AST SpaceMobile Is Go for Launch -- but Cash Burn Could Be a Problem

Globe and Mail

16-03-2025

AST SpaceMobile 's (NASDAQ: ASTS) stock took a big bounce after the company reported fourth-quarter results last week. At one point, shares of the satellite communications start-up were up 32% from their pre-earnings price, and even after Monday's steep price decline, they're still higher than they were before the report came out.
So that means the news was good, right? Revenues rising nicely, earnings ahead of analysts' forecasts, and so on?
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Well, not exactly.
At this point, the bottom line doesn't matter
Ahead of the report, analysts had been forecasting that AST would say it had lost $0.18 per share in Q4 on revenue of $2.4 million. AST did in fact lose $0.18 per share, but its revenue was only $1.9 million. For the year, the company missed on both top and bottom lines, losing $1.94 per share on $4.4 million in revenue.
So far, so bad. To be honest, though, earnings (or losses) aren't too significant for AST SpaceMobile right now. The company only has five comsats in orbit, and it hasn't yet received the go-ahead from the Federal Communications Commission to begin beta testing its direct-to-cell (DTC) communications service. That means any revenue the company might report today will be de minimis at best. It also means AST has essentially no chance of earning profits anytime soon.
In other words, if AST lost a bit more money than expected in 2024, that isn't necessarily a deal-breaker when it comes to the investment thesis. Much more important will be how quickly the company can build out its constellation, so it can begin beta testing, begin selling DTC cell service via partners, and begin booking some real revenue.
And there's good news on that front.
AST's BlueBirds of happiness
"The many pieces of our plan are rapidly coming into place," said AST CEO Abel Avellan in the Q4 release. For example, all five of the company's original BlueBird commercial satellites are now operational, and it's taking steps to put more satellites in orbit shortly.
Already, AST says it has 40 Block 2 BlueBirds in production, each more than three times the size of the five BlueBirds already up there. The company also said it's buying parts for at least 10 more satellites beyond that.
And AST has contracted with launch providers SpaceX, Blue Origin, and India's ISRO to launch a total of 60 satellites in 2025 and 2026.
Admittedly, it's unclear why these three sets of numbers don't quite line up -- why, for example, has it contracted to launch 20 more satellites than it currently has in production? One might surmise though, that AST is putting together whichever of the "many pieces of [its] plan," it can get a hold of, as fast as it can secure them, all in anticipation they'll fit together right in the end.
If nothing else, this speaks to management's clear intention to keep going big on its project, and to build out its capacity as quickly as possible without worrying that something might derail its plan. In furtherance of that plan, AST has secured agreements with 50 mobile network operators that serve nearly 3 billion subscribers total in more than 20 countries.
What could derail AST's plans
If there was just one detail I wish AST had addressed a bit better in its report, it would be how much of the above is already paid for, and how much more AST will have to spend. On the post-earnings conference call with analysts and investors, AST management said that, between cash on hand and the proceeds from its recent $460 million, 7-year convertible debt offering, AST now has nearly $1 billion in cash on its balance sheet.
Management asserted that this would be enough cash to keep it going for the next 12 months, and more specifically said it is "well positioned" to pay for the construction and launch of its "first threshold of 25 satellites."
Finally, management noted it expects to receive $43 million in revenue this year from the U.S. Space Force for a project it's working on for that agency. Between that contract and commercial revenue from its telecom partners, management expects to be free-cash-flow positive once it has 25 BlueBirds in orbit.
Again, all of this sounds great. Investors are probably glad to hear that after multiple rounds of dilutive secondary stock offerings and convertible debt issuance, AST is now in a position where it won't need to dilute them anymore in 2025.
Still, analysts polled by S&P Global Market Intelligence believe AST SpaceMobile will need to lay out nearly $1.1 billion in total capital expenditures over the next couple of years. So $1 billion may cover AST through 2025, but if it doesn't start making some money soon, it will almost certainly need to raise more cash in 2026.
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