Q1 2025 AST SpaceMobile Inc Earnings Call - Q&A
Speaker Change: Andres Ituarte, Christopher Schoell, Michael Crawford, Timothy Horan
Speaker Change: Please go ahead.
Speaker Change: Thank you and good afternoon, everyone. Today I'm also joined by Chairman and CEO of Bell, Avalon, and CFO and Chief Legal Officer, Andy Johnson.
Speaker Change: 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. Many factors could cause actual events to differ materially from the forward looking statements on this call for more information about these risks.
Speaker Change: And uncertainties. Please refer to the risk factors section of Asti space Mobile's annual report on Form 10-K for the year that ended December 31, 2024, with the Securities and Exchange Commission and other documents filed by the by S. T space mobile with the SEC from time to time.
Speaker Change: Also after our initial remarks, we will be starting our Q&A section with questions submitted by our shareholders.
Speaker Change: For those of you who may be 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. Additionally, there are billions of people without cellular broadband and who remain unconnected to the global economy. The markets. We are pursuing are massive and the problem. We are solving is important and touches nearly all.
Speaker Change: Of us 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 and supported by our extensive IP and patent portfolio. It's now my pleasure to pass over to chairman and CEO of Bell Avalon, who will give us an update on our activities since.
Speaker Change: Our last public call two months ago.
Speaker Change: So you just got the first quarter was our strongest star for US and we're currently on an incredible inflection point for the company.
Speaker Change: We start to accelerate the launch and scaling of our network and revenue starting to come in we continue executing on Saturday manufacturing commercialization regulatory initiatives and today, we are unveiling our or with our launch plan with five is scheduled launches over the next six to nine months I will touch on each of those key pieces.
Speaker Change: In more detail.
Speaker Change: Let me start by these calls you know we're all with the launches scheduled we expect to deploy over 60 side later in 'twenty five 'twenty, six which will drive continuous coverage in key markets such as the United States Europe, Japan.
Speaker Change: The U S government on all the rest of the markets, what we anticipate five or with the launches of corn over the next six to nine months, we'd all with the launches of corn every one to two months on average during 'twenty five 'twenty six hour campaign will begin with achievement of our first block to Bluebird satellites in Q2, we launched.
Speaker Change: During July.
Speaker Change: Simply put our speed to orbit means speed to commercial services, killing our constellation is critical to delivering on the global opportunity of providing space based era of connectivity to the modified phone in your pocket today.
Speaker Change: Saddam manufactured remains on track accelerated our target of building 40 block to Bluebird satellite each the largest ever commercial communication satellite Lloyd orbit alongside contracted or with the launch of for every 60 satellites as of today, we have accelerated our manufactured at airports in order to move at a rapid speed to reach.
Speaker Change: Our goals of scaling our Sally manufacturer will enable us to March.
Speaker Change: Or exceed the launch cadence necessary to build out our space based celeron. There were four continue Celebral bankole rich beginning with the key Mark has mentioned mentioned it earlier.
Speaker Change: In doing so we're also on track to reach manufacturing cadence will seek satellites per month during the fourth quarter of this year. We also expect to reach.
Speaker Change: We've only manufacturing cade in foil where microns or face a reproduction during the third quarter of this year.
Speaker Change: We expect to achieve this cadence through our expanded global footprint and streamline process and 95% vertical integration strategy, our content manufacturing in house or through third parties using own intellectual property helped drive speed.
Speaker Change: Certainty lower cost flexibility umbrella will do.
Speaker Change: Specifically the production of our micros or main building block for our satellites are fully vertically integrated within our manufacturing ecosystem. This is an extremely important proceeds we'd had help rightsize our lines of production I had enabled us to operate with complete control over the entire in micro production process now that.
Speaker Change: Our solid manufacturing cadence and accelerated production efforts support our launches scheduled we're now confident that ever we're now more confident than ever in our position to continue executing other skill we lead the industry with cellular broadband from this base.
Speaker Change: On the AC front, our novel AC cheap are currently undergoing a.
Speaker Change: Our assembly and testing stages, while the validation and qualification stages on nearly completion.
Speaker Change: We spent our ACG will become available for Saturday integration as early as June of this year.
Speaker Change: As you would recall our customer our custom ASIC chip will support up to 10 gigahertz in processing bandwidth, where sadly or 10 times the processing compare to our core and F. B, yes, with big data speeds of up 220 megabit per sale supporting many thousands of cells per satellite.
Speaker Change: Which is a key enabler of all.
Speaker Change: The first and only space based broadband cellular system together with the largest ever commercial communications satellites in load at all.
Speaker Change: On the commercial front, we continue to integrate our services with our immuno partners recently, our loan longtime partner rock within mobile completed a two way broadband video call in front of a live audience enabled by block one satellites over in Japan.
Speaker Change: The Cold war conducted using modified smartphones as part of our initial activation in the country and follow a successful video calls with partners.
Speaker Change: Like AT&T, Verizon umbrella phone in United States and Europe, respectively.
Speaker Change: The lilac deviation is another example of our ability to successfully enable full cellular broadband capabilities, including voice decks.
Data video another native seller of capabilities Japan.
Speaker Change: <unk> gone through a defined by his diverse geography prone to national disasters being able to provide cellular broadband service direct to device over the country.
Speaker Change: Montana region remote islands, and densely populated cities during routine and emergency situations are transformational application for our groundbreaking technology I am proud of our company's long history with the TD partnership with Rakuten I am excited for our continued progress in the country.
Speaker Change: Globally, we plan to walk through an initial sale orbital bunker probabilities in United States, Europe, and Japan on premium low band wireless is baked them together with partners.
Speaker Change: AT&T, Google Rockwood than Verizon and border phone, whereas in other players in the wireless ecosystem. This is unimportant Stefan initial service activation and naval and activation across several key markets in the U S or with borrowing geographic and demographic factors provide us the opportunity to optimize our <unk>.
Speaker Change: Network ahead of our full commercial deployment.
Speaker Change: We also receive a special temporary authority from the FCC for first name direct to revise salt Lake on activity on public safety bound 14 of spectrum. The FCC grants directly by sale of broadband connectivity in support of mission critical capabilities with over 7 million public safety connection first named network gave responders.
Speaker Change: The critical connectivity they need across diverse geographies, our groundbreaking technology stand to provide first responders with re I level and consistent space based cellular broadband connectivity due to inclusion crucial times of need.
Speaker Change: On the government business, we continue to span our U S government opportunity and are ramping up activity against our 43 million dollar contract in support of United States, a space development Agency <unk>.
Speaker Change: Even more recently, we signed a new contract award with another government agency throw a Brian contractor to provide support of communications over land Sea and air.
Speaker Change: As Carl will speak more to our new contract award momentarily.
Speaker Change: But this contract award highlights as display mobile innovated technology to back critical government missions across various use cases, both for communications and non communications obligations.
Speaker Change: In addition to advancing commercial uncle Allurement effort, we're working closely with regulators and government officials, who recognized that our technology is going to make our country, both more connected and more secure.
Speaker Change: In summary, all key elements of our business are progressing as expected or have accelerated to meet the customer demand for our groundbreaking technology.
Speaker Change: The first quarter was a period of strong execution, serving as a springboard into another pivotal charters of the company's life.
Speaker Change: We have now reached an inflection point, we scaled fundamental aspects of our business toward a full scale commercialization with our launch plan outline launch capacity secure on commercial and government partnership coming together, we expect positive momentum to compound at a record speed for our months and quarters to come.
Speaker Change: Connectivity is a human right.
Speaker Change: And each step in this process is a reminder of the important mission in hand, let.
Scott: Let me now turn the call to Scott to provide more details on our progress and initiatives.
Scott: Thank you about this was a strong start to the year for a S. T space mobile and we're expecting continued progress across all aspects of our business as we charge into a pivotal year for the company.
Let me expand upon our achievements over the last few months and what they mean for the commercialization of the company.
Scott: Our commercial efforts are accelerating and we're making major advancements in the deployment of our global network infrastructure, beginning with bookings of our gateway equipment Gateway.
Scott: <unk> always serve as a precursor to the rollout of our space mobile service, providing a leading indicator of the markets, where you'll see the initial service revenue.
Scott: In the first quarter, we saw gateway equipment bookings of $13.6 million and expect continued bookings of approximately $10 million on average per quarter during 2025.
Scott: We'll begin to recognize revenue from these bookings as and when gateways are installed and milestones are met and we expect to continue to provide updates on bookings as we build out our ground infrastructure.
Scott: As a reminder, our network infrastructure was designed from inception to closely mirror terrestrial cellular architecture prioritizing privacy and security of cellular data and information are ground based gateways received signals from our satellites each the largest ever commercially deployed communications satellites in lower orbit and seamlessly link those signals.
Scott: The networks of our mobile operating partners.
Scott: On the regulatory front.
Scott: We were recently granted special temporary authority from the FCC for first net on public safety as band 14 spectrum, enabling us to begin activating test services to deliver space based cellular broadband connectivity supporting features critical to first responders through initial test activation, we're now able to address the massive opportunity.
Scott: Of extending reliable broadband services to first responder agencies and consumers in emergency situations.
Scott: This can be done across areas, where terrestrial networks are unavailable as well as during network outages caused by infrastructure failures or natural disasters.
Scott: Our space based cellular broadband solution provides seamless device compatibility and our satellites enable automatic handoffs as consumers move in and out of terrestrial networks.
Scott: Together. This provides first responders with enhanced reliable broadband connectivity during the most critical situations, while maintaining the look and feel of the reliable terrestrial networks that they're used to.
Scott: The sheer size of our satellites is another benefit in our effort to support first responder communications are large antennas enable precise beam, forming meaning we can focus our signals on specific targeted areas over land and water emergencies can happen anywhere and responders need to stay connected across both accessible and hard to reach areas without geographic.
Scott: Coal impediments.
Scott: Continuing on to our partnership with Vodafone I'm also pleased to report that our jointly owned European satellite service business called Sacco is progressing according to plan.
Scott: Now to the U S government business, our pipeline continues to strengthen and as anticipated. We continue to expect it to be a meaningful contributor to revenue in the years to come.
Scott: Our recently announced contract award with the D. I you.
Scott: A government agency through a prime contractor facilitates initial communication services across various use cases and applications supporting communications over land Sea and air.
Scott: We believe this contract could yield low tens of millions of dollars in revenue over the next 12 to 18 months.
Scott: And earlier in the year, we also signed a $43 million revenue contract with the U S space development agency through a prime contractor for services delivered on our first five block one bluebird satellites in orbit and our first block to Bluebird satellite.
Scott: As a reminder, that contract is not a prepaid contract, but rather earned revenue we expect to receive and recognize under GAAP as we deliver those services.
Scott: To date, our government contract serve as important validation markers for our dual use satellite technology opening doors to sustained and substantial revenue streams across both communications and non communications applications I will now pass it over to Andy to walk you through our financial update.
Andy Johnson: Thanks, Scott and good afternoon, everyone.
Speaker Change: During the first quarter of 2025, our global team at Asti space Mobile worked tirelessly to accelerate satellite manufacturing efforts as we prepare to commence our launch campaign beginning this summer the Companys financial performance. During Q1 reflects our intense focus on executing on our manufacturing and launch of <unk>.
Speaker Change: <unk>, while simultaneously preparing for a meaningful revenue ramp over the coming periods as we begin to monetize both commercial and government opportunities for our dual use satellites.
Speaker Change: As the balance Scott conveyed in the earlier remarks, our progress against our corporate objectives in Q1 positions us well to begin executing an extensive launch cadence in support of offering our space mobile service, while continuing to facilitate critical U S government applications and support of National security efforts.
Speaker Change: We've established our objective of manufacturing. The next 40 satellites and are thrilled to start our launch campaign featuring at least five scheduled launches between Q2 of 2025 and Q1 of 2026.
Speaker Change: Our focus today is to move quickly and responsibly to bring our stakeholders space based broadband connectivity directly to their unmodified smartphones from a financial perspective. This objective requires careful consideration of our spending both in terms of operating expenses as we scale.
Speaker Change: Our organization and capital expenditures as we incur the necessary cost to secure not only the materials to manufacture our block to bluebird satellites, but also contracts for sufficient launch capacity across multiple providers to successfully deploy our constellation.
Speaker Change: Inherent to our focus on prudent spending is a strategic and thoughtful approach to raising adequate capital in order to execute on our ambitious plans and the growing direct to device broadband market that asps created and invented.
Speaker Change: Moving now to the operating and capital metric Slide Let's review the key operating metrics for the first quarter of 2025.
Speaker Change: On the first chart for the first quarter, we incurred non-GAAP adjusted cash operating expenses of $44 $9 million versus $48 million in the fourth quarter of 2024.
Speaker Change: As a reminder, non-GAAP adjusted operating expenses excludes certain noncash operating costs, including depreciation and amortization and stock based compensation.
Speaker Change: This quarter over quarter increase of $4 1 million resulted from $1 8 million and increased R&D costs, a $1 $7 million increase in adjusted general and administrative costs and a slight increase of $600000 in adjusted Engineering service costs. This.
Speaker Change: Modest increase in adjusted Opex for Q1 was expected and in line with the guidance I provided on our last earnings call as we continue to scale manufacturing and importantly add critical talent to our growing organization.
Speaker Change: Turning towards the second chart on this slide our capital expenditures for the first quarter of 2025 were approximately $124 million versus $86 million for the fourth quarter of 2024.
Speaker Change: This figure was made up of approximately $105 million of capitalized direct materials labor for our block to Bluebird satellites and payments made in connection with certain launch contracts with the balance relating to facility and production equipment expenditures.
Speaker Change: This amount was slightly less than the guidance of approximately $150 million to $175 million that I provided during our last earnings call and was primarily driven by changes in timing of certain launch contract payments from Q1 to later quarters during 2025.
Speaker Change: In line with our adjusted operating expenses for the first quarter of 2025, we estimate that our adjusted cash operating expenses for the second quarter. This year will come in at a similar level of approximately $45 million.
Speaker Change: We expect our capital expenditures to increase significantly as compared to the first quarter driven by a ramp in manufacturing, enabling us to reach our bold plan of producing six satellites per month in the fourth quarter of this year as well as planned payments related to our multiple launch contracts for our 2012.
5% in 2026 launch schedule.
Speaker Change: In line with our increasing Capex needs. We currently estimate that the average capital cost, including direct materials and launch costs for our constellation of over 90 block to Bluebird satellites will fall in the range of $21 million to $23 million per satellite.
Speaker Change: This increase over our previous estimate of 19 million to $21 million per satellite is primarily driven by higher launch costs from our announced near term launch schedule as well as higher direct materials cost due to recently announced tariffs.
Speaker Change: Our revised cost per satellite estimates are subject to fluctuations based on dynamic geopolitical factors, which impact our direct materials costs.
Speaker Change: We believe that the intrinsic value of our future business opportunities far outweighs the modest increase in costs due to tariffs. We are empowered by the rising demand for space based cellular broadband connectivity and industry that we created and invented and we are validated by the growing commercial and government opportunity.
Speaker Change: These before us and want to execute on them as quickly as possible.
Speaker Change: Despite this increase in cost per satellite, we reiterate our belief that the operation of a constellation of twenty-five bluebird satellites will enable us to potentially generate cash flows from operating activities.
Speaker Change: We do expect an increase in Capex in Q2 to a range, we believe will be between $230 million to $270 million to primarily reflect the timing of payments on multiple launch contracts.
Speaker Change: The timing of the changes in our adjusted operating expenditures and capital expenditures of as I've. Just described could be delayed or may not be realized due to a variety of factors.
Speaker Change: While Q1 and prior recent quarters reflect the company's stage as pre monetization with only modest revenue recognized in connection with primarily of limited government application contract I am pleased to begin speaking to you about our expectations for revenue in the coming periods.
Speaker Change: Our revenue opportunity is intimately linked to the number of our deployed satellites as we previously stated we believe we can enable continuous space mobile service across key markets, such as the United States Europe, Japan, and other strategic markets with the launch and operation of approximately 45 to 60.
Speaker Change: Bluebird satellites.
Speaker Change: We also plan to achieve non continuous space mobile service in selected targeted geographical markets with the launch of a total of 25 Bluebird satellites. Additionally, we will continue to support U S government applications currently ongoing and accelerating as we launch additional satellites.
Speaker Change: As we execute our launch in operation commencement efforts, we expect revenue to ramp towards the end of the year and into 2026, specifically, we believe we have a revenue opportunity in 2025, and the range of $50 million to $75 million.
Speaker Change: And loaded in the second half of the year and based on several contingencies, including one the successful launch and deployment of block to Bluebird satellites related to U S government applications contractual milestone achievements to critical gateway equipment sales to our <unk> partners and supported their anti.
Speaker Change: Supported commercial with commercialization efforts of space Mobile service and three service revenues in connection with the activation of our commercial service provided by our existing and planned deployed and operational satellites currently six and lower orbit with more to come over the six to nine months.
Speaker Change: There can be no assurances that we will achieve any or all of these objectives in our actual revenue results will vary based on a multitude of factors. Nevertheless, DHT team is proud to be commencing our revenue ramp and I look forward to updating you in subsequent quarters on our progress.
Speaker Change: Finally on the final chart on the slide we.
Speaker Change: We ended the first quarter with $874 5 billion in cash up from $567 5 million at the end of the fourth quarter of 2020 for.
Speaker Change: This significant increase in cash was driven primarily by approximately 403 million received from the convertible notes offering in late January that I discussed last call and approximately $55 million raised from the remaining amount available under the September 2024 at the market or <unk>.
Speaker Change: M facility.
Speaker Change: Our effective use of the ATM facility over the past nine months allowed us to increase critical liquidity and supplement other strategic financing initiatives now that that facility is fully utilized today, we are establishing an incremental 2025 aftermarket or ATM facility for up to.
Speaker Change: <unk> $500 million over the next three years available to the company to accelerate our bold operational plans to bring our space mobile service to market as soon as possible.
Speaker Change: We will continue to utilize this funding source in a disciplined fashion balancing our capital needs to align with the interest of our shareholders.
Speaker Change: We are also evaluating a path to provide for an equipment loan facility of between $50 million to $100 million in the form of non dilutive funding to support our manufacturing expansion, we will provide additional information on that facility as we progress our conversations.
Speaker Change: Finally, we continue to make good progress on non dilutive financing from quasi governmental sources of capital in the United States. We recently completed initial clearances for funding, which commences in approximately six to nine months diligence and documentation phase for over half a billion dollars in potential non dilutive capital.
Speaker Change: For multiple U S and international agencies, we will provide updates as appropriate and we will be working with the partner banks and our advisors to refine our alternatives.
Speaker Change: Revenue is ramping on plan and ASC space mobile remains well position to fund our near term operational plans, we will continue to leverage our balance sheet and ATM facility with prudence, while focusing on the myriad opportunities available to us in the form of non dilutive prepayments.
Speaker Change: As a stakeholder in ASC space mobile your takeaway for the first quarter of 2025 is simple the company is on target and continuing to execute against its accelerated operational plans for 2025 and 2026, we have a lot to accomplish this calendar year and the first quarter was a solid start to what we.
Speaker Change: We expect to be the most exciting year in ASD short, but impressive history. Thank you all for your continued support and with that this completes the presentation component of our business update call and I'll pass it back to Scott.
Scott: Thank you Andy before we go to the queue of analyst questions would like to address a few of the questions submitted by our investors operator could you. Please start us off with the first question.
Speaker Change: Scott from Indiana Act any further.
Scott: Details to share on the legato transaction.
Scott: Yes. This is Andy I'll be happy to take that question and appreciate the question Scott.
Scott: Yes, there are some updates so we'd be happy to share I mean, as a reminder, the transaction that Scott asked about is for Asps.
Scott: To acquire usage rights for 45 megahertz of mid band spectrum in the United States. So we view this as a <unk>.
Scott: It's huge fuel to our business here in the U S. As we look to actually access spectrum ourselves that can augment our service we.
Scott: We announced the definitive agreements signed towards the end of the quarter in late March and we're happy to say that we believe the approval process is on schedule and that will have more to say about about this in the coming weeks.
Scott: Importantly, we are looking at a structure in which we are financing our usage rights with.
Scott: With collateral that is restricted to the actual spectrum, we're acquiring so.
Scott: There will be a modest impact and in G&A in subsequent quarters, but but we are putting in place a separate financing package related to this.
Scott: Strategic L band acquisition. So thanks for the question.
Scott: Rick from the Netherlands, and it looks like the defense use case is growing what is the outlook there.
Speaker Change: Hey, Rick how are you doing.
Speaker Change: We've been talking about the government use case with increasing emphasis over the last four quarters or so and in general as everybody can see government demand for space based solutions like ours and others has been surging. This is driven by.
Speaker Change: An increased focus on.
Speaker Change: Defending our nation in.
Speaker Change: In space and is something that we are well positioned around because of our extremely innovative new tech and the largest phase arrays that we can put into orbit today commercially.
Speaker Change: We've already started driving revenue from some of our government contract Awards is now six of them to date that served as initial validation for this technology.
Speaker Change: These contract awards provide clear paths for applications in a couple of use cases.
Speaker Change: In late 2024, we were selected by the space Development agency for $43 million contract and that's a non communications use case, but importantly today, we are announcing a D IU contract and that is you.
Speaker Change: You can read that as communications use cases across many government agencies across many use cases, so I think we've seen really great progress on.
Speaker Change: Several different use cases that our unique technology can can offer.
Speaker Change: And we're really excited about continuing to grow that even as early as the second half of the year as Andy talked about.
Matt: Matt from Massachusetts.
Matt: You plan to submit any proposals for the announced $25 billion of Golden Dome project.
Speaker Change: Thank you Matt for the question, we really think that we are.
Speaker Change: Very well position with our technology to be an important contributor to the to the actual goals.
Speaker Change: Outlining the Golden Dome.
Speaker Change: The size.
Speaker Change: Our borrowers satellites.
Speaker Change: Our unique.
Speaker Change: On a completely differentiated or what.
Speaker Change: It can be done by industry or by our adversaries.
Speaker Change: And we think.
Speaker Change: We are technology.
Speaker Change: Will enable.
Speaker Change: Applications for National Securities are going to be important for this particular program Scott.
Speaker Change: Scott you may want to talk a little bit about the size of the program on where he is approved.
Speaker Change: For those not as familiar with this the 25 billion as a reference to what left the house Armed Services Committee recently, and we will go for a vote with the whole house as part of the budget reconciliation process. Importantly, this is not part of the new budget for fiscal year 2026. This is.
Speaker Change: Part of the budget reconciliation package that is only subject to a 50 vote in the Senate. So this is a.
Speaker Change: A way that the house Armed Services Committee is looking to pre fund Golden Dome in and support this really significant national security cool.
Scott: Scott from Indiana ask alright.
Scott: Shareholders expected to be invited to future launches this fall.
Speaker Change: Yes, absolutely we loved hosting our shareholders at the September launch event at the Cape and.
Scott: And we're really excited to host over.
Scott: Over 1000 people in the middle of the night and the rain. Many of you enjoyed that and we certainly did.
Scott: For the upcoming launch in July for reasons beyond our control, we won't be able to invite folks to our launch in India, but.
Scott: As a bell laid out our launch schedule with an orbital launch every one to two months on average going forward, we expect a lot of exciting events to come at the Cape and we will be sure to keep everybody updated.
Scott: As these come together and hope to see many of you there.
Scott: Really go from Portugal on.
Scott: On Monday April 20, there was a power outage that led to most of the Spain, and Portugal being at East Haynesville grounding clean halting public transport and forcing hospitals to suspend routine operations in mainland cutting all types of communications landline mobile phones or internet access.
Scott: In my case was 10 hours without access to any type of communications, except radio I don't know if you are aware of it but I would be happy to know ASC short term plans for Europe.
Scott: Thank you Mario and we saw this event on the news of course and watch it with interest.
Speaker Change: Emergencies, whether caused by infrastructure failures or natural disasters. These cause immediate and lingering need which is only compounded when communication is an accessible. So our service stands to provide cellular broadband connectivity directly to the phone in your pocket and this means consumers can feel safer in emergency situations.
Scott: Knowing they'll still have this connectivity.
Scott: Despite what's happening on the ground.
Scott: And as the supplies to Europe, specifically, our joint venture with Vodafone will exclusively distribute our service across Europe. This means that we'll be sharing ground based infrastructure to manage geographic boundaries and drive turnkey solutions to increase take up both for connectivity for citizens across the continent as well as in more.
Scott: Very important emergency.
Scott: Periods of need like like the one you described and of course outside of Europe. We recently received.
Scott: Special temporary authority from the FCC to do first net testing activation on public safety spectrum.
Scott: That's really important to us is a priority here in the United States.
Scott: And in Japan of course, our long time partner actin mobile successfully did a video call in front of a live audience. So these are these are places where this capability both emergency backup disaster recovery and consumer emergency.
Scott: Port that we can really support quite nicely.
Scott: And with that I'd like to thank our shareholders for submitting those questions operator, let's open the call to analysts questions now.
Thank you we will now be conducting a question and answer session. If you'd like to ask a question. Please press star one on your telephone keypad.
Speaker Change: Confirmation tone will indicate your line is in the question queue. You May press, starting to remove yourself from the queue for participants using speaker equipment. It may be necessary to pick up the handset before pressing the star keys.
Scott: One moment, please while we poll for questions.
Speaker Change: Our first question comes from the line of.
Bryan <unk>: Bryan <unk> with Cantor Fitzgerald. Please proceed with your question.
Speaker Change: Okay. Thank you.
Speaker Change: Maybe you could discuss the nature of the higher launch costs talk me through kind of talk us through how is that related to that related to like.
Speaker Change: Mark very configuration for satellite or are there other pricing factors to consider.
Speaker Change: Then lastly, if you could maybe talk about how ISP thinks about passing through those costs to other launch suppliers in the form of liquidated damages.
Speaker Change: Sure.
Andy Johnson: Hey, Colin I'll kick off and Andy can add anything additional.
Speaker Change: Basically.
Speaker Change: The demand signals, we're receiving are to get the service to market as fast as possible. So the way we've organized the whole program over the last year year and a half as against that goal. So what youre seeing is essentially.
Speaker Change: A little bit of pull forward on launch at a time when launched was harder to get.
Speaker Change: So we spent a little bit more than anticipated just to keep the timeline moving fast as Andy said.
Speaker Change: And on the tariff side.
Speaker Change: There is a little bit in there.
Speaker Change: More than half of our Capex is as launch at this point, but the portion thats materials. There is theres, some particularly raw materials that we source from abroad. So I think when you look at the.
Speaker Change: The totality of the move there and unit price. It's those two elements are what's driving it.
Speaker Change: Scott.
Speaker Change: Andy.
Speaker Change: They agree.
Speaker Change: Just to add and I think I mentioned this that this is a dynamic situation that we're looking at a tariff impact that.
Speaker Change: Many companies are looking at right now, but we all know that.
Speaker Change: Somewhat volatile and ebbs and flows with geopolitical.
Speaker Change: News. So so we will continue to work to optimize we continue to look at our own ability to optimize things like payload to look at future launch Optionality, but as Scott said the name of the game is getting our satellites built launched quickly and in exchange for doing that in an environment in which.
Speaker Change: Tariffs are a reality, we have a slight increase from call. It the 20 midpoint to the 22 midpoint and we'll continue to press on that but the good news is as we started.
Speaker Change: The notes were about to kick off a launch cadence that starts in July with one to two every one to two months as we head out of 25% to 26. So that's our priority right now and as I noted, we reiterate our belief that even an increase like that is.
Speaker Change: Is mitigated considerably by the opportunity of bringing our service to market as quickly as possible.
Speaker Change: Okay.
Speaker Change: The color and then maybe talking a little bit about.
Speaker Change: Spectrum portfolios in the spectrum sharing two subject dynamics to consider one is maybe talk about how you think about echostar spectrum portfolio, and maybe where you can unlock the most amount of value across RF bands.
Speaker Change: And then also maybe some commentary on the FCC spectrum sharing commentary and maybe just communicating kind of how customers are talking about.
Speaker Change: Any potential interference from pricing recovery or <unk>.
Speaker Change: Images recovery from other players.
Colin: Hey, Colin.
Speaker Change: That's a great question.
Speaker Change: Well for those I don't know familiar with this being as expected and as light fuel for our business.
Speaker Change: We are on a strategy that actually maximize.
Speaker Change: Access to existing phones in.
Speaker Change: Well really deal.
Speaker Change: Spectrum only phones.
Speaker Change: And also we have basically split the programming.
Speaker Change: In two phases, one that will go lower than which I always thought through with AT&T and Verizon.
Speaker Change: Both are full and bronco than others, where we.
Speaker Change: Basically chairing the spectrum, all the operator and reusing that spectrum that is it was originally allocated exclusively for the rest of what Sharon for space applications. We believe that as the faster you go to market and we believe those studies the best service possible, though we can offer to the Gulf tumors, even the the premium nature of that is baked.
Speaker Change: In terms of penetration ability to walk through walls.
Speaker Change: The frame of an airplane.
Speaker Change: Use electrical car, we have been demonstrated with our corner operator operating satellites.
Speaker Change: A.
Speaker Change: But.
Speaker Change: And as you probably are aware, we also have signed a definitive agreement.
Speaker Change: To complement our low band spectrum.
Speaker Change: And from our partner operators with our own spectrum in the mid band in the in the neighborhood of 45 megahertz.
Speaker Change: Which together with the size of our satellites will enable <unk> hundred 20 Megabits per second.
Speaker Change: Very individual sale support and thousands of sales per satellite.
Speaker Change: With respect to their strategies.
Speaker Change: <unk> is the combination of the low end on the mid band low one partner with the operators to get access to the premium bond that is available in every phone that works today without recording any modification to the phone or any new chain.
Speaker Change: Change to the phone.
Speaker Change: And keep.
Speaker Change: Keep fueling.
Speaker Change: The net where we'd expect room in this case.
Speaker Change: When we conclude the current transaction to under 45 megahertz fueling that with with.
Speaker Change: Probably one of the largest local for spectrum.
Speaker Change: Certainly not excess.
Speaker Change: Below the 60 megahertz in United States.
Speaker Change: Got it thank you.
Speaker Change: Thank you.
Speaker Change: Our next question comes from the line of Mike Crawford with B Riley Securities. Please proceed with your question.
Mike Crawford: Thank you just continuing on that theme, where you have this bifurcated strategy of <unk>.
Mike Crawford: <unk> low band spectrum with your <unk> partners, but now getting into cell band spectrum from legato does that change the way you're thinking about future or current <unk> agreements, where they might become more bespoke versus kind of a very standard template that.
Mike Crawford: You initially.
Mike Crawford: It had been.
Mike Crawford: Working towards.
Mike Crawford: Well.
Mike Crawford: Not really I mean, our focus is the user experience for the consumer the buy the service from the <unk>.
Mike Crawford: We think.
Mike Crawford: Yeah.
Mike Crawford: They enter into the market with the low band spectrum.
Mike Crawford: Give us a call.
Mike Crawford: With access to billions of phones.
Mike Crawford: 5 billion funds that have access to the low band spectrum.
Mike Crawford: But but DC.
Mike Crawford: This is simply a way to enhance permit more simultaneous users with higher data rates.
Mike Crawford: When we combine both spectrums as part one which is our network. So we don't we see it as a technical capability to basically.
Mike Crawford: Give the user the vessels both.
Speaker Change: <unk>, one is penetration and availability of influence on the other one is density.
Mike Crawford: With a low with a large local capacity.
Speaker Change: This case 45 megahertz.
Speaker Change: Okay. Thank you and then just one final question for me.
Speaker Change: The custom ASIC.
Speaker Change: What what batch of satellites.
Speaker Change: Before youre launching after this Indian launch.
Speaker Change: What do you expect to be the first one is with the customer base that included.
Speaker Change: It will be in approximately two launches after the next launch.
Speaker Change: And it will be very soon this isn't the final final integration to the actual <unk>.
Speaker Change: <unk> built out.
Speaker Change: That.
Speaker Change: Does that his plan.
Speaker Change: Not in this next imminent launch, but one one or two launches after that.
Speaker Change: Unless we say excellent.
Speaker Change: Yes, we're trying to we're trying to get into a cadence of that will be launching.
Speaker Change: <unk> constantly.
Speaker Change: During the next six to nine months.
Speaker Change: Alright, thank you.
Speaker Change: Thank you.
Speaker Change: Our next question comes from the line of Chris <unk> with UBS. Please proceed with your question.
Speaker Change: Great. Thank you last quarter you indicated you are preparing to run beta tests with your carrier partners can you update us on the status of those tests and any early learnings youre willing to share at this stage and you've talked about being able to manufacturers six satellites per month by <unk>, which is later than the timeline you mentioned last quarter can you just walk us through.
Speaker Change: The cause and what still needs to be done to achieve that milestone. Thank you.
Speaker Change: Yes, we had a we had already started activation is in the U S Europe, and Japan, I mean as a matter of fact.
Speaker Change: Rocco den Vodafone AT&T and Verizon the old announced the initial usage will be the capabilities.
Speaker Change: Which is basically the most difficult application to run when youre running when youre running a broadband capability. So that means that we support three moves or volumes or texts.
Speaker Change: Or E mail, so both face time, we support any obligation that you can run into you can run a vehicle, which is a life streaming capability.
Speaker Change: You can support basically any native application that is in Q4. So we are we are at that face.
Speaker Change: We are also starting.
Speaker Change: Lining up all the 50 seats under sales.
Speaker Change: In the United States.
Speaker Change: We're starting that process starting in June July.
Speaker Change: Did we complete that into the beta service.
Speaker Change: We will start offering a service that.
Speaker Change: Study.
Speaker Change: We'll reset on our beta.
Speaker Change: Then you will be on offer that resemble module policy will be final service when we have full constellation but intermittent.
Speaker Change: Built on more satellites.
Speaker Change: So we are on target for that this year, we're on target to.
Speaker Change: Just a little bit of services this year.
Speaker Change: Tool for broadband that include voice text data E mail Internet fixed Simon on vehicles.
Speaker Change: So that that is still that is still on target the <unk> the launch.
Speaker Change: For the next generation, which is the largest generation is three five times bigger than the block one is scheduled for July.
Speaker Change: We have maintained our plan.
Speaker Change: To maintain our capacity or six per months.
Speaker Change: The race, which is start in June July again also this year.
Speaker Change: We will referring to the six satellites per month is it fully integrated satellite.
Speaker Change: The more closer towards the end of the year.
Speaker Change: Thank you and then if I can just fit in one more I. Appreciate there is a number of moving pieces, but as you look to 2026 and the ability to fund the launch of the 60 satellites any help sizing the amount of capital you would need to raise and how you evaluate the different sources, whether it be the ATM or the quasi government progress you mentioned.
Speaker Change: Yes, I will let Scott and Andy to answer that in more detail, but we are focusing and non diluted.
Speaker Change: Capital.
Speaker Change: For the first time, we're giving initial indication of revenue for.
Speaker Change: For the second half of this year between 50 and $75 million.
Speaker Change: We have.
Speaker Change: Significantly we're known.
Speaker Change: Dilutive financing from sources like the IFC and the Exim Bank.
Speaker Change: More importantly contracts.
Speaker Change: Government contracts <unk> contracts.
Speaker Change: Social payments from from.
Speaker Change: From operators and thus our focus is basically getting financed by non dilutive.
Speaker Change: Yes.
Speaker Change: Sauces.
Right about this Andy here, Chris as well just to kind of piggyback.
Speaker Change: On that I mean, the ATM gives us great flexibility and we've proven to be very disciplined in how we use it.
Speaker Change: And it's a.
Speaker Change: It's an instrument that we like to have as we look at all Optionality, it's not the priority for sure last last quarter, we did mention that our convertible raise put us in a position to fund during the 25 satellites, which is our threshold for non continuous service and major major markets.
Speaker Change: And beyond.
Speaker Change: And as you look at our constellation for over 60 for the U S in similar geographies and over 90.
Speaker Change: You can do the math and sort of look at what the average cost with materials and launch costs are that we give and you get a sense for what we need.
Speaker Change: The reality is we feel very fortunate that we have a lot of opportunities both on the equity side as well as debt.
Speaker Change: Programs like the ex Im bank.
Speaker Change: Nancy different manufacturing equipment, which were quite mature and our exploration to do so you put all that together and and.
Speaker Change: And also layer on top of it the priority to move quickly.
Speaker Change: Last quarter, we did say six satellites per month, we had a reference to during the second half of 2025. Our message. This quarter is consistent with that we just are more precise and Q4. So when you are trying to move as quickly as we are in your manufacturing at the pace, which has never been done before.
Speaker Change: However, this is now it's never been done.
Speaker Change: You look at your financing needs as a package of opportunity and you sort of way when you when you access the capital markets versus other alternatives, while always prioritized prioritizing the prepayments from our partners, which has proven to be a great structure. So that kind of gives you a flavor we're in great position with.
Speaker Change: The balance sheet, but if we want to move quickly and if we want to expedite manufacturing like we talked about today, we want to make sure that that balance sheet stays incredibly strong and what we all know is a very volatile macro climate.
Speaker Change: For the markets right now so that's that's how we'd look at it and hopefully that's responsive to your question.
Speaker Change: Yes, thank you very much.
Speaker Change: Thank you.
Speaker Change: Our next question comes from the line of Caleb Henry with Quilty Space. Please proceed with your question.
Alright, Thanks, guys couple of questions one on the spectrum that kind of how that would be implemented.
Speaker Change: Am I right in thinking that that will require some sort of modification to the satellite.
Speaker Change: Payload or something.
Speaker Change: And if so how does <unk> plan to kind of go forward with that kind of introducing that new spectrum.
Speaker Change: Yes, when we are a base, which is six per months, thus 72 satellites per year.
Speaker Change: Basic design is 96 satellites in low band 96 satellites in Midland.
Speaker Change:
Speaker Change: We already have in our Asics and on our core technology. The support of these wound and <unk> is baked in the flow of our.
Speaker Change: Partner, operator, so so the MSS.
Speaker Change: Yes.
Speaker Change: Three GPP expectancy made ban already part of our design.
Speaker Change: Okay, Great and then a clarification just on the the Barcelona facility I had read that it was for manufacturing space, but I wasn't quite clear to me.
Speaker Change: The building is that secondary factory for manufacturing satellites that gateway is asics.
Speaker Change: So.
Speaker Change: That will be used for.
Speaker Change: Yes, we're focusing manufacturer manufacturing here in United States.
Speaker Change: 95%, where 95% vertically integrated.
Speaker Change: All day parts final integration testing.
Speaker Change: And here in Texas.
Speaker Change: We are.
Speaker Change: Approaching half a million square feet of manufacturing facility, when we add the new the new Barcelona facility and the new Florida facilities.
Speaker Change: In Spain, we do build.
Speaker Change: Certain.
Speaker Change: Hi, Tayo hydro.
Speaker Change: High reliability parts that are used in the central unit.
Speaker Change: But all of them get getting integrated here in <unk>.
Speaker Change: Finally in Texas.
Speaker Change: We integrate on Thursday.
Speaker Change: The complete spacecraft.
Speaker Change: Okay and then my last question was just on gateways.
Speaker Change: Looking at those rolling out and I think it was $10 million expected a year do you have a sense of how many gateways assay will have up by the end of the year and kind of how that plots alongside the ramp up of the constellation I don't know if theres a need of X number of gateways.
Speaker Change: Satellite or something to that effect.
Speaker Change: Hey, Kevin just a few reminders for the audience because our satellites are large the largest ever in lower orbit as we as we say.
Speaker Change: They had a large field of view so what that means practically is fewer gateways than is typical.
Speaker Change: Constellation and so in the U S. We'll have.
Speaker Change: Four or more gateways are applied for and other countries that will be one or two.
So it's a much smaller lift on the ground infrastructure side and it's one that we've designed to be shared with the operators because when when the operators rollout of new wireless service they are accustomed to.
Speaker Change: Deployment of base stations and so those base stations are integrated into our centralized gateways. So when you look at all of it.
Speaker Change: And we go country by country.
Speaker Change: One or two on our country bigger countries will have more in Europe, we've got a.
Speaker Change: More of a continental solution that manages the smaller size of the.
Speaker Change: The.
The countries individually and so what all that means is you're going to see gateways deployed low single digit millions per gateway and you roll that up and we're building it out and taking orders now.
Speaker Change: Terms of how many we have at the end of the year, we won't we won't give a firm target on that but you've heard us say repeatedly.
Speaker Change: Europe, and Japan are a priority. So those are certainly places youll start seeing more gateways installed faster.
Speaker Change: Got it thanks guys.
Speaker Change: Thank you. Our next question comes from the line of Tim Horan with Oppenheimer <unk> Company. Please proceed with your question.
Tim Horan: Well. Thanks, guys can you give us an update when you might well when we might see a commercial launch in the United States and have you worked out.
Wholesale agreement yet with the carriers in the United States the body.
Tim Horan: The economics and to be clear when you do that commercial launch it will have the full suite of services that you mentioned.
Tim Horan: Yes. The answer is yes, we did announce a definitive agreement with AT&T.
Tim Horan: Sure.
Tim Horan: We are working on the details for the commercial agreement with Verizon.
Tim Horan: <unk>.
Tim Horan: The idea is to have a beta service sometime by the end of this year on commercial service fully opened for consumers.
Tim Horan: Sometime during early 2026.
Tim Horan: It will be.
Tim Horan: And our plan is for the service to be.
Tim Horan: Yeah.
Tim Horan: Thanks.
Tim Horan: The internet.
Tim Horan: Data.
Tim Horan: On access to applications like videoconferencing.
Tim Horan: Great.
Tim Horan: Just out of curiosity why why do you think you need the legato spectrum when youre doing spectrum sharing.
Tim Horan: Im assuming youre doing spectrum sharing in areas, primarily where theyre not using the spectrum. So I guess can you just maybe elaborate how much spectrum do you expect to get from your partners and why would you need legato, if youre getting enough from them.
Tim Horan: Yes.
Tim Horan: One thing that is important to recognize that we were.
Tim Horan: We don't only serve well.
Tim Horan: Absolutely nothing.
Tim Horan: When youre in a campaign location, where you are in a remote location, we have the ability to serve.
Tim Horan: The consumer whatever their services <unk> support in our Fuji a food fight experience for the end user.
Tim Horan: So in order to support that you need.
Tim Horan: A lot of capacity in order to basically fill up what we call the imperfections so as the network.
Tim Horan: You need to be able to overlap terrestrial on.
Tim Horan: <unk>.
On satellite satellite over the same footprint and.
Tim Horan: Then you need to have a local.
Tim Horan: Traffic.
Tim Horan: Make made that possible so.
Tim Horan: With.
Tim Horan: The low band spectrum.
Tim Horan: We get access to.
Tim Horan: Call It premium spectrum with great penetration goes through please go through walls. It goes through.
Tim Horan: Some cards and Nissan available in every form.
Tim Horan: But typically.
Tim Horan: Limitations on how much affected you can allocate in Logan.
Tim Horan: So as the first.
Tim Horan: Like.
Tim Horan: Historically operators have deployed spectrum, they always start with the law with respect and what goes out of the one that provide more most coverage better penetration and better use user user experience.
That will get filled up by usage, you keep adding spectrum.
Tim Horan: And Thats you go back in time and when happens with win.
Tim Horan: Initially sell were unable were originally deploy they always start in the low end and then keep going up in frequency to create more more more density and that's the intent of the hour our planned 45 megahertz.
Tim Horan: Ben is to basically being able to continue.
Tim Horan: Adding subscribers.
Tim Horan: For our our network partners.
Tim Horan: Thank you.
Tim Horan: Thank you.
Tim Horan: Our next question comes from the line of Scott Searle with Roth Capital. Please proceed with your question.
Scott Searle: Good afternoon. Thanks for taking my questions, maybe just to follow up on the legato front in terms of L band support within existing cell phones in North America, how is that progressing from day one.
Scott Searle: Provided you're able to close the transaction how long does it take before you have a large supply of users within the United States that support the L band Spectrum, and then I had a follow up.
Speaker Change: Yes, I mean, the currently the <unk> is already in the Android ecosystem actually.
Scott Searle:
Scott Searle: You have.
Scott Searle: That then enable as part of the <unk> standard.
Scott Searle: We anticipate with the support of AT&T.
Scott Searle: Verizon Vodafone 50 operators around the globe that we benefit will disband.
Scott Searle: We anticipate one or two interactions on the new on the new on the new phones.
Scott Searle: For the for the phone be available with the full band.
Scott Searle: In every form so that the reason why we always had a hybrid approach where we start with low band.
Scott Searle: When we get the advantage of is in every phone.
Scott Searle: It is 80 have ordinary performance thats much better maximize coverage and then at.
Scott Searle: The Elba and the delayed sale.
Scott Searle: Of our deployment.
Scott Searle: Great. Thank you very helpful and if I could just on the U S Gulf.
Scott Searle: Government budget front.
Scott Searle: Defense space has done actually very well in terms of whether it's a continuing resolution.
Scott Searle: Or the.
Scott Searle: Projected discretionary budget I guess for fiscal 'twenty six so but there is some give and takes there too because like FEMA has been a little bit on the ropes. So I'm wondering as you kind of look at some of the opportunities and programs and discussions, we're having whether it's <unk> or otherwise.
Scott Searle: <unk> been through first.
Scott Searle: First net into the mix there huge opportunity to be able to support band 14.
Speaker Change: Do you see the gives and takes between.
Speaker Change: What's getting funded what's not getting funded and you guys still feel very comfortable about the position with U S government opportunities.
Yes, I mean, what I would say the dealer environment using our satellite is now.
Speaker Change: So what is the capability.
Speaker Change: They get.
Speaker Change: Our technology is actually very very clear for them at this point there has been resulted in six programs, we have ongoing with them.
Speaker Change: We see the Golden Dawn.
Speaker Change: Opportunity is an opportunity that we feel very strong in.
Speaker Change: Participating.
Speaker Change: As the government is already using our satellites for applications that our support for the needs of that program. So.
Speaker Change: Sure.
Speaker Change: A portion of that program was prioritized by the government.
On.
Speaker Change: We believe that.
Speaker Change: There is a good opportunity for us to be part of that.
Speaker Change: Thanks, so much Scott.
Sure.
Speaker Change: You've seen us building small contracts over the last couple of quarters with them, it's been pretty broad based dialogue broad based early contracts and in terms of where money is flowing and where it's not.
Speaker Change: One. Good example is the <unk>, which is the contract with just announced today. That's one area that just received another incremental <unk>.
Speaker Change: Large increase of funding so we think it's.
Speaker Change: Puts and takes as much more puts and takes of course and where we are.
Speaker Change: A novel Technology.
That's being used as a bell said today and and we are on the shortlist.
Speaker Change: Have conversations and we see a lot of a lot of positive momentum.
Speaker Change: Broad based but also in places that are receiving are receiving more funding and incremental funding even even recently.
Speaker Change: Great. Thanks, so much.
Speaker Change: Thank you.
Bryan Kraft: And our next question comes from the line of Bryan Kraft with Deutsche Bank. Please proceed with your question.
Bryan Kraft: Hi, Good afternoon, I had two if I could.
Bryan Kraft: First question, how many satellites will the first five launches this.
Bryan Kraft: This year actually include roughly.
Bryan Kraft: And is that a mix of launch providers or is it.
Bryan Kraft: One particular launch provider. That's that's doing all of those are most of them.
Bryan Kraft: And I guess, just a high level strategic question I was wondering if you could just talk about what you think your competitive moat looks like at this point I mean, obviously.
Bryan Kraft: No the market.
Bryan Kraft: While encouraged by the great progress that you guys have made over the last few years, there's always this concern about.
Bryan Kraft: Another company or companies effectively competing with you.
Maybe with the.
Bryan Kraft: A much larger fleet of smaller satellite. So I was wondering if you could just talk about that would love to hear your perspective on it. Thank you.
Bryan Kraft: Yes, I would say in terms of competitive landscape.
Bryan Kraft: What had been proven.
Bullshit <unk> by any other system is simply text messaging.
Bryan Kraft: We.
Bryan Kraft: Okay.
We have a capability that is way beyond that.
Bryan Kraft: <unk> gold from texts voice data Internet and video so.
Bryan Kraft: <unk>.
Bryan Kraft: There is a limitation of what you can do it.
Bryan Kraft: With a smaller satellites.
Basically physics.
Bryan Kraft: It's also a lot of inherent problems when you have thousands of satellites.
Bryan Kraft: Okay.
Bryan Kraft: <unk>.
Bryan Kraft: <unk>.
Bryan Kraft: Handovers and.
Bryan Kraft: Basically yes, the practicality of the phone being able to connect it to connect to a smaller towards smaller satellite. So I think at this point it would be improved but what the industry has been historically being capable of doing our capabilities have been supported by.
Bryan Kraft: The vast majority of the operators is a couple of ability for broadband and we think that our capabilities are very differentiated.
Speaker Change: It's a capability that is also dual use that means what we mean by dual use is used by God.
Bryan Kraft: Governments, particularly our government.
Speaker Change: On the vast majority of the network operators around the globe.
Bryan Kraft: <unk> axis.
Speaker Change: Through the agreement that we have with operators today we.
Speaker Change: We had access to billions of subscribers provided that would be enough capacity for them. So that's where we continue to build our our our portfolio perspective, starting in the United States.
Speaker Change: Thanks, Bob I appreciate the thoughtful answer and I don't know if you can say anything around the first five launches and how many satellites that will encompass and.
Speaker Change: Whether thats a <unk>.
Speaker Change: Single large provider, providing those first five or if it's a mix of providers. Thanks.
Brian: Hey, Brian.
Brian: Our strategy has been multi operator all along.
Brian: Should it go agnostic, all along and and so these early launches we expect will be consistent with that strategy. We do have some flexibility. These things are a little dynamic. So we can make firm commitments on all of it but in aggregate we feel that.
Brian: The timeline, we laid out it makes a lot of sense. So five five launches in the next six to nine months and our first one of course will only have one satellite.
Brian: Some of the earlier launches will have fewer than 10 full capacity, but would really like to be in a position to have.
Brian: 20 satellites up as soon as we can thereabouts, but but we're doing everything we can to to keep moving to the left on time.
Brian: We're over producing with our factory for sure to make sure that we're not the long pole and.
Brian: And we've been very proactive on.
Brian: This multi operator multi launch provider strategy. So that's kind of how we're thinking about it Brian and we're going to we'll play it out month by month and quarter by quarter and give you better updates, but we're pushing pushing hard on this because we know that we'll have the satellite's launch when we have the vehicles to go into orbit.
Brian: Thus our guidance depending on the vehicle you're talking about three to four vehicles per satellite.
Brian: Or eight vehicles for satellites.
Brian: And also ill remind that these are very large satellites. I mean these are the largest southern for communications. So they believe would like to be first launching will be single single launch given the the vehicles that we're using.
Brian: But.
Brian: Our launch gone to support three before one is motor vehicles eight in the bulk of the launch agreement that we have.
Brian: Okay. Thanks, so much.
Brian: Sure.
Speaker Change: Thank you. Our next question comes from the line of Chris Quilty with Quilty space. Please.
Speaker Change: Proceed with your question.
Chris Quilty: Hi, guys didn't expect to get a second bite at the Apple but.
Chris Quilty: I just wanted to follow up on the block to Bluebird launch.
Speaker Change: Should we view that is that a fully operational off the production line or is it still being viewed as.
Speaker Change: More of a pathfinder in terms of testing the unfurling mechanism and other <unk>.
Speaker Change: Aspects that will be bled into the production.
Speaker Change: <unk>.
Speaker Change: Is it more of the former than the latter.
Speaker Change: No no it's a full blown operational satellite.
Speaker Change: It does use.
Speaker Change: The same.
Speaker Change: Mike loans, which you know is the building block will be phased array.
Speaker Change: Exact same models that we use on the on the block one satellites, which we have now in operation. One of course is larger is three five times larger than the <unk> satellites.
Speaker Change: But if go model ultimately production line.
Speaker Change: We are producing.
Speaker Change: We're launching isn't one but we are producing 40 satellites.
Speaker Change: Year, we would be.
We're seeing that we will get closer to 53 <unk> worth of face at race by the end of this year.
Speaker Change: So it's coming out of the production line is up.
It's an operational satellite it will be part of the constellation.
Speaker Change: But to be clear I think you said by the fourth launch that production line will shift from FPGA to ASIC correct, Yes. The first defense budgets are EBITDA.
Speaker Change: Great.
Speaker Change:
Speaker Change: Second question.
Speaker Change: Real quickly I guess in the press release, you said, the $50 million to $75 million of revenue in the second half of the year.
Speaker Change: How much of that is actual.
Speaker Change: Service type revenue versus contractual payment says as milestones with customers.
Chris Quilty: Hey, Chris.
Chris Quilty: I would say a big contributor of course is our government business.
Chris Quilty: Including the $43 million SBA contract.
Chris Quilty: We announced last quarter and is milestone based but based on.
Chris Quilty: Work being done on our <unk> block, one satellites and our first block two satellite.
Chris Quilty: So there's a good portion of it that is milestone payments and there'll probably be some other government revenue in there, but there is also expected to be a good component of commercial revenue as well with early Activations and and importantly, those gateway installations, we walked through earlier on the call. So it'll be a balance certainly governments are big.
Chris Quilty: Contributor of our early revenue and Thats, primarily milestone based but on the on the commercial side, you'll see both the gateway installations and then also some initial activations we think.
Chris Quilty: Got you and just to follow up on the gateways.
Speaker Change: Thanks for the guidance you know around $10 million a quarter is there any reason that should ever accelerate or is that.
Good run rate to kind of expect as we look out the next year and the year after.
Speaker Change: And fair to assume that youre running that mostly.
Speaker Change: As a loss leader not a profit center.
Speaker Change: In terms of how we should model.
Speaker Change: The margin contribution.
Speaker Change: Yes, that's correct.
Speaker Change: You gave was just an enabler I mean, we're taking.
Speaker Change: Basically the gateway for United States are ready to operations. So then.
Speaker Change: The JV in Europe is taking up.
Speaker Change: The initial.
Speaker Change: Activations that we'd be using <unk> for the initial.
Speaker Change: Activation that we had in particular in the U K, so that would be a chair infrastructure in Europe, and then Japan and social.
Partially activated.
Speaker Change: We have multiple gateways, we have once in operation now. So we set initial focus is U S. Europe, Japan, and then some selected markets, where we are getting.
Speaker Change: Payments prepayments from <unk>.
To put in perspective U S for gateways logical entry level series three gateways.
Speaker Change: And then.
Speaker Change: Local for smaller countries are shared infrastructure.
Speaker Change: Yes.
Speaker Change: In Europe and in terms of modeling, Chris I would add.
Speaker Change: There is a margin on those it's a low margin.
Speaker Change: We view this as a way to enable the service, but it's not it's not a loss leader.
And second we think there's upside to that.
Speaker Change: Clearly guidance we gave.
Speaker Change: For sure but note that these can be lumpy as well. So we wanted to be conservative as we started talking about this metric.
Speaker Change: Great. Thanks for the color.
Speaker Change: Thank you.
Speaker Change: Our next question comes from the line of Colin Canfield with Cantor Fitzgerald. Please proceed with your question.
Colin Canfield: Hey, Thanks for the follow up I want to make sure I understand with the new contract.
Speaker Change: Maybe talk about kind of how we think about that as a task order is the larger of a larger contract or if that's the ceiling value of the contract and then.
Speaker Change: Maybe talk about the conversations you had with folks like what can you do have the former American Tower Corp executives that are leading the company and maybe some of the other front. Thank you.
Colin Canfield: Thanks Colin.
I think I would say on the <unk>. This is the recently received $2 billion of additional funding. This is definitely a place where.
Colin Canfield: The government's looking too.
Colin Canfield: Support new technologies and move fast with them the way to think about it is that it's a little bit of an incubation place where.
Colin Canfield: Our broad base of different government agencies can can take a look at the <unk> across different types of applications.
Colin Canfield: And it's a good place to get projects moving fast so I think on the one side think of it as a place to germinate new use cases.
For us, but it's also a place to accelerate use cases, we've been discussing that maybe just didn't didn't hit the first half a dozen and our priority conversation. So these are and in terms of the dollar amount I gave some guidance on low tens of millions.
Colin Canfield: Potential.
Colin Canfield: We set a $20 million ceiling.
Speaker Change: Some of these a little artificial relative to how some of these contracts get initially awarded I think.
Colin Canfield: This is just a great place for us to.
Colin Canfield: Continuing to push the use cases across a broad reach within the Dod and beyond.
Speaker Change: Got it thank you.
Speaker Change: Thank you.
Speaker Change: And we have reached the end of the question and answer session I would like to turn the floor back to Scott for closing remarks.
Scott Searle: Thank you operator, and we want to thank everyone for their questions all shareholders and the research analysts that joined the call.
Scott Searle: We look forward to providing more updates in the future and stay tuned.
Scott Searle: And this concludes today's conference you may disconnect. Your lines at this time. Thank you for your participation and have a great day.
Scott Searle: [music].