Fireside chat - Scott Wisniewski speaks at the UBS Global Media and Communications Conference

This is the ASD Space Mobilecast. This is basically from the seamless, regardless of where you are. We don't want the user even to know that it's connected by satellite. Listen, the opportunity that we have is very, very, very large. Hi everyone, I think we'll get started. My name is Khrushal, and I'm with the Communications and Media Research Team here at UBS. Today we're pleased to have President and Chief Strategy Officer Scott Wiznowski from ASD Space Mobile. Just before I get started, I need to quickly read. As a research analyst, I'm required to provide certain disclosures relating to the nature of my own relationship with that of UBS. Then he comes to me, I wish I expressed a view today. These disclosures are available at www.uvs.com/disclosures. Alternatively, please reach out to me and I can provide them to you after the presentation. So maybe starting off, it's been another very eventful year for the company. Maybe just kind of recap over the key milestones for ASD in 2025 and what are your priorities as you look out into 2026? Sure, and thank you very much for having us. So 2025 has been a fantastic year. It's very much built on 2023, which was about technical demonstration. 2024, which was about partners. In 2025 has been about scaling the business. We've done that with a lot of capital raised, two to three billion dollars raised over the course of the year. We've got our manufacturing plant almost up to rate as well. That's very important because we're a vertically integrated story, and which means we control the input to production and can move fast and innovate and keep that low cost. And we've also added additional partners, put a couple of definitive commercial agreements in place, including with Verizon and 30 Telecom Group. And for the first time as we exit the year, we're having revenue guidance in place for the second half of the year. And we've guided to over a billion dollars of committed revenue as of our last earnings call. So it's been a real exciting year to scale the business across commercial, strategic, capital, and manufacturing. And on top of that, we were able to kick off a lot of excitement this year around MSS Spectrum with our long-term rights access agreement that we put in place in last January. And that really secured for us additional spectrum within our four walls, a real strategic asset that we didn't have before to complement our cellular strategy. Maybe we can just start with a launch calendar. Can you just give us an update, where does the launch cadence look for Bloomberg, Bloomberg six and seven here in the coming weeks? So we're at a fantastic moment where we're deploying network. I think we've spent the last decade building an incredible new vertical within satellite and cellular industry and doing it from scratch in the face of folks not believing it could happen to suddenly being something that everybody talks about. And that was a long journey, but where we find ourselves today is that we're not talking about the tech or even capital or even the customers, we're talking about network deployment and services. And so that's what it's all about now is we're deploying network over the course of 2026, a launch every month or two on average, each launch will have up to six or eight satellites on it. And that will get us to our goal of 45 to 60 satellites in order to offer commercial grade service continuously in the United States, Europe and other markets that matter around the world. So that's the vision that's been the plan for about a year now. We're executing on that vision. And that is about the kickoff with our first next generation satellite launch. And then the next two weeks, one to follow shortly thereafter and then up 13 launches total for the end of 2026. And I think last earnings call you reiterated you expected five launches by the end of one queue. Can you just remind us through the different rocket providers how many satellites can fit fit on each of the different rockets and what that might imply for numbers satellites in orbit by the end of one queue. We're getting to orbit is a strategic topic for us. We have the technology within our four walls and then ecosystem that we've created with the operators to make cellular service on a broadband basis available to the six billion phones in translation today. It's a very powerful tool that we're deploying. And to do that, we need to get the orbit. And so our strategy there has been to make our satellites compatible with all the major heavy and medium launch providers out there. And we've signed up launch contracts with three big players, SpaceX Blue Origin and Israel out of India. There are other launch providers and more launch coming online and we're compatible with all of them. So for us, managing that ride orbit with multiple different providers and buying an excess of launch under contract more than we need to get to that 45 to 16 number has been our strategy all along. And you'll see us on each of those operators are going to have one satellite on our first rocket with Israel here in the coming weeks will have three or four satellites over time with SpaceX and will have six or eight satellites over time with the blue origin to the line rocket. And you mentioned the different launch providers. Can you just talk a little bit about the flexibility you have as you try to work towards that 45 to 60 satellites at the end of next year and you have the ability to pivot between the different providers any color there would be great. The short answer is yes, I joke with my friends in the launch industry that they have a tough time with their customers because they're basically a venture capitalist hard to know when people will be ready to go to orbit and the great thing about not as we plan to launch more on edge to space in a couple years and pretty much anyone on planet with the exception of two or three players. So being able to do that and do that with a vertically integrated strategy means we're not waiting for some prime to give it the notice quarterly we're not waiting when the satellites up in orbit to see if it's going to unfold properly or not our founder with 80 million shares and folks works on this 24/7 is there with the satellite suit to not so long with an entire very big team that done this multiple times before. So for us getting that right is incredibly important being in a position to have multiple stacked options with multiple different providers so that we can hit our cadence with a lot of extra cushion in the system is there strategy and we'll continue to push on that strategy over the course of 226 and 227. And I think the first block two satellites have been a little bit later than they be first envisions me can you just talk about what drove this shit if it's just natural growing pains and once you get past the first block two being launched at you have confidence that there's not going to be any sort of bottlenecks that materialize here over the next 12 months. Yeah we've been very fortunate that for a lot of reasons some are making some not really exposed the supply chain issues that you see across strategic industries on our last launch a year ago we did have some slowdowns based on two different component systems but we're able to bring those in house those are now resolved and so in terms of rolling out our next satellite which is the largest ever communications array put into lower orbit commercially and three times larger than our prior which was the largest in of itself. Being able to do that is something that we could uniquely do because one we're vertically integrated and two we actually you've made a sin components from the first program so by not changing each program we've been able to move fast and basically updating a program was a three X larger satellite in about 12 months time is pretty unprecedented in the satellite industry so the factory is now nearly at pace. The staffing and force base we need for that is in place and we've already started to think ahead including acquiring a foresight in middle in Texas where we're based that'll be focused exclusively on our microns which is our solar panels and components which are applicable for any satellites we build and many other applications. You mentioned the new ASIC chip will be incorporated into the satellite starting in one key just remind us what that does for the total processing power and capacity on block two satellites. So there's a number of challenges in deploying this architecture in orbit that we've overcome. The principal ones are making the phone weight you know phones are keyed for a tower that's a couple miles away so the speed of light is just too slow in space so we solve that problem a number of years ago. Another is managing the narrow airways in the cellular industry this is not satellite band where you have 100 megahertz and 20 megahertz guard bands you've got five megahertz back to back to back and by having our large satellite we can manage that interference. So that we don't hurt AT&T's network we don't hurt Verizon's network we don't hurt anyone else with network and being able to put that together is really important I'm sorry about what was the question. So just remind us what the ASIC chip what it does for total capacity and the total processing. So the ASIC doesn't solve those problems it's all the next problem which is how do you continue to scale and grow the business to hundreds and millions of subscribers. And so the ASIC chip will just give you a progression our test satellite in 2022 gave us 100 megahertz of processing power. Our satellites that are in orbit now since late last year give us a thousand you know one gigahertz of processing power. Our 3X satellite basically gives us 3X that and now what the ASIC will be able to get to our full promise of up to 10 gigahertz of processing power for satellite. So it basically tripled the capability of the satellite apple to apples and then you mentioned the manufacturing milestone of reaching six satellites per month by the end of the year. It seems like you're close so is it fair to say that these new facilities in Florida and Texas they're fully operational and it also feels like that pace is maybe a bit faster than what you're launching. You need to be at six satellites per month or is eventually do you anticipate that on an annual basis you will be launching that many satellites are going forward. So one of the keys to our success is that we've run a lot of parallel processes so you know we're not waiting for anything. If at some point some part of the program falls us down that will be true but at the moment no we are getting to six satellites per month and we're pushing on that very hard and the additional manufacturing locations that you mentioned are two of several that we brought online in the last six months. Those two are still ramping so they're not actively contributing. What they're going to do is give us more resiliency in the system and allow us to continue to produce and pull efficiencies out of it as well. There's a lot of what we do is we've thrown labor at things to make them move faster to meet our timeline and used the fact is this very rigorous, rigorous testing on the ground to manage yields. So even if something doesn't work we find out to the testing process and we swap it out. Going forward what you're going to see is a highly automated, very efficient set of organized manufacturing that allows us to not only hit that six satellite per month's target. But also have flexibility to go beyond it and also flexibility to grow with new growth opportunities ahead of us. Maybe just shifting over to the commercial momentum that you cited earlier so over one billion of revenue commitments with your carrier partners over how many years do these contracts typically run and how will these revenues ultimately be recognized. So we've been very fortunate from the beginning to have a really good following with the operators. I think it's because we solve a very real problem they have on the network deployment side which is how you cover all of population globally with terrestrial towers. It's an almost impossible task in space is so well suited to it. From the beginning they've been in the room with us as part of the conspiracy building a technology helping us on regulatory contributing capital on a group basis so that everyone's contributing a little bit. And this is very much a network for the operators. They're where the partner of choice in the direct device build out they own 20% of our equity and sit on our board. The operators collectively we have over 50 agreements at cover nearly two billion subscribers so our our ecosystem is profound and we're very excited about that and the last part of question just how do the revenues get recognized and how longer these contracts typically. So as we've started monetizing putting into contract with definitive commercial agreements these relationships we've I think our strategy is pretty much to sign longer term contract rather than short term I think our customers view this as infrastructure even though it's very much growth at the moment and a new offering it's very much infrastructure right so you've seen that scene across the board so we've signed agreements for five years six years ten years in one for two years. And those commitments you can think about is kind of you know we're not going to give weighted averages but but based on that layout you know pretty pretty weighted towards the front I would say on average but you're going to see more of those from us and and you know that they're going to build up over time so but but they're not back and weighted at all those are those are definitely heavily weighted towards the front. And I think in September when you've announced the new definitive agreement with Verizon can you just help us understand how did that agreement expand upon the initial partnership you announced back in May of 2024 and how did this definitive agreement stack up to prior definitive agreements in terms of the revenue share elements or even just to go to market approach you're thinking. So as we've built out the ecosystem you know the sac or sanct north star has been a 50 50 revenue share or add on revenues we want to be a growth engine for the operators which typically operate in a more mature industries very valuable industries the mature ones. And so being a growth engine and a revenue source is opposed to a cost center has always been our strategy so that 50 50 rev share has work great for us we're dedicated to it and that's very important so all over contract layout that revenue share. So as we've expanded the relationships with the operators these definitive commercial agreements they cover everything I mean this is not a tack on tax taxing service this is hundred plus pages bringing in 20 different cross functional groups across the company led by senior management to drive a new product offering that that we we think it's going to be worth hundreds of millions of dollars by customers. This is something that requires a lot of new thinking it's it it pulls on historical roaming agreements but it's it's new thinking and and in that way very sticky it's complicated and that that we view that now having been on the other side of a lot of these as a good thing for us and so we're going to continue to push through our customer sheet and build out the initial markets that matter and those will have service of 26 and then from there. And that's how we're going to structure and prioritize those relationships these agreements they're not only legally binding and provide minimum revenue commands and even significant prepayments in some instances they basically provide the vehicle through which we will build a business together and really transform connectivity for their users. And now that you have a few definitive agreements in hand are you finding that with your other commercial partners that conversations are progressing more quickly towards the definitive agreement. Yeah there's not an operator around the world who doesn't want to meet with us and think about how we can work together to constrain to largely been on us we want to build out with our partners those who've been aligned with us those who have brought equity investment minimum commitments alignment around spectrum strategies. And so that is our strategy we're continuing to grow the team in scale you see that in Europe with our joint venture with voter phone that's going to allow us to move into that medium and long tail faster than we otherwise would have but for us. 2025 was very important to build out these initial agreements and build consensus around what that market is going to look like and yeah I expect a lot of these come in 2026. And then you also recently announced the Saudi telecom deal in October can you just talk a little bit about the opportunity you see in that region and again how those terms might compare to some of your other relationships that you have to date. Yeah same same type of contract very much built on the same principles of revenue share and out on services minimum commitments and prepayments. And we're very aligned they are the leading operator in Saudi Arabia which is the largest cellular market in largest market in general in the Gulf. They have a very broad view on businesses having made an investment in telephonic growing a towers business and they're very forward thinking in how they they look at telecom and and how they can support it with their connectivity. And I think they think it left in the same way so we this agreement is built around their core market of Saudi Arabia but it's across various markets and the least in North Africa region and this is something that from from the board on down they feel very strongly about and we're really excited to have them as our partner in the region. And then maybe shifting over to the government side I think there's been a lot more headlines around the government opportunity for your business here in the past year. You just remind us how you're thinking about the TAM and the types of use cases that IST might be well positioned to target. So when we first went public government wasn't really part of our story but if we had a story that didn't have the US government it would be the first space story ever. So it's not surprising how things went out and over the last three years they kind of gradually integrated into our story and our revenue stream and today are our majority of our initial revenue. So at the end of the day what we can do is deploy more power to orbit faster and cheaper with larger arrays than anyone in the history of civilization. So that is a very valuable tool for connecting 6 billion people who go in and out of coverage as well as doing all the normal communication stuff that the US government does. Whether it's upgrading legacy services from from the last millennia or it's moving towards more programmatic buys of standards based services so that the troops always have connectivity or have redundant connectivity. All the way to enabling new devices headsets wearables that are low profile that look and feel like a cell phone but can enable next generation capabilities or drones. And so there's a lot of communications capabilities that we're going to enable. And then there's the non-communications capabilities so because these are the largest arrays employed commercially and very close to the largest arrays ever deployed and definitely the largest ever deployed at this cost level. We can do other things with our frequencies including radar that support a lot of very strategic capabilities for the US government and its allies. So that is what's brought us into the golden dome conversation that's evolved over the past year where we see you know we had a very positive US government investment space backtracking the last five to 10 years but with this year it's really accelerated. There's currently 150 billion dollar RFP open for a lot of the stuff that's involved will be involved with golden dome over time. These are really big use cases that are really relevant where the government is looking for dual use capabilities which means government services free writing or writing on commercial investment which is what we are. As well as avoiding vendor lock which means you're not stuck in a contract with one prime for a decade because you've made some investment you want to do all sources. So managing dual use technologies and deploying dual use technologies and avoiding vendor lock are key strategies that AST space mobile is in a perfect place to provide in addition to a capability that we can offer that's never been offered before and can be offered on the timeline of this administration. I think within the government sector the end goal is usually transitioning these initial use cases into programs of record what gives you confidence that some of these initial use cases you're supporting for the government will turn into programs of record and what is the typical timeline look for something like that. We've talked about programs of record before because it's a good way for folks that don't traffic in the government industry to understand how companies like us get big contracts and support the US government. And so I think about a program of record as over a hundred million dollars of revenue opportunity a year and multiple use cases that we can support was set up to 10 different use cases that we can compete for over time. The way to think about this cycle is usually a two to five year cycle depending on how ingrained you are as a as a supplier generally. And so some of these capabilities have been working on for multiple years and others are much more fledgling and early stage but we think that once we're deployed you know I've scale be one thing to notice. There's only been one Leo constellation in the history of the world that's gotten to the finish line without going bankrupt first and both and so but the promise of getting there has always been very strong if you could get over the initial capital timeline and technical difficulties which we believe we have at this point. And so once you're built the add on opportunities and the marginal economics and barriers to entry associated with those add on opportunities are profound. And so we think that once we're at this baseline service offering and low band globally that we'll be able to have a number of these opportunities available to us and we're we're developing those in parallel to be ready. Maybe if we shift over to the spectrum conversation so it seems like your thinking has evolved a bit here since when we first started speaking and so maybe just kind of talk about why you think it's important for you to own your own spectrum now as opposed to relying just on the carriers for your capacity. So our strategy from the get go consistent with the owner ecosystem strategy I talked about in developing the operators and developing the system with them was using the spectrum because we wanted to make their phones work better. We want to stand on the shoulders of their investment in spectrum and building out their customer base. And so naturally we had to solve the problems and the idea of putting new spectrum on phone seems like an inter-mountable hurdle as well as the cost associated with buying spectrum so our service and our capability or technologies you pretty uniquely set up to capture the thousand plus megahertz of low and midband spectrum that are operator partners own in deploy around the world today we can use it where they're not using it. And we can use it in an efficient way that gets more value to them more value to the regular more value to the end user the consumer those of us who want our phone to work. And so that is a really great strategy and having a lot of power in orbit for the big satellite helps us do that even on highly traffic takeaways. So that's forward and you know there's two big bands available in the world for mobile satellite services the L band and the F band. And what we did earlier this year was we find a long-term lease agreement for over 80 years to use 20 plus 20 megahertz which is the majority of L band in the United States and in Canada the United States being the most valuable wireless market in the world. Very valuable spectrum position that we can deploy in the years to come and enhance the services for our customer the MNO which at more spectrum means more traffic more subscribers better services and doing it in the strategic market. We've also made taking stuff to enhance that around the world in different bands but for us taking one of the two in the most valuable market in the world has very profound implications for how direct advice will evolve over over the decades to come. And is basically how we will the technology advantage today has secured ourselves in the decades come when that that that adage may erode and you know the industry becomes more mature. So the simple thing is we've got this nice baseline of cellular spectrum and on top of that we've added in own spectrum strategy that increases the amount of services we can offer the more subscribers we can serve. Maybe just to follow up on the S band deal you announced earlier this year you now have a seat at the table to try to secure these licenses on a country by country basis. Where does that process stand and outside of the US and Canada do you feel that you have everything you need from a spectrum standpoint or could we see you be opportunistic to secure other airways as well. We like our spectrum strategy the cellular strategy is a pretty strong one gives us a lot of flexibility and outside the US in Europe there's more spectrum more available than you know you typically find in our market so it's a good strategy it's one where partnering with operators is key. For instance sqc has that span rights in Saudi Arabia themselves it's not owned by a satellite company so that is a strategy that's a market by market dependent it's a classic regulatory stuff where you go and you bring your filing and you say listen I can I have network already deployed there's no build out requirement from the time or money and I'd like to offer services to your your citizens and. Help them with work travel convenience and life and death situations and so that's a compelling argument in one that we plan to. Take the regulators around the world in the US and in Canada we have our L band strategy in Europe we formed a joint venture with Vodafo and or participate in the spectrum opportunities in Europe and around the world we expect other opportunities over time to supplement our cellular strategy. A frequent question we get talking to investors is about competition in the space maybe you just talk about what you believe are the advantages your technology offers versus what other players like a star like might be bringing into the market. So we're standing up a new market that could be worth tens of billions of dollars it's basically making the six billion dollar six billion phones around the world work when they don't otherwise work well. And it's basically providing connectivity which is a lifeblood of society today to people when their phone works a little doesn't work much and afford it there's no towers here there's a lot of cats and cracks in these evolving and imperfect networks so that is a strategy that we think works really well. It's how the technology you have compares to what someone like star like is offering and what advantages do you have that maybe investors don't appreciate. Yeah well we think this is going to be a big market so first of all we're going to rate against ourselves to deploy this as fast as we can because the operators that were partnered with over 50 globally nearly three billion sub to monks them if we do a good job with that group we're going to have a fantastic business and we're very excited about it. We're partnered with two of the three players in the United States were partnered with Vodafone is the largest owner of spectrum in the world. Belkana is an investor American towers and investor Googles and investor rackets and as an investor. So we like our playing field very well and we believe that we are the partner of choice for the direct device industry we play very well with partners we always have. And so the way we've built out the capability we're about to start launching is we think we've done the right balance of good for the consumer good for government regulatory good for the operators and good for a g space mobile. Our technology is broadband which we think is the right solution it's hard to compare broadband with even voice let alone text we're not talking about apples and oranges we're talking about apples and aircraft carriers. These are these are really different and and yes we could have started with text three years ago but we went big out of the gate with broadband because we think that's the killer app for direct devices cellular broadband so that's what you're going to see from us launching next year. And that's a different shades us but even still we think it's a big beautiful new market that's going to have a lot of demand and the operators need a solution and we think we're a fantastic solution for them. And we saw the the Echo Star and Starlink announcement back in September where they purchased a large amount of spectrum what implications of any business have for your business and what what was your reaction to those headlines. Well it closely mirror the transaction that we did in January there's basically two bands a spectrum for this globally that are big one is L one is that we made one move in L and they made a single move in L. So these are the two big bands that are available for direct device and these transactions cover the most valuable market in the world which is the US. So I think our view of that transaction was that one it validated that we had an important asset on our books and it would made a good transaction to that the market is very healthy and going to be big and expectation because otherwise the purchase price that was paid for that spectrum would not make sense. And third it will closely aligned us with the operators who we plan to go to market with exclusively through the business model that we described so we're very and we think it brought us close to the operators and enhanced the value that we already had and it showed the value of the market we're creating. I appreciate this question a little early but can you just help us think about once this constellation gets ill and you start to see the modernization of flow through the financials how are you thinking about the operating leverage of this business and maybe compare those that margin potential to what you see from other satellite players that are public today. So when you look through the history of satellite companies last 20 years when the businesses have been doing well and growing you see 85% margins for for wholesale businesses and when you dig into those companies. Even today where there's attractive segments there can be 90% plus marginal economics even a margin filter margin so for us. There's big caps up front we all know that that's why we fund the business way we have. Once it's in orbit very little cost to maintain. There'll be a small maintenance caps line item over time as the seven to ten year cycle of the asset is recycled. But our op X which is in the 60s million dollars per quarter today might trend up a little bit with growth the opportunities are seeing our phenomenal but if you're looking at that plus some least expense. You still have a pretty fixed margin business we have some revenue shares including with the operators but those all come out of the before we get the growth revenue on our on our income statements so the flow through margin here and the operating leverage is pretty. Pretty special and and and we expect that to be in excess of 90% over time. And you made a lot of funding progress over the past year I think on the earnings call you said you know how funding in place to launch over 100 satellites as you look out into 2026 is is a fair that we could still continue to see you be opportunistic as you fund the future business or is it going to be a little bit of a digestion period there. So we've tried to be on our front foot with funding since the beginning of the company and the opportunistic and flexible and access different diverse capital markets and funding sources. We've we've said you know since early 2024 that we're really want to develop our operator partnerships around prepayments and minimum revenue claim is that could also support financing efficiently we've been doing that you see that accelerating including with a prepayment this year of 175 million as well as support from other other operators over the course of the year. And so we've been successful using the capital markets we think that the convert market in particular was very supportive of us as a growth scaling company this year with really unique and differentiated tech as we go into next year. You know with over 3.2 billion of pro forma cash and liquidity on the balance sheet we feel really well positioned for the opportunity and like we said have capital for over 100 million satellite deployment which is well an excess of our 45 to 60 target for next year. And so we're going to be reactive and efficient but management is very aligned with primarily equity compensation our founder and controlling shareholder and 24/7 support team he's got 8 million shares and don't take a salary so we are organized around maximizing the thermal value of the BCF and I think we're at a period now where you've pretty much seen the major capital structure moves that will make and everything else will be tidying up. I think when we've talked about the long term business model we used to talk about continuous coverage I think like 90 or 100 satellites to meet your business goals but is it fair based on the demand drivers you're seeing today that your plans can go well beyond 100 satellites over time. I think so so you know we're building out a low-band constellation now there's other frequencies that that are relevant there's potential government constellations and once you've built out these shells especially over time as space gets more constellations we think that we'll have a really attractive position as an operator of a couple of these very valuable shells and what you see in speculation in the market is what do you do when you're in the market. What do you do when you have a lot of power delivered to orbit in a very low-cost fashion and big markets in demand that support that and strategic interest of governments to support that. The add-on opportunities are really impressive and you see that with all the data-finter conversations in the last week or so whether it's communication services, non-communication services to the US government or the next generation of commercialization of space will be in a great position and build that out. Being vertically integrated and having a fantastic ecosystem and then having an orbit architecture. I think that's a good place to leave it. Thank you for being here today. I appreciate it very much. Thanks for listening to the AST Space Merver Podcast. If you enjoyed this episode and you'd like to help support the podcast please share it with others. Post about it on social media for leave a rating and review. To catch all the latest news about AST Space Merver make sure to subscribe. Thanks again and I'll see you next time. We're going to talk about the new technology that is connected by side-right. Our role is to bring this into reality always important to the animal. 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