Earnings Call Transcript - ASTS Q3 2021

Operator, Operator

Good day, ladies and gentlemen, and welcome to the AST SpaceMobile Third Quarter 2021 Business Update call. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session. The instructions will follow at that time. As a reminder, this conference call is being recorded. I would like to turn today's call over to Scott with the Company. Thank you. Please go ahead.

Scott Wisniewski, Chief Strategy Officer

Good afternoon, everyone. This is Scott Wisniewski, Chief Strategy Officer of AST SpaceMobile. 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 those results 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 Form S1, filed in June with the Securities and Exchange Commission, as well as Form 10-Q for the third quarter of 2021 and other documents filed by AST SpaceMobile with the SEC from time-to-time. Readers are cautioned not to put undue reliance on forward-looking statements, and the Company specifically disclaims any obligation to update the forward-looking statements that may be discussed during this call. With that, I would like to introduce Chairman and CEO Abel Avellan and Chief Financial Officer, Tom Severson, to the call as well. Abel, over to you.

Abel Avellan, Chairman and CEO

Thank you, Scott. I am really happy to be back with all of you again for our quarterly business update. But before I take you through our technology progress and industrialization, I wanted to spend a few minutes to explain the market opportunity and the technology for those who are new to AST SpaceMobile. Starting with the market opportunity, as I said before, we are chasing a huge market opportunity to connect people everywhere. There are over 5.2 billion mobile phones worldwide, and approximately half of the world’s population do not have similar roadmaps on their phones. We are not building this alone; we're building this with industry-leading strategic partners like Vodafone, American Tower, and Rakuten. Our service is designed for use by nearly all cellular subscribers as an add-on to their existing wireless plans. Now I want to move to an update on the utilization of our technology and how we're doing with Blue Walker 3. There are a lot of exciting things going on with our Company, and I'm eager to take you through our progress on both Blue Walker 3 and on the industrialization of our technology. Today, for the first time, we're going to take you through detailed photos of our technology and Blue Walker 3. Starting with our headquarters, we invested a lot of time and money in preparing our facilities to be ready for the production of satellites. Our headquarters is an 85,000 square foot facility located in Midland, Texas, where we do engineering, testing, and manufacturing for our satellite program. With all the investment that we have done and the headcount that we have placed at this facility, we expect this facility to produce up to two satellites per month. With the extension of a new facility, we will be able to hit our target of six satellites per month. I'm pleased to announce that we have entered into an agreement to purchase an additional 100,000 square feet of equipment in Midland. The two facilities will provide us access to 185,000 total square feet of manufacturing capacity in Texas. Moving to page nine, you will see the final assembly, integration, testing, and delivery of our satellites. Currently, this facility is busy with integration on the Global program, and next year, we plan to use it for BlueBird 1.

Scott Wisniewski, Chief Strategy Officer

Great. Thank you, Abel. Starting on Page 16, I'm really excited to cover a few topics with everyone today. We have watched the steady increase in activity, public attention, and investment in the space tech over the past year, and with this backdrop, AST SpaceMobile is the only pure-play for investors in LEO broadband. As Abel highlighted, we are playing in a very large market, with a solution applicable to over 5 billion mobile phones and a related 1 trillion addressable market. We're jointly going to market with industry giants, leading mobile network operators who have hundreds of millions of subscribers. We have approximately $360 million in cash on hand to fund business operations in the first phase of our production satellite.

Tom Severson, Chief Financial Officer

Thank you, Scott. First, I would like to also welcome everyone to our Third Quarter Business Update call. As a reminder, we became a public Company on April 6th of this year and raised $416 million from new investors and our pre-transaction investors, including Rakuten, Vodafone, and American Tower. We ended the quarter with $360.4 million in cash and the Company is currently debt-free. Our cash operating expenses, including engineering services, R&D, and G&A, decreased to $22.2 million, a decrease of $2.3 million compared to the prior quarter. This decrease was primarily due to R&D expenses which decreased $4.7 million. We expect our future quarterly R&D costs to be on average in the $9 to $10 million range through the end of 2022.

Abel Avellan, Chairman and CEO

Hey, Bryan. How are you? We are progressing as per expectations. We are in the final stage of building, assembling, and testing BlueWalker 3. We have all parts on hand. We had the ability to revoke the launch in December. However, we think if we do exercise that option, it will be within a few months of the original date, contingent on agreements with SpaceX. We're working very hard to be on time; however, we will not launch unless we have full confidence that we have passed all tests.

Bryan Kraft, Analyst

Just wondering if you could provide a little bit more color on the construction and development process for BlueWalker 3, relative to your expectations. And just curious if there's anything that changed this quarter around how you think about the timing for that build-out and eventual launch?

Chris Quilty, Analyst

Hi, Abel. I wanted to follow-up on that test schedule. I believe BlueWalker 3 is using FPGAs and I think the testing data eventually gets fed into the development of an ASIC, which would come at the end of the 6-month testing campaign. Can you verify that?

Abel Avellan, Chairman and CEO

Yes. We will continue based on FPGA, which allows us to incorporate learnings of BlueWalker 3 into our subsequent satellites. Our first initial subsequent satellites will also be based on an FPGA. We are very advanced on the ASIC; however, we're not dependent on it for initial satellites, as we aim to ensure everything is functioning correctly before moving forward. Thank you, Operator. Our Company is building a space-based cellular broadband network designed for use with the phone in your pocket today, extending cellular coverage beyond what was ever thought possible. I want to thank everyone for joining today, and hope you have a great rest of the week. Bye.

Operator, Operator

This concludes today's conference call. You may all disconnect.