Q4 2023 AST SpaceMobile Inc Earnings Call
[music].
Good day, and thank you for standing by and welcome to the E. S. T space mobile fourth quarter 2023 business update call. Please be advised that today's conference is being recorded.
I'd now like to hand, the conference over to your host today, Scott with Muskie Chief strategy Officer NFC based mobile. Please go ahead.
Scott: Thank you and good afternoon, everyone let.
Scott: Let me refer you to page two of the presentation, which contains our safe Harbor disclaimer.
Scott: 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.
Scott: Many factors could cause actual events to differ materially from the forward looking statements on this call.
Scott: For more information about these risks and uncertainties. Please refer to the risk factors section of empty space mobile the annual report on Form 10-K for the year ended December 31, 2023, with the Securities and Exchange Commission and other documents filed by S. T space mobile with the SEC from time to time.
Scott: 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 during this call.
Scott: Also after our initial remarks, we will be starting our Q&A section with questions submitted in advance by our shareholders.
Scott: Now referring to page three for those of you who are new to our company and mission. There are over 5 billion mobile phones in use today around the world, but many of us still experienced gaps in coverage as we live work and travel.
Scott: Additionally, there are billions of people without cellular broadband who remain unconnected to the global digital economy.
Scott: These markets that we are pursuing are massive and the problem. We're solving is important and touches nearly all of us.
Scott: In this backdrop S. T space mobile is building the first and only global cellular broadband network and space to operate directly with everyday unmodified mobile devices supported by our extensive IP and patent portfolio and designed for both commercial and government use.
None: With that I would like to introduce <unk>, chairman and CEO of Bell Avalon.
None: Thank you Scott I would like to welcome everybody to our Q4 2023 business update call.
None: He has been an incredibly busy few months here of the Justiss based model and I will walk you through updates on our key areas of focus today.
None: First are these totals a year, we announce it today you can best minutes from AT&T, Google umbrella that phone, which represent our board are confident in our technology and business model.
None: With this we hadn't it necessary funding on hand to execute near term. It's a <unk> plan for the launch of five 700 square foot blood one blueberries satellites on the niche of next generation 2400 square foot bluebirds.
None: Which will surpass blog, one are the largest face that ray in in-law, Ed or base.
None: We're also very excited to continuing to advance the caution with additional strategic partners. Following the blueprint strategic investment alone signed commercial payments.
None: Another great development on our commercialization worthy New contract award, we announced with the United State governments about Brian contractor, which we believe will open the door for dual use commercial and government applications of our satellites.
None: On the regulatory front, we have received great news recently with the new FCC rules, which we provide a pathway to lock over 200 megahertz over spectrum for directly buys to support the rollout of our technology.
None: The FCC bought at March 14th to approve the <unk> co overthrown of space, which was published in February.
None: This should facilitate a S D. It's based mobile FCC application to provide commercial services in the U S D.
None: This will simplify the overall obligation process by making the standout rules, which will cover the majority of these baseball applications.
None: When D C paid mainly regulatory entities globally will follow the new U S regulatory regime to regulate our services, we're starting to see these in large countries like Brazil.
None: Moving to manufacturing our <unk> hundred 85 sauce and acquired four Texas facilities are fully operational we production assembly and testing.
None: Unfortunately production was negatively impacted primarily by two suppliers leading to delays in integration and testing for these five 700, a square foot block one bluebirds, while we have also face initial challenges on the manufacturing of our new upgrade microns to be used for block one and block two.
None: In order to sell at a production.
None: Our next satellites.
None: And reduce dependency on outside suppliers, we acquire a license to manufacture one of the components and replace the older supply it with our own IP and design at.
None: At the same time, what rapidly stabilizing our micro production line.
None: This is important because these are the same micron building blocks for our next satellite launch.
None: With the supplier fixes, we will be able to manufacture in house and through our third parties of our own IP approximately 95% of all satellites took system for our next generation block to Bluebird satellite securing our supply chain further.
None: Next I can share updates on our orbital launches to provide a near term timeline, we expect that the five 700 food blow one bluebird salad will be transported for in our assembly facility to the loan side between July and August 2024.
None: And looking ahead, we have secured an additional launch contract for the first 2400 square foot next generation block to Bluebird satellite with a contract launch window from December 2024 to March 2025, which will surpass blog, one as the largest phase iia in loaded orbitz.
Also we announced last week, our custom ASIC entering the tape out phase, which is planned to enable 120 Megabits big data right on 40 megahertz of spectrum channels. These novel costume and low power architecture was developed to enable up to tenfold to improvement in processing bandwidth on each niche.
None: Generation 2400 square feet block, two blue where satellite did he sign off our custom ASIC with our processing volumes of approximately 10000 megahertz per satellite.
None: Long with the face with the large phase Iia easy enabler of Troy space based cellular broadband with a relatively small number of satellites.
None: Tcf will represent over four years equivalent to an estimated hold it at 15 nine years of intensive work will approximate $45 million of development on the AC alone.
None: And lastly in addition to the strategic the caution referred earlier.
We are very excited to have received three non binding letter of interest for non diluted quasi governmental funding.
None: As a result, we have initiated the process with these funding sources onshore will be we will be explaining more to you about these.
None: Turning to page five the investment from AT&T, Google umbrella phone are of a great significant for us. They are some of our largest perspective customers alongside the U S government.
None: Google in particular, the agreement to collaborate on product development will be a great benefit for a prospective M. N O customers, we had agreements and understand that we more than 40 mobile network operators globally, which have over 2 billion existing subscribers globally.
None: The T N T and Google joined Vodafone <unk> American Tower, and Bell, Canada, as an investors I could not be more proud to have these great organizations alongside us on the execution of our mission.
None: And as I stated before we continue to advance discussions with additional strategic partners. Following the blueprint with strategic investments alongside commercial payments.
None: Turning to page six a few weeks ago, we announced a new contract award with United State government through a prime contractor.
None: What do they stepped back.
None: On what is the opportunity here, our large phased array antenna technology in our space is able to address many potential opportunity for <unk> for mission critical capabilities in the government sector.
None: The lost opportunity on high power.
None: De lever into orbit on our locals compared with historical benchmark feed to decide who will remain till model for capturing commercial networks, we do I'll use capabilities.
None: And while we remain focused on a large commercial opportunity for our business. We're excited about initiatives underway with U S government as well.
None: We have begun recording initial revenue under this contract in Q1 'twenty 'twenty four.
None: Also there are potential order awards, including additional phases of these contracts are available to us in calendar year 2024.
None: Turning to page seven I want to take a moment to walk through why having a Renaissance is a really big deal and it's critical to achieve true broadband furnace based.
None: Our novel costume and low power architecture was developed to enable up to 10 fold improvement in processing and bandwidth on each satellite.
None: Like which will be lighter cheaper to produce and will require less mass door with.
None: The tape out would be completed with TSMC, the world's leading foundry.
None: Following war with leaders in the semiconductor industry over the last years.
None: For those of you, who who are not familiar with the industry jargon. The tape out means that we and our development partners completed a sign of the AC after four years of work and $45 million of investment.
None: We have now formally handed over those designed to TSMC to produce cheap for the initial set of AC to enable the 'twenty 400 square foot net generation block, two bluebirds, which will be expected to receive later this year.
None: I am extremely proud of the team are four.
To reach this critical milestone our AC along with our large and Dana will enable up to 120 megabits per second data rates for being on our 40 megahertz channels and 10000 Mega heard the processing bandwidth that combined with our large phase Iia EZ key enabler for true broadband furnace space to the phone that you're accelerating your.
None: Pocket.
None: I will now pass it to Scott to provide a brief regulatory update.
Scott: Thank you Bill.
Scott: On page eight I'll take us through some of the important progress on the regulatory front.
Scott: To provide a reminder for everyone. We made our first filings with the SEC back in 2020, and we've been in front of them regularly around the direct to device using standard unmodified cellular phones from a very early stage.
Scott: Importantly, the unanimous decision to adopt the new rules and March facilitates our FCC application to provide commercial service in the U S. Because it's specifically enables over 200 megahertz of low band frequencies for director device use.
Scott: Just prior to this FCC vote. We also filed an updated application to reflect a licensing jurisdiction with the U S. This represents a closer strategic alignment of Ast's based mobile network build out and future network operations in the United States.
Scott: And internationally.
Scott: Brazil announced an initial regulatory framework for director device as well.
Scott: This framework enables us to test in Brazil, with Tim in Brazil in Claro, a subsidiary of American mobile.
Scott: And with that I'll hand, it off to Sean for our financial update.
Sean: Thanks, Scott and good afternoon, everyone. The ASC space mobile business continued to make progress this quarter with significant fund raising in January <unk>.
Sean: <unk> work on the regulatory front.
Sean: Substantial level of activity in our assembly integration and testing facility in Midland focusing on the production of five BB one satellites.
Sean: I would also like to point out that we have entered the tape out phase of our custom ASIC chip.
Sean: The ASIC chip will provide for increases in processing capacity that will significantly raise the inventory gigabytes on future planned satellites, we can sell through our <unk> partners to end users. The ASIC design has been a normal four year process supported by a large investment, which we believe will be.
Sean: Difficult for competing systems to develop from a standing start.
Sean: As we get closer to the completion of the production of our five block one satellites I want to recognize and thank the hard working teams of engineers technicians and suppliers who are completing this incredible task. We believe our strategy of backward integration into the assembly integration and testing of the satellites will enable.
US to build our constellation Years' ahead of an outsource strategy.
Sean: And at a lower cost.
Sean: I want to move on to reviewing our key operating metrics for the fourth quarter that are displayed on slide nine.
Sean: On the first chart, we see the fourth quarter of 2023, we had non-GAAP adjusted cash operating expenses of $38 6 million versus $37 3 million in the third quarter.
Sean: non-GAAP adjusted operating expenses exclude certain noncash operating costs, including depreciation and amortization and stock based compensation.
Sean: Our fourth quarter non-GAAP adjusted operating expenses increased by $1 3 million versus the third quarter, our research and development expenses rose by $1 5 million this quarter due to increased expenditures on engineering models and prototypes in connection with our manufacturing process our R&D.
Sean: Expenses consist primarily of nonrecurring development activities for which we typically engaged third party vendors and payments are based on the completion of milestones.
Sean: Our engineering services expenses increased by zero point $5 million and our general administration expenses decreased by zero point $6 million in the fourth quarter as compared to the third quarter.
Sean: Turning towards the second chart on this page our capital expenditures for the fourth quarter were $33 9 million versus $71 7 million for the third quarter. This figure was made up of some modest launch payments capitalized direct materials for the block one satellites additional facility and production equipment for our assembly.
Sean: Integration and test facility in Midland and the delivery of commercial grade software from Nokia.
Sean: As of the end of the fourth quarter, we have spent over 90% of the expected amount for the five block one satellites, we are still projecting to spend approximately $115 million for the five BB one satellite.
Sean: And on the final chart on this slide we ended the first quarter with 210 $8 million in cash.
Sean: We're continuing to pursue using the balance of our senior credit facility, which would add an amount of capital in the low forties efforts around raising strategic capital may take precedence over the senior credit facility.
Sean: And at a minimum the deferment has reduced a bit of a negative carry would have incurred if we had accessed facility earlier.
Sean: As we stated in our 10-K, we believe this cash as well as our ability to raise capital through our existing facilities is sufficient to support our expenditures for at least the next 12 months.
Sean: As we've also discussed in our 10-K, our cost positions and capital plans are quite modular and has characteristics provides us the flexibility to increase or decrease our rate of expenditures depending upon changes in our build out plans and availability of capital. This flexibility provides us comfort that we can manage.
Sean: Our liquidity profile dynamically depending on our rate of raising capital.
Sean: Earlier this year, we provided guidance on our expected operating expense levels.
Sean: We have been supporting the development of efforts of our two critical satellite design block, one and block to our ASIC chip design and the construction of five PV one satellite.
Sean: The completion of the BB, one work and a significant portion of the BV to in ASIC design work is expected to result in a material reduction in our adjusted operating expenses and future capital expenditures.
Sean: This reduction in cash expenditures will be done without a material reduction in our employment head count as most of these reductions are related to the completion of third party work.
Sean: Overall, our adjusted operating expenses is expected to decline from an average of $38 7 million per quarter. During 2023 to an average of $30 million per quarter for 2024 as the block one design is completed and the block two design approaches completion.
Sean: These figures will vary depending upon manufacturing activity in each period. This guidance does not include the expected cost of approximately $15 million related to the tape out and initial production of our ASIC chips.
Sean: <unk> related costs will be recognized as an R&D expense in subsequent quarters in 2024 as the milestones are completed.
Sean: We also plan to reduce our outlook for capital expenditures as we reached the final investment for BP one.
Sean: The next three quarters, we expect to spend in the aggregate approximately $50 million to $60 million in capital expenditures any increase beyond these levels will be in conjunction with the timing of the deployment of our block two satellites, which could be either in late 2024 or the first quarter of 2025.
Sean: Timing of the changes in our adjusted operating expenses and capital expenditures as I, just described could be delayed or may not be realized due to a variety of factors.
Sean: On a final note I'd like to provide some additional detail on one of our additional funding strategies, which is complement to our recent strategic ground satellite and other infrastructure providers have historically utilized government and quasi government institutions, which are known as export credit agencies to source cost effective.
Sean: Long term debt funding of large projects.
Sean: The key underpinning of these funding structures has been proven technology and the sale of significant capacity through long term agreements to large creditworthy entities.
Sean: We have begun the process of approaching these funding institutions, which includes the hiring of an adviser and developing marketing materials. After preliminary discussions with a few of these agencies. We have received letters, which indicate their willingness to evaluate this type of financing with us we.
Sean: We are in the very early stages of this process and as we progress I will provide updates on these potential financings there can be no assurance that we will be successful in the pursuit of this type of financing and funding and.
Sean: And with that this completes the presentation component of our earnings call and I pass it back to Scott.
Scott: Thank you Sean.
Scott: Before we go to the queue of analysts' questions, we'd like to address a few of the questions submitted ahead of the call by our investors.
Scott: Operator could you please start us off with the first question.
None: Trevor from Colorado, as whereas the company on scaling up production to be able to meet the four satellites per month figures will that production beginning immediately.
None: Will there be a serious delay while the facilities are being built.
None: Thank you today before the questions. So first of all let me let me report the facilities are fully built.
None: We had all the testing facilities for our built in house.
None: We do not require in any step of the build of our satellites.
None: Do we taken out of our facilities, we had 185000 square feet facility of manufacturing.
None: A.
None: Capability, we are with the addition of these two suppliers.
None: Cause us.
None: <unk> problems in block one.
None: We are getting to a 95% vertical integration hold the way from the ASIC.
None: All these structures on everything that is required to build and launch. These diesel spacecraft. So so we don't we don't anticipate any any delays related to facility building a manufacturing building.
A.
None: Also the other aspect is the same building block that we use for broke one.
None: Got it that it took us time to get a stabilized two onto.
None: To produce outpaced would be the same five parks that will be used for block two photo satellites going forward. So so.
None: Of course, our focus right now is.
None: <unk> put in the blood ones.
None: In orbit.
None: Again, we estimated that we would be at the launch by us.
None: In around June July.
None: August.
None: <unk>.
None: We're ready.
None: Working on producing on the on the mix on the next launch that is on a window between.
The December and March.
None: Christian from Estonia at could you. Please give comments on the $100 million stock offering earlier this year. The reasoning why it was rushed and structured the way it was launched.
Thank you for that.
Taking the advice of our banks, we believe the offering structuring we chose with the best route to raise additional capital to complement our strategic capital raise at the end of the day the transaction achieved our goal of providing a significant level of funding. So that we can continue to pursue our business plan.
None: Moving forward, we will continue to look to raise capital with strategic players in the wireless ecosystem like we did in January and we are working to raise long term low cost debt capital with export credit agency agencies as I described during my presentation. I would also point out that most of the senior management team is aligned with the shareholders as most of their car.
None: <unk> is made up of restricted shares and options.
So complemented to Joan.
None: <unk>.
Answer.
None: Why we needed to do that.
Public equity deal.
None: We needed to prioritize timing.
None: We needed to complement.
None: The investment from AT&T, Google umbrella phone to keep on target too.
None: Our production plan and our build on our launches.
None: And at the same time.
None: We continue.
We're very excited about the strategic.
None: The original list of <unk> support.
None: We'll continue to have and also the non dilutive funding.
None: Shown on the team is working.
In order to complement its a <unk>.
None: Financing, we non dilutive financing, which is which is why we have.
None: Commenced to receive a letter of interest in that regard.
None: In addition, with prepayments from <unk> government payments.
None: Dennis from Chile.
None: Due to their larger size to Bluebird satellites in block two need a spacex starship rocket to be launched.
None: Thank you Daniel for the question no. The answer is not a matter of fact.
None: We're launching five bluebird wants.
None: And the next launch.
None: And we can launch.
Also 509.
None: An older providers, including the one that we will be using for our next launch.
None: Past due loans for Brooklyn.
None: So we have built our hour.
Our satellites to be completely agnostic to where most providers use we obviously.
None: Count on Falcon nine.
None: IL six Heathrow.
None: The upcoming new launches future new Glenn.
None: Uh huh.
None: Older launch providers medium to large size.
None: Vehicles. So the answer to your question is no we do not require or we don't.
None: We're not counting with the star chip.
None: For our Bluetooth launches.
None: Lead in from New Zealand as Hal.
How about the appointment as the commissioning of the ITU affected STS mission.
None: Linda I mean at least an hour hour.
None: Mission is to enable broadband.
None: Globally.
None: Regarding where people live work and the galaxy phone that they had in their pocket.
None: The broadband Commission had a single focus is making sure that the $2 6 billion people remain unconnected get connected.
None: I do not know.
None: Any order program.
None: A diehard.
None: That had a global in scope that have truly the ability to make a significant dent in the in the amount of people that get connected to broadband through their phones that our program. So this is this is in alignment with the broadband commissioning inevitable information that we had great participants.
None: <unk>.
None: The owner of <unk> in Mexico, we have the chairman of the FCC, We had the chairman of Horizon, we have the chairman of many of the large wireless ecosystem, including a very vibrant.
None: Full participation of governments regulators and peoples core interest is making sure that.
None: Dot.
None: The fact that connectivity human right get Institute on a global basis. So we see these are assumptions that support our mission.
None: It is a program, where we are proud to be part of it.
None: In the broadband Commissioner we have many.
None: Many.
None: New.
None: Initiatives on past locals locals phones for democratizing access to knowledge and information.
None: Okay.
None: Our universal network available to everybody on a global basis. So so we think that this is this is supportive.
None: As part of of our of our work on making sure that everybody regardless of where they will work have access to broadband in their phone.
None: And with that I'd like to thank our shareholders for submitting these questions operator, let's open the call to analysts questions now.
None: Thank you and now we will be conducting the last question and answer session and if you'd like to ask a question you May press star one on your telephone keypad, a confirmation tone will indicate your line is in the question queue. You May Press Star two if you would like to remove your question.
None: And for participants using speaker equipment, it may be necessary to pick up your handset before pressing the star.
None: And one moment, please while we poll for questions.
None: Our first question comes from the line of Chris Quilty with Quilty analytics.
Christopher David Quilty: Please proceed with your question.
Christopher David Quilty: Alright. Thanks, just first question on the microns and bringing those in house.
When you look at the supply chain for the Micron manufacturing are there any elements of that that were <unk>.
Christopher David Quilty: <unk> is particularly difficult or where you might have pricing issues relative to a vendor that might have had.
Christopher David Quilty: Higher volumes associated with certain components.
In order to manufacture them.
None: Hi, Chris.
Christopher David Quilty: Thank you for the question.
Christopher David Quilty: The micron spot, which is as you know is the building block of the of the satellite is is all components are either design or manufacture with us we basically manufacture from the solar panel.
Christopher David Quilty: All the way to the.
Christopher David Quilty: The all the electronics batteries of structures everything that goes into them.
Christopher David Quilty: The currently for this launch the Microsemi based on FPGA. So thus we're buying those from.
Christopher David Quilty: From.
Christopher David Quilty: From existing source for the first block one they will be also be sba's. So then we move forward we need following launches are with the AC we the 85000.
Christopher David Quilty: Launch so the just as a clarification the two suppliers that give us.
Christopher David Quilty: In Asia, we have no naming them they were noted in Mike.
Christopher David Quilty: Out of the or the Aussie Contracept system.
None: Oh perfect.
None: Second question with the <unk>.
None: <unk> for regulatory purposes to the U S. How does that impact your standing.
None: In any regulatory filings or does it.
None: We don't we don't see it.
None: In fact, none of that I think.
None: We are finding our opportunity with your hillerman potential fundings from United States.
On.
None: <unk>.
On the now that the FCC had.
None: How the framework that we think we will lead the rest of the world and how and how to regulate our product globally, we sold it to us.
None: The right time and the right.
None: Process to actually move our satellites to our U S. Aflac. So we're very proud of that.
None: We see that to be able to accelerate and we are working very closely now with the FCC.
We are obviously very happy with the.
None: With the new regulatory framework.
Now we start seeing replicate it in large countries.
None: Through the process of basically reusing a spectrum that is using terrestrial.
Deployments thrown a space, which is actually the core of our.
None: Of our technology, reducing the existing phone that is already in the focus of everybody.
Using it for connecting regardless, where the people leaves we got to live with the <unk> on a global basis.
None: Okay.
None: Very good thank you ill circle back in the queue.
None: Okay.
None: Yes.
None: Thank you. Our next question comes from the line of Mike Crawford with B Riley Securities. Please proceed with your question.
Michael Roy Crawford: Thank you I heard that youre, putting five black lung Bloomberg zone on the Falcon nine.
Michael Roy Crawford: At the end of the summer.
Michael Roy Crawford: Many blocks.
Michael Roy Crawford: Can you fit on to the launch that Youre looking for in December to the March timeframe and it sounds like that's from a different launch provider Spacex.
None: Yes. The next provider is known as Spacex is largely broken into loan vehicles. We had we're not we're not disclosing yet who the provider but is it going through that.
None: Already negotiated on the launch window is already agreed between December on March 25.
None: We're putting one satellite on that launch and thus also an FPGA base.
None: But is the large 2400.
None: Jim.
Square feet block two type of satellite.
None: Okay. Thank you and then.
None: Thank you.
None: Previously disclosed.
None: Intent to.
None: Enable in this service in Japan in 2026, how many blocks, who just need to be in service.
None: For you to be able to implement service in Japan.
None: Around 45 satellites.
None: The initial service launch, we do $45 60.
None: We are working very hard on.
None: Now, yes, just as a clarification deserve the same block one micron to say double micro that we're producing now the one that we continue to produce for block two.
It took.
None: More than expected to stabilize that line is a new micro when a new full capability, we'd ever seen vertically integrated by ourself.
None: But the good news that is past us.
None: We plan to continue to do that.
None: To get to a cadence of Av.
None: 72 satellites per year later.
None: Sweet.
None: It's stabilized now have enough parts to be able to do that.
None: The first ones are the most difficult.
None: To get up into space. They are also the one where you implemented the first time the changes on the upgrades that you're doing them.
None: Okay. Thank you and then a final question.
None: As it relates to your new strategic partner, Google. So I know your service works with just any phone that people already have but.
None: Are there certain things that Google could do to say Android operating system to make that.
None: Those firms connect even better with your network. Thank you.
None: Yes, I mean, you're absolutely right, our our our network our technology is completely open it for any phone to <unk> <unk> in the future <unk>. So we are completely independent of the phone manufacturer or actually the <unk> on the phone.
None: However, we believe we are super excited about the relationship with <unk>.
None: With Google.
None: <unk> as you know the the largest ecosystem provider for cellular phones with over $3 5 billion devices on a global basis.
None: I agree to collaborate in product development.
None: And implementation of features on the on the Google ecosystem that <unk> on the sold benefit <unk> for our customers.
None: In the end users the usage based model. So we're very excited about this relationship is super strategic for us is to create value.
None: On the on the Andrew ecosystem for our customers and end users.
None: Alright, Thank you very much.
None: Thank you.
None: Our next question comes from the line of Benjamin soft with Deutsche Bank. Please proceed with your question.
Benjamin Soff: Hey, guys. Thanks for taking the question.
My first one is just on the government contract is there any additional color you can provide on the type of service, you're providing and just generally how do you think about the market opportunity to work with government agencies in the U S and abroad, and then I have a follow up.
None: Yes, I mean the.
None: We do see the learning opportunity to be very very large I mean, obviously, a technology that can deliver.
None: Race face at rates of these sites.
None: Power that they generate and if you compare with the benchmark costing of that today.
None: For non communications applications, we're doing a lot of several order of magnitude.
None: Higher costs that we can do.
None: Despite the fact that we're doing it we had 185000 square feet facility, we're ramping our production we speak so the long end is super interested in this we do see.
None: These opportunities not only to be in the communication side, which is an obvious application being able to connect any <unk> any cellular device.
None: The Gorman use on a lower basis will defend users use on a global basis, but also there are a multitude of applications all of the same technology without any major changes to our <unk>.
None: Technology do we using the non communications.
None: Base, which we think is a very large market very large opportunity.
None: We see it also in combination of the prepayments that we expect to continue to get from <unk> <unk> from governments and the non dilutive funding that we see that the most efficient way to take out our network for.
None: We continue to build satellites based on on these agreements that we are starting to see so we're very excited about the hormone opportunity.
None: Sure.
None: And we think that we're in the very very early innings of that.
None: All we can do.
None: For our government.
None: Our technology.
Great and then my second question is on the block III satellite.
None: It has been a lot of moving pieces over the last couple of years and then just wondering wondering what your latest thoughts are on the timing and costs for these last two satellites and if there had been any changes recently.
None: Yeah, no we're maintaining our guidance of course for the block two as I said the parts. The building blocks are the same.
We're building for block one so the line our assembly line our processes are.
None: They can maintain.
None: We now control around 95% of our cost to build our satellites and also our supply change.
None: And that include for block two so we had.
None: A bloke tool we use these micro mills, which are the same for Borgwarner on block two.
None: They they rely on the St Solar system same same same solar panels.
None: Yeah.
Battery systems and structures.
On software so to maintain them. So we are that we had that done. So we are very excited to where we are on that.
None: On.
None: We have taken an approach of incrementally.
None: <unk> features to the satellites, so we'd love to work.
We reuse that but they obviously that they are larger they are 2400 square feet, each which is the what do you make it possible to get to 120 megabits of data right.
None: On a.
None: 10000, megahertz or processing bandwidth, which is really the only way to pro.
None: <unk> broadband directed to regular handsets.
None: Helpful. Thank you.
None: Yes.
None: Thank you. Our next question comes from the line of Chris Shaw with UBS. Please proceed with your question.
Christopher David Quilty: Great. Thank you for the block one satellites can you just update us on how youre thinking about initial use cases and expected revenue generation as you await more continuous coverage and then once in orbit can you also remind us the timeline for testing and calibrating those satellites and what are the key milestones that you need to reach to commence commercial service.
Yeah.
Yes.
Christopher David Quilty: The initial the known commercial usage.
As normal installation base is basically use it by satellite. So you said the revenue generation for that is incremental and we have satellites.
Christopher David Quilty: The for the <unk>.
We will be doing is immediately integrating that to the core to the core system.
Christopher David Quilty: We keep launching more satellites so so the.
Christopher David Quilty: Dave.
Christopher David Quilty: We disclosed that he sent initial payment by AT&T with the launch of <unk>.
Christopher David Quilty: There is a pre agreement with Vodafone to start using them and some of the core markets.
Christopher David Quilty: There is some revenue that we start generating initially also for known continue service.
Christopher David Quilty: We build the satellites, but it is a combination of revenue for nonwovens for non commercial.
Christopher David Quilty: Is it scale.
Christopher David Quilty: On a satellite by satellite basis.
Christopher David Quilty: For commercial is for non continuous service type of obligations, we start to seeing early revenue on that but our plan is to rapidly ramp with the support of of the Gorman contracts non diluted revenue prepayment revenues to continually wheel into.
Christopher David Quilty: Italy constellation So we're doing that by region, whether we end up prioritizing.
Christopher David Quilty: <unk>, our investors with us on <unk>.
Christopher David Quilty: To support on the <unk> of the constellation.
None: That's helpful. Thank you and I appreciate your dialogue with potential <unk> customers is likely ongoing but any update you can give on where you are discussion stand and are you seeing interest beyond the already announced set of partners that you have.
None: Yeah. The answer is yes, absolutely we have 48, approximately 48 operators that we had agreements.
None: We will use with them.
None: While using the same formula that we.
None: We use initially with AT&T and below the phone, we'll continue to do that.
On.
None: In a in a way off.
None: Prepayments.
None: Or advanced payments and sometimes combined.
None: <unk>.
None: A strategic investment or not so we had a very very vibrant ecosystem. We have now radiating D with a phone Google Rockwood then built.
None: Bell, Canada on American tower.
None: But we had over 48 relationships.
None: We are in constant.
None: Constant dialogue.
Everybody is super interesting in seeing our constellation App as soon as possible.
None: Everybody wants their regions and their customer to be prioritized and we take in what they can what they can advantage of that.
None: The relationship is very symbiotic between us and the operators.
None: Great. Thank you for all the color.
None: Thank you.
None: At this time I am showing no further questions I would like to turn the call back over to management for closing remarks.
None: Thank you operator.
None: We're building a space based cellular broadband network designed for the use of the phone in your pocket today I want to thank everybody for joining both shareholders and analysts for their questions and hope everybody has a great week. Thank you.
None: And this concludes today's conference you may disconnect your lines at this time.
Thank you and have a good day.
None: Yeah.
None: Yeah.
Mhm.
None: Hum.
None: Mhm.
None: Uh huh.
None: Uh huh.
Uh huh.
None: Hum.
None: Hum.
None: Hum.
None: Sure.
None: Hmm.
None: [music].
None: Hum.
None: Yes.
None: Okay.
None: [music].
None: Okay.