ASTS Nears Liftoff: Gateway Bookings Signal Rapid Progress.
Q1 2025 ER Digest
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This is an update of my original ASTS deep dive.
The onset of gateway bookings suggests ASTS is making rapid progress towards deploying a critical mass of D2D satellites. Once/if it does, ASTS is likely to become a multi-billion dollar free cash flow machine overnight.
ASTS remains well positioned to print billions in free cash flow practically overnight, as they continue advancing towards towards the full deployment of their satellite constellation. ASTS’s phased array technology enables them to beam broadband to smartphones directly, without modifying them. Coupled with ASTS’s extraordinary organisational properties, I believe the technology is hard enough to replicate for them to take the whole D2D (direct-to-device) market.
ASTS is effectively a venture capital play in the public markets, like Hims. Similarly, the fundamentals continue to evolve favourably in Q1 2025 and given the size of the opportunity ahead, ASTS is worth watching. The Q1 2025 earnings call is mostly composed of up-tone qualitative remarks from management. However, for the first time management shared that ASTS brought in $13.6M in gateway bookings: the money MNOs (Mobile Network Operators) spend on equipment that’s essential to integrate AST SpaceMobile’s satellite network with terrestrial cellular infrastructure.
ASTS had not previously reported gateway bookings, because it seems there were none. Further, MNOs stand to benefit from ASTS’s constellation because it promises to save them money. Therefore, MNOs spending money for the first time on gateways indicates that ASTS is progressing adequately. And that indeed, management’s positive remarks are likely true:
The first quarter was a strong start for us and we're currently in an incredible inflection point for the company.
[…]
We expect to deploy over 60 satellites during '25 and '26, which will drive continuous coverage in key markets such as the United States, Europe, Japan, the U.S. government and other strategic markets.
-Abel Avellan, ASTS CEO during the Q1 2025 earnings call.
Gateway bookings will likely remain a leading indicator of ASTS’s for the next 12-18 months, but the metric is unlikely to scale beyond that timeframe. This is because ASTS’s satellites are the largest ever communication satellites and according to management, they don’t need to launch more than 60 to deliver full coverage to their target markets (US, Europe and Japan). Therefore, gateway bookings will eventually flatten out and/or decrease asymptotically as the constellation matures. Further, each satellite generation is considerably larger that the previous one, which will further accentuate this trend.
The launch for the next generation, which is the largest generation is 3.5 times bigger than the Block 1 is scheduled for July. And we have maintained our plan to maintain a capacity of six per month, arrays, which is start in June, July again also this year.
We're referring to the six satellite per month is a fully integrated satellite the more closer towards the end of the year.
-Abel Avellan, ASTS CEO during the Q1 2025 earnings call.
ASTS remains a highly risky pick as the company’s financials continue to worsen as satellite manufacturing efforts accelerate, as you can see in the graph below. Cash from operations (blue line) remains negative, albeit reversing the declining trend since the start of 2024, while CapEx (purple line) continues to increase. ASTS is on a race to launch the aforementioned 45-60 satellites and now expects each satellite to cost between $21M-$23M versus $19M-$21M, due to to higher launch costs. Allegedly, the launch chain is working slower than expected and ASTS is paying premiums to accelerate.
The launch premiums are a particularly valuable datapoint in furthering my understanding of ASTS’s competitive positioning, relative to vertically integrated players like SpaceX and RocketLab. I learned in ASTS'‘s Q1 2025 earnings call transcript that over half of its CapEx is assigned to launches. Therefore, while I still expect ASTS’s D2D specialisation to prevail over time, much of ASTS’s (financial) strain at present does indeed come from not doing its own launches.
In Q1 2025 ASTS secured an additional $403M in cash received from a convertible notes offering. Despite the decreasing cash from operations, ASTS has a reasonable balance sheet to continue striving towards its ultimate goal of 45-60 satellites deployed: adjusted cash operating expenses are expected to come in at ~$45M in Q2 2025, similar to Q1 2025 levels. Once/if ASTS deploys the target number of satellites, ASTS remains positioned to print billions in free cash flow overnight: billions of end-customers worldwide will be able to sign up to the service with the click of a button.
Meanwhile, I look forward to continue to learning more about ASTS and about the space sector. I will continue studying ASTS quarterly going forward.
Until next time!
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