Q4 2021 AST SpaceMobile Inc Earnings And Business Update Call
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Good day, and thank you for standing by welcome to the a S. T based mobile fourth quarter 2021 business update call. At this time all participants are in a listen only mode.
After the speaker's presentation, there will be a question and answer session.
Ask a question during the session you will need to press star one on your telephone please be advised.
Today's conference is being recorded.
If you require any further assistance. Please press star zero I would now like to hand, the conference over to your speaker today, Scott with New ski Chief strategy Officer of ESG space Mobile. Please go ahead.
Thank you and good afternoon, everyone. This is Scott <unk> Chief strategy officer of NFC based mobile.
Let me refer you to slide two of the presentation, which contains our safe Harbor disclaimer. During today's call. We may make certain forward looking statements. These statements are based on current expectations and assumptions and as a result are subject to risks and uncertainties.
Any factors could cause actual events to differ materially from the forward looking statements on this call for more information about these risks and uncertainties. Please refer to the risk factors section of ASC space Mobiles Form 10-K for the year ended December 31, 2021, and other documents filed by ASC space mobile with the SEC from time to time.
Readers are cautioned not to put undue reliance on forward looking statements and the company specifically disclaims any obligation to update forward looking statements that may be discussed on this call.
After our initial remarks, we will be starting our Q&A section with questions submitted in advance by our shareholders.
With that I would like to introduce <unk>, chairman and CEO of Bell <unk> and Chief Financial Officer, Tom served some of the call as well bill over to you.
Thanks Scott.
This business update marked our first year as a public company.
For those new to Acs based mobile I would like to summarize some key achievements I'll remind you about some of our fundamentals.
We're chasing a huge market opportunity to connect people everywhere are let's see using our patented state based sale of broadband technology.
The approximately $5 3 billion mobile phones worldwide and the wireless service market generates over one trillion.
Annual revenue.
And according to the CMA approximately half of the world population do not have similar roadmap.
Our partners are industry, leading global companies like Vodafone are married.
Delaware and rock with them.
Indisputable leader in the industry, where we participate.
We believe that our services are going to be indispensable.
And we think that broadband connectivity is a human right that allows access to knowledge and information to the masses on a global scale.
Yes.
By the way of a quick update.
We are only scheduled for the planned launch of global group III the Soma.
We now have agreements on Mou's with mobile network operators, which represent over $1 8 billion subscribers.
We now have over 2100 and above in pending claims.
And over the last few months, we had achieved major milestones for the industrialisation above with that knowledge.
Including the acquisition and development of our hundreds of thousands of square feet second facility in Texas.
Together with our current 85000 square foot.
Headquarter.
This facility increases our overall manufacturing space in Texas for a total.
185000 square feet.
We are now known admission to industrialize our technology.
To allow the state based sale of broadband connectivity to.
Available everywhere.
Now moving on into Blue walk at three update.
Let's start with a little more detail on Blue Walker.
<unk>.
The satellite is on schedule.
For our planned solar launch on all testing and integration are near completion.
What is left.
For us is to store impact decided late into the final configuration.
After the final testing is completed and our Midland facility.
What <unk> seen this picture is blue Volcker three fly microbes.
Preparing to enter final RF compatibility test.
To launch <unk>.
Turning to page five.
Prior to the final environmental data, we will need to store impact this space for the last done.
This process involved with doing.
A 693 square feet phase III.
The acute the fleet into our launch vehicle adapter.
Which is.
Then mounted into the Falcon nine.
The process of restoring our satellite.
As an engineering challenge.
<unk> taken the company over two years to solve this.
After the last environmental test is completed.
A process that we expect will take approximately four weeks, we plan to perform the final inspection on this space.
Prior to moving moving to Florida for launch.
After <unk> so hard work on over 2100 patents and patent pending claims.
Company's confident he has created many of the key process designed to enable our cellular broadband system from this space.
Included but not limited to the following.
The ability to design build and.
Produce the milestones that are the building blocks of our spacecraft.
The technology to enable our face right to connect directly from its phase two regular modified mobile phones.
The ability to construct a system that can deploy a satellite with an opportune or 693 million square feet into our cubic volume capable of use with multiple launch partners.
And last but not least we have developed the knowledge to vertically integrate.
Key major components of the bill and construction of our spacecraft.
While we continue to expand our IP portfolio.
Now moving to industry update industrialization update.
In parallel with our technology. The development efforts, we have also been taking steps in the facilitation of our technology.
It takes some extension facility update.
In December we purchased a second facility in Texas.
Short drive from our current headquarters in Midland.
The appropriate the ultra several buildings with high quality sales. So we can build out our 100000 square feet of manufacturing space.
Pre install high capacity grade and additional land for more build out.
<expletive> Wei.
The facility will help us to grow our potential monthly satellite production from two satellite.
Six satellites per months or possibly more.
We have also been allowing.
Lining our supply chain to this target.
We have earmarked approximately $20 million of additional investment for the essential facility.
Are making great progress on the renovation.
This facility will be highly automated.
We'll focus on microphone assembly related solar panels assembly for our space.
We considered the purchase and planning around essential facility SMA you set for the neutralization of our technologies.
Now I will pass it off to Scott to provide additional business updates.
Thank you Bill.
<unk> on page nine.
In addition to the great technology and industrialization progress to date. The <unk> team also continues to advance the ball on the business side for.
We're building out the commercial opportunity enhancing our organization.
On the commercial side, we recently announced a new Mou with Orange group and operator with over 220 million subscribers globally.
This Mou will facilitate additional blue Walker three testing in an African country and we'll also explore opportunities for further collaboration to serve their subscribers.
With this signing there now one 8 billion subscribers represented by mobile network operators, with whom we have agreements and Emma and I will talk a little bit more about this opportunity in a moment.
We also signed a multi launch agreement covering <unk> III, the first Bluebird satellite and a framework for future launches.
This is an important milestone that brings increased certainty for our business beyond blue Hawker three.
Lastly, despite it being early days on the regulatory front, we remain active globally, both independently and together with the mobile network operators targeting approval for testing and commercial service supporting our base of initial regulatory approvals for the use of the band and three GPP frequencies in six countries.
On the organizational side, we increased employee count by 30% during Q4, which brings our full team to 566 comprised of 386 full time employees and consultants and 180 dedicated third party engineering staff as of December 31, 2021.
And as Bill mentioned, we also continue to actively protect our IP and increased our total patents and patent pending claims to 'twenty 100.
This IP portfolio continues to expand and provides us a competitive advantage.
Moving to page 10.
Given the recent activity here, we wanted to take a moment to highlight our mobile network operator relationships as they are critical to our business and our go to market strategy.
These agreements and understanding that support the $1 8 billion subscriber number has been put in place starting in 2018 to facilitate the development of our direct cell technology and lay out the key commercial elements of our <unk> relationships.
Many of the key terms of these agreements are intended to mirror agreements with our strategic partner Vodafone and.
And they leverage the spectrum and technology found in the over 5 billion mobile phones in use today.
Ultimately there are a few factors that we expect to drive success with our commercial relationships first M&A was like the solution because it will fix a real network problem amidst insatiable demand it will improve their service will drive new revenue and could support churn reduction goals.
Users will like the solution because it will fix our real network problem and it will be easy with no new hardware software required they just need to click yes, when they receive a text message offering service.
And the solution is a good one for ASC space mobile because the Super wholesale model, where the M&A was our customers designed to limit our operating expenses.
<unk> agreements with revenue share will let us participate in the upside and the easy sign up process allows us to grow subscribers quickly and with limited friction costs. Once our network is operational.
Now with that it is my pleasure to hand, it off Tom for the financial update.
Thank you Scott.
Since our last business update our teams were preparing to Blue Walker free test satellite World Summer launch and we've been executing on the setup of the company's industrial infrastructure to be able to meet our goal of producing six satellites per month during 2023.
So this and we are laser focused on the build out and preparation of our facilities.
At our new Midland facility, we expect to complete the first phase of the claim ROE build out during Q2 and are making other investments to construct what will be a state of the art satellite production line with automated machining processes.
We're also working on the build out of our network Operation Center and satellite Operation Center, which will be located at our 16000 square foot Engineering office located in Atlanta and Maryland.
Simultaneously, we are also integrating our ERP and enterprise systems, which will support the industrial manufacturing environment for the production of our Bluebird satellites.
Also in preparation for production our supply chain team continues to make solid progress with the procurement of long lead time sub systems and componentry for our Blue Bird satellites.
Based on our progress to date, we continue to reaffirm our cost estimates to build and launch the first 20 satellites with an average cost in the 13 million to $15 million range per satellite.
And for the full constellation, where we are still targeting to be able to build and launch a 168 satellites for an average cost per satellite of approximately $11 million.
Yes.
Now I'll move on to the Q4 financials at current operating expense trends.
We ended 2021 with $321 8 million of cash.
5 billion of total debt, which was incurred in connection with the Q4 purchase of our new AIG facility in Midland, Texas.
During the fourth quarter, our cash operating expenses, including engineering services R&D and G&A.
The $28 5 million, an increase of $7 5 million compared to the prior quarter. This.
This was due to increases across R&D engineering and G&A.
These increases resulted from the company's efforts relating to the completion of the Blue Walker three satellite and the preparation for the Blue Bird satellite production investments in our engineering team expenses relating to the setup of our supply chain for a bluebird satellites and other improvements to our operating infrastructure.
During the fourth quarter, our cash G&A costs were $10 7 million and we expect that our quarterly G&A cost will remain roughly in this range through the end of 2022.
During the fourth quarter, our cash engineering costs were $9 9 million and we expect to continue to see these costs continue to ramp through 2022 as our AI team prepares for the manufacturer of our Bluebird satellites.
We will also continue to invest in our in house electronics design adult development team focused on our Blue bar satellites and ground infrastructure. So.
So we'll give you a sense of scale, our engineering and AIG employees and consultants grew from 241 at the end of Q3 to 287 at the end of Q4.
We plan to continue to build this team to approximately 350 by the end of 2022.
In terms of our Capex to date, we've invested approximately $80 million for the build and launch.
The Blue Walker three satellite and.
And our capital investments for Blue Walker three are substantially complete.
Total investments in our property and equipment were $31 9 million through the end of the fourth quarter and this includes the $8 million purchase of our new AIG facility in Midland, Texas.
The company now has approximately 185000 square feet of industrial space in Midland.
Once the clean room build out of the new facility is complete we will have approximately 100000 square feet of ISO eight clean room manufacturing capacity.
We believe these facilities will be sufficient to support our manufacturing target to complete six production satellites per month during 2023.
Finally, as we ready for Walker three for its planned launch this summer and prepare the company for full scale manufacturing.
We are confident in the ability of our amazing team to execute our plans and deliver our game changing technology.
And with that I'll turn it back to Scott.
Before we go to the queue of analyst questions, we'd like to address a few of the questions submitted ahead of the call by our investors operator could you. Please start us off with the first question.
We have a question from Steve from Arizona.
And the dates for both Bluebird, one and Bluebird two were rejected from the launch services agreement.
Sharing those data during the earnings report.
Hi, Thank you for your question.
Well, let me start by saying that we plan to start production of Bluebird one satellite.
Later this year.
We think to ramp up our production capacity during 2023.
Towards our goal of reducing fixed atlas per months.
And then the multi launch agreement.
Recently sign it was designed to provide us.
Reflecting the lithium.
We begin to launch our blueberry production start late in 2022.
We have a question from Kevin from California.
Retail investors think confused on whether or not it's possible to launch BMW three without FCC approval can you clarify whether or not FCC approval is required for the planned summer launch.
Thank you Kevin for the question first of all we believe.
<unk> will come through on time for all with solid launch.
However, if necessary, we don't think that will be necessary, but if necessary.
Stock based outside the United States.
We do not think that the setup a requisite for our summer launch.
We have a question from Brian from Toronto asked.
You'll be competing directly with our elo constellation providers like space X Starlink and rural Undeserved market.
Hi, Bryan. Thank you for the question no we don't see.
It's basic.
One with.
Older.
Lee will sequence our competition through our system.
The way that we.
I'd like to explain it is we see our sales plus the sale our broadband sales.
System to provide connectivity directly to handsets, where we see the older systems.
<unk>.
Our broadband connectivity using terminals to connect home solar.
All of the type of location, so we do not see.
As in direct competition with.
Deal that legal systems.
We have a question from Chen from Nevada asked can you give an update at all in cost for building a single Bluebird.
I'll take that one this is Tom.
Thanks for your questions John .
We continue to reaffirm our current cost estimate to build and launch.
The first 20 blue birds to be in the $13 million to $15 million for satellite range.
We take materials and componentry into cost into consideration during the design process and approaches more but.
Through an automotive manufacturer, where we benefit from the scale production rather than a legacy satellite manufacturing model.
Since our last business update we have made solid progress in the supply chain negotiations and based on our progress to date. We are currently on track to meet our targeted cost.
Thanks Chip.
Thank you we have a question from Chen from Nevada.
Phase one fully funded if yes or no what are your plans for raising capital beyond Carling Warren.
I'll take this one as well.
Thanks again, thank you again for your question.
Let me start by saying that our balance sheet as a strong cash position with $322 million on the balance sheet at year end.
And one of our core corporate finance principles is to always maintain a strong balance sheet with a strong cash position.
But we currently estimate the capital S asset investments required to manufacture and launch the first 20 bloopers satellites.
To be between approximately $260 million and $300 million.
Which is expected to be incurred during 2022 and 2023.
Also let me point out that until we are self funding through operating cash flow.
We will be monitoring market conditions, and our goal is to opportunistically raise additional capital with the most advantageous terms possible.
We are continuously assessing various financing options are.
Our current expectation is that we will seek to raise additional capital before we launched the space mobile service commercially.
And with that I'd like to thank our shareholders for submitting these questions operator, let's open the call to analyst questions now.
As a reminder to ask a question you wanted to press star one on your telephone to withdraw your question press the pound key.
Please standby, while we compile the Q&A roster.
Our first question comes from the line of Bryan Kraft from Deutsche Bank. Your line is now open.
Hi, Thanks. Good afternoon can you talk about how much certainty. The Spacex agreement gives you as it relates to securing launch capacity for the Bluebird satellites in phase one.
And then a couple other related to that with some of the launch capacity seemingly coming out of the industry due to the war in Ukraine. How can you be so confident in your satellite build plus launch costs staying on plan I think Tom you reiterated the cost that you had previously disclosed and then lastly will there be.
Any additional payments due this year related to the Blue Walker three launch beyond the $23 million that you already paid thank you.
Hey, Brian how are you.
Well regarding the.
The launch the multi launch agreement.
We just basics that was.
Dawn to secure.
The initial the initial launches of.
We're BBB one hour operational provoking spacecraft.
And also the we're also addressing the global country.
Launch at the same time, so we will get three <unk>, one and <unk>.
First multi launch on the disagreement with the basics.
That's something that we try to do six months to a year ahead of time.
We have addressed with the leading with its basics.
Okay.
How far.
How much of the Bluebird.
Launches are.
Sort of covered in the agreement and I think that the when you announced the agreement it alluded to a framework for future launches.
Was just wondering what what kind of.
Certainty or confidence that gives you and the availability of launch capacity on if you could say anything there, but I was just curious about that.
Yes. This is Scott here.
We can't say much more than was disclosed but Spacex is currently doing more launches than anyone in the world right. So they offer the most ripe to space.
And this agreement gave us flexibility around timing and.
Rebooking and those sorts of things as well as making an early payment for the first satellite and then a reservation payment for another launch. So he can give us increased flexibility at the end of the day.
Okay. Thanks.
Can you.
The answer the last part of the question that I had asked about the additional payments.
Blue Walker, just curious from a cash flow perspective.
Sure. Brian This is Tom we're substantially complete with all the payments locker three.
Currently we have about $80 million invested there may be a few million dollars more to finish up but nothing material.
Okay, and Tom I know you reiterated the costs on the build and launch costs for your satellites.
Do you view, there being any more risk to that just given the.
Default.
Falling out of some of the industry capacity because of the Russia, Ukraine or.
Or do you still have a lot of confidence in that at this point.
Right.
The moment, we don't we don't see reason, while we address this agreement in advance.
And I also we see all of the significant amount of launch capacity coming into the market from a multitude of sources.
This agreement is a good bridge into that.
Great. Okay. Thank you very much.
Thank you. Our next question comes from the line of Griffin box from B Riley Securities. Your line is now open.
Hi, yes, thanks for taking my questions.
First off so given the recent three GPP release, 17 standard and then related to that.
Focus of <unk> supporting non terrestrial networks I was hoping you guys could help us understand how if at all of this.
Back to your technology.
Well I think I've seen all of the Atlanta, <unk> really supportive of our technology.
At the end of the day in order to have broadband connectivity directly to a handset.
You need a large satellite with all the patents and IP that we own.
Around 2000.
2100 pattern.
But in claims.
No.
We see it something that is actually beneficial for us help us to source <unk> from more vendors.
But we think.
Our IP.
Unique capability to connect directly to a handset.
Directly from this space is something that is unique for us.
All of these is approved.
Our technology, leading the way to go when you want to connect directly from the handset.
Got it thanks, Bill I appreciate that color and then I was curious too with the rising Leo satellite deployments. There is obviously a lot of talk and concern in the industry about the implications of orbital debris and Kessler syndrome. I'm wondering if you could help us understand how you're thinking about this and whether or not.
You anticipate any issues down the line from a regulatory perspective as it relates to your timeline for deploying the full constellation of.
<unk> hundred 70, some odd satellite.
Yes.
One thing that I would say different.
Any other proposed technology, we don't need thousands of satellites, we need only few hundreds of them.
And also are featured on our satellite 80 that we had a very safe profile in the directional movement that really do not make us.
More prone to any collisions on any of the regular Leo satellite.
No.
So that has been incorporated in the design by.
Reducing the number of require satellite to provide global service.
Robust space based global service and also the profile or the spacecraft in order to be very scene in the individuals detract in order to basically not be prone to collisions.
Got it okay great. Thanks, that's it from me guys. Thanks again I appreciate it.
Thank you as a reminder to ask a question you will need to press star one on your telephone.
At this time I am showing no further questions I would like to turn the call back over to Aes teeth based mobile for closing remarks.
Thank you operator, our company is building a space based cellular broadband network designed for use with the phone in your pocket today.
I want to thank everyone for joining both the shareholders and the analysts for the questions and hope everybody has a great rest of the week.
Thank you see you next time thank you.
This concludes today's conference call. Thank you for participating you may now disconnect.
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