ASTS

1. Executive Summary

• AST SpaceMobile is accelerating industrialization of its direct-to-device (D2D) cellular broadband network with expanded U.S. manufacturing, a tighter multi-launch cadence, and deepening commercial commitments.
• Liquidity and funding capacity were substantially enhanced via multiple convertible offerings and note repurchases, positioning the company to execute the 2025–2026 constellation build-out.

Key Takeaways

• Production acceleration: New facilities in Texas and Florida; workforce >1,800; target ~6 satellites/month cadence exiting 2025; BlueBird 6 launch set for Dec 15, 2025; five launches expected by end of Q1 2026; path to 45–60 satellites by end-2026.
• Commercial traction: Over $1.0B in aggregate contracted revenue commitments; stc Group definitive 10-year agreement with $175M prepayment; expanded U.S. coverage with Verizon; EU sovereign JV (SatCo with Vodafone) for 2026 launch.
• Funding strength: Pro forma liquidity of about $3.2B (per Q3 update), underpinned by $1.0B 2036 converts (2.00%) and $575M 2032 converts (2.375%), while retiring higher-coupon notes.
• Near-term revenue ramp: Q3 GAAP revenue $14.7M; reiterated 2H’25 guidance $50–$75M, driven by U.S. Government milestones and gateway deliveries.

2. Financial Performance

Capital Raises & Proceeds

• Oct-2025: Priced $1.0B 2.00% convertible notes due 2036 (initial conversion price ≈ $96.30/share); concurrently repurchased $50M of 4.25% 2032 notes and sold ~2.0M shares at $78.61 to fund the repurchase.
• Jul-2025: Closed $575M convertible notes due 2032 (2.375%); repurchased $135M of 4.25% 2032 notes; issued ~5.8M shares at $60.06 to fund repurchase.
• Jun-2025: Repurchased $225M of 4.25% 2032 notes; after Jul and Oct actions, remaining 4.25% 2032 notes ≈ $50M.
• Jan-2025: Closed $460M 4.25% 2032 converts (later largely repurchased).
• Jul-2025: $100M non-dilutive equipment financing (Trinity Capital), $25M drawn at closing.
• Net effect (latest): Lower blended interest cost, extended maturities, and materially increased balance-sheet flexibility; upsizing to $1.0B (from $850M) in Oct signals strong investor demand.
• Estimated annualized cash interest (post-October): ~$36–40M (2.00% on $1.0B ≈ $20M; 2.375% on $575M ≈ $13.7M; 4.25% on $50M ≈ $2.1M; excl. equipment facility specifics).

Early Revenue Initiatives

• Q3’25 GAAP revenue: $14.7M, primarily U.S. Government milestones and gateway deliveries.
• 2H’25 revenue guidance: $50–$75M (reiterated Nov-10).
• Government: Ongoing $43M SDA contract; demonstrated tactical NTN with U.S. DoD stakeholders (Hawaii).
• Commercial:
• stc Group: 10-year definitive agreement; $175M prepayment; three gateways and a NOC in Riyadh; commercial launch targeted Q4’26 (regulatory-dependent).
• Verizon definitive agreement expands U.S. coverage plans; intermittent U.S. activations progressing into early 2026.
• Vodafone: SatCo EU JV; EU Operations Centre in Germany; gateway order placed earlier; 21 EU states showing interest; commercial start 2026.

Expense Management & Cash Flow

• Adjusted operating expenses: $67.7M in Q3’25 (up from $51.7M in Q2’25) as manufacturing ramps.
• Capex: Elevated for satellite materials/launch (e.g., $323M in Q2’25; $124M in Q1’25), consistent with constellation build.
• Liquidity: As of Sept 30, 2025, cash and restricted cash ~$1.2B; pro forma cash/availability ~$3.2B (press release priority). Ample runway for 2025–2026 deployment.
• Note: EBITDA negative during scale-up; cost of capital reduced via refinancing and retirements of higher-coupon notes.

3. Guidance and Future Outlook

Production Ramp–Up

• BlueBird 6 launch: Dec 15, 2025 (India). Array ≈ 2,400 sq ft (≈3.5x larger than BB1–5) with ~10x data capacity uplift.
• Launch cadence: Five launches by end Q1’26; then every 1–2 months on average to reach 45–60 satellites in orbit by end-2026.
• Manufacturing: ~6 satellites/month by exit-2025; 40 satellites equivalent completed by early 2026.
• Facilities: Expanded to five in Texas (incl. new Midland site), Homestead, FL, plus Maryland; ~500,000 sq ft global footprint (≈400,000 sq ft U.S.); 95% vertical integration.

Expansion Plans

• Europe: SatCo JV with Vodafone; EU satellite operations centre in Germany; commercial start 2026; candidate for EU 2 GHz MSS spectrum.
• Middle East/Africa: stc Group 10-year agreement; gateways and NOC in Saudi Arabia; services Q4’26 pending CST approvals.
• North America/Japan/UK: Intermittent U.S. activation progressing into early 2026; Canada, Japan, U.K. activations planned in early 2026.
• India: Strategic partnership with Vi (Vodafone Idea) to extend services.

Operational Targets

• ASIC integration (AST5000): First integration planned Q1’26; supports up to 10 GHz processing bandwidth and ~120 Mbps peak per cell.
• Spectrum: Long-term access roadmap to L/S-Bands (incl. up to 45 MHz lower mid-band in U.S./Canada; 1,150 MHz tunable low/mid-band globally; >80 MHz paired spectrum in U.S.).
• Service objective: Continuous coverage across the U.S. and select markets by end-2026.

4. Strategic Positioning and Initiatives

Cost Management

• Vertical integration (~95%) to compress COGS, lower supplier risk, and improve schedule control.
• Debt optimization: Retired higher-coupon 4.25% 2032 notes; issued lower-rate 2036/2032 notes; minimized cash interest and extended maturities.
• U.S.-based manufacturing to streamline logistics and reduce geopolitical/supply-chain risk.

Product Development

• Transition to Block 2 BlueBirds (BB6 onward) with ~10x capacity vs. Block 1.
• AST5000 ASIC program to unlock higher throughput and efficiency.
• Gateway ecosystem expansion (U.S., EU, KSA) to support service activations.

Market Expansion

• >50 MNO partners with nearly 3B subscribers; definitive agreements with Verizon and stc; EU SatCo distribution platform.
• Government business: SDA and broader U.S. Government traction; demonstrated defense-grade NTN capabilities.

5. Competitive Positioning and Market Trends

Market Positioning

• Positioned as a leader in broadband D2D (beyond narrowband messaging), with the largest commercial LEO phased arrays and strong IP moat (~3,800 U.S. patents/claims).

Competitive Strengths

• Scale manufacturing and rapid cadence (six sats/month target).
• Spectrum strategy (L/S-band rights, EU MSS candidacy).
• Tier-1 MNO partnerships (AT&T, Verizon, Vodafone, stc, Rakuten, Vi) and government contracts.
• Demonstrated end-to-end service on unmodified smartphones.

Emerging Industry Trends

• Rapid adoption of 3GPP NTN features by MNOs and device OEMs.
• Sovereign and PPDR (public protection/disaster relief) demand tailwinds in EU and Middle East.
• Convergence of defense and commercial requirements for resilient NTN.

6. Technology and Innovation Strategy

Technological Advancements

• BlueBird 6 and beyond: larger arrays, higher spectral efficiency, and ~10x capacity uplift.
• AST5000 custom ASIC enabling up to 10 GHz satellite processing bandwidth; targets ~120 Mbps per cell.
• AI-assisted spectrum management efforts underway to optimize utilization (per management commentary).

New Product Developments

• Progressive integration of ASICs starting Q1’26; expansion of gateway/NOC footprint (U.S., EU, KSA).
• Continued spectrum portfolio expansion and tuning across L/S-bands to improve coverage and throughput.

Alignment with Market Needs

• Direct broadband to unmodified smartphones, aligning with MNOs’ needs for coverage extension without device swaps.
• Solutions targeted to emergency, rural, maritime, and defense use cases, expanding TAM beyond consumer roaming.

7. Risk and Reward Analysis

Growth Catalysts

• Near-term: Dec-15 BB6 launch; five launches by Q1’26; intermittent service activation in U.S. and other key markets in early 2026.
• Commercial: Monetization of stc $175M prepay and EU SatCo distribution from 2026; expanded Verizon footprint.
• Government: Additional NTN demonstrations and potential contracts following the $43M SDA award.
• Technology: ASIC deployment and spectrum access support higher ARPU services.

Downside Risks

• Execution/launch risk and potential weather/provider delays; schedule slips would push revenue recognition.
• Regulatory approvals (FCC, EU, CST in KSA) are gating items for broader commercialization.
• Capital intensity and dilution risk from ATM/convertible instruments; note overhang and conversion features.
• Competitive pressure from other D2D/NTN players; pricing and margin pressure as market matures.
• Technical risk at constellation scale (reliability, interference management, handset compatibility).

Valuation Metrics

• Near-term P/E not meaningful (negative earnings). Consider revenue and unit economics through 2026–2028.
• 2025 guide: $50–$75M (2H’25); illustrative 2026 revenue scenarios (company has not provided 2026 revenue guidance):
• Low: $250–$350M (staged service ramp; limited geo footprint).
• Base: $400–$550M (U.S./EU/JP intermittent to continuous; initial stc/SatCo traction).
• High: $600–$800M+ (faster activations; stronger MNO uptake; government growth).
• EV/Sales framework (illustrative): early-stage infrastructure businesses often trade ~4–8x forward Sales depending on growth/visibility. Applying to a Base 2026E $400–$550M implies EV ≈ $1.6–$4.4B. Investors should adjust for:
• Net debt/cash post-October financing and capex usage,
• Potential equity dilution from converts/ATM,
• Ramp velocity and margin realization as satellites enter service.
• DCF anchor points (illustrative, not guidance):
• Capex-heavy 2025–2026; management has previously indicated potential FCF positivity with ~25 satellites once service scales.
• WACC sensitivity high; execution and regulatory milestones should drive discount rate normalization.

8. Investment Thesis

Investment Rationale

• Unique broadband D2D capability to unmodified smartphones with clear manufacturing scale, deep MNO relationships, and expanding spectrum access.
• Strong liquidity and optimized debt structure to execute near-term launches and gateway buildout.
• Structural tailwinds in sovereign/PPDR, defense NTN, and rural coverage mandates support multi-year demand.

Price Target Justification

• A reasonable approach is an EV/Sales multiple on a probability-weighted 2026E revenue:
• Using a Base scenario ($400–$550M) and 4–8x EV/Sales yields EV ≈ $1.6–$4.4B.
• Upside case (faster service ramp to $600–$800M+) at 5–8x suggests EV ≈ $3.0–$6.4B.
• Translate EV to equity value by subtracting net debt (post-raise, post-capex) and dividing by fully diluted shares (including convertibles at their respective conversion prices). Given ongoing capital deployment, investors should refresh net cash and diluted share estimates before setting a per-share target.

Influencing Market Dynamics

• Key drivers: pace of launches/commissioning, regulatory approvals, MNO activation timelines, and handset OEM NTN feature adoption.
• Macro variables: launch market capacity, component/supply chain stability, and interest-rate trajectory affecting capital access and multiples.

9. Macroeconomic and Industry Trends

Regulatory Changes

• FCC STA granted for U.S. testing with AT&T/Verizon; continued FCC/ISED and CST (KSA) approvals are pivotal.
• EU: SatCo a candidate for 2 GHz MSS spectrum; emphasis on sovereign control (command switch, encryption key management).
• Long-term L/S-band access arrangements (incl. Ligado-related rights) underpin U.S./Canada strategy.

Supply Chain Dynamics

• U.S.-centric manufacturing and 95% vertical integration de-risk supply and improve lead-time control.
• Multi-provider launches with a planned 1–2 month cadence diversify launch risk and improve schedule resilience.

Technology Adoption Trends

• Acceleration of 3GPP NTN integration by MNOs and devices.
• Rising demand for resilient connectivity (PPDR/defense), maritime and remote broadband.
• Shift from narrowband SOS/messaging toward broadband D2D creates differentiation and ARPU opportunities.