AST SpaceMobile is on a mission to build the first and only global cellular broadband network accessible directly by standard smartphones. The company's ambitious goal is to bridge the digital divide and connect billions of people worldwide who currently lack access to reliable mobile connectivity.
Business Overview and History
AST SpaceMobile was founded in 2017 with the vision of using a constellation of low-earth orbit (LEO) satellites to provide seamless cellular coverage everywhere on the planet. The company is headquartered in Texas, where it operates a 185,000 square foot satellite assembly, integration, and testing facility. This state-of-the-art facility plays a crucial role in the development and production of the company's satellite technology.
In 2019, AST SpaceMobile launched its first test satellite, BW1, to validate the core architecture of its space-based cellular network. This initial satellite was instrumental in validating the satellite-to-cellular architecture and testing the effects of latency and doppler in a satellite-to-ground cellular environment using 4G-LTE protocol. The success of BW1 was a critical step in proving the viability of the company's innovative technology.
Following the success of BW1, AST SpaceMobile faced challenges in securing funding and regulatory approvals to advance its ambitious plans. In 2020 and 2021, the company successfully raised over $400 million through a SPAC merger and private equity financing. These funds were crucial in supporting the ongoing development of its satellite technology and network infrastructure.
During this period of growth, AST SpaceMobile also focused on expanding its intellectual property portfolio. By 2021, the company had amassed over 3,400 patent and patent pending claims worldwide, of which approximately 1,240 have been granted or allowed. This extensive IP portfolio solidifies its position as a leader in space-based cellular technology.
The company's technology breakthrough was further validated in 2023 when it achieved download speeds of over 21 Mbps and spectral efficiency of approximately 3 bits per hertz using the BW3 satellite. This paved the way for the launch of AST SpaceMobile's first commercial satellite constellation, the BlueBird series, in September 2024.
In September 2022, AST SpaceMobile launched its BlueWalker 3 test satellite and has since announced successful tests of voice calls and data speeds to unmodified smartphones using the satellite. The company plans to launch its first five commercial "BlueBird" satellites in September 2024 to provide initial, non-continuous cellular broadband service in the United States.
Financial Position and Operational Metrics
Financials
As of June 30, 2024, AST SpaceMobile had $287.6 million in cash and cash equivalents on its balance sheet, providing the company with ample liquidity to fund its ongoing satellite development and deployment efforts. The company's cash position was bolstered by a $55 million investment from Verizon in the second quarter, as well as $80 million raised through its at-the-market (ATM) equity facility.
During the first half of 2024, AST SpaceMobile reported $1.4 million in revenue, primarily from completing performance obligations under a U.S. government contract. The company does not expect to generate significant commercial revenue until it launches its initial constellation of five BlueBird satellites and begins offering service to its mobile network operator (MNO) partners.
For the most recent quarter, AST SpaceMobile reported revenue of $900,000, a net loss of $72,550,000, operating cash flow of -$16,152,000, and free cash flow of -$38,354,000. The company did not provide year-over-year growth figures.
AST SpaceMobile's operating expenses during the first six months of 2024 totaled $119.9 million, with the majority of these costs related to engineering services, research and development, and depreciation of its BW3 test satellite. The company has guided to adjusted cash operating expenses of $30-$35 million per quarter for the remainder of 2024 as it ramps up production of its next-generation Block 2 satellites. This guidance excludes approximately $15 million in costs related to the ASIC chip tape-out and initial production, which will be recognized as R&D expenses in subsequent quarters.
Capital expenditures during the first half of 2024 were $61.8 million, primarily for the procurement of materials and components for the Block 1 and Block 2 satellite programs. AST SpaceMobile estimates the total capital expenditure for the five-satellite Block 1 constellation did not materially exceed its prior estimate of $115 million.
The company expects their adjusted operating expenses and capital expenditures to decrease in future periods as they complete the Block 1 satellite work and a significant portion of the Block 2 development and ASIC tape-out.
Liquidity
The company's strong cash position of $287.6 million as of June 30, 2024, provides a solid foundation for its ongoing operations and satellite development. This includes $285.08 million in cash and cash equivalents, and $2.48 million in restricted cash. The company's current ratio and quick ratio were both 6.38 as of June 30, 2024, indicating a strong short-term liquidity position.
AST SpaceMobile recognizes the need for additional funding to support its ambitious growth plans. The company estimates it will need to raise an additional $275-$325 million to fund the deployment of its initial 20 Block 2 satellites and maintain a constellation of 25 satellites.
AST SpaceMobile has stated it will prioritize non-dilutive sources of capital, such as partnerships and prepayments from MNOs, over traditional equity raises. The recent $55 million investment from Verizon and the $80 million raised through the ATM equity facility demonstrate the company's ability to access various funding sources. The company currently has no plans for an underwritten public equity offering for the remainder of 2024.
In terms of debt financing, AST SpaceMobile has a $100 million senior secured credit facility, of which $48.5 million was drawn as of June 30, 2024. The company also has a $15 million capital equipment loan. Additionally, AST SpaceMobile is working on developing a financing package from export credit agencies to source cost-effective long-term debt funding for large projects.
Regulatory Milestones and Partnerships
A key milestone for AST SpaceMobile in 2024 was receiving an initial license from the FCC to operate its first five commercial BlueBird satellites. This authorization covers the use of specific spectrum frequencies to support gateway, feeder link, and telemetry operations. The company continues to work with the FCC and its MNO partners to secure additional approvals for full-scale commercial services.
On the partnership front, AST SpaceMobile made significant strides in the first half of 2024. In May, the company signed a commercial agreement with AT&T to provide satellite-based broadband services to AT&T's customers in the continental U.S. This was followed by a $100 million investment and prepayment commitment from Verizon in the same month.
These agreements with two of the largest U.S. wireless carriers represent a major endorsement of AST SpaceMobile's technology and business model. The company is also making progress with other global MNO partners, including Vodafone, Rakuten, and American Tower, as it works to expand its ecosystem and distribution channels. Additionally, AST SpaceMobile has received strategic investments from companies like Vodafone, Google, and Verizon.
Navigating Challenges and Risks
While AST SpaceMobile has made impressive technical and commercial advancements, the company faces several challenges and risks as it scales its operations.
The design, assembly, integration, testing, and launch of satellites and related ground infrastructure is a highly capital-intensive endeavor. AST SpaceMobile estimates it will need to raise an additional $275-$325 million to fund the deployment of its initial 20 Block 2 satellites and maintain a constellation of 25 satellites.
The company's ability to raise the necessary capital on favorable terms will be critical to executing its business plan. AST SpaceMobile has stated it will prioritize non-dilutive sources of capital, such as partnerships and prepayments from MNOs, over traditional equity raises. However, if market conditions deteriorate, the company may need to consider other financing options that could be dilutive to existing shareholders.
Another key risk is the successful launch and deployment of its satellite constellation. Any delays or failures in the launch or in-orbit operation of the BlueBird satellites could significantly set back AST SpaceMobile's commercial rollout and financial performance.
The company also faces regulatory hurdles in securing the necessary approvals from the FCC and other global authorities to operate its cellular broadband service. Delays or setbacks in the regulatory process could impact the company's ability to generate revenue and partner with MNOs.
Lastly, AST SpaceMobile operates in a highly competitive environment, with established players like SpaceX, Amazon, and others developing their own space-based connectivity solutions. The company's ability to differentiate its offering, maintain technological leadership, and win over MNO partners will be crucial to its long-term success.
It's worth noting that AST SpaceMobile is currently involved in several legal proceedings, including two putative class action lawsuits filed in Delaware and a securities class action lawsuit filed in federal court in Texas. The company was also named as a nominal defendant in a derivative lawsuit filed in federal court in Texas. These legal challenges could potentially impact the company's operations and financial position.
Outlook and Conclusion
AST SpaceMobile has made significant strides in transitioning from a research and development phase to commercial readiness. The successful launch of its first five BlueBird satellites in September 2024 represents a major milestone, and the company's partnerships with AT&T and Verizon demonstrate the growing demand for its space-based cellular broadband service.
However, the company still faces substantial execution risks and capital requirements as it scales its satellite constellation and global distribution network. Navigating these challenges will require AST SpaceMobile to maintain its technological edge, secure additional partnerships and funding, and efficiently deploy its next-generation satellites.
As an emerging growth company, AST SpaceMobile is subject to the risks associated with early-stage and emerging growth companies. The company has not yet generated any revenue from its SpaceMobile service, as it is still in the development and testing phase. This pre-revenue status underscores the speculative nature of an investment in AST SpaceMobile.
Given the company's ambitious vision, unique technological capabilities, and growing ecosystem of MNO partners, AST SpaceMobile presents a compelling long-term investment opportunity for investors willing to stomach the near-term volatility and risks. The company's ability to successfully transform its operational and financial milestones into sustainable shareholder value will be a key focus for analysts and investors in the years to come.