AST SpaceMobile - Earnings Call - Q4 2024

Executive Summary

• Q4 2024 showed early revenue ramp ($1.92M) and improved loss per share (–$0.18) as operating expenses fell sequentially; adjusted operating expenses declined to $40.8M from $45.3M in Q3, reflecting lower R&D tied to ASIC bring-up completion.
• Liquidity strengthened: year-end cash, cash equivalents and restricted cash were $567.5M (pro forma nearly $1.0B after the January convertible), supporting an accelerated build-out and test programs with AT&T, Verizon, Vodafone and Rakuten.
• Strategic catalysts: (1) Vodafone definitive commercial agreement through 2034 and planned European distribution JV, (2) U.S. SDA contract of $43M expected revenue over ~12 months, and (3) long-term access to up to 45 MHz of U.S. lower mid-band spectrum enabling peak speeds up to 120 Mbps; each narrows the path to commercialization and revenue scale.
• Operations scaled: five Block 1 BlueBird satellites reached full operational status; planning/production expanded to 40 Block 2 satellites; launch capacity for ~60 satellites in 2025–2026 contracted; management targets 6 satellites/month by 2H25, accelerating time-to-coverage in key markets.
• Estimates context: S&P Global consensus was unavailable at time of review; comparisons to Street estimates cannot be provided. We note CFO guided Q1’25 adjusted opex $40–$45M and capex $150–$175M, and indicated Q4’24 capex (~$86M) came in below prior ~$100M guide due to timing.

What Went Well and What Went Wrong

• What Went Well

  • Commercial traction: definitive long-term agreement with Vodafone through 2034 and a jointly owned European distribution entity to accelerate commercialization across Europe.
  • Government momentum: new $43M SDA contract (non-prepaid, milestone/service-based) expected to be recognized over ~12 months; fifth U.S. government award to date, expanding dual-use opportunity set.
  • Technology execution: five Block 1 satellites fully operational; ASIC bring-up completed with validation enabling up to 10,000 MHz processing bandwidth and peak 120 Mbps; FCC STA approvals with AT&T and Verizon to commence initial services.

• What Went Wrong

  • Limited current revenues: Q4 revenue was $1.92M with continuing net losses; the model remains pre-scale pending broader constellation deployment and commercialization.
  • Volatile non-cash items: large warrant liability remeasurement impacts persisted during 2024, complicating P&L optics (e.g., full-year other expense impact), though largely non-operational.
  • Capex ramp and funding needs: capex inflecting (Q4 ~$86M; Q1’25 guide $150–$175M) ahead of revenue scale; management continues to pursue quasi-governmental financing and other facilities to support accelerated plans.

Transcript

Operator (participant)

Good day, and thank you for standing by. Welcome to the AST SpaceMobile fourth quarter 2024 business update call. Please be advised that today's conference is being recorded. I would now like to hand the conference over to your host today, Scott Wisniewski, President of AST SpaceMobile. Please go ahead.

Scott Wisniewski (President)

Thank you, and good afternoon, everyone. Today, I'm also joined by Chairman and CEO Abel Avellan and our Chief Financial Officer, Andy Johnson. 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 and uncertainties, please refer to the risk factors section of AST SpaceMobile's annual report on Form 10-K for the year ended December 31st, 2024, of the Securities and Exchange Commission and other documents filed by AST SpaceMobile with the SEC from time to time.

Also, after our initial remarks, we will be starting our Q&A section with questions submitted by our shareholders. For those of you who may be new to our company and mission, there are over five billion mobile phones in use today around the world, but many of us still experience 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 of us. In this backdrop, AST SpaceMobile is building the first and only global cellular broadband network in space to operate directly with everyday, unmodified mobile devices and supported by our extensive IT and patent portfolio.

We have made significant progress over the past year, and I am excited to pass the call to our Chairman and CEO, Abel Avellan, who will discuss our achievements and our vision going into 2025.

Abel Avellan (Chairman and CEO)

Thank you, Scott. The past several months have been transformational for AST SpaceMobile, as we continue to accelerate manufacturing, expand our partner ecosystem, and demonstrate unique and differentiated space-based cellular broadband capabilities. 2024 was the year we validated AST SpaceMobile's position as a technology leader and inventor in this new industry. And in 2025, we will leverage this position alongside our expansive IP portfolio of more than 3,500 patents and patent-pending claims to further enable true space-based connectivity to the device in your pocket today. Simply put, we enter 2025 with the talent and partners, technology and intellectual property, access to space and the spectrum, and the funding to move at an accelerated pace in this fast-developing market. Key pieces of our business are now in place.

Our technology has the capacity to deliver voice, data, video calls, and other native cellular broadband capabilities, making us a truly differentiated offering for us and our network partners. We are now moving forward to integrate with our partner networks, which will enable initial service with our mobile network operator partners, AT&T and Verizon in the United States, Vodafone in the United Kingdom and Turkey, and Rakuten in Japan. Our mobile network operator partners include some of the largest telecom operators in the world, and the number of partnerships continues to grow. We now have agreements with approximately 50 mobile network operators globally, which have nearly 3 billion existing subscribers around the world. This year is about building our constellation to reach commercial service. As a reminder, our technology has been designed from the beginning to support broadband, not just text messaging or emergency SOS.

As noted recently by our partners, AT&T, Verizon, and Vodafone, who each completed video calls over our in-orbit network. We had the capability for voice and data services at broadband speed to unmodified smartphones. Since our last business update call with investors, we achieved several major milestones. First, we solidified our balance sheet with significant financing with an attractive structure, and with that, we are accelerating our manufacturing, which I will speak to you shortly. Second, we signed an agreement that, once completed, will provide us with the largest block of high-value, lower mid-band spectrum, augmenting the spectrum owned and operated by our partners. Third, we accelerate the satellite manufacturing effort with planning and production of 40 Block 2 Global Satellites underway, alongside additional components and materials needed for over 50.

Fourth, we continue to expand our commercial ecosystem, both with M&Os, with the Vodafone agreement, and with the government contracts. In fact, just this past week, we announced a new $43 million contract award in support of the U.S. Space Development Agency, or SDA. Our recent contract is just the beginning of what we expect to achieve with the U.S. government, and last, we continue to solidify the regulatory framework for our services with the SEC. Let me briefly elaborate on each of these achievements. We completed $460 million convertible senior note offering, resulting in nearly $1 billion in cash on our balance sheet. Alongside this capital raise, we secured capped call transactions, which increased the effective conversion price of the note to approximately $45 per share. With a 4.25% coupon, we significantly reduced our cost of capital for the company.

With the capped call, we minimized effective dilution to existing shareholders to approximately 3% at the effective conversion price. Importantly, as part of the transaction, AT&T, Google, Verizon, and Vodafone converted their existing notes and became Class A common shareholders. We welcome our loyal partners as shareholders, and we appreciate their ongoing support. The financing and our new balance sheet enabled us to immediately and aggressively accelerate our manufacturing plans. We have accelerated the procurement of components and materials needed for us to complete 40 fully integrated and assembled Block 2 BlueBird satellites. Additionally, we have accelerated the procurement of components and materials needed for us to complete fully assembled micros, which are the building block for our satellite and phased array for over 50 satellites.

As a reminder, the assembly stages are one of the last steps in the manufacturing process, and we procure long lead items first to ensure we remain on track for the integration and assembly stages. As part of our accelerated manufacturing, we have increased our global footprint to approximately 194,000 sq ft in Midland, Texas, 59,000 sq ft in Barcelona, Spain, and soon 85,000 additional sq ft in Compton, Florida, respectively. We have completed the bring-up and initial validation of our novel ASIC chip, which will support up to 10,000 MHz, 10 GHz in processing bandwidth per satellite, with peak data speed of up to 120 Mbps. We expect to incorporate our ASIC into Block 2 BlueBird satellites later this year.

We also exercised our contract option for more launches, and now we have fully contracted load capacity for approximately 60 satellites during 2025 and 2026, which gets us to continue servicing the U.S., Europe, and Japan, and some selected markets outside the United States. Next, we signed an agreement which will provide long-term access to up to 45 MHz of lower-mid band spectrum in the United States for direct-to-device satellite application. This agreement, when consummated, will augment our capability pairing existing plans for the continental United States on premium 3GPP low-band spectrum in the 850 MHz band, which offers superior penetration and coverage characteristics. With access to up to 45 MHz of lower-mid band spectrum, the largest available block of high-quality nationwide spectrum in the United States.

Spectrum is a scaled resource, and our spectrum agreement matches an attractive spectrum position with the largest satellite array for direct-to-device cellular broadband from space. The agreement for long-term access to this spectrum enhances our strategy of working with MNO partners. Our partners dedicate premium low-band spectrum to support our services. The spectrum we are accessing amplifies the existing capacity. Specifically, more spectrum means increased subscriber capacity and better service in the U.S., enabling peak data transmission speed of up to 120 Mbps per second for a true broadband experience directly from space to everyday smartphones. This positions us and our mobile network operator partners for significant growth, while reinforcing our place in the broader wireless ecosystem with a valuable strategic asset, and just recently, we received a special temporary authority STA approval from the FCC to commence testing service with AT&T and Verizon in the United States.

This approval enables us to connect and test our BlueBird satellites with unmodified smartphones without the need of any specialized software, device support, or updates. The FCC approvals underscore the shared goal between AST SpaceMobile and the Commission, and we anticipate additional FCC rulings soon, and we continue integrating our groundbreaking technology with our STA partners. The first five commercial Block 1 BlueBird satellites launched in September 2024 are fully operational. As a reminder, our satellites are massive, each the largest ever commercially deployed communication array in orbit, other than the International Space Station. For context, our upcoming Block 2 satellites are more than three times the size of Block 1 satellites, measuring approximately 2,400 sq ft. As a result, we need a much smaller number of satellites compared to traditional operators in the low Earth orbit.

The size of our satellites accelerates our path to commercial revenues, and the design of our satellites and network decreases any single point of failure, reducing our risk profile. I am very pleased to report the first five BlueBird satellites are all performing as expected. We have fully tested each satellite and put them into operations. It was exciting to watch Vodafone CEO Margherita Della Valle complete a video call using our space-based technology. AT&T and Verizon completed video calls shortly after. This operational milestone demonstrates our unique capabilities that our satellites were designed for, not just text messaging, but full broadband capabilities and other native cellular capabilities to completely unmodified smartphones. On the government front, we recently secured an additional contract for $43 million of revenue with the U.S. Space Development Agency through a prime contractor. Scott will provide support details momentarily.

But this commercial award highlights the capabilities of our dual-use technology for specialized government applications. Our government contract pipeline continues to show strength, driven by new use cases for our unique technology, which are becoming clearer every day. With our successful initial launch and the progress across manufacturing and our commercial and government agreement, you can see that key pieces of operationalizing the AST SpaceMobile network are now in place. I am incredibly proud of the tireless effort from our team and our partners, particularly over the past several months, to get us to this critical point. With each step, we move closer to achieving our mission of connecting the unconnected and look forward to bringing you more updates in the months ahead. I will now pass to Scott to provide more details on our commercial progress.

Scott Wisniewski (President)

Thank you, Abel. As Abel mentioned, the last few months have been truly significant for AST SpaceMobile. All of the facets of our business are coming together nicely, and we enter 2025 in our strongest position to date. Let me provide additional details on some of the achievements and what they mean for the commercialization of the company. Just last week, we signed a $43 million revenue contract with the U.S. Space Development Agency through a prime contractor. This contract follows successful in-orbit testing on our BlueWalker 3 test satellite under the previous contract announced in February of 2024. Importantly, this is not a prepaid contract, but rather revenue we expect to receive and recognize alongside service delivered on our five satellites in orbit and our first Block 2 BlueBird satellite.

This contract, as with our other U.S. government contracts to date, serves as an evaluation of our capabilities in support of potential larger, long-term contracts. Now, taking a step back, this marks our fifth contract award with the U.S. Government and our third supporting the U.S. Space Development Agency.

We continue to see a strong demand profile for space applications from the DOD, which you can read about in the press, and in particular for our unique architecture, which facilitates a diverse set of communications and non-communications applications. Our network is also attractively positioned as dual-use capable, meaning the same spacecraft can be used for both consumer and government programs. On the commercial front, we continue to advance with our partners, including the approximately 50 mobile network operators we have initial agreements with today.

The depth and excitement of these conversations has continued to increase alongside our business milestones, like the high-profile video calls with Vodafone, AT&T, and Verizon that we recently conducted. During 2025, we expect to round out our strategic markets with additional M&Os, building out the initial planned coverage footprint in the U.S., Europe, Japan, and with the U.S. government. Additionally, during the first half of 2025, you will begin to see gateway sales or bookings that will bring in cash and revenue during 2025 and also provide a leading indicator for the markets where you will see initial service revenue. Turning to Vodafone in particular, in December, we finalized a definitive long-term commercial agreement for SpaceMobile service through 2034. This agreement establishes the framework for Vodafone to offer space-based cellular broadband connectivity in its home markets, as well as to other operators via its partner markets program.

Our agreement with Vodafone is a culmination of the many years working together to advance connectivity, marking another significant step in our historic partnership. And then, just yesterday, we announced a further agreement with Vodafone to accelerate the commercialization of the SpaceMobile network across all of Europe. This jointly owned entity will exclusively distribute our space-based cellular broadband service, expanding our addressable market significantly in Europe. This means shared ground infrastructure to manage geographic boundaries and turnkey solutions to increase take-up with smaller operators earlier in our deployment. Also, in support of our European expansion, we are opening a research and validation hub in Málaga, Spain, to support space and land mobile broadband research.

This strategic expansion, along with our increased manufacturing footprint in Barcelona, will enhance our capabilities to serve the European market and underscore our long-term commitment to the continent. And with that, I will hand it off to Andy.

Andy Johnson (CFO)

Thanks, Scott, and good afternoon, everyone. I echo the sentiment expressed by Abel and Scott. 2024 was a pivotal year in the history of AST SpaceMobile, and we continued our rapid operating transformation during Q4 of 2024. Our successful launch of five Block 1 BlueBird satellites in September, coupled with our achievement of full operational status of those satellites in early Q4, has positioned us well to continue our intense focus on expanding our customers both through commercial and U.S. government engagements. As 2024 came to a close, AST SpaceMobile was a transformed company, poised to lead the burgeoning direct-to-device satellite communication industry. We have the financial resources to support our bold initiatives to accelerate the manufacturing and deployment of our satellites in an effort to scale our revenue in the coming periods.

The start of 2025 has been a continuation of this significant progress. As mentioned earlier, we accelerated satellite manufacturing efforts in line with our plans to launch up to 60 Block 2 BlueBird satellites during 2025 and 2026. We strengthened our balance sheet through our strategic capital raising, facilitating an increase in our production targets, including the planning and production of 40 Block 2 BlueBird satellites and fully assembled microns and phased array to support a total of 53 satellites. Production is well underway at our manufacturing facilities as we expand our footprint globally. Moving to the operating and metrics slide, let's review the key operating metrics for the fourth quarter and full year 2024. On the first chart for the fourth quarter of 2024, we incurred non-GAAP adjusted cash operating expenses of $40.8 million versus $45.3 million in the third quarter.

As a reminder, non-GAAP adjusted operating expenses exclude certain non-cash operating costs, including depreciation and amortization and stock-based compensation. This quarter-over-quarter decrease resulted from $9.3 million of reduced R&D costs, primarily related to our now completed ASIC bring-up and initial validation work, partially offset by a $4.2 million increase in adjusted engineering services costs and a slight increase of $0.6 million in adjusted general and administrative costs in connection with our accelerated plans related to our Block 2 BlueBird satellites and investments to bolster our critical commercial and administrative functions. For the full year 2024, non-GAAP adjusted cash operating expenses totaled $151.8 million compared to $154.6 million for the full year 2023.

Increased engineering services and G&A costs in 2024 were more than offset by a significant reduction in R&D costs as we reduced third-party research and development efforts and pivoted to our internal engineering and cross-functional administrative support in connection with our satellite manufacturing, deployment, commercial, and U.S. Government engagement efforts related to our Block 1 and Block 2 BlueBird satellites. Turning towards the second chart on this slide, our capital expenditures for the fourth quarter of 2024 were approximately $86 million versus $26.5 million for the third quarter of 2024. This figure is made up of approximately $77 million of capitalized direct materials and labor for our Block 2 BlueBird satellites and additional facility and production equipment for our recently expanded 194,000 sq ft assembly, integration, and test facilities in Midland, Texas.

This amount was just slightly less than our guidance of approximately $100 million that I provided on our last business update call in November due to timing of a payment ultimately made in January versus December. Overall, and as expected, capital expenditures have continued to ramp in connection with Block 2 BlueBird satellite production and related launch commitments. Today, we are executing a plan to increase monthly satellite production to six satellites per month in the second half of 2025. In connection with scaling manufacturing and continuing payments on our two-year launch campaign, we expect capital expenditures will continue to increase as compared to prior quarters. We expect CapEx in the range of $150-$175 million in the first quarter of 2025.

Consistent with the fourth quarter of 2024, we estimate that our adjusted cash operating expenses for the first quarter of 2025 will come in within a range of $40-$45 million as we continue to make critical investments across the organization in support of our growth plans. Timing of the changes in our adjusted operating expenditures and capital expenditures, as I've just described, could be delayed or may not be realized due to a variety of factors, and on the final chart on this slide, we ended the fourth quarter with $567.5 million in cash, up from $518.9 million at the end of the third quarter.

Our ability to maintain cash above $500 million during the fourth quarter, despite the increased capital expenditures, was a result of our effective and disciplined use of our existing at-the-market facility, or ATM, partially offset by the repayment of our previous senior credit facility that I discussed on our last call. We currently have approximately $66 million available on the ATM facility. Our discipline and effective use of this facility has allowed us to increase liquidity, supplementing our other strategic financing initiatives and accelerating future revenue opportunities, positioning us well to move quickly in building and launching our network. As Abel commented earlier, in 2025, we further strengthened our cash position through the execution of a seven-year $460 million convertible senior notes offering on attractive terms, including a capped call that increased the effective conversion price by 100% to $44.98 per share, thus minimizing dilution considerably to approximately 3%.

The offering was more than three times oversubscribed, providing the opportunity to expand our investor base to many new long-term holders that believe in our mission and execution plan of connecting the unconnected. Finally, we continue to make good progress on non-dilutive financing from quasi-governmental sources of capital in the United States, having passed key milestones, including transaction committee acceptance. If these applications are successful, we can use the proceeds to source cost-effective long-term debt funding of large projects. In parallel, we continue to explore financing opportunities through both domestic and global development institutions, providing financial services to businesses like ours in emerging markets. We will provide updates as appropriate, and we will be working with the partner banks and our advisors to refine our alternatives.

With our growing revenue profile and further diversified capital market access, we are confident that we can fund our accelerated operational plans with our existing balance sheet, continued focus on non-dilutive customer prepayments, and prudent use of the ATM facility. We are proud of the progress we made in 2024 and remain focused on our mission as we continue a fast start to 2025. I look forward to keeping you updated on our financial progress as the year unfolds, and with that, this completes the presentation component of our business update call, and I'll pass it back to Scott.

Scott Wisniewski (President)

Thank you, Andy. Before we go to the queue of analyst questions, we'd like to address a few of the questions submitted by our investors. Operator, could you please start us off with the first question?

Operator (participant)

Lee Den from New Zealand asked, "When does ASTS expect to reach the six BlueBird per month manufacturing target?"

Abel Avellan (Chairman and CEO)

Thank you, Lee, and for the question. It's great to see questions coming from New Zealand. We are in the process of manufacturing 40 satellites, and we are working already on the long lead items and all key parts of our ASICs, which are the main building block of our satellite, which is 53 of them. We believe that by the second half of this year, we will be at rate of six per month. For that, we had extended our facility in Midland to around 1,990,000 sq ft of manufacturing. We're adding an additional manufacturing facility in the tune of 85,000 sq ft of manufacturing facility in Florida and another 50,000 sq ft of manufacturing facility in Barcelona.

Operator (participant)

Rick from the Netherlands asked, "What do the current sats in orbit do for the company besides testing? Is there any progress on the defense or governmental part?"

Abel Avellan (Chairman and CEO)

Thank you, Rick, for the question. Yeah, well, they are fully in operation at this point. We have got them approved to operate in the United States under NASTA for both testing of AT&T and Verizon. We already have demonstrated full broadband capability on them, including voice, text, data, and video calling capabilities that will, in essence, become nationwide across the United States, obviously on an intermittent fashion, as there are only five that we're building 45 to 60 between this year and next year. With that, also, the government usage is planned to start.

They're starting doing testing on them and recently announced a new program with the government that is on the basis of the testing that they have done on BlueWalker 3 and now on the operational satellite that we have in orbit. We're very bullish about that opportunity and what the government can use with our satellites, which they're using already with the satellites that are in operation.

Operator (participant)

Andreas from New York asked, "The recently announced launch campaign had agreement with SpaceX, Blue Origin, and ISRO. Are you planning to expand beyond those three?"

Scott Wisniewski (President)

Thank you, Andreas. So as we thought about our launch strategy, we've done a few things on our side to position us for success. One is on the design of the satellite. It's launch vehicle agnostic.

There's a lot of commonalities in the designs for launch vehicles, and we were careful to design our BlueBirds so that they're stackable and configurable for each of the major launch vehicles. So that was the first step. And the second step was last year, we did a deep dive on the market, looked at available capacity, and we selected these three suppliers, as we've talked about. So those were important early steps that we took. And to your direct question, we have the ability to use other launch providers over time, for sure. But in order to get the capacity we wanted during 2025 and 2026, up to 60 satellites, which, as we mentioned on the call earlier, we've actually exercised that option for the full 60. We've got that capacity in the 2025 and 2026 timeframe.

As we build more capacity beyond that, we'll consider all of the supply in the market. For us, we like where we ended up, and this gives us a lot of ability to get to the 60 satellite target.

Operator (participant)

Brian from Maryland asked, "What are the remaining risks to full authorization from the FCC for operating a commercial constellation?"

Scott Wisniewski (President)

Thank you, Brian. As you may have seen, we recently received STA authorization from the FCC to do initial services with our satellites for both Verizon and AT&T, and that was the basis for the video calls we did with them a few weeks ago. We're also in the final stages of the process for a commercial modification of our existing commercial license, and that's something that we're working on.

Alongside that, we'll be rolling out a beta service that allows us to do scaled testing, and then a paid service will follow thereafter and with that, I'd like to thank our shareholders for submitting those questions. Operator, let's open the call to ask questions now.

Operator (participant)

Thank you. We will now be conducting a question-and-answer session. If you would like to ask a question, please press Star 1 on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press Star 2 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. One moment, please, while we poll for questions. Our first question comes from the line of Griffin Boss with B. Riley Securities. Please proceed with your question.

Griffin Boss (Research Analyst)

Hi, good evening. Thanks for taking my question. So your agreements with the roughly 50 M&O partners represent 3 billion subscribers. Now, how many M&O subscribers could be addressed by this new SATCO joint venture with Vodafone? Well, yeah, what would be more helpful is if you can give us a rough sense of the incremental number of subscribers this partnership could allow you to tap into, given this opens up the entire European market, which I assume likely includes M&Os that you didn't already have MOUs with.

Scott Wisniewski (President)

Thank you, Griffin. It's a great question, and it's a key reason why we and Vodafone wanted to put this structure in place. So, when you look at the full set of connections in Europe, you get to about 600-plus when you look at all the European countries together. And we were only covering before the Vodafone 10-home market. So, this does a couple of things.

One, it sets a plan for gateways across the continent that'll be able to, despite smaller country sizes, manage borders quite well and, at the same time, provide an efficient path to bringing on new countries that we hadn't originally contemplated and more M&Os in each country. So it's a big step up in that regard, going from just 10 countries to probably 3x that, although certainly we had good countries covered in the beginning, but this adds some really significant countries and some significant operator potential for us.

And we think that having a kind of a European-based, European-sovereign operator is really important. It's important for Europe. It's important for European operators. And it's, frankly, an extension of how we built our network, right? We built it so that operators and regulators can feel comfortable about how the traffic is managed. We think that this is a great extension of that.

Griffin Boss (Research Analyst)

That's great context. Thank you, Scott. And then next for me, it's related, but well, not related to that, but a two-part question. Both are related. First is this $43 million contract with the SDA. It's great to see. Are these or is it, yeah, is this for non-communication applications and services that you've mentioned for some time now and discussed in the prepared remarks? And then second part of this question, are you able to provide more detail as to what these non-communications applications are that your architecture is able to support? Are we talking missile tracking, PNT, remote sensing? Any color that you can provide to us, I think, would be helpful.

Scott Wisniewski (President)

Yeah. Thanks, Griffin. In terms of the capability that we're bringing to bear, its non-communications, like we said, and we won't offer more definition of that at this time. But it's consistent with the frequencies that we operate, and so that's what the satellite can do, but we'll say it's non-communications. In terms of the size of the opportunity, yes, this is kind of a second phase for the contract that we announced last February and that we've earned revenue against on the first satellite. This is $43 million that we expect to earn in the next 12 months or so off of the first five commercial satellites and the first block two satellite. Importantly, this is just another further evaluation, so the opportunity, we believe, to be quite large, small relative to the total opportunity. It's one that we're very excited about.

And like we said, that's a general timeframe and the satellites we need to execute on the milestones to deliver the $43 million of revenue.

Griffin Boss (Research Analyst)

Okay. And is that to be, so should we expect that to be linearly recognized over the next 12 months, or are you providing some services now that might be more robust in, say, six months?

Scott Wisniewski (President)

There might be a slight lag in getting going in the next couple of months, but generally speaking, linear is the right way to model it.

Griffin Boss (Research Analyst)

Okay. Great. Thanks, Scott. Appreciate it.

Operator (participant)

Thank you. Our next question comes from the line of Chris Schoell with UBS. Please proceed with your question.

Chris Schoell (Analyst)

Great. Thank you. We saw a lot of buzz with T-Mobile and Starlink's recent launch of its beta messaging service. Can you just remind us how your technology differs versus what T-Mobile and Starlink are bringing to market and the advantages you have? And appreciate their service as just messaging to start, but given the price points they put out there, how does this influence your own pricing strategy as you ready a full voice and broadband product? Thank you.

Abel Avellan (Chairman and CEO)

Thank you, Chris. I think that is a reflection of what AST pricing is for, which in essence is now still quasi-intermittent, yes, messaging service. Our services, as you know, is voice, text, data, internet, video, everything that you can do on your phone. Normally, you will be able to do it through our system. So it's a very differentiated package what we can offer to the operators.

We believe that our scale, the reason why we have a 10,000 of a spectrum per satellite that does lead to 10 MHz of a spectrum per satellite, 120 Mbps per second data rate directly to your phone without requiring any change on the phone or adaptation into the phone using premium existing 850 MHz band, is greatly differentiated. And it will allow our partner operators to differentiate with much better service and packages that basically enable the consumer to have the full-fledged connectivity when they get access to our service.

Chris Schoell (Analyst)

Got it. And then if I can just fit one more in on funding. I see the language in the 10-K indicating you have funding that you need for the next 12 months with the ATM. Appreciate there are a number of moving pieces, but as you look to 2026 and the ability to launch the 60 satellites, any help sizing the amount of capital you think you still need to raise and how you evaluate the different sources?

Andy Johnson (CFO)

Yeah, this is Andy. Thanks for the question, Chris. As we said both in our statements in the K, we're well positioned to get kind of that first threshold of 25 satellites, which starts a service and well beyond that. It is the case that we have 60 satellites under our launch campaign, and we feel very good about our ability to manufacture the 40 that are in process right now. Well, we're well positioned for the near term. We're always looking for smart capital-raising opportunities, and we'll continue to evaluate them. But with a pro forma balance sheet of about $1 billion, we're absolutely positioned in a very strong way for the next 12 months.

Chris Schoell (Analyst)

Okay. Great. Thank you.

Operator (participant)

Thank you. Our next question comes from the line of Brian Graf with Deutsche Bank. Please proceed with your question.

Brian Graf (Analyst)

Hi, good afternoon. I had a few if I could. I guess first on launches, are you still on track for an April launch of the next satellite? I think that's what you said. And can you give us any rough sense for the pacing you expect for launches in 2025 and 2026? Just roughly how many of the up to 60 would you expect to launch this year versus next year? I had a question about costs per satellite, if that's changed at all, or if it's still the $19 million-$21 million per satellite. Then the last thing I just want to ask you about was sort of following up on that funding topic from the last question.

We get a lot of questions regarding how much funding you'll need to fund the business plan and get the free cash flow positive. But it seems like the more funding you have available, the wider the scope of the business plan becomes, and the faster you accelerate the business plan. So it's not really about how much you need, but it's more about how much you can raise on attractive terms and invest at an attractive return. Is that the right way to think about it? And anything you'd elaborate on there from a funding perspective? Thank you.

Abel Avellan (Chairman and CEO)

Yeah, Brian. The way that we think about it is when we combine the non-communication application government base and the communications for consumers, we get the ability to turn monetizing, as you see in the recent order, not only by a constellation, but on a per satellite basis. So the last guidance that we gave is that we believe to be cash flow positive with around 25 satellites. It's not that we get to continue service with our 25 satellites, but with 25 satellites, we start getting enough applications that are non-communications combined with some other sources of revenue like gateways and infrastructure built up that allow us to get to our cash flow positive. With that, we have greatly accelerated our pace of production.

As Andy indicated, we close the year. We enter into the year with around $1 billion in cash that we are basically putting into work into upgrading our capacity of building up to six satellites a month, which it translates to roughly at some point 72 per year, and we need 45-60 to get continued service in the United States, so that's how we are basically planning our network build-up is basically start to get financed with revenue rather than equity or other type of transactions. In terms of the launch, we have secured 60 launches, 60 satellites to be launched, which we put well in our target in obtaining continued service in the U.S., Europe, Japan, and some selected markets. When we call selected markets, basically countries where there are customers that are getting to pay early access to our constellation.

That's another source of revenue that we will be utilizing going forward. With the New Glenn, we can launch up to eight satellites per launch that pretty much double the cadence of what is possible with the Falcon 9. We expect later in the year to start moving to a launch cadence of around one launch every 45 days on the New Glenn. We have other launches also that have been secured in advance to that. So we are in the process of manufacturing 40. We have in the process of manufacturing long lead items of 53. And that will dictate the cadence how we get them into space.

Brian Graf (Analyst)

Thanks, Avellan. Anything on the cost per satellite? Is that changed at all, or are you still in that $19 million-$21 million range?

Abel Avellan (Chairman and CEO)

No. Yeah, we're not changing the guidance on the cost per satellite.

Brian Graf (Analyst)

Okay. And then if I could just follow up just on funding. So you still expect to get to free cash flow positive at 25 satellites? I just want to make sure I understand that right. Or does the acceleration sort of modify that timeline?

Andy Johnson (CFO)

No, this is Andy. The only qualifier I'd add is on an operating basis, we see that we'll generate free cash flow at that basis. So obviously, CapEx flexes. We're going to ramp up, and we may dial back depending on needs at a point in time and when launch commitments are made. But on an actual operating basis, yes. As we've all explained, we believe that with 25 satellites, our applications and opportunities are sufficient to generate free cash flow.

Brian Graf (Analyst)

Okay. And then, I'm sorry, but just the last, I guess, follow-up to that would then be just trying to understand. If you can be free cash flow positive, roughly 25 satellites, just trying to understand the need for the $500 million in quasi-government funding that you're pursuing. And I understand it's attractive money. Is that more to refinance, or do you need that money for other operational purposes?

Scott Wisniewski (President)

I'd say, and this is Scott, that has been a long-term strategy of our funding plan, and it's an attractive way that companies like us get funding. And I would say that while we do have diverse access to a lot of capital markets, this is another one to open up. So we've been very prudent and conservative with funding over the life of the company, and this is a great pocket of capital to have available. And we'll assess our cash needs when it becomes available.

That particular funding source is a process, Brian, and it's one that we're in the middle of. And we'll assess how to use that and when to use that when the time is right. But for us, I think we've seen benefits of having good liquidity for the company that we've been able to generate over the last six months, and we like having that backdrop a lot.

Brian Graf (Analyst)

Are those quasi-government sources? Are those more like a facility that once you have it, you can draw on it and not pay interest on the whole thing, or is it once you get it, you get it, and now you've got this pile of cash that you've got to service the debt on?

Scott Wisniewski (President)

Well, we're pursuing at least three seriously at the moment, and different facilities have different structures. But yes, at least one of them does have a structure that's delayed draw, like you said, or milestone based. Although we're not going to be cheap, pennywise, pound foolish on cost of capital. The key is to maintain good liquidity for the company. But you're right. With the backdrop that I described, having some sort of delayed draw component could be very useful. And in fact, that's one of the ways that we thought about the financing for our recent spectrum deal.

Brian Graf (Analyst)

Okay. All right. Thanks very much. Appreciate the color.

Operator (participant)

Thank you. Our next question comes from the line of Colin Canfield with Cantor. Please proceed with your question.

Colin Canfield (Equity Analyst)

Hey, thanks. Maybe starting off, if you can talk a little bit about the organizational structure with respect to your chipset engineering team and maybe reflect a little bit or talk a little bit about how that chipset team is working with folks either at more kind of a handset OE level or even to the higher levels of Vodafone, Google, [audio distortion]

Abel Avellan (Chairman and CEO)

I think one clarification. Our ASIC platform, it is required or used on the satellites only. We do not require new chipsets on the handsets. So the way that we have organized ourselves, we start launching satellites using FPGAs, basically field-programmable gate arrays. Now that we have completed the ASIC, we're in the process of packaging and start incorporating them into the second half of this year.

So, the advanced chip, we have a 10 GHz processing capacity, one of the most advanced nodes that exists on the market today, and certainly one of the most advanced in space. But I wanted to make clear that we do not require any modification of the chipsets on the phones. Our system, it is designed to work on the phone that you have in your pocket without modifying anything on it.

Colin Canfield (Equity Analyst)

Yeah. Fully understood on the satellite chip being baked. Just to make sure I kind of understood the level of signals and frequency timing between OEMs and ASIC. As we think about the GAAP OpEx progression through the year, can you just maybe talk about how you think about the current guide and the level of step-up through the year and where you expect most of the cost growth through the year to progress?

Andy Johnson (CFO)

Andy, I think on the cost growth this year, we've got, we'll be talking each quarter about CapEx. But I mean, our CapEx is growth-based. It's based on ramping up the 40-plus satellites. We obviously have 40 in production and long lead items, milestones for 53. That will flex. We've started taking that on, and that sort of feeds into that guidance I gave on a ramp-up of CapEx in Q1. Otherwise, I mean, we gave guidance consistent with our OpEx that sort of follows in line for the most part with Q4. Our ASIC costs will come down as we finish that work and begin to fully integrate. But we'll make additional investments. We're becoming a commercial enterprise now. We're building out that muscle. We are investing in administrative functions across the organization as we grow and prepare to be a full operating company.

So, you'll see you're not going to see any incredible difference over if you look at the past prior periods in terms of how we're thinking about operating expense. But at this point, we'll come to you quarterly, which we have, and give you a view on going forward. And clearly, I mentioned this in my remarks, but it's probably worth restating. The opportunity for us to really bring cost down is in our R&D function, which in a lot of ways was primarily based on third-party expense. That work's been done. We have a satellite that is fully developed and engineered now, and we are moving to a full-on production environment. And you'll see investments in manufacturing. As Abel mentioned in his remarks, we've added space in Midland, Texas.

We've added space in Barcelona, and we're very excited to add manufacturing space in the very near term in Southern Florida. So you'll see those sorts of investments all feeding into becoming a scaling manufacturing company that optimizes satellite production at about six per month in the second half of the year.

Colin Canfield (Equity Analyst)

Got it. Got it. And then maybe a little bit on the European opportunity. Seems like the high-level structure of IRIS is looking to track towards something like FTA, where there's a lot of manufacturing upfront and aspirations for large leveraging of, we'll say, kind of more prime-type acquisition approaches. But as we've seen from the supply chain development on kind of the U.S. side, it's clear that there's obviously opportunities for services growth, right, with the $43 million that AST has won. So maybe if you can talk about the structure of AST, how you think about your ability to win contracts like the $43 million from FTA and the types of RevRec that we should expect, whether it's more cost or fee and kind of service delivery-based approaches.

Scott Wisniewski (President)

Sure. I'll take that one, Colin. First, just on RevRec, this is milestone-based, given that this is kind of technology evaluation. And so there are reports, tests, activities we'll be doing with the satellites in orbit, and that'll drive that revenue rec over the next 12 months, plus or minus, that we talked about earlier. And in terms of structure of how these contracts will look as they scale, the U.S. government and how they're thinking about buying defense stuff and how they're thinking about space evolves and has a lot of different elements to it.

But I would say we think we're really well positioned for all pieces of that. We function well in the desire to have kind of firm fixed price and deliver in an environment where you're buying something, you know what the cost is, and that's delivered by the supplier. We don't work on cost-plus contracts. So that's a positive dynamic. And in terms of service versus hardware sales, we tend to fall on the service side with how we've built our satellites and how they're dual use, as we've discussed. But we're open to the mission, and they evaluate different ways to structure deals. For us, it's important to get a return on the investment that we've put in place in our network, and we can be flexible on that. But we tend to fall on the service side more than on the hardware sale, obviously.

Colin Canfield (Equity Analyst)

Right. Right. Okay. Well, and then last one for me, maybe latest and greatest in terms of kind of expectations around the Legato deal closing, whether it's tracking court filings or kind of where you expect the next piece of information to come out.

Andy Johnson (CFO)

Yeah, this is Andy again. On the Legato deal, things are tracking nicely. We had publicly disclosed the main tenets of that deal when we signed our binding term sheet. So we have work to do to get to where we need to be to complete the deal, but we are well within the timeframe that the parties are set to do so. And of course, with the bankruptcy proceedings, that all needs to play out. But we're working hard on that. We've talked a lot about it. It's a strategic initiative for us, and we're making good progress.

Colin Canfield (Equity Analyst)

Got it. Appreciate the color. Thank you for the questions.

Operator (participant)

Thank you. We have reached the end of the question-and-answer session. I'll now turn the call back over to Scott Wisniewski for closing comments.

Scott Wisniewski (President)

Thank you, Operator. Just again, we want to thank all of our shareholders and research analysts for joining the call and everyone's continued strong support of our very important mission. We look forward to providing you further updates and have a great evening.

Operator (participant)

This concludes today's conference, and you may disconnect your line at this time. Thank you for your participation.