringing space
21:53
based broadband connectivity direct unmodified smartphones in
21:58
the rapidly growing direct to device market.
22:02
Our intentional focus on investing in operational growth
22:06
led to higher adjusted operating expenses and capital
22:09
expenditures in Q4 of 2025, both consistent with our expectations
22:16
and previously communicated to our during our Q32025 earnings
22:21
call. Importantly, our revenue ramp
22:24
continued in Q4 with significant revenue growth from commercial
22:29
gateway deliveries, services and contracted milestones completed
22:34
for the US government, resulting in 2025 revenue near the top of
22:39
our guidance range. Moving to the operating and
22:43
capital metrics slide, let's review the key metrics for the
22:47
fourth quarter and full year of 2025 in more detail on the 1st
22:52
chart. For the fourth quarter, we
22:54
incurred non GAAP adjusted operating expenses of $95.7
22:59
million versus $67.7 million in the third quarter.
23:04
As a reminder, non GAAP adjusted operating expenses exclude non
23:09
cash operating costs including depreciation and amortization
23:14
and stock based compensation. The quarter over quarter
23:18
increase of 28 point O million resulted primarily from a 23.4
23:24
million increase in adjusted cost of revenues related to
23:28
gateway deliveries. The first revenue from our M&O
23:32
partners together with a slight 3.5 million increase in adjusted
23:37
R&D costs, a 3.0 million increase in adjusted engineering
23:41
services costs. This partially offset by a 1.9
23:46
million decrease in adjusted general and administrative
23:49
costs. Our Q4 adjusted operating
23:52
expenses excluding those adjusted costs of revenue would
23:56
be $66.8 million compared to $62.2 million in Q3 of 2025,
24:05
which is in line with the mid 60s million guidance that I
24:10
previously provided. For the full year of 2025, non
24:15
GAAP adjusted operating expenses less adjusted cost of revenue
24:20
totaled $224.8 million compared to $151.8 million for the full
24:28
year of 2024. The primary drivers of the
24:31
increase were growth in our workforce, including contractors
24:34
and consultants, our expanded production facilities and other
24:38
professional fees including legal fees related to our
24:41
spectrum and financing transactions.
24:45
Turning now to the second chart on the slide, our capital
24:48
expenditures for the fourth quarter of 2025 were
24:51
approximately $407 million versus approximately $259
24:57
million for the third quarter of 2025.
25:00
This figure was made-up primarily of capitalized direct
25:03
materials labor for our Block 2 Bluebird satellites and payments
25:08
made in connection with multiple launch contracts with the
25:11
balance relating to facility and production equipment
25:14
expenditures. This amount was above the
25:17
quarterly guidance of 275 to $325 million that I provided
25:23
during our last earnings call, mainly due to intentional growth
25:27
investments to accelerate satellite material purchases and
25:31
the timing of launch contract payments.
25:34
For the first quarter of 2026, we estimate that our adjusted
25:39
operating expenses excluding cost of revenues will be in the
25:43
range of approximately 70 to $80 million as we add to our
25:47
workforce and continue to design, manufacture, launch and
25:51
operate our growing satellite constellation as well as pursue
25:55
the monetization of our L&S band spectrum usage rights.
26:00
We expect our capital expenditures to remain flat in
26:04
Q12026 with the fourth quarter of 2025 and it will come in at a
26:09
range of somewhere between 350 to $425,000,000, primarily
26:14
driven by the timing of launch payments related to our near
26:18
term launches, which as I previously explained vary from
26:21
quarter to quarter. We continue to estimate that the
26:25
average capital costs including direct materials and launch
26:28
costs for our constellation of over 90 Block 2 Bluebird
26:32
satellites will fall in the range of 21 million to $23
26:37
million per satellite. Our cost per satellite estimates
26:41
are subject to fluctuations based on dynamic geopolitical
26:45
factors, which could impact our costs.
26:48
As a reminder, the timing of the changes in our adjusted
26:51
operating expenses and capital expenditures, as I've just
26:55
described, could be delayed or may not be realized due to a
26:59
variety of factors. Our planned revenue ramp
27:02
continued during the fourth quarter and we expect to
27:05
continue to grow in 2026. Holistically.
27:08
With respect to revenue generation, we believe we can
27:11
enable continuous space mobile service across key markets such
27:16
as the United States, Europe, Japan and other strategic
27:19
markets with the launch and operation of approximately 45 to
27:24
60 Bluebird satellites and additional strategic worldwide
27:28
markets with the launch and operation of approximately 90
27:32
Bluebird satellites. Further, as we continue to
27:35
launch and deploy our constellation, we will continue
27:38
to support U.S. government applications currently ongoing
27:42
and accelerating as our constellation grows.
27:45
In the fourth quarter, we recognize revenue of $54.3
27:49
million, primarily driven by gateway hardware sales and
27:53
various U.S. government service milestone achievements.
27:56
Additionally, in Q4, we recognize revenue in connection
28:00
with the provision of critical consulting services for an M&O
28:04
partner. For the full year of 2025, we
28:09
achieved revenue of $70.9 million, representing the top
28:14
end of our 2025 revenue guidance range of 50 to $75 million.
28:21
Now turning to our revenue expectations.
28:23
In 2026, we manage the top line with the focus on full year
28:28
performance given the quarterly variability inherent to our
28:32
business, including the timing of contract signings, equipment
28:35
sales and milestone achievements.
28:38
As a result, we believe our revenue performance is best
28:41
evaluated on a full year basis. As we continue advancing our
28:46
launch and network activation initiatives, we expect revenue
28:50
to grow meaningfully relative to our 2025 financial performance.
28:55
Specifically, we expect to generate full year 2026 revenue
29:00
in the range of 150 to $200 million.
29:04
We expect revenue to continue to be driven by gateway deliveries,
29:08
achievement of contracted milestones for the US Government
29:12
MNO consulting services with potential upside related to the
29:16
recognition of initial commercial service revenue.
29:19
Quarterly revenue will likely vary significantly depending on
29:22
achievement of milestones and the timing of customer
29:25
activities. We believe that approximately
29:28
half of the revenue opportunity within our commercial pipeline
29:32
this year is already booked or contracted.
29:35
The remaining portion consists of a combination of advanced
29:39
stage opportunities that have not yet been signed as well as
29:43
net new business we expect to secure over the course of the
29:47
year. As previously noted, we
29:50
anticipate government related revenue growth to be driven by
29:53
the factors outlined earlier in Scott's remarks.
29:57
The achievement of our revenue plan remains subject to several
30:01
contingencies, including the successful launch and deployment
30:04
of Block 2 Bluebird satellites related to U.S. government
30:07
applications, contractual milestone achievements, critical
30:11
gateway equipment sales to our M&O partners in support of their
30:14
anticipated commercialization efforts of space mobile service
30:18
and service revenues in connection with the activation
30:21
of our commercial service provided by our by our existing
30:25
and planned deployed and operational satellites.
30:29
Finally, on the last chart on the slide, on a pro forma basis
30:33
inclusive inclusive of cash raised in February via the
30:37
convertible notes offering with a 2.25% ten year coupon at an
30:42
effective strike price of $116.30 per share and the
30:47
available liquidity under the at the market or ATM facility, Our
30:52
cash, cash equivalents and restricted cash as of December
30:57
31, 2025 was approximately $3.9 billion.
31:03
Primary drivers for this cash increase include the execution
31:08
of the two convertible notes offerings in October of 2025 and
31:12
February of 2026 for a total of approximately $2.2 billion of
31:19
net proceeds and approximately $706 million of net proceeds
31:26
raised from the 2025 ATM facilities during Q4, leaving
31:31
approximately $80 million available under that facility.
31:36
In addition to capital raised via the recent 2.25% ten year
31:41
convertible notes, we also took action since our last earnings
31:45
call by further reducing our outstanding debt related to the
31:49
January 2025 and July 2025 convertible notes, each due in
31:55
2032. Following the February
31:59
equitization transactions, we have now converted approximately
32:03
457,000,000 of the outstanding 460 million of the January
32:10
convertible notes into 19.2 million Class A shares and $250
32:16
million of the outstanding 575 million of the July notes into
32:22
4.5 million Class A shares. We will continue to look at
32:26
attractive debt reduction efforts, including convertible
32:29
notes as the year progresses. Given the current strength of
32:34
our balance sheet that now includes Cash, Cash equivalents
32:37
and restricted cash and available liquidity under the
32:40
ATM facility of over $3.9 billion on a pro forma basis as
32:47
of December 31. We are now not only fully funded
32:51
to manufacture and launch a constellation of over 100
32:54
satellites to provide worldwide space mobile service, but we
32:58
have increased our financial flexibility to make further
33:01
investments to expedite the timing of and augment the
33:05
capabilities of our space mobile service.
33:08
At this time, we do not have any plans to pursue additional
33:12
convertible debt. The combination of increasing
33:15
commercial and government opportunities, rapidly scaling
33:18
manufacturing and satellite launch operations and a
33:22
fortified balance sheet firmly positions ASD Space Mobile to
33:26
achieve our objectives. On behalf of all of our
33:29
stakeholders in 2026 and beyond, I'm incredibly proud of the
33:34
significant progress our company made in 2025, backed by the
33:39
intense focus and tireless efforts of our worldwide
33:42
workforce. It's now time to further execute
33:45
on our launch cadence to bring Space Mobile service to connect
33:49
the unconnected in the coming periods.
33:52
And with that, this completes the presentation component of
33:55
our business update call, and I'll pass it back to Scott.
33:58
Scott. Thank you, Andy.
34:01
Before we go to the queue of analyst questions, would like to
34:04
address a few of the questions submitted by our investors.
34:08
Operator, could you please start us off with the first question?
34:12
Justin from Georgia asks any interesting learnings from BB
34:16
Six and Seven? Is the production of composite
34:19
satellites going to be vastly different?
34:22
Any unforeseen delays? Thank you, Justin, for the
34:26
question. Yeah, BB 6, it is the largest
34:31
phase array ever deployed in space is 3 1/2 times bigger than
34:37
our previous deployments which were also the world record on on
34:41
size. And you know, going through that
34:47
first deployment of 2400 square feet successfully learn how to
34:52
capture, control and manage the satellite at that, at that size,
35:00
we'd allow us to actually do it much more faster.
35:02
We do 78910111214 satellite, satellite that I'm coming.
35:09
So, so that yes, that that was a very, very important milestone
35:16
in, in learning how to operate, deploy and fly something of this
35:25
size, which will help us to do it faster in the next
35:29
deployments. The other, the other, the other
35:33
thing that will happen going forward passing 6 and 7 is that
35:39
we're stuck in the satellites. So we, we're not be launching
35:43
individual satellites anymore. They will be back in Group or
35:47
either 346 or 8:00 in a single launch that will, that is what
35:56
will allow us to to meet our, our, our launch cadence of this
36:01
year, which is which you were expecting a 45 satellites in
36:08
orbit and 60 satellites ready to achieve during 2026.
36:15
Justin also asks is there an updated timeline for the mid
36:19
band constellation for using L&S band spectrum?
36:25
Yes, there is. We're planning to to start
36:29
launching the mid band constellation by the end of the
36:33
year. The mid band constellation had
36:36
the advantage of combining 3 GPP extend standard operator on a A
36:46
frequencies and also our our L&S bands which combine give a great
36:56
flexibility to the to the to the offering and also allow us to
37:03
continue to increase the data rate capacity that we have in
37:07
our system going way above our 120 megabits per second that we
37:12
already have in block 1. So that, that that allows a
37:18
combination of of IMT spectrum, which we see it like a run
37:25
extension to stain to stain capability in places where there
37:29
is no spectrum, there's no spectrum light up to overlay a
37:34
spectrum in our LNS in order to cover all locations As a as a
37:41
supplement and an augmentation of the terrestrial network with
37:45
data rate that far exceeds our 120 mega hour current 120
37:49
megabit per second in the low band block 1 satellites with the
37:55
largest satellites and with access to combine in certain
38:00
regions to over 100 megahertz of spectrum combine combining the
38:06
spectrum of our network partners and our own this, this will give
38:11
a true broadband experience on a global basis.
38:15
Leading from New Zealand asks, with the larger designs complete
38:19
and being produced, do you anticipate future R&D or new
38:23
product lines? This may be data centers,
38:26
exclusive military consolations, collecting data on usage,
38:30
providing aircraft and ship traffic, radar, etcetera.
38:36
Thank you, Leiden. Listen, the the the most
38:40
difficult aspect of the R&D with the launch, deployment and usage
38:48
of our BB6, the core aspect of it is complete.
38:53
So the ability to produce a lot of power, the ability to have a
38:56
very large aperture with very sensitive aperture, the ability
39:03
to to have a a many, many gigahertz of processing power
39:11
with our own ASIC, the ability to do a cost effectively with
39:16
our own power generation technology.
39:19
All of that R and DS have been completed and it's integral part
39:21
of what we have and what we're operating.
39:24
And as you said being completed. Now we do see many other
39:31
opportunities for the technology that we're starting to see usage
39:35
of them. One is radar, another is power
39:39
generation, another one is multiplying the spectrum usage.
39:46
So we believe in combining our large aperture with our AI
39:54
capability will create a a multiplier for the spectrum.
39:59
So the 50 megahertz that we have you know it will feel a multiple
40:06
of that we. Three times that, it could be 10
40:11
times that. So we see a lot of opportunities
40:15
of combining all these capability including very
40:18
precise geolocation, radar, communications, all that wrap up
40:25
with with an AI infrastructure within.
40:29
There is a significant additional value that we can
40:31
create with our infrastructure and the already invested R&D.
40:37
Kevin from Vancouver asks, can you share more color on the most
40:40
recent $1 billion convertible note offering?
40:44
Many investors are confused as your current liquidity was
40:47
already approximately $3 billion, insufficient for around
40:51
100 satellites. Were there any specific
40:54
opportunities in mind when you issued the offering or is it
40:57
really quote UN quote just in case something pops up?
41:02
Thanks for that question, Kevin. This is Andy.
41:05
It's absolutely the case that in Q4 when we finished the
41:08
convertible in October, we were in a position to fully fund the
41:13
worldwide constellation at 100 plus satellites.
41:16
Nothing has changed on that front.
41:19
And the convertible deal that we did it just over a billion
41:22
dollars in February provides us essentially extra flexibility to
41:27
look at investments that go beyond that first 100
41:30
constellation. And what I mean by that is
41:34
number one, we can accelerate the deployment of our control
41:38
global spectrum. With this added fund.
41:41
We also have the opportunity to monetize our technology to
41:44
capture commercial opportunities related to AI, which are
41:49
increasingly coming our way. We will look to deploy funds to
41:53
enhance our investment in government space opportunities
41:57
in the United States. We've talked about our debt
42:00
profile. These funds provide us
42:03
flexibility to look at reducing higher interest debt that we
42:08
currently have. And finally, opportunistically,
42:12
any investments that help us accelerate the time to bring
42:16
space mobile service and capabilities will be a good use
42:20
of these funds as well. And I would just close by noting
42:24
that we've confirmed that we have no current plans to look at
42:29
an additional convertible deal. We feel that the balance sheet
42:32
is where it needs to be to provide us the opportunity to
42:36
execute our objectives in the near and mid term.
42:41
And with that, I'd like to thank our shareholders for submitting
42:44
those questions. Operator, let's open up the call
42:47
to analyst questions now. Thank you.
42:51
And if you would like to ask a question, please press *1 on
42:54
your telephone keypad. A confirmation tone will
42:56
indicate a line is in the question queue.
42:59
You may press *2 to remove yourself from the queue.
43:01
For participants using speaker equipment, it may be necessary
43:04
to pick up the handset before pressing the star keys.
43:08
One moment please while we pull for question.
43:17
Our first question comes from the line of Griffin Boss with B
43:20
Riley Securities. Please proceed with your
43:23
question. Hey, good afternoon.
43:26
Thanks for taking my questions. So first I just want to talk
43:30
about, you know this expanding Pam that you've talked about
43:33
with the dual use capabilities in government contract.
43:37
Do you see any scenario where you build and launch future
43:41
block bird satellites with different payloads that might be
43:45
exclusively for government customers or applications?
43:52
Hey, how are you? Listen, the the satellites are
43:56
really designed to to manage all these applications in a single
44:01
platform. So we do not need a multiple
44:06
satellites for multiple payloads.
44:09
The core applications for our government contracts for our
44:18
partnership with the Mnos are all possible through the same
44:25
platform, which are in fact already being used in
44:32
combination of the two. So we we want to maximize and
44:38
and take advantage of a platform that that it can that can be
44:43
used simultaneously for the 2 terms.
44:50
Got it. OK, understood about.
44:51
Thanks for that. And then the second one for me.
44:54
You know you. You always mention your
44:56
thousands of patents and, and you talked about on this call,
44:59
you know, your expertise in building and deploying massive
45:02
structures in low Earth orbit that could be used for, you
45:06
know, myriad opportunities and. And you know, as if we call out
45:09
these these these burgeoning opportunities and AI, you call
45:12
that out with the convertible raise to.
45:13
But you have this one specific patent that that's been of
45:16
interest to us for a while for thermal management systems for
45:19
structure and site and space. And you know, that's a patent
45:22
that that describes a process for satellites where and you
45:25
know, heat is dissipated locally at each antenna and heat could
45:29
be directed to each antenna assembly during periods of
45:31
extreme cold. So just curious if you could
45:33
maybe elaborate. On on that.
45:35
Specifically as well as you know your other capabilities and how
45:38
that could you know, potentially be used for for opportunities in
45:41
data centers in space or why that makes, you know ASG
45:44
satellites attractive for those types of capabilities?
45:49
Yeah, no, absolutely. I mean there, there are many
45:51
key, key enablers that needed to be designed by us and the
45:58
deploying patent in order to solve probably the most
46:03
difficult problem which is connecting broadband regular
46:07
handsets. So for that we needed to develop
46:10
and Vertex integrate 95% of our technology had the technology to
46:16
produce a low cost power. That's a very significant or at
46:20
least our size we are, we are on a factor of 10 lower per square
46:28
meter power production of what historically manufacturers had
46:33
been using the size of the of the of the satellite.
46:38
And then the the ability to generate power at a low cost per
46:43
square meter and then being able to dissipate and and effectively
46:50
run a lot of wattage per square meter with within the power
46:56
constraints of the space. So we have that's what we have
47:01
built up a significant portfolio 5P that is a particular, I think
47:04
you, you, you hear it right. That's a particular technology
47:08
that enable a lot of things. Then when we talk about the
47:12
ability to manage the spectrum using AI capabilities, we we
47:18
call the spectrum AI spectrum management, the ability to to
47:23
use these satellites not only for for communications by other
47:30
applications like radar. When you combine that with the
47:35
ability to store manage data in a way that usage that uses the
47:43
spectrum very, very efficiently, is it open a lot of other
47:49
opportunities on the town that we have.
47:52
We, we believe the largest town is in broadband through
47:59
broadband directly to the handset where you will be
48:06
basically becoming what I call the third leg of communications.
48:09
You have Wi-Fi, you have cellular and now you have the
48:13
space. And our belief is to, to
48:17
participate at a scale in a way that is meaningful for our
48:23
global operators. The broadband capability is, is
48:27
essential and it's not and it's something that we have, not
48:31
something that we have now. I mean we you know, that's,
48:35
that's what we have with the, with the satellite that, that
48:37
we're deploying right now. And we're extremely happy of the
48:42
performance that we see on, on, on our BB6 in the new 2400
48:46
square feet platform that that we just launched.
48:53
Got it. Thanks for all the color bell.
48:55
I'll, I'll hand it off here and and hop back in the queue.
48:57
Thanks for taking my questions. Thank you.
49:04
Our next question comes from the line of Colin Canfield with
49:07
Cantor Fitzgerald. Please proceed with your
49:10
question. Hey, thank you for the question.
49:13
As we as we parse out the comments that you talked about
49:16
on 2028 revenue potential, just kind of.
49:19
Thinking like the bull bear of what?
49:20
You said, so multiple versus 1 billion of potential in 27,
49:24
which suggests, you know, let's call it 1.5 to 3 for 28.
49:28
How does the team kind of think about the mix of opportunities
49:31
between government and B to B customers and then kind of
49:35
within B to B? How do you think about tech?
49:38
Discussions between communications.
49:40
Intelligent and then intelligence and a non orbit.
49:43
Compute. Thank you.
49:48
Thanks, Colin. Just I'll take that.
49:51
So we, we, we put forward our expectations for revenue in 2026
49:57
building on, you know, the high end of our guidance that we
50:00
achieved in 2025 and then we stated a goal for 2027.
50:06
So we, we did not state anything for 2028.
50:09
So I'll, I'll, I'll keep my comments to 27.
50:13
But I think what we see is as we get this platform on a full year
50:17
run rate and we're able to put the, the consumer business, the,
50:23
the D to D communications business in place and some of
50:26
the most favorable markets globally.
50:30
And then you put that alongside our government applications
50:34
getting some, giving some time to mature and some, some
50:36
potential contract wins we're chasing.
50:39
That's how we got to that, you know, 2027 goal number.
50:41
And, and we think that, you know, that's probably, you know,
50:47
more weighted towards commercial based on that framework.
50:51
But but of course, upside, I think if government does better
50:54
and as you go out into 2028 and, and later in the decade,
50:57
ultimately we we do think that our commercial business is going
51:00
to be bigger. That's always been the premise.
51:02
So commercial I think at scale should be should be bigger than
51:07
government. We think that market's really
51:09
attractive. We think all the demand drivers
51:11
would track for 7-8 years of the company are are intact and and
51:15
growing stronger by the day. But the government business is,
51:18
is, is also very attractive. And as we said with all the
51:21
various use cases we're tracking, there's potential for
51:24
multiple billions of annual revenue through those use cases
51:28
as well. So we see a really bright
51:29
picture. I'd say it's largely consistent
51:31
with how we've always seen it. All the governments trended up
51:34
over the last year or two, but but that's how we see the mix
51:38
playing out. And and, and you know, I think
51:41
that's, you know, as we're deploying and as you saw we put
51:44
out a number of customer announcements today, we see the
51:48
the strength of that demand as as strong as ever go.
51:53
Ahead, thank you. I appreciate.
51:54
And then as we think of the. Progression of growth.
51:58
Is it fair to use the four Q? Performance as a baseline for
52:01
2026 and then growing from there or is the commentary in terms of
52:06
growth for 26 more aligned just growing from the 2025 annual
52:11
number? The the way I think about it is,
52:15
you know, before we initiate commercial service here, we're,
52:18
we're, we're doing revenue that's kind of earlier stage,
52:22
right. So the commercial revenue is, is
52:24
not as consistent and the government revenue is building
52:27
nicely, but but much lower than where it can be.
52:30
So quarter to quarter. I, I wouldn't say we're going to
52:33
we're planning on building quarter to quarter.
52:35
I think think about it annually like Andy put it in his speech,
52:39
it's really about an an annual target.
52:41
And so I think at least doubling where we hit in 2025 is the
52:45
right way to think about it was of course upside as we launched
52:48
commercial service. But quarter to quarter at least
52:51
in the next few quarters before commercial service comes into
52:54
play in the second-half of 2026, that's how to think about it.
52:58
As you know, we're going to be we're, we're putting commercial
53:01
infrastructure in place and we're performing against their
53:04
government pipeline. That's great.
53:07
Thank you. Thank you.
53:12
Our next question comes from the line of Brian Grass with
53:15
Deutsche Bank. Please proceed with your
53:17
question. Hi, good afternoon.
53:21
I'm just trying to understand the manufacturing side a little
53:24
bit better. Would you mind?
53:25
Providing just some color. On, on how many satellites
53:28
beyond BB7 are built ready to ship today and maybe how many
53:33
you expect to be to be built and ready to ship by mid year?
53:36
I know you talked about the microns and those are the
53:38
hardest part, but I think there is some, you know, assembly that
53:43
takes some time beyond the microns themselves.
53:46
And then, you know, just related to that, I mean, you know, I
53:49
think you know, clearly the manufacturing pace is is
53:52
somewhat behind where you had expected it to be.
53:55
Perhaps you could maybe just give us some appreciation for
53:58
the kinds of things that that maybe took longer than you had
54:00
expected and whether you think you've now worked through all
54:03
those issues and and you're kind of accelerated or accelerating
54:07
the pace up to where you know you had expected it to get to.
54:10
Thank you. Yeah, I, I think we we are at a
54:17
point where you see that acceleration.
54:22
We certainly see that in the in the manufacture, you know the
54:25
key building block which is the Micron.
54:27
So which we are on satellite 30, we are on target to at least be
54:33
ready to chip this year 60 satellites with a minimum of 45
54:43
in into orbit. So we went through a phase and
54:48
you know just a year ago the satellite were 3 1/2 times
54:52
smaller. They were already very big.
54:55
They were the biggest ever launch.
54:56
This one, this one's a 3 1/2 time bigger and that's BBBBB
55:05
6:00 and 7:00. But that basically what is
55:10
something that help us to accelerate our cadence of
55:14
satellites in orbities. We are able to stack them and
55:18
that stack is difficult. You know, you, you, you need to
55:22
to be able to stack either 346 or 8 satellites and, and that,
55:29
that that is a near completion. So, so, so that's that will you,
55:35
will you, you see in the, in the, in the in you see batches
55:40
of 6IN in, in, in the getting out of the factory very soon
55:45
here. And OK, so, so on, on the
55:52
stacking, if I, if I may, just in layman's terms.
55:59
Are you saying that there there are specific engineering things
56:02
that you had to figure out in order to get the stacking right?
56:06
Or you're just saying that, you know, getting that many done at
56:09
once so that you could stack them and get it ready for a
56:12
combined launch took some time. Just if you don't like clarify.
56:16
Getting getting them ready for a combined launch is the ability
56:21
of I mean, you're talking about don't say like A5 story building
56:26
worth of satellites stacking then in either blocks of three
56:32
of them, four, six of eight. And but that that process is
56:39
completed and, and the next batch of six, you see the
56:45
pictures and the in the in the deck that we that we put in the,
56:49
in the AR deck and, and that we, we pass our face, we get ready
56:59
to resume the achievements to the Cape.
57:03
OK. Thank you.
57:04
If I may sneak one more in, I know you said that BB7's gone
57:10
expected to go up this month and then you know launches every one
57:15
to two months. Could could we expect possibly a
57:18
launch with multiple satellites in April or is it likely to be
57:22
two months post the the March launch?
57:27
Yes, I mean the the all further launches are in a stack
57:33
configuration. We, we're not, we don't have any
57:36
more single launches like we did on BB6 and BB7.
57:42
This next coming launching launch is super important for us
57:47
as as basically a allows to reuse the first stage of the new
57:54
Glen, which is the only platform commercial that exists that can
57:59
actually stack eight of our satellites.
58:02
The other platform that starts six or three.
58:06
But with the new Glen, we get the maximum amount of satellites
58:09
per per launch and and and and and that that that ability is
58:16
becoming available with the with the new satellites.
58:19
And Brian, I just add, you know, we, we expect to ship that next
58:23
batch in April. So depending on timing and and
58:26
of course, under ideal conditions, it's about 3 weeks
58:28
or so to launch from there. So we're, we're not going to
58:30
speculate on, on launch timing for that, but we are, we look
58:34
like we're going to be in a position to ship those in April
58:36
and you can see that on Page 10 in our deck.
58:40
Great. Thank you.
58:44
Thank you. Our next question comes from the
58:47
line of Louis De Palma with William Blair.
58:49
Please proceed with your question.
58:53
Good, good. Evening, Abel, Scott and Andy,
58:56
Congrats on all of the the partnership announcements and
58:59
the progress with your constellation.
59:01
First. First, I was wondering, are you
59:03
in Barcelona for the conference and will there be more
59:08
announcements this week besides what you've already announced?
59:13
Are you are you holding back certain announcements?
59:18
Hey, hey, how you doing? It's Scott here.
59:20
Yeah, we're we are in a conference room in Barcelona.
59:23
So it's great to to do the call this quarter on the road.
59:26
But yeah, we did. We had a flurry of announcements
59:29
today and and yeah, you can expect more for the rest of the
59:32
week as well. Excellent.
59:36
And my, my, my second question is what service level will your
59:44
network support when you launch the different beta offerings in
59:50
the summer? Will will there be different
59:53
phases in terms of the service capabilities as as more
59:57
satellites come online or like should like the initial beta
1:00:02
that you know launches know whenever that takes place, will
1:00:07
that have like close to a a true 5G experience?
1:00:14
Yeah. The, the, the, the way to think
1:00:18
about this is, is big data rate. So what big data rate you can
1:00:24
expect on the phone will be direction directionally
1:00:28
proportional to the amount of spectrum that we get allocated.
1:00:33
And we, we some partners we have between our spectrum and their
1:00:39
spectrum and off to around 100 megahertz.
1:00:44
And you, you can think you can put a multiple of that number of
1:00:47
megahertz to think about what is the big data rate today we're
1:00:52
managing between 3:00 and 4:00 bits per Hertz.
1:00:55
So, so that multiple is in that order.
1:01:00
So the initial, the initial launch of Commercial Services is
1:01:06
with the lower end of that as the as the, as the allocated
1:01:11
spectrum, it will be less. But as we enable more, more
1:01:20
spectrum which the satellite support them now, they they had
1:01:26
great flexibility to keep adding the spectrum and keep adding and
1:01:29
and and later even combining low and spectrum with mid band
1:01:32
spectrum. Then you see the peak data rates
1:01:36
keep enhancing. So that that's, that's the way
1:01:39
to think about the, the, the, the, the key performance metrics
1:01:45
and we loan services. Thanks.
1:01:48
That makes sense to Belle. And One Financial question for
1:01:53
the $1 billion revenue, revenue goal for 2027, how much of that
1:02:01
is is customer or subscriber usage based versus being like
1:02:09
minimum revenue commitments that are contractually obligated with
1:02:14
your your MNO partners such that like if you actually are able to
1:02:22
get like between the 45 and 50 satellites online by the end of
1:02:28
the year, how much of that $1 billion is then like already in
1:02:32
the bag? So to speak.
1:02:35
Sure. So remember we we're at 1.2
1:02:39
billion contracted backlog right now, which we're very proud of
1:02:43
and is a testament to you know how we've built the ecosystem
1:02:46
with our partners and and how confident our partners are in
1:02:49
the business that we're building, right.
1:02:51
But that is still very, very low number compared to what our
1:02:56
expectations are for the revenue potential of the business.
1:02:59
So while it's a good indicator that backlog which again is, is
1:03:02
over 1.2 billion at this point, but it in terms of its
1:03:06
contribution to each individual year, it's it'll be a minority
1:03:10
for sure. So if we're for in terms of a
1:03:13
goal of a billion dollars, you know, you can think of that in
1:03:16
the low hundreds of millions, you know, somewhere 100 to 300
1:03:20
range depending on the year. Great.
1:03:26
Thanks, Scott. Thanks, everyone.
1:03:29
Thank you. Our next question comes from the
1:03:32
line of Chris Scholl with UBS. Please proceed with your
1:03:36
question. Great.
1:03:39
Thank you. Looking at your new disclosure,
1:03:41
it appears your services gross margins are around 90%.
1:03:45
Is this a good way to think about the business longer term
1:03:47
and as revenue generation starts to kick in?
1:03:49
Can you just remind us how you're thinking about operating
1:03:51
leverage and where you believe steady state EBITDA margins can
1:03:54
reach for the business? Thank you.
1:03:57
Yeah, we've been pretty consistent about this over time.
1:04:00
And when you look at the history of the satellite industry, when
1:04:03
it's been performing well has margins in the 80 plus percent
1:04:09
range. And even today if you look
1:04:11
across the the market, there are businesses with 90 plus percent
1:04:16
flow through margins in certain segments of the business, they
1:04:19
just might not report it that way.
1:04:21
So this has just tremendous operating leverage in it and,
1:04:25
and we've always known that off a fixed cost base.
1:04:29
So as we've built the business, nothing's really changed.
1:04:32
I mean we, we, we, we, we struggle to find true variable
1:04:35
cost in a meaningful way. And and this is compounded by
1:04:38
the fact that remember our go to market strategies with the
1:04:40
revenue share. So that is a big way that we
1:04:42
even get greater leverage in the business and make it not just
1:04:45
wholesale, but super wholesale. So at this point in our flow
1:04:49
through margins and our our operating leverage, we think
1:04:53
over time could contribute to an EBITDA margin, you know in the
1:04:56
90% area or higher. Great, thank you.
1:05:02
If I can just fit in one more, I recognize that the the 10K talks
1:05:05
about 90 satellites supporting your longer term business goals,
1:05:08
but does your ability to raise capital maybe incentivize you to
1:05:11
perhaps go beyond what is contemplated in the original
1:05:14
business plans? And I'll pass it over to Andy.
1:05:22
I mean, I think having that flexibility, I mean the, the
1:05:24
market is the capital markets have been wonderful for us over
1:05:28
the the past year. So that, that's absolutely the
1:05:31
case. But the, the, the, the reality
1:05:33
is when we get our constellation built, we're going to get
1:05:37
leverage in the PNL to actually be cash flow from cash flow
1:05:41
positive from operations. So we, we don't feel like at
1:05:45
this point we need to look beyond what we've raised right
1:05:47
now. It provides us the flexibility
1:05:49
to make additional investments opportunistic and some of the
1:05:52
other things that we're doing on our spectrum strategy.
1:05:55
But but the, the real goal is to, you know, to generate
1:05:59
revenue and, and profit from, from the constellation as we get
1:06:03
a launch. So that's kind of how we're
1:06:04
thinking about it right now. But it's certainly nice to have
1:06:07
the the balance sheet fortified the way it is.
1:06:11
OK, great. Thank you.
1:06:16
Thank you. Our next question comes from the
1:06:18
line of Greg Pendy with Clear Street.
1:06:21
Please proceed with your question.
1:06:23
Hey guys, thanks for taking my question.
1:06:25
Just a real quick one on the operating expenses that you
1:06:30
outlined, could you just remind us what you said?
1:06:33
And does that include what will likely be Spectrum licensing
1:06:37
fees, maybe around 20 million a quarter or lease, I'm sorry,
1:06:41
Spectrum lease payments? Yeah, this is Andy.
1:06:45
So it's a it's a bit of a, a walk here.
1:06:49
You've got, you know, sort of the gap op X which includes the
1:06:54
the normal non cash items which we adjust out which which we've
1:06:59
talked about. And then from there we also have
1:07:02
the cost of revenues which you know when we get to service,
1:07:06
we'll be moving to a more traditional COGS PNL that you'd
1:07:10
be more used to there. But then when you net that out,
1:07:13
my, my commentary was that we were just slightly over where we
1:07:17
were in, in Q3 of of 25 and right in that guidance that that
1:07:23
I gave for Q4 in the mid 60s. It does not include spectrum
1:07:28
cost as you described for licensing given that those are
1:07:31
capitalized until we actually start monetizing that that
1:07:36
asset. And of course we're at the point
1:07:37
where we're awaiting FCC approval.
1:07:40
So we will speak to that as a specific item when it comes time
1:07:45
to to kind of build that into the the operating expense.
1:07:49
But but but right now apples to apples that's that's been out
1:07:53
during the the course of 25. Very helpful.
1:07:57
Thanks a lot. Thank you.
1:08:03
And we have reached the end of the question and answer session.
1:08:05
And therefore, I'll now turn the call back over to Scott
1:08:08
Wisniewski for closing remarks. Thank you, operator.
1:08:13
And and we want to thank all of our shareholders and research
1:08:16
analysts for joining the call. We hope to see many of you down
1:08:19
in Florida at our upcoming launch.
1:08:21
Thank you. Bye.
1:08:24
And this concludes today's conference and you may
1:08:25
disconnect your lines at this time.
1:08:27
Thank you for your participation.