SpaceX has accomplished a lot of amazing things over its history. It just racked up another achievement.
“Excited to announce that SpaceX Starlink has achieved breakeven cash flow!” said founder and CEO Elon Musk on Thursday on X, the former Twitter. “Starlink is also now a majority of all active satellites and will have launched a majority of all satellites cumulatively from Earth by next year.”
Today, SpaceX accounts for roughly one-half of all orbital space launches around the world, and it’s growing its launch frequency. It also has a majority of all the satellites in orbit around the planet.
There are some 5,000 Starlink satellites in orbit. Starlink satellites are small, lower-cost satellites built by SpaceX that deliver high-speed, space-based Wi-Fi to customers on Earth. Starlink can cost about $120 a month and there is some hardware to buy as well.
Starlink ended 2022 with roughly 1 million subscribers. The subscriber count now isn’t known, but it could be approaching 2 million users based on prior growth rates. SpaceX didn’t return a request for comment.
Achieving cash break-even might not feel as significant as sending astronauts to the International Space Station, which SpaceX does, but it’s almost the business equivalent of that feet.
Oftentimes investors focus on earnings, but cash is arguably more important. It’s the lifeblood of any business. Earnings numbers are impacted by many non-cash items such as depreciation and receivables. Cash is just cash. Consistent cash flow is what any business needs to operate and grow.
Achieving internally generated cash flow also provides a business with a new measure of safety. At that point, the business doesn’t have to rely on external financing to keep running. Sometimes capital markets that provide that funding have their own issues. External financing isn’t always easy to get.
Free cash flow is defined as cash generated from business operations minus capital spending needed for assets to run the business. Free cash flow and earnings are typically close. Free cash flow for the
S&P 500
is about 90% of reported net income.
Free cash flow coming in under net income, in aggregate, is normal. The depreciation expense that impacts the net income calculation is typically a little smaller than the capital spending. One reason is things get more expensive over time and depreciation reflects things bought long ago. Another reason is companies get bigger—they need to buy more stuff.
Whether or not Musk was referring to cash from operations or free cash flow isn’t known. Either way, the announcement is still impressive for a company that is about 20 years old, has no real peers in its field, and pioneered reusable rockets.
Musk has hinted in the past that Starlink might pursue an initial public offering when it was profitable. Positive cash flow indicates the company is one step closer to profitability. That doesn’t mean an IPO is imminent. That’s up to the company, and Musk.
Write to Al Root at [email protected]
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