Birdseye View ASTS: Moonshot Potential vs. Financial Reality

0:00So back in May we got a comment in Spotify from Russell and Russell was asking us to do a bird's eye view of ASTS. I'm sorry it took me so long Russell I had to learn a lot about this stock and about this company. But today Andrew and I are ready and we're going to talk about this potential moonshot and we're going to break down what we can learn from this company, this stock and the information they give us. So buckle up. Here we go. Okay, so it's time for some real talk. I have a serious problem with shoes, like legitimate, like my wife has opinions about a type of a problem. So when I find a pair of shoes that I absolutely love and they're$300 or$400, I don't just buy them outright.

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2:21Stephen:We cut through the noise to focus on what works. Compounding, discipline, and the conviction to buy wonderful businesses and stick with them. Your path to financial freedom. Start now. And welcome back to Investing for Beginners. My name is Stephen Morris and he is Andrew Sather. And Andrew, man, you talk about a learning curve, bro. like i i know more about space and satellites and rocketry and broadcom communications and all that stuff than i ever cared to know

3:03Stephen:did it make you want to run and buy more spacex stock like now now you have to have it no not like i hate spacex too now spacex is no longer cool no i'm kidding um but it was a very steep learning curve for me just because i know nothing about this type of stuff um and you know reading through the 10k there are a lot of there's a lot of language i had to look up and figure out what it meant but we're going to break it all down for you in common english so you guys can understand as well and the first thing i want to start with is just what um asts which is their ticker it's ast space mobile um but we're going to break down or i want to break down from a 30 000 view basically what they do and why it's cool slash potentially earth shattering for us um so basically what you're trying to do is create a 4g lte 5g network via space satellite now one of the things i first questions i asked was why does that matter basically the way are your telecommunications working now is signal goes from our cell phone to a cell tower that cell tower breaks down our message sends it to a satellite that satellite sends it to another cell tower close to the recipient where it gets put back together and then sent to the recipient's phone and they can hear you what this does is basically cuts out the middleman it goes straight from us to the satellite to the person the reason this is huge is we we see it you know in movies and stuff like that via sat phones you know they they pull out these big bulky sat phones with this huge antenna and they're making phone calls from antarctica um now i have used sat phones in the past and i can tell you that the movies drastically overestimate their reliability they are not that great but um what this will do and even andrew like we see this in our iphones now and we don't even realize it because the sos function of our iphones is uh what they call d2d which is direct to cell which i don't that makes no sense as well like it shouldn't be d2c but they call it d2d whatever so but we we see that in that technology because basically you can send a short sos message directly to emergency rescue no matter where you're at and it will go straight from your cell phone to the satellite to the recipient.

5:50But that's a very small capacity. Basically, what ASTS is trying to do is give this worldwide. Now, now that we know what they're trying to do and why it's cool, they have secured contracts with AT &T and Verizon, obviously, the two of the biggest names and cell phone provider in the United States. They also have a contract with Vodafone, which is one of the biggest providers in Europe. We will dive into these contracts later, but yeah, so that's where we're at so far. Andrew, do you have any questions about anything yet? I guess like, I don't know,

6:37Stephen:all the all the space stuff i i don't get the hype around it um at least this one has a tangible like okay there's the cell tower reits that we're going to disrupt and that's like real cash flows but some of this just going to space to go to space i don't really understand well i mean it's more about reliability than anything um i mean imagine uh you're from California so I'm sure you've experienced earthquakes and what's one of the things you lose during an earthquake your ability to make a cell call because the tower goes down. I'm not entirely sure how it all works but the tower has to be calibrated to a specific degree or whatever.

7:21I'm not sure if degrees the right word to use but if that gets jarred or bumped or messed up in any way. Now that tower can't talk effectively or efficiently to the cell or to the satellite. And you weren't able to get a hold of 911. This totally negates that. It goes away. You know, basically, you know, nowhere in the mountains in North Carolina will you lose cell phone coverage now. So if you're hiking, you get lost. You're able to call for help. Huge, huge applications and the best part of it is we don't lose if because it's broadband we won't lose any uh any of the capability that we have now so like i was talking sat phones aren't near as reliable as people think they are this takes that away this may this makes it reliable like you see in the movies because it's that that 4g lte broadband 5g um it's a pretty huge deal and we're going to cover the REITs and you know the disruptions that are coming if they're able to pull this off a little bit later but the first thing that I think we should probably cover are just the financials because that's the obvious glaring huge huge how do I say it nicely problem that I find.

8:53And keep in mind that this is just my opinion off the research I did. I am not suggesting that it's a bad company. I'm not suggesting that it's a bad investment. I am simply suggesting what I think. So total revenue for 2025, Andrew, was 70.9 million. I'm sorry. Yeah, million. which is up significantly from 2024. And 2024 was only 4.4 million. But that doesn't cover near the amount of cash that they are burning. Just off of a guess, I know you read my notes, but do you have a guess to how much they've spent on a yearly basis so far?

9:46Stephen:i peaked like literally as you said that i peaked and i'm sorry i know the number but it's it's crazy like more than revenue yeah so they are uh operating at a loss of 35 point or i'm sorry 358.6 million dollars that is insane um how are they able to do this you ask well they've got some pretty good fundraisers they were able to raise 2.3 billion basically in cash um which is a lot of money andrew but at the end of the day uh if my math is correct that gives them about at their current cash burn that gives them about five years um without having to raise more cash yeah clock's ticking and so i mean and logically you say well they're able to do it once in my experience that's not quite how it works because like you know investors are going to want to see roi and if they're not seeing any any sort of return they're going to start pulling their money so they're going to have to find new investors and that can be very complicated especially when you're playing at this large of a scale so or sorry i'll interrupt real quick or you could raise and get a fraction of what you're able to get in the first round right so i mean I mean, they're basically operating on a ticking time bomb.

11:19When you combine that with their debt, man, it doesn't look good. Do you want to jump straight to their debt? Yeah.

11:32Stephen:Go for it. What kind of debt are we talking about? What kind of numbers here? So their debt. um and this is this is straight from uh their 10k so we're basically looking at three major convertibles um one at 207 million another at 112 billion and one at 1.3 billion dollars with a b um which is huge uh i mean that's just a massive amount of debt coupled with they're operating from a negative revenue like how is this how do how do how do they even think or i don't know how to ask this how do they expect this to be sustainable uh for the next five years yeah it's like um you're going on shark tank or something and you're like i haven't made revenue yet but i have a really cool idea i mean and it is a cool idea you know i think like i said it's earth shattering um if they're able to pull it off but you know having 2.2 total in debt, 2.2 billion total in debt, that alone eats away the cash they've been able to raise.

13:01And so the problem that I think comes from this, Andrew, and correct me if I'm wrong here, but so I was sitting there trying to figure out, okay, so these payments start coming due 2032, 2034, 2036. I know that's a long way off. But, you know, in terms of business, especially what they're trying to do, you know, that's right around the corner, especially if you're operating in negative cash flow. So, I mean, if they're not able to turn this around and start making money, you're looking at they're going to start converting and heavily diluting shares of their stock in order to be able to pay for this.

13:49The problem is their stock is currently falling and has been for a while now. If it continues to fall, eventually it won't be worth enough money to cover their debt, which will force them into other options, most likely bankruptcy.

14:09Yeah, I think you're spot on. so another thing i i feel that i probably should point out is of the 70.9 million guess how much of that is from what their core business model is which is the broadcom broad broadcom telecommunications there we go that's what i'm trying to say guess how much of that revenue comes from that next to none it all comes from from the the tech they're working on it comes from servicing satellites things like testing helping test satellites stuff like that equipment none of it comes from the actual service their company has or is supposed to have been built to provide, which I also like that.

15:05That really worries me. Why aren't they making money off of this yet? And the simple answer is that they don't have anything to make money on yet. They've broken up their satellites into two phases. They call it block one and block two. block one is currently launched in um outer space right now however it's still going through pretty comprehensive testing with AT &T Verizon and Bell Canada this is this all started in mid 2025 according to according to them in their 10k this is a year and a half late it was supposed to happen towards the end of 2023, beginning 2024. Block 2 still is not in orbit yet.

16:02It was supposed to have launched at the end of last year. However, it's currently delayed. It's being held up in assembly, integration, testing, and regulatory approval. And their timeline, they don't have one. They don't know when Block 2 is going to launch. Which, again, like, I mean, how do you get around that red flag. Like that's how this company is supposed to make money. And they don't know when block two is going to launch. Like that's a huge problem. Is it not? Or am I just overthinking?

16:35Stephen:Are they currently in assembly or in regulatory approval or all of the above? Like you have no clue. And this goes back to what we've talked about before, Andrew, when you're reading the 10 K, when you're listening to their earnings calls, are they being clear are they are they actually telling you what's going on or do they sound like a politician that's a great point andrew just made is it an assembly integration testing or regulatory approval they listed all of those in their 10k as where they are with block two that and so i guess that kind of makes sense if you think you know okay i got 100 satellites you know i got 10 in assembly i got 20 in integration i got a few in testing and the rest are in approval like okay i guess that kind of makes sense but i mean is that is that how you do that i don't know i couldn't really find an answer to that question um but that's a problem like i need an answer to that question i need a timeline because you're asking me for my money here trust me bro no not with money that is not something i roll with when it comes to my money um i don't know where are you so far, Andrew, with everything that I've covered so far.

17:48Stephen:I swung from like really excited about like a life changing technology to getting increasingly skeptical. I like how we're pulling from the 10K, we're pulling from the MD &A. So it's not your opinion. It's not some random analyst opinion. This is just straight from management. So what else in there kind of jumped out to you, if anything? So the next big thing, Andrew, that really... You may have heard about BILT as the loyalty program that lets you earn points on rent wherever you live. Well, they just leveled up even more. As of 2026, homeowners can earn up to 1.25x points on their mortgage payments.

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20:35Stephen:optional subscriptions to found plus for$35 a month or$315 per year or found pro for$80 a month or$720 a year there are no monthly account maintenance fees but other fees such as transactional fees for wires instant transfers and atm apply read found fee schedule what's the best way to get started in the market download my ebook for free at stockmarketpdf.com man and i do think this if i'm overthinking anything this is possibly the why i'm overthinking um so they they call so at &t verizon they call them mnos uh mobile network operators and the way it works traditionally with this sort of thing is it's all profit sharing there is no fixed price for services rendered so that concerns me as well because you know Verizon AT &T all these gigantic corporations are going to demand the best rates obviously and this is this is from their 10k page four uh they said M &O's will demand the best rates and walk when margins start to compress so that tells me that they may never see profitability depending on the market and the share they're getting from like they're not able to say hey we're going to charge a hundred dollars per sir you know per user per satellite or why you know i'm just pulling a number out of my butt i have no idea but i mean there there's no hard number to where i can sit down and do math and say okay so in five years we can expect to see you making this amount of money so how can i how can i look at this and think okay this is this is a wise investment with my money even though i don't have that that key what i feel is a key piece of information when buying an investment yeah i don't i don't think you're overthinking that it does bring an extra level of uncertainty and unclarity to the entire thesis absolutely and i mean we've talked about in the past one of my biggest things that i that i really look for and you know if you remember if you go back and listen to the episode of where we did a bird's eye view of cat uh one of my biggest problems with cat as an investment is they don't really have pricing power um this like they have zero pricing power at all um they get basically what the mnos decide that they get and there's really nothing they can do about it from what I can tell.

23:39Again, I could be overthinking, but I mean, to me, but pricing power is super important, at least to me. The reason, Andrew, I think I may be overthinking it is because they were very clear that this is how this part, this sector of business works. It is standard SOP. that you know it's all profit sharing there's no fixed rate but again like how can how can you predict your revenue your cash flow and how can you predict anything off of that and i mean i guess averages but that to me that that's you're gambling at that point you're not you're not investing yeah the next big thing um that i that i want to cover is their moat we you know how how much or how important moat is to me um and their moat is it is there kind of let me explain what i mean so back in march of 2025 they uh got into a contract with legato i'm not sure if i'm pronouncing that right um legato lc um and basically what this did is gave them a 60 megahertz up to a 60 megahertz s-band spectrum i'm not going to even try to explain what that means i vaguely know what it means because i had to look it all up but basically that gives them a massive advantage over the competitors because it's really hard to to recreate so that that is one area of the remote that is very important um again they're going to be able to deliver 4g lte 5g to uh standard uh unmodified phones that's important because traditionally sat phones are huge bulky they have tons of modifications to make them able to be to to be used and you know their competitors uh eardream i think i'm pronouncing that right uh curpier um starlink all these companies that would be their competitors they either do not have this capability or they're really far behind them and getting it um so that's a huge aspect i mean basically asts in layman's terms they're the only ones that can do this if they can pull this off they will be the only ones that are able to do this um and then

26:40Stephen:i'm to um i'm surprised starlink is not able to do this because i feel like they've been around for a long time they have been around for a long time and this is they are working on it um they would probably be their closest competitor but and again this is per their 10k um starlink is about three years behind uh behind them and being able to acquire this technology so if you look at my notes andrew uh under mo i i mentioned that their moat is three uh three to five year window and that's assuming that they are correct that starlink is about three years behind them that three years is up starlink catches up now they're starting to lose uh uh pro they're starting to lose uh what's the word um not market cap um oh market share market share thank you they're starting to lose market share um five years uh because that's when their money starts to run out so you lose money you know you have no money your moat doesn't matter your competitors catch up to you your moat starts getting eroded so that's uh at the very bottom like that's why I put the that's how I got that three to five year window for their mode yeah I I don't know if we can even find the answer to this but obviously the contracts haven't even been made yet like you said there's no revenue sharing going on now but I wonder if it's like a race like if if I'm going to secure Andrew's AT &T cell phone contract does that mean Starlink can't bid for Andrew's plan.

28:29And so I was like, are you racing to secure everybody's plan?

28:33Stephen:Do you know what I mean? And then who knows if you could actually get that answer? No, I'm not sure. So I couldn't find an answer to that directly, but something that kind of speaks towards that is another aspect of what makes ASTS strong in their moat or stronger in their moat. is that their contracts are non-inclusive. So basically Verizon signs a contract with them. Verizon is using ASTS and that's that. But ASTS can go to AT &T. They can go to Vodafone. They can go to Sprint, or I guess Sprint's not around anymore, but T-Mobile. they can go to all the competitors they want to acquire those services as well which I think is probably the brightest side to this whole contract situation is the fact they can get everybody now one led to your point once Starlink gets caught up or these other competitors start getting caught up what happens then that's you know again to be determined we don't know um we don't have the contracts that we can look at and say okay the at &t is locked in for at least 10 years so we know for 10 years that they're going to make at least x amount of money um we don't have that so we you know can't can't make a prediction off of it yeah did they ever say like how they're able to produce this technology or is it just kind of vague?

30:17It's very vague. They are not open at all with how they're doing what they're doing.

30:26I mean, I guess it makes sense. Kind of. I assume, I would assume there are patents involved. They don't talk about any of that. They're just very vague or they just completely don't answer the questions.

30:45Stephen:interesting all right um so we've talked about the financials the pricing power or lack thereof the potential moat that they may have but also the timeline on that um what else do you think deserves to be covered for this company you brought up earlier disruptions and i think that is a super a super huge thing we need to think about whether asts is able to pull this off or not and become the sole provider of

31:22satellite broadband solely to the world or if it's going to be starlink or one of the other competitors the the fact of the matter is this is going to happen eventually um so what does that mean for us so we have to look at things like crown castle amt sbac um these these cell tower reits that have been massively profitable um they're going to be massively disrupted because they will pretty much become obsolete. They will not be needed anymore. We will see cell towers start to go away because the only limit to coverage that these companies will be able to provide is based on how many satellites they're able to get into outer space.

32:18Assuming that number is unlimited because space is huge, eventually cell towers are going to become become completely non-existent they will we will never see them again um maybe have a few here and there for emergency type i don't i don't even know i don't know why you would still need cell towers um i'm sure somebody will think of something but yeah so we're going to see that start to go away we're going to see country companies like garmin um who provide a lot of hardware services hardware manufacturing services for these towers their garments going to get hit we're going to see telecom carriers get hit especially rural telecom carriers and then we're going to see even companies like viasat and panasonic they're kind of legacy companies in the geo satellite space they're going to get hit because asts is going to kind of take over as the go-to get your satellite here place i wonder if it like unlocks more for autonomous driving

33:34Stephen:i don't know if the connectivity is a bottleneck for that but just thinking out loud you know if previously you couldn't stay connected to the internet because a cell tower was too far away could you know theoretically have an always-on internet connection and just be able to do more technologically whether it's through robotics or autonomously or whatever it is i could see that being potentially very lucrative i don't know i didn't even think about uh think about that like um waymo So I didn't, I guess I didn't. Yeah, you're right. Obviously, they use GPS to be able to drive. No, I don't know.

34:23I don't know how that works. That's interesting.

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36:55Stephen:Like we're talking about on a daily basis, going through an area where the cell tower wasn't hitting me. And I'm like, this is catastrophic. Like, what am I going to do? Just sit in silence. I can't stream my Spotify music for five minutes. It was terrible. Right. So I guess the last thing we, we kind of touched on it, but I want to, I want to put this in its own block just so it's really clear. Um, I want to cover their, what I think their path to profitability could be. Um, obviously as, as we've already talked about, they got block one satellites already in orbit going through the test with ATT Verizon and Bell Canada.